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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-31721
AXIS CAPITAL HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)
Bermuda
(State or other jurisdiction of incorporation or organization)
98-0395986
(I.R.S. Employer Identification No.)
92 Pitts Bay Road, Pembroke, Bermuda HM 08
(Address of principal executive offices and zip code)
(441) 496-2600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common shares, par value $0.0125 per share | AXS | New York Stock Exchange
Depositary Shares, each representing a 1/100th interest in a 5.50% Series E preferred share | AXS PRE | New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ |  | Accelerated filer | ☐
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐
|  |  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At April 26, 2021, there were 84,760,169 common shares outstanding, $0.0125 par value per share, of the registrant.

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AXIS CAPITAL HOLDINGS LIMITED
INDEX TO FORM 10-Q

|  | Page
| PART I |
| Financial Information | 3
Item 1. | Consolidated Financial Statements | 5
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 46
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 74
Item 4. | Controls and Procedures | 75
| PART II |
| Other Information | 76
Item 1. | Legal Proceedings | 76
Item 1A. | Risk Factors | 76
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 76
Item 5. | Other Information | 77
Item 6. | Exhibits | 78
| Signatures | 79

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PART I FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts included in this report, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States ("U.S.") federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as "may", "should", "could", "anticipate", "estimate", "expect", "plan", "believe", "predict", "potential", "intend" or similar expressions. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond management's control.
Forward-looking statements contained in this report may include, but are not limited to, information regarding our estimates for catastrophes and other weather-related losses including losses related to the COVID-19 pandemic, measurements of potential losses in the fair market value of our investment portfolio and derivative contracts, our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the outcome of our strategic initiatives, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities' prices and foreign currency rates.
Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual events or results to differ materially from those indicated in such statements. We believe that these factors include, but are not limited to, the following:
•the adverse impact of the ongoing COVID-19 pandemic on our business, results of operations, financial condition and liquidity;
•the cyclical nature of the insurance and reinsurance business leading to periods with excess underwriting capacity and unfavorable premium rates;
•the occurrence and magnitude of natural and man-made disasters;
•the impact of global climate change on our business, including the possibility that we do not adequately assess or reserve for the increased frequency and severity of natural catastrophes;
•losses from war, terrorism and political unrest or other unanticipated losses;
•actual claims exceeding loss reserves;
•general economic, capital and credit market conditions, including fluctuations in interest rates, credit spreads, equity securities' prices and/or foreign currency values;
•the failure of any of the loss limitation methods we employ;
•the effects of emerging claims, coverage and regulatory issues, including uncertainty related to coverage definitions, limits, terms and conditions;
•the inability to purchase reinsurance or collect amounts due to us from reinsurance we have purchased;
•the loss of business provided to us by major brokers;
•breaches by third parties in our program business of their obligations to us;
•difficulties with technology and/or data security;
•the failure of our policyholders or intermediaries to pay premiums;
•the failure of our cedants to adequately evaluate risks;
•the inability to obtain additional capital on favorable terms, or at all;
•the loss of one or more of our key executives;
•a decline in our ratings with rating agencies;
•changes in accounting policies or practices;
•the use of industry models and changes to these models;
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•changes in governmental regulations and potential government intervention in our industry;
•inadvertent failure to comply with certain laws and regulations relating to sanctions and foreign corrupt practices;
•changes in the political environment of certain countries in which we operate or underwrite business, including the United Kingdom's withdrawal from the European Union;
•changes in tax laws; and
•other factors including but not limited to those described under Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as those factors may be updated from time to time in our periodic and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Readers are urged to carefully consider all such factors as the COVID-19 pandemic may have the effect of heightening many of the other risks and uncertainties described.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Website and Social Media Disclosure
We use our website (www.axiscapital.com) and our corporate Twitter (@AXIS_Capital) and LinkedIn (AXIS Capital) accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, e-mail alerts and other information about AXIS Capital may be received when enrolled in our "E-mail Alerts" program, which can be found in the Investor Information section of our website (www.axiscapital.com). The contents of our website and social media channels are not part of this Quarterly Report on Form 10-Q.
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

| Page
Consolidated Balance Sheets at March 31, 2021 (Unaudited) and December 31, 2020 | 6
Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (Unaudited) | 7
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 (Unaudited) | 8
Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2021 and 2020 (Unaudited) | 9
Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (Unaudited) | 10
Notes to Consolidated Financial Statements (Unaudited) | 12
Note 1 - Basis of Presentation and Significant Accounting Policies | 12
Note 2 - Segment Information | 13
Note 3 - Investments | 14
Note 4 - Fair Value Measurements | 23
Note 5 - Derivative Instruments | 33
Note 6 - Reserve for Losses and Loss Expenses | 35
Note 7 - Earnings Per Common Share | 39
Note 8 - Share-Based Compensation | 40
Note 9 - Shareholders' Equity | 43
Note 10 - Debt and Financing Arrangements | 44
Note 11 - Commitments and Contingencies | 44
Note 12 - Other Comprehensive Income (Loss) | 45

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2021 (UNAUDITED) AND DECEMBER 31, 2020

| 2021 |  | 2020
| (in thousands)
Assets |  |  |
Investments: |  |  |
Fixed maturities, available for sale, at fair value (Amortized cost 2021: $11,480,507; 2020: $11,566,930 Allowance for expected credit losses 2021: $234; 2020: $323) | $ | 11,728,611 |  |  | $ | 12,041,799 |
Fixed maturities, held to maturity, at amortized cost (Fair value 2021: $404,522 Allowance for expected credit losses 2021: $nil) | 404,690 |  |  | — |
Equity securities, at fair value (Cost 2021: $454,451; 2020: $421,744) | 547,676 |  |  | 518,445 |
Mortgage loans, held for investment, at fair value (Allowance for expected credit losses 2021: $nil; 2020: $nil) | 629,576 |  |  | 593,290 |
Other investments, at fair value | 790,530 |  |  | 829,156 |
Equity method investments | 123,370 |  |  | 114,209 |
Short-term investments, at fair value | 185,699 |  |  | 161,897 |
Total investments | 14,410,152 |  |  | 14,258,796 |
Cash and cash equivalents | 895,932 |  |  | 902,831 |
Restricted cash and cash equivalents | 664,347 |  |  | 600,401 |
Accrued interest receivable | 61,222 |  |  | 65,020 |
Insurance and reinsurance premium balances receivable (Allowance for expected credit losses 2021: $12,218; 2020: $8,836) | 3,367,142 |  |  | 2,738,342 |
Reinsurance recoverable on unpaid losses and loss expenses (Allowance for expected credit losses 2021: $25,118; 2020: $23,711) | 4,533,232 |  |  | 4,496,641 |
Reinsurance recoverable on paid losses and loss expenses | 459,411 |  |  | 434,201 |
Deferred acquisition costs | 577,509 |  |  | 431,439 |
Prepaid reinsurance premiums | 1,379,450 |  |  | 1,194,455 |
Receivable for investments sold | 1,450 |  |  | 2,150 |
Goodwill | 100,801 |  |  | 100,801 |
Intangible assets | 216,904 |  |  | 219,633 |
Value of business acquired | 2,826 |  |  | 3,854 |
Operating lease right-of-use assets | 116,693 |  |  | 123,579 |
Other assets | 298,756 |  |  | 305,544 |
Total assets | $ | 27,085,827 |  |  | $ | 25,877,687 |
Liabilities |  |  |
Reserve for losses and loss expenses | $ | 14,025,274 |  |  | $ | 13,926,766 |
Unearned premiums | 4,551,424 |  |  | 3,685,886 |
Insurance and reinsurance balances payable | 1,231,403 |  |  | 1,092,042 |
Debt | 1,310,009 |  |  | 1,309,695 |
Payable for investments purchased | 389,925 |  |  | 104,777 |
Operating lease liabilities | 134,002 |  |  | 140,263 |
Other liabilities | 267,400 |  |  | 322,564 |
Total liabilities | 21,909,437 |  |  | 20,581,993 |
Shareholders’ equity |  |  |
Preferred shares | 550,000 |  |  | 550,000 |
Common shares (shares issued 2021: 176,580; 2020: 176,580 shares outstanding 2021: 84,753; 2020: 84,353) | 2,206 |  |  | 2,206 |
Additional paid-in capital | 2,316,147 |  |  | 2,330,054 |
Accumulated other comprehensive income | 214,861 |  |  | 414,395 |
Retained earnings | 5,842,850 |  |  | 5,763,607 |
Treasury shares, at cost (2021: 91,827; 2020: 92,227) | (3,749,674) |  |  | (3,764,568) |
Total shareholders’ equity | 5,176,390 |  |  | 5,295,694 |
Total liabilities and shareholders’ equity | $ | 27,085,827 |  |  | $ | 25,877,687 |

See accompanying notes to Consolidated Financial Statements.
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

| Three months ended |  |
| 2021 |  | 2020 |  |  |  |
| (in thousands, except for per share amounts)
Revenues |  |  |  |  |  |  |
Net premiums earned | $ | 1,103,722 |  |  | $ | 1,088,625 |  |  |  |  |
Net investment income | 114,165 |  |  | 93,101 |  |  |  |  |
Other insurance related income (loss) | 2,781 |  |  | (8,707) |  |  |  |  |
Net investment gains (losses): |  |  |  |  |  |  |
Allowance for expected credit losses | 89 |  |  | (20,019) |  |  |  |  |
Impairment losses | — |  |  | (1,190) |  |  |  |  |
Other realized and unrealized investment gains (losses) | 29,556 |  |  | (41,668) |  |  |  |  |
Total net investment gains (losses) | 29,645 |  |  | (62,877) |  |  |  |  |
Total revenues | 1,250,313 |  |  | 1,110,142 |  |  |  |  |
Expenses |  |  |  |  |  |  |
Net losses and loss expenses | 714,718 |  |  | 908,073 |  |  |  |  |
Acquisition costs | 218,871 |  |  | 238,650 |  |  |  |  |
General and administrative expenses | 158,408 |  |  | 157,060 |  |  |  |  |
Foreign exchange losses (gains) | 4,113 |  |  | (61,683) |  |  |  |  |
Interest expense and financing costs | 15,571 |  |  | 23,472 |  |  |  |  |
Reorganization expenses | — |  |  | (982) |  |  |  |  |
Amortization of value of business acquired | 1,028 |  |  | 1,799 |  |  |  |  |
Amortization of intangible assets | 2,690 |  |  | 2,870 |  |  |  |  |
Total expenses | 1,115,399 |  |  | 1,269,259 |  |  |  |  |
Income (loss) before income taxes and interest in income (loss) of equity method investments | 134,914 |  |  | (159,117) |  |  |  |  |
Income tax (expense) benefit | (20,776) |  |  | 4,867 |  |  |  |  |
Interest in income (loss) of equity method investments | 9,162 |  |  | (23,577) |  |  |  |  |
Net income (loss) | 123,300 |  |  | (177,827) |  |  |  |  |
Preferred share dividends | 7,563 |  |  | 7,563 |  |  |  |  |
Net income (loss) available (attributable) to common shareholders | $ | 115,737 |  |  | $ | (185,390) |  |  |  |  |
Per share data |  |  |  |  |  |  |
Earnings (loss) per common share: |  |  |  |  |  |  |
Earnings (loss) per common share | $ | 1.37 |  |  | $ | (2.20) |  |  |  |  |
Earnings (loss) per diluted common share | $ | 1.36 |  |  | $ | (2.20) |  |  |  |  |
Weighted average common shares outstanding | 84,514 |  |  | 84,094 |  |  |  |  |
Weighted average diluted common shares outstanding | 84,965 |  |  | 84,094 |  |  |  |  |

See accompanying notes to Consolidated Financial Statements.
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

| Three months ended |  |
| 2021 |  | 2020 |  |  |  |
| (in thousands)
Net income (loss) | $ | 123,300 |  |  | $ | (177,827) |  |  |  |  |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |
Available for sale investments: |  |  |  |  |  |  |
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized | (171,831) |  |  | (242,962) |  |  |  |  |
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized | 47 |  |  | (16,590) |  |  |  |  |
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss) | (28,999) |  |  | 5,648 |  |  |  |  |
Unrealized gains (losses) arising during the period, net of reclassification adjustment | (200,783) |  |  | (253,904) |  |  |  |  |
Foreign currency translation adjustment | 1,249 |  |  | (7,725) |  |  |  |  |
Total other comprehensive income (loss), net of tax | (199,534) |  |  | (261,629) |  |  |  |  |
Comprehensive income (loss) | $ | (76,234) |  |  | $ | (439,456) |  |  |  |  |

See accompanying notes to Consolidated Financial Statements.
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

| Three months ended |  |
| 2021 |  | 2020 |  |  |  |
| (in thousands)
Preferred shares |  |  |  |  |  |  |
Balance at beginning of period | $ | 550,000 |  |  | $ | 775,000 |  |  |  |  |
Shares repurchased | — |  |  | (225,000) |  |  |  |  |
Balance at end of period | 550,000 |  |  | $ | 550,000 |  |  |  |  |
Common shares (par value) |  |  |  |  |  |  |
Balance at beginning and end of period | 2,206 |  |  | 2,206 |  |  |  |  |
Additional paid-in capital |  |  |  |  |  |  |
Balance at beginning of period | 2,330,054 |  |  | 2,317,212 |  |  |  |  |
Treasury shares reissued | (23,129) |  |  | (18,695) |  |  |  |  |
Share-based compensation expense | 9,222 |  |  | 9,481 |  |  |  |  |
Balance at end of period | 2,316,147 |  |  | 2,307,998 |  |  |  |  |
Accumulated other comprehensive income (loss) |  |  |  |  |  |  |
Balance at beginning of period | 414,395 |  |  | 171,710 |  |  |  |  |
Unrealized gains (losses) on available for sale investments, net of tax: |  |  |  |  |  |  |
Balance at beginning of period | 420,635 |  |  | 181,521 |  |  |  |  |
Unrealized gains (losses) arising during the period, net of reclassification adjustment | (200,783) |  |  | (253,904) |  |  |  |  |
Balance at end of period | 219,852 |  |  | (72,383) |  |  |  |  |
Cumulative foreign currency translation adjustments, net of tax: |  |  |  |  |  |  |
Balance at beginning of period | (6,240) |  |  | (9,811) |  |  |  |  |
Foreign currency translation adjustment | 1,249 |  |  | (7,725) |  |  |  |  |
Balance at end of period | (4,991) |  |  | (17,536) |  |  |  |  |
Balance at end of period | 214,861 |  |  | (89,919) |  |  |  |  |
Retained earnings |  |  |  |  |  |  |
Balance at beginning of period | 5,763,607 |  |  | 6,056,686 |  |  |  |  |
Net income (loss) | 123,300 |  |  | (177,827) |  |  |  |  |
Preferred share dividends (1) | (7,563) |  |  | (7,563) |  |  |  |  |
Common share dividends (1) | (36,494) |  |  | (35,289) |  |  |  |  |
Balance at end of period | 5,842,850 |  |  | 5,836,007 |  |  |  |  |
Treasury shares, at cost |  |  |  |  |  |  |
Balance at beginning of period | (3,764,568) |  |  | (3,778,806) |  |  |  |  |
Shares repurchased | (9,380) |  |  | (8,492) |  |  |  |  |
Shares reissued | 24,274 |  |  | 20,584 |  |  |  |  |
Balance at end of period | (3,749,674) |  |  | (3,766,714) |  |  |  |  |
Total shareholders’ equity | $ | 5,176,390 |  |  | $ | 4,839,578 |  |  |  |  |

(1) Refer to Note 9 'Shareholder's Equity' for details on dividends declared and paid related to the Company's common and preferred shares.
See accompanying notes to Consolidated Financial Statements.
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

| Three months ended
| 2021 |  | 2020
| (in thousands)
Cash flows from operating activities: |  |  |
Net income (loss) | $ | 123,300 |  |  | $ | (177,827) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |
Net investment (gains) losses | (29,645) |  |  | 62,877 |
Net realized and unrealized (gains) losses on other investments | (41,833) |  |  | 2,119 |
Amortization of fixed maturities | 7,965 |  |  | 6,359 |
Interest in (income) loss of equity method investments | (9,162) |  |  | 23,577 |
Amortization of value of business acquired | 1,028 |  |  | 1,799 |
Other amortization and depreciation | 15,096 |  |  | 15,612 |
Share-based compensation expense, net of cash payments | 1,721 |  |  | (4,650) |
Changes in: |  |  |
Accrued interest receivable | 3,585 |  |  | 1,234 |
Reinsurance recoverable balances on unpaid and paid losses | (61,380) |  |  | (260,131) |
Deferred acquisition costs | (147,129) |  |  | (119,796) |
Prepaid reinsurance premiums | (184,288) |  |  | (181,055) |
Reserve for losses and loss expenses | 97,161 |  |  | 348,285 |
Unearned premiums | 867,277 |  |  | 774,703 |
Insurance and reinsurance balances, net | (491,151) |  |  | (502,437) |
Other items | (7,399) |  |  | (40,413) |
Net cash provided by (used in) operating activities | 145,146 |  |  | (49,744) |
Cash flows from investing activities: |  |  |
Purchases of: |  |  |
Fixed maturities, available for sale | (4,671,969) |  |  | (2,777,053) |
Fixed maturities, held to maturity | (60,749) |  |  | — |
Equity securities | (35,668) |  |  | (16,132) |
Mortgage loans | (45,498) |  |  | (84,738) |
Other investments | (46,324) |  |  | (20,858) |
Short-term investments | (109,597) |  |  | (94,352) |
Proceeds from the sale of: |  |  |
Fixed maturities, available for sale | 4,188,525 |  |  | 2,506,490 |
Equity securities | (6,550) |  |  | 10,308 |
Other investments | 127,385 |  |  | 32,355 |
Short-term investments | 63,657 |  |  | 54,105 |
Proceeds from the redemption of fixed maturities, available for sale | 486,401 |  |  | 424,207 |
Proceeds from the redemption of fixed maturities, held to maturity | 61,170 |  |  | — |
Proceeds from redemption of short-term investments | 21,886 |  |  | 1,775 |
Proceeds from the repayment of mortgage loans | 9,321 |  |  | 399 |
Purchase of other assets | (6,216) |  |  | (13,485) |
Net cash provided by (used in) investing activities | (24,226) |  |  | 23,021 |
Cash flows from financing activities: |  |  |
Taxes paid on withholding shares | (9,381) |  |  | (8,491) |
Dividends paid - common shares | (38,583) |  |  | (37,318) |
Repurchase of preferred shares | — |  |  | (225,000) |
Dividends paid - preferred shares | (7,563) |  |  | (9,144) |
Net cash used in financing activities | (55,527) |  |  | (279,953) |
Effect of exchange rate changes on foreign currency cash, cash equivalents and restricted cash | (8,346) |  |  | (28,718) |
Increase (decrease) in cash, cash equivalents and restricted cash | 57,047 |  |  | (335,394) |
Cash, cash equivalents and restricted cash - beginning of period | 1,503,232 |  |  | 1,576,457 |
Cash, cash equivalents and restricted cash - end of period | $ | 1,560,279 |  |  | $ | 1,241,063 |
Supplemental disclosures of cash flow information: |  |  |
Income taxes paid (refund) | $ | 8,981 |  |  | $ | (2,131) |
Interest paid | $ | 22,700 |  |  | $ | 13,133 |

