LANCASHIRE HOLDINGS LIMITED - Full Year Results 2008

Hamilton, Bermuda - 16 February 2009 - Lancashire Holdings Limited ("Lancashire" or "the Company") (Ticker: LHL.BH) today announces its results for the fourth quarter of 2008 and the twelve month period ended 31 December 2008.

Against a backdrop of significant industry losses and dramatic investment market turmoil, Lancashire has produced an excellent return for shareholders.

Financial highlights for the fourth quarter of 2008:

• Fully converted book value per share of $6.86 at 31 December 2008, compared to $6.33 at 30 September 2008, an increase of 8.4%;
• Gross and net written premiums of $130.1 million;
• Loss ratio of 11.5% and a combined ratio of 35.4%;
• Annualised total investment return of 8.9%, including net investment income, realised gains and losses, impairments, and change in unrealised gains and losses;
• Net operating profit of $98.3 million, or $0.55 diluted operating earnings per share; and

·         Net profit after tax of $81.1 million, or $0.45 diluted earnings per share.

Financial highlights for the twelve months to 31 December 2008:

• Fully converted book value per share of $6.86 at 31 December 2008, compared to $6.38 at 31 December 2007, an increase of 7.5%;

·         Compound annual return on equity since inception of 17.7%;

• Gross written premiums of $638.1 million. Net written premiums of $574.7 million;
• Loss ratio of 61.8% and a combined ratio of 86.3%;
• Total investment return of 3.1% including net investment income, realised gains and losses, impairments, and change in unrealised gains and losses;
• Net operating profit of $119.4 million, or $0.64 diluted operating earnings per share; and

·         Net profit after tax of $97.5 million, or $0.53 diluted earnings per share.

Dividend Policy

Lancashire has approved the following dividend policy, which will be stated in the Company's Annual Report and forthcoming prospectus. The prospectus will be issued ahead of our application for admission of the Company's shares to the Official List of the UK Listing Authority and to trading on the London Stock Exchange's market for listed securities.

"Lancashire intends to maintain a strong balance sheet at all times, while generating an attractive risk-adjusted total return for shareholders. We will actively manage capital to achieve those aims. Capital management is expected to include the payment of a sustainable annual dividend, supplemented by special dividends from time to time. Dividends will be linked to past performance and future prospects. Under most scenarios, the annual dividend is not expected to reduce from one year to the next. Special dividends are expected to vary substantially in size and in timing."

Richard Brindle, Group Chief Executive Officer, commented:

"2008 was one of the toughest years that many of us have experienced in the insurance industry. To grow book value per share by 7.5% is a considerable achievement, and further proof if any were needed that our risk management has been thoroughly tested on both sides of the balance sheet. Lancashire has achieved an excellent combined ratio of 86.3% despite exposure to Hurricane Ike, one of the largest offshore and onshore market losses that the insurance industry has seen. We also achieved a very strong investment return. On Hurricanes Ike and Gustav, we originally forecast a net impact on our financial results of approximately $150 million and this estimate remains unchanged. These results are a great testament to our team.

Little has changed in the capital markets since our last report in October 2008; if anything conditions may have worsened. As we expected, it appears that investment losses in the fourth quarter have taken a further toll on the insurance industry's capacity. Importantly, unlike previous cycles, we do not expect to see a quick replenishment of lost capacity.

The market has undoubtedly turned. As in 2006, we expect the rate increases we have seen in January to gain momentum as the year progresses. Sections of the market are less than nimble and take some time to adjust their business plans to the new reality but the fundamental shift in the demand/supply equation is inescapable.

Looking forward, I can only reiterate that I believe we enter 2009 well placed to take advantage of some extraordinary opportunities. We are ready for the challenge."

Further detail of our 2008 fourth quarter results can be obtained from our Financial Supplement. This can be accessed via our website www.lancashiregroup.com.

Analyst and Investor Earnings Conference Call

There will be an analyst and investor conference call on the results at 1:00pm UK time / 8:00 am EST on Monday 16 February 2009. The call will be hosted by Richard Brindle, Chief Executive Officer, Simon Burton, Deputy Chief Executive Officer and Neil McConachie, Chief Financial Officer.

The call can be accessed by dialing +44 (0) 207 806 1953 / +1 718 354 1387 with the passcode 6603024. The call can also be accessed via webcast, please go to our website (www.lancashiregroup.com) to access.

A replay facility will be available for two weeks until Monday 2 March 2009. The dial in number for the replay facility is +44 (0) 207 806 1970 / + 1 718 354 1112 and the passcode is 6603024#. The replay facility can also be accessed at www.lancashiregroup.com .

For further information, please contact:

Investor enquiries and questions can also be directed to investors@lancashiregroup.com or by accessing the Company's website www.lancashiregroup.com.