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Results of Operations for the Year Ended December 31, 2019 - American Overseas Group Limited Announces Net Loss Of $3.7 Million and Operating Loss of $9.1 Million For the Year Ended December 31, 2019

HAMILTON, Bermuda, June 26, 2020 (GLOBE NEWSWIRE) -- American Overseas Group Limited (BSX:AORE.BH) (Pink Sheets: AOREF.PK) (“AOG” or the “Company”) today reported consolidated net loss available to common shareholders of $3.7 million, or $80.13 per diluted share, for the year ended December 31, 2019. This compares to consolidated net loss available to common shareholders of $3.2 million, or $69.12 per diluted share, for the year ended December 31, 2018.

The results for the year were driven by losses in the Company’s financial guaranty segment related to commuted policies and Puerto Rico related credits. Book value per share at December 31, 2019 was $1,159.08, a decline from the book value per share of $1,212.83 at December 31, 2018. 

For the year ended December 31, 2019, the Company had an operating loss of $9.1 million, or $196.78 per diluted share, compared to an operating loss of $0.6 million, or $11.97 per diluted share for the year ended December 31, 2018. Operating income for the property and casualty segment in 2019 was $0.9 million, compared to the $2.9 million operating income in 2018 for this segment. The financial guaranty segment had operating losses of $11.0 million for 2019, compared to financial guaranty operating losses of $4.5 million for 2018. 

Net earned property and casualty premiums increased $6.4 million from $2.4 million in 2018 to $8.8 million in 2019, driven by the addition of new agency relationships. Loss and loss adjustment expenses as a percentage of earned premiums improved slightly, 44.9% to 41.9% driven by both current and prior accident year results. Operating income in the property and casualty segment decreased $2.0 million primarily due to increase in acquisition costs resulting from significant increases in written premium.

The legacy financial guaranty portfolio of American Overseas Reinsurance Company Limited (“AORE”) continued to run-off satisfactorily. The financial guaranty operating loss of $11.0 million in 2019 is driven by net losses associated with the commutation of $1.065 billion of outstanding par during the second quarter of 2019, as well as unfavorable development on outstanding losses. As of December 31, 2019, outstanding par within the financial guaranty segment is $362 million compared to $1.474 billion at December 31, 2018. 

AORE entered into a Commutation Agreement, effective April 1, 2020, to commute the remaining portfolio of financial guaranty reinsurance business it had assumed from Assured Guaranty Municipal Corp (“AGMC”). The aggregate outstanding par value of the reinsurance portfolio being commuted was $345.0 million as of April 1, 2020, therefore eliminating the financial guaranty reinsurance business at AORE.

Operating expenses of $13.6 million in 2019 were comparable to 2018 of $13.4 million.   

As part of its ongoing capital management efforts, the Company will continue to redirect excess capital within the group to debt reduction unless other compelling opportunities present themselves.

Forward-Looking Statements

This release contains statements that may be considered "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, the Company's expectations regarding its ability to continue to write insurance or reinsurance for its operations. These statements are based on current expectations and the current views of the economic and operating environment and are not guarantees of future performance. A number of risks and uncertainties, including the current COVID-19 pandemic and its impact on the global economy and general economic competitive conditions, could cause actual results to differ materially from those expected in forward-looking statements. The Company's actual results could differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause actual results to differ materially include the Company's review of the results of its entire portfolio of policies, changes in general economic conditions, including from COVID-19, unemployment rates, inflation, foreign currency exchange rates, interest rates and other factors and other risks and uncertainties that have not yet been identified at this time. The Company undertakes no obligation to revise or update any forward-looking statement to reflect changes in conditions, events, or expectations, except as required by law.

Explanation of Non-GAAP Financial Measures

The Company believes that the following non-GAAP financial measure included in this press release serve to supplement GAAP information and is meaningful to investors.

Operating income (loss): The Company believes operating income (loss) is a useful measure because it measures income from operations, unaffected by non-operating items such as realized investment gains or losses. Operating income (loss) is typically used by research analysts and rating agencies in their analysis of the Company.

