Good day, and welcome to the third quarter 2010 AXIS Capital Holdings earnings conference call and webcast. (Operator Instructions) I would now like to turn the conference over to Ms. Linda Ventresca, Investor Relations.

I am happy to welcome you to our conference call to discuss the financial results for AXIS Capital for the quarter ended September 30, 2010. Our earnings press release, financial supplement and quarterly investment supplement were issued yesterday evening after the market closed. If you would like copies, please visit the Investor Information section of our website, www.axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast through the Investor Information section of our website. A replay of the teleconference will be available by dialing 877-344-7529 in the U.S. The international number is 412-317-0088. The conference code for both replay dial-in numbers is 444604. With me on today's call are John Charman, our CEO and President; and David Greenfield, our CFO. Before I turn the call over to John, I will remind everyone that statements made during this call, including the question-and-answer session, which are not historical facts, may be forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements contained in this presentation include but are not necessarily limited to information regarding our estimate of losses related to catastrophes, policies, and other loss events, general economic capital and credit market conditions, future growth prospects and financial results, evaluation of losses and loss reserves, investment strategies, investment portfolio and market performance, impact to the marketplace with respect to changes in pricing models and our expectations regarding pricing and other market conditions. These statements involve risks, uncertainties and assumptions which could cause actual results to differ materially from our expectations. For a discussion of these matters, please refer to the Risk Factors section in our most recent Form 10-K on file with the Securities and Exchange Commission. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, this presentation contains information regarding operating income, which is a non-GAAP financial measure within the meaning of the U.S. federal securities laws. For a reconciliation of this item to the most directly comparable GAAP financial measure, please refer to our press release which can be found on our website. With that, I'd like to turn the call over to John.

Good morning everyone, and thank you for joining us. After providing an overview of the results for the quarter, I will ask David to discuss those results in more detail. Then I will address underwriting activity and market outlook. For the quarter, operating earnings per share were up 22% to $1.22. Annualized operating return on equity for the quarter was 12.6%, which we view as healthy, given current end market conditions and the low investment view of the environment. The combined ratio was 85.6% and included $85 million in net losses from the New Zealand earthquake. Operating earnings per share for the year-to-date were $3.20, and we produced an attractive annualized operating ROE for the first nine months of the year of 11.3%, even taking into account the catastrophe activity this year. We ended the first nine months of the year with a combined ratio of 89.8%. Our progress in accreting diluted book value per share is a primary measure in assessing our shareholder value creation. Our operating and investment results reduced the diluted book value per share of $39.1 at September 30. That's a 6.7% increase since June 30, a 15.9% increase since year-end 2009 and a 23.5% increase compared to a year ago. Our capital position is strong, and David will talk more about capital management activities later. As previously indicated, David Greenfield's last day as our Chief Financial Officer will be November the 30. This is David's last conference call, and I know we will all miss David's insightful commentary regarding our financial results. David has been a valued member of our executive management group for the past four years. During this time, he has successfully directed financial strategy of the company, and led the further development of our accounting control, financial reporting, financial planning, tax and treasury functions. We thank David for his many contributions to AXIS Capital during the last four years and wish him well in his future endeavors. And we announced late last week, Albert Benchimol who currently serves as Chief Financial Officer of PartnerRe will be joining us on January the 17 as Executive Vice President and Chief Financial Officer. We expect that Albert will continue to build on the great work David has done with AXIS, and I am confident that we will continue to have one of the strongest management teams in the industry equipped to lead AXIS to even greater successes in the years ahead. I will now turn the call over to David to discuss our financial results for the third quarter of 2010 in more detail.

