UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

QUARTERLY REPORT UNDERPURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarter ended:		Commission File Number:
~~September 30, 2003~~March 31, 2004		1-13816

Everest Reinsurance Holdings, Inc.
(Exact name of Registrant as specified in its charter)


Delaware		22-3263609
(State or other juris-		(IRS Employer Identification
diction of incorporation		Number)
or organization)

477 Martinsville Road
Post Office Box 830
Liberty Corner, New Jersey 07938-0830
(908) 604-3000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

YES X NO

Indicate by check mark whether the registrant is an accelerated filer (as defined in ~~rule~~Rule 12b-2 of the Exchange Act).

YES NO X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


				Number of Shares Outstanding
Class				at ~~November~~May 1, ~~2003~~2004

Common ~~Stock,~~Shares, $.01 par value				1,000

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H of Form 10-Q.

EVEREST REINSURANCE HOLDINGS, INC.

Index To Form 10-Q

PART I

FINANCIAL INFORMATION


		Page
ITEM 1.FINANCIAL STATEMENTS


Consolidated Balance Sheets at ~~September 30, 2003~~March 31, 2004 (unaudited)		3
and December 31, ~~2002~~2003

Consolidated Statements of Operations and Comprehensive Income		4
for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2004 and 2003 (unaudited)
~~and 2002 (unaudited)~~


Consolidated Statements of Changes in ~~Stockholder's~~Stockholders’ Equity for the		5
three ~~and nine~~ months ended ~~September,~~March 31, 2004 and 2003 ~~and 2002~~(unaudited)
~~(unaudited)~~


Consolidated Statements of Cash Flows for the three ~~and nine~~months		6
~~months~~ ended ~~September 30,~~March 31, 2004 and 2003 ~~and 2002~~ (unaudited)

Notes to Consolidated Interim Financial Statements (unaudited)		7

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF
~~ITEM 2.~~ ~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF~~
FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~OPERATION		21

ITEM 4.CONTROLS AND PROCEDURES		35

PART II	21


~~ITEM 4.~~ ~~CONTROLS AND PROCEDURES~~OTHER INFORMATION	36

PART II

OTHER INFORMATION


~~ITEM 1.~~ ~~LEGAL PROCEEDINGS~~	37


ITEM 1.LEGAL PROCEEDINGS				36

ITEM 2.CHANGES IN SECURITIES, ~~AND~~ USE OF PROCEEDS				36
AND ISSUER PURCHASES OF EQUITY SECURITIES	~~None~~


ITEM 3.DEFAULTS UPON SENIOR SECURITIES	~~None~~
		36

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS	~~None~~
		36
~~ITEM 5.~~ ~~OTHER INFORMATION~~	~~None~~
ITEM 5.OTHER INFORMATION				36

ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K	38
			37

Part I- Item 1

~~EVEREST RE HOLDINGS, LTD.~~
~~CONSOLIDATED BALANCE SHEETS~~
~~(Dollars in thousands, except par value per share)~~

September 30, December 31,
2003 2002
ASSETS: (unaudited)
Fixed maturities - available for sale, at market value
  (amortized cost: 2003, $5,353,275; 2002, $4,569,844) $ 5,621,150 $ 4,805,976
Equity securities, at market value (cost: 2003, $82,915 ; 2002, $79,791) 91,400 72,468
Short-term investments 195,300 130,075
Other invested assets 54,437 42,307
Cash 112,968 116,843
          Total investments and cash 6,075,255 5,167,669

Accrued investment income 86,036 61,708
Premiums receivable 889,942 639,327
Reinsurance receivables unaffiliated 1,161,644 1,104,827
Reinsurance receivables affiliated 994,699 735,248
Funds held by reinsureds 142,680 121,308
Deferred acquisition costs 199,763 161,450
Prepaid reinsurance premiums 311,437 149,588
Deferred tax asset 140,078 144,376
Other assets 137,276 95,763
TOTAL ASSETS $ 10,138,810 $ 8,381,264
LIABILITIES:
Reserve for losses and adjustment expenses $ 5,686,964 $ 4,875,225
Unearned premium reserve 1,249,353 809,813
Funds held under reinsurance treaties 438,707 399,492
Losses in the course of payment 57,679 38,016
Contingent commissions 2,149 4,333
Other net payable to reinsurers 323,291 147,342
Current federal income taxes (7,970 ) (16,365 )
8.5% Senior notes due 3/15/2005 249,850 249,780
8.75% Senior notes due 3/15/2010 199,223 199,158
Revolving credit agreement borrowings 70,000 70,000
Company-obligated mandatorily redeemable preferred securities
  of subsidiary trusts holding solely subordinated debentures
  ("trust preferred securities") 210,000 210,000
Interest accrued on debt and borrowings 3,830 13,481
Other liabilities 145,962 90,261
          Total liabilities 8,629,038 7,090,536
STOCKEHOLDERS' EQUITY:
Common shares, par value: $0.01; 200 million shares authorized;
     1,000 shares issued in 2003 and 2002 - -
Additional paid-in capital 261,317 259,508
Accumulated other comprehensive income, net of
  deferred income taxes of $97.3 million in 2003 and
  $75.1 million in 2002 180,712 139,486
Retained earnings 1,067,743 891,734
          Total stockholders' equity 1,509,772 1,290,728
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,138,810 $ 8,381,264

~~The accompanying notes are an integral part of the consolidated financial statements.~~


EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
	March 31,		December 31,

(Dollars in thousands, except par value per share)	2004		2003

	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value
(amortized cost: 2004, $5,389,510; 2003, $5,649,269)	$ 5,718,282		$ 5,942,899
Equity securities, at market value (cost: 2004, $253,671; 2003, $146,407)	268,664		154,381
Short-term investments	469,606		113,186
Other invested assets (cost: 2004, $60,236; 2003, $59,183)	61,178		59,801
Cash	29,755		142,094

Total investments and cash	6,547,485		6,412,361
Accrued investment income	79,253		83,023
Premiums receivable	1,008,842		988,039
Reinsurance receivables - unaffiliated	1,214,077		1,245,891
Reinsurance receivables - affiliated	1,160,068		1,156,615
Funds held by reinsureds	134,924		142,775
Deferred acquisition costs	212,079		220,677
Prepaid reinsurance premiums	342,949		353,764
Deferred tax asset	149,757		159,758
Other assets	143,943		106,462

TOTAL ASSETS	$ 10,993,377		$ 10,869,365

LIABILITIES:
Reserve for losses and adjustment expenses	$ 6,041,460		$ 6,227,078
Unearned premium reserve	1,369,466		1,357,671
Funds held under reinsurance treaties	407,291		450,936
Losses in the course of payment	26,492		2,577
Contingent commissions	5,246		3,811
Other net payable to reinsurers	316,085		370,604
Current federal income taxes	39,384		40,945
8.5% Senior notes due 3/15/2005	249,899		249,874
8.75% Senior notes due 3/15/2010	199,269		199,245
Revolving credit agreement borrowings	70,000		70,000
Junior subordinated debt securities payable	546,393		216,496
Interest accrued on debt and borrowings	4,169		13,695
Other liabilities	160,356		119,569

Total liabilities	9,435,510		9,322,501

STOCKHOLDERS' EQUITY:
Common stock, par value: $0.01; 200 million shares authorized;
1,000 shares issued in 2004 and 2003	--		--
Additional paid-in capital	268,270		263,290
Treasury shares, at cost; 0.5 million in 2004 and 0.5 million
shares in 2003	(22,950	)	(22,950	)
Accumulated other comprehensive income, net of
deferred income taxes of $125.6 million in 2004 and $112.2
million in 2003	233,250		208,305
Retained earnings	1,079,297		1,098,219

Total stockholders' equity	1,557,867		1,546,864

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 10,993,377		$ 10,869,365

The accompanying notes are an integral part of the consolidated financial statements

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME~~
~~(Dollars in thousands, except per share amounts)~~

Three Months, Nine Months,
Ended September 30, Ended September 30,
2003 2002 2003 2002
(unaudited) (unaudited)

REVENUES:
Premiums earned $ 776,895 $ 456,387 $ 1,974,187 $ 1,366,112
Net investment income 70,491 64,402 210,627 194,673
Net realized capital (loss) (11,843 ) (7,074 ) (23,922 ) (45,944 )
Net derivative expense -- (1,009 ) -- (1,259 )
Other income (expense) 625 540 1,202 (3,941 )
Total revenues 836,168 513,246 2,162,094 1,509,641
CLAIMS AND EXPENSES:
Incurred loss and loss adjustment expenses 571,914 328,831 1,419,312 966,981
Commission, brokerage, taxes and fees 158,158 107,872 418,380 333,107
Other underwriting expenses 20,973 16,581 60,012 45,980
Distributions related to trust preferred securities 4,121 -- 12,364 --
Interest expense on senior notes 9,733 9,730 29,197 29,186
Interest expense on credit facility 327 966 1,035 2,728
Total claims and expenses 765,226 463,980 1,940,300 1,377,982
INCOME BEFORE TAXES 70,942 49,266 221,794 131,659
Income tax expense 10,451 14,463 45,785 27,993
NET INCOME $ 60,491 $ 34,803 $ 176,009 $ 103,666
Other comprehensive (loss) income , net of tax (74,279 ) 68,840 41,226 59,346
COMPREHENSIVE (LOSS) INCOME $ (13,788 ) $ 103,643 $ 217,235 $ 163,012

~~The accompanying notes are an integral part of the consolidated financial statements.~~


EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
	Three Months Ended
	March 31,

(Dollars in thousands)		2004		2003

	(unaudited)
REVENUES:
Premiums earned		$ 800,719		$ 531,691
Net investment income		65,823		67,714
Net realized capital loss		(27,046	)	(10,075	)
Other (expense) income		(17,260	)	355

Total revenues		822,236		589,685

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		593,223		376,190
Commission, brokerage, taxes and fees		168,674		104,706
Other underwriting expenses		19,262		18,218
Interest expense on senior notes		9,736		9,731
Interest expense on junior subordinated debt		4,419		4,249
Interest expense on credit facility		324		360

Total claims and expenses		795,638		513,454

INCOME BEFORE TAXES		26,598		76,231
Income tax expense		19,258		16,643

NET INCOME		$ 7,340		$ 59,588

Other comprehensive income , net of tax		24,945		21,128

COMPREHENSIVE INCOME		$ 32,285		$ 80,716

The accompanying notes are an integral part of the consolidated financial statements

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY~~
~~(Dollars in thousands, except per share amounts)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
(unaudited) (unaudited)
COMMON STOCK (shares outstanding):
Balance, beginning of period 1,000 1,000 1,000 1,000
Issued during the period -- -- -- --
Balance, end of period 1,000 1,000 1,000 1,000
COMMON STOCK (par value):
Balance, beginning of period -- -- -- --
Issued during the period -- -- -- --
Balance, end of period -- -- -- --
ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period $ 259,711 $ 259,411 $ 259,508 $ 258,775
Common stock issued during the period 1,606 21 1,809 657
Balance, end of period 261,317 259,432 261,317 259,432
ACCUMULATED OTHER COMPREHENSIVE INCOME,
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period 254,992 66,509 139,486 76,003
Net (decrease) increase during the period (74,280 ) 68,840 41,226 59,346
Balance, end of period 180,712 135,349 180,712 135,349
RETAINED EARNINGS:
Balance, beginning of period 1,007,252 845,494 891,734 776,631
Net income 60,491 34,803 176,009 103,666
Balance, end of period 1,067,743 880,297 1,067,743 880,297
TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD $ 1,509,772 $ 1,275,078 $ 1,509,772 $ 1,275,078

~~The accompanying notes are an integral part of the consolidated financial statements.~~


EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
	Three Months Ended
	March 31,

(Dollars in thousands, except share amounts)		2004		2003

		(unaudited)
COMMON STOCK (shares outstanding):
Balance, beginning of period		1,000		1,000
Issued during the period		--		--

Balance, end of period		1,000		1,000

COMMON STOCK (par value):
Balance, beginning of period		$ --		$ --
Issued during the period		--		--

Balance, end of period		--		--

ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period		263,290		259,508
Tax benefit from stock options exercised		4,935		--
Dividend from parent		45		--

Balance, end of period		268,270		259,508

ACCUMULATED OTHER COMPREHENSIVE INCOME,
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period		208,305		138,156
Net increase during the period		24,945		21,128

Balance, end of period		233,250		159,284

RETAINED EARNINGS:
Balance, beginning of period		1,098,219		891,734
Net income		7,340		59,588
Dividends paid		(26,262	)	--

Balance, end of period		1,079,297		951,322

TREAURY SHARES AT COST:
Balance, beginning of period		(22,950	)	(22,950	)
Treasury shares acquired during the period		--		--

Balance, end of period		(22,950	)	(22,950	)

TOTAL STOCKHOLDERS' EQUITY, END OF PERIOD		$ 1,557,867		$ 1,347,164

The accompanying notes are an integral part of the consolidated financial statements

~~EVEREST RE HOLDINGS, INC.~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(Dollars in thousands)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited) (unaudited)
Net income $ 60,491 $ 34,803 $ 176,009 $ 103,666
    Adjustments to reconcile net income to net cash provided by
    operating activities:
    Increase in premiums receivable (60,278 ) (51,001 ) (249,742 ) (148,862 )
    (Increase) decrease in funds held, net (646 ) 44,077 15,836 76,910
    Increase in reinsurance receivables (134,764 ) (88,498 ) (306,787 ) (157,057 )
    (Increase) decrease in deferred tax asset (6,906 ) 16,993 (17,819 ) 7,019
    Increase in reserve for losses and loss adjustment expenses 374,912 91,407 780,262 230,065
    Increase in unearned premiums 117,403 100,647 435,631 266,115
    Decrease in other assets and liabilities (35,154 ) (22,511 ) (82,211 ) (166,603 )
    Accrual of bond discount/amortization of bond premium (1,050 ) (2,169 ) (5,456 ) (6,332 )
    Amortization of underwriting discount on senior notes 46 42 135 124
    Realized capital losses 11,843 7,074 23,922 45,944
Net cash provided by operating activities 325,897 130,864 769,780 250,989
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale 182,695 155,982 451,886 340,555
Proceeds from fixed maturities sold - available for sale 88,168 157,604 402,181 610,234
Proceeds from equity securities sold 7,759 -- 8,056 19,940
Proceeds from other invested assets sold 3 4 244 3,064
Cost of fixed maturities acquired - available for sale (577,342 ) (292,701 ) (1,624,881 ) (1,025,585 )
Cost of equity securities acquired (6,095 ) (22,978 ) (10,254 ) (32,276 )
Cost of other invested assets acquired (5,197 ) (4,529 ) (6,757 ) (6,368 )
Net purchases of short-term securities (36,318 ) (145,586 ) (63,580 ) (206,169 )
Net increase (decrease) in unsettled securities transactions 45,147 (11,327 ) 65,742 56,326
Net cash used in investing activities (301,180 ) (163,531 ) (777,363 ) (240,279 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued during the period 1,606 21 1,809 657
Borrowing on revolving credit agreement -- 25,000 -- 45,000
Repayments on revolving credit agreement -- (5,000 ) -- (25,000 )
Net cash provided by financing activities 1,606 20,021 1,809 20,657
EFFECT OF EXCHANGE RATE CHANGES ON CASH (7,231 ) 2,807 1,899 7,582
Net increase (decrease) in cash 19,092 (9,839 ) (3,875 ) 38,949
Cash, beginning of period 93,876 116,297 116,843 67,509
Cash, end of period $ 112,968 $ 106,458 $ 112,968 $ 106,458
SUPPLEMENTAL CASH FLOW INFORMATION
Cash transactions:
Income taxes paid, net $ 818 $ 12,747 $ 46,856 $ 6,052
Interest paid $ 23,731 $ 20,291 $ 52,112 $ 41,461

~~The accompanying notes are an integral part of the consolidated financial statements.~~


EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended
	March 31,

(Dollars in thousands)		2004			2003

	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,340		$	59,588
Adjustments to reconcile net income to net cash provided by
operating activities:
Increase in premiums receivable		(108,057	)		(138,607	)
Increase in funds held, net		(47,213	)		(5,907	)
Decrease (increase) in reinsurance receivables		21,947			(72,908	)
Increase in deferred tax asset		(3,442	)		(14,799	)
Increase in reserve for losses and loss adjustment expenses		296,003			168,546
Increase in unearned premiums		106,911			207,997
(Decrease) increase in other assets and liabilities		(53,878	)		8,378
Amortization of bond premium/accrual of bond discount		152			(1,717	)
Amortization of underwriting discount on senior notes		48			44
Realized capital losses		27,047			10,075

Net cash provided by operating activities		246,858			220,690

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale		106,932			135,794
Proceeds from fixed maturities sold - available for sale		226,025			214,575
Proceeds from equity securities sold		1,317			120
Proceeds from other invested assets sold		3			10
Cost of fixed maturities acquired - available for sale		(595,644	)		(539,515	)
Cost of equity securities acquired		(108,230	)		--
Cost of other invested assets acquired		(126	)		(1,548	)
Net purchases of short-term securities		(356,572	)		(67,850	)
Net increase in unsettled securities transactions		37,272			60,600
Net proceeds from branch sale, net of cash disposed		(2,744	)		--

Net cash used in investing activities		(691,767	)		(197,814	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from stock options exercised		4,935			--
Dividend from parent		45
Proceeds from junior subordinated notes		329,897			--

Net cash provided by financing activities		334,877			--

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(2,307	)		(1,587	)

Net (decrease) increase in cash		(112,339	)		21,289
Cash, beginning of period		142,094			116,843

Cash, end of period	$	29,755		$	138,132

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash transactions:
Income taxes paid, net	$	19,528		$	5,451
Interest paid	$	23,957		$	24,034
Non-cash financing transaction:
Non-cash dividend to parent	$	26,262		$	--

The accompanying notes are an integral part of the consolidated financial statements

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003 and 2002

1. General

As used in this document, “Holdings” means Everest Reinsurance Holdings, Inc.,; “Group” means Everest Re Group, Ltd.,; “Bermuda Re” means Everest Reinsurance (Bermuda), Ltd., a subsidiary of Group; “Everest Re” means Everest Reinsurance Company, a subsidiary of Holdings, and its subsidiaries (unless the context otherwise requires); and the “Company” means ~~Everest Reinsurance~~ Holdings ~~Inc.~~ and its subsidiaries.