See accompanying notes to Consolidated Financial Statements.
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Supplemental disclosures of cash flow information: In 2021, the transfer of securities with a fair value of $405 million from fixed maturities, available for sale to fixed maturities, held to maturity was treated as a non-cash activity in the consolidated statement of cash flows (refer to Note 3 'Investments').
See accompanying notes to Consolidated Financial Statements.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited consolidated financial statements (the "financial statements") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the U.S. Securities and Exchange Commission's ("SEC") instructions to Form 10-Q and Article 10 of Regulation S-X and include AXIS Capital Holdings Limited ("AXIS Capital") and its subsidiaries (the "Company"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in AXIS Capital's Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.
In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations for the periods presented.
The results of operations for any interim period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated.
Tabular dollar and share amounts are in thousands, with the exception of per share amounts. All amounts are reported in U.S. dollars.
Significant Accounting Policies
Changes to the Company's significant accounting policies subsequent to its Annual Report on Form 10-K for the year ended December 31, 2020 are noted below:
a) Investments
Fixed Maturities, Held to maturity, at Fair Value
Fixed maturities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity or redemption. Fixed maturities classified as held to maturity are reported at amortized cost and are presented net of an allowance for expected credit losses. The allowance for expected credit losses is estimated based on the Company’s analysis of projected lifetime losses. The allowance for expected credit losses is recognized in net investment gains (losses) in the consolidated statements of operations. Any adjustment to the allowance for expected credit losses is recognized in the period in which it is determined.
b) Share-based Compensation
The Company is authorized to issue restricted shares, restricted stock units, performance restricted stock units, stock options, stock appreciation rights and other equity-based awards to its employees and directors. The Company's plan includes share-settled and cash-settled service awards and performance awards.
Restricted Stock Units - Share-Settled and Cash-Settled
The fair value of share-settled and cash-settled service awards is based on market value of the Company's common shares measured at the grant date and is expensed over the requisite service period. The fair value of the cash-settled service awards is recognized as a liability in the consolidated balance sheets and is remeasured at the end of each reporting period. The Company recognizes forfeitures when they occur.
Performance Restricted Stock Units - Share-Settled and Cash-Settled
The fair value of share-settled performance awards which include a market condition is measured on the grant date using a Monte Carlo simulation model which requires inputs including share price, expected volatility, expected term, expected dividend yield and risk-free interest rates. The fair value of share-settled and cash-settled performance awards which include a performance condition is based on market value of the Company's common shares measured at the grant date. The fair value of share-settled and cash-settled performance awards is recognized on a straight-line basis over the requisite service period. The fair value of the cash-settled performance awards is recognized as a liability in the consolidated balance sheets and is remeasured at the end of each reporting period. The Company recognizes forfeitures when they occur.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. SEGMENT INFORMATION
AXIS Capital's underwriting operations are organized around its global underwriting platforms, AXIS Insurance and AXIS Re. The Company has determined that it has two reportable segments, insurance and reinsurance. The Company does not allocate its assets by segment, with the exception of goodwill and intangible assets.
Insurance
The Company's insurance segment offers specialty insurance products to a variety of niche markets on a worldwide basis. The product lines in this segment are property, marine, terrorism, aviation, credit and political risk, professional lines, liability, accident and health, and discontinued lines - Novae.
Reinsurance
The Company's reinsurance segment provides treaty reinsurance to insurance companies on a worldwide basis. The product lines in this segment are catastrophe, property, credit and surety, professional lines, motor, liability, engineering, agriculture, marine and aviation, accident and health, and discontinued lines - Novae.
The following tables present the underwriting results of the Company's reportable segments, as well as the carrying amounts of allocated goodwill and intangible assets:

|  | 2021 |  | 2020 |
| Three months ended and at March 31, | Insurance |  | Reinsurance |  | Total |  | Insurance |  | Reinsurance |  | Total |
| Gross premiums written | $ | 1,103,198 |  | $ | 1,432,283 |  | $ | 2,535,481 |  | $ | 940,715 |  | $ | 1,490,443 |  | $ | 2,431,158 |
| Net premiums written | 707,814 |  | 1,071,072 |  | 1,778,886 |  | 581,650 |  | 1,097,394 |  | 1,679,044 |
| Net premiums earned | 616,286 |  | 487,436 |  | 1,103,722 |  | 562,064 |  | 526,561 |  | 1,088,625 |
| Other insurance related income (loss) | 415 |  | 2,366 |  | 2,781 |  | 647 |  | (9,354) |  | (8,707) |
| Net losses and loss expenses | (356,898) |  | (357,820) |  | (714,718) |  | (471,812) |  | (436,261) |  | (908,073) |
| Acquisition costs | (117,679) |  | (101,192) |  | (218,871) |  | (112,751) |  | (125,899) |  | (238,650) |
| Underwriting-related general and administrative expenses | (103,303) |  | (29,365) |  | (132,668) |  | (100,778) |  | (29,184) |  | (129,962) |
| Underwriting income (loss) | $ | 38,821 |  | $ | 1,425 |  | 40,246 |  | $ | (122,630) |  | $ | (74,137) |  | (196,767) |
| Net investment income |  |  |  |  | 114,165 |  |  |  |  |  | 93,101 |
| Net investment gains (losses) |  |  |  |  | 29,645 |  |  |  |  |  | (62,877) |
| Corporate expenses |  |  |  |  | (25,740) |  |  |  |  |  | (27,098) |
| Foreign exchange (losses) gains |  |  |  |  | (4,113) |  |  |  |  |  | 61,683 |
| Interest expense and financing costs |  |  |  |  | (15,571) |  |  |  |  |  | (23,472) |
| Reorganization expenses |  |  |  |  | — |  |  |  |  |  | 982 |
| Amortization of value of business acquired |  |  |  |  | (1,028) |  |  |  |  |  | (1,799) |
| Amortization of intangible assets |  |  |  |  | (2,690) |  |  |  |  |  | (2,870) |
| Income (loss) before income taxes and interest in income (loss) of equity method investments |  |  |  |  | $ | 134,914 |  |  |  |  |  | $ | (159,117) |
| Net losses and loss expenses ratio | 57.9 | % |  | 73.4 | % |  | 64.8 | % |  | 83.9 | % |  | 82.9 | % |  | 83.4 | % |
| Acquisition cost ratio | 19.1 | % |  | 20.8 | % |  | 19.8 | % |  | 20.1 | % |  | 23.9 | % |  | 21.9 | % |
| General and administrative expense ratio | 16.8 | % |  | 6.0 | % |  | 14.3 | % |  | 17.9 | % |  | 5.5 | % |  | 14.5 | % |
| Combined ratio | 93.8 | % |  | 100.2 | % |  | 98.9 | % |  | 121.9 | % |  | 112.3 | % |  | 119.8 | % |
| Goodwill and intangible assets | $ | 317,705 |  | $ | — |  | $ | 317,705 |  | $ | 329,824 |  | $ | — |  | $ | 329,824 |

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS
a) Fixed Maturities and Equity securities
Fixed maturities
The following table provides the amortized cost and fair values of the Company's fixed maturities classified as available for sale:

|  | Amortized cost |  | Allowance for expected credit losses |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value |  |  |
| At March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
| Available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,181,808 |  |  | $ | — |  |  | $ | 20,184 |  |  | $ | (14,899) |  |  | $ | 2,187,093 |  |  |  |
| Non-U.S. government | 689,358 |  |  | — |  |  | 28,789 |  |  | (3,426) |  |  | 714,721 |  |  |  |
| Corporate debt | 4,364,800 |  |  | (164) |  |  | 157,099 |  |  | (26,457) |  |  | 4,495,278 |  |  |  |
| Agency RMBS(1) | 1,186,277 |  |  | — |  |  | 29,602 |  |  | (7,385) |  |  | 1,208,494 |  |  |  |
| CMBS(2) | 1,227,004 |  |  | — |  |  | 50,586 |  |  | (3,541) |  |  | 1,274,049 |  |  |  |
| Non-agency RMBS | 163,617 |  |  | (70) |  |  | 4,505 |  |  | (883) |  |  | 167,169 |  |  |  |
| ABS(3) | 1,396,130 |  |  | — |  |  | 9,693 |  |  | (2,862) |  |  | 1,402,961 |  |  |  |
| Municipals(4) | 271,513 |  |  | — |  |  | 8,872 |  |  | (1,539) |  |  | 278,846 |  |  |  |
| Total fixed maturities, available for sale | $ | 11,480,507 |  |  | $ | (234) |  |  | $ | 309,330 |  |  | $ | (60,992) |  |  | $ | 11,728,611 |  |  |  |
| At December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
| Available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 1,881,489 |  |  | $ | — |  |  | $ | 38,969 |  |  | $ | (1,759) |  |  | $ | 1,918,699 |  |  |  |
| Non-U.S. government | 632,875 |  |  | — |  |  | 38,826 |  |  | (428) |  |  | 671,273 |  |  |  |
| Corporate debt | 4,408,351 |  |  | (303) |  |  | 254,261 |  |  | (6,358) |  |  | 4,655,951 |  |  |  |
| Agency RMBS(1) | 1,244,727 |  |  | — |  |  | 42,170 |  |  | (688) |  |  | 1,286,209 |  |  |  |
| CMBS(2) | 1,268,273 |  |  | — |  |  | 87,598 |  |  | (2,284) |  |  | 1,353,587 |  |  |  |
| Non-agency RMBS | 136,198 |  |  | (20) |  |  | 4,604 |  |  | (678) |  |  | 140,104 |  |  |  |
| ABS(3) | 1,712,236 |  |  | — |  |  | 14,527 |  |  | (6,685) |  |  | 1,720,078 |  |  |  |
| Municipals(4) | 282,781 |  |  | — |  |  | 13,148 |  |  | (31) |  |  | 295,898 |  |  |  |
| Total fixed maturities, available for sale | $ | 11,566,930 |  |  | $ | (323) |  |  | $ | 494,103 |  |  | $ | (18,911) |  |  | $ | 12,041,799 |  |  |  |

(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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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
The following table provides the amortized cost and fair values of the Company's fixed maturities classified as held to maturity:

|  | Amortized cost |  | Allowance for expected credit losses |  | Net carrying value |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value |  |  |
| At March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Held to maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |
| ABS(1) | $ | 404,690 |  |  | $ | — |  |  | $ | 404,690 |  |  | $ | 46 |  |  | $ | (214) |  |  | $ | 404,522 |  |  |  |
| Total fixed maturities, held to maturity | $ | 404,690 |  |  | $ | — |  |  | $ | 404,690 |  |  | $ | 46 |  |  | $ | (214) |  |  | $ | 404,522 |  |  |  |

(1)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by collateralized loan obligations ("CLOs").
On March 1, 2021, the Company transferred securities with total fair value of $405 million from fixed maturities, available for sale to fixed maturities, held to maturity. These securities, which the Company has the intent and ability to hold to maturity, were transferred in order to better align the accounting classification with their management strategy. The net unrealized gain at the date of the transfer, March 1, 2021, continues to be reported in the carrying value of the transferred securities and is amortized over the remaining life of the securities using the effective yield method.
Fixed maturities, held to maturity of $405 million at March 31, 2021 were presented net of an allowance for expected credit losses. The Company's ABS, held to maturity consist of CLO debt tranched securities. The Company uses a scenario-based approach to review its CLO debt portfolio and reviews subordination levels of these securities to determine their ability to absorb credit losses of the underlying collateral. If losses are forecast to be below the subordination level for a tranche held by the Company, the security is determined not to have a credit loss. At March 31, 2021, the allowance for credit losses expected to be recognized over the life of our ABS, held to maturity was $nil.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
Equity Securities
The following table provides the cost and fair values of the Company's equity securities:

|  | Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value |
| At March 31, 2021 |  |  |  |  |  |  |  |
| Equity securities |  |  |  |  |  |  |  |
| Common stocks | $ | 8,470 |  |  | $ | 1,682 |  |  | $ | (435) |  |  | $ | 9,717 |  |
| Preferred stocks | 5,519 |  |  | 1,430 |  |  | — |  |  | 6,949 |  |
| Exchange-traded funds | 182,544 |  |  | 87,184 |  |  | (342) |  |  | 269,386 |  |
| Bond mutual funds | 257,918 |  |  | 3,706 |  |  | — |  |  | 261,624 |  |
| Total equity securities | $ | 454,451 |  |  | $ | 94,002 |  |  | $ | (777) |  |  | $ | 547,676 |  |
| At December 31, 2020 |  |  |  |  |  |  |  |
| Equity securities |  |  |  |  |  |  |  |
| Common stocks | $ | 10,810 |  |  | $ | 689 |  |  | $ | (557) |  |  | $ | 10,942 |  |
| Preferred stocks | 6,301 |  |  | 1,767 |  |  | — |  |  | 8,068 |  |
| Exchange-traded funds | 147,794 |  |  | 74,314 |  |  | (390) |  |  | 221,718 |  |
| Bond mutual funds | 256,839 |  |  | 20,878 |  |  | — |  |  | 277,717 |  |
| Total equity securities | $ | 421,744 |  |  | $ | 97,648 |  |  | $ | (947) |  |  | $ | 518,445 |  |

In the normal course of investing activities, the Company actively manages allocations to non-controlling tranches of structured securities which are variable interests issued by Variable Interest Entities ("VIEs"). These structured securities include RMBS, CMBS and ABS.
The Company also invests in limited partnerships which represent 64% of the Company's other investments. The investments in limited partnerships include hedge funds, direct lending funds, private equity funds and real estate funds as well as CLO equity tranched securities, which are variable interests issued by VIEs (refer to Note 3(c) 'Other Investments'). The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs therefore the Company is not the primary beneficiary of these VIEs.
The maximum exposure to loss on these interests is limited to the amount of commitment made by the Company. The Company has not provided financial or other support to these structured securities other than the original investment.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
Contractual Maturities of Fixed Maturities
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The table below provides the contractual maturities of fixed maturities classified as available for sale:

|  | Amortized cost |  | Fair value |  | % of Total fair value |
| At March 31, 2021 |  |  |  |  |  |
| Maturity |  |  |  |  |  |
| Due in one year or less | $ | 584,411 |  |  | $ | 593,485 |  |  | 5.0 | % |
| Due after one year through five years | 4,361,986 |  |  | 4,482,143 |  |  | 38.2 | % |
| Due after five years through ten years | 2,324,428 |  |  | 2,363,912 |  |  | 20.2 | % |
| Due after ten years | 236,654 |  |  | 236,398 |  |  | 2.0 | % |
|  | 7,507,479 |  |  | 7,675,938 |  |  | 65.4 | % |
| Agency RMBS | 1,186,277 |  |  | 1,208,494 |  |  | 10.3 | % |
| CMBS | 1,227,004 |  |  | 1,274,049 |  |  | 10.9 | % |
| Non-agency RMBS | 163,617 |  |  | 167,169 |  |  | 1.4 | % |
| ABS | 1,396,130 |  |  | 1,402,961 |  |  | 12.0 | % |
| Total | $ | 11,480,507 |  |  | $ | 11,728,611 |  |  | 100.0 | % |
| At December 31, 2020 |  |  |  |  |  |
| Maturity |  |  |  |  |  |
| Due in one year or less | $ | 436,287 |  |  | $ | 444,527 |  |  | 3.6 | % |
| Due after one year through five years | 4,165,696 |  |  | 4,335,219 |  |  | 36.0 | % |
| Due after five years through ten years | 2,344,859 |  |  | 2,489,050 |  |  | 20.7 | % |
| Due after ten years | 258,654 |  |  | 273,025 |  |  | 2.3 | % |
|  | 7,205,496 |  |  | 7,541,821 |  |  | 62.6 | % |
| Agency RMBS | 1,244,727 |  |  | 1,286,209 |  |  | 10.7 | % |
| CMBS | 1,268,273 |  |  | 1,353,587 |  |  | 11.2 | % |
| Non-agency RMBS | 136,198 |  |  | 140,104 |  |  | 1.2 | % |
| ABS | 1,712,236 |  |  | 1,720,078 |  |  | 14.3 | % |
| Total | $ | 11,566,930 |  |  | $ | 12,041,799 |  |  | 100.0 | % |

ABS classified as held to maturity with a net carrying value of $405 million (2020: $nil) do not have a single maturity date and cannot be allocated over several maturity groupings.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
Gross Unrealized Losses
The following table summarizes fixed maturities available for sale in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:

|  | 12 months or greater |  | Less than 12 months |  | Total |
|  | Fair value |  | Unrealized losses |  | Fair value |  | Unrealized losses |  | Fair value |  | Unrealized losses |
| At March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | — |  |  | $ | — |  |  | $ | 973,758 |  |  | $ | (14,899) |  |  | $ | 973,758 |  |  | $ | (14,899) |  |
| Non-U.S. government | 2,257 |  |  | (485) |  |  | 156,529 |  |  | (2,941) |  |  | 158,786 |  |  | (3,426) |  |
| Corporate debt | 62,713 |  |  | (1,576) |  |  | 1,036,713 |  |  | (24,881) |  |  | 1,099,426 |  |  | (26,457) |  |
| Agency RMBS | 154 |  |  | (4) |  |  | 447,303 |  |  | (7,381) |  |  | 447,457 |  |  | (7,385) |  |
| CMBS | 18,422 |  |  | (140) |  |  | 133,199 |  |  | (3,401) |  |  | 151,621 |  |  | (3,541) |  |
| Non-agency RMBS | 6,153 |  |  | (478) |  |  | 59,008 |  |  | (405) |  |  | 65,161 |  |  | (883) |  |
| ABS | 95,782 |  |  | (1,537) |  |  | 241,242 |  |  | (1,325) |  |  | 337,024 |  |  | (2,862) |  |
| Municipals | — |  |  | — |  |  | 80,414 |  |  | (1,539) |  |  | 80,414 |  |  | (1,539) |  |
| Total fixed maturities, available for sale | $ | 185,481 |  |  | $ | (4,220) |  |  | $ | 3,128,166 |  |  | $ | (56,772) |  |  | $ | 3,313,647 |  |  | $ | (60,992) |  |
| At December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | — |  |  | $ | — |  |  | $ | 251,606 |  |  | $ | (1,759) |  |  | $ | 251,606 |  |  | $ | (1,759) |  |
| Non-U.S. government | 16,115 |  |  | (262) |  |  | 3,652 |  |  | (166) |  |  | 19,767 |  |  | (428) |  |
| Corporate debt | 63,640 |  |  | (2,244) |  |  | 233,970 |  |  | (4,114) |  |  | 297,610 |  |  | (6,358) |  |
| Agency RMBS | 6,580 |  |  | (20) |  |  | 78,672 |  |  | (668) |  |  | 85,252 |  |  | (688) |  |
| CMBS | 19,736 |  |  | (1,012) |  |  | 70,656 |  |  | (1,272) |  |  | 90,392 |  |  | (2,284) |  |
| Non-agency RMBS | 5,109 |  |  | (598) |  |  | 9,558 |  |  | (80) |  |  | 14,667 |  |  | (678) |  |
| ABS | 325,436 |  |  | (4,011) |  |  | 360,402 |  |  | (2,674) |  |  | 685,838 |  |  | (6,685) |  |
| Municipals | — |  |  | — |  |  | 11,881 |  |  | (31) |  |  | 11,881 |  |  | (31) |  |
| Total fixed maturities, available for sale | $ | 436,616 |  |  | $ | (8,147) |  |  | $ | 1,020,397 |  |  | $ | (10,764) |  |  | $ | 1,457,013 |  |  | $ | (18,911) |  |

Fixed Maturities
At March 31, 2021, 1,553 fixed maturities (2020: 719) were in an unrealized loss position of $61 million (2020: $19 million), of which $5 million (2020: $7 million) was related to securities below investment grade or not rated.
At March 31, 2021, 205 fixed maturities (2020: 249) had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $185 million (2020: $437 million).
The unrealized losses of $61 million (2020: $19 million) were due to non-credit factors and were expected to be recovered as the related securities approach maturity.
At March 31, 2021, the Company did not intend to sell the securities in an unrealized loss position and it is more likely than not that the Company will not be required to sell these securities before the anticipated recovery of their amortized costs.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
b) Mortgage Loans
The following table provides details of the Company's mortgage loans, held for investment:

|  | March 31, 2021 |  | December 31, 2020 |
|  | Carrying value |  | % of Total |  | Carrying value |  | % of Total |
| Mortgage loans, held for investment: |  |  |  |  |  |  |  |
| Commercial | $ | 629,576 |  |  | 100 | % |  | $ | 593,290 |  |  | 100 | % |
| Total mortgage loans, held for investment | $ | 629,576 |  |  | 100 | % |  | $ | 593,290 |  |  | 100 | % |

