AXIS CAPITAL HOLDINGS LTD - Annual Report: 2019 (Form 10-K)

Large accelerated filer	☒    Accelerated filer    ☐

Non-accelerated filer	☐    Smaller reporting company    ☐

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ITEM 1.	BUSINESS

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•	Property: provides physical loss or damage, business interruption and machinery breakdown cover for virtually all types of property, including commercial buildings, residential premises, construction projects and onshore renewable energy installations. This line of business includes primary and excess risks, some of which are catastrophe-exposed.

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Marine: provides cover for traditional marine classes, including offshore energy, cargo, liability, recreational marine, fine art, specie, and hull and war. Offshore energy coverage includes physical damage, business interruption, operator's extra expense and liability coverage for all aspects of offshore upstream energy, from exploration and construction through the operation and distribution phases.

•	Terrorism: provides cover for physical damage and business interruption of an insured following an act of terrorism and includes kidnap and ransom, and crisis management insurance.

•	Aviation: provides hull and liability, and specific war cover primarily for passenger airlines but also for cargo operations, general aviation operations, airports, aviation authorities, security firms and product manufacturers.

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Credit and Political Risk: provides credit and political risk insurance products for banks, commodity traders, corporations and multilateral and export credit agencies. Cover is provided for a range of risks including sovereign default, credit default, political violence, currency inconvertibility and non-transfer, expropriation, aircraft non-repossession and contract frustration due to political events.

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Professional Lines: provides directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity, cyber and privacy insurance, medical malpractice and other financial insurance related covers for commercial enterprises, financial institutions, not-for-profit organizations and other professional service providers. This business is predominantly written on a claims-made basis.

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•	Liability: primarily targets primary and low to mid-level excess and umbrella commercial liability risks in the U.S. wholesale markets in addition to primary and excess of loss employers, public, and products liability predominately in the U.K. Target industry sectors include construction, manufacturing, transportation and trucking, and other services.

•	Accident and Health: includes accidental death, travel insurance and specialty health products for employer and affinity groups.

•	Discontinued Lines - Novae: includes those lines of business that Novae exited or placed into run-off in the fourth quarter of 2016 and in the first quarter of 2017. These discontinued insurance lines include financial institutions, professional indemnity, international liability, and international direct and facultative property.

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Catastrophe: provides protection for most catastrophic losses that are covered in the underlying insurance policies written by our cedants. The underlying policies principally cover property-related exposures but other exposures including workers compensation and personal accident are also covered. The principal perils covered by policies in this portfolio include hurricane and windstorm, earthquake, flood, tornado, hail and fire. In some instances, terrorism may be a covered peril or the only peril. This business is written on a proportional and excess of loss basis.

•	Property: provides protection for property damage and related losses resulting from natural and man-made perils that are covered in the underlying personal and commercial lines insurance policies written by our cedants. The predominant

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•	Professional Lines: provides protection for directors’ and officers’ liability, employment practices liability, medical malpractice, professional indemnity, environmental liability, cyber and miscellaneous errors and omissions insurance risks. The underlying business is predominantly written on a claims-made basis. This business is written on a proportional and excess of loss basis.

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Credit and Surety: provides reinsurance of trade credit insurance products and includes proportional and excess of loss structures. The underlying insurance indemnifies sellers of goods and services in the event of a payment default by the buyer of those goods and services. Surety reinsurance provides protection for losses arising from a broad array of surety bonds issued by insurers to satisfy regulatory demands or contract obligations in a variety of jurisdictions around the world. Mortgage reinsurance is also provided to mortgage guaranty insurers and U.S. government sponsored entities for losses related to credit risk transfer into the private sector.

•	Motor: provides protection to insurers for motor liability and property damage losses arising out of any one occurrence. A loss occurrence can involve one or many claimants where the ceding insurer aggregates the claims from the occurrence. Traditional proportional and non-proportional reinsurance as well as structured solutions are offered.

•	Liability: provides protection to insurers of admitted casualty business, excess and surplus lines casualty business and specialty casualty programs. The primary focus of the underlying business is general liability, workers' compensation, auto liability, and excess casualty.

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Agriculture: provides protection for risks associated with the production of food and fiber on a global basis for primary insurance companies writing multi-peril crop insurance, crop hail, and named peril covers, as well as custom risk transfer mechanisms for agricultural dependent industries with exposures to crop yield and/or price deviations. This business is written on a proportional and aggregate stop loss reinsurance basis.

•	Engineering: provides protection for all types of construction risks and risks associated with erection, testing and commissioning of machinery and plants during the construction stage. This line of business also includes cover for losses arising from operational failures of machinery, plant and equipment, and electronic equipment as well as business interruption.

•	Marine and Other: includes marine and aviation reinsurance.

•	Accident and Health: includes personal accident, specialty health, accidental death, travel, life and disability reinsurance products which are offered on a proportional and catastrophic or per life excess of events loss basis.

•	Discontinued Lines - Novae: includes those lines of business that Novae exited or placed into run-off in the fourth quarter of 2016 and in the first quarter of 2017. These discontinued reinsurance lines include motor reinsurance, general liability reinsurance, and international facultative property.

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•	Protect our capital base and earnings by monitoring our risks against our stated risk appetite and limits;

•	Promote a sound risk management culture through disciplined and informed risk taking;

•	Enhance value creation and contribute to an optimal risk-return profile by providing the basis for efficient capital deployment;

•	Support our group-wide decision-making process by providing reliable and timely risk information; and

•	Safeguard our reputation.

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•	The Business Council oversees underwriting strategy and performance, establishes return targets, and manages risk/exposure constraints across each line of business, in line with the Company’s strategic goals.

•	The Product Boards for each major line of business aim to develop a coherent strategy for portfolio management, set underwriting guidelines and risk appetite, and leverage expertise across the multiple geographies that we operate in. The boards also oversee exposure management frameworks and view of risk.

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The Investment & Finance Committee oversees the Group’s investment activities by, among other things, monitoring market risks, the performance of our investment managers and the Group’s asset-liability management, liquidity positions and investment policies and guidelines. The Investment & Finance Committee also prepares the Group’s strategic asset allocation and presents it to the Finance Committee of the Board for approval.

