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AXIS Capital Reports Net Income of $117.8 Million for Second Quarter 2003

Company Release - 8/6/2003 8:00 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--Aug. 6, 2003--AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported net income for the quarter of $117.8 million, or $0.81 per diluted share, compared to $30.0 million, or $0.22 per diluted share, for the second quarter ended June 30, 2002, an increase of $87.8 million, or $0.59 per diluted share. Net income for the six months ended June 30, 2003 rose 264% to $224.9 million, or $1.55 per diluted share, from $61.7 million, or $0.46 per diluted share, for the corresponding period in 2002.

Net income excluding net realized gains and losses on investments, net of tax for the second quarter of 2003 was $102.3 million, or $0.70 per diluted share, compared with $21.3 million, or $0.16 per diluted share, for the quarter ended June 30, 2002. Net income excluding net realized gains and losses on investments, net of tax for the six months ended June 30, 2003 was $198.4 million, or $1.36 per diluted share, compared with $52.3 million, or $0.39 per diluted share, for the six months ended June 30, 2002. Net income excluding net realized gains and losses on investments, net of tax is a non-GAAP financial measure. A reconciliation of this measure to net income is presented at the end of this release.

Shareholders' equity has grown to $2.2 billion as at June 30, 2003. Diluted book value per share was $15.44, an increase of $1.48 or 10.6% from December 31, 2002. Diluted book value per share is a non-GAAP financial measure. A reconciliation of this measure to shareholders' equity is presented at the end of this release.

John Charman, President and CEO, commented "We are delighted to have produced such a strong set of financial results for our first reporting period as a public company. These results clearly demonstrate the differentiating AXIS franchise that has been built over the last eighteen months. All four of our underwriting segments are now fully operational, each has top quality ratings, excellent staff and well capitalized platforms from which we can not only sustain our profitability but, more importantly, from which we can generate future growth."

Gross premiums written for the second quarter of 2003 were $551.5 million compared to $260.7 million for the second quarter 2002. Of these premiums written: $207.7 million were derived from global insurance compared to $163.5 million in the corresponding quarter of 2002; $120.1 million from global reinsurance compared to $97.2 million in the corresponding quarter of 2002; $171.1 million from U.S. insurance; and $52.6 million from U.S. reinsurance. The latter two segments began underwriting at the start of 2003; therefore, there are no comparatives for the periods in 2002. For the quarter ended June 30, 2003 compared to the quarter ended June 30, 2002, net premiums written rose to $449.8 million from $234.0 million and net premiums earned increased to $335.6 million from $94.5 million.

For the quarter ended June 30, 2003, net investment income, including realized gains of $15.7 million, was $31.6 million compared with $22.7 million, including realized gains of $8.7 million, for the quarter ended June 30, 2002.

During the second quarter of 2003, the Company generated a combined ratio of 81.5%, a loss ratio of 58.3% and an expense ratio of 23.2% compared to 92.4%, 58.7% and 33.7%, respectively, for the second quarter of 2002.

Gross premiums written for the first six months of 2003 were $1,160.0 million compared to $526.4 million for the first six months of 2002. Of these premiums written: $451.3 million were derived from global insurance compared to $304.8 million in the corresponding period of 2002; $331.6 million from global reinsurance compared to $221.6 million in the corresponding period of 2002; $263.0 million from U.S. insurance; and $114.1 million from U.S. reinsurance. For the six months ended June 30, 2003 compared to the six months ended June 30, 2002, net premiums written increased to $990.0 million from $494.6 million and net premiums earned rose to $638.0 million from $150.1 million.

For the six months ended June 30, 2003, net investment income, including realized gains of $26.9 million, was $54.2 million compared with $43.3 million, including realized gains of $9.5 million, for the six months ended June 30, 2002.

During the first six months of 2003, the Company generated a combined ratio of 77.5%, a loss ratio of 53.6% and an expense ratio of 23.9% compared to 87.8%, 56.5% and 31.3%, respectively, for the first six months in 2002.

Subsequent to the end of the second quarter, the Company completed an initial public offering, which raised total net proceeds for the Company of $316.0 million from the sale of 15.4 million common shares.

AXIS Capital will host a conference call on Thursday, August 7, 2003 at 8:30 AM (Eastern) to discuss the second quarter financial results. This presentation will be available through an audio webcast accessible through the Investor Information section of the Company's website at www.axiscapital.com.

In addition, a financial supplement relating to the Company's financial results for the second quarter is available in the Investor Information section of our website.

AXIS Capital is a Bermuda-based global provider of specialty lines insurance and treaty reinsurance with shareholders' equity in excess of $2.2 billion and locations in Bermuda, the United States and Europe. Its operating subsidiaries have been assigned a rating of "A" ("Excellent") by A.M. Best and a rating of "A" ("Strong") by Standard & Poor's. For more information about AXIS Capital, visit the Company's website at www.axiscapital.com.

