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<P ALIGN="CENTER"><FONT SIZE=2><B>As filed with the Securities and Exchange Commission on March&nbsp;5, 2003.  </B></FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=2><B> Registration No. 333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=4><B>SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=2><B>Washington, D.C. 20549  </B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=4><B>FORM S-1<BR>  </B></FONT><FONT SIZE=2><B>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF 1933  </B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=4><B>AXIS CAPITAL HOLDINGS LIMITED<BR>  </B></FONT><FONT SIZE=2>(Exact name of Registrant as specified in its charter) </FONT></P>

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<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=2><B>Bermuda<BR> </B></FONT><FONT SIZE=2>(State or other jurisdiction of<BR>
incorporation or organization)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=2><B>6331</B></FONT><FONT SIZE=2><BR>
(Primary Standard Industrial<BR>
Classification Code Number)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=2><B>Not Applicable</B></FONT><FONT SIZE=2><BR>
(I.R.S. Employer<BR>
Identification No.)</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=1><B>106 Pitts Bay Road<BR>
Pembroke HM 08, Bermuda<BR>
Telephone: (441)&nbsp;296-2600<BR>  </B></FONT><FONT SIZE=1>(Address, including zip code, and telephone number,<BR>
including area code, of Registrant's principal executive offices) </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>CT Corporation System<BR>
111 Eighth Avenue, 13th Floor<BR>
New York, New York 10011<BR>  </B></FONT><FONT SIZE=2>(Name, address, including zip code, and telephone number,<BR>
including area code, of agent for service) </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>Copies to:  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Kevin G. McLean, Esq.<BR>
Senior Vice President, General Counsel and Secretary<BR>
AXIS Specialty U.S. Holdings, Inc.<BR>
c/o AXIS Capital Holdings Limited<BR>
106 Pitts Bay Road<BR>
Pembroke HM08, Bermuda<BR>
Telephone: (441) 296-2600<BR>
Facsimile: (441) 296-3140  </B></FONT></P>

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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>Gary Apfel, Esq.<BR>
Joseph L. Seiler III, Esq.<BR>
LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P.<BR>
725 South Figueroa Street, Suite 3100<BR>
Los Angeles, CA 90017-5404<BR>
Telephone: (213) 955-7350<BR>
Facsimile: (212) 649-0911</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>Gary I. Horowitz, Esq.<BR>
Simpson Thacher &amp; Bartlett<BR>
425 Lexington Avenue<BR>
New York, NY 10017-3954<BR>
Telephone: (212) 455-7113<BR>
Facsimile: (212) 455-2502</B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>Approximate date of commencement of the proposed sale of the securities to the public:<BR>
As soon as practicable after the Registration Statement becomes effective.  </B></FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act of
1933, check the following box.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this form is filed to register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this form is a post-effective amendment filed pursuant to Rule&nbsp;462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this form is a post-effective amendment filed pursuant to Rule&nbsp;462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434, check the following box.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>CALCULATION OF REGISTRATION FEE  </B></FONT></P>

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<TH WIDTH="48%" ALIGN="CENTER"><FONT SIZE=1><B>Title Of Each Class Of<BR>
Securities To Be Registered</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="25%" ALIGN="CENTER"><FONT SIZE=1><B>Proposed Maximum Aggregate Offering Price(1)(2)</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="25%" ALIGN="CENTER"><FONT SIZE=1><B>Amount Of<BR>
Registration Fee</B></FONT><BR></TH>
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<TD WIDTH="48%"><FONT SIZE=2>Common Shares, par value $0.10 per share</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="25%" ALIGN="CENTER" VALIGN="BOTTOM"><FONT SIZE=2>$517,500,000</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="25%" ALIGN="CENTER" VALIGN="BOTTOM"><FONT SIZE=2>$41,865.75</FONT></TD>
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<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Estimated
solely for the purpose of calculating the registration fee pursuant to Rule&nbsp;457 under the Securities Act of 1933, as amended. </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Includes
shares subject to the underwriters' over-allotment option. </FONT></DD></DL>
<BR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective
date until the Registrant shall file&nbsp;a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section&nbsp;8(a) of
the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may determine.</B></FONT></P>

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<P><FONT SIZE=2><B>The information in this prospectus is not complete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.   </B></FONT></P>

<P><FONT SIZE=3><B>PROSPECTUS</B></FONT><FONT SIZE=3> (Subject to Completion) </FONT></P>

<P><FONT SIZE=2>Issued&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>
<IMG SRC="g737735.jpg" ALT="GRAPHIC" WIDTH="114" HEIGHT="66">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>AXIS Capital Holdings Limited  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>Common Shares  </B></FONT></P>

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<P><FONT SIZE=2>AXIS Capital Holdings Limited is offering&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares and the selling shareholders are offering an
additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares in
an underwritten offering. AXIS Capital Holdings Limited will not receive any of the proceeds from the sale of common shares by the selling shareholders. We anticipate that the initial public offering
price of the common shares will be between $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. This is our initial public offering and no public market exists for our common shares.
</FONT></P>

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<P><FONT SIZE=2>We
intend to apply to list our common shares on the New York Stock Exchange under the symbol "AXS." </FONT></P>

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<P><FONT SIZE=3><B>Investing in our common shares involves risks. See "Risk Factors" beginning on page&nbsp;10.</B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>PRICE $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A SHARE  </B></FONT></P>

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<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Price to Public</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Underwriting<BR>
Discounts and<BR>
Commissions</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Proceeds to<BR>
Company</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Proceeds to<BR>
Selling<BR>
Shareholders</B></FONT><HR NOSHADE></TH>
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<TD WIDTH="36%"><FONT SIZE=2>Per Share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD WIDTH="36%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
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<P><FONT SIZE=2><B>AXIS Capital Holdings Limited has granted the underwriters the right to purchase up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares to cover
over-allotments.</B></FONT></P>

<P><FONT SIZE=2><B>The Securities and Exchange Commission, state securities regulators, the Registrar of Companies in Bermuda and the Bermuda Monetary Authority have not approved or disapproved
of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.</B></FONT></P>


<P><FONT SIZE=2>The
underwriters expect to deliver the common shares to purchasers on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003. </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B><I>Joint Book-Running Managers  </I></B></FONT></P>

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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>MORGAN STANLEY</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>SALOMON SMITH BARNEY</B></FONT></TD>
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<TD WIDTH="39%" VALIGN="TOP"><FONT SIZE=2><B>CREDIT SUISSE FIRST BOSTON</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><B>JPMORGAN</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><B>MERRILL LYNCH &amp; CO.</B></FONT></TD>
</TR>
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<TD WIDTH="50%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><B>DOWLING &amp; PARTNERS SECURITIES, LLC</B></FONT></TD>
<TD WIDTH="50%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><B>FOX-PITT, KELTON</B></FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003 </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_bg2730_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
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<A NAME="toc_bg2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>Table of Contents    <BR>  </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="92%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Prospectus Summary</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Risk Factors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Forward-Looking Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Use of Proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Dividend Policy</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Capitalization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Dilution</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Selected Consolidated Financial Information</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Industry Background</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>52</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Business</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Regulation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>71</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Management</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>83</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Principal and Selling Shareholders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>96</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Certain Relationships and Related Transactions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>102</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Material Tax Considerations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>103</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Description of Share Capital</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>118</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Shares Eligible for Future Sale</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>128</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Underwriting</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>130</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Legal Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>133</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Experts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>133</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Where You Can Find More Information</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>133</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Enforceability of Civil Liabilities Under United States Federal Securities Laws and Other Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>133</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Index to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>F-1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="92%"><FONT SIZE=2>Glossary of Selected Reinsurance, Insurance and Investment Terms</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>G-1</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003, which is the 25th day after the date of this prospectus, all dealers that buy, sell or trade our common shares, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or
subscriptions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with
information that is different from that contained in this prospectus. We are offering to sell and seeking offers to buy these securities only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common
shares.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Common shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 1998 of Bermuda which regulates the sale
of securities in Bermuda. In addition, the Bermuda Monetary Authority (the "BMA") must approve all issuances and transfers of shares of a Bermuda exempted company. Before this offering, we expect the
BMA will have issued their permission for the issue and free transferability of the common shares being offered pursuant to this prospectus, as long as the common shares are listed on the New York
Stock Exchange, to and among persons who are non-residents of Bermuda for exchange controls purposes. In addition, we will deliver to and file&nbsp;a copy of this prospectus with the
Registrar of Companies in Bermuda in accordance with
Bermuda law. The BMA and the Registrar of Companies accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or opinions expressed in
this prospectus.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Neither we nor the selling shareholders have authorized any offer of the common shares being offered pursuant to this prospectus to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulation&nbsp;1995, as amended (the "Regulations"). Common shares may not lawfully be offered or sold to persons in the United Kingdom
except in circumstances which do not  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

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<P><FONT SIZE=2><B> result in an offer to the public in the United Kingdom within the meaning of the Regulations or otherwise in compliance with all applicable provisions of the Regulations.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>This document is for distribution only to persons who (i)&nbsp;are outside the United Kingdom, (ii)&nbsp;have professional experience in matters relating to
investments or (iii)&nbsp;are persons falling within Article&nbsp;49(2)(a) to (d)&nbsp;("high net worth companies, unincorporated associations, etc.") of The Financial Services and Markets Act
2000 (Financial Promotion) Order 2001 (as amended) (all such persons together being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant
persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>ii</FONT></P>

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<BR></FONT><FONT SIZE=2><B>PROSPECTUS SUMMARY    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This summary highlights information contained elsewhere in this prospectus. While we have highlighted what we believe is the most
important information about us and this offering in this summary, you should read the entire prospectus carefully, including the "Risk Factors" and "Forward-Looking Statements" sections and our
consolidated financial statements and the notes to those consolidated financial statements before making an investment decision. In this prospectus, references to the "Company," "we," "us" or "our"
refer to AXIS Capital Holdings Limited and its subsidiaries, including AXIS Specialty Limited ("AXIS Specialty"), AXIS Re Limited ("AXIS Re"), AXIS Specialty Europe Limited ("AXIS Specialty Europe"),
AXIS Reinsurance Company ("AXIS Reinsurance"), AXIS Specialty Insurance Company ("AXIS Insurance"), Sheffield Insurance Corporation, which the Company acquired as of February&nbsp;28, 2002 and
intends to rename AXIS Indemnity Company ("AXIS Indemnity"), and any other direct or indirect subsidiary, unless the context suggests otherwise. References to "AXIS Holdings" refer solely to AXIS
Capital Holdings Limited. References in this prospectus to "dollars" or "$" are to the lawful currency of the United States of America, unless the context otherwise requires. Unless otherwise stated,
all figures assume no exercise of the underwriters' over-allotment option. All share amounts and strike prices contained in this prospectus will be adjusted to reflect a stock split which
the Company expects to effect prior to the consummation of the offering contemplated by this prospectus. For your convenience, we have provided a Glossary, beginning on page G-1, of
selected reinsurance, insurance and investment terms and have printed these terms in boldfaced type the first time they are used in this prospectus.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca2730_our_company"> </A>
<A NAME="toc_ca2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>OUR COMPANY    <BR>  </B></FONT></P>

<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide </FONT><FONT SIZE=2><B>specialty lines</B></FONT><FONT SIZE=2> insurance and </FONT><FONT SIZE=2><B>treaty reinsurance</B></FONT><FONT SIZE=2> on a
global basis, with headquarters in Bermuda. Through our operating subsidiaries based in Bermuda, Ireland and the United States, we focus on writing coverage for specialized classes of risk through our
team of highly skilled and experienced underwriters. Since our founding in November&nbsp;2001, we have successfully assembled a strong management team of proven leaders with significant industry
experience, established a global underwriting infrastructure and built a broad product portfolio. In 2002, our first full year of operation, we wrote $1.1&nbsp;billion of gross premiums, generated
$265.1&nbsp;million of net income, produced a </FONT><FONT SIZE=2><B>combined ratio</B></FONT><FONT SIZE=2> of 70.7% and earned a return on average equity of 14.7%. As of December&nbsp;31, 2002,
we had
$1.96&nbsp;billion of shareholders' equity. We believe that we have already established a recognized franchise in the insurance and </FONT><FONT SIZE=2><B>reinsurance</B></FONT><FONT SIZE=2>
industry and are well-positioned to provide our products to our customers. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
insurance and reinsurance industry has recently experienced severe dislocation as a result of an unprecedented impairment of capital, which has caused a substantial contraction in
global </FONT><FONT SIZE=2><B>underwriting capacity</B></FONT><FONT SIZE=2>. We believe this impairment has been caused primarily by the following factors: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Record
loss events in 2001 and 2002;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Continued
adverse loss development from industry legacy issues;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>An
adverse investment environment;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Exit
of key players from certain markets; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>A
significant number of ratings downgrades. </FONT></DD></DL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that from the beginning of 2001 through the end of 2002, capital available to write property and </FONT><FONT SIZE=2><B>casualty insurance</B></FONT><FONT SIZE=2> and
reinsurance has been impaired by an estimated $228 to $248&nbsp;billion in potential and realized underwriting and investment losses. This amount is equal to 33% to 35% of the approximately
$700&nbsp;billion in available capital at the end of 2000. At the same time that </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<P><FONT SIZE=2>
capacity has declined, we believe the demand for commercial insurance and reinsurance has increased as insureds have become increasingly aware of their risk exposures. These industry developments
have provided new companies such as ours with an opportunity to provide much needed underwriting capacity at attractive rates in conjunction with improved terms and conditions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
forming our Company, our strategy was to establish an entity with a solid capital base, a strong management team, a globally diversified product portfolio and a cost-effective
underwriting platform capable of allowing us to react quickly to changing market dynamics. We believe this strategy clearly differentiates us from incumbent insurers and reinsurers. In our first full
year of operation, we believe we have begun to successfully execute this strategy, and we are committed to capitalizing on the opportunities created by ongoing market dislocations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
seek to use our management's extensive expertise, experience and long-standing market relationships to identify and underwrite attractively priced risks while delivering
innovative insurance and reinsurance solutions to our customers. Our underwriters are focused on constructing a portfolio of risks that fully utilizes our capital while optimizing the
risk-reward characteristics of the portfolio. In specialty lines, we have designed our corporate and underwriting structure to create an operating platform that utilizes new procedures and
technologies. We believe we have a unique operating platform in specialty lines that provides us with a competitive advantage. We intend to continue to exercise highly disciplined underwriting
practices and manage a diverse book of business while seeking to maximize our profitability and generate superior returns on equity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
business is comprised of two underwriting segments: specialty lines and treaty reinsurance. During the year ended December&nbsp;31, 2002, we wrote gross premiums for our specialty
lines and treaty reinsurance of $793.8&nbsp;million and $314.2&nbsp;million, respectively. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
specialty lines segment primarily includes the following risk classifications: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Specialty
Risks (including Terrorism, Marine and Aviation War Risk and Political Risk);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Onshore
and Offshore Energy;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Aviation
and Aerospace;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Commercial
Property; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Marine.
</FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also expect to write specialty lines insurance covering professional liability and related lines as a result of our agreement to acquire the renewal rights to a book of business
written by the Financial Insurance Solutions unit of Kemper Insurance Companies ("Kemper"), a transaction we expect to consummate in early 2003. In connection with this acquisition, we added a senior
underwriting team from Kemper. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
treaty reinsurance segment provides short to medium tail, severity-driven products, primarily for catastrophic risks. The underlying property and casualty insurance business classes
covered by the treaties we write include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Property;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Workers'
Compensation, Personal Accident and Life;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Professional
Liability;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Casualty
</FONT><FONT SIZE=2><B>Clash</B></FONT><FONT SIZE=2>; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Marine
and Aviation. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
market and distribute our products primarily through the world's largest insurance and reinsurance </FONT><FONT SIZE=2><B>brokers</B></FONT><FONT SIZE=2>, such as Marsh&nbsp;Inc.
("Marsh"), including its subsidiary, Guy Carpenter&nbsp;&amp; Company,&nbsp;Inc. ("Guy Carpenter"), Aon Corporation ("Aon"), Willis Group Holdings&nbsp;Ltd. ("Willis") and Benfield Group
("Benfield"), among others. </FONT></P>

<P><FONT SIZE=2><B>Competitive Strengths  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our competitive strengths have enabled, and will continue to enable us to capitalize on the significant dislocation in the insurance and reinsurance
marketplace. These strengths include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Experienced Management and Underwriting Team with Proven Track Record.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our management team is
led by our President and CEO, John R. Charman, who has over 30&nbsp;years of industry experience, and our Chairman, Michael A. Butt, who has over 40&nbsp;years of industry experience. We have also
assembled a team of senior underwriters with an average industry experience of 20&nbsp;years at successful insurers and reinsurers in a variety of markets. The extensive depth and knowledge of our
management and underwriting teams provide us with the ability to successfully select and price complex risks.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Long-Standing Market Relationships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our underwriters have
well-established personal relationships with our insureds, </FONT><FONT SIZE=2><B>cedents</B></FONT><FONT SIZE=2> and brokers. We use our market relationships to identify business
opportunities and establish ourselves as leaders in lines of business that have been severely affected by the dislocation in insurance markets.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Demonstrated Ability to Attract High Quality Talent.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;From inception, we have successfully
targeted and hired high quality management and underwriting talent. In addition, we have capitalized on the significant dislocation in the insurance industry by selectively recruiting entire
underwriting teams, which has enabled us to expand our product lines.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Disciplined Approach to Underwriting and Risk Management.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe in generating underwriting
profitability through a disciplined, conservative approach utilizing peer review processes involving seasoned underwriters for each of our segments. We believe these peer review processes, combined
with our strict management of global aggregate exposures across products and sophisticated modeling capabilities, allow us to realize attractive prices, favorable terms and risk diversification.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Low-Cost International Infrastructure and Versatile Underwriting Platform.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We
believe our international presence, centralized coordination and proprietary technologies provide us with the flexibility to adapt to market conditions in real time and practice a highly opportunistic
underwriting approach. In addition, we believe our innovative technological platform and streamlined underwriting processes help lower our costs.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Superior Financial Strength.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;As of December&nbsp;31, 2002, we had a capital base of
$1.96&nbsp;billion without any outstanding debt. Our operating companies (with the exception of AXIS Indemnity, which is not rated) are rated "A" (Strong) by Standard&nbsp;&amp; Poor's and
"A-" (Excellent) by&nbsp;A.M. Best Company,&nbsp;Inc. ("A.M. Best"). These ratings reflect our ability to pay policyholder claims and are not applicable to the securities offered in
this prospectus. Our capital is unencumbered by historical losses relating to the tragic events of September&nbsp;11, 2001, asbestos, environmental or other legacy exposures that have led to capital
charges for others in our industry. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2><B>Strategy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate objective is to generate superior returns on equity while establishing ourselves as a global leader in providing specialty lines insurance and
treaty reinsurance products to our customers. We intend to achieve this objective by executing the following strategies: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Establish Global Leadership in Key Business Lines by Leveraging Management's Significant Experience and
Relationships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our senior management team has extensive customer relationships with leading insurers, cedents and brokers around the world. As a result, we have
been able to take advantage of the current dislocation in the insurance market to rapidly establish our market presence. We intend to continue to rely on the strength and depth of these relationships
to generate new business in the future and establish ourselves as a leading writer of specialty lines and treaty reinsurance.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Opportunistically Manage a Diverse Portfolio of Specialty Risks.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are opportunistic and
selective participants in business lines that have been most affected by the significant contraction in global underwriting capacity. In 2002, we constructed a diverse portfolio of business lines
consistent with our long-term targets. We intend to use our underwriting expertise to emphasize particular business lines in response to changing market conditions. By carefully choosing
our exposures, we plan to maintain a short to medium tail focus and build a geographically diverse portfolio that minimizes correlated risk.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Continue Commitment to Highly Disciplined Underwriting Practices.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to continue to
utilize our disciplined underwriting approach to minimize risk and reduce the volatility of our operating results. We believe that the use of peer review processes throughout our organization,
combined with our strict management of global aggregate exposures across products and sophisticated modeling capabilities, allow us to realize attractive prices, favorable terms and risk
diversification.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Maintain a Conservative Balance Sheet and Superior Financial Ratings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are committed to
maintaining our excellent capitalization, financial strength and ratings over the long-term. Our assets are conservatively invested in high-grade fixed income securities. Our
investment strategy is to preserve capital and proactively avoid problem credits by applying stringent watch-list criteria and following formalized investment guidelines.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Realize Increased Profitability by Maintaining Our Efficient, Low-Cost
Infrastructure.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to maintain and capitalize on our low-cost infrastructure to realize increased profitability as our business matures. Having
obtained requisite licenses, technology and underwriting expertise within our first year of operation, we believe we are well-positioned to grow our business without incurring significant
additional capital expenditures. We plan to use the flexibility provided by the scaleable nature of our infrastructure to respond to both positive and negative changes in market conditions as they
develop and to integrate new business opportunities in a cost-efficient manner.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Manage Capital Prudently.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to manage our capital prudently relative to our risk
exposure to maximize profitability and long-term growth in shareholder value. Our capital management strategy is to deploy capital efficiently to underwriting opportunities and to
establish adequate </FONT><FONT SIZE=2><B>loss reserves</B></FONT><FONT SIZE=2> to protect against future adverse developments. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2><B>Risks Relating to Our Company  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of your evaluation of our company, you should take into account the risks we face in our business. These risks include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Limited Operating History.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We began our business in November&nbsp;2001, and have a limited
operating and financial history. As a result, there is limited historical financial and operating information available to help you evaluate our performance or an investment in our common shares. In
addition, because we have not experienced any substantial claims to date, our historical financial results may not accurately indicate our future performance.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Exposure to Natural and Man-Made Disasters.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We may have substantial exposure to
unexpected losses resulting from natural and man-made disasters and other catastrophic events. The incidence and severity of such catastrophes are inherently unpredictable and our losses
from catastrophes could be substantial. The occurrence of claims from catastrophic events is likely to result in substantial volatility in our financial condition or results of operations for any
fiscal quarter or year and could have a material adverse effect on our financial condition or results of operations and our ability to write new business.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Uncertainty of Loss Reserves.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our results of operations and financial condition depend upon our
ability to assess accurately the potential losses associated with the risks that we insure and reinsure. To the extent actual claims exceed our expectations, this could cause a material increase in
our liabilities and a reduction in our profitability, including an operating loss and reduction of capital.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Failure of Loss Limitation Methods.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We seek to mitigate our loss exposure by employing various
limitations and exclusions. We cannot be sure that these loss limitation methods will be effective to mitigate the effect on our financial condition or results of operations from one or more
catastrophic or other events.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Emerging Claims and Coverage Issues.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Unexpected and unintended issues related to claims and
coverage may emerge as practices and conditions change both inside and outside of the insurance and reinsurance industry. These issues may adversely affect our business by either extending coverage
beyond our underwriting intent or by increasing the number or size of claims.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Risk Associated with Reinsurance Underwriting.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In our reinsurance business, we do not separately
evaluate each of the individual risks assumed under reinsurance treaties. This is common among reinsurers. Therefore, we will be largely dependent on the original underwriting decisions made by ceding
companies. We are subject to the risk that the ceding companies may not have adequately evaluated
the risks to be reinsured and that the premiums ceded may not adequately compensate us for the risks we assume.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Loss of Key Employees.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our success will depend in substantial part upon our ability to attract
and retain our principal employees. If we were to lose the services of members of our management team, our business could be adversely affected. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
more information about these and other risks, see "Risk Factors" beginning on page 10. You should carefully consider these risk factors together with all the other information
included in this prospectus. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<A NAME="page_ca2730_1_6"> </A>
<BR>

<P><FONT SIZE=2><B>Corporate History and Organization  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were founded with $1.7&nbsp;billion of capital and began operations in November&nbsp;2001 as AXIS Specialty. AXIS Specialty and its subsidiaries became
wholly owned subsidiaries of AXIS Holdings pursuant to an exchange offer consummated on December&nbsp;31, 2002 (the "Exchange Offer"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is a chart of our corporate organization showing only our operating insurance companies. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g707675.jpg" ALT="logo" WIDTH="513" HEIGHT="268">
  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
principal executive offices are located at 106 Pitts Bay Road, Pembroke HM 08, Bermuda, and our telephone number at that location is (441)&nbsp;296-2600. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<BR>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_cc2730_1_7"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cc2730_the_offering"> </A>
<A NAME="toc_cc2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>THE OFFERING    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Common shares offered by us</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Common shares offered by selling shareholders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Common shares to be outstanding after the offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Over-allotment option</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Use of proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="BOTTOM"><FONT SIZE=2>We estimate that our net proceeds from the initial public offering of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of our common shares, based on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and
commissions and estimated offering expenses we will pay, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million. We estimate that our net proceeds will be
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million if the underwriters exercise their over-allotment option in full. We intend to use the net proceeds of this
offering as additional capital for operations and general corporate purposes. We will not receive any of the proceeds from the sale of common shares by the selling shareholders.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Dividend policy</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" VALIGN="BOTTOM"><FONT SIZE=2>Our board of directors currently intends to authorize the payment of a dividend of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per common
share per quarter to our shareholders of record, beginning&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. Any determination to pay dividends will be at the discretion of our board of
directors and will be dependent upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and any
other factors our board of directors deems relevant.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%" VALIGN="TOP"><FONT SIZE=2>Proposed New York Stock Exchange symbol</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>AXS</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares shown to be outstanding after the offering is based upon 17,271,065 common shares outstanding as of December&nbsp;31, 2002 and excludes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>common
shares that may be issued pursuant to the underwriters' over-allotment option; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>2,431,663
common shares that may be issued pursuant to warrants outstanding as of December&nbsp;31, 2002 at a price of $100 per share; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>559,439
common shares that may be issued pursuant to options that had been granted as of December&nbsp;31, 2002 at a weighted average exercise price of
$104.25 per share; and </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>137,592
additional common shares available for future issuance under our stock option and incentive plans. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
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<A NAME="page_cc2730_1_8"> </A>
<UL>
<UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cc2730_summary_consolidated_financial_information"> </A>
<A NAME="toc_cc2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>SUMMARY CONSOLIDATED FINANCIAL INFORMATION    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our summary historical consolidated financial information for the periods ended and as of the dates indicated. AXIS Specialty was
incorporated on November&nbsp;8, 2001 and commenced operations on November&nbsp;20, 2001. AXIS Holdings was incorporated on December&nbsp;9, 2002. On December&nbsp;31, 2002, AXIS Specialty and
its subsidiaries became wholly owned subsidiaries of AXIS Holdings pursuant to the Exchange Offer. In the Exchange Offer, the shareholders of AXIS Specialty exchanged their shares for identical
shareholdings in AXIS Holdings. Following the Exchange Offer, AXIS Specialty distributed all of its wholly owned subsidiaries to AXIS Holdings. The Exchange Offer represents a business combination of
companies under common control and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
summary income statement and balance sheet data are derived from our audited consolidated financial statements included elsewhere in this prospectus, which have been prepared in
accordance with</FONT><FONT SIZE=2><B> generally accepted accounting principles </B></FONT><FONT SIZE=2>in the United States ("U.S. GAAP"). These historical results are not necessarily indicative of
results to be expected from any future period. You should read the following summary consolidated financial information together with the other information contained in this prospectus, including
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period Ended December 31, 2001(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands, except share amounts)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2><B>Summary Income Statement Data:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Gross premiums written</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Premiums ceded</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(89,726</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Net premiums earned</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4,763</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Net realized gains</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>26,070</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>394</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Acquisition costs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>103,703</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>832</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>General and administrative expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>46,521</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,566</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>265,119</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><BR><FONT SIZE=2><B>Per Share Data:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Basic earnings per share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Diluted earnings per share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Basic weighted average shares outstanding</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Diluted weighted average shares outstanding</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><BR><FONT SIZE=2><B>Selected Ratios (based on U.S. GAAP income statement data):</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Loss and loss expense ratio(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>42.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>51.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Acquisition cost ratio(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>19.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>44.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>General and administrative expense ratio(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>136.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Combined ratio(5)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>70.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>231.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
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<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>As of December 31, 2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>As Adjusted (unaudited)(6)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands, except share amounts)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Summary Balance Sheet Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>729,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Investments at fair market value</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,986,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Reserve for losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>215,934</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Unearned premiums</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>555,962</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Total shareholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,961,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><BR><FONT SIZE=2><B>Per Share Data (based on U.S. GAAP balance sheet data):</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Book value per share(7)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>113.54</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Diluted book value per share(8)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>111.66</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>The
financial information for this period reflects our results from November&nbsp;8, 2001, the date of incorporation of AXIS Specialty, to December&nbsp;31, 2001.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>The</FONT><FONT
SIZE=2><B> loss and loss expense ratio </B></FONT><FONT SIZE=2>is calculated by dividing</FONT><FONT SIZE=2><B> losses and loss expenses  </B></FONT><FONT SIZE=2>by</FONT><FONT SIZE=2><B> net premiums earned.</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>The</FONT><FONT
SIZE=2><B> acquisition cost ratio </B></FONT><FONT SIZE=2>is calculated by dividing total</FONT><FONT SIZE=2><B> acquisition costs </B></FONT><FONT SIZE=2>by net
premiums earned.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>The</FONT><FONT
SIZE=2><B> general and administrative expense ratio </B></FONT><FONT SIZE=2>is calculated by dividing general and administrative expenses by net premiums earned.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>The
combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>The
as adjusted balance sheet data as of December&nbsp;31, 2002 reflects the estimated net proceeds of the sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares by us in this
offering (assuming no
exercise of the underwriters' over-allotment option) at an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the
midpoint of the price range set forth on
the cover page of this prospectus) and after deducting the underwriting discounts and commissions and estimated offering expenses.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Book
value per share is based on total shareholders' equity divided by basic shares outstanding of 17,271,065 as of December&nbsp;31, 2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Diluted
book value per share is calculated based on total shareholders' equity, adjusted for the proceeds expected to be received upon the exercise of options and warrants, divided by
the number of common shares and common share equivalents outstanding at the end of the period. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<BR></FONT><FONT SIZE=2><B>RISK FACTORS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>An investment in our common shares involves a number of risks. You should carefully consider the following information about these risks,
together with the other information contained in this prospectus, before investing in our common shares. The risks and uncertainties described below are not the only ones we face. However, these are
the risks our management believes are material. Additional risks not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Any of the risks
described below could result in a significant or material adverse effect on our results of operations or financial condition, and a corresponding decline in the market price of our common shares. You
could lose all or part of your investment.</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this prospectus. See "Forward-Looking Statements."  </I></FONT></P>

<P><FONT SIZE=2><B><I>Risks Related to Our Company  </I></B></FONT></P>

<P><FONT SIZE=2><B>Our future performance is difficult to predict because we have a limited operating history.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We began our business in November&nbsp;2001, and have a limited operating and financial history. As a result, there is limited historical financial and
operating information available to help you evaluate our performance or an investment in our common shares. Insurance companies in their initial stages of development face substantial business and
financial risks and may suffer significant losses. They must successfully develop business relationships, establish operating procedures, hire staff, install management information and other systems
and complete other tasks necessary to conduct their intended business activities. It is possible that we will not be successful in implementing our business strategy or accomplishing these necessary
tasks. In addition, because we have not experienced any substantial claims to date, our historical financial results may not accurately indicate our future performance. </FONT></P>

<P><FONT SIZE=2><B>Our financial condition could be adversely affected by the occurrence of natural and man-made disasters.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may have substantial exposure to unexpected losses resulting from natural disasters, man-made catastrophes and other catastrophic events.
Catastrophes can be caused by various events, including hurricanes, earthquakes, hailstorms, explosions, severe winter weather, fires, war, acts of terrorism, political instability and other natural
or man-made disasters. In addition, we have written and will continue to write policies explicitly covering war, acts of terrorism and political risk. The incidence and severity of such
catastrophes are inherently unpredictable and our losses from catastrophes could be substantial. The occurrence of claims from catastrophic events is likely to result in substantial volatility in our
financial condition or results of operations for any fiscal quarter or year and could have a material adverse effect on our financial condition or results of operations and our ability to write new
business. This volatility is compounded by accounting regulations that do not permit reinsurers to reserve for such catastrophic events until they occur. We expect that increases in the values and
concentrations of insured property may increase the severity of such occurrences in the future. Although we attempt to manage our exposure to such events, a single catastrophic event could affect
multiple geographic zones or the frequency or severity of catastrophic events could exceed our estimates. As a result, the occurrence of one or more catastrophic events could have a material adverse
effect on our financial condition or results of operations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2><B>If actual claims exceed our loss reserves, our financial results could be significantly adversely affected.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our results of operations and financial condition depend upon our ability to assess accurately the potential losses associated with the risks that we insure and
reinsure. To the extent actual claims exceed our expectations, we will be required to immediately recognize the less favorable experience. This could cause a material increase in our liabilities and a
reduction in our profitability, including an operating loss and reduction of capital. To date, we have not been required to make any of these adjustments. However, it is early in our history, and the
number and size of reported claims has been small. It is expected that in the future, the number of claims will increase, and their size could exceed our expectations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
establish loss reserves to cover our estimated liability for the payment of all losses and loss expenses incurred with respect to premiums earned on the policies that we write. Our
operating history is too limited and our loss history is too insufficient to allow us currently to extrapolate </FONT><FONT SIZE=2><B>reserves </B></FONT><FONT SIZE=2>directly. Instead, our current
loss reserves are based on estimates involving actuarial and statistical projections of our expectations of the ultimate settlement and administration costs of claims </FONT><FONT SIZE=2><B>incurred
but not reported</B></FONT><FONT SIZE=2> ("IBNR"). We utilize actuarial models as well as historical insurance industry loss development patterns to establish appropriate loss reserves, as well as
estimates of future trends in claims severity, frequency and other factors. Establishing an appropriate level of loss reserves is an
inherently uncertain process. Accordingly, actual claims and claim expenses paid will likely deviate, perhaps substantially, from the reserve estimates reflected in our consolidated financial
statements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our loss reserves are determined to be inadequate, we will be required to increase loss reserves at the time of such determination with a corresponding reduction in our net income in
the period in which the deficiency is rectified. It is possible that claims in respect of events that have occurred could exceed our loss reserves and have a material adverse effect on our results of
operations or our financial condition in general. </FONT></P>

<P><FONT SIZE=2><B>The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or our results of operations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to mitigate our loss exposure by writing a number of our insurance and reinsurance contracts on an </FONT><FONT SIZE=2><B>excess of loss  </B></FONT><FONT SIZE=2>basis. In
addition, we limit program size for each client and purchase reinsurance for our own account. In the case of </FONT><FONT SIZE=2><B>proportional reinsurance  </B></FONT><FONT SIZE=2>treaties, we seek per occurrence limitations or loss and loss
expense ratio caps to limit the impact of losses from any one event. We cannot be sure that any of these loss
limitation methods will be effective. We also seek to limit our loss exposure by geographic diversification. Geographic zone limitations involve significant underwriting judgments, including the
determination of the area of the zones and the inclusion of a particular policy within a particular zone's limits. Various provisions of our policies, such as limitations or exclusions from coverage
or choice of forum, negotiated to limit our risks may not be enforceable in the manner we intend. As a result of these risks, one or more catastrophic or other events could result in claims that
substantially exceed our expectations, which could have a material adverse effect on our financial condition or results of operations. </FONT></P>

<P><FONT SIZE=2><B>The effects of emerging claim and coverage issues on our business are uncertain.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may
emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may
not become apparent until some time after we have issued insurance or reinsurance contracts that are affected by the changes. As a result, the full extent of liability under our insurance or
reinsurance contracts may not be known for many years after a contract is issued. One recent example of an emerging claims and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2>
coverage issue is larger settlements and jury awards against professionals and corporate directors and officers covered by professional liability and directors' and officers' liability insurance. </FONT></P>

<P><FONT SIZE=2><B>The risk associated with reinsurance underwriting could adversely affect us.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our reinsurance business, we do not separately evaluate each of the individual risks assumed under reinsurance treaties. This is common among reinsurers.
Therefore, we will be largely dependent on the original underwriting decisions made by ceding companies. We are subject to the risk that the ceding companies may not have adequately evaluated the
risks to be reinsured and that the premiums ceded may not adequately compensate us for the risks we assume. </FONT></P>

<P><FONT SIZE=2><B>We could be adversely affected by the loss of one or more principal employees or by an inability to attract and retain staff.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success will depend in substantial part upon our ability to attract and retain our principal employees. As of January&nbsp;1, 2003, we had 168
full-time employees and, accordingly, depend upon them for the generation and servicing of our business. We rely substantially upon the services of our executive management team. Although
we are not aware of any planned departures, if we were to lose the services of members of our management team, our business could be adversely affected. We do not currently maintain key man life
insurance policies with respect to our employees except for our Chief Executive Officer, John R. Charman. </FONT></P>

<P><FONT SIZE=2><B>Our operating subsidiaries are rated by Standard&nbsp;&amp; Poor's and&nbsp;A.M. Best, and a decline in these ratings could affect our standing among brokers and customers and
cause our sales and earnings to decrease.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ratings have become an increasingly important factor in establishing the competitive position of insurance and reinsurance companies. Standard&nbsp;&amp; Poor's
maintains a letter scale rating system ranging from "AAA" (Extremely Strong) to "R" (under regulatory supervision).&nbsp;A.M. Best maintains a letter scale rating system ranging from "A++"
(Superior) to "F" (in liquidation). Our operating subsidiaries (with the exception of AXIS Indemnity, which has not been rated) have been rated "A" (Strong) by Standard&nbsp;&amp; Poor's, which is the
sixth highest of twenty-one rating levels, and "A-" (Excellent) by&nbsp;A.M. Best, which is the fourth highest of fifteen rating levels. The objective of Standard&nbsp;&amp;
Poor's and&nbsp;A.M. Best's rating systems is to provide an opinion of an insurer's financial strength and ability to meet ongoing obligations to its policyholders. Our ratings reflect
Standard&nbsp;&amp; Poor's and&nbsp;A.M. Best's opinions of our financial strength, are not evaluations directed to investors in our common shares and are not recommendations to buy, sell or hold our
common shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of, Standard&nbsp;&amp; Poor's and/or&nbsp;A.M. Best. If our ratings are
reduced from their current levels by either Standard&nbsp;&amp; Poor's or&nbsp;A.M. Best, our competitive position in the insurance and reinsurance industry would suffer, and it would be more
difficult for us to market our products. A downgrade, therefore, could result in a substantial loss of business as insureds, ceding companies and brokers that place such business move to other
insurers and reinsurers with higher ratings. In addition, we will be in default of our revolving credit facility if we do not maintain a rating of at least B++ from&nbsp;A.M. Best. </FONT></P>


<P><FONT SIZE=2><B>Our reliance on brokers subjects us to their credit risk.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with industry practice, we frequently pay amounts owed on claims under our insurance and reinsurance contracts to brokers, and these brokers, in
turn, pay these amounts over to the clients that have purchased insurance or reinsurance from us. In some jurisdictions, if a broker fails to make such a payment, we might remain liable to the insured
or ceding insurer for the deficiency. Conversely, in certain jurisdictions, when the insured or ceding insurer pays premiums for these policies </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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to brokers for payment over to us, these premiums are considered to have been paid and the insured or ceding insurer will no longer be liable to us for those amounts, whether or not we have actually
received the premiums from the broker. Consequently, we assume a degree of credit risk associated with brokers around the world. To date we have not experienced any losses related to such credit
risks. </FONT></P>

<P><FONT SIZE=2><B>If we choose to purchase reinsurance, we may be unable to do so, and if we successfully purchase reinsurance, we may be unable to collect.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchase a limited amount of reinsurance for our own account in order to mitigate the effect of large and multiple losses upon our financial condition. A
reinsurer's insolvency, or inability or refusal to make payments under the terms of its reinsurance agreement with us could have a material adverse effect on us because we remain liable to the
insured. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, market conditions have limited, and in some cases have prevented, insurers and reinsurers from obtaining the types and amounts of reinsurance that they consider
adequate for their business needs. For example, following the tragic events of September&nbsp;11, 2001, terms and conditions in the reinsurance and retrocessional markets generally became less
attractive. Accordingly, we may not be able to obtain our desired amounts of reinsurance or </FONT><FONT SIZE=2><B>retrocessional reinsurance</B></FONT><FONT SIZE=2>. In addition, even if we are able
to obtain such reinsurance or retrocessional reinsurance, we may not be able to negotiate terms that we deem appropriate or acceptable or obtain such reinsurance or retrocessional reinsurance from
entities with satisfactory creditworthiness. </FONT></P>

<P><FONT SIZE=2><B>Since we depend on a few brokers for a large portion of our revenues, loss of business provided by any one of them could adversely affect us.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We market our insurance and reinsurance worldwide primarily through insurance and reinsurance brokers. Marsh, including its subsidiary Guy Carpenter, Aon, Willis
and Benfield provided 37.9%, 20.7%, 10.6% and 5.5% (for a total of 74.7%), respectively, of our </FONT><FONT SIZE=2><B>gross premiums written</B></FONT><FONT SIZE=2> in the year ended
December&nbsp;31, 2002. We believe these brokers also have, or may in the future acquire, ownership interests in insurance and reinsurance companies that may compete with us, and these brokers may
favor their own insurers or reinsurers over other companies. Loss of all or a substantial portion of the business provided by one or more of these brokers could have a material adverse effect on our
business. </FONT></P>

<P><FONT SIZE=2><B>Our investment performance may affect our financial results and ability to conduct business.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our funds are invested by several professional investment advisory management firms under the direction of our management team in accordance with detailed
investment guidelines set by us. See "Business&#151;Investments." Although our investment policies stress diversification of risks, conservation of principal and liquidity, our investments are
subject to market-wide risks and fluctuations, as well as to risks inherent in particular securities. In particular, the volatility of our claims may force us to liquidate securities,
which may cause us to incur capital losses. If we do not structure our investment portfolio so that it is appropriately matched with our insurance and reinsurance liabilities, we may be forced to
liquidate investments prior to maturity at a significant loss to cover such liabilities. Investment losses could significantly decrease our asset base, thereby affecting our ability to conduct
business. </FONT></P>

<P><FONT SIZE=2><B>We may be adversely affected by interest rate changes.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating results are affected, in part, by the performance of our investment portfolio. Our investment portfolio contains interest rate
sensitive-instruments, such as bonds, which may be adversely affected by changes in interest rates. Changes in interest rates could also have an adverse effect on our investment income and results of
operations. For example, if interest rates decline, funds reinvested will earn less than expected. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, our investment portfolio includes mortgage-backed securities. As of December&nbsp;31, 2002, mortgage-backed securities constituted approximately 32.9% of our invested
assets (assets under management by third party investment managers). As with other fixed income investments, the fair market value of these securities fluctuates depending on market and other general
economic conditions and the interest rate environment. Changes in interest rates can expose us to prepayment risks on these investments. In periods of declining interest rates, mortgage prepayments
generally increase and mortgage-backed securities are prepaid more quickly, requiring us to reinvest the proceeds at the then current market rates. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our
control. Although we attempt to take measures to manage the risks of investing in a changing interest rate environment, we may not be able to mitigate interest rate sensitivity effectively. Our
mitigation efforts include maintaining a high quality portfolio with a relatively short duration to reduce the effect of interest rate
changes on book value. Despite our mitigation efforts, a significant increase in interest rates could have a material adverse effect on our book value. </FONT></P>

<P><FONT SIZE=2><B>We may require additional capital in the future, which may not be available or may only be available on unfavorable terms.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future capital requirements depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at
levels sufficient to cover losses. To the extent that the funds generated by this offering are insufficient to fund future operating requirements and/or cover claim losses, we may need to raise
additional funds through financings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. In the case of equity
financings, dilution to our shareholders could result, and in any case such securities may have rights, preferences and privileges that are senior to those of the shares offered hereby. If we cannot
obtain adequate capital on favorable terms or at all, our business, operating results and financial condition could be adversely affected. </FONT></P>

<P><FONT SIZE=2><B>Our operating results may be adversely affected by currency fluctuations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our functional currency is the U.S. dollar. As of December&nbsp;31, 2002, 12.7% of our gross premiums were written in currencies other than the U.S. dollar and
we expect that a similar proportion will be written in currencies other than the U.S. dollar in 2003. A portion of our loss reserves and investments are also in non-U.S. currencies. We
may, from time to time, experience losses resulting from fluctuations in the values of these non-U.S. currencies, which could adversely affect our operating results. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have no currency hedges in place, nor are we currently aware of any material exposures to loss payments that will be paid in non-U.S. currencies. We intend to consider the
use of hedges when we are advised of known or probable significant losses that will be paid in non-U.S. currencies. However, it is possible that we will not successfully structure those
hedges so as to effectively manage these risks. </FONT></P>

<P><FONT SIZE=2><B>The regulatory system under which we operate, and potential changes thereto, could have a material adverse effect on our business.  </B></FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our insurance and reinsurance subsidiaries may not be able to obtain or maintain necessary licenses, permits,
authorizations or accreditations in locales where we currently engage in business or in new locales, or may be able to do so only at significant cost. In addition, we may not be able to comply fully
with, or obtain appropriate exemptions from, the wide variety of laws and regulations applicable to
insurance or reinsurance companies or holding companies. Failure to comply with or to obtain appropriate authorizations and/or exemptions under any applicable laws could result </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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in restrictions on our ability to do business or certain activities that are regulated in one or more of the jurisdictions in which we operate and could subject us to fines and other sanctions, which
could have a material adverse effect on our business. In addition, changes in the laws or regulations to which our insurance and reinsurance subsidiaries are subject could have a material adverse
effect on our business. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty is a registered Class&nbsp;4 Bermuda insurance and reinsurance company. Among other matters,
Bermuda statutes, regulations and policies of the BMA require AXIS Specialty to maintain minimum levels of statutory capital, surplus and liquidity, to meet solvency standards, to obtain prior
approval of ownership and transfer of shares and to submit to certain periodic examinations of its financial condition. These statutes and regulations may, in effect, restrict AXIS Specialty's ability
to write insurance and reinsurance policies, to make certain investments and to distribute funds. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
offshore insurance and reinsurance regulatory environment has become subject to increased scrutiny in many jurisdictions, including the United States and various states within the
United States. Compliance with any new laws or regulations regulating offshore insurers or reinsurers could have a material adverse effect on our business. In addition, although AXIS Specialty does
not believe it is or will be in violation of insurance laws or regulations of any jurisdiction outside Bermuda, inquiries or challenges to AXIS Specialty's insurance or reinsurance activities may
still be raised in the future. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS U.S. Subsidiaries.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;AXIS Reinsurance is organized in New York and is licensed to write certain lines of insurance and
reinsurance in New York and elsewhere throughout the United States. There is currently a restriction on its license in North Carolina that prevents it from writing new business in that state. We have
applied to the North Carolina regulators to have this restriction removed. AXIS Insurance and AXIS Indemnity are organized and licensed to write certain lines of insurance in Connecticut and Illinois,
respectively, and are eligible to write certain lines of insurance in certain other U.S. jurisdictions on an excess or surplus lines basis (AXIS Reinsurance, AXIS Insurance and AXIS Indemnity are
collectively referred to as the "AXIS U.S. Subsidiaries"). The AXIS U.S. Subsidiaries are subject to the laws and regulations of their respective states of domicile and other jurisdictions in which
they are licensed or otherwise eligible to engage in business. These laws and regulations, among other things, subject some affiliate transactions between such entities and other members of our
holding company system to regulatory authority and require them to maintain minimum levels of capital, surplus and liquidity and comply with applicable risk-based capital requirements. In
addition, they impose restrictions on the payment of dividends and distributions and in certain cases require them to file insurance premium rates and policy forms. These statutes and regulations may,
in effect, restrict the ability of the AXIS U.S. Subsidiaries to write new business or distribute assets to AXIS Holdings. The purpose of the state insurance laws and regulations is to protect U.S.
insureds and U.S. ceding insurance companies, not our shareholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
recent years, the U.S. insurance regulatory framework has come under increased federal scrutiny, and some state legislators have considered or enacted laws that may alter or increase
state regulation
of insurance and reinsurance companies and holding companies. Moreover, the National Association of Insurance Commissioners ("NAIC"), which is an association of the insurance commissioners of all 50
states and the District of Columbia, and state insurance regulators regularly reexamine existing laws and regulations. Changes in these laws and regulations or the interpretation of these laws and
regulations could have a material adverse effect on our business. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty Europe.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty Europe is a non-life insurance company incorporated under the laws of
Ireland and as such is subject to the regulation and supervision of the Department of Enterprise, Trade and Employment ("DETE") pursuant to the Irish Insurance Acts, 1909 to 2000 and the regulations
relating to insurance business (together, the "Insurance Acts and Regulations"). Among other things, without the consent of the Minister for Enterprise, Trade and Employment (the "Minister"), AXIS
Specialty Europe is not permitted to reduce the level of its capital, may not make </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<P><FONT SIZE=2>
any dividend payments, may not make intercompany loans and must maintain a minimum solvency margin. Additionally, AXIS Specialty Europe has agreed, in connection with receiving its authorization to
engage in the insurance business, not to write any reinsurance business. Also, an insurance company supervised by the DETE may have its authorization revoked by the Minister under certain
circumstances, including, among others, if the Minister determines that such company has not used its authorization for the last 12&nbsp;months, has expressly renounced its authorization or has
ceased to carry on business covered by the authorization for more than six months, or no longer fulfills the conditions required by the Insurance Acts and Regulations. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Re.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;AXIS Re is a reinsurance company incorporated under the laws of Ireland. Under Irish law, a reinsurance company such
as AXIS Re is required to maintain a minimum level of paid up share capital. As a general matter, AXIS Re is not subject to the same level of regulation in Ireland as AXIS Specialty Europe. However,
the Insurance Acts and Regulations provide that the Minister may create regulations that cause the general insurance laws and regulations in Ireland to apply to reinsurance companies that carry on the
type of business that AXIS Re carries on. If any regulations were adopted, such regulations could require AXIS Re to apply to the Minister to be authorized to carry on its business, which
authorization would likely contain conditions with which AXIS Re would then have to comply, such as in regard to capitalization, maintenance of reserves, reserving policy, investment policy, solvency
requirements and the filing of returns. If such an application for authorization were not successful or if AXIS Re were unable to comply with such conditions as might be attached to such
authorization, it would not be lawful for it to continue to carry on its business and it would have to cease operations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Minister has the power under Section&nbsp;22 of the Insurance Act, 1989 (as inserted by Section&nbsp;5 of the Insurance Act, 2000) to direct AXIS Re to cease writing business
indefinitely or for a specified period for, among other grounds, inadequate capitalization, unsuitable directors and/or management or insufficient staff based in Ireland. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the European Commission is currently considering proposals the effect of which would be to harmonize the regulation of reinsurers across the European Union (the "EU") and to
permit a reinsurer authorized in one EU member state to carry on business in any other EU member state
without requiring further authorization. If these proposals were to become law in Ireland, AXIS Re would be subject to a higher level of regulation than currently. However, while it is likely that
such a proposal will be adopted, at this preliminary stage it is not possible to determine the form that such regulation will take, and what impact, if any, such regulation would have on our financial
condition and results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes
in these laws and regulations or the interpretation of these laws and regulations could have a material adverse effect on our business or results of operations. </FONT></P>

<P><FONT SIZE=2><B>Our inability to obtain the necessary credit could affect our ability to offer reinsurance in certain markets.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty is not licensed or admitted as an insurer in any jurisdiction other than Bermuda. Because many jurisdictions do not permit insurance companies to
take credit for reinsurance obtained from unlicensed or non-admitted insurers on their statutory financial statements unless appropriate security mechanisms are in place, we anticipate
that our reinsurance clients will typically require AXIS Specialty to post a letter of credit or other collateral. We expect that the $375&nbsp;million available for letters of credit under AXIS
Specialty's revolving credit facility will be used for this purpose. However, if this facility is not sufficient or if we are unable to renew this facility or are unable to arrange for other types of
security on commercially reasonable terms, AXIS Specialty could be limited in its ability to write business for certain of our clients. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<P><FONT SIZE=2><B>Our business could be adversely affected by Bermuda employment restrictions.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may need to hire additional employees to work in Bermuda. Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may not engage in
any gainful occupation in Bermuda without an appropriate governmental work permit. Work permits may be granted or extended by the Bermuda government upon showing that, after proper public
advertisement in most cases, no Bermudian (or spouse of a Bermudian) is available who meets the minimum standard requirements for the advertised position. The Bermuda government recently announced a
new policy limiting the duration of work permits to six years, with certain exemptions for key employees. All of our Bermuda-based professional employees who require work permits have been granted
permits by the Bermuda government. The terms of these permits range from one to three years depending on the individual. It is possible that we could lose the services of one or more of our key
employees if we were unable to obtain or renew their work permits, which could have a material adverse affect on our business. </FONT></P>

<P><FONT SIZE=2><B>Our ability to pay dividends may be constrained by our holding company structure and certain regulatory and other constraints.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Holdings is a holding company and, as such, has no substantial operations of its own. AXIS Holdings does not expect to have any significant operations or
assets other than its ownership of the shares of its operating insurance and reinsurance subsidiaries, AXIS Specialty, AXIS Re, AXIS Specialty Europe, AXIS Reinsurance, AXIS Insurance and AXIS
Indemnity (collectively, our "Insurance Subsidiaries"). Dividends and other permitted distributions from our Insurance Subsidiaries are expected to be our sole source of funds to meet ongoing cash
requirements, including any future debt service payments and other expenses, and to pay dividends, if any, to our shareholders. Our Insurance Subsidiaries are subject to significant regulatory
restrictions limiting their ability to declare and pay dividends. The inability of our Insurance Subsidiaries to pay dividends in an amount sufficient to enable us to meet our cash requirements at the
holding company level could have a material adverse effect on our operations and our ability to pay dividends to our shareholders. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
AXIS Holdings is subject to Bermuda regulatory constraints that will affect its ability to pay dividends on its common shares and make other payments. Under the Bermuda
Companies Act of 1981, as amended (the "Companies Act"), AXIS Holdings may declare or pay a dividend out of distributable reserves only if it has reasonable grounds for believing that it is, or would
after the payment be, able to pay its liabilities as they become due and if the realizable value of its assets would thereby not be less than the aggregate of its liabilities and issued share capital
and share premium accounts. For more information regarding restrictions on the payment of dividends by AXIS Holdings and the Insurance Subsidiaries, see "Dividend Policy" and "Regulation." </FONT></P>


<P><FONT SIZE=2><B>Our founding shareholders and certain of our directors may have conflicts of interest with us.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our founding shareholders and certain of our directors engage in commercial activities and enter into transactions or agreements with us or in competition with
us, which may give rise to conflicts of interest. We derive a significant portion of our business through insurance and reinsurance relationships and other arrangements in which Marsh or its
affiliates have acted as a broker or insurance or reinsurance intermediary. In addition, our founding shareholders and certain of our directors have sponsored, and may in the future sponsor, other
entities engaged in or intending to engage in insurance and reinsurance underwriting, some of which may compete with us. They have also entered into or may in the future enter into, agreements with
companies that may compete with us. We do not have any agreement or understanding with any of these parties regarding the resolution of potential conflicts of interest. In addition, we may not be in a
position to influence any party's decision to engage in activities that would give rise to a conflict of interest. These parties may take actions that are not in our shareholders' best interests. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<P><FONT SIZE=2><B><I>Risks Related to Our Industry  </I></B></FONT></P>

<P><FONT SIZE=2><B>We operate in a highly competitive environment, and substantial new capital inflows into the insurance and reinsurance industry will increase competition.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The insurance and reinsurance industry is highly competitive. We compete on an international and regional basis with major U.S., Bermuda, European and other
insurers and reinsurers and certain underwriting syndicates, some of which have greater financial, marketing and management resources than we do. See "Business&#151;Competition." We compete
primarily on the basis of experience, the strength of our client relationships, reputation, speed of claims payment, overall financial strength, ratings, scope of business (both by size and geographic
location), premiums charged, policy and contract terms and conditions and products offered. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
number of newly-organized, Bermuda-based insurance and reinsurance entities compete in the same market segments in which we operate. In addition, we may not be aware of other companies
that may be planning to enter the segments of the insurance and reinsurance market in which we operate or of existing companies that may be planning to raise additional capital. Increased competition
could result in fewer </FONT><FONT SIZE=2><B>submissions</B></FONT><FONT SIZE=2>, lower premium rates and less favorable policy terms and conditions, which could have a material adverse impact on our
growth and profitability. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further,
insurance/risk-linked securities and derivative and other non-traditional risk transfer mechanisms and vehicles are being developed and offered by other
parties, including non-insurance company entities, which could impact the demand for traditional insurance and reinsurance. A number of new, proposed or potential legislative or industry
developments could also increase competition in our industries. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New
competition could cause the demand for insurance or reinsurance to fall or the expense of customer acquisition and retention to increase, either of which could have a material
adverse effect on our growth and profitability. </FONT></P>

<P><FONT SIZE=2><B>Recent events may result in political, regulatory and industry initiatives which could adversely affect our business.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The supply of insurance and reinsurance coverage has decreased due to withdrawal of capacity and substantial reductions in capital resulting from, among other
things, the tragic events of September&nbsp;11, 2001. This tightening of supply may result in governmental intervention in the insurance and reinsurance markets, both in the United States and
worldwide. For example, on November&nbsp;26, 2002, the
Terrorism Risk Insurance Act was enacted to ensure the availability of insurance coverage for terrorist acts in the United States. This law requires insurers writing certain lines of property and
casualty insurance to offer coverage against certain acts of terrorism causing damage within the United States or to U.S. flagged vessels or aircraft. In return, the law requires the federal
government to indemnify such insurers for 90% of insured losses resulting from covered acts of terrorism, subject to a premium-based deductible. The law expires automatically at the end of 2005. See
"Regulation&#151;United States&#151;Legislative Changes." Currently there is a great deal of uncertainty as to what effect the law will have on the insurance industry. At a minimum,
insurers will offer increased underwriting capacity in the United States for terrorism-related coverage, which could have an adverse effect on our business because we believe we were among the few
insurers already offering terrorism protection when the Act was adopted. We are currently unable to predict the extent to which the foregoing and other new initiatives may affect the demand for our
products or the risks which may be available for us to consider underwriting. At the same time, threats of further terrorist attacks and the military initiatives and political unrest in the Middle
East and Asia have adversely affected general economic, market and political conditions, increasing many of the risks associated with the insurance markets worldwide. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2><B>The insurance and reinsurance business is historically cyclical, and we expect to experience periods with excess underwriting capacity and unfavorable premium rates.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, insurers and reinsurers have experienced significant fluctuations in operating results due to competition, frequency of occurrence or severity of
catastrophic events, levels of capacity, general economic conditions and other factors. The supply of insurance and reinsurance is related to prevailing prices, the level of insured losses and the
level of industry surplus which, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance and reinsurance industry. As a result, the insurance and
reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of
capacity permitted favorable premium levels. Although premium levels for many products have increased in recent months, the supply of insurance and reinsurance may increase, either by capital provided
by new entrants or by the commitment of additional capital by existing insurers or reinsurers, which may cause prices to decrease. Any of these factors could lead to a significant reduction in premium
rates, less favorable policy terms and fewer submissions for our underwriting services. In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and
insurers may affect the cycles of the insurance and reinsurance business significantly, and we expect to experience the effects of such cyclicality. </FONT></P>

<P><FONT SIZE=2><B><I>Risks Related to Our Common Shares and This Offering  </I></B></FONT></P>

<P><FONT SIZE=2><B>There is no prior public market for our common shares and therefore you cannot be certain that an active trading market or a specific share price will be established.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently there is no public trading market for our common shares and, as a result of this risk, it is possible that an active trading market will not develop and
continue upon completion of this offering or that the market price of our common shares will decline below the initial public offering price. We intend to apply to list our common shares on the New
York Stock Exchange under the symbol "AXS." The initial public offering price per common share will be determined by agreement among us and the representatives of the underwriters and may not be
indicative of the market price of our common shares after our initial public offering. </FONT></P>

<P><FONT SIZE=2><B>Future sales of common shares may affect their market price and the future exercise of options and warrants will result in immediate and substantial dilution.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot predict what effect, if any, future sales of our common shares, or the availability of common shares for future sale, will have on the market price of
our common shares. Sales of substantial amounts of our common shares in the public market following our initial public offering, or the perception that such sales could occur, could adversely affect
the market price of our common shares and may make it more difficult for you to sell your common shares at a time and price which you deem appropriate. See "Description of Share
Capital&#151;Shareholders Agreement" and "Shares Eligible for Future Sale" for further information regarding circumstances under which additional common shares may be sold. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of our initial public offering, there will be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares outstanding. If the underwriters' over-allotment option for an
additional
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares is exercised,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares will be outstanding. Moreover, an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares will be issuable upon the full exercise or
conversion of outstanding vested options and warrants. In the event that the over-allotment option or any outstanding options or warrants to purchase common shares are exercised, you will
suffer immediate and substantial dilution of your investment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We,
our directors, officers and certain of our existing shareholders have agreed, with limited exceptions, for a period of 180&nbsp;days after the date of this prospectus, that we and
they will not, without the prior written consent of Morgan Stanley&nbsp;&amp; Co. Incorporated and Salomon Smith Barney&nbsp;Inc. on </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2>
behalf of the underwriters, directly or indirectly, offer to sell, sell or otherwise dispose of any of our common shares. All of the shareholders party to our shareholders agreement are subject to
similar restrictions. Following the consummation of this offering, certain of our existing shareholders and their transferees will have the right to require us to register their common shares under
the Securities Act of 1933 (the "Securities Act") for sale into the public markets, subject to the 180-day lock-up agreements and the restrictions in our shareholders
agreement. See "Description of Share Capital&#151;Shareholders Agreement." Upon the effectiveness of any such registration statement, all shares covered by the registration statement will be
freely transferable. In addition, following the consummation of this
offering, we intend to file&nbsp;a registration statement on Form&nbsp;S-8 under the Securities Act to register an aggregate of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares
reserved for issuance
under our Long-Term Equity Compensation Plan and our Directors Deferred Compensation Plan. Subject to the exercise of issued and outstanding options, shares registered under the registration statement
on Form&nbsp;S-8 will be available for sale into the public markets after the expiration of the 180-day lock-up agreements. </FONT></P>

<P><FONT SIZE=2><B>Public investors will suffer immediate and substantial dilution as a result of this offering.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The initial public offering price per common share is significantly higher than our net book value per share. Accordingly, if you purchase common shares in this
offering, you will suffer immediate and substantial dilution of your investment. Based upon the issuance and sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares at an
assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the midpoint of the price range set forth on the cover page of this prospectus), you will incur immediate dilution of
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in the net book value
per common share if you purchase common shares in this offering. </FONT></P>

<P><FONT SIZE=2><B>There are provisions in our charter documents which may reduce or increase the voting rights of our common shares.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bye-laws generally provide that shareholders have one vote for each common share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However, pursuant to a mechanism specified in our bye-laws the voting rights exercisable by a shareholder may be limited
so that certain persons or groups are not deemed to hold 9.5% or more of the voting power conferred by our common shares. The votes that could be cast by a shareholder but for these restrictions will
be allocated to the other shareholders. In addition, our board of directors may limit a shareholder's exercise of voting rights where it deems it necessary to do so to avoid adverse tax, legal or
regulatory consequences. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
these provisions, certain shareholders may have the right to exercise their voting rights limited to less than one vote per share, while other shareholders may have the right to
exercise their voting rights increased to more than one vote per share. Moreover, these provisions could have the effect of reducing the voting power of certain shareholders who would not otherwise be
subject to the limitation by virtue of their direct share ownership. Our bye-laws provide that shareholders will be notified of the applicable voting power exercisable with respect to
their common shares prior to any vote to be taken by the shareholders. See "Description of Share Capital&#151;Voting Rights." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of any reallocation of votes, your voting rights might increase above 5% of the aggregate voting power of the outstanding common shares, thereby possibly resulting in your
becoming a reporting person subject to Schedule&nbsp;13D or 13G filing requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also have the authority under our bye-laws to request information from any shareholder for the purpose of determining whether a shareholder's voting rights are to be
reallocated pursuant to the bye-laws. If a shareholder fails to respond to our request for information or submits incomplete or inaccurate information in response to a request by us, we
may, in our sole discretion, eliminate the shareholder's voting rights. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_dg2730_1_21"> </A> </FONT> <FONT SIZE=2><B>There are provisions in our bye-laws which may restrict the ability to transfer common shares and which may require shareholders to sell their common shares.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors may decline to register a transfer of any common shares under certain circumstances, including if they have reason to believe that any
non-de minimis adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders may occur as a result of such transfer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
bye-laws also provide that if our board of directors determines that share ownership by a person may result in non-de minimis adverse tax, legal or regulatory
consequences to us, any of our subsidiaries or any of our shareholders, then we have the option, but not the obligation, to require that shareholder to sell to us or to third parties to whom we assign
the repurchase right for fair market value the minimum number of common shares held by such person which is necessary to eliminate the non-de minimis adverse tax, legal or regulatory
consequences. See "Description of Share Capital&#151;Restrictions on Transfer of Common Shares or Warrants" and "Description of Share Capital&#151;Acquisition of Common Shares by Us." </FONT></P>

<P><FONT SIZE=2><B>Applicable insurance laws may make it difficult to effect a change of control of our company.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the
domestic insurer is domiciled. Prior to granting approval of an application to acquire control of a domestic insurer, the state insurance commissioner will consider such factors as the financial
strength of the applicant, the integrity and management of the applicant's board of directors and executive officers, the acquiror's plans for the management of the applicant's board of directors and
executive officers, the acquiror's plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of
control. Generally, state statutes provide that control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing, 10% or more of the voting securities of the domestic insurer. Because a person acquiring 10% or more of our common shares would indirectly control the same percentage of the
stock of the AXIS U.S. Subsidiaries, the insurance change of control laws of Connecticut, Illinois and New York would likely apply to such a transaction. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Insurance Acts and Regulations in Ireland require that anyone acquiring or disposing of a direct or indirect holding in an insurance company (such as AXIS Specialty
Europe) that represents 10% or more of the capital or of the voting rights of such company or that makes it possible to exercise a significant influence over the management of such company, or anyone
who proposes to decrease or increase that holding to specified levels, must first notify the Minister of their intention to do so. They also require any insurance company that becomes aware of any
acquisitions or disposals of its capital involving the specified levels to notify the Minister. The specified levels are 20%, 33% and 50% or such other level of ownership that results in the company
becoming the acquiror's subsidiary. The Minister has three months from the date of submission of a notification within which to oppose the proposed transaction if the Minister is not satisfied as to
the suitability of the acquiror "in view of the necessity to ensure sound and prudent management of the insurance undertaking." Any person having a shareholding of 10% or more of the issued share
capital in AXIS Holdings would be considered to have an indirect holding in AXIS Specialty Europe over the 10% limit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
our bye-laws limit the voting power of any shareholder to less than 9.5%, there can be no assurance that the applicable regulatory body would agree that a shareholder
who owned greater than 10% of our common shares did not, because of the limitation on the voting power of such shares, control the applicable Insurance Subsidiary. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of our Company, including through transactions, and in particular
unsolicited transactions, that some or all of our shareholders might consider to be desirable. </FONT></P>

<P><FONT SIZE=2><B>A few large shareholders may be able to influence shareholder decisions.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately upon completion of this offering, we expect to have&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shareholders
each of whom owns beneficially common shares representing
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% or more of the voting power of our common shares on a fully diluted basis. As a result of their ownership position, these shareholders voting together may have the ability to
significantly influence matters requiring shareholder approval, including, without limitation, the election of directors and amalgamations, consolidations, changes of control of our company and sales
of all or substantially all of our assets. </FONT></P>

<P><FONT SIZE=2><B>U.S. persons who own our common shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Companies Act, which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and their shareholders. Set forth
below is a summary of certain significant provisions of the Companies Act which includes, where relevant, information on
modifications thereto adopted pursuant to our bye-laws, applicable to us, which differ in certain respects from provisions of Delaware corporate law. Because the following statements are
summaries, they do not discuss all aspects of Bermuda law that may be relevant to us and our shareholders. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interested Directors.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Bermuda law and our bye-laws, a transaction entered into by us, in which a director
has an interest, will not be voidable by us, and such director will not be liable to us for any profit realized pursuant to such transaction, provided the nature of the interest is disclosed at the
first opportunity at a meeting of directors, or in writing to the directors. In addition, our bye-laws allow a director to be taken into account in determining whether a quorum is present
and to vote on a transaction in which that director has an interest following a declaration of the interest pursuant to the Companies Act provided that the director is not disqualified from doing so
by the chairman of the meeting. Under Delaware law, such transaction would not be voidable if: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
material facts as to such interested director's relationship or interests were disclosed or were known to the board of directors and the board of
directors in good faith authorized the transaction by the affirmative vote of a majority of the disinterested directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Such
material facts were disclosed or were known to the shareholders entitled to vote on such transaction and the transaction was specifically approved in
good faith by vote of the majority of shares entitled to vote thereon; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
transaction was fair as to the corporation as of the time it was authorized, approved or ratified. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>Under
Delaware law, such interested director could be held liable for a transaction in which such director derived an improper personal benefit. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain Transactions with Significant Shareholders.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As a Bermuda company, we may enter into certain business transactions
with our significant shareholders, including asset sales, in which a significant shareholder receives, or could receive, a financial benefit that is greater than that received, or to be received, by
other shareholders with prior approval from our board of directors but without obtaining prior approval from our shareholders. Amalgamations require the approval of the board of directors and, except
in the case of amalgamations with and between wholly-owned subsidiaries, a resolution of shareholders approved by a majority of at least 75% of the votes cast. If we were a Delaware corporation, we
would need, subject to certain exceptions, prior approval from shareholders holding at least two-thirds of our outstanding common stock not owned by such interested shareholder </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

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<P><FONT SIZE=2>
to enter into a business combination (which, for this purpose, includes mergers and asset sales of greater than 10% of our assets that would otherwise be considered transactions in the ordinary
course of business) with an interested shareholder for a period of three years from the time the person became an interested shareholder, unless we opted out of the relevant Delaware statute. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders' Suits.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders in many
U.S. jurisdictions. Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. However, the Bermuda courts ordinarily would be expected to follow
English case law precedent, which would permit a shareholder to commence an action in the name of the company to remedy a wrong done to the company where an act is alleged to be beyond the corporate
power of the company, is illegal or would result in the violation of our memorandum of association or bye-laws. Furthermore, consideration would be given by the court to acts that are
alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of our shareholders than actually approved it. The winning party in such
an action generally would be able to recover a portion of attorneys' fees incurred in connection with such action. Our bye-laws provide that shareholders waive all claims or rights of
action that they might have, individually or in the right of the company, against any director or officer for any act or failure to act in the performance of such director's or officer's duties,
except with respect to any fraud or dishonesty of such director or officer. Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things,
breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys' fees
incurred in connection with such action. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indemnification of Directors and Officers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Bermuda law and our bye-laws, we may indemnify our directors,
officers or any other person appointed to a committee of the board of directors (and their respective heirs, executors or administrators) to the full extent permitted by law against all actions,
costs, charges, liabilities, loss, damage or expense incurred or sustained by such person by reason of any act done, concurred in or omitted in the conduct of our business or in the discharge of
his/her duties; provided that such indemnification shall not extend to any matter in which any of such persons is found, in a final judgement or decree not subject to appeal, to have committed fraud
or dishonesty. Under Delaware law, a corporation may indemnify a director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if (i)&nbsp;such director or officer acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and (ii)&nbsp;with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe
his conduct was unlawful. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
further understand the risks associated with U.S. persons who own our common shares, see "Description of Share Capital&#151;Differences in Corporate Law" for more information
on the differences between Bermuda and Delaware corporate laws. </FONT></P>

<P><FONT SIZE=2><B>Anti-takeover provisions in our bye-laws could impede an attempt to replace or remove our directors, which could diminish the value of our common
shares.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bye-laws contain provisions that may entrench directors and make it more difficult for shareholders to replace directors even if the shareholders
consider it beneficial to do so. In addition, these provisions could delay or prevent a change of control that a shareholder might consider favorable. For example, these provisions may prevent a
shareholder from receiving the benefit from any premium over the market price of our common shares offered by a bidder in a potential takeover. Even in the
absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common shares if they are viewed as discouraging
takeover attempts in the future. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
example, our bye-laws contain the following provisions that could have such an effect: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>election
of our directors is staggered, meaning that the members of only one of three classes of our directors are selected each year;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>shareholders
have limited ability to remove directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
total voting power of any shareholder owning 9.5% or more of our common shares will be reduced to less than 9.5% of the total voting power of our common
shares;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
directors may decline to record the transfer of any common shares on our share register if it appears to the board of directors, in their sole and
reasonable discretion, after taking into account the limitations on voting rights contained in our bye-laws, that any non-deminimis adverse tax, regulatory or legal
consequences to the Company, any of its subsidiaries or any shareholder, would result from such transfer; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
directors may decline to record the transfer of any common shares on our share register unless the board of directors obtains: (i)&nbsp;a written
opinion from counsel supporting the legality of the transaction under U.S. securities laws and (ii)&nbsp;approval from appropriate governmental authority if such approval is required. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>AXIS Holdings is a Bermuda company and it may be difficult for you to enforce judgments against it or its directors and executive officers.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are incorporated pursuant to the laws of Bermuda and our business is based in Bermuda. In addition, certain of our directors and officers and certain of the
experts named in this prospectus reside outside the United States, and all or a substantial portion of our assets and the assets of such persons are located in jurisdictions outside the United States.
As such, it may be difficult or impossible to effect service of process within the United States upon us or those persons or to recover against us or them on judgments of U.S. courts, including
judgments predicated upon civil liability provisions of the U.S.
federal securities laws. Further, no claim may be brought in Bermuda against us or our directors and officers in the first instance for violation of U.S. federal securities laws because these laws
have no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court may, however, impose civil liability on us or our directors and officers if the facts
alleged in a complaint constitute or give rise to a cause of action under Bermuda law. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further,
we have been advised by Conyers Dill&nbsp;&amp; Pearman, our Bermuda counsel, that there is no treaty in effect between the United States and Bermuda providing for the enforcement
of judgments of U.S. courts, and there are grounds upon which Bermuda courts may not enforce judgments of U.S. courts. Because judgments of U.S. courts are not automatically enforceable in Bermuda, it
may be difficult for you to recover against us based upon such judgments. </FONT></P>


<P><FONT SIZE=2><B><I>Risks Related to Taxation  </I></B></FONT></P>

<P><FONT SIZE=2><B>We may become subject to taxes in Bermuda after March&nbsp;28, 2016, which may have a material adverse effect on our results of operations and your investment.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966, as amended, of Bermuda, has given each of AXIS Holdings and AXIS
Specialty an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the
nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to AXIS Holdings, AXIS Specialty or any of their respective operations, shares, debentures or other
obligations until March&nbsp;28, 2016. See "Material Tax Considerations&#151;Taxation of AXIS Holdings and Subsidiaries&#151;Bermuda." Given the limited duration of the Minister of
Finance's assurance we cannot be certain that we will not be subject to any Bermuda tax after March&nbsp;28, 2016. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

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<P><FONT SIZE=2><B>We may be subject to U.S. tax which may have a material adverse effect on our results of operations and your investment.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Holdings and AXIS Specialty are Bermuda companies, AXIS Specialty Holdings Ireland Limited ("AXIS Ireland Holdings"), AXIS Re and AXIS Specialty Europe are
Irish companies, AXIS Specialty UK Limited ("AXIS UK") and AXIS Specialty UK Holdings Limited ("AXIS UK Holdings") are U.K.
companies and AXIS Specialty (Barbados) Limited ("AXIS Barbados") is a Barbados company. We intend to manage our business so that each of these companies will operate in such a manner that none of
these companies will be subject to U.S. tax (other than U.S. excise tax on insurance and reinsurance premium income attributable to insuring or reinsuring U.S. risks and U.S. withholding tax on
certain U.S. source investment income), because none of these companies should be treated as engaged in a trade or business within the United States. However, because there is considerable uncertainty
as to the activities which constitute being engaged in a trade or business within the United States, we cannot be certain that the U.S. Internal Revenue Service ("IRS") will not contend successfully
that any of AXIS Holdings or its foreign subsidiaries is/are engaged in a trade or business in the United States. If AXIS Holdings or any of its foreign subsidiaries were considered to be engaged in a
business in the United States, we could be subject to U.S. corporate income and branch profits taxes on the portion of our earnings effectively connected to such U.S. business in which case our
results of operations and your investment could be materially adversely affected. See "Material Tax Considerations&#151;Taxation of AXIS Holdings and Subsidiaries&#151;United States." </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Holdings or a subsidiary might be subject to U.S. tax on a portion of its income (which in the case of a foreign subsidiary would only include income from U.S. sources) if AXIS
Holdings or such subsidiary is considered a personal holding company ("PHC"), for U.S. federal income tax purposes. This status will depend on whether 50% or more of our shares could be deemed to be
owned (pursuant to certain constructive ownership rules) by five or fewer individuals and whether 60% or more of AXIS Holdings' income, or the income of any of its subsidiaries, as determined for U.S.
federal income tax purposes, consists of "personal holding company income." We believe based upon information made available to us regarding our existing shareholder base and upon the advice of our
U.S. counsel, LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae, L.L.P. that neither AXIS Holdings nor any of its subsidiaries should be considered a PHC. Additionally, we intend to manage our business to
minimize the possibility that we will meet the 60% income threshold. However, because of the lack of complete information regarding our ultimate share ownership (i.e., as determined by the
constructive ownership rules for PHCs), we cannot be certain that AXIS Holdings and/or any of its subsidiaries will not be considered a PHC or that the amount of U.S. tax that would be imposed if it
were not the case would be immaterial. See "Material Tax Considerations&#151;Taxation of AXIS Holdings and Subsidiaries&#151;United States&#151;Personal Holding Companies." </FONT></P>

<P><FONT SIZE=2><B>We may be subject to U.K. tax which may have a material adverse effect on our results of operations.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of us, except for AXIS UK and AXIS UK Holdings, are incorporated in the United Kingdom. Accordingly, none of us, other than AXIS UK and AXIS UK Holdings,
should be treated as being resident in the United Kingdom unless our central management and control is exercised in the United Kingdom. The concept of central management and control is indicative of
the highest level of control of a company, which is wholly a question of fact. The directors of each of us, other than AXIS UK and AXIS UK Holdings, intend to manage our affairs so that none of us,
other than AXIS UK and AXIS UK Holdings, are resident in the United Kingdom for tax purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
company not resident in the United Kingdom for corporation tax purposes can nevertheless be subject to U.K. corporation tax if it carries on a trade through a branch or agency in the
United Kingdom but the charge to U.K. corporation tax is limited to profits (including revenue profits and capital gains) connected with such branch or agency. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
directors of each of us, other than AXIS UK and AXIS UK Holdings (which should be treated as resident in the United Kingdom by virtue of being incorporated and managed there), AXIS
Ireland Holdings (which has established a branch in the United Kingdom) and AXIS Specialty Europe (which it is intended should establish a branch in the United Kingdom), intend that we will operate in
such a manner so that none of us, other than AXIS UK, AXIS UK Holdings, AXIS Ireland Holdings and AXIS Specialty Europe, carry on a trade through a branch or agency in the United Kingdom.
Nevertheless, because neither case law nor U.K. statute definitively defines the activities that constitute trading in the United Kingdom through a branch or agency, the U.K. Inland Revenue might
contend successfully that any of us, other than AXIS UK, AXIS UK Holdings, AXIS Ireland Holdings and AXIS Specialty Europe, are/is trading in the United Kingdom through a branch or agency in the
United Kingdom. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the U.S. subsidiaries were trading in the United Kingdom through a branch or agency and the U.S. subsidiaries were to qualify for benefits under the applicable income tax
treaty between the United Kingdom and the United States, only those profits which were attributable to a permanent establishment in the United Kingdom would be subject to U.K. corporation tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe were trading in the U.K. through a branch or agency and they were entitled to the benefits of the tax treaty between Ireland
and the United Kingdom, they would only be subject to U.K. taxation on the profits which were attributable to a permanent establishment in the United Kingdom. The branch established in the United
Kingdom by AXIS Ireland Holdings constitutes a permanent establishment of that company and the profits attributable to that permanent establishment (which are calculated on a cost plus 10% basis) are
subject to U.K. corporation tax. It is believed that the branch that is to be established in the United Kingdom by AXIS Specialty Europe will represent a permanent establishment of that company in the
United Kingdom and that the profits attributable to that permanent establishment will be subject to U.K. corporation tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
United Kingdom has no income tax treaty with Bermuda. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are circumstances in which companies that are neither resident in the United Kingdom nor entitled to the protection afforded by a double tax treaty between the United Kingdom and
the jurisdiction in which they are resident may be exposed to income tax in the United Kingdom (other than by deduction or withholding) on the profits of a trade carried on there even if that trade is
not carried on through a branch or agency, but the directors of each of us intend that we will operate in such a manner that none of us will fall within the charge to income tax in the United Kingdom
(other than by deduction or withholding) in this respect </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of us, other than AXIS UK and AXIS UK Holdings, were treated as being resident in the United Kingdom for U.K. corporation tax purposes, or if any of us, other than AXIS Ireland
Holdings and AXIS Specialty Europe, were to be treated as carrying on a trade in the United Kingdom through a branch or agency or of having a permanent establishment in the United Kingdom, our results
of operations and your investment could be materially adversely affected. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
should be noted that the British Government has published draft legislation to modernize the taxation of foreign companies operating in the United Kingdom through branches, for
accounting periods starting on or after January&nbsp;1, 2003. If the draft legislation is enacted in its current form, a non-UK resident company will only fall within the charge to U.K.
corporation tax if it carries on a trade in the United Kingdom through a permanent establishment. The term "permanent establishment" is defined for these purposes in a manner which is consistent with
various internationally recognized characteristics commonly used in the United Kingdom's double tax treaties. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

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<P><FONT SIZE=2><B>We may be subject to Irish tax, which may have a material adverse effect on our results of operations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies resident in Ireland are generally subject to Irish corporation tax on their worldwide income and capital gains. None of us, except for AXIS Ireland
Holdings, AXIS Re and AXIS Specialty Europe, are incorporated in Ireland. As such, none of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, should be treated as being resident
in Ireland unless our central management and control is exercised in Ireland. The concept of central management and control is indicative of the highest level of control of a company, and is wholly a
question of fact. The directors of each of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, intend to operate in such a manner so that the central management and control of
each of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, is exercised outside of Ireland. Nevertheless, because central management and control is a question of fact to be
determined based on a number of different factors, the Irish Revenue Commissioners might contend successfully that the central management and control of any of us, other than AXIS Ireland Holdings,
AXIS Re and AXIS Specialty Europe, is exercised in Ireland. Should this occur, such company will be subject to Irish corporation tax on their worldwide income and capital gains. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
trading income of a company not resident in Ireland for Irish tax purposes can also be subject to Irish corporation tax if it carries on a trade through a branch or agency in
Ireland. The directors of each of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, intend to operate in such a manner so that none of us, other than AXIS Ireland Holdings, AXIS
Re and AXIS Specialty Europe, carry on a trade through a branch or agency in Ireland. Nevertheless, because neither case law nor Irish legislation definitively defines the activities that constitute
trading in Ireland through a branch or agency, the Irish Revenue Commissioners might contend successfully that any of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, is
trading through a branch or agency in Ireland. Should this occur, such companies will be subject to Irish corporation tax on profits attributable to that branch or agency. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, were treated as resident in Ireland for Irish corporation tax purposes, or as carrying on a trade in
Ireland through a branch or agency, our results of operations and your investment could be materially adversely affected. </FONT></P>

<P><FONT SIZE=2><B>If corporate tax rates in Ireland increase, our business and financial results could be adversely affected.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trading income derived from the insurance and reinsurance businesses carried on in Ireland by AXIS Specialty Europe and AXIS Re is generally taxed in Ireland at a
rate of 12.5%. Over the past number of years, various EU Member States have, from time to time, called for harmonization of corporate tax rates within the EU. Ireland, along with other Member States,
has consistently resisted any movement towards standardized corporate tax rates in the EU. The Government of Ireland has also made clear its commitment to retain the 12.5% rate of corporation tax
until at least the year 2025. Should, however, tax laws in Ireland change so as to increase the general corporation tax rate in Ireland, our results of operations could be materially adversely
affected. </FONT></P>

<P><FONT SIZE=2><B>If investments held by AXIS Specialty Europe or AXIS Re are determined not to be integral to the insurance and reinsurance businesses carried on by those companies, additional
Irish tax could be imposed and our business and financial results could be adversely affected.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on administrative practice, taxable income derived from investments made by AXIS Specialty Europe and AXIS Re is generally taxed in Ireland at the rate of
12.5% on the grounds that such investments either form part of the permanent capital required by regulatory authorities, or are otherwise integral to the insurance and reinsurance businesses carried
on by those companies. AXIS </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>

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Specialty Europe and AXIS Re intend to operate in such a manner so that the level of investments held by such companies does not exceed the amount that is integral to the insurance and reinsurance
businesses carried on by AXIS Specialty Europe and AXIS Re. If, however, investment income earned by AXIS Specialty Europe or AXIS Re exceeds these thresholds, or if the administrative practice of the
Irish Revenue Commissioners changes, Irish corporations tax could apply to such investment income at a higher rate (currently 25%) instead of the general 12.5% rate, and our results of operations
could be materially adversely affected. </FONT></P>

<P><FONT SIZE=2><B>If you acquire 10% or more of AXIS Holdings' shares, you may be subject to taxation under the "controlled foreign corporation" ("CFC") rules.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each "10% U.S. Shareholder" of a foreign corporation that is a CFC for an uninterrupted period of 30&nbsp;days or more during a taxable year, and who owns
shares in the CFC directly or indirectly through
foreign entities on the last day of the CFC's taxable year, must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC's "subpart F income," even if the
subpart F income is not distributed. A foreign corporation is considered a CFC if "10% U.S. Shareholders" own (directly, indirectly through foreign entities or by attribution by application of the
constructive ownership rules (i.e., "constructively"), of section&nbsp;958(b) of the Internal Revenue Code of 1986, as amended (the "Code")) more than 50% of the total combined voting power of all
classes of voting stock of such foreign corporation, or the total value of all stock of such corporation. A "10% U.S. Shareholder" is a U.S. Person (as defined in "Material Tax
Considerations&#151;Taxation of Shareholders&#151;United States Taxation") who owns (directly, indirectly through foreign entities or constructively) at least 10% of the total combined
voting power of all classes of stock entitled to vote of the foreign corporation. For purposes of taking into account insurance income, a CFC also includes a foreign insurance company in which more
than 25% of the total combined voting power of all classes of stock (or more than 25% of the total value of the stock) is owned by 10% U.S. Shareholders, on any day during the taxable year of such
corporation, if the gross amount of premiums or other consideration for the reinsurance or the issuing of insurance or annuity contracts exceeds 75% of the gross amount of all premiums or other
consideration in respect of all risks. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe, based on the advice of LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae, L.L.P., that because of the anticipated dispersion of our share ownership, provisions in our organizational
documents that limit voting power and other factors, no U.S. Person who owns shares of AXIS Holdings directly or indirectly through one or more foreign entities should be treated as owning (directly,
indirectly through foreign entities or constructively) 10% or more of the total voting power of all classes of shares of AXIS Holdings, or any of its foreign subsidiaries (these provisions are
described in "Description of Share Capital"). It is possible, however, that the IRS could challenge the effectiveness of these provisions and that a court could sustain such a challenge. See "Material
Tax Considerations&#151;Taxation of Shareholders&#151;United States Taxation&#151; Classification of AXIS Holdings or Its Foreign Subsidiaries as Controlled Foreign Corporations." </FONT></P>


<P><FONT SIZE=2><B>U.S. Persons who hold common shares may be subject to U.S. income taxation at ordinary income rates on their proportionate share of our "related party insurance income"
("RPII").  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the RPII of any of AXIS Specialty, AXIS Re and AXIS Specialty Europe (the "Foreign Insurance Subsidiaries") were to equal or exceed 20% of such company's gross
insurance income in any taxable year and direct or indirect insureds (and persons related to such insureds) own (or are treated as owning directly or indirectly through entities) 20% or more of the
voting power or value of AXIS Holdings, then a U.S. Person who owns shares of AXIS Holdings (directly or indirectly through foreign entities) on the last day of the taxable year would be required to
include in its income for U.S. federal income tax purposes such person's pro rata share of such Foreign Insurance Subsidiary's RPII for the entire taxable year, determined as if such RPII were
distributed proportionately only to U.S. Persons at </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

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that date regardless of whether such income is distributed. In addition, any RPII that is includible in the income of a U.S. tax-exempt organization may be treated as unrelated business
taxable income. The amount of RPII earned by the Foreign Insurance Subsidiaries (generally, premium and related investment income from the direct or indirect insurance or reinsurance of any direct or
indirect U.S. holder of common shares or any person related to such holder) will depend on a number of factors, including the geographic distribution of the Foreign Insurance Subsidiaries' business
and the identity of
persons directly or indirectly insured or reinsured by the Foreign Insurance Subsidiaries. We do not expect gross RPII to equal or exceed 20% of any of the Foreign Insurance Subsidiaries' gross
insurance income in any taxable year for the foreseeable future and do not expect our direct or indirect insureds (and related persons) to directly or indirectly own 20% or more of either the voting
power or value of our common shares, but we cannot be certain that this will be the case because some of the factors which determine the extent of RPII may be beyond our control. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
RPII rules provide that if a U.S. Person disposes of shares in a foreign insurance corporation in which U.S. Persons own 25% or more of the shares (even if the amount of RPII is less
than 20% of the corporation's gross insurance income and the ownership of its shares by direct or indirect insureds and related persons is less than the 20% threshold), any gain from the disposition
will generally be treated as ordinary income to the extent of the holder's share of the corporation's undistributed earnings and profits that were accumulated during the period that the holder owned
the shares (whether or not such earnings and profits are attributable to RPII). In addition, such a holder will be required to comply with certain reporting requirements, regardless of the amount of
shares owned by the holder. These RPII rules should not apply to dispositions of common shares because AXIS Holdings will not itself be directly engaged in the insurance business. The RPII provisions,
however, have never been interpreted by the courts or the U.S. Treasury Department in final regulations, and regulations interpreting the RPII provisions of the Code exist only in proposed form. It is
not certain whether these regulations will be adopted in their proposed form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any
interpretation or application of RPII by the IRS, the courts, or otherwise, might have retroactive effect. The U.S. Treasury Department has authority to impose, among other things, additional
reporting requirements with respect to RPII. Accordingly, the meaning of the RPII provisions and the application thereof to us and our subsidiaries is uncertain. See "Material Tax
Considerations&#151;Taxation of Shareholders&#151;United States Taxation&#151;The RPII Provisions." </FONT></P>

<P><FONT SIZE=2><B>U.S. Persons who hold common shares will be subject to adverse tax consequences if we are considered to be a Passive Foreign Investment Company ("PFIC") for U.S. federal income
tax purposes.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe, based on the advice of LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae, L.L.P., that we are not, and we currently do not expect to become, a PFIC for U.S.
federal income purposes. We cannot assure you, however, that we will not be deemed a PFIC by the IRS. If we were considered a PFIC, it could have material adverse tax consequences for an investor that
is subject to U.S. federal income taxation, including subjecting the investor to a greater tax liability than might otherwise apply and subjecting the investor to tax on amounts in advance of when tax
would otherwise be imposed. There are currently no regulations regarding the application of the PFIC provisions to an insurance company. New regulations or pronouncements interpreting or clarifying
these rules may be forthcoming. We cannot predict what impact, if any, such guidance would have on an investor that is subject to U.S. federal income taxation. See "Material Tax
Considerations&#151;Taxation of Shareholders&#151;United States Taxation&#151;Passive Foreign Investment Companies." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>29</FONT></P>

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<P><FONT SIZE=2><B>U.S. Persons who hold common shares will be subject to adverse tax consequences if we or any of our subsidiaries are considered to be a Foreign Personal Holding Company
("FPHC") for U.S. federal income tax purposes.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Holdings and/or any of its foreign subsidiaries could be considered to be an FPHC for U.S. federal income tax purposes if more than 50% of our shares could
be deemed to be owned by five or fewer individuals who are citizens or residents of the United States, and 60% or more of AXIS Holdings income, or that of its foreign subsidiaries, consists of
"foreign personal holding company income," as determined for U.S. federal income tax purposes. We believe based upon information made available to us regarding our existing shareholder base and upon
the advice of LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae, L.L.P. that neither AXIS Holdings nor any of its foreign subsidiaries should be considered an FPHC. Additionally, we intend to manage our business
to minimize the possibility that we will meet the 60% income threshold. However, because of the lack of complete information regarding our ultimate share ownership, we cannot be certain that AXIS
Holdings and/or any of its foreign subsidiaries will not be considered an FPHC. If we were considered an FPHC it could have material adverse tax consequences for an investor that is subject to U.S.
federal income taxation, including subjecting the investor to a greater tax liability than might otherwise apply and subjecting the investor to tax on amounts in advance of when tax would otherwise be
imposed. In addition, if we were considered an FPHC, upon the death of any U.S. individual owning common shares, such individual's heirs or estate would not be entitled to a "step-up" in
the basis of the common shares which might otherwise be available under U.S. federal income tax laws. See "Material Tax Considerations&#151;Taxation of Shareholders&#151;United States
Taxation&#151;Foreign Personal Holding Companies." </FONT></P>

<P><FONT SIZE=2><B>U.S. tax-exempt organizations who own our common shares may recognize unrelated business taxable income.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A U.S. tax-exempt organization may recognize unrelated business taxable income if a portion of our insurance income is allocated to the organization.
In general, insurance income will be allocated to a U.S. tax-exempt organization if either we are a controlled foreign corporation and the tax-exempt shareholder is a U.S. 10%
Shareholder or there is related person insurance income and certain exceptions do not apply. Although we do not believe that any U.S. Persons should be allocated such insurance income, we cannot be
certain that this will be the case. See "Material Tax Considerations&#151;Taxation of Shareholders&#151;United States Taxation&#151;Classification of AXIS Holdings or Its Foreign
Subsidiaries as Controlled Foreign Corporations" and "Material Tax Considerations&#151;Taxation of Shareholders&#151;United States Taxation&#151;The RPII Provisions." Potential
U.S. tax-exempt investors are advised to consult their own tax advisors. </FONT></P>

<P><FONT SIZE=2><B>Changes in U.S. federal income tax law could materially adversely affect an investment in our common shares.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legislation has been introduced in the U.S. Congress intended to eliminate certain perceived tax advantages of companies (including insurance companies) that have
legal domiciles outside the United States but have certain U.S. connections. While there is no currently pending legislative proposal which, if enacted, would have a material adverse effect on us or
our shareholders, it is possible that broader-
based legislative proposals could emerge in the future that could have an adverse impact on us or our shareholders. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
the U.S. federal income tax laws and interpretations regarding whether a company is engaged in a trade or business within the United States, or is a passive foreign
investment company or whether U.S. Persons would be required to include in their gross income the "subpart F income" or the related party insurance income of a controlled foreign corporation are
subject to change, possibly on a retroactive basis. There are currently no regulations regarding the application of the passive foreign investment company rules to insurance companies and the
regulations regarding related party </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>30</FONT></P>

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insurance income are still in proposed form. New regulations or pronouncements interpreting or clarifying such rules may be forthcoming. We cannot be certain if, when or in what form such regulations
or pronouncements may be provided and whether such guidance will have a retroactive effect. </FONT></P>

<P><FONT SIZE=2><B>The President's proposed legislation with respect to the elimination of taxation on dividends could materially affect an investment in our common shares.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President Bush has proposed legislation which would exempt from U.S. federal income taxation dividends paid by U.S. corporations (or foreign corporations to the
extent subject to U.S. federal income tax) to U.S. shareholders. Dividends paid by AXIS Holdings would generally not be exempt under this proposed legislation. As a result, if this legislation were
adopted in the proposed form, holders of our shares would incur higher taxes on the dividends we may pay than would be the case with comparable dividends from U.S. corporations. </FONT></P>

<P><FONT SIZE=2><B>The impact of Bermuda's letter of commitment to the Organization for Economic Cooperation and Development to eliminate harmful tax practices is uncertain and could adversely
affect our tax status in Bermuda.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Organization for Economic Cooperation and Development, which is commonly referred to as the OECD, has published reports and launched a global dialogue among
member and non-member countries on measures to limit harmful tax competition. These measures are largely directed at counteracting the effects of tax havens and preferential tax regimes in
countries around the world. In the OECD's report dated June&nbsp;26, 2000, Bermuda was not listed as a tax haven jurisdiction because it had previously signed a letter committing itself to eliminate
harmful tax practices by the end of 2005 and to embrace international tax standards for transparency, exchange of information and the elimination of any aspects of the regimes for financial and other
services that attract business with no substantial domestic activity. We are not able to predict what changes will arise from the commitment or whether such changes will subject us to additional
taxes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>31</FONT></P>

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<BR></FONT><FONT SIZE=2><B>FORWARD-LOOKING STATEMENTS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this prospectus may include forward-looking statements which reflect our current views with respect to future events and financial performance. These statements include
forward-looking statements both with respect to us specifically and the insurance and reinsurance sectors in general. Statements which include the words "expect," "intend," "plan," "believe,"
"project," "anticipate," "will" and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ
materially from those indicated in these statements. We believe that these factors include but are not limited to those described under "Risk Factors" above and the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>ineffectiveness
or obsolescence of our business strategy due to changes in current or future market conditions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>increased
competition on the basis of pricing, capacity, coverage terms or other factors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>greater
frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our
underwriting, reserving or investment practices anticipate based on historical experience or industry data;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
effects of acts of terrorism or war;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>developments
in the world's financial and capital markets that adversely affect the performance of our investments;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in regulation or tax laws applicable to us, our subsidiaries, brokers or customers;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>acceptance
of our products and services, including new products and services;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in the availability, cost or quality of reinsurance;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>decreased
demand for our insurance or reinsurance products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>loss
of key personnel;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
effects of mergers, acquisitions and divestitures;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in rating agency policies or practices;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in legal theories;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in accounting policies or practices; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this
prospectus. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>32</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected.
Any forward-looking statements you read in this prospectus reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to
our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly
qualified in their entirety by this paragraph. You should specifically consider the factors identified in this prospectus which could cause actual results to differ before making an investment
decision. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>33</FONT></P>

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<A NAME="toc_dk2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>USE OF PROCEEDS    <BR>  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that our net proceeds from the initial public offering of our common shares, based on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and commissions and our estimated offering expenses, will be
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million. We estimate that our net proceeds will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million if the underwriters exercise their over-allotment
option in full. We will not receive any of the proceeds from the sale of common shares by the selling shareholders. We intend to use the net proceeds of this offering as additional capital for
operations and general corporate purposes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk2730_dividend_policy"> </A>
<A NAME="toc_dk2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>DIVIDEND POLICY    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors currently intends to authorize the payment of a dividend of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per common share per quarter to our shareholders of record,
beginning&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. Any determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our results
of operations and cash flows, our
financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and any other factors our board of
directors deems relevant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are a holding company and have no direct operations. Our ability to pay dividends depends, in part, on the ability of our Insurance Subsidiaries to pay dividends to us. The Insurance
Subsidiaries are subject to significant regulatory restrictions limiting their ability to declare and pay dividends. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
we are subject to Bermuda regulatory constraints that will affect our ability to pay dividends on our common shares and make other payments. Under the Companies Act, we may
declare or pay a dividend out of distributable reserves only if we have reasonable grounds for believing that we are, or would after the payment be, able to pay our liabilities as they become due and
if the realizable value of our assets would thereby not be less than the aggregate of our liabilities and issued share capital and share premium accounts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, the maximum amount of distributions that our subsidiaries could pay to AXIS Holdings under applicable laws and regulations without prior regulatory
approval was approximately $511.9&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
more information regarding restrictions on the payment of dividends by us and our Insurance Subsidiaries, see "Regulation." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>34</FONT></P>

<HR NOSHADE>
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<BR>
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dm2730_1_35"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm2730_capitalization"> </A>
<A NAME="toc_dm2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>CAPITALIZATION    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our consolidated capitalization as of December&nbsp;31, 2002, on an actual basis and as adjusted to give effect to the sale of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares offered by us in this offering at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the midpoint of the price range set forth on the cover page of
this prospectus) and after deducting estimated underwriting discounts and commissions and our estimated offering expenses and assuming the underwriters do not exercise their over-allotment
option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should read this table in conjunction with "Selected Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and the consolidated financial statements and related notes that are included elsewhere in this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of December 31, 2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Adjusted<BR>
(unaudited)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands, except share numbers)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Debt Outstanding:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Revolving credit facility(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><BR><FONT SIZE=2><B>Shareholders' Equity:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Share capital (authorized: 100,000,000 common shares, par value $0.10; issued and outstanding: 17,271,065, actual and,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as adjusted)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,727</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,686,599</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(20,576</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accumulated other comprehensive gain</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>25,484</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>267,799</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="63%"><FONT SIZE=2>Total shareholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,961,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Total Capitalization</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,961,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Consists
of a $400&nbsp;million revolving credit facility pursuant to which up to $375&nbsp;million may be used to issue letters of credit and up to $50&nbsp;million may be used
for general corporate purposes, with total borrowings not to exceed $400&nbsp;million. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares shown to be outstanding as adjusted for the offering is based upon 17,271,065 common shares outstanding as of December&nbsp;31, 2002 and excludes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>common
 shares that may be issued pursuant to the underwriters' over-allotment option;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>2,431,663
common shares that may be issued pursuant to warrants outstanding as of December&nbsp;31, 2002 at a price of $100 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>559,439
common shares that may be issued pursuant to options that had been granted as of December&nbsp;31, 2002 at a weighted average exercise price of
$104.25 per share; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>137,592
additional common shares available for future issuance under our stock option and incentive plans. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>35</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=39,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=672562,FOLIO='35',FILE='DISK022:[03NYC0.03NYC2730]DM2730A.;20',USER='MREYES',CD=';5-MAR-2003;15:19' -->
<UL>
<UL>
</UL>
</UL>
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_do2730_1_36"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do2730_dilution"> </A>
<A NAME="toc_do2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>DILUTION    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2002, our net book value was $1.96&nbsp;billion, or $113.54 per common share. As used below, our net book value per common share
represents shareholders' equity divided by the number of common shares outstanding. After giving effect to the issuance of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of our common shares
at an assumed initial public offering
price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the midpoint of the price range set forth on the cover page of this prospectus), assuming that the underwriters'
over-allotment option is not
exercised, and the application of the estimated net proceeds therefrom, our net book value as of December&nbsp;31, 2002 would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;billion, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share. This amount represents an immediate increase of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per common share to the existing shareholders and an immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per common share issued to
the new investors purchasing shares offered hereby at the assumed initial public offering price. The following table illustrates this per share dilution: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Initial public offering price per common share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="84%"><FONT SIZE=2>Net book value per common share before the offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>113.54</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="84%"><FONT SIZE=2>Increase attributable to the offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net book value per common share after the offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Dilution per common share to new investors (1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>If
the underwriters' over-allotment option is exercised in full, dilution per share to new investors will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth as of December&nbsp;31, 2002 the number of our common shares issued, the total consideration paid and the average price per common share paid by all of
our existing
shareholders and new investors, after giving effect to the issuance of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares in the offering at an assumed initial public offering
price (before deducting estimated
underwriting discounts and commissions and our estimated offering expenses) of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the midpoint of the price range set forth on the
cover page of this prospectus). </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common Shares Issued</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total Consideration</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average<BR>
Price Per<BR>
Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Existing shareholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>17,271,065</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,728,344,089</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.07</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>New investors</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="35%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
table does not give effect to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>common
 shares that may be issued pursuant to the underwriters' over-allotment option;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>2,431,663
common shares that may be issued pursuant to warrants outstanding as of December&nbsp;31, 2002 at a price of $100 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>559,439
common shares that may be issued pursuant to options that had been granted as of December&nbsp;31, 2002 at a weighted average exercise price of
$104.25 per share; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>137,592
additional common shares available for future issuance under our stock option and incentive plans. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>36</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=40,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=247469,FOLIO='36',FILE='DISK022:[03NYC0.03NYC2730]DO2730A.;12',USER='MTITUSS',CD=';5-MAR-2003;01:20' -->
<UL>
<UL>
</UL>
</UL>
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dq2730_1_37"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq2730_selected_consolidated_financial_information"> </A>
<A NAME="toc_dq2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>SELECTED CONSOLIDATED FINANCIAL INFORMATION    <BR>  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our selected historical consolidated financial information for the periods ended and as of the dates indicated. AXIS Specialty was
incorporated on November&nbsp;8, 2001 and commenced operations on November&nbsp;20, 2001. AXIS Holdings was incorporated on December&nbsp;9, 2002. AXIS Specialty and its subsidiaries became
wholly owned subsidiaries of AXIS Holdings on December&nbsp;31, 2002, pursuant to the Exchange Offer. In the Exchange Offer, the shareholders of AXIS Specialty exchanged their shares for identical
shareholdings in AXIS Holdings. Following the Exchange Offer, AXIS Specialty distributed all shares of its wholly owned subsidiaries to AXIS Holdings. The Exchange Offer represents a business
combination of companies under common control and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selected consolidated income statement and balance sheet data are derived from our audited financial statements included elsewhere in this prospectus, which have been prepared in
accordance with U.S. GAAP and have been audited by Deloitte&nbsp;&amp; Touche, our independent auditors. These historical results are not necessarily indicative of results to be expected from any future
period. You should read the following selected consolidated financial information along with the information contained in this prospectus, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period Ended<BR>
December 31, 2001(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands, except share amounts)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2><B>Selected Income Statement Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Gross premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Premiums ceded</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(89,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Net premiums earned</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>4,763</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Net realized gains</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>26,070</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>394</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Acquisition costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>103,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>832</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>General and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>46,521</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>2,566</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Income tax recovery</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,430</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>265,119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><BR><FONT SIZE=2><B>Per Share Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Basic earnings per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Diluted earnings per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Basic weighted average shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Diluted weighted average shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2><B>Selected Ratios (based on U.S. GAAP income statement data):</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Loss and loss expense ratio(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>42.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>51.1</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Acquisition cost ratio(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>19.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>44.2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>General and administrative expense ratio(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>8.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>136.2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Combined ratio(5)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>70.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>231.5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>37</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=41,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=78321,FOLIO='37',FILE='DISK022:[03NYC0.03NYC2730]DQ2730A.;21',USER='DSELIGM',CD=';5-MAR-2003;12:25' -->
<A NAME="page_dq2730_1_38"> </A>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As of<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As of<BR>
December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands, except share amounts)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2><B>Selected Balance Sheet Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>729,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>761,670</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Investments at fair market value</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,079,686</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>2,986,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,877,773</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Reserve for losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>215,934</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Unearned premiums</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>555,962</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>24,862</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Total shareholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,961,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,649,552</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><BR><FONT SIZE=2><B>Per Share Data (based on U.S. GAAP balance sheet data):</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Book value per share(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>113.54</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>97.66</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Diluted book value per share(7)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>111.66</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>97.66</FONT></TD>
</TR>
</TABLE>
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<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>The
financial information for this period reflects our results from November&nbsp;8, 2001, the date of incorporation of AXIS Specialty, to December&nbsp;31, 2001.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>The
loss and loss expense ratio is calculated by dividing losses and loss expenses by net premiums earned.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>The
acquisition cost ratio is calculated by dividing total acquisition costs by net premiums earned.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>The
general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>The
combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Book
value per share is based on total shareholders' equity divided by basic shares outstanding of 17,271,065 as of December&nbsp;31, 2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Diluted
book value per share is calculated based on total shareholders' equity, adjusted for the proceeds expected to be received upon the exercise of options and warrants, divided by
the number of common shares and common share equivalents outstanding at the end of the period. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>38</FONT></P>

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<BR></FONT><FONT SIZE=2><B>MANAGEMENT'S DISCUSSION AND ANALYSIS<BR>  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS    <BR>  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and accompanying notes which appear elsewhere in this prospectus. It contains forward-looking statements that involve risks and uncertainties. Please see "Forward-Looking Statements" for
more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in
this prospectus, particularly under the headings "Risk Factors" and "Forward-Looking Statements." </FONT></P>


<P><FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a discussion of our results of operations and financial condition. Certain aspects of our business have loss experience characterized as low
frequency and high severity. This may result in volatility in both our results of operations and financial condition. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
commenced operations on November&nbsp;20, 2001 as AXIS Specialty. Pursuant to the Exchange Offer, on December&nbsp;31, 2002 the shareholders of AXIS Specialty exchanged their
shares for identical shareholdings in AXIS Holdings. Following the Exchange Offer, AXIS Specialty distributed all of its wholly owned subsidiaries to AXIS Holdings. The Exchange Offer represents a
business combination of companies under common control and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
only commenced operations on November&nbsp;20, 2001; therefore, any comparison to the prior period may not be meaningful. </FONT></P>

<P><FONT SIZE=2><B>Business Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We underwrite specialty lines insurance and treaty reinsurance on a global basis. Our business is comprised of two underwriting segments: specialty lines and
treaty reinsurance. Our specialty lines segment primarily includes the following risk classifications: specialty risks (including terrorism, marine and aviation war risk and political risk), onshore
and offshore energy, aviation and aerospace, commercial property and marine. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
treaty reinsurance segment provides short to medium tail, severity-driven products, primarily for catastrophic risks. The underlying property and casualty insurance business classes
covered by the treaties we write include: property, workers' compensation, personal accident and life, professional liability, casualty clash, and marine and aviation. Our contracts can be written on
either an excess of loss basis or a pro rata basis, also known as proportional. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
we underwrite both global specialty lines insurance and treaty reinsurance risks, we have a large aggregate exposure to natural and man-made disasters, which may result
in substantial volatility in our financial results. </FONT></P>

<P><FONT SIZE=2><B>Acquisition History  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2002, we completed the purchase of the Connecticut Specialty Insurance Company, a surplus lines-eligible carrier in 38 states, which was
subsequently renamed AXIS Specialty Insurance Company. We paid a purchase price of $17.4&nbsp;million. On November&nbsp;27, 2002, we completed the purchase of Royal&nbsp;&amp; SunAlliance Personal
Insurance Company, which is licensed in all 50 states of the United States, the District of Columbia and Puerto Rico and was subsequently renamed AXIS Reinsurance Company. We paid a purchase price of
$23.1&nbsp;million. As of February 28, 2003, we completed the purchase of Sheffield Insurance Corporation, which is licensed in Illinois and Alabama, surplus lines-eligible in 40 states and will be
renamed AXIS Indemnity Company. We paid a purchase </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>39</FONT></P>

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<P><FONT SIZE=2>
price of $34.7&nbsp;million. In connection with this acquisition, we added a senior team of insurance executives from Combined Specialty Group,&nbsp;Inc., a unit of Aon. In addition, in early
2003, we agreed to acquire the renewal rights to a book of professional liability and related lines business written by the Financial Insurance Solutions unit of Kemper in exchange for
a</FONT><FONT SIZE=2><B> ceding commission</B></FONT><FONT SIZE=2>. We expect to consummate this transaction in the first quarter of 2003. In connection with this acquisition, we added a senior
underwriting team from Kemper. We purchased these companies and agreed to acquire these rights as the foundation for commencing our U.S. operations. </FONT></P>

<P><FONT SIZE=2><B>Revenues  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We derive our revenues primarily from the sale of our insurance policies and reinsurance contracts. Insurance and reinsurance premiums are a function of the
number and type of contracts we write, as well as prevailing market prices. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renewal
dates for our business segments depend upon the underlying line of business. For the majority of business in our specialty lines segment, gross premiums are written throughout
the year. An exception to this is the business written in our aviation and aviation war accounts, which is predominantly written in the last quarter of the calendar year. For our treaty reinsurance
segment in 2002, a significant portion of our gross premiums were written in the first quarter of the calendar year, with the remainder primarily split between the second and third quarters. We
believe this seasonality may diminish as we expand into new treaty lines. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
premium income is supplemented by the income we generate from our investment portfolio. Our investment portfolio is comprised entirely of fixed income investments that are held as
available for sale. Under U.S. GAAP, these investments are carried at fair market value and unrealized gains and losses on the investments are not included in our statement of operations. Rather,
these unrealized gains and losses are included on our balance sheet in accumulated other comprehensive gain/(loss) as a separate component of shareholders' equity. </FONT></P>

<P><FONT SIZE=2><B>Expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our expenses primarily consist of losses and loss expenses, acquisition costs and general and administrative expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Losses
and loss expenses are management's best estimate of the ultimate cost of claims incurred during a reporting period. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition
costs relate to the fees, commissions and taxes paid to obtain business. Typically these are based on a certain percentage of the premium written and will vary by each line
of business that we underwrite. In addition, we include the personnel expenses of our underwriters in acquisition costs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
and administrative expenses consist primarily of personnel expenses (except those allocated to acquisition costs) and general operating expenses. With the exception of
acquisition costs, we do not allocate general and administrative operating expenses to our segments and instead record these costs at the corporate level. </FONT></P>


<P><FONT SIZE=2><B>Critical Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are certain accounting policies that we consider to be critical due to the amount of judgment and uncertainty inherent in the application of those policies.
In calculating financial statement estimates, the use of different assumptions could produce materially different estimates. In addition, if factors such as those described in "Risk Factors" cause
actual events to differ from the assumptions used in applying the accounting policy and calculating financial estimates, there could be a material adverse effect on our results of operations and
financial condition and liquidity. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>40</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe the following critical accounting policies affect significant estimates used in the preparation of our consolidated financial statements. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our revenue is generated primarily by gross premiums written from our underwriting operations. The basis for the
amount of gross premiums recognized varies by the type of contract we write. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the majority of our specialty lines we receive a flat premium which is identified in the policy and is recorded as unearned premium on the inception date of the contract. This
premium will only adjust if the underlying insured values adjust. We actively monitor underlying insured values and record adjustment premiums in the period in which amounts are reasonably
determinable. We also write a small amount of business on a line slip basis, under which we assume a fixed percentage share of the premiums and losses on a particular risk or group of risks along with
numerous other unrelated insurers. On line slip contracts, the premium is not contractually stated. Instead, we will determine the expected premium to be written as part of the underwriting process
based on information received from the insured parties and intermediaries, our experience with similar coverages and any industry information on the risks that may be available. We actively monitor
the emergence of actual premium data on line slip policies and adjust our estimates of written premiums to reflect reported premiums on a periodic basis as reliable information becomes available.
During the year ended December&nbsp;31, 2002, line slip premiums accounted for 6% of total gross premiums written. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
our treaty reinsurance business, we write contracts on both an excess of loss basis and a proportional basis. For excess of loss contracts, the amount of premium is usually
contractually documented at inception, and no management judgment is necessary. Generally, for most such contracts a deposit premium is contractually specified and is payable during the contract
period. After the contract has expired, a premium adjustment is calculated, which is based on the underlying exposure of the ceded business. We record the deposit premium at the inception of the
contract and record adjustments in the periods in which they are reasonably determinable. For business written on a proportional basis, we will determine the expected premium to be written as part of
the underwriting
process based on information received from the insured parties and intermediaries, our experience with similar coverages and any industry information on the risks that may be available. We actively
monitor the emergence of actual premium data on proportional treaties and adjust our estimates of written premiums to reflect reported premiums on a periodic basis as reliable information becomes
available. During the year ended December&nbsp;31, 2002, proportional premiums accounted for 8% of total gross premiums written. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
premiums are earned over the period during which we are exposed to the insured or reinsured risk. Generally this period equates to the contract period, except for contracts written
on a line slip or proportional basis. For line slip and proportional business, the earning period is generally taken to be twice the contract period due to the fact that some of the underlying
exposures may attach towards the end of our contracts, and such underlying exposures generally have a one year coverage period. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reserve for losses and loss expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For most insurance and reinsurance companies, the most significant judgment made by
management is the estimation of the reserve for losses and loss expenses, which we also refer to as loss reserves. Our loss reserves are estimated by management and are reviewed every quarter by our
independent actuarial consultants, based on generally accepted actuarial principles. The reserve for unpaid reported losses and loss expenses is established based upon our estimate of the total cost
of claims that were reported to us but not yet paid (reported case reserves), the costs of</FONT><FONT SIZE=2><B> additional case reserves </B></FONT><FONT SIZE=2>("ACR") on known events but not yet
reported to us, and the anticipated cost of claims incurred but not reported. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
reported losses, we establish reserves on a "case" basis within the parameters of the coverage provided in the insurance or reinsurance contracts. ACR is often estimated by our
claims function </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>41</FONT></P>

