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Flagstone Re Announces Fourth-Quarter 2008 Figures
HAMILTON, Bermuda - 17 February, 2009 - Flagstone Reinsurance Holdings Limited (NYSE: FSR) announced fourth quarter 2008 basic book value per share of $11.61 and diluted book value per share of $11.30, down 8.0% and 10.1% for the quarter (ratios inclusive of dividends), respectively. Net loss available to common shareholders for the quarter ended December 31, 2008 was $(75.6) million, or $(0.89) per diluted share, compared to net income of $51.4 million, or $0.60 per diluted share, for the quarter ended December 31, 2007. Net loss available to common shareholders for the year ended December 31, 2008 was $(187.3) million, or $(2.20) per diluted share, compared to net income of $167.9 million, or $2.05 per diluted share, for the year ended December 31, 2007.
CEO David Brown commented: "The 4th quarter was pleasing from an underwriting perspective. We achieved a 44.6% loss ratio which produced an underwriting profit of $46.9 million for the quarter despite net adverse development of $25.5 million on our Ike loss. For the year, our loss ratio was 58.1% producing underwriting profits of $73.4 million. This was achieved in one of the worst years ever for natural catastrophes and was without any material benefit of releases from prior years reserves.
Our net combined Ike and Gustav loss now stands at $140.2 million up from $115.0 million at the end of Q3. Although we are pleased that this adverse development of approximately 22% is less severe than that reported by many of our peers we are nevertheless disappointed at this development. The increase comes predominantly from mid-western clients who have been late in reporting losses as they deal with what was a very unusual event. Our written premium for the 4th quarter was $95.2 million which represents an increase of 46.3% over the same quarter last year and brings our total premium for the year to $781.9 million which is a 35.5% increase over 2007. This acceleration in premium growth in the fourth quarter reflects the significant business production we are seeing from our global platform as well as firming prices but it is important to note that it includes nothing from our newest and largest acquisition - Marlborough. This growth in business continues into 2009 and we were very pleased with our business at 1/1/2009 as we were able to capitalize on the hardening market caused in general by the losses of 2008 and in particular the difficulties being experienced by some major market participants. We were able to grow our business into attractive markets such as the US where our premiums are up 23% over the same period last year whilst the related aggregate exposure is down 3%. We fully expect the market firming to continue and our diverse business platform will allow us to allocate our capacity to the most attractive opportunities.
Although we are not typically major users of retrocessional cover, in anticipation of the capacity crunch we were proactive in arranging such covers early in the fourth quarter. We now have significant retrocessional protection covering losses on both an event and aggregate basis. This protection on top of our existing capital and our conservative investment portfolio positions us well to participate fully in the attractive markets we believe 2009 will present."
Chairman Mark Byrne noted: "2008 was a challenging year. Our book value declined due to investment losses, with the majority of these losses occurring in the third quarter and the first two weeks of the fourth quarter as we announced in mid-October. We had no material exposure or losses from Subprime or Alt-A securities; our losses were primarily due to our previous 23% allocation to global equity indices, and the worst performance of those equities in more than a century. When our internal circuit breakers were tripped, we made the decision to reallocate our asset portfolio in October to a very risk-averse portfolio where we remain today. Our investment portfolio is now conservative, allowing us to take advantage of the hardening cycle in the reinsurance markets. We expect to stay conservatively positioned on the investment side in 2009, with over 90% of our assets in high grade fixed income securities.
Our core operating results were strong in a highly active cat year with an 89.4% combined ratio. This clearly demonstrates the value created by our investment in industry-leading technologies and a large analytical staff. Our strong operating results are a direct result of the quality and efficiency of this global platform. Furthermore, we are pleased and excited about the continued diversification of our book and the further growth of our specialty lines business.
2008 was also a successful year for us organizationally, with our acquisitions in South Africa, Cyprus, Lloyds of London, and our restructuring into a Swiss operating platform. Since our reinsurance book is exposed to catastrophes, our results will not be smooth from quarter to quarter. However, as our diversifying business lines continue to grow in significance to our overall book, our core earnings variability has continued to decrease."
Additional information
The Company will host a conference call on Tuesday, February 17th, 2009 at 9:30 a.m. (EDT) to discuss this release. Live broadcast of the conference call will be available through the Investor Section of the Company's website at www.flagstonere.bm.
The Company, through its operating subsidiaries, is a global reinsurance and insurance company that employs a focused and technical approach to the Property Catastrophe, Property, and Specialty reinsurance and insurance businesses. Flagstone Réassurance Suisse has received "A-" financial strength ratings from both A.M. Best and Fitch Ratings, and "A3" ratings from Moody's Investors Service. Island Heritage and Flagstone Reinsurance Africa have received "A-" financial strength ratings from A.M. Best.
The Company is traded on the New York Stock Exchange under the symbol "FSR" and the Bermuda Stock Exchange under the symbol "FSR.BH". Additional financial information and other items of interest are available at the Company's website located at www.flagstonere.bm.
Please refer to the unaudited December 31, 2008 Financial Supplement, which will be posted on the Company's website for more detailed financial information.
CONTACT:
Flagstone Reinsurance Holdings Limited, Hamilton
Brenton Slade +1(441) 278-4303