Everest Re (EG) 8-K Results of Operations and Financial Condition

   
NEWS RELEASE

EVEREST RE GROUP, LTD.

Wessex House, 45 Reid Street, 2^nd Floor, Hamilton HM DX, Bermuda

Contact:

Elizabeth B. Farrell

Vice President, Investor Relations

Everest Global Services, Inc.

908.604.3169 For Immediate Release

Everest Re Group Announces First Quarter Earnings

HAMILTON, Bermuda – April 24, 2006 -- Everest Re Group, Ltd. (NYSE: RE) reported first quarter 2006 after-tax operating income¹, which excludes realized capital gains and losses, of $157.9 million, or $2.41 per diluted share, a 4.5% decrease compared to $165.2 million, or $2.90 per diluted share, in the first quarter of 2005. First quarter 2006 net income increased to $168.4 million, or $2.57 per diluted share, compared to $167.1 million, or $2.93 per diluted share, in the first quarter of 2005. Operating income differs from net income only by the exclusion of realized gains and losses on investments.

On a pre-tax basis, first quarter results for 2006 were impacted by increased catastrophe loss estimates, including reinstatement premiums, of $70.8 million, largely driven by changes in estimates for the 2005 hurricanes, compared to catastrophe losses in the same period of 2005 of $13.2 million. On an after-tax basis, these changes in estimates affected 2006 and 2005 results by $50.6 million and $9.9 million, respectively.

Gross premiums written for the first quarter of 2006 were $1.06 billion compared to $1.05 billion in 2005. Net premiums written were $1.02 billion, an increase of 1.1% from $1.01 billion for the first quarter of 2005. The Company’s GAAP combined ratio in the first quarter 2006 was 94.5% compared to 91.6% in 2005. Net investment income for the first quarter was $145.0 million compared to $132.9 million in the first quarter of 2005. Cash flow from operations for the first quarter of 2006 was $159.8 million, a decrease of 50.9% from $325.2 million in the first quarter of 2005.

1

At March 31, 2006, the Company's shareholders’ equity was $4.27 billion, or $65.72 per outstanding share. The change in book value represents a 3.1% increase from shareholders’ equity of $4.14 billion, or $64.04 per outstanding share, at December 31, 2005.

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “Although changes in estimates for the 2005 hurricanes substantially reduced first quarter earnings, we still posted a 15.7% ROE, demonstrating the strength of our worldwide operation. Our reinsurance business grew 8% for the quarter, as we continue to see new quality opportunities, particularly for property reinsurance.  Whereas our insurance premiums were down from less California workers comp business and less credit business, we have recently added new programs that should result in quality growth for the second half of the year.  Accordingly, we remain positive with regard to our overall prospects for 2006.”

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

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

A conference call discussing the first quarter results will be held at 8:30 a.m. Eastern Time on April 25, 2006. The call will be available on the Internet through the Company’s web site or atwww.streetevents.com.

2

Anyone receiving this release by wire or through the Internet may visit the Company’s web site to view supplemental financial information on the Company’s results. The supplemental information is located at www.everestre.com in the “Financial Reports” section of the “Investor Center”. The supplemental financial information may also be obtained by contacting the Company directly.

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

	Three Months Ended March 31,
(Dollars in thousands, except per share amounts)	2006				2005
	(unaudited)
	amount		per diluted share		amount		per diluted share
Net income	$	168,396	$	2.57	$	167,095	$	2.93
After-tax realized gains		10,524		0.16		1,848		0.03
After-tax operating income	$	157,872	$	2.41	$	165,247	$	2.90

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

– Financial Details Follow –

3

EVEREST RE GROUP, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
	Three Months Ended March 31,
(Dollars in thousands, except per share amounts)	2006			2005
	(unaudited)
REVENUES:
Premiums earned	$	1,021,790		$	1,005,915
Net investment income		145,026			132,886
Net realized capital gains		13,601			2,477
Net derivative income (expense)		3,879			(1,221	)
Other expense		(6,607	)		(3,441	)
Total revenues		1,177,689			1,136,616
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		698,943			668,254
Commission, brokerage, taxes and fees		237,502			222,322
Other underwriting expenses		29,014			30,390
Interest expense on senior notes		7,786			12,235
Interest expense on junior subordinated debt		9,362			9,362
Amortization of bond issue costs		235			315
Interest and fee expense on credit facility		97			110
Total claims and expenses		982,939			942,988
INCOME BEFORE TAXES		194,750			193,628
Income tax expense		26,354			26,533
NET INCOME	$	168,396		$	167,095
Other comprehensive loss, net of tax		(53,293	)		(128,625	)
COMPREHENSIVE INCOME	$	115,103		$	38,470
PER SHARE DATA:
Average shares outstanding (000's)		64,622			56,141
Net income per common share - basic	$	2.61		$	2.98
Average diluted shares outstanding (000's)		65,437			57,076
Net income per common share - diluted	$	2.57		$	2.93

