Oxbridge Re Holdings Limited — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are with 2020. The company is a Cayman Islands property and casualty reinsurer focused mainly on fully collateralized catastrophe reinsurance in the U.S. Gulf Coast, particularly Florida. Oxbridge Re NS operates as a reinsurance sidecar.
Key financial results
Amounts below are in U.S. dollars; financial statement figures are in thousands unless stated otherwise.
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $10,225 | $1,214 |
| Net premiums earned | $965 | $893 |
| Net income (loss) | $8,565 | $(50) |
| Basic and diluted EPS | $1.49 | $(0.01) |
| Net cash used in operating activities | $(253) | $(266) |
| Loss / acquisition cost / expense / combined ratios | 16.4% / 11.0% / 146.2% / 162.6% | 0.0% / 11.0% / 126.1% / 126.1% |
- 2021 revenue included a $9.173 million unrealized gain on the company’s Level 3 investment tied to Oxbridge Acquisition Corp. (OXAC), $755,000 in realized investment gains, and a $767,000 change in fair value of equity securities that reduced revenue. The unrealized OXAC gain was the principal driver of the year’s profit; it was not operating cash flow.
- Premiums assumed were $904,000, versus $864,000 in 2020. Net premiums earned rose 8%, partly due to accelerated premium recognition after a contract limit loss and higher reinsurance rates.
- Underwriting ratios remained above 100% on a combined basis. The 2021 result included $158,000 of losses associated with Hurricane Ida and an expense ratio affected by a $181,000 allowance for uncollectible premiums. The filing reports $158,000 of incurred losses and paid losses, with no loss reserve outstanding at year-end.
- At December 31, 2021, assets were $17.689 million, liabilities $1.038 million, and shareholders’ equity $16.651 million. Cash and cash equivalents were $3.527 million, plus $1.891 million of restricted cash held as collateral; combined cash balances were $5.418 million, down from $7.476 million in 2020.
- Other investments were $11.173 million at year-end, compared with zero in 2020. The filing reports $577,000 of equity securities, down from $787,000. Notes payable to participating-note holders were $216,000, unchanged year over year; the filing reports no other debt balance in the presented balance sheet.
Changes, outlook, and risks
- Net income increased sharply from a $50,000 loss in 2020, primarily because of the OXAC fair-value gain. The company cautions that its opportunistic underwriting and investment strategy can make period-to-period results volatile.
- OXRE invested $2 million in OAC Sponsor Ltd., which holds OXAC founder shares and private placement warrants. The investment is measured using Level 3 fair value inputs, including a 30% discount for marketability and risk of forfeiture. The company could lose the investment if OXAC fails to complete a business combination by November 16, 2022, subject to a possible extension through May 16, 2023.
- In March 2022, a cedant was placed into receivership. Of $370,000 in premiums receivable at year-end, $189,000 was subsequently collected; the company recorded a $181,000 allowance for the remainder.
- Management said COVID-19 had not materially disrupted operations and operations were back to normal as of December 31, 2021. It noted that pandemic-related claims, economic impacts, market volatility, and interest rates continued to create uncertainty for the reinsurance industry. The filing provides no quantitative earnings or revenue guidance.
- Key risks include catastrophe severity and frequency, concentrated underwriting exposure to a limited number of cedants, reserve-estimation uncertainty, cedant and broker credit risk, competition, collateral requirements, and OXAC valuation uncertainty. The company has no A.M. Best financial strength rating and does not expect to seek one in the foreseeable future. It paid no dividends in 2021 or 2020 and does not expect to resume them in the foreseeable future.
- The company reported no litigation, no off-balance-sheet arrangements, and effective disclosure controls and internal control over financial reporting. The auditor issued an unqualified opinion on the financial statements; the auditor did not attest to internal controls.
Investor verification priorities
- Review the OXAC investment valuation, the 30% Level 3 discount, and the risk and timing of a potential loss if no business combination is completed.
- Verify the receivable recovery and allowance relating to the cedant placed into receivership, including any subsequent developments.
- Assess underwriting economics apart from investment gains, including the combined ratio above 100%, catastrophe exposure, and cedant concentration.
- Confirm which cash balances are unrestricted and available to the parent, versus restricted as reinsurance collateral, and review subsidiary dividend constraints.
- Monitor loss emergence, reserve adequacy, and the terms and maturity of the $216,000 Series 2020-1 participating notes.