Q3 2022 Oxbridge Re Holdings Ltd Earnings Call

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Good afternoon, welcome to Oxbridge Re's third quarter 2022 earnings call. My name is Tara and I will be your conference. Operator. This afternoon. At this time, all participants will be in a listen only mode.

Joining us for today's presentation is Oxbridge Re's, Chairman, President and Chief Executive Officer, Jay Madhu, and Chief Financial Officer, and corporate Secretary Rendell Timothy following their remarks, we will open up the call for your questions I would like to remind everyone that this call is also being broadcast live and available for replay until November .

'twenty eight 2022 on the Investor information section of the Oxbridge re website at Www Dot Oxbridge re dot com.

Now I would like to turn the call over to rent and Timothy Chief Financial Officer of Roc spread re who will provide the necessary cautions regarding the forward looking statements will be made by management during this call.

Yeah.

Thank you operator during today's call there will be forward looking statements made regarding future events, including Oxbridge re's future financial performance.

These forward looking statements are made pursuant to the private Securities Litigation Reform Act of 1995.

Words, such as anticipate estimate.

<unk> expects intends plans projects and other similar words and expressions are intended to signify forward looking statements.

Forward looking statements are not gone to use for future results and conditions, but rather are subject to risks risks and uncertainties.

A discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward. Looking statements is included in the section entitled Risk factors contained in our Form 10-Q filed on September 30 of 2022.

I know our Form 10-Q filed today with the Securities and Exchange Commission the occurrence of any of these risks and uncertainties could have a material effect.

One of the company's business financial condition, and a volatile holdings, which in turn can cause significant market price driven volume truck fusions will skew to.

Any forward looking statements made on this conference call speak only as of the date of this conference call.

Except as required by law the company undertakes no obligation to update any forward looking statements contained on this call or in any company presentation, even if the company's expectations or any related events conditions or circumstances change no I would like to turn the call over to our chairman President and Chief Executive Officer, Jim <unk>.

Jim.

Thank you Brenda and welcome everyone. Thank you for joining US today before we start I would like to take a moment to provide a brief overview of our company.

Oxbridge re holdings limited was founded over nine years ago with a mission to provide reinsurance solutions, primarily to property and casualty insurers in the Gulf Coast region of the United States.

Through our licensed reinsurance subsidiary Oxitec reinsurance limited and our licensed reinsurance sidecar Oxbridge re at S. We rightfully collateralized policies to cover property losses from specific catastrophes and because we write fully collateralized contracts. We believe we can compete effectively with large carriers with.

We specialize in underwriting low frequency high severity risks, where we believe sufficient data exists to effectively analyze the risk return profile of reinsurance contracts.

Our objective is to achieve long term growth and book value per share by writing business on a selective and opportunistic basis that will generate attractive underwriting profits relative to risk.

As previously communicated we are also very pleased to have completed our investment in Oxbridge acquisition Corp.

Early August last year.

A special purpose acquisition company or spec focused on disruptive technology, we bill.

Aleve innovators and entrepreneurs.

Entrepreneurs and such destructive businesses, such as <unk>, blockchain and short tech and artificial intelligence cleanup Chi.

A significant opportunity to build value for our investors over the long term, we look forward to keeping you updated on its progress.

Regarding our investment portfolio, we remain opportunistic and will deploy our capital at favorable return opportunities arise that could contribute to the growth in capital and surplus and our licensed reinsurance subsidiaries overtime.

Overtime.

Nearly the current volatility volatility being experienced in the global financial markets is impacting our investment portfolios with unrealized.

Losses, so far in 2022.

With a negative impact of the last two years under the COVID-19 pandemic fully receding.

Economies and businesses around the world that we're faced with inflationary cost pressure in supply chain disruptions. These in turn have resulted in significant declines over the last few months in equity and capital markets around the world and while our business is not generally impacted by these economic challenges the equity market declines do have an impact on our net income due to <unk>.

Unrealized losses on our equity portfolio as well as unrealized losses on investment in the stack as Brendan will shortly our clients.

Having said this we continue to stay in close touch with our markets on the industry insurance industry to ensure we continue to deliver value to our shareholders over.

Over the long term, we remain highly optimistic about the prospects for our core reinsurance business, our investment to the spec or Oxbridge acquisition Corp.

The largest impact on our results in the third quarter of this year. It was the devastation caused by hurricane yet, which triggered limit losses on our reinsurance contracts our thoughts our thoughts go out to all those affected by this kept a catastrophic event.

I'll now turn things over to Randy to take us through our financial results.

Thank you Jay I would like to remind you that our typical contract period is from June one to may 31st of the following year.

