Good day, everyone, and welcome to the Third Quarter 2008 Earnings Release of Everest Re Group. Today's call is being recorded. At this time, for opening remarks, and introductions, I would like to turn the conference over to Ms. Beth Farrell, Vice President of Investor Relations. Please go ahead.

Thank you, Mark. Good morning and welcome to Everest Re's third quarter 2008 earnings conference call. Joining me today are Joe Taranto, our Chief Executive Officer; Tom Gallagher, our President; and Craig Eisenacher, our Chief Financial Officer. Before we begin, I will start with our comments by noting that SEC filings include extensive disclosures with respect to forward-looking statements. In that regard, I note that statements made during today's call, which are forward-looking in nature such as statements about projection, estimates, expectations and the like are subject to various risks. As you know, actual results could differ materially from current projections or expectations. Our SEC filings have a full listing of the risks that investor should consider in connection with such statements. Now, let me turn the call over to Joe Taranto.

Thanks, Beth. Good morning. Normally on the quarterly calls, we go right into what's happening in the insurance world and I will shortly ask Tom to do just that and have Craig follow with the financials. However, there seems to be little that's normal about this quarter, as the central issue seems to be more of the chaos in the worldwide financial system. It's easy to get down, when you consider the meltdown of the system, the destruction of value, the loss of many companies that were household names, and the many economic close that are still to come. Perhaps, there were many excesses that needed to be running out of the system. I trust they have been and we can now move forward. At Everest, despite the blood in the Street, we have remained strong with our client base intact, our employees committed and our ratings among the highest in the business. Going forward, I expect the world will be very different and that these changes will work to our benefit. As a reinsurer, we are capacity provider. Well, many of our clients are suddenly in need of more capacity, we'll try to help. As a reinsurer, we mitigate our clients' risk. Again, many of our clients as most of the world will be more risk-averse and looking for more partners to sharing their risk, again, we'll try to help. As a reinsurer and an insurer, we have extremely strong financials and financial ratings. Well again, the world is looking more closely at the credit quality of its partners than ever before and paying more for credit quality than ever before, which works well for Everest. Some of our competition has lost strength and as a result will lose business. There will be opportunities for us to pick up business, people and perhaps other companies. Much of the money that so easily came into our space from hedge funds and other sources has dried up. The staying power of many of the smaller companies in our sector will be questioned more than ever, again this will work to the advantage of Everest. The insurance market has been softening; in past cycles it had taken many years of deteriorating rates and conditions before the market turns up. At the beginning of the quarter, I thought we had years to go before better days appear. Now I see that timeframe dramatically reduced and expect the portions of the reinsurance and insurance market to improve by the one-month renewal season. In summary, it's been a rough three months but I see change coming and much will work to our company's benefit. Tom?

Hi, thanks Joe. Well, I'll continue what Joe, said about in his comments. It's been quite challenging in the last nine months. But as Joe said, we are entering a changed world. And we are well positioned to take full advantage of these changes. Let me make some brief comments on each segment of our portfolio which is a reflection of where the overall market has been in the first nine months of '08. Recognizing that third quarter has continued to perform generally as it has to the first six months of the year. Our international business including London and European ops represent almost 38% of our worldwide portfolio. We continue to see the treaty reinsurers being disciplined in their approach. Fortunate programs have remained stable with some price reductions on excess programs with good results both for our cat as well as per risk. And increases in areas where loses have impacted programs such as China, Chile, Australia and Peru. We have been able to increase our premium volume through new business as well as increased participations on existing programs in Latin America, Asia, Middle East as well as Brazil due to the recent opening of the reinsurance market in that country. We continue to benefit from our strong long-term relationships, preceding companies and our solid financial strength ratings which has allowed us to obtain preferential signings. Our U.S. business, including business written out of our Bermuda branch. This year RE represents 32% of our worldwide business with property being 22% and casualty 12%. The market conditions in these segments continue to be the most stressed. With pricing pressure both on property and casualty warrants, as well as ample capacity even at reduced prices. Though there has been limited treaty activity in the past quarter, our assessments of these…