The consolidated financial statements of the Company for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2004 and 2003 ~~and 2002~~ include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair ~~presentation~~statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America, has been omitted since it is not required for interim reporting purposes. The ~~year-end~~year end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. The results for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2004 and 2003 ~~and 2002~~ are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2003, 2002 ~~2001~~ and ~~2000~~2001 included in the Company’s most recent Form 10-K filing.

2. Capital ResourcesNew Accounting Pronouncement

~~On June 27,~~In January 2003, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 46, “Consolidation of Variable Interest Entities (“VIEs”) (“FIN 46”). FIN 46 addresses whether certain types of entities, referred to as VIEs, should be consolidated or deconsolidated in a company’s financial statements. During October 2003, the FASB deferred the effective date of FIN 46 provisions for VIEs created prior to February 1, 2003 to the first reporting period ending after December 15, 2003. During December 2003, the FASB issued FIN 46R, replacing FIN 46. FIN 46R is effective, for entities that had not adopted FIN 46 as of December 24, 2003, no later than the end of the first reporting period that ends on or after March 15, 2004. The Company adopted FIN 46R in the first quarter of 2004, resulting in the deconsolidation of Everest Re Capital Trust (“Capital Trust”) and Everest Re Capital Trust II (“Capital Trust II”). The 2003 consolidated balance sheet and statement of operations and comprehensive income have been restated to reflect the deconsolidation.

Capital Trust II and Capital Trust are wholly owned finance subsidiaries of Holdings that issued trust preferred securities on March 29, 2004 ($320 million of trust preferred securities) and November 14, 2002 ($210 million of trust preferred securities), respectively.

The proceeds of the March 29, 2004 and November 14, 2002 trust preferred securities offerings, together with Holdings’ investments in Capital Trust II ($9.9 million) and Capital Trust ($6.5 million), which are held as equity investments on the consolidated balance sheets, were used to purchase from Holdings $329.9 million of 6.20% junior subordinated debt securities and $216.5 million of 7.85% junior subordinated debt securities, respectively.

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and 2003

The impact of the deconsolidation effectively substituted Holdings’ junior subordinated debt securities, which are held by Capital Trust and Capital Trust II, for the trust preferred securities previously reported.

3. Capital Transactions

Group filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission ~~which was subsequently amended on September 10, 2003 and~~(“SEC”) that provides for the issuance of up to ~~$975~~$975.0 million of securities. Generally, under this shelf registration statement, Group is authorized to issue common shares, preferred shares, debt securities, warrants and hybrid securities, Holdings is authorized to issue debt securities and Capital Trust II and Everest Re Capital Trust ~~II and~~ III (“Capital Trust III”) are authorized to issue trust preferred securities. ~~As of the date of this Form 10-Q filing, the~~This registration statement was ~~not yet effective.~~declared effective by the SEC on December 22, 2003.

On March 29, 2004, Capital Trust II, an unconsolidated affiliate, issued trust preferred securities resulting in a takedown from the shelf registration statement of $320 million, leaving a remaining balance on the registration statement at March 31, 2004 of $655 million. In conjunction with the issuance of Capital Trust II’s trust preferred securities, Holdings issued $329.9 million of 6.20% junior subordinated debt securities due March 29, 2034 to Capital Trust II. Part of the proceeds from the junior subordinated debt securities issuance was used for capital contributions to Holdings’ operating subsidiaries.

On July 30, 2002, Group filed a shelf registration statement on Form S-3 with the ~~Securities and Exchange Commission, which provided~~SEC, providing for the issuance of up to $475.0 million of securities. Generally, under this shelf registration statement, Group was authorized to issue common shares, preferred shares, debt securities, warrants and hybrid securities, Holdings was authorized to issue debt securities and ~~Everest Re~~ Capital Trust ~~(“Capital Trust”)~~ was authorized to issue trust preferred securities. This shelf registration statement became effective on September 26, 2002. The following securities were issued pursuant to that registration statement.

On November 14, 2002, ~~pursuant to a trust agreement between Holdings and JPMorgan Chase Bank, the property trustee, and Chase Manhattan Bank USA, the Delaware trustee,~~ Capital Trust, ~~completed a public offering of $210.0 million of 7.85%~~an unconsolidated affiliate, issued trust preferred securities resulting in ~~net proceeds~~a takedown from the shelf registration statement of ~~$203.4~~$210 million. ~~The proceeds of~~In conjunction with the issuance ~~were used to purchase $210~~of Capital Trust’s trust preferred securities, Holdings issued $216.5 million of 7.85% junior subordinated debt securities ~~of Holdings that will be~~

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

~~held in trust by the property trustee for the benefit of the holders of the trust preferred securities.~~

~~Holdings used the~~due November 15, 2032 to Capital Trust. The proceeds from ~~the sale of~~ the junior subordinated debt securities issuance were primarily used for ~~general corporate purposes and made~~ capital contributions to ~~its~~Holdings’ operating subsidiaries.

On April 23, 2003, Group expanded the size of the remaining shelf registration to $318 million by filing a ~~post-effective amendment~~Post-Effective Amendment under Rule 462(b) of the Securities Act of 1933, as amended, and General Instruction IV of Form S-3 promulgated ~~thereunder.~~there under. On the same date, Group issued 4,480,135 of its common shares at a price of $70.75 per share, which resulted in $317.0 million in proceeds, before expenses of approximately $0.2 million. This transaction effectively exhausted the September 26, 2002 shelf registration.

~~On November 7, 2001, Group filed a shelf registration statement on Form S-3 with~~8

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the ~~Securities~~Three Months Ended March 31, 2004 and Exchange Commission, which provided for the issuance of up to $575 million of common equity. On February 27, 2002, pursuant to this registration statement, Group completed an offering of 5,000,000 of its common shares at a price of $69.25 per share, which resulted in $346.3 million of proceeds, before expenses of approximately $0.5 million. On October 2, 2002, Group filed a post-effective amendment to this registration statement that removed the remaining securities from registration.2003

On March 14, 2000, the Company completed public offerings of $200.0 million in principal amount of 8.75% senior notes due March 15, 2010 and $250.0 million in principal amount of 8.5% senior notes due March 15, 2005.

3.4. Contingencies

The Company continues to receive claims under expired contracts, ~~which assert~~asserting alleged injuries and/or damages relating to or resulting from environmental pollution and hazardous substances, including asbestos. The Company’s asbestos claims typically involve potential liability for bodily injury from exposure to asbestos or for property damage resulting from asbestos or products containing asbestos. The Company’s environmental claims typically involve potential liability for (a) the mitigation or remediation of environmental contamination or (b) bodily injury or property damages caused by the release of hazardous substances into the land, air or water.

The Company’s reserves include an estimate of the Company’s ultimate liability for ~~asbestosand~~asbestos and environmental (“A&E”) claims for which ultimate value cannot be estimated using traditional reserving techniques. There are significant uncertainties in estimating the amount of the Company’s potential losses from A&E claims. Among the ~~complications~~uncertainties are: (a) potentially

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

long waiting periods between exposure and manifestation of any bodily injury or property damage; (b) difficulty in identifying sources of asbestos or environmental contamination; (c) difficulty in properly allocating responsibility and/or liability for asbestos or environmental damage; (d) changes in underlying laws and judicial interpretation of those laws; (e) potential for an asbestos or environmental claim to involve many insurance providers over many policy periods; (f) long reporting delays, both from insureds to insurance companies and from ceding companies to reinsurers; (g) historical data on A&E losses, which is more limited and variable than historical information on other types of casualty claims; (h) questions concerning interpretation and application of insurance and reinsurance coverage; and (i) uncertainty regarding the number and identity of insureds with potential asbestos or environmental exposure.

With respect to asbestos claims in particular, several additional factors have emerged in recent years that further compound the difficulty in estimating the Company’s liability. These developments include: (a) continued growth in the ~~aggressiveness~~number of ~~the~~claims filed, in part reflecting a much more aggressive plaintiff bar; (b) a disproportionate percentage of claims filed by individuals with no functional injury from asbestos claims and with little to no financial ~~value;~~value but that have increasingly been considered in jury verdicts and settlements; (c) the growth in the number and significance of bankruptcy filings by companies as a result of asbestos ~~claims;~~claims (including, more recently, bankruptcy filings in which companies attempt to resolve their asbestos liabilities in a manner that is prejudicial to insurers and forecloses insurers from the negotiation of bankruptcy plans); (d) the growth in claim filings against defendants formerly regarded as “peripheral”; (e) ~~concentrations~~the concentration of claims in a small number of states that favor plaintiffs; (f) the growth in the number of claims that might impact the general liability portion of insurance policies rather than the product liability portion; (g) responses in which specific courts have adopted measures to ameliorate the worst procedural abuses; (h) an increase in settlement values being paid to asbestos claimants; and ~~(h)~~(i) the potential that the U.S. Congress or state legislatures may ~~consider~~adopt legislation to address the asbestos litigation issue.

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and 2003

Management believes that these uncertainties and factors continue to render reserves for A&E losses significantly less subject to traditional actuarial ~~methods~~analysis than ~~are~~ reserves for other types of losses. Given these uncertainties, management believes that no meaningful range for such ultimate losses can be established. The Company establishes reserves to the extent that, in the judgment of management, the facts and prevailing law reflect an exposure for the Company or its ceding companies.

In connection with the acquisition of Mt. McKinley Insurance Company (“Mt. McKinley”), which has significant exposure to A&E claims, Prudential Property and Casualty Insurance Company (“Prupac”), a subsidiary of The Prudential Insurance Company of America (“The Prudential”), provided reinsurance to Mt. McKinley covering 80% ($160.0 million) of the first $200.0 million of any adverse development of Mt. McKinley’s reserves as of September 19, 2000 and The Prudential guaranteed Prupac’s obligations to Mt. McKinley. ~~Through September 30, 2003, cessions~~Cessions under this reinsurance agreement ~~have reduced~~exhausted the limit available ~~remaining limits to $54.4 million~~under the contract at December 31, 2003.

The following table shows the development of prior year A&E reserves on both a gross and net of ~~coinsurance.~~retrocessional basis for the three months ended March 31, 2004 and 2003:


(Dollars in thousands)		2004			2003

Gross basis:
Beginning of period reserves	$	765,257		$	667,922
Incurred losses		66,000			17,673
Paid losses		(25,408	)		(18,635	)

End of period reserves	$	805,849		$	666,960

Net basis:
Beginning of period reserves	$	262,990		$	243,157
Incurred losses		4,187			8,465
Paid losses		32,644			(8,256	)

End of period reserves	$	299,821		$	243,366

At March 31, 2004, the gross reserves for A&E losses were comprised of $137.2 million representing case reserves reported by ceding companies, $113.9 million representing additional case reserves established by the Company on assumed reinsurance claims, $335.8 million representing case reserves established by the Company on direct insurance claims including Mt. McKinley, and $218.9 million representing incurred but not reported reserves (“IBNR”).

Mt. McKinley is a reinsurer of Everest Re. Under a series of transactions dating to 1986, Mt. McKinley reinsured several components of Everest Re’s business. In particular, Mt. McKinley provided ~~stop-loss reinsurance~~stop loss protection, in connection with the Company’s October 5, 1995 initial public offering, for any adverse loss development on Everest Re’s June 30, 1995 (December 31, 1994 for catastrophe losses) reserves, with $375.0 million in limits, of which $103.9 ~~million~~ remains available (the “Stop Loss Agreement”). The Stop Loss Agreement

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

and other reinsurance contracts between Mt. McKinley and Everest Re remain in effect following the acquisition. However, these contracts became transactions with affiliates effective on the date of the Mt. McKinley ~~acquisition, and their financial impact is thereafter eliminated on consolidation.~~acquisition. Effective September 19, 2000, Mt. McKinley and Bermuda Re entered into a loss portfolio transfer reinsurance agreement, whereby Mt. McKinley transferred, for what management believes to be ~~arm’s-length~~arm’s length consideration, all of its net ~~insurance~~reinsurance exposures and reserves to Bermuda Re.

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and 2003

Due to the uncertainties discussed above, the ultimate losses may vary materially from current loss reserves and, depending on coverage under the Company’s various reinsurance arrangements, could have a material adverse effect on the Company’s future financial condition, results of operations and cash flows.

The following table shows the development of prior year asbestos and environmental reserves on both a gross and net of retrocessional basis for the three and nine months ended September 30, 2003 and 2002:

(dollar amounts in thousands) Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Gross basis:
Beginning of period reserves $ 646,159 $ 639,102 $ 667,922 $ 644,390
Incurred losses 56,323 -- 73,996 30,000
Paid losses (9,702 ) (22,148 ) (49,138 ) (57,436 )
End of period reserves $ 692,780 $ 616,954 $ 692,780 $ 616,954
Net basis:
Beginning of period reserves $ 237,529 $ 262,602 $ 243,157 $ 276,169
Incurred losses 5,154 -- 13,620 1,885
Paid losses (11,839 ) (11,609 ) (2,255 ) (27,061 )
End of period reserves $ 254,522 $ 250,993 $ 254,522 $ 250,993

At September 30, 2003, the gross reserves for A&E losses were comprised of $130.9 million representing case reserves reported by ceding companies, $75.6 million representing additional case reserves established by the Company on assumed reinsurance claims, $263.4 million representing case reserves established by the Company on direct excess insurance claims including Mt. McKinley, and $222.9 million representing incurred but not reported reserves.

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance and reinsurance agreements and other more general contracts. In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it. In other ~~disputes,~~matters, the Company is resisting attempts by others to collect funds or enforce alleged rights. Such disputes are resolved through formal and informal means, including litigation and arbitration.

In all such matters, the Company believes that its positions are legally and commercially reasonable. The Company also regularly evaluates those positions, and where appropriate, establishes or adjusts insurance reserves to reflect its evaluation. The Company’s aggregate reserves take into account the possibility that the Company may not ultimately prevail in each and every disputed matter. The Company believes its aggregate reserves reduce the potential that an adverse resolution of one or more of these matters, at any point in time, would have a material impact on the Company’s financial condition or results of operations. However, there can be no assurance that adverse resolutions of such matters in any one period or in the aggregate will not result in a material adverse effect on the Company’s results of operations.

The Company does not believe that there are any other ~~materials~~material pending legal proceedings to which it or any of its subsidiaries or their properties are subject.

~~The Prudential sold annuities, which were purchased by property and casualty insurance companies to settle certain types of claim liabilities.~~ In 1993 and prior, ~~years,~~ the Company had a business arrangement with The Prudential wherein, for a fee, the Company accepted ~~the~~settled claim payment ~~obligation~~obligations of ~~these~~certain property and casualty insurers and, concurrently, became the owner of the annuity or assignee of the annuity ~~proceeds.~~proceeds funded by the property and casualty insurers specifically to fulfill these fully settled obligations. In these circumstances, the Company would be liable if The Prudential were unable to make the annuity payments. The estimated cost to replace all such annuities for which the Company was contingently liable at ~~September 30, 2003~~March 31, 2004 was ~~$153.6~~$154.6 million.

~~In 1990,~~11

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and 2003

Prior to its 1995 initial public offering, the Company had purchased annuities from an unaffiliated life insurance company with an A+ (Superior) rating from A.M. Best Company (“A.M. Best”) to settle certain claim liabilities of the Company. Should the life insurance company become unable to make the annuity payments, the Company would be liable for those claim liabilities. The estimated cost to replace such annuities at ~~September 30, 2003~~March 31, 2004 was ~~$15.7~~$16.4 million.