•	The Capital Management Committee oversees the integrity and effectiveness of the Company’s Capital Management Policy, including the capital management policies of the Company’s legal entities and branches, and oversees the availability of capital within the Group.

•	The Group Reserve Committee ensures appropriate oversight and challenge of the Group and Segment Reserves, led by the Group Chief Reserving Actuary.

•	The Reinsurance Security Committee ("RSC") sets out the financial security requirements of our reinsurance counterparties and approves our counterparties, as needed.

•	The Internal Model Committee oversees the Group's Internal Model framework, including the key model assumptions, methodology and validation framework.

•	The Operational Risk Committee oversees the Group's Operational Risk framework for the identification, management, mitigation and measurement of operational risk and facilitates the embedding of effective operational risk management practices throughout the Group.

•	The Emerging Risks Working Group oversees the processes for identifying, assessing and monitoring current and potential emerging risks.

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Excess of loss per risk – the reinsurer indemnifies us for loss amounts of all individual policies effected, defined in the treaty terms and conditions. Per risk treaties are an effective means of risk mitigation against large single losses (e.g. a large fire claim). This includes the Northshore Re catastrophe bond program, which provides a combined $715 million of limit across the Group. Refer to Item 7 'Management’s Discussion and Analysis of Financial Condition and Results of Operations' – Underwriting Results – Consolidated – Underwriting Expenses' for further details.

•	Catastrophe excess of loss – provides aggregate loss cover for our insurance portfolio against the accumulation of losses incurred from a single event (e.g. windstorm).

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Major failures and disasters which could cause a severe disruption to working environments, facilities and personnel, represent a significant operational risk to us. Our Business Continuity Management framework strives to protect critical business functions from these effects to enable us to carry out our core tasks in time and at the quality required. During 2019, we continued to review our Business Continuity Planning procedures through cyclical planned tests.

•	We have developed a number of Information Technology ("IT") platforms, applications and security controls to support our business activities worldwide. Dedicated security standards are in place for our IT systems to ensure the proper use, availability and protection of our information assets.

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Our use of third-party vendors exposes us to a number of increased operational risks, including the risk of security breaches, fraud, non-compliance with laws and regulations or internal guidelines and inadequate service. We manage material third-party vendor risk, by, among other things, performing a thorough risk assessment on potential large vendors, reviewing a vendor’s financial stability, ability to provide ongoing service and business continuity planning.

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We maintain cash and cash equivalents and high quality, liquid investment portfolios to meet expected outflows, as well as those that could result from a range of potential stress events. We place internal limits on the maximum percentage of cash and investments which may be in an illiquid form as well as on the minimum percentage of our asset portfolio which may be invested in unrestricted cash and liquid investment grade fixed income securities.

•	We maintain committed borrowing facilities, as well as access to diverse funding sources to cover contingencies. Funding sources include asset sales, external debt issuances and lines of credit.

•	Internal risk capital - We use our internal capital model to assess the capital consumption of our business, measuring and monitoring the potential aggregation of risk at extreme return periods.

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Regulatory capital requirements - In each country in which we operate, the local regulator specifies the minimum amount and type of capital that each of the regulated entities must hold in support of their liabilities and business plans. We target to hold, in addition to the minimum capital required to comply with the solvency requirements, an adequate buffer to ensure that each of our operating entities meets its local capital requirements. Refer to Item 8, Note 21 to the Consolidated Financial Statements, 'Statutory Financial Information' for further details.

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Rating agency capital requirements - Rating agencies apply their own models to evaluate the relationship between the required risk capital of a company and its available capital resources. The assessment of capital adequacy is usually an integral part of the rating agency process. Meeting rating agency capital requirements and maintaining strong credit ratings are strategic business objectives of the Company. Refer to Item 7 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources' for further details.

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ITEM 1A.	RISK FACTORS

•	$336 million, in the aggregate, primarily related to Japanese Typhoons Hagibis, Faxai and Tapah, Hurricane Dorian, and the Australia Wildfires in 2019;

•	$430 million, in the aggregate, primarily related to Hurricanes Michael and Florence, California Wildfires, and Typhoon Jebi in 2018; and

•	$835 million, in the aggregate, primarily related to U.S. weather-related events, Hurricanes Harvey, Irma and Maria, Mexico earthquakes and the California wildfires in 2017.

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•	Providing reinsurance capacity in markets and to consumers that we target;

•	Requiring our further participation in industry pools and guaranty associations;

•	Expanding the scope of coverage under existing policies; e.g., following large disasters;

•	Further regulating the terms of insurance and reinsurance contracts; or

•	Disproportionately benefiting the companies of one country over those of another.

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•	actual or anticipated variations in our quarterly results, including as a result of catastrophes or our investment performance;

•	any share repurchase program;

•	changes in market valuation of companies in the insurance/reinsurance industry;

•	changes in expectations of future financial performance or changes in estimates of securities analysts;

•	fluctuations in stock market processes and volumes;

•	issuances or sales of common shares or other securities in the future;

•	the addition or departure of key personnel;

•	changes in tax law; and

•	announcements by us or our competitors of acquisitions, investments or strategic alliances.

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ITEM 1B.	UNRESOLVED STAFF COMMENTS

ITEM 2.	PROPERTIES

ITEM 3.	LEGAL PROCEEDINGS

ITEM 4.	MINE SAFETY DISCLOSURES

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ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)	In thousands.

(b)	Shares are repurchased from employees to satisfy withholding tax liabilities that arise on the vesting of share-settled restricted stock units.

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ITEM 6.	SELECTED FINANCIAL DATA

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(1)

During 2019 and 2018, the Company recognized reorganization expenses of $37 million and $67 million, respectively, related to its transformation program which was launched in 2017. This program encompasses the integration of Novae Group plc ("Novae") which commenced in the fourth quarter of 2017, the realignment of our accident and health business, together with other initiatives designed to increase our efficiency and enhance our profitability while delivering a customer-centric operating model. During 2017, the Company recognized transaction and reorganization expenses of $27 million which included transaction costs incurred in connection with the acquisition of Novae, such as due diligence, legal, accounting, investment banking fees and expenses, as well as integration expenses related to the integration of Novae into the Company's operations and compensation-related costs associated with the termination of certain employees. During 2015, the Company implemented a number of profitability enhancement initiatives which resulted in recognition of transaction and reorganization expenses of $46 million and general and administrative expenses of $5 million.

