2. BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Company for the three months ended March 31, 2016 and 2015 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results on an interim basis. Certain financial information, which is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), has been omitted since it is not required for interim reporting purposes. The December 31, 2015 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results for the three months ended March 31, 2016 and 2015 are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2015, 2014 and 2013 included in the Company's most recent Form 10-K filing.

The Company consolidates the results of operations and financial position of all voting interest entities ("VOE") in which the Company has a controlling financial interest and all variable interest entities ("VIE") in which the Company is considered to be the primary beneficiary. The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each entity.

Effective January 1, 2016, the Company adopted Accounting Standards Update 2015-02, "Consolidation (Topic 810) Amendments to the Consolidation Analysis" issued by the United States Financial Accounting Standards Board ("FASB"), which changed the method in which the Company determines whether entities are consolidated by the Company. The adoption of this amended accounting guidance has been implemented utilizing a full retrospective application for all periods presented in the Company's unaudited interim consolidated financial statements.

The amended guidance includes changes in the identification of the primary beneficiary of companies considered to be VIEs. These changes resulted in the Company concluding that Mt. Logan Re is a VIE given it has insufficient equity at risk and that each underlying separate segregated account is likewise a VIE. The Company has concluded that it is the primary beneficiary of Mt. Logan Re, but not of the underlying separate segregated accounts and therefore has deconsolidated these segregated accounts. This change had no impact to the net income or retained earnings of the Company.

All significant intercompany accounts and transactions have been eliminated.

Application of Recently Issued Accounting Standard Changes.

Disclosures about Short-Duration Contracts. In May 2015, the FASB issued ASU 2015-09, authoritative guidance regarding required disclosures associated with short duration insurance contracts. The new disclosure requirements focus on information about initial claim estimates and subsequent claim estimate adjustment, methodologies in estimating claims and the timing, frequency and severity of claims related to short duration insurance contracts. This guidance is effective for annual reporting periods beginning after December 15, 2015 and interim reporting periods beginning after December 15, 2016. Therefore, the initial presentation of this guidance in the Company's financial statements and footnotes will be for its 10-K filing as of December 31, 2016. The Company does not anticipate that it will have a significant impact on its financial statements.

Debt Issuance Costs. In April 2015, The FASB issued ASU 2015–03, authoritative guidance on the presentation of debt issuance costs. This guidance requires that debt issuance costs be presented within the balance sheet as a reduction of the carrying value of the debt liability, rather than as a separate asset. This guidance is effective for annual reporting periods beginning after December 15, 2015 and related interim reporting periods. The Company does not anticipate that the adoption of this guidance will have a material impact on its financial statements.

Consolidation. In February 2015, the FASB issued ASU 2015-02, authoritative guidance regarding consolidation of reporting entities. The new guidance focuses on the required evaluation of whether certain legal entities should be consolidated. This guidance is effective for annual and interim reporting periods beginning after December 15, 2015. Based upon this guidance, the Company has determined that the separate segregated accounts associated with Mt. Logan Re, should not be consolidated. As a result, the Company has adjusted prior financial statements and footnotes to conform with this new consolidation presentation.

The following tables present certain financial statement line items as previously reported in 2015, the effect on those line items due to not consolidating the segregated accounts of Mt. Logan Re, in accordance with the newly adopted accounting policy and the line items as currently reported within the financial statements.


CONSOLIDATED BALANCE SHEET:	December 31, 2015
			Effect of adoption
	As previously		of new accounting			As Currently
	reported		policy			Reported
(Dollars in thousands)
ASSETS:
Short-term investments	$	1,795,455	$	(995,771	)	$	799,684
Total investments and cash		17,672,176		(995,771	)		16,676,405
Premiums receivable		1,479,293		3,797			1,483,090
Reinsurance receivables		840,420		53,617			894,037
Deferred acquisition costs		373,072		(721	)		372,351
Prepaid reinsurance premiums		157,424		7,547			164,971
Other assets		265,634		56,184			321,818
TOTAL ASSETS		21,426,175		(875,347	)		20,550,828

LIABILITIES:
Funds held under reinsurance treaties		88,544		(75,000	)		13,544
Commission reserves		79,849		(19,751	)		60,098
Other net payable to reinsurers		166,822		6,265			173,087
Other liabilities		291,322		(30,000	)		261,322
Total liabilities		13,060,729		(118,486	)		12,942,243

NONCONTROLLING INTERESTS:
Redeemable noncontrolling interests - Mt. Logan Re		756,861		(756,861	)		-

TOTAL LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY		21,426,175		(875,347	)		20,550,828


CONSOLIDATED STATEMENTS OF OPERATIONS	Three Months Ended March 31, 2015
AND COMPREHENSIVE INCOME (LOSS):				Effect of adoption
	As previously			of new accounting			As Currently
	reported			policy			Reported
(Dollars in thousands)
REVENUES:
Premiums earned	$	1,307,077		$	(34,589	)	$	1,272,488
Net investment income		122,583			(17	)		122,566
Other income (expense)		46,073			5,208			51,281
Total revenues		1,464,986			(29,398	)		1,435,588

CLAIMS AND EXPENSES:
Incurred losses and loss adjustment expenses		722,465			(7,310	)		715,155
Commision, brokerage, taxes and fees		287,167			(4,073	)		283,094
Other underwriting expenses		60,664			(1,923	)		58,741
Total claims and expenses		1,084,749			(13,306	)		1,071,443

NET INCOME (LOSS) BEFORE TAXES		380,237			(16,092	)		364,145
NET INCOME (LOSS)		339,070			(16,092	)		322,978

Net income (loss) attributable to noncontrolling interests		(16,092	)		16,092			-

NET INCOME (LOSS) ATTRIBUTABLE TO EVEREST RE GROUP		322,978			-			322,978


CONSOLIDATED STATEMENT OF CASH FLOWS:	Three Months Ended March 31, 2015
				Effect of adoption
	As previously			of new accounting			As Currently
(Dollars in thousands)	reported			policy			Reported
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	339,070		$	(16,092	)	$	322,978
Decrease (increase) in premiums receivable		(98,195	)		(3,533	)		(101,728	)
Decrease (increase) in funds held by reinsureds, net		62,973			(75,000	)		(12,027	)
Decrease (increase) in reinsurance receivables		(84,665	)		(5,363	)		(90,028	)
Decrease (increase) in prepaid reinsurance premiums		12,144			(25,012	)		(12,868	)
Increase (decrease) in other net payable to reinsurers		68,365			12,807			81,172
Change in other assets and liabilities, net		24,542			7,626			32,168
Net cash provided by (used in) operating activities		455,136			(104,567	)		350,569

CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in short-term investments		(7,567	)		230,519			222,952
Net cash provided by (used in) investing activities		(495,665	)		230,519			(265,146	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Third party investment in redeemable noncontrolling interest		156,848			(156,848	)		-
Dividends paid on third party investment in redeemable noncontrolling interest		(30,896	)		30,896			-
Net cash provided by (used in) financing activities		8,662			(125,952	)		(117,290	)