AXIS CAPITAL HOLDINGS LTD (Form: 10-Q, Received: 04/27/2010 16:25:23)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

¨ 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)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of April 23, 2010 there were 126,737,318 Common Shares, $0.0125 par value per share, of the registrant outstanding.

AXIS CAPITAL HOLDINGS LIMITED

INDEX TO FORM 10-Q


		Page
	PART I

	Financial Information	3

Item 1.	Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59

Item 4.	Controls and Procedures	59

	PART II

	Other Information	60

Item 1.	Legal Proceedings	60

Item 1A.	Risk Factors	60

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 5.	Exhibits	62

	Signatures	63

PART I FINANCIAL INFORMATION

Cautionary Statement Regarding Forward-looking Statements

This quarterly report contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States 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” and “intend.” Forward-looking statements contained in this report may include information regarding our estimates of losses related to catastrophes and other large losses, measurements of potential losses in the fair value of our investment portfolio and derivative contracts, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, equity prices, credit spreads and foreign currency rates. Forward-looking statements only reflect our expectations and are not guarantees of performance.

These statements involve risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements. We believe that these factors include, but are not limited to, the following:

•

the occurrence of natural and man-made disasters,

•

actual claims exceeding our loss reserves,

•

general economic, capital and credit market conditions and the persistence of the recent financial crisis,

•

the failure of any of the loss limitation methods we employ,

•

the effects of emerging claims and coverage issues,

•

the failure of our cedants to adequately evaluate risks,

•

inability to obtain additional capital on favorable terms, or at all,

•

the loss of one or more key executives,

•

a decline in our ratings with rating agencies,

•

loss of business provided to us by our major brokers,

•

changes in accounting policies or practices,

•

changes in governmental regulations,

•

increased competition,

•

changes in the political environment of certain countries in which we operate or underwrite business,

•

fluctuations in interest rates, credit spreads, equity prices and/or currency values, and

•

the other matters set forth under Item 1A, ‘ Risk Factors ’ and Item 7, ‘ Management’s Discussion and Analysis of Financial Conditions and Results of Operations ’ included in our Annual Report on Form 10-K for the year ended December 31, 2009.

We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS


		Page

Consolidated Balance Sheets as at March 31, 2010 (Unaudited) and December 31, 2009		5

Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (Unaudited)		6

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2010 and 2009 (Unaudited)		7

Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2010 and 2009 (Unaudited)		8

Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (Unaudited)		9

Notes to the Consolidated Financial Statements (Unaudited)		10

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2010 (UNAUDITED) AND DECEMBER 31, 2009


	2010			2009
	(in thousands)
Assets
Investments:
Fixed maturities, available for sale, at fair value (Amortized cost 2010: 9,499,645; 2009: $9,628,287)	$	9,649,199		$	9,718,355
Equity securities, available for sale, at fair value (Cost 2010: 192,486; 2009: $195,011)		201,920			204,375
Other investments, at fair value		538,917			570,276
Short-term investments		143,937			129,098

Total investments		10,533,973			10,622,104
Cash and cash equivalents		1,379,329			788,614
Restricted cash and cash equivalents		130,698			75,440
Accrued interest receivable		84,407			89,559
Insurance and reinsurance premium balances receivable		1,708,400			1,292,877
Reinsurance recoverable on unpaid and paid losses		1,445,918			1,424,172
Deferred acquisition costs		420,283			302,320
Prepaid reinsurance premiums		291,382			301,885
Securities lending collateral		86,975			129,814
Net receivable for investments sold		—			12,740
Goodwill and intangible assets		91,217			91,505
Other assets		156,588			175,494

Total assets	$	16,329,170		$	15,306,524


Liabilities
Reserve for losses and loss expenses	$	6,759,522		$	6,564,133
Unearned premiums		2,748,283			2,209,397
Insurance and reinsurance balances payable		144,679			173,156
Securities lending payable		87,975			132,815
Senior notes		993,712			499,476
Other liabilities		215,835			227,303
Net payable for investments purchased		3,145			—

Total liabilities		10,953,151			9,806,280


*Commitments and Contingencies*

Shareholders’ equity
Preferred shares - Series A and B		500,000			500,000
Common shares (2010: 154,473; 2009: 152,465 shares issued and 2010: 124,155; 2009: 132,140 shares outstanding )		1,929			1,903
Additional paid-in capital		2,027,950			2,014,815
Accumulated other comprehensive income		165,455			85,633
Retained earnings		3,649,770			3,569,411
Treasury shares, at cost (2010:30,318; 2009: 20,325 shares)		(969,085	)		(671,518	)

Total shareholders’ equity		5,376,019			5,500,244

Total liabilities and shareholders’ equity	$	16,329,170		$	15,306,524

See accompanying notes to Consolidated Financial Statements.

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


	2010			2009
	(in thousands, except for per share amounts)
Revenues
Net premiums earned	$	696,192		$	665,359
Net investment income		104,619			99,292
Other insurance related income (loss)		626			(9,395	)
Net realized investment gains (losses):
Other-than-temporary impairment losses		(6,957	)		(29,901	)
Portion of impairment losses transferred to other comprehensive income		1,449			-
Other realized investment gains (losses)		21,684			(10,696	)

Total net realized investment gains (losses)		16,176			(40,597	)

Total revenues		817,613			714,659


Expenses
Net losses and loss expenses		468,262			387,999
Acquisition costs		116,649			101,976
General and administrative expenses		99,769			86,557
Foreign exchange gains		(8,147	)		(389	)
Interest expense and financing costs		8,688			7,921

Total expenses		685,221			584,064


Income before income taxes		132,392			130,595
Income tax expense		11,361			5,697

Net income		121,031			124,898

Preferred share dividends		9,219			9,219

Net income available to common shareholders	$	111,812		$	115,679


Weighted average common shares and common share equivalents:
Basic		128,202			137,316

Diluted		142,176			149,023


Earnings per common share:
Basic	$	0.87		$	0.84

Diluted	$	0.79		$	0.78


Cash dividends declared per common share	$	0.21		$	0.20

See accompanying notes to Consolidated Financial Statements.

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


	2010			2009
	(in thousands)
Net income	$	121,031		$	124,898
Other comprehensive income, net of tax:
Available for sale investments:
Unrealized gains (losses) arising during the period		94,589			(99,249	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income		(1,449	)		—
Adjustment for re-classification of realized investment (gains) losses and net impairment losses recognized in net income		(12,834	)		41,533
Foreign currency translation adjustment		(484	)		(2,967	)

Comprehensive income	$	200,853		$	64,215

See accompanying notes to Consolidated Financial Statements.

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2010 AND 2009


	2010			2009
	(in thousands)
Preferred shares - Series A and B
Balance at beginning and end of period	$	500,000		$	500,000


Common shares (par value)
Balance at beginning of period		1,903			1,878
Shares issued		26			21

Balance at end of period		1,929			1,899


Additional paid-in capital
Balance at beginning of period		2,014,815			1,962,779
Shares issued		364			141
Stock options exercised		2,414			—
Share-based compensation expense		10,357			14,224

Balance at end of period		2,027,950			1,977,144


Accumulated other comprehensive income (loss)
Unrealized appreciation (depreciation) on available for sale investments, net of tax:
Balance at beginning of period		87,438			(702,548	)
Unrealized gains (losses) arising during the period, net of reclassification adjustment		81,755			(57,716	)
Portion of other-than-temporary impairment losses		(1,449	)		—

Balance at end of period		167,744			(760,264	)

Cumulative foreign currency translation adjustments, net of tax:
Balance at beginning of period		803			—
Foreign currency translation adjustment		(484	)		(2,967	)

Balance at end of period		319			(2,967	)

Supplemental Executive Retirement Plans (SERPs):
Balance at beginning of period		(2,608	)		(3,951	)
Net actuarial gain (loss)		—			—

Balance at end of period		(2,608	)		(3,951	)

Balance at end of period		165,455			(767,182	)


Retained earnings
Balance at beginning of period		3,569,411			3,198,492
Net income		121,031			124,898
Series A and B preferred share dividends		(9,219	)		(9,219	)
Common share dividends		(31,453	)		(31,779	)

Balance at end of period		3,649,770			3,282,392


Treasury shares, at cost
Balance at beginning of period		(671,518	)		(495,609	)
Shares repurchased for treasury		(297,567	)		(5,807	)

Balance at end of period		(969,085	)		(501,416	)


Total shareholders’ equity	$	5,376,019		$	4,492,837

See accompanying notes to Consolidated Financial Statements.

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2010 AND 2009


	2010			2009
	(in thousands)
Cash flows from operating activities:
Net income	$	121,031		$	124,898
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment (gains) losses		(16,176	)		40,597
Loss on insurance derivative contract		-			10,000
Net realized and unrealized gains of other investments		(16,265	)		(7,167	)
Amortization of fixed maturities		8,879			4,140
Other amortization and depreciation		2,153			3,201
Share-based compensation expense		10,357			14,224
Changes in:
Accrued interest receivable		5,152			(1,514	)
Reinsurance recoverable balances		(21,746	)		(54,020	)
Deferred acquisition costs		(117,963	)		(102,678	)
Prepaid reinsurance premiums		10,503			12,764
Reserve for loss and loss expenses		195,389			147,495
Unearned premiums		538,886			484,177
Insurance and reinsurance balances, net		(444,000	)		(443,340	)
Other items		59,262			11,189

Net cash provided by operating activities		335,462			243,966


Cash flows from investing activities:
Purchases of:
Fixed maturities		(2,761,817	)		(3,558,125	)
Equity securities		(7,707	)		(13,754	)
Other investments		-			(40,000	)
Proceeds from the sale of:
Fixed maturities		2,632,428			2,731,108
Equity securities		8,526			32,616
Other investments		44,187			42,044
Proceeds from redemption of fixed maturities		272,128			209,865
Net purchases (sales) of short-term investments		(14,629	)		39,533
Purchase of other assets		(1,761	)		(37,541	)
Change in restricted cash and cash equivalents		(55,258	)		21,465

Net cash (used in) provided by investing activities		116,097			(572,789	)


Cash flows from financing activities:
Net proceeds from issuance of senior notes		494,870			-
Repurchase of shares		(297,567	)		(5,807	)
Dividends paid - common shares		(31,390	)		(27,091	)
Dividends paid - preferred shares		(9,219	)		(9,219	)
Proceeds from issuance of common shares		2,804			162

Net cash (used in) provided by financing activities		159,498			(41,955	)


Effect of exchange rate changes on foreign currency cash		(20,342	)		(16,879	)

Increase (decrease) in cash and cash equivalents		590,715			(387,657	)
Cash and cash equivalents - beginning of period		788,614			1,697,581

Cash and cash equivalents - end of period	$	1,379,329		$	1,309,924

See accompanying notes to Consolidated Financial Statements.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.	BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Basis of Presentation

The interim consolidated financial statements include the accounts of AXIS Capital Holdings Limited (“AXIS Capital”) and its subsidiaries (herein referred to as “we,” “us,” “our,” or the “Company”).

The consolidated balance sheet at March 31, 2010 and the consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for the periods ended March 31, 2010 and 2009 have not been audited. The balance sheet at December 31, 2009 is derived from our audited financial statements.

These statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial information and with the Securities and Exchange Commission’s (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our 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.

The following information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2009. Tabular dollars and share amounts are in thousands, except per share amounts.

Significant Accounting Policies

There have been no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2009.

Adoption of New Accounting Standards

Transfers and Servicing of Financial Assets

Effective January 1, 2010, we adopted new guidance issued by the Financial Accounting Standards Board (“FASB”) with respect to accounting for transfers of financial assets, which amended the derecognition guidance and eliminated the exemption from consolidation for qualifying special-purpose entities (“QSPEs”). The adoption of this guidance did not impact our results of operations, financial condition or liquidity.

Fair Value Measurement Disclosures

Effective January 1, 2010, we adopted new guidance issued by the FASB requiring additional disclosures about transfers into and out of Levels 1 and 2 of the fair value hierarchy and separate disclosures about purchases, sales, issuance, and settlements relating to Level 3 measurements. As these new requirements related solely to disclosures, the adoption did not impact our results of operations, financial condition or liquidity. The additional disclosures have been provided in Note 4 – Fair Value Measurements.

Consolidations

Effective January 1, 2010, we adopted amended FASB guidance related to the consolidation of variable interest entities (“VIEs”). This amended guidance significantly affected the overall consolidation analysis, in particular by modifying the approach for determining the primary beneficiary of a VIE. The adoption of this guidance did not impact our results of operations or financial condition.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.	BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)

Subsequent Events

On February 24, 2010, the FASB amended its guidance on subsequent events to no longer require SEC filers to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements in order to alleviate potential conflicts between the FASB’s guidance and the SEC’s filing requirements. This guidance was effective immediately upon issuance. The adoption of this guidance had no impact on our results of operations or financial condition. While our consolidated financial statements no longer disclose the date through which we have evaluated subsequent events, we continue to be required to evaluate subsequent events through the date when our financial statements are issued.

Recently Issued Accounting Standards Not Yet Adopted

Embedded Credit Derivatives

In March 2010, the FASB issued new guidance clarifying the scope exemption for embedded credit-derivative features. Embedded credit-derivative features related only to the transfer of credit risk in the form of subordination of one financial instrument to another are not subject to potential bifurcation and separate accounting. However, other embedded credit-derivative features are required to be analyzed to determine whether they must be accounted for separately. Additional guidance on whether embedded credit-derivative features in financial instruments issued by structures such as collateralized debt obligations (“CDOs”) and synthetic CDOs are subject to bifurcation and separate accounting. To simplify compliance with this new guidance, an entity may make a one-time election to apply the fair value option to any investment in a beneficial interest in securitized financial assets, regardless of whether such investments contain embedded derivative features. This new guidance is effective as of July 1, 2010, with early adoption being permitted at April 1, 2010. We are presently evaluating the impact of the adoption of this guidance on our results of operations and financial position.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.	SEGMENT INFORMATION

Our underwriting operations are organized around our two global underwriting platforms, AXIS Insurance and AXIS Reinsurance and therefore we have determined that we have two reportable segments, insurance and reinsurance. Except for goodwill and intangible assets, we do not allocate our assets by segment as we evaluate the underwriting results of each segment separately from the results of our investment portfolio.

The following table summarizes the underwriting results of our operating segments for the periods indicated and the carrying values of goodwill and intangible assets at March 31, 2010 and 2009:


	2010									2009
Three months ended March 31,	Insurance			Reinsurance			Total			Insurance			Reinsurance			Total
Gross premiums written	$	372,929		$	1,052,272		$	1,425,201		$	364,158		$	959,337		$	1,323,495
Net premiums written		206,812			1,036,823			1,243,635			212,015			950,286			1,162,301
Net premiums earned		256,281			439,911			696,192			275,623			389,736			665,359
Other insurance related income (loss)		626			-			626			(9,805	)		410			(9,395	)
Net losses and loss expenses		(130,703	)		(337,559	)		(468,262	)		(152,704	)		(235,295	)		(387,999	)
Acquisition costs		(31,141	)		(85,508	)		(116,649	)		(26,203	)		(75,773	)		(101,976	)
General and administrative expenses		(61,610	)		(21,851	)		(83,461	)		(50,481	)		(18,271	)		(68,752	)

Underwriting income (loss)	$	33,453		$	(5,007	)		28,446		$	36,430		$	60,807			97,237

Corporate expenses								(16,308	)								(17,805	)
Net investment income								104,619									99,292
Net realized investment gains (losses)								16,176									(40,597	)
Foreign exchange gains								8,147									389
Interest expense and financing costs								(8,688	)								(7,921	)

Income before income taxes							$	132,392								$	130,595


Net loss and loss expense ratio		51.0%			76.7%			67.3%			55.4%			60.4%			58.3%
Acquisition cost ratio		12.2%			19.4%			16.7%			9.5%			19.4%			15.3%
General and administrative expense ratio		24.0%			5.0%			14.3%			18.3%			4.7%			13.0%

Combined ratio		87.2%			101.1%			98.3%			83.2%			84.5%			86.6%



Goodwill and intangible assets	$	91,217		$	-		$	91,217		$	95,380		$	-		$	95,380

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.	INVESTMENTS

a)	Fixed Maturities and Equities

The amortized cost or cost and fair values of our fixed maturities and equities were as follows:


At March 31, 2010	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit OTTI in AOCI ⁽³⁾
Fixed maturities
U.S. government and agency	$	1,327,369	$	9,553	$	(2,856	)	$	1,334,066	$	-
Non-U.S. government		685,643		6,137		(12,883	)		678,897		-
Corporate debt		3,747,774		144,767		(30,632	)		3,861,909		(492	)
Residential MBS ⁽¹⁾		1,855,645		45,502		(27,684	)		1,873,463		(9,189	)
Commercial MBS		684,658		24,782		(9,297	)		700,143		(505	)
ABS ⁽²⁾		573,259		7,826		(18,166	)		562,919		(4,819	)
Municipals		625,297		16,392		(3,887	)		637,802		(389	)

Total fixed maturities	$	9,499,645	$	254,959	$	(105,405	)	$	9,649,199	$	(15,394	)

Equity securities	$	192,486	$	18,767	$	(9,333	)	$	201,920


At December 31, 2009
Fixed maturities
U.S. government and agency	$	1,859,874	$	8,511	$	(11,726	)	$	1,856,659	$	-
Non-U.S. government		687,843		11,937		(2,966	)		696,814		-
Corporate debt		3,482,450		126,093		(27,777	)		3,580,766		(6,071	)
Residential MBS ⁽¹⁾		1,777,793		41,429		(39,581	)		1,779,641		(8,673	)
Commercial MBS		680,229		10,865		(28,283	)		662,811		(505	)
ABS ⁽²⁾		455,831		6,926		(19,618	)		443,139		(10,798	)
Municipals		684,267		18,495		(4,237	)		698,525		(389	)

Total fixed maturities	$	9,628,287	$	224,256	$	(134,188	)	$	9,718,355	$	(26,436	)

Equity securities	$	195,011	$	17,834	$	(8,470	)	$	204,375

(1)	Residential mortgage-backed securities (“MBS”) include agency pass-through securities and collateralized mortgage obligations.

(2)	Asset-backed securities (“ABS”) include debt tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, and other asset types. This asset class also includes an insignificant position in collateralized loan obligations (“CLOs”) and collateralized debt obligations (“CDOs”).

(3)	Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.	INVESTMENTS (CONTINUED)

Gross Unrealized Losses

The following tables summarize fixed maturities and equities 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:


At March 31, 2010	12 months or greater					Less than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturities
U.S. government and agency	$	21,290	$	(673	)	$	419,050	$	(2,183	)	$	440,340	$	(2,856	)
Non-U.S. government		-		-			282,352		(12,883	)		282,352		(12,883	)
Corporate debt		77,542		(8,632	)		975,557		(22,000	)		1,053,099		(30,632	)
Residential MBS		121,239		(22,094	)		515,155		(5,590	)		636,394		(27,684	)
Commercial MBS		99,424		(8,906	)		19,273		(391	)		118,697		(9,297	)
ABS		49,118		(17,640	)		117,858		(526	)		166,976		(18,166	)
Municipals		24,868		(2,075	)		101,370		(1,812	)		126,238		(3,887	)

Total fixed maturities	$	393,481	$	(60,020	)	$	2,430,615	$	(45,385	)	$	2,824,096	$	(105,405	)


Equity securities	$	27,471	$	(5,119	)	$	79,925	$	(4,214	)	$	107,396	$	(9,333	)


At December 31, 2009
Fixed maturities
U.S. government and agency	$	22,902	$	(915	)	$	1,252,602	$	(10,811	)	$	1,275,504	$	(11,726	)
Non-U.S. government		-		-			352,313		(2,966	)		352,313		(2,966	)
Corporate debt		160,213		(19,245	)		630,678		(8,532	)		790,891		(27,777	)
Residential MBS		183,287		(32,867	)		440,067		(6,714	)		623,354		(39,581	)
Commercial MBS		273,845		(27,180	)		79,561		(1,103	)		353,406		(28,283	)
ABS		51,626		(18,721	)		94,008		(897	)		145,634		(19,618	)
Municipals		13,432		(1,624	)		117,825		(2,613	)		131,257		(4,237	)

Total fixed maturities	$	705,305	$	(100,552	)	$	2,967,054	$	(33,636	)	$	3,672,359	$	(134,188	)


Equity securities	$	31,368	$	(6,025	)	$	86,947	$	(2,445	)	$	118,315	$	(8,470	)

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.	INVESTMENTS (CONTINUED)

Fixed Maturities

At March 31, 2010, 773 fixed maturities (2009: 832) were in an unrealized loss position of $105 million (2009: $134 million) of which $20 million (2009: $20 million) of this balance was related to securities below investment grade or not rated.

At March 31, 2010, 229 (2009: 312) securities have been in continuous unrealized loss position for 12 months or greater and have a fair value of $393 million (2009: $705 million). These securities were primarily corporate debt, non-agency residential MBS, non-agency commercial MBS, and ABS with a weighted average S&P credit rating of BBB+, BBB+, AA- and BBB-, respectively. We concluded these securities as well as the remaining securities in an unrealized loss position were temporarily impaired based on an analysis of the underlying credit, projected cash flows to be collected, and other qualitative factors. Further, at March 31, 2010, we did not intend to sell these securities in an unrealized loss position and it is more likely than not that we will not be required to sell these securities before the anticipated recovery of their amortized costs.

Equity Securities

At March 31, 2010, 88 securities (2009: 95) were in an unrealized loss position and 55 of these securities (2009: 56) have been in a continuous unrealized loss position for 12 months or greater. Based on our OTTI quarterly review process and our ability and intent to hold these securities for a reasonable period of time sufficient for a full recovery, we concluded that the above equities in an unrealized loss position were temporarily impaired at March 31, 2010 and December 31, 2009.

b)	Other Investments

The table below shows our portfolio of other investments reported at fair value:


	March 31, 2010			December 31, 2009

Hedge funds	$	96,918	18.0%	$	94,630	16.6%
Funds of hedge funds		227,618	42.2%		256,877	45.0%

Total hedge funds		324,536	60.2%		351,507	61.6%


Distressed securities		22,964	4.3%		22,957	4.0%
Long/short credit		81,373	15.1%		84,392	14.8%

Total credit funds		104,337	19.4%		107,349	18.8%


CLO - equity tranched securities		58,593	10.9%		61,332	10.8%
Short duration high yield fund		51,451	9.5%		50,088	8.8%

Total other investments	$	538,917	100.0%	$	570,276	100.0%

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.	INVESTMENTS (CONTINUED)

The major categories and related investment strategies for our investments in hedge and credit funds are as follows:


Hedge Fund Type		Investment Strategy
Hedge funds		Seek to achieve attractive risk-adjusted returns primarily through multi-strategy and long/short equity approaches. Multi-strategy funds invest in a variety of asset classes on a long and short basis and may employ leverage. Long/short equity funds invest primarily in equity securities (or derivatives) on a long and short basis and may employ leverage.

Funds of hedge funds		Seek to achieve attractive risk-adjusted returns by investing in a large pool of hedge funds across a diversified range of hedge fund strategies.


Credit Fund Type		Investment Strategy
Distressed securities		Seek to achieve attractive risk-adjusted returns by executing a strategy which assesses the issuer’s ability to improve its operations and often attempts to influence the process by which the issuer restructures its debt.

Long/short credit		Seek to achieve attractive risk-adjusted returns by executing a credit trading strategy involving selective long and short positions in primarily below investment-grade credit.

In aggregate, 94% of our hedge fund allocation is redeemable within one year and 100% is redeemable within two years, subject to prior written redemption notice varying from 45 to 95 days. This includes recognition of certain funds we hold which restrict new investor redemptions during a lock-up period. A lock-up period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. Another common restriction is the suspension of redemptions (known as “gates”) 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 or to prevent certain adverse regulatory, or any other reasons that may render the manager unable to promptly and accurately calculate the fund’s net asset value. During the three months ended March 31, 2010 and 2009, no gates were imposed on our redemption requests. At March 31, 2010, the only redemptions receivable relate to a December 31, 2009 redemption whereby

$2 million is being held back until the completion of the fund’s annual audit.

At March 31, 2010, we had $48 million of a long/short credit fund that we do not have the ability to liquidate at our own discretion as the fund is beyond its investment period and is currently distributing capital to its investors. Of the remaining credit fund holdings, 34% of the carrying value has annual or semi-annual liquidity and 66% has quarterly liquidity, subject to prior written redemption notice varying from 65 to 95 days.

At March 31, 2010, we have no unfunded commitments relating to our investments in hedge and credit funds.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.	INVESTMENTS (CONTINUED)

c)	Net Investment Income

Net investment income was derived from the following sources:


Three months ended March 31,	2010			2009
Fixed maturities	$	91,118		$	91,697
Other investments		16,265			6,870
Cash and cash equivalents		1,735			2,856
Equities		588			371
Short-term investments		220			266

Gross investment income		109,926			102,060
Investment expenses		(5,307	)		(2,768	)

Net investment income	$	104,619		$	99,292

d) Net Realized Investment Gains (Losses)

The following table provides an analysis of net realized investment gains (losses):


Three months ended March 31,	2010			2009
Gross realized gains	$	59,963		$	61,080
Gross realized losses		(41,338	)		(75,257	)
OTTI recognized in earnings		(5,508	)		(29,901	)

Net realized gains (losses) on fixed maturities and equities		13,117			(44,078	)

Change in fair value of investment derivatives ⁽¹⁾		(158	)		1,400

Fair value hedges: ⁽¹⁾
Derivative instruments		34,927			20,066
Hedged investments		(31,710	)		(17,985	)

Net realized investment gains (losses)	$	16,176		$	(40,597	)

(1)	Refer to Note 6 – Derivative Instruments

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.	INVESTMENTS (CONTINUED)

The following table summarizes the OTTI recognized in earnings by asset class:


Three months ended March 31,	2010		2009
Fixed maturities:
Corporate debt	$	1,650	$	11,422
Residential MBS		1,064		3,696
ABS		1,126		11,267

		3,840		26,385

Equities		1,668		3,516

Total OTTI recognized in earnings	$	5,508	$	29,901

Fixed maturities

On April 1, 2009, we adopted a new accounting standard which amended the previous OTTI recognition model for fixed maturities. Accordingly, for securities that we intended to sell at the end of each reporting period we recognized the entire unrealized loss in earnings. For the remaining impaired fixed maturities, from April 1, 2009, we have recorded only the estimated credit losses in earnings rather than the entire difference between the fair value and the amortized cost of fixed maturities. Because the new accounting standard does not allow for retrospective application, the OTTI amounts reported in the above table for the three months ended March 31, 2010, are not measured on the same basis as prior period amounts and accordingly these amounts are not comparable.

The following table provides a roll forward of the credit losses, before income taxes, for which a portion of the OTTI was recognized in AOCI:


Three months ended March 31,
Beginning balance at January 1, 2010	$	162,390
Additions for:
Credit impairments recognized on securities not previously impaired		344
Additional credit impairments recognized on securities previously impaired		587
Increases due to the passage of time on previously recorded credit losses		1,036
Reductions for:
Extended maturities on previously recorded credit losses		(551	)
Securities sold/redeemed during the period (realized)		(5,963	)

Ending balance at March 31, 2010	$	157,843

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.	INVESTMENTS (CONTINUED)

Credit losses are calculated based on the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to the impairment. The significant inputs and the methodology used to estimate the credit losses for which a portion of the OTTI was recognized in AOCI were as follows:

Corporate Debt:

Our projected cash flows for corporate debt securities are primarily driven by our assumptions regarding the probability of default and the timing and amount of recoveries associated with defaults. Our default and recovery rate assumptions are based on credit rating, credit analysis, industry analyst reports and forecasts, Moody’s historical default data and any other data relevant to the recoverability of the security. Additionally, our projected cash flows for MTNs include significant inputs such as future credit spreads and use of leverage over the expected duration of each MTN.

Residential MBS and Commercial MBS:

We utilized models to determine the estimated credit losses for structured debt securities. To project expected cash flows to be collected, we utilized underlying data from widely accepted third-party data sources as well as the following significant assumptions: expected defaults, delinquencies, recoveries, foreclosure costs, and prepayments. These assumptions require significant management judgment and vary for each structured security based on the underlying property type, vintage, loan to collateral value ratio, geographic concentration, and current level of subordination. For each structured debt security with a significant unrealized loss position we have also corroborated our principal loss estimate with the independent investment manager’s principal loss estimate.

For the first quarter of 2010, based on expected cash flows to be collected, we have recorded additional credit losses of $1 million on residential MBS.

ABS:

The majority of the unrealized losses on ABS at March 31, 2010 were related to CLO debt tranched securities. We utilized the same internal model as for CLO equity tranched securities (see Note 4 – Fair Value Measurements) to project estimated cash flows to be collected on the various CLO debt tranched securities. The significant inputs used in the model include default and recovery rates and collateral spreads. Our assumptions on default and recovery rates are established based on an assessment of actual experience to date for each CLO and review of recent credit rating agencies’ default and recovery forecasts. Based on projected cash flows at March 31, 2010, we do not anticipate credit losses on the CLO debt tranched securities.

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. We use a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. 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 we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.

•

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 our own assumptions 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 instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This may lead us to change the selection of our valuation technique (from market to cash flow approach) or may cause us 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.

We used the following methods and assumptions in estimating the fair value of our financial instruments as well as the general classification of such financial instruments pursuant to the above fair value hierarchy.

Fixed Maturities

At each valuation date, we use various valuation techniques to estimate the fair value of our fixed maturities portfolio. These techniques include, but are 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 are sourced from multiple vendors, and we maintain a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. The following describes the techniques generally used to determine the fair value of our fixed maturities by asset class.

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 our U.S. Treasury securities are based on unadjusted market prices, they are classified within Level 1. The fair values of U.S. government agency securities are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.	FAIR VALUE MEASUREMENTS (CONTINUED)

Non-U.S. government

Non-U.S. government securities comprise bonds issued by non-U.S. governments and their agencies along with supranational organizations. The fair value of these securities is based on prices obtained from international indices or a valuation model that includes the following inputs: 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 are observable market inputs, the fair value of non-U.S. government securities are classified within 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 these spreads and the yields for the risk-free yield curve are observable market inputs, the fair values of our corporate debt securities are classified within Level 2. Where pricing is unavailable from pricing services, we obtain unbinding quotes from broker-dealers. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. These securities are classified within Level 3 and consisted primarily of private corporate debt securities at March 31, 2010.

