Linda Ventresca - IR John Charman – CEO, President David Greenfield - CFO

Ron Bobman - Capital Returns Jay Cohen - Merrill Lynch Bill Wilt - Morgan Stanley Matt Heimermann – JP Morgan Vinay Misquith - Credit Suisse Susan Spivak - Wachovia

Welcome to the third quarter 2007 AXIS Capital Holdings Limitedearnings conference call. (Operator Instructions) I would now like to turn thepresentation over to your host for today's call, Ms. Linda Ventresca. You mayproceed, ma'am.

Thank you, Jeremy.Good morning, ladies and gentlemen. I am happy to welcome you to our conferencecall to discuss the financial results for AXIS Capital for the quarter ended September 30, 2007. Our third quarter earnings press release and financialsupplement were issued yesterday evening after the market closed. If you wouldlike copies, please visit the investor information section of our website,www.axiscapital.com. We set aside an hour for today's call, which is alsoavailable as an audio webcast through the investor information section of ourwebsite through Friday November 23, 2007. An audio replay will also be available through Friday November 9, 2007. Thetoll-free dial-in number for the replay is 888-286-8010 and the internationalnumber is 617-801-6888. The pass code for both replay dial-in numbers is19500687. With me on today's call are Michael Butt, our Chairman; JohnCharman, our CEO and President; and David Greenfield, our CFO. Before I turn the call over to John, I will remind everyonethat statements made during this call, including the question-and-answersession, which are not historical facts, may be forward-looking statementswithin the meaning of the U.S.federal securities laws. Forward-looking statements contained in thispresentation include, but are not necessarily limited to, information regardingour estimate of losses related to catastrophes and other loss events; futuregrowth prospects and financial results; evaluation of losses and loss reserves;investment strategies; investment portfolio and market performance; impact tothe marketplace with respect to changes in pricing models; and our expectationsregarding pricing and other market conditions. These statements involve risks,uncertainties and assumptions which could cause actual results to differmaterially from our expectations. For a discussion of these matters, please refer to the riskfactors section in our most recent Form 10-K on file with the Securities andExchange Commission. We undertake no obligation to update or revise publiclyany forward-looking statements whether as a result of new information, futureevents or otherwise. In addition, this presentation contains informationregarding diluted book value per common share, calculated using theif-converted method and operating income, which are non-GAAP financial measureswithin the meaning of the U.S. federal securities laws. For a reconciliation ofthese items to the most directly comparable GAAP financial measures, pleaserefer to our press release and Form 8-K issued last night, which can be foundon our website. With that, I would like to turn the call over to John.

Thank you, Linda and good morning to you all. We areextremely pleased to report our results for the third quarter of 2007. Ourquality underwriting portfolio, good investment earnings and overall favorableloss experience delivered record results for the quarter and for theyear-to-date. For the first nine months of this year, we achieved $749 millionin net income, yielding an annualized return on average common equity of 23.9%.Our diluted book value per share has increased 15% from the start of this yearand 22% for the rolling 12 months. In the quarter, our overall gross premiums written werestable relative to last year end; and for the year-to-date, gross premiumswritten was up modestly to $3 billion with many continuing importantunderwriting portfolio changes underlying these overall top line results. Ourunderwriting results were strong and healthy with a combined ratio for thequarter of 74.1% and a combined ratio for the year-to-date of 76.7%. Mindful of the robustness of our pre-binding pricemonitoring embedded in our underwriting peer review process, I am pleased toreport that our current year loss ratios continued to represent our solidunderwriting performance. Our underwriting results also contributedmeaningfully to earnings with pre-tax net investment income up 20% from thesame quarter last year and up 26% for the first nine months. With that, I will turn the call over to David to discuss ourfinancial results for the quarter in more detail.