Good morning, everyone. Before I begin, I'd like to just take a minute to thank you, John, for those kind words and to extend my thanks to all of my colleagues at AXIS and those in the financial community for your support and assistance over the past 4 years. We've accomplished quite a lot together and worked through some challenging financial markets. Thank you all. As John mentioned, we're pleased with our results for the quarter. Our diluted book value per share increased 7% during the quarter, reaching another all time high above $39. Book value was bolstered by net income, as well as further improvements in valuations for our investment portfolio. In addition, we delivered a strong annualized operating return on average common equity of 12.6% for the quarter. Net income available to common shareholders for the quarter was $239 million or $1.78 per diluted share, compared with a net loss of $96 million or $0.70 per diluted share for the third quarter of 2009. Operating income, which excludes the impact of realized gains and losses on investments, was $164 million or $1.22 per diluted share, compared with $152 million or $1 per diluted share for the third quarter of 2009. For the first nine months of 2010, net income available to common shareholders was $556 million or $4.4 per diluted share compared with $179 million or $1.19 per diluted share in the first nine months of 2009. Operating income was $439 million or $3.20 per diluted share, compared to $490 million or $3.26 per diluted share for the first nine months of last year. Turning to our top-line, our consolidated gross premiums written were $751 million for the quarter, a 3% decline from the third quarter of 2009. Reductions in our reinsurance segment were partially offset by selective…

Thank you, David. The market during this second half of the year does not look substantially different from what we've seen in the first half of this year. The market continues on a steady broad competitive track. The overall rate change for our insurance segment during the third quarter is estimated at minus 4% which is inline with the change in the prior quarter. Because of differences in mix of business between the two sequential quarters, the rate changes are not directly comparable. However, the trend is negative across most insurance lines and we expect to see a continuation of this negative trend through the balance of the year absent in major cap base. This modest decline in pricing across the portfolio was relatively consistent across most classes. The only class of business which has experienced meaningful positive rate change as expected is the offshore energy class, following the Deepwater Horizon loss. Overall, our renewal retention rates were amongst the highest we have seen as we remain focused on maintaining business that we know well. Aside from lines of business which are new to our overall portfolio such as accident and health, new business in our existing lines is limited. The greatest challenges ahead for the reinsurance market stem from the underwriting activity of primary companies, whether it's continued pressure on rate and changes in terms and conditions. While there is a general negative tone in the reinsurance marketplace, the tone naturally seems to be driven the loudest by intermediaries. In our view there is nothing particularly unhealthy about the current state of the reinsurance marketplace. We are operating in a marketplace where it is extremely challenging to find new opportunities in existing lines of business, but we remain satisfied with the portfolio that we have assembled. We have not…

(Operator Instructions) Our first question comes from Vinay Misquith of Credit Suisse.

Could you give us a sense for what the status is on the build-out of your platform? I believe you could have been build-out mode last year and earlier this year.

Sorry, did you say A&H?

Yes the A&H, and from just wanting to build out your platform in total. So has that nearly been completed?

Sorry, let me deal with A&H first. Because we said it was probably a two-and-a-half-year build. And we started in early 2009 to build this business. And by the end of 2009, we have round about 30 staff working for us dedicated to A&H which is a separate division. By the end of this year, we'll have around 60 people dedicated to A&H business. And it's a pretty significant investment which I signaled at the very onset of this initiative. And we will probably invest between something like $40 million to $50 million, which shows you how important this strategy is to us. And it'll probably have a run rate once it gets going of around $40 million. We would expect it to have just over a 100 people as a normalized run rate business. We will have all of our domestic licenses in place, give or take, one or two by the end of this year. We are now pretty operational within Europe from an insurance standpoint or a reinsurance standpoint. We expect a little bit of premium written this year, maybe $13 million, $15 million not much. But then, it will begin to ratchet up quite substantially we expect during 2011. And that will begin to offset some of the costs that we've incurred, but it was a five year build, Vinay. I'd say that's an extraordinarily good business once you can get into it. There's a very good opportunity for us because all of the businesses that are currently in this space that are material businesses are mature, their legacy businesses hiding behind modern fronts, but are overwhelmed with costs which we can actually build systems and processes which would be materially different. So we are coming to the end of the build stage and I would expect us to start showing some meaningful premium growth during 2011. As far as the rest of the company is concerned we've been busy building our Canadian operations and our Australian operations as well as our Singaporean operations, and we've been concentrating on that during the course. Everything else is ticking along pretty smoothly. Does that answer your question?

