Interim Results

Lancashire Holdings Limited
07 August 2006

Hamilton, Bermuda, 7 August 2006

                          Lancashire Holdings Limited

            Unaudited results for the 6 month period to 30 June 2006

          Operating income of $42.7 million for the first half of 2006

•        Operating income of $42.7 million(1)
•        Operating income per common share of $0.22
•        Net income of $39.3 million
•        Net income per common share of $0.19
•        Gross written premium of $316.3 million
•        Loss ratio of 11.6%

(1) Operating income excludes $3.4 million in net realized investment losses



Richard Brindle, Chief Executive Officer and Chief Underwriting Officer,
commented:

'Lancashire has had an excellent first half of 2006. We experienced strong
trading conditions and claims activity was low. From a standing start we are
very pleased to have established Lancashire as a significant market participant
in a wide range of specialty classes. The operational and financial results
achieved by the team in such a short period of time have been remarkable.'

Financial Highlights
                                      Property         Energy         Marine       Aviation         Total
Bound premium                            129.3          158.2           22.8           39.0         349.3

Gross premium written                    129.3          151.2           21.7           14.0         316.3
Net premium written                       89.6          120.0           21.7           14.0         245.3
Net premium earned                        30.6           24.4            6.2            3.1          64.3
Losses and loss expenses                 (2.1)          (3.5)          (1.8)              -         (7.4)
Acquisition costs                        (3.1)          (2.9)          (1.0)          (0.6)         (7.6)
Underwriting income                       25.4           18.0            3.4            2.5          49.3
Investment income                                                                                    24.2
Realised gains (losses)                                                                             (3.4)
Foreign exchange                                                                                    (1.1)
Operating expenses                                                                                 (13.6)
Warrants and options                                                                               (10.6)
Financing costs                                                                                     (5.5)
Profit after taxes                                                                                   39.3

Loss ratio (2)                            6.9%          14.3%          29.0%           0.0%         11.6%
Acquisition cost ratio (2)               10.1%          11.9%          16.1%          19.4%         11.8%
Expense ratio (2)                                                                                   21.1%
Combined ratio (2)                                                                                  44.5%

(2) Based on net earned premium

Chief Executive's Statement

Lancashire has emerged as a highly selective specialty insurer that is carefully
building a robust and diversified book that will stand the company in good stead
over the long term.

Our underwriting approach is unique and clear: We concentrate on classes of
business with the most attractive risk return characteristics available in the
market, including those classes most dislocated by the loss events of 2004 and
2005. The Lancashire underwriting team - highly regarded and well known experts
in our areas of focus - has strong broker relationships and boasts an impressive
record in producing market leading returns through hard and soft market cycles.

Our strategy has four cornerstones: (i) underwriting comes first; (ii) maintain
a strong balance sheet; (iii) stay nimble; and (iv) manage capital through the
cycle. We believe this strategy, successfully executed, will deliver our
overriding aim: to create attractive long-term growth in book value for our
shareholders.

As the year has progressed we have gradually deployed our capital towards the
best underwriting opportunities. Notwithstanding a generally favorable
environment, our disciplined strategy has entailed declining a large number of
risks which haven't met our return requirements. However, as we anticipated at
the beginning of the year, pricing and terms have steadily improved and we have
been patient to ensure we make most efficient use of our balance sheet. While we
have allocated the majority of our risk capital at this stage, we have
deliberately held back a proportion of capacity. We intend to use this
opportunistically in the event of further market dislocation or severe capacity
shortages in the market.

In the second half of the year, we generally expect continued strong pricing and
terms for the classes we write. While we will continue to expand our diversified
book through 2006 and into 2007, we will not compromise underwriting discipline
for top-line growth. If trading conditions unfold as expected, we expect bound
premium of between $675 and $750 million. This translates to GAAP gross written
premium for 2006 of between approximately $615 million and $680 million, and net
written premium between approximately $540 million and $610 million.

We are also very excited about the opening of our London underwriting operation.
Lancashire UK is an accretive, organic addition to our existing operation, one
which  will greatly increase the flexibility of our operations and afford us
access to a wider pool of high quality risks. We expect to see the benefits of
this almost immediately, and we look forward to capitalising on these benefits
as we move into 2007 and beyond.'

