Flagstone Reinsurance Holdings SA said fourth-quarter profits slumped 77 percent to $15 million, compared to same period of 2009, as catastrophe losses took their toll.The company revealed last week that it expected Australian flood losses in December to total around $10 million, while the triggering of aggregate covers was expected to cost a further $25 million.Net earnings for the year also fell by more than half to $97.1 million from $242.2 million in 2009.But the Class of 2005 Bermuda start-up, whose holding company is now in Luxembourg, managed to increase its diluted book value per share by three percent during the quarter to $15.51 and by 12.1 percent through the year.For the quarter, the combined ratio, which indicates the percentage of premium dollars spent on claims and expenses, was 105.7 percent and for the year, it was 101.6 percent.Flagstone chief executive officer David Brown said last year was a positive one for Flagstone, in that the firm grew its book value by 12.1 percent despite “an unprecedented number of large international events”.“Since our founding five years ago, our team has worked diligently to build a platform that today produces quality underwriting opportunities from around the globe, as well as sustainable profitability on an annual basis,” Mr Brown said.“It is this diversification, both geographically and by business line, that provides us with immense global opportunities to choose from. Our selective underwriting approach coupled with this diversification, has resulted in superior and sustainable underwriting performance, proven by our five-year average loss ratio of 42 percent.“However, in 2010 North America was unusually quiet, as it has been the past several years, while international activity was at record high levels, a historical anomaly which impacts a diversified portfolio such as ours and is reflected in our results.”Gross written premiums for the fourth quarter were $142 million, which represents an increase of 15.1 percent over the same quarter of 2009. Premium for the year totalled $1.1 billion, up 11.1 percent from 2009.Flagstone said flooding in large areas of Australia and Cyclone Yasi in Northern Australia would be first quarter 2011 events and would impact the first quarter financial results.“Due to the timing and nature of these events we are assessing our exposure and will provide a loss estimate when our assessment is concluded,” Mr Brown said. “It is important to note that the occurrence of this number of sizeable losses over the course of a year in this region is historically unprecedented.”Gary Prestia, Flagstone’s chief underwriting officer North America, said: “At January 1, 2011, we saw North American catastrophe pricing generally down seven to 10 percent on a risk-adjusted basis, and as such we were content to reduce risk by not renewing underpriced business. The northeast was among the more disappointing regions and we believe it has reached a point where an increasing number of programmes are no longer supportable on a marginal pricing basis.Flagstone’s total return on investments was 0.8 percent for the quarter and 4.2 percent for the year.