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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 --------------

                                    FORM 10-K

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              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000       Commission file number 1-13816

                       EVEREST REINSURANCE HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                              22-3263609
 (State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                              477 MARTINSVILLE ROAD
                               POST OFFICE BOX 830
                      LIBERTY CORNER, NEW JERSEY 07938-0830
                                 (908) 640-3000
          (Address, including zip code, and telephone number, including
             area code, of registrant's principal executive office)

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           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                                           Name of Each Exchange
   Title of Each Class                                      on Which Registered
---------------------------                                ---------------------
8.5% Senior Notes Due 2005                                         NYSE
8.75% Senior Notes Due 2010                                        NYSE

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

         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 _X_ No___

         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  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. [ X ]

         At March  23,  2001,  the  number of  common  shares of the  registrant
outstanding was 1,000, all of which are owned by Everest Re Group, Ltd.

         The Registrant  meets the  conditions set forth in General  Instruction
I(1)(a) and (b) of Form 10-K and is therefore  filing this form with the reduced
disclosure format permitted by General Instruction I of Form 10-K.

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<PAGE>
TABLE OF CONTENTS

ITEM                                                                        PAGE
----                                                                        ----

PART I

1.  Business
2.  Properties
3.  Legal Proceedings

4.  Submission of Matters to a Vote of Security Holders

PART II

5.  Market for Registrant's Common Equity and Related
     Stockholder Matters
6.  Selected Financial Data
7.  Management's Discussion and Analysis of Financial Condition
     and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8.  Financial Statements and Supplementary Data
9.  Changes in and Disagreements with Accountants on Accounting
     and Financial Disclosure

PART III

10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management
13. Certain Relationships and Related Transactions

PART IV

14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K


<PAGE>
PART I

UNLESS  OTHERWISE  INDICATED,  ALL  FINANCIAL  DATA IN THIS  DOCUMENT  HAVE BEEN
PREPARED USING GENERALLY ACCEPTED  ACCOUNTING  PRINCIPLES  ("GAAP").  AS USED IN
THIS DOCUMENT,  "HOLDINGS" MEANS EVEREST  REINSURANCE  HOLDINGS,  INC.;  "GROUP"
MEANS  EVEREST  RE GROUP,  LTD.  (FORMERLY  EVEREST  REINSURANCE  GROUP,  LTD.);
"EVEREST RE" MEANS EVEREST REINSURANCE COMPANY AND ITS SUBSIDIARIES  (UNLESS THE
CONTEXT  OTHERWISE   REQUIRES);   AND  THE  "COMPANY"  MEANS  HOLDINGS  AND  ITS
SUBSIDIARIES (UNLESS THE CONTEXT OTHERWISE REQUIRES).

ITEM 1.  BUSINESS

THE COMPANY
Holdings, a Delaware corporation,  is a wholly-owned  subsidiary of Group, which
is a Bermuda  holding  company  whose common  shares are publicly  traded in the
United States on the New York Stock Exchange under the symbol "RE".  Group files
an annual report on Form 10-K with the Securities and Exchange  Commission  with
respect  to  its  consolidated  operations,  including  Holdings.  Holdings  was
originally established in 1993 to serve as the parent holding company of Everest
Re (formed in 1973), a Delaware property and casualty  reinsurer.  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.
On February 24, 2000,  Holdings  became a wholly-owned  subsidiary of Group in a
corporate  restructuring  pursuant to which holders of shares of common stock of
Holdings  automatically  became  holders of the same number of common  shares of
Group.

On March 14, 2000, Holdings completed public offerings of $200 million principal
amount of 8.75%  senior  notes due March  15,  2010 and $250  million  principal
amount of 8.50%  senior  notes due March 15, 2005.  This  abbreviated  filing is
required as a result of this outstanding  debt. During 2000, the net proceeds of
these  offerings and  additional  funds were  distributed  by Holdings to Group.
Approximately $250 million of the distributions were used by Group to capitalize
Everest Reinsurance (Bermuda), Ltd. ("Bermuda Re"), a newly formed Bermuda-based
reinsurance subsidiary of Group.

The Company's principal business,  conducted through its operating subsidiaries,
is the  underwriting  of  reinsurance  and  insurance  in the United  States and
international markets. The Company underwrites  reinsurance both through brokers
and directly with ceding companies, giving it the flexibility to pursue business
regardless of the ceding company's preferred reinsurance  purchasing method. The
Company underwrites  insurance principally through general agency relationships.
Everest Re specializes in property and casualty  reinsurance and insurance.  The
Company's operating subsidiaries,  excluding Mt. McKinley Insurance Company, are
each rated A+  ("Superior") by A.M. Best Company ("A.M.  Best"),  an independent
insurance industry rating organization that rates insurance companies on factors
of concern to policyholders.

Following is a summary of the Company's operating subsidiaries:

                                       1
<PAGE>
o        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  (except  Nevada and Wyoming),  the District of Columbia,
         Puerto  Rico and  Canada,  and is  authorized  to  conduct  reinsurance
         business in the United  Kingdom and  Singapore.  Everest Re underwrites
         property and casualty reinsurance on a treaty and facultative basis for
         insurance   and   reinsurance   companies  in  the  United  States  and
         international markets. Everest Re had statutory surplus at December 31,
         2000 of $1,272.7 million.

o        Everest National  Insurance  Company ("Everest  National"),  an Arizona
         insurance company and a direct subsidiary of Everest Re, is licensed in
         42 states and the  District  of  Columbia  and is  authorized  to write
         property and casualty  insurance in the states in which it is licensed.
         This is often called writing insurance on an admitted basis.

o        Everest  Insurance  Company of Canada  ("Everest  Canada"),  a Canadian
         insurance company and a direct subsidiary of Everest Re, is licensed in
         all Canadian  provinces and  territories  and is federally  licensed to
         write property and casualty insurance under the Insurance Companies Act
         of Canada.

o        Everest Indemnity Insurance Company ("Everest  Indemnity"),  a Delaware
         insurance company and a direct subsidiary of Everest Re, engages in the
         excess and  surplus  lines  insurance  business  in the United  States.
         Excess and surplus lines insurance is specialty  property and liability
         coverage  that  an  insurer  not  licensed  to  write  insurance  in  a
         particular  state is permitted  to provide when the specific  specialty
         coverage is unavailable  from admitted  insurers.  This is often called
         writing  insurance  on  a  non-admitted  basis.  Everest  Indemnity  is
         licensed  in  Delaware   and  is  eligible  to  write   business  on  a
         non-admitted  basis in 41 states,  the  District of Columbia and Puerto
         Rico.

o        Mt. McKinley  Managers,  L.L.C.  ("Managers"),  a  New  Jersey  limited
         liability company and a direct subsidiary of Holdings,  is  licensed in
         New  Jersey as an  insurance  producer.  An  insurance  producer is any
         intermediary,  such as an agent or broker,  which  acts  as the conduit
         between  an  insurance  company  and  an  insured.  Managers,  which is
         licensed to act in New Jersey as  an  insurance  producer in connection
         with policies written on both an admitted and a surplus lines basis, is
         the underwriting manager for Everest  Indemnity.  As a result of a 1998
         acquisition  of  the assets of insurance  agency  operations in Alabama
         and Georgia, the continuing insurance agency operations are now carried
         on  by  subsidiaries  of  Managers.  These  subsidiaries  are  WorkCare
         Southeast, Inc., an Alabama insurance  agency,  and WorkCare  Southeast
         of Georgia,  Inc., a Georgia insurance agency.

o        Mt.  McKinley  Insurance  Company (f/k/a  Gibraltar  Casualty  Company,
         "Gibraltar")  ("Mt.  McKinley"),  a Delaware  insurance  company  and a
         direct  subsidiary of  Holdings,  was acquired by Holdings in September
         2000 from The  Prudential.  Mt.  McKinley  was formed by Everest  Re in
         1978  to  engage in the excess and  surplus  lines  insurance  business
         in the United  States.  In 1985, Mt.  McKinley  ceased  writing new and
         renewal insurance  and now its ongoing  operations  relate to servicing
         claims arising  from its  previously  written  business.  Mt.  McKinley
         was a  subsidiary  of Everest Re until 1991 when Everest Re distributed
         the  stock  of  Mt.  McKinley  to  a  wholly-owned  subsidiary  of  The
         Prudential.

                                       2
<PAGE>
o        Southeastern  Security Insurance Company ("SSIC"),  a Georgia insurance
         company and a direct  subsidiary of Everest Re, was acquired in January
         2000 and writes property and casualty insurance on an admitted basis in
         Georgia.

o        Everest Re Holdings,  Ltd.  ("Everest  Ltd."), a Bermuda company and  a
         direct subsidiary of Everest Re, was formed in 1998 and owns Everest Re
         Ltd.,  a  United  Kingdom  company  that  is  in  the  process of being
         dissolved  because its reinsurance  operations have been converted into
         branch operations of Everest Re.  Everest Ltd. also holds $84.1 million
         of  investments,  the  management  of  which  constitutes its principal
         operations.

REINSURANCE INDUSTRY OVERVIEW
Reinsurance  is an  arrangement  in which an insurance  company,  the reinsurer,
agrees to indemnify another insurance 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 net  liability  on  individual  or
classes  of risks,  catastrophe  protection  from large or  multiple  losses and
assistance in maintaining acceptable financial ratios. Reinsurance also provides
a ceding  company with  additional  underwriting  capacity by  permitting  it to
accept  larger risks and write more  business  than would be possible  without a
concomitant  increase in capital and  surplus.  Reinsurance,  however,  does not
discharge the ceding company from its liability to policyholders.

There are two basic types of reinsurance  arrangements:  treaty and  facultative
reinsurance. In treaty reinsurance,  the ceding company is obligated to cede and
the  reinsurer is obligated 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  and,
consequently, after a review of the ceding company's underwriting practices, are
largely dependent on the original risk 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 normally is purchased by ceding companies for
individual  risks not  covered by their  reinsurance  treaties,  for  amounts in
excess of the dollar limits of their reinsurance treaties and for unusual risks.

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.

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. 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).  There is  usually no
ceding commission on excess of loss reinsurance.

                                       3
<PAGE>
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 professional  reinsurance brokers or directly
with ceding  companies.  From a ceding  company's  perspective,  both the broker
market  and the  direct  market  have  advantages  and  disadvantages.  A ceding
company's decision to select one market 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  underwriting  strategies  seek to  capitalize  on its  financial
capacity,  its employee expertise and its flexibility to offer multiple products
through  multiple  distribution   channels.  The  Company's  strategies  include
effective  management  of the property and casualty  underwriting  cycle,  which
refers to the  tendency of  insurance  premiums,  profits and the demand for and
availability  of coverage to rise and fall over time.  The Company also seeks to
manage its catastrophe  exposures and  retrocessional  costs, which are incurred
when reinsurers purchase reinsurance. Efforts to control expenses and to operate
in a cost-efficient manner are also a continuing focus for the Company.

The  Company's  products  include  the  full  range  of  property  and  casualty
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"), workers compensation, non-standard
auto and loss portfolios.  The Company's  distribution channels include both the
direct  and  broker  reinsurance  markets,   U.S.  and  international   markets,
reinsurance,  both treaty and  facultative,  and  insurance,  both  admitted and
non-admitted.

The Company's underwriting strategy emphasizes underwriting profitability rather
than  premium  volume,  writing  specialized  property  and  casualty  risks and
integration  of  underwriting  expertise  across  all  underwriting  units.  Key
elements  of this  strategy  are prudent  risk  selection,  appropriate  pricing
through  strict  underwriting   discipline  and  continuous  adjustment  of  the
Company's  business mix to respond 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   strategy   also   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,  U.S. and international presence and
substantial   capital,   facilitate   adjustments   to  its   mix  of   business
geographically,  by line of  business  and by type of  coverage,  allowing it to
capitalize on those market opportunities that provide the greatest potential for
underwriting  profitability.  The  Company's  insurance  infrastructure  further
facilitates  this  strategy by allowing  the  Company to develop  business  that
requires the Company to issue  insurance  policies.  The Company also  carefully
monitors its mix of business to avoid inappropriate concentrations of geographic
or other risk.

                                       4
<PAGE>
The  Company's  underwriting  guidelines  seek  to  limit  the  accumulation  of
catastrophe  risks and to maintain a  cost-effective  retrocession  program.  In
implementing   its  underwriting   guidelines,   the  Company  seeks  to  select
opportunities  with  acceptable   risk/return  profiles  while  maintaining  the
Company's probable maximum loss at appropriate levels.

RATINGS
The  following  table  shows the  financial  strength  ratings of the  Company's
operating  subsidiaries  as reported  by A.M.  Best,  Standard & Poor's  Ratings
Services ("Standard & Poor's) and Moody's Investors Service  ("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 an equity
investment in an insurance company.
<TABLE>
<CAPTION>

Operating Subsidiary           A.M. Best        Standard & Poor's    Moody's
------------------------------------------------------------------------------
<S>                            <C>              <C>                  <C>
Everest Re                     A+ (Superior)    AA- (Very Strong)    A1 (Good)
Everest National               A+ (Superior)    AA- (Very Strong)    Not Rated
Everest Indemnity              A+ (Superior)    Not Rated            Not Rated
Southeastern Security          A+ (Superior)    BB pi                Not Rated
Everest Canada                 A+ (Superior)    Not Rated            Not Rated
Mt. McKinley                   Not Rated        B pi                 Not Rated
</TABLE>

A.M.  Best  states  that the  "A+"  ("Superior")  rating  is  assigned  to those
companies which, in its opinion,  have, on balance,  achieved superior financial
strength,  operating  performance  and  market  profile  when  compared  to  the
standards  established by A.M. Best and have  demonstrated a very strong ability
to meet their ongoing obligations to policyholders. The "A+" ("Superior") rating
is the second highest of fifteen ratings assigned by A.M. Best, which range from
"A++" ("Superior") to "F" ("In Liquidation"). Additionally, A.M. Best has eleven
classifications  within the "Not  Assigned"  category.  Standard & Poor's states
that the "AA-" rating is assigned to those  insurance  companies  which,  in its
opinion,   offer  excellent  financial  security  and  whose  capacity  to  meet
policyholder  obligations is strong under a variety of economic and underwriting
conditions.  The "AA-" rating is the fourth highest of nineteen ratings assigned
by  Standard & Poor's,  which  range from "AAA"  (Superior)  to "R"  (Regulatory
Action). Ratings from AA to B may be modified by the use of a plus or minus sign
to show  relative  standing  of the  insurer  within  those  rating  categories.
Ratings,  denoted with a "pi" subscript,  are ratings based on Standard & Poor's
analysis of published financial information and do not reflect in-depth meetings
with the  Company's  management.  The "BB pi" and "B pi" ratings are the twelfth
and fifteenth highest of the nineteen Standard & Poor's ratings.  Moody's states
that  insurance  companies  rated "A" offer good  financial  security.  However,
elements may be present  which  suggest a  susceptibility  to  impairment in the
future.  Moody's  rating  gradations  are shown through the use of nine distinct
symbols,  each  symbol  representing  a group of ratings in which the  financial
security is broadly the same.  The "A1"  (Good)  rating is the fifth  highest of
ratings  assigned  by  Moody's,  which  range  from "Aaa"  (Exceptional)  to "C"
(Lowest).  Moody's  further  distinguishes  the ranking of an insurer within its
generic  rating  classification  from  Aa to B with  1, 2 and 3 ("1"  being  the
highest).

                                       5
<PAGE>
The following table shows the investment  grade ratings of the Holdings'  senior
notes due March 15, 2005 and March 15, 2010 by A.M. Best,  Standard & Poor's and
Moody's.  Debt ratings are a current assessment of the  credit-worthiness  of an
obligor with respect to a specific obligation.
<TABLE>
<CAPTION>
                               A.M. Best        Standard & Poor's    Moody's
----------------------------------------------------------------------------
<S>                            <C>              <C>                  <C>
Senior Notes                   a                A-                   A3
</TABLE>

A company with a debt rating of "a" is  considered by A.M. Best to have a strong
capacity and willingness to meet the terms of the obligation and possesses a low
level of credit risk. The "a" rating is the sixth highest of 19 ratings assigned
by A.M.  Best,  which range from "aaa" to "ccc". A company with a debt rating of
"A-" is  considered  by  Standard  &  Poor's  to have a strong  capacity  to pay
interest and repay  principal,  although it is somewhat more  susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated  categories.  The "A-" rating from Standard & Poor's is the seventh
highest of 24 ratings  assigned by Standard & Poor's,  which range from "AAA" to
"D".  A  company   with  a  debt  rating  of  "A3"  is   considered   to  be  an
upper-medium-grade  obligation  by  Moody's.  This  rating  represents  adequate
capacity with respect to repayment of principal  and interest,  but elements may
be present which suggest a susceptibility to impairment  sometime in the future.
The "A3" rating is the seventh  highest of 21 ratings  assigned by Moody's which
range from "AAA" to "C".

All of the  above-mentioned  ratings are continually  monitored and revised,  if
necessary, by each of the rating agencies.

