Best Affirms AXIS Specialty and Subs ‘A’ Ratings; Outlook Positive

September 24, 2012

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a+” of AXIS Specialty Limited and its operating affiliates, as well as the ICR of “bbb+” and all existing debt ratings of AXIS’ parent, AXIS Capital Holdings Limited (ACHL), both domiciled in Hamilton, Bermuda.

The outlook for all of the ratings is positive.

The ratings reflect AXIS’ “excellent risk-adjusted capitalization, consistently strong operating performance through varied market conditions and robust enterprise risk management controls,” Best explained, adding that “AXIS’ operating strategy has historically emphasized underwriting profitability with a balanced risk profile.”

Best also indicated that, given the current soft casualty market conditions, the company is “well positioned with a diversified book of business and an expanding worldwide infrastructure. AXIS’ book of business emphasizes short to medium-tail lines and focuses on specialty risks including property, marine and political risk, along with property catastrophe coverages.

“AXIS’ historical operating performance has been strong, which places it among the top of its Bermudian peer group.” Best added that in its opinion, AXIS’ solid performance is attributable to its highly developed and integrated risk management controls and strong systems capabilities. Furthermore, AXIS retains a very strong level of risk-based capitalization under various A.M. Best stress scenarios.”

As partial offsetting factors Best cited “AXIS’ exposure to large catastrophe losses as well as the current soft casualty market environment.” Best added that it “considers the organization’s executive management team to be strong,” noting that “recently and within the past several months it has implemented changes at the senior management level and the Board of Directors, including the chief executive officer and chairman of the Board of Directors. While it is expected that the corporate culture and strategy of the organization will not change materially,” Best said it would continue to monitor this period of transition.

“These challenges and other rating factors, which,” Best said, “could lead to a downgrading of AXIS’ ratings or a revision in its outlook to negative, include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to its peers, significant adverse loss reserve development and/or a material decline in risk-adjusted capital.

“Alternatively, factors that could lead to an upgrading of the company’s ratings include continued favorable operating profitability coupled with maintenance of strong risk-adjusted capital levels.”

Best summarized the company ratings affected by its actions as follows:
The FSR of ‘A’ (Excellent) and ICRs of “a+” have been affirmed for AXIS Specialty Limited and its following operating affiliates:
— AXIS Re SE
— AXIS Reinsurance Company
— AXIS Specialty Europe SE
— AXIS Surplus Insurance Company
— AXIS Insurance Company

The following debt ratings have been affirmed:
AXIS Capital Holdings Limited—
— “bbb+” on $500 million 5.75 percent senior unsecured notes, due 2014
— “bbb-” on $250 million 7.25 percent non-cumulative preferred shares, Series A
— “bbb-” on $250 million 7.50 percent non-cumulative preferred shares, Series B
— “bbb-” on $400 million 6.875 percent non-cumulative preferred shares, Series C

AXIS Specialty Finance LLC (guaranteed by AXIS Capital Holdings Limited)—
— “bbb+” on $500 million 5.875 percent senior unsecured notes, due 2020

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
— “bbb-” on preferred stock

AXIS Capital Trust I, II & III (guaranteed by AXIS Capital Holdings Limited)—
— “bbb-” on preferred securities

Source: A.M. Best

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