Thank you, John. Goodmorning, everyone. As John mentioned, we are extremely pleased with our resultsfor this quarter. Our third quarter results marked another quarter of recordearnings against a comparable prior year period, our eighth quarter in a row.This once again demonstrates the powerful earnings potential of the global AXISfranchise. For the quarter, net income was $270 million, a 19% increaseover the $226 million in the third quarter of 2006. Earnings per diluted sharefor the quarter of $1.65 compared to $1.37 per diluted share in the thirdquarter of 2006. After-tax operating income, which excludes the impact ofrealized gains and losses on investments, was $271 million, a 19% increase fromthe $228 million for the third quarter of 2006. Operating earnings per dilutedshare of $1.66 in the quarter compared to $1.38 in the same quarter last year. For the first nine months of 2007, net income reached $749million, a 16% increase over the $645 million for the first nine months of2006. Earnings per diluted share of $4.53 for the first nine months of 2007compared to $3.94 per diluted share in the first nine months of 2006. After-taxoperating income was $754 million, a 13% increase from the $666 million for thefirst nine months of last year; and operating earnings per diluted share of$4.55 for the first nine months compared to $4.07 in the first nine months oflast year. These results translate to an impressive annualized returnon average common equity for the quarter of 25% and 23.9% for the first ninemonths of 2007. Our diluted book value per share increased 22% over the last 12months and 15% for the year-to-date. Turning to our top line, our consolidated gross premiumswritten was $755 million for the quarter and compares with $735 million in lastyear's third quarter. For year-to-date, consolidated gross premiums written of$3 billion were up 4%, due primarily to increases in our reinsurance segment,which I will comment on in a moment. Gross premiums written in our insurance segment were $481million and compared with $453 million in last year's third quarter. This 6%increase in the segment's gross premiums were largely generated from ourpolitical risk line. Transaction timing worked in our favor this quarter and wealso benefited from additional resources in this line to address theopportunities as they arose. As I've shared with you before, the unpredictabletiming and lengthy analytical lead time associated with the political riskbusiness impacts any comparative analysis amongst periods. The other notable increase in the quarter was from ourprofessional lines book, which is benefiting from the diversification strategywe started three years ago. This strategy has shown to be prudent. The increasein the quarter was primarily associated with renewal rights acquired inconnection with our Media/Pro acquisition this past May. Other than U.S.exposed catastrophe property business, which continued to present goodopportunities, market conditions in our other lines of business continued to beless favorable during the third quarter of 2007. This limited our opportunityto expand these lines, although we continued to seek out better price andstructured opportunities. Gross premiums written in the insurance segment for the ninemonths of 2007 were comparable with the same period in 2006. Gross premiums written in our reinsurance segment were $274million in the quarter, down 3% from $282 million in the third quarter of lastyear. This decline was driven by a reduction in catastrophe business where weallocated lower amounts of capital in the third quarter of 2007 relative to thesame period in 2006. As discussed in prior quarters, we reallocated somecatastrophe capacity from January 1 2006 renewals to take advantage of the much stronger mid-year 2006pricing. The reduction in catastrophe premium in this quarter was partiallyoffset by increased participation on certain professional lines and liabilityrenewals. For the first nine months of 2007, gross premiums written inthe reinsurance segment increased 8% compared to the same period in 2006. Thiswas largely a result of increased participation in the U.S.and European reinsurance markets during the major renewal period of the first quarter.The increase included approximately 3.6 percentage points related to thefavorable impact of exchange rate movements. Our professional lines business was the only reinsuranceline for which we experienced a reduction in gross premiums written over thenine months. This was driven by the non-renewal of several large contractsduring the second quarter due to cedents increasing their retention ofbusiness. Consolidated net premiums written decreased 4% in thequarter. This was