COMPETITION
The worldwide reinsurance and insurance businesses are highly competitive. Since
late 1999, market conditions,  including  unfavorable  industry-wide  results of
operations,  have  led to  modest  premium  rate  increases  as well  as  modest
improvements  in  contract  terms  in a  number  of  lines  of  reinsurance  and
insurance.  These changes reflect a reversal of the trend from 1987 through 1999
toward  increasingly  competitive  global market conditions across most lines of
business as reflected by decreasing  prices and broadening  contract terms.  The
earlier  trend  resulted  from a number of factors,  including  the emergence of
significant  reinsurance  capacity in Bermuda, a rejuvenated  Lloyd's market and
consolidation  and increased capital levels in the insurance  industry.  Many of
these same  factors  continue to operate.  As a result,  although the Company is
encouraged  by the recent  improvements,  the Company  cannot  predict  with any
reasonable certainty whether and to what extent these improvements will persist.

Competition  with respect to the types of reinsurance and insurance  business in
which the Company is engaged is based on many  factors,  including the perceived
overall  financial  strength of the  reinsurer or insurer,  the A.M. Best and/or
Standard & Poor's  rating of the reinsurer or insurer,  underwriting  expertise,
the  jurisdictions  where the  reinsurer  or insurer is  licensed  or  otherwise
authorized,  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.  The Company  competes in the United
States  and  international  reinsurance  and  insurance  markets  with  numerous
international and domestic  reinsurance and insurance  companies.  The Company's
competitors   include   independent   reinsurance   and   insurance   companies,
subsidiaries  or  affiliates  of  established   worldwide  insurance  companies,

                                       6
<PAGE>
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 the
Company and have  established  long-term and continuing  business  relationships
throughout the industry,  which can be a significant  competitive advantage.  In
addition,  the potential for  securitization  of reinsurance and insurance risks
through the capital  markets  provide an additional  source of  reinsurance  and
insurance capacity and competition.

EMPLOYEES
As of March 1, 2001, the Company employed 436 persons.  Management believes that
its 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.

ITEM 2.  PROPERTIES
Everest Re's corporate offices are located in approximately  112,000 square feet
of leased office space in Liberty Corner, New Jersey. The Company's other eleven
locations occupy a total of  approximately  69,500 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
The Company is involved  from time to time in ordinary  routine  litigation  and
arbitration proceedings incidental to its business. The Company does not believe
that there are any other material  pending legal  proceedings to which it or any
of its subsidiaries or their properties are subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information for this Item 4 is not required pursuant to General Instruction I(2)
of Form 10-K.

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION AND HOLDER OF COMMON STOCK
As of December 31, 2000,  all of the  Company's  common stock was owned by Group
and was not publicly traded.

During  2000 and 1999,  the  Company  declared  dividends  on its  common  stock
totaling $495.0 million and $11.6 million, respectively.

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  operating   subsidiaries,
regulatory  restrictions,  rating agency considerations and other factors. As an
insurance  holding  company,  the Company is dependent  on  dividends  and other
permitted   payments  from  its  subsidiaries  to  pay  cash  dividends  to  its
stockholders.  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 $897.5  million at

                                       7
<PAGE>
December  31,  2000,  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.  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 an insurer's statutory surplus as of the end of the
prior  calendar  year or (2) the insurer's  statutory net income,  not including
realized capital gains, for the prior calendar year. Under this definition,  the
maximum amount that will be available for the payment of dividends by Everest Re
in 2000 without  triggering  the  requirement  for prior  approval of regulatory
authorities  in connection  with a dividend is $165.1  million,  of which $100.0
million  was paid in  January  2001.  See  Note  11A of  Notes  to  Consolidated
Financial Statements.

RECENT SALES OF UNREGISTERED SECURITIES
None.

ITEM 6.  SELECTED FINANCIAL DATA

Information for this Item 6 is not required pursuant to General Instruction I(2)
of Form 10-K.

ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

The  following  is a  discussion  of the  results of  operations  and  financial
condition  of Everest  Reinsurance  Holdings,  Inc.  and its  subsidiaries  (the
"Company").  This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto presented under ITEM 8.

RESTRUCTURING
On February 24, 2000, a corporate  restructuring  was  completed  and Everest Re
Group,  Ltd.  ("Group")  became the new parent  holding  company of the Company,
which remains the holding company for Group's U.S. based operations.  Holders of
the Company's  common stock  automatically  became holders of the same number of
Group common shares. The Company is filing this report as a result of its public
issuance  of  senior  notes on March  14,  2000.  See ITEM 1 -  "Business  - The
Company" for a further discussion.

ACQUISITIONS
On September  19, 2000,  the Company  completed  the  acquisition  of all of the
issued and outstanding capital stock of Gibraltar Casualty Company ("Gibraltar")
from The Prudential  Insurance  Company of America ("The  Prudential") for $51.8
million,  which  approximated  book  value.  As a  result  of  the  acquisition,
Gibraltar  became a wholly  owned  subsidiary  of the Company  and,  immediately
following  the  acquisition,  its name was  changed  to Mt.  McKinley  Insurance
Company ("Mt.  McKinley").  In connection with the acquisition of Mt.  McKinley,
which has significant exposure to asbestos and environmental claims,  Prudential
Property  and  Casualty  Insurance  Company  ("Prupac"),  a  subsidiary  of  The
Prudential,  provided  reinsurance to Mt. McKinley covering 80% ($160.0 million)
of the  first  $200.0  million  of any  adverse  development  of Mt.  McKinley's
reserves  as of  September  19,  2000  and The  Prudential  guaranteed  Prupac's
obligation to Mt. McKinley.

                                       8
<PAGE>
Mt. McKinley,  a run-off property and casualty insurer in the United States, has
had a long  relationship with the Company and its principal  operating  company,
Everest  Reinsurance  Company ("Everest Re"). Mt. McKinley was formed in 1978 by
Everest Re and wrote  insurance  until 1985,  when it was placed in run-off.  In
1991, Mt. McKinley became a subsidiary of The Prudential. Mt. McKinley is also a
reinsurer  of Everest Re.  Under a series of  transactions  dating to 1986,  Mt.
McKinley reinsured several  components of Everest Re's business.  In particular,
Mt. McKinley provided stop-loss reinsurance  protection,  in connection with the
Company's  October 5, 1995 IPO, for any adverse loss development on Everest Re's
June 30, 1995 (December 31, 1994 for catastrophe  losses) reserves,  with $375.0
million in limits,  of which $89.4  million  remains  available  (the "Stop Loss
Agreement"). The Stop Loss Agreement and other reinsurance contracts between Mt.
McKinley and Everest Re remain in effect  following  the  acquisition.  However,
these  contracts have become  transactions  with  affiliates  with the financial
impact eliminated in consolidation.

Effective  September 19, 2000, Mt. McKinley and Everest  Reinsurance  (Bermuda),
Ltd.  ("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, including allocated and unallocated
loss adjustment expenses, to Bermuda Re.

On January 18,  2000,  Everest Re  purchased  all of the issued and  outstanding
shares  of  Cra-Co   Holdings  Ltd.,  the  Georgia  holding  company  parent  of
Southeastern  Security  Insurance  Company  ("SSIC"),  for $10.1 million,  which
approximated  book value.  SSIC is a Georgia  property  and  casualty  insurance
company, whose primary line of business is non-standard auto coverage.

RESULTS OF OPERATIONS
INDUSTRY CONDITIONS.  Since late 1999, market conditions,  including unfavorable
industry-wide  results of operations,  have led to modest premium rate increases
as well as  modest  improvements  in  contract  terms  in a  number  of lines of
reinsurance  and insurance.  These changes  reflect a reversal of the trend from
1987 through  1999 toward  increasingly  competitive  global  market  conditions
across most lines of business as reflected by decreasing  prices and  broadening
contract terms.  The earlier trend resulted from a number of factors,  including
the  emergence of  significant  reinsurance  capacity in Bermuda,  a rejuvenated
Lloyd's market and  consolidation  and increased capital levels in the insurance
industry.  Many of these same factors continue to operate. As a result, although
the Company is encouraged by the recent improvements, the Company cannot predict
with any reasonable certainty whether and to what extent these improvements will
persist.

SEGMENT INFORMATION
During the quarter ended December 31, 2000, the Company's  management  realigned
its operating  segments to better reflect the way that  management  monitors and
evaluates  the  Company's  financial  performance.  The Company has restated all
information  for  prior  years to  conform  to the new  segment  structure.  The
Company, through its subsidiaries,  operates in four segments: U.S. Reinsurance,
U.S. Insurance, Specialty Underwriting, and International.  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 United States. The U.S. Insurance operation writes property
and casualty insurance primarily through general agent relationships and surplus
lines brokers within the United  States.  The Specialty  Underwriting  operation
writes accident and health ("A&H"),  marine, aviation and surety business within

                                       9
<PAGE>
the United  States and  worldwide  through  brokers  and  directly  with  ceding
companies.  The International operation writes property and casualty reinsurance
through the Company's branches in Belgium,  London,  Canada,  and Singapore,  in
addition to foreign "home-office" business.

These  segments  are  managed in a  carefully  coordinated  fashion  with strong
elements of central control, including with respect to capital,  investments and
support operations. As a result, management monitors and evaluates the financial
performance  of  these   operating   segments   principally   based  upon  their
underwriting results.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
PREMIUMS.  Gross premiums  written  increased 20.3% to $1,374.0  million in 2000
from $1,141.8  million in 1999 as the Company took advantage of selected  growth
opportunities, while continuing to maintain a disciplined underwriting approach.
Premium  growth areas included a 255.9%  ($180.1  million)  increase in the U.S.
Insurance operation, principally attributable to growth in worker's compensation
insurance,  an 18.5%  ($49.7  million)  increase in the  Specialty  Underwriting
operation,  attributable  to growth in A&H writings  and a 3.6% ($11.2  million)
increase in the International operation,  mainly attributable to growth in North
and South America and the markets served from the Company's London branch. These
increases  were partially  offset by a 1.8% ($8.9 million)  decrease in the U.S.
Reinsurance operation where growth across property and casualty lines was offset
by reductions in non-standard  auto writings.  The Company  continued to decline
business that did not meet its objectives regarding underwriting profitability.

Ceded  premiums  increased to $166.7 million in 2000 from $46.3 million in 1999.
This increase was principally attributable to the higher utilization of contract
specific  cessions  in the  U.S.  Insurance  and  U.S.  Reinsurance  operations,
including a new 100% ceded U.S.  Longshore and Harbor Workers'  Compensation Act
and state act workers'  compensation  program in the U.S.  Insurance  operation,
which  contributed  $37.0  million  to the  increase.  In  addition,  adjustment
premiums of $35.2  million were ceded in 2000 relating to losses ceded under the
1999 accident year aggregate  excess of loss element of the Company's  corporate
retrocessional program.

Net  premiums  written  increased  by 10.2% to  $1,207.3  million  in 2000  from
$1,095.6  million in 1999.  This  increase was  consistent  with the increase in
gross premiums written and the increase in ceded premiums.

PREMIUM  REVENUES.  Net premiums earned increased by 8.5% to $1,162.6 million in
2000 from $1,071.5  million in 1999.  Contributing  to this increase was a 75.8%
($43.8  million)  increase  in the  U.S.  Insurance  operation,  a 14.1%  ($37.3
million)  increase in the Specialty  Underwriting  operation,  and a 3.3% ($15.1
million)  increase  in the U.S.  Reinsurance  operation.  These  increases  were
partially  offset  by a  1.7%  ($5.0  million)  decrease  in  the  International
operation.  All of these changes reflect  period-to-period  variability in gross
written and ceded premiums,  and business mix, together with normal  variability
in earnings patterns.  Business mix changes occur not only as the Company shifts
emphasis between products, lines of business,  distribution channels and markets
but also as individual contracts renew or non-renew,  almost always with changes
in coverage,  structure,  prices and/or terms, and as new contracts are accepted
with coverages, structures, prices and/or terms different from those of expiring
contracts.   As  premium   reporting  and  earnings  and  loss  and   commission
characteristics  derive  from  the  provisions  of  individual  contracts,   the
continuous turnover of individual contracts,  arising from both strategic shifts

                                       10
<PAGE>
and day to day  underwriting,  can and  does  introduce  appreciable  background
variability in various underwriting line items.

EXPENSES.  Incurred loss and loss adjustment expenses ("LAE") increased by 13.8%
to $878.2  million in 2000 from $771.6 million in 1999. The increase in incurred
losses and LAE was  principally  attributable  to the  increase in net  premiums
written  together with modest  strengthening  of prior period reserves in select
areas, including on a multi-year reinsurance treaty where such losses within the
current experience band were accompanied by  correspondingly  lower commissions.
The increase was partially offset by losses ceded under the Company's  corporate
retrocessional  program  and  also  reflects  changes  in the  Company's  mix of
business.  Incurred losses and LAE include catastrophe losses, which reflect the
impact of both current period events and favorable and  unfavorable  development
on prior period events, and are net of reinsurance.  Catastrophe  losses, net of
contract   specific   cessions   but  before   cessions   under  the   corporate
retrocessional program in 2000 were $13.9 million,  mainly reflecting modest net
adverse  development on 1999  catastrophe  events,  compared to $45.9 million in
1999.  Net  incurred  losses and LAE in 2000  reflected  ceded losses and LAE of
$176.4  million,  including  $70.0  million  ceded under the 1999  accident year
aggregate  excess of loss  component of the Company's  corporate  retrocessional
program.  Ceded losses and LAE in 1999 were $7.4 million with no cessions  under
the accident year aggregate excess of loss component of the Company's  corporate
retrocessional program.

Contributing to the increase in incurred losses and LAE in 2000 from 1999 were a
71.1%  ($29.2  million)  increase in the U.S.  Insurance  operation  principally
reflecting  increased  premium volume,  a 37.0% ($68.7 million)  increase in the
Specialty Underwriting  operation principally  attributable to increased premium
volume in A&H business  together  with modest  reserve  strengthening  for prior
period marine,  aviation and surety exposures, a 3.3% ($7.5 million) increase in
International  operation,   which  included  modest  reserve  strengthening  for
exposures  produced through its London and Canadian  branches,  and a 0.4% ($1.2
million) increase in the U.S. Reinsurance operation. Incurred losses and LAE for
each  operation  were also  impacted by  variability  relating to changes in the
level of premium volume and mix of business by class and type.

The Company's loss and LAE ratio ("loss ratio"), which is calculated by dividing
incurred losses and LAE by premiums earned,  increased by 3.5 percentage  points
to 75.5% in 2000 from  72.0% in 1999  reflecting  the  incurred  losses  and LAE
discussed  above.  The  following  table  shows the loss  ratios for each of the
Company's  operating  segments  for  2000 and  1999.  The  loss  ratios  for all
operations were impacted by the factors noted above.
<TABLE>
<CAPTION>
                 Operating Segment Loss Ratios
----------------------------------------------------------------
      Segment                           2000               1999
----------------------------------------------------------------
<S>                                     <C>                <C>
U.S. Reinsurance                        67.4%              69.3%
U.S. Insurance                          69.2%              71.1%
Specialty Underwriting                  84.0%              70.0%
International                           82.3%              78.3%
</TABLE>

Underwriting  expenses  decreased by 5.7% to $317.7  million in 2000 from $337.0
million  in 1999.  Commission,  brokerage,  taxes  and fees  decreased  by $18.5
million,  principally  reflecting  the  Company's  reassessment  of the expected

                                       11
<PAGE>
losses on the  multi-year  reinsurance  treaty  noted  above that led to a $33.8
million  decrease in contingent  commissions  with a  corresponding  increase to
losses,  partially  offset by increases in premiums  written and also reflecting
changes in the mix of business.  Other  underwriting  expenses decreased by $0.8
million.  Contributing to the underwriting  expense decrease were a 26.5% ($34.5
million) decrease in the U.S. Reinsurance  operation,  which included the impact
of the contingent  commission  adjustment  noted above and a 2.0% ($1.9 million)
decrease in the International  operation.  These decreases were partially offset
by a 52.8%  ($12.8  million) and a 9.1%  ($7.3  million)  increase  in  the U.S.
Insurance  operation and the  Specialty  Underwriting  operation,  respectively,
principally related to production volume increases. Except as noted, the changes
for each operation's  expenses  principally  resulted from changes in commission
expenses related to changes in premium volume and business mix by class and type
and, in some cases, the underwriting performance of the underlying business. The
Company's expense ratio, which is calculated by dividing  underwriting  expenses
by premiums earned, decreased by 4.2 percentage points to 27.3% in 2000 compared
to 31.5% in 1999.

