1st Quarter Results

LANCASHIRE HOLDINGS LIMITED


15 May 2009
Hamilton, Bermuda


              LANCASHIRE GROWS BOOK VALUE PER SHARE 3.1% IN Q1 2009
                            COMBINED RATIO OF 81.2%

Lancashire Holdings Limited ("Lancashire" or "the Company") today announces its
first quarter results for the three month period ended 31 March 2009.

Financial highlights for the first quarter of 2009:

• Fully converted book value per share of $7.07 at 31 March 2009, compared to
$6.86 at 31 December 2008, an increase of 3.1%. Compound annual return on
equity since inception of 17.4%;
• Gross written premiums of $142.8 million. Net written premiums of $99.2
million;
• Financial year loss ratio of 53.6% and a combined ratio of 81.2%. Accident
year loss ratio of 28.9%;
• Annualised total investment return of 4.6%, including net investment income,
realised gains and losses, impairments, and change in unrealised gains and
losses;
• Net operating profit of $35.8 million, or $0.19 diluted operating earnings
per share; and
• Net profit after tax of $40.7 million, or $0.22 diluted earnings per share.

Richard Brindle, Group Chief Executive Officer, commented:

"Lancashire had a reasonable quarter, growing book value per share by 3.1%. Our
underwriting and investment returns were good, with an accident year loss ratio
of 28.9% and an annualised total investment return of 4.6%. Our results were
impacted by the previously announced reserve strengthening for Hurricane Ike,
but our underlying earnings performance was strong. Since our inception,
Lancashire has grown book value per share, including dividends, in twelve
quarters out of thirteen, generating a compound annual return of 17.4%.

Lancashire's key markets are experiencing a hardening in rates and terms. This
has been gathering pace as the year has progressed and should continue to do so
in the months to come. In certain segments, most notably in the offshore energy
area, the market has been in disarray with renewals much later than expected.
We have been patiently holding back capacity in several classes, waiting for
the most opportune time to deploy our capital. Indeed, we wrote significantly
less in the first quarter of 2009 compared to 2008. However, the market is now
extremely active, with rates rising strongly year on year."

Underwriting results

Gross written premiums decreased by 23.5% in the first quarter of 2009 compared
to the same period in 2008. This was largely driven by Lancashire holding back
a large amount of capacity in the direct property, retrocession and energy
catastrophe classes in order to take better advantage of improving opportunities. 
Rate rises are gaining momentum with more significant increases expected as 
the year progresses.

Net written premiums decreased by 30.1% for the quarter compared to the same
period in 2008. This was chiefly due to lower gross written premiums. The
amount of reinsurance ceded in the first quarter remained broadly the same as a
year ago.

Net earned premiums as a proportion of net written premiums were 140.3% in the
first quarter of 2009 compared to 119.1% in the same period in 2008. The
increase reflects the reduction in gross written premiums in the quarter as
compared to the prior year.

The net loss ratio of 53.6% for the first quarter includes 28.6% attributable 
to an increase of $39.8 million in estimated losses for Hurricane Ike. There 
has been no further development since our announcement of 8 April 2009. 
Excluding the impact from Hurricane Ike, the Company's net loss ratio was 
25.0%, reflecting an otherwise comparatively quiet quarter for loss activity. 
Overall, net reserves experienced adverse prior year development of $34.4 
million for the quarter compared to a favourable development of $3.2 million 
in 2008. Excluding Hurricane Ike specific development, the prior year 
development was a favourable $5.4 million. The accident year loss ratio for the
quarter was 28.9% compared to 40.6% last year.

Investments

Net investment income was $13.5 million for the first quarter, a decrease of
23.7% from the first quarter of 2008. The quarterly total investment return was
1.1%, or 4.6% annualised, broadly in line with 1.2%, or 4.9% annualised, for
the first quarter of 2008. The Company's strategy of maintaining a conservative
investment portfolio to minimise potential losses from market volatility
continues unabated and the portfolio performed well in relative terms.

Total investment return, including net investment income, net realised gains
and losses, impairments and net change in unrealised gains and losses, was a
gain of $23.5 million in the quarter compared to $21.5 million for the prior
year. At 31 March 2009, the fixed income portfolio plus managed cash had a
duration of 1.4 years, a credit quality of AA+ and a market yield of 1.9%. The
reduced market yield is a result of both lower market yields in general, and a
lower asset allocation to corporate debt securities. Investment assets were
comprised of 67.8% fixed income and 32.2% cash. Lancashire is not currently
invested in equities, hedge funds or other alternative investments.

