Bermuda insurer Axis Capital's announcement of almost $400 million in writedowns and derivative losses will not affect its ratings with Standard & Poor's Ratings Services.

Axis announced last week that the losses would impact forthcoming third-quarter results, but S&P said yesterday it considered the losses "modest" relative to the company's capital base and so its A+ financial strength rating on Axis would remain unchanged.

The company said it expects its third quarter operating results to suffer as result of an increase of approximately $136 million in the fair value liability of an indemnity derivative contract that is exposed to longevity risk.

Axis also expects to incur about $260 million in other than temporary impairment losses (OTTI) in its fixed maturity investment portfolio related to certain medium-term note investments.

S&P said it expected Axis's underwriting performance for the second half of 2009 to remain strong and within expectations.

The rating agency added that it saw the derivative contract loss as "a one-time event in that it is not representative of the group's core property/casualty lines of business".

S&P appeared not to be worried about the investment losses either. "We continue to view capital adequacy as very strong and improving through the third quarter of 2009," the agency said.

Axis said last week that it expects its total capitalisation will increase to approximately $5.9 billion at September 30, 2009, compared to $5.4 billion at June 30, 2009. The expected increase "further supports our assessment", S&P added.

Overall the rating agency expects Axis's "underwriting results for full-year 2009 to remain strong, with the full-year combined ratio in the 85 percent-90 percent range and return on revenue upwards of 18 percent".