Cautionary Note Regarding Forward-Looking Statements

This release may include forward-looking statements within the meaning of the U.S. federal securities laws. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from the Company's expectations. Important factors that could cause actual events or results to be materially different from the Company's expectations include (1) the occurrence of natural and man-made disasters, (2) actual claims exceeding our loss reserves, (3), failure of any of the loss limitation methods we employ, (4) effects of emerging claims and coverage issues, (5) a decline in our ratings with Standard & Poor's and A.M. Best, (6) loss of business provided to us by our major brokers, (7) general economic conditions, (8) increased competition on the basis of pricing, capacity, coverage terms or other factors, and (9) changes in governmental regulations. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

                    AXIS CAPITAL HOLDINGS LIMITED

                     CONSOLIDATED BALANCE SHEETS
              (Expressed in thousands of U.S. dollars,
                 except share and per share amounts)

                                                 June 30,    Dec. 31,
                                                   2003        2002
                                               (Unaudited)
Assets
Cash and cash equivalents                      $  927,087  $  729,296
Investments at fair market value                2,394,606   1,702,990
   (Amortized cost 2003:$2,355,341;
    2002:$1,677,506)
Accrued interest receivable                        15,236      16,502
Insurance and reinsurance premium balances
 receivable                                       663,758     375,508
Deferred acquisition costs                        139,445      77,166
Prepaid reinsurance premiums                      145,704      49,673
Reinsurance recoverable                            51,841       1,703
Intangible assets                                  27,579      14,079
Other assets                                       20,973      19,204
                                                ----------  ----------
      Total Assets                             $4,386,229  $2,986,121
                                                ==========  ==========

Liabilities
Reserve for losses and loss expenses           $  569,253  $  215,934
Unearned premiums                               1,001,225     555,962
Insurance and reinsurance balances payable        214,739     142,696
Accounts payable and accrued expenses              54,375      24,119
Net payable for investments purchased             334,082      86,377
                                                ----------  ----------
      Total Liabilities                         2,173,674   1,025,088
                                                ----------  ----------

Shareholders' Equity
Share capital
  (Authorized 800,000,000 common shares, par
   value $0.0125;
  issued and outstanding 2003;138,925,528:
   2002; 138,168,520)                               1,737       1,727
Additional paid-in capital                      1,697,824   1,686,599
Deferred compensation                             (17,397)    (20,576)
Accumulated other comprehensive income             37,720      25,484
Retained earnings                                 492,671     267,799
                                                ----------  ----------
      Total Shareholders' Equity                2,212,555   1,961,033
                                                ----------  ----------

      Total Liabilities & Shareholders' Equity $4,386,229  $2,986,121
                                                ==========  ==========

Book value per common share                    $    15.93  $    14.19
                                                ==========  ==========
                    AXIS CAPITAL HOLDINGS LIMITED

           UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
     For the quarter and six months ended June 30, 2003 and 2002
              (Expressed in thousands of U.S. dollars,
                 except share and per share amounts)

                       Quarters ended            Six months ended
                    June 30,      June 30,      June 30,      June 30,
                      2003          2002          2003          2002
Revenues
 Gross premiums
  written      $    551,450  $    260,721  $  1,160,037  $    526,400
 Premiums ceded    (101,626)      (26,758)     (170,069)      (31,812)
 Change in
  unearned
  premiums         (114,232)     (139,493)     (351,949)     (344,516)
                ------------  ------------  ------------  ------------
 Net premiums
  earned            335,592        94,470       638,019       150,072

 Net investment
  income             15,904        14,055        27,256        33,837
 Net realized
  gains              15,705         8,690        26,903         9,463
 Other
  insurance
  related
  income             10,102             -        11,208             -
                ------------  ------------  ------------  ------------
    Total
     revenues       377,303       117,215       703,386       193,372
                ------------  ------------  ------------  ------------

Expenses
 Net losses and
  loss expenses     195,620        55,437       341,955        84,786
 Acquisition
  costs              55,945        20,008       108,980        28,900
 General and
  administrative
  expenses           21,719        11,859        43,297        18,052
 Foreign
  exchange
  gains             (12,855)         (115)      (14,742)         (109)
                ------------  ------------  ------------  ------------
    Total
     expenses       260,429        87,189       479,490       131,629
                ------------  ------------  ------------  ------------

Income before
 income taxes       116,874        30,026       223,896        61,743
 Income tax
  recovery
  (expense)             880           (19)          976           (19)
                ------------  ------------  ------------  ------------
Net Income     $    117,754  $     30,007  $    224,872  $     61,724
                ============  ============  ============  ============

Weighted
 average common
 shares and
  common share
   equivalents
   - basic      136,509,891   135,181,081   136,440,383   135,158,314
                ============  ============  ============  ============

