A.M. Best Affirms Everest Reinsurance Ratings

July 28, 2014

A.M. Best has affirmed the financial strength rating of A+ [Superior] and the issuer credit ratings of “aa-” of Everest Reinsurance [Bermuda] Ltd. and its reinsurance and insurance subsidiaries.

Concurrently, A.M. Best has affirmed the ICRs of “a-” of Everest Re Group, Ltd. [Bermuda] and Everest Reinsurance Holdings Inc. [Delaware]. Additionally, A.M. Best has assigned a debt rating of “a-” to the $400 million 4.868% senior unsecured notes, due 2044, recently issued by Everest Reinsurance Holdings Inc. A.M. Best also has affirmed the debt ratings of Everest Re Group, Ltd., Everest Reinsurance Holdings Inc. and Everest Capital Trust III. The outlook for all ratings is stable.

A statement from the ratings agency said, “The ratings reflect Everest Re’s consistently superior risk-adjusted capital position, long-term track record of generating favorable earnings, experienced management team, strong enterprise risk management (ERM) framework and market profile as a leading global provider of insurance and reinsurance products.

“Given its conservative financial leverage measures, Everest Re maintains strong financial flexibility with the ability to effectively manage its capital through market cycles. This is evidenced by Everest Re’s 10-year average combined ratio, which is below breakeven, representing underwriting profitability.

“Cash flows from operations also have consistently been strong. Everest Re’s balance sheet is supported by its conservative investment strategy with the current investment portfolio held at a shorter duration and equities at less than 10% of total investments.

“Everest Re continues to benefit from a seasoned management team, which has successfully deployed its low-cost operating structure to profitably distribute its reinsurance and insurance products globally through a large network of insurance and reinsurance intermediaries.

“Due to its diversified product offering and geographic spread, A.M. Best believes Everest Re is well positioned within its business sector to continue to perform in line with its peer group despite the current competitive market environment.

“A.M. Best believes that Everest Re maintains strong ERM capabilities and has established a risk management framework that effectively identifies, measures and monitors existing and emerging risks across its respective businesses and enables the efficient allocation of capital. It is A.M. Best’s opinion that Everest Re continues to enhance its ERM and internal modeling capabilities.

“Offsetting these positive rating factors is the organization’s exposure to large catastrophe losses. As part of its catastrophe management process, Everest Re utilizes catastrophe modeling and establishes risk limits to control catastrophic exposures on a probable maximum loss and aggregate basis, although catastrophe losses could impact earnings in any given year.

“The organization also maintains net asbestos and environmental (A&E) exposure of approximately $387 million, which has been steadily declining in recent years. A&E reserves are monitored on a quarterly basis against emerging trends with the most recent review indicating that current reserve levels are adequate.

“Rating factors that could lead to an upgrading of Everest Re’s ratings and/or a positive outlook include the continuation of long-term, consistently strong operating profitability relative to its peers and maintaining strong risk-adjusted capital levels.

“Rating factors that could lead to a downgrading of the organization’s ratings and/or a revised outlook include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers and A.M. Best’s expectations, significant adverse loss reserve development and/or a material decline in risk-adjusted capital.”

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