The Company's  combined ratio,  which is the sum of the loss and expense ratios,
decreased by 0.7 percentage points to 102.8% in 2000 compared to 103.5% in 1999.
The  following  table  shows  the  combined  ratios  for  each of the  Company's
operating  segments for 2000 and 1999.  The combined  ratios for all  operations
were impacted by the loss and expense ratio variability noted above.
<TABLE>
<CAPTION>
                  Operating Segment Combined Ratios
-------------------------------------------------------------------
       Segment                               2000             1999
-------------------------------------------------------------------
<S>                                          <C>              <C>
U.S. Reinsurance                             88.0%            97.9%
U.S. Insurance                              105.8%           113.1%
Specialty Underwriting                      113.1%           100.4%
International                               115.4%           111.5%
</TABLE>

Interest  expense was $39.4  million for 2000  compared to $1.5 million in 1999.
Interest  expense for 2000  reflects  $30.9  million  relating to the  Company's
issuance of senior notes and $8.5 million  relating to the  Company's  borrowing
under its revolving  credit  facility.  Interest  expense for 1999 reflects $1.5
million relating to the Company's borrowing under its credit facility.

Other income was $3.3 million in 2000  compared to other expense of $1.0 million
in 1999. Significant contributors to other income for 2000 were foreign exchange
gains as well as financing fees from SSIC,  offset by net derivative  income and
fair value adjustments and expenses relating to the Company's issuance of senior
notes. Other expense for 1999 principally reflected foreign exchange losses. The
foreign  exchange gains and losses are  attributable  to fluctuations in foreign
currency exchange rates.

INVESTMENTS.  Net investment  income increased by 7.3% to $271.4 million in 2000
from  $253.0  million  in 1999,  principally  reflecting  the growth in cash and
invested assets, including $50.0 million in retained proceeds from the Company's
issuance  of  senior  notes  coupled  with the  impact of  portfolio  management
activities.  The following table shows a comparison of various investment yields
as of December 31, 2000 and 1999, respectively, and for the periods then ended.

                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                       2000          1999
                                                      --------------------
<S>                                                   <C>           <C>
Imbedded pre-tax yield of cash and invested
 assets at end of period                                6.7%          6.2%
Imbedded after-tax yield of cash and invested
 assets at end of period                                5.0%          4.9%
Annualized pre-tax yield on average cash and
 invested assets                                        6.5%          6.2%
Annualized after-tax yield on average cash and
 invested assets                                        5.0%          4.9%
</TABLE>

Net  realized  capital  gains  were $0.3  million in 2000,  reflecting  realized
capital gains on the Company's investments of $30.3 million, partially offset by
$30.0 million of realized capital losses, compared to realized capital losses of
$16.8  million  in 1999.  The net  realized  capital  losses  in 1999  reflected
realized  capital losses of $33.9 million,  which were partially offset by $17.1
million of realized  capital gains.  The realized capital gains in 2000 and 1999
arose  mainly from  activity in the  Company's  equity  portfolio.  The realized
capital  losses in 2000 and 1999 arose  mainly from  activity  in the  Company's
fixed maturity portfolios.

INCOME TAXES. The Company recognized income tax expense of $43.8 million in 2000
compared  to $38.5  million in 1999 with the  increase  mainly  attributable  to
decreased realized capital losses.

NET INCOME.  Net income was $158.5 million in 2000 compared to $158.1 million in
1999.  This increase  generally  reflects the decreases in net realized  capital
losses,   together  with  the  improved  underwriting  and  investment  results,
partially offset by increased interest and income tax expense.

SAFE HARBOR DISCLOSURE
In  connection  with the "safe  harbor"  provisions  of the  Private  Securities
Litigation  Reform  Act of 1995  (the  "Act"),  the  Company  sets  forth  below
cautionary statements  identifying important factors that, among others, in some
cases have affected and that could cause its actual results to differ materially
from  those  which  might  be  projected,   forecasted,   or  estimated  in  its
forward-looking  statements,  as defined in the Act, made by or on behalf of the
Company in press releases,  written  statements or documents filed with the U.S.
Securities and Exchange  Commission,  or in its  communications  and discussions
with investors and analysts in the normal course of business  through  meetings,
phone calls and conference calls. These cautionary  statements  supplement other
factors  contained in this report which could cause the Company's actual results
to  differ  materially  from  those  which  might be  projected,  forecasted  or
estimated in its forward-looking statements.

Such forward-looking statements may include, but are not limited to, projections
of premium revenue, investment income, other revenue, losses, expenses, earnings
(including earnings per share), cash flows, plans for future operations,  common
stockholders'  equity (including book value per share),  investments,  financing
needs, capital plans,  dividends,  plans relating to products or services of the
Company,  and estimates  concerning the effects of litigation or other disputes,
as well as assumptions for any of the foregoing and are generally expressed with
words  such  as  "believes,"  "estimates,"  "expects,"  "anticipates,"  "plans,"
"projects,"   "forecasts,"   "goals,"  "could  have,"  "may  have"  and  similar
expressions. Undue reliance on any forward-looking statements should be avoided.

                                       13
<PAGE>
The  Company   undertakes  no  obligation  to  publicly  update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

Forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause the Company's  results to differ  materially  from
such  forward-looking  statements.  Such risks,  uncertainties and other factors
include, but are not limited to, the following:

1)  Changes in the level of competition  in the United States and  international
reinsurance  or  insurance   markets  that   adversely   affect  the  volume  or
profitability of the Company's reinsurance or insurance business.  These changes
include, but are not limited to, the intensification of price and contract terms
competition, the entry of new competitors,  consolidation in the reinsurance and
insurance  industry  and the  development  of new  products by new and  existing
competitors;

2)  Decrease in the demand for  reinsurance  and  insurance products of the type
offered by the Company and its ceding  insurer customers;

3)  The ability of the Company to execute its strategies;

4)  Occurrence of catastrophic events or other insured or reinsured  events with
a frequency or severity  exceeding the Company's estimates;

5)  Adverse  development  on claim  and claim  expense  liabilities  related  to
business  written in prior years,  including,  but not limited to, evolving case
law and its effect on  environmental  and other latent injury  claims,  changing
government  regulations,  newly identified  toxins,  newly reported claims,  new
theories   of   liability,   or   new   insurance   and   reinsurance   contract
interpretations;

6)  Greater than expected loss ratios on reinsurance or insurance written by the
Company;

7)  Changes in inflation that affect the  profitability of the Company's current
reinsurance and insurance businesses or the adequacy of its claim, claim expense
and policy benefit liabilities;

8)  Loss of services of any key employees;

9)  Lower than  estimated  retrocessional or  reinsurance  recoveries on losses,
including,  but not limited to, losses due to a  decline in the creditworthiness
of the Company's retrocessionaires or reinsurers;

10) Changes in the  reinsurance/retrocessional  market  impacting  the Company's
ability to cede risks above its desired level of retention.

11) Changes in  interest  rates,  increases  in which  cause a reduction  in the
market value of the Company's fixed income investment portfolio,  and its common
stockholders'  equity, and decreases in which cause a reduction of income earned
on new cash flow from operations as well as on the  reinvestment of the proceeds
from sales, calls or maturities of existing investments;

12) Losses due to foreign currency exchange rate fluctuations;

                                       14
<PAGE>
13) Adverse  results  in  litigation  matters,  including,  but not  limited to,
litigation related to environmental, asbestos  and  other  potential  mass  tort
claims;

14) Changes in the Company's ratings;

15) The impact of current and future  regulatory  environments,  generally,  and
on the ability of the Company's  subsidiaries  to  enter and exit reinsurance or
insurance markets; and

16) Adverse  changes in  tax  treatment  of the  Company's  business,  including
changes  in  tax  treatment  by  the  U.S  or  other   regulatory  or  political
organizations  with  jurisdiction or potential  jurisdiction over the Company or
its affiliates.

In addition  to the  factors  outlined  above that are  directly  related to the
Company's  businesses,  the Company is also subject to general  business  risks,
including, but not limited to, adverse state, federal or foreign legislation and
regulation,  adverse  publicity or news coverage and changes in general economic
factors.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET SENSITIVE INSTRUMENTS

The Securities and Exchange Commission  Financial Reporting Release #48 requires
registrants  to  clarify  and  expand  upon  the  existing  financial  statement
disclosure   requirements  for  derivative  financial  instruments,   derivative
commodity instruments,  and other financial instruments  (collectively,  "market
sensitive instruments").

The Company's  current  investment  strategy seeks to maximize  after-tax income
through a high quality, diversified,  taxable and tax-preferenced fixed maturity
portfolio,  while maintaining an adequate level of liquidity.  The Company's mix
of taxable and tax-preferenced investments is adjusted continuously,  consistent
with its current and projected  operating results,  market  conditions,  and tax
position.  The fixed  maturities  in the  investment  portfolio are comprised of
non-trading available for sale securities.  Additionally, the Company invests in
equity securities, which it believes will enhance the risk-adjusted total return
of the investment portfolio.

The overall  strategy  considers  the scope of present and  anticipated  Company
operations.  In  particular,  estimates of the financial  impact  resulting from
non-investment  asset and  liability  transactions,  together with the Company's
capital  structure  and  other  factors,  are used to  develop  a net  liability
analysis.  This analysis includes estimated payout characteristics for which the
investments of the Company provide liquidity. This analysis is considered in the
development of specific  investment  strategies for asset allocation,  duration,
and credit  quality.  The  change in  overall  market  sensitive  risk  exposure
principally  reflects the asset changes that took place during the year together
with minor changes in the underlying risk characteristics.

The $4.3 billion investment  portfolio is comprised of fixed maturity securities
that are  subject to  interest  rate risk and foreign  currency  rate risk,  and
equity  securities  that are subject to equity  price risk.  The impact of these
risks in the investment portfolio is generally mitigated by changes in the value
of  operating  assets and  liabilities  and their  associated  income  statement
impact.

                                       15
<PAGE>
Interest  rate  risk is the  potential  change  in value of the  fixed  maturity
portfolio  due  to  change  in  market  interest  rates.  Further,  it  includes
prepayment risk in a declining  interest rate  environment on the $462.9 million
of the $3.9 billion fixed maturity portfolio,  which consists of mortgage-backed
securities.   Prepayment  risk  results  from  potential  accelerated  principal
payments  that  shorten the average  life and thus,  the  expected  yield of the
security.

The tables below display the potential  impact of market value  fluctuations and
after-tax unrealized appreciation on the fixed maturity portfolio as of December
31, 2000 and 1999 based on parallel 200 basis point shifts in interest  rates up
and down in 100 basis point  increments.  For legal entities with a U.S.  dollar
functional currency,  this modeling was performed on each security individually.
To generate appropriate price estimates on mortgage-backed  securities,  changes
in prepayment  expectations under different interest rate environments are taken
into account. For legal entities with a non-U.S. dollar functional currency, the
effective  duration of the involved  portfolio of securities was used as a proxy
for the market value change under the various  interest  rate change  scenarios.
All amounts are in U.S. dollars and are presented in millions.
<TABLE>
<CAPTION>
                                           2000
                             INTEREST RATE SHIFT IN BASIS POINTS
------------------------------------------------------------------------------------------
                               -200         -100           0           100          200
------------------------------------------------------------------------------------------
<S>                          <C>          <C>          <C>          <C>          <C>
Total Market Value           $ 4,637.3    $ 4,384.1    $ 4,150.6    $ 3,923.7    $ 3,710.2

Market Value Change from
 Base (%)                         11.8%         5.6%         0.0%        (5.5%)      (10.6%)

Change in Unrealized
 Appreciation After-tax
 from Base ($)               $   316.4    $   151.8    $       0    $ (147.5)    $  (286.3)
</TABLE>

<TABLE>
<CAPTION>
                                           1999
                             INTEREST RATE SHIFT IN BASIS POINTS
------------------------------------------------------------------------------------------
                               -200         -100           0           100          200
------------------------------------------------------------------------------------------
<S>                          <C>          <C>          <C>          <C>          <C>
Total Market Value           $ 4,481.6    $ 4,210.8    $ 3,958.8    $ 3,724.0    $ 3,508.0

Market Value Change from
 Base (%)                         13.2%         6.4%         0.0%        (5.9%)      (11.4%)

Change in Unrealized
 Appreciation After-tax
 from Base ($)               $   339.8    $   163.7    $       0    $ (152.7)    $  (293.0)
</TABLE>

Foreign  currency rate risk is the potential change in value,  income,  and cash
flow  arising from  adverse  changes in foreign  currency  exchange  rates.  The
Company's  foreign  operations  each  maintain  capital in the  currency  of the
country of its geographic location consistent with local regulatory  guidelines.
Generally, the Company prefers to maintain the capital of its foreign operations
in U.S.  dollar  assets  although  this  varies by  regulatory  jurisdiction  in

                                       16
<PAGE>
accordance with market needs. Each foreign operation may conduct business in its
local currency as well as the currency of other  countries in which it operates.
The primary  foreign  currency  exposures are the Canadian  Dollar,  the British
Pound Sterling and the Euro for these foreign operations.  The Company mitigates
foreign exchange  exposure by a general matching of the currency and duration of
its  assets to its  corresponding  operating  liabilities.  In  accordance  with
Financial  Accounting  Standards Board Statement No. 52, the Company  translates
the assets,  liabilities and income of non-U.S. dollar functional currency legal
entities to the U.S. dollar.  This translation amount is reported as a component
of other comprehensive income. The primary functional foreign currency exposures
are the Canadian  Dollar,  the Belgian Franc and the British Pound  Sterling for
these foreign operations.

The tables  below  display the  potential  impact of a parallel 20% increase and
decrease in foreign  exchange rates on the valuation of invested  assets subject
to foreign currency exposure in 10% increments as of December 31, 2000 and 1999.
This analysis  includes the after-tax impact of translation  from  transactional
currency to functional  currency as well as the after-tax  impact of translation
from functional currency to the U.S. dollar reporting currency. During 1999, the
Company  redenominated  into the Euro all  invested  assets  denominated  in the
eleven  currencies  committed  to  convert  to the Euro.  The impact of the Euro
conversion was not material to the Company's  business,  operations or financial
condition. All amounts are in U.S. dollars and are presented in millions.
<TABLE>
<CAPTION>
                                        2000
                       CHANGE IN FOREIGN EXCHANGE RATES IN PERCENT
---------------------------------------------------------------------------------------
                                  -20%        -10%        0%          10%         20%
---------------------------------------------------------------------------------------
<S>                            <C>         <C>          <C>         <C>         <C>
Total After-tax Foreign
 Exchange Exposure             ($  42.9)   ($  22.5)    $     0     $  24.2     $  49.5
</TABLE>

<TABLE>
<CAPTION>
                                        1999
                       CHANGE IN FOREIGN EXCHANGE RATES IN PERCENT
---------------------------------------------------------------------------------------
                                  -20%        -10%        0%          10%         20%
---------------------------------------------------------------------------------------
<S>                            <C>         <C>          <C>         <C>         <C>
Total After-tax Foreign
 Exchange Exposure             ($  44.9)   ($  23.5)    $     0     $  24.9     $  51.0
</TABLE>

Equity  risk is the  potential  change in market  value of the common  stock and
preferred  stock  portfolios  arising from changing  equity prices.  The Company
invests in  predominately  high  quality  preferred  and common  stocks that are
traded on the major  exchanges in the United  States.  The primary  objective in
managing the $36.5  million  equity  portfolio is to provide  long-term  capital
growth through market appreciation and income.

The tables  below  display the impact on market value and  after-tax  unrealized
appreciation  of a 20% change in equity prices up and down in 10%  increments as
of December 31, 2000 and 1999. All amounts are in U.S. dollars and are presented
in millions.

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                         2000
                          CHANGE IN EQUITY VALUES IN PERCENT
--------------------------------------------------------------------------------------
                                -20%        -10%          0%         10%         20%
--------------------------------------------------------------------------------------
<S>                            <C>         <C>         <C>         <C>         <C>
Market Value of the
 Equity Portfolio              $  29.3     $  33.0     $  36.6     $  40.3     $  44.0

After-tax Change in
 Unrealized Appreciation          (4.8)       (2.4)          0         2.4         4.8
</TABLE>

<TABLE>
<CAPTION>
                                         1999
                          CHANGE IN EQUITY VALUES IN PERCENT
--------------------------------------------------------------------------------------
                                -20%        -10%          0%         10%         20%
--------------------------------------------------------------------------------------
<S>                            <C>         <C>         <C>         <C>         <C>
Market Value of the
 Equity Portfolio              $  72.6     $  81.6     $  90.7     $  99.8     $ 108.8

After-tax Change in
 Unrealized Appreciation         (11.8)       (5.9)          0         5.9        11.8
</TABLE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial  statements  and  schedules  listed in the  accompanying  Index to
Financial Statements and Schedules on page F-1 are filed as part of this report.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.
None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information  for this Item 10 is not  required  pursuant to General  Instruction
I(2) of Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION
Information  for this Item 11 is not  required  pursuant to General  Instruction
I(2) of Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information  for this Item 12 is not  required  pursuant to General  Instruction
I(2) of Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information  for this Item 13 is not  required  pursuant to General  Instruction
I(2) of Form 10-K.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

FINANCIAL STATEMENTS AND SCHEDULES
The financial  statements  and  schedules  listed in the  accompanying  Index to
Financial Statements and Schedules on page F-1 are filed as part of this report.

                                       18
<PAGE>
EXHIBITS
The exhibits listed on the accompanying  Index to Exhibits on page E-1 are filed
as part of this report.

