Everest Re Group said yesterday that it plans to book a pretax fourth-quarter charge of $311 million to strengthen asbestos reserves, but that net income overall for full-year 2007 will come in about the same as 2006.

The Bermuda-based company said its bottom line net income for 2007--including the after-tax effect of the asbestos charge and net realized capital losses--should come in between $831 million and $851 million, or $13.06 and $13.37 per share.

In 2006, Everest recorded a comparable net income figure of $840.8 million, or $12.87 per share, which also included adverse loss development from pre-1995 asbestos losses of over $100 million. In addition, the 2006 bottom line took a hit of $272 million of adverse development from a 2005 storm.

Partially offsetting those two hits, however, Everest experienced lower losses than expected its other business. As a result, overall net adverse development was only $131 million when the pluses and minuses were added up for the year.

In yesterday's announcement, Everest said net income for fourth-quarter 2007 is expected to be between $4 million and $24 million, or 6 cents to 38 cents per share. The fourth-quarter estimates are impacted not only by the reserve charge but also by after-tax net realized losses of $51 million, or 81 cents per share.

The comparable net-income figure for fourth-quarter 2006 was much higher, coming in at $206.4 million, or $3.15 per share.

In a statement, Craig Eisenacher, Everest's chief financial officer, noted that while the company had previously announced it would be conducting "an in-depth review of our potential asbestos exposures, the company believed that early disclosure of the outcome of its review would be helpful to our investors and potential investors."

In response to Everest's announcement, Moody's Investor Service said it affirmed ratings for the company, noting that the size of the charge fell within Moody's expectations and was already contemplated in the current ratings. The current financial strength rating is "Aa3."

"The asbestos charge is expected to be defrayed by robust earnings for full-year 2007, aided by fewer natural catastrophes than anticipated," Moody's said, also noting that the rating agency believes Everest's core reserves--those unrelated to asbestos--are estimated within a reasonable range.

Everest said it expects to officially release its fourth-quarter and full-year 2007 earnings after the financial markets' close on Jan. 30, 2008.

Special Reports /

Everest Taking $311 Million Charge For Asbestos

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