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AXIS Capital Reports Record First Quarter Net Income of $228 Million

Earnings Per Share of $1.37 and Annualized Return on Average Common Equity of 22.6%

Company Release - 4/30/2007 4:30 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--

AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported net income available to common shareholders of $228 million, or $1.37 per diluted common share for the quarter ended March 31, 2007, compared with net income of $195 million, or $1.19 per diluted common share, for the quarter ended March 31, 2006.

Operating income for the first quarter of 2007 was $227 million, or $1.37 per diluted share, compared with $205 million, or $1.25 per diluted common share, for the quarter ended March 31, 2006. This same item excluding foreign exchange gains, net of tax, for the first quarter of 2007 was $225 million, or $1.36 per diluted common share, compared with $196 million, or $1.20 per diluted common share, for the quarter ended March 31, 2006.

Operating income and operating income excluding foreign exchange gains, net of tax, are non-GAAP financial measures. Reconciliations of these measures to net income are presented at the end of this release.

Operating highlights for the first quarter of 2007 included the following:

    --  Gross premiums written increased by 12% to $1,303 million;

    --  Net premiums written increased by 15% to $1,139 million;

    --  Net premiums earned increased by 8% to $685 million;

    --  Combined ratio of 80.7% included net favorable prior period
        reserve development of 9.6 percentage points;

    --  Pre-tax net investment income increased by 34% to $125
        million;

    --  Annualized return on average common shareholders' equity was
        22.6%; and

    --  Diluted book value per common share increased by 27% from
        March 31, 2006, and by 5% from December 31, 2006, to $25.11.

Commenting on the first quarter 2007 financial results, John Charman, Chief Executive Officer and President of AXIS Capital, stated: "We are pleased to report that we have delivered an annualized return on average common equity of 22.6% for the quarter. In the quarter, we continued to aggressively reduce premium writings in areas where competition has been excessive but to grow appropriately when opportunities meet or exceed our underwriting profitability goals. Our execution strategy remains strong. We expect that our current underwriting portfolio will continue to generate healthy returns across the diverse product lines and geographies in which we have a presence. These returns, combined with our significant cash flow and investment earnings power, position us well to continue to produce meaningful book value growth in line with our excellent performance since inception."

Operating Results

Gross premiums written increased by 12%, or $138 million, and were derived 34% from our insurance segment and 66% from our reinsurance segment compared to 38% and 62%, respectively, for the first quarter of 2006.

The increase was driven by additional property and liability business written in our reinsurance segment. Approximately one-third of the increase was due to the favorable impact of exchange rate movements. Our combined ratio of 80.7% was comparable with 79.5% for the first quarter of 2006. We experienced favorable prior period reserve development from short tail lines of business of 9.6 percentage points in both quarters.

Insurance Segment

Our insurance segment reported gross premiums written of $436 million and net premiums written of $282 million, respectively, compared to $437 million and $275 million in the first quarter of 2006. Lines of business addressed in our insurance segment were generally characterized by pricing deterioration associated with normal market competition. This led to a reduction in our casualty premium. We also continued our withdrawal from the aviation and terrorism markets. This was offset by growth in our property account driven by an improvement in pricing of catastrophe-exposed business relative to the first quarter of 2006 when we declined business that was inadequately priced. We also wrote additional political risk business this quarter.

Our insurance segment reported a combined ratio of 81.5% compared to 70.2% for the first quarter of 2006. The increase was primarily due to a lower level of favorable reserve development, which was 9.1 percentage points in the current quarter compared to 20.4 percentage points in the first quarter of 2006. Favorable development in both periods continues to be related to short-tail lines only.

Reinsurance Segment

Our reinsurance segment reported an increase in gross premiums written of $138 million, or 19%, driven by our continued penetration of targeted business in the U.S and European reinsurance markets. Approximately one-third of the increase was due to the favorable impact of exchange rate movements.

Our reinsurance segment reported a combined ratio of 76.8% compared to 85.3% for the first quarter of 2006. This was primarily due to favorable prior period reserve development of 10.1 percentage points compared to adverse development of 1.6 percentage points in the first quarter of 2006. Our current pre-tax loss estimate from Windstorm Kyrill of $29 million included in our reinsurance segment results for the quarter is within our annual expectations for catastrophe losses.

