3rd Quarter Results

Lancashire Holdings Limited
29 October 2007

                          LANCASHIRE HOLDINGS LIMITED

        Fully converted book value grows 7.9% in Q3, 22.0% year to date
          Gross written premiums grow 33.1% in Q3, 40.2% year to date
                 Combined ratio 44.0% in Q3, 49.2% year to date
                  $100 million share repurchase authorisation



Hamilton, Bermuda, 29 October 2007

Lancashire Holdings Limited ('Lancashire' or 'the Company') today announces its
results for the third quarter of 2007 and the nine month period ended 30
September 2007, and the establishment of a $100 million share repurchase
program.

So far this year Lancashire has successfully navigated a higher than normal
frequency of medium-sized worldwide natural catastrophes, while also generating
strong underwriting results in the majority of the portfolio which is not
exposed to natural catastrophes. Together, this has produced an excellent return
for Lancashire shareholders.



Financial highlights for the third quarter of 2007:

•   Fully converted book value per share grew 7.9% over the quarter;

•   Gross written premiums of $147.3 million, an increase of 33.1% from the 
    third quarter of 2006. Net written premiums increased 36.5%;

•   Loss ratio of 23.1% and a combined ratio of 44.0%;

•   Total annualised investment return of 7.7% for the third quarter, including 
    net investment income, realised gains and losses, and unrealised gains
    and losses;

•   Net income after tax of $105.2 million, or $0.51 diluted earnings per share.



Financial highlights for the nine months to 30 September 2007:

•    Fully converted book value per share grew 22.0% year to date 2007, bringing 
     the rolling 12 month growth in fully converted book value per share to
     29.5%;

•    Gross written premiums of $598.8 million, an increase of 40.2% from the 
     first nine months of 2006. Net written premiums increased 48.4%;

•    Loss ratio of 26.8% and a combined ratio of 49.2%;

•    Total annualised investment return of 6.0% for the nine months to 30 
     September 2007, including net investment income, realised gains and losses, 
     and unrealised gains and losses;

•    Net income after tax of $275.6 million for the nine months to 30 September, 
     2007, or $1.34 diluted earnings per share.





The Company also announces that on 29 October 2007 its Board of Directors
approved a share repurchase program (the 'Repurchase Program') which authorises
the Company to repurchase its own shares by way of market purchases, tender
offers, accelerated purchase programs or privately negotiated transactions, up
to an aggregate purchase price of $100 million.

Richard Brindle, Group Chief Executive Officer, commented:

'Lancashire had an excellent quarter, our best yet. Fully converted book value
per share grew 7.9% in the quarter, bringing the year to date growth to 22.0%.
At the start of the year, we believed we could deliver a return on equity of 20
to 25%; we are now increasing estimated 2007 return on equity to between 26 and
29%. Net income in the third quarter of 2007 increased exactly 100% from the
same quarter in 2006, and net income for 2007 to date increased exactly 200%
from the same period last year.

'In 2007 to date, despite two land-falling category five Atlantic hurricanes,
insured losses in the United States from natural catastrophes have been lower
than average. In the rest of the world however, this year has seen a higher than
normal frequency of catastrophe losses. We have not incurred major losses from
these events, which has helped produce a 2007 loss ratio of 26.8% to date. A
large driver is our strategy to focus on a diversified insurance portfolio,
rather than a narrow focus on natural catastrophe business. We are pleased to
report that all segments of our business have generated strong underwriting
profits in 2007.

'Rates are softening, a little faster than anticipated. Market cycles are
inevitable but unpredictable. Rather than second-guess the timing of events, or
lack of events, our strategy is to stay nimble so we can react to a market which
is constantly changing. From an operational standpoint we do this by keeping our
infrastructure tight and our underwriting centralised. We will react quickly
when new opportunities arise, and move equally quickly when they diminish. From
a capacity standpoint, we do this by adopting flexible capital strategies,
recognising that outside factors can quickly and materially alter capital needs.
By remaining a nimble company and paying close attention to all aspects of cycle
management, we believe we can generate an attractive return for shareholders
over extended periods of time.

