Flagstone Reinsurance Holdings, S.A. - FORM 8-K - EX-99.2 BYLAWS - FINANCIAL SUPPLEMENT

Attached files

file	filename
8-K - COVER TO 8K - Flagstone Reinsurance Holdings, S.A.	cover8k.htm
EX-99.1 CHARTER - PRESS RELEASE - Flagstone Reinsurance Holdings, S.A.	exhibit991.htm



										Exhibit 99.2








Flagstone Reinsurance Holdings Limited




INVESTOR FINANCIAL SUPPLEMENT

FIRST QUARTER 2010





			Flagstone Reinsurance Holdings Limited
			Crawford House
			23 Church Street
			Hamilton HM 11
			Contact Information:
			Brenton Slade
			Chief Marketing Officer
			(441) 278-4303


			Website Information:
			http://www.flagstonere.com




		This report is for informational purposes only. It should be read in conjunction with the
		documents that we file with the Securities and Exchange Commission ("SEC") pursuant to the
		Securities Act of 1933 and the Securities Exchange Act of 1934.

Flagstone Reinsurance Holdings Limited

FINANCIAL SUPPLEMENT TABLE OF CONTENTS

Page(s)

Basis of Presentation

Cautionary Statement Regarding Forward-Looking Statements

Regulation G - Non-GAAP Financial Measures

iii

I. Financial Highlights

II. Income Statements

a. Consolidated Statements of Income - Quarterly

b. Segment Reporting

c. Gross Premiums Written by Line of Business and Geographic Area of Risk

III. Consolidated Balance Sheets

IV. Investment Portfolio Composition

V. Loss Reserve - Paid to Incurred Analysis

VI. Share Analysis

a. Capitalization

b. Earnings Per Common Share Information - As Reported

c. Basic and Diluted Book Value Per Common Share Analysis

VII. Mont Fort Consolidation

a. Balance Sheet Consolidation

b. Income Statement Consolidation

VIII. Non-GAAP Financial Measure Reconciliation

Flagstone Reinsurance Holdings Limited

BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION

•

Unless otherwise noted, all data is in thousands, except for share, per share amounts and ratio information.

•

The debt to capitalization ratio is an indication of the leverage of the Company. It is calculated by dividing the Company’s long term debt by the total capital. Total capital represents the sum of Flagstone shareholders’ equity plus long term debt.

•

N/A - means not applicable.

•

In presenting the Company’s results, management has included and discussed certain “non-GAAP” financial measures, as such term is defined in Regulation G promulgated by the SEC. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such non-GAAP financial measures to their respective most directly comparable GAAP financial measures in accordance with Regulation G is included in this financial supplement.

Flagstone Reinsurance Holdings Limited

Cautionary Statement Regarding Forward-Looking Statements:

This report may contain, and the Company may from time to time make, written or oral “forward-looking statements” within the meaning of the U.S. federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the Company’s control, that could cause actual results to differ materially from such statements. In particular, statements using words such as “may”, “should”, “estimate”, “expect”, “anticipate”, “intend”, “believe”, “predict”, “potential”, or words of similar import generally involve forward-looking statements.

Important events and uncertainties that could cause the actual results to differ include, but are not necessarily limited to: market conditions affecting the Company’s common share price; the impact of the volatility in the financial markets, including the duration of the crisis and the effectiveness of governmental solutions; the weakening economy, including the impact on our customers’ businesses; fluctuations in interest rates; the effects of corporate bankruptcies on capital markets; the possibility of severe or unanticipated losses from natural or man-made catastrophes; the effectiveness of our loss limitation methods; our dependence on principal employees; the cyclical nature of the reinsurance business; the levels of new and renewal business achieved; opportunities to increase writings in our core property and specialty reinsurance and insurance lines of business and in specific areas of the casualty reinsurance market; the sensitivity of our business to financial strength ratings established by independent rating agencies; the estimates reported by cedents and brokers on pro-rata contracts and certain excess of loss contracts where the deposit premium is not specified in the contract; the inherent uncertainties of establishing reserves for loss and loss adjustment expenses, our reliance on industry loss estimates and those generated by modeling techniques; unanticipated adjustments to premium estimates; changes in the availability, cost or quality of reinsurance or retrocessional coverage; changes in general economic conditions; changes in governmental regulation or tax laws in the jurisdictions where we conduct business; the amount and timing of reinsurance recoverables and reimbursements we actually receive from our reinsurers; the overall level of competition, and the related demand and supply dynamics in our markets relating to growing capital levels in the reinsurance industry; declining demand due to increased retentions by cedents and other factors; the impact of terrorist activities on the economy; and rating agency policies and practices.

These and other events that could cause actual results to differ are discussed in more detail from time to time in our filings with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by U.S. federal securities laws. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.

Flagstone Reinsurance Holdings Limited

REGULATION G

NON-GAAP FINANCIAL MEASURES

In presenting the Company’s results, management has included and discussed non-GAAP financial measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.

BASIC BOOK VALUE PER SHARE

Basic book value per common share is defined as total Flagstone shareholders’ equity divided by the number of common shares outstanding at the end of the period plus vested restricted share units, giving no effect to dilutive securities.

