Bermuda-based Flagstone Reinsurance Holdings Ltd. announced last night that full-year profits for 2007 rose by 10 percent to $167.9 million.

But profits for the fourth quarter of last year fell to $$51.4 million from $63.6 million in the same three months in 2006.

However, company chairman Mark Byrne said the best measure of the young company's succes was its increase in diluted book value, which stood at $13.87 at the end of last year and had risen 4.6 percent for the quarter.

"We are pleased with our fourth quarter results and our full year earnings," Mr. Byrne said. "We were able to grow our diluted book value per share 16.8 percent for the year in addition to significantly building our global platform and franchise.

"Since the founding of the company, the annualised growth in diluted book value per share is 19.0 percent, which is better than our 17 percent target. We regard the increase in diluted book value per share, measured over intervals of three years, as the best single measure of our performance for shareholders.

"Since our reinsurance book is exposed to catastrophes, our results will not be smooth from quarter to quarter. However, as our diversifying business lines become more significant to our overall book, our earnings variability should decrease."

Gross premiums written for the fourth quarter were $65.1 million, and $577.2 million for the full year. Chief executive officer David Brown said: "We are very happy with the full-year result, especially considering the level of catastrophes internationally and our focus on building a globally diversified book of business.

"Our share of international catastrophic losses serves to demonstrate that we have successfully developed a diversified portfolio of risks and, as a consequence, our results are not disproportionately dependant on the absence of catastrophes in North America.

"This diversification has been achieved thanks to our significant investment in growing our platform internationally with over 250 staff now working in nine offices in seven countries.

"In addition to the growth in international catastrophe exposure this platform is now producing growth in short tail specialty lines, which we expect to be an increasing proportion of our portfolio over the next few years.

"As rates soften, the large flow of business generated by our global reach allows us to be selective in where we allocate our underwriting capacity which is currently deployed in what we consider the best priced segments of the reinsurance market."