Everest Re to Raise $280 Million; S&P Affirms Ratings

December 5, 2005

The Everest Re Group announced from Bermuda that it has agreed to sell approximately $280 million of its common shares to Wachovia Securities, which will subsequently offer the common shares to public investors pursuant to an automatically effective Form S-3 shelf registration statement Everest filed last week.

Everest said it “expects to use the proceeds from the sale of its common shares for working capital and general corporate purposes. The Company noted that this additional capital further enhances its existing financial strength as well as its strategic positioning.”

Standard & Poor’s Ratings Services has issued a bulletin affirming its “A-” counterparty credit rating on the Everest Group, and has assigned its preliminary “A-” senior debt, “BBB+” subordinated debt, and “BBB” preferred stock ratings to Everest’s universal shelf registration.

S&P noted: “The new shelf has an unlimited notional amount and is in accordance with the new SEC rules effective Dec. 1, 2005.” The rating agency also affirmed its “A-” counterparty credit and senior debt, and “BBB” preferred stock ratings on Everest Group’s U.S.-based intermediary holding company Everest Reinsurance Holdings Inc.

In addition S&P affirmed its “AA-” counterparty credit and financial strength ratings on Everest Group’s operating subsidiaries, Everest Reinsurance Co. (Everest Re), Everest National Insurance Co., and Everest Reinsurance (Bermuda) Ltd. The outlook on all of the ratings is stable.

“The ratings affirmation is based on the group’s (collectively referred to as Everest) very strong competitive position, strong operating performance, very strong capital adequacy, and strong financial flexibility,” noted S&P credit analyst Laline Carvalho. “These positive factors are partially mitigated by low reinsurance usage and the group’s opportunistic business strategy, which could increase the group’s earnings volatility.”

S&P said: “Although Everest’s operating performance has been affected by volatility similar to that experienced by other reinsurers in recent years, Everest has been among the better performers within its peer group with one of the highest average ROR’s from 2000 through 2004 at 12 percent.” S&P also indicated that it “believes these results reflect Everest’s strong risk management capabilities and well-executed opportunistic strategy. Although the group’s full-year 2005 operating results are expected to be substantially affected by large catastrophe losses related to Hurricanes Katrina, Rita, and Wilma, which occurred in the second half of 2005, the expected modest operating loss for the year is reasonable relative to other reinsurance peers and within the context of very substantial industry losses related to these catastrophes.

“The group is expected to report a modest operating loss for full-year 2005, reflecting the expectation of $225 million in net losses related to Hurricane Wilma in the fourth quarter, and large catastrophe losses of $883 million reported in the third quarter mostly due to Hurricanes Katrina and Rita.

“Operating performance is expected to improve substantially in 2006, with the combined ratio in the 92 percent-94 percent range and ROR in the 11 percent-13 percent range, assuming a normalized level of catastrophe losses.

“Capital adequacy is expected to remain in the strong to very strong range in the next two years. Although premium growth is expected to grow in the low double-digit range in 2006, the group’s exposures are not expected to change materially. Financial leverage, as measured by total debt plus preferreds to total capital, is expected to remain within the rating range at 18 percent-22 percent, with fixed-charge coverage at or more than 6x.”

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