DILUTED BOOK VALUE PER SHARE

The Company has included diluted book value per common share because it takes into account the effect of dilutive securities, therefore, the Company believes it is a better measure of calculating shareholder returns than basic book value per common share. Diluted book value per common share is defined as total Flagstone shareholders’ equity divided by the number of common shares and common share equivalents outstanding at the end of the period including all potentially dilutive securities such as the warrant, performance share units and restricted share units. When the effect of securities would be anti-dilutive, these securities are excluded from the calculation of diluted book value per common share. The warrant was anti-dilutive and was excluded from the calculation of diluted book value per common share for all periods presented.

ANNUALIZED NET OPERATING RETURN ON AVERAGE FLAGSTONE SHAREHOLDERS’ EQUITY

Annualized net operating return on average Flagstone shareholders’ equity is defined as net operating income (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) divided by average Flagstone shareholders’ equity (the sum of opening and closing Flagstone shareholders’ equity divided by two). The result is then annualized (a statistical technique whereby figures covering a period of less than one year are extended to cover a 12 month period).

DILUTED NET OPERATING INCOME PER SHARE

Diluted net operating income per share 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 divided by diluted weighted average common shares outstanding.

iii

Flagstone Reinsurance Holdings Limited
FINANCIAL HIGHLIGHTS (Unaudited)

HIGHLIGHTS	Three months ended March 31,
	2010			2009

Gross premiums written	$	400,202		$	361,485
Net premiums written	$	323,781		$	285,816
Net premiums earned	$	216,815		$	172,835
Net investment income	$	7,285		$	(1,753	)
Net income attributable to Flagstone	$	31,504		$	35,743
Net operating income (1)	$	12,079		$	31,309
Comprehensive income attributable to Flagstone	$	28,307		$	37,637
Cash flow from operating activities	$	67,501		$	73,145
Loss and loss adjustment expense reserves	$	540,528		$	429,802
Flagstone shareholders’ equity	$	1,207,601		$	1,024,123


PER COMMON SHARE AND
COMMON SHARE DATA

Basic earnings per common share	$	0.38		$	0.42
Diluted earnings per common share	$	0.38		$	0.42
Diluted net operating income per common share (1)	$	0.15		$	0.37
Basic weighted average common shares outstanding		82,558,971			85,070,001
Diluted weighted average common shares outstanding		82,741,580			85,208,294
Book value per common share	$	15.04		$	12.04
Diluted book value per common share	$	14.25		$	11.60
Diluted book value per common share plus accumulated dividends	$	14.67		$	11.88
Dividend per share declared during the period	$	0.04		$	0.04

FINANCIAL RATIOS
Change in diluted book value per share (2)		2.1	%		3.0	%

Loss ratio		58.8	%		44.3	%
Acquisition cost ratio		19.8	%		16.2	%
General and administrative expense ratio		19.0	%		19.9	%
Combined ratio		97.6	%		80.4	%


INVESTMENT DATA
Total assets	$	2,817,419		$	2,472,039
Total cash and investments (3)	$	1,985,038		$	1,762,846

(1) Net operating income 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.
(2) Change in diluted book value per share represents the increase (decrease) in diluted book value per share in the period plus dividends declared.
(3) Cash and investments represents the total cash and cash equivalents, restricted cash, fixed maturity investments, short term investments, equities, other investments, accrued interest receivable and net payable for investments purchased.

Flagstone Reinsurance Holdings Limited
CONSOLIDATED STATEMENTS OF INCOME - QUARTERLY (Unaudited)
	Three months ended
	Three months ended															Year ended
	March 31, 2010				December 31, 2009			September 30, 2009		June 30, 2009			March 31, 2009				December 31, 2009
REVENUES																	(audited)
Gross premiums written	$	400,202		$	123,707		$	174,590		$	328,709		$	361,485		$	988,491
Premiums ceded		(76,421	)		(20,830	)		(39,781	)		(59,742	)		(75,669	)		(196,022	)
Net premiums written		323,781			102,877			134,809			268,967			285,816			792,469
Change in net unearned premiums		(106,966	)		100,250			60,708			(81,991	)		(112,981	)		(34,014	)
Net premiums earned		216,815			203,127			195,517			186,976			172,835			758,455
Net investment income (loss)		7,285			8,859			10,779			10,646			(1,753	)		28,531
Net realized and unrealized gains (losses) - investments		9,811			13,199			21,286			7,082			(1,899	)		39,668
Net realized and unrealized gains (losses) - other		5,658			(20	)		1,373			2,470			7,430			11,253
Other income		11,041			9,957			4,269			2,333			5,169			21,728
Total revenues		250,610			235,122			233,224			209,507			181,782			859,635


EXPENSES
Loss and loss adjustment expenses		127,379			68,775			80,175			57,641			76,594			283,185
Acquisition costs		42,837			37,007			35,224			36,203			28,037			136,471
General and administrative expenses		35,964			37,111			32,050			31,619			30,427			131,207
Stock based compensation expense		5,211			5,883			3,216			2,959			3,873			15,931
Interest expense		2,514			2,615			2,814			3,119			3,557			12,105
Net foreign exchange (gains) losses		(3,956	)		106			2,390			(362	)		1,097			3,231
Total expenses		209,949			151,497			155,869			131,179			143,585			582,130