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ahead of official notifications but in the same manner as reported case reserves. Where there is a possibility of a claim we book an ACR, which is only revised upon final determination that no claim
will arise or is adjusted as claims notifications are received. ACR is reflected in our consolidated financial statements as part of IBNR. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IBNR
is estimated using actuarial methods. Our estimate of IBNR is derived using the Bornhuetter-Ferguson method, which is typically used by companies with limited loss experience. This
method takes as a starting point an assumed ultimate loss and loss expense ratio and blends in the loss and loss expense ratio implied by the experience to date. For our assumed ultimate loss and loss
expense ratio for the specialty lines segment we select the initial expected loss and loss expense ratios based on benchmarks provided by independent actuaries, derived from comparable client data as
well as market information. These benchmarks are then adjusted for rating increases and changes in terms and conditions that had been observed in the market. For our assumed ultimate loss and loss
expense ratio for the treaty reinsurance segment we use contract by contract initial expected loss and loss expense ratios derived during pricing. Under U.S. GAAP, we are not permitted to establish
loss reserves with respect to our catastrophe reinsurance until an event which gives rise to a loss occurs. Within our catastrophe line of business on certain contracts that respond to highly visible,
major catastrophes we are not holding any IBNR, as we experienced no such catastrophes in 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying
these loss and loss expense ratios to our earned premium derives the estimated ultimate costs of the losses; from here we deduct paid losses and reported case reserves to
generate our IBNR. As at December&nbsp;31, 2002, the reserve for IBNR losses accounted for $155.0&nbsp;million or 72% of our total loss reserves. As of December&nbsp;31, 2002, a 5% change in the
reserve for IBNR losses would equate to a $7.8&nbsp;million change in loss reserves, which change would represent 2.9% of net income and 0.4% of shareholders' equity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
methodology of estimating loss reserves is reviewed each quarter to evaluate whether the assumptions made continue to be appropriate. Any adjustments that result from this review are
recorded in the quarter in which they are identified. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
reserving practices and the establishment of any particular reserve reflect management's judgment concerning sound financial practice and do not represent any admission of liability
with respect to any claims made against us. No assurance can be given that actual claims made and payments related thereto will not be in excess of the amounts reserved. During the loss settlement
period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, ultimate liability may exceed or be less than the
revised estimates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
assessing the adequacy of these reserves it must be noted that the actual final costs of settling claims outstanding is uncertain as it depends upon future events. There is
necessarily a range of possible outcomes and the eventual outcome will almost certainly differ from the projections currently made. This uncertainty is heightened by the short time in which we have
operated, thereby providing limited claims loss emergence patterns specifically for the Company. This has necessitated the use of benchmarks in deriving IBNR which, despite management's and the
independent actuary's care in selecting them, have the risk of differing from actual experience. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based Compensation Plans.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We currently account for stock compensation in accordance with Accounting Principles Board
Opinion No.&nbsp;25 ("APB 25") "Accounting for Stock Issued to Employees." Compensation expense for stock options and restricted stock awards granted to employees is recorded over the vesting period
using the intrinsic value method. Generally, we will issue options and restricted stock awards to an employee with a strike price equal to the estimated fair value on the date of grant. The fair
values of the strike prices for options granted and the restricted stock issued historically are consistent with an independent valuation obtained by the Company. Following the release of FAS </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>42</FONT></P>

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<P><FONT SIZE=2>
No.&nbsp;148, "Accounting for Stock-based Compensation&#151;Transition and Disclosure," we are reevaluating our accounting policy for stock-based compensation. </FONT></P>

<P><FONT SIZE=2><B>Results of Operations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a discussion and analysis of our consolidated results of operations for the period from November&nbsp;8, 2001 (inception) to
December&nbsp;31, 2001 and separately for the year ended December&nbsp;31, 2002. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Year ended December&nbsp;31, 2002  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the year ended December&nbsp;31, 2002, gross premiums written were $1.1&nbsp;billion. The amount of premiums
written with respect to any particular line of business may vary from year to year as a result of changes in market conditions. For example, the recently adopted Terrorism Risk Insurance Act could
impact the amount of business written for terrorism insurance. Reinsurance premiums ceded for the year ended December&nbsp;31, 2002 were $89.7&nbsp;million. We purchased this reinsurance primarily
to reduce our exposure to risk of loss on certain lines of business written in our specialty lines segment. Net premiums earned for the year ended December&nbsp;31, 2002 were $536.9&nbsp;million. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Investment Income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net investment income for the year ended December&nbsp;31, 2002 was $71.3&nbsp;million, which
consisted primarily of interest on bonds that was partially offset by investment management, accounting and custody fees of $3.7&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
annualized effective yield (calculated by dividing the investment income generated from invested assets by the average balance of the assets managed by our portfolio managers) for
the year ended December&nbsp;31, 2002 was 4.0%. The total return for our investment portfolio (calculated using beginning and ending market portfolio values, adjusted for external cash flows) for
the year ended December&nbsp;31, 2002 was 7.5%. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Realized Gains.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net realized gains for the year ended December&nbsp;31, 2002 were $26.1&nbsp;million, which included
net realized investment gains of $22.5&nbsp;million and net realized and unrealized gains/(losses) on investment derivative instruments of $3.6&nbsp;million. Net realized and unrealized
gains/(losses) on investment derivative instruments resulted from our use of derivative instruments to manage duration and currency exposure. During the year, we discontinued the use of investment
derivative instruments other than foreign currency forward contracts. A discussion of those instruments is located below under "&#151;Quantitative and Qualitative Disclosure about Market Risk." </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Insurance Related Income (Loss).</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other insurance related income (loss) for the year ended December&nbsp;31, 2002 was
$(0.6) million. This related to the movement in the fair value of our insurance
contracts which meet the definition of a derivative under Statement of Financial Accounting Standard No.&nbsp;133 "Accounting for Derivative Instruments and Hedging Activities." </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Losses and Loss Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Losses and loss expenses for the year ended December&nbsp;31, 2002 were $229.3&nbsp;million. Of
this expense, $17.0&nbsp;million related to paid claims, $60.0&nbsp;million related to reported case reserves and $154.0&nbsp;million related to IBNR offset by $1.7&nbsp;million related to
reinsurance recoveries. The loss and loss expense ratio for the year ended December&nbsp;31, 2002 was 42.7%. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition Costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Acquisition costs for the year ended December&nbsp;31, 2002 were $103.7&nbsp;million. The acquisition
cost ratio for the year ended December&nbsp;31, 2002 was 19.3%. The acquisition cost ratio reflects the costs directly related to the acquisition of business. Acquisition costs included: brokerage
fees and commissions, taxes and profit commissions, all of which vary based on the line of business, the method of acquisition and the location of the underlying risk. Hence, acquisition costs will
vary with </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>43</FONT></P>

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the mix and amount of business written. We also allocated the personnel expenses of our underwriters to acquisition costs including a non-cash charge of $1.7&nbsp;million relating to
stock-based compensation. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses for the year ended December&nbsp;31, 2002 were
$46.5&nbsp;million, which were driven primarily by personnel expenses, not allocated to acquisition costs, including a non-cash charge of $4.6&nbsp;million relating to stock-based
compensation. The general and administrative expense ratio for the year ended December&nbsp;31, 2002 was 8.7%. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is not expected that the general and administrative expenses incurred in 2002 will be comparable with those expected to be incurred in 2003. We expect general and administrative costs
to increase in 2003. For the year ended December&nbsp;31, 2002, we expensed $4.4&nbsp;million in costs associated with our establishment, licensing and organization. Although we do not believe
that these costs are of a recurring nature, this reduction in costs will be more than offset by additional employee and administrative costs. We added employees and infrastructure throughout the year
ended December&nbsp;31, 2002, including the addition of a significant number of employees in November&nbsp;2002, and we expect to add employees and infrastructure in 2003. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign Exchange Gains.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our functional currency is U.S. dollars. However, some of our business is written in other
currencies. The following sets forth the composition of our foreign exchange gains. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December 31, 2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Realized exchange gains</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,489</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Unrealized exchange gains</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8,121</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Foreign exchange gains</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9,610</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
realized gains have principally been made on receipt of premiums denominated in Sterling and Euros. Both of these currencies have strengthened against the U.S. dollar, with exchange
rates having increased between January&nbsp;1, 2002 and December&nbsp;31, 2002, by 11.0% for Sterling and 16.1% for the Euro. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
majority of the unrealized gains is due to the strengthening of the Sterling and the Euro on cash balances and insurance and reinsurance premium balances receivable denominated in
these currencies. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Tax Recovery.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our income tax recovery of $1.4&nbsp;million was primarily derived from our U.S. subsidaries which,
due to their limited operations during the year ended December&nbsp;31, 2002, provided tax loss carry forwards. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net income for the year ended December&nbsp;31, 2002 was $265.1&nbsp;million, comprised of net underwriting
income of $156.7&nbsp;million, net investment income and net realized gains of $97.4&nbsp;million, foreign exchange gains of $9.6&nbsp;million and an overall tax benefit of $1.4&nbsp;million. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive Income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive income for the year ended December&nbsp;31, 2002 was $291.1&nbsp;million, which was
comprised of net income of $265.1&nbsp;million and a net increase in unrealized gain of $25.9&nbsp;million. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Period ended December&nbsp;31, 2001  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We commenced operations as AXIS Specialty on November&nbsp;20, 2001. During the period ended December&nbsp;31, 2001, we wrote $26.7&nbsp;million of gross
premiums, which was primarily derived from the aviation and aviation war lines of business within our specialty book. Due to the short duration of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>44</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=6,SEQ=48,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=871910,FOLIO='44',FILE='DISK022:[03NYC0.03NYC2730]DS2730B.;16',USER='OALBERT',CD=';5-MAR-2003;12:35' -->
<A NAME="page_ds2730_1_45"> </A>

<P><FONT SIZE=2>
period, gross and net premiums earned were $1.9&nbsp;million. Net investment income was $4.8&nbsp;million for the period and net realized gains were $0.4&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Losses
and loss expenses were $1.0&nbsp;million, and acquisition costs were $0.8&nbsp;million. General and administrative expenses were $2.6&nbsp;million for the period ended
December&nbsp;31, 2001, which includes start up costs of $1.1&nbsp;million. Net income for the period ended December&nbsp;31, 2001 was $2.7&nbsp;million, and comprehensive income was
$2.2&nbsp;million. </FONT></P>

<P><FONT SIZE=2><B>Underwriting Results by Operating Segments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is comprised of two underwriting segments: specialty lines and treaty reinsurance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes the underwriting results, losses and loss expenses and ratios for our two business segments as of and for the year ended December&nbsp;31, 2002. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Specialty<BR>
Lines</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Treaty Reinsurance</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Revenues:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Gross premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>793,759</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>314,244</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>704,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>314,244</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,018,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net premiums earned</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>314,613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>222,237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other insurance related income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Expenses:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>137,848</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>91,417</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Acquisition costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>56,683</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>47,020</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>General and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>46,521</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="52%"><FONT SIZE=2><B>Underwriting Income</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>156,722</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Ratios:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Loss and loss expense ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>43.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>41.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>42.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Acquisition cost ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>18.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>19.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>General and administrative expense ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Combined ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>70.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<UL>

<P><FONT SIZE=2><B> Specialty Lines  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Specialty lines of business are written on both an insurance and reinsurance basis depending on the underlying needs of the client. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Year ended December&nbsp;31, 2002  </I></FONT></P>

</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the year ended December&nbsp;31, 2002, gross premiums written were $793.8&nbsp;million. Please see
"Business&#151;Business Segments&#151;Specialty Lines" for gross premiums written by line of business. Reinsurance premiums ceded for the year ended December&nbsp;31, 2002 were
$89.7&nbsp;million. The following table shows the derivation of net premiums earned: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December&nbsp;31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Gross premiums earned</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>354,667</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Ceded premiums amortized</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(40,054</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Net premiums earned</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>314,613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=2>45</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
premiums are earned over the period of the insured risk. Consequently, the level of earned premium should increase in 2003 as premiums written throughout 2002 continue to be earned
in 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ceded
premiums are amortized over the contract term. As the bulk of this premium incepted September&nbsp;1, 2002, the amount of amortized premium expensed in 2003 is expected to
increase. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Losses and Loss Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Losses and loss expenses were $137.8&nbsp;million for the year ended December&nbsp;31, 2002.
This was comprised of the following: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December&nbsp;31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Losses paid</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8,398</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Change in reported case reserves</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>38,143</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Change in IBNR</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>93,010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Reinsurance recoveries</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>137,848</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
loss and loss expense ratio for the year ended December&nbsp;31, 2002 was 43.8%. Within the marine book we experienced higher than expected losses and loss expenses in the marine
hull and recreational marine books; however, this is due more to the timing of the losses and the ramp up of earned premiums than to loss severity. We also experienced losses of $19.6&nbsp;million
within our aviation and aerospace book primarily due to the loss of two satellites during the year. In our other lines within the specialty lines segment, we did not experience any material losses. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition Costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Acquisition costs for the year ended December&nbsp;31, 2002 were $56.7&nbsp;million. The acquisition
cost ratio for the year ended December&nbsp;31, 2002 was 18.0%, which included 1.9% relating to allocated personnel expenses for underwriters. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Period ended December&nbsp;31, 2001  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the period ended December&nbsp;31, 2001, we wrote $24.5&nbsp;million of gross premiums. Due to the short duration of the period, net premiums earned
were $1.7&nbsp;million for the period. Losses and loss expenses were $0.9&nbsp;million, and acquisition costs were $0.3&nbsp;million. </FONT></P>

<UL>

<P><FONT SIZE=2><B> Treaty Reinsurance  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treaty reinsurance provides short-tailed, severity driven products primarily for catastrophic risks. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Year ended December&nbsp;31, 2002  </I></FONT></P>

</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the year ended December&nbsp;31, 2002, gross and</FONT><FONT SIZE=2><B> net premiums written  </B></FONT><FONT SIZE=2>were
$314.2&nbsp;million. Please see "Business&#151;Business Segments&#151;Treaty Reinsurance" for gross premiums written by line of business. Net premiums
earned for the year ended December&nbsp;31, 2002 were $222.2&nbsp;million. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>46</FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Losses and Loss Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Losses and loss expenses for the year ended December&nbsp;31, 2002 were $91.4&nbsp;million.
This was comprised of the following: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December&nbsp;31, 2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Losses paid</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8,560</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Change in reported case reserves</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>21,852</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Change in IBNR</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>61,005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>91,417</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
loss and loss expense ratio for the year ended December&nbsp;31, 2002 was 41.1%. Included within catastrophe lines were claims stemming from the European floods, which affected
parts of Europe, notably Germany, Austria and the Czech Republic in August&nbsp;2002 and from Hurricane Lili which swept across Louisiana and Mississippi on October&nbsp;2, 2002. Included in other
lines of treaty reinsurance were reserves of $20.0&nbsp;million relating to multiple crop covers primarily in the United States, following a severe year for claims relating to crop damage. Our
treaty reinsurance segment has loss experience categorized as low frequency but high severity in nature and therefore our loss experience can be volatile. During the year ended December&nbsp;31,
2002, our loss experience benefited from the lack of major catastrophes. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition Costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Acquisition costs for the year ended December&nbsp;31, 2002 were $47.0&nbsp;million. The acquisition
cost ratio for the year ended December&nbsp;31, 2002 was 21.2%, which included 2.9% relating to allocated personnel expenses for underwriters. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Period ended December&nbsp;31, 2001  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the period ended December&nbsp;31, 2001, we wrote $2.3&nbsp;million of gross premiums in our treaty reinsurance segment. Due to the short duration of
the period, net premiums earned were $0.2&nbsp;million, losses and loss expenses were $0.1&nbsp;million, and acquisition costs were $0.5&nbsp;million. </FONT></P>

<P><FONT SIZE=2><B>Liquidity and Capital Resources  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a holding company, and as such, have no substantial operations of our own. Our assets consist primarily of our investments in subsidiaries. As at
December&nbsp;31, 2002, we had operating subsidiaries in Bermuda, Ireland, Connecticut and New York and a representative office in the United Kingdom. Accordingly, our future cash flows depend upon
the availability of dividends or other statutorily permissible payments from our subsidiaries. The ability to pay such dividends will be limited by the applicable laws and regulations of Bermuda, the
United States and Ireland which subject the Insurance Subsidiaries to significant regulatory restrictions. These laws and regulations require, among other things, some of our insurance subsidiaries to
maintain minimum solvency requirements and limit the amount of dividends that these subsidiaries can pay to us, which in turn may limit our ability to pay dividends. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
we are subject to Bermuda regulatory constraints that will affect our ability to pay dividends on our common shares and make other payments. Under the Companies Act, we may
declare or pay a dividend out of distributable reserves only if we have reasonable grounds for believing that we are, or would after the payment be, able to pay our liabilities as they become due and
if the realizable value of our assets would thereby not be less than the aggregate of our liabilities and issued share capital and share premium accounts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, the maximum amount of distributions that our subsidiaries could pay to AXIS Holdings under applicable laws and regulations without prior regulatory
approval was approximately $511.9&nbsp;million. Consequently, no assurance can be given that we or our subsidiaries will </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>47</FONT></P>

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<P><FONT SIZE=2>
be permitted to pay dividends in the future. For a discussion of the various restrictions on the ability of us and our subsidiaries to pay dividends, please see "Regulation." </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Flows for the Year Ended December&nbsp;31, 2002.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the year ended December&nbsp;31, 2002, we generated a net
operating cash inflow of $660.6&nbsp;million, primarily relating to premiums received and investment income. During the year, we paid losses of $17.0&nbsp;million. We invested a net cash amount of
$702.9&nbsp;million during the year, and as of December&nbsp;31, 2002 had a cash balance of $729.3&nbsp;million. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Flows for the Period Ended December&nbsp;31, 2001.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For the period ended December&nbsp;31, 2001, we received
$1.7&nbsp;billion in cash from the private placement of shares in AXIS Specialty (which were subsequently exchanged for our common shares in the Exchange Offer), which were partially offset by
equity raising costs paid of $40.4&nbsp;million. During this period, we used $4.1&nbsp;million of cash in operating activities and invested a net cash amount of $882.9&nbsp;million. At
December&nbsp;31, 2001, we had a cash balance of $761.7&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the year ended December&nbsp;31, 2002, our cash flows from operations together with the proceeds from the private placement have provided us with sufficient liquidity to meet our
liquidity requirements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
an ongoing basis, our sources of funds primarily consist of premiums written, investment income and proceeds from sales and redemptions of investments. Cash is used primarily to pay
reinsurance, losses and loss expenses, brokerage commissions, excise taxes and general and administrative expenses and to purchase new investments. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
cash flows from operations generally represent the difference between premiums collected and investment earnings realized, reinsurance purchased and the losses and loss expenses
paid, underwriting and other expenses paid and investment losses realized. Cash flows from operations may differ substantially, however, from net income. To date, we have invested all cash flows not
required for operating purposes. The potential for a large claim under one of our insurance or reinsurance contracts means that substantial and unpredictable payments may need to be made within
relatively short periods of time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2002, total investments available for sale, accrued income and cash net of unsettled investment trades were $2.4&nbsp;billion, compared to $1.7&nbsp;billion at
December&nbsp;31, 2001. Our investment portfolio consisted entirely of fixed income securities at December&nbsp;31, 2002 and was managed by several
external investment management firms. At December&nbsp;31, 2002, all of these fixed income securities were investment grade, with 84.0% rated Aa3 or AA- or better by a nationally
recognized rating agency. The weighted-average rating of our fixed income portfolio was AA+, based on ratings assigned by Standard&nbsp;&amp;&nbsp;Poor's. The net payable for investments purchased at
December&nbsp;31, 2002 was $86.4&nbsp;million; this is a result of timing differences, as investments are accounted for on a traded date basis. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
at December&nbsp;31, 2002, we had $375.5&nbsp;million of insurance and reinsurance premium balances receivable. During the year ended December&nbsp;31, 2002, we collected in
excess of $600&nbsp;million of net premium receivables. As at December&nbsp;31, 2002, we had prepaid reinsurance of $49.7&nbsp;million and $1.7&nbsp;million of reinsurance recoverables under
these contracts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
March&nbsp;28, 2002, AXIS Specialty established a $400&nbsp;million revolving credit facility with a syndicate of commercial banks. Up to $375&nbsp;million may be used to issue
letters of credit and up to $50&nbsp;million for general corporate purposes, with total borrowing not to exceed $400&nbsp;million. As at December&nbsp;31, 2002, AXIS Specialty had letters of
credit of $10.0&nbsp;million outstanding. Associated with the bank commitments are various loan covenants with which AXIS Specialty was in compliance throughout the year that include, among other
things, the requirements that AXIS Specialty maintain a minimum level of capital and surplus of $1.2&nbsp;billion and a debt to total capitalization ratio not greater than 0.35:1.00. There was no
debt outstanding as of December&nbsp;31, 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>48</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty is not licensed or admitted as an insurer in any jurisdiction other than Bermuda. Because many jurisdictions do not permit insurance companies to take credit for
reinsurance obtained from unlicensed or non-admitted insurers on their statutory financial statements unless appropriate security mechanisms are in place, we anticipate that our
reinsurance clients will typically require AXIS Specialty to post a letter of credit or other collateral. We expect that the $375&nbsp;million available for letters of credit under AXIS Specialty's
revolving credit facility will be used for this purpose. However, if this facility is not sufficient or if we are unable to renew this facility or are unable to arrange for other types of security on
commercially reasonable terms, AXIS Specialty could be limited in its ability to write business for certain of our clients. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect that the proceeds of this offering, together with the capital base we established in our original private placement, will permit us to continue to implement our business
strategy. On an ongoing basis, we expect our internally generated funds, together with the revolving credit facility and the capital base established by this offering and the private placement funding
completed in November&nbsp;2001, to be sufficient to operate our business. However, there can be no assurance that we will not be required to incur other indebtedness to implement our business
strategy or pay claims. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
did not make any significant capital expenditures during the period ended December&nbsp;31, 2001 or the year ended December&nbsp;31, 2002. We currently expect capital expenditures
for 2003 to be less than $10&nbsp;million. </FONT></P>

<P><FONT SIZE=2><B>Quantitative and Qualitative Disclosure about Market Risk  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to potential loss from various market risks, including changes in interest rates and foreign currency exchange rates. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
investment portfolio consists of fixed income securities denominated in both U.S. and foreign currencies. Accordingly, earnings will be affected by many factors, including changes in
interest rates and foreign currency exchange rates. External investment professionals manage our portfolio under the direction of our management in accordance with detailed investment guidelines
provided by us. Our guidelines do not currently permit the use of derivatives other than foreign currency forward contracts. During the first half of 2002, however, we did utilize derivatives, as was
permitted under guidelines in effect at the time. We do not currently utilize derivatives other than foreign currency forward contracts. In the future we may change our guidelines to permit the use of
derivatives. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Rate Risk.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Fluctuations in interest rates have a direct impact on the market valuation of these securities. As
interest rates rise, the market value of our fixed income portfolio falls, and the converse is also true. We expect to manage interest rate risk by selecting investments with characteristics such as
duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, we held $734.6&nbsp;million at fair market value, or 32.9% of our total invested assets, in mortgage-related securities. When interest rates decline,
these assets are exposed to prepayment risk, which occurs when holders of underlying mortgages increase the frequency with which they prepay the outstanding principal before the maturity date and
refinance at a lower interest rate cost. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
consider the effect of interest rate movements on the market value of our assets under management by third party investment managers and the corresponding change in unrealized
appreciation. We have calculated the effect that an immediate parallel shift in the U.S. interest rate yield curve would have on our assets under management by third party investment managers as of
December&nbsp;31, 2002. The modeling of this effect was performed on each security individually using the security's effective duration and changes in prepayment expectations for mortgage-backed and
asset-backed securities. The results of this analysis are summarized in the table below. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>49</FONT></P>

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<BR></FONT><FONT SIZE=2><B>Interest Rate Movement Analysis on Market Value of Assets Under Management by Third Party Investment Managers    <BR>  </B></FONT></P>

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<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Interest Rate Shift in Basis Points<BR>
($ in thousands)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>-100</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>-50</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>0</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>+50</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>+100</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Total Market Value</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,279,257</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,256,359</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,233,232</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,209,876</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,186,291</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Market Value Change from Base</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1.0)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2.1)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Change in Unrealized Appreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>46,025</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>23,127</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(23,356</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(46,941</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign Currency Risk.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We will attempt to manage our foreign currency risk by seeking to match our liabilities under
insurance and reinsurance policies that are payable in foreign currencies with investments that are denominated in such currencies. Furthermore, we may use foreign currency forward contracts in an
effort to hedge against movements in the value of foreign currencies relative to the U.S. dollar and to gain exposure to interest rate differentials between differing market rates. A foreign currency
forward contract involves an obligation to purchase or sell a specified currency at a future date at a price set at the time of the contract. Foreign currency forward contracts will not eliminate
fluctuations in the value of our assets and liabilities denominated in foreign currencies but rather allow us to establish a rate of exchange for a future point in time. We do not expect to enter into
such contracts with respect to a material amount of our assets. Foreign currency forward contracts purchased are not specifically identifiable against cash, any single security or any groups of
securities and, therefore, do not qualify and are not designated as a hedge for financial reporting purposes. All realized gains and losses and unrealized gains and losses on foreign currency forward
contracts are recognized in the statements of operations and comprehensive income. At December&nbsp;31, 2002, the net contractual amount of foreign currency forward contracts was
$0.41&nbsp;million, with a negligible fair market value. We did not enter into any foreign currency forward contracts in 2001. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2002, we had receivable balances of $375.5&nbsp;million. Of this balance, 79% was denominated in U.S. dollars. Of the remaining balance, 9% was denominated in
Sterling and 6% in
Euro. A 5% increase or decrease in the value of the Euro and Sterling currencies against the U.S. dollar would produce a gain or loss of approximately $2.8&nbsp;million. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Risk.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have exposure to credit risk primarily as a holder of fixed income securities. Our risk management strategy
and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one issuer. We
attempt to limit our credit exposure by purchasing fixed income investments rated BBB-/Baa3 or higher. In addition, we have limited our exposure to any single corporate issuer to 5% or
less of our portfolio for securities rated A-/A3 or above and 2% or less of our portfolio for securities rated between BBB-/Baa3 to BBB+/Baa1. In addition, we have credit risk
under a contract where we receive a fixed annual premium for a five year period in return for assuming the risk of default on a pre-determined portfolio of sovereign obligations. Our
liability thereunder to the insured could be up to $350&nbsp;million. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Value-at-Risk.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our management uses Value-at-Risk ("VaR") as one of its tools to measure potential
losses in fair market values of our investment portfolio. The VaR calculation is calculated by a third party provider and reviewed by management. VaR uses a Monte Carlo simulation to project many
different prices of fixed income securities, derivatives and currencies taking into account, among other things, the volatility and the correlation between security price changes over certain forecast
horizons. The VaR of our investment portfolio at December&nbsp;31, 2002 was approximately $70.9&nbsp;million, which represents the potential loss in fair market value of our investment portfolio
over a one year time horizon within a 95% confidence level. The VaR computation is a risk analysis tool and does not purport to represent actual losses in fair market value. We cannot predict actual
future movements in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>50</FONT></P>

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<P><FONT SIZE=2>
market rates and do not present these results to be indicative of future movements in such market rates or to be representative of any actual impact that future changes in market rates may have on
our future results or financial position. </FONT></P>

<P><FONT SIZE=2><B>Currency  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our functional currency is the U.S. dollar. However, because we write a portion of our business and receive premiums in currencies other than U.S. dollars and may
maintain a small portion of our investment portfolio in investments denominated in currencies other than U.S. dollars, we may experience foreign exchange losses to the extent our foreign currency
exposure is not properly managed or otherwise hedged, which in turn would adversely affect our statement of operations and financial condition. </FONT></P>

<P><FONT SIZE=2><B>Effects of Inflation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not believe that inflation has had a material effect on our consolidated results of operations, except insofar as inflation may affect interest rates. The
potential exists, after a catastrophe loss, for the development of inflationary pressures in a local economy. The anticipated effects on us are considered in our catastrophe loss models. The effects
of inflation are also considered in pricing and in estimating reserves for unpaid claims and claim expenses. The actual effects of inflation on our results cannot be accurately known until claims are
ultimately settled. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>51</FONT></P>

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NAME="page_dw2730_1_52"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dw2730_industry_background"> </A>
<A NAME="toc_dw2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>INDUSTRY BACKGROUND    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The insurance and reinsurance industry has recently experienced severe dislocation as a result of an unprecedented impairment of capital, which has caused a
substantial contraction in global underwriting capacity. At the same time that capacity has declined, we believe the demand for commercial insurance and reinsurance has increased as insureds have
become increasingly aware of their risk exposures. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that from the beginning of 2001 through the end of 2002, capital available to write property and casualty insurance and reinsurance has been impaired by an estimated $228 to
$248&nbsp;billion in potential and realized underwriting and investment losses. This amount is equal to 33% to 35% of the approximately $700&nbsp;billion in available capital at the end of 2000.
The following table illustrates the estimated components of the impairment of capital that the industry has experienced: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="65%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="81%" ALIGN="LEFT"><FONT SIZE=1><B>Estimated Components of Capital Impairment<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="81%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>($ in billions)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>World Trade Center losses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>30-40</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>Estimated reserve deficiencies</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>78</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>Investment losses&#151;Non-U.S.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>100-110</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>Net realized investment losses&#151;U.S. (through June 30, 2002)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>Total potential losses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>228-248</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<UL>

<P><FONT SIZE=2><I> Sources: Sigma and&nbsp;A.M. Best.  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, many established insurers have exited key markets, including reinsurance subsidiaries of primary carriers. These industry developments have provided
new companies such as ours with an opportunity to provide much needed underwriting capacity at attractive rates in conjunction with improved terms and conditions. Importantly, this capacity is backed
by a capital base free of legacy liabilities prevalent in much of the industry. Some of the principal factors that we believe are driving the reduced capacity include: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Record losses.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The tragic events of September&nbsp;11, 2001 represented the largest insured loss in history, with industry
loss estimates of $30&nbsp;billion to $40&nbsp;billion, according to A.M. Best. In addition, the effect of these losses have been compounded by other catastrophe losses such as the 2002 European
floods. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Significant reserve shortfalls.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Reserve shortfalls from asbestos and environment-related ("A&amp;E") claims as well as poor
underwriting in the late 1990s continue to plague the property and casualty insurance industry. According to&nbsp;A.M. Best, the industry was under-reserved for A&amp;E claims by approximately
$53&nbsp;billion as of year-end 2001, and&nbsp;A.M. Best expects the industry to ultimately incur more than $121&nbsp;billion in net A&amp;E losses. Several major insurers have recently
taken significant asbestos-related charges, including Travelers Property Casualty Corp., ACE&nbsp;Limited, Fireman's Fund Insurance Company and The St. Paul Companies, totaling an estimated
$7.6&nbsp;billion in 2002 according to A.M. Best.&nbsp;A.M. Best further estimates $8&nbsp;billion of additional A&amp;E and other charges in 2003. Additionally, deficiencies are expected to be
greater and more widespread in the commercial market, where&nbsp;A.M. Best estimates core loss reserve shortfalls to be approximately $25&nbsp;billion excluding A&amp;E at year-end 2002.
We believe these reserving issues have led to significant capital impairment and withdrawal of capacity among the incumbents in the property and casualty industry. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Adverse investment returns.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A decline in global equity markets and significant credit losses, including losses caused by high
profile bankruptcies such as Enron Corp., WorldCom, Inc., Adelphia Communications Corp., U.S. Airways Group, Inc. and UAL Corporation, have created an </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>52</FONT></P>

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<P><FONT SIZE=2>
adverse investment environment for insurers and reinsurers. Sigma estimates a decline of $100-$110&nbsp;billion in European capital since the end of 2000 due to the adverse investment
environment, while&nbsp;A.M. Best estimates U.S. realized and unrealized investment losses from the end of 2000 through June&nbsp;30, 2002 to be $20&nbsp;billion. In addition, the current low
interest rate environment has also reduced the investment returns of insurers and reinsurers, underscoring the importance of generating underwriting profits rather than relying on investment results
in order to generate profitability. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Exit of key players.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In 2002, several market participants, including Gerling Group, SCOR S.A., AXA Group and Overseas
Partners&nbsp;Ltd., either exited particular business lines or significantly reduced their activity, further depleting the industry's available underwriting capacity. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Ratings decline.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In 2002, many property and casualty insurers and reinsurers were downgraded, including 47 out of the largest
150 rated reinsurers. Additionally, Lloyd's of London, traditionally a large provider of capacity for specialty lines, was downgraded by Standard &amp; Poor's on September&nbsp;20, 2001 after sustaining
large losses in the tragic events of September&nbsp;11, 2001. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Increased financial scrutiny.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In 2002, high-profile corporate scandals led to a significant overhaul in corporate
governance and scrutiny of financial results of public companies. We believe this increased scrutiny has led insurers to adopt a more conservative approach to reserving and has reduced the capacity
that they are willing or able to offer. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our first year of operation, we believe we have successfully capitalized on opportunities created by the market dislocation. We believe our capital base, underwriting talent, globally
diversified product offering and technology platform clearly differentiate us from incumbent insurers and reinsurers and allow us to operate cost effectively and to react quickly to changing market
dynamics. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>53</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ea2730_business"> </A>
<A NAME="toc_ea2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>BUSINESS    <BR>  </B></FONT></P>

<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide specialty lines insurance and treaty reinsurance on a global basis, with headquarters in Bermuda. Through our operating subsidiaries based in Bermuda,
Ireland and the United States, we focus on writing coverage for specialized classes of risk through our team of highly skilled and experienced underwriters. Since our founding in November&nbsp;2001,
we have successfully assembled a strong management team of proven leaders with significant industry experience, established a global underwriting infrastructure and built a broad product portfolio. In
2002, our first full year of operation, we wrote $1.1&nbsp;billion of gross premiums, generated $265.1&nbsp;million of net income, produced a combined ratio of 70.7% and earned a return on average
equity of 14.7%. As of December&nbsp;31, 2002, we had $1.96&nbsp;billion of shareholders' equity. We believe that we have already established a recognized franchise in the insurance and
reinsurance industries and are well-positioned to provide our products to our customers. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
seek to use our management's extensive expertise, experience and long-standing market relationships to identify and underwrite attractively priced risks while delivering
innovative insurance and reinsurance solutions to our customers. Our underwriters are focused on constructing a portfolio of risks that fully utilizes our capital while optimizing the
risk-reward characteristics of the portfolio. In specialty lines, we have designed our corporate and underwriting structure to create an operating platform that utilizes new procedures and
technologies. We believe we have a unique operating platform in specialty lines that provides us with a competitive advantage. We intend to continue to exercise highly disciplined underwriting
practices and manage a diverse book of business while seeking to maximize our profitability and generate superior returns on equity. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
business is comprised of two underwriting segments: specialty lines and treaty reinsurance. During the year ended December&nbsp;31, 2002, we wrote gross premiums for our specialty
lines and treaty reinsurance of $793.8&nbsp;million and $314.2&nbsp;million, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
specialty lines segment primarily includes the following risk classifications: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Specialty
Risks (including Terrorism, Marine and Aviation War Risk and Political Risk);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Onshore
and Offshore Energy;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Aviation
and Aerospace;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Commercial
Property; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Marine.
</FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also expect to write specialty lines insurance covering professional liability and related lines as a result of our agreement to acquire the renewal rights to a book of business
written by the Financial Insurance Solutions unit of Kemper, a transaction we expect to consummate in early 2003. In connection with this acquisition, we added a senior underwriting team from Kemper. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
treaty reinsurance segment provides short to medium tail, severity-driven products, primarily for catastrophic risks. The underlying property and casualty insurance business classes
covered by the treaties we write include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Property;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Workers'
Compensation, Personal Accident and Life;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Professional
Liability;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Casualty
Clash; and </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>54</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Marine
and Aviation. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
market and distribute our products primarily through the world's largest insurance and reinsurance brokers, such as Marsh (including its subsidiary, Guy Carpenter), Aon, Willis and
Benfield, among others. </FONT></P>

<P><FONT SIZE=2><B>Competitive Strengths  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our competitive strengths have enabled, and will continue to enable us to capitalize on the significant dislocation in the insurance and reinsurance
marketplace. These strengths include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Experienced
Management and Underwriting Team with Proven Track Record;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Long-Standing
Market Relationships;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Demonstrated
Ability to Attract High Quality Talent;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Disciplined
Approach to Underwriting and Risk Management;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Low-Cost
International Infrastructure and Versatile Underwriting Platform; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Superior
Financial Strength. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Experienced Management and Underwriting Team with Proven Track Record.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our management team is led by our President and CEO,
John R. Charman, who has over 30&nbsp;years of industry experience. Mr.&nbsp;Charman has served as CEO of Charman Underwriting Agencies and Tarquin plc, President of ACE International and Deputy
Chairman of Lloyd's. Our Chairman, Michael A. Butt, has over 40&nbsp;years of industry experience, having served as CEO of Mid Ocean&nbsp;Ltd., Chairman and CEO of Eagle Star Holdings and Eagle
Star Insurance Company, Chairman of Sedgwick Limited and as a Director of XL Capital&nbsp;Ltd. We have also assembled a team of senior underwriters with an average industry experience of
20&nbsp;years at successful insurers and reinsurers in a variety of markets. The extensive depth and
knowledge of our management and underwriting teams provide us with the ability to successfully select and price complex risks. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-standing Market Relationships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our underwriters have well-established personal relationships
with our insureds, cedents and brokers. We were founded by Marsh, the largest insurance broker worldwide, and believe that we have broad support among all major insurance and reinsurance brokers.
Almost all of our business is sourced from our underwriters' existing relationships with brokers and insureds. In addition, several of our senior underwriters have worked together previously, which we
believe provides our customers with a cohesive, seamless interface. We use our market relationships to identify business opportunities and establish ourselves as leaders in lines of business that have
been severely affected by the dislocation in insurance markets. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demonstrated Ability to Attract High Quality Talent.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;From inception, we have successfully targeted and hired high quality
management and underwriting talent. In addition, we have capitalized on the significant dislocation in the insurance industry by selectively recruiting entire underwriting teams, which has enabled us
to expand our product lines. For example, our acquisition of AXIS Indemnity included a team of experienced underwriters, providing us with a high quality, U.S.-based specialty lines platform. In
addition, in connection with our pending acquisition of the renewal rights from Kemper for its Financial Insurance Solutions professional liability and related lines business, we hired a team of
senior underwriters from Kemper to facilitate this expansion of our capabilities. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disciplined Approach to Underwriting and Risk Management.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe in generating underwriting profitability through a
disciplined, conservative approach utilizing peer review processes involving seasoned underwriters for each of our segments. We believe these peer review processes, combined with our strict management
of global aggregate exposures across products and sophisticated modeling </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>55</FONT></P>

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<P><FONT SIZE=2>
capabilities, allow us to realize attractive prices, favorable terms and risk diversification. We manage our exposures on a product and geographic basis through comprehensive, daily review by senior
management. For our property and casualty business, we use commercially available software, such as "RMS" and "CatTrader," to model, price and monitor exposures on complex risks. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Low-Cost International Infrastructure and Versatile Underwriting Platform.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Since our founding in
November&nbsp;2001, we have established 10 offices, including underwriting entities and built a staff of 168 employees. With teams of underwriters based in Bermuda, the United States and Ireland, we
have the ability to identify, source and underwrite a diverse portfolio of risks quickly and efficiently. We believe we have created an efficient, scaleable, low-cost infrastructure that
complements the global, specialized nature of our business. For specialty lines, we have built a unique Internet policy submission system called "Submit.Axis" that allows brokers to submit detailed
underwriting requests. Upon submission, we identify the appropriate licensed entity to underwrite the risk while feeding all submission data to our senior underwriting team. Despite incurring startup
costs, in 2002 we produced a ratio of general and administrative costs to net written premiums of 4.6% compared to a five-year average of 17.3% for U.S. commercial lines insurers as
defined by&nbsp;A.M. Best. We believe our international presence, centralized coordination and proprietary technologies provide us with the flexibility to adapt to market conditions
in real time and practice a highly opportunistic underwriting approach. In addition, we believe our innovative technological platform and streamlined underwriting processes help lower our costs. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Superior Financial Strength.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2002, we had a capital base of $1.96&nbsp;billion without any
outstanding debt. Our operating companies (with the exception of AXIS Indemnity, which is not rated) are rated "A" (Strong) by Standard&nbsp;&amp; Poor's, which is the sixth highest of 21 ratings, and
"A-" (Excellent) by&nbsp;A.M. Best, which is the fourth highest of 15 ratings. These ratings reflect our ability to pay policyholder claims and are not applicable to the securities
offered in this prospectus. Our financial strength allows us to offer large per risk limits. We believe we are one of the few companies in the current marketplace that can offer specialty lines in
excess of $100&nbsp;million in coverage on a per risk basis, which we believe provides us with consistent pricing power and superior risk selection capability. Our capital is unencumbered by
historical losses relating to the tragic events of September&nbsp;11, 2001, asbestos, environmental or other legacy exposures that have led to capital charges for others in our industry. We believe
our financial strength has quickly allowed us to be recognized as one of a select group of highly rated specialty insurers and bolstered our credibility among brokers and insureds. Our conservative
approach to managing our balance sheet reflects our commitment to maintaining our financial strength. </FONT></P>

<P><FONT SIZE=2><B>Strategy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate objective is to generate superior returns on equity while establishing ourselves as a global leader in providing specialty lines insurance and
treaty reinsurance products to our customers. We intend to achieve this objective by executing the following strategies: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Establish
Global Leadership in Key Business Lines by Leveraging Management's Significant Experience and Relationships;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Opportunistically
Manage a Diverse Portfolio of Specialty Risks;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Continue
Commitment to Highly Disciplined Underwriting Practices;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Maintain
a Conservative Balance Sheet and Superior Financial Ratings;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Realize
Increased Profitability by Maintaining Our Efficient, Low-Cost Infrastructure; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Manage
Capital Prudently. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>56</FONT></P>

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<UL>
<UL>
</UL>
</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Establish Global Leadership in Key Business Lines by Leveraging Management's Significant Experience and Relationships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
senior management team has extensive customer relationships with leading insurers, cedents and brokers around the world, including Marsh and its subsidiary Guy Carpenter, Aon, Willis and Benfield. As
a result, we have been able to take advantage of the current dislocation in the insurance market to rapidly establish our market presence. In our first full year, we wrote gross premiums of
$1.1&nbsp;billion with approximately 2,000 clients. We intend to continue to rely on the strength and depth of these relationships to generate new business in the future. We will continue to
capitalize on our management's industry experience and relationships as we establish ourselves as a leading writer of specialty lines and treaty reinsurance. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Opportunistically Manage a Diverse Portfolio of Specialty Risks.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are opportunistic and selective participants in business
lines that have been most affected by the significant contraction in global underwriting capacity. In 2002, we constructed a diverse portfolio of business lines consistent with our
long-term targets. We intend to use our underwriting expertise to emphasize particular business lines in response to changing market conditions. For example, we wrote $155.2&nbsp;million
of terrorism-related business in 2002 at highly attractive terms and average </FONT><FONT SIZE=2><B>attachment points</B></FONT><FONT SIZE=2> above $65.0&nbsp;million. By carefully choosing our
exposures, we plan to maintain a short to medium tail focus and build a geographically diverse portfolio that minimizes correlated risk. With our depth of experience, underwriting knowledge and
centralized exposure management, we are able to quickly and efficiently underwrite diverse classes of risk around the world and will continue to underwrite classes of risk consistent with our
underwriting expertise while monitoring evolving market conditions. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Continue Commitment to Highly Disciplined Underwriting Practices.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We intend to continue to utilize our disciplined
underwriting approach to minimize risk and reduce the volatility of our operating results. We believe that the use of peer review processes throughout our organization, combined with our strict
management of global aggregate exposures across products and sophisticated modeling capabilities, allow us to realize attractive prices, favorable terms and risk diversification. We also strive to
control our risk by insuring higher </FONT><FONT SIZE=2><B>layers</B></FONT><FONT SIZE=2> of loss. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintain a Conservative Balance Sheet and Superior Financial Ratings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are committed to maintaining our excellent
capitalization, financial strength and ratings over the long-term. Our assets are conservatively invested in high-grade fixed income securities. Our investment strategy is to
preserve capital and proactively avoid problem credits by applying stringent watch-list criteria and following formalized investment guidelines. We will continue to maintain a high
quality, short duration asset portfolio consistent with our ratings. We believe we are prudent buyers of reinsurance and will utilize the retrocessional market when capacity is available at attractive
terms. In addition, we will seek to maintain our current ratings, as we believe they are important for attracting business. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realize Increased Profitability by Maintaining Our Efficient, Low-Cost Infrastructure.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We intend to maintain and
capitalize on our low-cost infrastructure to realize increased profitability as our business matures. Having obtained requisite licenses, technology and underwriting expertise within our
first year of operation, we believe we are well-positioned to grow our business without incurring significant additional capital expenditures. We plan to use the flexibility provided by
the scaleable nature of our infrastructure to respond to both positive and negative changes in market conditions as they develop and to integrate new business opportunities in a
cost-efficient manner. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Manage Capital Prudently.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We intend to manage our capital prudently relative to our risk exposure to maximize profitability
and long-term growth in shareholder value. Our capital management strategy is to deploy capital efficiently to underwriting opportunities and to establish adequate loss reserves to protect
against future adverse developments. We will target an optimal level of overall leverage to support our underwriting, and if appropriate, we may return excess capital to shareholders in the form of
share repurchases or dividends. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>57</FONT></P>

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<P><FONT SIZE=2><B>Business Segments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is comprised of two underwriting segments: specialty lines and treaty reinsurance. Our business segments and the related gross premiums written, set
forth by business segment are as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ea2730_gross_premiums_written_by_business_segment"> </A>
<A NAME="toc_ea2730_2"> </A>
<BR></FONT><FONT SIZE=2><B><U>Gross Premiums Written by Business Segment</U>    <BR>  </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>For the Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Specialty Lines</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>793,759</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>71.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Treaty Reinsurance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>314,244</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>28.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="65%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<UL>

<P><FONT SIZE=2><B><I> Specialty Lines  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The specialty insurance market differs significantly from the standard market. In the standard market, insurance rates and forms are highly regulated, products
and coverages are largely uniform with relatively predictable exposures, and companies tend to compete for customers on the basis of price. In contrast, the specialty market provides coverage for
risks that do not fit the underwriting criteria of the standard carriers. Competition tends to focus less on price and more on availability, service and other value-based considerations. To reach our
financial and operational goals, we must have extensive knowledge and expertise in our chosen markets. Most of our risks are considered on an individual basis, and we employ tailored solutions in
order to respond to distinctive risk characteristics. We have chosen to be in only those lines where we believe we have specialized underwriting expertise. We can write business in all 50 states in
the United States as an admitted insurer and in 45 states on an excess and surplus basis. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
principal specialty lines are: specialty risks, onshore and offshore energy, aviation and aerospace, commercial property and marine. Since most of our specialty lines are for
property and not casualty coverage, the segment is principally short to medium tail business. This means that claims are generally made and settled earlier than in long tail business, which
facilitates our reserving process. Generally, the insurance we write is not first layer, which means that there is at least one layer of insurance coverage beneath ours provided by another insurer or
insurers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
premiums written, set forth by line, are as follows for our specialty lines business segment: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ea2730_gross_premiums_written_by_specialty_line"> </A>
<A NAME="toc_ea2730_3"> </A>
<BR></FONT><FONT SIZE=2><B><U>Gross Premiums Written by Specialty Line</U>    <BR>  </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>For the Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Specialty Risks (including terrorism, marine and aviation war risk and political risk)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>355,141</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>44.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Onshore and Offshore Energy</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>168,432</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>21.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Aviation and Aerospace</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>114,708</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Commercial Property</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>104,927</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Marine</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>50,551</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="67%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>793,759</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=2>58</FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Specialty Risks.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Specialty risks includes terrorism, marine and aviation war risk and political risk. Terrorism coverage
insures against physical damage and associated business interruption of an insured following an act of terrorism. We believe that we were one of only a few providers of terrorism insurance in 2002. As
such, we focused on this line, which we believe had favorable pricing and terms. Marine and aviation war insurance provides specific war coverage for the risks otherwise covered in our aviation and
marine books of business. We believe our ability to offer coverage for war, terrorism, hull and liability risks in the aviation market distinguishes us from most of our competitors. Our political
risks book generally provides protection against sovereign default or other sovereign actions resulting in impairment of cross-border investments, most often investments in infrastructure development,
for banks and major corporations in industries such as energy and mining. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Onshore and Offshore Energy.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The energy book concentrates on providing physical damage, business interruption and liability
coverage for the onshore and offshore oil and gas industry. There was considerable rate improvement in 2002 over 2001, and we therefore were aggressive in seeking energy business in 2002. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aviation and Aerospace.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The aviation and aerospace book provides insurance to both the aviation and aerospace markets. Core
aviation risks covered include hull and liability risks for passenger and cargo airlines and privately owned aircraft. In 2002, we sought to take advantage of favorable rates and terms within the
aviation line. The aerospace book provides property damage coverage on satellites for pre-launch, launch and in-orbit phases. In addition, the aerospace book provides coverage
for damage to the launch sites and launch and in-orbit liability. In 2002, the level of premiums written relating to the aerospace book of business was low because there was limited launch
activity during the year. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial Property.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The commercial property book primarily provides coverage for physical damage and business interruption
with respect to industrial properties. Coverage provided includes catastrophic and non-catastrophic events. In 2002, most of our premiums came from the United States, which experienced
improved market conditions following the tragic events of September&nbsp;11, 2001. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marine.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The marine book provides coverage for hull, liability, cargo and specie and recreational marine risks. These risks
include property damage to ships, pollution damage caused by vessels on a sudden and accidental basis and protection for general cargo and the contents of armored cars, vaults, exhibitions and
museums. In 2002, we limited our exposure to the marine business, as we did not believe the rates were favorable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
specialty lines customers include, among others, major companies in the airline, banking, multimedia, natural resources and oil and gas industries. No client in our specialty lines
segment accounted for more than 2.0% of our gross written premiums in 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to expand our focus into two additional lines in 2003, commercial liability and professional liability, neither of which was material to our gross written premiums in 2002. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial Liability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our commercial liability book will primarily target casualty risks in the United States excess and
surplus markets. Our target classes include mercantile, manufacturing and building/premises, with particular emphasis on commercial and consumer products, commercial construction and miscellaneous
general liability. We will primarily target accounts with severe but infrequent risks, which could affect the volatility of our results. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional Liability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to acquire the renewal rights to a professional liability and related lines book of
business written by the Financial Insurance Solutions unit of Kemper in exchange for a ceding commission, a transaction we expect to consummate in the first quarter of 2003. In connection with this
acquisition, we added a senior underwriting team from Kemper. The majority of this business will be directors' and officers' liability coverage. Directors' and officers' liability insurance generally
covers directors and officers of public companies against claims alleging mismanagement or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>59</FONT></P>

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<P><FONT SIZE=2>
other breaches of corporate duties. We believe this acquisition comes at a time when there is a capacity shortage in this line, the pricing for this business is increasing and terms and conditions
for underwriters in this line are improving. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Treaty Reinsurance  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treaty reinsurance contracts are contractual arrangements that provide for automatic reinsuring of a type or category of risk underwritten by our clients. When we
write treaty reinsurance contracts, we do not separately evaluate each of the risks assumed under the contracts and are largely dependent on the underwriting decisions made by the cedent. Accordingly,
we carefully review and analyze the cedent's risk management and underwriting practices in deciding whether to provide treaty reinsurance and in appropriately pricing the treaty. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
contracts can be written on either a pro rata basis, also known as proportional, or on an excess of loss basis. In pro rata contracts, the reinsurer reimburses the </FONT> <FONT SIZE=2><B>ceding company</B></FONT><FONT SIZE=2> for the cost of
producing the business in the form of a ceding commission. The ceding commission may include an additional commission
above the actual costs of the ceding company, and these contracts often have profit-oriented additional commissions as well. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
business generally operates as a subscription market, with the reinsurance intermediaries seeking participation for specific treaties among a number of reinsurers. We offer a price
at which we are willing to participate, and only participate if we believe available pricing is favorable. Those reinsurers that ultimately subscribe to any given treaty participate at substantially
the same pricing and terms and conditions. See "&#151;Underwriting and Risk Management." </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
premiums written, set forth by line, are as follows for our treaty reinsurance business segment: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ea2730_gross_premiums_written_by_treaty_reinsurance_line"> </A>
<A NAME="toc_ea2730_4"> </A>
<BR></FONT><FONT SIZE=2><B><U>Gross Premiums Written by Treaty Reinsurance Line</U>    <BR>  </B></FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>For the Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Catastrophe</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>230,741</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>73.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Property pro rata</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>53,916</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>17.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Property per risk</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>16,721</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12,866</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="67%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>314,244</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Catastrophe Reinsurance.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Most of our catastrophe reinsurance is for property risks. Our property catastrophe reinsurance
business reinsures catastrophic perils for ceding companies on a treaty basis. Our property catastrophe reinsurance contracts provide protection for most catastrophic losses that are covered in the
underlying insurance policies written by our ceding company clients. The principal perils in our portfolio include hurricane and windstorm, earthquake, flood, tornado, hail and fire. Coverage for
other perils may be negotiated on a case-by-case basis. This business is comprised of reinsurance contracts that incur losses only when events occur that impact more than one
risk or insured. Protection under property catastrophe treaties is provided on an occurrence basis, allowing our ceding company clients to combine losses that have been incurred in any single event
from multiple underlying policies. The multiple claimant nature of property catastrophe reinsurance requires careful monitoring and control of cumulative aggregate exposure. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also reinsure workers compensation, personal accident and life insurance risks. This business is almost exclusively focused on exposures in the United States and is virtually all
written on an excess of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>60</FONT></P>

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<BR>

<P><FONT SIZE=2>
loss basis. We focus on business that is exposed to severity losses and not expected to produce high levels of claims frequency. This business is written only at levels that would require multiple
deaths or injuries to result in a loss. The treaties include limitations on the maximum amount of coverage for any one person and our attachment points are multiples of these stipulated maximum
coverage limits.
There is a potential for events that trigger property catastrophe claims, such as catastrophic earthquakes, to also result in injuries and deaths. We closely monitor the potential for accumulation
within our businesses. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property Pro Rata Treaty Reinsurance.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Property pro rata treaty reinsurance is treaty insurance that covers a cedent's
aggregate losses from an event rather than losses from particular risks. This business is written on a proportional basis. Most of our pro rata treaty reinsurance contracts have occurrence limits.
Property pro rata treaty reinsurance may contain significant risk of accumulation of exposures, both to natural and other perils. Our underwriting process explicitly recognizes these exposures.
Natural perils, such as hurricane and windstorm, earthquake and flood, are analyzed through our catastrophe modeling systems. See "&#151;Underwriting and Risk Management." Other perils, such as
fire and terrorism events, are considered based on historic loss and loss expense ratios experienced by cedents and monitored for cumulative aggregate exposure. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property Per Risk Treaty Reinsurance.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our property per risk treaty reinsurance business reinsures a portfolio of particular
property risks of ceding companies on a treaty basis. For example, we could provide reinsurance to cover a cedent's losses for damage to commercial property under individual policies. This business is
comprised of a highly diversified portfolio of reinsurance contracts covering claims from individual insurance policies issued by our ceding company clients and including both personal lines and
commercial property risks (principally covering buildings, structures, equipment and contents). Loss exposure in this business includes the perils of fire, explosion, collapse, riot, vandalism,
hurricane and windstorm, tornado, flood and earthquake. This business is written on an excess of loss basis. Our property per risk treaty reinsurance agreements generally have occurrence limits. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Following the licensing of AXIS Reinsurance in December of 2002, we began writing other types of reinsurance. This
book focuses almost exclusively on exposures in the United States and is primarily written on an excess of loss basis. Treaty reinsurance lines in this book include: treaties that are exposed to loss
only through a combination of claims from more than one underlying insurance policy or coverage part (referred to as clash reinsurance); professional (including medical malpractice, directors and
officers, employment practices liability and miscellaneous errors and omissions insurance); and umbrella (personal and commercial). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2002, our treaty reinsurance customers were largely small to mid-sized North American insurers. No client in our treaty reinsurance lines accounted for more than 4.0% of
our gross written premiums in 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>61</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a breakdown of treaty reinsurance premiums by geography: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ea2730_gross_treaty_reinsurance_lines__gro02755"> </A>
<A NAME="toc_ea2730_5"> </A>
<BR></FONT><FONT SIZE=2><B><U>Gross Treaty Reinsurance Lines Premiums Written by Geographic Area</U>    <BR>  </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="24%" ALIGN="CENTER"><FONT SIZE=1><B>In Force as of<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>U.S.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>50.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>North America (excluding U.S.)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>15.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Worldwide (1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>13.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>9.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Caribbean</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>4.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Japan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>4.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Australia/New Zealand</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>1.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Africa</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>0.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Asia</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>0.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="68%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>"Worldwide"
risks comprise individual policies that insure risks on a worldwide basis. </FONT></DD></DL>

<P><FONT SIZE=2><B>Technology  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed a sophisticated technology platform to support our underwriting activities worldwide. We believe our use of technology allows us to maintain a
low cost infrastructure and efficient underwriting operations. In addition, we believe our technologies provide us with significant
competitive advantages as we seek to improve our relationships with our customers and provide enhanced levels of customer service. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"Submit.Axis"
is a unique, web-based policy submission capability that we have developed for our specialty lines business. Initially developed for brokers in the London
market, Submit.Axis allows brokers to provide details of a policy submission online and our underwriters to review and accept or decline their requests. Upon submission, our senior underwriters can
access submission details online and review relevant policy documentation. In addition, the underwriters in the applicable licensed entity interact with the broker and attach offers and final slip
information for broker review. Also, the system allows all specialty lines underwriters to view all business activity and assist with market intelligence and our peer review process. Additionally, in
reviewing submissions our underwriters utilize our proprietary licensing database to determine the appropriate licensed entity that can underwrite the risk. Our licensing database contains detailed
legal and regulatory information regarding each jurisdiction in which we are permitted to write business and permits us to respond rapidly to opportunities in a cost-efficient manner. We
are committed to continuing to identify and deploy technologies which enhance our processing and underwriting capabilities and which enable us to realize additional operating efficiencies. </FONT></P>

<P><FONT SIZE=2><B>Underwriting and Risk Management  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For our non-U.S. based specialty lines business, internal underwriting controls are exercised through a group of eight senior underwriters. Each proposal for each
risk we consider underwriting is attached to our website and can be reviewed by all underwriting staff. Each risk which is ultimately bound must be reviewed by senior underwriters in the applicable
licensed entity prior to the commitment of a line. This review process applies to each specialty line risk we underwrite prior to assessment and contractual commitment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>62</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
our U.S. specialty lines business written through AXIS Insurance, we utilize a similar review process. However, due to the large number of submissions received and the generally
smaller net </FONT><FONT SIZE=2><B>retentions</B></FONT><FONT SIZE=2> on this business, we use a modified peer review process whereby every account is reviewed by two or more underwriters before a
risk is bound and, depending upon the risk's characteristics and our underwriting guidelines, the risk may also be reviewed by a senior underwriting panel. In all cases, one of our senior officers
reviews all new business weekly, and only risks with the approval of a senior officer are bound by us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
utilize a variety of proprietary and commercially available tools to quantify and monitor the various risks we accept as a company. Our proprietary systems include those for modeling
risks associated with property catastrophe, workers' compensation and various casualty and specialty pricing models as well as our proprietary portfolio risk model. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to our catastrophe exposed U.S. specialty lines operations, AXIS Insurance's catastrophe modeling unit utilizes the Risklink product discussed below both to price and to
accumulate individual risks for our commercial property and onshore energy books. This analysis is then combined with the analysis of the treaty reinsurance segment to monitor aggregate exposures. For
terrorism perils, we have developed a proprietary system for monitoring accumulations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to our non-catastrophe exposed business in AXIS Insurance, we generally analyze specialty insurance contracts via a variety of rating models. Where applicable,
our models draw upon industry information, including historical trend and development information licensed from Insurance Services Office,&nbsp;Inc. and AMS Services,&nbsp;Inc. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the analysis of our catastrophe-exposed business in our treaty reinsurance segment, we utilize three natural catastrophe modeling tools (Risklink version 4.2 licensed by RMS and
Classic/2 and CATRADER licensed by AIR). In addition, we have developed an internal proprietary application, known as the AXIS Catastrophe Accumulation and Pricing System or "ACAPS", which allows us
to track the results from each of these models for both pricing and accumulation purposes. Our state-of-the-art modeling system (including an aggregate exposure
management tool) allows the underwriting team, in conjunction with the actuarial team, to analyze risk exposure on a per peril (e.g. fire, flood, earthquake, etc.) and a geographic basis. If a program
meets the underwriting criteria of the treaty reinsurance segment, the proposal is evaluated in terms of its risk/reward profile to assess the adequacy of the proposed pricing and its potential impact
on our overall return on capital. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our property pro rata business, we utilize a combination of actuarial techniques and catastrophe modeling. We use actuarial techniques to examine our ceding companies' underwriting
results as well as the underwriting results from the companies with comparable books of business and pertinent industry results. In our property per risk business, we rely almost exclusively on
actuarial techniques. Although per risk treaties may include exposure to natural perils, castastrophe modeling systems are generally not used largely because the cedents often do not know the physical
locations of the risks they have insured. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the above technical and analytical practices, our underwriters use a variety of means, including specific contract terms and diversification of risk by geography and type
of risk, to manage our exposure to loss. Substantially all business written contains aggregate limits, in addition to event limits. </FONT></P>

<P><FONT SIZE=2><B>Marketing  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We produce our business almost exclusively through insurance and reinsurance brokers worldwide, who receive a brokerage commission usually equal to a percentage
of gross premiums. Our management and underwriting team have longstanding relationships with key insurance and reinsurance brokers, such as
Marsh (including its subsidiary, Guy Carpenter), Aon, Willis and Benfield, and with many ceding companies. We believe Submit.Axis, our proprietary web based submission system, enhances these
relationships by enabling us to provide prompt and responsive service on underwriting submissions for our specialty lines. Senior management also has direct relationships with customers. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>63</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><A
NAME="page_ec2730_1_64"> </A> </FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows our gross premiums written by broker for the year ended December&nbsp;31, 2002: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ec2730_gross_premiums_written_by_broker"> </A>
<A NAME="toc_ec2730_1"> </A>
<BR></FONT><FONT SIZE=2><B><U>Gross Premiums Written by Broker</U>    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>For the Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Marsh (including Guy Carpenter)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>419,933</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>37.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Aon</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>229,357</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Willis</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>117,448</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Benfield</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>60,940</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Others</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>280,325</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="62%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Ceded Reinsurance  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchase and intend to continue purchasing reinsurance for our specialty lines. Reinsurance ceded will vary based on line of business and on market conditions
and other factors. We use reinsurance to control our aggregate exposure to a particular risk or class of risks. These agreements provide for recovery of a portion of losses and loss expenses from
reinsurers. We remain liable to the extent that reinsurers do not meet their obligations under these agreements, and therefore we evaluate the financial condition of our reinsurers and monitor
concentrations of credit risk. Our reinsurance is currently provided by entities rated "A" or better by Standard&nbsp;&amp; Poor's or&nbsp;A.M. Best. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross,
ceded and net amounts of premiums written and earned for the year ended December&nbsp;31, 2002 were as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ec2730_gross,_ceded_and_net_am__ec202382"> </A>
<A NAME="toc_ec2730_2"> </A>
<BR></FONT><FONT SIZE=2><B><U>Gross, Ceded and Net Amounts of Premiums Written and Earned</U>    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="65%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>For the Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Premiums Written</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Premiums Earned</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Gross</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>576,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Ceded</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(89,726</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(40,054</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Net</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,018,277</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>Retrocessions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may from time to time engage in the purchase of retrocessional coverage for our treaty reinsurance segment at times when capacity is available at attractive
prices from counterparties with high credit ratings. As of December&nbsp;31, 2002, we did not have any retrocessional coverage in place. </FONT></P>

<P><FONT SIZE=2><B>Claims Management  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a claims team composed of two units that provide global coverage and claims support for the business we write. These units are the U.S. claims unit and
the European claims unit. The role of our claims units is to investigate, evaluate and pay claims efficiently. We have implemented claims handling guidelines and claims reporting and control
procedures in both claims units. To monitor that claims are handled and reported in accordance with these guidelines, all claims matters are reviewed </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>64</FONT></P>

<HR NOSHADE>
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<A NAME="page_ec2730_1_65"> </A>
<BR>

<P><FONT SIZE=2>
weekly during a formal claims meeting. The minutes from this meeting are also circulated to all underwriters and senior management within the Company. To maintain communication between underwriting
and claims teams, claims personnel regularly report at underwriting meetings and frequently attend client meetings. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
we receive notice of a claim, regardless of size it is recorded within our underwriting and claims system, and reserves and payments are checked weekly. To assist with the reporting
of significant claims, we have also developed a large claims information database, or LCID. The database is primarily used to "flash report" significant events and potential insurance losses,
regardless of whether we have exposure. Where we have exposure, the system allows a direct notification to be instantly communicated to all underwriters and senior management worldwide. The database
is also used as an electronic workflow management tool for larger cases that may involve adjustment and coverage issues or litigation. As of December&nbsp;31, 2002, we did not have any claims in
litigation. Due to our short operating history, we had not experienced a high volume of claims as of December&nbsp;31, 2002. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have entered into an agreement with a third party London market claims settlement firm to outsource certain claims administration functions relating to business sourced in London. We
generally bear only a small percentage of the risk on policies from this market. We will seek to use similar outsourcing resources elsewhere when we determine them to be appropriate and available. </FONT></P>

<P><FONT SIZE=2><B>Reserves  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An insurer establishes reserves for losses and loss expenses that arise from its insurance and reinsurance products. These reserves are balance sheet liabilities
representing estimates of future
amounts required to pay losses and loss expenses for insured or reinsured claims that have occurred at or before the balance sheet date, whether already known or not yet reported. It is our policy to
establish these losses and loss expense reserves prudently after reflecting all information known to us as of the date they are recorded. Our loss reserves are estimated by management, based on
generally accepted actuarial principles, and are reviewed every quarter by Ernst&nbsp;&amp; Young. We do not have a reserving actuary, and therefore Ernst&nbsp;&amp; Young acts as our reserving actuary.
Ernst&nbsp;&amp; Young has access to our claims information and individual contracts as part of their quarterly review. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
loss reserves fall into two categories: (i)&nbsp;reported case reserves, which reflect our estimates of the total cost of claims that were reported to us but not yet paid and
(ii)&nbsp;our estimate of the anticipated costs of claims incurred but not yet reported to us, or IBNR, which includes our estimate of the costs of additional case reserves, or ACR. Under U.S. GAAP,
we are not permitted to establish loss reserves with respect to our property catastrophe reinsurance until an event which gives rise to a loss occurs. As a result, only losses incurred up to the
reporting date may be set aside, with no allowance for the provision of a contingency reserve to account for expected future losses with respect to our property catastrophe reinsurance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
reported losses, we establish reserves on a "case" basis for the estimated amount of the ultimate settlement within the parameters of the coverage provided in the insurance or
reinsurance contracts. Additional case reserves are often estimated by our claims units ahead of official notifications but in the same manner as case reserves. Where there is a possibility of a
claim, we book an additional case reserve, which is only revised upon final determination that no claim will arise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
estimate IBNR reserves using actuarial methods. We also utilize historical insurance industry loss development patterns, as well as estimates of future trends in claims severity,
frequency and other factors, to aid us in establishing our losses and loss expense reserves. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
loss reserves represent estimates, including actuarial and statistical projections at a given point in time, of an insurer's or reinsurer's expectations of the ultimate settlement
and administration costs of claims incurred, it is likely that the ultimate liability will differ from such estimates, perhaps </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>65</FONT></P>

<HR NOSHADE>
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<A NAME="page_ec2730_1_66"> </A>
<BR>

<P><FONT SIZE=2>
significantly. Such estimates are not precise in that, among other things, they are based on predictions of future developments and estimates of future trends in loss severity and frequency and other
variable factors such as inflation. This uncertainty is heightened by the short time in which our company has operated, thereby providing limited claims loss emergence patterns specifically for our
company. This has necessitated the use of benchmarks in deriving IBNR, which despite management's and the independent actuary's care in selecting them, have the risk of differing from actual
experience. During the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, ultimate
liability may exceed or be less than the revised estimates. </FONT></P>

<P><FONT SIZE=2><B>Investments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The finance committee of our board of directors establishes our investment policies and creates guidelines for external investment managers. Management implements
our investment strategy with the assistance of those external managers. These guidelines specify minimum criteria on the overall credit quality and liquidity characteristics of the portfolio and
include limitations on the size of certain holdings as well as restrictions on purchasing certain types of securities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
current investment strategy seeks to preserve principal and maintain liquidity while trying to maximize investment return through a high quality, diversified portfolio. In this
regard, at December&nbsp;31, 2002, fixed income securities and cash and cash equivalents comprised all $2.2&nbsp;billion of our assets under management by third party investment managers. At
December&nbsp;31, 2002, our fixed income portfolio consisted of U.S. and non-U.S. sovereign government obligations, corporate bonds and other securities of which 84.0% were rated
AA- or Aa3 or better by either Standard&nbsp;&amp; Poor's or Moody's, with an overall weighted average rating of AA+ based on ratings assigned by Standard&nbsp;&amp; Poor's. We did not have
any investments in equity securities at December&nbsp;31, 2002, although in the future we may invest in such securities. Our investment guidelines limit our aggregate exposure to any single issuer
to 5% or less of our portfolio for securities rated A-/A3 or above and 2% or less of our portfolio for securities rated between BBB-/Baa3 to BBB+/Baa1 other than with respect
to U.S. government and agency securities and securities issued by other member governments of the Organization for Co-operation and Economic Development ("OECD"). At December&nbsp;31,
2002, we did not have an aggregate exposure to any single issuer of more than 2% of our shareholders' equity, other than with respect to U.S. government and agency securities and securities issued by
other OECD member governments. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
investment guidelines include a current duration target of two to four years. The duration of an investment is based on the maturity of the security and also reflects the payment of
interest and the possibility of early principal payment of such security. We seek to utilize investment benchmarks that reflect this duration target. Management periodically revises our investment
benchmarks based on business and economic factors including the average duration of our potential liabilities. As at December&nbsp;31, 2002, our investment assets had an approximate average duration
of 2.5&nbsp;years. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>66</FONT></P>

<HR NOSHADE>
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<A NAME="page_ec2730_1_67"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
types of securities in our fixed income portfolio and their fair market values and amortized costs were as follows as of and for the year ended December&nbsp;31, 2002: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ec2730_types_of_securities_in_our_fix__typ04034"> </A>
<A NAME="toc_ec2730_3"> </A>
<BR></FONT><FONT SIZE=2><B><U>Types of Securities in Our Fixed Income Portfolio and Their Fair Market Values and Amortized Costs</U>    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Type of Investment<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized<BR>
Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Gains</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Losses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair<BR>
Market<BR>
Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>U.S. government and agency securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>426,939</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,365</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(101</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>434,203</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Non-U.S. government securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>97,949</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,191</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(652</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>98,488</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Corporate debt securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>295,050</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,184</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(482</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>305,752</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Mortgage-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>725,161</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,753</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>734,611</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Asset-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>119,259</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(4,740</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>116,533</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>States, municipalities and political subdivisions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>255</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,403</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="39%"><FONT SIZE=2>Total fixed income maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,677,506</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>34,212</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(8,728</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, mortgage-backed securities constituted approximately 32.9% of our invested assets (assets under management by third party investment managers). As with
other fixed income investments, the fair market value of these securities fluctuates depending on market and other general economic conditions and the interest rate environment. Changes in interest
rates can expose us to prepayment risks on these investments. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities are prepaid more quickly,
requiring us to reinvest the proceeds at the then current market rates. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
principal risk associated with corporate debt securities is the potential loss of income and potential realized and unrealized principal losses due to insolvencies and deteriorating
credit. Asset-backed securities are subject to structural, credit and capital markets risks. Structural risks include the security's priority in the issuer's capital structure, the adequacy of and
ability to realize proceeds from the collateral and the potential for prepayments. Credit risks include consumer or corporate credits such as credit card holders and corporate obligors. Capital
markets risks include the general level of interest rates and the liquidity for these securities in the market place. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Standard&nbsp;&amp; Poor's credit ratings for fixed income securities held as of December&nbsp;31, 2002 and the percentage of our invested assets (assets under management by third
party investment managers) they represented at such date were as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ec2730_credit_ratings_for_fixed_income_securities"> </A>
<A NAME="toc_ec2730_4"> </A>
<BR></FONT><FONT SIZE=2><B><U>Credit Ratings for Fixed Income Securities</U>    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>As of<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Rating<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Market Value</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage of<BR>
Total Fair<BR>
Market Value</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>AAA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,382,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,398,352</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>82.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>AA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>31,458</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>31,701</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>A</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>146,354</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>151,378</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>BBB</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>116,992</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>121,559</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="45%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,677,506</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>67</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=4,SEQ=71,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=543110,FOLIO='67',FILE='DISK022:[03NYC0.03NYC2730]EC2730A.;19',USER='OALBERT',CD=';5-MAR-2003;12:32' -->
<A NAME="page_ec2730_1_68"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
contractual maturities of fixed maturity securities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. The maturity distribution for fixed income securities held as of December&nbsp;31, 2002 was as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ec2730_maturity_distribution_for_fixed_income_securities"> </A>
<A NAME="toc_ec2730_5"> </A>
<BR></FONT><FONT SIZE=2><B><U>Maturity Distribution for Fixed Income Securities</U>    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>As of<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1><B>Maturity<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Market Value</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage of<BR>
Total Fair<BR>
Market Value</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Due in one year or less</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>76,350</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>76,475</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Due after one year through five years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>479,517</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>487,549</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>28.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Due after five years through ten years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>223,676</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>232,088</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>13.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Due after ten years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>53,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>55,734</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Subtotal</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>833,086</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>851,846</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>50.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Mortgage- and asset-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>844,420</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>851,144</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>50.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="45%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,677,506</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table illustrates net investment income, net realized gains on investments, net realized and unrealized gains on investment derivative instruments, annualized effective
yield and total return on investments for the year ended December&nbsp;31, 2002: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ec2730_net_investment_income_and_returns_on_investments"> </A>
<A NAME="toc_ec2730_6"> </A>
<BR></FONT><FONT SIZE=2><B><U>Net Investment Income and Returns on Investments</U>    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="69%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="69%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>($ in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="69%"><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="69%"><FONT SIZE=2>Net realized gains on investments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>22,515</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="69%"><FONT SIZE=2>Net realized and unrealized gains (losses) on investment derivative instruments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>3,555</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="69%"><FONT SIZE=2>Annualized effective yield(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>3.97</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="69%"><FONT SIZE=2>Total return(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT"><FONT SIZE=2>7.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Annualized
effective yield is calculated by dividing the investment income generated from assets under management by third party investment managers by the average balance of the
assets managed by the Company's portfolio managers.
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Total
return for our investment portfolio is calculated using beginning and ending market portfolio values, adjusted for external cash flows. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
investment portfolio consists of fixed income securities denominated in both U.S. and foreign currencies. Accordingly earnings will be affected by many factors including changes in
interest rates and foreign currency exchange rates. Our investment guidelines do not currently permit the use of derivatives other than foreign currency forward contracts. During the first half of
2002, however, we did utilize derivatives as was permitted by our guidelines in effect at the time. We do not currently utilize derivatives other than foreign currency forward contracts. In the future
we may change our guidelines to permit the use of derivatives. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>68</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, we had engaged J.P. Morgan Investment Management&nbsp;Inc. and certain affiliates ("J.P. Morgan Investment Management"), The Putnam Advisory Company,
L.L.C. ("Putnam"), BlackRock Financial Management,&nbsp;Inc. and certain affiliates ("BlackRock"), Pacific Investment Management Company LLC ("PIMCO"), and Deutsche Bank Trust Company Americas
("Deutsche Bank") to provide us with investment management and advisory services. We have agreed to pay investment management fees based on the respective funds under management after each calendar
quarter. The fees are taken into account in the calculation of net investment income. The agreements with J.P. Morgan Investment Management may be terminated by either party at any time upon written
notice, the agreements with Putnam, BlackRock and PIMCO may be terminated by either party upon 15&nbsp;days written notice, and the agreement with Deutsche Bank may be terminated by either party
upon 30&nbsp;days written notice. </FONT></P>

<P><FONT SIZE=2><B>Competition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The insurance and reinsurance industry is highly competitive. We compete on an international and regional basis with major U.S., Bermuda, European and other
international insurers and reinsurers and certain underwriting syndicates, some of which have greater financial, marketing and management resources than we do. In particular, we compete with insurers
and reinsurers that provide property and casualty-based lines of insurance and reinsurance, such as ACE Limited, American International Group, Inc., Berkshire Hathaway, Inc., Converium Group, IPCRe
Limited, Lloyd's of London, Munich Re Group, PartnerRe Ltd., Renaissance Re Holdings Ltd., Swiss Reinsurance Company and XL Capital Ltd. In addition, there are other new Bermuda reinsurers with whom
we compete, such as Allied World Assurance Company, Ltd., Arch Capital Group Ltd., Endurance Specialty Holdings Ltd., Montpelier Re Holdings Ltd. and Platinum Underwriters Holdings, Ltd. Competition
varies depending on the type of business being insured or reinsured. In the specialty market, competition tends to be focused more on availability, service and other value-based considerations than on
price. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, since September&nbsp;11, 2001, established competitors have completed or may be planning to complete additional capital raising transactions. New companies continue to be
formed to enter the insurance and reinsurance markets. Competition in the types of business that we underwrite is based on many factors, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reputation;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>strength
of client relationships;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>perceived
financial strength;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>management's
experience in the line of insurance or reinsurance to be written;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>premiums
charged and other terms and conditions offered;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>services
provided, products offered and scope of business (both by size and geographic location);
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>financial
ratings assigned by independent rating agencies; and
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>speed
of claims payment. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increased
competition could result in fewer submissions, lower premium rates and less favorable policy terms, which could adversely impact our growth and profitability. In addition,
capital markets participants have recently created alternative products that are intended to compete with reinsurance products. We are unable to predict the extent to which new, proposed or potential
initiatives may affect the demand for our products or the risks that may be available for us to consider underwriting. </FONT></P>

<P><FONT SIZE=2><B>Ratings  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ratings by independent agencies are an important factor in establishing the competitive position of insurance and reinsurance companies and are important to our
ability to market and sell our products. Rating organizations continually review the financial positions of insurers, including us. Standard&nbsp;&amp; </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>69</FONT></P>

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<BR>

<P><FONT SIZE=2>
Poor's maintains a letter scale rating system ranging from "AAA" (Extremely Strong) to "R" (under regulatory supervision).&nbsp;A.M. Best maintains a letter scale rating system ranging from "A++"
(Superior) to "F" (in liquidation). Our operating insurance subsidiaries (with the exception of AXIS Indemnity, which is not rated) have been rated "A" (Strong) by Standard&nbsp;&amp; Poor's, which is
the sixth highest of twenty-one rating levels, and "A-" (Excellent) by&nbsp;A.M. Best, which is the fourth highest of fifteen rating levels. The objective of
Standard&nbsp;&amp; Poor's and&nbsp;A.M. Best's ratings systems is to provide an opinion of an insurer's or reinsurer's financial strength and ability to meet ongoing obligations to its policyholders.
These ratings reflect our ability to pay policyholder claims and are not applicable to the securities offered in this prospectus and are not a recommendation to buy, sell or hold our common shares.
These ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of, Standard&nbsp;&amp; Poor's and&nbsp;A.M. Best. </FONT></P>

<P><FONT SIZE=2><B>Administration  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We outsource certain administrative functions to third parties that can provide levels of expertise in a cost-efficient manner that we cannot
replicate internally. Functions that we outsource include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>bulk
processing and accounting services;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>actuarial
services;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>investment
accounting services;
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>information
technology maintenance; and
<BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>claims
processing and back office services. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
outsourcing of these functions assisted us in quickly establishing our international underwriting platform, and provides us with the flexibility to adjust our administrative
infrastructure and costs to changing market conditions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have also entered into certain investment management and advisory services agreements that are described in "&#151;Investments." </FONT></P>

<P><FONT SIZE=2><B>Properties  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently lease office space in the following locations: Pembroke, Bermuda (our world headquarters); London, England; Dublin, Ireland; New York, New York;
Glastonbury, Connecticut; Los Angeles, California; Chicago, Illinois; and Alpharetta, Georgia. We also lease a small amount of office space in Dallas, Texas and San Francisco, California. These leases
have terms ranging from month-to-month to ten&nbsp;years. Additionally, we recently purchased a building in Dublin, Ireland, which is undergoing renovations and will
eventually house our Dublin office. We believe that for the foreseeable future this office space is sufficient for us to conduct our operations. </FONT></P>

<P><FONT SIZE=2><B>Employees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;1, 2003, we had 168 employees. With the pending acquisition of the renewal rights to the professional liability and related lines book of
business written by the Financial Insurance Solutions unit of Kemper, we have already hired approximately 55 additional employees. We believe that our employee relations are excellent. None of our
employees are subject to collective bargaining agreements. </FONT></P>

<P><FONT SIZE=2><B>Legal Proceedings  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not currently involved in any material litigation or arbitration. We anticipate that, similar to the rest of the insurance and reinsurance industry, we may
be subject to litigation and arbitration in the ordinary course of business. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>70</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ee2730_regulation"> </A>
<A NAME="toc_ee2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>REGULATION    <BR>  </B></FONT></P>


<P><FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business of insurance and reinsurance is regulated in most countries, although the degree and type of regulation varies significantly from one jurisdiction to
another. In Bermuda, we operate under a relatively less intensive regulatory regime. We are subject to extensive regulation under applicable statutes in Ireland and the United States. </FONT></P>

<P><FONT SIZE=2><B>Bermuda  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a holding company, AXIS Holdings is not subject to Bermuda insurance regulations. However, the Insurance Act 1978 of Bermuda and related regulations, as
amended (the "Insurance Act"), regulates the insurance business of our operating subsidiary in Bermuda, AXIS Specialty, and provides that no person may carry on any insurance business in or from
within Bermuda unless registered as an insurer by the BMA under the Insurance Act. Insurance as well as reinsurance is regulated under the Insurance Act. The BMA, in deciding whether to grant
registration, has broad discretion to act as it thinks fit in the public interest. The BMA is required by the Insurance Act to determine whether the applicant is a fit and proper body to be engaged in
the insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise to operate an insurance business. The continued registration of an applicant as an
insurer is subject to the applicant complying with the terms of its registration and such other conditions as the BMA may impose from time to time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
Insurance Advisory Committee appointed by the Bermuda Minister of Finance advises the BMA on matters connected with the discharge of the BMA's functions. Sub-committees of
the Insurance Advisory Committee supervise and review the law and practice of insurance in Bermuda, including reviews of accounting and administrative procedures. The
day-to-day supervision of insurers is the responsibility of the BMA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Insurance Act also imposes on Bermuda insurance companies solvency and liquidity standards and auditing and reporting requirements and grants the BMA powers to supervise,
investigate, require information and the production of documents and intervene in the affairs of insurance companies. Certain significant aspects of the Bermuda insurance regulatory framework are set
forth below. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Classification of Insurers  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Insurance Act distinguishes between insurers carrying on long-term business and insurers carrying on general business. There are four
classifications of insurers carrying on general business, with Class&nbsp;4 insurers subject to the strictest regulation. AXIS Specialty, which is incorporated to carry on general insurance and
reinsurance business, is registered as a Class&nbsp;4 insurer in Bermuda and is regulated as such under the Insurance Act. AXIS Specialty is not licensed to carry on long-term business.
Long-term business broadly includes life insurance and disability insurance with terms in excess of five years. General business broadly includes all types of insurance that is not
long-term business. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Cancellation of Insurer's Registration  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An insurer's registration may be canceled by the Supervisor of Insurance of the BMA on certain grounds specified in the Insurance Act, including failure of the
insurer to comply with its obligations under the Insurance Act or if, in the opinion of the BMA after consultation with the Insurance Advisory Committee, the insurer has not been carrying on business
in accordance with sound insurance principles. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>71</FONT></P>

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<UL>

<P><FONT SIZE=2><I> Principal Representative  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An insurer is required to maintain a principal office in Bermuda and to appoint and maintain a principal representative in Bermuda. For the purpose of the
Insurance Act, AXIS Specialty's principal office is its executive offices in Pembroke, Bermuda, and AXIS Specialty's principal representative is Andrew Cook. Without a reason acceptable to the BMA, an
insurer may not terminate the appointment of its principal representative, and the principal representative may not cease to act as such, unless 30&nbsp;days' notice in writing to the BMA is given
of the intention to do so. It is the duty of the principal representative, within 30&nbsp;days of reaching the view that there is a likelihood that the insurer will become insolvent or that a
reportable "event" has or is believed to have occurred, to make a report in writing to the BMA setting forth all the particulars of the case that are available to the principal representative. For
example, the failure by the insurer to comply substantially with a condition
imposed upon the insurer by the BMA relating to a solvency margin or a liquidity or other ratio would be a reportable "event." </FONT></P>

<UL>

<P><FONT SIZE=2><I> Independent Approved Auditor  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Every registered insurer must appoint an independent auditor who will audit and report annually on the statutory financial statements and the statutory financial
return of the insurer, both of which, in the case of AXIS Specialty, are required to be filed annually with the BMA. AXIS Specialty's independent auditor must be approved by the BMA and may be the
same person or firm that audits AXIS Holdings' consolidated financial statements and reports for presentation to its shareholders. AXIS Specialty's independent auditor is Deloitte&nbsp;&amp; Touche,
which also audits the Company's consolidated financial statements. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Loss Reserve Specialist  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a registered Class&nbsp;4 insurer, AXIS Specialty is required to submit an opinion of its approved loss reserve specialist with its statutory financial
return in respect of its losses and loss expenses provisions. The loss reserve specialist, who will normally be a qualified casualty actuary, must be approved by the BMA. Tony Jones of Ernst&nbsp;&amp;
Young has been approved to act as AXIS Specialty's loss reserve specialist. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Statutory Financial Statements  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty must prepare annual statutory financial statements. The Insurance Act prescribes rules for the preparation and substance of these statutory
financial statements, which include, in statutory form, a balance sheet, an income statement, a statement of capital and surplus and notes thereto. AXIS Specialty is required to give detailed
information and analyses regarding premiums, claims, reinsurance and investments. The statutory financial statements are not prepared in accordance with U.S. GAAP and are distinct from the financial
statements prepared for presentation to AXIS Specialty's shareholders under the Companies Act, which financial statements are prepared in accordance with U.S. GAAP. As a general business insurer, AXIS
Specialty is required to submit the annual statutory financial statements as part of the annual statutory financial return. The statutory financial statements and the statutory financial return do not
form part of the public records maintained by the BMA. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Annual Statutory Financial Return  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty is required to file with the BMA a statutory financial return no later than four months after its financial year end unless specifically extended
upon application to the BMA. The statutory financial return for a Class&nbsp;4 insurer includes, among other matters, a report of the approved independent auditor on the statutory financial
statements of the insurer, solvency certificates, the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>72</FONT></P>

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<P><FONT SIZE=2>
statutory financial statements, the opinion of the loss reserve specialist and a schedule of reinsurance ceded. The solvency certificates must be signed by the principal representative and at least
two directors of the insurer certifying that the minimum solvency margin has been met and whether the insurer complied with the conditions attached to its certificate of registration. The independent
approved auditor is required to state whether, in its opinion, it was reasonable for the directors to make these certifications. If an insurer's accounts have been audited for any purpose other than
compliance with the Insurance Act, a statement to that effect must be filed with the statutory financial return. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Minimum Solvency Margin and Restrictions on Dividends and Distributions  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Insurance Act, the value of the general business assets of a Class&nbsp;4 insurer, such as AXIS Specialty, must exceed the amount of its general
business liabilities by an amount greater than the prescribed minimum solvency margin. AXIS Specialty is required, with respect to its general business, to maintain a minimum solvency margin equal to
the greatest of: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>$100,000,000;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>50%
of net premiums written (being gross premiums written less any premiums ceded by AXIS Specialty, but AXIS Specialty may not deduct more than 25% of gross
premiums when computing net premiums written); and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>15%
of net losses and loss expense reserves. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty is prohibited from declaring or paying any dividends during any financial year if it is in breach of its minimum solvency margin or minimum liquidity ratio or if the
declaration or payment of such dividends would cause it to fail to meet such margin or ratio. In addition, if it has failed to meet its minimum solvency margin or minimum liquidity ratio on the last
day of any financial year, AXIS Specialty will be prohibited, without the approval of the BMA, from declaring or paying any dividends
during the next financial year. AXIS Specialty is also prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its
previous financial year's statutory balance sheet) unless it files with the BMA at least seven days before payment of such dividends an affidavit stating that it will continue to meet the required
margins. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty is prohibited, without the approval of the BMA, from reducing by 15% or more its total statutory capital as set out in its previous year's financial statements, and any
application for such approval must include an affidavit stating that it will continue to meet the required margins. In addition, at any time it fails to meet its solvency margin, AXIS Specialty is
required, within 30&nbsp;days (45&nbsp;days where total statutory capital and surplus falls to $75&nbsp;million or less) after becoming aware of such failure or having reason to believe that
such failure has occurred, to file with the BMA a written report containing certain information. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
under the Companies Act, neither AXIS Holdings nor AXIS Specialty may declare or pay a dividend, or make a distribution from contributed surplus, if there are reasonable
grounds for believing that it is, or would after the payment be, unable to pay its liabilities as they become due, or the realizable value of its assets would be less than the aggregate of its
liabilities and its issued share capital and share premium accounts. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Minimum Liquidity Ratio  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Insurance Act provides a minimum liquidity ratio for general business insurers, like AXIS Specialty. An insurer engaged in general business is required to
maintain the value of its relevant assets at not less than 75% of the amount of its relevant liabilities. Relevant assets include, but are not limited to, cash and time deposits, quoted investments,
unquoted bonds and debentures, first liens on real estate, investment income due and accrued, accounts and premiums receivable and reinsurance </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>73</FONT></P>

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<P><FONT SIZE=2>
balances receivable. There are certain categories of assets which, unless specifically permitted by the BMA, do not automatically qualify as relevant assets, such as unquoted equity securities,
investments in and advances to affiliates and real estate and collateral loans. The relevant liabilities are total general business insurance reserves and total other liabilities less deferred income
tax and sundry liabilities (by interpretation, those not specifically defined). </FONT></P>

<UL>

<P><FONT SIZE=2><I> Supervision, Investigation and Intervention  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The BMA may appoint an inspector with extensive powers to investigate the affairs of AXIS Specialty if the BMA believes that such an investigation is in the best
interests of its policyholders or persons who may become policyholders. In order to verify or supplement information otherwise provided to the
BMA, the BMA may direct AXIS Specialty to produce documents or information relating to matters connected with its business. If it appears to the BMA that there is a risk of AXIS Specialty becoming
insolvent, or that AXIS Specialty is in breach of the Insurance Act or any conditions imposed upon its registration, the BMA may, among other things, direct AXIS Specialty (i)&nbsp;not to take on
any new insurance business, (ii)&nbsp;not to vary any insurance contract if the effect would be to increase its liabilities, (iii)&nbsp;not to make certain investments, (iv)&nbsp;to liquidate
certain investments, (v)&nbsp;to maintain in, or transfer to the custody of a specified bank, certain assets, (vi)&nbsp;not to declare or pay any dividends or other distributions or to restrict
the making of such payments and/or (vii)&nbsp;to limit AXIS Specialty's premium income. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Disclosure of Information  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to powers under the Insurance Act to investigate the affairs of an insurer, the BMA may require certain information from an insurer (or certain other
persons) to be produced to the BMA. Further, the BMA has been given powers to assist other regulatory authorities, including foreign insurance regulatory authorities, with their investigations
involving insurance and reinsurance companies in Bermuda but subject to restrictions. For example, the BMA must be satisfied that the assistance being requested is in connection with the discharge of
regulatory responsibilities of the foreign regulatory authority. Further, the BMA must consider whether cooperation is in the public interest. The grounds for disclosure are limited and the Insurance
Act provides sanctions for breach of the statutory duty of confidentiality. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Certain Other Bermuda Law Considerations  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although AXIS Holdings is incorporated in Bermuda, it is classified as a non-resident of Bermuda for exchange control purposes by the BMA. Pursuant to
its non-resident status, AXIS Holdings may engage in transactions in currencies other than Bermuda dollars and there are no restrictions on its ability to transfer funds (other than funds
denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of its common shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Bermuda law, exempted companies are companies formed for the purpose of conducting business outside Bermuda from a principal place of business in Bermuda. As "exempted" companies,
AXIS Holdings and AXIS Specialty may not, without the express authorization of the Bermuda legislature or under a license or consent granted by the Minister of Finance, participate in certain business
transactions, including: (i)&nbsp;the acquisition or holding of land in Bermuda (except that held by way of lease or tenancy agreement which is required for its business and held for a term not
exceeding 50&nbsp;years, or which is used to provide accommodation or recreational facilities for its officers and employees and held with the consent of the Bermuda Minister of Finance, for a term
not exceeding 21&nbsp;years); (ii)&nbsp;the taking of mortgages on land in Bermuda to secure an amount in excess of $50,000; or (iii)&nbsp;the carrying on of business of any kind for which it is
not licensed in Bermuda, except in certain limited circumstances such as doing business with another exempted undertaking in furtherance of AXIS Holdings' business or AXIS Specialty's business (as the
case may be) carried on outside </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>74</FONT></P>

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<P><FONT SIZE=2>
Bermuda. AXIS Specialty is a licensed insurer in Bermuda, and so may carry on activities from Bermuda that are related to and in support of its insurance business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 1998 of Bermuda which regulates the sale of securities in
Bermuda. In addition, the BMA must approve all issuances and transfers of shares of a Bermuda exempted company. Before the offering contemplated by this prospectus, we expect the BMA will have issued
their permission for the issue and free transferability of the common shares being offered pursuant to this prospectus, as long as the shares are listed on the New York Stock Exchange, to and among
persons who are non-residents of Bermuda for exchange control purposes. In addition, we will deliver to and file&nbsp;a copy of this prospectus with the Registrar of Companies in Bermuda
in accordance with Bermuda law. The BMA and the Registrar of Companies accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or
opinions expressed in this prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Bermuda government actively encourages foreign investment in "exempted" entities like AXIS Holdings and AXIS Specialty that are based in Bermuda, but which do not operate in
competition with local businesses. AXIS Holdings and AXIS Specialty are not currently subject to taxes computed on profits or income or computed on any capital asset, gain or appreciation, or any tax
in the nature of estate duty or inheritance tax or to any foreign exchange controls in Bermuda. See "Material Tax Considerations&#151;Taxation of AXIS Holdings and
Subsidiaries&#151;Bermuda." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Bermuda law, non-Bermudians (other than spouses of Bermudians) may not engage in any gainful occupation in Bermuda without an appropriate governmental work permit. Work
permits may be granted or extended by the Bermuda government upon showing that, after proper public advertisement in most cases, no Bermudian (or spouse of a Bermudian) is available who meets the
minimum standard requirements for the advertised position. The Bermuda government recently announced a new policy limiting the duration of work permits to six years, with certain exemptions for key
employees. All of our Bermuda-based professional employees who require work permits have been granted permits by the Bermuda government. The terms of these permits range from one to three years
depending on the individual. </FONT></P>

<P><FONT SIZE=2><B>United States  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Holdings has three operating insurance subsidiaries domiciled in the United States, which we refer to as the AXIS U.S. Subsidiaries. </FONT></P>

<UL>

<P><FONT SIZE=2><I> U.S. Insurance Holding Company Regulation of AXIS Holdings  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Holdings, as the indirect parent of the AXIS U.S. Subsidiaries, is subject to the insurance holding company laws of Connecticut, New York, and Illinois.
These laws generally require each of the AXIS U.S. Subsidiaries to register with its respective domestic state insurance department and to furnish annually financial and other information about the
operations of companies within the holding company system. Generally, all material transactions among companies in the holding company system to which any of the AXIS U.S. Subsidiaries is a party,
including sales, loans, reinsurance agreements and service agreements must be fair and, if material or of a specified category, require prior notice and approval or non-disapproval by the
insurance department where the subsidiary is domiciled. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Changes of Control  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the
domestic insurer is domiciled. Prior to granting approval of an application to acquire control of a domestic insurer, the state insurance commissioner will consider such factors as: the financial
strength of the applicant, the integrity and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>75</FONT></P>

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<P><FONT SIZE=2>
management of the applicant's board of directors and executive officers, the acquiror's plans for the management of the applicant's board of directors and executive officers, the acquiror's plans for
the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control. Generally, state statutes provide that
control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10% or more of the voting
securities of the domestic insurer. Because a person acquiring 10% or more of our common shares would indirectly control the same percentage of the stock of the AXIS U.S. Subsidiaries, the insurance
change of control laws of Connecticut, Illinois and New York would likely apply to such a transaction. While our bye-laws limit the voting power of any shareholder to less than 9.5%, there
can be no assurance that the applicable state insurance regulator would agree that such shareholder did not control the applicable AXIS U.S. Subsidiary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of AXIS Holdings, including through transactions, and in particular
unsolicited transactions, that some or all of the shareholders of AXIS Holdings might consider to be desirable. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Legislative Changes  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;26, 2002, the Terrorism Risk Insurance Act was enacted to ensure the availability of insurance coverage for terrorist acts in the United
States. This law requires insurers writing certain lines of property and casualty insurance to offer coverage against certain acts of terrorism causing damage within the United States or to U.S.
flagged vessels or aircraft. In return, the law requires the federal government to indemnify such insurers for 90% of insured losses resulting from covered acts of terrorism, subject to a
premium-based deductible. Any existing policy exclusions for such coverage were immediately nullified by the law, although such exclusions may be reinstated if either the insured consents to
reinstatement or fails to pay any applicable increase in premium resulting from the additional coverage within 30&nbsp;days of being notified of such. It should be noted that "act of terrorism" as
defined by the law excludes purely domestic terrorism. For an act of terrorism to have occurred, the U.S. Treasury Secretary must make several findings, including that the act was committed on behalf
of a foreign person or foreign interest. The law expires automatically at the end of 2005. </FONT></P>

<UL>

<P><FONT SIZE=2><I> State Insurance Regulation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State insurance authorities have broad regulatory powers with respect to various aspects of the business of U.S. insurance companies, including: licensing to
transact business, accreditation of reinsurers, admittance of assets to statutory surplus, regulating unfair trade and claims practices, establishing reserve requirements and solvency standards,
regulating investments and dividends, approving policy forms and related materials in certain instances and approving premium rates in certain instances. State insurance laws and regulations may
require the AXIS U.S. Subsidiaries to file financial statements with insurance departments everywhere they will be licensed or authorized or accredited to conduct insurance business, and their
operations are subject to examination by those departments at any time. The AXIS U.S. Subsidiaries prepare statutory financial statements in accordance with </FONT><FONT SIZE=2><B>statutory
accounting principles</B></FONT><FONT SIZE=2> ("SAP") and procedures prescribed or permitted by these departments. State insurance departments also conduct periodic examinations of the books and
records, financial reporting, policy filings and market conduct of insurance companies domiciled in their states, generally once every three to five years. Examinations are generally carried out in
cooperation with the insurance departments of other states under guidelines promulgated by the NAIC. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
terms and conditions of reinsurance agreements generally are not subject to regulation by any U.S. state insurance department with respect to rates or policy terms. As a practical
matter, however, the rates charged by primary insurers do have an effect on the rates that can be charged by reinsurers. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>76</FONT></P>

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<UL>

<P><FONT SIZE=2><I> State Dividend Limitations  </I></FONT></P>

</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New York.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under New York law, the ability of AXIS Reinsurance to declare or pay any dividend to us which, together with all
dividends declared or distributed by it during the next preceding twelve months, exceeds the lesser of 10% of AXIS Reinsurance's statutory surplus as shown on its latest statutory financial statement
on file with the New York Superintendent of Insurance, or 100% of AXIS Reinsurance's adjusted net investment income during that period, will be subject to the prior approval of the New York
Superintendent of Insurance. An additional limitation is that New York does not permit a dividend to be declared or distributed except out of earned surplus. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
in connection with its acquisition of AXIS Reinsurance, AXIS Holdings agreed with the New York Insurance Department to not take a dividend from AXIS Reinsurance for two
years following the date of the acquisition (i.e., not before November&nbsp;27, 2004) without prior regulatory approval. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Connecticut.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Connecticut law, AXIS Insurance may not pay a dividend or make a distribution that exceeds the greater of
10% of AXIS Insurance statutory surplus as of the thirty-first day of December of the last preceding year, or the net income of AXIS Insurance for the twelve month period ending the thirty-first day
of December of the last preceding year without the prior approval of the Connecticut insurance commissioner unless thirty days have passed after receipt by the commissioner of notice of such payment
without the commissioner having disapproved of such payment. In addition, AXIS Insurance must report for informational purposes to the Connecticut insurance commissioner all dividends and other
distributions to securityholders within five business days following the declaration and at least 10&nbsp;days prior to payment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
under Connecticut law, AXIS Insurance may not pay or propose to pay any dividend within two years of the date of its acquisition by AXIS Holdings (i.e., not before
October&nbsp;2, 2004) without the prior approval of the Connecticut insurance commissioner. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Illinois.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Illinois law, AXIS Indemnity may not pay a dividend or make a distribution that exceeds the greater of 10% of
AXIS Indemnity's surplus as of the thirty-first day of December of the last preceding year, or the net income of AXIS Indemnity, for the twelve month period ending the thirty-first day of December of
the last preceding year until thirty days after the commissioner has received notice and the commissioner has not disapproved of such payment or until the insurance commissioner has approved such
payment within the thirty day period. In addition, AXIS Indemnity must report to the Illinois Insurance Commissioner all dividends and distributions to shareholders within five business days following
declaration and no less than 10 business days prior to payment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
dividend limitations imposed by the state laws are based on the statutory financial results of the respective AXIS U.S. Subsidiaries determined by using statutory accounting
practices which differ in certain respects from accounting principles used in financial statements prepared in conformity with U.S. GAAP. The significant differences relate to deferred acquisition
costs, deferred income taxes, required investment reserves, reserve calculation assumptions and surplus notes. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Risk-Based Capital Regulations  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New York, Connecticut and Illinois require that each domestic insurer report their risk-based capital based on a formula calculated by applying
factors to various asset, premium and reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk.
The respective state insurance regulators use the formula as an early warning regulatory tool to identify possibly inadequately capitalized insurers for purposes of initiating regulatory action, and
not as a means to rank insurers generally. State insurance laws impose broad confidentiality requirements on those engaged in the insurance business (including insurers, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>77</FONT></P>

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<P><FONT SIZE=2>
agents, brokers and others) and on state insurance departments as to the use and publication of risk-based capital data. The respective state insurance regulators have explicit regulatory
authority to require various actions by, or to take various actions against, insurers whose total adjusted capital does not exceed certain risk-based capital levels. Each of AXIS
Reinsurance, AXIS Insurance and AXIS Indemnity have risk-based capital in excess of the required levels. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Statutory Accounting Principles  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SAP is a basis of accounting developed to assist insurance regulators in monitoring and regulating the solvency of insurance companies. It is primarily concerned
with measuring an insurer's surplus to policyholders. Accordingly, statutory accounting focuses on valuing assets and liabilities of insurers at financial reporting dates in accordance with
appropriate insurance law and regulatory provisions applicable in each insurer's domiciliary state. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S.
GAAP is concerned with a company's solvency, but it is also concerned with other financial measurements, such as income and cash flows. Accordingly, U.S. GAAP gives more
consideration to appropriate matching of revenue and expenses and accounting for management's stewardship of assets than does SAP. As a direct result, different assets and liabilities and different
amounts of assets and liabilities will be reflected in financial statements prepared in accordance with U.S. GAAP as opposed to SAP. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statutory
accounting practices established by the NAIC and adopted, in part, by the New York, Connecticut and Illinois regulators determine, among other things, the amount of statutory
surplus and statutory net income of the AXIS U.S. Subsidiaries and thus determine, in part, the amount of funds they have available to pay dividends to us. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Guaranty Associations and Similar Arrangements  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of the jurisdictions in which the AXIS U.S. Subsidiaries are admitted to transact business require property and casualty insurers doing business within the
jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These
associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of
business in which the impaired, insolvent or failed insurer is engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Operations of AXIS Specialty, AXIS Re and AXIS Specialty Europe  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The insurance laws of each state of the United States and of many other countries regulate or prohibit the sale of insurance and reinsurance within their
jurisdictions by non-domestic insurers and reinsurers that are not admitted to do business within such jurisdictions. AXIS Specialty, AXIS Re and AXIS Specialty Europe are not admitted to
do business in the United States. We do not intend that AXIS Specialty, AXIS Re and AXIS Specialty Europe maintain offices or solicit, advertise, settle claims or conduct other insurance activities in
any jurisdiction in the United States where the conduct of such activities would require these companies to be admitted or authorized. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the regulatory requirements imposed by the jurisdictions in which they are licensed, reinsurers' business operations are affected by regulatory requirements in various
states of the United States governing "credit for reinsurance" which are imposed on their ceding companies. In general, a ceding company which obtains reinsurance from a reinsurer that is licensed,
accredited or approved by the jurisdiction or state in which the ceding company files statutory financial statements is permitted to reflect in its statutory financial statements a credit in an
aggregate amount equal to the ceding company's liability for unearned premiums (which are that portion of premiums written which applies </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>78</FONT></P>

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<P><FONT SIZE=2>
to the unexpired portion of the policy period), loss reserves and loss expense reserves ceded to the reinsurer. AXIS Specialty, AXIS Re and AXIS Specialty Europe are not licensed, accredited or
approved in any state in the U.S. The great majority of states, however, permit a credit to statutory surplus resulting from reinsurance obtained from a non-licensed or
non-accredited reinsurer to be recognized to the extent that the reinsurer provides a letter of credit, trust fund or other acceptable security arrangement. A few states do not allow
credit for reinsurance ceded to non-licensed reinsurers
except in certain limited circumstances and others impose additional requirements that make it difficult to become accredited. </FONT></P>

<P><FONT SIZE=2><B>Ireland  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the various restrictions and regulations discussed below, each of AXIS Specialty Europe and AXIS Re are restricted by companies legislation to
declaring dividends only out of "profits available for distribution." Profits available for distribution are a company's accumulated realized profits less its accumulated realized losses. Such profits
may not include profits previously utilized either by distribution or capitalization and such losses do not include amounts previously written off in a reduction or reorganization of capital. </FONT></P>

<UL>

<P><FONT SIZE=2><I> AXIS Specialty Europe  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty Europe is a non-life insurance company incorporated under the laws of Ireland on February&nbsp;18, 2002 and having its registered
office at Fitzwilton House, Wilton Place, Dublin 2 Ireland. AXIS Specialty Europe is subject to the regulation and supervision of the DETE pursuant to the Insurance Acts and Regulations. AXIS
Specialty Europe was authorized on May&nbsp;23, 2002 to undertake the business of non-life insurance in various classes of business. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
is normal in the case of insurance companies, when the DETE authorized AXIS Specialty Europe to write non-life insurance business, in addition to the obligations imposed
on AXIS Specialty Europe by the Insurance Acts and Regulations, the DETE granted the authorization subject to certain conditions. The following are the main conditions which have been imposed: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>AXIS
Specialty Europe must adhere to the business plan submitted to the DETE in connection with its application for authorization;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>AXIS
Specialty Europe must submit quarterly management accounts to the DETE for the first three years of operation;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>AXIS
Specialty Europe is not permitted to reduce the level of its capital without the consent of the Minister;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>AXIS
Specialty Europe may not make any dividend payments without the DETE's prior approval;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>no
intercompany loans may be made by AXIS Specialty Europe without prior notification to and approval of the Minister;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
management accounts of AXIS Holdings must be submitted to the DETE on a quarterly basis for the initial years of operation of AXIS Specialty Europe; </FONT></DD></DL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>79</FONT></P>

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<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>AXIS
Specialty Europe must maintain a minimum solvency margin equal to 200% of the solvency margin laid down by the Insurance Acts and Regulations (and a
solvency ratio of 50%); and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>AXIS
Specialty Europe must file annual statutory insurance returns in the format prescribed by the European Communities (Non-Life Insurance
Accounts) Regulations, 1995. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>In
addition to the above conditions, AXIS Specialty Europe has agreed, following a request from the DETE, not to write any reinsurance business. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;European Passport.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Ireland is a member of the European Economic Area (the "EEA"). The EEA comprises each of the countries of
the EU (being, as at January&nbsp;2003, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden and The United Kingdom) and
Iceland, Liechtenstein and Norway. The EEA was established by a 1992 agreement the effect of which is to create an area of free movement of goods and services (including insurance services) within EEA
countries. A consequential effect of the EEA agreement is that the rules on passporting of insurance services that apply between EU member states (described below) are extended to Iceland,
Liechtenstein and Norway. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ireland
has adopted the EU's Third Non-Life Insurance Directive (92/49/EEC) into Irish law. This Directive introduced a single system for the authorization and financial
supervision of non-life insurance companies by their home member state. Under this system AXIS Specialty Europe (as an Irish authorized insurance company) can carry on insurance business
in any other EU member state either under the rules of establishment or under the rules on the freedom of services. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
the basis of the foregoing, in addition to being authorized to carry on non-life insurance business in Ireland, AXIS Specialty Europe is also authorized to carry on
non-life insurance business in all other EEA member states under freedom of services. However, AXIS Specialty Europe is not licensed or admitted as an insurance company in any jurisdiction
other than Ireland and the other EEA member states. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the freedom of services notifications made on its behalf, AXIS Specialty Europe has applied to the DETE to establish a branch in the United Kingdom. This application is
ongoing and it is
intended, once this application is approved, to write certain U.K. based insurance business through this branch. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Qualifying Shareholding.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Insurance Acts and Regulations require that anyone acquiring or disposing of a "qualifying
holding" in an insurance company (such as AXIS Specialty Europe), or anyone who proposes to decrease or increase that holding to specified levels, must first notify the Minister of their intention to
do so. It also requires any insurance company that becomes aware of any acquisitions or disposals of its capital involving the "specified levels" to notify the Minister. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Minister has three months from the date of submission of a notification within which to oppose the proposed transaction if the Minister is not satisfied as to the suitability of the
acquiror "in view of the necessity to ensure sound and prudent management of the insurance undertaking." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
"qualifying holding" means a direct or indirect holding in an insurance company that represents 10% or more of the capital or of the voting rights of such company or that makes it
possible to exercise a significant influence over the management of such company. The specified levels are 20%, 33% and 50%, or such other level of ownership that results in the company becoming the
acquiror's subsidiary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
person having a shareholding of 10% or more of the issued share capital in AXIS Holdings would be considered to have an indirect holding in AXIS Specialty Europe over the 10% limit.
Any change that resulted in the indirect acquisition or disposal of a shareholding of greater than or equal to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>80</FONT></P>

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<P><FONT SIZE=2>
10% in the share capital of AXIS Specialty Europe, or a change that resulted in an increase or decrease to one of the specified levels, would need to be pre-cleared with the Minister. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finally,
AXIS Specialty Europe is required, at such times as may be specified by the Minister, and at least once a year, to notify the Minister of the names of shareholders possessing
qualifying holdings and the size of such holdings. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transactions with Related Companies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Insurance Acts and Regulations provide that prior to entering into any transaction
of a material nature with a related company or companies (including, in particular, the provision of loans to and acceptance of loans from a related company or companies) AXIS Specialty Europe must
submit to the Minister a draft of any contract or agreement which is to be entered into by AXIS Specialty Europe in relation to the transaction. In addition to the above, there is a requirement that
AXIS Specialty Europe notify the DETE on an annual basis with respect to transactions with related companies in excess of 10,000 euros. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial Requirements.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;AXIS Specialty Europe is required to maintain technical reserves calculated in accordance with the
Insurance Acts and Regulations. Assets representing its technical reserves are required to cover AXIS Specialty Europe's calculated underwriting liabilities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
AXIS Specialty Europe is required to establish and maintain an adequate solvency margin and a minimum guarantee fund, both of which must be free from all foreseeable
liabilities. Currently, the solvency margin is calculated as the higher amount of a percentage of the annual amount of premiums (premiums basis) or the average burden of claims for the last three
years (claims basis). As noted above with respect to the conditions attaching to AXIS Specialty Europe's authorization, AXIS Specialty Europe is required to have a solvency margin significantly in
excess of the prescribed minimum. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of the minimum guarantee fund which AXIS Specialty Europe is required to maintain is equal to one third of the solvency margin requirement as set out above, subject to a
minimum. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DETE Guidelines.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In addition to the Insurance Acts and Regulations, AXIS Specialty Europe is expected to comply with certain
guidelines issued by the DETE in July 2001. The following are the most relevant guidelines: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>All
insurance companies supervised by the DETE are obliged to appoint a compliance officer, who must carry out the duties and functions set forth in the
guidelines. The compliance officer may simultaneously hold other offices within the insurance company. The compliance officer of AXIS Specialty Europe is Mr.&nbsp;Tim Hennessy.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>All
directors of insurance companies supervised by the DETE are required to certify to the DETE on an annual basis that the company has complied with all
relevant legal and regulatory requirements throughout the year.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>All
insurance companies must adopt an appropriate asset management policy having regard to its liabilities profile.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>All
companies supervised by the DETE must formulate a clear and prudent policy on the use of derivatives for all purposes and, furthermore, have controls in
place to ensure that the policy is implemented.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Non-life
companies supervised by the DETE such as AXIS Specialty Europe are required to provide an annual actuarial opinion as to the adequacy of
their reserves. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Withdrawal of Authorization.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An insurance company supervised by the DETE may have its authorization revoked by the Minister,
if the Minister is satisfied that such company: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>81</FONT></P>

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<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>has
not used its authorization for the last 12&nbsp;months, has expressly renounced its authorization or has ceased to carry on business covered by the
authorization for more than six months;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>was
convicted of certain offences under the Insurance Acts and Regulations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>no
longer fulfils the conditions required by the Insurance Acts and Regulations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>has
been unable to take measures contained in a restoration plan or finance scheme envisaged by the Insurance Acts or Regulations; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>fails
seriously in its obligations under the Insurance Acts and Regulations. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approval of Directors and Managers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In addition to the restrictions set forth above, the DETE must approve the appointment of
any new directors or managers of AXIS Specialty Europe. </FONT></P>

<UL>

<P><FONT SIZE=2><I> AXIS Re  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Re is a reinsurance company incorporated under the laws of Ireland on February&nbsp;12, 2002 and having its registered office at Fitzwilton House, Wilton
Place, Dublin 2 Ireland. Under Irish law, a reinsurance company such as AXIS Re is required to maintain a minimum level of paid up share capital. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Re was required to file&nbsp;a notification with the DETE of its intention to carry on the business of reinsurance in Ireland. On an ongoing basis, AXIS Re will be obliged to
notify to the Minister of subsequent changes to the information contained in its notification no later than the end of the year in which such changes occur. Additionally, AXIS Re will be obliged to
prepare accounts in accordance
with the European Communities (Insurance Undertakings: Accounts) Regulations, 1996 and file the same with the Registrar of Companies in Ireland. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Minister has power under Section&nbsp;22 of the Insurance Act, 1989 (as inserted by Section&nbsp;5 of the Insurance Act, 2000) to direct AXIS Re to cease writing business
indefinitely or for a specified period. The grounds for such a direction include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>inadequate
capitalization;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>unsuitable
directors and/or management;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>insufficient
staff based in Ireland;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>evidence
of unlawful activity inside or outside Ireland; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>failure
to comply with the statutory notification requirements. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>United Kingdom  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under United Kingdom law, a company may only transact insurance and/or reinsurance business upon authorization. AXIS Specialty, AXIS Re and AXIS Specialty Europe
are not authorized to transact insurance and/or reinsurance business in the United Kingdom except as otherwise explained in "&#151;Ireland&#151;AXIS Specialty Europe&#151;European
Passport." However, AXIS Specialty U.K. Limited operates a representative office in the United Kingdom on behalf of AXIS Specialty, AXIS Re and AXIS Specialty Europe. Through this relationship, AXIS
Specialty U.K. Limited acts as an agent for, and sources business to, each of AXIS Specialty, AXIS Re and AXIS Specialty Europe. In addition, AXIS Specialty Europe currently intends to apply for
authorization to establish a branch office in the United Kingdom that would allow it to transact business in the United Kingdom. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>82</FONT></P>

