Good day everyone, and welcome to the Everest Re Group Ltd. Q2 2012 Earnings Release Call. Today’s conference is being recorded, and at this time for opening remarks and introductions I would like to turn the conference over to Beth Farrell. Please go ahead.

Thank you, Lisa. Good morning and welcome to Everest Re Group’s Q2 2012 earnings conference call. On the call with me today are Joe Taranto, the company’s Chairman and Chief Executive Officer; Dom Addesso, our President; and Craig Howie, our Chief Financial Officer. Before we begin I will preface our comments by noting that our 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 projections, 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 investors should consider in connection with such statements. Now let me turn the call over to Joe.

Thanks, Beth. Good morning. We are pleased with our results through the first six months. Our comprehensive income for that period is $519 million. During the six months we purchased $225 million of our stock, paid $51 million in dividends, and still increased our surplus $346 million or 6%. Booked value per share adjusted for dividends has increased 10%. Our annualized operating earnings ROE was 16%. Our reinsurance book has been positioned to capitalize on the best opportunities which have generally been on the property risks as rates, terms and conditions improved in the last couple of years in response to lost activity. We have done this without meaningful increasing our PMLs in any peak zones. We are pleased with our mid-year renewals. Dom will provide more detail on this shortly. Our insurance book has also been positioned to capitalize on our best opportunities. This includes our [DNO] operations, our A&H medical stop loss business, and select property businesses which continue to be profitable areas for us; as well as the California worker’s comp benefits and our general liability book where the market continues to improve; and our [crop book]. Again, Dom will provide more detail. Our $16 billion of invested assets continued to perform well, particularly given the challenges of finding quality investments in the current market. As previously announced, I will continue as CEO through the end of 2013 at which point Dom will become the CEO. I’m excited about continuing to lead our company through this year and next, and thrilled to have such a high quality individual – Dom Addesso – lead our company for many years thereafter. I like our team, our portfolio and our plan. Our company has never been stronger, our future has never been brighter. Dom?

Thank you, Joe. Good morning. As Joe indicated, we’ve had an excellent quarter overall. The year so far is playing out generally as expected with the attritional combined ratio improving by one point compared to the first six months of 2011. Rate increases and improving terms are beginning to work through the reinsurance property results. Total CAT premium year-over-year has increased $200 million with approximately half of that in rate increase. These results are also benefiting from the shift of pro rata to excess. Well this has a dampening effect on premium, the positive impact on margin is flowing through the loss and expense ratios. The combined ratio on our reinsurance property portfolios which has not yet been fully reflected through earnings has improved by 11 points. On the treaty casualty side we are beginning to see modest rate increase work through the results. It has not yet reached a level where we feel the need to aggressively expand, but the future opportunities may be more appealing over time. In that regard we are beginning to enhance our teams and structure to maximize our resources around the globe. Overall reinsurance premiums for the quarter were down, but this was due to foreign currency, reinstatement premiums, and the one-time effect of a cancelled [close share] contract. After eliminating the effect of these items, premiums were up 17% for the quarter. This was a result of the previously mentioned rate increases in many of our businesses. The Florida market at June 1 saw CAT rates move up on average by 5%. Canada property rate movements were similar. The Asian markets had the largest moves, where rates in loss-affected regions were up 20% plus. In Japan, we saw terms improve on proportional treaties although we did move some capacity to excess structures. July…

Thank you, Dom, and good morning everyone. We’re pleased to report that Everest had another very strong quarter with after-tax operating income of $223 million or $4.25 per diluted common share. In comparing these results to last year consideration must be given to the record catastrophes experienced in 2011. Net income for Q2 was $214.6 million or $4.08 per diluted share. Net income includes realized capital losses for the quarter. On a year-to-date basis, operating income was $462.9 million or $8.72 per share. This represents an annualized operating return on equity of 16.1%. Net income year-to-date is $519.3 million or $9.79 per share. This net income includes realized capital gains for the year. These results are reflective of the year-to-date overall attritional combined ratio improving one point from 87.8% down to 86.6%. This measure excludes the impact of catastrophes and reinstatement premiums. The total reinsurance attritional combined ratio was 83.7% compared to 84.7% in the prior year. The reinsurance segments would have improved even more if not for the $30 million charge in the marine line for the Costa Concordia cruise ship, $10 million of which was booked this quarter. This includes the estimated $200 million of additional costs to remove the wreck. The insurance segment attritional combined ratio was 98.7% compared to 99.3% in the prior year. This ratio is much better than the 105.8% ratio for the full year of 2011. These improvements should pinwheel as rate increases continue to earn in over time. Also providing better margins is the shift in our portfolio from quota share to excess of loss. Gross written premiums of $909 million for the quarter were down 8% compared to Q2 2011. This decline is primarily driven by the non-renewal of one large Florida quota share reinsurance contract in the quarter – more…

Lisa, we’re ready to take questions.

