Third Quarter 2012 Financial Highlights 38 Executive Summary 39 Underwriting Results - Group 43 Results by Segment: For the three and nine months ended September 30, 51 2012 and 2011
i) Insurance Segment 51
ii) Reinsurance Segment 54 Other Expenses, Net 57 Net Investment Income and Net Realized Investment Gains/Losses 58 Cash and Investments 61 Liquidity and Capital Resources 64 Critical Accounting Estimates 66 New Accounting Standards 66 Off-Balance Sheet and Special Purpose Entity Arrangements 66 Non-GAAP Financial Measures 67

• Net income available to common shareholders of $223 million, or $1.84 per share basic and $1.82 diluted

• Operating income of $201 million, or $1.63 per diluted share(1)

• Gross premiums written of $848 million

• Net premiums written of $651 million

• Net premiums earned of $862 million

• Net favorable prior year reserve development of $60 million, pre-tax

• Notable catastrophe and weather-related losses in the quarter included:

•            Estimated pre-tax net losses (net of related reinstatement premiums)
             of $40 million resulting from the impact of severe drought
             conditions on U.S. crops and $20 million for Hurricane Issac; and


•            An aggregate $27 million reduction in our estimate of pre-tax net
             losses (net of related reinstatement premiums) for first and second
             quarter 2012 U.S. weather events


•      No material change in our aggregate estimate for losses related to 2011
       and 2010 calendar year natural catastrophe events

• Underwriting income of $155 million and combined ratio of 85.3%

• Net investment income of $104 million

• Net realized investment gains of $51 million

Third Quarter 2012 Consolidated Financial Condition
• Total cash and investments of $14.2 billion; fixed maturities, cash and short-term securities comprise 90% of total cash and investments and have an average credit rating of AA-

• $9.0 billion, or 63%, of our cash and investment portfolio invested in investment-grade, short-term and intermediate-maturity fixed income holdings (excluding restricted cash and investments), where cash proceeds from sales are expected to be available within one to three business days under normal market conditions

• Total assets of $18.9 billion

• Reserve for losses and loss expenses of $8.8 billion and reinsurance recoverable of $1.8 billion

• Total debt of $995 million and a debt to total capital ratio of 14.5%

• Repurchased 5.2 million common shares for total cost of $179 million; remaining authorization under the repurchase program approved by our Board of Directors of $236 million at October 31, 2012

• Common shareholders' equity of $5.4 billion; diluted book value per common share of $43.57

(1) Operating income (loss) is a non-GAAP financial measure as defined in SEC Regulation G. See 'Non-GAAP Financial Measures' for reconciliation to nearest GAAP financial measure (net income (loss) available to common shareholders).

Business Overview

We are a Bermuda-based global provider of specialty lines insurance and treaty reinsurance products with operations in Bermuda, the United States, Europe, Singapore, Canada, Australia and Latin America. Our underwriting operations are organized around our two global underwriting platforms, AXIS Insurance and AXIS Reinsurance.

Our strategy is to leverage our expertise, experience and relationships to expand our business globally. We manage a book of business diversified both geographically and by product line. We seek to provide high-quality products and services to our clients, while maintaining profitability and generating superior returns on equity over the underwriting cycle. We are focused on organic growth, which we have supplemented with small acquisitions, while managing a portfolio of diversified and attractively priced risks. Our execution on this strategy in the first nine months of 2012 included:

• the continuing growth of our new accident & health line, focused on specialty accident and health products; and

• the focus on lines of business with attractive rates, generating premium growth in our insurance segment.

In addition, we effectively lowered the weighted average annual yield on our preferred equity capital base by 42 basis points, to 6.953%, at a book value cost of $7 million. This was achieved via the issuance of $400 million of 6.875% Series C shares, in conjunction with the redemption of $150 million of our 7.25% Series A preferred shares and the repurchase of $247 million of our 7.50% Series B preferred shares via tender offer.