Income before income taxes and
interest in earnings of equity investments		40,661			83,625			77,355			78,328			38,197			277,505
Provision for income tax		(2,852	)		(5,336	)		(532	)		(250	)		706			(5,412	)
Interest in earnings of equity investments		(259	)		(308	)		(370	)		(300	)		(378	)		(1,356	)
Net income		37,550			77,981			76,453			77,778			38,525			270,737
Less: Income attributable to noncontrolling interest		(6,046	)		(6,476	)		(9,323	)		(9,964	)		(2,782	)		(28,545	)
NET INCOME ATTRIBUTABLE TO FLAGSTONE	$	31,504		$	71,505		$	67,130		$	67,814		$	35,743		$	242,192

Net income	$	37,550		$	77,981		$	76,453		$	77,778		$	38,525		$	270,737
Change in currency translation adjustment		(3,697	)		(10	)		(4,656	)		5,399			1,867			2,600
Change in defined benefit pension plan obligation		500			(23	)		480			(145	)		(176	)		136
Comprehensive income		34,353			77,948			72,277			83,032			40,216			273,473
Less: Comprehensive income attributable to noncontrolling interest		(6,046	)		(6,087	)		(9,577	)		(11,743	)		(2,579	)		(29,986	)

COMPREHENSIVE INCOME ATTRIBUTABLE TO FLAGSTONE	$	28,307		$	71,861		$	62,700		$	71,289		$	37,637		$	243,487


KEY RATIOS

Loss ratio		58.8	%		33.9	%		41.0	%		30.8	%		44.3	%		37.3	%
Acquisition cost ratio		19.8	%		18.2	%		18.0	%		19.4	%		16.2	%		18.0	%
General and administrative expense ratio (1)		19.0	%		21.2	%		18.0	%		18.5	%		19.9	%		19.4	%
Combined ratio		97.6	%		73.3	%		77.0	%		68.7	%		80.4	%		74.7	%

PER COMMON SHARE DATA
Weighted average common shares outstanding - basic		82,558,971			83,071,505			84,004,784			85,070,001			85,070,001			84,279,777
Weighted average common shares outstanding - diluted (2)		82,741,580			83,294,463			84,176,602			85,162,981			85,208,294			84,503,792

Basic earnings per common share	$	0.38		$	0.86		$	0.80		$	0.80		$	0.42		$	2.87
Diluted earnings per common share	$	0.38		$	0.86		$	0.80		$	0.80		$	0.42		$	2.87


(1) The general and administrative expense ratio is inclusive of general and administrative expenses and stock based compensation expense.
(2) Dilutive share equivalents have been excluded in the weighted average common shares used for the calculation of diluted earnings per share in periods of net loss because the effect of such securities would be anti-dilutive.

Flagstone Reinsurance Holdings Limited
SEGMENT REPORTING (Unaudited)

	Three months ended March 31, 2010															Three months ended March 31, 2009
	Reinsurance			Lloyd's			Island Heritage			Inter segment Eliminations (1)			Total			Reinsurance			Lloyd's			Island Heritage			Inter segment Eliminations (1)			Total

Gross premiums written	$	342,692		$	52,189		$	17,762		$	(12,441	)	$	400,202		$	303,794		$	48,979		$	16,722		$	(8,010	)	$	361,485
Premiums ceded		(66,855	)		(11,605	)		(10,402	)		12,441			(76,421	)		(67,635	)		(5,149	)		(10,895	)		8,010			(75,669	)
Net written premiums		275,837			40,584			7,360			-			323,781			236,159			43,830			5,827			-			285,816
Net premiums earned	$	178,971		$	35,688		$	2,156		$	-		$	216,815		$	166,596		$	6,443		$	(162	)	$	(42	)	$	172,835
Other related income		470			8,644			5,606			(3,884	)		10,836			1,027			2,020			5,606			(3,623	)		5,030
Loss and loss adjustment expenses		(97,558	)		(29,428	)		(393	)		-			(127,379	)		(71,230	)		(5,331	)		(95	)		62			(76,594	)
Acquisition costs		(33,735	)		(8,994	)		(3,992	)		3,884			(42,837	)		(27,375	)		(1,037	)		(3,269	)		3,644			(28,037	)
General and administrative expenses (2)		(34,057	)		(4,942	)		(2,176	)		-			(41,175	)		(28,043	)		(3,834	)		(2,423	)		-			(34,300	)
Underwriting income (loss)	$	14,091		$	968		$	1,201		$	-		$	16,260		$	40,975		$	(1,739	)	$	(343	)	$	41		$	38,934
Loss ratio (3)		54.5	%		82.5	%		5.1	%					58.8	%		42.8	%		82.7	%		1.7	%					44.3	%
Acquisition cost ratio (3)		18.8	%		25.2	%		51.4	%					19.8	%		16.4	%		16.1	%		60.0	%					16.2	%
General and administrative expense ratio (3)		19.0	%		13.8	%		28.0	%					19.0	%		16.8	%		59.5	%		44.5	%					19.9	%
Combined ratio (3)		92.3	%		121.5	%		84.5	%					97.6	%		76.0	%		158.3	%		106.3	%					80.4	%
Total Assets	$	2,514,019		$	211,503		$	91,897					$	2,817,419		$	2,339,516		$	52,855		$	79,668					$	2,472,039

(1) Inter segment eliminations relate to Flagstone Suisse quota share arrangements with Island Heritage and Lloyd's.
(2) General and administrative expenses include stock based compensation expense.
(3) For Island Heritage segment all ratios calculated using expenses divided by net premiums earned plus other related income.

