Flagstone Reinsurance Holdings, S.A. (NYSE: FSR) today announced third quarter 2011 basic book value per share of $12.46 and diluted book value per share of $12.11, down 7.1% and 7.1%, respectively, for the quarter (percentages inclusive of dividends). Net loss attributable to Flagstone’s common shareholders for the quarter ended September 30, 2011, was $59.5 million, or $0.85 per diluted share, compared to a net income of $37.3 million, or $0.48 per diluted share, for the quarter ended September 30, 2010. Net loss attributable to Flagstone’s common shareholders for the nine months ended September 30, 2011, was $241.0 million, or $3.44 per diluted share, compared to a net income of $82.0 million, or $1.02 per diluted share, for the nine months ended September 30, 2010.

Operating highlights for the three and nine months ended September 30, 2011 and 2010 included the following:
   

For the three months ended September 30,
   

For the nine months ended September 30,
2011   2010   % Change     2011   2010   % Change
                 
(Expressed in millions of U.S. dollars, except percentages)
 
Net operating (loss) income (1) $ (55.9 ) $ 6.5 (960.0 ) % $ (216.8 ) $ 38.6 (661.7 ) %
Gross premiums written $ 169.9 $ 185.6 (8.5 ) % $ 938.5 $ 955.5 (1.8 ) %
Net premiums earned $ 179.2 $ 198.7 (9.8 ) % $ 601.0 $ 647.6 (7.2 ) %
Combined ratio 136.5 % 100.1 % 36.4 % 142.2 % 100.5 % 41.7 %
Total return on investments (1.0 ) % 2.6 % (3.6 ) % 0.4 % 3.3 % (2.9 ) %

(1) Operating income, a non-GAAP financial measure, is defined as net income attributable to Flagstone 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 net income attributable to Flagstone is presented at the end of this release.

For the third quarter, Flagstone produced a loss ratio of 94.6% and a combined ratio of 136.5%. This resulted in a decrease in diluted book value of 7.1% during the third quarter. Flagstone’s North American portfolio produced competitive results despite severe weather activity in the Midwest United States and Hurricane Irene impacting the Northeast. The quarter was negatively impacted by upward revisions from catastrophes occurring in the first quarter as well as some upwards movement from the U.S. weather in the second quarter.

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