OXbridge Re Holdings Limited — FY 2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. This is an annual report; the filing does not provide a standalone fourth-quarter results summary. Unless noted, financial amounts below are in U.S. dollars.
Business context
Oxbridge is a Cayman Islands specialty property and casualty reinsurer focused on fully collateralized catastrophe reinsurance, primarily for insurers in the U.S. Gulf Coast, with emphasis on Florida. It reported five cedants at year-end; its largest contract represented about 35% of collateral at risk. The company had no financial-strength rating and reported that it had not purchased retrocessional coverage.
Financial performance and position
| Metric | FY 2016 / Dec. 31, 2016 | FY 2015 / Dec. 31, 2015 |
|---|---|---|
| Net premiums earned | $18.058 million | $6.767 million |
| Total revenue | $19.062 million | $6.380 million |
| Net income | $2.581 million; $0.43 per diluted share | $4.601 million; $0.76 per diluted share |
| Loss and loss-adjustment expenses | $14.775 million | $0 |
| Combined ratio | 91.3% | 26.3% |
| Operating cash flow | $0.416 million | $8.126 million |
| Cash and cash equivalents | $12.242 million | $8.584 million |
| Restricted cash | $23.440 million | $30.368 million |
| Investments | $10.992 million | $9.348 million |
| Total assets / shareholders’ equity | $51.000 million / $37.163 million | $52.687 million / $37.027 million |
| Loss reserves | $8.702 million | None |
Net premiums earned rose 167%, substantially reflecting an $8.4 million reduction in the loss-experience-refund liability after significant losses arose under a retrospectively rated multi-year contract. Weather-related events drove the year’s $14.8 million loss expense and reduced net income despite higher reported revenue. The loss ratio was 82%; the expense ratio was 9.4%. Net realized investment gains were $0.554 million, net investment income was $0.450 million, and 2015 included $0.399 million of other-than-temporary impairment losses.
Cash from operations fell sharply year over year. Investing activities provided $6.869 million, primarily from net security sales and collateral withdrawals; financing used $3.627 million, including dividends and share repurchases. The company reported no off-balance-sheet arrangements and no debt balance in the supplied financial statements; management said it had no plans to issue debt but did not rule out future borrowing. Restricted assets support collateral obligations and are not freely available liquidity.
Material changes, outlook and risks
- Loss reserves increased from zero to $8.702 million. About 54% of the year-end reserve represented IBNR and expected development; $6.073 million of losses had been paid. With no retrocession, reported gross and net loss reserves were equal.
- The company paid $0.48 per share in dividends in 2016, compared with $0.43 diluted EPS, and repurchased 143,851 shares for $0.742 million. The board declared a further $0.12-per-share dividend in January 2017. Future dividends remain discretionary and subject to subsidiary capital and regulatory constraints.
- Management described the reinsurance market as overcapitalized and softening. Its stated response is to reduce premium writings rather than accept mispriced risks and to conserve capital; no numeric earnings or premium guidance was given.
- Important risks include catastrophe severity and frequency, uncertain reserve estimates, concentration in a small number of cedants and Florida-related exposures, reliance on collateral that limits capital deployment, lack of a financial rating, competition, and limited operating history. The filing also highlights potential conflicts involving shared directors and business relationships with HCI Group-related entities; related-party cedants included Claddaugh and HCPCI.
- Oxbridge Reinsurance Limited’s Cayman regulatory net worth was $22.9 million, above its stated $500 minimum and prescribed capital requirement. Management reported effective disclosure controls and internal control over financial reporting; the auditor’s report gave an unqualified opinion on the financial statements. The auditor did not attest to internal control, consistent with the company’s emerging-growth-company exemption.
Most important facts for investors to verify
- How the $8.4 million release of loss-experience-refund liability affected earned premiums and whether similar adjustments are likely to recur.
- Development and payment of the $8.702 million loss reserve, including the substantial IBNR component and exposure to further 2016-event claims.
- Actual cedant, geographic, and related-party concentration, including the relationship between the 35% largest-contract collateral figure and the broader concentration disclosures.
- Available unrestricted liquidity after collateral requirements, and the sustainability of dividends and repurchases given operating cash flow and earnings.
- Pricing and renewal conditions, the effect of having no rating or retrocessional protection, and management’s response if catastrophe exposure or market conditions worsen.