SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 or 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended:                                   Commission File Number:
     JUNE 30, 2001                                              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) 640-3000
          (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 at least the past 90 days.

                           YES    X                  NO
                                -----                    -----

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 August 9, 2001
             -----                                  ----------------------------
Common Stock,      $.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 June 30, 2001 (unaudited)
          and December 31, 2000                                                3

         Consolidated Statements of Operations and Comprehensive
          Income for the three and six months ended June 30, 2001
          and 2000 (unaudited)                                                 4

         Consolidated Statements of Changes in Stockholder's Equity
          for the three and six months ended June 30, 2001 and
          2000 (unaudited)                                                     5

         Consolidated Statements of Cash Flows for the three and six
          months ended June 30, 2001 and 2000 (unaudited)                      6

         Notes to Consolidated Financial Statements                            7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         -----------------------------------------------------------
         AND RESULTS OF OPERATIONS                                            17
         -------------------------

                                     PART II

                                OTHER INFORMATION
                                -----------------

ITEM 1.  LEGAL PROCEEDINGS                                                    27
         -----------------

ITEM 5.  OTHER INFORMATION                                                  None
         -----------------

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                     27
         --------------------------------


PART I - ITEM 1

                       EVEREST REINSURANCE HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
               (Dollars in thousands, except par value per share)



                                             June 30,       December 31,
                                           ------------     ------------
                                               2001             2000
                                           ------------     ------------
                                                      
ASSETS:                                             (unaudited)
Fixed maturities - available for
 sale, at market value (amortized
 cost: 2001, $3,961,149; 2000,
 $3,793,279)                               $  4,077,722     $  3,879,335
Equity securities, at market value
 (cost: 2001, $26,708; 2000, $22,395)            27,192           36,634
Short-term investments                          197,248          271,216
Other invested assets                            31,239           29,211
Cash                                             15,665           68,397
                                           ------------     ------------
   Total investments and cash                 4,349,066        4,284,793

Accrued investment income                        65,770           64,508
Premiums receivable                             433,866          393,229
Reinsurance receivables                       1,049,839          996,689
Funds held by reinsureds                        161,433          161,350
Deferred acquisition costs                      117,190           92,478
Prepaid reinsurance premiums                     64,148           58,196
Deferred tax asset                              200,909          174,451
Other assets                                     64,649           37,622
                                           ------------     ------------
TOTAL ASSETS                               $  6,506,870     $  6,263,316
                                           ============     ============

LIABILITIES:
Reserve for losses and adjustment
 expenses                                  $  3,835,334     $  3,785,747
Unearned premium reserve                        490,650          401,148
Funds held under reinsurance treaties           129,946          110,464
Losses in the course of payment                 102,034          101,995
Contingent commissions                            5,803            9,380
Other net payable to reinsurers                  66,365           60,332
Current federal income taxes                    (11,369)          (8,210)
8.5% Senior notes due 3/15/2005                 249,654          249,615
8.75% Senior notes due 3/15/2010                199,040          199,004
Revolving credit agreement borrowings           134,000          235,000
Interest accrued on debt and borrowings          11,446           12,212
Other liabilities                               157,459           56,142
                                           ------------     ------------
   Total liabilities                          5,370,362        5,212,829
                                           ------------     ------------

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01; 200
 million shares authorized; 1,000
 shares issued in 2001 and 2000                     -                -
Additional paid-in capital                      257,928          255,359
Accumulated other comprehensive income,
 net of deferred income taxes of $35.9
 million in 2001 and $30.4 million
 in 2000                                         66,846           56,747
Retained earnings                               811,734          738,381
                                           ------------     ------------
   Total stockholder's equity                 1,136,508        1,050,487
                                           ------------     ------------
TOTAL LIABILITIES AND STOCKHOLDER'S
 EQUITY                                    $  6,506,870     $  6,263,316
                                           ============     ============

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

                                       3

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


                                      Three Months Ended         Six Months Ended
                                           June 30,                  June 30,
                                    ----------------------    ----------------------
                                      2001         2000         2001         2000
                                    ---------    ---------    ---------    ---------
                                         (unaudited)               (unaudited)
                                                               
REVENUES:
Premiums earned                     $ 391,085    $ 285,780    $ 719,077    $ 551,964
Net investment income                  68,747       66,941      136,109      130,750
Net realized capital gain (loss)        4,084       (8,185)        (705)        (321)
Other income (expense)                    816         (370)       1,462          440
                                    ---------    ---------    ---------    ---------
Total revenues                        464,732      344,166      855,943      682,833
                                    ---------    ---------    ---------    ---------

CLAIMS AND EXPENSES:
Incurred loss and loss
 adjustment expenses                  290,244      233,669      532,692      430,058
Commission, brokerage, taxes
 and fees                              96,826       46,272      178,679      111,930
Other underwriting expenses            14,250       12,734       26,248       24,242
Interest expense on senior
 notes                                  9,726        9,722       19,450       11,342
Interest expense on credit
 facility                               1,819        1,888        4,516        3,351
                                    ---------    ---------    ---------    ---------
Total claims and expenses             412,865      304,285      761,585      580,923
                                    ---------    ---------    ---------    ---------

INCOME BEFORE TAXES                    51,867       39,881       94,358      101,910

Income tax                             12,105        8,340       21,005       21,319
                                    ---------    ---------    ---------    ---------

NET INCOME                          $  39,762    $  31,541    $  73,353    $  80,591
                                    =========    =========    =========    =========

Other comprehensive (loss)
 income, net of tax                   (20,708)      (6,035)      10,099        8,899
                                    ---------    ---------    ---------    ---------

COMPREHENSIVE INCOME                $  19,054    $  25,506    $  83,452    $  89,490
                                    =========    =========    =========    =========


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

                                       4

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


                                         Three Months Ended           Six Months Ended
                                              June 30,                    June 30,
                                      ------------------------    ------------------------
                                         2001          2000          2001          2000
                                      ----------    ----------    ----------    ----------
                                            (unaudited)                 (unaudited)
                                                                    
COMMON STOCK (shares outstanding):
Balance, beginning of period               1,000         1,000         1,000    46,457,817
Issued during the period                     -             -             -           8,500
Treasury stock acquired during
 the period                                  -             -             -        (650,400)
Treasury stock reissued during
 the period                                  -             -             -           1,780
Common stock retired during the
 period                                      -             -             -     (45,817,697)
Issued during the period                                                 -             -                -         1,000
                                      ----------    ----------    ----------    ----------
Balance, end of period                     1,000         1,000         1,000         1,000
                                      ==========    ==========    ==========    ==========


COMMON STOCK (par value):
Balance, beginning of period          $      -      $      -      $      -      $      509
Common stock retired during
 the period                                  -             -             -            (509)
                                      ----------    ----------    ----------    ----------
Balance, end of period                       -             -             -             -
                                      ----------    ----------    ----------    ----------

ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period             256,305       252,979       255,359       390,912
Retirement of treasury stock
 during the period                           -             -             -        (138,546)
Common stock issued during the
 period                                    1,623           -           2,569           157
Treasury stock reissued during
 the period                                  -             -             -              (2)
Contribution from subsidiary                 -             198           -             198
Common stock retired during the
 period                                      -             -             -             458
                                      ----------    ----------    ----------    ----------
Balance, end of period                   257,928       253,177       257,928       253,177
                                      ----------    ----------    ----------    ----------

