Flagstone Re: Gustav, Ike Losses Around $85 Million, Investment Commentary

September 17, 2008

Bermuda-based Flagstone Reinsurance Holdings Limited announced that its preliminary estimate of claims relating to its exposure to Hurricane Gustav are currently expected to be approximately $30 million, and exposure to Hurricane Ike are currently expected to be approximately $55 million.

The estimates are all “net of reinstatement premiums,” said the bulletin. Flagstone Re added that the “loss estimates are based on its proprietary modeling analysis, the assessment of individual treaties and client data. These preliminary loss estimates will be refined as additional information is received from cedants. Because these are early estimates there exists the possibility of significant revisions as further data becomes available.”

Flagstone Re also commented on its current investment posture. The Company said its strategy is to “allocate across multiple asset classes in order to achieve superior risk adjusted total returns in the medium term. Because these allocations include several global equity indices, and commodities, Flagstone’s total return for Q3 2008 as of today is approximately -4 percent. In accordance with the Company’s accounting policy the unrealized mark to market gains and losses emanating from its investment portfolio are recorded through net income rather than as an adjustment to book value through other comprehensive income.”

The bulletin added: “Flagstone has modest exposure to several specific situations that are concerning the market. Specifically, Flagstone has zero credit or counterparty exposure to Lehman Brothers. Regarding further counterparty and credit exposure, Flagstone has less than $1 million of net exposure to AIG bonds and receivables, less than $1.5 million of Wamu structured mortgage securities, no sub-prime securities and less than $2 million of Alt A securities. Furthermore, Flagstone does not hold any FNMA or FHLMC preferred or common shares.”

Source: Flagstone Re – www.flagstonere.bm

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