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Rating Action:

Moody’s affirms AXIS Capital’s ratings; outlook remains negative

09 December 2020


New York , December 9, 2020 – Moody's Investors Service, ("Moody's") has affirmed the ratings of AXIS Capital Holdings Limited (AXIS Capital - Baa3(hyb) preferred stock) and its subsidiaries, including the Baa1 guaranteed senior debt of its financing subsidiaries and the A2 insurance financial strength (IFS) ratings of its principal operating subsidiaries (see complete ratings list below). The outlook for the ratings remains negative.

RATINGS RATIONALE

According to Moody's, AXIS Capital's ratings reflect its diversified mix of specialty insurance and reinsurance business, good historical operating returns, solid reserve position and high quality investment portfolio. These strengths are tempered by the company's low and volatile profitability, meaningful catastrophe exposures, higher financial leverage relative to some of its peers and the potential for reserve volatility arising from claims inflation in the firm's long-tail casualty lines.

The negative rating outlook reflects Moody's view that AXIS Capital's profitability has been weak relative to its peers, reflecting elevated catastrophe losses (including coronavirus-related losses this year), as well as the underperformance of certain business lines, including its Lloyd's of London business. While AXIS Capital has taken steps to reduce catastrophe exposures, the company's earnings have been uneven and volatile. AXIS Capital's financial leverage, while lower, also remains higher than Moody's expectations at the current rating level.

For the first nine months of 2020, AXIS Capital reported a net loss attributable to common shareholders of approximately $146 million and a combined ratio of 109.6%, reflecting 17.5 points of catastrophe and coronavirus-related losses. Although AXIS Capital will likely report additional catastrophe losses during the fourth quarter, Moody's expects the firm's core profitability to benefit from the re-underwriting of its business over the past couple of years as well as higher pricing in both insurance and reinsurance. AXIS Capital has reported that pricing through the first nine months of 2020 has increased by 13% in insurance and 8% in reinsurance.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The following factors could lead to a return to stable outlook: 1) returns on capital consistently in the mid-single digit percentage range, or higher; 2) continued strengthening of risk-adjusted capitalization; 3) sustained adjusted financial leverage below 25%; and 4) maintaining a reasonable catastrophe risk profile.

Factors that could lead to a downgrade of AXIS Capital's ratings include: 1) failure to improve profitability metrics; 2) adjusted financial leverage consistently above 25%; 3) reduction in total shareholders' equity by more than 10% over a rolling twelve month period; and 4) a significant increase in the firm's catastrophe risk appetite.

RATINGS LIST

The following ratings have been affirmed:

AXIS Capital Holdings Limited -- non-cumulative preferred stock 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, non-cumulative preferred shelf at (P)Baa3;

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

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

The outlooks for AXIS Capital Holdings Limited, AXIS Specialty Finance LLC, AXIS Specialty Finance PLC, AXIS Specialty Limited, AXIS Reinsurance Company, AXIS Re SE and AXIS Insurance Company remain negative.

The principal methodology used in these ratings was Reinsurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187551 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

AXIS Capital Holdings Limited, through its operating subsidiaries, provides a broad range of specialty insurance and reinsurance solutions to its clients on a worldwide basis. During the nine months ended September 30, 2020, the company reported gross premiums written of $5.5 billion and a net loss attributable to common shareholders of $146 million. As of September 30, 2020, total shareholders' equity was approximately $5.3 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

James Eck
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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