EVEREST GROUP, LTD. - Annual Report: 2010 (Form 10-K)

group10k2010.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2010

Commission file number 1-15731

EVEREST RE GROUP, LTD.

(Exact name of registrant as specified in its charter)

Bermuda		98-0365432
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Wessex House - 2nd Floor

45 Reid Street

PO Box HM 845

Hamilton HM DX, Bermuda

441-295-0006

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Common Shares, $.01 par value per share				Name of Each Exchange on Which Registered New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	X	Accelerated filer
Non-accelerated filer		Smaller reporting company

(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES

The aggregate market value on June 30, 2010, the last business day of the registrant’s most recently completed second quarter, of the voting shares held by non-affiliates of the registrant was $3,977,436 thousand.

At February 1, 2011, the number of shares outstanding of the registrant’s common shares was 54,434,100.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Items 10, 11, 12, 13 and 14 of Form 10-K is incorporated by reference into Part III hereof from the registrant’s proxy statement for the 2011 Annual General Meeting of Shareholders, which will be filed with the Securities and Exchange Commission within 120 days of the close of the registrant’s fiscal year ended December 31, 2010.

EVEREST RE GROUP, LTD

TABLE OF CONTENTS

FORM 10-K

		Page

PART I

Item 1.	Business	1
Item 1A.	Risk Factors	29
Item 1B.	Unresolved Staff Comments	41
Item 2.	Properties	41
Item 3.	Legal Proceedings	41
Item 4.	Reserved	41


PART II

Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	41
Item 6.	Selected Financial Data	44
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	84
Item 8.	Financial Statements and Supplementary Data	84
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	84
Item 9A.	Controls and Procedures	84
Item 9B.	Other Information	85


PART III

Item 10.	Directors, Executive Officers and Corporate Governance	85
Item 11.	Executive Compensation	85
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	85
Item 13.	Certain Relationships and Related Transactions, and Director Independence	86
Item 14.	Principal Accountant Fees and Services	86


PART IV

Item 15.	Exhibits and Financial Statement Schedules	86

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PART I

Unless otherwise indicated, all financial data in this document have been prepared using accounting principles generally accepted in the United States of America (“GAAP”). As used in this document, “Group” means Everest Re Group, Ltd.; “Holdings Ireland” means Everest Underwriting Group (Ireland) Limited; “Ireland Re” means Everest Reinsurance Company (Ireland), Limited; “Holdings” means Everest Reinsurance Holdings, Inc.; “Everest Re” means Everest Reinsurance Company and its subsidiaries (unless the context otherwise requires); and the “Company”, “we”, “us”, and “our” means Everest Re Group, Ltd. and its subsidiaries, except when referring to periods prior to February 24, 2000, when it means Holdings and its subsidiaries.

ITEM 1. BUSINESS

The Company.

Group, a Bermuda company, was established in 1999 as a wholly-owned subsidiary of Holdings. On February 24, 2000, a corporate restructuring was completed and Group became the new parent holding company of Holdings. Holdings continues to be the holding company for the Company’s U.S. based operations. Holders of shares of common stock of Holdings automatically became holders of the same number of common shares of Group. Prior to the restructuring, Group had no significant assets or capitalization and had not engaged in any business or prior activities other than in connection with the restructuring.

In connection with the February 24, 2000 restructuring, Group established a Bermuda-based reinsurance subsidiary, Everest Reinsurance (Bermuda), Ltd. (“Bermuda Re”), which commenced business in the second half of 2000. Group also formed Everest Global Services, Inc., a Delaware subsidiary, to perform administrative functions for Group and its U.S. based and non-U.S. based subsidiaries.

On December 30, 2008, Group contributed Holdings to its recently established Irish holding company, Holdings Ireland. Holdings Ireland is a direct subsidiary of Group and was established to serve as a holding company for the U.S. and Irish reinsurance and insurance subsidiaries.

Holdings, a Delaware corporation, was established in 1993 to serve as the parent holding company of Everest Re, a Delaware property and casualty reinsurer formed in 1973. Until October 6, 1995, Holdings was an indirect wholly-owned subsidiary of The Prudential Insurance Company of America (“The Prudential”). On October 6, 1995, The Prudential sold its entire interest in Holdings in an initial public offering.

The Company’s principal business, conducted through its operating segments, is the underwriting of reinsurance and insurance in the U.S., Bermuda and international markets. The Company had gross written premiums, in 2010, of $4.2 billion with approximately 80% representing reinsurance and 20% representing insurance. Shareholders’ equity at December 31, 2010 was $6.3 billion. The Company underwrites reinsurance both through brokers and directly with ceding companies, giving it the flexibility to pursue business based on the ceding company’s preferred reinsurance purchasing method. The Company underwrites insurance principally through general agent relationships, brokers and surplus lines brokers. Group’s active operating subsidiaries, excluding Mt. McKinley Insurance Company (“Mt. McKinley”), which is in run-off, are each rated A+ (“Superior”) by A.M. Best Company (“A.M. Best”), a leading provider of insurer ratings that assigns financial strength ratings to insurance companies based on their ability to meet their obligations to policyholders.

Following is a summary of the Company’s principal operating subsidiaries:

Bermuda Re, a Bermuda insurance company and a direct subsidiary of Group, is registered in Bermuda as a Class 4 insurer and long-term insurer and is authorized to write property and casualty and life and annuity business. Bermuda Re commenced business in the second half of 2000. Bermuda Re’s UK branch writes property and casualty reinsurance to the United Kingdom and European markets. At December 31, 2010, Bermuda Re had shareholder’s equity of $3.0 billion.

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Everest International Reinsurance, Ltd. (“Everest International”), a Bermuda insurance company and a direct subsidiary of Group, is registered in Bermuda as a Class 4 insurer and long term insurer and is authorized to write property and casualty business and life and annuity business. Through 2010, all of Everest International’s business has been inter-affiliate quota share reinsurance assumed from Everest Re and the UK branch of Bermuda Re. At December 31, 2010, Everest International had shareholder’s equity of $354.5 million.

·	Ireland Re, an Ireland reinsurance company and an indirect subsidiary of Group, is licensed to write non-life reinsurance, both directly and through brokers, for the London and European markets.

Everest Re, a Delaware insurance company and a direct subsidiary of Holdings, is a licensed property and casualty insurer and/or reinsurer in all states, the District of Columbia and Puerto Rico and is authorized to conduct reinsurance business in Canada, Singapore and Brazil. Everest Re underwrites property and casualty reinsurance for insurance and reinsurance companies in the U.S. and international markets. At December 31, 2010, Everest Re had statutory surplus of $2.5 billion.

Everest Insurance Company of Canada (“Everest Canada”), a Canadian insurance company and direct subsidiary of Everest Re, is licensed to write property and casualty insurance in all Canadian provinces. As of December 31, 2010, Everest Canada was an inactive entity; however, in January 2011, Everest Re contributed additional capital to Everest Canada in order to resume operating activities. The Company expects that Everest Canada will begin writing new insurance business in 2011.

Everest National Insurance Company (“Everest National”), a Delaware insurance company and a direct subsidiary of Everest Re, is licensed in 50 states and the District of Columbia and is authorized to write property and casualty insurance on an admitted basis in the jurisdictions in which it is licensed. The majority of Everest National’s business is reinsured by its parent, Everest Re.

Everest Indemnity Insurance Company (“Everest Indemnity”), a Delaware insurance company and a direct subsidiary of Everest Re, writes excess and surplus lines insurance business in the U.S. on a non-admitted basis. Excess and surplus lines insurance is specialty property and liability coverage that an insurer not licensed to write insurance in a particular jurisdiction is permitted to provide to insureds when the specific specialty coverage is unavailable from admitted insurers. Everest Indemnity is licensed in Delaware and is eligible to write business on a non-admitted basis in all other states, the District of Columbia and Puerto Rico. The majority of Everest Indemnity’s business is reinsured by its parent, Everest Re.

·	Everest Security Insurance Company (“Everest Security”), a Georgia insurance company and a direct subsidiary of Everest Re, writes property and casualty insurance on an admitted basis in Georgia and Alabama. The majority of Everest Security’s business is reinsured by its parent, Everest Re.

Mt. McKinley, a Delaware insurance company and a direct subsidiary of Holdings, was acquired by Holdings in September 2000 from The Prudential. In 1985, Mt. McKinley ceased writing new and renewal insurance and commenced a run-off operation to service claims arising from its previously written business. Effective September 19, 2000, Mt. McKinley and Bermuda Re entered into a loss portfolio transfer reinsurance agreement, whereby Mt. McKinley transferred, for arm’s-length consideration, all of its net insurance exposures and reserves to Bermuda Re.

Reinsurance Industry Overview.

Reinsurance is an arrangement in which an insurance company, the reinsurer, agrees to indemnify another insurance or reinsurance company, the ceding company, against all or a portion of the insurance risks underwritten by the ceding company under one or more insurance contracts. Reinsurance can provide a ceding company with several benefits, including a reduction in its net liability on individual risks or classes of risks, catastrophe protection from large and/or multiple losses and/or a reduction in operating leverage as measured by the ratio of net premiums and reserves to capital. Reinsurance also provides a ceding company with additional underwriting capacity by permitting it to accept larger risks and write more business than would be acceptable relative to the ceding company’s financial resources. Reinsurance does not

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discharge the ceding company from its liability to policyholders; rather, it reimburses the ceding company for covered losses.

There are two basic types of reinsurance arrangements: treaty and facultative. Treaty reinsurance obligates the ceding company to cede and the reinsurer to assume a specified portion of a type or category of risks insured by the ceding company. Treaty reinsurers do not separately evaluate each of the individual risks assumed under their treaties, instead, the reinsurer relies upon the pricing and underwriting decisions made by the ceding company. In facultative reinsurance, the ceding company cedes and the reinsurer assumes all or part of the risk under a single insurance contract. Facultative reinsurance is negotiated separately for each insurance contract that is reinsured. Facultative reinsurance, when purchased by ceding companies, usually is intended to cover individual risks not covered by their reinsurance treaties because of the dollar limits involved or because the risk is unusual.

Both treaty and facultative reinsurance can be written on either a pro rata basis or an excess of loss basis. Under pro rata reinsurance, the ceding company and the reinsurer share the premiums as well as the losses and expenses in an agreed proportion. Under excess of loss reinsurance, the reinsurer indemnifies the ceding company against all or a specified portion of losses and expenses in excess of a specified dollar amount, known as the ceding company's retention or reinsurer's attachment point, generally subject to a negotiated reinsurance contract limit.

In pro rata reinsurance, the reinsurer generally pays the ceding company a ceding commission. The ceding commission generally is based on the ceding company’s cost of acquiring the business being reinsured (commissions, premium taxes, assessments and miscellaneous administrative expense and may contain profit sharing provisions, whereby the ceding commission is adjusted based on loss experience). Premiums paid by the ceding company to a reinsurer for excess of loss reinsurance are not directly proportional to the premiums that the ceding company receives because the reinsurer does not assume a proportionate risk. There is usually no ceding commission on excess of loss reinsurance.

Reinsurers may purchase reinsurance to cover their own risk exposure. Reinsurance of a reinsurer's business is called a retrocession. Reinsurance companies cede risks under retrocessional agreements to other reinsurers, known as retrocessionaires, for reasons similar to those that cause insurers to purchase reinsurance: to reduce net liability on individual or classes of risks, protect against catastrophic losses, stabilize financial ratios and obtain additional underwriting capacity.

Reinsurance can be written through intermediaries, generally professional reinsurance brokers, or directly with ceding companies. From a ceding company's perspective, the broker and the direct distribution channels have advantages and disadvantages. A ceding company's decision to select one distribution channel over the other will be influenced by its perception of such advantages and disadvantages relative to the reinsurance coverage being placed.

Business Strategy.

The Company’s business strategy is to sustain its leadership position within targeted reinsurance and insurance markets, provide effective management throughout the property and casualty underwriting cycle and thereby achieve an attractive return for its shareholders. The Company’s underwriting strategies seek to capitalize on its i) financial strength and capacity, ii) global franchise, iii) stable and experienced management team, iv) diversified product and distribution offerings, v) underwriting expertise and disciplined approach, vi) efficient and low-cost operating structure and vii) effective enterprise risk management practices.

The Company offers treaty and facultative reinsurance and admitted and non-admitted insurance. The Company’s products include the full range of property and casualty reinsurance and insurance coverages, including marine, aviation, surety, errors and omissions liability (“E&O”), directors’ and officers’ liability (“D&O”), medical malpractice, other specialty lines, accident and health (“A&H”) and workers’ compensation.

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The Company’s underwriting strategies emphasizes underwriting profitability over premium volume. Key elements of this strategy include careful risk selection, appropriate pricing through strict underwriting discipline and adjustment of the Company’s business mix in response to changing market conditions. The Company focuses on reinsuring companies that effectively manage the underwriting cycle through proper analysis and pricing of underlying risks and whose underwriting guidelines and performance are compatible with its objectives.

The Company’s underwriting strategies emphasizes flexibility and responsiveness to changing market conditions, such as increased demand or favorable pricing trends. The Company believes that its existing strengths, including its broad underwriting expertise, global presence, strong financial ratings and substantial capital, facilitate adjustments to its mix of business geographically, by line of business and by type of coverage, allowing it to participate in those market opportunities that provide the greatest potential for underwriting profitability. The Company’s insurance operations complement these strategies by accessing business that is not available on a reinsurance basis. The Company carefully monitors its mix of business across all operations to avoid unacceptable geographic or other risk concentrations.

Marketing.

The Company writes business on a worldwide basis for many different customers and lines of business, thereby obtaining a broad spread of risk. The Company is not substantially dependent on any single customer, small group of customers, line of business or geographic area. For the 2010 calendar year, no single customer (ceding company or insured) generated more than 5.3% of the Company’s gross written premiums. The Company believes that a reduction of business from any one customer would not have a material adverse effect on its future financial condition or results of operations.

Approximately 68%, 11% and 21% of the Company’s 2010 gross written premiums were written in the broker reinsurance, direct reinsurance and insurance markets, respectively.

The broker reinsurance market consists of several substantial national and international brokers and a number of smaller specialized brokers. Brokers do not have the authority to bind the Company with respect to reinsurance agreements, nor does the Company commit in advance to accept any portion of a broker’s submitted business. Reinsurance business from any ceding company, whether new or renewal, is subject to acceptance by the Company. Brokerage fees are generally paid by reinsurers. The Company’s ten largest brokers accounted for an aggregate of approximately 64% of gross written premiums in 2010. The largest broker, Aon Benfield Re, accounts for approximately 22% of gross written premiums. The second largest broker, Marsh and McLennan, accounted for approximately 20% of gross written premiums. The Company believes that a reduction of business assumed from any one broker would not have a material adverse effect on the Company.

The direct reinsurance market remains an important distribution channel for reinsurance business written by the Company. Direct placement of reinsurance enables the Company to access clients who prefer to place their reinsurance directly with reinsurers based upon the reinsurer’s in-depth understanding of the ceding company’s needs.

The Company’s insurance business is written principally through general agents, brokers and surplus lines brokers. In 2010, C.V. Starr & Company accounted for approximately 6% of the Company’s gross written premium. No other single general agent generated more than 3% of the Company’s gross written premiums.

The Company continually evaluates each business relationship, including the underwriting expertise and experience brought to bear through the involved distribution channel, performs analyses to evaluate financial security, monitors performance and adjusts underwriting decisions accordingly.

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Segment Results.

Through our subsidiaries, we operate in five segments: U.S. Reinsurance, U.S. Insurance, Specialty Underwriting, International and Bermuda. The U.S. Reinsurance operation writes property and casualty reinsurance, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies within the U.S. The U.S. Insurance operation writes property and casualty insurance primarily through general agents, brokers and surplus lines brokers within the U.S. The Specialty Underwriting operation writes A&H, marine, aviation and surety business within the U.S. and worldwide through brokers and directly with ceding companies. The International operation writes non-U.S. property and casualty reinsurance through Everest Re’s branches in Canada and Singapore and offices in Miami and New Jersey. The Bermuda operation provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers through brokers and directly with ceding companies from its Bermuda office and reinsurance to the United Kingdom and European markets through its UK branch and the Company’s Ireland subsidiary.

These segments are managed independently, but conform with corporate guidelines with respect to pricing, risk management, control of aggregate catastrophe exposures, capital, investments and support operations. Management generally monitors and evaluates the financial performance of these operating segments based upon their underwriting results.

Underwriting results include earned premium less losses and loss adjustment expenses (“LAE”) incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned. We utilize inter-affiliate reinsurance, although such reinsurance does not materially impact segment results, as business is generally reported within the segment in which the business was first produced. For selected financial information regarding these segments, see ITEM 8, “Financial Statements and Supplementary Data” - Note 19 of Notes to Consolidated Financial Statements and ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation - Segment Results”.

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Underwriting Operations.

The following five year table presents the distribution of the Company’s gross written premiums by its segments: U.S. Reinsurance, U.S. Insurance, Specialty Underwriting, International and Bermuda. The premiums for each segment are further split between property and casualty business and, for reinsurance business, between pro rata or excess of loss business:


	Gross Written Premiums by Segment
	Years Ended December 31,
(Dollars in millions)	2010				2009				2008				2007				2006
U.S. Reinsurance
Property
Pro Rata (1)	$	516.7	12.3	%	$	478.6	11.6	%	$	332.9	9.1	%	$	455.9	11.2	%	$	379.7	9.5	%
Excess		268.5	6.4	%		287.2	7.0	%		320.9	8.7	%		332.2	8.1	%		303.2	7.6	%
Casualty
Pro Rata (1)		179.3	4.3	%		175.8	4.3	%		67.4	1.8	%		216.5	5.3	%		446.7	11.2	%
Excess		179.2	4.3	%		230.7	5.6	%		236.7	6.4	%		189.0	4.6	%		207.1	5.2	%
Total (2)		1,143.7	27.2	%		1,172.3	28.4	%		957.9	26.0	%		1,193.5	29.3	%		1,336.7	33.4	%

U.S. Insurance
Property
Pro Rata (1)		115.3	2.7	%		112.6	2.7	%		29.8	0.8	%		85.6	2.1	%		40.6	1.0	%
Excess		-	0.0	%		-	0.0	%		-	0.0	%		-	0.0	%		-	0.0	%
Casualty
Pro Rata (1)		735.4	17.5	%		729.9	17.7	%		742.0	20.2	%		800.0	19.6	%		825.7	20.6	%
Excess		-	0.0	%		-	0.0	%		-	0.0	%		-	0.0	%		-	0.0	%
Total (2)		850.7	20.3	%		842.6	20.4	%		771.8	21.0	%		885.6	21.7	%		866.3	21.7	%

Specialty Underwriting
Property
Pro Rata (1)		196.3	4.7	%		169.6	4.1	%		218.9	6.0	%		190.2	4.7	%		179.3	4.5	%
Excess		47.4	1.1	%		43.3	1.0	%		29.7	0.8	%		51.1	1.3	%		37.5	0.9	%
Casualty
Pro Rata (1)		20.6	0.5	%		18.5	0.4	%		8.1	0.2	%		23.6	0.6	%		28.5	0.7	%
Excess		2.1	0.1	%		3.3	0.1	%		3.7	0.1	%		5.1	0.1	%		5.9	0.1	%
Total (2)		266.4	6.3	%		234.8	5.7	%		260.4	7.1	%		270.1	6.6	%		251.2	6.3	%

Total U.S.
Property
Pro Rata (1)		828.3	19.7	%		760.9	18.4	%		581.6	15.8	%		731.7	17.9	%		599.6	15.0	%
Excess		315.9	7.5	%		330.5	8.0	%		350.6	9.5	%		383.3	9.4	%		340.7	8.5	%
Casualty
Pro Rata (1)		935.3	22.3	%		924.3	22.4	%		817.5	22.2	%		1,040.1	25.5	%		1,300.9	32.5	%
Excess		181.3	4.3	%		234.0	5.7	%		240.3	6.5	%		194.1	4.8	%		213.0	5.3	%
Total (2)		2,260.8	53.8	%		2,249.6	54.5	%		1,990.1	54.1	%		2,349.2	57.6	%		2,454.2	61.3	%

International
Property
Pro Rata (1)		701.6	16.7	%		670.2	16.2	%		535.3	14.6	%		451.6	11.1	%		415.4	10.4	%
Excess		291.6	6.9	%		241.9	5.9	%		228.3	6.2	%		212.9	5.2	%		195.6	4.9	%
Casualty
Pro Rata (1)		120.3	2.9	%		94.0	2.3	%		71.6	1.9	%		68.3	1.7	%		53.9	1.3	%
Excess		93.4	2.2	%		78.4	1.9	%		69.4	1.9	%		73.1	1.8	%		66.8	1.7	%
Total (2)		1,207.0	28.7	%		1,084.5	26.3	%		904.7	24.6	%		805.9	19.8	%		731.7	18.3	%

Bermuda
Property
Pro Rata (1)		226.1	5.4	%		291.1	7.1	%		305.7	8.3	%		282.2	6.9	%		312.3	7.8	%
Excess		173.5	4.1	%		180.4	4.4	%		164.2	4.5	%		201.6	4.9	%		174.3	4.4	%
Casualty
Pro Rata (1)		205.0	4.9	%		185.6	4.5	%		178.8	4.9	%		326.1	8.0	%		230.7	5.8	%
Excess		128.4	3.1	%		137.8	3.3	%		134.7	3.7	%		112.5	2.8	%		97.7	2.4	%
Total (2)		733.0	17.5	%		794.8	19.3	%		783.4	21.4	%		922.5	22.7	%		815.0	20.4	%

Total Company
Property
Pro Rata (1)		1,756.0	41.8	%		1,722.2	41.7	%		1,422.6	38.7	%		1,465.6	35.9	%		1,327.3	33.2	%
Excess		781.0	18.6	%		752.7	18.2	%		743.2	20.2	%		797.8	19.6	%		710.6	17.8	%
Casualty
Pro Rata (1)		1,260.6	30.0	%		1,203.9	29.2	%		1,067.9	29.0	%		1,434.5	35.2	%		1,585.5	39.6	%
Excess		403.1	9.6	%		450.2	10.9	%		444.4	12.1	%		379.7	9.3	%		377.5	9.4	%
Total (2)	$	4,200.7	100.0	%	$	4,129.0	100.0	%	$	3,678.1	100.0	%	$	4,077.6	100.0	%	$	4,000.9	100.0	%
__________________
(1) For purposes of the presentation above, pro rata includes all insurance and reinsurance attaching to the first dollar of loss incurred by the ceding company.
(2) Certain totals and subtotals may not reconcile due to rounding.

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U.S. Reinsurance Segment. The Company’s U.S. Reinsurance segment writes property and casualty reinsurance, both treaty and facultative, through reinsurance brokers as well as directly with ceding companies within the U.S. The Company targets certain brokers and, through the broker market, specialty companies and small to medium sized standard lines companies. The Company also targets companies that place their business predominantly in the direct market, including small to medium sized regional ceding companies, and seeks to develop long-term relationships with those companies. In addition, the U.S. Reinsurance segment writes portions of reinsurance programs for large, national insurance companies.

In 2010, $742.7 million of gross written premiums were attributable to U.S. treaty property business, of which 69.6% was written on a pro rata basis and 30.4% was written on an excess of loss basis. Included in gross written premiums for U.S. treaty property business was $43.8 million related to the crop hail line of business. The Company’s property underwriters utilize sophisticated underwriting methods to analyze and price property business. The Company manages its exposures to catastrophe and other large losses by limiting exposures on individual contracts and limiting aggregate exposures to catastrophes in any particular zone and across contiguous zones.

U.S. treaty casualty business accounted for $331.8 million of gross written premiums in 2010, of which 54.0% was written on a pro rata basis and 46.0% was written on an excess of loss basis. The treaty casualty business consists of professional liability, D&O liability, workers’ compensation, excess and surplus lines and other liability coverages. As a result of the complex technical nature of most of these risks, the Company’s casualty underwriters tend to specialize by line of business and work closely with the Company’s pricing actuaries.

