Standard & Poor's Ratings Services has lowered its counterparty credit ratings on Bermuda-based Everest Re Group Ltd. and its US-based intermediary holding company, Everest Reinsurance Holdings Inc., to BBB+ from A-.

The ratings agency Standard & Poor's also said that it lowered its counterparty credit and financial strength ratings on operating subsidiaries Everest Reinsurance (Bermuda) Ltd., Everest Reinsurance Co., and Everest National Insurance Co. to A+ from AA-.

In addition, Standard & Poor's removed all of these ratings from CreditWatch, where they were placed on December 19, 2008, with negative implications.

The outlook on all these companies is stable.

"The downgrade stems from Everest's inability to exploit its competitive position to generate sustainable, strong underwriting and operating results commensurate with the former rating," said Standard & Poor's credit analyst Taoufik Gharib.

S&P added that the rating action was also a result of the company's continuous adverse reserve developments, which have plagued earnings. In addition, Everest's enterprise risk management (ERM) program is adequate, but the implementation of a more robust programme has been slower than expected.

The ratings on Everest are based on its strong competitive position with a global market reach, very strong capital adequacy, and strong financial flexibility, the ratings agency added.

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

"Premium writings will likely grow modestly in 2009, benefiting from hardening prices, mainly in property reinsurance," the S&P statement added. "Its international business will likely increase as a percentage of total writings as it continues to diversify its geographic business mix."

S&P expects Everest will produce a healthy combined ratio of 93% to 95% and a return on revenue of about 15 percent. Supporting these results are rate increases, mainly in the property reinsurance, and the investment income from its large invested asset base.

"Considering the recent downgrade, a revision of the outlook to positive is unlikely in the next 12 to 24 months," Mr. Gharib added. "However, if the company cannot sustain strong earnings or suffers further material adverse reserve developments, we could revise the outlook to negative."