Oxbridge Re Holdings Limited

Good afternoon, and welcome to Oxbridge-Reed's first quarter 2023 earnings call. My name is Camilla, and I will be your conference operator this afternoon. At this time, all participants are in a listen-only mode. Joining us for today's presentation is Oxbridge-Reed Chairman, President, and Chief Executive Officer, Jay Maru, and Chief Financial Officer and Corporate Secretary, Rendon 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 and available via webcast replay until on the investor relations section of the Oxbridge RE website at www.oxbridgeRE.com. Now, I would like to turn the floor over to Rendon 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. Thank you. Brendan, you may begin.

Thank you, Operator. During today's call, there will be forward-looking statements made regarding future events, including Oxford Reef's future financial performance. These forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995. Rules such as anticipate, estimates, expects, intends, plans, projects, and other similar rules 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 ideal results and events differ materially from such forward-looking statements is included in the section entitled Risk Factors in our Form 10-K file on March 30, 2023, and our Form 10-K file today with the Securities and Exchange Commission. 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 speaks 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? 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, Oxfords Reinsurance Limited, and our licensed reinsurance sidecar, Oxfords 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 efficiently with large carriers. We specialize in underwriting low-frequency, high-serious 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 in book value per share by writing business on a selective and opportunistic basis that will generate attractive underwriting profits relative to risk. We diversified our business in 2021 by being the lead and the sponsor of Oxbridge Acquisition for a special purpose acquisition company or SPAC, focusing on investing in disruptive technologies. During the first quarter of 2023, Oxbridge Acquisitions announced its intention to form a business combination with Jet.ai Inc. The company develops software and offers fractional aircraft ownership its fleet of private aircraft and those of its operating partner. Jet AI operates along two segments, software and aviation. The software segment features a B2C Charter GPT app and the B2B Jet.AI operator platform. The Charter GPT app uses natural language processing and machine learning to improve the private jet booking experience. The Jet.ai operator platform offers a suite of standalone software products to enable FAA Part 135 charter providers to add revenue, maximize efficiency, and reduce environmental impact. The aviation segment features jet aircraft fractions, jet cards, off-seat charter management, and buyer's brokerage. The transaction is expected to close at the end of the second quarter of this year for SEC, pending SEC and OTSAC shareholder approvals. We also further diversified our business with the creation of our new Web3 subsidiary, Assurance Plus Inc. The company offers an alternative investment opportunity, leveraging key qualities of blockchain technology to create a well-designed digital security under SEC guidelines that have complete transparency and compliance. Assurance Plus commenced an offering of securitized tokens, which, assuming no losses, are expected to generate a potential return of approximately 42% a year. This new trust is an entry into the Web3 and digital security market, which puts real-world assets on the blockchain and opens an entirely new avenue of democratizing reinsurance and potentially other opportunities in the future. We are very excited about both of these new opportunities and look forward to keeping you appraised of their progress in the upcoming quarters. 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 subsidiaries over time. Over the long term, we remain highly opportunistic about the prospects of our core reinsurance business and the two investments I commented on earlier in Oxbridge Acquisitions as well as Insurance Plus. I'll now turn things over to Rendon and take us through our financial results.

