Oxbridge Re Holdings Limited

Good afternoon. Welcome to Oxbridge Rees' fourth quarter and year-end 2022 earnings call. My name is Joe, and I will be your conference operator this afternoon. At this time, all participants will be in the listen-only mode. Joining us for today's presentation is Oxbridge Rees Chairman, President and Chief Executive Officer, Jade Mathew, and Chief Financial Officer and Corporate Secretary, Brendan Timothy. Following the 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, available via webcast replay until April 13, 2023, on the Investor Information section of the Oxbridge RE website at www.oxbridgeRE.com. Now, I would like to turn the call over to Brendan 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. Mr. Timothy? Thank you.

Thank you, operator. During today's call, there will be forward-looking statements made regarding future events, including Oxford Reade'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 subject to various risks and uncertainties. A detailed discussion of risks and uncertainties that could cause actual results and events that differ materially from such forward-looking statements is included in the section entitled Risk Factors, contained in our Form 10-K filed with the SEC and our Form 10-Q filed in previous quarters. 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 fluctuations 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 Chairman, President, and Chief Executive Officer, Jay Madhu.

Jay? Thank you, Brendan, and welcome, everyone. Thank you for joining us today. Before we start, I would like to take a moment to provide a brief overview of our company. Oxfords Reholdings Limited was founded 10 years ago with a mission to provide reinsurance solutions primarily to property and casualty insurers in the Gulf Coast region of the United States. We are very proud to be celebrating our 10th anniversary this year. Through our licensed reinsurance subsidiary, Oxbridge Reinsurance Limited, and our licensed reinsurance sidecar, Oxbridge ReNS, 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 risk where where we believe sufficient data exists to efficiently analyze the risk-return profile of reinsurance contracts. Our objective is to achieve long-term growth in book value per share by writing business on a selective and opportunistic basis that will generate attractive underlying profits relative to risk. As you may recall, in 2021, we launched Oxbridge Acquisition Corp., our special purpose acquisition company, or SPAC, focusing on investing in disruptive technologies. Subsequent to your end, Oxbridge Acquisition announced its intention to form a business combination with Jet Token Inc., a private aviation and artificial intelligence company offering fractional artificial ownership, jet cards, aircraft brokerage, and charter services. The transaction is expected to enable Jet to continue its growth strategy of AI software development and its aircraft fleet expansion. We expect the combination will be completed late in the second quarter. Thank you. In March, we continued to diversify our business with the formation of our new subsidiary, Insurance Plus, Inc., by issuing tokens that represent fractional interest in reinsurance contracts. Insurance Plus offers an alternative investment opportunity that leverages key qualities of blockchain technology to create a well-designed digital security. In March, Insurance Plus commenced an offering of $5 million in these tokens, which, assuming no casualty losses to property insurers by the company, are expected to generate a return of up to 196% after three years. I will have more to say about these transactions later in the call. Regarding our investment portfolio, we remain opportunistic and will deploy our capital when favorable return opportunities arise that can contribute to the growth of capital and surplus in our licensed reinsurance subsidiary over time. Clearly, the current volatility Volatility being experienced in the global financial markets is impacting our investment portfolio and our net income. Having said this, we continue to stay in close touch with our markets and the insurance industry to ensure we continue to deliver value to our shareholders. Over the long term, we remain highly opportunistic about the prospects of our core reinsurance business and two new transactions I mentioned earlier. I look forward to keep you appraised of our progress in the quarters to come. I will now turn it over to Rendon to take us through our financial results.

