Oxbridge Re Holdings Limited — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited consolidated results. Unless stated otherwise, financial amounts are in thousands of U.S. dollars.
Business context
Oxbridge is a Cayman Islands specialty property and casualty reinsurer focused on fully collateralized catastrophe reinsurance, primarily in the U.S. Gulf Coast and Florida. Its sidecar subsidiary, Oxbridge Re NS, provides additional underwriting capacity. The company also has a substantial indirect investment in Oxbridge Acquisition Corp. (OXAC), a special purpose acquisition company.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 or prior period |
|---|---|---|
| Net premiums earned | $210 | $181 |
| Net investment and other income | $33 | $14 |
| Net realized investment gain | $7 | — |
| Unrealized loss on other investments | $(230) | — |
| Change in fair value of equity securities | $(20) | $124 gain |
| Total revenue | $0 | $319 |
| Total expenses | $361 | $272 |
| Net income (loss) | $(387) | $28 |
| Basic and diluted earnings (loss) per share | $(0.07) | $0.00 |
| Operating cash flow | $(69) | $(67) |
| Investing cash flow | $(201) | $(646) |
The filing’s statement of operations displays total revenue as a dash for 2022; the listed revenue components net to zero. There were no losses or loss-adjustment expenses in either quarter. The combined ratio rose to 171.9% from 150.3%, reflecting higher general and administrative expenses; the loss ratio was 0% and the acquisition-cost ratio was 11% in both periods.
At March 31, 2022, total assets were $17.152 million, total liabilities $856,000, and shareholders’ equity $16.296 million. Cash and cash equivalents were $2.976 million; restricted cash was $2.172 million, for combined cash and restricted cash of $5.148 million. Other investments were $10.943 million, down from $11.173 million at year-end, including a $230,000 unrealized loss on OXAC-related holdings. Notes payable to participating noteholders were $216,000, unchanged from year-end; operating lease liabilities were $113,000.
Cash and restricted cash decreased by $270,000 during the quarter. The company issued 32,000 restricted shares; outstanding ordinary shares were 5,781,587 at quarter-end. No financing cash flows were reported.
Material changes and management commentary
- Net results swung from $28,000 income to a $387,000 loss, principally because of unfavorable fair-value changes in investments, including the $230,000 OXAC-related loss and $20,000 loss on equity securities.
- Premiums earned increased $29,000, which management attributed to higher weighted-average rates on reinsurance contracts in force.
- General and administrative expenses increased $86,000 to $338,000. Management cited inflationary fluctuations and increased personnel and other expenses.
- The unearned premium reserve fell $210,000 to $140,000 as premium income was recognized. Restricted cash increased $281,000, primarily due to premium deposits.
- Management said it believes cash flows and available liquidity are sufficient for operational needs and expects to fund operations from cash, investment income, underwriting activity and potentially future equity offerings. It reported no plan to issue debt.
Outlook, risks and unusual items
- No numerical earnings or underwriting guidance was provided. Management cautioned that results can fluctuate with opportunistic underwriting and investment activity, and that catastrophe season generally runs from June through November.
- Management said COVID-19 continues to create uncertainty for reinsurance losses, markets and future business; its ultimate impact remains unclear.
- The $10.943 million OXAC-related investment is classified as Level 3, relying on unobservable valuation inputs. The company warns it could lose its entire investment if OXAC fails to complete a business combination by November 16, 2022, or by May 16, 2023 if extended. Fair-value changes can materially affect earnings and equity.
- Other key risks include concentrated underwriting exposure, the severity and unpredictability of catastrophe losses, uncertainty in loss-reserve estimates, counterparty and broker credit risk, and the possibility of being deemed an investment company under U.S. law.
- Subsidiaries exceeded their $500,000 minimum and prescribed capital requirements. The filing reported no litigation or arbitration, no off-balance-sheet arrangements, and no material changes to risk factors apart from highlighting the OXAC-related risks.
- Management concluded disclosure controls and procedures were effective at quarter-end, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the OXAC business-combination deadline, extension status and assumptions underlying the Level 3 valuation and potential loss exposure.
- Review the source statement and supporting detail for the 2022 total-revenue dash; listed components net to zero.
- Assess whether premium growth and higher rates can offset the elevated expense ratio and general and administrative costs.
- Evaluate the company’s catastrophe exposure, claims reporting delays, reserve sensitivity and concentration among a limited number of entities.
- Distinguish unrestricted cash from restricted collateral and confirm subsidiary capital and dividend-transfer constraints.