UNEARNED COMPENSATION:
Balance, beginning of period                 -             -             -            (109)
Net increase during the period               -             -             -             109
                                      ----------    ----------    ----------    ----------
Balance, end of period                       -             -             -             -
                                      ----------    ----------    ----------    ----------

ACCUMULATED OTHER COMPREHENSIVE
 INCOME, NET OF DEFERRED INCOME
 TAXES:
Balance, beginning of period              87,554        (1,767)       56,747       (16,701)
Net (decrease) increase during
 the period                              (20,708)       (6,035)       10,099         8,899
                                      ----------    ----------    ----------    ----------
Balance, end of period                    66,846        (7,802)       66,846        (7,802)
                                      ----------    ----------    ----------    ----------

RETAINED EARNINGS:
Balance, beginning of period             771,972       723,914       738,381     1,074,941
Net income                                39,762        31,541        73,353        80,591
Restructure adjustments                      -              22           -             (55)
Dividends paid to parent                     -             -             -        (400,000)
                                      ----------    ----------    ----------    ----------
Balance, end of period                   811,734       755,477       811,734       755,477
                                      ----------    ----------    ----------    ----------

TREASURY STOCK AT COST:
Balance, beginning of period                 -             -             -        (122,070)
Treasury stock retired during
 the period                                  -             -             -         138,454
Treasury stock acquired during
 the period                                  -             -             -         (16,426)
Treasury stock reissued during
 the period                                  -             -             -              42
                                      ----------    ----------    ----------    ----------
Balance, end of period                       -             -             -             -
                                      ----------    ----------    ----------    ----------
TOTAL STOCKHOLDER'S EQUITY,
 END OF PERIOD                        $1,136,508    $1,000,852    $1,136,508    $1,000,852
                                      ==========    ==========    ==========    ==========

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

                                       5

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


                                             Three Months Ended           Six Months Ended
                                                  June 30,                    June 30,
                                          ------------------------    ------------------------
                                             2001          2000          2001          2000
                                          ----------    ----------    ----------    ----------
                                                                        
CASH FLOWS FROM OPERATING
 ACTIVITIES:                                    (unaudited)                 (unaudited)
Net income                                $   39,762    $   31,541    $   73,353    $   80,591
 Adjustments to reconcile net
  income to net cash provided by
  operating activities:
 (Increase) in premiums receivable           (26,133)      (17,269)      (43,725)      (47,162)
 Increase (decrease) in funds held, net       21,969         7,920        17,928        (5,968)
 (Increase) in reinsurance receivables       (47,045)      (26,843)      (54,440)      (18,146)
 (Decrease) in deferred tax asset            (35,023)       (1,711)      (33,302)       (4,482)
 Increase (decrease) in reserve for
  losses and loss adjustment expenses         72,304        (2,213)       70,795       (15,864)
 Increase in unearned premiums                28,000        14,653        90,472        44,928
 Decrease (increase) in other assets
  and liabilities                             10,066       (13,316)      (27,548)       (7,189)
 Non cash compensation expense                   -             -             -             109
 Accrual of bond discount/amortization
  of bond premium                             (1,434)       (2,076)       (2,532)       (3,583)
 Amortization of underwriting discount
  on senior notes                                 37            34            75            40
 Restructure adjustment                          -              23           -             (55)
 Realized capital (gains) losses              (4,084)        8,185           705           321
                                          ----------    ----------    ----------    ----------
Net cash provided by (used in)
 operating activities                         58,419        (1,072)       91,781        23,540
                                          ----------    ----------    ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities
 matured/called - available for sale          82,303        58,159       127,287        87,615
Proceeds from fixed maturities sold
 - available for sale                        189,145       313,447       211,139       411,137
Proceeds from equity securities sold          28,949         4,917        28,949        47,580
Proceeds from other invested assets
 sold                                             15           -              23           -
Cost of fixed maturities acquired
 - available for sale                       (308,492)     (379,238)     (533,141)     (625,678)
Cost of equity securities acquired           (20,027)          (13)      (20,027)       (1,191)
Cost of other invested assets acquired          (446)          (28)         (508)       (1,558)
Net (purchases) sales of short-term
 securities                                 (138,288)         (643)       75,363       (26,349)
Net increase in unsettled securities
 transactions                                 57,560        13,949        72,059        11,868
                                          ----------    ----------    ----------    ----------
Net cash (used in) provided by
 investing activities                       (109,281)       10,550       (38,856)      (96,576)
                                          ----------    ----------    ----------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock net of
 reissuances                                     -             -             -         (16,478)
Common stock issued during the period          1,623           -           2,569           106
Dividends paid to stockholders                   -             -             -        (400,000)
Proceeds from issuance of senior notes           -             -             -         448,507
Borrowing on revolving credit agreement        2,000           -          22,000        47,000
Repayments on revolving credit agreement         -             -        (123,000)          -
Contribution from subsidiary                     -             198           -             198
                                          ----------    ----------    ----------    ----------
Net cash provided by (used in)
 financing activities                          3,623           198       (98,431)       79,333
                                          ----------    ----------    ----------    ----------

EFFECT OF EXCHANGE RATE CHANGES
 ON CASH                                      (2,636)       (2,212)       (7,226)       (2,355)
                                          ----------    ----------    ----------    ----------

Net (decrease) increase in cash              (49,875)        7,464       (52,732)        3,942

Cash, beginning of period                     65,540        58,705        68,397        62,227
                                          ----------    ----------    ----------    ----------
Cash, end of period                       $   15,665    $   66,169    $   15,665    $   66,169
                                          ==========    ==========    ==========    ==========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash transactions:
Income taxes paid, net                    $   49,416    $   32,026    $   51,769    $   37,016
Interest paid                             $    1,911    $    1,987    $   24,657    $    2,910
Non-cash financing transaction:
Issuance of common stock                  $      -      $      -      $      -      $      -


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

                                       6

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000

1.  GENERAL

On February 24, 2000, a corporate  restructuring  was  completed  and Everest Re
Group,  Ltd.  ("Group")  became  the  new  parent  holding  company  of  Everest
Reinsurance  Holdings,  Inc. (the "Company"),  which remains the holding company
for Group's U.S. based operations. The Company is filing this report as a result
of its public issuance of debt securities on March 14, 2000.

The  consolidated  financial  statements  of the  Company  for the three and six
months  ended June 30, 2001 and 2000  include  all  adjustments,  consisting  of
normal recurring  accruals,  which, in the opinion of management,  are necessary
for a fair  presentation 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 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 six  months  ended  June 30,  2001 and 2000 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, 2000,  1999 and 1998  included in the
Company's most recent Form 10-K filing.

2.  ACQUISITIONS

On September  19, 2000,  the Company  completed  the  acquisition  of all of the
issued and outstanding capital stock of Gibraltar Casualty Company ("Gibraltar")
from The Prudential Insurance Company of America ("The Prudential")  pursuant to
a Stock Purchase Agreement between The Prudential and the Company dated February
24, 2000 and amended on August 8, 2000 (the "Stock  Purchase  Agreement").  As a
result of the  acquisition,  Gibraltar  became a wholly owned  subsidiary of the
Company and, immediately following the acquisition,  its name was changed to Mt.
McKinley Insurance Company ("Mt. McKinley").

