Flagstone: ‘We Have Put 2011 Behind Us’
Flagstone Reinsurance Holdings SA — the Luxembourg-based firm which maintains its executive offices and other operations in Bermuda — swung to a fourth-quarter loss as a series of back-to-back global catastrophes in 2011 impacted on the reinsurer’s results.
Flagstone reported today [Feb. 22] fourth quarter 2011 basic book value per share of $11.21 and diluted book value per share of $10.90, down (9.7)% and (9.6)%, respectively, for the quarter (percentages inclusive of dividends).
Flagstone’s results reflected major industry-wide catastrophe losses caused by devastating disasters in Japan, New Zealand, Australia and Thailand.
Net loss attributable to Flagstone’s common shareholders for the quarter ended December 31, 2011, was $85.2 million, or $(1.21) per share, compared to a net income of $15.0 million, or $0.20 per share, for the quarter ended December 31, 2010.
Net loss attributable to Flagstone’s common shareholders for the year ended December 31, 2011, was $326.1 million, or $ (4.65) per diluted share, compared to a net income of $97.1 million, or $1.23 per share, for the year ended December 31, 2010.
Net loss from continuing operations for the year ended December 31, 2011, was $301.7 million, or $(4.34) per share, compared to net income from continuing operations of $83.8 million, or $1.17 per diluted share, for the year ended December 31, 2010.
As previously announced on October 24, 2011, the company announced a strategic business realignment to divest its ownership positions in its Lloyd’s and Island Heritage reporting segments in order to address changing business conditions, refocus its underwriting strategy on its property catastrophe reinsurance business and reduce its focus on operating segments that absorb capital and produce lower returns.
The company experienced positive rate movement at January 1 renewals with North American rates up approximately 10-15%. The international business was also positive with Europe up 5% and loss affected regions up even more significantly.
This was beneficial for the portfolio as the company continued to execute on its plan to reduce overall firm risk by cutting international exposure limits by 50%, North American exposure limits by 30% and overall gross premiums written by 30%.
In addition to the progress on rebalancing the portfolio, the company is also making significant progress on the divestiture of its Lloyd’s and Island Heritage businesses with a short-list of qualified purchasers in discussions for them. As previously announced, the company expects that these divestitures will lower gross written premium by approximately $300 million per annum, with minimal impact on expected return on equity, as well as produce significant expense savings through reduced infrastructure and the consequent requirement for operational support.
“For the fourth quarter, Flagstone produced a loss ratio of 119.2% and a combined ratio of 160.4%,” said David Brown [pictured], Flagstone’s Chief Executive Officer. “This resulted in a decrease in diluted book value of 9.6% for the fourth quarter. The quarter was negatively impacted by upward revisions from catastrophes occurring in the first half of 2011 and by losses resulting from flooding in Thailand.”
Mr. Brown concluded, “2011 was the worst year on record for industry losses resulting from international catastrophes, and as a global reinsurer with a historical focus on international business, our results reflected this unprecedented number of significant events.
“We have now put 2011 behind us and expect that our realigned underwriting focus and our steps to streamline our operating platform will allow us to return to producing quality underwriting results. We continued to make progress on our strategic business realignment during the fourth quarter, and we look forward to providing updates as we make progress on the divestitures.
“We also continue to work closely with our clients and brokers and we are pleased with our book of business at the January 1 renewal period. We offer over $1 billion of underwriting capital, and our rating agency capital adequacy measures continue to be in excess of our normal operating buffer and expect them to increase further as a result of our divestitures, making us a key and valued trading partner for our clients.”
Originally incorporated in Bermuda, Flagstone Reinsurance Holdings Limited writes property, catastrophe, and short-tail specialty and casualty reinsurance worldwide. It provides mostly excess property catastrophe reinsurance coverage to insurance companies. Flagstone also offers coverage for claims arising from major natural and man-made catastrophes. The companys specialty reinsurance covers risks such as aviation, energy, satellite, marine, and workers’ compensation catastrophe.
Flagstone redomiciled to Luxembourg in 2010 to increase its “strategic and capital flexibility.”
