Bermuda-based insurer Axis Capital Holdings Ltd. has had the financial strength and counterparty credit ratings of its operating units raised to A+ by Standard & Poor's as a result of consistently strong financial results and its moderate debt levels.

In an announcement yesterday, S&P said it had also raised its counterparty credit and senior unsecured debt ratings on Axis to A- from BBB+.

The company led by chief executive officer John Charman and chairman Michael Butt topped $1 billion in annual net income in just its sixth year of business in 2007.

The upgrade will bolster Axis' competitive position at a time when several competitors have either been downgraded or are struggling to hang onto their current ratings after a tumultuous 2008, which saw large catastrophe losses and investment portfolio shrinkage.

Although Axis posted a $249 million net loss in the third quarter of 2008, largely as a result of hurricane-related claims of around $371 million, analysts expect Axis to swing to a profit in the last three months of 2008. The company plans to release its fourth-quarter and full-year results next Monday.

"The upgrade reflects our view that Axis has consistently outperformed most of its peers, with strong operating results since its inception in 2001," said Standard & Poor's credit analyst Laline Carvalho.

"We believe Axis' earnings quality is also strong, as demonstrated by a history of moderate earnings volatility relative to peers, even including large loss years such as 2005 and 2008."

The New York-based rating agency added its opinion that Axis has a strong competitive position, seasoned management team, very strong capital adequacy, strong liquidity, and significant enhancements to the group's enterprise risk management framework, which S&P now views as strong. "We also believe Axis' investment portfolio has relatively limited downside risk given the short-term and liquid nature of the investment portfolio, as well as modest exposure to sub-prime assets," S&P added in its commentary.

"The group has modest debt leverage and no significant debt maturities over the next five years. We also view Axis' exposure to potential losses from directors and officers and errors and omissions liability coverages in its professional liability portfolio as modest relative to the group's equity base."

Offsetting these strengths are Axis' exposure to severity-related risks, given the short-tail nature of its business portfolio, as well a business model that is moderately dependent on the use of reinsurance protection on the insurance side of the business, S&P added.