Oxbridge Re Holdings Limited — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Amounts are in U.S. dollars; financial statement amounts are in thousands unless stated otherwise. The company is a Cayman Islands property and casualty reinsurer focused on fully collateralized catastrophe reinsurance, primarily in the U.S. Gulf Coast and Florida.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Total revenue | $1.636 million | $1.531 million |
| Net premiums earned | $1.548 million | $1.381 million |
| Net investment income | $86,000 | $94,000 |
| Net income | $1.270 million | $1.043 million |
| Basic and diluted EPS | $0.22 | $0.17 |
| Operating cash flow | $12,000 | $2.625 million |
| Combined ratio | 23.6% | 35.3% |
- Net income rose about 22%, as higher earned premiums and lower expenses more than offset weaker investment income and realized gains.
- The loss ratio was negative 2.1%, versus 4.6%, reflecting $32,000 of favorable prior-period loss development. The company reported no losses incurred for the current period.
- Total assets were $47.480 million at March 31, down from $51.000 million at December 31, 2016. Total liabilities were $10.102 million and shareholders’ equity was $37.378 million. No debt is listed on the balance sheet.
- Cash and cash equivalents were $15.338 million; restricted cash was $15.871 million. Together they totaled $31.209 million, down from $35.682 million at year-end. Restricted funds secure reinsurance obligations and are not freely available for general use.
- Available-for-sale investments totaled $14.372 million, up from $10.992 million. The portfolio included $10.021 million of fixed-maturity securities and $4.351 million of equity securities.
- The loss and loss-adjustment-expense reserve fell to $5.684 million from $8.702 million, principally after $2.986 million of payments on prior-period losses. Management estimated that IBNR made up about 35% of the ending reserve.
- The subsidiary’s net worth was $23.2 million, above its $500,000 regulatory minimum. Dividends from the subsidiary remain subject to regulatory constraints.
Changes, outlook, and risks
- Net premiums earned increased 12%, which management attributed primarily to growth in the number and size of active reinsurance contracts. Total expenses declined to $366,000 from $488,000, including lower general and administrative expenses.
- Operating cash flow dropped sharply to $12,000. The filing attributes cash movements to premium receipts and payments, while investing cash flow included a $7.569 million net return of collateral, partly offset by net purchases of securities. Financing cash use was $1.043 million, including $705,000 of dividends and $338,000 of share repurchases.
- The company repurchased 54,277 shares during the quarter for $338,000, at an average $6.23 per share; approximately $919,000 remained available under the $2 million repurchase authorization. The quarterly dividend was $0.12 per share; a further $0.12 dividend was declared after quarter-end.
- Management said it had sufficient cash flows to meet liquidity needs, expected to fund operations through operating cash flows and potential future equity offerings, and had no plans to issue debt. The filing provides no quantitative earnings or revenue guidance.
- Catastrophe losses, especially hurricanes and other events during the June–November storm season, can materially affect results. The company emphasizes that it does not establish reserves for future events before an insured loss occurs, and that loss estimates may differ materially from ultimate claims.
- Underwriting is concentrated: a substantial portion of business ultimately relates to two Florida entities, one under common directorship. The company also has related-party reinsurance arrangements with Claddaugh; related-party balances included $2.1 million of loss-experience refund payable and $567,000 of unearned premiums at quarter-end.
- Management identified reserve estimation, investment valuation, and loss-experience refund liabilities as areas involving significant judgment. The company reported no litigation, no off-balance-sheet arrangements, and no material changes to previously disclosed risk factors. Disclosure controls were deemed effective.
Investor verification points
- Review the development and adequacy of loss reserves, including the independent actuary’s estimates and the reported favorable prior-period development.
- Assess catastrophe exposure, the concentration of Florida-related business, and the extent of related-party underwriting.
- Confirm how much cash is restricted as collateral and whether operating cash generation can support claims, dividends, and repurchases.
- Examine the investment portfolio’s unrealized losses, particularly equity securities, and the company’s assumptions that no securities were other-than-temporarily impaired.
- Verify the remaining repurchase authorization and the regulatory and subsidiary-capital capacity to fund future dividends.