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NAME="page_ei2730_1_83"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ei2730_management"> </A>
<A NAME="toc_ei2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>MANAGEMENT    <BR>  </B></FONT></P>

<P><FONT SIZE=2><B>Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth the names, ages and positions of our directors: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="54%" ALIGN="CENTER"><FONT SIZE=1><B>Positions</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Michael A. Butt(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Chairman of the Board</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>John R. Charman(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Deputy Chairman, President and Chief Executive Officer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Robert J. Newhouse, Jr.(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>77</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director, Chairman of the Executive Committee</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Charles A. Davis(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Robert L. Friedman(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>59</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Donald J. Greene(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>69</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Maurice A. Keane(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Edward J. Kelly, III(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Andrew H. Rush(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>45</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Scott A. Schoen(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Frank J. Tasco(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>75</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Jeffrey C. Walker(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Director</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Denotes
Class&nbsp;I director with term to expire in 2006.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Denotes
Class&nbsp;II director with term to expire in 2005.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Denotes
Class&nbsp;III director with term to expire in 2004. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
the board of directors is not currently classified, the above classifications denote a classification pursuant to amendments to the bye-laws that we expect to effect
prior to the consummation of the offering. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Michael A. Butt</B></FONT><FONT SIZE=2> has been Chairman of the Board since September 2002. Mr.&nbsp;Butt has over 40&nbsp;years of insurance industry
experience. From 1982 to 1986, Mr.&nbsp;Butt was the Chairman of Sedgwick Limited and Vice Chairman of the Sedgwick Group plc. From 1987 to 1992, Mr.&nbsp;Butt served as Chairman and CEO of Eagle
Star Holdings plc and Eagle Star Insurance Company. From 1993 to 1998, Mr.&nbsp;Butt was President and CEO of Mid Ocean Limited. From 1998 to August&nbsp;2002, Mr.&nbsp;Butt was a director of XL
Capital&nbsp;Ltd. Mr.&nbsp;Butt is also a former director of the Farmers Insurance Group, BAT Industries and Instituto Nazionale delle Assicuranzioni. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>John R. Charman</B></FONT><FONT SIZE=2> has been President, CEO and Deputy Chairman since inception. Mr.&nbsp;Charman has over 30&nbsp;years of experience in
the insurance industry and has been in a senior underwriting position since 1975, serving most recently as deputy chairman of ACE INA Holdings and President of ACE International. Mr.&nbsp;Charman
was also CEO at ACE Global Markets from 1998 to 2001. Prior to that,
Mr.&nbsp;Charman was the CEO of Tarquin plc (a joint venture company among Insurance Partners, Harvard University and the Charman Group), the parent company of the Charman Underwriting Agencies at
Lloyd's. He was also a deputy chairman of the Council of Lloyd's and a member of the Lloyd's Core Management Group and Lloyd's Market Board between 1995 and 1997. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Robert J. Newhouse, Jr.</B></FONT><FONT SIZE=2> has served as a director and as Chairman of the Executive Committee since inception. He was also the Chairman for
the first year of our operations, after which he stepped down as Chairman. Mr.&nbsp;Newhouse has over 50&nbsp;years of industry experience. He was the Chairman of the Board of Directors of Mid
Ocean Limited from 1992 until it was sold to XL Capital&nbsp;Ltd in 1998. From 1998 to May 2000, Mr.&nbsp;Newhouse was a director of XL Capital Ltd. Prior to that, Mr.&nbsp;Newhouse held various
executive positions with Marsh&nbsp;&amp; McLennan Companies, Inc. from 1954 through 1990 and served as President from 1976 to 1988 and Vice Chairman and Member of the Office of the Chairman </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>83</FONT></P>

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<P><FONT SIZE=2>
from 1988 through 1990. During that time, he played a major role in the formation of ACE Limited and XL Capital&nbsp;Ltd and served as a director of both companies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Charles A. Davis</B></FONT><FONT SIZE=2> has served as a director since inception. Mr.&nbsp;Davis is Chairman and CEO of MMC Capital,&nbsp;Inc. and a Vice
Chairman and director of Marsh&nbsp;&amp; McLennan Companies,&nbsp;Inc. Mr.&nbsp;Davis became CEO of MMC Capital,&nbsp;Inc. in 1999 and Chairman in 2002. Mr.&nbsp;Davis joined MMC
Capital,&nbsp;Inc. in 1998 as President, a position he held until 2002. Prior to joining MMC Capital,&nbsp;Inc. in 1998, Mr.&nbsp;Davis spent 23&nbsp;years at Goldman, Sachs&nbsp;&amp; Co.,
where, among other positions, he served as Head of Investment Banking Services worldwide, Head of the Financial Services Industry Group, a General Partner, a Senior Director, and a Limited Partner.
Mr.&nbsp;Davis is also a director of Media General,&nbsp;Inc., Progressive Corporation and Merchants Bancshares,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Robert L. Friedman</B></FONT><FONT SIZE=2> has served as a director since December 2001. Since 1999, Mr.&nbsp;Friedman has been a Senior Managing Director of
The Blackstone Group, L.P., and since February&nbsp;2003 he has also been that firm's Chief Administrative Officer and Chief Legal Officer. Prior to joining Blackstone, Mr.&nbsp;Friedman was a
partner at Simpson Thacher&nbsp;&amp; Bartlett for 25&nbsp;years, where he served as a senior member of that law firm's mergers and acquisitions practice. Mr.&nbsp;Friedman currently serves as a
Director of American Axle&nbsp;&amp; Manufacturing,&nbsp;Inc., Corp Group, Crowley Data LLC, Houghton Mifflin Holdings&nbsp;Inc., Northwest Airlines,&nbsp;Inc., Premcor&nbsp;Inc. and TRW
Automotive Holdings Corp. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Donald J. Greene</B></FONT><FONT SIZE=2> has served as a director since our inception. Mr.&nbsp;Greene was a name partner of LeBoeuf, Lamb, Greene&nbsp;&amp;
MacRae, L.L.P., where he practiced from 1964 until his retirement in 2001. Mr.&nbsp;Greene is also a director of AXA Financial, Equitable Life Assurance, and Associated Electric &amp; Gas Insurance
Services Limited. He is the Founding Director and current Chairman of the International Insurance Foundation, a member of the board of overseers of the School of Risk Management of St. John's
University (which school was formerly the College of Insurance), a director of the Risk Foundation and a director of the International Insurance Council. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Maurice A. Keane</B></FONT><FONT SIZE=2> has served as a director since September 2002. Mr.&nbsp;Keane is the former Group CEO of the Bank of Ireland, a
position he held from 1998 until his retirement in 2002. He was Deputy Group CEO from 1991 through 1997, having been a Managing Director since 1983. He is currently a director of the Bank of Ireland,
DCC plc and University College Dublin Foundation Limited and Chairman of BUPA Ireland Limited and Bank of Ireland UK Holdings Limited. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Edward J. Kelly, III</B></FONT><FONT SIZE=2> has served as a director since September 2002. Since March&nbsp;1, 2001, Mr.&nbsp;Kelly has been President, CEO
and Director of Mercantile Bankshares Corporation, and Chairman of the Board and CEO of Mercantile-Safe Deposit and Trust Company. Mr.&nbsp;Kelly served as Managing Director, Head of
Global Financial Institutions, and as Co-Head of Investment Banking Client Management of J.P. Morgan, Chase&nbsp;&amp; Co. during January&nbsp;2001. Prior thereto, he was a Managing
Director of J.P. Morgan&nbsp;&amp; Co. Incorporated and held additional positions with that company. Mr.&nbsp;Kelly is a director of Adams Express and Petroleum Resources (closed-end
investment companies), CSX Corporation, CIT Group, Constellation Energy Group,&nbsp;Inc. and Hartford Financial Services Group. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Andrew H. Rush</B></FONT><FONT SIZE=2> has served as a director since our inception. Mr.&nbsp;Rush is a Managing Director of Credit Suisse First Boston in the
Private Equity Group, a position he has held since 1989, and a member of the Investment Committee of DLJ Merchant Banking Partners III, L.P. Mr.&nbsp;Rush serves on the Board of Directors of Louis
Dreyfus Communications and Societe Ethanol des Synthesis. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Scott A. Schoen</B></FONT><FONT SIZE=2> has served as a director since our inception. Mr.&nbsp;Schoen is a Managing Director of Thomas H. Lee Advisors, L.L.C.,
which is the general partner of Thomas H. Lee Partners, L.P. Prior to joining the firm in 1986, Mr.&nbsp;Schoen was in the Private Finance Department of Goldman, Sachs&nbsp;&amp; Co. Mr.&nbsp;Schoen
is a director of ARC Holdings LLC, Syratech Corporation, TransWestern Publishing, United Industries and Wyndham International. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>84</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Frank J. Tasco</B></FONT><FONT SIZE=2> has served as a director since inception. Mr.&nbsp;Tasco is a Director of Travelers Property Casualty Corp.
Mr.&nbsp;Tasco retired in 1992 as Chairman of the Board and CEO of Marsh&nbsp;&amp; McLennan Companies, Inc., a position he held since 1986. From December&nbsp;1992 to December&nbsp;1994,
Mr.&nbsp;Tasco served as Chairman of Borden,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Jeffrey C. Walker</B></FONT><FONT SIZE=2> has served as a director since inception. Mr.&nbsp;Walker is the Managing Partner of J.P. Morgan Partners, J.P. Morgan
Chase&nbsp;&amp; Co.'s global private equity group and a member of the Executive Committee and Vice Chairman of J.P. Morgan Chase&nbsp;&amp; Co. Mr.&nbsp;Walker co-founded JPMP in 1984.
Mr.&nbsp;Walker is a director of numerous public and private corporations, including 1-800-Flowers.com,&nbsp;Inc., Doane Pet Care Enterprises,&nbsp;Inc. and Guitar
Center,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2><B>Board of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bye-laws provide that our board of directors shall consist of between 11 and 13 members, or such number as determined by the shareholders. The
current board of directors consists of 12 persons. Currently our bye-laws provide that the initial board of directors shall hold office for three years, at which time the board of
directors will be divided into three approximately equal classes. In addition, each director will serve a three year term, with termination staggered according to class. However, we intend to submit
proposed amended and restated bye-laws to a vote of our existing shareholders pursuant to which the board of directors will be staggered prior to consummation of this offering. The
proposed classification is noted in the table listing our board of directors under "Management&#151;Directors." </FONT></P>

<P><FONT SIZE=2><B>Committees of the Board of Directors  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Executive Committee is composed of Messrs.&nbsp;Butt, Charman, Davis, Schoen and Walker and is
chaired by Mr.&nbsp;Newhouse, Jr. Our description of the Executive Committee reflects changes that we expect to be made to the Executive Committee Charter prior to the consummation of the offering.
The committee assists the board of directors in fulfilling its responsibilities with respect to providing guidance on our overall business development and corporate oversight. It is responsible for
providing long range, strategic planning to the Company and for appointing special committees to work with management with regard to possible transactions involving mergers, acquisitions or
dispositions as well as the issuance of equities or equity-like securities. It may exercise the authority of the board of directors, when the board of directors is not in session, except
in cases where the action of the entire board of directors is required by the memorandum of association, the bye-laws or applicable law. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee is composed of Messrs.&nbsp;Greene, Rush and Walker and is chaired by
Mr.&nbsp;Tasco. Our description of the Compensation Committee's duties reflects changes that we expect to be made to the Compensation Committee's Charter prior to consummation of the offering. This
committee approves, administers and interprets our compensation and benefit policies, including our long-term equity incentive plans. It reviews and makes recommendations to the board of
directors to ensure that our compensation and benefit policies are consistent with our compensation philosophy and corporate governance guidelines. The committee is also responsible for establishing
our CEO's compensation in light of our established corporate performance goals. Each member of this committee is a non-management director. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finance Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Finance Committee is composed of Messrs.&nbsp;Butt, Kelly and Rush and is chaired by
Mr.&nbsp;Schoen. This committee generally approves and monitors all finance-related transactions, including investment of funds and financing facilities. It is also responsible for establishing our
investment guidelines, approving the selection and terms of investment managers, evaluating the performance of investment managers, monitoring the need for additional financing and ensuring compliance
with outstanding debt facility covenants. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>85</FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee is composed of Messrs.&nbsp;Keane and Tasco and is chaired by Mr.&nbsp;Friedman. Our
description of the Audit Committee's duties reflects changes that we expect to be made to the Audit Committee Charter prior to consummation of the offering. This committee has general responsibility
for the oversight and surveillance of our accounting, reporting and financial control practices. Among other functions, the committee reviews the qualifications for the independent auditors, makes
recommendations to the board of directors as to their selection, retains our independent auditor, pre-approves fees and services and reviews the scope and results of their audit.
Additionally, it oversees the activities of the Disclosure Committee, a management committee that ensures accurate, complete and fair disclosure of Company information in accordance with applicable
laws and listing requirements. Each member of the Audit Committee is a non-management director. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate Governance and Nominating Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Corporate Governance and Nominating Committee is composed of
Messrs.&nbsp;Davis and Kelly and is chaired by Mr.&nbsp;Greene. Our description of the Corporate Governance and Nominating Committee's duties reflects changes that we expect to be made to the
Corporate Governance and Nominating Committee Charter prior to consummation of the offering. This committee takes a leadership role in shaping our corporate governance by identifying and proposing
qualified director nominees, overseeing the purpose, structure and composition of the board committees, overseeing the annual evaluation of the board of directors and the committees, and periodically
reviewing our Corporate Governance Guidelines and Procedures and Code of Business Conduct. Each member of this committee is a non-management director. </FONT></P>

<P><FONT SIZE=2><B>Compensation Committee Interlocks and Insider Participation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Greene
is counsel to the law firm of LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P., which has been retained by the Company in connection with various matters, including the offering
to which this prospectus relates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Rush
is a managing director of Credit Suisse First Boston in the Private Equity Group and a member of the Investment Committee of DLJ Merchant Banking Partners III, L.P., both
of which are affiliates of Credit Suisse First Boston LLC. Mr.&nbsp;Walker is the Managing Partner of J.P. Morgan Partners and a member of the Executive Committee and Vice Chairman of J.P. Morgan
Chase &amp; Co., both of which are affiliates of J.P. Morgan Securities Inc. Credit Suisse First Boston LLC and J.P. Morgan Securities Inc. are acting as representatives of the underwriters in the
offering to which this prospectus relates. In addition, JPMorgan Chase Bank, an affiliate of J.P. Morgan Securities Inc. also acts as administrative agent and a lender for AXIS Specialty's
$400&nbsp;million revolving credit facility. </FONT></P>

<P><FONT SIZE=2><B>Director Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-employee directors receive $35,000 per year. Non-employee directors also receive $3,000 per board meeting attended and $1,500 per
committee meeting attended. Committee chairs also receive an annual fee of $3,000 for each committee chaired. Effective as of January&nbsp;1, 2003, each committee chair will receive a fee of $5,000,
with the exception of the audit committee chair, who will receive a fee of $10,000. Additionally, effective January&nbsp;1, 2003, each non-employee director will receive annually a grant
of 1,000 stock options plus $20,000 worth of common shares pursuant to a restricted stock grant, in both cases at the fair market value of the common shares at the time of grant. Directors who are
also employees do not receive compensation for their service as directors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2002, Messrs.&nbsp;Greene and Tasco also received an annual fee for their services as directors of AXIS Reinsurance in the amount of $15,000, which amount was pro rated for the
calendar year. Mr.&nbsp;Keane received an annual fee of $25,000, which amount was pro rated for the calendar year, and an attendance fee of $1,000 per meeting for his services as director of AXIS
Speciality Holdings Ireland Limited. He also serves as a director of AXIS Specialty Europe and AXIS Re. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>86</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
each non-employee director may elect to participate in an unfunded nonqualified deferred compensation plan (the "Directors Deferred Compensation Plan"). The
following description of the plan reflects changes that we expect to be made prior to consummation of the offering. This plan allows participating directors to elect (i)&nbsp;the amount, if any, of
cash or stock received as fees for services to be deferred (expressed as a dollar amount, number of shares, or percentage) and (ii)&nbsp;the form in which payment is to be made (lump sum or three
annual installments). Directors who choose to defer fees otherwise payable in shares are credited a number of phantom stock units equal in amount to the number of shares of stock deferred. Directors
who choose to defer fees otherwise payable in cash shall be credited with interest on their cash deferral at the LIBOR rate for the year of deferral. Amounts deferred are 100% vested at all times.
Generally, benefits are paid upon termination of service as a director. The plan is administered by the board of directors. </FONT></P>

<P><FONT SIZE=2><B>Executive Officers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth certain information concerning our executive officers: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="54%" ALIGN="CENTER"><FONT SIZE=1><B>Positions</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Michael A. Butt(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Chairman of the Board</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>John R. Charman(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>President, CEO and Deputy Chairman of the Board</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Robert J. Newhouse, Jr.(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>77</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Chairman of the Executive Committee</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Andrew Cook</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>40</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Executive Vice President and Chief Financial Officer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Richard H. Blum</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Chairman, AXIS Specialty U.S. Holdings, Inc.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>William A. Fischer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>41</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Executive Vice President and Chief Reinsurance Officer, AXIS Specialty</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>John Gressier</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Executive Vice President and Chief Insurance Officer, AXIS Specialty and AXIS Specialty Europe</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Kevin McLean</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Senior Vice President, General Counsel and Secretary, AXIS Specialty U.S. Holdings, Inc.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Michael E. Morrill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>43</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>President and CEO, AXIS Reinsurance</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>John Murray</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>42</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Senior Vice President and Chief Operations Officer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Dennis B. Reding</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>President and CEO, AXIS Insurance</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Richard Strachan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2>Chief Claims Officer</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Biography
available under "&#151;Directors." </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Andrew Cook</B></FONT><FONT SIZE=2> has been Executive Vice President and Chief Financial Officer since our inception. Mr.&nbsp;Cook, a chartered accountant,
has 15&nbsp;years of industry experience. From 1993 to 1999, he served as Senior Vice President and Chief Financial Officer of LaSalle Re Holdings Limited. Mr.&nbsp;Cook worked as an independent
consultant assisting clients in raising private equity capital from 1999 to 2000. He then served as Senior Vice President and Chief Financial Officer of Mutual Risk Management Limited from 2001 until
joining us in late 2001. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Richard H. Blum</B></FONT><FONT SIZE=2> has been Chairman of AXIS Specialty U.S. Holdings,&nbsp;Inc. since February 2002. Mr.&nbsp;Blum has over
44&nbsp;years of industry experience. From 1958 to 1996, Mr.&nbsp;Blum worked at Guy Carpenter,&nbsp;Inc., most recently serving as Chairman and CEO. He then worked at J&amp;H Marsh&nbsp;&amp;
McLennan Companies,&nbsp;Inc., serving as Vice-Chairman from 1997 to 1999 and Senior Advisor from 1999 until joining us in 2002. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>William A. Fischer</B></FONT><FONT SIZE=2> has been Executive Vice President and Chief Reinsurance Officer of AXIS Specialty since our inception.
Mr.&nbsp;Fischer has 14&nbsp;years of industry experience. Mr.&nbsp;Fischer began his career at Skandia America Reinsurance in 1987 as a treaty underwriter, where he served until November 1991.
From November 1991 to October 1994, he served as Vice President of Treaty Property Underwriting at Transatlantic Reinsurance Company. Mr.&nbsp;Fischer then served as Executive Vice </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>87</FONT></P>

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<P><FONT SIZE=2>
President with responsibilities for property, accident and health, and financial products at Everest Re Group, Ltd. from October 1994 to May 2001. Most recently, Mr.&nbsp;Fischer was a Senior Vice
President of the Brokered Group of American Re, where he was responsible for all property business, from May 2001 until joining us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>John Gressier</B></FONT><FONT SIZE=2> has been Executive Vice President and Chief Insurance Officer of AXIS Specialty and AXIS Specialty Europe since April 2002.
Mr.&nbsp;Gressier has over 15&nbsp;years of experience in the insurance industry. Mr.&nbsp;Gressier served as an underwriter at Charman Underwriting Agencies from 1989 until ACE Limited acquired
Charman in 1998. Mr.&nbsp;Gressier then served as Deputy Underwriter of Syndicates 488/2488, Director of ACE Global Markets Underwriting Limited, and Director of Marine and Specialty Lines for
Syndicate 2488. He was also a member of ACE Global Markets Executive Underwriting Committee. In February&nbsp;2001, Mr.&nbsp;Gressier was appointed Joint Active Underwriter of Syndicate 2488 and
director of the ACE Agency Board, where he served until joining us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Kevin McLean </B></FONT><FONT SIZE=2>has been a Senior Vice President, General Counsel and Secretary of AXIS Specialty U.S. Holdings since June 2002.
Mr.&nbsp;McLean has 18 years of experience in the insurance industry. From 1994 until 2002, Mr.&nbsp;McLean worked at Reliance Insurance Company, most recently serving as Executive Vice President,
General Counsel, and Assistant Secretary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Michael E. Morrill </B></FONT><FONT SIZE=2>has been President and CEO of AXIS Reinsurance since August 2002. Mr.&nbsp;Morrill has over 20&nbsp;years of
experience in the insurance and reinsurance industry. From 2001 to 2002, Mr.&nbsp;Morrill was the President and CEO of Gerling Global Reinsurance Corporation of America. From 1996 to 2001, he served
as Chief Underwriting Officer for North America and Senior Vice President at
Transatlantic Reinsurance Company. He has also held senior management and underwriting positions at Munich American Reinsurance Company, Cologne Reinsurance Company of America and Christiania General
Insurance Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>John Murray </B></FONT><FONT SIZE=2>has been Senior Vice President and Chief Operations Officer since our inception. Mr.&nbsp;Murray, a chartered accountant,
has 14&nbsp;years of industry experience. From 1995 to 2000, he was the Head of Operations for ACE Global Markets Limited. He then served as a Finance Director of Newmarket Underwriting Limited
during 2000 and 2001. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Dennis B. Reding </B></FONT><FONT SIZE=2>has been President and CEO of AXIS Insurance since January 2003. Mr.&nbsp;Reding has 32 years of industry experience.
Mr.&nbsp;Reding was President and CEO of Westchester Specialty Group from 1992 to 1998. He then served as President and CEO of ACE USA, Inc. from 1998 to 2001 and President of ACE INA Holdings, Inc.
from 2001 to 2002. Mr.&nbsp;Reding was Chairman and CEO of Combined Specialty Group, Inc., an Aon subsidiary, in 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Richard Strachan </B></FONT><FONT SIZE=2>has been Chief Claims Officer since April 2002. Mr.&nbsp;Strachan has 17 years of experience in the insurance and
reinsurance industry. From 1985 to 1997 he managed claims for Syndicates 488 and 2488 at both Charman Underwriting Agencies and Tarquin plc. From 1997 to 1999, Mr.&nbsp;Strachan served as a claims
adjuster at ACE Global Markets. From 1999 to 2001, he served as claims team leader for ACE Global Markets. </FONT></P>

<P><FONT SIZE=2><B>Management Compensation and Incentive Plans  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current executive officers are compensated according to the terms of their respective service agreements, which are described below. Our compensation policies
are designed to maximize shareholder value over the long-term. We believe our policies provide management with incentives to strive for excellence and link the financial interests of
management with those of our shareholders. The level of compensation and incentive awards is based on numerous factors, including achievement of performance objectives established by our Compensation
Committee and our board of directors. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>88</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the salaries and bonuses earned by our CEO and each of the next four most highly compensated executive officers during the year ended December&nbsp;31,
2002. These individuals are referred to as the "named executive officers." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ei2730_summary_compensation_table"> </A>
<A NAME="toc_ei2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>Summary Compensation Table    <BR>  </B></FONT></P>

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<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Annual Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Long Term Compensation Awards</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="16%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Principal<BR>
Position<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Year(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Salary(2)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Bonus(3)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Other Annual<BR>
Compensation(4)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Restricted<BR>
Stock Awards</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Securities<BR>
Underlying<BR>
Options/SARs</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other<BR>
Compensation(5)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=1>John R. Charman<BR>
President and CEO</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$<BR></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1,000,000<BR>
252,055</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,750,000<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$<BR></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>168,479<BR>
10,235</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$<BR></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>5,058,000<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>25,000<BR>
253,139</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$<BR></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>100,000<BR>
25,205</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=1>Robert J. Newhouse, Jr.<BR>
Executive Committee Chairman</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>350,000<BR>
88,219</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>550,000<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>29,910<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,011,600<BR>
1,500,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>15,000<BR>
30,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>35,000<BR>
8,822</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=1>William A. Fischer<BR>
Executive Vice President and Chief Reinsurance Officer</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>400,000<BR>
100,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>500,000<BR>
250,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>228,893<BR>
6,922</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>252,900<BR>
500,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>10,000<BR>
10,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>40,000<BR>
8,548</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=1>Andrew Cook<BR>
Executive Vice President and CFO</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>325,000<BR>
21,942</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>410,000<BR>
150,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>186,840<BR>
22,645</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>252,900<BR>
500,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>10,000<BR>
7,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>32,500<BR>
2,194</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=1>John Gressier<BR>
Executive Vice President and Chief Insurance Officer(6)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>295,763</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>400,000<BR>
157,740</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>3,506</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,524,900</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>17,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>19,440</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=1>Michael A. Butt<BR>
Chairman of the Board(7)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=1>2002</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=1>126,493</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=1>200,000</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=1>52,419</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=1>1,011,600</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=1>15,000</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=1>12,649</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Because
we commenced operations in November&nbsp;2001, we have no named executive officer compensation to report for 2000.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>The
numbers presented reflect earned salary.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>The
determination of bonus amount is based on a variety of factors, including service in 2001.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(4)</FONT></DT><DD><FONT SIZE=1>Other
Annual Compensation includes (i)&nbsp;housing allowance for the year 2002 paid to Mr.&nbsp;Charman in the amount of $127,121; (ii) housing allowance for the year 2002 paid
to Mr.&nbsp;Butt in the amount of $36,430; (iii)&nbsp;housing allowance paid to Mr.&nbsp;Fischer in the amount of $144,241; and (iv) housing allowance paid to Mr. Cook in the amount of $152,127.
The reported amount also includes the amount we paid for health and long term disability insurance, social insurance and taxes, club membership fees, car allowances and relocation expenses on behalf
of the named executive officers.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(5)</FONT></DT><DD><FONT SIZE=1>Includes
amounts paid in 2001 and 2002 under our defined contribution pension plan.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(6)</FONT></DT><DD><FONT SIZE=1>Mr.&nbsp;Gressier
joined us in 2002, and accordingly has no salary to report for 2001. His annual salary in 2002 was $394,350, of which $295,763 was earned.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(7)</FONT></DT><DD><FONT SIZE=1>Mr.&nbsp;Butt
joined us in 2002, and accordingly has no salary to report for 2001. His annual salary in 2002 was $500,000, of which $126,493 was earned. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>89</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=7,SEQ=93,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=534833,FOLIO='89',FILE='DISK022:[03NYC0.03NYC2730]EI2730B.;26',USER='CNAPOLE',CD=';5-MAR-2003;15:42' -->
<A NAME="page_ei2730_1_90"> </A>
<P ALIGN="CENTER"><FONT SIZE=1><A
NAME="ei2730_options/sar_grants_in_2002"> </A>
<A NAME="toc_ei2730_3"> </A>
<BR></FONT><FONT SIZE=2><B>Options/SAR Grants in 2002    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents information concerning stock options granted to the named executive officers during the year ended December&nbsp;31, 2002. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="21%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Option/SARs<BR>
Granted</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of Total<BR>
Options/SARs<BR>
Granted to<BR>
Employees in Fiscal<BR>
Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise of<BR>
Base Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Expiration<BR>
Date</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Grant Date Present<BR>
Value(1)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>John R. Charman</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>25,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>10.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>116.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12/12/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>720,500</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Robert J. Newhouse, Jr.&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>6.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>116.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2/12/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>432,300</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>William A. Fischer</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>116.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12/12/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>288,200</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Andrew Cook</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>116.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12/12/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>288,200</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>John Gressier</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4/1/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>218,925</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>116.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12/12/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>288,200</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>Michael A. Butt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>101.16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9/30/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>291,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>116.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12/12/2012</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>144,100</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>There
was no public market for our common shares as of December&nbsp;31, 2002. The fair market value of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for grants in 2002: risk free interest rates of
3.8%, expected life of 7&nbsp;years, expected volatility of 22.1% and a dividend yield of nil. We have used an average discount of 26.8% to provide for the start-up nature of operations
and the illiquidity of a privately held stock. </FONT></DD></DL>
<UL>

<P><FONT SIZE=2><B> Pension Plan  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide pension benefits to eligible employees through various plans sponsored by the Company. All pension plans are structured as defined contribution plans
or schemes under the laws of the United States, the United Kingdom, or Ireland. During the year ended December&nbsp;31, 2002, pension expenses totaled $1.0&nbsp;million. </FONT></P>

<UL>

<P><FONT SIZE=2><B> Long-Term Equity Compensation Plan  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has adopted, subject to existing shareholder approval, a long-term incentive plan (the "Long-Term Equity
Compensation Plan") in order to optimize our profitability and growth through incentives which are consistent with our goals and which link the interest of select employees, directors and consultants
with those of our shareholders. We believe the plan also promotes teamwork and provides employees, directors and consultants with an incentive to strive for excellence. The following description of
the plan reflects changes we expect to be made prior to consummation of the offering. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
plan provides for the granting of non-qualified stock options, incentive stock options (within the meaning of Section&nbsp;422 of the Code), stock appreciation rights
("SARs"), restricted stock awards, performance share and performance unit awards and share purchase rights. The maximum number of common shares with respect to which awards may be granted under the
plan is 993,346, of which 150,000 are available for issuance pursuant to share purchase rights and of which 843,346 are available for issuance under all other awards. In the event of any stock split,
stock dividend, or other such change to our capitalization, all share limitations and per-share prices will be adjusted by the compensation committee to prevent dilution or enlargement of
rights. Shares of stock covered by an award under the plan that are forfeited will again be available for issuance in connection with future grants of awards under the plan. As of December&nbsp;31,
2002, 855,754 shares have been issued or are subject to outstanding awards under the plan (including 111,815 shares pursuant to share purchase rights). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>90</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
compensation committee of our board of directors has broad authority to administer the plan, including the authority to determine when awards will be made, determine the type and
amount of
awards, determine the exercise price of options and SARs, determine any limitations, restrictions or conditions applicable to each award, determine the terms of any instrument that evidences an award
and select plan participants. Generally, the plan is open to directors, employees, and consultants, subject to certain conditions, as described below. Awards under the plan are generally granted for a
ten-year term, but may terminate earlier if the participant's employment or service terminates prior to the end of the term. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Options and SARs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The plan authorizes the issuance of options or SARs covering up to 609,846 shares. Options may be
either incentive stock options or non-qualified stock options. Incentive stock options can only be granted to employees, and generally expire 10&nbsp;years from the date they are
granted. The exercise price of an incentive stock option or a non-qualified stock option must be at least equal to the fair market value of the shares on the date such option is granted.
The exercise price of options granted under the plan may be paid (i)&nbsp;in cash, (ii)&nbsp;if permitted by the compensation committee, by delivery of previously-acquired shares of our common
stock, (iii)&nbsp;by any combination of (i)&nbsp;and (ii), (iv)&nbsp;pursuant to a cashless exercise program, or (v)&nbsp;by any other means the compensation committee approves, in its
discretion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SARs
may be granted as freestanding SARs, tandem SARs with a related option or any combination of these forms. The grant price of a freestanding SAR must equal the fair market value of a
share on the date of the grant. Freestanding SARs may be exercised upon whatever terms and conditions the compensation committee imposes, in its sole discretion. The grant price of tandem SARs must
equal the exercise price of the related option. A tandem SAR may be exercised for all or part of the shares subject to the related option upon surrender of the right to exercise the equivalent portion
of the related option. A tandem SAR may only be exercised with respect to shares for which its related option is then exercisable. All SARs terminate within ten&nbsp;years. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Stock, Performance Units and Performance Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The plan authorizes the granting of up to 233,500 shares of
restricted stock, performance shares, or performance units on such terms and conditions as the compensation committee deems advisable. Holders of such restricted stock may generally exercise full
voting rights and may be credited with regular dividends paid with respect to the underlying shares while they are so held. Generally, after the last day of the applicable period of restriction, the
shares become freely transferable. The period of restriction with respect to outstanding stock awards generally expires on the first to occur of (1)&nbsp;a date specified in the grant agreement,
(2)&nbsp;the recipient's retirement or (3)&nbsp;the occurrence of a change in control. As of December&nbsp;31, 2002, 229,500 restricted shares have been granted under the plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance
units and performance shares may be granted to participants according to terms determined by the compensation committee. Performance units and shares are conditional grants
of a specified number of common shares or an equivalent amount of cash. Each performance unit must have an initial value equal to the fair market value of a share on the date of grant, and the
compensation committee sets performance goals in its discretion that will determine the number and/or value of performance units or shares that will be paid out. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share Purchase Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The maximum number of shares that may be offered for purchase under the plan pursuant to share
purchase rights is 150,000 shares. Share purchase rights may only be granted to employees, according to such terms as determined by the compensation committee. To assist employees in purchasing shares
pursuant to a grant of share purchase rights, we may offer employees full recourse loans secured by the shares purchased with the loan proceeds. Share purchase rights exercisable for 111,815 shares of
our common stock have been granted under the plan as of December&nbsp;31, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If,
while any award granted under the plan remains outstanding, a change in control of the Company occurs, then all stock options and SARs outstanding at the time of the change in
control will </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>91</FONT></P>

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<P><FONT SIZE=2>
become exercisable in full immediately prior to the change in control, all restrictions with respect to restricted stock awards will lapse, and the target performance goals or payout opportunities
attainable under all outstanding awards of restricted stock, performance units and performance shares will be deemed to have been fully attained for all open performance periods as of the change in
control. </FONT></P>

<UL>

<P><FONT SIZE=2><B> Annual Bonus Plan  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company annually accrues a bonus pool, which currently is based upon pre-incentive net income. A maximum percentage of 4% of pre-incentive net
income is obtainable providing certain criteria, including, but not limited to, specified levels of net income and gross premiums written, have been achieved. The pool is distributed according to an
employee's level and corresponding bonus target percent. </FONT></P>

<UL>

<P><FONT SIZE=2><B> Employment Agreements  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following information summarizes the employment agreements for our Chief Executive Officer and our other named executive officers who were the most highly
compensated for the year ended December&nbsp;31, 2002. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Chief Executive Officer  </I></FONT></P>

</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John R. Charman.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Mr.&nbsp;Charman's employment agreement, Mr.&nbsp;Charman has agreed to serve as our President and
Chief Executive Officer, member of our board of directors and member of the Executive Committee of our board of directors. Mr.&nbsp;Charman's term of service under this agreement continues until
November&nbsp;20, 2004 followed by automatic additional one-year terms unless notice of termination of Mr.&nbsp;Charman's employment is provided by us or Mr.&nbsp;Charman at least one year prior
to the end of the term. Mr.&nbsp;Charman receives an annual base salary of $1,000,000 and an annual incentive bonus, to be determined by the board of directors, of no less than 75% of his base
salary. Mr.&nbsp;Charman's salary can be subject to review for increase at the discretion of the Board of Directors, however, it cannot be decreased. Mr.&nbsp;Charman has also been granted stock
options and restricted shares as an inducement to accept such position and as a performance incentive. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Mr.&nbsp;Charman's employment terminates as a result of death, Mr.&nbsp;Charman's employment agreement automatically terminates, and his designated beneficiary and/or
administrators are entitled to (i)&nbsp;base salary through to the end of the month in which he dies, (ii)&nbsp;a lump sum payment of one year's base salary, (iii)&nbsp;a separation bonus no
less than the greater of (A)&nbsp;$1,000,000 and (B)&nbsp;the highest amount awarded to Mr.&nbsp;Charman as an annual bonus for any of the three years immediately preceding his death,
(iv)&nbsp;immediate vesting of his previously unvested stock options and restricted shares as if his employment continued until the end of the 12-month period following his death, with the stock
options to remain exercisable for no longer than one year, (v)&nbsp;vesting and exercisability of all other equity awards and (vi)&nbsp;any accrued benefits under the Company's plans, programs or
agreements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Either
Mr.&nbsp;Charman or we may terminate his employment agreement if Mr.&nbsp;Charman becomes disabled by providing 15&nbsp;days prior written notice to the other party. If
Mr.&nbsp;Charman's employment ceases because of disability, then in addition to the entitlements discussed immediately above in the case of death, Mr.&nbsp;Charman is also entitled to
(i)&nbsp;disability benefits and (ii)&nbsp;continued coverage for one year under all benefit programs he was participating in immediately prior to the date of his termination. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate Mr.&nbsp;Charman's employment agreement for cause, which includes conviction of a felony involving moral turpitude, gross negligence or gross misconduct, or if
Mr.&nbsp;Charman voluntarily terminates his employment agreement with us, all of our obligations cease, and Mr.&nbsp;Charman will only be entitled to receive accrued base salary and benefits under
the Company's plans, programs or agreements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate Mr.&nbsp;Charman's employment without cause or if Mr.&nbsp;Charman terminates his employment with good reason as defined in the employment agreement, then
Mr.&nbsp;Charman is subject </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>92</FONT></P>

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to the same terms as if he ceased employment as a result of disability, except that Mr.&nbsp;Charman is entitled to receive payment of two year's base salary instead of one and is not entitled to
disability benefits. If we terminate Mr.&nbsp;Charman's employment agreement without cause, or if Mr.&nbsp;Charman terminates his employment with good reason, in anticipation of, or within the
12-month period following, a change in control as defined in the employment agreement, Mr.&nbsp;Charman is also entitled to receive the foregoing benefits, excluding disability benefits,
except that he is also entitled to (i)&nbsp;two times the amount of the separation bonus, (ii)&nbsp;immediate vesting of his previously unvested stock
options and restricted shares as if his employment continued until the third anniversary of the date of his termination and (iii)&nbsp;continued coverage for two years under all benefit programs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
amount payable to Mr.&nbsp;Charman pursuant to his employment agreement upon his termination of employment for any reason must be paid in a lump sum with respect to 50% promptly
following his termination, and with respect to the remaining 50%, with accrued interest, on the first anniversary of his termination date. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Charman
is also subject to non-competition and non-solicitation provisions for a period of one year after termination of the employment agreement along
with ongoing confidentiality and non-disparagement requirements. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Executive Officers  </I></FONT></P>

</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Michael A. Butt.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Mr.&nbsp;Butt's service agreement, Mr.&nbsp;Butt agreed to serve as Chairman of our Board of
Directors. Mr.&nbsp;Butt's term of service under this agreement continues until October&nbsp;1, 2005 followed by automatic additional one-year terms unless notice of termination of
Mr.&nbsp;Butt's employment is provided by us or Mr.&nbsp;Butt at least 90&nbsp;days prior to the end of the term. Mr.&nbsp;Butt receives an annual base salary of $500,000 and an annual
incentive bonus of no less than 50% of his base salary. AXIS Holdings has also granted Mr.&nbsp;Butt stock options and restricted shares as an inducement to accept such position and as a performance
incentive. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Mr.&nbsp;Butt's employment terminates as a result of death, Mr.&nbsp;Butt's agreement automatically terminates, and his spouse, beneficiary and/or administrators are entitled to
(i)&nbsp;any accrued base salary, (ii)&nbsp;a separation bonus no less than the greater of (A)&nbsp;$500,000 and (B)&nbsp;the highest amount awarded to Mr.&nbsp;Butt as an annual bonus for
any of the three years immediately preceding his death, (iii)&nbsp;immediate vesting of his previously unvested stock options and restricted shares as if his employment continued until the end of
the 12-month period following his death, with the stock options to remain exercisable for no longer than one year, (iv)&nbsp;vesting and excercisability of all other equity awards and (v)&nbsp;any
accrued benefits under the Company's plans, programs or agreements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Either
Mr.&nbsp;Butt or we may terminate his service agreement if Mr.&nbsp;Butt becomes disabled by providing 15&nbsp;days prior written notice to the other party. If
Mr.&nbsp;Butt's employment ceases because of disability, then in addition to the entitlements discussed immediately above in the case of death, Mr.&nbsp;Butt is also entitled to (i)&nbsp;payment
of one year's base salary, (ii)&nbsp;disability benefits and (iii)&nbsp;continued coverage for one year under all benefit programs he was participating in immediately prior to the date of his
termination. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate Mr.&nbsp;Butt's service agreement for cause as defined and described with respect to the employment agreement of Mr.&nbsp;Charman, or if Mr.&nbsp;Butt voluntarily
terminates his service agreement with us, all of our obligations cease, and Mr.&nbsp;Butt will only be entitled to receive accrued base salary and any accrued benefits under the Company's plans,
programs or agreements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate Mr.&nbsp;Butt's employment without cause or if Mr.&nbsp;Butt terminates his employment with good reason as defined in the service agreement, then Mr.&nbsp;Butt is
subject to the same terms as if he ceased employment as a result of disability, except that Mr.&nbsp;Butt is entitled to receive payment of two year's base salary instead of one and is not entitled
to disability benefits. If we terminate Mr.&nbsp;Butt's service agreement without cause or if Mr.&nbsp;Butt terminates his employment with good reason in anticipation of, or within the
12-month period following, a change in control as defined in the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>93</FONT></P>

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<P><FONT SIZE=2>
agreement, Mr.&nbsp;Butt is also entitled to receive the foregoing benefits, excluding disability benefits, except that he is also entitled to (i)&nbsp;two times the amount of the separation
bonus, (ii)&nbsp;immediate vesting of his previously unvested stock options and restricted shares as if his employment continued until the three-year anniversary of the date of his termination and
(iii)&nbsp;continued coverage for two years under all benefit programs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
amount payable to Mr.&nbsp;Butt pursuant to his service agreement upon his termination of employment for any reason must be paid in a lump sum with respect to 50% promptly
following his termination, and with respect to the remaining 50%, with accrued interest, on the first anniversary of his termination date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Butt
is also subject to non-competition and non-solicitation provisions for a period of one year after termination of the service agreement along with
ongoing confidentiality and non-disparagement requirements. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Robert J. Newhouse, Jr.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Mr.&nbsp;Newhouse's service agreement, Mr.&nbsp;Newhouse agreed to serve as Chairman of the
Executive Committee, member of the Board of Directors, and member of senior management of AXIS Holdings. Mr.&nbsp;Newhouse's term of service under this agreement continues until November&nbsp;20,
2004 followed by automatic additional one-year terms unless notice of termination of Mr.&nbsp;Newhouse's employment is provided by us or Mr.&nbsp;Newhouse at least 90&nbsp;days prior to the end
of the term. Mr.&nbsp;Newhouse receives an annual base salary of $350,000 and an annual incentive bonus not less than 75% of his annual base salary. AXIS Holdings has also granted
Mr.&nbsp;Newhouse fully vested and exercisable stock options along with fully vested, and wholly non-forfeitable shares pursuant to a share grant agreement as an inducement to accept
such position and as a performance incentive. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
Mr.&nbsp;Newhouse's death, Mr.&nbsp;Newhouse's service agreement automatically terminates, and his spouse, beneficiary and/or administrators are entitled to (i)&nbsp;any
accrued base salary, (ii)&nbsp;a separation bonus no less than the greater of (A)&nbsp;$350,000 and (B)&nbsp;the highest amount awarded to Mr.&nbsp;Newhouse as
an annual bonus for any of the three years immediately preceding his death, (iii)&nbsp;his stock options and shares granted pursuant to the share grant agreement, with the stock options to remain
exercisable until January&nbsp;2, 2012, (iv)&nbsp;vesting and exercisability of all other equity awards and (v)&nbsp;any accrued benefits under the Company's plans, programs and agreements.
Additionally, Mr.&nbsp;Newhouse's spouse, beneficiary and/or administrators are entitled to $175,000 or, if greater, one-half of his base salary effective immediately prior to the expiration of the
term of the service agreement annually for a period of three years, whether Mr.&nbsp;Newhouse's death occurs during or after the term of the service agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Either
Mr.&nbsp;Newhouse or we may terminate the service agreement if Mr.&nbsp;Newhouse becomes disabled by providing 15&nbsp;days prior written notice to the other party.
Moreover, if Mr.&nbsp;Newhouse's employment ceases because of disability, then in addition to the entitlements discussed immediately above in the case of death (except the three-year annual
payment), Mr.&nbsp;Newhouse is entitled to (i)&nbsp;payment of one year's base salary, (ii)&nbsp;disability benefits and (iii)&nbsp;continued coverage for one year under all benefit programs
Mr.&nbsp;Newhouse participated in immediately prior to the date of his termination. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate Mr.&nbsp;Newhouse's employment for cause, as defined in Mr.&nbsp;Charman's employment agreements, or if Mr.&nbsp;Newhouse voluntarily terminates his employment with
us, all of our obligations cease, and Mr.&nbsp;Newhouse will be entitled to (i)&nbsp;any accrued base salary, (ii)&nbsp;the stock options and shares under the share purchase option agreement and
the share grant agreement, respectively, (iii)&nbsp;vesting and exercisability of other equity awards and (iv)&nbsp;any accrued benefits under the Company's plans, programs or agreements. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate Mr.&nbsp;Newhouse's employment without cause or if Mr.&nbsp;Newhouse terminates his employment with good reason as defined in the service agreement, then
Mr.&nbsp;Newhouse is subject to the same terms as if he ceased employment as a result of disability, except that Mr.&nbsp;Newhouse is entitled to receive payment of two year's base salary instead
of one and is not entitled to disability benefits. If we terminate Mr.&nbsp;Newhouse's service agreement without cause or if Mr.&nbsp;Newhouse terminates his </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>94</FONT></P>

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employment with good reason in anticipation of, or within the 12-month period following, a change in control as defined in the service agreement, Mr.&nbsp;Newhouse is also entitled to
receive the foregoing benefits, excluding disability benefits, except that he is also entitled to (i)&nbsp;two times the amount of the separation bonus and (ii)&nbsp;continued coverage for two
years under all benefit programs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
amount payable to Mr.&nbsp;Newhouse pursuant to his service agreement upon his termination of employment for any reason must be paid in a lump sum. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Newhouse
is also subject to non-competition and non-solicitation provisions for a period of one year after termination of the service agreement along
with ongoing confidentiality and non-disparagement requirements. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;William A. Fischer.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Mr.&nbsp;Fischer's employment agreement, Mr.&nbsp;Fischer has agreed to serve as our Executive
Vice President and Chief Reinsurance Officer. Mr.&nbsp;Fischer's term of service continues until December&nbsp;1, 2004, followed by automatic one-year renewals. Mr.&nbsp;Fischer receives an
annual base salary of $475,000 and an annual bonus payable at the discretion of the Company, of no less than 50% of his base salary. AXIS Holdings has also granted Mr.&nbsp;Fischer options and
restricted shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Either
Mr.&nbsp;Fischer or we may terminate his employment agreement upon four months prior notice, provided that in lieu of such notice, the Company may, in its discretion, pay four
months salary to Mr.&nbsp;Fischer. In addition, we may terminate Mr.&nbsp;Fischer's agreement without prior notice in case of serious misconduct or repeated misconduct. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate, Mr.&nbsp;Fischer's employment for cause, or if Mr.&nbsp;Fischer terminates his employment for no good reason, then Mr.&nbsp;Fischer is entitled to his accrued base
salary, including any accrued vacation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we terminate Mr.&nbsp;Fischer's employment without cause, or if Mr.&nbsp;Fischer terminates his employment for good reason, then Mr.&nbsp;Fischer is entitled to his accrued
based salary, including any accrued vacation, and a lump sum payment equal to one year's base salary. Mr.&nbsp;Fischer is entitled to the same benefits if within six months of a change in control,
we terminate Mr.&nbsp;Fischer without cause, or Mr.&nbsp;Fischer's duties are adversely affected in a material way. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Fischer
is also subject to ongoing confidentiality requirements and a four-month post-employment covenant not to solicit employees or compete with us. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Andrew Cook.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Mr.&nbsp;Cook's employment agreement, Mr.&nbsp;Cook has agreed to serve as our Executive Vice
President and Chief Financial Officer. Mr.&nbsp;Cook's term of service continues until December&nbsp;10, 2003, followed by automatic one-year renewals. Mr.&nbsp;Cook receives an
annual base salary of $375,000 and an annual bonus payable at the discretion of the Company of no less than 50% of his base salary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
remaining material terms of Mr.&nbsp;Cook's agreement are substantially identical to Mr.&nbsp;Fischer's agreement. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John Gressier.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Mr.&nbsp;Gressier's employment agreement, Mr.&nbsp;Gressier has agreed to serve as our Executive
Vice President and Chief Insurance Officer. Mr.&nbsp;Gressier receives an annual base salary of $475,000 and an annual bonus payable at the discretion of the Company. Additionally,
Mr.&nbsp;Gressier may be granted stock options and restricted shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Either
Mr.&nbsp;Gressier or we may terminate his agreement upon six months prior written notice. Moreover, we may terminate Mr.&nbsp;Gressier's agreement without prior notice for his
action constituting cause for
termination, including, but not limited to, if Mr.&nbsp;Gressier is guilty of willful neglect in the discharge of his duties, commits any serious acts of dishonesty, or is convicted of any
indictable offense that affects his position with us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Gressier
is also subject to ongoing confidentiality requirements and a six month post-employment covenant not to solicit employees or compete with us. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>95</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=13,SEQ=99,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=487477,FOLIO='95',FILE='DISK022:[03NYC0.03NYC2730]EI2730B.;26',USER='CNAPOLE',CD=';5-MAR-2003;15:42' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ek2730_1_96"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ek2730_principal_and_selling_shareholders"> </A>
<A NAME="toc_ek2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>PRINCIPAL AND SELLING SHAREHOLDERS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information as of December&nbsp;31, 2002 regarding beneficial ownership of common shares and the applicable voting rights
attached to such share ownership in accordance with our bye-laws by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Each
person known by us to beneficially own 5% or more of our outstanding common shares;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Each
of our directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Each
of our named executive officers;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>All
of our executive officers and directors as a group; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Each
selling shareholder participating in this offering. </FONT></DD></DL>
</UL>
<BR>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Beneficial Ownership of<BR>
Principal Shareholders Prior<BR>
to the Offering(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Beneficial Ownership of<BR>
Principal Shareholders<BR>
After the Offering(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares Offered<BR>
in this<BR>
Offering</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name and Address of Beneficial Owner(2)<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Trident II, L.P. and related entities(3)(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,719,838</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Blackstone Management Associates (Cayman) III L.P(5)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>DLJMB Overseas Partners III, C.V. and affiliated funds(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Thomas H. Lee (Alternative) Fund V, L.P. and related entities(7)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>J.P. Morgan Partners (BHCA) L.P. and related entities(8)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,000,395</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Marsh &amp; McLennan Companies, Inc.(9)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,283,508</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>G.E. Capital Equity Investments, Limited(10)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>500,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>General Electric Pension Trust(11)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>500,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Michael A. Butt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29,885</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>John R. Charman(12)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>586,273</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Robert J. Newhouse, Jr.(13)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>53,915</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Robert L. Friedman(14)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Charles A. Davis(15)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Donald J. Greene</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Maurice A. Keane</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,055</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Edward J. Kelly, III</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Andrew H. Rush(16)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Scott A. Schoen(17)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,965,404</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Frank J. Tasco</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,544</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Jeffrey C. Walker(18)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>John Gressier</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>William Fischer(19)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,833</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>Andrew Cook(20)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>25,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="36%"><FONT SIZE=2>All directors and executive officers as a group (21 persons)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,757,220</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Less
than 1% </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>96</FONT></P>

<HR NOSHADE>
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<A NAME="page_ek2730_1_97"> </A>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
the outstanding common shares and assumes exercise of all outstanding warrants for common shares as well as the exercise of all outstanding
options currently exercisable or exercisable within 60&nbsp;days of December&nbsp;31, 2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>Our</FONT></DT><DD><FONT SIZE=2>bye-laws
 reduce the total voting power of any shareholder owning 9.5% or more of our common shares to less than 9.5% of the voting power
of our capital stock. See "Description of Share Capital&#151;Voting Rights."
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Unless
otherwise stated, the address for each beneficial owner is c/o AXIS Holdings, 106 Pitts Bay Road, Pembroke, HM 08, Bermuda.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>The
sole general partner of Trident II, L.P. is Trident Capital II, L.P. As the general partner, Trident Capital II, L.P. holds voting and investment
power with respect to the securities of the Company that are, or may be deemed to be, beneficially owned by Trident II, L.P. The manager of Trident II, L.P. is MMC Capital, Inc., a wholly owned
subsidiary of Marsh &amp; McLennan Risk Capital Holdings, Ltd. Marsh &amp; McLennan Risk Capital Holdings, Ltd. is a wholly owned, indirect subsidiary of Marsh &amp; McLennan Companies, Inc. The general partners
of Trident Capital II, L.P. are Marsh &amp; McLennan GP I, Inc., a wholly owned subsidiary of Marsh &amp; McLennan Risk Capital Holdings, Ltd., and two single member limited liability companies that are owned
by individuals who are senior executive officers of Marsh &amp; McLennan Companies, Inc. Marsh &amp; McLennan Risk Capital Holdings, Ltd., MMC Capital, Inc., Marsh &amp; McLennan Companies, Inc., Marsh &amp; McLennan
GP I, Inc. and the two single member limited liability companies that act as general partners of Trident Capital II, L.P. each disclaim beneficial ownership of the common shares and warrants of the
Company that are, or may be deemed to be, beneficially owned by Trident II, L.P. The principal address for Trident II, L.P. and Trident Capital II, L.P. is Maples &amp; Calder, Ugland House, Box 309,
South Church Street, George Town, Grand Cayman, Cayman Islands.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Includes
(i) 2,367,083 common shares of the Company held by Trident II, L.P. and (ii) 2,100,579 common shares of the Company issuable upon exercise of
warrants held by Trident II, L.P. Also includes an aggregate of 132,917 common shares of the Company and 117,926 common shares issuable upon exercise of warrants of the Company held by Marsh &amp;
McLennan Capital Professionals Fund, L.P. and Marsh &amp; McLennan Employees' Securities Company, L.P. that may be deemed to be beneficially owned by Trident II, L.P. Marsh &amp; McLennan Capital
Professionals Fund, L.P. and Marsh &amp; McLennan Employees' Securities Company, L.P. have agreed that they will coinvest with Trident II, L.P., on a pro rata basis in accordance with their committed
capital, and will not dispose of their investments prior to the disposition by Trident II, L.P. The warrants are currently exercisable at the price of $100 per share and expire on November 20, 2011.
Marsh &amp; McLennan Risk Capital Holdings, Ltd. has agreed that it will coordinate the timing of the sale of the common shares of the Company held by Marsh &amp; McLennan Risk Capital Holdings, Ltd. with the
sale of common shares (including warrants and common shares issuable upon exercise thereof) held by Trident II, L.P. As a result of such agreement, Trident II, L.P. may be deemed to beneficially own
common shares (including warrants and common shares issuable upon exercise thereof) of the Company that are held by Marsh &amp; McLennan Risk Capital Holdings, Ltd. See footnote (9) below. Trident II,
L.P. disclaims any beneficial ownership of any common shares of the Company held by Marsh &amp; McLennan Risk Capital Holdings, Ltd. (other than the shares held by Marsh &amp; McLennan Capital Professionals
Fund, L.P. and Marsh &amp; McLennan Employees' Securities Company, L.P.) and the number of common shares of the Company set forth in the table as beneficially owned by Trident II, L.P. excludes common
shares of the Company that are, or may be deemed to be, beneficially owned by Marsh &amp; McLennan Companies, Inc. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>97</FONT></P>

<HR NOSHADE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Includes
1,615,345.86 common shares held by Blackstone FI Capital Partners (Cayman) L.P.; 314,654.14 common shares held by Blackstone FI Offshore Capital
Partners L.P.; and 70,000 common shares held by Blackstone Family Investment Partnership (Cayman) III L.P. The sole general partner of Blackstone FI Capital Partners (Cayman) L.P. and Blackstone
Family Investment Partnership (Cayman) III L.P and the sole investment general partner of Blackstone FI Offshore Capital Partners L.P. is Blackstone Management Associates (Cayman) III L.P. The
principal address for each is Walkers, PO Box 265 GT, Walker House, George Town, Grand Cayman, Cayman Islands. As founding members of Blackstone Management Associates (Cayman) III L.P.,
Messrs.&nbsp;Peter G. Peterson and Stephen A. Schwarzman have the shared power to vote or to direct the vote of, and to dispose or to direct the disposition of, the shares of the identified class of
securities that may be deemed to be beneficially owned by Blackstone Management Associates (Cayman) III L.P. As a result, Messrs.&nbsp;Peterson and Schwarzman may be deemed to beneficially own the
common shares that Blackstone Management Associates (Cayman) III L.P. may be deemed to beneficially own, but they disclaim any such beneficial ownership except to the extent of their individual
pecuniary interest in such shares.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Includes
1,511,854 common shares owned by DLJMB Overseas Partners III, C.V.; 105,777 common shares held by DLJ Offshore Partners III C.V.; 27,285 common
shares held by DLJ Offshore Partners III-1, C.V.; 19,436 common shares held by DLJ Offshore Partners III-2, C.V.; 12,895 common shares held by DLJ&nbsp;MB PartnersIII
GmbH&nbsp;&amp; Co.KG; 2,560 common shares held by Millennium Partners II, L.P. and 320,193 common shares held by MBP III Plan Investors, L.P. The principal address for each is 11 Madison Avenue, 16th
Floor, New York, NY 10010. Credit Suisse First Boston, a Swiss bank, owns the majority of the voting stock of Credit Suisse First Boston, Inc., which in turn owns all of the voting stock of Credit
Suisse First Boston (USA), Inc. (formerly Donaldson Lufkin &amp; Jenrette, Inc.) ("CSFB-USA"). The DLJ related entities named above (the "DLJ Related Entities") are direct and indirect subsidiaries of
CSFB-USA and merchant banking funds advised by subsidiaries of CSFB-USA. Credit Suisse First Boston LLC, one of the underwriters in this offering, is a direct subsidiary of CSFB-USA and itself does
not hold any ownership interest in either Credit Suisse First Boston Private Equity, Inc. or any of the DLJ Related Entities.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Includes
1,541,234 common shares held by Thomas H. Lee (Alternative) Fund V, L.P.; 399,888 common shares held by Thomas H. Lee (Alternative) Parallel
Fund V, L.P.; 21,237 common shares held by Thomas H. Lee (Alternative) Cayman Fund V, L.P.; 2,964 common shares held by State Street Bank and Trust Company as Trustee under the 1997 Thomas H. Lee
Nominee Trust; 3,045 common shares held by Thomas H. Lee Investors Limited Partnership; 10,350 common shares held by Putnam Investments Employees' Securities Co. I LLC; 9,241 common shares held by
Putnam Investments Employees' Securities Co. II LLC; and 12,041 common shares held by Putnam Investments Holdings, LLC. The address for the Thomas H. Lee (Alternative) Fund V, L.P., Thomas H. Lee
(Alternative) Parallel Fund V, L.P. and Thomas H. Lee (Alternative) Cayman Fund V, L.P. is c/o Walkers, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands. The address for the 1997
Thomas H. Lee Nominee Trust and Thomas H. Lee Investors Limited Partnership is 75 State Street, Boston, Massachusetts 02109. The address for Putnam Investments Employees' Securities Company I, LLC,
Putnam Investments Employees' Securities Company 11, LLC and Putnam Investments Holdings LLC is One Post Office Square, Boston, Massachusetts 02109. No individual at Thomas H. Lee has voting or
investment control over the common shares owned of record by Thomas H. Lee (Alternative) Fund V, L.P., Thomas H. Lee (Alternative) Parallel Fund V, L.P., Thomas H. Lee (Alternative) Cayman Fund V,
L.P. and Thomas H. Lee Investors Limited Partnership. Thomas H. Lee has voting and investment control over common shares owned of record by State Street Bank and Trust Company as Trustee
under the 1997 Thomas H. Lee Nominee Trust. No individual at Putnam Investments has voting or investment control over common shares owned of record by Putnam Investments Employees' </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>98</FONT></P>

<HR NOSHADE>
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<UL>

<P><FONT SIZE=2>Securities
Co. I LLC, Putnam Investments Employees' Securities Co. II LLC and Putnam Investments Holdings, LLC. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Includes
1,063,449 common shares owned by J.P. Morgan Partners (BHCA), L.P. ("JPMP BHCA"), an indirect wholly owned subsidiary of J.P.&nbsp;Morgan
Chase &amp; Co., and 286,551 shares held by the following related fund entities ("JPMP Global Fund"): 5,107 common shares owned by J.P.&nbsp;Morgan Partners Global Investors, L.P.; 17,016 common shares
owned by J.P.&nbsp;Morgan Partners Global Investors A, L.P.; 85,531 common shares owned by J.P.&nbsp;Morgan Partners Global Investors (Cayman), L.P.; 9,532 common shares owned by
J.P.&nbsp;Morgan Partners Global Investors (Cayman), II L.P.; 97,234 common shares owned by J.P.&nbsp;Morgan Partners Global Investors (Cayman) III, L.P.; and 72,131 common shares owned by
J.P.&nbsp;Morgan Partners Global Investors (Cayman) IV, LP. The general partner of JPMP BHCA is JPMP Master Fund Manager, L.P., the general partner of which is JPMP Capital Corp. JPMP Capital Corp.
is the general partner of JPMP Global Investors, L.P., which is the general partner of each of the foregoing JPMP Global Fund entities. Two other companies controlled by J.P. Morgan Chase &amp; Co.,
J.P.&nbsp;Morgan Capital, L.P. and J.P. Morgan Corsair II Offshore Capital Partners, L.P., own 149,500 and 500,500 respectively (collectively, the "Corsair Shares"). Mr. Walker is the president of
J.P.&nbsp;Morgan Capital LLC, the general partner of J.P. Morgan Capital LP. Mr. Walker, JP&nbsp;MP BHCA and the JPMP Global Fund entities have no pecuniary interest in and disclaim beneficial
ownership of the Corsair Shares. The principal address for J.P.&nbsp;Morgan Chase &amp; Co. is 270 Park Avenue, New York, NY, 10017. The principal address each of JPMP BHCA, J.P.&nbsp;Morgan Partners
Global Investors, L.P., J.P.&nbsp;Morgan Partners Global Investors A, L.P., J.P.&nbsp;Morgan Partners Global Investors (Cayman), L.P., J.P.&nbsp;Morgan Partners Gobal Investors (Cayman), II
L.P., J.P.&nbsp;Morgan Partners Global Investors (Cayman) III, L.P., J.P.&nbsp;Morgan Partners Global Investors (Cayman) IV, L.P., J.P&nbsp;Morgan Capital L.P. is 1221 Avenue of the Americas,
New York, NY, 10020. The address for J.P.&nbsp;Morgan Corsair II Offshore Capital Partners, L.P. is 227 Park Avenue, New York, NY, 10172.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(9)</FONT></DT><DD><FONT SIZE=2>Includes
(i) 1,000,000 common shares of the Company, which constitute approximately 5.1% of all common shares outstanding, that are held by Marsh &amp;
McLennan Risk Capital Holdings, Ltd., (ii) 13,074 common shares of the Company that are held by indirect, wholly-owned subsidiaries of Marsh &amp; McLennan Companies, Inc., (iii) 132,917 common shares of
the Company and 117,926 common shares issuable upon exercise of warrants of the Company that are held by Marsh &amp; McLennan Capital Professionals Fund, L.P. and Marsh &amp; McLennan Employees' Securities
Company, L.P. and (iv) 19,591 common shares of the Company that are, or may be deemed to be, beneficially owned by another indirect, wholly-owned subsidiary of Marsh &amp; McLennan Companies, Inc. that
serves as the general partner of entities through which certain employees of Marsh &amp; McLennan Companies, Inc. and/or its subsidiaries co-invest, on a pro rata basis in accordance with committed
capital, with an institutional private equity fund that is not controlled by Marsh &amp; McLennan Companies, Inc. The warrants are currently exercisable at the price of $100 per share and expire on
November 20, 2011. As the ultimate parent corporation of its various subsidiaries, Marsh &amp; McLennan Companies, Inc. shares voting and investment power with respect to all common shares of the Company
that are, or may be deemed to be, beneficially owned by each of its subsidiaries. Marsh &amp; McLennan Risk Capital Holdings, Ltd. has agreed that it will coordinate the timing of the sale of the common
shares of the Company held by Marsh &amp; McLennan Risk Capital Holdings, Ltd. with the sale of common shares (including warrants and common shares issuable upon exercise thereof) held by Trident II, L.P.
As a result of such agreement, Marsh &amp; McLennan Companies, Inc. may be deemed to beneficially own common shares
(including warrants and common shares issuable upon exercise thereof) of the Company that are held by Trident II, L.P. See footnote (4) above. Marsh &amp; McLennan Companies, Inc. disclaims any beneficial
ownership of any common shares of the Company held by Trident II, L.P. and the number of common shares of the Company set forth in the table as </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>99</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>beneficially
owned by Marsh &amp; McLennan Companies, Inc. excludes common shares and warrants of the Company that are, or may be deemed to be, beneficially owned by Trident II, L.P. (but, as noted
above, includes the common shares and warrants of the Company held by Marsh &amp; McLennan Capital Professionals Fund, L.P. and Marsh &amp; McLennan Employees' Securities Company, L.P.). The principal address
for Marsh &amp; McLennan Companies, Inc. and Marsh &amp; McLennan Risk Capital Holdings, Ltd. is 1166 Avenue of the Americas, New York, New York 10036. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(10)</FONT></DT><DD><FONT SIZE=2>The
principal address is 120 Long Ridge Road, Stamford, Connecticut, 06905. Pursuant to the voting adjustment provided in our bye-laws, the
voting rights of these common shares increased from 2.9% to 5.2% in connection with the December&nbsp;17, 2002 shareholders meeting. Amounts set forth do not include any shares that may be deemed to
be beneficially owned by G.E. Capital Equity Investments, Limited through its limited partnership interest in Blackstone Management Associates (Cayman)&nbsp;III&nbsp;L.P.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(11)</FONT></DT><DD><FONT SIZE=2>The
principal address is 3003 Summer Street, Stamford, Connecticut 06905. Pursuant to the voting adjustment provided in our bye-laws, the
voting rights of these common shares increased from 2.9% to 5.2% in connection with the December&nbsp;17, 2002 shareholders meeting. Amounts set forth do not include any shares that may be deemed to
be beneficially owned by General Electric Pension Trust through its limited partnership interest in Trident&nbsp;II,&nbsp;L.P. and related entities.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(12)</FONT></DT><DD><FONT SIZE=2>Includes
199,426 common shares owned by Dragon Holdings Trust EBCAM Trustees (Jersey) Limited (JT49) ("Dragon Holdings Trust"), whose principal address
is PO Box 556 EBC House, 1-3 Seale Street, St. Helier, Jersey JE4 8XL, Channel Islands; 74,713 common shares owned by JR Charman Children's Settlement ("JR Charman Children's Settlement"),
whose principal address is PO Box 558, EBC House, 1-3 Seale Street, St. Helier, Jersey JE4 8XL, Channel Islands; 50,258 common shares owned by Mr.&nbsp;Charman; and 84,380 common shares
issuable upon exercise of vested options held by Mr.&nbsp;Charman. It also includes 133,122 common shares issuable upon exercise of warrants of the Company held by Dragon Holdings Trust and 44,374
common shares issuable upon exercise of warrants of the Company held by JR Charman Children's Settlement. Mr.&nbsp;Charman disclaims beneficial ownership of the common shares and common shares
issuable upon exercise of warrants held by Dragon Holdings Trust and JR Charman Children's Settlement.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(13)</FONT></DT><DD><FONT SIZE=2>Includes
35,000 common shares, 8,915 common shares issuable upon exercise of warrants of the Company and 10,000 common shares issuable upon exercise of
vested options held by Mr.&nbsp;Newhouse, Jr.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(14)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Friedman
is a Senior Managing Director of the Blackstone Group, L.P. Mr.&nbsp;Friedman disclaims beneficial ownership of all common shares
owned by Blackstone entities.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(15)</FONT></DT><DD><FONT SIZE=2>Mr.
Davis is Chairman and CEO of MMC Capital, Inc., a Director of Marsh &amp; McLennan Risk Capital Holdings, Ltd., and a Vice Chairman and Director of
Marsh &amp; McLennan Companies, Inc. He also serves as a member of the investment committee of Trident&nbsp;II, L.P. and is the sole member of one of the single member limited liability companies that
serves as a general partner of Trident Capital&nbsp;II, L.P., the general partner of Trident II, L.P. Mr. Davis disclaims beneficial ownership of the common shares and warrants of the Company that
are, or may be deemed to be, beneficially owned by Marsh&nbsp;&amp; McLennan Companies, Inc. (including the shares that are, or may be deemed to be, beneficially owned by Marsh&nbsp;&amp; McLennan Risk
Capital Holdings, Ltd. and MMC Capital, Inc.) and Trident&nbsp;II, L.P. See footnotes (3), (4) and (9) above.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(16)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Rush
is an officer in the Private Equity group of Credit Suisse First Boston. This group includes DLJ Merchant Banking III and all entities
listed in Footnote 6. Credit Suisse First Boston LLC, the Investment Banking arm of Credit Suisse First Boston, is a registered Broker </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>100</FONT></P>

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<UL>

<P><FONT SIZE=2>Dealer
and is the proposed Co-manager in the potential offering. Mr.&nbsp;Rush disclaims beneficial ownership of the common shares held by CSFB. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(17)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Schoen
is a Managing Director of Thomas H. Lee Advisors, LLC, the general partner of Thomas H. Lee Partners, L.P. Mr.&nbsp;Schoen disclaims
beneficial ownership of any of the common shares referred to in footnote 7 above, except to the extent of his pecuniary interest therein.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(18)</FONT></DT><DD><FONT SIZE=2>The
common shares owned by J.P. Morgan Partners (BHCA), L.P. may be deemed attributable to Mr.&nbsp;Walker because he is the President of JPMP Capital
Corp., which is the general partner of JPMP Master Fund Manager, L.P. (the general partner of J.P. Morgan Partners (BHCA), L.P.) and a limited partner of JPMP Master Fund Manager, L.P. The actual pro
rata portion of such beneficial ownership that may be deemed attributable to Mr.&nbsp;Walker is not readily determinable because it is subject to several variables, including the internal rate of
return and vesting within the sole shareholder of J.P. Morgan Partners (BHCA), L.P. and with JPMP Master Fund Manager, L.P. The common shares owned by each of the JPMP Global Fund entities identified
in footnote&nbsp;8 above may be deemed attributable to Mr.&nbsp;Walker because his position with JPMP Capital Corp., which the general partner of JPMP Global Investors, L.P. (the general partner
of each of the JPMP Global Fund entities). The actual pro rata portion of such beneficial ownership that may be deemed attributable to Mr.&nbsp;Walker is not readily determinable. Mr.&nbsp;Walker
disclaims beneficial ownership of the common shares held by J.P. Morgan Partners (BHCA), L.P. and the related JPMP Global Fund entities to the extend it exceeds his pecuniary interest in them.
Although Mr.&nbsp;Walker is also President of J.P.M.P. Capital, LLC, he does not have a pecuniary interest in, and disclaims beneficial ownership of the shares owned by J.P. Morgan Capital, L.P. and
J.P. Morgan Corsaire II Offshore Capital Partners, L.P.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(19)</FONT></DT><DD><FONT SIZE=2>Includes
7,500 common shares and 3,333 common shares issuable upon exercise of vested options held by Mr.&nbsp;Fischer.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(20)</FONT></DT><DD><FONT SIZE=2>Includes
22,500 common shares on 2,500 common shares issuable upon exercise of vested options held Mr.&nbsp;Cook. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>101</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
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<A NAME="toc_em2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS    <BR>  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We describe below some of the transactions we have entered into with parties that are related to our company. We believe that each of the transactions described
below was on terms no less favorable to us than we could have obtained from unrelated parties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trident&nbsp;II,
L.P., one of our founding shareholders, and two of its affiliates, Marsh &amp; McLennan Capital Professionals Fund and Marsh &amp; McLennan Employees' Securities Company, L.P.
received 2,218,505&nbsp;warrants (calculated as of December&nbsp;31, 2002) with a total estimated fair value of $59.4&nbsp;million when issued. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into two agreements in November&nbsp;2001 under which parties associated with certain of our founding investors provided assistance in connection with the
formation of AXIS Specialty. In connection with the first agreement, MMC Capital,&nbsp;Inc. ("MMC Capital") received $25.8&nbsp;million and John&nbsp;R.&nbsp;Charman received
$2.5&nbsp;million. One of our directors, Charles&nbsp;A. Davis, received approximately $1.2&nbsp;million of the $25.8&nbsp;million received by MMC Capital pursuant to the MMC Capital Long Term
Incentive Plan. In connection with the second agreement, Marsh&nbsp;&amp; McLennan Companies,&nbsp;Inc. received $8.4&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into an advisory agreement in November&nbsp;2001 with MMC Capital. Under this agreement, MMC Capital from time to time provides advice and assistance to the
Company in connection with transactions and other matters as may be agreed by MMC Capital and the Company. Under the terms of this agreement, AXIS Specialty pays an annual fee of $1.0&nbsp;million
for a period of five years from the date of initial funding. During the year ended December&nbsp;31, 2002, AXIS Specialty incurred $1.0&nbsp;million of fees and expenses to MMC Capital&nbsp;in
relation to this agreement. Mr.&nbsp;Davis receives approximately 4.5% of the payments made to MMC Capital pursuant to the MMC Capital Long Term Incentive Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into an agreement in November&nbsp;2001 with The Putnam Advisory Company, L.L.C. ("Putnam"), an affiliate of Marsh and McLennan Companies, Inc., under which
Putnam was appointed as an investment manager of part of the Company's investment portfolio. This agreement was entered into on an arms length basis on terms generally available in the market. During
the year ended December&nbsp;31, 2002, AXIS Specialty incurred $671,000 of fees in relation to this agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into an agreements in November&nbsp;2001 and December 2002 with J.P. Morgan Investment Management&nbsp;Inc. and its affiliates under which JPMorgan was
appointed as an investment manager of part of the Company's investment portfolio. These agreements were entered into on an arms length basis on terms generally available in the market. During the year
ended December&nbsp;31, 2002, AXIS Specialty incurred $441,000 of fees in relation to these agreements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2002, JPMorgan Chase Bank acted as administrative agent and/or lender for AXIS Specialty's $400&nbsp;million revolving credit facility. In
addition, certain subsidiaries of the Company hold several bank accounts with JPMorgan Chase Bank. Fees in relation to these transactions amounted to $658,000. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
subsidiaries use the services of Marsh and its affiliates. During the year ended December&nbsp;31, 2002 amounts paid with respect to accounting and human resource consulting
totaled $570,000 (2001:$nil). In addition, we pay brokerage and commissions to Marsh and its affiliates, which vary based on the amount of business produced. During the year ended December&nbsp;31,
2002, Marsh and its affiliates produced 37.9% (2001:&nbsp;22.7%) of our gross premiums written. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
relationships and related transactions with respect to the underwriters are set forth in "Underwriting." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>101</FONT></P>

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<A NAME="toc_eo2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>MATERIAL TAX CONSIDERATIONS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following summary of our taxation, and the taxation of our shareholders is based upon current law, is for general information only and
does not purport to be a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase common shares. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following legal discussion (including and subject to the matters and qualifications set forth in such summary) of the material tax considerations under (i)&nbsp;"Taxation of AXIS
Holdings and Subsidiaries&#151;Bermuda" and "Taxation of Shareholders&#151;Bermuda Taxation" is based upon the advice of Conyers Dill&nbsp;&amp; Pearman, special Bermuda legal counsel,
(ii)&nbsp;"Taxation of AXIS Holdings and Subsidiaries&#151;United Kingdom" is based upon the advice of Clyde&nbsp;&amp; Co., special United Kingdom legal counsel, (iii)&nbsp;"Taxation of AXIS
Holdings and Subsidiaries&#151;Ireland" is based upon the advice of William Fry Tax Advisers Limited, special Irish tax advisers, (iv)&nbsp;"Taxation of AXIS Holdings and
Subsidiaries&#151;Barbados" is based upon the advice of David King&nbsp;&amp; Co., special Barbados legal counsel and (v)&nbsp;"Taxation of AXIS Holdings and Subsidiaries&#151;United
States" and "Taxation of Shareholders&#151;United States Taxation" is based upon the advice of LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae, L.L.P., each of whom has reviewed this discussion and has
opined that the discussion constitutes, in all material respects, a fair and accurate summary of the relative income tax considerations relating to AXIS Holdings and its subsidiaries and the ownership
of AXIS Holdings' common shares by investors that are U.S. Persons (as defined below) who acquire such shares in the offering. As discussed further herein, LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae,
L.L.P. has also opined as to certain matters expressly set forth in the discussion relating to passive foreign investment company issues. The advice of such firms does not include any factual or
accounting matters, determinations or conclusions such as insurance accounting determinations or RPII, amounts and computations and amounts or components thereof (for example, amounts or computations
of income or expense items or reserves entering into RPII computations) or facts relating to the business, income, reserves or activities of AXIS Holdings and its subsidiaries. The opinion of these
firms relies upon and is premised on the accuracy of factual statements and representations made by AXIS Holdings concerning the business and properties, ownership, organization, source of income and
manner of operation of AXIS Holdings and its subsidiaries. The discussion is based upon current law. Legislative, judicial or administrative changes or interpretations may be forthcoming that could be
retroactive and could affect the tax consequence to holders of common shares. The tax treatment of a holder of common shares, or of a person treated as a holder of common shares for U.S. federal
income, state, local or non-U.S. tax purposes, may vary depending on the holder's particular tax situation. Statements contained herein as to the beliefs, expectations and conditions of
AXIS Holdings and its subsidiaries as to the application of such tax laws or facts represent the view of management as to the application of such laws and do not represent the opinions of counsel.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX
CONSEQUENCES OF OWNING COMMON SHARES UNDER THE LAWS OF THEIR COUNTRIES OF CITIZENSHIP, RESIDENCE, ORDINARY RESIDENCE OR DOMICILE. </FONT></P>

<P><FONT SIZE=2><B>Taxation of AXIS Holdings and Subsidiaries  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Bermuda  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under current Bermuda law, there is no income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by us. AXIS Holdings
and AXIS Specialty have each obtained from the Minister of Finance under The Exempted Undertaking Tax Protection Act 1966, as amended, an assurance that, in the event that Bermuda enacts legislation
imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, then the imposition of any such tax shall not be applicable
to AXIS Holdings and AXIS Specialty or to any of their operations or their shares, debentures or other obligations, until March&nbsp;28, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>102</FONT></P>

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2016. AXIS Holdings and AXIS Specialty could be subject to taxes in Bermuda after that date. This assurance is subject to the proviso that it is not to be construed so as to prevent the application
of any tax or duty to such persons as are ordinarily resident in Bermuda or to prevent the application of any tax payable in accordance with the provisions of the Land Tax Act 1967 or otherwise
payable in relation to any property leased to AXIS Holdings and AXIS Specialty. AXIS Holdings and AXIS Specialty each pay annual Bermuda government fees, and AXIS Specialty pays annual insurance
license fees. In addition, all entities employing individuals in Bermuda are required to pay a payroll tax and there are other sundry taxes payable, directly or indirectly, to the Bermuda government. </FONT></P>

<UL>

<P><FONT SIZE=2><I> United Kingdom  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS UK and AXIS UK Holdings are companies incorporated in the United Kingdom and are, therefore, resident in the United Kingdom for United Kingdom corporation
tax purposes and will be subject to the United Kingdom corporation tax on their worldwide profits (including revenue profits and capital gains). It is not expected that, in the context of the group's
profitability as a whole, any such tax charges will be seen to be significant. The maximum rate of United Kingdom corporation tax is currently 30% on profits of whatever description. Currently, no
United Kingdom withholding tax applies to dividends paid by AXIS UK and AXIS UK Holdings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of us except for AXIS UK and AXIS UK Holdings are not incorporated in the United Kingdom. Accordingly, except for AXIS UK and AXIS UK Holdings, we should not be treated as being
resident in the United Kingdom unless our central management and control is exercised in the United Kingdom. The concept of central management and control is indicative of the highest level of control
of a company, which is wholly a question of fact. The directors of each of us, other than AXIS UK and AXIS UK Holdings, intend to manage our affairs so that none of us, other than AXIS UK and AXIS UK
Holdings, are resident in the United Kingdom for tax purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
company not resident in the United Kingdom for corporation tax purposes can nevertheless be subject to U.K. corporation tax if it carries on a trade through a branch or agency in the
United Kingdom but the charge to U.K. corporation tax is limited to profits (including revenue profits and capital gains) connected with such branch or agency. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
directors of each of us, other than AXIS UK and AXIS UK Holdings (which should be treated as resident in the United Kingdom by virtue of being incorporated and managed there), AXIS
Ireland Holdings (which has established a branch in the United Kingdom) and AXIS Specialty Europe (which it is intended should establish a branch in the United Kingdom), intend that we will operate in
such a manner so that none of us, other than AXIS UK, AXIS UK Holdings, AXIS Ireland Holdings and AXIS Specialty Europe, carry on a trade through a branch or agency in the United Kingdom.
Nevertheless, because neither case law nor U.K. statute definitively defines the activities that constitute trading in the United Kingdom through a branch or agency, the U.K. Inland Revenue might
contend that any of us, other than AXIS UK and AXIS UK Holdings, are/is trading in the United Kingdom through a branch or agency in the United Kingdom. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the U.S. Subsidiaries were trading in the U.K. through a branch or agency and the U.S. Subsidiaries were to qualify for benefits under the applicable income tax treaty between
the United Kingdom and the United States, only those profits which were attributable to a permanent establishment in the United Kingdom would be subject to U.K. corporation tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Ireland Holdings, AXIS Re and AXIS Specialty Europe should be entitled to the benefits of the tax treaty between Ireland and the United Kingdom if they are resident in Ireland. If
AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe were trading in the U.K. through a branch or agency and they were entitled to the benefits of the tax treaty between Ireland and the United
Kingdom they would only be subject to U.K. taxation on their profits which were attributable to a permanent establishment in the United Kingdom. The branch established in the United Kingdom by AXIS
Ireland </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>103</FONT></P>

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<P><FONT SIZE=2>
Holdings constitutes a permanent establishment of that company and the profits attributable to that permanent establishment (which it has been agreed with the Inland Revenue should be calculated on a
cost plus 10% basis) are subject to United Kingdom corporation tax. It is believed that the branch that is to be established in the United Kingdom by AXIS Specialty Europe will constitute a permanent
establishment of that company and that the profits attributable to that permanent establishment will also be subject to United Kingdom corporation tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
United Kingdom has no income tax treaty with Bermuda. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are circumstances in which companies that are neither resident in the United Kingdom nor entitled to the protection afforded by a double tax treaty between the United Kingdom and
the jurisdiction in which they are resident may be exposed to income tax in the United Kingdom (other than by deduction or withholding) on the profits of a trade carried on there even if that trade is
not carried on through a branch or agency but the directors of each of us intend that we will operate in such a manner that none of us will fall within the charge to income tax in the United Kingdom
(other than by deduction or withholding) in this respect </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of us, other than AXIS UK and AXIS UK Holdings, were treated as being resident in the United Kingdom for U.K. corporation tax purposes, or if any of us, other than AXIS Specialty
Europe, were to be treated as carrying on a trade in the United Kingdom through a branch or agency or of having a permanent establishment in the United Kingdom, our results of operations and your
investment could be materially adversely affected. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
should be noted that the British Government has published draft legislation to modernize the taxation of foreign companies operating in the United Kingdom through branches, for
accounting periods starting on or after January&nbsp;1, 2003. If the draft legislation is enacted in its current form, a non-U.K. resident company will only fall within the charge to United Kingdom
corporation tax if it carries on a trade in the United Kingdom through a permanent establishment. The term "permanent establishment" is defined for these purposes in a manner which is consistent with
various internationally recognized characteristics commonly used in the United Kingdom's double tax treaties. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Ireland  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors of each of AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe intend to manage their affairs so that each of them is, and will continue to be,
resident in Ireland for Irish tax purposes. Assuming that AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe are and will continue to be resident in Ireland for Irish tax purposes, such
companies will be subject to Irish corporation tax on their worldwide income and capital gains. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Ireland Holdings carries on a trade in the United Kingdom through a branch and AXIS Specialty Europe intends to carry on a trade in the United Kingdom through a branch. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
such, profits from those branch activities would be liable to UK taxation and would also be liable to Irish corporation tax. A credit against the Irish corporation tax liability is
available for any UK tax paid
on such profits, subject to the maximum credit being equal to the Irish corporation tax payable on such profits. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
derived by AXIS Ireland Holdings, AXIS Re or AXIS Specialty Europe from an Irish trade (i.e. a trade that is not carried on wholly outside of Ireland) will be subject to Irish
corporation tax at the current rate of 12.5%. Other income (that is income from passive investments, income from non-Irish trades and income from certain dealings in land) will generally
be subject to Irish corporation tax at the current rate of 25%. Published administrative statements of the Irish Revenue Commissioners, suggest that investment income earned by AXIS Specialty Europe
and Axis Re will be taxed in Ireland at a rate of 12.5% provided that such investments either form part of the permanent </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>104</FONT></P>

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<P><FONT SIZE=2>
capital required by regulatory authorities, or are otherwise integral to the insurance and reinsurance businesses carried on by those companies. Other investment income earned by AXIS Ireland
Holdings, AXIS Re and AXIS Specialty Europe will generally be taxed in Ireland at an effective rate of 25%. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital
gains realized by AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe will generally be subject to Irish corporation tax at an effective rate of 20%. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Ireland Holdings, AXIS Re and AXIS Specialty Europe are, as limited liability companies, also within the charge to Irish capital duty. Irish capital duty applies at the rate of 1%
on the value received for share capital issued by such companies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
each of AXIS Re and AXIS Specialty Europe are Irish tax resident companies, distributions made by such companies to AXIS Ireland Holdings will not be taken into account in computing
the taxable income of AXIS Ireland Holdings. Irish withholding tax will also not apply to distributions made by any of AXIS Re and AXIS Specialty Europe to AXIS Ireland Holdings. Following the listing
of the common shares of AXIS Holdings on the New York Stock Exchange, and provided that such shares are substantially and regularly traded on that exchange, Irish withholding tax will not apply to
distributions paid by AXIS Ireland Holdings to AXIS Holdings provided AXIS Holdings has made an appropriate declaration, in prescribed form, to AXIS Ireland Holdings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, will be resident in Ireland for Irish tax purposes unless the central management and control of such
companies is, as a matter of fact, located in Ireland. See "Risk Factors&#151;Risks Related to Taxation&#151;We may be subject to Irish tax, which may have a material adverse effect on
our results of operations." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
company not resident in Ireland for Irish tax purposes can nevertheless be subject to Irish corporation tax if it carries on a trade through a branch or agency in Ireland or disposes
of certain specified assets (e.g. Irish land, minerals, or mineral rights, or shares deriving the greater part of their value from such assets). In such cases, the charge to Irish corporation tax is
limited to trading income
connected with the branch or agency, capital gains on the disposal of assets used in the branch or agency which are situated in Ireland at or before the time of disposal, and capital gains arising on
the disposal of specified assets, with tax imposed at the rates discussed above. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Barbados  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Barbados was incorporated in Barbados to act as a holding company for various companies in the United States. As such, AXIS Barbados was granted a license to
conduct international business in accordance with the provisions of the International Business Companies Act, Cap. 77 as amended (the "Act"), and related regulations. The Minister of Industry and
International Business (the "MIIB") has granted AXIS Barbados a guarantee that the benefits and exemptions contained in the Act will apply to AXIS Barbados until January&nbsp;11, 2017. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Act, AXIS Barbados is required to pay a maximum corporate tax rate of 2<SUP>1</SUP>/<SMALL>2</SMALL>% on its worldwide profits, which reduces to 1% on taxable profits over U.S.
$15&nbsp;million. Under the Act there is currently no withholding tax imposed on amounts paid by AXIS Barbados to persons not resident in Barbados. Additionally, under current Barbados law there is
no capital gains tax and no tax is payable on the transfer of shares in AXIS Barbados if transferred to a person who is not resident in Barbados or to another international business company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Act governs the licensing and operations of international business companies. Licenses are issued by the MIIB, who has broad discretion over whether licenses are granted or refused.
The MIIB has the authority to suspend or revoke a license if at any time a licensee fails to satisfy the conditions of the license, or is in violation of any provisions of the Act. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>105</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Act imposes on Barbados international business companies certain reporting requirements. For example, a licensee that has gross revenues and assets that exceed Barbados
$1.0&nbsp;million, which is approximately U.S. $500,000, is required to forward to the MIIB annual audited financial statements prepared in accordance with generally accepted accounting principles. </FONT></P>

<UL>

<P><FONT SIZE=2><I> United States  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion is a summary of certain U.S. federal income tax consideration relating to our operations. We have conducted and intend to conduct
substantially all of our foreign operations outside
the United States and to limit our U.S. contacts so that AXIS Holdings and its foreign subsidiaries should not be engaged in a trade or business in the United States. However, whether business is
being conducted in the United States is an inherently factual determination. Because the Internal Revenue Code of 1986, as amended (the "Code"), regulations and court decisions fail to identify
definitively activities that constitute being engaged in a trade or business in the United States, we cannot be certain that the IRS will not contend successfully that AXIS Holdings and its foreign
subsidiaries are or will be engaged in a trade or business in the United States. A foreign corporation deemed to be so engaged would be subject to U.S. income tax at regular corporate rates, as well
as the branch profits tax, on its income which is treated as effectively connected with the conduct of that trade or business unless the corporation is entitled to relief under the permanent
establishment provision of an applicable tax treaty, as discussed below. Such income tax, if imposed, would be based on effectively connected income computed in a manner generally analogous to that
applied to the income of a U.S. corporation, except that a foreign corporation is entitled to deductions and credits only if it timely files a U.S. federal income tax return. AXIS Specialty, AXIS Re
and AXIS Specialty Europe intend to file protective U.S. federal income tax returns on a timely basis in order to preserve the right to claim income tax deductions and credits if it is ever determined
that they are subject to U.S. federal income tax. The highest marginal federal income tax rates currently are 35% for a corporation's effectively connected income and 30% for the "branch profits" tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
AXIS Specialty is entitled to the benefits under the income tax treaty between Bermuda and the United States (the "Bermuda Treaty"), AXIS Specialty would not be subject to U.S. income
tax on any income found to be effectively connected with a U.S. trade or business unless that trade or business is conducted through a permanent establishment in the United States. No regulations
interpreting the Bermuda Treaty have been issued. AXIS Specialty currently intends to conduct its activities so that it does not have a permanent establishment in the United States, although we cannot
be certain that we will achieve this result. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
insurance enterprise resident in Bermuda generally will be entitled to the benefits of the Bermuda Treaty if (i)&nbsp;more than 50% of its shares are owned beneficially, directly or
indirectly, by individual residents of the United States or Bermuda or U.S. citizens and (ii)&nbsp;its income is not used in substantial part, directly or indirectly, to make disproportionate
distributions to, or to meet certain liabilities of, persons who are neither residents of either the United States or Bermuda nor U.S. citizens. We cannot be certain that AXIS Specialty will be
eligible for Bermuda Treaty benefits immediately following the offering or in the future because of factual and legal uncertainties regarding the residency and citizenship of AXIS Holdings'
shareholders. AXIS Holdings would not be eligible for treaty benefits because it is not an insurance company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign
insurance companies carrying on an insurance business within the United States have a certain minimum amount of effectively connected net investment income, determined in
accordance with a formula that depends, in part, on the amount of U.S. risk insured or reinsured by such companies. If AXIS Specialty is considered to be engaged in the conduct of an insurance
business in the United States and it is not entitled to the benefits of the Bermuda Treaty in general (because it fails to satisfy one of the limitations on treaty benefits discussed above), the Code
could subject a </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>106</FONT></P>

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<P><FONT SIZE=2>
significant portion of AXIS Specialty's investment income to U.S. income tax. In addition, while the Bermuda Treaty clearly applies to premium income, it is uncertain whether the Bermuda Treaty
applies
to other income such as investment income. If AXIS Specialty is considered engaged in the conduct of an insurance business in the United States and is entitled to the benefits of the Bermuda Treaty in
general, but the Bermuda Treaty is interpreted to not apply to investment income, a significant portion of AXIS Specialty's investment income could be subject to U.S. income tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the current income tax treaty between the United Kingdom and the United States (the "U.K. Treaty"), a U.K. company is entitled to the benefits of the U.K. Treaty if it is managed
and controlled in the United Kingdom. We believe that AXIS UK and AXIS UK Holdings should be characterized as managed and controlled in the United Kingdom, and thus should be entitled to the benefits
of the U.K. Treaty. As a result, AXIS UK and AXIS UK Holdings should be subject to U.S. federal income tax on their income found to be effectively connected with a U.S. trade or business only if such
income is attributable to the conduct of a trade or business carried on through a permanent establishment in the United States. AXIS UK and AXIS UK Holdings has conducted and intends to conduct their
activities in a manner so that they should not have permanent establishments in the United States, although we cannot be certain that we will achieve this result. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
United States and the United Kingdom have signed a new income tax treaty which is not yet in force (the "New U.K. Treaty"). As with the current U.K. Treaty, under the provisions of
the New U.K. Treaty, AXIS UK and AXIS UK Holdings, if entitled to the benefits of the New U.K. Treaty, will not be subject to U.S. federal income tax on any income found to be effectively connected
with a U.S. trade or business unless that trade or business is conducted through a permanent establishment in the United States. AXIS UK and AXIS UK Holdings will generally be entitled to the benefits
of the New U.K. Treaty, if among other reasons, (i)&nbsp;during at least half of the days during the relevant taxable period, at least 50% of AXIS UK's and AXIS UK Holding's stock is beneficially
owned, directly or indirectly, by citizens or residents of the United States and the United Kingdom, and less than 50% of AXIS UK's and AXIS UK Holding's gross income for the relevant taxable period
is paid or accrued, directly or indirectly, to persons who are not U.S. or U.K. residents in the form of payments that are deductible for purposes of U.K. taxation, (ii)&nbsp;with respect to
specific items of income, profit or gain derived from the United States, if such income, profit or gain is considered to be derived in connection with, or incidental to, AXIS UK's and AXIS UK
Holding's business conducted in the United Kingdom or (iii)&nbsp;at least 50% of the aggregate vote and value of their shares is owned directly or indirectly by five or fewer companies the principal
class of shares of which is listed and regularly traded on a recognized stock exchange. Although, we cannot be certain that AXIS UK and AXIS UK Holdings will be eligible for treaty benefits under the
New U.K. Treaty because of factual and legal uncertainties regarding (i)&nbsp;the residency and citizenship of AXIS Holdings' shareholders, (ii)&nbsp;the percentage of AXIS Holdings shares traded
on the New York Stock Exchange, (iii)&nbsp;the interpretation of what constitutes income incidental to or connected with a trade or business in the UK, and (iv)&nbsp;whether the New U.K. Treaty
will be ratified in its current form, we will endeavor to so qualify. The New U.K. Treaty will enter into force upon the exchange of instruments of ratification and will apply with respect to U.S.
federal income taxes for taxable periods beginning on or after the first day of January next following the date on which the New U.K. Treaty enters into force. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the income tax treaty between Ireland and the United States (the "Irish Treaty"), AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe if entitled to the benefits of the Irish
Treaty will not be subject to U.S. federal income tax on any income determined to be effectively connected with a U.S. trade or business unless that trade or business is conducted through a permanent
establishment in the U.S. Each of AXIS Ireland Holdings, AXIS Re, and/or AXIS Specialty Europe will generally be entitled to the benefits of the Irish Treaty with respect to their effectively
connected income, if among
other reasons, (i)&nbsp;at least 50% of the shares of AXIS Holdings, measured by both vote and value, are owned by Irish citizens or U.S. citizens or residents and less than 50% of its gross </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>107</FONT></P>

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<P><FONT SIZE=2>
income for the relevant taxable period is paid or accrued directly or indirectly to persons who are not U.S. or Irish residents in the form of payments that are deductible for Irish income tax
purposes or (ii)&nbsp;each of AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, respectively, are considered as engaged in the active conduct of a trade or business in Ireland and their
effectively connected income is connected with or incidental to that trade or business. Although we cannot be certain that AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe will be eligible for
Irish Treaty benefits because of factual and legal uncertainties regarding (i)&nbsp;the residency and citizenship of AXIS Holdings' shareholders, and (ii)&nbsp;the interpretation of what
constitutes (x)&nbsp;an active trade or business in Ireland and (y)&nbsp;income incidental or connected thereto, we will endeavor to so qualify. AXIS Ireland Holdings, AXIS Re and AXIS Specialty
Europe have conducted and intend to conduct their activities in a manner so that each of them should not have permanent establishments in the United States, although we cannot be certain that we will
achieve this result. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign
corporations not engaged in a trade or business in the United States are nonetheless subject to U.S. income tax imposed by withholding on certain "fixed or determinable annual or
periodic gains, profits and income" derived from sources within the United States (such as dividends and certain interest on investments), subject to exemption under the Code or reduction by
applicable treaties. Generally under the current U.K. Treaty the withholding rate on dividends is reduced to 15% and on interest is reduced to 0% and under the Irish Treaty the withholding rate on
dividends is reduced to 15% and on interest is reduced to 0%. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
United States also imposes an excise tax on insurance and reinsurance premiums paid to foreign insurers or reinsurers with respect to risks located in the United States. The rates of
tax applicable to premiums paid to AXIS Specialty are 4% for casualty insurance premiums and 1% for reinsurance premiums. The excise tax does not apply to premiums paid to AXIS Re and AXIS Specialty
Europe provided that they are entitled to the benefits of the Irish Treaty and the business for which the premiums are paid is not ceded to a reinsurer not entitled to a similar treaty based excise
tax exemption. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Services and AXIS U.S. Holdings are Delaware corporations, AXIS Reinsurance is a New York corporation, AXIS Insurance is a Connecticut corporation and AXIS Indemnity is an Illinois
corporation, as such each will be subject to taxation in the United States at regular corporate rates. Additionally, dividends paid by these companies to AXIS Barbados would be subject to a 30% U.S.
withholding tax, subject to reduction under the income tax treaty between Barbados and the United States to 5%. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Personal Holding Companies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;AXIS Holdings and/or any of its subsidiaries could be subject to U.S. tax on a portion of its
income if any of them are considered to be a personal holding company ("PHC") for U.S. federal income tax purposes. A corporation generally will be classified as a PHC for U.S. federal income tax
purposes in a given taxable year if (i)&nbsp;at any time during the last half of such taxable year, five or fewer individuals (without regard to their citizenship or residency) own or are deemed to
own (pursuant to certain constructive ownership rules) more than 50% of the stock of the corporation by value and (ii)&nbsp;at least 60% of the corporation's gross income, as determined for U.S.
federal income tax purposes, for such taxable year consists of "PHC income." PHC income includes, among other things, dividends, interest, royalties, annuities and, under certain circumstances, rents.
Under these constructive ownership rules, among other things, a partner will be treated as owning (i)&nbsp;stock owned by his partners and (ii)&nbsp;a proportionate amount of the stock owned by
the partnership. Also, stock treated as owned by such partner proportionally through such partnership will be treated as owned by the partner for purposes of reapplying the constructive ownership
rules. Additionally, certain entities (such as tax-exempt organizations and pension funds) will be treated as individuals. The PHC rules contain an exception for foreign corporations that
are classified as Foreign Personal Holding Companies (as discussed below). </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
AXIS Holdings or any subsidiary were a PHC in a given taxable year, such corporation would be subject to PHC tax (at the highest marginal rate on ordinary income applicable to
individuals) on its "undistributed PHC income" (which, in the case of its foreign subsidiaries, would exclude PHC income that is from non-U.S. sources, except to the extent that such
income is effectively connected with a trade or business in the U.S.). Thus, the PHC income of AXIS Holdings and its foreign subsidiaries would not include underwriting income or investment income
derived from non-U.S. sources and should not include dividends received by AXIS Holdings from its foreign subsidiaries (as long as such foreign subsidiaries are not engaged in the trade or
business in the U.S.) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe based upon information made available to us regarding our existing shareholder base and upon the advice of LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae, L.L.P. that neither AXIS
Holdings nor any of its subsidiaries should be considered a PHC for U.S. federal income tax purposes immediately following the offering. Additionally, we intend to manage our business to minimize the
possibility that we will meet the 60% income threshold. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot be certain, however, that AXIS Holdings and its subsidiaries will not become PHCs following the offering or in the future because of factors including legal and factual
uncertainties regarding the application of the constructive ownership rules, the makeup of AXIS Holdings' shareholder base, the gross income of AXIS Holdings or any of its subsidiaries and other
circumstances that could change the application of the PHC rules to AXIS Holdings and its subsidiaries. In addition, if AXIS Holdings or any of its subsidiaries were to become PHCs we cannot be
certain that the amount of PHC income will be immaterial. </FONT></P>


<P><FONT SIZE=2><B>Taxation of Shareholders  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Bermuda Taxation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, there is no Bermuda withholding or other tax payable on principal, interests or dividends paid to the holders of the common shares. </FONT></P>

<UL>

<P><FONT SIZE=2><I> United States Taxation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary sets forth the material United States federal income tax considerations related to the purchase, ownership and disposition of common shares.
Unless otherwise stated, this summary deals only with shareholders that are U.S. Persons (as defined below) who purchase their common shares in this offering and who hold their common shares as
capital assets within the meaning of section&nbsp;1221 of the Code. The following discussion is only a discussion of the material U.S. federal income tax matters as described herein and does not
purport to address all of the U.S. federal income tax consequences that may be relevant to a particular shareholder in light of such shareholder's specific circumstances. For example, if a partnership
holds our common shares, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the
common shares, you should consult your tax advisors. In addition, the following summary does not address the U.S. federal income tax consequences that may be relevant to special classes of
shareholders, such as financial institutions, insurance companies, regulated investment companies, real estate investment trusts, financial asset securitization investment trusts, dealers or traders
in securities, tax exempt organizations, expatriates, persons who are considered with respect to any of us as "United States shareholders" for purposes of the CFC rules of the Code (generally, a U.S.
Person, as defined below, who owns or is deemed to own 10% or more of the total combined voting power of all classes of AXIS Holdings or the stock of any of our subsidiaries entitled to vote
(</FONT><FONT SIZE=2><I>i.e.</I></FONT><FONT SIZE=2>, 10% U.S. Shareholders)), or persons who hold the common shares as part of a hedging or conversion transaction or as part of a
short-sale or straddle, who may be subject to special rules or treatment under the Code. This discussion is based upon the Code, the regulations promulgated thereunder and any relevant
administrative rulings or pronouncements or judicial decisions, all as in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>109</FONT></P>

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effect on the date hereof and as currently interpreted, and does not take into account possible changes in such tax laws or interpretations thereof, which may apply retroactively. This discussion
does not include any description of the tax laws of any state or local governments within the United States. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of this discussion, the term "U.S. Person" means: (i)&nbsp;a citizen or resident of the United States, (ii)&nbsp;a partnership or corporation, or entity treated as a
corporation, created or organized in or under the laws of the United States, or any political subdivision thereof, (iii)&nbsp;an estate the income of which is subject to U.S. federal income taxation
regardless of its source, (iv)&nbsp;a trust if either (x)&nbsp;a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S.
Persons have the authority to control all substantial decisions of such trust or (y)&nbsp;the trust has a valid election in effect to be treated as a U.S. Person for U.S. federal income tax purposes
or (v)&nbsp;any other person or entity that is treated for U.S. federal income tax purposes as if it were one of the foregoing. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxation of Dividends.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the discussions below relating to the potential application of the controlled foreign
corporation ("CFC"), related person insurance income ("RPII"), foreign personal holding company ("FPHC") and passive foreign investment company ("PFIC") rules, cash distributions, if any, made with
respect to the common shares will constitute dividends for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits of AXIS Holdings (as computed using
U.S. tax principles). Such dividends will not be eligible for the dividends received deduction. To the extent such distributions exceed AXIS Holdings' earnings and profits, they will be treated first
as a return of the shareholder's basis in the common shares to the extent thereof, and then as gain from the sale of a capital asset. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Classification of AXIS Holdings, or Its Foreign Subsidiaries as Controlled Foreign Corporations.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each "10% U.S. Shareholder"
(as defined below) of a foreign corporation that is a CFC for an uninterrupted period of 30&nbsp;days or more during a taxable year, and who owns shares in the CFC, directly or indirectly through
foreign entities, on the last day of the CFC's taxable year, must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC's "subpart F income," even if the
subpart F income is not distributed. A foreign corporation is considered a CFC if "10% U.S. Shareholders" own (directly, indirectly through foreign entities or by attribution by application of the
constructive ownership rules of section&nbsp;958(b) of the Code (</FONT><FONT SIZE=2><I>i.e.,</I></FONT><FONT SIZE=2> "constructively")) more than 50% of the total combined voting power of all
classes of voting stock of such foreign corporation, or more than 50% of the total value of all stock of such corporation. For purposes of taking into account insurance income, a CFC also includes a
foreign insurance company in which more than 25% of the total combined voting power of all classes of stock (or more than 25% of the total value of the stock) is owned by 10% U.S. Shareholders, on any
day during the taxable year of such corporation, if the gross amount of premiums or other consideration for the reinsurance or the issuing of insurance or annuity contracts exceeds 75% of the gross
amount of all premiums or other consideration in respect of all risks. A 10% U.S. Shareholder is a U.S. Person who owns (directly, indirectly through foreign entity or constructively) at least 10% of
the total combined voting power of all classes of stock entitled to vote of the foreign corporation. We believe, based on the advice of LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P., that because of the
anticipated dispersion of our share ownership, provisions in our organizational documents that limit voting power and other factors no U.S. Person who owns shares of AXIS Holdings directly or
indirectly through one or more foreign entities should be treated as owning (directly, indirectly through foreign entities, or constructively), 10% or more of the total voting power of all classes of
shares of AXIS Holdings or any of its foreign subsidiaries (these provisions are described in "Description of Share Capital"). It is possible, however, that the IRS could challenge the effectiveness
of these provisions and that a court could sustain such a challenge. </FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The RPII Provisions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following discussion generally is applicable only if the RPII of any of the Foreign Insurance
Subsidiaries (i.e., AXIS Specialty, AXIS Re and AXIS Specialty Europe), determined on a gross basis, is 20% or more of such Foreign Insurance Subsidiary's gross insurance income for the taxable year
and the 20% Ownership Exception (as defined below) is not met. The following discussion generally would not apply for any fiscal year in which such Foreign Insurance Subsidiary's RPII falls below the
20% threshold. Although we cannot be certain, AXIS Holdings believes that the gross RPII of each Foreign Insurance Subsidiary as a percentage of its gross insurance income will be below the 20%
threshold for the foreseeable future. Additionally, as AXIS Holdings is not licensed as an
insurance company we do not anticipate that AXIS Holdings will have insurance income, including RPII. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RPII
is any "insurance income" (as defined below) attributable to policies of insurance or reinsurance with respect to which the person (directly or indirectly) insured is a "RPII
shareholder" (as defined below) or a "related person" (as defined below) to such RPII shareholder. In general, and subject to certain limitations, "insurance income" is income (including premium and
investment income) attributable to the issuing of any insurance or reinsurance contract which would be taxed under the portions of the Code relating to insurance companies if the income were the
income of a domestic insurance company. For purposes of inclusion of the RPII of any Foreign Insurance Subsidiary in the income of RPII shareholders, unless an exception applies, the term "RPII
shareholder" includes any U.S. Person who owns (directly or indirectly through foreign entities) any amount (rather than stock possessing 10% or more of the total combined voting power) of AXIS
Holdings' shares. Generally, the term "related person" for this purpose means someone who controls or is controlled by the RPII shareholder or someone who is controlled by the same person or persons
which control the RPII shareholder. Control is measured by either more than 50% in value or more than 50% in voting power of stock applying certain constructive ownership principles. A corporation's
pension plan is ordinarily not a "related person" with respect to the corporation unless the pension plan owns, directly or indirectly through the application of certain constructive ownership rules,
more than 50% measured by vote or value, of the stock of the corporation. The Foreign Insurance Subsidiaries will be treated as RPII CFCs if RPII shareholders are treated as owning (directly or
indirectly through foreign entities) 25% or more of the shares of AXIS Holdings by vote or value. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2>RPII Exceptions.&nbsp;&nbsp;&nbsp;&nbsp;The special RPII rules do not apply if (i)&nbsp;direct and indirect insureds and persons related to such
insureds, whether or not U.S. Persons, are treated as owning (directly or indirectly through foreign entities) less than 20% of the voting power and less than 20% of the value of the stock of AXIS
Holdings (the "20% Ownership Exception"), (ii)&nbsp;RPII, determined on a gross basis, is less than 20% of each of the Foreign Insurance Subsidiary's gross insurance income for the taxable year (the
"20% Gross Income Exception), (iii)&nbsp;the Foreign Insurance Subsidiaries elect to be taxed on their RPII as if the RPII were effectively connected with the conduct of a U.S. trade or business,
and to waive all treaty benefits with respect to RPII and meet certain other requirements or (iv)&nbsp;the Foreign Insurance Subsidiaries elect to be treated as U.S. corporations and waive all
treaty benefits and meet certain other requirements. Where none of these exceptions applies, each U.S. Person owning or treated as owning any shares in AXIS Holdings (and therefore, indirectly, in the
Foreign Insurance Subsidiaries) on the last day of AXIS Holdings' taxable year will be required to include in its gross income for U.S. federal income tax purposes its share of the RPII for the
portion of the taxable year during which any Foreign Insurance Subsidiary was a CFC under the RPII provisions, determined as if all such RPII were distributed proportionately only to such U.S. Persons
at that date, but limited by each such U.S. Person's share of such Foreign Insurance Subsidiary's current-year earnings and profits as reduced by the U.S. Person's share, if any, of
certain prior-year deficits in earnings and profits. The Foreign Insurance Subsidiaries intend to operate in a manner that is intended to ensure that each qualifies for the 20% Gross
Income Exception. Although we believe that the RPII of any of the Foreign Insurance Subsidiaries has not in the recent past equaled or exceeded 20% of any such </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>111</FONT></P>

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company's gross insurance income, and do not expect it to do so in the foreseeable future, it is possible that we will not be successful in qualifying under this exception. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2>Computation of RPII.&nbsp;&nbsp;&nbsp;&nbsp;In order to determine how much RPII any Foreign Insurance Subsidiary has earned in each taxable year,
the Foreign Insurance Subsidiaries may obtain and rely upon information from their insureds and reinsureds to determine whether any of the insureds, reinsureds or persons related thereto own (directly
or indirectly through foreign entities) shares of AXIS Holdings and are U.S. Persons. AXIS Holdings may not be able to determine whether any of the underlying direct or indirect insureds to which the
Foreign Insurance Subsidiaries provide insurance or reinsurance are shareholders or related persons to such shareholders. Consequently, AXIS Holdings may not be able to determine accurately the gross
amount of RPII earned by each Foreign Insurance Subsidiary in a given taxable year. For any year in which any Foreign Insurance Subsidiary's gross RPII is 20% or more of such Foreign Insurance
Subsidiary's gross insurance income for the year, AXIS Holdings may also seek information from its shareholders as to whether beneficial owners of common shares at the end of the year are U.S. Persons
so that the RPII may be determined and apportioned among such persons; to the extent AXIS Holdings is unable to determine whether a beneficial owner of common shares is a U.S. Person, AXIS Holdings
may assume that such owner is not a U.S. Person, thereby increasing the per share RPII amount for all known RPII shareholders. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If,
as expected, RPII is less than 20% of gross insurance income, RPII shareholders will not be required to include RPII in their taxable income. The amount of RPII includable in the
income of a RPII shareholder is based upon the net RPII income for the year after deducting related expenses such as losses, loss reserves and operating expenses. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2>Apportionment of RPII to U.S. Holders.&nbsp;&nbsp;&nbsp;&nbsp;Every RPII shareholder who owns common shares on the last day of any fiscal year of
AXIS Holdings in which any Foreign Insurance Subsidiary's gross insurance income constituting RPII for that year equals or exceeds 20% of such Foreign Insurance Subsidiary's gross insurance income
should expect that for such year it will be required to include in gross income its share of such Foreign Insurance Subsidiary's RPII for the portion of the taxable year during which such Foreign
Insurance Subsidiary was a CFC under the RPII provisions, whether or not distributed, even though it may not have owned the shares throughout such period. A RPII shareholder who owns common shares
during such taxable year but not on the last day of the taxable year is not required to include in gross income any part of such Foreign Insurance Subsidiary's RPII. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2>Basis Adjustments.&nbsp;&nbsp;&nbsp;&nbsp;A RPII shareholder's tax basis in its common shares will be increased by the amount of any RPII that the
shareholder includes in income. The RPII shareholder may exclude from income the amount of any distributions by AXIS Holdings out of previously taxed RPII income. The RPII shareholder's tax basis in
its common shares will be reduced by the amount of such distributions that are excluded from income. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2>Uncertainty as to Application of RPII.&nbsp;&nbsp;&nbsp;&nbsp;The RPII provisions have never been interpreted by the courts or the Treasury
Department in final regulations, and regulations interpreting the RPII provisions of the Code exist only in proposed form. It is not certain whether these regulations will be adopted in their proposed
form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any interpretation or application of RPII by the IRS, the courts or otherwise, might
have retroactive effect. These provisions include the grant of authority to the Treasury Department to prescribe "such regulations as may be necessary to carry out the purpose of this subsection
including... regulations preventing the avoidance of this subsection through cross insurance arrangements or
otherwise." Accordingly, the meaning of the RPII provisions and the application thereof to the Foreign Insurance Subsidiaries is uncertain. In addition, we cannot be certain that the amount of RPII or
the amounts of the RPII inclusions, if any, will not be subject to adjustment based </FONT></P>

