Annual Report & Accounts 2008

Financial highlights

• Return on equity of 7.5 per cent (2007: 31.7 per cent)
• Net profit of $97.5 million (2007: $390.9 million)
• Gross premiums written of $638.1 million (2007: $753.1 million)
• Combined ratio 86.3 per cent (2007: $38.1 per cent)
• Total investment return of 3.1 per cent (2007: 6.4 per cent)
• Capital returned to shareholders of $58.0 million via share repurchases (2007 – $100.2 million capital returned to shareholders via share repurchases. The Company also declared a strategic dividend of $239.1 million in 2007)

Operating highlights

• Strong underwriting discipline in softening market – 2008 gross premiums were reduced by 15.3 per cent compared to 2007.
• Excellent underwriting performance in year that saw industry losses well above average – loss ratio of 61.8 per cent.
• Very strong investment return in extremely challenging investment markets – achieved total return of 3.1 per cent.
• Solid operating performance and prudent capital management in 2008 means Lancashire is well positioned to fully capitalize on attractive trading conditions in 2009.

Outlook for 2009

Early indications are that there will be a broadbased improvement in pricing across most of the lines of business that the Company writes, together with improvements in terms and conditions. The Directors are confident that prospects for Lancashire for 2009 are strong.