Mt. McKinley,  a run-off property and casualty insurer in the United States, has
had a long  relationship with the Company and its principal  operating  company,
Everest  Reinsurance  Company ("Everest Re"). Mt. McKinley was formed in 1978 by
Everest Re and wrote direct insurance until 1985, when it was placed in run-off.
In 1991, Mt.  McKinley  became a subsidiary of The  Prudential.  Mt. McKinley is
also 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   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 $89.4
million was available (the "Stop Loss  Agreement") at the acquisition  date. The
Stop Loss Agreement and other  reinsurance  contracts  between Mt.  McKinley and
Everest  Re remain in effect following the acquisition. However, these contracts

                                       7

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


have become transactions with affiliates with the financial impact eliminated in
consolidation.

Effective  September 19, 2000, Mt. McKinley and Everest  Reinsurance  (Bermuda),
Ltd.  ("Bermuda  Re")  entered  into  a  loss  portfolio  transfer   reinsurance
agreement, whereby Mt. McKinley transferred, for arm's-length consideration, all
of its net insurance exposures and reserves, including allocated and unallocated
loss adjustment expenses, to Bermuda Re.

Also during 2000, the Company completed an additional acquisition,  Southeastern
Security  Insurance Company, a United States property and casualty company whose
primary business is non-standard automobile insurance.

3.  CONTINGENCIES

The Company  continues to receive  claims under expired  contracts  which assert
alleged injuries and/or damages relating to or resulting from toxic torts, toxic
waste and other hazardous substances,  such as 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  asbestos  and  environmental  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
asbestos and environmental  claims. Among the complications are: (a) potentially
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  ceding  companies  to  reinsurers;  (g)
historical  data concerning  asbestos and  environmental  losses,  which is more
limited  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.

Management  believes  that  these  factors   continue  to  render  reserves  for
asbestos  and  environmental  losses  significantly  less subject to traditional
actuarial  methods  than  are  reserves  on  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

                                       8

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


extent  that,  in the  judgement 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,  which has significant exposure to asbestos and
environmental  claims,   Prudential  Property  and  Casualty  Insurance  Company
("Prupac"), a subsidiary of 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 June 30,
2001,  cessions  under this  reinsurance  agreement  have reduced the  available
remaining limits to $145.8 million net of coinsurance.  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 six months ended June 30, 2001 and 2000:


(dollar amounts in thousands)          Three Months Ended         Six Months Ended
                                            June 30,                  June 30,
                                       2001         2000         2001         2000
                                    -----------------------   -----------------------
                                                               
Gross basis:
Beginning of period reserves (1)    $  690,659   $  598,046   $  693,704   $  614,236
Incurred losses                          5,000          -         17,110          -
Paid losses                            (21,732)     (17,778)     (36,887)     (33,968)
                                    ----------   ----------   ----------   ----------
End of period reserves              $  673,927   $  580,268   $  673,927   $  580,268
                                    ==========   ==========   ==========   ==========

Net basis:
Beginning of period reserves        $  310,413   $  357,085   $  317,196   $  365,069
Incurred losses                            -            -            -            -
Paid losses                            (11,655)     (12,181)     (18,438)     (20,165)
                                    ----------   ----------   ----------   ----------
End of period reserves              $  298,758   $  344,904   $  298,758   $  344,904
                                    ==========   ==========   ==========   ==========

(1) The January 1, 2001  beginning  of period  reserves  include Mt.  McKinley's
    reserves from the 2000 acquisition transaction.

At June 30, 2001,  the  gross  reserves  for  asbestos and environmental  losses
were  comprised  of  $110.3  million  representing  case  reserves  reported  by
ceding   companies,   $63.9  million  representing  additional   case   reserves
established  by  the  Company  on  assumed  reinsurance  claims,  $160.1 million
representing  case   reserves  established  by  the  Company  on  direct  excess

                                       9

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


insurance  claims,  including  Mt.  McKinley,  and $339.6  million  representing
incurred but not reported ("IBNR") reserves.

The Company is involved  from time to time in ordinary  routine  litigation  and
arbitration proceedings incidental to its business. The Company does not believe
that there are any other material  pending legal  proceedings to which it or any
of its subsidiaries or their properties are subject.

The  Prudential  sells  annuities  which are  purchased by property and casualty
insurance  companies to settle certain types of claim  liabilities.  In 1993 and
prior years, the Company,  for a fee,  accepted the claim payment  obligation of
these property and casualty insurers, and, concurrently, became the owner of the
annuity or assignee of the annuity proceeds. 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 June 30, 2001 was $140.7 million.

The Company has purchased  annuities from an unaffiliated life insurance company
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
June 30, 2001 was $13.2 million.

                                       10

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


4.  OTHER COMPREHENSIVE INCOME

The Company's other comprehensive income is comprised as follows:


(dollar amounts in thousands)          Three Months Ended           Six Months Ended
                                            June 30,                    June 30,
                                       2001          2000          2001          2000
                                    ------------------------    ------------------------
                                                                  
Net unrealized appreciation
 of investments, net of
 deferred income taxes             ($   22,577)  ($    6,681)   $   10,915    $    9,093
Currency translation
 adjustments, net of deferred
 income taxes                            1,869           646          (816)         (194)
                                    ----------    ----------    ----------    ----------
Other comprehensive
 income, net of deferred
 income taxes                      ($   20,708)  ($    6,035)   $   10,099    $    8,899
                                    ==========    ==========    ==========    ==========


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"). First Union
National Bank is the  administrative  agent for the Credit Facility.  The Credit
Facility is used for  liquidity  and general  corporate  purposes and replaced a
prior credit facility,  which has been terminated.  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 First Union National Bank from
time to time as its prime rate or the Federal Funds rate plus 0.5% per annum. On
December 18, 2000, the Credit Facility was amended to extend the borrowing limit
to $235.0  million for a period of 120 days.  This 120-day period expired during
the three  months  ended  March 31, 2001 and the limit  reverted  back to $150.0
million.  The amount of margin  and the fees  payable  for the  Credit  Facility
depends upon the Company's  senior  unsecured debt rating.  Group has guaranteed
all of the Company's obligations under the Credit Facility.

The Credit  Facility  requires  Group to maintain a debt to capital ratio of not
greater  than 0.35 to 1, the  Company to  maintain a minimum  interest  coverage
ratio of 2.5 to 1 and Everest Re to  maintain  its  statutory  surplus at $850.0
million  plus  25%  of  aggregate  net  income  and  25%  of  aggregate  capital
contributions  earned  or  received  after  December 31, 1999.  The  Company was

                                       11

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


in compliance with all covenants under the facility at June 30, 2001 and 2000 as
well as for the three and six months ended June 30, 2001 and 2000.

During the three and six months ended June 30, 2001,  the Company made  payments
on the Credit  Facility of $0.0 million and $123.0  million,  respectively,  and
borrowings of $2.0 million and $22 .0 million, respectively. As of June 30, 2001
and 2000,  the Company had  outstanding  Credit  Facility  borrowings  of $134.0
million  and  $106.0  million,   respectively.   Interest  expense  incurred  in
connection with these borrowings was $1.8 million and $1.9 million for the three
months  ended June 30, 2001 and 2000,  respectively,  and $4.5  million and $3.4
million for the six months ended June 30, 2001 and 2000, respectively.


6.  SENIOR NOTES

During the first  quarter of 2000,  the Company  completed a public  offering of
$200.0  million  principal  amount of 8.75%  senior notes due March 15, 2010 and
$250.0 million  principal amount of 8.5% senior notes due March 15, 2005. During
the first  quarter of 2000,  the  Company  distributed  $400.0  million of these
proceeds  to Group  of  which  $250.0  million  was used by Group to  capitalize
Bermuda Re.