due to the reduction in reinsurance gross premiums written inthe quarter, the purchase of additional reinsurance coverage on a number ofbusiness lines within our insurance segment and the change in the mix ofbusiness toward lines with reinsurance programs associated with them. Year-to-date, net premiums written were up 3% driven by theincrease in reinsurance gross premiums written. In line with ourperiod-to-period changes in net premiums written and mix, consolidated netpremiums earned were down approximately 1% in the quarter and up 3% for thefirst nine months of 2007. Moving on to our underwriting results, our underwritingincome for the quarter of $200 million, which includes $112 million from ourinsurance segment and $88 million from our reinsurance segment, is up 14%relative to the same quarter last year. Underwriting results this quarter benefitedfrom both strong current-year underwriting results and continued favorable lossdevelopment from prior periods. The increase in underwriting income was drivenby our insurance segment. For the quarter, our consolidated combined ratio was 74.1%,an improvement of 3.6 points from the same period last year. This was primarilydriven by our insurance segment where the combined ratio of 63.3% represented a15.7 point improvement relative to the same period last year. The improvementwas due to more favorable loss experience than initially expected and a higherlevel of favorable loss development from prior years. Our reinsurance segment combined ratio increased 6.3 pointsover the prior year quarter to 77.1% due to a higher incidence of midsizecatastrophe losses in the current year and a lower level of favorable priorperiod loss development in the quarter. With respect to our current accident year loss ratio, thiscan vary from period to period depending on a number of factors that includethe level of estimated losses, changes in our mix of business and changes inthe benchmark assumptions used to establish our loss ratios. Of note, thecurrent accident year loss ratio was favorably impacted in this quarter ascompared to the same period last year by the increased weighting of our ownfavorable loss experience and development trends for catastrophe-exposedshort-tail lines in both our insurance and reinsurance segment. Our overall accident year loss ratio for the quarter of59.9% compares with 61% in the same quarter last year and there were a fewmoving parts. Our insurance segment accident year loss ratio for the quarterwas 56.9%, down 7.2 points from the same quarter last year. This brings ouraccident year loss ratio for the year-to-date in our insurance segment to62.9%, down 2.6 points from the same period last year. As I previously mentioned, reported claims on our short-taillines of business in the insurance segment were favorable relative to ourinitial expectations and the reduction in the current year loss ratios in thequarter and for the year-to-date compared to the same periods in 2006 reflectsthis lower loss activity. Our reinsurance segment accident year loss ratio was 62.1%,up 4 points for the quarter. This brings our year-to-date accident year lossratio in the reinsurance segment to 65.2% from 62.1% in the same period lastyear. The increase for the quarter and year-to-date was primarily due to theincreased mid-sized catastrophe losses, which impacted a variety of propertyreinsurance lines. We also experienced changes in business mix with morelonger-tail reinsurance lines in the mix, which generally have a higher initialexpected loss ratio compared to our other lines. Turning to prior period reserve development, our netfavorable reserve prior period development in the quarter was $82 million, or12 points. Of this amount, $59 million was from our insurance segmentrepresenting a positive impact of 19.4 points on the segment's loss ratio. Ourreinsurance segment posted $23 million in favorable loss developmentrepresenting a positive impact of 6.1 points on the segment's loss ratio. Allof the favorable reserve development is related to short-tail lines. As ever, we caution against comparing the level of reservedevelopment amongst periods. However, I would like to remind you that we docontinue to maintain the same discipline and conservative approach to quarterlyreserving established at our inception. Turning now to our investment portfolio, our total cash andinvestments increased to $10.3 billion at September 30 2007, up 2% for the quarter and 6% from year end.Net cash generated from operations was exceptionally strong at $563 million forthe quarter and $1.3 billion for the first nine months. These represent recordlevels of cash flow from operations for AXIS. Our fixed income portfolio is of high