Standard & Poor’s Ratings Services has placed its ‘A-‘ counterparty credit ratings on Bermuda-based Everest Re Group Ltd. and its U.S.-based intermediary holding company, Everest Reinsurance Holdings Inc., on CreditWatch with negative implications.
S&P has also placed its ‘AA-‘ counterparty credit and financial strength ratings on the main operating subsidiaries–Everest Reinsurance (Bermuda) Ltd., Everest Reinsurance Co., and Everest National Insurance Co. (collectively referred to as Everest)–on CreditWatch negative.
“We placed the ratings on CreditWatch because Everest’s 2008 underwriting performance is weaker than our expectation,” explained credit analyst Taoufik Gharib. “In addition, the company has been unable to generate sustainable very strong underwriting and operating results over multi-year periods.”
S&P said the “company generally relies less on the purchase of reinsurance because of its strategic emphasis on underwriting on a gross basis, which could accentuate earnings volatility given its changing business mix, which is currently more weighted toward property.
“Furthermore, the expected implementation of a robust enterprise risk management program, while it remains adequate, has been slower than expected.”
S&P added that the “ratings are based on the group’s strong and diversified competitive position as one of the top 10 global reinsurers based on 2007 net reinsurance premiums. This market presence affords Everest the operational resources to identify and write attractive business not readily accessible to weaker competitors.
“However, the company has not translated the strength of its competitive advantage into stronger underwriting results. The group enjoys very strong capital adequacy, reflecting senior management’s commitment to maintain a strong balance sheet with modest debt leverage. Everest’s financial flexibility is also strong and reflects the group’s modest financial leverage and very strong coverage.”
S&P also noted that it intends to “meet with Everest’s management team to address these concerns, which could lead us to lower the ratings by one notch. We expect to resolve the CreditWatch status of the ratings within the next three months.”
Source: Standard & Poor’s – www.standardandpoors.com
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