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Flagstone Reinsurance Holdings, S.A. (NYSE: FSR) today announced first quarter 2012 basic book value per share of $11.62 and diluted book value per share of $11.42, up 4.1% and 5.1%, respectively, for the quarter (percentages inclusive of dividends). Net income attributable to Flagstone’s common shareholders for the quarter ended March 31, 2012, was $39.2 million, or $0.55 per diluted share, compared to net loss of $161.2 million, or $2.32 loss per diluted share, for the quarter ended March 31, 2011. Net income from continuing operations for the quarter ended March 31, 2012, was $27.8 million, or $0.38 earnings per diluted share, compared to net loss from continuing operations of $148.2 million, or $2.15 loss per diluted share, for the quarter ended March 31, 2011.
As previously announced on April 2, 2012, and April 3, 2012, the Company entered into definitive agreements to divest its former Island Heritage and Lloyd’s reportable segments, respectively. The Island Heritage transaction was completed on April 5, 2012, as previously announced. The Lloyd’s transaction is expected to be completed before the end of the second quarter of 2012. These divestitures are part of a strategic business realignment to address changing business conditions, refocus the Company’s underwriting strategy on its property catastrophe reinsurance business and eliminate operations that absorb capital and produce lower returns.
Except as explicitly described as held for sale or as discontinued operations, and unless otherwise noted, all discussions and amounts presented herein relate only to Flagstone’s continuing operations. All prior years presented have been reclassified to conform to this new presentation.
Operating highlights of our continuing operations for the three months ended March 31, 2012 and 2011 included the following:
For the three months ended March 31,
(Expressed in millions of U.S. dollars, except percentages)
Operating income (loss) (1)
Gross premiums written
Net premiums earned
Total return on investments
(1) Operating income (loss), a non-GAAP financial measure, is defined as income (loss) from continuing operations adjusted for net realized and unrealized gains (losses) - investments, net realized and unrealized gains (losses) - other, net foreign exchange losses (gains), and non-recurring items. A reconciliation of this measure to income (loss) from continuing operations is presented at the end of this release.
David Brown, Flagstone’s Chief Executive Officer, stated, “In October 2011, Flagstone announced a strategic business decision to divest its ownership in its Lloyd’s and Island Heritage operations. The Company’s goal was to free up capital for its core business, substantially reducing risk while retaining acceptable ROE levels, to continue to lower costs and to return to profitability. I am pleased to say that we achieved these goals in the first quarter, and have started 2012 with a return to profitability, despite the ongoing challenging environment in the industry. Flagstone’s improved performance this quarter reflects the benefits of improving rates in its core business, which partially offset the reduction in income as the Company pares back its risk levels. It also begins to demonstrate the benefits of our expense saving initiatives, as well as the avoidance of significant exposure to first quarter 2012 loss events.