'In a softening market, industry returns gradually fall until capacity reaches
an appropriate level. We have been clear in our strategy. If underwriting
opportunities decrease, Lancashire will reduce its capacity to an appropriate
level. Our Board of Directors has today authorised a $100 million share
repurchase program. We will make a further assessment on capital requirements
nearer the end of the year. Should rate softening continue, we expect our 2008
portfolio will require less capital than we currently have. In addition to the
$100 million share repurchase programme, we would also anticipate returning at
least 50% of the profits realised in 2007 back to shareholders via a single
substantial dividend. We anticipate share repurchases and significant dividends
to become recurring weapons in Lancashire's arsenal of techniques for managing
capital effectively in a softening market. We term this latter aspect of capital
management 'strategic dividends'. Strategic dividends are in keeping with our
philosophy of nimbleness, affording us flexibility in tailoring our capital
needs while at the same time generating an attractive yield to investors. We
will continually explore all methods of capital management as appropriate.'



Underwriting results



Gross written premiums increased 33.1% in the third quarter of 2007 compared to
the same period in 2006. In 2007 to date, gross written premiums increased 40.2%
compared to the first nine months of 2006. The main drivers of the growth in
2007 premium written compared to 2006 have been due to strategic changes within
Lancashire, primarily the opening of the UK operating platform, which began
underwriting in late 2006, which itself led to a substantial increase in the
broker submission count in our second trading year. These structural benefits
more than offset rate reductions, leading to year-on-year premium growth. Moving
into the fourth quarter of 2007 and into 2008, while rates and terms in many
classes remain good, it is predicted that continued rate softening will
ultimately result in premium written declining compared to prior periods.

Relatively little reinsurance is purchased in the third quarter. For the year to
date, the amount of premium ceded was slightly higher than 2006, although as a
ratio of gross written premium, ceded premium was lower at 13.7% in 2007
compared to 18.5% in 2006. Net written premiums increased 36.5% in the third
quarter of 2007 compared to the third quarter of 2006, and increased 48.4% year
to date over the same period in 2006.  Sirocco Re, the energy business sidecar
sponsored by Lancashire in 2006, is not being renewed for 2008.

Net earned premiums as a proportion of net written premiums were 114.2% in the
third quarter of 2007, and 87.6% in the nine months to 30 September 2007.

The loss ratios of 23.1% and 26.8% for the three and nine months to 30 September
2007, respectively, reflect a very good underwriting performance in all
segments.



Investments

Net investment income was $20.9 million for the third quarter, an increase of
52.6% over the third quarter of 2006. Net investment income was $56.2 million in
the nine months to 30 September 2007, an increase of 48.3% over the same period
in 2006. The increase in investment income is primarily due to high net
operating cashflow, resulting in higher net invested assets.

Total investment return, including net investment income, net realised gains and
losses and net unrealised gains and losses, was $33.0 million in the quarter and
$68.5 million for the year to date. Total investment return was higher than net
investment income due primarily to volatile but strong fixed income markets in
the third quarter, offset by a relatively weak equity market compared to earlier
in the year.

Lancashire's strategy to maintain a short duration and high credit quality
investment portfolio remains unchanged. The portfolio contains no sub-prime
securities. All securitised holdings are either government or agency securities
or are rated AAA.



Capital



At 30 September 2007, total capital was $1.561 billion, comprising shareholders'
equity of $1.430 billion and $131 million of long-term debt. Leverage was 8.4%.


Outlook


Following strong profits for the year to date, our estimated growth in fully
converted book value per share is revised upwards from the previous guidance of
20 to 25%, to a new range of 26 to 29%, assuming a normal level of losses.  2007
gross premiums written are expected to be at least 20% higher than 2006.  This
is unchanged from previous guidance.

Further detail of our 2007 third quarter results can be obtained from our
Financial Supplement. This can be accessed via our website
www.lancashiregroup.com.



