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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 June 30, 2023
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 July 31, 2023, there were 85,221,229 common shares outstanding, $0.0125 par value per share, of the registrant.

Table of Contents
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 | 52
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 85
Item 4. | Controls and Procedures | 86
| PART II |
| Other Information | 86
Item 1. | Legal Proceedings | 86
Item 1A. | Risk Factors | 86
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 87
Item 5. | Other Information | 87
Item 6. | Exhibits | 88
| Signatures | 89

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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 including our exit from catastrophe and property reinsurance lines of business, our expectations regarding pricing, and other market and economic conditions including the liquidity of financial markets, developments in the commercial real estate market, inflation, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities' prices, and foreign currency exchange 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 undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
In this Form 10-Q, references to "AXIS Capital" refer to AXIS Capital Holdings Limited and references to "we", "us", "our", "AXIS", the "Group" or the "Company" refer to AXIS Capital Holdings Limited and its direct and indirect subsidiaries and branches.
Summary of Risk Factors
Investing in our common stock involves substantial risks, and our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the insurance/reinsurance industry. Some of the more significant material challenges and risks include the following:
Insurance Risk
•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, including the potential increase of our exposure to natural catastrophe losses due to climate change and the potential for inherently unpredictable losses from man-made catastrophes, such as cyber-attacks;
•the effects of emerging claims, systemic risks, and coverage and regulatory issues, including increasing litigation and uncertainty related to coverage definitions, limits, terms and conditions;
•actual claims exceeding reserves for losses and loss expenses;
•the adverse impact of inflation;
•the failure of any of the loss limitation methods we employ;
•the failure of our cedants to adequately evaluate risks;
Strategic Risk
•losses from war including losses related to the Russian invasion of Ukraine, terrorism and political unrest, or other unanticipated losses;
•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;
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•the loss of business provided to us by major brokers;
•a decline in our ratings with rating agencies;
•the loss of one or more of our key executives;
•increasing scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders regarding environmental, social and governance matters;
COVID-19
•the adverse impact of the ongoing COVID-19 pandemic on our business, results of operations, financial condition, and liquidity;
Credit and Market Risk
•the inability to purchase reinsurance or collect amounts due to us from reinsurance we have purchased;
•the failure of our policyholders or intermediaries to pay premiums;
•general economic, capital and credit market conditions, including banking and commercial real estate sector instability, financial market illiquidity and fluctuations in interest rates, credit spreads, equity securities' prices, and/or foreign currency exchange rates;
•breaches by third parties in our program business of their obligations to us;
Liquidity Risk
•the inability to access sufficient cash to meet our obligations when they are due;
Operational Risk
•changes in accounting policies or practices;
•the use of industry models and changes to these models;
•difficulties with technology and/or data security;
Regulatory Risk
•changes in governmental regulations and potential government intervention in our industry;
•inadvertent failure to comply with certain laws and regulations relating to sanctions, foreign corrupt practices, data protection and privacy; and
Risks Related to Taxation
•changes in tax laws.
Readers should carefully consider the risks noted above together with 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.
Website and Social Media Disclosure
We use our website (www.axiscapital.com) and our corporate LinkedIn (AXIS Capital) and X Corp. (@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 by those 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 June 30, 2023 (Unaudited) and December 31, 2022 | 6
Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited) | 7
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022 (Unaudited) | 8
Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2023 and 2022 (Unaudited) | 9
Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited) | 10
Notes to Consolidated Financial Statements (Unaudited) | 11
Note 1 - Basis of Presentation and Significant Accounting Policies | 11
Note 2 - Segment Information | 12
Note 3 - Investments | 15
Note 4 - Fair Value Measurements | 24
Note 5 - Derivative Instruments | 35
Note 6 - Reserve for Losses and Loss Expenses | 37
Note 7 - Earnings Per Common Share | 44
Note 8 - Share-Based Compensation | 44
Note 9 - Shareholders' Equity | 47
Note 10 - Debt and Financing Arrangements | 48
Note 11 - Federal Home Loan Bank Advances | 48
Note 12 - Commitments and Contingencies | 49
Note 13 - Other Comprehensive Income (Loss) | 50
Note 14 - Related Party Transactions | 51

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022

| 2023 |  | 2022 |
| (in thousands) |
Assets |  |  |  |
Investments: |  |  |  |
Fixed maturities, available for sale, at fair value (Amortized cost 2023: $12,272,258; 2022: $12,176,473 Allowance for expected credit losses 2023: $10,551; 2022: $11,733) | $ | 11,564,397 |  |  | $ | 11,326,894 |  |
Fixed maturities, held to maturity, at amortized cost (Fair value 2023: $697,695; 2022: $674,743 Allowance for expected credit losses 2023: $nil; 2022: $nil) | 717,310 |  |  | 698,351 |  |
Equity securities, at fair value (Cost 2023: $564,965; 2022: $494,356) | 596,692 |  |  | 485,253 |  |
Mortgage loans, held for investment, at fair value (Allowance for expected credit losses 2023: $3,638; 2022: $nil) | 609,274 |  |  | 627,437 |  |
Other investments, at fair value | 970,079 |  |  | 996,751 |  |
Equity method investments | 148,183 |  |  | 148,288 |  |
Short-term investments, at fair value | 46,282 |  |  | 70,310 |  |
Total investments | 14,652,217 |  |  | 14,353,284 |  |
Cash and cash equivalents | 1,173,925 |  |  | 751,415 |  |
Restricted cash and cash equivalents | 344,345 |  |  | 423,238 |  |
Accrued interest receivable | 100,915 |  |  | 94,418 |  |
Insurance and reinsurance premium balances receivable (Allowance for expected credit losses 2023: $13,309; 2022: $9,521) | 3,371,439 |  |  | 2,733,464 |  |
Reinsurance recoverable on unpaid losses and loss expenses (Allowance for expected credit losses 2023: $33,148; 2022: $30,715) | 5,865,609 |  |  | 5,831,172 |  |
Reinsurance recoverable on paid losses and loss expenses | 572,757 |  |  | 539,676 |  |
Deferred acquisition costs | 586,085 |  |  | 473,569 |  |
Prepaid reinsurance premiums | 1,767,474 |  |  | 1,550,370 |  |
Receivable for investments sold | 22,102 |  |  | 16,052 |  |
Goodwill | 100,801 |  |  | 100,801 |  |
Intangible assets | 192,342 |  |  | 197,800 |  |
Operating lease right-of-use assets | 108,511 |  |  | 92,214 |  |
Other assets | 457,171 |  |  | 438,338 |  |
Total assets | $ | 29,315,693 |  |  | $ | 27,595,811 |  |
Liabilities |  |  |  |
Reserve for losses and loss expenses | $ | 15,419,498 |  |  | $ | 15,168,863 |  |
Unearned premiums | 5,139,177 |  |  | 4,361,447 |  |
Insurance and reinsurance balances payable | 1,783,610 |  |  | 1,522,764 |  |
Debt | 1,313,006 |  |  | 1,312,314 |  |
Federal Home Loan Bank advances | 85,790 |  |  | 81,388 |  |
Payable for investments purchased | 81,835 |  |  | 19,693 |  |
Operating lease liabilities | 121,922 |  |  | 102,577 |  |
Other liabilities | 349,894 |  |  | 386,855 |  |
Total liabilities | 24,294,732 |  |  | 22,955,901 |  |
Shareholders’ equity |  |  |  |
Preferred shares | 550,000 |  |  | 550,000 |  |
Common shares (shares issued 2023: 176,580; 2022: 176,580 shares outstanding 2023: 85,216; 2022: 84,668) | 2,206 |  |  | 2,206 |  |
Additional paid-in capital | 2,361,185 |  |  | 2,366,253 |  |
Accumulated other comprehensive income (loss) | (630,509) |  |  | (760,300) |  |
Retained earnings | 6,485,901 |  |  | 6,247,022 |  |
Treasury shares, at cost (2023: 91,364; 2022: 91,912) | (3,747,822) |  |  | (3,765,271) |  |
Total shareholders’ equity | 5,020,961 |  |  | 4,639,910 |  |
Total liabilities and shareholders’ equity | $ | 29,315,693 |  |  | $ | 27,595,811 |  |

See accompanying notes to Consolidated Financial Statements.
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

|  | Three months ended |  | Six months ended
|  | 2023 |  | 2022 |  | 2023 |  | 2022
|  | (in thousands, except per share amounts)
| Revenues |  |  |  |  |  |  |
| Net premiums earned | $ | 1,265,745 |  |  | $ | 1,277,052 |  |  | $ | 2,495,944 |  |  | $ | 2,535,297 |
| Net investment income | 136,829 |  |  | 92,214 |  |  | 270,601 |  |  | 183,569 |
| Other insurance related income | 5,524 |  |  | 2,213 |  |  | 6,100 |  |  | 8,906 |
| Net investment gains (losses): |  |  |  |  |  |  |
| (Increase) decrease in allowance for expected credit losses | 354 |  |  | (6,911) |  |  | (2,456) |  |  | (6,981) |
| Impairment losses | (9,083) |  |  | (473) |  |  | (9,083) |  |  | (582) |
| Other realized and unrealized investment gains (losses) | (15,641) |  |  | (165,879) |  |  | (33,019) |  |  | (260,208) |
| Total net investment gains (losses) | (24,370) |  |  | (173,263) |  |  | (44,558) |  |  | (267,771) |
| Total revenues | 1,383,728 |  |  | 1,198,216 |  |  | 2,728,087 |  |  | 2,460,001 |
| Expenses |  |  |  |  |  |  |
| Net losses and loss expenses | 736,257 |  |  | 769,587 |  |  | 1,456,899 |  |  | 1,502,285 |
| Acquisition costs | 253,265 |  |  | 257,582 |  |  | 483,638 |  |  | 505,932 |
| General and administrative expenses | 168,503 |  |  | 165,586 |  |  | 335,314 |  |  | 334,627 |
| Foreign exchange losses (gains) | 30,104 |  |  | (57,000) |  |  | 38,814 |  |  | (101,274) |
| Interest expense and financing costs | 16,738 |  |  | 15,241 |  |  | 33,632 |  |  | 30,805 |
| Reorganization expenses | — |  |  | 15,728 |  |  | — |  |  | 15,728 |
| Amortization of intangible assets | 2,729 |  |  | 2,729 |  |  | 5,458 |  |  | 5,458 |
| Total expenses | 1,207,596 |  |  | 1,169,453 |  |  | 2,353,755 |  |  | 2,293,561 |
| Income before income taxes and interest in income (loss) of equity method investments | 176,132 |  |  | 28,763 |  |  | 374,332 |  |  | 166,440 |
| Income tax (expense) benefit | (27,558) |  |  | 4,965 |  |  | (43,454) |  |  | 4,942 |
| Interest in income (loss) of equity method investments | 2,100 |  |  | 1,050 |  |  | (105) |  |  | 12,600 |
| Net income | 150,674 |  |  | 34,778 |  |  | 330,773 |  |  | 183,982 |
| Preferred share dividends | 7,563 |  |  | 7,563 |  |  | 15,125 |  |  | 15,125 |
| Net income available to common shareholders | $ | 143,111 |  |  | $ | 27,215 |  |  | $ | 315,648 |  |  | $ | 168,857 |
| Per share data |  |  |  |  |  |  |
| Earnings per common share: |  |  |  |  |  |  |
| Earnings per common share | $ | 1.68 |  |  | $ | 0.32 |  |  | $ | 3.71 |  |  | $ | 1.98 |
| Earnings per diluted common share | $ | 1.67 |  |  | $ | 0.32 |  |  | $ | 3.68 |  |  | $ | 1.97 |
| Weighted average common shares outstanding | 85,207 |  |  | 85,173 |  |  | 85,036 |  |  | 85,068 |
| Weighted average diluted common shares outstanding | 85,812 |  |  | 85,843 |  |  | 85,833 |  |  | 85,826 |

See accompanying notes to Consolidated Financial Statements.
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

|  | Three months ended |  | Six months ended
|  | 2023 |  | 2022 |  | 2023 |  | 2022
|  | (in thousands)
| Net income | $ | 150,674 |  |  | $ | 34,778 |  |  | $ | 330,773 |  |  | $ | 183,982 |
| 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 | (98,402) |  |  | (461,946) |  |  | 41,700 |  |  | (901,771) |
| Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized | (15) |  |  | (2,039) |  |  | 8,073 |  |  | (5,167) |
| Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss) | 36,621 |  |  | 84,364 |  |  | 77,370 |  |  | 129,706 |
| Unrealized gains (losses) arising during the period, net of reclassification adjustment | (61,796) |  |  | (379,621) |  |  | 127,143 |  |  | (777,232) |
| Foreign currency translation adjustment | 3,183 |  |  | (6,193) |  |  | 2,648 |  |  | (3,418) |
| Total other comprehensive income (loss), net of tax | (58,613) |  |  | (385,814) |  |  | 129,791 |  |  | (780,650) |
| Comprehensive income (loss) | $ | 92,061 |  |  | $ | (351,036) |  |  | $ | 460,564 |  |  | $ | (596,668) |

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 AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

| Three months ended |  | Six months ended
| 2023 |  | 2022 |  | 2023 |  | 2022
| (in thousands)
Preferred shares |  |  |  |  |  |  |
Balance at beginning and end of period | $ | 550,000 |  |  | $ | 550,000 |  |  | $ | 550,000 |  |  | $ | 550,000 |
Common shares (par value) |  |  |  |  |  |  |
Balance at beginning and end of period | 2,206 |  |  | 2,206 |  |  | 2,206 |  |  | 2,206 |
Additional paid-in capital |  |  |  |  |  |  |
Balance at beginning of period | 2,347,637 |  |  | 2,328,986 |  |  | 2,366,253 |  |  | 2,346,179 |
Treasury shares reissued | (2,203) |  |  | (772) |  |  | (32,796) |  |  | (30,150) |
Share-based compensation expense | 15,751 |  |  | 13,293 |  |  | 27,728 |  |  | 25,478 |
Balance at end of period | 2,361,185 |  |  | 2,341,507 |  |  | 2,361,185 |  |  | 2,341,507 |
Accumulated other comprehensive income (loss) |  |  |  |  |  |  |
Balance at beginning of period | (571,896) |  |  | (338,300) |  |  | (760,300) |  |  | 56,536 |
Unrealized gains (losses) on available for sale investments, net of tax: |  |  |  |  |  |  |
Balance at beginning of period | (554,756) |  |  | (335,456) |  |  | (743,695) |  |  | 62,155 |
Unrealized gains (losses) arising during the period, net of reclassification adjustment | (61,796) |  |  | (379,621) |  |  | 127,143 |  |  | (777,232) |
Balance at end of period | (616,552) |  |  | (715,077) |  |  | (616,552) |  |  | (715,077) |
Cumulative foreign currency translation adjustments, net of tax: |  |  |  |  |  |  |
Balance at beginning of period | (17,140) |  |  | (2,844) |  |  | (16,605) |  |  | (5,619) |
Foreign currency translation adjustment | 3,183 |  |  | (6,193) |  |  | 2,648 |  |  | (3,418) |
Balance at end of period | (13,957) |  |  | (9,037) |  |  | (13,957) |  |  | (9,037) |
Balance at end of period | (630,509) |  |  | (724,114) |  |  | (630,509) |  |  | (724,114) |
Retained earnings |  |  |  |  |  |  |
Balance at beginning of period | 6,381,201 |  |  | 6,308,712 |  |  | 6,247,022 |  |  | 6,204,745 |
Net income | 150,674 |  |  | 34,778 |  |  | 330,773 |  |  | 183,982 |
Preferred share dividends (1) | (7,563) |  |  | (7,563) |  |  | (15,125) |  |  | (15,125) |
Common share dividends (1) | (38,411) |  |  | (37,247) |  |  | (76,769) |  |  | (74,922) |
Balance at end of period | 6,485,901 |  |  | 6,298,680 |  |  | 6,485,901 |  |  | 6,298,680 |
Treasury shares, at cost |  |  |  |  |  |  |
Balance at beginning of period | (3,748,919) |  |  | (3,731,064) |  |  | (3,765,271) |  |  | (3,749,010) |
Shares repurchased | (1,106) |  |  | (35,356) |  |  | (17,051) |  |  | (48,333) |
Shares reissued | 2,203 |  |  | 772 |  |  | 34,500 |  |  | 31,695 |
Balance at end of period | (3,747,822) |  |  | (3,765,648) |  |  | (3,747,822) |  |  | (3,765,648) |
Total shareholders’ equity | $ | 5,020,961 |  |  | $ | 4,702,631 |  |  | $ | 5,020,961 |  |  | $ | 4,702,631 |

(1) Refer to Note 9 'Shareholders' 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 SIX MONTHS ENDED JUNE 30, 2023 AND 2022

| Six months ended
| 2023 |  | 2022
| (in thousands)
Cash flows from operating activities: |  |  |
Net income | $ | 330,773 |  |  | $ | 183,982 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Net investment (gains) losses | 44,558 |  |  | 267,771 |
Net realized and unrealized (gains) losses on other investments | 5,236 |  |  | (39,419) |
Amortization of fixed maturities | (5,916) |  |  | 19,883 |
Interest in income (loss) of equity method investments | 105 |  |  | (12,600) |
Other amortization and depreciation | 31,182 |  |  | 31,057 |
Share-based compensation expense, net of cash payments | 24,640 |  |  | 21,726 |
Changes in: |  |  |
Accrued interest receivable | (6,565) |  |  | (9,615) |
Reinsurance recoverable on unpaid losses and loss expenses | (34,416) |  |  | 4,487 |
Reinsurance recoverable on paid losses and loss expenses | (32,700) |  |  | 131,422 |
Deferred acquisition costs | (114,124) |  |  | (113,313) |
Prepaid reinsurance premiums | (215,019) |  |  | (278,853) |
Reserve for losses and loss expenses | 253,575 |  |  | (244,488) |
Unearned premiums | 778,063 |  |  | 880,348 |
Insurance and reinsurance balances, net | (381,824) |  |  | (256,531) |
Other items | (76,489) |  |  | (72,091) |
Net cash provided by operating activities | 601,079 |  |  | 513,766 |
Cash flows from investing activities: |  |  |
Purchases of: |  |  |
Fixed maturities, available for sale | (3,230,430) |  |  | (3,947,249) |
Fixed maturities, held to maturity | (25,000) |  |  | (198,904) |
Equity securities | (84,272) |  |  | (49,924) |
Mortgage loans | (20,686) |  |  | (101,264) |
Other investments | (57,124) |  |  | (103,729) |
Short-term investments | (76,052) |  |  | (90,430) |
Proceeds from the sale of: |  |  |
Fixed maturities, available for sale | 2,694,067 |  |  | 3,419,822 |
Equity securities | 14,220 |  |  | 55,287 |
Other investments | 80,227 |  |  | 102,257 |
Short-term investments | 58,875 |  |  | 37,798 |
Proceeds from redemption of fixed maturities, available for sale | 423,836 |  |  | 670,456 |
Proceeds from redemption of fixed maturities, held to maturity | 6,059 |  |  | 3,500 |
Proceeds from redemption of short-term investments | 42,570 |  |  | 18,030 |
Proceeds from the repayment of mortgage loans | 35,412 |  |  | 39,596 |
Proceeds from the (purchase) sale of other assets, net | (7,584) |  |  | (17,047) |
Net cash used in investing activities | (145,882) |  |  | (161,801) |
Cash flows from financing activities: |  |  |
Repurchase of common shares - open market | — |  |  | (34,987) |
Taxes paid on withholding shares | (17,051) |  |  | (13,346) |
Dividends paid - common shares | (78,022) |  |  | (76,447) |
Dividends paid - preferred shares | (15,125) |  |  | (15,125) |
Federal Home Loan Bank advances, net | 5,250 |  |  | — |
Net cash used in financing activities | (104,948) |  |  | (139,905) |
Effect of exchange rate changes on foreign currency cash, cash equivalents and restricted cash | (6,632) |  |  | (31,822) |
Increase in cash, cash equivalents and restricted cash | 343,617 |  |  | 180,238 |
Cash, cash equivalents and restricted cash - beginning of period | 1,174,653 |  |  | 1,317,690 |
Cash, cash equivalents and restricted cash - end of period | $ | 1,518,270 |  |  | $ | 1,497,928 |
Supplemental disclosures of cash flow information: |  |  |
Income taxes paid | $ | 31,547 |  |  | $ | 12,865 |
Interest paid | $ | 31,600 |  |  | $ | 29,700 |

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, 2022, 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
There were no notable changes to the Company's significant accounting policies subsequent to its Annual Report on Form 10-K for the year ended December 31, 2022.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. SEGMENT INFORMATION
The Company'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 professional lines, property, liability, cyber, marine and aviation, accident and health, and credit and political risk.
Reinsurance
The Company's reinsurance segment provides treaty reinsurance to insurance companies on a worldwide basis. The product lines in this segment are liability, accident and health, professional lines, credit and surety, motor, agriculture, marine and aviation, catastrophe, property, and engineering.
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:
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. SEGMENT INFORMATION (CONTINUED)

|  | 2023 |  | 2022 |
| Three months ended and at June 30, | Insurance |  | Reinsurance |  | Total |  | Insurance |  | Reinsurance |  | Total |
| Gross premiums written | $ | 1,684,150 |  | $ | 600,228 |  | $ | 2,284,378 |  | $ | 1,469,622 |  | $ | 643,861 |  | $ | 2,113,483 |
| Net premiums written | 1,021,021 |  | 425,336 |  | 1,446,357 |  | 869,419 |  | 447,428 |  | 1,316,847 |
| Net premiums earned | 842,751 |  | 422,994 |  | 1,265,745 |  | 768,724 |  | 508,328 |  | 1,277,052 |
| Other insurance related income | 58 |  | 5,466 |  | 5,524 |  | 237 |  | 1,976 |  | 2,213 |
| Net losses and loss expenses | (457,650) |  | (278,607) |  | (736,257) |  | (421,836) |  | (347,751) |  | (769,587) |
| Acquisition costs | (156,972) |  | (96,293) |  | (253,265) |  | (144,732) |  | (112,850) |  | (257,582) |
| Underwriting-related general and administrative expenses | (113,534) |  | (19,721) |  | (133,255) |  | (108,577) |  | (26,826) |  | (135,403) |
| Underwriting income | $ | 114,653 |  | $ | 33,839 |  | 148,492 |  | $ | 93,816 |  | $ | 22,877 |  | 116,693 |
| Net investment income |  |  |  |  | 136,829 |  |  |  |  |  | 92,214 |
| Net investment gains (losses) |  |  |  |  | (24,370) |  |  |  |  |  | (173,263) |
| Corporate expenses |  |  |  |  | (35,248) |  |  |  |  |  | (30,183) |
| Foreign exchange (losses) gains |  |  |  |  | (30,104) |  |  |  |  |  | 57,000 |
| Interest expense and financing costs |  |  |  |  | (16,738) |  |  |  |  |  | (15,241) |
| Reorganization expenses |  |  |  |  | — |  |  |  |  |  | (15,728) |
| Amortization of intangible assets |  |  |  |  | (2,729) |  |  |  |  |  | (2,729) |
| Income before income taxes and interest in income of equity method investments |  |  |  |  | 176,132 |  |  |  |  |  | 28,763 |
| Income tax (expense) benefit |  |  |  |  | (27,558) |  |  |  |  |  | 4,965 |
| Interest in income of equity method investments |  |  |  |  | 2,100 |  |  |  |  |  | 1,050 |
| Net income |  |  |  |  | 150,674 |  |  |  |  |  | 34,778 |
| Preferred share dividends |  |  |  |  | 7,563 |  |  |  |  |  | 7,563 |
| Net income available to common shareholders |  |  |  |  | $ | 143,111 |  |  |  |  |  | $ | 27,215 |
| Net losses and loss expenses ratio | 54.3 | % |  | 65.9 | % |  | 58.2 | % |  | 54.9 | % |  | 68.4 | % |  | 60.3 | % |
| Acquisition cost ratio | 18.6 | % |  | 22.8 | % |  | 20.0 | % |  | 18.8 | % |  | 22.2 | % |  | 20.2 | % |
| General and administrative expense ratio | 13.5 | % |  | 4.6 | % |  | 13.3 | % |  | 14.1 | % |  | 5.3 | % |  | 12.9 | % |
| Combined ratio | 86.4 | % |  | 93.3 | % |  | 91.5 | % |  | 87.8 | % |  | 95.9 | % |  | 93.4 | % |
| Goodwill and intangible assets | $ | 293,143 |  | $ | — |  | $ | 293,143 |  | $ | 304,060 |  | $ | — |  | $ | 304,060 |

