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AXIS Capital Announces Record Third Quarter Net Income of $270 Million

Earnings Per Share of $1.65 and Annualized Return on Average Common Equity of 25.0%

Company Release - 10/29/2007 4:30 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--

AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported net income available to common shareholders for the quarter ended September 30, 2007 of $270 million, or $1.65 per diluted common share, compared with $226 million, or $1.37 per diluted common share, for the quarter ended September 30, 2006. Net income for the nine months ended September 30, 2007 was $749 million, or $4.53 per diluted share, compared with $645 million, or $3.94 per diluted share, for the corresponding period in 2006.

Operating income for the third quarter of 2007 was $271 million, or $1.66 per diluted share, compared with $228 million, or $1.38 per diluted common share, for the third quarter of 2006. This same item excluding foreign exchange gains, net of tax, for the third quarter of 2007 was $264 million, or $1.62 per diluted common share, compared with $231 million, or $1.40 per diluted common share, for the third quarter of 2006.

Operating income for the first nine months of 2007 was $754 million, or $4.55 per diluted share, compared with $666 million, or $4.07 per diluted common share, for the first nine months of 2006. This same item excluding foreign exchange gains, net of tax, for the first nine months of 2007 was $739 million, or $4.46 per diluted common share, compared with $641 million, or $3.92 per diluted common share, for the first nine months of 2006.

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

    --  Operating income increased 19% to $271 million.

    --  Gross premiums written increased 3% to $755 million.

    --  Net premiums earned of $686 million were stable.

    --  Combined ratio of 74.1% included net favorable reserve
        development of 12.0 percentage points.

    --  Pre-tax net investment income increased 20% to $119 million.

    --  Annualized return on average common shareholders' equity was
        25.0%.

    --  Diluted book value per common share increased by 22% from
        September 30, 2006, and by 15% from December 31, 2006, to
        $27.52.

    --  Shareholders' equity increased 12% from December 31, 2006 to
        $4.9 billion. Capital management initiatives during the first
        nine months of 2007 included $180 million of share
        repurchases.

Commenting on the third quarter 2007 results, John Charman, Chief Executive Officer and President of AXIS Capital, stated: "For our eighth quarter in a row, our quality underwriting portfolio, good investment earnings and overall favorable loss experience delivered record profitability. Our diluted book value per share has increased 15% from the start of the year and 22% over the last twelve months. We believe our global, diversified underwriting platform will continue to deliver market outperformance during 2008."

    SEGMENT HIGHLIGHTS

    Insurance Segment

Our insurance segment reported underwriting income for the quarter of $111 million, up $43 million, or 62%, from the third quarter of 2006. The segment's combined ratio was 63.3% compared with 79.0% in the prior year quarter. The decrease in the ratio was due to both a higher level of favorable prior period development and the recognition of low reported claim activity in our property lines this quarter. Net favorable development of 19.4 percentage points in the current quarter compared with 8.5 percentage points in the third quarter of 2006.

Our insurance segment reported gross premiums written in the quarter of $481 million, up 6% from the third quarter of 2006, and net premiums written of $316 million, down 2% from the third quarter of 2006. Despite an increasingly competitive marketplace in many of our lines, we were able to increase gross premiums written this quarter through the select expansion of our political risk and professional lines businesses. Growth in our professional lines business was associated with our acquisition in the last quarter of Media Pro. The reduction in net premiums written reflects an increase in premiums ceded. Cessions of 34% of gross premiums written in the quarter compared to cessions of 29% in the third quarter of 2006 and reflected expanded reinsurance coverage at attractive costs.

Reinsurance Segment

Our reinsurance segment reported underwriting income for the quarter of $88 million, down $19 million, or 18%, from the third quarter of 2006. The segment's combined ratio was 77.1% compared with 70.8% in the prior year quarter. The increase in the combined ratio was primarily due to an increase in the incidence of mid-sized natural catastrophe events in the quarter which included storms in Midwest U.S. and Canada and flooding damages in the U.K.

Our reinsurance segment reported gross premiums written in the quarter of $274 million, down 3% from the third quarter of 2006. This decrease was driven by reduced catastrophe business written in the quarter compared to the same period last year. In 2006, catastrophe capacity available at the beginning of 2006 was reallocated to mid-year renewals to take advantage of stronger mid-year pricing. The decrease in catastrophe premium in the quarter was partially offset by increased participations on renewals for professional lines and liability reinsurance business.

INVESTMENTS

Pre-tax net investment income increased $20 million, or 20%, to $119 million for the quarter. The increase principally reflects the impact of higher average investment balances and average investment yields, offset by a small reduction in net investment income from our alternative investment portfolio ("other investments"). In September, we sold our life settlement investment resulting in a reduction in our other investments and a corresponding reduction in our liability under repurchase agreement. We experienced net realized losses of $1 million in the three months ended September 30, 2007, compared to $2 million for the corresponding period of 2006.

CAPITALIZATION / SHAREHOLDERS' EQUITY

Total capitalization at September 30, 2007 was $5.4 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. During the quarter, we repurchased 2.2 million shares of common stock at an average price of $35.74 per share, for a total cost of $79.6 million. During the nine months ended September 30, 2007, we repurchased 4.9 million shares of common stock at an average price of $36.57 per share, for a total cost of $180 million. We have $220 million remaining under our current share repurchase authorization.

At September 30, 2007, diluted book value per common share was $27.52 and book value per common share was $30.50, compared to $24.02 and $26.09 respectively, as of December 31, 2006.

CONFERENCE CALL

We will host a conference call on Tuesday October 30, 2007 at 8:00 AM (Eastern) to discuss the third quarter financial results and related matters. The teleconference can be accessed by dialing (866) 510-0676 (U.S. callers) or (617) 597-5361 (international callers) and entering the pass code 19326384 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 September 30, 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 September 30, 2007 of $4.9 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
         SEPTEMBER 30, 2007 (UNAUDITED) AND DECEMBER 31, 2006

                                                   2007        2006
                                               ----------- -----------
Assets                                              (in thousands)
Investments:
   Fixed maturity investments available for
    sale, at fair value                        $ 7,814,855 $ 6,532,723
   Other investments, at fair value                612,429   1,130,664
                                               ----------- -----------
         Total investments                       8,427,284   7,663,387
Cash and cash equivalents                        1,830,852   1,989,287
Accrued interest receivable                         76,257      76,967
Insurance and reinsurance premium balances
 receivable                                      1,385,486   1,125,822
Reinsurance recoverable balances                 1,247,720   1,293,660
Reinsurance recoverable balances on paid
 losses                                             97,047      65,494
Deferred acquisition costs                         331,290     251,799
Prepaid reinsurance premiums                       246,027     241,821
Securities lending collateral                      861,280     794,149
Goodwill and intangible assets                      61,967      29,041
Other assets                                       146,694     133,860
                                               ----------- -----------
 Total assets                                  $14,711,904 $13,665,287
                                               =========== ===========

Liabilities
Reserve for losses and loss expenses           $ 5,531,379 $ 5,015,113
Unearned premiums                                2,433,339   2,015,556
Insurance and reinsurance balances payable         255,922     294,374
Securities lending payable                         858,546     791,744
Senior notes                                       499,234     499,144
Liability under repurchase agreement                     -     400,000
Net payable for investments purchased               49,023      62,185
Other liabilities                                  140,869     174,524
                                               ----------- -----------
 Total liabilities                               9,768,312 $ 9,252,640
                                               ----------- -----------

Shareholders' Equity
Preferred shares - Series A and B              $   500,000 $   500,000
Common shares                                        1,849       1,875
Additional paid-in capital                       1,859,067   1,929,406
Accumulated other comprehensive loss              (28,444)    (44,638)
Retained earnings                                2,690,742   2,026,004
Treasury shares, at cost                          (79,622)           -
                                               ----------- -----------
 Total shareholders' equity                      4,943,592   4,412,647
                                               ----------- -----------
 Total liabilities and shareholders' equity    $14,711,904 $13,665,287
                                               =========== ===========
                    AXIS CAPITAL HOLDINGS LIMITED
          CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
   FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