Investor Presentation and Earnings Call



UPDATE



There will be an investor conference call on the results at 11:30 UK time / 07:
30 EST on Tuesday 30 October 2007. This call will be hosted by Richard Brindle,
Chief Executive Officer; Neil McConachie, Chief Financial Officer; and Simon
Burton, Deputy Chief Executive Officer. The call can be accessed by dialing +44
(0) 207 806 1950/ [phone] with the passcode 1445892.

A replay facility will be available for two weeks until Tuesday 13 November. The
dial in number for the replay facility is [phone] / [phone]
and the passcode is 1445892#.



A replay facility can also be accessed at www.lancashiregroup.com .



For further information, please contact:


Lancashire Holdings                                   [phone]
Neil McConachie

Financial Dynamics                                    [phone]
Robert Bailhache
Nick Henderson

Kekst & Company Inc.
Michael Herley                                        [phone]
Mark Semer                                            [phone]




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) 30 Sept 2007


                                                                      Sept 30, 2007              December 31, 2006
                                                                                 $m                             $m
assets
cash and cash equivalents                                                     539.5                          400.1
accrued interest receivable                                                    10.4                            7.5
investments
 - fixed income securities
    - available for sale                                                    1,254.2                          896.3
    - at fair value through income                                             22.6                              -
 - equity securities, available for sale                                       73.2                           70.3
 - other investments                                                            7.2                           11.5
reinsurance assets
 - unearned premium on premium ceded                                           48.0                           19.1
 - reinsurance recoveries                                                       1.5                              -
deferred acquisition costs                                                     61.0                           51.5
inwards premium receivable from insureds and cedants                          176.7                          173.7
investment in associate                                                        21.7                           23.2
other assets                                                                   34.2                            9.5
total assets                                                                2,250.2                        1,662.7

liabilities
insurance contracts
 - loss and loss adjustment expenses                                          158.7                           39.1
 - unearned premiums                                                          418.6                          325.7
 - other payables                                                               7.0                            3.6
amounts payable to reinsurers                                                  29.3                            2.4
deferred acquisition costs ceded                                                6.6                            2.5
other payables                                                                 69.4                           23.2
long-term debt                                                                130.9                          128.6
total liabilities                                                             820.5                          525.1

shareholders' equity
share capital                                                                  98.0                           97.9
share premium                                                                  46.0                           33.6
contributed surplus                                                           848.1                          849.7
fair value and other reserves                                                  14.3                            8.7
retained earnings                                                             423.3                          147.7
total shareholders' equity attributable to equity                           1,429.7                        1,137.6
shareholders

total liabilities and shareholders' equity                                  2,250.2                        1,662.7


basic book value per share                                                    $7.30                          $5.81
fully converted book value per share                                          $6.93                          $5.68





Consolidated Income Statement

(Unaudited) to 30 September 2007


                                                  Quarter 3        Quarter 3           Year to           Year to
                                                       2007             2006              date              date

                                                                                          2007              2006
                                                         $m               $m                $m                $m

gross premiums written                                147.3            110.7             598.8             427.0
outwards reinsurance premiums                         (6.8)            (7.8)            (82.2)             (78.8

net premiums written                                  140.5            102.9             516.6             348.2

change in unearned premiums                            35.5            (6.4)            (92.9)           (247.8)
change in unearned premiums on premium ceded         (15.5)           (16.3)              28.9              44.1

net premiums earned                                   160.5             80.2             452.6             144.5

net investment income                                  20.9             13.7              56.2              37.9
net realised gains (losses) and impairments             2.3              2.1               6.7             (1.3)
share of profit of associate                            1.1              2.0               3.9               2.0
net foreign exchange gains (losses)                     1.7            (0.1)               3.5             (1.2)
net other investment income (losses)                  (2.0)                -             (2.5)                 -

total net revenue                                     184.5             97.9             520.4             181.9

insurance losses and loss adjustment expenses          38.1             12.8             122.9              20.2
insurance losses and loss adjustment expenses         (1.0)                -             (1.5)                 -
recoverable
net insurance acquisition expenses                     21.2             11.7              62.4              19.3
equity based compensation                               4.4              5.5              10.8              16.1
other operating expenses                               12.3             11.2              39.1              24.8

