Lancashire Holdings Ltd Releases Q1 2013 Results (Excerpt)

Hamilton, Bermuda – 02 May, 2013 – Lancashire Holdings Limited (“Lancashire” or “the Company”; Ticker: LHL BH) today announces its results for the three month period ended 31 March 2013.

Richard Brindle, Group Chief Executive Officer, commented: “I’m delighted to report another strong quarter for Lancashire with solid ROE and a very healthy combined ratio. We’re still seeing adequate rating in much of our core business, and whilst there are competitive threats, the strength of our business model allows us to outperform in both hard and soft markets.

In direct business lines the market has been variable with rate pressure in AV52 and some areas of terrorism, and reasonable requests for reductions in the energy offshore market following several years of rate increases. In marine the International Group of P&I clubs renewal saw good rate increases following heavy losses, but the rest of this market continues to disappoint. Lancashire’s ability to deploy meaningful line sizes with swift and clear decision making greatly assists in our marketing, and the support we are able to give to the brokers. Whilst the much-vaunted Aon/Berkshire Hathaway deal does increase the competitive pressure, we have already seen one major client decline to accept their offer. We value and work hard at our client relationships and are vigilant in protecting our participations. As a lead or agreement party on 74% of our business by premium volume over a rolling twelve months, we believe we are in a better position than most to control our own destiny.

In reinsurance the advent of third party capital has provided both threats and opportunities. There is undoubtedly rate pressure from additional capacity, and this has been seen very dramatically in the cat bond and ILW markets, with supply increasing and pricing decreasing. In contrast we saw a very orderly and sensible renewal season in Japan, which is now a major market for Lancashire. Rather than bemoan the advent of new capital, Lancashire is reacting creatively with new products that leverage our unique knowledge of non-catastrophe business and combine this with our leading catastrophe and capital modelling capabilities. I welcome Darren Redhead, who joined us in March to lead the Lancashire Capital Management division which will deploy Lancashire’s underwriting expertise on behalf of third party capital providers in the field of insurance and reinsurance. We are also using our capital optimisation studies to inform our reinsurance purchasing, given the plentiful supply of new capacity. As a result of new purchases in 1Q13 allied to discipline in managing our own exposures we now have what we believe is a significantly improved risk-adjusted portfolio.

Overall then it is a mixed picture, but Lancashire with its underwriting focus and discipline, and ability to adapt nimbly to changing markets is well-placed to manage this phase of the cycle.”

Elaine Whelan, Group Chief Financial Officer, commented: “After several years of notable losses in the first quarter, the first quarter of 2013 was refreshingly quiet.

In strong equity markets, our fixed income portfolio eked a small positive return of 0.1%. We therefore produced a strong return on equity of 4.7% and a combined ratio of 51.2% for the quarter.

With the 1 January and 1 April renewals performing reasonably in line with expectations, we will continue to monitor opportunities as we approach the U.S. hurricane season. However, all else equal, we anticipate a slight worsening in trading conditions and therefore would expect to return earnings generated in 2013 to shareholders towards the end of the year. While we clearly remain very strongly capitalised, we would like to thank our shareholders for their approval at yesterday’s Annual General Meeting for authority to allot and issue share capital of up to 15% on a non pre-emptive basis. This affords us the maximum flexibility to maintain our competitive position and take advantage of post loss pricing, should a major event occur.”

Gross premiums written decreased by 8.2% in the first quarter of 2013 compared to the same period in 2012, with the decrease in premiums derived primarily from Lancashire’s property retrocession book. The Group’s four principal classes, and the key market factors impacting them, are discussed below.

Property gross premiums written decreased by 16.7% for the first quarter of 2013 compared to the same period in 2012. The decrease is driven primarily by the property retrocession book. We reduced exposures due to worsening rates and terms and conditions. In addition, some opportunistic deals written in 2012 were not renewed. The decision to cease writing property direct and facultative business from 1 July 2012 also resulted in a reduction in property premiums for the first quarter of 2013 of $6.3 million as compared to the same period in the prior year. Property catastrophe excess-of-loss premiums written were broadly in line with the prior year. We saw increased deal flow in the political and sovereign risk classes and were able to write some new business with core clients in this class.

Energy gross premiums written increased by 2.7% for the first quarter of 2013 compared to the same period in 2012. The first quarter is not typically a major renewal period for the energy book and premium volumes were relatively consistent across all energy classes compared to the same period of 2012.

Marine gross premiums written increased by 26.0% for the first quarter of 2013 compared to the same period in 2012. Pricing was positive on loss affected accounts in the marine hull and marine P&I clubs following the Costa Concordia loss of 2012. The marine hull class also saw an increase in premium written compared to the same period in 2012 due to the timing of some non-annual contract renewals.

Aviation gross premiums written increased by 1.3% for the first quarter of 2013 compared to the same period in 2012. Pricing and renewal rates remain under pressure in the AV52 class resulting in a reduction in premiums written compared to the first quarter of 2012. These reductions are offset by new satellite premium written following our re-entry into the class in the third quarter of 2012.

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Ceded reinsurance premiums decreased by $5.6 million, or 5.5% for the first quarter of 2013 compared to the same period in 2012. The first quarter of 2013 included $52.6 million of cessions from the property retrocession book to the Accordion sidecar facility compared to $54.0 million in the first quarter of 2012. The first quarter of 2013 also included a combination of rate and cover increases on our outwards marine and energy programmes, which were largely offset by the non-renewal of the property per risk programme, which is now in run-off given our exit from the property direct and facultative line. We also continued to take advantage of available Industry Loss Warranties. The first quarter of 2012 included reinstatement premiums in relation to the Costa Concordia marine loss.

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Net premiums earned as a proportion of net premiums written were 112.8% in the first quarter of 2013 compared to 107.1% for the same period in 2012. The increased percentage for 2013 reflects the reduction in gross premiums written in the quarter compared to the same period in the prior year. Both years benefited from the lag in earnings from long-term contracts written in preceding years.

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The Group’s net loss ratio for the first quarter of 2013 was 17.2% compared to 35.7% for the same period in 2012. There were no significant losses in the first quarter of 2013 and attritional losses reported were also exceptionally low. We reached a settlement on our North East Industry Loss Warranty in relation to Sandy and that benefit is reflected in the quarter. The total estimated net loss, after reinsurance and reinstatement premiums, for Sandy is now $28.9 million compared to the estimated net loss, after reinsurance and reinstatement provisions, of $44.5 million that was included in Q4 2012. The first quarter of 2012 included $34.1 million of net losses, after reinsurance and reinstatement premium, for the total loss of the Costa Concordia.

Prior year favourable development for the first quarter was $16.9 million, compared to $20.6 million for the first quarter of 2012. Both years experienced releases due to lower than expected reported losses.

Capital

At 31 March 2013, total capital was $1.494 billion, comprising shareholders’ equity of $1.236 billion and $257.8 million of long-term debt. Leverage was 17.3%. Total capital at 31 March 2012 was $1.49 billion.

Dividends

During the first quarter of 2013, the Lancashire Board of Directors declared a final dividend in respect of 2012 of $0.10 (£0.07) per common share and an additional special dividend for 2012 of $1.05 (£0.69 pence) per common share. The dividends, totaling $220.6 million, were paid on 17 April 2013 to shareholders of record on 22 March 2013.

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.

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.