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upon subsequent IRS examination. Prospective investors considering an investment in common shares should consult his tax advisor as to the effects of these uncertainties. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax-Exempt Shareholders.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt entities will be required to treat certain subpart F insurance
income, including RPII, that is includible in income by the tax-exempt entity as unrelated business taxable income. Prospective investors that are tax exempt entities are urged to consult
their tax advisors as to the potential impact of the unrelated business taxable income provisions of the Code. A tax-exempt organization that is treated as a 10% U.S. Shareholder or a RPII
Shareholder also must file IRS Form&nbsp;5471 in the circumstances described above. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of Common Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the discussions below relating to the potential application of the Code
section&nbsp;1248, PFIC and FPHC rules, holders of common shares generally should recognize capital gain or loss for U.S. federal income tax purposes on the sale, exchange or other disposition of
common shares in the same manner as on the sale, exchange or other disposition of any other shares held as capital assets. If the holding period for these common shares exceeds one year, any gain will
be subject to tax at a current maximum marginal tax rate of 20% for individuals and 35% for corporations. Moreover, gain, if any, generally will be a U.S. source gain and generally will constitute
"passive income" for foreign tax credit limitation purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Code
section&nbsp;1248 provides that if a U.S. Person sells or exchanges stock in a foreign corporation and such person owned, directly, indirectly through certain foreign entities or
constructively, 10% or more of the voting power of the corporation at any time during the five-year period ending on the date of disposition when the corporation was a CFC, any gain from
the sale or exchange of the shares will be treated as ordinary income to the extent of the CFC's earnings and profits (determined under U.S. federal income tax principles) during the period that the
shareholder held the shares and while the corporation was a CFC (with certain adjustments). We believe that because of the anticipated dispersion of our share ownership, provisions in our
organizational documents that limit voting power and other factors that no U.S. shareholder of AXIS Holdings should be treated as owning (directly, indirectly through foreign entities or
constructively) 10% of more of the total voting power of AXIS Holdings; to the extent this is the case this application of Code Section&nbsp;1248 under the regular CFC rules should not apply to
dispositions of our common shares. It is possible, however, that the IRS could challenge the effectiveness of these provisions and that a court could sustain such a challenge. A 10% U.S. Shareholder
may in certain circumstances be required to report a disposition of shares of a CFC by attaching IRS Form&nbsp;5471 to the U.S. federal income tax or information return that it would normally file
for the taxable year in which the disposition occurs. In the event this is determined necessary, AXIS Holdings will provide a complete IRS Form&nbsp;5471 with the relevant information necessary to
complete the Form. Code section&nbsp;1248 also applies to the sale or exchange of shares in a foreign corporation if the foreign corporation would be treated as a CFC for RPII purposes regardless of
whether the shareholder is a 10% U.S. Shareholder or whether RPII constitutes 20% or more of the corporation's gross insurance income or the 20% Ownership Exception applies. Existing proposed
regulations do not address whether Code section&nbsp;1248 would apply if a foreign corporation is not a CFC but the foreign corporation has a subsidiary that is a CFC and that would be taxed as an
insurance company if it were
a domestic corporation. We believe, however, that this application of Code section&nbsp;1248 under the RPII rules should not apply to dispositions of common shares because AXIS Holdings will not be
directly engaged in the insurance business. We cannot be certain, however, that the IRS will not interpret the proposed regulations in a contrary manner or that the Treasury Department will not amend
the proposed regulations to provide that these rules will apply to dispositions of common shares. Prospective investors should consult their tax advisors regarding the effects of these rules on a
disposition of common shares. </FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Passive Foreign Investment Companies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In general, a foreign corporation will be a PFIC during a given year if (i)&nbsp;75%
or more of its gross income constitutes "passive income" or (ii)&nbsp;50% or more of its assets produce passive income. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
AXIS Holdings were characterized as a PFIC during a given year, U.S. Persons holding common shares would be subject to a penalty tax at the time of the sale at a gain of, or receipt
of an "excess distribution" with respect to, their shares, unless such persons made a "qualified electing fund election" or "mark-to-market" election. It is uncertain that AXIS
Holdings would be able to provide its shareholders with the information necessary for a U.S. Person to make these elections. In general, a shareholder receives an "excess distribution" if the amount
of the distribution is more than 125% of the average distribution with respect to the shares during the three preceding taxable years (or shorter period during which the taxpayer held the shares). In
general, the penalty tax is equivalent to an interest charge on taxes that are deemed due during the period the shareholder owned the shares, computed by assuming that the excess distribution or gain
(in the case of a sale) with respect to the shares was taken in equal portion at the highest applicable tax rate on ordinary income throughout the shareholder's period of ownership. The interest
charge is equal to the applicable rate imposed on underpayments of U.S. federal income tax for such period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the above purposes, passive income generally includes interest, dividends, annuities and other investment income. The PFIC rules provide that income "derived in the active conduct of
an insurance business by a corporation which is predominantly engaged in an insurance business... is not treated as passive income." The PFIC provisions also contain a look-through rule
under which a foreign corporation shall be treated as if it "received directly its proportionate share of the income..." and as if it "held its proportionate share of the assets..." of any other
corporation in which it owns at least 25% of the value of the stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
exception is intended to ensure that income derived by a bona fide insurance company is not treated as passive income, except to the extent such income is attributable to financial
reserves in excess of the reasonable needs of the insurance business. We expect for purposes of the PFIC rules, that each of AXIS Specialty, AXIS Re, AXIS Specialty Europe, AXIS Reinsurance, AXIS
Insurance, and AXIS Indemnity (the "Insurance Subsidiaries") will be predominantly engaged in an insurance business and is unlikely to have financial reserves in excess of the reasonable needs of its
insurance business. Accordingly, none of the income or assets of the Insurance Subsidiaries should be treated as passive. Additionally, we expect that AXIS Ireland Holdings, AXIS UK, AXIS UK Holdings
and AXIS
Barbados should not meet the 75% test or the 50% test because they should have sufficient non-passive income and assets either directly or through the operation of the
look-through rule and thus should not be treated as PFICs. Finally, we expect that the passive income and assets (other than the stock of any indirect AXIS Holdings subsidiary) of any
other AXIS Holding subsidiary will be deminimis with respect to the overall income and assets of AXIS Holdings. Also under the look-through rule, AXIS Holdings should be deemed to own its
proportionate share of the assets and to have received its proportionate share of the income of its direct and indirect subsidiaries for purposes of the 75% test and the 50% test. As a result, we
believe based on the opinion of LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P., that AXIS Holdings should not be treated as a PFIC. We cannot be certain, however, as there are currently no regulations
regarding the application of the PFIC provisions to an insurance company and new regulations or pronouncements interpreting or clarifying these rules may be forthcoming, that the IRS will not
challenge this position and that a court will not sustain such challenge. Prospective investors should consult their tax advisor as to the effects of the PFIC rules. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign Personal Holding Companies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A foreign corporation will be classified as an FPHC for U.S. federal income tax purposes
if (i)&nbsp;at any time during the taxable year at issue, five or fewer individuals who are U.S. citizens or residents own or are deemed to own (pursuant to certain constructive ownership rules)
more than 50% of all classes of the corporation's stock measured by voting power or </FONT></P>

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value and (ii)&nbsp;at least 60% of its gross income for the year is "FPHC income." Under these constructive ownership rules, among other things, a partner will be treated as owning
(i)&nbsp;stock owned by his partners and (ii)&nbsp;a proportionate amount of the stock owned by the partnership. Also, stock treated as owned by such partner proportionally through such
partnership will be treated as owned by the partner for purposes of reapplying the constructive ownership rules. If AXIS Holdings or any of its foreign subsidiaries were to become FPHCs, a portion of
the "undistributed foreign personal holding company income" (as defined for U.S. federal income tax purposes) of each such FPHC would be imputed to all of AXIS Holdings' shareholders who are U.S.
Persons. Such income would be taxable as a dividend, even if no cash dividend were actually paid. In such event, subsequent cash distributions will first be treated as a tax-free return of
any previously taxed and undistributed amounts. In addition, in such case, upon the death of any U.S. individual owning common shares, such individual's heirs or estate would not be entitled to a
"step-up" in the basis of the common shares which might otherwise be available under U.S. federal income tax laws. Moreover, each shareholder who owns, directly or indirectly, 10% or more
of the value of an FPHC is required to file IRS Form&nbsp;5471. We believe based upon information made available to us and LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P. regarding our existing shareholder
base and upon the advice of LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P. that neither AXIS Holdings nor any of its foreign subsidiaries should be considered an FPHC immediately following the offering
Additionally, we intend to manage our business to minimize the possibility that we will meet the 60% income threshold. We cannot be certain, however, that AXIS Holdings and/or any of its foreign
subsidiaries will not be considered an FPHC, because of factors including legal and factual uncertainties regarding the application of the constructive ownership rules, the makeup of AXIS Holdings'
shareholder base, the gross income of AXIS Holdings and/or any of its foreign subsidiaries and other circumstances that could change the application of the FPHC rules to AXIS Holdings and its foreign
subsidiaries. In addition, if AXIS Holdings or any of its foreign subsidiaries were to become an FPHC we cannot be certain that the amount of FPHC income will be immaterial. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign tax credit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Because it is anticipated that U.S. Persons will own a majority of our shares, only a portion of the
current income inclusions, if any, under the CFC, RPII and PFIC rules and of dividends paid by us (including any gain from the sale of common shares that is treated as a dividend under
section&nbsp;1248 of the Code) will be treated as foreign source income for purposes of computing a shareholder's U.S. foreign tax credit limitations. We will consider providing shareholders with
information regarding the portion of such amounts constituting foreign source income to the extent such information is reasonably available. It is also likely that substantially all of the "subpart F
income," RPII and dividends that are foreign source income will constitute either "passive" or "financial services" income for foreign tax credit limitation purposes. Thus, it may not be possible for
most shareholders to utilize excess foreign tax credits to reduce U.S. tax on such income. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information Reporting and Backup Withholding.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under certain circumstances, U.S. Persons owning stock in a foreign corporation
are required to file IRS Form&nbsp;5471 with their U.S. federal income tax returns. Generally, information reporting on IRS Form&nbsp;5471 is required by (i)&nbsp;a person who is treated as a
RPII shareholder, (ii)&nbsp;a 10% U.S. Shareholder of a foreign corporation that is a CFC for an uninterrupted period of 30&nbsp;days or more during any tax year of the foreign corporation, and
who owned the stock on the last day of that year and (iii)&nbsp;under certain circumstances, a U.S. Person who acquires stock in a foreign corporation, and as a result thereof owns 10% or more of
the voting power or value of such foreign corporation, whether or not such foreign corporation is a CFC. For any taxable year in which AXIS Holdings determines that gross RPII constitutes 20% or more
of any of the Foreign Insurance Subsidiary's gross insurance income and the 20% Ownership Exception does not apply, AXIS Holdings will provide to all U.S. Persons registered as shareholders of its
ordinary shares a completed IRS Form&nbsp;5471 or the relevant information necessary to complete the form. Failure to file IRS Form&nbsp;5471 may result in penalties. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
returns may be filed with the IRS in connection with distributions on the common shares and the proceeds from a sale or other disposition of the common shares unless the
holder of the common shares establishes an exemption from the information reporting rules. A holder of common shares that does not establish such an exemption may be subject to U.S. backup withholding
tax on these payments if the holder is not a corporation or non-U.S. Person or fails to provide its taxpayer identification number or otherwise comply with the backup withholding rules.
The amount of any backup withholding from a payment to a U.S. Person will be allowed as a credit against the U.S. Person's U.S. federal income tax liability and may entitle the U.S. Person to a
refund, provided that the required information is furnished to the IRS. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proposed U.S. Tax Legislation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Legislation has been introduced in the U.S. Congress intended to eliminate certain perceived
tax advantages of companies (including insurance companies) that have legal domiciles outside the United States but have certain U.S. connections. While there is no currently pending legislative
proposal which, if enacted, would have a material adverse effect on us, or our shareholders, it is possible that broader-based legislative proposals could emerge in the future that could have an
adverse impact on us, or our shareholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
the U.S. federal income tax laws and interpretations regarding whether a company is engaged in a trade or business within the United States, or is a passive foreign
investment company or whether U.S. Persons would be required to include in their gross income the "subpart F income" or
the related party insurance income of a controlled foreign corporation are subject to change, possibly on a retroactive basis. There are currently no regulations regarding the application of the
passive foreign investment company rules to insurance companies and the regulations regarding related party insurance income are still in proposed form. New regulations or pronouncements interpreting
or clarifying such rules may be forthcoming. We cannot be certain if, when or in what form such regulations or pronouncements may be provided and whether such guidance will have a retroactive effect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President
Bush has proposed legislation which would exempt dividends paid by U.S. corporations (or foreign corporations to the extent subject to U.S. income tax) to U.S. shareholders.
Dividends paid by AXIS Holdings would generally not be exempt under this proposed legislation. As a result, if this legislation were adopted in the form proposed holders of our shares would incur
higher taxes on the dividends we may pay than would be the case with comparable dividends from U.S. corporations. </FONT></P>

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<BR></FONT><FONT SIZE=2><B>DESCRIPTION OF SHARE CAPITAL    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary of our share capital is qualified in its entirety by the provisions of our memorandum of association and bye-laws, the
shareholders agreement among substantially all of our existing shareholders and the warrants outstanding on our common shares, copies of which will be filed as exhibits to the registration statement
of which this prospectus is a part. As of December&nbsp;31, 2002, there were 171 record holders of our common shares. In this section, "we," "us" and "our" refer to AXIS Holdings and not any of its
subsidiaries. </FONT></P>

<P><FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are authorized to issue up to an aggregate of 100,000,000 common shares, par value U.S. $0.10 per share, of which 17,271,065 common shares were outstanding as
of December&nbsp;31, 2002. Immediately after the completion of this offering,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares
(&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares if the underwriters exercise their
over-allotment option in full) will be outstanding. Except as described below, our common shares will have no preemptive rights or other rights to subscribe for additional common shares,
no rights of redemption, conversion or exchange and no sinking fund rights. In the event of liquidation, dissolution or winding-up, the holders of our common shares are entitled to share
equally in our assets, if any remain after the payment of all our debts and liabilities and the liquidation preference of any outstanding preferred shares. Under certain circumstances, AXIS Holdings
has the right to purchase all or a portion of the shares held by a shareholder. See "&#151;Acquisition of Common Shares by Us" below. All of the common shares issued in connection with the
offering will be, when issued, fully paid and nonassessable. Holders of our common shares are entitled to receive dividends as may be lawfully declared from time to time by our board of directors. </FONT></P>

<P><FONT SIZE=2><B>Voting Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, and except as provided below, shareholders have one vote for each AXIS Holdings common share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However, pursuant to a mechanism specified in our bye-laws the voting rights exercisable by a shareholder may be limited.
In any situation in which the "controlled shares" (as defined below) of a U.S. Person or the common shares held by a Direct Foreign Shareholder Group (as defined below) would constitute 9.5% or more
of the votes conferred by the issued common shares, the voting rights exercisable by a shareholder with respect to such shares shall be limited so that no U.S. Person or
Direct Foreign Shareholder Group is deemed to hold 9.5% or more of the voting power conferred by our common shares. The votes that could be cast by a shareholder but for these restrictions will be
allocated to the other shareholders pro rata based on the voting power held by such shareholders, provided that no allocation of any such voting rights may cause a U.S. Person or Direct Foreign
Shareholder Group to exceed the 9.5% limitation as a result of such allocation. In addition, our board of directors may limit a shareholder's voting rights where it deems it necessary to do so to
avoid adverse tax, legal or regulatory consequences. "Controlled shares" includes, among other things, all common shares that a U.S. Person owns directly, indirectly or constructively (within the
meaning of Section&nbsp;958 of the Code). A "Direct Foreign Shareholder Group" includes a shareholder or group of commonly controlled shareholders that are not U.S Persons. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also have the authority under our bye-laws to request information from any shareholder for the purpose of determining whether a shareholder's voting rights are to be
reallocated pursuant to the bye-laws. If a shareholder fails to respond to our request for information or submits incomplete or inaccurate information in response to a request by us, we
may, in our sole discretion, eliminate the shareholder's voting rights. </FONT></P>

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<P><FONT SIZE=2><B>Restrictions on Transfer of Common Shares or Warrants  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors may decline to register a transfer of any common shares under certain circumstances, including if they have reason to believe that any
non-de minimis adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders may occur as a result of such transfer. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
restrictions on transfer and voting restrictions described above may have the effect of delaying, deferring or preventing a change in control of AXIS Holdings. </FONT></P>

<P><FONT SIZE=2><B>Acquisition of Common Shares by Us  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our bye-laws and subject to Bermuda law, if our board of directors determines that any shareholder's ownership of common shares may result in
non-de minimis adverse tax, legal or regulatory consequences to us, any of our subsidiaries or any of our shareholders, we have the option, but not the obligation, to require such
shareholder to sell to us or to a third party to whom we assign the repurchase right the minimum number of common shares that is necessary to avoid or cure any such adverse consequences at a price
determined in the good faith discretion of the board of directors to represent the shares' fair market value. </FONT></P>

<P><FONT SIZE=2><B>Issuance of Shares  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to our bye-laws and Bermuda law, our board of directors has the power to issue any of our unissued shares as it determines, including the
issuance of any shares or class of shares with preferred, deferred or other special rights. </FONT></P>


<P><FONT SIZE=2><B>Shareholders Agreement  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have entered into a shareholders agreement with substantially all of our existing shareholders. The shareholders
agreement, together with our bye-laws, define the rights and obligations of existing shareholders party to the agreement with respect to the transfer of our common shares, our corporate
governance and related matters. Certain provisions of our shareholders agreement, which we have not described, will terminate upon consummation of the offering. The shareholders agreement may be
amended only with our consent and the consent of the holders of 75% of the aggregate number of shares outstanding held by the parties to the shareholders agreement at the time. Amendments and
modifications which adversely affect a shareholder party to the agreement in a manner different than any other shareholder party to the agreement may only be effected with the consent of such
shareholder. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tag-Along Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of our bye-laws and shareholders agreement, generally if any
existing shareholder (or group of existing shareholders) proposes to transfer 20% or more of our outstanding shares (in value or in voting power), then the other shareholders party to the shareholders
agreement have a right (i)&nbsp;to notice of the terms and conditions of the transfer, and (ii)&nbsp;to participate proportionally in the transfer. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Registration Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any shareholder who beneficially owned more than 1,000,000 shares on December&nbsp;31, 2002 has the
right to request registration for a public offering of all or a portion of its shares at any time following the earlier of 180&nbsp;days after the effective date of this registration statement and
the expiration of the period during which the managing underwriters for this offering prohibit us from otherwise publicly distributing our shares. We will use commercially reasonable efforts to effect
the registration of such shares, but will not be required to file&nbsp;a registration if (i)&nbsp;the aggregate proceeds expected to be received from such offering are less than $25,000,000, or
(ii)&nbsp;we have already effected one such requested registration in the previous four-month period. If the shares are to be sold in an underwritten offering and the managing
underwriters notifies us that, in their view, </FONT></P>

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the number of shares proposed to be included in the offering exceeds the largest number of shares that can be sold without an adverse effect on such offering, then the number of shares requested to
be registered will be allocated, pro rata, among the requesting shareholders. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore,
the holders of registration rights are limited in the total number of registration requests they can make, other than with respect to registrations pursuant to the filing of
a Form&nbsp;S-3 with the SEC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, if we propose to register any common shares or any options, warrants or other rights to acquire, or securities convertible into or exchangeable for, our common shares under
the Securities Act (other than shares to be issued pursuant to an employee benefits plan or similar plan or in connection with a merger, acquisition or similar transaction) for our own account or for
the account of a selling shareholder, we will offer shareholders who are party to the shareholders agreement the opportunity, subject to certain conditions, to include their common shares in such
registration statement. Pursuant to the shareholders agreement, we shall use all reasonable efforts to effect the sale of any such shares. If the shares are to be sold in an underwritten offering and
the managing underwriters notifies us that, in their view, the number of shares proposed to be included in the offering exceeds the largest number of shares that can be sold without an adverse effect
on such offering, then the number of shares requested to be registered will be allocated, pro rata, among the requesting shareholders, provided that if the Company initiates registration to sell its
own shares, such shares will have priority in registration. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shareholders agreement provides that in the case of the offering pursuant to this prospectus, neither we nor the existing shareholders party to the shareholders agreement will effect
any public sale or distribution of any of our shares, or other securities convertible into or exchangeable for shares, during the period beginning 14&nbsp;days prior to the effective date of the
registration statement and ending 180&nbsp;days after such effective date. In the case of any other offering that occurs before the two year anniversary of this offering, neither we, nor the
existing shareholders party to the shareholders agreement will effect any public sale or distribution of any of our shares, or other securities convertible into or exchangeable for shares, during the
period beginning 14&nbsp;days prior to the effective date of the applicable registration statement and ending 90&nbsp;days after such effective date. In both cases, we may agree with the lead
managing underwriters to permit public distribution before the end of the specified time period. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indemnification.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the shareholders agreement, we agreed to hold harmless each shareholder selling shares in a
registered offering from damages relating to a material omission or misstatement in the registration statement or prospectus, provided such omission or misstatement was not made based on information
furnished to the company by the shareholder. We also agreed to hold the underwriters harmless. Each participating shareholder agrees to hold harmless us, our officers, directors, agents and the
underwriters to the same extent. </FONT></P>


<P><FONT SIZE=2><B>Bye-laws  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the provisions of the bye-laws described above under "&#151;Voting Rights," the following provisions are a summary of some of
the other important provisions of our bye-laws. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors and Corporate Action.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our bye-laws provide that our board of directors shall consist of
between 11 and 13 members, or such number as determined by the shareholders. The initial board of directors consists of 12 persons. Currently our bye-laws provide that the initial board of
directors shall hold office for three years, at which time the board of directors will be divided into three approximately equal classes. In addition, each director will serve a three year term, with
termination staggered according to class. However, we intend to submit proposed amended and restated bye-laws to a vote of our existing shareholders pursuant to which the board of
directors will be staggered prior to consummation of this offering. The proposed classification is noted in the table </FONT></P>

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listing our board of directors under "Management&#151;Directors." Shareholders may remove a director at a special meeting, provided that notice of the intention to hold a special meeting for
the purpose of removing a director is provided to that director at least two weeks before that meeting. Vacancies on the board of directors can be filled by the board of directors if the vacancy
occurs as a result of death, disability, disqualification or resignation of a director, or from an increase in the size of the board of directors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
the affirmative votes of a majority of the votes cast at any meeting at which quorum is present is required to authorize a resolution put to vote at a meeting of the board of
directors. Corporate action may also be taken by a unanimous written resolution of the board of directors without a meeting. Unless otherwise determined by the board of directors, a quorum shall be a
majority of directors in office from time to time, provided that in no event shall it be less than two directors. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder Action.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At any general meeting, two or more persons present in person and representing, in person or by proxy,
more than 50% of the aggregate voting power of our shares throughout the meeting shall constitute a quorum for the transaction of business. In general, anything that may be done by resolution of our
shareholders in a general meeting may, without a meeting, be taken by a resolution in writing signed by all of the shareholders entitled to attend such meeting and vote on the resolution. In general,
any questions proposed for the consideration of the shareholders at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the
bye-laws. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting of Subsidiary Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If we are required or entitled to vote at a general meeting of any of AXIS Specialty, AXIS
Specialty Holdings Ireland Limited, AXIS Specialty UK Limited, AXIS Specialty UK Holdings Limited or AXIS Specialty (Barbados) Limited (together, the "First Tier Subsidiaries") on a resolution
proposed by such First Tier Subsidiary, our directors shall refer the subject matter of the vote to our shareholders and seek direction from such shareholders as to how they should vote on the
resolution proposed by the First Tier Subsidiary. Substantially similar provisions are contained in the bye-laws (or equivalent governing documents) of the First Tier Subsidiaries (with
the exception of AXIS Barbados). </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The bye-laws may only be amended by a resolution adopted by the board of directors and by resolution
of the shareholders. </FONT></P>

<P><FONT SIZE=2><B>Warrants  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain warrants to purchase common shares in AXIS Holdings are currently outstanding (the "Warrants"). The terms of the Warrants provide that they are
exercisable at any time prior to November&nbsp;20, 2011 for a certain percentage of our issued and outstanding shares. Taken as a whole, the Warrants are exercisable for a number of common shares
equal to 12% of our common shares outstanding on a fully diluted basis. Upon the occurrence of an "Initial Public Offering" or an "Acquisition Event" (in each case, as defined in the Warrants) with
respect to us, the amount of shares for which the Warrants are exercisable would be fixed based upon the number of our common shares outstanding on a fully diluted basis as of the close of business on
the day immediately prior to the consummation of such Initial Public Offering or Acquisition Event. Prior to consummation of the offering to which this prospectus relates, we expect to enter into
amendments to the Warrants (the "Warrant Amendments") that will fix the amount of shares for which the Warrants are exercisable based upon the number of our common shares outstanding on a fully
diluted basis as of the close of business on the day immediately prior to the consummation of the offering. The exercise price and number of common shares issuable upon exercise of each warrant will
be subject to adjustment in respect of events that may have a dilutive effect on its underlying share ownership interest. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>120</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the number of warrants to purchase common shares outstanding as of December&nbsp;31, 2002: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ALIGN="LEFT"><FONT SIZE=1><B>Holder<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Warrants to Acquire<BR>
Common Shares(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage of<BR>
Diluted Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Expiration</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Trident II, L.P.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>2,100,579</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10.367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Marsh &amp; McLennan Capital Professionals Fund, L.P.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>58,760</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.290</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Marsh &amp; McLennan Employees' Securities Company, L.P.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>59,166</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.292</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Dragon Holdings Settlement</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>133,122</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.657</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>JR Charman Children's Settlement</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>44,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.219</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Robert J. Newhouse, Jr.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>8,915</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.044</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Robert J. Newhouse, III</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>6,687</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Stephan F. Newhouse</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>15,602</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.077</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Paul B. Newhouse</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>4,458</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.022</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11/20/2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>2,431,663</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12.001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Based
upon outstanding shares of 17,271,065 plus 2,431,663 common shares issuable upon exercise of outstanding warrants plus 559,439 common shares issuable upon the exercise of
outstanding options, as of December&nbsp;31, 2002. This number is to be fixed immediately prior to offering as described above on a diluted basis. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the warrants were immediately exercised for cash, Trident II, L.P., Marsh&nbsp;&amp; McLennan Capital Professionals Fund, L.P., Marsh&nbsp;&amp; McLennan Employees' Securities Company,
L.P., Dragon Holdings
Settlement, JR Charman Children's Settlement, Robert J. Newhouse, Jr., Robert J. Newhouse, III, Stephan F. Newhouse and Paul B. Newhouse would own 22.7%, 0.6%, 0.6%, 1.7%, 0.6%, 0.2%, 0.1%, 0.2%, and
0.0%, respectively (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%,
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, respectively, following the offering
assuming the underwriters' over-allotment option is not exercised and the warrant holders make no additional purchases), of our common shares, assuming the exercise of all outstanding
warrants. </FONT></P>

<P><FONT SIZE=2><B>Anti-Takeover Provisions and Insurance Regulations Concerning Change of Control  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the provisions of our bye-laws as well as certain insurance regulations concerning change of control could delay or prevent a change of
control of the Company that a shareholder might consider favorable. See "Risk Factors&#151;Risks Related to Our Common Shares and This Offering." </FONT></P>


<P><FONT SIZE=2><B>Differences in Corporate Law  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should be aware that the Companies Act, which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and
their shareholders. In order to highlight these differences, set forth below is a summary of certain significant provisions of the Companies Act (including modifications adopted pursuant to our
bye-laws) applicable to us which differ in certain respects from provisions of the State of Delaware corporate law. Because the following statements are summaries, they do not address all
aspects of Bermuda law that may be relevant to us and our shareholders. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Duties of Directors.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Bermuda law, at common law, members of a board of directors owe a fiduciary duty to the company to
act in good faith in their dealings with or on behalf of the company </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>121</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>
and exercise their powers and fulfill the duties of their office honestly. This duty has the following essential elements: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
duty to act in good faith in the best interests of the company;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
duty not to make a personal profit from opportunities that arise from the office of director;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
duty to avoid conflicts of interest; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
duty to exercise powers for the purpose for which such powers were intended. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Companies Act imposes a duty on directors and officers of a Bermuda company: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
act honestly and in good faith with a view to the best interests of the company; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Companies Act imposes various duties on officers of a company with respect to certain matters of management and administration of the company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Companies Act provides that in any proceedings for negligence, default, breach of duty or breach of trust against any officer, if it appears to a court that such officer is or may be
liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that, having regard to all the circumstances of the case, including
those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from any
liability on such terms as the court may think fit. This provision has been interpreted to apply only to actions brought by or on behalf of the company against such officers. Our bye-laws,
however, provide that shareholders waive all claims or rights of action that they might have, individually or in the right of AXIS Holdings, against any director or officer of us for any act or
failure to act in the performance of such director's or officer's duties, except this waiver does not extend to any claims or rights of action that arise out of fraud or dishonesty on the part of such
director or officer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Delaware law, the business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with a
fiduciary duty of care to protect the interests of the corporation and a fiduciary duty of loyalty to act in the best interests of its stockholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
duty of care requires that directors act in an informed and deliberative manner and inform themselves, prior to making a business decision, of all material information reasonably
available to them. The duty of care also requires that directors exercise care in overseeing and investigating the conduct of corporate employees. The duty of loyalty may be summarized as the duty to
act in good faith, not out of self-interest, and in a manner which the director reasonably believes to be in the best interests of the stockholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
party challenging the propriety of a decision of a board of directors bears the burden of rebutting the applicability of the presumptions afforded to directors by the "business
judgment rule." If the presumption is not rebutted, the business judgment rule attaches to protect the directors and their decisions, and their business judgments will not be second guessed. Where,
however, the presumption is rebutted, the directors bear the burden of demonstrating the entire fairness of the relevant transaction. Notwithstanding the foregoing, Delaware courts subject directors'
conduct to enhanced scrutiny in respect of defensive actions taken in response to a threat to corporate control and approval of a transaction resulting in a sale of control of the corporation. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interested Directors.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Bermuda law and our bye-laws, a transaction entered into by us, in which a director
has an interest, will not be voidable by us, and such director will not be liable to us for </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>122</FONT></P>

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<P><FONT SIZE=2>
any profit realized pursuant to such transaction, provided the nature of the interest is disclosed at the first opportunity at a meeting of directors, or in writing to the directors. In addition, our
bye-laws allow a director to be taken into account in determining whether a quorum is present and to vote on a transaction in which the director has an interest following a declaration of
the interest pursuant to the Companies Act, provided that the director is not disqualified from doing so by the chairman of the meeting. Under Delaware law, such transaction would not be voidable if
(i)&nbsp;the material facts as to such interested director's relationship or interests are disclosed or are known to the board of directors and the board of directors in good faith authorizes the
transaction by the affirmative vote of a majority of the disinterested directors, (ii)&nbsp;such material facts are disclosed or are known to the shareholders entitled to vote on such transaction
and the transaction is specifically approved in good faith by vote of the majority of shares entitled to vote thereon or (iii)&nbsp;the transaction is fair as to the corporation as of the time it is
authorized, approved or ratified. Under Delaware law, such interested director could be held liable for a transaction in which such director derived an improper personal benefit. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Bermuda law does not permit payment of dividends or distributions of contributed surplus by a company if there are
reasonable grounds for believing that the company, after the payment is made, would be unable to pay its liabilities as they become due, or the realizable value of the company's assets would be less,
as a result of the payment, than the aggregate of its liabilities and its issued share capital and share premium accounts. The excess of the consideration paid on issue of shares over the aggregate
par value of such shares must (except in certain limited circumstances) be credited to a share premium account. Share premium may be distributed in certain limited circumstances, for example to pay up
unissued shares which may be distributed to shareholders in proportion to their holdings, but is otherwise subject to limitation. In addition, our ability to pay dividends is subject to Bermuda
insurance laws and regulatory constraints. See "Dividend Policy" and "Regulation." </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Delaware law, subject to any restrictions contained in the company's certificate of incorporation, a company may pay dividends out of surplus or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. Delaware law also provides that dividends may not be paid out of net profits at any time when capital
is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amalgamations, Mergers and Similar Arrangements.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We may acquire the business of another Bermuda exempted company or a company
incorporated outside Bermuda when conducting such business would benefit the Company and would be conducive to attaining our objectives contained within our memorandum of association. We may, with the
approval of at least 75% of the votes cast at a general meeting of our shareholders at which a quorum is present, amalgamate with another Bermuda company or with a body incorporated outside Bermuda.
In the case of an amalgamation, a shareholder may apply to a Bermuda court for a proper valuation of such shareholder's shares if such shareholder is not satisfied that fair market value has been paid
for such shares. The court ordinarily would not disapprove the transaction on that ground absent evidence of fraud or bad faith. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Delaware law, with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the board of directors and a
majority of the outstanding shares entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions may, under certain circumstances,
be entitled to appraisal rights pursuant to which such shareholder may receive payment in the amount of the fair market value of the shares held by such shareholder (as determined by a court) in lieu
of the consideration such shareholder would otherwise receive in the transaction. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Takeovers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Bermuda law provides that where an offer is made for shares of a company and, within four months of the offer, the
holders of not less than 90% of the shares which are the subject of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>123</FONT></P>

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the offer accept, the offeror may by notice require the non-tendering shareholders to transfer their shares on the terms of the offer. Dissenting shareholders may apply to the court
within one month of the notice objecting to the transfer. The burden is on the dissenting shareholders to show that the court should exercise its discretion to enjoin the required transfer, which the
court will be unlikely to do unless there is evidence of fraud or bad faith or collusion between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing
out minority shareholders. Delaware law provides that a parent corporation, by resolution of its board of directors and without any shareholder vote, may merge with any subsidiary of which it owns at
least 90% of each class of capital stock. Upon any such merger, dissenting stockholders of the subsidiary would have appraisal rights. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain Transactions with Significant Shareholders.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As a Bermuda company, we may enter into certain business transactions
with our significant shareholders, including asset sales, in which a significant shareholder receives, or could receive, a financial benefit that is greater than that received, or to be received, by
other shareholders with prior approval from our board of directors but without obtaining prior approval from our shareholders. Amalgamations require the approval of the board of directors and, except
in the case of amalgamations with and between wholly-owned subsidiaries, a resolution of shareholders approved by a majority of at least 75% of the votes cast. If we were a Delaware corporation, we
would need, subject to certain exceptions, prior approval from shareholders holding at least two-thirds of our outstanding common stock not owned by such interested shareholder to enter
into a business combination (which, for this purpose, includes asset sales of greater than 10% of our assets that would otherwise be considered transactions in the ordinary course of business) with an
interested shareholder for a period of three years from the time the person became an interested shareholder, unless we opted out of the relevant Delaware statute. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders' Suits.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders under
legislation or judicial precedent in many U.S. jurisdictions. Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law precedent, which would permit a shareholder to commence an action in our name to remedy a wrong done to us where the act complained of is
alleged to be beyond our corporate power or is illegal or would result in the violation of our memorandum of association or bye-laws. Furthermore, consideration would be given by the court
to acts that are alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of our shareholders than actually approved it. The
winning party in such an action generally would be able to recover a portion of attorneys' fees incurred in connection with such action. Our bye-laws provide that shareholders waive all
claims or rights of action that they might have, individually or in the right of AXIS Holdings, against any director or officer for any action or failure to act in the performance of such director's
or officer's duties, except such waiver shall not extend to claims or rights of action that arise out of any fraud or dishonesty of such director or officer. Class actions and derivative actions
generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions,
the court generally has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indemnification of Directors and Officers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Bermuda law and our bye-laws, we may indemnify our directors,
officers or any other person appointed to a committee of the board of directors (and their respective heirs, executors or administrators) to the full extent permitted by law against all actions,
costs, charges, liabilities, loss, damage or expense incurred or suffered by such person by reason of any act done, concurred in or omitted in the conduct of our business or in the discharge of
his/her duties; provided that such indemnification shall not extend to any matter involving any fraud or dishonesty (as determined in a final judgment or decree not subject to appeal) on the part of
such director, officer or other person. Under Delaware law, a corporation may indemnify a director </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>124</FONT></P>

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or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or
proceeding by reason of such position if (i)&nbsp;such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation
and (ii)&nbsp;with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe his conduct was unlawful. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inspection of Corporate Records.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Members of the general public have the right to inspect our public documents available at
the office of the Registrar of Companies in Bermuda and our registered office in Bermuda, which will include our memorandum of association (including its objects and powers) and any alteration to our
memorandum of association and documents relating to any increase or reduction of authorized capital. Our shareholders have the additional right to inspect our bye-laws, minutes of general
meetings and financial statements, which must be presented to the annual general meeting of shareholders. The register of our shareholders is also open to inspection by shareholders without charge,
and to members of the public for a fee. We are required to maintain our share register in Bermuda but may establish a branch register outside of Bermuda. We are required to keep at our registered
office a register of our directors and officers which is open for inspection by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to
inspect or obtain copies of any other corporate records. Delaware law permits any shareholder to inspect or obtain copies of a corporation's shareholder list and its other books and records for any
purpose reasonably related to such person's interest as a shareholder. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder Proposals.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Bermuda law, the Companies Act provides that shareholders may, as set forth below and at their
own expense (unless a company otherwise resolves), require a company to give notice of any resolution that the shareholders can properly propose at the next annual general meeting and/or to circulate
a statement prepared by the requesting shareholders in respect of any matter referred to in a proposed resolution or any business to be conducted at a general meeting. The number of shareholders
necessary for such a requisition is either that number of shareholders representing at least 5% of the total voting rights of all shareholders having a right to vote at the meeting to which the
requisition relates or not less than 100 shareholders. Delaware law does not include a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in
which business may be brought before a meeting. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Calling of Special Shareholders Meetings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under our bye-laws, a special general meeting may be called by our
President or by our Chairman or by any two directors or by any director and our Secretary or by the board of directors. Under Bermuda law, a special meeting may also be called by the shareholders when
requisitioned by the holders of at least 10% of the paid up voting share capital of AXIS Holdings as provided by the Companies Act. Delaware law permits the board of directors or any person who is
authorized under a corporation's certificate of incorporation or bye-laws to call a special meeting of shareholders. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment of Memorandum of Association.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Bermuda law provides that the memorandum of association of a company may be amended
by a resolution passed at a general meeting of shareholders of which due notice has been given. An amendment to the memorandum of association that alters a company's business objects may require
approval of the Bermuda Minister of Finance, who may grant or withhold approval at his or her discretion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Bermuda law, the holders of an aggregate of not less than 20% in par value of a company's issued share capital have the right to apply to the Bermuda courts for an annulment of any
amendment of the memorandum of association adopted by shareholders at any general meeting, other than an amendment which alters or reduces a company's share capital as provided in the Companies Act.
Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda court. An application for an annulment of an amendment of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>125</FONT></P>

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memorandum of association must be made within 21&nbsp;days after the date on which the resolution altering the company's memorandum of association is passed and may be made on behalf of persons
entitled to make the application by one or more of their designees as such holders may appoint in writing for such purpose. No application may be made by the shareholders voting in favor of the
amendment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Delaware law, amendment of the certificate of incorporation, which is the equivalent of a memorandum of association, of a company must be made by a resolution of the board of
directors setting forth the amendment, declaring its advisability, and either calling a special meeting of the shareholders entitled to vote or directing that the amendment proposed be considered at
the next annual meeting of the shareholders. Delaware law requires that, unless a different percentage is provided for in the certificate of incorporation, a majority of the outstanding shares
entitled to vote thereon is required to approve the amendment of the certificate of incorporation at the shareholders meeting. If the amendment would alter the number of authorized shares or otherwise
adversely affect the rights or preference of any class of a company's stock, Delaware law provides that the holders of the outstanding shares of such affected class should be entitled to vote as a
class upon the proposed amendment, regardless of whether such holders are entitled to vote by the certificate of incorporation. However, the number of authorized shares of any class may be increased
or decreased, to the extent not falling below the number of shares then outstanding, by the affirmative vote of the holders of a majority of the stock entitled to vote, if so provided in the company's
certificate of incorporation or any amendment that created such class or was adopted prior to the issuance of such class or that was authorized by the affirmative vote of the holders of a majority of
such class of stock. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment of Bye-laws.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Consistent with the Companies Act, AXIS Holdings' bye-laws provide that the
bye-laws may only be rescinded, altered or amended, upon approval by a resolution of our board of directors and by a resolution of our shareholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Delaware law, holders of a majority of the voting power of a corporation and, if so provided in the certificate of incorporation, the directors of the corporation, have the power
to adopt, amend and repeal the bylaws of a corporation. </FONT></P>

<P><FONT SIZE=2><B>Listing  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to apply to have our common shares approved for listing on the New York Stock Exchange under the trading symbol "AXS". </FONT></P>

<P><FONT SIZE=2><B>Transfer Agent and Registrar  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for the common shares will be The Bank of New York. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>126</FONT></P>

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<BR></FONT><FONT SIZE=2><B>SHARES ELIGIBLE FOR FUTURE SALE    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of the offering we will have a total of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares
outstanding (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares if the underwriters exercise the
over-allotment option in full). All of the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares sold in the offering will be freely tradable without restriction or further registration
under the Securities Act by
persons other than our "affiliates." Under the Securities Act, an "affiliate" of a company is a person that directly or indirectly controls, is controlled by or is under common control with that
company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
remaining&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares outstanding will be "restricted securities" within the meaning of Rule&nbsp;144 under the Securities Act and may not be
sold in the absence
of registration under the Securities Act unless an exemption from registration is available, including the exemptions contained in Rule&nbsp;144. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Holdings, its directors and executive officers, all of its warrant holders and certain of its current shareholders have agreed with the underwriters not to, directly or indirectly,
dispose of or hedge any of their common shares or securities convertible into or exchangeable for common shares, whether owned currently or later acquired, for a period of 180&nbsp;days from the
date of this prospectus, without the prior written consent of Morgan Stanley&nbsp;&amp; Co. Incorporated and Salomon Smith Barney&nbsp;Inc., subject to certain exceptions. Immediately following this
offering, shareholders subject to the lock-up agreement will own&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares and warrants exercisable
for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common shares, representing approximately
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the then outstanding common shares, or approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% if the underwriters' over-allotment option is exercised in full. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may, however, grant options to purchase common shares under our existing Long-Term Equity Compensation Plan and issue common shares upon the exercise of warrants for
common shares or the exercise of outstanding options as long as the holder of such common shares agrees in writing to be bound by the obligations and restrictions of the lock-up agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
general, under Rule&nbsp;144, a person (or persons whose shares are aggregated), including any person who may be deemed our affiliate, is entitled to sell within any three-month
period, a number of restricted securities that does not exceed the greater of 1% of the then outstanding common shares and the average weekly trading volume in the
over-the-counter market during the four calendar weeks preceding each such sale, provided that at least one year has elapsed since such shares were acquired from us or any
affiliate of ours and certain manner of sale, notice requirements and requirements as to
availability of current public information about us are satisfied. Any person who is deemed to be our affiliate must comply with the provisions of Rule&nbsp;144 (other than the one-year
holding period requirement) in order to sell common shares which are not restricted securities (such as shares acquired by affiliates either in the offering or through purchases in the open market
following the offering). In addition, under Rule&nbsp;144(k), a person who is not our affiliate, and who has not been our affiliate at any time during the 90&nbsp;days preceding any sale, is
entitled to sell such shares without regard to the foregoing limitations, provided that at least two years have elapsed since the shares were acquired from us or any affiliate of ours. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, we had outstanding warrants currently exercisable for 2,431,663 common shares and have granted options to purchase a total of 559,439 common shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
the consummation of this offering, we intend to file one or more registration statements on Form&nbsp;S-8 under the Securities Act to register common shares
issued or reserved for issuance under the Long-Term Equity Compensation Plan and the Directors Deferred Compensation Plan. Any such Form&nbsp;S-8 registration statement will
automatically become effective upon filing. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting
restrictions with us or the lock-up restrictions described above. We expect that the registration statement on Form&nbsp;S-8 will cover&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
and options. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>127</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the shareholders agreement, our initial investors have certain demand registration rights which will continue to apply to all of such shares after the offering. At any time
beginning 180&nbsp;days after the effective date of the registration statement relating to the offering, subject to exceptions, such shareholders may request that we file&nbsp;a registration
statement under the Securities Act covering their shares, subject to certain minimum offering size requirements. Upon receipt of any such request, we generally will be required to use commercially
reasonable efforts to effect such registration. Each such shareholder may only demand a certain number of registrations. In addition, we are not required to effect any registration requested by any
such shareholders if we have effected any registration (other than on Form&nbsp;S-3 or any successor form relating to secondary offerings) within four months prior to such request. We
are generally obligated to bear the expenses, other than underwriting fees, discounts and sales commissions, of all such registrations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the shareholders agreement, our initial investors also have certain "piggyback" registration rights with respect to our common shares. Accordingly, if we propose to register
any of our securities, either for our own account or for the account of other shareholders, with certain exceptions, we are required to notify such shareholders and to include in such registration all
the common shares requested to be included by them, subject to rejection of such shares under certain circumstances by an underwriter. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
prediction can be made as to the effect, if any, future sales of shares, or the availability of shares for future sales, will have on the market price of our common shares prevailing
from time to time. The sale of substantial amounts of our common shares in the public market, or the perception that such sales could occur, could harm the prevailing market price of our common
shares. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>128</FONT></P>

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<BR></FONT><FONT SIZE=2><B>UNDERWRITING    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Morgan Stanley&nbsp;&amp; Co. Incorporated and Salomon Smith Barney&nbsp;Inc. are acting as joint book-running managers of this offering and, together
with Credit Suisse First Boston LLC, J.P. Morgan Securities&nbsp;Inc., Merrill Lynch, Pierce, Fenner&nbsp;&amp; Smith Incorporated, Dowling and Partners Securities, LLC and Fox-Pitt, Kelton Inc., are
acting as the representatives of the underwriters named below. Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters
have severally agreed to purchase, and we and the selling shareholders have agreed to sell to them, the number of common shares indicated below: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Morgan Stanley &amp; Co. Incorporated</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Salomon Smith Barney Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Credit Suisse First Boston LLC</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>J.P. Morgan Securities Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Merrill Lynch, Pierce, Fenner &amp; Smith<BR>
Incorporated</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Dowling &amp; Partners Securities, LLC</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Fox-Pitt, Kelton Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="77%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters are offering the common shares subject to their acceptance of the common shares from us and the selling shareholders. The underwriting agreement provides that the
obligations of the several underwriters to pay for and accept delivery of the common shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for all of the common shares offered by this prospectus if any such common shares are taken. However, the underwriters are not
required to take or pay for the common shares covered by the underwriters' over-allotment option described below. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters initially propose to offer part of the common shares directly to the public at the public offering price listed on the cover page of this prospectus and part to certain
dealers at a price that represents a concession not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a common share under the public offering price. Any underwriter may allow,
and such dealers may reallow, a concession
not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a common share to other underwriters or to certain dealers. After the initial public offering of the common shares, the
offering price and other selling terms may
from time to time be varied by the representatives of the underwriters. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have granted to the underwriters an option, exercisable for 30&nbsp;days from the date of this prospectus, to purchase up to an aggregate
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional common shares
at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the common shares offered by this prospectus. To the extent the option is exercised, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same percentage of the additional common shares as the number listed next to the underwriter's name in the preceding table bears
to the total number of common shares listed next to the names of all underwriters in the preceding table. If the underwriters' option is exercised in full, the total price to the public would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the midpoint of the price range set forth on the cover page of this prospectus), the total underwriters'
discounts and commissions paid by us and the selling shareholders would be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, respectively, and the total proceeds to us and the selling shareholders would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, respectively. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>129</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
estimated offering expenses, excluding the underwriting discounts and commissions, are approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which includes legal, accounting and
printing costs and various
other fees associated with registration and listing of the common shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by them. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to apply to list our common shares on the New York Stock Exchange under the symbol "AXS." In connection with the listing of the common shares on the New York Stock Exchange,
the underwriters will undertake to sell round lots of 100 shares or more to a minimum of 2,000 beneficial owners. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of AXIS Holdings, the directors and executive officers of AXIS Holdings, all of its warrantholders and certain other shareholders of AXIS Holdings has agreed that, without the prior
written consent of
Morgan Stanley&nbsp;&amp; Co. Incorporated and Salomon Smith Barney&nbsp;Inc., together, on behalf of the underwriters, it will not, during the period ending 180&nbsp;days after the date of this
prospectus: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant
to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any common shares or any securities convertible into or exercisable or exchangeable for common shares; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>enter
in any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common shares; </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>whether
any such transaction is to be settled by delivery of common shares or such other securities, in cash or otherwise. The restrictions described in this paragraph do not apply to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
sale of common shares in this offering to the underwriters;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
grant of options to purchase common shares under our existing Long-Term Equity Compensation Plan and the issuance of common shares upon the
exercise of warrants for common shares outstanding on the date hereof, the exercise of options outstanding on the date hereof or granted pursuant to such plan or the conversion of any outstanding
securities outstanding on the date hereof as long as the holder of such common shares agrees in writing to be bound by the obligations and restrictions of the lock-up agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>transactions
by any person other than AXIS Holdings relating to common shares or other securities acquired in open market transactions after the completion
of the offering of the common shares; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>transfers
by any person other than AXIS Holdings to an affiliate of such person, a family member of such person or a trust created for the benefit of such
person or family member, provided that any transferee agrees to be bound by the transfer restrictions described here and subject to certain other conditions. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to facilitate the offering of the common shares, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common shares.
Specifically, the underwriters may sell more common shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short
position is no greater than the number of common shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing common shares in the open market. In determining the source of common shares to close
out a covered short sale, the underwriters will consider, among other things, the open market price of common shares compared to the price available under the over-allotment option. The
underwriters may </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>130</FONT></P>

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also sell common shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing common shares in
the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market after
pricing that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering or to cover any over-allotments, the underwriters may bid
for, and purchase, common shares in the open market to stabilize the price of the common shares. The underwriting syndicate may also reclaim selling concessions allowed to an underwriter or a dealer
for distributing the common shares in the offering, if the syndicate repurchases previously distributed common shares to cover syndicate short positions or to stabilize the price of the common shares.
These activities may raise or maintain the market price of the common shares. The underwriters are not required to engage in these activities, and may end any of these activities at any time. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We,
the selling shareholders and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. </FONT></P>

<P><FONT SIZE=2><B>Relationship with Underwriters  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time certain of the underwriters and their affiliates have provided us, and continue to provide us, with commercial, investment banking and other
financial services for which they have received and continue to receive customary fees and commissions. See "Certain Relationships and Related Transactions". In addition, affiliates of Morgan
Stanley&nbsp;&amp; Co. Incorporated (including certain accounts over which such affiliates exercise discretion), Credit Suisse First Boston LLC, J.P. Morgan Securities&nbsp;Inc., Merrill Lynch,
Pierce, Fenner&nbsp;&amp; Smith Incorporated, and Dowling &amp; Partners Securities, LLC own 2.7%, 10.1%, 10.1%, 2.5%, and 0.1%, respectively, of our outstanding shares, warrants and exercisable options as
of December 31, 2002. In addition, an executive officer of Morgan Stanley&nbsp;&amp; Co. Incorporated is a relative of one of our executive officers and directors. In addition, Mr.&nbsp;Andrew H.
Rush, one of our directors, is a managing director of Credit Suisse First Boston in the Private Equity Group and a member of the Investment Committee of DLJ Merchant Banking Partners III, L.P., both
of which are affiliates of Credit Suisse First Boston LLC, and Mr.&nbsp;Jeffrey C. Walker, one of our directors, is the Managing Partner of J.P. Morgan Partners and a member of the Executive
Committee and Vice Chairman of J.P. Morgan Chase&nbsp;&amp; Co., both of which are affiliates of J.P. Morgan Securities&nbsp;Inc. JPMorgan Chase Bank, an affiliate of J.P. Morgan
Securities&nbsp;Inc., also acts as administrative agent and a lender for AXIS Specialty's $400&nbsp;million revolving credit facility. </FONT></P>

<P><FONT SIZE=2><B>Price of the Offering  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no public market for the common shares. The initial public offering price will be determined by negotiations between us and
the representatives of the
underwriters. Among the factors to be considered in determining the initial public offering price will be the future prospects of our company and our industry in general, premiums, earnings and
certain other financial and operating information of our company in recent periods, and the price-earnings ratios, price-book value ratios, market prices of securities and certain
financial and operating information of companies engaged in activities similar to those of our company. The estimated initial public offering price range set forth on the cover page of this
preliminary prospectus is subject to change as a result of market conditions and other factors. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>131</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
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<A NAME="toc_ew2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>LEGAL MATTERS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain matters as to U.S. law in connection with this offering will be passed upon for us by LeBoeuf, Lamb, Greene&nbsp;&amp; MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York. The validity of the issuance of common shares under Bermuda law will be passed upon for us by Conyers Dill&nbsp;&amp; Pearman,
Hamilton, Bermuda. Certain legal matters in connection with this offering will be passed upon for the underwriters by Simpson Thacher&nbsp;&amp; Bartlett, New York, New York. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ew2730_experts"> </A>
<A NAME="toc_ew2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>EXPERTS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements of AXIS Capital Holdings Limited and its subsidiaries included in this prospectus and the related financial statement
schedules included elsewhere in the registration statement have been audited by Deloitte&nbsp;&amp; Touche, independent auditors, as stated in their reports appearing in this prospectus and elsewhere in
the registration statement, and are included in reliance upon the reports of such firm given upon their authority as experts in auditing and accounting. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ew2730_where_you_can_find_more_information"> </A>
<A NAME="toc_ew2730_3"> </A>
<BR></FONT><FONT SIZE=2><B>WHERE YOU CAN FIND MORE INFORMATION    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC, a registration statement on Form&nbsp;S-1 under the Securities Act with respect to the common shares offered in this
prospectus. This prospectus, filed as part of the registration statement, does not contain all of the information set forth in the registration statement and its exhibits and schedules, portions of
which have been omitted as permitted by the rules and regulations of the SEC. For further information about us and our common shares, we refer you to the registration statement and to its exhibits and
schedules. Statements in this prospectus about the contents of any contract, agreement or other document are not necessarily complete and, in each instance, we refer you to the copy of such contract,
agreement or document filed as an exhibit to the registration statement, with each such statement being qualified in all respects by reference to the document to which it refers. Anyone may inspect
the registration statement and its exhibits and schedules without charge at the public reference facilities the SEC maintains at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain copies
of all or any part of these materials from the SEC upon the payment of certain fees prescribed by the SEC. You may obtain further information about the operation of the SEC's Public Reference Room by
calling the SEC at 1-800-SEC-0330. You may also inspect these reports and other
information without charge at a web site maintained by the SEC. The address of this site is http://www.sec.gov. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of this offering, we will become subject to the informational requirements of the Securities Exchange Act of 1934 and will be required to file reports, proxy statements
and other information with the SEC. You will be able to inspect and copy these reports, proxy statements and other information at the public reference facilities maintained by the SEC at the address
noted above. You also will be able to obtain copies of this material from the Public Reference Room of the SEC as described above, or inspect them without charge at the SEC's web site. We intend to
furnish our shareholders with annual reports containing consolidated financial statements audited by an independent accounting firm. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ew2730_enforceability_of_civil_liabil__enf03956"> </A>
<A NAME="toc_ew2730_4"> </A>
<BR></FONT><FONT SIZE=2><B>ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES<BR>  FEDERAL SECURITIES LAWS AND OTHER MATTERS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Holdings is organized under the laws of Bermuda. In addition, some of its directors and officers reside outside the United States, and all or a substantial
portion of their assets and its assets are or may be located in jurisdictions outside the United States. Therefore, it may be difficult for investors to effect service of process within the United
States upon its non-U.S. directors and officers or to recover against AXIS Holdings, or its non-U.S. directors and officers on judgments of U.S. courts, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>132</FONT></P>

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<P><FONT SIZE=2>
including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Further, no claim may be brought in Bermuda against us or our directors and officers in the
first instance for violation of U.S. federal securities laws because these laws have no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court may,
however, impose civil liability on us or our directors and officers if the facts alleged in a complaint constitute or give rise to a cause of action under Bermuda law. However, AXIS Holdings may be
served with process in the United States with respect to actions against it arising out of or in connection with violations of U.S. federal securities laws relating to offers and sales of common
shares made hereby by serving CT Corporation System, its U.S. agent, irrevocably appointed for that purpose. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further,
we have been advised by Conyers Dill&nbsp;&amp; Pearman that there is no treaty in effect between the United States and Bermuda providing for the enforcement of judgments of U.S.
courts, and there are grounds upon which Bermuda courts may not enforce judgments of U.S. courts. Because judgments of U.S. courts are not automatically enforceable in Bermuda, it may be difficult for
you to recover against us based upon such judgments. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Holdings has applied for and expects to obtain consent for the issue and transfer of the common shares to and between non-residents of Bermuda for exchange control
purposes from the BMA as required by the Exchange Control Act 1972 of Bermuda and related regulations, subject to the condition that the common shares shall be listed on the New York Stock Exchange or
any other appointed stock exchange. In addition, AXIS Holdings will deliver a copy of this prospectus to the Registrar of Companies in Bermuda for filing pursuant to the Companies Act. However, the
BMA and Registrar of Companies in Bermuda accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or opinions expressed in this
prospectus. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>133</FONT></P>

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NAME="fa2730_index_to_consolidated_financia__ind02916"> </A>
<A NAME="toc_fa2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS    <BR>    <BR>    AXIS CAPITAL HOLDINGS LIMITED    <BR>    </B></FONT></P>

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<TH WIDTH="91%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Page No.</B></FONT><HR NOSHADE></TH>
</TR>
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<TD WIDTH="91%"><FONT SIZE=2>Report of Independent Auditors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>F-2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Balance Sheets as at December 31, 2002 and December&nbsp;31, 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2002 and the period ended December&nbsp;31, 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-4</FONT></TD>
</TR>
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<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Statements of Changes in Shareholders' Equity for the year ended December 31, 2002 and the period ended December&nbsp;31, 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-5</FONT></TD>
</TR>
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<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Statements of Cash Flows for the year ended December 31, 2002 and the period ended December&nbsp;31, 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-6</FONT></TD>
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<TD WIDTH="91%"><FONT SIZE=2><BR>
Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-7</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>F-1</FONT></P>

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<P><FONT SIZE=1>Chartered Accountants<BR>
Corner House<BR>
Church&nbsp;&amp; Parliament Streets<BR>
P.O.&nbsp;Box HM 1556<BR>
Hamilton, Bermuda HMFX </FONT></P>

<P><FONT SIZE=1>Telephone:
(441)&nbsp;292 1500<BR>
Facsimile: (441)&nbsp;292 0961 </FONT></P>

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<TD WIDTH="3%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=5><B>Deloitte<BR>
&amp;&nbsp;Touche</B></FONT></TD>
</TR>
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<BR></FONT><FONT SIZE=2><B>INDEPENDENT AUDITORS' REPORT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>To
the Board of Directors and Shareholders<BR>
of AXIS Capital Holdings Limited </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying consolidated balance sheets of AXIS Capital Holdings Limited and subsidiaries (the "Company") as of December&nbsp;31, 2002 and 2001, and the related
consolidated statements of operations and comprehensive income, changes in shareholders' equity and cash flows for the year ended December&nbsp;31, 2002 and the period from November&nbsp;8, 2001
(date of incorporation) to December&nbsp;31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of AXIS Capital Holdings Limited and subsidiaries as of
December&nbsp;31, 2002 and 2001, and the results of their operations and their cash flows for the year ended December&nbsp;31, 2002 and the period from November&nbsp;8, 2001 to
December&nbsp;31, 2001 in conformity with accounting principles generally accepted in the United States of America. </FONT></P>

<P><FONT SIZE=2>February&nbsp;10,
2003 </FONT></P>

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<P><FONT SIZE=1>Deloitte<BR>
Touche<BR>
Tohmatsu </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2>F-2</FONT></P>

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<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    CONSOLIDATED BALANCE SHEETS    <BR>    <BR>    As at December&nbsp;31, 2002 and 2001<BR>  <BR>    (Expressed in thousands of U.S. dollars except for share data)    <BR>
</B></FONT></P>

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<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
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<TD COLSPAN=3><FONT SIZE=2><B>Assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>729,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>761,670</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Investments at fair market value</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,079,686</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2><I>(Amortized cost 2002: $1,677,506; 2001: $1,080,142)</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Accrued interest receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>16,502</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,466</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Insurance and reinsurance premium balances receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>375,508</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>23,696</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Deferred acquisition costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>77,166</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,215</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Prepaid reinsurance premiums</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,673</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Reinsurance recoverable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Intangible assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14,079</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>19,204</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,040</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="62%"><FONT SIZE=2>Total Assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,986,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,877,773</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><BR><FONT SIZE=2><B>Liabilities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Reserve for losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>215,934</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Unearned premiums</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>555,962</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>24,862</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Insurance and reinsurance balances payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>142,696</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Accounts payable and accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>24,119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net payable for investments purchased</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>86,377</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>198,264</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="62%"><FONT SIZE=2>Total Liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,025,088</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>228,221</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><BR><FONT SIZE=2><B>Shareholders' Equity</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Share capital</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2><I>(Authorized 100,000,000 common shares, par value $0.10;<BR>
issued and outstanding 2002: 17,271,065; 2001: 16,890,336)</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,727</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,689</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,686,599</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,646,950</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Deferred compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(20,576</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(1,311</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Accumulated other comprehensive gain (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>25,484</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(456</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>267,799</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="62%"><FONT SIZE=2>Total Shareholders' Equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,961,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,649,552</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="62%"><FONT SIZE=2>Total Liabilities &amp; Shareholders' Equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,986,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,877,773</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-3</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=141,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=1031560,FOLIO='F-3',FILE='DISK022:[03NYC0.03NYC2730]FC2730A.;6',USER='JLAWRENA',CD=';5-MAR-2003;14:45' -->
<A NAME="page_fc2730_1_4"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fc2730_axis_capital_holdings_limited___axi07756"> </A>
<A NAME="toc_fc2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME    <BR>    <BR>    For the year ended December&nbsp;31, 2002 and the period from November&nbsp;8, 2001 to
December&nbsp;31, 2001<BR>  <BR>    (Expressed in thousands of U.S. dollars)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year ended<BR>
December&nbsp;31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period ended<BR>
December&nbsp;31, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Revenues</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Gross premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Premiums ceded</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(89,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Change in unearned premiums</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(481,427</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(24,862</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net premiums earned</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>4,763</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net realized gains</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>26,070</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>394</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Other insurance related income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="50%"><FONT SIZE=2>Total revenues</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>633,568</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>7,041</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Expenses</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Acquisition costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>103,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>832</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>General and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>46,521</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>2,566</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Foreign exchange gains</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(9,610</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="50%"><FONT SIZE=2>Total expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>369,879</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>4,361</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>263,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Income tax recovery</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,430</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Net Income</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>265,119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Other comprehensive income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Unrealized gains (losses) arising during the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>25,805</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(456</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Adjustment for re-classification of gains (losses) realized in income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Comprehensive income</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>291,059</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>2,224</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-4</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=142,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=652209,FOLIO='F-4',FILE='DISK022:[03NYC0.03NYC2730]FC2730B.;8',USER='JLAWRENA',CD=';5-MAR-2003;14:45' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fe2730_1_5"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fe2730_axis_capital_holdings_limited___axi07578"> </A>
<A NAME="toc_fe2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY    <BR>    <BR>    For the year ended December&nbsp;31, 2002 and the period from November&nbsp;8, 2001 to
December&nbsp;31, 2001<BR>  <BR>    (Expressed in thousands of U.S. dollars)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2><B>Share Capital</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at beginning of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,689</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Issued during period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>38</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,727</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><BR><FONT SIZE=2><B>Additional paid-in capital</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at beginning of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,646,950</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Contributed surplus on shares issued during period, net of costs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>39,649</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,581,807</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Fair value of issued warrants</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>65,143</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,686,599</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,646,950</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><BR><FONT SIZE=2><B>Deferred Compensation</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at beginning of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(1,311</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Deferred compensation issued during period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(25,480</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(1,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Amortization of deferred compensation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,215</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>89</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(20,576</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(1,311</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><BR><FONT SIZE=2><B>Accumulated other comprehensive gain (loss)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at beginning of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(456</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Change in unrealized gains (losses)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>25,940</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(456</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>25,484</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(456</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><BR><FONT SIZE=2><B>Retained earnings</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at beginning of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Net income for period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>265,119</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Balance at end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>267,799</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><BR><FONT SIZE=2><B>Total Shareholders' Equity</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,961,033</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,649,552</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-5</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=143,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=429452,FOLIO='F-5',FILE='DISK022:[03NYC0.03NYC2730]FE2730A.;8',USER='JGUERRE',CD=';5-MAR-2003;15:37' -->
<A NAME="page_fe2730_1_6"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fe2730_axis_capital_holdings_limited___axi06727"> </A>
<A NAME="toc_fe2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    CONSOLIDATED STATEMENTS OF CASH FLOWS    <BR>    <BR>    For the year ended December&nbsp;31, 2002 and the period from November&nbsp;8, 2001 to December&nbsp;31, 2001<BR>
<BR>    (Expressed in thousands of U.S. dollars)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period ended<BR>
December 31, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Cash flows provided by operating activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>265,119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Adjustments to reconcile net income to net cash provided by<BR>
(used in) operating activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net realized gains on sales of investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(26,070</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(394</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization of discounts on fixed maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>5,665</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization of deferred compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>6,215</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>89</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued interest receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(8,036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(8,466</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Insurance and reinsurance premium balances receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(351,812</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(23,696</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Reinsurance recoverable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(1,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred acquisition costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(74,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(2,215</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Prepaid reinsurance premiums</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(49,673</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(12,926</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(2,040</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Reserve for loss and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>214,971</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Unearned premiums</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>531,100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>24,862</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Insurance and reinsurance balances payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>142,696</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accounts payable and accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>19,987</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>4,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="50%"><FONT SIZE=2>Total adjustments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>395,463</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(6,765</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net cash provided by (used in) operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>660,582</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(4,085</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Cash flows provided by (used in) investing activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net cash paid in acquisition of subsidiaries</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(40,399</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Purchases of fixed maturities and short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(7,326,772</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(1,168,438</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Sales of fixed maturities and short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>6,664,246</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>285,554</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(702,925</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(882,884</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Cash flows provided by (used in) financing activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Issue of shares, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>9,969</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,648,639</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>9,969</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1,648,639</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Increase/(decrease) in cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(32,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>761,670</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents&#151;beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>761,670</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents&#151;end of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>729,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>761,670</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes to consolidated financial statements </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-6</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fg2730_1_7"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fg2730_axis_capital_holdings_limited___axi05263"> </A>
<A NAME="toc_fg2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    <BR>    <BR>    (Expressed in thousands of U.S. dollars except share amounts)    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>1.&nbsp;&nbsp;&nbsp;&nbsp;History  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS Capital Holdings Limited (the "Company") is a holding company organized under the laws of Bermuda. The Company was incorporated on December&nbsp;9, 2002.
AXIS Specialty Limited ("AXIS Specialty") and its subsidiaries became wholly owned subsidiaries of the Company on December&nbsp;31, 2002, pursuant to the Exchange Offer (as defined below). AXIS
Specialty commenced operations on November&nbsp;20, 2001. The Company through its subsidiaries provides a broad range of insurance and reinsurance products on a worldwide basis. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to an exchange offer consummated on December&nbsp;31, 2002 (the "Exchange Offer"), the shareholders of AXIS Specialty exchanged their shares for identical shareholdings in the
Company. Following the Exchange Offer, AXIS Specialty distributed its wholly owned subsidiaries to the Company. The Exchange Offer represents a business combination of companies under common control
and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty Holdings Ireland Limited, a wholly owned subsidiary of the Company, was incorporated in Ireland on January&nbsp;28, 2002 to act as a holding company for AXIS Specialty
Europe Limited and AXIS Re Limited. AXIS Specialty Europe Limited became licensed as a European insurer in May&nbsp;2002. AXIS Re Limited also became entitled to carry on reinsurance business from
Ireland in May 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty U.S. Holdings&nbsp;Inc. ("AXIS U.S. Holdings"), a wholly owned subsidiary of the Company, was incorporated in Delaware on March&nbsp;11, 2002. It acts as a holding
company for AXIS Reinsurance Company which is domiciled in New York. AXIS Reinsurance Company is licensed to write insurance and reinsurance in all 50 states in the United States, the District of
Columbia and Puerto Rico. AXIS Specialty Insurance Company, a wholly owned subsidiary of AXIS Reinsurance Company, is domiciled in Connecticut. AXIS Specialty Insurance Company is a surplus
lines-eligible insurer in 38 of the states in the United States. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November&nbsp;14, 2002, the Company announced that AXIS U.S. Holdings had agreed to acquire an Illinois domiciled surplus lines company. Regulatory approval for this acquisition was
received after year end. </FONT></P>

<P><FONT SIZE=2><B>2.&nbsp;&nbsp;&nbsp;&nbsp;Summary Of Significant Accounting Policies  </B></FONT></P>


<P><FONT SIZE=2><B>a)&nbsp;&nbsp;&nbsp;&nbsp;Basis of Presentation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in accordance with accounting
principles generally accepted in the United States ("U.S. GAAP"). All significant inter-company accounts and transactions have been eliminated. The preparation of these consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those
estimates. The major estimates reflected in the Company's consolidated financial statements include, but are not limited to, the reserves for losses and loss expenses and premium estimates for
business written on a line slip or proportional basis. The terms "FAS" and "FASB" used in these notes refer to Statements of Financial Accounting Standards issued by the United States Financial
Accounting Standards Board. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-7</FONT></P>

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<A NAME="page_fg2730_1_8"> </A>

<P><FONT SIZE=2><B>b)&nbsp;&nbsp;&nbsp;&nbsp;Investments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's investments are considered to be "available for sale" under the definition included in FAS No.&nbsp;115, "Accounting for Certain Investments in
Debt and Equity Securities" and are reported at fair market value. The fair market value of investments is based upon quoted market values. The net
unrealized gain or loss on investments is included as accumulated other comprehensive gain / (loss) in shareholders' equity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments
are reviewed on a regular basis to determine if they have sustained an impairment of value that is considered to be other than temporary. The identification of potentially
impaired investments involves significant management judgment. Any unrealized depreciation in value considered by management to be other than temporary is charged to income in the period that it is
determined. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases
and sales of investments are recorded on a trade date basis. Realized gains or losses on sales of investments are determined based on the specific identification method. Net
investment income includes interest and dividend income together with amortization of market premiums and discounts and is net of investment management, custody and investment accounting fees. For
mortgage-backed securities, and any other holdings for which there is a prepayment risk, prepayment assumptions are evaluated and revised as necessary. Any adjustments required due to the resultant
change in effective yields and maturities are recognized on a prospective basis through yield adjustments. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
and cash equivalents include fixed interest deposits placed with a maturity of under 90&nbsp;days when purchased. </FONT></P>

<P><FONT SIZE=2><B>c)&nbsp;&nbsp;&nbsp;&nbsp;Premiums and Acquisition Costs  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums written are recorded in accordance with the terms of the underlying policies. Reinsurance premiums assumed are estimated based upon information received
from ceding companies and any subsequent differences arising on such estimates are recorded in the period they are determined. Premiums are generally contractually stated except for business written
on a line slip or proportional basis. For these types of contracts the Company will determine the estimated premium to be written as part of the underwriting process based on information received from
the insured parties and intermediaries, the Company's experience with similar coverages and any industry information on the risks that may be available. The Company actively monitors the emergence of
actual premium data on line slip policies and proportional reinsurance contracts and adjusts its estimates of written premiums to reflect reported premiums on a periodic basis as reliable information
becomes available. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums
are earned over the terms of the policies in proportion to the risks to which they relate. Unearned premiums represent the portion of premiums written which is applicable to the
unexpired portion of the policies in force. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition
costs which vary with and are directly related to the acquisition of policies, primarily fees paid to brokers, commissions and taxes are deferred and amortized over the
period in which the related premiums are earned. Deferred acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income. If such costs are estimated to be unrecoverable, they are expensed. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-8</FONT></P>

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<A NAME="page_fg2730_1_9"> </A>

<P><FONT SIZE=2><B>d)&nbsp;&nbsp;&nbsp;&nbsp;Reinsurance  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the normal course of business, the Company seeks to reduce the loss that may arise from events that could cause unfavorable underwriting results by reinsuring
certain levels of risk in various lines of business with other reinsurers. Reinsurance premiums ceded are expensed over the period the reinsurance coverage is provided. Prepaid reinsurance premiums
represent the portion of premiums ceded on the unexpired term of the policies in force. Amounts recoverable from reinsurers are estimated in a manner consistent with the loss reserve associated with
the underlying policy. </FONT></P>

<P><FONT SIZE=2><B>e)&nbsp;&nbsp;&nbsp;&nbsp;Losses and Loss Expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reserves for losses and loss expenses include reserves for unpaid reported losses and loss expenses and for losses incurred but not reported ("IBNR"). The
reserves for unpaid reported losses and loss expenses are established by management based on amounts reported from insureds or ceding companies, and on additional case reserves established on known
events where official notification has not been reported, and represent the estimated ultimate costs of events or conditions that have been reported to or specifically identified by the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
reserve for losses incurred but not reported has been estimated by management in consultation with independent actuaries. Estimated IBNR is derived using the Bornhuetter-Ferguson
method. This method takes as a starting point an assumed ultimate loss and loss expense ratio and blends in the loss and loss expense ratio implied by the experience to date. For the Company's assumed
ultimate loss and loss expense ratio for the specialty book of business the initial expected loss and loss expense ratios selected are based on benchmarks provided by independent actuaries, derived
from comparable client data, as well as market information. These benchmarks are then adjusted for any rating increases that had been observed in the market. For the Company's assumed ultimate loss
and loss expense ratio for the treaty reinsurance book of business, contract by contract initial expected loss and loss expense ratios were derived during pricing. Applying these loss and loss expense
ratios to our earned premium derives the estimated ultimate costs of the losses; from here paid losses and reported case reserves are deducted to generate the Company's IBNR. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
management believes that the reserves for unpaid losses and loss expenses are sufficient to pay losses that fall within coverages assumed by the Company, the actual losses and loss
expenses incurred by the Company may be greater or less than the reserve provided. Due to the start up nature of the Company's operations, actual loss experience is limited; this increases the
potential for significant
deviation from currently estimated amounts. The methods of determining such estimates and establishing the resulting reserve are reviewed quarterly and any adjustments are reflected in operations in
the period in which they become known. </FONT></P>

<P><FONT SIZE=2><B>f)&nbsp;&nbsp;&nbsp;&nbsp;Foreign Currency Translation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The functional currency of the Company and its subsidiaries is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are translated
at year end exchange rates, with the resulting foreign exchange gains and losses recognized in the consolidated statements of operations and comprehensive income. Revenues and operating expenses are
translated at average exchange rates during the year. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-9</FONT></P>

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<A NAME="page_fg2730_1_10"> </A>

<P><FONT SIZE=2><B>g)&nbsp;&nbsp;&nbsp;&nbsp;Stock Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for stock compensation in accordance with Accounting Principles Board Opinion No.&nbsp;25 ("APB 25"), "Accounting for Stock Issued to
Employees." Compensation expense for stock options and for restricted stock awards granted to employees is recorded over the vesting period using the intrinsic value method. The Company provides
disclosure of the pro forma effect of applying FAS No.&nbsp;123 "Accounting for Stock Compensation," which requires compensation expense for employee stock options to be measured as the fair market
value of the options at the grant date. </FONT></P>

<P><FONT SIZE=2><B>h)&nbsp;&nbsp;&nbsp;&nbsp;Segment Reporting  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company reports segment results in accordance with FAS No.&nbsp;131, "Segment Reporting". Under FAS&nbsp;131, reportable segments represent an aggregation
of operating segments that meet certain criteria for aggregation specified in FAS&nbsp;131. </FONT></P>

<P><FONT SIZE=2><B>i)&nbsp;&nbsp;&nbsp;&nbsp;Derivative Instruments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for its derivative instruments using FAS No.&nbsp;133, "Accounting for Derivative Instruments and Hedging Activities". FAS&nbsp;133
requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value with movements in fair value reflected in earnings. </FONT></P>

<P><FONT SIZE=2><I>Derivative Contracts  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain contracts underwritten by the Company have been determined to meet the definition of a derivative under FAS&nbsp;133, and are therefore recorded at
their fair value. The fair values of these contracts are modeled on prevailing market conditions and on the terms and the structure of the contract. When data is not readily available from the market
the Company seeks to use data from independent counterparties. The change resulting from a movement in fair value of such contracts is included in the statement of operations and comprehensive income
in other insurance related income. </FONT></P>

<P><FONT SIZE=2><I>Investment Related Derivative Instruments  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company uses investment derivatives to manage duration and currency exposure, for yield enhancement or to obtain exposure to a particular financial market.
None of these derivatives are designated as hedges, and accordingly, financial futures, options, swaps and foreign currency forward contracts are carried at fair value in investments, with the
corresponding realized and unrealized gains and losses included in realized gains and losses in the consolidated statements of operations. </FONT></P>

<P><FONT SIZE=2><B>j)&nbsp;&nbsp;&nbsp;&nbsp;Intangible Assets  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with its purchase of two licensed insurance companies domiciled in the United States, the Company acquired numerous state licenses that are
disclosed as intangible assets. In accordance with FAS&nbsp;142 "Goodwill and Other Intangible Assets", the Company will not amortize the licenses but will re-evaluate, on a yearly
basis, the recoverability of the assets. In addition, the Company will re-evaluate their fair value whenever changes in circumstances warrant. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-10</FONT></P>

<HR NOSHADE>
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<A NAME="page_fg2730_1_11"> </A>

<P><FONT SIZE=2><B>k)&nbsp;&nbsp;&nbsp;&nbsp;Taxation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company utilizes the liability method of accounting for income taxes. Under this method, deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance against the deferred tax asset
is provided for if and when the Company believes that a portion of the deferred tax asset may not be realized in the foreseeable future. </FONT></P>

<P><FONT SIZE=2><B>l)&nbsp;&nbsp;&nbsp;&nbsp;New Accounting Pronouncements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;31, 2002 the FASB issued FAS No.&nbsp;148, "Accounting for Stock-Based Compensation&#151;Transition and Disclosure." The Company
currently accounts for stock compensation under APB 25. As such, the Company is required to present additional disclosures. </FONT></P>


<P><FONT SIZE=2><B>3.&nbsp;&nbsp;&nbsp;&nbsp;Segment Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is comprised of two underwriting segments&#151;specialty lines and treaty reinsurance. In addition, there is a corporate segment that includes
the investment and financing operations of the Company. The Company evaluates the performance of each underwriting segment based on underwriting results. Other items of revenue and expenditure are not
evaluated at the segment level. In addition, management does not allocate its assets by segment as it considers the underwriting results of each segment separately from the results of its investment
portfolio. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
business written by the Company has loss experience generally characterized as low frequency and high severity. This may result in volatility in both the Company's and an
individual segment's results and operational cash flows. </FONT></P>

<P><FONT SIZE=2><B>Specialty Lines  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Specialty lines of business are written on both an insurance and reinsurance basis depending on the underlying needs of the client. Specialty lines written
include: marine and energy, aviation and aerospace, war risk, terrorism, political risk, commercial property risks and various other lines on a worldwide basis. The Company endeavors to aggregate its
catastrophe exposures across both its specialty lines and treaty reinsurance segments. </FONT></P>

<P><FONT SIZE=2><B>Treaty Reinsurance  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treaty reinsurance business is the assumption of an ongoing portfolio of insurance risk from primary insurance carriers. This portfolio can be written on either
an excess of loss basis or a pro rata basis and can cover a variety of underlying insurance products including but not limited to: property, worker's compensation, personal accident and life,
professional liability, casualty clash, and marine and aviation. The Company endeavors to manage its exposures to catastrophic events by limiting the amount of its exposure in each geographic zone
worldwide and by event peril and requires that its property and catastrophe contracts provide for aggregate limits and varying attachment points. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-11</FONT></P>

<HR NOSHADE>
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<A NAME="page_fg2730_1_12"> </A>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is an analysis of the underwriting results by segment together with a reconciliation of underwriting profit (loss) to income before income taxes: </FONT></P>

<P><FONT SIZE=2><B>Year ended December&nbsp;31, 2002  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="50%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Specialty Lines</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Treaty<BR>
Reinsurance</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Gross premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>793,759</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>314,244</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Net premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>704,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>314,244</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,018,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Gross premiums earned</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>354,667</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>222,237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>576,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Net premiums earned</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>314,613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>222,237</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Other insurance related income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>137,848</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>91,417</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Acquisition costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>56,683</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>47,020</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>103,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>General and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>46,521</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Underwriting profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>156,722</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Realized gains on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>26,070</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Foreign exchange gain</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9,610</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>263,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Loss and loss expense ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>43.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>41.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>42.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Acquisition cost ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>18.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>21.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>19.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>General and administrative expense ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Combined ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>70.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Period ended December&nbsp;31, 2001  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Specialty Lines</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Treaty<BR>
Reinsurance</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Gross premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24,465</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,281</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Net premiums written</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24,465</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,281</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Gross premiums earned</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,713</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>171</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Net premiums earned</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,713</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>171</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Other insurance related income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>886</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>77</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Acquisition costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>512</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>832</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>General and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,566</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Underwriting loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,477</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,763</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Realized gains on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>394</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,680</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Loss and loss expense ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>45.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>51.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Acquisition cost ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>18.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>299.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>44.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>General and administrative expense ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>136.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>Combined ratio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>231.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-12</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=6,SEQ=150,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=644434,FOLIO='F-12',FILE='DISK022:[03NYC0.03NYC2730]FG2730A.;20',USER='OALBERT',CD=';5-MAR-2003;14:46' -->
<A NAME="page_fg2730_1_13"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows an analysis of the Company's gross premiums written by geographical location of subsidiary for the year ended December&nbsp;31, 2002 and the
period ended December&nbsp;31, 2001: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period Ended<BR>
December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Bermuda</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1,015,057</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Ireland</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>90,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>United States</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>2,784</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>4.&nbsp;&nbsp;&nbsp;&nbsp;Business Combinations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2002, the Company completed, through a subsidiary, the purchase of the Connecticut Specialty Insurance Company, a surplus lines-eligible
carrier in 38 states which was subsequently renamed AXIS Specialty Insurance Company. The Company paid a purchase price of $17.4&nbsp;million. On November&nbsp;27, 2002, the Company completed,
through a subsidiary, the purchase of Royal&nbsp;&amp; SunAlliance Personal Insurance Company, which is licensed in all 50 states of the United States, the District of Columbia and Puerto Rico and was
subsequently renamed AXIS Reinsurance Company. The Company paid a purchase price of $23.1&nbsp;million. The Company purchased these companies as the foundation for commencing its U.S. operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
purchases have been accounted for under the purchase method of accounting. The assets of the two companies (fixed income securities $23.0&nbsp;million, cash $3.4&nbsp;million
and licenses $14.1&nbsp;million) were recorded at their fair values on the date of completion of the acquisitions. The process of determining the fair value of the acquired assets, as required under
purchase accounting, included independent valuations. The purchase prices have been fully allocated against the fair values of the assets; consequently no goodwill was recorded. The companies had no
liabilities at the dates of acquisition. </FONT></P>

<P><FONT SIZE=2><B>5.&nbsp;&nbsp;&nbsp;&nbsp;Investments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net investment income is derived from the following sources: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="50%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period ended<BR>
December 31, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Fixed maturities and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>74,996</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>5,089</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Investment expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(3,709</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(326</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>4,763</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-13</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=7,SEQ=151,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=852632,FOLIO='F-13',FILE='DISK022:[03NYC0.03NYC2730]FG2730B.;10',USER='OALBERT',CD=';5-MAR-2003;14:46' -->
<A NAME="page_fg2730_1_14"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following represents an analysis of realized gains (losses) and the change in unrealized gains on investments: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="50%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period ended<BR>
December 31, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="50%"><FONT SIZE=2>Gross realized gains</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>47,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1,469</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="50%"><FONT SIZE=2>Gross realized losses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(24,488</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(1,075</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="50%"><FONT SIZE=2>Net realized gains on fixed maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>22,515</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>394</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="50%"><FONT SIZE=2>Net realized and unrealized gains on derivative instruments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>3,555</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="50%"><FONT SIZE=2>Net realized gains on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>26,070</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>394</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="50%"><FONT SIZE=2>Change in unrealized gains (losses) on fixed maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>25,940</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(456</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="50%"><FONT SIZE=2>Total net realized gains (losses) and change in unrealized gain (loss) on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>52,010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(62</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
investments are held as available for sale. The amortized cost and fair market values are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>At December 31, 2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized<BR>
Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Gains</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Losses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Market<BR>
Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>U.S. government and agency securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>426,939</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,365</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(101</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>434,203</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Non-U.S. government securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>97,949</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,191</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(652</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>98,488</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Corporate debt securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>295,050</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,184</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(482</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>305,752</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Mortgage-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>725,161</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,753</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>734,611</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Asset-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>119,259</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(4,740</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>116,533</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>States, municipalities and political subdivisions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>255</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,403</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Total fixed income maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,677,506</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>34,212</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(8,728</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>At December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized<BR>
Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross Unrealized<BR>
Gains</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross Unrealized<BR>
Losses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Market<BR>
Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>U.S. government and agency securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>478,768</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>890</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,429</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>478,229</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Non-U.S. government securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,324</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(15</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,309</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Corporate debt securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>157,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>617</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(572</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>157,332</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Mortgage-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>403,352</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,058</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>403,361</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Asset-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>36,205</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>36,236</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>States, municipalities and political subdivisions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,206</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,219</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="40%"><FONT SIZE=2>Total fixed income maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,080,142</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,625</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,081</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,079,686</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-14</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=8,SEQ=152,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=502933,FOLIO='F-14',FILE='DISK022:[03NYC0.03NYC2730]FG2730B.;10',USER='OALBERT',CD=';5-MAR-2003;14:46' -->
<A NAME="page_fg2730_1_15"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth certain information regarding the credit ratings of the Company's bond portfolio: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31, 2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Ratings*<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>AAA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,382,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>82.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>56,670</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>AA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>31,458</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>329,823</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>30.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>A</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>146,354</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>505,502</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>46.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>BBB</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>116,992</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>177,946</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>BB</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,201</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,677,506</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,080,142</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Ratings
as assigned by Standard&nbsp;&amp; Poor's Corporation </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
contractual maturities of fixed maturity securities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized<BR>
Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Market<BR>
Value</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized<BR>
Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Market<BR>
Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Due in one year or less</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>76,350</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>76,475</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>19,497</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>19,497</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Due after one year through five years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>479,517</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>487,549</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>358,267</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>358,699</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Due after five years through ten years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>223,676</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>232,088</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>175,316</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>174,604</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Due after ten years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>53,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>55,734</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>87,505</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>87,289</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>833,086</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>851,846</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>640,585</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>640,089</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Mortgage- and asset-backed securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>844,420</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>851,144</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>439,557</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>439,597</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>Total fixed maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,677,506</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,702,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,080,142</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,079,686</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2002, $17.5&nbsp;million (2001: $nil) of securities were on deposit with various state or government insurance departments in order to comply with relevant
insurance regulations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-15</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=9,SEQ=153,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=251222,FOLIO='F-15',FILE='DISK022:[03NYC0.03NYC2730]FG2730B.;10',USER='OALBERT',CD=';5-MAR-2003;14:46' -->
<BR>
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT SIZE=2><A
NAME="page_fi2730_1_16"> </A> </FONT></P>

<P><FONT SIZE=2><B>6.&nbsp;&nbsp;&nbsp;&nbsp;Losses and loss expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unpaid losses and loss expenses are comprised of: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Reserve for reported losses and loss expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>60,956</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Reserve for losses incurred but not reported</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>154,978</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Unpaid losses and loss expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>215,934</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
losses and loss expenses incurred comprise: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Period ended<BR>
December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Losses and loss expense payments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>16,958</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Change in unpaid losses and loss expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>214,010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Reinsurance recoveries</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(1,703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Net losses and loss expenses incurred</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table represents an analysis of paid and unpaid losses and loss expenses and a reconciliation of the beginning and ending unpaid losses and loss expenses for the periods
indicated: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Unpaid losses and loss expenses at beginning of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD COLSPAN=3><FONT SIZE=2>Increase in net losses and loss expenses incurred in respect of losses occurring in:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Current year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>230,063</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Prior year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(798</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="54%"><FONT SIZE=2>Total incurred losses and loss expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD COLSPAN=3><FONT SIZE=2>Less net losses and loss expenses paid in respect of losses occurring in:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Current year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>16,943</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Prior year</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="54%"><FONT SIZE=2>Total net paid losses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>16,958</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Change in unrealized foreign exchange loss</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>961</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Net unpaid losses and loss expenses at end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>214,231</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Reinsurance recoverable</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,703</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Gross unpaid losses and loss expenses at end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>215,934</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
business written by the Company has loss experience generally characterized as low frequency and high severity in nature. This may result in volatility in the Company's financial
results. Actuarial assumptions used to establish the liability for losses and loss expenses are periodically adjusted to reflect comparisons to actual losses and loss expense development, inflation
and other considerations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-16</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=154,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=581408,FOLIO='F-16',FILE='DISK022:[03NYC0.03NYC2730]FI2730A.;11',USER='OALBERT',CD=';5-MAR-2003;14:46' -->
<A NAME="page_fi2730_1_17"> </A>
<BR>

<P><FONT SIZE=2><B>7.&nbsp;&nbsp;&nbsp;&nbsp;Reinsurance  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's insurance subsidiaries use reinsurance agreements to reduce exposure to risk of loss on certain lines of specialty insurance. These agreements
provide for recovery of a portion of losses and loss reserves from reinsurers. The Company's insurance subsidiaries remain liable to the extent that reinsurers do not meet their obligations under
these agreements, and therefore the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. Provisions are made for amounts considered potentially
uncollectible. The allowance for uncollectible reinsurance recoverable was $nil as at December&nbsp;31, 2002 (2001: $nil). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
premiums written, ceded and net amounts of premiums written and premiums earned for the year ended December&nbsp;31, 2002 and the period ended December&nbsp;31, 2001 are as
follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="42%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Year ended<BR>
December&nbsp;31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Period ended<BR>
December&nbsp;31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="42%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Premiums written</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Premiums earned</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Premiums written</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Premiums earned</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>Gross</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,108,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>576,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>Ceded</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>89,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>40,054</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>Net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,018,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>8.&nbsp;&nbsp;&nbsp;&nbsp;Derivative Instruments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company writes certain contracts that are classified as derivatives under FAS&nbsp;133. In addition, the Company may enter into derivative instruments such
as futures, options, interest rate swaps and foreign currency forward contracts in order to manage duration and foreign currency exposure, obtain exposure to a particular financial market or for yield
enhancement. The Company manages the exposure to these instruments based on guidelines established by management. These derivative instruments are carried at fair value with the corresponding changes
in fair value recognized in income in the period that they occur. </FONT></P>

<P><FONT SIZE=2><B>a)&nbsp;&nbsp;&nbsp;&nbsp;Derivative Contracts  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended December&nbsp;31, 2002, the Company entered into a contract under which it will receive a fixed annual premium for a five year period and
in return it will assume the risk of default on a pre-determined portfolio of financial obligations with a notional value of $350&nbsp;million. This contract meets the definition of a
derivative contract under FAS&nbsp;133. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has recorded this contract at fair value with any changes in the value reflected in other insurance related income in the consolidated statement of operations and
comprehensive income. The
contract is modeled on prevailing market conditions and certain other factors relating to the structure of the contract. When data is not readily available from the market the Company uses data from
independent counterparties. The Company's model takes into account movements on credit spreads and credit qualities. The change in fair value recorded for the year ended December&nbsp;31, 2002 was
$(0.6) million. As at December&nbsp;31, 2002, an asset of $37.8&nbsp;million was included in insurance and reinsurance premiums receivable and a liability in the amount of $47.9&nbsp;million was
recorded in reinsurance balances payable in respect of this contract. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-17</FONT></P>

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<A NAME="page_fi2730_1_18"> </A>
<BR>

<P><FONT SIZE=2><B>b)&nbsp;&nbsp;&nbsp;&nbsp;Foreign Currency Exposure Management  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company periodically uses foreign currency forward contracts to minimize the effect of fluctuating foreign currencies and to gain exposure to interest rate
differentials between differing market rates. Forward currency contracts purchased are not specifically identifiable against cash, any single security or any groups of securities and, therefore, do
not qualify and are not designated as a hedge for financial reporting purposes. All realized gains and unrealized gains and losses on foreign currency forward contracts are recognized in the
statements of operations and comprehensive income. During the year ended December&nbsp;31, 2002, the Company recorded $3.6&nbsp;million of realized and unrealized gains on investment derivative
instruments. As at December&nbsp;31, 2002, the net contractual amount of foreign currency forward contracts was $0.41&nbsp;million (2001: $nil), with a negligible fair market value (2001: $nil). </FONT></P>

<P><FONT SIZE=2><B>9.&nbsp;&nbsp;&nbsp;&nbsp;Commitments and contingencies  </B></FONT></P>


<P><FONT SIZE=2><B>a)&nbsp;&nbsp;&nbsp;&nbsp;Concentrations of credit risk  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The investment portfolio is managed by external advisors in accordance with prudent standards of diversification. Specific provisions limit the allowable holdings
of a single issue and issuers. The Company did not have an aggregate exposure in a single entity, other than in U.S. Government, U.S. Government agencies and German Government securities, of more than
2% of shareholders' equity at December&nbsp;31, 2002. </FONT></P>

<P><FONT SIZE=2><B>b)&nbsp;&nbsp;&nbsp;&nbsp;Brokers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company produces its business through brokers and direct relationships with insurance companies. During the year ended December&nbsp;31, 2002, three brokers
accounted for approximately 69.2% (2001: 81.8%) of the total gross premiums written by the Company. One broker accounted for approximately 37.9% (2001: 22.7%), the second for approximately 20.7%
(2001: 39.5%) and the third for approximately 10.6% (2001: 19.6%). Each of these brokers is a large, well established company. No other broker and no one insured or reinsured accounted for more than
10% of gross premiums written in the year ended December&nbsp;31, 2002 and the period ended December&nbsp;31, 2001. </FONT></P>

<P><FONT SIZE=2><B>c)&nbsp;&nbsp;&nbsp;&nbsp;Credit Facilities  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at December&nbsp;31, 2002, AXIS Specialty had a $400&nbsp;million revolving credit facility available from a syndicate of commercial banks. Up to
$375&nbsp;million may be used to issue letters of credit and up to $50&nbsp;million for general corporate purposes with total borrowing not to exceed $400&nbsp;million. As at December&nbsp;31,
2002, AXIS Specialty had letters of credit of $10.0&nbsp;million outstanding. Associated with AXIS Specialty's bank commitments are various loan covenants that include, among other things, the
requirement that AXIS Specialty maintain a minimum level of capital and surplus of $1.2&nbsp;billion and a debt to total capitalization ratio not greater than 0.35:1.00. AXIS Specialty was in
compliance with all covenants throughout the year. There was no debt outstanding as at December&nbsp;31, 2002 or December&nbsp;31, 2001. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-18</FONT></P>

<HR NOSHADE>
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<A NAME="page_fi2730_1_19"> </A>
<BR>

<P><FONT SIZE=2><B>d)&nbsp;&nbsp;&nbsp;&nbsp;Lease commitments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and its subsidiaries lease office space in the countries in which they operate under operating leases which expire at various dates through
March&nbsp;2012. The Company renews and enters into new leases in the ordinary course of business as required. Total rent expense with respect to these operating leases for the year ended
December&nbsp;31, 2002 was approximately $1,885 (2001:$89) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
minimum lease payments under the leases are expected to be as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="83%" ALIGN="LEFT"><FONT SIZE=1><B>Year<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,562</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,409</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,241</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,033</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>759</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Later years</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,339</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Total minimum future lease commitments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,343</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>10.&nbsp;&nbsp;&nbsp;&nbsp;Shareholders' equity  </B></FONT></P>

<P><FONT SIZE=2><B>a)&nbsp;&nbsp;&nbsp;&nbsp;Authorized shares  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The authorized share capital is 100,000,000 common shares of a par value of $0.10 each. The following table is a summary of changes in common shares issued and
outstanding: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Issued and outstanding shares, beginning of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>16,890,336</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Shares issued</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>380,729</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>16,890,336</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Issued and outstanding shares, end of period</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>17,271,065</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>16,890,336</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>b)&nbsp;&nbsp;&nbsp;&nbsp;Share warrants  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants were issued to the founding group of shareholders which entitle them to purchase up to 12% of the aggregate number of outstanding shares of common stock,
calculated on a fully diluted basis, on the exercise date at a price of $100 per warrant share. As at December&nbsp;31, 2002, 2,431,663 common shares (2001: 2,343,491) would be issued pursuant to
the warrant agreements, if all warrants were exercised. The expiration date for these warrants is November&nbsp;20, 2011. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
warrants were granted to the founding group of shareholders as an inducement to purchase stock in the Company, therefore no compensation expense has been recorded in connection with
the warrants. The fair value of the warrants as at November&nbsp;20, 2001, of $65.1&nbsp;million has been included in additional paid-in capital. This value has been calculated using
the Black-Scholes option-pricing model. The assumptions used were: volatility of 22.1%; risk-free interest rate 5.1%; expected life 7&nbsp;years; and dividend yield nil. The company has
used a discount of 30% to provide for the start-up nature of operations and the illiquidity of a privately held stock. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-19</FONT></P>

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<A NAME="page_fi2730_1_20"> </A>
<BR>

<P><FONT SIZE=2><B>11.&nbsp;&nbsp;&nbsp;&nbsp;Employee benefit plans  </B></FONT></P>

<P><FONT SIZE=2><B>a)&nbsp;&nbsp;&nbsp;&nbsp;Pension plans  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company provides pension benefits to eligible employees through various plans sponsored by the Company. All pension plans are structured as defined
contribution plans. During the year ended December&nbsp;31, 2002, pension expenses totaled $1.0&nbsp;million (2001: $67), respectively. </FONT></P>

<P><FONT SIZE=2><B>b)&nbsp;&nbsp;&nbsp;&nbsp;Options  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a stock option plan for employees under which up to 613,846 common shares of the Company may be issued. In addition, the board of directors has
granted 45,000 options to an employee of the Company which are considered to be outside of the plan. The plan is administered by the Company and the Compensation Committee of the Board of Directors.
Grant prices are established at the fair value of the Company's common stock at the date of grant. Options have a life of 10&nbsp;years and generally vest ratably on an annual basis, over three
years from the date of grant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2002, the Company expensed $18 (2001: $nil) related to the grant of options. The weighted average fair value of options granted during 2002 was
$7,676 (2001: $8,321). Had the Company applied the fair value method detailed in FAS&nbsp;123 in accounting for options, the Company would have expensed $5,172 during the year ended
December&nbsp;31, 2002 (2001: $1,094). Had the Company applied FAS&nbsp;123 in accounting for options, net income would have been $259,965 (2001: $1,586) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in
2002: risk free interest rates of 3.8% (2001: 5.1%), expected life of 7&nbsp;years (2001: 7&nbsp;years), expected volatility of 22.1% (2001: 22.1%) and a dividend yield of nil (2001:nil). The
Company has used an average discount of 26.8% to provide for the start-up nature of operations and the illiquidity of a privately held stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a summary of stock options and related activity: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="46%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="46%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>Outstanding&#151;beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>323,639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>235,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>109.69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>323,639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>Outstanding&#151;end of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>559,439</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>104.25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>323,639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>Options exercisable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>107,880</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>Options available for grant</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>99,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>320,207</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=2>F-20</FONT></P>

<HR NOSHADE>
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<A NAME="page_fi2730_1_21"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes information about the Company's stock options for options outstanding as of December&nbsp;31, 2002: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="33%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="33%" ALIGN="LEFT"><FONT SIZE=1><B>Range of Exercise prices<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Average Remaining<BR>
Contractual Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average Exercise Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>$100-$105</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>409,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.07</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.01 years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>107,880</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>$106-$110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>107.62</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.84 years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>$111-$116</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>144,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>116.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.95 years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>c)&nbsp;&nbsp;&nbsp;&nbsp;Restricted stock awards  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a restricted share plan for employees under which up to 229,500 common shares of the Company may be issued. In addition, the Board has granted
25,000 shares to an employee of the Company which is considered to be outside of the plan. During the year ended December&nbsp;31, 2002, 206,500 (2001: 48,000) restricted common shares were awarded
to employees of the Company and its subsidiaries bringing the total issued to date to 254,500. These shares cliff vest at the end of a three year period from the date of grant and contain certain
restrictions, for said period, relating to, among other things, forfeiture in the event of termination of employment and transferability. At the time of grant, deferred compensation equivalent to the
difference between the issue price and the estimated fair market value is charged to shareholders' equity and subsequently amortized over the three-year vesting period. During the year
ended December&nbsp;31, 2002, the Company amortized $6,215 (2001: $89) of restricted stock to income. </FONT></P>

<P><FONT SIZE=2><B>12.&nbsp;&nbsp;&nbsp;&nbsp;Related party transactions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transactions listed below are classified as related party transactions, as each counterparty has either a direct or indirect shareholding in the Company. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into two agreements in November&nbsp;2001 under which parties associated with certain of our founding investors provided assistance in connection with the
formation of AXIS Specialty. In connection with the first agreement, MMC Capital,&nbsp;Inc. received $25.8&nbsp;million and John R. Charman received $2.5&nbsp;million. In connection with the
second agreement, Marsh&nbsp;&amp; McLennan Companies,&nbsp;Inc. received $8.4&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into an advisory agreement in November&nbsp;2001 with MMC Capital,&nbsp;Inc. ("MMC Capital"). Under this agreement, MMC Capital from time to time provides
advice and assistance to the Company in connection with transactions and other matters as may be agreed by MMC Capital and the Company. Under the terms of this agreement, AXIS Specialty pays an annual
fee of $1.0&nbsp;million for a period of five years from the date of initial funding. During the year ended December&nbsp;31, 2002, AXIS Specialty incurred $1,005 (2001: $115) of fees and expenses
to MMC Capital in relation to this agreement of which $nil (2001: $115) was included in accounts payable and accrued expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into an agreement in November&nbsp;2001 with The Putnam Advisory Company, L.L.C. ("Putnam") under which Putnam was appointed as an investment manager of part of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-21</FONT></P>

<HR NOSHADE>
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<A NAME="page_fi2730_1_22"> </A>
<BR>

<P><FONT SIZE=2>
its investment portfolio. This agreement was entered into on an arms length basis on terms generally available in the market. During the year ended December&nbsp;31, 2002, AXIS Specialty incurred
$671 (2001: $73) of fees in relation to this agreement of which $172 (2001: $73) was included in accounts payable and accrued expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AXIS
Specialty entered into agreements in November&nbsp;2001 and December 2002 with J.P. Morgan Investment Management&nbsp;Inc. and its affiliates ("J.P. Morgan") under which J.P.
Morgan was appointed as an investment manager of part of the company's investment portfolio. These agreements were entered into on an arms length basis on terms available generally in the market.
During the year ended December&nbsp;31, 2002, AXIS Specialty incurred $441 (2001: $57) of fees in relation to these agreements of which $240 (2001: $57) was included in accounts payable and accrued
expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2002, JPMorgan Chase Bank acted as administrative agent and lender for AXIS Specialty's $400&nbsp;million revolving credit facility. In
addition, certain subsidiaries of the Company hold several bank accounts with JPMorgan Chase Bank. Fees in relation to these transactions amounted to $658, of which $14 (2001:&nbsp;$nil) was
included in accounts payable and accrued expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's subsidiaries use the services of Marsh &amp; McLennan Companies, Inc. and its subsidiaries ("Marsh &amp; McLennan"). During the year ended December&nbsp;31, 2002 amounts paid
with respect to accounting and human resource consulting totaled $570 of which $185 (2001:$nil) was included in accounts payable and accrued expenses. In addition, we pay brokerage and commissions to
Marsh &amp; McLennan, which vary based on the amount of business produced. During the year ended December&nbsp;31, 2002, Marsh &amp; McLennan produced 37.9% (2001: 22.7%) of our gross premiums written. </FONT></P>

<P><FONT SIZE=2><B>13.&nbsp;&nbsp;&nbsp;&nbsp;Taxation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under current Bermuda law, the Company is not required to pay any taxes in Bermuda on its income or capital gains. The Company has received an undertaking from
the Minister of Finance in Bermuda that, in the event of any taxes being imposed, the Company will be exempt from taxation in Bermuda until March&nbsp;2016. The Company has operating and branch
subsidiaries in the United States, Ireland and the United Kingdom and is subject to the relevant taxes in those jurisdictions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
tax recovery for the year ended December&nbsp;31, 2002, was as follows</FONT><FONT SIZE=2><B>:</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="80%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Current income tax</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>641</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Deferred income tax recovery</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2,071</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Total income tax recovery</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,430</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
was no expense or payable in 2001 as the only company operating was located in Bermuda. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-22</FONT></P>

<HR NOSHADE>
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<A NAME="page_fi2730_1_23"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income taxes reflect the tax impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Significant
components of the net deferred tax asset (liability) are as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deferred tax assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="77%"><FONT SIZE=2>Discounting of loss reserves</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>112</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="77%"><FONT SIZE=2>Unearned premium</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="77%"><FONT SIZE=2>Tax loss carry forwards</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,007</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,151</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deferred tax liabilities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="77%"><FONT SIZE=2>Deferred acquisition costs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net deferred tax asset</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,071</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>14.&nbsp;&nbsp;&nbsp;&nbsp;Statutory Financial Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's insurance and reinsurance operations are subject to insurance laws and regulations in the jurisdictions in which it operates, including Bermuda,
Ireland and the United States. Statutory capital and surplus as reported to the relevant regulatory authorities for the principal operating subsidiaries of the Company is as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Bermuda</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Ireland</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>United States</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Required statutory capital and surplus</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>498,453</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Actual statutory capital and surplus</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,387,624</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>446,123</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>370,652</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
difference between statutory financial statements and statements prepared in accordance with U.S. GAAP vary by jurisdiction, however the primary difference is that statutory
financial statements do not reflect deferred policy acquisition costs, net deferred tax assets, intangible assets, unrealized appreciation on investments and any unauthorized/authorized reinsurance
charges. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's U.S. operations required statutory capital and surplus is determined using risk based capital tests, and is the threshold that constitutes the authorized control level,
which authorizes the commissioner to take whatever regulatory actions considered necessary to protect policyholders and creditors. The risk based capital was low compared to actual capital and surplus
due to the fact that the U.S. operations are currently in start-up mode. The capital was contributed late in 2002 to support 2003 premium writings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
at December&nbsp;31, 2002, there are no statutory restrictions on the payment of dividends from retained earnings by the Company as the minimum statutory capital and surplus
requirements are satisfied by the share capital and additional paid-in capital of the Company in all jurisdictions. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
well, the minimum levels of solvency and liquidity have been met and all applicable regulatory requirements and licensing rules complied with. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-23</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2><B>15.&nbsp;&nbsp;&nbsp;&nbsp;Subsequent Events  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the year ended December&nbsp;31, 2002, AXIS U.S. Holdings received regulatory approval for the purchase of the Illinois domiciled surplus lines company. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, on January&nbsp;30, 2003, the Company announced that AXIS U.S. Holdings had agreed to acquire the renewal rights to the directors and officers and related product lines
written by Kemper's Financial Insurance Solutions Group. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-24</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ha2730_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha2730_glossary_of_selected_reinsuran__glo02601"> </A>
<A NAME="toc_ha2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>GLOSSARY OF SELECTED REINSURANCE, INSURANCE AND INVESTMENT TERMS    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><B>Acquisition costs:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2>The aggregate of policy acquisition costs, including commissions and the portion of administrative, general and other expenses attributable to underwriting operations.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Acquisition cost ratio:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The acquisition cost ratio measures the ratio of acquisition costs to net premiums written, if determined in accordance with SAP, or the ratio of acquisition costs (adjusted by deferred policy acquisition costs) to net premiums earned if determined
in accordance with U.S. GAAP.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Additional case reserves ("ACR"):</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The reserves set aside on events that are known but not yet reported, based on the possibility of a claim. This amount is adjusted as claims notifications are received.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Attachment point:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The amount of loss (per occurrence or in the aggregate, as the case may be) above which excess of loss reinsurance becomes operative.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Broker:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
One who negotiates contracts of insurance or reinsurance, receiving a commission for placement and other service rendered, between (i)&nbsp;a policyholder and a primary insurer, on behalf of the insured party, (ii) a primary insurer and reinsurer, on
behalf of the primary insurer, or (iii) a reinsurer and a retrocessionaire, on behalf of the reinsurer.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Casualty insurance:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Insurance that is primarily concerned with the losses caused by injuries to third persons (in other words, persons other than the policyholder) and the legal liability imposed on the insured resulting therefrom.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Cede; Cedent; Ceding company:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
When a party reinsures its liability with another, it "cedes" business and is referred to as the "cedent" or "ceding company."</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Ceding commission:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
A fee based upon the ceding company's cost of acquiring the business being reinsured (including commissions, premium taxes, assessments and miscellaneous administrative expense) which also may include a profit factor.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Clash coverage:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Exposure to a larger single loss than intended due to losses incurred under two or more coverages or policies for the same event.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Combined ratio:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio, determined in accordance with either SAP or U.S. GAAP. A combined ratio below 100% generally indicates
profitable underwriting prior to the consideration of investment income. A combined ratio over 100% generally indicates unprofitable underwriting prior to the consideration of investment income.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>G-1</FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Excess of loss reinsurance:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
A generic term describing reinsurance that indemnifies the reinsured against all or a specified portion of losses on underlying insurance policies in excess of a specified amount, which is called a "level" or "retention." Also known as
non-proportional reinsurance. Excess of loss reinsurance is written in layers. A reinsurer or group of reinsurers accepts a band of coverage up to a specified amount. The total coverage purchased by the cedent is referred to as a "program" and will
typically be placed with predetermined reinsurers in pre-negotiated layers. Any liability exceeding the outer limit of the program reverts to the ceding company, which also bears the credit risk of a reinsurer's insolvency.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Generally accepted accounting principles ("U.S. GAAP"):</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
United States generally accepted accounting principles as defined by the American Institute of Certified Public Accountants or statements of the Financial Accounting Standards Board. U.S. GAAP is the method of accounting to be used by AXIS Holdings
for reporting to shareholders.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>General and administrative expense ratio:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The ratio of general and administrative expenses to net premiums earned.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Gross premiums written:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Total premiums for insurance written and assumed reinsurance during a given period.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Incurred but not reported ("IBNR"):</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Reserves for estimated losses that have been incurred by insureds and reinsureds but not yet reported to the insurer or reinsurer, including unknown future developments on losses which are known to the insurer or reinsurer.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Layer:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The interval between the retention or attachment point and the maximum limit of indemnity for which a reinsurer is responsible.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Loss and loss expense ratio:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The ratio of losses and loss expenses to net premiums earned, determined in accordance with either SAP or U.S. GAAP.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Loss reserves:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Liabilities established by insurers and reinsurers to reflect the estimated cost of claims payments and the related expenses that the insurer or reinsurer will ultimately be required to pay in respect of insurance or reinsurance it has written.
Reserves are established for losses and for loss expenses.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Losses and loss expenses:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The expenses of settling claims, including legal and other fees and the portion of general expenses allocated to claim settlement costs (also known as claim adjustment expenses) plus losses incurred with respect to claims.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Net premiums earned:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The portion of net premiums written during or prior to a given period that was actually recognized as income during such period.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Net premiums written:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Gross premiums written for a given period less premiums ceded to reinsurers and retrocessionaires during such period.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>G-2</FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Proportional reinsurance:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
A generic term describing all forms of reinsurance in which the reinsurer shares a proportional part of the original premiums and losses of the reinsured. Proportional reinsurance is also known as pro rata reinsurance, quota share reinsurance or
participating reinsurance. In proportional reinsurance the reinsurer generally pays the ceding company a ceding commission.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Reinsurance:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
An arrangement in which an insurance company, the reinsurer, agrees to indemnify another insurance or reinsurance company, the ceding company, against all or a portion of the insurance or reinsurance risks underwritten by the ceding company under one
or more policies. Reinsurance can provide a ceding company with several benefits, including a reduction in net liability on individual risks and catastrophe protection from large or multiple losses. Reinsurance also provides a ceding company with
additional underwriting capacity by permitting it to accept larger risks and write more business than would be possible without a concomitant increase in capital and surplus, and facilitates the maintenance of acceptable financial ratios by the
ceding company. Reinsurance does not legally discharge the primary insurer from its liability with respect to its obligations to the insured.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Reserves:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Liabilities established by insurers and reinsurers to reflect the estimated costs of claim payments and the related expenses that the insurer or reinsurer will ultimately be required to pay in respect of insurance or reinsurance it has written.
Reserves are established for losses, for loss expenses and for unearned premiums. Loss reserves consist of "case reserves," or reserves established with respect to individual reported claims, and "IBNR reserves." For reinsurers, loss expenses
reserves are generally not significant because substantially all of the loss expenses associated with particular claims are incurred by the primary insurer and reported to reinsurers as losses. Unearned premium reserves constitute the portion of
premium paid in advance for insurance or reinsurance that has not yet been provided. See also "Loss Reserves."</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Retention:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The amount or portion of risk that an insurer retains for its own account. Losses in excess of the retention level up to the outer limit of the program, if any, are paid by the reinsurer. In proportional treaties, the retention may be a percentage of
the original policy's limit. In excess of loss business, the retention is a dollar amount of loss, a loss ratio or a percentage.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Retrocessional reinsurance; Retrocessionaire:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
A transaction whereby a reinsurer cedes to another reinsurer, the retrocessionaire, all or part of the reinsurance that the first reinsurer has assumed. Retrocessional reinsurance does not legally discharge the ceding reinsurer from its liability
with respect to its obligations to the reinsured. Reinsurance companies cede risks to retrocessionaires for reasons similar to those that cause primary insurers to purchase reinsurance: to reduce net liability on individual risks, to protect against
catastrophic losses, to stabilize financial ratios and to obtain additional underwriting capacity.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>G-3</FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Specialty lines:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Lines of insurance and reinsurance that provide coverage for risks that are often unusual or difficult to place and do not fit the underwriting criteria of standard commercial products carriers.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Statutory accounting principles ("SAP"):</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
Recording transactions and preparing financial statements in accordance with the rules and procedures prescribed or permitted by United States state insurance regulatory authorities including the NAIC, which in general reflect a liquidating, rather
than going concern, concept of accounting.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Submission:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
An unprocessed application for (i) insurance coverage forwarded to a primary insurer by a prospective policyholder or by a broker on behalf of such prospective policyholder, (ii) reinsurance coverage forwarded to a reinsurer by a prospective ceding
insurer or by a broker or intermediary on behalf of such prospective ceding insurer or (iii) retrocessional coverage forwarded to a retrocessionaire by a prospective ceding reinsurer or by a broker or intermediary on behalf of such prospective ceding
reinsurer.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Treaty reinsurance:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The reinsurance of a specified type or category of risks defined in a reinsurance agreement between a primary insurer or other reinsured and a reinsurer. Typically, in treaty reinsurance, the primary insurer or reinsured is obligated to offer, and
the reinsurer is obligated to accept, a specified portion of all of that type or category of risks originally written by the primary insurer or reinsured.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><BR><FONT SIZE=2><B>Underwriting capacity:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
The maximum amount that an insurance company can write. The limit is generally determined by the company's retained earnings and investment capital. Reinsurance serves to increase a company's underwriting capacity by reducing its exposure from
particular risks.</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>G-4</FONT></P>

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<IMG SRC="g737735.jpg" ALT="GRAPHIC" WIDTH="378" HEIGHT="216">
  </B></FONT></P>

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NAME="page_ja2730_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ja2730_part_ii_information_not_required_in_prospectus"> </A>
<A NAME="toc_ja2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART&nbsp;II    <BR>    <BR>    INFORMATION NOT REQUIRED IN PROSPECTUS    <BR>  </B></FONT></P>

<P><FONT SIZE=2><B>ITEM 13.&nbsp;&nbsp;&nbsp;&nbsp;OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the expenses payable by the Registrant in connection with the issuance and distribution of the common shares being registered
hereby. All of such expenses are estimates, other than the filing and listing fees payable to the Securities and Exchange Commission, the New York Stock Exchange and the National Association of
Securities Dealers,&nbsp;Inc. </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Filing Fee&#151;Securities and Exchange Commission</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>41,866</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Listing Fee&#151;The New York Stock Exchange</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Fee&#151;National Association of Securities Dealers</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>30,500</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Fees and Expenses of Counsel</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Printing Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Fees and Expenses of Accountants</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Blue Sky Fees and Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Transfer Agent Fees and Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,500</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Miscellaneous Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>To
be provided by amendment </FONT></DD></DL>