Rendon? 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, 2022 increased marginally to $995,000 from $965,000 due primarily to the acceleration of premium recognition on two of our reinsurance contracts. suffered limit losses due to the impact of Hurricane Ian during 2022, as well as higher rates on reinsurance contracts in 2022 when compared to the prior year. Our net investment and other income rose in 2022 to $201,000, primarily due to administrative fee income related to our SPAC investments. We experienced a small $35,000 unrealized loss in 2022 due to a fair value change in our equity investment in Oxbridge Acquisition Corp. When compared to the prior year, we recognized a $9.2 million unrealized gain. We also recognized a $338,000 negative change in the fair value of our equity securities as of December 31, 2022, down from $767,000 negative change in the prior year. Both were due to the challenging global capital markets we all experienced. All of these factors taken together resulted in total revenues declining to $850,000 in 2022, compared to $10.2 million in the prior year. The decrease is primarily due to the significant decline in the unrealized gain on our investment in all SPACs. Total expenses including loss and loss adjustment expenses, policy acquisition costs, and general admin expenses for the end of December 31, 2022, with 2.5 million up from 1.6 million in 2021. Increases due primarily to the approximate 1.1 million loss included in 2022, resulting from the triggering of loss limits onto reinsurance contracts from Hurricane Ian. In addition, we have experienced general higher administrative expenses this year due to inflationary cost pressures and the appointment of a new head of special projects. Largely due to the loss and loss adjustment expenses in 2022 and the significant change in the unrealized valuation on our SPAC in 2022, we experienced a net loss of 1.8 million or 31 cents per share in 2022 compared to net income of 8.6 million in fiscal 2021. With respect to our financial ratios, as we have discussed before in our investor calls, we use various measures to analyze the growth and profitability of our business operations. For our reinsurance business, we measure underwriting profitability by examining our loss ratio, our acquisition ratio, expense ratio, and combined ratio. Our loss ratio, which measures underwriting profitability, is the ratio of loss and loss adjustment expenses incurred in the premiums earned. The loss ratio increased to 107.8% for the year ended December 31st, 2022, compared to 16.4% in the prior year. Again, due to the limit loss suffered, onto reinsurance contracts, which was partially offset by a higher denominator in net premiums earned. Our acquisition cost ratio, which measures operational efficiencies, compares policy acquisition costs, net premiums earned. The ratio remains stable at 11% in 2022 compared to the prior year. Our expense ratio, which measures operating performance, compares policy acquisition costs in general and admin expenses with net premiums earned. The expense ratio increased 153.1%, increased to 153.1% for the year end of December 31st, 2022, from 146.2% in the prior year, primarily due to the higher general and administrative expenses in 2022. Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio. The combined ratio increased to 268.9% in 2022 from 162.6% in 2021, due again to the increase in the loss ratio resulting from Hurricane Ian limit losses, as well as increased general and admin expenses. Now to the internal balance sheet, our investment portfolio increased to 642,000 at December 31st, 2022 from 577 at the prior year end, due primarily to net purchases of equity securities during the year, partially offset by unrealized losses we experienced due to the volatile capital markets. Other investments, which is our investment in our SPAC, increased marginally due to the positive change in the fair value of our investment in Oxbridge Acquisition Corp. Cash and cash equivalents, unrestricted cash and cash equivalents, decreased to 3.9 million at December 31st, 2022, compared with 5.4 million at December 31st, 2021. Total shareholder equity at the year end was approximately 15 million, or 2,060 cents per common share. Now I'll turn the call back Over to Jay to wrap up before we take your question. Jay?

Thank you, Rendon. In December last year, we were pleased to have Dr. Ruel Ocho join our team as head of special projects. Dr. Ocho is a specialist in digital innovation and blockchain technologies with significant experience in digital architecture, IT strategy, artificial intelligence, and other leading-edge technologies. In late January, we announced the incorporation of Assurance Plus, a wholly-owned subsidiary of Oxbridge REIT. Assurance Plus, led by Dr. Ocho, will issue tokenized reinsurance securities that indirectly represent fractional interest in reinsurance contracts underwritten by a reinsurance subsidiary. Token holders will receive a return on the performance of these underlying reinsurance contracts. In essence, Assurance Plus will democratize access to reinsurance as an alternative investment opportunity that leverages the key qualities of blockchain technology to create a well-designed digital security. Our tokens will enable investors to participate and have their interests permanently and transparently recorded on a blockchain ledger. These opportunities were typically unavailable to investors in the past due to high barriers to entry. We followed up the launch of Assurance Plus with the commencement of our first offering of up to $5 million in tokens on March 27th this year. The proceeds of this offering will be used by Oxbridge to invest in collateralized reinsurance contracts. Assuming there are no casualty losses reinsured by Oxbridge, token investors are expected to receive a significant return of up to 196% at the end of three years. However, we plan to list the tokens on an ATS exchange, giving investors access to liquidity and the income. We believe our investment in Assurance Plus will further diversify our business and enhance shareholder value over the long term. More on this could be found on our website, assuranceplus.com. Following this exciting investment opportunity in late February, we utilize a special purpose acquisition company, Oxbridge Acquisition Corp., to embark on a business combination with Jet Token Inc., a company offering fractional aircraft ownership, jet card, aircraft brokerage, and charter services through its fleet of private aircraft. Our wholly owned subsidiary, Oxbridge Reinsurance Limited, is a lead investor and a SPAC sponsor. and holds the equivalent of 1.4 million shares with a cost basis of approximately $2.3 million. At closing of this transaction, the investment will have a value of $14.2 million, not including the value of approximately 3.1 million warrants we beneficially own in the SPAC. These exciting new investment opportunities further diversify our business and low profile, positioning us to capitalize on growth and emerging technologies. We are very excited about the future value of these investments and the potential they bring to our shareholders. So in closing, our business is well diversified. Our investment insurance plus positions us in a new leading-edge technology business, further diversifying our business. Our investment in the SPAC is progressing according to plan. We remain debt-free. We have a strong balance sheet. And more importantly, we have real opportunity based on a viable business model that is based on diversification. We remain opportunistic not only in our core business, but also our broader view of the market. With that, we are ready to open the calls for questions. Operator, please provide the appropriate instructions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the start keys. One moment, please. We'll pull for questions. Our first question comes from the line of Kent Angoke with Capital Securities. Please proceed.

