Oxbridge Re Holdings Limited — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Unaudited consolidated financial statements; amounts below are in U.S. dollars, generally in millions unless stated otherwise.
Business context and financial position
Oxbridge Re underwrites predominantly fully collateralized property-catastrophe reinsurance, mainly in the U.S. Gulf Coast and Florida. Its subsidiaries also include SurancePlus, which offers blockchain-based tokenized reinsurance securities. The company reported one operating segment.
- At September 30, total assets were $11.20 million, down from $16.62 million at December 31, 2022. Shareholders’ equity was $7.95 million, versus $14.99 million.
- Cash and cash equivalents were $1.80 million; restricted cash was $1.85 million, compared with $1.21 million and $2.72 million, respectively, at year-end. Restricted funds are held as reinsurance collateral and are not equivalent to unrestricted liquidity.
- Notes payable to noteholders were $118,000, down from $216,000. The company also reported a $100,000 loan receivable from Jet.AI and $1.29 million of liabilities to Delta Cat Re tokenholders.
- Operating cash flow was negative $1.36 million for the nine months; investing cash flow was negative $105,000 and financing cash flow was positive $1.18 million. Cash and restricted cash combined declined $279,000 to $3.65 million.
Results and material changes
| Metric | Three months ended Sept. 30 | Nine months ended Sept. 30 |
|---|---|---|
| Net premiums earned | $549,000 vs. $591,000 in 2022 | $732,000 vs. $995,000 |
| Total revenue | Negative $6.38 million vs. negative $696,000 | Negative $5.14 million vs. negative $191,000 |
| Net loss | $7.30 million vs. $2.16 million | $7.24 million vs. $2.47 million |
| Basic and diluted loss per share | $1.24 vs. $0.37 | $1.23 vs. $0.43 |
| Combined ratio | 125.3% vs. 247.2% | 244.3% vs. 224.4% |
The principal driver of the losses was an unrealized loss on other investments, largely Oxbridge’s Jet.AI investment: $6.89 million in Q3 and $6.38 million for the nine-month period. The reported nine-month result also included a $34,000 unrealized loss on equity securities. These fair-value items substantially outweighed underwriting and fee income.
- There were no losses incurred in the 2023 quarter or nine-month period; the prior-year comparison included $1.07 million of Hurricane Ian-related losses, which were paid during 2023.
- Q3 general and administrative expense increased to $628,000 from $323,000; nine-month expense rose to $1.71 million from $1.05 million. The filing attributes the increase to expense fluctuations and offering costs, including Maxim equity-distribution offering costs.
- The nine-month combined ratio rose year over year as higher general and administrative expense more than offset the absence of current-period claims. The expense ratio was 244.3% for the nine months, reflecting expenses relative to a small earned-premium base.
Outlook, risks and unusual items
- Management said it believed operating cash flows were sufficient for liquidity needs and expected to fund operations through cash, investment income, underwriting activity and potentially future equity offerings. No quantified earnings or revenue guidance was provided.
- Jet.AI-related investments are material and subject to quarterly fair-value remeasurement. The $5.04 million carrying value of other investments was classified as Level 3 in the fair-value table; valuation movements may materially affect earnings and equity.
- Oxbridge invested $100,000 in a Jet.AI bridge note. The overall notes carry 5% interest, mature March 11, 2024, and include redemption and default provisions. Repayment depends in part on Jet.AI financing; the filing describes a potential 120% principal increase and conversion rights upon specified defaults.
- SurancePlus raised $2.45 million in gross token proceeds, including approximately $1.17 million from Oxbridge. The securities relate to the 2023–2024 treaty year. The filing describes an expected 42% annual investor return assuming no covered casualty losses; this is conditional, not a guaranteed return.
- Catastrophe exposure, concentration among a limited number of counterparties, delayed or incomplete claims reporting, and reserve-estimation uncertainty remain material risks. Management reported no loss reserves at September 30, but future events could produce significant claims.
- Oxbridge Reinsurance Limited and Oxbridge Re NS each exceeded the $500,000 minimum regulatory net-worth requirement at period-end. Subsidiary dividends are restricted by regulatory capital requirements.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. The company reported no current litigation or arbitration and no material changes to risk factors, while highlighting Jet.AI valuation risk.
Important facts for investors to verify
- Jet.AI investment composition, valuation inputs and sensitivity to market-price changes, including the effect of further fair-value losses on equity.
- Unrestricted cash available for corporate needs versus restricted collateral, and the timing and availability of trust releases.
- Jet.AI bridge-note repayment status, financing proceeds and any default or conversion consequences.
- Delta Cat Re token obligations, actual underwriting results and realized investor returns compared with the conditional return described in the filing.
- Renewal premiums, catastrophe exposure and subsequent claims development, particularly given the company’s concentrated, high-severity underwriting profile.
- The impact of offering costs and ongoing expenses on the expense and combined ratios as premium volume changes.