Investments

Pre-tax net investment income increased 34% from the first quarter of 2006 to $125 million. Reflecting the impact of higher investment balances and average investment yields, net investment income from cash and fixed maturity investments increased 25% to $100 million, while net investment income from our alternative investment portfolio increased 89% to $25 million. We experienced $0.3 million of net realized gains, compared to net realized losses of $11 million in the first three months of 2006.

Interest Expense

Our interest expense for the quarter was $15 million compared to $8 million in the first quarter of 2006. The increase was primarily due to interest costs incurred on the $400 million repurchase agreement we entered into in December 2006 to fund our investment in a life settlement contracts portfolio.

Capitalization / Shareholders' Equity

Total capitalization at March 31, 2007 was $5.1 billion, including $0.5 billion of long-term debt and $0.5 billion of preferred equity, compared to $4.9 billion at December 31, 2006.

At March 31, 2007, diluted book value per common share was $25.11 and book value per common share was $27.54, compared to $24.02 and $26.09 respectively, at December 31, 2006. The diluted book value per common share was calculated using the "if-converted" method which is a non-GAAP financial measure. A reconciliation of this measure to book value per share is presented at the end of this release.

Conference Call

We will host a conference call on Tuesday May 1st, 2007 at 8:00 AM (Eastern) to discuss the first quarter financial results and related matters. The teleconference can be accessed by dialing (800) 659-1966 (U.S. callers) or (617) 614-2711 (international callers) and entering the pass code 33693955 approximately ten minutes in advance of the call. A live, listen-only webcast of the call will be available via the Investor Information section of our website at www.axiscapital.com.

In addition, a financial supplement relating to our financial results for the quarter ended March 31, 2007 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 at March 31, 2007 of $4.6 billion and locations in Bermuda, the United States, Europe and Singapore. 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. AXIS Capital has been assigned a senior unsecured debt rating of Baa1 (stable) by Moody's Investors Service and BBB+ (stable) by Standard & Poor's. For more information about AXIS Capital, visit our website at www.axiscapital.com.

                    AXIS CAPITAL HOLDINGS LIMITED
                     CONSOLIDATED BALANCE SHEETS
           MARCH 31, 2007 (UNAUDITED) AND DECEMBER 31, 2006

                                                 2007         2006
                                             ------------ ------------
Assets                                            (in thousands)
Investments:
   Fixed maturity investments available for
    sale, at fair value                      $ 6,805,333  $ 6,532,723
   Other investments, at fair value            1,094,828    1,130,664
                                             ------------ ------------
         Total investments                     7,900,161    7,663,387
Cash and cash equivalents                      2,090,834    1,989,287
Accrued interest receivable                       68,056       76,967
Insurance and reinsurance premium balances
 receivable                                    1,507,855    1,125,822
Reinsurance recoverable balances               1,307,609    1,293,660
Reinsurance recoverable balances on paid
 losses                                           94,284       65,494
Deferred acquisition costs                       345,904      251,799
Prepaid reinsurance premiums                     238,359      241,821
Securities lending collateral                    895,832      794,149
Goodwill and intangible assets                    28,786       29,041
Other assets                                     134,757      133,860
                                             ------------ ------------
 Total assets                                $14,612,437  $13,665,287
                                             ============ ============

Liabilities
Reserve for losses and loss expenses         $ 5,186,191  $ 5,015,113
Unearned premiums                              2,466,213    2,015,556
Insurance and reinsurance balances payable       286,068      294,374
Securities lending payable                       893,692      791,744
Liability under repurchase agreement             400,000      400,000
Senior notes                                     499,180      499,144
Net payable for investments purchased             92,608       62,185
Other liabilities                                146,738      174,524
                                             ------------ ------------
 Total liabilities                           $ 9,970,690  $ 9,252,640
                                             ------------ ------------

Shareholders' Equity
Preferred shares - Series A and B            $   500,000  $   500,000
Common shares                                      1,880        1,875
Additional paid-in capital                     1,936,518    1,929,406
Accumulated other comprehensive loss             (22,125)     (44,638)
Retained earnings                              2,225,474    2,026,004
                                             ------------ ------------
 Total shareholders' equity                    4,641,747    4,412,647
                                             ------------ ------------
 Total liabilities and shareholders' equity  $14,612,437  $13,665,287
                                             ============ ============
                    AXIS CAPITAL HOLDINGS LIMITED
          CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
              THREE MONTHS ENDED MARCH 31, 2007 and 2006


