Oxbridge Re Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 12, 2023

There are 4 speakers on the call.

Operator

Good afternoon, and welcome to Oxbridge Re's First Quarter 2023 Earnings Call. My name is Camilla, and I will be your conference operator this afternoon. At this time, all participants are in a listen only mode. Joining us for today's presentation is Oxbridge Reed's Brendon Timothy. Following their remarks, we will open up the call for your questions.

Operator

I would like to remind everyone that this call is also being broadcast live via webcast and available via webcast replay until on the Investor Relations section of the Oxbridge REIT website at www.oxbridgereit.com. Now, I would like to turn the floor 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. Thank you. Wrendon, you may begin.

Speaker 1

Thank you, operator. During today's call, there will be forward looking statements made regarding future events, including Oxbridge Reade'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, intends, plans, projects and other similar rules 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.

Speaker 1

A 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 in our Form 10 ks filed on March 30, 2023, and our Form 10 ks filed today with the Securities and Exchange Commission. The occurrence of any of these risks and uncertainties could have a material adverse effect on the company's business, financial condition and the volatility of our earnings, which in turn can cause significant market price and trading volume fluctuation for our securities. Any forward looking statements made on this conference call speaks 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 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 our Chairman, President and Chief Executive Officer, Jay Madhu.

Speaker 1

Jay?

Speaker 2

Thank you, Wrendon, 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 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 proud to be celebrating our 10th anniversary this year.

Speaker 2

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 write fully collateralized contracts, we believe we can compete efficiently with large carriers. 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 in book value per share by running business on a selective and opportunistic basis that will generate attractive underwriting profits relative to risk. We diversified our business in 2021 by being the lead and the sponsor of Oxbridge Acquisition Corp, a special purpose acquisition company or SPAC, focusing on investing in disruptive technologies.

Speaker 2

During the Q1 of 2023, Oxbridge Acquisitions announced its intention to form a business combination with Jet dotai Inc. The company develops software and offers fractional aircraft ownership, JET card, aircraft brokerage and charter through its fleet of private aircraft and those of its operating partner. JET AI operates along 2 segments, software and aviation. The software segment features a B2C Charter GPT app and the B2B jet dotai operator platform. The Charter GPT app uses natural language processing and machine learning to approve the private jet booking experience.

Speaker 2

The jet dotai operator platform offers a suite of standalone software products to enable FAA Part 135 charter providers to add revenue, maximize efficiency and reduce environmental impact. The Aviation segment features jet aircraft fractions, jet cards, on fleet charter management and buyer's brokerage. The transaction is expected to close at the end of the Q2 of this year for SEC pending SEC and AOCSAC shareholder approval. We also further diversified our business with the creation of our new Web3 subsidiary, Assurance Plus Inc. The company offers an alternative investment opportunity leveraging key qualities of blockchain technology to create a well designed digital security under SEC guidelines that have complete transparency and compliance.

Speaker 2

Insurance Plus commenced an offering of Securlyzed tokens, which assuming no losses are expected to generate a potential return of approximately 42% a year. This new thrust is an entry into the Web3 and digital security market, which puts real world assets on the blockchain and opens an entirely new avenue of democratizing reinsurance and potentially other opportunities in the future. We are very excited about both of these new opportunities and look forward to keeping you appraised of their progress in the upcoming quarters. Regarding our investment portfolio, we remain opportunistic and will deploy our capital when favorable return opportunities arise that can contribute to the growth of capital and surplus in our licensed reinsurance subsidiaries over time. Over the long term, we remain highly opportunistic about the prospects of our core reinsurance business and the two investments I commented on earlier in Oxbridge Acquisitions as well as Assurance Plus.