Results of Operations
                                       Three months ended September 30,           Nine months ended September 30,
                                        2012         % Change      2011           2012        % Change       2011

  Underwriting income (loss):
  Insurance                        $    76,391         89%      $  40,515     $   111,509        nm      $   12,799
  Reinsurance                           78,608         59%         49,514         225,919        nm        (355,100 )
  Net investment income                103,638         110%        49,396         294,110       13%         260,068
  Net realized investment gains         50,803        (12%)        57,557          95,699      (24%)        125,177
  Other revenues (expenses), net       (77,292 )        nm         24,295        (170,186 )     98%         (85,922 )
  Net income (loss)                    232,148          5%        221,277         557,051        nm         (42,978 )
  Preferred share dividends             (8,741 )       (5%)        (9,219 )       (29,487 )      7%         (27,656 )
  Loss on repurchase of preferred            -          -               -         (14,009 )      -                -
  shares
  Net income (loss) available to   $   223,407          5%      $ 212,058     $   513,555        nm      $  (70,634 )
  common shareholders

  Operating income (loss)          $   200,640         112%     $  94,727     $   449,207        nm      $ (221,080 )

nm - not meaningful

Underwriting Results

We recognized total underwriting income of $155 million for the third quarter of 2012, compared to $90 million for the third quarter of 2011. Underwriting income improved in each of our segments, with the primary driver being a reduction in the level of natural catastrophe-related losses. During the third quarter of 2011, our consolidated underwriting income was impacted by aggregate pre-tax net losses (net of related reinstatement premiums) of $65 million for Hurricane Irene, Tropical Storm Lee and Danish flooding, as well as an aggregate $26 million increase in our estimate for first half 2011 catastrophe events. Comparatively, during the third quarter of 2012, we recognized pre-tax net losses (net of related reinstatement premiums) of $40 million resulting from the impact of severe

drought conditions on U.S. crops, $20 million for Hurricane Isaac and an aggregate $27 million reduction in our estimate for first and second quarter 2012 U.S. weather events. Reduced exposure and loss experience related to aggregate property reinsurance of regional insurance companies in the U.S. also contributed to the favorable variance between periods. Partially offsetting these factors was an $18 million reduction in net favorable prior year reserve development quarter-over-quarter.

For the nine months ended September 30, 2012, we recorded underwriting income of $337 million, in contrast to an underwriting loss of $342 million for the comparable period of 2011. Natural catastrophe-related losses were also the primary driver of this variance, with our reinsurance segment being impacted to a greater extent. During the nine months ended September 30, 2011, we recognized aggregate pre-tax net losses (net of related reinstatement premiums) of $792 million for current year catastrophe events; this included the February New Zealand earthquake ("New Zealand II"), the Japanese earthquake and tsunami, the series of severe U.S. storms and tornadoes in April and May, first quarter Australian weather events, the June aftershock in New Zealand ("New Zealand III"), Hurricane Irene, Tropical Storm Lee and Danish flooding. The global frequency and severity of catastrophe activity was comparatively subdued during the first nine months of 2012; our underwriting income was impacted by aggregate pre-tax net losses (net of related reinstatement premiums) of $133 million, including $73 million for first and second quarter 2012 U.S. weather events and the previously mentioned crop and Hurricane Isaac amounts.

Our insurance segment's underwriting income for the first nine months of 2011 included aggregate catastrophe-related pre-tax net losses (inclusive of related premiums to reinstate reinsurance protection) of $129 million related to the Japanese earthquake and tsunami, New Zealand II, the series of severe U.S. storms in April and May, Hurricane Irene, Tropical Storm Lee and the first quarter Australian weather events. Underwriting income for the first nine months of 2012 included aggregate pre-tax net losses of $58 million for the first and second quarter 2012 U.S. weather events and Hurricane Isaac. Underwriting results also improved due to growth in net premiums earned, driven by the expansion of our business over the past year; however, this was partially offset by commensurate growth in acquisition costs and general and administrative expenses. Finally, an $8 million increase in net favorable prior year reserve development also contributed to the variance in underwriting results between periods.