MBS

Our portfolio of residential MBS and commercial MBS are originated by both agencies and non-agencies. The fair values of these securities are determined through the use of a pricing model (including Option Adjusted Spread) which uses prepayment speeds and spreads to determine the appropriate average life of the MBS. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the significant inputs used to price MBS are observable market inputs, the fair values of the MBS are classified within Level 2. Where pricing is unavailable from pricing services, we obtain unbinding 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. These securities are classified within Level 3 and consist primarily of certain non-agency residential MBS.

ABS

ABS include mostly investment-grade bonds backed by pools of loans with a variety of underlying collateral, including automobile loan receivables, credit card receivables, and collateralized loan obligation debt tranched securities originated by a variety of financial institutions. Similarly to MBS, the fair values of ABS are priced through the use of a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price ABS are observable market inputs, the fair values of ABS are classified within Level 2. Where pricing is unavailable from pricing services, we obtain unbinding quotes from broker-dealers or use an internal model to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. At March 31, 2010, the use of an internal model was limited to our investment in CLO debt tranched securities and included the following significant inputs: default and recovery rates, collateral spreads, and risk free yield curves. As most of these inputs are unobservable, these securities are classified within Level 3.

Municipals

Our municipal portfolio comprises bonds issued by U.S. domiciled state and municipality entities. The fair value of these securities is determined using spreads obtained from broker-dealers, trade prices and the new issue market. As the significant inputs used to price the municipals are observable market inputs, municipals are classified within Level 2.

Equity Securities

Equity securities include U.S. and foreign common stocks as well as a foreign bond mutual fund. For common stocks we classified these within Level 1 as their fair values are based on quoted market prices in active markets. Our investment in the foreign bond mutual fund has daily liquidity, with redemption based on the net asset value of the fund. Accordingly, we have classified this investment as Level 2.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.	FAIR VALUE MEASUREMENTS (CONTINUED)

Other Investments

The short-duration high yield fund is classified within Level 2 as its fair value is estimated using the net asset value reported by Bloomberg and it has daily liquidity.

The hedge and credit funds are classified within Level 3 as we estimate their respective fair values using net asset values as advised by external fund managers or third party administrators. Refer to Note 3 for further details on this asset class.

The CLO – equity tranched securities (“CLO – Equities”) are classified within Level 3 as we estimate the fair value for these securities based on an internal valuation model due to the lack of observable, relevant trade in the secondary markets. At March 31, 2010, our internal valuation model included the following significant unobservable inputs which remained unchanged from December 31, 2009.


Default rates:
- for 2010	4.6	%
- thereafter until maturity of securities	4.4	%

Recovery rate until maturity of securities	50.0	%

Collateral spreads until maturity of securities	3.3	%

Derivative Instruments

Our foreign currency forward contracts and options are customized to our hedging strategies and trade in the over-the-counter derivative market. We estimate the fair value for these derivatives using models based on significant observable market inputs from third party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. Accordingly, we classified these derivatives within Level 2.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.	FAIR VALUE MEASUREMENTS (CONTINUED)

The table below presents the financial instruments measured at fair value on a recurring basis.


At March 31, 2010	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total Fair Value

Assets
Fixed maturities
U.S. government and agency	$	795,468	$	538,598		$	-	$	1,334,066
Non-U.S. government		-		678,897			-		678,897
Corporate debt		-		3,843,740			18,169		3,861,909
Residential MBS		-		1,870,043			3,420		1,873,463
Commercial MBS		-		696,696			3,447		700,143
ABS		-		515,256			47,663		562,919
Municipals		-		637,802			-		637,802

		795,468		8,781,032			72,699		9,649,199
Equity securities		145,501		56,419			-		201,920
Other investments		-		51,451			487,466		538,917
Other assets (see Note 6)		-		308			-		308

Total	$	940,969	$	8,889,210		$	560,165	$	10,390,344


Liabilities
Other liabilities (see Note 6)	$	-	$	(9,632	)	$	-	$	(9,632	)



At December 31, 2009

Assets
Fixed maturities
U.S. government and agency	$	1,207,033	$	649,626		$	-	$	1,856,659
Non-U.S. government		-		696,814			-		696,814
Corporate debt		-		3,562,636			18,130		3,580,766
Residential MBS		-		1,773,002			6,639		1,779,641
Commercial MBS		-		660,402			2,409		662,811
ABS		-		399,554			43,585		443,139
Municipals		-		698,525			-		698,525

		1,207,033		8,440,559			70,763		9,718,355
Equity securities		142,716		61,659			-		204,375
Other investments		-		50,088			520,188		570,276
Other assets (see Note 6)		-		9,968			-		9,968

Total	$	1,349,749	$	8,562,274		$	590,951	$	10,502,974


Liabilities
Other liabilities	$	-	$	-		$	-	$	-

During 2010 and 2009, we had no transfers between Levels 1 and 2.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.	FAIR VALUE MEASUREMENTS (CONTINUED)

Level 3 financial instruments

The following tables present changes in Level 3 for financial instruments measured at fair value on a recurring basis for the periods indicated:


	Fixed Maturities
Three months ended March 31, 2010	Corporate debt			Residential MBS			Commercial MBS			ABS			Total			Other Investments			Total Assets

Balance at beginning of period	$	18,130		$	6,639		$	2,409		$	43,585		$	70,763		$	520,188		$	590,951

Total net realized and unrealized gains included in net income ⁽¹⁾		-			-			-			-			-			14,902			14,902
Total net realized and unrealized losses included in net income ⁽¹⁾		(1,550	)		-			-			-			(1,550	)		-			(1,550	)
Change in net unrealized gains included in other comprehensive income		1,623			274			32			106			2,035			-			2,035
Change in net unrealized losses included in other comprehensive income		(34	)		(20	)		(238	)		(24	)		(316	)		-			(316	)
Purchases		-			-			3,474			4,000			7,474			-			7,474
Sales		-			-			-			-			-			(42,593	)		(42,593	)
Settlements / distributions		-			(353	)		(111	)		(4	)		(468	)		(5,031	)		(5,499	)
Transfers into Level 3		-			780			-			-			780			-			780
														-
Transfers out of Level 3		-			(3,900	)		(2,119	)		-			(6,019	)		-			(6,019	)

Balance at end of period	$	18,169		$	3,420		$	3,447		$	47,663		$	72,699		$	487,466		$	560,165

Level 3 gains / losses included in earnings attributable to the change in unrealized gains / losses relating to those assets held at the reporting date	$	(1,550	)	$	-		$	-		$	-		$	(1,550	)	$	14,902		$	13,352

(1)	Realized gains and losses on fixed maturities are included in net realized investment gains (losses). Realized gains and (losses) on other investments are included in net investment income.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.	FAIR VALUE MEASUREMENTS (CONTINUED)


	Fixed Maturities
Three months ended March 31, 2009	Corporate debt			Residential MBS			Commercial MBS			ABS			Total			Other Investments			Total Assets			Other Liabilities ⁽¹⁾

Balance at beginning of period	$	-		$	-		$	-		$	-		$	-		$	450,542		$	450,542		$	62,597

Total net realized and unrealized gains included in net income ⁽¹⁾		-			-			-			-			-			7,229			7,229			-
Total net realized and unrealized losses included in net income ⁽¹⁾		-			-			-			(373	)		(373	)		(945	)		(1,318	)		10,000
Change in net unrealized gains included in other comprehensive income		-			1,319			107			408			1,834			-			1,834			-
Change in net unrealized losses included in other comprehensive income		(1,284	)		(375	)		(21	)		(2,452	)		(4,132	)		-			(4,132	)		-
Purchases		-			-			-			-			-			40,000			40,000			-
Sales		-			-			-			-			-			(42,044	)		(42,044	)		-
Settlements / distributions		-			(3,078	)		-			(193	)		(3,271	)		(2,800	)		(6,071	)		-
Transfers into Level 3		18,818			51,168			479			50,368			120,833			-			120,833			-
Transfers out of Level 3		-			-			-			-			-			-			-			-

Balance at end of period	$	17,534		$	49,034		$	565		$	47,758		$	114,891		$	451,982		$	566,873		$	72,597

Level 3 gains / losses included in earnings attributable to the change in unrealized gains /losses relating to those assets and liabilities held at the reporting date	$	-		$	-		$	-		$	(373	)	$	(373	)	$	6,284		$	5,911		$	-

(1)	Realized gains and losses on fixed maturities are included in net realized investment gains (losses). Realized gains and (losses) on other investments are included in net investment income. Losses on other liabilities are included in other insurance related (loss) income.

During the three months ended March 31, 2010, certain fixed maturities with a fair value of $1 million (2009: $121 million) were transferred into Level 3 from Level 2. At March 31, 2010, the reclassifications to Level 3 consisted of residential MBS; whereas at March 31, 2009 the reclassifications were primarily related to residential MBS, commercial MBS and debt tranches of CLOs (included in ABS). The transfers into Level 3 were due to a reduction in the volume of recently executed transactions and market quotations for these securities, or a lack of available broker quotes such that unobservable inputs had to be utilized for the valuation of these securities. The transfers into Level 3 were not as a result of changes in valuation methodology that we made.

As the financial markets continued to recover during the first quarter of 2010, the volume of market transactions also increased for certain of our Level 3 securities such that significant observable market inputs were used for the valuation of these securities at March 31, 2010. As a result, certain fixed maturities with a fair value of $6 million were transferred out of Level 3 to Level 2.

Following the adoption of the new Fair Value Measurements and Disclosures guidance on January 1, 2010, transfers into and out of Level 3 reflect the fair value of the securities at the end of the reporting period. This transition was applied prospectively and accordingly the current quarter’s transfers into and out of Level 3 from Level 2 are not comparable with prior period as transfers into Level 3 were previously recorded at the fair value of the security at the beginning of the reporting period.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.	FAIR VALUE MEASUREMENTS (CONTINUED)

Fair Values of Financial Instruments

The carrying amount of financial assets and liabilities presented on the Consolidated Balance Sheets as at March 31, 2010, and December 31, 2009 approximated their fair values with the exception of senior notes. At March 31, 2010, the senior notes are recorded at amortized cost with a carrying value of $994 million (2009: $499 million) and a fair value of $1,020 million (2009: $510 million).

5.	RESERVE FOR LOSSES AND LOSS EXPENSES

The following table shows a reconciliation of our beginning and ending gross unpaid losses and loss expenses for the periods indicated:



Three months ended March 31,	2010			2009
Gross reserve for losses and loss expenses, beginning of period	$	6,564,133		$	6,244,783
Less reinsurance recoverable on unpaid losses, beginning of period		(1,381,058	)		(1,314,551	)

Net reserve for losses and loss expenses, beginning of period		5,183,075			4,930,232


Net incurred losses related to:
Current year		549,728			472,333
Prior years		(81,466	)		(84,334	)

		468,262			387,999


Net paid losses related to:
Current year		(11,306	)		(14,802	)
Prior years		(249,727	)		(259,291	)

		(261,033	)		(274,093	)

Foreign exchange gains		(58,144	)		(37,003	)

Net reserve for losses and loss expenses, end of period		5,332,160			5,007,135
Reinsurance recoverable on unpaid losses, end of period		1,427,362			1,385,143

Gross reserve for losses and loss expenses, end of period	$	6,759,522		$	6,392,278

We write business with loss experience generally characterized as low frequency and high severity in nature, which results in volatility in our financial results. During the three months ended March 31, 2010, we recognized net loss and loss expenses of $106 million relating to the Chilean earthquake in February 2010. Our estimate was derived from a ground-up assessment of our individual contracts and treaties in the affected regions and is consistent with our market share in the region. As part of our estimation process, we also considered current industry insured loss estimates, market share analysis, catastrophe modeling analysis and the limited information available to date from clients, brokers and loss adjusters. Industry-wide insured loss estimates and our own loss estimate for the Chilean earthquake are subject to change, as there is very limited actual loss data available at this time. Actual losses in relation to this event may ultimately differ materially from current loss estimates.

Net losses and loss expenses incurred include net favorable prior period reserve development of $81 million and $84 million for the three months ended March 31, 2010 and 2009, respectively. Prior period reserve development arises from changes to loss estimates recognized in the current year that relate to losses incurred in previous calendar years.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.	RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)

The following table summarizes net favorable reserve development by segment:



Three months ended March 31,	2010		2009
Insurance	$	25,369	$	35,906
Reinsurance		56,097		48,428

Total	$	81,466	$	84,334

Overall, a significant portion of the net favorable prior period reserve development in the first quarters of 2010 and 2009 was generated from the property, marine, terrorism (included in “other”) and aviation lines of our insurance segment and the property, catastrophe and crop lines of our reinsurance segment. These lines of business, the majority of which have short tail exposures, contributed $51 million and $78 million of the total net favorable reserve development in the first quarters of 2010 and 2009, respectively. The favorable development on these lines of business primarily reflects the recognition of better than expected loss emergence rather than explicit changes to our actuarial assumptions.

Approximately $36 million and $14 million of the net favorable reserve development in the first quarter of 2010 and 2009, respectively, was generated from professional lines insurance and reinsurance business. This favorable development was driven by increased incorporation of our own historical claims experience into our ultimate expected loss ratios for accident years 2006 and prior, with less weighting being given to information derived from industry benchmarks. We began to give weight to our own loss experience on 2005 and prior accident year professional lines business in 2008 because they had developed a reasonable level of credible loss data. However, the impact of this change was somewhat muted in the first quarter of 2009 due to the strengthening of reserves on the 2007 and 2008 accident years in relation to the credit crisis.

6.	DERIVATIVE INSTRUMENTS

The following table summarizes information on the location and amounts of derivative fair values on the consolidated balance sheet at March 31, 2010:

Asset Derivatives

Liability Derivatives

Notional
Amount

Balance Sheet
Location

Fair value

Balance Sheet
Location

Fair Value

Derivatives designated as hedging instruments

Foreign exchange contracts

606,118

Other assets

Other liabilities

(8,447

)

Derivatives not designated as hedging instruments

Relating to investment portfolio:

Foreign exchange contracts

60,407

Other assets

308

Other liabilities

(723

)

Relating to underwriting portfolio:

Foreign exchange contracts

33,165

Other assets

Other liabilities

(462

)

Total derivatives

308

(9,632

)

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.	DERIVATIVE INSTRUMENTS (CONTINUED)

The following table summarizes information on the location and amounts of derivative fair values on the consolidated balance sheet at December 31, 2009:

Asset Derivatives

Liability Derivatives

Notional
Amount

Balance Sheet
Location

Fair value

Balance Sheet
Location

Fair Value

Derivatives designated as hedging instruments

Foreign exchange contracts

659,617

Other assets

9,557

Other liabilities

Derivatives not designated as hedging instruments

Relating to investment portfolio:

Foreign exchange contracts

21,436

Other assets

411

Other liabilities

Total derivatives

9,968

For the fair value hierarchy level, refer to Note 4 – Fair Value Measurements.

The following table provides the total unrealized and realized gains (losses) recorded in earnings for the three months ended March 31, 2010 and 2009.


	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		2010			2009

Derivatives designated as hedging instruments
Foreign exchange contracts	Net realized investment gains (losses)	$	34,927		$	20,066


Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange contracts	Net realized investment gains (losses)	$	(158	)	$	1,400

Relating to underwriting portfolio:
Longevity risk derivative	Other insurance related income (loss)		-			(10,000	)
Currency collar options:
Put options - Long	Foreign exchange gains (losses)		-			2,331
Call options - Short	Foreign exchange gains (losses)		-			97
Foreign exchange contracts	Foreign exchange gains (losses)		3,064			3,152
Catastrophe-related risk	Other insurance related income (loss)		-			(35	)

Total		$	2,906		$	(3,055	)

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.	DERIVATIVE INSTRUMENTS (CONTINUED)

Derivative Instruments Designated as a Fair Value Hedge

The hedging relationship foreign currency contracts were entered into to mitigate the foreign currency exposure of two available for sale (“AFS”) fixed maturity portfolios denominated in Euros. The hedges were designated and qualified as a fair value hedge. The net impact of the hedges is recognized in net realized investment losses.

The following table provides the net earnings impact of the fair value hedges for the three months ended March 31, 2010 and 2009:



Three months ended March 31,	2010			2009

Foreign exchange contracts	$	34,927		$	20,066
Hedged investment portfolio		(31,710	)		(17,985	)


Hedge ineffectiveness recognized in earnings	$	3,217		$	2,081

Derivative Instruments not Designated as Hedging Instruments

a) Relating to Investment Portfolio

Within our investment portfolio we are exposed to foreign currency risk. Accordingly, the fair values for our investment portfolio are partially influenced by the change in foreign exchange rates. We entered into foreign currency forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities have not been designated as specific hedges for financial reporting purposes.

b) Relating to Underwriting Portfolio

Longevity Risk

In September 2007, we issued a policy which indemnifies a third party in the event of a non-payment of a $400 million asset-backed note. This security had a 10 year term with the full principal amount due at maturity and was collateralized by a portfolio of life settlement contracts and cash held by a special purpose entity. We concluded that the indemnity contract was a derivative instrument and accordingly recorded it at its fair value. For the three months ended, March 31, 2009, the loss on this contract was $10 million. This contract was cancelled and settled during the fourth quarter of 2009.

Foreign Currency Risk

Our insurance and reinsurance subsidiaries and branches operate in various foreign countries and consequently our underwriting portfolio is exposed to significant foreign currency risk. We manage foreign currency risk by seeking to match our liabilities under insurance and reinsurance policies that are payable in foreign currencies with cash and investments that are denominated in such currencies. When necessary, we may also use derivatives to economically hedge un-matched foreign currency exposures, specifically forward contracts and currency options.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7.	SHARE-BASED COMPENSATION

Restricted Stock

The following table provides a reconciliation of the beginning and ending balance of nonvested restricted stock for the three months ended March 31, 2010:


	Number of Restricted Stock		Weighted Average Grant Date Fair Value
Nonvested restricted stock - beginning of period	4,555		$	33.03
Granted	1,387			28.70
Vested	(1,805	)		31.91
Forfeited	(40	)		34.14

Nonvested restricted stock - end of period	4,097		$	32.12

At March 31, 2010, we had 4,096,703 nonvested restricted stock outstanding, including 295,625 restricted stock units. For the three months ended March 31, 2010 and 2009, we incurred share-based compensation costs of $10 million and $14 million, respectively, and recorded tax benefits thereon of $2 million (2009: $1 million). The total grant-date fair value of shares vested during the three months ended March 31, 2010 and 2009 were $58 million and $51 million, respectively. At March 31, 2010 and December 31, 2009, there were $91 million and $63 million, respectively, of unrecognized share-based compensation costs, which are expected to be recognized over the weighted average period of 3.0 years and 2.4 years, respectively.

8.	EARNINGS PER COMMON SHARE

The following table sets forth the comparison of basic and diluted earnings per common share:



At and for the three months ended March 31,	2010		2009
Basic earnings per common share
Net income available to common shareholders	$	111,812	$	115,679

Weighted average common shares outstanding		128,202		137,316

Basic earnings per common share	$	0.87	$	0.84


Diluted earnings per common share
Net income available to common shareholders	$	111,812	$	115,679

Weighted average common shares outstanding		128,202		137,316
Share equivalents:
Warrants		11,675		9,729
Restricted stock		1,501		1,308
Options		761		668
Restricted stock units		37		2

Weighted average common shares outstanding - diluted		142,176		149,023

Diluted earnings per common share	$	0.79	$	0.78

For the three months ended March 31, 2010, there were 400,834 (2009: 2,405,980) restricted stock, nil (2009: 1,567,168) options and nil (2009: 162,000) restricted stock units, which would have resulted in the issuance of common shares that were excluded in the computation of diluted earnings per share because the effect would be anti-dilutive.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9.	SHAREHOLDERS’ EQUITY

a)	Common Shares

The following table presents our common shares issued and outstanding:



Three months ended March 31,	2010		2009

Shares issued, balance at beginning of period	152,465		150,455
Shares issued	2,008		1,630

Total shares issued at end of period	154,473		152,085


Treasury shares, balance at beginning of period	(20,325	)	(14,243	)
Shares repurchased	(9,993	)	(220	)

Total treasury shares at end of period	(30,318	)	(14,463	)


Total shares outstanding	124,155		137,622

b)	Treasury Shares

During the three months ended March 31, 2010 and 2009, we made the following share repurchases, which are held in treasury:


Three months ended March 31,	2010		2009
In the open market:
Total shares		9,639		—
Total cost	$	287,350	$	—


Average price per share ⁽¹⁾	$	29.81	$	—


From employees:
Total shares		354		220
Total cost	$	10,217	$	5,806


Average price per share ⁽¹⁾	$	28.87	$	26.40

Total
Total shares		9,993		220
Total cost	$	297,567	$	5,806


Average price per share ⁽¹⁾	$	29.78	$	26.40

(1)	Calculated using whole figures.

Subsequent to March 31, 2010, through April 23, 2010, we repurchased a further 1,922,600 common shares at an average price of $31.43 per share, for a total cost of $60 million. At April 23, 2010, we have approximately $194 million of remaining authorization for common share repurchases under the 2009 plan, which will expire on December 31, 2011.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

10.

DEBT AND FINANCING ARRANGEMENTS

On March 23, 2010, AXIS Specialty Finance LLC (“AXIS Specialty Finance”), an indirect wholly-owned subsidiary of AXIS Capital, issued $500 million aggregate principal amount of 5.875% senior unsecured debt (“5.875% Senior Notes”) at an issue price of 99.624%. The net proceeds of the issuance, after consideration of the offering discount and underwriting expenses and commissions, totaled approximately $495 million. AXIS Specialty Finance has the option to redeem the 5.875% Senior Notes at any time and from time to time, in whole or in part, at a “make-whole” redemption price. Unless previously redeemed, the 5.875% Senior Notes will mature on June 1, 2020. Interest on the 5.875% Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2010.

The 5.875% Senior Notes are ranked as unsecured senior obligations of AXIS Specialty Finance. AXIS Capital has fully and unconditionally guaranteed all obligations of AXIS Specialty Finance under the 5.875% Senior Notes. AXIS Capital’s obligations under this guarantee are unsecured and senior and rank equally with all other senior obligations of AXIS Capital.

The related indenture contains various covenants, including limitations on liens on the stock of restricted subsidiaries, restrictions as to the disposition of the stock of restricted subsidiaries and limitations on mergers and consolidations. We were in compliance with all the covenants contained in the indenture at March 31, 2010.

Consistent with our Senior Notes issued in November 2004, interest expense recognized in relation to the 5.875% Senior Notes includes interest payable, amortization of the offering discount and amortization of debt offering expenses. The offering discount and debt offering expenses are amortized over the period of time during which the Senior Notes are outstanding.

AXIS CAPITAL HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

11.

COMMITMENTS AND CONTINGENCIES

a)	Legal Proceedings

Except as noted below, we are not a party to any material 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. In our opinion, the eventual outcome of these legal proceedings is not expected to have a material adverse effect on our financial condition or results of operations.

In 2005, a putative class action lawsuit was filed against our U.S. insurance subsidiaries. In re Insurance Brokerage Antitrust Litigation was filed on August 15, 2005 in the United States District Court for the District of New Jersey and includes as defendants numerous insurance brokers and insurance companies. The lawsuit alleges antitrust and Racketeer Influenced and Corrupt Organizations Act (“RICO”) violations in connection with the payment of contingent commissions and manipulation of insurance bids and seeks damages in an unspecified amount. On October 3, 2006, the District Court granted, in part, motions to dismiss filed by the defendants, and ordered plaintiffs to file supplemental pleadings setting forth sufficient facts to allege their antitrust and RICO claims. After plaintiffs filed their supplemental pleadings, defendants renewed their motions to dismiss. On April 15, 2007, the District Court dismissed without prejudice plaintiffs’ complaint, as amended, and granted plaintiffs thirty (30) days to file another amended complaint and/or revised RICO Statement and Statements of Particularity. In May 2007, plaintiffs filed (i) a Second Consolidated Amended Commercial Class Action complaint, (ii) a Revised Particularized Statement Describing the Horizontal Conspiracies Alleged in the Second Consolidated Amended Commercial Class Action Complaint, and (iii) a Third Amended Commercial Insurance Plaintiffs’ RICO Case Statement Pursuant to Local Rule 16.1(B)(4). On June 21, 2007, the defendants filed renewed motions to dismiss. On September 28, 2007, the District Court dismissed with prejudice plaintiffs’ antitrust and RICO claims and declined to exercise supplemental jurisdiction over plaintiffs’ remaining state law claims. On October 10, 2007, plaintiffs filed a notice of appeal of all adverse orders and decisions to the United States Court of Appeals for the Third Circuit, and a hearing was held in April 2009. We believe that the lawsuit is completely without merit and we continue to vigorously defend the filed action.

b)	Dividends for Common Shares and Preferred Shares

On March 4, 2010, our Board of Directors declared a dividend of $0.21 per common share to shareholders of record at March 31, 2010 and payable on April 15, 2010. The Board of Directors also declared a dividend of $0.453125 per Series A 7.25% Preferred Share and a dividend of $1.875 per Series B 7.5% Preferred Share. The Series A Preferred Share dividend is payable on April 15, 2010, to shareholders of record at the close of business on March 31, 2010 and the Series B Preferred Share dividend is payable on June 1, 2010, to shareholders of record at the close of business on May 14, 2010.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations. This should be read in conjunction with the consolidated financial statements and related notes included in Item 1 of this report and also our Management’s Discussion and Analysis of Results of Operations and Financial Condition contained in our Annual Report on Form 10-K for the year ended December 31, 2009. Tabular dollars are in thousands, except per share amounts. Amounts in tables may not reconcile due to rounding differences.


		Page

First Quarter 2010 Financial Highlights		35

Executive Summary		36

Underwriting Results – Group		38

Results by Segment: Years ended December 31, 2009, 2008 and 2007		43

i) Insurance Segment		43

ii) Reinsurance Segment		45

Other Revenues and Expenses		48

Investment Income and Net Realized Investment Gains/Losses		49

Cash and Investments		52

Liquidity and Capital Resources		56

Commitments and Contingencies		57

Critical Accounting Estimates		57

New Accounting Standards		57

Off-Balance Sheet and Special Purpose Entity Arrangements		57

Non-GAAP Financial Measures		58

FIRST QUARTER 2010 FINANCIAL HIGHLIGHTS

First Quarter 2010 Consolidated Results of Operations

•

Net income available to common shareholders of $112 million, or $0.87 per share basic and $0.79 diluted

•

Operating income of $96 million, or $0.67 per share diluted ⁽¹⁾

•

Gross premiums written of $1.4 billion

•

Net premiums earned of $0.7 billion

•

Net favorable prior year reserve development of $81 million, pre-tax

•

Estimated pre-tax net losses, net of related reinstatement premiums, of $100 million for the Chilean earthquake and $47 million for Australian storms, European Windstorm Xynthia and U.S. winter storms, combined

•

Underwriting income of $28 million and combined ratio of 98.3%

•

Net investment income of $105 million

•

Net realized investment gains of $16 million

First Quarter 2010 Consolidated Financial Condition

•

Total investments of $10.5 billion; fixed maturities and short-term securities comprise 93% of total investments, with an average credit rating of AA

•

Total assets of $16.3 billion

•

Reserve for losses and loss expenses of $6.8 billion and reinsurance recoverable of $1.4 billion

•

Total debt of $994 million and debt to total capitalization ratio of 15.6%, following the issuance of $500 million aggregate principal value senior notes

•

Common shareholders’ equity of $4.9 billion; diluted book value per common share of $34.56

•

Repurchased 9.64 million common shares in the open market for total cost of $287 million under share repurchase authorization; remaining authorization of $255 million at March 31, 2010

•

Strong liquidity with $4.4 billion expected to be available within one to three business days

(1)	Operating income is a non-GAAP financial measure as defined in SEC Regulation G. See ‘Non-GAAP Financial Measures’ for reconciliation to nearest GAAP financial measure (net income available to common shareholders)

EXECUTIVE SUMMARY

Business Overview

We are a Bermuda-based global provider of specialty lines insurance and treaty reinsurance products with operations in Bermuda, the United States, Europe, Singapore, Canada and Australia. Our underwriting operations are organized around our two global underwriting platforms, AXIS Insurance and AXIS Reinsurance. Our strategy is to leverage our expertise, experience and relationships to expand our business globally. We are focused on organic growth, which we have supplemented with small acquisitions, while managing a portfolio of diversified and attractively priced risks. Our execution on this strategy in the first quarter included the launch of our Global Accident & Health platform, focused on specialty products rather than traditional medical coverages and locking in $500 million of capital for 10 years at 5.875% via issuance of senior notes in March 2010, taking advantage of the favorable interest rate environment. We expect these actions will contribute to our long-term growth.

Results of Operations


Three months ended March 31,	2010			Percentage Change	2009
Three months ended March 31,	2010			Percentage Change	2009

Underwriting income (loss):
Insurance	$	33,453		(8%)	$	36,430
Reinsurance		(5,007	)	(108%)		60,807
Net investment income		104,619		5%		99,292
Net realized investment gains (losses)		16,176		nm		(40,597	)
Other revenues and expenses		(28,210	)	(9%)		(31,034	)

Net income		121,031		(3%)		124,898
Preferred share dividends		(9,219	)	-		(9,219	)

Net income available to common shareholders	$	111,812		(3%)	$	115,679


Operating income:
Operating income	$	95,650		(39%)	$	155,811
Net realized investment gains (losses), net of tax		16,162				(40,132	)

Net income available to common shareholders	$	111,812			$	115,679

nm	– not meaningful

Underwriting Results

Total underwriting income for the first quarter of 2010 decreased $69 million, or 71%, from the same period of 2009. The decrease was driven by higher catastrophe losses, in particular, net losses incurred of $100 million as a result of the Chilean earthquake in February 2010 (net of related reinstatement premiums). Other net catastrophe losses this quarter included Australian storms, European Windstorm Xynthia and U.S. winter storms, together totaling $47 million. Catastrophe losses in the first quarter of 2009 were less significant and emanated largely from European Windstorm Klaus.

