Lancashire Holdings Ltd – Release Q3 2012 Results (Excerpt)

Hamilton, Bermuda – 08 November, 2012 – Lancashire Holdings Limited (“Lancashire” or “the Company”; Ticker: LHL BH) today announces its results for the third quarter of 2012 and the nine month period ended 30 September 2012.

Richard Brindle, Group Chief Executive Officer, commented: “Sandy has caused tragic loss of life and significant damage in its progress from the Caribbean through North America. Our thoughts at Lancashire go out to all those affected.

Thankfully, the third quarter has been relatively quiet in terms of catastrophes and we have not suffered significant risk losses so Lancashire has produced another strong set of results. The third quarter return on equity of 5.7%, and 13.2% for the year to date, continues our record of consistent increase in book value per share, including dividends. We have now generated a compound annual return of 19.4% since inception, and with a combined ratio for the quarter of 48.9%, our inception to date combined ratio now stands at 58.3%.

In our view, the market outlook in our lines of business is stable. Premium rates will come under pressure for the January renewals with more than enough capacity in the great majority of our lines, but we believe that our emphasis on risk selection helps us to produce superior results across the cycle. We are surprised with the over positive note which we have seen from some about rate increases, as we do not believe that this will carry into 2013 for most classes.

As ever, Lancashire will focus on servicing its core portfolio of insurance and reinsurance clients, who make up the majority of our portfolio, whilst looking for opportunistic areas of dislocation, or new demand, to leverage the Lancashire brand. With the ever growing flow of alternative funds into our market place, we also continue to explore opportunities to build partnerships with capital market participants seeking underwriters with a proven track record for building shareholder value.”

Elaine Whelan, Group Chief Financial Officer, commented: “With the third quarter producing little in the way of major losses, and with solid investment performance in choppy markets, we are pleased to report our 5.7% return on equity. As we watch the U.S recovering from the massive amount of damage wreaked by Sandy, we will undoubtedly see some impact on our fourth quarter results. It is, however, simply too early to provide any meaningful estimate for reserves.

The announcement of our special dividend and dividend equivalent payments of $172.7 million brings our total capital return since inception to $1.5 billion, or 84.0% of total comprehensive income – or 98.6% of comprehensive income for the year to date. Market conditions in 2013 look stable overall for our portfolio – reasonable, if not spectacular, markets. Our recent debt issuance should allow us to absorb Sandy’s impact and still carry more than normal excess headroom into the January 1 renewal season to take advantage of any unforeseen opportunities that may arise. As ever, if we can’t find good ways to put our capital to work, we will re-assess our needs and return any surplus.”

Investments

Net investment income, excluding realised and unrealised gains and losses, was $7.4 million for the third quarter of 2012, a decrease of 29.5% from the third quarter of 2011. Overall lower yields and a reduction in both the emerging market debt and equity portfolios contributed to the decrease in investment income for the quarter compared to the third quarter of 2011. The Group liquidated its equity position in the third quarter of 2011 given the increasing volatility in the markets at that point. In addition, the Group disposed of virtually all of its non USD emerging market debt in the third quarter of 2011.

Currently 4.1% of the portfolio is allocated to the emerging market debt portfolio with an overall average credit quality of BBB. The Group has no exposure to European peripheral sovereign debt. Exposure to European peripheral corporate debt is approximately $2.7 million consisting of Spanish and Italian non-financial corporate debt. The corporate bond allocation, excluding Federal Deposit Insurance Corporation guaranteed bonds, represented 28.4% of managed invested assets at 30 September 2012 compared to 30.6% at 30 September 2011. During the third quarter of 2012 the Group invested a small portion of the portfolio, 0.4%, to bank loans. It is expected that this will increase to approximately 2.5% of total managed invested assets. The bank loan portfolio will consist of highly rated floating rate notes and is expected to help manage interest rate risk.

Total investment return, including net investment income, net realised gains and losses, impairments and net change in unrealised gains and losses, was $21.7 million for the third quarter of 2012 compared to a loss of $4.8 million for the third quarter of 2011, and was $55.7 million for the 2012 year to date versus $28.0 million for the same period in 2011. The losses from the third quarter of 2011 resulted primarily from the currency exposure in the non USD emerging market debt portfolio and the equity portfolio, both of which have since been liquidated. The 2012 quarter to date and year to date returns benefited from significant credit spread tightening, particularly in the emerging market debt portfolio.

Capital

At 30 September 2012, total capital was $1.636 billion, comprising shareholders’ equity of $1.508 billion and $127.9 million of long-term debt. Leverage was 7.8%. Total capital was $1.562 billion at 30 September 2011 and $1.455 billion at 31 December 2011.

On 5 October 2012 the Group launched and priced an offering of $130 million 5.70% senior unsecured notes due in 2022 (the “Notes”) pursuant to a private offering to U.S. Qualified Institutional Buyers and elsewhere, according to applicable restrictions. The Notes were listed and admitted to trading on the London Stock Exchange on 16 October 2012. Lancashire expects to use the net proceeds of the offering for general corporate purposes.

Dividends

Lancashire announces that its Board has declared a special dividend for 2012 of $0.90 per common share (approximately £0.56 per common share at the current exchange rate), which will result in an aggregate payment of approximately $145 million. The dividend will be paid in Pounds Sterling on 19 December 2012 (the “Dividend Payment Date”) to shareholders of record on 30 November 2012 (the “Record Date”) using the £ / $ spot market exchange rate at 12 Noon London time on the Record Date.

In addition to the special dividend payment to shareholders, approximately $28 million in aggregate will be paid on the Dividend Payment Date to holders of share warrants issued by the Company pursuant to the terms of the warrants.

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.

Financial information

Further details of our 2012 third quarter results can be obtained from our Financial Supplement. This can be accessed via our website at 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 / 8:00am EST on Thursday 8 November 2012. The conference call will be hosted by Lancashire management.

The call can be accessed by dialling +44 208 817 9301 / +1 718 354 1226 with the confirmation code 8805130#. 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 Thursday 22 November 2012. The dial in number for the replay facility is +44 207 769 6425 with passcode 8805130# .The replay facility will also be accessible at www.lancashiregroup.com

For further information, please contact:

Lancashire Holdings Limited

Christopher Head                    +44 20 7264 4145

chris.head@lancashiregroup.com

Jonny Creagh-Coen               +44 20 7264 4066

jcc@lancashiregroup.com

Haggie Financial                     +44 20 7417 8989

Peter Rigby                             (Peter Rigby mobile +44 7803851426)

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