A.M. Best Affirms Ratings of Everest Re.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--June 20, 2003 A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Everest Re Group, Ltd's (Bermuda) (NYSE NYSE See: New York Stock Exchange : RE) core reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. and insurance subsidiaries. Concurrently, A.M. Best has affirmed the debt rating of "a" relative to senior debt obligations issued by the intermediate U.S. holding company, Everest Reinsurance Holdings, Inc. and the "a-" debt rating of the trust preferred securities issued by Everest Re Capital Trust and guaranteed by Everest Reinsurance Holdings, Inc. These ratings reflect Everest Re's favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. earnings trends, strong risk-adjusted capital position, excellent financial flexibility and well-established global reinsurance franchise. In 2002, Everest Re generated a return on equity of 14.1%, which was comprised of a small underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. gain and solid level of net investment earnings. This favorable trend continued in first quarter 2003, with the group earning net income of $94 million, benefiting from a sustainable improvement in underwriting activities, which generated a 93.5% combined ratio. In addition to historically favorable operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before , the group's capital formation has been supplemented by Everest Re's ability to raise over $850 million in capital since January 2002 through the issuance of common stock and trust preferred securities. This has increased the group's shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. as of March 31, 2003, to almost $2.5 billion and total capital in excess of $3.2 billion. Everest Re's financial leverage ratios are commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with its rating, and A.M. Best expects the group to maintain its level of debt and preferred capital at no greater than 30%, with its fixed charge coverage being in the high single-digit range. Offsetting these positive factors is Everest Re's elevated operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. position within its U.S. operations, which is compounded by the recent growth in its primary business, specifically workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. in California. The group has a large long-tailed loss reserve base, which includes $521 million of asbestos and environmental (A&E) reserves, and results in its capitalization being more susceptible to deterioration in its carried reserve position. In 2002, Everest Re strengthened prior year loss reserves by $140 million, which included $23 million for A&E. Everest Re does continue to maintain $75 million in adverse loss development protection from a stop loss cover. More importantly, Everest Re continues to benefit from a stable, seasoned management team, which has successfully leveraged its capital resources and low cost operating structure to profitably distribute its reinsurance and insurance products globally through a large network of customers. Accordingly, A.M. Best believes Everest Re is strongly positioned to continue generating superior returns through the current hardened market cycle. The financial strength rating of A+ (Superior) has been affirmed for the following core operating reinsurance and insurance subsidiaries of Everest Re Group, Ltd: -- Everest Reinsurance Company -- Everest National Insurance Company -- Everest Security Insurance Company -- Everest Indemnity Insurance indemnity insurance Managed care A type of health insurance in which a Pt can choose the hospital and provider, and the insurer reimburses the Pt or provider for a set percentage of the cost, minus deductibles and co-payments Company -- Everest Reinsurance (Bermuda), Ltd. The following debt ratings have been affirmed: Everest Reinsurance Holdings, Inc.-- -- "a" on $250 million 8.50% senior notes, due March 15, 2005 -- "a" on $200 million 8.75% senior notes, due March 15, 2010 Everest Re Capital Trust (guaranteed by Everest Re Holdings, Inc.)-- -- "a-" on $200 million 7.85% trust preferred securities, due November 15, 2032 A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion