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AXIS Capital Announces Record Fourth Quarter Net Income of $306 Million and Full Year Net Income of $1.1 billion

Fourth Quarter Diluted Earnings Per Share of $1.89 and Annualized Return on Average Common Equity of 26.9%

Company Release - 2/4/2008 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 fourth quarter of 2007 of $306 million, or $1.89 per diluted share, compared with net income of $281 million, or $1.69 per diluted share, for the corresponding period in 2006. Net income available to common shareholders for the full year of 2007 was $1,055 million, or $6.41 per diluted common share, compared with net income of $926 million, or $5.63 per diluted common share, for the prior year.

Operating income for the fourth quarter of 2007 was $296 million, or $1.83 per diluted share, compared with $284 million, or $1.71 per diluted common share, for the fourth quarter of 2006. This same item excluding foreign exchange gains, net of tax, for the fourth quarter of 2007 was also $296 million, or $1.83 per diluted common share, compared with $278 million, or $1.67 per diluted common share, for the same period in 2006.

Operating income for the full year of 2007 was $1,050 million, or $6.38 per diluted share, compared with $950 million, or $5.78 per diluted common share for 2006. This same item excluding foreign exchange gains, net of tax, for 2007 was $1,035 million, or $6.29 per diluted common share, compared with $919 million, or $5.59 per diluted common share, for 2006.

           Fourth Quarter and Full Year Operating Highlights

AXIS Capital delivered an exceptionally strong performance this quarter and year:

    --  Operating income increased 4% to a record $296 million for the
        quarter and 11% to a record $1,050 million for the year.

    --  Net premiums earned decreased 3% to $669 million in the
        quarter and increased 1% to $2,734 million for the year.

    --  Our combined ratio improved by 2.9 ratio points to 70.8% for
        the quarter and by 2.0 ratio points to 75.3% for the year.

    --  Pre-tax net investment income increased 2% to $125 million in
        the quarter and 19% for the year to a record $483 million.

    --  Return on average common shareholders' equity was 26.9% for
        the quarter (annualized) and 24.6% for the year.

    --  Diluted book value per common share increased 23% from
        December 31, 2006 to $28.79.

    --  Shareholders' equity increased 17% from December 31, 2006 to
        $5.2 billion.

    --  Capital management initiatives during the year included $305
        million of share repurchases. Also, in December 2007, our
        Board approved a 12% increase in the quarterly common dividend
        to $0.185 per common share.

Commenting on the fourth quarter results, John Charman, Chief Executive Officer and President of AXIS Capital stated: "I am proud that our established, high-quality global franchise in both the insurance and reinsurance markets has delivered over $1 billion in annual earnings in just the sixth year since our inception. This achievement is unparalleled in our sector. During this milestone year, AXIS increased diluted book value per share by 23% and we returned more than $400 million to shareholders through share repurchases and dividends. During this extraordinarily turbulent time throughout the financial services sector, the strength and solidity of the AXIS balance sheet speaks for itself. The consistency, stability and diversity of our management team, our operations and our earnings stand us in extremely good stead for the challenging times ahead."

                          Segment Highlights

    Insurance Segment

Our insurance segment reported underwriting income for the quarter of $105 million, up 11%, from the fourth quarter of 2006. This increase primarily reflected a 10.6 ratio point reduction in the segment's loss ratio, driven by a higher level of net favorable prior year reserve development. For the full year, our insurance segment reported underwriting income of $374 million, up 3% from the prior year. This increase was also driven by a higher level of net favorable prior year reserve development. Our loss ratio before net favorable development was 61.9% and 61.6% in 2007 and 2006, respectively.

Our insurance segment reported gross premiums written in the quarter of $509 million, down 8% from the fourth quarter of 2006. The reduction reflects our strong underwriting discipline in the face of competitive market conditions and rate pressures across most of our lines. For the full year, our insurance segment reported gross premiums written of $2,039 million, down 2% from 2006. Net premiums written in our insurance segment decreased 21% to $322 million in the quarter and by 9% to $1,327 million for the full year. These reductions were due to reductions in gross premiums written, the purchase of additional reinsurance coverage at attractive costs and also a shift in business mix towards lines with higher levels of ceded premiums.

