Interim Results

31st August 2011

Omega Insurance Holdings Limited

Interim results for the six months ended 30 June 2011

Omega Insurance Holdings Limited ("Omega" or "The Group") today announces interim results for the six months ended 30 June 2011.

Highlights

Business and Financial Performance

·; Book of business repositioned to take advantage of hardening markets when rating conditions improve

·; Improved catastrophe performance relative to industry peers due to actions taken over the past 12 months

·; Gross premiums written reduction of 15.4% to US$206.5 million in line with plan (H1 2010: US$244.1 million)

·; Combined ratio of 133.2% (H1 2010: 128.3%)

·; Claims ratio of 104.4% (H1 2010: 100.1%), of which 41.9% arising from catastrophe losses

·; US$51.3 million of catastrophe losses net of reinstatement premiums (H1 2010: US$29.4 million); - H1 2011 industry CAT losses are US$60.2 billion (H1 2010 industry CAT losses US$26.9 billion)*

·; Net prior year reserve release of US$ 1.0 million (H1 2010: strengthening of US$12.0 million)

·; Investment return of 0.73% (H1 2010: 1.44%)

·; Loss before tax of US$49.1 million (H1 2010: loss of US$34.2 million)

·; Basic earnings per share of (18.3)cents (H1 2010: (13.3)cents)

·; Interim dividend of $nil for the half year (H1 2010: 6.0 cents)

·; The Company remains in discussions with third parties regarding potential corporate activity, with the aim to conclude the process shortly.

*Source: Munich Re NatCat Service

Richard Pexton, Chief Executive Officer of Omega, said:

"This has been the costliest first half for insured catastrophe losses on record and Omega's half year result is largely attributable to those industry losses.

"As a result of the actions we have taken over the past 12 months our catastrophe losses are now in line with our peers. These actions have included the significant reduction in the more volatile areas of our catastrophe account and the placement of a more effective reinsurance programme.

"The Group has concentrated on disciplined underwriting and cycle management, dedicating less capital to the more volatile commodity classes. We are focusing on the core areas of the business, where our relationships with brokers and clients are very strong.

"We have purchased additional reinsurance cover, all of which remains intact for the US wind season, and in the event of a major industry wind loss in the second half, we would expect significant rate improvements across several of our classes.

"Finally, I am pleased to report that our investment in the operational side of the business has led to significant improvements in both the Group's infrastructure and resources."

Media Enquiries:

David Haggie/Juliet Tilley, Haggie Financial +44 (0)20 7417 8989

Analyst Enquiries:

David Coles, Head of Investor Relations, Omega +44 (0)20 7767 3000

Overview

2011 continues to be a period of transition for Omega. The first half of 2011 has been a period of exceptional loss activity for the insurance industry, in particular from those events relating to the Japanese earthquake and tsunami, the earthquake in New Zealand, the Australia flooding and the US tornados. The corrective actions we have taken have brought our catastrophe losses in line with our peers.

Omega incurred a pre-tax loss of US$49.1 million for the first half of the year and a combined ratio of 133.2%, of which approximately 41.9% is attributed to the catastrophe losses. The actions we have taken over the past 12 months through repositioning of the underlying books of business and purchase of more effective reinsurance programmes have lessened the severity of these major industry losses on our capital compared to what would otherwise have been the case. 2011 catastrophe losses measured as a percentage of 31 December 2010 Net Tangible Assets were at the lower end of our peer group. Going forward, we continue to focus on the core book of business written by the Syndicate and the US, and we are well positioned to take advantage of more favourable market conditions when the rating environment improves.

In line with its 2011 business plan, the Syndicate (of which the Group has an economic interest of 52.4% for 2011 (2010: 51.1%) has reduced its premium written, having exited Marine Energy and retrocessional business. This is reflected in the overall reduction of US$12.9 million in Syndicate derived gross premium written. The Syndicate anticipates writing total premium for the 2011 year of account of approximately US$430 million which is broadly in line with its original business plan.