Looking forward, we expect that a combination of our larger underwriting base
together with continued strong trading conditions in our core lines of business
will result in an increasing number of attractive underwriting opportunities for
Lancashire in the medium term. At this time, we continue to target a 2006 ROE of
16 to 20 percent, assuming a normal level of losses.

Dividends

We are finding ample opportunities to fully deploy our capital, and expect to be
able to continue to do so for the remainder of 2006 at a minimum. As such, we
have not declared an interim dividend at 30 June 2006. We continually assess our
capital adequacy and structure to best match the projected underwriting
opportunities and will make any adjustments necessary as the environment
evolves, including the payment of dividends as and when appropriate.

Operating and Financial Review

Gross written premiums for the half year were $316.3 million. Overall trading
conditions in the classes written by Lancashire have been very good,
particularly in classes impacted by the loss events of 2005. In 2006, we
anticipate that premium for risks exposed to natural catastrophes will represent
approximately 55% of our total written premium. Lancashire writes premium,
mostly on a direct basis, in four lines: property, energy, marine and aviation.

Property

This line contains property retrocession, direct and facultative property and
terrorism. Pricing has been excellent, as have terms and conditions,
particularly in the retrocession and direct and facultative classes. Trading
conditions in these classes steadily improved through the six months to 30 June
2006 and are expected to remain at levels at least this good for the remainder
of 2006. Trading conditions in terrorism are reasonably good. Lancashire expects
to increase its terrorism book in the latter half of 2006 and into 2007
following the arrival of our new terrorism specialist to the team in mid August.
We have also written a handful of political risk contracts.

Energy

The energy line includes offshore and onshore energy written on a worldwide
basis. The Gulf of Mexico offshore energy class represents approximately 75% of
energy premium written through 30 June 2006. Trading conditions in this class
have been unprecedented. Pricing is consistently up several hundred percent
accompanied by dramatic tightening in terms and conditions. Trading conditions
elsewhere in the world have also improved markedly, albeit not to the extreme
amounts seen in the U.S.

Marine

This line includes marine excess of loss and a number of marine hull, marine
war, marine P&I and other miscellaneous marine classes. As reported in earlier
trading statements, marine excess of loss renewal prices were disappointing in
January and we declined to participate to any great extent. To date, this has
been the most disappointing major class of business written by Lancashire and we
do not foresee a significant amount of attractive opportunities for the
remainder of 2006. It is too early to forecast 2007 conditions. Direct marine
rates have been better than seen in the reinsurance classes, and we are
gradually building our book. However, based on projected trading conditions for
the remainder of 2006 marine will represent a smaller proportion of our overall
book than anticipated.

Aviation

To date, our aviation focus has been centered on AV52 aviation war carve-out
business. We do not write general aviation business at this time, as we believe
pricing is inadequate. AV52 pricing has been reasonably strong, and we predict
it will continue though October renewals. We also plan to write a small number
of Aviation ILW contracts.

Reinsurance

Outwards reinsurance premiums ceded in the six month period were $71.0 million,
including $22.2 million ceded to Sirocco Reinsurance Limited, a newly formed
Bermuda reinsurer in which Lancashire invested $20.0 million in June 2006.
Sirocco and Lancashire have entered into a rolling one year quota share
agreement in respect of Gulf of Mexico offshore energy risks. Sirocco does not
write risks directly at this time. Lancashire is entitled to a ceding commission
and profit commission from Sirocco, depending on the underwriting results of the
ceded business.

Net premiums earned were $64.3 million for the first half of 2006. As a newly
formed company with no existing book of unearned policies, there is a
substantial difference between the relative size of premiums written and
premiums earned because policies written generally earn over a twelve month
period. This relative difference is largest in periods immediately following
inception but will reduce in the second half of 2006.

The loss ratio for the six months to 30 June 2006 was 11.6%, driven by the
relative absence of large loss events in the major classes written by
Lancashire. All but a de minimus amount of the loss expense recorded is in
respect of losses incurred but not reported.

