Addendum to the Letter from the CEO*

Thank you for your interest in our 2019 Annual Report, titled “Foundation for the Future”. It was written and sent to print before the novel coronavirus advanced across the globe. It seems a lifetime ago. Yet, I am encouraged the key principles discussed therein remain as relevant as ever in the era of the global pandemic and the challenges our society will face over the next many months.

We wrote of the multi-year transformation we had launched to become a stronger, more nimble company to address the growing challenges facing our industry, including climate change, new and emerging risks, geopolitical factors and disruptive technologies. We can add to that list a pandemic that threatens millions of lives and has disrupted the global economy. It is not hyperbole to posit this pandemic will change us forever.

We acknowledged our journey faced many challenges, but it remains that the progress we’ve achieved has prepared our Company to address the COVID-19 pandemic in a much stronger position than we have been in many years. Our capital adequacy, whether calculated using our own internal models, regulatory requirements or rating agency benchmarks, was stronger at the end of 2019 than it had been in many years. A major contributor to our capital adequacy was a significant reduction in our net exposure to catastrophe risk, the result of improved construction of our gross portfolio and increased use of reinsurance, retrocession and third-party capital. After many years of repositioning, AXIS entered 2020 with what we believe to be the best-balanced book of business in the history of our Company. We also had a prudently constructed investment portfolio, with over 85% of invested assets in investment grade fixed income securities and a low exposure to equities.

To be clear, we will not avoid losses related to COVID-19, nor the mark-to-market volatility in investments, as capital markets gyrate with every piece of news. Our corporate purpose centers around protecting our customers from the unfortunate impact of calamitous events. They placed their trust in us when purchasing (re)insurance protection, and we will pay all valid claims with pride and honor. Given what we know today, we are confident that with total capital of $7.4 billion at December 31, 2019, we have ample funds to address the liabilities for which we contracted.

One of the concepts addressed in our annual report is the social purpose of our industry – to mutualize risk, not to subsidize it. We are mindful of and sympathetic to the significant setbacks faced by individuals and businesses across the globe. We see it in our families and communities everywhere we live and work. However, the best way for our industry to serve its social purpose is to pay all claims where coverage was agreed. To do any different would put at risk the solvency of our industry. Insurance could play an instrumental role in the economic recovery from the pandemic, but it is not reasonable to weaken a critical component of social stability in asking our industry to pay for coverages that were not offered, agreed to, nor paid for.

As a purpose-driven organization, AXIS feels a deep commitment to do our part to give back and help support the relief efforts that are underway globally, as well as in our local communities. In April 2020, we announced that we are re-focusing our planned charitable investments to commit $1 million in targeted philanthropic donations to support global and local COVID-19 relief and community support efforts. The donations are an extension of our Corporate Citizenship strategy, which focuses on initiatives that build resilience and sustainable value, and its long-standing philanthropic support of the communities in which AXIS does business.

Another subject of our report was our investment in technology and furthering agile and efficient operations. Over the last few years, we invested tens of millions of dollars to replace our technical platform, establishing appropriate redundancy and business continuity plans, reducing paper requirements, and equipping all of our colleagues with laptops and 24/7 access to our core systems. In recent weeks, we also added digital Work From Home kits to improve their ability to work remotely. These investments have delivered outstanding returns in 2020, in the shape of seamless continuation of first-class service to all our customers and partners in distribution all over the world. As I write this letter, we have completed five weeks of Work From Home protocols, continuing to receive submissions, submit quotes, bind business and pay claims, and executing on opportunities to play both defense and offense, with admirably high levels of productivity and responsiveness.

I am proud of the service we are providing in these difficult times, and I am confident it will further enhance our brand in our chosen markets:

• A specialty insurer and global reinsurer with a recognized ability to help customers manage complex risks
• A firm known for the acumen and technical expertise of our underwriters, and
• A carrier committed to providing great service, including best in class claims management, to our customers and partners in distribution

None of this would be possible without our outstanding family of AXIS colleagues across the world. Having worked with them for many years, I am never surprised by their commitment, hard work, and dedication to our Company and our customers. In these last few weeks, they have surpassed every expectation. I am grateful for their engagement, and the manner in which they have navigated this crisis with fortitude, imagination, grit and grace. They are the reason we will get through this crisis in a stronger relative position and prepared to participate in the recovery that will inevitably follow the pandemic.

The worst of this pandemic will pass, and our communities will begin the hard work of recovery, even as we are likely to sustain social distancing until we find a reliable vaccine and cure for COVID-19. All indications are that this will be an expensive experience for our industry, and the longer-term challenges highlighted earlier in our letter will remain. In my experience, periods of difficulty and crisis are generally followed by windows of significant opportunity and growth. We intend to manage our Company to minimize the downsides of this pandemic, keep an eye on the future, and emerge on the other side in a strong relative position to respond to the needs of our customers and partners in distribution, and continue on the path to leadership in specialty lines and global reinsurance on which we were already committed. This is our promise to all of our customers, partners in distribution, colleagues, investors and other stakeholders of our Company.