With respect to net premiums earned net premiums earned for the three and nine months ended September 30th when they're playing through increased due primarily to the acceleration of premium recognition when two or four reinsurance contracts due to the limit losses suffered resulting from the impact of hurricane Ian as well as higher rates on our reinsurance contracts compared to the prior year.

Our net investment income and other income rose moderately through the first nine months of the year, primarily due to administrative fees income related to our spec investment we experienced $1 3 million unrealized loss.

In the third quarter due to the negative fair value change in our equity investment in Fox, which acquisition Corp, who doesn't have any negative unrealized loss of 986000 through the first nine months of the year.

In last year's third quarter, we had recognized at some point 1 million unrealized gain one of the main factors in the change in net income this year compared to prior year investment continued continues to be booked at a substantial discount due to the current illiquidity of our investment in the snack wheel.

Recognizing a 355000 negative change in the fair value of our equity Securities at September 5th year, 2022 due largely to the challenge and global capital market environment, We are all experiencing.

All of the factors taken together resulted in total revenues declining to negative six six for the first nine months of 2022 compared to $8 2 million last year, which I mentioned included $7 1 million unrealized gain on investments in almost back to lexicon is included in the loss and loss adjustment expenses policy acquisition cost and general admin.

And since we're up through the first nine months of 2022, due primarily to the $1 1 billion loss incurred in the third quarter.

Got it from the treatment of the limit loss on two insurance reinsurance contracts as a result of Hurricane yen. In addition, we have experienced higher general and admin expenses. This year due to personnel costs and inflationary cost pressures.

With respect to net income or loss largely due to hurricanes in loss and loss adjustment in the third quarter of 2022, and the significant unrealized loss on this box investments in the third year in the third quarter, we experienced a net loss of $2 2 million or 37 cents per share in the third quarter and.

$2 5 million or 43 per share for the nine months period ended September 15, 2022, compared to net income of $6 five and 7 million in the comparable period last year.

With respect to our financial ratios as we have discussed before our investor calls, we use various measures to analyze the growth and profitability of our business operations for our reinsurance business, we measure underwriting profitability by examining our loss ratio acquisition ratio expense ratio and combined ratio.

Our loss ratio, which measures underwriting profitability is the ratio of loss and loss adjustment expenses incurred to net premiums good.

The loss ratio increased to 181, 6% on Windows seven eight.

8% for the quarter and nine month period ended September 32022, respectively, compared to 29% on one or seven 8% for the prior year respective periods. The increases are really due to the limit losses suffered on two of our reinsurance contracts as a result of hurricane Ian partially offset by a higher demand.

We need to in net premiums earned.

Oh acquisition cost ratio, which measures operational efficiency compares policy acquisition costs and that prevents this way should decrease.

At 11% in the third quarter, an increase much notice to 11, 1% for the first nine months of 2022 compared to 11% in the prior year.

Year periods.

Our expense ratio, which measures operating performance compares policy acquisition costs, and general and admin expenses with net premiums in the expense ratio decreased to 65, 7% and 116, 6%.

For the fourth on the nine months ended September 30 of 2023, respectively compared to $86 eight and 129% for the prior year respective period.

The decreases are due.

Due to a higher denominator in that perhaps others.

There's also a premium acceleration, partially offset by increased policy acquisition cost and general and administrative expenses in 2022 compared to the prior year or combined ratio, which is used to measure underwriting performance is.

Some of the loss ratio and the expense ratio the combined ratio increased to 47, 2% and 224, 4% for the quarter and nine months period.

And at September 30 of 2022, respectively, compared to $2 24, 4% and a 143, 8% for the prior year respective period.

The increase was again due to the increase in the loss ratio.

During the third quarter, resulting from Hurricanes.

Net loss as well as increased general and administrative expenses.

Turning to the balance sheet or investment portfolio increased to 624000 at September 30 of 2022 from 577000 at year end, primarily due to the net put yourself equity securities, partially offset by unrealized losses, we experienced due to the volatile capital markets are the investments decrease as mentioned you didn't.

Negative change in the fair value of our investment at Oxbridge acquisition Corp.

Cash and cash equivalents unrestricted cash and cash equivalents decreased to $4 4 million at the.

Most of the tier 2022, compared with $5 4 million at December 31st two into 'twenty one.

Shareholders' equity at quarter end was $14 3 million.

Or to $2 47.

Book value per share I'll know turn the call back to Jay to wrap up before we take your questions.

Thank you Brenda as previously mentioned through our reinsurance subsidiary, we look to invest close to 50% of our equity last year was no different between the reinsurance contracts and through investments on oases sponsor limited the sponsor of the spec we have stuck to that resolved while oximetry as a lead investor in the spak stomach risk capital was laid off two additional.

And restaurants on the sponsor at a higher share price. The result, being that despite the fact that oximetry contributed approximately 34, 7% of the risk capital.

Rich economics are significantly maximize and that it owns approximately 49, 6% and 63, 1% of the ordinary shares at preferred shares respectively. After sponsor, which tracks our class B shares and private placement warrants, respectively, and thus back that's our investment further diversifies, our business and positions us to <unk>.

<unk> growth in the emerging disruptive technologies being developed.

We're very excited about the future value of our investment and the potential that Oxford acquisition Corp can bring to our shareholders.

Looking ahead, we remain optimistic about the long term prospects of our business as always we continue to evaluate additional opportunities for growth as well as further diversification of our risk profile. So.

So in closing our business is well diversified our resolve to limiting our exposure to reinsurance contracts. This year helps significantly and lowering the potential loss by catastrophic damage caused by Hurricanes, Ian and Nicole.

Our investment in an Oxford acquisition office on entry into disruptive technology businesses with a focus on blockchain and short tech artificial intelligence and clean energy that investment continues to be booked at a substantial discount to current fair market value. We remain debt free we have a strong balance sheet with solid cash position and most important.

We have real opportunity based on a viable business model that is based on diversification.

We remain opportunistic not only for our business, but also for our broader view of the market.

With that we're ready to open the call for questions. Operator, please provide the appropriate instructions.

Thank you Sir the floor is now opened for questions.

If you do have a question. Please press star one on your telephone keypad at this time.

You are using a speaker phone and we ask that while posing your question you pick up your handset to provide the best sound quality.

Again, if you do have a question or comment. Please press star one on your telephone keypad at this time, please hold a moment, while we poll for questions.

We will take our first question from Ken <unk> with Capitol Securities. Please go ahead.

It appears we lost Mr. Engle can you guys. Just a moment, we will see I think he is back up for a question.

And we will return to Mr. <unk>.

Your line is now open thank you Sir.

Thank you, Hey, Brendan Hey, Jay can you extra.

Extrapolate a little bit further on the unlock unrealized losses in both the stack as well as in the investment portfolio.

Secondly, what about the any losses or yeah limit losses on both Ian and Nicole are there is there going to be anything else coming on down bolsters Hurricanes and thirdly, and perhaps most specifically you all.

On file for an extension on the spec.

I think for another I think nine months I think it was where do we stand on that.

Yeah, So Ken I'll take the I'll take the Hurricane question first so.

Hurricane Ian and Nicole Devlin catastrophic for the industry.

Various different folks Rms and Corelogic I've come out, saying that the losses industry losses are somewhere between 50 to 75 billion.

While this was a huge catastrophic loss for the industry Oxbridge didn't have a substantial loss of Oxford, you only lost about $500000 of capital during the year and the reason for that was our resolve to not invest too much in reinsurance contracts. So while it was a loss for us it could have been.

A lot larger had we had invest it to to a higher degree.

So in other words quantified there there's nothing else coming further from both those hurricanes is quantified.

That is correct.

Got it cool thank you.

In in respect to the losses or the Mark the Mark to market that we have we have taken and that's exactly what it is they're mark to market losses.

Based on based on the trading of the spark based on where we are with that.

We thought it prudent to take to take a slight haircut on the on the market value of the spec other all the other shares rather so that's basically what youre seeing so it's not an actual loss. It is just a mark to market draw down as what Youre seeing there.

Okay and my final question.

I'll have filed for an extension on the spec I don't believe I've seen an 8-K on that as of yet did you get the I think it was an eight or nine month extension on that.

Yes.

We just filed we just filed documents with the SEC. This evening after market close.

But we did get a nine month extension, which to US I think is excellent because it gives us another nine months to work through the opportunities that are afforded to us.

Good I appreciate the color there. Thank you.

Yep.

Thanks, Ken.

As a reminder, if you would like to ask a question you May press star one on your telephone keypad at this time.

Again, if you would like to ask a question or comment you May press star one on your telephone keypad now.

Once more if you would like to queue up for a question you May press star one at this time.

At this time. This concludes our question and answer session I would now like to turn the call back over to Mr. Madhu for his closing remarks.

Thank you for joining us on today's call before we wrap up I want to thank our employees business partners and investors for their continued support.

Especially want to express my gratitude to the Oxbridge team, who continues to leverage their significant experience to manage and build our business. During these challenging times, we look forward to updating you on our next call. If you have any further questions. Please contact us anytime. Thank you again for your time and attention today and your interest in Oxbridge operator.

Before we conclude today's call I would like to remind everyone that a recording of today's call will be available via replay late report will be available for replay via a link available at the investors section of the company's website. Thank you for joining us today for our presentation. You may now disconnect and have a great day.

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