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

4.5. Other Comprehensive Income (Loss)

The Company’s other comprehensive income ~~(loss)~~ is comprised as follows:

(dollar amounts in thousands) Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Net unrealized
(depreciation)/appreciation
of investments, net of
deferred income taxes ($69,979) $69,735 $31,168 $57,903
Currency translation
adjustments, net of deferred
income taxes (4,301) (895) 10,058 1,443
Other comprehensive income/(loss),
net of deferred
income taxes ($74,280) $68,840 $41,226 $59,346

5. Credit Line

On December 21, 1999, the Company entered into a three-year senior revolving credit facility with a syndicate of lenders (the “Credit Facility”). On November 21, 2002, the maturity date of the Credit Facility was extended to December 19, 2003. Wachovia Bank, National Association (“Wachovia Bank”) is the administrative agent for the Credit Facility. The Credit Facility is used for liquidity and general corporate purposes. The Credit Facility provides for the borrowing of up to $150.0 million with interest at a rate selected by the Company equal to either (i) the Base Rate (as defined below) or (ii) an adjusted London InterBank Offered Rate (“LIBOR”) plus a margin. The Base Rate is the higher of the rate of interest established by Wachovia Bank from time to time as its prime rate or the Federal Funds rate plus 0.5% per annum. The amount of margin and the fees payable for the Credit Facility depends upon the Company’s senior unsecured debt rating. Group guaranteed the Company’s obligations under the Credit Facility.

The Credit Facility requires the Company to maintain a debt to capital ratio of not greater than 0.35 to 1 and to maintain a minimum interest coverage ratio of 2.5 to 1 to maintain its statutory surplus at $850.0 million plus 25% of future aggregate net income and 25% of future aggregate capital contributions. As of September 30, 2003, the Company was in compliance with these covenants.

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

During the three and nine months ended September 30, 2003, Holdings made no payments and no borrowings on the Credit Facility. For the three and nine months ended September 30, 2002, Holdings made payments on the Credit Facility of $5.0 million and $25.0 million, respectively and had new Credit Facility borrowings of $25.0 million and $45.0 million, respectively.

As of September 30, 2003 and December 31, 2002, Holdings had outstanding Credit Facility borrowings of $70.0 million. Interest expense incurred in connection with the borrowing was $0.3 million and $1.0 million for the three months ended September 30, 2003 and 2002, respectively, and $1.0 million and $2.7 million for the nine months ended September 30, 2003 and 2002, respectively.

Effective October 10, 2003, the Company entered into a new three-year, $150.0 million revolving credit facility (the “New Credit Facility”), under similar terms, with a syndicate of lenders. Wachovia Bank is the administrative agent for the New Credit Facility. The required debt to capital and minimum interest coverage ratios have remained the same while the Everest Re statutory surplus requirement was increased to $1.0 billion plus 25% of future aggregate net income and 25% of future aggregate capital contributions and Group no longer guarantees Holdings’ obligations under the New Credit Facility. This New Credit Facility will replace the existing Credit Facility which would have expired on December 19, 2003 and will continue to be used for liquidity and general corporate purposes. A $70.0 million borrowing under the New Credit Facility was used to pay off the $70.0 million indebtedness under the old Credit Facility.


	Three Months Ended
	March 31,
(Dollars in thousands)		2004			2003

Net unrealized appreciation
of investments, net of deferred income taxes	$	27,616		$	17,393
Currency translation adjustments, net of
deferred income taxes		(2,671	)		3,735

Other comprehensive income, net of
deferred income taxes	$	24,945		$	21,128

6. Letters of Credit

The Company has arrangements available for the issuance of letters of credit, which letters are generally collateralized by the Company’s cash and investments. Under these arrangements, at ~~September 30,~~March 31, 2004 and 2003, ~~and 2002,~~ letters of credit for ~~$77.9~~$0.0 million and ~~$11.3~~$65.9 million, respectively, were issued and outstanding, generally supporting reinsurance provided by the ~~company’s~~Company’s non-U.S. operations.

Effective January 1, 2004, Everest Re sold its United Kingdom branch to Bermuda Re, a Bermuda insurance company and direct subsidiary of Group. The ~~following table summarizes the Company’s~~outstanding letters of credit supporting reinsurance provided by the London branch were transferred to Bermuda Re as part of ~~September 30, 2003. All dollar amounts are in thousands.~~


			~~Year of~~
~~Bank~~	~~Commitment~~	~~In Use~~	~~Expiry~~

~~Citibank (London)~~	~~Individual~~	~~$ 886~~	~~12/31/2003~~
~~Citibank (London)~~	~~Individual~~	~~$ 3,206~~	~~01/28/2005~~
~~Citibank (London)~~	~~Individual~~	~~$67,791~~	~~12/31/2006~~
~~Wachovia~~	~~Individual~~	~~$ 5,002~~	~~12/31/2003~~
~~Wachovia~~	~~Individual~~	~~$ 1,045~~	~~03/31/2004~~

~~Total~~		~~$ 77,921~~

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

sale transaction.

7. Trust Agreements

The Company has established a trust agreement as security for reinsurance recoverables of a non-affiliated ceding company, which effectively uses Company investments as collateral for reinsurance recoverables. At March 31, 2004, the total amount on deposit in the trust account was $18.7 million.

8. Senior Notes

~~During the first quarter of~~On March 14, 2000, the Company completed a public ~~offering~~offerings of $200.0 million in principal amount of 8.75% senior notes due March 15, 2010 and $250.0 million in principal amount of 8.5% senior notes due March 15, 2005.

Interest expense incurred in connection with these senior notes was $9.7 million for the three months ended ~~September 30,~~March 31, 2004 and 2003, respectively.

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and ~~2002 and $29.2 million for the nine months ended September 30,~~ 2003 ~~and 2002.~~

8. Trust Preferred9. Junior Subordinated Debt Securities Payable

~~Capital Trust is a wholly owned finance subsidiary~~On March 29, 2004, the Company issued $329.9 million of ~~Holdings. Holdings~~6.20% junior subordinated debt securities due March 29, 2034. The Company can redeem the junior subordinated debt securities before their maturity at 100% of their principal amount plus accrued interest as of the date of redemption, in whole or in part, on one or more occasions at any time on or after March 30, 2009; or at any time, in whole, but not in part, within 90 days of the occurrence and continuation of specific events.

On November 14, 2002, the Company issued $216.5 million of 7.85% junior subordinated debt securities due November 15, 2032. The Company can redeem the junior subordinated debt securities before their maturity at 100% of their principal amount plus accrued interest as of the date of redemption, in whole or in part, on one or more occasions at any time on or after November 14, 2007; or at any time, in whole, but not in part, within 90 days of the occurrence and continuation of specific events.

The Company considers that the mechanisms and obligations relating to the trust preferred securities, taken together, constitute a full and unconditional guarantee by ~~Holdings~~the Company of Capital ~~Trust’s~~Trust and Capital Trust II’s payment obligations with respect to ~~the~~their respective trust preferred securities.

There are certain regulatory and contractual restrictions on the ability of Holdings’ operating subsidiaries to transfer funds to Holdings in the form of cash dividends, loans or advances. The insurance laws of the State of Delaware, where Holdings’ direct insurance subsidiaries are domiciled, require regulatory approval before those subsidiaries can pay dividends or make loans or advances to Holdings that exceed certain statutory thresholds. In addition, the terms of the Holdings’ ~~credit facility~~Credit Facility (discussed below) require Everest Re, Holdings’ principal insurance subsidiary, to maintain a certain statutory surplus level. At December 31, ~~2002, $986.3~~2003, $1,561.1 million of the ~~$1,290.7~~$2,264.0 million in net assets of Holdings’ consolidated subsidiaries were subject to the foregoing regulatory restrictions.

In November 2002, pursuant to a trust agreement between the Company and JPMorgan Chase Bank, the property trustee, and Chase Manhattan Bank USA, the Delaware trustee, Capital Trust completed a public offering of $210.0 million of 7.85% trust preferred securities, resultingInterest expense incurred in ~~net proceeds of $203.4 million. The proceeds of the issuance were used to purchase $210 million of 7.85%~~connection with these junior subordinated debt securities was $4.4 million and $4.2 million for the three months ended March 31, 2004 and 2003, respectively.

10. Credit Line

Effective October 10, 2003, the Company entered into a new three year, $150.0 million senior revolving credit facility with a syndicate of lenders, replacing its December 21, 1999, senior revolving credit facility. Both the October 10, 2003 and December 21, 1999 senior revolving credit agreements, which have similar terms, are referred to collectively as the “Credit Facility”. The Credit Facility is used for liquidity and general corporate purposes. The Credit Facility provides for the borrowing of up to $150.0 million with interest at a rate selected by the Company equal to either (1) the Base Rate (as defined below) or (2) an adjusted London InterBank Offered Rate (“LIBOR”) plus a margin. The Base Rate is the higher of the ~~Company that will be held in trust~~rate of interest established by Wachovia Bank from time to time as its prime rate or the ~~property trustee~~Federal Funds rate plus 0.5% per annum. The amount of margin and the fees payable for the ~~benefit of~~Credit Facility depends upon the ~~holders of the trust preferred securities. The Company used the proceeds from the sale of the junior subordinated~~Company’s senior unsecured debt ~~securities principally for capital contributions to its operating subsidiaries.~~rating.

Holdings may elect to redeem the junior subordinated debt securities, in whole or in part, at any time after November 14, 2007. If such an early redemption occurs, the outstanding trust preferred securities will also be proportionately redeemed. If there is no early redemption, Everest Re Capital Trust will redeem all of the outstanding trust preferred securities when the junior subordinated debt securities are paid at maturity on November 15, 2032.

~~Capital Trust will redeem all of the outstanding trust preferred securities when the junior subordinated debt securities are paid at maturity on November 15, 2032. The Company may~~

1413

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003
The Credit Facility requires the Company to maintain a debt to capital ratio of not greater than 0.35 to 1 and 2002

~~elect~~a minimum interest coverage ratio of 2.5 to ~~redeem~~1 and requires Everest Re to maintain its statutory surplus at $1.0 billion plus 25% of aggregate net income and capital contributions earned or received after January 1, 2003. As of March 31, 2004, the ~~junior subordinated debt securities,~~Company was in ~~whole or~~compliance with these covenants.

During the three months ended March 31, 2004 and 2003, respectively, the Company made no payments on and had no additional borrowings under the Credit Facility. As of March 31, 2004 and 2003, the Company had outstanding Credit Facility borrowings of $70.0 million. Interest expense incurred in ~~part, at any time after November 14, 2007. If such an early redemption occurs, the outstanding trust preferred securities will also be proportionately redeemed.~~

~~Distributions on the trust preferred securities are cumulative~~connection with these borrowings was $0.3 million and ~~pay quarterly in arrears. Distributions relating to the trust preferred securities~~$0.4 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2004 and 2003, ~~were $4.1 million and $12.4 million,~~ respectively.

9.11. Segment Reporting

The Company, through its subsidiaries, operates in four segments: U.S. Reinsurance, U.S. Insurance, Specialty Underwriting and International. The U.S. Reinsurance operation writes property and casualty reinsurance on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies within the ~~United States.~~U.S. The U.S. Insurance operation writes property and casualty insurance primarily through general agent relationships and surplus lines brokers within the ~~United States.~~U.S. The Specialty Underwriting operation writes accident and health (“A&H”), marine, aviation and surety business within the ~~United States~~U.S. and worldwide through brokers and directly with ceding companies. The International operation writes property and casualty reinsurance through the Company’s branches in ~~London,~~ Canada and Singapore, in addition to foreign business written through the Company’s Miami and New Jersey ~~headquarters and Miami office.~~offices.

These segments are managed in a carefully coordinated fashion with strong elements of central control, including with respect to capital, investments and support operations. As a result, management monitors and evaluates the financial performance of these operating segments based upon their underwriting gain or loss (“underwriting results”). ~~The Companyutilizes inter-affiliate reinsurance and such reinsurance does not impact segment results, since business is generally reported within the segment in which the business was first produced.~~ Underwriting results include earned premium less ~~incurred loss~~losses and loss adjustment expenses (“LAE”) incurred, commission and brokerage expenses and other underwriting expenses. The Companyutilizes inter-affiliate reinsurance, but such reinsurance does not impact segment results, as business is generally reported within the segment in which the business was first produced.

The Company does not maintain separate balance sheet data for its operating segments. Accordingly, the Company does not review and evaluate the financial results of its operating segments based upon balance sheet data.

~~Group has recently announced that one of its subsidiaries,~~Effective January 1, 2004, Everest Re ~~has reached agreement, subject to regulatory approval, to sell~~sold the net assets of its United Kingdom branch to ~~another~~Bermuda Re, a Bermuda insurance company and direct subsidiary of ~~Group’s subsidiaries,~~Group, for $77.0 million. In connection with the sale, Everest Re provided Bermuda ~~Re. Business~~Re with a reserve indemnity agreement providing for ~~this branch is currently reported through~~indemnity payments of up to 90% of £25 million in the ~~International segment. Upon completion~~event December 31, 2002 loss and loss adjustment reserves develop adversely. The impact on the financial statements for the three months ended March 31, 2004 was a dividend to Group of $26.3 million as net assets sold exceeded the purchase price, an underwriting gain of $10.9 million due to the sale related adjustments of the ~~transaction,~~2003 and 2002 quota share cessions and an increase in the current period incurred losses of $36.8 million relating to liability under the reserve indemnity agreement. Business for the UK branch ~~business will no longer be~~was previously reported ~~in Holdings. However, this will not have a material impact on the operating results~~as part of the ~~company.~~Company’s International segment.

1514

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003 and 2002

The following tables present the relevant underwriting results for the operating ~~segments for the three and nine months ended September 30, 2003 and 2002.~~segments:


U.S. Reinsurance
	Three Months Ended
	March 31,
(Dollars in thousands)		2004			2003

Gross written premiums	$	367,932		$	342,415
Net written premiums		294,288			256,111

Premiums earned	$	294,965		$	193,044
Incurred losses and loss adjustment expenses		211,773			131,839
Commission and brokerage		78,284			41,569
Other underwriting expenses		5,727			4,870

Underwriting (loss) gain	$	(819	)	$	14,766


U.S. Insurance
	Three Months Ended
	March 31,
(Dollars in thousands)		2004		2003

Gross written premiums	$	353,705	$	310,699
Net written premiums		264,175		233,220

Premiums earned	$	173,421	$	158,546
Incurred losses and loss adjustment expenses		144,848		115,314
Commission and brokerage		9,793		29,519
Other underwriting expenses		11,125		7,885

Underwriting gain	$	7,655	$	5,828

~~U.S. Reinsurance~~

(dollar values in thousands) Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Gross written premiums $ 533,497 $ 254,083 $ 1,259,026 $ 589,841
Net written premiums 412,614 201,264 951,193 508,380

Earned premiums $ 336,747 $ 153,940 $ 786,943 $ 458,587
Incurred losses and loss adjustment
expenses 266,010 113,282 597,590 327,425
Commission and brokerage 80,828 32,786 188,385 112,707
Other underwriting expenses 4,935 4,538 15,341 13,797
Underwriting (loss) gain ($ 15,026) $ 3,334 ($ 14,373) $ 4,658

~~U.S. Insurance~~

(dollar values in thousands) Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Gross written premiums $ 221,604 $ 196,527 $ 808,297 $ 616,937
Net written premiums 135,145 123,535 563,565 430,515

Earned premiums $ 173,680 $ 118,352 $ 505,448 $ 324,848
Incurred losses and loss adjustment
expenses 131,843 87,762 368,927 230,237
Commission and brokerage    21,152   30,868    81,221   78,895
Other underwriting expenses      9,231    5,861    25,714   16,788
Underwriting gain (loss) $   11,454 ($     6,139) $   29,586 ($     1,072)

1615

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003 and 2002

~~Specialty Underwriting~~

(dollar values in thousands) Three Months Ended Nine Months Ended

September 30, September 30,
2003 2002 2003 2002
Gross written premiums $ 124,090 $ 109,345 $ 393,762 $ 346,090
Net written premiums 94,316 97,450 301,388 320,233

Earned premiums $ 91,688 $ 89,239 $ 295,538 $ 307,786
Incurred losses and loss adjustment
expenses 58,649 71,484 202,747 238,082
Commission and brokerage 23,427 23,368 78,128 86,699
Other underwriting expenses 1,473 1,584 4,392 4,476
Underwriting gain (loss) $ 8,139 ($ 7,197) $ 10,271 ($ 21,471)

~~International~~

(dollar values in thousands) Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Gross written premiums $ 275,798 $ 133,673 $ 645,462 $ 358,280
Net written premiums 198,598 101,311 431,927 297,893

Earned premiums $ 174,780 $ 94,856 $ 386,258 $ 274,891
Incurred losses and loss adjustment
expenses 115,410 56,303 250,048 171,237
Commission and brokerage 32,751 20,850 70,646 54,806
Other underwriting expenses 4,221 3,053 11,491 9,374
Underwriting gain $ 22,398 $ 14,650 $ 54,073 $ 39,474


Specialty Underwriting
	Three Months Ended
	March 31,
(Dollars in thousands)		2004		2003

Gross written premiums	$	122,057	$	131,805
Net written premiums		100,693		95,086

Premiums earned	$	99,653	$	91,317
Incurred losses and loss adjustment expenses		63,866		75,632
Commission and brokerage		27,854		24,824
Other underwriting expenses		1,699		1,338

Underwriting gain (loss)	$	6,234	$	(10,477)


International
	Three Months Ended
	March 31,
(Dollars in thousands)		2004		2003

Gross written premiums	$	148,472	$	176,407
Net written premiums		116,106		100,290

Premiums earned	$	113,865	$	88,784
Incurred losses and loss adjustment expenses		58,989		53,405
Commission and brokerage		21,781		8,794
Other underwriting expenses		2,718		3,146

Underwriting gain	$	30,377	$	23,439

The following table reconciles the underwriting results for the operating segments to income before tax as reported in the consolidated statements of operations and comprehensive ~~income, with all dollar values presented in thousands:~~income.

