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Edited Transcript of OXBR earnings conference call or presentation 14-May-19 8:30pm GMT

Q1 2019 Oxbridge Re Holdings Ltd Earnings Call

GEORGE TOWN Jun 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Oxbridge Re Holdings Ltd earnings conference call or presentation Tuesday, May 14, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Sanjay Madhu

Oxbridge Re Holdings Limited - Chairman, President & CEO

* Wrendon Timothy

Oxbridge Re Holdings Limited - CFO & Secretary

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Conference Call Participants

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* Kent E. Engelke

Capitol Securities Management, Inc. - Chief Economic Strategist & MD

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Presentation

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Operator [1]

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Good afternoon. Welcome to Oxbridge Re's First Quarter 2019 Earnings Call. My name is Christie, and I will be your conference operator this afternoon. (Operator Instructions)

Joining us for today's presentation is Oxbridge Re's President and Chief Executive Officer, Jay Madhu; and Chief Financial Officer and Corporate Secretary, Wrendon Timothy. (Operator Instructions)

I would like to remind everyone that this call is also being broadcast live via webcast and available via webcast replay until June 14, 2019, on the Investor Information section of the Oxbridge Re website at www.oxbridgere.com.

Now I would like to turn the call over to Wrendon Timothy, 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. Sir, please proceed.

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Wrendon Timothy, Oxbridge Re Holdings Limited - CFO & Secretary [2]

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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 anticipates, estimates, expects, intend, plan, project and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the SEC. The occurrence of any of these risks and uncertainties could have a material adverse effect on the company's business, financial condition and results of operations. Any forward-looking statements made on this conference call speak only as of the date of this conference call. And except as required by law, the company undertakes no obligation to update any forward-looking statements contained on this call or in any company's presentation even if the company's expectations or any related events, conditions or circumstances change.

Now I would like to turn the call over to our Chairman, President and CEO, Jay Madhu. Jay?

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Sanjay Madhu, Oxbridge Re Holdings Limited - Chairman, President & CEO [3]

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Thank you, Wrendon, and welcome, everyone. Thank you for joining us today. As we do each quarter, before we get into our results, I would like to take a moment to provide a brief overview of our company.

Oxbridge Re Holding Limited was founded over 6 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, Oxbridge Re Insurance Limited, and licensed reinsurance sidecar, Oxbridge Re NS, we write fully collateralized policies to cover property losses from specific catastrophes. And as some of you already know, because we write fully collateralized contracts, we are able to complete -- compete effectively with large carriers. We specialize in underwriting low-frequency, high-severity risks where we believe sufficient data exist to efficiently analyze the risk-return profile of insurance contracts. Our objective is to achieve long-term growth in book value per share by writing business on a selective and opportunistic basis that will generate attractive underwriting profits relative to risk.

Regarding our investment portfolio, we remain opportunistic, and we'll deploy our capital when favorable return opportunities arise, which we believe, in turn, will drive our results through supplemental investment income. That being said, our focus and top priority remains on profitable underwriting.

With that overview now behind us and before we go into our results for the first quarter of 2019, I will now turn it over to Wrendon to take us through our financial results for the period. Wrendon?

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Wrendon Timothy, Oxbridge Re Holdings Limited - CFO & Secretary [4]

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Thank you, Jay. I will now get into our financial results for the quarter ended March 31, 2019.

A point to note is our typical contract period is from June 1 to May 31 of the following year.

With respect to net premiums earned for the first quarter of 2019, net premiums earned decreased $227,000 to nil from $227,000 in the first quarter of 2018. The decrease in net premiums earned was wholly due to the previous acceleration of premium recognition due to full limit losses being incurred in all the company's reinsurance contracts during the quarter ended December 31, 2018, combined with no new contracts written in the current period when compared to the same year ago period.

With respect to net investment income, for the first quarter of 2019, net investment income totaled $63,000 plus $51,000 of change in fair value of equity securities and $3000 of net realized investment gains. This compared with $72,000 of net investment income, which was offset by $172,000 of change in fair value of equity securities and $173,000 of net realized investment losses in the first quarter of 2018.

With respect to total expenses, our total expenses for the first quarter of 2019 including loss and loss adjustment expenses, policy acquisition cost and general and admin expenses were $264,000 compared with $326,000 in the first quarter of 2018. The decrease in expenses was due to no loss or loss adjustment expenses, no policy acquisition cost and a decrease in general and administrative expenses when compared to the prior year period.

With respect to net loss for the first quarter of 2019, net loss totaled $147,000 or $0.03 per basic and diluted share compared with net loss of $211,000 or $0.04 per basic and diluted share in the first quarter of 2018. The decrease in net loss was primarily due to lower general and admin expenses incurred during the first quarter 2019 compared to the year ago period.

Now turning to our financial ratios for the quarter ended March 31, 2019. We use these risk 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 and ILW income earned. Our loss ratio for the first quarter of 2019 was 0%, unchanged from the first quarter of 2018. The loss ratio results were due to no loss or loss adjustment expenses incurred in the quarters ending March 31, 2019 and 2018, respectively.

Our acquisition cost ratio, which measures operational efficiency, compares policy acquisition cost to net premiums earned. The acquisition cost ratio was 0% for the first quarter of 2019 compared with 3.6% for the same year ago period. The decrease in acquisition cost ratio was due to no acquisition cost incurred during the current quarter when compared with quarter ended March 31, 2018.

Our expense ratio, which measures operating performance, compares policy acquisition cost and general and admin expenses with net premiums and ILW income earned. The expense ratio was undefined during the first quarter of 2019 compared with 84% for the first quarter of 2018. The difference in expense ratio was wholly due to a denominator of $0 and net premium earned as recorded during the quarter ended March 31, 2019, when compared with the quarter ended March 31, 2018.

Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio. If the combined ratio is at/or above 100%, underwriting is not profitable. The combined ratio was also undefined for the first quarter 2019 and 84% in the same year ago period. The difference in the combined ratio was wholly due to a denominator of $0 and net premiums earned as recorded during the quarter ending March 31, 2019, when compared with the quarter ending March 31, 2018.

Now turning to the balance sheet. Total investments, which include investments in fixed maturity and equity securities, totaled $213,000 at March 31, 2019, compared to $1.2 million at December 31, 2018. Total shareholders' equity at March 31, 2019, was $8.2 million, down from $8.3 million at December 31, 2018.

At March 31, 2019, cash and cash equivalents and restricted cash and cash equivalents totaled $8 million compared with $11.3 million at December 31, 2018.

Now with that, I'd like to turn the call back over to Jay. Jay?

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Sanjay Madhu, Oxbridge Re Holdings Limited - Chairman, President & CEO [5]

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Thank you, Wrendon. We spent a lot of time on our last quarter call discussing at length the severity and the novelty of the events pertaining to the last hurricane season. So I want to rehash those items again today. However, we do need to acknowledge their occurrence in the fourth quarter of 2018 where we suffered the limit loss. While that's the nature of our business and having said that, we will not deviate from our historically effective method of conservative prudent underwriting. As always, stated, in regards to our underwriting, we do not intend to pursue an aggressive investment strategy and instead, we'll continue to focus our business on underwriting profits rather than investment profits. In a more temperate regular year, our conservative approach will have more than likely indicated a favorable return for the risk we assume as it has in the past years.

As we mentioned on our previous call, during 2018, we have also organized a new subsidiary Oxbridge Re NS to function as a reinsurance sidecar. Going forward, we maintain that the opportunity presented by Oxbridge Re NS would be accretive to shareholder value. In a more common loss-free year, the sidecar gives us the ability to diversify our revenue stream and risk while being able to attract -- able to receive attractive returns. In addition, it also gives accredited investors and avenue to invest alongside us in reinsurance contracts. These contracts have the ability to earn a higher rate of return while taking only reinsurance underwriting risk and not financial market risk, thus, diversifying the sidecar investors' portfolio.

Going forward, we remain cognizant of the need to exercise both caution and patience in identifying new opportunities. Over the long haul, this true -- this tried and true approach has worked favorably for us, and we look forward to more success in the years ahead. To sum it up, we have survived 2 back-to-back severe hurricane seasons in Florida. We have worked on reducing our G&A. We are debt-free. We have approximately $8 million of cash in the bank, a solid team, a public platform that affords growth, among other things, and ensures total transparency. We remain very appreciative of our patient and loyal shareholders who have supported us over the years and continue to support us now. We look forward to updating you on our progress in the upcoming months.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from Kent Engelke with Capitol Securities Management.

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Kent E. Engelke, Capitol Securities Management, Inc. - Chief Economic Strategist & MD [2]

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I actually have 2 different questions. One, you commented about ownership or your loyal shareholders. And the other question is really -- is opportunities outside your core business area. I guess I first ask the second question first. Have you all considered any opportunities outside your core business area?

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Sanjay Madhu, Oxbridge Re Holdings Limited - Chairman, President & CEO [3]

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The reason I hesitate is I want to try to be as transparent as possible but also kind of be -- make sure that I don't trip on something. So I think every CEO, every board should always evaluate opportunity. And it's very evident that this company is a for-profit business. So I think anything that is accretive to shareholder value, we would definitely look at. But it would need to make sense to us.

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Kent E. Engelke, Capitol Securities Management, Inc. - Chief Economic Strategist & MD [4]

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And then that echoes into your loyal shareholders and your ownership structure and the like. Looking at Bloomberg, it's evident that there has been some buying taking place. You have one person bought another 50,000 shares on April 30. You have a company that took about 9.1%, 9.2% stake in it over the past month or so in that neighborhood. I think the insiders control what 55%, 60% in the company. Any comment about the ownership? Obviously, there is no interest like self-interested. Frankly, I'm somewhat relieved that the insiders have such a big stake in the company because that aligns my interest with your interest. Can you comment on any of that?

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Sanjay Madhu, Oxbridge Re Holdings Limited - Chairman, President & CEO [5]

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Yes. The -- we have a really strong shareholder base and we're very happy for that. The other thing is people are always so fixated sometimes on the stock price. But when somebody takes a look at the financials of the books of Oxbridge, our book value as of this call over here is $1.43. And we have $0 debt. So that inherently makes a tremendous amount of sense to most people. But having a solid shareholder base is paramount to us.

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Kent E. Engelke, Capitol Securities Management, Inc. - Chief Economic Strategist & MD [6]

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I'm looking at it. Obviously, there are some people that think there is considerable interest there because why would someone buy a total of 600,000 shares in the last 30 days. And to me that gives me some sort of indication that looking at opportunities set may not be necessarily in your core business areas. So hey, I look forward to seeing how this all is going to unfold.

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Sanjay Madhu, Oxbridge Re Holdings Limited - Chairman, President & CEO [7]

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Yes. Thank you, absolutely. Thank you, Kent.

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Operator [8]

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(Operator Instructions)

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Sanjay Madhu, Oxbridge Re Holdings Limited - Chairman, President & CEO [9]

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I think this would signify that this concludes today's closing remarks. And I would like to say thank you all for today. I especially want to thank our employees, business partners and investors for their continued support. We look forward to updating you on our next call. Operator?

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Operator [10]

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Thank you. That does conclude today's teleconference. We appreciate your participation, and you may all disconnect. Have a great day.