13

Table of Contents
AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. SEGMENT INFORMATION (CONTINUED)

|  | 2023 |  | 2022 |
| Six months ended and at June 30, | Insurance |  | Reinsurance |  | Total |  | Insurance |  | Reinsurance |  | Total |
| Gross premiums written | $ | 3,099,762 |  | $ | 1,566,592 |  | $ | 4,666,354 |  | $ | 2,796,886 |  | $ | 1,951,205 |  | $ | 4,748,091 |
| Net premiums written | 1,903,597 |  | 1,151,116 |  | 3,054,713 |  | 1,713,332 |  | 1,416,387 |  | 3,129,719 |
| Net premiums earned | 1,659,206 |  | 836,738 |  | 2,495,944 |  | 1,521,539 |  | 1,013,758 |  | 2,535,297 |
| Other insurance related income | 112 |  | 5,988 |  | 6,100 |  | 319 |  | 8,587 |  | 8,906 |
| Net losses and loss expenses | (907,117) |  | (549,782) |  | (1,456,899) |  | (827,579) |  | (674,706) |  | (1,502,285) |
| Acquisition costs | (304,030) |  | (179,608) |  | (483,638) |  | (283,543) |  | (222,389) |  | (505,932) |
| Underwriting-related general and administrative expenses | (230,164) |  | (43,486) |  | (273,650) |  | (222,527) |  | (57,972) |  | (280,499) |
| Underwriting income | $ | 218,007 |  | $ | 69,850 |  | 287,857 |  | $ | 188,209 |  | $ | 67,278 |  | 255,487 |
| Net investment income |  |  |  |  | 270,601 |  |  |  |  |  | 183,569 |
| Net investment gains (losses) |  |  |  |  | (44,558) |  |  |  |  |  | (267,771) |
| Corporate expenses |  |  |  |  | (61,664) |  |  |  |  |  | (54,128) |
| Foreign exchange (losses) gains |  |  |  |  | (38,814) |  |  |  |  |  | 101,274 |
| Interest expense and financing costs |  |  |  |  | (33,632) |  |  |  |  |  | (30,805) |
| Reorganization expenses |  |  |  |  | — |  |  |  |  |  | (15,728) |
| Amortization of intangible assets |  |  |  |  | (5,458) |  |  |  |  |  | (5,458) |
| Income before income taxes and interest in income (loss) of equity method investments |  |  |  |  | 374,332 |  |  |  |  |  | 166,440 |
| Income tax (expense) benefit |  |  |  |  | (43,454) |  |  |  |  |  | 4,942 |
| Interest in income (loss) of equity method investments |  |  |  |  | (105) |  |  |  |  |  | 12,600 |
| Net income |  |  |  |  | 330,773 |  |  |  |  |  | 183,982 |
| Preferred share dividends |  |  |  |  | 15,125 |  |  |  |  |  | 15,125 |
| Net income available to common shareholders |  |  |  |  | $ | 315,648 |  |  |  |  |  | $ | 168,857 |
| Net losses and loss expenses ratio | 54.7 | % |  | 65.7 | % |  | 58.4 | % |  | 54.4 | % |  | 66.6 | % |  | 59.3 | % |
| Acquisition cost ratio | 18.3 | % |  | 21.5 | % |  | 19.4 | % |  | 18.6 | % |  | 21.9 | % |  | 20.0 | % |
| General and administrative expense ratio | 13.9 | % |  | 5.2 | % |  | 13.4 | % |  | 14.7 | % |  | 5.7 | % |  | 13.1 | % |
| Combined ratio | 86.9 | % |  | 92.4 | % |  | 91.2 | % |  | 87.7 | % |  | 94.2 | % |  | 92.4 | % |
| Goodwill and intangible assets | $ | 293,143 |  | $ | — |  | $ | 293,143 |  | $ | 304,060 |  | $ | — |  | $ | 304,060 |

14

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS
a) Fixed Maturities, Available for Sale
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 June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
| Available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,889,184 |  |  | $ | — |  |  | $ | 421 |  |  | $ | (97,593) |  |  | $ | 2,792,012 |  |  |  |
| Non-U.S. government | 621,702 |  |  | (17) |  |  | 2,560 |  |  | (37,633) |  |  | 586,612 |  |  |  |
| Corporate debt | 4,655,745 |  |  | (10,397) |  |  | 9,342 |  |  | (327,082) |  |  | 4,327,608 |  |  |  |
| Agency RMBS(1) | 1,496,299 |  |  | — |  |  | 3,975 |  |  | (96,620) |  |  | 1,403,654 |  |  |  |
| CMBS(2) | 950,340 |  |  | — |  |  | 38 |  |  | (79,271) |  |  | 871,107 |  |  |  |
| Non-agency RMBS | 149,827 |  |  | (100) |  |  | 274 |  |  | (15,900) |  |  | 134,101 |  |  |  |
| ABS(3) | 1,347,053 |  |  | (37) |  |  | 568 |  |  | (47,028) |  |  | 1,300,556 |  |  |  |
| Municipals(4) | 162,108 |  |  | — |  |  | 219 |  |  | (13,580) |  |  | 148,747 |  |  |  |
| Total fixed maturities, available for sale | $ | 12,272,258 |  |  | $ | (10,551) |  |  | $ | 17,397 |  |  | $ | (714,707) |  |  | $ | 11,564,397 |  |  |  |
| At December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
| Available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,731,733 |  |  | $ | — |  |  | $ | 5,386 |  |  | $ | (97,789) |  |  | $ | 2,639,330 |  |  |  |
| Non-U.S. government | 612,546 |  |  | — |  |  | 2,395 |  |  | (52,912) |  |  | 562,029 |  |  |  |
| Corporate debt | 4,680,798 |  |  | (11,521) |  |  | 5,269 |  |  | (418,990) |  |  | 4,255,556 |  |  |  |
| Agency RMBS(1) | 1,297,423 |  |  | — |  |  | 4,663 |  |  | (99,301) |  |  | 1,202,785 |  |  |  |
| CMBS(2) | 1,029,863 |  |  | — |  |  | 60 |  |  | (82,145) |  |  | 947,778 |  |  |  |
| Non-agency RMBS | 151,907 |  |  | (123) |  |  | 275 |  |  | (18,525) |  |  | 133,534 |  |  |  |
| ABS(3) | 1,499,728 |  |  | (35) |  |  | 555 |  |  | (70,721) |  |  | 1,429,527 |  |  |  |
| Municipals(4) | 172,475 |  |  | (54) |  |  | 139 |  |  | (16,205) |  |  | 156,355 |  |  |  |
| Total fixed maturities, available for sale | $ | 12,176,473 |  |  | $ | (11,733) |  |  | $ | 18,742 |  |  | $ | (856,588) |  |  | $ | 11,326,894 |  |  |  |

(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)
Contractual 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 June 30, 2023 |  |  |  |  |  |
| Maturity |  |  |  |  |  |
| Due in one year or less | $ | 608,109 |  |  | $ | 591,621 |  |  | 5.2 | % |
| Due after one year through five years | 5,408,673 |  |  | 5,166,273 |  |  | 44.7 | % |
| Due after five years through ten years | 2,139,206 |  |  | 1,936,227 |  |  | 16.7 | % |
| Due after ten years | 172,751 |  |  | 160,858 |  |  | 1.4 | % |
|  | 8,328,739 |  |  | 7,854,979 |  |  | 68.0 | % |
| Agency RMBS | 1,496,299 |  |  | 1,403,654 |  |  | 12.1 | % |
| CMBS | 950,340 |  |  | 871,107 |  |  | 7.5 | % |
| Non-agency RMBS | 149,827 |  |  | 134,101 |  |  | 1.2 | % |
| ABS | 1,347,053 |  |  | 1,300,556 |  |  | 11.2 | % |
| Total | $ | 12,272,258 |  |  | $ | 11,564,397 |  |  | 100.0 | % |
| At December 31, 2022 |  |  |  |  |  |
| Maturity |  |  |  |  |  |
| Due in one year or less | $ | 422,039 |  |  | $ | 409,972 |  |  | 3.7 | % |
| Due after one year through five years | 5,349,123 |  |  | 5,078,273 |  |  | 44.8 | % |
| Due after five years through ten years | 2,192,344 |  |  | 1,919,450 |  |  | 16.9 | % |
| Due after ten years | 234,046 |  |  | 205,575 |  |  | 1.8 | % |
|  | 8,197,552 |  |  | 7,613,270 |  |  | 67.2 | % |
| Agency RMBS | 1,297,423 |  |  | 1,202,785 |  |  | 10.6 | % |
| CMBS | 1,029,863 |  |  | 947,778 |  |  | 8.4 | % |
| Non-agency RMBS | 151,907 |  |  | 133,534 |  |  | 1.2 | % |
| ABS | 1,499,728 |  |  | 1,429,527 |  |  | 12.6 | % |
| Total | $ | 12,176,473 |  |  | $ | 11,326,894 |  |  | 100.0 | % |

16

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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 June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 875,378 |  |  | $ | (62,863) |  |  | $ | 1,776,604 |  |  | $ | (34,730) |  |  | $ | 2,651,982 |  |  | $ | (97,593) |  |
| Non-U.S. government | 232,887 |  |  | (30,092) |  |  | 288,238 |  |  | (7,541) |  |  | 521,125 |  |  | (37,633) |  |
| Corporate debt | 2,448,366 |  |  | (288,978) |  |  | 1,359,957 |  |  | (38,104) |  |  | 3,808,323 |  |  | (327,082) |  |
| Agency RMBS | 512,098 |  |  | (72,058) |  |  | 693,467 |  |  | (24,562) |  |  | 1,205,565 |  |  | (96,620) |  |
| CMBS | 750,801 |  |  | (72,713) |  |  | 105,984 |  |  | (6,558) |  |  | 856,785 |  |  | (79,271) |  |
| Non-agency RMBS | 95,695 |  |  | (15,256) |  |  | 28,298 |  |  | (644) |  |  | 123,993 |  |  | (15,900) |  |
| ABS | 1,038,046 |  |  | (44,731) |  |  | 172,761 |  |  | (2,297) |  |  | 1,210,807 |  |  | (47,028) |  |
| Municipals | 108,560 |  |  | (12,520) |  |  | 28,255 |  |  | (1,060) |  |  | 136,815 |  |  | (13,580) |  |
| Total fixed maturities, available for sale | $ | 6,061,831 |  |  | $ | (599,211) |  |  | $ | 4,453,564 |  |  | $ | (115,496) |  |  | $ | 10,515,395 |  |  | $ | (714,707) |  |
| At December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 467,032 |  |  | $ | (41,365) |  |  | $ | 1,414,181 |  |  | $ | (56,424) |  |  | $ | 1,881,213 |  |  | $ | (97,789) |  |
| Non-U.S. government | 207,637 |  |  | (33,027) |  |  | 298,048 |  |  | (19,885) |  |  | 505,685 |  |  | (52,912) |  |
| Corporate debt | 1,562,355 |  |  | (268,289) |  |  | 2,350,504 |  |  | (150,701) |  |  | 3,912,859 |  |  | (418,990) |  |
| Agency RMBS | 220,595 |  |  | (40,469) |  |  | 771,191 |  |  | (58,832) |  |  | 991,786 |  |  | (99,301) |  |
| CMBS | 343,494 |  |  | (40,888) |  |  | 599,877 |  |  | (41,257) |  |  | 943,371 |  |  | (82,145) |  |
| Non-agency RMBS | 75,137 |  |  | (14,691) |  |  | 53,484 |  |  | (3,834) |  |  | 128,621 |  |  | (18,525) |  |
| ABS | 685,990 |  |  | (48,913) |  |  | 686,190 |  |  | (21,808) |  |  | 1,372,180 |  |  | (70,721) |  |
| Municipals | 52,994 |  |  | (10,120) |  |  | 96,003 |  |  | (6,085) |  |  | 148,997 |  |  | (16,205) |  |
| Total fixed maturities, available for sale | $ | 3,615,234 |  |  | $ | (497,762) |  |  | $ | 6,269,478 |  |  | $ | (358,826) |  |  | $ | 9,884,712 |  |  | $ | (856,588) |  |

At June 30, 2023, 4,491 fixed maturities (2022: 4,525) were in an unrealized loss position of $715 million (2022: $857 million), of which $33 million (2022: $64 million) was related to securities below investment grade or not rated.
At June 30, 2023, 3,089 fixed maturities (2022: 1,842) had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $6,062 million (2022: $3,615 million).
The unrealized loss es of $715 million (2022: $857 million) were due to non-credit factors and were expected to be recovered as the related securities approach maturity.
At June 30, 2023, 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) Fixed Maturities, Held to Maturity
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 June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Held to maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 90,200 |  |  | $ | — |  |  | $ | 90,200 |  |  | $ | — |  |  | $ | (11,411) |  |  | $ | 78,789 |  |  |  |
| ABS(1) | 627,110 |  |  | — |  |  | 627,110 |  |  | 41 |  |  | (8,245) |  |  | 618,906 |  |  |  |
| Total fixed maturities, held to maturity | $ | 717,310 |  |  | $ | — |  |  | $ | 717,310 |  |  | $ | 41 |  |  | $ | (19,656) |  |  | $ | 697,695 |  |  |  |
| At December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Held to maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 85,200 |  |  | $ | — |  |  | $ | 85,200 |  |  | $ | — |  |  | $ | (11,428) |  |  | $ | 73,772 |  |  |  |
| ABS(1) | 613,151 |  |  | — |  |  | 613,151 |  |  | — |  |  | (12,180) |  |  | 600,971 |  |  |  |
| Total fixed maturities, held to maturity | $ | 698,351 |  |  | $ | — |  |  | $ | 698,351 |  |  | $ | — |  |  | $ | (23,608) |  |  | $ | 674,743 |  |  |  |

(1)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by collateralized loan obligations ("CLOs").
At June 30, 2023, fixed maturities, held to maturity of $717 million (2022: $698 million) were presented net of an allowance for expected credit losse s of $nil (2022: $nil).
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 June 30, 2023, the allowance for credit losses expected to be recognized over the life of the Company's ABS, held to maturity w as $nil.
To estimate expected credit losses for corporate debt securities, held to maturity, the Company's projected cash flows are primarily driven by assumptions regarding the severity of loss, which is a function of the probability of default and projected recovery rates. The Company's default and recovery rates are based on credit ratings, credit analysis and macroeconomic forecasts. At June 30, 2023, the allowance for credit losses expected to be recognized over the life of the Company's corporate debt, held to m aturity was $nil.
Contractual Maturities
ABS classified as held to maturity with a net carrying value of $627 million (2022: $613 million) do not have a single maturity date and cannot be allocated over several maturity groupings.
Corpo rate debt classified as held to maturity with a net carrying value of $86 million (2022: $81 million) is due between 3 years and 10 years and corporate debt classified as held to maturity with a net carrying value of $4 million (2022: $4 million) is due after ten years.
18

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
c) 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 June 30, 2023 |  |  |  |  |  |  |  |
| Equity securities |  |  |  |  |  |  |  |
| Common stocks | $ | 3,130 |  |  | $ | 322 |  |  | $ | (406) |  |  | $ | 3,046 |  |
| Preferred stocks | 5,115 |  |  | — |  |  | (131) |  |  | 4,984 |  |
| Exchange-traded funds | 198,244 |  |  | 103,126 |  |  | (2,205) |  |  | 299,165 |  |
| Bond mutual funds | 358,476 |  |  | 269 |  |  | (69,248) |  |  | 289,497 |  |
| Total equity securities | $ | 564,965 |  |  | $ | 103,717 |  |  | $ | (71,990) |  |  | $ | 596,692 |  |
| At December 31, 2022 |  |  |  |  |  |  |  |
| Equity securities |  |  |  |  |  |  |  |
| Common stocks | $ | 7,279 |  |  | $ | 636 |  |  | $ | (442) |  |  | $ | 7,473 |  |
| Preferred stocks | 115 |  |  | — |  |  | (43) |  |  | 72 |  |
| Exchange-traded funds | 207,505 |  |  | 68,058 |  |  | (5,757) |  |  | 269,806 |  |
| Bond mutual funds | 279,457 |  |  | — |  |  | (71,555) |  |  | 207,902 |  |
| Total equity securities | $ | 494,356 |  |  | $ | 68,694 |  |  | $ | (77,797) |  |  | $ | 485,253 |  |

d) Mortgage Loans
The following table provides details of the Company's mortgage loans, held for investment:

|  | June 30, 2023 |  | December 31, 2022 |
|  | Carrying value |  | % of Total |  | Carrying value |  | % of Total |
| Mortgage loans, held for investment: |  |  |  |  |  |  |  |
| Commercial | $ | 612,912 |  |  | 101 | % |  | $ | 627,437 |  |  | 100 | % |
| Allowance for expected credit losses | (3,638) |  |  | (1 | %) |  | — |  |  | — | % |
| Total mortgage loans, held for investment | $ | 609,274 |  |  | 100 | % |  | $ | 627,437 |  |  | 100 | % |

The primary credit quality indicators for commercial mortgage loans are 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 quarterly.
The Company has a high quality mortgage loan portfolio with a weighted average debt service coverage ratio of 2.0x (2022: 2.3x) and a weighted average loan-to-value ratio of 66% (2022: 60%). At June 30, 2023, and 2022 there were no past due amounts associated with the commercial mortgage loans held by the Company.
On a quarterly basis, collateral dependent mortgage loans (e.g, when the borrower is experiencing financial difficulty, including when foreclosure is reasonably possible or probable) are evaluated individually for credit losses. The allowance for expected credit losses for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan's underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of collateral dependent
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
loans, which are evaluated individually for credit losses, is recognized as a change in the allowance for expected credit losses which is recorded in net investment gains (losses).
At June 30, 2023, there are two collateral dependent loans with estimated loan-to-value ratios in excess of 100%, resulting in an allowance for expected credit loss of $4 million.
e) Other Investments
The following table provides a summary of the Company's other investments, together with additional information relating to the liquidity of each category:

|  | Fair value |  | % of Total |  | Redemption frequency (if currently eligible) |  | Redemption notice period |
| At June 30, 2023 |  |  |  |  |  |  |  |
| Multi-strategy funds | $ | 26,126 |  |  | 3 | % |  | Quarterly |  | 60-90 days |
| Direct lending funds | 248,834 |  |  | 26 | % |  | Quarterly(1) |  | 90 days |
| Private equity funds | 272,249 |  |  | 28 | % |  | n/a |  | n/a |
| Real estate funds | 302,945 |  |  | 31 | % |  | Quarterly(2), Annually(3) |  | 45-90 days |
| CLO-Equities | 4,877 |  |  | — | % |  | n/a |  | n/a |
| Other privately held investments | 115,048 |  |  | 12 | % |  | n/a |  | n/a |
| Total other investments | $ | 970,079 |  |  | 100 | % |  |  |  |  |
| At December 31, 2022 |  |  |  |  |  |  |  |
| Multi-strategy funds | $ | 32,616 |  |  | 3 | % |  | Quarterly |  | 60-90 days |
| Direct lending funds | 258,626 |  |  | 26 | % |  | Quarterly(1) |  | 90 days |
| Private equity funds | 265,836 |  |  | 27 | % |  | n/a |  | n/a |
| Real estate funds | 298,499 |  |  | 30 | % |  | Quarterly(2), Annually(3) |  | 45-90 days |
| CLO-Equities | 5,016 |  |  | — | % |  | n/a |  | n/a |
| Other privately held investments | 136,158 |  |  | 14 | % |  | n/a |  | n/a |
| Total other investments | $ | 996,751 |  |  | 100 | % |  |  |  |  |

n/a - not applicable
(1) Applies to one fund with a fair va lue of $30 million (2022: $39 million).
(2) Applies to one fund with a fair value of $68 million (2022: $73 million).
(3) Applies to one fund with a fair value of $25 million (2022: $27 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 six months ended June 30, 2023 and 2022, neither of these restrictions impacted the Company's redemption requests. At June 30, 2023, there w ere no hedg e fund holdings (2022: $nil) where the Company is still within the lockup period.
At June 30, 2023, the Company h ad $28 million (2022: $26 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.
At June 30, 2023, the Company had $192 million (2022: $183 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
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
fully returned until the completion of the fund's investment term. These funds have investment terms ranging from four to twelve years and the General Partners of certain funds have the option to extend the term by up to three years.
At June 30, 2023, the Company had $161 million (2022: $158 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.
At June 30, 2023, the Company had $129 million (2022: $141 million) of unfunded commitments as a limited partner in real estate funds. These funds include an open-ended fund and funds with investment terms ranging from two years to the dissolution of the underlying fund.
f) 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 the Company and The Blackstone Group L.P. ("Blackstone"). Through long-term service agreements, the Company 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 Variable Interest Entities ("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.
g) Variable Interest Entities
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 73% of the Company's other investments. The investments in limited partnerships include hedge funds, direct lending funds, private equity funds and real estate funds and CLO equity tranched securities, which are variable interests issued by VIEs (refer to Note 3(e) '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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
h) Net Investment Income
Net investment income was derived from the following sources:

|  | Three months ended June 30, |  |  |  |  | Six months ended June 30, |
|  | 2023 |  | 2022 |  |  |  |  |  |  | 2023 |  | 2022 |
| Fixed maturities | $ | 124,390 |  |  | $ | 72,607 |  |  |  |  |  |  |  | $ | 242,652 |  |  | $ | 137,416 |  |
| Other investments | (5,341) |  |  | 14,327 |  |  |  |  |  |  |  | (4,855) |  |  | 40,377 |  |
| Equity securities | 2,990 |  |  | 2,688 |  |  |  |  |  |  |  | 5,445 |  |  | 4,860 |  |
| Mortgage loans | 8,880 |  |  | 4,903 |  |  |  |  |  |  |  | 17,266 |  |  | 9,067 |  |
| Cash and cash equivalents | 11,161 |  |  | 3,679 |  |  |  |  |  |  |  | 21,174 |  |  | 4,797 |  |
| Short-term investments | 2,129 |  |  | 402 |  |  |  |  |  |  |  | 3,789 |  |  | 567 |  |
| Gross investment income | 144,209 |  |  | 98,606 |  |  |  |  |  |  |  | 285,471 |  |  | 197,084 |  |
| Investment expenses | (7,380) |  |  | (6,392) |  |  |  |  |  |  |  | (14,870) |  |  | (13,515) |  |
| Net investment income | $ | 136,829 |  |  | $ | 92,214 |  |  |  |  |  |  |  | $ | 270,601 |  |  | $ | 183,569 |  |

i) Net Investment Gains (Losses)
The following table provides an analysis of net investment gains (losses):

|  |  | Three months ended June 30, |  | Six months ended June 30, |  |  |  |
|  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |
|  | Gross realized investment gains |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Fixed maturities and short-term investments | $ | 11,460 |  |  | $ | 1,127 |  |  | $ | 23,829 |  |  | $ | 11,549 |  |  |  |  |  |  |
|  | Equity securities | 17 |  |  | — |  |  | 1,535 |  |  | — |  |  |  |  |  |  |
|  | Gross realized investment gains | 11,477 |  |  | 1,127 |  |  | 25,364 |  |  | 11,549 |  |  |  |  |  |  |
|  | Gross realized investment losses |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Fixed maturities and short-term investments | (43,695) |  |  | (87,601) |  |  | (97,343) |  |  | (150,747) |  |  |  |  |  |  |
|  | Equity securities | — |  |  | — |  |  | (396) |  |  | (224) |  |  |  |  |  |  |
|  | Gross realized investment losses | (43,695) |  |  | (87,601) |  |  | (97,739) |  |  | (150,971) |  |  |  |  |  |  |
|  | (Increase) decrease in allowance for expected credit losses, fixed maturities, available for sale | 2,094 |  |  | (6,911) |  |  | 1,182 |  |  | (6,981) |  |  |  |  |  |  |
|  | (Increase) decrease in allowance for expected credit losses, mortgage loans | (1,740) |  |  | — |  |  | (3,638) |  |  | — |  |  |  |  |  |  |
|  | Impairment losses(1) | (9,083) |  |  | (473) |  |  | (9,083) |  |  | (582) |  |  |  |  |  |  |
|  | Change in fair value of investment derivatives(2) | (528) |  |  | 4,822 |  |  | (1,474) |  |  | 7,063 |  |  |  |  |  |  |
|  | Net unrealized gains (losses) on equity securities | 17,105 |  |  | (84,227) |  |  | 40,830 |  |  | (127,849) |  |  |  |  |  |  |
|  | Net investment losses | $ | (24,370) |  |  | $ | (173,263) |  |  | $ | (44,558) |  |  | $ | (267,771) |  |  |  |  |  |  |

(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'.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
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 June 30, |  | Six months ended June 30, |  |  |  |
|  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |
|  | Balance at beginning of period | $ | 12,645 |  |  | $ | 383 |  |  | $ | 11,733 |  |  | $ | 313 |  |  |  |  |  |  |
|  | Expected credit losses on securities where credit losses were not previously recognized | 3,742 |  |  | 6,899 |  |  | 4,355 |  |  | 6,908 |  |  |  |  |  |  |
|  | Additions (reductions) for expected credit losses on securities where credit losses were previously recognized | (1,223) |  |  | 14 |  |  | (304) |  |  | 92 |  |  |  |  |  |  |
|  | Impairments of securities which the Company intends to sell or more likely than not will be required to sell | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |
|  | Securities sold/redeemed/matured | (4,613) |  |  | (2) |  |  | (5,233) |  |  | (19) |  |  |  |  |  |  |
|  | Balance at end of period | $ | 10,551 |  |  | $ | 7,294 |  |  | $ | 10,551 |  |  | $ | 7,294 |  |  |  |  |  |  |

j) Reverse Repurchase Agreements
At June 30, 2023, the Company held $24 million (2022: $nil) 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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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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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 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 the significant inputs used to price preferred stocks are observable market inputs, the fair value of these securities are classified as Level 2. 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, preferred shares, common shares, convertible notes, investments in limited partnerships 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 derived from one or a combination of valuation methodologies which consider factors including recent capital raises by the investee companies, comparable precedent transaction multiples, comparable publicly traded multiples, third-party valuations, discounted cash-flow models, and other techniques that consider the industry and development stage of each investee company. The fair value of the variable yield security is determined using an externally developed discounted cash flow model. In order to assess the reasonableness of the information received from investee companies, 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 these companies. In addition, the Company engages in regular communication with management at investee companies. As the significant inputs used to price these investments are unobservable, the fair values of other privately held investments are classified as Level 3.
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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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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 June 30, 2023 |  |  |  |  |  |  |  |  |  |
| Assets |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,756,539 |  |  | $ | 35,473 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,792,012 |  |
| Non-U.S. government | — |  |  | 586,612 |  |  | — |  |  | — |  |  | 586,612 |  |
| Corporate debt | — |  |  | 4,198,562 |  |  | 129,046 |  |  | — |  |  | 4,327,608 |  |
| Agency RMBS | — |  |  | 1,403,654 |  |  | — |  |  | — |  |  | 1,403,654 |  |
| CMBS | — |  |  | 871,107 |  |  | — |  |  | — |  |  | 871,107 |  |
| Non-agency RMBS | — |  |  | 134,101 |  |  | — |  |  | — |  |  | 134,101 |  |
| ABS | — |  |  | 1,300,556 |  |  | — |  |  | — |  |  | 1,300,556 |  |
| Municipals | — |  |  | 148,747 |  |  | — |  |  | — |  |  | 148,747 |  |
|  | 2,756,539 |  |  | 8,678,812 |  |  | 129,046 |  |  | — |  |  | 11,564,397 |  |
| Equity securities |  |  |  |  |  |  |  |  |  |
| Common stocks | 3,046 |  |  | — |  |  | — |  |  | — |  |  | 3,046 |  |
| Preferred stocks | 2 |  |  | 4,982 |  |  | — |  |  | — |  |  | 4,984 |  |
| Exchange-traded funds | 299,165 |  |  | — |  |  | — |  |  | — |  |  | 299,165 |  |
| Bond mutual funds | — |  |  | 289,497 |  |  | — |  |  | — |  |  | 289,497 |  |
|  | 302,213 |  |  | 294,479 |  |  | — |  |  | — |  |  | 596,692 |  |
| Other investments |  |  |  |  |  |  |  |  |  |
| Multi-strategy funds | — |  |  | — |  |  | — |  |  | 26,126 |  |  | 26,126 |  |
| Direct lending funds | — |  |  | — |  |  | — |  |  | 248,834 |  |  | 248,834 |  |
| Private equity funds | — |  |  | — |  |  | — |  |  | 272,249 |  |  | 272,249 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | 302,945 |  |  | 302,945 |  |
| CLO-Equities | — |  |  | — |  |  | 4,877 |  |  | — |  |  | 4,877 |  |
| Other privately held investments | — |  |  | — |  |  | 115,048 |  |  | — |  |  | 115,048 |  |
|  | — |  |  | — |  |  | 119,925 |  |  | 850,154 |  |  | 970,079 |  |
| Short-term investments | — |  |  | 46,282 |  |  | — |  |  | — |  |  | 46,282 |  |
| Other assets |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | — |  |  | 3,627 |  |  | — |  |  | — |  |  | 3,627 |  |
| Total Assets | $ | 3,058,752 |  |  | $ | 9,023,200 |  |  | $ | 248,971 |  |  | $ | 850,154 |  |  | $ | 13,181,077 |  |
| Liabilities |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | $ | — |  |  | $ | 11,382 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,382 |  |
| Cash-settled awards (refer to Note 8) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
| Total Liabilities | $ | — |  |  | $ | 11,382 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,382 |  |

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AXIS CAPITAL HOLDINGS LIMITED
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, 2022 |  |  |  |  |  |  |  |  |  |
| Assets |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,600,636 |  |  | $ | 38,694 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,639,330 |  |
| Non-U.S. government | — |  |  | 562,029 |  |  | — |  |  | — |  |  | 562,029 |  |
| Corporate debt | — |  |  | 4,136,452 |  |  | 119,104 |  |  | — |  |  | 4,255,556 |  |
| Agency RMBS | — |  |  | 1,202,785 |  |  | — |  |  | — |  |  | 1,202,785 |  |
| CMBS | — |  |  | 947,778 |  |  | — |  |  | — |  |  | 947,778 |  |
| Non-agency RMBS | — |  |  | 133,534 |  |  | — |  |  | — |  |  | 133,534 |  |
| ABS | — |  |  | 1,429,527 |  |  | — |  |  | — |  |  | 1,429,527 |  |
| Municipals | — |  |  | 156,355 |  |  | — |  |  | — |  |  | 156,355 |  |
|  | 2,600,636 |  |  | 8,607,154 |  |  | 119,104 |  |  | — |  |  | 11,326,894 |  |
| Equity securities |  |  |  |  |  |  |  |  |  |
| Common stocks | 7,473 |  |  | — |  |  | — |  |  | — |  |  | 7,473 |  |
| Preferred stocks | 72 |  |  | — |  |  | — |  |  | — |  |  | 72 |  |
| Exchange-traded funds | 269,806 |  |  | — |  |  | — |  |  | — |  |  | 269,806 |  |
| Bond mutual funds | — |  |  | 207,902 |  |  | — |  |  | — |  |  | 207,902 |  |
|  | 277,351 |  |  | 207,902 |  |  | — |  |  | — |  |  | 485,253 |  |
| Other investments |  |  |  |  |  |  |  |  |  |
| Multi-strategy funds | — |  |  | — |  |  | — |  |  | 32,616 |  |  | 32,616 |  |
| Direct lending funds | — |  |  | — |  |  | — |  |  | 258,626 |  |  | 258,626 |  |
| Private equity funds | — |  |  | — |  |  | — |  |  | 265,836 |  |  | 265,836 |  |
| Real estate funds | — |  |  | — |  |  | — |  |  | 298,499 |  |  | 298,499 |  |
| CLO-Equities | — |  |  | — |  |  | 5,016 |  |  | — |  |  | 5,016 |  |
| Other privately held investments | — |  |  | — |  |  | 136,158 |  |  | — |  |  | 136,158 |  |
|  | — |  |  | — |  |  | 141,174 |  |  | 855,577 |  |  | 996,751 |  |
| Short-term investments | — |  |  | 70,310 |  |  | — |  |  | — |  |  | 70,310 |  |
| Other assets |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | — |  |  | 37,682 |  |  | — |  |  | — |  |  | 37,682 |  |
| Total Assets | $ | 2,877,987 |  |  | $ | 8,923,048 |  |  | $ | 260,278 |  |  | $ | 855,577 |  |  | $ | 12,916,890 |  |
| Liabilities |  |  |  |  |  |  |  |  |  |
| Derivative instruments (refer to Note 5) | $ | — |  |  | $ | 703 |  |  | $ | — |  |  | $ | — |  |  | $ | 703 |  |
| Cash-settled awards (refer to Note 8) | — |  |  | 4,792 |  |  | — |  |  | — |  |  | 4,792 |  |
| Total Liabilities | $ | — |  |  | $ | 5,495 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,495 |  |

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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 June 30, 2023 of investments classified as Level 3 in the fair value hierarchy:

|  | Asset fair value | Valuation technique | Unobservable input | Amount / Range | Weighted average |
| Other investments - CLO-Equities | $ | 4,877 |  | Discounted cash flow | Default rate | 4.5% | 4.5% |
|  |  |  | Loss severity rate | 50.0% | 50.0% |
|  |  |  | Collateral spread | 3.0% | 3.0% |
|  |  |  | Estimated maturity date | 5 years | 5 years |
| Other investments - Other privately held investments | $ | 17,813 |  | Discounted cash flow | Discount rate | 7.9% | 7.9% |
|  |  | Default rate | 0.5% | 0.5% |
|  |  |  | Loss absorption yield | 1.0% | 1.0% |
|  |  |  | Estimated maturity date | 1-2 years | 2 years |

Note: Fixed maturities of $129 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 $97 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.
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.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
The following table presents 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 June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 130,427 |  |  | $ | — |  |  | $ | — |  |  | $ | (3,304) |  |  | $ | (1,354) |  |  | $ | 5,551 |  |  | $ | — |  |  | $ | (2,274) |  |  | $ | 129,046 |  |  | $ | — |  |  |
|  | 130,427 |  |  | — |  |  | — |  |  | (3,304) |  |  | (1,354) |  |  | 5,551 |  |  | — |  |  | (2,274) |  |  | 129,046 |  |  | — |  |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| CLO-Equities | 5,019 |  |  | — |  |  | — |  |  | 493 |  |  | — |  |  | — |  |  | — |  |  | (635) |  |  | 4,877 |  |  | 493 |  |  |
| Other privately held investments | 140,953 |  |  | — |  |  | — |  |  | (6,231) |  |  | — |  |  | 14,858 |  |  | (34,532) |  |  | — |  |  | 115,048 |  |  | (14,314) |  |  |
|  | 145,972 |  |  | — |  |  | — |  |  | (5,738) |  |  | — |  |  | 14,858 |  |  | (34,532) |  |  | (635) |  |  | 119,925 |  |  | (13,821) |  |  |
| Total assets | $ | 276,399 |  |  | $ | — |  |  | $ | — |  |  | $ | (9,042) |  |  | $ | (1,354) |  |  | $ | 20,409 |  |  | $ | (34,532) |  |  | $ | (2,909) |  |  | $ | 248,971 |  |  | $ | (13,821) |  |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |
| Total liabilities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |
| Six months ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 119,104 |  |  | $ | — |  |  | $ | — |  |  | $ | (3,311) |  |  | $ | (170) |  |  | $ | 24,461 |  |  | $ | — |  |  | $ | (11,038) |  |  | $ | 129,046 |  |  | $ | — |  |  |
|  | 119,104 |  |  | — |  |  | — |  |  | (3,311) |  |  | (170) |  |  | 24,461 |  |  | — |  |  | (11,038) |  |  | 129,046 |  |  | — |  |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| CLO-Equities | 5,016 |  |  | — |  |  | — |  |  | 903 |  |  | — |  |  | — |  |  | — |  |  | (1,042) |  |  | 4,877 |  |  | 903 |  |  |
| Other privately held investments | 136,158 |  |  | — |  |  | — |  |  | (5,895) |  |  | — |  |  | 19,317 |  |  | (34,532) |  |  | — |  |  | 115,048 |  |  | (13,976) |  |  |
|  | 141,174 |  |  | — |  |  | — |  |  | (4,992) |  |  | — |  |  | 19,317 |  |  | (34,532) |  |  | (1,042) |  |  | 119,925 |  |  | (13,073) |  |  |
| Total assets | $ | 260,278 |  |  | $ | — |  |  | $ | — |  |  | $ | (8,303) |  |  | $ | (170) |  |  | $ | 43,778 |  |  | $ | (34,532) |  |  | $ | (12,080) |  |  | $ | 248,971 |  |  | $ | (13,073) |  |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |
| Total liabilities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |

(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)

|  | 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 June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 60,890 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (3,828) |  |  | $ | 15,768 |  |  | $ | — |  |  | $ | — |  |  | $ | 72,830 |  |  | $ | — |  |
|  | 60,890 |  |  | — |  |  | — |  |  | — |  |  | (3,828) |  |  | 15,768 |  |  | — |  |  | — |  |  | 72,830 |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| CLO-Equities | 4,881 |  |  | — |  |  | — |  |  | 803 |  |  | — |  |  | — |  |  | — |  |  | (876) |  |  | 4,808 |  |  | 803 |  |
| Other privately held investments | 115,474 |  |  | — |  |  | — |  |  | (5,110) |  |  | — |  |  | 7,606 |  |  | — |  |  | (2,000) |  |  | 115,970 |  |  | (5,110) |  |
|  | 120,355 |  |  | — |  |  | — |  |  | (4,307) |  |  | — |  |  | 7,606 |  |  | — |  |  | (2,876) |  |  | 120,778 |  |  | (4,307) |  |
| Total assets | $ | 181,245 |  |  | $ | — |  |  | $ | — |  |  | $ | (4,307) |  |  | $ | (3,828) |  |  | $ | 23,374 |  |  | $ | — |  |  | $ | (2,876) |  |  | $ | 193,608 |  |  | $ | (4,307) |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | 5,074 |  |  | $ | — |  |  | $ | — |  |  | $ | (366) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,708 |  |  | $ | (366) |  |
| Total liabilities | $ | 5,074 |  |  | $ | — |  |  | $ | — |  |  | $ | (366) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,708 |  |  | $ | (366) |  |
| Six months ended June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Corporate debt | $ | 42,894 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (6,623) |  |  | $ | 37,231 |  |  | $ | — |  |  | $ | (672) |  |  | $ | 72,830 |  |  | $ | — |  |
|  | 42,894 |  |  | — |  |  | — |  |  | — |  |  | (6,623) |  |  | 37,231 |  |  | — |  |  | (672) |  |  | 72,830 |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| CLO-Equities | 5,910 |  |  | — |  |  | — |  |  | 1,675 |  |  | — |  |  | — |  |  | — |  |  | (2,777) |  |  | 4,808 |  |  | 1,675 |  |
| Other privately held investments | 104,521 |  |  | — |  |  | — |  |  | (3,491) |  |  | — |  |  | 16,940 |  |  | — |  |  | (2,000) |  |  | 115,970 |  |  | (3,491) |  |
|  | 110,431 |  |  | — |  |  | — |  |  | (1,816) |  |  | — |  |  | 16,940 |  |  | — |  |  | (4,777) |  |  | 120,778 |  |  | (1,816) |  |
| Total assets | $ | 153,325 |  |  | $ | — |  |  | $ | — |  |  | $ | (1,816) |  |  | $ | (6,623) |  |  | $ | 54,171 |  |  | $ | — |  |  | $ | (5,449) |  |  | $ | 193,608 |  |  | $ | (1,816) |  |
| Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative instruments | $ | 5,630 |  |  | $ | — |  |  | $ | — |  |  | $ | (922) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,708 |  |  | $ | (922) |  |
| Total liabilities | $ | 5,630 |  |  | $ | — |  |  | $ | — |  |  | $ | (922) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,708 |  |  | $ | (922) |  |

(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.
Transfers into Level 3 from Level 2
There were no transfers into Level 3 from Level 2 during the three and six months ended June 30, 2023 and 2022.
Transfers out of Level 3 into Level 2
There were no transfers out of Level 3 into Level 2 during the three and six months ended June 30, 2023 and 2022.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
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 June 30, 2023 and December 31, 2022 all funds measured at fair value using NAVs are reported generally on a one quarter 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 June 30, 2023, 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 June 30, 2023, the Company's fixed maturities, held to maturity, were recorded at amortized cost with a carrying value of $717 million (2022: $698 million) and a fair value of $698 million (2022: $675 million). 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 June 30, 2023, 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 June 30, 2023, the Company's debt was recorded at amortized cost with a carrying value of $1,313 million (2022: $1,312 million) and a fair value of $1,160 million (2022: $1,160 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 this debt is classified as Level 2.
At June 30, 2023, Federal Home Loan Bank advances were recorded at amortized cost with a carrying value of $86 million (2022: $81 million) and a fair value of $86 million (2022: $81 million). As these advances are not actively traded, their fair values are classified as Level 2.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. DERIVATIVE INSTRUMENTS
The following table provides the balance sheet classifications of derivatives recorded at fair value:

|  | June 30, 2023 |  | December 31, 2022 |
|  | 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 | $ | 138,437 |  |  | $ | 8 |  |  | $ | 915 |  |  | $ | 54,076 |  |  | $ | 81 |  |  | $ | 559 |  |
| Relating to underwriting portfolio: |  |  |  |  |  |  |  |  |  |  |  |
| Foreign exchange forward contracts | 1,672,333 |  |  | 3,619 |  |  | 10,467 |  |  | 1,441,273 |  |  | 37,601 |  |  | 144 |  |
| Total derivatives |  |  | $ | 3,627 |  |  | $ | 11,382 |  |  |  |  | $ | 37,682 |  |  | $ | 703 |  |

(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.
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:

|  | June 30, 2023 |  | December 31, 2022 |
|  | Gross amounts | Gross amounts offset | Net amounts(1) |  | Gross amounts | Gross amounts offset | Net amounts(1) |
| Derivative assets | $ | 9,556 |  | $ | (5,929) |  | $ | 3,627 |  |  | $ | 41,762 |  | $ | (4,080) |  | $ | 37,682 |  |
| Derivative liabilities | $ | 17,311 |  | $ | (5,929) |  | $ | 11,382 |  |  | $ | 4,783 |  | $ | (4,080) |  | $ | 703 |  |

(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.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. DERIVATIVE INSTRUMENTS (CONTINUED)
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.
The following table provides the total unrealized and realized gains (losses) recognized in net income (loss) for derivatives not designated as hedges:

|  |  | Consolidated statement of operations line item that includes gain (loss) recognized in net income (loss) | Three months ended June 30, |  | Six months ended June 30, |
|  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
|  | Relating to investment portfolio: |  |  |  |  |  |  |  |  |
|  | Foreign exchange forward contracts | Net investment gains (losses) | $ | (527) |  |  | $ | 4,822 |  |  | $ | (1,474) |  |  | $ | 7,063 |  |
|  | Relating to underwriting portfolio: |  |  |  |  |  |  |  |  |
|  | Foreign exchange forward contracts | Foreign exchange (losses) gains | (3,013) |  |  | (31,146) |  |  | 8,237 |  |  | (59,122) |  |
|  | Other underwriting-related contracts | Other insurance related income (loss) | — |  |  | 367 |  |  | — |  |  | 922 |  |
|  | Total |  | $ | (3,540) |  |  | $ | (25,957) |  |  | $ | 6,763 |  |  | $ | (51,137) |  |