Thanks, Tom. Our third quarter net after tax operating income was $12.6 million which includes $210 million net loss from Hurricanes Gustav and Ike. Net operating income per share was $0.21 compared to $3.68 per fully diluted share in the third quarter of 2007. Catastrophe loses were much less significant at $17 million after tax in last year's third quarter. Absent all cat loses from both periods net operating income was $231 million in this year's third quarter compared to $249 million in last year's third quarter. So our underlying operating income fundamentals remained quite strong. The financial markets were front page news this quarter and they affected us. We incurred $246 million of net after tax realized capital loses in the quarter. After these loses, our net results were a $233 million loss equating to $3.80 per share. The realized losses broke down as follows on an after tax basis; $131 million from other contemporary impairments on fixed income securities largely financial institutions. $53 million from mark-to-market losses on our equity portfolio which is carried at fair value and $62 million in realized capitalized losses on sales of booked equities and fixed income securities. In addition, we suffered approximately $190 million of after tax unrealized losses on our fixed income portfolio as credit spreads widened significantly during the quarter. We repurchased 3,002,000 shares of our common stock early in the quarter at a cost of $25 million and we declared and paid our regular dividends to shareholders. After all of these items, our GAAP equity declined by $530 million in the quarter to $5.04 billion from $5.57 billion at June 30th. As well, our book value per share decreased by 9% to $82.02 from $90.32 at the end of the second quarter. I will talk about liquidity and capital…

Thank you very much. [Operator Instructions]. Let's take our first question today from Josh Shanker with Citi.

Good morning. In your opening remarks, you mentioned that these CV Starr business might have appeared under price to that you are receiving and for you are returning it down. I'm wondering if you have any opinions about this. Is this business that would be otherwise placed at AIG or what the... or where that business is going and whether it will turn it back to if things harden? And the second question and then I will get back in line. I was wondering if you can talk a little bit about outlook on 4Q investment losses?

Okay. If I can try on the CV Starr, I mean my understanding is that the biggest part of the decline was the public entity business in the quarter. And it's simply that the pricing pressures in the market are such that the business just isn't meeting our return levels and therefore we're not riding it.

And where is it going to?

It is going to be a variety of competitors, but certainly AIG would be the one but not the only one. It tends to be the bigger company is riding that business.

And any comments you can make about equity losses or other investment losses in the fourth quarter?

Clearly, since the end of the third quarter the equity markets have declined further and we've taken some unrealized losses there as well both credit and the Muni bond markets have widened some more. And we've taken some losses there. I think at this point it's premature to speculate of how much that might be. But it's not a significant amount from our perspective.

Now, I'll get back in line. Thank you.

Our next question will come from Susan Spivak with Wachovia.

Good morning. Joe, thanks for your comments just on where we are in this cycle. And I guess, I just wanted to follow-up on something we heard this morning from a broker about the pricing in AIG in Lexington. Basically what AIG is doing everything they can to defend the pricing on this business. And my question to you is whether do you think this will work and will reinsurers be there to provide capacity outlook competitive prices or will we be in a better environment as you alluded to in your openings comments, where the clients will need more capacity and reinsurers will fit to the discipline?

Well Susan, I certainly I would like to think that that the reinsurers will take a good look at what they're supporting and only support those that are riding at adequate rates. We have seen certainly that AIG has some difficulty with attaining new business and even with some of its renewals given the changes that have happened for them and I'm certain here and there that they and others have gone to lower prices to maintain business. Again, we kind of are looking for a different world not just from them but from the whole marketplace going forward. A lot of this competition that we're talking about took place in the third quarter. And again, most people when they put their financials together at the end of the third quarter are looking at different numbers than they were at the end of the second quarter. So we certainly are hopeful that we will see some improvements across the board as we move toward one - one, as we move into 2009 from most of the companies out there because that really is what is needed, might you see some short term distress from those that have been harder hit by the changes? Yes we hope that works its way out, we hope that reinsurers only support those that are riding business at adequate rates.

Okay. And just I think a follow-up Joe, it's really the first time in years I heard you actually talk about an opportunity to pick up other companies and so I was wondering if you could just give us some more details of what might make a good fit with Everest?

