Bermuda
|
98-0481623
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
Large
accelerated filer o
|
Accelerated
filer þ
|
Non-accelerated
filer o
(Do not check if a smaller reporting company)
|
Smaller
reporting company o
|
As
at June 30, 2009
|
As
at December 31, 2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Investments:
|
||||||||
Fixed
maturities, at fair value (Amortized cost: 2009 - $1,062,445 ; 2008 -
$787,792)
|
$ | 1,077,479 | $ | 784,355 | ||||
Short
term investments, at fair value (Amortized cost: 2009 - $222,882; 2008 -
$30,491)
|
229,837 | 30,413 | ||||||
Equity
investments, at fair value (Cost: 2009 - $10,802; 2008 -
$16,266)
|
3,400 | 5,313 | ||||||
Other
investments
|
53,534 | 54,655 | ||||||
Total
Investments
|
1,364,250 | 874,736 | ||||||
Cash
and cash equivalents
|
378,232 | 783,705 | ||||||
Restricted
cash
|
79,561 | 42,403 | ||||||
Premium
balances receivable
|
453,668 | 218,287 | ||||||
Unearned
premiums ceded
|
85,563 | 31,119 | ||||||
Reinsurance
recoverable
|
16,810 | 16,422 | ||||||
Accrued
interest receivable
|
9,554 | 7,226 | ||||||
Receivable
for investments sold
|
11,114 | 9,634 | ||||||
Deferred
acquisition costs
|
70,484 | 44,601 | ||||||
Funds
withheld
|
18,676 | 14,433 | ||||||
Goodwill
|
16,541 | 17,141 | ||||||
Intangible
assets
|
36,850 | 32,873 | ||||||
Other
assets
|
113,095 | 123,390 | ||||||
Total
Assets
|
$ | 2,654,398 | $ | 2,215,970 | ||||
LIABILITIES
|
||||||||
Loss
and loss adjustment expense reserves
|
$ | 453,490 | $ | 411,565 | ||||
Unearned
premiums
|
522,681 | 270,891 | ||||||
Insurance
and reinsurance balances payable
|
46,214 | 31,123 | ||||||
Payable
for investments purchased
|
16,249 | 7,776 | ||||||
Long
term debt
|
251,987 | 252,575 | ||||||
Other
liabilities
|
57,220 | 58,577 | ||||||
Total
Liabilities
|
1,347,841 | 1,032,507 | ||||||
EQUITY
|
||||||||
Common
voting shares, 150,000,000 authorized, $0.01 par value, issued and
outstanding
(2009
- 84,864,844; 2008 - 84,801,732)
|
849 | 848 | ||||||
Additional
paid-in capital
|
904,228 | 897,344 | ||||||
Accumulated
other comprehensive loss
|
(2,902 | ) | (8,271 | ) | ||||
Retained
earnings
|
192,604 | 96,092 | ||||||
Total Flagstone Shareholders'
Equity
|
1,094,779 | 986,013 | ||||||
Noncontrolling
Interest in Subsidiaries
|
211,778 | 197,450 | ||||||
Total
Equity
|
1,306,557 | 1,183,463 | ||||||
Total
Liabilities and Equity
|
$ | 2,654,398 | $ | 2,215,970 |
For
the Three Months Ended
|
For
the Six Months Ended
|
|||||||||||||||
June
30, 2009
|
June
30, 2008
|
June
30, 2009
|
June
30, 2008
|
|||||||||||||
REVENUES
|
||||||||||||||||
Gross
premiums written
|
$ | 328,709 | $ | 271,178 | $ | 690,194 | $ | 513,424 | ||||||||
Premiums
ceded
|
(59,742 | ) | (38,435 | ) | (135,411 | ) | (54,449 | ) | ||||||||
Net
premiums written
|
268,967 | 232,743 | 554,783 | 458,975 | ||||||||||||
Change
in net unearned premiums
|
(81,991 | ) | (90,976 | ) | (194,972 | ) | (181,951 | ) | ||||||||
Net
premiums earned
|