The Company’s facultative unit conducts business both through brokers and directly with ceding companies, and consists of four underwriting units representing property, casualty, specialty and national brokerage lines of business. Business is written from a facultative headquarters office in New York and satellite offices in Boston, Chicago and Oakland. In 2010, $29.6 million, $26.7 million and $12.9 million of gross written premiums were attributable to the property, casualty and national brokerage lines of business, respectively.

In 2010, 96.0% and 4.0% of the U.S. Reinsurance segment’s gross written premiums were written in the broker reinsurance and direct reinsurance markets, respectively.

U.S. Insurance Segment. In 2010, the Company’s U.S. Insurance segment wrote $850.7 million of gross written premiums, of which 86.5% was casualty and 13.5% was property. Of the total business written, Everest National wrote $659.2 million and Everest Re wrote $58.0 million, principally targeting commercial property and casualty business written through general agents with program administrators. Workers’ compensation business accounted for $250.9 million, or 29.5%, of the total business written, including $209.4 million, or 83.5%, of workers’ compensation business written in California. Everest Indemnity wrote $111.7 million, principally excess and surplus lines insurance business written through surplus lines brokers. Everest Security wrote $21.8 million, principally non-standard auto insurance written through retail agents. With respect to insurance written through general agents and surplus lines brokers, the Company supplements the initial underwriting process with periodic claims, underwriting and operational reviews and ongoing monitoring.

Specialty Underwriting Segment. The Company’s Specialty Underwriting segment writes A&H, marine, aviation and surety reinsurance. The A&H unit primarily focuses on health reinsurance of traditional indemnity plans, self-insured health plans, accident coverages and specialty medical plans. The marine and aviation unit focuses on ceding companies with a particular expertise in marine and aviation business. The marine and aviation business is written primarily through brokers and contains a significant international component written primarily through the London market. Surety business consists mainly of reinsurance of contract surety bonds.

In 2010, gross written premiums of the A&H unit totaled $123.1 million, primarily written through brokers.

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The marine and aviation unit’s 2010 gross written premiums totaled $93.0 million, substantially all of which was written on a treaty basis and sourced through reinsurance brokers. Of the marine and aviation gross written premiums in 2010, marine treaties represented 75.6% and consisted mainly of hull and cargo coverage. In 2010, the marine unit’s premiums were written 39.0% on a pro rata basis and 61.0% on an excess of loss basis. Of the marine and aviation gross written premiums in 2010, aviation premiums accounted for 24.4% and included reinsurance of airline and general aviation risks. In 2010, the aviation unit's premiums were written 90.7% on a pro rata basis and 9.3% on an excess of loss basis.

In 2010, gross written premiums of the surety unit totaled $50.3 million, 99.7% of which was written on a pro rata basis. Most of the portfolio is reinsurance of contract surety bonds written directly with ceding companies, with the remainder being trade credit reinsurance, mostly in international markets.

International Segment. The Company’s International segment focuses on opportunities in the international reinsurance markets. The Company targets several international markets, including: Canada, with a branch in Toronto; Asia, with a branch in Singapore; and Latin America, Brazil, Africa and the Middle East, which business is serviced from Everest Re’s Miami and New Jersey offices. The Company also writes from New Jersey “home-foreign” business, which provides reinsurance on the international portfolios of U.S. insurers. Of the Company’s 2010 international gross written premiums, 82.3% represented property business, while 17.7% represented casualty business. As with its U.S. operations, the Company’s International segment focuses on financially sound companies that have strong management and underwriting discipline and expertise. Of the Company’s international business, 70.8% was written through brokers, with 29.2% written directly with ceding companies.

Gross written premiums of the Company’s Canadian branch totaled $186.9 million in 2010 and consisted of 22.6% of pro rata property business, 27.4% of excess property business, 18.0% of pro rata casualty business and 32.0% of excess casualty business. Of the Canadian gross written premiums, 87.1% consisted of treaty reinsurance, while 12.9% was facultative reinsurance.

The Company’s Singapore branch covers the Asian markets and accounted for $277.7 million of gross written premiums in 2010 and consisted of 65.6% of pro rata property business, 29.1% of excess property business, 4.2% of pro rata casualty business and 1.1% of excess casualty business.

International business written out of Everest Re’s Miami and New Jersey offices accounted for $742.4 million of gross written premiums in 2010 and consisted of 64.2% of pro rata treaty property business, 10.1% of pro rata treaty casualty business, 20.2% of excess treaty property business, 3.9% of excess treaty casualty business and 1.6% of facultative property and casualty business. Of this international business, 65.7% was sourced from Latin America, 19.7% was sourced from the Middle East, 9.6% was sourced from Africa and 5.0% was home-foreign business.

Bermuda Segment. The Company’s Bermuda segment writes property and casualty reinsurance through Bermuda Re and property and casualty reinsurance through its UK branch as well as through Ireland. In 2010, Bermuda Re had gross written premiums of $277.6 million, virtually all of which was treaty reinsurance.

In 2010, the UK branch of Bermuda Re wrote $384.5 million of gross treaty reinsurance premium consisting of 33.6% of pro rata property business, 26.1% of excess property business, 14.8% of pro rata casualty business and 25.5% of excess casualty business.

In 2010, Ireland wrote $70.9 million of gross treaty reinsurance premium consisting of 51.9% of pro rata property business, 34.2% of excess property business, 7.0% of pro rata casualty business and 6.9% of excess casualty business.

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Geographic Areas. The Company conducts its business in Bermuda, the U.S. and a number of foreign countries. For select financial information about geographic areas, see ITEM 8, “Financial Statements and Supplementary Data” - Note 19 of Notes to the Consolidated Financial Statements. Risks attendant to the foreign operations of the Company parallel those attendant to the U.S. operations of the Company, with the primary exception of foreign exchange risks. For more information about the risks, see ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Safe Harbor Disclosure”.

Underwriting.

One of the Company’s strategies is to "lead" as many of the reinsurance treaties it underwrites as possible. The Company leads on approximately two-thirds of its treaty reinsurance business as measured by premium. The lead reinsurer on a treaty generally accepts one of the largest percentage shares of the treaty and is in the strongest position to negotiate price, terms and conditions. Management believes this strategy enables it to obtain more favorable terms and conditions on the treaties on which it participates. When the Company does not lead the treaty, it may still suggest changes to any aspect of the treaty. The Company may decline to participate on a treaty based upon its assessment of all relevant factors.

The Company’s treaty underwriting process involves a team approach among the Company’s underwriters, actuaries and claim staff. Treaties are reviewed for compliance with the Company’s general underwriting standards and most larger treaties are subjected to detailed actuarial analysis. The actuarial models used in such analyses are tailored in each case to the subject exposures and loss experience. The Company does not separately evaluate each of the individual risks assumed under its treaties. The Company does, however, evaluate the underwriting guidelines of its ceding companies to determine their adequacy prior to entering into a treaty. The Company may also conduct underwriting, operational and claim audits at the offices of ceding companies to monitor adherence to underwriting guidelines. Underwriting audits focus on the quality of the underwriting staff, pricing and risk selection and rate monitoring over time. Claim audits may be performed in order to evaluate the client’s claims handling abilities and practices.

The Company’s facultative underwriters operate within guidelines specifying acceptable types of risks, limits and maximum risk exposures. Specified classes of large premium U.S. risks are referred to Everest Re’s New York facultative headquarters for specific review before premium quotations are given to clients. In addition, the Company’s guidelines require certain types of risks to be submitted for review because of their aggregate limits, complexity or volatility, regardless of premium amount on the underlying contract. Non-U.S. risks exhibiting similar characteristics are reviewed by senior managers within the involved operations.

The Company’s insurance operations principally write casualty coverages for homogeneous risks through select program managers. These programs are evaluated based upon actuarial analysis and the program manager’s capabilities. The Company’s rates, forms and underwriting guidelines are tailored to specific risk types. The Company’s underwriting, actuarial, claim and financial functions work closely with its program managers to establish appropriate underwriting and processing guidelines as well as appropriate performance monitoring mechanisms.

Risk Management of Underwriting and Retrocession Arrangements

Underwriting Risk and Accumulation Controls. Each segment and business unit manages its underwriting risk in accordance with established guidelines. These guidelines place dollar limits on the amount of business that can be written based on a variety of factors, including ceding company profile, line of business, geographic location and risk hazards. In each case, the guidelines permit limited exceptions, which must be authorized by the Company’s senior management. Management regularly reviews and revises these guidelines in response to changes in business unit market conditions, risk versus reward analyses and the Company’s enterprise and underwriting risk management processes.

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The operating results and financial condition of the Company can be adversely affected by catastrophe and other large losses. The Company manages its exposure to catastrophes and other large losses by:

·	selective underwriting practices;

·	diversifying its risk portfolio by geographic area and by types and classes of business;

·	limiting its aggregate catastrophe loss exposure in any particular geographic zone and contiguous zones;

·	purchasing reinsurance and/or retrocessional protection to the extent that such coverage can be secured cost-effectively. See “Reinsurance and Retrocession Arrangements”.

Like other insurance and reinsurance companies, the Company is exposed to multiple insured losses arising out of a single occurrence, whether a natural event, such as a hurricane or an earthquake, or other catastrophe, such as an explosion at a major factory. A large catastrophic event can be expected to generate insured losses to multiple reinsurance treaties, facultative certificates and across lines of business.

The Company focuses on potential losses that could result from any single event or series of events as part of its evaluation and monitoring of its aggregate exposures to catastrophic events. Accordingly, the Company employs various techniques to estimate the amount of loss it could sustain from any single catastrophic event or series of events in various geographic areas. These techniques range from deterministic approaches, such as tracking aggregate limits exposed in catastrophe-prone zones and applying reasonable damage factors, to modeled approaches that attempt to scientifically measure catastrophe loss exposure using sophisticated Monte Carlo simulation techniques that forecast frequency and severity of expected losses on a probabilistic basis.

No single computer model or group of models is currently capable of projecting the amount and probability of loss in all global geographic regions in which the Company conducts business. In addition, the form, quality and granularity of underwriting exposure data furnished by ceding companies is not uniformly compatible with the data requirements for the Company’s licensed models, which adds to the inherent imprecision in the potential loss projections. Further, the results from multiple models and analytical methods must be combined and interpolated to estimate potential losses by and across business units. Also, while most models have been updated to incorporate claims information from recent catastrophic events, catastrophe model projections are still inherently imprecise. In addition, uncertainties with respect to future climatic patterns and cycles add to the already significant uncertainty of loss projections from models using historic long term frequency and severity data.

Nevertheless, when combined with traditional risk management techniques and sound underwriting judgment, catastrophe models are a useful tool for underwriters to price catastrophe exposed risks and for providing management with quantitative analyses with which to monitor and manage catastrophic risk exposures by zone and across zones for individual and multiple events.

Projected catastrophe losses are generally summarized in terms of the probable maximum loss (“PML”). The Company defines PML as its anticipated loss, taking into account contract terms and limits, caused by a single catastrophe affecting a broad contiguous geographic area, such as that caused by a hurricane or earthquake. The PML will vary depending upon the modeled simulated losses and the make-up of the in force book of business. The projected severity levels are described in terms of “return periods”, such as “100-year events” and “250-year events”. For example, a 100-year PML is the estimated loss to the current in-force portfolio from a single event which has a 1% probability of being exceeded in a twelve month period. In other words, it corresponds to a 99% probability that the loss from a single event will fall below the indicated PML. It is important to note that PMLs are estimates. Modeled events are hypothetical events produced by a stochastic model. As a result, there can be no assurance that any actual event will align with the modeled event or that actual losses from events similar to the modeled events will not vary materially from the modeled event PML.

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From an enterprise risk management perspective, management sets limits on the levels of catastrophe loss exposure the Company may underwrite. The limits are revised periodically based on a variety of factors, including but not limited to the Company’s financial resources and expected earnings and risk/reward analyses of the business being underwritten.

Management estimates that the projected economic loss from its largest 100-year event in a given zone represents approximately 10% of its projected 2011 shareholders’ equity. Economic loss is the gross PML reduced by estimated reinstatement premiums to renew coverage and estimated income taxes. The impact of income taxes on the PML depends on the distribution of the losses by corporate entity, which is also affected by inter-affiliate reinsurance. Management also monitors and controls its largest PMLs at multiple points along the loss distribution curve, such as loss amounts at the 20, 50, 100, 250, 500 and 1,000 year return periods. This process enables management to identify and control exposure accumulations and to integrate such exposures into enterprise risk, underwriting and capital management decisions.

The Company’s catastrophe loss projections, segmented by risk zones, are updated quarterly and reviewed as part of a formal risk management review process. The table below reflects the Company’s gross PMLs at various return times for its top three zones/perils (as ranked by the largest 1 in 100 year events) based on loss projection data as of January 1, 2011:

Return Periods (in years)	1 in 20		1 in 50		1 in 100		1 in 250		1 in 500		1 in 1,000
Exceeding Probability		5.0%		2.0%		1.0%		0.4%		0.2%		0.1%

(Dollars in millions)
Zone/Area, Peril
Southeast U.S., Wind	$	298	$	600	$	941	$	1,172	$	1,333	$	1,446
California, Earthquake		84		255		678		838		1,009		1,146
Japan, Wind		136		385		560		625		662		687

The projected economic losses for the top three zones/perils scheduled above are as follows:

Return Periods (in years)	1 in 100		1 in 250		1 in 500		1 in 1,000
Exceeding Probability		1.0%		0.4%		0.2%		0.1%

(Dollars in millions)
Zone/Area, Peril
Southeast U.S., Wind	$	640	$	799	$	918	$	1,014
California, Earthquake		536		623		740		823
Japan, Wind		399		442		493		496

The Company considers purchasing retrocessional protection by evaluating the underlying exposures in comparison to the availability of cost-effective protection. For the period from July 1, 2010 to July 1, 2011, the Company’s International Underwriting Operation has catastrophe loss reinsurance protection in place of 75% of $100.0 million excess $250.0 million, excluding the territories of the U.S., Japan, Europe and Caribbean wind. The Company continues to evaluate the availability and cost of various retrocessional products and loss mitigation approaches in the marketplace.

The Company believes that its methods of monitoring, analyzing and managing catastrophe exposures provide a credible risk management framework, which are integrated with its enterprise risk management, underwriting and capital management plans. However, there is much uncertainty and imprecision inherent in the catastrophe models and the catastrophe loss estimation process generally. As a result, there can be no assurance that the Company will not experience losses from individual events that exceed the PML or other return period projections, perhaps by a material amount. Nor can there be assurance that the Company will not experience events impacting multiple zones, or multiple severe events that could, in the aggregate, exceed the Company’s PML expectations by a significant amount.

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Terrorism Risk. The Company has limited exposure to losses from terrorism risk. While the Company writes some reinsurance contracts covering events of terrorism, the Company’s risk management philosophy is to limit the amount of coverage provided and specifically not provide terrorism coverage for properties or in areas that may be considered a target for terrorists. Although providing terrorism coverage on reinsurance contracts is negotiable, most insurance policies mandate inclusion of terrorism coverage. As a result, the Company is exposed to losses from terrorism on its U.S. insurance book of business, particularly its workers’ compensation and property policies. However, the U.S. insurance book generally does not insure large corporations or corporate locations that represent large concentrations of risk.

As a result of its limited exposure, the Company does not believe the U.S. Terrorism Risk Insurance Act of 2002 that was signed into law November 2002 and amended in December 2005 and December 2007 has had or will have a significant impact on its operations.

Reinsurance and Retrocession Arrangements. The Company does not typically purchase significant retrocessional coverage for specific reinsurance business written, but it will do so when management deems it to be prudent and/or cost-effective to reinsure a portion of the risks being assumed. The Company participates in “common account” retrocessional arrangements for certain reinsurance treaties whereby a ceding company purchases reinsurance for the benefit of itself and its reinsurers under one or more of its reinsurance treaties. Common account retrocessional arrangements reduce the effect of individual or aggregate losses to all participating companies, including the ceding company, with respect to the involved treaties.

The Company typically considers the purchase of reinsurance to cover insurance program exposures written by the U.S. Insurance segment. The type of reinsurance coverage considered is dependent upon individual risk exposures, individual program exposures, aggregate exposures by line of business, overall segment and corporate wide exposures and the cost effectiveness of available reinsurance. The majority of reinsurance placed is with captives of its general agents. This arrangement is a mechanism designed to enable general agents to share in the operating results of the placed business. Facultative reinsurance will typically be considered for large individual exposures and quota share reinsurance will generally be considered for entire programs of business.

The Company also considers purchasing corporate level retrocessional protection covering the potential accumulation of exposures. Such consideration includes balancing the underlying exposures against the availability of cost-effective retrocessional protection.

All of the Company’s reinsurance and retrocessional agreements transfer significant reinsurance risk and therefore, are accounted for as reinsurance in accordance with the Financial Accounting Standards Board (“FASB”) guidance.

At December 31, 2010, the Company had $684.7 million in reinsurance receivables with respect to both paid and unpaid losses ceded. Of this amount, $171.7 million, or 25.1%, was receivable from C.V. Starr (Bermuda) (“C.V. Starr”); $105.0 million, or 15.3% was receivable from Transatlantic Reinsurance Company (“Transatlantic”); $100.0 million, or 14.6%, was receivable from Continental Insurance Company (“Continental”); $48.9 million, or 7.1%, was receivable from Munich Reinsurance Company (“Munich Re”) and $45.0 million, or 6.6%, was receivable from Berkley Insurance Company (“Berkley”). The receivable from C.V. Starr is fully collateralized by a trust agreement. The receivable from Continental Insurance Company is collateralized by a funds held arrangement under which we have retained the premiums earned by the retrocessionaire to secure obligations of the retrocessionaire, recorded them as a liability, credited interest on the balances at a stated contractual rate and reduced the liability account as payments became due. As of December 31, 2010, such funds had reduced the Company’s net exposure to Continental to $5.6 million. No other retrocessionaire accounted for more than 5% of the Company’s receivables. Although management carefully selects its reinsurers, the Company is subject to credit risk with respect to its reinsurance because the ceding of risk to reinsurers does not relieve the Company of its liability to insureds or ceding companies. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition”.

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Claims.

Reinsurance claims are managed by the Company’s professional claims staff whose responsibilities include reviewing initial loss reports and coverage issues, monitoring claims handling activities of ceding companies, establishing and adjusting proper case reserves and approving payment of claims. In addition to claims assessment, processing and payment, the claims staff selectively conducts comprehensive claim audits of both specific claims and overall claim procedures at the offices of selected ceding companies. Insurance claims, except those relating to Mt. McKinley’s business, are generally handled by third party claims service providers who have limited authority and are subject to oversight by the Company’s professional claims staff.

The Company intensively manages its asbestos and environmental (“A&E”) exposures through dedicated, centrally managed claim staffs for Mt. McKinley and Everest Re. Both are staffed with experienced claim and legal professionals who specialize in the handling of such exposures. These units actively manage each individual insured and reinsured account, responding to claim developments with evaluations of the involved exposures and adjustment of reserves as appropriate. Specific or general claim developments that may have material implications for the Company are regularly communicated to senior management, actuarial, legal and financial areas. Senior management and claim management personnel meet at least quarterly to review the Company’s overall reserve positions and make changes, if appropriate. The Company continually reviews its internal processing, communications and analytics, seeking to enhance the management of its A&E exposures, in particular in regard to changes in asbestos claims and litigation.

Reserves for Unpaid Property and Casualty Losses and LAE.

Significant periods of time may elapse between the occurrence of an insured loss, the reporting of the loss to the insurer and the reinsurer and the payment of that loss by the insurer and subsequent payments to the insurer by the reinsurer. To recognize liabilities for unpaid losses and LAE, insurers and reinsurers establish reserves, which are balance sheet liabilities representing estimates of future amounts needed to pay reported and unreported claims and related expenses for losses that have already occurred. Actual losses and LAE paid may deviate, perhaps substantially, from such reserves. To the extent reserves prove to be insufficient to cover actual losses and LAE after taking into account available reinsurance coverage, the Company would have to recognize such reserve shortfalls and incur a charge to earnings, which could be material in the period such recognition takes place. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Loss and LAE Reserves”.

As part of the reserving process, insurers and reinsurers evaluate historical data and trends and make judgments as to the impact of various factors such as legislative and judicial developments that may affect future claim amounts, changes in social and political attitudes that may increase loss exposures and inflationary and general economic trends. While the reserving process is difficult and subjective for insurance companies, the inherent uncertainties of estimating such reserves are even greater for the reinsurer, due primarily to the longer time between the date of an occurrence and the reporting of any attendant claims to the reinsurer, the diversity of development patterns among different types of reinsurance treaties or facultative contracts, the necessary reliance on the ceding companies for information regarding reported claims and differing reserving practices among ceding companies. In addition, trends that have affected development of liabilities in the past may not necessarily occur or affect liability development in the same manner or to the same degree in the future. As a result, actual losses and LAE may deviate, perhaps substantially, from estimates of reserves reflected in the Company's consolidated financial statements.

Like many other property and casualty insurance and reinsurance companies, the Company has experienced adverse loss development for prior accident years, which has led to increases in losses and LAE reserves and corresponding charges to income (loss) in the periods in which the adjustments were made. There can be no assurance that adverse development from prior years will not continue in the future or that such adverse development will not have a material adverse effect on net income (loss).

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Changes in Historical Reserves.

The following table shows changes in historical loss reserves for the Company for 2000 and subsequent years. The table is presented on a GAAP basis except that the Company’s loss reserves for its Canadian branch operations are presented in Canadian dollars, the impact of which is not material. The top line of the table shows the estimated reserves for unpaid losses and LAE recorded at each year end date. The upper (paid) portion of the table presents the related cumulative amounts paid through each subsequent year end. The lower (liability re-estimated) portion shows the re-estimated amount of the original reserves as of the end of each succeeding year. The reserve estimates have been revised as more information became known about the actual claims for which the reserves were carried. The cumulative (deficiency)/redundancy line represents the cumulative change in estimates since the initial reserve was established. It is equal to the initial reserve less the latest estimate of the ultimate liability.

Since the Company has international operations, some of its loss reserves are established in foreign currencies and converted to U.S. dollars for financial reporting. Changes in conversion rates from period to period impact the U.S. dollar value of carried reserves and correspondingly, the cumulative deficiency line of the table. However, unlike other reserve development that affects net income (loss), the impact of currency translation is a component of other comprehensive income (loss). To differentiate these two reserve development components, the translation impacts for each calendar year are reflected in the table of Effects on Pre-tax Income Resulting from Reserve Re-estimates.

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Each amount other than the original reserves in the top half of the table below includes the effects of all changes in amounts for prior periods. For example, if a loss settled in 2003 for $100,000, was first reserved in 2000 at $60,000 and remained unchanged until settlement, the $40,000 deficiency (actual loss minus original estimate) would affect the cumulative deficiency for each of the years in 2000 through 2002. Conditions and trends that have affected development of the ultimate liability in the past are not indicative of future developments. Accordingly, it is not appropriate to extrapolate future redundancies or deficiencies based on this table.

