Flagstone Re said poor investment results were primarily responsible for a 2008 fourth-quarter net loss of $75.6 million, or 89 cents per share, compared to 2007 fourth-quarter net income of $51.4 million, or 60 cents per share.

For all of 2008, the Bermuda-based reinsurer and specialty insurer reported a net loss of $187.3 million, or $2.20 per share, compared to net income of $167.9 million, or $2.05 per share in 2007.

Net realized and unrealized investment losses for the 2008 fourth quarter totaled $111.8 million, compared to losses of $1.6 million for the 2007 fourth quarter. For the year, net realized and unrealized investment losses totaled $272.2 million, versus gains of $17.2 million in 2007.

Total return on invested assets for the quarter was minus-7.8 percent, down 9.2 percent from 2007 fourth-quarter return on invested assets of 1.4 percent. For all of 2008, return on invested assets was minus-13.9 percent, down 20.9 percent from a 2007 figure of 7 percent. The company said the change in returns for both the quarter and the year “is primarily due to the significant declines in the global equity, bond and commodities markets in 2008.”

Such declines, it said, are attributable to “the broader deterioration and volatility in the credit markets, the widening of credit spreads in fixed income sectors, significant failures of large financial institutions, uncertainty regarding the effectiveness of governmental solutions and the lingering impact of the subprime residential mortgage crisis.”

Regarding investment performance in general, Flagstone Re Chairman Mark Byrne said in a statement, “We had no material exposure or losses from subprime or Alt-A securities. Our losses were primarily due to our previous 23 percent allocation to global equity indices and the worst performance of those equities in more than a century.

“When our internal circuit breakers were tripped, we made the decision to reallocate our asset portfolio in October to a very risk-averse portfolio where we remain today. Our investment portfolio is now conservative, allowing us to take advantage of the hardening cycle in the reinsurance markets. We expect to stay conservatively positioned on the investment side in 2009, with over 90 percent of our assets in high grade fixed income securities.”

Net premiums written for the 2008 fourth quarter were $84.5 million, up from the 2007 fourth-quarter figure of $55.8 million. For the year, net premiums written increased to $694.7 million in 2008 compared to $527 million in 2007.

Net premiums earned jumped to $188.5 million in the 2008 fourth quarter from $125.3 million in the 2007 fourth quarter. For all of 2008, net premiums earned increased to $654.2 million from $477.1 million in 2007.

The 2008 fourth-quarter combined ratio deteriorated by 11.5 points rising to 75.9, up from 64.4 in the 2007 fourth quarter. For the year, the combined ratio climbed to 89.4 from 72.8 in 2007.

David Brown, CEO of Flagstone Re, said in a conference call that the quarterly results were “pleasing from an underwriting perspective.” He noted the company saw $46.9 million in underwriting profit despite a net adverse $25.5 million development on Ike losses.

Mr. Brown noted in a statement, “Our net combined Ike and Gustav loss now stands at $140.2 million up from $115.0 million at the end of [the 2008 third quarter]. Although we are pleased that this adverse development of approximately 22 percent is less severe than that reported by many of our peers, we are nevertheless disappointed at this development. The increase comes predominantly from Midwestern clients who have been late in reporting losses as they deal with what was a very unusual event.”

Mr. Brown noted that the company produced underwriting profits of $73.4 million for the year, and said the year was one of the worst ever for natural catastrophes.