S&P Affirms Axis Specialty ‘A’ Ratings

February 4, 2003

Standard & Poor’s Ratings Services announced that it has affirmed its ‘A’ counterparty credit and financial strength ratings of Bermuda-based Axis Specialty Ltd. and its ‘A’ financial strength rating on four other units of Axis Capital Holdings Ltd. with a stable outlook.

S&P issued the bulletin following Axis’ announcement that it has acquired the renewal rights to directors and officers liability insurance and related lines written by Lumbermens Mutual Casualty Co. (LMCC), the main operating company of the Kemper Group.

The bulletin, prepared by S&P credit analyst Charles Titterton, noted that AXIS had acquired an “exclusive option to write certain classes of business underwritten by LMCC (at its discretion and on a policy-by-policy basis) in return for a commercially negotiated override commission.”

Axis is rapidly becoming a power in the reinsurance world. The company, formed in the wake of Sept. 11 by Marsh’s Trident II investment fund, CSFB, J.P. Morgan and other private investors, has expanded rapidly. Its shares are listed on the NYSE, and it writes international specialty insurance and reinsurance covers both in Europe, mainly through its office in Ireland, and the U.S.

“Axis remains extremely well capitalized and appears at present to maintain a level of capitalization higher than many of its competitors,” Best noted. “The market appears solid for most covers it writes through 2003. Axis should finish 2003 with extremely strong earnings and a ‘AAA’ capital adequacy ratio. Beyond 2003 or 2004, the traditional tough competitive environment in specialty insurance and reinsurance will reassert itself, driving down margins for all players,” Best concluded.

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