8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

July 23, 2007

Everest Re Group, Ltd.

 

(Exact name of registrant as specified in its charter)

Bermuda	1-15731	98-0365432
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)
Wessex House – 2nd Floor 45 Reid Street PO Box HM 845 Hamilton HM DX, Bermuda		Not Applicable
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 441-295-0006

Not Applicable

 

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 23, 2007, the registrant issued a news release announcing its second quarter 2007 results. A copy of that news release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The news release furnished herewith contains information regarding the registrant’s operating income. Operating income differs from net income, the most directly comparable generally accepted accounting principle financial measure, only by the exclusion of realized capital gains and losses on investments. Management believes that presentation of operating income provides useful information to investors because it more accurately measures and predicts the registrant’s results of operations by removing the variability arising from the management of the registrant’s investment portfolio. In addition, management, analysts and investors use operating income to evaluate the financial performance of the registrant and the insurance industry in general.

In accordance with general instruction B.2 of Form 8-K, the information in this report, including exhibits, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

Exhibit No. Description

99.1 News Release of the registrant,

dated July 23, 2007

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 hereunto duly authorized.

EVEREST RE GROUP, LTD.
By:	/s/ CRAIG EISENACHER
	Craig Eisenacher Executive Vice President and Chief Financial Officer

Dated: July 23, 2007

EXHIBIT INDEX

Exhibit

Number Description of Document Page No.

99.1 News Release of the registrant,

dated July 23, 2007 5

EX-99

NEWS RELEASE

EVEREST RE GROUP, LTD.

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

Contact:

Elizabeth B. Farrell

Vice President, Investor Relations

Everest Global Services, Inc.

908.604.3169 For Immediate Release

Everest Re Group Reports Second Quarter 2007 Earnings

HAMILTON, Bermuda – July 23, 2007 -- Everest Re Group, Ltd. (NYSE: RE) reported second quarter after-tax operating income¹, which excludes realized capital gains and losses, of $213.3 million, or $3.36 per diluted share, compared to $218.7 million, or $3.35 per diluted share, for the second quarter of last year. Net income, including net realized capital gains and losses, was $282.9 million for the second quarter of 2007, up from $220.4 million for the second quarter of 2006. Net income per diluted share grew by 31.7% to $4.45 in this year’s second quarter from $3.38 in the second quarter of 2006.

For the six months ended June 30, 2007, after-tax operating income was $481.2 million compared to $376.6 million for the six months ended June 30, 2006. On a per diluted share basis, net operating income was $7.50, an increase of 30% compared to $5.77 for the six months ended June 30, 2006. Net income, including realized capital gains and losses was $580.5 million in the first six months of 2007, or $9.05 per diluted share compared to $388.8 million or $5.96 per diluted share, for the first six months of 2006.

Operating highlights for the second quarter of 2007 included the following:

• Gross written premiums were $935.5 million, a 2.8% increase compared to $910.4 million in the second quarter of 2006. Growth in the reinsurance segments, with gross written premiums up by 8.2% quarter over quarter, more than offset the decline in the insurance book. Year-to-date, gross written premiums of $1.95 billion, in the aggregate, are little changed from last year.

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• Net investment income increased 17.2% to $179.7 million compared to $153.3 million in the second quarter of 2006.

• Cash flow from operations was $96.4 million for the quarter compared to $151.6 million in 2006. These results include catastrophe loss payouts of $127.9 million and $241.1 million, respectively, and tax payments of $135.0 million and $26.2 million, respectively, for the three months ended June 30, 2007 and 2006.

• The year-to-date annualized operating income return on average shareholders’ equity was 18.5% and the annualized net income return was 21.5%.

• The GAAP combined ratio in the second quarter was 89.2% compared to 87.7% in the same period last year. Overall, the Company experienced net unfavorable development of $2.3 million in the quarter which had a negligible impact on the combined ratio. Prior years’ loss reserves, excluding mass action, developed favorably by $35.7 million and asbestos reserves developed unfavorably by $38.0 million.

• Catastrophe losses were $70.4 million (net of reinstatement premiums) for the quarter, adding 8.1 points to the combined ratio. The storms and flooding in Australia and England accounted for the largest portion of these losses.

• Shareholders equity grew from $5.1 billion to $5.3 billion in the first six months of 2007, despite $200 million of share repurchases and a doubling of the common dividend. Book value per share stood at $84.46 as of June 30, up 7.6% from $78.53 as of year end 2006.

• Since year end 2006, the Company has repurchased 2.1 million of its common shares at an average price of $95.32. The total cost of the repurchased shares is $200 million, $19 million of which was purchased in the second quarter. The repurchases were made pursuant to a 5 million share repurchase authorization provided by the Company’s Board of Directors, leaving 2.9 million shares available under the authorization.

Commenting on the Company’s results, Chairman and Chief Executive Officer, Joseph V. Taranto said, “The earnings power evident in recent quarters highlights the strength of Everest’s franchise. In an increasingly challenging marketplace, we have maintained our discipline and focus always keeping our eyes on the bottom line.”