Well, you are right Susan, historically we have looked to home growth and still that will be the primary focus. But there are some good companies out there that are certainly at very attractive prices and there are some small good companies that may want some added strength to give them better staying power in the current environment. And so I do think there maybe some increased opportunities. Now, our stock is not what it was, but that's the case for many of the public companies out there. So, that might even itself out. But looking for a better future in the industry and looking at some of the prices on some of the quality businesses out there, we are going to look around and have more conversations than we would have had a year ago.

Okay. That's fair. And just one more, any premium targets you have for '09 or is just too early?

Too early. We put together budgets in the last couple of weeks, but I think we need to re-visit those budgets in light of new circumstances.

Okay. That's great. Thanks for the answer.

Next is Jay Gelb with Barclays Capital.

Thanks. Good morning. On the potential for a cycle turn, could this be a situation perhaps more like after the 2005 hurricane season, where there was expectations of perhaps more of a broad based churn and it just didn't come about given the amount of capital that was in the system or urged us, just something fundamentally different about it from this perspective?

Well certainly, that could happen, we can't tell you precisely what's going to happen, but there is certainly less capital suddenly in this system. And that's something that wasn't as much the case I think at the end of 2005. So that would mean that you might see changes that go beyond just the sectors that were hit by the hurricanes in 2005. And certainly we are hopeful that, that would be the case. But we can't guarantee anything in terms of how the world would change. I think Tom and I believe there certainly will be pockets that will change for January 1st, there will be more changes as we go into 2009. We don't expect wholesale across the board, every product, every country that happened before. I mean that happened in 2001 that happened in 1986. We don't see that happening, but we certainly are hopeful that as an intelligent industry that response to the conditions and we do see some improvements.

Okay. And then just to switch gears on investment income, the $11 million of partnership income in the third quarter. Any prospects of what that could be in the fourth quarter given dislocations in the market?

That income tends to be fairly volatile. We had exited some of our public securities oriented limited partnerships. At the same time we've embarked on an enhancement I guess to our equity management strategy and we've allocated some funds to some strategic equity managers. So we both decreased and increased our exposure to public securities in that sector of our income statement if you will. So at this point, we've got about 25% exposure to public securities in the overall limited partnership bucket. The project oriented part of the portfolio which is close to 50% and it's 45% to 50% tends to be more stable. And then we have another 30% that's in the Mezodine private equity finance and that tends to be more stable as well. So it's a little difficult to tell because you've got operating income or I guess I should say earned income flowing through there on the investments. And as well any mark-to-market gains to losses flow through that as income. I think it's likely to continue to be quite volatile given that the financial markets continue to be quite volatile.

Is there any lag on that from what was reported in the third quarter?

There tends to be a lag it can be a month to a quarter I will tell you one of our equity oriented limited partnerships did report their September results in time for us to book that in the quarter it was a loss and as a result we booked it.

Okay. And then I think you also mentioned the $15 million equity put option where did that get reflected in the income statement?

That's in derivative income; it has got a separate line item.

Okay, is that included in operating income?

Yes.

So $15 million benefit?

Yes.

Okay, thank you.

You are welcome.

Our next question comes from Tom Cholnoky with Goldman Sachs.

Good morning. And just two question, Joe. Just going back to acquisitions should we think, how should we think about you looking at there from a strategic perspective are you going to be looking at bolt on transactions potentially or transformational ones? I guess that's my first question and I will follow-up with another one. And would it be reinsurance versus insurance?

Tom, I think in the last few years we probably were more interested in insurance than reinsurance but at this stage I think we would open up the... what we look out a little bit more. And I wouldn't rule out either, I mean bolt on always sounds more manageable, transformational sounds bolder for sure but I wouldn't dismiss either.

Okay. And then just, I don't know if there are any updates on Centrix at all or as you can just... we are still comfortably with where we are?

Sure, Craig, will give you the answer.

