S & P Downgrades Everest Re

Standard & Poor's Rating Services has cut the rating of Everest Re to "A-plus" from "double-A-minus."

S&P's New York office, which released the announcement on Bermuda-based Everest, said the downgrade to "A-plus" affects the financial strength and counterparty credit ratings of the reinsurer's operating subsidiaries. S&P also lowered the counterparty credit ratings of the holding company to "triple-B-plus" from "A-minus."

The outlook is stable, S&P said, noting that the rating agency has removed all of these ratings from CreditWatch, where they were placed on Dec. 19, 2008 with negative implications.

Explaining the actions, credit analyst Taoufik Gharib said they stem from Everest's "inability to exploit its competitive position to generate sustainable, strong underwriting and operating results commensurate with the former rating."

The rating action, S&P said, was also a result of continuous adverse reserve developments. In addition, Everest's enterprise risk management program is adequate, but the implementation of a more robust ERM [enterprise risk management] program has been slower than expected, S&P said.

S&P said the stable outlook reflects its view that Everest will maintain its strong competitive position with a global presence.

During a fourth-quarter earnings conference call last month, Joseph Taranto, Everest's chief executive officer, addressed the possibility of an S&P downgrade, saying he believed it would have no meaningful impact on the reinsurer's business going forward.

An "A-plus" is still a very good S&P rating, Mr. Taranto said, adding that the group's A.M. Best rating, referenced by most U.S. customers, is at Best's "excellent" level of "A-plus" as well.

"Our clients know us and our strength. We have been dealing with many of them for 30-plus years," he added, noting that even though S&P imposed a CreditWatch in late December--during the reinsurance renewal season--"I did not hear from one underwriter that it was factor in any of our deals."

In 2009, S&P said it expects Everest will produce a combined ratio in the 93-95 range.

The rating firm also commented that Everest has shifted its business mix toward property and international business in the past two years, with reductions in U.S. casualty writings, adding that this strategy could make the company's operating results more volatile.

This article was updated at 2:24 p.m.