                             Three months ended    Nine months ended
                             ------------------- ---------------------
                                 2007     2006      2007       2006
                             ---------- -------- ---------- ----------
                             (in thousands, except per share amounts)
Revenues
 Net premiums earned           $685,845 $692,780 $2,065,090 $2,005,473
 Net investment income          118,908   98,787    357,873    284,018
 Net realized investment
  losses                        (1,192)  (1,722)    (5,548)   (22,428)
 Other insurance related
  income                          1,005      804      3,638      1,866
                             ---------- -------- ---------- ----------
  Total revenues                804,566  790,649  2,421,053  2,268,929
                             ---------- -------- ---------- ----------
Expenses
 Net losses and loss
  expenses                      328,193  365,958  1,079,714  1,096,598
 Acquisition costs              100,039  103,615    293,923    295,151
 General and administrative
  expenses                       79,813   68,470    210,993    181,538
 Foreign exchange (gains)
  losses                        (7,202)    2,738   (16,477)   (25,427)
 Interest expense and
  financing costs                13,929    8,239     43,241     24,639
                             ---------- -------- ---------- ----------
  Total expenses                514,772  549,020  1,611,394  1,572,499
                             ---------- -------- ---------- ----------
Income before income taxes      289,794  241,629    809,659    696,430
 Income tax expense              10,677    6,181     32,943     23,540
                             ---------- -------- ---------- ----------
Net income                      279,117  235,448    776,716    672,890
      Preferred share
       dividends                  9,142    9,226     27,573     28,083
                             ---------- -------- ---------- ----------
Net income available to
 common shareholders           $269,975 $226,222 $  749,143 $  644,807
                             ========== ======== ========== ==========

Weighted average common
 shares and common
share equivalents:
 Basic                          146,845  149,884    148,753    149,657
                             ========== ======== ========== ==========
 Diluted                        164,064  164,701    165,458    163,863
                             ========== ======== ========== ==========

Earnings per common share:
 Basic                         $   1.84 $   1.51 $     5.04 $     4.31
                             ========== ======== ========== ==========
 Diluted                       $   1.65 $   1.37 $     4.53 $     3.94
                             ========== ======== ========== ==========

Cash dividends declared per
 common share                  $  0.165 $   0.15      0.495 $     0.45
                             ========== ======== ========== ==========
                    AXIS CAPITAL HOLDINGS LIMITED
               CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
        FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006


                                                  2007
                                    ---------------------------------
                                    Insurance  Reinsurance   Total
                                    ---------- ----------- ----------
Gross premiums written              $  480,729  $  274,495 $  755,224
Net premiums written                   315,605     268,297    583,902
Net premiums earned                    301,925     383,920    685,845
Other insurance related income             610         395      1,005
Net losses and loss expenses         (113,092)   (215,101)  (328,193)
Acquisition costs                     (34,721)    (65,318)  (100,039)
General and administrative expenses   (43,262)    (15,828)   (59,090)
                                    ---------- ----------- ----------
   Underwriting income              $  111,460  $   88,068    199,528
                                    ========== ===========

Corporate expenses                                           (20,723)
Net investment income                                         118,908
Net realized investment losses                                (1,192)
Foreign exchange gains (losses)                                 7,202
Interest expense and financing costs                         (13,929)
                                                           ----------
  Income before income taxes                               $  289,794
                                                           ==========

Net loss and loss expense ratio          37.5%       56.0%      47.9%
Acquisition cost ratio                   11.5%       17.0%      14.6%
General and administrative
   expense ratio                         14.3%        4.1%      11.6%
                                    ---------- ----------- ----------
   Combined ratio                        63.3%       77.1%      74.1%
                                    ========== =========== ==========


