Everest Re Group Ltd.'s profits plunged 46 percent over the second quarter of 2008, thanks partially to an after-tax charge of $45.5 million relating to a sub-prime auto loan credit insurance programme.

The reinsurer attributed weakening US economic conditions as the key reason behind the action, as default rates and average claim amounts were higher than expected, due to declining used car values. The programme has been in run-off since the end of 2005 and Everest said it had written no similar business since.

In last night's earnings release, Everest said it had settled its potential claim liability with the programme's biggest policyholder and only nine percent of the orginially insured portfolio remained.

Net income dropped to $153 million, or $2.47 per share for the quarter, from $289.9 million, or $4.45 per share, for the corresponding period last year.

For the six months ended June 30, 2008, after-tax operating income was down at $370.6 million, or $5.94 per share, compared to $481.2 million, or $7.50 per share, for the the same period in 2007.

Net income was $231 million in the first six months of 2008, or $3.70 per share, compared to $580.5 million, or $9.05 per diluted share, between January and June 2007.

The company also reported second quarter 2008 after-tax operating income, which excludes realised capital gains and losses, of $180 million, or $2.90 per share, compared to after-tax operating income of $213.3 million, or $3.36 per share, in the second quarter of 2007.

Gross written premiums of $905.3 million decreased three percent from the same period in 2007, with reinsurance premiums, across all segments, down eight percent, while the insurance segment's premiums increased 18 percent.

Everest's chairman and CEO, Joseph Taranto, said: "Our core business continues to perform very well as we maintain disciplined underwriting in an increasingly competitive marketplace."

Everest's share price fell one percent to close on $78 ahead of the second quarter results being released yesterday.

Report Card:

Net income: $153 million compared to $282.9 million in 2007

Combined ratio: 94.4 percent compared to 89.2 percent in 2007

Gross premiums written: $905.3 million compared to $935.5 million in 2007