Oxbridge Re Holdings Limited, Q4 2022 Earnings Call, Mar 30, 2023
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Ladies and gentlemen, thank you for your patience our conference will begin momentarily.
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Good afternoon, welcome to Oxbridge Re's fourth quarter and year end 2022 earnings call. My name is Joe 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 right.
And Chief Executive Officer, Jay bathroom, and Chief Financial Officer, and corporate Secretary rented and Timothy <unk>.
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 via webcast available via webcast replay until April 13, 2023 on the Investor information section of the Oxbridge re website at Www Dot spiritually dotcom.
Now I would like to turn the call over to Brendan Kennedy Chief Financial Officer of Oxbridge re who will provide the necessary cautions regarding the forward looking statements that 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 its future financial performance.
These forward looking statements are made pursuant to the private Securities Litigation Reform Act.
1995.
Such as anticipates estimates expects.
Intends plans projects and other similar words and expressions are intended to signify forward.
Forward looking statements forward looking statements are not guarantees of future results.
And conditions, but rather are subject to various risks and uncertainties.
Detailed 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-K filed with the SEC Form 10-Q filed in previous quarters.
The occurrence of any of these risks and uncertainties could have a material adverse effect on the company's business financial condition and the <unk>.
Volatile CFO at Linden, which insulin can cause significant market price and trading volume fluctuation for securities any forward looking statements.
On this conference call speak only as of the detailed this conference cool Unaccepted 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 now I'd like to turn the call over to chairman, President and Chief Executive Officer, Jim.
Jay.
Thank you Brendan 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, Oxford <unk> Holdings Limited was founded 10 years ago with a mission to provide reinsurance solutions, primarily to property and casualty insurers in the Gulf Coast region of the United States.
We are very clear we are very proud to be celebrating our 10th anniversary this year.
Through our licensed reinsurance subsidiary Oxbridge reinsurance limited and our licensed reinsurance sidecar Oxbridge re Ns, we write fully collateralized policies to cover property losses from specific catastrophes and because we were 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 efficiently analyze the risk return profile of reinsurance contracts.
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 you May recall in 2021, we launched Oxbridge acquisition Corp, a special purpose acquisition company or spec focused focusing on investing in disruptive technologies subsequent to Europe Oxbridge acquisition analysis intention to form a business combination with <unk>, a private aviation and artificial intelligence.
Company offering factual artificial ownership.
<unk> cards and crop brokerage and charter services. The transaction is expected to enable <unk> to continue its growth strategy of AI software development and its aircraft fleet expansion.
We expect the combination will be completed late in the second quarter.
Yes.
In March we continue to diversify our business with the formation of our new subsidiary <unk>, Inc. By issuing tokens that represent fractional interests in reinsurance contracts shorts plus offers an alternative investments investment opportunity that leverages key qualities of blockchain technology to create a well designed digital security in March.
<unk> commenced an offering of $5 million of these tokens, which assuming though casualty losses to property insurers by the company.
Are expected to generate a return of up to 196%. After three years I will have more to say about these transactions later in the call.
Regarding our investment portfolio, we maintain an opportunistic.
We remain opportunistic and will deploy our capital at favorable return opportunities arise that can contribute to the growth of our capital surplus and our licensed reinsurance subsidiary overtime.
Currently the clearly the current volatility volatility being experienced in the global financial markets is impacting our investment portfolio and our net income.
Having said this we continue to stay in close touch with our markets of the insurance industry.
To ensure we continue to deliver value to our shareholders over the long term, we remain highly opportunistic about the prospects of our core reinsurance business at two new transactions I mentioned earlier I look forward to keep our keep you appraised of our progress in the quarters to come I will now turn it 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.
With respect to net premiums earned net premiums earned for the year ended December 31, 2022 increased marginally to 995000 from 965000 due primarily to the acceleration of premium recognition on two of our units one reinsurance contracts.
Limit losses due to the impact of Hurricane E on during 2022.
Well of higher rates on reinsurance contracts in 2022, when compared to the prior year.
Well wouldn't it investments.
The income rules.
In 2022 to 201000, primarily due to administrative administrative fee income related to our stock investments, we experienced a small 35000 unrealized loss in 2022.
Value change in our equity investment in Oxbridge acquisition Corp, when compared to the prior year, we recognized a $9 2 million of unrealized gains. We also recognize it's 350000 negative change in the fair value of equity Securities as of December 31st 2022 down from 767.
The negative change in the prior year.
