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Press Release

AXIS Capital's Net Income Doubles to $532.3 Million for 2003

Company Release - 2/11/2004 5:02 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--Feb. 11, 2004--AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported a 100% increase in net income for the year ended December 31, 2003 of $532.3 million, or $3.42 per diluted share, compared to $265.1 million, or $1.91 per diluted share, for the year ended December 31, 2002, an increase of $267.2 million, or $1.51 per diluted share.

Net income for the quarter ended December 31, 2003 rose 44.2% to $160.5 million, or $0.97 per diluted share, from $111.3 million, or $0.80 per diluted share, for the fourth quarter ended December 31, 2002.

Net income excluding net realized gains and losses on investments, net of tax for the year ended December 31, 2003 was $509.2 million, or $3.28 per diluted share, compared with $239.2 million, or $1.72 per diluted share, for the year ended December 31, 2002.

Net income excluding net realized gains and losses on investments, net of tax for the fourth quarter of 2003 was $158.4 million, or $0.96 per diluted share, compared with $101.6 million, or $0.73 per diluted share, for the quarter ended December 31, 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 was in excess of $2.8 billion at December 31, 2003. This includes the net proceeds of $316.0 million received from the Company's initial public offering completed in July 2003. Diluted book value per share at December 31, 2003 was $17.48, compared to $13.96 at December 31, 2002. Diluted book value per share is a non-GAAP financial measure. A reconciliation of this measure to book value per share is presented at the end of this release.

John Charman, President and CEO, commented: "During 2003, we have generated over a 100% increase in our gross written premiums, $1.3 billion of operating cash flow as well as a 100% increase in net income. Our return on equity was in excess of 22%. Against every measure of financial performance we have clearly demonstrated the continuing, outstanding daily achievements of AXIS since our inception. We have been and will continue to be dedicated in our pursuit of creating real, significant and strategic long-term value for our shareholders."

Gross premiums written for the year ended December 31, 2003 were $2,273.6 million compared to $1,108.0 million for the year ended December 31, 2002. Of these premiums written: $980.7 million were derived from global insurance compared to $793.8 million in the prior year; $462.9 million from global reinsurance compared to $314.2 million in the prior year; $625.9 million from U.S. insurance; and $204.1 million from U.S. reinsurance. Included within our global segments for 2002 was some business that is now included within our U.S. segments. Our U.S. segments, which were fully operational by the end of the first quarter of 2003, have no comparatives for the period in 2002. For the year ended December 31, 2003 compared to the year ended December 31, 2002, net premiums written rose to $1,908.4 million from $1,018.3 million and net premiums earned increased to $1,436.2 million from $536.9 million.

For the year ended December 31, 2003, net investment income was $74.0 million and realized gains were $22.6 million, compared with $71.3 million in net investment income and $26.1 million in realized gains for the year ended December 31, 2002. Cash flow generated from operations was $1.3 billion compared with $660.6 million for the year ended December 31, 2003.

For the year ended December 31, 2003, the Company generated a combined ratio of 73.7%, a loss ratio of 51.1% and an expense ratio of 22.6% compared to 70.7%, 42.7% and 28.0%, respectively, for the year ended December 31, 2002. Over the past two years, our loss ratios have benefited from limited loss activity. In 2003, our expense ratio improved as our earned premium base accelerated.

Gross premiums written for the fourth quarter of 2003 were $479.7 million compared to $329.3 million for the fourth quarter 2002. Of these premiums written: $280.1 million were derived from global insurance compared to $309.9 million in the corresponding quarter of 2002; $16.7 million from global reinsurance compared to $19.4 million in the corresponding quarter of 2002; $174.8 million from U.S. insurance; and $8.1 million from U.S. reinsurance. Included within our global segments for 2002 was some business that is now included within our U.S. segments. Our U.S. segments, which were fully operational by the end of the first quarter of 2003, have no comparatives for the period in 2002. For the quarter ended December 31, 2003 compared to the quarter ended December 31, 2002, net premiums written rose to $384.0 million from $323.7 million and net premiums earned increased to $400.7 million from $219.1 million.

For the quarter ended December 31, 2003, net investment income was $27.4 million and realized gains were $1.4 million, compared with $16.0 million in net investment income and $9.7 million in realized gains for the quarter ended December 31, 2002.