                                                     2007      2006
                                                   --------- ---------
                                                     (in thousands,
                                                          except
                                                   per share amounts)
Revenues
 Net premiums earned                               $685,304  $633,594
 Net investment income                              125,280    93,568
 Net realized investment gains (losses)                 301   (10,929)
 Other insurance related income                       1,940       624
                                                   --------- ---------
    Total revenues                                  812,825   716,857
                                                   --------- ---------

Expenses
 Net losses and loss expenses                       392,797   358,658
 Acquisition costs                                   98,139    89,704
 General and administrative expenses                 62,606    55,411
 Foreign exchange gains                              (2,391)   (9,264)
 Interest expense and financing costs                15,144     8,085
                                                   --------- ---------
    Total expenses                                  566,295   502,594
                                                   --------- ---------

Income before income taxes                          246,530   214,263
 Income tax expense                                   9,747     9,447
                                                   --------- ---------
Net income                                          236,783   204,816
   Preferred share dividends                         (9,204)   (9,631)
                                                   --------- ---------

Net income available to common shareholders
                                                   $227,579  $195,185
                                                   ========= =========



Weighted average common shares and
common share equivalents:
Basic                                               150,433   149,314
                                                   ========= =========
Diluted                                             166,035   163,555
                                                   ========= =========



Earnings per common share:

Basic                                              $   1.51  $   1.31
                                                   ========= =========

Diluted                                            $   1.37  $   1.19
                                                   ========= =========
                    AXIS CAPITAL HOLDINGS LIMITED
                CONSOLIDATED SEGMENT DATA (UNAUDITED)
                  THREE MONTHS ENDED MARCH 31, 2007


                                    Insurance  Reinsurance    Total
                                    ---------- ----------- -----------
                                              (in thousands)
Gross premiums written              $ 436,488   $ 866,134  $1,302,622
Net premiums written                  282,046     857,311   1,139,357
Net premiums earned                   314,932     370,372     685,304
Other insurance related income            767       1,173       1,940
Net losses and loss expenses         (185,952)   (206,845)   (392,797)
Acquisition costs                     (35,348)    (62,791)    (98,139)
General and administrative expenses   (35,523)    (14,743)    (50,266)
                                    ---------- ----------- -----------
Underwriting income                 $  58,876   $  87,166     146,042
                                    ========== ===========

Corporate expenses                                            (12,340)
Net investment income                                         125,280
Net realized investment gains                                     301
Foreign exchange gains                                          2,391
Interest expense                                              (15,144)
                                                           -----------
Income before income taxes                                 $  246,530
                                                           ===========

Net loss and loss expense ratio          59.0%       55.8%       57.3%
Acquisition cost ratio                   11.2%       17.0%       14.3%
General and administrative expense
 ratio                                   11.3%        4.0%        9.1%
                                    ---------- ----------- -----------
Combined ratio                           81.5%       76.8%       80.7%
                                    ========== =========== ===========
                    AXIS CAPITAL HOLDINGS LIMITED
                CONSOLIDATED SEGMENT DATA (UNAUDITED)
                  THREE MONTHS ENDED MARCH 31, 2006

                                    Insurance  Reinsurance    Total
                                    ---------- ----------- -----------
                                              (in thousands)
Gross premiums written              $ 437,050   $ 727,690  $1,164,740
Net premiums written                  275,150     717,178     992,328
Net premiums earned                   322,713     310,881     633,594
Other insurance related income            624           -         624
Net losses and loss expenses         (156,170)   (202,488)   (358,658)
Acquisition costs                     (37,456)    (52,248)    (89,704)
General and administrative expenses   (33,055)    (10,714)    (43,769)
                                    ---------- ----------- -----------
Underwriting income                 $  96,656   $  45,431     142,087
                                    ========== ===========

Corporate expenses                                            (11,642)
Net investment income                                          93,568
Net realized investment losses                                (10,929)
Foreign exchange gains                                          9,264
Interest expense                                               (8,085)
                                                           -----------
Income before income taxes                                 $  214,263
                                                           ===========

Net loss and loss expense ratio          48.4%       65.1%       56.6%
Acquisition cost ratio                   11.6%       16.8%       14.2%
General and administrative expense
 ratio                                   10.2%        3.4%        8.7%
                                    ---------- ----------- -----------
Combined ratio                           70.2%       85.3%       79.5%
                                    ========== =========== ===========