Ten Year GAAP Loss Development Table Presented Net of Reinsurance with Supplemental Gross Data (1) (2)

(Dollars in millions)	2000			2001			2002			2003			2004			2005			2006			2007		2008			2009		2010
Net Reserves for unpaid
loss and LAE	$	3,364.9		$	3,472.5		$	3,895.8		$	5,158.4		$	6,766.9		$	8,175.4		$	8,078.9		$	8,324.7	$	8,214.7		$	8,315.9	$	8,650.7
Paid (cumulative) as of:
One year later		718.1			892.7			902.6			1,141.7			1,553.1			2,116.9			1,915.4			1,816.4		1,997.2			1,988.7
Two years later		1,264.2			1,517.9			1,641.7			1,932.6			2,412.3			3,447.8			3,192.8			3,182.2		3,405.8
Three years later		1,637.5			2,033.5			2,176.8			2,404.6			3,181.4			4,485.2			4,246.3			4,191.7
Four years later		2,076.0			2,413.1			2,485.2			2,928.5			3,854.8			5,306.5			5,036.3
Five years later		2,286.4			2,612.3			2,836.6			3,451.1			4,459.5			5,950.6
Six years later		2,482.5			2,867.9			3,241.5			3,948.3			4,952.9
Seven years later		2,705.9			3,172.2			3,670.5			4,340.8
Eight years later		2,998.5			3,537.5			3,986.9
Nine years later		3,211.5			3,771.2
Ten years later		3,482.3
Net Liability re-estimated as of:
One year later		3,364.9			3,612.6			4,152.7			5,470.4			6,633.7			8,419.8			8,356.7			8,112.9		8,461.9			8,229.4
Two years later		3,484.6			3,901.8			4,635.0			5,407.1			6,740.5			8,609.2			8,186.3			8,307.6		8,382.7
Three years later		3,688.6			4,400.0			4,705.3			5,654.5			7,059.9			8,489.7			8,398.7			8,267.1
Four years later		4,210.3			4,516.7			5,062.5			6,073.1			6,996.7			8,683.8			8,401.8
Five years later		4,216.5			4,814.0			5,507.1			6,093.4			7,162.2			8,729.6
Six years later		4,379.3			5,240.2			5,544.9			6,227.0			7,246.3
Seven years later		4,773.4			5,257.5			5,623.8			6,329.0
Eight years later		4,768.1			5,295.4			5,698.9
Nine years later		4,761.4			5,339.0
Ten years later		4,772.0

Cumulative (deficiency)/redundancy	$	(1,407.1	)	$	(1,866.5	)	$	(1,803.2	)	$	(1,170.6	)	$	(479.3	)	$	(554.2	)	$	(322.9	)	$	57.7	$	(168.1	)	$	86.5

Gross liability - end of year	$	3,853.7		$	4,356.0		$	4,985.8		$	6,424.7		$	7,886.6		$	9,175.1		$	8,888.0		$	9,032.2	$	8,905.9		$	8,957.4	$	9,340.1
Reinsurance receivable		488.8			883.5			1,090.0			1,266.3			1,119.6			999.7			809.1			707.4		691.2			641.5		689.4
Net liability-end of year	$	3,364.9		$	3,472.5		$	3,895.8		$	5,158.4		$	6,766.9		$	8,175.4		$	8,078.9		$	8,324.7	$	8,214.7		$	8,315.9	$	8,650.7
Gross re-estimated liability
at December 31, 2010	$	6,061.2		$	6,781.0		$	7,124.7		$	7,736.3		$	8,433.6		$	9,818.2		$	9,205.2		$	8,941.6	$	9,047.5		$	8,881.4
Re-estimated receivable
at December 31, 2010		1,289.2			1,442.0			1,425.7			1,407.2			1,187.4			1,088.5			803.5			674.5		664.8			652.0
Net re-estimated liability
at December 31, 2010	$	4,772.0		$	5,339.0		$	5,698.9		$	6,329.0		$	7,246.3		$	8,729.6		$	8,401.8		$	8,267.1	$	8,382.7		$	8,229.4
Gross cumulative
(deficiency)/redundancy	$	(2,207.5	)	$	(2,425.0	)	$	(2,138.9	)	$	(1,311.6	)	$	(547.1	)	$	(643.1	)	$	(317.3	)	$	90.6	$	(141.6	)	$	76.0

(1) The Canadian Branch reserves are reflected in Canadian dollars.
(2) Some amounts may not reconcile due to rounding.

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Every year in the above table, except 2007 and 2009, reflects a cumulative deficiency, also referred to as adverse development, with the largest indicated cumulative deficiency in 2001. Three classes of business were the principal contributors to those deficiencies: 1) the run-off of asbestos claims for both direct and reinsurance business has significantly contributed to the cumulative deficiencies for all years presented through 2006; 2) professional liability reinsurance, general casualty reinsurance and workers’ compensation insurance contributed to the deficiencies for years 2000 through 2003; and 3) property catastrophe adverse development contributed to the deficiency for 2005.

In 2007, the Company completed a detailed study of its asbestos experience and its cedants’ asbestos exposures and also considered industry trends. As a result of the study, the Company increased its gross reinsurance asbestos reserves by $250.0 million and increased its gross direct asbestos reserves by $75.0 million. These reserve increases, as well as adverse development on asbestos in prior years, have a significant impact on the cumulative deficiencies. Subsequent to the study, the Company’s loss activity has been in line with expectations per the reserves established at December 31, 2007. The Company’s A&E reserves represent management’s best estimate of the ultimate liability, however, there can be no assurance that ultimate loss payments will not exceed such reserves, perhaps by a significant amount. No additional gross reserve strengthening was made during 2008 through 2010.

In the professional liability reinsurance class, the early 2000s saw a proliferation of claims relating to bankruptcies and other corporate, financial and/or management improprieties. This resulted in an increase in the frequency and severity of claims under the professional liability policies reinsured by the Company. In the general casualty area, the Company has experienced claim frequency and severity greater than expected in the Company’s pricing and reserving assumptions, particularly for the 2000 accident year.

In the workers’ compensation insurance class, the majority of which was written in California, the Company has experienced adverse development primarily for accident years 2001 and 2002 due to higher than expected claim frequency and severity. As a result of significant growth in this book of business in a challenging business environment, the Company’s writings in this class were subject to more relative variability than in some of its established and/or stable lines of business. Although cumulative results through 2010 continue to be profitable for this book of business, there was some deterioration in claim frequency and severity related to accident years 2001 and 2002.

The adverse development on the 2008 outstanding reserves was primarily attributable to foreign exchange rate movements resulting in an increase in the U.S. dollar reserves. In addition, the Company experienced adverse development on liability exposures for sub-prime for accident years 2006-2008 and contractors’ liability exposures for accident years 2001-2005. The contractor liability exposures are currently in run-off. The Company also experienced adverse development on property lines but was offset by favorable development on other casualty lines.

The Company’s loss and LAE reserves represent management’s best estimate of the ultimate liability. While there can be no assurance that these reserves will not need to be increased in the future, management believes that the Company’s existing reserves and reserving methodologies reduce the likelihood that any such increases would have a material adverse effect on the Company’s financial condition, results of operations or cash flows. These statements regarding the Company’s loss reserves are forward looking statements within the meaning of the U.S. federal securities laws and are intended to be covered by the safe harbor provisions contained therein. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Safe Harbor Disclosure”.

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The following table is derived from the Ten Year GAAP Loss Development Table above and summarizes the effect of reserve re-estimates, net of reinsurance, on calendar year operations by accident year for the same ten year period ended December 31, 2010. Each column represents the amount of net reserve re-estimates made in the indicated calendar year and shows the accident years to which the re-estimates are applicable. The amounts in the total accident year column on the far right represent the cumulative reserve re-estimates for the indicated accident years.

Since the Company has operations in many countries, part of the Company’s loss and LAE reserves are in foreign currencies and translated to U.S. dollars for each reporting period. Fluctuations in the exchange rates for the currencies, period over period, affect the U.S. dollar amount of outstanding reserves. The translation adjustment line at the bottom of the table eliminates the impact of the exchange fluctuations from the reserve re-estimates.

Effects on Pre-tax Income Resulting from Reserves Re-estimates
																															Cumulative
																															Re-estimates
																															for Each
(Dollars in millions)	2001			2002			2003			2004			2005			2006			2007			2008			2009			2010			Accident Year
Accident Years
2000 and prior	$	-		$	(119.7	)	$	(204.1	)	$	(521.7	)	$	(6.1	)	$	(162.8	)	$	(394.1	)	$	5.3		$	6.6		$	(10.5	)	$	(1,407.1	)
2001					(20.4	)		(85.2	)		23.5			(110.6	)		(134.4	)		(32.1	)		(22.7	)		(44.5	)		(33.1	)		(459.4	)
2002								32.3			15.9			46.4			(60.0	)		(18.4	)		(20.5	)		(41.1	)		(31.5	)		(76.8	)
2003											170.3			133.7			109.7			26.0			17.5			(54.5	)		(27.1	)		375.7
2004														69.9			140.7			99.2			83.5			(32.1	)		18.1			379.2
2005																	(137.6	)		130.1			56.3			(28.6	)		38.2			58.4
2006																				(88.4	)		50.9			(18.3	)		42.8			(13.1	)
2007																							41.5			17.6			43.6			102.7
2008																										(52.5	)		38.6			(13.9	)
2009																													7.4			7.4
Total calendar year effect	$	-		$	(140.1	)	$	(256.9	)	$	(312.0	)	$	133.3		$	(244.4	)	$	(277.8	)	$	211.8		$	(247.2	)	$	86.5
Canada (1)		7.4			(1.4	)		(26.6	)		(16.3	)		(6.6	)		(0.5	)		(49.6	)		63.7			(39.4	)		(21.2	)
Translation adjustment		(17.7	)		38.4			86.7			78.9			(100.3	)		109.3			120.9			(310.4	)		157.8			(34.5	)
Re-estimate of net reserve after translation adjustment	$	(10.3	)	$	(103.1	)	$	(196.8	)	$	(249.4	)	$	26.4		$	(135.6	)	$	(206.5	)	$	(34.9	)	$	(128.8	)	$	30.9

(1)	This adjustment converts Canadian dollars to U.S. dollars.

(Some amounts may not reconcile due to rounding.)

The reserve development by accident year reflected in the above table was generally the result of the same factors described above that caused the deficiencies shown in the Ten Year GAAP Loss Development Table. The unfavorable development experienced in the 2000 and prior accident years relate principally to the previously discussed asbestos development. Other business areas contributing to adverse development were casualty reinsurance, including professional liability classes and workers’ compensation insurance, where, in retrospect, the Company’s initial estimates of losses were underestimated principally as the result of unanticipated variability in the underlying exposures. The favorable development for accident years 2003 through 2004 relates primarily to favorable experience with respect to property reinsurance business. In addition, casualty reinsurance has reflected favorable development for accident years 2003 to 2006.

The Company’s loss reserving methodologies continuously monitor the emergence of loss and loss development trends, seeking, on a timely basis, to both adjust reserves for the impact of trend shifts and to factor the impact of such shifts into the Company’s underwriting and pricing on a prospective basis.

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The following table presents a reconciliation of beginning and ending reserve balances for the periods indicated on a GAAP basis:

	Years Ended December 31,
(Dollars in millions)	2010			2009			2008

Gross reserves at beginning of period	$	8,937.9		$	8,840.7		$	9,040.6
Incurred related to:
Current year		2,976.6			2,245.3			2,404.1
Prior years		(30.9	)		128.8			34.9
Total incurred losses		2,945.7			2,374.1			2,439.0
Paid related to:
Current year		568.3			388.2			495.1
Prior years		1,988.7			1,997.2			1,816.4
Total paid losses		2,557.1			2,385.4			2,311.5
Foreign exchange/translation adjustment		(34.5	)		157.8			(310.4	)
Change in reinsurance receivables on unpaid losses and LAE		48.2			(49.2	)		(17.0	)
Gross reserves at end of period	$	9,340.2		$	8,937.9		$	8,840.7

(Some amounts may not reconcile due to rounding.)

Prior years’ reserves decreased by $30.9 million and increased by $128.8 million and $34.9 million for the years ended December 31, 2010, 2009 and 2008, respectively. The decrease for 2010 was attributable to a $140.8 million decrease in non-US reinsurance business (Bermuda and International), partially offset by the $109.9 million increase in the US insurance, specialty, and reinsurance business. The decrease in the non-US reinsurance business was due to reserve studies that indicated net favorable reserve development, as well as reductions in loss estimates for prior year catastrophes. The increase in the US reinsurance is primarily due to reserve strengthening in casualty lines for construction liability claims and the increase in the US insurance business is due to reserve strengthening on several terminated programs.

The increase for 2009 was attributable to a $59.0 million increase in the insurance business, primarily contractors’ liability exposure, and $69.8 million in the reinsurance business, in both domestic and international, as a result of increased reserves on sub-prime exposures and property, partially offset by favorable development in casualty.

The increase for 2008 was primarily due to $85.3 million of reserve development for a run-off auto loan credit insurance program and a $32.6 million adverse arbitration decision; partially offset by net favorable development on the remainder of the Company’s reserves.

Reserves for Asbestos and Environmental Losses and LAE.

At December 31, 2010, the Company’s gross reserves for A&E claims represented 5.9% of its total reserves. The Company’s A&E liabilities stem from Mt. McKinley’s direct insurance business and Everest Re’s assumed reinsurance business. There are significant uncertainties in estimating the amount of the Company’s potential losses from A&E claims and ultimate values cannot be estimated using traditional reserving techniques. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asbestos and Environmental Exposures” and Item 8, “Financial Statements and Supplementary Data” - Note 3 of Notes to Consolidated Financial Statements.

Mt. McKinley’s book of direct A&E exposed insurance policies is relatively small and homogenous. It arises from a limited period, from 1978 to 1984. The book was principally excess liability, thereby limiting exposure analysis to a limited number of policies and forms. As a result of this focused structure, the Company believes that it is able to comprehensively analyze its exposures, allowing it to identify, analyze and actively monitor those claims which have unusual exposure, including policies on which it may be exposed to pay expenses in addition to policy limits or on which non-products coverage may be contended.

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The Company endeavors to actively engage with every insured account posing significant potential asbestos exposure to Mt. McKinley. Such engagement can take the form of pursuing a final settlement, negotiation, litigation, or the monitoring of claim activity under Settlement in Place (“SIP”) agreements. SIP agreements generally condition an insurer’s payment upon the actual claim experience of the insured and may have annual payment caps or other measures to control the insurer’s payments. The Company’s Mt. McKinley operation is currently managing seven SIP agreements, three of which were executed prior to the acquisition of Mt. McKinley in 2000. The Company’s preference with respect to coverage settlements is to execute settlements that call for a fixed schedule of payments, because such settlements eliminate future uncertainty.

The Company has significantly enhanced its classification of insureds by exposure characteristics over time, as well as its analysis by insured for those it considers to be more exposed or active. Those insureds identified as relatively less exposed or active are subject to less rigorous, but still active management, with an emphasis on monitoring those characteristics, which may indicate an increasing exposure or levels of activity. The Company continually focuses on further enhancement of the detailed estimation processes used to evaluate potential exposure of policyholders, including those that may not have reported significant A&E losses.

Everest Re’s book of assumed A&E reinsurance is relatively concentrated within a limited number of contracts and for a limited period, from 1977 to 1984. Because the book of business is relatively concentrated and the Company has been managing the A&E exposures for many years, its claim staff is familiar with the ceding companies that have generated most of these liabilities in the past and which are therefore most likely to generate future liabilities. The Company’s claim staff has developed familiarity both with the nature of the business written by its ceding companies and the claims handling and reserving practices of those companies. This level of familiarity enhances the quality of the Company’s analysis of its exposure through those companies. As a result, the Company believes that it can identify those claims on which it has unusual exposure, such as non-products asbestos claims, for concentrated attention. However, in setting reserves for its reinsurance liabilities, the Company relies on claims data supplied, both formally and informally by its ceding companies and brokers. This furnished information is not always timely or accurate and can impact the accuracy and timeliness of the Company’s ultimate loss projections.

The following table summarizes the composition of the Company’s total reserves for A&E losses, gross and net of reinsurance, for the periods indicated:

	Years Ended December 31,
(Dollars in millions)	2010			2009			2008
Case reserves reported by ceding companies	$	135.4		$	141.5		$	161.0
Additional case reserves established by the Company (assumed reinsurance)(1)		116.1			150.2			139.7
Case reserves established by the Company (direct insurance)		38.9			63.0			133.8
Incurred but not reported reserves		264.4			283.9			352.3
Gross reserves		554.8			638.7			786.8
Reinsurance receivable		(21.9	)		(25.6	)		(37.7	)
Net reserves	$	532.9		$	613.1		$	749.1
______________

(1)	Additional reserves are case specific reserves established by the Company in excess of those reported by the ceding company, based on the Company’s assessment of the covered loss.

(Some amounts may not reconcile due to rounding.)

Additional losses, including those relating to latent injuries and other exposures, which are as yet unrecognized, the type or magnitude of which cannot be foreseen by either the Company or the industry, may emerge in the future. Such future emergence could have material adverse effects on the Company’s future financial condition, results of operations and cash flows.

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Future Policy Benefit Reserves.

The Company wrote a limited amount of life and annuity reinsurance in its Bermuda segment. Future policy benefit liabilities for annuities are reported at the accumulated fund balance of these contracts. Reserves for those liabilities include mortality provisions with respect to life and annuity claims, both reported and unreported. Actual experience in a particular period may be worse than assumed experience and, consequently, may adversely affect the Company’s operating results for that period. See ITEM 8, “Financial Statements and Supplementary Data” - Note 1F of Notes to Consolidated Financial Statements.

Activity in the reserve for future policy benefits is summarized for the periods indicated:

	At December 31,
(Dollars in millions)	2010			2009			2008
Balance at beginning of year	$	64.5		$	66.2		$	78.4
Liabilities assumed		0.2			0.3			0.2
Adjustments to reserves		2.9			8.8			6.5
Benefits paid in the current year		(4.7	)		(10.8	)		(19.0	)
Balance at end of year	$	63.0		$	64.5		$	66.2

(Some amounts may not reconcile due to rounding.)

Investments.

The board of directors of each of the Company’s operating subsidiaries is responsible for establishing investment policy and guidelines and, together with senior management, for overseeing their execution.

The Company’s principal investment objectives are to ensure funds are available to meet its insurance and reinsurance obligations and to maximize after-tax investment income while maintaining a high quality diversified investment portfolio. Considering these objectives, the Company views its investment portfolio as having two components: 1) the investments needed to satisfy outstanding liabilities (its core fixed maturities portfolio) and 2) investments funded by the Company’s shareholders’ equity.

For the portion needed to satisfy global outstanding liabilities, the Company generally invests in taxable and tax-preferenced fixed income securities with an average credit quality of Aa2, as rated by Moody’s Investors Service, Inc. (“Moody’s”). For the U.S. portion of this portfolio, the Company’s mix of taxable and tax-preferenced investments is adjusted periodically, consistent with the Company’s current and projected U.S. operating results, market conditions and the Company’s tax position. This global fixed maturity securities portfolio is externally managed by an independent, professional investment manager using portfolio guidelines approved by the Company.

Over the past few years and particularly in 2010, the Company expanded the allocation of its investments funded by shareholders’ equity to include: 1) a greater percentage of publicly traded equity securities, 2) emerging market fixed maturities through mutual fund structures, 3) high yield fixed maturities, 4) bank loan securities and 5) private equity limited partnership investments. The objective of this portfolio diversification is to enhance the risk-adjusted total return of the investment portfolio by allocating a prudent portion of the portfolio to higher return asset classes, which are also less subject to changes in value with movements in interest rates. The Company limits its allocation to these asset classes because of 1) the potential for volatility in their values and 2) the impact of these investments on regulatory and rating agency capital adequacy models. The Company use investment managers experienced in these markets and adjusts its allocation to these investments based upon market conditions. At December 31, 2010, the market value of investments in these investment market sectors, carried at both market and fair value, approximated 36% of shareholders’ equity.

The duration of an investment is based on the maturity of the security but also reflects the payment of interest and the possibility of early prepayments. The Company’s fixed income investment guidelines include a general duration guideline. This investment duration guideline is established and periodically revised by management, which considers economic and business factors, as well as the Company’s average duration of potential liabilities, which, at December 31, 2010, is estimated at approximately 3.8 years, based on the estimated payouts of underwriting liabilities using standard duration calculations.

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The duration of the fixed income portfolio at December 31, 2010 and 2009 was 3.8 years. The Company shortened the duration of its portfolio in response to very low available yields, particularly on securities with longer maturities. As a result, the Company has focused on purchasing high quality, shorter duration investments and investments with floating rate yields. These investments will be less subject to decline in market value if interest rates rise in the future, as forecasted by most investment analysts.

For each currency in which the Company has established substantial loss and LAE reserves, the Company seeks to maintain invested assets denominated in such currency in an amount approximately equal to the estimated liabilities. Approximately 28% of the Company’s consolidated reserves for losses and LAE and unearned premiums represent amounts payable in foreign currencies.

The Company’s net investment income was $653.5 million, $547.8 million and $565.9 million for the years ended December 31, 2010, 2009 and 2008, respectively. The increase for the year ended 2010 was primarily due to the changes in reported income (loss) from our limited partnership investments.

In addition to the increase in investment income, the economic and financial market improvements resulted in net realized capital gains for 2010 of $101.9 million. In 2010, the Company recorded $70.4 million of gains due to fair value re-measurements on fixed maturity and equity securities and $34.5 million of net realized capital gains from sales of fixed maturity and equity securities, partially offset by $3.0 million of other-than-temporary impairments on fixed maturity securities. The gains on the sales of fixed maturity securities were primarily the result of selling securities in foreign currencies, which will reduce exposure to currency fluctuations in the future. In 2009, net realized capital losses were $2.3 million, due to $29.4 million of net realized capital losses from sales of fixed maturity and equity securities and $13.2 million of other-than-temporary impairments on fixed maturity securities, partially offset by $40.2 million of gains due to fair value re-measurements on fixed maturity and equity securities. In 2008, net realized capital losses were $695.8 million, due to $276.0 million in losses from fair value re-measurements primarily on equity securities as a result of the global financial markets credit crisis, $243.3 million of losses from sales of fixed maturity and equity securities and $176.5 million of other-than-temporary impairments on available for sale fixed maturity securities.

The Company’s cash and invested assets totaled $15.4 billion at December 31, 2010, which consisted of 89.0% fixed maturities and cash, of which 94.7% were investment grade; 7.1% equity securities and 3.9% other invested assets. The average maturity of fixed maturity securities was 6.1 years at December 31, 2010, and their overall duration was 3.8 years.

As of December 31, 2010, the Company did not have any direct investments in commercial real estate or direct commercial mortgages or any material holdings of derivative investments (other than equity index put option contracts as discussed in ITEM 8, “Financial Statements and Supplementary Data” - Note 4 of Notes to Consolidated Financial Statements) or securities of issuers that are experiencing cash flow difficulty to an extent that the Company’s management believes could threaten the issuer’s ability to meet debt service payments, except where other-than-temporary impairments have been recognized.

The Company’s investment portfolio includes structured commercial mortgage-backed securities (“CMBS”) with a book value of $324.9 million and a market value of $337.2 million. CMBS securities comprising more than 61% of the December 31, 2010 market value are rated AAA by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”). Furthermore, securities comprising more than 92% of the market value are rated investment grade by Standard & Poor’s.

At December 31, 2010, the Company’s fixed maturity portfolio included $1.5 million in book value of asset-backed securities with sub-prime mortgage loan exposure and the market value of these investments was $2.0 million. Sub-prime mortgage loans generally represent loans made to borrowers with limited or blemished credit records.

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The following table reflects investment results for the Company for the periods indicated:

	December 31,
								Pre-tax			Pre-tax
			Pre-tax		Pre-tax			Realized Net			Unrealized Net
	Average		Investment		Effective			Capital (Losses)			Capital Gains
(Dollars in millions)	Investments (1)		Income (2)		Yield			Gains (3)			(Losses)
2010	$	15,297.4	$	653.5		4.27	%	$	101.9		$	48.4
2009		14,472.8		547.8		3.79	%		(2.3	)		636.7
2008		14,411.8		565.9		3.93	%		(695.8	)		(310.4	)
2007		14,491.7		682.4		4.71	%		86.3			21.4
2006		13,446.5		629.4		4.68	%		35.1			131.7

(1) Average of the beginning and ending carrying values of investments and cash, less net funds held, future policy benefit reserve, and
non-interest bearing cash. Bonds, common stock and redeemable and non-redeemable preferred stocks are carried at market value.
Common stock which are actively managed are carried at fair value.
(2) After investment expenses, excluding realized net capital gains (losses).
(3) Included in 2010, 2009, 2008 and 2007, are fair value re-measurements of $70.4 million, $40.2 million, ($276.0) million and $76.6 million, respectively.
(Some amounts may not reconcile due to rounding.)