186,976 | 141,767 | 359,811 | 277,024 | ||||||||||||
Net
investment income
|
10,646 | 13,279 | 8,893 | 31,975 | ||||||||||||
Net
realized and unrealized gains (losses) - investments
|
7,082 | (9,339 | ) | 5,183 | (21,751 | ) | ||||||||||
Net
realized and unrealized gains (losses) - other
|
2,470 | 11,132 | 9,900 | (1,105 | ) | |||||||||||
Other
income
|
2,333 | 2,127 | 7,502 | 3,851 | ||||||||||||
Total
revenues
|
209,507 | 158,966 | 391,289 | 289,994 | ||||||||||||
EXPENSES
|
||||||||||||||||
Loss
and loss adjustment expenses
|
57,641 | 56,298 | 134,235 | 96,065 | ||||||||||||
Acquisition
costs
|
36,203 | 27,210 | 64,240 | 51,375 | ||||||||||||
General
and administrative expenses
|
34,578 | 24,214 | 68,878 | 50,763 | ||||||||||||
Interest
expense
|
3,119 | 4,609 | 6,676 | 9,949 | ||||||||||||
Net
foreign exchange (gains) losses
|
(362 | ) | 1,630 | 735 | (5,069 | ) | ||||||||||
Total
expenses
|
131,179 | 113,961 | 274,764 | 203,083 | ||||||||||||
Income
before income taxes and interest in earnings of equity
investments
|
78,328 | 45,005 | 116,525 | 86,911 | ||||||||||||
Provision
for income tax
|
(250 | ) | (442 | ) | 456 | (1,307 | ) | |||||||||
Interest
in loss of equity investments
|
(300 | ) | - | (678 | ) | - | ||||||||||
Net
income
|
77,778 | 44,563 | 116,303 | 85,604 | ||||||||||||
Less:
Income attributable to noncontrolling interest
|
(9,964 | ) | (2,615 | ) | (12,746 | ) | (10,796 | ) | ||||||||
NET
INCOME ATTRIBUTABLE TO FLAGSTONE
|
$ | 67,814 | $ | 41,948 | $ | 103,557 | $ | 74,808 | ||||||||
Net
income
|
$ | 77,778 | $ | 44,563 | $ | 116,303 | $ | 85,604 | ||||||||
Change
in currency translation adjustment
|
5,399 | (2,766 | ) | 7,266 | (4,186 | ) | ||||||||||
Change
in defined benefit pension plan obligation
|
(145 | ) | 27 | (321 | ) | (522 | ) | |||||||||
Comprehensive
income
|
83,032 | 41,824 | 123,248 | 80,896 | ||||||||||||
Less:
Comprehensive income attributable to noncontrolling
interest
|
(11,743 | ) | (2,615 | ) | (14,322 | ) | (10,796 | ) | ||||||||
COMPREHENSIVE
INCOME ATTRIBUTABLE TO FLAGSTONE
|
$ | 71,289 | $ | 39,209 | $ | 108,926 | $ | 70,100 | ||||||||
Weighted
average common shares outstanding—Basic
|
85,070,001 | 85,470,205 | 85,070,001 | 85,470,043 | ||||||||||||
Weighted
average common shares outstanding—Diluted
|
85,162,981 | 85,638,506 | 85,253,230 | 85,714,196 | ||||||||||||
Net
income attributable to Flagstone per common share—Basic
|
$ | 0.80 | $ | 0.49 | $ | 1.22 | $ | 0.88 | ||||||||
Net
income attributable to Flagstone per common share—Diluted
|
$ | 0.80 | $ | 0.49 | $ | 1.21 | $ | 0.87 | ||||||||
Dividends
declared per common share
|
$ | 0.04 | $ | 0.04 | $ | 0.08 | $ | 0.08 |
For
the six month period ended June 30, 2009
|
Total
equity
|
Comprehensive
income
|
Retained
earnings
|
Accumulated
other comprehensive loss
|
Common
voting shares
|
Additional
paid-in capital
|
Noncontrolling
interest in subsidiaries
|
|||||||||||||||
Beginning
balance
|
$ | 1,183,463 | $ | - | $ | 96,092 | $ | (8,271 | ) | $ | 848 | $ | 897,344 | $ | 197,450 | |||||||