Flagstone Reinsurance Holdings Limited
GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS AND
GEOGRAPHIC AREA OF RISK (Unaudited)



	Three months ended March 31, 2010					Three months ended March 31, 2009
	Gross premiums written		% of total			Gross premiums written		% of total
Line of Business (1)
Reinsurance and Lloyd's
Property catastrophe	$	208,256		52.1	%	$	200,740		55.5	%
Property		71,586		17.9	%		51,861		14.3	%
Short-tail specialty and casualty		102,598		25.6	%		92,162		25.6	%
		382,440		95.6	%		344,763		95.4	%
Island Heritage
Insurance		17,762		4.4	%		16,722		4.6	%
Total	$	400,202		100.0	%	$	361,485		100.0	%


	Three months ended March 31, 2010					Three months ended March 31, 2009
	Gross premiums written		% of total			Gross premiums written		% of total
Geographic area of risk insured (2)
Caribbean (3)	$	22,111		5.5	%	$	21,089		5.8	%
Europe		77,082		19.3	%		70,628		19.6	%
Japan and Australasia		20,007		5.0	%		11,918		3.3	%
North America		139,087		34.8	%		125,736		34.8	%
Worldwide risks (4)		119,021		29.7	%		111,147		30.7	%
Other		22,894		5.7	%		20,967		5.8	%
Total	$	400,202		100.0	%	$	361,485		100.0	%

(1) Gross premiums written relating to the Lloyd’s segment are primarily included in short-tail specialty and casualty and property.
(2) Except as otherwise noted, each of these categories includes contracts that cover risks located primarily in the designated geographic area.
(3) Gross premiums written relating to the Island Heritage segment are included in the Caribbean geographic area.
(4) This geographic area includes contracts that cover risks in two or more geographic zones.

Flagstone Reinsurance Holdings Limited
CONSOLIDATED BALANCE SHEETS (Unaudited)

	As at
		March 31, 2010			December 31, 2009			September 30, 2009		June 30, 2009				March 31, 2009
ASSETS
Investments:
Fixed maturity investments, at fair value	$	1,199,577		$	1,228,561		$	1,250,939		$	1,077,479		$	944,520
Short term investments, at fair value		310,061			232,434			202,711			229,837			124,907
Other investments		56,607			46,224			49,756			56,934			55,169
Total investments		1,566,245			1,507,219			1,503,406			1,364,250			1,124,596

Cash and cash equivalents		412,441			370,415			334,730			378,232			603,950
Restricted cash		24,293			67,686			52,370			79,561			41,644
Premium balances receivable		386,831			278,956			376,584			453,668			363,382
Unearned premiums ceded		83,125			52,690			80,907			85,563			68,014
Reinsurance recoverable		22,213			19,270			15,996			16,810			11,582
Accrued interest receivable		9,475			11,223			9,318			9,554			6,840
Receivable for investments sold		41,104			5,160			27,410			11,114			14,578
Deferred acquisition costs		66,057			54,637			67,088			70,484			59,970
Funds withheld		23,934			22,168			21,890			18,676			12,425
Goodwill		16,295			16,533			16,496			16,541			16,022
Intangible assets		33,528			35,790			35,666			36,850			32,531
Other assets		131,878			125,021			102,006			113,095			116,505
TOTAL ASSETS	$	2,817,419		$	2,566,768		$	2,643,867		$	2,654,398		$	2,472,039

LIABILITIES
Loss and loss adjustment expense reserves	$	540,528		$	480,660		$	471,954		$	453,490		$	429,802
Unearned premiums		466,022			330,416			459,087			522,681			421,218
Insurance and reinsurance balances payable		72,883			62,864			65,974			46,214			51,641
Payable for investments purchased		68,520			11,457			37,944			16,249			28,762
Long term debt		251,309			252,402			252,774			251,987			265,306
Other liabilites		49,710			63,155			60,173			57,220			51,158
TOTAL LIABILITIES		1,448,972			1,200,954			1,347,906			1,347,841			1,247,887

EQUITY
Common voting shares		850			850			849			849			849
Common shares held in treasury		(50	)		(20	)		(20	)		-			-
Additional paid-in capital		864,708			892,817			887,829			904,228			901,344
Accumulated other comprehensive loss		(10,173	)		(6,976	)		(7,332	)		(2,902	)		(6,377	)
Retained earnings		352,266			324,347			256,289			192,604			128,307
Total Flagstone shareholders' equity		1,207,601			1,211,018			1,137,615			1,094,779			1,024,123
Noncontrolling interest in subsidiaries (1)		160,846			154,796			158,346			211,778			200,029
TOTAL EQUITY		1,368,447			1,365,814			1,295,961			1,306,557			1,224,152

TOTAL LIABILITIES AND EQUITY	$	2,817,419		$	2,566,768		$	2,643,867		$	2,654,398		$	2,472,039

Basic book value per common share	$	15.04		$	14.56		$	13.69		$	12.87		$	12.04
Diluted book value per common share	$	14.25		$	13.97		$	13.20		$	12.42		$	11.60
Debt to total capitalization (2)		17.2	%		17.2	%		18.2	%		18.7	%		20.6	%

(1) Noncontrolling interest in subsidiaries includes Mont Fort Re (see pages 11 and 12 for additional information), Island Heritage, Flagstone Reinsurance Africa ($nil as of December 31, 2009) and IAL King Air Limited (with effect from October 1, 2009).
(2) Comprises long term debt divided by the sum of long term debt plus Flagstone shareholders' equity.