The acquisition cost ratio for the period was 11.8% and the underwriting
operating expense ratio was 21.1%. The underwriting operating expense ratio for
the first half of 2006 is significantly higher than the expected long term ratio
due to the lag in net premiums earned at this early stage in the Company's life.

Net investment income for the first half of 2006 was $24.2 million. The fixed
income portfolio is currently yielding 5.6%. During the period, we realized $3.4
million of net losses. The portfolio incurred an unrealized loss of $5.7 million
for the six months to 30 June 2006. The split of assets at 30 June 2006 was
fixed income 75%, cash 18% and equities 7%. The weighted average duration and
credit quality was 2.6 years and AAA, respectively.

Employee warrants and option expense is the accrual of the fair value of
warrants and options granted to employees since inception. The fair value is
calculated on the grant date and will be expensed over the vesting period of
each security, which is between three and four years. The fair value is expensed
in the income statement and there is a corresponding credit to share premium in
the balance sheet resulting in a net zero impact on total shareholders' equity.

Total capital at 30 June 2006 was $1.1 billion, comprising $991.3 million of
common equity and $127.1 million of long-term debt. Leverage is 11.4%. Fully
converted book value per share at 30 June 2006 was $5.06 compared to $4.84 at 31
December 2005, representing a growth of 4.5% in the six months to 30 June 2006.
Based on projected opportunities for the remainder of 2006, we believe the level
and mix of capital is appropriate. This will be reassessed by management as the
trading environment evolves.

Consolidated Balance Sheet

(unaudited) at 30 June 2006
                                                                           2006                  2005
                                                                             $m                    $m
Assets
cash and cash equivalents                                                 215.0               1,072.4
debt securities                                                           866.5                     -
equity securities                                                          86.9                     -
total cash and investments                                              1,168.4               1,072.4

unearned premium on premium ceded                                          60.4                     -
accrued interest receivable                                                 7.9                   2.0
inwards premium receivable from insureds and cedants                      165.0                   2.1
deferred acquisition costs                                                 29.7                   0.5
investment in associate                                                    20.0                     -
other assets                                                                4.0                   0.7
pending trades - receivable                                                77.2                     -
total assets                                                            1,532.6               1,077.7

Liabilities
loss reserves                                                               7.4                     -
unearned premiums                                                         244.0                   2.6
reinsurance payable                                                        32.0                     -
deferred acquisition costs ceded                                            5.6                     -
accounts payable, accrued expenses and other liabilities                    6.3                   2.6
long-term debt                                                            127.1                 125.4
pending trades - payable                                                  118.9                     -

total liabilities                                                         541.3                 130.6

Equity
share capital                                                              97.9                  97.9
share premium                                                             871.4                 860.8
fair value and other reserves                                             (5.7)                     -
retained earnings (deficit)                                                27.7                (11.6)
total shareholders' equity attributable to equity                         991.3                 947.1
shareholders
total liabilities and shareholders' equity                              1,532.6               1,077.7


Consolidated Income Statement

(unaudited) to 30 June 2006
                                                                                                    2006
                                                                                                      $m
underwriting revenues
gross premiums written                                                                             316.3
outwards reinsurance premiums                                                                     (71.0)
net premiums written                                                                               245.3
change in unearned premiums                                                                      (241.4)
change in unearned premiums on premium ceded                                                        60.4
net premiums earned                                                                                 64.3
insurance losses and loss adjustment expenses                                                      (7.4)
insurance acquisition expenses                                                                     (7.6)
other operating expenses                                                                          (13.6)
net underwriting income                                                                             35.7

net investment income                                                                               24.2
net realised gains (losses)                                                                        (3.4)
net foreign exchange gains (losses)                                                                (1.1)
investment income and expenses                                                                      19.7
fair value of warrants & options issued                                                           (10.6)
interest expense on long term debt                                                                 (5.5)
corporate expenses                                                                                (16.1)
net income                                                                                          39.3

loss ratio                                                                                         11.6%
acquisition cost ratio                                                                             11.8%
expense ratio                                                                                      21.1%
combined ratio                                                                                     44.5%

Basic earnings per share ($)                                                                       $0.20
Diluted earnings per share ($)                                                                     $0.19



