A.M. Best Affirms Ratings of Lancashire Holdings Limited and Its Subsidiaries

A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings (ICR) of “a” of Lancashire Insurance Company Limited (Hamilton, Bermuda) and Lancashire Insurance Company (UK) Limited (United Kingdom) (collectively referred to as Lancashire). Additionally, A.M. Best has affirmed the ICR of “bbb” and the issue ratings of the parent company, Lancashire Holdings Limited (Lancashire Holdings) (Hamilton, Bermuda) [LSE:LRE]. The outlook for each rating remains stable. (See below for a detailed listing of the issue ratings.)

Lancashire’s ratings reflect the group’s robust risk-adjusted capitalization and excellent operating performance. Lancashire continues to produce strong overall returns and underwriting results that consistently outperform its peer group. The group’s results are attributed to its experienced management team that has tightly managed the underwriting cycle by keeping growth flat in addition to prudent use of its retrocession program. The group’s operating activities focus on a specialist approach to writing core accounts and targeting dislocated classes of business. Additionally, the ratings continue to reflect the group’s strong and comprehensive enterprise risk management framework. This customized risk management framework also has contributed to Lancashire’s ability to consistently produce excellent underwriting results and in turn to generate return measures at the high end of the peer group.

Lancashire maintains good financial flexibility, with the ability to access capital from equity and debt markets. In addition to its traditional capacity provided through its Bermuda and London operations, Lancashire benefits from its ownership of its Lloyd’s platform, Cathedral Capital Limited and Kinesis Capital Management Limited, Lancashire's special purpose vehicle, which allows the group to provide additional capacity and generate fee income.

Partially offsetting these positive rating factors are the difficult current market conditions across most lines of business written and the persistent low interest rate environment, making the underwriting and investment environments that Lancashire operates in very challenging and Lancashire’s exposure to low-frequency, high-severity events due to its targeted lines of business. Additionally, A.M. Best has some concerns regarding recent personnel turnover over at Lancashire’s Cathedral operations. However, given the group’s strong risk management and underwriting acumen those changes are not expected to materially impact Lancashire’s overall results.

The following issue ratings have been affirmed:

Lancashire Holdings Limited—

-- “bbb” on $130 million 5.7% senior unsecured notes, due 2022

-- “bbb-” on $97 million 3.7% over LIBOR subordinated notes, due 2035

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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