The $581 million improvement in the reinsurance segment's underwriting result for the first nine months of 2012 was primarily attributable to the significantly lower level of natural catastrophe losses described above. In 2011, we recognized aggregate pre-tax net losses (net of related reinstatement premiums) of $663 million for New Zealand II/III, the Japanese earthquake and tsunami, the first quarter Australian weather events, the series of U.S. storms and tornadoes in April and May, Danish flooding and Hurricane Irene. Underwriting income for the first nine months of 2012 included pre-tax net losses (net of related reinstatement premiums) of $75 million for first and second quarter 2012 U.S. weather events, the impact of the severe drought conditions on U.S. crops and Hurricane Isaac. Underwriting results also improved due to the reduced exposure and loss experience related to aggregate property reinsurance contracts. However, the impact of these favorable variances was partially offset by reductions in net premiums earned and net favorable prior year reserve development and increases in acquisition costs and general and administrative expenses.

Net Investment Income

Net investment income for the three and nine months ended September 30, 2012 increased $54 million and $34 million, respectively, from the comparable periods of 2011, with the improvement in both periods driven by our alternative investment portfolio ("other investments"). We recognized income of $34 million and $72 million from this portfolio in the three and nine months ended September 30, 2012, respectively, compared to a loss of $30 million and income of $7 million, respectively, for the same periods of 2011; these variances were largely driven by hedge fund valuations, reflective of global equity market performance. These favorable variances were partially offset by reductions of $10 million and $31 million, respectively, in income from our fixed maturity portfolio for the three and nine-month periods. The declines in fixed maturity income were attributable to lower reinvestment yields, partially offset by higher investment balances.

Net Realized Investment Gains

During each period presented, we realized investment-related gains on sales related to minor fixed income reallocations. Other-than-temporary impairment ("OTTI") charges were $5 million lower and $10 million higher for the three and nine-month periods ended September 30, 2012, respectively.

Other (Expenses) Revenues, Net

The unfavorable variances noted for both the quarter and year-to-date were primarily driven by foreign exchange rate movements; we recognized foreign exchange losses for both 2012 periods, compared to gains in both periods of 2011. These amounts arose from the remeasurement of our foreign-denominated net insurance-related liabilities; Sterling and euro exchange rate movements drove the third quarter amounts, while the Sterling was the primary driver for the nine-month periods.

Excluding these foreign exchange amounts, other expenses increased by $17 million and $49 million during the three and nine-month periods. The third quarter variance was driven by higher performance-related compensation costs and income tax expenses, both related to improved operating results. Further contributing to the variance for the nine-month period was the recognition of separation payments and accelerated and incremental share-based compensation costs, totaling $34 million, in relation to our second quarter 2012 senior leadership transition.

Loss on Repurchase of Preferred Shares

In conjunction with the effective reduction of the dividend rate on our preferred equity base previously discussed, we repurchased $150 million of our 7.25% Series A preferred shares and $247 million of our 7.5% Series B preferred shares during the first half of 2012. While the Series A shares were redeemed at liquidation value, we paid a $7 million premium to repurchase the Series B shares in advance of the first eligible redemption date. This premium, combined with the recognition of the proportionate share of issue costs for both series as an expense, resulted in the a $14 million loss. As the issue costs for these shares were recognized in shareholders' equity in the period the shares were originally issued, the only impact on book value related to the $7 million premium on the Series B repurchase. Refer to Item 1, Note 9 to the Consolidated Financial Statements for further details.

Outlook

We continue to see pricing improvements in the primary insurance marketplace, particularly in the United States. Improvements now extend across most classes and geographies within our insurance segment. While there remains variation in the level of improvement across lines of business and markets, we expect continued improvement. In our reinsurance segment, we are benefiting from the gradual strengthening in the primary insurance market in some lines, especially for proportional treaties where cedants are experiencing pricing improvements in their portfolios. Meanwhile, non-proportional, or excess of loss, reinsurance business is generally stable. We will continue to monitor market conditions and pursue the business we consider most attractive, via the expansion of our existing portfolio and the execution of strategic initiatives.