Three Months Ended Nine Months Ended
September 30,    September 30,
2003 2002 2003 2002
Underwriting gain $ 26,965 $ 4,648 $  79,557 $   21,589
Net investment income   70,491 64,402    210,627    194,673
Realized (loss)    (11,843)   (7,074)      (23,922)      (45,944)

Net derivative expense            -   (1,009)            -        (1,259)
Corporate expenses      (1,115)   (1,545)       (3,074)        (1,545)
Interest expense    (14,181) (10,696)     (42,596)      (31,914)
Other income (expense)         625      540        1,202        (3,941)
Income before taxes    $ 70,942 $  49,266 $  221,794 $  131,659


	Three Months Ended
	March 31,
(Dollars in thousands)		2004			2003

Underwriting gain from segments	$	43,447		$	33,556
UK branch sale and related transactions		(25,894	)		--

Underwriting gain	$	17,553		$	33,556
Net investment income		65,823			67,714
Net realized capital loss		(27,046	)		(10,075	)
Corporate income (expense)		2,007			(979	)
Interest expense		(14,479	)		(14,340	)
Other (expense) income		(17,260	)		355

Income before taxes	$	26,598		$	76,231

1716

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003
The comparability of the International segment underwriting results has been impacted by the sale of the UK branch from Everest Re to Bermuda Re. In order to provide comparability, the 2003 results for the International segment need to be adjusted to exclude the UK branch activity. Effectively these adjustments remove the UK branch from 2003 in the International segment underwriting results allowing for the comparability of the results period-over-period. The following table reflects the underwriting results for the International segment for as reported for the three months ended March 31, 2004 and 2002

proforma for the three months ended March 31, 2003:


		International			International
		Segment			Segment
		2004			2003
		As Reported			Proforma

(Dollars in thousands)
Gross written premiums	$	148,472		$	97,706
Ceded written premiums		(32,366	)		(52,729	)

Net written premiums		116,106			44,977

Premiums earned	$	113,865		$	41,901
Incurred losses and loss adjustment expenses		58,989			22,219
Commission, brokerage, taxes and fees		21,781			4,220
Other underwriting expenses		2,718			2,221

Underwriting gain	$	30,377		$	13,241

The Company produces foreign business in its ~~United States~~U.S. and ~~International~~international operations. The net income and assets of the individual foreign countries in which the Company writes business are not identifiable in the Company’s financial records. ~~The largest country, other~~Other than the United States, in which the Company writes business, is the United Kingdom, with $86.2 and $219.9 million of gross written premiums for the three and nine months ended September 30, 2003, respectively. NoU.S., no other country represented more than 5% of the Company’s revenues.

10.12. Derivatives

The Company has in its product portfolio a credit default swap, ~~contract,~~ which it no longer ~~writes.~~offers. This ~~contract~~product meets the definition of a derivative under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”). The Company’s position in this contract is unhedged and is accounted for as a derivative in accordance with FAS 133. Accordingly, this contract is carried at fair value ~~with~~and is recorded in “Other liabilities” in the balance sheet and changes in fair value are recorded in the statement of ~~operations.~~operations and comprehensive income.

11.13. Investments — Interest Only Strips

Commencing with the second ~~quarter of 2003 and continuing in the third~~ quarter of 2003, the Company has invested in interest only strips of mortgage-backed securities (“~~Interest Only Strips”~~interest only strips”). These securities give the holder the right to receive interest payments at a stated coupon rate on an underlying pool of mortgages. The interest payments on the outstanding mortgages are guaranteed by ~~various entities.~~entities generally rated AAA. The ultimate cash flow from these investments is primarily dependent upon the average life of the mortgage pool. Generally, as market interest rates and more specifically market mortgage rates decline, mortgagees tend to refinance which will decrease the average life of a mortgage pool and decrease expected cash flows. Conversely, as market interest rates and more specifically mortgage rates rise, repayments will slow and the ultimate cash flows will tend to rise. Accordingly, the market value of these investments ~~tend~~tends to increase as general interest rates rise and decline as general interest rates fall. These movements are generally counter to the impact of interest rate ~~impact~~movements on the Company’s other fixed income investments. The ~~total~~ market value of the ~~Interest Only Strips~~interest only strips was $175.6 million at ~~September 30,~~March 31, 2004.

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and 2003 ~~was $151.6 million.~~

The Company accounts for its investment in ~~Interest Only Strips~~interest only strips in accordance with Emerging Issues Task Force No. 99-20, ~~Recognition~~“Recognition of Interest Income and Impairment on ~~Purchased~~Purchases and ~~Retained~~ Beneficial Interests in Securitized Financial ~~Assets, ("~~Assets” (“EITF ~~99-20"~~99-20”). EITF 99-20 sets forth the rules for recognizing interest income on all credit-sensitive mortgage and asset-backed securities and certain prepayment-sensitive securities including agency ~~interest-only~~interest only strips, whether purchased or retained in securitization, ~~and~~as well as the rules for determining when these securities must be written down to fair value because of impairment. EITF 99-20 requires a decrease in the valuation of residual interests in securitizations to be recorded as a reduction to the carrying value of the residual interests through a charge to earnings, rather than an unrealized loss in ~~stockholders~~stockholders’ equity, when any portion of the decline in fair value is attributable to, as defined by EITF 99-20, an impairment loss. As such, the Company recorded a realized capital loss from impairments on its ~~Interest Only Strips~~interest only strips of ~~$13.7 million, net of income tax benefit of $7.4~~$43.9 million for the three ~~and nine~~ months ended ~~September 30, 2003.~~

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

12. New Accounting Pronouncement

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). FAS 142 established new accounting and reporting standards for acquired goodwill and other intangible assets. It requires that an entity determine if other intangible assets have an indefinite useful life or a finite useful life. Goodwill and those intangible assets with indefinite useful lives are not subject to amortization and must be tested at least annually for impairment. Those with finite useful lives are subject to amortization and must be tested annually for impairment. This statement is effective for all fiscal quarters of all fiscal years beginning after December 15, 2001. The Company adopted FAS 142 on January 1, 2002. The implementation of this statement has not had a material impact on the financial position, results of operations or cash flows of the Company.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“FAS 150”). The Company adopted the accounting treatment in accordance with FAS 150, and have reclassified its Trust Preferred Securities as a liability in its financial statements beginning with the period ending June 30, 2003.

In January 2003, the FASB issued Financial Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN No. 46 addresses whether certain types of entities, referred to as variable interest entities (“VIEs”), should be consolidated in a company’s financial statements. During October 2003, the FASB deferred the effective date of FIN 46 provisions for VIEs created prior to February 1, 2003 to the first reporting period ending after December 15, 2003. The Company is awaiting the final rules before implementing FIN 46. Based on the current provisions, the Company believes that the implementation of FIN 46 will not have a material effect on the Company’s consolidated financial position.March 31, 2004.

13.14. Related-Party Transactions

During the normal course of business, the Company, through its affiliates, engages in reinsurance and brokerage and commission business transactions, which management believes to be at arm’s- length, with companies controlled by or affiliated with ~~one~~certain of ~~its~~Group’s outside directors. ~~These transactions are on terms as favorable as could have been obtained from unrelated third parties.~~ Such transactions, individually and in the aggregate, are ~~immaterial~~not material to the Company’s financial condition, results of operations and cash flows.

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and 2003

The Company engages in business transactions with Group, Bermuda Re and ~~Bermuda Re.~~Everest International Reinsurance, Ltd. (“Everest International”). Effective January 1, ~~2003,~~2004, Everest Re and Bermuda Re ~~entered into a~~renewed the 2003 Quota Share Reinsurance agreement, for what management believes to be arm’s-length consideration, whereby Everest Re’s Canadian Branch cedes to Bermuda Re 50% of its net retained liability on all new and renewal property business written during the terms of this agreement. Effective January 1, 2004, Everest Re and Bermuda Re amended the existing Quota Share Reinsurance agreement (the “whole account quota share”), through which Everest Re previously ceded 25% of its business to Bermuda Re so that effective January 1, 2004 Everest Re will cede 22.5% to Bermuda Re and 2.5% to Everest International of the net retained liability on all new and renewal covered business written during the term of this agreement. Effective January 1, 2003, Everest Re and Bermuda Re ~~revised~~amended the ~~Quota Share Reinsurance Agreement,~~whole account quota share, whereby Everest Re cedes to

~~EVEREST REINSURANCE HOLDINGS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(continued)~~

For the Three and Nine Months Ended September 30, 2003 and 2002

Bermuda Re 25% of the net retained liability on all new and renewal policies written during the term of this agreement. For policies effective January 1, 2002 through December 31, 2002, Everest Re ceded 20% of the net retained liability to Bermuda Re. Management believes the quota share arrangements ~~for both years~~ were entered into ~~as,~~on an arm’s-length basis and ~~reflect,~~reflects arm’s-length pricing. For premiums earned and losses incurred for the period January 1, 2002 through December 31, 2002, Everest Re, Everest National Insurance Company and Everest Security Insurance Company entered into an Excess of Loss Reinsurance Agreement with Bermuda Re, for what management believes to be ~~arm’s- length~~arm’s-length consideration, covering workers’ compensation losses occurring on and after January 1, 2002, as respects new, renewal and in force policies effective on that date through December 31, 2002. Bermuda Re is liable for any loss exceeding $100,000 per occurrence, with its liability not to exceed $150,000 per occurrence. Effective October 1, 2001, Everest Re and Bermuda Re entered into a loss portfolio reinsurance agreement, whereby Everest Re transferred all of its Belgium Branch net insurance exposures and reserves to Bermuda Re for what management believes to be arm’s-length consideration and subsequently closed its Belgium Branch. Effective September 19, 2000, Mt. McKinley and Bermuda Re entered into a loss portfolio transfer reinsurance agreement, whereby Mt. McKinley transferred, for what management believes to be arm’s-length consideration, all of its net insurance exposures and reserves to Bermuda Re.

EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(continued)

For the Three Months Ended March 31, 2004 and 2003

The following table summarizes the premiums and losses ceded by the Company to Bermuda ~~Re:~~

Three Months Ended Nine Months Ended
September 30, September 30
    (dollar values in thousands) 2003 2002 2003 2002
    Ceded written premium $ 269,487 $ 122,562 $ 704,579 $ 252,114
    Ceded earned premium $ 218,663 $   93,124 $ 561,902 $ 172,626
    Ceded losses and LAE $ 140,868 $   59,344 $ 361,083 $ 123,301

14. Subsequent Events

Effective October 10, 2003, the Company entered into a new three-year, $150.0 million revolving credit facility (the “New Credit Facility”), under similar terms, with a syndicate of lenders. Wachovia Bank is the administrative agent for the New Credit Facility. The required debt to capitalRe and ~~minimum interest coverage ratios have remained the same while the~~ Everest Re statutory surplus requirement was increased to $1.0 billion plus 25% of future aggregate net income and 25% of future aggregate capital contributions and Group no longer guarantees Holdings’ obligations under the New Credit Facility. This New Credit Facility will replace the existing Credit Facility which would have expired on December 19, 2003 and will continue to be used for liquidity and general corporate purposes. A $70.0 million borrowing under the New Credit Facility was used to pay off the $70.0 million indebtedness under the old Credit Facility.International, respectively:


Bermuda Re

	Three Months Ended
	March 31,

(Dollars in thousands)		2004		2003

Ceded written premiums	$	16,613	$	233,777
Ceded earned premiums	$	35,857	$	187,372
Ceded losses and LAE	$	54,622	$	121,726


Everest International

	Three Months Ended
	March 31,

(Dollars in thousands)		2004	2003

Ceded written premiums	$	6,240	$ -
Ceded earned premiums	$	2,811	$ -
Ceded losses and LAE	$	1,609	$ -

Part I — Item 2

EVEREST REINSURANCE HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATION

RESULTS OF OPERATIONS

Industry Conditions

The worldwide reinsurance and insurance businesses are highly competitive yet cyclical by product and market. ~~The terrorist attacks~~Competition with respect to the types of reinsurance and insurance business in which the Company is engaged is based on ~~September 11, 2001 (the “September 11 attacks”~~many factors, including the perceived overall financial strength of the reinsurer or insurer, A.M. Best Company’s (“A.M. Best”) ~~resulted in losses which reduced industry~~and/or Standard & Poor’s Rating Services (“Standard & Poor’s”) ratings of the reinsurer or insurer, underwriting expertise, the jurisdictions where the reinsurer or insurer is licensed or otherwise authorized, capacity and ~~were of sufficient magnitude to cause most individual companies to reassess their capital position, tolerance for risk, exposure control mechanisms and the pricing~~coverages offered, premiums charged, other terms and conditions at which they are willing to take on risk. The gradual and variable improving trend that had been apparent through 2000 and earlier in 2001 firmed significantly. This firming generally took the form of immediate and significant upward pressure on prices, more restrictive terms and conditions and a reduction of coverage limits and capacity availability. Such pressures were widespread, with variability depending on the product and markets involved, but mainly depending on the characteristics of the ~~underlying risk exposures.~~reinsurance and insurance business offered, services offered, speed of claims payment and reputation and experience in lines written. The ~~magnitude of~~Company competes in the ~~changes was sufficient to create temporary disequilibrium in some markets as individual buyers~~U.S. and ~~sellers adapted to changes in both their internal and market dynamics.~~

~~Through 2002, the Company’s markets, and~~international reinsurance and insurance markets with numerous international and domestic reinsurance and insurance companies. The Company’s competitors include independent reinsurance and insurance companies, subsidiaries or affiliates of established worldwide insurance companies, reinsurance departments of certain insurance companies and domestic and international underwriting operations, including underwriting syndicates at Lloyd’s. Some of these competitors have greater financial resources than the Company and have established long-term and continuing business relationships throughout the industry, which can be a significant competitive advantage. In addition, the potential for securitization of reinsurance and insurance risks through capital markets provides an additional source of potential reinsurance and insurance capacity and competition.

For the three months ended March 31, 2004, the improved market conditions, which developed during 2000 through 2003, have continued generally sustaining attractive pricing, terms and conditions. There are signs that pressures for incremental firming have abated for some classes and some property pricing has declined modestly while pricing for most casualty classes remain firm. More broadly, the industry remains exposed to fundamental issues that negatively impacted its aggregate capacity in ~~general,~~2002 and 2003, including weak investment market conditions and adverse loss emergence. Both of these tend to depress the industry’s aggregate financial performance and perceptions of financial strength of industry participants and thereby reduce the accumulation of competitive pressures as respects pricing, terms and conditions. These factors suggest that the current attractive market conditions are likely to persist through 2004 and into 2005.

Through 2003, reinsurance and insurance markets generally continued to firm, reflecting the continuing, although diminishing, implications of losses arising from the terrorist attacks of September 11, ~~attacks as well as~~2001 and more broadly, the impact of aggregate company reactions to broad and growing recognition that competition in the late 1990s reached extremes in many classes and markets, which ultimately led to inadequate pricing and overly broad terms, conditions and coverages. The effect of these extremes, which ~~has become~~became apparent through excessive loss emergence, ~~varies~~varied widely by company depending on product offerings, markets accessed, underwriting and operating practices, competitive strategies and business volumes. Across all market participants, however, the aggregate general effect ~~has been impaired~~was depressed financial results and erosion of the industry capital base. Coupled with deteriorating investment market conditions and results, and renewed concerns regarding longer term industry specific issues, including asbestos exposure and sub-par capital returns, these financial impacts introduced substantial, and in some cases extreme, pressure for the initiation and/or strengthening of corrective action by individual market participants. These pressures, aggregating across industry participants, ~~resulted~~reinforced the trend established in 2000 through 2003 toward firming prices, more restrictive terms and conditions, tightened coverage availability across most classes and markets and increasing concern with respect to the financial security of insurance and reinsurance providers.