Due to the challenge and global capital markets. We all experience all of these factors taken together resulted in total revenues declining to 800000 in 2022 compared to $10 2 million in the prior year. The decrease is primarily due to the significant decline in the unrealized gain on our investment and walks back too.
Total expenses, including loss and loss adjustment expenses policy acquisition cost and general and admin expenses for the year ended December 31st 2022, with $2 5 million up from $1 6 million in 2021. The increase is due primarily to the approximate.
One 1 million loss included in 2022 resulted from the.
Triggering of loss limit onto reinsurance contracts for market Ian and.
In addition, we have general Ohio.
Administrative expenses this year due to inflationary cost pressures.
The appointment of a new head of special projects.
Largely due to the loss and loss adjustment expenses in 2022 other significant change in the unrealized.
Pollution or spark into and its way too we experienced a net loss of $1 8 million or 31 cents per share in 2022 compared to net income of $8 6 million in fiscal 2021.
With respect to our financial ratios as we have discussed before in 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.
Profitability by examining our loss ratio acquisition ratio expense ratio, our combined ratio.
Our loss ratio, which measures underwriting profitability is the ratio of loss and loss adjustment expenses incurred to net premiums earned.
The loss ratio increased to 107, 8% for the year ended December 31st 2022, compared to 54% in the prior year again due to the limit loss suffered through reinsurance contracts, which was partially offset by higher denominator in net premiums earned.
Our acquisition cost ratio, which measures operational efficiencies compares policy acquisition cost net premiums in.
The ratio remained stable at 11% in 2022 compared to the prior year.
Our expense ratio, which measures operating performance compares policy acquisition costs, and general and admin expenses with net premiums.
The expense ratio increased 152, 1%.
Increased to 153, 1% for the year ended December 31, 2022 from 146, 2% in the prior year, primarily due to the higher general and administrative expenses in flight.
Our combined ratio, which is used to measure underwriting performance is the sum of the loss ratio on the expense ratio combined ratio increased to 269% in 2022 from $162 six was that in 2021 due again to the increase in the loss ratio, resulting from hurricane.
Losses, as well as increased general and admin expenses.
Notably into live balance sheet or investment portfolio increased to 642000 at December 31st 2022 from <unk> 77 in the prior year due primarily to net purchases of equity securities during the year, partially offset by unrealized losses, we experienced due to the Florida capital markets, while the investments which is the investment in our spot.
Kris marginally due to the positive change in fair value of our investment.
Ox, which acquisition Corp, cash and cash equivalents unrestricted cash and cash equivalents decreased to $9 million at December 31st 2022, compared with $5 4 million at December 31st 2021 two.
Shareholders equity at year end was approximately $50 million or $2.60 per common share.
Now I'll turn the call back over to Jim to wrap up before we take your questions Jay.
Thank you Brenda and December last year, we were pleased to have Dr. <unk> join our team as head of special projects <unk>, a specialist in digital innovation and blockchain technologies with significant experience in digital architecture strategy artificial intelligence and other leading edge technologies.
In late January we announced the incorporation of assurance plus wholly owned subsidiary of Oxbridge re.
Sharp plus led by Dr. <unk> will issue <unk> reinsurance securities indirectly represent <unk> interests in reinsurance contracts underwritten by our reinsurance subsidiary token holders will receive a return of the performance of its underlying reinsurance contracts and assets sharp plus for that market type access.
Through our reinsurance of alternative investment opportunity that leverages, the key qualities of blockchain technology to create a well designed digital security.
Our tokens will enable investors to participate and have their interest permanently at transparently recorded on a blockchain ledger these opportunities where typically unavailable to the investors in the past due to the high barriers to entry.
We follow up follow up the launch assurance plus with the commencement of our first offering of up to $5 million of tokens.
March 27th this year.
Proceeds of this offering will be used to.
We used by Oxbridge investment collateralized reinsurance contracts, assuming there are no casualty losses reinsured by Oxbridge token and restaurant is expected to receive a significant start up up to a 196% at the end of three years. However, we plan to lesser tokens on Ats exchange, giving investors access to liquidity in the interim we.
We believe our investment insurance plus will further diversify our business and enhance shareholder value over the long term.
More on this can be found on our website at <unk> plus dot com.
Following this exciting investment opportunity in late February we utilized our specialist we utilize a special purpose acquisition company, Oxford acquisition Corp to embark on a business combination with jet token Inc. A company offering fractional aircraft ownership jet card.
Aircraft brokerage at charter services through its fleet are private aircraft, our wholly owned subsidiary Oxbridge reinsurance limited as a lead in Russia at the spark sponsor and holds the equivalent of one 4 million shares of the cost basis of approximately $2 $3 million.