Financial Measures
We believe the following financial indicators are important in evaluating our
performance and measuring the overall growth in value generated for our common
shareholders:
                                                     Three months ended and at        Nine months ended and at
                                                           September 30,                   September 30,
                                                       2012             2011           2012              2011

  ROACE (annualized)(1)                                 16.9 %            17.5 %        13.3 %            (1.9 %)
  Operating ROACE (annualized)(2)                       15.2 %             7.8 %        11.6 %            (5.9 %)
  DBV per common share(3)                          $   43.57         $   37.06     $   43.57         $   37.06
  Cash dividends declared per common share         $    0.24         $    0.23     $    0.72         $    0.69

(1) Return on average common equity ("ROACE") is calculated by dividing annualized net income (loss) available to common shareholders for the period by the average shareholders' equity determined by using the common shareholders' equity balances at the beginning and end of the period.

(2) Operating ROACE is calculated by dividing annualized operating income (loss) for the period by the average common shareholders' equity determined by using the common shareholders' equity balances at the beginning and end of the period. Annualized operating ROACE is a non-GAAP financial measure as defined in SEC Regulation G. See 'Non-GAAP Financial Measures' for reconciliation to the nearest GAAP financial measure (ROACE).

(3) Diluted book value ("DBV") represents total common shareholders' equity divided by the number of common shares and diluted common share equivalents outstanding, determined using the treasury stock method.

Return on Equity
The improvements in operating ROACE for both the third quarter and year-to-date were largely attributable to improved underwriting results (primarily due to the reduction in natural catastrophe losses previously described) and the favorable variance in income from our other investments. The improvement in income from other investments impacted operating ROACE more significantly in the third quarter than for the nine-month period; in both periods, this improvement was partially offset by reduced yields from our fixed maturity portfolio. In addition to the items noted above for operating ROACE, ROACE is also impacted by net realized investment gains, foreign exchange losses (gains) and the loss on repurchase of preferred shares. In the aggregate, these amounts contributed favorably to our results for each period presented; thus, ROACE exceeded operating ROACE. The magnitude of the differences between ROACE and operating ROACE varied between periods, largely due to the foreign exchange losses (gains) previously discussed.
Diluted Book Value per Common Share
Our DBV per common share increased 18% from that of a year ago, primarily reflective of the generation of $594 million in net income available to common shareholders over the past 12 months and valuation improvements for our available-for-sale investment portfolio. The execution of common share repurchases at a discount to book value over the past year also contributed to diluted book value growth.

UNDERWRITING RESULTS - GROUP
--------------------------------------------------------------------------------

The following table provides our group underwriting results for the periods
indicated. Underwriting income (loss) is a pre-tax measure of underwriting
profitability that takes into account net premiums earned and other insurance
related income as revenues and net losses and loss expenses, acquisition costs
and underwriting-related general and administrative costs as expenses.
                                       Three months ended September 30,           Nine months ended September 30,
                                        2012         % Change      2011           2012        % Change       2011

  Revenues:
  Gross premiums written           $   847,686          2%      $ 835,056     $ 3,387,229       (1%)     $ 3,429,649
  Net premiums written                 650,599         (3%)       673,453       2,819,360       (4%)       2,924,372
  Net premiums earned                  862,447          3%        839,992       2,559,414        4%        2,468,207
  Other insurance related income           953                      1,156           1,884                      2,047
  Expenses:
  Current year net losses and loss    (503,083 )                 (585,270 )    (1,601,255 )               (2,271,284 )
  expenses
  Prior year reserve development        60,431                     78,431         180,274                    179,686
  Acquisition costs                   (158,796 )                 (146,836 )      (483,589 )                 (430,097 )
  Underwriting-related general and
  administrative
  expenses(1)                         (106,953 )                  (97,444 )      (319,300 )                 (290,860 )
  Underwriting income (loss)(2)    $   154,999         72%      $  90,029     $   337,428        nm      $  (342,301 )