Comprehensive
income:
|
||||||||||||||||||||||
Net
income
|
116,303 | 116,303 | 103,557 | 12,746 | ||||||||||||||||||
Other
comprehensive income:
|
||||||||||||||||||||||
Change
in currency translation adjustment
|
7,266 | 7,266 | 5,690 | 1,576 | ||||||||||||||||||
Defined
benefit pension plan obligation
|
(321 | ) | (321 | ) | (321 | ) | ||||||||||||||||
6,945 | 6,945 | |||||||||||||||||||||
Comprehensive
income
|
123,248 | $ | 123,248 | |||||||||||||||||||
Stock
based compensation
|
7,068 | 7,068 | ||||||||||||||||||||
Subsidiary
stock based compensation
|
(94 | ) | (94 | ) | ||||||||||||||||||
Subsidiary
stock issuance
|
- | (184 | ) | 184 | ||||||||||||||||||
Purchase
of noncontrolling interest
|
(84 | ) | (84 | ) | ||||||||||||||||||
Issue
of shares, net
|
1 | 1 | ||||||||||||||||||||
Dividends
declared
|
(7,045 | ) | (7,045 | ) | ||||||||||||||||||
Ending
balance
|
$ | 1,306,557 | $ | 192,604 | $ | (2,902 | ) | $ | 849 | $ | 904,228 | $ | 211,778 | |||||||||
For
the six month period ended June 30, 2008
|
Total
equity
|
Comprehensive
income
|
Retained
earnings
|
Accumulated
other comprehensive income
|
Common
voting shares
|
Additional
paid-in capital
|
Noncontrolling
interest in subsidiaries
|
|||||||||||||||
Beginning
balance
|
$ | 1,395,263 | $ | - | $ | 296,890 | $ | 7,426 | $ | 853 | $ | 905,316 | $ | 184,778 | ||||||||
Repurchase
of preferred shares
|
(6,639 | ) | (6,639 | ) | ||||||||||||||||||
Acquisition
of subsidiaries
|
7,416 | 7,416 | ||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||
Net
income
|
85,604 | 85,604 | 74,808 | 10,796 | ||||||||||||||||||
Other
comprehensive income:
|
||||||||||||||||||||||
Change
in currency translation adjustment
|
(4,186 | ) | (4,186 | ) | (4,186 | ) | ||||||||||||||||
Defined
benefit pension plan obligation
|
(522 | ) | (522 | ) | (522 | ) | ||||||||||||||||
(4,708 | ) | (4,708 | ) | |||||||||||||||||||
Comprehensive
income
|
80,896 | $ | 80,896 | |||||||||||||||||||
Stock
based compensation
|
7,012 | 7,012 | ||||||||||||||||||||
Subsidiary
stock based compensation
|
(337 | ) | (337 | ) | ||||||||||||||||||
Issue
of shares, net
|
(364 | ) | (364 | ) | ||||||||||||||||||
Dividends
declared
|
(7,049 | ) | (7,049 | ) | ||||||||||||||||||
Other
|
(91 | ) | (91 | ) | ||||||||||||||||||
Ending
balance
|
$ | 1,476,107 | $ | 364,649 | $ | 2,718 | $ | 853 | $ | 911,964 | $ | 195,923 |
For
the Six Months Ended
|
||||||||
June
30, 2009
|
June
30, 2008
|
|||||||
Cash flows provided by (used
in) operating activities:
|
||||||||
Net
income
|
$ | 116,303 | $ | 85,604 | ||||
Adjustments to reconcile net
income to net cash provided by operating
activities:
|
||||||||
Net
realized and unrealized (gains) losses
|
(15,083 | ) | 22,856 | |||||
Net
unrealized foreign exchange gains
|
(2,430 | ) | - | |||||
Depreciation
expense
|
3,347 | 2,214 | ||||||
Share
based compensation expense
|
6,832 | 6,788 | ||||||
Interest
in earnings of equity investments
|
678 | - | ||||||