Omega Specialty third party premium volume in H1 2011 was US$28.9 million (H1 2010 US$56.5 million) due to the previously announced exits from the retrocessional account and the significant reduction of mid-year catastrophe renewals. We do not plan significant further writings in Bermuda this year which will allow more efficient use of capital.

Our US business continues to grow with gross written premium of US$25.7 million (H1 2010: US$22.8 million), and it is now licensed to write business in all 50 states. Increased underwriting opportunities from these recent licenses should enable it to meet its growth targets for 2011. The combined ratio decreased for the period to 101.5% (H1 2010: 107.9%) as the business increases in scale.

During 2011, more effective Group reinsurance protections have been purchased. We have better matched the reinsurance programme to underlying exposures and reduced the basis risk. Although the Group has suffered significant net losses from catastrophe experience during 2011, reinsurance recoveries increased substantially to 29.1%, up from 16.8% in H1 2010 (2010 full year: 9.0%).

Operational Developments

We continue to invest in our operational capabilities and risk management as we develop the operational infrastructure of the Group and prepare for Solvency II.

Corporate Activity

As previously announced, Omega has received a number of approaches that may lead to an offer being made for the Company, and the Directors will continue to review these approaches in the context of the best interests of the business and all stakeholders. We are striving to conclude the process shortly.

Underwriting Result

Net premium

The decrease in net premium written is reflective of the actions taken to reposition the business described above. Net earned premiums, when compared to the same period last year, have increased by 29.3% due to the full effect of the increase in the Group's share of the Syndicate for the 2010 year of account. The full effect of the reduction in gross premium written will be more pronounced in the full year results. Premium ceded to reinsurers totalled 21.0% of Gross premium written (H1 2010: 24.7%).

Loss experience

*Includes $13.4m whole account recoveries

The catastrophe loss ratio of 41.9% includes US$70.6 million estimated losses net of class specific reinsurance recoveries before net inwards reinstatement premiums of US$5.9 million. Additionally, whole account recoveries of US$13.4 million have been recorded which, in the absence of the significant catastrophe activity, would have been recognised as reinsurance commissions in the second half of the year. Excluding whole account recoveries, the reinsurance recovery ratio for the six months ending 30 June is 22.4% which is substantially higher than 16.8% in 2010. Estimates for the 2010 catastrophe losses increased by US$4.3 million during the period.

The net attritional loss ratio of 63.3% (H1 2010: 61.8%) is affected by reinsurance premiums protecting catastrophe exposures. Hence, the gross attritional loss ratios are more representative of performance. The current accident year gross attritional loss ratio is 51.4% (H1 2010: 44.0%). The year on year movement has arisen primarily due to increases in our underlying ultimate loss ratios at 31 December 2010 together with the effect of premium earning profiles of the business (which has inflated the H1 2011 loss ratio) and a marginal increase in our gross ultimate loss ratios at 30 June 2011.

Net prior year reserve releases total US$ 1.0 million (H1 2010: strengthening of $12.0 million).

Underwriting Agency

The Group's subsidiary, Omega Underwriting Agencies Ltd (OUAL), receives agency fees and profit commission from unaligned capacity for its management of Syndicate 958. The 2009 Year of Account is now projected to close at a profit ranging from 3% to 8% return on capacity. As a result, accrued profit commission has reduced by $0.5m in the first half of 2011. The 2010 year of account is currently projected at a loss on capacity of between (2.5)% and (12.5)% and, as a result, the Group has not recognised any related profit commission. Additionally, future profit commission will be reduced in accordance with the deficit clause contained in the Agency agreement.

Group Expenses

The Group's expense base has increased in line with Group's investment in operational infrastructure by recruitment of staff in operational, risk management, actuarial, finance and IT functions. Additionally the Group's share of underwriting expenses has increased as a result of its increased participation on the Syndicate.

Investments

Assets under the Group's management were US$684.8 million at 30 June 2011 (H1 2010: US$621.9 million) and the investment return for the first half was 0.73% (H1 2010: 1.44%), yielding investment income of US$4.9 million. The investment portfolio is predominantly invested in USD fixed income assets where returns in government bonds and cash are at historically low levels. The return achieved is in line with our expectations for the period.

