Flagstone Reinsurance Holdings Ltd.'s operating income more than doubled last year, as the company benefited from selling more reinsurance and a quiet hurricane season.

The Bermuda-based reinsurer posted full-year net income of $242.2 million, or $2.87 per share, compared to a net loss of $187.3 million, or $2.20 per diluted share, for 2008.

Operating income was $194.5 million, compared to $96.5 million in 2008 — an increase of 101.6 percent.

Flagstone reported diluted book value per share of $13.97, up six percent for the fourth quarter of 2009 and 24.6 percent for the year.

Net income for the fourth quarter was $71.5 million, or 86 cents per share, compared to a net loss of $75.6 million, or 89 cents per share, for the same period in 2008.

Flagstone chairman Mark Byrne said the most profitable results in the Class of 2005 company's history were testimony to the use of a high level of technology and analysis in its underwriting.

"As we de-risked the investment portfolio in October 2008, the 2009 result is almost entirely a function of core underwriting returns, rather than movement in asset values," Mr. Byrne said.

"Our core operating results were strong with a 74.7 percent combined ratio. This clearly demonstrates the value created by our investment in industry-leading technologies and a powerful analytical staff as well as being a direct result of the quality and efficiency of our global platform."

Mr. Byrne said Flagstone had diversified its business and had achieved its desired 50/50 split of non-cat to catastrophe-exposed business.

"Our Lloyd's operation, Marlborough, continues to develop and has added immensely to our opportunity set, while we continue to streamline and enhance the rest of our global platform," Mr. Byrne added.

"In 2009 we added further offices in Rio de Janeiro and New York. The Rio office allows us access to the growing Brazilian market, and the opening of our agency in New York has opened up the North American marine and energy market on both a primary and reinsurance basis."

Flagstone's 2009 return on investment was 4.6 percent, compared to minus 13.9 percent in 2008, and 1.4 percent for the fourth quarter. Mr. Byrne said Flagstone has 85 to 90 percent of its assets in high-grade fixed income securities and cash.

Chief executive officer David Brown said the company's diversification and global reach was an ongoing advantage. "The significant diversification, both geographically and by line of business, means that we have an immense global set of opportunities to choose from, which coupled with our selective underwriting approach, results in superior and sustainable underwriting performance," Mr. Brown said.

"This diversification also allows us to keep single event risk manageable and increases our premium to surplus ratio."

As for business written in at January 1, 2010, Mr. Brown said North American wind exposed rates were down within the five to 10 percent. But Flagstone grew its book by writing nearly 20 percent more premiums in the US and Canada than a year earlier, he added.

"Overall we expect cycle management to play an increasing part as the year progresses in order to maintain underwriting and pricing discipline in what is likely to be a more challenging mid-year renewal season than 2009," Mr. Brown said.

FLAGSTONE RE Q4 REPORT CARD

Net income: $71.5 million compared to a loss of $75.6 million in 2008

Gross premiums written: $123.7 million compared to $95.2 million in 2008

Combined ratio: 73.3 percent compared to 75.9 percent in 2008