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 reserve for unpaid losses and loss expenses:

|  | Six months ended June 30, |  |
|  | 2023 |  | 2022 |  |
| Gross reserve for losses and loss expenses, beginning of period | $ | 15,168,863 |  |  | $ | 14,653,094 |  |  |
| Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period | (5,831,172) |  |  | (5,017,611) |  |  |
| Net reserve for unpaid losses and loss expenses, beginning of period | 9,337,691 |  |  | 9,635,483 |  |  |
| Net incurred losses and loss expenses related to: |  |  |  |  |
| Current year | 1,467,256 |  |  | 1,515,182 |  |  |
| Prior years | (10,357) |  |  | (12,897) |  |  |
|  | 1,456,899 |  |  | 1,502,285 |  |  |
| Net paid losses and loss expenses related to: |  |  |  |  |
| Current year | (129,414) |  |  | (120,713) |  |  |
| Prior years | (1,210,101) |  |  | (1,354,605) |  |  |
|  | (1,339,515) |  |  | (1,475,318) |  |  |
| Foreign exchange and other | 98,814 |  |  | (272,994) |  |  |
| Net reserve for unpaid losses and loss expenses, end of period | 9,553,889 |  |  | 9,389,456 |  |  |
| Reinsurance recoverable on unpaid losses and loss expenses, end of period | 5,865,609 |  |  | 5,008,583 |  |  |
| Gross reserve for losses and loss expenses, end of period | $ | 15,419,498 |  |  | $ | 14,398,039 |  |  |

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 six months ended June 30, 2023, the Company recognized catastrophe and weather-related losses, net of reinstatement premiums, of $70 million (2022: $127 million).
Estimates for Significant Catastrophe Events
At June 30, 2023, 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 New Zealand floods and Cyclone Gabrielle in 2023, Hurricane Ian, Winter Storm Elliot, June European Convective Storms, the Russia-Ukraine war and COVID-19 in 2022, Hurricane Ida, U.S. Winter Storms Uri and Viola and July European Floods in 2021, and 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. As a result, actual losses for these events may ultimately differ materially from current estimates.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
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 June 30, |  | Six months ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |
|  | Favorable (Adverse) |  | Favorable (Adverse) |  | Favorable (Adverse) |  | Favorable (Adverse) |
| Insurance | $ | 2,784 |  |  | $ | 2,773 |  |  | $ | 3,825 |  |  | $ | 9,838 |  |
| Reinsurance | 3,535 |  |  | 1,167 |  |  | 6,532 |  |  | 3,059 |  |
| Total | $ | 6,319 |  |  | $ | 3,940 |  |  | $ | 10,357 |  |  | $ | 12,897 |  |

The following sections provide further details on net prior year reserve development by segment, line of business and accident year:
Insurance Segment:
The following table maps the Company's lines of business to expected claim tails:

| Insurance segment |  |  |  |  |  |
|  | Expected claims tail |
|  | Short | Medium | Long |  |  |  |
| Lines of business |  |  |  |  |  |  |
| Property | X |  |  |  |  |  |
| Accident and health | X |  |  |  |  |  |
| Marine and aviation | X |  |  |  |  |  |
| Cyber |  | X |  |  |  |  |
| Professional lines |  | X |  |  |  |  |
| Credit and political risk |  | X |  |  |  |  |
| Liability |  |  | X |  |  |  |

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
Prior year reserve development by line of business was as follows:

|  | Three months ended June 30, |  | Six months ended June 30, |  |  |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |
|  | Favorable (Adverse) |  | Favorable (Adverse) |  | Favorable (Adverse) |  | Favorable (Adverse) |  |  |  |  |  |
| Property | $ | (208) |  |  | $ | 2,721 |  |  | $ | 5,692 |  |  | $ | 10,783 |  |  |  |  |  |  |
| Accident and health | (248) |  |  | (1,334) |  |  | (552) |  |  | 2,298 |  |  |  |  |  |  |
| Marine and aviation | 2,682 |  |  | 2,927 |  |  | 15,903 |  |  | 17,575 |  |  |  |  |  |  |
| Cyber | 676 |  |  | 7,783 |  |  | 9,128 |  |  | 7,097 |  |  |  |  |  |  |
| Professional lines | (3,498) |  |  | (2,350) |  |  | (16,092) |  |  | (8,286) |  |  |  |  |  |  |
| Credit and political risk | 8,430 |  |  | 4,287 |  |  | 12,949 |  |  | 5,182 |  |  |  |  |  |  |
| Liability | (5,050) |  |  | (11,261) |  |  | (23,203) |  |  | (24,811) |  |  |  |  |  |  |
| Total | $ | 2,784 |  |  | $ | 2,773 |  |  | $ | 3,825 |  |  | $ | 9,838 |  |  |  |  |  |  |

For the three months ended June 30, 2023, the Company recognized $3 million of net favorable prior year reserve development, the principal components of which were:
•$8 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2018 through 2022 accident years.
•$3 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo book of business related to 2022 catastrophe events, partially offset by increases in the loss estimates within the marine liability book of business related to the 2020 and 2021 accident years.
•$5 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. excess casualty general liability and U.S. programs books of business mainly related to the 2017 through 2019 accident years.
•$3 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. financial institutions book of business mainly related to the 2009 and 2018 accident years, U.S. commercial management solutions book of business mainly related to the 2017 through 2019 accident years, and an increase in the loss estimate attributable to a specific large claim within the U.S. design professional and environmental book of business mainly related to the 2019 accident year.
For the three months ended June 30, 2022, the Company recognized $3 million of net favorable prior year reserve development, the principal components of which were:
•$8 million of net favorable prior year reserve development on cyber business primarily due t o better than expected loss emergence mainly related to 2020 and older accident years.
•$4 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2020 and 2021 accident years.
•$11 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 2017 through 2021 accident years and reserve strengthening within the U.S. primary casualty book of business mainly related to the 2015 and 2017 accident years.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
For the six months ended June 30, 2023, the Company recognized $4 million of net favorable prior year reserve development, the principal components of which were:
•$16 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo book of business related to 2022 catastrophe events, partially offset by increases in the loss estimates within the marine liability book of business related to the 2020 and 2021 accident years.
•$13 million of net favorable prior year reserve development on credit and political risk business primarily due to a decrease in the loss estimate attributable to a specific large claim related to the 2020 accident year and better than expected loss emergence related to recent accident years.
•$9 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence mainly related to 2019 and older accident years.
•$6 million of net favorable prior year reserve development on property business primarily due to better than expected loss emergence attributable to 2022 catastrophe events, partially offset by reserve strengthening related to the 2021 accident year.
•$23 million of net adverse prior year reserve developmen t on liability business primarily due to reserve strengthening within the U.S. primary casualty book of business mainly related to the 2015, 2018 and 2021 accident years, and U.S. excess casualty general liability and U.S. programs book of business mainly related to the 2017 through 2019 accident years.
•$16 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. financial institutions book of business mainly related to the 2009 and 2018 accident years, U.S. commercial management solutions book of business mainly related the 2017 through 2019 accident years, and U.S. design professional and environmental book of business mainly related to the 2019 accident year.
For the six months ended June 30, 2022, we recognized $10 million of net favorable prior year reserve development, the principal components of which were:
•$18 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo and marine offshore energy books of business mainly related to the 2018 and 2021 accident years, and aviation business mainly related to the 2021 accident year.
•$11 million of net favorable prior year reserve development on property business primarily due to decreases in loss estimates attributable to specific large claims related to the 2017 accident year, and better than expected loss emergence attributable to 2018 catastrophe events.
•$7 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence related to several accident years.
•$5 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2017, 2020 and 2021 accident years.
•$25 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 2017 through 2021 accident years and an increase in the loss estimate attributable to a specific large claim related to the 2017 accident year.
•$8 million of net adverse prior year reserve development on professional lines bus iness primarily due to increases in loss estimates attributable to specific large claims related to the 2015 and 2017 accident years, and reserve strengthening within run-off lines of business mainly related to the 2016 and 2018 accident years.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
Reinsurance Segment:
The following table maps the Company's lines of business to expected claim tails:

| Reinsurance segment |  |  |
|  | Expected claims tail |
|  | Short | Medium | Long |
| Lines of business |  |  |  |
| Accident and health | X |  |  |
| Agriculture | X |  |  |
| Marine and aviation | X |  |  |
| Professional lines |  | X |  |
| Credit and surety |  | X |  |
| Motor |  |  | X |
| Liability |  |  | X |
| Run-off lines |  |  |  |
| Catastrophe | X |  |  |
| Property | X |  |  |
| Engineering | X |  |  |

Prior year reserve development by line of business was as follows:

|  | Three months ended June 30, |  | Six months ended June 30, |  |  |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |
|  | Favorable (Adverse) |  | Favorable (Adverse) |  | Favorable (Adverse) |  | Favorable (Adverse) |  |  |  |  |  |
| Accident and health | $ | 7,284 |  |  | $ | 2,186 |  |  | $ | 14,273 |  |  | $ | 1,687 |  |  |  |  |  |  |
| Agriculture | 2,122 |  |  | 7,141 |  |  | 14,013 |  |  | 8,372 |  |  |  |  |  |  |
| Marine and aviation | 5,197 |  |  | (896) |  |  | 4,947 |  |  | (400) |  |  |  |  |  |  |
| Professional lines | (10,504) |  |  | (6,000) |  |  | (13,728) |  |  | (30,522) |  |  |  |  |  |  |
| Credit and surety | (582) |  |  | 3,582 |  |  | (1,128) |  |  | 11,047 |  |  |  |  |  |  |
| Motor | (4,825) |  |  | 3,860 |  |  | (21,946) |  |  | 2,130 |  |  |  |  |  |  |
| Liability | (7,017) |  |  | (6,823) |  |  | (39,870) |  |  | (10,928) |  |  |  |  |  |  |
| Total | (8,325) |  |  | 3,050 |  |  | (43,439) |  |  | (18,614) |  |  |  |  |  |  |
| Run-off lines |  |  |  |  |  |  |  |  |  |  |  |  |
| Catastrophe | 7,487 |  |  | (694) |  |  | 38,546 |  |  | (940) |  |  |  |  |  |  |
| Property | 2,264 |  |  | 2,053 |  |  | 9,147 |  |  | 24,592 |  |  |  |  |  |  |
| Engineering | 2,109 |  |  | (3,242) |  |  | 2,278 |  |  | (1,979) |  |  |  |  |  |  |
| Total run-off lines | 11,860 |  |  | (1,883) |  |  | 49,971 |  |  | 21,673 |  |  |  |  |  |  |
| Total | $ | 3,535 |  |  | $ | 1,167 |  |  | $ | 6,532 |  |  | $ | 3,059 |  |  |  |  |  |  |

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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 June 30, 2023, the Company recognized $4 million of net favorable prior year reserve development, the principal components of which were:
•$7 million of net favorable development on accident and health business primarily due to better than expected loss emergence mainly related to the 2022 accident year, partially offset by reserve strengthening mainly related to the 2021 accident year.
•$5 million of net favorable development on marine and aviation business primarily due to better than expected loss emergence mainly related to the 2020 and 2022 accident years.
•$11 million of net adverse development on professional lines business primarily due to reserve strengthening within the European proportional book of business related to several accidents years and reserve strengthening attributable to one cedant within the U.S. proportional book of business related to 2019 and older accident years.
•$7 million of net adverse development on liability business primarily due to reserve strengthening within the U.S. proportional book of business related to 2018 and older accident years, increases in loss estimates attributable to several cedants within the European book of business related to the 2016 though 2018 accident years and increases in loss estimates attributable to several claims within the Multiline book of business related to older accident years.
•$5 million of net adverse development on motor business primarily due to reserve strengthening related to the 2018 through 2022 accident years.
Run-off lines
•$7 million of net favorable development on catastrophe business primarily due to better than expected loss emergence mainly related to the 2018 and 2022 accident years.
For the three months ended June 30, 2022, the Company recognized $1 million of net favorable prior year reserve development, the principal components of which were:
•$7 million of net favorable prior year development on the agriculture book of business mainly related to the 2021 accident year.
•$4 million of net favorable prior year reserve development on motor business primarily due to better than expected loss emergence mainly related to the 2018 and 2019 accidents years.
•$4 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence mainly related to the 2018 and 2020 accidents years.
•$7 million of net adverse prior year development on liability business primarily due to an increase in the loss estimate attributable to a specific large claim related to the 2021 accident year.
•$6 million of net adverse prior year development on professional lines business primarily due to reserve strengthening within the U.S. public D&O book of business related to the 2015 through 2018 accident years, partially offset by better than expected loss emergence attributable to the U.S. and Europe non-proportional books of business related to several accident years.
For the six months ended June 30, 2023, the Company recognized $7 million of net favorable prior year reserve development, the principal components of which were:
•$14 million of net favorable development on accident and health business primarily due to better than expected loss emergence mainly related to the 2019, 2020 and 2022 accident years.
•$14 million of net favorable development on agriculture business primarily due to better than expected loss emergence mainly related to the 2022 accident year.
•$5 million of net favorable development on marine and aviation business primarily due to better than expected loss emergence mainly related to the 2021 and 2022 accident years.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$40 million of net adverse development on liability business primarily due to reserve strengthening to reflect increased estimates of future loss trend due to inflation, an increase in the loss estimate attributable to a specific large claim within the European book of business related to the 2021 accident year and reserve strengthening within the U.S. proportional book of business related to 2019 and older accident years.
•$22 million of net adverse development on motor business primarily due to reserve strengthening to reflect increased estimates of future loss trend due to inflation and reserve strengthening related to the 2018 through 2022 accident years.
•$14 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the European proportional book of business related to several accident years and reserve strengthening attributable to one cedant within the U.S. proportional book of business related to 2019 and older accident years.
Run-off lines
•$39 million of net favorable development on catastrophe business primarily due to better than expected loss emergence mainly related to the 2022 accident year.
•$9 million of net favorable development on property business primarily due to better than expected loss emergence attributable to the European book of business mainly related to the 2018 and 2019 accident years.
For the six months ended June 30, 2022, we recognized $3 million of net favorable prior year reserve development, the principal components of which were:
•$11 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence mainly related the 2016, 2018 and 2020 accidents years.
•$8 million of net favorable prior year reserve development on agriculture business mainly related to the 2021 accident year.
•$31 million of net adverse prior year development on professiona l lines business primarily due to increases in loss estimates attributable to one cedant related to the 2016 to 2018 accident years, a specific large claim related to the 2017 accident year, and reserve strengthening within the U.S. public D&O book of business related to several accident years.
•$11 million of net adverse prior year development on liability business primarily due to increases in loss estimates attributable to specific large claims related to the 2018 and 2021 accident years.
Run-off lines
•$25 million of net favorable prior year development on property business primarily due to better than expected loss emergence attributable to 2018 through 2021 catastrophe events.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. EARNINGS PER COMMON SHARE
The following table presents a comparison of earnings per common share and earnings per diluted common share:

|  |  | Three months ended June 30, |  |  | Six months ended June 30, |  |  |
|  |  | 2023 |  | 2022 |  |  | 2023 |  | 2022 |  |  |  |  |  |
|  | Earnings per common share |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Net income | $ | 150,674 |  |  | $ | 34,778 |  |  |  | $ | 330,773 |  |  | $ | 183,982 |  |  |  |  |  |  |
|  | Less: Preferred share dividends | 7,563 |  |  | 7,563 |  |  |  | 15,125 |  |  | 15,125 |  |  |  |  |  |  |
|  | Net income available to common shareholders | $ | 143,111 |  |  | $ | 27,215 |  |  |  | $ | 315,648 |  |  | $ | 168,857 |  |  |  |  |  |  |
|  | Weighted average common shares outstanding | 85,207 |  |  | 85,173 |  |  |  | 85,036 |  |  | 85,068 |  |  |  |  |  |  |
|  | Earnings per common share | $ | 1.68 |  |  | $ | 0.32 |  |  |  | $ | 3.71 |  |  | $ | 1.98 |  |  |  |  |  |  |
|  | Earnings per diluted common share |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Net income available to common shareholders | $ | 143,111 |  |  | $ | 27,215 |  |  |  | $ | 315,648 |  |  | $ | 168,857 |  |  |  |  |  |  |
|  | Weighted average common shares outstanding | 85,207 |  |  | 85,173 |  |  |  | 85,036 |  |  | 85,068 |  |  |  |  |  |  |
|  | Share-based compensation plans | 605 |  |  | 670 |  |  |  | 797 |  |  | 758 |  |  |  |  |  |  |
|  | Weighted average diluted common shares outstanding | 85,812 |  |  | 85,843 |  |  |  | 85,833 |  |  | 85,826 |  |  |  |  |  |  |
|  | Earnings per diluted common share | $ | 1.67 |  |  | $ | 0.32 |  |  |  | $ | 3.68 |  |  | $ | 1.97 |  |  |  |  |  |  |
|  | Weighted average anti-dilutive shares excluded from the dilutive computation | 736 |  |  | 146 |  |  |  | 770 |  |  | 567 |  |  |  |  |  |  |

8. SHARE-BASED COMPENSATION
Performance Restricted Stock Units
Performance Restricted Stock Units granted in 2023
Share-settled performance restricted stock units granted in 2023 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 the three months ended March 31, 2023 in relation to senior leadership transition
Share-settled performance restricted stock units granted in the three months ended March 31, 2023 to one senior leader 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, fifty percent of these awards will vest at the end of a one-year performance period, and the remaining fifty percent of these awards will vest at the end of a three-year vest period within a range of 0% to 200% of target.
Performance Restricted Stock Units granted in the three months ended June 30, 2023 in relation to senior leadership transition
Share-settled performance restricted stock units granted in the three months ended June 30, 2023 to one senior leader include a market condition which is the Company’s total shareholder return's compound annual growth rate ("TSR CAGR") over the performance period. TSR CAGR 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.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. SHARE-BASED COMPENSATION (CONTINUED)
Valuation assumptions
The fair value of performance restricted stock units granted in 2023 was measured on the grant date using a Monte Carlo simulation model.
The following table provides details of the significant inputs used in the Monte Carlo simulation model:

| Six months ended June 30, | 2023 (1) | 2023 (2) | 2023 (3) | 2022 |
| Expected volatility | 36.24% | 29.30% | 30.05% | 33.44% |
| Expected term (in years) | 3.0 | 1.0 | 3.0 | 3.0 |
| Expected dividend yield | n/a | n/a | n/a | n/a |
| Risk-free interest rate | 3.79% | 4.61% | 3.39% | 1.26% |

(1) Performance restricted stock units granted in the ordinary course of business
(2) Performance restricted stock units granted in the three months ended March 31, 2023 in relation to senior leadership transition
(3) Performance restricted stock units granted in the three months ended June 30, 2023 in relation to senior leadership transition
Beginning share price: The beginning share price was based on the average closing share price over the 10 trading days preceding and including the start of the performance period. The beginning share price of the awards granted in the three months ended June 30, 2023 to one senior leader was based on the average closing share price over the 30 trading days preceding and including the start of the performance period.
Ending share price: The ending share price was based on the average projected closing share price over the 10 trading days preceding and including the end of the performance period. The ending share price of the awards granted in the three months ended June 30, 2023 to one senior leader was based on the average closing share price over the 30 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 for awards granted in 2023 is generally measured from January 1, 2023 to December 31, 2025, with performance for awards granted to one senior leader in the three months ended March 31, 2023 being measured from January 1, 2023 to December 31, 2023, and performance for awards granted to one senior leader in the three months ended June 30, 2023 being measured from May 4, 2023 to May 4, 2026. Performance for awards granted in 2022 is measured from January 1, 2022 to December 31, 2024.
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 2023 and 2022 is determined on the grant date based on the fair value calculated by the Monte Carlo simulation model, and is recognized on a straight-line basis over the requisite service period. During the three months ended March 31, 2023, the transition in our senior leadership resulted in a modification of the previously existing vesting terms of the outstanding restricted stock units and performance restricted stock units granted in 2022 and earlier of one senior leader, and a modification of the performance period of that leader's performance restricted stock units granted in 2022. The modifications did not result in incremental compensation expense.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. SHARE-BASED COMPENSATION (CONTINUED)
Share-Settled Awards
The following table provides an activity summary of the Company's share-settled restricted stock units for the six months ended June 30, 2023:

|  | 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 | 330 |  |  | $ | 60.01 |  |  | 2,117 |  |  | $ | 53.16 |  |
| Granted | 122 |  |  | 66.13 |  |  | 856 |  |  | 57.64 |  |
| Vested | (72) |  |  | 62.26 |  |  | (759) |  |  | 53.67 |  |
| Forfeited | — |  |  | — |  |  | (101) |  |  | 53.88 |  |
| Non-vested restricted stock units - end of period | 380 |  |  | $ | 61.55 |  |  | 2,113 |  |  | $ | 54.76 |  |

Cash-Settled awards
The following table provides an activity summary of the Company's cash-settled restricted stock units for the six months ended June 30, 2023:

|  |  |  | Cash-Settled Service Restricted Stock Units |
|  |  |  | Number of restricted stock units |
| Non-vested restricted stock units - beginning of period |  |  | 60 |  |
| Granted |  |  | — |  |
| Vested |  |  | (59) |  |
| Forfeited |  |  | (1) |  |
| Non-vested restricted stock units - end of period |  |  | — |  |

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

| Six months ended June 30, | 2023 |  | 2022 |
| Share-based compensation expense(1) | $ | 28,240 |  |  | $ | 29,052 |  |
| Tax benefits associated with share-based compensation expense | $ | 4,840 |  |  | $ | 4,956 |  |
| Liability for cash-settled restricted stock units(2) | $ | — |  |  | $ | 3,796 |  |
| Fair value of restricted stock units vested(3) | $ | 53,614 |  |  | $ | 48,121 |  |
| Unrecognized share-based compensation expense | $ | 96,649 |  |  | $ | 106,007 |  |
| Expected weighted average period associated with the recognition of unrecognized share-based compensation expense | 2.7 years |  | 2.7 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 June 30, |  | Six months ended June 30, |  |  |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |
| Shares issued, balance at beginning of period | 176,580 |  |  | 176,580 |  |  | 176,580 |  |  | 176,580 |  |  |  |  |  |  |
| Shares issued | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |
| Total shares issued at end of period | 176,580 |  |  | 176,580 |  |  | 176,580 |  |  | 176,580 |  |  |  |  |  |  |
| Treasury shares, balance at beginning of period | (91,397) |  |  | (91,304) |  |  | (91,912) |  |  | (91,806) |  |  |  |  |  |  |
| Shares repurchased | (20) |  |  | (640) |  |  | (282) |  |  | (885) |  |  |  |  |  |  |
| Shares reissued | 53 |  |  | 19 |  |  | 830 |  |  | 766 |  |  |  |  |  |  |
| Total treasury shares at end of period | (91,364) |  |  | (91,925) |  |  | (91,364) |  |  | (91,925) |  |  |  |  |  |  |
| Total shares outstanding | 85,216 |  |  | 84,655 |  |  | 85,216 |  |  | 84,655 |  |  |  |  |  |  |