The primary credit quality indicator for commercial mortgage loans is the debt service coverage ratio which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan (generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss) and the loan-to-value ratio which compares the unpaid principal balance of the loan to the estimated fair value of the underlying collateral (generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss). The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis.
The Company has a high quality mortgage loan portfolio with a weighted average debt service coverage rati o of 2.4x (2020: 2.4x) and a weighted average loan-to-value ratio of 60% (2020: 60%). At March 31, 2021, there are no credit losses or past due amounts associated with the commercial mortgage loans held by the Company.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
c) Other Investments
The following tables provide a summary of the Company's other investments, together with additional information relating to the liquidity of each category:

|  | Fair value |  | Redemption frequency (if currently eligible) |  | Redemption notice period |
| At March 31, 2021 |  |  |  |  |  |  |  |
| Long/short equity funds | $ | 19,033 |  |  | 2 | % |  | Annually |  | 60 days |
| Multi-strategy funds | 106,971 |  |  | 14 | % |  | Quarterly, Semi-annually |  | 60-95 days |
| Direct lending funds | 279,324 |  |  | 35 | % |  | Quarterly(1) |  | 90 days |
| Private equity funds | 153,515 |  |  | 19 | % |  | n/a |  | n/a |
| Real estate funds | 163,635 |  |  | 21 | % |  | Quarterly(2) |  | 45 days |
| CLO-Equities | 6,269 |  |  | 1 | % |  | n/a |  | n/a |
| Other privately held investments | 61,783 |  |  | 8 | % |  | n/a |  | n/a |
| Overseas deposits | — |  |  | — | % |  | n/a |  | n/a |
| Total other investments | $ | 790,530 |  |  | 100 | % |  |  |  |  |
| At December 31, 2020 |  |  |  |  |  |  |  |
| Long/short equity funds | $ | 25,300 |  |  | 3 | % |  | Annually |  | 60 days |
| Multi-strategy funds | 121,420 |  |  | 15 | % |  | Quarterly, Semi-annually |  | 60-95 days |
| Direct lending funds | 272,131 |  |  | 33 | % |  | Quarterly(1) |  | 90 days |
| Private equity funds | 124,706 |  |  | 15 | % |  | n/a |  | n/a |
| Real estate funds | 164,250 |  |  | 20 | % |  | Quarterly(2) |  | 45 days |
| CLO-Equities | 6,173 |  |  | 1 | % |  | n/a |  | n/a |
| Other privately held investments | 70,011 |  |  | 8 | % |  | n/a |  | n/a |
| Overseas deposits | 45,165 |  |  | 5 | % |  | n/a |  | n/a |
| Total other investments | $ | 829,156 |  |  | 100 | % |  |  |  |  |

n/a - not applicable
(1) Applies to one fund with a fair value of $38 million (2020: $38 million).
(2) Applies to one fund with a fair value of $66 million (2020: $61 million).
Two common redemption restrictions which may impact the Company's ability to redeem hedge funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the fund's net assets which may otherwise hinder the general partner or investment manager's ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. During the three months ended March 31, 2021 and 2020, neither of these restrictions impacted the Company's redemption requests. At March 31, 2021, $19 million (2020: $25 million), representing 15% (2020: 17%) of total hedge funds, relate to holdings where the Company is still within the lockup period. The expiration of these lockup periods range from April 2021 to March 2022.
At March 31, 2021, the Company had $187 million (2020: $151 million) of unfunded commitments as a limited partner in direct lending funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until the completion of the fund's investment term. These funds have investment terms ranging from five to fifteen years and the General Partners of certain funds have the option to extend the term by up to three years.
At March 31, 2021, the Company had $20 million (2020: $20 million) of unfunded commitments as a limited partner in multi-strategy hedge funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until after the completion of the funds' investment term. These funds have investment terms ranging from two years to the dissolution of the underlying fund.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
At March 31, 2021, the Company had $191 million (2020: $201 million) of unfunded commitments as a limited partner in funds which invest in real estate and real estate securities and businesses. These funds include an open-ended fund and funds with investment terms ranging from seven years to the dissolution of the underlying fund.
At March 31, 2021, the Company had $137 million (2020: $166 million) of unfunded commitments as a limited partner in private equity funds. The life of the funds is subject to the dissolution of the underlying funds. The Company expects the overall holding period to be over five years.
During 2015, the Company made a $50 million commitment as a limited partner of a bank revolver opportunity fund. The fund has an investment term of seven years and the General Partners have the option to extend the term by up to two years. At March 31, 2021, this commitment remains unfunded. It is not anticipated that the full amount of this fund will be drawn.
d) Equity Method Investments
During 2016, the Company paid $108 million including direct transaction costs to acquire 19% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Through long-term service agreements, AXIS Capital will serve as Harrington Re's reinsurance underwriting manager and Blackstone will serve as exclusive investment management service provider. As an investor, the Company expects to benefit from underwriting profit generated by Harrington Re and the income and capital appreciation Blackstone seeks to deliver through its investment management services. In addition, the Company has entered into an arrangement with Blackstone under which underwriting and investment related fees will be shared equally. Harrington is not a VIE that is required to be included in the Company's consolidated financial statements. The Company accounts for its ownership interest in Harrington under the equity method of accounting. The Company's proportionate share of the underlying equity in net assets resulted in a basis difference of $5 million which represents initial transactions costs.
e) Net Investment Income
Net investment income was derived from the following sources:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Fixed maturities | $ | 69,470 |  |  | $ | 89,943 |  |  |  |  |  |
| Other investments | 41,833 |  |  | (2,120) |  |  |  |  |  |
| Equity securities | 2,498 |  |  | 2,125 |  |  |  |  |  |
| Mortgage loans | 4,187 |  |  | 4,053 |  |  |  |  |  |
| Cash and cash equivalents | 2,336 |  |  | 4,930 |  |  |  |  |  |
| Short-term investments | 133 |  |  | 1,498 |  |  |  |  |  |
| Gross investment income | 120,457 |  |  | 100,429 |  |  |  |  |  |
| Investment expenses | (6,292) |  |  | (7,328) |  |  |  |  |  |
| Net investment income | $ | 114,165 |  |  | $ | 93,101 |  |  |  |  |  |

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
f) Net Investment Gains (Losses)
The following table provides an analysis of net investment gains (losses):

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Gross realized investment gains |  |  |  |  |  |  |  |
| Fixed maturities and short-term investments | $ | 50,170 |  |  | $ | 39,931 |  |  |  |  |  |
| Equity securities | 569 |  |  | 1,920 |  |  |  |  |  |
| Gross realized investment gains | 50,739 |  |  | 41,851 |  |  |  |  |  |
| Gross realized investment losses |  |  |  |  |  |  |  |
| Fixed maturities and short-term investments | (19,368) |  |  | (22,766) |  |  |  |  |  |
| Equity securities | (89) |  |  | (2,682) |  |  |  |  |  |
| Gross realized investment losses | (19,457) |  |  | (25,448) |  |  |  |  |  |
| Allowance for expected credit losses | 89 |  |  | (20,019) |  |  |  |  |  |
| Impairment losses(1) | — |  |  | (1,190) |  |  |  |  |  |
| Change in fair value of investment derivatives(2) | 1,749 |  |  | 3,162 |  |  |  |  |  |
| Net unrealized gains (losses) on equity securities | (3,475) |  |  | (61,233) |  |  |  |  |  |
| Net investment gains (losses) | $ | 29,645 |  |  | $ | (62,877) |  |  |  |  |  |

(1) Related to instances where the Company intends to sell securities or it is more likely than not that the Company will be required to sell securities before their anticipated recovery.
(2) Refer to Note 5 'Derivative Instruments'.
The following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Balance at beginning of period | $ | 323 |  |  | $ | — |  |  |  |  |  |
| Expected credit losses on securities where credit losses were not previously recognized | 63 |  |  | 20,019 |  |  |  |  |  |
| Additions (reductions) for expected credit losses on securities where credit losses were previously recognized | (105) |  |  | — |  |  |  |  |  |
| Impairments of securities which the Company intends to sell or more likely than not will be required to sell | — |  |  | — |  |  |  |  |  |
| Securities sold/redeemed/matured | (47) |  |  | — |  |  |  |  |  |
| Balance at end of period | $ | 234 |  |  | $ | 20,019 |  |  |  |  |  |

g) Reverse Repurchase Agreements
At March 31, 2021, the Company held $46 million (2020: $91 million) of reverse repurchase agreements. These loans are fully collateralized, are generally outstanding for a short period of time and are presented on a gross basis as part of cash and cash equivalents in the Company's consolidated balance sheets. The required collateral for these loans is either cash or U.S. Treasuries at a minimum rate of 102% of the loan principal. Upon maturity, the Company receives principal and interest income. The Company monitors the estimated fair value of the securities loaned and borrowed on a daily basis with additional collateral obtained as necessary throughout the duration of the transaction.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
Fair value is defined as the price to sell an asset or transfer a liability (i.e. the "exit price") in an orderly transaction between market participants. U.S. GAAP prescribes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement. The hierarchy is broken down into three levels as follows:
•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 judgments about assumptions that market participants might use.
The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.
Accordingly, the degree of judgment exercised by management in determining fair value is greatest for financial instruments categorized as Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many financial instruments. This may lead the Company to change the selection of valuation technique (from market to cash flow approach) or may cause the Company to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy.
Valuation Techniques
The valuation techniques, including significant inputs and assumptions generally used to determine the fair values of the Company's financial instruments as well as the classification of the fair values of its financial instruments in the fair value hierarchy are described in detail below.
Fixed Maturities
At each valuation date, the Company uses the market approach valuation technique to estimate the fair value of its fixed maturities portfolio, where possible. The market approach includes, but is not limited to, prices obtained from third-party pricing services for identical or comparable securities and the use of "pricing matrix models" using observable market inputs such as yield curves, credit risks and spreads, measures of volatility, and prepayment speeds. Pricing from third-party pricing services is sourced from multiple vendors, where available, and the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Where prices are unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers who are active in the corresponding markets. The valuation techniques including significant inputs and assumptions generally used to determine the fair values of the Company's fixed maturities by asset class as well as the classifications of the fair values of these securities in the fair value hierarchy are described in detail below.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
U.S. Government and Agency
U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. As the fair values of U.S. Treasury securities are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. The fair values of U.S. government agency securities are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of U.S. government agency securities are classified as Level 2.
Non-U.S. Government
Non-U.S. government securities include bonds issued by non-U.S. governments and their agencies along with supranational organizations (collectively also known as sovereign debt securities). The fair values of these securities are based on prices obtained from international indices or valuation models that include inputs such as interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the sovereign bond in terms of issuer, maturity and seniority. As the significant inputs used to price these securities are observable market inputs, the fair values of non-U.S. government securities are classified as Level 2.
Corporate Debt
Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of corporate debt securities are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.
Agency RMBS
Agency RMBS consist of bonds issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The fair values of these securities are priced using a mortgage pool specific model which uses daily inputs from the active to be announced market and the spread associated with each mortgage pool based on vintage. As the significant inputs used to price these securities are observable market inputs, the fair values of Agency RMBS are classified as Level 2.
CMBS
CMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using a pricing model which uses dealer quotes and other available trade information along with security level characteristics to determine deal specific spreads. As the significant inputs used to price these securities are observable market inputs, the fair values of CMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. I n this event, the fair values of these securities are classified as Level 3.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Non-agency RMBS
Non-agency RMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using an option adjusted spread model or other relevant models, which use inputs including available trade information or broker quotes, prepayment and default projections based on historical statistics of the underlying collateral and current market data. As the significant inputs used to price these securities are observable market inputs, the fair values of non-agency RMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. I n this event, the fair values of these securities are classified as Level 3.
ABS
ABS mainly include investment-grade bonds backed by pools of loans with a variety of underlying collateral, including auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs"), originated by a variety of financial institutions. The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, the fair values of ABS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers t o estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. I n this event, the fair values of these securities are classified as Level 3.
Municipals
Municipals comprise revenue bonds and general obligation bonds issued by U.S. domiciled state and municipal entities. The fair values of these securities are determined using spreads obtained from the new issue market, trade prices and broker-dealers quotes. As the significant inputs used to price these securities are observable market inputs, the fair values of municipals are classified as Level 2.
Equity Securities
Equity securities include common stocks, preferred stocks, exchange-traded funds and bond mutual funds. As the fair values of common stocks, preferred stocks and exchange-traded funds are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. As bond mutual funds have daily liquidity, the fair values of these securities are classified as Level 2.
Other Investments
The fair value of an indirect investment in CLO-Equities is estimated using an income approach valuation technique, specifically an externally developed discounted cash flow model due to the lack of observable and relevant trades in secondary markets. As the significant inputs used to price this security are unobservable, the fair value of the indirect investment in CLO-Equities is classified as Level 3.
Other privately held investments include convertible preferred shares, common shares, convertible notes and a variable yield security. These investments are initially valued at cost, which approximates fair value. In subsequent measurement periods, the fair values of these investments are generally determined using capital statements obtained from each investee company. In order to assess the reasonableness of the information received from each investee company, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact the results of operations, financial condition or liquidity of investee companies. In addition, the Company engages in regular communication with management at the investee companies. The fair value of the variable yield security was determined using an externally developed discounted cash flow model. As the significant inputs used to price these investments are unobservable, the fair values of other privately held investments are classified as Level 3.
Overseas deposits include investments in private funds held by Syndicate 2007 where the underlying investments are primarily U.S. government, non-U.S. government and corporate debt securities. The funds do not trade on an exchange, therefore, they are not included in available for sale investments. As the significant inputs used to price the underlying investments are observable market inputs, the fair values of overseas deposits are classified as Level 2.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Short-term Investments
Short-term investments primarily comprise highly liquid securities with maturities greater than three months but less than one year from the date of purchase. These securities are typically not actively traded due to their approaching maturity, therefore their amortized cost approximates fair value. The fair values of short-term investments are classified as Level 2.
Derivative Instruments
Derivative instruments include foreign exchange forward contracts that are customized to the Company's economic hedging strategies and trade in the over-the-counter derivative market. The fair values of these derivatives are determined using a market approach valuation technique based on significant observable market inputs from third-party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used to price these derivatives are observable market inputs, the fair values of these derivatives are classified as Level 2.
Other underwriting-related derivatives include insurance and reinsurance contracts that are accounted for as derivatives. These derivative contracts are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models. As the significant inputs used to price these derivatives are unobservable, the fair values of these contracts are classified as Level 3.
Cash Settled Awards
Cash settled awards comprise restricted stock units that form part of the Company's compensation program. Although the fair values of these awards are determined using observable quoted market prices in active markets, the restricted stock units are not actively traded. As the significant inputs used to price these securities are observable market inputs, the fair values of these liabilities are classified as Level 2.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
The tables below present the financial instruments measured at fair value on a recurring basis for the periods indicated:

|  | Quoted prices in active markets for identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3) |  | Fair value based on NAV practical expedient |  | Total fair value |
| At March 31, 2021 |  |  |  |  |  |  |  |  |  |
| Assets |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,121,183 |  |  | $ | 65,910 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,187,093 |  |
| Non-U.S. government | — |  |  | 714,721 |  |  | — |  |  | — |  |  | 714,721 |  |
| Corporate debt | — |  |  | 4,492,873 |  |  | 2,405 |  |  | — |  |  | 4,495,278 |  |
| Agency RMBS | — |  |  | 1,208,494 |  |  | — |  |  | — |  |  | 1,208,494 |  |
| CMBS | — |  |  | 1,273,144 |  |  | 905 |  |  | — |  |  | 1,274,049 |  |
| Non-agency RMBS | — |  |  | 167,169 |  |  | — |  |  | — |  |  | 167,169 |  |
| ABS | — |  |  | 1,395,786 |  |  | 7,175 |  |  | — |  |  | 1,402,961 |  |
| Municipals | — |  |  | 278,846 |  |  | — |  |  | — |  |  | 278,846 |  |
|  | 2,121,183 |  |  | 9,596,943 |  |  | 10,485 |  |  | — |  |  | 11,728,611 |  |
| Equity securities |  |  |  |  |  |  |  |  |  |
| Common stocks | 9,717 |  |  | — |  |  | — |  |  | — |  |  | 9,717 |  |
| Preferred stocks | 6,949 |  |  | — |  |  | — |  |  | — |  |  | 6,949 |  |
| Exchange-traded funds | 269,386 |  |  | — |  |  | — |  |  | — |  |  | 269,386 |  |
| Bond mutual funds | — |  |  | 261,624 |  |  | — |  |  | — |  |  | 261,624 |  |
|  | 286,052 |  |  | 261,624 |  |  | — |  |  | — |  |  | 547,676 |  |
| Other investments |  |  |  |  |  |  |  |  |  |
| Hedge funds (1) | — |  |  | — |  |  | — |  |  | 126,004 |  |  | 126,004 |  |
| Direct lending funds | — |  |  | — |  |  | — |  |  | 279,324 |  |  | 279,324 |  |
| Private equity funds | — |  |  | — |  |  | — |  |  | 153,515 |  |  | 153,515 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | 163,635 |  |  | 163,635 |  |
| CLO-Equities | — |  |  | — |  |  | 6,269 |  |  | — |  |  | 6,269 |  |
| Other privately held investments | — |  |  | — |  |  | 61,783 |  |  | — |  |  | 61,783 |  |
| Overseas deposits | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
|  | — |  |  | — |  |  | 68,052 |  |  | 722,478 |  |  | 790,530 |  |
| Short-term investments | — |  |  | 185,699 |  |  | — |  |  | — |  |  | 185,699 |  |
| Other assets |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | — |  |  | 3,254 |  |  | — |  |  | — |  |  | 3,254 |  |
| Total Assets | $ | 2,407,235 |  |  | $ | 10,047,520 |  |  | $ | 78,537 |  |  | $ | 722,478 |  |  | $ | 13,255,770 |  |
| Liabilities |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | $ | — |  |  | $ | 19,705 |  |  | $ | 8,462 |  |  | $ | — |  |  | $ | 28,167 |  |
| Cash settled awards (refer to Note 8) | — |  |  | 4,626 |  |  | — |  |  | — |  |  | 4,626 |  |
| Total Liabilities | $ | — |  |  | $ | 24,331 |  |  | $ | 8,462 |  |  | $ | — |  |  | $ | 32,793 |  |

(1) Includes Long/short equity and Multi-strategy funds.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)

|  | Quoted prices in active markets for identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3) |  | Fair value based on NAV practical expedient |  | Total fair value |
| At December 31, 2020 |  |  |  |  |  |  |  |  |  |
| Assets |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 1,861,240 |  |  | $ | 57,459 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,918,699 |  |
| Non-U.S. government | — |  |  | 671,273 |  |  | — |  |  | — |  |  | 671,273 |  |
| Corporate debt | — |  |  | 4,653,447 |  |  | 2,504 |  |  | — |  |  | 4,655,951 |  |
| Agency RMBS | — |  |  | 1,286,209 |  |  | — |  |  | — |  |  | 1,286,209 |  |
| CMBS | — |  |  | 1,351,847 |  |  | 1,740 |  |  | — |  |  | 1,353,587 |  |
| Non-agency RMBS | — |  |  | 140,104 |  |  | — |  |  | — |  |  | 140,104 |  |
| ABS | — |  |  | 1,709,413 |  |  | 10,665 |  |  | — |  |  | 1,720,078 |  |
| Municipals | — |  |  | 295,898 |  |  | — |  |  | — |  |  | 295,898 |  |
|  | 1,861,240 |  |  | 10,165,650 |  |  | 14,909 |  |  | — |  |  | 12,041,799 |  |
| Equity securities |  |  |  |  |  |  |  |  |  |
| Common stocks | $ | 10,942 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 10,942 |  |
| Preferred stocks | 8,068 |  |  | — |  |  | — |  |  | — |  |  | 8,068 |  |
| Exchange-traded funds | 221,718 |  |  | — |  |  | — |  |  | — |  |  | 221,718 |  |
| Bond mutual funds | — |  |  | 277,717 |  |  | — |  |  | — |  |  | 277,717 |  |
|  | 240,728 |  |  | 277,717 |  |  | — |  |  | — |  |  | 518,445 |  |
| Other investments |  |  |  |  |  |  |  |  |  |
| Hedge funds (1) | — |  |  | — |  |  | — |  |  | 146,720 |  |  | 146,720 |  |
| Direct lending funds | — |  |  | — |  |  | — |  |  | 272,131 |  |  | 272,131 |  |
| Private equity funds | — |  |  | — |  |  | — |  |  | 124,706 |  |  | 124,706 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | 164,250 |  |  | 164,250 |  |
| CLO-Equities | — |  |  | — |  |  | 6,173 |  |  | — |  |  | 6,173 |  |
| Other privately held investments | — |  |  | — |  |  | 70,011 |  |  | — |  |  | 70,011 |  |
| Overseas deposits | — |  |  | 45,165 |  |  | — |  |  | — |  |  | 45,165 |  |
|  | — |  |  | 45,165 |  |  | 76,184 |  |  | 707,807 |  |  | 829,156 |  |
| Short-term investments | — |  |  | 161,897 |  |  | — |  |  | — |  |  | 161,897 |  |
| Other assets |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | — |  |  | 18,875 |  |  | — |  |  | — |  |  | 18,875 |  |
| Total Assets | $ | 2,101,968 |  |  | $ | 10,669,304 |  |  | $ | 91,093 |  |  | $ | 707,807 |  |  | $ | 13,570,172 |  |
| Liabilities |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | $ | — |  |  | $ | 2,364 |  |  | $ | 9,122 |  |  | $ | — |  |  | $ | 11,486 |  |
| Cash settled awards (refer to Note 8) | — |  |  | 13,273 |  |  | — |  |  | — |  |  | 13,273 |  |
| Total Liabilities | $ | — |  |  | $ | 15,637 |  |  | $ | 9,122 |  |  | $ | — |  |  | $ | 24,759 |  |

(1) Includes Long/short equity and Multi-strategy funds.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
The following table quantifies the significant unobservable inputs used in estimating fair values at March 31, 2021 of investments classified as Level 3 in the fair value hierarchy:

|  | Fair value | Valuation technique | Unobservable input | Range | Weighted average |
| Other investments - CLO-Equities | $ | 6,269 |  | Discounted cash flow | Default rates | 4.5% | 4.5% |
|  |  |  | Loss severity rate | 50.0% | 50.0% |
|  |  |  | Collateral spreads | 3.0% | 3.0% |
|  |  |  | Estimated maturity dates | 5 years | 5 years |
| Other investments - Other privately held investments | $ | 21,643 |  | Discounted cash flow | Discount rate | 1.3% | 1.3% |
|  |  | Default rate | 0.5% | 0.5% |
|  |  |  | Loss absorption yield | 1.0% | 1.0% |
|  |  |  | Estimated maturity date | 5 years | 5 years |
| Derivatives - Other underwriting-related derivatives | $ | (8,462) |  | Discounted cash flow | Discount rate | 0.9% | 0.9% |

