Axis Specialty Ltd. and its operating affiliates have been affirmed the financial strength rating (FSR) of A (excellent) and issuer credit ratings (ICR) of "a+" by AM Best Co.

Concurrently, Best has affirmed the ICR of "bbb+" and all existing debt ratings of Axis Capital Holdings Ltd. (ACHL).

The outlook for all ratings is stable.

Best said that the ratings reflect Axis' consistently strong operating performance, excellent risk-based capitalisation, robust enterprise risk management controls and a highly experienced management team. AXIS' operating strategy has historically emphasized underwriting profitability with a balanced risk profile. The company maintains a well diversified book of business, both geographically and by line of business, with an emphasis on short to medium-tail lines, principally specialty insurance lines including property, marine and political risk, along with property catastrophe and other specialty reinsurance coverages.

Axis' historical operating performance has been strong, with a five-year average combined ratio of approximately 85 percent and a five-year average return on equity in the mid double digit range, both of which place the company in a leadership position among its Bermudian peer group.

In Best's opinion, Axis' solid performance is attributable to its formalised and integrated risk management controls and strong systems capability. Furthermore, Axis retains a very strong level of risk-based capitalisation under various Best stress scenarios. As a result, the ratings agency expects Axis to continue managing its capital base in a conservative manner within acceptable ranges to support its current ratings.

Both financial leverage and interest coverage also are at acceptable levels relative to ACHL's ratings. Best anticipates ACHL to maintain total debt-to-capital measures in the mid-teens to low twenties in the near term.

Partially offsetting these positive rating factors is Axis' exposure to large catastrophe losses as well as the cyclical changes occurring in the current market environment. Axis did experience a significant level of realised and unrealised investment losses in 2008, primarily attributable to the disruption of global markets.