Underwriting income in our insurance segment was broadly in line with the prior year quarter.

Our reinsurance segment generated an underwriting loss of $5 million in the first quarter of 2010, compared to income of $61 million in the first quarter of 2009. This variance was primarily driven by the higher level of catastrophe losses, discussed above.

Net Investment Income

Net investment income for the first quarter of 2010 was $5 million, or 5%, higher in comparison with the same period in the prior year. Fair value increases on our other investments were the primary driver of this increase.

Net Realized Investment Gains (Losses)

Unprecedented volatility and turmoil in the global financial markets during 2008 and 2009 led to significant impairment charges on our available-for-sale investments in the prior year. In the first quarter of 2009, net realized investment losses included other-than-temporary impairment (“OTTI”) charges of $30 million and losses on the sale of preferred shares amounting to $15 million. Financial markets were comparatively stable in the first quarter of 2010 and OTTI charges declined to $6 million.

Other Revenues and Expenses

The 9% reduction in other revenues and expenses was primarily due to foreign exchange gains, which more than offset an increase in income tax expense due to a higher proportion of consolidated income being earned by our U.S. and European subsidiaries.

Financial Measures

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



Three months ended and at March 31,	2010		2009

ROACE (annualized) ⁽¹⁾		9.1%		11.6%
Operating ROACE (annualized) ⁽²⁾		7.7%		15.7%
DBV per common share ⁽³⁾	$	34.56	$	26.35
Cash dividends per common share	$	0.21	$	0.20

(1)	ROACE is calculated by dividing annualized net income available to common shareholders for the period by the average shareholders’ equity determined by using the common shareholders’ equity balances at the beginning and end of the period.

(2)

Operating ROACE is calculated by dividing annualized operating income for the period by the average common shareholders’ equity determined by using the common shareholders’ equity balances at the beginning and end of the period. Annualized operating ROACE is a non-GAAP financial measure as defined in SEC Regulation G. See ‘Non-GAAP Financial Measures’ for reconciliation to the nearest GAAP financial measure (ROACE).

(3)	DBV represents total common shareholders’ equity divided by the number of common shares and diluted common share equivalents outstanding, determined using the treasury stock method.

Return on Equity

Annualized ROACE for the first quarter of 2010 decreased 2.5 percentage points relative to the comparable 2009 period. The decline primarily reflects a higher average common equity balance this quarter, following a global recovery in financial markets, together with net income available to common shareholders generated over the last 12 months. This was partially offset by common share repurchases executed in the fourth quarter of 2009 and first quarter of 2010.

The 8.0 percentage point decline in annualized operating ROACE reflects the higher average common equity, as noted for ROACE above, as well as a 39% reduction in operating income. Operating income was significantly impacted by the level of catastrophe activity noted in the first quarter of 2010. Although the impact of catastrophes on net income and ROACE was largely mitigated by a $57 million favorable variance in net realized gains/losses due to improved economic conditions, these are excluded from operating income and operating ROACE.

Diluted book value per common share (“DBV per common share”)

Our March 31, 2009 DBV per common share was depressed as a result of unprecedented turmoil in global credit and equity markets. By December 31, 2009, our DBV per common share had recovered to $33.65 due to: (1) a recovery in global financial markets resulting in improved valuations for our available-for-sale securities, (2) the generation of net income available to common shareholders of $345 million in the last three quarters of 2009 and (3) the execution of share repurchases in the fourth quarter of 2009. The increase in the first quarter of 2010 was primarily driven by net income, the execution of further share repurchases at a discount to diluted book value and net increases in the fair value of our investments.

UNDERWRITING RESULTS - GROUP

The following table provides our group underwriting results for the periods indicated. Underwriting income is a measure of underwriting profitability that takes into account net premiums earned and other insurance related income as revenues and net losses and loss expenses, acquisition costs and underwriting-related general and administrative costs as expenses.


Three months ended March 31,	2010			Percentage Change	2009

Revenues:
Gross premiums written	$	1,425,201		8%	$	1,323,495
Net premiums written		1,243,635		7%		1,162,301
Net premiums earned		696,192		5%		665,359
Other insurance related income (loss)		626		nm		(9,395	)

Expenses:
Current year net losses and loss expenses		(549,728	)			(472,333	)
Prior period reserve development		81,466				84,334
Acquisition costs		(116,649	)			(101,976	)
General and administrative expenses		(83,461	)			(68,752	)

Underwriting income ⁽¹⁾	$	28,446		(71%)	$	97,237

nm	– not meaningful

(1)	Refer to Item 1, Note 2 to the Consolidated Financial Statements, for a reconciliation of underwriting income to “Income before income tax” for the periods indicated above.

UNDERWRITING REVENUES

Premiums Written: Gross and net premiums written, by segment, were as follows:


	Gross Premiums Written
Three months ended March 31,	2010		Change	2009
Insurance	$	372,929	2%	$	364,158
Reinsurance		1,052,272	10%		959,337

Total	$	1,425,201	8%	$	1,323,495


% ceded
Insurance		45%	3%		42%
Reinsurance		1%	-		1%
Total		13%	1%		12%

	Net Premiums Written
	2010		Change	2009
Insurance	$	206,812	(2%)	$	212,015
Reinsurance		1,036,823	9%		950,286

Total	$	1,243,635	7%	$	1,162,301

The 8% increase in consolidated gross premiums written largely reflects increases in our reinsurance segment, driven primarily by growth opportunities within our credit and bond and motor lines of business. Growth in our insurance segment is primarily attributable to select U.S. middle-market property and energy opportunities. Reinsurance protection within our insurance segment was broadly in line with the prior year quarter.

Net Premium Earned: Net premiums earned by segment were as follows:


Three months ended March 31,	2010			2009			Percentage Change

Insurance	$	256,281	37%	$	275,623	41%	(7%)
Reinsurance		439,911	63%		389,736	59%	13%

Total	$	696,192	100%	$	665,359	100%	5%

Changes in net premiums earned reflect period to period changes in net premiums written and business mix, together with normal variability in premium earning patterns. In our reinsurance segment, where a significant portion of our business is written in the first quarter, the 13% increase in net premiums earned primarily reflects the growth in gross premiums written, discussed above. In our insurance segment, where premiums are written more evenly throughout the year, the 7% decrease in net premiums earned was driven by premium reductions over the last year as we reduced our aggregate natural peril catastrophe exposures.

UNDERWRITING EXPENSES

The following table provides a breakdown of our combined ratio:


Three months ended March 31,	2010		Percentage Point Change	2009

Current accident year loss ratio	79.0%		8.0	71.0%
Prior period reserve development	(11.7%	)	1.0	(12.7%	)
Acquisition cost ratio	16.7%		1.4	15.3%
General and administrative expense ratio ⁽¹⁾	14.3%		1.3	13.0%

Combined ratio	98.3%		11.7	86.6%

(1)	The general and administration expense ratio includes corporate expenses not allocated to underwriting segments of 2.3% and 2.7%, for the three months ended March 31, 2010 and 2009, respectively. These costs are discussed further in the ‘ Other Revenue and Expenses ’ section below.

Current Accident Year Loss Ratio:

The 8.0 percentage point increase in our quarterly current accident year loss ratio was largely driven by an increase in catastrophe losses this quarter. We recognized estimated pre-tax net losses (net of related reinstatement premiums) of $100 million in relation to the Chilean earthquake. On February 27, 2010, a magnitude 8.8 earthquake occurred off the coast of the Maule Region of Chile. The earthquake and following tsunami and aftershocks caused significant destruction to areas in Chile. Our net estimated losses from the event before considering related reinstatement premiums are $106 million, with substantially all of this amount emanating from our reinsurance segment. Our estimate was derived from a ground-up assessment of our individual contracts and treaties in the affected regions and is consistent with our market share in the region. As part of our estimation process, we also considered current industry insured loss estimates, market share analysis, catastrophe modeling analysis and the limited information available to date from clients, brokers and loss adjusters. Industry-wide insured loss estimates and our own loss estimate for the Chilean earthquake are subject to change, as there is very limited actual loss data available at this time. Actual losses in relation to this event may ultimately differ materially from current loss estimates.

In addition, during the first quarter we recognized pre-tax net losses (net of related reinstatement premiums) of $47 million for Australian storms, European Windstorm Xynthia and U.S. winter storms, combined. The impact of catastrophe losses in the first quarter of 2009 was lower and emanated principally from European Windstorm Klaus.

The following factors partially offset the impact of a higher level of catastrophe activity on the current accident year loss ratio:

•

A decrease in the expected loss ratio for our trade credit and bond reinsurance business in 2010, as the current accident year loss ratio on this business was elevated in 2009 due to increased loss activity amidst the deteriorating global economic environment;

•

A lower frequency and severity of property and energy risk insurance losses;

•

The continued incorporation of more of our own historical loss experience within short-tail lines of business, which had the impact of reducing our initial expected losses, given our loss experience has been generally better than we expected; and

•

For our medium to long-tail lines, and in particular our professional lines insurance and reinsurance business, our historical loss experience on prior accident years has generally been lower than our initial projected loss ratios. In recognition of the increasing maturity and credibility of our own historical loss experience, we placed increased weight on our own loss experience when establishing our projected loss ratios for the 2010 accident year, with a corresponding reduction in the weight assigned to industry data. We also took into account the recovery from the global financial crisis. This, therefore, led to lower initial projected loss ratios for the current accident year in 2010.

Prior Period Reserve Development:

Our favorable prior period development was the net result of several underlying reserve developments on prior accident years, identified during our quarterly reserve review process. The following table provides a break down of prior period reserve development by segment:



Three months ended March 31,	2010		2009

Insurance	$	25,369	$	35,906
Reinsurance		56,097		48,428

Total	$	81,466	$	84,334

Overview

We caution that conditions and trends that impacted the development of our liabilities in the past may not necessarily occur in the future. The following sections provide further details on prior year reserve development by segment, line of business and accident year.

Insurance Segment:



Three months ended March 31	2010			2009

Property and other	$	14,944		$	12,171
Marine		2,320			12,899
Aviation		(813	)		3,145
Credit and political risk		(12,638	)		(91	)
Professional lines		22,452			6,370
Liability		(896	)		1,412

Total	$	25,369		$	35,906

In the first quarter of 2010, we recognized $25 million of net favorable reserve development, the principal components of which were:

•

$14 million of net favorable prior period reserve development on property business, the majority of which related to the 2008 and 2007 accident years and related to better than expected loss emergence.

•

$13 million of net adverse prior period reserve development on credit and political risk business, as we finalize settlements for certain loss events.

•

$22 million of net favorable prior period reserve development on professional lines business, principally related to the 2005 and 2006 accident years, as discussed in the overview.

In the first quarter of 2009, we recognized $36 million of net favorable reserve development, the principal components of which were:

•

$11 million of net favorable prior period reserve development on property business, primarily related to accident years 2008 and 2007 driven by better than expected loss emergence.

•

$13 million of net favorable prior period reserve development on marine business, driven by better than expected loss emergence. This included favorable development on energy offshore business of $11 million, primarily in relation to the 2008 accident year.

•

$6 million of net favorable prior period reserve development on professional lines business, primarily generated from the 2005 accident year, as well as the 2004 accident year to a lesser extent, for reasons described in the overview. However, this favorable development was partially offset by adverse development on the 2008 and 2007 accident year business, reflecting higher than expected loss activity on financial institutions business associated with the global financial crisis.

Reinsurance Segment:



Three months ended March 31,	2010			2009

Catastrophe, property and other	$	35,068		$	53,304
Credit and bond		5,455			(15,040	)
Professional lines		13,533			8,037
Motor		(83	)		2,540
Liability		2,124			(413	)

Total	$	56,097		$	48,428

In the first quarter of 2010, we recognized $56 million of net favorable reserve development, the principal components of which were:

•

$35 million of net favorable prior period reserve development on catastrophe, property and other business largely consisting of:

•

$20 million of net favorable prior period reserve development on catastrophe business, emanating largely from the 2009 ($10 million) and 2005 ($9 million) accident years. While the 2009 accident year development was primarily driven by better than expected loss emergence, the development on the 2005 accident year principally relates to a reduction in our reserve on one particular claim following receipt of updated information.

•

$6 million of net favorable prior period reserve development on property business, emanating mainly from the 2008 accident year and related to better than expected loss emergence.

•

$8 million of net favorable development on crop reserves (included in “other”), principally related to the 2009 accident year and largely as a result of the reduction in reserves for Canadian crop losses following updated information from the cedant.

•

$5 million of net favorable development on trade credit and bond reinsurance lines of business, largely related to the 2007 and 2006 accident years, in recognition of our better than expected actual experience to date.

•

$14 million of net favorable prior period reserve development on professional lines reinsurance business, primarily on the 2004 and 2005 accident years, as discussed in the overview above.

•

$2 million of net favorable prior period reserve development on liability reserves, primarily as a result of the commutation of two treaties.

In the first quarter of 2009, we recognized $48 million of net favorable reserve development, the principal components of which were:

•

$53 million of net favorable prior period reserve development on catastrophe, property and other business largely consisting of:

•

$31 million of net favorable prior period reserve development on catastrophe business, generated from accident years 2008 ($19 million) and 2007 ($12 million) and emanating from property related catastrophe business ($25 million), due to better than expected loss emergence, and workers compensation catastrophe business ($6 million), driven by the continued transition from initial expected loss ratios to our actual loss experience.

•

$17 million of net favorable prior period reserve development on property business, primarily relating to $10 million of net favorable development on accident year 2008, and emanating almost entirely from property per risk business. The favorable development was driven by better than expected loss emergence.

•

$15 million of net adverse development on trade credit and bond reinsurance lines of business, driven by adverse development of $32 million on accident year 2008 reflecting updated loss information received from our cedants, including a new loss notification on one facultative contract. This was partially offset by favorable development on earlier accident years due to better than expected loss emergence.

•

$8 million of net favorable prior period reserve development on professional lines reinsurance business, primarily driven by development on the 2004 and 2005 accident years as discussed in the overview above.

RESULTS BY SEGMENT

INSURANCE SEGMENT

Results from our insurance segment were as follows:


Three months ended March 31,	2010			Percentage Change		2009

Revenues:
Gross premiums written	$	372,929		2%		$	364,158
Net premiums written		206,812		(2%)			212,015
Net premiums earned		256,281		(7%)			275,623
Other insurance related income (loss)		626		nm			(9,805	)
Expenses:
Current year net losses and loss expenses		(156,072	)				(188,610	)
Prior period reserve development		25,369					35,906
Acquisition costs		(31,141	)				(26,203	)
General and administrative expenses		(61,610	)				(50,481	)

Underwriting income	$	33,453		(8%)		$	36,430


Ratios:	Percentage Point Change
Current year loss ratio		60.9%		(7.5	)		68.4%
Prior period reserve development		(9.9%	)	3.1			(13.0%	)
Acquisition cost ratio		12.2%		2.7			9.5%
General and administrative ratio		24.0%		5.7			18.3%

Combined ratio		87.2%		4.0			83.2%

nm	– not meaningful

Gross Premiums Written: The following table provides gross premiums written by line of business:


Three months ended March 31,	2010					2009			Percentage Change

Property	$	118,214		32%		$	106,138	29%	11%
Marine		66,859		18%			60,626	16%	10%
Terrorism		5,091		1%			5,667	2%	(10%)
Aviation		3,136		1%			17,067	5%	(82%)
Credit and political risk		(2,698	)	(1%	)		2,491	1%	nm
Professional lines		127,945		34%			120,328	33%	6%
Liability		53,716		15%			51,812	14%	4%
Other ⁽¹⁾		666		-			29	-	nm

Total	$	372,929		100%		$	364,158	100%	2%

nm	– not meaningful

(1)	Includes accident and health

We took advantage of select U.S. middle-market property and energy opportunities during the first quarter of 2010, resulting in increases in gross premiums written (offshore energy business is recognized in the marine line of business). This increase was partially offset by a reduction in aviation business due to the shift in renewal dates on certain policies to the second quarter of 2010. Also, in connection with the settlement of prior accident year credit and political risk claims, gross premiums written on this line of business include $12 million in premium reductions in the first quarter of 2010. Absent these adjustments, we wrote $9 million of credit and political risk business, as global lending and trade activity gradually resumes.

Premiums Ceded: Premiums ceded in the current quarter were $166 million, or 45% of gross premiums written, compared with $152 million, or 42%, in the comparable period in 2009. Our reinsurance protection was broadly in line with the prior year quarter. The increase in the ceded ratio was primarily driven by the premium adjustment on our credit and political risk business discussed above.

Net Premiums Earned: The following table provides net premiums earned by line of business:


Three months ended March 31,	2010			2009			Percentage Change

Property	$	65,461	25%	$	73,411	27%	(11%)
Marine		34,978	14%		33,772	12%	4%
Terrorism		7,597	3%		9,941	4%	(24%)
Aviation		15,264	6%		17,156	6%	(11%)
Credit and political risk		14,729	6%		35,132	13%	(58%)
Professional lines		98,542	38%		86,707	31%	14%
Liability		19,576	8%		19,410	7%	1%
Other		134	-		94	-	43%

Total	$	256,281	100%	$	275,623	100%	(7%)

The 7% decrease in net premiums earned is consistent with a 5% reduction in net premiums written in the rolling twelve-month period ending March 31, 2010 versus the corresponding period ending March 31, 2009. The decline in net premiums written largely resulted from our decision to reduce peak zone catastrophe exposures in certain property and marine lines during 2009 as part of our diversification strategy and the premium adjustment discussed above, which was fully earned. Net premiums earned on our credit and political risk business, which typically provides multi-year coverage, have declined in comparison to the first quarter of 2009 as a result of a notable reduction in opportunities to write business in 2009 due to the weakened global economy. The duration of the unearned premium on our credit and political risk line of business at March 31, 2010 was 4.6 years, down from 5.0 years at March 31, 2009.

Insurance Losses

Loss Ratio: The table below shows the components of our loss ratio:


Three months ended March 31,	2010		Percentage Point Change		2009
Current accident year	60.9%		(7.5	)	68.4%
Prior period reserve development	(9.9%	)	3.1		(13.0%	)

Loss ratio	51.0%		(4.4	)	55.4%

Current Accident Year Loss Ratio

The 7.5 percentage point decrease in our current accident year loss ratio was partially the result of a lower frequency and severity of reported losses on our property and energy lines during 2010. In comparison, during the first quarter of 2009, we experienced a high frequency of losses on our energy lines of business. In addition, the lower current accident year ratio was driven by business mix changes and the previously discussed consideration of our own loss experience in establishing loss ratios for our medium to long-tail business in 2010, most notably for professional lines.

Our insurance segment’s exposure to the Chilean earthquake and other first quarter 2010 catastrophe losses was minimal.

Refer to the ‘ Prior Period Reserve Development ’ section for further details.

Acquisition Cost Ratio: The 2.7 point increase in our acquisition cost ratio reflects the impact of a non-recurring premium tax adjustment.

General and Administrative Expense Ratio: The increase in the general and administrative ratio primarily reflects a combination of lower earned premiums and additional headcount and IT costs over this period, associated with the build-out of the segment’s platform.

Other Insurance Related Income / Loss: We recorded a $10 million increase in the fair value of the liability associated with our indemnity contract exposed to longevity risk during the first quarter of 2009. As we negotiated the cancellation of this contract during the fourth quarter of 2009 and this was the only contract of this kind in our portfolio, there is no corresponding amount for 2010.

Insurance Segment Outlook

Competition continues to increase in the insurance marketplace. Generally, terms and conditions, as well as breadth of coverage, remain stable. The recent pricing trend is negative across most lines of business and we expect to see this continue through the rest of the year, absent a significant industry event. Liability lines remain an outlier, with the greatest price reductions.

REINSURANCE SEGMENT

Results from our reinsurance segment were as follows:


Three months ended March 31,	2010			Percentage Change		2009
Revenues:
Gross premiums written	$	1,052,272		10%		$	959,337
Net premiums written		1,036,823		9%			950,286
Net premiums earned		439,911		13%			389,736
Other insurance related income		-		nm			410
Expenses:
Current year net losses and loss expenses		(393,656	)				(283,723	)
Prior period reserve development		56,097					48,428
Acquisition costs		(85,508	)				(75,773	)
General and administrative expenses		(21,851	)				(18,271	)

Underwriting income (loss)	$	(5,007	)	(108%)		$	60,807


Ratios:	Percentage Point Change
Current year loss ratio		89.5%		16.7			72.8%
Prior period reserve development		(12.8%	)	(0.4	)		(12.4%	)
Acquisition cost ratio		19.4%		-			19.4%
General and administrative ratio		5.0%		0.3			4.7%

Combined ratio		101.1%		16.6			84.5%

nm – not meaningful

Gross Premiums Written: The following table provides gross premiums written by line of business:


Three months ended March 31,	2010			2009			Percentage Change	Excluding FX Impact

Catastrophe	$	227,781	22%	$	237,347	25%	(4%)	(5%)
Property		178,498	17%		126,430	13%	41%	40%
Professional lines		106,799	10%		113,640	12%	(6%)	(7%)
Credit and bond		228,073	22%		197,271	21%	16%	13%
Motor		118,114	11%		77,572	8%	52%	49%
Liability		133,379	13%		153,856	16%	(13%)	(14%)
Engineering		44,376	4%		41,266	4%	8%	6%
Other		15,252	1%		11,955	1%	28%	26%

Total	$	1,052,272	100%	$	959,337	100%	10%	8%

Gross premiums written in the first quarter of 2010 were favorably impacted by a weaker U.S. dollar at our major renewal date of January 1, most significantly against the Euro and Sterling. The impact of foreign exchange rate movements is highlighted in the table above. Gross premiums written otherwise increased 8%, driven by growth opportunities across several of our lines of business.

Our motor line of business benefited from significant new business in the first quarter of 2010, as we increased our participation in select European markets, including the U.K. This more than offset our reduced participation in certain French excess-of-loss motor business, where we considered rates less attractive. Another contributing factor to the increase in gross premiums written was our trade credit and bond line of business, primarily reflecting new Latin American surety business. The increase in property premiums was driven by new business opportunities, as well as a shift in the renewal date for one significant treaty from the second quarter of 2009 to the first quarter of 2010. Offsetting these increases, our liability premium decreased primarily due to one pro-rata contract renewed in the first quarter of 2009, which was extended and subsequently renewed during the second quarter of 2010. Also, our catastrophe premium was down slightly, as we reduced our aggregate exposure to European windstorm risk.

Net Premiums Earned: The following table provides net premiums earned by line of business:


Three months ended March 31,	2010			2009			Percentage Change

Catastrophe	$	117,417	27%	$	109,211	28%	8%
Property		80,878	18%		73,461	19%	10%
Professional lines		71,305	16%		63,866	16%	12%
Credit and bond		54,023	12%		43,384	11%	25%
Motor		30,375	7%		21,573	6%	41%
Liability		63,407	14%		56,558	14%	12%
Engineering		15,846	4%		14,984	4%	6%
Other		6,660	2%		6,699	2%	(1%)

Total	$	439,911	100%	$	389,736	100%	13%

The 13% increase in net premiums earned largely reflects an increase in gross premiums written of 13% in the rolling twelve months ended March 31, 2010 compared to the same period ending March 31, 2009.

Loss Ratio: The table below shows the components of our loss ratio:


Three months ended March 31,	2010		Percentage Point Change		2009

Current accident year	89.5%		16.7		72.8%
Prior period reserve development	(12.8%	)	(0.4	)	(12.4%	)

Loss ratio	76.7%		16.3		60.4%

Current Accident Year Loss Ratio

The 16.7 percentage point increase in our current accident year loss ratio was primarily driven by an increase in catastrophe losses this quarter. We recognized estimated pre-tax net losses (net of related reinstatement premiums) of $95 million for the Chilean earthquake. In addition, during the first quarter we recognized pre-tax net losses (net of related reinstatement premiums) of $47 million for Australian storms, European Windstorm Xynthia and U.S. winter storms, combined. In contrast, catastrophe losses in the first quarter of 2009 were notably less significant and largely emanated from European Windstorm Klaus.

The following factors partially offset the impact of a higher level of catastrophe activity on the current accident year loss ratio:

•

A decrease in the expected loss ratio for our trade credit and bond reinsurance business in 2010, as the current accident year loss ratio on this business was elevated in 2009 due to increased loss activity expected in the deteriorating global economic environment;

•

The continued incorporation of more of our own historical loss experience within short-tail lines of business, which has reduced our net loss ratio because our experience has been generally than we expected.

•

The previously discussed increased consideration of our own loss experience in establishing loss ratios for our medium to long-tail business in 2010, most notably for professional lines.

Refer to the ‘ Prior Period Reserve Development ’ section for further details.

Reinsurance Segment Outlook

The reinsurance market is broadly stable, with terms and conditions generally holding. We expect to see modest pricing deterioration in the non-catastrophe U.S. property reinsurance market. For casualty and professional lines business, we are seeing the constraints generally imposed by reinsurers to control utilization of limits come under pressure, as cedants struggle with a challenging and competitive insurance marketplace.

North American property catastrophe reinsurance business remains one of the most attractively priced lines of business. We have yet to see a material pricing impact from the Chilean earthquake, although we may see some firming in smaller exposure zones as the year progresses. The two major Australian storms have resulted in back-up covers to replace exhausted catastrophe limits. Smaller, more vulnerable companies have purchased these covers at higher prices. The next significant renewal for major cedants with Australian exposure is at July 1 and we expect a combination of higher pricing and higher attachment points.

OTHER REVENUES AND EXPENSES

The following table provides a breakdown of our other revenues and expenses:


Three months ended March 31,	2010			Percentage Change	2009

Corporate expenses	$	16,308		(8%)	$	17,805
Foreign exchange gains		(8,147	)	nm		(389	)
Interest expense and financing costs		8,688		10%		7,921
Income tax expense		11,361		99%		5,697

Total	$	28,210		(9%)	$	31,034

nm – not meaningful

Corporate Expenses: Our 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 for the first quarter of 2010 were in line with the prior year quarter.

Foreign Exchange Gains: Some of our business is written in currencies other than U.S. dollars. The foreign exchange gain in the first quarter of 2010 was primarily due to the remeasurement of net liabilities denominated in Euro and Sterling, following their depreciation against the U.S. dollar.

Interest Expense and Financing Costs: Interest expense primarily relates to interest due on our senior notes and increased in the first quarter of 2010 following the issuance on March 23, 2010 of $500 million aggregate principal amount of ten-year senior notes. As a result of this issuance, we expect interest expense to increase in future periods. See ‘Liquidity and Capital Resources’ for further details.

Income Tax Expense: Income tax is generated primarily through our foreign operations in the United States and Europe. Our effective tax rate, which is calculated as income tax expense divided by income before tax, was 8.6% for the first quarter of 2010 compared with 4.4% in the same period of 2009. Our effective tax rate may vary between periods, depending on the distribution of net income or losses among our operating jurisdictions. In the first quarter of 2010, the proportion of consolidated income generated by our U.S. and European subsidiaries was higher than in the first quarter of 2009, resulting in an increase in our effective rate.

NET INVESTMENT INCOME AND NET REALIZED INVESTMENT GAINS/LOSSES

Net Investment Income

The following table provides a breakdown of income earned from our cash and investment portfolio by major asset class:


Three months ended March 31,	2010			% Change	2009

Fixed maturities	$	91,118		(1%)	$	91,697
Other investments		16,265		137%		6,870
Cash and cash equivalents		1,735		(39%)		2,856
Equities		588		58%		371
Short-term investments		220		(17%)		266

Gross investment income		109,926		8%		102,060
Investment expense		(5,307	)	92%		(2,768	)

Net investment income	$	104,619		5%	$	99,292


Average pre-tax yield: ⁽¹⁾
Fixed maturities		3.8%				4.2%
Cash and cash equivalents		0.6%				0.7%

(1)	Pre-tax yield is annualized and calculated as net investment income divided by the average amortized cost balance for the period.

Fixed Maturities

We earned an average pre-tax yield of 3.8% on our fixed maturities during the current quarter, a decrease of 40 basis points from the same quarter in 2009. This decline was primarily due to further tightening of credit spreads which was partially offset by higher treasury yields in the two to five year duration range of the yield curve in 2010 over the comparable period in 2009. During the current quarter, the weighted-average duration of our fixed maturities portfolio declined to 2.9 years at March 31, 2010 from 3.1 years at December 31, 2009. The impact of lower reinvestment yields in 2010 was partially offset by the increase of $817 million or 9% in our average fixed maturities balance in comparison to the first quarter of 2009.

Other Investments

As noted in our ‘ Critical Accounting Estimates - Fair Value Measurements’ , we record the change in fair value on our other investments in net investment income. Accordingly, the pre-tax return on other investments may vary materially year over year, in particular during volatile credit and equity markets. The following table provides a breakdown of net investment income (loss) from other investments:



Three months ended March 31,	2010		2009

Credit funds	$	6,455	$	5,925
Hedge funds		6,155		359
CLO - equity tranched securities		2,292		(297	)
Short duration high yield fund		1,363		883

Total	$	16,265	$	6,870


Pre-tax return on other investments ⁽¹⁾		2.9%		1.4%

(1)	The pre-tax return on other investments is non-annualized and calculated by dividing total income (loss) from other investments by the average month-end fair value balances held for the periods indicated.

The increase in other investment income in 2010 was primarily driven by our hedge fund investments due to positive returns on higher average hedge funds balances compared to the first quarter of 2009. These funds, primarily multi-strategy and long/short equity focused, benefited from the stronger broad equity markets during the first quarter of this year. Investment income from hedge funds in the first quarter of 2009 was also lower as the recovery within global equity markets was in its early stages. During the first quarter of 2009, loan valuations started their recovery which was sustained throughout 2009 and has continued into the first quarter of 2010, driving improved conditions for our credit fund investments and collateralized loan obligation (“CLO”) equity tranched securities.

Cash and Cash Equivalents

The reduction in investment income from cash and cash equivalents was driven mainly by lower global short-term interest rates and negative foreign exchange movements.

Net Realized Investment Gains/Losses

Our fixed maturities and equities are classified as available for sale and reported at fair value. The effect of market movements on our available for sale investment portfolio impacts net income (through net realized gains/losses) only when securities are sold or when OTTI are recorded on these assets. Additionally, net income is impacted (through net realized gains/losses) by changes in the fair value of investment derivatives, mainly foreign exchange forward contracts.

