Best Affirms Everest Re’s ‘A+’ Ratings; Stable Outlook

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of the Bermuda-based Everest Re Group, Ltd.’s reinsurance and insurance subsidiaries. Best also affirmed the ICR of “a-” of Everest Re and Everest Reinsurance Holdings, Inc. of Delaware and the debt ratings of “a-” on senior unsecured debt, “bbb+” on subordinated debt and “bbb” on junior subordinated notes and preferred stock of Everest Re. The outlook for all ratings is stable.

“Everest Re’s ratings reflect its consistently superior risk-adjusted capitalization, strong long-term operating performance and excellent market profile as a leading global reinsurance company,” said Best. The rating agency also noted the Group’s “solid diversification with regard to product lines, geography and distribution.”

In addition Best singled out the group’s “strong and experienced management team” as having demonstrated a “long-term track record of success in allocating capital to profitable business lines throughout varying phases of the reinsurance pricing cycle.”

Best said it “believes that Everest Re maintains robust risk management capabilities and continues to enhance an already effective enterprise risk management framework, which identifies, measures and monitors existing and emerging risks across its respective business lines and allocates capital accordingly.”

However, Best also noted that “Everest Re’s exposure to large catastrophe losses as well as the cyclical changes occurring in the current market environment,” should be considered as offsetting factors.

As part of its catastrophe management process, Everest Re utilizes catastrophe modeling and establishes risk limits to control catastrophic exposures on both a probable maximum loss (PML) and aggregate basis. “Although catastrophe losses could impact earnings in a given year, Everest Re has successfully managed market cycles and unforeseen events as evidenced by its 10-year average return on equity of 11.5 percent,” Best pointed out.

“Furthermore, Everest Re experienced a significant level of realized and unrealized investment losses in 2008, primarily attributable to the disruption of global markets. Management has responded by reducing the level of equity investments to approximately 6 percent of the investment portfolio and shortening durations on fixed income instruments.

Both financial leverage and interest coverage are at acceptable levels relative to Everest Re’s ratings. A.M. Best expects Everest Re to maintain total debt-to-capital measures below 25 percent in the mid term.”

Best summarized the individual members of the group, affected by the ratings as follows:
The FSR of A+ (Superior) and ICRs of “aa-” have been affirmed for the following core operating reinsurance and insurance subsidiaries of Everest Re Group, Ltd.:
— Everest Reinsurance Company
— Everest Reinsurance (Bermuda), Ltd.
— Everest International Reinsurance, Ltd.
— Everest Reinsurance (Ireland) Ltd.
— Everest National Insurance Company
— Everest Security Insurance Company
— Everest Indemnity Insurance Company

Source: A.M. Best – www.ambest.com