N@N

OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of aa+a of AXIS Specialty Limited (AXIS) and its operating affiliates. Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of abbb+a and all existing debt ratings of AXIS Capital Holdings Limited (ACHL) (both domiciled in Hamilton, Bermuda) (NYSE: AXS).

"Catastrophe Risk Management Incorporated Within the Rating Analysis"

Additionally, A.M. Best has downgraded the FSR to B++ (Good) from A (Excellent) and ICR to abbb+a from aa+a of AXIS Specialty Insurance Company (Alpharetta, GA). The outlook for both ratings is stable. Subsequently, A.M. Best has withdrawn the ratings due to managementas plans to cease writing new business, and thus place this company in run off. (See below for a detailed list of the companies and ratings.)

The ratings reflect AXISa consistently strong operating performance on a relative and absolute basis, excellent risk-based capitalization, robust enterprise risk management controls and a highly experienced management team. AXISa operating strategy has historically emphasized underwriting profitability with a balanced risk profile. Given the current soft casualty market conditions the company is well positioned with a diversified book of business and expanding worldwide infrastructure. AXISa book of business emphasizes short to medium-tail lines and focuses on specialty risks including property, marine and political risk, along with property catastrophe coverages.

AXISa historical operating performance has been strong, with a five-year average combined ratio and a five-year average return on equity through 2010, which places the company among the top of its Bermudian peer group. In A.M. Bestas opinion, AXISa solid performance is attributable to its highly developed and integrated risk management controls and strong systems capabilities. Furthermore, AXIS retains a very strong level of risk-based capitalization under various A.M. Best stress scenarios. As a result, A.M. Best expects AXIS to continue managing its capital base in a conservative manner within acceptable ranges to support its current ratings. Both financial leverage and interest coverage also are at acceptable levels relative to ACHLas ratings.

Partially offsetting these positive rating factors is AXISa exposure to large catastrophe losses as well as the current soft casualty market environment. These challenges and other rating factors, which could lead to a downgrade or revision in the outlook to negative, include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers, significant adverse loss reserve development and/or a material decline in risk-adjusted capital. Alternatively, factors that could lead to an upgrade include continued favorable operating profitability coupled with maintenance of strong risk-adjusted capital levels.

The FSR of A (Excellent) and ICRs of aa+a have been affirmed for AXIS Specialty Limited and its following operating affiliates:

• AXIS Re Limited
• AXIS Reinsurance Company
• AXIS Specialty Europe Limited
• AXIS Surplus Insurance Company
• AXIS Insurance Company

The following debt ratings have been affirmed:

AXIS Capital Holdings Limiteda"
-- abbb+a on $500 million 5.75% senior unsecured notes, due 2014
-- abbb-a on $250 million 7.25% non-cumulative preferred shares, Series A
-- abbb-a on $250 million 7.50% non-cumulative preferred shares, Series B

AXIS Specialty Finance LLC (guaranteed by AXIS Capital Holdings Limited)
-- abbb+a on $500 million 5.875% senior unsecured notes, due 2020

The following indicative ratings have been affirmed under the current shelf registration:

AXIS Capital Holdings Limited
-- abbb+a on senior unsecured debt
-- abbba on subordinated debt
-- abbb-a on preferred stock

AXIS Capital Trust I, II & III (guaranteed by AXIS Capital Holdings Limited)
-- abbb-a on preferred securities

The principal methodology used in determining these ratings is [ Bestas Credit Rating Methodology -- Global Life and Non-Life Insurance Edition ], which provides a comprehensive explanation of A.M. Bestas rating process and highlights the different rating criteria employed. Additional key criteria utilized include: aRisk Management and the Rating Process for Insurance Companiesa; aUnderstanding BCAR for Property/Casualty Insurersa; aUnderstanding Universal BCARa; aCatastrophe Analysis in A.M. Best Ratingsa; aCatastrophe Risk Management Incorporated Within the Rating Analysisa; aRating Members of Insurance Groupsa; and aA.M. Bestas Ratings & the Treatment of Debt.a Methodologies can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, A.M. Best Company is the worldas oldest and most authoritative insurance rating and information source. For more information, visit [ www.ambest.com ].

Copyright 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.