OXBRIDGE RE HOLDINGS LIMITED — Q1 2021 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2021, compared with Q1 2020; balance-sheet figures compare March 31, 2021 with December 31, 2020. Oxbridge is a Cayman Islands property and casualty reinsurer focused on fully collateralized catastrophe risks, primarily in the U.S. Gulf Coast and Florida. Oxbridge Re NS operates as a reinsurance sidecar. Amounts below are in U.S. dollars, thousands, unless noted.
Financial performance and position
| Metric | Q1 2021 / March 31, 2021 | Comparable period / prior date |
|---|---|---|
| Total revenue | $319 | $(23) in Q1 2020 |
| Net premiums earned | $181 | $264 in Q1 2020 |
| Net investment income | $14 | $33 in Q1 2020 |
| Change in fair value of equity securities | +$124 | $(326) in Q1 2020 |
| Total expenses | $272 | $275 in Q1 2020 |
| Net income (loss) | $28; $0.00 per share | $(364); $(0.06) per share in Q1 2020 |
| Operating cash flow | $(67) | $(4) in Q1 2020 |
| Cash and restricted cash | $6,763, including $2,134 restricted | $7,476 at December 31, 2020 |
| Total assets / shareholders’ equity | $8,812 / $8,068 | $9,083 / $8,025 at December 31, 2020 |
| Notes payable / operating lease liabilities | $216 / $200 | $216 / $222 at December 31, 2020 |
The loss ratio was 0%; acquisition cost ratio 11.0%; expense and combined ratios 150.3%, versus 104.2% in Q1 2020. No losses or loss-adjustment expenses were incurred or reserved in either quarter. The company purchased $648 of equity securities; net cash used in investing activities was $646. No financing cash flow was reported.
Changes versus Q1 2020 and prior year-end
- Net income improved by $392, mainly because equity securities recorded a $124 fair-value gain versus a $326 loss in Q1 2020. This investment-market swing more than offset lower premiums earned and lower investment income.
- Net premiums earned declined by $83; management attributed the decrease to less capital deployed. The higher expense and combined ratios primarily reflect the lower premium base, not a reported increase in losses.
- Equity securities rose to $1,557 from $787 at year-end, principally due to purchases. Restricted cash rose by $220, which management attributed to premium deposits. Total cash and restricted cash fell by $713.
Outlook, commentary and risks
No specific earnings or premium guidance is provided. Management said it believed liquidity was sufficient for operational needs and expected to rely on cash, investment income and underwriting activities; it also noted potential future equity offerings and no current plans for debt other than participating notes. Management described the reinsurance market as affected by COVID-19-related uncertainty and said the pandemic could sustain upward pricing trends, while emphasizing that impacts and opportunities remained uncertain. Operations had returned to normal by March 31, 2021, with no material disruption reported.
Key risks include severe catastrophe losses, concentrated underwriting exposure to a limited number of entities, counterparty and broker credit risk, and equity-market volatility. The company cautions that loss estimates are uncertain and that GAAP does not allow reserves for future events before losses are incurred. Its subsidiaries each had reported net worth above the $500 minimum regulatory requirement. No litigation, off-balance-sheet arrangements, or material subsequent events requiring disclosure were reported. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Confirm that the $28 net income was driven substantially by the $124 unrealized equity gain, and assess sensitivity to investment-market reversals.
- Review underwriting capacity and exposure despite zero reported Q1 losses and loss reserves; catastrophe activity is seasonal, generally June through November.
- Assess liquidity available for claims: $2,134 of the $6,763 cash and restricted-cash balance was restricted as collateral.
- Track premium generation and expense levels, given lower earned premiums and a 150.3% combined ratio.
- Check the MD&A narrative’s period-label inconsistency: it appears to describe the $28 Q1 2021 income as “for the quarter ended March 31, 2020,” although the financial statements show a Q1 2020 loss of $364.