Thank you. (Operator instructions.) And we’ll take our first question from Amit Kumar with Macquarie Research. Amit Kumar – Macquarie Research : Thanks, and congrats on a very strong quarter. I just had a few sort of clarification-type questions on the crop insurance book, and the color was very helpful that you gave in the opening remarks. First of all, can you just sort of refresh us in what is the crop distribution in the heartland book? It’s not that corn is the predominant just based on where it is, but can you just refresh us what is that distribution?

You mean the distribution by crop? Amit Kumar – Macquarie Research : Yes.

Its normal distribution is corn and soybean; corn and soybean are the main products. Amit Kumar – Macquarie Research : And then do you have the percentages or…

Give me a second here, Amit. The information I have in front of me will not let me give you a precise answer, Amit, so I’m going to have to follow up on that question. Amit Kumar – Macquarie Research : Okay, that’s fine. And secondly I know you mentioned the stop loss coverage. Would this be similar to sort of what the industry standard is in terms of where it attaches? Can you give us any other color on that?

It attaches at a 110%. I think it’s 95% and we have a 5% participation. It’s 30 points of limit. [95 of 30%], excess of 110%.

It’s similar in structure to what most companies purchase. Amit Kumar – Macquarie Research : Got it, that’s very helpful. And I guess the only other question I have for now is you know, obviously your overall book has evolved. You’re talking about CAT-exposed premiums being at $1 billion versus right now at $700 million. I’m curious how should we sort of think about the CAT load discussion? I know we’ve discussed a number in the past but as the book changes how do you think about the CAT load internally?

That’s not changed significantly, Amit. As we’ve mentioned there’s been no major shift in our peak zones and we’ve pushed out some additional aggregate into non-peak zones but that’s not changing materially our annual expected outlook.

And a lot of the change comes from rate increases. Amit Kumar – Macquarie Research : Got it. Okay, that’s all I have for now. I’ll re-queue for additional questions. Thanks.

We’ll take our next question from Josh Shanker from Deutsche Bank. Josh Shanker – Deutsche Bank: Yeah, good morning everyone. I just want to walk through the Florida quota share arrangement a little bit. I wanted to know what impact there was on the expense ratio or the loss ratio in terms of maybe giveback of premiums or something like that that may be one time in nature? Also I wanted to know does the program dissolve or does it go to a competitor? And then talk a little about the philosophy of letting that program leave and what changed in the economics over the last few years.

I’ll start with the latter part of that question with regard to what happened and then I’ll turn it over to Craig to take you through some of the numbers. Basically we would have supported the deal that was in place with us last year but a competitor offered terms that we could not support. We in fact had a contractual right on the deal that was put forth to do more than 50% but we chose not to do anything, and instead we redeployed our capital into Florida XOL deals which we think offer better returns. So that’s the long and short of it in terms of that specific deal, but Craig will give you the particulars numbers-wise.

Josh, one of the things is we don’t typically discuss any one transaction on a call like this. However what I can tell you is what we did is we portfolio’d out the unearned premium. That unearned premium was $194 million. We have to resource the corresponding commission and then we have to remove any deferred acquisition costs associated with that on our unearned premium. But this was a one-time transaction and a one-time event. So you’re right that it was an impact as part of our combined ratio for the quarter but there were a number of other adjustments and impacts in that combined ratio as well. Josh Shanker – Deutsche Bank: Okay, no problem. But arguably we can be comfortable saying that the expense ratio in US reinsurance is inflated in Q2?

Correct. Josh Shanker – Deutsche Bank: Okay, thank you.

The (inaudible) points of inflation on the expense, that’s on a worldwide basis. So there is a blip in the quarter that drove up the expense ratio that should go away.

And we have Greg Locraft with Morgan Stanley. Please go ahead. Greg Locraft – Morgan Stanley: Yeah hi, good morning and again, congrats on the quarter. I just wanted to get your appetite for buybacks at today’s levels given that the valuation really hasn’t moved much year to date because you’ve had so much book value growth.

Our appetite remains strong. We think it’s one of the best ways to use the profits, the earnings that we’re making. Now we are moving into hurricane season and do we’ll be a bit more cautious in this quarter than perhaps otherwise, but we intend to continue to buy nonetheless. Greg Locraft – Morgan Stanley: Okay, and then if you can just remind me historically have you ever bought in the wind season and would that strategy change?

