Oxbridge Re Holdings Limited — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 30, 2021. This is an annual report, not a standalone fourth-quarter filing. Amounts below are in U.S. dollars; financial statement amounts are generally in thousands unless stated otherwise.
Business context
Oxbridge is a Cayman Islands specialty property and casualty reinsurer focused mainly on fully collateralized catastrophe reinsurance for insurers, particularly in the U.S. Gulf Coast. Its subsidiary Oxbridge Re NS operates as a sidecar, issuing participating notes to support a quota share of reinsurance business. The company says it prioritizes underwriting results and long-term book-value growth over predictable quarterly earnings.
Financial results and position
| Metric | FY2020 / Dec. 31, 2020 | FY2019 / Dec. 31, 2019 |
|---|---|---|
| Total revenue | $1.214 million | $981,000 |
| Net premiums earned | $893,000 | $617,000 |
| Net loss | $50,000; $0.01 loss per share | $305,000; $0.05 loss per share |
| Loss ratio | 0.0% | 0.0% |
| Combined ratio | 126.1% | 183.3% |
| Cash and cash equivalents | $5.562 million | $5.962 million |
| Restricted cash | $1.914 million | $2.054 million |
| Equity securities | $787,000 | $692,000 |
| Notes payable | $216,000 | $600,000 |
| Total assets / shareholders’ equity | $9.083 million / $8.025 million | $9.495 million / $8.043 million |
Net realized investment gains were $374,000 in 2020, compared with $3,000 in 2019; the 2020 results also included a $155,000 decline in fair value of equity securities. The company attributed the narrower net loss primarily to realized investment gains. General and administrative expenses fell to $1.028 million from $1.067 million, while acquisition costs rose to $98,000 from $64,000.
No losses were incurred in either year, and the year-end loss and loss-adjustment expense reserve was zero. The 126.1% combined ratio remained above 100%, which the company says indicates underwriting was not profitable. The company reported operating cash use of $266,000 in the cash flow statement for 2020, versus $4.371 million in 2019; investing activities provided $110,000 and financing activities used $384,000. The MD&A narrative rounds or reports operating cash use as $267,000, differing by $1,000 from the statement.
Changes versus 2019
- Net premiums earned increased $276,000, which management attributed to a return to normal premium recognition after accelerated recognition in the prior period.
- Total revenue increased $233,000, with higher earned premiums and realized investment gains partly offset by lower investment and other income, a fair-value loss, and no repeat of the 2019 $106,000 commutation gain.
- The combined ratio improved from 183.3% to 126.1%, primarily due to higher earned premiums and lower total expenses, but remained above the underwriting-profitability threshold.
- Notes payable declined by $384,000, reflecting redemption of Series 2019-1 participating notes and issuance of $216,000 of Series 2020-1 notes. The 2019 notes were fully redeemed in June 2020; Series 2020-1 notes mature June 1, 2023.
- Total cash and restricted cash declined by $540,000 to $7.476 million. Shareholders’ equity decreased by $18,000.
Outlook, risks and unusual items
- Outlook: No quantified earnings or premium guidance is provided. Management describes underwriting as selective and opportunistic, and says it may reduce premium writings in a soft market rather than accept mispriced risk. It expected operating liquidity to come from cash, investment income and underwriting activities, with potential future equity offerings as an additional source; it reported no plan to issue debt.
- Key risks: Catastrophe severity and frequency, concentrated exposure to a limited number of cedants, reserve uncertainty, broker and counterparty credit risk, intense competition and reinsurance-market cyclicality. The company has no financial strength rating and must fully collateralize its contracts, constraining capital available for growth.
- COVID-19: The company temporarily closed its offices, reopened in May 2020 after government approval, and reported minimal operational impact. It nevertheless warned that market disruption, investment declines or interruption of premium cash inflows could adversely affect results and liquidity.
- Capital and dividends: Both reinsurance subsidiaries exceeded their $500,000 minimum and prescribed capital requirements at year-end. No dividends were paid in 2020 or 2019; the company said it did not expect to resume cash dividends in the foreseeable future.
- Other items: A director and officer invested $68,000 in Series 2020-1 participating notes. No litigation, off-balance-sheet arrangements, or subsequent events requiring disclosure were reported. The financial statements received an unqualified audit opinion; management concluded disclosure controls and internal control over financial reporting were effective, but the auditor did not attest to internal control.
Important facts for investors to verify
- Review the audited statements and notes for investment-gain composition, the $155,000 fair-value loss, and cash-flow presentation.
- Assess how a zero loss reserve and no reported claims relate to catastrophe exposures, claims-development disclosures, and the independent actuary’s reserve assessment.
- Verify current collateral requirements, cedant concentration, subsidiary capital headroom and the terms and redemption risks of participating notes.
- Check subsequent results for renewal premiums, underwriting profitability, liquidity and any change in dividend policy or capital-raising plans.
- Review warrant terms and registration status: 8,230,700 warrants were outstanding at year-end, with a $7.50 exercise price and expiration on March 26, 2024; the filing warns cash exercise may not be available without an effective registration statement.