S&P Affirms AXIS Ratings; Raises Outlook to Positive

June 1, 2007

Standard & Poor’s Ratings Services has affirmed its “BBB+” counterparty credit and senior debt ratings on AXIS Capital Holdings Ltd. and affirmed its “A” counterparty credit and financial strength ratings on its operating subsidiaries.

S&P also announced that it has revised its outlook on AXIS Capital Holdings Ltd. and its subsidiaries – AXIS Specialty Ltd., AXIS Reinsurance Co., AXIS Specialty Europe Ltd., AXIS Specialty Insurance Co., AXIS Surplus Insurance Co., and AXIS Re Ltd. (collectively referred to as AXIS) – to positive from stable.

“The outlook revision reflects AXIS’ success in building a strong and well-diversified business franchise since its launch in 2001 as well as its strong operating performance in recent years,” noted S&P credit analyst Laline Carvalho. “The positive outlook is also supported by our belief that AXIS benefits from a strong management team in addition to excellent risk controls in its insurance operations.”

S&P praised AXIS’ “flexible and nimble business model as well as its well-established underwriting modeling and process capabilities,” indicating that the Company is well positioned to “navigate through softening P/C markets in coming years.”

The group’s “strong competitive position, strong operating results, seasoned management team, excellent insurance risk controls, and very strong consolidated capital adequacy,” formed the basis for the ratings affirmation.

As offsetting factors, S&P noted AXIS’ “relatively short track record compared with longer-standing insurance and reinsurance peers and its exposure to severity-related risks.”

S&P said it “expects AXIS to maintain very strong average operating returns with RORs in the low double-digit range, though results in any period are subject to volatility from large losses.” Absent extraordinary losses, S&P anticipates AXIS will maintain a combined ration in the 85 to 90 percent range. Capital adequacy is also expected to remain very strong.

In terms of financial leverage “-as measured by total debt plus preferred shares to total capital -” S&P expects it to be “supportive of the ratings at less than 25 percent over the medium term, with fixed-charge coverage remaining very strong at more than 8x.”

The rating agency also believes AXIS will “continue to show prudence and opportunism in its underwriting approach.” Premiums are expected to show “flat to modest growth in 2007,” including growth related to AXIS “March 2007 acquisition of MediaPro (which will provide a platform for growth in midsize niche businesses worldwide) and in other areas such as political risk, offset by decreased writings in segments within the P/C market, where conditions are softening and may not meet AXIS’ profitability requirements.”

Commenting on the upgrade to a positive out look, S&P said it “indicates that AXIS could be upgraded by one notch over the next one to two years. Factors that would contribute to an upgrade would be the continuation of strong operating performance as well as continued evidence of excellent risk controls in its underwriting practices and prudent cycle management underwriting.”

However, S&P also indicated that if the Company’s operating performance does not meet its “expectations, or the group’s cycle management practices are viewed to be weaker than expected, the outlook could be revised to stable.”

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