SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

CONDENSED BALANCE SHEETS


	At December 31,
(Dollars and share amounts in thousands, except par value per share)	2013		2012
ASSETS:
Fixed maturities - available for sale, at market value	$	10,776	$	13,327
(amortized cost: 2013, $10,778; 2012, $13,051)
Equity securities - available for sale, at fair value		88,338		61,893
Other invested assets, at market value		3,046		12,943
Other invested assets, at fair value		1,515,052		1,068,711
Short-term investments		25,181		45,983
Cash		159		289
Total investments and cash		1,642,552		1,203,146
Investment in subsidiaries, at equity in the underlying net assets		3,136,782		3,068,916
Accrued investment income		97		165
Advances to affiliates		63,999		37,700
Income taxes recoverable		146,395		99,614
Other assets		17,487		25,908
TOTAL ASSETS	$	5,007,312	$	4,435,449

LIABILITIES:
5.4% Senior notes due 10/15/2014	$	249,958	$	249,907
6.6% Long term notes due 5/1/2067		238,361		238,357
Junior subordinated debt securities payable		-		329,897
Accrued interest on debt and borrowings		4,781		4,781
Deferred tax liability		272,535		121,127
Due to subsidiaries		42,456		1,084
Other liabilities		8,743		11,690
Total liabilities		816,834		956,843

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01; 3,000 shares authorized;
1,000 shares issued and outstanding (2013 and 2012)		-		-
Additional paid-in capital		351,051		340,223
Accumulated other comprehensive income (loss), net of deferred income
tax expense (benefit) of $47,195 at 2013 and $99,544 at 2012		87,648		184,867
Retained earnings		3,751,779		2,953,516
Total stockholder's equity		4,190,478		3,478,606
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	5,007,312	$	4,435,449

See notes to consolidated financial statements.

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS


	Years Ended December 31,
(Dollars in thousands)	2013			2012			2011
REVENUES:
Net investment income	$	23,451		$	21,526		$	21,619
Net realized capital gains (losses)		467,999			254,680			(1,789	)
Other income (expense)		(420	)		(371	)		(191	)
Net income (loss) of subsidiaries		511,976			377,963			(181,912	)
Total revenues		1,003,006			653,798			(162,273	)

EXPENSES:
Interest expense		45,452			50,685			50,736
Corporate expense		6,065			7,108			3,353
Total expenses		51,517			57,793			54,089

INCOME (LOSS) BEFORE TAXES		951,489			596,005			(216,362	)
Income tax expense (benefit)		153,226			75,676			(13,541	)

NET INCOME (LOSS)	$	798,263		$	520,329		$	(202,821	)

Other comprehensive income (loss), net of tax :
Unrealized appreciation (depreciation) ("URA(D)") on securities arising during the period		(99,241	)		9,390			22,049
Less: reclassification adjustment for realized losses (gains) included in net income (loss)		(2,465	)		633			20,240
Total URA(D) on securities arising during the period		(101,706	)		10,023			42,289

Foreign currency translation adjustments		(19,128	)		7,030			(2,805	)

Benefit plan actuarial net gain (loss) for the period		17,837			(11,771	)		(31,776	)
Reclassification adjustment for amortization of net (gain) loss included in net income (loss)		5,778			4,795			2,324
Total benefit plan net gain (loss) for the period		23,615			(6,976	)		(29,452	)
Total other comprehensive income (loss), net of tax		(97,219	)		10,077			10,032

COMPREHENSIVE INCOME (LOSS)	$	701,044		$	530,406		$	(192,789	)

See notes to consolidated financial statements.

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS


	Years Ended December 31,
(Dollars in thousands)	2013			2012			2011

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	798,263		$	520,329		$	(202,821	)
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (earnings) deficit of subsidiaries		(511,976	)		(377,963	)		181,912
Dividends received from subsidiaries		359,000			100,000			75,000
Increase (decrease) in accrued interest on debt and borrowings		-			-			(13	)
Decrease (increase) in federal income tax recoverable		(46,780	)		(56,234	)		46,765
Decrease (increase) in deferred tax asset/liability		151,504			107,163			(10,306	)
Change in other assets and liabilities, net		20,618			(13,486	)		(27,391	)
Amortization of bond premium (accrual of bond discount)		280			303			80
Amortization of underwriting discount on senior notes		54			52			49
Net realized capital losses (gains)		(467,999	)		(254,680	)		1,789
Net cash provided by (used in) operating activities		302,964			25,484			65,064

CASH FLOWS FROM INVESTING ACTIVITIES:
Additional investment in subsidiaries		(1,102	)		(11,102	)		(19,051	)
Proceeds from fixed maturities matured/called - available for sale, at market value		1,993			1,749			394
Proceeds from equity securities sold - available for sale, at fair value		24,750			13,659			32,323
Proceeds from other invested assets sold		9,897			-			-
Cost of fixed maturities acquired - available for sale, at market value		-			-			(14,777	)
Cost of equity securities acquired - available for sale, at fair value		(29,537	)		(28,334	)		-
Cost of other invested assets acquired, at fair value		-			-			(37,611	)
Cost of business acquired		-			-			(55,000	)
Net change in short-term investments		20,802			(1,494	)		77,616
Net cash provided by (used in) investing activities		26,803			(25,522	)		(16,106	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net cost of senior notes maturing		(329,897	)		-			-
Revolving credit borrowings		-			-			(50,000	)
Net cash provided by (used in) financing activities		(329,897	)		-			(50,000	)

Net increase (decrease) in cash		(130	)		(38	)		(1,042	)
Cash, beginning of period		289			327			1,369
Cash, end of period	$	159		$	289		$	327

Non-cash financing transaction:
Non-cash contribution from parent	$	10,828		$	6,807		$	5,650
Non-cash contribution to subsidiaries		(10,828	)		(6,807	)		(5,650	)

See notes to consolidated financial statements.

1.)	The accompanying condensed financial information should be read in conjunction with the Consolidated Financial Statements and related Notes of Everest Reinsurance Holdings, Inc. and its Subsidiaries.

2.)	The Holdings Credit Facility, Senior Notes and Long-Term Subordinated Notes presented in Notes 5, 6 and 7 are direct obligations of the Registrant.