Consolidated Cash Flow Statement

(unaudited) to 30 June 2006
                                                                                                        2006
                                                                                                          $m
cash flows from operating activities
profit (loss) on ordinary activities before interest income and expense                                 39.3
employee benefits expense                                                                               10.6
foreign exchange                                                                                         1.1
realized (gains) losses on investments                                                                   3.4
accrued interest receivable                                                                            (5.9)
unearned premium on premium ceded                                                                     (60.4)
deferred acquisition costs                                                                            (29.2)
other receivables                                                                                     (80.6)
inwards premium receivable from insureds and cedants                                                 (162.6)
losses and loss adjustment expenses                                                                      7.4
unearned premiums                                                                                      241.4
deferred acquisition costs ceded                                                                         5.6
amounts payable to reinsurers                                                                           32.0
accrued interest payable                                                                                 0.1
other payables                                                                                         122.4
net cash flows from (used in) operating activities                                                     124.6
cash flows from investing activities
investment in associates                                                                              (20.0)
purchase of debt securities                                                                        (1,528.5)
purchase of equity securities                                                                         (88.2)
proceeds on maturity and disposal of debt securities                                                   650.0
proceeds on disposal of equity securities                                                                4.4
net cash flows used in investing activities                                                          (982.3)
net (decrease) increase in cash and cash equivalents                                                 (857.7)
cash and cash equivalents at beginning of period                                                     1,072.4
effect of exchange rate fluctuations on cash and                                                         0.3
   cash equivalents
cash and cash equivalents at end of period                                                             215.0


The Company expects to issue a complete set of interim financial statements
together with a review opinion by the Company's auditors by August 31, 2006.
Lancashire expects to issue a further trading update in the fourth quarter of
2006.

Investor Presentation

There will be an investor presentation on the results at 1130 UK time (BST) on
Monday 7 August at Financial Dynamics, Holborn Gate, 26 Southampton Buildings,
London WC2A 1PB. This presentation will be hosted by Richard Brindle, Chief
Executive Officer and Chief Underwriting Officer; Neil McConachie, Chief
Financial Officer and Chief Operating Officer; and Simon Burton, Deputy Chief
Underwriting Officer. Those wishing to attend are asked to contact Rob Bailhache
or Nick Henderson at Financial Dynamics on [phone] /
[e-mail] or [phone] / [e-mail].

The presentation will also be accessible via a conference call for those unable
to attend in person. To dial-in please call [phone].

There will also be a live webcast of the presentation at www.lancashire.bm. A
replay facility can also be accessed at www.lancashire.bm.

For further information, please contact:

Lancashire Holdings                                   [phone]
Neil McConachie

Financial Dynamics
Rob Bailhache                                         [phone]
Nick Henderson                                        [phone]


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

About Lancashire

Lancashire was established in late 2005 as a new insurance and reinsurance
business to take advantage of the favourable underwriting conditions arising
arise from the large insured losses incurred in 2004 and 2005.  The Company has
an A.M. Best rating of A- (Excellent) with a stable outlook.

Lancashire was admitted to AIM on 16 December 2005 following an Offer of Common
Shares to investors.  The Common Shares trade under the ticker symbol LRE.


NOTE REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS MADE IN THIS ANNOUNCEMENT OR ON THE CONFERENCE CALL THAT ARE
NOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE
INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING WORDS 'BELIEVES',
'ANTICIPATES', 'PLANS', 'PROJECTS', 'INTENDS', 'EXPECTS', 'ESTIMATES',
'PREDICTS', 'MAY', '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, 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 ACHIEVEMENTS EXPRESSED OR IMPLIED
BY SUCH FORWARD-LOOKING STATEMENTS.  THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY
AS AT THE DATE OF THIS ANNOUNCEMENT OR OTHER INFORMATION CONCERNED. LANCASHIRE
HOLDINGS LIMITED EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING (SAVE AS
REQUIRED TO COMPLY WITH ANY LEGAL OR REGULATORY OBLIGATIONS (INCLUDING THE AIM
RULES)) TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONS
WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON
WHICH ANY SUCH STATEMENT IS BASED.


                      This information is provided by RNS
            The company news service from the London Stock Exchange