"If I had to use one word to describe what we've seen, it's disappointing," Chairman and Chief Executive Officer Joseph V. Taranto said beginning his comments about the market during an investor conference call this morning.

Yesterday, Everest Re Group announced earnings of $264 million, or $4.64 per share. In that written statement, Mr. Taranto noted evidence of a "changing market environment."

Amplifying the description this morning, he said that in the primary insurance sector there has been a continued decline on short-tailed business.

"In fact, property rates, if anything, were down a bit more than we'd seen in the months just before July."

While casualty insurance rates had evidenced a flattening in recent months, Mr. Taranto reported seeing rate reduction in July for "certain pockets" of casualty business, identifying those as excess directors and officers, California workers' compensation business, and umbrella.

Separately, last week, Michael Stone, president and chief operating officer of Peoria, Ill.-based RLI, reported sobering trends for directors and officers liability, as well, noting that for public companies that have not seen any losses, competitors were reducing rates some 20-25 percent. Mr. Stone commented that rates for other casualty business were "flat to up a bit."

Mr. Taranto, on the topic of reinsurance, reported seeing more competition."

"Frankly, we're seeing a lot of insurers and reinsurers looking back at the absolutely terrific results" of the last few years, "aggressively pursuing market share, and not adjusting to the changing market conditions as much as they should be."

He added, "This is something Everest will not do," explaining that as market conditions change, the company will do less business in its property facultative reinsurance operation, less business in its Bermuda-based individual risk operation, and less in the medical stop-loss area.

Additionally, he said, the company would be cautious in writing the pockets of casualty business that he had previously identified to be experiencing rate reductions.

Noting that the company's year-end prediction of top-line growth for 2004 was in the 10-15 percent range, Mr. Taranto said that while results for the first six months tracked that prediction, he did not expect the second-half growth figures to come up to that level.

Through six months, net written premiums grew 14.9 percent to $2.2 billion overall.

"We're happy with [our] results," he said, highlighting the fact that the company achieved a 22 percent return on equity in the quarter. "But the market has dipped," he said.

The 22 percent return was achieved "despite the fact that we put up some meaningful reserves" for asbestos exposures, Mr. Taranto said, identifying the ROE figure as a testament to the power of his group's insurance and reinsurance operations.

During the call, the group's chief financial officer explained that the asbestos developments reported for the second quarter reflected "increasing clarity on ultimate settlements" as a result of recent progress in settling open cases or bringing them closer to conclusion.

Pressed by an analyst to indicate what percentage of cases are close to finality, Mr. Taranto reiterated that the company has had a "tremendous amount of settlement activity" in the last six months?more than in the prior six years.

"I think we've made progress on a really meaningful chunk of top exposures," he added.

Executives were also asked to detail Everest's plans following the termination of a contract with an insurance agency that produced the majority of Everest Re Group's California workers' compensation business. When Everest announced the termination in June, the company indicated that it had developed contingency plans for writing California workers' compensation business and that it intended to remain an active participant in this market.

Today, Mr. Taranto noted that he was not concerned about having the infrastructure and production capabilities to actively write business. Instead, a more pressing concern is the overall market in California, "and where the market is taking" this business.

Mr. Taranto noted that with its position at the high-end of the market, Everest's premiums for California workers' comp have been falling off. He noted that the group saw premium declines of roughly 30 percent in May and June relative to the same periods in 2003.

Entering July, Everest lowered its rates 7 percent. But so far, the month's results have put the company on track to write only half the premium of the prior July, he said.

California workers' comp "results have been excellent for a year-and-a-half and the market is recognizing that, Mr. Taranto said. "It is our plan to stay in the market, but at existing rate and commission structures," he said.

Mr. Taranto noted that Everest employees in Orange County, which previously sought only large account business, will be writing smaller accounts directly and that individual deals might be structured in which some retail and wholesale agencies product some business for Everest.

"We want to be in it [the California workers' comp market]. But we want to be in it at our rates and our commissions," he said.