Note: Fixed maturities of $10 million that are classified as Level 3 are excluded from the above table as these securities are priced using broker-dealer quotes. In addition, other privately held investments of $40 million that are classified as Level 3 are excluded from the above table as these investments are priced using capital statements received from investee companies.
Other Investments - CLO-Equities
The CLO-Equities market continues to be relatively inactive with only a small number of transactions being observed, particularly related to transactions involving CLO-Equities held by the Company. Accordingly, the fair value of the Company's indirect investment in CLO-Equities is determined using a discounted cash flow model prepared by an external investment manager.
The default and loss severity rates are the most judgmental unobservable market inputs to the discounted cash flow model to which the valuation of the Company's indirect investment in CLO-Equities is most sensitive. A significant increase (decrease) in either of these significant inputs in isolation would result in a lower (higher) fair value estimate for the investment in CLO-Equities and, in general, a change in default rate assumptions would be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs as they are based on the historical average of actual spreads and the weighted average life of the current underlying portfolios, respectively. A significant increase (decrease) in either of these significant inputs in isolation would result in a higher (lower) fair value estimate for the investment in CLO-Equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates.
On a quarterly basis, the Company's valuation process for its indirect investment in CLO-Equities includes a review of the underlying cash flows and key assumptions used in the discounted cash flow model. The above significant unobservable inputs are reviewed and updated based on information obtained from secondary markets, including information received from the managers of the Company's CLO-Equities investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact future cash flows. In addition, the assumptions the Company uses in its models are updated through regular communication with industry participants and ongoing monitoring of the deals in which the Company participates.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Other Investments - Other Privately Held Securities
Other privately held securities are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair value of the variable yield security was determined using an externally developed discounted cash flow model. This model includes inputs that are specific to that investment. The inputs used in the fair value measurement include an appropriate discount rate, default rate, loss absorption rate and estimated maturity date. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of this investment. A significant increase (decrease) in this input in isolation could result in significantly lower (higher) fair value measurement for this investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as investee specific information that may impact future cash flows.
Derivatives - Other Underwriting-related Derivatives
Other underwriting-related derivatives are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models which use appropriate discount rates. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of these derivatives. A significant increase (decrease) in this input in isolation could result in a significantly lower (higher) fair value measurement for the derivative contracts. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as contract specific information that may impact future cash flows.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
The following tables present changes in Level 3 for financial instruments measured at fair value on a recurring basis:

|  | Opening balance |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Included in net income(1) |  | Included in OCI (2) |  | Purchases |  | Sales |  | Settlements/ distributions |  | Closing balance |  | Change in unrealized gains/(losses) (3) |  |
| Three months ended March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 2,504 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (99) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,405 |  |  | $ | — |  |  |
| CMBS | 1,740 |  |  | — |  |  | — |  |  | — |  |  | 14 |  |  | — |  |  | — |  |  | (849) |  |  | 905 |  |  | — |  |  |
| Non-agency RMBS | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |
| ABS | 10,665 |  |  | 6,184 |  |  | (9,203) |  |  | — |  |  | 29 |  |  | — |  |  | — |  |  | (500) |  |  | 7,175 |  |  | — |  |  |
|  | 14,909 |  |  | 6,184 |  |  | (9,203) |  |  | — |  |  | (56) |  |  | — |  |  | — |  |  | (1,349) |  |  | 10,485 |  |  | — |  |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| CLO-Equities | 6,173 |  |  | — |  |  | — |  |  | 570 |  |  | — |  |  | — |  |  | — |  |  | (474) |  |  | 6,269 |  |  | 570 |  |  |
| Other privately held investments | 70,011 |  |  | — |  |  | — |  |  | 18,479 |  |  | — |  |  | 273 |  |  | (26,980) |  |  | — |  |  | 61,783 |  |  | 1,098 |  |  |
|  | 76,184 |  |  | — |  |  | — |  |  | 19,049 |  |  | — |  |  | 273 |  |  | (26,980) |  |  | (474) |  |  | 68,052 |  |  | 1,668 |  |  |
| Total assets | $ | 91,093 |  |  | $ | 6,184 |  |  | $ | (9,203) |  |  | $ | 19,049 |  |  | $ | (56) |  |  | $ | 273 |  |  | $ | (26,980) |  |  | $ | (1,823) |  |  | $ | 78,537 |  |  | $ | 1,668 |  |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | 9,122 |  |  | $ | — |  |  | $ | — |  |  | $ | (660) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8,462 |  |  | $ | (660) |  |  |
| Total liabilities | $ | 9,122 |  |  | $ | — |  |  | $ | — |  |  | $ | (660) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8,462 |  |  | $ | (660) |  |  |

|  | Opening balance |  | Transfers into Level 3 |  | Transfers out of Level 3 |  | Included in net income(1) |  | Included in OCI (2) |  | Purchases |  | Sales |  | Settlements/ distributions |  | Closing balance |  | Change in unrealized gains/(losses)(3) |  |
| Three months ended March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 2,297 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (52) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,245 |  |  | $ | — |  |  |
| CMBS | 5,235 |  |  | — |  |  | — |  |  | — |  |  | (293) |  |  | — |  |  | — |  |  | (571) |  |  | 4,371 |  |  | — |  |  |
| Non-agency RMBS | — |  |  | 9,185 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9,185 |  |  | — |  |  |
| ABS | 489 |  |  | — |  |  | — |  |  | — |  |  | (153) |  |  | — |  |  | — |  |  | — |  |  | 336 |  |  | — |  |  |
|  | 8,021 |  |  | 9,185 |  |  | — |  |  | — |  |  | (498) |  |  | — |  |  | — |  |  | (571) |  |  | 16,137 |  |  | — |  |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| CLO-Equities | 14,328 |  |  | — |  |  | — |  |  | (847) |  |  | — |  |  | — |  |  | — |  |  | (688) |  |  | 12,793 |  |  | (847) |  |  |
| Other privately held investments | 36,934 |  |  | — |  |  | — |  |  | 80 |  |  | — |  |  | 427 |  |  | — |  |  | — |  |  | 37,441 |  |  | 80 |  |  |
|  | 51,262 |  |  | — |  |  | — |  |  | (767) |  |  | — |  |  | 427 |  |  | — |  |  | (688) |  |  | 50,234 |  |  | (767) |  |  |
| Total assets | $ | 59,283 |  |  | $ | 9,185 |  |  | $ | — |  |  | $ | (767) |  |  | $ | (498) |  |  | $ | 427 |  |  | $ | — |  |  | $ | (1,259) |  |  | $ | 66,371 |  |  | $ | (767) |  |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | 9,672 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,492 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 20,164 |  |  | $ | 10,492 |  |  |
| Total liabilities | $ | 9,672 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,492 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 20,164 |  |  | $ | 10,492 |  |  |

(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 and liabilities held at the reporting date.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Transfers into Level 3 from Level 2
The transfers into Level 3 from Level 2 during the three months ended March 31, 2021 and 2020 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities.
Transfers out of Level 3 into Level 2
The transfers out of Level 3 into Level 2 during the three months ended March 31, 2021 were primarily due to the availability of observable market inputs and multiple quotes from pricing vendors for certain fixed maturities. There were no transfers out of Level 3 into Level 2 during the three months ended March 31, 2020.
Measuring the Fair Value of Other Investments Using Net Asset Valuations
The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are estimated using net asset valuations ("NAVs") as advised by external fund managers or third-party administrators. For these funds, NAVs are based on the manager's or administrator's valuation of the underlying holdings in accordance with the fund's governing documents and in accordance with U.S. GAAP.
For hedge funds, direct lending funds, private equity funds and real estate funds, valuation statements are typically released on a reporting lag. Therefore, the Company estimates the fair value of these funds by starting with the most recent fund valuations and adjusting for capital calls, redemptions, drawdowns and distributions. Return estimates are not available from the relevant fund managers for these funds, therefore the Company typically has a reporting lag in its fair value measurements of these funds. At March 31, 2021 and December 31, 2020 all funds measured at fair value using NAVs are reported on a lag.
The Company often does not have access to financial information relating to the underlying securities held within the funds, therefore, management is unable to corroborate the fair values placed on the securities underlying the asset valuations provided by fund managers or fund administrators. In order to assess the reasonableness of the NAVs, the Company performs a number of monitoring procedures on a quarterly basis, to assess the quality of the information provided by fund managers and fund administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager, regular evaluation of fund performance against applicable benchmarks and the backtesting of the Company's fair value estimates against subsequently received NAVs. Backtesting involves comparing the Company's previously reported fair values for each fund against NAVs per audited financial statements (for year-end values) and final NAVs from fund managers and fund administrators (for interim values).
The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are measured using the NAV practical expedient, therefore the fair values of these funds have not been categorized within the fair value hierarchy.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Financial Instruments Disclosed, But Not Carried, at Fair Value
The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments, including insurance contracts.
At March 31, 2021, the carrying values of cash and cash equivalents including restricted amounts, accrued investment income, receivable for investments sold, certain other assets, payable for investments purchased and certain other liabilities approximated fair values due to their short maturities. As these financial instruments are not actively traded, their fair values are classified as Level 2.
At March 31, 2021, the Company's ABS fixed maturities held to maturity, were recorded at amortized cost with a carrying value of $405 million (2020: $nil) and a fair value of $405 million (2020: $nil). The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, their fair values are classified as Level 2.
At March 31, 2021, the carrying value of mortgage loans, held for investment, approximated fair value. The fair values of mortgage loans are primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk or are determined from pricing for similar loans. As mortgage loans are not actively traded, their fair values are classified as Level 3.
At March 31, 2021, the Company's debt was recorded at amortized cost with a carrying value of $1,310 million (2020: $1,310 million) and a fair value of $1,425 million (2020: $1,485 million). The fair value of the Company's debt is based on prices obtained from a third-party pricing service and is determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair value of the Company's debt is classified as Level 2.
5. DERIVATIVE INSTRUMENTS
The following table provides the balance sheet classifications of derivatives recorded at fair value:

|  | March 31, 2021 |  | December 31, 2020 |
|  | Derivative notional amount |  | Derivative asset fair value(1) |  | Derivative liability fair value(1) |  | Derivative notional amount |  | Derivative asset fair value(1) |  | Derivative liability fair value(1) |
| Relating to investment portfolio: |  |  |  |  |  |  |  |  |  |  |  |
| Foreign exchange forward contracts | $ | 313,081 |  |  | $ | 3,026 |  |  | $ | 198 |  |  | $ | 105,781 |  |  | $ | 2 |  |  | $ | 2,364 |  |
| Relating to underwriting portfolio: |  |  |  |  |  |  |  |  |  |  |  |
| Foreign exchange forward contracts | 1,159,353 |  |  | 228 |  |  | 19,507 |  |  | 1,197,012 |  |  | 18,873 |  |  | — |  |
| Other underwriting-related contracts | 75,000 |  |  | — |  |  | 8,462 |  |  | 75,000 |  |  | — |  |  | 9,122 |  |
| Total derivatives |  |  | $ | 3,254 |  |  | $ | 28,167 |  |  |  |  | $ | 18,875 |  |  | $ | 11,486 |  |

(1)Derivative assets and derivative liabilities are classified within other assets and other liabilities in the consolidated balance sheets.
The notional amounts of derivative contracts represent the basis on which amounts paid or received are calculated and are presented in the above table to quantify the volume of the Company's derivative activities. Notional amounts are not reflective of credit risk.
None of the Company's derivative instruments are designated as hedges under current accounting guidance.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. DERIVATIVE INSTRUMENTS (CONTINUED)
Offsetting Assets and Liabilities
The Company's derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements which establish terms that apply to all transactions. In the event of a bankruptcy or other stipulated event, master netting agreements provide that individual positions be replaced with a new amount, usually referred to as the termination amount, determined by taking into account market prices and converting into a single currency. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure.
The following table provides a reconciliation of gross derivative assets and liabilities to the net amounts presented in the consolidated balance sheets, with the difference being attributable to the impact of master netting agreements:

|  | March 31, 2021 |  | December 31, 2020 |
|  | Gross amounts | Gross amounts offset | Net amounts(1) |  | Gross amounts | Gross amounts offset | Net amounts(1) |
| Derivative assets | $ | 5,557 |  | $ | (2,303) |  | $ | 3,254 |  |  | $ | 27,765 |  | $ | (8,890) |  | $ | 18,875 |  |
| Derivative liabilities | $ | 30,470 |  | $ | (2,303) |  | $ | 28,167 |  |  | $ | 20,376 |  | $ | (8,890) |  | $ | 11,486 |  |

(1)Net asset and liability derivatives are classified within other assets and other liabilities in the consolidated balance sheets.
Refer to Note 3 'Investments' for information on reverse repurchase agreements.
a) Relating to Investment Portfolio
Foreign Currency Risk
The Company's investment portfolio is exposed to foreign currency risk therefore the fair values of its investments are partially influenced by changes in foreign exchange rates. The Company may enter into foreign exchange forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities are not designated as specific hedges for financial reporting purposes.
b) Relating to Underwriting Portfolio
Foreign Currency Risk
The Company's insurance and reinsurance subsidiaries and branches operate in various countries. Some of its business is written in currencies other than the U.S. dollar, therefore the underwriting portfolio is exposed to significant foreign currency risk. The Company manages foreign currency risk by seeking to match its foreign-denominated net liabilities under insurance and reinsurance contracts with cash and investments that are denominated in the same currencies. The Company uses derivative instruments, specifically, forward contracts to economically hedge foreign currency exposures.
Other Underwriting-related Risks
The Company enters into insurance and reinsurance contracts that are accounted for as derivatives. These insurance or reinsurance contracts provide indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers these contracts to be part of its underwriting operations.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. DERIVATIVE INSTRUMENTS (CONTINUED)
The following table provides the total unrealized and realized gains (losses) recognized in net income for derivatives not designated as hedges:

|  | Consolidated statement of operations line item that includes gain (loss) recognized in net income | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Relating to investment portfolio: |  |  |  |  |  |  |  |  |
| Foreign exchange forward contracts | Net investment gains (losses) | $ | 1,749 |  |  | $ | 3,162 |  |  |  |  |  |
| Relating to underwriting portfolio: |  |  |  |  |  |  |  |  |
| Foreign exchange forward contracts | Foreign exchange gains (losses) | (26,056) |  |  | (690) |  |  |  |  |  |
| Other underwriting-related contracts | Other insurance related income (losses) | 661 |  |  | (10,201) |  |  |  |  |  |
| Total |  | $ | (23,646) |  |  | $ | (7,729) |  |  |  |  |  |

6. RESERVE FOR LOSSES AND LOSS EXPENSES
Reserve Roll-Forward
The following table presents a reconciliation of the Company's beginning and ending gross reserve for losses and loss expenses and net reserves for unpaid losses and loss expenses:

|  | Three months ended March 31, |  |
|  | 2021 |  | 2020 |  |
| Gross reserve for losses and loss expenses, beginning of period | $ | 13,926,766 |  |  | $ | 12,752,081 |  |  |
| Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period | (4,496,641) |  |  | (3,877,756) |  |  |
| Net reserve for unpaid losses and loss expenses, beginning of period | 9,430,125 |  |  | 8,874,325 |  |  |
| Net incurred losses and loss expenses related to: |  |  |  |  |
| Current year | 720,035 |  |  | 914,186 |  |  |
| Prior years | (5,317) |  |  | (6,113) |  |  |
|  | 714,718 |  |  | 908,073 |  |  |
| Net paid losses and loss expenses related to: |  |  |  |  |
| Current year | (26,944) |  |  | (19,081) |  |  |
| Prior years | (666,139) |  |  | (652,014) |  |  |
|  | (693,083) |  |  | (671,095) |  |  |
| Foreign exchange and other | 40,282 |  |  | (130,609) |  |  |
| Net reserve for unpaid losses and loss expenses, end of period | 9,492,042 |  |  | 8,980,694 |  |  |
| Reinsurance recoverable on unpaid losses and loss expenses, end of period | 4,533,232 |  |  | 4,101,579 |  |  |
| Gross reserve for losses and loss expenses, end of period | $ | 14,025,274 |  |  | $ | 13,082,273 |  |  |

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
The Company writes business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in its financial results. During the three months ended March 31, 2021, the Company recognized catastrophe and weather-related losses, net of reinstatement premiums of $110 million (2020: $300 million).
At March 31, 2021, foreign exchange and other included a reduction in reinsurance recoverable on unpaid losses of $49 million related to the Reinsurance to Close of the 2018 year of account of Syndicate 2007.
Estimates for Significant Catastrophe Events
At March 31, 2021, net reserves for losses and loss expenses included estimated amounts for numerous catastrophe events. The magnitude and complexity of losses arising from certain of these events inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at estimated net reserves for losses and loss expenses. These events include the U.S. Winter Storms Uri and Viola in 2021, the COVID-19 pandemic, Hurricanes Laura, Sally, Zeta and Delta, the Midwest derecho and wildfires across the West Coast of the United States in 2020, Japanese Typhoons Hagibis, Faxai and Tapah, Hurricane Dorian and the Australia Wildfires in 2019 and Hurricanes Michael and Florence, California Wildfires and Typhoon Jebi in 2018. As a result, actual losses for these events may ultimately differ materially from current estimates.
Prior Year Reserve Development
The Company's net favorable prior year reserve development arises from changes to estimates of losses and loss expenses related to loss events that occurred in previous calendar years. The following table presents net prior year reserve development by segment:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
|  | Favorable (Adverse) |  | Favorable (Adverse) |  |  |  |  |
| Insurance | $ | 1,505 |  |  | $ | 3,832 |  |  |  |  |  |
| Reinsurance | 3,812 |  |  | 2,281 |  |  |  |  |  |
| Total | $ | 5,317 |  |  | $ | 6,113 |  |  |  |  |  |

The following sections provide further details on net prior year reserve development by segment, reserving class and accident year.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
Insurance Segment:
The following table maps lines of business to reserve classes and the expected claim tails:

Insurance segment |  |  |  |  |
| Reserve class and tail
| Property and other | Marine | Aviation | Credit and political risk | Professional lines | Liability
| Short | Short | Short/Medium | Medium | Medium | Long
Reported lines of business |  |  |  |  |  |
Property | X |  |  |  |  |
Marine |  | X |  |  |  |
Terrorism | X |  |  |  |  |
Aviation |  |  | X |  |  |
Credit and political risk |  |  |  | X |  |
Professional lines |  |  |  |  | X |
Liability |  |  |  |  |  | X
Accident and health | X |  |  |  |  |
Discontinued lines - Novae | X |  |  |  | X | X

Prior year reserve development by reserve class was as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
|  | Favorable (Adverse) |  | Favorable (Adverse) |  |  |  |  |
| Property and other | $ | 15,391 |  |  | $ | 12,491 |  |  |  |  |  |
| Marine | 11,875 |  |  | (2,202) |  |  |  |  |  |
| Aviation | 1,035 |  |  | 3,991 |  |  |  |  |  |
| Credit and political risk | (5,371) |  |  | (916) |  |  |  |  |  |
| Professional lines | (14,593) |  |  | (5,087) |  |  |  |  |  |
| Liability | (6,832) |  |  | (4,445) |  |  |  |  |  |
| Total | $ | 1,505 |  |  | $ | 3,832 |  |  |  |  |  |

For the three months ended March 31, 2021, we recognized $2 million of net favorable prior year reserve development, the principal components of which were:
•$15 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to the 2017, 2019 and 2020 catastrophe events.
•$12 million of net favorable prior year reserve development on marine business primarily due better than expected loss emergence attributable to cargo and energy offshore books of business mainly related to the 2017 and 2020 accident years.
•$15 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the commercial management solutions, European program and European management liability solutions books of business mainly related to the 2018 accident year.
•$7 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program book of business mainly related to the 2018 accident year.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
For the three months ended March 31, 2020, we recognized $4 million of net favorable prior year reserve development, the principal components of which were:
•$12 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to the 2017 and 2018 catastrophe events.
•$5 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening related to the 2016 and 2017 accident years.
Reinsurance Segment:
The following table maps lines of business to reserve classes and the expected claim tails:

Reinsurance segment |  |  |  |
| Reserve class and tail
| Property and other | Credit and surety | Professional lines | Motor | Liability
| Short | Medium | Medium | Long | Long
Reported lines of business |  |  |  |  |
Catastrophe | X |  |  |  |
Property | X |  |  |  |
Credit and surety |  | X |  |  |
Professional lines |  |  | X |  |
Motor |  |  |  | X |
Liability |  |  |  |  | X
Engineering | X |  |  |  |
Agriculture | X |  |  |  |
Marine and aviation | X |  |  |  |
Accident and health | X |  |  |  |
Discontinued lines - Novae | X |  |  | X | X

Prior year reserve development by reserve class was as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Property and other | $ | 969 |  |  | $ | (3,905) |  |  |  |  |  |
| Credit and surety | (4,939) |  |  | 4,854 |  |  |  |  |  |
| Professional lines | (2,204) |  |  | 5,162 |  |  |  |  |  |
| Motor | 17,140 |  |  | 13,085 |  |  |  |  |  |
| Liability | (7,154) |  |  | (16,915) |  |  |  |  |  |
| Total | $ | 3,812 |  |  | $ | 2,281 |  |  |  |  |  |