EVEREST RE GROUP, LTD. CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value per share)	March 31, 2006			December 31, 2005
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value
(amortized cost: 2006, $10,391,468; 2005, $9,872,239)	$	10,417,094		$	10,042,134
Equity securities, at market value (cost: 2006, $1,015,777; 2005, $922,090)		1,264,556			1,090,825
Short-term investments		983,714			1,443,751
Other invested assets (cost: 2006, $317,942; 2005, $285,385)		319,276			286,812
Cash		166,364			107,275
Total investments and cash		13,151,004			12,970,797
Accrued investment income		132,276			133,213
Premiums receivable		1,207,160			1,188,866
Reinsurance receivables		1,007,034			1,048,749
Funds held by reinsureds		295,946			286,856
Deferred acquisition costs		354,990			352,745
Prepaid reinsurance premiums		83,433			84,798
Deferred tax asset		238,665			234,562
Current federal income tax receivable		4,241			75,022
Other assets		119,168			98,932
TOTAL ASSETS	$	16,593,917		$	16,474,539
LIABILITIES:
Reserve for losses and adjustment expenses	$	9,146,997		$	9,126,702
Future policy benefit reserve		128,056			133,155
Unearned premium reserve		1,598,058			1,596,309
Funds held under reinsurance treaties		156,836			190,641
Losses in the course of payment		25,515			19,434
Contingent commissions		13,486			19,378
Other net payable to reinsurers		70,795			50,354
8.75% Senior notes due 3/15/2010		199,473			199,446
5.4% Senior notes due 10/15/2014		249,626			249,617
Junior subordinated debt securities payable		546,393			546,393
Accrued interest on debt and borrowings		9,041			10,041
Other liabilities		183,529			193,375
Total liabilities		12,327,805			12,334,845
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $0.01; 50 million shares authorized;
no shares issued and outstanding		-			-
Common shares, par value: $0.01; 200 million shares authorized;
(2006) 64.9 million and (2005) 64.6 million issued		649			646
Additional paid-in capital		1,766,363			1,748,797
Unearned compensation		(15,518	)		(17,051	)
Accumulated other comprehensive income, net of deferred income taxes of
$135.5 million at 2006 and $134.9 million at 2005		167,853			221,146
Retained earnings		2,346,765			2,186,156
Total shareholders' equity		4,266,112			4,139,694
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	16,593,917		$	16,474,539

EVEREST RE GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended March 31,
(Dollars in thousands)	2006			2005
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	168,396		$	167,095
Adjustments to reconcile net income to net cash provided by
operating activities:
(Increase) decrease in premiums receivable		(14,626	)		32,778
Increase in funds held by reinsureds, net		(38,284	)		(37,082	)
Decrease in reinsurance receivables		47,540			11,143
Increase in deferred tax asset		(4,693	)		(12,648	)
(Decrease) increase in reserve for losses and loss adjustment expenses		(10,126	)		140,692
Decrease in future policy benefit reserve		(5,098	)		(2,346	)
(Decrease) increase in unearned premiums		(1,584	)		842
Decrease in other assets and liabilities, net		23,035			19,074
Non-cash compensation expense		1,533			444
Amortization of bond premium		7,304			7,644
Amortization of underwriting discount on senior notes		36			58
Realized capital gains		(13,601	)		(2,477	)
Net cash provided by operating activities		159,832			325,217
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale		166,441			123,015
Proceeds from fixed maturities sold - available for sale		104,077			120,270
Proceeds from equity securities sold		27,649			-
Proceeds from other invested assets sold		5,562			1,781
Cost of fixed maturities acquired - available for sale		(763,683	)		(367,968	)
Cost of equity securities acquired		(116,111	)		(168,021	)
Cost of other invested assets acquired		(28,698	)		(6,417	)
Net sales of short-term securities		462,807			158,866
Net increase in unsettled securities transactions		23,178			31,174
Net cash used in investing activities		(118,778	)		(107,300	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period		17,569			10,445
Dividends paid to shareholders		(7,787	)		(6,198	)
Repayment of senior notes		-			(250,000	)
Net cash provided by (used in) financing activities		9,782			(245,753	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		8,253			(5,572	)
Net increase (decrease) in cash		59,089			(33,408	)
Cash, beginning of period		107,275			184,930
Cash, end of period	$	166,364		$	151,522
SUPPLEMENTAL CASH FLOW INFORMATION
Cash transactions:
Income taxes paid, net	$	(51,318	)	$	36,890
Interest paid	$	18,308		$	28,847