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Rating Action:

Moody’s affirms AXIS Capital’s ratings; outlook changed to negative

03 April 2019

New York , April 3, 2019 – Moody's Investors Service ("Moody's") has affirmed the ratings of AXIS Capital Holdings Limited (NYSE: AXS, Baa3(hyb) preferred stock) and its subsidiaries, including the Baa1 guaranteed senior debt of its finance subsidiaries and the A2 insurance financial strength (IFS) rating of its operating subsidiaries (see complete ratings list below). In the same action, Moody's has changed the ratings' outlook to negative from stable primarily reflecting lower capitalization and higher operating and financial leverage relative to peers.

RATINGS RATIONALE

According to Moody's, AXIS' ratings reflect its diversified mix of specialty insurance and reinsurance businesses with expertise in niche markets, good historical operating returns, a solid reserve position, and high quality fixed income portfolio. These strengths are tempered by meaningful catastrophe exposure including terrorism risk, elevated operating and financial leverage relative to similarly-rated peers; the company's focus on long-tail lines, which heightens vulnerability to reserve volatility; and exposure to specialty lines, which inherently carry more risk than standard lines.

For 2018, AXIS reported net income of $0.4 million and a combined ratio of 99.9%, reflecting a series of mid-sized global catastrophe losses, though much improved from the net loss of $416 million in 2017. Following the acquisition of Novae Group plc in October 2017, the company's operating and financial leverage increased significantly. While the company has taken steps to reduce volatility in part through reinsurance, AXIS' financial leverage (29.4% at year-end 2018, or 26.6% pro forma excluding senior notes maturing April 2019) and gross underwriting leverage (4.2x at year-end 2018) remain high relative to similarly-rated, catastrophe-exposed peers.

The following factors could lead to a return to stable outlook: 1) strengthening of risk-adjusted capitalization; 2) adjusted debt-to-capital below 25%, including 50% of preferred shares treated as debt; 3) maintaining a reasonable catastrophe risk profile while capitalization improves; 4) returns on capital consistently in the mid-single digit range. Factors that could lead to a downgrade of AXIS' ratings include: 1) sustained elevated gross underwriting leverage; 2) adjusted debt-to-capital ratio consistently above 25%; 3) low profitability with multi-year returns on capital below the mid-single digit range (normalized for expected catastrophe losses); 4) reduction in total shareholders' equity by more than 10% over a rolling twelve month period; 5) significant increase in the firm's catastrophe risk appetite; 6) unexpectedly large losses in proof-of-concept or non-core product lines.

LIST OF RATINGS

The following ratings have been affirmed:

AXIS Capital Holdings Limited -- preferred stock at Baa3(hyb); preferred stock noncumulative at Baa3(hyb); senior unsecured shelf at (P)Baa1, subordinated shelf at (P)Baa2, junior subordinated shelf at (P)Baa2, preferred shelf at (P)Baa3;

AXIS Specialty Finance LLC -- guaranteed senior unsecured at Baa1; senior unsecured shelf at (P)Baa1, subordinated shelf at (P)Baa2, junior subordinated shelf at (P)Baa2;

AXIS Specialty Finance PLC -- guaranteed senior unsecured at Baa1; senior unsecured shelf at (P)Baa1, subordinated shelf at (P)Baa2, junior subordinated shelf at (P)Baa2;

AXIS Specialty Limited -- insurance financial strength at A2;

AXIS Reinsurance Company -- insurance financial strength at A2;

AXIS Re SE -- insurance financial strength at A2;

AXIS Insurance Company -- insurance financial strength at A2.

Outlook Actions:

..Issuer: AXIS Capital Holdings Limited

....Outlook, Changed To Negative From Stable

..Issuer: AXIS Insurance Company

....Outlook, Changed To Negative From Stable

..Issuer: AXIS Re SE

....Outlook, Changed To Negative From Stable

..Issuer: AXIS Reinsurance Company

....Outlook, Changed To Negative From Stable

..Issuer: AXIS Specialty Finance LLC

....Outlook, Changed To Negative From Stable

..Issuer: AXIS Specialty Finance PLC

....Outlook, Changed To Negative From Stable

..Issuer: AXIS Specialty Limited

....Outlook, Changed To Negative From Stable

The principal methodology used in these ratings was Reinsurers published in May 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

AXIS Capital Holdings Limited (NYSE: AXS) is a midsize Bermuda-based property-casualty insurer and reinsurer with total shareholders' equity of $5.0 billion as of December 31, 2018. For 2018, the company reported gross premiums written of $6.9 billion, net premiums written of $4.7 billion, and net income of $0.4 million.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of  the guarantor entity.  Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jasper Cooper, CFA
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Sarah Hibler
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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