Thank you for your continued confidence and support. May you and your loved ones stay safe and healthy.

Letter from the CEO Dated April 2

BUILDING A FOUNDATION FOR THE FUTURE

Several years ago, we launched a multi-year transformation program to help AXIS reposition its business and portfolio to become a stronger, more nimble company as the market has evolved. Our team has remained focused on executing against our financial plan, making strategic decisions and investments that we believe will create a strong and lasting foundation for profitable growth and leadership.

One reason this is necessary is because over the past decade, our industry has been buffeted by several challenges, including persistently low interest rates following the financial crisis, increasing evidence of the impact of climate change on extreme weather events, new and emerging risks such as cyber, growing competition from capital markets participants, shifting geopolitical factors and disruptive technologies.

The journey has not been without challenges, and it is taking longer than we had planned to demonstrate the beneficial financial impact of the actions we have taken, particularly within the past two years, to strengthen our portfolio.

Nevertheless, we enter 2020 with momentum and on a clear path to delivering an adequate return. We are a much different company than we were just a few years ago—one with a better and more balanced portfolio, less exposure to catastrophes, stronger market positioning, improved digital capabilities, and a clearly defined purpose.

Purpose and Performance

Stepping back, it is important to remember that the purpose of the (re)insurance industry—and our source of value to society—remains unchanged. We exist to help society manage risk. Our industry’s societal purpose has several components, all essential in understanding the current (re)insurance market, AXIS’ performance and return to shareholders in the past year, and our potential for the future:

• We mutualize risk. By spreading the cost of risk across a large pool of participants, our customers can absorb a manageable expense and avoid a catastrophic outcome to an adverse event. As the aggregate cost of losses has mounted, our industry has been slow to correct premium levels, and in many cases started to subsidize the cost of risk. Over the past few quarters, the industry has started to both adjust its appetite for risk as well as premium levels to ensure the total cost of losses is appropriately borne by the bearers of risk. Within this environment, AXIS has taken decisive steps to increase rates and reorient our portfolio toward risks that we can address in a profitable manner.

• We help customers resolve complex adverse situations, using the specialized expertise we have gathered over time. We bring experience in resolving difficult situations and infrequent events, and helping customers when they face challenges. AXIS’ excellence in claims management is recognized by our clients and partners in distribution, giving us an edge in close competitive situations, and is essential to both our social and corporate purpose.

• We advocate for conditions that reduce both the frequency and severity of loss events. We use our insights to advocate for changes in behaviors, practices and regulations that can reduce the cost of risk. Many improvements to safety features, building codes and tort reform are based on the data and research provided by the insurance industry. This eventually benefits society through lower aggregate loss costs, which ultimately translate into lower insurance premiums for our customers, freeing up resources for investment. Our Corporate Citizenship initiatives are additional examples of how we advocate for such conditions and deliver value—our activities aim to make our communities and planet safer and more sustainable.

With a clear view of our industry’s societal purpose, and AXIS’ own purpose of giving people and organizations the confidence they need to pursue their goals and ambitions, we are vigorously pursuing strategies to drive long-term performance and value while staying true to our core strengths:

• A specialty insurer and global reinsurer with a recognized ability to help customers manage complex risks;

• A firm known for the acumen and technical expertise of our underwriters; and

• A carrier that is committed to providing great service, including best-in-class claims management, to our clients and partners in distribution.

Chairman’s Letter

“As we work to create a more resilient, valuable and profitable company, we are positioning AXIS for the challenges and opportunities of a changing (re)insurance business”.

Learn More

2019 Financial Results

Our performance this year reflected significant weather events, including an exceptionally severe Japanese typhoon season, poor crop conditions in the U.S., and loss creep from prior period catastrophes. We also experienced higher than planned losses in our Aviation and non-cat Property lines. Although these loss events were consistent with normal industry volatility for these lines and our market shares, the result was nevertheless a sub-plan performance year.

Net income available to common shareholders was $282 million, or $3.34 per diluted common share, and ex-PGAAP operating income** was $234 million, or $2.77 per diluted common share. Our results included estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $336 million. Even with these headwinds, our portfolio actions delivered meaningful progress, with a reduction of 1.1 points to our current year ex-cat loss ratio, bringing the reduction in our current year ex-cat loss ratio to 3.1 points over a two-year period.

Discipline, Progress and Momentum

Despite the challenges that we faced, in 2019 we made significant progress in strengthening our business and creating a strong foundation for the future:

Portfolio Repositioning. From late 2018 through the end of 2019, we reoriented the portfolio to reduce exposures to lines with lower profitability and less attractive growth prospects, while changing the mix to focus on more attractive subsectors of risk classes.