quality with aweighted average rating of AA+ and 90% of those securities rated A or better.The amount for which collateral comprises sub-prime or Alt-A mortgages is anegligible portion of our overall investment portfolio at $197 million or lessthan 2% of our portfolio. All of this is rated AAA. Our position remainsunchanged relative to last quarter. Our investment portfolio performed well overall in thequarter. Our net investment income for the quarter was $119 million, a 20%increase over the 2006 quarter. Our nine-month net investment income of $358million was up 26% year-over-year. These increases were due to largerinvestment balances and higher yields on cash and fixed maturities. We remainoptimistic that positive cash flow will continue to drive growth in investmentincome. During the quarter, our net investment income fromalternatives, or other investments, declined $1.6 million from the same periodlast year. There were a few underlying changes of note here. First, we had anincrease in the fair value of our life settlements contract investment of about$20 million. Absent this increase, our net investment income from ouralternative investments was down. This was due to the broad repricing of risk in the capitalmarkets and the lack of liquidity in the below investment grade credit market,which substantially and negatively impacted the performance in the quarter forour credit funds and to a lesser extent our hedge funds. We do expect that thisrepricing of risk, which presented some downside for the quarter, will presentopportunities for us going forward. It is worth mentioning that sincequarter-end, we have already recovered a substantial portion of the declinefrom credit funds. With respect to hedge funds, we have now been invested inthis asset class for almost three years and returns have been as expected. Youwill have noticed that we no longer hold the portfolio of life settlementscontracts in our other investments. Following the extraordinary disruption inthe financial markets in the middle of this year, we found the volatility inour investment earnings introduced by the structure of this investment to beunacceptable to us. However, the longevity risk component remains attractive. Soduring the quarter, we saw an opportunity to restructure the transaction toreduce earnings volatility and retain the longevity risk. Specifically, we soldthe asset-backed note. In connection with the sale, the $400 million repurchaseagreement used to finance the purchase of the note was also terminated. Youshould note that the interest expense associated with this repo will not beincurred in the future quarters. Finally, we retained the longevity risk in the form of aninsurance contract, which indemnifies the holder of the note in the event ofnonpayment on the principal of its investment in the asset-backed note. Thiscontract is recorded as a derivative contract and quarterly movements in itsfair value will be recorded in the other insurance income line of our incomestatement. Moving on, net realized losses for the quarter were $1million as compared with net realized losses of $2 million in the third quarterof 2006. Net realized losses for the nine months were $6 million as comparedwith $22 million in the same period last year. With respect to foreign exchange, changes in exchange ratesprimarily between sterling and euro versus the U.S. dollar continued to have apositive impact on our net asset positions. In this quarter, we had $7 millionin foreign exchange gains and $16 million in the first nine months of 2007.These gains compared with losses of $3 million in the third quarter and gainsof $25 million in the first nine months of last year. Our interest expense for the quarter was $14 millioncompared to $8 million in the third quarter of 2006. This increase was due tothe interest costs incurred on the $400 million repurchase agreement, which Imentioned has now been terminated. Returning to the balance sheet, our total net loss reservesstand at $4.2 billion and 71% of these net reserves are IBNR reserves. Totalshareholder's equity increased 12% to $4.9 billion since year end. With respect to capital management, in August, we were ableto take advantage of the equity market volatility to repurchase 2.2 millioncommon shares for a total cost of approximately $80 million. This brings ouryear-to-date share repurchases to $180 million. We have a further $220 millionavailable under our current share repurchase authorization. We will continue toactively manage our capital position and evaluate opportunities as they arise.Total capital to deploy in our globally diversified franchise now stands at$5.4 billion. Now I would like to turn the call back to John.