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

|  | Three months ended June 30, |  | Six months ended June 30, |  |  |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |
| In the open market: |  |  |  |  |  |  |  |  |  |  |  |  |
| Total shares | — |  |  | 634 |  |  | — |  |  | 634 |  |  |  |  |  |  |
| Total cost | $ | — |  |  | $ | 34,987 |  |  | $ | — |  |  | $ | 34,987 |  |  |  |  |  |  |
| Average price per share(1) | $ | — |  |  | $ | 55.22 |  |  | $ | — |  |  | $ | 55.22 |  |  |  |  |  |  |
| From employees:(2) |  |  |  |  |  |  |  |  |  |  |  |  |
| Total shares | 20 |  |  | 6 |  |  | 282 |  |  | 251 |  |  |  |  |  |  |
| Total cost | $ | 1,106 |  |  | $ | 369 |  |  | $ | 17,051 |  |  | $ | 13,346 |  |  |  |  |  |  |
| Average price per share(1) | $ | 53.95 |  |  | $ | 60.02 |  |  | $ | 60.32 |  |  | $ | 53.10 |  |  |  |  |  |  |
| Total shares repurchased: |  |  |  |  |  |  |  |  |  |  |  |  |
| Total shares | 20 |  |  | 640 |  |  | 282 |  |  | 885 |  |  |  |  |  |  |
| Total cost | $ | 1,106 |  |  | $ | 35,356 |  |  | $ | 17,051 |  |  | $ | 48,333 |  |  |  |  |  |  |
| Average price per share(1) | $ | 53.95 |  |  | $ | 55.27 |  |  | $ | 60.32 |  |  | $ | 54.62 |  |  |  |  |  |  |

(1) Calculated using whole numbers.
(2) Shares are repurchased from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. SHAREHOLDERS' EQUITY (CONTINUED)
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 June 30, 2023 |  |  |  |  |  |
| Common shares | $ | 0.44 |  |  | $ | — |  |  | $ | 0.44 |  |
| Series E preferred shares | $ | 34.38 |  |  | $ | — |  |  | $ | 34.38 |  |
| Three months ended June 30, 2022 |  |  |  |  |  |
| Common shares | $ | 0.43 |  |  | $ | — |  |  | $ | 0.43 |  |
| Series E preferred shares | $ | 34.38 |  |  | $ | — |  |  | $ | 34.38 |  |
| Six months ended June 30, 2023 |  |  |  |  |  |
| Common shares | $ | 0.88 |  |  | $ | 0.44 |  |  | $ | 0.44 |  |
| Series E preferred shares | $ | 68.75 |  |  | $ | 34.38 |  |  | $ | 34.38 |  |
| Six months ended June 30, 2022 |  |  |  |  |  |
| Common shares | $ | 0.86 |  |  | $ | 0.43 |  |  | $ | 0.43 |  |
| Series E preferred shares | $ | 68.75 |  |  | $ | 34.38 |  |  | $ | 34.38 |  |

10. DEBT AND FINANCING ARRANGEMENTS
Letter of Credit Facility
On March 31, 2023, the $150 million secured letter of credit facility expired. The terms and conditions of the $500 million secured letter of credit facility remain unchanged.
11. FEDERAL HOME LOAN BANK ADVANCES
The Company's subsidiaries, AXIS Insurance Company and AXIS Surplus Insurance Company are members of the Federal Home Loan Bank of Chicago ("FHLB").
At June 30, 2023, the companies had admitted assets of approximately $3 billion which provides borrowing capacity of up to approximately $773 million.
At June 30, 2023, the Company had $86 million of borrowings under the FHLB program, with maturities in 2023 and 2024 and interest payable at interest rates between 4.9% and 5.7%. The Company incurred interest expense of $1 million for the three months ended June 30, 2023 and $2 million for the six months ended June 30, 2023. The borrowings under the FHLB program are secured by investments with a fair value of $95 million.
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12. 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 its insurance or reinsurance operations. Estimated amounts payable related to these proceedings are included in the reserve for losses and loss expenses in the Company's financial statements.
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)
13. OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the tax effects allocated to each component of other comprehensive income (loss):

|  | 2023 |  | 2022 |  |
|  | 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 June 30, |  |  |  |  |  |  |  |  |  |  |  |  |
| Available for sale investments: |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized | $ | (112,993) |  |  | $ | 14,591 |  |  | $ | (98,402) |  |  | $ | (482,284) |  |  | $ | 20,338 |  |  | $ | (461,946) |  |  |
| Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized | (51) |  |  | 36 |  |  | (15) |  |  | (2,180) |  |  | 141 |  |  | (2,039) |  |  |
| Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss) | 40,157 |  |  | (3,536) |  |  | 36,621 |  |  | 93,813 |  |  | (9,449) |  |  | 84,364 |  |  |
| Unrealized gains (losses) arising during the period, net of reclassification adjustment | (72,887) |  |  | 11,091 |  |  | (61,796) |  |  | (390,651) |  |  | 11,030 |  |  | (379,621) |  |  |
| Foreign currency translation adjustment | 3,183 |  |  | — |  |  | 3,183 |  |  | (6,193) |  |  | — |  |  | (6,193) |  |  |
| Total comprehensive income (loss), net of tax | $ | (69,704) |  |  | $ | 11,091 |  |  | $ | (58,613) |  |  | $ | (396,844) |  |  | $ | 11,030 |  |  | $ | (385,814) |  |  |
| Six months ended June 30, |  |  |  |  |  |  |  |  |  |  |  |  |
| Available for sale investments: |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized | $ | 46,744 |  |  | $ | (5,044) |  |  | $ | 41,700 |  |  | $ | (987,265) |  |  | $ | 85,494 |  |  | $ | (901,771) |  |  |
| Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized | 9,013 |  |  | (940) |  |  | 8,073 |  |  | (5,400) |  |  | 233 |  |  | (5,167) |  |  |
| Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss) | 84,277 |  |  | (6,907) |  |  | 77,370 |  |  | 146,729 |  |  | (17,023) |  |  | 129,706 |  |  |
| Unrealized gains (losses) arising during the period, net of reclassification adjustment | 140,034 |  |  | (12,891) |  |  | 127,143 |  |  | (845,936) |  |  | 68,704 |  |  | (777,232) |  |  |
| Foreign currency translation adjustment | 2,648 |  |  | — |  |  | 2,648 |  |  | (3,418) |  |  | — |  |  | (3,418) |  |  |
| Total other comprehensive income (loss), net of tax | $ | 142,682 |  |  | $ | (12,891) |  |  | $ | 129,791 |  |  | $ | (849,354) |  |  | $ | 68,704 |  |  | $ | (780,650) |  |  |

The following table presents details of amounts reclassified from accumulated other comprehensive income (loss) ("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 June 30, |  | Six months ended June 30, |
| 2023 |  | 2022 |  | 2023 |  | 2022 |
| Unrealized gains (losses) on available for sale investments |  |  |  |  |  |  |  |  |
|  | Other realized gains (losses) | $ | (31,074) |  |  | $ | (93,340) |  |  | $ | (75,194) |  |  | $ | (146,147) |  |
|  | Impairment losses | (9,083) |  |  | (473) |  |  | (9,083) |  |  | (582) |  |
|  | Total before tax | (40,157) |  |  | (93,813) |  |  | (84,277) |  |  | (146,729) |  |
|  | Income tax (expense) benefit | 3,536 |  |  | 9,449 |  |  | 6,907 |  |  | 17,023 |  |
|  | Net of tax | $ | (36,621) |  |  | $ | (84,364) |  |  | $ | (77,370) |  |  | $ | (129,706) |  |

(1) Amounts in parentheses are charges to net income (loss).
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
14. RELATED PARTY TRANSACTIONS
At June 30, 2023, the Company has invested $6 million in a loan to Eagle Point Credit Management LLC, which is majority-owned by Trident IX L.P., a Stone Point private equity fund.
At June 30, 2023, the Company has invested $5 million in cumulative preferred shares of Aspida Holdings Ltd. The $5 million investment was syndicated to the Company by Stone Point.
At June 30, 2023, the Company has invested $11 million in Monarch Point Re (ISA 2023) Ltd., a newly created collateralized reinsurer which is jointly sponsored by the Company and Stone Point.
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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 and six months ended June 30, 2023 and 2022 and our financial condition at June 30, 2023 and December 31, 2022. 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, 2022. Unless otherwise noted, tabular dollars are in thousands, except per share amounts. Amounts in tables may not reconcile due to rounding differences.

| Page
Second Quarter 2023 Financial Highlights | 53
Overview | 54
Consolidated Results of Operations | 57
Results by Segment: |
i) Insurance Segment | 59
ii) Reinsurance Segment | 64
Net Investment Income and Net Investment Gains (Losses) | 70
Other Expenses (Revenues), Net | 73
Financial Measures | 75
Non-GAAP Financial Measures Reconciliation | 77
Cash and Investments | 80
Liquidity and Capital Resources | 83
Critical Accounting Estimates | 84
Recent Accounting Pronouncements | 85

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SECOND QUARTER 2023 FINANCIAL HIGHLIGHTS

Second Quarter 2023 Consolidated Results of Operations
•Net income available to common shareholders of $143 million, or $1.68 per common share, and $1.67 per diluted common share
•Operating income(1) of $191 million, or $2.23 per diluted common share(1)
•Gross premiums written of $2.3 billion
•Net premiums written of $1.4 billion
•Net premiums earned of $1.3 billion
•Pre-tax catastrophe and weather-related losses, net of reinsurance, of $32 million ($28 million, after-tax), (Insurance: $26 million; Reinsurance: $6 million), or 2.6 points on the current accident year loss ratio, primarily attributable to Cyclone Gabrielle, and other U.S. weather-related events.
•Net favorable prior year reserve development of $6 million
•Underwriting income(2) of $148 million and combined ratio of 91.5%
•Net investment income of $137 million
•Net investment losses of $24 million
•Foreign exchange losses of $30 million
Second Quarter 2023 Consolidated Financial Condition
•Total cash and investments of $16.2 billion; fixed maturities, short-term investments, and cash and cash equivalents comprise 85% of total cash and investments and have an average credit rating of AA-
•Total assets of $29.3 billion
•Reserve for losses and loss expenses of $15.4 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $6.4 billion
•Debt of $1.3 billion and debt to total capital ratio(3) of 20.7%
•Common shareholders’ equity of $4.5 billion; book value per diluted common s hare of $50.98
(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, the most comparable GAAP financial measure, net income (loss), is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations', and a discussion of the rationale for its presentation is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(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, through its operating subsidiaries, is a global specialty underwriter and provider of insurance and reinsurance solutions 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 strong 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, operating efficiency, corporate citizenship 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 six months of 2023 included the following:
•increasing our relevance in a select number of attractive specialty lines insurance and reinsurance markets 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 returns while deploying capital within risk limits, diversification and risk management;
•investing in attractive growth markets and advancing capabilities to address more transactional specialist business (small to mid-sized customers) with our key distribution partners;
•continuing the implementation of a more focused distribution strategy while building mutually beneficial relationships with clients and partners;
•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;
•utilizing reinsurance markets and third-party capital relationships; and
•fostering a positive workplace environment that enables us to attract, retain and develop top talent.
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Outlook
We are committed to leadership in specialty insurance and reinsurance. We believe our market positioning, specialty underwriting acumen, global platform, claims management capabilities and deep relationships with our distributors and clients, supported by a conservative and well performing investment portfolio, will provide opportunities for increased profitability, with differences among o ur lines of business driven by our tactical response to market conditions.
We expect rate improvement to continue across most lines as carriers assess the impact of heightened catastrophe loss activity, financial and social inflation, and geopolitical uncertainty, among other factors. Following multiple years of rate increases outpacing loss trend, pricing in most lines is now highly attractive and we continue to pursue growth.
Rates, terms and conditions across the majority of insurance lines continued to be favorable as pricing generally continues to rise, albeit at varying levels based on market dynamics relative to the individual lines. Market dislocations continue to drive more risks into the Wholesale channel, and we anticipate this to sustain throughout 2023 with the strongest market opportunities occurring in Specialty and E&S lines. We are continuing to pursue a highly targeted and disciplined underwriting strategy across every line we write and all our channels of distribution.
Pricing momentum in non-proportional reinsurance continues to be strong while our proportional reinsurance business is benefiting from rate increases in the underlying business. We expect these market conditions to persist in the near term. We continue to focus on underwriting discipline and driving targeted profitable growth among the specialty and casualty reinsurance lines that we offer.
We are encouraged by the pricing improvements we are seeing across most markets, which we expect will carry through 2023, and that rate will continue to keep pace with loss cost trends in the majority of our lines. Where prices continue to deliver adequate profitability, we will look to grow within our risk and volatility guidelines. With a strengthened book of business, and a growing footprint in the specialty markets that are seeing the most favorable conditions, we believe AXIS is well positioned to drive profitable growth within the current environment.
Recent Developments
Recent Disruption in the Banking Sector
Following the recent disruption in the banking sector, we established a working group to review existing underwriting and investment exposures and to assess potential vulnerabilities. In addition, stress tests were undertaken to assess broader potential underwriting and credit impacts. Based on our review, we have determined that potential exposures are within our risk appetite for an event of this nature. We continue to closely monitor banking and associated sectoral impacts.
We note that underwriting exposures emanated from areas where we affirmatively accepted the risks which are within our risk management guidelines.
We believe the losses and loss expenses that have been incurred at June 30, 2023, based on current facts and circumstances, are contained within our expected loss ratios. We continue to monitor the appropriateness of our assumptions as new information comes to light and will adjust our estimates, as appropriate.
Response to Russia-Ukraine War
Following the Russian invasion of Ukraine and the triggering of sanctions against the countries involved, organizations and named individuals, we established a task-force to coordinate our response to this situation.
The Russia-Ukraine war, and its related impacts, are an evolving risk to which we are exposed from an underwriting and reserving perspective.
Our team continues to track the situation closely, to perform stress and scenario testing on underwriting exposures and to consider a range of economic impacts and external pressures across individual product lines.
Underwriting
We continue to monitor international sanctions which impact our global operations that were effective since March 27, 2022. The impact on gross premiums written for the six months ended June 30, 2023 of the cancellation of policies with exposures to the Russia-Ukraine war was immaterial. We continue to evaluate opportunities to write business in the region, not including Russia or Ukraine risks.
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We are also continuing to closely monitor cash due from our customers and reinsurers, giving due consideration to the Russia-Ukraine war and associated international sanctions. At June 30, 2023, we considered the potential financial impact of the Russia-Ukraine war when determining allowances for expected credit losses for insurance and reinsurance premium balances receivable and reinsurance recoverable balances on unpaid losses and loss expenses. Based on facts and circumstances at that time, we did not adjust allowances for expected credit losses at June 30, 2023. We will continue to monitor the appropriateness of allowances for expected credit losses as new information comes to light. Adjustments to allowances for expected credit losses in subsequent periods could be material.
Reserving
At June 30, 2023, estimated pre-tax net losses attributable to the Russia-Ukraine war were $47 million.
The estimate of net reserves for losses and loss expenses related to the Russia-Ukraine war is subject to significant uncertainty. This uncertainty is driven by the difficulty in performing on-site evaluations, and by the inherent difficulty in making assumptions due to the lack of comparable events, the ongoing nature of the event, and its far-reaching impacts.
While we believe the overall estimate of net reserves for losses and loss expenses is adequate for losses and loss expenses that have been incurred at June 30, 2023, based on current facts and circumstances, we will continue to monitor the appropriateness of our assumptions as new information comes to light and will adjust the estimate of net reserves for losses and loss expenses, as appropriate.
Actual losses for this event may ultimately differ materially from current estimates.
Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' for further information.
Investments
At June 30, 2023, we had no direct exposures to Russia or Ukraine within our investments portfolio.
Refer to Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K for further information.
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CONSOLIDATED RESULTS OF OPERATIONS

|  | Three months ended June 30, |  |  |  | Six months ended June 30, |
|  | 2023 |  | % Change |  | 2022 |  |  |  | 2023 |  | % Change |  | 2022 |
| Underwriting revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Gross premiums written | $ | 2,284,378 |  |  | 8% |  | $ | 2,113,483 |  |  |  |  | $ | 4,666,354 |  |  | (2%) |  | $ | 4,748,091 |  |
| Net premiums written | 1,446,357 |  |  | 10% |  | 1,316,847 |  |  |  |  | 3,054,713 |  |  | (2%) |  | 3,129,719 |  |
| Net premiums earned | 1,265,745 |  |  | (1%) |  | 1,277,052 |  |  |  |  | 2,495,944 |  |  | (2%) |  | 2,535,297 |  |
| Other insurance related income | 5,524 |  |  | nm |  | 2,213 |  |  |  |  | 6,100 |  |  | (32%) |  | 8,906 |  |
| Underwriting expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net losses and loss expenses | (736,257) |  |  | (4%) |  | (769,587) |  |  |  |  | (1,456,899) |  |  | (3%) |  | (1,502,285) |  |
| Acquisition costs | (253,265) |  |  | (2%) |  | (257,582) |  |  |  |  | (483,638) |  |  | (4%) |  | (505,932) |  |
| Underwriting-related general and administrative expenses(1) | (133,255) |  |  | (2%) |  | (135,403) |  |  |  |  | (273,650) |  |  | (2%) |  | (280,499) |  |
| Underwriting income(2) | 148,492 |  |  |  |  | 116,693 |  |  |  |  | 287,857 |  |  |  |  | 255,487 |  |
| Net investment income | 136,829 |  |  | 48% |  | 92,214 |  |  |  |  | 270,601 |  |  | 47% |  | 183,569 |  |
| Net investment gains (losses) | (24,370) |  |  | (86%) |  | (173,263) |  |  |  |  | (44,558) |  |  | (83%) |  | (267,771) |  |
| Corporate expenses(1) | (35,248) |  |  | 17% |  | (30,183) |  |  |  |  | (61,664) |  |  | 14% |  | (54,128) |  |
| Foreign exchange (losses) gains | (30,104) |  |  | nm |  | 57,000 |  |  |  |  | (38,814) |  |  | nm |  | 101,274 |  |
| Interest expense and financing costs | (16,738) |  |  | 10% |  | (15,241) |  |  |  |  | (33,632) |  |  | 9% |  | (30,805) |  |
| Reorganization expenses | — |  |  | nm |  | (15,728) |  |  |  |  | — |  |  | nm |  | (15,728) |  |
| Amortization of intangible assets | (2,729) |  |  | —% |  | (2,729) |  |  |  |  | (5,458) |  |  | —% |  | (5,458) |  |
| Income before income taxes and interest in income (loss) of equity method investments | 176,132 |  |  |  |  | 28,763 |  |  |  |  | 374,332 |  |  |  |  | 166,440 |  |
| Income tax (expense) benefit | (27,558) |  |  | nm |  | 4,965 |  |  |  |  | (43,454) |  |  | nm |  | 4,942 |  |
| Interest in income (loss) of equity method investments | 2,100 |  |  | nm |  | 1,050 |  |  |  |  | (105) |  |  | nm |  | 12,600 |  |
| Net income | 150,674 |  |  |  |  | 34,778 |  |  |  |  | 330,773 |  |  |  |  | 183,982 |  |
| Preferred share dividends | (7,563) |  |  | —% |  | (7,563) |  |  |  |  | (15,125) |  |  | —% |  | (15,125) |  |
| Net income available to common shareholders | $ | 143,111 |  |  |  |  | $ | 27,215 |  |  |  |  | $ | 315,648 |  |  |  |  | $ | 168,857 |  |

nm – not meaningful is 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 $35,248 and $30,183 for the three months ended June 30, 2023 and 2022, respectively, and $61,664 and $54,128 for the six months ended June 30, 2023 and 2022, 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.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in in Item 10(e) of SEC Regulation S-K. The reconciliation to net income (loss), the most comparable GAAP financial measure, is presented above. 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 June 30, |  |  |  | Six months ended June 30, |
|  | 2023 |  | % Change |  | 2022 |  |  |  | 2023 |  | % Change |  | 2022 |
| Gross premiums written: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | $ | 1,684,150 |  | 15% |  | $ | 1,469,622 |  |  |  | $ | 3,099,762 |  | 11% |  | $ | 2,796,886 |
| Reinsurance | 600,228 |  | (7%) |  | 643,861 |  |  |  | 1,566,592 |  | (20%) |  | 1,951,205 |
| Total gross premiums written | $ | 2,284,378 |  | 8% |  | $ | 2,113,483 |  |  |  | $ | 4,666,354 |  | (2%) |  | $ | 4,748,091 |
| Percent of gross premiums written ceded |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | 39 | % |  | (2 pts) |  | 41 | % |  |  |  | 39 | % |  | — pt |  | 39 | % |
| Reinsurance | 29 | % |  | (2 pts) |  | 31 | % |  |  |  | 27 | % |  | — pt |  | 27 | % |
| Total percent of gross premiums written ceded | 37 | % |  | (1 pt) |  | 38 | % |  |  |  | 35 | % |  | 1 pt |  | 34 | % |
| Net premiums written: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | $ | 1,021,021 |  | 17% |  | $ | 869,419 |  |  |  | $ | 1,903,597 |  | 11% |  | $ | 1,713,332 |
| Reinsurance | 425,336 |  | (5%) |  | 447,428 |  |  |  | 1,151,116 |  | (19%) |  | 1,416,387 |
| Total net premiums written | $ | 1,446,357 |  | 10% |  | $ | 1,316,847 |  |  |  | $ | 3,054,713 |  | (2%) |  | $ | 3,129,719 |
| Net premiums earned: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Insurance | $ | 842,751 |  | 10% |  | $ | 768,724 |  |  |  | $ | 1,659,206 |  | 9% |  | $ | 1,521,539 |
| Reinsurance | 422,994 |  | (17%) |  | 508,328 |  |  |  | 836,738 |  | (17%) |  | 1,013,758 |
| Total net premiums earned | $ | 1,265,745 |  | (1%) |  | $ | 1,277,052 |  |  |  | $ | 2,495,944 |  | (2%) |  | $ | 2,535,297 |

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

|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2023 |  | % Point Change |  | 2022 |  |  | 2023 |  | % Point Change |  | 2022 |
| Current accident year loss ratio, excluding catastrophe and weather-related losses | 56.1 | % |  | 0.8 |  | 55.3 | % |  |  | 56.0 | % |  | 1.3 |  | 54.7 | % |
| Catastrophe and weather-related losses ratio | 2.6 | % |  | (2.7) |  | 5.3 | % |  |  | 2.8 | % |  | (2.3) |  | 5.1 | % |
| Current accident year loss ratio | 58.7 | % |  | (1.9) |  | 60.6 | % |  |  | 58.8 | % |  | (1.0) |  | 59.8 | % |
| Prior year reserve development ratio | (0.5 | %) |  | (0.2) |  | (0.3 | %) |  |  | (0.4 | %) |  | 0.1 |  | (0.5 | %) |
| Net losses and loss expenses ratio | 58.2 | % |  | (2.1) |  | 60.3 | % |  |  | 58.4 | % |  | (0.9) |  | 59.3 | % |
| Acquisition cost ratio | 20.0 | % |  | (0.2) |  | 20.2 | % |  |  | 19.4 | % |  | (0.6) |  | 20.0 | % |
| General and administrative expense ratio(1) | 13.3 | % |  | 0.4 |  | 12.9 | % |  |  | 13.4 | % |  | 0.3 |  | 13.1 | % |
| Combined ratio | 91.5 | % |  | (1.9) |  | 93.4 | % |  |  | 91.2 | % |  | (1.2) |  | 92.4 | % |

