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Press Release

AXIS Capital Reports Net Income of $166.8 Million for First Quarter 2004

Company Release - 5/3/2004 5:05 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--May 3, 2004--AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported a 56% increase in net income for the quarter ended March 31, 2004 to $166.8 million, or $1.00 per diluted share, from $107.1 million, or $0.75 per diluted share, for the quarter ended March 31, 2003. This was generated by increased underwriting profits and investment income. Annualized return on shareholders' equity was 22.9% for the quarter ended March 31, 2004 compared to 21.2% for the quarter ended March 31, 2003.

Net income excluding net realized gains and losses on investments, net of tax, for the quarter ended March 31, 2004 was $157.6 million, or $0.94 per diluted share, compared with $96.0 million, or $0.67 per diluted share, for the quarter ended March 31, 2003. 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.

John Charman, President and CEO, commented: "This first quarter of 2004 saw all four of our underwriting segments fully operational for the first time. Our diversified, global AXIS franchise was able to participate strongly in the important renewal season and all segments reported substantial growth ranging from 23% to 170%. This geographic and product diversified group of specialty businesses, trading daily as a highly efficient and focused, integrated underwriting machine, has generated an annualized return on average equity of 22.9%." Mr. Charman continued, "Our diversity of operations, our strong balance sheet, our highly skilled and well regarded underwriting professionals continue to attract quality business and drive long-term real value for our shareholders."

Gross premiums written for the quarter ended March 31, 2004 were $1,044.1 million compared to $608.6 million for the quarter ended March 31, 2003, an increase of 72%. Of these premiums written: $300.4 million were derived from global insurance compared to $243.6 million in the corresponding quarter of 2003, an increase of 23%; $429.1 million from global reinsurance compared to $211.5 million in the corresponding quarter of 2003, an increase of 103%; $148.3 million from U.S. insurance compared to $91.9 million in the corresponding quarter of 2003, an increase of 61%; and $166.3 million from U.S. reinsurance compared to $61.6 million the corresponding quarter of 2003, an increase of 170%. The increase in our global reinsurance gross premiums written was largely driven by our strategic expansion into continental Europe. The increase in our U.S. insurance and reinsurance gross premiums written was largely driven by greater market penetration and our ability to participate fully in the first quarter's important renewal season.

For the quarter ended March 31, 2004 compared to the quarter ended March 31, 2003, ceded premiums increased to $144.9 million from $68.4 million and our net premiums written rose to $899.2 million from $540.1 million. Net premiums earned increased to $471.2 million from $302.4 million. The increase reflects the increase in our gross premiums written over the last twelve months.

For the quarter ended March 31, 2004, net investment income was $31.3 million and realized gains were $10.1 million, compared with $11.4 million in net investment income and $11.2 million in realized gains for the quarter ended March 31, 2003. The increase in net investment income was due to increased invested assets on which we obtained improved investment yields. Cash flow generated from operations was $365.5 million compared with $264.4 million for the quarter ended March 31, 2004.

For the quarter ended March 31, 2004, the Company generated a combined ratio of 72.5%, a loss ratio of 51.5% and an expense ratio of 21.0% compared to 73.1%, 48.4% and 24.7%, respectively, for the quarter ended March 31, 2003. In both of these quarters, there was limited catastrophic loss activity. In addition, our loss ratios benefited by 10.3 percentage points and 3.4 percentage points, respectively, as a result of favorable prior period loss reserve development. Our expense ratio continues to improve as our earned premium base increases.

Our shareholders' equity increased to $3.0 billion at March 31, 2004. Diluted book value per share at March 31, 2004 was $18.54, compared to $17.48 at December 31, 2003. 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.

AXIS Capital will host a conference call on Tuesday, May 4, 2004 at 8:30 AM (Eastern) to discuss the first quarter financial results and related matters. 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 first 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 $3.0 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

                 UNAUDITED CONSOLIDATED BALANCE SHEETS
              As at March 31, 2004 and December 31, 2003
  (Expressed in thousands of U.S. dollars, except share and per share
                               amounts)

                                               March 31,    December
                                                   2004      31, 2003
Assets
Cash and cash equivalents                      $  802,129  $  605,175
Investments at fair market value                3,692,455   3,385,576
(Amortized cost 2004:
  $3,633,957; 2003:$3,359,102)
Other investments                                   9,332           -
Accrued interest receivable                        30,564      29,530
Net receivable for investments sold                     -       3,371
Securities lending collateral                     505,186           -
Insurance and reinsurance premium balances
 receivable                                     1,019,195     660,530
Deferred acquisition costs                        219,113     136,281
Prepaid reinsurance premiums                      213,994     164,999
Reinsurance recoverable                           190,917     124,899
Intangible assets                                  24,204      24,579
Other assets                                       39,899      37,333
                                                ----------  ----------
       Total Assets                            $6,746,988  $5,172,273
                                                ==========  ==========

Liabilities
Reserve for losses and loss expenses           $1,261,094  $  992,846
Unearned premiums                               1,620,384   1,143,447
Insurance and reinsurance balances payable        193,252     151,381
Accounts payable and accrued expenses              39,456      67,451
Securities lending payable                        504,730           -
Net payable for investments purchased             121,509           -
                                                ----------  ----------
       Total Liabilities                        3,740,425   2,355,125
                                                ----------  ----------