Thank you, David. As a general comment, the market continuesto be more competitive as the year progresses. As I said last quarter, theincrease in competition is particularly apparent in primary insurance lines ofbusiness. As always, the magnitude and rationality of this competition variesconsiderably by line, by segment of the market and by competitor. Opportunitiescontinue to exist in all lines, although we have to work harder each day to tryto find them. We believe that the strong marketing initiatives and brandbuilding that we have undertaken over the last four years are key advantages innavigating through these challenging market conditions. Rate reductions on U.S.casualty business that were flat to minus 10% have now moved more towards 10%reductions in price. Our rate monitoring shows that our rate reductions aremeaningfully below those published in mainstream market indices. An importantpoint is that we are not competing on deductibles or self-insured retentions. North American catastrophe exposed risks remain the mostattractively priced, although we are coming off peak levels. Aviation, mostsegments of the marine market, terrorism and international North Americannon-cat property continue to be the most competitive and we continue to hold anextremely defensive posture here. Whilst the pace of broker request for morefavorable terms and conditions are increasing, we are holding firm and themarket generally also seems to be resisting. As I reported in our last call, overall discipline continuesto be maintained in the established reinsurance marketplace and the competitivebehavior for the most part appears rational. At that time, I also expressed myconsternation with respect to the increased retentions on the part of primarycompanies given the price competitive behavior we are witnessing in many areasof the insurance marketplace. I firmly believe this trend towards higher retention shouldcease in the coming months. We are of the view that primary companies simplycannot reach the competitive levels of the late '90s without the aid of cheapreinsurance and so far reinsurers have not been leading the market down. As 2007 has progressed, underlying exposure growth andexperience continues to be dealt with both appropriately and technically by thereinsurance market with some normal competitive wear on price. Broadly, we havenot experienced any significant slide in terms, conditions or overrides. As you know, during this time of year following the July 1reinsurance renewals, the reinsurance marketplace is relatively quiet. We arestill quite far away from the major January 1 reinsurance renewal date, but wedo expect the reinsurance marketplace to remain disciplined. As we have matured, we have continuously experiencedimproved signings in our reinsurance business due to our high quality financialsecurity, consistency of approach and overall service. During upcomingreinsurance renewals, we expect that we will continue to strengthen ourposition in the signings for business that we deliberately target. We maintainone of the strongest capital bases amongst our Bermudapeers and this does not go unnoticed by our cedents. On the topic of the impact of the recent crisis in thefinancial markets, we continue to monitor potential exposures across ourenterprise, which we believe are limited. As discussed by David ,on the assetside of our balance sheet, our assessment of our investment portfolio indicatesthat we have minimal exposure to sub-prime and credit issues. We have alsoexamined potential exposure in professional lines, particularly in thefinancial institutions area and we are comfortable at this time that anyexposure will be within our estimates of expected loss for these lines. It is still too early in the credit market to predict theimpact of pricing in the D&O market. What is clear is that some lawsuitshave been filed, which likely will trigger coverage under D&O policies andwe expect that more suits are likely to follow. As we have seen with othermarket events, total limits purchased will be a key driver to the marketplace. Sub-primelenders typically did not purchase large limits. This group is expected to bearthe brunt of litigation. But companies that have substantial balance sheetexposure to sub-prime mortgages may also be targeted. We have seen a number of large financial institutionsannounce charges to earnings for the third quarter. Many of these types ofinstitutions buy only Side A coverage. These factors, combined with a strongrisk selection, high attachment points and average net limits of around $6million at AXIS, support our view that any losses will be manageable. In conclusion, I once again stress that our corecompetencies have become even more important, namely: risk selection, pricingexperience, negotiating savvy, market positioning, all of these vitalattributes, which we possess are showing their true worth in our current andnear future trading activity. Our focus is on how we redeploy capital to maximumadvantage. Our experienced underwriters at AXIS have, in previous ventures,strongly differentiated themselves in softening markets. AXIS previously hasdemonstrated that if we believe there are unacceptable changes in the market,we will quickly and efficiently walk away from unattractive business. Since our inception, we have been consistently pricing overour required technical margins and we believe there is still ample room tocontinue to do so. Our price and exposure monitoring continues to underscorethe robustness of our current year loss ratios and I am confident theunderwriting at AXIS will continue to drive strong results. Our expectation is that our activities this year willcontinue to drive strong book value growth of the highest quality. We willcontinue to seek out ways to outperform over time. With that, I would like to open the line for questions.