~~Thus far in 2003 these general trends have continued,~~The Company has been generally sustaining upward pressure on pricing, continued constriction of terms, conditions and coverages and constrained capacity. There are signs that pressures for incremental firming may be abating for some property classes, but these are offset by clear signs that pressures for incremental firming continue to build for casualty classes in general. More broadly, the industry remains exposed to fundamental issues that negatively impacted 2002, including difficult investment market conditions and adverse loss emergence, both of which have continued to erode the industry’s aggregate financial performance and perceptions of the financial strength of industry participants. These factors indicate the current strong market conditions are likely to persist until further corrective actions, possibly combined with improved investment conditions, restore more normal competitive conditions.

These current trends reflect a clear reversal of the general trend from 1987 through 1999 toward increasingly competitive global market conditions across most lines of business, as reflected by decreasing prices and broadening contract terms. The earlier trend resulted from a number of factors, including the emergence of significant reinsurance capacity in Bermuda, changes in the Lloyd’s market, consolidation and increased capital levels in the insurance and reinsurance industries, as well as the emergence of new reinsurance and financial products addressing traditional exposures in alternative fashions.

~~Many of these factors continue to operate and may take on additional importance as the result of the firming market conditions that have emerged. As a result, although the Company is~~ encouraged by ~~recent~~ industry developments, which ~~operate~~have operated to its advantage, and more ~~generally,~~broadly, by continued attractive current market ~~conditions,~~conditions. However, the Company cannot predict with any reasonable certainty whether and to what extent these ~~favorable~~ conditions will persist. In particular, changes in the Lloyd’s market and the potential reemergence of a market share orientation amongst some industry participants, combined with improving and in some cases strong financial results, introduce uncertainty about the level of competitive pressures, which may emerge over 2004 and 2005.

Financial Summary

The Company’s management monitors and evaluates overall Company performance based principally upon underwriting and financial results. The following is a summary of consolidated underwriting results and net income for the three months ended March 31:


(Dollars in thousands)		2004			2003

Gross written premiums	$	992,166		$	961,326
Net written premiums		915,013			684,707

Premiums earned	$	800,719		$	531,691
Incurred losses and loss adjustment expenses		593,223			376,190
Commission, brokerage, taxes and fees		168,674			104,706
Other underwriting expenses		21,269			17,239

Underwriting gain		17,553			33,556

Net investment income		65,823			67,714
Net realized capital loss		(27,046	)		(10,075	)
Corporate income (expense)		2,007			(979	)
Interest expense		(14,479	)		(14,340	)
Other (expense) income		(17,260	)		355

Income before taxes		26,598			76,231
Income tax expense		19,258			16,643

Net Income	$	7,340		$	59,588


Loss ratio	74	.1%	70	.8%
Commission and expense ratio	21	.1%	19	.7%
Other underwriting expense ratio	2	.4%	3	.4%

Combined ratio	97	.6%	93	.9%

The comparability of the above financial results has been impacted by the sale of the UK branch from Everest Re to Bermuda Re and the associated Everest Re and Bermuda Re reserve indemnity agreement as well as sale related adjustments to the 2003 and 2002 quota share cessions. In order to provide comparability of the financial results between the years, the 2003 results need to be adjusted to exclude the UK branch activity wherein gross written premiums, net written premiums, premiums earned, incurred losses and LAE and underwriting expenses would decrease by $78.7 million; $55.3 million, $46.9 million, $31.2 million, and $5.5 million, respectively, resulting in a net decrease in underwriting gain of $10.2 million. Additionally, in order to provide comparability of the financial results between the years, the 2004 results need to be adjusted to exclude the one time effects associated with the branch sale wherein ceded written premiums would increase by $139.8 million and net written premiums, premiums earned, incurred losses and LAE and underwriting expenses would decrease by $118.8 million, $113.7 million and $31.0 million, respectively, resulting in a net decrease in underwriting gain of $25.9 million. Effectively these adjustments remove the UK branch from 2003 underwriting results and adjust 2004 underwriting results to exclude the one-time effects related to the sale. The following tables reflect a reconciliation from reported to proforma underwriting results for the three months ended March 31, 2004 and 2003:


				Sale
		2004		Related			2004
	As Reported		Transactions				Proforma

(Dollars in thousands)


Gross written premiums	$	992,166	$	--		$	992,166
Ceded written premiums		77,153		(139,751	)		216,904


Net written premiums		915,013		139,751			775,262

Premiums earned	$	800,719	$	118,815		$	681,904
Incurred losses and loss adjustment expenses		593,223		113,747			479,476
Commission, brokerage, taxes and fees		168,674		30,962			137,712
Other underwriting expenses		19,262		--			19,262

Underwriting gain	$	19,560	$	(25,894	)	$	45,454


Loss ratio	74	.1%	70	.3%
Commission ratio	21	.1%	20	.2%
Other underwriting expense ratio	2	.4%	2	.8%

Combined ratio	97	.6%	93	.3%



		2003	UK branch				2003
	As Reported		Adjustment				Proforma

(Dollars in thousands)


Gross written premiums	$	961,326	$	(78,701	)	$	882,625
Ceded written premiums		276,619		(23,388	)		253,231


Net written premiums		684,707		(55,313	)		629,394

Premiums earned	$	531,691	$	(46,883	)	$	484,808
Incurred losses and loss adjustment expenses		376,190		(31,186	)		345,004
Commission, brokerage, taxes and fees		104,706		(4,574	)		100,132
Other underwriting expenses		18,218		(925	)		17,293

Underwriting gain	$	32,577	$	(10,198	)	$	22,379


Loss ratio	70	.8%	71	.2%
Commission ratio	19	.7%	20	.7%
Other underwriting expense ratio	3	.4%	3	.6%

Combined ratio	93	.9%	95	.4%

In the remainder of this Financial Summary section and the following Segment Information section, all analysis relates to the comparable proforma information except where indicated.

As indicated in the preceding Industry Conditions section, the reinsurance and insurance industry has experienced favorable market conditions in recent years. The favorable market conditions, coupled with the Company’s financial strength, strategic positioning and market and underwriting expertise, enabled it to increase its volume of business. As a result, gross written premiums for the three months ended March 31, 2004 increased by 12.4% compared with the three months ended March 31, 2003. Due to the nature of its businesses, the Company is unable to precisely differentiate the effects of price changes as compared to the effects of changes in exposure. Similarly, because individual reinsurance arrangements often reflect revised coverages, structuring, pricing, terms and/or conditions from period to period, the Company is unable to differentiate between the premium volumes attributable to new business as compared to renewal business. Management believes however, that on balance, the Company’s growth is reasonably balanced between growth in exposures underwritten and increased pricing and/or improved terms and conditions. Management believes further that market conditions are generally more favorable for casualty business classes than for property business classes; however, management notes that it continues to see business opportunities in most product classes and markets. Although premium volumes have increased, the Company continues to decline business that does not meet its objectives regarding underwriting profitability.

The components of the underwriting gain (loss) are highly correlated to the level of premium volume. The amount of net written premiums reflects gross written premiums less ceded premiums. Premiums ceded were $216.9 million (21.9% of gross written premiums) and $253.2 million (28.7% of gross written premiums) for the three months ended March 31, 2004 and 2003, respectively. The decrease in ceded premiums was principally attributable to the sale of the UK branch in which the business no longer resides with the Company; therefore, no cessions on that book of business are made in conjunction with the quota share agreement.

Premiums earned increased to $681.9 million from $484.8 million for the three months ended March 31, 2004 compared to the three months ended March 31, 2003. The change reflects period-to period changes in net written premiums and business mix together with normal variability in earnings patterns. Business mix changes occur not only as the Company shifts emphasis between products, lines of business, distribution channels and markets but also as individual contracts renew or non-renew, almost always with changes in coverage, structure, prices and/or terms, and as new contracts are accepted with coverages, structures, prices and/or terms different from those of expiring contracts.

Incurred losses and LAE increased primarily as a result of the increased premium volume. Premiums earned increased 40.7% and incurred losses and LAE increased by 39.2% reflecting that part of the premium increase, represented improvement in pricing, terms and conditions, as opposed to an increase in exposures. Partially offsetting the impact of improved pricing was the effect of prior year loss reserve strengthening. The increase in losses relating to prior period reserve strengthening was $24.6 million and $27.5 million for three months ended March 31, 2004, and 2003, respectively.

Commission, brokerage and tax expense increased $37.6 million or 37.5%, as a result of the increasing premium volume and earnings, which generally vary in direct proportion to premium. Expenses also increased slightly due to the increase in business.

Net investment income decreased $1.9 million to $65.8 million for the three months ended March 31, 2004 from $67.7 in the three months ended March 31, 2003 due to $6.0 million decrease from the sale of the UK branch, partially offset by increases in cash and invested assets. The Company’s cash flow from operations was $246.9 million and $220.7 million for the three months ended March 31, 2004 and 2003, respectively.

Net realized capital losses of $27.0 million and $10.1 million for the three months ended March 31, 2004 and 2003, respectively, were primarily the result of the impairment of interest only strips in accordance with EITF 99-20 and write-downs in the value of securities deemed to be impaired on an other than temporary basis, partially offset by realized gains.

The Company generated an income tax expense of $19.3 million and $16.6 million for the three months ended March 31, 2004 and 2003, respectively, principally reflecting one time tax expenses related to the sale of the UK branch.

The decrease in net income to $7.3 million from $59.6 million for the three months ended March 31, 2004 and 2003, respectively, is primarily due to the sale and related transactions discussed above.

The Company’s stockholders’ equity increased to $1,557.9 million as of March 31,2004 from $1,546.9 million as of December 31, 2003. This increase is primarily due to net income for the period and an increase in unrealized appreciation on the Company’s investments. Management believes that the Company generally has sufficient capital and resources to meet its obligations.

Segment Information

The Company, through its subsidiaries, operates in four segments: U.S. Reinsurance, U.S. Insurance, Specialty Underwriting and International. The U.S. Reinsurance operation writes property and casualty reinsurance, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies within the ~~United States.~~U.S. The U.S. Insurance operation writes property and casualty insurance primarily through general agent relationships and surplus lines brokers within the ~~United States.~~U.S. The Specialty Underwriting operation writes ~~accident and health,~~A&H, marine, aviation and surety business within the ~~United States~~U.S. and worldwide through brokers and directly with ceding companies. The International operation writes property and casualty reinsurance through the Company’s branches in ~~London,~~ Canada and Singapore, in addition to foreign business written through the Company’s Miami and New Jersey ~~headquarters and Miami office.~~offices.

~~Group has recently announced that one of its subsidiaries,~~Effective January 1, 2004, Everest Re ~~has reached agreement, subject to regulatory approval, to sell~~sold its United Kingdom branch to ~~another~~Bermuda Re, a Bermuda insurance company and a direct subsidiary of ~~Group’s subsidiaries, Bermuda Re. Business~~Group. Prior to 2004, business for this branch ~~is currently reported through~~was previously included in the results of the International segment. ~~Upon completion~~The comparability of the ~~transaction,~~financial results has been impacted by the sale of the UK branch ~~business will no longer be reported in Holdings. However, this will not have a material impact on the operating results~~from Everest Re to Bermuda Re. In order to provide comparability of the ~~Company.~~financial results between the years, the 2003 results for the International segment need to be adjusted to exclude the UK branch activity wherein gross written premiums, net written premiums, premiums earned, incurred losses and LAE and underwriting expenses would decrease by $78.7 million; $55.3 million, $46.9 million, $31.2 million, and $5.5 million, respectively, resulting in a net decrease in underwriting gain of $10.2 million. Effectively these adjustments remove the UK branch from 2003 International underwriting results allowing for the comparability of those results period-over-period. The following table reflects reconciliation from reported to proforma underwriting results for the three months ended March 31, 2003 for the International segment:

~~Group also announced that another subsidiary, Everest National Insurance Company, has opened a regional office~~26


		International						International
		Segment						Segment
		2003			UK branch			2003
		As Reported			Adjustment		Proforma

(Dollars in thousands)
Gross written premiums	$	176,407		$	(78,701	)	$	97,706
Ceded written premiums		(76,117	)		(23,388	)		(52,729	)

Net written premiums		100,290			(55,313	)		44,977

Premiums earned	$	88,784		$	(46,883	)	$	41,901
Incurred losses and loss adjustment expenses		53,405			(31,186	)		22,219
Commission, brokerage, taxes and fees		8,794			(4,574	)		4,220
Other underwriting expenses		3,146			(925	)		2,221

Underwriting gain	$	23,439		$	(10,198	)	$	13,241


Loss ratio	60	.2%	53	.0%
Commission ratio	9	.9%	10	.1%
Other underwriting expense ratio	3	.5%	5	.3%

Combined ratio	73	.6%	68	.4%

All the comparative analysis in ~~California~~this Segment Information section relates to ~~better serve its western U.S. Insurance business. The additional office will not affect segment reporting.~~the proforma information in the above table except where indicated otherwise.

Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002

Premiums. Gross written premiums ~~written~~ increased ~~66.6%~~12.4% to ~~$1,155.0~~$992.2 million in the three months ended ~~September 30, 2003~~March 31, 2004 from ~~$693.5~~$882.6 million in the three months ended ~~September 30, 2002,~~March 31, 2003, as the Company took advantage of the general firming of rates, terms and conditions and selected growth opportunities, while continuing to maintain a disciplined underwriting approach. Due to the nature of its businesses, the Company is unable to precisely differentiate the effects of price changes as compared to changes in exposure. Similarly, because individual reinsurance arrangements often reflect revised coverages, structuring, pricing, terms and/or conditions from period to period, the Company is unable to precisely differentiate between the premium volume attributable to new business as compared to renewal business. Management believes however that, during the period, the more significant element of its period to period growth related, for most of its operations, to growth in exposures underwritten, with a lesser but still significant element relating to increased pricing and/or improved terms and conditions. Management believes further that market conditions are generally more favorable for casualty business classes than for property business classes although pricing for the latter generally remains at/or above attractive levels. As each of the Company’s operations monitors conditions for the products they offer in the markets they serve and adjusts its marketing and underwriting activities opportunistically, the current period reflected growth across all operations. Although premium volumes have increased significantly, the Company continued to decline business that did not meet its objectives regarding underwriting profitability.

Premium growth areas included an 110.0% ($279.4 million) increase in the U.S. Reinsurance operation, principally related to a $201.5 million increase in treaty casualty business and a $72.7 million increase in treaty property business. The International operation increased ~~106.3%~~52.0% ($~~142.1~~50.8 million), primarily due to a ~~$93.4 million increase in premiums from the London branch, a $27.8~~$41.6 million increase in international business written through the ~~home office~~Miami and New Jersey offices representing primarily Latin American business and an ~~$18.1~~$8.2 million increase in Canadian business. The U.S. Insurance operation grew ~~12.8%~~13.8% ($~~25.1~~43.0 million), principally as a result of a ~~$16.2~~$46.7 million increase in ~~excess and surplus lines insurance and~~program business outside of the workers’ compensation class, partially offset by a ~~$7.4~~$3.7 million decrease in workers’ compensation business. The U.S. Reinsurance operation grew 7.5% ($25.5 million), principally related to a $99.0 million increase in ~~errors~~treaty casualty business, partially offset by a $52.6 million decrease in treaty property business and ~~omissions exposures.~~a $20.2 million decrease in facultative business. The Specialty Underwriting operation ~~increased 13.5%~~decreased 7.4% ($~~14.7~~9.7 million), resulting primarily from a ~~$24.7~~$9.3 million ~~increase~~decrease in ~~accident~~A&H business and ~~health business~~a $1.5 million decrease in marine and aviation, partially offset by an ~~$8.1 million decline~~increase in ~~marine business.~~surety business of $1.1 million.

Ceded premiums ~~increased~~decreased to ~~$314.3~~$216.9 million for the three months ended March 31, 2004 from $253.2 million in the three months ended ~~September 30,~~March 31, 2003 ~~from $169.9~~and net written premiums increased by 23.2% to $775.3 million in the three months ended September 30, 2002. This increase was principally attributable to $269.2 million of ceded premiums relating to quota share reinsurance agreements between Everest Re and Bermuda Re. Under these agreements Everest Re cedes 25% of its net retained liability on all new and renewal policies written for underwriting year 2003, Everest Re cedes 20% of its net retained liability on all new and renewal policies written for underwriting year 2002, and Everest Re’s Canadian branch cedes 50% of its net retained liability on all new and renewal property policies written for the 2003 underwriting year. Ceded premiums for the three months ended September 30, 2002 included $4.5 million and $11.9 million in adjustment premium relating to claims made under the 2001 and 2000 accident year aggregate excess of loss elements of the Company’s corporate retrocessional programs, respectively. There were no such adjustment premiums ceded under the Company’s corporate retrocessional program in the three months ended September 30, 2003.

~~Net premiums written increased by 60.6% to $840.7~~March 31, 2004 from $629.4 million in the three months ended ~~September 30, 2003 from $523.6 million~~March 31, 2003. This increase in ~~the three months ended September 30, 2002, reflecting~~net written premium reflects the increase in gross written premiums ~~written,~~ combined with the ~~growth~~decrease in ceded premiums.