Yes. The second question for David, the net investment income yield remained relatively flat this quarter versus last quarter despite significantly lower rates, can you give us a sense for why that's happened?

Well I think, you have to look at the positioning of the portfolio. So when you look at the portfolio composition, we are looking at areas where we can maintain our yield as best we can without sacrificing duration and quality. We do expect the yield's going to continue to come down as I made comments earlier today in the call. But for now, the yields are holding at about the 3.6 level. But I think as we get into next year, given our pessimistic view on rates and the over all environment, we're going to expect that yield's going to trend down to the low three's into the two's.

Our next question is from Matthew Heimermann of JPMorgan.

I guess just with respect to the policy risk trade credit business, can you give us the sense of where that business is being booked this year versus last year just so we can better understand what it might mean going forward?

Well, let me give you a flavor of just how many policies we have written this year to date. We've actually written 25 policies with an average exposure around $23 million. And the average tenure in years is just under five years, it's 4.6 years. We actually have written on a gross written premium basis at the end of the third quarter, just over $20.5 million. So it's still relatively modest, but obviously we've got the earned coming in from prior year's writings still. So again, we are just growing back into the market quite carefully. Does that help?

That helps, but I guess I was thinking more just some color into the, you mentioned both in the commentary and the press release that we axe of your picks came down and I would suspect that's just proportionally being effected by the earn from prior year. So I was just trying to get a sense.

Before David jumps in, I want to just drop back to what I said to you guys three years ago as a result of the financial crisis and the activity that we had. We started to elevate our loss picks on this line of business which we would normally expect to have pretty minimal activity. Back in 2007, and then through 2008 and 2009 being the highest loss level of activity that we had. This is a sort of business that we're very proactive in monitoring activity, including potential default activity. And so, we move pretty quickly and we know very quickly whether they're any issues with any of these contracts, and we reserved very early on. So the reaction that we've taken to look at the loss pick is a reflection of the fundamental change that we though would come into 2010 which is a substantial improvement in the global economical climate which has had a direct impact on the sort of claims activity that we've seen which we anticipated.

Let me just add, because I provided these numbers or some numbers along these lines in the previous calls. In terms of combined ratio for a political risks business, we're now sort of trending to below 100% combined from the elevated levels that we were a year ago. And substantially lower loss activity, and particularly with regard to the loss ratio in the current year, the accident year, much of the losses that where loss ratio is really being put up into IBNR as opposed in case reserves So when you look at this line, and you put that together John's commentary and think about this business, don't forget about our conservative, our reserving posture. And so I think as this continues, we'll see those loss ratios and combined ratios come down even further as we have more and more experience in the current market.

Matt, we said in our commentary that we are now seeing a much more normalized, what we would consider to be a much more normalized portfolios, the global economy has settled.

And then, David, do you have same number or give us a same sense for the trade credit?

Very similar story, I mean we're down below the hundred on the combined ratio. And again, we're seeing very positive results in that business; and that business has gone through couple of years of re-pricing now. So it's pretty much in line with what we've said on several of our calls in terms of the trends in this particular line of business.

And, Mat, just on that point because we held meetings back in September with all the three large trade credit businesses. And I think during the financial crisis, which was really rolling fast into '09, they really became very conservative about some of their estimations for the '09 accident. And I think that fortunately, those estimations tended to be a bit up more on the conservative side, though as we're getting better information now and as that year develops more fully, we'll feel a lot more comfortable with the ultimate outcome of it.

And then I guess, just the one thing more related to capital. If I look at the PML you put in for U.S. just under a $1.5 billion, and then your stated threshold for loss is 25% of total capital. So if I just took a look at where that was today, it would suggest that you've got an additional $250 million in round numbers of capital room. I just would rather than validating the number, conceptually is that a reasonable way to think about your capital flexibility?