Your first question comes from Ron Bobman - Capital Returns. Ron Bobman - Capital Returns: I had a question about the life settlement note. Could yougive us a little more background when the investment was made? I am not sure ifI heard you right. Was it a $400 million note? I may have heard you wrong; thatsounded awfully large. What was the effect, the economic loss or gaininvestment to date? Thanks a lot.

Sure, Ron. We madethe investment at the end of 2006 inthe fourth quarter and we were carrying that as a $400 million investment inour other alternatives portfolio throughout the first three quarters of thisyear. As I made a comment in my remarks, we sold it at the end of the thirdquarter, so it is no longer on the balance sheet. In terms of the economic returns, you can go back and lookat our results for the quarter, but essentially we were carrying that on a fairvalue mark-to-market or mark-to-model basis and the net return on theinvestment side through the quarters was a net of zero through the nine months. Ron Bobman - Capital Returns: At year-end '06, you had about a $7.5 billion investmentportfolio. It is presumably comprised of hundreds if not thousands of lifepolicies, but I am surprised you'd have $400 million in one particular note.Could you comment on that? Out of a $7.5 billion portfolio.

We haven't discussed the underlying details of the licensesettlement, but it wasn't hundreds of thousands of policies I can assure you ofthat. It was a particular transaction that we spent a great deal of timelooking at and we were quite comfortable with the underlying risk exposure inthe investment, particularly the longevity risk and we like the way that riskfit into our risk profile. Ron Bobman - Capital Returns: What do you mean by longevity risk?

Essentially it has to do with the underlying lives in thepolicy and how long those lives will continue.

Your next question comes from Jay Cohen - Merrill Lynch. Jay Cohen - Merrill Lynch: What was the interest expense associated with the lifesettlement contract that now goes away, if you could just quantify that?

I think it was about $6 million a quarter. Jay Cohen - Merrill Lynch: Separately, maybe just go over this again, but you seem tosuggest that you were now using your own loss experience more in settingaccident year loss ratios. Later on in the call, you said you haven't changedyour philosophy and I think I understand that, but if you could talk about thatand if in fact your own loss experience does suggest lower loss ratios, which Iguess that is the conclusion?

I think both of thosepoints are correct, Jay. I think overall in terms of our reserving philosophy,we have not changed our conservative nature, so I think that was the point ofthose comments that I made. But with respect to the current accident year 2007,we have begun to consider some of the experience within this year inestablishing the loss ratios that we reported in the third quarter and throughthe nine-month period, but essentially all within this quarter. Effectively, we couldn't ignore the favorable experience wewere seeing throughout the early parts of '07 in those analyses and that is why wehave incorporated that in the current accident year loss ratios. Jay Cohen - Merrill Lynch: So it is favorabledevelopment from the first half of the year?

Through the firstnine months essentially.

Your next question comes from Bill Wilt - Morgan Stanley. Bill Wilt - Morgan Stanley: You are purchasing more reinsurance on your insuranceportfolio. Prices in reinsurance presumably favorable and you are happy to layout some of the risk. John, you have commented on a couple of quarters now thediscipline in the reinsurance marketplace. I assume you are very careful aboutthe credit risk you are taking, so could you help square those two actions andcomments?

I think that I have been extremely consistent about mycomments about the stability of the reinsurance marketplace in general. We havevery high regard to the security that we use and accept within our reinsuranceprograms. What we are able to do is the fact that we are a very goodunderwriting company. People recognize that. They saw that our experience throughthe hurricanes of '04 and '05 was very much broadly in line with theunderwriting information they had been provided and we were one of the very fewcompanies that didn't actually exhaust all its reinsurance protection. I thinkthat has been well-received by reinsurers that have been doing business with usfor quite some time. So we are able to squeeze a bit more margin from them on theback of not only our underwriting results, but also the robustness -- and Iwant to deal with this -- about the way we go about our underwriting. I have said we have had a price monitoring system in placefor the insurance business that has evolved over about 15 to 18 years and itencompasses both new business and renewal business and there is a very strongconsistency of approach in the way that we monitor that. That again isrespected by our reinsurers. So the way I square it up, Bill, is the fact that I think wehave had a greater benefit because of our underwriting track record and the waywe go about our underwriting in a very disciplined way and the fact we willjust not accept business unless it is priced right and has the right conditionsand has the right deductibles. Our reinsurers are prepared to respect that andprice that in accordingly. Bill Wilt - Morgan Stanley: Is there a governing philosophy that we can keep in the backof our respective heads as we think about your approach to purchasingreinsurance?