total expenses                                         75.0             41.2             233.7              80.4

profit before tax and finance costs                   109.5             56.7             286.7             101.5

finance costs                                           4.4              4.1              10.5               9.6

profit before tax                                     105.1             52.6             276.2              91.9

tax                                                   (0.1)                -               0.6                 -

profit after tax for the period attributable to       105.2             52.6             275.6              91.9
equity shareholders

net loss ratio                                        23.1%            16.0%             26.8%             14.0%
net acquisition cost ratio                            13.2%            14.6%             13.8%             13.4%
administrative expense ratio                           7.7%            14.0%              8.6%             17.2%
combined ratio                                        44.0%            44.6%             49.2%             44.6%

basic earnings per share                              $0.54            $0.27             $1.41             $0.47
diluted earnings per share                            $0.51            $0.26             $1.34             $0.46

change in fully converted book value per               7.9%             5.9%             22.0%            10.5 %
share





Consolidated Cash Flow Statement

(Unaudited) 30 Sept 2007






                                                                      nine                          twelve
                                                                    months                          months
                                                                      2007                            2006
                                                                        $m                           $m

cash flows from operating activities
profit before interest and tax                                       229.1                        116.4
interest income                                                       55.6                         53.6
interest expense                                                      (8.5)                       (10.6)
tax                                                                   (0.6)                        (0.2)
depreciation                                                           1.0                          0.6
amortisation of debt securities                                       (0.8)                        (1.2)
employee benefit expense                                              10.8                         22.5
foreign exchange                                                      (2.4)                          1.9
share of profit of associate                                          (3.9)                        (3.2)
net unrealised losses (gains) on derivative financial                  2.3                        (1.8)
instruments
net realised (gains) and impairments on investments                   (6.7)                        (0.8)
net fair value losses on investments at fair value                     0.2                            -
through income
unrealised losses on swaps                                             0.1                          0.9
accrued interest receivable                                           (2.9)                        (5.6)
reinsurance assets
- unearned premium on premium ceded                                  (28.9)                       (19.1) 
reinsurance recoveries                                                (1.5)                            -
deferred acquisition costs                                            (9.5)                       (51.0)
other receivables                                                    (23.4)                        (6.0)
inwards premium receivable from insureds and cedants                  (1.2)                      (171.4)
deferred tax asset                                                    (1.0)                        (0.8)
insurance contracts
  - losses and loss adjustment expenses                              118.7                         39.1
  - unearned premiums                                                 92.9                        323.1
  - other payables                                                     3.4                          3.6
amounts payable to reinsurers                                         26.9                          2.4
deferred acquisition costs ceded                                       4.1                          2.5
other payables                                                        45.3                         18.6
corporation tax payable                                                0.8                          1.0
accrued interest payable                                                -                            -
net cash flows from operating activities                             499.9                        314.5
cash flows from investing activities
purchase of property, plant and equipment                             (1.3)                        (2.6)
investment in associate                                                 -                         (20.0)
dividends received from associate                                      5.4                            -
purchase of debt securities                                       (1,628.7)                    (2,086.1)
purchase of equity securities                                        (21.9)                       (76.1)
proceeds on maturity and disposal of debt securities               1,252.4                      1,185.6
proceeds on disposal of equity securities                             26.3                         20.9
net purchase of other investments                                      3.3                         (9.7)
net cash flows used in investing activities                         (364.5)                      (988.0)

net increase (decrease) in cash and cash equivalents                 135.4                       (673.5)
cash and cash equivalents at beginning of period                     400.1                      1,072.4
effect of exchange rate fluctuations on cash and cash                  4.0                          1.2
equivalents
cash and cash equivalents at end of period                           539.5                        400.1







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 and its Common Shares
trade on AIM 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 AND 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', 'FORECASTS', 'GUIDANCE',
'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, 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; 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 DOCUMENT. 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 TO REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONS OR
CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.






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