Reinsurance Segment

Our reinsurance segment reported underwriting income for the quarter of $102 million, which was comparable with the fourth quarter of 2006. The segment's combined ratio was 73.0% compared with 71.4% in the prior period quarter. For the full year, our reinsurance segment reported underwriting income of $364 million, up 17% from the prior year. This increase was primarily due to a higher level of net favorable prior year reserve development. Our loss ratio before net favorable development was 62.8% and 60.3% in 2007 and 2006, respectively.

Our reinsurance segment reported gross premiums written in the quarter of $64 million, down 61% from the fourth quarter of 2006. The reduction was primarily related to increased retentions by cedants as well as a property proportional treaty written in the fourth quarter of 2006 with a 16-month term. For the full year, our reinsurance segment reported gross premiums written of $1,551 million, which was in line with the prior year.

                              Investments

Pre-tax net investment income increased 2% to $125 million in the quarter, largely reflecting higher average investment balances in our fixed income portfolio. For the full year, net investment income increased 19% to a record $483 million, reflecting both higher average investment balances and average investment yields. We experienced net realized gains of $11 million and $5 million in the fourth quarter and full year of 2007, respectively, compared to net realized losses of $3 million and $26 million, for the corresponding periods of 2006. Our investment portfolio has $76 million in direct exposure to subprime mortgages, representing less than 1% of our total cash and investments. Virtually all of these are AAA-rated by major rating agencies, and includes $26 million which are backed by U.S. Government sponsored agencies. Overall, there has been no material adverse impact on our investment portfolio to date as a result of this exposure or our exposure to the broader credit deterioration in the markets.

                  Capitalization/Shareholders' Equity

Total capitalization at December 31, 2007 was $5.7 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 3.2 million shares of common stock at an average price of $38.58 per share, for a total cost of $125 million. During the year, we repurchased 8.2 million shares of common stock at an average price of $37.38 per share, for a total cost of $305 million. In December, our Board approved a new share repurchase authorization of up to $400 million of our common shares, which is set to expire on December 31, 2009. Our current total authorization for share repurchases through December 31, 2008 is $495 million and includes $95 million of common shares remaining under our 2006 authorization.

At December 31, 2007, diluted book value per common share, on a treasury stock basis, was $28.79 and book value per common share was $32.69, compared to $23.45 and $26.09 respectively, as of December 31, 2006.

                            Conference Call

We will host a conference call on Tuesday, February 5, 2008 at 8:00 AM (Eastern) to discuss the fourth quarter financial results and related matters. The teleconference can be accessed by dialing (866) 356-3093 (U.S. callers) or (617) 597-5381 (international callers) and entering the pass code 15928142 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 December 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 December 31, 2007 of $5.2 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
                DECEMBER 31, 2007 (UNADITED) AND 2006

                                                  2007        2006
                                               ----------- -----------
Assets                                             (in thousands)
Investments:
     Fixed maturity investments available for
      sale, at fair value                      $ 8,331,666 $ 6,532,723
    Other investments, at fair value               645,987   1,130,664
                                               ----------- -----------
Total investments                                8,977,653   7,663,387
Cash and cash equivalents                        1,332,921   1,989,287
Accrued interest receivable                         87,338      76,967
Insurance and reinsurance premium balances
 receivable                                      1,231,494   1,125,822
Reinsurance recoverable balances                 1,280,295   1,293,660
Reinsurance recoverable balances on paid losses     76,598      65,494
Deferred acquisition costs                         276,801     251,799
Prepaid reinsurance premiums                       242,940     241,821
Securities lending collateral                      865,256     794,149
Net receivable for investments sold                 86,356           -
Goodwill and intangible assets                      61,653      29,041
Other assets                                       156,004     133,860
                                               ----------- -----------
      Total assets                             $14,675,309 $13,665,287
                                               =========== ===========

Liabilities
Reserve for losses and loss expenses           $ 5,587,311 $ 5,015,113
Unearned premiums                                2,146,087   2,015,556
Insurance and reinsurance balances payable         244,988     294,374
Securities lending payable                         863,906     791,744
Senior notes                                       499,261     499,144
Other liabilities                                  175,134     174,524
Liability under repurchase agreement                     -     400,000
Net payable for investments purchased                    -      62,185
                                               ----------- -----------
      Total liabilities                          9,516,687   9,252,640
                                               ----------- -----------

Shareholders' Equity
Preferred shares - Series A and B                  500,000     500,000
Common shares                                        1,850       1,875
Additional paid-in capital                       1,869,810   1,929,406
Accumulated other comprehensive income (loss)       22,668    (44,638)
Retained earnings                                2,968,900   2,026,004
Treasury shares, at cost                         (204,606)           -
                                               ----------- -----------
      Total shareholders' equity                 5,158,622   4,412,647
                                               ----------- -----------
      Total liabilities and shareholders'
       equity                                  $14,675,309 $13,665,287
                                               =========== ===========
                    AXIS CAPITAL HOLDINGS LIMITED
          CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
     FOR THE QUARTERS AND YEARS ENDED DECEMBER 31, 2007 AND 2006

                                Quarters ended        Years ended
                               ----------------- ---------------------
                                 2007     2006      2007       2006
                               -------- -------- ---------- ----------
                                  (in thousands, except per share
                                               amounts)
Revenues
 Net premiums earned           $669,320 $688,797 $2,734,410 $2,694,270
 Net investment income          125,000  123,082    482,873    407,100
 Net realized investment gains
  (losses)                       10,778  (3,274)      5,230   (25,702)
 Other insurance related
  income                            273    1,027      3,911      2,893
                               -------- -------- ---------- ----------
  Total revenues                805,371  809,632  3,226,424  3,078,561
                               -------- -------- ---------- ----------
Expenses
 Net losses and loss expenses   290,546  329,257  1,370,260  1,425,855
 Acquisition costs               90,574   91,808    384,497    386,959
 General and administrative
  expenses                       92,838   86,858    303,831    268,396
 Foreign exchange gains           (349)  (7,078)   (16,826)   (32,505)
 Interest expense and
  financing costs                 7,912    8,315     51,153     32,954
                               -------- -------- ---------- ----------
  Total expenses                481,521  509,160  2,092,915  2,081,659
                               -------- -------- ---------- ----------
Income before income taxes      323,850  300,472  1,133,509    996,902
 Income tax expense               8,547   10,302     41,491     33,842
                               -------- -------- ---------- ----------
Net income                      315,303  290,170  1,092,018    963,060
      Preferred share
       dividends                  9,203    9,212     36,775     37,295
                               -------- -------- ---------- ----------
Net income available to common
 shareholders                  $306,100 $280,958 $1,055,243 $  925,765
                               ======== ======== ========== ==========

Weighted average common shares
 and common share equivalents:
 Basic                          143,877  150,006    147,524    149,745
                               ======== ======== ========== ==========
 Diluted                        161,732  165,986    164,515    164,394
                               ======== ======== ========== ==========

Earnings per common share:
 Basic                         $   2.13 $   1.87 $     7.15 $     6.18
                               ======== ======== ========== ==========
 Diluted                       $   1.89 $   1.69 $     6.41 $     5.63
                               ======== ======== ========== ==========

Cash dividends declared per
 common share                  $  0.185 $  0.165 $     0.68 $    0.615
                               ======== ======== ========== ==========
                    AXIS CAPITAL HOLDINGS LIMITED
               CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
          FOR THE QUARTERS ENDED DECEMBER 31, 2007 AND 2006