Yes, very comfortable with where we are at present. Based upon well we commuted about a-third of our exposure with one of the policy holders and that was as of the end of last quarter, I think we covered that in our call last quarter. Looking at the actual paid losses this quarter, I think we would have expected about $10.5 million and we've seen $8.5 million. It's only one quarter so, I think it's probably premature to get too excited about it. But it's probably the first quarter we've seen in the long time, where we have seen actual results better than what we would have expected. The portfolio continues to decline and value are estimated, overall exposure is down in another $20 million - $30 million from last quarter. The portfolio is more mature, 90% plus of it, tends to be 60 days or less past due. So things seem to be pretty much under control there.

Okay. Then just sorry, one other final question, just in terms of the market environment in '09, is it my sense correct that probably perhaps more of the opportunities will be on the reinsurance than necessarily the insurance side? Is that the way to think about it given the way you describe the market environment?

If I could think, it will be both Tom, I mean we are certainly hoping that insurance rates reverse and begin to go up, in some pockets that have been heard like the property side, or the D&O side lead the way. We are also hopeful that there will be increased reinsurance opportunities, especially for companies that have the ratings and the financials that we have as the world wants to reduce some of this risk, and at the same time, get the best quality in terms of the reinsurance that it purchases. So it's a fluid situation. We can't predict it entirely, we'll see what happens and take it from there. But I'm hopeful both sides, we see increased opportunities.

I know, this I said was the last question, I'll get one more, sorry. Just going back to acquisitions, if in fact you were to do something on a transformational basis, would we... should we expect you to do that maybe perhaps within equity offering in conjunction within a large acquisition or how would you fund something like that?

Well, again Tom, in every situation would have its own uniqueness. Let me just state the obvious in terms of our stock is down and that's kind of something that makes you less keen to use it. But if you are talking to a potential partner that is also public with their stock down in our sector. Well as I said that kind of is offsetting, starts to make those kind of transactions more possible. The cash side of things, we're all looking to kind of maintain cash at this point and you had at the same time, you are looking at entities often that are selling below book. So that kind of is an inducement to go that way. So it would depend on the situation and the size and what we thought we have in the way of excess capital and what we thought the other entity has in the way of capitals and we deal with the uniquely molded.

Okay. Great. Thank you.

Matthew Heimermann with JPMorgan has a question.

Good morning, everybody. Couple of questions, first on with respect to the improving pricing conditions next year, I guess one question I had was the sustainability, if we suddenly see credit improving and a lot of the damage has been done the fixed income side if spreads suddenly starts to come in, how would that affect the sustainability in your mind or the duration of any hardening we see next year?

That's really good question and I can't pretend that I know more than you know in terms of the answer to that. Let's face it most of us sit here hoping that the credit situation does improve and that bond values do come back. And if that's the case then suddenly you have more surplus coming back and I could see where that might mitigate some of the transformation that we are hoping will take place. But I would just say to you that, you know the dynamics on that as well as I do and so you can kind of do your own guess work, it's as probably as good as my guess work.

Fair enough. And then I guess, how much of your, I guess one thing as I mean at '09, it's... in my view would be there is probably pressure there. So how much of you can book renews let's say in the first three months of the year where you potentially have maybe have higher probability to walk in a better environment?

I will have to say we probably do about 45% to 50% of our business during that period.

Okay. And then... I was just hoping you could confirm or correct, my rough math was that AIG was roughly 7% of your business and I wanted to know if that was correct and in particular, how that's going to change given, I don't know whether to think of them was somebody you potentially needs more of your capacity or because of some of the dynamics potentially, you'll be looking elsewhere?

It's a mixed bag AIG has been and continues to be an important client to us. We deal with a number of the subs and entities within AIG. Clearly, they are going through some changes and those changes will continue. Certainly, you could argue that they may look to buy more reinsurance because of the surplus issues they have had. In addition, to that, a lot of these companies maybe sold and then they may have some new reinsurance purchasing missions after that. So far, we've probably seen little change in terms of the reinsurance purchasing that they do. It's been on that side of the fence for them, it's kind of been business as usual. But of course if there are sales and other things that may change going forward, it's hard to figure out whether all of what they are going through is good or bad or someone like in Everest, I'd like to think that as they go to their changes, we stand there ready to help them and it will actually be a net positive for us.