The amortized cost, market value and gross unrealized appreciation and depreciation of available for sale, fixed maturity and equity security investments, carried at market value, are as follows for the periods indicated:

	At December 31, 2010
	Amortized		Unrealized		Unrealized			Market
(Dollars in millions)	Cost		Appreciation		Depreciation			Value
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	394.7	$	12.8	$	(5.7	)	$	401.8
Obligations of U.S. states and political subdivisions		2,809.5		116.9		(24.9	)		2,901.5
Corporate securities		2,917.0		168.7		(16.5	)		3,069.2
Asset-backed securities		210.7		7.8		(0.2	)		218.3
Mortgage-backed securities
Commercial		324.9		17.8		(5.5	)		337.2
Agency residential		2,018.4		76.4		(1.5	)		2,093.3
Non-agency residential		76.3		1.2		(1.7	)		75.7
Foreign government securities		1,584.4		79.7		(25.7	)		1,638.4
Foreign corporate securities		1,675.4		71.3		(31.6	)		1,715.1
Total fixed maturity securities	$	12,011.3	$	552.4	$	(113.3	)	$	12,450.5
Equity securities	$	363.3	$	3.0	$	(2.6	)	$	363.7

(Some amounts may not reconcile due to rounding.)

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	At December 31, 2009
	Amortized		Unrealized		Unrealized			Market
(Dollars in millions)	Cost		Appreciation		Depreciation			Value
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	339.8	$	17.9	$	(3.5	)	$	354.2
Obligations of U.S. states and political subdivisions		3,694.3		183.8		(24.3	)		3,853.8
Corporate securities		2,421.9		107.8		(33.0	)		2,496.7
Asset-backed securities		310.4		7.7		(4.4	)		313.7
Mortgage-backed securities
Commercial		475.2		5.2		(37.8	)		442.6
Agency residential		2,310.8		61.5		(3.9	)		2,368.4
Non-agency residential		177.5		0.2		(17.1	)		160.6
Foreign government securities		1,507.4		100.3		(16.9	)		1,590.8
Foreign corporate securities		1,377.4		72.4		(24.7	)		1,425.1
Total fixed maturity securities	$	12,614.7	$	556.8	$	(165.6	)	$	13,005.9
Equity securities	$	14.0	$	2.3	$	-		$	16.3

(Some amounts may not reconcile due to rounding.)

The following table represents the credit quality distribution of the Company’s fixed maturities for the periods indicated:

	At December 31,
	2010					2009
(Dollars in millions)	Market		Percent of			Market		Percent of
Rating Agency Credit Quality Distribution:	Value		Total			Value		Total
AAA	$	5,293.2		42.5	%	$	5,715.0		43.9	%
AA		2,612.5		21.0	%		2,736.6		21.0	%
A		2,646.0		21.3	%		2,807.0		21.6	%
BBB		1,221.3		9.8	%		1,450.0		11.2	%
BB		393.0		3.2	%		103.2		0.8	%
B		247.3		2.0	%		88.0		0.7	%
Other		37.2		0.3	%		106.2		0.8	%
Total	$	12,450.5		100.0	%	$	13,005.9		100.0	%

(Some amounts may not reconcile due to rounding.)

The following table summarizes fixed maturities by contractual maturity for the periods indicated:

	At December 31,
	2010					2009
	Market		Percent of			Market		Percent of
(Dollars in millions)	Value		Total			Value		Total
Fixed maturity securities - available for sale
Due in one year or less	$	580.5		4.7	%	$	652.5		5.0	%
Due after one year through five years		4,057.2		32.6	%		3,151.8		24.2	%
Due after five years through ten years		2,686.1		21.6	%		2,634.7		20.3	%
Due after ten years		2,402.2		19.3	%		3,281.6		25.2	%
Asset-backed securities		218.3		1.8	%		313.7		2.4	%
Mortgage-backed securities		2,506.2		20.0	%		2,971.6		22.8	%
Total fixed maturity securities	$	12,450.5		100.0	%	$	13,005.9		100.0	%

(Some amounts may not reconcile due to rounding.)

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Financial Strength Ratings.

The following table shows the current financial strength ratings of the Company’s operating subsidiaries as reported by A.M. Best, Standard & Poor’s and Moody’s. These ratings are based upon factors of concern to policyholders and should not be considered an indication of the degree or lack of risk involved in a direct or indirect equity investment in an insurance or reinsurance company.

All of the below-mentioned ratings are continually monitored and revised, if necessary, by each of the rating agencies. The ratings presented in the following table were in effect as of February 28, 2011.

The Company believes that its ratings, in general, are important to its operations because they provide the Company’s customers and investors with an independent assessment of the Company’s underlying financial strength using a scale that provides for relative comparisons. Strong financial ratings are particularly important for reinsurance companies. Ceding companies must rely on their reinsurers to pay covered losses well into the future. As a result, a highly rated reinsurer is generally preferred.

Operating Subsidiary:	A.M. Best	Standard & Poor's	Moody's

Everest Re	A+ (Superior)	A+ (Strong)	Aa3 (Excellent)
Bermuda Re	A+ (Superior)	A+ (Strong)	Aa3 (Excellent)
Ireland Re	A+ (Superior)	A+ (Strong)	Not Rated
Everest International	A+ (Superior)	Not Rated	Not Rated
Everest National	A+ (Superior)	A+ (Strong)	Not Rated
Everest Indemnity	A+ (Superior)	Not Rated	Not Rated
Everest Security	A+ (Superior)	Not Rated	Not Rated
Everest Canada	A+ (Superior)	Not Rated	Not Rated
Mt. McKinley	Not Rated	Not Rated	Not Rated

A.M. Best states that the “A+” (“Superior”) rating is assigned to those companies which, in its opinion, have a superior ability to meet their ongoing insurance policy and contract obligations based on A.M. Best’s comprehensive quantitative and qualitative evaluation of a company’s balance sheet strength, operating performance and business profile. Standard & Poor’s states that the “A+” rating is assigned to those insurance companies which, in its opinion, have strong financial security characteristics with respect to their ability to pay under its insurance policies and contracts in accordance with their terms. Moody’s states that insurance companies rated “Aa” offer excellent financial security. Together with the “Aaa” rated companies, “Aa” rated companies constitute what are generally known as high-grade companies, with “Aa” rated companies generally having somewhat larger long-term risks.

Subsidiaries other than Everest Re and Bermuda Re may not be rated by some or any rating agencies because such ratings are not considered essential by the individual subsidiary’s customers or because of the limited nature of the subsidiary’s operations. In particular, Mt. McKinley is not rated because it is in run-off status.

Debt Ratings.

The following table shows the debt ratings by A.M. Best, Standard & Poor’s and Moody’s of the Holdings’ senior notes due October 15, 2014, long term notes due May 1, 2067 and Everest Re Capital Trust II’s (“Capital Trust II”) trust preferred securities due March 29, 2034, all of which are considered investment grade. Debt ratings are the rating agencies’ current assessment of the credit worthiness of an obligor with respect to a specific obligation.

	A.M. Best		Standard & Poor's		Moody's
Senior Notes	a-	(Strong)	A-	(Strong)	A3	(Good)
Trust Preferred Securities	bbb+	(Adequate)	BBB	(Adequate)	Baa1	(Adequate)
Long Term Notes	bbb	(Adequate)	BBB	(Adequate)	Baa1	(Adequate)

A debt rating of “a-” is assigned by A.M. Best where the issuer, in A.M. Best’s opinion, has a strong ability to meet the terms of the obligation. A.M. Best assigns a debt rating in the “bbb” range where the issuer, in A.M. Best’s opinion, has adequate ability to meet the terms of the obligation. Standard & Poor’s assigns a debt rating in the “A” range to issuers that exhibit strong capacity and willingness to meet its financial

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commitments on obligations as they come due. A debt rating in the “BBB” range is assigned by Standard & Poor’s where the issuers exhibit adequate protection parameters although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. According to Moody’s, a debt rating of “A3” is assigned to issues that are considered upper-medium-grade obligations and subject to low credit risk. Obligations rated “Baa1” are subject to moderate credit risk and are considered medium-grade and as such may possess certain speculative characteristics.

Competition.

The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and market. As such, financial results tend to fluctuate with periods of constrained availability, high rates and strong profits followed by periods of abundant capacity, low rates and constrained profitability. Competition in the types of reinsurance and insurance business that we underwrite is based on many factors, including the perceived overall financial strength of the reinsurer or insurer, ratings of the reinsurer or insurer by A.M. Best and/or Standard & Poor’s, underwriting expertise, the jurisdictions where the reinsurer or insurer is licensed or otherwise authorized, capacity and coverages offered, premiums charged, other terms and conditions of the reinsurance and insurance business offered, services offered, speed of claims payment and reputation and experience in lines written. Furthermore, the market impact from these competitive factors related to reinsurance and insurance is generally not consistent across lines of business, domestic and international geographical areas and distribution channels.

We compete in the U.S., Bermuda and international reinsurance and insurance markets with numerous global competitors. Our competitors include independent reinsurance and insurance companies, subsidiaries or affiliates of established worldwide insurance companies, reinsurance departments of certain insurance companies and domestic and international underwriting operations, including underwriting syndicates at Lloyd’s. Some of these competitors have greater financial resources than we do and have established long term and continuing business relationships, which can be a significant competitive advantage. In addition, the lack of strong barriers to entry into the reinsurance business and the potential for securitization of reinsurance and insurance risks through capital markets provide additional sources of potential reinsurance and insurance capacity and competition.

Worldwide insurance and reinsurance market conditions continued to be very competitive, particularly in the casualty lines of business. Generally, there was ample insurance and reinsurance capacity relative to demand. We noted, however, that in many markets and lines during 2009 and 2010, the rates of decline have slowed, pricing in some segments was relatively flat and there was upward movement in some others, particularly property catastrophe coverage in Latin America and Australia where there have been significant losses. Competition and its effect on rates, terms and conditions vary widely by market and coverage yet continues to be most prevalent in the U.S. casualty insurance and reinsurance markets. The U.S. insurance markets in which we participate were extremely competitive as well.

Rates in the international markets have generally been stable and we have seen some increases, particularly for catastrophe exposed business. We have grown our business in the Middle East, Latin America and Asia.

Overall, we believe that current marketplace conditions offer pockets of profit opportunities for us given our strong ratings, distribution system, reputation and expertise. We continue to employ our strategy of targeting business that offers the greatest profit potential, while maintaining balance and diversification in our overall portfolio.

Employees.

As of February 1, 2011, the Company employed 973 persons, which includes the employees from the acquisition of Heartland Crop Insurance, Inc. in January 2011. Management believes that employee relations are good. None of the Company’s employees are subject to collective bargaining agreements, and the Company is not aware of any current efforts to implement such agreements.

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Regulatory Matters.

The Company and its insurance subsidiaries are subject to regulation under the insurance statutes of the various jurisdictions in which they conduct business, including essentially all states of the U.S., Canada, Singapore, Brazil (licensed in 2008), the United Kingdom, Ireland and Bermuda. These regulations vary from jurisdiction to jurisdiction and are generally designed to protect ceding insurance companies and policyholders by regulating the Company’s conduct of business, financial integrity and ability to meet its obligations. Many of these regulations require reporting of information designed to allow insurance regulators to closely monitor the Company’s performance.

Insurance Holding Company Regulation. Under applicable U.S. laws and regulations, no person, corporation or other entity may acquire a controlling interest in the Company, unless such person, corporation or entity has obtained the prior approval for such acquisition from the insurance commissioners of Delaware and the other states in which the Company’s insurance subsidiaries are domiciled or deemed domiciled, currently California and Georgia. Under these laws, “control” is presumed when any person acquires, directly or indirectly, 10% or more of the voting securities of an insurance company. To obtain the approval of any change in control, the proposed acquirer must file an application with the relevant insurance commissioner disclosing, among other things, the background of the acquirer and that of its directors and officers, the acquirer’s financial condition and its proposed changes in the management and operations of the insurance company. U.S. state regulators also require prior notice or regulatory approval of material inter-affiliate transactions within the holding company structure.

The Insurance Companies Act of Canada requires prior approval by the Minister of Finance of anyone acquiring a significant interest in an insurance company authorized to do business in Canada. In addition, the Company is subject to regulation by the insurance regulators of other states and foreign jurisdictions in which it is authorized to do business. Certain of these states and foreign jurisdictions impose regulations regulating the ability of any person to acquire control of an insurance company authorized to do business in that jurisdiction without appropriate regulatory approval similar to those described above.

Dividends. Under Bermuda law, Group is prohibited from declaring or paying a dividend if such payment would reduce the realizable value of its assets to an amount less than the aggregate value of its liabilities and its issued share capital and share premium (additional paid-in capital) accounts. Group’s ability to pay dividends and its operating expenses is partially dependent upon dividends from its subsidiaries. The payment of dividends by insurance subsidiaries is limited under Bermuda law as well as the laws of the various U.S. states in which Group’s insurance and reinsurance subsidiaries are domiciled or deemed domiciled. The limitations are generally based upon net income (loss) and compliance with applicable policyholders’ surplus or minimum solvency and liquidity requirements as determined in accordance with the relevant statutory accounting practices. Under Irish corporate and regulatory law, Holdings Ireland and its subsidiaries are limited as to the dividends they can pay based on retained earnings and net income (loss) and/or capital and minimum solvency requirements. As Holdings has outstanding debt obligations, it is dependent upon dividends and other permissible payments from its operating subsidiaries to enable it to meet its debt and operating expense obligations and to pay dividends.

Under Bermuda law, Bermuda Re and Everest International are unable to declare or make payment of a dividend if they fail to meet their minimum solvency margin or minimum liquidity ratio. As long term insurers, Bermuda Re and Everest International are also unable to declare or pay a dividend to anyone who is not a policyholder unless, after payment of the dividend, the value of the assets in their long term business fund, as certified by their approved actuary, exceeds their liabilities for long term business by at least the $250,000 minimum solvency margin. Prior approval of the Bermuda Monetary Authority is required if Bermuda Re’s or Everest International’s dividend payments would reduce their prior year end total statutory capital by 15.0% or more. At December 31, 2010, Bermuda Re and Everest International exceeded their solvency and liquidity requirements by a significant margin.

The payment of dividends to Holdings by Everest Re is subject to limitations imposed by Delaware law. Generally, Everest Re may only pay dividends out of its statutory earned surplus, which was $2,527.5 million at December 31, 2010, and only after it has given 10 days prior notice to the Delaware Insurance Commissioner. During this 10-day period, the Commissioner may, by order, limit or disallow the payment of ordinary dividends if the Commissioner finds the insurer to be presently or potentially in financial distress.

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Further, the maximum amount of dividends that may be paid without the prior approval of the Delaware Insurance Commissioner in any twelve month period is the greater of (1) 10% of the insurer’s statutory surplus as of the end of the prior calendar year or (2) the insurer’s statutory net income (loss), not including realized capital gains (losses), for the prior calendar year. Accordingly, the maximum amount that will be available for the payment of dividends by Everest Re in 2011 without triggering the requirement for prior approval of regulatory authorities in connection with a dividend is $252.8 million.

Insurance Regulation. Neither Bermuda Re nor Everest International is admitted to do business in any jurisdiction in the U.S. Both conduct their insurance business from their offices in Bermuda, and in the case of Bermuda Re, its branch in the UK. In Bermuda, Bermuda Re and Everest International are regulated by the Insurance Act 1978 (as amended) and related regulations (the “Act”). The Act establishes solvency and liquidity standards and auditing and reporting requirements and subjects Bermuda Re and Everest International to the supervision, investigation and intervention powers of the Bermuda Monetary Authority. Under the Act, Bermuda Re and Everest International, as Class 4 insurers, are each required to maintain a principal office in Bermuda, to maintain a minimum of $100 million in statutory capital and surplus, to have an independent auditor approved by the Bermuda Monetary Authority conduct an annual audit and report on their respective statutory and U.S. GAAP financial statements and filings and to have an appointed loss reserve specialist (also approved by the Bermuda Monetary Authority) review and report on their respective loss reserves annually.

Bermuda Re and Everest International are also registered under the Act as long term insurers and are thereby authorized to write life and annuity business. As long term insurers, Bermuda Re and Everest International are required to maintain $250,000 in statutory capital separate from their Class 4 minimum statutory capital and surplus, to maintain long term business funds, to separately account for this business and to have an approved actuary prepare a certificate concerning their long term business assets and liabilities to be filed annually. Bermuda Re’s operations in the United Kingdom and worldwide are subject to regulation by the Financial Services Authority (the “FSA”). The FSA imposes solvency, capital adequacy, audit, financial reporting and other regulatory requirements on insurers transacting business in the United Kingdom. Bermuda Re presently meets or exceeds all of the FSA’s solvency and capital requirements.

U.S. domestic property and casualty insurers, including reinsurers, are subject to regulation by their state of domicile and by those states in which they are licensed. The regulation of reinsurers is typically focused on financial condition, investments, management and operation. The rates and policy terms of reinsurance agreements are generally not subject to direct regulation by any governmental authority.

The operations of Everest Re’s foreign branch offices in Canada and Singapore are subject to regulation by the insurance regulatory officials of those jurisdictions. Management believes that the Company is in compliance with applicable laws and regulations pertaining to its business and operations.

Everest Indemnity, Everest National, Everest Security and Mt. McKinley are subject to regulations similar to the U.S. regulations applicable to Everest Re. In addition, Everest National and Everest Security must comply with substantial regulatory requirements in each state where they conduct business. These additional requirements include, but are not limited to, rate and policy form requirements, requirements with regard to licensing, agent appointments, participation in residual markets and claim handling procedures. These regulations are primarily designed for the protection of policyholders.

Licenses. Everest Re is a licensed property and casualty insurer and/or reinsurer in all states, the District of Columbia and Puerto Rico. In New Hampshire and Puerto Rico, Everest Re is licensed for reinsurance only. Such licensing enables U.S. domestic ceding company clients to take credit for uncollateralized reinsurance receivables from Everest Re in their statutory financial statements.

Everest Re is licensed as a property and casualty reinsurer in Canada. It is also authorized to conduct reinsurance business in Singapore and Brazil. Everest Re can also write reinsurance in other foreign countries. Because some jurisdictions require a reinsurer to register in order to be an acceptable market for local insurers, Everest Re is registered as a foreign insurer and/or reinsurer in the following countries: Argentina, Bolivia, Chile, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Peru, Venezuela and the Philippines. Everest National is licensed in 50 states and the District of Columbia. Everest Indemnity

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is licensed in Delaware and is eligible to write insurance on a surplus lines basis in 49 states, the District of Columbia and Puerto Rico. Everest Security is licensed in Georgia and Alabama. Mt. McKinley is licensed in Delaware and California. Bermuda Re and Everest International are registered as Class 4 and long term insurers in Bermuda. Bermuda Re is also an authorized reinsurer in the U.K.

Periodic Examinations. Everest Re, Everest National, Everest Indemnity, Everest Security and Mt. McKinley are subject to periodic financial examination (usually every three years) of their affairs by the insurance departments of the states in which they are licensed, authorized or accredited. Everest Re’s, Everest National’s, Everest Security’s, Everest Indemnity’s and Mt. McKinley’s last examination reports were as of December 31, 2006. None of these reports contained any material findings or recommendations. In addition, U.S. insurance companies are subject to examinations by the various state insurance departments where they are licensed concerning compliance with applicable conduct of business regulations.

NAIC Risk-Based Capital Requirements. The U.S. National Association of Insurance Commissioners (“NAIC”) has developed a formula to measure the amount of capital appropriate for a property and casualty insurance company to support its overall business operations in light of its size and risk profile. The major categories of a company’s risk profile are its asset risk, credit risk, and underwriting risk. The standards are an effort by the NAIC to prevent insolvencies, to ward off other financial difficulties of insurance companies and to establish uniform regulatory standards among state insurance departments.

Under the approved formula, a company’s statutory surplus is compared to its risk based capital (“RBC”). If this ratio is above a minimum threshold, no action is necessary. Below this threshold are four distinct action levels at which an insurer’s domiciliary state regulator can intervene with increasing degrees of authority over an insurer as the ratio of surplus to RBC decreases. The mildest intervention requires an insurer to submit a plan of appropriate corrective actions. The most severe action requires an insurer to be rehabilitated or liquidated.

Based on their financial positions at December 31, 2010, Everest Re, Everest National, Everest Indemnity and Everest Security significantly exceed the minimum thresholds. Since Mt. McKinley ceased writing new and renewal insurance in 1985, its domiciliary regulator, the Delaware Insurance Commissioner, has exempted Mt. McKinley from complying with RBC requirements.

Various proposals to change the RBC formula arise from time to time. The Company is unable to predict whether any such proposal will be adopted, the form in which any such proposals would be adopted or the effect, if any, the adoption of any such proposal or change in the RBC calculations would have on the Company.

Tax Matters.

The following summary of the taxation of the Company is based on current law. There can be no assurance that legislative, judicial, or administrative changes will not be enacted that materially affect this summary.

Bermuda. Under Bermuda law, no income, withholding or capital gains taxes are imposed upon Group and its Bermuda subsidiaries. Group and its Bermuda subsidiaries have received an undertaking from the Minister of Finance in Bermuda that, in the event of any taxes being imposed, Group and its Bermuda subsidiaries will be exempt from taxation in Bermuda until March 2016. Non-Bermuda branches of Bermuda subsidiaries are subject to local taxes in the jurisdictions in which they operate.

United States. Group’s U.S. subsidiaries conduct business in and are subject to taxation in the U.S. Non-U.S. branches of U.S. subsidiaries are subject to local taxation in the jurisdictions in which they operate. Should the U.S. subsidiaries distribute current or accumulated earnings and profits in the form of dividends or otherwise, the Company would be subject to withholding taxes. Group and its Bermuda subsidiaries believe that they have operated and will continue to operate their businesses in a manner that will not cause them to generate income treated as effectively connected with the conduct of a trade or business within the U.S. On this basis, Group does not expect that it and its Bermuda subsidiaries will be required to pay U.S. corporate income taxes other than withholding taxes on certain investment income and premium excise taxes. If Group or its Bermuda subsidiaries were to become subject to U.S. income tax, there could be a material adverse effect on the Company’s financial condition, results of operations and cash flows.

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United Kingdom. Bermuda Re’s UK branch conducts business in the UK and is subject to taxation in the UK. Bermuda Re believes that it has operated and will continue to operate its Bermuda operation in a manner which will not cause them to be subject to UK taxation. If Bermuda Re’s Bermuda operations were to become subject to UK income tax, there could be a material adverse impact on the Company’s financial condition, results of operations and cash flow.

Ireland. Holdings Ireland and Ireland Re conduct business in Ireland and are subject to taxation in Ireland.

Available Information.

The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports are available free of charge through the Company’s internet website at http://www.everestre.com as soon as reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission (the “SEC”).

ITEM 1A. RISK FACTORS

In addition to the other information provided in this report, the following risk factors should be considered when evaluating an investment in our securities. If the circumstances contemplated by the individual risk factors materialize, our business, financial condition and results of operations could be materially and adversely affected and the trading price of our common shares could decline significantly.

RISKS RELATING TO OUR BUSINESS

Fluctuations in the financial markets could result in investment losses.

Prolonged and severe disruptions in the public debt and equity markets, such as occurred during 2008, could result in significant realized and unrealized losses in our investment portfolio. For the year ended December 31, 2008, we incurred $695.8 million of realized investment gains and $310.4 million of unrealized investment losses. Although financial markets significantly improved during 2009 and 2010, they could deteriorate in the future and again result in substantial realized and unrealized losses, which could have a material adverse impact on our results of operations, equity, business and insurer financial strength and debt ratings.