Interest expense incurred in connection with these senior notes was $9.7 million
for the three  months  ended June 30, 2001 and 2000 and $19.5  million and $11.3
million for the six months ended June 30, 2001 and 2000, respectively.


7.  SEGMENT REPORTING

During the quarter ended December 31, 2000, the Company's  management  realigned
its operating  segments to better reflect the way that  management  monitors and
evaluates  the  Company's  financial  performance.  The Company has restated all
information  for  prior  years to  conform  to the new  segment  structure.  The
Company, through its subsidiaries,  operates in four segments: U.S. Reinsurance,
U.S. Insurance,  Specialty Reinsurance and International  Reinsurance.  The U.S.
Reinsurance  operation writes property and casualty treaty  reinsurance  through
reinsurance  brokers as well as directly with ceding companies within the United
States, in addition to property,  casualty and specialty facultative reinsurance
through brokers and directly with ceding companies within the United States. The
U.S.  Insurance  operation  writes  property  and casualty  insurance  primarily
through general agent  relationships and surplus lines brokers within the United
States. The Specialty Reinsurance operation writes accident and health,  marine,
aviation and surety  business  within the United  States and  worldwide  through
brokers  and  directly  with ceding  companies.  The  International  Reinsurance
operation  writes  property  and  casualty  reinsurance  through  the  Company's
branches in  Belgium,  London,  Canada,  and  Singapore,  in addition to foreign
"home-office" business.

                                       12

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


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   principally   based  upon  their
underwriting gain or loss ("underwriting results"). Underwriting results include
earned premium less incurred loss and loss adjustment  expenses,  commission and
brokerage expenses and other underwriting expenses.

The following tables present the relevant underwriting results for the operating
segments  for the three and six months  ended June 30,  2001 and 2000,  with all
dollar values presented in thousands.


                                U.S. REINSURANCE
- --------------------------------------------------------------------------------
                                  Three Months Ended          Six Months Ended
                                       June 30,                  June 30,
                                   2001         2000         2001         2000
                                ------------------------------------------------
                                                           
Earned premiums                 $ 140,256    $ 109,754    $ 249,366    $ 229,027
Incurred losses and loss
 adjustment expenses              109,734       93,934      185,095      177,933
Commission and brokerage           37,322        1,282       63,852       26,842
Other underwriting expenses         4,094        4,075        7,334        8,077
                                ---------    ---------    ---------    ---------
Underwriting (loss) gain       ($  10,894)   $  10,463   ($   6,915)   $  16,175
                                =========    =========    =========    =========



                                 U.S. INSURANCE
- --------------------------------------------------------------------------------
                                   Three Months Ended         Six Months Ended
                                       June 30,                  June 30,
                                   2001         2000         2001         2000
                                ----------------------    ----------------------
                                                           
Earned premiums                 $  68,357    $  20,456    $ 120,498    $  38,959
Incurred losses and loss
 adjustment expenses               49,065       13,423       86,264       24,685
Commission and brokerage           13,990        4,480       27,528       10,809
Other underwriting expenses         3,952        2,774        7,917        5,486
                                ---------    ---------    ---------    ---------
Underwriting gain (loss)        $   1,350   ($     221)  ($   1,211)  ($   2,021)
                                =========    =========    =========    =========


                                       13

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000



                              SPECIALTY REINSURANCE
- --------------------------------------------------------------------------------
                                   Three Months Ended         Six Months Ended
                                       June 30,                  June 30,
                                   2001         2000         2001         2000
                                ----------------------    ----------------------
                                                           
Earned premiums                 $  99,070    $  80,615    $ 192,808    $ 142,826
Incurred  losses and loss
 adjustment expenses               73,547       69,537      148,096      114,163
Commission and brokerage           23,630       21,424       47,565       39,393
Other underwriting expenses         1,578        1,535        2,950        2,863
                                ---------    ---------    ---------    ---------
Underwriting gain (loss)        $     315   ($  11,881)  ($   5,803)  ($  13,593)
                                =========    =========    =========    =========



                            INTERNATIONAL REINSURANCE
- --------------------------------------------------------------------------------
                                   Three Months Ended         Six Months Ended
                                       June 30,                  June 30,
                                   2001         2000         2001         2000
                                ----------------------    ----------------------
                                                           
Earned premiums                 $  83,401    $  74,955    $ 156,404    $ 141,152
Incurred  losses and loss
 adjustment expenses               57,897       56,775      113,236      113,277
Commission and brokerage           21,884       19,086       39,734       34,886
Other underwriting expenses         3,446        3,460        6,613        6,846
                                ---------    ---------    ---------    ---------
Underwriting gain (loss)        $     174   ($   4,366)  ($   3,179)  ($  13,857)
                                =========    =========    =========    =========


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:


                                ------------------------------------------------
                                   Three Months Ended         Six Months Ended
                                       June 30,                  June 30,
                                   2001         2000         2001         2000
                                ----------------------    ----------------------
                                                           
Underwriting (loss)            ($   9,055)  ($   6,005)  ($  17,108)  ($  13,296)
Net investment income              68,747       66,941      136,109      130,750
Realized gain (loss)                4,084       (8,185)        (705)        (321)
Corporate operations                1,180          890        1,434          970
Interest expense                   11,545       11,610       23,966       14,693
Other income (expense)                816         (370)       1,462          440
                                ---------    ---------    ---------    ---------
Income before taxes             $  51,867    $  39,881    $  94,358    $ 101,910
                                =========    =========    =========    =========

                                       14

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


The Company writes premium in the United States and international  markets.  The
revenues, net income and identifiable assets of the individual foreign countries
in which the Company writes business are not material.

8.  NEW ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging  Activities"  ("FAS 133"). In June 1999, the FASB issued
Statement of Financial  Accounting Standards No. 137, "Deferral of the Effective
Date of FASB Statement No. 133" ("FAS 137"), which allowed entities that had not
adopted FAS 133 to defer its effective date to all fiscal quarters of all fiscal
years beginning after June 15, 2000. In June 2000, the FASB issued  Statement of
Financial  Accounting  Standards  No. 138,  "Accounting  for Certain  Derivative
Instruments and Certain Hedging  Activities,  an amendment of FASB Statement No.
133," which amended the accounting  and reporting  standards of FAS 133. FAS 133
established  accounting and reporting standards for derivative  instruments.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the consolidated  balance sheet and measure those  instruments at
fair value.  The Company adopted the deferral  provisions of FAS 137,  effective
January 1, 2000 and adopted FAS 133, as amended, effective January 1, 2001.

The Company  continually  seeks to expand its products  portfolio and certain of
its products have been  determined to meet the definition of a derivative  under
FAS 133. These products  consist of credit default swaps and specialized  equity
options,  all of which have  characteristics  which allow the transactions to be
analyzed  using   approaches   consistent  with  those  used  in  the  Company's
reinsurance transactions. The Company has previously recorded the derivatives at
their  fair  value in  earlier  financial  statements,  but  chose to delay  the
adoption  of FAS  133.  As  such,  the  adoption  of FAS 133 has  not  caused  a
cumulative-effect-type adjustment. The fair value of these products are included
as part of other liabilities and the corresponding  mark to market adjustment is
included  as  part of  other  expense  and not  shown  separately  due to  their
immaterial nature.

