Beleaguered reinsurer reveals further loss creep and Thai flood hit of $63.3m

Flagstone Reinsurance has reported a net loss for 2011 of $326.1m, compared to net income of $97.1m in 2010. The net loss from continuing operations for the year was $301.7m, compared to net income from continuing operations of $83.8m in 2010.

The combined ratio was 153.6% for the year, compared to 99.9% in 2010. For the fourth quarter the combined ratio was 160.4%, reflecting the impact of the Thai floods. Flagstone expects net incurred losses of $14.9m on the Thailand floods and net adverse developments on earlier 2011 known events of $48.4m.

In October, Flagstone announced it was looking for buyers for its Lloyd’s syndicate and Caribbean-based insurer Island Heritage, in order to address changing business conditions. Chief executive David Brown said the reinsurer “continued to make progress on our strategic business realignment during the fourth quarter, and we look forward to providing updates as we make progress on the divestitures.”

The loss ratio for 2011 was 118.4%, up from 62.4% in 2010. This is primarily due to more significant losses from catastrophic events in the current period, including net incurred losses related to the Australian floods ($31m), cyclone Yasi ($33.7m), the Melbourne floods ($23.8m), the New Zealand earthquake of February 2011 ($144m), the Japan earthquake and tsunami ($108.5m), the New Zealand earthquake of June 2011 ($20.5m), the US tornadoes ($43.3m), Hurricane Irene ($11.8m), the Danish cloudburst ($19.1m) and the Thailand floods ($14.9m).

“2011 was the worst year on record for industry losses resulting from international catastrophes, and as a global reinsurer with a historical focus on international business, our results reflected this unprecedented number of significant events,” said Brown. “We have now put 2011 behind us and expect that our realigned underwriting focus and our steps to streamline our operating platform will allow us to return to producing quality underwriting results.”

The Class of 2005 reinsurer intends to refocus its underwriting strategy on its property catastrophe reinsurance business and reduce its focus on operating segments that absorb capital and produce lower returns.