Flagstone Reinsurance Holdings Limited
INVESTMENT PORTFOLIO COMPOSITION (Unaudited)


	As at
TYPE OF INVESTMENT	March 31, 2010				December 31, 2009				September 30, 2009				June 30, 2009				March 31, 2009
U.S. government and agency securities	$	427,731	27.3	%	$	431,715	28.6	%	$	504,142	33.5	%	$	435,765	32.0	%	$	486,822	43.3	%
Corporates		469,900	30.0	%		519,242	34.5	%		488,780	32.5	%		426,041	31.2	%		239,273	21.3	%
U.S. states and political subdivisions		2,206	0.1	%		1,903	0.1	%		1,968	0.1	%		369.00	0.0	%		-	0.0	%
Other foreign governments		58,296	3.7	%		114,427	7.6	%		112,171	7.5	%		99,846	7.3	%		101,603	9.0	%
Mortgage-backed securities		179,296	11.5	%		112,067	7.4	%		106,631	7.1	%		95,096	7.0	%		89,326	7.9	%
Asset-backed securities		62,148	4.0	%		49,207	3.3	%		37,247	2.5	%		20,362	1.5	%		27,496	2.4	%
Total fixed maturities		1,199,577	76.6	%		1,228,561	81.5	%		1,250,939	83.2	%		1,077,479	79.0	%		944,520	83.9	%
Short term investments		310,061	19.8	%		232,434	15.4	%		202,711	13.5	%		229,837	16.8	%		124,907	11.1	%
Total		1,509,638	96.4	%		1,460,995	96.9	%		1,453,650	96.7	%		1,307,316	95.8	%		1,069,427	95.0	%
Other investments		56,607	3.6	%		46,224	3.1	%		49,756	3.3	%		56,934	4.2	%		55,169	5.0	%
Total	$	1,566,245	100.0	%	$	1,507,219	100.0	%	$	1,503,406	100.0	%	$	1,364,250	100.0	%	$	1,124,596	100.0	%


CREDIT QUALITY OF FIXED MATURITIES AND SHORT TERM INVESTMENTS
AAA	$	1,171,384	77.6	%	$	1,043,223	71.4	%	$	1,046,725	72.0	%	$	968,804	74.1	%	$	833,416	78.0	%
AA		91,165	6.0	%		111,300	7.6	%		89,281	6.2	%		84,993	6.5	%		82,590	7.7	%
A		168,916	11.2	%		214,214	14.7	%		216,442	14.9	%		176,485	13.5	%		110,004	10.3	%
BBB		78,173	5.2	%		91,723	6.3	%		99,450	6.8	%		76,102	5.8	%		42,990	4.0	%
Below investment grade		-	0.0	%		535	0.0	%		1,752	0.1	%		932	0.1	%		427	0.0	%
Total	$	1,509,638	100.0	%	$	1,460,995	100.0	%	$	1,453,650	100.0	%	$	1,307,316	100.0	%	$	1,069,427	100.0	%


MATURITY PROFILE OF FIXED MATURITIES AND SHORT TERM INVESTMENTS
Within one year	$	424,133	28.0	%	$	312,253	21.4	%	$	286,503	19.6	%	$	286,690	21.8	%	$	190,111	17.8	%
From one to five years		581,532	38.5	%		588,707	40.3	%		740,212	50.9	%		656,081	50.2	%		473,794	44.3	%
From five to ten years		222,979	14.8	%		324,095	22.2	%		209,992	14.4	%		186,571	14.3	%		221,870	20.7	%
Above ten years		38,575	2.6	%		72,753	5.0	%		73,065	5.1	%		62,516	4.9	%		66,830	6.3	%
Asset-backed and mortgage-backed securities		242,419	16.1	%		163,187	11.1	%		143,878	10.0	%		115,458	8.8	%		116,822	10.9	%
Total	$	1,509,638	100.0	%	$	1,460,995	100.0	%	$	1,453,650	100.0	%	$	1,307,316	100.0	%	$	1,069,427	100.0	%


Average credit quality	AA+				AA+				AA+				AA+				AA+

OTHER INVESTMENTS
Investment funds	$	5,734			$	5,486			$	5,113			$	5,316			$	7,841
Catastrophe bonds		46,600				36,128				18,219				43,221				39,175
Equity securities		212				290				21,796				3,400				2,855
Other investment		4,061				4,320				4,628				4,997				5,298
Total	$	56,607			$	46,224			$	49,756			$	56,934			$	55,169

Flagstone Reinsurance Holdings Limited
RESERVE FOR LOSSES AND LOSS EXPENSES: PAID TO INCURRED ANALYSIS (Unaudited)



