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Rating Action:

Moody's rates $500mn senior notes guaranteed by AXIS Capital Holdings

18 Mar 2010

New York, March 18, 2010 -- Moody's Investors Service has assigned a Baa1 rating and stable outlook to the $500 million, 5.875% ten-year senior notes issuance of AXIS Specialty Finance LLC ("AXIS Finance"), an indirect U.S. subsidiary of Bermuda-based AXIS Capital Holdings Limited (NYSE: AXS, "AXIS Capital"). Moody's has also assigned provisional ratings to the new shelf registration of AXIS Capital (list below).

AXIS Capital, the ultimate parent, will provide an unconditional and irrevocable guarantee of the notes. The guarantee will rank equally in right of payment with other senior unsecured indebtedness of AXIS Capital.

AXIS Finance and AXIS Capital will use the proceeds for general corporate purposes which may include share repurchases. As of March 15, 2010, AXIS Capital had $293.5 million remaining under its share repurchase authorization.

"This debt issue draws on the ample borrowing capacity that AXIS Capital had," said Kevin Lee, a senior credit officer at Moody's. "However, considering the potential for more share buybacks and recent losses on their credit and political risk business, we think the ratings have little tolerance for more leverage following this issuance." Debt-to-capital ratio will go up meaningfully from 14% to 20% pro forma as of 12/31/2009 (excluding potential share buybacks and including as debt 50% of the preferred shares and operating lease commitments).

On February 10, 2010, Moody's affirmed AXIS Capital's ratings and stable outlook after it announced 2009 fourth quarter results, which included a reserving provision for a $399 million credit insurance policy for Blue City Investments. At that time Moody's said that AXIS' credit, political risk and bond portfolios would remain a key pressure point for the ratings in the near term but that current ratings would have some tolerance for more potential losses.

The issuance is a drawdown from the new shelf.

Moody's Baa1 senior unsecured debt rating on AXIS Capital is based on the credit support provided by its various insurance operating subsidiaries and reasonable financial flexibility, though financial leverage will go up meaningfully as a result of this debt issue.

The A2 insurance financial strength rating of AXIS Specialty Limited, the principal operating subsidiary, is based on its broad market acceptance, robust risk-adjusted capitalization, and good underwriting profitability since its inception in November 2001. Since inception AXIS Capital has achieved an average return on average common equity of 16%, which compares favorably to most of our rated non-life (re)insurance companies, notwithstanding material investment losses in 2008 and 2009.

These credit strengths are tempered by exposure to catastrophic losses, exposure to inflation-sensitive liabilities which may impact reserve strength, and broad appetite for risk including (re)insuring exposures which are highly specialized or have a significant credit component, such as Blue City Investments.

AXIS Capital's estimates for the Chile earthquake and European windstorm Xynthia suggest the losses will be readily manageable relative to earnings and capital. The company estimates losses from the Chile earthquake will be between $60-$125 million and losses from European windstorm Xynthia will be between $10-20 million, all estimates pre-tax and net of reinstatement premiums.

The following ratings have been assigned with a stable outlook:

AXIS Specialty Finance LLC -- $500 million, 5.875% ten-year senior notes guaranteed by AXIS Capital Holdings Limited at Baa1;

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

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

AXIS Capital Trust I --provisional guaranteed trust preferred securities at (P)Baa2;

AXIS Capital Trust II --provisional guaranteed trust preferred securities at (P)Baa2;

AXIS Capital Trust III --provisional guaranteed trust preferred securities at (P)Baa2;

AXIS Capital Holdings Ltd. (NYSE: AXS) is a Bermuda holding company that provides specialty insurance and property/casualty reinsurance worldwide. For full year 2009, the company reported gross premiums written of $3,587 million, net income to common shareholders of $461 million, and shareholders' equity of $5,500 million as of 12/31/2009.

The last rating action on AXIS Capital was on February 10, 2010, when Moody's affirmed the ratings with a stable outlook.

The principal methodology used in rating AXIS Capital was Moody's Global Rating Methodology for Reinsurers, published in July 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Moody's insurance financial strength ratings are opinions about the ability of insurance companies to punctually pay senior policyholder claims and obligations. For more information, please visit our website at www.moodys.com.

New York
Kevin Lee
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Stanislas Rouyer
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates $500mn senior notes guaranteed by AXIS Capital Holdings
No Related Data.
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