Flagstone Reinsurance Holdings Ltd. saw its profits rise to more than $35 million in the first quarter of 2009, despite taking a hit from a number of international catastrophes, including Winter Storm Klaus and the Australian bushfires.

The reinsurer's net income rose from $32.9 million, or 38 cents per share, in the first quarter to $35.7 million, or 42 cents, for the same period in 2008.

But its operating income dropped 38.4 percent to $31.3 million in the first quarter of 2009 from $50.8 million in the same period last year. However, gross premiums written were up 49.2 percent to $361.5 million from $242.2 million over the corresponding time.

Combined ratio - the percentage of premium dollars paid out on claims and expenses - rose to 80.4 percent from 66.9 percent.

Flagtone's CEO David Brown said: "Due to the significant geographic diversification in our portfolio, we will expect to suffer losses more frequently from international events than those of our peers with more concentrated North American exposure. However, due to the increased premium leverage this diversification affords us, we are able to produce a superior loss ratio measured over time. We believe that our loss ratio over the last three years is amongst the best in our industry.

"Our gross premiums written increased 49.2 percent with our new Lloyd's acquisition, Marlborough, accounting for 41 percent of the increase. We expect Marlborough to continue to generate attractive business in the short tail specialty lines it targets and materially add to our diversification."

Flagstone's chairman Mark Byrne said: "Our basic book value increased four percent and on a diluted basis three percent for the quarter, which are satisfactory results. With the de-risking of our asset portfolio in October, we do not expect to receive much return from the current allocation so our results did not have any asset return as a tailwind.

"However, given the excellent underwriting opportunities, we are happy with a high quality portfolio of mainly fixed income securities and cash. The conservative positioning of our assets gives us a stable capital base from which to underwrite and provides us with the advantage of being a superior credit to our clients and counterparties.

"In these unstable times we believe this gives us an added edge, allowing us to see preferential business and terms. "