<P><FONT SIZE=2><B>ITEM 14.&nbsp;&nbsp;&nbsp;&nbsp;INDEMNIFICATION OF DIRECTORS AND OFFICERS.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bye-law 30 of the Registrant's bye-laws provides, among other things, that: the directors, officers and any other persons appointed to a
committee of the board of directors of the Registrant, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Registrant to the full extent
permitted by law from and against all actions, costs, charges, liabilities, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or
sustain by or by reason of any act done, concurred in or omitted in or about the conduct of the Registrant's business or the execution of their duty, or supposed duty, or in their respective offices
or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or
other persons with whom any moneys or effects belonging to the Registrant shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys
of or belonging to the Registrant shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in
relation thereto; </FONT><FONT SIZE=2><I>provided, that</I></FONT><FONT SIZE=2> this indemnity shall not extend to any matter in which any of said persons is found, in a final judgment or decree not
subject to appeal, to have committed fraud or dishonesty. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bye-law
31 of the Registrant's bye-laws provides that each shareholder agrees to waive any claim or right of action it might have, whether individually or by or
in the right of the Registrant, against any director or officer on account of any action taken by such director or officer, or the failure of such director or officer to take any action in the
performance of his duties with or for the Registrant, provided that such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such director or officer. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Companies Act provides that a Bermuda company may indemnify its directors in respect of any loss arising or liability attaching to them as a result of any negligence, default, breach
of duty or breach of trust of which they may be guilty. However, the Companies Act also provides that any </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-1</FONT></P>

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<P><FONT SIZE=2>
provision, whether contained in the company's bye-laws or in a contract or arrangement between the company and the director, indemnifying such director against any liability which would
attach to him in respect of his fraud or dishonesty will be void. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Registrant has purchased directors and officers liability insurance policies. Such insurance would be available to the Registrant's directors and officers in accordance with its
terms. In addition, certain directors may be covered by directors and officers liability insurance policies purchased by their respective employers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to the form of Underwriting Agreement to be filed as Exhibit&nbsp;1.1 hereto for provisions providing that the Underwriters are obligated, under certain
circumstances, to indemnify the directors, certain officers and the controlling persons of the Registrant against certain liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to the Shareholders Agreement to be filed as Exhibit&nbsp;10.1 hereto for provisions providing that the Registrant and certain holders of common shares and warrants
are each obligated to indemnify the other for certain actions. </FONT></P>

<P><FONT SIZE=2><B>ITEM 15.&nbsp;&nbsp;&nbsp;&nbsp;RECENT SALES OF UNREGISTERED SECURITIES.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since its formation, the Registrant has issued unregistered securities as described below. None of the transactions involved any underwriters, underwriting
discounts or commissions or any public offering, and the Registrant believes that each transaction, if deemed to be a sale of a security, was exempt from the registration requirements of the
Securities Act by virtue of Section&nbsp;4(2) thereof, Regulation&nbsp;D promulgated thereunder, Rule&nbsp;701 pursuant to compensatory benefit plans and contracts relating to compensation as
provided under Rule&nbsp;701 or Regulation&nbsp;S for offerings of securities outside of the United States. The recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, such securities were restricted as to transfers and appropriate legends were
affixed to the share certificates and instruments issued in such transactions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November&nbsp;20, 2001, AXIS Specialty Limited ("AXIS Specialty") sold 16,866,907 common shares to certain accredited investors for an aggregate price of $1.7&nbsp;billion and
issued warrants exercisable for common shares in an amount equal to 12% of the common shares of AXIS Specialty outstanding on a fully diluted basis. The sale of shares and warrants were made in
reliance on Section&nbsp;4(2) of the Exchange Act. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time between November&nbsp;20, 2001 and December&nbsp;31, 2002, AXIS Specialty issued common shares and granted options pursuant to its Long-Term Equity Compensation
Plan and its Directors Deferred Compensation Plan. These plans were subsequently assumed by the Registrant. These
issuances were made in reliance on Rule&nbsp;701 under the Securities Act. As of December&nbsp;31, 2002, options with respect to 559,439 common shares of the Registrant were outstanding. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December&nbsp;31, 2002, the Registrant exchanged 17,075,378 common shares of the Registrant for an equal number of common shares of AXIS Specialty. In addition, outstanding warrants
exercisable for common shares of AXIS Specialty were exchanged for the same number of common warrants of the Registrant. This exchange was made in reliance on Section&nbsp;4(2) of the Securities Act
and Regulation&nbsp;D promulgated thereunder. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-2</FONT></P>

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<P><FONT SIZE=2><B>ITEM 16.&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.  </B></FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Exhibits
</FONT></DD></DL>
</UL>
<BR>

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<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit<BR>
Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="88%" ALIGN="CENTER"><FONT SIZE=1><B>Description of Document</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2>Underwriting Agreement*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Certificate of Incorporation and Memorandum of Association of AXIS Capital Holdings Limited*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Amended and Restated Bye-laws of AXIS Capital Holdings Limited*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Specimen Common Share Certificate*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Specimen Warrant to Acquire Common Shares*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of Conyers Dill &amp; Pearman*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of William Fry Tax Advisers Limited*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of LeBoeuf Lamb Greene &amp; MacRae, L.L.P.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of Clyde &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of David King &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Amended and Restated Shareholders Agreement, dated December 31, 2002 among the Registrant and each of the persons listed on Schedule A thereto*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between John R. Charman and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Service Agreement between Robert J. Newhouse, Jr. and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Service Agreement between Michael A. Butt and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Service Agreement between Michael E. Morrill and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between Dennis B. Reding and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between Andrew Cook and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between William A. Fischer and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between John Gressier and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between Richard Strachan and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.11</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March&nbsp;28, 2002*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Revolving Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March&nbsp;28, 2002*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Statement re computation of per share earnings*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
21.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Subsidiaries of the registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of Deloitte &amp; Touche</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of Conyers Dill &amp; Pearman*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of William Fry Tax Advisers*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>II-3</FONT></P>

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<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of Clyde &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of David King &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney (included as part of the signature pages for certain directors except as otherwise filed herein)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Charles A. Davis</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Edward J. Kelly, III</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Scott A. Schoen</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Andrew H. Rush</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Jeffrey C. Walker</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
99.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Form F-N*</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>To
be filed by amendment.
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Financial
Statement Schedules </FONT></DD></DL>
</DD></DL>
<BR>

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<TD WIDTH="16%"><FONT SIZE=2>Schedule I</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Summary of Investments Other Than Investments in Related Parties&#151;not required since the information is fully disclosed in the Consolidated Financial Statements and notes to the Consolidated Financial
Statements</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2>Schedule II</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Condensed Financial Information of Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2>Schedule III</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Supplementary Insurance Information</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2>Schedule IV</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Reinsurance</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2>Schedule V</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Valuation and Qualifying Accounts&#151;not required since the information is fully disclosed in the Consolidated Financial Statements and notes to the Consolidated Financial Statements</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="16%"><FONT SIZE=2>Schedule VI</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Supplementary Information Concerning Property/Casualty Insurance Operations&#151;not required since amount does not meet requirement for disclosure</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>II-4</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>[LETTERHEAD OF DELOITTE &amp; TOUCHE]  </B></FONT></P>

<P><FONT SIZE=2><B>INDEPENDENT AUDITORS' REPORT<BR>  </B></FONT><FONT SIZE=2>To the Board of Directors and Shareholders of<BR>
AXIS Capital Holdings Limited </FONT></P>

<P><FONT SIZE=2>We
have audited the consolidated financial statements of AXIS Capital Holdings Limited and subsidiaries as at December&nbsp;31, 2002 and 2001 and for the year ended December&nbsp;31, 2002 and the
period from November&nbsp;8, 2001 (date of incorporation) to December&nbsp;31, 2001, and have issued our report thereon dated February&nbsp;10, 2003; such financial statements and report are
included in this registration statement. Our audits also included the financial statement schedules of AXIS Capital Holdings Limited listed in the Index at Item&nbsp;16 (b) of this registration
statement. These financial statement
schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. </FONT></P>


<P><FONT SIZE=2>DELOITTE
&amp; TOUCHE<BR>
Hamilton, Bermuda<BR>
February 10, 2003 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-5</FONT></P>

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<P><FONT SIZE=2><B>ITEM 17.&nbsp;&nbsp;&nbsp;&nbsp;UNDERTAKINGS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned Registrant hereby undertakes that: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule&nbsp;430A and contained in the form of prospectus filed by the Registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared effective. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;For
the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be
a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each purchaser. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-6</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_jc2730_1_7"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jc2730_signatures"> </A>
<A NAME="toc_jc2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>SIGNATURES    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in Pembroke, Bermuda, on the 5th day of March, 2003. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=2>AXIS Capital Holdings Limited</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOHN R. CHARMAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="46%"><FONT SIZE=2>John R. Charman</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="46%"><FONT SIZE=2><I>President and Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jc2730_power_of_attorney"> </A>
<A NAME="toc_jc2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>POWER OF ATTORNEY    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Know all men by these presents, that the undersigned directors and officers of the Registrant, a Bermuda limited liability company, which is filing a Registration
Statement on Form&nbsp;S-1 with the Securities and Exchange Commission, Washington, D.C. 20549 under the provisions of the Securities Act of 1933 hereby constitute and appoint John R.
Charman, Michael A. Butt and Andrew Cook, and each of them, the individual's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution,
for the person and in his or her name, place and stead, in any and all capacities, to sign such registration statement and any or all amendments, including post-effective amendments to the
registration statement, including a prospectus or an amended prospectus therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule&nbsp;462(b)
under the Securities Act, and all other documents in connection therewith to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on the 5th day of
March, 2003. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="46%" ALIGN="CENTER"><FONT SIZE=1><B>Signature</B></FONT><HR NOSHADE></TH>
<TH WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="46%" ALIGN="CENTER"><FONT SIZE=1><B>Title</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOHN R. CHARMAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> John R. Charman</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2>President and Chief Executive Officer, Director<BR>
(Principal Executive Officer)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>ANDREW COOK</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Andrew Cook</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2><BR>
Executive Vice President and Chief Financial Officer<BR>
(Principal Financial Officer)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>CLARE MORAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Clare Moran</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2><BR>
Vice President and Controller<BR>
(Controller)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>MICHAEL A. BUTT</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Michael A. Butt</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>II-7</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=174,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=90421,FOLIO='II-7',FILE='DISK022:[03NYC0.03NYC2730]JC2730A.;24',USER='JLAWRENA',CD=';5-MAR-2003;16:09' -->
<A NAME="page_jc2730_1_8"> </A>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>ROBERT J. NEWHOUSE, JR.</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Robert J. Newhouse, Jr.</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT><HR NOSHADE><FONT SIZE=2> Charles A. Davis</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>ROBERT L. FRIEDMAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Robert L. Friedman</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DONALD J. GREENE</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Donald J. Greene</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>MAURICE A. KEANE</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Maurice A. Keane</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT><HR NOSHADE><FONT SIZE=2> Edward J. Kelly, III</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT><HR NOSHADE><FONT SIZE=2> Andrew H. Rush</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT><HR NOSHADE><FONT SIZE=2> Scott A. Schoen</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>FRANK J. TASCO</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Frank J. Tasco</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT><HR NOSHADE><FONT SIZE=2> Jeffrey C. Walker</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>KEVIN G. MCLEAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> (authorized representative in the United States)</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="1%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="44%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>ANDREW COOK</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2><I>Attorney-in-fact</I></FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>II-8</FONT></P>

<HR NOSHADE>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_je2730_1_9"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="je2730_schedule_ii"> </A>
<A NAME="toc_je2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>SCHEDULE II    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="je2730_axis_capital_holdings_limited___axi03656"> </A>
<A NAME="toc_je2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    BALANCE SHEET    <BR>    <BR>    As at December 31, 2002<BR>  (Expressed in thousands of U.S. Dollars)    <BR>    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Assets</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>60,578</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Investments at fair value</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>64,010</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Accrued interest receivable</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>378</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Investment in subsidiaries</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,817,476</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,284</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="78%"><FONT SIZE=2><B>Total Assets</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,946,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><BR><FONT SIZE=2><B>Liabilities</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Intercompany payable</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>11,218</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total Liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>11,218</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><BR><FONT SIZE=2><B>Shareholder's Equity</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Share capital</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,727</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,686,599</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deferred compensation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(20,576</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other comprehensive income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Retained earnings</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>267,799</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="78%"><FONT SIZE=2><B>Total Shareholders Equity</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,935,508</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="78%"><FONT SIZE=2><B>Total Liabilites &amp; Shareholders Equity</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,946,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>II-9</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=176,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=159604,FOLIO='II-9',FILE='DISK022:[03NYC0.03NYC2730]JE2730A.;10',USER='JLAWRENA',CD=';5-MAR-2003;16:09' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_jf2730_1_10"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="jf2730_schedule_ii_(continued)"> </A>
<A NAME="toc_jf2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>SCHEDULE II (Continued)    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jf2730_axis_capital_holdings_limited___axi05625"> </A>
<A NAME="toc_jf2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME    <BR>    <BR>    For the year ended December 31, 2002<BR>  (Expressed in thousands of U.S.Dollars)    <BR>
</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Revenue</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Equity in net earnings of subsidiaries</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>267,792</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Net investment income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Realized gains</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><BR><FONT SIZE=2><B> Expenses</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>General and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Income before income taxes</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>267,799</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Income Taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Net Income</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>267,799</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
Other comprehensive income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Unrealized losses arising during the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Comprehensive income</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>267,758</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>II-10</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=177,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=691781,FOLIO='II-10',FILE='DISK022:[03NYC0.03NYC2730]JF2730A.;11',USER='JLAWRENA',CD=';5-MAR-2003;16:09' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_jh2730_1_11"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="jh2730_schedule_ii_(continued)"> </A>
<A NAME="toc_jh2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>SCHEDULE II (Continued)    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jh2730_axis_capital_holdings_limited___axi04626"> </A>
<A NAME="toc_jh2730_2"> </A>
<BR></FONT><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED    <BR>    <BR>    STATEMENT OF CASH FLOWS    <BR>    <BR>    For the year ended December 31, 2002<BR>  (Expressed in thousands of U.S.&nbsp;Dollars)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended<BR>
December 31, 2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Cash flows provided by operating activites:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>267,799</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Adjustments to reconcile net income to net cash provided by (used in)operating activites:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization of of discounts on fixed maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued interest receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(378</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Purchase of accrued interest receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>369</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Equity in net earnings of subsidiaries</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(267,792</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="70%"><FONT SIZE=2>Total adjustments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(267,799</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net cash provided by operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Cash flows provided by (used in) investing activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Dividend from subsidiary</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>125,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Purchases of fixed maturites and short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>(64,422</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>60,578</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Increase in cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>60,578</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents&#151;beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents&#151;end of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>60,578</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>II-11</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=178,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=239322,FOLIO='II-11',FILE='DISK022:[03NYC0.03NYC2730]JH2730A.;16',USER='JLAWRENA',CD=';5-MAR-2003;16:09' -->
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_ji2730_1_12"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><B>SCHEDULE III  </B></FONT></P>

<A NAME="ji2730_axis_capital_holding_1ank"> </A>
<A NAME="ji2730_axis_capital_holdings_limited___axi02707"> </A>
<A NAME="toc_ji2730_1"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B> AXIS CAPITAL HOLDINGS LIMITED<BR>
SUPPLEMENTARY INSURANCE INFORMATION<BR>
For the year ended December&nbsp;31, 2002 and the period ended December&nbsp;31, 2001<BR>
(Expressed in thousands of U.S. Dollars)  </B></FONT></P>

<P><FONT SIZE=2><B> Year ended December 31, 2002  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Deferred<BR>
Acquisition<BR>
Costs</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Reserve for<BR>
Losses and<BR>
Loss Expenses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Unearned<BR>
Premiums</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net<BR>
Premiums<BR>
Earned</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net<BR>
Investment<BR>
Income(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Losses and<BR>
Loss<BR>
Expenses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortization<BR>
of Deferred<BR>
Acquisition<BR>
Costs</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net<BR>
Premiums<BR>
Written</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Other<BR>
Operating<BR>
Expenses</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Specialty Insurance</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>54,360</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>133,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>461,844</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>314,613</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>137,848</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>56,683</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>704,033</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Treaty Reinsurance</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>22,806</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>82,934</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>94,118</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>222,237</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>91,417</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>47,020</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>314,244</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Not allocated to segments</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>46,521</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="1%">&nbsp;</TD>
<TD WIDTH="21%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>77,166</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>215,934</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>555,962</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>536,850</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>71,287</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>229,265</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>103,703</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,018,277</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>46,521</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B> Period ended December 31, 2001  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Deferred<BR>
Acquisition<BR>
Costs</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Reserve for<BR>
Losses and<BR>
Loss Expenses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Unearned<BR>
Premiums</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net<BR>
Premiums<BR>
Earned</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net<BR>
Investment<BR>
Income(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Losses and<BR>
Loss<BR>
Expenses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortization<BR>
of Deferred<BR>
Acquisition<BR>
Costs</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net<BR>
Premiums<BR>
Written</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Other<BR>
Operating<BR>
Expenses</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Specialty Insurance</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,983</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>886</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>22,751</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,713</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>886</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>320</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>24,465</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Treaty Reinsurance</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>232</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>77</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2,111</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>171</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>77</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>512</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2,281</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Not allocated to segments</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,763</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2,566</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="1%">&nbsp;</TD>
<TD WIDTH="22%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,215</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>24,862</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,763</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>963</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>832</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>26,746</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2,566</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">

<P><FONT SIZE=2>(1)&nbsp;&nbsp;&nbsp;&nbsp;Investment
income is not allocated to the Company's segments as the invested assets are managed centrally. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-12</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=179,EFW="2104850",CP="AXIS CAPITAL HOLDINGS LIMITED",DN="1",CHK=286885,FOLIO='II-12',FILE='DISK022:[03NYC0.03NYC2730]JI2730A.;16',USER='JLAWRENA',CD=';5-MAR-2003;16:09' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_jj2730_1_13"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="jj2730_schedule_iv"> </A>
<A NAME="toc_jj2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>SCHEDULE IV    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><BR><FONT SIZE=2><B>AXIS CAPITAL HOLDINGS LIMITED  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> SUPPLEMENTARY REINSURANCE INFORMATION  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> For the year ended December 31, 2002 and the period ended December 31, 2001<BR>
(Expressed in millions of U.S. Dollars)  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="96%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Ceded to Other Companies</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Assumed from Other Companies</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Net Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Percentage of<BR>
Amount Assumed<BR>
to Net</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>Year ended December 31, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>469</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>90</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,018</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>Period ended December 31, 2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>52</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>II-13</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jk2730_exhibit_index"> </A>
<A NAME="toc_jk2730_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT INDEX    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit<BR>
Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="88%" ALIGN="CENTER"><FONT SIZE=1><B>Description of Document</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2>Underwriting Agreement*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Certificate of Incorporation and Memorandum of Association of AXIS Capital Holdings Limited*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Amended and Restated Bye-laws of AXIS Capital Holdings Limited*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Specimen Common Share Certificate*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Specimen Warrant to Acquire Common Shares*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of Conyers Dill &amp; Pearman*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of William Fry Tax Advisers Limited*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of LeBoeuf Lamb Greene &amp; MacRae, L.L.P.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of Clyde &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Opinion of David King &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Amended and Restated Shareholders Agreement, dated December 31, 2002 among the Registrant and each of the persons listed on Schedule A thereto*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between John R. Charman and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Service Agreement between Robert J. Newhouse, Jr. and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Service Agreement between Michael A. Butt and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Service Agreement between Michael E. Morrill and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between Dennis B. Reding and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between Andrew Cook and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between William A. Fischer and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between John Gressier and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Employment Agreement between Richard Strachan and the Registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.11</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March&nbsp;28, 2002*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Revolving Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March&nbsp;28, 2002*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Statement re computation of per share earnings*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
21.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Subsidiaries of the registrant*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of Deloitte &amp; Touche</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of Conyers Dill &amp; Pearman*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of William Fry Tax Advisers*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of LeBoeuf, Lamb, Greene &amp; MacRae, L.L.P.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of Clyde &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
23.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of David King &amp; Co.*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney (included as part of the signature pages for certain directors except as otherwise filed herein)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Charles A. Davis*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Edward J. Kelly, III</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Scott A. Schoen*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Andrew H. Rush*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Power of Attorney for Jeffrey C. Walker*</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
99.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Form F-N*</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>To
be filed by amendment. </FONT></DD></DL>
<HR NOSHADE>
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<BR>
<P><br><A NAME="03NYC2730_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bg2730_1">Table of Contents</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ca2730_1">PROSPECTUS SUMMARY</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca2730_2">OUR COMPANY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_cc2730_1">THE OFFERING</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_cc2730_2">SUMMARY CONSOLIDATED FINANCIAL INFORMATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de2730_1">RISK FACTORS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_di2730_1">FORWARD-LOOKING STATEMENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dk2730_1">USE OF PROCEEDS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dk2730_2">DIVIDEND POLICY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dm2730_1">CAPITALIZATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_do2730_1">DILUTION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dq2730_1">SELECTED CONSOLIDATED FINANCIAL INFORMATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ds2730_1">MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_du2730_1">Interest Rate Movement Analysis on Market Value of Assets Under Management by Third Party Investment Managers</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dw2730_1">INDUSTRY BACKGROUND</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ea2730_1">BUSINESS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ea2730_2">Gross Premiums Written by Business Segment</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ea2730_3">Gross Premiums Written by Specialty Line</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ea2730_4">Gross Premiums Written by Treaty Reinsurance Line</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ea2730_5">Gross Treaty Reinsurance Lines Premiums Written by Geographic Area</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ec2730_1">Gross Premiums Written by Broker</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ec2730_2">Gross, Ceded and Net Amounts of Premiums Written and Earned</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ec2730_3">Types of Securities in Our Fixed Income Portfolio and Their Fair Market Values and Amortized Costs</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ec2730_4">Credit Ratings for Fixed Income Securities</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ec2730_5">Maturity Distribution for Fixed Income Securities</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ec2730_6">Net Investment Income and Returns on Investments</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ee2730_1">REGULATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ei2730_1">MANAGEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ei2730_2">Summary Compensation Table</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ei2730_3">Options/SAR Grants in 2002</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ek2730_1">PRINCIPAL AND SELLING SHAREHOLDERS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_em2730_1">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_eo2730_1">MATERIAL TAX CONSIDERATIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_eq2730_1">DESCRIPTION OF SHARE CAPITAL</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_es2730_1">SHARES ELIGIBLE FOR FUTURE SALE</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_eu2730_1">UNDERWRITING</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ew2730_1">LEGAL MATTERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ew2730_2">EXPERTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ew2730_3">WHERE YOU CAN FIND MORE INFORMATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ew2730_4">ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES LAWS AND OTHER MATTERS</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fa2730_1">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AXIS CAPITAL HOLDINGS LIMITED</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fb2730_1">INDEPENDENT AUDITORS' REPORT</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fc2730_1">AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED BALANCE SHEETS As at December 31, 2002 and 2001 (Expressed in thousands of U.S. dollars except for share data)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_fc2730_2">AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For the year ended December 31, 2002 and the period from November 8, 2001 to December 31, 2001 (Expressed in thousands
of U.S. dollars)</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fe2730_1">AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the year ended December 31, 2002 and the period from November 8, 2001 to December 31, 2001 (Expressed in thousands of
U.S. dollars)</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_fe2730_2">AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31, 2002 and the period from November 8, 2001 to December 31, 2001 (Expressed in thousands of U.S. dollars)
</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fg2730_1">AXIS CAPITAL HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Expressed in thousands of U.S. dollars except share amounts)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ha2730_1">GLOSSARY OF SELECTED REINSURANCE, INSURANCE AND INVESTMENT TERMS</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ja2730_1">PART II INFORMATION NOT REQUIRED IN PROSPECTUS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_jc2730_1">SIGNATURES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_jc2730_2">POWER OF ATTORNEY</A></FONT><BR>
<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_je2730_1">SCHEDULE II</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_je2730_2">AXIS CAPITAL HOLDINGS LIMITED BALANCE SHEET As at December 31, 2002 (Expressed in thousands of U.S. Dollars)</A></FONT><BR>

<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_jf2730_1">SCHEDULE II (Continued)</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_jf2730_2">AXIS CAPITAL HOLDINGS LIMITED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME For the year ended December 31, 2002 (Expressed in thousands of U.S.Dollars)</A></FONT><BR>