Shareholders' Equity
Share capital
  (Authorized 800,000,000 common shares,
    par value $0.0125; issued and
     outstanding 2004; 152,480,904:
      2003; 152,474,011)                            1,906       1,906
Additional paid-in capital                      2,005,425   2,000,731
Accumulated other comprehensive income,
 net of tax                                        53,906      25,164
Retained earnings                                 945,326     789,347
                                                ----------  ----------
       Total Shareholders' Equity               3,006,563   2,817,148
                                                ----------  ----------
       Total Liabilities & Shareholders'
        Equity                                  $6,746,988  $5,172,273
                                                ==========  ==========


                     AXIS CAPITAL HOLDINGS LIMITED

                 UNAUDITED CONSOLIDATED STATEMENTS OF
                              OPERATIONS
            For the quarters ended March 31, 2004 and 2003
       (Expressed in thousands of U.S. dollars, except share and
                          per share amounts)

                                             Quarters ended March 31,
                                             2004               2003
                                                              (note 1)
Revenues
 Gross premiums written                       $1,044,123     $608,587
 Premiums ceded                                 (144,933)     (68,443)
 Change in unearned premiums                    (427,942)    (237,717)
                                             ------------ ------------
 Net premiums earned                             471,248      302,427

 Net investment income                            31,259       11,352
 Net realized gains                               10,097       11,198
 Other insurance related income                      288        1,106
                                             ------------ ------------
    Total revenues                               512,892      326,083
                                             ------------ ------------

Expenses
 Net losses and loss expenses                    242,600      146,335
 Acquisition costs                                56,963       44,251
 General and administrative expenses              41,888       30,362
 Foreign exchange                                  1,145       (1,887)
                                             ------------ ------------
    Total expenses                               342,596      219,061
                                             ------------ ------------

Income before income taxes                       170,296      107,022
 Income tax (expense) recovery                    (3,510)          97
                                             ------------ ------------
Net Income                                      $166,786     $107,119
                                             ============ ============

Weighted average common shares and
  common share equivalents - basic           152,480,904  136,381,025
                                             ============ ============

Weighted average common shares and
 common share equivalents - diluted          167,252,826  142,785,514
                                             ============ ============

Net income per share - basic                       $1.09        $0.79
                                             ============ ============

Net income per share - diluted                     $1.00        $0.75
                                             ============ ============

Insurance Ratios
Loss ratio                                          51.5%        48.4%
Expense ratio                                       21.0%        24.7%
                                             ------------ ------------
Combined ratio                                      72.5%        73.1%
                                             ============ ============

Note 1: Acquisition costs and general and administrative costs for 2003 have been reclassified to conform to current year classifications.

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) our limited operating history, (2) the occurrence of natural and man-made disasters, (3) actual claims exceeding our loss reserves, (4), failure of any of the loss limitation methods we employ, (5) effects of emerging claims and coverage issues, (6) the failure of our cedants to adequately evaluate risks, (7) the loss of one or more key executives (8) a decline in our ratings with Standard & Poor's and A.M. Best, (9) loss of business provided to us by our major brokers, (10) changes in governmental regulations, (11) increased competition and (12) general economic conditions. 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 ended March 31, 2004 and 2003
  (Expressed in thousands of U.S. dollars, except per share amounts)


                                             Quarters ended March 31,
                                              2004             2003

Net income                                  $ 166,786       $ 107,119

Adjustment for net realized gains on
      investments                             (10,097)        (11,198)
Adjustment for associated tax impact
    of net realized gains on investments          953              77

Net income excluding realized gains on      ---------       ----------
    investments, net of tax                 $ 157,642       $  95,998
                                            =========       ==========
Net income per share - diluted              $    1.00       $    0.75

Adjustment for net realized gains on            (0.06)          (0.08)
      investments
Adjustment for associated tax impact
    of net realized gains on investments         0.00            0.00

Net income excluding realized gains on
    investments, net of tax per diluted     ---------       ----------
    share                                   $    0.94       $    0.67
                                            =========       ==========

Weighted average common shares and
    common share equivalents - diluted    167,252,826     142,785,514
                                          ===========     ============


                     AXIS CAPITAL HOLDINGS LIMITED

               NON-GAAP FINANCIAL MEASURE RECONCILIATION
                     DILUTED BOOK VALUE PER SHARE
              As at March 31, 2004 and December 31, 2003
       (Expressed in thousands of U.S. dollars, except share and
                          per share amounts)

                                              March 31,   December 31,
                                                 2004         2003

Shareholders' equity                          $3,006,563   $2,817,148

Shares outstanding                           152,480,904  152,474,011

                                             ------------ ------------
Book value per share                              $19.72       $18.48
                                             ============ ============

Diluted book value on an "as if
 converted basis"

Shareholders' equity                          $3,006,563   $2,817,148
add in:
       proceeds on exercise of options            94,885       62,630
       proceeds on exercise of warrants          244,814      244,811

                                             ------------ ------------
Adjusted shareholders' equity                 $3,346,262   $3,124,589
                                             ------------ ------------

As if converted diluted shares
 outstanding Shares outstanding              152,480,904  152,474,011
add in:
       vesting of restricted stock             2,430,175    1,884,696
       exercise of options                     5,766,102    4,695,512
       exercise of warrants                   19,774,584   19,690,692

                                             ------------ ------------
Diluted shares outstanding                   180,451,765  178,744,911
                                             ------------ ------------

                                             ------------ ------------
Diluted book value per share                      $18.54       $17.48
                                             ============ ============

In the fourth quarter of 2004, 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, 2004.

As a result, 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: Investors:
             AXIS Capital Holdings Limited

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

    SOURCE: AXIS Capital Holdings Limited