For the fourth quarter of 2003, the Company generated a combined ratio of 72.1%, a loss ratio of 51.9% and an expense ratio of 20.2% compared to 64.6%, 36.8% and 27.8%, respectively, for the fourth quarter of 2002. The Company's loss ratios have benefited from relatively benign catastrophic loss activity. In 2003, our expense ratio improved as our earned premium base accelerated.

AXIS Capital will host a conference call on Thursday, February 12, 2004 at 8:30 AM (Eastern) to discuss the fourth quarter and year end 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 fourth 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 of approximately $2.8 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.


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

                                             December 31, December 31,
                                                  2003         2002
Assets
Cash and cash equivalents                    $   605,175  $   729,296
Investments at fair market value               3,385,576    1,702,990
   (Amortized cost 2003:$3,359,102;
    2002:$1,677,506)
Accrued interest receivable                       29,530       16,502
Net receivable for investments sold                3,371            -
Insurance and reinsurance premium balances
 receivable                                      660,530      327,615
Deferred acquisition costs                       136,281       77,166
Prepaid reinsurance premiums                     164,999       49,673
Reinsurance recoverable                          124,899        1,703
Intangible assets                                 24,579       14,079
Other assets                                      37,333       19,204
                                             ------------ ------------
          Total Assets                       $ 5,172,273  $ 2,938,228
                                             ============ ============

Liabilities
Reserve for losses and loss expenses         $   992,846  $   215,934
Unearned premiums                              1,143,447      555,962
Insurance and reinsurance balances payable       151,381       94,803
Accounts payable and accrued expenses             67,451       24,119
Net payable for investments purchased                  -       86,377
                                             ------------ ------------
           Total Liabilities                   2,355,125      977,195
                                             ------------ ------------

Shareholders' Equity
Share capital
  (Authorized 800,000,000 common shares,
   par value $0.0125; issued and
   outstanding 2003;152,474,011:
   2002; 138,168,520)                              1,906        1,727
Additional paid-in-capital                     2,000,731    1,686,599
Deferred compensation                                  -      (20,576)
Accumulated other comprehensive income            25,164       25,484
Retained earnings                                789,347      267,799
                                             ------------ ------------
           Total Shareholders' Equity          2,817,148    1,961,033
                                             ------------ ------------

           Total Liabilities & Shareholders'
             Equity                          $ 5,172,273  $ 2,938,228
                                             ============ ============
                                                       -
Book value per share                         $     18.48  $     14.19
                                             ============ ============
Diluted book value per share                 $     17.48  $     13.96
                                             ============ ============
                     AXIS CAPITAL HOLDINGS LIMITED
                 CONSOLIDATED STATEMENTS OF OPERATIONS
      For the quarters and years ended December 31, 2003 and 2002
               (Expressed in thousands of U.S. dollars,
                  except share and per share amounts)

                 Quarters ended December 31, Years ended December 31,
                        2003         2002         2003         2002
Revenues
 Gross premiums
  written          $   479,666  $   329,343  $ 2,273,645  $ 1,108,003
 Premiums ceded        (95,622)      (5,626)    (365,258)     (89,726)
 Change in unearned
  premiums              16,700     (104,643)    (472,157)    (481,427)
                --------------- ------------ ------------ ------------
 Net premiums
  earned               400,744      219,074    1,436,230      536,850

 Net investment
  income                27,363       15,974       73,961       71,287
 Net realized gains      1,378        9,738       22,567       26,070
 Other insurance
  related income         5,263         (639)      25,019         (639)
                --------------- ------------ ------------ ------------
  Total revenues       434,748      244,147    1,557,777      633,568
                --------------- ------------ ------------ ------------

Expenses
 Net losses and
  loss expenses        207,884       80,637      734,019      229,265
 Acquisition costs      54,963       43,778      229,712      103,703
 General and
  administrative
  expenses              26,118       17,194       94,589       46,521
 Foreign exchange
  gains                (12,899)      (7,014)     (32,215)      (9,610)
                --------------- ------------ ------------ ------------
  Total expenses       276,066      134,595    1,026,105      369,879
                --------------- ------------ ------------ ------------

Income before
 income taxes          158,682      109,552      531,672      263,689
 Income tax
  recovery              (1,813)      (1,719)        (678)      (1,430)
                --------------- ------------ ------------ ------------
Net Income         $   160,495  $   111,271  $   532,350  $   265,119
                =============== ============ ============ ============