Okay. And then I guess one for Craig, you made the comment that all your books mark-to-market and you have liquid proxies for most of it. I wanted to drove down on the Muni book, there is a big difference between where secondary pricing and where primary pricing is on similar new obligations coming to market. And I was just curious, which... how much flexibility you had in marketing and which price I guess signal you are relying on?

Okay. I believe its secondary market. Its interactive data, Corp does our pricing for us through Deutsche and that's based on actual trades and similar trades and similarity in issues. And of course as you know that the muni market has been under a significant amount of pressure and we think... I guess it's more technical and fundamental as well as leverage structures are coming undone. Muni bond funds are in a negative cash flow position, the auction market of course collapsed etcetera so. It is the secondary market measure I believe and I can verify that to make sure that, that's my belief.

Okay. Perfect, thank you very much.

Your next question will come from Ian Betterman with Adage Capital [ph].

Hi, guys. I want to ask you how you are thinking about your cost of capital today versus what it was say year ago? And what I mean by that is... if I am an insurer, a client of yours who maybe made some bad investment decisions maybe got hit by the cash pretty hard and the agencies are breathing down my neck a little. And I have a choice between raising capital well below book or given that I've raised my retentions the last few years coming to you guys and saying you know what maybe I am just going to buy a whole lot more reinsurance this year, because the cost of that capital is maybe today is 12% to 15%, maybe next year even if it is a little over 15%, still a heck of a lot cheaper than my alternative. So I guess what I am wondering is maybe pricing even more than your suggesting than maybe should be charging at 20% cost of capital because these clients do not have better alternatives and sure supply and demand with suggest. It is almost a new version of the reinsurance over charged not to your be ticking that business but that you are sort of that the cheap capital around the world for anyone to access?

Well, we certainly are hopeful that pricing will trends up and you probably need to give that speech to all of our competitors.

I hope they are listening.

We make an interesting point obviously companies that have dropped below the capital level that they need to run their businesses it's not an attractive option to go out to the market right now and raise additional capital. And so, one would guess that a better alternative might be increased use of reinsurance, which kind of just get back to our capital usage as well. So I think we're talking the same thing and I think we are seeing a dynamic play to improvements in our space and we certainly hope it does.

Well you have a higher hurdle rate for new business at one - one of '09 or one - one of '08?

We will. For certain segments of our business, we really will look to have improved conditions.

Okay. Great. That's what I wanted to hear. Thanks, Joe.

Our next question comes from Vinay Misquith with Credit Suisse.

Hi, good morning.

Good morning.

In looking at the impact of unrealized losses on the capital of companies, could you help me understand whether rating agencies are actually looking at the unrealized losses because of your spread widening and things you have to hold more capital or are they looking beyond that? And this management that I... thinking in terms of the unrealized losses due to spread widening, is just a temporary phenomenon or how do you see that just more of a capital depletion which would make you to want raise rates more?

Okay. Vinay, I think there is two parts to the question. On the first one kind of I guess is may sound a little flip, but intrusive how the rating agencies reviewing unrealized losses it's probably best to talk to them about that. Generally, the capital models require certain levels of capitals to back certain sort of risks. And unless and until they change those factors, the fact that you are in an unrealized or even a realized loss position isn't going to change those factors. As a result of what's happened in the last quarter or quarter and a half, they may reassess some of the those factors, and it may have an impact on the capital that they require at various rating levels going forward, but thus far, we haven't seen that. We have had discussions, and the discussions that we have had with the rating agencies relative to where we are, they seem to be quite comfortable.

Okay. So, just to paraphrase that, would it be fair to assume that right now at least the rating agencies are looking beyond these spread widening and saying this is more of a temporary factor. And therefore, not pressing companies to keep more capital because of that.

Well no, I mean I think realistically, the rating agencies look at the required capital based upon the makeup of the income statement, the balance sheet, the reserves, the lines of business premium, growth, all of the aspects that they require capital for. They look at that relative to the capital that you have in your business, and then in essence they have a grid, right, that based upon the relationship between their view of the required capital and the actual capital that you have, you fall in the ratings grid. So, whether it's realized or unrealized I don't think that has a big impact at this point. Having said that, I would say in the short-term given that we're beginning at least to see a little bit of improvement maybe in the credit markets they may not be too active in terms of reducing company's ratings and give us some time to see what happens if some companies capital positions are not as strong as they were.