Cautionary Note Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements contained in this release include our expectations regarding market conditions and information regarding our estimates of losses related to natural disasters. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause actual events or results to be materially different from our expectations include (1) our limited operating history, (2) the occurrence of natural and man-made disasters, (3) actual claims exceeding our loss reserves, (4) the failure of any of the loss limitation methods we employ, (5) the 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 rating agencies, (9) the loss of business provided to us by our major brokers, (10) changes in governmental regulations, (11) increased competition, (12) general economic conditions and (13) the other factors set forth in our most recent report on Form 10-K, Form 10-Q and other documents on file with the Securities and Exchange Commission. We undertake 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, we have presented "operating income" which represents net income available to common shareholders, before the after tax impact of net realized gains and losses on investments, "operating income, excluding the after tax impact of foreign exchange gains/losses" and "diluted book value per common share," which are non-GAAP financial measures. We have included the first and second measures as we believe that security analysts, rating agencies and investors believe that realized gains and losses and foreign exchange, where an actively managed foreign exchange program is not in place, are largely opportunistic and are a function of economic and interest rate conditions. As a result, we believe that they evaluate earnings before realized gains and losses and foreign exchange, adjusted for tax, to make performance comparisons with our industry peers. We have included the third measure because it takes into account the effect of dilutive securities and, therefore, we believe that this is a better measure of calculating shareholder returns than book value per share.

                    AXIS CAPITAL HOLDINGS LIMITED
              NON-GAAP FINANCIAL MEASURE RECONCILIATION
           OPERATING INCOME AND OPERATING INCOME EXCLUDING
            FOREIGN EXCHANGE GAINS AND LOSSES, NET OF TAX
              THREE MONTHS ENDED MARCH 31, 2007 and 2006
              ( in thousands, except per share amounts)


                                                     2007      2006
                                                   --------- ---------

Net income available to common shareholders        $227,579  $195,185

Adjustment for net realized investment (gains)
 losses                                                (301)   10,929
Adjustment for associated tax impact                   (139)     (943)
                                                   --------- ---------
Operating income                                    227,139   205,171

Adjustment for foreign exchange gains                (2,391)   (9,264)
Adjustment for associated tax impact                    166       293
Operating income excluding foreign exchange gains,
 net of tax                                        --------- ---------
                                                   $224,914  $196,200
                                                   ========= =========

Net income per share - diluted                     $   1.37  $   1.19
Adjustment for net realized investment (gains)
 losses                                                   -      0.07
Adjustment for associated tax impact                      -     (0.01)
                                                   --------- ---------
Operating income per share - diluted               $   1.37  $   1.25

Adjustment for foreign exchange gains                 (0.01)    (0.06)
Adjustment for associated tax impact                      -      0.01

                                                   --------- ---------
Operating income excluding foreign exchange gains,
 net of tax                                        $   1.36  $   1.20
                                                   ========= =========

Weighted average common shares and common share
 equivalents - diluted                              166,035   163,555
                                                   ========= =========
                    AXIS CAPITAL HOLDINGS LIMITED
              NON-GAAP FINANCIAL MEASURE RECONCILIATION
                     DILUTED BOOK VALUE PER SHARE
                 MARCH 31, 2007 AND DECEMBER 31, 2006
          (in thousands, except share and per share amounts)

                                                  2007        2006
                                               ----------- -----------

Common shareholders' equity                    $4,141,747  $3,912,647
                                               ----------- -----------

Common shares outstanding                         150,417     149,982
                                               ----------- -----------

Book value per common share                    $    27.54  $    26.09
                                               =========== ===========

Diluted book value on an "if converted" basis

Common shareholders' equity                    $4,141,747  $3,912,647
add in:
 proceeds on exercise of options                   94,835      96,485
 proceeds on exercise of warrants                 244,363     244,363

                                               ----------- -----------
Adjusted shareholders' equity                  $4,480,945  $4,253,495
                                               =========== ===========

As if converted diluted shares outstanding
Common shares outstanding                         150,417     149,982
add in:
 vested phantom stock units                            55          46
 vesting of restricted stock                        3,273       2,229
 exercise of options                                5,058       5,147
 exercise of warrants                              19,652      19,644

                                               ----------- -----------
Diluted common shares outstanding                 178,455     177,048
                                               ----------- -----------

Diluted book value per common share            $    25.11  $    24.02
                                               =========== ===========

Source: AXIS Capital Holdings Limited

Contact: Investor: AXIS Capital Holdings Limited Linda Ventresca, 441-405-2727 info@axiscapital.com or Media: Kekst and Company Joseph Kuo, 212-521-4800