Other operating expenses

Other operating expenses, excluding the cost of warrants and options, increased
by $0.7 million to $12.4 million in the first quarter of 2009 compared to the
same period in 2008. Employee compensation costs were 52.4% of other operating
expenses compared to 49.8% in 2008.

Equity based compensation was $3.0 million in the first quarter of 2009
compared to a credit of $1.5 million in the same period last year. This expense
includes mark to market adjustments on certain performance warrants.

Capital

At 31 March 2009, total capital was $1.446 billion, comprising shareholders'
equity of $1.317 billion and $128.7 million of long-term debt. Leverage was
8.9%. Total capital at 31 December 2008 was $1.404 billion.

Outlook

Lancashire aims to achieve a cross-cycle return of 13% above a risk free rate.
This is unchanged from previous guidance.


Further detail of our 2009 first quarter results can be obtained from our
Financial Supplement. This can be accessed via our website
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 / 8:00 am EST on Friday, 15 May 2009. The call will be hosted by
Richard Brindle, Chief Executive Officer, Simon Burton, Deputy Chief Executive
Officer and Neil McConachie, Chief Financial Officer.

The call can be accessed by dialing [phone] / [phone] with
the passcode 1457383. 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 Friday, 29 May 2009.
The dial in number for the replay facility is [phone] / +1 718 354
1112 and the passcode is 1457383#. The replay facility can also be accessed at
www.lancashiregroup.com .

For further information, please contact:

Lancashire Holdings + 44 (0)20 7264 4066
Jonny Creagh-Coen

Financial Dynamics [phone]
Robert Bailhache
Nick Henderson

Investor enquiries and questions can also be directed to [e-mail] 
or by accessing the Company's website www.lancashiregroup.com.

consolidated balance sheet
(unaudited)

                                              31 march 2009      31 december 2008
                                                         $m                    $m
assets
cash and cash equivalents                             731.1                 413.6
accrued interest receivable                             9.3                  10.1
investments
- fixed income securities
- available for sale                                1,464.8               1,595.4
- at fair value through profit and loss                   -                   4.0
- equity securities, available for sale                   -                   5.8
- other investments                                       -                     -
reinsurance assets
- unearned premium on premium ceded                    36.6                  10.0
- reinsurance recoveries                               53.4                  42.1
- other receivables                                     3.2                   3.2
deferred acquisition costs                             57.0                  60.9
inwards premium receivable from insureds
and cedants                                           176.3                 187.3
other assets                                           72.1                 156.6
total assets                                        2,603.8               2,489.0

liabilities
insurance contracts
- loss and loss adjustment expenses                   564.7                 528.8
- unearned premiums                                   326.2                 339.6
- other payables                                       16.2                  17.6
amounts payable to reinsurers                          21.9                   2.0
deferred acquisition costs ceded                        2.6                   1.9
other payables                                        226.4                 195.6
long-term debt                                        128.7                 130.8
total liabilities                                   1,286.7               1,216.3

shareholders' equity
share capital                                          91.2                  91.1
treasury shares                                      (59.0)                (58.0)
share premium                                          65.2                  60.1
contributed surplus                                   752.6                 754.8
fair value and other reserves                          29.3                  27.6
dividends                                                 -                   0.1
retained earnings                                     437.8                 397.0
total shareholders' equity attributable to
equity shareholders                                 1,317.1               1,272.7

total liabilities and shareholders' equity          2,603.8               2,489.0

basic book value per share                            $7.62                 $7.36
fully converted book value per share                  $7.07                 $6.86


consolidated income statement
(unaudited)
                                                  quarter 1             quarter 1 
                                                       2009                  2008 
                                                         $m                    $m
gross premiums written                                142.8                 186.7
outwards reinsurance premiums                        (43.6)                (44.8)

net premiums written                                   99.2                 141.9

change in unearned premiums                            13.4                   3.2
change in unearned premiums on premium ceded           26.6                  23.9

net premiums earned                                   139.2                 169.0

net investment income                                  13.5                  17.7
net other investment income (losses)                      -                 (0.5)
net realised gains (losses) and impairments             8.0                   7.5
net fair value gains (losses) on investments
at fair value through profit and loss                   0.3                 (0.7)
share of profit (loss) of associate                       -                 (0.1)
net foreign exchange gains (losses)                   (1.6)                   0.3