The following table provides a breakdown of net realized investment gains/losses:



Three months ended March 31,	2010			2009

On sale of:
Fixed maturities and short-term investments	$	17,068		$	728
Equities		1,557			(14,905	)

OTTI charges recognized in earnings		(5,508	)		(29,901	)

Change in fair value of investment derivatives		(158	)		1,400

Fair value hedges:
Change in fair value of derivative instruments		34,927			20,066
Change in fair value of hedged investments		(31,710	)		(17,985	)

Net realized investment gains (losses)	$	16,176		$	(40,597	)

On sale of investments

Generally, sales of individual securities occur when we conclude there are changes in the credit quality of a particular issuer or market value is likely to deteriorate. We may also sell to reduce a concentration in a particular issuer or asset class.

Fixed maturities and short-term investments:

The net realized investment gains on the sale of fixed maturities and short-term investments in the first quarter of 2010 relate primarily to gains on sales of U.S. corporate debt securities which were sold as a result of rebalancing the sector composition of our corporate debt portfolio.

Equities:

Net realized investment losses on the sale of equities in the first quarter of 2009 were driven by the sale of preferred shares in the financial sector.

OTTI charges

We review our available-for-sale investment portfolio each quarter to determine if the unrealized loss position of a security is other-than-temporary. Refer to the ‘ Critical Accounting Estimates – OTTI ’ section for further details on our impairment review process.

In accordance with the new accounting guidance issued and effective April 1, 2009, the OTTI charge to earnings in 2010 reflects only credit impairments, where projected cash flows are less than the amortized cost of a security, or the full unrealized loss position if we intend to sell a fixed maturity security or it is more likely than not that we will need to sell it to meet our liabilities. This guidance does not allow for retrospective application, therefore the OTTI charge recorded in the first quarter of 2009 as well as for prior year periods are based on previous OTTI accounting guidance (i.e. the difference between the fair value and amortized cost of a debt security in an unrealized loss position). Accordingly, the 2010 first quarter OTTI charge is not comparable with the 2009 first quarter OTTI charge.

The following table summarizes our OTTI recognized in earnings by asset class:



Three months ended March 31,	2010		2009

Fixed maturities:
Corporate debt	$	1,650	$	11,422
Residential MBS		1,064		3,696
ABS		1,126		11,267

		3,840		26,385

Equities		1,668		3,516

Total OTTI recognized in earnings	$	5,508	$	29,901

Fixed maturities:

The OTTI charges in first quarter of 2010 were significantly lower when compared with the same quarter of 2009, primarily due to a change in accounting principle for OTTI charges recognized in earnings (as noted above) and the return of stability in the credit markets. The 2009 OTTI charges on corporate debt were related to the subordinated debt of certain U.S. and foreign banks while charges on non-agency residential MBS and ABS were largely due to exposures to alternative-A and sub-prime collateral.

Equities:

The OTTI losses on equities in the first quarters of 2010 and 2009 are due to the severity and duration of the unrealized loss positions, for which we concluded the forecasted recovery period was too uncertain. The recognition of such losses does not necessarily indicate that sales will occur or that sales are imminent or planned.

Fair Value Hedges

Due to the significant volatility in the Euro vs. U.S. dollar currencies in 2008, we implemented a fair value hedging program to hedge un-matched foreign currency exposures. During the first quarters of 2010 and 2009, our hedging program was effective, generating gains of less than 2% of notional balances.

Total Return

Our investment strategy is to take a long-term view by actively managing our investment portfolio to maximize total return within certain guidelines and constraints, designed to manage risk. In assessing returns under this approach, we include net investment income, net realized investment gains and losses and the change in unrealized gains and losses generated by our investment portfolio. The following table provides a breakdown of the total return on cash and investments for the period indicated:



Three months ended March 31,	2010		2009

Net investment income	$	104,619	$	99,292
Net realized investments gains (losses)		16,176		(40,597	)
Change in net unrealized gains/losses, net of currency hedges		85,259		(59,442	)

Total	$	206,054	$	(747	)


Average cash and investments ⁽¹⁾	$	11,742,385	$	10,456,278


Total return on average cash and investments, pre-tax ⁽²⁾		1.8%		(0.0%	)

(1)	The average cash and investments balance is calculated by taking the average of the month-end fair value balances held for the periods indicated.

(2)	Non-annualized.

CASH AND INVESTMENTS

The table below provides a breakdown of our cash and investments:


	March 31, 2010				December 31, 2009
	Fair Value		Amortized Cost or Cost		Fair Value		Amortized Cost or Cost
Fixed maturities	$	9,649,199	$	9,499,645	$	9,718,355	$	9,628,287
Equities		201,920		192,486		204,375		195,011
Other investments		538,917		548,944		570,276		585,414
Short-term investments		143,937		143,937		129,098		129,098

Total investments	$	10,533,973	$	10,385,012	$	10,622,104	$	10,537,810


Cash and cash equivalents ⁽¹⁾	$	1,510,027	$	1,510,027	$	864,054	$	864,054

(1)	Includes restricted cash and cash equivalents of $131 million and $75 million for 2010 and 2009, respectively.

The amortized cost/cost of our total investments decreased by $153 million from December 31, 2009, primarily as a result of redemption of fixed maturities to fund share repurchases. Cash and cash equivalents increased by $646 million, primarily due to receipt of the $495 million net proceeds from our senior notes offering in March 2010.

The decrease of $88 million in the fair value of our total investments during the quarter was primarily due to net sales offset by improved valuation on our investments. Valuations for our fixed maturities improved due to additional tightening of credit spreads during the current quarter. Global equity indices rose again this quarter but the improved valuation on our equities portfolio was offset by negative movement in foreign exchange rates, mostly the Euro and Sterling against the U.S. dollar. Our other investments portfolio had a strong quarter with growth being driven by pricing improvements on our hedge and credit fund holdings primarily due to continuing strong performance in the global equity and credit markets.

The total change in net unrealized gains (losses) on our available-for-sale investment portfolio for the first quarter of 2010 was as follows:


	Net Unrealized Gains (Losses) at March 31, 2010			Net Unrealized Gains (Losses) at December 31, 2009			Change in 2010

Fixed maturities:
U.S. government and agency	$	6,697		$	(3,215	)	$	9,912
Non-U.S. government		(6,746	)		8,971			(15,717	)
Corporate debt		114,135			98,316			15,819
Residential MBS		17,818			1,848			15,970
Commercial MBS		15,485			(17,418	)		32,903
ABS		(10,340	)		(12,692	)		2,352
Municipals		12,505			14,258			(1,753	)

Total fixed maturities	$	149,554		$	90,068		$	59,486


Equities:
Common stock	$	9,434		$	9,364		$	70

The following provides a further analysis on our investment portfolio by asset classes.

Fixed Maturities

The following provides a breakdown of our investment in fixed maturities:


	March 31, 2010			December 31, 2009
	Fair Value		% of Total	Fair Value		% of Total

Fixed maturities:
U.S. government and agencies	$	1,334,066	14%	$	1,856,659	19%
Non-U.S. government		678,897	7%		696,814	7%
Corporate debt		3,861,909	40%		3,580,766	37%
Residential MBS		1,873,463	19%		1,779,641	18%
Commercial MBS		700,143	7%		662,811	7%
ABS		562,919	6%		443,139	5%
Municipals		637,802	7%		698,525	7%

Total	$	9,649,199	100%	$	9,718,355	100%


Credit ratings: ⁽¹⁾
U.S. government and agencies	$	1,334,066	14%	$	1,856,659	19%
AAA ⁽²⁾		4,023,296	41%		4,007,688	41%
AA		1,021,048	11%		914,454	9%
A		1,844,404	19%		1,760,929	18%
BBB		1,268,981	13%		1,036,359	11%
Below BBB ⁽³⁾		157,404	2%		142,266	2%

Total	$	9,649,199	100%	$	9,718,355	100%

(1)	As assigned by S&P. In the absence of an S&P rating, we used the lower rating established by Moody’s or Fitch

(2)	Includes U.S. government-sponsored agency residential MBS and commercial MBS

(3)	Non-investment grade securities

During the current quarter, the majority of new investments were made in high-grade corporate debt securities to take advantage of higher yields while maintaining the same overall credit quality profile for the investment portfolio. We also reduced our U.S. government and agencies holdings and allocated the proceeds to corporate debt and structured securities due to our positive outlook for further credit spread tightening as the global economy continue to recover in 2010. At March 31, 2010, fixed maturities had an approximate average duration of 2.9 years (2009: 3.1 years). When incorporating cash and cash equivalents into this calculation, the average duration at March 31, 2010 was 2.5 years (2009: 2.8 years).

At March 31, 2010, the weighted average credit rating of our fixed maturities portfolio was AA (2009: AA). To calculate the weighted average credit rating, we assigned points to each rating with 30 points for the highest rating (U.S. government and agencies) and 2 points for the lowest rating (D) and used the average the weighted average market values of the individual securities. Securities that are not rated by S&P, Moody’s or Fitch are excluded from the weighted average calculation. At March 31, 2010, the fair value of securities not rated totaled $27 million (2009: $21 million).

The non-investment grade securities reported in the above table are predominantly the result of downgrades subsequent to our initial purchases. We continue to hold these non-investment grade securities as we believe there is good return prospect based on their respective fundamentals. The increase in non-investment grade holdings since December 31, 2009, was primarily due to downgrades and, to a lesser extent, improved valuations of several non-agency residential MBS issues and corporate debt issues along with a small number of municipals and ABS.

Gross Unrealized Losses:

At March 31, 2010, the gross unrealized losses on our fixed maturities portfolio were $105 million (2009: $134 million). The following table provides information on the severity of the unrealized loss position as a percentage of amortized cost for all investment grade fixed maturities in an unrealized loss position.


	March 31, 2010						December 31, 2009
Severity of Unrealized Loss	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses

0-10%	$	2,595,736	$	(51,636	)	61%	$	3,313,450	$	(47,697	)	42%
10-20%		68,941		(12,348	)	14%		168,116		(30,904	)	27%
20-30%		45,270		(15,023	)	18%		66,169		(19,902	)	17%
30-40%		2,785		(1,481	)	2%		17,851		(9,263	)	8%
40-50%		440		(352	)	0%		696		(552	)	1%
> 50%		2,678		(4,126	)	5%		3,538		(6,154	)	5%

Total	$	2,715,850	$	(84,966	)	100%	$	3,569,820	$	(114,472	)	100%

At March 31, 2010, the gross unrealized losses greater than 50% of amortized cost remaining on investment grade fixed maturities comprise non-agency CMBS and ABS where we do not anticipate credit losses. These securities have a weighted average credit rating of BBB+ by S&P. The greater than 50% severity of unrealized loss at December 31, 2009, consisted primarily of non-agency RMBS, non-agency CMBS and ABS where we did not anticipate credit losses. These securities had a weighted average credit rating of AA- by S&P. The decrease in this balance since December 31, 2009 was primarily due to the significant improvement in the pricing of one AAA-rated non-agency RMBS during the first quarter of 2010. The gross unrealized losses for the other ranges of severity noted in the above table have shifted to lower severity bands in the current quarter primarily due to the recovery of the global financial markets.

The following table provides information on the severity of the unrealized loss position as a percentage of amortized cost for all below non-investment grade fixed maturities in an unrealized loss position at March 31, 2010 and December 31, 2009:


	March 31, 2010						December 31, 2009
Severity of Unrealized Loss	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses

0-10%	$	46,439	$	(978	)	5%	$	59,464	$	(1,866	)	10%
10-20%		37,547		(7,402	)	36%		20,993		(4,614	)	23%
20-30%		7,484		(2,491	)	12%		6,039		(2,160	)	11%
30-40%		13,971		(7,497	)	37%		11,914		(6,855	)	35%
40-50%		2,110		(1,607	)	8%		3,756		(3,227	)	16%
> 50%		244		(464	)	2%		373		(994	)	5%

Total	$	107,795	$	(20,439	)	100%	$	102,539	$	(19,716	)	100%

The greater than 50% severity of unrealized loss at March 31, 2010, relates primarily related to non-agency RMBS and ABS where we do not anticipate credit losses. Although the total gross unrealized losses for non-investment grade securities has not changed significantly, there has been a general improvement in the mix within the table as only 10% have gross unrealized losses of greater than 40% of amortized cost, compared to 21% at December 31, 2009.

Other Investments

The composition of our other investment portfolio is summarized as follows:


	March 31, 2010			December 31, 2009

Hedge funds	$	96,918	18.0%	$	94,630	16.6%
Funds of hedge funds		227,618	42.2%		256,877	45.0%

Total hedge funds		324,536	60.2%		351,507	61.6%


Distressed securities		22,964	4.3%		22,957	4.0%
Long/short credit		81,373	15.1%		84,392	14.8%

Total credit funds		104,337	19.4%		107,349	18.8%


CLO - equity tranched securities		58,593	10.9%		61,332	10.8%
Short duration high yield fund		51,451	9.5%		50,088	8.8%

Total other investments	$	538,917	100.0%	$	570,276	100.0%

The decrease in the fair value of our total hedge funds investment in 2010 reflects $33 million of redemptions, offset by $6 million of improved valuations as a result of the strong global equity markets. Similarly, the decrease in fair value of our credit funds investment in the current quarter was due to $9 million of distributions, offset by $6 million of improved valuations due to strong performance of its underlying collateral. Certain hedge and credit fund investments may be subject to restrictions on redemptions which may limit our ability to liquidate these investments in the short term. Refer to Item 1, Note 3 (b) of our Consolidated Financial Statements for further details.

The decrease in the fair value of the CLO – equity tranched securities in the quarter is primarily due to $5 million of cash distributions collected during the current quarter.

LIQUIDITY AND CAPITAL RESOURCES

Refer to the ‘ Liquidity and Capital Resources ’ section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2009 for a general discussion of our liquidity and capital resources. During the first quarter of 2010, we completed a senior note issuance and continued executions of common stock repurchases under the program authorized by our Board of Directors.

The following table summarizes our consolidated capitalization for the periods indicated:


	March 31, 2010		December 31, 2009

Long-term debt	$	993,712	$	499,476


Preferred shares		500,000		500,000
Common equity		4,876,019		5,000,244

Shareholders’ equity		5,376,019		5,500,244

Total capitalization	$	6,369,731	$	5,999,720


Ratio of debt to total capitalization		15.6%		8.3%

Ratio of debt and preferred equity to total capital		23.5%		16.7%

On March, 23, 2010, AXIS Specialty Finance, an indirect wholly-owned subsidiary of AXIS Capital, issued ten-year senior notes with a $500 million aggregate principal amount, maturing on June 1, 2020. These notes bear interest at a rate of 5.875%, payable semi-annually in arrears. AXIS Capital has fully and unconditionally guaranteed all the obligations of AXIS Specialty Finance under these notes. AXIS Capital’s obligations under this guarantee are unsecured and senior and rank equally with all of its other senior obligations. The related indenture contains various covenants, including limitations on liens on the stock of restricted subsidiaries, restrictions as to the disposition of the stock of restricted subsidiaries and limitations on mergers and consolidations. We were in compliance with all the covenants at March 31, 2010.

We intend to use the net proceeds from senior notes offering for general corporate purposes. The issuance of this debt has increased our ratios of debt to total capitalization and debt and preferred equity to total capital to 15.6% and 23.5%, respectively, from 8.3% and 16.7%, as of December 31, 2009.

At March 31, 2010, our common equity was $4.9 billion, compared to $5.0 billion at December 31, 2009. The following table reconciles our opening and closing common equity position:



Three months ended March 31,	2010

Common equity - opening	$	5,000,244
Net income		121,031
Change in unrealized appreciation on available for sale investments, net of tax		80,306
Share repurchases		(297,567	)
Common share dividends		(31,453	)
Preferred share dividends		(9,219	)
Share-based compensation and other		12,677

Common equity - closing	$	4,876,019

During the first quarter of 2010, we repurchased common shares in the open market for a total of $287 million (refer to Part II, Item 2 ‘Unregistered Sales of Equity Securities and Use of Proceeds’ for additional information). Subsequent to March 31, 2010, and through April 23, 2010, we repurchased additional common shares for $60 million. As of April 23, 2010, approximately $194 million remains available under our repurchase program.

We continue to anticipate that cash flows from operations will continue to be sufficient to cover cash outflows under most loss scenarios, as well as our other contractual commitments, through the foreseeable future.

COMMITMENTS AND CONTINGENCIES

There have been no material changes in our commitments or contingencies since December 31, 2009. Refer to Item 7 included in our Annual Report on Form 10-K for the year ended December 31, 2009.

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements have been prepared in conformity with U.S. GAAP, which include certain accounting policies that we consider to be critical due to the amount of judgment and uncertainty inherent in the application of those policies. While we believe that the amounts included in our Consolidated Financial Statements reflect our best judgment, the use of different assumptions could produce materially different accounting estimates. As disclosed in our 2009 Annual Report on Form 10-K, we believe the following accounting estimates are critical to our operations and require the most subjective and complex judgment:

•

Reserve for losses and loss expenses

•

Reinsurance recoverable balances

•

Premiums

•

Fair Value Measurements

•

Other-Than-Temporary Impairments (OTTI)

Refer to Item 7 included in our Annual Report on Form 10-K for the year ended December 31, 2009 for qualitative discussions on our Critical Accounting Estimates.

NEW ACCOUNTING STANDARDS

See Item 1, Note 1 to the Consolidated Financial Statements for a discussion of new accounting standards we have recently adopted and recently issued accounting pronouncements we have not yet adopted.

OFF-BALANCE SHEET AND SPECIAL PURPOSE ENTITY ARRANGEMENTS

At March 31, 2010, we have not entered into any off-balance sheet arrangements, as defined by Item 303 (a) (4) of Regulation S-K.

NON-GAAP FINANCIAL MEASURES

In this report, we have presented operating income, which is a “non-GAAP financial measure” as defined in Regulation G. Operating income represents after-tax operational results without consideration of after-tax net realized investment gains (losses). In addition, we have presented diluted operating earnings per share and operating return on average common equity (“operating ROACE”), which are derived from the non-GAAP operating income measure. These measures can be reconciled to the nearest GAAP financial measures as follows:



Three months ended March 31,	2010		2009

Operating income	$	95,650	$	155,811
Net realized investment gains (losses), net of tax ⁽¹⁾		16,162		(40,132	)

Net income available to common shareholders	$	111,812	$	115,679


Operating income per share - diluted	$	0.67	$	1.05
Net realized investment gains (losses), net of tax		0.12		(0.27	)

Net income per share - diluted	$	0.79	$	0.78


Weighted average common shares and common share equivalents - diluted		142,176		149,023


Average common shareholders’ equity	$	4,938,132	$	3,976,939

ROACE (annualized)		9.1%		11.6%

Operating ROACE (annualized)		7.7%		15.7%

(1)	Tax impact of $14 and ($465) for the three months ended March 31, 2010 and 2009, 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.

We present our results of operations in the way we believe will be most meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. This presentation includes the use of “operating income” and “annualized operating return on average common equity” which is based on the “operating income” measure. Although the investment of premiums to generate income and realized investment gains (or losses) is an integral part of our operations, the determination to realize investment gains (or 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 (or losses) are somewhat opportunistic for many companies. In this regard, certain users of our financial statements evaluate earnings excluding after-tax net realized investment gains (losses) to understand the profitability of recurring sources of income.

We believe that showing net income available to common shareholders exclusive of net realized gains (losses) 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 realized gains (losses) from their analyses for the same reasons.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Refer to Item 7A, included in our 2009 Form 10-K. There have been no material changes to this item since December 31, 2009.

ITEM 4.

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 our 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”)) as of March 31, 2010. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2010, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit 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.

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 quarter ended March 31, 2010. Based upon that evaluation, there were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

ITEM 1A.

RISK FACTORS

There were no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information regarding the number of shares we repurchased during the three months ended March 31, 2010:

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(a)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Announced Plans or Programs ^(b)
January 1-31, 2010	3,679,758	$28.35	3,405,014	$445.5 million
February 1-28, 2010	3,350,691	$29.70	3,276,300	$348.1 million
March 1-31, 2010	2,962,407	$31.63	2,957,700	$254.6 million
Total	9,992,856		9,639,014	$254.6 million

(a)	Share repurchases relating to withhold to cover tax liabilities upon vesting of restricted stock awards are excluded from our share repurchase plan.

(b)	On December 6, 2007, our Board of Directors approved a new share repurchase plan with the authorization to repurchase up to an additional $400 million of our common shares until December 31, 2009.

On December 10, 2009, our Board of Directors extended the above repurchase plan until December 31, 2011. Further, our Board of Directors approved a new share repurchase plan with the authorization to repurchase up to an additional $500 million of our common shares to be effected from time to time in the open market or in privately negotiated transactions. This share repurchase plan will expire on December 31, 2011.

ITEM 5.

EXHIBITS


(a)		Exhibits

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 setting from the specific rights, preferences, limitations and other terms of the Series A Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 4, 2005).

4.3		Certificate of Designations setting from the specific rights, preferences, limitations and other terms of the Series B Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 23, 2005).

4.4		Senior Indenture among AXIS Specialty Finance LLC, AXIS Capital Holdings Limited and The Bank of New York Mellon Trust Company, N.A., as trustee, dated as of March 23, 2010.

4.5		Form of 5.875% Senior Notes due 2020 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 23, 2010).

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.

SIGNATURES

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

Dated: April 27, 2010


AXIS CAPITAL HOLDINGS LIMITED

By:
		/s/ JOHN R. CHARMAN
		John R. Charman
		President and Chief Executive Officer

		/s/ DAVID B. GREENFIELD
		David B. Greenfield
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Exhibit 4.4

EXECUTION COPY

AXIS SPECIALTY FINANCE LLC,

Issuer

AXIS CAPITAL HOLDINGS LIMITED,

Guarantor

AND

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

Trustee

SENIOR INDENTURE

Dated as of March 23, 2010

CROSS REFERENCE SHEET*

Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of March 23, 2010, among AXIS Specialty Finance LLC, AXIS Capital Holdings Limited and The Bank of New York Mellon Trust Company, N.A., Trustee:


Section of the Act		Section of Indenture
310(a)(1) and (2)		6.9
310(a)(3) and (4)		Inapplicable
310(b)		6.8 and 6.10(1), (2) and (4)
310(c)		Inapplicable
311(a)		6.13
311(b)		6.13
311(c)		Inapplicable
312(a)		4.1 and 4.2
312(b)		4.2
312(c)		4.2
313(a)		4.3
313(b)(1)		Inapplicable
313(b)(2)		4.3
313(c)		4.3, 5.11, 6.10, 6.11, 8.2 and 12.2
313(d)		4.3
314(a)		3.4 and 3.10
314(b)		Inapplicable
314(c)(1) and (2)		11.5
314(c)(3)		Inapplicable
314(d)		Inapplicable
314(e)		11.5
314(f)		Inapplicable
315(a), (c) and (d)		6.1
315(b)		5.11
315(e)		5.12
316(a)(1)		5.9 and 5.10
316(a)(2)		Not required
316(a) (last sentence)		7.4
316(b)		5.7
317(a)		5.2
317(b)		3.3
318(a)		11.7

*	This Cross Reference Sheet is not part of the Indenture.

TABLE OF CONTENTS


		Page

ARTICLE I
DEFINITIONS

Section 1.1	Certain Terms Defined	1

ARTICLE II
SECURITIES

Section 2.1	Forms Generally	5
Section 2.2	Form of Trustee’s Certificate of Authentication	6
Section 2.3	Amount Unlimited; Issuable in Series	6
Section 2.4	Authentication and Delivery of Securities	8
Section 2.5	Execution of Securities	10
Section 2.6	Certificate of Authentication	10
Section 2.7	Denomination and Date of Securities; Payments of Interest	11
Section 2.8	Registration, Transfer and Exchange	11
Section 2.9	Mutilated, Defaced, Destroyed, Lost and Stolen Securities	14
Section 2.10	Cancellation of Securities	15
Section 2.11	Temporary Securities	15
Section 2.12	Global Securities	15
Section 2.13	CUSIP Numbers	15

ARTICLE III
COVENANTS OF THE ISSUER

Section 3.1	Payment of Principal, Premium and Interest	15
Section 3.2	Offices for Payments, Etc	16
Section 3.3	Money for Security Payments to be Held in Trust; Unclaimed Money	16
Section 3.4	Statements of Officers of Issuer and Guarantor as to Default; Notice of Default	17
Section 3.5	Existence	18
Section 3.6	Maintenance of Properties	18
Section 3.7	Payment of Taxes and Other Claims	18
Section 3.8	Further Instruments and Acts	18
Section 3.9	Limitation on Liens	18
Section 3.10	Commission Reports	18
Section 3.11	Calculation of Original Issue Discount	18

ARTICLE IV
SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE

Section 4.1	Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders	19
Section 4.2	Preservation of Information; Communications to Holders	19


Section 4.3	Reports by the Trustee	19
Section 4.4	[Reserved]	19
Section 4.5	[Reserved]	19

ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT

Section 5.1	Event of Default Defined; Acceleration of Maturity; Waiver of Default	20
Section 5.2	Collection of Indebtedness by Trustee; Trustee May Prove Debt	22
Section 5.3	Application of Proceeds	23
Section 5.4	Suits for Enforcement	24
Section 5.5	Restoration of Rights on Abandonment of Proceedings	24
Section 5.6	Limitations on Suits by Securityholders	24
Section 5.7	Unconditional Right of Securityholders to Institute Certain Suits	25
Section 5.8	Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default	25
Section 5.9	Control by Holders of Securities	25
Section 5.10	Waiver of Past Defaults
Section 5.11	Trustee to Give Notice of Default, but May Withhold in Certain Circumstances	25
Section 5.12	Right of Court to Require Filing of Undertaking to Pay Costs	26

ARTICLE VI
CONCERNING THE TRUSTEE

Section 6.1	Duties and Responsibilities of the Trustee: During Default; Prior to Default	26
Section 6.2	Certain Rights of the Trustee	27
Section 6.3	Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof	28
Section 6.4	Trustee and Agents May Hold Securities or Coupons; Collections, Etc	28
Section 6.5	Moneys Held by Trustee	29
Section 6.6	Compensation and Indemnification of Trustee and its Prior Claim	29
Section 6.7	Right of Trustee to Rely on Officer’s Certificate, Etc	29
Section 6.8	Indentures Not Creating Potential Conflicting Interests for the Trustee	29
Section 6.9	Persons Eligible for Appointment as Trustee	29
Section 6.10	Resignation and Removal; Appointment of Successor Trustee	30
Section 6.11	Acceptance of Appointment by Successor Trustee	30
Section 6.12	Merger, Amalgamation, Conversion, Consolidation or Succession to Business of Trustee	31
Section 6.13	Preferential Collection of Claims Against the Issuer	32
Section 6.14	Appointment of Authenticating Agent	32

ARTICLE VII
CONCERNING THE SECURITYHOLDERS

Section 7.1	Evidence of Action Taken by Securityholders	33
Section 7.2	Proof of Execution of Instruments and of Holding of Securities	33


Section 7.3	Holders to Be Treated as Owners	34
Section 7.4	Securities Owned by Issuer or Guarantor Deemed Not Outstanding	34
Section 7.5	Right of Revocation of Action Taken	34

ARTICLE VIII
SUPPLEMENTAL INDENTURES

Section 8.1	Supplemental Indentures Without Consent of Securityholders	35
Section 8.2	Supplemental Indentures With Consent of Securityholders	36
Section 8.3	Effect of Supplemental Indenture	37
Section 8.4	Documents to Be Given to Trustee	37
Section 8.5	Notation on Securities in Respect of Supplemental Indentures	37
Section 8.6	Conformity with Trust Indenture Act of 1939	37

ARTICLE IX
CONSOLIDATION, MERGER, AMALGAMATION, SALE OR CONVEYANCE

Section 9.1	Issuer and Guarantor May Consolidate, Etc., Only on Certain Terms	37
Section 9.2	Successor Substituted for the Issuer	38
Section 9.3	Restrictions on Certain Dispositions	38

ARTICLE X
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

Section 10.1	Termination of Issuer and Guarantor’s Obligations Under the Indenture	39
Section 10.2	Application of Trust Funds	39
Section 10.3	Applicability of Defeasance Provisions; Issuer’s Option to Effect Defeasance or Covenant Defeasance	39
Section 10.4	Defeasance and Discharge	40
Section 10.5	Covenant Defeasance	40
Section 10.6	Conditions to Defeasance or Covenant Defeasance	40
Section 10.7	Deposited Money and U.S. Government Obligations to be Held in Trust	42
Section 10.8	Repayment to Issuer	42
Section 10.9	Indemnity For U.S. Government Obligations	42
Section 10.10	Reimbursement	42

ARTICLE XI
MISCELLANEOUS PROVISIONS

Section 11.1	Incorporators, Shareholders, Officers and Directors of Issuer and Guarantor Exempt from Individual Liability	42
Section 11.2	Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities and Coupons	42
Section 11.3	Successors and Assigns of Issuer and Guarantor Bound by Indenture	43
Section 11.4	Notices and Demands on Issuer, Guarantor, Trustee and Holders of Securities and Coupons	43
Section 11.5	Officer’s Certificates and Opinions of Counsel; Statements to Be Contained Therein	43
Section 11.6	Payments Due on Saturdays, Sundays and Holidays	44
Section 11.7	Conflict of Any Provision of Indenture with Trust Indenture Act of 1939	44

iii


Section 11.8	New York Law to Govern; Waiver of Jury Trial	44
Section 11.9	Counterparts	44
Section 11.10	Effect of Headings	44
Section 11.11	Securities in a Foreign Currency or in Euro	44
Section 11.12	Judgment Currency	45
Section 11.13	Separability Clause	45
Section 11.14	Force Majeure	45
Section 11.15	Submission to Jurisdiction	45

ARTICLE XII
REDEMPTION OF SECURITIES AND SINKING FUNDS

Section 12.1	Applicability of Article	46
Section 12.2	Notice of Redemption; Partial Redemptions	46
Section 12.3	Payment of Securities Called for Redemption	47
Section 12.4	Exclusion of Certain Securities from Eligibility for Selection for Redemption	48
Section 12.5	Mandatory and Optional Sinking Funds	48

ARTICLE XIII
GUARANTEE

Section 13.1	Unconditional Guarantee	49
Section 13.2	Limitation on Liability	51
Section 13.3	Execution and Delivery of the Indenture	51
Section 13.4	Waiver of Subrogation	51
Section 13.5	Assumption by Guarantor	51
Section 13.6	No Suspension of Remedies	52

THIS INDENTURE, dated as of March 23, 2010 among AXIS SPECIALTY FINANCE LLC, a Delaware-limited liability company (the “Issuer”), AXIS CAPITAL HOLDINGS LIMITED, an exempted company incorporated in Bermuda as a holding company (the “Guarantor”), and The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the “Trustee”),

WITNESSETH:

WHEREAS, the Issuer has duly authorized the issue from time to time of its unsecured debentures, notes or other evidences of its unsecured indebtedness to be issued in one or more series (the “Securities”) up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture;

WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide, among other things, for the authentication, delivery and administration of the Securities; and

WHEREAS, the Guarantor has duly authorized the execution and delivery of this Indenture to provide for the full and unconditional guarantee of the payment obligations due on the Securities and to provide for the issuance from time to time of its guarantee of the Securities.

