A letter from the CEO

To Our Shareholders:

For AXIS, 2017 was a year of both progress and adversity.

On one hand, AXIS was effective in advancing its strategic goal of becoming a global leader in specialty insurance and reinsurance. Significant new actions were taken, prior-year investments began to bear fruit, and as 2018 got under way, we launched an important initiative to accelerate our growth strategy and strengthen our operating model to provide smarter, faster and more creative solutions to clients and partners.

At the same time, along with so many other property and casualty (re)insurers, we were impacted by some of the most expensive catastrophe events in recent history and costly regulatory changes. These took a serious toll on our year's financial results.

A Year of Costly Catastrophes

First, the negatives: from a financial perspective, 2017 was deeply disappointing.

Difficult market conditions and sustained pricing pressure have persisted over several years, impacting our core ex-cat results. In the first quarter, we were impacted by the Ogden rate change in the U.K., which increased our costs for U.K. motor business. The industry experienced higher U.S. attritional weather losses in the first half of the year, a record level of third-quarter catastrophe losses, and historic California wildfires in the fourth quarter; all of which led to a net loss for the year.

Of the approximately $120 billion in global insurance catastrophe losses in the year, our net retained losses were $835 million, or approximately 0.7% of global industry losses. This contributed 20 points to our full-year loss ratio (as compared to 6 points in 2016). By contrast, catastrophe losses represented 40 points and 28 points, respectively, in the other mega-catastrophe years of 2005 and 2011.

Our experience in 2017 was in line with our peer group of hybrid insurers and reinsurers, and demonstrated the benefits of our recent efforts to reduce the volatility of our results. We intend to continue to shape our gross and net portfolios to further reduce the susceptibility of our portfolio to catastrophe exposure.

We reported an operating loss of $265 million and a net loss of $416 million for the year, and our book value per share declined 7.5% to $53.88. Included in our net loss were transaction and reorganization expenses of $21 million and a $42 million charge to write down our deferred tax asset as a result of the change in the tax law in the U.S. at the end of the year.

While the financial impact of the year's challenges on our company was within the range experienced by our Bermuda peer group, it does not fully explain my greatest disappointment of the year: the 23% drop in our stock price.

While it was a subpar year for many Bermuda companies, we believe that our stock performance was further exacerbated by questions relating to our acquisition of Novae. Prior to the acquisition, Novae management had begun to take actions to address its underperformance as it entered 2017 and, in our due diligence, we confirmed that we could reasonably expect to reap the benefits of the repositioning that had been underway. Our experience with Novae since we signed our transaction, and after the close in October, indicates that the benefits will exceed our initial expectations. Expected cost synergies are now estimated at $60 million, as compared to our initial estimate of $50 million. In January 2018, we concluded a reinsurance to close transaction that was underway during our negotiation of the acquisition. This transaction transfers to our reinsurer essentially all liabilities relating to 2015 and prior years, providing finality and security with regard to the balance sheet we acquired. And our combined underwriting teams are now transacting in a market that is much stronger than we anticipated at the time of the acquisition. They are doing so as members of a company that has a much stronger market position. We are optimistic that as we proceed with the integration of Novae, our results will demonstrate to all our stakeholders the value of this strategic acquisition.

While our financial performance was disappointing, 2017 was an outstanding year for organizational development.

Increased Relevance and Leadership in Key Markets

AXIS was founded in 2001, making its mark as a smart provider of capacity in what was then a hard market. The most profitable lines in the first decade of our existence are arguably among the most challenged now. In anticipation of this, over the past five years, we have rebalanced our portfolio and focused our efforts on repositioning AXIS to become an increasingly relevant player in targeted markets while charting a course for long-term profitability and reducing the overall volatility of our book. As the year came to a close, AXIS wrote in excess of $6 billion in gross premiums and has increased its market position in a number of areas, including:

• Top-10 in U.S. Excess and Surplus Lines;
• Top-10 in the London Market and at Lloyd’s;
• Top-10 Insurer of North American Professional Lines; and
• Top-15 Global P&C Reinsurer

Further, AXIS established global leadership in lines with strong growth potential, and we are now a top-5 player in cyber, renewable energy and marine.

Our recently attained relevance is an important asset in countering the threats presented by excess capital and the disintermediation of the traditional insurance value chain. Our current scale provides opportunities for efficiencies and the capacity to invest in promising initiatives. I believe we are well positioned to leverage our market relevance to gain preferential access to new business, increase our market leadership within the lines in which we choose to compete and reposition our portfolio for enhanced profitability.