[We have] but again, we’ve bought less than we have in other quarters. But you know, at this point we have a lot of excess capital, profits are good. We like the portfolio and the only hesitation is the fact that it’s hurricane season. But we like the price and it’s really one of the ways of continuing to move the football down the field. We like buying our stock at these levels. Greg Locraft – Morgan Stanley: Excellent, okay. Thanks. And then just shifting gears back to crop, it’s actually pretty amazing. You’re not the only carrier but the industry is staring at what at least what would be the largest loss in crop in history and yet you guys are booking at 95% and are going to obviously make more in the line if your projections prove out. And so I guess what I’m trying to understand is what is going into that expectation of a 95%? What gives you guys confidence that what appears to be the worst industry loss ever is not going to result in you guys losing money in that particular line?

Greg, it’s Dom. It’s still very early to be predicting what the outcome is, but also recognizing that it’s a limited amount of premium that was earned in Q2 from crop. So that fact that we built a very small underwriting gain, which I think is consistent with what many of the other markets have done; and it’s not inconceivable given that, as I mentioned in my script, we could eke out a small profit because at this point only 24% of the states are severely affected. Now, that could change in the months ahead in either direction and we have ranges around where the result could end up, which include both a strong profit and a modest loss. So it was really much too early to predict how to book this and frankly, given the level of earned premium that we had in the quarter it wasn’t that material at least as in the impact for this quarter. And ultimately as I said, even as the year plays out on the insurance side our annualized premium for crop is $150 million, and of that $135 million is MPCI-related; the remainder is crop [hail].

Yeah, to follow up on that, that really means that this is 3% of our worldwide premium and it’s got a stop loss on it; and as Dom noted only 25% of the business now is in the states that are performing quite poorly. Having said that, as Dom noted it remains to play out. It certainly could get worse and we could lose money on this – we’ll see. But really in the grand scheme of things it is not a real big deal for us. Greg Locraft – Morgan Stanley: Excellent, very thorough. And then last is on the top line decline, the loss of the contract which you called out in the quarter, are there any lingering impacts to that as we think about premiums and our models going forward on the top line and the bottom line? Just how we should handle that.

I don’t think there are any adverse issues in terms of margins or profits or [attritionals] going forward. Premiums may be down a bit; they were down this quarter, and we won’t have that treaty on an ongoing basis. But really our focus is on margin and profits and attritional. We don’t see any issues on that front.

In fact, margins really should be going up as again, I indicated moving more of our CAT PML from proportional to excess, we’re benefitting not only on the attritional loss ratio but also on the commission ratio. Greg Locraft – Morgan Stanley: Okay, great, and again, the profitability is strong. But I guess what you’re saying though is there will be top line pressure that plays through for at least the next three quarters. We’ve taken one quarter of the decline and it should continue but profits are up because of all the reasons you’ve stated.

Greg, what’s in that is you think about the rate increases we’ve had, not only in Florida but around the globe, and a lot of that rate increase is offsetting to a very large degree this one particular transaction.

Yeah, and you don’t have one quarter in this quarter. You have the whole unearned premium reserve portfolio’d out, so everything that was on the books has been written but hasn’t earned at this point has been reversed. So this is a very unusual quarter in that regard. Greg Locraft – Morgan Stanley: Okay, good. Thanks a lot, guys.

We’ll take our next question from Cliff Gallant with KBW. Cliff Gallant – Keefe Bruyette & Woods: Good morning, good quarter. Just two questions: the first just on the switch from quota share to XOL – is that simply a reflection of current market terms or is there something more intrinsic about the business that you prefer in XOL? And then my second question was just on investment income, and we continue to see low yields and the outcome doesn’t look good there – is there any sense that you should change your strategy, try to get more yield?

Well, let me start on the first part. What we have found I think looking around the world in the last year or so is XOL rates have been going out where in many cases pro rata rates have not. So more and more that’s pushing us into the XOL camp. Having said that we still see pro rata deals that we like doing, and we put those through our models and see how those returns compare to other potential deals. We’re talking about CAT deals now and so again, it’s a portfolio optimization model that we’re using. We want to do the best deals. We have a certain aggregate that we’re willing to apply and we want only the best deals to go into that aggregate. And what shakes out of that shakes out of that. Now, as it turns out, given the trends that’s more and more XOL as opposed to pro rata.

From an investment standpoint, Cliff, I don’t see a dramatic change in our portfolio here. First of all there’s been a lot of changes in the portfolio over the past couple years but right now it’s very conservative. It’s a diversified portfolio. It’s very high credit quality. We don’t’ have control over the low interest rate environment but we have to live with it. We have to make it up on the underwriting side, and there’s been a lot of discussion about underwriting benefits here and a decline in our attritional ratio; and that will make up for it to get to the bottom line ROE. Cliff Gallant – Keefe Bruyette & Woods: Okay, that makes sense. Thank you.