Our results could be adversely affected by catastrophic events.

We are exposed to unpredictable catastrophic events, including weather-related and other natural catastrophes, as well as acts of terrorism. Any material reduction in our operating results caused by the occurrence of one or more catastrophes could inhibit our ability to pay dividends or to meet our interest and principal payment obligations. Subsequent to April 1, 2010, we define a catastrophe as an event that causes a loss on property exposures before reinsurance of at least $10.0 million, before corporate level reinsurance and taxes. Prior to April 1, 2010, we used a threshold of $5.0 million. By way of illustration, during the past five calendar years, pre-tax catastrophe losses, net of contract specific reinsurance but before cessions under corporate reinsurance programs, were as follows:

Calendar year:	Pre-tax catastrophe losses
(Dollars in millions)
2010		$	571.1
2009			67.4
2008			364.3
2007			160.0
2006			287.9

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Our losses from future catastrophic events could exceed our projections.

We use projections of possible losses from future catastrophic events of varying types and magnitudes as a strategic underwriting tool. We use these loss projections to estimate our potential catastrophe losses in certain geographic areas and decide on the purchase of retrocessional coverage or other actions to limit the extent of potential losses in a given geographic area. These loss projections are approximations, reliant on a mix of quantitative and qualitative processes, and actual losses may exceed the projections by a material amount, resulting in a material adverse effect on our financial condition and results of operations.

If our loss reserves are inadequate to meet our actual losses, net income would be reduced or we could incur a loss.

We are required to maintain reserves to cover our estimated ultimate liability of losses and LAE for both reported and unreported claims incurred. These reserves are only estimates of what we believe the settlement and administration of claims will cost based on facts and circumstances known to us. In setting reserves for our reinsurance liabilities, we rely on claim data supplied by our ceding companies and brokers and we employ actuarial and statistical projections. The information received from our ceding companies is not always timely or accurate, which can contribute to inaccuracies in our loss projections. Because of the uncertainties that surround our estimates of loss and LAE reserves, we cannot be certain that ultimate loss and LAE payments will not exceed our estimates. If our reserves are deficient, we would be required to increase loss reserves in the period in which such deficiencies are identified which would cause a charge to our earnings and a reduction of capital. By way of illustration, during the past five calendar years, the reserve re-estimation process resulted in a decrease to our pre-tax net income in four of the years:

Calendar year:	Effect on pre-tax net income
(Dollars in millions)
2010	$	30.9	increase
2009		128.8	decrease
2008		34.9	decrease
2007		206.5	decrease
2006		135.6	decrease

See ITEM 1, “Business - Changes in Historical Reserves,” which provides a more detailed chart showing the effect of reserve re-estimates on calendar year operating results for the past ten years.

The difficulty in estimating our reserves is significantly more challenging as it relates to reserving for potential A&E liabilities. At year-end 2010, 5.9% of our gross reserves were comprised of A&E reserves. A&E liabilities are especially hard to estimate for many reasons, including the long delays between exposure and manifestation of any bodily injury or property damage, difficulty in identifying the source of the asbestos or environmental contamination, long reporting delays and difficulty in properly allocating liability for the asbestos or environmental damage. Legal tactics and judicial and legislative developments affecting the scope of insurers’ liability, which can be difficult to predict, also contribute to uncertainties in estimating reserves for A&E liabilities.

The failure to accurately assess underwriting risk and establish adequate premium rates could reduce our net income or result in a net loss.

Our success depends on our ability to accurately assess the risks associated with the businesses on which the risk is retained. If we fail to accurately assess the risks we retain, we may fail to establish adequate premium rates to cover our losses and LAE. This could reduce our net income and even result in a net loss.

In addition, losses may arise from events or exposures that are not anticipated when the coverage is priced. An example of an unanticipated event is the terrorist attacks on September 11, 2001. Neither the magnitude of loss on a single line of business nor the combined impact on several lines of business from an act of terrorism on such a large scale was contemplated when we priced our coverages. In addition to unanticipated events, we also face the unanticipated expansion of our exposures, particularly in long-tail liability lines. An example of this is the expansion over time of the scope of insurers’ legal liability within the mass tort arena, particularly for A&E exposures discussed above.

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Decreases in pricing for property and casualty reinsurance and insurance could reduce our net income.

The worldwide reinsurance and insurance businesses are highly competitive, as well as cyclical by product and market. These cycles, as well as other factors that influence aggregate supply and demand for property and casualty insurance and reinsurance products, are outside of our control. The supply of (re)insurance is driven by prevailing prices and levels of capacity that may fluctuate in response to a number of factors including large catastrophic losses and investment returns being realized in the insurance industry. Demand for (re)insurance is influenced by underwriting results of insurers and insureds, including catastrophe losses, and prevailing general economic conditions. If any of these factors were to result in a decline in the demand for (re)insurance or an overall increase in (re)insurance capacity, our net income could decrease.

If rating agencies downgrade the ratings of our insurance subsidiaries, future prospects for growth and profitability could be significantly and adversely affected.

Our active insurance company subsidiaries currently hold financial strength ratings assigned by third-party rating agencies which assess and rate the claims paying ability and financial strength of insurers and reinsurers. Our active subsidiaries carry an “A+” (“Superior”) rating from A.M. Best. Everest Re, Bermuda Re, Ireland Re and Everest National hold an “A+” (“Strong”) rating from Standard & Poor’s. Everest Re and Bermuda Re hold an “Aa3” (“Excellent”) rating from Moody’s. Financial strength ratings are used by client companies and agents and brokers that place the business as an important means of assessing the financial strength and quality of reinsurers. A downgrade or withdrawal of any of these ratings might adversely affect our ability to market our insurance products and could have a material and adverse effect on future prospects for growth and profitability.

On March 13, 2009, Everest Re’s, Bermuda Re’s and Everest National’s ratings were downgraded one level by Standard & Poor’s to “A+”. However, we cannot assure that a further downgrade will not occur in the future if we do not continue to meet the evolving criteria expected of our current rating. In that regard, several of the rating agencies are in the process of modifying their approaches to evaluating enterprise risk management and its impact on ratings. Therefore, we cannot predict the outcome of this reassessment or its potential impact upon our ratings.

Consistent with market practice, much of our treaty reinsurance business allows the ceding company to terminate the contract or seek collateralization of our obligations in the event of a rating downgrade below a certain threshold. The termination provision would generally be triggered if a rating fell below A.M. Best’s A- rating level, which is three levels below Everest Re’s current rating of A+. To a lesser extent, Everest Re also has modest exposure to reinsurance contracts that contain provisions for obligatory funding of outstanding liabilities in the event of a rating agency downgrade. That provision would also generally be triggered if Everest Re’s rating fell below A.M. Best’s A- rating level.

The failure of our insureds, intermediaries and reinsurers to satisfy their obligations to us could reduce our net income.

In accordance with industry practice, we have uncollateralized receivables from insureds, agents and brokers and/or rely on agents and brokers to process our payments. We may not be able to collect amounts due from insureds, agents and brokers, resulting in a reduction to net income.

We are also subject to the credit risk of reinsurers in connection with retrocessional arrangements because the transfer of risk to a reinsurer does not relieve us of our liability to the insured. In addition, reinsurers may be unwilling to pay us even though they are able to do so. The failure of one or more of our reinsurers to honor their obligations to us in a timely fashion would impact our cash flow and reduce our net income and could cause us to incur a significant loss.

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If we are unable or choose not to purchase reinsurance and transfer risk to reinsurers, our net income could be reduced or we could incur a net loss in the event of unusual loss experience.

We are generally less reliant on the purchase of reinsurance than many of our competitors, in part because of our strategic emphasis on underwriting discipline and management of the cycles inherent in our business. We try to separate our risk taking process from our risk mitigation process in order to avoid developing too great a reliance on reinsurance. The bulk of these cessions are to captives of program managers, who thereby share in the results of the business they produce. We otherwise generally purchase reinsurance from other third parties only when we expect a net benefit. The percentage of business that we reinsure to other than captives of program managers, may vary considerably from year to year, depending on our view of the relationship between cost and expected benefit for the contract period.

	2010	2009	2008	2007	2006
Percentage of ceded written premiums to gross written premiums	6.1%	4.8%	4.7%	3.9%	3.1%

Changes in the availability and cost of reinsurance, which are subject to market conditions that are outside of our control, have reduced to some extent our ability to use reinsurance to tailor the risks we assume on a contract or program basis or to mitigate or balance exposures across our reinsurance operations. Because we have purchased minimal reinsurance in recent years, our net income could be reduced following a large unreinsured event or adverse overall claims experience.

Our industry is highly competitive and we may not be able to compete successfully in the future.

Our industry is highly competitive and subject to pricing cycles that can be pronounced. We compete globally in the U.S., Bermuda and international reinsurance and insurance markets with numerous competitors. Our competitors include independent reinsurance and insurance companies, subsidiaries or affiliates of established worldwide insurance companies, reinsurance departments of certain insurance companies and domestic and international underwriting operations, including underwriting syndicates at Lloyd’s.

According to Standard & Poor’s, we rank among the top ten global reinsurance groups, in which almost three-quarters of the market share is concentrated. The worldwide premium available to the reinsurance market, for both life and non-life business, was estimated to be $157 billion in 2009 according to data compiled by the International Association of Insurance Supervisors. The top twenty groups in our industry represent just over 85% of these revenues. The leaders in this market are Munich Re, Swiss Re, Hannover Ruckversicherung AG, Berkshire Hathaway Inc., SCOR and syndicates at Lloyd’s. Some of these competitors have greater financial resources than we do and have established long term and continuing business relationships throughout the industry, which can be a significant competitive advantage. In addition, the lack of strong barriers to entry into the reinsurance business and the potential for securitization of reinsurance and insurance risks through capital markets provide additional sources of potential reinsurance and insurance capacity and competition.

We are dependent on our key personnel.

Our success has been, and will continue to be, dependent on the ability to retain the services of existing key executive officers and to attract and retain additional qualified personnel in the future. The loss of the services of any key executive officer or the inability to hire and retain other highly qualified personnel in the future could adversely affect our ability to conduct business. Generally, we consider key executive officers to be those individuals who have the greatest influence in setting overall policy and controlling operations: Chairman and Chief Executive Officer, Joseph V. Taranto (age 61), and Executive Vice President and Chief Financial Officer, Dominic J. Addesso (age 57).

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Special considerations apply to our Bermuda operations. Under Bermuda law, non-Bermudians, other than spouses of Bermudians and individuals holding permanent resident certificates, are not permitted to engage in any gainful occupation in Bermuda without a work permit issued by the Bermuda government. A work permit is only granted or extended if the employer can show that, after a proper public advertisement, no Bermudian, spouse of a Bermudian or individual holding a permanent resident certificate is available who meets the minimum standards for the position. The Bermuda government places a six-year term limit on individuals with work permits, subject to specified exemptions for persons deemed to be key employees of businesses with a significant physical presence in Bermuda. Currently, all four of our Bermuda-based professional employees who require work permits have been granted permits by the Bermuda government that expire at various times between April 2012 and February 2014. This includes Mark de Saram, the chief executive officer of our Bermuda reinsurance operation. In the event his work permit were not renewed, we could lose his services, thereby adversely affecting our ability to conduct our business in Bermuda until we were able to replace him with an individual in Bermuda who did not require a work permit or who was granted the permit. The Company has an employment contract with Mr. de Saram, which was filed with the SEC and most recently amended on October 7, 2010, to extend Mr. de Saram’s term of employment to November 1, 2012.

Our investment values and investment income could decline because they are exposed to interest rate, credit, and market risks.

A significant portion of our investment portfolio consists of fixed income securities and smaller portions consist of equity securities and other investments. Both the fair market value of our invested assets and associated investment income fluctuate depending on general economic and market conditions. For example, the fair market value of our predominant fixed income portfolio generally increases or decreases inversely to fluctuations in interest rates. The market value of our fixed income securities could also decrease as a result of a downturn in the business cycle, such as the downturn we are currently experiencing, that causes the credit quality of such securities to deteriorate. The net investment income that we realize from future investments in fixed income securities will generally increase or decrease with interest rates.

Interest rate fluctuations also can cause net investment income from fixed income investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, to differ from the income anticipated from those securities at the time of purchase. In addition, if issuers of individual investments are unable to meet their obligations, investment income will be reduced and realized capital losses may arise.

The majority of our fixed income securities are classified as available for sale and temporary changes in the market value of these investments are reflected as changes to our shareholders’ equity. Our actively managed equity security portfolio is fair valued and any changes in fair value are reflected as net realized capital gains or losses. As a result, a decline in the value of the securities in our portfolio reduces our capital or could cause us to incur a loss.

We have invested a portion of our investment portfolio in equity securities. The value of these assets fluctuate with changes in the markets. In times of economic weakness, the fair value of these assets may decline, and may negatively impact net income. We also invest in non-traditional investments which have different risk characteristics than traditional fixed income and equity securities. These alternative investments are comprised primarily of private equity limited partnerships. The changes in value and investment income (loss) for these partnerships are more volatile than over-the-counter securities.

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The following table quantifies the portion of our investment portfolio that consists of fixed income securities, equity securities and asset-backed investments that carry prepayment risk.

	At
(Dollars in millions)	December 31, 2010		% of Total
Mortgage-backed securities:
Commercial	$	337.2		2.2	%
Agency residential		2,093.3		13.6	%
Non-agency residential		75.7		0.5	%
Other asset-backed		218.3		1.4	%
Total asset-backed		2,724.5		17.7	%
Other fixed income		9,726.0		63.3	%
Total fixed income, at market value		12,450.5		81.0	%
Fixed maturities, at fair value		180.5		1.2	%
Equity securities, at market value		363.7		2.4	%
Equity securities, at fair value		721.4		4.7	%
Other invested assets		605.2		3.9	%
Cash and short-term investments		1,043.7		6.8	%
Total investments and cash	$	15,365.0		100.0	%

(Some amounts may not reconcile due to rounding.)

We may experience foreign currency exchange losses that reduce our net income and capital levels.

Through our Bermuda and international operations, we conduct business in a variety of foreign (non-U.S.) currencies, principally the Euro, the British pound, the Canadian dollar, and the Singapore dollar. Assets, liabilities, revenues and expenses denominated in foreign currencies are exposed to changes in currency exchange rates. Our functional currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results and financial position. In 2010, we wrote approximately 31% of our reinsurance coverages in non-U.S. currencies; as of December 31, 2010, we maintained approximately 16.6% of our investment portfolio in investments denominated in non-U.S. currencies. During 2010, 2009 and 2008, the impact on our quarterly pre-tax net income from exchange rate fluctuations ranged from a loss of $13.2 million to a gain of $8.4 million.

RISKS RELATING TO REGULATION

Insurance laws and regulations restrict our ability to operate and any failure to comply with those laws and regulations could have a material adverse effect on our business.

We are subject to extensive and increasing regulation under U.S., state and foreign insurance laws. These laws limit the amount of dividends that can be paid to us by our operating subsidiaries, impose restrictions on the amount and type of investments that we can hold, prescribe solvency, accounting and internal control standards that must be met and maintained and require us to maintain reserves. These laws also require disclosure of material inter-affiliate transactions and require prior approval of “extraordinary” transactions. Such “extraordinary” transactions include declaring dividends from operating subsidiaries that exceed statutory thresholds. These laws also generally require approval of changes of control of insurance companies. The application of these laws could affect our liquidity and ability to pay dividends, interest and other payments on securities, as applicable, and could restrict our ability to expand business operations through acquisitions of new insurance subsidiaries. We may not have or maintain all required licenses and approvals or fully comply with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and regulations. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or monetarily penalize us. These types of actions could have a material adverse effect on our business. To date, no material fine, penalty or restriction has been imposed on us for failure to comply with any insurance law or regulation.

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As a result of the recent dislocation of the financial markets, Congress and the Presidential administration in the United States, are contemplating changes in the way the financial services industry is regulated. It is possible that insurance regulation will be drawn into this process, and that federal regulatory initiatives in the insurance industry could emerge. The future impact of such initiatives, if any, on our operation, net income (loss) or financial condition cannot be determined at this time.

Regulatory challenges in the United States could adversely affect the ability of Bermuda Re to conduct business.

Bermuda Re does not intend to be licensed or admitted as an insurer or reinsurer in any U.S. jurisdiction. Under current law, Bermuda Re generally will be permitted to reinsure U.S. risks from its office in Bermuda without obtaining those licenses. However, the insurance and reinsurance regulatory framework is subject to periodic legislative review and revision. In the past, there have been congressional and other initiatives in the United States regarding increased supervision and regulation of the insurance industry, including proposals to supervise and regulate reinsurers domiciled outside the United States. If Bermuda Re were to become subject to any insurance laws of the United States or any U.S. state at any time in the future, it might be required to post deposits or maintain minimum surplus levels and might be prohibited from engaging in lines of business or from writing some types of policies. Complying with those laws could have a material adverse effect on our ability to conduct business in Bermuda and international markets.

Bermuda Re may need to be licensed or admitted in additional jurisdictions to develop its business.

As Bermuda Re’s business develops, it will monitor the need to obtain licenses in jurisdictions other than Bermuda and the U.K., where it has an authorized branch, in order to comply with applicable law or to be able to engage in additional insurance-related activities. In addition, Bermuda Re may be at a competitive disadvantage in jurisdictions where it is not licensed or does not enjoy an exemption from licensing relative to competitors that are so licensed or exempt from licensing. Bermuda Re may not be able to obtain any additional licenses that it determines are necessary or desirable. Furthermore, the process of obtaining those licenses is often costly and may take a long time.

Bermuda Re’s ability to write reinsurance may be severely limited if it is unable to arrange for security to back its reinsurance.

Many jurisdictions do not permit insurance companies to take credit for reinsurance obtained from unlicensed or non-admitted insurers on their statutory financial statements without appropriate security. Bermuda Re’s reinsurance clients typically require it to post a letter of credit or enter into other security arrangements. If Bermuda Re is unable to obtain or maintain a letter of credit facility on commercially acceptable terms or is unable to arrange for other types or security, its ability to operate its business may be severely limited. If Bermuda Re defaults on any letter of credit that it obtains, it may be required to prematurely liquidate a substantial portion of its investment portfolio and other assets pledged as collateral.

RISKS RELATING TO GROUP’S SECURITIES

Because of our holding company structure, our ability to pay dividends, interest and principal is dependent on our receipt of dividends, loan payments and other funds from our subsidiaries.

Group and Holdings are holding companies, each of whose most significant assets consists of the stock of their operating subsidiaries. As a result, each of Group’s and Holdings’ ability to pay dividends, interest or other payments on its securities in the future will depend on the earnings and cash flows of the operating subsidiaries and the ability of the subsidiaries to pay dividends or to advance or repay funds to it. This ability is subject to general economic, financial, competitive, regulatory and other factors beyond our control. Payment of dividends and advances and repayments from some of the operating subsidiaries are regulated by U.S., state and foreign insurance laws and regulatory restrictions, including minimum solvency and liquidity thresholds. Accordingly, the operating subsidiaries may not be able to pay dividends or advance or repay funds to Group and Holdings in the future, which could prevent us from paying dividends, interest or other payments on our securities.

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Provisions in Group’s bye-laws could have an anti-takeover effect, which could diminish the value of its common shares.

Group’s bye-laws contain provisions that may entrench directors and make it more difficult for shareholders to replace directors even if the shareholders consider it beneficial to do so. In addition, these provisions could delay or prevent a change of control that a shareholder might consider favorable. The effect of these provisions could be to prevent a shareholder from receiving the benefit from any premium over the market price of our common shares offered by a bidder in a potential takeover. Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common shares if they are viewed as discouraging takeover attempts in the future.

For example, Group’s bye-laws contain the following provisions that could have an anti-takeover effect:

·	election of directors is staggered, meaning that the members of only one of three classes of directors are selected each year;

·	shareholders have limited ability to remove directors;

·	the total voting power of any shareholder owning more than 9.9% of the common shares will be reduced to 9.9% of the total voting power of the common shares;

·	the board of directors may decline to register any transfer of common shares if it has reason to believe that the transfer would result in:

i.)	any person that is not an investment company beneficially owning more than 5.0% of any class of the issued and outstanding share capital of Group,

ii.)	any person holding controlled shares in excess of 9.9% of any class of the issued and outstanding share capital of Group, or

iii.)

any adverse tax, regulatory or legal consequences to Group, any of its subsidiaries or any of its shareholders;

·	Group also has the option to redeem or purchase all or part of a shareholder’s common shares to the extent the board of directors determines it is necessary or advisable to avoid or cure any adverse or potential adverse consequences if:

i.)	any person that is not an investment company beneficially owns more than 5.0% of any class of the issued and outstanding share capital of Group,

ii.)	any person holds controlled shares in excess of 9.9% of any class of the issued and outstanding share capital of Group, or

iii.)

share ownership by any person may result in adverse tax, regulatory or legal consequences to Group, any of its subsidiaries or any other shareholder.

The Board of Directors has indicated that it will apply these bye-law provisions in such manner that “passive institutional investors” will be treated similarly to investment companies. For this purpose, “passive institutional investors” include all persons who are eligible, pursuant to Rule 13d-1(b)(1) under the U.S. Securities Exchange Act of 1934, to file a short-form statement on Schedule 13G, other than an insurance company or any parent holding company or control person of an insurance company.

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Applicable insurance laws may also have an anti-takeover effect.

Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where that insurance company is domiciled. Prior to granting approval of an application to acquire control of a domestic insurance company, a state insurance commissioner will consider such factors as the financial strength of the applicant, the integrity and competence of the applicant’s board of directors and executive officers, the acquiror’s plans for the future operations of the insurance company and any anti-competitive results that may arise from the consummation of the acquisition of control. Because any person who acquired control of Group would thereby acquire indirect control of its insurance company subsidiaries in the U.S., the insurance change of control laws of Delaware, California and Georgia would apply to such a transaction. This could have the effect of delaying or even preventing such a change of control.

Investors in Group may have more difficulty in protecting their interests than investors in a U.S. corporation.

The Companies Act 1981 of Bermuda (the “Companies Act”), differs in material respects from the laws applicable to U.S. corporations and their shareholders. The following is a summary of material differences between the Companies Act, as modified in some instances by provisions of Group’s bye-laws, and Delaware corporate law that could make it more difficult for investors in Group to protect their interests than investors in a U.S. corporation. Because the following statements are summaries, they do not address all aspects of Bermuda law that may be relevant to Group and its shareholders.

Alternate Directors. Group’s bye-laws provide, as permitted by Bermuda law, that each director may appoint an alternate director, who shall have the power to attend and vote at any meeting of the board of directors or committee at which that director is not personally present and to sign written consents in place of that director. Delaware law does not provide for alternate directors.

Committees of the Board of Directors. Group’s bye-laws provide, as permitted by Bermuda law, that the board of directors may delegate any of its powers to committees that the board appoints, and those committees may consist partly or entirely of non-directors. Delaware law allows the board of directors of a corporation to delegate many of its powers to committees, but those committees may consist only of directors.

Interested Directors. Bermuda law and Group’s bye-laws provide that if a director has a personal interest in a transaction to which the company is also a party and if the director discloses the nature of this personal interest at the first opportunity, either at a meeting of directors or in writing to the directors, then the company will not be able to declare the transaction void solely due to the existence of that personal interest and the director will not be liable to the company for any profit realized from the transaction. In addition, after a director has made the declaration of interest referred to above, he or she is allowed to be counted for purposes of determining whether a quorum is present and to vote on a transaction in which he or she has an interest, unless disqualified from doing so by the chairman of the relevant board meeting. Under Delaware law, an interested director could be held liable for a transaction in which that director derived an improper personal benefit. Additionally, under Delaware law, a corporation may be able to declare a transaction with an interested director to be void unless one of the following conditions is fulfilled:

·	the material facts as to the interested director’s relationship or interests are disclosed or are known to the board of directors and the board in good faith authorizes the transaction by the affirmative vote of a majority of the disinterested directors;

·	the material facts are disclosed or are known to the shareholders entitled to vote on the transaction and the transaction is specifically approved in good faith by the holders of a majority of the voting shares; or

·	the transaction is fair to the corporation as of the time it is authorized, approved or ratified.

