Lancashire Holdings Ltd – Q3 2010 Results Released (Excerpt)

Hamilton, Bermuda – 08 November, 2010 - Lancashire Holdings Limited (“Lancashire” or “the Company”) (Ticker: LHL BH) today announces its results for the third quarter of 2010 and the nine month period ended 30 September 2010.

Richard Brindle, Group Chief Executive Officer, commented:

“Lancashire continues to maintain underwriting discipline through the insurance cycle and we have adapted to suit prevailing insurance market conditions. We increased our appetite for energy business but reduced our book in most other areas. The first half of the year saw an active claims environment and with exposure to both the Deepwater Horizon disaster and the Chile Maule earthquake, we experienced manageable losses from these events. During the third quarter, despite an active Atlantic wind season, there were very low loss levels and we have had minimal exposure to the New Zealand earthquake.

Lancashire increased book value per share by 7.9% in the third quarter, delivering a return on equity of 15.9% for the first nine months of the year. Since our inception in 2005, we have generated a compound annual return of 20.0%.

Our combined ratio for the third quarter was an excellent 39.2%, which reflects a quieter claims environment, particularly in the property catastrophe area. Our investments returned 8.1% on an annualised basis, which results in part from a strong return in our emerging market debt portfolio.

As we reported after the second quarter, the Deepwater Horizon loss has resulted in a broad increase in demand and strengthening in premium rates in the worldwide energy market. The energy sector remains dynamic, and Lancashire will continue to explore opportunities from these developments.

Consistent with our underwriting plan, we have continued to reduce exposure on property direct and facultative and reinsurance lines, where there has been a steady decline in the number of adequately priced deals. The year on year comparison of third quarter gross premium figures in our largest classes is illustrative of our strategy at this time: our property segment shows a 25% reduction on premium while our energy segment shows a 16% increase.

Lancashire remains committed to an agile and adaptable approach to both its underwriting and its capital management. We believe that this approach best meets both the needs of our clients and the expectations of our shareholders.”

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

“Given our strong profitability, and continued overall market softening, our excess capital has grown as 2010 has progressed. This has been mitigated through steady share repurchases but it is now appropriate that we supplement our repurchases with a significant special dividend. This will quickly bring our capital to a level we consider more appropriate for the anticipated challenging trading conditions in 2011 and Lancashire will finish the year with less capital than it started with. At this time we believe that the industry as a whole would also benefit from a material reduction in capacity.”

Capital

At 30 September 2010, total capital was $1.575 billion, comprising shareholders’ equity of $1.446 billion and $129.7 million of long-term debt. Leverage was 8.2%. Total capital at 31 December 2009 was $1.510 billion.

Repurchase program

The Group continues to repurchase its own shares by way of on market purchases utilising the share repurchase program (the “Repurchase Program”) authorising the repurchase by the Company of a maximum of 18,250,306 shares. The Repurchase Program had 7,841,826 shares remaining to be purchased at 30 September 2010. $36.1 million of shares were repurchased during the third quarter of 2010 and $136.4 million in the nine months to 30 September 2010. No shares were repurchased in the same periods in the prior year.

Dividends

The Lancashire Board of Directors has declared a special dividend to be paid out of retained earnings of $1.40 per common share (approximately £0.86 per common share at the current exchange rate), which results in an aggregate payment of approximately $213.0 million (the “Special Dividend”). The Special Dividend will be paid in pounds sterling on 19 January 2011 (the “Special Dividend Payment Date”) to shareholders of record on 10 December 2010 (the “Record Date”) using the GBP£/US$ spot market exchange rate at the close of business in London on the Record Date.

In accordance with the terms of Lancashire’s warrants, a payment equivalent to the Special Dividend to shareholders will also be paid in pounds sterling on 19 January 2011 to those warrant holders listed on the Company’s warrant register as of the Record Date. The warrant payment will be made in respect of the number of common shares for which each warrant is exercisable as at the Record Date (approximately $51.3 million in aggregate).

The Group will continue to review the appropriate level and composition of capital for the Group with the intention of managing capital to enhance risk-adjusted returns on equity.

Further detail of our 2010 third quarter results can be obtained from our Financial Supplement. This can be accessed via our website www.lancashiregroup.com

For further information please contact:

Investor enquiries and questions can also be directed to info@lancashiregroup.com or by accessing the Group’s website www.lancashiregroup.com.

About Lancashire

Lancashire, through its UK and Bermuda-based insurance subsidiaries, is a global provider of specialty insurance products. Its insurance subsidiaries carry the Lancashire group rating of A minus (Excellent) from A.M. Best with a stable outlook. Lancashire has capital in excess of $1 billion and its Common Shares trade on the main market of the London Stock Exchange under the ticker symbol LRE. Lancashire is headquartered at Power House, 7 Par-la-Ville Road, Hamilton HM 11, Bermuda. The mailing address is Lancashire Holdings Limited, P.O. Box HM 2358, Hamilton HM HX, Bermuda. For more information on Lancashire, visit the Company's website at www.lancashiregroup.com.