Information About the Company

American Overseas Group Limited is an insurance holding company incorporated in Bermuda and a tax resident of the United Kingdom. Its operating subsidiaries provide specialty property/casualty insurance, reinsurance and insurance management services. More information can be found at www.aoreltd.com.

American Overseas Group Limited

info@aoreltd.com 



American Overseas Group Limited
Consolidated Balance Sheets
(unaudited)
As at December 31, 2019 and December 31, 2018
(dollars in thousands)
               
        December 31, 2019     December 31, 2018
Assets        
               
    Investments:        
      Fixed-maturity securities held as available for sale, at fair value $ 129,748       $ 135,896  
      Equity investments held as available for sale, at fair value   1,181         5,730  
    Cash and cash equivalents   22,602         34,708  
    Restricted cash   10,557         6,554  
    Accrued investment income   675         662  
    Premiums receivable   81,000         78,610  
    Deferred insurance premiums   125,728         -  
    Reinsurance balances receivable, net   210,405         322,338  
    Salvage and subrogation recoverable   386         333  
    Deferred policy acquisition costs   515         161  
    Intangible assets   4,800         4,800  
    Goodwill   33,050         33,050  
    Other assets   3,184         1,712  
      Total Assets $ 623,831       $ 624,554  
               
               
Liabilities and Equity        
  Liabilities:        
    Loss and loss expense reserve $ 263,686       $ 266,727  
    Unearned premiums   128,793         110,812  
    Ceded premium payable   89,078         94,330  
    Payable to general agents   3,087         1,428  
    Funds withheld   52,794         54,440  
    Accounts payable and accrued liabilities   5,071         2,524  
    Redeemable preference shares: ($0.10 par value and $1,000 redemption value; authorized shares - 75,000; issued and outstanding shares - 38,600 at December 31, 2019 and December 31, 2018, respectively)   7,292         7,038  
    Derivative liabilities   10         266  
    Notes payable   16,521         16,521  
    Non-owned interest in VIE   300         300  
    Interest payable   451         451  
    Fair value adjustment   2,901         13,741  
    Deferred tax liability   322         35  
      Total Liabilities   570,306         568,613  
               
  Shareholders' Equity:        
    Common shares   4,618         4,613  
    Additional paid-in capital   189,002         188,729  
    Accumulated other comprehensive income   1,323         237  
    Retained deficit   (147,471 )       (143,691 )
      Total Shareholders' Equity   47,472         49,888  
      Non-controlling interest of preferred shares of subsidiaries   6,053         6,053  
    Total Equity   53,525         55,941  
               
               
      Total Liabilities and Equity $ 623,831       $ 624,554  
               
               
    See Notes to 2019 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com
               



American Overseas Group Limited
  Consolidated Statements of Operations
  (unaudited)
  For twelve months ended December 31, 2019 and 2018
  (dollars in thousands, except share and per share amounts)
               
               
          Year ended December 31,
            2019       2018  
    Revenues      
               
      Net premiums earned $ (5,423 )   $ (215 )
      Fee income   11,591       11,470  
               
    Change in fair value of credit derivatives      
      Realized gains and other settlements   74       14  
      Unrealized gains   191       61  
               
        Net change in fair value of credit derivatives   265       75  
               
      Net investment income   2,447       2,809  
      Net realized gains on investments   1,824       8  
      Fair value adjustment   10,586       332  
      Other income   383       532  
               
        Total revenues   21,673       15,011  
               
    Expenses      
      Losses and loss adjustment expenses   7,474       2,593  
      Acquisition expenses   1,627       (577 )
      Operating expenses   13,605       13,392  
      Interest expense   1,803       2,191  
               
        Total expenses   24,509       17,599  
               
               
  Net (loss) available to common shareholders $ (2,836 )   $ (2,588 )
      Income tax (expense)   (287 )     (4 )
               
