Flagstone Reinsurance Holdings SA suffered a second-quarter net loss of $20.2 million during the three months to June 30, 2011 as record industry losses from the first quarter carried through and the US storms took their toll.That compared to a profit of $13.3 million in 2010. The Class of 2005 re/insurer, which redomiciled from Bermuda to Luxembourg last year, posted a net loss of $181.4 million, or $2.60 per share, for the first six months of 2011 versus a net income of $44.8 million, or 55 cents per share, for the same period last year.The company also announced a basic book value per share of $13.45 and diluted book value per share of $13.08, down two percent and 1.7 percent, respectively, for the quarter.David Brown, Flagstone's CEO, said: “The first half of 2011 has been the industry's costliest period on record for economic losses resulting from catastrophic events. The record industry losses from the first quarter carried through the second quarter with the occurrence of a third earthquake in New Zealand and severe weather events in the United States.“Despite this unprecedented activity, our balance sheet remains strong and the outlook for Flagstone is positive. Some of the markets in which we are active are benefiting from significant rate increases and we continue to believe our operational platform can access the markets we find attractive.“We expect these positive rate movements, coupled with our expense initiatives, to positively impact our net results moving forward. In addition to these trends, in 2011 we chose to increase our spending on retrocessional coverage, which although resulting in increased ceded premiums this quarter, has also assisted in protecting our balance sheet from the potential impact of future large events should they occur this year. The reduction of our modeled probable maximum losses, as compared to the fourth quarter of 2010, reflects the benefits of this initiative.”For the second quarter, Flagstone produced a loss ratio of 67.3 percent and a combined ratio of 107.1 percent, resulting in a decrease in diluted book value of 1.7 percent during the second quarter.Flagstone's strategy to regionally diversify in North America resulted in favourable results despite the severe weather activity in the US. Offsetting this was a limited amount of upwards revisions from catastrophes occurring in the first quarter as well as a third earthquake in New Zealand in June.“Entering the key renewal season at mid-year, we received support from key clients and brokers and continued to enhance our portfolio while also improving certain existing relationships and adding several new key clients,” Mr Brown added. “As a result, we were able to carefully position our portfolio to take advantage of an increase in rates in attractive areas and, consequently, our overall North American portfolio improved on a risk adjusted basis, even as we implemented our strategy to lower operating leverage.“As a result, Flagstone's gross premiums written decreased 6.3 percent during the second quarter. In addition, as a result of programme shifts to move upwards to improved pricing, our aggregate exposure to our North American portfolio was down 23 percent while premium written decreased by approximately $14 million.“In particular, our pricing indicated that Florida rates were up approximately 10 to 15 percent on upper layers, and eight to 10 percent on lower layers, although our book of business saw an overall rate increase of nine percent due to our optimisations.”