WHEREAS, all things necessary to make this Indenture a valid indenture and legally binding agreement according to its terms have been done;

NOW, THEREFORE:

In consideration of the premises and the purchases of the Securities by the holders thereof, the Issuer, the Guarantor and the Trustee covenant and agree for the equal and proportionate benefit of the respective holders from time to time of the Securities and of the Coupons, if any, appertaining thereto as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Terms Defined . The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section. All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939 or the definitions of which in the Securities Act of 1933 are referred to in the Trust Indenture Act of 1939, including terms defined therein by reference to the Securities Act of 1933 (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in said Trust Indenture Act of 1939 and in said Securities Act of 1933 as in force at the date of this Indenture. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term “GENERALLY ACCEPTED ACCOUNTING PRINCIPLES” means such accounting principles as are generally accepted at the time of any computation. The words “HEREIN,” “HEREOF” and “HEREUNDER” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular.

“AUTHENTICATING AGENT” shall have the meaning set forth in Section 6.14.

“AUTHORIZED NEWSPAPER” means a newspaper of general circulation, in the official language of the country of publication or in the English language customarily published on each Business Day whether or not published on Saturdays, Sundays or holidays. Whenever successive publications in an Authorized Newspaper are required hereunder they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or different Authorized Newspapers.

“BOARD OF DIRECTORS” means either the Board of Directors of the Issuer or the Guarantor, as applicable, or any committee of such Board duly authorized to act on behalf of the Issuer or the Guarantor, as applicable.

“BOARD RESOLUTION” means a copy of one or more resolutions, certified by the secretary or an assistant secretary of the Issuer or the Guarantor, as applicable, to have been duly adopted or consented to by the Board of Directors and to be in full force and effect, and delivered to the Trustee; provided that, for the avoidance of doubt, that a Board Resolution may authorize any officer or committee of the Issuer or Guarantor, as applicable, to take actions required hereunder, without need for an additional Board Resolution.

“BUSINESS DAY” means, with respect to any Security, a day that in the city (or in any of the cities, if more than one) in which amounts are payable, as specified in the form of such Security, and in The City of New York is not a day on which banking institutions are authorized or required by law, executive order or regulation to close.

“COMMISSION” means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or if at any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act of 1939, then the body performing such duties on such date.

“CONSOLIDATED TOTAL ASSETS” means, in respect of the Guarantor, as of any date of determination, the amount of total assets shown on the consolidated balance sheet of the Guarantor and its consolidated subsidiaries contained in the most recent annual or quarterly report filed with the Commission, or if the Guarantor is not then subject to the Securities Exchange Act of 1934, the most recent annual or quarterly report to shareholders and, in respect of any Subsidiary as of any date of determination, the amount of total assets of such Subsidiary and its consolidated subsidiaries from which such consolidated balance sheet of the Guarantor and its consolidated Subsidiaries was derived.

“CORPORATE TRUST OFFICE” means the principal office of the Trustee at which, at any time, its corporate trust business shall be administered, which office at the date hereof is located at 525 William Penn Place, 38 ^th Floor, Pittsburgh, PA 15259, Attention: Corporate Trust Administration, or such other address as the Trustee may designate from time to time by notice to the Holders and the Issuer, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Issuer).

“COUPON” means any interest coupon appertaining to an Unregistered Security.

“COVENANT DEFEASANCE” shall have the meaning set forth in Section 10.5.

“DEFEASANCE” shall have the meaning set forth in Section 10.4.

“DEPOSITARY” means, with respect to the Securities of any series issuable or issued in global form, the Person designated as Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “DEPOSITARY” shall mean or include each Person who is then a Depositary hereunder, and if at any time there is more than one such Person, “DEPOSITARY” as used with respect to the Securities of any such series shall mean the Depositary with respect to the Registered Securities in global form of that series.

“DOLLAR” means the coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.

“EURO” means the currency unit referred to in the second sentence of Council Regulation (EC) No. 974/98 of 3 May 1998.

“EVENT OF DEFAULT” means any event or condition specified as such in Section 5.1.

“FAIR VALUE” when used with respect to Voting Shares means the fair value as determined in good faith by the Board of Directors of the Guarantor.

“FOREIGN CURRENCY” means a currency issued by the government of a country other than the United States.

“GUARANTEE” means the guarantee of the Issuer’s payment obligations due on the Securities under this Indenture by the Guarantor pursuant to Article XIII.

“GUARANTOR” means AXIS Capital Holdings Limited, an exempted company incorporated in Bermuda as a holding company, and, subject to Article IX, its successors and assigns.

“GUARANTOR ORDER” means a written statement, request or order of the Guarantor signed in its name by the chairman or deputy chairman of the Board of Directors, the president, any executive, senior or other vice president or the treasurer of the Guarantor.

“HOLDER,” “HOLDER OF SECURITIES,” “SECURITYHOLDER” or other similar terms mean (1) in the case of any Registered Security, the person in whose name such Security is registered in the security register kept by the Issuer for that purpose in accordance with the terms hereof, and (2) in the case of any Unregistered Security, the bearer of such Security, or any Coupon appertaining thereto, as the case may be.

“INDEBTEDNESS” shall have the meaning set forth in Section 5.1.

“INDENTURE” means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented or both, and shall include the forms and terms of particular series of Securities established as contemplated hereunder.

“ISSUER” means AXIS Specialty Finance LLC, a Delaware limited liability company and, subject to Article IX, its successors and assigns.

“ISSUER ORDER” means a written statement, request or order of the Issuer signed in its name by the chairman or deputy chairman of the Board of Directors, the president, any executive, senior or other vice president or the treasurer of the Issuer.

“JUDGMENT CURRENCY” shall have the meaning set forth in Section 11.12.

“OFFICER’S CERTIFICATE” means a certificate signed by the chairman or deputy chairman of the Board of Directors, the president or any executive, senior or other vice president or the treasurer of the Issuer or the Guarantor, as applicable, and delivered to the Trustee. Each such certificate shall comply with Section 314 of the Trust Indenture Act of 1939 and include the statements provided for in Section 11.5.

“OPINION OF COUNSEL” means an opinion in writing signed by the General Counsel of the Issuer or the Guarantor, as applicable, or by such other legal counsel who may be an employee of or counsel to the Issuer or Guarantor, as applicable. Each such opinion shall comply with Section 314 of the Trust Indenture Act of 1939 and include the statements provided for in Section 11.5.

“ORIGINAL ISSUE DATE” of any Security (or portion thereof) means the earlier of (1) the date of such Security or (2) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution.

“ORIGINAL ISSUE DISCOUNT SECURITY” means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1.

“OUTSTANDING” (except as otherwise provided in Sections 7.4, 10.4 and 10.5), when used with reference to Securities, shall, subject to the provisions of Sections 7.4, 10.4 and 10.5 mean, as of any particular time, all Securities authenticated and delivered by the Trustee under this Indenture, except

(1) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

(2) Securities, or portions thereof, for the payment or redemption of which moneys or U.S. Government Obligations (as provided for in Section 10.1) in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer or the Guarantor for the Holders of such Securities (if the Issuer or Guarantor shall act as paying agent), provided that if such Securities, or portions thereof, are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and

(3) Securities which shall have been paid or in substitution for which other Securities shall have been authenticated and delivered pursuant to the terms of Section 2.9 (except with respect to any such Security as to which proof satisfactory to the Trustee is presented that such Security is held by a person in whose hands such Security is a legal, valid and binding obligation of the Issuer) or Securities not deemed outstanding pursuant to Section 12.2.

In determining whether the Holders of the requisite principal amount of Outstanding Securities of any or all series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1.

“PERIODIC OFFERING” means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Issuer or its agents upon the issuance of such Securities.

“PERMITTED LIENS” means liens for taxes or assessments or governmental charges or levies not then due and delinquent or the validity of which is being contested in good faith or which are less than $1,000,000 in amount and liens created by or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings or which involves claims of less than $1,000,000.

“PERSON” means a legal person, including any individual, company, limited liability company, corporation, estate, partnership, limited liability partnership, joint venture, association, joint shares company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity of whatever nature.

“PRINCIPAL” whenever used with reference to the Securities or any Security or any portion thereof, shall be deemed to include “and premium, if any.”

“RECORD DATE” shall have the meaning set forth in Section 2.7.

“REGISTERED SECURITY” means any Security registered on the Security register of the Issuer.

“REQUIRED CURRENCY” shall have the meaning set forth in Section 11.12.

“RESPONSIBLE OFFICER” when used with respect to the Trustee means any vice president, any senior trust officer or any trust officer, any assistant vice president, any assistant treasurer, or any other officer or assistant officer associated with the corporate trust department of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

“RESTRICTED SUBSIDIARY” means (1) AXIS Specialty Limited; (2) any other future or present Subsidiary of the Guarantor the Consolidated Total Assets of which constitute 20 percent or more of the Consolidated Total Assets of the Guarantor; and (3) any Subsidiary which is a successor, by merger or otherwise, to substantially all of the business or properties of any Subsidiary referred to or described in the foregoing clauses (1) or (2).

“SECURITY” or “SECURITIES” has the meaning stated in the first recital of this Indenture, or, as the case may be, Securities that have been authenticated and delivered under this Indenture.

“SUBSIDIARY” means any corporation, partnership or other entity of which at the time of determination the Issuer or the Guarantor, as applicable, owns or controls directly or indirectly more than 50% of the shares of Voting Shares.

“TRUST INDENTURE ACT OF 1939” (except as otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939 as in force at the date as of which this Indenture was originally executed.

“TRUSTEE” means the Person identified as “Trustee” in the first paragraph hereof and, subject to the provisions of Article VI, shall also include any successor trustee. “Trustee” shall also mean or include each Person who is then a trustee hereunder and if at any time there is more than one such Person, “Trustee” as used with respect to the Securities of any series shall mean the trustee with respect to the Securities of such series.

“UNREGISTERED SECURITY” means any Security other than a Registered Security.

“U.S. GOVERNMENT OBLIGATIONS” means securities which are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed by the full faith and credit of the United States of America which, in either case, are not callable or redeemable at the option of the issuer thereof or otherwise subject to prepayment, and shall also include a depository receipt issued by a New York Clearing House bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment or interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt or from any amount held by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.

“VOTING SHARES” means shares of any class or classes having general voting power under ordinary circumstances to elect a majority of the board of directors, managers or trustees of the corporation in question, provided that, for the purposes hereof, shares which carry only the right to vote conditionally on the happening of an event shall not be considered voting shares whether or not such event shall have happened.

“YIELD TO MATURITY” means the yield to maturity on a series of securities, calculated at the time of issuance of such series, or, if applicable, at the most recent redetermination of interest on such series, and calculated in accordance with accepted financial practice.

ARTICLE II

SECURITIES

Section 2.1 Forms Generally . The Securities of each series and the Coupons, if any, to be attached thereto shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant

to rather than set forth in a Board Resolution, an Officer’s Certificate detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with any rules of any securities exchange or to conform to general usage, all as may be determined by the officers executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons. If temporary Securities of any series are issued as permitted by Section 2.11, the form thereof also shall be established as provided in the preceding sentence. If the forms of Securities and Coupons, if any, of the series are established by, or by action taken pursuant to, a Board Resolution, a copy of the Board Resolution together with an appropriate record of any such action taken pursuant thereto, including a copy of the approved form of Securities or Coupons, if any, shall be certified by the Secretary or an Assistant Secretary of the Issuer and delivered to the Trustee at or prior to the delivery of the Issuer Order contemplated by Section 2.4 for the authentication and delivery of such Securities.

The definitive Securities and Coupons, if any, shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons, if any.

Section 2.2 Form of Trustee’s Certificate of Authentication . The Trustee’s certificate of authentication on all Securities shall be in substantially the following form:

“This is one of the Securities referred to in the within mentioned Senior Indenture.



as Trustee

By
		Authorized Signatory”

Dated:

If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, then the Trustee’s Certificate of Authentication to be borne by the Securities of each such series shall be substantially as follows:

“This is one of the Securities referred to in the within mentioned Senior Indenture.



as Authenticating Agent

By
		Authorized Signatory”

Section 2.3 Amount Unlimited; Issuable in Series . The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.

The Securities may be issued in one or more series and each such series shall rank equally and pari passu with all other unsecured and unsubordinated debt of the Issuer. There shall be established in or pursuant to one or more Board Resolutions (and to the extent established pursuant to rather than set forth in a Board Resolution, in an Officer’s Certificate detailing such establishment) or established in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series,

(1) the designation of the Securities of the series, including CUSIP numbers, if available, which shall distinguish the Securities of the series from the Securities of all other series;

(2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3);

(3) if other than Dollars, the coin or currency in which the Securities of that series are denominated (including, but not limited to, any Foreign Currency or Euro);

(4) the date or dates on which the principal of the Securities of the series is payable;

(5) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, on which such interest shall be payable and (in the case of Registered Securities) on which a record shall be taken for the determination of Holders to whom interest is payable and/or the method by which such rate or rates or date or dates shall be determined;

(6) the place or places where the principal of and any interest on Securities of the series shall be payable (if other than as provided in Section 3.2);

(7) the right, if any, of the Issuer to redeem Securities, in whole or in part, at its option and the period or periods within which, the price or prices at which and any terms and conditions upon which Securities of the series may be so redeemed, pursuant to any sinking fund or otherwise;

(8) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and any terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;

(9) if other than denominations of $2,000 and any integral multiple of $1,000 in the case of Registered Securities, or $1,000 and $5,000 in the case of Unregistered Securities, the denominations in which Securities of the series shall be issuable;

(10) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon acceleration of the maturity thereof;

(11) if other than the coin or currency in which the Securities of that series are denominated, the coin or currency in which payment of the principal of or interest on the Securities of such series shall be payable;

(12) if the principal of or interest on the Securities of such series are to be payable, at the election of the Issuer, the Guarantor or a Holder thereof, in a coin or currency other than that in which the Securities are denominated, the period or periods within which, and the terms and conditions upon which, such election may be made;

(13) if the amount of payments of principal of and interest on the Securities of the series may be determined with reference to an index based on a coin or currency other than that in which the Securities of the series are denominated, the manner in which such amounts shall be determined;

(14) whether the Securities of the series will be issuable as Registered Securities or Unregistered Securities (with or without Coupons), and whether such Securities will be issuable in global form or any combination of the foregoing, any restrictions applicable to the offer, sale or delivery of Unregistered Securities or the payment of interest thereon and, if other than as provided in Section 2.8, the terms upon and locations at which Unregistered Securities of any series may be exchanged for Registered Securities of such series and vice versa;

(15) [Reserved];

(16) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions;

(17) any Trustees, Depositaries, Authenticating Agents, paying or transfer Agents or Registrars or any other agents with respect to the Securities of such series;

(18) any deletions from, modifications of or additions to the Events of Default or covenants with respect to the Securities of such series;

(19) provisions, if any, granting special rights to the Holders of Securities of the series upon the occurrence of such events as may be specified;

(20) the date as of which any Unregistered Securities of the series and any temporary Security in global form representing Outstanding Securities of the series shall be dated if other than the date of original issuance of the first Security of the series to be issued;

(21) the applicability, if any, to the Securities of or within the series of Article X, or such other means of Defeasance or Covenant Defeasance as may be specified for the Securities and Coupons, if any, of such series;

(22) if the Securities of the series shall be issued in whole or in part in global form (a) the Depositary for such global Securities, (b) the form of any legend in addition to or in lieu of that in Section 2.4 which shall be borne by such global security, (c) whether beneficial owners of interests in any Securities of the series in global form may exchange such interests for certificated Securities of such series and of like tenor of any authorized form and denomination, and (d) if other than as provided in Section 2.8, the circumstances under which any such exchange may occur;

(23) the right of the Issuer and/or the Guarantor, if any, to defer any payment of principal of or interest on the Securities of the series, or any tranche thereof, and the maximum length of any such deferral period; and

(24) any other terms of the series or the related Guarantee (which terms shall not be inconsistent with the provisions of this Indenture).

All Securities of any one series and Coupons, if any, appertaining thereto, shall be substantially identical, except in the case of Registered Securities as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution or Officer’s Certificate referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and may pursuant to the Board Resolution or Officer’s Certificate be issued from time to time, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolution, such Officer’s Certificate or in any such indenture supplemental hereto.

Section 2.4 Authentication and Delivery of Securities .

(1) The Issuer may deliver Securities of any series having attached thereto appropriate Coupons, if any, executed by the Issuer to the Trustee for authentication together with the applicable documents referred to below in this Section, and the Trustee shall thereupon authenticate and deliver such Securities to or upon the order of the Issuer (contained in the Issuer Order referred to below in this Section) or pursuant to such procedures acceptable to the Trustee and to such recipients as may be specified from time to time by an Issuer Order. The maturity date, original issue date, interest rate and any other terms of the Securities of such series and Coupons, if any, appertaining thereto shall be determined by or pursuant to such Issuer Order and procedures. In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such

Securities, the Trustee shall receive and (subject to Section 6.1) shall be fully protected in relying upon, unless and until such documents have been superseded or revoked:

(a) an Issuer Order requesting such authentication and setting forth delivery instructions if the Securities and Coupons, if any, are not to be delivered to the Issuer, provided that, with respect to Securities of a series subject to a Periodic Offering, (i) such Issuer Order may be delivered by the Issuer to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (ii) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to an Issuer Order or pursuant to procedures acceptable to the Trustee as may be specified from time to time by an Issuer Order and (iii) the maturity date or dates, original issue date or dates, interest rate or rates and any other terms of Securities of such series shall be determined by an Issuer Order or pursuant to such procedures;

(b) any Board Resolution, Officer’s Certificate and/or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the forms and terms of the Securities, and Coupons, if any, were established;

(c) an Officer’s Certificate setting forth the form or forms and terms of the Securities and Coupons, if any, stating that the form or forms and terms of the Securities and Coupons, if any, have been established pursuant to Sections 2.1 and 2.3 and comply with this Indenture, and covering such other matters as the Trustee may reasonably request; and

(d) at the option of the Issuer, either one or more Opinions of Counsel, or a letter addressed to the Trustee permitting it to conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, on one or more Opinions of Counsel, substantially to the effect that:

(i) the forms of the Securities and Coupons, if any, have been duly authorized and established in conformity with the provisions of this Indenture;

(ii) in the case of an underwritten offering, the terms of the Securities have been duly authorized and established in conformity with the provisions of this Indenture, and, in the case of an offering that is not underwritten, certain terms of the Securities have been established pursuant to a Board Resolution, an Officer’s Certificate or a supplemental indenture in accordance with this Indenture, and when such other terms as are to be established pursuant to procedures set forth in an Issuer Order shall have been established, all such terms will have been duly authorized by the Issuer and will have been established in conformity with the provisions of this Indenture;

(iii) the Guarantor has duly taken all necessary action with respect to the issuance of the Guarantee;

(iv) when the Securities and Coupons, if any, have been executed by the Issuer and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered to and duly paid for by the purchasers thereof, they will have been duly issued under this Indenture, will be entitled to the benefits of this Indenture, and will be valid and binding obligations of the Issuer, and such Guarantee, when the Securities and Coupons, if any, have been executed by the Issuer and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered to and duly paid for by the purchasers thereof, will be valid and binding obligations of the Guarantor, in each case enforceable in accordance with their respective terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally and (ii) rights of acceleration, if any, and the availability of equitable remedies may be limited by equitable principles of general applicability; and

(v) that all applicable laws and requirements in respect of the execution and delivery by the Issuer of such Securities have been complied with.

In rendering such opinions, any counsel may qualify any opinions as to enforceability by stating that such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium and other similar laws affecting the rights and remedies of creditors and is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Such counsel may rely upon opinions of other counsel (copies of which shall be delivered to the Trustee), in which case the opinion shall state that such counsel believes he or she and the Trustee are entitled so to rely. Such counsel may also state that, insofar as such opinion involves factual matters, he or she has relied, to the extent he or she deems proper, upon certificates of officers of the Issuer and its subsidiaries and certificates of public officials.

(2) The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Issuer or if the Trustee in good faith by its board of directors or board of trustees, executive committee, or a trust committee of directors or trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders or would affect the Trustee’s own rights, duties or immunities under the Securities, this Indenture or otherwise.

(3) If the Issuer shall establish pursuant to Section 2.3 that the Securities of a series are to be issued in whole or in part in global form, then the Issuer shall execute and the Trustee shall, in accordance with this Section and the Issuer Order with respect to such series, authenticate and deliver one or more Securities in global form that (a) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities of such series issued and not yet canceled, (b) if such Securities are Registered Securities, shall be registered in the name of the Depositary for such Security or Securities in global form or the nominee of such Depositary, (c) if such Securities are Registered Securities, shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s instructions and (d) shall bear a legend substantially to the following effect:

“Unless and until it is exchanged in whole or in part for Securities in definitive form, this Security may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.”

(4) Each Depositary designated pursuant to Section 2.3 must, at the time of its designation and at all times while it serves as Depositary, be a clearing agency registered under the Securities Exchange Act of 1934 and any other applicable statute or regulation.

Section 2.5 Execution of Securities . The Securities and, if applicable, each Coupon appertaining thereto shall be signed on behalf of the Issuer by the chairman or deputy chairman of its Board of Directors or its president or any executive, senior or other vice president or its treasurer, which may, but need not, be attested. Such signatures may be the manual or facsimile signatures of the present or any future such officers. Typographical and other minor errors or defects in any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee.

In case any officer of the Issuer who shall have signed any of the Securities or Coupons, if any, shall cease to be such officer before the Security or Coupon so signed (or the Security to which the Coupon so signed appertains) shall be authenticated and delivered by the Trustee or disposed of by the Issuer, such Security or Coupon nevertheless may be authenticated and delivered or disposed of as though the person who signed such Security or Coupon had not ceased to be such officer of the Issuer; and any Security or Coupon may be signed on behalf of the Issuer by such persons as, at the actual date of the execution of such Security or Coupon, shall be the proper officers of the Issuer, although at the date of the execution and delivery of this Indenture any such person was not such an officer.

Section 2.6 Certificate of Authentication . Only such Securities as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee by the manual signature of one of its authorized signatories, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. No Coupon shall be entitled to the benefits of this Indenture or shall be valid and obligatory for any purpose until the certificate of authentication on the Security to which such Coupon appertains

shall have been duly executed by the Trustee. The execution of such certificate by the Trustee upon any Security executed by the Issuer shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture.

Section 2.7 Denomination and Date of Securities; Payments of Interest . The Securities of each series shall be issuable as Registered Securities or Unregistered Securities in denominations established as contemplated by Section 2.3 or, with respect to the Registered Securities of any series, if not so established, in denominations of $2,000 and any larger integral multiple of $1,000. If denominations of Unregistered Securities of any series are not so established, such Securities shall be issuable in denominations of $1,000 and $5,000. The Securities of each series shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the officers of the Issuer executing the same may determine with the approval of the Trustee, as evidenced by the execution and authentication thereof.

Each Registered Security shall be dated the date of its authentication. Each Unregistered Security shall be dated as provided in the resolution or resolutions of the Board of Directors referred to in Section 2.3. The Securities of each series shall bear interest, if any, from the date, and such interest shall be payable on the dates, established as contemplated by Section 2.3.

The person in whose name any Registered Security of any series is registered at the close of business on any record date applicable to a particular series with respect to any interest payment date for such series shall be entitled to receive the interest, if any, payable on such interest payment date notwithstanding any transfer or exchange of such Registered Security subsequent to the record date and prior to such interest payment date, except if and to the extent the Issuer shall default in the payment of the interest due on such interest payment date for such series, in which case such defaulted interest shall be paid to the persons in whose names Outstanding Registered Securities for such series are registered at the close of business on a subsequent record date (which shall be not less than five Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Issuer to the Holders of Registered Securities not less than 15 days preceding such subsequent record date. The term “record date” as used with respect to any interest payment date (except a date for payment of defaulted interest) for the Securities of any series shall mean the date specified as such in the terms of the Registered Securities of such series established as contemplated by Section 2.3, or, if no such date is so established, if such interest payment date is the first day of a calendar month, the fifteenth day of the next preceding calendar month or, if such interest payment date is the fifteenth day of a calendar month, the first day of such calendar month, whether or not such record date is a Business Day.

Section 2.8 Registration, Transfer and Exchange .

(1) The Issuer will keep at each office or agency to be maintained for the purpose as provided in Section 3.2 for each series of Securities a register or registers in which, subject to such reasonable regulations as it may prescribe, it will provide for the registration of Registered Securities of such series and the registration of transfer of Registered Securities of such series. Such register shall be in written form in the English language. At all reasonable times such register or registers shall be open for inspection by the Trustee.

(2) Upon due presentation for registration of transfer of any Registered Security of any series at any such office or agency to be maintained for the purpose as provided in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Registered Security or Registered Securities of the same series, maturity date, interest rate and original issue date in authorized denominations for a like aggregate principal amount.

Unregistered Securities (except for any temporary Unregistered Securities in global form) and Coupons (except for Coupons attached to any temporary Unregistered Securities in global form) shall be transferable by delivery.

(3)(a) At the option of the Holder thereof, Registered Securities of any series (other than a Registered Security in global form, except as set forth below) may be exchanged for a Registered Security or Registered Securities of such series having authorized denominations and an equal aggregate principal amount, upon surrender of such Registered Securities to be exchanged at the agency of the Issuer that shall be maintained for such

purpose in accordance with Section 3.2 and upon payment, if the Issuer shall so require, of the charges hereinafter provided. Whenever any Registered Securities are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and deliver, the Registered Securities which the Holder making the exchange is entitled to receive.

(b) Unless otherwise specified as contemplated by Section 2.3, at the option of the Holder, Unregistered Securities of such series may be exchanged for Registered Securities (if the Securities of such series are issuable in registered form) or Unregistered Securities (if Unregistered Securities of such series are issuable in more than one denomination and such exchanges are permitted by such series) of the same series, of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at the agency of the Issuer that shall be maintained for such purpose in accordance with Section 3.2, with all unmatured Coupons and all matured Coupons in default thereto appertaining. If the Holder of an Unregistered Security is unable to produce any such unmatured Coupon or Coupons or matured Coupon or Coupons in default, such exchange may be effected if the Unregistered Securities are accompanied by payment in funds acceptable to the Issuer and the Trustee in an amount equal to the face amount of such missing Coupon or Coupons, or the surrender of such missing Coupon or Coupons may be waived by the Issuer and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any paying agent harmless. If thereafter the Holder of such Security shall surrender to any paying agent any such missing Coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment as provided in Section 3.2. Notwithstanding the foregoing, in case any Unregistered Security of any series is surrendered at any such office or agency in exchange for a Registered Security of the same series after the close of business at such office or agency on (i) any record date and before the opening of business at such office or agency on the relevant interest payment date, or (ii) any special record date for payment of defaulted interest and before the opening of business at such office or agency on the related date for payment of defaulted interest, such Unregistered Security shall be surrendered without the Coupon relating to such interest or defaulted interest payment date or proposed date of payment, as the case may be (or, if such Coupon is so surrendered with such Unregistered Security, such Coupon shall be returned to the person so surrendering the Unregistered Security), and interest or defaulted interest, as the case may be, will not be payable on such date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Unregistered Security, but will be payable only to the Holder of such Coupon, when due in accordance with the provisions of this Indenture.

(c) Registered Securities of any series may not be exchanged for Unregistered Securities of such series unless (i) otherwise specified pursuant to Section 2.3 and (ii) the Issuer has delivered to the Trustee an Opinion of Counsel that (A) the Issuer has received from the Internal Revenue Service a ruling or (B) since the date hereof, there has been a change in the applicable Federal income tax law, in either case to the effect that the inclusion of terms permitting Registered Securities to be exchanged for Unregistered Securities would result in no adverse Federal income tax effect to the Issuer, or to any Holder. Whenever any Securities are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities and Coupons surrendered upon any exchange or transfer provided for in this Indenture shall be canceled promptly and disposed of by the Trustee in accordance with its procedures for the disposition of cancelled securities in effect as of the date of such cancellation and the Trustee will deliver a certificate of disposition thereof to the Issuer.

(4) All Registered Securities presented for registration of transfer, exchange, redemption or payment shall (if so required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer and the Trustee duly executed by the Holder or his or her attorney duly authorized in writing.

The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Securities. No service charge shall be made for any such transaction.

The Issuer shall not be required to exchange or register a transfer of (a) any Securities of any series for a period of 15 days next preceding the first mailing of notice of redemption of Securities of such series to be redeemed or (b) any Securities selected, called or being called for redemption, in whole or in part, except, in the case of any Security to be redeemed in part, the portion thereof not so to be redeemed.

(5) Notwithstanding any other provision of this Section 2.8, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Registered Security in global form representing all or a portion of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary.