(2)	During 2017, the Company recognized a tax expense of $42 million due to the revaluation of net deferred tax assets pursuant to the U.S. Tax Reform.

(3)	During 2019, 2018 and 2017, the Company recognized amortization of value of business acquired ("VOBA") of $27 million, $172 million and $50 million, respectively, related to the acquisition of Novae. Refer to Item 8, Note 4 to the Consolidated Financial Statements 'Goodwill and Intangible Assets' for further details.

(4)	During 2015, the Company accepted a request from PartnerRe Ltd., a Bermuda exempted company ("PartnerRe") to terminate the Agreement and Plan of Amalgamation (the "Amalgamation Agreement") with the Company. PartnerRe paid the Company a termination fee of $280 million.

(5)

During 2015, the Company early adopted the Accounting Standard Update ("ASU") 2015-02 "Consolidation (Topic 810) Amendments to the Consolidation Analysis", issued by the Financial Accounting Standards Board. The adoption of this accounting guidance resulted in the Company concluding that it was no longer required to consolidate the results of operations and the financial position of AXIS Ventures Reinsurance Limited ("Ventures Re"). The Company adopted this accounting guidance using the modified retrospective approach and ceased to consolidate Ventures Re effective January 1, 2015.

(6)	Operating ratios are calculated by dividing the respective operating expenses by net premiums earned.

(7)	Book value per common share and book value per diluted common share are calculated by dividing total common shareholders’ equity by the number of common shares and diluted common share outstanding, respectively.

(8)	Calculations and share amounts at December 31, 2015 include 1,358,380 additional shares delivered to the Company in January 2016 under the Company's Accelerated Share Repurchase ("ASR") agreement entered into on August 17, 2015.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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•	Net income available to common shareholders of $282.4 million, or $3.37 per common share and $3.34 per diluted common share

•	Operating income(1) of $213 million, or $2.52 per diluted common share(1)

•	Gross premiums written of $6.9 billion

•	Net premiums written of $4.5 billion

•	Net premiums earned of $4.6 billion

•	Estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $336 million (Insurance: $84 million; Reinsurance: $252 million), or 7.5 points on the current accident year loss ratio, primarily related to Japanese Typhoons Hagibis, Faxai and Tapah, Hurricane Dorian, Australian Wildfires, and other weather-related events

•	Net favorable prior year reserve development of $79 million

•	Underwriting income(2) of $29 million and combined ratio of 102.6%

•	Net investment income of $479 million

•	Net investment gains of $91 million

•	Amortization of value of business acquired ("VOBA") of $27 million

•	Reorganization expenses of $37 million

•	Foreign exchange gains of $12 million

•	Total cash and investments of $15.9 billion; fixed maturities, cash and short-term securities comprise 89% of total cash and investments and have an average credit rating of AA-

•	Total assets of $25.6 billion

•	Reserve for losses and loss expenses of $12.8 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $4.2 billion

•	Debt of $1.8 billion and a debt to total capital ratio(3) of 24.6%

•	Common shares repurchased were 0.2 million for $10 million

•	Common shareholders’ equity of $4.8 billion; book value per diluted common share of $55.79

(1)

Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliations to the most comparable GAAP financial measures, net income (loss) and earnings (loss) per diluted common share, respectively, are provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary – Results of Operations' and a discussion of the rationale for the presentation of these items is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary – Non GAAP Financial Measures'.

(2)

Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to net income (loss), the most comparable GAAP financial measure, is provided in 'Management's Discussion and Analysis of Financial Condition – Executive Summary – Results of Operations' and a discussion of the rationale for its presentation is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary – Non GAAP Financial Measures'.

(3)	The debt to total capital ratio is calculated by dividing debt by total capital. Total capital represents the sum of total shareholders’ equity and debt.

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•	increasing our relevance in a select number of attractive specialty lines insurance and treaty reinsurance markets, and continuing the implementation of a more focused distribution strategy;

•	continuing to grow a leadership position in the areas of our business with strong potential for profitable growth including U.S. excess and surplus lines, North America professional lines and Lloyd's specialty insurance business;

•	continuing to re-balance our portfolio towards less volatile lines of business that carry attractive rates;

•	continuing to improve the effectiveness and efficiency of our operating platforms and processes;

•	investing in data and technology capabilities, and tools to empower our underwriters and enhance the service we provide to our customers;

•	broadening risk-funding sources and the development of vehicles that utilize third-party capital; and

•	growing our corporate citizenship program to give back to our communities and help contribute to a more sustainable future.

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(1)

Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $129 million, $108 million and $130 million for the years ended December 31, 2019, 2018 and 2017, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other (Expenses) Revenues, Net' for further details. Refer also to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures' for further details.

(2)	Tax cost (benefit) of $12 million, $(12) million and $2 million for the years ended December 31, 2019, 2018 and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses.

(3)	Tax cost (benefit) of $1 million, $(4) million and $(8) million for the years ended December 31, 2019, 2018 and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions.

(4)	Tax (benefit) of $(7) million, $(11) million and $(3) million for the years ended December 31, 2019, 2018 and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

(5)	Tax cost (benefit) of $nil, $0.3 million and $nil for the years ended December 31, 2019, 2018 and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

(6)	Tax impact is $nil.

(7)

Operating income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliations to net income (loss), the most comparable GAAP financial measure is presented in the table above, and a discussion of the rationale for its presentation is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures'.

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(1)	Refer to Item 8, Note 13 to the Consolidated Financial Statements 'Earnings Per Common Share' for further details.

(2)

Operating income (loss) per diluted common share is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to earnings (loss) per diluted common share, the most comparable GAAP financial measure is presented in the table above, and a discussion of the rationale for its presentation is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures'.

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

(4)

Operating ROACE, a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K, is calculated by dividing operating income (loss) for the year by the average common shareholders' equity determined using the common shareholders’ equity balances at the beginning and end of the year. The reconciliation to ROACE, the most comparable GAAP financial measure is presented in the table above and a discussion of the rationale for its presentation is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures'.