That's one way to look at it, Matt. And obviously, we're still in an environment with great pressure on earnings. So, we look at these numbers very regularly in terms of putting our books together. So, I would agree that's one way we can look at that.

Our next question is from Greg Locraft from Morgan Stanley.

I wanted to just get some color on the New Zealand quake, how did you come to the $85 million estimate? How do you feel relative to the Chile exposure in the first quarter? And can you just give us some thought there?

I think that the New Zealand quake is fundamentally different from the Chilean earthquake in the fact that it's pretty predominantly residential exposures that have been affected. Where, the Chilean loss happened to be a very substantial commercial loss, as well as residential. And then there are also practical issues, Greg. With the Chilean loss if you remember, because it didn't have enough loss addresses that could speak Spanish. And trying to get loss adjusters into that part of the world is a huge logistical issue. And that has been why it's taken much longer for the Chilean loss to emerge into the international market. The New Zealand quake is slightly different; it's a much more mature market. We are involved with many of the local companies who have been very long term buyers of CAT business, they've got very good reputations and it's an important part of our effort in the Asia-Pacific region to build our business there, especially given the data quality issues and the competitiveness in the rest of Asia. So, we probably have a slightly higher than expected loss than we expected. But, that was really as a result of one risk program that performed worse than we had modeled or we had expected. But, what I want to do is to put New Zealand into context of our global portfolio, and that's very important to understand. And very important to understand how that global portfolio fits into our overall portfolio. And so far this year, we estimate that industry cap losses have been around about $26 billion. And we estimate our total exposure, and we believe that we are conservatively reserved, our total exposure will be around about $315 million which is just around about 1.25% market share which is actually there or thereabouts where we'd expect. We'd expect to be somewhere depending upon the geography between 1.25% somewhere between 1% and 2% market share. I think you need to think about the New Zealand loss, not just as New Zealand but as part of our global cap exposures.

Just shifting gears on the commentary, John, you mentioned that you were thinking 2012 is kind of how you're planning the business for a potential change in the market. What decisions are you making today to sort of adjust for that? Is that a shifting, you're thinking from six months ago?

We started planning for a change in the market a couple of years ago. And the way that we started planning there was actually looking at transforming efficiency as an underwriting business in both our insurance sector and both our reinsurance sector, trying to make sure that we were as best equipped as we could do to react immediately and positively and strongly, and especially efficiently to any change in the marketplace. And you can't do that overnight; it's taken two, two-and-a-half years for us to get into a position where today we are very well I think structured to take advantage of the market. I think the market turn, in honesty we thought might come a little earlier, but not much earlier. So we've been patient. I think we've been disciplined. But we are very well positioned globally. Don't forget Axis is a fantastic, diversified global business in both insurance products and reinsurance products, by product and by geography. And when we smell the recovery, we will take full advantage of it.

And then any magic to 2012 in terms of your thinking as to why that might be a year when the odds are in favor of the market turning?

You still have some stupid outliers, but I'd like to tell you I think they are otherwise (inaudible), they are very upset with me. But my instinct tells me that on the primary side, things are getting to the bottom in terms of the downward pressure. So much has been cut out of the account generally in terms of price that there really isn't a lot more give in it, but for the general market. And that's why I think it will be 2012.

Our next question is from (Alan Straus of Omega).

Just wanted to ask, on the share repurchase program what type of timeframe you have for that? Is that a one year timeframe, assuming that there are no major cats? And number two, I just wanted to congratulate David on doing a great job, and good luck on his next endeavor. Thank you, Alan. A couple of comments on this. The program that the Board authorized has a two-year timeframe for us to execute on it. That doesn't necessarily mean we are going to take two years or wait for two years or do it all quickly. I think the way it's best to look at it is, given the current market conditions, our view is, we're going to try to keep our capital levels somewhat stable. So essentially, we're going to try to be aggressive in repurchasing shares when we think that the valuations are in our favor as you might think they are now. And we're going to try to maintain, repurchases at the levels of the earnings that we're creating or the capital that we're creating over the course of the next couple of years.