Novae Acquisition: Accelerating Our Strategy to Drive Profitable Growth

Of all our actions in 2017, the acquisition of Novae Group plc for $617 million in cash, completed in October, was our most impactful step in accelerating AXIS' strategy to drive profitable growth. Novae is a respected diversified specialty insurer operating exclusively through Lloyd's of London. Its addition gives AXIS greater leadership in specialty lines and increased relevance in the important London market for international specialty risk.

With a portfolio complementary to our own, the acquisition of Novae vaulted AXIS to a desirable market position. We rose to a top-10 position at Lloyd's, where we had just completed our three-year introductory period and had launched our own managing agency to oversee AXIS Syndicate 1686. This acquisition further confirmed our confidence in the Lloyd's market and our commitment to its future.

The acquisition of Novae also complemented our position as a top-10 participant in a number of markets (listed above). We orig- inally expected the transaction to enhance our ROACE/earnings, and we conservatively based that expectation on assumptions that market conditions were not changing. Improving market conditions in 2018 render the transaction more financially compelling than initially expected.

We are enthused about the opportunities we see developing in the London market, given our new leadership position. One of our highest priorities for 2018 is to complete the integration of Novae into AXIS, a process already well underway. (For more information on Novae, see our accompanying sidebar article, "The Novae Acquisition.")

Global Expansion Continues - Brussels, Amsterdam, Miami and Dubai

While Novae increased our London presence, we also expanded in other major markets. Our acquisition of Belgium-based Aviabel, announced late 2016 and completed in 2017, augmented our general aviation insurance and reinsurance business. Through its offices in Brussels and Amsterdam, we gained a valuable footprint on the Continent, complementing our presence in Dublin and London. We believe this helps insulate AXIS from adverse complications that may arise from future developments related to Brexit.

In the U.S., we launched a Miami office to serve as a regional coverholder for Latin American and Caribbean business written under the umbrella of our Lloyd's syndicates. We also continued to grow in Dubai, expanding the range of services we can provide to the local market and to emerging markets of the Middle East and North Africa.

Today, from our more than 30 offices throughout the world, including Bermuda, New York, London, Zurich and Singapore, AXIS has a presence in virtually all the major industry hubs where we believe it is vital to participate.

Rebalancing the Portfolio

In tandem with these efforts, AXIS continued to rebalance our portfolio to optimize our resources and business mix. Our guiding principles are the relevance of our businesses in their markets, their current and anticipated profitability, and their potential for future growth. As such, we allocated more resources into such areas as cyber, renewable energy, wholesale excess & surplus lines, and our managing general agency units. Similarly, we exited onshore energy, where despite our patience over several years, we did not envision sufficient improvement in market conditions. We also exited coverages for weather and commodities, where we never achieved sufficient profitability or scale.

Further Expansion of Strategic Capital Partnerships

During the year, we advanced our strategy of harnessing available third-party capital, to help us grow our business and meet client needs by matching the right risk with the right capital.

Our strategic capital partnerships continued to generate meaningful fee income, resulting in $36 million in 2017, up from $22 million in 2016, while allowing us to deliver enhanced capacity, innovation and tailored solutions to our clients and brokers. This included Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS and Blackstone Group L.P. ("Blackstone"). In its first full year of operation, we ceded $195 million to Harrington Re and received substantial fee income in return and Harrington accreted book value. As the year ended, AXIS had in excess of $1.8 billion of third- party capital at our disposal.

Looking Ahead - Embracing Change in a Transformed Landscape

Strengthening our operating model and scaling up our data and analytics capabilities

To capitalize on sweeping business, economic and technological changes transforming the (re)insurance marketplace, AXIS is implementing a large-scale effort to strengthen its operating model, making the Company "future-ready" and further positioning it for long-term profitable growth.

"Our job is to be there to help our customers when they suffer adversity."

This includes accelerating efforts to expand the Company's data and analytics capabilities while enhancing its client offerings and further increasing AXIS' overall agility.

Specifically, this included the launch of an enterprise-wide Global Underwriting and Analytics unit (GUA) that will partner with AXIS' underwriting, claims and actuarial teams within our business segments. GUA will arm these professionals with greater insights, resources and tools to deliver even more value and services. This move also includes the further expansion of our Data & Analytics Center of Excellence as a global resource for the entire company and our clients (see sidebar article, "Growing a Data & Analytics Center of Excellence").