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Transactions with Significant Shareholders. As a Bermuda company, Group may enter into business transactions with its significant shareholders, including asset sales, in which a significant shareholder receives, or could receive, a financial benefit that is greater than that received, or to be received, by other shareholders with prior approval from Group’s board of directors but without obtaining prior approval from the shareholders. In the case of an amalgamation, in which two or more companies join together and continue as a single company, a resolution of shareholders approved by a majority of at least 75% of the votes cast is required in addition to the approval of the board of directors, except in the case of an amalgamation with and between wholly-owned subsidiaries. If Group was a Delaware corporation, any business combination with an interested shareholder (which, for this purpose, would include mergers and asset sales of greater than 10% of Group’s assets that would otherwise be considered transactions in the ordinary course of business) within a period of three years from the time the person became an interested shareholder would require prior approval from shareholders holding at least 66 2/3% of Group’s outstanding common shares not owned by the interested shareholder, unless the transaction qualified for one of the exemptions in the relevant Delaware statute or Group opted out of the statute. For purposes of the Delaware statute, an “interested shareholder” is generally defined as a person who together with that person’s affiliates and associates owns, or within the previous three years did own, 15% or more of a corporation’s outstanding voting shares.

Takeovers. Under Bermuda law, if an acquiror makes an offer for shares of a company and, within four months of the offer, the holders of not less than 90% of the shares that are the subject of the offer tender their shares, the acquiror may give the nontendering shareholders notice requiring them to transfer their shares on the terms of the offer. Within one month of receiving the notice, dissenting shareholders may apply to the court objecting to the transfer. The burden is on the dissenting shareholders to show that the court should exercise its discretion to enjoin the transfer. The court will be unlikely to do this unless there is evidence of fraud or bad faith or collusion between the acquiror and the tendering shareholders aimed at unfairly forcing out minority shareholders. Under another provision of Bermuda law, the holders of 95% of the shares of a company (the “acquiring shareholders”) may give notice to the remaining shareholders requiring them to sell their shares on the terms described in the notice. Within one month of receiving the notice, dissenting shareholders may apply to the court for an appraisal of their shares. Within one month of the court’s appraisal, the acquiring shareholders are entitled either to acquire all shares involved at the price fixed by the court or cancel the notice given to the remaining shareholders. If shares were acquired under the notice at a price below the court’s appraisal price, the acquiring shareholders must either pay the difference in price or cancel the notice and return the shares thus acquired to the shareholder, who must then refund the purchase price. There are no comparable provisions under Delaware law.

Inspection of Corporate Records. Members of the general public have the right to inspect the public documents of Group available at the office of the Registrar of Companies and Group’s registered office, both in Bermuda. These documents include the memorandum of association, which describes Group’s permitted purposes and powers, any amendments to the memorandum of association and documents relating to any increase or reduction in Group’s authorized share capital. Shareholders of Group have the additional right to inspect Group’s bye-laws, minutes of general meetings of shareholders and audited financial statements that must be presented to the annual general meeting of shareholders. The register of shareholders of Group also is open to inspection by shareholders without charge, and to members of the public for a fee. Group is required to maintain its share register at its registered office in Bermuda. Group also maintains a branch register in the offices of its transfer agent in the U.S., which is open for public inspection as required under the Companies Act. Group is required to keep at its registered office a register of its directors and officers that is open for inspection by members of the public without charge. However, Bermuda law does not provide a general right for shareholders to inspect or obtain copies of any other corporate records. Under Delaware law, any shareholder may inspect or obtain copies of a corporation’s shareholder list and its other books and records for any purpose reasonably related to that person’s interest as a shareholder.

Shareholder’s Suits. The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders under legislation or judicial precedent in many U.S. jurisdictions. Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. However, the Bermuda courts ordinarily would be expected to follow English case law precedent, which would permit a shareholder to bring an action in the name of Group to remedy a wrong done to Group where the act complained of is alleged to be beyond the corporate power of Group or illegal or would result in the violation of Group’s

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memorandum of association or bye-laws. Furthermore, the court would give consideration to acts that are alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of Group’s shareholders than actually approved it. The winning party in an action of this type generally would be able to recover a portion of attorneys’ fees incurred in connection with the action. Under Delaware law, class actions and derivative actions generally are available to stockholders for breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In these types of actions, the court has discretion to permit the winning party to recover its attorneys’ fees.

Limitation of Liability of Directors and Officers. Group’s bye-laws provide that Group and its shareholders waive all claims or rights of action that they might have, individually or in the right of the Company, against any director or officer for any act or failure to act in the performance of that director’s or officer’s duties. However, this waiver does not apply to claims or rights of action that arise out of fraud or dishonesty. This waiver may have the effect of barring claims arising under U.S. federal securities laws. Under Delaware law, a corporation may include in its certificate of incorporation provisions limiting the personal liability of its directors to the corporation or its stockholders for monetary damages for many types of breach of fiduciary duty. However, these provisions may not limit liability for any breach of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, the authorization of unlawful dividends, stock repurchases or stock redemptions, or any transaction from which a director derived an improper personal benefit. Moreover, Delaware provisions would not be likely to bar claims arising under U.S. federal securities laws.

Indemnification of Directors and Officers. Group’s bye-laws provide that Group shall indemnify its directors or officers to the full extent permitted by law against all actions, costs, charges, liabilities, loss, damage or expense incurred or suffered by them by reason of any act done, concurred in or omitted in the conduct of Group’s business or in the discharge of their duties. Under Bermuda law, this indemnification may not extend to any matter involving fraud or dishonesty of which a director or officer may be guilty in relation to the company, as determined in a final judgment or decree not subject to appeal. Under Delaware law, a corporation may indemnify a director or officer who becomes a party to an action, suit or proceeding because of his position as a director or officer if (1) the director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and (2) if the action or proceeding involves a criminal offense, the director or officer had no reasonable cause to believe his or her conduct was unlawful.

Enforcement of Civil Liabilities. Group is organized under the laws of Bermuda. Some of our directors and officers may reside outside the U.S. A substantial portion of our assets are or may be located in jurisdictions outside the U.S. A person may not be able to effect service of process within the U.S. on directors and officers of Group and those experts who reside outside the U.S. A person also may not be able to recover against them or Group on judgments of U.S. courts or to obtain original judgments against them or Group in Bermuda courts, including judgments predicated upon civil liability provisions of the U.S. federal securities laws.

Dividends. Bermuda law does not allow a company to declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that a company, after the payment is made, would be unable to pay its liabilities as they become due, or that the realizable value of a company’s assets would be less, as a result of the payment, than the aggregate of its liabilities and its issued share capital and share premium accounts. The share capital account represents the aggregate par value of issued shares, and the share premium account represents the aggregate amount paid for issued shares over and above their par value. Under Delaware law, subject to any restrictions contained in a company’s certificate of incorporation, a company may pay dividends out of the surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Surplus is the amount by which the net assets of a corporation exceed its stated capital. Delaware law also provides that dividends may not be paid out of net profits at any time when stated capital is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.

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RISKS RELATING TO TAXATION

If U.S. tax law changes, our net income may be reduced.

In the last few years, some members of Congress have expressed concern about U.S. corporations that move their place of incorporation to low-tax jurisdictions. Also, some members of Congress have expressed concern over a competitive advantage that foreign-controlled insurers and reinsurers may have over U.S. controlled insurers and reinsurers due to the purchase of reinsurance by U.S. insurers from affiliates operating in some foreign jurisdictions, including Bermuda. It is possible that future legislation that would be disadvantageous to our Bermuda insurance subsidiaries could be enacted. If any such legislation were enacted, the U.S. tax burden on our Bermuda operations, or on some business ceded from our licensed U.S. insurance subsidiaries to some offshore reinsurers, could be increased. This would reduce our net income.

Group and/or Bermuda Re may be subject to U.S. corporate income tax, which would reduce our net income.

Bermuda Re. The income of Bermuda Re is a significant portion of our worldwide income from operations. We have established guidelines for the conduct of our operations that are designed to ensure that Bermuda Re is not engaged in the conduct of a trade or business in the U.S. Based on its compliance with those guidelines, we believe that Bermuda Re should not be required to pay U.S. corporate income tax, other than withholding tax on U.S. source dividend and interest income. However, if the Internal Revenue Service (“IRS”) were to successfully contend that Bermuda Re was engaged in a trade or business in the U.S., Bermuda Re would be required to pay U.S. corporate income tax on any income that is subject to the taxing jurisdiction of the U.S., and possibly the U.S. branch profits tax. Even if the IRS were to successfully contend that Bermuda Re was engaged in a U.S. trade or business, we believe that the U.S.-Bermuda tax treaty would preclude the IRS from taxing Bermuda Re’s income except to the extent that its income were attributable to a permanent establishment maintained by that subsidiary. We do not believe that Bermuda Re has a permanent establishment in the U.S. If the IRS were to successfully contend that Bermuda Re did have income attributable to a permanent establishment in the U.S., Bermuda Re would be subject to U.S. tax on that income.

Group. We conduct our operations in a manner designed to minimize our U.S. tax exposure. Based on our compliance with guidelines designed to ensure that we generate only immaterial amounts, if any, of income that is subject to the taxing jurisdiction of the U.S., we believe that we should be required to pay only immaterial amounts, if any, of U.S. corporate income tax, other than withholding tax on U.S. source dividend and interest income. However, if the IRS successfully contended that we had material amounts of income that is subject to the taxing jurisdiction of the U.S., we would be required to pay U.S. corporate income tax on that income, and possibly the U.S. branch profits tax and the imposition of such tax would reduce our net income.

If Bermuda Re became subject to U.S. income tax on its income, or if we became subject to U.S. income tax, our income could also be subject to the U.S. branch profits tax. In that event, Group and Bermuda Re would be subject to taxation at a higher combined effective rate than if they were organized as U.S. corporations. The combined effect of the 35% U.S. corporate income tax rate and the 30% branch profits tax rate is a net tax rate of 54.5%. The imposition of these taxes would reduce our net income.

Group and/or Bermuda Re may become subject to Bermuda tax, which would reduce our net income.

Group and Bermuda Re are not subject to income or capital gains taxes in Bermuda. Both companies have received an assurance from the Bermuda Minister of Finance under The Exempted Undertakings Tax Protection Act 1966 of Bermuda to the effect that if any legislation is enacted in Bermuda that imposes any tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then that tax will not apply to us or to any of our operations or our shares, debentures or other obligations until March 28, 2016. This assurance does not prevent the application of any of those taxes to persons ordinarily resident in Bermuda and does not prevent the imposition of any tax payable in accordance with the provisions of The Land Tax Act 1967 of Bermuda or otherwise payable in relation to any land leased to Group or Bermuda Re. There are currently no procedures

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for extending these assurances. As a result, Group and Bermuda Re could be subject to taxes in Bermuda after March 28, 2016, which would reduce our net income.

Our net income will be reduced if U.S. excise and withholding taxes are increased.

Bermuda Re is subject to an excise tax on reinsurance and insurance premiums with respect to risks located in the U.S. In addition, Bermuda Re may be subject to withholding tax on dividend and interest income from U.S. sources. These taxes could increase and other taxes could be imposed in the future on Bermuda Re’s business, which would reduce our net income.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Everest Re’s corporate offices are located in approximately 230,500 square feet of leased office space in Liberty Corner, New Jersey. Bermuda Re’s corporate offices are located in approximately 3,600 total square feet of leased office space in Hamilton, Bermuda. The Company’s other thirteen locations occupy a total of approximately 106,900 square feet, all of which are leased. Management believes that the above-described office space is adequate for its current and anticipated needs.

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of business, the Company is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine the Company’s rights and obligations under insurance, reinsurance and other contractual agreements. In some disputes, the Company seeks to enforce its rights under an agreement or to collect funds owing to it. In other matters, the Company is resisting attempts by others to collect funds or enforce alleged rights. These disputes arise from time to time and are ultimately resolved through both informal and formal means, including negotiated resolution, arbitration and litigation. In all such matters, the Company believes that its positions are legally and commercially reasonable. While the final outcome of these matters cannot be predicted with certainty, the Company does not believe that any of these matters, when finally resolved, will have a materially adverse effect on the Company’s financial position or liquidity. However, an adverse resolution of one or more of these items in any one quarter or fiscal year could have a materially adverse effect on the Company’s results of operations in that period.

ITEM 4. RESERVED

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information.

The common shares of Group trade on the New York Stock Exchange under the symbol, “RE”. The quarterly high and low market prices of Group’s common shares for the periods indicated were:

	2010				2009
	High		Low		High		Low
First Quarter	$	86.60	$	79.53	$	76.54	$	58.69
Second Quarter		83.40		69.57		75.54		66.36
Third Quarter		86.47		69.24		88.99		70.00
Fourth Quarter		88.82		81.61		92.49		83.09

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Number of Holders of Common Shares.

The number of record holders of common shares as of February 1, 2011 was 76. That number does not include the beneficial owners of shares held in “street” name or held through participants in depositories, such as The Depository Trust Company.

Dividend History and Restrictions.

In 1995, the Board of Directors of the Company established a policy of declaring regular quarterly cash dividends and has paid a regular quarterly dividend in each quarter since the fourth quarter of 1995. The Company declared and paid its regular quarterly cash dividend of $0.48 per share for each of the four quarters of 2010 and 2009. The Company’s Board of Directors declared a dividend of $0.48 per share, payable on or before March 23, 2011 to shareholders of record on March 9, 2011.

The declaration and payment of future dividends, if any, by the Company will be at the discretion of the Board of Directors and will depend upon many factors, including the Company’s earnings, financial condition, business needs and growth objectives, capital and surplus requirements of its operating subsidiaries, regulatory restrictions, rating agency considerations and other factors. As an insurance holding company, the Company is partially dependent on dividends and other permitted payments from its subsidiaries to pay cash dividends to its shareholders. The payment of dividends to Group by Holdings and to Holdings by Everest Re is subject to Delaware regulatory restrictions and the payment of dividends to Group by Bermuda Re is subject to Bermuda insurance regulatory restrictions. See “Regulatory Matters – Dividends” and ITEM 8, “Financial Statements and Supplementary Data” - Note 15 of Notes to Consolidated Financial Statements.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Issuer Purchases of Equity Securities
	(a)		(b)		(c)		(d)
							Maximum Number (or
					Total Number of		Approximate Dollar
					Shares (or Units)		Value) of Shares (or
					Purchased as Part		Units) that May Yet
	Total Number of				of Publicly		Be Purchased Under
	Shares (or Units)		Average Price Paid		Announced Plans or		the Plans or
Period	Purchased		per Share (or Unit)		Programs		Programs (1)
January 1 - 31, 2010		-	$	-		-		3,470,563
February 1 - 28, 2010		414,112	$	82.9986		401,718		8,068,845
March 1 - 31, 2010		160,588	$	85.2870		160,588		7,908,257
April 1 - 30, 2010		-	$	-		-		7,908,257
May 1 - 31, 2010		1,365,724	$	76.3182		1,365,724		6,542,533
June 1 - 30, 2010		1,314,768	$	72.9026		1,314,768		5,227,765
July 1 - 31, 2010		-	$	-		-		5,227,765
August 1 - 31, 2010		842,036	$	80.0132		842,036		4,385,729
September 1 - 30, 2010		395,457	$	82.6359		391,631		3,994,098
October 1 - 31, 2010		-	$	-		-		3,994,098
November 1 - 30, 2010		589,361	$	87.7827		589,107		3,404,991
December 1 - 31, 2010		-	$	-		-		3,404,991
Total		5,082,046	$	-		5,065,572		3,404,991

(1) On September 21, 2004, the Company’s board of directors approved an amended share repurchase program authorizing the Company and/or its subsidiary Holdings to purchase up to an aggregate of 5,000,000 of the Company’s common shares through open market transactions, privately negotiated transactions or both. On July 21, 2008, the Company’s executive committee of the board of directors approved an amendment to the September 21, 2004 share repurchase program authorizing the Company and/or its subsidiary Holdings to purchase up to an aggregate of 10,000,000 of the Company’s common shares (recognizing that the number of shares authorized for repurchase has been reduced by those shares that have already been purchased) in open market transactions, privately negotiated transactions or both. On February 24, 2010, the Company’s executive committee of the board of directors approved an amendment to the September 21, 2004, share repurchase program and the July 21, 2008, amendment authorizing the Company and/or its subsidiary Holdings, to purchase up to 15,000,000 of the Company’s common shares (recognizing that the number of shares authorized for repurchase has been reduced by those shares that have already been purchased) in open market transactions, privately negotiated transactions or both.

Recent Sales of Unregistered Securities.

None.

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Performance Graph.

The following Performance Graph compares cumulative total shareholder returns on the Common Shares (assuming reinvestment of dividends) from December 31, 2005 through December 31, 2010, with the cumulative total return of the Standard & Poor’s 500 Index and the Standard & Poor’s Insurance (Property and Casualty) Index.

	12/05	12/06	12/07	12/08	12/09	12/10

Everest Re Group, Ltd.	100.00	98.38	102.58	79.67	92.03	93.32
S&P 500	100.00	115.80	122.16	76.96	97.33	111.99
S&P Property & Casualty Insurance	100.00	112.87	97.11	68.55	77.01	83.90


*$100 invested on 12/31/05 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

Copyright© 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

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ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated GAAP financial data of the Company as of and for the years ended December 31, 2010, 2009, 2008, 2007, and 2006 were derived from the audited consolidated financial statements of the Company. The following financial data should be read in conjunction with the Consolidated Financial Statements and accompanying notes.

	Years Ended December 31,
(Dollars in millions, except per share amounts)	2010			2009			2008			2007			2006
Operating data:
Gross written premiums	$	4,200.7		$	4,129.0		$	3,678.1		$	4,077.6		$	4,000.9
Net written premiums		3,945.6			3,929.8			3,505.2			3,919.4			3,875.7
Premiums earned		3,934.6			3,894.1			3,694.3			3,997.5			3,853.2
Net investment income		653.5			547.8			565.9			682.4			629.4
Realized gain on debt repurchase		-			78.3			-			-			-
Net realized capital gains (losses)		101.9			(2.3	)		(695.8	)		86.3			35.1
Incurred losses and loss adjustment
expenses (including catastrophes)		2,945.7			2,374.1			2,439.0			2,548.1			2,434.4
Net catastrophe losses (1)		544.1			65.2			307.2			126.5			283.0
Commission, brokerage, taxes and fees		931.9			928.3			930.7			961.8			883.3
Other underwriting expenses		166.3			167.2			148.5			139.5			111.4
Corporate expenses (7)		14.9			17.6			13.8			13.1			26.5
Interest, fees and bond issue cost
amortization expense		55.8			72.1			79.2			91.6			69.9
Income (loss) before taxes		591.2			939.3			(83.6	)		1,028.0			991.8
Income tax expense (benefit)		(19.5	)		132.3			(64.8	)		188.7			150.9
Net income (loss) (2)		610.8			807.0			(18.8	)		839.3			840.8

EARNINGS (LOSS) PER COMMON SHARE:
Basic (3)	$	10.73		$	13.26		$	(0.30	)	$	13.25		$	12.95

Diluted (4)	$	10.70		$	13.22		$	(0.30	)	$	13.15		$	12.84

Dividends declared	$	1.92		$	1.92		$	1.92		$	1.92		$	0.60

Certain GAAP financial ratios: (5)
Loss ratio		74.9	%		61.0	%		66.0	%		63.7	%		63.2	%
Other underwriting expense ratio		27.9	%		28.1	%		29.2	%		27.6	%		25.8	%
Combined ratio (2)		102.8	%		89.1	%		95.2	%		91.3	%		89.0	%

Balance sheet data (at end of period):
Total investments and cash	$	15,365.0		$	14,918.8		$	13,714.3		$	14,936.2		$	13,957.1
Total assets		18,408.0			18,001.3			16,846.6			17,999.5			17,107.6
Loss and LAE reserves		9,340.2			8,937.9			8,840.7			9,040.6			8,840.1
Total debt		868.1			1,018.0			1,179.1			1,178.9			995.6
Total liabilities		12,124.5			11,899.6			11,886.2			12,314.7			11,999.9
Shareholders' equity		6,283.5			6,101.7			4,960.4			5,684.8			5,107.7
Book value per share (6)		115.45			102.87			80.77			90.43			78.53
_____________________________

(1)

Catastrophe losses are presented net of reinsurance and reinstatement premiums. Effective April 1, 2010, a catastrophe is defined, for purposes of the consolidated Selected Financial Data, as an event that caused a loss on property exposures before reinsurance of at least $10.0 million before corporate level reinsurance and taxes. All prior periods reflect a catastrophe as a property event with expected reported losses of at least $5.0 million before corporate level reinsurance and taxes. Catastrophe insurance provides coverage for one event. When limits are exhausted, some contractual arrangements provide for the availability of additional coverage upon the payment of additional premium. This additional premium is referred to as reinstatement premium.

(2)	Some amounts may not reconcile due to rounding.

(3)	Based on weighted average basic common shares outstanding of 56.6 million, 60.7 million, 61.7 million, 63.1 million and 64.7 million for 2010, 2009, 2008, 2007 and 2006, respectively.

(4)	Based on weighted average diluted common shares outstanding of 56.8 million, 60.8 million, 62.0 million, 63.6 million, and 65.3 million for 2010, 2009, 2008, 2007 and 2006, respectively.

(5)

Loss ratio is the GAAP losses and LAE incurred as a percentage of GAAP net premiums earned. Underwriting expense ratio is the GAAP commissions, brokerage, taxes, fees and other underwriting expenses as a percentage of GAAP net premiums earned. Combined ratio is the sum of the loss ratio and underwriting expense ratio.

(6)	Based on $54.4 million, 59.3 million, 61.4 million, 62.9 million and 65.0 million common shares outstanding for December 31, 2010, 2009, 2008, 2007 and 2006, respectively.

(7)	In previous years, corporate expenses were included as part of the other underwriting expenses and the other underwriting expense ratio. Prior years have been adjusted to reflect the change.

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following is a discussion and analysis of our results of operations and financial condition. It should be read in conjunction with the Consolidated Financial Statements and accompanying notes thereto presented under ITEM 8, “Financial Statements and Supplementary Data”.

Industry Conditions.

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Financial Summary.

We monitor and evaluate our overall performance based upon financial results. The following table displays a summary of the consolidated net income (loss), ratios and shareholders’ equity for the periods indicated.