                                                 2007
                                   ---------------------------------
                                   Insurance  Reinsurance   Total
                                   ---------- ----------- ----------
Gross premiums written             $  509,326  $   63,539 $  572,865
Net premiums written                  322,111      63,044    385,155
Net premiums earned                   293,338     375,982    669,320
Other insurance related income            123         150        273
Net losses and loss expenses        (101,652)   (188,894)  (290,546)
Acquisition costs                    (28,911)    (61,663)   (90,574)
General and administrative expenses  (57,858)    (23,927)   (81,785)
                                   ---------- ----------- ----------
   Underwriting income             $  105,040  $  101,648    206,688
                                   ========== ===========

Corporate expenses                                          (11,053)
Net investment income                                        125,000
Net realized investment gains
 (losses)                                                     10,778
Foreign exchange gains                                           349
Interest expense and financing
 costs                                                       (7,912)
                                                          ----------
  Income before income taxes                              $  323,850
                                                          ==========

Net loss and loss expense ratio         34.7%       50.2%      43.4%
Acquisition cost ratio                   9.9%       16.4%      13.5%
General and administrative
   expense ratio                        19.7%        6.4%      13.9%
                                   ---------- ----------- ----------
   Combined ratio                       64.3%       73.0%      70.8%
                                   ========== =========== ==========


                                                   2006
                                    ----------------------------------
                                     Insurance  Reinsurance   Total
                                    ----------- ----------- ----------
Gross premiums written               $  550,696  $  163,310 $  714,006
Net premiums written                    406,605     163,601    570,206
Net premiums earned                     331,775     357,022    688,797
Other insurance related income              284         743      1,027
Net losses and loss expenses          (150,449)   (178,808)  (329,257)
Acquisition costs                      (34,996)    (56,812)   (91,808)
General and administrative expenses    (51,847)    (19,281)   (71,128)
                                    ----------- ----------- ----------
   Underwriting income               $   94,767  $  102,864    197,631
                                    =========== ===========

Corporate expenses                                            (15,730)
Net investment income                                          123,082
Net realized investment gains
 (losses)                                                      (3,274)
Foreign exchange gains                                           7,078
Interest expense and financing costs                           (8,315)
                                                            ----------
  Income before income taxes                                $  300,472
                                                            ==========

Net loss and loss expense ratio           45.3%       50.1%      47.8%
Acquisition cost ratio                    10.5%       15.9%      13.3%
General and administrative
   expense ratio                          15.6%        5.4%      12.6%
                                    ----------- ----------- ----------
   Combined ratio                         71.4%       71.4%      73.7%
                                    =========== =========== ==========
                    AXIS CAPITAL HOLDINGS LIMITED
               CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
            FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006


                                                2007
                                 -----------------------------------
                                 Insurance  Reinsurance    Total
                                 ---------- ----------- ------------
Gross premiums written           $2,039,214  $1,550,876 $  3,590,090
Net premiums written              1,326,647   1,537,110    2,863,757
Net premiums earned               1,208,440   1,525,970    2,734,410
Other insurance related income        1,860       2,051        3,911
Net losses and loss expenses      (534,264)   (835,996)  (1,370,260)
Acquisition costs                 (126,423)   (258,074)    (384,497)
General and administrative
 expenses                         (175,810)    (69,721)    (245,531)
                                 ---------- ----------- ------------
   Underwriting income           $  373,803  $  364,230      738,033
                                 ========== ===========

Corporate expenses                                          (58,300)
Net investment income                                        482,873
Net realized investment gains
 (losses)                                                      5,230
Foreign exchange gains                                        16,826
Interest expense and financing
 costs                                                      (51,153)
                                                        ------------
  Income before income taxes                            $  1,133,509
                                                        ============

Net loss and loss expense ratio       44.2%       54.8%        50.1%
Acquisition cost ratio                10.5%       16.9%        14.1%
General and administrative
   expense ratio                      14.5%        4.6%        11.1%
                                 ---------- ----------- ------------
   Combined ratio                     69.2%       76.3%        75.3%
                                 ========== =========== ============


