Oxbridge Re Holdings Limited (NASDAQ:OXBR) Q4 2023 Earnings Call Transcript

Oxbridge Re Holdings Limited (NASDAQ:OXBR) Q4 2023 Earnings Call Transcript March 26, 2024

Oxbridge Re Holdings Limited isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon. Welcome to Oxbridge Re’s Fourth Quarter and Year End 2023 Earnings Call. My name is Shomali and I will be your conference operator this afternoon. At this time all participants will be in a listen only mode. Joining us for today’s presentation is Oxbridge Re’s Chairman, President, and Chief Executive Officer, Jay Madhu; and Chief Financial Officer and Corporate Secretary, Wrendon Timothy. Following their remarks, we will open up the call for your questions. I would like to remind everyone that this call is also being broadcast live via webcast and available via webcast replay until April 9th, 2024 on the Investor Information section of the Oxbridge Re website at www.oxbridgere.com. Now, I like to turn the call over to Wrendon Timothy, Chief Financial Officer of Oxbridge Re, who will provide the necessary cautions regarding the forward-looking statements that will be made by management during this call.

Wrendon Timothy: Thank you, Operator. During today’s call, there will be forward-looking statements made regarding future events, including Oxbridge Re’s future financial performance. These forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipates, estimates, expects, intends, plans, projects and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled Risk Factors contained in our Form 10-K filed with the Securities and Exchange Commission today, March 26 2024.

The occurrence of any of these risks and uncertainties could have a material adverse effect on the company’s business, financial condition and the volatility of our earnings, which in turn can cause significant market price and trading volume fluctuation for our securities. Any forward-looking statements made on this conference call speak only as of the date of this conference call. And except as required by law, the company undertakes no obligation to update any forward-looking statements contained on this call or in any company presentation, even if the company’s expectations or any related events, conditions or circumstances change. Now I’d like to turn the call over to our Chairman, President and Chief Executive Officer, Jay Madhu. Jay?

Jay Madhu: Thank you, Wrendon, and welcome, everyone. Thank you for joining us today. Let me start by saying we are proud of the significant steps we have taken this year to fortify and diversify our business. Our core business remains reinsurance, where we write fully collateralized policies to cover property losses from specific catastrophes. And because we write fully collateralized contracts, we believe we can compete effectively with large carriers. We specialize in underwriting low-frequency, high-severity risks, where we believe sufficient data exists to effectively analyze the risk-return profile of reinsurance contracts. Our objective is to achieve long-term growth and book value per share by writing business on a selective and opportunistic basis that will generate attractive underwriting profits relative to risk.

Building on the stable reinsurance foundation, we begin to diversify our business in 2021 as a lead sponsor of Oxbridge Acquisition Corp., a special purpose acquisition company, or SPAC, focusing on investing in disruptive technologies. In August of 2023, Oxbridge Acquisition successfully completed its business combination with Jet.AI Inc. The company develops software and offers fractional aircraft ownership, jet card, aircraft brokerage and charter to its fleet of private aircraft and those of operating partners. It operates in two segments: software and aviation. The software segment features the B2B CharterGPT app and the B2B Jet.AI operator platform. The CharterGPT app uses natural language processing and machine learning to improve the private jet booking experience.

See also 20 Least Densely Populated States in the US and 25 Sunniest States in the US.

Q&A Session

The Jet.AI operator platform operates a suite of stand-alone software products such as ReRoute and DynoFlight to enable FAA Part 135 charter providers to add revenue, maximize efficiency and reduce environmental impact. The aviation segment features jet aircraft fractionalization, jet cards, on free charter, management and buyers brokerage. With the completion of the business combination in August of 2023, the company began trading on the NASDAQ stock exchange. Our interest in Jet.AI is recognized at fair value and in other investments on our balance sheet. In 2023, we expanded our business portfolio by establishing SurancePlus Inc. a new subsidiary focused on Web3 technology. SurancePlus specializes in democratizing tokenized real-world assets or RWAs, offering tokenized reinsurance securities as alternative investment opportunities.

These securities leverage blockchain technology to ensure complete transparency and compliance with the SEC guidelines, representing a significant advancement in the digital security market. Consequently, this initiative aims to broaden investor participation, extending opportunities beyond a select group of ultra-high net worth individuals. Crucially, the establishment of SurancePlus was achieved without incurring new debt or diluting equity in our shareholders, reflecting our efficient approach to diversification. We are enthusiastic about the prospects of these new investments and remain committed to keep our stakeholders informed of the progress in the forthcoming quarters. Looking ahead, we intend to reposition Oxbridge as a prominent player, the real-world asset to RWA Web3 sector.