The market conditions in the first half of the year were very volatile, as the initial signs of economic recovery at the start of the year were overshadowed by increased concerns about the ability of Southern European countries to repay their debts. As the year progressed the economic conditions began to deteriorate, inflation rose and Southern European borrowing costs soared, resulting in large movements in asset prices.

Against this background, Omega's high allocation to government bonds benefited from the safe haven demand for US treasuries. As the prices of these bonds rose, we were able to continue to implement our investment strategy and reduce Omega's exposure to government bonds by selectively increasing its corporate bond and asset backed securities. With concerns of the debt crisis in Southern Europe spreading from Greece and Portugal to Italy and Spain, the downturn in world growth and the US downgrade by Standard and Poors to AA+, the emphasis for the remainder of the year will remain on capital preservation over that of return.

At 30 June 2011 Omega held less than 0.29% of its investments in Italian and Spanish government bonds which were sold subsequent to 30 June 2011 and 0.44% in corporate bonds in those countries. There are no direct holdings in Greece, Portugal or Ireland.

*Includes government bonds, government agency and government guaranteed bonds

*Includes US government and government backed securities.

Taxation

Omega's effective tax rate for the period is 9.3% (H1 2010: 5.8%). The rate reflects the distribution of underwriting losses according to the relevant jurisdiction. Tax credits have been accrued on underwriting losses incurred as well as for tax relief on Syndicate capacity which is amortised in the Group's UK tax returns. The tax relief on the amortisation of the Syndicate capacity has resulted in a reduction in the deferred tax liability of the corporate member of US$2.7 million. The balance sheet includes a deferred tax asset of US$3.1 million (H1 2010: US$4.1 million) primarily for the losses incurred since the formation of Omega US. The asset reflects tax losses expected to be offset against future taxable profits in the US.

Capital and Group Cash Flow

The protective actions taken by the Group over the past fifteen months to decrease volatility of the underlying book of business by exiting certain lines of business and purchasing more appropriate reinsurance programmes has enabled it to maintain a strong risk-adjusted capital base in an extraordinary loss environment.

Risks and Uncertainties

The nature of our risks and uncertainties remains materially the same as described in our 2010 annual report and accounts (pages 87 to 90).

The most significant risk remains that of insurance underwriting either due to exposure to catastrophes or due to margin erosion in a softening market. Omega has maintained its approach of diversified business lines, focusing on smaller, regional insurance companies and smaller insureds.

The Group has retained its low tolerance for market risk, keeping its asset portfolio in short duration highly rated fixed income assets with less concentration in government securities. The Company's liquidity remains strong given its investment portfolio of high quality fixed income assets.

Market conditions and outlook

2011 is a year of transition for Omega. After a disappointing 2010, our key focus has been to protect the Group's capital as effectively as possible and to position the Group for a return to targeted returns on equity. As a result in the short term underlying profits, which reflect the current rating and investment conditions, are dampened.

For 2012, we will be focusing our efforts on achieving the optimum mix of group underwriting across our segments and deploying our capital in the most effective manner. Clearly any further events in 2011 will have an impact on the Company's second half results. In the event of a major US wind loss in the second half of the year we would expect to see significant rate increases. The Group also continues to focus on building the quality of its resources, infrastructure and processes so that it is well placed to take advantage of market opportunities at the point they arise.

The Board remains confident that adequate returns remain in our core book of business, and it has been pleasing to see that our strong core relationships with our brokers and clients have been unwavering in this period of uncertainty for the Group.

Richard Pexton

Chief Executive Officer

30 August 2011

Responsibility Statement

The Directors have confirmed that to the best of our knowledge:

·; the condensed set of consolidated financial statements have been prepared in accordance with IAS 34 (Interim Financial Reporting);

·; the interim management report includes a fair review of information required by:

(a) DTR 4.2.7R of the Disclosure Transparency Rules (an indication of important events during the first six months of the financial year and their impact on the set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year); and

(b) DTR 4.2.8R of the Disclosure Transparency Rules (disclosure of related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so).