In June 2001, the FASB issued FAS 142,  "Goodwill and Other Intangible  Assets".
FAS 142 establishes new accounting and reporting standards for acquired goodwill
and  other  intangible  assets.  It  requires  that an entity  determine  if the
goodwill or other  intangible  asset has an  indefinite  useful life or a finite
useful  life.  Those  with  indefinite  useful  lives  will  not be  subject  to
amortization  and must be tested  annually  for  impairment.  Those with  finite
useful  lives will be 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. Management believes that implementation
of this statement will not have a material  impact on the financial  position of
the Company.

                                       15

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

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000


9.  RELATED-PARTY TRANSACTIONS

During the normal  course of  business,  the  Company,  through its  affiliates,
engages  in  arms-length  reinsurance  and  brokerage  and  commission  business
transactions  with  companies  controlled  by or  affiliated  with  its  outside
directors. Such transactions,  individually and in the aggregate, are immaterial
to the Company's financial condition, results of operations and cash flows.

The Company engages in business  transactions  with Group and Bermuda Re. During
the first quarter of 2000,  the Company  distributed  $400.0 million to Group to
facilitate the completion of the corporate restructuring. In addition, effective
September 19, 2000,  Mt.  McKinley and Bermuda Re entered into a loss  portfolio
transfer  reinsurance   agreement,   whereby  Mt.  McKinley   transferred,   for
arm's-length  consideration,  all of its net  insurance  exposures and reserves,
including allocated and unallocated loss adjustment expenses to Bermuda Re.

                                       16

PART I - ITEM 2



                       EVEREST REINSURANCE HOLDINGS, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

RESTRUCTURING

On February 24, 2000, a corporate  restructuring  was  completed  and Everest Re
Group,  Ltd.  ("Group")  became  the  new  parent  holding  company  of  Everest
Reinsurance  Holdings,  Inc. (the "Company"),  which remains the holding company
for Group's U.S. based operations. The Company is filing this report as a result
of its public issuance of debt securities on March 14, 2000.

ACQUISITIONS

On September  19, 2000,  the Company  completed  the  acquisition  of all of the
issued and outstanding capital stock of Gibraltar Casualty Company ("Gibraltar")
from The Prudential Insurance Company of America ("The Prudential")  pursuant to
a Stock Purchase Agreement between The Prudential and the Company dated February
24, 2000 and amended on August 8, 2000 (the "Stock  Purchase  Agreement").  As a
result of the  acquisition,  Gibraltar  became a wholly owned  subsidiary of the
Company and, immediately following the acquisition,  its name was changed to Mt.
McKinley Insurance Company ("Mt. McKinley").  In connection with the acquisition
of Mt. McKinley,  which has significant  exposure to asbestos and  environmental
claims,  Prudential  Property  and  Casualty  Insurance  Company  ("Prupac"),  a
subsidiary of 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.

Mt. McKinley,  a run-off property and casualty insurer in the United States, has
had a long  relationship with the Company and its principal  operating  company,
Everest  Reinsurance  Company ("Everest Re"). Mt. McKinley was formed in 1978 by
Everest Re and wrote direct insurance until 1985, when it was placed in run-off.
In 1991, Mt.  McKinley  became a subsidiary of The  Prudential.  Mt. McKinley is
also 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   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 $89.4
million was available (the "Stop Loss  Agreement") at the acquisition  date. The
Stop Loss Agreement and other  reinsurance  contracts  between Mt.  McKinley and
Everest Re remain in effect following the acquisition.  However, these contracts
have become transactions with affiliates with the financial impact eliminated in
consolidation.

                                       17

Effective  September 19, 2000, Mt. McKinley and Everest  Reinsurance  (Bermuda),
Ltd.  ("Bermuda  Re")  entered  into  a  loss  portfolio  transfer   reinsurance
agreement, whereby Mt. McKinley transferred, for arm's-length consideration, all
of its net insurance exposures and reserves, including allocated and unallocated
loss adjustment expenses, to Bermuda Re.

Also during 2000, the Company completed an additional acquisition,  Southeastern
Security  Insurance  Company  ("SSIC"),  a United  States  property and casualty
company whose primary business is non-standard automobile insurance.

INDUSTRY CONDITIONS

Since late 1999, market conditions,  including unfavorable industry-wide results
of  operations,  have led to modest  premium  rate  increases  as well as modest
improvements  in  contract  terms  in a  number  of  lines  of  reinsurance  and
insurance.  These changes reflect a reversal of the 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, a rejuvenated  Lloyd's market and
consolidation  and increased capital levels in the insurance  industry.  Many of
these same  factors  continue  to  operate.  As a result,  although  the Company
continues  to be  encouraged  by the recent  improvements,  the  Company  cannot
predict  with  any  reasonable  certainty  whether  and  to  what  extent  these
improvements will persist.

SEGMENT INFORMATION

During the quarter ended December 31, 2000, the Company's  management  realigned
its operating  segments to better reflect the way that  management  monitors and
evaluates  the  Company's  financial  performance.  The Company has restated all
information  for  prior  years to  conform  to the new  segment  structure.  The
Company, through its subsidiaries,  operates in four segments: U.S. Reinsurance,
U.S. Insurance,  Specialty Reinsurance and International  Reinsurance.  The U.S.
Reinsurance  operation writes property and casualty treaty  reinsurance  through
reinsurance  brokers as well as directly with ceding companies within the United
States, in addition to property,  casualty and specialty facultative reinsurance
through brokers and directly with ceding companies within the United States. The
U.S.  Insurance  operation  writes  property  and casualty  insurance  primarily
through general agent  relationships and surplus lines brokers within the United
States. The Specialty Reinsurance operation writes accident and health,  marine,
aviation and surety  business  within the United  States and  worldwide  through
brokers  and  directly  with ceding  companies.  The  International  Reinsurance
operation  writes  property  and  casualty  reinsurance  through  the  Company's
branches in  Belgium,  London,  Canada,  and  Singapore,  in addition to foreign
"home-office" business.

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   principally   based  upon  their
underwriting results.

                                       18

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

PREMIUMS.  Gross premiums written increased 47.9% to $482.6 million in the three
months  ended June 30, 2001 from $326.2  million in the three  months ended June
30, 2000 as the Company took advantage of selected growth  opportunities,  while
continuing to maintain a disciplined underwriting approach. Premium growth areas
included a 231.7%  ($87.0  million)  increase in the U.S.  Insurance  operation,
principally  attributable to growth in workers' compensation  insurance, a 32.5%
($40.6 million) increase in the U.S. Reinsurance operation, primarily reflecting
improved market  conditions,  a 26.3% ($21.7 million)  increase in the Specialty
Reinsurance operation,  principally  attributable to growth in medical stop loss
business,  a component of A&H writings,  and an 8.8% ($7.1 million)  increase in
the International Reinsurance operation,  mainly attributable to growth in Latin
America.  The  Company  continued  to  decline  business  that  did not meet its
objectives regarding underwriting profitability.

Ceded  premiums  increased  to $65.8  million in the three months ended June 30,
2001 from $31.1  million in the three months ended June 30, 2000.  This increase
was  principally  attributable  to the higher  utilization of contract  specific
retrocessions in the U.S. Insurance  operation,  including a 100% ceded program,
first written in the third quarter of 2000, which  contributed  $19.3 million to
the  increase.  The ceded  premiums for the three months ended June 30, 2001 and
2000  included   adjustment   premiums  of  $15.4  million  and  $11.7  million,
respectively,  relating to claims made under the 1999  accident  year  aggregate
excess of loss element of the Company's corporate retrocessional program.

Net premiums  written  increased by 41.2% to $416.7  million in the three months
ended June 30, 2001 from $295.1 million in the three months ended June 30, 2000.
This  increase  was  consistent  with the  increase in gross  premiums  written,
partially offset by the increase in ceded premiums.

