Flagstone Reinsurance Holdings reported a net loss of $1.3 million for the third quarter just ahead of its proposed merger with Bermuda-based Validus.The third quarter net loss compared to a net loss of $59.5 million or $0.85 loss per diluted share for the same period last year.According to the company, the decrease in net underwriting loss is the result of fewer significant loss events during the third quarter of 2012, including US drought, compared to losses recorded in the same period in 2011 (Hurricane Irene, Danish cloudburst, and Melbourne floods), offset by a significant reduction in gross premiums written and net premiums earned, which the company said was in line with their current underwriting strategy.The company’s basic book value per share stood at $11.64 and diluted book value per share of $11.45, down 0.4 percent and 0.3 percent, respectively, for the quarter (percentages inclusive of dividends).Net loss from continuing operations for the three months ended September 30, 2012, was $7.1 million, or ten cents loss per diluted share, compared to a net loss from continuing operations of $53.7 million, or 76 cents loss per diluted share, for the same period last year.On August 30, 2012, Flagstone and Validus jointly announced that the boards of directors of both companies have approved a definitive merger agreement pursuant to which Validus will acquire all of the issued and outstanding shares of Flagstone. As of the announcement date, the transaction represented an aggregate equity value of $623.2 million and is currently expected to be completed in the fourth quarter of 2012, subject to customary closing conditions, including obtaining regulatory approvals and the approval of Flagstone’s shareholders.David Brown, Flagstone’s CEO, stated: “Flagstone’s results in the third quarter were generally in line with our expectations. We were pleased to announce our agreement to combine with Validus Holdings on August 30, 2012. The transaction, which presents a significant premium and immediate value to our shareholders, was the culmination of a robust process in which our board carefully considered a broad range of strategic alternatives. We look forward to working with Validus and anticipate completing the transaction in the fourth quarter.”According to Validus CEO Ed Noonan, his company will begin to start writing combined business on January 1.Mr Noonan added that while most of Flagstone’s business is “fairly well priced”, Validus won’t seek to keep all of it, saying “Flagstone had an appetite that included a lot of pro rata business, more risk excessive loss business, more regional central European type customers and that doesn’t really tend to play well to our risk appetite so I would expect to see that diminish considerably.”