If at any time the Depositary for any Registered Securities of a series represented by one or more Registered Securities in global form notifies the Issuer that it is unwilling or unable to continue as Depositary for such Registered Securities or if at any time the Depositary for such Registered Securities shall no longer be eligible under Section 2.4, the Issuer shall appoint a successor Depositary eligible under Section 2.4 with respect to such Registered Securities. If a successor Depositary eligible under Section 2.4 for such Registered Securities is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer’s election pursuant to Section 2.3 that such Registered Securities be represented by one or more Registered Securities in global form shall no longer be effective and the Issuer will execute, and the Trustee, upon receipt of an Officer’s Certificate for the authentication and delivery of definitive Securities of such series, will authenticate and deliver, Securities of such series in definitive registered form without Coupons, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Registered Security or Securities in global form representing such Registered Securities in exchange for such Registered Security or Securities in global form.

The Issuer may at any time and in its sole discretion determine that the Registered Securities of any series issued in the form of one or more Registered Securities in global form shall no longer be represented by a Registered Security or Securities in global form. In such event the Issuer will execute, and the Trustee, upon receipt of an Officer’s Certificate for the authentication and delivery of definitive Securities of such series, will authenticate and deliver, Securities of such series in definitive registered form without Coupons, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Registered Security or Securities in global form representing such Registered Securities, in exchange for such Registered Security or Securities in global form.

If specified by the Issuer pursuant to Section 2.3 with respect to Securities represented by a Registered Security in global form, the Depositary for such Registered Security in global form may surrender such Registered Security in global form in exchange in whole or in part for Registered Securities of the same series in definitive form on such terms as are acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge,

(a) to the Person specified by such Depositary a new Registered Security or Securities of the same series, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person’s beneficial interest in the Registered Security in global form; and

(b) to such Depositary a new Registered Security in global form in a denomination equal to the difference, if any, between the principal amount of the surrendered Registered Security in global form and the aggregate principal amount of Registered Securities authenticated and delivered pursuant to clause (a) above.

Upon the exchange of a Registered Security in global form for Registered Securities in definitive form without Coupons, in authorized denominations, such Registered Security in global form shall be canceled by the Trustee or an agent of the Issuer or the Trustee. Registered Securities in definitive form issued in exchange for a Registered Security in global form pursuant to this Section 2.8 shall be registered in such names and in such authorized denominations as the Depositary for such Registered Security in global form, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Issuer or the Trustee. The Trustee or such agent shall deliver such Securities to or as directed by the Persons in whose names such Securities are so registered.

(6) All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Issuer (and with respect to the Guarantee, the Guarantor), evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.

(7) Notwithstanding anything herein or in the terms of any series of Securities to the contrary, none of the Issuer, the Trustee or any agent of the Issuer or the Trustee (any of which, other than the Issuer, shall conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, on an Officer’s Certificate and an Opinion of Counsel) shall be required to exchange any Unregistered Security for a Registered Security if such exchange would result in adverse income tax consequences to the Issuer.

(8) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among depositary participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities . In case any Security or any Coupon appertaining to any Security shall become mutilated, defaced or be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon the written request of any officer of the Issuer, the Trustee shall authenticate and deliver a new Security of the same series, maturity date, interest rate and original issue date, bearing a number or other distinguishing symbol not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and in substitution for the Security so destroyed, lost or stolen with Coupons corresponding to the Coupons appertaining to the Securities so mutilated, defaced, destroyed, lost or stolen, or in exchange or substitution for the Security to which such mutilated, defaced, destroyed, lost or stolen Coupon appertained, with Coupons appertaining thereto corresponding to the Coupons so mutilated, defaced, destroyed, lost or stolen. In every case the applicant for a substitute Security or Coupon shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity satisfactory to them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security or Coupon and of the ownership thereof and in the case of mutilation or defacement shall surrender the Security and related Coupons to the Trustee or such agent.

Upon the issuance of any substitute Security or Coupon, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) or its agent connected therewith. In case any Security or Coupon which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may instead of issuing a substitute Security, pay or authorize the payment of the same or the relevant Coupon (without surrender thereof except in the case of a mutilated or defaced Security or Coupon), if the applicant for such payment shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity satisfactory to them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Issuer and the Trustee and any agent of the Issuer or the Trustee evidence to their satisfaction of the destruction, loss or theft of such Security or Coupon and of the ownership thereof.

Every substitute Security or Coupon of any series issued pursuant to the provisions of this Section by virtue of the fact that any such Security or Coupon is destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer (and with respect to the Guarantee, the Guarantor), whether or not the destroyed, lost or stolen Security or Coupon shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities or Coupons of such series duly authenticated and delivered hereunder. All Securities and Coupons shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced or destroyed, lost or stolen Securities and Coupons and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

Section 2.10 Cancellation of Securities . All Securities and Coupons surrendered for payment, redemption, registration of transfer or exchange, or for credit against any payment in respect of a sinking or analogous fund, if surrendered to the Issuer or any agent of the Issuer, the Guarantor or any agent of the Guarantor or the Trustee or any agent of the Trustee, shall be delivered to the Trustee or its agent for cancellation or, if surrendered to the Trustee, shall be canceled by it; and no Securities or Coupons shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee or its agent shall dispose of canceled Securities and Coupons held by it in accordance with its customary procedures for the disposition of cancelled securities in effect as of the date of such cancellation. If the Issuer or its agent or the Guarantor or its agent shall acquire any of the Securities or Coupons, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities or Coupons unless and until the same are delivered to the Trustee or its agent for cancellation.

Section 2.11 Temporary Securities . Pending the preparation of definitive Securities for any series, the Issuer may execute and the Trustee shall authenticate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Trustee). Temporary Securities of any series shall be issuable as Registered Securities without Coupons, or as Unregistered Securities with or without Coupons attached thereto, of any authorized denomination, and substantially in the form of the definitive Securities of such series but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer with the concurrence of the Trustee as evidenced by the execution and authentication thereof. Temporary Securities may contain such references to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay the Issuer shall execute and shall furnish definitive Securities of such series and thereupon temporary Registered Securities of such series may be surrendered in exchange therefor without charge at each office or agency to be maintained by the Issuer for that purpose pursuant to Section 3.2 and, in the case of Unregistered Securities, at any agency maintained by the Issuer for such purpose as specified pursuant to Section 3.2, and the Trustee shall authenticate and deliver in exchange for such temporary Securities of such series an equal aggregate principal amount of definitive Securities of the same series having authorized denominations and, in the case of Unregistered Securities, having attached thereto any appropriate Coupons. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series, unless otherwise established pursuant to Section 2.3. The provisions of this Section are subject to any restrictions or limitations on the issue and delivery of temporary Unregistered Securities of any series that may be established pursuant to Section 2.3 (including any provision that Unregistered Securities of such series initially be issued in the form of a single Unregistered Security in global form to be delivered to a Depositary or agency located outside the United States and the procedures pursuant to which Unregistered Securities in definitive or global form of such series would be issued in exchange for such temporary Unregistered Security in global form).

Section 2.12 Global Securities . Neither the Trustee nor any agent shall have any responsibility for any actions taken or not taken by the Depositary.

Section 2.13 CUSIP Numbers . The Issuer in issuing the Securities may use “CUSIP” numbers (if then generally in use), and, if so used by the Issuer, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

ARTICLE III

COVENANTS OF THE ISSUER

Section 3.1 Payment of Principal, Premium and Interest . The Issuer covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay or cause to be paid the principal of, and premium, if any, and interest on, each of the Securities of such series at the place or places, at the respective times and in the manner provided in such Securities and in the Coupons, if any, appertaining thereto and in this

Indenture. The interest on Securities with Coupons attached shall be payable only upon presentation and surrender of the several Coupons for such interest installments as are evidenced thereby as they severally mature. If any temporary Unregistered Security provides that interest thereon may be paid while such Security is in temporary form, the interest on any such temporary Unregistered Security shall be paid, as to the installments of interest evidenced by Coupons attached thereto, if any, only upon presentation and surrender thereof, and, as to the other installments of interest, if any, only upon presentation of such Securities for notation thereon of the payment of such interest, in each case subject to any restrictions that may be established pursuant to Section 2.3. The interest on Registered Securities shall be payable only to or upon the written order of the Holders thereof and, at the option of the Issuer or the Guarantor, may be paid by wire transfer or by mailing checks for such interest payable to or upon the written order of such Holders at their last addresses as they appear on the registry books of the Issuer.

Section 3.2 Offices for Payments, Etc . So long as any Securities are issued as Registered Securities, the Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency where the Registered Securities of each series may be presented for payment, where the Securities of each series may be presented for exchange as is provided in this Indenture and, if applicable, pursuant to Section 2.3 and where the Registered Securities of each series may be presented for registration of transfer as in this Indenture provided.

So long as any Securities are issued as Unregistered Securities, the Issuer will maintain one or more offices or agencies in a city or cities located outside the United States (including any city in which such an agency is required to be maintained under the rules of any shares exchange on which the Securities of such series are listed) where the Unregistered Securities, if any, of each series and Coupons, if any, appertaining thereto may be presented for payment. No payment on any Unregistered Security or Coupon will be made upon presentation of such Unregistered Security or Coupon at an agency of the Issuer within the United States nor will any payment be made by transfer to an account in, or by mail to an address in, the United States unless pursuant to applicable United States laws and regulations then in effect such payment can be made without adverse tax consequences to the Issuer. Notwithstanding the foregoing, payments in Dollars on Unregistered Securities of any series and Coupons appertaining thereto which are payable in Dollars may be made at an agency of the Issuer maintained in the Borough of Manhattan, The City of New York, if such payment in Dollars at each agency maintained by the Issuer outside the United States for payment on such Unregistered Securities is illegal or effectively precluded by exchange controls or other similar restrictions.

The Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency where notices and demands to or upon the Issuer in respect of the Securities of any series, the Coupons appertaining thereto or this Indenture may be served.

The Issuer will give to the Trustee written notice of the location of each such office or agency and of any change of location thereof. In case the Issuer shall fail to maintain any agency required by this Section, or shall fail to give such notice of the location or of any change in the location of any of the above agencies, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee.

The Issuer may from time to time designate one or more additional offices or agencies where the Securities of a series and any Coupons appertaining thereto may be presented for payment, where the Securities of that series may be presented for exchange as provided in this Indenture and pursuant to Section 2.3 and where the Registered Securities of that series may be presented for registration of transfer as in this Indenture provided, and the Issuer may from time to time rescind any such designation, as the Issuer may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain the agencies provided for in this Section. The Issuer will give to the Trustee prompt written notice of any such designation or rescission thereof.

Section 3.3 Money for Security Payments to be Held in Trust; Unclaimed Money . If the Issuer or the Guarantor shall at any time act as paying agent, it will, on or before each due date of the principal of and premium, if any, or interest on any of the Securities, segregate and hold in trust for the benefit of the Holders entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Holders or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.

Whenever the Issuer shall have one or more paying agents, it will, on or prior to each due date of the principal of and premium, if any, or interest on any Securities, deposit with the paying agent or paying agents a sum sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Holders entitled to such principal, premium, if any, or interest, and, unless such paying agent is the Trustee, the Issuer will promptly notify the Trustee of its action or failure so to act.

The Issuer will cause each paying agent other than the Trustee to execute and deliver to the Trustee an instrument in which such paying agent shall agree with the Trustee, subject to the provisions of this Section, that such paying agent will:

(1) hold all sums held by it for the payment of the principal of and premium, if any, or interest on Securities in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(2) give the Trustee notice of any default by the Issuer (or any other obligor upon the Securities) in the making of any payment of principal and premium, if any, or interest; and

(3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.

The Issuer or the Guarantor may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order or Guarantor Order direct any paying agent to pay, to the Trustee all sums held in trust by the Issuer, the Guarantor or such paying agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Issuer, the Guarantor or such paying agent; and, upon such payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any paying agent, or then held by the Issuer or the Guarantor in trust for the payment of the principal of and premium, if any, or interest on any Security and remaining unclaimed for two years after such principal and premium, if any, or interest has become due and payable shall be paid to the Issuer or Guarantor, as applicable, on Issuer Order or Guarantor Order, or, if then held by the Issuer or the Guarantor, shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Issuer or the Guarantor, as applicable, for payment thereof, and all liability of the Trustee or such paying agent with respect to such trust money, and all liability of the Issuer or the Guarantor, as applicable, as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such paying agent, before being required to make any such repayment, shall at the expense of the Issuer or the Guarantor, as applicable, cause to be published at least once, in an Authorized Newspaper in the Borough of Manhattan, The City of New York, and at least once in an Authorized Newspaper in London, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer or the Guarantor, as applicable.

Section 3.4 Statements of Officers of Issuer and Guarantor as to Default; Notice of Default .

(1) The Issuer and the Guarantor will deliver to the Trustee, within 120 days after the end of each fiscal year of the Issuer ending after the date hereof, a certificate, signed by the principal executive officer, principal financial officer or principal accounting officer, stating whether or not to the best knowledge of the signer thereof the Issuer or the Guarantor, as applicable is in default (without regard to periods of grace or requirements of notice) in the performance and observance of any of the terms, provisions and conditions hereof, and if the Issuer or the Guarantor, as applicable, shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.

(2) The Issuer and the Guarantor shall file with the Trustee written notice of the occurrence of any default or Event of Default within five Business Days of its becoming aware of any such default or Event of Default.

Section 3.5 Existence . Subject to Article IX, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises and those of each of its Subsidiaries; provided, however, that the Issuer shall not be required to preserve any such right or franchise if the Issuer shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer or the business of any Subsidiary and that the loss thereof is not disadvantageous in any material respect to the Holders.

Section 3.6 Maintenance of Properties . The Issuer will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Issuer may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Issuer from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Issuer, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders.

Section 3.7 Payment of Taxes and Other Claims . The Issuer shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon the Issuer or any Subsidiary or upon the income, profits or property of the Issuer or any Subsidiary, and (2) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Issuer or any Subsidiary; provided, however, that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts adequate reserves have been made.

Section 3.8 Further Instruments and Acts . Upon request of the Trustee or as necessary, the Issuer and the Guarantor will execute and deliver such further instruments and perform such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

Section 3.9 Limitation on Liens . The Guarantor and its Restricted Subsidiaries may not issue, assume, incur, suffer to exist or guarantee any indebtedness for borrowed money secured by a mortgage, pledge, lien or other encumbrance, directly or indirectly, upon any shares of the Voting Shares of a Restricted Subsidiary which shares are owned by the Guarantor or its Restricted Subsidiaries without effectively providing that the Securities (and if the Issuer or the Guarantor so elects, any other indebtedness of the Issuer or the Guarantor ranking on a parity with the Securities) shall be secured equally and ratably with, or prior to, any such secured indebtedness so long as such indebtedness remains outstanding. This Section 3.9 shall not apply to Permitted Liens upon any shares of Voting Shares of any Person existing at the time such Person becomes a Restricted Subsidiary and any extensions, renewals or replacements thereof.

Section 3.10 Commission Reports . The Guarantor shall provide to the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the Commission, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Guarantor is required to file with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s or the Guarantor’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates). The Trustee shall be under no obligation to analyze or make any credit decisions with respect to reports or other information received by it pursuant to this Section, but shall hold such reports and other information solely for the benefit of, and review by, the security holders.

Section 3.11 Calculation of Original Issue Discount . The Issuer shall file with the Trustee promptly at the end of each calendar year (1) a written notice specifying the amount of original issue discount

(including daily rates and accrual periods), if any, accrued on Outstanding Securities as of the end of such year and (2) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time.

ARTICLE IV

SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE

Section 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders . If and so long as the Trustee shall not be the Security Registrar for the Securities of any series, the Issuer and any other obligor on the Securities will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Registered Securities of such series pursuant to Section 312 of the Trust Indenture Act of 1939 (1) semi-annually not more than 5 days after each record date for the payment of interest on such Registered Securities, as hereinabove specified, as of such record date and on dates to be determined pursuant to Section 2.3 for non-interest bearing Registered Securities in each year, and (2) at such other times as the Trustee may request in writing, within thirty days after receipt by the Issuer of any such request as of a date not more than 15 days prior to the time such information is furnished.

Section 4.2 Preservation of Information; Communications to Holders .

(1) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 4.1 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar or paying agent. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.

(2) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act of 1939.

(3) Every Holder of Securities, by receiving and holding the same, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any agent of any of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Sections 4.1 and 4.2(2), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 4.2(2).

Section 4.3 Reports by the Trustee . Any Trustee’s report required under Section 313(a) of the Trust Indenture Act of 1939 shall be transmitted within 60 days after May 15 in each year beginning in 2010, as provided in Section 313(c) of the Trust Indenture Act of 1939, so long as any Securities are Outstanding hereunder, and shall be dated as of May 15, if required by and in compliance with Section 313(a) of the Trust Indenture Act of 1939.

A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each securities exchange, if any, upon which the Securities are listed, with the Commission and with the Issuer. The Issuer will promptly notify the Trustee when the Securities are listed on any securities exchange and of any delisting thereof.

Section 4.4 [ Reserved ].

Section 4.5 [ Reserved ].

ARTICLE V

REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT

Section 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default . “Event of Default” with respect to Securities of any series wherever used herein, means each one of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) unless it is either inapplicable to a particular series or it is specifically deleted or modified in an indenture supplemental hereto, if any, under which such series of Securities is issued:

(1) default in the payment of any installment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days and the interest payment date has not been properly extended or deferred; provided, however, that if the Issuer and the Guarantor are permitted by the terms of the Securities of the applicable series to defer the payment in question, the date on which such payment is due and payable shall be the date on which the Issuer and the Guarantor are required to make payment following such deferral, if such deferral has been elected pursuant to the terms of the Securities of that series (subject to any deferral of any due date in the case of an extension period); or

(2) default in the payment of all or any part of the principal of, or premium, if any, on any of the Securities of such series as and when the same shall become due and payable either at maturity, upon any redemption, by declaration or otherwise; provided, however, that if the Issuer and the Guarantor are permitted by the terms of the Securities of the applicable series to defer the payment in question, the date on which such payment is due and payable shall be the date on which the Issuer and the Guarantor are required to make payment following such deferral, if such deferral has been elected pursuant to the terms of the Securities of that series (subject to any deferral of any due date in the case of an extension period); or

(3) default in the payment of any sinking fund installment as and when the same shall become due and payable by the terms of the Securities of such series; or

(4) failure on the part of the Issuer or the Guarantor duly to observe or perform any other of the covenants or agreements on the part of the Issuer or the Guarantor, as applicable, in the Securities of such series (other than a covenant or agreement in respect of the Securities of such series a default in the performance or breach of which is elsewhere in this Section specifically dealt with) or contained in this Indenture (other than a covenant or agreement included in this Indenture solely for the benefit of a series of Securities other than such series) for a period of 90 days after the date on which written notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Issuer and/or the Guarantor remedy the same, shall have been given by registered or certified mail, return receipt requested, to the Issuer and the Guarantor by the Trustee, or to the Issuer, the Guarantor and the Trustee by the holders of at least 33% in aggregate principal amount of the Outstanding Securities of such series; or

(5) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Issuer, the Guarantor or any Restricted Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Issuer, the Guarantor or any Restricted Subsidiary under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, and such decree or order shall have continued undischarged and unstayed for a period of 120 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Issuer, the Guarantor or any Restricted Subsidiary or of its or their property, or for the winding up or liquidation of its or their affairs, shall have been entered, and such decree or order shall have remained in force and unstayed for a period of 120 days; or

(6) the Issuer, the Guarantor or any Restricted Subsidiary shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Issuer, the Guarantor

or any Restricted Subsidiary or for any substantial part of its or their property, or make any general assignment for the benefit of creditors, or shall admit in writing its inability to pay its or their respective debts generally as they become due; or

(7) an event of default, as defined in any one or more mortgages, indentures, instruments, bonds, debentures, notes or other similar instruments under which there may be issued, or by which there may be secured or evidenced, any indebtedness (other than the Securities of such series or nonrecourse obligations) (“Indebtedness”) in excess of $100,000,000 for money borrowed by the Issuer, the Guarantor or a Restricted Subsidiary shall occur (after giving effect to any applicable grace period), if such event of default shall result in the acceleration of such Indebtedness prior to its expressed maturity unless such Indebtedness is discharged or such acceleration is cured, waived, rescinded or annulled within 30 days after written notice thereof shall have been given by registered or certified mail, return receipt requested, to the Issuer and the Guarantor by the Trustee or to the Issuer, the Guarantor and the Trustee by the Holders of at least 33% in aggregate principal amount of the Outstanding Securities (treated as one class) which notice shall state that it is a “Notice of Default” hereunder; or

(8) other than as expressly permitted in this Indenture, the Guarantee ceases to be in full force and effect with respect to any Outstanding Securities of such series or is declared to be null and void and unenforceable; or

(9) any other Event of Default provided in the supplemental indenture under which such series of Securities is issued or in the form of Security for such series; provided that if any such default shall cease or be cured, waived, rescinded or annulled, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon cured.

If an Event of Default described in clause (1), (2), (3), (4), (7), (8) or (9) occurs and is continuing, then, and in each and every such case, except for any series of Securities the principal of which shall have already become due and payable, either the Trustee or the Holders of not less than 33% in aggregate principal amount of the Securities of each such affected series then Outstanding hereunder (voting as separate classes) by notice in writing to the Issuer and the Guarantor (and to the Trustee if given by Securityholders), may declare the entire principal (or, if the Securities of any such affected series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) of such Securities, and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration, the same shall become immediately due and payable. If an Event of Default specified in clause (5) or (6) occurs, all unpaid principal (or, if any Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof) of all the Securities then Outstanding, and interest accrued thereon, if any, shall be due and payable immediately, without any declaration or other act on the part of the Trustee or any Securityholder.

The foregoing provisions, however, are subject to the condition that if, at any time after the principal (or, if the Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof) of the Securities of any series (or of all the Securities, as the case may be) shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer or the Guarantor shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of such series (or of all the Securities, as the case may be) and the principal of any and all Securities of each such series (or of all the Securities, as the case may be) which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of each such series (or at the respective rates of interest or Yields to Maturity of all the Securities, as the case may be) to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, its agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence, bad faith or willful misconduct, and if any and all Events of Default under the Indenture, other than the non-payment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, then and in every such case the Holders of a majority in aggregate principal amount of all the Securities of each such series, or of all the Securities, in each case voting as a single class, then Outstanding, by written notice to the Issuer, the Guarantor and to the Trustee, may

waive all defaults with respect to each such series (or with respect to all the Securities, as the case may be) and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

For all purposes under this Indenture, if a portion of the principal of any Original Issue Discount Securities shall have been accelerated and declared due and payable pursuant to the provisions hereof, then, from and after such declaration, unless such declaration has been rescinded and annulled, the principal amount of such Original Issue Discount Securities shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration, together with interest, if any, thereon and all other amounts owing thereunder, shall constitute payment in full of such Original Issue Discount Securities.

Section 5.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt .

(1) The Issuer covenants that (a) in case default shall be made in the payment of any installment of interest on any of the Securities of any series when such interest shall have become due and payable, and such default shall have continued for a period of 30 days or (b) in case default shall be made in the payment of all or any part of the principal of the Securities of any series when the same shall have become due and payable, whether upon maturity of the Securities of such series or upon any redemption or by declaration or otherwise, then upon demand of the Trustee, the Issuer will pay to the Trustee for the benefit of the Holders of the Securities of such series the whole amount that then shall have become due and payable on all Securities of such series, and such Coupons, for principal or interest, as the case may be (with interest to the date of such payment upon the overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of such series); and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and any expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of its negligence, bad faith or willful misconduct.

Until such demand is made by the Trustee, the Issuer may pay the principal of and interest on the Securities of any series to the registered holders, whether or not the Securities of such series be overdue.

(2) In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Issuer, the Guarantor or other obligor upon the Securities and collect in the manner provided by law out of the property of the Issuer, the Guarantor or other obligor upon the Securities, wherever situated the moneys adjudged or decreed to be payable.

(3) In case there shall be pending proceedings relative to the Issuer, the Guarantor or any other obligor upon the Securities under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property, the Guarantor or its property or such other obligor, or in case of any other comparable judicial proceedings relative to the Issuer, the Guarantor or other obligor upon the Securities, or to the creditors or property of the Issuer, the Guarantor or such other obligor, the Trustee, irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise:

(a) to file and prove a claim or claims for the whole amount of principal and interest (or, if the Securities of any series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) owing and unpaid in respect of the Securities of any series, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including

any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence, bad faith or willful misconduct) and of the Securityholders allowed in any judicial proceedings relative to the Issuer, the Guarantor or other obligor upon the Securities, or to the creditors or property of the Issuer, the Guarantor or such other obligor,

(b) unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Securities of any series in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and

(c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Securityholders and of the Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Securityholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence, bad faith or willful misconduct.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities of any series or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person.

(4) All rights of action and of asserting claims under this Indenture, or under any of the Securities of any series or Coupons appertaining to such Securities, may be enforced by the Trustee without the possession of any of such Securities or Coupons or the production thereof in any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Securities or Coupons appertaining to such Securities in respect of which such action was taken.

(5) In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Securities or Coupons appertaining to such Securities in respect to which such action was taken, and it shall not be necessary to make any Holders of such Securities or Coupons appertaining to such Securities parties to any such proceedings.

Section 5.3 Application of Proceeds . Any moneys collected by the Trustee pursuant to this Article in respect of any series shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the several Securities and Coupons appertaining to such Securities in respect of which monies have been collected and stamping (or otherwise noting) thereon the payment, or issuing Securities of such series in reduced principal amounts in exchange for the presented Securities of like series if only partially paid, or upon surrender thereof if fully paid:

FIRST: To the payment of costs and expenses applicable to such series in respect of which monies have been collected, including reasonable compensation to the Trustee and each predecessor Trustee and their respective agents and attorneys and of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence, bad faith or willful misconduct;

SECOND: In case the principal of the Securities of such series in respect of which moneys have been collected shall not have become and be then due and payable, to the payment of interest on the Securities of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that

such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in such Securities, such payments to be made ratably to the persons entitled thereto, without discrimination or preference;

THIRD: In case the principal of the Securities of such series in respect of which moneys have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for principal and interest, with interest upon the overdue principal, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such principal, interest or Yield to Maturity, without preference or priority of principal over interest or Yield to Maturity, or of interest or Yield to Maturity over principal, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series, ratably to the aggregate of such principal, accrued and unpaid interest or Yield to Maturity; and

FOURTH: To the payment of the remainder, if any, to the Issuer or as a court of competent jurisdiction shall direct in writing.

Section 5.4 Suits for Enforcement . In case an Event of Default has occurred, has not been waived and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem necessary to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

Section 5.5 Restoration of Rights on Abandonment of Proceedings . In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Issuer, the Guarantor and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceedings had been taken.

Section 5.6 Limitations on Suits by Securityholders . No Holder of any Security of any series or of any Coupon appertaining thereto shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than 33% in aggregate principal amount of the Securities of each affected series then Outstanding (treated as a single class) shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceeding and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 5.9; it being understood and intended, and being expressly covenanted by the taker and Holder of every Security or Coupon with every other taker and Holder and the Trustee, that no one or more Holders of Securities of any series or Coupons appertaining to such Securities shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other such Holder of Securities or Coupons appertaining to such Securities, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of the applicable series and Coupons appertaining to such Securities. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

Section 5.7 Unconditional Right of Securityholders to Institute Certain Suits . Notwithstanding any other provision in this Indenture and any provision of any Security, the right of any Holder of any Security or Coupon to receive payment of the principal of and interest on such Security or Coupon on or after the respective due dates expressed in such Security or Coupon, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 5.8 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default . Except as provided in Section 5.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities or Coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

No delay or omission of the Trustee or of any Holder of Securities or Coupons to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to Section 5.6, every power and remedy given by this Indenture or by law to the Trustee or to the Holders of Securities or Coupons may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders of Securities or Coupons.

Section 5.9 Control by Holders of Securities . The Holders of a majority in aggregate principal amount of the Securities of each series affected (with all such series voting as a single class) at the time Outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such series by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture; provided further that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of Holders of the Securities of all series so affected not joining in the giving of said direction, it being understood that (subject to Section 6.1) the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders.

Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction or directions by Securityholders.

Section 5.10 Waiver of Past Defaults . Prior to the acceleration of the maturity of any Securities as provided in Section 5.1, the Holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding with respect to which an Event of Default shall have occurred and be continuing, may (voting as a single class) on behalf of the Holders of all such Securities waive any past default or Event of Default described in Section 5.1 and its consequences, except a default in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Security affected. In the case of any such waiver, the Issuer, the Guarantor, the Trustee and the Holders of all such Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

Upon any such waiver, such default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured, and not to have occurred for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

Section 5.11 Trustee to Give Notice of Default, but May Withhold in Certain Circumstances . The Trustee shall, within ninety days after the occurrence of a default with respect to the Securities of any series,

give notice of all defaults with respect to that series actually known to a Responsible Officer of the Trustee (1) if any Unregistered Securities of that series are then Outstanding, to the Holders thereof, by publication at least once in an Authorized Newspaper in the Borough of Manhattan, The City of New York and at least once in an Authorized Newspaper in London and (2) to all Holders of Securities of such series in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act of 1939, unless in each case such defaults shall have been cured before the mailing or publication of such notice (the term “defaults” for the purpose of this Section being hereby defined to mean any event or condition which is, or with notice or lapse of time or both would become, an Event of Default); provided that, except in the case of default in the payment of the principal of or interest on any of the Securities of such series, or in the payment of any sinking fund installment on such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders of such series.

Section 5.12 Right of Court to Require Filing of Undertaking to Pay Costs . All parties to this Indenture agree, and each Holder of any Security or Coupon by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder or group of Securityholders of any series holding in the aggregate more than 10% in aggregate principal amount of the Securities of such series, or, in the case of any suit relating to or arising under clause (4) or (9) of Section 5.1 (if the suit relates to Securities of more than one but less than all series), 10% in aggregate principal amount of Securities then Outstanding and affected thereby, or in the case of any suit relating to or arising under clause (4) or (9) (if the suit under clause (4) or (9) relates to all the Securities then Outstanding), (5), (6), (7) or (8) of Section 5.1, 10% in aggregate principal amount of all Securities then Outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of or interest on any Security on or after the due date expressed in such Security or any date fixed for redemption.

ARTICLE VI

CONCERNING THE TRUSTEE

Section 6.1 Duties and Responsibilities of the Trustee: During Default; Prior to Default .

