A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa-" of AXIS Specialty Limited (AXIS) and its operating affiliates. Concurrently, A.M. Best has affirmed the Long-Term ICR of "a-" and the existing Long-Term Issue Credit Ratings (Long-Term IR) of AXIS' parent, AXIS Capital Holdings Limited (ACHL) (both domiciled in Hamilton, Bermuda) [NYSE:AXS]. The outlook of these Credit Ratings (ratings) ratings is stable. (See below for a detailed list of the companies and Long-Term IRs.) The ratings reflect AXIS' superior risk-adjusted capitalization, long-term track record of strong operating performance through varied market conditions and robust enterprise risk management framework and controls. In A.M. Best's opinion, AXIS continues to maintain very strong levels of risk-based capitalization under various A.M. Best stress-testing scenarios. Historically, AXIS' book of business focused on short to medium-tail lines of business, with a concentration on specialty risks, which can be complex to underwrite, reserve and risk manage. AXIS' operating strategy has emphasized underwriting profitability with balanced risk-taking. AXIS' historical strong operating performance placed it among the top of its Bermuda peer group. However, in recent years, AXIS has had an elevated expense ratio when compared with peers, largely attributed to the build-out of its accident and health lines. Additionally, overall results in 2015 benefited from the one-time termination fee related to the proposed merger with PartnerRe Ltd. While AXIS' hybrid platform gives the group flexibility, its insurance segment results, which have been largely impacted by the aforementioned accident and health build-out, have not been meaningful contributors to earnings in recent years. Going forward, AXIS will need to improve return levels to maintain operating results in line with its current rating level while facing the headwinds of challenging underwriting and investment conditions. Rating factors that could lead to an upgrade would be a demonstration of long-term, consistently strong operating results coupled with superior risk-adjusted capitalization through various market cycles. Rating factors that could lead to a downgrade or negative outlook include unfavorable trends in operating results, outsized insurance or investment losses or a significant decline in risk-adjusted capitalization.