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(1)

Ex-PGAAP operating income (loss), ex-PGAAP operating income (loss) per diluted common share and ex-PGAAP operating ROACE are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliations to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders, earnings (loss) per diluted common share, and ROACE, respectively, are presented in the table above, and a discussion of the rationale for the presentation of these items is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures'.

(2)	Ex-PGAAP operating ROACE is calculated by dividing ex-PGAAP operating income (loss) for the year by the average common shareholders' equity determined using the common shareholders’ equity balances at the beginning and end of the year.

(3)	Tax (benefit) of $(7) million, $(35) million and $(10) million for the years ended December 31, 2019, 2018, and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

(4)	Tax cost of $2 million, $24 million and $6 million for the years ended December 31, 2019, 2018, and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

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(1)	Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, is provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary – Results of Operations'.

(2)	Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to net income (loss), the most comparable GAAP financial measure, is provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary – Results of Operation'.

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(1)	The general and administration expense ratio included corporate expenses not allocated to underwriting segments of 2.8%, 2.3% and 3.1% for 2019, 2018 and 2017, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details.

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•	$33 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence related to the 2015 through 2017 accident years.

•	$19 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence related to recent accident years.

•	$12 million of net favorable prior year reserve development on professional lines business reflecting generally favorable experience on older accident years as we continued to transition to more experience based actuarial methods.

•	$11 million of net favorable prior year reserve development on property and other business primarily due to overall better than expected loss emergence related to the 2017 catastrophe events and SuperStorm Sandy, partially offset by reserve strengthening within the international book of business, mainly related to the 2018 accident year.

•	$25 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. excess casualty and U.S. primary casualty books of business mainly driven by the higher frequency and severity of auto claims and the higher frequency of general liability claims, mainly related to the 2015 and 2017 accident years.

•	$65 million of net favorable prior year reserve development on property and other business primarily due to overall better than expected loss emergence related to the 2017 catastrophe events.

•	$32 million of net favorable prior year reserve development on professional lines business primarily due to better than expected loss experience, particularly related to the 2014 and 2015 accident years.

•	$18 million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence on more recent accident years.

•	$22 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. excess casualty book of business mainly driven by the higher frequency of large auto and general liability claims mainly related to the 2015 accident year.

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•	$71 million of net favorable prior year reserve development on motor business primarily due to the impact of the increase in the Ogden Rate and changes in related actuarial assumptions, on several accident years.

•	$53 million of net favorable prior year reserve development on credit and surety business primarily due to generally better than expected loss emergence, mainly related to accident years 2015 through 2017.

•	$31 million of net favorable prior year reserve development on liability business due to increased weight given by management to experience based indications on older accident years.

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$133 million of net adverse prior year reserve development on property and other business primarily due to an increase in loss estimates attributable to Hurricanes Irma and Michael consistent with industry trends, an increase in loss estimates attributable to Typhoon Jebi consistent with updated industry insured loss estimates, and reserve strengthening within the U.S. regional and commercial proportional property books of business and the European proportional property book of business.

•	$33 million of net favorable prior year reserve development on credit and surety business primarily due to generally better than expected loss emergence, mainly related to accident years 2013 and 2014.

•	$23 million of net favorable prior year reserve development on motor business primarily due to non proportional treaty business related to older accident years.

•	$23 million of net favorable prior year reserve development on liability business primarily due to increased weight given by management to experience based indications on older accident years.

•	$21 million of net favorable prior year reserve development on professional lines business reflecting the generally favorable experience on older accident years as we continued to transition to more experience based actuarial methods.

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(1)	Pre-tax yield is calculated by dividing net investment income by the average month-end amortized cost balances for the periods indicated.

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(1)	Excluding overseas deposits.

(2)	The pre-tax return on other investments is calculated by dividing total net investment income from other investments by the average month-end fair value balances held for the periods indicated, excluding overseas deposits.

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(1)	Change in net unrealized gains (losses) on fixed maturities is calculated by taking net unrealized gains (losses) at period end less net unrealized gains (losses) at the prior period end.

(2)	The average cash and investments balance is calculated by taking the average of the period end fair value balances.

(3)

Pre-tax total return on average cash and investments excluding foreign exchange rate movements is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to pre-tax total return on cash and investments, the most comparable GAAP financial measure, included foreign exchange gains (losses) of $25 million, $(48) million and $80 million for the years ended December 31, 2019, 2018 and 2017, respectively.

(1)	Includes restricted cash and cash equivalents of $335 million and $597 million for 2019 and 2018, respectively.

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(1)	Includes bonds issued by states, municipalities, and political subdivisions.

(2)	Includes U.S. government-sponsored agencies, residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities ("CMBS").

(3)	Non-investment grade and non-rated securities.

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(1)	Includes supranationals only in the eurozone.

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(1)	Non-investment grade securities

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(1)	Refer to Item 8, ‘Consolidated Statements of Cashflows’, for further details.

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Net cash provided by operating activities was $199 million in 2019 compared to $11 million in 2018. Cash inflows from insurance and reinsurance operations typically include premiums, net of acquisition costs, and reinsurance recoverables. Cash outflows principally include payments of claims and loss adjustment expenses together with payments of premiums to reinsurers and operating expenses. Cash provided by operating activities can fluctuate due to timing differences between the collection of premiums and reinsurance recoverables and the payment of claims and loss adjustment expenses, and the payment of premiums to reinsurers. Operating cash inflows increased in 2019 compared to 2018, primarily attributable to an increase in premiums and reinsurance recoverables received, partially offset by an increase in payments of claims and loss adjustment expenses, an increase in costs associated with the purchase of reinsurance and retrocessional covers and an increase in operating expenses.

•	Investing cash outflows in 2019 principally related to the net purchases of fixed maturities of $693 million, net purchases of equity securities of $22 million, partially offset by net proceeds from the sale of other investments of $31 million.

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Financing cash inflows were due to net proceeds from the issuance of $300 million 3.900% Senior Notes and $425 million of Junior Subordinated Notes. Financing cash outflows primarily related to the repayment of $250 million 2.650% Senior Notes and dividends paid to common and preferred shareholders of $180 million in 2019 (2018: $176 million). Cash outflows also included common share repurchases associated with the vesting of share-settled restricted stock units of $10 million in 2019 ( 2018: $10 million). Any future share repurchases are discretionary, the timing and amount of repurchase transactions depend on a variety of factors including, but not limited to, global insurance and reinsurance, and financial market conditions and opportunities, capital management and regulatory considerations (refer to 'Capital Resources – Share Repurchases' below for further details). In 2018, we also fully redeemed the $36 million of Dekania Notes at par.