So is it just safe to assume that all earnings basically are free cash flow, just not included in the capital gains?

That's one way to look at it. I don't want you to pin me down exactly how we're going to do it. But essentially, the view is that we have a very strong capital base and we're going to try to keep it steady in these market conditions.

Our next question is from Brian Meredith of UBS.

Two questions for you John. Could you give us a sense of what the aviation renewal looks like here at October 1? And then the second one is could you comment on what your thoughts are about the trade credit reinsurance renewal coming up at '11?

I think the aviation market is still pretty barmy which is an English expression for pretty dopy. I think that the signs of hardening appeared towards the end of last year and the early part of this year have been significantly dampened. And I'll just remind you, Brian, that we pulled out of this class of business at the end of 2005. And since 2005, I think 10 to 12 dedicated aviation businesses have been set up, at a time when no underwriters have been making well. I don't know if any underwriters have been making any real money on that portfolio of that business over the last four of five years. So because of the number of participants, don't forget that aviation is what we call a verticalized marketplace. You have a meter that sets the price, the price is at a 100%. And then the following market will be discounted by as much as 30% to 40% of the premium in order for them to access shares on that particular renewal. So when people tell you about there aviation portfolio, you really need to dig in to ask them just what the average reduction of the leaders price is that they're writing this business at. And exactly how much their reinsurance is costing. Because they're probably running the first $300 million in terms of 100% loss before their reinsurance programs can kick in. I heard they're frustrated by the market and its failure to recognize the huge exposures that the market is taking on and the lack of appropriate premium pricing relative to exposure. One only has to look at the new Airbus 380s and the number of passengers and liabilities involved with those passengers as well $300 million values and see just how minimal the premiums have…

And then one last question, could you give us your thoughts on the marine and energy reinsurance for '11 and could that impart some further upward pressure on the primary rates you think in '11?

It's going to be interesting, because without a shadow of a doubt the energy market has been knocked by the rise of loss. And there will naturally be some reaction to that which would either be by way of increased retentions or coupled with increased pricing. We actually will negotiate our renewal pretty hard, because we have had a very good record with our reinsurers in this line of business for many years. As far as the marine account is concerned, I regard that in the same way I regard the aviation account. It is substantially under-priced, underwritten by underwriters who really don't understand the business and have had no real length of time. I worked for (inaudible) for five years and built insurance for it a long, long time ago. So I think I understand that business pretty well. And I look with dismay, their underwriting talent to write that class of business, let alone report it. So for the reinsurance or the marine market it tends to be loss-driven rather, more than exposure-driven.

Our next question is from Beth Malone of Wunderlich Securities.

I have a couple of questions. How do you view shareholder dividends as a way to manage your excess capital?

Well, I think we much prefer share repurchases over any sort of special dividends or one-time dividends. We think that the dividend yield on our stock is an important measure of shareholder return. And we have a good track record of paying dividends and increasing our dividends, and I would expect that to continue in the future. But I think all else being equal, if we have options, we would prefer share repurchase to any sort of special-type dividends.

And then, on the earthquake exposure, should we assume that pricing for earthquake risks is going to be rising?

Yes, especially in some of these outlying areas. I think that California and Japan I still think there'll be a lot commercial pressure to suppress that pricing. But I think you will find significant changes in the approach to the entry to some of these more peripheral earthquake exposed regions.

And does that suggest that you all will be writing more of that risk going forward?

No, I said we're going to get paid better.

Okay, but not increase your exposures?

I don't see that, not in a material way Beth. But I see that there will be a restructuring of a lot of these, as I said secondary geographies in terms of the data that we get out of them is pretty good; the modeling by and large has been pretty good. But I think that there's been a greater recognition of frequency and severity. So we are going to have to deal with that. And the market is dealing with it.