Our portfolio repositioning comes at a time when market conditions are the best we have seen in a decade. In many of our lines, we have seen a greater willingness to pay a more reasonable price for coverage. While many lines are still not priced at attractive levels, we are encouraged that rate increases will last through 2020, and likely longer. Thus, we believe the quality of the business we have written in the past year will have a positive impact on our financial performance in 2020 and beyond.

We were able to replace most of the premium volume lost in canceled or exited business with growth in lines whose pricing met or exceeded our target requirements.

Thus, earned premiums were down modestly this year, and that put some pressure on our G&A ratio. We were able to meet our G&A ratio targets with good expense control—and we continue to look for additional opportunities for cost savings.

With respect to catastrophe losses and volatility, we have shaved peak exposures, increased geographic diversification, and made other changes to shift our annual expected cat loss curve down. At the same time, we have focused on growing and investing in our most attractive lines and new specialty businesses. Significantly, we are Top 5, Top 10 or Top 15 in substantially every one of our businesses and strategic relationships—and well-positioned in many of the markets that are benefitting from a favorable pricing environment.

New Specialty Businesses. As clients increasingly face new and emerging risks, we have established AXIS in categories with complex risk needs that align with our expertise, where there is solid potential for long-term growth and profitability. We have a powerful franchise as a leading insurer in Cyber and Renewable Energy and more recently, we have focused on building our multi-channel Small Specialty Commercial insurance business.

Agile and Efficient Operations. This year we modernized our workplace environments—from our new London office at The Scalpel to major renovations in our New York office to preparing for a move of our U.S. head office in Alpharetta — while reducing our physical footprint to generate both cost savings and operating efficiencies. Plans are underway to introduce additional automation, digitalization and process improvements.

Third-Party Capital. AXIS has made particularly strong progress in attracting third-party capital to expand our capacity and to better match the right risk with the right capital. We are one of the few (re)insurance firms to grow third-party capital activity in the current market. In 2019, we ceded $1.0 billion in premiums to strategic capital partners, an increase of 29% from 2018, and received fee income of $80.2 million for originating, structuring and managing these relationships—a 66% increase from $48.5 million in 2018.

London Market. We have continued to invest in the London market. Today, it is our largest location in terms of headcount, and the heart of our international insurance business. Following completion of the acquisition of London specialty insurer Novae in 2017, we have fully integrated both businesses and to date have realized $52.4 million in net savings. We are now operating as a single syndicate and have become a leading syndicate in the Lloyd’s of London marketplace.

Talent Development. We have continued our efforts to attract and develop a quality team with the skills needed in a changing business environment. Among key staff additions, Tony Jordan was named Group Chief Actuary and Jason Busti joined AXIS as our President of North America for AXIS Re. We note that Keith Schlosser joined our firm as Global Chief Information Officer and both he and Ben Rubin, Global Head of Risk Funding, were named to our Executive Committee in late 2019.

I would also like to recognize our departing Executive Committee members Chief Operations Officer Richard Strachan and Group Chief Underwriting Officer Eric Gesick. Rich and Eric have been valued leaders within our organization and we wish them both every success in the future.

Corporate Citizenship

Our ability to mutualize risk—to deliver on our industry’s societal purpose—depends not only on our financial strength, but on how our decisions impact our colleagues, society and the planet through what we call Corporate Citizenship. After extensive discussions with our leadership, and strong input from the AXIS Board of Directors, in 2019 we formalized our Corporate Citizenship program through the creation of a cross-disciplinary team. We are focused on initiatives that we believe will deliver long-term, sustainable value for our Company and society, and ultimately build safety and resilience—both essential to our core business of risk. To this end, we scaled up work in four areas where our efforts can have the greatest benefit: protecting the environment, fostering inclusion and diversity, raising our voice through advocacy, and investing in our communities. I invite you to read more about our work in the Corporate Citizenship section of this report.

In closing, I wish to thank the clients who have placed their trust in our ability to help manage their risks, and the shareholders who have invested in our future. I also wish to thank our team members for their hard work and professionalism, and our Board of Directors for their valuable counsel. In particular, I express my deep appreciation to Michael Butt OBE, who has announced his intention to retire in September 2020 as our Chairman and a member of the Board. It is my privilege to serve with Michael and to call him a mentor, colleague and a friend. A member of the Insurance Hall of Fame, Michael has made indelible contributions to the industry in Bermuda, Europe, North America and around the world, and his vision and leadership have been indispensable to AXIS’ development and growth. We are a stronger organization for Michael’s many contributions, and we wish him all the best.

We begin 2020 with a strong foundation in place, one that will help both AXIS and its clients and partners navigate a volatile world. We have worked very hard to get to this point and I am confident that we will see results from the actions we have taken.

You have our commitment that we will do everything in our power to deliver on our goals in 2020, and I look forward to reporting to you on our progress.