Everest Re Group Reports Third Quarter 2009 Earnings

Everest Re Group, Ltd. (NYSE: RE) reported third quarter 2009 net income of $228.6 million, or $3.75 per diluted common share, compared to a net loss of $233.1 million, or $3.79 per common share, for the third quarter of 2008. After-tax operating income¹, excluding realized capital gains and losses, was $209.4 million, or $3.43 per diluted common share, for the third quarter 2009, compared to after-tax operating income¹ of $12.6 million, or $0.20 per common share, for the same period last year.

For the nine months ended September 30, 2009, net income was $609.8 million, or $9.94 per diluted common share, compared to a loss of $2.2 million or $0.04 per common share, for the first nine months of 2008. After-tax operating income¹, excluding realized capital gains and losses and the gain on the first quarter’s debt repurchase, was $571.8 million for the first nine months of 2009, or $9.32 per diluted common share, compared to $383.2 million, or $6.18 per common share, for the same period in 2008.

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, "We have achieved yet another milestone in Everest’s history with shareholders’ equity topping more than $6 billion at quarter end. Book value per share has increased 25%, since the beginning of the year, benefitting from strong earnings and the financial market recovery to date. These results are a testament to the discipline and strength of the organization.”

Operating highlights for the third quarter of 2009 included the following:

• Gross written premiums increased 13% to $1.1 billion for the quarter compared to $999.2 million for the same period in 2008. Excluding the impact of foreign exchange, gross written premiums were up approximately 14%. Worldwide reinsurance premiums increased 12%, but adjusting for foreign exchange grew approximately 13%. Insurance premiums, which are entirely derived from the U.S. markets, were up 19%. This growth is being driven by a strong U.S. reinsurance property market, particularly for catastrophe exposed regions, the continued expansion of business in various international reinsurance markets and new program development on the insurance book.
• The GAAP loss and combined ratios were 60.2% and 88.7%, respectively, for the quarter compared to 87.3% and 115.0%, respectively, in the third quarter of 2008. Last year’s results were impacted by catastrophe losses, primarily emanating from Hurricanes Gustav and Ike. Excluding prior year development and catastrophe losses, the current year attritional loss ratio was 56.8%, up slightly from the 55.5% reported for last year’s third quarter.
• Net investment income was $165.4 million, relatively flat compared to the third quarter of 2008. Limited partnership income added $23.5 million for the quarter due in large part to income from partnerships investing in public equities.
• Net after-tax realized capital gains totaled $19.3 million for the quarter, a major component, of which, includes after-tax fair value adjustments to the equity portfolio. This compares to net after-tax realized capital losses of $245.7 million in the same period last year.
• Net after-tax unrealized capital gains totaled $343.5 million during the quarter, driven by a general decline in interest rates and a continued narrowing of credit spreads.
• Cash flow from operations was $314.7 million compared to cash flows of $375.4 million in the same quarter last year.
• For the quarter, the annualized after-tax operating income¹ return on average adjusted shareholders’ equity² was 14.9% compared to 0.9% in 2008.
• Shareholders’ equity ended the quarter at $6.1 billion, up 23% from year-end 2008. Accordingly, book value per share increased 25% to $100.75 as of September 30, 2009 from $80.77 at year-end 2008.
• The Company repurchased 491,731 of its common shares during the quarter and 1.2 million of its common shares since year end. Through September, the total cost of the repurchased shares under this program was $90.5 million, representing an average purchase price of $75.44 per share. The repurchases were made pursuant to a share repurchase authorization, provided by the Company’s Board of Directors, under which there remains 4.6 million shares available.

This news release contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federal securities laws. These statements involve risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements made on behalf of the Company. These risks and uncertainties include the impact of general economic conditions and conditions affecting the insurance and reinsurance industry, the adequacy of our reserves, our ability to assess underwriting risk, trends in rates for property and casualty insurance and reinsurance, competition, investment market fluctuations, trends in insured and paid losses, catastrophes, regulatory and legal uncertainties and other factors described in our latest Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Everest Re Group, Ltd. is a Bermuda holding company that operates through the following subsidiaries: Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. Everest Reinsurance (Bermuda), Ltd., including through its branch in the United Kingdom, provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers. Everest Reinsurance Company (Ireland), Limited provides reinsurance to non-life insurers in Europe. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the U.S. Everest Indemnity Insurance Company offers excess and surplus lines insurance in the U.S. Additional information on Everest Re Group companies can be found at the Group’s web site at www.everestre.com.

A conference call discussing the third quarter results will be held at 8:30 a.m. Eastern Time on October 29, 2009. The call will be available on the Internet through the Company’s web site or at www.streetevents.com.

Recipients are encouraged to visit the Company’s web site to view supplemental financial information on the Company’s results. The supplemental information is located at www.everestre.com in the "Financial Reports” section of the "Investor Center”. The supplemental financial information may also be obtained by contacting the Company directly.

¹The Company generally uses after-tax operating income, a non-GAAP financial measure, to evaluate its performance. After-tax operating income consists of net income excluding after-tax net realized capital gains (losses) as the following reconciliation displays:

Although net realized capital gains (losses) are an integral part of the Company’s insurance operations, the determination of net realized capital gains (losses) is independent of the insurance underwriting process. The Company believes that the level of net realized capital gains (losses) for any particular period is not indicative of the performance of the underlying business in that particular period. Providing only a GAAP presentation of net income makes it more difficult for users of the financial information to evaluate the Company’s success or failure in its basic business, and may lead to incorrect or misleading assumptions and conclusions. The Company understands that the equity analysts who follow the Company focus on after-tax operating income in their analyses for the reasons discussed above. The Company provides after-tax operating income to investors so that they have what management believes to be a useful supplement to GAAP information concerning the Company’s performance.

²Adjusted shareholders’ equity excludes net after-tax unrealized (appreciation) depreciation of investments.