Accretion/amortization
on fixed maturities
|
5,683 | (9,736 | ) | |||||
Changes
in assets and liabilities, excluding net assets acquired:
|
||||||||
Reinsurance
premium receivable
|
(236,036 | ) | (175,080 | ) | ||||
Unearned
premiums ceded
|
(54,158 | ) | (24,728 | ) | ||||
Deferred
acquisition costs
|
(25,729 | ) | (20,439 | ) | ||||
Funds
withheld
|
(4,195 | ) | (3,386 | ) | ||||
Loss
and loss adjustment expense reserves
|
38,663 | 47,063 | ||||||
Unearned
premiums
|
249,819 | 210,635 | ||||||
Insurance
and reinsurance balances payable
|
19,218 | 21,478 | ||||||
Resinsurance
recoverable
|
623 | - | ||||||
Other
changes in assets and liabilities, net
|
25,570 | 4,883 | ||||||
Net
cash provided by operating activities
|
129,105 | 168,152 | ||||||
Cash flows (used in) provided
by investing activities:
|
||||||||
Net
cash (paid) received in (disposal) acquisition of
subsidiaries
|
(1,731 | ) | 4,729 | |||||
Purchases
of fixed income securities
|
(1,423,515 | ) | (936,439 | ) | ||||
Sales
and maturities of fixed income securities
|
963,914 | 1,230,546 | ||||||
Purchases
of equity securities
|
(2,006 | ) | (39,974 | ) | ||||
Sales
of equity securities
|
4,359 | - | ||||||
Purchases
of other investments
|
(4,114 | ) | (330,203 | ) | ||||
Sales
of other investments
|
(3,628 | ) | 144,675 | |||||
Purchases
of fixed assets
|
(7,456 | ) | (10,786 | ) | ||||
Sale
of fixed asset
|
145 | - | ||||||
Change
in restricted cash
|
(37,158 | ) | (1,006 | ) | ||||
Net
cash (used in) provided by investing activities
|
(511,190 | ) | 61,542 | |||||
Cash flows (used in) provided
by financing activities:
|
||||||||
Issue
of common shares, net of issuance costs paid
|
- | (364 | ) | |||||
Contribution
of minority interest
|
- | (429 | ) | |||||
Repurchase
of minority interest
|
- | (8,652 | ) | |||||
Dividend
paid on common shares
|
(6,786 | ) | (6,825 | ) | ||||
Repayment
of long term debt
|
(15,038 | ) | (9,195 | ) | ||||
Other
|
414 | (4,003 | ) | |||||
Net
cash used in financing activities
|
(21,410 | ) | (29,468 | ) | ||||
Effect
of foreign exchange rate on cash
|
(1,978 | ) | (998 | ) | ||||
(Decrease)
increase in cash and cash equivalents
|
(405,473 | ) | 199,228 | |||||
Cash
and cash equivalents - beginning of year
|
783,705 | 362,622 | ||||||
Cash
and cash equivalents - end of period
|
$ | 378,232 | $ | 561,850 | ||||
Supplemental cash flow
information:
|
||||||||
Receivable
for investments sold
|
$ | 11,114 | $ | 2,942 | ||||
Payable
for investments purchased
|
$ | 16,249 | $ | 6,162 | ||||
Interest
paid
|
$ | 6,681 | $ | 10,679 |
Fair Value Measurement at June 30, 2009,
using:
|
||||||||||||||||
Quoted
Prices in
|
Significant
Other
|
Significant
Other
|
||||||||||||||
Fair
Value
|
Active
Markets
|
Observable
Inputs
|
Unobservable
Inputs
|
|||||||||||||
Measurements
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
Description
|
||||||||||||||||
U.S.
government and agency securities
|
$ | 435,766 | $ | 392,688 | $ | 43,078 | $ | - | ||||||||
U.S.