The Directors are confident that the Group has adequate resource to continue in operation for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing the accounts.

Richard Pexton

Chief Executive Officer

30 August 2011

2011 Half Year Condensed Consolidated Financial Statements

Condensed Consolidated Income Statement

Condensed Consolidated Statement of Comprehensive Income

Notes to the condensed consolidated financial statements

1. GENERAL INFORMATION AND ACCOUNTING POLICIES

BASIS OF PREPARATION

The interim consolidated financial statements for the period ended 30 June 2011 and 30 June 2010 are unaudited but have been subject to a review by the Group's independent auditors and have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

The statutory accounts for the year ended 31 December 2010, prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board ('IFRS') and interpretations issued by the International Financial Reporting Interpretations Committees ("IFRIC"), both as adopted for use by the European Union ('EU') and applied in accordance with the Bermuda Companies Act 1981, have been reported on by the Group's auditors, Ernst & Young LLP. The independent auditors' report on the group accounts for the year ended 31 December 2010 was not qualified. The comparative figures provided for the 12 months ended 31 December 2010 are based on the Group's statutory accounts.

Condensed consolidated financial statement values are presented in US dollars rounded to the nearest $'000 unless otherwise stated.

ACCOUNTING POLICIES

The interim consolidated financial statements have been prepared in accordance with accounting policies that are consistent with the prior accounting periods.

Changes to accounting requirements applicable to these financial statements

IAS 24 Related Party Disclosures (Amendment)

The amended standard is effective for annual periods beginning on or after 1 January 2011. It clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. This does not have a material impact on the Group.

Future changes to accounting requirements

IFRS 9 Financial instruments Classification and Measurement, as issued, reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. In subsequent phases, the IASB will address classification and measurement of financial liabilities, hedge accounting and derecognition. The completion of this project is expected in 2011. The adoption of IFRS 9 will have an effect on the classification and measurement of the Group's financial assets. However, the Group has determined that the effect shall be quantified in conjunction with the other phases when issued to present a comprehensive picture.

While there are a number of new or amended International Financial Reporting Standards and IFRIC interpretations that have been issued, they are either not required to be adopted by the Group at present or have no material effect on these interim condensed consolidated financial statements. The Group is assessing the future impact of these standards.

2. SEGMENTAL INFORMATION

The Group's reportable segments have been identified as follows:

1. Group reinsurance of, and participation on, Syndicate 958.

2. Omega Specialty (other reinsurance) which is the non-Syndicate derived business written by Omega Specialty in Bermuda.

3. Omega US Insurance which is the contribution to the Group from Omega US ignoring the effects of intra-group reinsurance.

4. Omega Underwriting Agents - which show the results for managing the non-Omega share of Syndicate 958 and includes profit commission and agency fees received for managing the Syndicate.

5. Other group activities - which show the results of transactions that do not relate to any of the segments above, being primarily those of the Group's ultimate and intermediate holding companies.

i) Income statement by segment

For the six months ended 30 June 2011:

For the six months ended 30 June 2010:

For the year ended 31 December 2010:

ii) Gross written premium class analysis

For the six months ended 30 June 2011:

For the six months ended 30 June 2010:

For the year ended 31 December 2010:

3. INVESTMENT RETURN

There are no derivative fair value gains in the period ended 30 June 2011 as the foreign exchange forward contracts entered into by Syndicate 958 expired on 31 December 2010.

4. INCOME FROM MANAGEMENT OF LLOYD'S SYNDICATE

The negative profit commission of $503k for the six months to June 2011 relates solely to the 2009 year of account.

Due to losses experienced in the 2010 and 2011 years of account, no profit commission has been accrued at June 2011 on those years of account. As a result of profit commission deficit clauses in the agency agreement, future profit commission income will be reduced by deficits on the 2010 and 2011 years of account.

The negative profit commission income of $5,806k in the six months to 30 June 2010 included the reversal of previously accrued profit commission income of $7,019k on the 2009 year of account.

5. NET ACQUISITION COSTS