REPORTS ON FORM 8-K
An  amendment  to the current  report on Form 8-K dated  September  19, 2000 was
filed on December 4, 2000  concerning  the  acquisition of Mt.  McKinley  (f/k/a
Gibraltar)  to include  the  filing of the  financial  statements  and pro forma
financial information required to be filed with that current report on Form 8-K.

                                       19
<PAGE>
SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 23, 2001.

                                      EVEREST REINSURANCE HOLDINGS, INC.


                                      By: /s/ JOSEPH V. TARANTO
                                          -------------------------------------
                                          Joseph V. Taranto
                                          (Chairman and Chief Executive Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.


/s/  JOSEPH V. TARANTO        Chairman and Chief Executive        March 23, 2001
-------------------------     Officer and Director
Joseph V. Taranto

/s/  STEPHEN L. LIMAURO       Executive Vice President,           March 23, 2001
-------------------------     Chief Financial Officer,
Stephen L. Limauro            Treasurer and Comptroller
                              and Director

/s/  THOMAS J. GALLAGHER      Director                            March 23, 2001
-------------------------
Thomas J. Gallagher

                                       20
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES


                                                                           Pages
                                                                           -----
Everest Reinsurance Holdings, Inc.

Report of Independent Accountants on Financial Statements
 and Schedules                                                               F-2

Consolidated Balance Sheets at December 31, 2000 and 1999                    F-3

Consolidated Statements of Operations and Comprehensive Income
 for the years ended December 31, 2000, 1999 and 1998                        F-4

Consolidated Statements of Changes in Stockholder's Equity
 for the years ended December 31, 2000, 1999 and 1998                        F-5

Consolidated Statements of Cash Flows for the years ended
 December 31, 2000, 1999 and 1998                                            F-6

Notes to Consolidated Financial Statements                                   F-7

Schedules

I     Summary of Investments Other Than Investments in
       Related Parties at December 31, 2000                                  S-1

II    Condensed Financial Information of Registrant:
        Balance  Sheets as of December 31, 2000 and 1999                     S-2
        Statements of Operations for the Years Ended
         December 31, 2000, 1999 and 1998                                    S-3
        Statements of Cash Flows for the Years Ended
         December 31, 2000, 1999 and 1998                                    S-4

III   Supplementary Insurance Information as of December 31, 2000
       and 1999 and for the years ended December 31, 2000, 1999
       and 1998                                                              S-5

IV    Reinsurance for the years ended December 31, 2000, 1999
       and 1998                                                              S-6


Schedules other than those listed above are omitted for the reason that they are
not  applicable  or the  information  is otherwise  contained  in the  Financial
Statements.

                                      F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder
of Everest Reinsurance Holdings, Inc.


In our opinion,  the consolidated  financial  statements  listed in the index on
page F-1 of this  Form  10-K  present  fairly,  in all  material  respects,  the
financial position of Everest Reinsurance Holdings, Inc. and its subsidiaries at
December 31, 2000 and 1999,  and the results of their  operations and their cash
flows for each of the three  years in the  period  ended  December  31,  2000 in
conformity with accounting principles generally accepted in the United States of
America. In addition,  in our opinion,  the financial statement schedules listed
in the index on page F-1 of this  Form  10-K  present  fairly,  in all  material
respects,  the information  set forth therein when read in conjunction  with the
related  consolidated  financial  statements.  These  financial  statements  and
financial   statement   schedules  are  the   responsibility  of  the  Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedules based on our audits. We conducted
our audits of these statements in accordance with auditing  standards  generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers LLP
New York, New York
February 14, 2001


                                       F-2
<PAGE>
Part I - Item 1

                       EVEREST REINSURANCE HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
               (Dollars in thousands, except par value per share)


<TABLE>
<CAPTION>
                                         December 31,     December 31,
                                         ------------     ------------
                                             2000             1999
                                         ------------     ------------
<S>                                      <C>              <C>
ASSETS:
Fixed maturities - available for
 sale, at market value (amortized
 cost: 2000, $3,793,279; 1999,
 $3,940,625)                             $  3,879,335     $  3,885,278
Equity securities, at market value
 (cost: 2000, $22,395; 1999,
 $50,224)                                      36,634           90,693
Short-term investments                        271,216           73,558
Other invested assets                          29,211           27,482
Cash                                           68,397           62,227
                                         ------------     ------------
   Total investments and cash               4,284,793        4,139,238


Accrued investment income                      64,508           64,898
Premiums receivable                           393,229          294,941
Reinsurance receivables                       996,689          742,513
Funds held by reinsureds                      161,350          157,237
Deferred acquisition costs                     92,478           82,713
Prepaid reinsurance premiums                   58,196            9,582
Deferred tax asset                            174,451          188,326
Other assets                                   37,622           24,854
                                         ------------     ------------
TOTAL ASSETS                             $  6,263,316     $  5,704,302
                                         ============     ============

LIABILITIES:
Reserve for losses and adjustment
 expenses                                $  3,785,747     $  3,646,992
Unearned premium reserve                      401,148          308,563
Funds held under reinsurance
 treaties                                     110,464          178,520
Losses in the course of payment               101,995           67,065
Contingent commissions                          9,380           58,169
Other net payable to reinsurers                60,332           13,217
Current federal income taxes                   (8,210)          (4,475)
8.5% Senior notes due 3/15/2005               249,615               -
8.75% Senior notes due 3/15/2010              199,004               -
Revolving credit agreement
 borrowings                                   235,000           59,000
Accrued interest on debt and
 borrowings                                    12,212              106
Other liabilities                              56,142           49,663
                                         ------------     ------------
   Total liabilities                        5,212,829        4,376,820
                                         ------------     ------------

Commitments and contingencies
 (Note 12)

STOCKHOLDER'S EQUITY:
Common stock, par value: $0.01;
 200 million shares authorized;
 1,000 shares issued in 2000 and
 50.9 million shares issued in 1999                -               509
Additional paid-in capital                    255,359          390,912
Unearned compensation                              -              (109)
Accumulated other comprehensive
 income, net of deferred income
 taxes of $30.4 million in 2000
 and deferred income taxes benefit
 of $9.1 million in 1999                       56,747          (16,701)
Retained earnings                             738,381        1,074,941
Treasury stock, at cost; 0.0
 million shares in 2000 and 4.4
 million shares in 1999                            -          (122,070)
                                         ------------     ------------
   Total stockholder's equity               1,050,487        1,327,482
                                         ------------     ------------
TOTAL LIABILITIES AND
 STOCKHOLDER'S EQUITY                    $  6,263,316     $  5,704,302
                                         ============     ============
</TABLE>

The  accompanying  notes  are  an integral part of  the  consolidated  financial
statements.

                                      F-3
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                (Dollars in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                            Years Ended December 31,
                                   -----------------------------------------
                                      2000           1999           1998
                                   -----------    -----------    -----------
<S>                                <C>            <C>            <C>
REVENUES:
Premiums earned                    $ 1,162,597    $ 1,071,451    $ 1,068,010
Net investment income                  271,389        252,999        244,909
Net realized capital
 gain (loss)                               291        (16,760)          (765)
Other income (expense)                   3,341         (1,030)         3,046
                                   -----------    -----------    -----------
                                     1,437,618      1,306,660      1,315,200
                                   -----------    -----------    -----------

CLAIMS AND EXPENSES:
Incurred losses and loss
 adjustment expenses                   878,241        771,570        778,404
Commission, brokerage,
 taxes and fees                        267,410        285,957        274,559
Other underwriting
 expenses                               50,264         48,263         49,561
Non-recurring restructure
 expenses                                   -           2,798             -
Interest expense on
 senior notes                           30,896             -              -
Interest expense on
 credit facility                         8,490          1,490             -
                                   -----------    -----------    -----------
                                     1,235,301      1,110,078      1,102,524
                                   -----------    -----------    -----------

INCOME BEFORE TAXES                    202,317        196,582        212,676

Income tax                              43,822         38,521         47,479
                                   -----------    -----------    -----------

NET INCOME                         $   158,495    $   158,061    $   165,197
                                   ===========    ===========    ===========

Other comprehensive income
 (loss), net of tax                     73,448       (202,219)        33,199
                                   -----------    -----------    -----------

COMPREHENSIVE INCOME (LOSS)        $   231,943    $   (44,158)   $   198,396
                                   ===========    ===========    ===========
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-4
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
                       CONSOLIDATED STATEMENTS OF CHANGES
                             IN STOCKHOLDER'S EQUITY
                (Dollars in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                             Years Ended December 31,
                                     -----------------------------------------
                                        2000           1999           1998
                                     -----------    -----------    -----------
<S>                                  <C>            <C>            <C>
COMMON STOCK (SHARES OUTSTANDING):
Balance, beginning of period          46,457,817     49,989,204     50,479,271
Issued during the period                   8,500         17,400         34,436
Treasury stock acquired during
 the period                             (650,400)    (3,554,047)      (529,040)
Treasury stock reissued during
 the period                                1,780          5,260          4,537
Common stock retired during
 the period                          (45,817,697)            -              -
Issued during the period                   1,000             -              -
                                     -----------    -----------    -----------
Balance, end of period                     1,000     46,457,817     49,989,204
                                     ===========    ===========    ===========

COMMON STOCK (PAR VALUE):
Balance, beginning of period         $       509    $       509    $       508
Common stock retired during
 the period                                 (509)            -               1
                                     -----------    -----------    -----------
Balance, end of period                        -             509            509
                                     -----------    -----------    -----------

ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period             390,912        390,559        389,876
Retirement of treasury stock
 during the period                      (138,546)            -              -
Common stock issued during
 the period                                2,339            317            610
Treasury stock reissued
 during period                                (2)            36             73
Contribution from subsidiary                 198             -              -
Common stock retired during
 the period                                  458             -              -
                                     -----------    -----------    -----------
Balance, end of period                   255,359        390,912        390,559
                                     -----------    -----------    -----------

UNEARNED COMPENSATION:
Balance, beginning of period                (109)          (240)          (514)
Net increase during the period               109            131            274
                                     -----------    -----------    -----------
Balance, end of period                        -            (109)          (240)
                                     -----------    -----------    -----------

ACCUMULATED OTHER COMPREHENSIVE
 INCOME, NET OF DEFERRED INCOME
 TAXES:
Balance, beginning of period             (16,701)       185,518        152,319
Net increase (decrease) during
 the period                               73,448       (202,219)        33,199
                                     -----------    -----------    -----------
Balance, end of period                    56,747        (16,701)       185,518
                                     -----------    -----------    -----------

RETAINED EARNINGS:
Balance, beginning of period           1,074,941        928,500        773,380
Net income                               158,495        158,061        165,197
Restructure adjustments                      (55)            -              -
Dividends paid to parent                (495,000)       (11,620)       (10,077)
                                     -----------    -----------    -----------
Balance, end of period                   738,381      1,074,941        928,500
                                     -----------    -----------    -----------

TREASURY STOCK AT COST:
Balance, beginning of period            (122,070)       (25,642)        (8,086)
Treasury stock retired during
 the period                              138,454             -              -
Treasury stock acquired during
 period                                  (16,426)       (96,551)       (17,663)
Treasury stock reissued during
 period                                       42            123            107
                                     -----------    -----------    -----------
Balance, end of period                        -        (122,070)       (25,642)
                                     -----------    -----------    -----------
TOTAL STOCKHOLDER'S EQUITY,
 END OF PERIOD                       $ 1,050,487    $ 1,327,482    $ 1,479,204
                                     ===========    ===========    ===========
</TABLE>

The  accompanying  notes are an  integral  part of  the  consolidated  financial
statements.

                                      F-5
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                           -----------------------------------------
                                              2000 *         1999           1998
                                           -----------    -----------    -----------
<S>                                        <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                 $   158,495    $   158,061    $   165,197
 Adjustments to reconcile net income
  to net cash provided by operating
  activities net of effects from the
  purchase of Mt. McKinley Insurance
  Company
  (Increase) in premiums receivable           (101,894)       (36,179)        (4,466)
  Decrease (increase) in funds held
   by reinsureds, net                           29,135         23,007         (7,766)
  (Increase) decrease in reinsurance
   receivables                                (173,954)       239,763       (289,908)
  (Increase) in deferred tax asset             (16,247)       (17,169)        (2,532)
  Increase (decrease) in reserve for
   losses and loss adjustment expenses             827       (133,706)       359,178
  Increase (decrease) in unearned
   premiums                                     95,076         25,077        (52,757)
  (Increase) decrease in other assets
   and liabilities                             (16,887)       (67,106)        16,949
  Non cash compensation expense                    109            131            274
  Accrual of bond discount/amortization
   of bond premium                              (7,553)        (5,203)        (1,617)
  Amortization of underwriting discount
   on senior notes                                 112             -              -
  Restructure adjustment                           (55)            -              -
  Realized capital (gains) losses                 (291)        16,760            765
                                           -----------    -----------    -----------
Net cash (used in) provided by
 operating activities                          (33,127)       203,436        183,317
                                           -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities
 matured/called - availa1be for sale           181,381        205,669        162,514
Proceeds from fixed maturities sold
 - available for sale                          730,589        665,873        373,327
Proceeds from equity securities sold            49,556         69,397         50,508
Proceeds from other invested assets
 sold                                               -             181          7,605
Cost of fixed maturities acquired
 - available for sale                       (1,174,662)      (990,369)      (731,500)
Cost of equity securities acquired              (2,732)       (16,643)       (22,350)
Cost of other invested assets acquired          (1,698)       (23,109)          (935)
Net (purchases) sales of short-term
 securities                                   (205,524)       (38,200)        40,273
Net (decrease) in unsettled securities
 transactions                                     (955)           (47)          (499)
Payment for puchase of Mt. McKinley
 Insurance Company, net of cash
 acquired                                      349,743             -              -
                                           -----------    -----------    -----------
Net cash (used in) investing
 activities                                    (74,302)      (127,248)      (121,057)
                                           -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock net of
 reissuances                                   (16,478)       (96,392)       (17,483)
Common stock issued during the period            2,288            317            610
Dividends paid to stockholders                (495,000)       (11,620)       (10,077)
Proceeds from issuance of senior notes         448,507             -              -
Net borrowings on revolving credit
 agreement                                     176,000         59,000             -
Contribution from subsidiary                       198             -              -
Net (decrease) in collateral for
 loaned securities                                  -              -         (47,119)
                                           -----------    -----------    -----------
Net cash provided by (used in)
 financing activities                          115,515        (48,695)       (74,069)
                                           -----------    -----------    -----------

EFFECT OF EXCHANGE RATE CHANGES
 ON CASH                                        (1,916)        (4,592)          (443)
                                           -----------    -----------    -----------

Net increase (decrease) in cash                  6,170         22,901        (12,252)
Cash, beginning of period                       62,227         39,326         51,578
                                           -----------    -----------    -----------
Cash, end of period                        $    68,397    $    62,227    $    39,326
                                           ===========    ===========    ===========

SUPPLEMENTAL CASH FLOW INFORMATION
CASH TRANSACTIONS:
Income taxes paid, net                     $    62,141    $    59,586    $    65,659
Interest paid                              $    27,169    $     1,384    $        -
NON-CASH FINANCING TRANSACTION:
Issuance of common stock                   $        -     $       131    $       274

</TABLE>

* In the quarter ended September  30,  2000,  the Company  purchased  all of the
  capital stock of Mt. McKinley Insurance Company  for $51,800.  In  conjunction
  with  the  acquisition,  the  fair  value  of assets acquired was $679,672 and
  liabilities was $627,872.

The  accompanying  notes  are  an integral  part of the  consolidated  financial
statements.

                                      F-6
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.  Business and Basis of Presentation

Everest Re Group, Ltd. ("Group"), a Bermuda company with its principal executive
office in Barbados,  was  established  in 1999 as a  wholly-owned  subsidiary of
Everest  Reinsurance  Holdings,  Inc.  ("Holdings").  On February  24,  2000,  a
corporate  restructuring  was completed and Group became the new parent  holding
company of Holdings. Holders of shares of common stock of Holdings automatically
became holders of the same number of common shares of Group. The "Company" means
Holdings  and its  subsidiaries,  unless the  context  otherwise  requires.  The
Company,  through its subsidiaries,  principally  provides property and casualty
reinsurance and insurance in the United States and internationally.  The Company
is filing  this  report as a result of its public  issuance  of senior  notes on
March 14, 2000. See also Note 5.

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with generally accepted accounting principles in the United States of
America.  The statements  include the following  domestic and foreign direct and
indirect  subsidiaries of the Company:  Everest  Reinsurance  Company  ("Everest
Re"), Everest National Insurance Company ("Everest National"), Everest Indemnity
Insurance Company ("Everest  Indemnity"),  Everest Re Holdings,  Ltd.  ("Everest
Ltd."), a Bermuda domiciled  successor company of Everest Re Ltd. (the assets of
which funded  Everest Ltd. and which was formerly  known as Everest  Reinsurance
Ltd.),  Southeastern  Security  Insurance  Company  ("SSIC"),  Everest Insurance
Company  of  Canada   ("Everest   Canada"),   Mt.  McKinley   Managers,   L.L.C.
("Managers"),   Workcare  Southeast,   Inc.  ("Workcare  Southeast"),   Workcare
Southeast of Georgia, Inc. ("Workcare Georgia"),  Workcare, Inc and Mt. McKinley
Insurance Company ("Mt. McKinley"). All amounts are reported in U.S. dollars.

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  in the United States of America  requires  management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities (and disclosure of contingent assets and liabilities) at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

B.  Investments

Fixed  maturity  investments  are  classified as available for sale.  Unrealized
appreciation and depreciation,  as a result of temporary changes in market value
during the period, are reflected in "accumulated other comprehensive income" net
of income taxes in stockholder's  equity.  Unrealized  losses,  which are deemed
other than temporary,  are charged to net income.  Equity securities are carried
at market value with unrealized appreciation or depreciation,  net of applicable
deferred  income tax,  credited or charged  directly  to  stockholder's  equity.
Short-term  investments  are stated at cost,  which  approximates  market value.
Realized gains or losses on sale of  investments  are determined on the basis of
identified cost. With respect to securities that are not publicly traded, market
value  has  been  determined  based  on  pricing  models.  For  publicly  traded
securities, market value is based on quoted market prices. Other invested assets
include limited  partnerships and rabbi trusts.  Limited partnerships are valued
pursuant  to  the  equity  method  of  accounting,   which  management  believes
approximates  market  value.  The  Supplemental  Retirement  Plan rabbi trust is
carried at market value,  while the Deferred  Compensation  Plan rabbi trust and
Supplemental  Savings Plan rabbi trust are carried at cost,  which  approximates
market value. Cash includes cash and bank time deposits with original maturities
of ninety days or less.

                                      F-7
<PAGE>
C.  Uncollectible Reinsurance Balances

The Company provides  reserves for uncollectible  reinsurance  balances based on
management's  assessment of the collectibility of the outstanding balances. Such
reserves  were $27.9  million at December 31, 2000 and $25.3 million at December
31, 1999. See also Note 8.

D.  Deferred Acquisition Costs

Acquisition costs,  consisting principally of commissions and brokerage expenses
and certain premium taxes and fees associated with the Company's reinsurance and
insurance  business  incurred  at the time a contract  or policy is issued,  are
deferred and amortized over the period in which the related premiums are earned,
generally one year.  Deferred  acquisition  costs are limited to their estimated
realizable value based on the related unearned premiums,  anticipated claims and
claim expenses and anticipated  investment  income.  Deferred  acquisition costs
amortized to income  (expense)  were $10.1  million,  $12.4  million and ($11.4)
million in 2000, 1999 and 1998, respectively.

E.  Reserve for Losses and Loss Adjustment Expenses

The reserve for unpaid losses and loss adjustment  expenses  ("LAE") is based on
individual  case  estimates  and  reports  received  from  ceding  companies.  A
provision is included  for losses and LAE  incurred  but not  reported  ("IBNR")
based on past  experience.  A provision is also  included for certain  potential
liabilities relating to asbestos and environmental exposures,  which liabilities
cannot be estimated with traditional reserving techniques. See also Note 12. The
reserves are reviewed  continually and any changes in estimates are reflected in
earnings in the period the adjustment is made. Management believes that adequate
provision has been made for the Company's  losses and LAE. Loss and LAE reserves
are presented  gross of reinsurance  receivables and incurred losses and LAE are
presented net of ceded reinsurance.

Accruals for contingent  commission  liabilities are established for reinsurance
contracts  that  provide  for the stated  commission  percentage  to increase or
decrease based on the loss experience of the contract.  Changes in the estimated
liability for such arrangements are recorded as contingent commissions. Accruals
for contingent  commission  liabilities are determined through the review of the
contracts  that  have  these  adjustable  features  and are  estimated  based on
expected loss and loss adjustment expenses.

F.  Premium Revenues

Premiums  written are earned  ratably over the periods of the related  insurance
and reinsurance contracts or policies. Unearned premium reserves are established
to cover the  remainder of the  unexpired  contract  period.  Such  reserves are
established  based upon reports received from ceding companies or computed using
pro rata methods based on statistical data. Written and earned premiums, and the
related costs, which have not yet been reported to the Company are estimated and
accrued. Premiums are net of ceded reinsurance.

G.  Income Taxes

The Company and its  subsidiaries,  where  required,  file their own federal tax
returns and calculate their current tax provisions accordingly.  Deferred income
taxes have been  recorded to recognize  the tax effect of temporary  differences
between the financial reporting and income tax bases of assets and liabilities.

                                      F-8
<PAGE>
H.  Foreign Currency Translation

Assets and liabilities  relating to foreign  operations are translated into U.S.
dollars at the exchange rates in effect at the balance sheet date;  revenues and
expenses are translated into U.S.  dollars using average  exchange rates.  Gains
and losses resulting from translating foreign currency financial statements, net
of deferred  income  taxes,  are  excluded  from net income and  accumulated  in
stockholder's equity.

I.  Acquisitions

On  September  19, 2000,  the Company  acquired Mt.  McKinley,  f/k/a  Gibraltar
Casualty  Company,  for $51.8 million.  Mt.  McKinley is a run-off  property and
casualty  insurer  in the  United  States.  No  goodwill  was  generated  in the
transaction.   The  acquisition  was  recorded  using  the  purchase  method  of
accounting. Accordingly, the December 31, 2000 consolidated financial statements
of the Company include the results of Mt. McKinley from September 19, 2000.

In connection  with the  acquisition of Mt.  McKinley,  Prudential  Property and
Casualty Insurance Company ("Prupac"),  a subsidiary of The Prudential Insurance
Company of America ("The  Prudential"),  provided  reinsurance  to Mt.  McKinley
covering  80%  ($160.0  million)  of the first  $200.0  million  of any  adverse
development  of Mt.  McKinley's  reserves  as of  September  19,  2000  and  The
Prudential  guaranteed  Prupac's  obligation  to Mt.  McKinley.  The  stop  loss
reinsurance  protection  that was  provided  by Mt.  McKinley at the time of the
Company's  Initial  Public  Offering  ("IPO")  and other  reinsurance  contracts
between Mt. McKinley and Everest Re remain in effect  following the acquisition.
However,  these contracts have become  transactions  with  affiliates,  with the
financial impact eliminated in consolidation.

The following  unaudited pro forma  information  assumes the  acquisition of Mt.
McKinley  occurred at the  beginning of each year  presented.  The unaudited pro
forma financial information is presented for informational  purposes only and is
not necessarily indicative of the operating results that would have occurred had
the acquisition been consummated at the beginning of each year presented, nor is
it necessarily indicative of future operating results.

<TABLE>
<CAPTION>
                                            Years ended December 31,
                                         ------------------------------
                                             2000              1999
(Dollars in thousands)                            (Unaudited)
                                         ------------      ------------
<S>                                      <C>               <C>
Revenues                                 $  1,457,284      $  1,336,672
Net income                                    161,079            82,919

</TABLE>
Also during 2000, the Company completed the acquisition of SSIC, a United States
property and casualty company whose primary  business is non-standard  auto. The
purchase price of the acquisition was approximately  $10.1 million.  Goodwill of
$3.0 million was generated as a result of the acquisition and was recorded using
the purchase method of accounting.

On July 1, 1998,  Managers  acquired the assets of agency  operations in Alabama
and  Georgia,  which now operate as Workcare  Southeast  and  Workcare  Georgia.
Everest National also acquired an agency  operation in Texas,  Workcare Inc. The
acquisition price of these three agencies was $2.9 million.  These  acquisitions
were accounted for using the purchase method.

                                      F-9
<PAGE>
Separate pro forma  information of these additional  acquisitions  have not been
presented as management has determined that such information is not material.

J.   Segmentation

During the quarter ended December 31, 2000, the Company's  management  realigned
its operating  segments to better reflect the way that  management  monitors and
evaluates  the  Company's  financial  performance.   The  Company,  through  its
subsidiaries,  operates in four  segments:  U.S.  Reinsurance,  U.S.  Insurance,
Specialty Underwriting and International.  The presentation of segments for 1999
and 1998 has been  restated to conform to the 2000  presentation.  See also Note
14.

K.  Future Application of Accounting Standards

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards ("SFAS") No. 133,  "Accounting for Derivative  Instruments
and  Hedging  Activities".   This  statement  requires  all  derivatives  to  be
recognized  as either  assets  or  liabilities  in the  statement  of  financial
position and to be measured at fair value. This statement shall be effective for
all fiscal  quarters of all fiscal years  beginning after June 15, 2000. In June
2000, the Financial  Accounting  Standards  Board amended SFAS No. 133 with SFAS
No. 138, which  facilitates the  implementation  of SFAS No. 133 and extends the
effective date of  implementation to all fiscal years beginning after January 1,
2001.  Management believes that these statements will not have a material impact
on the financial position of the Company.

                                      F-10
<PAGE>
2.  INVESTMENTS

The  amortized  cost,  market  value,  and  gross  unrealized  appreciation  and
depreciation of fixed maturity  investments and equity  securities are presented
in the tables below:
<TABLE>
<CAPTION>

(dollar values in thousands)            Amortized      Unrealized       Unrealized         Market
                                           Cost       Appreciation     Depreciation        Value
                                      -----------     ------------     ------------     ------------
<S>                                   <C>             <C>              <C>              <C>
As of December 31, 2000
Fixed maturities - available
 for sale
 U.S. Treasury securities and
  obligations of U.S. government
  agencies and corporations           $   133,053     $      4,777     $        -       $    137,830
 Obligations of U.S. states
  and political subdivisions            1,514,099           85,261              423        1,598,937
 Corporate securities                   1,198,216           25,865           66,089        1,157,992
 Mortgage-backed securities               449,438           13,932              495          462,875
 Foreign government securities            211,711           17,137              130          228,718
 Foreign corporate securities             286,762            7,735            1,514          292,983
                                      -----------     ------------     ------------     ------------
Total fixed maturities                $ 3,793,279     $    154,707     $     68,651     $  3,879,335
                                      ===========     ============     ============     ============
Equity securities                     $    22,395     $     14,266     $         27     $     36,634
                                      ===========     ============     ============     ============

As of December 31, 1999
Fixed maturities - available
 for sale
 U.S. Treasury securities and
  obligations of U.S. government
  agencies and corporations           $   135,461     $        501     $      1,505     $    134,457
 Obligations of U.S. states
  and political subdivisions            2,066,456           37,893           76,346        2,028,003
 Corporate securities                     877,803            1,642           30,390          849,055
 Mortgage-backed securities               337,387            2,318            1,921          337,784
 Foreign government securities            250,644           11,932              444          262,132
 Foreign corporate securities             272,874            4,491            3,518          273,847
                                      -----------     ------------     ------------     ------------
Total fixed maturities                $ 3,940,625     $     58,777     $    114,124     $  3,885,278
                                      ===========     ============     ============     ============
Equity securities                     $    50,224     $     41,555     $      1,086     $     90,693
                                      ===========     ============     ============     ============

</TABLE>

                                      F-11
<PAGE>
The  amortized  cost  and  market  value of fixed  maturities  are  shown in the
following table by contractual  maturity.  Mortgage-backed  securities generally
are more  likely to be  prepaid  than  other  fixed  maturities.  As the  stated
maturity of such  securities  may not be  indicative of actual  maturities,  the
total for mortgage-backed securities is shown separately.
<TABLE>
<CAPTION>
                                                      December 31, 2000,
                                                 ---------------------------
                                                  Amortized         Market
(dollar values in thousands)                        Cost            Value
                                                 -----------     -----------
<S>                                              <C>             <C>
Fixed maturities - available for sale
 Due in one year or less                         $    94,819     $    95,233
 Due after one year through five years               650,326         673,143
 Due after five years through ten years            1,344,314       1,371,602
 Due after ten years                               1,254,382       1,276,482
 Mortgage-backed securities                          449,438         462,875
                                                 -----------     -----------
Total                                            $ 3,793,279     $ 3,879,335
                                                 ===========     ===========
</TABLE>

Proceeds from sales of fixed  maturity  investments  during 2000,  1999 and 1998
were $730.6  million,  $665.9 million and $373.3  million,  respectively.  Gross
gains of $8.7 million,  $0.9 million and $6.3 million, and gross losses of $27.7
million,  $28.5  million and $6.6  million  were  realized on those sales during
2000, 1999 and 1998, respectively.

The  changes in net  unrealized  gains  (losses) of  investments  of the Company
(including  unrealized  gains and losses on fixed  maturities  not  reflected in
stockholder's equity) are derived from the following sources:
<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                             ----------------------------------------
(dollar values in thousands)                    2000           1999           1998
                                             ----------     ----------     ----------
<S>                                          <C>            <C>            <C>
Increase (decrease) during the period
 between the market value and cost of
 investments carried at market value,
 and deferred tax thereon:
  Equity securities                          $  (26,229)    $  (14,018)    $   16,212
  Fixed maturities                              141,403       (304,872)        41,034
  Other invested assets                              23            (42)           -
  Deferred taxes                                (40,319)       111,626        (20,036)
                                             ----------     ----------     ----------
Increase (decrease) in unrealized
 appreciation, net of deferred taxes,
 included in stockholder's equity            $   74,878     $ (207,306)    $   37,210
                                             ==========     ==========     ==========

</TABLE>

                                      F-12
<PAGE>
The components of net investment income are presented in the table below:
<TABLE>
<CAPTION>
                                               Years Ended December 31,
                                       ----------------------------------------
(dollar values in thousands)              2000           1999           1998
                                       ----------     ----------     ----------
<S>                                    <C>            <C>            <C>
Fixed maturities                       $  274,905     $  256,067     $  249,382
Equity securities                           1,198          3,796          4,601
Short-term investments                      6,908          3,702          2,849
Other interest income                       3,081          1,652          3,273
                                       ----------     ----------     ----------
Total gross investment income             286,092        265,217        260,105
                                       ----------     ----------     ----------
Interest on funds held                     11,316          9,133         11,983
Other investment expenses                   3,387          3,085          3,213
                                       ----------     ----------     ----------
Total investment expenses                  14,703         12,128         15,196
                                       ----------     ----------     ----------
Total net investment income            $  271,389     $  252,999     $  244,909
                                       ==========     ==========     ==========
</TABLE>

The  components of realized  capital  gains  (losses) are presented in the table
below:
<TABLE>
<CAPTION>
                                               Years Ended December 31,
                                       ----------------------------------------
(dollar values in thousands)              2000           1999           1998
                                       ----------     ----------     ----------
<S>                                    <C>            <C>            <C>
Fixed maturities                       $  (18,967)    $  (27,615)    $     (287)
Equity securities                          19,260         10,836           (455)
Short-term investments                         (2)            19            (23)
                                       ----------     ----------     ----------
Total                                  $      291     $  (16,760)    $     (765)
                                       ==========     ==========     ==========
</TABLE>

Securities  with a carrying  value amount of $255.9 million at December 31, 2000
were on deposit with various  state or  governmental  insurance  departments  in
compliance with insurance laws.

                                      F-13

<PAGE>
3.  RESERVE FOR LOSSES AND LAE

Activity in the reserve for losses and LAE expenses is summarized as follows:
<TABLE>
<CAPTION>

                                               Years Ended December 31,
                                      -------------------------------------------
(dollar values in thousands)             2000            1999            1998
                                      -----------     -----------     -----------
<S>                                   <C>             <C>             <C>
Reserves at January 1                 $ 3,646,992     $ 3,800,041     $ 3,437,818
 Less reinsurance recoverables            727,780         915,741         688,694
                                      -----------     -----------     -----------
 Net balance at January 1               2,919,212       2,884,300       2,749,124
                                      -----------     -----------     -----------
Incurred related to:
 Current year                             870,454         806,930         752,349
 Prior years                                7,787         (35,360)         26,055
                                      -----------     -----------     -----------
   Total incurred losses and LAE          878,241         771,570         778,404
                                      -----------     -----------     -----------
Paid related to:
 Current year                             318,673         252,407         192,404
 Prior years                              673,429         484,251         450,824
                                      -----------     -----------     -----------
   Total paid losses and LAE              992,102         736,658         643,228
                                      -----------     -----------     -----------
Net balance at December 31              2,805,351       2,919,212       2,884,300
 Plus reinsurance recoverables (1)        980,396         727,780         915,741
                                      -----------     -----------     -----------
   Balance at December 31             $ 3,785,747     $ 3,646,992     $ 3,800,041
                                      ===========     ===========     ===========
</TABLE>

(1) Reinsurance  recoverables for 2000 include $491,572  resulting from the loss
portfolio transfer. See also Note 8.

Prior year incurred losses increased by $7.8 million in 2000, decreased by $35.4
million in 1999 and increased by $26.1  million in 1998.  These changes were the
result of normal reserve development inherent in the uncertainty in establishing
loss  and  LAE  reserves,  as  well  as the  impact  of  foreign  exchange  rate
fluctuations  on loss reserves and, for 1999 and 1998,  changes in the Company's
coinsurance in connection with stop loss reinsurance  protection provided by Mt.
McKinley at the time of the Company's IPO of ($6.0)  million and $17.1  million,
respectively.  Although coverage remains under this reinsurance, the acquisition
of  Mt.  McKinley  causes  the  financial  impact  of  any  cession  under  this
reinsurance to eliminate in consolidation. See also Note 8.

4.  CREDIT LINE

On December 21, 1999,  the Company  entered into a three-year  senior  revolving
credit facility with a syndicate of lenders (the "Credit Facility"). First Union
National Bank is the  administrative  agent for the Credit Facility.  The Credit
Facility  will be used for  liquidity  and  general  corporate  purposes  and to
refinance  existing debt under the Company's  prior credit  facility,  which has
been terminated.  The Credit Facility provides for the borrowing of up to $150.0
million with  interest at a rate selected by the Company equal to either (1) the
Base Rate (as defined below) or (2) an adjusted  London  InterBank  Offered Rate
("LIBOR")  plus a margin.  The Base Rate is the  higher of the rate of  interest
established  by First Union National Bank from time to time as its prime rate or
the Federal  Funds rate plus 0.5% per annum.  On December 18,  2000,  the Credit
Facility  was  amended to extend the  borrowing  limit to $235.0  million  for a
period of 120 days, at which time the limit reverts back to $150.0 million.  The
amount of margin and the fees  payable for the Credit  Facility  depend upon the
Company's  senior  unsecured  debt.  Group has  guaranteed  all of the Company's
obligations under the Credit Facility.

                                      F-14
<PAGE>
The Credit Facility agreement requires Group to maintain a debt to capital ratio
of not greater than 0.35 to 1, Holdings to maintain a minimum interest  coverage
ratio of 2.5 to 1 and Everest Re to maintain statutory surplus at $850.0 million
plus 25% of future  aggregate  net  income and 25% of future  aggregate  capital
contributions. The Company was in compliance with these requirements at December
31, 2000.

As of December  31, 2000 and 1999,  the Company had  outstanding  borrowings  of
$235.0 million and $59.0 million,  respectively.  Interest  expense  incurred in
connection with these borrowings was $8.5, $1.5 million and $0.0 million for the
periods  ending  December  31,  2000,  December  31, 1999 and December 31, 1998,
respectively.

5.  SENIOR NOTES

On March 14, 2000,  the Company  completed  public  offerings of $200.0  million
principal  amount of 8.75%  senior  notes due March 15, 2010 and $250.0  million
principal  amount of 8.5% senior notes due March 15, 2005.  During 2000, the net
proceeds of these offerings and additional funds were distributed by the Company
to Group.  Interest  expense  incurred in connection with these senior notes was
$30.9 million at December 31, 2000.

6.  OPERATING LEASE AGREEMENTS

The future minimum rental commitments,  exclusive of cost escalation clauses, at
December  31, 2000 for all of the  Company's  operating  leases  with  remaining
non-cancelable terms in excess of one year are as follows:
<TABLE>
<CAPTION>
                                   ----------------------------
                                   (dollar values in thousands)
                                   ----------------------------
<S>                                                  <C>
2001                                                 $    4,710
2002                                                      4,501
2003                                                      4,131
2004                                                      4,105
2005                                                      3,889
Thereafter                                               19,474
                                   ----------------------------
Total payments                                           40,810
Sublease income                                             202
                                   ----------------------------
Net commitments                                      $   40,608
                                   ============================
</TABLE>

All of these leases,  the expiration terms of which range from 2001 to 2010, are
for the rental of office space.  Rental expense,  net of sublease rental income,
was $4.4  million,  $4.2  million  and $5.3  million  for  2000,  1999 and 1998,
respectively.

                                      F-15
<PAGE>
7.  INCOME TAXES

The components of income taxes for the periods presented are as follows:
<TABLE>
<CAPTION>
                                            Years Ended December 31,
                                      -------------------------------------
(dollar values in thousands)             2000          1999          1998
                                      ---------     ---------     ---------
<S>                                   <C>           <C>           <C>
Current tax:
 U.S.                                 $  61,401     $  53,076     $  44,341
 Foreign                                   (289)        2,615         8,854
                                      ---------     ---------     ---------
 Total current tax                       61,112        55,691        53,195
Total deferred U.S. tax (benefit)       (17,290)      (17,170)       (5,716)
                                      ---------     ---------     ---------
 Total income tax                     $  43,822     $  38,521     $  47,479
                                      =========     =========     =========
</TABLE>

A reconciliation of the U.S. federal income tax rate to the Company's  effective
tax rate is as follows:
<TABLE>
<CAPTION>
                                            Years Ended December 31,
                                       ----------------------------------
                                         2000         1999         1998
                                       --------     --------     --------
<S>                                    <C>          <C>          <C>
Federal income tax rate                    35.0%        35.0%        35.0%
Increase (reduction) in taxes
 resulting from:
 Tax exempt income                        (14.7)       (17.5)       (14.8)
 Other, net                                 1.4          2.1          2.1
                                       --------     --------     --------
 Effective tax rate                        21.7%        19.6%        22.3%
                                       ========     ========     ========
</TABLE>

Deferred  income  taxes  reflect  the tax  effect of the  temporary  differences
between the value of assets and liabilities for financial statement purposes and
such values as  measured by the U.S.  tax laws and  regulations.  The  principal
items making up the net deferred income tax asset are as follows:
<TABLE>
<CAPTION>
                                                     December 31,
                                              ---------------------------
(dollar values in thousands)                     2000            1999
                                              -----------     -----------
<S>                                           <C>             <C>
Deferred tax assets:
 Reserve for losses and loss
  adjustment expenses                         $   188,364     $   189,640
 Unearned premium reserve                          24,007          20,929
 Foreign currency translation                       4,670           3,899
 Net operating loss carryforward                   22,514           1,976
 Other assets                                       2,360           8,833
 Net unrealized depreciation of
  investments                                         -             5,222
                                              -----------     -----------
Total deferred tax assets                         241,915         230,499
                                              -----------     -----------

Deferred tax liabilities:
 Deferred acquisition costs                        32,367          28,949
 Net unrealized appreciation of
  investments                                      35,097             -
 Other liabilities                                    -            13,224
                                              -----------     -----------
Total deferred tax liabilities                     67,464          42,173
                                              -----------     -----------
Net deferred tax assets                       $   174,451     $   188,326
                                              ===========     ===========
</TABLE>

                                      F-16
<PAGE>
The Company and its subsidiaries have total net operating loss  carryforwards of
$64.3 million that expire during years 2001-2021. Management believes that it is
more  likely  than not that the Company  will  realize  the  benefits of its net
deferred tax assets and,  accordingly,  no valuation allowance has been recorded
for the periods presented.

Stockholder's  equity at December 31, 2000 reflects tax benefits of $2.2 million
related to compensation expense deductions for stock options exercised.

8.  REINSURANCE

The Company  utilizes  reinsurance  agreements  to reduce its  exposure to large
claims and catastrophic loss occurrences.  These agreements provide for recovery
from  reinsurers  of a  portion  of  losses  and  loss  expenses  under  certain
circumstances   without   relieving  the  insurer  of  its   obligation  to  the
policyholder.  Losses and LAE incurred and earned  premiums are after  deduction
for reinsurance.  In the event reinsurers were unable to meet their  obligations
under reinsurance agreements,  the Company would not be able to realize the full
value of the  reinsurance  recoverable  balances.  The Company may hold  partial
collateral,  including  letters of credit,  under these agreements and has never
suffered a material loss because of a reinsurer's default. See also Note 1(C).

The Company  purchases  corporate  level  retrocessions  covering the  potential
accumulation of all exposures.  For 1999, the Company purchased an accident year
aggregate  excess of loss  retrocession  agreement from London Life and Casualty
Reinsurance  Corp.  ("London  Life")  which  provided  up to $175.0  million  of
coverage if Everest Re's  consolidated  statutory basis accident year loss ratio
exceeded a loss ratio  attachment  point  provided in the  contract for the 1999
accident year.  During 2000, the Company ceded $70.0 million of losses to London
Life, reducing the limit available under the contract to $105.0 million.

Effective  September 19, 2000, Mt. McKinley and Everest  Reinsurance  (Bermuda),
Ltd.  ("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, including allocated and unallocated
loss adjustment expenses to Bermuda Re.

Written and earned premiums are comprised of the following:
<TABLE>
<CAPTION>
                                          Years Ended December 31,
                                 -------------------------------------------
(dollar values in thousands)        2000            1999            1998
                                 -----------     -----------     -----------
<S>                              <C>             <C>             <C>
Written premium
 Direct                          $   224,177     $    70,473     $    78,976
 Assumed                           1,149,848       1,071,344         966,914
 Ceded                              (166,704)        (46,248)        (29,291)
                                 -----------     -----------     -----------
 Net written premium             $ 1,207,321     $ 1,095,569     $ 1,016,599
                                 ===========     ===========     ===========
Earned premium
 Direct                          $   138,982     $    73,822     $    75,017
 Assumed                           1,145,142       1,042,921       1,022,611
 Ceded                              (121,527)        (45,292)        (29,618)
                                 -----------     -----------     -----------
 Net earned premium              $ 1,162,597     $ 1,071,451     $ 1,068,010
                                 ===========     ===========     ===========

</TABLE>

                                      F-17
<PAGE>
The amounts deducted from losses and LAE incurred for net reinsurance recoveries
were  $173.1  million,  $7.4  million  and $357.4  million  for the years  ended
December 31, 2000, 1999 and 1998,  respectively.  The net reinsurance recoveries
for 1999 and 1998 were impacted by cessions to stop loss reinsurance provided by
Mt. McKinley at the time of the Company's IPO.

9.  COMPREHENSIVE INCOME

The components of comprehensive income for the periods ending December 31, 2000,
1999 and 1998 are shown in the following table:
<TABLE>
<CAPTION>

(dollar values in thousands)             2000           1999           1998
                                      ----------------------------------------
<S>                                   <C>            <C>            <C>
Net income                            $  158,495     $  158,061     $  165,197
                                      ----------     ----------     ----------
Other comprehensive income,
 before tax:
 Foreign currency translation
  adjustments                             (2,201)         7,824         (6,304)
  Unrealized gains (losses) on
   securities arising during the
   period                                115,488       (302,172)        58,012
  Less: reclassification
   adjustment for realized
   (gains) losses included in net
   income                                   (291)        16,760            765
                                      ----------     ----------     ----------
Other comprehensive income
 (loss), before tax                      112,996       (311,108)        50,943
                                      ----------     ----------     ----------
Income tax expense (benefit)
 related to items of other
 comprehensive income:
 Tax (benefit) expense from
  foreign currency translation              (771)         2,737         (2,292)
 Tax expense (benefit)from
  unrealized gains (losses)
  arising during the period               40,421       (105,760)        20,304
 Tax expense (benefit) from
  realized gains (losses)
  included in net income                     102         (5,866)          (268)
                                      ----------     ----------     ----------
Income tax expense (benefit)
 related to items of other
 comprehensive income:                    39,548       (108,889)        17,744
Other comprehensive income
 (loss), net of tax                       73,448       (202,219)        33,199
                                      ----------     ----------     ----------
Comprehensive income (loss)           $  231,943     $  (44,158)    $  198,396
                                      ==========     ==========     ==========

</TABLE>

                                      F-18
<PAGE>
The  following  table shows the  components of the change in  accumulated  other
comprehensive income for the years ending December 31, 2000 and 1999.
<TABLE>
<CAPTION>

(dollar values in thousands)                    2000                         1999
                                       ----------------------------------------------------
<S>                                    <C>           <C>           <C>           <C>
Beginning balance of accumulated
 other comprehensive income                          $ (16,701)                  $  185,518
                                                     ---------                   ----------

Beginning balance of foreign
 currency translation adjustments      $  (7,003)                  $ (12,090)
Current period change in foreign
 currency translation adjustments         (1,430)       (1,430)        5,087         5,087
                                       ---------     ---------     ---------     ---------
Ending balance of foreign currency
 translation adjustments                  (8,433)                     (7,003)
                                       ---------                   ---------

Beginning balance of unrealized
 gains on securities                      (9,698)                    197,608
Current period change in unrealized
 gains on securities                      74,878        74,878      (207,306)     (207,306)
                                       ---------     ---------     ---------     ---------
Ending balance of unrealized gains
 on securities                            65,180                      (9,698)
                                       ---------                   ---------

Current period change in accumulated
 other comprehensive income                             73,448                    (202,219)
                                                     ---------                   ---------

Ending balance of accumulated other
 comprehensive income                                $  56,747                   $ (16,701)
                                                     =========                   =========

</TABLE>

10. EMPLOYEE BENEFIT PLANS

The Company maintains both a qualified and non-qualified defined benefit pension
plan for its U.S. employees.  Generally, the Company computes the benefits based
on average earnings over a period prescribed by the plans and credited length of
service.  The  Company  has  not  been  required  to fund  contributions  to its
qualified defined benefit pension plan for the years ended December 31, 2000 and
1999  because  the  Company's  qualified  plan was  subject to the full  funding
limitation  under  the  Internal  Revenue  Service  guidelines.   The  Company's
non-qualified  defined benefit pension plan,  effective  October 1995,  provides
compensating   pension  benefits  for  participants  whose  benefits  have  been
curtailed  under the qualified  plan due to Internal  Revenue Code  limitations.
Pension  expense for the Company's  plans for the years ended December 31, 2000,
1999 and 1998 were $1.0 million, $1.5 million and $1.6 million, respectively.

                                      F-19
<PAGE>
The following table summarizes the status of these plans:
<TABLE>
<CAPTION>

                                                    Years Ended December 31,
                                                    ------------------------
(dollar values in thousands)                          2000          1999
                                                    ---------      ---------
<S>                                                 <C>            <C>
Change in projected benefit obligation:
 Benefit obligation at beginning of year            $  22,060      $  22,095
 Service cost                                           1,351          1,476
 Interest cost                                          1,628          1,532
 Actuarial gain                                          (252)           677
 Change in discount rate                                  -           (3,576)
 Benefits paid                                           (215)          (144)
                                                    ---------      ---------
 Benefit obligation at end of year                     24,572         22,060
                                                    ---------      ---------
Change in plan assets:
 Fair value of plan assets at beginning of year        21,375         18,132
 Actual return on plan assets                            (960)         2,475
 Actual contributions during the year                     -              912
 Benefits paid                                           (215)          (144)
                                                    ---------      ---------
 Fair value of plan assets at end of year              20,200         21,375
                                                    ---------      ---------

 Funded status                                         (4,372)          (685)
 Unrecognized prior service cost                        1,034          1,181
 Unrecognized net (gain)                               (1,820)        (4,669)
 Additional liability                                     -              (39)
                                                    ---------      ---------
 (Accrued) pension cost                             $  (5,158)     $  (4,212)
                                                    =========      =========
</TABLE>

Plan assets are comprised of shares in investment trusts with  approximately 63%
and 37% of the  underlying  assets  consisting  of equity  securities  and fixed
maturities, respectively.

Net periodic pension cost included the following components:
<TABLE>
<CAPTION>

                                              Years Ended December 31,
                                         ----------------------------------
(dollar values in thousands)               2000         1999         1998
                                         --------     --------     --------
<S>                                      <C>          <C>          <C>
Service cost                             $  1,351     $  1,476     $  2,001
Interest cost                               1,628        1,532        1,178
Expected return on assets                  (1,915)      (1,625)      (1,560)
Amortization of net loss (gain)
 from earlier periods                        (225)           6          (54)
Amortization of unrecognized
 prior service cost                           147          147          -
                                         --------     --------     --------
Net periodic pension cost                $    986     $  1,536     $  1,565
                                         ========     ========     ========
</TABLE>

The weighted  average  discount  rates used to determine the  actuarial  present
value of the projected benefit obligation for 2000, 1999 and 1998 are 7.5%, 7.5%
and 6.75%, respectively. The rate of compensation increase used to determine the
actuarial present value of the projected  benefit  obligation for 2000, 1999 and
1998 is 4.50%.  The expected  long-term  rate of return on plan assets for 2000,
1999 and 1998 is 9.0%.

                                      F-20
<PAGE>
The Company also maintains both qualified and non-qualified defined contribution
plans ("Savings Plan" and "Non-Qualified  Savings Plan",  respectively) covering
U.S.  employees.  Under the plans, the Company contributes up to a maximum 3% of
the  participants'  compensation  based on the  contribution  percentage  of the
employee.  The  Non-Qualified  Savings Plan provides  compensating  savings plan
benefits for  participants  whose benefits have been curtailed under the Savings
Plan due to Internal Revenue Code limitations.  The Company's  incurred expenses
related to these plans were $0.6  million,  $0.6  million  and $0.5  million for
2000, 1999 and 1998, respectively.

In addition,  the Company maintains several defined  contribution  pension plans
covering non-U.S. employees. Each non-U.S. office (Canada, London, Belgium, Hong
Kong,  and  Singapore)  maintains  a separate  plan for the  non-U.S.  employees
working in that  location.  The Company  contributes  various  amounts  based on
salary,  age,  and/or years of service.  The  contributions  as a percentage  of
salary  for the  branch  offices  range from 2% to 12%.  The  contributions  are
generally used to purchase pension benefits from local insurance providers.  The
Company's  incurred  expenses  related to these  plans were $0.3  million,  $0.3
million and $0.3 million for 2000, 1999 and 1998, respectively.

During 1998,  the Company  entered into a change of control  agreement  with the
Chief Executive  Officer and adopted a Senior  Executive Change of Control Plan,
which will  provide  benefits  to certain  officers  in the event of a change in
control of the Company.

11. DIVIDEND RESTRICTIONS AND STATUTORY FINANCIAL INFORMATION

A.  Dividend Restrictions

Delaware law provides  that an  insurance  company  which is either an insurance
holding  company or a member of an insurance  holding system and is domiciled in
the state shall not pay dividends  without  giving prior notice to the Insurance
Commissioner  of Delaware and may not pay dividends  without the approval of the
Insurance Commissioner if the value of the proposed dividend,  together with all
other dividends and distributions  made in the preceding twelve months,  exceeds
the greater of (1) 10% of  statutory  surplus or (2) net income,  not  including
realized  capital gains,  each as reported in the prior year's  statutory annual
statement.  In addition,  no dividend may be paid in excess of unassigned earned
surplus.  At December  31, 2000,  Everest Re had $165.1  million  available  for
payment of dividends in 2001 without prior regulatory approval,  of which $100.0
million was paid in January 2001.

B.  Statutory Financial Information

Everest Re prepares  its  statutory  financial  statements  in  accordance  with
accounting  practices  prescribed  or permitted by the National  Association  of
Insurance   Commissioners   ("NAIC")  and  the  Delaware  Insurance  Department.
Prescribed  statutory  accounting  practices  are  set  forth  in a  variety  of
publications  of the  NAIC,  as well as state  laws,  regulations,  and  general
administrative  rules.  The  capital  and  statutory  surplus  of Everest Re was
$1,272.7 million (unaudited) and $1,147.6 million at December 31, 2000 and 1999,
respectively.  The  statutory  net  income  of  Everest  Re was  $165.3  million
(unaudited),  $149.9 million and $176.7 million for the years ended December 31,
2000, 1999 and 1998, respectively.

                                      F-21
<PAGE>
C.  Codification

The Company's operating  subsidiaries file statutory-basis  financial statements
with the state departments of insurance in the states in which the subsidiary is
licensed.  On January 1, 2001,  significant  changes to the  statutory-basis  of
accounting  became  effective.  The  cumulative  effect of these changes will be
recorded  as a  direct  adjustment  to  statutory  surplus.  Management  has not
quantified  the effects of  codification  as of December 31, 2000,  but believes
that it will not have a material impact on the Company's operating subsidiaries'
statutory surplus.

                                      F-22
<PAGE>
12. CONTINGENCIES

The Company  continues to receive  claims under  expired  contracts  that assert
alleged injuries and/or damages relating to or resulting from toxic torts, toxic
waste and other hazardous substances,  such as asbestos.  The Company's asbestos
claims typically involve liability or potential liability for bodily injury from
exposure to asbestos or for property damage  resulting from asbestos or products
containing  asbestos.  The  Company's  environmental  claims  typically  involve
potential  liability for (1) the  mitigation  or  remediation  of  environmental
contamination  or (2) bodily injury or property damages caused by the release of
hazardous substances into the land, air or water.

The Company's  reserves include an estimate of the Company's  ultimate liability
for  asbestos  and  environmental  claims  for which  ultimate  value  cannot be
estimated  using  traditional  reserving   techniques.   There  are  significant
uncertainties  in estimating the amount of the Company's  potential  losses from
asbestos and environmental  claims. Among the complications are: (1) potentially
long waiting periods between exposure and  manifestation of any bodily injury or
property  damage;   (2)  difficulty  in  identifying   sources  of  asbestos  or
environmental    contamination;    (3)   difficulty   in   properly   allocating
responsibility  and/or  liability  for  asbestos or  environmental  damage;  (4)
changes in  underlying  laws and  judicial  interpretation  of those  laws;  (5)
potential  for an  asbestos or  environmental  claim to involve  many  insurance
providers  over  many  policy  periods;  (6) long  reporting  delays,  both from
insureds  to  insurance  companies  and  ceding  companies  to  reinsurers;  (7)
historical  data concerning  asbestos and  environmental  losses,  which is more
limited  than  historical  information  on other types of casualty  claims;  (8)
questions concerning interpretation and application of insurance and reinsurance
coverage; and (9) uncertainty regarding the number and identity of insureds with
potential asbestos or environmental exposure.

Management  believes that these factors continue to render reserves for asbestos
and environmental  losses  significantly  less subject to traditional  actuarial
methods than are reserves on other types of losses.  Given these  uncertainties,
management  believes  that no meaningful  range for such ultimate  losses can be
established.  The  Company  establishes  reserves  to the  extent  that,  in the
judgment of management, the facts and prevailing law reflect an exposure for the
Company or its ceding company.  Due to the  uncertainties  discussed  above, the
ultimate  losses may vary materially from current loss reserves and could have a
material adverse effect on the Company's future financial condition,  results of
operations and cash flows. See also Note 8.

                                      F-23
<PAGE>
The  following   table  shows  the   development  of  prior  year  asbestos  and
environmental  reserves on both a gross and net of retrocessional  basis for the
years ended:
<TABLE>
<CAPTION>

(dollar values in thousands)            2000           1999           1998
                                     ----------     ----------     ----------
<S>                                  <C>            <C>            <C>
Gross basis
Beginning of reserves                $  614,236     $  660,793     $  446,132
Incurred losses                          (5,852)         3,690        249,597
Paid losses                              85,320        (50,247)       (34,936)
                                     ----------     ----------     ----------
End of period reserves               $  693,704     $  614,236     $  660,793
                                     ==========     ==========     ==========

Net basis
Beginning of reserves                $  365,069     $  263,542     $  212,376
Incurred losses  (1)                     (5,645)           -           15,385
Paid losses  (2)                        (42,228)       101,527         35,781
                                     ----------     ----------     ----------
End of period reserves               $  317,196     $  365,069     $  263,542
                                     ==========     ==========     ==========
</TABLE>

(1) Net of $0.0 million, $0.0 million and $138.5 million ceded in 2000, 1999 and
1998,  respectively,  under the incurred loss reimbursement  feature of the stop
loss  reinsurance  protection  provided  by  Mt.  McKinley  at the  time  of the
Company's IPO.

(2) Net of $0.0 million,  $118.8  million and $39.7 million ceded paid losses in
2000, 1999 and 1998,  respectively,  under the stop loss reinsurance  protection
provided by Mt. McKinley at the time of the Company's IPO.

At December 31, 2000, the gross reserves for asbestos and  environmental  losses
were comprised of $106.8 million  representing  case reserves reported by ceding
companies,  $74.0 million  representing  additional case reserves established by
Everest  Re on assumed  reinsurance  claims,  $51.0  million  representing  case
reserves  established  by Everest Re on direct excess  insurance  claims,  $67.3
million  representing  case  reserves  resulting  from  the  acquisition  of Mt.
McKinley and $394.6 million representing IBNR reserves.

The Company is also named in various legal proceedings  incidental to its normal
business  activities.  In the opinion of the Company,  none of these proceedings
would have a material  adverse effect upon the financial  condition,  results of
operations or cash flows of the Company.

The  Prudential  sells  annuities  which are  purchased by property and casualty
insurance  companies to settle certain types of claim  liabilities.  In 1993 and
prior,  Everest Re, for a fee,  accepted  the claim  payment  obligation  of the
property  and  casualty  insurer,  and,  concurrently,  became  the owner of the
annuity or assignee of the annuity proceeds. In these circumstances,  Everest Re
would be liable if The Prudential were unable to make the annuity payments.  The
estimated  cost  to  replace  all  such  annuities  for  which  Everest  Re  was
contingently  liable at December 31, 2000 and 1999 was $148.7 million and $146.2
million, respectively.

Everest Re has purchased  annuities from an unaffiliated  life insurance company
to settle  certain claim  liabilities  of Everest Re. Should the life  insurance
company become unable to make the annuity payments,  Everest Re would be liable.
The estimated  cost to replace such  annuities at December 31, 2000 and 1999 was
$12.6 million and $11.7 million, respectively.

                                      F-24
<PAGE>
13. RELATED-PARTY TRANSACTIONS

During the normal  course of  business,  the  Company,  through its  affiliates,
engages  in  arms-length  reinsurance  and  brokerage  and  commission  business
transactions with companies controlled or affiliated with its outside directors.
These transactions are immaterial to the Company's financial condition,  results
of operations and cash flows.

The Company engages in business  transactions  with Group and Bermuda Re. During
2000,  the  Company  distributed  $495.0  million  to  Group to  facilitate  the
completion of the corporate restructuring.  In addition, 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,  including
allocated and unallocated loss adjustment expenses to Bermuda Re.

14. SEGMENT REPORTING

During the quarter ended December 31, 2000, the Company's  management  realigned
its operating  segments to better reflect the way that  management  monitors and
evaluates  the  Company's  financial  performance.  The Company has restated all
information  for  prior  years to  conform  to the new  segment  structure.  The
Company, through its subsidiaries,  operates in four segments: U.S. Reinsurance,
U.S. Insurance,  Specialty Underwriting and International.  The U.S. Reinsurance
operation writes property and casualty treaty  reinsurance  through  reinsurance
brokers as well as directly with ceding companies  within the United States,  in
addition to property,  casualty and specialty  facultative  reinsurance  through
brokers and directly with ceding  companies  within the United States.  The U.S.
Insurance  operation writes property and casualty  insurance  primarily  through
general agent  relationships and surplus lines brokers within the United States.
The  Specialty  Underwriting  operation  writes  accident  and  health,  marine,
aviation and surety  business  within the United  States and  worldwide  through
brokers and directly with ceding companies.  The International  operation writes
property and casualty  reinsurance  through the  Company's  branches in Belgium,
London, Canada, and Singapore, in addition to foreign "home-office" business.

These  segments  are  managed in a  carefully  coordinated  fashion  with strong
elements of central control, including with respect to capital,  investments and
support operations. As a result, management monitors and evaluates the financial
performance of these operating  segments based upon their  underwriting  gain or
loss ("underwriting results").  Underwriting results include earned premium less
losses  and  LAE  incurred,   commission   and  brokerage   expenses  and  other
underwriting expenses. The accounting policies of the operating segments are the
same as those described in Note 1, Summary of Significant Accounting Policies.

The  Company  does not  maintain  separate  balance  sheet  data for each of its
operating  segments.  Accordingly,  the Company does not review and evaluate the
financial results of its operating segments based upon balance sheet data.

                                      F-25
<PAGE>
The following tables present the relevant underwriting results for the operating
segments for the three years ended December 31, 2000, 1999 and 1998.
<TABLE>
<CAPTION>

                                U.S. REINSURANCE
--------------------------------------------------------------------------------
(dollar values in thousands)             2000            1999            1998
                                      ----------      ----------      ----------
<S>                                   <C>             <C>             <C>
Earned premiums                       $  471,631      $  456,572      $  519,732
Incurred losses and loss
 adjustment expenses                     317,735         316,507         355,530
Commission and brokerage                  78,978         112,285         130,361
Other underwriting expenses               17,039          18,270          18,703
                                      ----------      ----------      ----------
Underwriting gain                     $   57,879      $    9,510      $   15,138
                                      ==========      ==========      ==========
</TABLE>
<TABLE>
<CAPTION>
                                 U.S. INSURANCE
--------------------------------------------------------------------------------
(dollar values in thousands)             2000            1999            1998
                                      ----------      ----------      ----------
<S>                                   <C>             <C>             <C>
Earned premiums                       $  101,576      $   57,791      $   65,493
Incurred losses and loss
 adjustment expenses                      70,277          41,077          47,758
Commission and brokerage                  25,487          15,702          16,637
Other underwriting expenses               11,646           8,593           7,021
                                      ----------      ----------      ----------
Underwriting (loss)                   $   (5,834)     $   (7,581)     $   (5,923)
                                      ==========      ==========      ==========
</TABLE>
<TABLE>
<CAPTION>
                             SPECIALTY UNDERWRITING
--------------------------------------------------------------------------------
(dollar values in thousands)             2000            1999            1998
                                      ----------      ----------      ----------
<S>                                   <C>             <C>             <C>
Earned premiums                       $  302,637      $  265,343      $  141,264
Incurred losses and loss
 adjustment expenses                     254,302         185,608         104,190
Commission and brokerage                  81,794          76,024          41,201
Other underwriting expenses                6,253           4,702           5,343
                                      ----------      ----------      ----------
Underwriting (loss)                   $  (39,712)     $     (991)     $   (9,470)
                                      ==========      ==========      ==========
</TABLE>
<TABLE>
<CAPTION>
                                  INTERNATIONAL
--------------------------------------------------------------------------------
(dollar values in thousands)             2000            1999            1998
                                      ----------      ----------      ----------
<S>                                   <C>             <C>             <C>
Earned premiums                       $  286,753      $  291,745      $  341,521
Incurred losses and loss
 adjustment expenses                     235,927         228,378         270,926
Commission and brokerage                  81,151          81,946          86,360
Other underwriting expenses               13,798          14,892          16,422
                                      ----------      ----------      ----------
Underwriting (loss)                   $  (44,123)     $  (33,471)     $  (32,187)
                                      ==========      ==========      ==========
</TABLE>

                                      F-26
<PAGE>
The  following  table  reconciles  the  underwriting  results for the  operating
segments  to income  before tax as reported in the  consolidated  statements  of
operations and comprehensive income:
<TABLE>
<CAPTION>

(dollar values in thousands)           2000             1999             1998
                                    -----------      -----------      -----------
<S>                                 <C>              <C>              <C>
Underwriting (loss)                 $   (31,790)     $   (32,533)     $   (32,442)
Net investment income                   271,389          252,999          244,909
Realized gain (loss)                        291          (16,760)            (765)
Corporate expenses                       (1,528)          (4,604)          (2,072)
Interest expense                        (39,386)          (1,490)             -
Other income (expense)                    3,341           (1,030)           3,046
                                    -----------      -----------      -----------
Income before taxes                 $   202,317      $   196,582      $   212,676
                                    ===========      ===========      ===========
</TABLE>

The Company writes premium in the United States and international  markets.  The
revenues, net income and identifiable assets of the individual foreign countries
in which the Company writes business are not material.

Approximately  12.9%, 17.9% and 17.0% of the Company's gross premiums written in
2000, 1999 and 1998,  respectively,  were sourced through the Company's  largest
intermediary.

15. SUBSEQUENT EVENT

During 2001,  the Company  paid down its credit  facility  borrowings  by $123.0
million,  bringing  total  outstanding  borrowings to $112.0 million from $235.0
million.

On January 18, 2001, Everest Re paid a $100.0 million dividend to Holdings.

                                      F-27
<PAGE>
16. UNAUDITED QUARTERLY FINANCIAL DATA

Summarized quarterly financial data were as follows:

<TABLE>
<CAPTION>

(dollar values in thousands
 except per share amounts)
                                    1st          2nd          3rd          4th
                                  Quarter      Quarter      Quarter      Quarter
                                 ---------    ---------    ---------    ---------
<S>                              <C>          <C>          <C>          <C>
2000 OPERATING DATA:
 Gross written premium           $ 304,252    $ 326,225    $ 355,550    $ 387,998
 Net written premium               287,537      295,129      302,043      322,612
 Earned premium                    266,184      285,780      291,191      319,442
 Net investment income              63,809       66,941       71,281       69,388
 Net realized capital
  gain (loss)                        7,864       (8,185)         (89)         701
 Total claims and
  underwriting expenses            273,555      292,675      298,336      331,349
 Net income                         49,051       31,541       40,390       37,513
                                 =========    =========    =========    =========

1999 OPERATING DATA:
 Gross written premium           $ 253,896    $ 283,183    $ 299,535    $ 305,205
 Net written premium               242,504      271,430      290,359      291,276
 Earned premium                    234,135      275,419      285,480      276,417
 Net investment income              62,080       64,570       62,232       64,117
 Net realized capital
  (loss) gain                       (2,186)      (7,267)      (7,686)         379
 Total claims and
  underwriting
  expenses (1)                     242,047      283,899      293,431      289,211
 Net income                         41,242       38,065       39,209       39,545
                                 =========    =========    =========    =========
</TABLE>

(1)  Fourth Quarter 1999 includes $2,798 of non-recurring restructure expenses.