states and political subdivisions
|
369 | - | 369 | - | ||||||||||||
Non
U.S. government and government agencies
|
99,846 | - | 99,846 | - | ||||||||||||
Corporates
|
426,041 | - | 426,041 | - | ||||||||||||
Mortgage-backed
securities
|
95,096 | - | 94,133 | 963 | ||||||||||||
Asset-backed
securities
|
20,361 | - | 20,361 |
-
|
||||||||||||
Equity
investments
|
3,400 | 3,400 | - | - | ||||||||||||
Short
term investments
|
229,837 | 85,438 | 144,399 | - | ||||||||||||
1,310,716 | 481,526 | 828,227 | 963 | |||||||||||||
Other
Investments
|
||||||||||||||||
Investment
funds
|
5,316 | - | - | 5,316 | ||||||||||||
Catastrophe
bonds
|
43,221 | - | - | 43,221 | ||||||||||||
48,537 | - | - | 48,537 | |||||||||||||
Totals
|
$ | 1,359,253 | $ | 481,526 | $ | 828,227 | $ | 49,500 |
Fair
Value Measurement at December 31, 2008, using:
|
||||||||||||||||
Quoted
Prices in
|
Significant
Other
|
Significant
Other
|
||||||||||||||
Fair
Value
|
Active
Markets
|
Observable
Inputs
|
Unobservable
Inputs
|
|||||||||||||
Measurements
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
Description
|
||||||||||||||||
Fixed
maturity investments
|
$ | 784,355 | $ | 447,226 | $ | 336,203 | $ | 926 | ||||||||
Short
term investments
|
30,413 | 30,413 | - | - | ||||||||||||
Equity
investments
|
5,313 | 5,313 | - | - | ||||||||||||
820,081 | 482,952 | 336,203 | 926 | |||||||||||||
Other
Investments
|
||||||||||||||||
Investment
funds
|
9,805 | - | 647 | 9,158 | ||||||||||||
Catastrophe
bonds
|
39,174 | - | - | 39,174 | ||||||||||||
48,979 | - | 647 | 48,332 | |||||||||||||
Totals
|
$ | 869,060 | $ | 482,952 | $ | 336,850 | $ | 49,258 |
For
the Six Months Ended June 30, 2009
|
||||||||||||||||
Mortgage
- backed securities
|
Investment
funds
|
Catastrophe
bonds
|
Total
|
|||||||||||||
Fair
value, December 31, 2008
|
$ | 926 | $ | 9,158 | $ | 39,174 | $ | 49,258 | ||||||||
Total
unrealized losses included in earnings
|
75 | (1,418 | ) | 83 | (1,260 | ) | ||||||||||
Net
purchases and sales
|
(47 | ) | 101 | - | 54 | |||||||||||
Total
investment income included in earning
|
4 | - | (82 | ) | (78 | ) | ||||||||||
Fair
value, March 31, 2009
|
958 | 7,841 | 39,175 | 47,974 | ||||||||||||
Total
unrealized losses included in earnings
|
70 | (2,664 | ) | 54 | (2,540 | ) | ||||||||||
Net
purchases and sales
|
(71 | ) | 139 | 3,925 | 3,993 | |||||||||||
Total
investment income included in earning
|
6 | - | 67 | 73 | ||||||||||||
Fair
value, June 30, 2009
|
$ | 963 | $ | 5,316 | $ | 43,221 | $ | 49,500 |
As
at June 30, 2009
|
||||||||||||||||||||||||||
Asset Derivatives | Liability Derivatives |
Total
Derivatives
|
||||||||||||||||||||||||
Balance
Sheet
|
Derivative
|
Balance
Sheet
|
Derivative
|
Derivative
|
Net
|
|||||||||||||||||||||
Location
|
Exposure
|
Fair
Value
|
Location
|
Exposure
|
Fair
Value
|
Exposure
|
Fair
Value
|
|||||||||||||||||||
Derivatives
designated as hedging instruments
|
||||||||||||||||||||||||||
Foreign
currency forward contracts (1)
|
Other
Assets
|
$ | 117,763 | $ | 162 |
Other
Liabilities
|
$ | 17,295 | $ | 444 | $ | 135,058 | $ | (282 | ) | |||||||||||