Fair enough. The second question would be about your capacity to AIG. Now, we've heard anecdotes in the market about they being more competitive, would you be willing to pull back based on as you thought that the pricing was not adequate?

Yes, always that's what we do. I don't want you to sing a lot of AIG for us on that. That's true with any company we'd be training with. And sometime, we just look at the line of business that frankly we see if we did this to last soft market. It cuts to the point where many lines of business. We didn't like anybody was riding the business at. And so we pulled back from the entire market. So I think no one has done that better in the past than we have. And frankly, when you look at our numbers through the nine months, you can kind of see that even though we have great credit, we have been doing less business as we really have pulled back from certain areas. We continue to do that we thought rates were inadequate.

It's fair enough. One last question if I may. Have you actually seen trying to become more rating sensitive because I often heard the arguments during hard markets as lines go to better red that green shows and of course you're one of them but have you actually seen that happen this time and if you could talk about the last hard market that's really happened?

I think we're seeing it internationally probably more so than domestically. We're hearing that companies are looking to upgrade the overall credit rating with their panels; they are looking to replace companies whose credit ratings have fallen off etcetera. And in fact we can get, we have got seen some situations were we've gotten preferential pricing in preferential terms as a result of that. I think there is some shopping going on here in both on the direct side and the reinsurance side where companies whether they are actually replacing insurers and reinsurers in their programs. They are at least in the market looking where they think may have some credit concerns so I think from that standpoint stronger ratings it is definitely a benefit in this market.

But we see it in the U.S. on the casualty side not as much on the property side, but on the casualty side where it takes years for the losses to play out, and you were reinsurers would be around many years later we see a flight toward security.

And would you say that a AA rating is sort of a must for the casualty reinsurance business?

Well I'd like to say that... various company is do is another matter and that obviously would be great limitation to the panel if they just use that. Although there are a few that keep the quality that high. There are some big companies that really only five or six reinsurers that they deal with and we just about always we are one of those five or six. But there are other companies that want a broader panel and certainly if it's property business they tend to broaden the panel because they are looking at it like they just need to the reinsurer to be around from one or two years. And so it's a lower requirement than the casualty business.

And I thank you.

Josh Shanker with Citi has a follow-up question.

Thank you, I don't mean to have you comment too much on a competitor but it's... remain to your business, I want to talk a little about what are you seeing in your business for the relation to the AIG situation are you seeing resonates are you seeing brokers contracting, and finally are you getting calls from clients who are just sniffing around finding out what their alternatives are?

Well, the answer is all of the above. I mean, I don't want to this call to turn into call that AIG, suppose to--

I understand.

About Everest. But some of the things you cited are the things that you expect to be happening given the situation that AIG defends. And so, these things are at least in part happening. Now, where they go from here, the time will tell, we know that's going to be number of sales, we'll see what that does as they do get broken up. But I just want to cut a talk about it from the emphasis side, yes, there will be people, yes that will look to do other things outside of what the situation currently is at AIG. Of course their world has changed. At the same time, I think a lot of the units within AIG are still looking to bind together and still looking to be a major player and still looking to buy a reinsurance and still looking to deal with a company as like ourselves that they've been dealing with for many years. Even if they get sold, in fact if they get sold they may need us more than they ever have before, because certainly we're not talking to this company that's $200 billion in market cap and could very, very frequently tell us, we'll just keep it next if you don't like it. So, I do think it will make for opportunities for us, but as far as the AIG itself the things that you mentioned. Sure, I mean that's happening because of what they are going through.

I appreciate I really think you can't give too much away. But, thank you.

And that does conclude our question-and-answer session. I'll now turn the conference to our host for any closing or additional remarks.

Thank you for joining us this morning and certainly as always if you have any follow-up questions that we did not touch on, please feel free to call me. Again, thank you.

And that does conclude our conference call. Thank you for joining us today. .