Flagstone Reinsurance Holdings SA last night reported an 80 percent fall in profits for the second quarter, compared to last year.

Net income was $13.3 million, or 17 cents per share, compared to $67.8 million, or 80 cents per share for the second quarter of 2009.

The class of 2005 reinsurer, which moved its holding company from Bermuda to Luxembourg earlier this year, recorded a 12.4 percent increase in gross premiums written to $369.6 million.

But operating income, which strips out the impact of investment gains and losses, plunged 65.4 percent to $20.1 million.

Diluted book value per share was rose 1.9 percent during the quarter to $14.47. In New York trading yesterday, Flagstone's share price closed on $11.30.

Flagstone was hit by a loss of $12.8 million from the Thailand riots, which erupted in April this year.

The company's underwriting results were impacted by a $27.5 million loss related to the Deepwater Horizon oil rig, which exploded and sank in the Gulf of Mexico in April. But that loss did not impact the company's net income figure, since 91 percent of the loss was attributable to Mont Fort, one of the company's sidecars.

Sidecars are retrocessional vehicles which give reinsurers greater capacity to write more business. Flagstone does not have a controlling interest Mont Fort and the reinsurer's loss attributable to the rig disaster was $4.4 million.

Combined ratio, which reflects underwriting profitability when less than 100 percent, was 103.4 percent, compared to 68.7 percent in the second quarter of 2009.

The company also outlined plans to sell three of its four corporate aircraft, a move that chief executive officer David Brown said would save $8 million a year.

Returns on investments were a negative 0.8 percent, compared to 1.2 percent in the same period last year.

"After four and a half years of rapid development we have now reached a watershed level of maturity as a company," said David Brown, Flagstone's chief executive officer. "We believe we now have a fully operational platform that can access all of the markets we find attractive.

"Our future development will concentrate on accessing and optimising the business we write as well as turning our focus to increasing productivity, enhancing efficiencies, and lowering and rationalising costs and expenses."

Mr. Brown said the 12.4 percent increase in gross premiums written was "reflective of better signings with our preferred clients".