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(1)

We are obligated to pay claims for specified loss events covered by the insurance and reinsurance contracts that we write. Loss payments represent our most significant future payment obligation. In contrast to our other contractual obligations, cash payments are not determinable from the terms specified within the underlying contracts. Our best estimate of reserve for losses and loss expenses is reflected in the table above. Actual amounts and timing may differ materially from our best estimate (refer to ‘Critical Accounting Estimates – Reserve for Losses and Loss Expenses’ for further details). We have not taken into account corresponding reinsurance recoverable on unpaid amounts that would be due to us.

(2)	In the ordinary course of business, we renew and enter into new leases for office space which expire at various dates (refer to Item 8, Note 12 to the Consolidated Financial Statements 'Leases' for further details).

(3)	We have $588 million of unfunded investment commitments related to our other investments portfolio, which are callable by our investment managers (refer to Item 8, Note 5(c) to the Consolidated Financial Statements 'Investments' for further details). In addition, we have $32 million of unfunded commitments related to our commercial mortgage loans portfolio.

(4)	Refer to Item 8, Note 10(a) to the Consolidated Financial Statements 'Debt and Financing Arrangements' for further details.

(5)	Debt (interest payments) includes $17 million of unamortized discount and debt insurance expenses.

•	reserves for losses and loss expenses;

•	reinsurance recoverable on unpaid losses and loss expenses, including the provision for uncollectible amounts;

•	gross premiums written and net premiums earned;

•	fair value measurements of financial assets and liabilities; and

•	other-than-temporary impairments ("OTTI") in the carrying value of available for sale securities.

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Expected Loss Ratio Method ("ELR Method"): This method estimates ultimate losses for an accident year or underwriting year by applying an expected loss ratio to the earned or written premium for that year. Generally, expected loss ratios are based on one or more of (a) an analysis of historical loss experience to date, (b) pricing information and (c) industry data, adjusted as appropriate, to reflect changes in rates, loss and exposure trends, and terms and conditions. This method is insensitive to actual incurred losses for the accident year or underwriting year in question and is, therefore, often useful in the early stages of development when very few losses have been incurred. Conversely, the lack of sensitivity to incurred/paid losses for the accident year or underwriting year in question means that this method is usually inappropriate in later stages of an accident year or underwriting year’s development.

•

Loss Development Method (also referred to as the "Chain Ladder Method" or "Link Ratio Method"): This method assumes that the losses incurred/paid for each accident year or underwriting year at a particular development stage follow a relatively similar pattern. It assumes that on average, every accident year or underwriting year will display the same percentage of ultimate losses incurred/paid at the same point in time after the inception of that year. The percentages incurred/paid are established for each development stage (e.g. 12 months, 24 months, etc.) after examining averages from historical loss development data and/or external industry benchmark information. Ultimate losses are then estimated by multiplying the actual incurred/paid losses by the reciprocal of the established incurred/paid percentage. The strengths of this method are that it reacts to loss emergence/payments and that it makes full use of historical claim emergence/payment experience. However, this method has weaknesses when the underlying assumption of stable loss development/payment patterns is not valid. This could be the consequence of changes in business mix, claim inflation trends or claim reporting practices and/or the presence of large claims, among other things. Furthermore, this method tends to produce volatile estimates of ultimate losses where there is volatility in the underlying incurred/paid patterns. In particular, where the expected percentage of incurred/paid losses is low, small deviations between actual and expected claims can lead to very volatile estimates of ultimate losses. As a result, this method is often unsuitable at early development stages for an accident year or underwriting year.

•

Bornhuetter-Ferguson Method ("BF Method"): This method can be seen as a combination of the ELR and Loss Development Methods, under which the Loss Development Method is given progressively more weight as an accident year or underwriting year matures. The main advantage of the BF Method is that it provides a more stable estimate of ultimate losses than the Loss Development Method at earlier stages of development, while remaining more responsive to emerging loss development than the ELR Method. In addition, the BF Method allows for the incorporation of external market information through the use of expected loss ratios, whereas the Loss Development Method does not incorporate such information.

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•	Insurance and Reinsurance Professional Lines

•	Reinsurance Credit and Surety

•	Insurance Credit and Political Risk

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•	more significant weight given to industry benchmarks in forming our key actuarial assumptions;

•	potential volatility of actuarial estimates, given the number of years of development it takes to produce a meaningful incurred loss as a percentage of ultimate losses;

•	inherent uncertainties about loss trends, claims inflation (e.g. medical, judicial, social) and general economic conditions; and

•	the possibility of future litigation, legislative or judicial change that may impact future loss experience relative to the prior industry loss experience relied on in reserve estimation.

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•	estimates of the size of insured industry losses from the catastrophic event and our corresponding market share;

•	a review of our portfolio of contracts to identify those contracts which may be exposed to the catastrophic event;

•	a review of modeled loss estimates based on information previously reported by customers and brokers, including exposure data obtained during the underwriting process;

•	discussions of the impact of the event with our customers and brokers; and

•	catastrophe bulletins published by various independent statistical reporting agencies.

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•	changes in renewal rates or rates of new business accepted by cedants (changes could result from changes in the relevant insurance market that could affect more than one of our cedants or could be a consequence of changes in the marketing strategy or risk appetite of an individual cedant);

•	changes in underlying exposure values; and/or

•	changes in rates being charged by cedants.

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•	Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.

•	Level 2 – Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

•	Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect our judgments about assumptions that market participants might use.

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a.	the length of time and extent to which the fair value is less than the amortized cost.

b.	the financial condition, near-term and long-term prospects for the issuer of the security, including relevant industry conditions and trends, and the implications of rating agency actions, and offering prices.

c.	the reason for the decline (e.g. credit spread widening, credit event, foreign exchange rate movements);

d.	the historical and implied volatility of the fair value.

e.	the collateral structure and credit support of the security, if applicable.