For the three months ended March 31, 2021, we recognized $4 million of net favorable prior year reserve development, the principal components of which were:
•$17 million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business related to several accident years.
•$7 million of net adverse prior year reserve development on liability business primarily due to an increase in the loss estimate attributable to a specific large loss related to the 2017 accident year.
•$5 million of net adverse prior year reserve development on credit and surety business primarily due to an increase in the loss estimate attributable to a specific large loss related to the 2020 accident year.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
For the three months ended March 31, 2020, we recognized $2 million of net favorable prior year reserve development, the principal components of which were:
•$13 million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business related to 2014 and prior accident years.
•$5 million of net favorable prior year reserve development on professional lines business reflecting generally favorable experience on older accident years as the Company continued to transition to more experience based actuarial methods.
•$5 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence related to the 2016 accident year.
•$17 million of net adverse prior year development on liability business primarily due to reserve strengthening within the European proportional and non-proportional books of business and the U.S. proportional book of business related to the 2016 and 2017 accident years.
7. EARNINGS PER COMMON SHARE
The following table presents a comparison of earnings (loss) per common share and earnings (loss) per diluted common share:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Earnings (loss) per common share |  |  |  |  |  |  |  |
| Net income (loss) | $ | 123,300 |  |  | $ | (177,827) |  |  |  |  |  |
| Less: Preferred share dividends | 7,563 |  |  | 7,563 |  |  |  |  |  |
| Net income (loss) available (attributable) to common shareholders | 115,737 |  |  | (185,390) |  |  |  |  |  |
| Weighted average common shares outstanding | 84,514 |  |  | 84,094 |  |  |  |  |  |
| Earnings (loss) per common share | $ | 1.37 |  |  | $ | (2.20) |  |  |  |  |  |
| Earnings (loss) per diluted common share |  |  |  |  |  |  |  |
| Net income (loss) available (attributable) to common shareholders | $ | 115,737 |  |  | $ | (185,390) |  |  |  |  |  |
| Weighted average common shares outstanding | 84,514 |  |  | 84,094 |  |  |  |  |  |
| Share-based compensation plans(1) | 451 |  |  | — |  |  |  |  |  |
| Weighted average diluted common shares outstanding | 84,965 |  |  | 84,094 |  |  |  |  |  |
| Earnings (loss) per diluted common share | $ | 1.36 |  |  | $ | (2.20) |  |  |  |  |  |
| Weighted average anti-dilutive shares excluded from the dilutive computation | 1,697 |  |  | 806 |  |  |  |  |  |

(1) Due to the net loss attributable to common shareholders recognized for the three months ended March 31, 2020, the share equivalents were anti-dilutive.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. SHARE-BASED COMPENSATION
Performance Restricted Stock Units
Performance Restricted Stock Units granted in 2021
Performance restricted stock units granted in 2021 include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three year performance period within a range of 0% to 200% of target. Performance restricted stock units granted in 2021 were share-settled awards.
Valuation assumptions
The fair value of performance restricted stock units granted in 2021 was measured on the grant date using a Monte Carlo simulation model.
The following table provides details of the inputs used in the Monte Carlo simulation model:

| Three months ended March 31, | 2021 |
| Expected volatility | 32.99% |
| Expected term (in years) | 3.0 |
| Expected dividend yield | n/a |
| Risk-free interest rate | 0.17% |

Beginning share price: The beginning share price is based on the average closing share price over the 10 trading days preceding and including the start of the performance period
Ending share price: The ending share price is based on the average closing share price over the 10 trading days preceding and including the end of the performance period.
Expected volatility: The expected volatility is estimated based on the Company's historical share price volatility.
Expected term: Performance is measured from January 1, 2021 to December 31, 2023
Expected dividend yield: The expected dividend yield is not applicable to the performance restricted stock units as dividends are paid at the end of the vesting period and do not affect the value of the performance restricted stock units.
Risk-free interest rate: The risk free rate is estimated based on the yield on a U.S. treasury zero-coupon bond issued with a remaining term equal to the vesting period of the performance restricted stock units.
Compensation expense associated with performance restricted stock units granted in 2021 is determined on the grant date based on the fair value calculated by the Monte Carlo simulation model. The fair value of these awards is recognized on a straight-line basis over the requisite service period.
Performance Restricted Stock Units g ranted in 2020 and 2019
Performance restricted stock units granted in 2020 and 2019 include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three year performance period within a range of 75% to 125% of target. Performance restricted stock units granted in 2020 and 2019 were share-settled awards.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. SHARE-BASED COMPENSATION (CONTINUED)
Compensation expense associated with performance restricted stock units granted in 2020 and 2019 is determined based on market value of the Company's common shares measured at the grant date. The fair value of these awards is recognized on a straight-line basis over the requisite service period and is subject to periodic adjustment based on the achievement of established performance criteria during the performance period.
Performance Restricted Stock Units g ranted in 2018
Performance restricted stock units granted in 2018 included a performance condition which was growth in the Company’s book value per diluted common share adjusted for dividends over three years compared to its peer group. Growth in book value per diluted common share adjusted for dividends was calculated in accordance with the terms of the applicable award agreements. Where performance goals were achieved, these awards cliff vested at the end of a three year performance period within a range of 0% to 200% of target. Performance restricted stock units granted in 2018 were share-settled awards.
Compensation expense associated with performance restricted stock units granted in 2018 was determined based on market value of the Company's common shares measured at the grant date. The fair value of these awards was recognized on a straight-line basis over the requisite service period and was subject to periodic adjustment based on the achievement of established performance criteria during the performance period.
Share-Settled Awards
The following table provides an activity summary of the Company's share-settled restricted stock units for the three months ended March 31, 2021:

|  | Share-Settled Performance Restricted Stock Units |  | Share-Settled Service Restricted Stock Units |
|  | Number of restricted stock units |  | Weighted average grant date fair value |  | Number of restricted stock units |  | Weighted average grant date fair value |
| Non-vested restricted stock units - beginning of period | 289 |  |  | $ | 55.92 |  |  | 1,501 |  |  | $ | 56.50 |  |
| Granted | 122 |  |  | 49.04 |  |  | 1,180 |  |  | 47.88 |  |
| Vested | (66) |  |  | 48.89 |  |  | (523) |  |  | 56.38 |  |
| Forfeited | — |  |  | — |  |  | (20) |  |  | 56.58 |  |
| Non-vested restricted stock units - end of period | 345 |  |  | $ | 54.84 |  |  | 2,138 |  |  | $ | 51.77 |  |

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. SHARE-BASED COMPENSATION (CONTINUED)
Cash-Settled awards
The following table provides an activity summary of the Company's cash-settled restricted stock units for the three months ended March 31, 2021:

|  |  |  | Cash-Settled Service Restricted Stock Units |
|  |  |  | Number of restricted stock units |
| Non-vested restricted stock units - beginning of period |  |  | 471 |  |
| Granted |  |  | — |  |
| Vested |  |  | (213) |  |
| Forfeited |  |  | (9) |  |
| Non-vested restricted stock units - end of period |  |  | 248 |  |

The following table provides additional information related to share-based compensation:

Three months ended March 31, | 2021 |  | 2020
Share-based compensation expense(1) | $ | 12,339 |  |  | $ | 13,132 |
Tax benefits associated with share-based compensation expense | $ | 1,771 |  |  | $ | 1,889 |
Liability for cash-settled restricted stock units(2) | $ | 4,626 |  |  | $ | 5,711 |
Fair value of restricted stock units vested(3) | $ | 39,981 |  |  | $ | 45,565 |
Unrecognized share-based compensation expense | $ | 122,163 |  |  | $ | 111,909 |
Expected weighted average period associated with the recognition of unrecognized share-based compensation expense | 3.0 years |  | 2.8 years

(1) Related to share-settled restricted stock units and cash-settled restricted stock units.
(2) Included in other liabilities in the consolidated balance sheets.
(3) Fair value is based on the closing price of the Company's common shares on the vest date.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. SHAREHOLDERS' EQUITY
The following table presents changes in common shares issued and outstanding:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Shares issued, balance at beginning of period | 176,580 |  |  | 176,580 |  |  |  |  |  |
| Shares issued | — |  |  | — |  |  |  |  |  |
| Total shares issued at end of period | 176,580 |  |  | 176,580 |  |  |  |  |  |
| Treasury shares, balance at beginning of period | (92,227) |  |  | (92,621) |  |  |  |  |  |
| Shares repurchased | (189) |  |  | (150) |  |  |  |  |  |
| Shares reissued | 589 |  |  | 489 |  |  |  |  |  |
| Total treasury shares at end of period | (91,827) |  |  | (92,282) |  |  |  |  |  |
| Total shares outstanding | 84,753 |  |  | 84,298 |  |  |  |  |  |

Treasury Shares
The following table presents common shares repurchased from shares held in Treasury:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| In the open market: |  |  |  |  |  |  |  |
| Total shares | — |  |  | — |  |  |  |  |  |
| Total cost | $ | — |  |  | $ | — |  |  |  |  |  |
| Average price per share(1) | $ | — |  |  | $ | — |  |  |  |  |  |
| From employees:(2) |  |  |  |  |  |  |  |
| Total shares | 189 |  |  | 150 |  |  |  |  |  |
| Total cost | $ | 9,380 |  |  | $ | 8,492 |  |  |  |  |  |
| Average price per share(1) | $ | 49.73 |  |  | $ | 56.43 |  |  |  |  |  |
| Total shares repurchased: |  |  |  |  |  |  |  |
| Total shares | 189 |  |  | 150 |  |  |  |  |  |
| Total cost | $ | 9,380 |  |  | $ | 8,492 |  |  |  |  |  |
| Average price per share(1) | $ | 49.73 |  |  | $ | 56.43 |  |  |  |  |  |

(1) Calculated using whole numbers.
(2) Shares are repurchased from employees to satisfy withholding tax liabilities related to the vesting of share-settled restricted stock units.
Dividends
The following table presents dividends declared and paid related to the Company's common and preferred shares:

|  | Per share data |
|  | Dividends declared |  | Dividends paid in period of declaration |  | Dividends paid in period following declaration |
| Three months ended March 31, 2021 |  |  |  |  |  |
| Common shares | $ | 0.42 |  |  | $ | — |  |  | $ | 0.42 |  |
| Series E preferred shares | $ | 34.38 |  |  | $ | — |  |  | $ | 34.38 |  |
| Three months ended March 31, 2020 |  |  |  |  |  |
| Common shares | $ | 0.41 |  |  | $ | — |  |  | $ | 0.41 |  |
| Series E preferred shares | $ | 34.38 |  |  | $ | — |  |  | $ | 34.38 |  |

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10. DEBT AND FINANCING ARRANGEMENTS
a)Letters of Credit
Effective March 31, 2021, certain of AXIS Capital’s operating subsidiaries (the "Participating Subsidiaries") amended their existing $750 million secured letter of credit facility to: (i) extend the expiration date of the $250 million secured letter of credit facility to March 31, 2022, with each letter of credit provided pursuant to such credit facility having a tenor not to extend beyond March 31, 2023; (ii) reduce the utilization capacity available under the $250 million secured letter of credit facility to $150 million, reducing the maximum aggregate utilization capacity of the credit facility from $750 million to $650 million; and (iii) make administrative changes to the remaining $500 million secured letter of credit facility.
Letters of credit issued under the secured letter of credit facility are principally used to support the reinsurance obligations of the Participating Subsidiaries. The Participating Subsidiaries are s ubject to certain covenants, including the requirement to maintain sufficient collateral to cover the obligations outstanding under the facilities. Such obligations include contingent reimbursement obligations for outstanding letters of credit and fees payable to Citibank Europe plc. In the event of default, Citibank Europe plc may exercise certain remedies, including the exercise of control over pledged collateral and the termination facility to any or all of the Participating Subsidiaries.
11. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.
The Company is not party to any material legal proceedings arising outside the ordinary course of business.
Investments
Refer to Note 3 - 'Investments' for information on the Company's unfunded investment commitments related to the Company's other investment portfolio.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12. OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the tax effects allocated to each component of other comprehensive income (loss):

|  | 2021 |  | 2020 |  |
|  | Before tax amount |  | Income tax (expense) benefit |  | Net of tax amount |  | Before tax amount |  | Income tax (expense) benefit |  | Net of Tax Amount |  |
| Three months ended March 31, |  |  |  |  |  |  |  |  |  |  |  |  |
| Available for sale investments: |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized | $ | (196,066) |  |  | $ | 24,235 |  |  | $ | (171,831) |  |  | $ | (260,758) |  |  | $ | 17,796 |  |  | $ | (242,962) |  |  |
| Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized | 47 |  |  | — |  |  | 47 |  |  | (18,125) |  |  | 1,535 |  |  | (16,590) |  |  |
| Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss) | (30,876) |  |  | 1,877 |  |  | (28,999) |  |  | 4,126 |  |  | 1,522 |  |  | 5,648 |  |  |
| Unrealized gains (losses) arising during the period, net of reclassification adjustment | (226,895) |  |  | 26,112 |  |  | (200,783) |  |  | (274,757) |  |  | 20,853 |  |  | (253,904) |  |  |
| Foreign currency translation adjustment | 1,249 |  |  | — |  |  | 1,249 |  |  | (7,725) |  |  | — |  |  | (7,725) |  |  |
| Total comprehensive income (loss) | $ | (225,646) |  |  | $ | 26,112 |  |  | $ | (199,534) |  |  | $ | (282,482) |  |  | $ | 20,853 |  |  | $ | (261,629) |  |  |

The following table presents details of amounts reclassified from accumulated other comprehensive income ("AOCI") to net income (loss):

|  |  | Amount reclassified from AOCI(1) |
| AOCI Components | Consolidated statement of operations line item that includes reclassification adjustment | Three months ended March 31, |  |  |
| 2021 |  | 2020 |  |  |  |  |
| Unrealized gains (losses) on available for sale investments |  |  |  |  |  |  |  |  |
|  | Other realized gains (losses) | $ | 30,876 |  |  | $ | (2,936) |  |  |  |  |  |
|  | Impairment losses | — |  |  | (1,190) |  |  |  |  |  |
|  | Total before tax | 30,876 |  |  | (4,126) |  |  |  |  |  |
|  | Income tax (expense) benefit | (1,877) |  |  | (1,522) |  |  |  |  |  |
|  | Net of tax | $ | 28,999 |  |  | $ | (5,648) |  |  |  |  |  |

(1) Amounts in parentheses are charges to net income (loss).
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our results of operations for the three months ended March 31, 2021 and 2020 and our financial condition at March 31, 2021 and December 31, 2020. This should be read in conjunction with Item 1 'Consolidated Financial Statements' of this report and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020. Tabular dollars are in thousands, except per share amounts. Amounts in tables may not reconcile due to rounding differences.

| Page
First Quarter 2021 Financial Highlights | 47
Overview | 48
Consolidated Results of Operations | 50
Results by Segment: |
i) Insurance Segment | 52
ii) Reinsurance Segment | 56
Net Investment Income and Net Investment Gains (Losses) | 60
Other Expenses (Revenues), Net | 62
Financial Measures | 64
Non-GAAP Financial Measures Reconciliation | 66
Cash and Investments | 69
Liquidity and Capital Resources | 72
Critical Accounting Estimates | 73
Recent Accounting Pronouncements | 73
Off-Balance Sheet and Special Purpose Entity Arrangements | 73

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FIRST QUARTER 2021 FINANCIAL HIGHLIGHTS

First Quarter 2021 Consolidated Results of Operations
•Net income available to common shareholders of $116 million, or $1.37 per common share, and $1.36 per dilute d common shar e
•O perating income(1) of $83 million, or $0.97 per diluted common share(1)
•Gross premiums written of $2.5 billion
•Net premiums written of $1.8 billion
•Net premiums earned of $1.1 billion
•Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $110 million (Insurance: $36 million and Reinsurance: $74 million), or 10.1 points on the current accident year loss ratio, primarily attributable to Winter Storms Uri and Viola, principally related to the state of Texas, and other weather-related events.
•Net favorable prior year reserve development of $5 million
•Underwriting income(2) of $40 million and combined ratio of 98.9%
•Net investment income of $114 million
•Net investment gains of $30 million
•Foreign exchange l osses of $4 million
First Quarter 2021 Consolidated Financial Condition
•Total cash and investments of $15.6 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 $27.1 billion
•Reserve for losses and loss expenses of $14.0 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $5.0 billion
•Total debt of $1.3 billion and debt to total capital ratio(3) of 20.2%
•Common shareholders’ equity of $4.6 billion; book value per diluted common s hare of $53.03
(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) available (attributable) to common shareholders and earnings (loss) per diluted common share, respectively, and a discussion of the rationale for the presentation of these items are provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(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 presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.
(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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OVERVIEW

Business Overview
AXIS Capital Holdings Limited ("AXIS Capital"), through its operating subsidiaries, is a global provider of specialty lines insurance and treaty reinsurance with operations in Bermuda, the U.S., Europe, Singapore and Canada. Our underwriting operations are organized around our global underwriting platforms, AXIS Insurance and AXIS Re.
We provide our clients and distribution partners with a broad range of risk transfer products and services, and meaningful capacity, backed by excellent financial strength. We manage our portfolio holistically, aiming to construct the optimum portfolio of risks, consistent with our risk appetite and the development of our franchise. We nurture an ethical, entrepreneurial, disciplined and diverse culture that promotes outstanding client service, intelligent risk taking and the achievement of superior risk-adjusted returns for our shareholders. We believe that the achievement of our objectives will position us as a global leader in specialty risks. The execution of our business strategy for the first three months of 2021 included the following:
•implementing a global response strategy to help manage and mitigate the impact of COVID-19, spanning underwriting, investments, capital and liquidity, operations and employee welfare;
•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;
•re-balancing our portfolio towards less volatile lines of business that carry attractive rates;
•improving 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 that 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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Outlook
We are committed to leadership in specialty insurance and global reinsurance, where we have depth of talent and expertise. We believe we are well-positioned to succeed in the rapidly evolving marketplace. Through our hybrid strategy, we have developed substantial platforms, providing us with both balance and diversification, enabling us to take advantage of positive opportunities in either market to generate the most attractive risk-return portfolio for our shareholders. We believe our market positioning, underwriting expertise, best-in-class claims management capabilities and strong relationships with our distributors and clients will provide opportunities for increased profitability, with differences among our lines driven by our tactical response to market conditions.
Rates, terms and conditions across virtually all insurance lines and geographies continued to see improvement through the first quarter of 2021. We expect many specialty segments will continue to experience further pricing improvements through the course of 2021 as carriers assess pricing adequacy, portfolio construction and account preferences. As insurance market conditions continue to improve, capacity and capital remains available and willing to support business across a broad range of return hurdles. In this market environment, we are focusing on those lines of business and market segments that are adequately priced, and we are trading off growth for profitability in other areas.
The reinsurance market is also experiencing an improvement in rates and terms and conditions. These improvements are due to a combination of pressures on the industry, including near-term drivers such as the failure of the industry to meet the cost of capital in the last four years, the increased frequency of natural catastrophe events, together with long term drivers such as the pressure on reserve adequacy levels, low interest rates and the looming uncertainty related to social inflation. Balanced with the case for change is the strong industry capitalization, which dampens the impact. We believe the improvements will translate into a healthier and more profitable market. This environment requires a combination of strong underwriting and portfolio management mixed with smart incremental growth where returns are attractive. We have repositioned our portfolio during the last several years and believe our business is well-positioned for the current market environment.
We are encouraged by the pricing improvements that we are seeing across both the insurance and reinsurance segments. While there is positive rate momentum across most lines and markets, not all lines are at adequate levels and, in multiple cases, more rate is needed to deliver adequate returns, particularly given recent high loss experience in the market, the COVID-19 pandemic and lower interest rates. Where prices appropriately reflect these trends to deliver adequate profitability we will look to grow within our risk and volatility guidelines. With the most balanced book in the history of our company, we believe AXIS is well positioned to drive profitable growth within the current market environment.
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CONSOLIDATED RESULTS OF OPERATIONS