Let me also give you a statistic that might help keep this in perspective relative to the pro rata versus excess. And it’s not as if, as Joe indicated, that we stopped writing pro rata. It’s just reducing the proportion. So in terms of the proportion of pro rata to excess business, in 2010 – and I’m going back to 2010 because that’s a reflection of how it earns through the portfolio – pro rata was 68%, XOL obviously 32%. In 2011 61%/39%, and in 2012 for June it’s 57%/43%. So I mean that just gives you the trend line of the pro rata. The pro rata is also benefitting, by the way, from underlying increases in primary rates but it’s not as if pro rata is falling off a cliff here. Cliff Gallant – Keefe Bruyette & Woods: Okay, that’s helpful. Thank you.

We’ll take our next question from Ian Gutterman with Adage Capital. Ian Gutterman – Adage Capital: Hi. Just can you clarify again for me on the universal contract, I think you said $194 million of unearned premium? Over what time period [would you have kept] the contract? Over what time period would that have earned out – by the end of the year, does it go into next year?

It would have been one year and you’re correct – the number was $194 million that was portfolio’d out of unearned. Ian Gutterman – Adage Capital: Okay, so basically that’s Q3 of this year through Q2 of next year that would of earned out.

Correct. Ian Gutterman – Adage Capital: Got it, okay great. And then can you talk about, just given the portfolio changes you’ve made in CAT, I don’t know if you can give us a Florida only PML or just talk about how you’ve structured the portfolio in XOL? Are you exposed more to the [Florida-only’s] and nationals, are you playing high layers, low layers – some sort of sense of what types of events or companies you might be exposed to.

Our portfolio hasn’t changed much in that regard, frankly, and it’s pretty well ventilated. We support regionals, locals and national clients. It’s a wide array of client list.

And no meaningful change to the PML. Ian Gutterman – Adage Capital: Alright, even though I would have thought… I mean (inaudible) implies you pay at dollar one where XOL means you pay obviously higher, so it would seem you’d be less exposed to lower events [this year] at a minimum. Is that right?

Well slightly that’s true, but there are CAT covers that do attach low. And then of course you can deploy more limit up high and it has a similar PML.

And (inaudible) our design was to not increase the PML so we’ve worked backwards from that. Ian Gutterman – Adage Capital: Okay, and maybe just lastly on that is just as you were trying to reallocate onto XOL-type programs, I mean some of your competitors have sort of discussed it being difficult to stay on programs that they liked in the past because of some of these nontraditional competitors coming in. I just wondered how much of a concern was that as you were repositioning or were you sort of playing on a contract that doesn’t tend to attract that kind of capital?

You know there’s always competition in our business, there always will be; and it comes in from the normal competitors and yes, you do see it come in in unconventional ways here and there, be it sidecars or other things. So yes, there was a little bit more than that recently. Having said that, as Dom noted in Florida as an example rates still went up, so I’m sure it had a dampening effect but rates still went up. And I’ve found it overall this June and July to be a very sensible market where we were still able to achieve what we were looking to achieve. To a certain degree, more competition coming in that still keeps it a sensible market is not a bad thing. We don’t want so much coming in that it makes it a market that doesn’t rate very well, but a lot of the competition that is coming in in an unconventional way only wants to come in if it’s a reasonable market and frankly will go away I think if it is not. So put it all together, I don’t think it changed the world all that much and we were happy with what we achieved.

We also have demand too, Ian, coming out of model drift as well as companies seeking to buy more protection. So those are some offsetting factors to what you’ve described. Ian Gutterman – Adage Capital: Of course, of course. Do you have any emerging thoughts as far as a willingness to engage with some of these new form of capital?

We’re open. We talk to some of these potential new ventures. If it makes sense for us we could engage. We’re open-minded about it. Ian Gutterman – Adage Capital: Okay, thanks guys.

Our next question comes from [Michael Yancey] with Goldman Sachs. [Michael Yancey] – Goldman Sachs: Thank you very much. So one question I had, you mentioned capital deployment before and you mentioned the nonrenewal of this Florida contract. Just thinking about capital deployment through wind season, I mean does the fact that you have less exposure now it would appear to wind season allow you to get more comfortable with deployment through wind season? And I guess the second question I think, Joe, you mentioned upfront you’re deploying capital relative to the capital you’re generating. I guess my question would be why stop there? Why not deploy more if you have enough capital and you feel comfortable that there’s enough there to continue? And then I just have one follow-up, thanks.

