Everest Re reported a slight drop in second-quarter operating earnings yesterday, with catastrophe losses of $70.4 million from storms and flooding in Australia and England contributing to the decline.

Net operating earnings were $213.3 million, or $3.36 per share, compared with $218.7 million, or $3.35 per share, in last year's second quarter.

Including realized investment gains of $91.7 million, net income for the quarter was $282.9 million, or $4.45 per share, up roughly 28 percent over last year's second quarter.

Investment income (from interest and dividends) also contributed to a stronger overall bottom line, jumping 17 percent to $179.7 million in the quarter.

Although underwriting profits fell, as evidenced by a rising combined ratio, the second-quarter combined ratio was still nearly 11 points below breakeven, coming in at 89.2 overall. The combined ratio was just 1.5 points above last year's 87.7 ratio for the same quarter, even though this year's result included 8.1 points attributable to catastrophe losses.

Joseph Taranto, chairman and chief executive officer, declared it a good quarter and first half for his company during a conference call yesterday morning. He highlighted six-month net income of $580 million, just over $9 per share, compared with $388.8 million last year, or just under $6 per share, noting that this year's first-half figure represents a 22 percent annualized return.

In addition, he said the fact that Everest Re's worldwide gross premiums were essentially flat through six months “given changes in the market is a good result,” attributing some of the ability to maintain volume to Everest's position as a large, established player in the reinsurance sector.

Although overall gross written premiums rose slightly in the quarter–to $935 million, or 2.8 percent over last year's second quarter–Mr. Taranto admitted to being surprised by the pace of intensifying competition, particularly in the primary casualty insurance business.

Noting that Everest's gross insurance premiums–representing roughly 20 percent of worldwide premiums overall–fell 8 percent through six months, he said competition is getting “much tougher” on contractors liability business, and that rates on medical malpractice business “have reduced to the point where we are essentially out of the market.”

Insulating the company some from current market conditions, he said, Everest recently agreed to three new programs.

Tom Gallagher, president, said the three programs will add $150 million to annual premiums, identifying them as a towing-and-recovery program, a program covering brownstones in New York and Boston for property and casualty, and a program covering moving and storage as well as forestry and agricultural risks.

Mr. Taranto said growth in U.S. property reinsurance business has largely offset declines in U.S. casualty operations. Having recently concluded midyear Florida deals, he said he expects Everest will write “as much or a bit more” Florida property reinsurance business in 2007 than in 2006.

“Many [Florida] clients have purchased pro-rata and excess-of-loss reinsurance from the professional reinsurance market beyond what was contemplated this past January,” he said.

Commenting on the situation for property reinsurance worldwide, he said “recent losses in the U.K. and Australia may mitigate some [price] declines, but we do not expect this to produce material upward market corrections.”

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