Further details of the strategic direction will be shared later in the call. In summary, we maintain a strong sense of optimism regarding the long-term outlook of our core reinsurance business alongside the successful integration of our new ventures, Jet.AI and SurancePlus, as we embrace RWA market more comprehensively. I’ll now turn things over to Wrendon and take us through our financial results.

Wrendon Timothy: Thank you, Jay. I would like to remind you that our typical contract period is from June 1 to May 31 of the following year. With respect to net premiums earned, net premiums earned for the year ended December 31, 2023 increased to $1,255,000 from $995,000 in the prior year. The increases are due to the higher rates on reinsurance contracts in force during the quarter and year ended December 31, 2023, when compared with the prior periods. Our net investment and other income rose in 2023 to $303,000, primarily due to higher rates on our money market funds. You can also see that we generated our incentive technology origination, and management fee income of $300,000 in 2023 from our SurancePlus subsidiary. We recorded an unrealized loss of $8.9 million on our other investments, the result of our remeasurement of our investment in Jet.AI at fair value.

We also recognized a $38,000 positive change in fair value of our equity securities as of December 31, 2023, well up from the $338,000 negative change in the prior year. All these factors taken together resulted in consolidated total revenues of negative $7.05 million in 2023 compared to $850,000 in the prior year. Total expenses include loss and loss adjustment expenses, policy acquisition costs, and general and admin expenses for the year ending December 31, 2023 with $2.3 million, down from $2.6 million in 2022 due to the triggering of limit loss on two re-insurance contracts in September 2022 as a result of Hurricane Ian, which was partially offset by higher policy acquisition costs and increased general and admin expenses in 2023 as a result of inflationary expense fluctuations and the recognition of previously deferred offering costs in relation to our S-3 registration.

We experienced a net loss of $9.9 million, or $1.69 per share in 2023 compared to net loss of $1.8 million, or $0.31 per share in fiscal 2022. The decline in the quarter and year ended December 31, 2023 is primarily due to the fair value changes in the company’s equity investment in Jet.AI, as well as increased general expenses associated with the recognition of previously deferred offering costs on its S-3 registration. As we have discussed before on our investor calls, we use various measures to analyze growth and profitability of our business operations. For our reinsurance business, we measure underwriting profitability by examining our loss ratio, acquisition ratio, expense ratio, and combined ratio. Our loss ratio, which measures underwriting profitability is the ratio of losses and loss adjustment expenses incurred to net premiums earned.

The loss ratio decreased to 0% for the year ending December 31st, 2023 compared to 107.8% in the prior year, wholly due to the limit losses suffered on two of our reinsurance contracts as a result of Hurricane Ian in September of 2022. Our acquisition cost ratio, which measures operational efficiency, compares policy acquisition costs to net premium earned. Our acquisition cost ratio increased marginally to 11.2% for the year ended December 31, 2023 compared with 11.1% in the prior year. Our expense ratio, which measures operating performance, compares policy acquisition costs and general and admin expenses with net premiums. The expense ratio increased to 185.2% for the year end of December 31, 2023 from 153.1% for the prior year due to higher general and admin expenses in 2023, primarily from the recognition of previous differed expenses associated with companies from S-3 registration, as well as marginal expenses associated with a successful launch of our SurancePlus private placement offering.

Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio. The combined ratio decreased to 185.2% for the year ended December 31, 2023 from 260.9% for the prior year. The decrease is due to a decrease in our loss ratio during the year ended December 31, 2023, as a result of no underwriting losses suffered in 2023 when compared with underwriting losses suffered in 2022, as a result of Hurricane Ian. Now turning to our balance sheet, our investment portfolio increased to $680,000 at December 31, 2023 from $642,000 at the prior year end, due primarily to unrealized gaines we experienced due to the improved global capital markets in the year. Other investments decreased due to the negative change in the fair value of our equity investment in Jet.AI.

Cash and cash equivalent and restricted cash and cash equivalent decreased to $3.7 million at December 31, 2023 compared to $3.9 million at December 31, 2022. Now I’d like to turn the call back over to Jay to wrap up before we take your questions. Jay?