Bermuda in Boston 2006 conference

Simon Burton, Deputy Chief Underwriting OfficerNeil McConachie, Chief Financial Officer and Chief Operating Officer

19 September 2006 www.lancashire.bm

Safe Harbour Statements

2

CERTAIN STATEMENTS (WHICH INCLUDES MODELED LOSS SCENARIOS) MADE IN THIS PRESENTATION 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 ACHIEVMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF 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 OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.

Introduction to Lancashire

• focus = short-tail property• property• energy• marine• aviation

• focus = insurance• 70% direct 30% reinsurance• licensed in Bermuda and UK

• CEO is Richard Brindle• currently 11 underwriters• approx 50 staff

• formed late 2005

• initially capitalized at $1.1 billion• $950M equity + $125M hybrid• listed on London AIM

exchange at inception

• A.M. Best rating of A minus (stable)

• aim to generate 15%+ ROE over the cycle

Richard Brindle has excellent track record

• Richard Brindle significantly outperformed Lloyd’s

• Syndicate 2488 and 488 combined return on capacity of 21% translates to a 27% pre-tax return on capital (assuming a 75% capacity to capital ratio)

Profit before personal expenses as a percentage of capacity(Syndicate 2488 & 488)

-7.5%

-16.2% -16.8%-13.8%

1.3%

9.8%

17.6%16.0%

10.0%

-7.5%

-1.3%

8.6%

11.9%

8.5%

18.9%

27.2%

39.0%

22.1%

30.9%

19.3%

12.3%13.7%

7.5%7.1%

12.7%

8.2%

-20%

-10%

0%

10%

20%

30%

40%

50%

Lloyd's Syndicates 488 and 2488

20.6%

Capacity (£m) 62 74 105 105 113 143 207 198 264 299 330 330 250

0.4%

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1998 1999

Profit before personal expenses as a % of

capacity (Ascot)

15.3%

-16.0%

42.0%

44.6%

-20%

-10%

0%

10%

20%

30%

40%

50%

Lloyd's Syndicate 1414

42.2%

0.9%

2001 2002

R Brindle was underwriter at Syndicate 488 from 1986, appointed deputy underwriter in 1988 and acted as main underwriter from 1991 to 1999

Lancashire business strategyand trading conditions

strategy: build long-term growth in book value

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Lancashire

cornerstones

underwriting comes first

strong balance sheet

stay nimble

manage capital through cycle

underwriting comes first• true underwriting culture

• needs leadership & team with expertise, experience and enthusiasm• Lancashire has team of sector experts, led by Richard Brindle• Lancashire has collegiate approach: every risk discussed on daily call

•market sector selection• the most attractive sectors are direct specialty property and property retro• Lancashire has primary focus on these sectors: unique among peers• Lancashire dynamically moves between sub-sectors as environment changes

• strong broker support• specialty property and property retro is driven by London brokers• Lancashire has major London presence and exceptional relationships

• highly disciplined approach to risk selection• every risk must stand on its own merits: bottom line result is key, not top line• Lancashire has already demonstrated this, and will do so through the cycle

7

we will write premium to match the cycle

0

50

100

150

20x020x120x220x320x420x520x6

rela

tive

inde

x pricingpremiumcapital

Illustrative example of insurance cycle

8

strong return on equity through the cycle

0

50

100

150

20x020x120x220x320x420x520x6

rela

tive

inde

x

pricing

capital

expectedROE

Illustrative example of insurance cycle

9

business mix

based on estimated 2006 mix of written premium

Property 40%

Energy 40%

marine 10%

aviation 10%

insurance 70%

reinsurance 30%

Nat cat exposed 55%

Other 45%

diversified book of short-tail property risks

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• Property• Retro – pricing strong, capacity limited despite sidecars• D&F – wide-spread strength building• Terrorism – conditions reasonable to good, not spectacular

• Energy• Offshore Gulf of Mexico – pricing & terms unprecedented• Offshore Rest of World – conditions good• Onshore Gulf of Mexico – pricing strong, not as spectacular as offshore• Onshore Rest of World – conditions good

• Marine• Excess of Loss – disappointing, written very little• Direct – improving, acceptable conditions

• Aviation (AV 52)• Conditions good, improving

trading conditions strong in 2006

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• underwriting conditions look favourable for 2007• conditions look favourable even in absence of large losses

• capacity squeeze for key Lancashire lines• further price strengthening likely in D&F and retro, stable elsewhere• adverse development from KRW storms• very strong conditions of 2006 expected to continue through 2007

