Flagstone Reinsurance Holdings Ltd. will invest, via a subsidiary, in the capital stock of Imperial Reinsurance Company Ltd., acquiring a 65 percent of the company.

The deal, subject to regulatory approvals and closing conditions, is expected to be concluded in the second quarter of 2008. Imperial Re, domiciled in South Africa, writes multiple lines of reinsurance in sub-Saharan Africa.

Current owner Imperial Holdings will hold 35 percent of Imperial Re and will be represented on the board. In addition, Steve Smith will continue to be the managing director of the company. Flagstone's capital and technical support will enhance the company's services, increase market penetration and broaden product distribution, both by line of business and geographically within Africa.

Mark Byrne, chairman of Flagstone, will become the new chairman of Imperial Re.

"We are excited about this further strengthening of our relationship with Imperial Re and the Imperial Group," he said.

"This acquisition dovetails with our strategy, giving Flagstone capacity in a fast growing, technically adequate market, in a strong economy. Our colleagues at Imperial Holdings, a large and respected conglomerate in South Africa will make great partners for Imperial Re, as we seek to leverage existing relationships in the Republic of South Africa as well as the broader region. Steve Smith and his team have our full confidence and support."

Hubert Brody, Imperial's CEO, said: "The sale of our stake in the business will create a re-insurance company with equity of approximately 220 million rand and will free up approximately 80 million rand of capital for Imperial Holdings. It unlocks Imperial Re's true potential throughout sub-Saharan Africa."

Mr. Smith said: "Imperial Re's management and staff are excited by this development; it will significantly enhance the company's value proposition for the short-term insurance market in South Africa and we are sure that it will be welcomed by both insurers and reinsurance brokers. We will be in an unique position in the South African reinsurance market by having a blend of international and South African ownership."