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•	declines in value greater than 20% for nine consecutive months, and

•	declines in value greater than 10% for twelve consecutive months.

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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(1)	Assumes 10% change in underlying currencies relative to the U.S. dollar.

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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•	We tested the effectiveness of controls over the valuation of the recorded loss and loss expense reserves, including the review and approval process that management has in place for significant actuarial methods and assumptions used and the approval of management’s best estimate of loss and loss expense reserves.

•	We tested the completeness and accuracy of the underlying data that served as the basis for the Company’s actuarial analysis, including historical claims data, to test the reasonableness of key inputs to the actuarial estimate.

•	With the assistance of our actuarial specialists:

–	We independently developed an estimate of the reserves for selected classes of business, compared our estimates to those booked by the Company, and evaluated the differences.

–	We evaluated the Company’s methodologies against recognized actuarial practices for the remaining classes. We also evaluated the assumptions used by the Company using our industry knowledge and experience and other analytical procedures.

–	We compared the results of the reserve study prepared by third party actuaries to management’s best estimate and evaluated the differences.

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1.	HISTORY

•	AXIS Specialty Limited ("AXIS Specialty Bermuda"), a Bermuda domiciled company is licensed to provide specialty insurance and treaty reinsurance products on a worldwide basis. In addition, AXIS Specialty Bermuda conducts insurance and reinsurance business through its branch in Singapore, AXIS Specialty Limited (Singapore Branch).

•

AXIS Insurance Company, domiciled in Illinois and AXIS Reinsurance Company, domiciled in New York, together with AXIS Reinsurance Company (Canadian Branch) are licensed to offer a range of specialty insurance and treaty reinsurance products to a variety of niche markets on a worldwide basis. AXIS Surplus Insurance Company, domiciled in the state of Illinois is eligible to write insurance on a surplus lines basis.

•

AXIS Specialty Europe SE ("AXIS Specialty Europe") is a European public limited liability company, incorporated as a non-life insurer under the laws of Ireland. It is a Societas Europaea (SE), or European society company, and has been registered in accordance with company law of the E.U. AXIS Specialty Europe also conducts insurance business through its branch in the United Kingdom, AXIS Specialty Europe SE ("UK Branch"). Effective January 1, 2019, the shares of Compagnie Belge d’Assurances Aviation NV/SA ("Aviabel") were transferred to AXIS Specialty Europe from AXIS Specialty Holdings Ireland Limited and Aviabel was merged into AXIS Specialty Europe by way of merger by absorption and dissolved without going into liquidation (the "Aviabel Merger"). In connection with the Aviabel Merger, AXIS Specialty Europe established new branches in Belgium and the Netherlands, AXIS Specialty Europe SE (Belgium Branch) and AXIS Specialty Europe SE (Netherlands Branch), respectively. Effective January 1, 2019, AXIS Specialty Europe conducts insurance business through its new branches in Belgium and the Netherlands.

•	AXIS Re SE is a European public limited liability company, incorporated as a reinsurer under the laws of Ireland. AXIS Re SE is also a Societas Europaea (SE). AXIS Re SE also conducts reinsurance business through its branch in Switzerland, AXIS Re SE, Dublin (Zurich Branch).

•

The Company operates in the Lloyd's of London ("Lloyd's") market through its corporate members AXIS Corporate Capital UK Limited and AXIS Corporate Capital UK II Limited (formerly Novae Corporate Underwriting Limited), which provide 70% and 30%, respectively of AXIS Syndicate 1686's ("Syndicate 1686") capital support. AXIS Corporate Capital UK Limited was the sole corporate member of Syndicate 1686 until December 31, 2018. AXIS Syndicate 1686 is managed by AXIS Managing Agency Ltd.

•

On October 2, 2017, AXIS Specialty UK Holdings Limited, a wholly owned subsidiary of the Company, acquired a 100% ownership interest in Novae Group plc ("Novae"). AXIS Corporate Capital UK II Limited is the sole corporate member of Novae Syndicate 2007 ("Syndicate 2007"). Novae Syndicates Limited ("NSL") managed Syndicate 2007 until January 1, 2018, when the Company received authorization from Lloyd’s for AXIS Managing Agency to commence management and oversight of Syndicate 2007. Effective January 1, 2019, Syndicate 2007 ceased accepting new business and was placed into run-off.

•	AXIS Ventures Limited ("AXIS Ventures"), regulated by the BMA as an insurance manager, generates fee income from services provided to strategic capital partners.

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•	reserve for losses and loss expenses;

•	reinsurance recoverable on unpaid losses and loss expenses, including the provision for uncollectible amounts;

•	gross and net premiums written and net premiums earned;

•	fair value measurements of financial assets and liabilities; and

•	other-than-temporary impairments ("OTTI") in the carrying value of available-for-sale securities.

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a)	Investments

a.	the duration and the extent of the decline;

b.	the financial condition, near-term and long-term prospects of the issuer of the security;

c.	the reason for the decline (e.g. credit spread widening, credit event, foreign exchange rate movements);

d.	the historical and implied future volatility of the fair value; and

e.	the collateral structure and credit support of the security, if applicable.

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b)	Cash and Cash Equivalents

c)	Premiums and Acquisition Costs

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d)	Losses and Loss Expenses

e)	Reinsurance

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f)	Foreign Exchange

g)	Share-based Compensation

h)	Derivative Instruments

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i)	Goodwill and Intangible Assets

j)	Income Taxes

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k)	Treasury Shares

l)	New Accounting Standards Adopted in 2019

1.	whether any expired or existing contracts are or contain leases;

2.	the lease classification for any expired or existing leases; and

3.	initial direct costs for any existing leases.

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m)	Recently Issued Accounting Standards Not Yet Adopted

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(1)	Residential mortgage-backed securities ("RMBS") originated by U.S. government-sponsored agencies.

(2)	Commercial mortgage-backed securities ("CMBS").

(3)	Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs").

(4)	Municipals include bonds issued by states, municipalities and political subdivisions.

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b)	Mortgage Loans

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c)	Other Investments

•	Long/short equity funds: Seek to achieve attractive returns primarily by executing an equity trading strategy involving long and short investments in publicly-traded equity securities.

