Everest Re to Take $311 Million Charge for Asbestos; No Effect Say Rating Agencies

The Bermuda-based Everest Re Group announced that it has completed the previously announced detailed study of its potential asbestos exposures, and will take a “net pre-tax charge of $311 million related to the strengthening of its asbestos reserves in the fourth quarter.”

When the reserve actions are completed, Everest Re said it “expects after-tax operating income1 to range between $55 million and $75 million for the quarter and between $769 million and $789 million for the twelve months ended December 31, 2007. After-tax operating income1 is expected to be $.87 to $1.19 per fully diluted share for the quarter and $12.09 to $12.40 per fully diluted share for the twelve months ended December 31, 2007. For the year ended December 31, 2006, after-tax operating income1 was $817.9 million or $12.52 per fully diluted share.”

In a related move The Group said that its “net income for the quarter, including after-tax net realized capital losses of $51 million or $.81 per fully diluted share, primarily relating to fair value accounting for the equity portfolio, is expected to be between $4 million and $24 million, or $.06 to $.38 per fully diluted share. Net income for the full year, including after-tax net realized capital gains of $62 million or $.98 per fully diluted share, is expected to range between $831 million and $851 million, which would be between $13.06 and $13.37 per fully diluted share.”

CFO Craig Eisenacher commented: “Inasmuch as we had previously announced that we would be conducting an in depth review of our potential asbestos exposures, we believe that early disclosure of the outcome of the review in the context of our expected operating results is helpful to our investors and potential investors.”

The Company expects to release its fourth quarter and full year 2007 earnings after the financial markets’ close on January 30, 2008 Management will provide expanded commentary and answer questions during the subsequent earnings conference call scheduled for 8:30 am EST the following morning. The call will be available on the Internet through the Company’s web site or at: www.streetevents.com.

None of rating agencies seemed overly concerned by the announcement. Standard & Poor’s Ratings Services said that its ratings on Everest Re (‘A-‘/Stable) and related subsidiaries would not be affected, and that the charge was within its expectations.

A.M. Best commented that “the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of the reinsurance and insurance subsidiaries of Everest Re Group, Ltd. are unchanged following the announcement concerning the findings on the Everest Re asbestos loss reserve review.”

Fitch Ratings affirmed Everest Re’s ratings, as well as those of its subsidiaries. All of the rating agencies noted that the Group had strong financial fundamentals, and is expected to report increased earnings for 2007.

Sources: Everest Re Group – at: www.everestre.com. Standard & Poor’s – www.standardandpoors.com ; A.M. Best – www.ambest.com ; Fitch Ratings – www.fitchratings.com