  General and administrative       $   134,611                  $ 114,537     $   419,595                $   349,162
  expenses(1)
  Income (loss) before income      $   242,297                  $ 225,042     $   572,365                $   (35,086 )
  taxes(2)

nm - not meaningful
(1) Underwriting-related general and administrative expenses is a non-GAAP measure as defined in SEC Regulation G. Our total general and administrative expenses also included corporate expenses of $27,658 and $17,093, respectively, for the three months ended September 30, 2012 and 2011 and $100,295 and $58,302, respectively, for the nine months ended September 30, 2012 and 2011; refer to 'Other Expenses (Revenues), Net' for additional information related to these corporate expenses. Also, refer to 'Non-GAAP Financial Measures' for further information.

(2) Group (or consolidated) underwriting income (loss) is a non-GAAP financial measure as defined in SEC Regulation G. Refer to Item 1, Note 2 to the Consolidated Financial Statements for a reconciliation of consolidated underwriting income (loss) to the nearest GAAP financial measure (income
(loss) before income taxes) for the periods indicated above. Also, refer to 'Non-GAAP Financial Measures' for additional information related to the presentation of consolidated underwriting income (loss).

UNDERWRITING REVENUES

Premiums Written:

Gross and net premiums written, by segment, were as follows:
                                            Gross Premiums Written
                  Three months ended September 30,           Nine months ended September 30,
                   2012          Change       2011           2012         Change        2011

  Insurance   $   529,678          7%      $ 493,460     $ 1,729,365        8%      $ 1,600,548
  Reinsurance     318,008         (7%)       341,596       1,657,864       (9%)       1,829,101
  Total       $   847,686          2%      $ 835,056     $ 3,387,229       (1%)     $ 3,429,649

  % ceded
  Insurance            37 %      4 pts            33 %            32 %    2 pts              30 %
  Reinsurance           - %      0 pts             - %             1 %    0 pts               1 %
  Total                23 %      4 pts            19 %            17 %    2 pts              15 %

                                             Net Premiums Written
                  Three months ended September 30,           Nine months ended September 30,
                   2012         % Change      2011           2012        % Change       2011

  Insurance   $   332,591          -%      $ 331,857     $ 1,176,443        5%      $ 1,116,222
  Reinsurance     318,008         (7%)       341,596       1,642,917       (9%)       1,808,150
  Total       $   650,599         (3%)     $ 673,453     $ 2,819,360       (4%)     $ 2,924,372

Gross premiums written growth for the quarter was driven by a $36 million increase our insurance segment, partially offset by a $24 million reduction in our reinsurance segment. The increase in insurance was attributable to a number of lines of business, including liability, professional lines and accident & health. Select new business opportunities and, to a lesser extent, rate increases drove the increase in liability. Newer initiatives and an improving rate environment contributed to growth in professional lines and our recently established accident & health line continued to generate new business. These increases were partially offset by a reduction in property business, driven by the non-renewal of certain catastrophe-exposed business written through managing general agents ("MGAs"). Reductions in catastrophe and property business drove the decrease for the reinsurance segment. While more than half of an $18 million reduction in catastrophe premium was attributable to renewal timing differences, the continued repositioning of our portfolio in light of current risk/return characteristics also contributed. The decrease in property premiums was driven by reductions in reinsurance purchasing by certain of our clients, as well as our evaluation of risk/return characteristics. This was partially offset by growth in our liability reinsurance business, attributable to a number of factors including: premium adjustments on prior year treaties, line size increases and increases in expected writings by certain clients.

The $42 million reduction in gross premiums written during the first nine months of 2012 was driven by a $171 million, or 9%, decrease in our reinsurance segment and primarily related to the repositioning of our catastrophe reinsurance . . .