Lancashire Holdings Ltd Releases Q1 2011 Results (Excerpt)

Hamilton, Bermuda – 06 May, 2011 - Lancashire Holdings Limited (“Lancashire” or the “Group”; Ticker: LHL BH) today announces its results for the three month period ended 31 March 2011.

Richard Brindle, Group Chief Executive Officer, commented:

“On Friday 11 March 2011 a massive earthquake measuring 9.0 in magnitude struck off the north-east coast of Japan. The earthquake was followed by a powerful tsunami that devastated towns and property in the coastal regions and resulted, tragically, in the loss of many thousands of lives. I would like to express the concern and sympathy of everyone at Lancashire to all those in Japan who have suffered injury and loss, and in particular our Japanese clients and business partners.

We have seen a series of significant catastrophe losses during the first quarter of 2011, including floods in Australia, the Christchurch Lyttleton earthquake in New Zealand, serious storm damage to a Floating Production Storage and Offloading (FPSO) vessel stationed in the North Sea Gryphon field, potential losses arising from the political unrest throughout North Africa and the Middle East, and the Tohoku earthquake and tsunami in Japan. Material losses have been sustained by the industry.

At the time of the release of Lancashire's 2010 year end results in February 2011, I reported that the Group expected a tendency towards declining premiums during 2011. In the light of recent events, the picture for the insurance sector during 2011 is less clear but increasingly positive.

Another noteworthy development is the release of version 11 of the RMS model for U.S. wind risks. RMS version 11 will lead to higher capital requirements across the industry, albeit many companies will be slow - or unwilling - to adjust to the new reality.

Industry losses and the impact of RMS version 11 are creating opportunities for companies that react in a nimble manner. The serious erosion of capital across the insurance and reinsurance market has halted declining premium rates in several classes we write, and is contributing to encouraging premium rate increases in certain business lines. The strongest rate rises are being seen in the property catastrophe retrocession programs, a class where Lancashire is a major market participant. Pricing in other lines we write is also generally holding firm. We continue to explore the possibilities for leveraging our underwriting expertise. We are well positioned to ensure Lancashire can take full advantage of favourable risk pricing opportunities and to provide the coverage required by our clients, whilst ensuring that the capital available for our underwriting is managed flexibly and productively.”

Elaine Whelan, Group Chief Financial Officer, commented:

“Against the backdrop of the unusually high level of risk and catastrophe losses impacting our industry so far this year, we are delighted to have performed so well. We also began investing in equities as a risk management response to the dramatic drop in bond values in the fourth quarter. We are therefore happy to report an investment return for the quarter of 0.6%, or 2.5% annualised. This is particularly pleasing given the continued volatility in the investment markets during the quarter.

On the capital side, in the run up to hurricane season and with pockets of market hardening following the accumulation of international property catastrophe losses, we will monitor developments closely, deploying our capital to the best opportunities.”

Capital

At 31 March 2011, total capital was $1.413 billion, comprising shareholders’ equity of $1.282 billion and $130.8 million of long-term debt. Leverage was 9.3%. Total capital at 31 March 2010 was $1.489 billion.

Repurchase program

There were no shares repurchased during the first quarter of 2011 compared to $12.9 million of shares repurchased in the same period of 2010. The share repurchase program had 7,841,826 shares of the authorised maximum of 18,250,306 remaining to be purchased at 31 March 2011.

At the Annual General Meeting held on 5 May 2011 the shareholders approved a renewed share repurchase program with such authority to expire at the conclusion of the 2012 Annual General Meeting or, if earlier, 15 months from the date the resolution approving the renewed share repurchase program was passed.

Dividends

During the first quarter of 2011, the Lancashire Board declared a final dividend in respect of 2010 of $0.10 (6.2 pence) per common share. The dividend, totaling $18.9 million, was paid on 20 April 2011 to shareholders of record on 18 March 2011.

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.

The complete text of this release along with further details of the 2011 first quarter results can be obtained from our Financial Supplement. This can be accessed via our website www.lancashiregroup.com

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About Lancashire

Lancashire, through its UK and Bermuda-based insurance subsidiaries, is a global provider of specialty insurance products. The Group companies carry the following ratings:

^{(1)Financial Strength Rating applies to Lancashire Insurance Company Limited and Lancashire Insurance Company (UK) Limited}

^{(2) Long Term Issuer Rating applies to Lancashire Holdings Limited}

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

Lancashire Insurance Company (UK) Limited is regulated by the Financial Services Authority in the UK.

Lancashire Marketing Services (Middle East) Limited is authorised and regulated by the Dubai Financial Services Authority.

Lancashire Insurance Company Limited is regulated by the Bermuda Monetary Authority in Bermuda.