Weighted average common
 shares and common share
 equivalents -
 basic             152,464,156  135,975,617  144,262,881  135,442,240
                =============== ============ ============ ============

Weighted average common
 shares and common share
  equivalents -
  diluted          166,213,948  139,796,025  155,690,763  138,480,623
                =============== ============ ============ ============

Net income per
 share - basic    $       1.05  $      0.82  $      3.69  $      1.96
                =============== ============ ============ ============

Net income per
 share - diluted  $       0.97  $      0.80  $      3.42  $      1.91
                =============== ============ ============ ============

Insurance Ratios
Loss ratio                51.9%        36.8%        51.1%        42.7%
Expense ratio             20.2%        27.8%        22.6%        28.0%
                --------------- ------------ ------------ ------------
Combined ratio            72.1%        64.6%        73.7%        70.7%
                =============== ============ ============ ============

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.

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 because it takes into account the effect of dilutive securities and, therefore, the Company believes that this is a better measure of calculating shareholder returns than book value per share.


                     AXIS CAPITAL HOLDINGS LIMITED
               NON-GAAP FINANCIAL MEASURE RECONCILIATION
    NET INCOME EXCLUDING REALIZED GAINS AND LOSSES ON INVESTMENTS,
                              NET OF TAX
      For the quarters and years ended December 31, 2003 and 2002
  (Expressed in thousands of U.S. dollars, except per share amounts)

                          Quarters ended             Years ended
                           December 31,              December 31,
                        2003         2002         2003         2002

Net income           $ 160,495    $ 111,271    $ 532,350    $ 265,119

Adjustment for net
 realized gains on
 investments            (1,378)      (9,738)     (22,567)     (26,070)
Adjustment for associated
 tax impact of net realized
 gains on investments     (669)          36         (616)         102

Net income excluding
 realized gains on
 investments,      ------------ ------------ ------------ ------------
 net of tax           $ 158,448   $ 101,569    $ 509,167    $ 239,151
                   ============ ============ ============ ============

Net income per
 share - diluted      $    0.97   $    0.80    $    3.42    $    1.91
                   ============ ============ ============ ============

Adjustment for net
 realized gains on
 investments             (0.01)       (0.07)       (0.14)       (0.19)
Adjustment for
 associated tax
 impact of net
 realized gains on
 investments             (0.00)        0.00        (0.00)        0.00

Net income excluding
 realized gains on
 investments, net of
 tax per diluted   ------------ ------------ ------------ ------------
 share               $    0.96    $    0.73    $    3.28    $    1.72
                   ============ ============ ============ ============



Weighted average common
 shares and common
 share equivalents
 - diluted         166,213,948  138,480,623  155,690,762  139,796,025
                   ============ ============ ============ ============

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

                                           December 31,   December 31,
                                                2003          2002

Shareholders' equity                       $  2,817,148   $ 1,961,033

Shares outstanding                          152,474,011   138,168,520

                                           -------------  ------------
Book value per share                       $      18.48   $     14.19
                                           =============  ============

Diluted book value on an "as if
 converted basis"

Shareholders' equity                       $  2,817,148   $ 1,961,033
add in:
 proceeds on exercise of options                 62,630        58,323
 proceeds on exercise of warrants               244,811       243,166
                                           -------------  ------------
Adjusted shareholders' equity              $  3,124,589   $ 2,262,522
                                           -------------  ------------

As if converted diluted shares outstanding
Shares outstanding                          152,474,011   138,168,520
add in:
 vesting of restricted stock                  1,884,696             -
 exercise of options                          4,695,512     4,475,512
 exercise of warrants                        19,690,692    19,453,304
                                           -------------  ------------
Diluted shares outstanding                  178,744,911   162,097,336
                                           -------------  ------------
                                           -------------  ------------
Diluted book value per share               $      17.48   $     13.96
                                           =============  ============

In the fourth quarter of 2003, the Company adopted, prospectively, the fair value recognition provisions of SFAS 123 "Accounting for Stock-Based Compensation", for all stock-based employee compensation granted, modified or settled after January 1, 2003.

In addition, with respect to unvested restricted stock awards, the amount of deferred compensation is eliminated from share capital and additional paid-in-capital. This charge impacts the calculation of "Book value per share" but has no impact on the calculation of "Diluted book value per share".


    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 Accettella/Caroline Gentile
             (212) 521-4859

    SOURCE: AXIS Capital Holdings Limited