PREMIUM  REVENUES.  Net premiums earned  increased by 36.8% to $391.1 million in
the three  months  ended June 30, 2001 from $285.8  million in the three  months
ended June 30, 2000.  Contributing to this increase was a 234.2% ($47.9 million)
increase in the U.S.  Insurance  operation,  a 27.8% ($30.5 million) increase in
the  U.S.  Reinsurance  operation,  a  22.9%  ($18.5  million)  increase  in the
Specialty  Reinsurance  operation  and an 11.3% ($8.4  million)  increase in the
International  Reinsurance  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 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 loss adjustment expenses ("LAE") increased by 24.2%
to $290.2 million in the three months ended June 30, 2001 from $233.7 million in
the three months ended June 30,  2000.  The increase in incurred  losses and LAE
was  principally  attributable  to the increase in net premiums  earned and also
reflects the impact of changes in the Company's mix of business. 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

                                       19

and  are  net of  reinsurance.  Catastrophe  losses,  net of  contract  specific
cessions but before cessions under the corporate  retrocessional  program,  were
$13.9 million in the three months ended June 30, 2001 and related principally to
the tropical storm Alison loss event compared to net catastrophe  losses of $6.2
million in the three months ended June 30, 2000. Incurred losses and LAE for the
three months ended June 30, 2001 reflected ceded losses and LAE of $77.1 million
compared  to ceded  losses and LAE in the three  months  ended June 30,  2000 of
$40.5  million,  with  the  increase  principally  attributable  to  the  higher
utilization of contract specific  retrocessions in the U.S. Insurance operation.
The ceded  losses  and LAE for the three  months  ended  June 30,  2001 and 2000
reflect $29.0 million and $23.5 million, respectively, of losses ceded under the
1999 accident year aggregate excess of loss component of the Company's corporate
retrocessional program.

Contributing  to the  increase  in incurred  losses and LAE in the three  months
ended June 30,  2001 from the three  months  ended  June 30,  2000 were a 265.5%
($35.6 million) increase in the U.S. Insurance operation principally  reflecting
increased  premium  volume  coupled  with  changes  in this  segment's  specific
reinsurance  programs, an 16.8% ($15.8 million) increase in the U.S. Reinsurance
operation,  principally  reflecting  losses in connection  with  tropical  storm
Alison, a 5.8% ($4.0 million)  increase in the Specialty  Reinsurance  operation
principally  attributable  to increased  premium  volume in A&H and a 2.0% ($1.1
million) increase in the International  Reinsurance  operation.  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 premiums earned,  decreased by 7.6 percentage  points
to 74.2% in the three  months ended June 30, 2001 from 81.8% in the three months
ended June 30, 2000 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 June 30, 2001 and 2000.  The loss ratios for
all operations were impacted by the factors noted above.



                          OPERATING SEGMENT LOSS RATIOS
- --------------------------------------------------------------------------------
       Segment                                     2001                    2000
- --------------------------------------------------------------------------------
                                                                     
U.S. Reinsurance                                   78.2%                   85.5%
U.S. Insurance                                     71.8%                   65.6%
Specialty Reinsurance                              74.2%                   86.3%
International Reinsurance                          69.4%                   75.7%


Underwriting  expenses  increased by 88.3% to $111.1 million in the three months
ended June 30, 2001 from $59.0  million in the three months ended June 30, 2000.
Commission,  brokerage,  taxes and fees increased by $50.6 million,  principally
reflecting  increases in premium  volume and changes in the mix of business.  In
addition,  in 2000,  the  Company's  reassessment  of the  expected  losses on a
multi-year  reinsurance  treaty led to a $32.2  million  decrease in  contingent
commissions with a corresponding increase to losses. Other underwriting expenses
increased by $1.5 million.  Contributing to these underwriting expense increases
were a  673.1%  ($36.1  million)  increase  in the U.S.  Reinsurance  operation,
principally  relating  to  the  impact  in  2000  of the  contingent  commission
adjustment noted above, a 147.3% ($10.7 million) increase in the U.S.  Insurance
operation,  mainly relating to increased  premium volume, a 12.3% ($2.8 million)

                                       20

increase in the  International  Reinsurance  operation and a 9.8% ($2.2 million)
increase  in  the  Specialty  Reinsurance   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  specific  reinsurance  and the  underwriting
performance of the underlying  business.  The Company's expense ratio,  which is
calculated by dividing  underwriting  expenses by premiums earned, was 28.4% for
the three  months  ended June 30, 2001  compared  to 20.6% for the three  months
ended June 30, 2000.

The Company's  combined ratio,  which is the sum of the loss and expense ratios,
increased by 0.2 percentage  points to 102.6% in the three months ended June 30,
2001  compared to 102.4% in the three months ended June 30, 2000.  The following
table shows the combined ratios for each of the Company's operating segments for
the three  months  ended June 30,  2001 and 2000.  The  combined  ratios for all
operations were impacted by the loss and expense ratio variability noted above.


                        OPERATING SEGMENT COMBINED RATIOS
- --------------------------------------------------------------------------------
       Segment                                     2001                    2000
- --------------------------------------------------------------------------------
                                                                    
U.S. Reinsurance                                   107.8%                  90.4%
U.S. Insurance                                      98.0%                 101.1%
Specialty Reinsurance                               99.7%                 114.7%
International Reinsurance                           99.8%                 105.8%


Interest  expense for the three  months  ended June 30,  2001 was $11.5  million
compared to $11.6  million for the three months  ended June 30,  2000.  Interest
expense for the three months ended June 30, 2001 reflects $9.7 million  relating
to the  Company's  issuance  of senior  notes and $1.8  million  relating to the
Company's borrowings under it's revolving credit facility.  Interest expense for
the three  months  ended June 30, 2000  reflects  $9.7  million  relating to the
Company's  issuance of senior notes and $1.9 million  relating to the  Company's
borrowings under its revolving credit facility.

Other income for the three months ended June 30, 2001 was $0.8 million  compared
to other  expense of $0.4  million  for the three  months  ended June 30,  2000.
Significant  contributors  to other  income for the three  months ended June 30,
2001  were  foreign  exchange  gains as well as  financing  fees,  offset by the
amortization of deferred expenses  relating to the Company's  issuance of senior
notes  in  2000.  Other  expense  for the  three  months  ended  June  30,  2000
principally  included foreign  exchange  losses.  The foreign exchange gains and
losses for both periods are  attributable to  fluctuations  in foreign  currency
exchange rates.

INVESTMENT RESULTS. Net investment income increased 2.7% to $68.7 million in the
three  months  ended June 30, 2001 from $66.9  million in the three months ended
June 30, 2000,  principally reflecting the effect of investing the $82.2 million
of cash flow from  operations  in the twelve  months  ended June 30,  2001.  The
following table shows a comparison of various  investment  yields as of June 30,
2001 and  December 31, 2000,  respectively,  and for the periods  ended June 30,
2001 and 2000, respectively.