Well you know I think we will be buying back. In terms of going even more aggressively, let’s put everything in perspective. Craig noted we bought back 23% of the stock in recent years and frankly, we’ve added to that that we plan on continuing to buy in a meaningful way. Beyond that we like having excess capital. We like having capital for business opportunities. It didn’t hurt having capital last year when there was a ton of losses out there and some others that downgraded because they didn’t have enough capital. So we want to balance everything. We want to keep having high-quality earnings that we can buy back more, and we will just continue to buy back. I think we pitched it at a very reasonable level all things considered. I think you said something upfront about something that suggested our exposure was down. I think we’ve said we’ve kept the PMLs the same but we didn’t really say that we’ve taken them down. So our exposure if you will just looking from a PML point of view to hurricane is still approximately the same in peak zones. [Michael Yancey] – Goldman Sachs: Even after adjusting for the nonrenewal of that one large contract?

Yes, yes because we redeployed that capital to do some other excessive loss contracts. [Michael Yancey] – Goldman Sachs: Gotcha, okay. And then one follow-up on the crop stuff: I assume that the reason your losses even in a worst case scenario are limited or relatively bracket-able is because of the reinsurance program that you have. And I guess my question is is that all private market reinsurance? Is some of that back to the government? That’s my first question.

What I was referring to is the stop loss program and Craig referenced it as well in his opening comments. That’s private reinsurance. That’s not the sessions to the federal government, no. [Michael Yancey] – Goldman Sachs: Is there a quota share as well or is it just purely a stop loss?

Stop loss. We do have quota share with XOL, right. [Michael Yancey] – Goldman Sachs: Understood, okay. And then just the last one: the growth, and it looks like a lot of the premium growth came out of international reinsurance, and I just wanted to understand where are you focusing your attention and do you expect that that will continue to be the engine for premium growth for the remainder of the year? Thanks.

On the international side some of what you’re seeing is a rate increase coming out of Australia, coming out of Japan, a little bit continuing in Latin America. But we’ve been very strong on the international front for years but again, I think much of what you’re seeing there most recently is rate increase on the XOL side. [Michael Yancey] – Goldman Sachs: Got it, great. Okay, thank you.

We’ll take our next question from Vinay Misquith with Evercore Partners. Vinay Misquith – Evercore Partners: Hi, good morning. The first question is on the crop insurance. You mentioned that you’re writing on 95% combined ratio. What’s your loss ratio for the business that you’re working at right now?

The combined is the 95%, yes. The way we book it’s 95% combined. Vinay Misquith – Evercore Partners: So the loss ratio would be similar to the combined ratio, correct?

Well you’ve got the commission fees in there. We’ll get you that number in a second. Vinay Misquith – Evercore Partners: The reason I ask is that the stop loss is that 110% loss ratio so I just wanted to find out the apples to apples. Okay, great.

The stop loss ratio works off of the entire combined excluding our internal expenses which are small. And the loss ratio is 75% so it’s [25%] (inaudible). Vinay Misquith – Evercore Partners: Alright, so just looking at apples to apples it’s 110% of the loss ratio was say maybe the 90% to 95% that you’re booking at now, correct? I mean that’s the potential upside or loss that you may have, correct?

95% could go to another 15 points before the stop loss would begin, yes. Vinay Misquith – Evercore Partners: Okay fair enough, great, thanks. The second question was on rate increases. You’ve had very strong rate increases and that’s flattening out right now. Where do you see rate increases going out next year should we have a benign CAT season?

Well, I think they’re going to level off if you have little to no CATs. If they stay where they’re at I think they’d be leveling off at a very reasonable place where there’d still be some very good opportunities. But I would not expect them to continue up way beyond what they’ve done in the last couple of years if there was little in the way of catastrophes. Vinay Misquith – Evercore Partners: That’s helpful, thank you.

And there are no further questions. I’d like to turn the conference back over to Mr. Joseph Taranto for any additional or closing remarks.

Well, I will make one comment. We didn’t talk much about the casualty market and Dom certainly noted that whereas we’re seeing rate increases there and it’s getting more promising it’s still not exciting enough for us to really make some bigger bets there. But I would remind everyone that we certainly have the firepower, distribution and people to do so should that end of the market begin to get more interesting. We have the firepower both on the insurance side and the reinsurance side, so we are hoping that many who are predicting that that end of the world will continue upward and will continue to improve, we certainly hope that that is the case; and if that is the case we’ll be able to do more there. I thought I’d comment on that since we really hadn’t addressed it whatsoever. But other than that, thank you for joining us today.

And that concludes today’s teleconference. Thank you for your participation.