(1) The general and administrative expense ratio included corporate expenses not allocated to underwriting segments of 2.8% and 2.4% fo r the three months ended June 30, 2023 and 2022, respectively, and 2.5% and 2.1% fo r the six months ended June 30, 2023 and 2022, 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 June 30, |  |  | Six months ended June 30, |
|  | 2023 |  | % Change |  | 2022 |  |  | 2023 |  | % Change |  | 2022 |
| Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |
| Gross premiums written | $ | 1,684,150 |  | 15% |  | $ | 1,469,622 |  |  | $ | 3,099,762 |  | 11% |  | $ | 2,796,886 |
| Net premiums written | 1,021,021 |  | 17% |  | 869,419 |  |  | 1,903,597 |  | 11% |  | 1,713,332 |
| Net premiums earned | 842,751 |  | 10% |  | 768,724 |  |  | 1,659,206 |  | 9% |  | 1,521,539 |
| Other insurance related income | 58 |  | (76%) |  | 237 |  |  | 112 |  | (65%) |  | 319 |
| Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |
| Current accident year net losses and loss expenses | (460,434) |  |  |  | (424,609) |  |  | (910,942) |  |  |  | (837,417) |  |
| Prior year reserve development | 2,784 |  |  |  | 2,773 |  |  | 3,825 |  |  |  | 9,838 |  |
| Acquisition costs | (156,972) |  |  |  | (144,732) |  |  | (304,030) |  |  |  | (283,543) |  |
| Underwriting-related general and administrative expenses | (113,534) |  |  |  | (108,577) |  |  | (230,164) |  |  |  | (222,527) |  |
| Underwriting income | $ | 114,653 |  |  |  | $ | 93,816 |  |  | $ | 218,007 |  |  |  |  | $ | 188,209 |  |
| Ratios: |  |  | % Point Change |  |  |  |  |  |  | % Point Change |  |  |
| Current accident year loss ratio, excluding catastrophe and weather-related losses | 51.5 | % |  | (0.1) |  | 51.6 | % |  |  | 51.8 | % |  | 0.8 |  | 51.0 | % |
| Catastrophe and weather-related losses ratio | 3.1 | % |  | (0.5) |  | 3.6 | % |  |  | 3.1 | % |  | (0.9) |  | 4.0 | % |
| Current accident year loss ratio | 54.6 | % |  | (0.6) |  | 55.2 | % |  |  | 54.9 | % |  | (0.1) |  | 55.0 | % |
| Prior year reserve development ratio | (0.3 | %) |  | — |  | (0.3 | %) |  |  | (0.2 | %) |  | 0.4 |  | (0.6 | %) |
| Net losses and loss expenses ratio | 54.3 | % |  | (0.6) |  | 54.9 | % |  |  | 54.7 | % |  | 0.3 |  | 54.4 | % |
| Acquisition cost ratio | 18.6 | % |  | (0.2) |  | 18.8 | % |  |  | 18.3 | % |  | (0.3) |  | 18.6 | % |
| Underwriting-related general and administrative expense ratio | 13.5 | % |  | (0.6) |  | 14.1 | % |  |  | 13.9 | % |  | (0.8) |  | 14.7 | % |
| Combined ratio | 86.4 | % |  | (1.4) |  | 87.8 | % |  |  | 86.9 | % |  | (0.8) |  | 87.7 | % |

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Gross Premiums Written
Gross premiums written by line of business were as follows:

|  | Three months ended June 30, |  |  |  |  | Six months ended June 30, |  |  |
|  | 2023 |  |  |  | 2022 |  |  |  | % Change |  |  | 2023 |  |  |  | 2022 |  |  |  | % Change |
| Professional lines | $ | 294,403 |  |  | 17 | % |  | $ | 323,141 |  |  | 22 | % |  | (9%) |  |  | $ | 516,018 |  |  | 17 | % |  | $ | 627,556 |  |  | 22 | % |  | (18%) |
| Property | 533,479 |  |  | 32 | % |  | 400,529 |  |  | 28 | % |  | 33% |  |  | 914,818 |  |  | 29 | % |  | 708,448 |  |  | 26 | % |  | 29% |
| Liability | 328,768 |  |  | 20 | % |  | 306,541 |  |  | 21 | % |  | 7% |  |  | 612,795 |  |  | 20 | % |  | 559,703 |  |  | 20 | % |  | 9% |
| Cyber | 182,049 |  |  | 11 | % |  | 173,134 |  |  | 12 | % |  | 5% |  |  | 334,837 |  |  | 11 | % |  | 304,585 |  |  | 11 | % |  | 10% |
| Marine and aviation | 205,153 |  |  | 12 | % |  | 153,796 |  |  | 10 | % |  | 33% |  |  | 438,576 |  |  | 14 | % |  | 378,314 |  |  | 14 | % |  | 16% |
| Accident and health | 85,836 |  |  | 5 | % |  | 65,396 |  |  | 4 | % |  | 31% |  |  | 165,219 |  |  | 5 | % |  | 123,696 |  |  | 4 | % |  | 34% |
| Credit and political risk | 54,462 |  |  | 3 | % |  | 47,085 |  |  | 3 | % |  | 16% |  |  | 117,499 |  |  | 4 | % |  | 94,584 |  |  | 3 | % |  | 24% |
| Total | $ | 1,684,150 |  |  | 100 | % |  | $ | 1,469,622 |  |  | 100 | % |  | 15% |  |  | $ | 3,099,762 |  |  | 100 | % |  | $ | 2,796,886 |  |  | 100 | % |  | 11% |

Gross premiums written for the three months ended June 30, 2023 increased by $215 million, or 15%, compared to the three months ended June 30, 2022. The increase was attributable to property, marine and aviation, liability, accident and health, cyber, and credit and political risk lines, partially offset by a decrease in professional lines.
The increases in property, marine and aviation, liability, and cyber lines were due to favorable rate changes and new business. The increases in accident and health, and credit and political risk lines were due to new business.
The decrease in professional lines was due to a lower level of activity in transactional liability business together with an unattractive pricing environment for U.S. public Directors and Officers ("D&O") business.
Gross premiums written for the six months ended June 30, 2023, increased by $303 million, or 11%, ($325 million, or 12%, on a constant currency basis(1)), compared to the six months ended June 30, 2022. The increase was attributable to property, marine and aviation, liability, accident and health, cyber, and credit and political risk lines, partially offset by a decrease in professional lines.
The increases in property, marine and aviation, liability, cyber, and credit and political risk lines were due to favorable rate changes and new business. The increase in accident and health lines was due to new business.
The decrease in professional lines was due to a lower level of activity in transactional liability business together with an unattractive pricing environment for U.S. public D&O business.
Ceded Premiums Written
Ceded premiums written for the three months ended June 30, 2023, was $663 million, or 39%, of gross premiums written, compared to $600 million, or 41%, of gross premiums written for the three months ended June 30, 2022.
The increase in ceded premiums written of $63 million, or 10%, was primarily driven by increases in property, liability, and marine and aviation lines, partially offset by a decrease in professional lines.
The increases in property and liability lines reflected the increase in gross premiums written for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The increase in property lines was also attributable to the restructuring of two significant existing quota share treaties.
(1) Amounts presented on a constant currency basis are non-GAAP financial measures as defined in Item 10 (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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The increase in marine and aviation lines was attributable to negative premium adjustments for the three months ended June 30, 2023, compared to positive premium adjustments for the three months ended June 30, 2022.
The decrease in professional lines reflected the decrease in gross premiums written for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The decrease in professional lines was also due to the restructuring of a significant existing quota share treaty.
Ceded premiums written for the six months ended June 30, 2023, was $1,196 million, or 39%, of gross premiums written, compared to $1,084 million, or 39%, of gross premiums written fo r the six months ended June 30, 2022.
The increase in ceded premiums written of $113 million, or 10%, was primarily driven by increases in property and liability lines, partially offset by a decrease in professional lines.
The increases in property and liability lines reflected the increase in gross premiums written for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
The increase in property lines was also attributable to the restructuring of two significant existing quota share treaties.
The decrease in professional lines reflected the decrease in gross premiums written for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The decrease in professional lines was also due to the restructuring of a significant existing quota share treaty.
Net Premiums Earned
Net premiums earned by line of business were as follows:

|  | Three months ended June 30, |  |  |  | Six months ended June 30, |  |  |
|  | 2023 |  |  |  | 2022 |  |  |  | % Change |  | 2023 |  |  |  | 2022 |  |  |  | % Change |
| Professional lines | $ | 187,961 |  |  | 22 | % |  | $ | 203,356 |  |  | 26 | % |  | (8%) |  | $ | 376,914 |  |  | 23 | % |  | $ | 417,679 |  |  | 27 | % |  | (10%) |
| Property | 209,890 |  |  | 25 | % |  | 190,720 |  |  | 25 | % |  | 10% |  | 407,157 |  |  | 24 | % |  | 370,873 |  |  | 26 | % |  | 10% |
| Liability | 120,883 |  |  | 14 | % |  | 113,730 |  |  | 15 | % |  | 6% |  | 245,738 |  |  | 15 | % |  | 218,907 |  |  | 14 | % |  | 12% |
| Cyber | 81,723 |  |  | 10 | % |  | 72,305 |  |  | 9 | % |  | 13% |  | 163,543 |  |  | 10 | % |  | 140,822 |  |  | 9 | % |  | 16% |
| Marine and aviation | 141,404 |  |  | 17 | % |  | 113,728 |  |  | 15 | % |  | 24% |  | 266,732 |  |  | 16 | % |  | 231,419 |  |  | 15 | % |  | 15% |
| Credit and political risk | 28,838 |  |  | 3 | % |  | 24,069 |  |  | 3 | % |  | 20% |  | 62,526 |  |  | 4 | % |  | 49,491 |  |  | 3 | % |  | 26% |
| Accident and health | 72,052 |  |  | 9 | % |  | 50,816 |  |  | 7 | % |  | 42% |  | 136,596 |  |  | 8 | % |  | 92,348 |  |  | 6 | % |  | 48% |
| Total | $ | 842,751 |  |  | 100 | % |  | $ | 768,724 |  |  | 100 | % |  | 10% |  | $ | 1,659,206 |  |  | 100 | % |  | $ | 1,521,539 |  |  | 100 | % |  | 9% |

Net premiums earned for the three months ended June 30, 2023 increased by $74 million, or 10%, ($87 million, or 11%, on a constant currency basis), c ompared to the three months ended June 30, 2022.
The increase was primarily driven by increases in gross premiums earned in property, liability, marine and aviation, accident and health, and cyber lines, together with a decrease in ceded premiums earned in professional lines. These amounts were partially offset by increases in ceded premiums earned in liability, and property lines and a decrease in gross premiums earned in professional lines.
Net premiums earned for the six months ended June 30, 2023 increased by $138 million, or 9%, ($157 million, or 10%, on a constant currency basis), compared to the six months ended June 30, 2022.
The increase was primarily driven by increases in gross premiums earned in property, liability, accident and health, marine and aviation, cyber, and credit and political risk lines, together with a decrease in ceded premiums earned in professional lines. These amounts were partially offset by increases in ceded premiums earned in liability, property, and cyber lines and a decrease in gross premiums earned in professional lines.
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Loss Ratio
The components of the loss ratio were as follows:

|  | Three months ended June 30, |  | Six months ended June 30, |
|  | 2023 |  | % Point Change |  | 2022 |  | 2023 |  | % Point Change |  | 2022 |
| Current accident year loss ratio | 54.6 | % |  | (0.6) |  | 55.2 | % |  | 54.9 | % |  | (0.1) |  | 55.0 | % |
| Prior year reserve development ratio | (0.3 | %) |  | — |  | (0.3 | %) |  | (0.2 | %) |  | 0.4 |  | (0.6 | %) |
| Loss ratio | 54.3 | % |  | (0.6) |  | 54.9 | % |  | 54.7 | % |  | 0.3 |  | 54.4 | % |

C urrent Accident Year Loss Ratio
The current accident year loss rati o decreased to 54.6% for the three months ended June 30, 2023, from 55.2% for the three months ended June 30, 2022.
The decrease in the current accident year loss ratio for three months ended June 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the three months ended June 30, 2023, catastrophe and weather-related losses, were $26 million, or 3.1 points, primarily attributable to U.S. weather-related events. Comparatively, during the three months ended June 30, 2022, catastrophe and weather-related lo sses, were $28 million, or 3.6 points, primarily attributable to South Africa floods, and the high frequency of small to mid-sized other weather-related events that occurred worldwide.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 51.5% for the three months ended June 30, 2023, from 51.6% for the three months ended June 30, 2022. The decrease was principally due to improved loss experience in property, and marine and aviation lines, together with changes in business mix associated with the decrease in professional lines business written in recent periods, being largely offset by higher year-over-year loss ratios in liability lines consistent with changes in loss assumptions reflected in recent periods.
The current accident year loss rati o decreased to 54.9% for the six months ended June 30, 2023, from 55.0% for the six months ended June 30, 2022.
The decrease in current accident year loss ratio for six months ended June 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the six months ended June 30, 2023, catastrophe and weather-related losses, were $51 million, or 3.1 points, primarily attributable to the Earthquake in Turkey, Cyclone Gabrielle, New Zealand floods, and other weather-related events. Comparatively, during the six months ended June 30, 2022, catastrophe and weather-related lo sses, were $61 million, or 4.0 points, including natural catastrophe and weather-related losses of $44 million primarily attributable to Eastern Australia floods, South Africa floods, and the high frequency of small to mid-sized other weather-related events that occurred worldwide. The remaining losses of $16 million were attributable to the Russia-Ukraine war.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio increased to 51.8% for the six months ended June 30, 2023, from 51.0% for the six months ended June 30, 2022. T he increase was principally due to higher year-over-year loss ratios in liability lines consistent with changes in loss assumptions refle cted in recent periods, partially offset by changes in business mix associated with the decrease in professional lines business written in recent periods.
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 lines of business, the expected claims tails and prior year reserve development.
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Acquisition Cost Ratio
The acquisition cost ratio decreased to 18.6% for the three months ended June 30, 2023, from 18.8% for the three months ended June 30, 2022, primarily related to changes in business mix attributable to the decrease in program business in property lines written in recent periods and an increase in ceding commission in liability and property lines.
The acquisition cost ratio decreased to 18.3% for the six months ended June 30, 2023, from 18.6% for the six months ended June 30, 2022, primarily related to changes in business mix attributable to the decrease in program business in property lines written in recent periods.
Underwriting-Related General and Administrative Expense Ratio
The underwriting-related general and administrative expense ratio decreased to 13.5% for the three months ended June 30, 2023, from 14.1% for the three months ended June 30, 2022, mainly driven by an increase in net premiums earned, partially offset by increases in information technology costs, personnel costs, and professional fees.
The underwriting-related general and administrative expense ratio decreased to 13.9% for the six months ended June 30, 2023, from 14.7% for the six months ended June 30, 2022, mainly driven by an increase in net premiums earned and a decrease in professional fees, partially offset by increases in personnel costs and information technology costs.
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Reinsurance Segment
Results from the reinsurance segment were as follows:

|  | Three months ended June 30, |  | Six months ended June 30, |
|  | 2023 |  | % Change |  | 2022 |  | 2023 |  | % Change |  | 2022 |
| Revenues: |  |  |  |  |  |  |  |  |  |  |  |
| Gross premiums written | $ | 600,228 |  | (7%) |  | $ | 643,861 |  | $ | 1,566,592 |  | (20%) |  | $ | 1,951,205 |
| Net premiums written | 425,336 |  | (5%) |  | 447,428 |  | 1,151,116 |  | (19%) |  | 1,416,387 |
| Net premiums earned | 422,994 |  | (17%) |  | 508,328 |  | 836,738 |  | (17%) |  | 1,013,758 |
| Other insurance related income | 5,466 |  | nm |  | 1,976 |  | 5,988 |  | (30%) |  | 8,587 |
| Expenses: |  |  |  |  |  |  |  |  |  |  |  |
| Current accident year net losses and loss expenses | (282,142) |  |  |  | (348,918) |  | (556,314) |  |  |  | (677,765) |  |
| Prior year reserve development | 3,535 |  |  |  | 1,167 |  | 6,532 |  |  |  | 3,059 |  |
| Acquisition costs | (96,293) |  |  |  | (112,850) |  | (179,608) |  |  |  | (222,389) |  |
| Underwriting-related general and administrative expenses | (19,721) |  |  |  | (26,826) |  | (43,486) |  |  |  | (57,972) |  |
| Underwriting income | $ | 33,839 |  |  |  | $ | 22,877 |  | $ | 69,850 |  |  |  | $ | 67,278 |  |
| Ratios: |  |  | % Point Change |  |  |  |  |  | % Point Change |  |  |
| Current accident year loss ratio, excluding catastrophe and weather-related losses | 65.3 | % |  | 4.4 |  | 60.9 | % |  | 64.2 | % |  | 3.9 |  | 60.3 | % |
| Catastrophe and weather-related losses ratio | 1.4 | % |  | (6.3) |  | 7.7 | % |  | 2.3 | % |  | (4.3) |  | 6.6 | % |
| Current accident year loss ratio | 66.7 | % |  | (1.9) |  | 68.6 | % |  | 66.5 | % |  | (0.4) |  | 66.9 | % |
| Prior year reserve development ratio | (0.8 | %) |  | (0.6) |  | (0.2 | %) |  | (0.8 | %) |  | (0.5) |  | (0.3 | %) |
| Net losses and loss expenses ratio | 65.9 | % |  | (2.5) |  | 68.4 | % |  | 65.7 | % |  | (0.9) |  | 66.6 | % |
| Acquisition cost ratio | 22.8 | % |  | 0.6 |  | 22.2 | % |  | 21.5 | % |  | (0.4) |  | 21.9 | % |
| Underwriting-related general and administrative expense ratio | 4.6 | % |  | (0.7) |  | 5.3 | % |  | 5.2 | % |  | (0.5) |  | 5.7 | % |
| Combined ratio | 93.3 | % |  | (2.6) |  | 95.9 | % |  | 92.4 | % |  | (1.8) |  | 94.2 | % |

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

|  | Three months ended June 30, |  |  |  |  |  | Six months ended June 30, |  |  |  |
|  | 2023 |  |  |  | 2022 |  |  |  | % Change |  |  |  | 2023 |  |  |  | 2022 |  |  |  | % Change |  |
| Liability | $ | 159,234 |  |  | 27 | % |  | $ | 190,072 |  |  | 30 | % |  | (16%) |  |  |  | $ | 358,095 |  |  | 23 | % |  | $ | 474,420 |  |  | 24 | % |  | (25%) |  |
| Accident and health | 20,696 |  |  | 3 | % |  | 9,971 |  |  | 2 | % |  | nm |  |  |  | 316,681 |  |  | 20 | % |  | 340,703 |  |  | 17 | % |  | (7%) |  |
| Professional lines | 186,233 |  |  | 31 | % |  | 173,056 |  |  | 27 | % |  | 8% |  |  |  | 322,435 |  |  | 21 | % |  | 306,635 |  |  | 16 | % |  | 5% |  |
| Credit and surety | 103,430 |  |  | 17 | % |  | 76,872 |  |  | 12 | % |  | 35% |  |  |  | 218,667 |  |  | 14 | % |  | 180,748 |  |  | 9 | % |  | 21% |  |
| Motor | 26,966 |  |  | 4 | % |  | 35,814 |  |  | 6 | % |  | (25%) |  |  |  | 167,081 |  |  | 11 | % |  | 187,528 |  |  | 10 | % |  | (11%) |  |
| Agriculture | 66,985 |  |  | 11 | % |  | 49,971 |  |  | 8 | % |  | 34% |  |  |  | 89,385 |  |  | 6 | % |  | 77,796 |  |  | 4 | % |  | 15% |  |
| Marine and aviation | 22,034 |  |  | 4 | % |  | 25,198 |  |  | 4 | % |  | (13%) |  |  |  | 52,563 |  |  | 3 | % |  | 75,684 |  |  | 4 | % |  | (31%) |  |
| Total | 585,578 |  |  | 97 | % |  | 560,954 |  |  | 89 | % |  | 4% |  |  |  | 1,524,907 |  |  | 98 | % |  | 1,643,514 |  |  | 84 | % |  | (7%) |  |
| Run-off lines |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Catastrophe | 10,874 |  |  | 2 | % |  | 62,077 |  |  | 8 | % |  | (82%) |  |  |  | 27,175 |  |  | 1 | % |  | 200,473 |  |  | 10 | % |  | (86%) |  |
| Property | 3,842 |  |  | 1 | % |  | 20,386 |  |  | 3 | % |  | (81%) |  |  |  | 13,447 |  |  | 1 | % |  | 96,709 |  |  | 5 | % |  | (86%) |  |
| Engineering | (66) |  |  | — | % |  | 444 |  |  | — | % |  | nm |  |  |  | 1,063 |  |  | — | % |  | 10,509 |  |  | 1 | % |  | (90%) |  |
| Total run-off lines | 14,650 |  |  | 3 | % |  | 82,907 |  |  | 11 | % |  | (82%) |  |  |  | 41,685 |  |  | 2 | % |  | 307,691 |  |  | 16 | % |  | (86%) |  |
| Total | $ | 600,228 |  |  | 100 | % |  | $ | 643,861 |  |  | 100 | % |  | (7%) |  |  |  | $ | 1,566,592 |  |  | 100 | % |  | $ | 1,951,205 |  |  | 100 | % |  | (20%) |  |