	Years Ended December 31,									Percentage Increase/(Decrease)
(Dollars in millions)	2010			2009			2008				2010/2009			2009/2008
Gross written premiums	$	4,200.7		$	4,129.0		$	3,678.1			1.7	%		12.3	%
Net written premiums		3,945.6			3,929.8			3,505.2			0.4	%		12.1	%

REVENUES:
Premiums earned	$	3,934.6		$	3,894.1		$	3,694.3			1.0	%		5.4	%
Net investment income		653.5			547.8			565.9			19.3	%		-3.2	%
Net realized capital gains (losses)		101.9			(2.3	)		(695.8	)	NM				-99.7	%
Realized gain on debt repurchase		-			78.3			-			-100.0	%	NM
Net derivative gain (loss)		(1.1	)		3.2			(20.9	)		-134.9	%		-115.3	%
Other income (expense)		16.9			(22.5	)		(15.9	)		-175.3	%		41.6	%
Total revenues		4,705.8			4,498.6			3,527.6			4.6	%		27.5	%

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		2,945.7			2,374.1			2,439.0			24.1	%		-2.7	%
Commission, brokerage, taxes and fees		931.9			928.3			930.7			0.4	%		-0.3	%
Other underwriting expenses		166.3			167.2			148.5			-0.6	%		12.5	%
Corporate expenses		14.9			17.6			13.8			-14.6	%		27.5	%
Interest, fees and bond issue cost amortization expense		55.8			72.1			79.2			-22.5	%		-9.0	%
Total claims and expenses		4,114.6			3,559.3			3,611.2			15.6	%		-1.4	%

INCOME (LOSS) BEFORE TAXES		591.2			939.3			(83.6	)		-37.1	%	NM
Income tax expense (benefit)		(19.5	)		132.3			(64.8	)		-114.7	%	NM
NET INCOME (LOSS)	$	610.8		$	807.0		$	(18.8	)		-24.3	%	NM

RATIOS:										Point Change
Loss ratio		74.9	%		61.0	%		66.0	%		13.9			(5.0	)
Commission and brokerage ratio		23.7	%		23.8	%		25.2	%		(0.1	)		(1.4	)
Other underwriting expense ratio		4.2	%		4.3	%		4.0	%		(0.1	)		0.3
Combined ratio		102.8	%		89.1	%		95.2	%		13.7			(6.1	)

	At December 31,									Percentage Increase/(Decrease)
(Dollars in millions, except per share amounts)		2010			2009			2008			2010/2009			2009/2008
Balance sheet data:
Total investments and cash	$	15,365.0		$	14,918.8		$	13,714.3			3.0	%		8.8	%
Total assets		18,408.0			18,001.3			16,846.6			2.3	%		6.9	%
Loss and loss adjustment expense reserves		9,340.2			8,937.9			8,840.7			4.5	%		1.1	%
Total debt		868.1			1,018.0			1,179.1			-14.7	%		-13.7	%
Total liabilities		12,124.5			11,899.6			11,886.2			1.9	%		0.1	%
Shareholders' equity		6,283.5			6,101.7			4,960.4			3.0	%		23.0	%
Book value per share		115.45			102.87			80.77			12.2	%		27.4	%

(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)

Revenues.

Premiums. Gross written premiums increased by $71.8 million, or 1.7%, in 2010, compared to 2009, reflecting an increase of $63.7 million in our reinsurance business and $8.1 million increase in our insurance business. The increase in reinsurance premiums was primarily the result of increased writings in our U.S. treaty property and international books of business, driven by a combination of new business, increased participations on renewal contracts, rate increases in select areas, and economic and insurance growth in several regions. The increase in insurance premiums was due to increased writings in professional liability and California workers’ compensation business, partially offset by a reduction in the audit premium accrual for workers’ compensation business. Net written premiums increased $15.8 million, or 0.4%, in 2010 compared to 2009. The lower increase in net written premiums relative to the change in gross written premiums was due to the increased use of reinsurance on several large programs in the insurance book. Premiums earned increased $40.5 million, or 1.0%, in 2010, compared to 2009. The change in net premiums earned is relatively consistent with the increase in net written premiums.

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Gross written premiums increased by $450.8 million, or 12.3%, in 2009 compared to 2008, reflecting an increase of $380.1 million in our reinsurance business and $70.8 million in our insurance business. The increased reinsurance business was primarily attributable to increased rates on property business, in both the international and U.S. markets, new crop hail quota share treaty business, expanded participation on renewal contracts and new writings as ceding companies continued to favor reinsurers, such as Everest, with strong financial ratings. The increase in insurance premiums were primarily in the workers’ compensation and financial institution D&O and E&O lines of business, which were new offerings for us in 2009. Net written premiums increased $424.5 million, or 12.1%, in 2009 compared to 2008. The increases in net written premiums are primarily due to the increase in gross written premiums. Premiums earned increased $199.8 million, or 5.4%, in 2009 compared to 2008, reflective of the higher net written premiums. The change in net premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period, whereas written premiums are recorded at the initiation of the coverage period.

Net Investment Income. Net investment income increased $105.7 million, or 19.3%, in 2010 compared with net investment income of $547.8 million in 2009, primarily as a result of an $89.7 million increase in investment income from our limited partnerships. Net pre-tax investment income, as a percentage of average invested assets, was 4.5% in 2010 compared to 3.8% for 2009. The variance in this yield was primarily the result of fluctuations in our limited partnership income.

Net investment income decreased by 3.2% in 2009, compared to 2008, due primarily to lower yields on new money, partially offset by a decrease in losses from our limited partnership investments that invest in public and non-public securities, both equity and debt. As a result, net pre-tax investment income, as a percentage of average invested assets, was 3.8% for 2009 compared to 4.0% for 2008.

Net Realized Capital Gains (Losses). Net realized capital gains were $101.9 million in 2010 compared to net realized capital losses of $2.3 million and $695.8 million in 2009 and 2008, respectively. Of the $101.9 million, there were $70.4 million of gains in fair value re-measurements and $34.5 million from net realized capital gains from sales on our fixed maturity and equity securities, which were partially offset by $3.0 million of other-than-temporary impairments. The net realized capital loss of $2.3 million in 2009, was the result of $29.3 million of net realized capital losses from sales and $13.2 million in other-than-temporary impairments on our available for sale fixed maturity securities, partially offset by a $40.2 million gain in fair value re-measurements. The net realized capital losses in 2008 were primarily the result of the credit crisis impacting the global financial markets, which drove down the values of equity and fixed income securities. The components of the $695.8 million of realized losses in 2008 were $276.0 million of losses in fair value re-measurements, $243.3 million of net realized capital losses from sales and $176.5 million in other-than-temporary impairments on our available for sale fixed maturity securities.

Realized Gain on Debt Repurchase. On March 19, 2009, we commenced a cash tender offer for any and all of the 6.60% fixed to floating rate long term subordinated notes due 2067. Upon expiration of the tender offer, we had reduced our outstanding debt by $161.4 million, which resulted in a pre-tax gain on debt repurchase of $78.3 million.

Net Derivative Gain (Loss). In 2005 and prior, we sold seven equity index put option contracts, which are outstanding. These contracts meet the definition of a derivative in accordance with FASB guidance and as such, are fair valued each quarter with the change recorded as net derivative gain or loss in the consolidated statements of operations and comprehensive income (loss). As a result of these adjustments in value, we recognized a net derivative loss of $1.1 million in 2010, a net derivative gain of $3.2 million in 2009 and a net derivative loss of $20.9 million in 2008. The change in the fair value of these equity index put option contracts is indicative of the change in the financial markets over the same periods.

Other Income (Expense). We recorded other income of $16.9 million and other expense of $22.5 million and $15.9 million in 2010, 2009 and 2008, respectively. The changes were primarily the result of fluctuations in foreign currency exchange rates for the corresponding periods.

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Claims and Expenses.

Incurred Losses and Loss Adjustment Expenses. The following table presents our incurred losses and loss adjustment expenses (“LAE”) for the periods indicated.

	Years Ended December 31,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2010
Attritional (a)	$	2,390.1			60.8	%		$	(15.4	)		-0.4	%		$	2,374.7			60.4	%
Catastrophes (b)		586.5			14.9	%			(15.4	)		-0.4	%			571.1			14.5	%
A&E		-			0.0	%			-			0.0	%			-			0.0	%
Total	$	2,976.6			75.7	%		$	(30.8	)		-0.8	%		$	2,945.7			74.9	%

2009
Attritional (a)	$	2,181.4			56.0	%		$	124.8			3.2	%		$	2,306.2			59.2	%
Catastrophes		63.8			1.6	%			3.6			0.1	%			67.4			1.7	%
A&E		-			0.0	%			0.4			0.0	%			0.4			0.0	%
Total	$	2,245.2			57.7	%		$	128.8			3.3	%		$	2,374.1			61.0	%

2008
Attritional (a)	$	2,050.3			55.5	%		$	24.4			0.7	%		$	2,074.7			56.2	%
Catastrophes		353.8			9.6	%			10.5			0.3	%			364.3			9.9	%
A&E		-			0.0	%			-			0.0	%			-			0.0	%
Total	$	2,404.1			65.1	%		$	34.9			0.9	%		$	2,439.0			66.0	%

Variance 2010/2009
Attritional (a)	$	208.7			4.8		pts	$	(140.2	)		(3.6	)	pts	$	68.5			1.2		pts
Catastrophes (b)		522.7			13.3		pts		(19.0	)		(0.5	)	pts		503.7			12.8		pts
A&E		-			-		pts		(0.4	)		-		pts		(0.4	)		-		pts
Total	$	731.4			18.0		pts	$	(159.6	)		(4.1	)	pts	$	571.6			13.9		pts

Variance 2009/2008
Attritional (a)	$	131.1			0.5		pts	$	100.4			2.5		pts	$	231.5			3.0		pts
Catastrophes		(290.0	)		(8.0	)	pts		(6.8	)		(0.2	)	pts		(296.8	)		(8.2	)	pts
A&E		-			-		pts		0.4			-		pts		0.4			-		pts
Total	$	(158.9	)		(7.4	)	pts	$	94.0			2.4		pts	$	(64.9	)		(5.0	)	pts

(a) Attritional losses exclude catastrophe and A&E losses.
(b) Effective with the 2010 reporting period, a catastrophe is a property event with expected reported losses of at least $10.0 million.
All prior periods reflect a catastrophe as a property event with expected reported losses of at least $5.0 million.
(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by $571.6 million, or 24.1%, for the year ended December 31, 2010 compared to the same period in 2009. Of the $571.6 million increase, current year catastrophe losses increased $522.7 million (13.3 points), period over period, primarily due to losses on the Chilean earthquake, New Zealand earthquake, Australian hailstorms and floods, and the Canadian hailstorm. The current year attritional losses also increased $208.7 million (4.8 points) reflecting higher expected loss ratios on current year business due to prevailing market conditions. Partially offsetting these higher current year losses was a decrease of $159.6 million, or 4.1 points, in prior year loss development as the 2010 reserve studies indicated net favorable reserve development and loss estimates for prior year catastrophes were reduced.

Incurred losses and LAE were lower by $64.9 million, or 2.7%, in 2009 compared to 2008. The absence, in 2009, of any large catastrophe losses as experienced in 2008, reduced the loss ratio 8.0 points, or $290.0 million, period over period. Partially offsetting the reduction in catastrophe losses was the increase in both current and prior years’ attritional losses. The $131.1 million increase in current year attritional losses was principally due to the increase in earned premium from 2008 to 2009. The $100.4 million increase in prior years’ attritional losses was primarily due to increased reserves for exposure related to sub-prime and contractors’ liability.

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Commission, Brokerage, Taxes and Fees. Commission, brokerage, taxes and fees increased by $3.5 million, or 0.4%, for the year ended December 31, 2010 compared to the same period in 2009. The change was primarily the result of an increase in premiums earned, as the commission ratio, year over year, was comparable.

Commission, brokerage, taxes and fees decreased by $2.4 million, or 0.3%, in 2009 compared to the same period in 2008. The change in this directly variable expense was influenced by reduction in contingent commissions and changes in the mix of business.

Other Underwriting Expenses. Other underwriting expenses, which have remained stable in relation to premium volume, were $166.3 million, $167.2 million and $148.5 million in 2010, 2009 and 2008, respectively.

Corporate Expenses. Corporate expenses, which are expenses that are not allocated to segments, were $14.9 million, $17.6 million and $13.8 million for the years ended December 31, 2010, 2009 and 2008, respectively. These expenses were previously included as underwriting expenses and therefore included in the other underwriting expense ratio. Effective January 1, 2010, these expenses were removed from the calculation of the other underwriting expense ratio and prior periods were recalculated to conform.

Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $55.8 million and $72.1 million in 2010 and 2009, respectively. The decrease was primarily due to the combination of the repurchase of debt in March 2009 and the maturing of debt in 2010.

Interest, fees and other bond amortization was $72.1 million and $79.2 million in 2009 and 2008, respectively. The decrease, period over period, was primarily due to the partial repurchase of our long term subordinated notes in March 2009.

Income Tax Expense (Benefit). We had income tax benefit of $19.5 million in 2010, an income tax expense of $132.3 million in 2009 and an income tax benefit of $64.8 million in 2008. Our income tax is primarily a function of the statutory tax rates and corresponding pre-tax income in the jurisdictions where we operate, coupled with the impact from tax-preferenced investment income. The taxes for 2010 included a $48.9 million benefit resulting from a favorable Internal Revenue Service (“IRS”) audit settlement. Absent these types of unusual items, variations in our effective tax rate generally result from changes in the relative levels of pre-tax income among jurisdictions with different tax rates.

Net Income (Loss).

Our net income was $610.8 million and $807.0 million in 2010 and 2009, respectively. The decrease was primarily driven by a few large catastrophe losses in 2010 compared to no similar catastrophe events in 2009, partially offset by an increase in net realized capital gains and a reduction in income taxes, in addition to the other components discussed above.

Our net income was $807.0 million, in 2009, compared to a net loss of $18.8 million, in 2008. This increase was primarily driven by smaller after-tax net realized capital losses and fewer catastrophe losses in 2009 compared to 2008.

Ratios.

Our combined ratio increased by 13.7 points to 102.8% in 2010 compared to 89.1% in 2009. The loss ratio component increased 13.9 points in 2010 over the same period last year, principally due to the increase in current year catastrophe losses as a result of the Chilean earthquake, Australian hailstorms and floods, New Zealand earthquake and the Canadian hailstorm. Both the other underwriting expense ratio component and the commission and brokerage ratio component remained relatively flat over the same periods last year.

Our combined ratio decreased by 6.1 points to 89.1% in 2009 compared to 95.2% in 2008. The loss ratio component decreased 5.0 points in 2009 compared to the same period last year, principally due to the significant decrease in catastrophe losses. The commission and brokerage ratio component decreased by 1.4 points in 2009 compared to the same period last year, due to mix of business, while the other

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underwriting expense ratio component increased by 0.3 points in 2009 compared to the same period last year.

Shareholders’ Equity.

Shareholders’ equity increased by $181.8 million to $6,283.5 million at December 31, 2010 from $6,101.7 million at December 31, 2009, principally as a result of $610.8 million of net income, $60.2 million of unrealized appreciation, net of tax, on investments, share-based compensation transactions of $17.8 million and $1.9 million of foreign currency translation adjustments, partially offset by repurchases of 5.1 million common shares for $398.6 million, $108.5 million of shareholder dividends and $1.8 million of benefit plan obligation adjustments.

Shareholders’ equity increased by $1,141.4 million to $6,101.7 million at December 31, 2009 from $4,960.4 million at December 31, 2008, principally as a result of $807.0 million of net income, $529.9 million of unrealized appreciation on investments, net of tax, $83.8 million of foreign currency translation adjustments and share-based compensation transactions of $22.5 million, partially offset by 2.4 million common share repurchases for $190.6 million and $116.9 million of shareholder dividends.

Consolidated Investment Results

Net Investment Income.

Net investment income increased by 19.3% to $653.5 million in 2010 compared to $547.8 million in 2009, primarily due to an increase in income from our limited partnership investments and increased dividend income from equities due to our expanded equity portfolio.

Net investment income decreased 3.2% to $547.8 million in 2009 from $565.9 million in 2008, primarily due to lower yields on new money, partially offset by a decrease in losses from our limited partnership investments that invest in public and non-public securities, both equity and debt.

The following table shows the components of net investment income for the periods indicated.

	Years Ended December 31,
(Dollars in millions)	2010			2009			2008
Fixed maturities	$	581.9		$	570.8		$	543.4
Equity securities		12.2			3.6			19.9
Short-term investments and cash		0.2			6.0			52.1
Other invested assets
Limited partnerships		70.7			(19.0	)		(42.2	)
Other		1.3			0.1			2.3
Total gross investment income		666.2			561.4			575.5
Interest debited (credited) and other expense		(12.8	)		(13.6	)		(9.6	)
Total net investment income	$	653.5		$	547.8		$	565.9

(Some amounts may not reconcile due to rounding.)

The following table shows a comparison of various investment yields for the periods indicated.

	2010	2009	2008
Imbedded pre-tax yield of cash and invested assets at December 31	3.9%	4.1%	4.5%
Imbedded after-tax yield of cash and invested assets at December 31	3.5%	3.6%	4.0%

Annualized pre-tax yield on average cash and invested assets	4.5%	3.8%	4.0%
Annualized after-tax yield on average cash and invested assets	3.9%	3.5%	3.4%

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Because of our historical income orientation, we have generally managed our investments to maximize reportable income. The following table provides a comparison of our total return by asset class relative to broadly accepted industry benchmarks for the periods indicated:

	2010	2009	2008
Fixed income portfolio total return	5.3%	9.4%	0.3%
Barclay's Capital - U.S. aggregate index	6.5%	5.9%	5.2%

Common equity portfolio total return	15.4%	28.9%	-40.9%
S&P 500 index	15.1%	26.5%	-37.0%

Other invested asset portfolio total return	18.7%	-1.8%	-7.4%

The pre-tax equivalent total return for the bond portfolio was approximately 5.7%, 10.1% and 1.0%, respectively, in 2010, 2009 and 2008. The pre-tax equivalent return adjusts the yield on tax-exempt bonds to the fully taxable equivalent.

Net Realized Capital Gains (Losses).

The following table presents the composition of our net realized capital gains (losses) for the periods indicated.

	Years Ended December 31,										2010/2009			2009/2008
(Dollars in millions)	2010			2009			2008			Variance			Variance
Gains (losses) from sales:
Fixed maturity securities, market value
Gains	$	140.2		$	19.7		$	14.5		$	120.5		$	5.2
Losses		(112.8	)		(65.4	)		(27.2	)		(47.4	)		(38.2	)
Total		27.5			(45.7	)		(12.6	)		73.2			(33.1	)

Fixed maturity securities, fair value
Gains		0.8			0.8			0.1			-			0.7
Losses		-			(0.2	)		-			0.2			(0.2	)
Total		0.8			0.7			0.1			0.1			0.6

Equity securities, market value
Gains		0.1			8.1			-			(8.0	)		8.1
Losses		-			-			-			-			-
Total		0.1			8.1			-			(8.0	)		8.1

Equity securities, fair value
Gains		11.4			8.4			23.4			3.0			(15.0	)
Losses		(5.3	)		(0.9	)		(254.1	)		(4.4	)		253.2
Total		6.1			7.5			(230.6	)		(1.4	)		238.1

Total net realized capital gains (losses) from sales
Gains		152.6			37.0			38.0			115.6			(1.0	)
Losses		(118.1	)		(66.5	)		(281.3	)		(51.6	)		214.8
Total		34.5			(29.4	)		(243.3	)		63.9			213.9

Other-than-temporary impairments:		(3.0	)		(13.2	)		(176.5	)		10.2			163.3

Gains (losses) from fair value adjustments:
Fixed maturities, fair value		15.1			9.3			1.5			5.8			7.8
Equity securities, fair value		55.3			30.9			(277.5	)		24.4			308.4
Total		70.4			40.2			(276.0	)		30.2			316.2

Total net realized capital gains (losses)	$	101.9		$	(2.3	)	$	(695.8	)	$	104.2		$	693.5

(Some amounts may not reconcile due to rounding.)

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Net realized capital gains were $101.9 million in 2010 compared to net realized capital losses of $2.3 million and $695.8 million in 2009 and 2008, respectively. In 2010, we recorded $70.4 million of gains due to fair value re-measurements on fixed maturity and equity securities, $34.5 million of net realized capital gains from sales of fixed maturity and equity securities, partially offset by $3.0 million of other-than-temporary impairments on fixed maturity securities. The gains on the sales of fixed maturity securities included selling securities in foreign currencies, which will reduce our exposure to currency fluctuations in the future. The losses included the impact of selling part of our municipal bond portfolio in the latter part of the year as credit concerns arose in this market sector. We will be able to carry these realized losses back for income tax purposes to offset previously realized gains. This carry back availability expired at the end of 2010. In 2009, we recorded $29.3 million of net realized capital losses from sales of fixed maturity and equity securities and $13.2 million of other-than-temporary impairments on fixed maturity securities, partially offset by $40.2 million of gains due to fair value re-measurements on fixed maturity and equity securities. In 2008, we recorded $276.0 million in losses due to fair value re-measurements primarily on equity securities as a result of the global financial markets credit crisis, $243.3 million of losses from sales of our equity portfolio and $176.5 million of other-than-temporary impairments on our available for sale fixed maturity securities.

Segment Results.

Through our subsidiaries, we operate in five segments: U.S. Reinsurance, U.S. Insurance, Specialty Underwriting, International and Bermuda. The U.S. Reinsurance operation writes property and casualty reinsurance, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies within the U.S. The U.S. Insurance operation writes property and casualty insurance primarily through general agents, brokers and surplus lines brokers within the U.S. The Specialty Underwriting operation writes A&H, marine, aviation and surety business within the U.S. and worldwide through brokers and directly with ceding companies. The International operation writes non-U.S. property and casualty reinsurance through Everest Re’s branches in Canada and Singapore and offices in Brazil, Miami and New Jersey. The Bermuda operation provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers through brokers and directly with ceding companies from its Bermuda office and reinsurance to the United Kingdom and European markets through its UK branch and the Company’s Ireland subsidiary.

Underwriting results include earned premium less losses and LAE incurred, commission and brokerage expenses and other underwriting expenses. We measure our underwriting results using ratios, in particular loss, commission and brokerage and other underwriting expense ratios, which respectively, divide incurred losses, commissions and brokerage and other underwriting expenses by premiums earned. We utilize inter-affiliate reinsurance, although such reinsurance does not materially impact segment results, as business is generally reported within the segment in which the business was first produced.

Our loss and LAE reserves are our best estimate of our ultimate liability for unpaid claims. We re-evaluate our estimates on an ongoing basis, including all prior period reserves, taking into consideration all available information and, in particular, recently reported loss claim experience and trends related to prior periods. Such re-evaluations are recorded in incurred losses in the period in which re-evaluation is made.

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The following discusses the underwriting results for each of our segments for the periods indicated.

U.S. Reinsurance.

The following table presents the underwriting results and ratios for the U.S. Reinsurance segment for the periods indicated.

	Years Ended December 31,									2010/2009						2009/2008
(Dollars in millions)	2010			2009			2008			Variance			% Change			Variance			% Change
Gross written premiums	$	1,143.7		$	1,172.3		$	957.9		$	(28.6	)		-2.4	%	$	214.4			22.4	%
Net written premiums		1,145.2			1,167.2			948.8			(22.1	)		-1.9	%		218.4			23.0	%

Premiums earned	$	1,129.3		$	1,150.3		$	1,050.3		$	(21.0	)		-1.8	%	$	100.0			9.5	%
Incurred losses and LAE		706.3			574.8			798.2			131.6			22.9	%		(223.4	)		-28.0	%
Commission and brokerage		284.6			272.2			273.3			12.4			4.6	%		(1.2	)		-0.4	%
Other underwriting expenses		33.9			36.2			32.2			(2.2	)		-6.2	%		4.0			12.4	%
Underwriting gain (loss)	$	104.5		$	267.2		$	(53.3	)	$	(162.7	)		-60.9	%	$	320.6		NM

													Point Chg						Point Chg
Loss ratio		62.5	%		50.0	%		76.0	%					12.5						(26.0	)
Commission and brokerage ratio		25.2	%		23.7	%		26.0	%					1.5						(2.3	)
Other underwriting expense ratio		3.0	%		3.1	%		3.1	%					(0.1	)					-
Combined ratio		90.7	%		76.8	%		105.1	%					13.9						(28.3	)

(NM, not meaningful)
(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums decreased by 2.4% to $1,143.7 million in 2010 from $1,172.3 million in 2009, primarily due to a $40.7 million (48.2%) decrease in the crop hail quota share treaties, a $32.4 million (8.9%) decrease in U.S. treaty casualty volume and a $28.6 million (29.2%) decrease in facultative volume, partially offset by a $73.7 million (11.8%) increase in treaty property volume. Net written premiums decreased 1.9% to $1,145.2 million in 2010 compared to $1,167.2 million in 2009, which is in line with the decline in gross written premiums. Correspondingly, premiums earned decreased 1.8% to $1,129.3 million in 2010 compared to $1,150.3 million in 2009.