This news release contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federal securities laws. These statements involve risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements made on behalf of the Company. These risks and uncertainties include the impact of general economic conditions and conditions affecting the insurance and reinsurance industry, the adequacy of our reserves, our ability to assess underwriting risk, trends in rates for property and casualty insurance and reinsurance, competition, investment market fluctuations, trends in insured and paid

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losses, catastrophes, regulatory and legal uncertainties and other factors described in our latest Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

A conference call discussing the second quarter results will be held at 8:30 a.m. Eastern Time on July 24, 2007. The call will be available on the Internet through the Company’s web site or at www.streetevents.com.

Recipients are encouraged to visit the Company’s web site to view supplemental financial information on the Company’s results. The supplemental information is located at www.everestre.com in the “Financial Reports” section of the “Investor Center”. The supplemental financial information may also be obtained by contacting the Company directly.

_________________________

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

	Three Months Ended June,								Six Months Ended June 30,
(Dollars in thousands, except per share amounts)	2007				2006				2007				2006
	(unaudited)								(unaudited)
		amount		per diluted share		amount		per diluted share		amount		per diluted share		amount		per diluted share
Net income	$	282,868	$	4.45	$	220,403	$	3.38	$	580,450	$	9.05	$	388,799	$	5.96
After-tax realized gains		69,581		1.09		1,700		0.03		99,240		1.55		12,224		0.19
After-tax operating income	$	213,287	$	3.36	$	218,703	$	3.35	$	481,210	$	7.50	$	376,575	$	5.77

Although realized capital gains (losses) are an integral part of the Company’s insurance operations, the determination of realized capital gains (losses) is independent of the insurance underwriting process. The Company believes that the level of realized gains (losses) for any particular period is not indicative of the performance of the underlying business in that particular period. Providing only a GAAP presentation of

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net income makes it more difficult for users of the financial information to evaluate the Company’s success or failure in its basic business, and may lead to incorrect or misleading assumptions and conclusions. The Company understands that the equity analysts who follow the Company focus on after-tax operating income in their analyses for the reasons discussed above. The Company provides after-tax operating income to investors so that they have what management believes to be a useful supplement to GAAP information concerning the Company’s performance.

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— Financial Details Follow —

EVEREST RE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
		Three Months Ended						Six Months Ended
		June 30,						June 30,
(Dollars in thousands, except per share amounts)		2007			2006			2007			2006
		(unaudited)						(unaudited)
REVENUES:
Premiums earned	$	999,320		$	893,332		$	2,004,049		$	1,915,122
Net investment income		179,693			153,333			335,489			298,359
Net realized capital gains		91,774			2,472			132,666			16,073
Net derivative income		5,995			1,316			3,227			5,195
Other (expense) income		(8,044	)		2,275			(4,379	)		(4,332	)
Total revenues		1,268,738			1,052,728			2,471,052			2,230,417
CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		619,114			543,637			1,184,882			1,242,580
Commission, brokerage, taxes and fees		234,423			206,403			460,078			443,905
Other underwriting expenses		37,541			33,645			73,601			62,659
Interest expense on senior notes		7,790			7,787			15,579			15,573
Interest expense on long term notes		4,327			-			4,327			-
Interest expense on junior subordinated debt		9,362			9,362			18,724			18,724
Amortization of bond issue costs		2,687			234			2,922			469
Interest and fee expense on credit facilities		77			98			154			195
Total claims and expenses		915,321			801,166			1,760,267			1,784,105
INCOME BEFORE TAXES		353,417			251,562			710,785			446,312
Income tax expense		70,549			31,159			130,335			57,513
NET INCOME	$	282,868		$	220,403		$	580,450		$	388,799
Other comprehensive loss, net of tax		(106,716	)		(105,324	)		(109,898	)		(158,617	)
COMPREHENSIVE INCOME	$	176,152		$	115,079		$	470,552		$	230,182
PER SHARE DATA:
Average shares outstanding (000's)		62,901			64,708			63,533			64,665
Net income per common share - basic	$	4.50		$	3.41		$	9.14		$	6.01
Average diluted shares outstanding (000's)		63,518			65,258			64,137			65,264
Net income per common share - diluted	$	4.45		$	3.38		$	9.05		$	5.96