nm – not meaningful
Gross premiums written for the three months ended June 30, 2023, decreased by $44 million, or 7% ($32 million, or 5%, on a constant currency basis), compared to the three months ended June 30, 2022. The decrease was primarily attributable to catastrophe, liability, property, and motor lines, partially offset by increases in credit and surety, agriculture, professional lines, and accident and health lines.
The decreases in catastrophe and property lines were associated with the exit from these lines of business in June 2022.
The decrease in liability lines was related to a decrease in the line size on a significant contract and non-renewals of U.S. regional multi-line business that included a high proportion of property exposures following the exit from catastrophe and property lines of business, together with non-renewals associated with repositioning the portfolio, partially offset by new business and a higher level of premium adjustments associated with favorable market conditions in the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The decrease in motor line s was attributable to the non-renewal of two significant contracts and the timing of the renewal of a significant contract, partially offset by premium adjustments attributable to a significant contract and favorable market conditions.
The increase in credit and surety lines was driven by new credit and mortgage business, and premium adjustments.
The increase in agriculture lines was due to the timing of the renewal of a significant contract and premium adjustments.
The increase in professional lines was attributable to new business and increased line sizes associated with select contracts with favorable risk profiles, partially offset by a lower level of premium adjustments associated with favorable market conditions in the three months ended June 30, 2023, compared to the three months ended June 30, 2022, and the timing of the renewal of several contracts.
The increase in accident and health lines was related to positive premium adjustments in the three months ended June 30, 2023, compared to negative premium adjustments in the three months ended June 30, 2022.
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Gross premiums written for the six months ended June 30, 2023, decreased by $385 million, or 20% ($342 million, or 18%, on a constant currency basis), compared to the six months ended June 30, 2022. The decrease was attributable to catastrophe, liability, property, accident and health, marine and aviati on, motor, and engineering lines, partially offset by increases in credit and surety, professional lines, and agriculture lines.
The decreases in catastrophe and property lines were associated with the exit from these lines of business in June 2022.
The decrease in liability lines was related to non-renewals of U.S. regional multi-line business that included a high proportion of property exposures and a decrease in the line size on a significant contract following the exit from catastrophe and property lines of business, together with non-renewals associated with repositioning the portfolio, partially offset by new business and a higher level of premium adjustments associated with favorable market conditions in the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
The decrease in accident and health lines was due to negative premium adjustments in the six months ended June 30, 2023, compared to positive premium adjustments in the six months ended June 30, 2022 and the timing of renewals of two significant contracts.
The decrease in marine and aviation lines was attributable to non-renewals of marine business and the exit from aviation business effective January 1, 2023.
The decrease in motor lines was attributable to non-renewals and decreased line sizes associated with repositioning the portfolio, partially offset by new business and premium adjustments attributable to a significant contract and favorable market conditions.
The decrease in engineering lines was due to positive premium adjustments related to a significant contract in the six months ended June 30, 2022.
The increase in credit and surety lines was driven by new business, including mortgage business, and premiums adjustments.
The increase in professional lines was attributable to new business and increased line sizes associated with select contracts with favorable risk profiles, partially offset by a lower level of premium adjustments associated with favorable market conditions in the six months ended June 30, 2023, compared to the six months ended June 30, 2022, and the timing of the renewal of several contracts.
The increase in agriculture lines was due to the timing of the renewal of a significant contract.
Ceded Premiums Written
Ceded premiums written for the three months ended June 30, 2023, was $175 million, or 29%, of gross premiums written, compared to $196 million, or 31%, of gross premiums written for the three months ended June 30, 2022. The decrease in ceded premiums written o f $22 million, or 11%, w as primarily driven by decreases in catastrophe and liability lines, partially offset by increases in credit and surety, accident and health, and agriculture lines.
The decrease in catastrophe lines reflected the decrease in gross premiums written in the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The decrease in liability lines reflected the decrease in gross premiums written in the three months ended June 30, 2023, compared to the three months ended June 30, 2022, together with the non-renewal of a significant retrocessional treaty with a strategic capital partner, the decrease in premiums ceded to an existing quota share retrocessional treaty with a strategic capital partner and the restructuring of a significant quota share retrocessional treaty.
The increase in credit and surety lines reflected the increase in gross premiums written in the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The increase in accident and health lines was attributable to premiums ceded to a new quota share retrocessional treaty and the restructuring of a significant quota share retrocessional treaty with a strategic capital partner.
The increase in agriculture lines was attributable to premiums ceded to a new quota share retrocessional treaty.
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Ceded premiums written for the six months ended June 30, 2023, was $415 million, or 27%, of gross premiums written, compared to $535 million, or 27%, of gross premiums written for the six months ended June 30, 2022. The decrease in ceded premiums written of $119 million, or 22%, was primarily driven by decreases in catastrophe and liability lines, partially offset by increases in accident and health, and agriculture lines.
The decrease in catastrophe lines reflected the decrease in gross premiums written in the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
The decrease in liability lines reflected the decrease in gross premiums written in the six months ended June 30, 2023, compared to the six months ended June 30, 2022, together with the decrease in premiums ceded to an existing quota share retrocessional treaty with a strategic capital partner and the restructuring of a significant quota share retrocessional treaty.
The increase in accident and health lines was attributable to the restructuring of a significant quota share retrocessional treaty with a strategic capital partner and premiums ceded to a new quota share retrocessional treaty.
The increase in agriculture lines was attributable to premiums ceded to a new quota share retrocessional treaty.
Net Premiums Earned
Net premiums earned by line of business were as follows:

|  | Three months ended June 30, |  |  |  | Six months ended June 30, |  |  |
|  | 2023 |  |  |  | 2022 |  |  |  | % Change |  | 2023 |  |  |  | 2022 |  |  |  | % Change |
| Liability | $ | 108,075 |  |  | 26 | % |  | $ | 124,909 |  |  | 25 | % |  | (13%) |  | $ | 210,517 |  |  | 25 | % |  | $ | 234,680 |  |  | 23 | % |  | (10%) |
| Accident and health | 88,920 |  |  | 21 | % |  | 92,365 |  |  | 18 | % |  | (4%) |  | 172,103 |  |  | 21 | % |  | 187,929 |  |  | 19 | % |  | (8%) |
| Professional lines | 57,999 |  |  | 14 | % |  | 62,702 |  |  | 12 | % |  | (8%) |  | 115,011 |  |  | 14 | % |  | 119,069 |  |  | 12 | % |  | (3%) |
| Credit and surety | 60,362 |  |  | 14 | % |  | 48,750 |  |  | 10 | % |  | 24% |  | 114,375 |  |  | 14 | % |  | 93,200 |  |  | 9 | % |  | 23% |
| Motor | 44,958 |  |  | 11 | % |  | 50,611 |  |  | 10 | % |  | (11%) |  | 83,794 |  |  | 10 | % |  | 100,628 |  |  | 10 | % |  | (17%) |
| Agriculture | 26,460 |  |  | 6 | % |  | 21,825 |  |  | 4 | % |  | 21% |  | 52,092 |  |  | 6 | % |  | 43,952 |  |  | 4 | % |  | 19% |
| Marine and aviation | 15,848 |  |  | 4 | % |  | 19,959 |  |  | 4 | % |  | (21%) |  | 32,125 |  |  | 4 | % |  | 38,065 |  |  | 4 | % |  | (16%) |
| Total | 402,622 |  |  | 96 | % |  | 421,121 |  |  | 83 | % |  | (4%) |  | 780,017 |  |  | 94 | % |  | 817,523 |  |  | 81 | % |  | (5%) |
| Run-off lines |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Catastrophe | 8,954 |  |  | 1 | % |  | 44,071 |  |  | 9 | % |  | (80%) |  | 22,313 |  |  | 2 | % |  | 99,180 |  |  | 9 | % |  | (78%) |
| Property | 8,699 |  |  | 2 | % |  | 36,736 |  |  | 7 | % |  | (76%) |  | 27,307 |  |  | 3 | % |  | 76,641 |  |  | 8 | % |  | (64%) |
| Engineering | 2,719 |  |  | 1 | % |  | 6,400 |  |  | 1 | % |  | (58%) |  | 7,101 |  |  | 1 | % |  | 20,414 |  |  | 2 | % |  | (65%) |
| Total run-off lines | 20,372 |  |  | 4 | % |  | 87,207 |  |  | 17 | % |  | (77%) |  | 56,721 |  |  | 6 | % |  | 196,235 |  |  | 19 | % |  | (71%) |
| Total | $ | 422,994 |  |  | 100 | % |  | $ | 508,328 |  |  | 100 | % |  | (17%) |  | $ | 836,738 |  |  | 100 | % |  | $ | 1,013,758 |  |  | 100 | % |  | (17%) |

Net premiums earned for the three months ended June 30, 2023, decreased by $85 million, or 17% ($70 million, or 14%, on a constant currency basis), compared to the three months ended June 30, 2022.
The decrease was primarily driven by decreases in gross premiums earned in catastrophe, property, liability, and professional lines together with an increase in ceded premiums earned in motor lines. These amounts were partially offset by a decrease in ceded premiums earned in catastrophe lines and increases in gross premiums earned in credit and surety, and agriculture lines.
Net premiums earned for the six months ended June 30, 2023, decreased by $177 million, or 17% ($145 million, or 14%, on a constant currency basis), compared to the six months ended June 30, 2022.
The decrease was primarily driven by decreases in gross premiums earned in cata strophe, property, liability, engineering, accident and health, motor, and marine and aviation lines together with an increase in ceded premiums earned in motor lines. These amounts were partially offset by decreases in ceded premiums earned in catastrophe and liability lines and increases in gross premiums earned in credit and surety, and agriculture lines.
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Other Insurance Related Income (Loss)
Other insurance related income increased by $3 million to $5 million for the three months ended June 30, 2023, compared to other insurance related income of $2 million for the three months ended June 30, 2022, primarily associated with an increase in fees related to arrangements with strategic capital partners.
Other insurance related income decreased by $3 million to $6 million for the six months ended June 30, 2023, compared to other insurance related income of $9 million for the six months ended June 30, 2022, primarily associated with a decrease in fees related to arrangements with strategic capital partners.
Loss Ratio
The components of the loss ratio were as follows:

|  | Three months ended June 30, |  | Six months ended June 30, |
|  | 2023 |  | % Point Change |  | 2022 |  | 2023 |  | % Point Change |  | 2022 |
| Current accident year loss ratio | 66.7 | % |  | (1.9) |  | 68.6 | % |  | 66.5 | % |  | (0.4) |  | 66.9 | % |
| Prior year reserve development ratio | (0.8 | %) |  | (0.6) |  | (0.2 | %) |  | (0.8 | %) |  | (0.5) |  | (0.3 | %) |
| Loss ratio | 65.9 | % |  | (2.5) |  | 68.4 | % |  | 65.7 | % |  | (0.9) |  | 66.6 | % |

Current Accident Year Loss Ratio
The current accident year loss rat io decreased to 66.7% fo r the three months ended June 30, 2023 from 68.6% for the three months ended June 30, 2022.
The current accident year loss ratio for three months ended June 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the three months ended June 30, 2023, catastrophe and weather-related losses, were $6 million, or 1.4 points, primarily attributable to Cyclone Gabrielle, and other weather-related events. Comparatively, during the three months ended June 30, 2022, catastrophe and weather-related losses, were $39 million, or 7.7 points, primarily attributable to South Africa floods and the high frequency of small to mid-sized other weather-related events that occurred worldwide.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio increased to 65.3% for the three months ended June 30, 2023, from 60.9% for the three months ended June 30, 2022. The increase was principally due to elevated experience in engineering lines and changes in business mix due to the exit from catastrophe and property lines of business, partially offset by the increase in credit and surety lines of business written in the recent periods which carry a lower loss ratio.
The current accident year loss rat io decreased to 66.5% fo r the six months ended June 30, 2023 from 66.9% for the six months ended June 30, 2022.
The current accident year loss ratio for six months ended June 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the six months ended June 30, 2023, catastrophe and weather-related losses, were $19 million, or 2.3 points, primarily attributable to Cyclone Gabrielle, and other weather-related events. Comparatively, during the six months ended June 30, 2022, catastrophe and weather-related losses, were $66 million, or 6.6 points, including natural catastrophe and weather-related losses of $53 million primarily attributable South Africa floods and the high frequency of small to mid-sized other weather-related events that occurred worldwide. The remaining losses of $13 million were attributable to the Russia-Ukraine war.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio increased to 64.2% for the six months ended June 30, 2023, from 60.3% for the six months ended June 30, 2022. The increase was principally due elevated experience in engineering lines and changes in business mix due to the exit from catastrophe and property lines of business, partially offset by the increase in credit and surety lines of business written in the recent periods which carry a lower loss ratio.
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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 lines of business, the expected claims tails and prior year reserve development.
Acquisition Cost Ratio
The acquisition cost ratio increased to 22.8% for the three months ended June 30, 2023, from 22.2% for the three months ended June 30, 2022, principally related to changes in business mix driven by increases in credit and surety, accident and health, professional lines, and liability lines of business written in recent periods and decreases in catastrophe and property lines of business written in recent periods, partially offset by the impact of retrocessional contracts on credit and surety, liability, professional lines, motor, and accident and health lines.
The acquisition cost ratio decreased to 21.5% for the six months ended June 30, 2023, from 21.9% for the six months ended June 30, 2022, principally related to the impact of retrocessional contracts on professional lines, credit and surety, liability, motor, accident and health lines, and adjustments attributable to loss-sensitive features mainly in motor lines, partially offset by changes in business mix driven by increases in professional lines, credit and surety, liability, and accident and health lines of business written in recent periods and decreases in catastrophe and property lines of business written in recent periods.
Underwriting-Related General and Administrative Expense Ratio
The underwriting-related general and administrative expense decreased to 4.6% for the three months ended June 30, 2023, from 5.3% f or the three months ended June 30, 2022, mainly driven by a decrease in personnel costs associated with the exit from catastrophe and property lines of business, partially offset by decreases in net premiums earned and fees related to arrangements with strategic capital partners.
The underwriting-related general and administrative expense ratio decreased to 5.2% for the six months ended June 30, 2023, from 5.7% for the six months ended June 30, 2022, mainly driven by a decrease in personnel costs associated with the exit from catastrophe and property lines of business, partially offset by decreases in net premiums earned and fees related to arrangements with strategic capital partners.
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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 June 30, |  | Six months ended June 30, |
|  | 2023 |  | % Change |  | 2022 |  | 2023 |  | % Change |  | 2022 |
| Fixed maturities | $ | 124,390 |  | 71% |  | $ | 72,607 |  | $ | 242,652 |  | 77% |  | $ | 137,416 |
| Other investments | (5,341) |  | nm |  | 14,327 |  | (4,855) |  | nm |  | 40,377 |
| Equity securities | 2,990 |  | 11% |  | 2,688 |  | 5,445 |  | 12% |  | 4,860 |
| Mortgage loans | 8,880 |  | 81% |  | 4,903 |  | 17,266 |  | 90% |  | 9,067 |
| Cash and cash equivalents | 11,161 |  | nm |  | 3,679 |  | 21,174 |  | nm |  | 4,797 |
| Short-term investments | 2,129 |  | nm |  | 402 |  | 3,789 |  | nm |  | 567 |
| Gross investment income | 144,209 |  | 46% |  | 98,606 |  | 285,471 |  | 45% |  | 197,084 |
| Investment expense | (7,380) |  | 15% |  | (6,392) |  | (14,870) |  | 10% |  | (13,515) |
| Net investment income | $ | 136,829 |  | 48% |  | $ | 92,214 |  | $ | 270,601 |  | 47% |  | $ | 183,569 |
| Pre-tax yield:(1) |  |  |  |  |  |  |  |  |  |  |  |
| Fixed maturities | 3.8 | % |  |  |  | 2.3 | % |  | 3.8 | % |  |  |  | 2.2 | % |

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 and six months ended June 30, 2023, was $124 million and $243 million, respectively, compared to net investment income of $73 million and $137 million, respectively, for the three and six months ended June 30, 2022. The increase for the three and six months ended June 30, 2023, compared to the same period in 2022, was due to an increase in yields.
Other Investments
Net investment income (loss) from other investments was as follows:

|  | Three months ended June 30, |  | Six months ended June 30, |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |
| Hedge, direct lending, private equity and real estate funds | $ | 178 |  | $ | 15,934 |  | $ | (269) |  | $ | 38,736 |
| Other privately held investments | (6,012) |  | (2,410) |  | (5,513) |  | (384) |
| CLO-Equities | 493 |  | 803 |  | 927 |  | 2,025 |
| Total net investment income (loss) from other investments | $ | (5,341) |  | $ | 14,327 |  | $ | (4,855) |  | $ | 40,377 |
| Pre-tax return on other investments(1) | (0.5 | %) |  | 1.5 | % |  | (0.5 | %) |  | 4.2 | % |

(1)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.
Net investment loss attributable to other investments for the three and six months ended June 30, 2023, was $5 million and $5 million, respectively, compared to net investment income of $14 million and $40 million, respectively, for the three and six months ended June 30, 2022. The decrease for the three and six months ended June 30, 2023, compared to the same period in 2022, was primarily related to lower returns from real estate and private equity funds.
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Net Investment Gains (Losses)
Net investment gains (losses) were as follows:

|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2023 |  | 2022 |  |  | 2023 |  | 2022 |
| On sale of investments: |  |  |  |  |  |  |  |  |
| Fixed maturities and short-term investments | $ | (32,235) |  |  | $ | (86,474) |  |  |  | $ | (73,514) |  |  | $ | (139,198) |  |
| Equity securities | 17 |  |  | — |  |  |  | 1,139 |  |  | (224) |  |
|  | (32,218) |  |  | (86,474) |  |  |  | (72,375) |  |  | (139,422) |  |
| (Increase) decrease in allowance for expected credit losses, fixed maturities, available for sale | 2,094 |  |  | (6,911) |  |  |  | 1,182 |  |  | (6,981) |  |
| (Increase) decrease in allowance for expected credit losses, mortgage loans | (1,740) |  |  | — |  |  |  | (3,638) |  |  | — |  |
| Impairment losses (1) | (9,083) |  |  | (473) |  |  |  | (9,083) |  |  | (582) |  |
| Change in fair value of investment derivatives | (528) |  |  | 4,822 |  |  |  | (1,474) |  |  | 7,063 |  |
| Net unrealized gains (losses) on equity securities | 17,105 |  |  | (84,227) |  |  |  | 40,830 |  |  | (127,849) |  |
| Net investment gains (losses) | $ | (24,370) |  |  | $ | (173,263) |  |  |  | $ | (44,558) |  |  | $ | (267,771) |  |

(1)Related to instances where we intend to sell securities, or it is more likely than not that we will be required to sell securities before their anticipated recovery.
On Sale of Investments and Net Unrealized Gains (Losses) on Equity Securities
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.
Net investment losses for the three and six months ended June 30, 2023 were $24 million and $45 million, respectively, compared to net investment losses of $173 million and $268 million, respectively, for the three and six months ended June 30, 2022.
For the three months ended June 30, 2023, the net investment losses were primarily due to net realized losses on the sale of corporate debt and U.S. government securities, partially offset by net unrealized gains on equity securities. For the three months ended June 30, 2022, the net investment losses were primarily due to net realized losses on the sale of corporate debt, U.S government and Agency RMBS and net unrealized losses on equity securities.
For the six months ended June 30, 2023, the net investment losses were primarily due to net realized losses on the sale of corporate debt, CMBS and U.S government securities and net unrealized gains on equity securities. For the six months ended June 30, 2022, the net investment losses were primarily due to net realized losses on the sale of U.S government, corporate debt and Agency RMBS and net unrealized losses on equity securities.
(Increase) decrease in allowance for expected credit losses, mortgage loans
For the three and six months ended June 30, 2023, the allowance for expected credit losses increased by $2 million and $4 million, respectively, primarily related to two collateral dependent mortgage loans. Refer to Note 3(d) to the Consolidated Financial Statements 'Investments'.
Impairment Losses
The impairment losses for the three and six months ended June 30, 2023 were $9 million and $9 million, respectively, compared to impairment losses of $0.5 million and $0.6 million, respectively, for the three and six months ended June 30, 2022. The increase in impairment losses related to a small number of securities that we intend to sell before their anticipated recovery.
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Change in Fair Value of Investment Derivatives
We economically hedge foreign exchange exposure with derivative contracts.
For the three and six months ended June 30, 2023, foreign exchange hedges resulted in net losses of $1 million and $1 million, respectively, primarily attributable to securities denominated in pound sterling and euro.
For the three and six months ended June 30, 2022, foreign exchange hedges resulted in net gains of $5 million and $7 million, respective ly, primarily attributable to securities denominated in pound sterling and euro.
Total Return
Total return on cash and investments was as follows:

|  | Three months ended June 30, |  | Six months ended June 30, |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |
| Net investment income | $ | 136,829 |  | $ | 92,214 |  | $ | 270,601 |  | $ | 183,569 |
| Net investments gains (losses) | (24,370) |  | (173,263) |  | (44,558) |  | (267,771) |
| Change in net unrealized gains (losses) on fixed maturities (1) | (72,887) |  | (390,651) |  | 140,034 |  | (845,936) |
| Interest in income (loss) of equity method investments | 2,100 |  | 1,050 |  | (105) |  | 12,600 |
| Total | $ | 41,672 |  | $ | (470,650) |  | $ | 365,972 |  | $ | (917,538) |
| Average cash and investments(2) | $ | 16,077,600 |  | $ | 15,863,410 |  | $ | 15,951,158 |  | $ | 16,066,338 |
| Total return on average cash and investments, pre-tax: |  |  |  |  |  |  |  |
| Including investment related foreign exchange movements | 0.3 | % |  | (3.0 | %) |  | 2.3 | % |  | (5.7 | %) |
| Excluding investment related foreign exchange movements(3) | 0.1 | % |  | (2.5 | %) |  | 2.0 | % |  | (5.1 | %) |

(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 (losses) gai ns of $21 million and $(78) million for the three months ended June 30, 2023 and 2022, respectively and foreign exchange (losses) gains of $40 million and $(106) million for the six months ended June 30, 2023 and 2022, respectively.
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OTHER EXPENSES (REVENUES), NET

