OXBRIDGE RE HOLDINGS LIMITED — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unaudited consolidated financial statements; dollar amounts below are in thousands unless stated otherwise.
Business context
Oxbridge is a Cayman Islands property and casualty reinsurer focused mainly on fully collateralized catastrophe reinsurance in the U.S. Gulf Coast, alongside its Oxbridge Re NS sidecar and SurancePlus digital-securities business. It reports one operating segment. Ordinary shares outstanding were 5,870,234 as of August 15, 2023.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $691 | $503 | $1,237 | $505 |
| Net premiums earned | $183 | $194 | $183 | $404 |
| Net income (loss) | $(85) | $77 | $57 | $(310) |
| Basic and diluted EPS | $(0.01) | $0.01 | $0.01 | $(0.05) |
| General and administrative expense | $677 | $389 | $1,081 | $728 |
Q2 revenue increased, but the company moved from profit to loss as general and administrative expenses rose, including costs associated with SurancePlus’s token offering. Six-month results improved from a loss to modest income, supported by $300 of SurancePlus management fee income, investment gains and other income, despite lower earned premiums and higher expenses. Six-month net income included a $505 unrealized gain on other investments, principally the OXAC investment, and an $81 gain from changes in the fair value of equity securities.
No losses were incurred in the three- or six-month periods. The filing reports a 0% loss ratio. For the six months, it reports a 10.9% acquisition cost ratio and a 601.6% expense and combined ratio, up from 191.1% in 2022, reflecting higher expenses relative to earned premiums.
Financial position and cash flows
- Assets and equity: Total assets were $18,708 at June 30, 2023, versus $16,616 at year-end 2022; shareholders’ equity was $15,155 versus $14,989.
- Cash and liquidity: Cash and cash equivalents were $3,117 and restricted cash was $372, for combined cash of $3,489, down from $3,928 at year-end. Restricted cash fell substantially as funds were released from the Avatar and Olympus arrangements.
- Cash flows, six months: Operating activities used $1,614, investing activities used $5, and financing activities provided $1,180, primarily from Delta Cat Re token proceeds net of noteholder payments. Combined cash declined by $439.
- Debt and liabilities: Total liabilities were $3,553, up from $1,627. Notes payable to noteholders were $118, down from $216; the balance also included $2,013 of unearned premiums and $1,059 due to Delta Cat Re tokenholders. Lease liabilities were $60.
- Investments: Other investments were $11,928, all classified as Level 3 fair value assets, largely reflecting the company’s indirect OXAC interests. Equity securities were $723. Management’s OXAC valuation uses a 25.11% discount for marketability and other risks.
Material changes, outlook and risks
- SurancePlus completed a private placement of 244,776 Delta Cat Re securities at $10 each, raising $2.448 million gross, including approximately $1.280 million from third-party investors and $1.167 million from Oxbridge. The securities relate to reinsurance contracts for the 2023–2024 treaty year. The filing describes a potential 42% annual return only assuming no casualty losses; this is not a guaranteed return.
- After quarter-end, OXAC shareholders approved its Jet Token business combination on August 7, 2023; it closed August 10, and the combined company began trading as Jet.AI. This is a subsequent event and was not reflected in the June 30 balance sheet.
- Management said it believed available cash flows were sufficient for liquidity needs and expected to rely on cash, investment income, underwriting and potentially future equity offerings. It gave no specific financial guidance and said results may fluctuate with catastrophe activity, underwriting opportunities, investment performance and capital deployment.
- Key risks include hurricane and other catastrophe losses, concentrated underwriting exposures, claims-reporting and reserve-estimation uncertainty, counterparty and broker credit risk, and the significant judgment involved in valuing Level 3 OXAC interests. The filing states subsidiaries exceeded their $500 minimum regulatory net-worth requirements and that there were no off-balance-sheet arrangements or current litigation.
- Management concluded disclosure controls were effective at period-end and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Reconcile the 2022 six-month net loss: the financial statements report $(310), while the MD&A narrative cites $(319).
- Confirm the effect of the August 10 OXAC/Jet.AI transaction on the value and liquidity of Oxbridge’s Level 3 investment; the June 30 carrying value was $11.928 million.
- Review third-party versus company-funded participation in Delta Cat Re, tokenholder obligations, and actual underwriting and loss performance against the stated conditional return illustration.
- Assess whether earned premiums and operating cash generation can support the expense base; six-month operating cash flow was negative $1.614 million and the combined ratio was 601.6%.
- Monitor catastrophe exposure, claims development and restricted-cash collateral needs, particularly during the June–November storm season.