Everest Re: The Irish Connection

On June 29, Everest Re Group (RE - Analyst Report) announced that Everest Reinsurance Company (Ireland) Limited, its newly established direct subsidiary, has received a license from the Irish Financial Services Regulatory Authority to operate as an authorized non-life reinsurer in Ireland.

As a result, Everest Re will be able to operate throughout the European Union under a single regulatory framework. The company focuses on providing property, casualty and motor classes of business on direct and broker basis. In May 2009, A.M. Best Co. assigned a financial strength rating of A+ (Superior) and an issuer credit rating of aa- to Everest Reinsurance (Ireland) Ltd, with a stable outlook for both ratings.

Everest Re has been generating business in Europe for decades through its representative offices in London and Brussels. This new arrangement supports its existing operations in London and Brussels along with its new operation in Cologne.

Everest Re is focused on diversifying its business geographically. We note that rate decreases in the international markets have generally been less pronounced than in the U.S. markets. Overall, rates for the overseas business were up 5% to 10% during the first quarter of 2009. Going forward, we expect a hardening within the insurance and reinsurance rates, terms and conditions, though the current economic slowdown will restrict significant top-line growth of the company.

We think that Everest’s strong capital position, diversification of product lines, geography and distribution and robust financial strength ratings give the company an edge over its peers (Montpelier Re Holdings Ltd. [MRH - Analyst Report], ACE Limited [ACE - Analyst Report], XL Capital Ltd. [XL - Analyst Report] and PartnerRe Ltd. [PRE - Analyst Report]). Hence, we continue with our Hold recommendation on the shares of Everest Re.