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Change |  | 2020 |  |  |  |  |  |  |
| Underwriting revenues: |  |  |  |  |  |  |  |  |  |  |  |
| Gross premiums written | $ | 2,535,481 |  |  | 4% |  | $ | 2,431,158 |  |  |  |  |  |  |  |
| Net premiums written | 1,778,886 |  |  | 6% |  | 1,679,044 |  |  |  |  |  |  |  |
| Net premiums earned | 1,103,722 |  |  | 1% |  | 1,088,625 |  |  |  |  |  |  |  |
| Other insurance related income (loss) | 2,781 |  |  | nm |  | (8,707) |  |  |  |  |  |  |  |
| Underwriting expenses: |  |  |  |  |  |  |  |  |  |  |  |
| Net losses and loss expenses | (714,718) |  |  | (21%) |  | (908,073) |  |  |  |  |  |  |  |
| Acquisition costs | (218,871) |  |  | (8%) |  | (238,650) |  |  |  |  |  |  |  |
| Underwriting-related general and administrative expenses(1) | (132,668) |  |  | 2% |  | (129,962) |  |  |  |  |  |  |  |
| Underwriting income (loss) | $ | 40,246 |  |  |  |  | $ | (196,767) |  |  |  |  |  |  |  |
| Net investment income | 114,165 |  |  | 23% |  | 93,101 |  |  |  |  |  |  |  |
| Net investment gains (losses) | 29,645 |  |  | nm |  | (62,877) |  |  |  |  |  |  |  |
| Corporate expenses(1) | (25,740) |  |  | (5%) |  | (27,098) |  |  |  |  |  |  |  |
| Foreign exchange (losses) gains | (4,113) |  |  | nm |  | 61,683 |  |  |  |  |  |  |  |
| Interest expense and financing costs | (15,571) |  |  | (34%) |  | (23,472) |  |  |  |  |  |  |  |
| Reorganization expenses | — |  |  | nm |  | 982 |  |  |  |  |  |  |  |
| Amortization of value of business acquired | (1,028) |  |  | (43%) |  | (1,799) |  |  |  |  |  |  |  |
| Amortization of intangible assets | (2,690) |  |  | (6%) |  | (2,870) |  |  |  |  |  |  |  |
| Income (loss) before income taxes and interest in income (loss) of equity method investments | 134,914 |  |  |  |  | (159,117) |  |  |  |  |  |  |  |
| Income tax (expense) benefit | (20,776) |  |  | nm |  | 4,867 |  |  |  |  |  |  |  |
| Interest in income (loss) of equity method investments | 9,162 |  |  | nm |  | (23,577) |  |  |  |  |  |  |  |
| Net income (loss) | $ | 123,300 |  |  |  |  | $ | (177,827) |  |  |  |  |  |  |  |
| Preferred share dividends | (7,563) |  |  | —% |  | (7,563) |  |  |  |  |  |  |  |
| Net income (loss) available (attributable) to common shareholders | $ | 115,737 |  |  |  |  | $ | (185,390) |  |  |  |  |  |  |  |

nm – not meaningful - defined as a variance greater than +/-100%
(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 o f $25,740 and $27,098 for the three months ended March 31, 2021 and 2020, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details on corporate expenses. Refer also to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.
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Underwriting Revenues
Underwriting revenues by segment were as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Change |  | 2020 |  |  |  |  |  |  |
| Gross premiums written: |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | $ | 1,103,198 |  |  | 17% |  | $ | 940,715 |  |  |  |  |  |  |  |
| Reinsurance | 1,432,283 |  |  | (4%) |  | 1,490,443 |  |  |  |  |  |  |  |
| Total gross premiums written | $ | 2,535,481 |  |  | 4% |  | $ | 2,431,158 |  |  |  |  |  |  |  |
| Percent of gross premiums written ceded |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | 36% |  | (2 pts) |  | 38% |  |  |  |  |  |  |
| Reinsurance | 25% |  | (1 pts) |  | 26% |  |  |  |  |  |  |
| Total percent of gross premiums ceded | 30% |  | (1 pts) |  | 31% |  |  |  |  |  |  |
| Net premiums written: |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | $ | 707,814 |  |  | 22% |  | $ | 581,650 |  |  |  |  |  |  |  |
| Reinsurance | 1,071,072 |  |  | (2%) |  | 1,097,394 |  |  |  |  |  |  |  |
| Total net premiums written | $ | 1,778,886 |  |  | 6% |  | $ | 1,679,044 |  |  |  |  |  |  |  |
| Net premiums earned: |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | $ | 616,286 |  |  | 10% |  | $ | 562,064 |  |  |  |  |  |  |  |
| Reinsurance | 487,436 |  |  | (7%) |  | 526,561 |  |  |  |  |  |  |  |
| Total net premiums earned | $ | 1,103,722 |  |  | 1% |  | $ | 1,088,625 |  |  |  |  |  |  |  |

Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Results by Segment' for further details on underwriting revenues.
Underwriting Expenses
The components of the combined ratio were as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Point Change |  | 2020 |  |  |  |  |  |  |
| Current accident year loss ratio excluding catastrophe and weather-related losses | 55.1 | % |  | (2.0) |  | 57.1 | % |  |  |  |  |  |  |
| Catastrophe and weather-related losses ratio | 10.1 | % |  | (16.8) |  | 26.9 | % |  |  |  |  |  |  |
| Current accident year loss ratio | 65.2 | % |  | (18.8) |  | 84.0 | % |  |  |  |  |  |  |
| Prior year reserve development ratio | (0.4 | %) |  | 0.2 |  | (0.6 | %) |  |  |  |  |  |  |
| Net losses and loss expenses ratio | 64.8 | % |  | (18.6) |  | 83.4 | % |  |  |  |  |  |  |
| Acquisition cost ratio | 19.8 | % |  | (2.1) |  | 21.9 | % |  |  |  |  |  |  |
| General and administrative expense ratio(1) | 14.3 | % |  | (0.2) |  | 14.5 | % |  |  |  |  |  |  |
| Combined ratio | 98.9 | % |  | (20.9) |  | 119.8 | % |  |  |  |  |  |  |

(1) The general and administrative expense ratio included corporate expenses not allocated to underwriting segments of 2.3% and 2.5% fo r the three months ended March 31, 2021 and 2020, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details.
Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Results by Segment' for further details on underwriting expenses.
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RESULTS BY SEGMENT

Insurance Segment
Results for the insurance segment were as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Change |  | 2020 |  |  |  |  |  |  |
| Revenues: |  |  |  |  |  |  |  |  |  |  |  |
| Gross premiums written | $ | 1,103,198 |  |  | 17% |  | $ | 940,715 |  |  |  |  |  |  |  |
| Net premiums written | 707,814 |  |  | 22% |  | 581,650 |  |  |  |  |  |  |  |
| Net premiums earned | 616,286 |  |  | 10% |  | 562,064 |  |  |  |  |  |  |  |
| Other insurance related income | 415 |  |  | (36%) |  | 647 |  |  |  |  |  |  |  |
| Expenses: |  |  |  |  |  |  |  |  |  |  |  |
| Current accident year net losses and loss expenses | (358,403) |  |  |  |  | (475,644) |  |  |  |  |  |  |  |
| Prior year reserve development | 1,505 |  |  |  |  | 3,832 |  |  |  |  |  |  |  |
| Acquisition costs | (117,679) |  |  |  |  | (112,751) |  |  |  |  |  |  |  |
| Underwriting-related general and administrative expenses | (103,303) |  |  |  |  | (100,778) |  |  |  |  |  |  |  |
| Underwriting income (loss) | $ | 38,821 |  |  |  |  | $ | (122,630) |  |  |  |  |  |  |  |
| Ratios: |  |  | % Point Change |  |  |  |  |  |  |  |  |
| Current accident year loss ratio excluding catastrophe and weather-related losses | 52.3 | % |  | (1.9) |  | 54.2 | % |  |  |  |  |  |  |
| Catastrophe and weather-related losses ratio | 5.9 | % |  | (24.5) |  | 30.4 | % |  |  |  |  |  |  |
| Current accident year loss ratio | 58.2 | % |  | (26.4) |  | 84.6 | % |  |  |  |  |  |  |
| Prior year reserve development ratio | (0.3 | %) |  | 0.4 |  | (0.7 | %) |  |  |  |  |  |  |
| Net losses and loss expenses ratio | 57.9 | % |  | (26.0) |  | 83.9 | % |  |  |  |  |  |  |
| Acquisition cost ratio | 19.1 | % |  | (1.0) |  | 20.1 | % |  |  |  |  |  |  |
| Underwriting-related general and administrative expense ratio | 16.8 | % |  | (1.1) |  | 17.9 | % |  |  |  |  |  |  |
| Combined ratio | 93.8 | % |  | (28.1) |  | 121.9 | % |  |  |  |  |  |  |

nm – not meaningful
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Gross Premiums Written
Gross premiums written by line of business were as follows:

|  | Three months ended March 31, |  |  |  |  |  |  |
|  | 2021 |  |  |  | 2020 |  |  |  | % Change |  |  |  |  |  |  |  |  |  |  |
| Property | $ | 261,786 |  |  | 23 | % |  | $ | 223,603 |  |  | 24 | % |  | 17% |  |  |  |  |  |  |  |  |  |  |
| Marine | 187,948 |  |  | 17 | % |  | 156,296 |  |  | 17 | % |  | 20% |  |  |  |  |  |  |  |  |  |  |
| Terrorism | 19,744 |  |  | 2 | % |  | 16,520 |  |  | 2 | % |  | 20% |  |  |  |  |  |  |  |  |  |  |
| Aviation | 20,402 |  |  | 2 | % |  | 17,230 |  |  | 2 | % |  | 18% |  |  |  |  |  |  |  |  |  |  |
| Credit and political risk | 37,451 |  |  | 3 | % |  | 47,675 |  |  | 5 | % |  | (21%) |  |  |  |  |  |  |  |  |  |  |
| Professional lines | 337,765 |  |  | 31 | % |  | 258,391 |  |  | 27 | % |  | 31% |  |  |  |  |  |  |  |  |  |  |
| Liability | 193,151 |  |  | 18 | % |  | 170,878 |  |  | 18 | % |  | 13% |  |  |  |  |  |  |  |  |  |  |
| Accident and health | 44,847 |  |  | 4 | % |  | 51,062 |  |  | 5 | % |  | (12%) |  |  |  |  |  |  |  |  |  |  |
| Discontinued lines - Novae | 104 |  |  | — | % |  | (940) |  |  | — | % |  | nm |  |  |  |  |  |  |  |  |  |  |
| Total | $ | 1,103,198 |  |  | 100 | % |  | $ | 940,715 |  |  | 100 | % |  | 17% |  |  |  |  |  |  |  |  |  |  |

nm – not meaningful
Gross premiums written for the three months ended March 31, 2021 increased by $162 million, or 17% ($154 million, or 16%, on a constant currency basis(1)), compared to the three months ended March 31, 2020. The increase was primarily attributable to professional lines, property, marine, and liability lines, partially offset by decreases in credit and political risk, and accident and health lines.
The increase in professional lines was due to new business, favorable rate changes and timing differences. The increases in property, marine and liability lines were due to new business and favorable rate changes. The decrease in credit and political risk lines was due to reduced business opportunities related to the current economic climate. The decrease in accident and health lines was due to timing differences.
Ceded Premiums Written
Ceded premiums written for the three months ended March 31, 2021 was $395 million, or 36%, of gross premiums written, compared to $359 million, or 38%, of gross premiums written fo r the three months ended March 31, 2020. The increase in ceded premiums written of $36 million, or 10%, was primarily driven by increases in professional lines and liability lines, partially offset by a decrease in marine lines.
(1) Amounts presented on a constant currency basis are non-GAAP financial measures as defined in Item10 (e) of SEC Regulation S-K. The constant currency basis is calculated by applying the average foreign exchange rate from the current year to the prior year balance.
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Net Premiums Earned
Net premiums earned by line of business were as follows:

|  | Three months ended March 31, |  |  |  |  |  |  |
|  | 2021 |  |  |  | 2020 |  |  |  | % Change |  |  |  |  |  |  |  |  |  |  |
| Property | $ | 161,099 |  |  | 26 | % |  | $ | 150,282 |  |  | 26 | % |  | 7% |  |  |  |  |  |  |  |  |  |  |
| Marine | 85,390 |  |  | 14 | % |  | 67,944 |  |  | 12 | % |  | 26% |  |  |  |  |  |  |  |  |  |  |
| Terrorism | 13,781 |  |  | 2 | % |  | 12,363 |  |  | 2 | % |  | 11% |  |  |  |  |  |  |  |  |  |  |
| Aviation | 17,722 |  |  | 3 | % |  | 14,776 |  |  | 3 | % |  | 20% |  |  |  |  |  |  |  |  |  |  |
| Credit and political risk | 20,998 |  |  | 3 | % |  | 26,086 |  |  | 5 | % |  | (20)% |  |  |  |  |  |  |  |  |  |  |
| Professional lines | 203,261 |  |  | 33 | % |  | 179,071 |  |  | 32 | % |  | 14% |  |  |  |  |  |  |  |  |  |  |
| Liability | 77,712 |  |  | 13 | % |  | 78,568 |  |  | 14 | % |  | (1)% |  |  |  |  |  |  |  |  |  |  |
| Accident and health | 36,192 |  |  | 6 | % |  | 33,561 |  |  | 6 | % |  | 8% |  |  |  |  |  |  |  |  |  |  |
| Discontinued lines - Novae | 131 |  |  | — | % |  | (587) |  |  | — | % |  | nm |  |  |  |  |  |  |  |  |  |  |
| Total | $ | 616,286 |  |  | 100 | % |  | $ | 562,064 |  |  | 100 | % |  | 10% |  |  |  |  |  |  |  |  |  |  |

nm – not meaningful
Net premiums earned for the three months ended March 31, 2021 increased by $54 million, or 10% ($46 million, or 8%, on a constant currency basis), compared to the three months ended March 31, 2020. The increase was primarily driven by increases in gross premiums earned in professional lines, marine and property lines, together with a decrease in ceded premium s earned in marine and property lines, partially offset by increases in ceded premiums earned in professional lines and credit and political risk lines.
Loss Ratio
The components of the loss ratio were as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Point Change |  | 2020 |  |  |  |  |  |  |
| Current accident year loss ratio | 58.2 | % |  | (26.4) |  | 84.6 | % |  |  |  |  |  |  |
| Prior year reserve development ratio | (0.3 | %) |  | 0.4 |  | (0.7 | %) |  |  |  |  |  |  |
| Loss ratio | 57.9 | % |  | (26.0) |  | 83.9 | % |  |  |  |  |  |  |

C urrent Accident Year Loss Ratio
The current accident year loss ratio decreased to 58.2% for the three months ended March 31, 2021, from 84.6% for the three months ended March 31, 2020.
During the three months ended March 31, 2021, catastrophe and weather-related losses were $36 million, or 5.9 points, primarily attributable to Winter Storms Uri and Viola and other weather-related events. Comparatively, during the three months ended March 31, 2020, catastrophe and weather-related losses, net of reinstatement premiums, were $178 million, or 30.4 points.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 52.3% for the three months ended March 31, 2021, from 54.2% for the three months ended March 31, 2020. The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses, was principally due to the impact of favorable pricing over loss trends, changes in business mix and improved loss experience in property lines largely associated with the repositioning of the portfolio, partially offset by an increase in loss experience in marine lines.
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Prior Year Reserve Development
Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.
Acquisition Cost Ratio
The acquisition cost rati o decreased to 19.1% fo r the three months ended March 31, 2021, from 20.1% for the three months ended March 31, 2020, principally related to an increase in ceding commissions.
Underwriting-Related General and Administrative Expense Ratio
The underwriting-related general and administrative expense ratio decreased to 16.8% for the three months ended March 31, 2021, from 17.9% for the three months ended March 31, 2020, mainly driven by an increase in net premiums earned.
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Reinsurance Segment
Results from the reinsurance segment were as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Change |  | 2020 |  |  |  |  |  |  |
| Revenues: |  |  |  |  |  |  |  |  |  |  |  |
| Gross premiums written | $ | 1,432,283 |  |  | (4%) |  | $ | 1,490,443 |  |  |  |  |  |  |  |
| Net premiums written | 1,071,072 |  |  | (2%) |  | 1,097,394 |  |  |  |  |  |  |  |
| Net premiums earned | 487,436 |  |  | (7%) |  | 526,561 |  |  |  |  |  |  |  |
| Other insurance related income (loss) | 2,366 |  |  | nm |  | (9,354) |  |  |  |  |  |  |  |
| Expenses: |  |  |  |  |  |  |  |  |  |  |  |
| Current accident year net losses and loss expenses | (361,632) |  |  |  |  | (438,542) |  |  |  |  |  |  |  |
| Prior year reserve development | 3,812 |  |  |  |  | 2,281 |  |  |  |  |  |  |  |
| Acquisition costs | (101,192) |  |  |  |  | (125,899) |  |  |  |  |  |  |  |
| Underwriting-related general and administrative expenses | (29,365) |  |  |  |  | (29,184) |  |  |  |  |  |  |  |
| Underwriting income (loss) | $ | 1,425 |  |  |  |  | $ | (74,137) |  |  |  |  |  |  |  |
| Ratios: |  |  | % Point Change |  |  |  |  |  |  |  |  |
| Current accident year loss ratio excluding catastrophe and weather-related losses | 58.6 | % |  | (1.6) |  | 60.2 | % |  |  |  |  |  |  |
| Catastrophe and weather-related losses ratio | 15.6 | % |  | (7.5) |  | 23.1 | % |  |  |  |  |  |  |
| Current accident year loss ratio | 74.2 | % |  | (9.1) |  | 83.3 | % |  |  |  |  |  |  |
| Prior year reserve development ratio | (0.8 | %) |  | (0.4) |  | (0.4 | %) |  |  |  |  |  |  |
| Net losses and loss expenses ratio | 73.4 | % |  | (9.5) |  | 82.9 | % |  |  |  |  |  |  |
| Acquisition cost ratio | 20.8 | % |  | (3.1) |  | 23.9 | % |  |  |  |  |  |  |
| Underwriting-related general and administrative expense ratio | 6.0 | % |  | 0.5 |  | 5.5 | % |  |  |  |  |  |  |
| Combined ratio | 100.2 | % |  | (12.1) |  | 112.3 | % |  |  |  |  |  |  |

nm – not meaningful
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Gross Premiums Written
Gross premiums written by line of business were as follows:

|  | Three months ended March 31, |  |  |  |  |  |  |  |  |
|  | 2021 |  |  |  | 2020 |  |  |  | % Change |  |  |  |  |  |  |  |  |  |  |  |  |
| Catastrophe | $ | 250,956 |  |  | 17 | % |  | $ | 262,283 |  |  | 17 | % |  | (4%) |  |  |  |  |  |  |  |  |  |  |  |  |
| Property | 126,455 |  |  | 9 | % |  | 133,189 |  |  | 9 | % |  | (5%) |  |  |  |  |  |  |  |  |  |  |  |  |
| Credit and surety | 83,221 |  |  | 6 | % |  | 100,739 |  |  | 7 | % |  | (17%) |  |  |  |  |  |  |  |  |  |  |  |  |
| Professional lines | 131,255 |  |  | 9 | % |  | 123,570 |  |  | 8 | % |  | 6% |  |  |  |  |  |  |  |  |  |  |  |  |
| Motor | 223,524 |  |  | 16 | % |  | 279,132 |  |  | 19 | % |  | (20%) |  |  |  |  |  |  |  |  |  |  |  |  |
| Liability | 269,201 |  |  | 19 | % |  | 218,896 |  |  | 15 | % |  | 23% |  |  |  |  |  |  |  |  |  |  |  |  |
| Engineering | (2,428) |  |  | — | % |  | 15,920 |  |  | 1 | % |  | nm |  |  |  |  |  |  |  |  |  |  |  |  |
| Agriculture | 16,441 |  |  | 1 | % |  | 18,248 |  |  | 1 | % |  | (10%) |  |  |  |  |  |  |  |  |  |  |  |  |
| Marine and aviation | 32,340 |  |  | 2 | % |  | 29,993 |  |  | 2 | % |  | 8% |  |  |  |  |  |  |  |  |  |  |  |  |
| Accident and health | 301,318 |  |  | 21 | % |  | 307,678 |  |  | 21 | % |  | (2%) |  |  |  |  |  |  |  |  |  |  |  |  |
| Discontinued lines - Novae | — |  |  | — | % |  | 795 |  |  | — | % |  | nm |  |  |  |  |  |  |  |  |  |  |  |  |
| Total | $ | 1,432,283 |  |  | 100 | % |  | $ | 1,490,443 |  |  | 100 | % |  | (4%) |  |  |  |  |  |  |  |  |  |  |  |  |

nm – not meaningful
Gross premiums written for the three months ended March 31, 2021 decreased by $58 million, or 4% ($82 million, or 5%, on a constant currency basis), compared to the three months ended March 31, 2020. The decrease was primarily attributable to motor, engineering, credit and surety, catastrophe and property lines, partially offset by increases in liability and professional lines.
The decreases in motor, engineering and catastrophe lines were driven by non-renewals and decreased line sizes associated with the repositioning of the portfolio. The decrease in credit and surety lines was driven by premium adjustments and a reduced line size on a significant contract. The decrease in property lines was driven by premium adjustments.
The increases in liability and professional lines were driven by favorable market conditions associated with renewals and new business.
Ceded Premiums Written
Ceded premiums written for the three months ended March 31, 2021 was $361 million, or 25%, of gross premiums written, compared to $393 million, or 26%, of gross premiums written for the three months ended March 31, 2020.
The decrease in ceded premiums written of $32 million, or 8%, was primarily driven by catastrophe, property, credit and surety, and professional lines, partially offset by an increase in liability lines. The decrease in catastrophe lines was attributable to a non-renewal of a significant excess of loss treaty, partially offset by additional costs associated with the purchase of catastrophe bond protection. The decrease in property lines was attributable to a non-renewal of a fronting arrangement. The decrease in credit and surety lines was attributable to premium adjustments. The decrease in professional lines was attributable to the restructuring of an existing quota share retrocessional treaty. The increase in liability lines was attributable to an increase in premiums ceded to the retrocessional cover with Harrington Re.
.
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Net Premiums Earned
Net premiums earned by line of business were as follows:

