LANCASHIRE GROWS FULLY CONVERTED BOOK VALUE PER SHARE 7.4% IN Q3 2009

Hamilton, Bermuda - 05 November, 2009 - Lancashire Holdings Limited ("Lancashire" or "the Company") (Ticker: LHL.BH) today announces its results for the third quarter of 2009 and the nine month period ended 30 September 2009.

Financial highlights for the third quarter of 2009:

Fully converted book value per share of $8.09 at 30 September 2009, compared to $7.58 at 30 June 2009. Return on Equity of  7.4%, including the $0.05 interim dividend declared in July 2009;

Gross written premiums of $139.7 million. Net written premiums of $139.2 million;

Reported loss ratio of 10.8% and a combined ratio of 39.1%. Accident year loss ratio of 25.7%;

Annualised total investment return of 6.4%;

Net operating profit of $103.1 million, or $0.55 diluted operating earnings per share; and

Net profit after tax of $108.7 million, or $0.58 diluted earnings per share.

Financial highlights for the nine months to 30 September 2009:

Fully converted book value per share of $8.09 at 30 September 2009, compared to $6.89 at 31 December 2008. Return on Equity of  18.1%, including the $0.05 interim dividend declared in July 2009;

Compound annual Return on Equity since inception of 19.1%;

Gross written premiums of $524.4 million. Net written premiums of $477.1 million;

Reported loss ratio of 22.8% and a combined ratio of 51.3%; Accident year loss ratio of 28.2%;

Annualised total investment return of 4.5%;

Net operating profit of $242.3 million, or $1.30 diluted operating earnings per share;

Net profit after tax of $255.8 million, or $1.37 diluted earnings per share;

Special dividend of $263 million, or $1.25 per common share payable in GBP on 6 January 2010 to shareholders of record on 20 November 2009; and

Further $150 million share repurchase facility authorised (subject to shareholder approval).

Richard Brindle, Group Chief Executive Officer, commented:

"I am pleased to report another very good performance by the Lancashire Group. Return on Equity, defined as growth in fully converted book value per share plus dividends, was 7.4% in the third quarter and 18.1% for the nine months to 30 September 2009.

Our underwriting result was excellent with a combined ratio for the third quarter of 39.1% and our conservative investment portfolio returned 6.4% on an annualised basis. Since our inception, Lancashire has had a positive Return on Equity, in fourteen quarters out of fifteen, generating a compound annual return of 19.1%. Lancashire has also achieved a combined ratio well under 100% and achieved a positive total investment return in fourteen quarters out of fifteen.

We have made excellent progress in further building our property catastrophe book with exposures in the United States and there are plenty of new opportunities in both this and the international arena. This is helping us to achieve our stated goal of becoming a significant market participant in property catastrophe generally. Lancashire saw good overall premium growth in the quarter compared to the previous year, largely driven by the expansion of our property catastrophe portfolio.

We have been encouraged by the underwriting discipline demonstrated by the market compared to previous cycles, particularly in the reinsurance sector. This is borne out by the fact that we are still achieving positive renewal price increases in the majority of our classes. We also continue to work with clients and brokers on their Gulf of Mexico insurance needs to find innovative solutions to the issues that affected both markets and clients this year.

We are excited by the prospects available to us from our recently announced joint venture with GCube in the alternative energy space. We have also identified other new business opportunities and are working closely with our distribution base to take full advantage of these prospects."

Neil McConachie, President and Group Chief Financial Officer, commented:

"A cornerstone of Lancashire's strategy is to manage our capital prudently and actively. We believe this is a vital component in delivering a superior Return on Equity to our shareholders over the long-term.

In the past, we have managed capital by repurchasing shares at attractive prices, and also through the mechanisms of ordinary dividends and special dividends. Following an extended period of consistent growth in book value, Lancashire has generated capital well in excess of our targeted level. If the price is right, we are aiming to increase our share repurchase activity over the coming months. We also anticipate declaring a final dividend in early 2010 in line with our stated dividend policy, subject to Board approval at that time.  

However, we have concluded that it is appropriate we return a meaningful portion of our excess capital to shareholders more quickly than we can achieve with the aforementioned methods. We have therefore decided to declare a special dividend of $1.25 per share. This equates to a payout of approximately $263 million."