Premium Revenues. Net premiums earned increased by ~~70.2%~~40.7% to ~~$776.9~~$681.9 million in the three months ended ~~September 30, 2003~~March 31, 2004 from ~~$456.4~~$484.8 million in the three months ended ~~September 30, 2002.~~March 31, 2003. Contributing to this increase was ~~an 118.8%~~a 171.8% ($~~182.8~~72.0 million) increase in the International operation, a 52.8% ($101.9 million) increase in the U.S. Reinsurance operation, ~~an 84.3%~~a 9.4% ($~~79.9 million) increase in the International operation, a 46.7% ($55.3~~14.9 million) increase in the U.S. Insurance operation, and a ~~2.7%~~9.1% ($~~2.4~~8.3 million) increase in the Specialty Underwriting operation. All of these changes reflect period-to-period changes in net written premiums and business mix, together with normal variability in earnings patterns. Business mix changes occur not only as the Company shifts emphasis between products, lines of business, distribution channels and markets, but also as individual contracts renew or non-renew, almost always with changes in coverage, structure, prices and/or terms, and as new contracts are accepted with coverages, structures, prices and/or terms different from those of expiring contracts. As premium reporting, earnings, loss and commission characteristics derive from the provisions of individual contracts, the continuous turnover of individual contracts, arising from both strategic shifts and day to day underwriting, can and does introduce appreciable background variability in various underwriting line items.

Expenses. Incurred ~~loss~~losses and LAE increased by ~~73.9%~~39.0% to ~~$571.9~~$479.5 in the three months ended ~~September 30, 2003~~March 31, 2004 from ~~$328.8~~$345.0 million in the three months ended ~~September 30, 2002.~~March 31, 2003. The increase in incurred losses and LAE was principally attributable to the increase in net premiums ~~earned, the impact of changes in the Company’s mix of business and~~earned.

Net prior period reserve adjustments for ~~prior period losses.~~

~~Net reserve adjustments for non-asbestos and environmental~~non-A&E exposures for the three months ended ~~September 30, 2003,~~March 31, 2004 were ~~$46.2 million, and are~~$20.4 million. The adjustments were comprised of ~~$26.7~~an $8.8 million ~~related~~increase relating principally to the casualty ~~and, in particular,~~exposures (including directors ~~and~~& officers liability ~~exposures of~~exposures) in the U.S. Reinsurance operation, ~~$8.2~~and an $11.6 million ~~related mainly~~increase relating principally to ~~the casualty exposures of the London~~general liability ($7.5 million), and ~~Canadian branch units of the International operation, $8.3 million relating~~ to ~~the workers~~a lesser extent medical malpractice and workers’ compensation exposures ofin the U.S. Insurance ~~operation and $3.0 million relating to the surety exposures of the Specialty Underwriting~~ operation.

The ~~increase for the U.S. Insurance operation relates to the 2001 and 2002 accident exposure years and all other reserve adjustments relate to the 1996-1999 accident exposure years.~~

~~Net~~net prior period reserve adjustments related to ~~asbestos and environmental~~A&E exposures were ~~$5.2~~$4.2 million and $8.5 million for the three months ended ~~September 30, 2003.~~March 31, 2004 and 2003, respectively. The Company has ~~asbestos and environmental~~A&E exposure ~~principally relating~~related to contracts written by the Company prior to 1986 and ~~commutations thereof.~~to claim obligations acquired as part of the Mt. McKinley acquisition in September 2000. The development on business written by the Company, net of reinsurance, was ~~$ 5.2~~$4.2 million and the net development on the acquired business was $0.0 million. Substantially all of the Company’s ~~asbestos and environmental~~A&E exposures relate to insurance and reinsurance contracts with coverage periods prior to 1986.

~~In all cases, the prior period development reflects management’s judgment as to the implications of losses reported during the period on the Company’s reserve balances.~~

Incurred losses and LAE include catastrophe losses, which include the impact of both current period events and favorable and unfavorable development on prior period events, and are net of reinsurance. Catastrophe losses are net of specific reinsurance, but before recoveries under corporate level reinsurance and potential incurred but not reported (“IBNR”) reserve offset. A catastrophe is ana property event ~~that causes a pre-tax loss on property exposures~~with expected reported losses of at least $5.0 million before corporate level reinsurance and ~~has an event date of January 1, 1988 or later.~~taxes. Catastrophe losses, net of contract specific cessions were ~~$6.5~~$1.8 million in the three months ended ~~September 30, 2003, relating principally to hurricanes Fabian and Isabel,~~March 31, 2004, compared to ~~$10.2~~$0.0 million in the three months ended ~~September 30, 2002.~~March 31, 2003.

2428

Incurred losses and LAE for the three months ended ~~September 30, 2003~~March 31, 2004 reflected ceded losses and LAE of ~~$186.9~~$137.3 million compared to ceded losses and LAE in the three months ended ~~September 30, 2002~~March 31, 2003 of ~~$130.4~~$115.2 million. ~~Ceded losses and LAE~~The increase in ~~the three months ended September 30, 2003 include $131.6 million of~~ ceded losses ~~relating to~~is primarily the ~~quota share reinsurance transactions noted earlier between the Company and Bermuda Re. The ceded losses and LAE for the three months ended September 30, 2002 included $9.6 million and $22.0 million~~result of fluctuations in losses ceded under the ~~2001 and 2000 accident year aggregate excess of loss component of~~specific reinsurance coverages purchased by the Company’s corporate retrocessional program, respectively. There were no comparable losses ceded to the accident year aggregate excess of loss components of the Company’s corporate retrocessional program in the three months ended September 30, 2003.U.S. Insurance operation.

The segment components of the increase in incurred losses and LAE in the three months ended ~~September 30, 2003~~March 31, 2004 from the three months ended ~~September 30, 2002~~March 31, 2003 were ~~an 134.8%~~a 165.5% ($~~152.7~~36.8 million) increase in the International operation, a 60.6% ($79.9 million) increase in the U.S. Reinsurance operation, ~~an 105.0% ($59.1 million) increase in the International operation,~~ and a ~~50.2%~~25.6% ($~~44.1~~29.5 million) increase in the U.S. Insurance operation, partially offset by a ~~18.0%~~15.6% ($~~12.8~~11.8 million) decrease in the Specialty Underwriting operation. These ~~increases~~changes generally reflect ~~the increases~~fluctuations in premiums earned, ~~premiums,~~ modest reductions in the current year loss ~~expectationassumptions~~expectation assumptions for most segments reflecting continued improvement in market conditions and pricing, and the prior period reserve development discussed above. Incurred losses and LAE for each operation were also impacted by variability relating to changes in ~~the level of premium volume and~~ mix of business by class and type.

The Company’s loss and LAE ratio, ~~(“loss ratio”),~~ which is calculated by dividing incurred losses and LAE by net premiums earned, ~~increased~~decreased by ~~1.5~~0.9 percentage points to ~~73.6%~~70.3% in the three months ended ~~September 30, 2003~~March 31, 2004 from ~~72.1%~~71.2% in the three months ended ~~September 30, 2002,~~March 31, 2003, reflecting the incurred losses and LAE discussed above.

The following table shows the loss ratios for each of the Company’s operating segments for the three months ended ~~September 30, 2003~~March 31, 2004 and ~~2002.~~2003. The loss ratios for all operations were impacted by the factors noted above.


Operating Segment Loss Ratios
Segment Loss Ratios				Segment Loss Ratios

Segment	2003	2002	20	04	20	03

U.S. Reinsurance	79.0%	73.6%	71	.8%	68	.3%
U.S. Insurance	75.9%	74.2%	83	.5%	72	.7%
Specialty Underwriting	64.0%	80.1%	64	.1%	82	.8%
International	66.0%	59.4%	51	.8%	53	.0%

~~Underwriting~~Segment underwriting expenses increased by ~~43.9%~~36.5% to ~~$179.1~~$159.0 million in the three months ended ~~September 30, 2003~~March 31, 2004 from ~~$124.5~~$116.4 million in the three months ended ~~September 30, 2002.~~March 31, 2003. Commission, brokerage, taxes and fees increased by ~~$50.3~~$37.6 million, principally reflecting an increase ~~of $134.0 million~~ in ~~expenses due to~~ premium volume ~~which was partially offset by an increase~~and changes in ~~ceded commissions~~the mix of ~~$83.7 million. Other~~business. Segment other underwriting expenses increased by ~~$4.4 million as the Company expanded operations to support it’s increased business volume.~~$5.0 million. Contributing to the ~~$54.7 million~~ increase in expenses was a 180.4% ($11.6 million) increase in the International operation, an ~~129.8%~~80.9% ($~~48.4~~37.6 million) increase in the U.S. Reinsurance operation and a ~~54.7%~~13.0% ($~~13.1~~3.4 million) increase in the ~~International~~Specialty Underwriting operation, ~~which were~~ partially offset by a ~~17.3%~~44.1% ($~~6.3~~16.5 million) decrease in the U.S. Insurance ~~operation and a 0.2% ($0.1 million) decrease in the Specialty Underwriting~~ operation. The changes for each operation’s expenses principally resulted from changes in commission expenses related to changes in premium volume and business mix by class and type and, in some cases, changes in the use of reinsurance, including with Bermuda Re, and the underwriting performance of the underlying business. The Company’s expense ratio, which is calculated by dividing underwriting expenses by net premiums earned, was ~~23.1%~~23.0% for the three months ended ~~September 30, 2003~~March 31, 2004 compared to ~~27.3%~~24.3% for the three months ended ~~September 30, 2002.~~March 31, 2003.

2529

The Company’s combined ratio, which is the sum of the loss and expense ratios, decreased by ~~2.6~~2.1 percentage points to ~~96.7%~~93.3% in the three months ended ~~September 30, 2003~~March 31, 2004 compared to ~~99.3%~~95.4% in the three months ended ~~September 30, 2002.~~March 31, 2003.

The following table shows the combined ratios for each of the Company’s operating segments for the three months ended ~~September 30, 2003~~March 31, 2004 and ~~2002.~~2003. The combined ratios for all operations were impacted by the loss and expense ratio variability noted above.


Operating Segment Combined Ratios
Segment Combined Ratios			Segment Combined Ratios

Segment	2003	2002		20	04	20	03

U.S. Reinsurance	104.5%	97.8%		100	.3%	91	.9%
U.S. Insurance	93.4%	105.2%		95	.7%	96	.3%
Specialty Underwriting	91.1%	108.1%		93	.7%	111	.5%
International	87.2%	84.6%		73	.3%	68	.4%

Investment Results.Net investment income ~~increased 9.5%~~decreased 2.8% to ~~$70.5~~$65.8 million in the three months ended ~~September 30, 2003~~March 31, 2004 from ~~$64.4~~$67.7 million in the three months ended ~~September 30, 2002, principally reflecting the effects of investing the $944.0~~March 31, 2003 due to $6.0 million ~~of cash flow from operations in the twelve months ended September 30, 2003, and $203.4 million of net proceeds~~decrease from the ~~issuance~~sale of ~~trust preferred securities in November 2002,~~the UK branch, partially offset by ~~the effects of the lower interest rate environment.~~increases in cash and invested assets.

The following table shows a comparison of various investment yields for the periods indicated:


	2003	2002


Imbedded pre-tax yield of cash and invested
assets at September 30, 2003 and 2002	4.7%	5.6%
Imbedded after-tax yield of cash and invested
assets at September 30, 2003 and 2002	3.9%	4.4%
Annualized pre-tax yield on average cash and
invested assets for the three months ended
September 30, 2003 and 2002	5.0%	5.6%
Annualized after-tax yield on average cash and
invested assets for the three months ended
September 30,2003 and 2002	4.0%	4.4%

2003 2002
Imbedded pre-tax yield of cash and invested
  assets at September 30, 2003 and 2002 4.7% 5.6%
Imbedded after-tax yield of cash and invested
  assets at September 30, 2003 and 2002 3.9% 4.4%
Annualized pre-tax yield on average cash and
  invested assets for the three months ended
  September 30, 2003 and 2002 5.0% 5.6%
Annualized after-tax yield on average cash and
  invested assets for the three months ended
  September 30,2003 and 2002 4.0% 4.4%


	20	04	20	03

Imbedded pre-tax yield of cash and invested assets at
March 31, 2004 and December 31, 2003	4	.5%	4	.7%
Imbedded after-tax yield of cash and invested assets at
March 31, 2004 and December 31, 2003	3	.7%	3	.8%
Annualized pre-tax yield on average cash and invested
assets for the three months ended March 31, 2004 and 2003	4	.3%	5	.3%
Annualized after-tax yield on average cash and invested
assets for the three months ended March 31, 2004 and 2003	3	.5%	4	.3%

Net realized capital losses of ~~$11.8~~$27.0 million in the three months ended ~~September 30, 2003,~~March 31, 2004 reflected realized capital losses on the Company’s investments of ~~$22.5~~$44.1 million which included ~~$1.2~~$43.9 million ~~relating~~related to the write-downs in the value of ~~securities~~interest only strips deemed to be impaired on an other than temporary basis ~~and $21.1 million related to the impairment on Interest Only Strips~~ in accordance with EITF 99-20, partially offset by ~~$10.6~~$17.0 million of realized capital ~~gains, which included $5.3 million of realized capital gains on the Interest Only Strips, compared to net~~gains. Net realized capital losses ~~of $7.1~~were $10.1 million in the three months ended ~~September 30, 2002. The net realized capital losses in the three months ended September 30, 2002 reflected~~March 31, 2003 reflecting realized capital losses of ~~$18.4~~$15.9 million, which included ~~$8.7~~$14.1 million relating to write-downs in the value of securities deemed to be impaired on an other than temporary basis, partially offset by ~~$11.3~~$5.8 million of realized capital gains.

Interest expense for the three months ended September 30, 2003 was $10.1 million compared to $10.7 million for the three months ended September 30, 2002. Interest expense for the three months ended September 30, 2003 reflected $9.7 million relating to the senior notes and $0.3 million relating to borrowings under the revolving Credit Facility. Interest expense for the three months ended September 30, 2002 reflected $9.7 million relating to senior notes and $1.0 million relating to borrowings under the revolving Credit Facility.

Distributions on the trust preferred securities are cumulative and pay quarterly in arrears. Distributions relating to the trust preferred securities for the three months ended September 30, 2003 were $4.1 million. The securities were issued in November 2002.

Other income for the three months ended September 30, 2003 was $0.6 million compared to other income of $0.5 million for the three months ended September 30, 2002. This change is primarily due to recognition of gains previously deferred under retroactive reinsurance agreements with affiliates, partially offset by higher foreign exchange losses.

The Company has in its product portfolio a credit default swap, ~~contract,~~ which it no longer ~~writes.~~offers. This ~~contract~~product meets the definition of a derivative under FAS 133. There was no net derivative expense from this credit default transaction for the three months ended ~~September 30, 2003~~March 31, 2004 and ~~a $1.0 million derivative~~2003.

Other expense for the three months ended ~~September~~ March 31, 2004 was $17.2 million compared to other income of $0.4 million for the three months ended March 31, 2003. This change is primarily due to a deferred gain adjustment on the retroactive reinsurance agreements with affiliates.

30 ~~2002.~~

Interest expense for the three months ended March 31, 2004 and 2003 was $14.5 million and $14.3 million, respectively. Interest expense for the three months ended March 31, 2004 included $9.7 million relating to the senior notes, $4.4 million relating to the junior subordinated debt securities and $0.3 million relating to borrowings under the revolving credit facility. Interest expense for the three months ended March 31, 2003 included $9.7 million relating the senior notes, $4.2 million relating to the junior subordinated debt securities and $0.4 million relating to borrowings under the revolving credit facility.

Income Taxes. The Company recognized income tax expense of ~~$10.5~~$19.3 million in the three months ended ~~September 30, 2003~~March 31, 2004 compared to an income tax ~~benefit~~expense of ~~$14.5~~$16.6 million in the three months ended ~~September 30, 2002.~~March 31, 2003. The ~~decrease~~increase in taxes ~~generally resulted from an increase in realized capital losses,~~relates principally to the sale of the UK branch, which is partially offset by ~~improved underwriting and investment results.~~the tax benefit of the realized capital losses.

