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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 17, 2011 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of Everest Re Group Ltd.'s (Everest Re) (Bermuda) [NYSE: RE] reinsurance and insurance subsidiaries. Concurrently, A.M. Best has affirmed the ICRs of "a-" of Everest Re and Everest Reinsurance Holdings Inc. (Delaware). A.M. Best also has affirmed the debt ratings of Everest Re, Everest Reinsurance Holdings Inc., Everest Capital Trust II and Everest Capital Trust III. The outlook for all ratings is stable. (See below for a detailed listing of the companies.)
The ratings reflect Everest Re's consistently superior risk-adjusted capital position, long-term track record of generating favorable earnings 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 evident by Everest Re's five-year average combined ratio, which is below break-even, representing underwriting profitability. Cash flows from operations also have been consistently 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. A.M. Best believes that Everest Re has maintained strong traditional risk management capabilities and has established an enterprise risk management framework that effectively identifies, measures and monitors existing and emerging risks across its respective businesses and enables the efficient allocation of capital.
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.
Somewhat offsetting these positive rating factors are the group'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 (PML) and aggregate basis, although catastrophe losses could impact earnings in a given year.
The group also maintains net asbestos and environmental (A&E) exposure of approximately $530 million, which has been 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.
Due to moderate financial leverage, the group maintains a significant amount of capital to support its insurance and debt obligations. A.M. Best expects Everest Re to continue to manage its outstanding debt and preferred issues at a level no greater than 25% of total capital with its fixed charge coverage remaining strong.
The FSRs of A+ (Superior) and ICRs of "aa-" have been affirmed for the following operating reinsurance and insurance subsidiaries of Everest Re Group Ltd.: