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 Reports Record Earnings for the Second Quarter

HAMILTON, Bermuda – July 24, 2006 -- Everest Re Group, Ltd. (NYSE: RE) reported record second quarter 2006 after-tax operating income¹, which excludes realized capital gains and losses, of $218.7 million, or $3.35 per diluted share, a 26.2% increase compared to $173.3 million, or $3.03 per diluted share, in the second quarter of 2005. Second quarter 2006 net income increased 13.5% to $220.4 million, or $3.38 per diluted share, compared to $194.2 million, or $3.40 per diluted share, in the second quarter of 2005. Operating income differs from net income only by the exclusion of realized gains and losses on investments.

For the six months ended June 30, 2006, after-tax operating income was $376.6 million, or $5.77 per diluted share, an increase of 11.2% compared to $338.6 million, or $5.93 per diluted share, in 2005. Net income in the first six months of 2006 was $388.8 million, or $5.96 per diluted share, an increase of 7.6% compared to $361.3 million, or $6.33 per diluted share, in 2005.

Operating highlights for the second quarter of 2006 included the following:

• The GAAP combined ratio in the second quarter was 87.7% compared to 91.4% in the same period last year. Strong underwriting year fundamentals and the lack of unusual catastrophe or risk loss events in the quarter offset $36 million of net adverse development on 2005 and prior accident year reserves principally relating to 2005 catastrophe events.

• Gross premiums written were $910 million, a 17.9% decrease compared to $1.11 billion in the second quarter of 2005, reflecting a worldwide

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reinsurance operation decline of 14.7% and an insurance segment decline of 27.8%.

• Net investment income increased by 11.6% to $153 million as compared to $137 million in 2005.

• Cash flow from operations amounted to $152 million for the period as compared to $292 million in 2005. These include catastrophe loss payouts of $241 million and $68 million, respectively, for the three months ended June 30, 2006 and 2005.

• The annualized return on average shareholders’ equity was 20.7% for the quarter and 18.2% for the first half of 2006; and

• Shareholders’ equity was $4.38 billion or $67.42 per outstanding share representing a 5.8% 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, “We are pleased to post the best earnings quarter we have ever had. Whereas our top line reduced in the first six months, as we adjusted to a changing underwriting landscape, we expect new production opportunities to result in double digit growth in the second half of the year, with the fourth quarter being particularly strong. We expect our disciplined approach combined with excellent underwriting fundamentals will produce strong profitability in 2006, absent unusual catastrophe or risk events.”

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

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

Recipients are encouraged to visit the Company’s web site to view supplemental financial information on the Company’s results. The supplemental information is located atwww.everestre.comin 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 June 30,								Six Months Ended June 30,
(Dollars in thousands, except per share amounts)	2006				2005				2006				2005
	(unaudited)
		amount		per diluted share		amount		per diluted share		amount		per diluted share		amount		per diluted share
Net income	$	220,403	$	3.38	$	194,180	$	3.40	$	388,799	$	5.96	$	361,275	$	6.33
After-tax realized gains		1,700		0.03		20,873		0.37		12,224		0.19		22,721		0.40
After-tax operating income	$	218,703	$	3.35	$	173,307	$	3.03	$	376,575	$	5.77	$	338,554	$	5.93

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 –

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EVEREST RE GROUP, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands, except per share amounts)	2006			2005			2006			2005
	(unaudited)						(unaudited)
REVENUES:
Premiums earned	$	893,332		$	1,092,500		$	1,915,122		$	2,098,415
Net investment income		153,333			137,448			298,359			270,334
Net realized capital gains		2,472			27,309			16,073			29,786
Net derivative income (expense)		1,316			(6,816	)		5,195			(8,037	)
Other income (expense)		2,275			511			(4,332	)		(2,930	)
Total revenues		1,052,728			1,250,952			2,230,417			2,387,568
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		543,637			690,615			1,242,580			1,358,869
Commission, brokerage, taxes and fees		206,403			276,585			443,905			498,907
Other underwriting expenses		33,645			31,312			62,659			61,702
Interest expense on senior notes		7,787			7,709			15,573			19,944
Interest expense on junior subordinated debt		9,362			9,362			18,724			18,724
Amortization of bond issue costs		234			235			469			550
Interest and fee expense on credit facility		98			98			195			208
Total claims and expenses		801,166			1,015,916			1,784,105			1,958,904
INCOME BEFORE TAXES		251,562			235,036			446,312			428,664
Income tax expense		31,159			40,856			57,513			67,389
NET INCOME	$	220,403		$	194,180		$	388,799		$	361,275
Other comprehensive (loss) income, net of tax		(105,324	)		134,158			(158,617	)		5,533
COMPREHENSIVE INCOME	$	115,079		$	328,338		$	230,182		$	366,808
PER SHARE DATA:
Average shares outstanding (000's)		64,708			56,266			64,665			56,204
Net income per common share - basic	$	3.41		$	3.45		$	6.01		$	6.43
Average diluted shares outstanding (000's)		65,258			57,128			65,264			57,102
Net income per common share - diluted	$	3.38		$	3.40		$	5.96		$	6.33