Speaker 2

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

Speaker 1

Thank you, Jay. I'd like to remind you that our typical reinsurance contract period is from June 1 to May 31st the following year. With regard to net premiums earned, net premiums earned for the quarter ended March June 2023 were nil compared to $210,000 in the last year's Q1. The decrease was due to the acceleration of premium recognition and so far reinsurance contracts during 2022 are rising from the limit loss of what from the Hurricane Ion impact. So there have been no reinsurance premiums recorded in this quarter.

Speaker 1

There have also been no losses to date incurred in 2023. With regards to investment income, our net investment income and other income rose in the quarter to $89,000 from $33,000 due to higher rates on money market funds. We generated a solid $3,000 unrealized gain in the Q1 of 2023 due to a fair value change in our equity investment in Upbridge Acquisition Corp. And last year's Q1, this change resulted in a $250,000 unrealized loss. We also recognize a $76,000 dollars positive change in the fair value of our equity securities as of March 31, 2023, much improved from the $20,000 negative change in the prior year Q1.

Speaker 1

All of these factors taken together resulted in total revenues of $546,000 for the 3 months ended March 31, 2023 compared to nil in the prior year's Q1. With regard to total expenses, total expenses were up marginally in the Q4 of 2023 to $404,000 from $354,000 last year. There was no policy acquisition cost or underwriting expenses in the quarter due to the acceleration of premium recognition and the resulting acceleration of policy acquisition cost. In additional, general and admin expenses are high in 2023 due to increased personnel costs and inflationary cost pressures. Due to due primarily to the positive change in the fair value of our equity securities and all investments in the quarter, we generated net income of $142,000 or $0.02 per share for the 3 months ended March 31, 2023 compared to a net loss of $387,000 or $0.07 per share in the last year Q1.

Speaker 1

As we have discussed before in our investor calls, we use various measures to analyze the growth of our business. 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 unwritten profitability, is the ratio of loss and loss adjustment expenses incurred in the premiums earned, with no losses or loss adjustment expenses in either Q1 of 2023 or 2022, the loss ratio was 0% compared to the same period. Our acquisition cost ratio, which measures operational efficiency, compared to policy acquisition cost and net premiums earned. Likewise, with no premiums earned in the 4th quarter of 2023, the ratio was 0% compared to 11% in the prior year.

Speaker 1

Our expense ratio, which measures operating performance compared to policy acquisition costs and general admin expenses with net premiums earned as a result of no premiums in 2023, our expense ratio was 0% in the Q1 compared to 171.9% in the Q1 of 2022. Our combined ratio, which is used to measure underwriting performance is the sum of the loss ratio and expense ratio. With no premiums to run-in the Q1, the combined ratio is 0 percent compared to 171.9 percent in last year's Q1. Now turning to the balance sheet. Our investment portfolio increased to 700 and 18,000 at March 31, 2023 from 642,000 at the prior end, largely due to the gain we experienced during the quarter.

Speaker 1

Other investments increased marginally due to the positive change in the fair value of our investments in Oxbridge Acquisition Corp. Cash and cash equivalents and restricted cash and cash equivalents decreased to $3,600,000 at March 31, 2023 compared to $3,900,000 at December 30, 2022. The shareholders' equity at quarter end increased to $15,200,000 or approximately 2.59 dollars per common share. Now I'll turn the call back over to Jay to wrap up before we take your questions.

Speaker 2

Thank you, Wrendon. As we discussed on our year end conference call, in late January, we announced the incorporation of Surence Plus, a wholly owned subsidiary of Oxbridge Re. Surence Plus will issue tokenized securities that indirectly represent interest in reinsurance contracts underwritten by our reinsurance subsidiary. Token holders will receive a return on the performance of these underlying reinsurance contracts. In essence, Assurance plus will democratize access to reinsurance as an alternative investment opportunity that leverages the key qualities of blockchain technology to create a well designed digital security.