  Net (loss) before dividends   (3,123 )     (2,592 )
      Dividends on preference shares of subsidiary   (585 )     (585 )
               
               
  Net (loss) available to common shareholders $ (3,708 )   $ (3,177 )
               
               
    Net (loss) per common share:      
    Basic $ (80.34 )   $ (69.12 )
    Diluted   (80.13 )     (69.12 )
               
    Weighted-average number of common shares outstanding:      
    Basic   46,161       45,965  
    Diluted   46,281       45,965  
               
    See Notes to 2019 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com    
               



AMERICAN OVERSEAS GROUP LTD.          
           
NET INCOME AND OPERATING INCOME BY SEGMENT        
           
           
(dollars in thousands) December 31, 2019
  Net income available
to common
shareholders
Net realized loss
on sales of
investments
Net change in
fair value of
credit derivatives
Fair value
adjustments
Operating
income
Property and casualty:          
           
Net premiums earned $ 8,824         $ 8,824  
Losses and loss adjustment expenses   (3,701 )         (3,701 )
Acquisition expenses   (4,752 )         (4,752 )
Fee income   11,591           11,591  
Operating expenses   (10,741 )         (10,741 )
Income tax   (287 )         (287 )
Property and casualty   934     -     -     -     934  
           
Financial guaranty:          
           
Net premiums earned   (14,247 )       13,129     (1,118 )
Net change in fair value of credit derivatives   265       (191 )     74  
Losses and loss adjustment expenses   (3,773 )       (3,644 )   (7,417 )
Acquisition expenses   3,125         (2,868 )   257  
Operating expenses   (2,753 )         (2,753 )
Financial guaranty   (17,383 )   -     (191 )   6,617     (10,957 )
           
Corporate and Investing          
           
Net investment income   2,447           2,447  
Net realized loss on sales of investments   1,824     (1,824 )       -  
Fair value adjustment   10,586         (10,586 )   -  
Operating expenses   (111 )         (111 )
Interest expense   (1,803 )         (1,803 )
Other income, net of other expense   383           383  
Corporate and investing   13,326     (1,824 )   -     (10,586 )   916  
           
Group total $ (3,123 ) $ (1,824 ) $ (191 ) $ (3,969 ) $ (9,107 )
           
           
           
AMERICAN OVERSEAS GROUP LTD.          
           
NET INCOME AND OPERATING INCOME BY SEGMENT        
           
           
(dollars in thousands) December 31, 2018
  Net income available
to common
shareholders
Net realized loss
on sales of
investments
Net change in
fair value of
credit derivatives
Fair value
adjustments
Operating
income
Property and casualty:          
           
Net premiums earned $ 2,361         $ 2,361  
Losses and loss adjustment expenses   (1,060 )         (1,060 )
Acquisition expenses   (556 )         (556 )
Fee income   11,470           11,470  
Operating expenses   (9,278 )         (9,278 )
Income tax   (4 )         (4 )
Property and casualty   2,933     -     -     -     2,933  
           
Financial guaranty:          
           
Net premiums earned   (2,576 )       8,649     6,073  
Net change in fair value of credit derivatives   75       (61 )     14  
Losses and loss adjustment expenses   (1,533 )       (3,848 )   (5,381 )
Acquisition expenses   1,133         (2,359 )   (1,226 )
Operating expenses   (3,975 )         (3,975 )
Financial guaranty   (6,877 )   -     (61 )   2,442     (4,495 )
           
Corporate and Investing          
           
Net investment income   2,809           2,809  
Net realized loss on sales of investments   8     (15,608 )     15,600     -  
Fair value adjustment   332         (332 )   -  
Operating expenses   (139 )         (139 )
Interest expense   (2,191 )         (2,191 )
Other income, net of other expense   532           532  
Corporate and investing   1,351     (15,608 )   -     15,268     1,011  
           
Group total $ (2,592 ) $ (15,608 ) $ (61 ) $ 17,710   $ (551 )