total net revenue                                     159.4                 193.2

insurance losses and loss adjustment expenses          89.1                  66.9
insurance losses and loss adjustment
expenses recoverable                                 (14.5)                 (1.2)
net insurance acquisition expenses                     26.0                  26.0
equity based compensation                               3.0                 (1.5)
other operating expenses                               12.4                  11.7

total expenses                                        116.0                 101.9

profit before tax and finance costs                    43.4                  91.3

finance costs                                           2.4                   4.9

profit before tax                                      41.0                  86.4

tax                                                   (0.3)                 (1.8)

profit after tax                                       40.7                  84.6

net loss ratio                                        53.6%                 38.9%
net acquisition cost ratio                            18.7%                 15.4%
administrative expense ratio                           8.9%                  6.9%

combined ratio                                        81.2%                 61.2%

basic earnings per share                              $0.24                 $0.46
diluted earnings per share                            $0.22                 $0.45

change in fully converted book value per share         3.1%                  5.0%


consolidated cash flow statement
(unaudited)
                                                  quarter 1             quarter 1
                                                       2009                  2008
                                                         $m                    $m
cash flows from operating activities
profit before tax                                      41.0                  86.4
tax paid                                              (0.3)                 (0.5)
depreciation                                            0.2                   0.3
interest expense                                        1.9                   2.8
interest and dividend income                         (16.7)                (16.4)
amortisation of fixed income securities                 2.0                 (0.3)
equity based compensation                               3.0                 (1.5)
foreign exchange                                        0.8                   0.2
share of loss (profit) of associate                       -                   0.1
net other investment losses                               -                   0.5
net realised (gains) losses and impairments
on investments                                        (8.0)                 (7.5)
net fair value (gains) losses on investments
at fair value through profit and loss                 (0.3)                   0.7
unrealised loss on interest rate swaps                    -                   1.8
reinsurance assets
- unearned premium on premium ceded                  (26.6)                (23.9)
- reinsurance recoveries                             (11.3)                 (1.3)
- other receivables                                       -                   8.2
deferred acquisition costs                              3.9                 (1.5)
other receivables                                      85.3                (15.0)
inwards premium receivable from
insureds and cedants                                   10.5                 (6.3)
insurance contracts
- losses and loss adjustment expenses                  37.0                  54.5
- unearned premiums                                  (13.4)                 (3.2)
- other payables                                      (2.1)                 (6.1)
amounts payable to reinsurers                          19.9                  27.6
deferred acquisition costs ceded                        0.7                   0.8
other payables                                         30.0                  23.3
net cash flows from operating activities              157.5                 123.7

cash flows used in investing activities
interest and dividends received                        17.4                  19.5
purchase of property, plant and equipment                 -                     -
dividends received from associate                         -                  19.2
purchase of fixed income securities               (1,072.9)               (886.2)
purchase of equity securities                             -                 (9.3)
proceeds on maturity and disposal
of fixed income securities                          1,216.7                 853.9
proceeds on disposal of equity securities               4.6                   2.2
net proceeds on other investments                       0.2                   0.1
net cash flows used in investing activities           166.0                 (0.6)

cash flows used in financing activities
interest paid                                         (2.0)                 (2.9)
dividends paid                                           -                (238.2)
shares repurchased                                    (1.0)                (10.5)
net cash flows used in financing activities           (3.0)               (251.6)

net (decrease) increase in cash and
cash equivalents                                      320.5               (128.5)
cash and cash equivalents at beginning of year        413.6                 737.3
effect of exchange rate fluctuations on cash
and cash equivalents                                  (3.0)                   1.2
cash and cash equivalents at end of period            731.1                 610.0


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 dollars and its
Common Shares trade on the main market of the London Stock Exchange under the
ticker symbol LRE. Lancashire is headquartered at Mintflower Place, 8
Par-La-Ville Road, Hamilton HM 08, 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.