EVEREST RE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
		June 30,		December 31,
(Dollars in thousands, except par value per share)		2007		2006
		(unaudited)
ASSETS:
Fixed maturities - available for sale, at market value
(amortized cost: 2007, $9,676,029; 2006, $10,210,165)	$	9,624,885	$	10,319,850
Equity securities - available for sale, at market value (cost: 2007, $16,393; 2006, $1,252,595)		16,393		1,613,678
Equity securities, at fair value		1,551,240		-
Short-term investments		2,436,747		1,306,498
Other invested assets (cost: 2007, $587,990; 2006, $466,232)		590,657		467,193
Cash		187,790		249,868
Total investments and cash		14,407,712		13,957,087
Accrued investment income		146,150		141,951
Premiums receivable		1,091,841		1,136,787
Reinsurance receivables		724,219		772,813
Funds held by reinsureds		287,735		284,809
Deferred acquisition costs		368,420		388,117
Prepaid reinsurance premiums		51,856		67,757
Deferred tax asset		227,957		220,047
Federal income taxes recoverable		15,998		-
Other assets		162,565		138,202
TOTAL ASSETS	$	17,484,453	$	17,107,570
LIABILITIES:
Reserve for losses and loss adjustment expenses	$	8,743,833	$	8,840,140
Future policy benefit reserve		93,537		100,962
Unearned premium reserve		1,505,558		1,612,250
Funds held under reinsurance treaties		73,695		70,982
Losses in the course of payment		75,733		55,290
Commission reserves		36,908		23,665
Other net payable to reinsurers		30,618		47,483
Current federal income taxes payable		-		43,002
8.75% Senior notes due 3/15/2010		199,621		199,560
5.4% Senior notes due 10/15/2014		249,670		249,652
6.6% Long term notes due 5/1/2067		399,637		-
Junior subordinated debt securities payable		546,393		546,393
Accrued interest on debt and borrowings		14,368		10,041
Other liabilities		176,957		200,463
Total liabilities		12,146,528		11,999,883
SHAREHOLDERS' EQUITY:
Preferred shares, par value: $0.01; 50 million shares authorized;
no shares issued and outstanding		-		-
Common shares, par value: $0.01; 200 million shares authorized;
(2007) 63.2 million and (2006) 65.0 million issued and outstanding		653		650
Additional paid-in capital		1,791,220		1,770,496
Accumulated other comprehensive income, net of deferred income taxes of
$30.4 million at 2007 and $175.0 million at 2006		(12,170)		348,543
Treasury shares, at cost; (2007) 2.1 million shares and (2006) 0.0 million shares		(200,080)		-
Retained earnings		3,758,302		2,987,998
Total shareholders' equity		5,337,925		5,107,687
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	17,484,453	$	17,107,570

EVEREST RE GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2007			2006			2007			2006
	(unaudited)						(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	282,868		$	220,403		$	580,450		$	388,799
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease in premiums receivable		45,724			83,688			48,290			69,062
(Increase) decrease in funds held by reinsureds, net		(94	)		(4,325	)		981			(42,609	)
Decrease in reinsurance receivables		67,870			55,661			54,498			103,201
Decrease (increase) in deferred tax asset		7,337			(292	)		26,405			(4,985	)
Decrease in reserve for losses and loss adjustment expenses		(33,499	)		(167,385	)		(134,010	)		(177,511	)
Decrease in future policy benefit reserve		(4,065	)		(11,254	)		(7,425	)		(16,352	)
Decrease in unearned premiums		(91,315	)		(22,797	)		(111,347	)		(24,381	)
Change in other assets and liabilities, net		(88,979	)		(8,559	)		(74,989	)		14,476
Non-cash compensation expense		4,437			3,007			9,287			6,350
Amortization of bond premium		(2,124	)		5,911			(826	)		13,215
Amortization of underwriting discount on senior notes		41			37			80			73
Realized capital gains		(91,774	)		(2,472	)		(132,666	)		(16,073	)
Net cash provided by operating activities		96,427			151,623			258,728			313,265
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities matured/called - available for sale		305,278			192,648			617,195			359,089
Proceeds from fixed maturities sold - available for sale		169,549			48,298			204,035			152,375
Proceeds from equity securities - available for sale		-			92,573			-			120,222
Proceeds from equity securities - fair value		1,027,955			-			1,318,561			-
Proceeds from other invested assets sold		5,572			21,141			27,383			26,703
Cost of fixed maturities acquired - available for sale		(155,618	)		(79,224	)		(255,487	)		(842,907	)
Cost of equity securities acquired - available for sale		-			(261,659	)		-			(377,770	)
Cost of equity securities acquired - fair value		(816,891	)		-			(1,138,408	)		-
Cost of other invested assets acquired		(78,004	)		(30,254	)		(119,765	)		(58,952	)
Net (purchases) sales of short-term securities		(873,100	)		(108,943	)		(1,103,090	)		353,864
Net increase in unsettled securities transactions		(3,992	)		(24,378	)		(4,412	)		(1,200	)
Net cash used in investing activities		(419,251	)		(149,798	)		(453,988	)		(268,576	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares issued during the period		9,715			2,659			11,440			18,418
Purchase of treasury stock		(19,039	)		-			(200,080	)		-
Proceeds from issuance of long term notes		399,637			-			399,637			-
Dividends paid to shareholders		(30,223	)		(7,792	)		(60,961	)		(15,579	)
Net cash provided by (used in) financing activities		360,090			(5,133	)		150,036			2,839
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(9,685	)		12,367			(16,854	)		20,620
Net increase (decrease) in cash		27,581			9,059			(62,078	)		68,148
Cash, beginning of period		160,209			166,364			249,868			107,275
Cash, end of period	$	187,790		$	175,423		$	187,790		$	175,423
SUPPLEMENTAL CASH FLOW INFORMATION
Cash transactions:
Income taxes paid (recovered)	$	135,022		$	26,232		$	160,306		$	(25,086	)
Interest paid	$	16,189		$	16,210		$	34,378		$	34,518