<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_jh2730_1">SCHEDULE II (Continued)</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_jh2730_2">AXIS CAPITAL HOLDINGS LIMITED STATEMENT OF CASH FLOWS For the year ended December 31, 2002 (Expressed in thousands of U.S. Dollars)</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ji2730_1">AXIS CAPITAL HOLDINGS LIMITED SUPPLEMENTARY INSURANCE INFORMATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_jj2730_1">SCHEDULE IV</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_jk2730_1">EXHIBIT INDEX</A></FONT><BR>
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QuickLinks
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As filed with the Securities and Exchange Commission on March 5, 2003.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AXIS CAPITAL HOLDINGS LIMITED
(Exact name of Registrant as specified in its charter)
Bermuda
(State or other jurisdiction of
incorporation or organization)
6331
(Primary Standard Industrial
Classification Code Number)
Not Applicable
(I.R.S. Employer
Identification No.)
106 Pitts Bay Road
Pembroke HM 08, Bermuda
Telephone: (441) 296-2600
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
CT Corporation System
111 Eighth Avenue, 13th Floor
New York, New York 10011
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Kevin G. McLean, Esq.
Senior Vice President, General Counsel and Secretary
AXIS Specialty U.S. Holdings, Inc.
c/o AXIS Capital Holdings Limited
106 Pitts Bay Road
Pembroke HM08, Bermuda
Telephone: (441) 296-2600
Facsimile: (441) 296-3140
Gary Apfel, Esq.
Joseph L. Seiler III, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017-5404
Telephone: (213) 955-7350
Facsimile: (212) 649-0911
Gary I. Horowitz, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Telephone: (212) 455-7113
Facsimile: (212) 455-2502
Approximate date of commencement of the proposed sale of the securities to the public:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.
o
If
this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
o
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
o
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.
o
CALCULATION OF REGISTRATION FEE
Title Of Each Class Of
Securities To Be Registered
Proposed Maximum Aggregate Offering Price(1)(2)
Amount Of
Registration Fee
Common Shares, par value $0.10 per share
$517,500,000
$41,865.75
(1)
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2)
Includes
shares subject to the underwriters' over-allotment option.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
PROSPECTUS
(Subject to Completion)
Issued            , 2003
Shares
AXIS Capital Holdings Limited
Common Shares
AXIS Capital Holdings Limited is offering                common shares and the selling shareholders are offering an
additional                common shares in
an underwritten offering. AXIS Capital Holdings Limited will not receive any of the proceeds from the sale of common shares by the selling shareholders. We anticipate that the initial public offering
price of the common shares will be between $        and $        per share. This is our initial public offering and no public market exists for our common shares.
We
intend to apply to list our common shares on the New York Stock Exchange under the symbol "AXS."
Investing in our common shares involves risks. See "Risk Factors" beginning on page 10.
PRICE $        A SHARE
Price to Public
Underwriting
Discounts and
Commissions
Proceeds to
Company
Proceeds to
Selling
Shareholders
Per Share
$
$
$
$
Total
$
$
$
$
AXIS Capital Holdings Limited has granted the underwriters the right to purchase up to an additional                common shares to cover
over-allotments.
The Securities and Exchange Commission, state securities regulators, the Registrar of Companies in Bermuda and the Bermuda Monetary Authority have not approved or disapproved
of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
underwriters expect to deliver the common shares to purchasers on                  , 2003.
Joint Book-Running Managers
MORGAN STANLEY
SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
JPMORGAN
MERRILL LYNCH & CO.
DOWLING & PARTNERS SECURITIES, LLC
FOX-PITT, KELTON
,
2003
Table of Contents
Page
Prospectus Summary
1
Risk Factors
10
Forward-Looking Statements
32
Use of Proceeds
34
Dividend Policy
34
Capitalization
35
Dilution
36
Selected Consolidated Financial Information
37
Management's Discussion and Analysis of Financial Condition and Results of Operations
39
Industry Background
52
Business
54
Regulation
71
Management
83
Principal and Selling Shareholders
96
Certain Relationships and Related Transactions
102
Material Tax Considerations
103
Description of Share Capital
118
Shares Eligible for Future Sale
128
Underwriting
130
Legal Matters
133
Experts
133
Where You Can Find More Information
133
Enforceability of Civil Liabilities Under United States Federal Securities Laws and Other Matters
133
Index to Consolidated Financial Statements
F-1
Glossary of Selected Reinsurance, Insurance and Investment Terms
G-1
Until                        ,
2003, which is the 25th day after the date of this prospectus, all dealers that buy, sell or trade our common shares, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or
subscriptions.
You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with
information that is different from that contained in this prospectus. We are offering to sell and seeking offers to buy these securities only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common
shares.
Common shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 1998 of Bermuda which regulates the sale
of securities in Bermuda. In addition, the Bermuda Monetary Authority (the "BMA") must approve all issuances and transfers of shares of a Bermuda exempted company. Before this offering, we expect the
BMA will have issued their permission for the issue and free transferability of the common shares being offered pursuant to this prospectus, as long as the common shares are listed on the New York
Stock Exchange, to and among persons who are non-residents of Bermuda for exchange controls purposes. In addition, we will deliver to and file a copy of this prospectus with the
Registrar of Companies in Bermuda in accordance with
Bermuda law. The BMA and the Registrar of Companies accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or opinions expressed in
this prospectus.
Neither we nor the selling shareholders have authorized any offer of the common shares being offered pursuant to this prospectus to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulation 1995, as amended (the "Regulations"). Common shares may not lawfully be offered or sold to persons in the United Kingdom
except in circumstances which do not
i
result in an offer to the public in the United Kingdom within the meaning of the Regulations or otherwise in compliance with all applicable provisions of the Regulations.
This document is for distribution only to persons who (i) are outside the United Kingdom, (ii) have professional experience in matters relating to
investments or (iii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations, etc.") of The Financial Services and Markets Act
2000 (Financial Promotion) Order 2001 (as amended) (all such persons together being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant
persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.
ii
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. While we have highlighted what we believe is the most
important information about us and this offering in this summary, you should read the entire prospectus carefully, including the "Risk Factors" and "Forward-Looking Statements" sections and our
consolidated financial statements and the notes to those consolidated financial statements before making an investment decision. In this prospectus, references to the "Company," "we," "us" or "our"
refer to AXIS Capital Holdings Limited and its subsidiaries, including AXIS Specialty Limited ("AXIS Specialty"), AXIS Re Limited ("AXIS Re"), AXIS Specialty Europe Limited ("AXIS Specialty Europe"),
AXIS Reinsurance Company ("AXIS Reinsurance"), AXIS Specialty Insurance Company ("AXIS Insurance"), Sheffield Insurance Corporation, which the Company acquired as of February 28, 2002 and
intends to rename AXIS Indemnity Company ("AXIS Indemnity"), and any other direct or indirect subsidiary, unless the context suggests otherwise. References to "AXIS Holdings" refer solely to AXIS
Capital Holdings Limited. References in this prospectus to "dollars" or "$" are to the lawful currency of the United States of America, unless the context otherwise requires. Unless otherwise stated,
all figures assume no exercise of the underwriters' over-allotment option. All share amounts and strike prices contained in this prospectus will be adjusted to reflect a stock split which
the Company expects to effect prior to the consummation of the offering contemplated by this prospectus. For your convenience, we have provided a Glossary, beginning on page G-1, of
selected reinsurance, insurance and investment terms and have printed these terms in boldfaced type the first time they are used in this prospectus.
OUR COMPANY
Overview
We provide
specialty lines
insurance and
treaty reinsurance
on a
global basis, with headquarters in Bermuda. Through our operating subsidiaries based in Bermuda, Ireland and the United States, we focus on writing coverage for specialized classes of risk through our
team of highly skilled and experienced underwriters. Since our founding in November 2001, we have successfully assembled a strong management team of proven leaders with significant industry
experience, established a global underwriting infrastructure and built a broad product portfolio. In 2002, our first full year of operation, we wrote $1.1 billion of gross premiums, generated
$265.1 million of net income, produced a
combined ratio
of 70.7% and earned a return on average equity of 14.7%. As of December 31, 2002,
we had
$1.96 billion of shareholders' equity. We believe that we have already established a recognized franchise in the insurance and
reinsurance
industry and are well-positioned to provide our products to our customers.
The
insurance and reinsurance industry has recently experienced severe dislocation as a result of an unprecedented impairment of capital, which has caused a substantial contraction in
global
underwriting capacity
. We believe this impairment has been caused primarily by the following factors:
•
Record
loss events in 2001 and 2002;
•
Continued
adverse loss development from industry legacy issues;
•
An
adverse investment environment;
•
Exit
of key players from certain markets; and
•
A
significant number of ratings downgrades.
We
believe that from the beginning of 2001 through the end of 2002, capital available to write property and
casualty insurance
and
reinsurance has been impaired by an estimated $228 to $248 billion in potential and realized underwriting and investment losses. This amount is equal to 33% to 35% of the approximately
$700 billion in available capital at the end of 2000. At the same time that
1
capacity has declined, we believe the demand for commercial insurance and reinsurance has increased as insureds have become increasingly aware of their risk exposures. These industry developments
have provided new companies such as ours with an opportunity to provide much needed underwriting capacity at attractive rates in conjunction with improved terms and conditions.
In
forming our Company, our strategy was to establish an entity with a solid capital base, a strong management team, a globally diversified product portfolio and a cost-effective
underwriting platform capable of allowing us to react quickly to changing market dynamics. We believe this strategy clearly differentiates us from incumbent insurers and reinsurers. In our first full
year of operation, we believe we have begun to successfully execute this strategy, and we are committed to capitalizing on the opportunities created by ongoing market dislocations.
We
seek to use our management's extensive expertise, experience and long-standing market relationships to identify and underwrite attractively priced risks while delivering
innovative insurance and reinsurance solutions to our customers. Our underwriters are focused on constructing a portfolio of risks that fully utilizes our capital while optimizing the
risk-reward characteristics of the portfolio. In specialty lines, we have designed our corporate and underwriting structure to create an operating platform that utilizes new procedures and
technologies. We believe we have a unique operating platform in specialty lines that provides us with a competitive advantage. We intend to continue to exercise highly disciplined underwriting
practices and manage a diverse book of business while seeking to maximize our profitability and generate superior returns on equity.
Our
business is comprised of two underwriting segments: specialty lines and treaty reinsurance. During the year ended December 31, 2002, we wrote gross premiums for our specialty
lines and treaty reinsurance of $793.8 million and $314.2 million, respectively.
Our
specialty lines segment primarily includes the following risk classifications:
•
Specialty
Risks (including Terrorism, Marine and Aviation War Risk and Political Risk);
•
Onshore
and Offshore Energy;
•
Aviation
and Aerospace;
•
Commercial
Property; and
•
Marine.
We
also expect to write specialty lines insurance covering professional liability and related lines as a result of our agreement to acquire the renewal rights to a book of business
written by the Financial Insurance Solutions unit of Kemper Insurance Companies ("Kemper"), a transaction we expect to consummate in early 2003. In connection with this acquisition, we added a senior
underwriting team from Kemper.
Our
treaty reinsurance segment provides short to medium tail, severity-driven products, primarily for catastrophic risks. The underlying property and casualty insurance business classes
covered by the treaties we write include:
•
Property;
•
Workers'
Compensation, Personal Accident and Life;
•
Professional
Liability;
•
Casualty
Clash
; and
•
Marine
and Aviation.
2
We
market and distribute our products primarily through the world's largest insurance and reinsurance
brokers
, such as Marsh Inc.
("Marsh"), including its subsidiary, Guy Carpenter & Company, Inc. ("Guy Carpenter"), Aon Corporation ("Aon"), Willis Group Holdings Ltd. ("Willis") and Benfield Group
("Benfield"), among others.
Competitive Strengths
We believe our competitive strengths have enabled, and will continue to enable us to capitalize on the significant dislocation in the insurance and reinsurance
marketplace. These strengths include:
•
Experienced Management and Underwriting Team with Proven Track Record.
Our management team is
led by our President and CEO, John R. Charman, who has over 30 years of industry experience, and our Chairman, Michael A. Butt, who has over 40 years of industry experience. We have also
assembled a team of senior underwriters with an average industry experience of 20 years at successful insurers and reinsurers in a variety of markets. The extensive depth and knowledge of our
management and underwriting teams provide us with the ability to successfully select and price complex risks.
•
Long-Standing Market Relationships.
Our underwriters have
well-established personal relationships with our insureds,
cedents
and brokers. We use our market relationships to identify business
opportunities and establish ourselves as leaders in lines of business that have been severely affected by the dislocation in insurance markets.
•
Demonstrated Ability to Attract High Quality Talent.
From inception, we have successfully
targeted and hired high quality management and underwriting talent. In addition, we have capitalized on the significant dislocation in the insurance industry by selectively recruiting entire
underwriting teams, which has enabled us to expand our product lines.
•
Disciplined Approach to Underwriting and Risk Management.
We believe in generating underwriting
profitability through a disciplined, conservative approach utilizing peer review processes involving seasoned underwriters for each of our segments. We believe these peer review processes, combined
with our strict management of global aggregate exposures across products and sophisticated modeling capabilities, allow us to realize attractive prices, favorable terms and risk diversification.
•
Low-Cost International Infrastructure and Versatile Underwriting Platform.
We
believe our international presence, centralized coordination and proprietary technologies provide us with the flexibility to adapt to market conditions in real time and practice a highly opportunistic
underwriting approach. In addition, we believe our innovative technological platform and streamlined underwriting processes help lower our costs.
•
Superior Financial Strength.
As of December 31, 2002, we had a capital base of
$1.96 billion without any outstanding debt. Our operating companies (with the exception of AXIS Indemnity, which is not rated) are rated "A" (Strong) by Standard & Poor's and
"A-" (Excellent) by A.M. Best Company, Inc. ("A.M. Best"). These ratings reflect our ability to pay policyholder claims and are not applicable to the securities offered in
this prospectus. Our capital is unencumbered by historical losses relating to the tragic events of September 11, 2001, asbestos, environmental or other legacy exposures that have led to capital
charges for others in our industry.
3
Strategy
Our corporate objective is to generate superior returns on equity while establishing ourselves as a global leader in providing specialty lines insurance and
treaty reinsurance products to our customers. We intend to achieve this objective by executing the following strategies:
•
Establish Global Leadership in Key Business Lines by Leveraging Management's Significant Experience and
Relationships.
Our senior management team has extensive customer relationships with leading insurers, cedents and brokers around the world. As a result, we have
been able to take advantage of the current dislocation in the insurance market to rapidly establish our market presence. We intend to continue to rely on the strength and depth of these relationships
to generate new business in the future and establish ourselves as a leading writer of specialty lines and treaty reinsurance.
•
Opportunistically Manage a Diverse Portfolio of Specialty Risks.
We are opportunistic and
selective participants in business lines that have been most affected by the significant contraction in global underwriting capacity. In 2002, we constructed a diverse portfolio of business lines
consistent with our long-term targets. We intend to use our underwriting expertise to emphasize particular business lines in response to changing market conditions. By carefully choosing
our exposures, we plan to maintain a short to medium tail focus and build a geographically diverse portfolio that minimizes correlated risk.
•
Continue Commitment to Highly Disciplined Underwriting Practices.
We intend to continue to
utilize our disciplined underwriting approach to minimize risk and reduce the volatility of our operating results. We believe that the use of peer review processes throughout our organization,
combined with our strict management of global aggregate exposures across products and sophisticated modeling capabilities, allow us to realize attractive prices, favorable terms and risk
diversification.
•
Maintain a Conservative Balance Sheet and Superior Financial Ratings.
We are committed to
maintaining our excellent capitalization, financial strength and ratings over the long-term. Our assets are conservatively invested in high-grade fixed income securities. Our
investment strategy is to preserve capital and proactively avoid problem credits by applying stringent watch-list criteria and following formalized investment guidelines.
•
Realize Increased Profitability by Maintaining Our Efficient, Low-Cost
Infrastructure.
We intend to maintain and capitalize on our low-cost infrastructure to realize increased profitability as our business matures. Having
obtained requisite licenses, technology and underwriting expertise within our first year of operation, we believe we are well-positioned to grow our business without incurring significant
additional capital expenditures. We plan to use the flexibility provided by the scaleable nature of our infrastructure to respond to both positive and negative changes in market conditions as they
develop and to integrate new business opportunities in a cost-efficient manner.
•
Manage Capital Prudently.
We intend to manage our capital prudently relative to our risk
exposure to maximize profitability and long-term growth in shareholder value. Our capital management strategy is to deploy capital efficiently to underwriting opportunities and to
establish adequate
loss reserves
to protect against future adverse developments.
4
Risks Relating to Our Company
As part of your evaluation of our company, you should take into account the risks we face in our business. These risks include:
•
Limited Operating History.
We began our business in November 2001, and have a limited
operating and financial history. As a result, there is limited historical financial and operating information available to help you evaluate our performance or an investment in our common shares. In
addition, because we have not experienced any substantial claims to date, our historical financial results may not accurately indicate our future performance.
•
Exposure to Natural and Man-Made Disasters.
We may have substantial exposure to
unexpected losses resulting from natural and man-made disasters and other catastrophic events. The incidence and severity of such catastrophes are inherently unpredictable and our losses
from catastrophes could be substantial. The occurrence of claims from catastrophic events is likely to result in substantial volatility in our financial condition or results of operations for any
fiscal quarter or year and could have a material adverse effect on our financial condition or results of operations and our ability to write new business.
•
Uncertainty of Loss Reserves.
Our results of operations and financial condition depend upon our
ability to assess accurately the potential losses associated with the risks that we insure and reinsure. To the extent actual claims exceed our expectations, this could cause a material increase in
our liabilities and a reduction in our profitability, including an operating loss and reduction of capital.
•
Failure of Loss Limitation Methods.
We seek to mitigate our loss exposure by employing various
limitations and exclusions. We cannot be sure that these loss limitation methods will be effective to mitigate the effect on our financial condition or results of operations from one or more
catastrophic or other events.
•
Emerging Claims and Coverage Issues.
Unexpected and unintended issues related to claims and
coverage may emerge as practices and conditions change both inside and outside of the insurance and reinsurance industry. These issues may adversely affect our business by either extending coverage
beyond our underwriting intent or by increasing the number or size of claims.
•
Risk Associated with Reinsurance Underwriting.
In our reinsurance business, we do not separately
evaluate each of the individual risks assumed under reinsurance treaties. This is common among reinsurers. Therefore, we will be largely dependent on the original underwriting decisions made by ceding
companies. We are subject to the risk that the ceding companies may not have adequately evaluated
the risks to be reinsured and that the premiums ceded may not adequately compensate us for the risks we assume.
•
Loss of Key Employees.
Our success will depend in substantial part upon our ability to attract
and retain our principal employees. If we were to lose the services of members of our management team, our business could be adversely affected.
For
more information about these and other risks, see "Risk Factors" beginning on page 10. You should carefully consider these risk factors together with all the other information
included in this prospectus.
5
Corporate History and Organization
We were founded with $1.7 billion of capital and began operations in November 2001 as AXIS Specialty. AXIS Specialty and its subsidiaries became
wholly owned subsidiaries of AXIS Holdings pursuant to an exchange offer consummated on December 31, 2002 (the "Exchange Offer").
Set
forth below is a chart of our corporate organization showing only our operating insurance companies.
Our
principal executive offices are located at 106 Pitts Bay Road, Pembroke HM 08, Bermuda, and our telephone number at that location is (441) 296-2600.
6
THE OFFERING
Common shares offered by us
common shares
Common shares offered by selling shareholders
common shares
Common shares to be outstanding after the offering
common shares
Over-allotment option
common shares
Use of proceeds
We estimate that our net proceeds from the initial public offering of        of our common shares, based on an assumed initial public offering price of
$                  per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and
commissions and estimated offering expenses we will pay, will be approximately $                   million. We estimate that our net proceeds will be
approximately $                   million if the underwriters exercise their over-allotment option in full. We intend to use the net proceeds of this
offering as additional capital for operations and general corporate purposes. We will not receive any of the proceeds from the sale of common shares by the selling shareholders.
Dividend policy
Our board of directors currently intends to authorize the payment of a dividend of $                  per common
share per quarter to our shareholders of record, beginning                  . Any determination to pay dividends will be at the discretion of our board of
directors and will be dependent upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and any
other factors our board of directors deems relevant.
Proposed New York Stock Exchange symbol
AXS
The
number of shares shown to be outstanding after the offering is based upon 17,271,065 common shares outstanding as of December 31, 2002 and excludes:
•
common
shares that may be issued pursuant to the underwriters' over-allotment option;
•
2,431,663
common shares that may be issued pursuant to warrants outstanding as of December 31, 2002 at a price of $100 per share;
•
559,439
common shares that may be issued pursuant to options that had been granted as of December 31, 2002 at a weighted average exercise price of
$104.25 per share; and
•
137,592
additional common shares available for future issuance under our stock option and incentive plans.
7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth our summary historical consolidated financial information for the periods ended and as of the dates indicated. AXIS Specialty was
incorporated on November 8, 2001 and commenced operations on November 20, 2001. AXIS Holdings was incorporated on December 9, 2002. On December 31, 2002, AXIS Specialty and
its subsidiaries became wholly owned subsidiaries of AXIS Holdings pursuant to the Exchange Offer. In the Exchange Offer, the shareholders of AXIS Specialty exchanged their shares for identical
shareholdings in AXIS Holdings. Following the Exchange Offer, AXIS Specialty distributed all of its wholly owned subsidiaries to AXIS Holdings. The Exchange Offer represents a business combination of
companies under common control and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty.
The
summary income statement and balance sheet data are derived from our audited consolidated financial statements included elsewhere in this prospectus, which have been prepared in
accordance with
generally accepted accounting principles
in the United States ("U.S. GAAP"). These historical results are not necessarily indicative of
results to be expected from any future period. You should read the following summary consolidated financial information together with the other information contained in this prospectus, including
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus.
Year Ended December 31, 2002
Period Ended December 31, 2001(1)
($ in thousands, except share amounts)
Summary Income Statement Data:
Gross premiums written
$
1,108,003
$
26,746
Premiums ceded
(89,726
)
—
Net premiums earned
536,850
1,884
Net investment income
71,287
4,763
Net realized gains
26,070
394
Losses and loss expenses
229,265
963
Acquisition costs
103,703
832
General and administrative expenses
46,521
2,566
Net income
265,119
2,680
Per Share Data:
Basic earnings per share
Diluted earnings per share
Basic weighted average shares outstanding
Diluted weighted average shares outstanding
Selected Ratios (based on U.S. GAAP income statement data):
Loss and loss expense ratio(2)
42.7
%
51.1
%
Acquisition cost ratio(3)
19.3
44.2
General and administrative expense ratio(4)
8.7
136.2
Combined ratio(5)
70.7
%
231.5
%
8
As of December 31, 2002
Actual
As Adjusted (unaudited)(6)
($ in thousands, except share amounts)
Summary Balance Sheet Data:
Cash and cash equivalents
$
729,296
Investments at fair market value
1,702,990
Total assets
2,986,121
Reserve for losses and loss expenses
215,934
Unearned premiums
555,962
Total shareholders' equity
$
1,961,033
Per Share Data (based on U.S. GAAP balance sheet data):
Book value per share(7)
$
113.54
Diluted book value per share(8)
111.66
(1)
The
financial information for this period reflects our results from November 8, 2001, the date of incorporation of AXIS Specialty, to December 31, 2001.
(2)
The
loss and loss expense ratio
is calculated by dividing
losses and loss expenses
by
net premiums earned.
(3)
The
acquisition cost ratio
is calculated by dividing total
acquisition costs
by net
premiums earned.
(4)
The
general and administrative expense ratio
is calculated by dividing general and administrative expenses by net premiums earned.
(5)
The
combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio.
(6)
The
as adjusted balance sheet data as of December 31, 2002 reflects the estimated net proceeds of the sale of                  common shares by us in this
offering (assuming no
exercise of the underwriters' over-allotment option) at an assumed initial public offering price of $                      per share (the
midpoint of the price range set forth on
the cover page of this prospectus) and after deducting the underwriting discounts and commissions and estimated offering expenses.
(7)
Book
value per share is based on total shareholders' equity divided by basic shares outstanding of 17,271,065 as of December 31, 2002.
(8)
Diluted
book value per share is calculated based on total shareholders' equity, adjusted for the proceeds expected to be received upon the exercise of options and warrants, divided by
the number of common shares and common share equivalents outstanding at the end of the period.
9
RISK FACTORS
An investment in our common shares involves a number of risks. You should carefully consider the following information about these risks,
together with the other information contained in this prospectus, before investing in our common shares. The risks and uncertainties described below are not the only ones we face. However, these are
the risks our management believes are material. Additional risks not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Any of the risks
described below could result in a significant or material adverse effect on our results of operations or financial condition, and a corresponding decline in the market price of our common shares. You
could lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this prospectus. See "Forward-Looking Statements."
Risks Related to Our Company
Our future performance is difficult to predict because we have a limited operating history.
We began our business in November 2001, and have a limited operating and financial history. As a result, there is limited historical financial and
operating information available to help you evaluate our performance or an investment in our common shares. Insurance companies in their initial stages of development face substantial business and
financial risks and may suffer significant losses. They must successfully develop business relationships, establish operating procedures, hire staff, install management information and other systems
and complete other tasks necessary to conduct their intended business activities. It is possible that we will not be successful in implementing our business strategy or accomplishing these necessary
tasks. In addition, because we have not experienced any substantial claims to date, our historical financial results may not accurately indicate our future performance.
Our financial condition could be adversely affected by the occurrence of natural and man-made disasters.
We may have substantial exposure to unexpected losses resulting from natural disasters, man-made catastrophes and other catastrophic events.
Catastrophes can be caused by various events, including hurricanes, earthquakes, hailstorms, explosions, severe winter weather, fires, war, acts of terrorism, political instability and other natural
or man-made disasters. In addition, we have written and will continue to write policies explicitly covering war, acts of terrorism and political risk. The incidence and severity of such
catastrophes are inherently unpredictable and our losses from catastrophes could be substantial. The occurrence of claims from catastrophic events is likely to result in substantial volatility in our
financial condition or results of operations for any fiscal quarter or year and could have a material adverse effect on our financial condition or results of operations and our ability to write new
business. This volatility is compounded by accounting regulations that do not permit reinsurers to reserve for such catastrophic events until they occur. We expect that increases in the values and
concentrations of insured property may increase the severity of such occurrences in the future. Although we attempt to manage our exposure to such events, a single catastrophic event could affect
multiple geographic zones or the frequency or severity of catastrophic events could exceed our estimates. As a result, the occurrence of one or more catastrophic events could have a material adverse
effect on our financial condition or results of operations.
10
If actual claims exceed our loss reserves, our financial results could be significantly adversely affected.
Our results of operations and financial condition depend upon our ability to assess accurately the potential losses associated with the risks that we insure and
reinsure. To the extent actual claims exceed our expectations, we will be required to immediately recognize the less favorable experience. This could cause a material increase in our liabilities and a
reduction in our profitability, including an operating loss and reduction of capital. To date, we have not been required to make any of these adjustments. However, it is early in our history, and the
number and size of reported claims has been small. It is expected that in the future, the number of claims will increase, and their size could exceed our expectations.
We
establish loss reserves to cover our estimated liability for the payment of all losses and loss expenses incurred with respect to premiums earned on the policies that we write. Our
operating history is too limited and our loss history is too insufficient to allow us currently to extrapolate
reserves
directly. Instead, our current
loss reserves are based on estimates involving actuarial and statistical projections of our expectations of the ultimate settlement and administration costs of claims
incurred
but not reported
("IBNR"). We utilize actuarial models as well as historical insurance industry loss development patterns to establish appropriate loss reserves, as well as
estimates of future trends in claims severity, frequency and other factors. Establishing an appropriate level of loss reserves is an
inherently uncertain process. Accordingly, actual claims and claim expenses paid will likely deviate, perhaps substantially, from the reserve estimates reflected in our consolidated financial
statements.
If
our loss reserves are determined to be inadequate, we will be required to increase loss reserves at the time of such determination with a corresponding reduction in our net income in
the period in which the deficiency is rectified. It is possible that claims in respect of events that have occurred could exceed our loss reserves and have a material adverse effect on our results of
operations or our financial condition in general.
The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or our results of operations.
We seek to mitigate our loss exposure by writing a number of our insurance and reinsurance contracts on an
excess of loss
basis. In
addition, we limit program size for each client and purchase reinsurance for our own account. In the case of
proportional reinsurance
treaties, we seek per occurrence limitations or loss and loss
expense ratio caps to limit the impact of losses from any one event. We cannot be sure that any of these loss
limitation methods will be effective. We also seek to limit our loss exposure by geographic diversification. Geographic zone limitations involve significant underwriting judgments, including the
determination of the area of the zones and the inclusion of a particular policy within a particular zone's limits. Various provisions of our policies, such as limitations or exclusions from coverage
or choice of forum, negotiated to limit our risks may not be enforceable in the manner we intend. As a result of these risks, one or more catastrophic or other events could result in claims that
substantially exceed our expectations, which could have a material adverse effect on our financial condition or results of operations.
The effects of emerging claim and coverage issues on our business are uncertain.
As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may
emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may
not become apparent until some time after we have issued insurance or reinsurance contracts that are affected by the changes. As a result, the full extent of liability under our insurance or
reinsurance contracts may not be known for many years after a contract is issued. One recent example of an emerging claims and
11
coverage issue is larger settlements and jury awards against professionals and corporate directors and officers covered by professional liability and directors' and officers' liability insurance.
The risk associated with reinsurance underwriting could adversely affect us.
In our reinsurance business, we do not separately evaluate each of the individual risks assumed under reinsurance treaties. This is common among reinsurers.
Therefore, we will be largely dependent on the original underwriting decisions made by ceding companies. We are subject to the risk that the ceding companies may not have adequately evaluated the
risks to be reinsured and that the premiums ceded may not adequately compensate us for the risks we assume.
We could be adversely affected by the loss of one or more principal employees or by an inability to attract and retain staff.
Our success will depend in substantial part upon our ability to attract and retain our principal employees. As of January 1, 2003, we had 168
full-time employees and, accordingly, depend upon them for the generation and servicing of our business. We rely substantially upon the services of our executive management team. Although
we are not aware of any planned departures, if we were to lose the services of members of our management team, our business could be adversely affected. We do not currently maintain key man life
insurance policies with respect to our employees except for our Chief Executive Officer, John R. Charman.
Our operating subsidiaries are rated by Standard & Poor's and A.M. Best, and a decline in these ratings could affect our standing among brokers and customers and
cause our sales and earnings to decrease.
Ratings have become an increasingly important factor in establishing the competitive position of insurance and reinsurance companies. Standard & Poor's
maintains a letter scale rating system ranging from "AAA" (Extremely Strong) to "R" (under regulatory supervision). A.M. Best maintains a letter scale rating system ranging from "A++"
(Superior) to "F" (in liquidation). Our operating subsidiaries (with the exception of AXIS Indemnity, which has not been rated) have been rated "A" (Strong) by Standard & Poor's, which is the
sixth highest of twenty-one rating levels, and "A-" (Excellent) by A.M. Best, which is the fourth highest of fifteen rating levels. The objective of Standard &
Poor's and A.M. Best's rating systems is to provide an opinion of an insurer's financial strength and ability to meet ongoing obligations to its policyholders. Our ratings reflect
Standard & Poor's and A.M. Best's opinions of our financial strength, are not evaluations directed to investors in our common shares and are not recommendations to buy, sell or hold our
common shares.
Our
ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of, Standard & Poor's and/or A.M. Best. If our ratings are
reduced from their current levels by either Standard & Poor's or A.M. Best, our competitive position in the insurance and reinsurance industry would suffer, and it would be more
difficult for us to market our products. A downgrade, therefore, could result in a substantial loss of business as insureds, ceding companies and brokers that place such business move to other
insurers and reinsurers with higher ratings. In addition, we will be in default of our revolving credit facility if we do not maintain a rating of at least B++ from A.M. Best.
Our reliance on brokers subjects us to their credit risk.
In accordance with industry practice, we frequently pay amounts owed on claims under our insurance and reinsurance contracts to brokers, and these brokers, in
turn, pay these amounts over to the clients that have purchased insurance or reinsurance from us. In some jurisdictions, if a broker fails to make such a payment, we might remain liable to the insured
or ceding insurer for the deficiency. Conversely, in certain jurisdictions, when the insured or ceding insurer pays premiums for these policies
12
to brokers for payment over to us, these premiums are considered to have been paid and the insured or ceding insurer will no longer be liable to us for those amounts, whether or not we have actually
received the premiums from the broker. Consequently, we assume a degree of credit risk associated with brokers around the world. To date we have not experienced any losses related to such credit
risks.
If we choose to purchase reinsurance, we may be unable to do so, and if we successfully purchase reinsurance, we may be unable to collect.
We purchase a limited amount of reinsurance for our own account in order to mitigate the effect of large and multiple losses upon our financial condition. A
reinsurer's insolvency, or inability or refusal to make payments under the terms of its reinsurance agreement with us could have a material adverse effect on us because we remain liable to the
insured.
From
time to time, market conditions have limited, and in some cases have prevented, insurers and reinsurers from obtaining the types and amounts of reinsurance that they consider
adequate for their business needs. For example, following the tragic events of September 11, 2001, terms and conditions in the reinsurance and retrocessional markets generally became less
attractive. Accordingly, we may not be able to obtain our desired amounts of reinsurance or
retrocessional reinsurance
. In addition, even if we are able
to obtain such reinsurance or retrocessional reinsurance, we may not be able to negotiate terms that we deem appropriate or acceptable or obtain such reinsurance or retrocessional reinsurance from
entities with satisfactory creditworthiness.
Since we depend on a few brokers for a large portion of our revenues, loss of business provided by any one of them could adversely affect us.
We market our insurance and reinsurance worldwide primarily through insurance and reinsurance brokers. Marsh, including its subsidiary Guy Carpenter, Aon, Willis
and Benfield provided 37.9%, 20.7%, 10.6% and 5.5% (for a total of 74.7%), respectively, of our
gross premiums written
in the year ended
December 31, 2002. We believe these brokers also have, or may in the future acquire, ownership interests in insurance and reinsurance companies that may compete with us, and these brokers may
favor their own insurers or reinsurers over other companies. Loss of all or a substantial portion of the business provided by one or more of these brokers could have a material adverse effect on our
business.
Our investment performance may affect our financial results and ability to conduct business.
Our funds are invested by several professional investment advisory management firms under the direction of our management team in accordance with detailed
investment guidelines set by us. See "Business—Investments." Although our investment policies stress diversification of risks, conservation of principal and liquidity, our investments are
subject to market-wide risks and fluctuations, as well as to risks inherent in particular securities. In particular, the volatility of our claims may force us to liquidate securities,
which may cause us to incur capital losses. If we do not structure our investment portfolio so that it is appropriately matched with our insurance and reinsurance liabilities, we may be forced to
liquidate investments prior to maturity at a significant loss to cover such liabilities. Investment losses could significantly decrease our asset base, thereby affecting our ability to conduct
business.
We may be adversely affected by interest rate changes.
Our operating results are affected, in part, by the performance of our investment portfolio. Our investment portfolio contains interest rate
sensitive-instruments, such as bonds, which may be adversely affected by changes in interest rates. Changes in interest rates could also have an adverse effect on our investment income and results of
operations. For example, if interest rates decline, funds reinvested will earn less than expected.
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In
addition, our investment portfolio includes mortgage-backed securities. As of December 31, 2002, mortgage-backed securities constituted approximately 32.9% of our invested
assets (assets under management by third party investment managers). As with other fixed income investments, the fair market value of these securities fluctuates depending on market and other general
economic conditions and the interest rate environment. Changes in interest rates can expose us to prepayment risks on these investments. In periods of declining interest rates, mortgage prepayments
generally increase and mortgage-backed securities are prepaid more quickly, requiring us to reinvest the proceeds at the then current market rates.
Interest
rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our
control. Although we attempt to take measures to manage the risks of investing in a changing interest rate environment, we may not be able to mitigate interest rate sensitivity effectively. Our
mitigation efforts include maintaining a high quality portfolio with a relatively short duration to reduce the effect of interest rate
changes on book value. Despite our mitigation efforts, a significant increase in interest rates could have a material adverse effect on our book value.
We may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
Our future capital requirements depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at
levels sufficient to cover losses. To the extent that the funds generated by this offering are insufficient to fund future operating requirements and/or cover claim losses, we may need to raise
additional funds through financings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. In the case of equity
financings, dilution to our shareholders could result, and in any case such securities may have rights, preferences and privileges that are senior to those of the shares offered hereby. If we cannot
obtain adequate capital on favorable terms or at all, our business, operating results and financial condition could be adversely affected.
Our operating results may be adversely affected by currency fluctuations.
Our functional currency is the U.S. dollar. As of December 31, 2002, 12.7% of our gross premiums were written in currencies other than the U.S. dollar and
we expect that a similar proportion will be written in currencies other than the U.S. dollar in 2003. A portion of our loss reserves and investments are also in non-U.S. currencies. We
may, from time to time, experience losses resulting from fluctuations in the values of these non-U.S. currencies, which could adversely affect our operating results.
We
have no currency hedges in place, nor are we currently aware of any material exposures to loss payments that will be paid in non-U.S. currencies. We intend to consider the
use of hedges when we are advised of known or probable significant losses that will be paid in non-U.S. currencies. However, it is possible that we will not successfully structure those
hedges so as to effectively manage these risks.
The regulatory system under which we operate, and potential changes thereto, could have a material adverse effect on our business.
General.
Our insurance and reinsurance subsidiaries may not be able to obtain or maintain necessary licenses, permits,
authorizations or accreditations in locales where we currently engage in business or in new locales, or may be able to do so only at significant cost. In addition, we may not be able to comply fully
with, or obtain appropriate exemptions from, the wide variety of laws and regulations applicable to
insurance or reinsurance companies or holding companies. Failure to comply with or to obtain appropriate authorizations and/or exemptions under any applicable laws could result
14
in restrictions on our ability to do business or certain activities that are regulated in one or more of the jurisdictions in which we operate and could subject us to fines and other sanctions, which
could have a material adverse effect on our business. In addition, changes in the laws or regulations to which our insurance and reinsurance subsidiaries are subject could have a material adverse
effect on our business.
AXIS Specialty.
AXIS Specialty is a registered Class 4 Bermuda insurance and reinsurance company. Among other matters,
Bermuda statutes, regulations and policies of the BMA require AXIS Specialty to maintain minimum levels of statutory capital, surplus and liquidity, to meet solvency standards, to obtain prior
approval of ownership and transfer of shares and to submit to certain periodic examinations of its financial condition. These statutes and regulations may, in effect, restrict AXIS Specialty's ability
to write insurance and reinsurance policies, to make certain investments and to distribute funds.
The
offshore insurance and reinsurance regulatory environment has become subject to increased scrutiny in many jurisdictions, including the United States and various states within the
United States. Compliance with any new laws or regulations regulating offshore insurers or reinsurers could have a material adverse effect on our business. In addition, although AXIS Specialty does
not believe it is or will be in violation of insurance laws or regulations of any jurisdiction outside Bermuda, inquiries or challenges to AXIS Specialty's insurance or reinsurance activities may
still be raised in the future.
AXIS U.S. Subsidiaries.
AXIS Reinsurance is organized in New York and is licensed to write certain lines of insurance and
reinsurance in New York and elsewhere throughout the United States. There is currently a restriction on its license in North Carolina that prevents it from writing new business in that state. We have
applied to the North Carolina regulators to have this restriction removed. AXIS Insurance and AXIS Indemnity are organized and licensed to write certain lines of insurance in Connecticut and Illinois,
respectively, and are eligible to write certain lines of insurance in certain other U.S. jurisdictions on an excess or surplus lines basis (AXIS Reinsurance, AXIS Insurance and AXIS Indemnity are
collectively referred to as the "AXIS U.S. Subsidiaries"). The AXIS U.S. Subsidiaries are subject to the laws and regulations of their respective states of domicile and other jurisdictions in which
they are licensed or otherwise eligible to engage in business. These laws and regulations, among other things, subject some affiliate transactions between such entities and other members of our
holding company system to regulatory authority and require them to maintain minimum levels of capital, surplus and liquidity and comply with applicable risk-based capital requirements. In
addition, they impose restrictions on the payment of dividends and distributions and in certain cases require them to file insurance premium rates and policy forms. These statutes and regulations may,
in effect, restrict the ability of the AXIS U.S. Subsidiaries to write new business or distribute assets to AXIS Holdings. The purpose of the state insurance laws and regulations is to protect U.S.
insureds and U.S. ceding insurance companies, not our shareholders.
In
recent years, the U.S. insurance regulatory framework has come under increased federal scrutiny, and some state legislators have considered or enacted laws that may alter or increase
state regulation
of insurance and reinsurance companies and holding companies. Moreover, the National Association of Insurance Commissioners ("NAIC"), which is an association of the insurance commissioners of all 50
states and the District of Columbia, and state insurance regulators regularly reexamine existing laws and regulations. Changes in these laws and regulations or the interpretation of these laws and
regulations could have a material adverse effect on our business.
AXIS Specialty Europe.
AXIS Specialty Europe is a non-life insurance company incorporated under the laws of
Ireland and as such is subject to the regulation and supervision of the Department of Enterprise, Trade and Employment ("DETE") pursuant to the Irish Insurance Acts, 1909 to 2000 and the regulations
relating to insurance business (together, the "Insurance Acts and Regulations"). Among other things, without the consent of the Minister for Enterprise, Trade and Employment (the "Minister"), AXIS
Specialty Europe is not permitted to reduce the level of its capital, may not make
15
any dividend payments, may not make intercompany loans and must maintain a minimum solvency margin. Additionally, AXIS Specialty Europe has agreed, in connection with receiving its authorization to
engage in the insurance business, not to write any reinsurance business. Also, an insurance company supervised by the DETE may have its authorization revoked by the Minister under certain
circumstances, including, among others, if the Minister determines that such company has not used its authorization for the last 12 months, has expressly renounced its authorization or has
ceased to carry on business covered by the authorization for more than six months, or no longer fulfills the conditions required by the Insurance Acts and Regulations.
AXIS Re.
AXIS Re is a reinsurance company incorporated under the laws of Ireland. Under Irish law, a reinsurance company such
as AXIS Re is required to maintain a minimum level of paid up share capital. As a general matter, AXIS Re is not subject to the same level of regulation in Ireland as AXIS Specialty Europe. However,
the Insurance Acts and Regulations provide that the Minister may create regulations that cause the general insurance laws and regulations in Ireland to apply to reinsurance companies that carry on the
type of business that AXIS Re carries on. If any regulations were adopted, such regulations could require AXIS Re to apply to the Minister to be authorized to carry on its business, which
authorization would likely contain conditions with which AXIS Re would then have to comply, such as in regard to capitalization, maintenance of reserves, reserving policy, investment policy, solvency
requirements and the filing of returns. If such an application for authorization were not successful or if AXIS Re were unable to comply with such conditions as might be attached to such
authorization, it would not be lawful for it to continue to carry on its business and it would have to cease operations.
The
Minister has the power under Section 22 of the Insurance Act, 1989 (as inserted by Section 5 of the Insurance Act, 2000) to direct AXIS Re to cease writing business
indefinitely or for a specified period for, among other grounds, inadequate capitalization, unsuitable directors and/or management or insufficient staff based in Ireland.
In
addition, the European Commission is currently considering proposals the effect of which would be to harmonize the regulation of reinsurers across the European Union (the "EU") and to
permit a reinsurer authorized in one EU member state to carry on business in any other EU member state
without requiring further authorization. If these proposals were to become law in Ireland, AXIS Re would be subject to a higher level of regulation than currently. However, while it is likely that
such a proposal will be adopted, at this preliminary stage it is not possible to determine the form that such regulation will take, and what impact, if any, such regulation would have on our financial
condition and results of operations.
Changes
in these laws and regulations or the interpretation of these laws and regulations could have a material adverse effect on our business or results of operations.
Our inability to obtain the necessary credit could affect our ability to offer reinsurance in certain markets.
AXIS Specialty is not licensed or admitted as an insurer in any jurisdiction other than Bermuda. Because many jurisdictions do not permit insurance companies to
take credit for reinsurance obtained from unlicensed or non-admitted insurers on their statutory financial statements unless appropriate security mechanisms are in place, we anticipate
that our reinsurance clients will typically require AXIS Specialty to post a letter of credit or other collateral. We expect that the $375 million available for letters of credit under AXIS
Specialty's revolving credit facility will be used for this purpose. However, if this facility is not sufficient or if we are unable to renew this facility or are unable to arrange for other types of
security on commercially reasonable terms, AXIS Specialty could be limited in its ability to write business for certain of our clients.
16
Our business could be adversely affected by Bermuda employment restrictions.
We may need to hire additional employees to work in Bermuda. Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may not engage in
any gainful occupation in Bermuda without an appropriate governmental work permit. Work permits may be granted or extended by the Bermuda government upon showing that, after proper public
advertisement in most cases, no Bermudian (or spouse of a Bermudian) is available who meets the minimum standard requirements for the advertised position. The Bermuda government recently announced a
new policy limiting the duration of work permits to six years, with certain exemptions for key employees. All of our Bermuda-based professional employees who require work permits have been granted
permits by the Bermuda government. The terms of these permits range from one to three years depending on the individual. It is possible that we could lose the services of one or more of our key
employees if we were unable to obtain or renew their work permits, which could have a material adverse affect on our business.
Our ability to pay dividends may be constrained by our holding company structure and certain regulatory and other constraints.
AXIS Holdings is a holding company and, as such, has no substantial operations of its own. AXIS Holdings does not expect to have any significant operations or
assets other than its ownership of the shares of its operating insurance and reinsurance subsidiaries, AXIS Specialty, AXIS Re, AXIS Specialty Europe, AXIS Reinsurance, AXIS Insurance and AXIS
Indemnity (collectively, our "Insurance Subsidiaries"). Dividends and other permitted distributions from our Insurance Subsidiaries are expected to be our sole source of funds to meet ongoing cash
requirements, including any future debt service payments and other expenses, and to pay dividends, if any, to our shareholders. Our Insurance Subsidiaries are subject to significant regulatory
restrictions limiting their ability to declare and pay dividends. The inability of our Insurance Subsidiaries to pay dividends in an amount sufficient to enable us to meet our cash requirements at the
holding company level could have a material adverse effect on our operations and our ability to pay dividends to our shareholders.
Additionally,
AXIS Holdings is subject to Bermuda regulatory constraints that will affect its ability to pay dividends on its common shares and make other payments. Under the Bermuda
Companies Act of 1981, as amended (the "Companies Act"), AXIS Holdings may declare or pay a dividend out of distributable reserves only if it has reasonable grounds for believing that it is, or would
after the payment be, able to pay its liabilities as they become due and if the realizable value of its assets would thereby not be less than the aggregate of its liabilities and issued share capital
and share premium accounts. For more information regarding restrictions on the payment of dividends by AXIS Holdings and the Insurance Subsidiaries, see "Dividend Policy" and "Regulation."
Our founding shareholders and certain of our directors may have conflicts of interest with us.
Our founding shareholders and certain of our directors engage in commercial activities and enter into transactions or agreements with us or in competition with
us, which may give rise to conflicts of interest. We derive a significant portion of our business through insurance and reinsurance relationships and other arrangements in which Marsh or its
affiliates have acted as a broker or insurance or reinsurance intermediary. In addition, our founding shareholders and certain of our directors have sponsored, and may in the future sponsor, other
entities engaged in or intending to engage in insurance and reinsurance underwriting, some of which may compete with us. They have also entered into or may in the future enter into, agreements with
companies that may compete with us. We do not have any agreement or understanding with any of these parties regarding the resolution of potential conflicts of interest. In addition, we may not be in a
position to influence any party's decision to engage in activities that would give rise to a conflict of interest. These parties may take actions that are not in our shareholders' best interests.
17
Risks Related to Our Industry
We operate in a highly competitive environment, and substantial new capital inflows into the insurance and reinsurance industry will increase competition.
The insurance and reinsurance industry is highly competitive. We compete on an international and regional basis with major U.S., Bermuda, European and other
insurers and reinsurers and certain underwriting syndicates, some of which have greater financial, marketing and management resources than we do. See "Business—Competition." We compete
primarily on the basis of experience, the strength of our client relationships, reputation, speed of claims payment, overall financial strength, ratings, scope of business (both by size and geographic
location), premiums charged, policy and contract terms and conditions and products offered.
A
number of newly-organized, Bermuda-based insurance and reinsurance entities compete in the same market segments in which we operate. In addition, we may not be aware of other companies
that may be planning to enter the segments of the insurance and reinsurance market in which we operate or of existing companies that may be planning to raise additional capital. Increased competition
could result in fewer
submissions
, lower premium rates and less favorable policy terms and conditions, which could have a material adverse impact on our
growth and profitability.
Further,
insurance/risk-linked securities and derivative and other non-traditional risk transfer mechanisms and vehicles are being developed and offered by other
parties, including non-insurance company entities, which could impact the demand for traditional insurance and reinsurance. A number of new, proposed or potential legislative or industry
developments could also increase competition in our industries.
New
competition could cause the demand for insurance or reinsurance to fall or the expense of customer acquisition and retention to increase, either of which could have a material
adverse effect on our growth and profitability.
Recent events may result in political, regulatory and industry initiatives which could adversely affect our business.
The supply of insurance and reinsurance coverage has decreased due to withdrawal of capacity and substantial reductions in capital resulting from, among other
things, the tragic events of September 11, 2001. This tightening of supply may result in governmental intervention in the insurance and reinsurance markets, both in the United States and
worldwide. For example, on November 26, 2002, the
Terrorism Risk Insurance Act was enacted to ensure the availability of insurance coverage for terrorist acts in the United States. This law requires insurers writing certain lines of property and
casualty insurance to offer coverage against certain acts of terrorism causing damage within the United States or to U.S. flagged vessels or aircraft. In return, the law requires the federal
government to indemnify such insurers for 90% of insured losses resulting from covered acts of terrorism, subject to a premium-based deductible. The law expires automatically at the end of 2005. See
"Regulation—United States—Legislative Changes." Currently there is a great deal of uncertainty as to what effect the law will have on the insurance industry. At a minimum,
insurers will offer increased underwriting capacity in the United States for terrorism-related coverage, which could have an adverse effect on our business because we believe we were among the few
insurers already offering terrorism protection when the Act was adopted. We are currently unable to predict the extent to which the foregoing and other new initiatives may affect the demand for our
products or the risks which may be available for us to consider underwriting. At the same time, threats of further terrorist attacks and the military initiatives and political unrest in the Middle
East and Asia have adversely affected general economic, market and political conditions, increasing many of the risks associated with the insurance markets worldwide.
18
The insurance and reinsurance business is historically cyclical, and we expect to experience periods with excess underwriting capacity and unfavorable premium rates.
Historically, insurers and reinsurers have experienced significant fluctuations in operating results due to competition, frequency of occurrence or severity of
catastrophic events, levels of capacity, general economic conditions and other factors. The supply of insurance and reinsurance is related to prevailing prices, the level of insured losses and the
level of industry surplus which, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance and reinsurance industry. As a result, the insurance and
reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of
capacity permitted favorable premium levels. Although premium levels for many products have increased in recent months, the supply of insurance and reinsurance may increase, either by capital provided
by new entrants or by the commitment of additional capital by existing insurers or reinsurers, which may cause prices to decrease. Any of these factors could lead to a significant reduction in premium
rates, less favorable policy terms and fewer submissions for our underwriting services. In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and
insurers may affect the cycles of the insurance and reinsurance business significantly, and we expect to experience the effects of such cyclicality.
Risks Related to Our Common Shares and This Offering
There is no prior public market for our common shares and therefore you cannot be certain that an active trading market or a specific share price will be established.
Currently there is no public trading market for our common shares and, as a result of this risk, it is possible that an active trading market will not develop and
continue upon completion of this offering or that the market price of our common shares will decline below the initial public offering price. We intend to apply to list our common shares on the New
York Stock Exchange under the symbol "AXS." The initial public offering price per common share will be determined by agreement among us and the representatives of the underwriters and may not be
indicative of the market price of our common shares after our initial public offering.
Future sales of common shares may affect their market price and the future exercise of options and warrants will result in immediate and substantial dilution.
We cannot predict what effect, if any, future sales of our common shares, or the availability of common shares for future sale, will have on the market price of
our common shares. Sales of substantial amounts of our common shares in the public market following our initial public offering, or the perception that such sales could occur, could adversely affect
the market price of our common shares and may make it more difficult for you to sell your common shares at a time and price which you deem appropriate. See "Description of Share
Capital—Shareholders Agreement" and "Shares Eligible for Future Sale" for further information regarding circumstances under which additional common shares may be sold.
Upon
completion of our initial public offering, there will be                  common shares outstanding. If the underwriters' over-allotment option for an
additional
                  common shares is exercised,                  common
shares will be outstanding. Moreover, an additional                  common shares will be issuable upon the full exercise or
conversion of outstanding vested options and warrants. In the event that the over-allotment option or any outstanding options or warrants to purchase common shares are exercised, you will
suffer immediate and substantial dilution of your investment.
We,
our directors, officers and certain of our existing shareholders have agreed, with limited exceptions, for a period of 180 days after the date of this prospectus, that we and
they will not, without the prior written consent of Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. on
19
behalf of the underwriters, directly or indirectly, offer to sell, sell or otherwise dispose of any of our common shares. All of the shareholders party to our shareholders agreement are subject to
similar restrictions. Following the consummation of this offering, certain of our existing shareholders and their transferees will have the right to require us to register their common shares under
the Securities Act of 1933 (the "Securities Act") for sale into the public markets, subject to the 180-day lock-up agreements and the restrictions in our shareholders
agreement. See "Description of Share Capital—Shareholders Agreement." Upon the effectiveness of any such registration statement, all shares covered by the registration statement will be
freely transferable. In addition, following the consummation of this
offering, we intend to file a registration statement on Form S-8 under the Securities Act to register an aggregate of                  common shares
reserved for issuance
under our Long-Term Equity Compensation Plan and our Directors Deferred Compensation Plan. Subject to the exercise of issued and outstanding options, shares registered under the registration statement
on Form S-8 will be available for sale into the public markets after the expiration of the 180-day lock-up agreements.
Public investors will suffer immediate and substantial dilution as a result of this offering.
The initial public offering price per common share is significantly higher than our net book value per share. Accordingly, if you purchase common shares in this
offering, you will suffer immediate and substantial dilution of your investment. Based upon the issuance and sale of                  common shares at an
assumed initial public offering price of
$                  per share (the midpoint of the price range set forth on the cover page of this prospectus), you will incur immediate dilution of
approximately $                  in the net book value
per common share if you purchase common shares in this offering.
There are provisions in our charter documents which may reduce or increase the voting rights of our common shares.
Our bye-laws generally provide that shareholders have one vote for each common share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However, pursuant to a mechanism specified in our bye-laws the voting rights exercisable by a shareholder may be limited
so that certain persons or groups are not deemed to hold 9.5% or more of the voting power conferred by our common shares. The votes that could be cast by a shareholder but for these restrictions will
be allocated to the other shareholders. In addition, our board of directors may limit a shareholder's exercise of voting rights where it deems it necessary to do so to avoid adverse tax, legal or
regulatory consequences.
Under
these provisions, certain shareholders may have the right to exercise their voting rights limited to less than one vote per share, while other shareholders may have the right to
exercise their voting rights increased to more than one vote per share. Moreover, these provisions could have the effect of reducing the voting power of certain shareholders who would not otherwise be
subject to the limitation by virtue of their direct share ownership. Our bye-laws provide that shareholders will be notified of the applicable voting power exercisable with respect to
their common shares prior to any vote to be taken by the shareholders. See "Description of Share Capital—Voting Rights."
As
a result of any reallocation of votes, your voting rights might increase above 5% of the aggregate voting power of the outstanding common shares, thereby possibly resulting in your
becoming a reporting person subject to Schedule 13D or 13G filing requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
We
also have the authority under our bye-laws to request information from any shareholder for the purpose of determining whether a shareholder's voting rights are to be
reallocated pursuant to the bye-laws. If a shareholder fails to respond to our request for information or submits incomplete or inaccurate information in response to a request by us, we
may, in our sole discretion, eliminate the shareholder's voting rights.
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There are provisions in our bye-laws which may restrict the ability to transfer common shares and which may require shareholders to sell their common shares.
Our board of directors may decline to register a transfer of any common shares under certain circumstances, including if they have reason to believe that any
non-de minimis adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders may occur as a result of such transfer.
Our
bye-laws also provide that if our board of directors determines that share ownership by a person may result in non-de minimis adverse tax, legal or regulatory
consequences to us, any of our subsidiaries or any of our shareholders, then we have the option, but not the obligation, to require that shareholder to sell to us or to third parties to whom we assign
the repurchase right for fair market value the minimum number of common shares held by such person which is necessary to eliminate the non-de minimis adverse tax, legal or regulatory
consequences. See "Description of Share Capital—Restrictions on Transfer of Common Shares or Warrants" and "Description of Share Capital—Acquisition of Common Shares by Us."
Applicable insurance laws may make it difficult to effect a change of control of our company.
Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the
domestic insurer is domiciled. Prior to granting approval of an application to acquire control of a domestic insurer, the state insurance commissioner will consider such factors as the financial
strength of the applicant, the integrity and management of the applicant's board of directors and executive officers, the acquiror's plans for the management of the applicant's board of directors and
executive officers, the acquiror's plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of
control. Generally, state statutes provide that control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing, 10% or more of the voting securities of the domestic insurer. Because a person acquiring 10% or more of our common shares would indirectly control the same percentage of the
stock of the AXIS U.S. Subsidiaries, the insurance change of control laws of Connecticut, Illinois and New York would likely apply to such a transaction.
In
addition, the Insurance Acts and Regulations in Ireland require that anyone acquiring or disposing of a direct or indirect holding in an insurance company (such as AXIS Specialty
Europe) that represents 10% or more of the capital or of the voting rights of such company or that makes it possible to exercise a significant influence over the management of such company, or anyone
who proposes to decrease or increase that holding to specified levels, must first notify the Minister of their intention to do so. They also require any insurance company that becomes aware of any
acquisitions or disposals of its capital involving the specified levels to notify the Minister. The specified levels are 20%, 33% and 50% or such other level of ownership that results in the company
becoming the acquiror's subsidiary. The Minister has three months from the date of submission of a notification within which to oppose the proposed transaction if the Minister is not satisfied as to
the suitability of the acquiror "in view of the necessity to ensure sound and prudent management of the insurance undertaking." Any person having a shareholding of 10% or more of the issued share
capital in AXIS Holdings would be considered to have an indirect holding in AXIS Specialty Europe over the 10% limit.
While
our bye-laws limit the voting power of any shareholder to less than 9.5%, there can be no assurance that the applicable regulatory body would agree that a shareholder
who owned greater than 10% of our common shares did not, because of the limitation on the voting power of such shares, control the applicable Insurance Subsidiary.
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These
laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of our Company, including through transactions, and in particular
unsolicited transactions, that some or all of our shareholders might consider to be desirable.
A few large shareholders may be able to influence shareholder decisions.
Immediately upon completion of this offering, we expect to have                  shareholders
each of whom owns beneficially common shares representing
        % or more of the voting power of our common shares on a fully diluted basis. As a result of their ownership position, these shareholders voting together may have the ability to
significantly influence matters requiring shareholder approval, including, without limitation, the election of directors and amalgamations, consolidations, changes of control of our company and sales
of all or substantially all of our assets.
U.S. persons who own our common shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation.
The Companies Act, which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and their shareholders. Set forth
below is a summary of certain significant provisions of the Companies Act which includes, where relevant, information on
modifications thereto adopted pursuant to our bye-laws, applicable to us, which differ in certain respects from provisions of Delaware corporate law. Because the following statements are
summaries, they do not discuss all aspects of Bermuda law that may be relevant to us and our shareholders.
Interested Directors.
Under Bermuda law and our bye-laws, a transaction entered into by us, in which a director
has an interest, will not be voidable by us, and such director will not be liable to us for any profit realized pursuant to such transaction, provided the nature of the interest is disclosed at the
first opportunity at a meeting of directors, or in writing to the directors. In addition, our bye-laws allow a director to be taken into account in determining whether a quorum is present
and to vote on a transaction in which that director has an interest following a declaration of the interest pursuant to the Companies Act provided that the director is not disqualified from doing so
by the chairman of the meeting. Under Delaware law, such transaction would not be voidable if:
•
The
material facts as to such interested director's relationship or interests were disclosed or were known to the board of directors and the board of
directors in good faith authorized the transaction by the affirmative vote of a majority of the disinterested directors;
•
Such
material facts were disclosed or were known to the shareholders entitled to vote on such transaction and the transaction was specifically approved in
good faith by vote of the majority of shares entitled to vote thereon; or
•
The
transaction was fair as to the corporation as of the time it was authorized, approved or ratified.
Under
Delaware law, such interested director could be held liable for a transaction in which such director derived an improper personal benefit.
Certain Transactions with Significant Shareholders.
As a Bermuda company, we may enter into certain business transactions
with our significant shareholders, including asset sales, in which a significant shareholder receives, or could receive, a financial benefit that is greater than that received, or to be received, by
other shareholders with prior approval from our board of directors but without obtaining prior approval from our shareholders. Amalgamations require the approval of the board of directors and, except
in the case of amalgamations with and between wholly-owned subsidiaries, a resolution of shareholders approved by a majority of at least 75% of the votes cast. If we were a Delaware corporation, we
would need, subject to certain exceptions, prior approval from shareholders holding at least two-thirds of our outstanding common stock not owned by such interested shareholder
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to enter into a business combination (which, for this purpose, includes mergers and asset sales of greater than 10% of our assets that would otherwise be considered transactions in the ordinary
course of business) with an interested shareholder for a period of three years from the time the person became an interested shareholder, unless we opted out of the relevant Delaware statute.
Shareholders' Suits.
The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders in many
U.S. jurisdictions. Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. However, the Bermuda courts ordinarily would be expected to follow
English case law precedent, which would permit a shareholder to commence an action in the name of the company to remedy a wrong done to the company where an act is alleged to be beyond the corporate
power of the company, is illegal or would result in the violation of our memorandum of association or bye-laws. Furthermore, consideration would be given by the court to acts that are
alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of our shareholders than actually approved it. The winning party in such
an action generally would be able to recover a portion of attorneys' fees incurred in connection with such action. Our bye-laws provide that shareholders waive all claims or rights of
action that they might have, individually or in the right of the company, against any director or officer for any act or failure to act in the performance of such director's or officer's duties,
except with respect to any fraud or dishonesty of such director or officer. Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things,
breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys' fees
incurred in connection with such action.
Indemnification of Directors and Officers.
Under Bermuda law and our bye-laws, we may indemnify our directors,
officers or any other person appointed to a committee of the board of directors (and their respective heirs, executors or administrators) to the full extent permitted by law against all actions,
costs, charges, liabilities, loss, damage or expense incurred or sustained by such person by reason of any act done, concurred in or omitted in the conduct of our business or in the discharge of
his/her duties; provided that such indemnification shall not extend to any matter in which any of such persons is found, in a final judgement or decree not subject to appeal, to have committed fraud
or dishonesty. Under Delaware law, a corporation may indemnify a director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if (i) such director or officer acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and (ii) with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe
his conduct was unlawful.
To
further understand the risks associated with U.S. persons who own our common shares, see "Description of Share Capital—Differences in Corporate Law" for more information
on the differences between Bermuda and Delaware corporate laws.
Anti-takeover provisions in our bye-laws could impede an attempt to replace or remove our directors, which could diminish the value of our common
shares.
Our bye-laws contain provisions that may entrench directors and make it more difficult for shareholders to replace directors even if the shareholders
consider it beneficial to do so. In addition, these provisions could delay or prevent a change of control that a shareholder might consider favorable. For example, these provisions may prevent a
shareholder from receiving the benefit from any premium over the market price of our common shares offered by a bidder in a potential takeover. Even in the
absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common shares if they are viewed as discouraging
takeover attempts in the future.
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For
example, our bye-laws contain the following provisions that could have such an effect:
•
election
of our directors is staggered, meaning that the members of only one of three classes of our directors are selected each year;
•
shareholders
have limited ability to remove directors;
•
the
total voting power of any shareholder owning 9.5% or more of our common shares will be reduced to less than 9.5% of the total voting power of our common
shares;
•
our
directors may decline to record the transfer of any common shares on our share register if it appears to the board of directors, in their sole and
reasonable discretion, after taking into account the limitations on voting rights contained in our bye-laws, that any non-deminimis adverse tax, regulatory or legal
consequences to the Company, any of its subsidiaries or any shareholder, would result from such transfer; and
•
our
directors may decline to record the transfer of any common shares on our share register unless the board of directors obtains: (i) a written
opinion from counsel supporting the legality of the transaction under U.S. securities laws and (ii) approval from appropriate governmental authority if such approval is required.
AXIS Holdings is a Bermuda company and it may be difficult for you to enforce judgments against it or its directors and executive officers.
We are incorporated pursuant to the laws of Bermuda and our business is based in Bermuda. In addition, certain of our directors and officers and certain of the
experts named in this prospectus reside outside the United States, and all or a substantial portion of our assets and the assets of such persons are located in jurisdictions outside the United States.
As such, it may be difficult or impossible to effect service of process within the United States upon us or those persons or to recover against us or them on judgments of U.S. courts, including
judgments predicated upon civil liability provisions of the U.S.
federal securities laws. Further, no claim may be brought in Bermuda against us or our directors and officers in the first instance for violation of U.S. federal securities laws because these laws
have no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court may, however, impose civil liability on us or our directors and officers if the facts
alleged in a complaint constitute or give rise to a cause of action under Bermuda law.
Further,
we have been advised by Conyers Dill & Pearman, our Bermuda counsel, that there is no treaty in effect between the United States and Bermuda providing for the enforcement
of judgments of U.S. courts, and there are grounds upon which Bermuda courts may not enforce judgments of U.S. courts. Because judgments of U.S. courts are not automatically enforceable in Bermuda, it
may be difficult for you to recover against us based upon such judgments.
Risks Related to Taxation
We may become subject to taxes in Bermuda after March 28, 2016, which may have a material adverse effect on our results of operations and your investment.
The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966, as amended, of Bermuda, has given each of AXIS Holdings and AXIS
Specialty an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the
nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to AXIS Holdings, AXIS Specialty or any of their respective operations, shares, debentures or other
obligations until March 28, 2016. See "Material Tax Considerations—Taxation of AXIS Holdings and Subsidiaries—Bermuda." Given the limited duration of the Minister of
Finance's assurance we cannot be certain that we will not be subject to any Bermuda tax after March 28, 2016.
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We may be subject to U.S. tax which may have a material adverse effect on our results of operations and your investment.
AXIS Holdings and AXIS Specialty are Bermuda companies, AXIS Specialty Holdings Ireland Limited ("AXIS Ireland Holdings"), AXIS Re and AXIS Specialty Europe are
Irish companies, AXIS Specialty UK Limited ("AXIS UK") and AXIS Specialty UK Holdings Limited ("AXIS UK Holdings") are U.K.
companies and AXIS Specialty (Barbados) Limited ("AXIS Barbados") is a Barbados company. We intend to manage our business so that each of these companies will operate in such a manner that none of
these companies will be subject to U.S. tax (other than U.S. excise tax on insurance and reinsurance premium income attributable to insuring or reinsuring U.S. risks and U.S. withholding tax on
certain U.S. source investment income), because none of these companies should be treated as engaged in a trade or business within the United States. However, because there is considerable uncertainty
as to the activities which constitute being engaged in a trade or business within the United States, we cannot be certain that the U.S. Internal Revenue Service ("IRS") will not contend successfully
that any of AXIS Holdings or its foreign subsidiaries is/are engaged in a trade or business in the United States. If AXIS Holdings or any of its foreign subsidiaries were considered to be engaged in a
business in the United States, we could be subject to U.S. corporate income and branch profits taxes on the portion of our earnings effectively connected to such U.S. business in which case our
results of operations and your investment could be materially adversely affected. See "Material Tax Considerations—Taxation of AXIS Holdings and Subsidiaries—United States."
AXIS
Holdings or a subsidiary might be subject to U.S. tax on a portion of its income (which in the case of a foreign subsidiary would only include income from U.S. sources) if AXIS
Holdings or such subsidiary is considered a personal holding company ("PHC"), for U.S. federal income tax purposes. This status will depend on whether 50% or more of our shares could be deemed to be
owned (pursuant to certain constructive ownership rules) by five or fewer individuals and whether 60% or more of AXIS Holdings' income, or the income of any of its subsidiaries, as determined for U.S.
federal income tax purposes, consists of "personal holding company income." We believe based upon information made available to us regarding our existing shareholder base and upon the advice of our
U.S. counsel, LeBoeuf, Lamb, Greene & MacRae, L.L.P. that neither AXIS Holdings nor any of its subsidiaries should be considered a PHC. Additionally, we intend to manage our business to
minimize the possibility that we will meet the 60% income threshold. However, because of the lack of complete information regarding our ultimate share ownership (i.e., as determined by the
constructive ownership rules for PHCs), we cannot be certain that AXIS Holdings and/or any of its subsidiaries will not be considered a PHC or that the amount of U.S. tax that would be imposed if it
were not the case would be immaterial. See "Material Tax Considerations—Taxation of AXIS Holdings and Subsidiaries—United States—Personal Holding Companies."
We may be subject to U.K. tax which may have a material adverse effect on our results of operations.
None of us, except for AXIS UK and AXIS UK Holdings, are incorporated in the United Kingdom. Accordingly, none of us, other than AXIS UK and AXIS UK Holdings,
should be treated as being resident in the United Kingdom unless our central management and control is exercised in the United Kingdom. The concept of central management and control is indicative of
the highest level of control of a company, which is wholly a question of fact. The directors of each of us, other than AXIS UK and AXIS UK Holdings, intend to manage our affairs so that none of us,
other than AXIS UK and AXIS UK Holdings, are resident in the United Kingdom for tax purposes.
A
company not resident in the United Kingdom for corporation tax purposes can nevertheless be subject to U.K. corporation tax if it carries on a trade through a branch or agency in the
United Kingdom but the charge to U.K. corporation tax is limited to profits (including revenue profits and capital gains) connected with such branch or agency.
25
The
directors of each of us, other than AXIS UK and AXIS UK Holdings (which should be treated as resident in the United Kingdom by virtue of being incorporated and managed there), AXIS
Ireland Holdings (which has established a branch in the United Kingdom) and AXIS Specialty Europe (which it is intended should establish a branch in the United Kingdom), intend that we will operate in
such a manner so that none of us, other than AXIS UK, AXIS UK Holdings, AXIS Ireland Holdings and AXIS Specialty Europe, carry on a trade through a branch or agency in the United Kingdom.
Nevertheless, because neither case law nor U.K. statute definitively defines the activities that constitute trading in the United Kingdom through a branch or agency, the U.K. Inland Revenue might
contend successfully that any of us, other than AXIS UK, AXIS UK Holdings, AXIS Ireland Holdings and AXIS Specialty Europe, are/is trading in the United Kingdom through a branch or agency in the
United Kingdom.
If
any of the U.S. subsidiaries were trading in the United Kingdom through a branch or agency and the U.S. subsidiaries were to qualify for benefits under the applicable income tax
treaty between the United Kingdom and the United States, only those profits which were attributable to a permanent establishment in the United Kingdom would be subject to U.K. corporation tax.
If
AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe were trading in the U.K. through a branch or agency and they were entitled to the benefits of the tax treaty between Ireland
and the United Kingdom, they would only be subject to U.K. taxation on the profits which were attributable to a permanent establishment in the United Kingdom. The branch established in the United
Kingdom by AXIS Ireland Holdings constitutes a permanent establishment of that company and the profits attributable to that permanent establishment (which are calculated on a cost plus 10% basis) are
subject to U.K. corporation tax. It is believed that the branch that is to be established in the United Kingdom by AXIS Specialty Europe will represent a permanent establishment of that company in the
United Kingdom and that the profits attributable to that permanent establishment will be subject to U.K. corporation tax.
The
United Kingdom has no income tax treaty with Bermuda.
There
are circumstances in which companies that are neither resident in the United Kingdom nor entitled to the protection afforded by a double tax treaty between the United Kingdom and
the jurisdiction in which they are resident may be exposed to income tax in the United Kingdom (other than by deduction or withholding) on the profits of a trade carried on there even if that trade is
not carried on through a branch or agency, but the directors of each of us intend that we will operate in such a manner that none of us will fall within the charge to income tax in the United Kingdom
(other than by deduction or withholding) in this respect
If
any of us, other than AXIS UK and AXIS UK Holdings, were treated as being resident in the United Kingdom for U.K. corporation tax purposes, or if any of us, other than AXIS Ireland
Holdings and AXIS Specialty Europe, were to be treated as carrying on a trade in the United Kingdom through a branch or agency or of having a permanent establishment in the United Kingdom, our results
of operations and your investment could be materially adversely affected.
It
should be noted that the British Government has published draft legislation to modernize the taxation of foreign companies operating in the United Kingdom through branches, for
accounting periods starting on or after January 1, 2003. If the draft legislation is enacted in its current form, a non-UK resident company will only fall within the charge to U.K.
corporation tax if it carries on a trade in the United Kingdom through a permanent establishment. The term "permanent establishment" is defined for these purposes in a manner which is consistent with
various internationally recognized characteristics commonly used in the United Kingdom's double tax treaties.
26
We may be subject to Irish tax, which may have a material adverse effect on our results of operations.
Companies resident in Ireland are generally subject to Irish corporation tax on their worldwide income and capital gains. None of us, except for AXIS Ireland
Holdings, AXIS Re and AXIS Specialty Europe, are incorporated in Ireland. As such, none of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, should be treated as being resident
in Ireland unless our central management and control is exercised in Ireland. The concept of central management and control is indicative of the highest level of control of a company, and is wholly a
question of fact. The directors of each of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, intend to operate in such a manner so that the central management and control of
each of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, is exercised outside of Ireland. Nevertheless, because central management and control is a question of fact to be
determined based on a number of different factors, the Irish Revenue Commissioners might contend successfully that the central management and control of any of us, other than AXIS Ireland Holdings,
AXIS Re and AXIS Specialty Europe, is exercised in Ireland. Should this occur, such company will be subject to Irish corporation tax on their worldwide income and capital gains.
The
trading income of a company not resident in Ireland for Irish tax purposes can also be subject to Irish corporation tax if it carries on a trade through a branch or agency in
Ireland. The directors of each of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, intend to operate in such a manner so that none of us, other than AXIS Ireland Holdings, AXIS
Re and AXIS Specialty Europe, carry on a trade through a branch or agency in Ireland. Nevertheless, because neither case law nor Irish legislation definitively defines the activities that constitute
trading in Ireland through a branch or agency, the Irish Revenue Commissioners might contend successfully that any of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, is
trading through a branch or agency in Ireland. Should this occur, such companies will be subject to Irish corporation tax on profits attributable to that branch or agency.
If
any of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, were treated as resident in Ireland for Irish corporation tax purposes, or as carrying on a trade in
Ireland through a branch or agency, our results of operations and your investment could be materially adversely affected.
If corporate tax rates in Ireland increase, our business and financial results could be adversely affected.
Trading income derived from the insurance and reinsurance businesses carried on in Ireland by AXIS Specialty Europe and AXIS Re is generally taxed in Ireland at a
rate of 12.5%. Over the past number of years, various EU Member States have, from time to time, called for harmonization of corporate tax rates within the EU. Ireland, along with other Member States,
has consistently resisted any movement towards standardized corporate tax rates in the EU. The Government of Ireland has also made clear its commitment to retain the 12.5% rate of corporation tax
until at least the year 2025. Should, however, tax laws in Ireland change so as to increase the general corporation tax rate in Ireland, our results of operations could be materially adversely
affected.
If investments held by AXIS Specialty Europe or AXIS Re are determined not to be integral to the insurance and reinsurance businesses carried on by those companies, additional
Irish tax could be imposed and our business and financial results could be adversely affected.
Based on administrative practice, taxable income derived from investments made by AXIS Specialty Europe and AXIS Re is generally taxed in Ireland at the rate of
12.5% on the grounds that such investments either form part of the permanent capital required by regulatory authorities, or are otherwise integral to the insurance and reinsurance businesses carried
on by those companies. AXIS
27
Specialty Europe and AXIS Re intend to operate in such a manner so that the level of investments held by such companies does not exceed the amount that is integral to the insurance and reinsurance
businesses carried on by AXIS Specialty Europe and AXIS Re. If, however, investment income earned by AXIS Specialty Europe or AXIS Re exceeds these thresholds, or if the administrative practice of the
Irish Revenue Commissioners changes, Irish corporations tax could apply to such investment income at a higher rate (currently 25%) instead of the general 12.5% rate, and our results of operations
could be materially adversely affected.
If you acquire 10% or more of AXIS Holdings' shares, you may be subject to taxation under the "controlled foreign corporation" ("CFC") rules.
Each "10% U.S. Shareholder" of a foreign corporation that is a CFC for an uninterrupted period of 30 days or more during a taxable year, and who owns
shares in the CFC directly or indirectly through
foreign entities on the last day of the CFC's taxable year, must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC's "subpart F income," even if the
subpart F income is not distributed. A foreign corporation is considered a CFC if "10% U.S. Shareholders" own (directly, indirectly through foreign entities or by attribution by application of the
constructive ownership rules (i.e., "constructively"), of section 958(b) of the Internal Revenue Code of 1986, as amended (the "Code")) more than 50% of the total combined voting power of all
classes of voting stock of such foreign corporation, or the total value of all stock of such corporation. A "10% U.S. Shareholder" is a U.S. Person (as defined in "Material Tax
Considerations—Taxation of Shareholders—United States Taxation") who owns (directly, indirectly through foreign entities or constructively) at least 10% of the total combined
voting power of all classes of stock entitled to vote of the foreign corporation. For purposes of taking into account insurance income, a CFC also includes a foreign insurance company in which more
than 25% of the total combined voting power of all classes of stock (or more than 25% of the total value of the stock) is owned by 10% U.S. Shareholders, on any day during the taxable year of such
corporation, if the gross amount of premiums or other consideration for the reinsurance or the issuing of insurance or annuity contracts exceeds 75% of the gross amount of all premiums or other
consideration in respect of all risks.
We
believe, based on the advice of LeBoeuf, Lamb, Greene & MacRae, L.L.P., that because of the anticipated dispersion of our share ownership, provisions in our organizational
documents that limit voting power and other factors, no U.S. Person who owns shares of AXIS Holdings directly or indirectly through one or more foreign entities should be treated as owning (directly,
indirectly through foreign entities or constructively) 10% or more of the total voting power of all classes of shares of AXIS Holdings, or any of its foreign subsidiaries (these provisions are
described in "Description of Share Capital"). It is possible, however, that the IRS could challenge the effectiveness of these provisions and that a court could sustain such a challenge. See "Material
Tax Considerations—Taxation of Shareholders—United States Taxation— Classification of AXIS Holdings or Its Foreign Subsidiaries as Controlled Foreign Corporations."
U.S. Persons who hold common shares may be subject to U.S. income taxation at ordinary income rates on their proportionate share of our "related party insurance income"
("RPII").
If the RPII of any of AXIS Specialty, AXIS Re and AXIS Specialty Europe (the "Foreign Insurance Subsidiaries") were to equal or exceed 20% of such company's gross
insurance income in any taxable year and direct or indirect insureds (and persons related to such insureds) own (or are treated as owning directly or indirectly through entities) 20% or more of the
voting power or value of AXIS Holdings, then a U.S. Person who owns shares of AXIS Holdings (directly or indirectly through foreign entities) on the last day of the taxable year would be required to
include in its income for U.S. federal income tax purposes such person's pro rata share of such Foreign Insurance Subsidiary's RPII for the entire taxable year, determined as if such RPII were
distributed proportionately only to U.S. Persons at
28
that date regardless of whether such income is distributed. In addition, any RPII that is includible in the income of a U.S. tax-exempt organization may be treated as unrelated business
taxable income. The amount of RPII earned by the Foreign Insurance Subsidiaries (generally, premium and related investment income from the direct or indirect insurance or reinsurance of any direct or
indirect U.S. holder of common shares or any person related to such holder) will depend on a number of factors, including the geographic distribution of the Foreign Insurance Subsidiaries' business
and the identity of
persons directly or indirectly insured or reinsured by the Foreign Insurance Subsidiaries. We do not expect gross RPII to equal or exceed 20% of any of the Foreign Insurance Subsidiaries' gross
insurance income in any taxable year for the foreseeable future and do not expect our direct or indirect insureds (and related persons) to directly or indirectly own 20% or more of either the voting
power or value of our common shares, but we cannot be certain that this will be the case because some of the factors which determine the extent of RPII may be beyond our control.
The
RPII rules provide that if a U.S. Person disposes of shares in a foreign insurance corporation in which U.S. Persons own 25% or more of the shares (even if the amount of RPII is less
than 20% of the corporation's gross insurance income and the ownership of its shares by direct or indirect insureds and related persons is less than the 20% threshold), any gain from the disposition
will generally be treated as ordinary income to the extent of the holder's share of the corporation's undistributed earnings and profits that were accumulated during the period that the holder owned
the shares (whether or not such earnings and profits are attributable to RPII). In addition, such a holder will be required to comply with certain reporting requirements, regardless of the amount of
shares owned by the holder. These RPII rules should not apply to dispositions of common shares because AXIS Holdings will not itself be directly engaged in the insurance business. The RPII provisions,
however, have never been interpreted by the courts or the U.S. Treasury Department in final regulations, and regulations interpreting the RPII provisions of the Code exist only in proposed form. It is
not certain whether these regulations will be adopted in their proposed form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any
interpretation or application of RPII by the IRS, the courts, or otherwise, might have retroactive effect. The U.S. Treasury Department has authority to impose, among other things, additional
reporting requirements with respect to RPII. Accordingly, the meaning of the RPII provisions and the application thereof to us and our subsidiaries is uncertain. See "Material Tax
Considerations—Taxation of Shareholders—United States Taxation—The RPII Provisions."
U.S. Persons who hold common shares will be subject to adverse tax consequences if we are considered to be a Passive Foreign Investment Company ("PFIC") for U.S. federal income
tax purposes.
We believe, based on the advice of LeBoeuf, Lamb, Greene & MacRae, L.L.P., that we are not, and we currently do not expect to become, a PFIC for U.S.
federal income purposes. We cannot assure you, however, that we will not be deemed a PFIC by the IRS. If we were considered a PFIC, it could have material adverse tax consequences for an investor that
is subject to U.S. federal income taxation, including subjecting the investor to a greater tax liability than might otherwise apply and subjecting the investor to tax on amounts in advance of when tax
would otherwise be imposed. There are currently no regulations regarding the application of the PFIC provisions to an insurance company. New regulations or pronouncements interpreting or clarifying
these rules may be forthcoming. We cannot predict what impact, if any, such guidance would have on an investor that is subject to U.S. federal income taxation. See "Material Tax
Considerations—Taxation of Shareholders—United States Taxation—Passive Foreign Investment Companies."
29
U.S. Persons who hold common shares will be subject to adverse tax consequences if we or any of our subsidiaries are considered to be a Foreign Personal Holding Company
("FPHC") for U.S. federal income tax purposes.
AXIS Holdings and/or any of its foreign subsidiaries could be considered to be an FPHC for U.S. federal income tax purposes if more than 50% of our shares could
be deemed to be owned by five or fewer individuals who are citizens or residents of the United States, and 60% or more of AXIS Holdings income, or that of its foreign subsidiaries, consists of
"foreign personal holding company income," as determined for U.S. federal income tax purposes. We believe based upon information made available to us regarding our existing shareholder base and upon
the advice of LeBoeuf, Lamb, Greene & MacRae, L.L.P. that neither AXIS Holdings nor any of its foreign subsidiaries should be considered an FPHC. Additionally, we intend to manage our business
to minimize the possibility that we will meet the 60% income threshold. However, because of the lack of complete information regarding our ultimate share ownership, we cannot be certain that AXIS
Holdings and/or any of its foreign subsidiaries will not be considered an FPHC. If we were considered an FPHC it could have material adverse tax consequences for an investor that is subject to U.S.
federal income taxation, including subjecting the investor to a greater tax liability than might otherwise apply and subjecting the investor to tax on amounts in advance of when tax would otherwise be
imposed. In addition, if we were considered an FPHC, upon the death of any U.S. individual owning common shares, such individual's heirs or estate would not be entitled to a "step-up" in
the basis of the common shares which might otherwise be available under U.S. federal income tax laws. See "Material Tax Considerations—Taxation of Shareholders—United States
Taxation—Foreign Personal Holding Companies."
U.S. tax-exempt organizations who own our common shares may recognize unrelated business taxable income.
A U.S. tax-exempt organization may recognize unrelated business taxable income if a portion of our insurance income is allocated to the organization.
In general, insurance income will be allocated to a U.S. tax-exempt organization if either we are a controlled foreign corporation and the tax-exempt shareholder is a U.S. 10%
Shareholder or there is related person insurance income and certain exceptions do not apply. Although we do not believe that any U.S. Persons should be allocated such insurance income, we cannot be
certain that this will be the case. See "Material Tax Considerations—Taxation of Shareholders—United States Taxation—Classification of AXIS Holdings or Its Foreign
Subsidiaries as Controlled Foreign Corporations" and "Material Tax Considerations—Taxation of Shareholders—United States Taxation—The RPII Provisions." Potential
U.S. tax-exempt investors are advised to consult their own tax advisors.
Changes in U.S. federal income tax law could materially adversely affect an investment in our common shares.
Legislation has been introduced in the U.S. Congress intended to eliminate certain perceived tax advantages of companies (including insurance companies) that have
legal domiciles outside the United States but have certain U.S. connections. While there is no currently pending legislative proposal which, if enacted, would have a material adverse effect on us or
our shareholders, it is possible that broader-
based legislative proposals could emerge in the future that could have an adverse impact on us or our shareholders.
Additionally,
the U.S. federal income tax laws and interpretations regarding whether a company is engaged in a trade or business within the United States, or is a passive foreign
investment company or whether U.S. Persons would be required to include in their gross income the "subpart F income" or the related party insurance income of a controlled foreign corporation are
subject to change, possibly on a retroactive basis. There are currently no regulations regarding the application of the passive foreign investment company rules to insurance companies and the
regulations regarding related party
30
insurance income are still in proposed form. New regulations or pronouncements interpreting or clarifying such rules may be forthcoming. We cannot be certain if, when or in what form such regulations
or pronouncements may be provided and whether such guidance will have a retroactive effect.
The President's proposed legislation with respect to the elimination of taxation on dividends could materially affect an investment in our common shares.
President Bush has proposed legislation which would exempt from U.S. federal income taxation dividends paid by U.S. corporations (or foreign corporations to the
extent subject to U.S. federal income tax) to U.S. shareholders. Dividends paid by AXIS Holdings would generally not be exempt under this proposed legislation. As a result, if this legislation were
adopted in the proposed form, holders of our shares would incur higher taxes on the dividends we may pay than would be the case with comparable dividends from U.S. corporations.
The impact of Bermuda's letter of commitment to the Organization for Economic Cooperation and Development to eliminate harmful tax practices is uncertain and could adversely
affect our tax status in Bermuda.
The Organization for Economic Cooperation and Development, which is commonly referred to as the OECD, has published reports and launched a global dialogue among
member and non-member countries on measures to limit harmful tax competition. These measures are largely directed at counteracting the effects of tax havens and preferential tax regimes in
countries around the world. In the OECD's report dated June 26, 2000, Bermuda was not listed as a tax haven jurisdiction because it had previously signed a letter committing itself to eliminate
harmful tax practices by the end of 2005 and to embrace international tax standards for transparency, exchange of information and the elimination of any aspects of the regimes for financial and other
services that attract business with no substantial domestic activity. We are not able to predict what changes will arise from the commitment or whether such changes will subject us to additional
taxes.
31
FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this prospectus may include forward-looking statements which reflect our current views with respect to future events and financial performance. These statements include
forward-looking statements both with respect to us specifically and the insurance and reinsurance sectors in general. Statements which include the words "expect," "intend," "plan," "believe,"
"project," "anticipate," "will" and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise.
All
forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ
materially from those indicated in these statements. We believe that these factors include but are not limited to those described under "Risk Factors" above and the following:
•
ineffectiveness
or obsolescence of our business strategy due to changes in current or future market conditions;
•
increased
competition on the basis of pricing, capacity, coverage terms or other factors;
•
greater
frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our
underwriting, reserving or investment practices anticipate based on historical experience or industry data;
•
the
effects of acts of terrorism or war;
•
developments
in the world's financial and capital markets that adversely affect the performance of our investments;
•
changes
in regulation or tax laws applicable to us, our subsidiaries, brokers or customers;
•
acceptance
of our products and services, including new products and services;
•
changes
in the availability, cost or quality of reinsurance;
•
changes
in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers;
•
decreased
demand for our insurance or reinsurance products;
•
loss
of key personnel;
•
the
effects of mergers, acquisitions and divestitures;
•
changes
in rating agency policies or practices;
•
changes
in legal theories;
•
changes
in accounting policies or practices; and
•
changes
in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors.
The
foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this
prospectus. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
32
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected.
Any forward-looking statements you read in this prospectus reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to
our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly
qualified in their entirety by this paragraph. You should specifically consider the factors identified in this prospectus which could cause actual results to differ before making an investment
decision.
33
USE OF PROCEEDS
We estimate that our net proceeds from the initial public offering of our common shares, based on an assumed initial public offering price of
$                  per
share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and commissions and our estimated offering expenses, will be
approximately $                   million. We estimate that our net proceeds will be approximately
$                   million if the underwriters exercise their over-allotment
option in full. We will not receive any of the proceeds from the sale of common shares by the selling shareholders. We intend to use the net proceeds of this offering as additional capital for
operations and general corporate purposes.
DIVIDEND POLICY
Our board of directors currently intends to authorize the payment of a dividend of
$                  per common share per quarter to our shareholders of record,
beginning                  . Any determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our results
of operations and cash flows, our
financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and any other factors our board of
directors deems relevant.
We
are a holding company and have no direct operations. Our ability to pay dividends depends, in part, on the ability of our Insurance Subsidiaries to pay dividends to us. The Insurance
Subsidiaries are subject to significant regulatory restrictions limiting their ability to declare and pay dividends.
Additionally,
we are subject to Bermuda regulatory constraints that will affect our ability to pay dividends on our common shares and make other payments. Under the Companies Act, we may
declare or pay a dividend out of distributable reserves only if we have reasonable grounds for believing that we are, or would after the payment be, able to pay our liabilities as they become due and
if the realizable value of our assets would thereby not be less than the aggregate of our liabilities and issued share capital and share premium accounts.
As
of December 31, 2002, the maximum amount of distributions that our subsidiaries could pay to AXIS Holdings under applicable laws and regulations without prior regulatory
approval was approximately $511.9 million.
For
more information regarding restrictions on the payment of dividends by us and our Insurance Subsidiaries, see "Regulation."
34
CAPITALIZATION
The following table sets forth our consolidated capitalization as of December 31, 2002, on an actual basis and as adjusted to give effect to the sale of
                  common shares offered by us in this offering at an assumed initial public offering price of
$                  per share (the midpoint of the price range set forth on the cover page of
this prospectus) and after deducting estimated underwriting discounts and commissions and our estimated offering expenses and assuming the underwriters do not exercise their over-allotment
option.
You
should read this table in conjunction with "Selected Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and the consolidated financial statements and related notes that are included elsewhere in this prospectus.
As of December 31, 2002
Actual
As Adjusted
(unaudited)
($ in thousands, except share numbers)
Debt Outstanding:
Revolving credit facility(1)
$
—
$
—
Shareholders' Equity:
Share capital (authorized: 100,000,000 common shares, par value $0.10; issued and outstanding: 17,271,065, actual and,          as adjusted)
$
1,727
$
Additional paid-in capital
1,686,599
Deferred compensation
(20,576
)
Accumulated other comprehensive gain
25,484
Retained earnings
267,799
Total shareholders' equity
1,961,033
Total Capitalization
$
1,961,033
$
(1)
Consists
of a $400 million revolving credit facility pursuant to which up to $375 million may be used to issue letters of credit and up to $50 million may be used
for general corporate purposes, with total borrowings not to exceed $400 million.
The
number of shares shown to be outstanding as adjusted for the offering is based upon 17,271,065 common shares outstanding as of December 31, 2002 and excludes:
•
common
 shares that may be issued pursuant to the underwriters' over-allotment option;
•
2,431,663
common shares that may be issued pursuant to warrants outstanding as of December 31, 2002 at a price of $100 per share;
•
559,439
common shares that may be issued pursuant to options that had been granted as of December 31, 2002 at a weighted average exercise price of
$104.25 per share; and
•
137,592
additional common shares available for future issuance under our stock option and incentive plans.
35
DILUTION
As of December 31, 2002, our net book value was $1.96 billion, or $113.54 per common share. As used below, our net book value per common share
represents shareholders' equity divided by the number of common shares outstanding. After giving effect to the issuance of                  of our common shares
at an assumed initial public offering
price of $                  per share (the midpoint of the price range set forth on the cover page of this prospectus), assuming that the underwriters'
over-allotment option is not
exercised, and the application of the estimated net proceeds therefrom, our net book value as of December 31, 2002 would have been
$                   billion, or $                  per
common share. This amount represents an immediate increase of $                  per common share to the existing shareholders and an immediate dilution of
$                  per common share issued to
the new investors purchasing shares offered hereby at the assumed initial public offering price. The following table illustrates this per share dilution:
Initial public offering price per common share
$
Net book value per common share before the offering
113.54
Increase attributable to the offering
Net book value per common share after the offering
Dilution per common share to new investors (1)
$
(1)
If
the underwriters' over-allotment option is exercised in full, dilution per share to new investors will be $                  .
The
following table sets forth as of December 31, 2002 the number of our common shares issued, the total consideration paid and the average price per common share paid by all of
our existing
shareholders and new investors, after giving effect to the issuance of                  common shares in the offering at an assumed initial public offering
price (before deducting estimated
underwriting discounts and commissions and our estimated offering expenses) of $                  per share (the midpoint of the price range set forth on the
cover page of this prospectus).
Common Shares Issued
Total Consideration
Average
Price Per
Share
Number
Percent
Amount
Percent
Existing shareholders
17,271,065
$
1,728,344,089
$
100.07
New investors
Total
This
table does not give effect to:
•
common
 shares that may be issued pursuant to the underwriters' over-allotment option;
•
2,431,663
common shares that may be issued pursuant to warrants outstanding as of December 31, 2002 at a price of $100 per share;
•
559,439
common shares that may be issued pursuant to options that had been granted as of December 31, 2002 at a weighted average exercise price of
$104.25 per share; and
•
137,592
additional common shares available for future issuance under our stock option and incentive plans.
36
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth our selected historical consolidated financial information for the periods ended and as of the dates indicated. AXIS Specialty was
incorporated on November 8, 2001 and commenced operations on November 20, 2001. AXIS Holdings was incorporated on December 9, 2002. AXIS Specialty and its subsidiaries became
wholly owned subsidiaries of AXIS Holdings on December 31, 2002, pursuant to the Exchange Offer. In the Exchange Offer, the shareholders of AXIS Specialty exchanged their shares for identical
shareholdings in AXIS Holdings. Following the Exchange Offer, AXIS Specialty distributed all shares of its wholly owned subsidiaries to AXIS Holdings. The Exchange Offer represents a business
combination of companies under common control and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty.
The
selected consolidated income statement and balance sheet data are derived from our audited financial statements included elsewhere in this prospectus, which have been prepared in
accordance with U.S. GAAP and have been audited by Deloitte & Touche, our independent auditors. These historical results are not necessarily indicative of results to be expected from any future
period. You should read the following selected consolidated financial information along with the information contained in this prospectus, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus.
Year Ended
December 31, 2002
Period Ended
December 31, 2001(1)
($ in thousands, except share amounts)
Selected Income Statement Data:
Gross premiums written
$
1,108,003
$
26,746
Premiums ceded
(89,726
)
—
Net premiums earned
536,850
1,884
Net investment income
71,287
4,763
Net realized gains
26,070
394
Losses and loss expenses
229,265
963
Acquisition costs
103,703
832
General and administrative expenses
46,521
2,566
Income tax recovery
1,430
—
Net income
265,119
2,680
Per Share Data:
Basic earnings per share
$
$
Diluted earnings per share
$
$
Basic weighted average shares outstanding
Diluted weighted average shares outstanding
Selected Ratios (based on U.S. GAAP income statement data):
Loss and loss expense ratio(2)
42.7
%
51.1
%
Acquisition cost ratio(3)
19.3
44.2
General and administrative expense ratio(4)
8.7
136.2
Combined ratio(5)
70.7
%
231.5
%
37
As of
December 31, 2002
As of
December 31, 2001
($ in thousands, except share amounts)
Selected Balance Sheet Data:
Cash and cash equivalents
$
729,296
$
761,670
Investments at fair market value
1,702,990
1,079,686
Total assets
2,986,121
1,877,773
Reserve for losses and loss expenses
215,934
963
Unearned premiums
555,962
24,862
Total shareholders' equity
1,961,033
1,649,552
Per Share Data (based on U.S. GAAP balance sheet data):
Book value per share(6)
$
113.54
$
97.66
Diluted book value per share(7)
111.66
97.66
(1)
The
financial information for this period reflects our results from November 8, 2001, the date of incorporation of AXIS Specialty, to December 31, 2001.
(2)
The
loss and loss expense ratio is calculated by dividing losses and loss expenses by net premiums earned.
(3)
The
acquisition cost ratio is calculated by dividing total acquisition costs by net premiums earned.
(4)
The
general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned.
(5)
The
combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio.
(6)
Book
value per share is based on total shareholders' equity divided by basic shares outstanding of 17,271,065 as of December 31, 2002.
(7)
Diluted
book value per share is calculated based on total shareholders' equity, adjusted for the proceeds expected to be received upon the exercise of options and warrants, divided by
the number of common shares and common share equivalents outstanding at the end of the period.
38
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and accompanying notes which appear elsewhere in this prospectus. It contains forward-looking statements that involve risks and uncertainties. Please see "Forward-Looking Statements" for
more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in
this prospectus, particularly under the headings "Risk Factors" and "Forward-Looking Statements."
General
The following is a discussion of our results of operations and financial condition. Certain aspects of our business have loss experience characterized as low
frequency and high severity. This may result in volatility in both our results of operations and financial condition.
We
commenced operations on November 20, 2001 as AXIS Specialty. Pursuant to the Exchange Offer, on December 31, 2002 the shareholders of AXIS Specialty exchanged their
shares for identical shareholdings in AXIS Holdings. Following the Exchange Offer, AXIS Specialty distributed all of its wholly owned subsidiaries to AXIS Holdings. The Exchange Offer represents a
business combination of companies under common control and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty.
We
only commenced operations on November 20, 2001; therefore, any comparison to the prior period may not be meaningful.
Business Overview
We underwrite specialty lines insurance and treaty reinsurance on a global basis. Our business is comprised of two underwriting segments: specialty lines and
treaty reinsurance. Our specialty lines segment primarily includes the following risk classifications: specialty risks (including terrorism, marine and aviation war risk and political risk), onshore
and offshore energy, aviation and aerospace, commercial property and marine.
Our
treaty reinsurance segment provides short to medium tail, severity-driven products, primarily for catastrophic risks. The underlying property and casualty insurance business classes
covered by the treaties we write include: property, workers' compensation, personal accident and life, professional liability, casualty clash, and marine and aviation. Our contracts can be written on
either an excess of loss basis or a pro rata basis, also known as proportional.
Since
we underwrite both global specialty lines insurance and treaty reinsurance risks, we have a large aggregate exposure to natural and man-made disasters, which may result
in substantial volatility in our financial results.
Acquisition History
On October 1, 2002, we completed the purchase of the Connecticut Specialty Insurance Company, a surplus lines-eligible carrier in 38 states, which was
subsequently renamed AXIS Specialty Insurance Company. We paid a purchase price of $17.4 million. On November 27, 2002, we completed the purchase of Royal & SunAlliance Personal
Insurance Company, which is licensed in all 50 states of the United States, the District of Columbia and Puerto Rico and was subsequently renamed AXIS Reinsurance Company. We paid a purchase price of
$23.1 million. As of February 28, 2003, we completed the purchase of Sheffield Insurance Corporation, which is licensed in Illinois and Alabama, surplus lines-eligible in 40 states and will be
renamed AXIS Indemnity Company. We paid a purchase
39
price of $34.7 million. In connection with this acquisition, we added a senior team of insurance executives from Combined Specialty Group, Inc., a unit of Aon. In addition, in early
2003, we agreed to acquire the renewal rights to a book of professional liability and related lines business written by the Financial Insurance Solutions unit of Kemper in exchange for
a
ceding commission
. We expect to consummate this transaction in the first quarter of 2003. In connection with this acquisition, we added a senior
underwriting team from Kemper. We purchased these companies and agreed to acquire these rights as the foundation for commencing our U.S. operations.
Revenues
We derive our revenues primarily from the sale of our insurance policies and reinsurance contracts. Insurance and reinsurance premiums are a function of the
number and type of contracts we write, as well as prevailing market prices.
Renewal
dates for our business segments depend upon the underlying line of business. For the majority of business in our specialty lines segment, gross premiums are written throughout
the year. An exception to this is the business written in our aviation and aviation war accounts, which is predominantly written in the last quarter of the calendar year. For our treaty reinsurance
segment in 2002, a significant portion of our gross premiums were written in the first quarter of the calendar year, with the remainder primarily split between the second and third quarters. We
believe this seasonality may diminish as we expand into new treaty lines.
Our
premium income is supplemented by the income we generate from our investment portfolio. Our investment portfolio is comprised entirely of fixed income investments that are held as
available for sale. Under U.S. GAAP, these investments are carried at fair market value and unrealized gains and losses on the investments are not included in our statement of operations. Rather,
these unrealized gains and losses are included on our balance sheet in accumulated other comprehensive gain/(loss) as a separate component of shareholders' equity.
Expenses
Our expenses primarily consist of losses and loss expenses, acquisition costs and general and administrative expenses.
Losses
and loss expenses are management's best estimate of the ultimate cost of claims incurred during a reporting period.
Acquisition
costs relate to the fees, commissions and taxes paid to obtain business. Typically these are based on a certain percentage of the premium written and will vary by each line
of business that we underwrite. In addition, we include the personnel expenses of our underwriters in acquisition costs.
General
and administrative expenses consist primarily of personnel expenses (except those allocated to acquisition costs) and general operating expenses. With the exception of
acquisition costs, we do not allocate general and administrative operating expenses to our segments and instead record these costs at the corporate level.
Critical Accounting Policies
There are certain accounting policies that we consider to be critical due to the amount of judgment and uncertainty inherent in the application of those policies.
In calculating financial statement estimates, the use of different assumptions could produce materially different estimates. In addition, if factors such as those described in "Risk Factors" cause
actual events to differ from the assumptions used in applying the accounting policy and calculating financial estimates, there could be a material adverse effect on our results of operations and
financial condition and liquidity.
40
We
believe the following critical accounting policies affect significant estimates used in the preparation of our consolidated financial statements.
Premiums.
Our revenue is generated primarily by gross premiums written from our underwriting operations. The basis for the
amount of gross premiums recognized varies by the type of contract we write.
For
the majority of our specialty lines we receive a flat premium which is identified in the policy and is recorded as unearned premium on the inception date of the contract. This
premium will only adjust if the underlying insured values adjust. We actively monitor underlying insured values and record adjustment premiums in the period in which amounts are reasonably
determinable. We also write a small amount of business on a line slip basis, under which we assume a fixed percentage share of the premiums and losses on a particular risk or group of risks along with
numerous other unrelated insurers. On line slip contracts, the premium is not contractually stated. Instead, we will determine the expected premium to be written as part of the underwriting process
based on information received from the insured parties and intermediaries, our experience with similar coverages and any industry information on the risks that may be available. We actively monitor
the emergence of actual premium data on line slip policies and adjust our estimates of written premiums to reflect reported premiums on a periodic basis as reliable information becomes available.
During the year ended December 31, 2002, line slip premiums accounted for 6% of total gross premiums written.
For
our treaty reinsurance business, we write contracts on both an excess of loss basis and a proportional basis. For excess of loss contracts, the amount of premium is usually
contractually documented at inception, and no management judgment is necessary. Generally, for most such contracts a deposit premium is contractually specified and is payable during the contract
period. After the contract has expired, a premium adjustment is calculated, which is based on the underlying exposure of the ceded business. We record the deposit premium at the inception of the
contract and record adjustments in the periods in which they are reasonably determinable. For business written on a proportional basis, we will determine the expected premium to be written as part of
the underwriting
process based on information received from the insured parties and intermediaries, our experience with similar coverages and any industry information on the risks that may be available. We actively
monitor the emergence of actual premium data on proportional treaties and adjust our estimates of written premiums to reflect reported premiums on a periodic basis as reliable information becomes
available. During the year ended December 31, 2002, proportional premiums accounted for 8% of total gross premiums written.
Our
premiums are earned over the period during which we are exposed to the insured or reinsured risk. Generally this period equates to the contract period, except for contracts written
on a line slip or proportional basis. For line slip and proportional business, the earning period is generally taken to be twice the contract period due to the fact that some of the underlying
exposures may attach towards the end of our contracts, and such underlying exposures generally have a one year coverage period.
Reserve for losses and loss expenses.
For most insurance and reinsurance companies, the most significant judgment made by
management is the estimation of the reserve for losses and loss expenses, which we also refer to as loss reserves. Our loss reserves are estimated by management and are reviewed every quarter by our
independent actuarial consultants, based on generally accepted actuarial principles. The reserve for unpaid reported losses and loss expenses is established based upon our estimate of the total cost
of claims that were reported to us but not yet paid (reported case reserves), the costs of
additional case reserves
("ACR") on known events but not yet
reported to us, and the anticipated cost of claims incurred but not reported.
For
reported losses, we establish reserves on a "case" basis within the parameters of the coverage provided in the insurance or reinsurance contracts. ACR is often estimated by our
claims function
41
ahead of official notifications but in the same manner as reported case reserves. Where there is a possibility of a claim we book an ACR, which is only revised upon final determination that no claim
will arise or is adjusted as claims notifications are received. ACR is reflected in our consolidated financial statements as part of IBNR.
IBNR
is estimated using actuarial methods. Our estimate of IBNR is derived using the Bornhuetter-Ferguson method, which is typically used by companies with limited loss experience. This
method takes as a starting point an assumed ultimate loss and loss expense ratio and blends in the loss and loss expense ratio implied by the experience to date. For our assumed ultimate loss and loss
expense ratio for the specialty lines segment we select the initial expected loss and loss expense ratios based on benchmarks provided by independent actuaries, derived from comparable client data as
well as market information. These benchmarks are then adjusted for rating increases and changes in terms and conditions that had been observed in the market. For our assumed ultimate loss and loss
expense ratio for the treaty reinsurance segment we use contract by contract initial expected loss and loss expense ratios derived during pricing. Under U.S. GAAP, we are not permitted to establish
loss reserves with respect to our catastrophe reinsurance until an event which gives rise to a loss occurs. Within our catastrophe line of business on certain contracts that respond to highly visible,
major catastrophes we are not holding any IBNR, as we experienced no such catastrophes in 2002.
Applying
these loss and loss expense ratios to our earned premium derives the estimated ultimate costs of the losses; from here we deduct paid losses and reported case reserves to
generate our IBNR. As at December 31, 2002, the reserve for IBNR losses accounted for $155.0 million or 72% of our total loss reserves. As of December 31, 2002, a 5% change in the
reserve for IBNR losses would equate to a $7.8 million change in loss reserves, which change would represent 2.9% of net income and 0.4% of shareholders' equity.
The
methodology of estimating loss reserves is reviewed each quarter to evaluate whether the assumptions made continue to be appropriate. Any adjustments that result from this review are
recorded in the quarter in which they are identified.
Our
reserving practices and the establishment of any particular reserve reflect management's judgment concerning sound financial practice and do not represent any admission of liability
with respect to any claims made against us. No assurance can be given that actual claims made and payments related thereto will not be in excess of the amounts reserved. During the loss settlement
period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, ultimate liability may exceed or be less than the
revised estimates.
In
assessing the adequacy of these reserves it must be noted that the actual final costs of settling claims outstanding is uncertain as it depends upon future events. There is
necessarily a range of possible outcomes and the eventual outcome will almost certainly differ from the projections currently made. This uncertainty is heightened by the short time in which we have
operated, thereby providing limited claims loss emergence patterns specifically for the Company. This has necessitated the use of benchmarks in deriving IBNR which, despite management's and the
independent actuary's care in selecting them, have the risk of differing from actual experience.
Stock-based Compensation Plans.
We currently account for stock compensation in accordance with Accounting Principles Board
Opinion No. 25 ("APB 25") "Accounting for Stock Issued to Employees." Compensation expense for stock options and restricted stock awards granted to employees is recorded over the vesting period
using the intrinsic value method. Generally, we will issue options and restricted stock awards to an employee with a strike price equal to the estimated fair value on the date of grant. The fair
values of the strike prices for options granted and the restricted stock issued historically are consistent with an independent valuation obtained by the Company. Following the release of FAS
42
No. 148, "Accounting for Stock-based Compensation—Transition and Disclosure," we are reevaluating our accounting policy for stock-based compensation.
Results of Operations
The following is a discussion and analysis of our consolidated results of operations for the period from November 8, 2001 (inception) to
December 31, 2001 and separately for the year ended December 31, 2002.
Year ended December 31, 2002
Premiums.
In the year ended December 31, 2002, gross premiums written were $1.1 billion. The amount of premiums
written with respect to any particular line of business may vary from year to year as a result of changes in market conditions. For example, the recently adopted Terrorism Risk Insurance Act could
impact the amount of business written for terrorism insurance. Reinsurance premiums ceded for the year ended December 31, 2002 were $89.7 million. We purchased this reinsurance primarily
to reduce our exposure to risk of loss on certain lines of business written in our specialty lines segment. Net premiums earned for the year ended December 31, 2002 were $536.9 million.
Net Investment Income.
Net investment income for the year ended December 31, 2002 was $71.3 million, which
consisted primarily of interest on bonds that was partially offset by investment management, accounting and custody fees of $3.7 million.
The
annualized effective yield (calculated by dividing the investment income generated from invested assets by the average balance of the assets managed by our portfolio managers) for
the year ended December 31, 2002 was 4.0%. The total return for our investment portfolio (calculated using beginning and ending market portfolio values, adjusted for external cash flows) for
the year ended December 31, 2002 was 7.5%.
Net Realized Gains.
Net realized gains for the year ended December 31, 2002 were $26.1 million, which included
net realized investment gains of $22.5 million and net realized and unrealized gains/(losses) on investment derivative instruments of $3.6 million. Net realized and unrealized
gains/(losses) on investment derivative instruments resulted from our use of derivative instruments to manage duration and currency exposure. During the year, we discontinued the use of investment
derivative instruments other than foreign currency forward contracts. A discussion of those instruments is located below under "—Quantitative and Qualitative Disclosure about Market Risk."
Other Insurance Related Income (Loss).
Other insurance related income (loss) for the year ended December 31, 2002 was
$(0.6) million. This related to the movement in the fair value of our insurance
contracts which meet the definition of a derivative under Statement of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities."
Losses and Loss Expenses.
Losses and loss expenses for the year ended December 31, 2002 were $229.3 million. Of
this expense, $17.0 million related to paid claims, $60.0 million related to reported case reserves and $154.0 million related to IBNR offset by $1.7 million related to
reinsurance recoveries. The loss and loss expense ratio for the year ended December 31, 2002 was 42.7%.
Acquisition Costs.
Acquisition costs for the year ended December 31, 2002 were $103.7 million. The acquisition
cost ratio for the year ended December 31, 2002 was 19.3%. The acquisition cost ratio reflects the costs directly related to the acquisition of business. Acquisition costs included: brokerage
fees and commissions, taxes and profit commissions, all of which vary based on the line of business, the method of acquisition and the location of the underlying risk. Hence, acquisition costs will
vary with
43
the mix and amount of business written. We also allocated the personnel expenses of our underwriters to acquisition costs including a non-cash charge of $1.7 million relating to
stock-based compensation.
General and Administrative Expenses.
General and administrative expenses for the year ended December 31, 2002 were
$46.5 million, which were driven primarily by personnel expenses, not allocated to acquisition costs, including a non-cash charge of $4.6 million relating to stock-based
compensation. The general and administrative expense ratio for the year ended December 31, 2002 was 8.7%.
It
is not expected that the general and administrative expenses incurred in 2002 will be comparable with those expected to be incurred in 2003. We expect general and administrative costs
to increase in 2003. For the year ended December 31, 2002, we expensed $4.4 million in costs associated with our establishment, licensing and organization. Although we do not believe
that these costs are of a recurring nature, this reduction in costs will be more than offset by additional employee and administrative costs. We added employees and infrastructure throughout the year
ended December 31, 2002, including the addition of a significant number of employees in November 2002, and we expect to add employees and infrastructure in 2003.
Foreign Exchange Gains.
Our functional currency is U.S. dollars. However, some of our business is written in other
currencies. The following sets forth the composition of our foreign exchange gains.
Year Ended December 31, 2002
($ in thousands)
Realized exchange gains
$
1,489
Unrealized exchange gains
8,121
Foreign exchange gains
$
9,610
The
realized gains have principally been made on receipt of premiums denominated in Sterling and Euros. Both of these currencies have strengthened against the U.S. dollar, with exchange
rates having increased between January 1, 2002 and December 31, 2002, by 11.0% for Sterling and 16.1% for the Euro.
The
majority of the unrealized gains is due to the strengthening of the Sterling and the Euro on cash balances and insurance and reinsurance premium balances receivable denominated in
these currencies.
Income Tax Recovery.
Our income tax recovery of $1.4 million was primarily derived from our U.S. subsidaries which,
due to their limited operations during the year ended December 31, 2002, provided tax loss carry forwards.
Net Income.
Net income for the year ended December 31, 2002 was $265.1 million, comprised of net underwriting
income of $156.7 million, net investment income and net realized gains of $97.4 million, foreign exchange gains of $9.6 million and an overall tax benefit of $1.4 million.
Comprehensive Income.
Comprehensive income for the year ended December 31, 2002 was $291.1 million, which was
comprised of net income of $265.1 million and a net increase in unrealized gain of $25.9 million.
Period ended December 31, 2001
We commenced operations as AXIS Specialty on November 20, 2001. During the period ended December 31, 2001, we wrote $26.7 million of gross
premiums, which was primarily derived from the aviation and aviation war lines of business within our specialty book. Due to the short duration of the
44
period, gross and net premiums earned were $1.9 million. Net investment income was $4.8 million for the period and net realized gains were $0.4 million.
Losses
and loss expenses were $1.0 million, and acquisition costs were $0.8 million. General and administrative expenses were $2.6 million for the period ended
December 31, 2001, which includes start up costs of $1.1 million. Net income for the period ended December 31, 2001 was $2.7 million, and comprehensive income was
$2.2 million.
Underwriting Results by Operating Segments
Our business is comprised of two underwriting segments: specialty lines and treaty reinsurance.
The
following table summarizes the underwriting results, losses and loss expenses and ratios for our two business segments as of and for the year ended December 31, 2002.
Specialty
Lines
Treaty Reinsurance
Total
($ in thousands)
Revenues:
Gross premiums written
$
793,759
$
314,244
$
1,108,003
Net premiums written
704,033
314,244
1,018,277
Net premiums earned
314,613
222,237
536,850
Other insurance related income (loss)
(639
)
—
(639
)
Expenses:
Losses and loss expenses
137,848
91,417
229,265
Acquisition costs
56,683
47,020
103,703
General and administrative expenses
46,521
Underwriting Income
$
156,722
Ratios:
Loss and loss expense ratio
43.8
%
41.1
%
42.7
%
Acquisition cost ratio
18.0
21.2
19.3
General and administrative expense ratio
—
—
8.7
Combined ratio
70.7
%
Specialty Lines
Specialty lines of business are written on both an insurance and reinsurance basis depending on the underlying needs of the client.
Year ended December 31, 2002
Premiums.
In the year ended December 31, 2002, gross premiums written were $793.8 million. Please see
"Business—Business Segments—Specialty Lines" for gross premiums written by line of business. Reinsurance premiums ceded for the year ended December 31, 2002 were
$89.7 million. The following table shows the derivation of net premiums earned:
Year Ended December 31, 2002
($ in thousands)
Gross premiums earned
$
354,667
Ceded premiums amortized
(40,054
)
Net premiums earned
$
314,613
45
Gross
premiums are earned over the period of the insured risk. Consequently, the level of earned premium should increase in 2003 as premiums written throughout 2002 continue to be earned
in 2003.
Ceded
premiums are amortized over the contract term. As the bulk of this premium incepted September 1, 2002, the amount of amortized premium expensed in 2003 is expected to
increase.
Losses and Loss Expenses.
Losses and loss expenses were $137.8 million for the year ended December 31, 2002.
This was comprised of the following:
Year Ended December 31, 2002
($ in thousands)
Losses paid
$
8,398
Change in reported case reserves
38,143
Change in IBNR
93,010
Reinsurance recoveries
(1,703
)
Losses and loss expenses
$
137,848
The
loss and loss expense ratio for the year ended December 31, 2002 was 43.8%. Within the marine book we experienced higher than expected losses and loss expenses in the marine
hull and recreational marine books; however, this is due more to the timing of the losses and the ramp up of earned premiums than to loss severity. We also experienced losses of $19.6 million
within our aviation and aerospace book primarily due to the loss of two satellites during the year. In our other lines within the specialty lines segment, we did not experience any material losses.
Acquisition Costs.
Acquisition costs for the year ended December 31, 2002 were $56.7 million. The acquisition
cost ratio for the year ended December 31, 2002 was 18.0%, which included 1.9% relating to allocated personnel expenses for underwriters.
Period ended December 31, 2001
During the period ended December 31, 2001, we wrote $24.5 million of gross premiums. Due to the short duration of the period, net premiums earned
were $1.7 million for the period. Losses and loss expenses were $0.9 million, and acquisition costs were $0.3 million.
Treaty Reinsurance
Treaty reinsurance provides short-tailed, severity driven products primarily for catastrophic risks.
Year ended December 31, 2002
Premiums.
In the year ended December 31, 2002, gross and
net premiums written
were
$314.2 million. Please see "Business—Business Segments—Treaty Reinsurance" for gross premiums written by line of business. Net premiums
earned for the year ended December 31, 2002 were $222.2 million.
46
Losses and Loss Expenses.
Losses and loss expenses for the year ended December 31, 2002 were $91.4 million.
This was comprised of the following:
Year Ended December 31, 2002
($ in thousands)
Losses paid
$
8,560
Change in reported case reserves
21,852
Change in IBNR
61,005
Losses and loss expenses
$
91,417
The
loss and loss expense ratio for the year ended December 31, 2002 was 41.1%. Included within catastrophe lines were claims stemming from the European floods, which affected
parts of Europe, notably Germany, Austria and the Czech Republic in August 2002 and from Hurricane Lili which swept across Louisiana and Mississippi on October 2, 2002. Included in other
lines of treaty reinsurance were reserves of $20.0 million relating to multiple crop covers primarily in the United States, following a severe year for claims relating to crop damage. Our
treaty reinsurance segment has loss experience categorized as low frequency but high severity in nature and therefore our loss experience can be volatile. During the year ended December 31,
2002, our loss experience benefited from the lack of major catastrophes.
Acquisition Costs.
Acquisition costs for the year ended December 31, 2002 were $47.0 million. The acquisition
cost ratio for the year ended December 31, 2002 was 21.2%, which included 2.9% relating to allocated personnel expenses for underwriters.
Period ended December 31, 2001
During the period ended December 31, 2001, we wrote $2.3 million of gross premiums in our treaty reinsurance segment. Due to the short duration of
the period, net premiums earned were $0.2 million, losses and loss expenses were $0.1 million, and acquisition costs were $0.5 million.
Liquidity and Capital Resources
We are a holding company, and as such, have no substantial operations of our own. Our assets consist primarily of our investments in subsidiaries. As at
December 31, 2002, we had operating subsidiaries in Bermuda, Ireland, Connecticut and New York and a representative office in the United Kingdom. Accordingly, our future cash flows depend upon
the availability of dividends or other statutorily permissible payments from our subsidiaries. The ability to pay such dividends will be limited by the applicable laws and regulations of Bermuda, the
United States and Ireland which subject the Insurance Subsidiaries to significant regulatory restrictions. These laws and regulations require, among other things, some of our insurance subsidiaries to
maintain minimum solvency requirements and limit the amount of dividends that these subsidiaries can pay to us, which in turn may limit our ability to pay dividends.
Additionally,
we are subject to Bermuda regulatory constraints that will affect our ability to pay dividends on our common shares and make other payments. Under the Companies Act, we may
declare or pay a dividend out of distributable reserves only if we have reasonable grounds for believing that we are, or would after the payment be, able to pay our liabilities as they become due and
if the realizable value of our assets would thereby not be less than the aggregate of our liabilities and issued share capital and share premium accounts.
As
of December 31, 2002, the maximum amount of distributions that our subsidiaries could pay to AXIS Holdings under applicable laws and regulations without prior regulatory
approval was approximately $511.9 million. Consequently, no assurance can be given that we or our subsidiaries will
47
be permitted to pay dividends in the future. For a discussion of the various restrictions on the ability of us and our subsidiaries to pay dividends, please see "Regulation."
Cash Flows for the Year Ended December 31, 2002.
In the year ended December 31, 2002, we generated a net
operating cash inflow of $660.6 million, primarily relating to premiums received and investment income. During the year, we paid losses of $17.0 million. We invested a net cash amount of
$702.9 million during the year, and as of December 31, 2002 had a cash balance of $729.3 million.
Cash Flows for the Period Ended December 31, 2001.
For the period ended December 31, 2001, we received
$1.7 billion in cash from the private placement of shares in AXIS Specialty (which were subsequently exchanged for our common shares in the Exchange Offer), which were partially offset by
equity raising costs paid of $40.4 million. During this period, we used $4.1 million of cash in operating activities and invested a net cash amount of $882.9 million. At
December 31, 2001, we had a cash balance of $761.7 million.
For
the year ended December 31, 2002, our cash flows from operations together with the proceeds from the private placement have provided us with sufficient liquidity to meet our
liquidity requirements.
On
an ongoing basis, our sources of funds primarily consist of premiums written, investment income and proceeds from sales and redemptions of investments. Cash is used primarily to pay
reinsurance, losses and loss expenses, brokerage commissions, excise taxes and general and administrative expenses and to purchase new investments.
Our
cash flows from operations generally represent the difference between premiums collected and investment earnings realized, reinsurance purchased and the losses and loss expenses
paid, underwriting and other expenses paid and investment losses realized. Cash flows from operations may differ substantially, however, from net income. To date, we have invested all cash flows not
required for operating purposes. The potential for a large claim under one of our insurance or reinsurance contracts means that substantial and unpredictable payments may need to be made within
relatively short periods of time.
At
December 31, 2002, total investments available for sale, accrued income and cash net of unsettled investment trades were $2.4 billion, compared to $1.7 billion at
December 31, 2001. Our investment portfolio consisted entirely of fixed income securities at December 31, 2002 and was managed by several
external investment management firms. At December 31, 2002, all of these fixed income securities were investment grade, with 84.0% rated Aa3 or AA- or better by a nationally
recognized rating agency. The weighted-average rating of our fixed income portfolio was AA+, based on ratings assigned by Standard & Poor's. The net payable for investments purchased at
December 31, 2002 was $86.4 million; this is a result of timing differences, as investments are accounted for on a traded date basis.
As
at December 31, 2002, we had $375.5 million of insurance and reinsurance premium balances receivable. During the year ended December 31, 2002, we collected in
excess of $600 million of net premium receivables. As at December 31, 2002, we had prepaid reinsurance of $49.7 million and $1.7 million of reinsurance recoverables under
these contracts.
On
March 28, 2002, AXIS Specialty established a $400 million revolving credit facility with a syndicate of commercial banks. Up to $375 million may be used to issue
letters of credit and up to $50 million for general corporate purposes, with total borrowing not to exceed $400 million. As at December 31, 2002, AXIS Specialty had letters of
credit of $10.0 million outstanding. Associated with the bank commitments are various loan covenants with which AXIS Specialty was in compliance throughout the year that include, among other
things, the requirements that AXIS Specialty maintain a minimum level of capital and surplus of $1.2 billion and a debt to total capitalization ratio not greater than 0.35:1.00. There was no
debt outstanding as of December 31, 2002.
48
AXIS Specialty is not licensed or admitted as an insurer in any jurisdiction other than Bermuda. Because many jurisdictions do not permit insurance companies to take credit for
reinsurance obtained from unlicensed or non-admitted insurers on their statutory financial statements unless appropriate security mechanisms are in place, we anticipate that our
reinsurance clients will typically require AXIS Specialty to post a letter of credit or other collateral. We expect that the $375 million available for letters of credit under AXIS Specialty's
revolving credit facility will be used for this purpose. However, if this facility is not sufficient or if we are unable to renew this facility or are unable to arrange for other types of security on
commercially reasonable terms, AXIS Specialty could be limited in its ability to write business for certain of our clients.
We
expect that the proceeds of this offering, together with the capital base we established in our original private placement, will permit us to continue to implement our business
strategy. On an ongoing basis, we expect our internally generated funds, together with the revolving credit facility and the capital base established by this offering and the private placement funding
completed in November 2001, to be sufficient to operate our business. However, there can be no assurance that we will not be required to incur other indebtedness to implement our business
strategy or pay claims.
We
did not make any significant capital expenditures during the period ended December 31, 2001 or the year ended December 31, 2002. We currently expect capital expenditures
for 2003 to be less than $10 million.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to potential loss from various market risks, including changes in interest rates and foreign currency exchange rates.
Our
investment portfolio consists of fixed income securities denominated in both U.S. and foreign currencies. Accordingly, earnings will be affected by many factors, including changes in
interest rates and foreign currency exchange rates. External investment professionals manage our portfolio under the direction of our management in accordance with detailed investment guidelines
provided by us. Our guidelines do not currently permit the use of derivatives other than foreign currency forward contracts. During the first half of 2002, however, we did utilize derivatives, as was
permitted under guidelines in effect at the time. We do not currently utilize derivatives other than foreign currency forward contracts. In the future we may change our guidelines to permit the use of
derivatives.
Interest Rate Risk.
Fluctuations in interest rates have a direct impact on the market valuation of these securities. As
interest rates rise, the market value of our fixed income portfolio falls, and the converse is also true. We expect to manage interest rate risk by selecting investments with characteristics such as
duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities.
As
of December 31, 2002, we held $734.6 million at fair market value, or 32.9% of our total invested assets, in mortgage-related securities. When interest rates decline,
these assets are exposed to prepayment risk, which occurs when holders of underlying mortgages increase the frequency with which they prepay the outstanding principal before the maturity date and
refinance at a lower interest rate cost.
We
consider the effect of interest rate movements on the market value of our assets under management by third party investment managers and the corresponding change in unrealized
appreciation. We have calculated the effect that an immediate parallel shift in the U.S. interest rate yield curve would have on our assets under management by third party investment managers as of
December 31, 2002. The modeling of this effect was performed on each security individually using the security's effective duration and changes in prepayment expectations for mortgage-backed and
asset-backed securities. The results of this analysis are summarized in the table below.
49
Interest Rate Movement Analysis on Market Value of Assets Under Management by Third Party Investment Managers
Interest Rate Shift in Basis Points
($ in thousands)
-100
-50
0
+50
+100
Total Market Value
$
2,279,257
$
2,256,359
$
2,233,232
$
2,209,876
$
2,186,291
Market Value Change from Base
2.1
%
1.0
%
0.0
%
(1.0)
%
(2.1)
%
Change in Unrealized Appreciation
$
46,025
$
23,127
$
0
$
(23,356
)
$
(46,941
)
Foreign Currency Risk.
We will attempt to manage our foreign currency risk by seeking to match our liabilities under
insurance and reinsurance policies that are payable in foreign currencies with investments that are denominated in such currencies. Furthermore, we may use foreign currency forward contracts in an
effort to hedge against movements in the value of foreign currencies relative to the U.S. dollar and to gain exposure to interest rate differentials between differing market rates. A foreign currency
forward contract involves an obligation to purchase or sell a specified currency at a future date at a price set at the time of the contract. Foreign currency forward contracts will not eliminate
fluctuations in the value of our assets and liabilities denominated in foreign currencies but rather allow us to establish a rate of exchange for a future point in time. We do not expect to enter into
such contracts with respect to a material amount of our assets. Foreign currency forward contracts purchased are not specifically identifiable against cash, any single security or any groups of
securities and, therefore, do not qualify and are not designated as a hedge for financial reporting purposes. All realized gains and losses and unrealized gains and losses on foreign currency forward
contracts are recognized in the statements of operations and comprehensive income. At December 31, 2002, the net contractual amount of foreign currency forward contracts was
$0.41 million, with a negligible fair market value. We did not enter into any foreign currency forward contracts in 2001.
At
December 31, 2002, we had receivable balances of $375.5 million. Of this balance, 79% was denominated in U.S. dollars. Of the remaining balance, 9% was denominated in
Sterling and 6% in
Euro. A 5% increase or decrease in the value of the Euro and Sterling currencies against the U.S. dollar would produce a gain or loss of approximately $2.8 million.
Credit Risk.
We have exposure to credit risk primarily as a holder of fixed income securities. Our risk management strategy
and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one issuer. We
attempt to limit our credit exposure by purchasing fixed income investments rated BBB-/Baa3 or higher. In addition, we have limited our exposure to any single corporate issuer to 5% or
less of our portfolio for securities rated A-/A3 or above and 2% or less of our portfolio for securities rated between BBB-/Baa3 to BBB+/Baa1. In addition, we have credit risk
under a contract where we receive a fixed annual premium for a five year period in return for assuming the risk of default on a pre-determined portfolio of sovereign obligations. Our
liability thereunder to the insured could be up to $350 million.
Value-at-Risk.
Our management uses Value-at-Risk ("VaR") as one of its tools to measure potential
losses in fair market values of our investment portfolio. The VaR calculation is calculated by a third party provider and reviewed by management. VaR uses a Monte Carlo simulation to project many
different prices of fixed income securities, derivatives and currencies taking into account, among other things, the volatility and the correlation between security price changes over certain forecast
horizons. The VaR of our investment portfolio at December 31, 2002 was approximately $70.9 million, which represents the potential loss in fair market value of our investment portfolio
over a one year time horizon within a 95% confidence level. The VaR computation is a risk analysis tool and does not purport to represent actual losses in fair market value. We cannot predict actual
future movements in
50
market rates and do not present these results to be indicative of future movements in such market rates or to be representative of any actual impact that future changes in market rates may have on
our future results or financial position.
Currency
Our functional currency is the U.S. dollar. However, because we write a portion of our business and receive premiums in currencies other than U.S. dollars and may
maintain a small portion of our investment portfolio in investments denominated in currencies other than U.S. dollars, we may experience foreign exchange losses to the extent our foreign currency
exposure is not properly managed or otherwise hedged, which in turn would adversely affect our statement of operations and financial condition.
Effects of Inflation
We do not believe that inflation has had a material effect on our consolidated results of operations, except insofar as inflation may affect interest rates. The
potential exists, after a catastrophe loss, for the development of inflationary pressures in a local economy. The anticipated effects on us are considered in our catastrophe loss models. The effects
of inflation are also considered in pricing and in estimating reserves for unpaid claims and claim expenses. The actual effects of inflation on our results cannot be accurately known until claims are
ultimately settled.
51
INDUSTRY BACKGROUND
The insurance and reinsurance industry has recently experienced severe dislocation as a result of an unprecedented impairment of capital, which has caused a
substantial contraction in global underwriting capacity. At the same time that capacity has declined, we believe the demand for commercial insurance and reinsurance has increased as insureds have
become increasingly aware of their risk exposures.
We
believe that from the beginning of 2001 through the end of 2002, capital available to write property and casualty insurance and reinsurance has been impaired by an estimated $228 to
$248 billion in potential and realized underwriting and investment losses. This amount is equal to 33% to 35% of the approximately $700 billion in available capital at the end of 2000.
The following table illustrates the estimated components of the impairment of capital that the industry has experienced:
Estimated Components of Capital Impairment
Amount
($ in billions)
World Trade Center losses
$
30-40
Estimated reserve deficiencies
78
Investment losses—Non-U.S.
100-110
Net realized investment losses—U.S. (through June 30, 2002)
20
Total potential losses
$
228-248
Sources: Sigma and A.M. Best.
Additionally, many established insurers have exited key markets, including reinsurance subsidiaries of primary carriers. These industry developments have provided
new companies such as ours with an opportunity to provide much needed underwriting capacity at attractive rates in conjunction with improved terms and conditions. Importantly, this capacity is backed
by a capital base free of legacy liabilities prevalent in much of the industry. Some of the principal factors that we believe are driving the reduced capacity include:
Record losses.
The tragic events of September 11, 2001 represented the largest insured loss in history, with industry
loss estimates of $30 billion to $40 billion, according to A.M. Best. In addition, the effect of these losses have been compounded by other catastrophe losses such as the 2002 European
floods.
Significant reserve shortfalls.
Reserve shortfalls from asbestos and environment-related ("A&E") claims as well as poor
underwriting in the late 1990s continue to plague the property and casualty insurance industry. According to A.M. Best, the industry was under-reserved for A&E claims by approximately
$53 billion as of year-end 2001, and A.M. Best expects the industry to ultimately incur more than $121 billion in net A&E losses. Several major insurers have recently
taken significant asbestos-related charges, including Travelers Property Casualty Corp., ACE Limited, Fireman's Fund Insurance Company and The St. Paul Companies, totaling an estimated
$7.6 billion in 2002 according to A.M. Best. A.M. Best further estimates $8 billion of additional A&E and other charges in 2003. Additionally, deficiencies are expected to be
greater and more widespread in the commercial market, where A.M. Best estimates core loss reserve shortfalls to be approximately $25 billion excluding A&E at year-end 2002.
We believe these reserving issues have led to significant capital impairment and withdrawal of capacity among the incumbents in the property and casualty industry.
Adverse investment returns.
A decline in global equity markets and significant credit losses, including losses caused by high
profile bankruptcies such as Enron Corp., WorldCom, Inc., Adelphia Communications Corp., U.S. Airways Group, Inc. and UAL Corporation, have created an
52
adverse investment environment for insurers and reinsurers. Sigma estimates a decline of $100-$110 billion in European capital since the end of 2000 due to the adverse investment
environment, while A.M. Best estimates U.S. realized and unrealized investment losses from the end of 2000 through June 30, 2002 to be $20 billion. In addition, the current low
interest rate environment has also reduced the investment returns of insurers and reinsurers, underscoring the importance of generating underwriting profits rather than relying on investment results
in order to generate profitability.
Exit of key players.
In 2002, several market participants, including Gerling Group, SCOR S.A., AXA Group and Overseas
Partners Ltd., either exited particular business lines or significantly reduced their activity, further depleting the industry's available underwriting capacity.
Ratings decline.
In 2002, many property and casualty insurers and reinsurers were downgraded, including 47 out of the largest
150 rated reinsurers. Additionally, Lloyd's of London, traditionally a large provider of capacity for specialty lines, was downgraded by Standard & Poor's on September 20, 2001 after sustaining
large losses in the tragic events of September 11, 2001.
Increased financial scrutiny.
In 2002, high-profile corporate scandals led to a significant overhaul in corporate
governance and scrutiny of financial results of public companies. We believe this increased scrutiny has led insurers to adopt a more conservative approach to reserving and has reduced the capacity
that they are willing or able to offer.
In
our first year of operation, we believe we have successfully capitalized on opportunities created by the market dislocation. We believe our capital base, underwriting talent, globally
diversified product offering and technology platform clearly differentiate us from incumbent insurers and reinsurers and allow us to operate cost effectively and to react quickly to changing market
dynamics.
53
BUSINESS
Overview
We provide specialty lines insurance and treaty reinsurance on a global basis, with headquarters in Bermuda. Through our operating subsidiaries based in Bermuda,
Ireland and the United States, we focus on writing coverage for specialized classes of risk through our team of highly skilled and experienced underwriters. Since our founding in November 2001,
we have successfully assembled a strong management team of proven leaders with significant industry experience, established a global underwriting infrastructure and built a broad product portfolio. In
2002, our first full year of operation, we wrote $1.1 billion of gross premiums, generated $265.1 million of net income, produced a combined ratio of 70.7% and earned a return on average
equity of 14.7%. As of December 31, 2002, we had $1.96 billion of shareholders' equity. We believe that we have already established a recognized franchise in the insurance and
reinsurance industries and are well-positioned to provide our products to our customers.
We
seek to use our management's extensive expertise, experience and long-standing market relationships to identify and underwrite attractively priced risks while delivering
innovative insurance and reinsurance solutions to our customers. Our underwriters are focused on constructing a portfolio of risks that fully utilizes our capital while optimizing the
risk-reward characteristics of the portfolio. In specialty lines, we have designed our corporate and underwriting structure to create an operating platform that utilizes new procedures and
technologies. We believe we have a unique operating platform in specialty lines that provides us with a competitive advantage. We intend to continue to exercise highly disciplined underwriting
practices and manage a diverse book of business while seeking to maximize our profitability and generate superior returns on equity.
Our
business is comprised of two underwriting segments: specialty lines and treaty reinsurance. During the year ended December 31, 2002, we wrote gross premiums for our specialty
lines and treaty reinsurance of $793.8 million and $314.2 million, respectively.
Our
specialty lines segment primarily includes the following risk classifications:
•
Specialty
Risks (including Terrorism, Marine and Aviation War Risk and Political Risk);
•
Onshore
and Offshore Energy;
•
Aviation
and Aerospace;
•
Commercial
Property; and
•
Marine.
We
also expect to write specialty lines insurance covering professional liability and related lines as a result of our agreement to acquire the renewal rights to a book of business
written by the Financial Insurance Solutions unit of Kemper, a transaction we expect to consummate in early 2003. In connection with this acquisition, we added a senior underwriting team from Kemper.
Our
treaty reinsurance segment provides short to medium tail, severity-driven products, primarily for catastrophic risks. The underlying property and casualty insurance business classes
covered by the treaties we write include:
•
Property;
•
Workers'
Compensation, Personal Accident and Life;
•
Professional
Liability;
•
Casualty
Clash; and
54
•
Marine
and Aviation.
We
market and distribute our products primarily through the world's largest insurance and reinsurance brokers, such as Marsh (including its subsidiary, Guy Carpenter), Aon, Willis and
Benfield, among others.
Competitive Strengths
We believe our competitive strengths have enabled, and will continue to enable us to capitalize on the significant dislocation in the insurance and reinsurance
marketplace. These strengths include:
•
Experienced
Management and Underwriting Team with Proven Track Record;
•
Long-Standing
Market Relationships;
•
Demonstrated
Ability to Attract High Quality Talent;
•
Disciplined
Approach to Underwriting and Risk Management;
•
Low-Cost
International Infrastructure and Versatile Underwriting Platform; and
•
Superior
Financial Strength.
Experienced Management and Underwriting Team with Proven Track Record.
Our management team is led by our President and CEO,
John R. Charman, who has over 30 years of industry experience. Mr. Charman has served as CEO of Charman Underwriting Agencies and Tarquin plc, President of ACE International and Deputy
Chairman of Lloyd's. Our Chairman, Michael A. Butt, has over 40 years of industry experience, having served as CEO of Mid Ocean Ltd., Chairman and CEO of Eagle Star Holdings and Eagle
Star Insurance Company, Chairman of Sedgwick Limited and as a Director of XL Capital Ltd. We have also assembled a team of senior underwriters with an average industry experience of
20 years at successful insurers and reinsurers in a variety of markets. The extensive depth and
knowledge of our management and underwriting teams provide us with the ability to successfully select and price complex risks.
Long-standing Market Relationships.
Our underwriters have well-established personal relationships
with our insureds, cedents and brokers. We were founded by Marsh, the largest insurance broker worldwide, and believe that we have broad support among all major insurance and reinsurance brokers.
Almost all of our business is sourced from our underwriters' existing relationships with brokers and insureds. In addition, several of our senior underwriters have worked together previously, which we
believe provides our customers with a cohesive, seamless interface. We use our market relationships to identify business opportunities and establish ourselves as leaders in lines of business that have
been severely affected by the dislocation in insurance markets.
Demonstrated Ability to Attract High Quality Talent.
From inception, we have successfully targeted and hired high quality
management and underwriting talent. In addition, we have capitalized on the significant dislocation in the insurance industry by selectively recruiting entire underwriting teams, which has enabled us
to expand our product lines. For example, our acquisition of AXIS Indemnity included a team of experienced underwriters, providing us with a high quality, U.S.-based specialty lines platform. In
