FLAGSTONE RE REPORTS DILUTED BOOK VALUE PER SHARE OF $14.25 FOR END OF FIRST QUARTER 2010

HAMILTON, Bermuda – 04 May, 2010 - Flagstone Reinsurance Holdings Limited (NYSE:FSR) announced first quarter 2010 basic book value per share of $15.04 and diluted book value per share of $14.25, up 3.4% and 2.1%, respectively, for the quarter (percentages inclusive of dividends).  Net income attributable to Flagstone’s common shareholders for the quarter ended March 31, 2010, was $31.5 million, or $0.38 per diluted share, compared to a net income of $35.7 million, or $0.42 per diluted share, for the quarter ended March 31, 2009. 

CEO David Brown commented: “We are pleased with our financial results for the first quarter of 2010.  From an underwriting perspective, we performed well despite the occurrence of multiple international catastrophes including winter storm Xynthia in France, Australian storms and the earthquake in Chile.  The only individually material loss to us was from Chile and we still believe that our initial estimate of $50 million is reasonable.  However, we also believe that the overall industry loss from this event will develop towards the higher end of the range of industry estimates and out of caution have recorded a net reserve of $55m against this event.   Despite these events, Flagstone’s emphasis on technical underwriting and risk management allowed us to produce a loss ratio of 58.8% and underwriting profits of $16.3 million.  Again, thanks to the significant amounts of premiums generated by our diversified global platform, we were able to offset losses and produce a superior loss ratio. We believe that our accident year loss ratios over the last 3 years are amongst the best in our industry.

We are pleased with the renewal book of business written for the first quarter as we generally saw disciplined underwriting, with rates only marginally pressured downward, while the international book saw rates flat to down 5%.  Overall, our gross premiums written increased 10.7% with our Lloyd’s platform, Marlborough, continuing to generate business in the short tail specialty lines it targets and materially adding to our diversification.  We have also announced that we are re-branding Marlborough Underwriting Agency Limited effective May 4, 2010, and it will now be called Flagstone Syndicate Management Limited, more fully reflecting the completed integration of Marlborough into the Flagstone Group.  Our solid results in the quarter are a testament to our growing breadth, level of service and our reputation; we remain confident that we will continue to execute and deliver strong returns in the year to come.

In the first quarter, Japanese renewal rates were flat to down 5% year over year for both wind and earthquake, although the Company’s exposure was lowered as well, resulting in a net 2% reduction in rates.  Flagstone carefully grew its North American portfolio in the quarter at renewal by approximately 20%, and its exposure grew by a similar amount, in part due to re-positioning on different layers as the North American portfolio saw decreases of approximately 8% in average rate.  Modeled expected losses declined in-line with this due to reductions in underlying exposures at the Company’s clients and changes in commercial vendor models.  Consequently, on a risk-adjusted basis, both internationally and in North America, effective rates are closer to flat.”

Chairman Mark Byrne noted: “Given the amount and severity of catastrophes in the quarter, our positive results are a confirmation of our diversification and risk management strategy.  Flagstone’s investment portfolio remains conservatively positioned and we are comfortable with our high quality portfolio of mainly fixed income securities and cash.  This position gives us a stable capital base from which to underwrite and provides us with the advantage of being a high-quality credit to our clients and counterparties.  We believe this, along with our technical expertise and leading client service, gives us an added edge, allowing us to see preferential business and terms.

A significant development in the first quarter was our decision to recommend to shareholders a plan to change our place of incorporation from Bermuda to Luxembourg.  We believe the change in incorporation from Bermuda to Luxembourg will increase our strategic and capital flexibility while maintaining our operating model and long-term strategy.  Furthermore, the move more firmly establishes our identity as a truly global company with a strong European footprint.  We continue to refine and integrate our global platform and the spread of quality business we continue to generate is a direct result of this global reach.  Our diversified and technologically savvy approach affords us the ability to efficiently scale our business as attractive opportunities arise, while reducing expense ratios as we mature.  We continue to look at new lines of business in a methodical manner, but currently we are satisfied that we are in the best-priced lines of business and are sufficiently diversified in the short-tail sector of the industry.  Finally, as significant shareholders in Flagstone, we are pleased with our opportunity set and positioning in the market, and remain enthusiastic about the remainder of the year.”

Flagstone shareholders’ equity

On March 11, 2010, the Company entered into a private purchase agreement to repurchase 2,984,146 common shares pursuant to its buyback program at a total cost of $33.6 million. 

At March 31, 2010, Flagstone’s shareholders' equity was $1.2 billion and diluted book value per share was $14.25.

Regulation G

This earnings release includes diluted book value per share. This is a non-GAAP financial measure, and a reconciliation of this measure to Flagstone’s shareholders’ equity is presented at the end of this release. The Company believes this measure to be useful alongside comparable GAAP measures in evaluating the Company’s financial performance as management believes the growth in the Company’s diluted book value per share ultimately translates into growth in the Company’s stock price.

Additional information

The Company will host a conference call on Tuesday, May 4, 2010, at 9:30 a.m. (EDT) to discuss this release.  Live broadcast of the conference call will be available on the Financial & Investor section of the Company’s website at www.flagstonere.com.

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 on the Company’s website located at www.flagstonere.com.

Please refer to the unaudited March 31, 2010, Financial Supplement, which will be posted on the Company’s website for more detailed financial information.

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.com.

Contact:
Flagstone Reinsurance Holdings Limited, Hamilton
Brenton Slade, +1-441-278-4303

Investors:

Okapi Partners LLC