My approach topurchasing reinsurance has always been to either enhance profitability or todramatically reduce the potential for loss. It has been consistent over the 35years that I have been buying it. Bill Wilt - Morgan Stanley: The weighting of the current AXIS individual loss experiencewith industry data, I asked you to generalize -- realizing it wouldn’t be byline -- but could you describe where you are in that process from a broadperspective? Is it 50/50 at this point? Is it still skewed towards morecredibility assigned to the industry experience or vice versa?

I just want to stateagain what David stated earlier. We maintain our conservative approach toreserving. That is embedded throughout our insurance business and reinsurancebusiness. Secondly, our price monitoring activity, which I believe isone of the strongest in the industry and one of the most tested over a longperiod of time, allows us to feed automatically through to our current lossactual market conditions, not perceived market conditions by a lot of people inthe marketplace, ours feed through automatically. We like to think that we dodemonstrate real time our real experience in the marketplace and are thenreserving on a very conservative basis. So David, I don't want you to overlay on that.

Bill, I would justadd this is really related to our shorter-tail lines and within the currentaccident year, the view that the experience was more favorable than we thoughtwe would see at the outset of the year, so we effectively took that intoconsideration beginning in this quarter.

We have not released this. We keep on banging on about manyof our what we consider to be long-tail reserves. We have made that pointquarter after quarter and then if you look at the long-tail element of ourreinsurance business, which is the majority that has an impact on the way thatwe are conservative loss picking that business.

Your next question comes from Matt Heimermann – JP Morgan. Matt Heimermann - JP Morgan: Could you just clarify on the current year re-estimate, howmany points that was for the full year, the benefit?

We don't look at it that way, Matt, so I would just focus onthe end of quarter accident year ratio. Matt Heimermann - JP Morgan: Could you just repeatthat? I just missed it. I want to make sure I don't inflate anything.

We don't provide that individual or that level of detail inour reserving process, so I would just suggest you focus on our accident year ratiosat the end of the quarter, year-to-date numbers. Matt Heimermann - JP Morgan: If I heard you correctly with respect to Bill's question onthe reinsurance, John, what it really sounds like you are saying is where youare buying more reinsurance is property and so this whole issue of growingreinsurance versus shrinking insurance risk is apples and oranges?

No, it's broader thanproperty where we buy across most of our specialty lines on the insurance side.But I have never believed that in a softening market you increase your retentions. I have been through about four majorcycles now in my career, four or five, and I believe that is the most prudentthing to do. Matt Heimermann - JP Morgan: The last question is the growth you see in the professionallines and liability lines on the reinsurance side, you mentioned participation.Could you just remind us what type of client that you are talking about hereand also just the contract form, excess of loss versus quota share and line ofbusiness for example?

You picked up on thefact that it is largely excess of loss in our reinsurance portfolio, apart fromthe credit and bond portfolios we ride out of Europe,are predominantly excess of loss and that has been so from the outset. That iswhere we chose to position our reinsurance portfolio. I regret that I have forgotten about what yourfirst point was. Matt Heimermann - JP Morgan: I just wondered inaddition to excess of loss, the type of customer or accounts that these are,just specialty versus standard and maybe relative size of companies?

Well, we actuallyhave dealt with the diversity within that. We have dealt with them all. But wehave been very nimble. We have been very nimble; I said in the last quarter Ithink that one of the things that is very important to our reinsurance peopleis the fact they get direct feedback from our primary people in terms ofunderwriting behavior. That substantially influences whether we are prepared todeal with individual cedents or not. But without a shadow of a doubt,professional lines reinsurance business in the U.S.was impacted by some of the major companies retaining substantially more oftheir business and some retained it all. But we have a very good spread ofcedents geographically and by designated size. Matt Heimermann - JP Morgan: Is it fair to assume most of this growth is coming just inthe U.S.operation?

Yes, for professionallines, yes.

Your next question comes from Vinay Misquith - CreditSuisse. Vinay Misquith - Credit Suisse: You mentioned that your reinsurance business was affected bysome mid-size losses in the Midwest U.S. and Canada.Do you have a number on that? I was wondering whether you are writing somecoverage in the Midwest and Canada.