• underwriting conditions look reasonable in 2008• if no large losses, pricing may weaken from 2007 but remain good• if large losses do occur, conditions likely to stabilise

• pricing stability partly depends on barriers to entry• barriers to entry low for commodity lines eg. property cat reinsurance• barriers to entry high for specialist lines eg. direct energy

• looking out, cycle should gradually soften until next large industry event• we will remain nimble and manage business in tune with cycle

outlook for 2007: very promising

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Lancashire risk and capital strategy

modeled loss scenarios

• 1 in 100 year event for Lancashire is a very large U.S. windstorm causing extensive damage onshore and offshore

• KRW loss = 22.5% of June 30 equity. Peer group average1 = 24.5% of June 30 equity

• Aim is to maintain GAAP ‘net loss’2 from 1 in 100 year occurrence to under 25% of capital1 Source: JP Morgan report Aug 1 ‘06: MRH = 39.9%, ENH = 31.8%, PTP = 21.1%, AXS = 19.6%, PRE = 19.0%, RE = 15.9%2 ‘net loss’ = gross loss, less reinsurance recovered, including any reinstatement premium; excludes profits made rest of year

% capital impact from historical events

0%

10%

20%

30%

40%

50%

1 in 100KatrinaRita

Wilma

KRW

2004*AndrewNorthridge

% o

f 30

june

cap

ital gross

net

•See Safe Harbour disclosures

•modeled losses on portfolio in force portfolio on 1 july 2006

• modeled using RMS 6.0 offshore/onshore event set

• includes clash from all classes

* 2004 = hurricanes Charlie, Francis, Ivan and Jeanne

capital management strategy

• “underwriting comes first”• underwriting opportunities dictate capital levels

• “maintain strong balance sheet”

• hybrid leverage at 11%, debt leverage zero%

• scope to increase leverage modestly, when appropriate

• “stay nimble”• easier to manage capital with small number of locations and people

• “manage capital through the cycle”• established sidecar, Sirocco Re, to cede Gulf of Mexico energy risks

• if excess capital generated in low loss environment, will consider dividends (special or ordinary) and/or share repurchases

• if opportunities decrease, will reduce capital accordingly15

• UK platform increases flexibility and provides new opportunities• underwriting authorisation throughout European Union

• enhances existing business plan• same classes of business, same management team• added ability to deliver above average long term returns

Lancashire Insurance Company (UK)

LancashireU.K.

Lancashire Bermuda

85% quota share

Collateral for losses and UPR

$110M capital* $1.1 billion capital*

* estimated Jan 1, 2007

premium premium

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results through six months to June 30

2006 H1 property energy marine aviation total$m $m $m $m $m

bound 129.3 158.2 22.8 39.0 349.3

gross premiums written 129.3 151.2 21.7 14.0 316.2

net premiums written 89.6 120.0 21.7 14.0 245.3

net premiums earned 30.6 24.4 6.2 3.1 64.3

claims ratio 6.9% 14.3% 29.0% 0.0% 11.6%

17- IBNR makes up 100% of reserves at June 30 -

Earning power accelerating

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• Aim is to create above average long-term growth in book value

• Richard Brindle has track record of creating excess returns through cycles

•Attractive absolute return and risk-adjusted return• in low / normal loss environment, expected ROE is excellent

• low attritional loss ratio

- loss ratio in six months to June 30 = 11.6%

• in high cat environment, downside contained

- KRW repeat = 22.5% of equity, 20% of capital (using RMS 6.0)

• Earning power accelerates in 2007 and beyond• earned premium ramps us quickly after first year

• written premium expected to increase in 2007 v 2006

• Lancashire has got off to a great start

• trading conditions in our core lines of focus are extremely strong and forecast to continue in 2007

• potential earning power accelerating

• in most scenarios, projected return on equity is excellent

• under stressed scenarios, capital impairment is contained

• opening of UK underwriting location enhances business strategy

• Lancashire looks forward with optimism

summary

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• IPO date = December 15 2005

• IPO price = $5.00 / 284 pence• £1.00 = $1.76

• September 14 close = $6.30 / 335 pence• £1.00 = $1.88

• Percentage Gain dollars = 26%• Percentage Gain Sterling = 18%

• Fully diluted book value (June 30) = $5.06• Share price / book value multiple = 1.25x (September 14)

Appendix: share performance to date

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www.lancashire.bm

(1) 441 278 8950