A.M. Best Co. has affirmed the financial strength rating (FSR) of
A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Everest Re
Group, Ltd.’s (Everest Re) (Bermuda) [NYSE: RE] reinsurance and
insurance subsidiaries. Concurrently, A.M. Best has affirmed the ICR of
“a-” of Everest Re and Everest Reinsurance Holdings, Inc.
(Delaware). A.M. Best also has affirmed 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. (See below for a detailed listing of the
companies and ratings.)
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. Additionally,
Everest Re maintains solid diversification with regard to product lines,
geography and distribution.
The group benefits from a strong and experienced management team, which
has a demonstrated long-term track record of success in allocating
capital to profitable business lines throughout varying phases of the
reinsurance pricing cycle. A.M. Best 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.
Somewhat offsetting these positive rating factors are Everest Re’s
exposure to large catastrophe losses as well as the cyclical changes
occurring in the current market environment. 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%.
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% 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.