                                                  2006
                                    ---------------------------------
                                    Insurance  Reinsurance   Total
                                    ---------- ----------- ----------
Gross premiums written              $  453,116  $  281,794 $  734,910
Net premiums written                   323,618     282,295    605,913
Net premiums earned                    327,701     365,079    692,780
Other insurance related income             412         392        804
Net losses and loss expenses         (182,280)   (183,678)  (365,958)
Acquisition costs                     (40,796)    (62,819)  (103,615)
General and administrative expenses   (36,141)    (12,162)   (48,303)
                                    ---------- ----------- ----------
   Underwriting income              $   68,896  $  106,812    175,708
                                    ========== ===========

Corporate expenses                                           (20,167)
Net investment income                                          98,787
Net realized investment losses                                (1,722)
Foreign exchange gains (losses)                               (2,738)
Interest expense and financing costs                          (8,239)
                                                           ----------
  Income before income taxes                               $  241,629
                                                           ==========

Net loss and loss expense ratio          55.6%       50.3%      52.8%
Acquisition cost ratio                   12.4%       17.2%      15.0%
General and administrative
   expense ratio                         11.0%        3.3%       9.9%
                                    ---------- ----------- ----------
   Combined ratio                        79.0%       70.8%      77.7%
                                    ========== =========== ==========
                    AXIS CAPITAL HOLDINGS LIMITED
               CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

                                                 2007
                                  -----------------------------------
                                  Insurance  Reinsurance    Total
                                  ---------- ----------- ------------
Gross premiums written            $1,529,888  $1,487,337 $  3,017,225
Net premiums written               1,004,536   1,474,066    2,478,602
Net premiums earned                  915,102   1,149,988    2,065,090
Other insurance related income         1,737       1,901        3,638
Net losses and loss expenses       (432,612)   (647,102)  (1,079,714)
Acquisition costs                   (97,512)   (196,411)    (293,923)
General and administrative
 expenses                          (117,952)    (45,794)    (163,746)
                                  ---------- ----------- ------------
   Underwriting income            $  268,763  $  262,582      531,345
                                  ========== ===========

Corporate expenses                                           (47,247)
Net investment income                                         357,873
Net realized investment losses                                (5,548)
Foreign exchange gains                                         16,477
Interest expense and financing
 costs                                                       (43,241)
                                                         ------------
  Income before income taxes                             $    809,659
                                                         ============

Net loss and loss expense ratio        47.3%       56.3%        52.3%
Acquisition cost ratio                 10.7%       17.1%        14.2%
General and administrative
   expense ratio                       12.9%        4.0%        10.2%
                                  ---------- ----------- ------------
   Combined ratio                      70.9%       77.4%        76.7%
                                  ========== =========== ============

                                                 2006
                                  -----------------------------------
                                  Insurance  Reinsurance    Total
                                  ---------- ----------- ------------
Gross premiums written            $1,519,771  $1,375,259 $  2,895,030
Net premiums written               1,053,794   1,365,179    2,418,973
Net premiums earned                  973,985   1,031,488    2,005,473
Other insurance related income         1,474         392        1,866
Net losses and loss expenses       (486,235)   (610,363)  (1,096,598)
Acquisition costs                  (117,006)   (178,145)    (295,151)
General and administrative
 expenses                          (104,069)    (34,377)    (138,446)
                                  ---------- ----------- ------------
   Underwriting income            $  268,149  $  208,995      477,144
                                  ========== ===========

Corporate expenses                                           (43,092)
Net investment income                                         284,018
Net realized investment losses                               (22,428)
Foreign exchange gains                                         25,427
Interest expense and financing
 costs                                                       (24,639)
                                                         ------------
  Income before income taxes                             $    696,430
                                                         ============

Net loss and loss expense ratio        49.9%       59.2%        54.7%
Acquisition cost ratio                 12.0%       17.3%        14.7%
General and administrative
   expense ratio                       10.7%        3.3%         9.1%
                                  ---------- ----------- ------------
   Combined ratio                      72.6%       79.8%        78.5%
                                  ========== =========== ============
                    AXIS CAPITAL HOLDINGS LIMITED
              NON-GAAP FINANCIAL MEASURE RECONCILIATION
           OPERATING INCOME AND OPERATING INCOME EXCLUDING
                  FOREIGN EXCHANGE GAINS, NET OF TAX
   FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006