Net Income. Net income was ~~$60.5million in the three months ended September 30, 2003 compared to a net income of $34.8~~$7.3 million in the three months ended ~~September 30, 2002,~~March 31, 2004 compared to net income of $59.6 million in the three months ended March 31, 2003, reflecting the factors noted above.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002

~~Premiums.~~ Gross premiums written increased 62.6% to $3,106.6 million in the nine months ended September 30, 2003 from $1,911.1 million in the nine months ended September 30, 2002, as the Company took advantage of the general firming of rates, terms and conditions and selected growth opportunities, while continuing to maintain a disciplined underwriting approach. Due to the nature of its businesses, the Company is unable to precisely differentiate the effects of price changes as compared to changes in exposure. Similarly, because individual reinsurance arrangements often reflect revised coverages, structuring, pricing, terms and/or conditions from period to period, the Company is unable to precisely differentiate between the premium volume attributable to new business as compared to renewal business. Management believes however that, during the period, the more significant element of its period to period growth related, for most of its operations, to growth in exposures underwritten, with a lesser but still significant element relating to increased pricing and/or improved terms and conditions. Management believes further that market conditions are generally more favorable for casualty business classes than for property business classes although pricing for the latter generally remains at/or above attractive levels. As each of the Company’s operations monitors conditions for the products they offer, and in the markets they serve and adjust its marketing and underwriting activities opportunistically, the current period saw growth across all operations. Although premium volumes have increased significantly, the Company continued to decline business that did not meet its objectives regarding underwriting profitability.

Premium growth areas included an 113.5% ($669.2 million) increase in the U.S. Reinsurance operation, principally related to a $418.3 million increase in treaty casualty business, an $181.1 million increase in treaty property business and a $59.0 million increase in facultative business. The International operation increased 80.2% ($287.2 million) primarily due to an $192.2 million increase in premiums from the London branch, a $40.5 million increase in international business written through the home office representing primarily Latin American business and a $43.9 million increase to Canadian business. The U.S. Insurance operation grew 31.0% ($191.4 million) principally as a result of an $83.9 million increase in workers’ compensation and a $53.9 million increase in excess and surplus lines insurance. The Specialty Underwriting operation increased 13.8% ($47.7 million) resulting primarily from a $47.8 million increase in accident and health business.

Ceded premiums increased to $504.5 million in the nine months ended September 30, 2003 from $354.0 million in the nine months ended September 30, 2002. This increase was principally attributable to $700.8 million of ceded premiums relating to quota share reinsurance agreements between Everest Re and Bermuda Re. Under these agreements Everest Re cedes to Bermuda Re 25% of its net retained liability on all new and renewal policies written for underwriting year 2003, Everest Re cedes to Bermuda Re 20% of its net retained liability on all new and renewal policies written for underwriting year 2002, and Everest Re’s Canadian branch cedes to Bermuda Re 50% of its net retained liability on all new and renewal property policies written for the 2003 underwriting year. In addition, ceded premiums for the nine months ended September 30, 2003 included $20.0 million in adjustment of the Company’s corporate retrocessional programs, while ceded premiums for the nine months ended September 30, 2002 included $5.1 million and $11.9 million in adjustment premium relating to claims made under the 2001 and 2000 accident year aggregate excess of loss elements of the Company’s corporate retrocessional programs, respectively.

Net premiums written increased by 44.4% to $2,248.1 million in the nine months ended September 30, 2003 from $1,557.0 million in the nine months ended September 30, 2002, reflecting the increase in gross premiums written, combined with the growth in ceded premiums.

~~Premium Revenues.~~ Net premiums earned increased by 44.5% to $1,974.2 million in the nine months ended September 30, 2003 from $1,366.1 million in the nine months ended September 30, 2002. Contributing to this increase was a 71.6% ($328.4 million) increase in the U.S. Reinsurance operation, a 55.6% ($180.6 million) increase in the U.S. Insurance operation and a 40.5% ($111.4 million) increase in the International operation, which was partially offset by a 4.0% ($12.2 million) decrease in the Specialty Underwriting operation. All of these changes reflect period-to-period changes in net written premiums and business mix, together with normal variability in earnings patterns. Business mix changes occur not only as the Company shifts emphasis between products, lines of business, distribution channels and markets but also as individual contracts renew or non-renew, almost always with changes in coverage, structure, prices and/or terms, and as new contracts are accepted with coverages, structures, prices and terms different from those of expiring contracts. As premium reporting and earnings and loss and commission characteristics derive from the provisions of individual contracts, the continuous turnover of individual contracts, arising from both strategic shifts and day to day underwriting, can and does introduce appreciable background variability in various underwriting line items.

~~Expenses.~~ Incurred loss and LAE increased by 46.8% to $1,419.3 in the nine months ended September 30, 2003 from $967.0 million in the nine months ended September 30, 2002. The increase in incurred losses and LAE was principally attributable to the increase in net premiums earned, the impact of changes in the Company’s mix of business and reserve adjustments for prior period losses.

Net reserve adjustments for non-asbestos and environmental exposures for the nine months ended September 30, 2003 were $105.5 million, which amount is net of a 2000 accident year cession of $35.0 million, and are comprised of a $66.0 million increase relating principally to the casualty exposures including, directors and officers liability exposures in the U.S. Reinsurance operation, an $18.0 million increase relating to the surety exposures in the Specialty Underwriting operation, a $13.2 million increase relating mainly to the casualty exposures of the London and Canadian branch elements in the International operation and an $8.3 million increase relating to the workers’ compensation exposures in the U.S. Insurance operation. The increase for the U.S. Insurance operation relates to the 2001 and 2002 accident exposure years and all other reserve adjustments relate to the 1996-2000 accident exposure years.

Net reserve adjustments related to asbestos and environmental exposures were $ 13.6 million for the nine months ended September 30, 2003. The Company has asbestos and environmental exposure principally related to contracts written by the Company prior to 1986 and commutations thereof. The development on business written by the Company, net of reinsurance, was $ 13.6 million. Substantially all of the Company’s asbestos and environmental exposures relate to insurance and reinsurance contracts with coverage periods prior to 1986.

~~In all cases, the prior period development reflects management’s judgement as to the implications of losses reported during the period on the Company’s reserve balances.~~

Incurred losses and LAE include catastrophe losses, which include the impact of both current period events and favorable and unfavorable development on prior period events, and are net of reinsurance. A catastrophe is an event that causes a pre-tax loss on property exposures of at least $5.0 million and has an event date of January 1, 1988 or later. Catastrophe losses, net of contract specific cessions, were $23.7 million in the nine months ended September 30, 2003 relating principally to May 2003 tornado and hailstorm events and hurricanes Fabian and Isabel, compared to $11.9 million in the nine months ended September 30, 2002.

Incurred losses and LAE for the nine months ended September 30, 2003 reflected ceded losses and LAE of $473.0 million compared to ceded losses and LAE in the nine months ended September 30, 2002 of $263.7 million. Ceded losses and LAE in the nine months ended September 30, 2003 include $348.7 million of ceded losses relating to the quota share reinsurance transactions noted earlier between Everest Re and Bermuda Re. The ceded losses and LAE for the nine months ended September 30, 2003 included $35.0 million of losses ceded under the 2000 accident year aggregate excess of loss component of the Company’s corporate retrocessional program. The ceded losses and LAE for the nine months ended September 30, 2002 included $11.0 million and $22.0 million of losses ceded under the 2001 and 2000 accident year aggregate excess of loss component of the Company’s corporate retrocessional program, respectively.

The segment components of the increase in incurred losses and LAE in the nine months ended September 30, 2003 from the nine months ended September 30, 2002 were a 82.5% ($270.2 million) increase in the U.S. Reinsurance operation, a 60.2% ($138.7 million) increase in the U.S. Insurance operation, and a 46.0% ($78.8 million) increase in the International operation. These increases were partially offset by a 14.8% ($35.3 million) decrease in the Specialty Underwriting operation. These increases generally reflected the increases in earned premiums, modest reductions in the current year loss expectation assumptions for most segments, reflecting continued improvement in market conditions and pricing, the increase in catastrophe losses and the prior period reserve development discussed above. Incurred losses and LAE for each operation were also impacted by variability relating to changes in the level of premium volume and mix of business by class and type.

The Company’s loss and LAE ratio (“loss ratio”), which is calculated by dividing incurred losses and LAE by net premiums earned, increased by 1.1 percentage points to 71.9% in the nine months ended September 30, 2003 from 70.8% in the nine months ended September 30, 2002, reflecting the incurred losses and LAE discussed partially offset by the general firming of rates, terms and conditions.

The following table shows the loss ratios for each of the Company’s operating segments for the nine months ended September 30, 2003 and 2002. The loss ratios for all operations were impacted by the factors noted above.


Operating Segment Loss Ratios

Segment	2003	2002

U.S. Reinsurance	75.9%	71.4%
U.S. Insurance	73.0%	70.9%
Specialty Underwriting	68.6%	77.4%
International	64.7%	62.3%

Operating Segment Loss Ratios
Segment 2003 2002
U.S. Reinsurance 75.9% 71.4%
U.S. Insurance 73.0% 70.9%
Specialty Underwriting 68.6% 77.4%
International 64.7% 62.3%

Underwriting expenses increased by 26.2% to $478.4 million in the nine months ended September 30, 2003 from $379.1 million in the nine months ended September 30, 2002. Commission, brokerage, taxes and fees increased by $85.3 million, principally reflecting an increase of $244.9 million in the expenses due to premium volume which was partially offset by an increase in ceded commissions of $159.6 million. Other underwriting expenses increased by $14.0 million. Contributing to the $99.3 million increase in expenses were a 61.0% ($77.2 million) increase in the U.S. Reinsurance operation, a 28.0% ($18.0 million) increase in the International operation, and a 11.8% ($11.3 million) increase in the U.S. Insurance operation, partially offset by a 9.5% ($8.7 million) decrease in the Specialty Underwriting operation. The changes for each operation’s expenses principally resulted from changes in commission expenses related to changes in premium volume and business mix by class and type and, in some cases, changes in the use of reinsurance, including with Bermuda Re, and the underwriting performance of the underlying business. The Company’s expense ratio, which is calculated by dividing underwriting expenses by net premiums earned, was 24.2% for the nine months ended September 30, 2003 compared to 27.7% for the nine months ended September 30, 2002.

The Company’s combined ratio, which is the sum of the loss and expense ratios, decreased by 2.4 percentage points to 96.1% in the nine months ended September 30, 2003 compared to 98.5% in the nine months ended September 30, 2002. The following table shows the combined ratios for each of the Company’s operating segments for the nine months ended September 30, 2003 and 2002. The combined ratios for all operations were impacted by the loss and expense ratio variability noted above.


Operating Segment Combined Ratios

Segment	2003	2002

U.S. Reinsurance	101.8%	99.0%
U.S. Insurance	94.1%	100.3%
Specialty Underwriting	96.5%	107.0%
International	86.0%	85.6%

Operating Segment Combined Ratios
Segment 2003 2002
U.S. Reinsurance 101.8% 99.0%
U.S. Insurance 94.1% 100.3%
Specialty Underwriting 96.5% 107.0%
International 86.0% 85.6%

~~Investment Results.~~Net investment income increased 8.2% to $210.6 million in the nine months ended September 30, 2003 from $194.7 million in the nine months ended September 30, 2002, principally reflecting the effects of investing the $944.0 million of cash flow from operations in the twelve months ended September 30, 2003 and $203.4 million of net proceeds from the issuance of trust preferred securities in November 2002, all partially offset by the effect of the lower interest rate environment.

~~The following table shows a comparison of various investment yields for the periods indicated:~~

2003 2002
Imbedded pre-tax yield of cash and invested
assets at September 30, 2003 and December 31, 2002 4.7% 5.1%
Imbedded after-tax yield of cash and invested
assets at September 30, 2003 and December 31, 2002 3.9% 4.2%
Annualized pre-tax yield on average cash
and invested assets for the six months ended
September 30, 2003 and 2002 5.2% 5.8%
Annualized after-tax yield on average cash
and invested assets for the six months ended
September 30,2003 and 2002 4.2% 4.5%

Net realized capital losses were $23.9 million in the nine months ended September 30, 2003, reflecting realized capital losses on the Company’s investments of $41.4 million which included $15.3 million relating to write-downs in the value of securities deemed to be impaired on an other than temporary basis and $21.1 million related to the impairment on Interest Only Strips in accordance with EITF 99-20, partially offset by $17.5 million of realized capital gains, which included $5.3 million of realized capital gains on the Interest Only Strips, compared to net realized capital losses of $45.9 million in the nine months ended September 30, 2002. The net realized capital loss in the nine months ended September 30, 2002 reflected realized capital losses of $79.8 million, which included $65.6 million relating to write-downs in the value of securities, of which $25.7 million was for WorldCom, Inc., deemed to be impaired on an other than temporary basis, partially offset by $33.9 million of realized capital gains.

Interest expense for the nine months ended September 30, 2003 was $30.2 million compared to $31.9 million for the nine months ended September 30, 2002. Interest expense for the nine months ended September 30, 2003 reflected $29.2 million relating to the senior notes and $1.0 million relating to borrowings under the revolving Credit Facility. Interest expense for the nine months ended September 30, 2002 reflected $29.2 million relating to the senior notes and $2.7 million relating to borrowings under the revolving Credit Facility.

Distributions on the trust preferred securities are cumulative and pay quarterly in arrears. Distributions relating to the trust preferred securities for the nine months ended September 30, 2003 were $12.4 million. These securities were issued in November 2002.

Other income for the nine months ended September 30, 2003 was $1.2 million compared to other expense of $3.9 million for the nine months ended September 30, 2002. This change is primarily due to recognition through amortization of gains previously deferred under retroactive reinsurance agreements with affiliates, partially offset by higher foreign exchange losses.

The Company has in its product portfolio a credit default swap contract, which it no longer writes. This contract meets the definition of a derivative under FAS 133. There was no net derivative expense, essentially reflecting changes in fair value, from this credit default transaction for the nine months ended September 30, 2003, compared to the $1.3 million derivative expense for the nine months ended September 30, 2002.

~~Income Taxes.~~ The Company recognized income tax expense of $45.8 million in the nine months ended September 30, 2003 compared to an income tax expense of $28.0 million in the nine months ended September 30, 2002. The increase in taxes generally reflects the improved underwriting and investment income results.

~~Net Income.~~ ~~Net income was $176.0 million in the nine months ended September 30, 2003 compared to a net income of $103.7 million in the nine months ended September 30, 2002.~~

Market Sensitive Instruments. The Securities and Exchange Commission’s Financial Reporting Release #48 requires registrants to clarify and expand upon the existing financial statement disclosure requirements for derivative financial instruments, derivative commodity instruments, and other financial instruments (collectively, “market sensitive instruments”). The Company does not enter into market sensitive instruments for trading purposes.

The Company’s current investment strategy generally seeks to maximize after-tax income through a high quality, diversified, taxable and tax-preferenced fixed maturity portfolio, while maintaining an adequate level of liquidity. The Company’s mix of taxable and tax-preferenced investments is adjusted continuously, consistent with its current and projected operating results, market conditions and tax position. The fixed maturities in the investment portfolio are comprised of non-trading available for sale securities. Additionally, the Company invests in equity securities, which it believes will enhance the risk-adjusted total return of the investment portfolio. The Company has also engaged in a credit default swap, the market sensitivity of which is believed not to be material.

The overall investment strategy considers the scope of present and anticipated Company operations. In particular, estimates of the financial impact resulting from non-investment asset and liability transactions, together with the Company’s capital structure and other factors, are used to develop a net liability analysis. This analysis includes estimated payout characteristics for which the investments of the Company provide liquidity. This analysis is considered in the development of specific investment strategies for asset allocation, duration, and credit quality. The change in overall market sensitive risk exposure principally reflects the asset changes that took place during the ~~year, with minor changes~~period including the acquisition of interest only strips in which market value increases as interest rates rise and decreases as interest rates fall. The addition of these securities to the portfolio mitigates the impact of potential interest rate shifts in the ~~underlying risk characteristics.~~overall portfolio.

The ~~$6.1~~Company’s $6.5 billion investment portfolio is principally comprised ~~principally~~ of fixed maturity securities, ~~that~~which are subject to interest rate risk and foreign currency rate risk, and equity securities, ~~that~~which are subject to equity price risk. The impact of these risks in the investment portfolio is generally mitigated by changes in the value of operating assets and liabilities and their associated income statement impact.

Interest rate risk is the potential change in value of the fixed maturity portfolio, including short-term investments, due to change in market interest rates. In a declining interest rate environment, it includes prepayment risk on the ~~$382.1~~$578.5 million of mortgage-backed securities in the ~~$5.8 billion~~$5,718.3 million fixed maturity ~~portfolio, which could result is lower reinvestment rates.~~portfolio. Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.

The table below displays the potential impact of market value fluctuations and after-tax unrealized appreciation on the fixed maturity portfolio as of ~~September~~March 31, 2004 based on parallel 200 basis point shifts in interest rates up and down in 100 basis point increments. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimates on mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account. For legal entities with a non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under the various interest rate change scenarios. All amounts are in U.S. dollars and are presented in millions.