Well, let me dealwith your latter point. We have a very diversified global portfolio of the reinsurancecatastrophe business and that ranges from Peruto the U.S. to Europeand to parts of Asia. So it is globally diversified. Secondly, it is diversified throughout policy limits. Therehas been no change in that. If anything, it has been towards higher layers asopposed to lower layers, Vinay. All that has happened, and I think you might bebarking up the wrong tree -- if you will forgive me for saying so -- is thefact that there were a series of losses globally. The UKyou know, Canadayou know, Midwest you know, Peru,where relatively minor catastrophe losses occurred and we have been prudent inthe quarter in setting up reserves for them. Some we have had notificationsfor; others we have had very little notification for. But as we get greatercertainty, we will either confirm those reserves or we will take them down. Vinay Misquith - Credit Suisse: The only reason is that because for many of the other reinsurers,you have not really seen this mentioned on the calls before, so I was justcurious why it was more of an issue with AXIS than for others.

I don't regard it asmaterial, Vinay, not in the global catastrophe portfolio that we have andlooking at the geographic dispersion of these losses and the number of them.You know we reserve conservatively, so it's not a big deal. Vinay Misquith - Credit Suisse: On the absolute level of profitability, pricing is goingdown and you have expressed some optimism that reinsurers will not cut pricesdrastically even though profitability has been strong this year. What is yoursense for the absolute level of profitability now and how it is going to trendin the next year?

Reinsurers price accordingly and are there to make money fortheir shareholders and so are we. We take, just as every other reinsurer,substantial amounts of risk for the price we get paid. Just because we make alot of money, that is great and we have given underlying cedents huge coverageand taken pressure off their balance sheet. I am very comfortable with the waythat the vast majority of the reinsurance companies that I see, and I touch, andI talk to are transacting business and going about their business. I am extraordinarily more concerned about the behavior ofsome of the primary underwriters and the erosion of their net margins. I havesaid to you many times before and I have said to other people on this call, Ihave been disturbed by the fact that the CEOs of a lot of companies are sodetached from their day-to-day business activities, as well as not reallyunderstanding the robustness of their price monitoring in their underlyingbusiness, that they are going to have a nasty surprise when their net margins reallyshow up. So I am pretty comfortable from a reinsurance point of viewgoing into this year end and actually through next year. Don't forget, we havehad a pretty benign level of major loss in the reinsurance market.

Your final question comes from Susan Spivak - Wachovia. Susan Spivak - Wachovia: John, could you just talk a little bit about how you see theM&A environment developing in the insurance industry over the next six to12 months?

Well, you guys know far more about it than I do. We arepretty disinterested in it because we don't see a lot of synergy. Most peopleare trying to peddle the same wares in our industry certainly on the insuranceside and the reinsurance side. There is not a lot of differentiation in firstlooks at businesses. Investment bankers are still trolling around Bermuda and theU.S. trying to fit businesses together, but there is not business logic anduntil the differentiation in price-to-book between the really good businesses inour industry and the not-so-good businesses in our industry -- with nowhere to go quite frankly -- untilthose shareholders of those businesses recognize that there is going to be asubstantial devaluation in their price to books, I don't expect there to be alot of M&A activity. But I believe the pressures will come about during thecourse of next year that will lead to those weaker players having to dosomething because it will be more than obvious then. Susan Spivak - Wachovia: So we are still about12 months off then from any significant activity?

During the course ofnext year, I think an awful lot of people are finding it very tough. I don'tcomment about other people by name, but we know that a lot of our competitorsare finding it really tough. You can undercut prices, but at the end of theday, sustainability in our business is a different factor and you are either aquality operation and there are some very good quality operators in thespecialty marketplace, but there are an awful lot of [doffs] if you don't mindme saying so and the market needs to figure that out and properly price them.Then you will get M&A activity.

At this time, I would like to turn the call back to Mr. JohnCharman for any closing remarks.

Well, as usual, thank you all for taking the time to listento us today. We hope that you are pleased with our results for the quarter andwe look forward to talking to you again at in what seems to be a relativelyshort period of time. Thank you again.