And then you mentioned that you don't see a lot of opportunities from an acquisition standpoint because of pricing of those potential acquisitions. But if your assessment of the pricing environment for insurance stretching out until no recovery till 2012, do you anticipate that you will get that opportunity in 2011?

I still don't see a lot of, and forgive me; I don't mean to be disrespectful to my peer group. I don't see a lot of value out there which is transformational to us from an acquisition standpoint. We will still look at specialist businesses to see which would compliment our existing portfolio, but in terms of trying to find something that's transformational for us. Every man on this job is trying to do the same thing out there, some better than others, but I think we would rather substantially increase if we saw rating increases coming through. With the operating efficiency we have, with the market penetration we have, I would rather throw our capital at expanding our existing portfolios than actually look to buying in a mediocre business that's got volume.

Our next question comes from Ian Gutterman of Adage Capital.

Two questions if I can. The first is, as I'm looking at the improvement in loss ratios, when I look at the accident year ex-cat loss ratio year-to-date for both insurance and reinsurance, they're now actually slightly better than '06 and '07. I understand why it would actually be better than '08 and '09 given what's going on with the trade and (brokerage) stuff, but why should it be better than '06 and '07 given what's happened to pricing the last 4 years?

Maybe I'll start John, and you can jump in, but I think it's very difficult to compare today's mix of business with the same mix that we have back in '06 and '07. And John could talk more to that specific point. But more importantly, when you just look at our reported ratios and the way you are doing it, you have also factor in the point that I've been kind of talking about for several quarters now which is, we are incorporating more and more of our own experience at the time we're writing the business as opposed to letting it develop and using market pay status. So when you look at '06, '07 data, a lot of that's market-driven factors that we are using in the initial reserving, whereas we are now incorporating more and more of our own experience in our businesses today.

But what we do have Ian, you've heard me bang on before about our price monitoring system. I hear that my peer group were just recently discovering that they ought to price-monitor new business, which I find absolutely astounding. We have had a continuous process which is been very stable and it is audited, regulated. Regarding the price monitoring of all our business that we undertake, and that's on a pro forma basis, it's very consistent for both new and renewal business. Not only taking into account any price reductions or price increases, but also any changes in conditions. And that has to be peer-reviewed; it is not just the ability of an underwriter to optimistically choose a loss pick; that then immediately is fed into our current accident year loss picks. So, it may look a bit odd, but it's pretty robust. And it represents the way that we underwrite our portfolio, and where we have to squeeze margin in a different way from a lot of other people.

John, just a follow up on when the market may turn. I guess, strikes me as optimistic to think 2012 could be at the turn just given, we talk about your peers, a lot of your peers seem to be very content with single digit accident year ROEs and rationalizing why that's okay. And they are showing no signs of broad-based at risk development or any of the other pain we usually get, associated with the turn.

Looking at price to book values of between 0.6 and 0.8 when they're at 0.5 and 0.7 and they're still pretty comfortable earning a single digit return and their investors have walked away from them. I expect their management will do something about it.

I guess my concern is just, when I had these similar conversations is that, and maybe we don't get there till we actually see balance sheet holes develop, and that might be two or three more years.

The point is Ian, which I don't think it will happen, but say it did happen, I think we are extremely well positioned to squeeze whatever margin we have. And we've proven that time and time again. We have a great portfolio balanced graphically and by product, we have great underwriters, we are a very, very efficient company. We'll have accident and health coming on stream next year, which will be great. So, I am not fussed about the future, you can bring on whatever you like. We'll be at the top of the earning stream for whatever the market conditions are.

This concludes our question and answer session. I'd like to turn the conference back over to our speakers for any closing remarks.

Ladies and gentlemen, thank you again for taking the time to listen to us this morning. We all very much enjoyed the discussion. And once again, I would like to thank David for his service and his friendship over the last four years. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect.