Everest Re Group, Ltd. beat analyst expectations and posted its best earnings quarter ever, helped by investment income and a lack of catastrophes.

Operating income, which excludes net realised investment gains and losses, rose to $218 million in the second quarter 2006, a 26 percent gain on $173.3 million earned in the same period 2005. Broken down, operating income was $3.35 per share compared to $3.03 per share in the second quarter of 2005.

The Bermuda-based reinsurer was expected to earn $3.07 a share, according to the average estimate of 13 analysts in a Thomson First Call survey.

Quarterly income increased 14 percent to $220.4 million, or $3.38 per share, compared to $194.2 million, or $3.40 per share, in the second quarter of 2005.

Strong underwriting year fundamentals and a lack of unusual catastrophe or risk loss events in the quarter offset $36 million of net adverse development on 2005 and prior accident year reserves principally relating to 2005 catastrophe events, the company said in its earning statement. It had a combined ratio of 87.7 percent compared to 91.4 percent in the same period last year.

Gross premiums written declined 18 percent in the second quarter 2006, reflecting a world-wide reinsurance operation decline of 14.7 percent and an insurance segment decline of 27.8 percent, the company said in its earnings statement.

Net investment income increased by 12 percent to $153 million in the second quarter 2006.

While Everest Re?s top line reduced in the half of 2006 as it adjusted to a changing underwriting landscape, chairman and chief executive officer, Joseph V. Taranto said yesterday that he expects new production opportunities to result in double digit growth in the second half of the year, with the fourth quarter being particularly strong.

?We expect our disciplined approach combined with excellent underwriting fundamentals will produce strong profitability in 2006, absent unusual catastrophe or risk events,? he said in the company?s earnings statement.

Everest Re shares closed at $91.13, up $1.88 or 2.1 percent on a volume of 447,400 shares on the New York Stock Exchange.