	Three months ended March 31, 2010									Three months ended December 31, 2009									Three months ended September 30, 2009
Loss and loss adjustment expense reserves	Gross			Recoveries			Net			Gross			Recoveries			Net			Gross			Recoveries			Net

Beginning of period	$	480,660		$	(19,270	)	$	461,390		$	471,954		$	(15,996	)	$	455,958		$	453,490		$	(16,810	)	$	436,680

Incurred		134,801			(7,422	)		127,379			74,261			(5,486	)		68,775			82,434			(2,259	)		80,175

Other (1)		(5,041	)		2,101			(2,940	)		316			4,826			5,142			4,634			1,753			6,387

Paid		(69,892	)		2,378			(67,514	)		(65,871	)		(2,614	)		(68,485	)		(68,604	)		1,320			(67,284	)

End of period	$	540,528		$	(22,213	)	$	518,315		$	480,660		$	(19,270	)	$	461,390		$	471,954		$	(15,996	)	$	455,958

Paid to incurred percentage		51.8	%		32.0	%		53.0	%		88.7	%		(47.6	)%		99.6	%		83.2	%		58.4	%		83.9	%



	Three months ended June 30, 2009									Three months ended March 31, 2009
Loss and loss adjustment expense reserves	Gross			Recoveries			Net			Gross			Recoveries			Net

Beginning of period	$	429,802		$	(11,582	)	$	418,220		$	411,565		$	(16,422	)	$	395,143

Incurred		59,805			(2,164	)		57,641			78,083			(1,489	)	$	76,594

Other (1)		18,577			(15,325	)		3,252			(6,039	)		4,760		$	(1,279	)

Paid		(54,694	)		12,261			(42,433	)		(53,807	)		1,569			(52,238	)

End of period	$	453,490		$	(16,810	)	$	436,680		$	429,802		$	(11,582	)	$	418,220

Paid to incurred percentage		91.5	%		566.6	%		73.6	%		68.9	%		105.4	%		68.2	%


(1) This amount represents the movement in reserves as a result of foreign exchange movements.

Flagstone Reinsurance Holdings Limited
CAPITALIZATION (Unaudited)

	As at
	March 31, 2010				December 31, 2009			September 30, 2009		June 30, 2009			March 31, 2009


Long term debt	$	251,309		$	252,402		$	252,774		$	251,987		$	265,306
Flagstone shareholders’ equity		1,207,601			1,211,018			1,137,615			1,094,779			1,024,123

Total Capitalization	$	1,458,910		$	1,463,420		$	1,390,389		$	1,346,766		$	1,289,429

Leverage ratio:
Debt to total capitalization		17.2	%		17.2	%		18.2	%		18.7	%		20.6	%


				March 31, 2010						March 31, 2009
				Debt or Facility Principal			Outstanding			Debt or Facility Principal			Outstanding
Debt and financing arrangements
Junior Subordinated Deferrable Interest Notes (a)				$	25,000		$	25,000		$	25,000		$	25,000
Junior Subordinated Deferrable Interest Notes (b)				$	100,000		$	88,750		$	100,000		$	88,750
Deferrable Interest Debentures (c)				$	120,000		$	120,000		$	120,000		$	120,000
Deferrable Interest Debentures (d)				€	13,000		€	13,000		€	13,000		€	13,000
Other long term debt				$	-		$	-		$	945		$	-
Aircraft financing				$	-		$	-		$	45,150		$	14,285
Letter of credit facility (e)				$	-		$	-		$	200,000		$	-
Letter of credit facility (f)				$	450,000		$	394,521		$	450,000		$	324,500
Letter of credit facility (g)				$	200,000		$	32,306		$	200,000		$	-
Letter of credit facility (h)				$	50,000		$	-		$	-		$	-


Notes:
(a) The Junior Subordinated Deferrable Interest Notes have a floating rate equal to LIBOR plus 310 basis points per annum reset quarterly. The notes mature on September 15, 2037, and may be called at par by the Issuer at any time after September 15, 2012.

(b) The Junior Subordinated Deferrable Interest Notes have a floating rate equal to LIBOR plus 300 basis points per annum reset quarterly. The notes mature on July 30, 2037, and may be called at par by the Issuer at any time after July 30, 2012.

(c) The Deferrable Interest Debentures have a floating rate equal to LIBOR plus 354 basis points per annum reset quarterly. The notes mature on September 15, 2036, and may be called at par by the Issuer at any time after September 15, 2011.

(d) The Deferrable Interest Debentures have a floating rate equal to EURIBOR plus 354 basis points per annum reset quarterly. The notes mature on September 15, 2036 and may be called at par by the Issuer at any time after September 15, 2011.

(e) $200.0 million uncommitted letter of credit facility agreement with Wachovia Bank, N.A. This facility was terminated on June 11, 2009.

(f) On January 22, 2009, Flagstone Suisse entered into a secured $450.0 million standby letter of credit facilty with Citibank Europe Plc. The drawn amount of the facility at March 31, 2010, was secured by $438.4 million of fixed maturity securities from the Company's investment portfolio.

(g) On March 5, 2009, Flagstone Suisse entered into a secured $200.0 million secured committed letter of credit facility with Barclays Bank Plc. The drawn amount of the facillity at March 31, 2010, was secured by $35.9 million of fixed maturity securities from the Company's investment portfolio.