addition, in connection with our pending acquisition of the renewal rights from Kemper for its Financial Insurance Solutions professional liability and related lines business, we hired a team of
senior underwriters from Kemper to facilitate this expansion of our capabilities.
Disciplined Approach to Underwriting and Risk Management.
We believe in generating underwriting profitability through a
disciplined, conservative approach utilizing peer review processes involving seasoned underwriters for each of our segments. We believe these peer review processes, combined with our strict management
of global aggregate exposures across products and sophisticated modeling
55
capabilities, allow us to realize attractive prices, favorable terms and risk diversification. We manage our exposures on a product and geographic basis through comprehensive, daily review by senior
management. For our property and casualty business, we use commercially available software, such as "RMS" and "CatTrader," to model, price and monitor exposures on complex risks.
Low-Cost International Infrastructure and Versatile Underwriting Platform.
Since our founding in
November 2001, we have established 10 offices, including underwriting entities and built a staff of 168 employees. With teams of underwriters based in Bermuda, the United States and Ireland, we
have the ability to identify, source and underwrite a diverse portfolio of risks quickly and efficiently. We believe we have created an efficient, scaleable, low-cost infrastructure that
complements the global, specialized nature of our business. For specialty lines, we have built a unique Internet policy submission system called "Submit.Axis" that allows brokers to submit detailed
underwriting requests. Upon submission, we identify the appropriate licensed entity to underwrite the risk while feeding all submission data to our senior underwriting team. Despite incurring startup
costs, in 2002 we produced a ratio of general and administrative costs to net written premiums of 4.6% compared to a five-year average of 17.3% for U.S. commercial lines insurers as
defined by A.M. Best. We believe our international presence, centralized coordination and proprietary technologies provide us with the flexibility to adapt to market conditions
in real time and practice a highly opportunistic underwriting approach. In addition, we believe our innovative technological platform and streamlined underwriting processes help lower our costs.
Superior Financial Strength.
As of December 31, 2002, we had a capital base of $1.96 billion without any
outstanding debt. Our operating companies (with the exception of AXIS Indemnity, which is not rated) are rated "A" (Strong) by Standard & Poor's, which is the sixth highest of 21 ratings, and
"A-" (Excellent) by A.M. Best, which is the fourth highest of 15 ratings. These ratings reflect our ability to pay policyholder claims and are not applicable to the securities
offered in this prospectus. Our financial strength allows us to offer large per risk limits. We believe we are one of the few companies in the current marketplace that can offer specialty lines in
excess of $100 million in coverage on a per risk basis, which we believe provides us with consistent pricing power and superior risk selection capability. Our capital is unencumbered by
historical losses relating to the tragic events of September 11, 2001, asbestos, environmental or other legacy exposures that have led to capital charges for others in our industry. We believe
our financial strength has quickly allowed us to be recognized as one of a select group of highly rated specialty insurers and bolstered our credibility among brokers and insureds. Our conservative
approach to managing our balance sheet reflects our commitment to maintaining our financial strength.
Strategy
Our corporate objective is to generate superior returns on equity while establishing ourselves as a global leader in providing specialty lines insurance and
treaty reinsurance products to our customers. We intend to achieve this objective by executing the following strategies:
•
Establish
Global Leadership in Key Business Lines by Leveraging Management's Significant Experience and Relationships;
•
Opportunistically
Manage a Diverse Portfolio of Specialty Risks;
•
Continue
Commitment to Highly Disciplined Underwriting Practices;
•
Maintain
a Conservative Balance Sheet and Superior Financial Ratings;
•
Realize
Increased Profitability by Maintaining Our Efficient, Low-Cost Infrastructure; and
•
Manage
Capital Prudently.
56
Establish Global Leadership in Key Business Lines by Leveraging Management's Significant Experience and Relationships.
Our
senior management team has extensive customer relationships with leading insurers, cedents and brokers around the world, including Marsh and its subsidiary Guy Carpenter, Aon, Willis and Benfield. As
a result, we have been able to take advantage of the current dislocation in the insurance market to rapidly establish our market presence. In our first full year, we wrote gross premiums of
$1.1 billion with approximately 2,000 clients. We intend to continue to rely on the strength and depth of these relationships to generate new business in the future. We will continue to
capitalize on our management's industry experience and relationships as we establish ourselves as a leading writer of specialty lines and treaty reinsurance.
Opportunistically Manage a Diverse Portfolio of Specialty Risks.
We are opportunistic and selective participants in business
lines that have been most affected by the significant contraction in global underwriting capacity. In 2002, we constructed a diverse portfolio of business lines consistent with our
long-term targets. We intend to use our underwriting expertise to emphasize particular business lines in response to changing market conditions. For example, we wrote $155.2 million
of terrorism-related business in 2002 at highly attractive terms and average
attachment points
above $65.0 million. By carefully choosing our
exposures, we plan to maintain a short to medium tail focus and build a geographically diverse portfolio that minimizes correlated risk. With our depth of experience, underwriting knowledge and
centralized exposure management, we are able to quickly and efficiently underwrite diverse classes of risk around the world and will continue to underwrite classes of risk consistent with our
underwriting expertise while monitoring evolving market conditions.
Continue Commitment to Highly Disciplined Underwriting Practices.
We intend to continue to utilize our disciplined
underwriting approach to minimize risk and reduce the volatility of our operating results. We believe that the use of peer review processes throughout our organization, combined with our strict
management of global aggregate exposures across products and sophisticated modeling capabilities, allow us to realize attractive prices, favorable terms and risk diversification. We also strive to
control our risk by insuring higher
layers
of loss.
Maintain a Conservative Balance Sheet and Superior Financial Ratings.
We are committed to maintaining our excellent
capitalization, financial strength and ratings over the long-term. Our assets are conservatively invested in high-grade fixed income securities. Our investment strategy is to
preserve capital and proactively avoid problem credits by applying stringent watch-list criteria and following formalized investment guidelines. We will continue to maintain a high
quality, short duration asset portfolio consistent with our ratings. We believe we are prudent buyers of reinsurance and will utilize the retrocessional market when capacity is available at attractive
terms. In addition, we will seek to maintain our current ratings, as we believe they are important for attracting business.
Realize Increased Profitability by Maintaining Our Efficient, Low-Cost Infrastructure.
We intend to maintain and
capitalize on our low-cost infrastructure to realize increased profitability as our business matures. Having obtained requisite licenses, technology and underwriting expertise within our
first year of operation, we believe we are well-positioned to grow our business without incurring significant additional capital expenditures. We plan to use the flexibility provided by
the scaleable nature of our infrastructure to respond to both positive and negative changes in market conditions as they develop and to integrate new business opportunities in a
cost-efficient manner.
Manage Capital Prudently.
We intend to manage our capital prudently relative to our risk exposure to maximize profitability
and long-term growth in shareholder value. Our capital management strategy is to deploy capital efficiently to underwriting opportunities and to establish adequate loss reserves to protect
against future adverse developments. We will target an optimal level of overall leverage to support our underwriting, and if appropriate, we may return excess capital to shareholders in the form of
share repurchases or dividends.
57
Business Segments
Our business is comprised of two underwriting segments: specialty lines and treaty reinsurance. Our business segments and the related gross premiums written, set
forth by business segment are as follows:
Gross Premiums Written by Business Segment
For the Year Ended
December 31, 2002
($ in thousands)
Specialty Lines
$
793,759
71.6
%
Treaty Reinsurance
314,244
28.4
Total
$
1,108,003
100.0
%
Specialty Lines
The specialty insurance market differs significantly from the standard market. In the standard market, insurance rates and forms are highly regulated, products
and coverages are largely uniform with relatively predictable exposures, and companies tend to compete for customers on the basis of price. In contrast, the specialty market provides coverage for
risks that do not fit the underwriting criteria of the standard carriers. Competition tends to focus less on price and more on availability, service and other value-based considerations. To reach our
financial and operational goals, we must have extensive knowledge and expertise in our chosen markets. Most of our risks are considered on an individual basis, and we employ tailored solutions in
order to respond to distinctive risk characteristics. We have chosen to be in only those lines where we believe we have specialized underwriting expertise. We can write business in all 50 states in
the United States as an admitted insurer and in 45 states on an excess and surplus basis.
Our
principal specialty lines are: specialty risks, onshore and offshore energy, aviation and aerospace, commercial property and marine. Since most of our specialty lines are for
property and not casualty coverage, the segment is principally short to medium tail business. This means that claims are generally made and settled earlier than in long tail business, which
facilitates our reserving process. Generally, the insurance we write is not first layer, which means that there is at least one layer of insurance coverage beneath ours provided by another insurer or
insurers.
Gross
premiums written, set forth by line, are as follows for our specialty lines business segment:
Gross Premiums Written by Specialty Line
For the Year Ended
December 31, 2002
($ in thousands)
Specialty Risks (including terrorism, marine and aviation war risk and political risk)
$
355,141
44.7
%
Onshore and Offshore Energy
168,432
21.2
Aviation and Aerospace
114,708
14.5
Commercial Property
104,927
13.2
Marine
50,551
6.4
Total
$
793,759
100.0
%
58
Specialty Risks.
Specialty risks includes terrorism, marine and aviation war risk and political risk. Terrorism coverage
insures against physical damage and associated business interruption of an insured following an act of terrorism. We believe that we were one of only a few providers of terrorism insurance in 2002. As
such, we focused on this line, which we believe had favorable pricing and terms. Marine and aviation war insurance provides specific war coverage for the risks otherwise covered in our aviation and
marine books of business. We believe our ability to offer coverage for war, terrorism, hull and liability risks in the aviation market distinguishes us from most of our competitors. Our political
risks book generally provides protection against sovereign default or other sovereign actions resulting in impairment of cross-border investments, most often investments in infrastructure development,
for banks and major corporations in industries such as energy and mining.
Onshore and Offshore Energy.
The energy book concentrates on providing physical damage, business interruption and liability
coverage for the onshore and offshore oil and gas industry. There was considerable rate improvement in 2002 over 2001, and we therefore were aggressive in seeking energy business in 2002.
Aviation and Aerospace.
The aviation and aerospace book provides insurance to both the aviation and aerospace markets. Core
aviation risks covered include hull and liability risks for passenger and cargo airlines and privately owned aircraft. In 2002, we sought to take advantage of favorable rates and terms within the
aviation line. The aerospace book provides property damage coverage on satellites for pre-launch, launch and in-orbit phases. In addition, the aerospace book provides coverage
for damage to the launch sites and launch and in-orbit liability. In 2002, the level of premiums written relating to the aerospace book of business was low because there was limited launch
activity during the year.
Commercial Property.
The commercial property book primarily provides coverage for physical damage and business interruption
with respect to industrial properties. Coverage provided includes catastrophic and non-catastrophic events. In 2002, most of our premiums came from the United States, which experienced
improved market conditions following the tragic events of September 11, 2001.
Marine.
The marine book provides coverage for hull, liability, cargo and specie and recreational marine risks. These risks
include property damage to ships, pollution damage caused by vessels on a sudden and accidental basis and protection for general cargo and the contents of armored cars, vaults, exhibitions and
museums. In 2002, we limited our exposure to the marine business, as we did not believe the rates were favorable.
Our
specialty lines customers include, among others, major companies in the airline, banking, multimedia, natural resources and oil and gas industries. No client in our specialty lines
segment accounted for more than 2.0% of our gross written premiums in 2002.
We
intend to expand our focus into two additional lines in 2003, commercial liability and professional liability, neither of which was material to our gross written premiums in 2002.
Commercial Liability.
Our commercial liability book will primarily target casualty risks in the United States excess and
surplus markets. Our target classes include mercantile, manufacturing and building/premises, with particular emphasis on commercial and consumer products, commercial construction and miscellaneous
general liability. We will primarily target accounts with severe but infrequent risks, which could affect the volatility of our results.
Professional Liability.
We have agreed to acquire the renewal rights to a professional liability and related lines book of
business written by the Financial Insurance Solutions unit of Kemper in exchange for a ceding commission, a transaction we expect to consummate in the first quarter of 2003. In connection with this
acquisition, we added a senior underwriting team from Kemper. The majority of this business will be directors' and officers' liability coverage. Directors' and officers' liability insurance generally
covers directors and officers of public companies against claims alleging mismanagement or
59
other breaches of corporate duties. We believe this acquisition comes at a time when there is a capacity shortage in this line, the pricing for this business is increasing and terms and conditions
for underwriters in this line are improving.
Treaty Reinsurance
Treaty reinsurance contracts are contractual arrangements that provide for automatic reinsuring of a type or category of risk underwritten by our clients. When we
write treaty reinsurance contracts, we do not separately evaluate each of the risks assumed under the contracts and are largely dependent on the underwriting decisions made by the cedent. Accordingly,
we carefully review and analyze the cedent's risk management and underwriting practices in deciding whether to provide treaty reinsurance and in appropriately pricing the treaty.
Our
contracts can be written on either a pro rata basis, also known as proportional, or on an excess of loss basis. In pro rata contracts, the reinsurer reimburses the
ceding company
for the cost of
producing the business in the form of a ceding commission. The ceding commission may include an additional commission
above the actual costs of the ceding company, and these contracts often have profit-oriented additional commissions as well.
This
business generally operates as a subscription market, with the reinsurance intermediaries seeking participation for specific treaties among a number of reinsurers. We offer a price
at which we are willing to participate, and only participate if we believe available pricing is favorable. Those reinsurers that ultimately subscribe to any given treaty participate at substantially
the same pricing and terms and conditions. See "—Underwriting and Risk Management."
Gross
premiums written, set forth by line, are as follows for our treaty reinsurance business segment:
Gross Premiums Written by Treaty Reinsurance Line
For the Year Ended
December 31, 2002
($ in thousands)
Catastrophe
$
230,741
73.4
%
Property pro rata
53,916
17.2
Property per risk
16,721
5.3
Other
12,866
4.1
Total
$
314,244
100.0
%
Catastrophe Reinsurance.
Most of our catastrophe reinsurance is for property risks. Our property catastrophe reinsurance
business reinsures catastrophic perils for ceding companies on a treaty basis. Our property catastrophe reinsurance contracts provide protection for most catastrophic losses that are covered in the
underlying insurance policies written by our ceding company clients. The principal perils in our portfolio include hurricane and windstorm, earthquake, flood, tornado, hail and fire. Coverage for
other perils may be negotiated on a case-by-case basis. This business is comprised of reinsurance contracts that incur losses only when events occur that impact more than one
risk or insured. Protection under property catastrophe treaties is provided on an occurrence basis, allowing our ceding company clients to combine losses that have been incurred in any single event
from multiple underlying policies. The multiple claimant nature of property catastrophe reinsurance requires careful monitoring and control of cumulative aggregate exposure.
We
also reinsure workers compensation, personal accident and life insurance risks. This business is almost exclusively focused on exposures in the United States and is virtually all
written on an excess of
60
loss basis. We focus on business that is exposed to severity losses and not expected to produce high levels of claims frequency. This business is written only at levels that would require multiple
deaths or injuries to result in a loss. The treaties include limitations on the maximum amount of coverage for any one person and our attachment points are multiples of these stipulated maximum
coverage limits.
There is a potential for events that trigger property catastrophe claims, such as catastrophic earthquakes, to also result in injuries and deaths. We closely monitor the potential for accumulation
within our businesses.
Property Pro Rata Treaty Reinsurance.
Property pro rata treaty reinsurance is treaty insurance that covers a cedent's
aggregate losses from an event rather than losses from particular risks. This business is written on a proportional basis. Most of our pro rata treaty reinsurance contracts have occurrence limits.
Property pro rata treaty reinsurance may contain significant risk of accumulation of exposures, both to natural and other perils. Our underwriting process explicitly recognizes these exposures.
Natural perils, such as hurricane and windstorm, earthquake and flood, are analyzed through our catastrophe modeling systems. See "—Underwriting and Risk Management." Other perils, such as
fire and terrorism events, are considered based on historic loss and loss expense ratios experienced by cedents and monitored for cumulative aggregate exposure.
Property Per Risk Treaty Reinsurance.
Our property per risk treaty reinsurance business reinsures a portfolio of particular
property risks of ceding companies on a treaty basis. For example, we could provide reinsurance to cover a cedent's losses for damage to commercial property under individual policies. This business is
comprised of a highly diversified portfolio of reinsurance contracts covering claims from individual insurance policies issued by our ceding company clients and including both personal lines and
commercial property risks (principally covering buildings, structures, equipment and contents). Loss exposure in this business includes the perils of fire, explosion, collapse, riot, vandalism,
hurricane and windstorm, tornado, flood and earthquake. This business is written on an excess of loss basis. Our property per risk treaty reinsurance agreements generally have occurrence limits.
Other.
Following the licensing of AXIS Reinsurance in December of 2002, we began writing other types of reinsurance. This
book focuses almost exclusively on exposures in the United States and is primarily written on an excess of loss basis. Treaty reinsurance lines in this book include: treaties that are exposed to loss
only through a combination of claims from more than one underlying insurance policy or coverage part (referred to as clash reinsurance); professional (including medical malpractice, directors and
officers, employment practices liability and miscellaneous errors and omissions insurance); and umbrella (personal and commercial).
In
2002, our treaty reinsurance customers were largely small to mid-sized North American insurers. No client in our treaty reinsurance lines accounted for more than 4.0% of
our gross written premiums in 2002.
61
The
following is a breakdown of treaty reinsurance premiums by geography:
Gross Treaty Reinsurance Lines Premiums Written by Geographic Area
In Force as of
December 31, 2002
U.S.
50.1
%
North America (excluding U.S.)
15.9
Worldwide (1)
13.4
Europe
9.6
Caribbean
4.4
Japan
4.3
Australia/New Zealand
1.7
Africa
0.3
Asia
0.3
Total
100.0
%
(1)
"Worldwide"
risks comprise individual policies that insure risks on a worldwide basis.
Technology
We have developed a sophisticated technology platform to support our underwriting activities worldwide. We believe our use of technology allows us to maintain a
low cost infrastructure and efficient underwriting operations. In addition, we believe our technologies provide us with significant
competitive advantages as we seek to improve our relationships with our customers and provide enhanced levels of customer service.
"Submit.Axis"
is a unique, web-based policy submission capability that we have developed for our specialty lines business. Initially developed for brokers in the London
market, Submit.Axis allows brokers to provide details of a policy submission online and our underwriters to review and accept or decline their requests. Upon submission, our senior underwriters can
access submission details online and review relevant policy documentation. In addition, the underwriters in the applicable licensed entity interact with the broker and attach offers and final slip
information for broker review. Also, the system allows all specialty lines underwriters to view all business activity and assist with market intelligence and our peer review process. Additionally, in
reviewing submissions our underwriters utilize our proprietary licensing database to determine the appropriate licensed entity that can underwrite the risk. Our licensing database contains detailed
legal and regulatory information regarding each jurisdiction in which we are permitted to write business and permits us to respond rapidly to opportunities in a cost-efficient manner. We
are committed to continuing to identify and deploy technologies which enhance our processing and underwriting capabilities and which enable us to realize additional operating efficiencies.
Underwriting and Risk Management
For our non-U.S. based specialty lines business, internal underwriting controls are exercised through a group of eight senior underwriters. Each proposal for each
risk we consider underwriting is attached to our website and can be reviewed by all underwriting staff. Each risk which is ultimately bound must be reviewed by senior underwriters in the applicable
licensed entity prior to the commitment of a line. This review process applies to each specialty line risk we underwrite prior to assessment and contractual commitment.
62
For
our U.S. specialty lines business written through AXIS Insurance, we utilize a similar review process. However, due to the large number of submissions received and the generally
smaller net
retentions
on this business, we use a modified peer review process whereby every account is reviewed by two or more underwriters before a
risk is bound and, depending upon the risk's characteristics and our underwriting guidelines, the risk may also be reviewed by a senior underwriting panel. In all cases, one of our senior officers
reviews all new business weekly, and only risks with the approval of a senior officer are bound by us.
We
utilize a variety of proprietary and commercially available tools to quantify and monitor the various risks we accept as a company. Our proprietary systems include those for modeling
risks associated with property catastrophe, workers' compensation and various casualty and specialty pricing models as well as our proprietary portfolio risk model.
With
respect to our catastrophe exposed U.S. specialty lines operations, AXIS Insurance's catastrophe modeling unit utilizes the Risklink product discussed below both to price and to
accumulate individual risks for our commercial property and onshore energy books. This analysis is then combined with the analysis of the treaty reinsurance segment to monitor aggregate exposures. For
terrorism perils, we have developed a proprietary system for monitoring accumulations.
With
respect to our non-catastrophe exposed business in AXIS Insurance, we generally analyze specialty insurance contracts via a variety of rating models. Where applicable,
our models draw upon industry information, including historical trend and development information licensed from Insurance Services Office, Inc. and AMS Services, Inc.
For
the analysis of our catastrophe-exposed business in our treaty reinsurance segment, we utilize three natural catastrophe modeling tools (Risklink version 4.2 licensed by RMS and
Classic/2 and CATRADER licensed by AIR). In addition, we have developed an internal proprietary application, known as the AXIS Catastrophe Accumulation and Pricing System or "ACAPS", which allows us
to track the results from each of these models for both pricing and accumulation purposes. Our state-of-the-art modeling system (including an aggregate exposure
management tool) allows the underwriting team, in conjunction with the actuarial team, to analyze risk exposure on a per peril (e.g. fire, flood, earthquake, etc.) and a geographic basis. If a program
meets the underwriting criteria of the treaty reinsurance segment, the proposal is evaluated in terms of its risk/reward profile to assess the adequacy of the proposed pricing and its potential impact
on our overall return on capital.
In
our property pro rata business, we utilize a combination of actuarial techniques and catastrophe modeling. We use actuarial techniques to examine our ceding companies' underwriting
results as well as the underwriting results from the companies with comparable books of business and pertinent industry results. In our property per risk business, we rely almost exclusively on
actuarial techniques. Although per risk treaties may include exposure to natural perils, castastrophe modeling systems are generally not used largely because the cedents often do not know the physical
locations of the risks they have insured.
In
addition to the above technical and analytical practices, our underwriters use a variety of means, including specific contract terms and diversification of risk by geography and type
of risk, to manage our exposure to loss. Substantially all business written contains aggregate limits, in addition to event limits.
Marketing
We produce our business almost exclusively through insurance and reinsurance brokers worldwide, who receive a brokerage commission usually equal to a percentage
of gross premiums. Our management and underwriting team have longstanding relationships with key insurance and reinsurance brokers, such as
Marsh (including its subsidiary, Guy Carpenter), Aon, Willis and Benfield, and with many ceding companies. We believe Submit.Axis, our proprietary web based submission system, enhances these
relationships by enabling us to provide prompt and responsive service on underwriting submissions for our specialty lines. Senior management also has direct relationships with customers.
63
The following table shows our gross premiums written by broker for the year ended December 31, 2002:
Gross Premiums Written by Broker
For the Year Ended
December 31, 2002
($ in thousands)
Marsh (including Guy Carpenter)
$
419,933
37.9
%
Aon
229,357
20.7
Willis
117,448
10.6
Benfield
60,940
5.5
Others
280,325
25.3
Total
$
1,108,003
100.0
%
Ceded Reinsurance
We purchase and intend to continue purchasing reinsurance for our specialty lines. Reinsurance ceded will vary based on line of business and on market conditions
and other factors. We use reinsurance to control our aggregate exposure to a particular risk or class of risks. These agreements provide for recovery of a portion of losses and loss expenses from
reinsurers. We remain liable to the extent that reinsurers do not meet their obligations under these agreements, and therefore we evaluate the financial condition of our reinsurers and monitor
concentrations of credit risk. Our reinsurance is currently provided by entities rated "A" or better by Standard & Poor's or A.M. Best.
Gross,
ceded and net amounts of premiums written and earned for the year ended December 31, 2002 were as follows:
Gross, Ceded and Net Amounts of Premiums Written and Earned
For the Year Ended
December 31, 2002
Premiums Written
Premiums Earned
($ in thousands)
Gross
$
1,108,003
$
576,904
Ceded
(89,726
)
(40,054
)
Net
$
1,018,277
$
536,850
Retrocessions
We may from time to time engage in the purchase of retrocessional coverage for our treaty reinsurance segment at times when capacity is available at attractive
prices from counterparties with high credit ratings. As of December 31, 2002, we did not have any retrocessional coverage in place.
Claims Management
We have a claims team composed of two units that provide global coverage and claims support for the business we write. These units are the U.S. claims unit and
the European claims unit. The role of our claims units is to investigate, evaluate and pay claims efficiently. We have implemented claims handling guidelines and claims reporting and control
procedures in both claims units. To monitor that claims are handled and reported in accordance with these guidelines, all claims matters are reviewed
64
weekly during a formal claims meeting. The minutes from this meeting are also circulated to all underwriters and senior management within the Company. To maintain communication between underwriting
and claims teams, claims personnel regularly report at underwriting meetings and frequently attend client meetings.
When
we receive notice of a claim, regardless of size it is recorded within our underwriting and claims system, and reserves and payments are checked weekly. To assist with the reporting
of significant claims, we have also developed a large claims information database, or LCID. The database is primarily used to "flash report" significant events and potential insurance losses,
regardless of whether we have exposure. Where we have exposure, the system allows a direct notification to be instantly communicated to all underwriters and senior management worldwide. The database
is also used as an electronic workflow management tool for larger cases that may involve adjustment and coverage issues or litigation. As of December 31, 2002, we did not have any claims in
litigation. Due to our short operating history, we had not experienced a high volume of claims as of December 31, 2002.
We
have entered into an agreement with a third party London market claims settlement firm to outsource certain claims administration functions relating to business sourced in London. We
generally bear only a small percentage of the risk on policies from this market. We will seek to use similar outsourcing resources elsewhere when we determine them to be appropriate and available.
Reserves
An insurer establishes reserves for losses and loss expenses that arise from its insurance and reinsurance products. These reserves are balance sheet liabilities
representing estimates of future
amounts required to pay losses and loss expenses for insured or reinsured claims that have occurred at or before the balance sheet date, whether already known or not yet reported. It is our policy to
establish these losses and loss expense reserves prudently after reflecting all information known to us as of the date they are recorded. Our loss reserves are estimated by management, based on
generally accepted actuarial principles, and are reviewed every quarter by Ernst & Young. We do not have a reserving actuary, and therefore Ernst & Young acts as our reserving actuary.
Ernst & Young has access to our claims information and individual contracts as part of their quarterly review.
Our
loss reserves fall into two categories: (i) reported case reserves, which reflect our estimates of the total cost of claims that were reported to us but not yet paid and
(ii) our estimate of the anticipated costs of claims incurred but not yet reported to us, or IBNR, which includes our estimate of the costs of additional case reserves, or ACR. Under U.S. GAAP,
we are not permitted to establish loss reserves with respect to our property catastrophe reinsurance until an event which gives rise to a loss occurs. As a result, only losses incurred up to the
reporting date may be set aside, with no allowance for the provision of a contingency reserve to account for expected future losses with respect to our property catastrophe reinsurance.
For
reported losses, we establish reserves on a "case" basis for the estimated amount of the ultimate settlement within the parameters of the coverage provided in the insurance or
reinsurance contracts. Additional case reserves are often estimated by our claims units ahead of official notifications but in the same manner as case reserves. Where there is a possibility of a
claim, we book an additional case reserve, which is only revised upon final determination that no claim will arise.
We
estimate IBNR reserves using actuarial methods. We also utilize historical insurance industry loss development patterns, as well as estimates of future trends in claims severity,
frequency and other factors, to aid us in establishing our losses and loss expense reserves.
Since
loss reserves represent estimates, including actuarial and statistical projections at a given point in time, of an insurer's or reinsurer's expectations of the ultimate settlement
and administration costs of claims incurred, it is likely that the ultimate liability will differ from such estimates, perhaps
65
significantly. Such estimates are not precise in that, among other things, they are based on predictions of future developments and estimates of future trends in loss severity and frequency and other
variable factors such as inflation. This uncertainty is heightened by the short time in which our company has operated, thereby providing limited claims loss emergence patterns specifically for our
company. This has necessitated the use of benchmarks in deriving IBNR, which despite management's and the independent actuary's care in selecting them, have the risk of differing from actual
experience. During the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, ultimate
liability may exceed or be less than the revised estimates.
Investments
The finance committee of our board of directors establishes our investment policies and creates guidelines for external investment managers. Management implements
our investment strategy with the assistance of those external managers. These guidelines specify minimum criteria on the overall credit quality and liquidity characteristics of the portfolio and
include limitations on the size of certain holdings as well as restrictions on purchasing certain types of securities.
Our
current investment strategy seeks to preserve principal and maintain liquidity while trying to maximize investment return through a high quality, diversified portfolio. In this
regard, at December 31, 2002, fixed income securities and cash and cash equivalents comprised all $2.2 billion of our assets under management by third party investment managers. At
December 31, 2002, our fixed income portfolio consisted of U.S. and non-U.S. sovereign government obligations, corporate bonds and other securities of which 84.0% were rated
AA- or Aa3 or better by either Standard & Poor's or Moody's, with an overall weighted average rating of AA+ based on ratings assigned by Standard & Poor's. We did not have
any investments in equity securities at December 31, 2002, although in the future we may invest in such securities. Our investment guidelines limit our aggregate exposure to any single issuer
to 5% or less of our portfolio for securities rated A-/A3 or above and 2% or less of our portfolio for securities rated between BBB-/Baa3 to BBB+/Baa1 other than with respect
to U.S. government and agency securities and securities issued by other member governments of the Organization for Co-operation and Economic Development ("OECD"). At December 31,
2002, we did not have an aggregate exposure to any single issuer of more than 2% of our shareholders' equity, other than with respect to U.S. government and agency securities and securities issued by
other OECD member governments.
Our
investment guidelines include a current duration target of two to four years. The duration of an investment is based on the maturity of the security and also reflects the payment of
interest and the possibility of early principal payment of such security. We seek to utilize investment benchmarks that reflect this duration target. Management periodically revises our investment
benchmarks based on business and economic factors including the average duration of our potential liabilities. As at December 31, 2002, our investment assets had an approximate average duration
of 2.5 years.
66
The
types of securities in our fixed income portfolio and their fair market values and amortized costs were as follows as of and for the year ended December 31, 2002:
Types of Securities in Our Fixed Income Portfolio and Their Fair Market Values and Amortized Costs
Year Ended
December 31, 2002
Type of Investment
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Market
Value
($ in thousands)
U.S. government and agency securities
$
426,939
$
7,365
$
(101
)
$
434,203
Non-U.S. government securities
97,949
1,191
(652
)
98,488
Corporate debt securities
295,050
11,184
(482
)
305,752
Mortgage-backed securities
725,161
12,203
(2,753
)
734,611
Asset-backed securities
119,259
2,014
(4,740
)
116,533
States, municipalities and political subdivisions
13,148
255
—
13,403
Total fixed income maturities
$
1,677,506
$
34,212
$
(8,728
)
$
1,702,990
As
of December 31, 2002, mortgage-backed securities constituted approximately 32.9% of our invested assets (assets under management by third party investment managers). As with
other fixed income investments, the fair market value of these securities fluctuates depending on market and other general economic conditions and the interest rate environment. Changes in interest
rates can expose us to prepayment risks on these investments. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities are prepaid more quickly,
requiring us to reinvest the proceeds at the then current market rates.
The
principal risk associated with corporate debt securities is the potential loss of income and potential realized and unrealized principal losses due to insolvencies and deteriorating
credit. Asset-backed securities are subject to structural, credit and capital markets risks. Structural risks include the security's priority in the issuer's capital structure, the adequacy of and
ability to realize proceeds from the collateral and the potential for prepayments. Credit risks include consumer or corporate credits such as credit card holders and corporate obligors. Capital
markets risks include the general level of interest rates and the liquidity for these securities in the market place.
The
Standard & Poor's credit ratings for fixed income securities held as of December 31, 2002 and the percentage of our invested assets (assets under management by third
party investment managers) they represented at such date were as follows:
Credit Ratings for Fixed Income Securities
As of
December 31, 2002
Rating
Amortized Cost
Fair Market Value
Percentage of
Total Fair
Market Value
($ in thousands)
AAA
$
1,382,702
$
1,398,352
82.1
%
AA
31,458
31,701
1.9
A
146,354
151,378
8.9
BBB
116,992
121,559
7.1
Total
$
1,677,506
$
1,702,990
100.0
%
67
The
contractual maturities of fixed maturity securities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. The maturity distribution for fixed income securities held as of December 31, 2002 was as follows:
Maturity Distribution for Fixed Income Securities
As of
December 31, 2002
Maturity
Amortized Cost
Fair Market Value
Percentage of
Total Fair
Market Value
($ in thousands)
Due in one year or less
$
76,350
$
76,475
4.5
%
Due after one year through five years
479,517
487,549
28.6
Due after five years through ten years
223,676
232,088
13.6
Due after ten years
53,543
55,734
3.3
Subtotal
833,086
851,846
50.0
Mortgage- and asset-backed securities
844,420
851,144
50.0
Total
$
1,677,506
$
1,702,990
100.0
%
The
following table illustrates net investment income, net realized gains on investments, net realized and unrealized gains on investment derivative instruments, annualized effective
yield and total return on investments for the year ended December 31, 2002:
Net Investment Income and Returns on Investments
Year Ended
December 31, 2002
($ in thousands)
Net investment income
$
71,287
Net realized gains on investments
22,515
Net realized and unrealized gains (losses) on investment derivative instruments
3,555
Annualized effective yield(1)
3.97
%
Total return(2)
7.50
%
(1)
Annualized
effective yield is calculated by dividing the investment income generated from assets under management by third party investment managers by the average balance of the
assets managed by the Company's portfolio managers.
(2)
Total
return for our investment portfolio is calculated using beginning and ending market portfolio values, adjusted for external cash flows.
Our
investment portfolio consists of fixed income securities denominated in both U.S. and foreign currencies. Accordingly earnings will be affected by many factors including changes in
interest rates and foreign currency exchange rates. Our investment guidelines do not currently permit the use of derivatives other than foreign currency forward contracts. During the first half of
2002, however, we did utilize derivatives as was permitted by our guidelines in effect at the time. We do not currently utilize derivatives other than foreign currency forward contracts. In the future
we may change our guidelines to permit the use of derivatives.
68
As
of December 31, 2002, we had engaged J.P. Morgan Investment Management Inc. and certain affiliates ("J.P. Morgan Investment Management"), The Putnam Advisory Company,
L.L.C. ("Putnam"), BlackRock Financial Management, Inc. and certain affiliates ("BlackRock"), Pacific Investment Management Company LLC ("PIMCO"), and Deutsche Bank Trust Company Americas
("Deutsche Bank") to provide us with investment management and advisory services. We have agreed to pay investment management fees based on the respective funds under management after each calendar
quarter. The fees are taken into account in the calculation of net investment income. The agreements with J.P. Morgan Investment Management may be terminated by either party at any time upon written
notice, the agreements with Putnam, BlackRock and PIMCO may be terminated by either party upon 15 days written notice, and the agreement with Deutsche Bank may be terminated by either party
upon 30 days written notice.
Competition
The insurance and reinsurance industry is highly competitive. We compete on an international and regional basis with major U.S., Bermuda, European and other
international insurers and reinsurers and certain underwriting syndicates, some of which have greater financial, marketing and management resources than we do. In particular, we compete with insurers
and reinsurers that provide property and casualty-based lines of insurance and reinsurance, such as ACE Limited, American International Group, Inc., Berkshire Hathaway, Inc., Converium Group, IPCRe
Limited, Lloyd's of London, Munich Re Group, PartnerRe Ltd., Renaissance Re Holdings Ltd., Swiss Reinsurance Company and XL Capital Ltd. In addition, there are other new Bermuda reinsurers with whom
we compete, such as Allied World Assurance Company, Ltd., Arch Capital Group Ltd., Endurance Specialty Holdings Ltd., Montpelier Re Holdings Ltd. and Platinum Underwriters Holdings, Ltd. Competition
varies depending on the type of business being insured or reinsured. In the specialty market, competition tends to be focused more on availability, service and other value-based considerations than on
price.
In
addition, since September 11, 2001, established competitors have completed or may be planning to complete additional capital raising transactions. New companies continue to be
formed to enter the insurance and reinsurance markets. Competition in the types of business that we underwrite is based on many factors, including:
•
reputation;
•
strength
of client relationships;
•
perceived
financial strength;
•
management's
experience in the line of insurance or reinsurance to be written;
•
premiums
charged and other terms and conditions offered;
•
services
provided, products offered and scope of business (both by size and geographic location);
•
financial
ratings assigned by independent rating agencies; and
•
speed
of claims payment.
Increased
competition could result in fewer submissions, lower premium rates and less favorable policy terms, which could adversely impact our growth and profitability. In addition,
capital markets participants have recently created alternative products that are intended to compete with reinsurance products. We are unable to predict the extent to which new, proposed or potential
initiatives may affect the demand for our products or the risks that may be available for us to consider underwriting.
Ratings
Ratings by independent agencies are an important factor in establishing the competitive position of insurance and reinsurance companies and are important to our
ability to market and sell our products. Rating organizations continually review the financial positions of insurers, including us. Standard &
69
Poor's maintains a letter scale rating system ranging from "AAA" (Extremely Strong) to "R" (under regulatory supervision). A.M. Best maintains a letter scale rating system ranging from "A++"
(Superior) to "F" (in liquidation). Our operating insurance subsidiaries (with the exception of AXIS Indemnity, which is not rated) have been rated "A" (Strong) by Standard & Poor's, which is
the sixth highest of twenty-one rating levels, and "A-" (Excellent) by A.M. Best, which is the fourth highest of fifteen rating levels. The objective of
Standard & Poor's and A.M. Best's ratings systems is to provide an opinion of an insurer's or reinsurer's financial strength and ability to meet ongoing obligations to its policyholders.
These ratings reflect our ability to pay policyholder claims and are not applicable to the securities offered in this prospectus and are not a recommendation to buy, sell or hold our common shares.
These ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of, Standard & Poor's and A.M. Best.
Administration
We outsource certain administrative functions to third parties that can provide levels of expertise in a cost-efficient manner that we cannot
replicate internally. Functions that we outsource include:
•
bulk
processing and accounting services;
•
actuarial
services;
•
investment
accounting services;
•
information
technology maintenance; and
•
claims
processing and back office services.
Our
outsourcing of these functions assisted us in quickly establishing our international underwriting platform, and provides us with the flexibility to adjust our administrative
infrastructure and costs to changing market conditions.
We
have also entered into certain investment management and advisory services agreements that are described in "—Investments."
Properties
We currently lease office space in the following locations: Pembroke, Bermuda (our world headquarters); London, England; Dublin, Ireland; New York, New York;
Glastonbury, Connecticut; Los Angeles, California; Chicago, Illinois; and Alpharetta, Georgia. We also lease a small amount of office space in Dallas, Texas and San Francisco, California. These leases
have terms ranging from month-to-month to ten years. Additionally, we recently purchased a building in Dublin, Ireland, which is undergoing renovations and will
eventually house our Dublin office. We believe that for the foreseeable future this office space is sufficient for us to conduct our operations.
Employees
As of January 1, 2003, we had 168 employees. With the pending acquisition of the renewal rights to the professional liability and related lines book of
business written by the Financial Insurance Solutions unit of Kemper, we have already hired approximately 55 additional employees. We believe that our employee relations are excellent. None of our
employees are subject to collective bargaining agreements.
Legal Proceedings
We are not currently involved in any material litigation or arbitration. We anticipate that, similar to the rest of the insurance and reinsurance industry, we may
be subject to litigation and arbitration in the ordinary course of business.
70
REGULATION
General
The business of insurance and reinsurance is regulated in most countries, although the degree and type of regulation varies significantly from one jurisdiction to
another. In Bermuda, we operate under a relatively less intensive regulatory regime. We are subject to extensive regulation under applicable statutes in Ireland and the United States.
Bermuda
As a holding company, AXIS Holdings is not subject to Bermuda insurance regulations. However, the Insurance Act 1978 of Bermuda and related regulations, as
amended (the "Insurance Act"), regulates the insurance business of our operating subsidiary in Bermuda, AXIS Specialty, and provides that no person may carry on any insurance business in or from
within Bermuda unless registered as an insurer by the BMA under the Insurance Act. Insurance as well as reinsurance is regulated under the Insurance Act. The BMA, in deciding whether to grant
registration, has broad discretion to act as it thinks fit in the public interest. The BMA is required by the Insurance Act to determine whether the applicant is a fit and proper body to be engaged in
the insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise to operate an insurance business. The continued registration of an applicant as an
insurer is subject to the applicant complying with the terms of its registration and such other conditions as the BMA may impose from time to time.
An
Insurance Advisory Committee appointed by the Bermuda Minister of Finance advises the BMA on matters connected with the discharge of the BMA's functions. Sub-committees of
the Insurance Advisory Committee supervise and review the law and practice of insurance in Bermuda, including reviews of accounting and administrative procedures. The
day-to-day supervision of insurers is the responsibility of the BMA.
The
Insurance Act also imposes on Bermuda insurance companies solvency and liquidity standards and auditing and reporting requirements and grants the BMA powers to supervise,
investigate, require information and the production of documents and intervene in the affairs of insurance companies. Certain significant aspects of the Bermuda insurance regulatory framework are set
forth below.
Classification of Insurers
The Insurance Act distinguishes between insurers carrying on long-term business and insurers carrying on general business. There are four
classifications of insurers carrying on general business, with Class 4 insurers subject to the strictest regulation. AXIS Specialty, which is incorporated to carry on general insurance and
reinsurance business, is registered as a Class 4 insurer in Bermuda and is regulated as such under the Insurance Act. AXIS Specialty is not licensed to carry on long-term business.
Long-term business broadly includes life insurance and disability insurance with terms in excess of five years. General business broadly includes all types of insurance that is not
long-term business.
Cancellation of Insurer's Registration
An insurer's registration may be canceled by the Supervisor of Insurance of the BMA on certain grounds specified in the Insurance Act, including failure of the
insurer to comply with its obligations under the Insurance Act or if, in the opinion of the BMA after consultation with the Insurance Advisory Committee, the insurer has not been carrying on business
in accordance with sound insurance principles.
71
Principal Representative
An insurer is required to maintain a principal office in Bermuda and to appoint and maintain a principal representative in Bermuda. For the purpose of the
Insurance Act, AXIS Specialty's principal office is its executive offices in Pembroke, Bermuda, and AXIS Specialty's principal representative is Andrew Cook. Without a reason acceptable to the BMA, an
insurer may not terminate the appointment of its principal representative, and the principal representative may not cease to act as such, unless 30 days' notice in writing to the BMA is given
of the intention to do so. It is the duty of the principal representative, within 30 days of reaching the view that there is a likelihood that the insurer will become insolvent or that a
reportable "event" has or is believed to have occurred, to make a report in writing to the BMA setting forth all the particulars of the case that are available to the principal representative. For
example, the failure by the insurer to comply substantially with a condition
imposed upon the insurer by the BMA relating to a solvency margin or a liquidity or other ratio would be a reportable "event."
Independent Approved Auditor
Every registered insurer must appoint an independent auditor who will audit and report annually on the statutory financial statements and the statutory financial
return of the insurer, both of which, in the case of AXIS Specialty, are required to be filed annually with the BMA. AXIS Specialty's independent auditor must be approved by the BMA and may be the
same person or firm that audits AXIS Holdings' consolidated financial statements and reports for presentation to its shareholders. AXIS Specialty's independent auditor is Deloitte & Touche,
which also audits the Company's consolidated financial statements.
Loss Reserve Specialist
As a registered Class 4 insurer, AXIS Specialty is required to submit an opinion of its approved loss reserve specialist with its statutory financial
return in respect of its losses and loss expenses provisions. The loss reserve specialist, who will normally be a qualified casualty actuary, must be approved by the BMA. Tony Jones of Ernst &
Young has been approved to act as AXIS Specialty's loss reserve specialist.
Statutory Financial Statements
AXIS Specialty must prepare annual statutory financial statements. The Insurance Act prescribes rules for the preparation and substance of these statutory
financial statements, which include, in statutory form, a balance sheet, an income statement, a statement of capital and surplus and notes thereto. AXIS Specialty is required to give detailed
information and analyses regarding premiums, claims, reinsurance and investments. The statutory financial statements are not prepared in accordance with U.S. GAAP and are distinct from the financial
statements prepared for presentation to AXIS Specialty's shareholders under the Companies Act, which financial statements are prepared in accordance with U.S. GAAP. As a general business insurer, AXIS
Specialty is required to submit the annual statutory financial statements as part of the annual statutory financial return. The statutory financial statements and the statutory financial return do not
form part of the public records maintained by the BMA.
Annual Statutory Financial Return
AXIS Specialty is required to file with the BMA a statutory financial return no later than four months after its financial year end unless specifically extended
upon application to the BMA. The statutory financial return for a Class 4 insurer includes, among other matters, a report of the approved independent auditor on the statutory financial
statements of the insurer, solvency certificates, the
72
statutory financial statements, the opinion of the loss reserve specialist and a schedule of reinsurance ceded. The solvency certificates must be signed by the principal representative and at least
two directors of the insurer certifying that the minimum solvency margin has been met and whether the insurer complied with the conditions attached to its certificate of registration. The independent
approved auditor is required to state whether, in its opinion, it was reasonable for the directors to make these certifications. If an insurer's accounts have been audited for any purpose other than
compliance with the Insurance Act, a statement to that effect must be filed with the statutory financial return.
Minimum Solvency Margin and Restrictions on Dividends and Distributions
Under the Insurance Act, the value of the general business assets of a Class 4 insurer, such as AXIS Specialty, must exceed the amount of its general
business liabilities by an amount greater than the prescribed minimum solvency margin. AXIS Specialty is required, with respect to its general business, to maintain a minimum solvency margin equal to
the greatest of:
•
$100,000,000;
•
50%
of net premiums written (being gross premiums written less any premiums ceded by AXIS Specialty, but AXIS Specialty may not deduct more than 25% of gross
premiums when computing net premiums written); and
•
15%
of net losses and loss expense reserves.
AXIS
Specialty is prohibited from declaring or paying any dividends during any financial year if it is in breach of its minimum solvency margin or minimum liquidity ratio or if the
declaration or payment of such dividends would cause it to fail to meet such margin or ratio. In addition, if it has failed to meet its minimum solvency margin or minimum liquidity ratio on the last
day of any financial year, AXIS Specialty will be prohibited, without the approval of the BMA, from declaring or paying any dividends
during the next financial year. AXIS Specialty is also prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its
previous financial year's statutory balance sheet) unless it files with the BMA at least seven days before payment of such dividends an affidavit stating that it will continue to meet the required
margins.
AXIS
Specialty is prohibited, without the approval of the BMA, from reducing by 15% or more its total statutory capital as set out in its previous year's financial statements, and any
application for such approval must include an affidavit stating that it will continue to meet the required margins. In addition, at any time it fails to meet its solvency margin, AXIS Specialty is
required, within 30 days (45 days where total statutory capital and surplus falls to $75 million or less) after becoming aware of such failure or having reason to believe that
such failure has occurred, to file with the BMA a written report containing certain information.
Additionally,
under the Companies Act, neither AXIS Holdings nor AXIS Specialty may declare or pay a dividend, or make a distribution from contributed surplus, if there are reasonable
grounds for believing that it is, or would after the payment be, unable to pay its liabilities as they become due, or the realizable value of its assets would be less than the aggregate of its
liabilities and its issued share capital and share premium accounts.
Minimum Liquidity Ratio
The Insurance Act provides a minimum liquidity ratio for general business insurers, like AXIS Specialty. An insurer engaged in general business is required to
maintain the value of its relevant assets at not less than 75% of the amount of its relevant liabilities. Relevant assets include, but are not limited to, cash and time deposits, quoted investments,
unquoted bonds and debentures, first liens on real estate, investment income due and accrued, accounts and premiums receivable and reinsurance
73
balances receivable. There are certain categories of assets which, unless specifically permitted by the BMA, do not automatically qualify as relevant assets, such as unquoted equity securities,
investments in and advances to affiliates and real estate and collateral loans. The relevant liabilities are total general business insurance reserves and total other liabilities less deferred income
tax and sundry liabilities (by interpretation, those not specifically defined).
Supervision, Investigation and Intervention
The BMA may appoint an inspector with extensive powers to investigate the affairs of AXIS Specialty if the BMA believes that such an investigation is in the best
interests of its policyholders or persons who may become policyholders. In order to verify or supplement information otherwise provided to the
BMA, the BMA may direct AXIS Specialty to produce documents or information relating to matters connected with its business. If it appears to the BMA that there is a risk of AXIS Specialty becoming
insolvent, or that AXIS Specialty is in breach of the Insurance Act or any conditions imposed upon its registration, the BMA may, among other things, direct AXIS Specialty (i) not to take on
any new insurance business, (ii) not to vary any insurance contract if the effect would be to increase its liabilities, (iii) not to make certain investments, (iv) to liquidate
certain investments, (v) to maintain in, or transfer to the custody of a specified bank, certain assets, (vi) not to declare or pay any dividends or other distributions or to restrict
the making of such payments and/or (vii) to limit AXIS Specialty's premium income.
Disclosure of Information
In addition to powers under the Insurance Act to investigate the affairs of an insurer, the BMA may require certain information from an insurer (or certain other
persons) to be produced to the BMA. Further, the BMA has been given powers to assist other regulatory authorities, including foreign insurance regulatory authorities, with their investigations
involving insurance and reinsurance companies in Bermuda but subject to restrictions. For example, the BMA must be satisfied that the assistance being requested is in connection with the discharge of
regulatory responsibilities of the foreign regulatory authority. Further, the BMA must consider whether cooperation is in the public interest. The grounds for disclosure are limited and the Insurance
Act provides sanctions for breach of the statutory duty of confidentiality.
Certain Other Bermuda Law Considerations
Although AXIS Holdings is incorporated in Bermuda, it is classified as a non-resident of Bermuda for exchange control purposes by the BMA. Pursuant to
its non-resident status, AXIS Holdings may engage in transactions in currencies other than Bermuda dollars and there are no restrictions on its ability to transfer funds (other than funds
denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of its common shares.
Under
Bermuda law, exempted companies are companies formed for the purpose of conducting business outside Bermuda from a principal place of business in Bermuda. As "exempted" companies,
AXIS Holdings and AXIS Specialty may not, without the express authorization of the Bermuda legislature or under a license or consent granted by the Minister of Finance, participate in certain business
transactions, including: (i) the acquisition or holding of land in Bermuda (except that held by way of lease or tenancy agreement which is required for its business and held for a term not
exceeding 50 years, or which is used to provide accommodation or recreational facilities for its officers and employees and held with the consent of the Bermuda Minister of Finance, for a term
not exceeding 21 years); (ii) the taking of mortgages on land in Bermuda to secure an amount in excess of $50,000; or (iii) the carrying on of business of any kind for which it is
not licensed in Bermuda, except in certain limited circumstances such as doing business with another exempted undertaking in furtherance of AXIS Holdings' business or AXIS Specialty's business (as the
case may be) carried on outside
74
Bermuda. AXIS Specialty is a licensed insurer in Bermuda, and so may carry on activities from Bermuda that are related to and in support of its insurance business.
Common
shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 1998 of Bermuda which regulates the sale of securities in
Bermuda. In addition, the BMA must approve all issuances and transfers of shares of a Bermuda exempted company. Before the offering contemplated by this prospectus, we expect the BMA will have issued
their permission for the issue and free transferability of the common shares being offered pursuant to this prospectus, as long as the shares are listed on the New York Stock Exchange, to and among
persons who are non-residents of Bermuda for exchange control purposes. In addition, we will deliver to and file a copy of this prospectus with the Registrar of Companies in Bermuda
in accordance with Bermuda law. The BMA and the Registrar of Companies accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or
opinions expressed in this prospectus.
The
Bermuda government actively encourages foreign investment in "exempted" entities like AXIS Holdings and AXIS Specialty that are based in Bermuda, but which do not operate in
competition with local businesses. AXIS Holdings and AXIS Specialty are not currently subject to taxes computed on profits or income or computed on any capital asset, gain or appreciation, or any tax
in the nature of estate duty or inheritance tax or to any foreign exchange controls in Bermuda. See "Material Tax Considerations—Taxation of AXIS Holdings and
Subsidiaries—Bermuda."
Under
Bermuda law, non-Bermudians (other than spouses of Bermudians) may not engage in any gainful occupation in Bermuda without an appropriate governmental work permit. Work
permits may be granted or extended by the Bermuda government upon showing that, after proper public advertisement in most cases, no Bermudian (or spouse of a Bermudian) is available who meets the
minimum standard requirements for the advertised position. The Bermuda government recently announced a new policy limiting the duration of work permits to six years, with certain exemptions for key
employees. All of our Bermuda-based professional employees who require work permits have been granted permits by the Bermuda government. The terms of these permits range from one to three years
depending on the individual.
United States
AXIS Holdings has three operating insurance subsidiaries domiciled in the United States, which we refer to as the AXIS U.S. Subsidiaries.
U.S. Insurance Holding Company Regulation of AXIS Holdings
AXIS Holdings, as the indirect parent of the AXIS U.S. Subsidiaries, is subject to the insurance holding company laws of Connecticut, New York, and Illinois.
These laws generally require each of the AXIS U.S. Subsidiaries to register with its respective domestic state insurance department and to furnish annually financial and other information about the
operations of companies within the holding company system. Generally, all material transactions among companies in the holding company system to which any of the AXIS U.S. Subsidiaries is a party,
including sales, loans, reinsurance agreements and service agreements must be fair and, if material or of a specified category, require prior notice and approval or non-disapproval by the
insurance department where the subsidiary is domiciled.
Changes of Control
Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the
domestic insurer is domiciled. Prior to granting approval of an application to acquire control of a domestic insurer, the state insurance commissioner will consider such factors as: the financial
strength of the applicant, the integrity and
75
management of the applicant's board of directors and executive officers, the acquiror's plans for the management of the applicant's board of directors and executive officers, the acquiror's plans for
the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control. Generally, state statutes provide that
control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10% or more of the voting
securities of the domestic insurer. Because a person acquiring 10% or more of our common shares would indirectly control the same percentage of the stock of the AXIS U.S. Subsidiaries, the insurance
change of control laws of Connecticut, Illinois and New York would likely apply to such a transaction. While our bye-laws limit the voting power of any shareholder to less than 9.5%, there
can be no assurance that the applicable state insurance regulator would agree that such shareholder did not control the applicable AXIS U.S. Subsidiary.
These
laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of AXIS Holdings, including through transactions, and in particular
unsolicited transactions, that some or all of the shareholders of AXIS Holdings might consider to be desirable.
Legislative Changes
On November 26, 2002, the Terrorism Risk Insurance Act was enacted to ensure the availability of insurance coverage for terrorist acts in the United
States. This law requires insurers writing certain lines of property and casualty insurance to offer coverage against certain acts of terrorism causing damage within the United States or to U.S.
flagged vessels or aircraft. In return, the law requires the federal government to indemnify such insurers for 90% of insured losses resulting from covered acts of terrorism, subject to a
premium-based deductible. Any existing policy exclusions for such coverage were immediately nullified by the law, although such exclusions may be reinstated if either the insured consents to
reinstatement or fails to pay any applicable increase in premium resulting from the additional coverage within 30 days of being notified of such. It should be noted that "act of terrorism" as
defined by the law excludes purely domestic terrorism. For an act of terrorism to have occurred, the U.S. Treasury Secretary must make several findings, including that the act was committed on behalf
of a foreign person or foreign interest. The law expires automatically at the end of 2005.
State Insurance Regulation
State insurance authorities have broad regulatory powers with respect to various aspects of the business of U.S. insurance companies, including: licensing to
transact business, accreditation of reinsurers, admittance of assets to statutory surplus, regulating unfair trade and claims practices, establishing reserve requirements and solvency standards,
regulating investments and dividends, approving policy forms and related materials in certain instances and approving premium rates in certain instances. State insurance laws and regulations may
require the AXIS U.S. Subsidiaries to file financial statements with insurance departments everywhere they will be licensed or authorized or accredited to conduct insurance business, and their
operations are subject to examination by those departments at any time. The AXIS U.S. Subsidiaries prepare statutory financial statements in accordance with
statutory
accounting principles
("SAP") and procedures prescribed or permitted by these departments. State insurance departments also conduct periodic examinations of the books and
records, financial reporting, policy filings and market conduct of insurance companies domiciled in their states, generally once every three to five years. Examinations are generally carried out in
cooperation with the insurance departments of other states under guidelines promulgated by the NAIC.
The
terms and conditions of reinsurance agreements generally are not subject to regulation by any U.S. state insurance department with respect to rates or policy terms. As a practical
matter, however, the rates charged by primary insurers do have an effect on the rates that can be charged by reinsurers.
76
State Dividend Limitations
New York.
Under New York law, the ability of AXIS Reinsurance to declare or pay any dividend to us which, together with all
dividends declared or distributed by it during the next preceding twelve months, exceeds the lesser of 10% of AXIS Reinsurance's statutory surplus as shown on its latest statutory financial statement
on file with the New York Superintendent of Insurance, or 100% of AXIS Reinsurance's adjusted net investment income during that period, will be subject to the prior approval of the New York
Superintendent of Insurance. An additional limitation is that New York does not permit a dividend to be declared or distributed except out of earned surplus.
Additionally,
in connection with its acquisition of AXIS Reinsurance, AXIS Holdings agreed with the New York Insurance Department to not take a dividend from AXIS Reinsurance for two
years following the date of the acquisition (i.e., not before November 27, 2004) without prior regulatory approval.
Connecticut.
Under Connecticut law, AXIS Insurance may not pay a dividend or make a distribution that exceeds the greater of
10% of AXIS Insurance statutory surplus as of the thirty-first day of December of the last preceding year, or the net income of AXIS Insurance for the twelve month period ending the thirty-first day
of December of the last preceding year without the prior approval of the Connecticut insurance commissioner unless thirty days have passed after receipt by the commissioner of notice of such payment
without the commissioner having disapproved of such payment. In addition, AXIS Insurance must report for informational purposes to the Connecticut insurance commissioner all dividends and other
distributions to securityholders within five business days following the declaration and at least 10 days prior to payment.
Additionally,
under Connecticut law, AXIS Insurance may not pay or propose to pay any dividend within two years of the date of its acquisition by AXIS Holdings (i.e., not before
October 2, 2004) without the prior approval of the Connecticut insurance commissioner.
Illinois.
Under Illinois law, AXIS Indemnity may not pay a dividend or make a distribution that exceeds the greater of 10% of
AXIS Indemnity's surplus as of the thirty-first day of December of the last preceding year, or the net income of AXIS Indemnity, for the twelve month period ending the thirty-first day of December of
the last preceding year until thirty days after the commissioner has received notice and the commissioner has not disapproved of such payment or until the insurance commissioner has approved such
payment within the thirty day period. In addition, AXIS Indemnity must report to the Illinois Insurance Commissioner all dividends and distributions to shareholders within five business days following
declaration and no less than 10 business days prior to payment.
The
dividend limitations imposed by the state laws are based on the statutory financial results of the respective AXIS U.S. Subsidiaries determined by using statutory accounting
practices which differ in certain respects from accounting principles used in financial statements prepared in conformity with U.S. GAAP. The significant differences relate to deferred acquisition
costs, deferred income taxes, required investment reserves, reserve calculation assumptions and surplus notes.
Risk-Based Capital Regulations
New York, Connecticut and Illinois require that each domestic insurer report their risk-based capital based on a formula calculated by applying
factors to various asset, premium and reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk.
The respective state insurance regulators use the formula as an early warning regulatory tool to identify possibly inadequately capitalized insurers for purposes of initiating regulatory action, and
not as a means to rank insurers generally. State insurance laws impose broad confidentiality requirements on those engaged in the insurance business (including insurers,
77
agents, brokers and others) and on state insurance departments as to the use and publication of risk-based capital data. The respective state insurance regulators have explicit regulatory
authority to require various actions by, or to take various actions against, insurers whose total adjusted capital does not exceed certain risk-based capital levels. Each of AXIS
Reinsurance, AXIS Insurance and AXIS Indemnity have risk-based capital in excess of the required levels.
Statutory Accounting Principles
SAP is a basis of accounting developed to assist insurance regulators in monitoring and regulating the solvency of insurance companies. It is primarily concerned
with measuring an insurer's surplus to policyholders. Accordingly, statutory accounting focuses on valuing assets and liabilities of insurers at financial reporting dates in accordance with
appropriate insurance law and regulatory provisions applicable in each insurer's domiciliary state.
U.S.
GAAP is concerned with a company's solvency, but it is also concerned with other financial measurements, such as income and cash flows. Accordingly, U.S. GAAP gives more
consideration to appropriate matching of revenue and expenses and accounting for management's stewardship of assets than does SAP. As a direct result, different assets and liabilities and different
amounts of assets and liabilities will be reflected in financial statements prepared in accordance with U.S. GAAP as opposed to SAP.
Statutory
accounting practices established by the NAIC and adopted, in part, by the New York, Connecticut and Illinois regulators determine, among other things, the amount of statutory
surplus and statutory net income of the AXIS U.S. Subsidiaries and thus determine, in part, the amount of funds they have available to pay dividends to us.
Guaranty Associations and Similar Arrangements
Most of the jurisdictions in which the AXIS U.S. Subsidiaries are admitted to transact business require property and casualty insurers doing business within the
jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These
associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of
business in which the impaired, insolvent or failed insurer is engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets.
Operations of AXIS Specialty, AXIS Re and AXIS Specialty Europe
The insurance laws of each state of the United States and of many other countries regulate or prohibit the sale of insurance and reinsurance within their
jurisdictions by non-domestic insurers and reinsurers that are not admitted to do business within such jurisdictions. AXIS Specialty, AXIS Re and AXIS Specialty Europe are not admitted to
do business in the United States. We do not intend that AXIS Specialty, AXIS Re and AXIS Specialty Europe maintain offices or solicit, advertise, settle claims or conduct other insurance activities in
any jurisdiction in the United States where the conduct of such activities would require these companies to be admitted or authorized.
In
addition to the regulatory requirements imposed by the jurisdictions in which they are licensed, reinsurers' business operations are affected by regulatory requirements in various
states of the United States governing "credit for reinsurance" which are imposed on their ceding companies. In general, a ceding company which obtains reinsurance from a reinsurer that is licensed,
accredited or approved by the jurisdiction or state in which the ceding company files statutory financial statements is permitted to reflect in its statutory financial statements a credit in an
aggregate amount equal to the ceding company's liability for unearned premiums (which are that portion of premiums written which applies
78
to the unexpired portion of the policy period), loss reserves and loss expense reserves ceded to the reinsurer. AXIS Specialty, AXIS Re and AXIS Specialty Europe are not licensed, accredited or
approved in any state in the U.S. The great majority of states, however, permit a credit to statutory surplus resulting from reinsurance obtained from a non-licensed or
non-accredited reinsurer to be recognized to the extent that the reinsurer provides a letter of credit, trust fund or other acceptable security arrangement. A few states do not allow
credit for reinsurance ceded to non-licensed reinsurers
except in certain limited circumstances and others impose additional requirements that make it difficult to become accredited.
Ireland
In addition to the various restrictions and regulations discussed below, each of AXIS Specialty Europe and AXIS Re are restricted by companies legislation to
declaring dividends only out of "profits available for distribution." Profits available for distribution are a company's accumulated realized profits less its accumulated realized losses. Such profits
may not include profits previously utilized either by distribution or capitalization and such losses do not include amounts previously written off in a reduction or reorganization of capital.
AXIS Specialty Europe
AXIS Specialty Europe is a non-life insurance company incorporated under the laws of Ireland on February 18, 2002 and having its registered
office at Fitzwilton House, Wilton Place, Dublin 2 Ireland. AXIS Specialty Europe is subject to the regulation and supervision of the DETE pursuant to the Insurance Acts and Regulations. AXIS
Specialty Europe was authorized on May 23, 2002 to undertake the business of non-life insurance in various classes of business.
As
is normal in the case of insurance companies, when the DETE authorized AXIS Specialty Europe to write non-life insurance business, in addition to the obligations imposed
on AXIS Specialty Europe by the Insurance Acts and Regulations, the DETE granted the authorization subject to certain conditions. The following are the main conditions which have been imposed:
•
AXIS
Specialty Europe must adhere to the business plan submitted to the DETE in connection with its application for authorization;
•
AXIS
Specialty Europe must submit quarterly management accounts to the DETE for the first three years of operation;
•
AXIS
Specialty Europe is not permitted to reduce the level of its capital without the consent of the Minister;
•
AXIS
Specialty Europe may not make any dividend payments without the DETE's prior approval;
•
no
intercompany loans may be made by AXIS Specialty Europe without prior notification to and approval of the Minister;
•
the
management accounts of AXIS Holdings must be submitted to the DETE on a quarterly basis for the initial years of operation of AXIS Specialty Europe;
79
•
AXIS
Specialty Europe must maintain a minimum solvency margin equal to 200% of the solvency margin laid down by the Insurance Acts and Regulations (and a
solvency ratio of 50%); and
•
AXIS
Specialty Europe must file annual statutory insurance returns in the format prescribed by the European Communities (Non-Life Insurance
Accounts) Regulations, 1995.
In
addition to the above conditions, AXIS Specialty Europe has agreed, following a request from the DETE, not to write any reinsurance business.
European Passport.
Ireland is a member of the European Economic Area (the "EEA"). The EEA comprises each of the countries of
the EU (being, as at January 2003, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden and The United Kingdom) and
Iceland, Liechtenstein and Norway. The EEA was established by a 1992 agreement the effect of which is to create an area of free movement of goods and services (including insurance services) within EEA
countries. A consequential effect of the EEA agreement is that the rules on passporting of insurance services that apply between EU member states (described below) are extended to Iceland,
Liechtenstein and Norway.
Ireland
has adopted the EU's Third Non-Life Insurance Directive (92/49/EEC) into Irish law. This Directive introduced a single system for the authorization and financial
supervision of non-life insurance companies by their home member state. Under this system AXIS Specialty Europe (as an Irish authorized insurance company) can carry on insurance business
in any other EU member state either under the rules of establishment or under the rules on the freedom of services.
On
the basis of the foregoing, in addition to being authorized to carry on non-life insurance business in Ireland, AXIS Specialty Europe is also authorized to carry on
non-life insurance business in all other EEA member states under freedom of services. However, AXIS Specialty Europe is not licensed or admitted as an insurance company in any jurisdiction
other than Ireland and the other EEA member states.
In
addition to the freedom of services notifications made on its behalf, AXIS Specialty Europe has applied to the DETE to establish a branch in the United Kingdom. This application is
ongoing and it is
intended, once this application is approved, to write certain U.K. based insurance business through this branch.
Qualifying Shareholding.
The Insurance Acts and Regulations require that anyone acquiring or disposing of a "qualifying
holding" in an insurance company (such as AXIS Specialty Europe), or anyone who proposes to decrease or increase that holding to specified levels, must first notify the Minister of their intention to
do so. It also requires any insurance company that becomes aware of any acquisitions or disposals of its capital involving the "specified levels" to notify the Minister.
The
Minister has three months from the date of submission of a notification within which to oppose the proposed transaction if the Minister is not satisfied as to the suitability of the
acquiror "in view of the necessity to ensure sound and prudent management of the insurance undertaking."
A
"qualifying holding" means a direct or indirect holding in an insurance company that represents 10% or more of the capital or of the voting rights of such company or that makes it
possible to exercise a significant influence over the management of such company. The specified levels are 20%, 33% and 50%, or such other level of ownership that results in the company becoming the
acquiror's subsidiary.
Any
person having a shareholding of 10% or more of the issued share capital in AXIS Holdings would be considered to have an indirect holding in AXIS Specialty Europe over the 10% limit.
Any change that resulted in the indirect acquisition or disposal of a shareholding of greater than or equal to
80
10% in the share capital of AXIS Specialty Europe, or a change that resulted in an increase or decrease to one of the specified levels, would need to be pre-cleared with the Minister.
Finally,
AXIS Specialty Europe is required, at such times as may be specified by the Minister, and at least once a year, to notify the Minister of the names of shareholders possessing
qualifying holdings and the size of such holdings.
Transactions with Related Companies.
The Insurance Acts and Regulations provide that prior to entering into any transaction
of a material nature with a related company or companies (including, in particular, the provision of loans to and acceptance of loans from a related company or companies) AXIS Specialty Europe must
submit to the Minister a draft of any contract or agreement which is to be entered into by AXIS Specialty Europe in relation to the transaction. In addition to the above, there is a requirement that
AXIS Specialty Europe notify the DETE on an annual basis with respect to transactions with related companies in excess of 10,000 euros.
Financial Requirements.
AXIS Specialty Europe is required to maintain technical reserves calculated in accordance with the
Insurance Acts and Regulations. Assets representing its technical reserves are required to cover AXIS Specialty Europe's calculated underwriting liabilities.
Additionally,
AXIS Specialty Europe is required to establish and maintain an adequate solvency margin and a minimum guarantee fund, both of which must be free from all foreseeable
liabilities. Currently, the solvency margin is calculated as the higher amount of a percentage of the annual amount of premiums (premiums basis) or the average burden of claims for the last three
years (claims basis). As noted above with respect to the conditions attaching to AXIS Specialty Europe's authorization, AXIS Specialty Europe is required to have a solvency margin significantly in
excess of the prescribed minimum.
The
amount of the minimum guarantee fund which AXIS Specialty Europe is required to maintain is equal to one third of the solvency margin requirement as set out above, subject to a
minimum.
DETE Guidelines.
In addition to the Insurance Acts and Regulations, AXIS Specialty Europe is expected to comply with certain
guidelines issued by the DETE in July 2001. The following are the most relevant guidelines:
•
All
insurance companies supervised by the DETE are obliged to appoint a compliance officer, who must carry out the duties and functions set forth in the
guidelines. The compliance officer may simultaneously hold other offices within the insurance company. The compliance officer of AXIS Specialty Europe is Mr. Tim Hennessy.
•
All
directors of insurance companies supervised by the DETE are required to certify to the DETE on an annual basis that the company has complied with all
relevant legal and regulatory requirements throughout the year.
•
All
insurance companies must adopt an appropriate asset management policy having regard to its liabilities profile.
•
All
companies supervised by the DETE must formulate a clear and prudent policy on the use of derivatives for all purposes and, furthermore, have controls in
place to ensure that the policy is implemented.
•
Non-life
companies supervised by the DETE such as AXIS Specialty Europe are required to provide an annual actuarial opinion as to the adequacy of
their reserves.
Withdrawal of Authorization.
An insurance company supervised by the DETE may have its authorization revoked by the Minister,
if the Minister is satisfied that such company:
81
•
has
not used its authorization for the last 12 months, has expressly renounced its authorization or has ceased to carry on business covered by the
authorization for more than six months;
•
was
convicted of certain offences under the Insurance Acts and Regulations;
•
no
longer fulfils the conditions required by the Insurance Acts and Regulations;
•
has
been unable to take measures contained in a restoration plan or finance scheme envisaged by the Insurance Acts or Regulations; or
•
fails
seriously in its obligations under the Insurance Acts and Regulations.
Approval of Directors and Managers.
In addition to the restrictions set forth above, the DETE must approve the appointment of
any new directors or managers of AXIS Specialty Europe.
AXIS Re
AXIS Re is a reinsurance company incorporated under the laws of Ireland on February 12, 2002 and having its registered office at Fitzwilton House, Wilton
Place, Dublin 2 Ireland. Under Irish law, a reinsurance company such as AXIS Re is required to maintain a minimum level of paid up share capital.
AXIS
Re was required to file a notification with the DETE of its intention to carry on the business of reinsurance in Ireland. On an ongoing basis, AXIS Re will be obliged to
notify to the Minister of subsequent changes to the information contained in its notification no later than the end of the year in which such changes occur. Additionally, AXIS Re will be obliged to
prepare accounts in accordance
with the European Communities (Insurance Undertakings: Accounts) Regulations, 1996 and file the same with the Registrar of Companies in Ireland.
The
Minister has power under Section 22 of the Insurance Act, 1989 (as inserted by Section 5 of the Insurance Act, 2000) to direct AXIS Re to cease writing business
indefinitely or for a specified period. The grounds for such a direction include:
•
inadequate
capitalization;
•
unsuitable
directors and/or management;
•
insufficient
staff based in Ireland;
•
evidence
of unlawful activity inside or outside Ireland; and
•
failure
to comply with the statutory notification requirements.
United Kingdom
Under United Kingdom law, a company may only transact insurance and/or reinsurance business upon authorization. AXIS Specialty, AXIS Re and AXIS Specialty Europe
are not authorized to transact insurance and/or reinsurance business in the United Kingdom except as otherwise explained in "—Ireland—AXIS Specialty Europe—European
Passport." However, AXIS Specialty U.K. Limited operates a representative office in the United Kingdom on behalf of AXIS Specialty, AXIS Re and AXIS Specialty Europe. Through this relationship, AXIS
Specialty U.K. Limited acts as an agent for, and sources business to, each of AXIS Specialty, AXIS Re and AXIS Specialty Europe. In addition, AXIS Specialty Europe currently intends to apply for
authorization to establish a branch office in the United Kingdom that would allow it to transact business in the United Kingdom.
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MANAGEMENT
Directors
The table below sets forth the names, ages and positions of our directors:
Name
Age
Positions
Michael A. Butt(1)
60
Chairman of the Board
John R. Charman(1)
50
Deputy Chairman, President and Chief Executive Officer
Robert J. Newhouse, Jr.(2)
77
Director, Chairman of the Executive Committee
Charles A. Davis(1)
54
Director
Robert L. Friedman(2)
59
Director
Donald J. Greene(2)
69
Director
Maurice A. Keane(3)
61
Director
Edward J. Kelly, III(3)
49
Director
Andrew H. Rush(3)
45
Director
Scott A. Schoen(1)
44
Director
Frank J. Tasco(2)
75
Director
Jeffrey C. Walker(3)
47
Director
(1)
Denotes
Class I director with term to expire in 2006.
(2)
Denotes
Class II director with term to expire in 2005.
(3)
Denotes
Class III director with term to expire in 2004.
While
the board of directors is not currently classified, the above classifications denote a classification pursuant to amendments to the bye-laws that we expect to effect
prior to the consummation of the offering.
Michael A. Butt
has been Chairman of the Board since September 2002. Mr. Butt has over 40 years of insurance industry
experience. From 1982 to 1986, Mr. Butt was the Chairman of Sedgwick Limited and Vice Chairman of the Sedgwick Group plc. From 1987 to 1992, Mr. Butt served as Chairman and CEO of Eagle
Star Holdings plc and Eagle Star Insurance Company. From 1993 to 1998, Mr. Butt was President and CEO of Mid Ocean Limited. From 1998 to August 2002, Mr. Butt was a director of XL
Capital Ltd. Mr. Butt is also a former director of the Farmers Insurance Group, BAT Industries and Instituto Nazionale delle Assicuranzioni.
John R. Charman
has been President, CEO and Deputy Chairman since inception. Mr. Charman has over 30 years of experience in
the insurance industry and has been in a senior underwriting position since 1975, serving most recently as deputy chairman of ACE INA Holdings and President of ACE International. Mr. Charman
was also CEO at ACE Global Markets from 1998 to 2001. Prior to that,
Mr. Charman was the CEO of Tarquin plc (a joint venture company among Insurance Partners, Harvard University and the Charman Group), the parent company of the Charman Underwriting Agencies at
Lloyd's. He was also a deputy chairman of the Council of Lloyd's and a member of the Lloyd's Core Management Group and Lloyd's Market Board between 1995 and 1997.
Robert J. Newhouse, Jr.
has served as a director and as Chairman of the Executive Committee since inception. He was also the Chairman for
the first year of our operations, after which he stepped down as Chairman. Mr. Newhouse has over 50 years of industry experience. He was the Chairman of the Board of Directors of Mid
Ocean Limited from 1992 until it was sold to XL Capital Ltd in 1998. From 1998 to May 2000, Mr. Newhouse was a director of XL Capital Ltd. Prior to that, Mr. Newhouse held various
executive positions with Marsh & McLennan Companies, Inc. from 1954 through 1990 and served as President from 1976 to 1988 and Vice Chairman and Member of the Office of the Chairman
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from 1988 through 1990. During that time, he played a major role in the formation of ACE Limited and XL Capital Ltd and served as a director of both companies.
Charles A. Davis
has served as a director since inception. Mr. Davis is Chairman and CEO of MMC Capital, Inc. and a Vice
Chairman and director of Marsh & McLennan Companies, Inc. Mr. Davis became CEO of MMC Capital, Inc. in 1999 and Chairman in 2002. Mr. Davis joined MMC
Capital, Inc. in 1998 as President, a position he held until 2002. Prior to joining MMC Capital, Inc. in 1998, Mr. Davis spent 23 years at Goldman, Sachs & Co.,
where, among other positions, he served as Head of Investment Banking Services worldwide, Head of the Financial Services Industry Group, a General Partner, a Senior Director, and a Limited Partner.
Mr. Davis is also a director of Media General, Inc., Progressive Corporation and Merchants Bancshares, Inc.
Robert L. Friedman
has served as a director since December 2001. Since 1999, Mr. Friedman has been a Senior Managing Director of
The Blackstone Group, L.P., and since February 2003 he has also been that firm's Chief Administrative Officer and Chief Legal Officer. Prior to joining Blackstone, Mr. Friedman was a
partner at Simpson Thacher & Bartlett for 25 years, where he served as a senior member of that law firm's mergers and acquisitions practice. Mr. Friedman currently serves as a
Director of American Axle & Manufacturing, Inc., Corp Group, Crowley Data LLC, Houghton Mifflin Holdings Inc., Northwest Airlines, Inc., Premcor Inc. and TRW
Automotive Holdings Corp.
Donald J. Greene
has served as a director since our inception. Mr. Greene was a name partner of LeBoeuf, Lamb, Greene &
MacRae, L.L.P., where he practiced from 1964 until his retirement in 2001. Mr. Greene is also a director of AXA Financial, Equitable Life Assurance, and Associated Electric & Gas Insurance
Services Limited. He is the Founding Director and current Chairman of the International Insurance Foundation, a member of the board of overseers of the School of Risk Management of St. John's
University (which school was formerly the College of Insurance), a director of the Risk Foundation and a director of the International Insurance Council.
Maurice A. Keane
has served as a director since September 2002. Mr. Keane is the former Group CEO of the Bank of Ireland, a
position he held from 1998 until his retirement in 2002. He was Deputy Group CEO from 1991 through 1997, having been a Managing Director since 1983. He is currently a director of the Bank of Ireland,
DCC plc and University College Dublin Foundation Limited and Chairman of BUPA Ireland Limited and Bank of Ireland UK Holdings Limited.
Edward J. Kelly, III
has served as a director since September 2002. Since March 1, 2001, Mr. Kelly has been President, CEO
and Director of Mercantile Bankshares Corporation, and Chairman of the Board and CEO of Mercantile-Safe Deposit and Trust Company. Mr. Kelly served as Managing Director, Head of
Global Financial Institutions, and as Co-Head of Investment Banking Client Management of J.P. Morgan, Chase & Co. during January 2001. Prior thereto, he was a Managing
Director of J.P. Morgan & Co. Incorporated and held additional positions with that company. Mr. Kelly is a director of Adams Express and Petroleum Resources (closed-end
investment companies), CSX Corporation, CIT Group, Constellation Energy Group, Inc. and Hartford Financial Services Group.
Andrew H. Rush
has served as a director since our inception. Mr. Rush is a Managing Director of Credit Suisse First Boston in the
Private Equity Group, a position he has held since 1989, and a member of the Investment Committee of DLJ Merchant Banking Partners III, L.P. Mr. Rush serves on the Board of Directors of Louis
Dreyfus Communications and Societe Ethanol des Synthesis.
Scott A. Schoen
has served as a director since our inception. Mr. Schoen is a Managing Director of Thomas H. Lee Advisors, L.L.C.,
which is the general partner of Thomas H. Lee Partners, L.P. Prior to joining the firm in 1986, Mr. Schoen was in the Private Finance Department of Goldman, Sachs & Co. Mr. Schoen
is a director of ARC Holdings LLC, Syratech Corporation, TransWestern Publishing, United Industries and Wyndham International.
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Frank J. Tasco
has served as a director since inception. Mr. Tasco is a Director of Travelers Property Casualty Corp.
Mr. Tasco retired in 1992 as Chairman of the Board and CEO of Marsh & McLennan Companies, Inc., a position he held since 1986. From December 1992 to December 1994,
Mr. Tasco served as Chairman of Borden, Inc.
Jeffrey C. Walker
has served as a director since inception. Mr. Walker is the Managing Partner of J.P. Morgan Partners, J.P. Morgan
Chase & Co.'s global private equity group and a member of the Executive Committee and Vice Chairman of J.P. Morgan Chase & Co. Mr. Walker co-founded JPMP in 1984.
Mr. Walker is a director of numerous public and private corporations, including 1-800-Flowers.com, Inc., Doane Pet Care Enterprises, Inc. and Guitar
Center, Inc.
Board of Directors
Our bye-laws provide that our board of directors shall consist of between 11 and 13 members, or such number as determined by the shareholders. The
current board of directors consists of 12 persons. Currently our bye-laws provide that the initial board of directors shall hold office for three years, at which time the board of
directors will be divided into three approximately equal classes. In addition, each director will serve a three year term, with termination staggered according to class. However, we intend to submit
proposed amended and restated bye-laws to a vote of our existing shareholders pursuant to which the board of directors will be staggered prior to consummation of this offering. The
proposed classification is noted in the table listing our board of directors under "Management—Directors."
Committees of the Board of Directors
Executive Committee.
The Executive Committee is composed of Messrs. Butt, Charman, Davis, Schoen and Walker and is
chaired by Mr. Newhouse, Jr. Our description of the Executive Committee reflects changes that we expect to be made to the Executive Committee Charter prior to the consummation of the offering.
The committee assists the board of directors in fulfilling its responsibilities with respect to providing guidance on our overall business development and corporate oversight. It is responsible for
providing long range, strategic planning to the Company and for appointing special committees to work with management with regard to possible transactions involving mergers, acquisitions or
dispositions as well as the issuance of equities or equity-like securities. It may exercise the authority of the board of directors, when the board of directors is not in session, except
in cases where the action of the entire board of directors is required by the memorandum of association, the bye-laws or applicable law.
Compensation Committee.
The Compensation Committee is composed of Messrs. Greene, Rush and Walker and is chaired by
Mr. Tasco. Our description of the Compensation Committee's duties reflects changes that we expect to be made to the Compensation Committee's Charter prior to consummation of the offering. This
committee approves, administers and interprets our compensation and benefit policies, including our long-term equity incentive plans. It reviews and makes recommendations to the board of
directors to ensure that our compensation and benefit policies are consistent with our compensation philosophy and corporate governance guidelines. The committee is also responsible for establishing
our CEO's compensation in light of our established corporate performance goals. Each member of this committee is a non-management director.
Finance Committee.
The Finance Committee is composed of Messrs. Butt, Kelly and Rush and is chaired by
Mr. Schoen. This committee generally approves and monitors all finance-related transactions, including investment of funds and financing facilities. It is also responsible for establishing our
investment guidelines, approving the selection and terms of investment managers, evaluating the performance of investment managers, monitoring the need for additional financing and ensuring compliance
with outstanding debt facility covenants.
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Audit Committee.
The Audit Committee is composed of Messrs. Keane and Tasco and is chaired by Mr. Friedman. Our
description of the Audit Committee's duties reflects changes that we expect to be made to the Audit Committee Charter prior to consummation of the offering. This committee has general responsibility
for the oversight and surveillance of our accounting, reporting and financial control practices. Among other functions, the committee reviews the qualifications for the independent auditors, makes
recommendations to the board of directors as to their selection, retains our independent auditor, pre-approves fees and services and reviews the scope and results of their audit.
Additionally, it oversees the activities of the Disclosure Committee, a management committee that ensures accurate, complete and fair disclosure of Company information in accordance with applicable
laws and listing requirements. Each member of the Audit Committee is a non-management director.
Corporate Governance and Nominating Committee.
The Corporate Governance and Nominating Committee is composed of
Messrs. Davis and Kelly and is chaired by Mr. Greene. Our description of the Corporate Governance and Nominating Committee's duties reflects changes that we expect to be made to the
Corporate Governance and Nominating Committee Charter prior to consummation of the offering. This committee takes a leadership role in shaping our corporate governance by identifying and proposing
qualified director nominees, overseeing the purpose, structure and composition of the board committees, overseeing the annual evaluation of the board of directors and the committees, and periodically
reviewing our Corporate Governance Guidelines and Procedures and Code of Business Conduct. Each member of this committee is a non-management director.
Compensation Committee Interlocks and Insider Participation
Mr. Greene
is counsel to the law firm of LeBoeuf, Lamb, Greene & MacRae, L.L.P., which has been retained by the Company in connection with various matters, including the offering
to which this prospectus relates.
Mr. Rush
is a managing director of Credit Suisse First Boston in the Private Equity Group and a member of the Investment Committee of DLJ Merchant Banking Partners III, L.P., both
of which are affiliates of Credit Suisse First Boston LLC. Mr. Walker is the Managing Partner of J.P. Morgan Partners and a member of the Executive Committee and Vice Chairman of J.P. Morgan
Chase & Co., both of which are affiliates of J.P. Morgan Securities Inc. Credit Suisse First Boston LLC and J.P. Morgan Securities Inc. are acting as representatives of the underwriters in the
offering to which this prospectus relates. In addition, JPMorgan Chase Bank, an affiliate of J.P. Morgan Securities Inc. also acts as administrative agent and a lender for AXIS Specialty's
$400 million revolving credit facility.
Director Compensation
Non-employee directors receive $35,000 per year. Non-employee directors also receive $3,000 per board meeting attended and $1,500 per
committee meeting attended. Committee chairs also receive an annual fee of $3,000 for each committee chaired. Effective as of January 1, 2003, each committee chair will receive a fee of $5,000,
with the exception of the audit committee chair, who will receive a fee of $10,000. Additionally, effective January 1, 2003, each non-employee director will receive annually a grant
of 1,000 stock options plus $20,000 worth of common shares pursuant to a restricted stock grant, in both cases at the fair market value of the common shares at the time of grant. Directors who are
also employees do not receive compensation for their service as directors.
In
2002, Messrs. Greene and Tasco also received an annual fee for their services as directors of AXIS Reinsurance in the amount of $15,000, which amount was pro rated for the
calendar year. Mr. Keane received an annual fee of $25,000, which amount was pro rated for the calendar year, and an attendance fee of $1,000 per meeting for his services as director of AXIS
Speciality Holdings Ireland Limited. He also serves as a director of AXIS Specialty Europe and AXIS Re.
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Additionally,
each non-employee director may elect to participate in an unfunded nonqualified deferred compensation plan (the "Directors Deferred Compensation Plan"). The
following description of the plan reflects changes that we expect to be made prior to consummation of the offering. This plan allows participating directors to elect (i) the amount, if any, of
cash or stock received as fees for services to be deferred (expressed as a dollar amount, number of shares, or percentage) and (ii) the form in which payment is to be made (lump sum or three
annual installments). Directors who choose to defer fees otherwise payable in shares are credited a number of phantom stock units equal in amount to the number of shares of stock deferred. Directors
who choose to defer fees otherwise payable in cash shall be credited with interest on their cash deferral at the LIBOR rate for the year of deferral. Amounts deferred are 100% vested at all times.
Generally, benefits are paid upon termination of service as a director. The plan is administered by the board of directors.
Executive Officers
The table below sets forth certain information concerning our executive officers:
Name
Age
Positions
Michael A. Butt(1)
60
Chairman of the Board
John R. Charman(1)
50
President, CEO and Deputy Chairman of the Board
Robert J. Newhouse, Jr.(1)
77
Chairman of the Executive Committee
Andrew Cook
40
Executive Vice President and Chief Financial Officer
Richard H. Blum
63
Chairman, AXIS Specialty U.S. Holdings, Inc.
William A. Fischer
41
Executive Vice President and Chief Reinsurance Officer, AXIS Specialty
John Gressier
35
Executive Vice President and Chief Insurance Officer, AXIS Specialty and AXIS Specialty Europe
Kevin McLean
44
Senior Vice President, General Counsel and Secretary, AXIS Specialty U.S. Holdings, Inc.
Michael E. Morrill
43
President and CEO, AXIS Reinsurance
John Murray
42
Senior Vice President and Chief Operations Officer
Dennis B. Reding
54
President and CEO, AXIS Insurance
Richard Strachan
35
Chief Claims Officer
(1)
Biography
available under "—Directors."
Andrew Cook
has been Executive Vice President and Chief Financial Officer since our inception. Mr. Cook, a chartered accountant,
has 15 years of industry experience. From 1993 to 1999, he served as Senior Vice President and Chief Financial Officer of LaSalle Re Holdings Limited. Mr. Cook worked as an independent
consultant assisting clients in raising private equity capital from 1999 to 2000. He then served as Senior Vice President and Chief Financial Officer of Mutual Risk Management Limited from 2001 until
joining us in late 2001.
Richard H. Blum
has been Chairman of AXIS Specialty U.S. Holdings, Inc. since February 2002. Mr. Blum has over
44 years of industry experience. From 1958 to 1996, Mr. Blum worked at Guy Carpenter, Inc., most recently serving as Chairman and CEO. He then worked at J&H Marsh &
McLennan Companies, Inc., serving as Vice-Chairman from 1997 to 1999 and Senior Advisor from 1999 until joining us in 2002.
William A. Fischer
has been Executive Vice President and Chief Reinsurance Officer of AXIS Specialty since our inception.
Mr. Fischer has 14 years of industry experience. Mr. Fischer began his career at Skandia America Reinsurance in 1987 as a treaty underwriter, where he served until November 1991.
From November 1991 to October 1994, he served as Vice President of Treaty Property Underwriting at Transatlantic Reinsurance Company. Mr. Fischer then served as Executive Vice
87
President with responsibilities for property, accident and health, and financial products at Everest Re Group, Ltd. from October 1994 to May 2001. Most recently, Mr. Fischer was a Senior Vice
President of the Brokered Group of American Re, where he was responsible for all property business, from May 2001 until joining us.
John Gressier
has been Executive Vice President and Chief Insurance Officer of AXIS Specialty and AXIS Specialty Europe since April 2002.
Mr. Gressier has over 15 years of experience in the insurance industry. Mr. Gressier served as an underwriter at Charman Underwriting Agencies from 1989 until ACE Limited acquired
Charman in 1998. Mr. Gressier then served as Deputy Underwriter of Syndicates 488/2488, Director of ACE Global Markets Underwriting Limited, and Director of Marine and Specialty Lines for
Syndicate 2488. He was also a member of ACE Global Markets Executive Underwriting Committee. In February 2001, Mr. Gressier was appointed Joint Active Underwriter of Syndicate 2488 and
director of the ACE Agency Board, where he served until joining us.
Kevin McLean
has been a Senior Vice President, General Counsel and Secretary of AXIS Specialty U.S. Holdings since June 2002.
Mr. McLean has 18 years of experience in the insurance industry. From 1994 until 2002, Mr. McLean worked at Reliance Insurance Company, most recently serving as Executive Vice President,
General Counsel, and Assistant Secretary.
Michael E. Morrill
has been President and CEO of AXIS Reinsurance since August 2002. Mr. Morrill has over 20 years of
experience in the insurance and reinsurance industry. From 2001 to 2002, Mr. Morrill was the President and CEO of Gerling Global Reinsurance Corporation of America. From 1996 to 2001, he served
as Chief Underwriting Officer for North America and Senior Vice President at
Transatlantic Reinsurance Company. He has also held senior management and underwriting positions at Munich American Reinsurance Company, Cologne Reinsurance Company of America and Christiania General
Insurance Company.
John Murray
has been Senior Vice President and Chief Operations Officer since our inception. Mr. Murray, a chartered accountant,
has 14 years of industry experience. From 1995 to 2000, he was the Head of Operations for ACE Global Markets Limited. He then served as a Finance Director of Newmarket Underwriting Limited
during 2000 and 2001.
Dennis B. Reding
has been President and CEO of AXIS Insurance since January 2003. Mr. Reding has 32 years of industry experience.
Mr. Reding was President and CEO of Westchester Specialty Group from 1992 to 1998. He then served as President and CEO of ACE USA, Inc. from 1998 to 2001 and President of ACE INA Holdings, Inc.
from 2001 to 2002. Mr. Reding was Chairman and CEO of Combined Specialty Group, Inc., an Aon subsidiary, in 2002.
Richard Strachan
has been Chief Claims Officer since April 2002. Mr. Strachan has 17 years of experience in the insurance and
reinsurance industry. From 1985 to 1997 he managed claims for Syndicates 488 and 2488 at both Charman Underwriting Agencies and Tarquin plc. From 1997 to 1999, Mr. Strachan served as a claims
adjuster at ACE Global Markets. From 1999 to 2001, he served as claims team leader for ACE Global Markets.
Management Compensation and Incentive Plans
Our current executive officers are compensated according to the terms of their respective service agreements, which are described below. Our compensation policies
are designed to maximize shareholder value over the long-term. We believe our policies provide management with incentives to strive for excellence and link the financial interests of
management with those of our shareholders. The level of compensation and incentive awards is based on numerous factors, including achievement of performance objectives established by our Compensation
Committee and our board of directors.
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The
following table sets forth the salaries and bonuses earned by our CEO and each of the next four most highly compensated executive officers during the year ended December 31,
2002. These individuals are referred to as the "named executive officers."
Summary Compensation Table
Annual Compensation
Long Term Compensation Awards
Name and Principal
Position
Year(1)
Salary(2)
Bonus(3)
Other Annual
Compensation(4)
Restricted
Stock Awards
Securities
Underlying
Options/SARs
All Other
Compensation(5)
John R. Charman
President and CEO
2002
2001
$
1,000,000
252,055
$
1,750,000
—
$
168,479
10,235
$
5,058,000
—
25,000
253,139
$
100,000
25,205
Robert J. Newhouse, Jr.
Executive Committee Chairman
2002
2001
350,000
88,219
550,000
—
29,910
—
1,011,600
1,500,000
15,000
30,000
35,000
8,822
William A. Fischer
Executive Vice President and Chief Reinsurance Officer
2002
2001
400,000
100,000
500,000
250,000
228,893
6,922
252,900
500,000
10,000
10,000
40,000
8,548
Andrew Cook
Executive Vice President and CFO
2002
2001
325,000
21,942
410,000
150,000
186,840
22,645
252,900
500,000
10,000
7,500
32,500
2,194
John Gressier
Executive Vice President and Chief Insurance Officer(6)
2002
295,763
400,000
157,740
3,506
1,524,900
17,500
19,440
Michael A. Butt
Chairman of the Board(7)
2002
126,493
200,000
52,419
1,011,600
15,000
12,649
(1)
Because
we commenced operations in November 2001, we have no named executive officer compensation to report for 2000.
(2)
The
numbers presented reflect earned salary.
(3)
The
determination of bonus amount is based on a variety of factors, including service in 2001.
(4)
Other
Annual Compensation includes (i) housing allowance for the year 2002 paid to Mr. Charman in the amount of $127,121; (ii) housing allowance for the year 2002 paid
to Mr. Butt in the amount of $36,430; (iii) housing allowance paid to Mr. Fischer in the amount of $144,241; and (iv) housing allowance paid to Mr. Cook in the amount of $152,127.
The reported amount also includes the amount we paid for health and long term disability insurance, social insurance and taxes, club membership fees, car allowances and relocation expenses on behalf
of the named executive officers.
(5)
Includes
amounts paid in 2001 and 2002 under our defined contribution pension plan.
(6)
Mr. Gressier
joined us in 2002, and accordingly has no salary to report for 2001. His annual salary in 2002 was $394,350, of which $295,763 was earned.
(7)
Mr. Butt
joined us in 2002, and accordingly has no salary to report for 2001. His annual salary in 2002 was $500,000, of which $126,493 was earned.
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Options/SAR Grants in 2002
The following table presents information concerning stock options granted to the named executive officers during the year ended December 31, 2002.
Name
Number of
Securities
Underlying
Option/SARs
Granted
Percent of Total
Options/SARs
Granted to
Employees in Fiscal
Year
Exercise of
Base Price
Expiration
Date
Grant Date Present
Value(1)
John R. Charman
25,000
10.6
%
$
116.00
12/12/2012
$
720,500
Robert J. Newhouse, Jr.
15,000
6.4
116.00
2/12/2012
432,300
William A. Fischer
10,000
4.2
116.00
12/12/2012
288,200
Andrew Cook
10,000
4.2
116.00
12/12/2012
288,200
John Gressier
7,500
3.2
100.00
4/1/2012
218,925
10,000
4.2
116.00
12/12/2012
288,200
Michael A. Butt
10,000
4.2
101.16
9/30/2012
291,000
5,000
2.1
116.00
12/12/2012
144,100
(1)
There
was no public market for our common shares as of December 31, 2002. The fair market value of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for grants in 2002: risk free interest rates of
3.8%, expected life of 7 years, expected volatility of 22.1% and a dividend yield of nil. We have used an average discount of 26.8% to provide for the start-up nature of operations
and the illiquidity of a privately held stock.
Pension Plan
We provide pension benefits to eligible employees through various plans sponsored by the Company. All pension plans are structured as defined contribution plans
or schemes under the laws of the United States, the United Kingdom, or Ireland. During the year ended December 31, 2002, pension expenses totaled $1.0 million.
Long-Term Equity Compensation Plan
Our board of directors has adopted, subject to existing shareholder approval, a long-term incentive plan (the "Long-Term Equity
Compensation Plan") in order to optimize our profitability and growth through incentives which are consistent with our goals and which link the interest of select employees, directors and consultants
with those of our shareholders. We believe the plan also promotes teamwork and provides employees, directors and consultants with an incentive to strive for excellence. The following description of
the plan reflects changes we expect to be made prior to consummation of the offering.
The
plan provides for the granting of non-qualified stock options, incentive stock options (within the meaning of Section 422 of the Code), stock appreciation rights
("SARs"), restricted stock awards, performance share and performance unit awards and share purchase rights. The maximum number of common shares with respect to which awards may be granted under the
plan is 993,346, of which 150,000 are available for issuance pursuant to share purchase rights and of which 843,346 are available for issuance under all other awards. In the event of any stock split,
stock dividend, or other such change to our capitalization, all share limitations and per-share prices will be adjusted by the compensation committee to prevent dilution or enlargement of
rights. Shares of stock covered by an award under the plan that are forfeited will again be available for issuance in connection with future grants of awards under the plan. As of December 31,
2002, 855,754 shares have been issued or are subject to outstanding awards under the plan (including 111,815 shares pursuant to share purchase rights).
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The
compensation committee of our board of directors has broad authority to administer the plan, including the authority to determine when awards will be made, determine the type and
amount of
awards, determine the exercise price of options and SARs, determine any limitations, restrictions or conditions applicable to each award, determine the terms of any instrument that evidences an award
and select plan participants. Generally, the plan is open to directors, employees, and consultants, subject to certain conditions, as described below. Awards under the plan are generally granted for a
ten-year term, but may terminate earlier if the participant's employment or service terminates prior to the end of the term.
Stock Options and SARs.
The plan authorizes the issuance of options or SARs covering up to 609,846 shares. Options may be
either incentive stock options or non-qualified stock options. Incentive stock options can only be granted to employees, and generally expire 10 years from the date they are
granted. The exercise price of an incentive stock option or a non-qualified stock option must be at least equal to the fair market value of the shares on the date such option is granted.
The exercise price of options granted under the plan may be paid (i) in cash, (ii) if permitted by the compensation committee, by delivery of previously-acquired shares of our common
stock, (iii) by any combination of (i) and (ii), (iv) pursuant to a cashless exercise program, or (v) by any other means the compensation committee approves, in its
discretion.
SARs
may be granted as freestanding SARs, tandem SARs with a related option or any combination of these forms. The grant price of a freestanding SAR must equal the fair market value of a
share on the date of the grant. Freestanding SARs may be exercised upon whatever terms and conditions the compensation committee imposes, in its sole discretion. The grant price of tandem SARs must
equal the exercise price of the related option. A tandem SAR may be exercised for all or part of the shares subject to the related option upon surrender of the right to exercise the equivalent portion
of the related option. A tandem SAR may only be exercised with respect to shares for which its related option is then exercisable. All SARs terminate within ten years.
Restricted Stock, Performance Units and Performance Shares.
The plan authorizes the granting of up to 233,500 shares of
restricted stock, performance shares, or performance units on such terms and conditions as the compensation committee deems advisable. Holders of such restricted stock may generally exercise full
voting rights and may be credited with regular dividends paid with respect to the underlying shares while they are so held. Generally, after the last day of the applicable period of restriction, the
shares become freely transferable. The period of restriction with respect to outstanding stock awards generally expires on the first to occur of (1) a date specified in the grant agreement,
(2) the recipient's retirement or (3) the occurrence of a change in control. As of December 31, 2002, 229,500 restricted shares have been granted under the plan.
Performance
units and performance shares may be granted to participants according to terms determined by the compensation committee. Performance units and shares are conditional grants
of a specified number of common shares or an equivalent amount of cash. Each performance unit must have an initial value equal to the fair market value of a share on the date of grant, and the
compensation committee sets performance goals in its discretion that will determine the number and/or value of performance units or shares that will be paid out.
Share Purchase Rights.
The maximum number of shares that may be offered for purchase under the plan pursuant to share
purchase rights is 150,000 shares. Share purchase rights may only be granted to employees, according to such terms as determined by the compensation committee. To assist employees in purchasing shares
pursuant to a grant of share purchase rights, we may offer employees full recourse loans secured by the shares purchased with the loan proceeds. Share purchase rights exercisable for 111,815 shares of
our common stock have been granted under the plan as of December 31, 2002.
If,
while any award granted under the plan remains outstanding, a change in control of the Company occurs, then all stock options and SARs outstanding at the time of the change in
control will
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become exercisable in full immediately prior to the change in control, all restrictions with respect to restricted stock awards will lapse, and the target performance goals or payout opportunities
attainable under all outstanding awards of restricted stock, performance units and performance shares will be deemed to have been fully attained for all open performance periods as of the change in
control.
Annual Bonus Plan
The Company annually accrues a bonus pool, which currently is based upon pre-incentive net income. A maximum percentage of 4% of pre-incentive net
income is obtainable providing certain criteria, including, but not limited to, specified levels of net income and gross premiums written, have been achieved. The pool is distributed according to an
employee's level and corresponding bonus target percent.
Employment Agreements
The following information summarizes the employment agreements for our Chief Executive Officer and our other named executive officers who were the most highly
compensated for the year ended December 31, 2002.
Chief Executive Officer
John R. Charman.
Under Mr. Charman's employment agreement, Mr. Charman has agreed to serve as our President and
Chief Executive Officer, member of our board of directors and member of the Executive Committee of our board of directors. Mr. Charman's term of service under this agreement continues until
November 20, 2004 followed by automatic additional one-year terms unless notice of termination of Mr. Charman's employment is provided by us or Mr. Charman at least one year prior
to the end of the term. Mr. Charman receives an annual base salary of $1,000,000 and an annual incentive bonus, to be determined by the board of directors, of no less than 75% of his base
salary. Mr. Charman's salary can be subject to review for increase at the discretion of the Board of Directors, however, it cannot be decreased. Mr. Charman has also been granted stock
options and restricted shares as an inducement to accept such position and as a performance incentive.
If
Mr. Charman's employment terminates as a result of death, Mr. Charman's employment agreement automatically terminates, and his designated beneficiary and/or
administrators are entitled to (i) base salary through to the end of the month in which he dies, (ii) a lump sum payment of one year's base salary, (iii) a separation bonus no
less than the greater of (A) $1,000,000 and (B) the highest amount awarded to Mr. Charman as an annual bonus for any of the three years immediately preceding his death,
(iv) immediate vesting of his previously unvested stock options and restricted shares as if his employment continued until the end of the 12-month period following his death, with the stock
options to remain exercisable for no longer than one year, (v) vesting and exercisability of all other equity awards and (vi) any accrued benefits under the Company's plans, programs or
agreements.
Either
Mr. Charman or we may terminate his employment agreement if Mr. Charman becomes disabled by providing 15 days prior written notice to the other party. If
Mr. Charman's employment ceases because of disability, then in addition to the entitlements discussed immediately above in the case of death, Mr. Charman is also entitled to
(i) disability benefits and (ii) continued coverage for one year under all benefit programs he was participating in immediately prior to the date of his termination.
If
we terminate Mr. Charman's employment agreement for cause, which includes conviction of a felony involving moral turpitude, gross negligence or gross misconduct, or if
Mr. Charman voluntarily terminates his employment agreement with us, all of our obligations cease, and Mr. Charman will only be entitled to receive accrued base salary and benefits under
the Company's plans, programs or agreements.
If
we terminate Mr. Charman's employment without cause or if Mr. Charman terminates his employment with good reason as defined in the employment agreement, then
Mr. Charman is subject
92
to the same terms as if he ceased employment as a result of disability, except that Mr. Charman is entitled to receive payment of two year's base salary instead of one and is not entitled to
disability benefits. If we terminate Mr. Charman's employment agreement without cause, or if Mr. Charman terminates his employment with good reason, in anticipation of, or within the
12-month period following, a change in control as defined in the employment agreement, Mr. Charman is also entitled to receive the foregoing benefits, excluding disability benefits,
except that he is also entitled to (i) two times the amount of the separation bonus, (ii) immediate vesting of his previously unvested stock
options and restricted shares as if his employment continued until the third anniversary of the date of his termination and (iii) continued coverage for two years under all benefit programs.
Any
amount payable to Mr. Charman pursuant to his employment agreement upon his termination of employment for any reason must be paid in a lump sum with respect to 50% promptly
following his termination, and with respect to the remaining 50%, with accrued interest, on the first anniversary of his termination date.
Mr. Charman
is also subject to non-competition and non-solicitation provisions for a period of one year after termination of the employment agreement along
with ongoing confidentiality and non-disparagement requirements.
Executive Officers
Michael A. Butt.
Under Mr. Butt's service agreement, Mr. Butt agreed to serve as Chairman of our Board of
Directors. Mr. Butt's term of service under this agreement continues until October 1, 2005 followed by automatic additional one-year terms unless notice of termination of
Mr. Butt's employment is provided by us or Mr. Butt at least 90 days prior to the end of the term. Mr. Butt receives an annual base salary of $500,000 and an annual
incentive bonus of no less than 50% of his base salary. AXIS Holdings has also granted Mr. Butt stock options and restricted shares as an inducement to accept such position and as a performance
incentive.
If
Mr. Butt's employment terminates as a result of death, Mr. Butt's agreement automatically terminates, and his spouse, beneficiary and/or administrators are entitled to
(i) any accrued base salary, (ii) a separation bonus no less than the greater of (A) $500,000 and (B) the highest amount awarded to Mr. Butt as an annual bonus for
any of the three years immediately preceding his death, (iii) immediate vesting of his previously unvested stock options and restricted shares as if his employment continued until the end of
the 12-month period following his death, with the stock options to remain exercisable for no longer than one year, (iv) vesting and excercisability of all other equity awards and (v) any
accrued benefits under the Company's plans, programs or agreements.
Either
Mr. Butt or we may terminate his service agreement if Mr. Butt becomes disabled by providing 15 days prior written notice to the other party. If
Mr. Butt's employment ceases because of disability, then in addition to the entitlements discussed immediately above in the case of death, Mr. Butt is also entitled to (i) payment
of one year's base salary, (ii) disability benefits and (iii) continued coverage for one year under all benefit programs he was participating in immediately prior to the date of his
termination.
If
we terminate Mr. Butt's service agreement for cause as defined and described with respect to the employment agreement of Mr. Charman, or if Mr. Butt voluntarily
terminates his service agreement with us, all of our obligations cease, and Mr. Butt will only be entitled to receive accrued base salary and any accrued benefits under the Company's plans,
programs or agreements.
If
we terminate Mr. Butt's employment without cause or if Mr. Butt terminates his employment with good reason as defined in the service agreement, then Mr. Butt is
subject to the same terms as if he ceased employment as a result of disability, except that Mr. Butt is entitled to receive payment of two year's base salary instead of one and is not entitled
to disability benefits. If we terminate Mr. Butt's service agreement without cause or if Mr. Butt terminates his employment with good reason in anticipation of, or within the
12-month period following, a change in control as defined in the
93
agreement, Mr. Butt is also entitled to receive the foregoing benefits, excluding disability benefits, except that he is also entitled to (i) two times the amount of the separation
bonus, (ii) immediate vesting of his previously unvested stock options and restricted shares as if his employment continued until the three-year anniversary of the date of his termination and
(iii) continued coverage for two years under all benefit programs.
Any
amount payable to Mr. Butt pursuant to his service agreement upon his termination of employment for any reason must be paid in a lump sum with respect to 50% promptly
following his termination, and with respect to the remaining 50%, with accrued interest, on the first anniversary of his termination date.
Mr. Butt
is also subject to non-competition and non-solicitation provisions for a period of one year after termination of the service agreement along with
ongoing confidentiality and non-disparagement requirements.
Robert J. Newhouse, Jr.
Under Mr. Newhouse's service agreement, Mr. Newhouse agreed to serve as Chairman of the
Executive Committee, member of the Board of Directors, and member of senior management of AXIS Holdings. Mr. Newhouse's term of service under this agreement continues until November 20,
2004 followed by automatic additional one-year terms unless notice of termination of Mr. Newhouse's employment is provided by us or Mr. Newhouse at least 90 days prior to the end
of the term. Mr. Newhouse receives an annual base salary of $350,000 and an annual incentive bonus not less than 75% of his annual base salary. AXIS Holdings has also granted
Mr. Newhouse fully vested and exercisable stock options along with fully vested, and wholly non-forfeitable shares pursuant to a share grant agreement as an inducement to accept
such position and as a performance incentive.
Upon
Mr. Newhouse's death, Mr. Newhouse's service agreement automatically terminates, and his spouse, beneficiary and/or administrators are entitled to (i) any
accrued base salary, (ii) a separation bonus no less than the greater of (A) $350,000 and (B) the highest amount awarded to Mr. Newhouse as
an annual bonus for any of the three years immediately preceding his death, (iii) his stock options and shares granted pursuant to the share grant agreement, with the stock options to remain
exercisable until January 2, 2012, (iv) vesting and exercisability of all other equity awards and (v) any accrued benefits under the Company's plans, programs and agreements.
Additionally, Mr. Newhouse's spouse, beneficiary and/or administrators are entitled to $175,000 or, if greater, one-half of his base salary effective immediately prior to the expiration of the
term of the service agreement annually for a period of three years, whether Mr. Newhouse's death occurs during or after the term of the service agreement.
Either
Mr. Newhouse or we may terminate the service agreement if Mr. Newhouse becomes disabled by providing 15 days prior written notice to the other party.
Moreover, if Mr. Newhouse's employment ceases because of disability, then in addition to the entitlements discussed immediately above in the case of death (except the three-year annual
payment), Mr. Newhouse is entitled to (i) payment of one year's base salary, (ii) disability benefits and (iii) continued coverage for one year under all benefit programs
Mr. Newhouse participated in immediately prior to the date of his termination.
If
we terminate Mr. Newhouse's employment for cause, as defined in Mr. Charman's employment agreements, or if Mr. Newhouse voluntarily terminates his employment with
us, all of our obligations cease, and Mr. Newhouse will be entitled to (i) any accrued base salary, (ii) the stock options and shares under the share purchase option agreement and
the share grant agreement, respectively, (iii) vesting and exercisability of other equity awards and (iv) any accrued benefits under the Company's plans, programs or agreements.
If
we terminate Mr. Newhouse's employment without cause or if Mr. Newhouse terminates his employment with good reason as defined in the service agreement, then
Mr. Newhouse is subject to the same terms as if he ceased employment as a result of disability, except that Mr. Newhouse is entitled to receive payment of two year's base salary instead
of one and is not entitled to disability benefits. If we terminate Mr. Newhouse's service agreement without cause or if Mr. Newhouse terminates his
94
employment with good reason in anticipation of, or within the 12-month period following, a change in control as defined in the service agreement, Mr. Newhouse is also entitled to
receive the foregoing benefits, excluding disability benefits, except that he is also entitled to (i) two times the amount of the separation bonus and (ii) continued coverage for two
years under all benefit programs.
Any
amount payable to Mr. Newhouse pursuant to his service agreement upon his termination of employment for any reason must be paid in a lump sum.
Mr. Newhouse
is also subject to non-competition and non-solicitation provisions for a period of one year after termination of the service agreement along
with ongoing confidentiality and non-disparagement requirements.
William A. Fischer.
Under Mr. Fischer's employment agreement, Mr. Fischer has agreed to serve as our Executive
Vice President and Chief Reinsurance Officer. Mr. Fischer's term of service continues until December 1, 2004, followed by automatic one-year renewals. Mr. Fischer receives an
annual base salary of $475,000 and an annual bonus payable at the discretion of the Company, of no less than 50% of his base salary. AXIS Holdings has also granted Mr. Fischer options and
restricted shares.
Either
Mr. Fischer or we may terminate his employment agreement upon four months prior notice, provided that in lieu of such notice, the Company may, in its discretion, pay four
months salary to Mr. Fischer. In addition, we may terminate Mr. Fischer's agreement without prior notice in case of serious misconduct or repeated misconduct.
If
we terminate, Mr. Fischer's employment for cause, or if Mr. Fischer terminates his employment for no good reason, then Mr. Fischer is entitled to his accrued base
salary, including any accrued vacation.
If
we terminate Mr. Fischer's employment without cause, or if Mr. Fischer terminates his employment for good reason, then Mr. Fischer is entitled to his accrued
based salary, including any accrued vacation, and a lump sum payment equal to one year's base salary. Mr. Fischer is entitled to the same benefits if within six months of a change in control,
we terminate Mr. Fischer without cause, or Mr. Fischer's duties are adversely affected in a material way.
Mr. Fischer
is also subject to ongoing confidentiality requirements and a four-month post-employment covenant not to solicit employees or compete with us.
Andrew Cook.
Under Mr. Cook's employment agreement, Mr. Cook has agreed to serve as our Executive Vice
President and Chief Financial Officer. Mr. Cook's term of service continues until December 10, 2003, followed by automatic one-year renewals. Mr. Cook receives an
annual base salary of $375,000 and an annual bonus payable at the discretion of the Company of no less than 50% of his base salary.
The
remaining material terms of Mr. Cook's agreement are substantially identical to Mr. Fischer's agreement.
John Gressier.
Under Mr. Gressier's employment agreement, Mr. Gressier has agreed to serve as our Executive
Vice President and Chief Insurance Officer. Mr. Gressier receives an annual base salary of $475,000 and an annual bonus payable at the discretion of the Company. Additionally,
Mr. Gressier may be granted stock options and restricted shares.
Either
Mr. Gressier or we may terminate his agreement upon six months prior written notice. Moreover, we may terminate Mr. Gressier's agreement without prior notice for his
action constituting cause for
termination, including, but not limited to, if Mr. Gressier is guilty of willful neglect in the discharge of his duties, commits any serious acts of dishonesty, or is convicted of any
indictable offense that affects his position with us.
Mr. Gressier
is also subject to ongoing confidentiality requirements and a six month post-employment covenant not to solicit employees or compete with us.
95
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information as of December 31, 2002 regarding beneficial ownership of common shares and the applicable voting rights
attached to such share ownership in accordance with our bye-laws by:
•
Each
person known by us to beneficially own 5% or more of our outstanding common shares;
•
Each
of our directors;
•
Each
of our named executive officers;
•
All
of our executive officers and directors as a group; and
•
Each
selling shareholder participating in this offering.
Beneficial Ownership of
Principal Shareholders Prior
to the Offering(1)
Beneficial Ownership of
Principal Shareholders
After the Offering(1)
Number of
Shares Offered
in this
Offering
Name and Address of Beneficial Owner(2)
Number
Percentage
Number
Percentage
Trident II, L.P. and related entities(3)(4)
4,719,838
23.8
%
Blackstone Management Associates (Cayman) III L.P(5)
2,000,000
10.1
%
DLJMB Overseas Partners III, C.V. and affiliated funds(6)
2,000,000
10.1
%
Thomas H. Lee (Alternative) Fund V, L.P. and related entities(7)
2,000,000
10.1
%
J.P. Morgan Partners (BHCA) L.P. and related entities(8)
2,000,395
10.1
%
Marsh & McLennan Companies, Inc.(9)
1,283,508
6.5
%
G.E. Capital Equity Investments, Limited(10)
500,000
2.5
%
General Electric Pension Trust(11)
500,000
2.5
%
Michael A. Butt
29,885
*
John R. Charman(12)
586,273
3.0
%
Robert J. Newhouse, Jr.(13)
53,915
*
Robert L. Friedman(14)
0
0
%
Charles A. Davis(15)
0
0
%
Donald J. Greene
9,500
*
Maurice A. Keane
2,055
*
Edward J. Kelly, III
11
*
Andrew H. Rush(16)
0
0
%
Scott A. Schoen(17)
1,965,404
9.9
%
Frank J. Tasco
10,544
*
Jeffrey C. Walker(18)
0
0
%
John Gressier
17,500
*
William Fischer(19)
10,833
*
Andrew Cook(20)
25,000
*
All directors and executive officers as a group (21 persons)
2,757,220
13.9
%
*
Less
than 1%
96
(1)
Includes
the outstanding common shares and assumes exercise of all outstanding warrants for common shares as well as the exercise of all outstanding
options currently exercisable or exercisable within 60 days of December 31, 2002.
Our
bye-laws
 reduce the total voting power of any shareholder owning 9.5% or more of our common shares to less than 9.5% of the voting power
of our capital stock. See "Description of Share Capital—Voting Rights."
(2)
Unless
otherwise stated, the address for each beneficial owner is c/o AXIS Holdings, 106 Pitts Bay Road, Pembroke, HM 08, Bermuda.
(3)
The
sole general partner of Trident II, L.P. is Trident Capital II, L.P. As the general partner, Trident Capital II, L.P. holds voting and investment
power with respect to the securities of the Company that are, or may be deemed to be, beneficially owned by Trident II, L.P. The manager of Trident II, L.P. is MMC Capital, Inc., a wholly owned
subsidiary of Marsh & McLennan Risk Capital Holdings, Ltd. Marsh & McLennan Risk Capital Holdings, Ltd. is a wholly owned, indirect subsidiary of Marsh & McLennan Companies, Inc. The general partners
of Trident Capital II, L.P. are Marsh & McLennan GP I, Inc., a wholly owned subsidiary of Marsh & McLennan Risk Capital Holdings, Ltd., and two single member limited liability companies that are owned
by individuals who are senior executive officers of Marsh & McLennan Companies, Inc. Marsh & McLennan Risk Capital Holdings, Ltd., MMC Capital, Inc., Marsh & McLennan Companies, Inc., Marsh & McLennan
GP I, Inc. and the two single member limited liability companies that act as general partners of Trident Capital II, L.P. each disclaim beneficial ownership of the common shares and warrants of the
Company that are, or may be deemed to be, beneficially owned by Trident II, L.P. The principal address for Trident II, L.P. and Trident Capital II, L.P. is Maples & Calder, Ugland House, Box 309,
South Church Street, George Town, Grand Cayman, Cayman Islands.
(4)
Includes
(i) 2,367,083 common shares of the Company held by Trident II, L.P. and (ii) 2,100,579 common shares of the Company issuable upon exercise of
warrants held by Trident II, L.P. Also includes an aggregate of 132,917 common shares of the Company and 117,926 common shares issuable upon exercise of warrants of the Company held by Marsh &
McLennan Capital Professionals Fund, L.P. and Marsh & McLennan Employees' Securities Company, L.P. that may be deemed to be beneficially owned by Trident II, L.P. Marsh & McLennan Capital
Professionals Fund, L.P. and Marsh & McLennan Employees' Securities Company, L.P. have agreed that they will coinvest with Trident II, L.P., on a pro rata basis in accordance with their committed
capital, and will not dispose of their investments prior to the disposition by Trident II, L.P. The warrants are currently exercisable at the price of $100 per share and expire on November 20, 2011.
Marsh & McLennan Risk Capital Holdings, Ltd. has agreed that it will coordinate the timing of the sale of the common shares of the Company held by Marsh & McLennan Risk Capital Holdings, Ltd. with the
sale of common shares (including warrants and common shares issuable upon exercise thereof) held by Trident II, L.P. As a result of such agreement, Trident II, L.P. may be deemed to beneficially own
common shares (including warrants and common shares issuable upon exercise thereof) of the Company that are held by Marsh & McLennan Risk Capital Holdings, Ltd. See footnote (9) below. Trident II,
L.P. disclaims any beneficial ownership of any common shares of the Company held by Marsh & McLennan Risk Capital Holdings, Ltd. (other than the shares held by Marsh & McLennan Capital Professionals
Fund, L.P. and Marsh & McLennan Employees' Securities Company, L.P.) and the number of common shares of the Company set forth in the table as beneficially owned by Trident II, L.P. excludes common
shares of the Company that are, or may be deemed to be, beneficially owned by Marsh & McLennan Companies, Inc.
97
(5)
Includes
1,615,345.86 common shares held by Blackstone FI Capital Partners (Cayman) L.P.; 314,654.14 common shares held by Blackstone FI Offshore Capital
Partners L.P.; and 70,000 common shares held by Blackstone Family Investment Partnership (Cayman) III L.P. The sole general partner of Blackstone FI Capital Partners (Cayman) L.P. and Blackstone
Family Investment Partnership (Cayman) III L.P and the sole investment general partner of Blackstone FI Offshore Capital Partners L.P. is Blackstone Management Associates (Cayman) III L.P. The
principal address for each is Walkers, PO Box 265 GT, Walker House, George Town, Grand Cayman, Cayman Islands. As founding members of Blackstone Management Associates (Cayman) III L.P.,
Messrs. Peter G. Peterson and Stephen A. Schwarzman have the shared power to vote or to direct the vote of, and to dispose or to direct the disposition of, the shares of the identified class of
securities that may be deemed to be beneficially owned by Blackstone Management Associates (Cayman) III L.P. As a result, Messrs. Peterson and Schwarzman may be deemed to beneficially own the
common shares that Blackstone Management Associates (Cayman) III L.P. may be deemed to beneficially own, but they disclaim any such beneficial ownership except to the extent of their individual
pecuniary interest in such shares.
(6)
Includes
1,511,854 common shares owned by DLJMB Overseas Partners III, C.V.; 105,777 common shares held by DLJ Offshore Partners III C.V.; 27,285 common
shares held by DLJ Offshore Partners III-1, C.V.; 19,436 common shares held by DLJ Offshore Partners III-2, C.V.; 12,895 common shares held by DLJ MB PartnersIII
GmbH & Co.KG; 2,560 common shares held by Millennium Partners II, L.P. and 320,193 common shares held by MBP III Plan Investors, L.P. The principal address for each is 11 Madison Avenue, 16th
Floor, New York, NY 10010. Credit Suisse First Boston, a Swiss bank, owns the majority of the voting stock of Credit Suisse First Boston, Inc., which in turn owns all of the voting stock of Credit
Suisse First Boston (USA), Inc. (formerly Donaldson Lufkin & Jenrette, Inc.) ("CSFB-USA"). The DLJ related entities named above (the "DLJ Related Entities") are direct and indirect subsidiaries of
CSFB-USA and merchant banking funds advised by subsidiaries of CSFB-USA. Credit Suisse First Boston LLC, one of the underwriters in this offering, is a direct subsidiary of CSFB-USA and itself does
not hold any ownership interest in either Credit Suisse First Boston Private Equity, Inc. or any of the DLJ Related Entities.
(7)
Includes
1,541,234 common shares held by Thomas H. Lee (Alternative) Fund V, L.P.; 399,888 common shares held by Thomas H. Lee (Alternative) Parallel
Fund V, L.P.; 21,237 common shares held by Thomas H. Lee (Alternative) Cayman Fund V, L.P.; 2,964 common shares held by State Street Bank and Trust Company as Trustee under the 1997 Thomas H. Lee
Nominee Trust; 3,045 common shares held by Thomas H. Lee Investors Limited Partnership; 10,350 common shares held by Putnam Investments Employees' Securities Co. I LLC; 9,241 common shares held by
Putnam Investments Employees' Securities Co. II LLC; and 12,041 common shares held by Putnam Investments Holdings, LLC. The address for the Thomas H. Lee (Alternative) Fund V, L.P., Thomas H. Lee
(Alternative) Parallel Fund V, L.P. and Thomas H. Lee (Alternative) Cayman Fund V, L.P. is c/o Walkers, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands. The address for the 1997
Thomas H. Lee Nominee Trust and Thomas H. Lee Investors Limited Partnership is 75 State Street, Boston, Massachusetts 02109. The address for Putnam Investments Employees' Securities Company I, LLC,
Putnam Investments Employees' Securities Company 11, LLC and Putnam Investments Holdings LLC is One Post Office Square, Boston, Massachusetts 02109. No individual at Thomas H. Lee has voting or
investment control over the common shares owned of record by Thomas H. Lee (Alternative) Fund V, L.P., Thomas H. Lee (Alternative) Parallel Fund V, L.P., Thomas H. Lee (Alternative) Cayman Fund V,
L.P. and Thomas H. Lee Investors Limited Partnership. Thomas H. Lee has voting and investment control over common shares owned of record by State Street Bank and Trust Company as Trustee
under the 1997 Thomas H. Lee Nominee Trust. No individual at Putnam Investments has voting or investment control over common shares owned of record by Putnam Investments Employees'
98
Securities
Co. I LLC, Putnam Investments Employees' Securities Co. II LLC and Putnam Investments Holdings, LLC.
(8)
Includes
1,063,449 common shares owned by J.P. Morgan Partners (BHCA), L.P. ("JPMP BHCA"), an indirect wholly owned subsidiary of J.P. Morgan
Chase & Co., and 286,551 shares held by the following related fund entities ("JPMP Global Fund"): 5,107 common shares owned by J.P. Morgan Partners Global Investors, L.P.; 17,016 common shares
owned by J.P. Morgan Partners Global Investors A, L.P.; 85,531 common shares owned by J.P. Morgan Partners Global Investors (Cayman), L.P.; 9,532 common shares owned by
J.P. Morgan Partners Global Investors (Cayman), II L.P.; 97,234 common shares owned by J.P. Morgan Partners Global Investors (Cayman) III, L.P.; and 72,131 common shares owned by
J.P. Morgan Partners Global Investors (Cayman) IV, LP. The general partner of JPMP BHCA is JPMP Master Fund Manager, L.P., the general partner of which is JPMP Capital Corp. JPMP Capital Corp.
is the general partner of JPMP Global Investors, L.P., which is the general partner of each of the foregoing JPMP Global Fund entities. Two other companies controlled by J.P. Morgan Chase & Co.,
J.P. Morgan Capital, L.P. and J.P. Morgan Corsair II Offshore Capital Partners, L.P., own 149,500 and 500,500 respectively (collectively, the "Corsair Shares"). Mr. Walker is the president of
J.P. Morgan Capital LLC, the general partner of J.P. Morgan Capital LP. Mr. Walker, JP MP BHCA and the JPMP Global Fund entities have no pecuniary interest in and disclaim beneficial
ownership of the Corsair Shares. The principal address for J.P. Morgan Chase & Co. is 270 Park Avenue, New York, NY, 10017. The principal address each of JPMP BHCA, J.P. Morgan Partners
Global Investors, L.P., J.P. Morgan Partners Global Investors A, L.P., J.P. Morgan Partners Global Investors (Cayman), L.P., J.P. Morgan Partners Gobal Investors (Cayman), II
L.P., J.P. Morgan Partners Global Investors (Cayman) III, L.P., J.P. Morgan Partners Global Investors (Cayman) IV, L.P., J.P Morgan Capital L.P. is 1221 Avenue of the Americas,
New York, NY, 10020. The address for J.P. Morgan Corsair II Offshore Capital Partners, L.P. is 227 Park Avenue, New York, NY, 10172.
(9)
Includes
(i) 1,000,000 common shares of the Company, which constitute approximately 5.1% of all common shares outstanding, that are held by Marsh &
McLennan Risk Capital Holdings, Ltd., (ii) 13,074 common shares of the Company that are held by indirect, wholly-owned subsidiaries of Marsh & McLennan Companies, Inc., (iii) 132,917 common shares of
the Company and 117,926 common shares issuable upon exercise of warrants of the Company that are held by Marsh & McLennan Capital Professionals Fund, L.P. and Marsh & McLennan Employees' Securities
Company, L.P. and (iv) 19,591 common shares of the Company that are, or may be deemed to be, beneficially owned by another indirect, wholly-owned subsidiary of Marsh & McLennan Companies, Inc. that
serves as the general partner of entities through which certain employees of Marsh & McLennan Companies, Inc. and/or its subsidiaries co-invest, on a pro rata basis in accordance with committed
capital, with an institutional private equity fund that is not controlled by Marsh & McLennan Companies, Inc. The warrants are currently exercisable at the price of $100 per share and expire on
November 20, 2011. As the ultimate parent corporation of its various subsidiaries, Marsh & McLennan Companies, Inc. shares voting and investment power with respect to all common shares of the Company
that are, or may be deemed to be, beneficially owned by each of its subsidiaries. Marsh & McLennan Risk Capital Holdings, Ltd. has agreed that it will coordinate the timing of the sale of the common
shares of the Company held by Marsh & McLennan Risk Capital Holdings, Ltd. with the sale of common shares (including warrants and common shares issuable upon exercise thereof) held by Trident II, L.P.
As a result of such agreement, Marsh & McLennan Companies, Inc. may be deemed to beneficially own common shares
(including warrants and common shares issuable upon exercise thereof) of the Company that are held by Trident II, L.P. See footnote (4) above. Marsh & McLennan Companies, Inc. disclaims any beneficial
ownership of any common shares of the Company held by Trident II, L.P. and the number of common shares of the Company set forth in the table as
99
beneficially
owned by Marsh & McLennan Companies, Inc. excludes common shares and warrants of the Company that are, or may be deemed to be, beneficially owned by Trident II, L.P. (but, as noted
above, includes the common shares and warrants of the Company held by Marsh & McLennan Capital Professionals Fund, L.P. and Marsh & McLennan Employees' Securities Company, L.P.). The principal address
for Marsh & McLennan Companies, Inc. and Marsh & McLennan Risk Capital Holdings, Ltd. is 1166 Avenue of the Americas, New York, New York 10036.
(10)
The
principal address is 120 Long Ridge Road, Stamford, Connecticut, 06905. Pursuant to the voting adjustment provided in our bye-laws, the
voting rights of these common shares increased from 2.9% to 5.2% in connection with the December 17, 2002 shareholders meeting. Amounts set forth do not include any shares that may be deemed to
be beneficially owned by G.E. Capital Equity Investments, Limited through its limited partnership interest in Blackstone Management Associates (Cayman) III L.P.
(11)
The
principal address is 3003 Summer Street, Stamford, Connecticut 06905. Pursuant to the voting adjustment provided in our bye-laws, the
voting rights of these common shares increased from 2.9% to 5.2% in connection with the December 17, 2002 shareholders meeting. Amounts set forth do not include any shares that may be deemed to
be beneficially owned by General Electric Pension Trust through its limited partnership interest in Trident II, L.P. and related entities.
(12)
Includes
199,426 common shares owned by Dragon Holdings Trust EBCAM Trustees (Jersey) Limited (JT49) ("Dragon Holdings Trust"), whose principal address
is PO Box 556 EBC House, 1-3 Seale Street, St. Helier, Jersey JE4 8XL, Channel Islands; 74,713 common shares owned by JR Charman Children's Settlement ("JR Charman Children's Settlement"),
whose principal address is PO Box 558, EBC House, 1-3 Seale Street, St. Helier, Jersey JE4 8XL, Channel Islands; 50,258 common shares owned by Mr. Charman; and 84,380 common shares
issuable upon exercise of vested options held by Mr. Charman. It also includes 133,122 common shares issuable upon exercise of warrants of the Company held by Dragon Holdings Trust and 44,374
common shares issuable upon exercise of warrants of the Company held by JR Charman Children's Settlement. Mr. Charman disclaims beneficial ownership of the common shares and common shares
issuable upon exercise of warrants held by Dragon Holdings Trust and JR Charman Children's Settlement.
(13)
Includes
35,000 common shares, 8,915 common shares issuable upon exercise of warrants of the Company and 10,000 common shares issuable upon exercise of
vested options held by Mr. Newhouse, Jr.
(14)
Mr. Friedman
is a Senior Managing Director of the Blackstone Group, L.P. Mr. Friedman disclaims beneficial ownership of all common shares
owned by Blackstone entities.
(15)
Mr.
Davis is Chairman and CEO of MMC Capital, Inc., a Director of Marsh & McLennan Risk Capital Holdings, Ltd., and a Vice Chairman and Director of
Marsh & McLennan Companies, Inc. He also serves as a member of the investment committee of Trident II, L.P. and is the sole member of one of the single member limited liability companies that
serves as a general partner of Trident Capital II, L.P., the general partner of Trident II, L.P. Mr. Davis disclaims beneficial ownership of the common shares and warrants of the Company that
are, or may be deemed to be, beneficially owned by Marsh & McLennan Companies, Inc. (including the shares that are, or may be deemed to be, beneficially owned by Marsh & McLennan Risk
Capital Holdings, Ltd. and MMC Capital, Inc.) and Trident II, L.P. See footnotes (3), (4) and (9) above.
(16)
Mr. Rush
is an officer in the Private Equity group of Credit Suisse First Boston. This group includes DLJ Merchant Banking III and all entities
listed in Footnote 6. Credit Suisse First Boston LLC, the Investment Banking arm of Credit Suisse First Boston, is a registered Broker
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Dealer
and is the proposed Co-manager in the potential offering. Mr. Rush disclaims beneficial ownership of the common shares held by CSFB.
(17)
Mr. Schoen
is a Managing Director of Thomas H. Lee Advisors, LLC, the general partner of Thomas H. Lee Partners, L.P. Mr. Schoen disclaims
beneficial ownership of any of the common shares referred to in footnote 7 above, except to the extent of his pecuniary interest therein.
(18)
The
common shares owned by J.P. Morgan Partners (BHCA), L.P. may be deemed attributable to Mr. Walker because he is the President of JPMP Capital
Corp., which is the general partner of JPMP Master Fund Manager, L.P. (the general partner of J.P. Morgan Partners (BHCA), L.P.) and a limited partner of JPMP Master Fund Manager, L.P. The actual pro
rata portion of such beneficial ownership that may be deemed attributable to Mr. Walker is not readily determinable because it is subject to several variables, including the internal rate of
return and vesting within the sole shareholder of J.P. Morgan Partners (BHCA), L.P. and with JPMP Master Fund Manager, L.P. The common shares owned by each of the JPMP Global Fund entities identified
in footnote 8 above may be deemed attributable to Mr. Walker because his position with JPMP Capital Corp., which the general partner of JPMP Global Investors, L.P. (the general partner
of each of the JPMP Global Fund entities). The actual pro rata portion of such beneficial ownership that may be deemed attributable to Mr. Walker is not readily determinable. Mr. Walker
disclaims beneficial ownership of the common shares held by J.P. Morgan Partners (BHCA), L.P. and the related JPMP Global Fund entities to the extend it exceeds his pecuniary interest in them.
Although Mr. Walker is also President of J.P.M.P. Capital, LLC, he does not have a pecuniary interest in, and disclaims beneficial ownership of the shares owned by J.P. Morgan Capital, L.P. and
J.P. Morgan Corsaire II Offshore Capital Partners, L.P.
(19)
Includes
7,500 common shares and 3,333 common shares issuable upon exercise of vested options held by Mr. Fischer.
(20)
Includes
22,500 common shares on 2,500 common shares issuable upon exercise of vested options held Mr. Cook.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We describe below some of the transactions we have entered into with parties that are related to our company. We believe that each of the transactions described
below was on terms no less favorable to us than we could have obtained from unrelated parties.
Trident II,
L.P., one of our founding shareholders, and two of its affiliates, Marsh & McLennan Capital Professionals Fund and Marsh & McLennan Employees' Securities Company, L.P.
received 2,218,505 warrants (calculated as of December 31, 2002) with a total estimated fair value of $59.4 million when issued.
AXIS
Specialty entered into two agreements in November 2001 under which parties associated with certain of our founding investors provided assistance in connection with the
formation of AXIS Specialty. In connection with the first agreement, MMC Capital, Inc. ("MMC Capital") received $25.8 million and John R. Charman received
$2.5 million. One of our directors, Charles A. Davis, received approximately $1.2 million of the $25.8 million received by MMC Capital pursuant to the MMC Capital Long Term
Incentive Plan. In connection with the second agreement, Marsh & McLennan Companies, Inc. received $8.4 million.
AXIS
Specialty entered into an advisory agreement in November 2001 with MMC Capital. Under this agreement, MMC Capital from time to time provides advice and assistance to the
Company in connection with transactions and other matters as may be agreed by MMC Capital and the Company. Under the terms of this agreement, AXIS Specialty pays an annual fee of $1.0 million
for a period of five years from the date of initial funding. During the year ended December 31, 2002, AXIS Specialty incurred $1.0 million of fees and expenses to MMC Capital in
relation to this agreement. Mr. Davis receives approximately 4.5% of the payments made to MMC Capital pursuant to the MMC Capital Long Term Incentive Plan.
AXIS
Specialty entered into an agreement in November 2001 with The Putnam Advisory Company, L.L.C. ("Putnam"), an affiliate of Marsh and McLennan Companies, Inc., under which
Putnam was appointed as an investment manager of part of the Company's investment portfolio. This agreement was entered into on an arms length basis on terms generally available in the market. During
the year ended December 31, 2002, AXIS Specialty incurred $671,000 of fees in relation to this agreement.
AXIS
Specialty entered into an agreements in November 2001 and December 2002 with J.P. Morgan Investment Management Inc. and its affiliates under which JPMorgan was
appointed as an investment manager of part of the Company's investment portfolio. These agreements were entered into on an arms length basis on terms generally available in the market. During the year
ended December 31, 2002, AXIS Specialty incurred $441,000 of fees in relation to these agreements.
During
the year ended December 31, 2002, JPMorgan Chase Bank acted as administrative agent and/or lender for AXIS Specialty's $400 million revolving credit facility. In
addition, certain subsidiaries of the Company hold several bank accounts with JPMorgan Chase Bank. Fees in relation to these transactions amounted to $658,000.
Our
subsidiaries use the services of Marsh and its affiliates. During the year ended December 31, 2002 amounts paid with respect to accounting and human resource consulting
totaled $570,000 (2001:$nil). In addition, we pay brokerage and commissions to Marsh and its affiliates, which vary based on the amount of business produced. During the year ended December 31,
2002, Marsh and its affiliates produced 37.9% (2001: 22.7%) of our gross premiums written.
Certain
relationships and related transactions with respect to the underwriters are set forth in "Underwriting."
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MATERIAL TAX CONSIDERATIONS
The following summary of our taxation, and the taxation of our shareholders is based upon current law, is for general information only and
does not purport to be a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase common shares. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.
The
following legal discussion (including and subject to the matters and qualifications set forth in such summary) of the material tax considerations under (i) "Taxation of AXIS
Holdings and Subsidiaries—Bermuda" and "Taxation of Shareholders—Bermuda Taxation" is based upon the advice of Conyers Dill & Pearman, special Bermuda legal counsel,
(ii) "Taxation of AXIS Holdings and Subsidiaries—United Kingdom" is based upon the advice of Clyde & Co., special United Kingdom legal counsel, (iii) "Taxation of AXIS
Holdings and Subsidiaries—Ireland" is based upon the advice of William Fry Tax Advisers Limited, special Irish tax advisers, (iv) "Taxation of AXIS Holdings and
Subsidiaries—Barbados" is based upon the advice of David King & Co., special Barbados legal counsel and (v) "Taxation of AXIS Holdings and Subsidiaries—United
States" and "Taxation of Shareholders—United States Taxation" is based upon the advice of LeBoeuf, Lamb, Greene & MacRae, L.L.P., each of whom has reviewed this discussion and has
opined that the discussion constitutes, in all material respects, a fair and accurate summary of the relative income tax considerations relating to AXIS Holdings and its subsidiaries and the ownership
of AXIS Holdings' common shares by investors that are U.S. Persons (as defined below) who acquire such shares in the offering. As discussed further herein, LeBoeuf, Lamb, Greene & MacRae,
L.L.P. has also opined as to certain matters expressly set forth in the discussion relating to passive foreign investment company issues. The advice of such firms does not include any factual or
accounting matters, determinations or conclusions such as insurance accounting determinations or RPII, amounts and computations and amounts or components thereof (for example, amounts or computations
of income or expense items or reserves entering into RPII computations) or facts relating to the business, income, reserves or activities of AXIS Holdings and its subsidiaries. The opinion of these
firms relies upon and is premised on the accuracy of factual statements and representations made by AXIS Holdings concerning the business and properties, ownership, organization, source of income and
manner of operation of AXIS Holdings and its subsidiaries. The discussion is based upon current law. Legislative, judicial or administrative changes or interpretations may be forthcoming that could be
retroactive and could affect the tax consequence to holders of common shares. The tax treatment of a holder of common shares, or of a person treated as a holder of common shares for U.S. federal
income, state, local or non-U.S. tax purposes, may vary depending on the holder's particular tax situation. Statements contained herein as to the beliefs, expectations and conditions of
AXIS Holdings and its subsidiaries as to the application of such tax laws or facts represent the view of management as to the application of such laws and do not represent the opinions of counsel.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX
CONSEQUENCES OF OWNING COMMON SHARES UNDER THE LAWS OF THEIR COUNTRIES OF CITIZENSHIP, RESIDENCE, ORDINARY RESIDENCE OR DOMICILE.
Taxation of AXIS Holdings and Subsidiaries
Bermuda
Under current Bermuda law, there is no income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by us. AXIS Holdings
and AXIS Specialty have each obtained from the Minister of Finance under The Exempted Undertaking Tax Protection Act 1966, as amended, an assurance that, in the event that Bermuda enacts legislation
imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, then the imposition of any such tax shall not be applicable
to AXIS Holdings and AXIS Specialty or to any of their operations or their shares, debentures or other obligations, until March 28,
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2016. AXIS Holdings and AXIS Specialty could be subject to taxes in Bermuda after that date. This assurance is subject to the proviso that it is not to be construed so as to prevent the application
of any tax or duty to such persons as are ordinarily resident in Bermuda or to prevent the application of any tax payable in accordance with the provisions of the Land Tax Act 1967 or otherwise
payable in relation to any property leased to AXIS Holdings and AXIS Specialty. AXIS Holdings and AXIS Specialty each pay annual Bermuda government fees, and AXIS Specialty pays annual insurance
license fees. In addition, all entities employing individuals in Bermuda are required to pay a payroll tax and there are other sundry taxes payable, directly or indirectly, to the Bermuda government.
United Kingdom
AXIS UK and AXIS UK Holdings are companies incorporated in the United Kingdom and are, therefore, resident in the United Kingdom for United Kingdom corporation
tax purposes and will be subject to the United Kingdom corporation tax on their worldwide profits (including revenue profits and capital gains). It is not expected that, in the context of the group's
profitability as a whole, any such tax charges will be seen to be significant. The maximum rate of United Kingdom corporation tax is currently 30% on profits of whatever description. Currently, no
United Kingdom withholding tax applies to dividends paid by AXIS UK and AXIS UK Holdings.
All
of us except for AXIS UK and AXIS UK Holdings are not incorporated in the United Kingdom. Accordingly, except for AXIS UK and AXIS UK Holdings, we should not be treated as being
resident in the United Kingdom unless our central management and control is exercised in the United Kingdom. The concept of central management and control is indicative of the highest level of control
of a company, which is wholly a question of fact. The directors of each of us, other than AXIS UK and AXIS UK Holdings, intend to manage our affairs so that none of us, other than AXIS UK and AXIS UK
Holdings, are resident in the United Kingdom for tax purposes.
A
company not resident in the United Kingdom for corporation tax purposes can nevertheless be subject to U.K. corporation tax if it carries on a trade through a branch or agency in the
United Kingdom but the charge to U.K. corporation tax is limited to profits (including revenue profits and capital gains) connected with such branch or agency.
The
directors of each of us, other than AXIS UK and AXIS UK Holdings (which should be treated as resident in the United Kingdom by virtue of being incorporated and managed there), AXIS
Ireland Holdings (which has established a branch in the United Kingdom) and AXIS Specialty Europe (which it is intended should establish a branch in the United Kingdom), intend that we will operate in
such a manner so that none of us, other than AXIS UK, AXIS UK Holdings, AXIS Ireland Holdings and AXIS Specialty Europe, carry on a trade through a branch or agency in the United Kingdom.
Nevertheless, because neither case law nor U.K. statute definitively defines the activities that constitute trading in the United Kingdom through a branch or agency, the U.K. Inland Revenue might
contend that any of us, other than AXIS UK and AXIS UK Holdings, are/is trading in the United Kingdom through a branch or agency in the United Kingdom.
If
any of the U.S. Subsidiaries were trading in the U.K. through a branch or agency and the U.S. Subsidiaries were to qualify for benefits under the applicable income tax treaty between
the United Kingdom and the United States, only those profits which were attributable to a permanent establishment in the United Kingdom would be subject to U.K. corporation tax.
AXIS
Ireland Holdings, AXIS Re and AXIS Specialty Europe should be entitled to the benefits of the tax treaty between Ireland and the United Kingdom if they are resident in Ireland. If
AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe were trading in the U.K. through a branch or agency and they were entitled to the benefits of the tax treaty between Ireland and the United
Kingdom they would only be subject to U.K. taxation on their profits which were attributable to a permanent establishment in the United Kingdom. The branch established in the United Kingdom by AXIS
Ireland
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Holdings constitutes a permanent establishment of that company and the profits attributable to that permanent establishment (which it has been agreed with the Inland Revenue should be calculated on a
cost plus 10% basis) are subject to United Kingdom corporation tax. It is believed that the branch that is to be established in the United Kingdom by AXIS Specialty Europe will constitute a permanent
establishment of that company and that the profits attributable to that permanent establishment will also be subject to United Kingdom corporation tax.
The
United Kingdom has no income tax treaty with Bermuda.
There
are circumstances in which companies that are neither resident in the United Kingdom nor entitled to the protection afforded by a double tax treaty between the United Kingdom and
the jurisdiction in which they are resident may be exposed to income tax in the United Kingdom (other than by deduction or withholding) on the profits of a trade carried on there even if that trade is
not carried on through a branch or agency but the directors of each of us intend that we will operate in such a manner that none of us will fall within the charge to income tax in the United Kingdom
(other than by deduction or withholding) in this respect
If
any of us, other than AXIS UK and AXIS UK Holdings, were treated as being resident in the United Kingdom for U.K. corporation tax purposes, or if any of us, other than AXIS Specialty
Europe, were to be treated as carrying on a trade in the United Kingdom through a branch or agency or of having a permanent establishment in the United Kingdom, our results of operations and your
investment could be materially adversely affected.
It
should be noted that the British Government has published draft legislation to modernize the taxation of foreign companies operating in the United Kingdom through branches, for
accounting periods starting on or after January 1, 2003. If the draft legislation is enacted in its current form, a non-U.K. resident company will only fall within the charge to United Kingdom
corporation tax if it carries on a trade in the United Kingdom through a permanent establishment. The term "permanent establishment" is defined for these purposes in a manner which is consistent with
various internationally recognized characteristics commonly used in the United Kingdom's double tax treaties.
Ireland
The directors of each of AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe intend to manage their affairs so that each of them is, and will continue to be,
resident in Ireland for Irish tax purposes. Assuming that AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe are and will continue to be resident in Ireland for Irish tax purposes, such
companies will be subject to Irish corporation tax on their worldwide income and capital gains.
AXIS
Ireland Holdings carries on a trade in the United Kingdom through a branch and AXIS Specialty Europe intends to carry on a trade in the United Kingdom through a branch.
As
such, profits from those branch activities would be liable to UK taxation and would also be liable to Irish corporation tax. A credit against the Irish corporation tax liability is
available for any UK tax paid
on such profits, subject to the maximum credit being equal to the Irish corporation tax payable on such profits.
Income
derived by AXIS Ireland Holdings, AXIS Re or AXIS Specialty Europe from an Irish trade (i.e. a trade that is not carried on wholly outside of Ireland) will be subject to Irish
corporation tax at the current rate of 12.5%. Other income (that is income from passive investments, income from non-Irish trades and income from certain dealings in land) will generally
be subject to Irish corporation tax at the current rate of 25%. Published administrative statements of the Irish Revenue Commissioners, suggest that investment income earned by AXIS Specialty Europe
and Axis Re will be taxed in Ireland at a rate of 12.5% provided that such investments either form part of the permanent
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capital required by regulatory authorities, or are otherwise integral to the insurance and reinsurance businesses carried on by those companies. Other investment income earned by AXIS Ireland
Holdings, AXIS Re and AXIS Specialty Europe will generally be taxed in Ireland at an effective rate of 25%.
Capital
gains realized by AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe will generally be subject to Irish corporation tax at an effective rate of 20%.
AXIS
Ireland Holdings, AXIS Re and AXIS Specialty Europe are, as limited liability companies, also within the charge to Irish capital duty. Irish capital duty applies at the rate of 1%
on the value received for share capital issued by such companies.
As
each of AXIS Re and AXIS Specialty Europe are Irish tax resident companies, distributions made by such companies to AXIS Ireland Holdings will not be taken into account in computing
the taxable income of AXIS Ireland Holdings. Irish withholding tax will also not apply to distributions made by any of AXIS Re and AXIS Specialty Europe to AXIS Ireland Holdings. Following the listing
of the common shares of AXIS Holdings on the New York Stock Exchange, and provided that such shares are substantially and regularly traded on that exchange, Irish withholding tax will not apply to
distributions paid by AXIS Ireland Holdings to AXIS Holdings provided AXIS Holdings has made an appropriate declaration, in prescribed form, to AXIS Ireland Holdings.
None
of us, other than AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, will be resident in Ireland for Irish tax purposes unless the central management and control of such
companies is, as a matter of fact, located in Ireland. See "Risk Factors—Risks Related to Taxation—We may be subject to Irish tax, which may have a material adverse effect on
our results of operations."
A
company not resident in Ireland for Irish tax purposes can nevertheless be subject to Irish corporation tax if it carries on a trade through a branch or agency in Ireland or disposes
of certain specified assets (e.g. Irish land, minerals, or mineral rights, or shares deriving the greater part of their value from such assets). In such cases, the charge to Irish corporation tax is
limited to trading income
connected with the branch or agency, capital gains on the disposal of assets used in the branch or agency which are situated in Ireland at or before the time of disposal, and capital gains arising on
the disposal of specified assets, with tax imposed at the rates discussed above.
Barbados
AXIS Barbados was incorporated in Barbados to act as a holding company for various companies in the United States. As such, AXIS Barbados was granted a license to
conduct international business in accordance with the provisions of the International Business Companies Act, Cap. 77 as amended (the "Act"), and related regulations. The Minister of Industry and
International Business (the "MIIB") has granted AXIS Barbados a guarantee that the benefits and exemptions contained in the Act will apply to AXIS Barbados until January 11, 2017.
Under
the Act, AXIS Barbados is required to pay a maximum corporate tax rate of 2
1
/
2
% on its worldwide profits, which reduces to 1% on taxable profits over U.S.
$15 million. Under the Act there is currently no withholding tax imposed on amounts paid by AXIS Barbados to persons not resident in Barbados. Additionally, under current Barbados law there is
no capital gains tax and no tax is payable on the transfer of shares in AXIS Barbados if transferred to a person who is not resident in Barbados or to another international business company.
The
Act governs the licensing and operations of international business companies. Licenses are issued by the MIIB, who has broad discretion over whether licenses are granted or refused.
The MIIB has the authority to suspend or revoke a license if at any time a licensee fails to satisfy the conditions of the license, or is in violation of any provisions of the Act.
105
The
Act imposes on Barbados international business companies certain reporting requirements. For example, a licensee that has gross revenues and assets that exceed Barbados
$1.0 million, which is approximately U.S. $500,000, is required to forward to the MIIB annual audited financial statements prepared in accordance with generally accepted accounting principles.
United States
The following discussion is a summary of certain U.S. federal income tax consideration relating to our operations. We have conducted and intend to conduct
substantially all of our foreign operations outside
the United States and to limit our U.S. contacts so that AXIS Holdings and its foreign subsidiaries should not be engaged in a trade or business in the United States. However, whether business is
being conducted in the United States is an inherently factual determination. Because the Internal Revenue Code of 1986, as amended (the "Code"), regulations and court decisions fail to identify
