Everest Re Group Reports Fourth Quarter and Full Year 2008 Earnings

Everest Re Group, Ltd. (NYSE: RE) reported fourth quarter 2008 after-tax operating income¹, which excludes realized capital gains and losses of $179.5 million, or $2.93 per share, compared to after-tax operating income¹ of $63.2 million, or $1.00 per diluted share, in the fourth quarter of 2007. Including net realized capital gains and losses, the Company reported a net loss of $16.6 million, or $0.27 per share, for the fourth quarter of 2008 compared to net income of $12.2 million, or $0.19 per diluted share, for the same period last year.

For the year ended December 31, after-tax operating income¹ was $562.7 million, or $9.12 per share, for 2008, compared to $776.9 million, or $12.21 per diluted share, for 2007. Including net realized capital gains and losses, the Company had a net loss of $18.8 million for the full year 2008, or $0.30 per share, compared to net income of $839.3 million, or $13.19 per diluted share, for 2007.

Shareholders’ equity ended the year at $5 billion, or $80.77 book value per common share outstanding.

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, "While this year has been challenging on the investment front, we are pleased with the performance of our core operations. Our capital and underwriting fundamentals remain strong, and we are well positioned to capitalize on future market opportunities.”

Operating highlights for the fourth quarter and full year 2008 included the following:

• Gross written premiums were $896.1 million for the quarter, 15% lower than in the same period in 2007. A one-time assumption of a premium portfolio for a newly incepted insurance program in 2007, which did not recur in 2008, contributed approximately half of the decrease. Adjusting for this, the current quarter gross written premium is 8% lower than last year’s fourth quarter; consistent with the trend seen throughout the year. Reinsurance premiums, in the aggregate, were down 7% and insurance premiums, adjusted for the large premium accrual in 2007, were down 13%. Insurance premiums were impacted by softer workers’ compensation, public entity and contractors markets as well as the timing of new business.
• The GAAP combined ratio for the fourth quarter was 83.5% compared to 108.4% for the same period last year. Favorable reserve development, excluding catastrophes, was $41.5 million which reduced the combined ratio by 5 points in the current quarter. In 2007, the Company experienced significant adverse reserve development due primarily to strengthening of its asbestos reserves. Pre-tax catastrophe losses, net of reinstatement premiums, had a minimal impact in both the current year quarter and the prior year quarter. The combined ratio for the full year 2008 was 95.6% compared to 91.6% for the full year 2007.
• Net investment income was $75.4 million for the fourth quarter 2008, down more than 50% compared to fourth quarter 2007. Losses emanating from limited partnership investments, primarily partnerships with significant public equity exposures, were the principal driver of the decline. Investment income totaled $565.9 million for the full year 2008; a 17% decline compared to the same period in 2007.
• Net after-tax realized capital losses totaled $196.1 million for the quarter compared to $51.0 million in the same period last year. During the quarter, the managed public equity portfolio lost $184.7 million and was largely liquidated and write-downs for other-than-temporary impairments were $14.2 million. As of 12/31/08, cash and invested assets totaled $13.7 billion with 94% represented by cash and fixed income securities.
• With AAA corporate rates down and the S&P 500 Index significantly lower, the valuation model produced net derivative expense of $34.1 million for the quarter and $20.9 million for the year. In 2007, the quarterly and yearly expenses were $3.8 million and $2.1 million, respectively.
• Cash flow from operations was $55.3 million compared to $235.7 million for the same quarter in 2007. For the year, cash flow from operations was $663.0 million for 2008 compared to $854.4 million for 2007.
• For the year, the after-tax operating income¹ return on average adjusted shareholders’ equity² was 10.5% compared to 14.6% in 2007.
• Shareholders’ equity at December 31, 2008 was $5.0 billion down from $5.7 billion at December 31, 2007, reflective of year-to-date after-tax operating income¹ of $562.7 million offset by net after-tax realized and unrealized losses on investments of $818.1 million, foreign currency translation adjustments of $193.3 million, share repurchases of $150.7 million, and dividend payouts of $118.6 million. Book value per share at the end of the year was $80.77 compared to $90.43 at December 31, 2007.
• Since year end 2007, the Company has repurchased 1.6 million of its common shares at an average price of $92.35. Since January 2007, the Company has repurchased 4.2 million of its common shares at an average price of $94.31. The total cost to date of the repurchased shares under this program is $392.3 million. The Company's cumulative share repurchase authorizations allow for additional repurchases of up to 5.8 million shares.

This news release contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federal securities laws. These statements involve risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements made on behalf of the Company. These risks and uncertainties include the impact of general economic conditions and conditions affecting the insurance and reinsurance industry, the adequacy of our reserves, our ability to assess underwriting risk, trends in rates for property and casualty insurance and reinsurance, competition, investment market fluctuations, trends in insured and paid losses, catastrophes, regulatory and legal uncertainties and other factors described in our latest Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Everest Re Group, Ltd. is a Bermuda holding company that operates through the following subsidiaries: Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. Everest Reinsurance (Bermuda), Ltd., including through its branch in the United Kingdom, provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the U.S. Everest Indemnity Insurance Company offers excess and surplus lines insurance in the U.S. Additional information on Everest Re Group companies can be found at the Group’s web site at www.everestre.com.

A conference call discussing the fourth quarter results will be held at 8:30 a.m. Eastern Time on February 12, 2009. The call will be available on the Internet through the Company’s web site or at www.streetevents.com.

Recipients are encouraged to visit the Company’s web site to view supplemental financial information on the Company’s results. The supplemental information is located at www.everestre.com in the "Financial Reports” section of the "Investor Center”. The supplemental financial information may also be obtained by contacting the Company directly.

¹The Company generally uses after-tax operating income, a non-GAAP financial measure, to evaluate its performance. After-tax operating income consists of net income excluding after-tax net realized capital gains (losses) as the following reconciliation displays:

Although net realized capital gains (losses) are an integral part of the Company’s insurance operations, the determination of net realized capital gains (losses) is independent of the insurance underwriting process. The Company believes that the level of net realized gains (losses) for any particular period is not indicative of the performance of the underlying business in that particular period. Providing only a GAAP presentation of net income makes it more difficult for users of the financial information to evaluate the Company’s success or failure in its basic business, and may lead to incorrect or misleading assumptions and conclusions. The Company understands that the equity analysts who follow the Company focus on after-tax operating income in their analyses for the reasons discussed above. The Company provides after-tax operating income to investors so that they have what management believes to be a useful supplement to GAAP information concerning the Company’s performance.

²Adjusted shareholders’ equity excludes net after-tax unrealized (appreciation) depreciation of investments.

Financial Details Follow