|  | Three months ended March 31, |  |  |  |  |  |  |
|  | 2021 |  |  |  | 2020 |  |  |  | % Change |  |  |  |  |  |  |  |  |  |  |
| Catastrophe | $ | 80,782 |  |  | 19 | % |  | $ | 74,474 |  |  | 14 | % |  | 8% |  |  |  |  |  |  |  |  |  |  |
| Property | 55,337 |  |  | 11 | % |  | 66,729 |  |  | 13 | % |  | (17%) |  |  |  |  |  |  |  |  |  |  |
| Credit and surety | 35,433 |  |  | 7 | % |  | 43,514 |  |  | 8 | % |  | (19%) |  |  |  |  |  |  |  |  |  |  |
| Professional lines | 50,847 |  |  | 10 | % |  | 48,963 |  |  | 9 | % |  | 4% |  |  |  |  |  |  |  |  |  |  |
| Motor | 54,952 |  |  | 11 | % |  | 61,968 |  |  | 12 | % |  | (11%) |  |  |  |  |  |  |  |  |  |  |
| Liability | 92,040 |  |  | 19 | % |  | 96,913 |  |  | 18 | % |  | (5%) |  |  |  |  |  |  |  |  |  |  |
| Engineering | 7,143 |  |  | 1 | % |  | 13,333 |  |  | 3 | % |  | (46%) |  |  |  |  |  |  |  |  |  |  |
| Agriculture | 15,316 |  |  | 3 | % |  | 22,292 |  |  | 4 | % |  | (31%) |  |  |  |  |  |  |  |  |  |  |
| Marine and aviation | 11,228 |  |  | 2 | % |  | 9,851 |  |  | 2 | % |  | 14% |  |  |  |  |  |  |  |  |  |  |
| Accident and health | 84,358 |  |  | 17 | % |  | 87,619 |  |  | 17 | % |  | (4%) |  |  |  |  |  |  |  |  |  |  |
| Discontinued lines - Novae | — |  |  | — | % |  | 905 |  |  | — | % |  | nm |  |  |  |  |  |  |  |  |  |  |
| Total | $ | 487,436 |  |  | 100 | % |  | $ | 526,561 |  |  | 100 | % |  | (7%) |  |  |  |  |  |  |  |  |  |  |

nm – not meaningful
Net premiums earned for the three months ended March 31, 2021 decreased by $39 million, or 7% ($40 million, or 8%, on a constant currency basis), compared to the three months ended March 31, 2020. The decrease was primarily driven by decreases in gross premiums earned in credit and surety, property, agriculture, engineering and motor lines, partially offset by decreases in ceded premiums earned in credit and surety, and property lines.
Other Insurance Related Income (Loss)
Other insurance related income was $2 million for the three months ended March 31, 2021, compared to other insurance related loss of $9 million for the three months ended March 31, 2020. The other insurance related income for the three months ended March 31, 2021
was primarily related to fees associated with arrangements with strategic capital partners. The other insurance related loss for the three months ended March 31, 2020 was primarily due to the recognition of a full limit loss of $10 million associated with the WHO pandemic risk-linked swap.
Loss Ratio
The components of the loss ratio were as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Point Change |  | 2020 |  |  |  |  |  |  |
| Current accident year loss ratio | 74.2 | % |  | (9.1) |  | 83.3 | % |  |  |  |  |  |  |
| Prior year reserve development ratio | (0.8 | %) |  | (0.4) |  | (0.4 | %) |  |  |  |  |  |  |
| Loss ratio | 73.4 | % |  | (9.5) |  | 82.9 | % |  |  |  |  |  |  |

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Current Accident Year Loss Ratio
The current accident year loss ratio decreased to 74.2% for the three months ended March 31, 2021, from 83.3% for the three months ended March 31, 2020.
During the three months ended March 31, 2021, catastrophe and weather-related losses, net of reinstatement premiums, were $74 million, or 15.6 points, primarily attributable to Winter Storms Uri and Viola and other weather-related events. Comparatively, during the three months ended March 31, 2020, catastrophe and weather-related losses were $122 million, or 23.1 points.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 58.6% for the three months ended March 31, 2021, from 60.2% for the three months ended March 31, 2020. The decrease in the current accident year loss ratio after adjusting for the impact of catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends and changes in business mix, partially offset by an increase in loss experience in property lines.
Prior Year Reserve Development
Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.
Acquisition Cost Ratio
The acquisition cost ratio decreased to 20.8% for the three months ended March 31, 2021, from 23.9% for the three months ended March 31, 2020, principally related to changes in business mix and the impact of retrocessional contracts.
Underwriting-Related General and Administrative Expense Ratio:
The underwriting-related general and administrative expense in creased to 6.0% for the three months ended March 31, 2021, from 5.5% for the three months ended March 31, 2020, mainly driven by a decrease in net premiums earned.
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NET INVESTMENT INCOME AND NET INVESTMENT GAINS (LOSSES)

Net Investment Income
Net investment income from our cash and investment portfolio by major asset class was as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Change |  | 2020 |  |  |  |  |  |  |
| Fixed maturities | $ | 69,470 |  | (23%) |  | $ | 89,943 |  |  |  |  |  |  |
| Other investments | 41,833 |  | nm |  | (2,120) |  |  |  |  |  |  |
| Equity securities | 2,498 |  | 18% |  | 2,125 |  |  |  |  |  |  |
| Mortgage loans | 4,187 |  | 3% |  | 4,053 |  |  |  |  |  |  |
| Cash and cash equivalents | 2,336 |  | (53%) |  | 4,930 |  |  |  |  |  |  |
| Short-term investments | 133 |  | (91%) |  | 1,498 |  |  |  |  |  |  |
| Gross investment income | 120,457 |  | 20% |  | 100,429 |  |  |  |  |  |  |
| Investment expense | (6,292) |  | (14%) |  | (7,328) |  |  |  |  |  |  |
| Net investment income | $ | 114,165 |  | 23% |  | $ | 93,101 |  |  |  |  |  |  |
| Pre-tax yield:(1) |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities | 2.4 | % |  |  |  | 2.9 | % |  |  |  |  |  |  |

nm - not meaningful
(1) Pre-tax yield is calculated by dividing annualized net investment income by the average month-end amortized cost balances.
Fixed Maturities
Net investment income attributable to fixed maturities for the three months ended March 31, 2021 was $69 million, compared to net investment income of $90 million for the three months ended March 31, 2020. The decrease for the three months ended March 31, 2021, compared to the same period in 2020, was due to the decrease in yields.
Other Investments
Net investment income from other investments was as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Hedge, direct lending, private equity and real estate funds | $ | 22,773 |  | $ | (1,352) |  |  |  |  |
| Other privately held investments | 18,478 |  | 80 |  |  |  |  |
| CLO-Equities | 582 |  | (848) |  |  |  |  |
| Net investment income (loss) from other investments (1) | $ | 41,833 |  | $ | (2,120) |  |  |  |  |
| Pre-tax return on other investments(2) | 5.3 | % |  | (0.3) | % |  |  |  |  |

(1)Excluding overseas deposits.
(2)The pre-tax return on other investments is calculated by dividing total net investment income from other investments (non-annualized) by the average month-end fair value balances held for the periods indicated, excluding overseas deposits.
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Net investment income attributable to other investments for the three months ended March 31, 2021 was $42 million, compared to net investment loss of $2 million for the three months ended March 31, 2020. The increase for the three months ended March 31, 2021, compared to the same period in 2020, was due to higher returns from private equity and hedge funds, and a realized gain of $17 million associated with the sale of a privately held investment.
Net Investment Gains (Losses)
Net investment gains (losses) were as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| On sale of investments: |  |  |  |  |  |  |  |
| Fixed maturities and short-term investments | $ | 30,802 |  |  | $ | 17,165 |  |  |  |  |  |
| Equity securities | 480 |  |  | (762) |  |  |  |  |  |
|  | 31,282 |  |  | 16,403 |  |  |  |  |  |
| Allowance for expected credit losses | 89 |  |  | (20,019) |  |  |  |  |  |
| Impairment losses | — |  |  | (1,190) |  |  |  |  |  |
| Change in fair value of investment derivatives | 1,749 |  |  | 3,162 |  |  |  |  |  |
| Net unrealized gains (losses) on equity securities | (3,475) |  |  | (61,233) |  |  |  |  |  |
| Net investment gains (losses) | $ | 29,645 |  |  | $ | (62,877) |  |  |  |  |  |

Net investment gains for the three months ended March 31, 2021 were $30 million, compared to net investment losses of $63 million for the three months ended March 31, 2020. For the three months ended March 31, 2021, the net investment gains were primarily due to net realized gains on the sale of corporate debt and U.S. government securities, partially offset by net unrealized losses on equity securities. For the three months ended March 31, 2020, the net investment losses were primarily due to net unrealized losses on equity securities and expected credit losses on corporate debt securities, partially offset by net realized gains on the sale of U.S. government and agency RMBS securities.
On Sale of Investments
Generally, sales of individual securities occur when there are changes in the relative value, credit quality or duration of a particular issue. We may also sell securities to re-balance our investment portfolio in order to change exposure to particular asset classes or sectors.
Impairment Losses
The impairment losses for the three months ended March 31, 2021 were $nil, compared to impairment losses of $1 million for the three months ended March 31, 2020. For the three months ended March 31, 2020, these losses were principally due to impairments of non-investment grade corporate debt securities that we intend to sell or more likely than not will be required to sell.
Change in Fair Value of Investment Derivatives
From time to time, we economically hedge foreign exchange exposure with derivative contracts.
For the three months ended March 31, 2021, w e recorded gains of $2 million related to foreign exchange contracts. For the three months ended March 31, 2020, w e recorded gains of $3 million related to foreign exchange contracts.
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Total Return
Total return on cash and investments was as follows:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Net investment income | $ | 114,165 |  | $ | 93,101 |  |  |  |  |
| Net investments gains (losses) | 29,645 |  | (62,877) |  |  |  |  |
| Change in net unrealized gains (losses) on fixed maturities (1) | (226,895) |  | (274,757) |  |  |  |  |
| Interest in income (loss) of equity method investments | 9,162 |  | (23,577) |  |  |  |  |
| Total | $ | (73,923) |  | $ | (268,110) |  |  |  |  |
| Average cash and investments(2) | $ | 15,727,085 |  | $ | 15,711,614 |  |  |  |  |
| Total return on average cash and investments, pre-tax: |  |  |  |  |  |  |  |
| Including investment related foreign exchange movements | (0.5 | %) |  | (1.7 | %) |  |  |  |  |
| Excluding investment related foreign exchange movements(3) | (0.4 | %) |  | (1.3 | %) |  |  |  |  |

(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 cash and investments excluding foreign exchange 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 $(12) million and $(61) million for the three months ended March 31, 2021 and 2020, respectively.

OTHER EXPENSES (REVENUES), NET

The following table provides a summary of other expenses (revenues), net:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | % Change |  | 2020 |  |  |  |  |  |  |
| Corporate expenses | $ | 25,740 |  |  | (5%) |  | $ | 27,098 |  |  |  |  |  |  |  |
| Foreign exchange losses (gains) | 4,113 |  |  | nm |  | (61,683) |  |  |  |  |  |  |  |
| Interest expense and financing costs | 15,571 |  |  | (34%) |  | 23,472 |  |  |  |  |  |  |  |
| Income tax expense (benefit) | 20,776 |  |  | nm |  | (4,867) |  |  |  |  |  |  |  |
| Total | $ | 66,200 |  |  |  |  | $ | (15,980) |  |  |  |  |  |  |  |

nm – not meaningful
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Corporate Expenses
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 a percentage of net premiums earned, corporate expenses decreased t o 2.3% for the three months ended March 31, 2021, from 2.5% for the three months ended March 31, 2020.
The decrease in corporate expenses for the three months ended March 31, 2021 was primarily related to decreases in information technology costs, partially offset by a decrease in the allocation of corporate costs to the insurance and reinsurance segments.
Foreign Exchange Losses (Gains)
Some of our business is written in currencies other than the U.S. dollar. Foreign exchange losses of $4 million for the three months ended March 31, 2021 were mainly driven by the impact of the weakening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and Canadian dollar, offset by the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in euro.
Foreign exchange gains of $62 million for the three months ended March 31, 2020 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.
Interest Expense and Financing Costs
Interest expense and financing costs are related to interest due on the 5.150% senior unsecured notes ("5.150% Senior Notes") issued in 2014, the 4.000% senior unsecured notes ("4.000% Senior Notes") issued in 2017, the 3.900% senior unsecured notes ("3.900% Senior Notes"), and the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019.
Interest expense and financing costs decreased by $8 million for the three months ended March 31, 2021, compared to the same period in 2020, due to the repayment of the 5.875% Senior Notes on June 1, 2020.
Income Tax Expense (Benefit)
Income tax expense (benefit) primarily results from income (loss) generated by our foreign operations in the U.S. and Europe. Our effective tax rate is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments. This effective rate can vary between periods depending on the distribution of net income (loss) among tax jurisdictions, as well as other factors.
The tax expense of $21 million for the three months ended March 31, 2021 was principally due to the generation of pre-tax income in our U.S., European, and U.K. operations.
The tax benefit of $5 million for the three months ended March 31, 2020 was principally due to the generation of pre-tax losses in our U.K. and European operations, partially offset by pre-tax income in our U.S. operations.
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FINANCIAL MEASURES

We believe the following financial indicators are important in evaluating performance and measuring the overall growth in value generated for common shareholders:

|  | Three months ended March 31, |  |  |
|  | 2021 |  | 2020 |  |  |  |  |
| Annualized return on average common equity(1) | 9.9 | % |  | nm |  |  |  |  |
| Annualized operating return on average common equity(2) | 7.1 | % |  | nm |  |  |  |  |
| Book value per diluted common share(3) | $ | 53.03 |  | $ | 49.78 |  |  |  |  |
| Cash dividends declared per common share | $ | 0.42 |  | $ | 0.41 |  |  |  |  |
| Increase (decrease) in book value per diluted common share adjusted for dividends | $ | (1.64) |  | $ | (5.60) |  |  |  |  |

(1)Annualized return on average common equity ("ROACE") is calculated by dividing annualized net income (loss) available (attributable) to common shareholders for the period by the average common shareholders' equity determined using the common shareholders' equity balances at the beginning and end of the period.
(2)Annualized operating return on average common equity ("operating ROACE") is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, and a discussion of the rationale for the presentation of this item is provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures Reconciliation'.
(3)Book value per diluted common share represents total common shareholders’ equity divided by diluted common shares outstanding, determined using the treasury stock method. Cash-settled restricted stock units are excluded.
Return on Average Common Equity
Our objective is to generate superior returns on capital that appropriately reward common shareholders for the risks we assume and to grow revenue only when we expect the returns will meet or exceed our requirements. We recognize that the nature of underwriting cycles and the frequency or severity of large loss events in any one year may challenge the ability to achieve a profitability target in any specific period.
ROACE reflects the impact of net income (loss) available (attributable) to common shareholders including net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.
The increase in ROACE for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was primarily driven by increases in underwriting income, net investment gains, interest in income of equity method investments, and net investment income, together with a decrease in interest expense and financing costs, partially offset by the foreign exchange losses and income tax expense.
Operating ROACE excludes the impact of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.
The increase in operating ROACE for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was primarily driven by increases in underwriting income and net investment income, together with a decrease in interest expense and financing costs, partially offset by the income tax expense.
Book Value per Diluted Common Share
We consider book value per diluted common share to be an appropriate measure of returns to common shareholders, as we believe growth in book value on a diluted basis will ultimately translate into appreciation of stock price.
During the three months ended March 31, 2021, b ook value per diluted common shar e decreased by 4% due to a decrease in net unrealized gains reported in accumulated other comprehensive income and common dividends declared, partially offset by the net income generated.
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Cash Dividends Declared per Common Share
We believe in returning excess capital to shareholders by way of dividends and share repurchases. Accordingly, dividend policy is an integral part of the value we create for shareholders. Our cumulative strong earnings have permitted our Board of Directors to approve seventeen successive annual increases in quarterly common share dividends.
Book Value per Diluted Common Share Adjusted for Dividends
Taken together, we believe that growth in book value per diluted common share and common share dividends declared represent the total value created for common shareholders. As companies in the insurance industry have differing dividend payout policies, we believe investors use the book value per diluted common share adjusted for dividends metric to measure comparable performance across the industry.
During the three months ended March 31, 2021, the decrease in total value of $1.64, or 3%, was driven by a decrease in unrealized investment gains reported in accumulated other comprehensive income, partially offset by the net income generated in the period.
During the three months ended March 31, 2020, the decrease in total value of $5.60, or 10%, was driven by the net loss generated in the period and unrealized investment losses reported in accumulated other comprehensive income.
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NON-GAAP FINANCIAL MEASURES RECONCILIATION

| Three months ended March 31, |  |
| 2021 |  | 2020 |  |  |  |
Net income (loss) available (attributable) to common shareholders | $ | 115,737 |  | $ | (185,390) |  |  |  |
Net investment (gains) losses(1) | (29,645) |  | 62,877 |  |  |  |
Foreign exchange losses (gains)(2) | 4,113 |  | (61,683) |  |  |  |
Reorganization expenses(3) | — |  | (982) |  |  |  |
Interest in (income) loss of equity method investments(4) | (9,162) |  | 23,577 |  |  |  |
Income tax expense (benefit) | 1,694 |  | (2,811) |  |  |  |
Operating income (loss) | $ | 82,737 |  | $ | (164,412) |  |  |  |
Earnings (loss) per diluted common share | $ | 1.36 |  | $ | (2.20) |  |  |  |
Net investment (gains) losses | (0.35) |  | 0.75 |  |  |  |
Foreign exchange losses (gains) | 0.05 |  | (0.73) |  |  |  |
Reorganization expenses | — |  | (0.01) |  |  |  |
Interest in (income) loss of equity method investments | (0.11) |  | 0.28 |  |  |  |
Income tax expense (benefit) | 0.02 |  | (0.03) |  |  |  |
Operating income (loss) per diluted common share(5) | $ | 0.97 |  | $ | (1.94) |  |  |  |
Weighted average diluted common shares outstanding(6) | 84,965 |  | 84,094 |  |  |  |
Average common shareholders' equity | $ | 4,686,042 |  | $ | 4,529,293 |  |  |  |
Annualized return on average common equity | 9.9 | % |  | nm |  |  |  |
Annualized operating return on average common equity(7) | 7.1 | % |  | nm |  |  |  |

(1)Tax cost (benefit) of $1,484 and ($5,677) for the three months ended March 31, 2021 and 2020, 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.
(2)Tax cost (benefit) of $210 and $2,527 for the three months ended March 31, 2021 and 2020, 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.
(3)Tax cost of $339 for the three months ended March 31, 2020. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(4)Tax cost (benefit) of $nil for the three months ended March 31, 2021 and 2020, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(5)Loss per diluted common share and operating loss per diluted common share for the three months ended March 31, 2020 were calculated using weighted average common shares outstanding due to the net loss attributable to common shareholders and the operating loss recognized in the period.
(6)Refer to Item 1, Note 7 to our Consolidated Financial Statements 'Earnings per Common Share' for further details.
(7)Annualized operating ROACE is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, is presented in the table above, and a discussion of the rationale for its presentation is provided below.
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Rationale for the Use of Non-GAAP Financial Measures
We present our results of operations in a way we believe will be meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. Some of the measurements we use are considered non-GAAP financial measures under SEC rules and regulations. In this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we present underwriting-related general and administrative expenses, consolidated underwriting income (loss), operating income (loss) (in total and on a per share basis), annualized operating return on average common equity ("operating ROACE"), amounts presented on a constant currency basis and pre-tax total return on cash and investments excluding foreign exchange movements which are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. We believe that these non-GAAP financial measures, which may be defined and calculated differently by other companies, help explain and enhance the understanding of our results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Underwriting-Related General and Administrative Expenses
Underwriting-related general and administrative expenses include those general and administrative expenses that are incremental and/or directly attributable to our underwriting operations. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.
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 our underwriting operations, these costs are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss). General and administrative expenses, the most comparable GAAP financial measure to underwriting-related general and administrative expenses, also includes corporate expenses.
The reconciliation of underwriting-related general and administrative expenses to general and administrative expenses, the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.
Consolidated Underwriting Income (Loss)
Consolidated underwriting income (loss) 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. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.
We evaluate our underwriting results separately from the performance of our investment portfolio. As a result, we believe it is appropriate to exclude net investment income and net investment gains (losses) from our underwriting profitability measure.
Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on our net insurance-related liabilities. However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio. As a result, we believe that foreign exchange losses (gains) are not a meaningful contributor to our underwriting performance, therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss).
Interest expense and financing costs primarily relate to interest payable on our debt. As these expenses are not incremental and/or directly attributable to our underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss).
Reorganization expenses are related to the 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 our accident and health business, together with other initiatives designed to increase efficiency and enhance profitability, while delivering a customer-centric operating model. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from consolidated underwriting income (loss).
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Amortization of intangible assets including VOBA arose from business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from consolidated underwriting income (loss).
We believe that the presentation of underwriting-related general and administrative expenses and consolidated underwriting income (loss) provides investors with an enhanced understanding of our results of operations, by highlighting the underlying pre-tax profitability of our underwriting activities. The reconciliation of consolidated underwriting income (loss) to net income (loss), the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.
Operating Income (Loss)
Operating income (loss) represents after-tax operational results exclusive of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.
Although the investment of premiums to generate income and investment gains (losses) is an integral part of our operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment gains (losses) is somewhat opportunistic for many companies.
Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on net insurance-related liabilities. In addition, we recognize unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities in net investment gains (losses). We also recognize unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss). These unrealized foreign exchange losses (gains) generally offset a large portion of the foreign exchange losses (gains) reported in net income (loss), thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business.
Reorganization expenses are related to the 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 our accident and health business, together with other initiatives designed to increase efficiency and enhance profitability, while delivering a customer-centric operating model. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from operating income (loss).
Interest in income (loss) of equity method investments is primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, this income (loss) is excluded from operating income (loss).
Certain users of our financial statements evaluate performance exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments to understand the profitability of recurring sources of income.
We believe that showing net income (loss) available (attributable) to common shareholders exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments reflects the underlying fundamentals of our business. In addition, we believe that this presentation enables investors and other users of our financial information to analyze performance in a manner similar to how our management analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure, is presented above.
We also present operating income (loss) per diluted common share and annualized operating ROACE, which are derived from the operating income (loss) measure and are reconciled above to the most comparable GAAP financial measures, earnings (loss) per diluted common share and annualized return on average common equity ("ROACE"), respectively.
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Constant Currency Basis
We present gross premiums written, net premiums written and net premiums earned on a constant currency basis in this MD&A. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts. We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written, net premiums written and net premiums earned on a constant basis. The reconciliation to gross premiums written, net premiums written and net premiums earned on a GAAP basis is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment'.
Pre-Tax Total Return on Cash and Investments excluding Foreign Exchange Movement
Pre-tax total return on cash and investments excluding foreign exchange movements measures net investment income (loss), net investments gains (losses), interest in income (loss) of equity method investments, and change in unrealized gains (losses) generated by average cash and investment balances. The reconciliation of pre-tax total return on cash and investments excluding foreign exchange movements to pre-tax total return on cash and investments, the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net Investment Income and Net Investment Gains (Losses)'. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio.