Gross written premiums increased by 22.4% to $1,172.3 million in 2009 from $957.9 million in 2008, primarily due to $103.9 million (40.0%) increase in U.S. treaty casualty volume, $84.6 million from the new crop hail quota share treaties, a $15.8 million (2.6%) increase in treaty property volume and a $10.5 million (12.0%) increase in facultative volume. Our treaty casualty premiums were higher as we wrote more quota share business as a replacement for more business written on an excess of loss basis. Net written premiums increased 23.0% to $1,167.2 million in 2009 compared to $948.8 million in 2008, relatively in line with the increase in gross written premiums. Premiums earned increased 9.5% to $1,150.3 million in 2009 compared to $1,050.3 million in 2008. The change in premiums earned relative to net written premiums is the result of timing; premiums, for proportionate contracts, are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

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Incurred Losses and LAE. The following table presents the incurred losses and LAE for the U.S. Reinsurance segment for the periods indicated.

	Years Ended December 31,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2010
Attritional	$	613.1			54.3	%		$	59.1			5.2	%		$	672.3			59.5	%
Catastrophes		30.8			2.7	%			3.3			0.3	%			34.1			3.0	%
A&E		-			0.0	%			-			0.0	%			-			0.0	%
Total segment	$	643.9			57.0	%		$	62.4			5.5	%		$	706.3			62.5	%

2009
Attritional	$	550.8			47.9	%		$	30.6			2.7	%		$	581.4			50.5	%
Catastrophes		-			0.0	%			(7.1	)		-0.6	%			(7.1	)		-0.6	%
A&E		-			0.0	%			0.4			0.0	%			0.4			0.0	%
Total segment	$	550.8			47.9	%		$	23.9			2.1	%		$	574.8			50.0	%

2008
Attritional	$	471.3			44.9	%		$	52.9			5.0	%		$	524.2			49.9	%
Catastrophes		253.5			24.1	%			20.4			1.9	%			273.9			26.1	%
A&E		-			0.0	%			-			0.0	%			-			0.0	%
Total segment	$	724.9			69.0	%		$	73.3			7.0	%		$	798.2			76.0	%

Variance 2010/2009
Attritional	$	62.3			6.4		pts	$	28.5			2.5		pts	$	90.9			9.0		pts
Catastrophes		30.8			2.7		pts		10.4			0.9		pts		41.2			3.6		pts
A&E		-			-		pts		(0.4	)		-		pts		(0.4	)		-		pts
Total segment	$	93.1			9.1		pts	$	38.5			3.4		pts	$	131.5			12.5		pts

Variance 2009/2008
Attritional	$	79.5			3.0		pts	$	(22.3	)		(2.3	)	pts	$	57.2			0.6		pts
Catastrophes		(253.5	)		(24.1	)	pts		(27.5	)		(2.5	)	pts		(281.0	)		(26.7	)	pts
A&E		-			-		pts		0.4			-		pts		0.4			-		pts
Total segment	$	(174.0	)		(21.1	)	pts	$	(49.4	)		(4.9	)	pts	$	(223.4	)		(26.0	)	pts

(Some amounts may not reconcile due to rounding.)

Incurred losses were $131.5 million (12.5 points) higher at $706.3 million in 2010 compared to $574.8 million in 2009, primarily as a result of the $62.3 million (6.4 points) increase in current year attritional losses, reflective of current competitive market conditions, $28.5 million (2.5 points) increase in prior year attritional losses, and a $41.2 million (3.6 points) increase in catastrophe losses, largely due to the New Zealand earthquake and the Chilean earthquake. The increase in prior years’ attritional losses was primarily driven by reserve strengthening in casualty lines for construction liability claims.

Incurred losses were $223.4 million (26.0 points) lower at $574.8 million in 2009 compared to $798.2 million in 2008, primarily as a result of the $281.0 million (26.7 points) decrease in catastrophe losses due to the absence of current year catastrophes in 2009. The prior years’ reserve development in 2009 primarily related to sub-prime liability exposures.

Segment Expenses. Commission and brokerage expenses increased by 4.6% to $284.6 million in 2010 compared to $272.2 million in 2009, primarily due to a shift in the mix of business across lines with different commission rates. Segment other underwriting expenses in 2010 decreased slightly to $33.9 million from $36.2 million in 2009.

Commission and brokerage expenses decreased by 0.4% to $272.2 million in 2009 compared to $273.3 million in 2008, primarily due to the change in the mix and type of business written. Segment other underwriting expenses for 2009 increased to $36.2 million from $32.2 million for 2008, due to growth in the overall infrastructure.

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U.S. Insurance.

The following table presents the underwriting results and ratios for the U.S. Insurance segment for the periods indicated.

	Years Ended December 31,									2010/2009						2009/2008
(Dollars in millions)	2010			2009			2008			Variance			% Change			Variance			% Change
Gross written premiums	$	850.7		$	842.6		$	771.8		$	8.1			1.0	%	$	70.8			9.2	%
Net written premiums		605.6			656.2			617.0			(50.6	)		-7.7	%		39.2			6.4	%

Premiums earned	$	626.4		$	671.1		$	705.5		$	(44.7	)		-6.7	%	$	(34.4	)		-4.9	%
Incurred losses and LAE		527.5			538.6			549.9			(11.2	)		-2.1	%		(11.2	)		-2.0	%
Commission and brokerage		118.1			124.4			146.7			(6.2	)		-5.0	%		(22.3	)		-15.2	%
Other underwriting expenses		69.7			74.6			64.3			(5.0	)		-6.6	%		10.3			16.0	%
Underwriting gain (loss)	$	(88.9	)	$	(66.5	)	$	(55.4	)	$	(22.4	)		33.6	%	$	(11.1	)		20.1	%

													Point Chg						Point Chg
Loss ratio		84.2	%		80.3	%		77.9	%					3.9						2.4
Commission and brokerage ratio		18.9	%		18.5	%		20.8	%					0.4						(2.3	)
Other underwriting expense ratio		11.1	%		11.1	%		9.2	%					-						1.9
Combined ratio		114.2	%		109.9	%		107.9	%					4.3						2.0

(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums increased by 1.0% to $850.7 million in 2010 compared to $842.6 million in 2009. This was primarily due to increased writings in professional liability and California workers’ compensation business partially offset by a reduction in audit premiums for workers’ compensation business. Net written premiums decreased 7.7% to $605.6 million compared to $656.2 million in 2009 due to an increase in the use of reinsurance on several large programs. Ceded premiums generally relate to specific reinsurance purchased and fluctuate based upon the level of premiums written in the individual reinsured programs. Premiums earned decreased 6.7% to $626.4 million in 2010 compared to $671.1 million in 2009. The change in premiums earned is relatively consistent with the decrease in net written premium.

Gross written premiums increased by 9.2% to $842.6 million in 2009 compared to $771.8 million for 2008. Most of the new premium was derived from our entry into the financial institution D&O and E&O market and additional property insurance written in Florida, where rates to exposure remained attractive. Net written premiums increased by 6.4% to $656.2 million in 2009 compared to $617.0 million in 2008, as the increase in gross written premiums was partially offset by the increase in ceded written premiums. Premiums earned decreased 4.9% to $671.1 million in 2009 compared to $705.5 million in 2008. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

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Incurred Losses and LAE. The following table presents the incurred losses and LAE for the U.S. Insurance segment for the periods indicated.

	Years Ended December 31,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2010
Attritional	$	490.7			78.3	%		$	36.8			5.9	%		$	527.5			84.2	%
Catastrophes		-			0.0	%			-			0.0	%			-			0.0	%
Total segment	$	490.7			78.3	%		$	36.8			5.9	%		$	527.5			84.2	%

2009
Attritional	$	479.6			71.5	%		$	59.0			8.8	%		$	538.6			80.3	%
Catastrophes		-			0.0	%			-			0.0	%			-			0.0	%
Total segment	$	479.6			71.5	%		$	59.0			8.8	%		$	538.6			80.3	%

2008
Attritional	$	481.0			68.2	%		$	69.1			9.8	%		$	550.1			78.0	%
Catastrophes		-			0.0	%			(0.3	)		0.0	%			(0.3	)		0.0	%
Total segment	$	481.0			68.2	%		$	68.8			9.8	%		$	549.9			77.9	%

Variance 2010/2009
Attritional	$	11.1			6.8		pts	$	(22.2	)		(2.9	)	pts	$	(11.1	)		3.9		pts
Catastrophes		-			-		pts		-			-		pts		-			-		pts
Total segment	$	11.1			6.8		pts	$	(22.2	)		(2.9	)	pts	$	(11.1	)		3.9		pts

Variance 2009/2008
Attritional	$	(1.4	)		3.3		pts	$	(10.1	)		(1.0	)	pts	$	(11.5	)		2.3		pts
Catastrophes		-			-		pts		0.3			-		pts		0.3			-		pts
Total segment	$	(1.4	)		3.3		pts	$	(9.8	)		(1.0	)	pts	$	(11.2	)		2.4		pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE decreased by 2.1% to $527.5 million in 2010 compared to $538.6 million in 2009. The decrease was due to lower net premiums earned, partially offset by an increase in the attritional loss ratio, year over year. Current year attritional losses increased $11.1 million (6.8 points), due to higher expected loss ratios on several programs, reflective of current market conditions. Offsetting the increase in current year losses was a decrease of $22.2 million (2.9 points) in prior years’ loss development compared to 2009. The 2010 prior years’ unfavorable development of $36.8 million was primarily the result of reserve strengthening on several terminated programs.

Incurred losses and LAE decreased by 2.0% to $538.6 million in 2009 compared to $549.9 million in 2008. This decrease was due to the decrease in net earned premiums, partially offset by the increase in the loss ratio, period over period. Prior years’ attritional losses were $10.1 million less unfavorable in 2009 compared to 2008. The 2009 unfavorable development of $59.0 million was primarily the result of reserve strengthening on contractors’ liability programs, package policy business and workers’ compensation business. The 2008 unfavorable development of $69.1 million was primarily the result of $85.3 million reserve strengthening for an auto loan credit insurance program, partially offset by $16.2 million in favorable prior years’ reserve development.

Segment Expenses. Commission and brokerage decreased by 5.0% to $118.1 million in 2010 compared to $124.4 million in 2009. This decrease was primarily the result of a decrease in net premiums earned and changes in the mix of business. Segment other underwriting expenses decreased to $69.7 million in 2010 compared to $74.6 million in 2009. This decrease was the result of management’s direct actions to reduce operating expenses.

Commission and brokerage decreased by 15.2% to $124.4 million in 2009 compared to $146.7 million in 2008. The decrease was primarily due to the change in the mix of business written and the reinsurance purchased on the business written. Segment other underwriting expenses in 2009 increased to $74.6 million compared to $64.3 million in 2008. The increase was primarily due to increased costs associated with the expanded infrastructure.

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Specialty Underwriting.

The following table presents the underwriting results and ratios for the Specialty Underwriting segment for the periods indicated.

	Years Ended December 31,									2010/2009						2009/2008
(Dollars in millions)	2010			2009			2008			Variance			% Change			Variance			% Change
Gross written premiums	$	266.4		$	234.8		$	260.4		$	31.7			13.5	%	$	(25.6	)		-9.8	%
Net written premiums		262.2			230.0			254.2			32.2			14.0	%		(24.3	)		-9.5	%

Premiums earned	$	272.3		$	234.5		$	251.8		$	37.8			16.1	%	$	(17.2	)		-6.8	%
Incurred losses and LAE		203.9			163.4			165.9			40.5			24.8	%		(2.5	)		-1.5	%
Commission and brokerage		69.6			72.6			70.8			(3.0	)		-4.1	%		1.7			2.5	%
Other underwriting expenses		8.6			8.7			8.1			(0.1	)		-1.7	%		0.7			8.2	%
Underwriting gain (loss)	$	(9.8	)	$	(10.1	)	$	7.0		$	0.4			-3.6	%	$	(17.2	)		-244.1	%

													Point Chg						Point Chg
Loss ratio		74.9	%		69.7	%		65.9	%					5.2						3.8
Commission and brokerage ratio		25.6	%		30.9	%		28.1	%					(5.3	)					2.8
Other underwriting expense ratio		3.1	%		3.7	%		3.2	%					(0.6	)					0.5
Combined ratio		103.6	%		104.3	%		97.2	%					(0.7	)					7.1

(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums increased by 13.5% to $266.4 million in 2010 compared to $234.8 million in 2009, primarily due to an increase in A&H business with its entry into the stop-loss primary market for coverages on self-insured companies in 2010 and increased writings on special per risk reinsurance programs. Correspondingly, net written premiums increased 14.0% to $262.2 million in 2010 compared to $230.0 million in 2009. Premiums earned increased 16.1% to $272.3 million in 2010 compared to $234.5 million in 2009, relatively consistent with the increase in net written premiums.

Gross written premiums decreased by 9.8% to $234.8 million in 2009 compared to $260.4 million for 2008, primarily due to a $33.7 million decrease in marine premiums and a $5.9 million decrease in surety premiums, partially offset by a $10.0 million increase in aviation premiums and a $2.7 million increase in A&H premiums. Net written premiums decreased 9.5% to $230.0 million in 2009 compared to $254.2 million in 2008, in line with the decrease in gross writings. Premiums earned decreased 6.8% to $234.5 million in 2009 compared to $251.8 million in 2008. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.

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Incurred Losses and LAE. The following table presents the incurred losses and LAE for the Specialty Underwriting segment for the periods indicated.

	Years Ended December 31,
	Current			Ratio %/				Prior			Ratio %/				Total			Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred			Pt Change
2010
Attritional	$	192.7			70.7	%		$	4.5			1.7	%		$	197.2			72.4	%
Catastrophes		0.5			0.2	%			6.2			2.3	%			6.7			2.5	%
Total segment	$	193.2			70.9	%		$	10.7			4.0	%		$	203.9			74.9	%

2009
Attritional	$	160.0			68.2	%		$	(3.6	)		-1.5	%		$	156.4			66.7	%
Catastrophes		-			0.0	%			7.0			3.0	%			7.0			3.0	%
Total segment	$	160.0			68.2	%		$	3.4			1.4	%		$	163.4			69.7	%

2008
Attritional	$	150.8			59.9	%		$	(7.5	)		-3.0	%		$	143.3			56.9	%
Catastrophes		17.5			7.0	%			5.1			2.0	%			22.6			9.0	%
Total segment	$	168.3			66.9	%		$	(2.5	)		-1.0	%		$	165.9			65.9	%

Variance 2010/2009
Attritional	$	32.7			2.5		pts	$	8.1			3.2		pts	$	40.8			5.7		pts
Catastrophes		0.5			0.2		pts		(0.8	)		(0.7	)	pts		(0.3	)		(0.5	)	pts
Total segment	$	33.2			2.7		pts	$	7.3			2.6		pts	$	40.5			5.2		pts

Variance 2009/2008
Attritional	$	9.2			8.3		pts	$	3.9			1.5		pts	$	13.1			9.8		pts
Catastrophes		(17.5	)		(7.0	)	pts		1.9			1.0		pts		(15.6	)		(6.0	)	pts
Total segment	$	(8.3	)		1.3		pts	$	5.8			2.4		pts	$	(2.5	)		3.8		pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased by 24.8% to $203.9 million in 2010 compared to $163.4 million in 2009, due to an increase in net premiums earned coupled with an increase in the loss ratio. Current year attritional losses increased $32.7 million (2.5 points) as a result of losses on the offshore oil rig in the Gulf and higher expected loss ratios in A&H and surety lines of business. In addition, prior years’ attritional losses increased $8.1 million (3.2 points) due to unfavorable reserve development on select specialty classes of business in 2010 compared to favorable reserve development in 2009.

Incurred losses and LAE decreased by 1.5% to $163.4 million for 2009 compared to $165.9 million in 2008, primarily as a result of a decrease in catastrophe losses on the marine book of business, period over period. Partially offsetting this decrease were the proportionally higher current year attritional losses on the marine business in addition to less favorable reserve development on prior years’ attritional losses on most of the Specialty Underwriting lines.

Segment Expenses. Commission and brokerage decreased 4.1% to $69.6 million in 2010 compared to $72.6 million in 2009. This decrease was primarily due to changes in the mix of business, with a higher level of excess of loss marine business and primary A&H business in 2010, both of which carry lower commission ratios. Lower contingent commissions on the surety and aviation books of business, driven by changes in the expected profitability of this business also favorably impacted the commission ratio. Segment other underwriting expenses decreased slightly to $8.6 million in 2010 compared to $8.7 million in 2009.

Commission and brokerage increased 2.5% to $72.6 million in 2009 compared to $70.8 million in 2008 as commissions increased on the A&H business. Segment other underwriting expenses for 2009 increased slightly to $8.7 million compared to $8.1 million for 2008.

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International.

The following table presents the underwriting results and ratios for the International segment for the periods indicated.

	Years Ended December 31,									2010/2009						2009/2008
(Dollars in millions)	2010			2009			2008			Variance			% Change			Variance		% Change
Gross written premiums	$	1,207.0		$	1,084.5		$	904.7		$	122.5			11.3	%	$	179.8		19.9	%
Net written premiums		1,199.6			1,081.3			902.1			118.3			10.9	%		179.2		19.9	%

Premiums earned	$	1,168.1		$	1,053.5		$	885.5		$	114.6			10.9	%	$	168.1		19.0	%
Incurred losses and LAE		1,050.1			613.3			504.8			436.8			71.2	%		108.4		21.5	%
Commission and brokerage		288.4			267.1			230.9			21.3			8.0	%		36.2		15.7	%
Other underwriting expenses		27.6			23.1			19.8			4.6			19.8	%		3.3		16.7	%
Underwriting gain (loss)	$	(198.0	)	$	150.1		$	129.9		$	(348.1	)		-231.9	%	$	20.1		15.5	%

													Point Chg					Point Chg
Loss ratio		89.9	%		58.2	%		57.0	%					31.7					1.2
Commission and brokerage ratio		24.7	%		25.4	%		26.1	%					(0.7	)				(0.7	)
Other underwriting expense ratio		2.4	%		2.2	%		2.2	%					0.2					-
Combined ratio		117.0	%		85.8	%		85.3	%					31.2					0.5

(Some amounts may not reconcile due to rounding.)

Premiums. Gross written premiums increased by 11.3% to $1,207.0 million in 2010 compared to $1,084.5 million in 2009, due to continued strong growth in premiums written through the Brazil, Miami and New Jersey offices, a $42.7 million increase; Asia, a $55.7 million increase; and Canada, a $24.2 million increase; resulting from a combination of new business, rate increases in select areas, and economic and insurance growth in some markets. Also contributing to the increase was $16.0 million in reinstatement premiums from the Chilean earthquake and Calgary hailstorm. Net written premiums increased by 10.9% to $1,199.6 million in 2010 compared to $1,081.3 million in 2009, principally as a result of the increase in gross written premiums. Premiums earned increased 10.9% to $1,168.1 million in 2010 compared to $1,053.5 million in 2009, consistent with the trend noted for net written premiums.

Gross written premiums increased by 19.9% to $1,084.5 million in 2009 compared to $904.7 million in 2008. As a result of our strong financial strength ratings, we saw increased participations on treaties in most regions, new business writings and preferential signings, including preferential terms and conditions. In addition, rates, in some markets, also contributed to the increased written premiums. Premiums written through the Brazil, Miami and New Jersey offices increased by $122.9 million (21.3%), the Asian branch increased by $32.4 million (17.1%) and the Canadian branch premiums increased by $24.5 million (17.7%). Net written premiums increased by 19.9% to $1,081.3 million in 2009 compared to $902.1 million in 2008, principally as a result of the increase in gross written premiums. Premiums earned increased 19.0% to $1,053.5 million in 2009 compared to $885.5 million in 2008, consistent with the increase in net written premiums.

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Incurred Losses and LAE. The following table presents the incurred losses and LAE for the International segment for the periods indicated.

	Years Ended December 31,
	Current			Ratio %/				Prior			Ratio %/				Total		Ratio %/
(Dollars in millions)	Year			Pt Change				Years			Pt Change				Incurred		Pt Change
2010
Attritional	$	647.7			55.5	%		$	(41.9	)		-3.6	%		$	605.8		51.9	%
Catastrophes		460.7			39.4	%			(16.4	)		-1.4	%			444.3		38.0	%
Total segment	$	1,108.4			94.9	%		$	(58.3	)		-5.0	%		$	1,050.1		89.9	%

2009
Attritional	$	546.7			51.9	%		$	19.4			1.8	%		$	566.0		53.7	%
Catastrophes		43.4			4.1	%			3.8			0.4	%			47.2		4.5	%
Total segment	$	590.1			56.0	%		$	23.2			2.2	%		$	613.3		58.2	%

2008
Attritional	$	501.4			56.6	%		$	(33.5	)		-3.8	%		$	467.9		52.8	%
Catastrophes		43.5			4.9	%			(6.7	)		-0.8	%			36.9		4.2	%
Total segment	$	544.9			61.5	%		$	(40.1	)		-4.5	%		$	504.8		57.0	%

Variance 2010/2009
Attritional	$	101.0			3.6		pts	$	(61.3	)		(5.4	)	pts	$	39.8		(1.8	)	pts
Catastrophes		417.3			35.3		pts		(20.2	)		(1.8	)	pts		397.1		33.5		pts
Total segment	$	518.3			38.9		pts	$	(81.5	)		(7.2	)	pts	$	436.8		31.7		pts

Variance 2009/2008
Attritional	$	45.3			(4.7	)	pts	$	52.8			5.6		pts	$	98.1		0.9		pts
Catastrophes		(0.1	)		(0.8	)	pts		10.5			1.2		pts		10.3		0.3		pts
Total segment	$	45.2			(5.5	)	pts	$	63.3			6.7		pts	$	108.4		1.2		pts

(Some amounts may not reconcile due to rounding.)

Incurred losses and LAE increased 71.2% to $1,050.1 million in 2010 compared to $613.3 in 2009. The increase was principally due to a $417.3 million (35.3 points) increase in current year catastrophes related to the Chilean earthquake, the Australian hailstorms and floods, the New Zealand earthquake and the Canadian hailstorm compared to the absence in 2009 of any similar large events. Attritional losses also increased, primarily due to an increase in premiums earned and higher expected loss ratios, which were partially offset by favorable development on prior years’ reserves.

Incurred losses and LAE increased 21.5% to $613.3 million in 2009 compared to $504.8 million in 2008. The increase was primarily due to reserve strengthening of prior years’ non-catastrophe attritional losses in 2009 of $19.4 million compared to 2008’s favorable prior years’ non-catastrophe attritional development of $33.5 million. Current year attritional losses were higher primarily due to the increase in earned premiums. Current year catastrophe losses were flat year over year.

Segment Expenses. Commission and brokerage increased 8.0% to $288.4 million in 2010 compared to $267.1 million in 2009. The increase was primarily in line with the increases in premiums earned. Segment other underwriting expenses increased to $27.6 million in 2010 compared to $23.1 million in 2009. The increase was consistent with the growth in premiums earned resulting in stable other underwriting expense ratios for the periods.

Commission and brokerage increased 15.7% to $267.1 million in 2009 compared to $230.9 million in 2008. The increase was primarily due to the growth in premiums earned in conjunction with the blend of business mix. Segment other underwriting expenses in 2009 increased to $23.1 million compared to $19.8 million in 2008, consistent with growth in business.

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Bermuda.

The following table presents the underwriting results and ratios for the Bermuda segment for the periods indicated.

	Years Ended December 31,						2010/2009		2009/2008
(Dollars in millions)	2010		2009		2008		Variance	% Change	Variance	% Change
Gross written premiums	$	733.0	$	794.8	$	783.4	$