(h) On June 5, 2009, Flagstone Suisse entered into a secured $50.0 million standby letter of credit facility with BNP Paribas. As at March 31, 2010, no letters of credit have been issued under this facility.

Flagstone Reinsurance Holdings Limited
EARNINGS PER COMMON SHARE INFORMATION - AS REPORTED, GAAP (Unaudited)


	Three months ended March 31,
	2010		2009

Net income attributable to Flagstone	$	31,504	$	35,743

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic weighted average common shares outstanding (1)		82,558,971		85,070,001

Dilutive share equivalents:
Weighted average unvested restricted share units (2)		182,609		138,293
Diluted weighted average common shares outstanding		82,741,580		85,208,294

EARNINGS PER COMMON SHARE
Basic	$	0.38	$	0.42
Diluted	$	0.38	$	0.42


(1) Includes weighted average vested restricted share units.
(2) Dilutive share equivalents have been excluded in the weighted average common shares used for the calculation of diluted earnings per share in periods of net loss because the effect of such securities would be anti-dilutive.

Flagstone Reinsurance Holdings Limited
NON-GAAP FINANCIAL MEASURES RECONCILIATION
BASIC AND DILUTED BOOK VALUE PER COMMON SHARE (Unaudited)


	As at
		March 31, 2010			December 31, 2009			September 30, 2009			June 30, 2009			March 31, 2009

DILUTIVE COMMON SHARES AS IF OUTSTANDING

Flagstone shareholders’ equity	$	1,207,601		$	1,211,018		$	1,137,615		$	1,094,779		$	1,024,123

Cumulative dividends declared		35,200			34,409			30,964			27,519			24,001

Common shares outstanding		80,001,073			82,985,219			82,864,844			84,864,844			84,864,844
add in:
vested restricted share units		270,053			205,157			205,157			205,157			205,157
Total common shares and common share equivalents outstanding		80,271,126			83,190,376			83,070,001			85,070,001			85,070,001

Basic book value per common share	$	15.04		$	14.56		$	13.69		$	12.87		$	12.04

Basic book value per common share plus accumulated dividends (2)	$	15.48		$	14.97		$	14.07		$	13.19		$	12.32

Diluted book value on an "as if converted basis"
Flagstone shareholders' equity	$	1,207,601		$	1,211,018		$	1,137,615		$	1,094,779		$	1,024,123
add in:
proceeds on exercise of warrant (1)		-			-			-			-			-
Adjusted Flagstone shareholders' equity	$	1,207,601		$	1,211,018		$	1,137,615		$	1,094,779		$	1,024,123

Cumulative dividends declared	$	35,200		$	34,409		$	30,964		$	27,519		$	24,001

As if converted diluted shares outstanding
Common shares and share equivalents outstanding		80,271,126			83,190,376			83,070,001			85,070,001			85,070,001
add in:
vesting of performance share units		4,130,213			3,305,713			2,813,585			2,786,585			2,871,703
vesting of restricted share units		319,960			168,000			328,096			299,660			320,210
Diluted common shares outstanding		84,721,299			86,664,089			86,211,682			88,156,246			88,261,914


Diluted book value per common share	$	14.25		$	13.97		$	13.20		$	12.42		$	11.60

Diluted book value per common share plus accumulated dividends (2)	$	14.67		$	14.37		$	13.55		$	12.73		$	11.88




Change in diluted book value per share: Quarter		2.0	%		5.9	%		6.3	%		7.0	%		2.7	%
Change in diluted book value per share adjusted for dividends (3): Quarter		2.1	%		6.0	%		6.5	%		7.2	%		3.0	%
Change in diluted book value per share adjusted for dividends (3): Rolling 12 months		23.5	%		24.6	%		5.7	%		(13.3	)%		(16.4	)%
Annualized change in diluted book value per share adjusted for dividends since inception		9.8	%		9.9	%		8.9	%		7.6	%		5.9	%


(1) Diluted book value per share incorporates the assumption that the warrant would not be exercised at the end of any period where the share price is less than the strike price.
(2) Basic and diluted book value per common share plus accumulated dividends is calculated by dividing the sum of Flagstone shareholders' equity and cumulative dividends declared by diluted common shares outstanding.
(3) Change in diluted book value adjusted for dividends is the internal rate of return of the increase in diluted book value per share in the period plus dividends declared.

Flagstone Reinsurance Holdings Limited
SUMMARY CONSOLIDATING BALANCE SHEET - MONT FORT (Unaudited)

	As at March 31, 2010
	As at March 31, 2010
	Flagstone Consolidated Excluding Mont Fort			Mont Fort			Consolidation/ Elimination			Flagstone Consolidated
ASSETS
Investments:
Fixed maturity investments, at fair value	$	1,150,547		$	49,030		$	-		$	1,199,577
Short term investments, at fair value		306,833			3,228			-			310,061
Other investments		58,156			-			(1,549	)		56,607
Total investments		1,515,536			52,258			(1,549	)		1,566,245