Hey, Brendan. Hey, Jay. Just want to make sure I heard you correctly on the SPAC investments there. You all own about 1.4 million shares in OXAC, which is worth about $4.2 million in that neighborhood. Your call space is about 2.3 million, and you have 3.4 million warrants exercised at what price?

Kent, yeah, this is Rendon. I think one of your numbers was accurate. So our cost basis is roughly $2.3 million. We own 1.4 million shares, roughly, and at closing, those shares would be worth $14 million, not $4 million. I think you said $4 million. In terms of the warrants, we have It's disclosed in the press release and the 10-K as well. We have just over 3 million warrants. Those warrants strike at $1,150. Those are typical SPAC warrants, strike at 15% above the IPO price. And can't really put a value to those yet, but presumably if the business combination goes well, those will obviously have some value. Okay.

based upon where the warrants are. If it's the same warrants that are trading on the exchange, what's that value? Approximately $210,000 at this juncture. In regards to what is the percentage that you actually own of the SPAC itself?

Oxbridge owns just, well, Oxbridge owns about 49% of the sponsor, and the sponsor owns typically 20% of the SPAC because there were some redemptions in the SPAC. We don't want to get too much into the SPAC here, but there were some redemptions in the SPAC. Right now, I believe the sponsor owns about 68% of the SPAC. And so on business combination, those numbers sort of get a little bit hard to predict. What I'll encourage you to do, we did file an S-4 that sort of like an S-4 for the SPAC that is on the SEC website. Sort of like lays out what the closing will look like, assuming all the SPAC shareholders stays in. It will show the percentage that the SPAC will own. If everybody redeems, if some people redeem, if nobody redeems, you know, I'll point you to that. That will give you a better idea of, you know, how it will look on closing, you know.

I thought it was very encouraging, the monies that you were able to remain once you had that one-year period up. And I thought it was very encouraging how much the SPAC actually had. Going back to on the reinsurance tokens, you're saying the first offering is about $5 million. Obviously, that's private placement. And how does Oxfords get paid on that?

Yeah. So, yeah, we're attempting to raise approximately $5 million. So the Oxbridge will, off that, those tokens, the monies that come in, Oxbridge will issue tokens. Oxbridge will take a small management fee off the top. And then in every successful year, we will share in the profitability of the contracts. But the way we are encouraging investors to invest Be part of our story over here is we are saying the investor will get the first 20% of return, and then they will share the remaining return with us on an 80-20 basis. So it's highly accretive to somebody to invest.

And what is the cost incurring to Oxbridge on that?

Majority of the costs are being – we're kind of doing a lot of this in-house. So the cost, we've been able to develop this entire platform on an extremely low budget at this point because we're doing all of this. Majority of it is done in-house. Of course, we have some attorney fees and audit fees and so on, but those have not been significant.

Cool. It seems like the company is – really starting to move forward and you have two very, you know, I think neat things that are unfolding the last, you know, 60, 90 days, 30, 90 days. So look forward to see how things unfold.

Yes. And we're, we're very excited about this. Thank you, Kat.

Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your cell phone keypad. Ladies and gentlemen, there are no further questions at this time. And I would like to turn the call back to Mr. Mohadou for closing remarks.

Thank you for joining us on today's call. Before we wrap up, I want to thank our employees, business partners, and investors for their continued support. I especially want to express our gratitude to the Oak Ridge team who continue to leverage their significant experience to manage and build our business during these challenging times. We look forward to updating you on our next call, and if you have any further questions, please contact us anytime. Thank you again for your time and attention today and your interest in Oxbridge. Operator?

Thank you, sir. This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.