(1) With respect to the Holders of any series of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to such series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities of a series has occurred (which has not been cured or waived), the Trustee shall exercise with respect to such series of Securities such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(2) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that

(a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default with respect to such series which may have occurred:

(i) the duties and obligations of the Trustee with respect to the Securities of any series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein unless specifically required by this Indenture);

(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(c) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture;

(d) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders pursuant to Section 5.9 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

(e) the Trustee shall not be required to take notice, and shall not be deemed to have notice, of any default or Event of Default hereunder, except Events of Default described in paragraphs (1), (2) and (3) of Section 5.1 hereof, unless a Responsible Officer of the Trustee shall be notified specifically of the default or Event of Default on a written instrument or document delivered to it at its notice address by the Issuer, the Guarantor or by the Holders of at least 10% of the aggregate principal amount of Securities then outstanding. In the absence of delivery of notice satisfying those requirements, the Trustee may assume conclusively that there is no default or Event of Default, except as noted.

(3) None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it.

The provisions of this Section 6.1 are in furtherance of and subject to Section 315 of the Trust Indenture Act of 1939.

Section 6.2 Certain Rights of the Trustee . In furtherance of and subject to the Trust Indenture Act of 1939, and subject to Section 6.1:

(1) the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, and shall be protected in acting or refraining from acting upon any resolution, Officer’s Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(2) any request, direction, order or demand of the Issuer or the Guarantor mentioned herein shall be sufficiently evidenced by an Officer’s Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Issuer or the Guarantor, as applicable;

(3) the Trustee may consult with legal counsel of its choice or other experts, and the advice of such experts within the scope of such expert’s area of expertise or opinion of counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion.

(4) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred therein or thereby;

(5) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities of all series affected by such Event of Default and then Outstanding; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require indemnity satisfactory to it against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Issuer or the Guarantor or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer or the Guarantor upon demand;

(6) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder;

(7) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder;

(8) the Trustee may request that the Issuer and/or Guarantor deliver a Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Certificate may be signed by any person authorized to sign an Officer’s Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded;

(9) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer or the Guarantor, at a time reasonably determined by the Issuer or the Guarantor, as applicable, personally or by agent or attorney at the sole cost of the Issuer or the Guarantor, as applicable, and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; and

(10) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

Section 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof . The recitals contained herein and in the Securities, except the Trustee’s certificates of authentication, shall be taken as the statements of the Issuer or the Guarantor, as applicable, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture or of any Securities or Coupons. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof.

Section 6.4 Trustee and Agents May Hold Securities or Coupons; Collections, Etc . The Trustee or any agent of the Issuer, the Guarantor or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities or Coupons with the same rights it would have if it were not the Trustee or such agent and may otherwise deal with the Issuer or the Guarantor and receive, collect, hold and retain collections from the Issuer or the Guarantor with the same rights it would have if it were not the Trustee or such agent.

Section 6.5 Moneys Held by Trustee . Subject to the provisions of Section 3.3 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuer, the Guarantor or the Trustee shall be under any liability for interest on any moneys received by it hereunder.

Section 6.6 Compensation and Indemnification of Trustee and its Prior Claim . The Issuer and the Guarantor covenant and agree to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed in writing between the Issuer, the Guarantor and the Trustee from time to time (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Issuer and the Guarantor covenant and agree to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except any such expense, disbursement or advance as shall be determined to have been caused by its own negligence, bad faith or willful misconduct. The Issuer and the Guarantor, jointly and severally, also covenant to indemnify the Trustee, each predecessor Trustee and their respective directors, officers, employees, and agents (the “indemnitees”) for, and to hold the indemnitees harmless against, any and all loss, liability, claim, damage, penalty, fine or expense, including taxes and reasonable out-of-pocket expenses, reasonable incidental expenses and reasonable legal fees and expenses incurred without negligence, bad faith or willful misconduct on the indemnitees’ part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and the indemnitees’ duties hereunder, including the costs and expenses of defending themselves against or investigating any claim, whether asserted by the Issuer, the Guarantor or any Holder or any other Person, or liability in connection with the exercise or performance of the indemnitees’ duties or obligations hereunder. The obligations of the Issuer and the Guarantor under this Section to compensate and indemnify the indemnitees and to pay or reimburse the indemnitees for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee in accordance with Section 6.10 herein. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities or Coupons, and the Securities are hereby subordinated to such senior claim.

The Trustee shall have a lien prior to the Securities as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 6.6, except with respect to funds held in trust for the benefit of the Holders of particular Securities.

When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(5) or Section 5.1(6), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law.

The provisions of this section shall survive the termination of this Indenture.

Section 6.7 Right of Trustee to Rely on Officer’s Certificate, Etc . Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence, bad faith or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officer’s Certificate delivered to the Trustee, and such certificate, in the absence of negligence, bad faith or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof.

Section 6.8 Indentures Not Creating Potential Conflicting Interests for the Trustee . The following indentures are hereby specifically described for the purposes of Section 310(b)(1) of the Trust Indenture Act of 1939: this Indenture with respect to the Securities of any series.

Section 6.9 Persons Eligible for Appointment as Trustee . The Trustee for each series of Securities hereunder shall at all times be a corporation or banking association organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $50,000,000, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by Federal, State or District of Columbia authority. Such corporation or banking association shall have a place of business or an affiliate with a place of business in the Borough of Manhattan, The City of New York if there be such a corporation or association in such location willing to act upon reasonable and customary terms and conditions. If such corporation or association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation or association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.10.

The provisions of this Section 6.9 are in furtherance of and subject to Section 310(a) of the Trust Indenture Act of 1939.

Section 6.10 Resignation and Removal; Appointment of Successor Trustee .

(1) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign with respect to one or more or all series of Securities by giving written notice of resignation to the Issuer and the Guarantor and (a) if any Unregistered Securities of a series affected are then Outstanding, by giving notice of such resignation to the Holders thereof, by publication, at the Issuer’s expense, at least once in an Authorized Newspaper in the Borough of Manhattan, The City of New York, and at least once in an Authorized Newspaper in London, (b) if any Unregistered Securities of a series affected are then Outstanding, by mailing notice of such resignation to the Holders thereof who have filed their names and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act of 1939 at such addresses as were so furnished to the Trustee and (c) by mailing notice of such resignation to the Holders of then Outstanding Registered Securities of each series affected at their addresses as they shall appear on the registry books. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor Trustee or Trustees with respect to the applicable series by written instrument in duplicate, executed by authority of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee or Trustees. If no successor Trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may, at the Issuer’s expense, petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.12, on behalf of himself or herself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.

(2) In case at any time any of the following shall occur:

(a) the Trustee shall fail to comply with the provisions of Section 310(b) of the Trust Indenture Act of 1939 with respect to any series of Securities after written request therefor by the Issuer or by any Securityholder who has been a bona fide Holder of a Security or Securities of such series for at least six months; or

(b) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.9 and Section 310(a) of the Trust Indenture Act of 1939 and shall fail to resign after written request therefor by the Issuer or by any Securityholder; or

(c) the Trustee shall become incapable of acting with respect to any series of Securities, or shall be adjudged bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;

then, in any such case, the Issuer may remove the Trustee with respect to the applicable series of Securities and appoint a successor Trustee for such series by written instrument, in duplicate, executed by order of the Board of Directors of the Issuer, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 315(e) of the Trust Indenture Act of 1939, any Securityholder who has been a bona fide Holder of a Security or Securities of such series for at least six months may on behalf of himself or herself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper, remove the Trustee and appoint a successor Trustee.

(3) The Holders of a majority in aggregate principal amount of the Securities of each series at the time Outstanding may at any time remove the Trustee with respect to Securities of such series and appoint a successor Trustee with respect to the Securities of such series by delivering to the Trustee so removed, to the successor Trustee so appointed and to the Issuer the evidence provided for in Section 7.1 of the action in that regard taken by such Securityholders.

(4) Any resignation or removal of the Trustee with respect to any series and any appointment of a successor Trustee with respect to such series pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.11.

Section 6.11 Acceptance of Appointment by Successor Trustee . Any successor Trustee appointed as provided in Section 6.10 shall execute and deliver to the Issuer, the Guarantor and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee with respect to all or any applicable series shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations with respect to such series of its predecessor hereunder, with like effect as if originally named as Trustee for such series hereunder; but, nevertheless, on the written request of the Issuer or the Guarantor or of the successor Trustee, upon payment of its charges then unpaid, the Trustee ceasing to act shall, subject to Section 3.3, pay over to the successor Trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor Trustee, the Issuer and the Guarantor shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.

If a successor Trustee is appointed with respect to the Securities of one or more (but not all) series, the Issuer, the Guarantor, the predecessor Trustee and each successor Trustee with respect to the Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to-the Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts under separate indentures.

No successor Trustee with respect to any series of Securities shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor Trustee shall be qualified under Section 310(b) of the Trust Indenture Act of 1939 and eligible under the provisions of Section 6.9.

Upon acceptance of appointment by any successor Trustee as provided in this Section 6.11, the Issuer shall give notice thereof (1) if any Unregistered Securities of a series affected are then Outstanding, to the Holders thereof, by publication of such notice at least once in an Authorized Newspaper in the Borough of Manhattan, The City of New York, and at least once in an Authorized Newspaper in London and (2) if any Unregistered Securities of a series affected are then Outstanding, to the Holders thereof who have filed their names and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act of 1939, by mailing such notice to such Holders at such addresses as were so furnished to the Trustee (and the Trustee shall make such information available to the Issuer for such purpose) and (3) if any Registered Securities of a series affected are then

Outstanding, to the Holders thereof, by mailing such notice to such Holders at their addresses as they shall appear on the registry books. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 6.10. If the Issuer fails to give such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Issuer.

Section 6.12 Merger, Amalgamation, Conversion, Consolidation or Succession to Business of Trustee . Any corporation or national banking association into which the Trustee may be merged or amalgamated or converted or with which it may be consolidated, or any corporation or national banking association resulting from any merger, amalgamation, conversion or consolidation to which the Trustee shall be a party, or any corporation or national banking association succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation or national banking association shall be qualified under Section 310(b) of the Trust Indenture Act of 1939 and eligible under the provisions of Section 6.9, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding.

In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities of any series shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Securities of such series or in this Indenture provided that the certificate of the Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, amalgamation, conversion or consolidation.

Section 6.13 Preferential Collection of Claims Against the Issuer . The Trustee shall comply with Section 311(a) of the Trust Indenture Act of 1939, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act of 1939. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act of 1939 to the extent indicated therein.

Section 6.14 Appointment of Authenticating Agent . As long as any Securities of a series remain Outstanding, the Trustee may, by an instrument in writing, appoint with the approval of the Issuer and the Guarantor an authenticating agent (the “Authenticating Agent”) which shall be authorized to act on behalf of the Trustee to authenticate Securities, including Securities issued upon exchange, registration of transfer, partial redemption or pursuant to Section 2.9. Securities of each such series authenticated by such Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee. Whenever reference is made in this Indenture to the authentication and delivery of Securities of any series by the Trustee or to the Trustee’s Certificate of Authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent for such series and a Certificate of Authentication executed on behalf of the Trustee by such Authenticating Agent. Such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 (determined as provided in Section 6.9 with respect to the Trustee) and subject to supervision or examination by Federal or State authority.

Any corporation into which any Authenticating Agent may be merged, amalgamated or converted, or with which it may be consolidated, or any corporation resulting from any merger, amalgamation or conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent with respect to all series of Securities for which it served as Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent. The Trustee may at any time terminate the Authenticating Agent. Any Authenticating Agent may at any time, and if it shall cease to be eligible shall, resign by giving written notice of resignation to the Trustee and to the Issuer and the Guarantor.

Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.14 with respect to one or more series of Securities, the Trustee shall upon receipt of an Issuer Order or Guarantor Order appoint a successor Authenticating Agent and the Issuer shall provide notice of such appointment to all Holders of Securities of such series in the manner and to the extent provided in Section 11.4. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. The Issuer agrees to pay to the Authenticating Agent for such series from time to time reasonable compensation. The Authenticating Agent for the Securities of any series shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee.

Sections 6.2, 6.3, 6.4, 6.6 and 7.3 shall be applicable to any Authenticating Agent.

ARTICLE VII

CONCERNING THE SECURITYHOLDERS

Section 7.1 Evidence of Action Taken by Securityholders . Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Securityholders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee, the Issuer and the Guarantor, if made in the manner provided in this Article.

Section 7.2 Proof of Execution of Instruments and of Holding of Securities . Subject to Sections 6.1 and 6.2, the execution of any instrument by a Securityholder or his or her agent or proxy may be, proved in the following manner:

(1) The fact and date of the execution by any Holder of any instrument may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the person executing such instruments acknowledged to him or her the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute sufficient proof of the authority of the person executing the same.

(2) The fact of the holding by any Holder of an Unregistered Security of any series, and the identifying number of such Security and the date of his or her holding the same, may be proved by the production of such Security or by a certificate executed by any trust company, bank, banker or recognized securities dealer wherever situated satisfactory to the Trustee, if such certificate shall be deemed by the Trustee to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Security of such series bearing a specified identifying number was deposited with or exhibited to such trust company, bank, banker or recognized securities dealer by the person named in such certificate. Any such certificate may be issued in respect of one or more Unregistered Securities of one or more series specified therein. The holding by the person named in any such certificate of any Unregistered Securities of any series specified therein shall be presumed to continue for a period of one year from the date of such certificate unless at the time of any determination of such holding (a) another certificate bearing a later date issued in respect of the same Securities shall be produced, or (b) the Securities of such series specified in such certificate shall be produced by some other person, or (c) the Securities of such series specified in such certificate shall have ceased to be Outstanding. Subject to Sections 6.1 and 6.2, the fact and date of the execution of any such instrument and the amount and numbers of Securities of any series held by the person so executing such instrument and the amount and numbers of any Security or Securities for such series may also be proven in accordance with such reasonable rules and regulations as may be prescribed by the Trustee for such series or in any other manner which the Trustee for such series may deem sufficient.

(3) In the case of Registered Securities, the ownership of such Securities shall be proved by the Security register or by a certificate of the Security registrar.

The Issuer may set a record date for purposes of determining the identity of Holders of Registered Securities of any series entitled to vote or consent to any action referred to in Section 7.1, which record date may be set at any time or from time to time by notice to the Trustee, for any date or dates (in the case of any adjournment or reconsideration) not more than 60 days nor less than five days prior to the proposed date of such vote or consent, and thereafter, notwithstanding any other provisions hereof, with respect to Registered Securities of any series, only Holders of Registered Securities of such series of record on such record date shall be entitled to so vote or give such consent or revoke such vote or consent.

Section 7.3 Holders to Be Treated as Owners . The Issuer, the Guarantor, the Trustee and any agent of the Issuer, the Guarantor or the Trustee may deem and treat the person in whose name any Security shall be registered upon the Security register for such series as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Security and for all other purposes; and none of the Issuer, the Guarantor, the Trustee or any agent of the Issuer, the Guarantor or the Trustee shall be affected by any notice to the contrary. The Issuer, Guarantor, the Trustee and any agent of the Issuer, the Guarantor or the Trustee may treat the Holder of any Unregistered Security and the Holder of any Coupon as the absolute owner of such Unregistered Security or Coupon (whether or not such Unregistered Security or Coupon shall be overdue) for the purpose of receiving payment thereof or on account thereof and for all other purposes and none of the Issuer, the Guarantor, the Trustee, or any agent of the Issuer, the Guarantor or the Trustee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his or her order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Unregistered Security or Coupon.

Section 7.4 Securities Owned by Issuer or Guarantor Deemed Not Outstanding . In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Issuer, the Guarantor or any other obligor on the Securities with respect to which such determination is being made or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer, the Guarantor or any other obligor on the Securities with respect to which such determination is being made shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only Securities which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Issuer, the Guarantor or any other obligor upon the Securities or any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer, the Guarantor or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly an Officer’s Certificate listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described Persons; and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept such Officer’s Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination.

Section 7.5 Right of Revocation of Action Taken . At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Security. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of

whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Guarantor, the Trustee and the Holders of all the Securities affected by such action.

ARTICLE VIII

SUPPLEMENTAL INDENTURES

Section 8.1 Supplemental Indentures Without Consent of Securityholders .

(1) In addition to any supplemental indenture otherwise authorized by this Indenture, the Issuer and the Guarantor, each when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order or Guarantor Order, as applicable), and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, which comply with the Trust Indenture Act of 1939, as then in effect, without the consent of the Holders, for one or more of the following purposes:

(a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets;

(b) to evidence the succession of another Person to the Issuer or the Guarantor, as the case may be, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Issuer or the Guarantor, as the case may be, pursuant to Article IX;

(c) to add to the covenants of the Issuer or the Guarantor such further covenants, restrictions, conditions or provisions as the Issuer, the Guarantor and the Trustee shall consider to be for the protection of the Holders of Securities or Coupons, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of such series to waive such an Event of Default;

(d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make any other provisions as the Issuer or Guarantor may deem necessary or desirable, provided that no such action shall materially adversely affect the interests of the Holders of the Securities or Coupons;

(e) to establish the forms or terms of Securities of any series or of the Coupons appertaining to such Securities as permitted by Sections 2.1 and 2.3;

(f) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11; and

(g) to make any other changes that do not materially adversely affect holders of the affected Securities.

(2) The Trustee is hereby authorized to join with the Issuer and the Guarantor in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

(3) Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Securities at the time outstanding, notwithstanding any of the provisions of Section 8.2.

Section 8.2 Supplemental Indentures With Consent of Securityholders .

(1) With the consent (evidenced as provided in Article VII) of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of all series affected by such supplemental indenture, the Issuer and the Guarantor, each when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order or Guarantor Order, as applicable), and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto, which comply with the Trust Indenture Act of 1939, as then in effect, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of each such series or of the Coupons appertaining to such Securities; provided, that no such supplemental indenture shall (a) extend the final maturity of any then issued Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon or reduce any amount payable on redemption thereof, or make the principal thereof (including any amount in respect of original issue discount), or interest thereon payable in any coin or currency other than that provided in such Securities and any Coupons thereon or in accordance with the terms thereof, or reduce the amount of the principal of a then issued Original Issue Discount Security that would be due and payable upon an acceleration of the maturity thereof pursuant to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section 5.2, or impair or affect the right of any Securityholder to institute suit for the payment thereof or, if such Securities provide therefor, any right of repayment at the option of the Securityholder, in each case without the consent of the Holder of each Security so affected, (b) reduce the percentage in principal amount of then issued Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected or (c) other than as expressly permitted in this Indenture, modify the Guarantee with respect to such series in a manner that adversely affects the Holders of Securities of such series, without the consent of the Holder of each Security so affected.

(2) A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of Holders of Securities of such series, or of Coupons appertaining to such Securities, with respect to such covenant or provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series or of the Coupons appertaining to such Securities.

(3) Upon the request of the Issuer or the Guarantor, accompanied by a copy of a resolution of the Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order or Guarantor Order, as applicable) certified by the secretary or an assistant secretary of the Issuer or Guarantor, as applicable, authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Holders of the Securities as aforesaid and other documents, if any, required by Section 7.1, the Trustee shall join with the Issuer and the Guarantor in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

(4) It shall not be necessary for the consent of the Securityholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

(5) Promptly after the execution by the Issuer, the Guarantor and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall give notice thereof (a) if any Registered Securities of a series affected thereby are then Outstanding, to the Holders thereof by mailing a notice thereof by first-class mail to such Holders at their addresses as they shall appear on the Security register, (b) if any Unregistered Securities of a series affected thereby are then Outstanding, to the Holders thereof who have filed their names and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act of 1939, by mailing a notice thereof by first-class mail to such Holders at such addresses as were so furnished to the Trustee and (c) if any Unregistered Securities of a series affected thereby are then Outstanding, to all Holders thereof, by publication of a notice thereof at least once in an Authorized Newspaper in the Borough of Manhattan, The City of New York, and at least once in an Authorized Newspaper in London and in each case such notice shall set forth in general terms the substance of such supplemental indenture. Any failure of the Trustee to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

Section 8.3 Effect of Supplemental Indenture . Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer, the Guarantor and the Holders of Securities of each series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

Section 8.4 Documents to Be Given to Trustee . The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall be provided with, and shall be fully protected in relying upon, an Officer’s Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article VIII is authorized or permitted by the Indenture.

Section 8.5 Notation on Securities in Respect of Supplemental Indentures . Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Trustee for such series as to any matter provided for by such supplemental indenture or as to any action taken by Securityholders. If the Issuer or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors of each of the Issuer and the Guarantor, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding.

Section 8.6 Conformity with Trust Indenture Act of 1939 . Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act of 1939 as then in effect.

ARTICLE IX

CONSOLIDATION, MERGER, AMALGAMATION, SALE OR CONVEYANCE

Section 9.1 Issuer and Guarantor May Consolidate, Etc., Only on Certain Terms . Neither the Issuer nor the Guarantor shall consolidate with or merge or amalgamate into another Person or sell other than for cash all or substantially all its assets to another Person, or purchase all or substantially all the assets of another Person, unless:

(1) either the Issuer or the Guarantor is the continuing Person, or the successor Person (if other than the Issuer or the Guarantor) expressly assumes by supplemental indenture the obligations and covenants evidenced by the Indenture and the Securities (in which case, the Issuer or the Guarantor, as applicable, will be discharged therefrom),

(2) if the Issuer or the Guarantor is not the continuing Person, the successor Person shall be a corporation or limited liability company organized and existing under the laws of the United States of America, any state thereof, the District of Columbia, Bermuda, the Cayman Islands, Barbados or any country or state which is a member of the Organization for Economic Cooperation and Development;

(3) immediately thereafter, the Issuer, the Guarantor or the successor Person (if other than the Issuer or the Guarantor) would not be in default in the performance of any covenant or condition contained herein, and

(4) a specified Officers’ Certificate and an Opinion of Counsel are delivered to the Trustee, each (a) stating that such transaction and any supplemental indenture pertaining thereto, comply with Article VIII and Article IX, respectively, and (b) otherwise complying with Section 11.5.

Section 9.2 Successor Substituted for the Issuer . Upon any consolidation of the Issuer or the Guarantor with, or merger or amalgamation of the Issuer or the Guarantor into, any other Person or any conveyance or transfer of the properties and assets of the Issuer of the Guarantor, substantially as an entirety, as the case may be, in accordance with Section 9.1, the successor Person formed by such consolidation or into which the Issuer or the Guarantor is merged or amalgamated or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer or the Guarantor, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Issuer or the Guarantor herein, and thereafter, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities.

Section 9.3 Restrictions on Certain Dispositions . As long as any of the Securities remain Outstanding, the Guarantor will not, and will not permit any Restricted Subsidiary to, issue, sell, assign, transfer or otherwise dispose of, directly or indirectly, any of the Voting Shares of any Restricted Subsidiary, unless:

(1) the issuance, sale, assignment, transfer or other disposition is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the request of the Issuer, the Guarantor or of one of the Restricted Subsidiaries;

(2) all of the Voting Shares of a Restricted Subsidiary then owned by the Guarantor or by its Restricted Subsidiaries is disposed of in a single transaction or in a series of related transactions, for a consideration consisting of cash or other property the fair market value of which (as determined in good faith by the Board of Directors of the Guarantor) is at least equal to the Fair Value of such Voting Shares;

(3) the issuance, sale, assignment, transfer or other disposition is made to the Issuer, the Guarantor or another Restricted Subsidiary; or

(4) after giving effect to the issuance, sale, assignment, transfer or other disposition, the Guarantor and its Restricted Subsidiaries would own directly or indirectly at least 80% of the issued and outstanding Voting Shares of such Restricted Subsidiary and such issuance, sale, assignment, transfer or other disposition is made for a consideration consisting of cash or other property which is at least equal to the Fair Value of such Voting Shares, as determined in good faith by the Board of Directors of the Guarantor.

Notwithstanding the foregoing, the Issuer and Guarantor may merge or consolidate any of their other respective Subsidiaries into or with another Person and the Issuer and Guarantor may sell, transfer or otherwise dispose of the assets of any Restricted Subsidiary or the Guarantor’s business in accordance with the provisions of this Indenture. Furthermore, the foregoing covenant will not prohibit any issuance or disposition of securities by any other Subsidiary.

ARTICLE X

SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

Section 10.1 Termination of Issuer and Guarantor’s Obligations Under the Indenture .

(1) This Indenture shall upon an Issuer Order cease to be of further effect with respect to Securities of or within any series and any Coupons appertaining thereto (except as to any surviving rights of registration of transfer or exchange of such Securities and replacement of such Securities which may have been lost, stolen or mutilated as herein expressly provided for) and the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to such Securities and any Coupons appertaining thereto when

(a) either

(i) all such Securities previously authenticated and delivered and all Coupons appertaining thereto (other than (A) such Coupons appertaining to Unregistered Securities surrendered in exchange for Registered Securities and maturing after such exchange, surrender of which is not required or has been waived as provided in Section 2.8, (B) such Securities and Coupons which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9, (C) such Coupons appertaining to Unregistered Securities called for redemption and maturing after the date fixed for redemption thereof, surrender of which has been waived as provided in Section 12.3 and (D) such Securities and Coupons for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer or the Guarantor and thereafter repaid to the Issuer or the Guarantor or discharged from such trust as provided in Section 3.3) have been delivered to the Trustee for cancellation; or

(ii) all Securities of such series and, in the case of (X) or (Y) below, all Coupons appertaining thereto not theretofore delivered to the Trustee for cancellation (X) have become due and payable, or (Y) will become due and payable within one year, or (Z) if redeemable at the option of the Issuer, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer, in the case of (X), (Y) or (Z) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in the currency or currencies or currency unit or units in which the Securities of such series are payable, sufficient to pay and discharge the entire indebtedness on such Securities and such Coupons not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest, with respect thereto, to the date of such deposit (in the case of Securities which have become due and payable) or maturity date or redemption date, as the case may be;

(b) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and

(c) the Issuer has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with.

(2) Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Issuer and the Guarantor to the Trustee and any predecessor Trustee under Section 6.6, the obligations of the Issuer and the Guarantor to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to (1)(a)(ii) of this Section, the obligations of the Trustee under Section 10.2 and the last paragraph of Section 3.3 shall survive such satisfaction and discharge.

Section 10.2 Application of Trust Funds . Subject to the provisions of the last paragraph of Section 3.3, all money deposited with the Trustee pursuant to Section 10.1 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the Coupons and this Indenture, to the payment, either directly or through any paying agent (including the Issuer or the Guarantor acting as paying agent) as the Trustee may determine, to the Persons entitled thereto of the principal, premium, if any, and any interest for whose payment such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by law.

Section 10.3 Applicability of Defeasance Provisions; Issuer’s Option to Effect Defeasance or Covenant Defeasance . If pursuant to Section 2.3 provision is made for either or both of (1) defeasance of the Securities of or within a series under Section 10.4 or (2) covenant defeasance of the Securities of or within a series

under Section 10.5, then the provisions of such Section or Sections, as the case may be, together with the provisions of Sections 10.6 through 10.9 inclusive, with such modifications thereto as may be specified pursuant to Section 2.3 with respect to any Securities, shall be applicable to such Securities and any Coupons appertaining thereto, and the Issuer may at its option by or pursuant to Board Resolution, at any time, with respect to such Securities and any Coupons appertaining thereto, elect to have Section 10.4 (if applicable) or Section 10.5 (if applicable) be applied to such Outstanding Securities and any Coupons appertaining thereto upon compliance with the conditions set forth below in this Article.

Section 10.4 Defeasance and Discharge . Upon the Issuer’s exercise of the option specified in Section 10.3 applicable to this Section with respect to the Securities of or within a series, the Issuer and the Guarantor shall be deemed to have been discharged from their respective obligations with respect to such Securities and any Coupons appertaining thereto and the related Guarantee on and after the date the conditions set forth in Section 10.6 are satisfied (hereinafter “defeasance”). For this purpose, such defeasance means that the Issuer and the Guarantor shall be deemed to have paid and discharged the entire indebtedness represented by such Securities and any Coupons appertaining thereto and the related Guarantee which shall thereafter be deemed to be “Outstanding” only for the purposes of Section 10.7 and the other Sections of this Indenture referred to in clause (2) of this Section, and to have satisfied all of their other obligations under such Securities and any Coupons appertaining thereto and the related Guarantee and this Indenture insofar as such Securities and any Coupons appertaining thereto and the related Guarantee are concerned (and the Trustee, at the expense of the Issuer or the Guarantor, as applicable, shall on an Issuer Order or Guarantor Order execute proper instruments acknowledging the same), except the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of such Securities and any Coupons appertaining thereto to receive, solely from the trust funds described in Section 10.6(1) and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest, on such Securities or any Coupons appertaining thereto when such payments are due; (2) the Issuer and the Guarantor’s obligations with respect to such Securities under Sections 2.8, 2.9, 3.2 and 3.3 and Article XIII; (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (4) this Article X. Subject to compliance with this Article X, the Issuer or the Guarantor may exercise the option under this Section notwithstanding the prior exercise of the option under Section 10.5 with respect to such Securities and any Coupons appertaining thereto. Following a defeasance, payment of such Securities may not be accelerated because of an Event of Default.

Section 10.5 Covenant Defeasance . Upon the Issuer’s exercise of the option specified in Section 10.3 applicable to this Section with respect to any Securities of or within a series, the Issuer and the Guarantor shall be released from their respective obligations under Sections 9.1, 3.5, 3.6, 3.7 and 3.9, if specified pursuant to Section 2.3, their obligations under any other covenant with respect to such Securities and any Coupons appertaining thereto and the related Guarantee on and after the date the conditions set forth in Section 10.6 are satisfied (hereinafter, “covenant defeasance”), and such Securities and any Coupons appertaining thereto and the related Guarantee shall thereafter be deemed to be not “Outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with Sections 9.1 and Article III or such other covenant, but shall continue to be deemed “Outstanding” for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Securities and any Coupons appertaining thereto, the Issuer and Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 5.1(4) or (9) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any Coupons appertaining thereto shall be unaffected thereby.