•	Multi-strategy funds: Seek to achieve above-market returns by pursuing multiple investment strategies to diversify risks and reduce volatility. This category includes funds of hedge funds which invest in a large pool of hedge funds across a diversified range of hedge fund strategies.

•	Direct lending funds: Seek to achieve attractive risk-adjusted returns, including current income generation, by investing in funds which provide financing directly to borrowers.

•	Private equity funds: Seek to achieve attractive risk-adjusted returns by investing in private transactions over the course of several years.

•	Real estate funds: Seek to achieve attractive risk-adjusted returns by making and managing investments in real estate and real estate securities and businesses.

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d)	Equity Method Investments

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f)	Net Investment Gains (Losses)

(1)	Refer to Note 7 'Derivative Instruments'

(2)	Effective January 1, 2018, the Company adopted ASU No. 2016-01 which requires the change in fair value of equity securities to be recognized in net income.

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g)	Restricted Assets

h)	Reverse Repurchase Agreements

•	Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

•	Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

•	Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect the Company's own judgments about assumptions that market participants might use.

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(1)	Includes Long/short equity and Multi-strategy funds.

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(1)	Includes Long/short equity and Multi-strategy funds.

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(1)	Realized gains (losses) on fixed maturities, and realized and unrealized gains (losses) on other assets and other liabilities included in net income are included in net investment gains (losses). Realized and unrealized gains (losses) on other investments included in net income are included in net investment income.

(2)	Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").

(3)	Change in unrealized gains (losses) relating to assets held at the reporting date.

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(1)	Asset and liability derivatives are classified within other assets and other liabilities in the consolidated balance sheets.

(1)	Net asset and liability derivatives are classified within other assets and other liabilities in the consolidated balance sheets.

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a)	Relating to Investment Portfolio

b)	Relating to Underwriting Portfolio

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•

Expected Loss Ratio Method ("ELR Method"): This method estimates ultimate losses for an accident year or underwriting year by applying an expected loss ratio to the earned or written premium for that year. Generally, expected loss ratios are based on one or more of (a) an analysis of historical loss experience to date, (b) pricing information and (c) industry data, adjusted as appropriate, to reflect changes in rates, loss and exposure trends, and terms and conditions. This method is insensitive to actual incurred losses for the accident year or underwriting year in question and is, therefore, often useful in the early stages of development when very few losses have been incurred. Conversely, the lack of sensitivity to incurred/paid losses for the accident year or underwriting year in question means that this method is usually inappropriate in later stages of an accident year or underwriting year’s development.

•

Loss Development Method (also referred to as the "Chain Ladder Method" or "Link Ratio Method"): This method assumes that the losses incurred/paid for each accident year or underwriting year at a particular development stage follow a relatively similar pattern. It assumes that on average, every accident year or underwriting year will display the same percentage of ultimate losses incurred/paid at the same point in time after the inception of that year. The percentages incurred/paid are established for each development stage (e.g. 12 months, 24 months, etc.) after examining averages from historical loss development data and/or external industry benchmark information. Ultimate losses are then estimated by multiplying the actual incurred/paid losses by the reciprocal of the established incurred/paid percentage. The strengths of this method are that it reacts to loss emergence/payments and that it makes full use of historical claim emergence/payment experience. However, this method has weaknesses when the underlying assumption of stable loss development/payment patterns is not valid. This could be the consequence of changes in business mix, claim inflation trends or claim reporting practices and/or the presence of large claims, among other things. Furthermore, this method

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Bornhuetter-Ferguson Method ("BF Method"): This method can be seen as a combination of the ELR and Loss Development Methods, under which the Loss Development Method is given progressively more weight as an accident year or underwriting year matures. The main advantage of the BF Method is that it provides a more stable estimate of ultimate losses than the Loss Development Method at earlier stages of development, while remaining more responsive to emerging loss development than the ELR Method. In addition, the BF Method allows for the incorporation of external market information through the use of expected loss ratios, whereas the Loss Development Method does not incorporate such information.

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•	estimates of the size of insured industry losses from the catastrophic event and the Company's corresponding market share;

•	a review of the Company's portfolio of contracts performed to identify those contracts which may be exposed to the catastrophic event;

•	a review of modeled loss estimates based on information previously reported by customers and brokers, including exposure data obtained during the underwriting process;

•	discussions of the impact of the event with customers and brokers; and

•	catastrophe bulletins published by various independent statistical reporting agencies.

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(1)

Non-U.S. dollar denominated loss data is converted to U.S dollar at the rates of exchange in effect at the balance sheet date for material underlying currencies. Fluctuations in currency exchange rates may cause material shifts in loss development. Reserves for losses and loss expenses disclosed in the consolidated balance sheets are also remeasured using rates of exchange in effect at the balance sheet date.

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a)	Debt

(1)	On April 1, 2019, AXIS Specialty Finance PLC, a 100% owned finance subsidiary, repaid $250 million aggregate principal amount of 2.650% Senior Notes at their stated maturity.

(2)

The Junior Notes accrue interest from the date of issuance to, but excluding, January 15, 2030 (the "Par Call Date") at the fixed rate of 4.900% and from, and including, the Par Call Date, at a rate equal to the Five-Year Treasury Rate as of the Reset Interest Determination Date, plus 3.186%. Interest of the Junior Notes is payable semi-annually on January 15 and July 15 of each year, beginning on July 15, 2020.

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b)	Letter of Credit Facility

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a)	Concentrations of Credit Risk

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d)	Legal Proceedings

e)	Investments

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f)	Funds at Lloyd's

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(1)	Due to the net loss recognized for the year ended December 31, 2017, the share equivalents were anti-dilutive.

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a)	Common Shares

(1)	Calculated using whole numbers.

(2)	Shares are repurchased from employees to satisfy withholding tax liabilities that arise on the vesting of share-settled restricted stock units.

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b)	Preferred Shares

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16.	SHARE-BASED COMPENSATION

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a)	Share-Settled Awards

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19.	INCOME TAXES

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(1)	At December 31, 2019 and 2018, the total operating loss carryforwards includes Lloyd's deferred year of account losses of $50 million and $68 million, respectively.

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(1)	At December 31, 2019, all remaining operating and capital loss carryforwards and tax credits can be carried forward indefinitely.