Weighted
 average common
 shares and
 common share
  equivalents -
  diluted       145,701,443   135,311,032   145,045,136   135,288,513
                ============  ============  ============  ============

Net income per
 share - basic $       0.86  $       0.22  $       1.65  $       0.46
                ============  ============  ============  ============

Net income per
 share -
 diluted       $       0.81  $       0.22  $       1.55  $       0.46
                ============  ============  ============  ============

Insurance
 Ratios
Loss ratio             58.3%         58.7%         53.6%         56.5%
Expense ratio          23.2%         33.7%         23.9%         31.3%
                ------------  ------------  ------------  ------------
Combined ratio         81.5%         92.4%         77.5%         87.8%
                ============  ============  ============  ============
Non-GAAP Financial Measures

In addition to the GAAP financial measures included within this
release, the Company has presented "net income excluding net realized
gains and losses on investments, net of tax" and "diluted book value
per share," which are non-GAAP financial measures. The Company has
included the first measure as it believes that security analysts,
rating agencies and investors believe that realized gains and losses
are largely opportunistic and are a function of economic and interest
rate conditions. As a result, the Company believes that they evaluate
earnings before realized gains and losses, adjusted for tax to make
performance comparisons with the Company's industry peers. The Company
has included the second measure relating to diluted book value per
share as it believes that this is a valid method of assessing
shareholder return.

                     AXIS CAPITAL HOLDINGS LIMITED

               NON-GAAP FINANCIAL MEASURE RECONCILIATION
    NET INCOME EXCLUDING REALIZED GAINS AND LOSSES ON INVESTMENTS,
                              NET OF TAX
      For the quarter and six months ended June 30, 2003 and 2002
  (Expressed in thousands of U.S. dollars, except per share amounts)

                       Quarters ended             Six months ended
                   June 30,      June 30,      June 30,      June 30,
                     2003          2002         2003           2002

Net income          117,754        30,007       224,872        61,724

Adjustment for
 net realized
 gains on
 investments        (15,705)       (8,690)      (26,903)       (9,463)

Adjustment for
 associated tax
 impact of net
 realized gains on
 investments            325             -           403             -

Net income excluding
 realized gains
 on investments,------------ ------------- ------------- -------------
 net of tax    $    102,374  $     21,317  $    198,372  $     52,261
               ============= ============= ============= =============

Net income per
 share -
 diluted       $       0.81  $       0.22  $       1.55  $       0.46
               ============= ============= ============= =============
Adjustment for
 net realized
 gains on             (0.11)        (0.06)        (0.19)        (0.07)
 investments

Adjustment for
 associated tax
 impact of net
 realized gains on
 investments              -             -             -             -

Net income excluding
 realized gains on
 investments,
 net of tax
 per diluted   ------------- ------------- ------------- -------------
 share         $       0.70  $       0.16          1.36  $       0.39
               ============= ============= ============= =============
Weighted
 average common
 shares and
 common share
 equivalents
 - diluted      145,701,443   135,311,032   145,045,136   135,288,513
               ============= ============= ============= =============
                     AXIS CAPITAL HOLDINGS LIMITED

               NON-GAAP FINANCIAL MEASURE RECONCILIATION
                     DILUTED BOOK VALUE PER SHARE
               As at June 30, 2003 and December 31, 2002
               (Expressed in thousands of U.S. dollars,
                  except share and per share amounts)

                                              June 30,    December 31,
                                                2003           2002

Shareholders' equity                          2,212,555     1,961,033

Shares outstanding                          138,925,528   138,168,520
                                           ------------- -------------
Book value per share                       $      15.93  $      14.19
                                           ============= =============

Diluted book value on an "as if converted
 basis"

Shareholders' equity                          2,212,555     1,961,033
add in:
  proceeds on exercise of options                61,331        58,323
  proceeds on exercise of warrants              244,784       243,166

                                           ------------- -------------
Adjusted shareholders' equity                 2,518,670     2,262,522
                                           ------------- -------------

As if converted diluted shares
 outstanding
Shares outstanding                          138,925,528   138,168,520
add in:
  exercise of options                         4,667,512     4,475,512
  exercise of warrants                       19,582,720    19,453,304

                                           ------------- -------------
Diluted shares outstanding                  163,175,760   162,097,336
                                           ------------- -------------
                                           ------------- -------------
Diluted book value per share               $      15.44  $      13.96
                                           ============= =============

    CONTACT: Investor Contacts:
             AXIS Capital Holdings Limited

             Andrew Cook / Linda Ventresca
             441-297-9513
             info@axiscapital.com
              or
             Media Contacts:
             Kekst and Company
             Laura LeClair / Caroline Gentile
             212-521-4859

    SOURCE: AXIS Capital Holdings Limited