Catastrophe losses drive Flagstone to $59.5m loss
Flagstone Re swung to a third-quarter loss of $59.5 million in what CEO David Brown called “the worst year on record for industry losses resulting from catastrophes”.
The Luxembourg-based company, which set up in Bermuda six years ago in the wake of Hurricane Katrina, booked $91.4 million of net catastrophe losses in the July through September quarter.
The losses were related to Hurricane Irene ($21 million), flooding in Denmark ($10.2 million) and the Melbourne floods ($16.8 million), as well as $43.4 million in net losses related to events in the first half of the year.
Flagstone is undergoing a restructuring after being hard hit by the string of natural disasters in 2011 and seeking to sell its ownership interests in its Lloyd’s unit and Island Heritage operations.
Mr Brown stated that the company was still stable.
“2011 continues to be the worst year on record for industry losses resulting from catastrophes, and our results continue to be meaningfully impacted by a number of significant events,” said Mr Brown.
“Despite these losses our balance sheet remains stable, with more than $1 billion of underwriting capital, and our rating agency capital adequacy measures continue to be in excess of our normal operating buffer.”
Flagstone’s diluted book value per share was $12.11, down 7.1 percent for the quarter.
The reinsurer’s net loss for the first nine months of this year was $241 million, or $3.44 per share, compared to a net income of $82 million, or $1.02 per share, for the same period in 2010.
The catastrophe losses took their toll on the company’s combined ratio, the percentage of premium dollars outlaid on claims and expenses, which was 136.5 percent for the quarter, compared to 100.1 percent for the third quarter of 2010.
Mr Brown said: “After careful and thoughtful consideration over the last 18 months, we have recently announced some key strategic decisions designed to realign our strategy and core capabilities.
“We believe that refocusing our efforts will result in enhanced capital levels for rating agencies and a higher quality, more profitable book of business. By substantially reducing expenses and divesting some of our non-core assets, we are unlocking significant amounts of capital and resources.
“Through this refocus, we are returning Flagstone to a more nimble, cost-effective and opportunistic structure, without impact on our overall return on equity. We have long prided ourselves on providing some of the fastest and most technical underwriting service standards in the business, and we look forward to delivering improved results for our clients and shareholders by continuing with our strengths and serving our core markets.”
The company wrote less business than it did in the third quarter of last year, with gross premiums of $169.9 million compared to $185.6 million in 2010.