Diversification and expansion proved to be the key for Flagstone Reinsurance Holdings Ltd., as it boosted its net income by more than $25 million for the second quarter of 2009.

The Bermuda re/insurer saw its profits increase to $67.8 million, or 80 cents per share, for the second quarter from $41.9 million, or 49 cents per share, for the same period in 2008.

Gross premiums written also rose 21.2 percent to $328.7 million from $271.2 million over respective periods, while the company's combined ratio improved from 68.7 percent to 76 percent.

Basic book value per share meanwhile climbed by 7.1 percent to $12.87 and diluted book value per share by 7.2 percent to $12.42 for the quarter.

"We are very pleased with our financial result for the second quarter of 2009," said David Brown, Flagstone's CEO.

"Flagstone's solid performance this quarter is the result of the continued strength of our underwriting, expansion in several lines of business and geographical diversification. In particular, this diversification accounted for a loss ratio in the quarter of 30.8 percent and a combined ratio of 68.7 percent, which produced an underwriting profit of $61.9 million for the quarter.

"Our ability to generate quality business on a global basis allows us to continue adding significant premium leverage to our business and achieve outstanding operating performance.

"Note that our Lloyds platform, Marlborough Underwriting Agency Ltd., is only beginning to impact the top line, as our fresh corporate name ramps up. Premiums written at Marlborough for the half year were a quite satisfactory $85.6 million, in line with plan."

Mark Byrne, Flagstone's executive chairman, said: "I am pleased by the significant increases we saw this quarter in our book value.

"Flagstone's underwriting and overall results remain strong, especially considering the relatively minor contribution from our defensive investment portfolio in the quarter.

"Given the attractive level of rates globally in the lines we target, and our ability to generate and select attractive business and leverage our underwriting capital, we are confident that Flagstone is well-positioned for future growth and profitability.

"We are also excited by the prospects of our recently opened representative office in Brazil. Operating within the Lloyd's offices in Rio, this office will be able to access Brazil's growing and attractive market. We anticipate that this will begin to impact our portfolio of business in the second half of 2009."

FLAGSTONE Q2 REPORT CARD

Net income: $67.8 million compared to $41.9 million in 2008

Combined ratio: 68.7 percent compared to 76 percent in 2008

Gross premiums written: $328.7 million compared to $271.2 million in 2008