                                       21



                                                             2001           2000
                                                             -------------------
                                                                      
Imbedded pre-tax yield of cash and invested
 assets at June 30, 2001 and December 31, 2000               6.6%           6.7%
Imbedded after-tax yield of cash and invested
 assets at June 30, 2001 and December 31, 2000               5.0%           5.0%
Annualized pre-tax yield on average cash and
 invested assets for the three months ended June 30,
 2001 and 2000                                               6.6%           6.3%
Annualized after-tax yield on average cash and
 invested assets for the three months ended June 30,
 2001 and 2000                                               4.9%           4.7%


Net realized  capital gains were $4.1 million in the three months ended June 30,
2001,  reflecting  realized capital gains on the Company's  investments of $20.3
million,  partially offset by $16.2 million of realized capital losses, compared
to net  realized  capital  losses of $8.2 million in the three months ended June
30,  2000.  The net realized  capital  losses in the three months ended June 30,
2000 reflected  realized  capital losses of $12.1 million,  partially  offset by
$3.9 million of realized capital gains. The realized capital losses in the three
months ended June 30, 2001 and 2000 arose mainly from  activity in the Company's
U.S. fixed maturity  portfolio.  The realized  capital gains in the three months
ended June 30, 2001 and 2000 arose mainly from activity in the Company's  equity
portfolio.

INCOME TAXES.  The Company  incurred  income tax expense of $12.1 million in the
three  months  ended June 30, 2001  compared to $8.3 million in the three months
ended June 30, 2000  principally  reflecting  the realized  capital gains in the
three months ended June 30, 2001 compared to the realized  capital losses in the
three months ended June 30, 2000. In addition,  the  relationship  of tax-exempt
income to pre-tax income declined due to shifts in the Company's investment mix.

NET INCOME. Net income was $39.8 million in the three months ended June 30, 2001
compared to $31.5 million in the three months ended June 30, 2000. This increase
generally  reflects the  improved  investment  results,  as well as the realized
capital gains in the three months ended June 30, 2001.


SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

PREMIUMS.  Gross premiums  written  increased 43.0% to $901.5 million in the six
months ended June 30, 2001 from $630.5  million in the six months ended June 30,
2000 as the Company  took  advantage  of selected  growth  opportunities,  while
continuing to maintain a disciplined underwriting approach. Premium growth areas
included a 234.5% ($176.5  million)  increase in the U.S.  Insurance  operation,
principally  attributable to growth in workers' compensation  insurance, a 37.2%
($54.0 million)  increase in the Specialty  Reinsurance  operation,  principally
attributable  to growth  in  medical  stop loss  business,  a  component  of A&H
writings,  a 10.8% ($28.0 million) increase in the U.S.  Reinsurance  operation,
primarily  reflecting  improved market  conditions,  and an 8.2% ($12.5 million)
increase in the  International  Reinsurance  operation,  mainly  attributable to

                                       22

growth in Latin America.  The Company continued to decline business that did not
meet its objectives regarding underwriting profitability.

Ceded premiums  increased to $97.9 million in the six months ended June 30, 2001
from $47.8  million in the six months  ended June 30,  2000.  This  increase was
principally   attributable  to  the  higher  utilization  of  contract  specific
retrocessions in the U.S. Insurance  operation,  including a 100% ceded program,
first written in the third quarter of 2000, which  contributed  $29.9 million to
the increase. The ceded premiums for the six months ended June 30, 2001 and 2000
included adjustment  premiums of $15.4 million and $11.7 million,  respectively,
relating to claims made under the 1999  accident year  aggregate  excess of loss
element of the Company's corporate retrocessional program.

Net  premiums  written  increased  by 37.9% to $803.6  million in the six months
ended June 30, 2001 from $582.7  million in the six months  ended June 30, 2000.
This  increase  was  consistent  with the  increase in gross  premiums  written,
partially offset by the increase in ceded premiums.

PREMIUM  REVENUES.  Net premiums earned  increased by 30.3% to $719.1 million in
the six months  ended June 30, 2001 from $552.0  million in the six months ended
June 30,  2000.  Contributing  to this  increase  was a 209.3%  ($81.5  million)
increase in the U.S.  Insurance  operation,  a 35.0% ($50.0 million) increase in
the Specialty  Reinsurance  operation,  a 10.8% ($15.3 million)  increase in the
International  Reinsurance operation and an 8.9% ($20.3 million) increase in the
U.S.  Reinsurance  operation.  All of these  changes  reflect  period  to period
changes  in  net  written   premiums  and  business  mix  together  with  normal
variability in earnings patterns.

EXPENSES.  Incurred loss and loss adjustment expenses ("LAE") increased by 23.9%
to $532.7  million in the six months ended June 30, 2001 from $430.1  million in
the six months ended June 30, 2000. The increase in incurred  losses and LAE was
principally  attributable  to the  increase  in net  premiums  earned  and  also
reflects the impact of changes in the Company's mix of business. 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,  net of  contract  specific
cessions but before cessions under the corporate  retrocessional  program,  were
$28.7 million in the six months ended June 30, 2001 and related  principally  to
the tropical  storm Alison,  Petrobras Oil Rig and El Salvador  earthquake  loss
events  compared  to net  catastrophe  losses of $9.2  million in the six months
ended June 30, 2000.  Incurred  losses and LAE for the six months ended June 30,
2001 reflected  ceded losses and LAE of $109.7 million  compared to ceded losses
and LAE in the six  months  ended  June  30,  2000 of  $57.3  million,  with the
increase principally attributable to the higher utilization of contract specific
retrocessions in the U.S. Insurance operation.  The ceded losses and LAE for the
six months ended June 30, 2001 and 2000 reflect $29.0 million and $23.5 million,
respectively,  of losses ceded under the 1999 accident year aggregate  excess of
loss component of the Company's corporate retrocessional program.

Contributing  to the increase in incurred losses and LAE in the six months ended
June 30,  2001 from the six  months  ended  June 30,  2000 were a 249.5%  ($61.6
million)  increase  in  the  U.S.  Insurance  operation  principally  reflecting
increased  premium  volume  coupled  with  changes  in  this  segments  specific
reinsurance  programs,  a  29.7%  ($33.9  million)  increase  in  the  Specialty
Reinsurance  operation  principally  attributable to increased premium volume in
A&H business together with catastrophe  losses relating to the Petrobras Oil Rig
event,  and a 4.0% ($7.2 million)  increase in the U.S.  Reinsurance  operation,

                                       23

principally reflecting losses in connection with tropical storm Alison. 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 premiums earned, deceased by 3.8 percentage points to
74.1% in the six months  ended June 30, 2001 from 77.9% in the six months  ended
June 30, 200  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 six months  ended June 30, 2001 and 2000.  The loss ratios for
all operations were impacted by the factors noted above.


                          OPERATING SEGMENT LOSS RATIOS
- --------------------------------------------------------------------------------
       Segment                                     2001                    2000
- --------------------------------------------------------------------------------
                                                                     
U.S. Reinsurance                                   74.2%                   77.7%
U.S. Insurance                                     71.6%                   63.4%
Specialty Reinsurance                              76.8%                   79.9%
International Reinsurance                          72.4%                   80.3%


Underwriting  expenses  increased  by 50.4% to $204.9  million in the six months
ended June 30, 2001 from $136.2  million in the six months  ended June 30, 2000.
Commission,  brokerage,  taxes and fees increased by $66.7 million,  principally
reflecting  increases in premium  volume and changes in the mix of business.  In
addition,  in 2000,  the  Company's  reassessment  of the  expected  losses on a
multi-year  reinsurance  treaty led to a $32.2  million  decrease in  contingent
commissions with a corresponding increase to losses. Other underwriting expenses
increased by $2.0 million.  Contributing to these underwriting expense increases
were a 117.5% ($19.2 million) increase in the U.S. Insurance  operation,  mainly
relating to the increased  premium volume, a 103.9% ($36.3 million)  increase in
the U.S.  Reinsurance  operation,  which  included the impact of the  contingent
commission  adjustment  noted  above,  a 19.5%  ($8.3  million)  increase in the
Specialty  Reinsurance  operation,  and an 11.1% ($4.6 million)  increase in the
International  Reinsurance 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  specific  reinsurance  and  the  underwriting  performance  of the
underlying  business.  The  Company's  expense  ratio,  which is  calculated  by
dividing  underwriting expenses by premiums earned, was 28.5% for the six months
ended June 30, 2001 compared to 24.7% for the six months ended June 30, 2000.