                                      F-28
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
                      SCHEDULE I - SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES
                                DECEMBER 31, 2000
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                  COLUMN A                      COLUMN B      COLUMN C      COLUMN D
------------------------------------------     ----------    ----------    ----------
                                                                             Amount
                                                                            Shown in
                                                               Market       Balance
                                                  Cost          Value        Sheet
                                               ----------    ----------    ----------
<S>                                            <C>           <C>           <C>
Fixed maturities-available for sale Bonds:
  U.S. government and government agencies      $  133,053    $  137,830    $  137,830
  State, municipalities and political
   subdivisions                                 1,514,099     1,598,937     1,598,937
  Foreign government securities                   211,711       228,718       228,718
  Foreign corporate securities                    286,762       292,983       292,983
  Public utilities                                148,757       150,007       150,007
  All other corporate bonds                       991,429       948,347       948,347
  Mortgage pass-through securities                449,438       462,875       462,875
  Redeemable preferred stock                       58,030        59,638        59,638
                                               ----------    ----------    ----------
Total fixed maturities-available for sale       3,793,279     3,879,335     3,879,335
Equity securities                                  22,395        36,634        36,634
Short-term investments                            271,216       271,216       271,216
Other invested assets                              29,230        29,211        29,211
Cash                                               68,397        68,397        68,397
                                               ----------    ----------    ----------
Total investments and cash                     $4,184,517    $4,284,793    $4,284,793
                                               ==========    ==========    ==========

</TABLE>


                                      S-1
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
         SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
                             CONDENSED BALANCE SHEET
               (Dollars in thousands, except par value per share)

<TABLE>
<CAPTION>
                                         December 31,      December 31,
                                         ------------      ------------
                                             2000              1999
                                         ------------      ------------
<S>                                      <C>               <C>
ASSETS
 Equity securities, at market value
  (cost: 2000, $55; 1999, $0)            $        143      $         -
 Short-term investments                        26,359                -
 Cash                                              28             4,231
 Investment in subsidiaries, at
  equity in the underlying net
  assets                                    1,706,111         1,385,054
 Receivable from affliate                      (2,488)           (1,920)
 Deferred tax asset                            14,653             1,944
 Accrued investment income                          4                -
 Other assets                                   3,312               435
                                         ------------      ------------
Total assets                             $  1,748,122      $  1,389,744
                                         ============      ============

LIABILITIES
 8.5% Senior notes due 3/15/2005         $    249,615      $         -
 8.75% Senior notes due 3/15/2010             199,004                -
 Revolving credit facility                    235,000            59,000
 Accrued interest on debt and
  borrowings                                   12,212               106
 Other liabilities                              1,804             3,156
                                         ------------      ------------
Total liabilities                             697,635            62,262
                                         ------------      ------------

STOCKHOLDER'S EQUITY
 Common stock, par value: $0.01;
  200 million shares authorized;
  1,000 issued in 2000 and 50.9
  million shares issued in 1999                    -                509
 Paid-in capital                              255,359           390,912
 Unearned compensation                             -               (109)
 Accumulated other comprehensive
  income, net of deferred taxes
  benefit of $30.4 million in 2000
  and deferred income taxes
  benefit of $9.1 million in 1999              56,747           (16,701)
 Treasury stock, at cost; 0.0
  million shares in 2000 and
  4.4 million shares in 1999                       -           (122,070)
 Retained earnings                            738,381         1,074,941
                                         ------------      ------------
Total stockholder's equity                  1,050,487         1,327,482
                                         ------------      ------------
Total liabilities and
 stockholder's equity                    $  1,748,122      $  1,389,744
                                         ============      ============
</TABLE>

                 See notes to consolidated financial statements.

                                      S-2
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
         SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
                        CONDENSED STATEMENT OF OPERATIONS
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                         For Years Ended December 31,
                                 -------------------------------------------
                                    2000            1999            1998
                                 -----------     -----------     -----------
<S>                              <C>             <C>             <C>
REVENUES
Dividends received from
 subsidiaries                    $        -      $        -      $    43,125
Net investment income                  1,371             612             521
Other (expense)                         (416)             -               -
Equity in undistributed
 change in retained
 earnings of subsidiaries            184,191         161,388         122,197
                                 -----------     -----------     -----------
   Total revenues                    185,146         162,000         165,843
                                 -----------     -----------     -----------

EXPENSES
Interest expense                      39,386           1,490              -
Other expenses                             5           2,489             862
                                 -----------     -----------     -----------

Income before taxes                  145,755         158,021         164,981
Income tax (benefit)                 (12,740)            (40)           (216)
                                 -----------     -----------     -----------
   Net income                    $   158,495     $   158,061     $   165,197
                                 ===========     ===========     ===========

</TABLE>
                 See notes to consolidated financial statements.

                                      S-3
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
         SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
                        CONDENSED STATEMENT OF CASHFLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                           For Years Ended December 31,
                                     ----------------------------------------
                                        2000           1999           1998
                                     ----------     ----------     ----------
<S>                                  <C>            <C>            <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES
Net income                           $  158,495     $  158,061     $  165,197
 Adjustments to reconcile
  net income to net cash
  provided by operating
  activities:
  Equity in undistributed
   change in retained
   earnings of subsidiaries            (585,734)      (161,388)      (122,197)
  (Decrease) increase in
   other liabilities                     (1,352)         1,488           (181)
  Increase in accrued
   interest on debt and
   borrowings                            12,106            106             -
  (Increase) in deferred
   tax asset                            (12,709)           (40)          (216)
  (Increase) in other assets             (2,881)          (435)            -
  Decrease (increase) in
   receivable from affliates                568         20,754        (13,154)
  Restructure adjustment                    (55)            -              -
  Accrual of bond discount                 (877)            -              -
  Amortization of underwriting
   discount on senior notes                 112             -              -
  Non-cash compensation                     109            131            273
                                     ----------     ----------     ----------

NET CASH (USED IN) PROVIDED BY
 OPERATING ACTIVITIES                  (432,218)        18,677         29,722

CASH FLOWS FROM INVESTING
 ACTIVITIES
  Additional investment in
   subsidiaries                         349,743             50         (2,772)
  Cost of equity securities
   acquired                                 (55)            -              -
  Net (purchases) of
   short-term securities                (25,482)            -              -
                                     ----------     ----------     ----------

NET CASH PROVIDED BY (USED IN)
 INVESTING ACTIVITIES                   324,206             50         (2,772)

CASH FLOWS FROM FINANCING
 ACTIVITIES
Net borrowing on revolving
 credit line                            176,000         59,000             -
Proceeds from issuance of
 senior notes                           448,507             -              -
Acquisition of treasury stock
 net of reissuances                     (16,478)       (62,106)       (17,483)
Effect of restructuring                 (11,706)            -              -
Common stock issued during
 the period                               2,288            317            610
Contribution from subsidiaries              198             -              -
Dividends paid to stockholders         (495,000)       (11,707)       (10,077)
                                     ----------     ----------     ----------

NET CASH PROVIDED BY (USED IN)
 FINANCING ACTIVITIES                   103,809        (14,496)       (26,950)

Net increase in cash                     (4,203)         4,231             -
Cash, begining of period                  4,231             -              -
                                     ----------     ----------     ----------
Cash, end of period                  $       28     $    4,231     $       -
                                     ==========     ==========     ==========

SUPPLEMENTAL CASH FLOW
 INFORMATION
NON-CASH OPERATING
 TRANSACTION:
Dividends received from
 subsidiaries in the form of
 forgiveness of liabilities          $       -      $      836     $      967

</TABLE>
                 See notes to consolidated financial statements.

                                      S-4
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
               SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
                             (Dollars in thousands)

<TABLE>
<CAPTION>
    COLUMN A         COLUMN B    COLUMN C    COLUMN D     COLUMN F    COLUMN G     COLUMN H       COLUMN I    COLUMN J    COLUMN K
------------------------------------------------------------------------------------------------------------------------------------
                               RESERVE FOR                                         INCURRED     AMORTIZATION
                     DEFERRED   LOSSES AND   UNEARNED                   NET      LOSS AND LOSS  OF DEFERRED     OTHER        NET
                   ACQUISITION  ADJUSTMENT    PREMIUM      EARNED    INVESTMENT   ADJUSTMENT    ACQUISITION   OPERATING    WRITTEN
 GEOGRAPHIC AREA      COSTS      EXPENSES    RESERVES     PREMIUM      INCOME      EXPENSES        COSTS      EXPENSES     PREMIUM
-----------------  -----------  ----------  -----------  ----------  ----------  -------------  ------------  ---------  -----------
<S>                <C>          <C>         <C>          <C>         <C>         <C>            <C>           <C>        <C>
December 31, 2000
 Domestic          $    75,436  $3,176,004  $   340,509  $  875,844  $  236,079   $    642,314  $    186,259  $  36,466  $   902,946
 International          17,042     609,743       60,639     286,753      35,310        235,927        81,151     13,798      304,375
                   -----------  ----------  -----------  ----------  ----------  -------------  ------------  ---------  -----------
   Total           $    92,478  $3,785,747  $   401,148  $1,162,597  $  271,389  $     878,241  $    267,410  $  50,264  $ 1,207,321
                   ===========  ==========  ===========  ==========  ==========  =============  ============  =========  ===========

DECEMBER  31,
 1999 (1)
 Domestic          $    63,324  $3,083,151  $   239,488  $  779,706  $  209,617  $     543,192  $    198,323  $  41,857  $   799,265
 International          19,389     563,841       69,075     291,745      43,382        228,378        81,946     14,892      296,304
                   -----------  ----------  -----------  ----------  ----------  -------------  ------------  ---------  -----------
   Total           $    82,713  $3,646,992  $   308,563  $1,071,451  $  252,999  $     771,570  $    280,269  $  56,749  $ 1,095,569
                   ===========  ==========  ===========  ==========  ==========  =============  ============  =========  ===========

DECEMBER  31,
 1998 (1)
 Domestic                                                $  726,489  $  194,607  $     507,478  $    182,800  $  38,538  $   713,022
 International                                              341,521      50,302        270,926        86,360     16,422      303,577
                                                         ----------  ----------  -------------  ------------  ---------  -----------
   Total                                                 $1,068,010  $  244,909  $     778,404  $    269,160  $  54,960  $ 1,016,599
                                                         ==========  ==========  =============  ============  =========  ===========
</TABLE>

(1)  The 1998 and 1999 amounts have been restated to conform to the 2000 segment
presentation.

                                      S-5
<PAGE>
                       EVEREST REINSURANCE HOLDINGS, INC.
                            SCHEDULE IV - REINSURANCE
                             (Dollars in thousands)

<TABLE>
<CAPTION>

          Column A              Column B        Column C           Column D         Column E       Column F
----------------------------    ---------    ---------------    ---------------    -----------    ----------
                                  GROSS         CEDED TO         ASSUMED FROM          NET        ASSUMED TO
                                  AMOUNT     OTHER COMPANIES    OTHER COMPANIES      AMOUNT           NET
                                ---------    ---------------    ---------------    -----------    ----------
<S>                             <C>          <C>                <C>                <C>            <C>
DECEMBER 31, 2000
Total property and liability
 insurance earned premium       $ 138,982    $       121,527    $     1,145,142    $ 1,162,597         98.5%
DECEMBER 31, 1999
Total property and liability
 insurance earned premium       $  73,822    $        45,292    $     1,042,921    $ 1,071,451         97.3%
DECEMBER 31, 1998
Total property and liability
 insurance earned premium       $  75,017    $        29,618    $     1,022,611    $ 1,068,010         95.7%

</TABLE>


                                      S-6
<PAGE>
INDEX TO EXHIBITS


Exhibit No.                                                                 Page
-----------                                                                 ----

2.1   Agreement and Plan of Merger among  Everest  Reinsurance  Holdings,  Inc.,
      Everest Re Group, Ltd.  and  Everest Re Merger  Corporation,  incorporated
      herein by reference to Exhibit 2.1 to the  Registration  Statement on Form
      S-4 (No. 333-87361)

3.1   Certificate of  Incorporation  of  Everest  Reinsurance   Holdings,  Inc.,
      incorporated herein  by reference  to  Exhibit  4.1  to  the  Registration
      Statement on Form S-8 (No. 333-05771)

3.2   Bye-Laws of Everest Reinsurance  Holdings,  Inc.,  incorporated  herein by
      reference  to  Exhibit  3.2  to  the  Everest  Reinsurance  Holdings, Inc.
      Quarterly Report on Form 10-Q for the quarter ended March 31, 2000

4.1   Indenture, dated  March 14, 2000, between  Everest  Reinsurance  Holdings,
      Inc. and The  Chase  Manhattan Bank, as  Trustee,  incorporated  herein by
      reference  to  Exhibit  4.1 to Everest Reinsurance Holdings, Inc. Form 8-K
      filed on March 15, 2000

4.2   First Supplemental Indenture  relating to the 8.5% Senior  Notes due March
      15, 2005, dated March 14, 2000, between Everest Reinsurance Holdings, Inc.
      and  The  Chase  Manhattan  Bank,  as  Trustee,  incorporated   herein  by
      reference  to  Exhibit  4.2 to Everest Reinsurance Holdings, Inc. Form 8-K
      filed on March 15, 2000

4.3   Second Supplemental Indenture relating to the 8.75% Senior Notes due March
      15, 2010, dated March 14, 2000, between Everest Reinsurance Holdings, Inc.
      and The Chase Manhattan Bank, as Trustee, incorporated herein by reference
      to Exhibit 4.3 to the Everest Reinsurance Holdings, Inc. Form 8-K filed on
      March 15, 2000

*10.1 Employment  Agreement  with Joseph V. Taranto  executed on July 15,  1998,
      incorporated herein by reference  to  Exhibit 10.21 to Everest Reinsurance
      Holdings, Inc. Quarterly Report on  Form  10-Q  for the quarter ended June
      30, 1998 (the "second quarter 1998 10-Q")

*10.2 Amendment of  Employment   Agreement  by  and  among  Everest  Reinsurance
      Company,  Everest  Reinsurance  Holdings, Inc., Everest Re Group, Ltd. and
      Joseph  V.  Taranto  dated  February  15,  2000,  incorporated  herein  by

                                      E-1

      reference to Exhibit 10.29 to Everest Re Group, Ltd. Annual Report on Form
      10-K for the year ended December 31, 1999 (the "1999 10-K")

*10.3 Change of Control Agreement  with  Joseph V.  Taranto  effective  July 15,
      1998,  incorporated  herein  by  reference  to Exhibit 10.22 to the second
      quarter 1998 10-Q

*10.4 Amendment of Change of Control Agreement by and among Everest  Reinsurance
      Company,  Everest  Reinsurance  Holdings, Inc., Everest Re Group, Ltd. and
      Joseph  V.  Taranto  dated  February  15,  2000,  incorporated  herein  by
      reference to Exhibit 10.30 to the 1999 10-K

10.5  Credit Agreement Between Everest Reinsurance  Holdings,  Inc., the Lenders
      Named  Therein  and  First  Union  National  Bank  dated December 21, 1999
      providing   for   a   $150  million   Senior  Revolving  Credit  Facility,
      incorporated  herein by  reference to Exhibit 10.30 to Everest Reinsurance
      Holdings, Inc. Form 8-K filed on December 28, 1999

10.6  First Amendment to Credit  Agreement dated as of December 21, 1999 between
      Everest  Reinsurance  Holdings,  Inc., the Lenders Named Therein and First
      Union National Bank, incorporated  herein by reference to Exhibit 10.19 to
      Everest Re Group, Ltd.  Annual  Report  on  Form  10-K  for the year ended
      December 31, 2000 (the "2000 10-K")

10.7  Parent Guaranty dated February 24, 2000 made by Everest Re Group,  Ltd. in
      favor  of  the  Lenders  under Everest Reinsurance Holdings, Inc.'s Credit
      Facility, incorporated  herein  by  reference to Exhibit 10.33 to the 1999
      10-K

10.8  Guarantor Consent dated  December 18, 2000 made by Everest Re Group,  Ltd.
      in  favor of the Lenders under Everest Reinsurance Holdings, Inc.'s Credit
      Facility,  incorporated  herein  by reference to Exhibit 10.21 to the 2000
      10-K

10.9  Stock Purchase  Agreement  between  The  Prudential  Insurance  Company of
      America  and  Everest  Reinsurance  Holdings,  Inc. for the sale of common
      stock of Gibraltar Casualty Company dated  February 24, 2000, incorporated
      herein by reference to Exhibit 10.32 to the 1999 10-K

10.10 Amendment  No. 1  to  Stock  Purchase  Agreement  between  The  Prudential
      Insurance  Company  of  America and Everest Reinsurance Holdings, Inc. for
      the sale of common stock  of  Gibraltar  Casualty  Company dated August 8,
      2000, incorporated herein by reference to Exhibit  10.1  to the Everest Re

                                      E-2

      Group, Ltd. Quarterly  Report on Form 10-Q for the  quarter ended June 30,
      2000

10.11 Proportional Excess of Loss  Reinsurance  Agreement  entered  into between
      Gibraltar  Casualty Company and Prudential Property and Casualty Insurance
      Company, incorporated  herein  by  reference  to Exhibit 10.24 to the 2000
      10-K

10.12 Guarantee Agreement made by The Prudential Insurance Company of America in
      favor of Gibraltar Casualty Company,  incorporated  herein by reference to
      Exhibit 10.25 to the 2000 10-K

10.13 Lease,  effective   December   26,  2000  between  OTR,  an  Ohio  general
      partnership,  and  Everest  Reinsurance  Company,  incorporated  herein by
      reference to Exhibit 10.26 to the 2000 10-K

23.1  Consent of PricewaterhouseCoopers LLP, filed herewith

27.1  Financial Data Schedule, filed herewith

--------------------------
* Management contract or compensatory plan or arrangement.

                                      E-3