As of March 31, 2004
Interest Rate Shift in Basis Points

	-200			-100			0			100			200

Total Market Value	$	6,899	.8		$ 6,533	.3		$ 6,187	.9		$ 5,884	.0		$5,538	.9
Market Value Change from Base (%)		11	.5%		5	.6%		0	.0%		-4	.9%		-10	.5%
Change in Unrealized Appreciation
After-tax from Base ($)	$	462	.8		$ 224	.5		$ --			$ (197	.5)		$ (421	.8)

3332

As of September 30, 2003
Interest Rate Shift in Basis Points
-200 -100 0 100 200
Total Market Value $   6,552.5 $   6,159.4 $   5,816.5 $   5,471.9 $   5,131.2
Market Value Change
from Base (%)     12.7%     5.9%     0%     (5.9)%     (11.8)%
Change in Unrealized
Appreciation After-tax
from Base ($) $     478.4 $     222.9 $    0 ($   223.9) ($   445.4)

Foreign currency rate risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of the Company’s foreign operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Generally, the Company prefers to maintain the capital of its foreign operations in U.S. dollar assets, although this varies by regulatory jurisdiction in accordance with market needs. Each foreign operation may conduct business in its local currency as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are the Canadian Dollar, the British Pound Sterling and the Euro. The Company mitigates foreign exchange exposure by a general matching of the currency and duration of its assets to its corresponding operating liabilities. In accordance with Financial Accounting Standards Board Statement No. 52, the Company translates the assets, liabilities and income of non-U.S. dollar functional currency legal entities to the U.S. dollar. This translation amount is reported as a component of other comprehensive income. The primary functional foreign currency exposures for these foreign operations are the Canadian Dollar, the Euro and the British Pound Sterling. As of September 30, 2003, there has been no material change in exposure to foreign exchange rates as compared to December 31, 2002.


As of March 31, 2004
Change in Foreign Exchange Rates in Percent

		-20	%		-10	%		0	%		10	%		20	%

Total After-tax Foreign
Exchange Exposure	$	(27	.7)	$	(15	.2)	$	--		$	17	.2	$	35	.8

Equity risk is the potential change in market value of the common stock and preferred stock portfolios arising from changing equity prices. The Company invests in high quality common and preferred stocks that are traded on the major exchanges in the ~~United States~~U.S. and funds investing in such securities. The primary objective in managing the equity portfolio is to provide long-term capital growth through market appreciation and income. ~~As of September 30, 2003, there has been no material change in exposure to changing equity prices as compared to December 31, 2002.~~


As of March 31, 2004
Change in Equity Values in Percent

	-20%			-10%			0%			10%			20%

Market Value of the Equity Portfolio		$ 214	.9		$ 241	.8		$ 268	.7		$ 295	.5		$ 322	.4

After-tax Change in Unrealized
Appreciation		$ (34	.9)		$ (17	.5)		$ --			$ 17	.5		$ 34	.9

3433

Safe Harbor Disclosure.This report contains forward-looking statements within the meaning of the U.S. federal securities laws. The Company intends these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may”, “will”, “should”, “could”, “anticipate”, “estimate”, “expect”, “plan”, “believe”, “predict”, “potential” and “intend”. Forward-looking statements contained in this report include information regarding the Company’s reserves for losses and LAE, including reserves for ~~asbestos and environmental~~A&E claims, the adequacy of the Company’s provision for uncollectible balances, estimates of the Company’s catastrophe exposure, and the effects of ~~catastrophe~~catastrophic events on the Company’s financial statements and the ability of the Company’s subsidiaries to pay dividends. Forward-looking statements only reflect the Company’s expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from the Company’s expectations. Important factors that could cause the Company’s actual results to be materially different from its expectations include the uncertainties that surround the estimating of reserves for losses and LAE, those discussed in Note 34 of Notes to ~~the~~Consolidated Financial Statements (Unaudited) included in this report and the risks described under the caption “Risk Factors” in the Company’s most recent Annual Report on Form ~~10-K.~~10-K Part II, Item 7. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

3534

Part I – Item 4

EVEREST REINSURANCE HOLDINGS, INC.
CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company’s management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer believe that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in ~~Securities and Exchange Commission’s~~SEC’s rules and forms. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this report.

3635

Other Information

Part II – Item 1. Legal Proceedings

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance and reinsurance agreements and other more general contracts. In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it. In other disputes, the Company is resisting attempts by others to collect funds or enforce alleged rights. Such disputes are resolved through formal and informal means, including litigation and arbitration.

Part II - Item 2. Changes in Securities, and Use of Proceeds and Issuer Purchases of Equity Securities

None

Part II – Item 3. Defaults Upon Senior Securities

None

Part II - Item 4. Submission of Matters to a Vote of Security Holders

None

Part II – Item 5. Other Information

None

3736

Part II -– Item 6. Exhibits and Reports on Form 8-K

a) Exhibit Index:

Exhi bit Description
10 .1 Credit Agreement, dated October 10, 2003, between Everest Reinsurance Holdings, Inc., The Lenders Named
Lenders Named therein and Wachovia Bank, National Association providing for a $150 million revolving credit facility,
herein by reference to Exhibit 10.1 of the Everest Re Group, Ltd. Report on Form 10-Q for the
quarter ended September 30, 2003.
31 .1 Section 302 Certification of Joseph V. Taranto
31 .2 Section 302 Certification of Stephen L. Limauro
32 .1 Section 906 Certification of Joseph V. Taranto and Stephen L. Limauro

~~Omitted from this Part II are items~~Exhibit No.Description

31.1 Section 302 Certification of Joseph V. Taranto

31.2 Section 302 Certification of Stephen L. Limauro

32.1 Section 906 Certification of Joseph V. Taranto and Stephen L. Limauro

b) Reports on Form 8-K:

A report on Form 8-K was filed on March 19, 2004, under Item 7, attaching as an exhibit the consent of PricewaterhouseCoopers LLP to the incorporation by reference in the Company’s Registration Statement on Form S-3 of PricewaterhouseCoopers LLP’s report dated January 29, 2004 relating to the financial statements and financial statement schedules, which ~~are inapplicable or to which~~appears in the ~~answer is negative~~Company’s Annual Report on Form 10-K for the ~~period covered.~~year ended December 31, 2003.

38 A report on Form 8-K was filed on March 30, 2004, under Item 7, attaching as exhibits certain agreements, legal opinions and consents relating to the issuance of trust preferred securities by Capital Trust II, which exhibits were filed with reference to and thereby incorporated by reference into the Registration Statement on Form S-3 filed,inter alia, by the Company and Capital Trust II.

Everest Reinsurance Holdings, Inc.Inc..

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	Everest Reinsurance Holdings, Inc.
	(Registrant)


	/S/ STEPHEN L. LIMAURO

	Stephen L. Limauro
	Executive Vice President and ~~Chief~~
	Chief Financial Officer

	(Duly Authorized Officer and Principal Financial Officer)
	~~Financial Officer)~~

Dated: ~~November 14, 2003~~May 17, 2004


	September 30,			December 31,

		2003			2002

ASSETS:		(unaudited)
Fixed maturities - available for sale, at market value
(amortized cost: 2003, $5,353,275; 2002, $4,569,844)	$	5,621,150		$	4,805,976
Equity securities, at market value (cost: 2003, $82,915 ; 2002, $79,791)		91,400			72,468
Short-term investments		195,300			130,075
Other invested assets		54,437			42,307
Cash		112,968			116,843

Total investments and cash		6,075,255			5,167,669

Accrued investment income		86,036			61,708
Premiums receivable		889,942			639,327
Reinsurance receivables unaffiliated		1,161,644			1,104,827
Reinsurance receivables affiliated		994,699			735,248
Funds held by reinsureds		142,680			121,308
Deferred acquisition costs		199,763			161,450
Prepaid reinsurance premiums		311,437			149,588
Deferred tax asset		140,078			144,376
Other assets		137,276			95,763

TOTAL ASSETS	$	10,138,810		$	8,381,264

LIABILITIES:
Reserve for losses and adjustment expenses	$	5,686,964		$	4,875,225
Unearned premium reserve		1,249,353			809,813
Funds held under reinsurance treaties		438,707			399,492
Losses in the course of payment		57,679			38,016
Contingent commissions		2,149			4,333
Other net payable to reinsurers		323,291			147,342
Current federal income taxes		(7,970	)		(16,365	)
8.5% Senior notes due 3/15/2005		249,850			249,780
8.75% Senior notes due 3/15/2010		199,223			199,158
Revolving credit agreement borrowings		70,000			70,000
Company-obligated mandatorily redeemable preferred securities
of subsidiary trusts holding solely subordinated debentures
("trust preferred securities")		210,000			210,000
Interest accrued on debt and borrowings		3,830			13,481
Other liabilities		145,962			90,261

Total liabilities		8,629,038			7,090,536

STOCKEHOLDERS' EQUITY:
Common shares, par value: $0.01; 200 million shares authorized;
1,000 shares issued in 2003 and 2002		-			-
Additional paid-in capital		261,317			259,508
Accumulated other comprehensive income, net of
deferred income taxes of $97.3 million in 2003 and
$75.1 million in 2002		180,712			139,486
Retained earnings		1,067,743			891,734

Total stockholders' equity		1,509,772			1,290,728

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,138,810		$	8,381,264


	Three Months,							Nine Months,
	Ended September 30,							Ended September 30,

	2003				2002			2003			2002
		(unaudited)						(unaudited)

REVENUES:
Premiums earned	$	776,895		$	456,387		$	1,974,187		$	1,366,112
Net investment income		70,491			64,402			210,627			194,673
Net realized capital (loss)		(11,843	)		(7,074	)		(23,922	)		(45,944	)
Net derivative expense		--			(1,009	)		--			(1,259	)
Other income (expense)		625			540			1,202			(3,941	)

Total revenues		836,168			513,246			2,162,094			1,509,641

CLAIMS AND EXPENSES:
Incurred loss and loss adjustment expenses		571,914			328,831			1,419,312			966,981
Commission, brokerage, taxes and fees		158,158			107,872			418,380			333,107
Other underwriting expenses		20,973			16,581			60,012			45,980
Distributions related to trust preferred securities		4,121			--			12,364			--
Interest expense on senior notes		9,733			9,730			29,197			29,186
Interest expense on credit facility		327			966			1,035			2,728

Total claims and expenses		765,226			463,980			1,940,300			1,377,982

INCOME BEFORE TAXES		70,942			49,266			221,794			131,659
Income tax expense		10,451			14,463			45,785			27,993

NET INCOME	$	60,491		$	34,803		$	176,009		$	103,666

Other comprehensive (loss) income , net of tax		(74,279	)		68,840			41,226			59,346

COMPREHENSIVE (LOSS) INCOME	$	(13,788	)	$	103,643		$	217,235		$	163,012


	Three Months Ended					Nine Months Ended
	September 30,					September 30,

	2003			2002		2003		2002

	(unaudited)					(unaudited)
COMMON STOCK (shares outstanding):
Balance, beginning of period		1,000			1,000		1,000		1,000
Issued during the period		--			--		--		--

Balance, end of period		1,000			1,000		1,000		1,000

COMMON STOCK (par value):
Balance, beginning of period		--			--		--		--
Issued during the period		--			--		--		--

Balance, end of period		--			--		--		--

ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period	$	259,711		$	259,411	$	259,508	$	258,775
Common stock issued during the period		1,606			21		1,809		657

Balance, end of period		261,317			259,432		261,317		259,432

ACCUMULATED OTHER COMPREHENSIVE INCOME,
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period		254,992			66,509		139,486		76,003
Net (decrease) increase during the period		(74,280	)		68,840		41,226		59,346

Balance, end of period		180,712			135,349		180,712		135,349

RETAINED EARNINGS:
Balance, beginning of period		1,007,252			845,494		891,734		776,631
Net income		60,491			34,803		176,009		103,666

Balance, end of period		1,067,743			880,297		1,067,743		880,297

TOTAL STOCKHOLDER'S EQUITY, END OF PERIOD	$	1,509,772		$	1,275,078	$	1,509,772	$	1,275,078



(dollar amounts in thousands)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2003			2002			2003				2002

Gross basis:
Beginning of period reserves	$	646,159		$	639,102		$	667,922		$	644,390
Incurred losses		56,323			--			73,996			30,000
Paid losses		(9,702	)		(22,148	)		(49,138	)		(57,436	)

End of period reserves	$	692,780		$	616,954		$	692,780		$	616,954

Net basis:
Beginning of period reserves	$	237,529		$	262,602		$	243,157		$	276,169
Incurred losses		5,154			--			13,620			1,885
Paid losses		(11,839	)		(11,609	)		(2,255	)		(27,061	)

End of period reserves	$	254,522		$	250,993		$	254,522		$	250,993



(dollar values in thousands)	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2003	2002	2003	2002

Gross written premiums	$ 533,497	$ 254,083	$ 1,259,026	$ 589,841
Net written premiums	412,614	201,264	951,193	508,380

Earned premiums	$ 336,747	$ 153,940	$ 786,943	$ 458,587
Incurred losses and loss adjustment
expenses	266,010	113,282	597,590	327,425
Commission and brokerage	80,828	32,786	188,385	112,707
Other underwriting expenses	4,935	4,538	15,341	13,797

Underwriting (loss) gain	($ 15,026)	$ 3,334	($ 14,373)	$ 4,658



As of September 30, 2003
Interest Rate Shift in Basis Points

	-200	-100	0	100	200

Total Market Value	$ 6,552.5	$ 6,159.4	$ 5,816.5	$ 5,471.9	$ 5,131.2
Market Value Change
from Base (%)	12.7%	5.9%	0%	(5.9)%	(11.8)%
Change in Unrealized
Appreciation After-tax
from Base ($)	$ 478.4	$ 222.9	$ 0	($ 223.9)	($ 445.4)


Exhi	bit	Description
10	.1	Credit Agreement, dated October 10, 2003, between Everest Reinsurance Holdings, Inc., The Lenders Named
		Lenders Named therein and Wachovia Bank, National Association providing for a $150 million revolving credit facility,
		herein by reference to Exhibit 10.1 of the Everest Re Group, Ltd. Report on Form 10-Q for the
		quarter ended September 30, 2003.
31	.1	Section 302 Certification of Joseph V. Taranto
31	.2	Section 302 Certification of Stephen L. Limauro
32	.1	Section 906 Certification of Joseph V. Taranto and Stephen L. Limauro

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QUARTERLY REPORT UNDERPURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

477 Martinsville RoadPost Office Box 830Liberty Corner, New Jersey 07938-0830(908) 604-3000

EVEREST REINSURANCE HOLDINGS, INC.

Index To Form 10-Q

PART I

FINANCIAL INFORMATION

PART II

OTHER INFORMATION

Part I- Item 1

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003 and 2002

1. General

2. Capital ResourcesNew Accounting Pronouncement

3. Capital Transactions

For the Three and Nine Months Ended September 30, 2003 and 2002

3.4. Contingencies

For the Three and Nine Months Ended September 30, 2003 and 2002

For the Three and Nine Months Ended September 30, 2003 and 2002

For the Three and Nine Months Ended September 30, 2003 and 2002

For the Three and Nine Months Ended September 30, 2003 and 2002

For the Three and Nine Months Ended September 30, 2003 and 2002

For the Three and Nine Months Ended September 30, 2003 and 2002

4.5. Other Comprehensive Income (Loss)

5. Credit Line

For the Three and Nine Months Ended September 30, 2003 and 2002

For the Three and Nine Months Ended September 30, 2003 and 2002

6. Letters of Credit

For the Three and Nine Months Ended September 30, 2003 and 2002

For the Three and Nine Months Ended September 30, 2003 and 2002

7. Trust Agreements

8. Senior Notes

8. Trust Preferred9. Junior Subordinated Debt Securities Payable

10. Credit Line

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003The Credit Facility requires the Company to maintain a debt to capital ratio of not greater than 0.35 to 1 and 2002

9.11. Segment Reporting

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003 and 2002

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003 and 2002

10.12. Derivatives

11.13. Investments — Interest Only Strips

For the Three and Nine Months Ended September 30, 2003 and 2002

12. New Accounting Pronouncement

13.14. Related-Party Transactions

For the Three and Nine Months Ended September 30, 2003 and 2002

14. Subsequent Events

Part I — Item 2

EVEREST REINSURANCE HOLDINGS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATION

RESULTS OF OPERATIONS

Industry Conditions

Financial Summary

Segment Information

Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002

Part I – Item 4

EVEREST REINSURANCE HOLDINGS, INC.CONTROLS AND PROCEDURES

Other Information

Part II – Item 1. Legal Proceedings

Part II - Item 2. Changes in Securities, and Use of Proceeds and Issuer Purchases of Equity Securities

Part II – Item 3. Defaults Upon Senior Securities

Part II - Item 4. Submission of Matters to a Vote of Security Holders

Part II – Item 5. Other Information

Part II -– Item 6. Exhibits and Reports on Form 8-K

Everest Reinsurance Holdings, Inc.Inc..

Signatures

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

477 Martinsville Road
Post Office Box 830
Liberty Corner, New Jersey 07938-0830
(908) 604-3000

For the Three and Nine Months Ended September 30,March 31, 2004 and 2003
The Credit Facility requires the Company to maintain a debt to capital ratio of not greater than 0.35 to 1 and 2002

EVEREST REINSURANCE HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATION

EVEREST REINSURANCE HOLDINGS, INC.
CONTROLS AND PROCEDURES