NOTE REGARDING FORWARD-LOOKING STATEMENTS:

CERTAIN STATEMENTS AND INDICATIVE PROJECTIONS MADE IN THIS ANNOUNCEMENT THAT
ARE NOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE
INCLUDING WITHOUT LIMITATION, STATEMENTS CONTAINING WORDS 'BELIEVES',
'ANTICIPATES', 'PLANS', 'PROJECTS', 'FORECASTS', 'GUIDANCE', 'INTENDS',
'EXPECTS', 'ESTIMATES', 'PREDICTS', 'MAY', 'CAN', 'WILL', 'SEEKS', 'SHOULD',
OR, IN EACH CASE, THEIR NEGATIVE OR COMPARABLE TERMINOLOGY. ALL STATEMENTS
OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDING, WITHOUT LIMITATION, THOSE
REGARDING THE GROUP'S FINANCIAL POSITION, RESULTS OF OPERATIONS, LIQUIDITY,
PROSPECTS, GROWTH, CAPITAL MANAGEMENT PLANS, BUSINESS STRATEGY, PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS (INCLUDING DEVELOPMENT PLANS AND
OBJECTIVES RELATING TO THE GROUP'S INSURANCE BUSINESS) ARE FORWARD-LOOKING
STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE GROUP TO BE MATERIALLY DIFFERENT FROM FUTURE
RESULTS, PERFORMANCE OR ACHIEVMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS.

THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO: THE NUMBER AND TYPE OF INSURANCE
AND REINSURANCE CONTRACTS THAT WE WRITE; THE PREMIUM RATES AVAILABLE AT THE
TIME OF SUCH RENEWALS WITHIN OUR TARGETED BUSINESS LINES; THE ABSENCE OF LARGE
OR UNUSUALLY FREQUENT LOSS EVENTS; THE IMPACT THAT OUR FUTURE OPERATING
RESULTS, CAPITAL POSITION AND RATING AGENCY AND OTHER CONSIDERATIONS HAVE ON
THE EXECUTION OF ANY CAPITAL MANAGEMENT INITIATIVES; THE POSSIBILITY OF GREATER
FREQUENCY OR SEVERITY OF CLAIMS AND LOSS ACTIVITY THAN OUR UNDERWRITING,
RESERVING OR INVESTMENT PRACTICES HAVE ANTICIPATED; THE RELIABILITY OF, AND
CHANGES IN ASSUMPTIONS TO, CATASTROPHE PRICING, ACCUMULATION AND ESTIMATED LOSS
MODELS; LOSS OF KEY PERSONNEL; A DECLINE IN OUR OPERATING SUBSIDIARIES' RATING
WITH A.M. BEST COMPANY; INCREASED COMPETITION ON THE BASIS OF PRICING,
CAPACITY, COVERAGE TERMS OR OTHER FACTORS; A CYCLICAL DOWNTURN OF THE INDUSTRY;
THE IMPACT OF A DETERIORATING CREDIT ENVIRONMENT CREATED BY THE FINANCIAL
MARKETS AND CREDIT CRISIS; A RATING DOWNGRADE OF, OR A MARKET DECLINE IN,
SECURITES IN OUR INVESTMENT PORTFOLIO; CHANGES IN GOVERNMENTAL REGULATIONS OR
TAX LAWS IN JURISDICTIONS WHERE LANCASHIRE CONDUCTS BUSINESS; LANCASHIRE OR ITS
BERMUDIAN SUBSIDIARY BECOMING SUBJECT TO INCOME TAXES IN THE UNITED STATES OR
THE UNITED KINGDOM; AND THE EFFECTIVENESS OF OUR LOSS LIMITATION METHODS. ANY
ESTIMATES RELATING TO LOSS EVENTS INVOLVE THE EXERCISE OF CONSIDERABLE JUDGMENT
AND REFLECT A COMBINATION OF GROUND-UP EVALUATIONS, INFORMATION AVAILABLE TO
DATE FROM BROKERS AND INSUREDS, MARKET INTELLIGENCE, INITIAL TENTATIVE LOSS
REPORTS AND OTHER SOURCES. JUDGMENTS IN RELATION TO FLOOD LOSSES INVOLVE 
COMPLEX FACTORS POTENTIALLY CONTRIBUTING TO THIS TYPE OF LOSS, AND WE 
CAUTION AS TO THE PRELIMINARY NATURE OF THE INFORMATION USED TO PREPARE 
ANY SUCH ESTIMATES.

THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF PUBLICATION OF
THIS ANNOUNCEMENT. LANCASHIRE HOLDINGS LIMITED EXPRESSLY DISCLAIMS ANY
OBLIGATION OR UNDERTAKING (SAVE AS REQUIRED TO COMPLY WITH ANY LEGAL OR
REGULATORY OBLIGATIONS (INCLUDING THE RULES OF THE LONDON STOCK EXCHANGE)) TO
DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS TO
REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONS OR CIRCUMSTANCES ON WHICH ANY
SUCH STATEMENT IS BASED.