                                                  2006
                                  ------------------------------------
                                   Insurance  Reinsurance    Total
                                  ----------- ----------- ------------
Gross premiums written             $2,070,467  $1,538,569 $  3,609,036
Net premiums written                1,460,399   1,528,780    2,989,179
Net premiums earned                 1,305,760   1,388,510    2,694,270
Other insurance related income          1,758       1,135        2,893
Net losses and loss expenses        (636,684)   (789,171)  (1,425,855)
Acquisition costs                   (152,002)   (234,957)    (386,959)
General and administrative
 expenses                           (155,916)    (53,658)    (209,574)
                                  ----------- ----------- ------------
   Underwriting income             $  362,916  $  311,859      674,775
                                  =========== ===========

Corporate expenses                                            (58,822)
Net investment income                                          407,100
Net realized investment gains
 (losses)                                                     (25,702)
Foreign exchange gains                                          32,505
Interest expense and financing
 costs                                                        (32,954)
                                                          ------------
  Income before income taxes                              $    996,902
                                                          ============

Net loss and loss expense ratio         48.8%       56.8%        52.9%
Acquisition cost ratio                  11.6%       16.9%        14.4%
General and administrative
   expense ratio                        11.9%        3.9%        10.0%
                                  ----------- ----------- ------------
   Combined ratio                       72.3%       77.6%        77.3%
                                  =========== =========== ============
                    AXIS CAPITAL HOLDINGS LIMITED
              NON-GAAP FINANCIAL MEASURE RECONCILIATION
           OPERATING INCOME AND OPERATING INCOME EXCLUDING
                  FOREIGN EXCHANGE GAINS, NET OF TAX
     FOR THE QUARTERS AND YEARS ENDED DECEMBER 31, 2007 AND 2006


                                 Quarters Ended       Years Ended
                               ------------------ --------------------
                                  2007     2006      2007       2006
                               --------- -------- ---------- ---------

Net income available to common
 shareholders                  $ 306,100 $280,958 $1,055,243 $ 925,765

Adjustment for net realized
 investment (gains) losses      (10,778)    3,274    (5,230)    25,702
Adjustment for associated tax
 impact                              514       99      (380)   (1,625)
                               --------- -------- ---------- ---------
Operating income                 295,836  284,331  1,049,633   949,842

Adjustment for foreign exchange
 gains                             (349)  (7,078)   (16,826)  (32,505)
Adjustment for associated tax
 impact                              401      435      1,728     1,619
Operating income excluding
 foreign exchange
                               --------- -------- ---------- ---------
gains, net of tax              $ 295,888 $277,688 $1,034,535 $ 918,956
                               ========= ======== ========== =========

Net income per share - diluted $    1.89 $   1.69 $     6.41 $    5.63
Adjustment for net realized
 investment (gains) losses        (0.06)     0.02     (0.03)      0.16
Adjustment for associated tax
 impact                                -        -          -    (0.01)
                               --------- -------- ---------- ---------
Operating income per share -
 diluted                            1.83     1.71       6.38      5.78

Adjustment for foreign exchange
 gains                                 -   (0.04)     (0.10)    (0.20)
Adjustment for associated tax
 impact                                -        -       0.01      0.01
Operating income excluding
 foreign exchange
                               --------- -------- ---------- ---------
gains, net of tax              $    1.83 $   1.67 $     6.29 $    5.59
                               ========= ======== ========== =========

Weighted average common shares
 and
 common share equivalents -
  diluted                        161,732  165,986    164,515   164,394
                               ========= ======== ========== =========
         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) the occurrence of natural and man-made disasters, (2) actual claims exceeding our loss reserves, (3) the failure of any of the loss limitation methods we employ, (4) the effects of emerging claims and coverage issues, (5) the failure of our cedants to adequately evaluate risks, (6) the loss of one or more key executives, (7) a decline in our ratings with rating agencies, (8) the loss of business provided to us by our major brokers, (9) changes in governmental regulations, (10) increased competition, (11), interest rate and/or currency value fluctuations, (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.

We have included these 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.

Source: AXIS Capital Holdings Limited

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