Speaker 2

Our tokens will enable more investors to participate and have their interest permanently and transparently recorded on the chain. These opportunities were typically unavailable to investors in the past due to high barriers to entry. Following this exciting investment opportunity, in late February, we utilized Oxbridge Acquisition Corp. To embark on a business combination with Jet AI Inc, a company offering fractional aircraft ownership, jet card, aircraft brokerage and charter service through its fleet of private aircraft. Our wholly owned subsidiary, Autridge Reinsurance Limited, is the lead investor in our SPAC sponsor holds 1,500,000 shares, which at the closing of transaction will have a value of approximately $14,200,000 not including the value of 3,100,000 private warrants we beneficially own in the SPAC.

Speaker 2

These exciting new investment opportunities further diversify our business and risk portfolio, positioning us to capitalize on growth in emerging technologies. We are very excited about the future value of these investments and the potential they bring to our shareholders. So in closing, our book value per share at quarter end is $2.59 per share. Our business is well diversified. Our investment in insurance funds positions us in a new leading edge Web3 technology business.

Speaker 2

Our investment in Oxbridge AcquisitionJet dotai and Artificial Intelligence Aviation Business is on track. We remain debt free. We have strong balance sheet with a solid cash position. And most importantly, we have opportunity based on a viable business model that is based on diversification. We remain opportunistic not only in our core business, but also our broader view of the market.

Speaker 2

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

Operator

Thank you, sir. We will now be conducting a question and answer Thank you. Our first question comes from Ken Englke with Capital Securities. Please proceed with your question.

Speaker 3

Hey, Jay. Hey, Randy. A couple of questions come to mind right, Ali. I guess the first and foremost on the Assurance Plus, to try to increase the potential value there, you have a lot of things going on. You We consider the possibility of maybe spending something out to recognize that value that is there.

Speaker 3

Then secondly, in regards to on the SPAC, were we out on the voting of the SPAC itself? I would think that once that merger is closed, there should be a very large release of potential value, at least on the balance sheet based upon on accounting rules and the like. Looking where you price your stock is, it looks like there's a lot of value based upon things that are already in place.

Speaker 2

Hi, Ken. Yes, I'll take your second question first. And the answer to that is yes. We don't realize a full mark to market value on the investment on the SPAC at the moment. But once that's closed, that will normalize.

Speaker 2

So there will be an uptick in recognition. So we're looking forward to that. We hope that actually just yesterday, the SEC SEC comments went in yesterday and got filed with the SEC the 2nd round of comments the 1st round of comments rather. And if all goes well, we expect this to close by the end of Q2 of this year. So everything looks on track, and we're good to go there.

Speaker 2

In relation to your first question, how do we monetize Assurance Plus? That will be work in progress. But what we have done is we have developed a Web3 we have developed a Web3 company internally. We didn't go out. There was no solution.

Speaker 2

We didn't raise capital. We didn't raise cash. We developed it all in house. So shareholders have owned 100% of that company at the moment. As we go forward, and it will definitely be Board approval, etcetera, but there's definitely an opportunity to maybe do something much bigger.

Speaker 2

But once we go forward with insurance plus and we issue the reinsurance token, there's definitely opportunity to go raise funds and do various different kind of tokens of the like as well. So absolutely, we're very excited.

Speaker 3

A lot of opportunity, a lot of potential. Following you all for a long time, and it looks like we're finally on the cusp of doing something.

Speaker 2

Yes, yes. This has been an extremely busy year, extremely busy last year. But now we're almost there, looking forward to it.

Operator

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

Speaker 2

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 continuing support. I especially want to express our gratitude to the Oxbridge team continue 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. And if you have any further questions, please contact me anytime.

Speaker 2

Thank you again for your time and attention today and your interest in Oxbridge. Operator?

Operator

Thank you. Before we conclude today's call, I would like to remind everyone that a recording of today's call will be available for replay via a link available in the Investors section of the company's website until May 26, 2023. Thank you for joining us today for our presentation. You may now disconnect.

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Earnings Conference Call
Oxbridge Re Q1 2023
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