162 | 444 | (282 | ) | |||||||||||||||||||||||
Derivatives
not designated as hedging instruments
|
||||||||||||||||||||||||||
Futures
contracts
|
Other
Assets
|
$ | - | $ | - |
Other
Liabilities
|
$ | 48,351 | $ | 1,133 | $ | 48,351 | $ | (1,133 | ) | |||||||||||
Total
return swaps
|
Other
Assets
|
40,000 | 515 |
Other
Liabilities
|
5,000 | 201 | 45,000 | 314 | ||||||||||||||||||
Currency
swaps
|
Other
Assets
|
- | - |
Other
Liabilities
|
18,237 | 154 | 18,237 | (154 | ) | |||||||||||||||||
Foreign
currency forward contracts
|
Other
Assets
|
97,314 | 5,170 |
Other
Liabilities
|
431,573 | 15,541 | 528,887 | (10,371 | ) | |||||||||||||||||
Mortgage
backed securities TBA
|
Other
Assets
|
39,958 | 353 |
Other
Liabilities
|
5,037 | 6 | 44,995 | 347 | ||||||||||||||||||
Other
reinsurance derivatives
|
Other
Assets
|
- | - |
Other
Liabilities
|
- | 847 | - | (847 | ) | |||||||||||||||||
6,038 | 17,882 | (11,844 | ) | |||||||||||||||||||||||
Total
Derivatives
|
$ | 6,200 | $ | 18,326 | $ | (12,126 | ) |
As
at December 31, 2008
|
||||||||||||||||||||||||||
Asset Derivatives | Liability Derivatives |
Total
Derivatives
|
||||||||||||||||||||||||
Balance
Sheet
|
Derivative
|
Balance
Sheet
|
Derivative
|
Derivative
|
Net
|
|||||||||||||||||||||
Location
|
Exposure
|
Fair
Value
|
Location
|
Exposure
|
Fair
Value
|
Exposure
|
Fair
Value
|
|||||||||||||||||||
Derivatives
designated as hedging instruments
|
||||||||||||||||||||||||||
Forward
currency forward contracts (1)
|
Other
Assets
|
$ | 43,327 | $ | 1,419 |
Other
Liabilities
|
$ | 294,385 | $ | 7,103 | $ | 337,712 | $ | (5,684 | ) | |||||||||||
1,419 | 7,103 | (5,684 | ) | |||||||||||||||||||||||
Derivatives
not designated as hedging instruments
|
||||||||||||||||||||||||||
Futures
contracts
|
Other
Assets
|
$ | 40,530 | $ | 333 |
Other
Liabilities
|
$ | 21,356 | $ | 190 | $ | 61,886 | $ | 143 | ||||||||||||
Total
return swaps
|
Other
Assets
|
58,395 | 5,564 |
Other
Liabilities
|
12,473 | 1,852 | 70,868 | 3,712 | ||||||||||||||||||
Currency
swaps
|
Other
Assets
|
- | - |
Other
Liabilities
|
18,071 | 315 | 18,071 | (315 | ) | |||||||||||||||||
Foreign
currency forward contracts
|
Other
Assets
|
54,768 | 1,493 |
Other
Liabilities
|
60,924 | 5,317 | 115,692 | (3,824 | ) | |||||||||||||||||
Mortgage
backed securities TBA
|
Other
Assets
|
63,937 | 648 |
Other
Liabilities
|
- | - | 63,937 | 648 | ||||||||||||||||||
Other
reinsurance derivatives
|
Other
Assets
|
- | - |
Other
Liabilities
|
- | 541 | - | (541 | ) | |||||||||||||||||
8,038 | 8,215 | (177 | ) | |||||||||||||||||||||||
Total
Derivatives
|
$ | 9,457 | $ | 15,318 | $ | (5,861 | ) |
(1)
|
Recognized
as a foreign currency hedge under SFAS
133.
|
Amount
of Gain or (Loss) on Derivatives Recognized in
|
|||||||||||||||||
Comprehensive Income (Loss) | Net Income | ||||||||||||||||
Derivatives
Designated as Hedging Instruments
|
(Effective Portion) | (Ineffective Portion) | |||||||||||||||
For the Three Months Ended |
For
the Three Months Ended
|
||||||||||||||||
June
30, 2009
|
June
30, 2008
|
Location
|
June
30, 2009
|