EVEREST RE GROUP, LTD. CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value per share)	June 30, 2006		December 31, 2005
	(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value
(amortized cost: 2006, $10,276,401; 2005, $9,872,239)	$	10,177,052	$	10,042,134
Equity securities, at market value (cost: 2006, $1,205,942; 2005, $922,090)		1,415,683		1,090,825
Short-term investments		1,097,109		1,443,751
Other invested assets (cost: 2006, $320,769; 2005, $285,385)		322,297		286,812
Cash		175,423		107,275
Total investments and cash		13,187,564		12,970,797
Accrued investment income		145,178		133,213
Premiums receivable		1,129,856		1,188,866
Reinsurance receivables		963,883		1,048,749
Funds held by reinsureds		286,757		286,856
Deferred acquisition costs		360,898		352,745
Prepaid reinsurance premiums		75,036		84,798
Deferred tax asset		275,468		234,562
Current federal income tax receivable		-		75,022
Other assets		111,353		98,932
TOTAL ASSETS	$	16,535,993	$	16,474,539
LIABILITIES:
Reserve for losses and adjustment expenses	$	9,041,703	$	9,126,702
Future policy benefit reserve		116,803		133,155
Unearned premium reserve		1,581,445		1,596,309
Funds held under reinsurance treaties		135,508		190,641
Losses in the course of payment		11,806		19,434
Contingent commissions		11,314		19,378
Other net payable to reinsurers		74,049		50,354
Current federal income taxes		24		-
8.75% Senior notes due 3/15/2010		199,502		199,446
5.4% Senior notes due 10/15/2014		249,635		249,617
Junior subordinated debt securities payable		546,393		546,393
Accrued interest on debt and borrowings		10,041		10,041
Other liabilities		178,705		193,375
Total liabilities		12,156,928		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		1,756,511		1,731,746
Accumulated other comprehensive income, net of deferred income taxes of
$99.0 million at 2006 and $134.9 million at 2005		62,529		221,146
Retained earnings		2,559,376		2,186,156
Total shareholders' equity		4,379,065		4,139,694
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	16,535,993	$	16,474,539

EVEREST RE GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2006			2005			2006			2005
	(unaudited)						(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	220,403		$	194,180		$	388,799		$	361,275
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease (increase) in premiums receivable		83,688			(26,235	)		69,062			6,543
Increase in funds held by reinsureds, net		(4,325	)		(56,041	)		(42,609	)		(93,123	)
Decrease in reinsurance receivables		55,661			106,051			103,201			117,194
(Increase) decrease in deferred tax asset		(292	)		3,466			(4,985	)		(9,182	)
(Decrease) increase in reserve for losses and loss adjustment expenses		(167,385	)		136,651			(177,511	)		277,343
Decrease in future policy benefit reserve		(11,254	)		(7,428	)		(16,352	)		(9,774	)
Decrease in unearned premiums		(22,797	)		(19,345	)		(24,381	)		(18,503	)
(Increase) decrease in other assets and liabilities, net		(8,559	)		(17,034	)		14,476			2,040
Non-cash compensation expense		3,007			1,569			6,350			3,117
Amortization of bond premium		5,911			3,633			13,215			11,277
Amortization of underwriting discount on senior notes		37			33			73			91
Realized capital gains		(2,472	)		(27,309	)		(16,073	)		(29,786	)
Net cash provided by operating activities		151,623			292,191			313,265			618,512
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale		192,648			205,674			359,089			328,689
Proceeds from fixed maturities sold - available for sale		48,298			1,051,729			152,375			1,171,999
Proceeds from equity securities sold		92,573			10,331			120,222			10,331
Proceeds from other invested assets sold		21,141			28,941			26,703			30,722
Cost of fixed maturities acquired - available for sale		(79,224	)		(1,186,966	)		(842,907	)		(1,554,934	)
Cost of equity securities acquired		(261,659	)		(232,696	)		(377,770	)		(400,717	)
Cost of other invested assets acquired		(30,254	)		(82,761	)		(58,952	)		(89,178	)
Net sales of short-term securities		(108,943	)		(152,672	)		353,864			6,194
Net (decrease) increase in unsettled securities transactions		(24,378	)		39,758			(1,200	)		70,932
Net cash used in investing activities		(149,798	)		(318,662	)		(268,576	)		(425,962	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period		2,659			2,151			18,418			11,492
Dividends paid to shareholders		(7,792	)		(6,202	)		(15,579	)		(12,400	)
Repayment of senior notes		-			-			-			(250,000	)
Net cash (used in) provided by financing activities		(5,133	)		(4,051	)		2,839			(250,908	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		12,367			(8,051	)		20,620			(13,623	)
Net increase (decrease) in cash		9,059			(38,573	)		68,148			(71,981	)
Cash, beginning of period		166,364			151,522			107,275			184,930
Cash, end of period	$	175,423		$	112,949		$	175,423		$	112,949
SUPPLEMENTAL CASH FLOW INFORMATION
Cash transactions:
Income taxes paid, net	$	26,232		$	70,561		$	(25,086	)	$	107,451
Interest paid	$	16,210		$	16,322		$	34,518		$	45,169