CASH AND INVESTMENTS

Details of cash and investments are as follows:

|  | March 31, 2021 |  |  | December 31, 2020 |
|  |  | Fair Value |  |  |  | Fair Value |
| Fixed maturities, available for sale |  | $ | 11,728,611 |  |  |  |  | $ | 12,041,799 |  |
| Fixed maturities, held to maturity(1) |  | 404,522 |  |  |  |  | — |  |
| Equity securities |  | 547,676 |  |  |  |  | 518,445 |  |
| Mortgage loans |  | 629,576 |  |  |  |  | 593,290 |  |
| Other investments |  | 790,530 |  |  |  |  | 829,156 |  |
| Equity method investments |  | 123,370 |  |  |  |  | 114,209 |  |
| Short-term investments |  | 185,699 |  |  |  |  | 161,897 |  |
| Total investments |  | $ | 14,409,984 |  |  |  |  | $ | 14,258,796 |  |
| Cash and cash equivalents(2) |  | $ | 1,560,279 |  |  |  |  | $ | 1,503,232 |  |

(1)Presented at net carrying value of $405 million (2020: $nil) in the consolidated balance sheets.
(2)Includes restricted cash and cash equivalents of $664 million and $600 million at March 31, 2021 and at December 31, 2020, respectively.
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Overview
The fair value of total investments increased by $151 million in the three months ended March 31, 2021, driven by cash inflows from operations, partially offset by the decrease in market value of fixed maturities due to the increase in yields.
An analysis of our investment portfolio by asset class is detailed below:
Fixed Maturities
Details of our fixed maturities portfolio are as follows:

|  | March 31, 2021 |  | December 31, 2020 |
|  | Fair Value |  | % of Total |  | Fair Value |  | % of Total |
| Fixed maturities: |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,187,093 |  |  | 18 | % |  | $ | 1,918,699 |  |  | 16 | % |
| Non-U.S. government | 714,721 |  |  | 6 | % |  | 671,273 |  |  | 6 | % |
| Corporate debt | 4,495,278 |  |  | 37 | % |  | 4,655,951 |  |  | 39 | % |
| Agency RMBS | 1,208,494 |  |  | 10 | % |  | 1,286,209 |  |  | 11 | % |
| CMBS | 1,274,049 |  |  | 11 | % |  | 1,353,587 |  |  | 11 | % |
| Non-agency RMBS | 167,169 |  |  | 1 | % |  | 140,104 |  |  | 1 | % |
| ABS | 1,807,483 |  |  | 15 | % |  | 1,720,078 |  |  | 14 | % |
| Municipals(1) | 278,846 |  |  | 2 | % |  | 295,898 |  |  | 2 | % |
| Total | $ | 12,133,133 |  |  | 100 | % |  | $ | 12,041,799 |  |  | 100 | % |
| Credit ratings: |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,187,093 |  |  | 18 | % |  | $ | 1,918,699 |  |  | 16 | % |
| AAA(2) | 4,475,315 |  |  | 37 | % |  | 4,551,312 |  |  | 37 | % |
| AA | 998,219 |  |  | 8 | % |  | 913,707 |  |  | 8 | % |
| A | 1,807,738 |  |  | 15 | % |  | 1,896,407 |  |  | 16 | % |
| BBB | 1,631,335 |  |  | 13 | % |  | 1,732,058 |  |  | 14 | % |
| Below BBB(3) | 1,033,433 |  |  | 9 | % |  | 1,029,616 |  |  | 9 | % |
| Total | $ | 12,133,133 |  |  | 100 | % |  | $ | 12,041,799 |  |  | 100 | % |

(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.
At March 31, 2021, fixed maturities had a weighted average credit rating of AA- (2020: AA-), a book yield of 2.1% (2020: 2.3%) and an average duration of 3.3 years (2020: 3.3 years). At March 31, 2021, fixed maturities together with short-term investments, and cash and cash equivalents (i.e. total investments of $13.9 billion), had an average credit rating of AA- (2020: AA-) and an average duration of 3.0 years (2020: 3.0 years).
At March 31, 2021, net unrealized gains on fixed maturities were $248 million, compared to net unrealized gains of $475 million at December 31, 2020, a decrease of $227 million due to the increase in yields.
Equity Securities
At March 31, 2021, net unrealized gains on equity securities were $93 million, compared to unrealized gains of $97 million at December 31, 2020, a decrease of $4 million driven by the decline in value of our bond mutual funds.
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Mortgage Loans
During the three months ended March 31, 2021, our investment in commercial mortgage loans increased by $36 million. The commercial mortgage loans are high quality and collateralized by a variety of commercial properties and are diversified both geographically throughout the U.S. and by property type to reduce the risk of concentration. At March 31, 2021, there were no credit losses or past due amounts associated with our commercial mortgage loans portfolio.
Other Investments
Details of our other investments portfolio are as follows:

|  | March 31, 2021 |  | December 31, 2020 |
|  | Fair Value |  | % of Total |  | Fair Value |  | % of Total |
| Hedge funds |  |  |  |  |  |  |  |
| Long/short equity funds | $ | 19,033 |  |  | 2 | % |  | $ | 25,300 |  |  | 3 | % |
| Multi-strategy funds | 106,971 |  |  | 14 | % |  | 121,420 |  |  | 15 | % |
| Total hedge funds | 126,004 |  |  | 16 | % |  | 146,720 |  |  | 18 | % |
| Direct lending funds | 279,324 |  |  | 35 | % |  | 272,131 |  |  | 33 | % |
| Private equity funds | 153,515 |  |  | 19 | % |  | 124,706 |  |  | 15 | % |
| Real estate funds | 163,635 |  |  | 21 | % |  | 164,250 |  |  | 20 | % |
| Total hedge, direct lending, private equity and real estate funds | 722,478 |  |  | 91 | % |  | 707,807 |  |  | 86 | % |
| CLO-Equities | 6,269 |  |  | 1 | % |  | 6,173 |  |  | 1 | % |
| Other privately held investments | 61,783 |  |  | 8 | % |  | 70,011 |  |  | 8 | % |
| Overseas deposits | — |  |  | — | % |  | 45,165 |  |  | 5 | % |
| Total other investments | $ | 790,530 |  |  | 100 | % |  | $ | 829,156 |  |  | 100 | % |

Refer to Note 3(c) to the Consolidated Financial Statements 'Investments'.
Equity Method Investments
During 2016, we paid $108 million including direct transactions costs to acquire 19% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Harrington is not a variable interest entity that is required to be included in our consolidated financial statements. We account for our ownership interest in Harrington under the equity method of accounting.
In our consolidated results, our ownership interest in Harrington is reported in interest in income (loss) of equity method investments.
Interest in income of equity method investments was $9 million for the three months ended March 31, 2021, compared to interest in loss of equity method investments of $24 million for the three months ended March 31, 2020. The income for the three months ended March 31, 2021 was attributable to positive investment returns realized by Harrington.
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LIQUIDITY AND CAPITAL RESOURCES

Refer to the ‘Liquidity and Capital Resources’ section included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 for a general discussion of liquidity and capital resources.
The following table summarizes consolidated capital:

|  | March 31, 2021 |  | December 31, 2020 |
| Debt | $ | 1,310,009 |  |  | $ | 1,309,695 |  |
| Preferred shares | 550,000 |  |  | 550,000 |  |
| Common equity | 4,626,390 |  |  | 4,745,694 |  |
| Shareholders’ equity | 5,176,390 |  |  | 5,295,694 |  |
| Total capital | $ | 6,486,399 |  |  | $ | 6,605,389 |  |
| Ratio of debt to total capital | 20.2 | % |  | 19.8 | % |
| Ratio of debt and preferred equity to total capital | 28.7 | % |  | 28.2 | % |

We finance operations with a combination of debt and equity capital. Debt to total capital and debt, and preferred equity to total capital ratios provide an indication of our capital structure, along with some insight into our financial strength. We believe that our financial flexibility remains strong. Refer to Item 1, Note 10 to the Consolidated Financial Statements 'Debt and Financing Arrangements' for recent changes to our capital structure.
Common Equity
During the three months ended March 31, 2021, common equity decreased by $119 million. The following table reconciles opening and closing common equity positions:

| Three months ended March 31, | 2021 |
| Common equity - opening | $ | 4,745,694 |  |
| Treasury shares reissued | 1,145 |  |
| Share-based compensation expense | 9,222 |  |
| Change in unrealized gains (losses) on available for sale investments, net of tax | (200,783) |  |
| Foreign currency translation adjustment | 1,249 |  |
| Net income (loss) | 123,300 |  |
| Preferred share dividends | (7,563) |  |
| Common share dividends | (36,494) |  |
| Treasury shares repurchased | (9,380) |  |
| Common equity - closing | $ | 4,626,390 |  |

During the three months ended March 31, 2021, we repurchased 189,000 common shares from employees to satisfy withholding tax liabilities related to the vesting of share-settled restricted stock units granted under our 2007 and 2017 Long-Term Equity Compensation Plans for a total cost of $9.4 million.
A common share repurchase plan has not been authorized for 2021.
We expect cash flows generated from operations, combined with liquidity provided by our investment portfolio, will be sufficient to cover cash outflows and other contractual commitments through the foreseeable future.
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CRITICAL ACCOUNTING ESTIMATES

The consolidated financial statements include certain amounts that are inherently uncertain and judgmental in nature. As a result, we are required to make assumptions and best estimates in order to determine the reported values. We consider an accounting estimate to be critical if: (1) it requires that significant assumptions be made in order to deal with uncertainties and (2) changes in the estimate could have a material impact on our results of operations, financial condition or liquidity.
We believe the material items requiring such subjective and complex estimates are:
•reserves for losses and loss expenses;
•reinsurance recoverable on unpaid losses and loss expenses, including the allowance for expected credit losses;
•gross premiums written and net premiums earned;
•fair value measurements of financial assets and liabilities; and
•the allowance for expected credit losses associated with fixed maturities, available for sale and fixed maturities, held to maturity securities.
Other than our consideration of the impact of the allowance for expected credit losses associated with fixed maturities, held to maturity securities detailed in Note 1 'Basis of Presentation and Significant Accounting Policies' to the consolidated financial statements, we believe that the critical accounting estimates discussion in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, continue to describe the significant estimates and judgments included in the preparation of the consolidated financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

At March 31, 2021 and December 31, 2020 there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition or liquidity.

OFF-BALANCE SHEET AND SPECIAL PURPOSE ENTITY ARRANGEMENTS

At March 31, 2021, the Company had not entered into any off-balance sheet arrangements, as defined by Item 303(a)(4) of Regulation S-K.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Item 7A included in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to this item since December 31, 2020, with the exception of the changes in exposure to foreign currency risk presented below.
Foreign Currency Risk
The table below provides a sensitivity analysis of total net foreign currency exposures.

|  | AUD |  | NZD |  | CAD |  | EUR |  | GBP |  | JPY |  | Other |  | Total |
| At March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net managed assets (liabilities), excluding derivatives | $ | 28,012 |  |  | $ | 5,096 |  |  | $ | 298,680 |  |  | $ | (371,784) |  |  | $ | (162,878) |  |  | $ | (130,299) |  |  | $ | 139,704 |  |  | $ | (193,469) |  |
| Foreign currency derivatives, net | (1,523) |  |  | 4,547 |  |  | (279,567) |  |  | 405,475 |  |  | 240,099 |  |  | 115,270 |  |  | (2,841) |  |  | 481,460 |  |
| Net managed foreign currency exposure | 26,489 |  |  | 9,643 |  |  | 19,113 |  |  | 33,691 |  |  | 77,221 |  |  | (15,029) |  |  | 136,863 |  |  | 287,991 |  |
| Other net foreign currency exposure | — |  |  | — |  |  | 120 |  |  | 2,664 |  |  | (924) |  |  | — |  |  | 34,317 |  |  | 36,177 |  |
| Total net foreign currency exposure | $ | 26,489 |  |  | $ | 9,643 |  |  | $ | 19,233 |  |  | $ | 36,355 |  |  | $ | 76,297 |  |  | $ | (15,029) |  |  | $ | 171,180 |  |  | $ | 324,168 |  |
| Net foreign currency exposure as a percentage of total shareholders’ equity | 0.5 | % |  | 0.2 | % |  | 0.4 | % |  | 0.7 | % |  | 1.5 | % |  | (0.3 | %) |  | 3.3 | % |  | 6.3 | % |
| Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement(1) | $ | 2,649 |  |  | $ | 964 |  |  | $ | 1,923 |  |  | $ | 3,636 |  |  | $ | 7,630 |  |  | $ | (1,503) |  |  | $ | 17,118 |  |  | $ | 32,417 |  |

(1)Assumes 10% change in underlying currencies relative to the U.S. dollar.
Total Net Foreign Currency Exposure
At March 31, 2021, total net foreign currency assets were $324 million driven by increases in exposures to the euro, pound sterling and other non-core currencies primarily due to new business written during the three months ended March 31, 2021. In addition, $34 million included in other net foreign currency exposures related to assets managed by specific investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy. An emerging market debt portfolio is the primary contributor to this group of assets.
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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) at March 31, 2021. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, at March 31, 2021, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of changes in the Company’s internal control over financial reporting that occurred during the three months ended March 31, 2021.
Based upon that evaluation, there were no changes in the Company's internal control over financial reporting that occurred during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company has not experienced any material impact to its internal control over financial reporting resulting from the introduction of a remote work model due to the COVID-19 pandemic.
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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.
The Company is not party to any material legal proceedings arising outside the ordinary course of business.

ITEM 1A. RISK FACTORS

There were no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities
Common Shares
The following table shows information regarding the number of common shares repurchased:

Period | Total number of shares purchased(a) (b) |  | Average price paid per share |  | Total number of shares purchased as part of publicly announced plans or programs |  | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(b) |
January 1-31, 2021 | 6 |  |  | $50.41 |  |  | — |  |  | — |  |
February 1-28, 2021 | 13 |  |  | $46.18 |  |  | — |  |  | — |  |
March 1-31, 2021 | 170 |  |  | $49.97 |  |  | — |  |  | — |  |
Total | 189 |  |  |  |  | — |  |  | — |  |

(a) In thousands.
(b) Shares are repurchased from employees to satisfy withholding tax liabilities related to the vesting of share-settled restricted stock units.
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ITEM 5. OTHER INFORMATION

Disclosure of Certain Activities Under Section 13(r) of the Securities Exchange Act of 1934
Section 13(r) of the Securities Exchange Act of 1934, as amended, requires issuers to disclose in their annual and quarterly reports whether they or any of their affiliates knowingly engaged in certain activities with Iran or with individuals or entities that are subject to certain sanctions under U.S. law. Issuers are required to provide this disclosure even where the activities, transactions or dealings are conducted outside of the U.S. in compliance with applicable law.
As and when allowed by the applicable law and regulations, certain of our non-U.S. subsidiaries provide treaty reinsurance coverage to non-U.S. insurers on a worldwide basis, including insurers of liability, marine, aviation and energy risks, and as a result, these underlying reinsurance portfolios may have some exposure to Iran. In addition, we underwrite insurance and facultative reinsurance on a global basis to non-U.S. insureds and insurers, including for liability, marine, aviation and energy risks. Coverage provided to non-Iranian business may indirectly cover an exposure in Iran. For example, certain of our operations underwrite global marine hull war and cargo policies that provide coverage for vessels navigating into and out of ports worldwide, including Iran. For the quarter ended March 31, 2021, there has been no material amount of premium allocated or apportioned to activities relating to Iran. We intend for our non-U.S. subsidiaries to continue to provide such coverage only to the extent permitted by applicable law.
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ITEM 6. EXHIBITS

2.1 | Rule 2.7 Announcement, dated July 5, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 6, 2017).
2.2 | Rule 2.7 Announcement, dated August 24, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 25, 2017).
3.1 | Certificate of Incorporation and Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1(Amendment No. 1) (No. 333-103620) filed on April 16, 2003).
3.2 | Amended and Restated Bye-Laws (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed on May 15, 2009).
4.1 | Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (Amendment No. 3) (No. 333-103620) filed on June 10, 2003).
4.2 | Certificate of Designations establishing the specific rights, preferences, limitations and other terms of the Series E Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 7, 2016).
*10.1 | Executive Long-Term Equity Compensation Program (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K filed on February 26, 2021).
*10.2 | Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K filed on February 26, 2021).
*10.3 | Form of Employee Restricted Stock Unit Award Agreement (Performance Vesting) (incorporated by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K filed on February 26, 2021).
*10.4 | Form of Employee Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K filed on February 26, 2021).
10.5 | Deed of Amendment dated April 1, 2021 to Committed Letter of Credit Facility dated December 18, 2015, as amended, by and among AXIS Specialty Limited, AXIS Re SE, AXIS Specialty Europe SE, AXIS Insurance Company, AXIS Reinsurance Company, AXIS Surplus Insurance Company and Citibank Europe plc (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 6, 2021).
10.6 | Deed of Amendment dated April 1, 2021 to Committed Letter of Credit Facility - Facility Number 2 dated March 27, 2017, as amended, by and among AXIS Specialty Limited, AXIS Re SE, AXIS Specialty Europe SE, AXIS Insurance Company, AXIS Reinsurance Company, AXIS Surplus Insurance Company and Citibank Europe plc (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 6, 2021).
†31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101 | The following financial information from AXIS Capital Holdings Limited’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in Inline XBRL: (i) Consolidated Balance Sheets at March 31, 2021 and December 31, 2020; (ii) Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020; (iv) Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2021 and 2020; (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020; and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
†104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Exhibits 10.1 through 10.4 represent a management contract, compensatory plan or arrangement in which directors and/or executive officers are eligible to participate.
† Filed herewith.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 28, 2021

AXIS CAPITAL HOLDINGS LIMITED
By: | /S/ ALBERT BENCHIMOL
| Albert Benchimol
| President and Chief Executive Officer
| (Principal Executive Officer)
| /S/ PETER VOGT
| Peter Vogt
| Chief Financial Officer
| (Principal Financial Officer)

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