Closing of this transaction the investment will have a value of $14 $2 million not including the value of approximately $3 1 million warrants. We beneficially owned in the stack. These exciting new investment opportunities further diversify our business and low profile.
Positioning us to capitalize on growth in emerging technologies. We are very excited about the future value of these investments and potentially they bring and the potential they bring to our shareholders. So in closing our business is well diversified our investment insurance plus positions us in a new leading edge technology business.
Further diversifying our business our investment to the spec is progressing according to plan, we remain debt free and we have a strong balance sheet and more importantly, we have real opportunity based on a viable business model that is based on diversification.
Opportunistic not only in our core business, but also our broader view of the market with that we're ready to open the calls for best part of my.
Our questions operator, please provide the appropriate instructions.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.
Tom will indicate your line is in the question queue.
You May press Star two if you would like to win.
A question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Please poll.
Poll for questions.
Our first question comes from the line of tense.
Okay with capital Securities. Please proceed.
Hey, Brendan J, just want to make sure I heard you correctly on the spec investment there you are.
We'll own about one 4 million shares in AC which is worth about $4 $2 million in that neighborhood. Your cost base is about $2 3 billion and you have $3 4 million warrants exercised.
What price.
Yeah, Ken This is Brendan I think well I think one of your numbers weren't accurate. So although of course the basis is two point.
At $2 $3 million.
One 4 million shares roughly and at closing those shares would be would.
$14 million.
No no not formula might be get that four 4 million.
In terms of new Warren we have.
As disclosed in the press release and the 10-K is the way we have just over 3 million warrants.
The warrants.
Strike at $11 50.
Given the typical spot Lawrence strike.
10% above the the.
The IPO price.
Kind of ready to put a value to boost yet, but presumably if the business.
Combination goes well.
Yes, the upfront value.
Based upon where the warrants or if it's the same warrants that are trading on the exchange.
What's that value.
Approximately $210000 at this juncture so.
Yeah.
And in regards to what is the percent of ship that you actually own of the spak itself.
So.
Just well Oxbridge owns about 49% of the sponsor and the sponsor Owens.
Typically 20% of the <unk>.
The spot because there was some redemptions in the spot that we don't get too much into this bucket, but there was some redemptions on the stock.
Right now I believe the sponsor owns about 68% of the back.
And so on business combination booth number sort of get a little bit.
Hard to predict what would that encourage you to do we did file an S four but sort of like lease and therefore the spot that is on the on the SEC website sort of likely though what what the what it could then will look like a few of them in all star shareholders season, which shows the percentage that is back with one if everybody redeem.
There's some people redeem if nobody redeems pointed out that will give you a better idea of.
How it will look on on closing.
Yeah.
I thought it was very encouraging.
The monies that you were able to remain once you had that one year period up and I thought it was very encouraging how much the spec actually had going back to on the reinsurance tokens.
Youre, saying the first offerings about $5 million is that a is that.
Obviously, that's private placement and how does Oxford, you get paid on that.
Yeah.
So yeah, we are attempting to raise approximately $5 million so.
<unk>.
Oxbridge.
All of that.
Those tokens will those tokens the monies that comment Oxfords will issue tokens, Oxford she'll take a small management fee off the top and then in every successful year, we will we will share in the wheelchair.
And the profitability of the contracts, but the way we are.
The waiver encouraging in Russia.
To be part of our story over here is we're saying the investor will get the first 20% of return and then they will share the remaining.
The remaining return with us on an 80 20 basis.
So.
It's highly accretive to somebody to invest.
Yeah.
Yeah.
What is the cost incurred to oxbridge on that.
Majority of the costs are being we're kind of doing a lot of this in house. So the cost we've been able to develop this entire platform on an extremely low budget at this point because we're doing all of this majority of it is done in house of course, we have some attorney fees and audit fees and so on but.
<unk>.
Those have industrials have not be insignificant.
Cool.
Seems like the company is.
We're really starting to move forward and you have to vary.
I think neat things that are unfolding in the last 60 90 days 30 to 90 days, so look forward to see how things unfold.
Yes.
Very excited about this thank you Kat.
Yeah.
Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one on yourself on key pad.
Yeah.
And gentlemen, there are no further questions at this time.
And I would like to turn the call back to Mr. Martin for 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 I, especially want to express our gratitude to the Oxbridge team will continue to leverage the significant experience to manage and build our business. During these challenging times, we look forward to updating you on our next call.
And 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.
Thank you Sir.
This concludes today's conference you may now disconnect your lines at this time. Thank you for your participation.