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

|  | Three months ended June 30, |  | Six months ended June 30, |
|  | 2023 |  | % Change |  | 2022 |  | 2023 |  | % Change |  | 2022 |
| Corporate expenses | $ | 35,248 |  |  | 17% |  | $ | 30,183 |  |  | $ | 61,664 |  |  | 14% |  | $ | 54,128 |  |
| Foreign exchange losses (gains) | 30,104 |  |  | nm |  | (57,000) |  |  | 38,814 |  |  | nm |  | (101,274) |  |
| Interest expense and financing costs | 16,738 |  |  | 10% |  | 15,241 |  |  | 33,632 |  |  | 9% |  | 30,805 |  |
| Income tax expense (benefit) | 27,558 |  |  | nm |  | (4,965) |  |  | 43,454 |  |  | nm |  | (4,942) |  |
| Total | $ | 109,648 |  |  |  |  | $ | (16,541) |  |  | $ | 177,564 |  |  |  |  | $ | (21,283) |  |

nm – not meaningful
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 were 2.8% for the three months ended June 30, 2023, compared to 2.4% for the three months ended June 30, 2022 due to an increase in executive-related compensation costs associated with the transition in our senior leadership.
As a percentage of net premiums earned, corporate expenses were 2.5% for the six months ended June 30, 2023, compared to 2.1% for the six months ended June 30, 2022 due to an increase in performance related-compensation costs and executive-related compensation costs associated with the transition in our senior leadership.
Foreign Exchange Losses (Gains)
Some of our business is written in currencies other than the U.S. dollar.
Foreign exchange losses of $30 million for the three months ended June 30, 2023 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.
Foreign exchange losses of $39 million for the six months ended June 30, 2023 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 euro.
Foreign exchange gains of $57 million for the three months ended June 30, 2022 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.
Foreign exchange gains of $101 million for the six months ended June 30, 2022 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"), the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019, and the Federal Home Loan advances ("FHLB advances") received in the 2022 and 2023.
Interest expense and financing costs were $17 million and $34 million for the three and six months ended June 30, 2023, respectively.
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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 which is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments was 15.5% and 11.6% for the three and six months ended June 30, 2023, an d (16.7%) and (2.8%) for the three and six months ended June 30, 2022, respectively. 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 $28 million for the three months ended June 30, 2023 was principally due to the generation of pre-tax income in our U.S., U.K and European operations.
The tax expense of $43 million for the six months ended June 30, 2023 was principally due to the generation of pre-tax income in our U.S., U.K and European operations, partially offset by a decrease in the valuation allowance on deferred tax assets in Europe.
The tax benefit of $5 million for the three months ended June 30, 2022 was principally due to the generation of pre-tax losses in our European operations, partially offset by the generation of pre-tax income in our U.S. and U.K. operations.
The tax benefit of $5 million for the six months ended June 30, 2022 was principally due to the generation of pre-tax losses in our European operations together with the revaluation of net deferred tax assets and liabilities associated with the increase in the U.K. tax rate to 25% from 19%, effective 2023, partially offset by an income tax expense principally due to the generation of pre-tax income in our U.S. and U.K. 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 June 30, |  | Six months ended June 30, |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |
| Annualized return on average common equity(1) | 12.9 | % |  | 2.5 | % |  | 14.7 | % |  | 7.5 | % |
| Annualized operating return on average common equity(2) | 17.2 | % |  | 13.7 | % |  | 18.3 | % |  | 14.6 | % |
| Book value per diluted common share(3) | $ | 50.98 |  | $ | 47.62 |  | $ | 50.98 |  | $ | 47.62 |
| Cash dividends declared per common share | $ | 0.44 |  | $ | 0.43 |  | $ | 0.88 |  | $ | 0.86 |
| Increase (decrease) in book value per diluted common share adjusted for dividends | $ | 1.11 |  | $ | (3.92) |  | $ | 5.11 |  | $ | (6.17) |

(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 its presentation 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 the number of diluted common share 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 June 30, 2023, compared to the three months ended June 30, 2022, was primarily driven by a decrease in net investment losses, an increase in net investment income and underwriting income and a decrease in reorganization expenses, partially offset by foreign exchange losses, and an increase in income tax expense.
The increase in ROACE for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, was primarily driven by a decrease in net investment losses, an increase in net investment income and underwriting income and a decrease in reorganization expenses and average common shareholder's equity, partially offset by foreign exchange losses, and an increase in 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 June 30, 2023, compared to the three months ended June 30, 2022, was primarily driven by an increase in net investment income and underwriting income, partially offset by an increase in income tax expense.
The increase in operating ROACE for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, was primarily driven by an increase in net investment income and underwriting income and a decrease in average common shareholder's equity, partially offset by an increase in income tax expense.
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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 our stock price.
During the three months ended June 30, 2023, book value per diluted common share increased by 1% due to net income for the period, partially offset by net unrealized investment losses reported in accumulated other comprehensive income (loss), and common dividends declared.
During the six months ended June 30, 2023, book value per diluted common share increased by 9% due to net income for the period, and a decrease in net unrealized investment losses reported in accumulated other comprehensive income (loss), partially offset by common dividends declared.
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 nineteen 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 June 30, 2023, the increase in total value of $1.11, or 2%, was driven by a net income for the period, partially offset by net unrealized investment losses recognized in accumulated other comprehensive income (loss).
During the six months ended June 30, 2023, the increase in total value of $4.91, or 11%, was driven by net income for the period, and a decrease in net unrealized investment losses recognized in accumulated other comprehensive income (loss).
During the three months ended June 30, 2022, the decrease in total value of $3.92, or 8%, was driven by net unrealized losses reported in accumulated other comprehensive income (income), partially offset by net income for the period.
During the six months ended June 30, 2022, the decrease in total value of $6.17, or 13%, was driven by net unrealized losses reported in accumulated other comprehensive income (income), partially offset by the net income for the period.
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NON-GAAP FINANCIAL MEASURES RECONCILIATION

|  | Three months ended June 30, |  | Six months ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
| Net income available to common shareholders | $ | 143,111 |  | $ | 27,215 |  | $ | 315,648 |  | $ | 168,857
| Net investment (gains) losses(1) | 24,370 |  | 173,263 |  | 44,558 |  | 267,771
| Foreign exchange losses (gains)(2) | 30,104 |  | (57,000) |  | 38,814 |  | (101,274)
| Reorganization expenses(3) | — |  | 15,728 |  | — |  | 15,728
| Interest in (income) loss of equity method investments(4) | (2,100) |  | (1,050) |  | 105 |  | (12,600)
| Income tax benefit | (4,308) |  | (9,165) |  | (7,893) |  | (9,663)
| Operating income | $ | 191,177 |  | $ | 148,991 |  | $ | 391,232 |  | $ | 328,819
| Earnings per diluted common share | $ | 1.67 |  | $ | 0.32 |  | $ | 3.68 |  | $ | 1.97
| Net investment (gains) losses | 0.28 |  | 2.02 |  | 0.52 |  | 3.12
| Foreign exchange losses (gains) | 0.35 |  | (0.66) |  | 0.45 |  | (1.18)
| Reorganization expenses | — |  | 0.18 |  | — |  | 0.18
| Interest in (income) loss of equity method investments | (0.02) |  | (0.01) |  | — |  | (0.15)
| Income tax benefit | (0.05) |  | (0.11) |  | (0.09) |  | (0.11)
| Operating income per diluted common share | $ | 2.23 |  | $ | 1.74 |  | $ | 4.56 |  | $ | 3.83
| Weighted average diluted common shares outstanding(5) | 85,812 |  | 85,843 |  | 85,833 |  | 85,826
| Average common shareholders' equity | $ | 4,440,595 |  | $ | 4,361,586 |  | $ | 4,280,436 |  | $ | 4,506,644
| Annualized return on average common equity | 12.9 | % |  | 2.5 | % |  | 14.7 | % |  | 7.5 | %
| Annualized operating return on average common equity(6) | 17.2 | % |  | 13.7 | % |  | 18.3 | % |  | 14.6 | %

(1)Tax expense (benefit) of ($2,352) and ($19,598) for the three months ended June 30, 2023 and 2022, respectively, and ($3,880) and ($32,912) for the six months ended June 30, 2023 and 2022, 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 expense (benefit) of ($1,956) and $12,132 for the three months ended June 30, 2023 and 2022, respectively, and ($4,013) and $24,948 for the six months ended June 30, 2023 and 2022, 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 expense (benefit) of $nil and ($1,699) for the three months ended June 30, 2023 and 2022, respectively, and $nil and ($1,699) for the six months ended June 30, 2023 and 2022, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(4)Tax expense (benefit) of $nil for the three and six months ended June 30, 2023 and 2022, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(5)Refer to Item 1, Note 7 to our Consolidated Financial Statements 'Earnings per Common Share' for further details.
(6)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 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, including 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 recognized in net investment gains (losses), and unrealized foreign exchange losses (gains) on our available for sale investments recognized in other comprehensive income (loss), generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio, thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation 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 and Federal Home Loan Bank advances. 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).
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Reorganization expenses include compensation-related costs and software asset impairments mainly attributable to our exit from catastrophe and property reinsurance lines of business, part of an overall approach to reduce our exposure to volatile catastrophe risk, which was announced in June 2022. 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).
Amortization of intangible assets 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. However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio, including 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 recognized in net investment gains (losses) and unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss), generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio, thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business. Therefore, foreign exchange losses (gains) are excluded from operating income (loss).
Reorganization expenses include compensation-related costs and software asset impairments mainly attributable to our exit from catastrophe and property reinsurance lines of business, part of an overall approach to reduce our exposure to volatile catastrophe risk, which was announced in June 2022. 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 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 in order 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.
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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.
Constant Currency Basis
We present gross 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 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 Movements
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. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio. 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)'.

CASH AND INVESTMENTS

Details of cash and investments are as follows:

|  | June 30, 2023 |  |  | December 31, 2022 |
|  |  | Fair Value |  |  |  | Fair Value |
| Fixed maturities, available for sale |  | $ | 11,564,397 |  |  |  |  | $ | 11,326,894 |  |
| Fixed maturities, held to maturity(1) |  | 697,695 |  |  |  |  | 674,743 |  |
| Equity securities |  | 596,692 |  |  |  |  | 485,253 |  |
| Mortgage loans |  | 609,274 |  |  |  |  | 627,437 |  |
| Other investments |  | 970,079 |  |  |  |  | 996,751 |  |
| Equity method investments |  | 148,183 |  |  |  |  | 148,288 |  |
| Short-term investments |  | 46,282 |  |  |  |  | 70,310 |  |
| Total investments |  | $ | 14,632,602 |  |  |  |  | $ | 14,329,676 |  |
| Cash and cash equivalents(2) |  | $ | 1,518,270 |  |  |  |  | $ | 1,174,653 |  |

(1)Presented at net carrying value of $717 million (2022: $698 million) in the consolidated balance sheets.
(2)Includes restricted cash and cash equivalents of $344 million and $423 million at June 30, 2023 and at December 31, 2022, respectively.
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Overview
The fair value of total investments increased by $303 million in the six months ended June 30, 2023, driven by the increase in market value of fixed maturities and the reinvestment of interest income.
An analysis of our investment portfolio by asset class is detailed below:
Fixed Maturities
Details of our fixed maturities portfolio are as follows:

|  | June 30, 2023 |  | December 31, 2022 |
|  | Fair Value |  | % of Total |  | Fair Value |  | % of Total |
| Fixed maturities: |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,792,012 |  |  | 23 | % |  | $ | 2,639,330 |  |  | 22 | % |
| Non-U.S. government | 586,612 |  |  | 5 | % |  | 562,029 |  |  | 5 | % |
| Corporate debt | 4,406,397 |  |  | 36 | % |  | 4,329,328 |  |  | 36 | % |
| Agency RMBS | 1,403,654 |  |  | 11 | % |  | 1,202,785 |  |  | 10 | % |
| CMBS | 871,107 |  |  | 7 | % |  | 947,778 |  |  | 8 | % |
| Non-agency RMBS | 134,101 |  |  | 1 | % |  | 133,534 |  |  | 1 | % |
| ABS | 1,919,462 |  |  | 16 | % |  | 2,030,498 |  |  | 17 | % |
| Municipals(1) | 148,747 |  |  | 1 | % |  | 156,355 |  |  | 1 | % |
| Total | $ | 12,262,092 |  |  | 100 | % |  | $ | 12,001,637 |  |  | 100 | % |
| Credit ratings: |  |  |  |  |  |  |  |
| U.S. government and agency | $ | 2,792,012 |  |  | 23 | % |  | $ | 2,639,330 |  |  | 22 | % |
| AAA(2) | 4,270,115 |  |  | 35 | % |  | 4,189,661 |  |  | 36 | % |
| AA | 851,806 |  |  | 6 | % |  | 871,966 |  |  | 7 | % |
| A | 1,909,187 |  |  | 16 | % |  | 1,835,746 |  |  | 15 | % |
| BBB | 1,376,521 |  |  | 11 | % |  | 1,377,638 |  |  | 11 | % |
| Below BBB(3) | 1,062,451 |  |  | 9 | % |  | 1,087,296 |  |  | 9 | % |
| Total | $ | 12,262,092 |  |  | 100 | % |  | $ | 12,001,637 |  |  | 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 June 30, 2023, fixed maturities had a weighted average credit rating of AA- (2022: AA-), a book yield of 3.9% (2022: 3.5%) and an average duration of 2.9 years (2022: 3.0 years). At June 30, 2023, fixed maturities together with short-term investments, and cash and cash equivalents (i.e. total investments of $13.8 billion), had an average credit rating of AA- (2022: AA-) and an average duration of 2.6 years (2022: 2.8 years).
At June 30, 2023, net unrealized losses on fixed maturities were $708 million, compared to net unrealized losses of $850 million at December 31, 2022, a decrease of $142 million due to improved market values and a realization of losses associated with sales in the period.
Equity Securities
At June 30, 2023, net unrealized gains on equity securities were $32 million, compared to net unrealized losses of $9 million at December 31, 2022, an increase of $41 million driven by the improvement in global equity markets and the increase in market value of bond mutual funds.
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Mortgage Loans
At June 30, 2023, our investment in commercial mortgage loans was $609 million, compared to $627 million at December 31, 2022, a decrease of $18 million. The commercial mortgage loans are high quality, first lien and are collateralized by a variety of commercial properties which are diversified geographically throughout the U.S. and by property type to reduce the risk of concentration. At June 30, 2023, there are two collateral dependent loans with estimated loan-to-value ratios in excess of 100%, resulting in an allowance for credit losses of $4 million.
Other Investments
Details of our other investments portfolio are as follows:

|  | June 30, 2023 |  | December 31, 2022 |
|  | Fair Value |  | % of Total |  | Fair Value |  | % of Total |
| Hedge funds |  |  |  |  |  |  |  |
| Multi-strategy funds | $ | 26,126 |  |  | 3 | % |  | $ | 32,616 |  |  | 3 | % |
| Total hedge funds | 26,126 |  |  | 3 | % |  | 32,616 |  |  | 3 | % |
| Direct lending funds | 248,834 |  |  | 26 | % |  | 258,626 |  |  | 26 | % |
| Private equity funds | 272,249 |  |  | 28 | % |  | 265,836 |  |  | 27 | % |
| Real estate funds | 302,945 |  |  | 31 | % |  | 298,499 |  |  | 30 | % |
| Total hedge, direct lending, private equity and real estate funds | 850,154 |  |  | 88 | % |  | 855,577 |  |  | 86 | % |
| CLO-Equities | 4,877 |  |  | — | % |  | 5,016 |  |  | — | % |
| Other privately held investments | 115,048 |  |  | 12 | % |  | 136,158 |  |  | 14 | % |
| Total other investments | $ | 970,079 |  |  | 100 | % |  | $ | 996,751 |  |  | 100 | % |

Refer to Note 3(e) to the Consolidated Financial Statements 'Investments'.
Equity Method Investments
Our ownership interest in Harrington is reported in interest in income (loss) of equity method investments.
Interest in income (loss) of equity method investments of $2 million for the three months ended June 30, 2023, compared to $1 million for the three months ended June 30, 2022, an increase of $1 million attributable to higher investment gains realized by Harrington.
Interest in income (loss) of equity method investments of $nil, for the six months ended June 30, 2023, compared to $13 million for the six months ended June 30, 2022, a decrease of $13 million attributable to lower investment gains and underwriting losses in the current period compared to underwriting income in the prior period 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, 2022 for a general discussion of liquidity and capital resources.
The following table summarizes consolidated capital:

|  | June 30, 2023 |  | December 31, 2022 |
| Debt | $ | 1,313,006 |  |  | $ | 1,312,314 |  |
| Preferred shares | 550,000 |  |  | 550,000 |  |
| Common equity | 4,470,961 |  |  | 4,089,910 |  |
| Shareholders’ equity | 5,020,961 |  |  | 4,639,910 |  |
| Total capital | $ | 6,333,967 |  |  | $ | 5,952,224 |  |
| Ratio of debt to total capital | 20.7 | % |  | 22.0 | % |

We finance operations with a combination of debt and equity capital. The debt to total capital ratio provides an indication of our capital structure, along with some insight into our financial strength. While the impact of unrealized investment losses recognized in accumulated other comprehensive income (loss), following a decrease in market value of our fixed maturities in 2022, has reduced common shareholders' equity, we believe that our financial flexibility remains strong and adjustments are made, if there are developments that differ from previous expectations.
Federal Home Loan Bank Advances
The Company's subsidiaries, AXIS Insurance Company and AXIS Surplus Insurance Company are members of the Federal Home Loan Bank of Chicago ("FHLB").
At June 30, 2023, the Company had $86 million of borrowings under the FHLB program, with maturities in 2023 and 2024 and interest payable at interest rates between 4.9% and 5.7%. The Company incurred interest expense of $1 million for the three months ended June 30, 2023 and $2 million for the six months ended June 30, 2023. The borrowings under the FHLB program are secured by investments with a fair value of $95 million.
Line of credit
On March 31, 2023, the $150 million secured letter of credit facility expired as we determined that the $500 million secured letter of credit facility would be sufficient to meet future obligations.
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Common Equity
During the six months ended June 30, 2023, common equity increased by $381 million. The following table reconciles opening and closing common equity positions:

| Six months ended June 30, | 2023 |
| Common equity - opening | $ | 4,089,910 |  |
| Share-based compensation expense | 27,728 |  |
| Change in unrealized gains (losses) on available for sale investments, net of tax | 127,143 |  |
| Foreign currency translation adjustment | 2,648 |  |
| Net income (loss) | 330,773 |  |
| Preferred share dividends | (15,125) |  |
| Common share dividends | (76,769) |  |
| Treasury shares repurchased | (17,051) |  |
| Treasury shares reissued | 1,704 |  |
| Common equity - closing | $ | 4,470,961 |  |

During the six months ended June 30, 2023, we repurchased 282,000 common shares from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units granted under our 2017 Long-Term Equity Compensation Plan for a total cost of $17 million.
At August 1, 2023, we had $100 million of remaining authorization under our Board-authorized share repurchase program for common share repurchases through December 31, 2023 (refer to Part II, Item 2 'Unregistered Sales of Equity Securities and Use of Proceeds' for further details).
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.

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.
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, 2022, continues to describe the significant estimates and judgments included in the preparation of the consolidated financial statements.
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RECENT ACCOUNTING PRONOUNCEMENTS

At June 30, 2023, 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.

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, 2022. There have been no material changes to this item since December 31, 2022, 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 |  |  |  | CAD |  | EUR |  | GBP |  | JPY |  | Other |  | Total |
| At June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net managed assets (liabilities), excluding derivatives | $ | 5,840 |  |  |  |  | $ | 384,231 |  |  | $ | (368,102) |  |  | $ | (278,257) |  |  | $ | (28,728) |  |  | $ | 68,487 |  |  | $ | (216,529) |  |
| Foreign currency derivatives, net | 22,341 |  |  |  |  | (376,068) |  |  | 397,532 |  |  | 232,075 |  |  | 50,544 |  |  | (91,268) |  |  | 235,156 |  |
| Net managed foreign currency exposure | 28,181 |  |  |  |  | 8,163 |  |  | 29,430 |  |  | (46,182) |  |  | 21,816 |  |  | (22,781) |  |  | 18,627 |  |
| Other net foreign currency exposure | — |  |  |  |  | 153 |  |  | (293) |  |  | 15 |  |  | — |  |  | — |  |  | (125) |  |
| Total net foreign currency exposure | $ | 28,181 |  |  |  |  | $ | 8,316 |  |  | $ | 29,137 |  |  | $ | (46,167) |  |  | $ | 21,816 |  |  | $ | (22,781) |  |  | $ | 18,502 |  |
| Net foreign currency exposure as a percentage of total shareholders’ equity | 0.6 | % |  |  |  | 0.2 | % |  | 0.6 | % |  | (0.9 | %) |  | 0.4 | % |  | (0.5 | %) |  | 0.4 | % |
| Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement(1) | $ | 2,818 |  |  |  |  | $ | 832 |  |  | $ | 2,914 |  |  | $ | (4,617) |  |  | $ | 2,182 |  |  | $ | (2,278) |  |  | $ | 1,850 |  |

(1)Assumes 10% appreciation in underlying currencies relative to the U.S. dollar.
Total Net Foreign Currency Exposure
At June 30, 2023, total net foreign currency assets were $19 million primarily driven by exposures to the euro, australian dollar, japanese yen, and canadian dollar. During the six months ended June 30, 2023, the change in total net foreign currency exposure was primarily due to new business written in the period.
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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 June 30, 2023. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, at June 30, 2023, 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 June 30, 2023.
Based upon that evaluation, there were no changes in the Company's internal control over financial reporting that occurred during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are 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 us in the ordinary course of insurance or reinsurance operations. Estimated amounts payable related to these proceedings are included in the reserve for losses and loss expenses in the Company's financial statements.
We are 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, 2022.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities
The following table shows information regarding the number of common shares repurchased in the quarter ended June 30, 2023:

Period | Total number of shares purchased (a) (b) |  | Average price paid per share |  | Total number of shares purchased as part of publicly announced programs (a) |  | Maximum number (or approximate dollar value) of shares that may yet be purchased under the announced programs (c) |
April 1-30, 2023 | 14 |  |  | $54.52 |  |  | — |  | $100 million |
May 1-31, 2023 | 2 |  |  | $54.26 |  |  | — |  |  | $100 million |
June 1-30, 2023 | 4 |  |  | $51.68 |  |  | — |  |  | $100 million |
Total | 20 |  |  |  |  | — |  |  | $100 million |

(a) In thousands.
(b) Includes shares repurchased from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units.
(c) On December 8, 2022, our Board of Directors authorized a share repurchase program for up to $100 million of our common shares, effective January 1, 2023 through to December 31, 2023. Share repurchases may be effected from time to time in the open market or privately negotiated transactions, depending on market conditions.

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 insurance and reinsurance portfolios may have some exposure to Iran. In addition, we provide 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 June 30, 2023, 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.
Insider Trading Arrangements and Policies
During the three months ended June 30, 2023, no director or officer of the Company adopted, terminated or is currently party to a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
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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 | Employment Agreement dated April 11, 2023 by and between AXIS Specialty U.S. Services, Inc., AXIS Capital Holdings Limited and Vincent Tizzio (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 14, 2023). |
†10.2 | Form of Employee Restricted Stock Unit Award Agreement (Performance Vesting). |
10.3 | AXIS Capital Holdings Limited Second Amended and Restated 2017 Long-Term Equity Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 8, 2023). |
†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 June 30, 2023 formatted in Inline XBRL: (i) Consolidated Balance Sheets at June 30, 2023 and December 31, 2022; (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022; (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022; (iv) Consolidated Statements of Changes in Shareholders' Equity for the six months ended June 30, 2023 and 2022; (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022; 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). |

† 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: August 1, 2023

AXIS CAPITAL HOLDINGS LIMITED
By: | /S/ VINCENT TIZZIO
| Vincent Tizzio
| President and Chief Executive Officer
| (Principal Executive Officer)
| /S/ PETER VOGT
| Peter Vogt
| Chief Financial Officer
| (Principal Financial Officer)

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