Among the operational enhancements, AXIS realigned its Accident & Health (A&H) business, merging the units into our core insurance and reinsurance segments. The move will enable the business to deliver synergies in combination with our property & casualty insurance and reinsurance businesses, helping A&H teams leverage relationships across our businesses. Additionally, we anticipate our P&C reinsurance teams will take advantage of the geographic expansion and client relationships achieved by our A&H teams. We expect A&H will continue to grow profitably and be an important contributor to AXIS.

Similarly, we introduced an integrated functional model for both our IT and Finance departments that will help better leverage expertise across our organization. Through these changes, we are improving the fitness of our company and making AXIS more agile, efficient and better able to adapt to and capitalize on change as the market continues to evolve.

Facing external challenges

The changing regulatory and political environment, marked by such developments as Brexit, new U.S. tax laws and competing international jurisdictional demands, present ongoing challenges to navigate.

We face a competitive market, too, but one that may be turning more accommodative. I anticipate this firming will be gradual, at best, and unfold over the long term. But I believe that AXIS is well positioned to meet these challenges and to take advantage of these opportunities.

Above all, I am optimistic that, as an industry, the world is still greatly in need of our product. As we have successfully demonstrated this past year, our job is to be there to help our customers when they suffer adversity. We are finding increasing opportunities to provide protection as the world engages in robust economic activity, grows in complexity and as new perils emerge. Our challenge is to give good value to our customers for the product we sell, so they perceive the benefit in buying insurance, while at the same time we must provide an adequate return to our shareholders.

Societal impact and enacting positive change

In 2017, we continued to further realize the potential of our business to deliver a positive societal impact and create positive change in the communities where we do business. In (re)insurance, we offer a service that has the potential to significantly benefit society. We give our customers confidence to pursue their goals and help them when they face a challenging period. (Re)insurance serves as a safety net for the free market. The solutions that we provide help drive progress, grow emerging markets, and, in many ways, strengthen the fabric of society.

As a values-driven organization, AXIS strives to take the core of what we do - enable the pursuit of opportunities and help people when they are down - and bring it to our broader communities. This behavior manifests through the tangible initiatives we lead to give back. An example is our signature Day of Giving initiative, where our employees come together as teams and volunteer to support local causes. In 2017, we hosted our first-ever Global Day of Giving Rally, which enjoyed participation among more than 600 employees worldwide, resulting in 46 community-giving activations within a two-month span (see sidebar article, "Giving Back to Our Communities"). As a company with a strong sense of purpose, enacting positive change will continue to be a priority in 2018 and for years to come.

Investing in new talent and growing a high- performance culturee

At AXIS, a key area of focus has been to build a workplace environment that makes our company attractive for the best talent and that is conducive to growing a high-performance culture. In 2017, we scaled up this effort and expanded our talent management offerings. This will continue in 2018, as we are introducing new professional development programs to help us invest in our most important resource, our people.

While it is typically our priority to grow from within, through targeted recruitment and through acquisition, we have continued to expand the breadth and depth of talent across the organization. This focus on attracting and growing top talent extends to our executive committee. Notably, this year we are formally welcoming Steve Arora as the new CEO of our Reinsurance business. Steve is an accomplished and widely respected executive who stands at the forefront of an emerging generation of senior leaders in our profession. I must also thank Jan Ekberg for his strong and steady oversight of our Reinsurance business during the interim period in 2017. Jan has resumed his role as President and Chief Underwriting Officer of AXIS Re Europe.

I must also extend my appreciation to Chris DiSipio, the longtime CEO of our A&H business. During Chris' tenure at AXIS, he guided the growth of AXIS A&H from a start-up into a profitable $500 million business. With the realignment of A&H, Chris decided to begin a new chapter in his career, and we wish him the best in his future endeavors.

Above all, I wish to express my gratitude to Joe Henry, who retired at year-end. Joe was an exceptionally strong Chief Financial Officer, a leader of our company, a trusted adviser and a friend. At the same time, I welcome Pete Vogt as our new CFO. Pete has been promoted following roles as COO of our Insurance business, as well as previously serving as CFO and COO of A&H. Pete is a highly accomplished and respected leader within AXIS and, our organization will benefit from his dual understanding of both finance and operations. I look forward to working closely with him in the years ahead

I must also thank our Chairman Michael Butt, our Board of Directors, and our shareholders for their continued support.

Finally, I also want to thank all our AXIS employees - both those who have newly joined our company and those who have been with us for many years - for their tremendous work and contribution during a difficult, yet transformative year. Despite the challenges we faced, AXIS has made significant progress in advancing its leadership position, and a tremendous future stands before us.


Albert A. Benchimol
President and Chief Executive Officer