A.M. Best Affirms Ratings of AXIS Specialty Limited and Debt Ratings of AXIS Capital Holdings Limited

Business Wire, July 11, 2006

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" of AXIS Specialty Limited (AXIS) and its operating affiliates. Concurrently, A.M. Best has affirmed the ICR of "bbb" and all existing debt ratings of AXIS Capital Holdings Limited (NYSE: AXS) (both of Hamilton, Bermuda). A.M. Best has also assigned debt ratings to AXIS Capital Holdings Limited and has assigned an FSR and ICR to AXIS Insurance Company. The outlook for all ratings is stable. (See below for a detailed list of the ratings.)

The ratings of AXIS reflect its excellent risk-based capitalization, strong operating performance, a highly experienced management team and well established broker relationships. AXIS continues to maintain a diversified book of business, both geographically and by line of business, which focuses on broker-sourced short- and medium-tail lines, principally specialty lines in property, marine, energy and aerospace, along with property catastrophe reinsurance coverage. The company has selectively expanded into professional lines and increased its writings in umbrella and excess liability coverages. Casualty lines now account for approximately 30% of AXIS' gross premium writings.

Although AXIS experienced net losses of approximately $1 billion relating to the 2005 hurricane season, its strong capitalization, effective catastrophe management and efficient risk management controls produced a combined ratio just over breakeven at 101.8%. Operating results through March 31, 2006 continue to be strong with a 79.5% combined ratio and shareholders' equity at $3.6 billion.

AXIS' solid operating performance is somewhat tempered by its short operating history. Due to the long-tail nature of its casualty business, the consistency and sustainability of this segment's operating performance has yet to be proven. However, it is noted that a significant portion of this long-tail business is related to professional lines, which are primarily written on a claims-made basis.

John Charman, Chief Executive Officer has announced his retirement from AXIS upon the expiration of his existing employment agreement on December 31, 2008. Mr. Charman's leadership has been key to AXIS' formation and success. As a succession plan has not yet been delineated, A.M. Best will focus on the successor plans when available and evaluate the effect on the company's future operating performance and marketing position. Despite these concerns, A.M. Best expects AXIS to continue managing its capital base very conservatively within acceptable ranges to support its current ratings and meet the more stringent capital requirements for a recently established Bermuda entity.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for AXIS Specialty Limited and its following operating affiliates:

--AXIS Re Limited

--AXIS Reinsurance Company

--AXIS Specialty Europe Limited

--AXIS Specialty Insurance Company

--AXIS Surplus Insurance Company

The following debt rating has been affirmed:

AXIS Capital Holdings Limited--

--"bbb" on $500 million 5.75% senior unsecured notes, due 2014

The following indicative ratings have been affirmed under the current shelf registration:

AXIS Capital Holdings Limited--

--"bbb" on senior unsecured debt

--"bbb-" on subordinated debt

--"bb " on preferred stock

AXIS Capital Trust I, II & III (guaranteed by AXIS Capital Holdings Limited)--

--"bb " on preferred securities

The ICR of "bbb" has been affirmed for AXIS Capital Holdings Limited.

The FSR of A (Excellent) and ICR of "a" have been assigned to AXIS Insurance Company.

The following debt ratings have been assigned:

AXIS Capital Holdings Limited--

--"bb " on $250 million 7.25% non-cumulative preferred shares, Series A

--"bb " on $250 million 7.50% non-cumulative preferred shares, Series B

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.