The Company's  combined ratio,  which is the sum of the loss and expense ratios,
was 102.6% in the six months ended June 30, 2001 and 2000.  The following  table
shows the combined ratios for each of the Company's  operating  segments for the
six months ended June 30, 2001 and 2000. The combined  ratios for all operations
were impacted by the loss and expense ratio variability noted above.

                                       24



                        OPERATING SEGMENT COMBINED RATIOS
- --------------------------------------------------------------------------------
       Segment                                     2001                    2000
- --------------------------------------------------------------------------------
                                                                    
U.S. Reinsurance                                  102.8%                   92.9%
U.S. Insurance                                    101.0%                  105.2%
Specialty Reinsurance                             103.0%                  109.5%
International Reinsurance                         102.0%                  109.8%


Interest  expense  for the six  months  ended  June 30,  2001 was $24.0  million
compared  to $14.7  million  for the six months  ended June 30,  2000.  Interest
expense for the six months ended June 30, 2001 reflects  $19.5 million  relating
to the  Company's  issuance  of senior  notes and $4.5  million  relating to the
Company's borrowings under it's revolving credit facility.  Interest expense for
the six months  ended June 30,  2000  reflects  $11.3  million  relating  to the
Company's  issuance of senior notes and $3.4 million  relating to the  Company's
borrowings under its revolving credit facility.

Other income for the six months ended June 30, 2001 was $1.5 million compared to
$0.4 million for the six months ended June 30, 2000. Significant contributors to
other income for the six months ended June 30, 2001 were foreign  exchange gains
as well as  financing  fees,  offset by the  amortization  of deferred  expenses
relating to the Company's issuance of senior notes in 2000. Other income for the
six months ended June 30, 2000  principally  included foreign exchange gains and
financing fees. The foreign  exchange gains for both periods are attributable to
fluctuations in foreign currency exchange rates.

INVESTMENT  RESULTS.  Net investment  income increased 4.1% to $136.1 million in
the six months  ended June 30, 2001 from $130.8  million in the six months ended
June 30, 2000,  principally reflecting the effect of investing the $82.2 million
of cash flow from  operations  in the twelve  months ended June 30, 2001 and the
investment in the second  quarter of 2000 of the $450.0 million in proceeds from
the Company's  issuance of senior notes.  The following table shows a comparison
of  various  investment  yields  as of June 30,  2001  and  December  31,  2000,
respectively, and for the periods ended June 30, 2001 and 2000, respectively.


                                                             2001           2000
                                                             -------------------
                                                                      
Imbedded pre-tax yield of cash and invested
 assets at June 30, 2001 and December 31, 2000               6.6%           6.7%
Imbedded after-tax yield of cash and invested
 assets at June 30, 2001 and December 31, 2000               5.0%           5.0%
Annualized pre-tax yield on average cash and
 invested assets for the six months ended June 30,
 2001 and 2000                                               6.5%           6.2%
Annualized after-tax yield on average cash and
 invested assets for the six months ended June 30,
 2001 and 2000                                               4.8%           4.7%


Net realized  capital  losses were $0.7 million in the six months ended June 30,
2001,  reflecting realized capital losses on the Company's  investments of $21.3
million,  partially offset by $20.6 million of realized capital gains,  compared
to net realized  capital losses of $0.3 million in the six months ended June 30,

                                       25

2000.  The net  realized  capital  losses in the six months  ended June 30, 2000
reflected  realized  capital losses of $19.7 million,  partially offset by $19.4
million of realized capital gains. The realized capital losses in the six months
ended June 30, 2001 and 2000 arose mainly from  activity in the  Company's  U.S.
fixed  maturity  portfolio.  The realized  capital gains in the six months ended
June 30,  2001and  2000 arose  mainly  from  activity  in the  Company's  equity
portfolio.

INCOME TAXES.  The Company  incurred  income tax expense of $21.0 million in the
six months ended June 30, 2001 compared to $21.3 million in the six months ended
June 30, 2000,  reflecting  the increase in realized  capital losses in 2001. In
addition,  the relationship of tax-exempt  income to pre-tax income declined due
to shifts in the Company's investment mix.

NET INCOME.  Net income was $73.4  million in the six months ended June 30, 2001
compared to $80.6  million in the six months ended June 30, 2000.  This decrease
generally  reflects  increased  interest  expense,  partially offset by improved
investment results.

MARKET  SENSITIVE  INSTRUMENTS.  The  Company's  risks  associated  with  market
sensitive  instruments  have not  changed  materially  since  the  period  ended
December 31, 2000.

SAFE HARBOR  DISCLOSURE.  In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 (the "Act"), the Company in its
Form 10-K for the  fiscal  year ended  December  31,  2000 set forth  cautionary
statements  identifying  important factors,  among others,  that could cause its
actual  results  to differ  materially  from  those  which  might be  projected,
forecasted  or estimated in its  forward-looking  statements,  as defined in the
Act, made by or on behalf of the Company in press releases,  written  statements
or  documents  filed with the  Securities  and  Exchange  Commission,  or in its
communications  and discussions with investors and analysts in the normal course
of business through meetings, phone calls and conference calls. These cautionary
statements  supplement other factors  contained in this report which could cause
the  Company's  actual  results to differ  materially  from those which might be
projected, forecasted or estimated in its forward-looking statements.

Forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause the Company's  results to differ  materially  from
such forward-looking  statements.  Such forward-looking  statements may include,
but are not limited to, projections of premium revenue, investment income, other
revenue, losses, expenses,  earnings (including earnings per share), cash flows,
and common  shareholders'  equity  (including  book value per share),  plans for
future operations, investments, financing needs, capital plans, dividends, plans
relating to products or services of the Company,  and estimates  concerning  the
effects of litigation or other  disputes,  as well as assumptions for any of the
foregoing  and  are  generally   expressed   with  words  such  as   "believes,"
"estimates,"  "expects,"   "anticipates,"   "plans,"  "projects,"   "forecasts,"
"goals,"  "could  have,"  "may  have"  and  similar  expressions.   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.

                                       26

                       EVEREST REINSURANCE HOLDINGS, INC.

                                OTHER INFORMATION


PART II - ITEM 1. LEGAL PROCEEDINGS

The Company is involved  from time to time in ordinary  routine  litigation  and
arbitration proceedings incidental to its business. The Company does not believe
that there are any other material  pending legal  proceedings to which it or any
of its subsidiaries or their properties are subject.

PART II - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a)      No additional  exhibits  are  required to  be  furnished  by Item 601 of
        Regulation S-K.

b)      There  were  no  reports on Form 8-K filed during the three-month period
        ending June 30, 2001.

Omitted  from  this Part II are items  which  are  inapplicable  or to which the
answer is negative for the period covered.

                                       27

                       EVEREST REINSURANCE HOLDINGS, 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
                                  Duly Authorized Officer, Senior Vice President
                                  and Chief Financial Officer





Dated:  August 9, 2001