Cash and cash equivalents		314,111			98,330			-			412,441
Restricted cash		24,293			-			-			24,293
Premium balances receivable		391,735			3,543			(8,447	)		386,831
Unearned premiums ceded		83,125			-			-			83,125
Reinsurance recoverable		22,213			-			-			22,213
Accrued interest receivable		9,275			200			-			9,475
Receivable for investments sold		40,709			395			-			41,104
Deferred acquisition costs		66,057			-			-			66,057
Funds withheld		23,934			-			-			23,934
Goodwill, intangibles and other assets		181,699			2			-			181,701
Due from related parties		1,194			(1,194	)		-			-
TOTAL ASSETS	$	2,673,881		$	153,534		$	(9,996	)	$	2,817,419

LIABILITIES
Loss and loss adjustment expense reserves	$	540,528		$	-		$	-		$	540,528
Unearned premiums		466,022			-			-			466,022
Insurance and reinsurance balance payable		72,232			9,098			(8,447	)		72,883
Payable for investments purchased		67,153			1,367			-			68,520
Long term debt		251,309			-			-			251,309
Other liabilites		49,652			58			-			49,710
TOTAL LIABILITIES		1,446,896			10,523			(8,447	)		1,448,972



EQUITY
Common voting shares		850			1,400			(1,400	)		850
Common shares held in treasury		(50	)		-			-			(50	)
Additional paid-in capital		864,708			78,100			(78,100	)		864,708
Accumulated other comprehensive loss		(10,173	)		-			-			(10,173	)
Retained earnings		352,266			63,511			(63,511	)		352,266
TOTAL FLAGSTONE SHAREHOLDERS' EQUITY		1,207,601			143,011			(143,011	)		1,207,601

Noncontrolling interest in subsidiaries		19,384			-			141,462			160,846
TOTAL EQUITY		1,226,985			143,011			(1,549	)		1,368,447
TOTAL LIABILITIES AND EQUITY	$	2,673,881		$	153,534		$	(9,996	)	$	2,817,419

Flagstone Reinsurance Holdings Limited
SUMMARY CONSOLIDATING INCOME STATEMENTS - MONT FORT (Unaudited)

	Three months ended March 31, 2010
	Flagstone Consolidated Excluding Mont Fort			Mont Fort			Consolidation/ Elimination			Flagstone Consolidated

REVENUES
Gross premiums written	$	400,202		$	4,656		$	(4,656	)	$	400,202
Premiums ceded		(81,077	)		-			4,656			(76,421	)
Net premiums written		319,125			4,656			-			323,781
Change in net unearned premiums		(107,993	)		1,027			-			(106,966	)
Net premiums earned		211,132			5,683			-			216,815
Net investment income		6,956			329			-			7,285
Net realized and unrealized losses - investments		8,974			837			-			9,811
Net realized and unrealized gains - other		5,206			452			-			5,658
Other income		12,450			(1,119	)		(290	)		11,041
Total revenues		244,718			6,182			(290	)		250,610


EXPENSES
Loss and loss adjustment expenses		127,379			-			-			127,379
Acquisition costs		42,513			614			(290	)		42,837
General and administrative expenses		41,124			51			-			41,175
Interest expense		2,514			-			-			2,514
Net foreign exchange losses		(3,956	)		-			-			(3,956	)
Total expenses		209,574			665			(290	)		209,949

Income before income taxes and interest in earnings of equity investments		35,144			5,517			-			40,661
Provision for income tax		(2,852	)		-			-			(2,852	)
Interest in earnings of equity investments		(259	)		-			-			(259	)
Net income		32,033			5,517			-			37,550
Less: Income attributable to noncontrolling interest		(529	)		-			(5,517	)		(6,046	)
NET INCOME ATTRIBUTABLE TO FLAGSTONE	$	31,504		$	5,517		$	(5,517	)	$	31,504

Income before noncontrolling interest	$	32,033		$	5,517		$	-		$	37,550
Change in currency translation adjustment		(3,697	)		-			-			(3,697	)
Change in defined benefit pension plan obligation		500			-			-			500
Comprehensive income		28,836			5,517			-			34,353
Less: Comprehensive income attributable to noncontrolling interest		(529	)		-			(5,517	)		(6,046	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO FLAGSTONE	$	28,307		$	5,517		$	(5,517	)	$	28,307


KEY RATIOS

Loss ratio		60.3	%								58.8	%
Acquisition cost ratio		20.1	%								19.8	%
General and administrative expense ratio		19.5	%								19.0	%
Combined ratio		99.9	%								97.6	%

Flagstone Reinsurance Holdings Limited
NON-GAAP FINANCIAL MEASURE RECONCILIATION (Unaudited)


	Three months ended March 31,
	2010			2009

Net income attributable to Flagstone	$	31,504		$	35,743

ADJUSTMENTS FOR:
Net realized and unrealized (gains) losses - investments		(9,811	)		1,899
Net realized and unrealized (gains) losses - other		(5,658	)		(7,430	)
Net foreign exchange (gains) losses		(3,956	)		1,097


NET OPERATING INCOME	$	12,079		$	31,309


AVERAGE FLAGSTONE SHAREHOLDERS’ EQUITY	$	1,209,309		$	1,005,068


ANNUALIZED NET OPERATING RETURN ON AVERAGE FLAGSTONE SHAREHOLDERS’ EQUITY		4.0	%		12.5	%

Attached files

Flagstone Reinsurance Holdings, S.A. Reports

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