                               Three Months Ended  Nine Months Ended
                               ------------------ --------------------
                                 2007      2006      2007      2006
                               --------- -------- ---------- ---------

Net income available to common
 shareholders                   $269,975 $226,222  $ 749,143 $ 644,807

Adjustment for net realized
 investment losses                 1,192    1,722      5,548    22,428
Adjustment for associated tax
 impact                            (335)      149      (893)   (1,724)
                               --------- -------- ---------- ---------
Operating income                 270,832  228,093    753,798   665,511

Adjustment for foreign
 exchange (gains) losses         (7,202)    2,738   (16,477)  (25,427)
Adjustment for associated tax
 impact                              650        -      1,327     1,184
Operating income excluding
 foreign exchange
                               --------- -------- ---------- ---------
(gains) losses, net of tax      $264,280 $230,831  $ 738,648 $ 641,268
                               ========= ======== ========== =========

Net income per share - diluted  $   1.65 $   1.37  $    4.53 $    3.94
Adjustment for net realized
 investment losses                  0.01     0.01       0.03      0.14
Adjustment for associated tax
 impact                                -        -     (0.01)    (0.01)
                               --------- -------- ---------- ---------
Operating income per share -
 diluted                        $   1.66 $   1.38  $    4.55 $    4.07

Adjustment for foreign
 exchange (gains) losses          (0.04)     0.02     (0.10)    (0.16)
Adjustment for associated tax
 impact                                -        -       0.01      0.01
Operating income excluding
 foreign exchange
                               --------- -------- ---------- ---------
(gains) losses, net of tax      $   1.62 $   1.40  $    4.46 $    3.92
                               ========= ======== ========== =========

Weighted average common shares
 and
 common share equivalents -
  diluted                        164,064  164,701    165,458   163,863
                               ========= ======== ========== =========
                        AXIS CAPITAL HOLDINGS
              NON-GAAP FINANCIAL MEASURE RECONCILIATION
                     DILUTED BOOK VALUE PER SHARE
               SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
               (in thousands, except per share amounts)

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

Common shareholders' equity                      $4,443,592 $3,912,647
                                                 ---------- ----------

Shares outstanding                                  145,710    149,982
                                                 ---------- ----------

Book value per share                             $    30.50 $    26.09
                                                 ========== ==========

Diluted book value on a
"if converted basis":
Common shareholders' equity                      $4,443,592 $3,912,647
add in:
   proceeds on exercise of options                   89,947     96,485
   proceeds on exercise of warrants                 244,200    244,363
                                                 ---------- ----------
Adjusted shareholders' equity                    $4,777,739 $4,253,495
                                                 ---------- ----------


Shares outstanding                                  145,710    149,982
add in:
   vested phantom stock units                            53         46
   vesting of restricted stock                        3,342      2,229
   exercise of options                                4,853      5,147
   exercise of warrants                              19,651     19,644
                                                 ---------- ----------
Diluted shares outstanding                          173,609    177,048
                                                 ---------- ----------

Diluted book value per share                     $    27.52 $    24.02
                                                 ========== ==========

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 this release, we have presented the following non-GAAP financial measures:

1. Operating income. This represents net income available to common shareholders, before the after tax impact of net realized gains and losses on investments;

2. Operating income, excluding the after tax impact of foreign exchange gains/losses; and

3. Diluted book value per common share using the "if-converted" method.

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 the full conversion of our outstanding stock options, warrants, restricted stock and phantom stock units. As we have no plans to reacquire all such dilutive securities, the calculation assumes the retention of all proceeds upon exercise and the resulting issuance of common shares to remain outstanding. Because we had dilutive common shares outstanding in each of the periods presented, we believe diluted book value per share provides useful information for investors to measure shareholder returns.

Source: AXIS Capital Holdings Limited

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