definitively activities that constitute being engaged in a trade or business in the United States, we cannot be certain that the IRS will not contend successfully that AXIS Holdings and its foreign
subsidiaries are or will be engaged in a trade or business in the United States. A foreign corporation deemed to be so engaged would be subject to U.S. income tax at regular corporate rates, as well
as the branch profits tax, on its income which is treated as effectively connected with the conduct of that trade or business unless the corporation is entitled to relief under the permanent
establishment provision of an applicable tax treaty, as discussed below. Such income tax, if imposed, would be based on effectively connected income computed in a manner generally analogous to that
applied to the income of a U.S. corporation, except that a foreign corporation is entitled to deductions and credits only if it timely files a U.S. federal income tax return. AXIS Specialty, AXIS Re
and AXIS Specialty Europe intend to file protective U.S. federal income tax returns on a timely basis in order to preserve the right to claim income tax deductions and credits if it is ever determined
that they are subject to U.S. federal income tax. The highest marginal federal income tax rates currently are 35% for a corporation's effectively connected income and 30% for the "branch profits" tax.
If
AXIS Specialty is entitled to the benefits under the income tax treaty between Bermuda and the United States (the "Bermuda Treaty"), AXIS Specialty would not be subject to U.S. income
tax on any income found to be effectively connected with a U.S. trade or business unless that trade or business is conducted through a permanent establishment in the United States. No regulations
interpreting the Bermuda Treaty have been issued. AXIS Specialty currently intends to conduct its activities so that it does not have a permanent establishment in the United States, although we cannot
be certain that we will achieve this result.
An
insurance enterprise resident in Bermuda generally will be entitled to the benefits of the Bermuda Treaty if (i) more than 50% of its shares are owned beneficially, directly or
indirectly, by individual residents of the United States or Bermuda or U.S. citizens and (ii) its income is not used in substantial part, directly or indirectly, to make disproportionate
distributions to, or to meet certain liabilities of, persons who are neither residents of either the United States or Bermuda nor U.S. citizens. We cannot be certain that AXIS Specialty will be
eligible for Bermuda Treaty benefits immediately following the offering or in the future because of factual and legal uncertainties regarding the residency and citizenship of AXIS Holdings'
shareholders. AXIS Holdings would not be eligible for treaty benefits because it is not an insurance company.
Foreign
insurance companies carrying on an insurance business within the United States have a certain minimum amount of effectively connected net investment income, determined in
accordance with a formula that depends, in part, on the amount of U.S. risk insured or reinsured by such companies. If AXIS Specialty is considered to be engaged in the conduct of an insurance
business in the United States and it is not entitled to the benefits of the Bermuda Treaty in general (because it fails to satisfy one of the limitations on treaty benefits discussed above), the Code
could subject a
106
significant portion of AXIS Specialty's investment income to U.S. income tax. In addition, while the Bermuda Treaty clearly applies to premium income, it is uncertain whether the Bermuda Treaty
applies
to other income such as investment income. If AXIS Specialty is considered engaged in the conduct of an insurance business in the United States and is entitled to the benefits of the Bermuda Treaty in
general, but the Bermuda Treaty is interpreted to not apply to investment income, a significant portion of AXIS Specialty's investment income could be subject to U.S. income tax.
Under
the current income tax treaty between the United Kingdom and the United States (the "U.K. Treaty"), a U.K. company is entitled to the benefits of the U.K. Treaty if it is managed
and controlled in the United Kingdom. We believe that AXIS UK and AXIS UK Holdings should be characterized as managed and controlled in the United Kingdom, and thus should be entitled to the benefits
of the U.K. Treaty. As a result, AXIS UK and AXIS UK Holdings should be subject to U.S. federal income tax on their income found to be effectively connected with a U.S. trade or business only if such
income is attributable to the conduct of a trade or business carried on through a permanent establishment in the United States. AXIS UK and AXIS UK Holdings has conducted and intends to conduct their
activities in a manner so that they should not have permanent establishments in the United States, although we cannot be certain that we will achieve this result.
The
United States and the United Kingdom have signed a new income tax treaty which is not yet in force (the "New U.K. Treaty"). As with the current U.K. Treaty, under the provisions of
the New U.K. Treaty, AXIS UK and AXIS UK Holdings, if entitled to the benefits of the New U.K. Treaty, will not be subject to U.S. federal income tax on any income found to be effectively connected
with a U.S. trade or business unless that trade or business is conducted through a permanent establishment in the United States. AXIS UK and AXIS UK Holdings will generally be entitled to the benefits
of the New U.K. Treaty, if among other reasons, (i) during at least half of the days during the relevant taxable period, at least 50% of AXIS UK's and AXIS UK Holding's stock is beneficially
owned, directly or indirectly, by citizens or residents of the United States and the United Kingdom, and less than 50% of AXIS UK's and AXIS UK Holding's gross income for the relevant taxable period
is paid or accrued, directly or indirectly, to persons who are not U.S. or U.K. residents in the form of payments that are deductible for purposes of U.K. taxation, (ii) with respect to
specific items of income, profit or gain derived from the United States, if such income, profit or gain is considered to be derived in connection with, or incidental to, AXIS UK's and AXIS UK
Holding's business conducted in the United Kingdom or (iii) at least 50% of the aggregate vote and value of their shares is owned directly or indirectly by five or fewer companies the principal
class of shares of which is listed and regularly traded on a recognized stock exchange. Although, we cannot be certain that AXIS UK and AXIS UK Holdings will be eligible for treaty benefits under the
New U.K. Treaty because of factual and legal uncertainties regarding (i) the residency and citizenship of AXIS Holdings' shareholders, (ii) the percentage of AXIS Holdings shares traded
on the New York Stock Exchange, (iii) the interpretation of what constitutes income incidental to or connected with a trade or business in the UK, and (iv) whether the New U.K. Treaty
will be ratified in its current form, we will endeavor to so qualify. The New U.K. Treaty will enter into force upon the exchange of instruments of ratification and will apply with respect to U.S.
federal income taxes for taxable periods beginning on or after the first day of January next following the date on which the New U.K. Treaty enters into force.
Under
the income tax treaty between Ireland and the United States (the "Irish Treaty"), AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe if entitled to the benefits of the Irish
Treaty will not be subject to U.S. federal income tax on any income determined to be effectively connected with a U.S. trade or business unless that trade or business is conducted through a permanent
establishment in the U.S. Each of AXIS Ireland Holdings, AXIS Re, and/or AXIS Specialty Europe will generally be entitled to the benefits of the Irish Treaty with respect to their effectively
connected income, if among
other reasons, (i) at least 50% of the shares of AXIS Holdings, measured by both vote and value, are owned by Irish citizens or U.S. citizens or residents and less than 50% of its gross
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income for the relevant taxable period is paid or accrued directly or indirectly to persons who are not U.S. or Irish residents in the form of payments that are deductible for Irish income tax
purposes or (ii) each of AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe, respectively, are considered as engaged in the active conduct of a trade or business in Ireland and their
effectively connected income is connected with or incidental to that trade or business. Although we cannot be certain that AXIS Ireland Holdings, AXIS Re and AXIS Specialty Europe will be eligible for
Irish Treaty benefits because of factual and legal uncertainties regarding (i) the residency and citizenship of AXIS Holdings' shareholders, and (ii) the interpretation of what
constitutes (x) an active trade or business in Ireland and (y) income incidental or connected thereto, we will endeavor to so qualify. AXIS Ireland Holdings, AXIS Re and AXIS Specialty
Europe have conducted and intend to conduct their activities in a manner so that each of them should not have permanent establishments in the United States, although we cannot be certain that we will
achieve this result.
Foreign
corporations not engaged in a trade or business in the United States are nonetheless subject to U.S. income tax imposed by withholding on certain "fixed or determinable annual or
periodic gains, profits and income" derived from sources within the United States (such as dividends and certain interest on investments), subject to exemption under the Code or reduction by
applicable treaties. Generally under the current U.K. Treaty the withholding rate on dividends is reduced to 15% and on interest is reduced to 0% and under the Irish Treaty the withholding rate on
dividends is reduced to 15% and on interest is reduced to 0%.
The
United States also imposes an excise tax on insurance and reinsurance premiums paid to foreign insurers or reinsurers with respect to risks located in the United States. The rates of
tax applicable to premiums paid to AXIS Specialty are 4% for casualty insurance premiums and 1% for reinsurance premiums. The excise tax does not apply to premiums paid to AXIS Re and AXIS Specialty
Europe provided that they are entitled to the benefits of the Irish Treaty and the business for which the premiums are paid is not ceded to a reinsurer not entitled to a similar treaty based excise
tax exemption.
AXIS
Services and AXIS U.S. Holdings are Delaware corporations, AXIS Reinsurance is a New York corporation, AXIS Insurance is a Connecticut corporation and AXIS Indemnity is an Illinois
corporation, as such each will be subject to taxation in the United States at regular corporate rates. Additionally, dividends paid by these companies to AXIS Barbados would be subject to a 30% U.S.
withholding tax, subject to reduction under the income tax treaty between Barbados and the United States to 5%.
Personal Holding Companies.
AXIS Holdings and/or any of its subsidiaries could be subject to U.S. tax on a portion of its
income if any of them are considered to be a personal holding company ("PHC") for U.S. federal income tax purposes. A corporation generally will be classified as a PHC for U.S. federal income tax
purposes in a given taxable year if (i) at any time during the last half of such taxable year, five or fewer individuals (without regard to their citizenship or residency) own or are deemed to
own (pursuant to certain constructive ownership rules) more than 50% of the stock of the corporation by value and (ii) at least 60% of the corporation's gross income, as determined for U.S.
federal income tax purposes, for such taxable year consists of "PHC income." PHC income includes, among other things, dividends, interest, royalties, annuities and, under certain circumstances, rents.
Under these constructive ownership rules, among other things, a partner will be treated as owning (i) stock owned by his partners and (ii) a proportionate amount of the stock owned by
the partnership. Also, stock treated as owned by such partner proportionally through such partnership will be treated as owned by the partner for purposes of reapplying the constructive ownership
rules. Additionally, certain entities (such as tax-exempt organizations and pension funds) will be treated as individuals. The PHC rules contain an exception for foreign corporations that
are classified as Foreign Personal Holding Companies (as discussed below).
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If
AXIS Holdings or any subsidiary were a PHC in a given taxable year, such corporation would be subject to PHC tax (at the highest marginal rate on ordinary income applicable to
individuals) on its "undistributed PHC income" (which, in the case of its foreign subsidiaries, would exclude PHC income that is from non-U.S. sources, except to the extent that such
income is effectively connected with a trade or business in the U.S.). Thus, the PHC income of AXIS Holdings and its foreign subsidiaries would not include underwriting income or investment income
derived from non-U.S. sources and should not include dividends received by AXIS Holdings from its foreign subsidiaries (as long as such foreign subsidiaries are not engaged in the trade or
business in the U.S.)
We
believe based upon information made available to us regarding our existing shareholder base and upon the advice of LeBoeuf, Lamb, Greene & MacRae, L.L.P. that neither AXIS
Holdings nor any of its subsidiaries should be considered a PHC for U.S. federal income tax purposes immediately following the offering. Additionally, we intend to manage our business to minimize the
possibility that we will meet the 60% income threshold.
We
cannot be certain, however, that AXIS Holdings and its subsidiaries will not become PHCs following the offering or in the future because of factors including legal and factual
uncertainties regarding the application of the constructive ownership rules, the makeup of AXIS Holdings' shareholder base, the gross income of AXIS Holdings or any of its subsidiaries and other
circumstances that could change the application of the PHC rules to AXIS Holdings and its subsidiaries. In addition, if AXIS Holdings or any of its subsidiaries were to become PHCs we cannot be
certain that the amount of PHC income will be immaterial.
Taxation of Shareholders
Bermuda Taxation
Currently, there is no Bermuda withholding or other tax payable on principal, interests or dividends paid to the holders of the common shares.
United States Taxation
The following summary sets forth the material United States federal income tax considerations related to the purchase, ownership and disposition of common shares.
Unless otherwise stated, this summary deals only with shareholders that are U.S. Persons (as defined below) who purchase their common shares in this offering and who hold their common shares as
capital assets within the meaning of section 1221 of the Code. The following discussion is only a discussion of the material U.S. federal income tax matters as described herein and does not
purport to address all of the U.S. federal income tax consequences that may be relevant to a particular shareholder in light of such shareholder's specific circumstances. For example, if a partnership
holds our common shares, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the
common shares, you should consult your tax advisors. In addition, the following summary does not address the U.S. federal income tax consequences that may be relevant to special classes of
shareholders, such as financial institutions, insurance companies, regulated investment companies, real estate investment trusts, financial asset securitization investment trusts, dealers or traders
in securities, tax exempt organizations, expatriates, persons who are considered with respect to any of us as "United States shareholders" for purposes of the CFC rules of the Code (generally, a U.S.
Person, as defined below, who owns or is deemed to own 10% or more of the total combined voting power of all classes of AXIS Holdings or the stock of any of our subsidiaries entitled to vote
(
i.e.
, 10% U.S. Shareholders)), or persons who hold the common shares as part of a hedging or conversion transaction or as part of a
short-sale or straddle, who may be subject to special rules or treatment under the Code. This discussion is based upon the Code, the regulations promulgated thereunder and any relevant
administrative rulings or pronouncements or judicial decisions, all as in
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effect on the date hereof and as currently interpreted, and does not take into account possible changes in such tax laws or interpretations thereof, which may apply retroactively. This discussion
does not include any description of the tax laws of any state or local governments within the United States.
For
purposes of this discussion, the term "U.S. Person" means: (i) a citizen or resident of the United States, (ii) a partnership or corporation, or entity treated as a
corporation, created or organized in or under the laws of the United States, or any political subdivision thereof, (iii) an estate the income of which is subject to U.S. federal income taxation
regardless of its source, (iv) a trust if either (x) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S.
Persons have the authority to control all substantial decisions of such trust or (y) the trust has a valid election in effect to be treated as a U.S. Person for U.S. federal income tax purposes
or (v) any other person or entity that is treated for U.S. federal income tax purposes as if it were one of the foregoing.
Taxation of Dividends.
Subject to the discussions below relating to the potential application of the controlled foreign
corporation ("CFC"), related person insurance income ("RPII"), foreign personal holding company ("FPHC") and passive foreign investment company ("PFIC") rules, cash distributions, if any, made with
respect to the common shares will constitute dividends for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits of AXIS Holdings (as computed using
U.S. tax principles). Such dividends will not be eligible for the dividends received deduction. To the extent such distributions exceed AXIS Holdings' earnings and profits, they will be treated first
as a return of the shareholder's basis in the common shares to the extent thereof, and then as gain from the sale of a capital asset.
Classification of AXIS Holdings, or Its Foreign Subsidiaries as Controlled Foreign Corporations.
Each "10% U.S. Shareholder"
(as defined below) of a foreign corporation that is a CFC for an uninterrupted period of 30 days or more during a taxable year, and who owns shares in the CFC, directly or indirectly through
foreign entities, on the last day of the CFC's taxable year, must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC's "subpart F income," even if the
subpart F income is not distributed. A foreign corporation is considered a CFC if "10% U.S. Shareholders" own (directly, indirectly through foreign entities or by attribution by application of the
constructive ownership rules of section 958(b) of the Code (
i.e.,
"constructively")) more than 50% of the total combined voting power of all
classes of voting stock of such foreign corporation, or more than 50% of the total value of all stock of such corporation. For purposes of taking into account insurance income, a CFC also includes a
foreign insurance company in which more than 25% of the total combined voting power of all classes of stock (or more than 25% of the total value of the stock) is owned by 10% U.S. Shareholders, on any
day during the taxable year of such corporation, if the gross amount of premiums or other consideration for the reinsurance or the issuing of insurance or annuity contracts exceeds 75% of the gross
amount of all premiums or other consideration in respect of all risks. A 10% U.S. Shareholder is a U.S. Person who owns (directly, indirectly through foreign entity or constructively) at least 10% of
the total combined voting power of all classes of stock entitled to vote of the foreign corporation. We believe, based on the advice of LeBoeuf, Lamb, Greene & MacRae, L.L.P., that because of the
anticipated dispersion of our share ownership, provisions in our organizational documents that limit voting power and other factors no U.S. Person who owns shares of AXIS Holdings directly or
indirectly through one or more foreign entities should be treated as owning (directly, indirectly through foreign entities, or constructively), 10% or more of the total voting power of all classes of
shares of AXIS Holdings or any of its foreign subsidiaries (these provisions are described in "Description of Share Capital"). It is possible, however, that the IRS could challenge the effectiveness
of these provisions and that a court could sustain such a challenge.
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The RPII Provisions.
The following discussion generally is applicable only if the RPII of any of the Foreign Insurance
Subsidiaries (i.e., AXIS Specialty, AXIS Re and AXIS Specialty Europe), determined on a gross basis, is 20% or more of such Foreign Insurance Subsidiary's gross insurance income for the taxable year
and the 20% Ownership Exception (as defined below) is not met. The following discussion generally would not apply for any fiscal year in which such Foreign Insurance Subsidiary's RPII falls below the
20% threshold. Although we cannot be certain, AXIS Holdings believes that the gross RPII of each Foreign Insurance Subsidiary as a percentage of its gross insurance income will be below the 20%
threshold for the foreseeable future. Additionally, as AXIS Holdings is not licensed as an
insurance company we do not anticipate that AXIS Holdings will have insurance income, including RPII.
RPII
is any "insurance income" (as defined below) attributable to policies of insurance or reinsurance with respect to which the person (directly or indirectly) insured is a "RPII
shareholder" (as defined below) or a "related person" (as defined below) to such RPII shareholder. In general, and subject to certain limitations, "insurance income" is income (including premium and
investment income) attributable to the issuing of any insurance or reinsurance contract which would be taxed under the portions of the Code relating to insurance companies if the income were the
income of a domestic insurance company. For purposes of inclusion of the RPII of any Foreign Insurance Subsidiary in the income of RPII shareholders, unless an exception applies, the term "RPII
shareholder" includes any U.S. Person who owns (directly or indirectly through foreign entities) any amount (rather than stock possessing 10% or more of the total combined voting power) of AXIS
Holdings' shares. Generally, the term "related person" for this purpose means someone who controls or is controlled by the RPII shareholder or someone who is controlled by the same person or persons
which control the RPII shareholder. Control is measured by either more than 50% in value or more than 50% in voting power of stock applying certain constructive ownership principles. A corporation's
pension plan is ordinarily not a "related person" with respect to the corporation unless the pension plan owns, directly or indirectly through the application of certain constructive ownership rules,
more than 50% measured by vote or value, of the stock of the corporation. The Foreign Insurance Subsidiaries will be treated as RPII CFCs if RPII shareholders are treated as owning (directly or
indirectly through foreign entities) 25% or more of the shares of AXIS Holdings by vote or value.
RPII Exceptions.    The special RPII rules do not apply if (i) direct and indirect insureds and persons related to such
insureds, whether or not U.S. Persons, are treated as owning (directly or indirectly through foreign entities) less than 20% of the voting power and less than 20% of the value of the stock of AXIS
Holdings (the "20% Ownership Exception"), (ii) RPII, determined on a gross basis, is less than 20% of each of the Foreign Insurance Subsidiary's gross insurance income for the taxable year (the
"20% Gross Income Exception), (iii) the Foreign Insurance Subsidiaries elect to be taxed on their RPII as if the RPII were effectively connected with the conduct of a U.S. trade or business,
and to waive all treaty benefits with respect to RPII and meet certain other requirements or (iv) the Foreign Insurance Subsidiaries elect to be treated as U.S. corporations and waive all
treaty benefits and meet certain other requirements. Where none of these exceptions applies, each U.S. Person owning or treated as owning any shares in AXIS Holdings (and therefore, indirectly, in the
Foreign Insurance Subsidiaries) on the last day of AXIS Holdings' taxable year will be required to include in its gross income for U.S. federal income tax purposes its share of the RPII for the
portion of the taxable year during which any Foreign Insurance Subsidiary was a CFC under the RPII provisions, determined as if all such RPII were distributed proportionately only to such U.S. Persons
at that date, but limited by each such U.S. Person's share of such Foreign Insurance Subsidiary's current-year earnings and profits as reduced by the U.S. Person's share, if any, of
certain prior-year deficits in earnings and profits. The Foreign Insurance Subsidiaries intend to operate in a manner that is intended to ensure that each qualifies for the 20% Gross
Income Exception. Although we believe that the RPII of any of the Foreign Insurance Subsidiaries has not in the recent past equaled or exceeded 20% of any such
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company's gross insurance income, and do not expect it to do so in the foreseeable future, it is possible that we will not be successful in qualifying under this exception.
Computation of RPII.    In order to determine how much RPII any Foreign Insurance Subsidiary has earned in each taxable year,
the Foreign Insurance Subsidiaries may obtain and rely upon information from their insureds and reinsureds to determine whether any of the insureds, reinsureds or persons related thereto own (directly
or indirectly through foreign entities) shares of AXIS Holdings and are U.S. Persons. AXIS Holdings may not be able to determine whether any of the underlying direct or indirect insureds to which the
Foreign Insurance Subsidiaries provide insurance or reinsurance are shareholders or related persons to such shareholders. Consequently, AXIS Holdings may not be able to determine accurately the gross
amount of RPII earned by each Foreign Insurance Subsidiary in a given taxable year. For any year in which any Foreign Insurance Subsidiary's gross RPII is 20% or more of such Foreign Insurance
Subsidiary's gross insurance income for the year, AXIS Holdings may also seek information from its shareholders as to whether beneficial owners of common shares at the end of the year are U.S. Persons
so that the RPII may be determined and apportioned among such persons; to the extent AXIS Holdings is unable to determine whether a beneficial owner of common shares is a U.S. Person, AXIS Holdings
may assume that such owner is not a U.S. Person, thereby increasing the per share RPII amount for all known RPII shareholders.
If,
as expected, RPII is less than 20% of gross insurance income, RPII shareholders will not be required to include RPII in their taxable income. The amount of RPII includable in the
income of a RPII shareholder is based upon the net RPII income for the year after deducting related expenses such as losses, loss reserves and operating expenses.
Apportionment of RPII to U.S. Holders.    Every RPII shareholder who owns common shares on the last day of any fiscal year of
AXIS Holdings in which any Foreign Insurance Subsidiary's gross insurance income constituting RPII for that year equals or exceeds 20% of such Foreign Insurance Subsidiary's gross insurance income
should expect that for such year it will be required to include in gross income its share of such Foreign Insurance Subsidiary's RPII for the portion of the taxable year during which such Foreign
Insurance Subsidiary was a CFC under the RPII provisions, whether or not distributed, even though it may not have owned the shares throughout such period. A RPII shareholder who owns common shares
during such taxable year but not on the last day of the taxable year is not required to include in gross income any part of such Foreign Insurance Subsidiary's RPII.
Basis Adjustments.    A RPII shareholder's tax basis in its common shares will be increased by the amount of any RPII that the
shareholder includes in income. The RPII shareholder may exclude from income the amount of any distributions by AXIS Holdings out of previously taxed RPII income. The RPII shareholder's tax basis in
its common shares will be reduced by the amount of such distributions that are excluded from income.
Uncertainty as to Application of RPII.    The RPII provisions have never been interpreted by the courts or the Treasury
Department in final regulations, and regulations interpreting the RPII provisions of the Code exist only in proposed form. It is not certain whether these regulations will be adopted in their proposed
form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any interpretation or application of RPII by the IRS, the courts or otherwise, might
have retroactive effect. These provisions include the grant of authority to the Treasury Department to prescribe "such regulations as may be necessary to carry out the purpose of this subsection
including... regulations preventing the avoidance of this subsection through cross insurance arrangements or
otherwise." Accordingly, the meaning of the RPII provisions and the application thereof to the Foreign Insurance Subsidiaries is uncertain. In addition, we cannot be certain that the amount of RPII or
the amounts of the RPII inclusions, if any, will not be subject to adjustment based
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upon subsequent IRS examination. Prospective investors considering an investment in common shares should consult his tax advisor as to the effects of these uncertainties.
Tax-Exempt Shareholders.
Tax-exempt entities will be required to treat certain subpart F insurance
income, including RPII, that is includible in income by the tax-exempt entity as unrelated business taxable income. Prospective investors that are tax exempt entities are urged to consult
their tax advisors as to the potential impact of the unrelated business taxable income provisions of the Code. A tax-exempt organization that is treated as a 10% U.S. Shareholder or a RPII
Shareholder also must file IRS Form 5471 in the circumstances described above.
Dispositions of Common Shares.
Subject to the discussions below relating to the potential application of the Code
section 1248, PFIC and FPHC rules, holders of common shares generally should recognize capital gain or loss for U.S. federal income tax purposes on the sale, exchange or other disposition of
common shares in the same manner as on the sale, exchange or other disposition of any other shares held as capital assets. If the holding period for these common shares exceeds one year, any gain will
be subject to tax at a current maximum marginal tax rate of 20% for individuals and 35% for corporations. Moreover, gain, if any, generally will be a U.S. source gain and generally will constitute
"passive income" for foreign tax credit limitation purposes.
Code
section 1248 provides that if a U.S. Person sells or exchanges stock in a foreign corporation and such person owned, directly, indirectly through certain foreign entities or
constructively, 10% or more of the voting power of the corporation at any time during the five-year period ending on the date of disposition when the corporation was a CFC, any gain from
the sale or exchange of the shares will be treated as ordinary income to the extent of the CFC's earnings and profits (determined under U.S. federal income tax principles) during the period that the
shareholder held the shares and while the corporation was a CFC (with certain adjustments). We believe that because of the anticipated dispersion of our share ownership, provisions in our
organizational documents that limit voting power and other factors that no U.S. shareholder of AXIS Holdings should be treated as owning (directly, indirectly through foreign entities or
constructively) 10% of more of the total voting power of AXIS Holdings; to the extent this is the case this application of Code Section 1248 under the regular CFC rules should not apply to
dispositions of our common shares. It is possible, however, that the IRS could challenge the effectiveness of these provisions and that a court could sustain such a challenge. A 10% U.S. Shareholder
may in certain circumstances be required to report a disposition of shares of a CFC by attaching IRS Form 5471 to the U.S. federal income tax or information return that it would normally file
for the taxable year in which the disposition occurs. In the event this is determined necessary, AXIS Holdings will provide a complete IRS Form 5471 with the relevant information necessary to
complete the Form. Code section 1248 also applies to the sale or exchange of shares in a foreign corporation if the foreign corporation would be treated as a CFC for RPII purposes regardless of
whether the shareholder is a 10% U.S. Shareholder or whether RPII constitutes 20% or more of the corporation's gross insurance income or the 20% Ownership Exception applies. Existing proposed
regulations do not address whether Code section 1248 would apply if a foreign corporation is not a CFC but the foreign corporation has a subsidiary that is a CFC and that would be taxed as an
insurance company if it were
a domestic corporation. We believe, however, that this application of Code section 1248 under the RPII rules should not apply to dispositions of common shares because AXIS Holdings will not be
directly engaged in the insurance business. We cannot be certain, however, that the IRS will not interpret the proposed regulations in a contrary manner or that the Treasury Department will not amend
the proposed regulations to provide that these rules will apply to dispositions of common shares. Prospective investors should consult their tax advisors regarding the effects of these rules on a
disposition of common shares.
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Passive Foreign Investment Companies.
In general, a foreign corporation will be a PFIC during a given year if (i) 75%
or more of its gross income constitutes "passive income" or (ii) 50% or more of its assets produce passive income.
If
AXIS Holdings were characterized as a PFIC during a given year, U.S. Persons holding common shares would be subject to a penalty tax at the time of the sale at a gain of, or receipt
of an "excess distribution" with respect to, their shares, unless such persons made a "qualified electing fund election" or "mark-to-market" election. It is uncertain that AXIS
Holdings would be able to provide its shareholders with the information necessary for a U.S. Person to make these elections. In general, a shareholder receives an "excess distribution" if the amount
of the distribution is more than 125% of the average distribution with respect to the shares during the three preceding taxable years (or shorter period during which the taxpayer held the shares). In
general, the penalty tax is equivalent to an interest charge on taxes that are deemed due during the period the shareholder owned the shares, computed by assuming that the excess distribution or gain
(in the case of a sale) with respect to the shares was taken in equal portion at the highest applicable tax rate on ordinary income throughout the shareholder's period of ownership. The interest
charge is equal to the applicable rate imposed on underpayments of U.S. federal income tax for such period.
For
the above purposes, passive income generally includes interest, dividends, annuities and other investment income. The PFIC rules provide that income "derived in the active conduct of
an insurance business by a corporation which is predominantly engaged in an insurance business... is not treated as passive income." The PFIC provisions also contain a look-through rule
under which a foreign corporation shall be treated as if it "received directly its proportionate share of the income..." and as if it "held its proportionate share of the assets..." of any other
corporation in which it owns at least 25% of the value of the stock.
This
exception is intended to ensure that income derived by a bona fide insurance company is not treated as passive income, except to the extent such income is attributable to financial
reserves in excess of the reasonable needs of the insurance business. We expect for purposes of the PFIC rules, that each of AXIS Specialty, AXIS Re, AXIS Specialty Europe, AXIS Reinsurance, AXIS
Insurance, and AXIS Indemnity (the "Insurance Subsidiaries") will be predominantly engaged in an insurance business and is unlikely to have financial reserves in excess of the reasonable needs of its
insurance business. Accordingly, none of the income or assets of the Insurance Subsidiaries should be treated as passive. Additionally, we expect that AXIS Ireland Holdings, AXIS UK, AXIS UK Holdings
and AXIS
Barbados should not meet the 75% test or the 50% test because they should have sufficient non-passive income and assets either directly or through the operation of the
look-through rule and thus should not be treated as PFICs. Finally, we expect that the passive income and assets (other than the stock of any indirect AXIS Holdings subsidiary) of any
other AXIS Holding subsidiary will be deminimis with respect to the overall income and assets of AXIS Holdings. Also under the look-through rule, AXIS Holdings should be deemed to own its
proportionate share of the assets and to have received its proportionate share of the income of its direct and indirect subsidiaries for purposes of the 75% test and the 50% test. As a result, we
believe based on the opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., that AXIS Holdings should not be treated as a PFIC. We cannot be certain, however, as there are currently no regulations
regarding the application of the PFIC provisions to an insurance company and new regulations or pronouncements interpreting or clarifying these rules may be forthcoming, that the IRS will not
challenge this position and that a court will not sustain such challenge. Prospective investors should consult their tax advisor as to the effects of the PFIC rules.
Foreign Personal Holding Companies.
A foreign corporation will be classified as an FPHC for U.S. federal income tax purposes
if (i) at any time during the taxable year at issue, five or fewer individuals who are U.S. citizens or residents own or are deemed to own (pursuant to certain constructive ownership rules)
more than 50% of all classes of the corporation's stock measured by voting power or
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value and (ii) at least 60% of its gross income for the year is "FPHC income." Under these constructive ownership rules, among other things, a partner will be treated as owning
(i) stock owned by his partners and (ii) a proportionate amount of the stock owned by the partnership. Also, stock treated as owned by such partner proportionally through such
partnership will be treated as owned by the partner for purposes of reapplying the constructive ownership rules. If AXIS Holdings or any of its foreign subsidiaries were to become FPHCs, a portion of
the "undistributed foreign personal holding company income" (as defined for U.S. federal income tax purposes) of each such FPHC would be imputed to all of AXIS Holdings' shareholders who are U.S.
Persons. Such income would be taxable as a dividend, even if no cash dividend were actually paid. In such event, subsequent cash distributions will first be treated as a tax-free return of
any previously taxed and undistributed amounts. In addition, in such case, upon the death of any U.S. individual owning common shares, such individual's heirs or estate would not be entitled to a
"step-up" in the basis of the common shares which might otherwise be available under U.S. federal income tax laws. Moreover, each shareholder who owns, directly or indirectly, 10% or more
of the value of an FPHC is required to file IRS Form 5471. We believe based upon information made available to us and LeBoeuf, Lamb, Greene & MacRae, L.L.P. regarding our existing shareholder
base and upon the advice of LeBoeuf, Lamb, Greene & MacRae, L.L.P. that neither AXIS Holdings nor any of its foreign subsidiaries should be considered an FPHC immediately following the offering
Additionally, we intend to manage our business to minimize the possibility that we will meet the 60% income threshold. We cannot be certain, however, that AXIS Holdings and/or any of its foreign
subsidiaries will not be considered an FPHC, because of factors including legal and factual uncertainties regarding the application of the constructive ownership rules, the makeup of AXIS Holdings'
shareholder base, the gross income of AXIS Holdings and/or any of its foreign subsidiaries and other circumstances that could change the application of the FPHC rules to AXIS Holdings and its foreign
subsidiaries. In addition, if AXIS Holdings or any of its foreign subsidiaries were to become an FPHC we cannot be certain that the amount of FPHC income will be immaterial.
Foreign tax credit.
Because it is anticipated that U.S. Persons will own a majority of our shares, only a portion of the
current income inclusions, if any, under the CFC, RPII and PFIC rules and of dividends paid by us (including any gain from the sale of common shares that is treated as a dividend under
section 1248 of the Code) will be treated as foreign source income for purposes of computing a shareholder's U.S. foreign tax credit limitations. We will consider providing shareholders with
information regarding the portion of such amounts constituting foreign source income to the extent such information is reasonably available. It is also likely that substantially all of the "subpart F
income," RPII and dividends that are foreign source income will constitute either "passive" or "financial services" income for foreign tax credit limitation purposes. Thus, it may not be possible for
most shareholders to utilize excess foreign tax credits to reduce U.S. tax on such income.
Information Reporting and Backup Withholding.
Under certain circumstances, U.S. Persons owning stock in a foreign corporation
are required to file IRS Form 5471 with their U.S. federal income tax returns. Generally, information reporting on IRS Form 5471 is required by (i) a person who is treated as a
RPII shareholder, (ii) a 10% U.S. Shareholder of a foreign corporation that is a CFC for an uninterrupted period of 30 days or more during any tax year of the foreign corporation, and
who owned the stock on the last day of that year and (iii) under certain circumstances, a U.S. Person who acquires stock in a foreign corporation, and as a result thereof owns 10% or more of
the voting power or value of such foreign corporation, whether or not such foreign corporation is a CFC. For any taxable year in which AXIS Holdings determines that gross RPII constitutes 20% or more
of any of the Foreign Insurance Subsidiary's gross insurance income and the 20% Ownership Exception does not apply, AXIS Holdings will provide to all U.S. Persons registered as shareholders of its
ordinary shares a completed IRS Form 5471 or the relevant information necessary to complete the form. Failure to file IRS Form 5471 may result in penalties.
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Information
returns may be filed with the IRS in connection with distributions on the common shares and the proceeds from a sale or other disposition of the common shares unless the
holder of the common shares establishes an exemption from the information reporting rules. A holder of common shares that does not establish such an exemption may be subject to U.S. backup withholding
tax on these payments if the holder is not a corporation or non-U.S. Person or fails to provide its taxpayer identification number or otherwise comply with the backup withholding rules.
The amount of any backup withholding from a payment to a U.S. Person will be allowed as a credit against the U.S. Person's U.S. federal income tax liability and may entitle the U.S. Person to a
refund, provided that the required information is furnished to the IRS.
Proposed U.S. Tax Legislation.
Legislation has been introduced in the U.S. Congress intended to eliminate certain perceived
tax advantages of companies (including insurance companies) that have legal domiciles outside the United States but have certain U.S. connections. While there is no currently pending legislative
proposal which, if enacted, would have a material adverse effect on us, or our shareholders, it is possible that broader-based legislative proposals could emerge in the future that could have an
adverse impact on us, or our shareholders.
Additionally,
the U.S. federal income tax laws and interpretations regarding whether a company is engaged in a trade or business within the United States, or is a passive foreign
investment company or whether U.S. Persons would be required to include in their gross income the "subpart F income" or
the related party insurance income of a controlled foreign corporation are subject to change, possibly on a retroactive basis. There are currently no regulations regarding the application of the
passive foreign investment company rules to insurance companies and the regulations regarding related party insurance income are still in proposed form. New regulations or pronouncements interpreting
or clarifying such rules may be forthcoming. We cannot be certain if, when or in what form such regulations or pronouncements may be provided and whether such guidance will have a retroactive effect.
President
Bush has proposed legislation which would exempt dividends paid by U.S. corporations (or foreign corporations to the extent subject to U.S. income tax) to U.S. shareholders.
Dividends paid by AXIS Holdings would generally not be exempt under this proposed legislation. As a result, if this legislation were adopted in the form proposed holders of our shares would incur
higher taxes on the dividends we may pay than would be the case with comparable dividends from U.S. corporations.
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DESCRIPTION OF SHARE CAPITAL
The following summary of our share capital is qualified in its entirety by the provisions of our memorandum of association and bye-laws, the
shareholders agreement among substantially all of our existing shareholders and the warrants outstanding on our common shares, copies of which will be filed as exhibits to the registration statement
of which this prospectus is a part. As of December 31, 2002, there were 171 record holders of our common shares. In this section, "we," "us" and "our" refer to AXIS Holdings and not any of its
subsidiaries.
General
We are authorized to issue up to an aggregate of 100,000,000 common shares, par value U.S. $0.10 per share, of which 17,271,065 common shares were outstanding as
of December 31, 2002. Immediately after the completion of this offering,                  common shares
(                  common shares if the underwriters exercise their
over-allotment option in full) will be outstanding. Except as described below, our common shares will have no preemptive rights or other rights to subscribe for additional common shares,
no rights of redemption, conversion or exchange and no sinking fund rights. In the event of liquidation, dissolution or winding-up, the holders of our common shares are entitled to share
equally in our assets, if any remain after the payment of all our debts and liabilities and the liquidation preference of any outstanding preferred shares. Under certain circumstances, AXIS Holdings
has the right to purchase all or a portion of the shares held by a shareholder. See "—Acquisition of Common Shares by Us" below. All of the common shares issued in connection with the
offering will be, when issued, fully paid and nonassessable. Holders of our common shares are entitled to receive dividends as may be lawfully declared from time to time by our board of directors.
Voting Rights
In general, and except as provided below, shareholders have one vote for each AXIS Holdings common share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However, pursuant to a mechanism specified in our bye-laws the voting rights exercisable by a shareholder may be limited.
In any situation in which the "controlled shares" (as defined below) of a U.S. Person or the common shares held by a Direct Foreign Shareholder Group (as defined below) would constitute 9.5% or more
of the votes conferred by the issued common shares, the voting rights exercisable by a shareholder with respect to such shares shall be limited so that no U.S. Person or
Direct Foreign Shareholder Group is deemed to hold 9.5% or more of the voting power conferred by our common shares. The votes that could be cast by a shareholder but for these restrictions will be
allocated to the other shareholders pro rata based on the voting power held by such shareholders, provided that no allocation of any such voting rights may cause a U.S. Person or Direct Foreign
Shareholder Group to exceed the 9.5% limitation as a result of such allocation. In addition, our board of directors may limit a shareholder's voting rights where it deems it necessary to do so to
avoid adverse tax, legal or regulatory consequences. "Controlled shares" includes, among other things, all common shares that a U.S. Person owns directly, indirectly or constructively (within the
meaning of Section 958 of the Code). A "Direct Foreign Shareholder Group" includes a shareholder or group of commonly controlled shareholders that are not U.S Persons.
We
also have the authority under our bye-laws to request information from any shareholder for the purpose of determining whether a shareholder's voting rights are to be
reallocated pursuant to the bye-laws. If a shareholder fails to respond to our request for information or submits incomplete or inaccurate information in response to a request by us, we
may, in our sole discretion, eliminate the shareholder's voting rights.
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Restrictions on Transfer of Common Shares or Warrants
Our board of directors may decline to register a transfer of any common shares under certain circumstances, including if they have reason to believe that any
non-de minimis adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders may occur as a result of such transfer.
The
restrictions on transfer and voting restrictions described above may have the effect of delaying, deferring or preventing a change in control of AXIS Holdings.
Acquisition of Common Shares by Us
Under our bye-laws and subject to Bermuda law, if our board of directors determines that any shareholder's ownership of common shares may result in
non-de minimis adverse tax, legal or regulatory consequences to us, any of our subsidiaries or any of our shareholders, we have the option, but not the obligation, to require such
shareholder to sell to us or to a third party to whom we assign the repurchase right the minimum number of common shares that is necessary to avoid or cure any such adverse consequences at a price
determined in the good faith discretion of the board of directors to represent the shares' fair market value.
Issuance of Shares
Subject to our bye-laws and Bermuda law, our board of directors has the power to issue any of our unissued shares as it determines, including the
issuance of any shares or class of shares with preferred, deferred or other special rights.
Shareholders Agreement
General.
We have entered into a shareholders agreement with substantially all of our existing shareholders. The shareholders
agreement, together with our bye-laws, define the rights and obligations of existing shareholders party to the agreement with respect to the transfer of our common shares, our corporate
governance and related matters. Certain provisions of our shareholders agreement, which we have not described, will terminate upon consummation of the offering. The shareholders agreement may be
amended only with our consent and the consent of the holders of 75% of the aggregate number of shares outstanding held by the parties to the shareholders agreement at the time. Amendments and
modifications which adversely affect a shareholder party to the agreement in a manner different than any other shareholder party to the agreement may only be effected with the consent of such
shareholder.
Tag-Along Rights.
Pursuant to the terms of our bye-laws and shareholders agreement, generally if any
existing shareholder (or group of existing shareholders) proposes to transfer 20% or more of our outstanding shares (in value or in voting power), then the other shareholders party to the shareholders
agreement have a right (i) to notice of the terms and conditions of the transfer, and (ii) to participate proportionally in the transfer.
Registration Rights.
Any shareholder who beneficially owned more than 1,000,000 shares on December 31, 2002 has the
right to request registration for a public offering of all or a portion of its shares at any time following the earlier of 180 days after the effective date of this registration statement and
the expiration of the period during which the managing underwriters for this offering prohibit us from otherwise publicly distributing our shares. We will use commercially reasonable efforts to effect
the registration of such shares, but will not be required to file a registration if (i) the aggregate proceeds expected to be received from such offering are less than $25,000,000, or
(ii) we have already effected one such requested registration in the previous four-month period. If the shares are to be sold in an underwritten offering and the managing
underwriters notifies us that, in their view,
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the number of shares proposed to be included in the offering exceeds the largest number of shares that can be sold without an adverse effect on such offering, then the number of shares requested to
be registered will be allocated, pro rata, among the requesting shareholders.
Furthermore,
the holders of registration rights are limited in the total number of registration requests they can make, other than with respect to registrations pursuant to the filing of
a Form S-3 with the SEC.
In
addition, if we propose to register any common shares or any options, warrants or other rights to acquire, or securities convertible into or exchangeable for, our common shares under
the Securities Act (other than shares to be issued pursuant to an employee benefits plan or similar plan or in connection with a merger, acquisition or similar transaction) for our own account or for
the account of a selling shareholder, we will offer shareholders who are party to the shareholders agreement the opportunity, subject to certain conditions, to include their common shares in such
registration statement. Pursuant to the shareholders agreement, we shall use all reasonable efforts to effect the sale of any such shares. If the shares are to be sold in an underwritten offering and
the managing underwriters notifies us that, in their view, the number of shares proposed to be included in the offering exceeds the largest number of shares that can be sold without an adverse effect
on such offering, then the number of shares requested to be registered will be allocated, pro rata, among the requesting shareholders, provided that if the Company initiates registration to sell its
own shares, such shares will have priority in registration.
The
shareholders agreement provides that in the case of the offering pursuant to this prospectus, neither we nor the existing shareholders party to the shareholders agreement will effect
any public sale or distribution of any of our shares, or other securities convertible into or exchangeable for shares, during the period beginning 14 days prior to the effective date of the
registration statement and ending 180 days after such effective date. In the case of any other offering that occurs before the two year anniversary of this offering, neither we, nor the
existing shareholders party to the shareholders agreement will effect any public sale or distribution of any of our shares, or other securities convertible into or exchangeable for shares, during the
period beginning 14 days prior to the effective date of the applicable registration statement and ending 90 days after such effective date. In both cases, we may agree with the lead
managing underwriters to permit public distribution before the end of the specified time period.
Indemnification.
Pursuant to the shareholders agreement, we agreed to hold harmless each shareholder selling shares in a
registered offering from damages relating to a material omission or misstatement in the registration statement or prospectus, provided such omission or misstatement was not made based on information
furnished to the company by the shareholder. We also agreed to hold the underwriters harmless. Each participating shareholder agrees to hold harmless us, our officers, directors, agents and the
underwriters to the same extent.
Bye-laws
In addition to the provisions of the bye-laws described above under "—Voting Rights," the following provisions are a summary of some of
the other important provisions of our bye-laws.
Our Board of Directors and Corporate Action.
Our bye-laws provide that our board of directors shall consist of
between 11 and 13 members, or such number as determined by the shareholders. The initial board of directors consists of 12 persons. Currently our bye-laws provide that the initial board of
directors shall hold office for three years, at which time the board of directors will be divided into three approximately equal classes. In addition, each director will serve a three year term, with
termination staggered according to class. However, we intend to submit proposed amended and restated bye-laws to a vote of our existing shareholders pursuant to which the board of
directors will be staggered prior to consummation of this offering. The proposed classification is noted in the table
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listing our board of directors under "Management—Directors." Shareholders may remove a director at a special meeting, provided that notice of the intention to hold a special meeting for
the purpose of removing a director is provided to that director at least two weeks before that meeting. Vacancies on the board of directors can be filled by the board of directors if the vacancy
occurs as a result of death, disability, disqualification or resignation of a director, or from an increase in the size of the board of directors.
Generally,
the affirmative votes of a majority of the votes cast at any meeting at which quorum is present is required to authorize a resolution put to vote at a meeting of the board of
directors. Corporate action may also be taken by a unanimous written resolution of the board of directors without a meeting. Unless otherwise determined by the board of directors, a quorum shall be a
majority of directors in office from time to time, provided that in no event shall it be less than two directors.
Shareholder Action.
At any general meeting, two or more persons present in person and representing, in person or by proxy,
more than 50% of the aggregate voting power of our shares throughout the meeting shall constitute a quorum for the transaction of business. In general, anything that may be done by resolution of our
shareholders in a general meeting may, without a meeting, be taken by a resolution in writing signed by all of the shareholders entitled to attend such meeting and vote on the resolution. In general,
any questions proposed for the consideration of the shareholders at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the
bye-laws.
Voting of Subsidiary Shares.
If we are required or entitled to vote at a general meeting of any of AXIS Specialty, AXIS
Specialty Holdings Ireland Limited, AXIS Specialty UK Limited, AXIS Specialty UK Holdings Limited or AXIS Specialty (Barbados) Limited (together, the "First Tier Subsidiaries") on a resolution
proposed by such First Tier Subsidiary, our directors shall refer the subject matter of the vote to our shareholders and seek direction from such shareholders as to how they should vote on the
resolution proposed by the First Tier Subsidiary. Substantially similar provisions are contained in the bye-laws (or equivalent governing documents) of the First Tier Subsidiaries (with
the exception of AXIS Barbados).
Amendment.
The bye-laws may only be amended by a resolution adopted by the board of directors and by resolution
of the shareholders.
Warrants
Certain warrants to purchase common shares in AXIS Holdings are currently outstanding (the "Warrants"). The terms of the Warrants provide that they are
exercisable at any time prior to November 20, 2011 for a certain percentage of our issued and outstanding shares. Taken as a whole, the Warrants are exercisable for a number of common shares
equal to 12% of our common shares outstanding on a fully diluted basis. Upon the occurrence of an "Initial Public Offering" or an "Acquisition Event" (in each case, as defined in the Warrants) with
respect to us, the amount of shares for which the Warrants are exercisable would be fixed based upon the number of our common shares outstanding on a fully diluted basis as of the close of business on
the day immediately prior to the consummation of such Initial Public Offering or Acquisition Event. Prior to consummation of the offering to which this prospectus relates, we expect to enter into
amendments to the Warrants (the "Warrant Amendments") that will fix the amount of shares for which the Warrants are exercisable based upon the number of our common shares outstanding on a fully
diluted basis as of the close of business on the day immediately prior to the consummation of the offering. The exercise price and number of common shares issuable upon exercise of each warrant will
be subject to adjustment in respect of events that may have a dilutive effect on its underlying share ownership interest.
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The
following table shows the number of warrants to purchase common shares outstanding as of December 31, 2002:
Holder
Warrants to Acquire
Common Shares(1)
Percentage of
Diluted Shares
Exercise
Price
Expiration
Trident II, L.P.
2,100,579
10.367
%
$
100.00
11/20/2011
Marsh & McLennan Capital Professionals Fund, L.P.
58,760
.290
100.00
11/20/2011
Marsh & McLennan Employees' Securities Company, L.P.
59,166
.292
100.00
11/20/2011
Dragon Holdings Settlement
133,122
.657
100.00
11/20/2011
JR Charman Children's Settlement
44,374
.219
100.00
11/20/2011
Robert J. Newhouse, Jr.
8,915
.044
100.00
11/20/2011
Robert J. Newhouse, III
6,687
.033
100.00
11/20/2011
Stephan F. Newhouse
15,602
.077
100.00
11/20/2011
Paul B. Newhouse
4,458
.022
100.00
11/20/2011
Total
2,431,663
12.001
%
(1)
Based
upon outstanding shares of 17,271,065 plus 2,431,663 common shares issuable upon exercise of outstanding warrants plus 559,439 common shares issuable upon the exercise of
outstanding options, as of December 31, 2002. This number is to be fixed immediately prior to offering as described above on a diluted basis.
If
the warrants were immediately exercised for cash, Trident II, L.P., Marsh & McLennan Capital Professionals Fund, L.P., Marsh & McLennan Employees' Securities Company,
L.P., Dragon Holdings
Settlement, JR Charman Children's Settlement, Robert J. Newhouse, Jr., Robert J. Newhouse, III, Stephan F. Newhouse and Paul B. Newhouse would own 22.7%, 0.6%, 0.6%, 1.7%, 0.6%, 0.2%, 0.1%, 0.2%, and
0.0%, respectively (        %,        %,        %,        %,
        %,        %,        %, and        %, respectively, following the offering
assuming the underwriters' over-allotment option is not exercised and the warrant holders make no additional purchases), of our common shares, assuming the exercise of all outstanding
warrants.
Anti-Takeover Provisions and Insurance Regulations Concerning Change of Control
Some of the provisions of our bye-laws as well as certain insurance regulations concerning change of control could delay or prevent a change of
control of the Company that a shareholder might consider favorable. See "Risk Factors—Risks Related to Our Common Shares and This Offering."
Differences in Corporate Law
You should be aware that the Companies Act, which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and
their shareholders. In order to highlight these differences, set forth below is a summary of certain significant provisions of the Companies Act (including modifications adopted pursuant to our
bye-laws) applicable to us which differ in certain respects from provisions of the State of Delaware corporate law. Because the following statements are summaries, they do not address all
aspects of Bermuda law that may be relevant to us and our shareholders.
Duties of Directors.
Under Bermuda law, at common law, members of a board of directors owe a fiduciary duty to the company to
act in good faith in their dealings with or on behalf of the company
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and exercise their powers and fulfill the duties of their office honestly. This duty has the following essential elements:
•
a
duty to act in good faith in the best interests of the company;
•
a
duty not to make a personal profit from opportunities that arise from the office of director;
•
a
duty to avoid conflicts of interest; and
•
a
duty to exercise powers for the purpose for which such powers were intended.
The
Companies Act imposes a duty on directors and officers of a Bermuda company:
•
to
act honestly and in good faith with a view to the best interests of the company; and
•
to
exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
In
addition, the Companies Act imposes various duties on officers of a company with respect to certain matters of management and administration of the company.
The
Companies Act provides that in any proceedings for negligence, default, breach of duty or breach of trust against any officer, if it appears to a court that such officer is or may be
liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that, having regard to all the circumstances of the case, including
those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from any
liability on such terms as the court may think fit. This provision has been interpreted to apply only to actions brought by or on behalf of the company against such officers. Our bye-laws,
however, provide that shareholders waive all claims or rights of action that they might have, individually or in the right of AXIS Holdings, against any director or officer of us for any act or
failure to act in the performance of such director's or officer's duties, except this waiver does not extend to any claims or rights of action that arise out of fraud or dishonesty on the part of such
director or officer.
Under
Delaware law, the business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with a
fiduciary duty of care to protect the interests of the corporation and a fiduciary duty of loyalty to act in the best interests of its stockholders.
The
duty of care requires that directors act in an informed and deliberative manner and inform themselves, prior to making a business decision, of all material information reasonably
available to them. The duty of care also requires that directors exercise care in overseeing and investigating the conduct of corporate employees. The duty of loyalty may be summarized as the duty to
act in good faith, not out of self-interest, and in a manner which the director reasonably believes to be in the best interests of the stockholders.
A
party challenging the propriety of a decision of a board of directors bears the burden of rebutting the applicability of the presumptions afforded to directors by the "business
judgment rule." If the presumption is not rebutted, the business judgment rule attaches to protect the directors and their decisions, and their business judgments will not be second guessed. Where,
however, the presumption is rebutted, the directors bear the burden of demonstrating the entire fairness of the relevant transaction. Notwithstanding the foregoing, Delaware courts subject directors'
conduct to enhanced scrutiny in respect of defensive actions taken in response to a threat to corporate control and approval of a transaction resulting in a sale of control of the corporation.
Interested Directors.
Under Bermuda law and our bye-laws, a transaction entered into by us, in which a director
has an interest, will not be voidable by us, and such director will not be liable to us for
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any profit realized pursuant to such transaction, provided the nature of the interest is disclosed at the first opportunity at a meeting of directors, or in writing to the directors. In addition, our
bye-laws allow a director to be taken into account in determining whether a quorum is present and to vote on a transaction in which the director has an interest following a declaration of
the interest pursuant to the Companies Act, provided that the director is not disqualified from doing so by the chairman of the meeting. Under Delaware law, such transaction would not be voidable if
(i) the material facts as to such interested director's relationship or interests are disclosed or are known to the board of directors and the board of directors in good faith authorizes the
transaction by the affirmative vote of a majority of the disinterested directors, (ii) such material facts are disclosed or are known to the shareholders entitled to vote on such transaction
and the transaction is specifically approved in good faith by vote of the majority of shares entitled to vote thereon or (iii) the transaction is fair as to the corporation as of the time it is
authorized, approved or ratified. Under Delaware law, such interested director could be held liable for a transaction in which such director derived an improper personal benefit.
Dividends.
Bermuda law does not permit payment of dividends or distributions of contributed surplus by a company if there are
reasonable grounds for believing that the company, after the payment is made, would be unable to pay its liabilities as they become due, or the realizable value of the company's assets would be less,
as a result of the payment, than the aggregate of its liabilities and its issued share capital and share premium accounts. The excess of the consideration paid on issue of shares over the aggregate
par value of such shares must (except in certain limited circumstances) be credited to a share premium account. Share premium may be distributed in certain limited circumstances, for example to pay up
unissued shares which may be distributed to shareholders in proportion to their holdings, but is otherwise subject to limitation. In addition, our ability to pay dividends is subject to Bermuda
insurance laws and regulatory constraints. See "Dividend Policy" and "Regulation."
Under
Delaware law, subject to any restrictions contained in the company's certificate of incorporation, a company may pay dividends out of surplus or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. Delaware law also provides that dividends may not be paid out of net profits at any time when capital
is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.
Amalgamations, Mergers and Similar Arrangements.
We may acquire the business of another Bermuda exempted company or a company
incorporated outside Bermuda when conducting such business would benefit the Company and would be conducive to attaining our objectives contained within our memorandum of association. We may, with the
approval of at least 75% of the votes cast at a general meeting of our shareholders at which a quorum is present, amalgamate with another Bermuda company or with a body incorporated outside Bermuda.
In the case of an amalgamation, a shareholder may apply to a Bermuda court for a proper valuation of such shareholder's shares if such shareholder is not satisfied that fair market value has been paid
for such shares. The court ordinarily would not disapprove the transaction on that ground absent evidence of fraud or bad faith.
Under
Delaware law, with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the board of directors and a
majority of the outstanding shares entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions may, under certain circumstances,
be entitled to appraisal rights pursuant to which such shareholder may receive payment in the amount of the fair market value of the shares held by such shareholder (as determined by a court) in lieu
of the consideration such shareholder would otherwise receive in the transaction.
Takeovers.
Bermuda law provides that where an offer is made for shares of a company and, within four months of the offer, the
holders of not less than 90% of the shares which are the subject of
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the offer accept, the offeror may by notice require the non-tendering shareholders to transfer their shares on the terms of the offer. Dissenting shareholders may apply to the court
within one month of the notice objecting to the transfer. The burden is on the dissenting shareholders to show that the court should exercise its discretion to enjoin the required transfer, which the
court will be unlikely to do unless there is evidence of fraud or bad faith or collusion between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing
out minority shareholders. Delaware law provides that a parent corporation, by resolution of its board of directors and without any shareholder vote, may merge with any subsidiary of which it owns at
least 90% of each class of capital stock. Upon any such merger, dissenting stockholders of the subsidiary would have appraisal rights.
Certain Transactions with Significant Shareholders.
As a Bermuda company, we may enter into certain business transactions
with our significant shareholders, including asset sales, in which a significant shareholder receives, or could receive, a financial benefit that is greater than that received, or to be received, by
other shareholders with prior approval from our board of directors but without obtaining prior approval from our shareholders. Amalgamations require the approval of the board of directors and, except
in the case of amalgamations with and between wholly-owned subsidiaries, a resolution of shareholders approved by a majority of at least 75% of the votes cast. If we were a Delaware corporation, we
would need, subject to certain exceptions, prior approval from shareholders holding at least two-thirds of our outstanding common stock not owned by such interested shareholder to enter
into a business combination (which, for this purpose, includes asset sales of greater than 10% of our assets that would otherwise be considered transactions in the ordinary course of business) with an
interested shareholder for a period of three years from the time the person became an interested shareholder, unless we opted out of the relevant Delaware statute.
Shareholders' Suits.
The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders under
legislation or judicial precedent in many U.S. jurisdictions. Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law precedent, which would permit a shareholder to commence an action in our name to remedy a wrong done to us where the act complained of is
alleged to be beyond our corporate power or is illegal or would result in the violation of our memorandum of association or bye-laws. Furthermore, consideration would be given by the court
to acts that are alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of our shareholders than actually approved it. The
winning party in such an action generally would be able to recover a portion of attorneys' fees incurred in connection with such action. Our bye-laws provide that shareholders waive all
claims or rights of action that they might have, individually or in the right of AXIS Holdings, against any director or officer for any action or failure to act in the performance of such director's
or officer's duties, except such waiver shall not extend to claims or rights of action that arise out of any fraud or dishonesty of such director or officer. Class actions and derivative actions
generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions,
the court generally has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action.
Indemnification of Directors and Officers.
Under Bermuda law and our bye-laws, we may indemnify our directors,
officers or any other person appointed to a committee of the board of directors (and their respective heirs, executors or administrators) to the full extent permitted by law against all actions,
costs, charges, liabilities, loss, damage or expense incurred or suffered by such person by reason of any act done, concurred in or omitted in the conduct of our business or in the discharge of
his/her duties; provided that such indemnification shall not extend to any matter involving any fraud or dishonesty (as determined in a final judgment or decree not subject to appeal) on the part of
such director, officer or other person. Under Delaware law, a corporation may indemnify a director
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or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or
proceeding by reason of such position if (i) such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation
and (ii) with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe his conduct was unlawful.
Inspection of Corporate Records.
Members of the general public have the right to inspect our public documents available at
the office of the Registrar of Companies in Bermuda and our registered office in Bermuda, which will include our memorandum of association (including its objects and powers) and any alteration to our
memorandum of association and documents relating to any increase or reduction of authorized capital. Our shareholders have the additional right to inspect our bye-laws, minutes of general
meetings and financial statements, which must be presented to the annual general meeting of shareholders. The register of our shareholders is also open to inspection by shareholders without charge,
and to members of the public for a fee. We are required to maintain our share register in Bermuda but may establish a branch register outside of Bermuda. We are required to keep at our registered
office a register of our directors and officers which is open for inspection by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to
inspect or obtain copies of any other corporate records. Delaware law permits any shareholder to inspect or obtain copies of a corporation's shareholder list and its other books and records for any
purpose reasonably related to such person's interest as a shareholder.
Shareholder Proposals.
Under Bermuda law, the Companies Act provides that shareholders may, as set forth below and at their
own expense (unless a company otherwise resolves), require a company to give notice of any resolution that the shareholders can properly propose at the next annual general meeting and/or to circulate
a statement prepared by the requesting shareholders in respect of any matter referred to in a proposed resolution or any business to be conducted at a general meeting. The number of shareholders
necessary for such a requisition is either that number of shareholders representing at least 5% of the total voting rights of all shareholders having a right to vote at the meeting to which the
requisition relates or not less than 100 shareholders. Delaware law does not include a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in
which business may be brought before a meeting.
Calling of Special Shareholders Meetings.
Under our bye-laws, a special general meeting may be called by our
President or by our Chairman or by any two directors or by any director and our Secretary or by the board of directors. Under Bermuda law, a special meeting may also be called by the shareholders when
requisitioned by the holders of at least 10% of the paid up voting share capital of AXIS Holdings as provided by the Companies Act. Delaware law permits the board of directors or any person who is
authorized under a corporation's certificate of incorporation or bye-laws to call a special meeting of shareholders.
Amendment of Memorandum of Association.
Bermuda law provides that the memorandum of association of a company may be amended
by a resolution passed at a general meeting of shareholders of which due notice has been given. An amendment to the memorandum of association that alters a company's business objects may require
approval of the Bermuda Minister of Finance, who may grant or withhold approval at his or her discretion.
Under
Bermuda law, the holders of an aggregate of not less than 20% in par value of a company's issued share capital have the right to apply to the Bermuda courts for an annulment of any
amendment of the memorandum of association adopted by shareholders at any general meeting, other than an amendment which alters or reduces a company's share capital as provided in the Companies Act.
Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda court. An application for an annulment of an amendment of the
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memorandum of association must be made within 21 days after the date on which the resolution altering the company's memorandum of association is passed and may be made on behalf of persons
entitled to make the application by one or more of their designees as such holders may appoint in writing for such purpose. No application may be made by the shareholders voting in favor of the
amendment.
Under
Delaware law, amendment of the certificate of incorporation, which is the equivalent of a memorandum of association, of a company must be made by a resolution of the board of
directors setting forth the amendment, declaring its advisability, and either calling a special meeting of the shareholders entitled to vote or directing that the amendment proposed be considered at
the next annual meeting of the shareholders. Delaware law requires that, unless a different percentage is provided for in the certificate of incorporation, a majority of the outstanding shares
entitled to vote thereon is required to approve the amendment of the certificate of incorporation at the shareholders meeting. If the amendment would alter the number of authorized shares or otherwise
adversely affect the rights or preference of any class of a company's stock, Delaware law provides that the holders of the outstanding shares of such affected class should be entitled to vote as a
class upon the proposed amendment, regardless of whether such holders are entitled to vote by the certificate of incorporation. However, the number of authorized shares of any class may be increased
or decreased, to the extent not falling below the number of shares then outstanding, by the affirmative vote of the holders of a majority of the stock entitled to vote, if so provided in the company's
certificate of incorporation or any amendment that created such class or was adopted prior to the issuance of such class or that was authorized by the affirmative vote of the holders of a majority of
such class of stock.
Amendment of Bye-laws.
Consistent with the Companies Act, AXIS Holdings' bye-laws provide that the
bye-laws may only be rescinded, altered or amended, upon approval by a resolution of our board of directors and by a resolution of our shareholders.
Under
Delaware law, holders of a majority of the voting power of a corporation and, if so provided in the certificate of incorporation, the directors of the corporation, have the power
to adopt, amend and repeal the bylaws of a corporation.
Listing
We intend to apply to have our common shares approved for listing on the New York Stock Exchange under the trading symbol "AXS".
Transfer Agent and Registrar
The transfer agent and registrar for the common shares will be The Bank of New York.
126
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering we will have a total of                  common shares
outstanding (                  shares if the underwriters exercise the
over-allotment option in full). All of the                  shares sold in the offering will be freely tradable without restriction or further registration
under the Securities Act by
persons other than our "affiliates." Under the Securities Act, an "affiliate" of a company is a person that directly or indirectly controls, is controlled by or is under common control with that
company.
The
remaining                  common shares outstanding will be "restricted securities" within the meaning of Rule 144 under the Securities Act and may not be
sold in the absence
of registration under the Securities Act unless an exemption from registration is available, including the exemptions contained in Rule 144.
AXIS
Holdings, its directors and executive officers, all of its warrant holders and certain of its current shareholders have agreed with the underwriters not to, directly or indirectly,
dispose of or hedge any of their common shares or securities convertible into or exchangeable for common shares, whether owned currently or later acquired, for a period of 180 days from the
date of this prospectus, without the prior written consent of Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc., subject to certain exceptions. Immediately following this
offering, shareholders subject to the lock-up agreement will own                  common shares and warrants exercisable
for                  common shares, representing approximately
        % of the then outstanding common shares, or approximately        % if the underwriters' over-allotment option is exercised in full.
We
may, however, grant options to purchase common shares under our existing Long-Term Equity Compensation Plan and issue common shares upon the exercise of warrants for
common shares or the exercise of outstanding options as long as the holder of such common shares agrees in writing to be bound by the obligations and restrictions of the lock-up agreement.
In
general, under Rule 144, a person (or persons whose shares are aggregated), including any person who may be deemed our affiliate, is entitled to sell within any three-month
period, a number of restricted securities that does not exceed the greater of 1% of the then outstanding common shares and the average weekly trading volume in the
over-the-counter market during the four calendar weeks preceding each such sale, provided that at least one year has elapsed since such shares were acquired from us or any
affiliate of ours and certain manner of sale, notice requirements and requirements as to
availability of current public information about us are satisfied. Any person who is deemed to be our affiliate must comply with the provisions of Rule 144 (other than the one-year
holding period requirement) in order to sell common shares which are not restricted securities (such as shares acquired by affiliates either in the offering or through purchases in the open market
following the offering). In addition, under Rule 144(k), a person who is not our affiliate, and who has not been our affiliate at any time during the 90 days preceding any sale, is
entitled to sell such shares without regard to the foregoing limitations, provided that at least two years have elapsed since the shares were acquired from us or any affiliate of ours.
As
of December 31, 2002, we had outstanding warrants currently exercisable for 2,431,663 common shares and have granted options to purchase a total of 559,439 common shares.
Following
the consummation of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register common shares
issued or reserved for issuance under the Long-Term Equity Compensation Plan and the Directors Deferred Compensation Plan. Any such Form S-8 registration statement will
automatically become effective upon filing. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting
restrictions with us or the lock-up restrictions described above. We expect that the registration statement on Form S-8 will cover                  shares
and options.
127
Pursuant
to the shareholders agreement, our initial investors have certain demand registration rights which will continue to apply to all of such shares after the offering. At any time
beginning 180 days after the effective date of the registration statement relating to the offering, subject to exceptions, such shareholders may request that we file a registration
statement under the Securities Act covering their shares, subject to certain minimum offering size requirements. Upon receipt of any such request, we generally will be required to use commercially
reasonable efforts to effect such registration. Each such shareholder may only demand a certain number of registrations. In addition, we are not required to effect any registration requested by any
such shareholders if we have effected any registration (other than on Form S-3 or any successor form relating to secondary offerings) within four months prior to such request. We
are generally obligated to bear the expenses, other than underwriting fees, discounts and sales commissions, of all such registrations.
Pursuant
to the shareholders agreement, our initial investors also have certain "piggyback" registration rights with respect to our common shares. Accordingly, if we propose to register
any of our securities, either for our own account or for the account of other shareholders, with certain exceptions, we are required to notify such shareholders and to include in such registration all
the common shares requested to be included by them, subject to rejection of such shares under certain circumstances by an underwriter.
No
prediction can be made as to the effect, if any, future sales of shares, or the availability of shares for future sales, will have on the market price of our common shares prevailing
from time to time. The sale of substantial amounts of our common shares in the public market, or the perception that such sales could occur, could harm the prevailing market price of our common
shares.
128
UNDERWRITING
Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. are acting as joint book-running managers of this offering and, together
with Credit Suisse First Boston LLC, J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Dowling and Partners Securities, LLC and Fox-Pitt, Kelton Inc., are
acting as the representatives of the underwriters named below. Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters
have severally agreed to purchase, and we and the selling shareholders have agreed to sell to them, the number of common shares indicated below:
Name
Number of Shares
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Credit Suisse First Boston LLC
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Dowling & Partners Securities, LLC
Fox-Pitt, Kelton Inc.
Total
The
underwriters are offering the common shares subject to their acceptance of the common shares from us and the selling shareholders. The underwriting agreement provides that the
obligations of the several underwriters to pay for and accept delivery of the common shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for all of the common shares offered by this prospectus if any such common shares are taken. However, the underwriters are not
required to take or pay for the common shares covered by the underwriters' over-allotment option described below.
The
underwriters initially propose to offer part of the common shares directly to the public at the public offering price listed on the cover page of this prospectus and part to certain
dealers at a price that represents a concession not in excess of $                  a common share under the public offering price. Any underwriter may allow,
and such dealers may reallow, a concession
not in excess of $                  a common share to other underwriters or to certain dealers. After the initial public offering of the common shares, the
offering price and other selling terms may
from time to time be varied by the representatives of the underwriters.
We
have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate
of                  additional common shares
at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the common shares offered by this prospectus. To the extent the option is exercised, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same percentage of the additional common shares as the number listed next to the underwriter's name in the preceding table bears
to the total number of common shares listed next to the names of all underwriters in the preceding table. If the underwriters' option is exercised in full, the total price to the public would be
$                  assuming an initial public offering price of
$                  per share (the midpoint of the price range set forth on the cover page of this prospectus), the total underwriters'
discounts and commissions paid by us and the selling shareholders would be $                  and
$                  , respectively, and the total proceeds to us and the selling shareholders would be
$                  and $                  , respectively.
129
Our
estimated offering expenses, excluding the underwriting discounts and commissions, are approximately $                  , which includes legal, accounting and
printing costs and various
other fees associated with registration and listing of the common shares.
The
underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by them.
We
intend to apply to list our common shares on the New York Stock Exchange under the symbol "AXS." In connection with the listing of the common shares on the New York Stock Exchange,
the underwriters will undertake to sell round lots of 100 shares or more to a minimum of 2,000 beneficial owners.
Each
of AXIS Holdings, the directors and executive officers of AXIS Holdings, all of its warrantholders and certain other shareholders of AXIS Holdings has agreed that, without the prior
written consent of
Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc., together, on behalf of the underwriters, it will not, during the period ending 180 days after the date of this
prospectus:
•
offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant
to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any common shares or any securities convertible into or exercisable or exchangeable for common shares; or
•
enter
in any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common shares;
whether
any such transaction is to be settled by delivery of common shares or such other securities, in cash or otherwise. The restrictions described in this paragraph do not apply to:
•
the
sale of common shares in this offering to the underwriters;
•
the
grant of options to purchase common shares under our existing Long-Term Equity Compensation Plan and the issuance of common shares upon the
exercise of warrants for common shares outstanding on the date hereof, the exercise of options outstanding on the date hereof or granted pursuant to such plan or the conversion of any outstanding
securities outstanding on the date hereof as long as the holder of such common shares agrees in writing to be bound by the obligations and restrictions of the lock-up agreement;
•
transactions
by any person other than AXIS Holdings relating to common shares or other securities acquired in open market transactions after the completion
of the offering of the common shares; and
•
transfers
by any person other than AXIS Holdings to an affiliate of such person, a family member of such person or a trust created for the benefit of such
person or family member, provided that any transferee agrees to be bound by the transfer restrictions described here and subject to certain other conditions.
In
order to facilitate the offering of the common shares, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common shares.
Specifically, the underwriters may sell more common shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short
position is no greater than the number of common shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing common shares in the open market. In determining the source of common shares to close
out a covered short sale, the underwriters will consider, among other things, the open market price of common shares compared to the price available under the over-allotment option. The
underwriters may
130
also sell common shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing common shares in
the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market after
pricing that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering or to cover any over-allotments, the underwriters may bid
for, and purchase, common shares in the open market to stabilize the price of the common shares. The underwriting syndicate may also reclaim selling concessions allowed to an underwriter or a dealer
for distributing the common shares in the offering, if the syndicate repurchases previously distributed common shares to cover syndicate short positions or to stabilize the price of the common shares.
These activities may raise or maintain the market price of the common shares. The underwriters are not required to engage in these activities, and may end any of these activities at any time.
We,
the selling shareholders and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
Relationship with Underwriters
From time to time certain of the underwriters and their affiliates have provided us, and continue to provide us, with commercial, investment banking and other
financial services for which they have received and continue to receive customary fees and commissions. See "Certain Relationships and Related Transactions". In addition, affiliates of Morgan
Stanley & Co. Incorporated (including certain accounts over which such affiliates exercise discretion), Credit Suisse First Boston LLC, J.P. Morgan Securities Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and Dowling & Partners Securities, LLC own 2.7%, 10.1%, 10.1%, 2.5%, and 0.1%, respectively, of our outstanding shares, warrants and exercisable options as
of December 31, 2002. In addition, an executive officer of Morgan Stanley & Co. Incorporated is a relative of one of our executive officers and directors. In addition, Mr. Andrew H.
Rush, one of our directors, is a managing director of Credit Suisse First Boston in the Private Equity Group and a member of the Investment Committee of DLJ Merchant Banking Partners III, L.P., both
of which are affiliates of Credit Suisse First Boston LLC, and Mr. Jeffrey C. Walker, one of our directors, is the Managing Partner of J.P. Morgan Partners and a member of the Executive
Committee and Vice Chairman of J.P. Morgan Chase & Co., both of which are affiliates of J.P. Morgan Securities Inc. JPMorgan Chase Bank, an affiliate of J.P. Morgan
Securities Inc., also acts as administrative agent and a lender for AXIS Specialty's $400 million revolving credit facility.
Price of the Offering
Prior to this offering, there has been no public market for the common shares. The initial public offering price will be determined by negotiations between us and
the representatives of the
underwriters. Among the factors to be considered in determining the initial public offering price will be the future prospects of our company and our industry in general, premiums, earnings and
certain other financial and operating information of our company in recent periods, and the price-earnings ratios, price-book value ratios, market prices of securities and certain
financial and operating information of companies engaged in activities similar to those of our company. The estimated initial public offering price range set forth on the cover page of this
preliminary prospectus is subject to change as a result of market conditions and other factors.
131
LEGAL MATTERS
Certain matters as to U.S. law in connection with this offering will be passed upon for us by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York. The validity of the issuance of common shares under Bermuda law will be passed upon for us by Conyers Dill & Pearman,
Hamilton, Bermuda. Certain legal matters in connection with this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of AXIS Capital Holdings Limited and its subsidiaries included in this prospectus and the related financial statement
schedules included elsewhere in the registration statement have been audited by Deloitte & Touche, independent auditors, as stated in their reports appearing in this prospectus and elsewhere in
the registration statement, and are included in reliance upon the reports of such firm given upon their authority as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC, a registration statement on Form S-1 under the Securities Act with respect to the common shares offered in this
prospectus. This prospectus, filed as part of the registration statement, does not contain all of the information set forth in the registration statement and its exhibits and schedules, portions of
which have been omitted as permitted by the rules and regulations of the SEC. For further information about us and our common shares, we refer you to the registration statement and to its exhibits and
schedules. Statements in this prospectus about the contents of any contract, agreement or other document are not necessarily complete and, in each instance, we refer you to the copy of such contract,
agreement or document filed as an exhibit to the registration statement, with each such statement being qualified in all respects by reference to the document to which it refers. Anyone may inspect
the registration statement and its exhibits and schedules without charge at the public reference facilities the SEC maintains at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain copies
of all or any part of these materials from the SEC upon the payment of certain fees prescribed by the SEC. You may obtain further information about the operation of the SEC's Public Reference Room by
calling the SEC at 1-800-SEC-0330. You may also inspect these reports and other
information without charge at a web site maintained by the SEC. The address of this site is http://www.sec.gov.
Upon
completion of this offering, we will become subject to the informational requirements of the Securities Exchange Act of 1934 and will be required to file reports, proxy statements
and other information with the SEC. You will be able to inspect and copy these reports, proxy statements and other information at the public reference facilities maintained by the SEC at the address
noted above. You also will be able to obtain copies of this material from the Public Reference Room of the SEC as described above, or inspect them without charge at the SEC's web site. We intend to
furnish our shareholders with annual reports containing consolidated financial statements audited by an independent accounting firm.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES
FEDERAL SECURITIES LAWS AND OTHER MATTERS
AXIS Holdings is organized under the laws of Bermuda. In addition, some of its directors and officers reside outside the United States, and all or a substantial
portion of their assets and its assets are or may be located in jurisdictions outside the United States. Therefore, it may be difficult for investors to effect service of process within the United
States upon its non-U.S. directors and officers or to recover against AXIS Holdings, or its non-U.S. directors and officers on judgments of U.S. courts,
132
including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Further, no claim may be brought in Bermuda against us or our directors and officers in the
first instance for violation of U.S. federal securities laws because these laws have no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court may,
however, impose civil liability on us or our directors and officers if the facts alleged in a complaint constitute or give rise to a cause of action under Bermuda law. However, AXIS Holdings may be
served with process in the United States with respect to actions against it arising out of or in connection with violations of U.S. federal securities laws relating to offers and sales of common
shares made hereby by serving CT Corporation System, its U.S. agent, irrevocably appointed for that purpose.
Further,
we have been advised by Conyers Dill & Pearman that there is no treaty in effect between the United States and Bermuda providing for the enforcement of judgments of U.S.
courts, and there are grounds upon which Bermuda courts may not enforce judgments of U.S. courts. Because judgments of U.S. courts are not automatically enforceable in Bermuda, it may be difficult for
you to recover against us based upon such judgments.
AXIS
Holdings has applied for and expects to obtain consent for the issue and transfer of the common shares to and between non-residents of Bermuda for exchange control
purposes from the BMA as required by the Exchange Control Act 1972 of Bermuda and related regulations, subject to the condition that the common shares shall be listed on the New York Stock Exchange or
any other appointed stock exchange. In addition, AXIS Holdings will deliver a copy of this prospectus to the Registrar of Companies in Bermuda for filing pursuant to the Companies Act. However, the
BMA and Registrar of Companies in Bermuda accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or opinions expressed in this
prospectus.
133
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AXIS CAPITAL HOLDINGS LIMITED
Page No.
Report of Independent Auditors
F-2
Consolidated Balance Sheets as at December 31, 2002 and December 31, 2001
F-3
Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2002 and the period ended December 31, 2001
F-4
Consolidated Statements of Changes in Shareholders' Equity for the year ended December 31, 2002 and the period ended December 31, 2001
F-5
Consolidated Statements of Cash Flows for the year ended December 31, 2002 and the period ended December 31, 2001
F-6
Notes to Consolidated Financial Statements
F-7
F-1
Chartered Accountants
Corner House
Church & Parliament Streets
P.O. Box HM 1556
Hamilton, Bermuda HMFX
Telephone:
(441) 292 1500
Facsimile: (441) 292 0961
Deloitte
& Touche
INDEPENDENT AUDITORS' REPORT
To
the Board of Directors and Shareholders
of AXIS Capital Holdings Limited
We
have audited the accompanying consolidated balance sheets of AXIS Capital Holdings Limited and subsidiaries (the "Company") as of December 31, 2002 and 2001, and the related
consolidated statements of operations and comprehensive income, changes in shareholders' equity and cash flows for the year ended December 31, 2002 and the period from November 8, 2001
(date of incorporation) to December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of AXIS Capital Holdings Limited and subsidiaries as of
December 31, 2002 and 2001, and the results of their operations and their cash flows for the year ended December 31, 2002 and the period from November 8, 2001 to
December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.
February 10,
2003
Deloitte
Touche
Tohmatsu
F-2
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
As at December 31, 2002 and 2001
(Expressed in thousands of U.S. dollars except for share data)
December 31, 2002
December 31, 2001
Assets
Cash and cash equivalents
$
729,296
$
761,670
Investments at fair market value
1,702,990
1,079,686
(Amortized cost 2002: $1,677,506; 2001: $1,080,142)
Accrued interest receivable
16,502
8,466
Insurance and reinsurance premium balances receivable
375,508
23,696
Deferred acquisition costs
77,166
2,215
Prepaid reinsurance premiums
49,673
—
Reinsurance recoverable
1,703
—
Intangible assets
14,079
—
Other assets
19,204
2,040
Total Assets
$
2,986,121
$
1,877,773
Liabilities
Reserve for losses and loss expenses
$
215,934
$
963
Unearned premiums
555,962
24,862
Insurance and reinsurance balances payable
142,696
—
Accounts payable and accrued expenses
24,119
4,132
Net payable for investments purchased
86,377
198,264
Total Liabilities
1,025,088
228,221
Shareholders' Equity
Share capital
(Authorized 100,000,000 common shares, par value $0.10;
issued and outstanding 2002: 17,271,065; 2001: 16,890,336)
1,727
1,689
Additional paid-in capital
1,686,599
1,646,950
Deferred compensation
(20,576
)
(1,311
)
Accumulated other comprehensive gain (loss)
25,484
(456
)
Retained earnings
267,799
2,680
Total Shareholders' Equity
1,961,033
1,649,552
Total Liabilities & Shareholders' Equity
$
2,986,121
$
1,877,773
See
accompanying notes to consolidated financial statements
F-3
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the year ended December 31, 2002 and the period from November 8, 2001 to
December 31, 2001
(Expressed in thousands of U.S. dollars)
Year ended
December 31, 2002
Period ended
December 31, 2001
Revenues
Gross premiums written
$
1,108,003
$
26,746
Premiums ceded
(89,726
)
—
Change in unearned premiums
(481,427
)
(24,862
)
Net premiums earned
536,850
1,884
Net investment income
71,287
4,763
Net realized gains
26,070
394
Other insurance related income (loss)
(639
)
—
Total revenues
633,568
7,041
Expenses
Losses and loss expenses
229,265
963
Acquisition costs
103,703
832
General and administrative expenses
46,521
2,566
Foreign exchange gains
(9,610
)
—
Total expenses
369,879
4,361
Income before income taxes
263,689
2,680
Income tax recovery
1,430
—
Net Income
265,119
2,680
Other comprehensive income
Unrealized gains (losses) arising during the year
25,805
(456
)
Adjustment for re-classification of gains (losses) realized in income
135
—
Comprehensive income
$
291,059
$
2,224
See
accompanying notes to consolidated financial statements
F-4
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended December 31, 2002 and the period from November 8, 2001 to
December 31, 2001
(Expressed in thousands of U.S. dollars)
December 31, 2002
December 31, 2001
Share Capital
Balance at beginning of period
$
1,689
$
—
Issued during period
38
1,689
Balance at end of period
1,727
1,689
Additional paid-in capital
Balance at beginning of period
1,646,950
—
Contributed surplus on shares issued during period, net of costs
39,649
1,581,807
Fair value of issued warrants
—
65,143
Balance at end of period
1,686,599
1,646,950
Deferred Compensation
Balance at beginning of period
(1,311
)
—
Deferred compensation issued during period
(25,480
)
(1,400
)
Amortization of deferred compensation
6,215
89
Balance at end of period
(20,576
)
(1,311
)
Accumulated other comprehensive gain (loss)
Balance at beginning of period
(456
)
—
Change in unrealized gains (losses)
25,940
(456
)
Balance at end of period
25,484
(456
)
Retained earnings
Balance at beginning of period
2,680
—
Net income for period
265,119
2,680
Balance at end of period
267,799
2,680
Total Shareholders' Equity
$
1,961,033
$
1,649,552
See
accompanying notes to consolidated financial statements
F-5
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, 2002 and the period from November 8, 2001 to December 31, 2001
(Expressed in thousands of U.S. dollars)
Year ended
December 31, 2002
Period ended
December 31, 2001
Cash flows provided by operating activities:
Net income
$
265,119
$
2,680
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Net realized gains on sales of investments
(26,070
)
(394
)
Amortization of discounts on fixed maturities
5,665
—
Amortization of deferred compensation
6,215
89
Accrued interest receivable
(8,036
)
(8,466
)
Insurance and reinsurance premium balances receivable
(351,812
)
(23,696
)
Reinsurance recoverable
(1,703
)
—
Deferred acquisition costs
(74,951
)
(2,215
)
Prepaid reinsurance premiums
(49,673
)
—
Other assets
(12,926
)
(2,040
)
Reserve for loss and loss expenses
214,971
963
Unearned premiums
531,100
24,862
Insurance and reinsurance balances payable
142,696
—
Accounts payable and accrued expenses
19,987
4,132
Total adjustments
395,463
(6,765
)
Net cash provided by (used in) operating activities
660,582
(4,085
)
Cash flows provided by (used in) investing activities:
Net cash paid in acquisition of subsidiaries
(40,399
)
—
Purchases of fixed maturities and short-term investments
(7,326,772
)
(1,168,438
)
Sales of fixed maturities and short-term investments
6,664,246
285,554
Net cash used in investing activities
(702,925
)
(882,884
)
Cash flows provided by (used in) financing activities:
Issue of shares, net
9,969
1,648,639
Net cash provided by financing activities
9,969
1,648,639
Increase/(decrease) in cash and cash equivalents
(32,374
)
761,670
Cash and cash equivalents—beginning of period
761,670
—
Cash and cash equivalents—end of period
$
729,296
$
761,670
See
accompanying notes to consolidated financial statements
F-6
AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars except share amounts)
1.    History
AXIS Capital Holdings Limited (the "Company") is a holding company organized under the laws of Bermuda. The Company was incorporated on December 9, 2002.
AXIS Specialty Limited ("AXIS Specialty") and its subsidiaries became wholly owned subsidiaries of the Company on December 31, 2002, pursuant to the Exchange Offer (as defined below). AXIS
Specialty commenced operations on November 20, 2001. The Company through its subsidiaries provides a broad range of insurance and reinsurance products on a worldwide basis.
Pursuant
to an exchange offer consummated on December 31, 2002 (the "Exchange Offer"), the shareholders of AXIS Specialty exchanged their shares for identical shareholdings in the
Company. Following the Exchange Offer, AXIS Specialty distributed its wholly owned subsidiaries to the Company. The Exchange Offer represents a business combination of companies under common control
and has been accounted for at historical cost. All comparative data for 2001 relates to the consolidated financial statements of AXIS Specialty.
AXIS
Specialty Holdings Ireland Limited, a wholly owned subsidiary of the Company, was incorporated in Ireland on January 28, 2002 to act as a holding company for AXIS Specialty
Europe Limited and AXIS Re Limited. AXIS Specialty Europe Limited became licensed as a European insurer in May 2002. AXIS Re Limited also became entitled to carry on reinsurance business from
Ireland in May 2002.
AXIS
Specialty U.S. Holdings Inc. ("AXIS U.S. Holdings"), a wholly owned subsidiary of the Company, was incorporated in Delaware on March 11, 2002. It acts as a holding
company for AXIS Reinsurance Company which is domiciled in New York. AXIS Reinsurance Company is licensed to write insurance and reinsurance in all 50 states in the United States, the District of
Columbia and Puerto Rico. AXIS Specialty Insurance Company, a wholly owned subsidiary of AXIS Reinsurance Company, is domiciled in Connecticut. AXIS Specialty Insurance Company is a surplus
lines-eligible insurer in 38 of the states in the United States.
On
November 14, 2002, the Company announced that AXIS U.S. Holdings had agreed to acquire an Illinois domiciled surplus lines company. Regulatory approval for this acquisition was
received after year end.
2.    Summary Of Significant Accounting Policies
a)    Basis of Presentation
These consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in accordance with accounting
principles generally accepted in the United States ("U.S. GAAP"). All significant inter-company accounts and transactions have been eliminated. The preparation of these consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those
estimates. The major estimates reflected in the Company's consolidated financial statements include, but are not limited to, the reserves for losses and loss expenses and premium estimates for
business written on a line slip or proportional basis. The terms "FAS" and "FASB" used in these notes refer to Statements of Financial Accounting Standards issued by the United States Financial
Accounting Standards Board.
F-7
b)    Investments
The Company's investments are considered to be "available for sale" under the definition included in FAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" and are reported at fair market value. The fair market value of investments is based upon quoted market values. The net
unrealized gain or loss on investments is included as accumulated other comprehensive gain / (loss) in shareholders' equity.
Investments
are reviewed on a regular basis to determine if they have sustained an impairment of value that is considered to be other than temporary. The identification of potentially
impaired investments involves significant management judgment. Any unrealized depreciation in value considered by management to be other than temporary is charged to income in the period that it is
determined.
Purchases
and sales of investments are recorded on a trade date basis. Realized gains or losses on sales of investments are determined based on the specific identification method. Net
investment income includes interest and dividend income together with amortization of market premiums and discounts and is net of investment management, custody and investment accounting fees. For
mortgage-backed securities, and any other holdings for which there is a prepayment risk, prepayment assumptions are evaluated and revised as necessary. Any adjustments required due to the resultant
change in effective yields and maturities are recognized on a prospective basis through yield adjustments.
Cash
and cash equivalents include fixed interest deposits placed with a maturity of under 90 days when purchased.
c)    Premiums and Acquisition Costs
Premiums written are recorded in accordance with the terms of the underlying policies. Reinsurance premiums assumed are estimated based upon information received
from ceding companies and any subsequent differences arising on such estimates are recorded in the period they are determined. Premiums are generally contractually stated except for business written
on a line slip or proportional basis. For these types of contracts the Company will determine the estimated premium to be written as part of the underwriting process based on information received from
the insured parties and intermediaries, the Company's experience with similar coverages and any industry information on the risks that may be available. The Company actively monitors the emergence of
actual premium data on line slip policies and proportional reinsurance contracts and adjusts its estimates of written premiums to reflect reported premiums on a periodic basis as reliable information
becomes available.
Premiums
are earned over the terms of the policies in proportion to the risks to which they relate. Unearned premiums represent the portion of premiums written which is applicable to the
unexpired portion of the policies in force.
Acquisition
costs which vary with and are directly related to the acquisition of policies, primarily fees paid to brokers, commissions and taxes are deferred and amortized over the
period in which the related premiums are earned. Deferred acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income. If such costs are estimated to be unrecoverable, they are expensed.
F-8
d)    Reinsurance
In the normal course of business, the Company seeks to reduce the loss that may arise from events that could cause unfavorable underwriting results by reinsuring
certain levels of risk in various lines of business with other reinsurers. Reinsurance premiums ceded are expensed over the period the reinsurance coverage is provided. Prepaid reinsurance premiums
represent the portion of premiums ceded on the unexpired term of the policies in force. Amounts recoverable from reinsurers are estimated in a manner consistent with the loss reserve associated with
the underlying policy.
e)    Losses and Loss Expenses
Reserves for losses and loss expenses include reserves for unpaid reported losses and loss expenses and for losses incurred but not reported ("IBNR"). The
reserves for unpaid reported losses and loss expenses are established by management based on amounts reported from insureds or ceding companies, and on additional case reserves established on known
events where official notification has not been reported, and represent the estimated ultimate costs of events or conditions that have been reported to or specifically identified by the Company.
The
reserve for losses incurred but not reported has been estimated by management in consultation with independent actuaries. Estimated IBNR is derived using the Bornhuetter-Ferguson
method. This method takes as a starting point an assumed ultimate loss and loss expense ratio and blends in the loss and loss expense ratio implied by the experience to date. For the Company's assumed
ultimate loss and loss expense ratio for the specialty book of business the initial expected loss and loss expense ratios selected are based on benchmarks provided by independent actuaries, derived
from comparable client data, as well as market information. These benchmarks are then adjusted for any rating increases that had been observed in the market. For the Company's assumed ultimate loss
and loss expense ratio for the treaty reinsurance book of business, contract by contract initial expected loss and loss expense ratios were derived during pricing. Applying these loss and loss expense
ratios to our earned premium derives the estimated ultimate costs of the losses; from here paid losses and reported case reserves are deducted to generate the Company's IBNR.
While
management believes that the reserves for unpaid losses and loss expenses are sufficient to pay losses that fall within coverages assumed by the Company, the actual losses and loss
expenses incurred by the Company may be greater or less than the reserve provided. Due to the start up nature of the Company's operations, actual loss experience is limited; this increases the
potential for significant
deviation from currently estimated amounts. The methods of determining such estimates and establishing the resulting reserve are reviewed quarterly and any adjustments are reflected in operations in
the period in which they become known.
f)    Foreign Currency Translation
The functional currency of the Company and its subsidiaries is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are translated
at year end exchange rates, with the resulting foreign exchange gains and losses recognized in the consolidated statements of operations and comprehensive income. Revenues and operating expenses are
translated at average exchange rates during the year.
F-9
g)    Stock Compensation
The Company accounts for stock compensation in accordance with Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees." Compensation expense for stock options and for restricted stock awards granted to employees is recorded over the vesting period using the intrinsic value method. The Company provides
disclosure of the pro forma effect of applying FAS No. 123 "Accounting for Stock Compensation," which requires compensation expense for employee stock options to be measured as the fair market
value of the options at the grant date.
h)    Segment Reporting
The Company reports segment results in accordance with FAS No. 131, "Segment Reporting". Under FAS 131, reportable segments represent an aggregation
of operating segments that meet certain criteria for aggregation specified in FAS 131.
i)    Derivative Instruments
The Company accounts for its derivative instruments using FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". FAS 133
requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value with movements in fair value reflected in earnings.
Derivative Contracts
Certain contracts underwritten by the Company have been determined to meet the definition of a derivative under FAS 133, and are therefore recorded at
their fair value. The fair values of these contracts are modeled on prevailing market conditions and on the terms and the structure of the contract. When data is not readily available from the market
the Company seeks to use data from independent counterparties. The change resulting from a movement in fair value of such contracts is included in the statement of operations and comprehensive income
in other insurance related income.
Investment Related Derivative Instruments
The Company uses investment derivatives to manage duration and currency exposure, for yield enhancement or to obtain exposure to a particular financial market.
None of these derivatives are designated as hedges, and accordingly, financial futures, options, swaps and foreign currency forward contracts are carried at fair value in investments, with the
corresponding realized and unrealized gains and losses included in realized gains and losses in the consolidated statements of operations.
j)    Intangible Assets
In connection with its purchase of two licensed insurance companies domiciled in the United States, the Company acquired numerous state licenses that are
disclosed as intangible assets. In accordance with FAS 142 "Goodwill and Other Intangible Assets", the Company will not amortize the licenses but will re-evaluate, on a yearly
basis, the recoverability of the assets. In addition, the Company will re-evaluate their fair value whenever changes in circumstances warrant.
F-10
k)    Taxation
The Company utilizes the liability method of accounting for income taxes. Under this method, deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance against the deferred tax asset
is provided for if and when the Company believes that a portion of the deferred tax asset may not be realized in the foreseeable future.
l)    New Accounting Pronouncements
On December 31, 2002 the FASB issued FAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." The Company
currently accounts for stock compensation under APB 25. As such, the Company is required to present additional disclosures.
3.    Segment Information
The Company is comprised of two underwriting segments—specialty lines and treaty reinsurance. In addition, there is a corporate segment that includes
the investment and financing operations of the Company. The Company evaluates the performance of each underwriting segment based on underwriting results. Other items of revenue and expenditure are not
evaluated at the segment level. In addition, management does not allocate its assets by segment as it considers the underwriting results of each segment separately from the results of its investment
portfolio.
Certain
business written by the Company has loss experience generally characterized as low frequency and high severity. This may result in volatility in both the Company's and an
individual segment's results and operational cash flows.
Specialty Lines
Specialty lines of business are written on both an insurance and reinsurance basis depending on the underlying needs of the client. Specialty lines written
include: marine and energy, aviation and aerospace, war risk, terrorism, political risk, commercial property risks and various other lines on a worldwide basis. The Company endeavors to aggregate its
catastrophe exposures across both its specialty lines and treaty reinsurance segments.
Treaty Reinsurance
Treaty reinsurance business is the assumption of an ongoing portfolio of insurance risk from primary insurance carriers. This portfolio can be written on either
an excess of loss basis or a pro rata basis and can cover a variety of underlying insurance products including but not limited to: property, worker's compensation, personal accident and life,
professional liability, casualty clash, and marine and aviation. The Company endeavors to manage its exposures to catastrophic events by limiting the amount of its exposure in each geographic zone
worldwide and by event peril and requires that its property and catastrophe contracts provide for aggregate limits and varying attachment points.
F-11
The
following is an analysis of the underwriting results by segment together with a reconciliation of underwriting profit (loss) to income before income taxes:
Year ended December 31, 2002
Specialty Lines
Treaty
Reinsurance
Total
Gross premiums written
$
793,759
$
314,244
$
1,108,003
Net premiums written
704,033
314,244
1,018,277
Gross premiums earned
354,667
222,237
576,904
Net premiums earned
314,613
222,237
536,850
Other insurance related income (loss)
(639
)
—
(639
)
Losses and loss expenses
137,848
91,417
229,265
Acquisition costs
56,683
47,020
103,703
General and administrative expenses
46,521
Underwriting profit
156,722
Net investment income
71,287
Realized gains on investments
26,070
Foreign exchange gain
9,610
Income before income taxes
$
263,689
Loss and loss expense ratio
43.8
%
41.1
%
42.7
%
Acquisition cost ratio
18.0
21.2
19.3
General and administrative expense ratio
8.7
Combined ratio
70.7
%
Period ended December 31, 2001
Specialty Lines
Treaty
Reinsurance
Total
Gross premiums written
$
24,465
$
2,281
$
26,746
Net premiums written
24,465
2,281
26,746
Gross premiums earned
1,713
171
1,884
Net premiums earned
1,713
171
1,884
Other insurance related income
—
—
—
Losses and loss expenses
886
77
963
Acquisition costs
320
512
832
General and administrative expenses
2,566
Underwriting loss
(2,477
)
Net investment income
4,763
Realized gains on investments
394
Income before income taxes
$
2,680
Loss and loss expense ratio
51.7
%
45.0
%
51.1
%
Acquisition cost ratio
18.7
299.4
44.2
General and administrative expense ratio
136.2
Combined ratio
231.5
%
F-12
The
following table shows an analysis of the Company's gross premiums written by geographical location of subsidiary for the year ended December 31, 2002 and the
period ended December 31, 2001:
Year Ended
December 31, 2002
Period Ended
December 31, 2001
Bermuda
$
1,015,057
$
26,746
Ireland
90,192
—
United States
2,784
—
Total
$
1,108,003
$
26,746
4.    Business Combinations
On October 1, 2002, the Company completed, through a subsidiary, the purchase of the Connecticut Specialty Insurance Company, a surplus lines-eligible
carrier in 38 states which was subsequently renamed AXIS Specialty Insurance Company. The Company paid a purchase price of $17.4 million. On November 27, 2002, the Company completed,
through a subsidiary, the purchase of Royal & SunAlliance Personal Insurance Company, which is licensed in all 50 states of the United States, the District of Columbia and Puerto Rico and was
subsequently renamed AXIS Reinsurance Company. The Company paid a purchase price of $23.1 million. The Company purchased these companies as the foundation for commencing its U.S. operations.
These
purchases have been accounted for under the purchase method of accounting. The assets of the two companies (fixed income securities $23.0 million, cash $3.4 million
and licenses $14.1 million) were recorded at their fair values on the date of completion of the acquisitions. The process of determining the fair value of the acquired assets, as required under
purchase accounting, included independent valuations. The purchase prices have been fully allocated against the fair values of the assets; consequently no goodwill was recorded. The companies had no
liabilities at the dates of acquisition.
5.    Investments
Net investment income is derived from the following sources:
Year ended
December 31, 2002
Period ended
December 31, 2001
Fixed maturities and cash equivalents
$
74,996
$
5,089
Investment expenses
(3,709
)
(326
)
Net investment income
$
71,287
$
4,763
F-13
The
following represents an analysis of realized gains (losses) and the change in unrealized gains on investments:
Year ended
December 31, 2002
Period ended
December 31, 2001
Gross realized gains
$
47,003
$
1,469
Gross realized losses
(24,488
)
(1,075
)
Net realized gains on fixed maturities
22,515
394
Net realized and unrealized gains on derivative instruments
3,555
—
Net realized gains on investments
26,070
394
Change in unrealized gains (losses) on fixed maturities
25,940
(456
)
Total net realized gains (losses) and change in unrealized gain (loss) on investments
$
52,010
$
(62
)
All
investments are held as available for sale. The amortized cost and fair market values are as follows:
At December 31, 2002
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market
Value
U.S. government and agency securities
$
426,939
$
7,365
$
(101
)
$
434,203
Non-U.S. government securities
97,949
1,191
(652
)
98,488
Corporate debt securities
295,050
11,184
(482
)
305,752
Mortgage-backed securities
725,161
12,203
(2,753
)
734,611
Asset-backed securities
119,259
2,014
(4,740
)
116,533
States, municipalities and political subdivisions
13,148
255
—
13,403
Total fixed income maturities
$
1,677,506
$
34,212
$
(8,728
)
$
1,702,990
At December 31, 2001
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Market
Value
U.S. government and agency securities
$
478,768
$
890
$
(1,429
)
$
478,229
Non-U.S. government securities
1,324
—
(15
)
1,309
Corporate debt securities
157,287
617
(572
)
157,332
Mortgage-backed securities
403,352
1,058
(1,049
)
403,361
Asset-backed securities
36,205
47
(16
)
36,236
States, municipalities and political subdivisions
3,206
13
—
3,219
Total fixed income maturities
$
1,080,142
$
2,625
$
(3,081
)
$
1,079,686
F-14
The
following table sets forth certain information regarding the credit ratings of the Company's bond portfolio:
December 31, 2002
December 31, 2001
Ratings*
Amortized Cost
Percentage
Amortized Cost
Percentage
AAA
$
1,382,702
82.4
%
$
56,670
5.2
%
AA
31,458
1.9
329,823
30.5
A
146,354
8.7
505,502
46.8
BBB
116,992
7.0
177,946
16.5
BB
—
—
10,201
1.0
Total
$
1,677,506
100.0
%
$
1,080,142
100.0
%
*
Ratings
as assigned by Standard & Poor's Corporation
The
contractual maturities of fixed maturity securities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
December 31, 2002
December 31, 2001
Amortized
Cost
Fair Market
Value
Amortized
Cost
Fair Market
Value
Due in one year or less
$
76,350
$
76,475
$
19,497
$
19,497
Due after one year through five years
479,517
487,549
358,267
358,699
Due after five years through ten years
223,676
232,088
175,316
174,604
Due after ten years
53,543
55,734
87,505
87,289
833,086
851,846
640,585
640,089
Mortgage- and asset-backed securities
844,420
851,144
439,557
439,597
Total fixed maturities
$
1,677,506
$
1,702,990
$
1,080,142
$
1,079,686
At
December 31, 2002, $17.5 million (2001: $nil) of securities were on deposit with various state or government insurance departments in order to comply with relevant
insurance regulations.
F-15
6.    Losses and loss expenses
Unpaid losses and loss expenses are comprised of:
December 31, 2002
December 31, 2001
Reserve for reported losses and loss expenses
$
60,956
$
—
Reserve for losses incurred but not reported
154,978
963
Unpaid losses and loss expenses
$
215,934
$
963
Net
losses and loss expenses incurred comprise:
Year ended
December 31, 2002
Period ended
December 31, 2001
Losses and loss expense payments
$
16,958
$
—
Change in unpaid losses and loss expenses
214,010
963
Reinsurance recoveries
(1,703
)
—
Net losses and loss expenses incurred
$
229,265
$
963
The
following table represents an analysis of paid and unpaid losses and loss expenses and a reconciliation of the beginning and ending unpaid losses and loss expenses for the periods
indicated:
December 31, 2002
December 31, 2001
Unpaid losses and loss expenses at beginning of period
$
963
$
—
Increase in net losses and loss expenses incurred in respect of losses occurring in:
Current year
230,063
963
Prior year
(798
)
—
Total incurred losses and loss expenses
229,265
963
Less net losses and loss expenses paid in respect of losses occurring in:
Current year
16,943
—
Prior year
15
—
Total net paid losses
16,958
—
Change in unrealized foreign exchange loss
961
—
Net unpaid losses and loss expenses at end of period
214,231
963
Reinsurance recoverable
1,703
—
Gross unpaid losses and loss expenses at end of period
$
215,934
$
963
Certain
business written by the Company has loss experience generally characterized as low frequency and high severity in nature. This may result in volatility in the Company's financial
results. Actuarial assumptions used to establish the liability for losses and loss expenses are periodically adjusted to reflect comparisons to actual losses and loss expense development, inflation
and other considerations.
F-16
7.    Reinsurance
The Company's insurance subsidiaries use reinsurance agreements to reduce exposure to risk of loss on certain lines of specialty insurance. These agreements
provide for recovery of a portion of losses and loss reserves from reinsurers. The Company's insurance subsidiaries remain liable to the extent that reinsurers do not meet their obligations under
these agreements, and therefore the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. Provisions are made for amounts considered potentially
uncollectible. The allowance for uncollectible reinsurance recoverable was $nil as at December 31, 2002 (2001: $nil).
Gross
premiums written, ceded and net amounts of premiums written and premiums earned for the year ended December 31, 2002 and the period ended December 31, 2001 are as
follows:
Year ended
December 31, 2002
Period ended
December 31, 2001
Premiums written
Premiums earned
Premiums written
Premiums earned
Gross
$
1,108,003
$
576,904
$
26,746
$
1,884
Ceded
89,726
40,054
—
—
Net
$
1,018,277
$
536,850
$
26,746
$
1,884
8.    Derivative Instruments
The Company writes certain contracts that are classified as derivatives under FAS 133. In addition, the Company may enter into derivative instruments such
as futures, options, interest rate swaps and foreign currency forward contracts in order to manage duration and foreign currency exposure, obtain exposure to a particular financial market or for yield
enhancement. The Company manages the exposure to these instruments based on guidelines established by management. These derivative instruments are carried at fair value with the corresponding changes
in fair value recognized in income in the period that they occur.
a)    Derivative Contracts
During the year ended December 31, 2002, the Company entered into a contract under which it will receive a fixed annual premium for a five year period and
in return it will assume the risk of default on a pre-determined portfolio of financial obligations with a notional value of $350 million. This contract meets the definition of a
derivative contract under FAS 133.
The
Company has recorded this contract at fair value with any changes in the value reflected in other insurance related income in the consolidated statement of operations and
comprehensive income. The
contract is modeled on prevailing market conditions and certain other factors relating to the structure of the contract. When data is not readily available from the market the Company uses data from
independent counterparties. The Company's model takes into account movements on credit spreads and credit qualities. The change in fair value recorded for the year ended December 31, 2002 was
$(0.6) million. As at December 31, 2002, an asset of $37.8 million was included in insurance and reinsurance premiums receivable and a liability in the amount of $47.9 million was
recorded in reinsurance balances payable in respect of this contract.
F-17
b)    Foreign Currency Exposure Management
The Company periodically uses foreign currency forward contracts to minimize the effect of fluctuating foreign currencies and to gain exposure to interest rate
differentials between differing market rates. Forward currency contracts purchased are not specifically identifiable against cash, any single security or any groups of securities and, therefore, do
not qualify and are not designated as a hedge for financial reporting purposes. All realized gains and unrealized gains and losses on foreign currency forward contracts are recognized in the
statements of operations and comprehensive income. During the year ended December 31, 2002, the Company recorded $3.6 million of realized and unrealized gains on investment derivative
instruments. As at December 31, 2002, the net contractual amount of foreign currency forward contracts was $0.41 million (2001: $nil), with a negligible fair market value (2001: $nil).
9.    Commitments and contingencies
a)    Concentrations of credit risk
The investment portfolio is managed by external advisors in accordance with prudent standards of diversification. Specific provisions limit the allowable holdings
of a single issue and issuers. The Company did not have an aggregate exposure in a single entity, other than in U.S. Government, U.S. Government agencies and German Government securities, of more than
2% of shareholders' equity at December 31, 2002.
b)    Brokers
The Company produces its business through brokers and direct relationships with insurance companies. During the year ended December 31, 2002, three brokers
accounted for approximately 69.2% (2001: 81.8%) of the total gross premiums written by the Company. One broker accounted for approximately 37.9% (2001: 22.7%), the second for approximately 20.7%
(2001: 39.5%) and the third for approximately 10.6% (2001: 19.6%). Each of these brokers is a large, well established company. No other broker and no one insured or reinsured accounted for more than
10% of gross premiums written in the year ended December 31, 2002 and the period ended December 31, 2001.
c)    Credit Facilities
As at December 31, 2002, AXIS Specialty had a $400 million revolving credit facility available from a syndicate of commercial banks. Up to
$375 million may be used to issue letters of credit and up to $50 million for general corporate purposes with total borrowing not to exceed $400 million. As at December 31,
2002, AXIS Specialty had letters of credit of $10.0 million outstanding. Associated with AXIS Specialty's bank commitments are various loan covenants that include, among other things, the
requirement that AXIS Specialty maintain a minimum level of capital and surplus of $1.2 billion and a debt to total capitalization ratio not greater than 0.35:1.00. AXIS Specialty was in
compliance with all covenants throughout the year. There was no debt outstanding as at December 31, 2002 or December 31, 2001.
F-18
d)    Lease commitments
The Company and its subsidiaries lease office space in the countries in which they operate under operating leases which expire at various dates through
March 2012. The Company renews and enters into new leases in the ordinary course of business as required. Total rent expense with respect to these operating leases for the year ended
December 31, 2002 was approximately $1,885 (2001:$89)
Future
minimum lease payments under the leases are expected to be as follows:
Year
2003
$
2,562
2004
2,409
2005
2,241
2006
1,033
2007
759
Later years
3,339
Total minimum future lease commitments
$
12,343
10.    Shareholders' equity
a)    Authorized shares
The authorized share capital is 100,000,000 common shares of a par value of $0.10 each. The following table is a summary of changes in common shares issued and
outstanding:
December 31, 2002
December 31, 2001
Issued and outstanding shares, beginning of period
16,890,336
—
Shares issued
380,729
16,890,336
Issued and outstanding shares, end of period
17,271,065
16,890,336
b)    Share warrants
Warrants were issued to the founding group of shareholders which entitle them to purchase up to 12% of the aggregate number of outstanding shares of common stock,
calculated on a fully diluted basis, on the exercise date at a price of $100 per warrant share. As at December 31, 2002, 2,431,663 common shares (2001: 2,343,491) would be issued pursuant to
the warrant agreements, if all warrants were exercised. The expiration date for these warrants is November 20, 2011.
The
warrants were granted to the founding group of shareholders as an inducement to purchase stock in the Company, therefore no compensation expense has been recorded in connection with
the warrants. The fair value of the warrants as at November 20, 2001, of $65.1 million has been included in additional paid-in capital. This value has been calculated using
the Black-Scholes option-pricing model. The assumptions used were: volatility of 22.1%; risk-free interest rate 5.1%; expected life 7 years; and dividend yield nil. The company has
used a discount of 30% to provide for the start-up nature of operations and the illiquidity of a privately held stock.
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11.    Employee benefit plans
a)    Pension plans
The Company provides pension benefits to eligible employees through various plans sponsored by the Company. All pension plans are structured as defined
contribution plans. During the year ended December 31, 2002, pension expenses totaled $1.0 million (2001: $67), respectively.
b)    Options
The Company has a stock option plan for employees under which up to 613,846 common shares of the Company may be issued. In addition, the board of directors has
granted 45,000 options to an employee of the Company which are considered to be outside of the plan. The plan is administered by the Company and the Compensation Committee of the Board of Directors.
Grant prices are established at the fair value of the Company's common stock at the date of grant. Options have a life of 10 years and generally vest ratably on an annual basis, over three
years from the date of grant.
During
the year ended December 31, 2002, the Company expensed $18 (2001: $nil) related to the grant of options. The weighted average fair value of options granted during 2002 was
$7,676 (2001: $8,321). Had the Company applied the fair value method detailed in FAS 123 in accounting for options, the Company would have expensed $5,172 during the year ended
December 31, 2002 (2001: $1,094). Had the Company applied FAS 123 in accounting for options, net income would have been $259,965 (2001: $1,586)
The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in
2002: risk free interest rates of 3.8% (2001: 5.1%), expected life of 7 years (2001: 7 years), expected volatility of 22.1% (2001: 22.1%) and a dividend yield of nil (2001:nil). The
Company has used an average discount of 26.8% to provide for the start-up nature of operations and the illiquidity of a privately held stock.
The
following is a summary of stock options and related activity:
2002
2001
Number of
Options
Average
Exercise
Price
Number of
Options
Average
Exercise
Price
Outstanding—beginning of period
323,639
$
100.00
—
—
Granted
235,800
109.69
323,639
$
100.00
Outstanding—end of period
559,439
$
104.25
323,639
$
100.00
Options exercisable
107,880
—
Options available for grant
99,407
320,207
F-20
The
following table summarizes information about the Company's stock options for options outstanding as of December 31, 2002:
Options Outstanding
Options Exercisable
Range of Exercise prices
Number of Options
Average Exercise Price
Average Remaining
Contractual Life
Number of Options
Average Exercise Price
$100-$105
409,689
$
100.07
9.01 years
107,880
$
100.00
$106-$110
5,250
$
107.62
9.84 years
—
—
$111-$116
144,500
$
116.00
9.95 years
—
—
c)    Restricted stock awards
The Company has a restricted share plan for employees under which up to 229,500 common shares of the Company may be issued. In addition, the Board has granted
25,000 shares to an employee of the Company which is considered to be outside of the plan. During the year ended December 31, 2002, 206,500 (2001: 48,000) restricted common shares were awarded
to employees of the Company and its subsidiaries bringing the total issued to date to 254,500. These shares cliff vest at the end of a three year period from the date of grant and contain certain
restrictions, for said period, relating to, among other things, forfeiture in the event of termination of employment and transferability. At the time of grant, deferred compensation equivalent to the
difference between the issue price and the estimated fair market value is charged to shareholders' equity and subsequently amortized over the three-year vesting period. During the year
ended December 31, 2002, the Company amortized $6,215 (2001: $89) of restricted stock to income.
12.    Related party transactions
The transactions listed below are classified as related party transactions, as each counterparty has either a direct or indirect shareholding in the Company.
AXIS
Specialty entered into two agreements in November 2001 under which parties associated with certain of our founding investors provided assistance in connection with the
formation of AXIS Specialty. In connection with the first agreement, MMC Capital, Inc. received $25.8 million and John R. Charman received $2.5 million. In connection with the
second agreement, Marsh & McLennan Companies, Inc. received $8.4 million.
AXIS
Specialty entered into an advisory agreement in November 2001 with MMC Capital, Inc. ("MMC Capital"). Under this agreement, MMC Capital from time to time provides
advice and assistance to the Company in connection with transactions and other matters as may be agreed by MMC Capital and the Company. Under the terms of this agreement, AXIS Specialty pays an annual
fee of $1.0 million for a period of five years from the date of initial funding. During the year ended December 31, 2002, AXIS Specialty incurred $1,005 (2001: $115) of fees and expenses
to MMC Capital in relation to this agreement of which $nil (2001: $115) was included in accounts payable and accrued expenses.
AXIS
Specialty entered into an agreement in November 2001 with The Putnam Advisory Company, L.L.C. ("Putnam") under which Putnam was appointed as an investment manager of part of
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its investment portfolio. This agreement was entered into on an arms length basis on terms generally available in the market. During the year ended December 31, 2002, AXIS Specialty incurred
$671 (2001: $73) of fees in relation to this agreement of which $172 (2001: $73) was included in accounts payable and accrued expenses.
AXIS
Specialty entered into agreements in November 2001 and December 2002 with J.P. Morgan Investment Management Inc. and its affiliates ("J.P. Morgan") under which J.P.
Morgan was appointed as an investment manager of part of the company's investment portfolio. These agreements were entered into on an arms length basis on terms available generally in the market.
During the year ended December 31, 2002, AXIS Specialty incurred $441 (2001: $57) of fees in relation to these agreements of which $240 (2001: $57) was included in accounts payable and accrued
expenses.
During
the year ended December 31, 2002, JPMorgan Chase Bank acted as administrative agent and lender for AXIS Specialty's $400 million revolving credit facility. In
addition, certain subsidiaries of the Company hold several bank accounts with JPMorgan Chase Bank. Fees in relation to these transactions amounted to $658, of which $14 (2001: $nil) was
included in accounts payable and accrued expenses.
The
Company's subsidiaries use the services of Marsh & McLennan Companies, Inc. and its subsidiaries ("Marsh & McLennan"). During the year ended December 31, 2002 amounts paid
with respect to accounting and human resource consulting totaled $570 of which $185 (2001:$nil) was included in accounts payable and accrued expenses. In addition, we pay brokerage and commissions to
Marsh & McLennan, which vary based on the amount of business produced. During the year ended December 31, 2002, Marsh & McLennan produced 37.9% (2001: 22.7%) of our gross premiums written.
13.    Taxation
Under current Bermuda law, the Company is not required to pay any taxes in Bermuda on its income or capital gains. The Company has received an undertaking from
the Minister of Finance in Bermuda that, in the event of any taxes being imposed, the Company will be exempt from taxation in Bermuda until March 2016. The Company has operating and branch
subsidiaries in the United States, Ireland and the United Kingdom and is subject to the relevant taxes in those jurisdictions.
Income
tax recovery for the year ended December 31, 2002, was as follows
:
December 31, 2002
Current income tax
$
641
Deferred income tax recovery
(2,071
)
Total income tax recovery
$
(1,430
)
There
was no expense or payable in 2001 as the only company operating was located in Bermuda.
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Deferred
income taxes reflect the tax impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Significant
components of the net deferred tax asset (liability) are as follows:
December 31, 2002
Deferred tax assets:
Discounting of loss reserves
$
112
Unearned premium
32
Tax loss carry forwards
2,007
$
2,151
Deferred tax liabilities:
Deferred acquisition costs
$
(80
)
$
(80
)
Net deferred tax asset
$
2,071
14.    Statutory Financial Information
The Company's insurance and reinsurance operations are subject to insurance laws and regulations in the jurisdictions in which it operates, including Bermuda,
Ireland and the United States. Statutory capital and surplus as reported to the relevant regulatory authorities for the principal operating subsidiaries of the Company is as follows:
Bermuda
Ireland
United States
Required statutory capital and surplus
$
498,453
$
5,265
$
5,000
Actual statutory capital and surplus
1,387,624
446,123
370,652
The
difference between statutory financial statements and statements prepared in accordance with U.S. GAAP vary by jurisdiction, however the primary difference is that statutory
financial statements do not reflect deferred policy acquisition costs, net deferred tax assets, intangible assets, unrealized appreciation on investments and any unauthorized/authorized reinsurance
charges.
The
Company's U.S. operations required statutory capital and surplus is determined using risk based capital tests, and is the threshold that constitutes the authorized control level,
which authorizes the commissioner to take whatever regulatory actions considered necessary to protect policyholders and creditors. The risk based capital was low compared to actual capital and surplus
due to the fact that the U.S. operations are currently in start-up mode. The capital was contributed late in 2002 to support 2003 premium writings.
As
at December 31, 2002, there are no statutory restrictions on the payment of dividends from retained earnings by the Company as the minimum statutory capital and surplus
requirements are satisfied by the share capital and additional paid-in capital of the Company in all jurisdictions.
As
well, the minimum levels of solvency and liquidity have been met and all applicable regulatory requirements and licensing rules complied with.
F-23
15.    Subsequent Events
After the year ended December 31, 2002, AXIS U.S. Holdings received regulatory approval for the purchase of the Illinois domiciled surplus lines company.
In
addition, on January 30, 2003, the Company announced that AXIS U.S. Holdings had agreed to acquire the renewal rights to the directors and officers and related product lines
written by Kemper's Financial Insurance Solutions Group.
F-24
GLOSSARY OF SELECTED REINSURANCE, INSURANCE AND INVESTMENT TERMS
Acquisition costs:
The aggregate of policy acquisition costs, including commissions and the portion of administrative, general and other expenses attributable to underwriting operations.
Acquisition cost ratio:
The acquisition cost ratio measures the ratio of acquisition costs to net premiums written, if determined in accordance with SAP, or the ratio of acquisition costs (adjusted by deferred policy acquisition costs) to net premiums earned if determined
in accordance with U.S. GAAP.
Additional case reserves ("ACR"):
The reserves set aside on events that are known but not yet reported, based on the possibility of a claim. This amount is adjusted as claims notifications are received.
Attachment point:
The amount of loss (per occurrence or in the aggregate, as the case may be) above which excess of loss reinsurance becomes operative.
Broker:
One who negotiates contracts of insurance or reinsurance, receiving a commission for placement and other service rendered, between (i) a policyholder and a primary insurer, on behalf of the insured party, (ii) a primary insurer and reinsurer, on
behalf of the primary insurer, or (iii) a reinsurer and a retrocessionaire, on behalf of the reinsurer.
Casualty insurance:
Insurance that is primarily concerned with the losses caused by injuries to third persons (in other words, persons other than the policyholder) and the legal liability imposed on the insured resulting therefrom.
Cede; Cedent; Ceding company:
When a party reinsures its liability with another, it "cedes" business and is referred to as the "cedent" or "ceding company."
Ceding commission:
A fee based upon the ceding company's cost of acquiring the business being reinsured (including commissions, premium taxes, assessments and miscellaneous administrative expense) which also may include a profit factor.
Clash coverage:
Exposure to a larger single loss than intended due to losses incurred under two or more coverages or policies for the same event.
Combined ratio:
The combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio, determined in accordance with either SAP or U.S. GAAP. A combined ratio below 100% generally indicates
profitable underwriting prior to the consideration of investment income. A combined ratio over 100% generally indicates unprofitable underwriting prior to the consideration of investment income.
G-1
Excess of loss reinsurance:
A generic term describing reinsurance that indemnifies the reinsured against all or a specified portion of losses on underlying insurance policies in excess of a specified amount, which is called a "level" or "retention." Also known as
non-proportional reinsurance. Excess of loss reinsurance is written in layers. A reinsurer or group of reinsurers accepts a band of coverage up to a specified amount. The total coverage purchased by the cedent is referred to as a "program" and will
typically be placed with predetermined reinsurers in pre-negotiated layers. Any liability exceeding the outer limit of the program reverts to the ceding company, which also bears the credit risk of a reinsurer's insolvency.
Generally accepted accounting principles ("U.S. GAAP"):
United States generally accepted accounting principles as defined by the American Institute of Certified Public Accountants or statements of the Financial Accounting Standards Board. U.S. GAAP is the method of accounting to be used by AXIS Holdings
for reporting to shareholders.
General and administrative expense ratio:
The ratio of general and administrative expenses to net premiums earned.
Gross premiums written:
Total premiums for insurance written and assumed reinsurance during a given period.
Incurred but not reported ("IBNR"):
Reserves for estimated losses that have been incurred by insureds and reinsureds but not yet reported to the insurer or reinsurer, including unknown future developments on losses which are known to the insurer or reinsurer.
Layer:
The interval between the retention or attachment point and the maximum limit of indemnity for which a reinsurer is responsible.
Loss and loss expense ratio:
The ratio of losses and loss expenses to net premiums earned, determined in accordance with either SAP or U.S. GAAP.
Loss reserves:
Liabilities established by insurers and reinsurers to reflect the estimated cost of claims payments and the related expenses that the insurer or reinsurer will ultimately be required to pay in respect of insurance or reinsurance it has written.
Reserves are established for losses and for loss expenses.
Losses and loss expenses:
The expenses of settling claims, including legal and other fees and the portion of general expenses allocated to claim settlement costs (also known as claim adjustment expenses) plus losses incurred with respect to claims.
Net premiums earned:
The portion of net premiums written during or prior to a given period that was actually recognized as income during such period.
Net premiums written:
Gross premiums written for a given period less premiums ceded to reinsurers and retrocessionaires during such period.
G-2
Proportional reinsurance:
A generic term describing all forms of reinsurance in which the reinsurer shares a proportional part of the original premiums and losses of the reinsured. Proportional reinsurance is also known as pro rata reinsurance, quota share reinsurance or
participating reinsurance. In proportional reinsurance the reinsurer generally pays the ceding company a ceding commission.
Reinsurance:
An arrangement in which an insurance company, the reinsurer, agrees to indemnify another insurance or reinsurance company, the ceding company, against all or a portion of the insurance or reinsurance risks underwritten by the ceding company under one
or more policies. Reinsurance can provide a ceding company with several benefits, including a reduction in net liability on individual risks and catastrophe protection from large or multiple losses. Reinsurance also provides a ceding company with
additional underwriting capacity by permitting it to accept larger risks and write more business than would be possible without a concomitant increase in capital and surplus, and facilitates the maintenance of acceptable financial ratios by the
ceding company. Reinsurance does not legally discharge the primary insurer from its liability with respect to its obligations to the insured.
Reserves:
Liabilities established by insurers and reinsurers to reflect the estimated costs of claim payments and the related expenses that the insurer or reinsurer will ultimately be required to pay in respect of insurance or reinsurance it has written.
Reserves are established for losses, for loss expenses and for unearned premiums. Loss reserves consist of "case reserves," or reserves established with respect to individual reported claims, and "IBNR reserves." For reinsurers, loss expenses
reserves are generally not significant because substantially all of the loss expenses associated with particular claims are incurred by the primary insurer and reported to reinsurers as losses. Unearned premium reserves constitute the portion of
premium paid in advance for insurance or reinsurance that has not yet been provided. See also "Loss Reserves."
Retention:
The amount or portion of risk that an insurer retains for its own account. Losses in excess of the retention level up to the outer limit of the program, if any, are paid by the reinsurer. In proportional treaties, the retention may be a percentage of
the original policy's limit. In excess of loss business, the retention is a dollar amount of loss, a loss ratio or a percentage.
Retrocessional reinsurance; Retrocessionaire:
A transaction whereby a reinsurer cedes to another reinsurer, the retrocessionaire, all or part of the reinsurance that the first reinsurer has assumed. Retrocessional reinsurance does not legally discharge the ceding reinsurer from its liability
with respect to its obligations to the reinsured. Reinsurance companies cede risks to retrocessionaires for reasons similar to those that cause primary insurers to purchase reinsurance: to reduce net liability on individual risks, to protect against
catastrophic losses, to stabilize financial ratios and to obtain additional underwriting capacity.
G-3
Specialty lines:
Lines of insurance and reinsurance that provide coverage for risks that are often unusual or difficult to place and do not fit the underwriting criteria of standard commercial products carriers.
Statutory accounting principles ("SAP"):
Recording transactions and preparing financial statements in accordance with the rules and procedures prescribed or permitted by United States state insurance regulatory authorities including the NAIC, which in general reflect a liquidating, rather
than going concern, concept of accounting.
Submission:
An unprocessed application for (i) insurance coverage forwarded to a primary insurer by a prospective policyholder or by a broker on behalf of such prospective policyholder, (ii) reinsurance coverage forwarded to a reinsurer by a prospective ceding
insurer or by a broker or intermediary on behalf of such prospective ceding insurer or (iii) retrocessional coverage forwarded to a retrocessionaire by a prospective ceding reinsurer or by a broker or intermediary on behalf of such prospective ceding
reinsurer.
Treaty reinsurance:
The reinsurance of a specified type or category of risks defined in a reinsurance agreement between a primary insurer or other reinsured and a reinsurer. Typically, in treaty reinsurance, the primary insurer or reinsured is obligated to offer, and
the reinsurer is obligated to accept, a specified portion of all of that type or category of risks originally written by the primary insurer or reinsured.
Underwriting capacity:
The maximum amount that an insurance company can write. The limit is generally determined by the company's retained earnings and investment capital. Reinsurance serves to increase a company's underwriting capacity by reducing its exposure from
particular risks.
G-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13.    OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses payable by the Registrant in connection with the issuance and distribution of the common shares being registered
hereby. All of such expenses are estimates, other than the filing and listing fees payable to the Securities and Exchange Commission, the New York Stock Exchange and the National Association of
Securities Dealers, Inc.
Filing Fee—Securities and Exchange Commission
$
41,866
Listing Fee—The New York Stock Exchange
*
Fee—National Association of Securities Dealers
$
30,500
Fees and Expenses of Counsel
*
Printing Expenses
*
Fees and Expenses of Accountants
*
Blue Sky Fees and Expenses
*
Transfer Agent Fees and Expenses
$
17,500
Miscellaneous Expenses
*
Total
*
*
To
be provided by amendment
ITEM 14.    INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Bye-law 30 of the Registrant's bye-laws provides, among other things, that: the directors, officers and any other persons appointed to a
committee of the board of directors of the Registrant, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Registrant to the full extent
permitted by law from and against all actions, costs, charges, liabilities, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or
sustain by or by reason of any act done, concurred in or omitted in or about the conduct of the Registrant's business or the execution of their duty, or supposed duty, or in their respective offices
or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or
other persons with whom any moneys or effects belonging to the Registrant shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys
of or belonging to the Registrant shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in
relation thereto;
provided, that
this indemnity shall not extend to any matter in which any of said persons is found, in a final judgment or decree not
subject to appeal, to have committed fraud or dishonesty.
Bye-law
31 of the Registrant's bye-laws provides that each shareholder agrees to waive any claim or right of action it might have, whether individually or by or
in the right of the Registrant, against any director or officer on account of any action taken by such director or officer, or the failure of such director or officer to take any action in the
performance of his duties with or for the Registrant, provided that such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such director or officer.
The
Companies Act provides that a Bermuda company may indemnify its directors in respect of any loss arising or liability attaching to them as a result of any negligence, default, breach
of duty or breach of trust of which they may be guilty. However, the Companies Act also provides that any
II-1
provision, whether contained in the company's bye-laws or in a contract or arrangement between the company and the director, indemnifying such director against any liability which would
attach to him in respect of his fraud or dishonesty will be void.
The
Registrant has purchased directors and officers liability insurance policies. Such insurance would be available to the Registrant's directors and officers in accordance with its
terms. In addition, certain directors may be covered by directors and officers liability insurance policies purchased by their respective employers.
Reference
is made to the form of Underwriting Agreement to be filed as Exhibit 1.1 hereto for provisions providing that the Underwriters are obligated, under certain
circumstances, to indemnify the directors, certain officers and the controlling persons of the Registrant against certain liabilities under the Securities Act of 1933, as amended (the "Securities
Act").
Reference
is made to the Shareholders Agreement to be filed as Exhibit 10.1 hereto for provisions providing that the Registrant and certain holders of common shares and warrants
are each obligated to indemnify the other for certain actions.
ITEM 15.    RECENT SALES OF UNREGISTERED SECURITIES.
Since its formation, the Registrant has issued unregistered securities as described below. None of the transactions involved any underwriters, underwriting
discounts or commissions or any public offering, and the Registrant believes that each transaction, if deemed to be a sale of a security, was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof, Regulation D promulgated thereunder, Rule 701 pursuant to compensatory benefit plans and contracts relating to compensation as
provided under Rule 701 or Regulation S for offerings of securities outside of the United States. The recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, such securities were restricted as to transfers and appropriate legends were
affixed to the share certificates and instruments issued in such transactions.
On
November 20, 2001, AXIS Specialty Limited ("AXIS Specialty") sold 16,866,907 common shares to certain accredited investors for an aggregate price of $1.7 billion and
issued warrants exercisable for common shares in an amount equal to 12% of the common shares of AXIS Specialty outstanding on a fully diluted basis. The sale of shares and warrants were made in
reliance on Section 4(2) of the Exchange Act.
From
time to time between November 20, 2001 and December 31, 2002, AXIS Specialty issued common shares and granted options pursuant to its Long-Term Equity Compensation
Plan and its Directors Deferred Compensation Plan. These plans were subsequently assumed by the Registrant. These
issuances were made in reliance on Rule 701 under the Securities Act. As of December 31, 2002, options with respect to 559,439 common shares of the Registrant were outstanding.
On
December 31, 2002, the Registrant exchanged 17,075,378 common shares of the Registrant for an equal number of common shares of AXIS Specialty. In addition, outstanding warrants
exercisable for common shares of AXIS Specialty were exchanged for the same number of common warrants of the Registrant. This exchange was made in reliance on Section 4(2) of the Securities Act
and Regulation D promulgated thereunder.
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ITEM 16.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
Exhibits
Exhibit
Number
Description of Document
1.1
Underwriting Agreement*
3.1
Certificate of Incorporation and Memorandum of Association of AXIS Capital Holdings Limited*
3.2
Amended and Restated Bye-laws of AXIS Capital Holdings Limited*
4.1
Specimen Common Share Certificate*
4.2
Specimen Warrant to Acquire Common Shares*
5.1
Opinion of Conyers Dill & Pearman*
8.1
Opinion of William Fry Tax Advisers Limited*
8.2
Opinion of LeBoeuf Lamb Greene & MacRae, L.L.P.*
8.3
Opinion of Clyde & Co.*
8.4
Opinion of David King & Co.*
10.1
Amended and Restated Shareholders Agreement, dated December 31, 2002 among the Registrant and each of the persons listed on Schedule A thereto*
10.2
Employment Agreement between John R. Charman and the Registrant*
10.3
Service Agreement between Robert J. Newhouse, Jr. and the Registrant*
10.4
Service Agreement between Michael A. Butt and the Registrant*
10.5
Service Agreement between Michael E. Morrill and the Registrant*
10.6
Employment Agreement between Dennis B. Reding and the Registrant*
10.7
Employment Agreement between Andrew Cook and the Registrant*
10.8
Employment Agreement between William A. Fischer and the Registrant*
10.9
Employment Agreement between John Gressier and the Registrant*
10.10
Employment Agreement between Richard Strachan and the Registrant*
10.11
Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March 28, 2002*
10.12
Revolving Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March 28, 2002*
11.1
Statement re computation of per share earnings*
21.1
Subsidiaries of the registrant*
23.1
Consent of Deloitte & Touche
23.2
Consent of Conyers Dill & Pearman*
23.3
Consent of William Fry Tax Advisers*
23.4
Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.*
II-3
23.5
Consent of Clyde & Co.*
23.6
Consent of David King & Co.*
24.1
Power of Attorney (included as part of the signature pages for certain directors except as otherwise filed herein)
24.2
Power of Attorney for Charles A. Davis
24.3
Power of Attorney for Edward J. Kelly, III
24.4
Power of Attorney for Scott A. Schoen
24.5
Power of Attorney for Andrew H. Rush
24.6
Power of Attorney for Jeffrey C. Walker
99.1
Form F-N*
*
To
be filed by amendment.
(b)
Financial
Statement Schedules
Schedule I
—
Summary of Investments Other Than Investments in Related Parties—not required since the information is fully disclosed in the Consolidated Financial Statements and notes to the Consolidated Financial
Statements
Schedule II
—
Condensed Financial Information of Registrant
Schedule III
—
Supplementary Insurance Information
Schedule IV
—
Reinsurance
Schedule V
—
Valuation and Qualifying Accounts—not required since the information is fully disclosed in the Consolidated Financial Statements and notes to the Consolidated Financial Statements
Schedule VI
—
Supplementary Information Concerning Property/Casualty Insurance Operations—not required since amount does not meet requirement for disclosure
II-4
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AXIS Capital Holdings Limited
We
have audited the consolidated financial statements of AXIS Capital Holdings Limited and subsidiaries as at December 31, 2002 and 2001 and for the year ended December 31, 2002 and the
period from November 8, 2001 (date of incorporation) to December 31, 2001, and have issued our report thereon dated February 10, 2003; such financial statements and report are
included in this registration statement. Our audits also included the financial statement schedules of AXIS Capital Holdings Limited listed in the Index at Item 16 (b) of this registration
statement. These financial statement
schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE
& TOUCHE
Hamilton, Bermuda
February 10, 2003
II-5
ITEM 17.    UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The
undersigned Registrant hereby undertakes that:
(1)  For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared effective.
(2)  For
the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be
a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The
undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each purchaser.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in Pembroke, Bermuda, on the 5th day of March, 2003.
AXIS Capital Holdings Limited
By:
/s/
JOHN R. CHARMAN
Name:
John R. Charman
Title:
President and Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents, that the undersigned directors and officers of the Registrant, a Bermuda limited liability company, which is filing a Registration
Statement on Form S-1 with the Securities and Exchange Commission, Washington, D.C. 20549 under the provisions of the Securities Act of 1933 hereby constitute and appoint John R.
Charman, Michael A. Butt and Andrew Cook, and each of them, the individual's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution,
for the person and in his or her name, place and stead, in any and all capacities, to sign such registration statement and any or all amendments, including post-effective amendments to the
registration statement, including a prospectus or an amended prospectus therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b)
under the Securities Act, and all other documents in connection therewith to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on the 5th day of
March, 2003.
Signature
Title
/s/
JOHN R. CHARMAN
John R. Charman
President and Chief Executive Officer, Director
(Principal Executive Officer)
/s/
ANDREW COOK
Andrew Cook
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/
CLARE MORAN
Clare Moran
Vice President and Controller
(Controller)
/s/
MICHAEL A. BUTT
Michael A. Butt
Director
II-7
/s/
ROBERT J. NEWHOUSE, JR.
Robert J. Newhouse, Jr.
Director
*
Charles A. Davis
Director
/s/
ROBERT L. FRIEDMAN
Robert L. Friedman
Director
/s/
DONALD J. GREENE
Donald J. Greene
Director
/s/
MAURICE A. KEANE
Maurice A. Keane
Director
*
Edward J. Kelly, III
Director
*
Andrew H. Rush
Director
*
Scott A. Schoen
Director
/s/
FRANK J. TASCO
Frank J. Tasco
Director
*
Jeffrey C. Walker
Director
/s/
KEVIN G. MCLEAN
(authorized representative in the United States)
*
/s/
ANDREW COOK
Attorney-in-fact
II-8
SCHEDULE II
AXIS CAPITAL HOLDINGS LIMITED
BALANCE SHEET
As at December 31, 2002
(Expressed in thousands of U.S. Dollars)
December 31, 2002
Assets
Cash and cash equivalents
$
60,578
Investments at fair value
64,010
Accrued interest receivable
378
Investment in subsidiaries
1,817,476
Other assets
4,284
Total Assets
$
1,946,726
Liabilities
Intercompany payable
$
11,218
Total Liabilities
11,218
Shareholder's Equity
Share capital
1,727
Additional paid-in capital
1,686,599
Deferred compensation
(20,576
)
Other comprehensive income
(41
)
Retained earnings
267,799
Total Shareholders Equity
1,935,508
Total Liabilites & Shareholders Equity
$
1,946,726
II-9
SCHEDULE II (Continued)
AXIS CAPITAL HOLDINGS LIMITED
STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the year ended December 31, 2002
(Expressed in thousands of U.S.Dollars)
Year Ended
December 31, 2002
Revenue
Equity in net earnings of subsidiaries
$
267,792
Net investment income
7
Realized gains
—
Expenses
General and administrative expenses
—
Income before income taxes
267,799
Income Taxes
—
Net Income
267,799
Other comprehensive income
Unrealized losses arising during the year
(41
)
Comprehensive income
$
267,758
II-10
SCHEDULE II (Continued)
AXIS CAPITAL HOLDINGS LIMITED
STATEMENT OF CASH FLOWS
For the year ended December 31, 2002
(Expressed in thousands of U.S. Dollars)
Year Ended
December 31, 2002
Cash flows provided by operating activites:
Net income
$
267,799
Adjustments to reconcile net income to net cash provided by (used in)operating activites:
Amortization of of discounts on fixed maturities
2
Accrued interest receivable
(378
)
Purchase of accrued interest receivable
369
Equity in net earnings of subsidiaries
(267,792
)
Total adjustments
(267,799
)
Net cash provided by operating activities
0
Cash flows provided by (used in) investing activities:
Dividend from subsidiary
125,000
Purchases of fixed maturites and short-term investments
(64,422
)
Net cash used in investing activities
60,578
Increase in cash and cash equivalents
60,578
Cash and cash equivalents—beginning of period
—
Cash and cash equivalents—end of period
$
60,578
II-11
SCHEDULE III
AXIS CAPITAL HOLDINGS LIMITED
SUPPLEMENTARY INSURANCE INFORMATION
For the year ended December 31, 2002 and the period ended December 31, 2001
(Expressed in thousands of U.S. Dollars)
Year ended December 31, 2002
Deferred
Acquisition
Costs
Reserve for
Losses and
Loss Expenses
Unearned
Premiums
Net
Premiums
Earned
Net
Investment
Income(1)
Losses and
Loss
Expenses
Amortization
of Deferred
Acquisition
Costs
Net
Premiums
Written
Other
Operating
Expenses
Specialty Insurance
$
54,360
$
133,000
$
461,844
$
314,613
$
—
$
137,848
$
56,683
$
704,033
$
—
Treaty Reinsurance
22,806
82,934
94,118
222,237
—
91,417
47,020
314,244
—
Not allocated to segments
—
—
—
—
71,287
—
—
—
46,521
Total
$
77,166
$
215,934
$
555,962
$
536,850
$
71,287
$
229,265
$
103,703
$
1,018,277
$
46,521
Period ended December 31, 2001
Deferred
Acquisition
Costs
Reserve for
Losses and
Loss Expenses
Unearned
Premiums
Net
Premiums
Earned
Net
Investment
Income(1)
Losses and
Loss
Expenses
Amortization
of Deferred
Acquisition
Costs
Net
Premiums
Written
Other
Operating
Expenses
Specialty Insurance
$
1,983
$
886
$
22,751
$
1,713
$
—
$
886
$
320
$
24,465
$
—
Treaty Reinsurance
232
77
2,111
171
—
77
512
2,281
—
Not allocated to segments
—
—
—
—
4,763
—
—
—
2,566
Total
$
2,215
$
963
$
24,862
$
1,884
$
4,763
$
963
$
832
$
26,746
$
2,566
(1)    Investment
income is not allocated to the Company's segments as the invested assets are managed centrally.
II-12
SCHEDULE IV
AXIS CAPITAL HOLDINGS LIMITED
SUPPLEMENTARY REINSURANCE INFORMATION
For the year ended December 31, 2002 and the period ended December 31, 2001
(Expressed in millions of U.S. Dollars)
Gross
Ceded to Other Companies
Assumed from Other Companies
Net Amount
Percentage of
Amount Assumed
to Net
Year ended December 31, 2002
$
469
$
90
$
639
$
1,018
63
%
Period ended December 31, 2001
13
—
14
27
52
II-13
EXHIBIT INDEX
Exhibit
Number
Description of Document
1.1
Underwriting Agreement*
3.1
Certificate of Incorporation and Memorandum of Association of AXIS Capital Holdings Limited*
3.2
Amended and Restated Bye-laws of AXIS Capital Holdings Limited*
4.1
Specimen Common Share Certificate*
4.2
Specimen Warrant to Acquire Common Shares*
5.1
Opinion of Conyers Dill & Pearman*
8.1
Opinion of William Fry Tax Advisers Limited*
8.2
Opinion of LeBoeuf Lamb Greene & MacRae, L.L.P.*
8.3
Opinion of Clyde & Co.*
8.4
Opinion of David King & Co.*
10.1
Amended and Restated Shareholders Agreement, dated December 31, 2002 among the Registrant and each of the persons listed on Schedule A thereto*
10.2
Employment Agreement between John R. Charman and the Registrant*
10.3
Service Agreement between Robert J. Newhouse, Jr. and the Registrant*
10.4
Service Agreement between Michael A. Butt and the Registrant*
10.5
Service Agreement between Michael E. Morrill and the Registrant*
10.6
Employment Agreement between Dennis B. Reding and the Registrant*
10.7
Employment Agreement between Andrew Cook and the Registrant*
10.8
Employment Agreement between William A. Fischer and the Registrant*
10.9
Employment Agreement between John Gressier and the Registrant*
10.10
Employment Agreement between Richard Strachan and the Registrant*
10.11
Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March 28, 2002*
10.12
Revolving Credit Agreement among the Registrant, various lending institutions and JPMorgan Chase Bank as Administrative Agent, dated as of March 28, 2002*
11.1
Statement re computation of per share earnings*
21.1
Subsidiaries of the registrant*
23.1
Consent of Deloitte & Touche
23.2
Consent of Conyers Dill & Pearman*
23.3
Consent of William Fry Tax Advisers*
23.4
Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.*
23.5
Consent of Clyde & Co.*
23.6
Consent of David King & Co.*
24.1
Power of Attorney (included as part of the signature pages for certain directors except as otherwise filed herein)
24.2
Power of Attorney for Charles A. Davis*
24.3
Power of Attorney for Edward J. Kelly, III
24.4
Power of Attorney for Scott A. Schoen*
24.5
Power of Attorney for Andrew H. Rush*
24.6
Power of Attorney for Jeffrey C. Walker*
99.1
Form F-N*
*
To
be filed by amendment.
QuickLinks
Table of Contents
PROSPECTUS SUMMARY
OUR COMPANY
THE OFFERING
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
RISK FACTORS
FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest Rate Movement Analysis on Market Value of Assets Under Management by Third Party Investment Managers
INDUSTRY BACKGROUND
BUSINESS
Gross Premiums Written by Business Segment
Gross Premiums Written by Specialty Line
Gross Premiums Written by Treaty Reinsurance Line
Gross Treaty Reinsurance Lines Premiums Written by Geographic Area
Gross Premiums Written by Broker
Gross, Ceded and Net Amounts of Premiums Written and Earned
Types of Securities in Our Fixed Income Portfolio and Their Fair Market Values and Amortized Costs
Credit Ratings for Fixed Income Securities
Maturity Distribution for Fixed Income Securities
Net Investment Income and Returns on Investments
REGULATION
MANAGEMENT
Summary Compensation Table
Options/SAR Grants in 2002
PRINCIPAL AND SELLING SHAREHOLDERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MATERIAL TAX CONSIDERATIONS
DESCRIPTION OF SHARE CAPITAL
SHARES ELIGIBLE FOR FUTURE SALE
UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES LAWS AND OTHER MATTERS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AXIS CAPITAL HOLDINGS LIMITED
INDEPENDENT AUDITORS' REPORT
AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED BALANCE SHEETS As at December 31, 2002 and 2001 (Expressed in thousands of U.S. dollars except for share data)
AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For the year ended December 31, 2002 and the period from November 8, 2001 to December 31, 2001 (Expressed in thousands
of U.S. dollars)
AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the year ended December 31, 2002 and the period from November 8, 2001 to December 31, 2001 (Expressed in thousands of
U.S. dollars)
AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31, 2002 and the period from November 8, 2001 to December 31, 2001 (Expressed in thousands of U.S. dollars)
AXIS CAPITAL HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Expressed in thousands of U.S. dollars except share amounts)
GLOSSARY OF SELECTED REINSURANCE, INSURANCE AND INVESTMENT TERMS
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
POWER OF ATTORNEY
SCHEDULE II
AXIS CAPITAL HOLDINGS LIMITED BALANCE SHEET As at December 31, 2002 (Expressed in thousands of U.S. Dollars)
SCHEDULE II (Continued)
AXIS CAPITAL HOLDINGS LIMITED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME For the year ended December 31, 2002 (Expressed in thousands of U.S.Dollars)
SCHEDULE II (Continued)
AXIS CAPITAL HOLDINGS LIMITED STATEMENT OF CASH FLOWS For the year ended December 31, 2002 (Expressed in thousands of U.S. Dollars)
AXIS CAPITAL HOLDINGS LIMITED SUPPLEMENTARY INSURANCE INFORMATION
SCHEDULE IV
EXHIBIT INDEX