S&P Raises AXIS and Subs Ratings; Outlook Stable

February 3, 2009

Standard & Poor’s Ratings Services has raised its counterparty credit and senior unsecured debt ratings on Bermuda-based insurance and reinsurance holding company AXIS Capital Holdings Ltd. to ‘A-‘ from ‘BBB+’.

S&P also raised its counterparty credit and financial strength ratings on AXIS Capital’s operating subsidiaries (collectively referred to as AXIS) to ‘A+’ from ‘A’, and assigned ‘A+’ counterparty credit ratings on AXIS Specialty Europe Ltd., AXIS Reinsurance Co., AXIS Specialty Insurance Co., and AXIS Surplus Insurance Co.

The outlook on all of the ratings is stable.
“The upgrade reflects our view that AXIS has consistently outperformed most of its peers, with strong operating results since its inception in 2001,” explained credit analyst Laline Carvalho. “We believe AXIS’ earnings quality is also strong, as demonstrated by a history of moderate earnings volatility relative to peers, even including large loss years such as 2005 and 2008.”

S&P noted that “other rating factors supporting the upgrade are AXIS’ strong competitive position, seasoned management team, very strong capital adequacy, strong liquidity, and significant enhancements to the group’s enterprise risk management framework, which we now view as strong. We also believe AXIS’ investment portfolio has relatively limited downside risk given the short-term and liquid nature of the investment portfolio, as well as modest exposure to subprime assets.

“The group has modest debt leverage and no significant debt maturities over the next five years. We also view AXIS’ exposure to potential losses from directors and officers and errors and omissions liability coverages in its professional liability portfolio as modest relative to the group’s equity base.

“Partially offsetting these strengths are AXIS’ exposure to severity-related risks given the short-tail nature of its business portfolio, as well a business model that is moderately dependent on the use of reinsurance protection on the insurance side of the business.”

Source: Standard & Poor’s – www.standardandpoors.com

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