(2)	At December 31, 2019 and 2018, the U.K. operating loss carryforward includes Lloyd's deferred year of account losses of $293 million and $403 million, respectively.

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(1)

Effective January 1, 2018, the Company adopted ASU No. 2016-01. The adoption of this guidance resulted in a cumulative adjustment to reclassify unrealized investment gains on equity securities from accumulated other comprehensive income to retained earnings. Refer to Item 8, Note 2 'Basis of Presentation and Significant Accounting Policies' to the consolidated financial statements for additional information.

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(1)	Amounts in parentheses are charges to net income (loss)

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(1)

Consolidated underwriting income is a pre-tax measure of underwriting profitability that takes into account net premiums earned and other insurance related income (loss) as revenues and net losses and loss expenses, acquisition costs and underwriting-related general and administrative expenses as expenses. Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to income (loss) before income taxes and interest in income (loss) of equity method investments, the most comparable GAAP financial measure, is provided in Note 3 'Segment Information'.

(2)

Underwriting-related general and administrative expenses includes those general and administrative expenses that are incremental and/or directly attributable to the Company's underwriting operations. Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $129 million, $108 million and $130 million for the years ended December 31, 2019, 2018 and 2017, respectively. Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to the Company's underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses.

(3)

During the quarters ended March 31, June 30, September 30 and December 31, 2019, the Company recognized reorganization expenses of $15 million, $3 million, $11 million and $8 million, respectively, related to its transformation program which was launched in 2017. This program encompasses the integration of Novae which commenced in the fourth quarter of 2017, the realignment of the accident and health business, together with other initiatives designed to increase the Company's efficiency and enhance the Company's profitability while delivering a customer-centric operating model. During the quarters ended March 31, June 30, September 30 and December 31, 2018, the Company recognized reorganization expenses of $13 million, $19 million, $16 million and $19 million, respectively (refer to Note 18 'Transaction and Reorganization Expense').

(4)

During the quarters ended March 31, June 30, September 30 and December 31, 2019, the Company recognized amortization of VOBA of $13 million, $7 million, $4 million, $2 million, respectively, related to the acquisition of Novae. During the quarters ended March 31, June 30, September 30 and December 31, 2018, the Company recognized amortization of VOBA of $57 million, $53 million, $39 million and $23 million (refer to Note 4 'Goodwill and Intangible Assets').

23.	SUBSEQUENT EVENTS

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.	CONTROLS AND PROCEDURES

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ITEM 9B.	OTHER INFORMATION

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

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ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	Financial Statements, Financial Statement Schedules and Exhibits

1.	Financial Statements

2.	Financial Statement Schedules

Schedule I	–    Summary of Investments - Other than Investments in Related Parties

Schedule II	–    Condensed Financial Information of Registrant

Schedule III	–    Supplementary Insurance Information

Schedule IV	–    Supplementary Reinsurance Information

3.	Exhibits

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*	Exhibits 10.2 through 10.42 represent a management contract, compensatory plan or arrangement in which directors and/or executive officers are eligible to participate.

†	Filed herewith.

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ITEM 16.	FORM 10-K SUMMARY

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(1)	Other investments exclude investments where the Company is considered to have the ability to exercise significant influence over the operating and financial policies of the investees.

(2)	Equity method investments are excluded as the Company has the ability to exercise significant influence over the operating and financial policies of the investees.

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(1)	AXIS Capital has fully and unconditionally guaranteed all obligations of AXIS Specialty Finance LLC, a 100% owned finance subsidiary, related to the issuance of $500 million aggregate principal amount of 5.875% senior unsecured notes. AXIS Capital’s obligations under this guarantee are unsecured senior obligations and rank equally with all other senior obligations of AXIS Capital.

(2)	AXIS Capital has fully and unconditionally guaranteed all obligations of AXIS Specialty Finance PLC, a 100% owned finance subsidiary, related to the issuance of $250 million aggregate principal amount of 5.15% senior unsecured notes. AXIS Capital's obligations under this guarantee are unsecured senior obligations and rank equally with all other senior obligations of AXIS Capital.

(3)	AXIS Capital has fully and unconditionally guaranteed all obligations of AXIS Specialty Finance PLC, a 100% owned finance subsidiary, related to the issuance of $350 million aggregate principal amount of 4.0% senior unsecured notes. AXIS Capital's obligations under this guarantee are unsecured senior obligations and rank equally with all other senior obligations of AXIS Capital.

(4)	On February 15, 2018, AXIS Capital contributed $105 million to AXIS Specialty Global Holdings Limited to support the capital requirements of its U.S. subsidiaries.

(5)	AXIS Capital has fully and unconditionally guaranteed all obligations of AXIS Specialty Finance LLC, a 100% owned finance subsidiary, related to the issuance of $300 million aggregate principal amount of 3.9% senior unsecured notes. AXIS Capital's obligations under this guarantee are unsecured senior obligations and rank equally with all other senior obligations of AXIS Capital.

(6)

AXIS Capital has fully and unconditionally guaranteed all obligations of AXIS Specialty Finance LLC, a 100% owned finance subsidiary, related to the issuance of $425 million aggregate principal amount of 4.9% fixed-rate reset junior unsecured notes. AXIS Capital's obligation under this guarantee is an unsecured junior subordinated obligation and ranks equally with all future unsecured and junior subordinated obligations of AXIS Capital, and junior in right of payment to all outstanding and future senior obligations of AXIS Capital.

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(1)	On April 15, 2017 a promissory note of $368 million advanced by AXIS Capital Holdings Limited to AXIS Specialty Limited on November 7, 2016, matured. For the year ended December 31, 2017, interest earned at an annual rate of 1.132% and was recorded in net investment income.

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(1)	The Company evaluates underwriting results of its reportable segments separately from the performance of its investment portfolio therefore, the Company believes it is appropriate to exclude net investment income from its underwriting profitability measure.

(2)

Amounts related to the Company's reportable segments reflect underwriting-related general and administrative expenses, which includes those general and administrative expenses that are incremental and/or directly attributable to the Company's underwriting operations. Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, presented in the table above, also included corporate expenses of $129 million, $108 million and $130 million for the years ended December 31, 2019, 2018 and 2017, respectively. Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to the Company's underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses.

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