IPO Filing: Flagstone Reinsurance

Flagstone Reinsurance Holdings Limited has filed to come public via an IPO under the "FSR" ticker on NYSE.  It has noted $175 million in share sales to be the amount, but that is for filing purposes only.  The underwriting group is rather large with Lehman & Citigroup as the lead underwriters and others in the syndicate are as follows: JPMorgan, Credit Suisse, Wachovia, KBW, Dowling & Partners, Fox-Pitt Kelton, & Cochran Caronia Waller.

This Bermuda-based re-insurer writes primarily  property, property catastrophe and  short-tail specialty and casualty reinsurance.  It diversifies its risk zones by geographic diversification as well.  It claims that substantially all of its reinsurance contracts contain loss limitation provisions such as fixed monetary limits to our exposure and per event caps; and specializes in underwriting low-frequency and high severity risks where it has enough data to justify the coverage. Its specialty lines include aviation, energy, accident and health, satellite, marine and workers’ compensation catastrophe.

Flagstone has raised approximately $850 million through three closings of a private placement of common shares and the issuance of debentures. Through the year ended December 31, 2006, it had $302.5 million in gross premiums written, of which $219.1 million was property catastrophe reinsurance.  A.M.Best has affirmed an "A-" credit rating (excellent) to its insurance exposure and financial strength.

Lehman (LEH-NYSE) owns some 22.1% of the company, but since Lehman has a market cap of over $30 Billion you cannot really consider this a true backdoor play or a huge "unlocking of value" for Lehman that would make a significant ‘investable’ contribution to its balance sheet.  Other key ownership is followed by Haverford wiuth 13.9% ownership, and followed by Silver Creek entities with 13.7% ownership.

Jon C. Ogg
March 6, 2007