Section 10.6 Conditions to Defeasance or Covenant Defeasance . The following shall be the conditions to application of Section 10.4 or Section 10.5 to any Securities of or within a series and any Coupons appertaining thereto:

(1) The Issuer or the Guarantor shall have deposited or caused to be deposited irrevocably with the Trustee (or another Trustee satisfying the requirements of Section 6.9 who shall agree to comply with, and shall be entitled to the benefits of, the provisions of Sections 10.3 through 10.9 inclusive and the last paragraph of Section 3.3 applicable to the Trustee, for purposes of such Sections also a “Trustee”) as trust funds in trust for the

purpose of making the payments referred to in clauses (X) and (Y) of this Section 10.6(1), specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any Coupons appertaining thereto, with instructions to the Trustee as to the application thereof, (a) money in an amount (in such currency, currencies or currency unit or units in which such Securities and any Coupons appertaining thereto are then specified as payable at maturity), or (b) if Securities of such series are not subject to repayment at the option of Holders, U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment referred to in clause (X) or (Y) of this Section 10.6(1), money in an amount or (c) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, (X) the principal of, premium, if any, and interest on Securities and any Coupons appertaining thereto on the maturity of such principal or installment of principal or interest and (Y) any mandatory sinking fund payments applicable to such Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and such Securities and any Coupons appertaining thereto. Before such a deposit the Issuer may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date or dates in accordance with Article XII which shall be given effect in applying the foregoing.

(2) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default or Event of Default under, this Indenture or result in a breach or violation of, or constitute a default under, any other material agreement or instrument to which the Issuer or the Guarantor is a party or by which it is bound.

(3) In the case of an election under Section 10.4, the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel to the effect that (a) the Issuer or the Guarantor has received from, or there has been published by, the Internal Revenue Service a ruling, or (b) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities and any Coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred.

(4) In the case of an election under Section 10.5, the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities and any Coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.

(5) The Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 10.4 or the covenant defeasance under Section 10.5 (as the case may be), including those contained in this Section 10.6 other than the 90 day period specified in Section 10.6(7), have been complied with.

(6) This Issuer shall have delivered to the Trustee an Officer’s Certificate to the effect that neither such Securities nor any other Securities of the same series, if then listed on any securities exchange, will be delisted as a result of such deposit.

(7) No event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Securities or any other Securities shall have occurred and be continuing at the time of such deposit or, with regard to any such event specified in Sections 5.1(5) and (6), at any time on or prior to the 90th day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 90th day).

(8) Such defeasance or covenant defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940 unless such trust shall be registered under such Act or exempt from registration thereunder.

(9) Such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Issuer in connection therewith as contemplated by Section 2.3.

Section 10.7 Deposited Money and U.S. Government Obligations to be Held in Trust . Subject to the provisions of the last paragraph of Section 3.3, all money and U.S. Government Obligations (or other property as may be provided pursuant to Section 2.3) (including the proceeds thereof) deposited with the Trustee pursuant to Section 10.6 in respect of any Securities of any series and any Coupons appertaining thereto shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and any Coupons appertaining thereto and this Indenture, to the payment, either directly or through any paying agent (including the Issuer or the Guarantor acting as paying agent) as the Trustee may determine, to the Holders of such Securities and any Coupons appertaining thereto of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

Section 10.8 Repayment to Issuer . The Trustee (any paying agent) shall promptly pay to the Issuer upon Issuer Order any excess money or securities held by them at any time.

Section 10.9 Indemnity For U.S. Government Obligations . The Issuer shall pay, and shall indemnify the Trustee against, any tax, fee or other charge imposed on or assessed against U.S. Government Obligations deposited pursuant to this Article or the principal and interest and any other amount received on such U.S. Government Obligations.

Section 10.10 Reimbursement . If the Trustee or the paying agent is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or judgment of any court or government authority enjoining, restraining or otherwise prohibiting such application, then the obligations under this Indenture and such Securities from which the Issuer and the Guarantor have been discharged or released pursuant to Section 10.4 or 10.5 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or paying agent is permitted to apply all money held in trust pursuant to Section 10.7 with respect to such Securities in accordance with this Article; provided, however, that if the Issuer or the Guarantor makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Issuer or the Guarantor, as applicable, shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in trust.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.1 Incorporators, Shareholders, Officers and Directors of Issuer and Guarantor Exempt from Individual Liability . No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Security, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such or against any past, present or future shareholder, officer or director, as such, of the Issuer, the Guarantor or of any successor, either directly or through the Issuer, the Guarantor or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities and the Coupons appertaining thereto by the Holders thereof and as part of the consideration for the issue of the Securities and the Coupons appertaining thereto.

Section 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities and Coupons . Nothing in this Indenture, in the Securities or in the Coupons appertaining thereto, expressed or implied, shall give or be construed to give to any person, firm or corporation, other than the parties hereto and their successors and the Holders of the Securities or Coupons, if any, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and of the Holders of the Securities or Coupons, if any.

Section 11.3 Successors and Assigns of Issuer and Guarantor Bound by Indenture . All the covenants, stipulations, promises and agreements in this Indenture contained by or in behalf of the Issuer or the Guarantor, as applicable, shall bind its respective successors and assigns, whether so expressed or not.

Section 11.4 Notices and Demands on Issuer, Guarantor, Trustee and Holders of Securities and Coupons . Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Securities or Coupons to or on (i) the Issuer, shall be in writing (which may be by facsimile) and may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to AXIS Specialty Finance LLC, 11680 Great Oaks Way, Suite 500, Alpharetta, GA 30022, Attn: General Counsel, or to or on (ii) the Guarantor, shall be in writing (which may be by facsimile) and may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Guarantor is filed by the Guarantor with the Trustee) to AXIS Capital Holdings Limited, 92 Pitts Bay Road, Pembroke HM 08, Bermuda, Attn: General Counsel. Any notice, direction, request or demand by the Issuer, the Guarantor or any Holder of Securities or Coupons to or upon the Trustee shall be deemed to have been sufficiently given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Trustee is filed by the Trustee with the Issuer and the Guarantor) to The Bank of New York Mellon Trust Company, N.A., 525 William Penn Place, 38 ^th Floor, Pittsburgh, PA 15259, Attn: Corporate Trust Administration.

Where this Indenture provides for notice to Holders of Registered Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at his or her last address as it appears in the Security register. In any case where notice to such Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer or the Guarantor when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be reasonably satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice.

Section 11.5 Officer’s Certificates and Opinions of Counsel; Statements to Be Contained Therein . Upon any application or demand by the Issuer or the Guarantor to the Trustee to take any action under any of the provisions of this Indenture, the Issuer or the Guarantor, as applicable, shall furnish to the Trustee an Officer’s Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with.

Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition, (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

Any certificate, statement or opinion of an officer of the Issuer or the Guarantor, as applicable, may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his or her certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it

relates to factual matters, information with respect to which is in the possession of the Issuer or the Guarantor, as applicable, upon the certificate, statement or opinion of or representations by an officer or officers of the Issuer or the Guarantor, as applicable, unless such counsel actually knows that the certificate, statement or opinion or representations with respect to the matters upon which his or her certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.

Any certificate, statement or opinion of an officer of the Issuer or the Guarantor, as applicable, or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer or the Guarantor, as applicable, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his or her certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.

Any certificate or opinion of any independent firm of public accountants filed with and directed to the Trustee shall contain a statement that such firm is independent.

Section 11.6 Payments Due on Saturdays, Sundays and Holidays . If the date of maturity of interest on or principal of the Securities of any series or any Coupons appertaining thereto or the date fixed for redemption or repayment of any such Security or Coupon shall not be a Business Day, then payment of interest or principal need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date.

Section 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939 . If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by, or with another provision (an “incorporated provision”) included in this Indenture by operation of, Sections 310 to 318, inclusive, of the Trust Indenture Act of 1939, such imposed duties or incorporated provision shall control.

Section 11.8 New York Law to Govern; Waiver of Jury Trial . This Indenture and each Security and Coupon shall be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of such State, except as may otherwise be required by mandatory provisions of law.

EACH OF THE ISSUER, THE GUARANTOR AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.

Section 11.9 Counterparts . This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.

Section 11.10 Effect of Headings . The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 11.11 Securities in a Foreign Currency or in Euro . Unless otherwise specified in an Officer’s Certificate delivered pursuant to Section 2.3 of this Indenture with respect to a particular series of Securities, whenever for purposes of this Indenture any action may be taken by the Holders of a specified percentage in aggregate principal amount of Securities of all series or all series affected by a particular action at the time Outstanding and, at such time, there are Outstanding Securities of any series which are denominated in a coin or currency other than Dollars (including Euros), then the principal amount of Securities of such series which shall be deemed to be Outstanding for the purpose of taking such action shall be that amount of Dollars that could be obtained for such amount at the Market Exchange Rate. For purposes of this Section 11.11, Market Exchange Rate shall mean the noon Dollar buying rate in New York City for cable transfers of that currency as published by the Federal Reserve Bank of New York; provided, however, in the case of Euros, Market Exchange Rate shall mean the rate of exchange determined by the Commission of the European Communities (or any successor thereto) as

published in the Official Journal of the European Communities (such publication or any successor publication, the “Journal”). If such Market Exchange Rate is not available for any reason with respect to such currency, the Trustee shall use, in its sole discretion and without liability on its part, such quotation, of the Federal Reserve Bank of New York or, in the case of Euros, the rate of exchange as published in the Journal, as of the most recent available date, or quotations or, in the case of Euros, rates of exchange from one or more major banks in The City of New York or in the country of issue of the currency in question, which for purposes of the Euro shall be Brussels, Belgium, or such other quotations or, in the case of Euro, rates of exchange as the Trustee shall deem appropriate. The provisions of this paragraph shall apply in determining the equivalent principal amount in respect of Securities of a series denominated in a currency other than Dollars in connection with any action taken by Holders of Securities pursuant to the terms of this Indenture.

All decisions and determinations of the Trustee regarding the Market Exchange Rate or any alternative determination provided for in the preceding paragraph shall be in its sole discretion and shall, in the absence of manifest error, be conclusive to the extent permitted by law for all purposes and irrevocably binding upon the Issuer, the Guarantor and all Holders.

Section 11.12 Judgment Currency . The Issuer and the Guarantor agree, each to the fullest extent that it may effectively do so under applicable law, that (1) if for the purpose of obtaining judgment in any court it is necessary to convert the sum due in respect of the principal of, any premium, interest on the Securities of any series (the “Required Currency”) into a currency in which a judgment will be rendered (the “Judgment Currency”), the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the day on which final unappealable judgment is entered, unless such day is not a Business Day, then, to the extent permitted by applicable law, the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the Business Day preceding the day on which final unappealable judgment is entered and (2) its obligations under this Indenture to make payments in the Required Currency (a) shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment (whether or not entered in accordance with subsection (1)), in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the actual receipt, by the payee, of the full amount of the Required Currency expressed to be payable in respect of such payments, (b) shall be enforceable as an alternative or additional cause of action for the purpose of recovering in the Required Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Required Currency so expressed to be payable and (c) shall not be affected by judgment being obtained for any other sum due under this Indenture.

Section 11.13 Separability Clause . If any provision of this Indenture or of the Securities, or the application of any such provision to any Person or circumstance, shall be held to be invalid, illegal or unenforceable, the remainder of this Indenture or of the Securities, or the application of such provision to Persons or circumstances other than those as to whom or which it is invalid, illegal or unenforceable, shall not in any way be affected or impaired thereby.

Section 11.14 Force Majeure . In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

Section 11.15 Submission to Jurisdiction . The Issuer and the Guarantor each agrees that any judicial proceedings instituted in relation to any matter arising under this Indenture or the Securities appertaining thereto may be brought in any United States Federal or New York State court sitting in the Borough of Manhattan, The City of New York, New York to the extent that such court has subject matter jurisdiction over the controversy, and, by execution and delivery of this Indenture, the Issuer and the Guarantor each hereby irrevocably accepts, generally and unconditionally, the jurisdiction of the aforesaid courts, acknowledges their competence and irrevocably agrees to be bound by any judgment rendered in such proceeding. The Issuer and the Guarantor each

also irrevocably and unconditionally waives for the benefit of the Trustee and the Holders of the Securities any immunity from jurisdiction and any immunity from legal process (whether through service or notice, attachment prior to judgment, attachment in the aid of execution, execution or otherwise) in respect of this Indenture. The Issuer and the Guarantor each hereby irrevocably designates and appoints for the benefit of the Trustee and the Holders of the Securities for the term of this Indenture CT Corporation System, 111 Eighth Avenue, New York, New York 10011, as its agent to receive on its behalf service of all process (with a copy of all such service of process to be delivered to (i) if to the Issuer, AXIS Specialty Finance LLC, 11680 Great Oaks Way, Suite 500, Alpharetta, GA 30022, Attention: General Counsel and (ii) if to the Guarantor, AXIS Capital Holdings Limited 92 Pitts Bay Road, Pembroke HM 08, Bermuda, Attention: General Counsel) brought against it with respect to any such proceeding in any such court in The City of New York, such service being hereby acknowledged by the Issuer and the Guarantor to be effective and binding service on it in every respect whether or not the Issuer or the Guarantor, as applicable, shall then be doing or shall have at any time done business in New York. Such appointment shall be irrevocable so long as any of the Securities or the obligations of the Issuer or the Guarantor, as applicable, hereunder remain outstanding until the appointment of a successor by the Issuer or the Guarantor, as applicable, and such successor’s acceptance of such appointment. Upon such acceptance, the Issuer or the Guarantor, as applicable, shall notify the Trustee in writing of the name and address of such successor. The Issuer and the Guarantor each further agrees for the benefit of the Trustee and the Holders of the Securities to take any and all action, including the execution and filing of any and all such documents and instruments, as its agent in full force and effect so long as any of the Securities or the obligations of the Issuer or the Guarantor, as applicable, hereunder shall be outstanding. The Trustee shall not be obligated and shall have no responsibility with respect to any failure by the Issuer or the Guarantor to take any such action. Nothing herein shall affect the right to serve process in any other manner permitted by any law or limit the right of the Trustee or any Holder to institute proceedings against the Issuer or the Guarantor in the courts of any other jurisdiction or jurisdictions.

ARTICLE XII

REDEMPTION OF SECURITIES AND SINKING FUNDS

Section 12.1 Applicability of Article . The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 2.3 for Securities of such series.

Section 12.2 Notice of Redemption; Partial Redemptions . Notice of redemption to the Holders of Registered Securities of any series to be redeemed as a whole or in part at the option of the Issuer shall be given by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Securities of such series at their last addresses as they shall appear upon the registry books. Notice of redemption to the Holders of Unregistered Securities to be redeemed as a whole or in part, who have filed their names and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act of 1939 shall be given at the Issuer’s expense by mailing notice of such redemption, by first class mail, postage prepaid, at least 30 days and not more than 60 prior to the date fixed for redemption, to such Holders at such addresses as were so furnished to the Trustee (and, in the case of any such notice given by the Issuer, the Trustee shall make such information available to the Issuer for such purpose). Notice of redemption to all other Holders of Unregistered Securities shall be published in an Authorized Newspaper in the Borough of’ Manhattan, The City of New York, and in an Authorized Newspaper in London, in each case, once in each of three successive calendar weeks, the first publication to be not less than 30 nor more than 60 days prior to the date fixed for redemption. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series.

The notice of redemption to each such Holder shall identify the securities to be redeemed (including CUSIP numbers), shall specify, the principal amount of each Security of such series held by such Holder to be redeemed, the date fixed for redemption, the redemption price, the place or places of payment, that payment will be made upon presentation and surrender of such Securities and, in the case of Securities with Coupons attached thereto, of all Coupons appertaining thereto maturing after the date fixed for redemption, that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, that interest accrued to the date

fixed for redemption will be paid as specified in such notice and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part only the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued.

The notice of redemption of Securities of any series to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer’s request, by the Trustee (provided it receives the Officer’s Certificate below) in the name and at the expense of the Issuer.

On or before 10:00 a.m., New York City time, the redemption date specified in the notice of redemption given as provided in this Section, the Issuer will deposit with the Trustee or with one or more paying agents (or, if the Issuer or the Guarantor is acting as paying agent, set aside, segregate and hold in trust as provided in Section 3.3) an amount of money sufficient to redeem on the redemption date all the Securities of such series so called for redemption at the appropriate redemption price, together with accrued interest to the date fixed for redemption. The Issuer will deliver to the Trustee at least 75 days prior to the date fixed for redemption an Officer’s Certificate stating the aggregate principal amount of Securities to be redeemed. In case of a redemption at the election of the Issuer prior to the expiration of any restriction on such redemption, the Issuer shall deliver to the Trustee, prior to the giving of any notice of redemption to Holders pursuant to this Section, an Officer’s Certificate stating that such restriction has been complied with.

If less than all the Securities of a series are to be redeemed, the Trustee shall select, in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed in whole or in part. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities of such series selected for redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.

Section 12.3 Payment of Securities Called for Redemption . If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and on and after said date (unless the Issuer shall default in the payment of such Securities at the redemption price, together with interest accrued to said date) interest on the Securities or portions of Securities so called for redemption shall cease to accrue, and the unmatured Coupons, if any, appertaining thereto shall be void, and, except as provided in Sections 3.3 and 6.5, such Securities shall cease from and after the date fixed for redemption to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Securities at a place of payment specified in said notice, together with all Coupons, if any, appertaining thereto maturing after the date fixed for redemption, said Securities or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption; provided that payment of interest becoming due on or prior to the date fixed for redemption shall be payable in the case of Securities with Coupons attached thereto, to the Holders of the Coupons for such interest upon surrender thereof, and in the case of Registered Securities, to the Holders of such Registered Securities registered as such on the relevant record date subject to the terms and provisions of Sections 2.3 and 2.7 hereof.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest or Yield to Maturity (in the case of an Original Issue Discount Security) borne by such Security.

If any Security with Coupons attached thereto is surrendered for redemption and is not accompanied by all appurtenant Coupons maturing after the date fixed for redemption, such Security may be redeemed after deducting from the redemption price any amount equal to the face amount of all such missing Coupons, or the surrender of such missing Coupon or Coupons may be waived by the Issuer and the Trustee if there

be furnished to them such security or indemnity as they may require to save each of them and any paying agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any paying agent any such missing Coupon in respect of which a deduction shall have been made from the redemption price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by Coupons shall be payable as provided in Section 2.9 and, unless otherwise specified as contemplated by Section 2.3, only upon presentation and surrender of those Coupons.

Upon presentation of any Security redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Security or Securities of such series, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented.

Section 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption . Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in an Officer’s Certificate delivered to the Trustee at least 40 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer, (b) the Guarantor or (c) an entity specifically identified in such written statement as directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or the Guarantor.

Section 12.5 Mandatory and Optional Sinking Funds .

(1) The minimum amount of any sinking fund payment provided for by the terms of the Securities of any series is herein referred to as a “mandatory sinking fund payment”, and any payment in excess of such minimum amount provided for by the terms of the Securities of any series is herein referred to as an “optional sinking fund payment”. The date on which a sinking fund payment is to be made is herein referred to as the “sinking fund payment date”.

(2) In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Issuer may at its option (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to the mandatory sinking fund) by the Issuer or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant to Section 2.10, (b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Issuer through any optional redemption provision contained in the terms of such series. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund redemption price specified in such Securities.

(3) On or before the 60th day next preceding each sinking fund payment date for any series, the Issuer will deliver to the Trustee an Officer’s Certificate (which need not contain the statements required by Section 11.5) (a) specifying the portion of the mandatory sinking fund payment to be satisfied by payment of cash and the portion to be satisfied by credit of Securities of such series and the basis for such credit, (b) stating that none of the Securities of such series has theretofore been so credited, (c) stating that no defaults in the payment of interest or Events of Default with respect to such series have occurred (which have not been waived or cured) and are continuing and (d) stating whether or not the Issuer intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Issuer intends to pay on or before the next succeeding sinking fund payment date. Any Securities of such series to be credited and required to be delivered to the Trustee in order for the Issuer to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with such Officer’s Certificate (or reasonably promptly thereafter if acceptable to the Trustee). Such Officer’s Certificate shall be irrevocable and upon its receipt by the Trustee the Issuer shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Issuer, on or before any such 60th day, to deliver such Officer’s Certificate and Securities specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Issuer (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof and (ii) that the Issuer will make no optional sinking fund payment with respect to such series as provided in this Section.

(4) If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any unused balance of any preceding sinking fund payments made in cash shall exceed $50,000 (or the equivalent thereof in any Foreign Currency or Euro) or a lesser sum in Dollars (or the equivalent thereof in any Foreign Currency or Euro) if the Issuer shall so request with respect to the Securities of any particular series, such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price together with accrued interest to the date fixed for redemption. If such amount shall be $50,000 (or the equivalent thereof in any Foreign Currency or Euro) or less and the Issuer makes no such request then it shall be carried over until a sum in excess of $50,000 (or the equivalent thereof in any Foreign Currency or Euro) is available. The Trustee shall select, in the manner provided in Section 12.2, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be, and shall (if requested in writing by the Issuer) inform the Issuer of the serial numbers of the Securities of such series (or portions thereof) so selected. Securities shall be excluded from eligibility for redemption under this Section if they are identified by registration and certificate number in an Officer’s Certificate delivered to the Trustee at least 60 days prior to the sinking fund payment date as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer, (b) the Guarantor or (c) an entity specifically identified in such Officer’s Certificate as directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or the Guarantor. The Trustee, in the name and at the expense of the Issuer (or the Issuer, if it shall so request the Trustee in writing) shall cause notice of redemption of the Securities of such series to be given in substantially the manner provided in Section 12.2 (and with the effect provided in Section 12.3) for the redemption of Securities of such series in part at the option of the Issuer. The amount of any sinking fund payments not so applied or allocated to the redemption of Securities of such series shall be added to the next cash sinking fund payment for such series and, together with such payment, shall be applied in accordance with the provisions of this Section. Any and all sinking fund moneys held on the stated maturity date of the Securities of any particular series (or earlier, if such maturity is accelerated), which are not held for the payment or redemption of particular Securities of such series shall be applied, together with other moneys, if necessary, sufficient for the purpose, to the payment of the principal of, and interest on, the Securities of such series at maturity.

(5) On or before each sinking fund payment date, the Issuer shall pay to the Trustee in cash or shall otherwise provide for the payment of all interest accrued to the date fixed for redemption on Securities to be redeemed on the next following sinking fund payment date.

(6) The Trustee shall not redeem or cause to be redeemed any Securities of a series with sinking fund moneys or give any notice of redemption of Securities for such series by operation of the sinking fund during the continuance of a default in payment of interest on such Securities or of any Event of Default except that, where the giving of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Issuer a sum sufficient for such redemption. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article V and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 5.10 or the default cured on or before the sixtieth day preceding the sinking fund payment date in any year, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities.

ARTICLE XIII

GUARANTEE

Section 13.1 Unconditional Guarantee .

The Guarantor does hereby fully and unconditionally guarantee (the “Guarantee”) to the Holders and to the Trustee all payment obligations of the Issuer due under this Indenture, including without limitation on each series of Securities when due, in accordance with the provisions of this Indenture, as provided below. The Guarantee shall rank equally in right of payment with other unsecured, senior indebtedness of the Guarantor.

The Guarantor hereby waives notice of acceptance of the Guarantee and of default of performance by the Issuer, and hereby agrees that payment under the Guarantee shall be subject to no condition other than the giving of a written request for payment, stating the fact of default of performance. This Guarantee is a guarantee of payment and not of collection.

The obligations of the Guarantor under the Guarantee shall in no way be impaired by: (1) any extension, amendment, modification or renewal of a series of Securities; (2) any waiver of any Event of Default, extension of time or failure to enforce any series of Securities; or (3) any extension, moratorium or other relief granted to the Issuer pursuant to any applicable law or statute.

The Guarantor shall be obligated to make payment under the Guarantee, for the benefit of the Holders, at the same place as the Issuer is obligated to make payment.

Subject to the provisions of this Article XIII, the Guarantor hereby agrees that:

(a) each series of Securities will be paid strictly in accordance with the terms of this Indenture, regardless of the value, genuineness, validity, regularity or enforceability of such series of Securities, and of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Trustee with respect thereto; and

(b) the liability of the Guarantor to the extent herein set forth shall be absolute, unconditional and irrevocable, not subject to any reduction, limitation, impairment, termination (other than payment in full of the series of Securities), defense, offset, counterclaim or recoupment whatsoever (all of which are hereby expressly waived by the Guarantor to the extent permitted by law) whether by reason of any claim of any character whatsoever, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, or by reason of any liability at any time to the Guarantor or otherwise, whether based upon any obligations or any other agreement or otherwise, and howsoever arising, whether out of action or inaction or otherwise and whether resulting from default, willful misconduct, gross negligence or otherwise, and without limiting the foregoing, irrespective of:

(i) any lack of validity or enforceability of any agreement or instrument relating to such series of Securities;

(ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of such series of Securities, or any rescission, amendment or other modification or waiver of or consent to any departure from any of the terms or provisions of this Indenture, the Securities or any other agreement relating to any Securities of such series;

(iii) any increase in, addition to, exchange or release of, or nonperfection of any lien on or security interest in, any collateral, or any release or amendment or waiver of or consent to any departure from or failure to enforce any other guarantee, for all or any of such series of Securities;

(iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Issuer in respect of such series of Securities;

(v) the absence of any action on the part of the Trustee to obtain payment of such series of Securities from the Issuer;

(vi) any insolvency, bankruptcy, reorganization or dissolution, or any similar proceeding of the Issuer, including, without limitation, rejection of such series of Securities in such bankruptcy; or

(vii) the absence of notice or any delay in any action to enforce any Securities of such series or to exercise any right or remedy against the Guarantor or the Issuer, whether hereunder, under any Securities of such series or any agreement or any indulgence, compromise or extension granted.

Notwithstanding anything to the contrary in this Guarantee, the Guarantor does not waive any defense that would be available to the Issuer based on a breach, default or misrepresentation by the Trustee, or failure of any condition to the Issuer’s obligations under this Indenture or the illegality of any provision of this Indenture.

The Guarantor further agrees that, to the extent that the Issuer or the Guarantor makes a payment or payments to the Trustee, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to the Issuer or the Guarantor or their respective estate, trustee, receiver or any other party under any federal bankruptcy laws, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, this Guarantee and the advances or part thereof which have been paid, reduced or satisfied by such amount (and the provisions of this Indenture in respect of the Guarantee) shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred.

Section 13.2 Limitation on Liability .

The Guarantor, and by its acceptance of Securities of any series, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee not constitute a fraudulent transfer or conveyance for purposes of the United States Bankruptcy Code or any similar state law to the extent applicable to any Guarantee. Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the obligations guaranteed hereunder by the Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to the Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

Section 13.3 Execution and Delivery of the Indenture .

If an officer whose signature is on this Indenture no longer holds that office at the time the Trustee authenticates Securities of any series with respect to which the Guarantee is made or at any time thereafter, the Guarantee shall be valid nevertheless.

The delivery of Securities of any series by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantor.

Section 13.4 Waiver of Subrogation .

The Guarantor shall be subrogated to all rights of the Holders of each series of Securities and the Trustee against the Issuer in respect of any amounts paid to such Holders by the Guarantor pursuant to the provisions of the Guarantee; provided, however, that the Guarantor shall not be entitled to enforce, or to receive any payments arising out of or based upon such right of subrogation until the principal of, interest on and additional interest, if any, payable in respect of all Securities of such series issued under such Indenture shall have been paid in full.

Section 13.5 Assumption by Guarantor .

The Guarantor may, without the consent of the Holders, assume all of the rights and obligations of the Issuer hereunder with respect to a series of Securities and under the Securities of such series if, after giving effect to such assumption, no Event of Default or event which with the giving of notice or lapse of time, or both, would become an Event of Default, shall have occurred and shall be continuing. Upon such an assumption, the Guarantor shall execute a supplemental indenture evidencing its assumption of all such rights and obligations of the Issuer and the Issuer shall be released from its liabilities hereunder and under such Securities as obligor on the Securities of such series.

Section 13.6 No Suspension of Remedies .

Nothing contained in this Article XIII shall limit the right of the Trustee or the Holders of Securities of any series to take any action to accelerate the maturity of the Securities of such series pursuant to Article V or to pursue any rights or remedies hereunder or under applicable law.

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of .


AXIS SPECIALTY FINANCE LLC, as Issuer

By:		/s/ Andrew M. Weissert
Name:		Andrew M. Weissert
Title:		Chief Executive Officer and President

AXIS CAPITAL HOLDINGS LIMITED, as Guarantor

By:		/s/ David B. Greenfield
Name:		David B. Greenfield
Title:		Executive Vice President and Chief Financial Officer

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee

By:		/s/ Leslie Lockhart
Name:		Leslie Lockhart
Title:		Sr Associate

Exhibit 31.1

CERTIFICATION

OF CHIEF EXECUTIVE OFFICER

AXIS Capital Holdings Limited

Pursuant to section 302 of the Sarbanes-Oxley Act of 2002

I, John R. Charman, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of AXIS Capital Holdings Limited for the period ended March 31, 2010;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15 (f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: April 27, 2010		/s/ JOHN R. CHARMAN
		John R. Charman
		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

OF CHIEF FINANCIAL OFFICER

AXIS Capital Holdings Limited

Pursuant to section 302 of the Sarbanes-Oxley Act of 2002

I, David B. Greenfield, certify that:

1.	I have reviewed this Quarterly Report of Form 10-Q AXIS Capital Holdings Limited for the period ended March 31, 2010;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: April 27, 2010		/s/ DAVID B. GREENFIELD
		David B. Greenfield
		Executive Vice President and Chief Financial Officer

Exhibit 32.1

AXIS CAPITAL HOLDINGS LIMITED

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of AXIS Capital Holdings Limited (the “Company”) for the quarterly period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John R. Charman, Chief Executive Officer of the Company, hereby certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: April 27, 2010		/s/ JOHN R. CHARMAN
		John R. Charman
		President and Chief Executive Officer

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

Exhibit 32.2

AXIS CAPITAL HOLDINGS LIMITED

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of AXIS Capital Holdings Limited (the “Company”) for the quarterly period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David B. Greenfield, Chief Financial Officer of the Company, hereby certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: April 27, 2010		/s/ DAVID B. GREENFIELD
		David B. Greenfield
		Executive Vice President and
		Chief Financial Officer