Thank you, Jay. I'd like to remind you that our typical reinsurance contract period is from June 1 to May 31 of the following year. With regard to net premiums, the net premiums for the quarter ended March of 2023 were nil, compared to 210,000 in the last year's first quarter. The decrease was due to the acceleration of premium recognition, and so far, reinsurance contracts during 2022 are rising from the limit loss support from the hurricane impact. So there have been no reinsurance premiums recorded in this quarter. There have also been no losses to date incurred in 2023. With regard to investment income, our net investment income and other income rose in the quarter to 89,000 from 23,000 due to higher rates on money market funds. We generated a solid 3,000 unrealized gain in the first quarter of 2023 due to a fair value change in our equity investment in Acquisition Corp. In last year's first quarter, this change resulted in a 230,000 unrealized loss. We also recognized a 76,000 positive change in the fair value for equity securities as of March 31, 2023, much improved from the 20,000 negative change in the prior year's first quarter. All of these factors taken together resulted in total revenues of 546,000 for the three months ended March 31, 2023, compared to nil in the prior year's first quarter. With regard to total expenses, total expenses were up marginally in the fourth quarter, of 2023 to $404,000 from $361,000 last year. There were no policy acquisition costs or underwriting expenses in the quarter due to the acceleration of premium recognition and the resulting acceleration of policy acquisition costs. In addition, general and admin expenses are high in 2023 due to increased personnel costs and inflationary cost pressures. Due primarily to the positive change in the fair value for equity securities and other investments in the quarter, we generated net income of $142,000, or $0.02 per share, for the three months ending March 31, 2023, compared to a net loss of $387,000, or $0.07 per share, in the last year's first quarter. As we have discussed before on our investor calls, we used various measures, To analyze the growth and profitability of our business, for our insurance 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 loss and loss adjustment expenses, including net premiums earned. With no losses or loss adjustment expenses in either the first quarter of 2023 or 2022, the loss ratio was 0% in both years. Our acquisition cost ratio, which measures operational efficiency, compares policy acquisition costs and net premiums earned. Likewise, with no premiums earned in the first quarter of 2023, the ratio was 0% compared to 11% in the prior year. Our expense ratio, which measures operating performance, compares policy acquisition costs and general added expenses with net premiums earned. As a result of no premiums in 2023, our expense ratio was 0% in the first quarter compared to 171.9% in the first quarter of 2022. Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio. With no premiums earned in the first quarter, the combined ratio was 0% compared to 171.9% in last year's first quarter. Now turning to the balance sheet. Our investment portfolio increased to $718,000 at March 31, 2023, from $642,000 at the prior end, largely due to the gain of experience during the quarter. Our investments increased marginally due to the positive change in the fair value of our investments in our acquisition corp. Cash and cash equivalents and restricted cash and cash equivalents increased to $3.6 million at March 31, 2023, compared to $3.9 million at December 31, 2022. So the shareholder's equity at quarter end increased to $15.2 million, or approximately $2.59 per common share. Now I'll turn the call back over to Jay to wrap up before we take your questions.

Thank you, Rendon. As we discussed on our year-end conference call, in late January, we announced the incorporation of Assurance Plus, a wholly owned subsidiary of BoxBridge Re. Assurance Plus will issue tokenized securities that that indirectly represent fractionalized interest in reinsurance contracts underwritten by our 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 more investors to participate and have their interest permanently and transparently recorded on the chain. These opportunities were typically unavailable to investors in the past due to high barriers to entry. Following this exciting investment opportunity in late February, we utilized We utilize Oxbridge Acquisition Corp. to embark on a business combination with Jet AI Inc., a company offering fractional aircraft ownership, jet card, aircraft brokerage, and charter service to its fleet of private aircraft. Our wholly owned subsidiary, Oxbridge Reinsurance Limited, is the lead investor in our SPAC sponsor and holds 1.5 million shares, which at the closing of transaction will have a value of approximately $14.2 million. not including the value of 3.1 million private warrants we beneficially own in the SPAC. These exciting new investment opportunities further diversify our business and risk portfolio, positioning us to capitalize on growth in 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 book value per share at quarter end is $2.56. is well diversified. Our investment insurance plus positions us in a new leading-edge Web3 technology business. Our investment in Oxbridge Acquisition slash Jet.ai, an artificial intelligence aviation business, is on track. We remain debt-free. We have a strong balance sheet with a solid cash position. And most importantly, we have 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 markets. With that, we are ready to open the call for questions. Operator, please provide the appropriate instructions.

Thank you, sir. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation cell will indicate that 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 handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from Ken Engelke with Capital Securities. Please proceed with your question.

Hey, Jay. Hey, Rendon. A couple questions come to mind right now. I guess the first and foremost, on Assurance Plus, to try to increase the potential value there, you have a lot of things going on. You ever consider the possibility of maybe spending something out to recognize that value that is there? And secondly, in regards to on the SPAC, were we out on the voting of the SPAC itself? I would think that once that merger is closed, there should be a very large release of potential value, at least on the balance sheet, based on accounting rules and the like. Looking where you price your stock is, it looks like there's a lot of value based upon things that are already in place.

Hi, Ted. Yeah, I'll take your second question first. And the answer to that is yes. We don't realize a full mark-to-market value on the investment in the SPAC at the moment, but once that's closed, that will normalize. So there will be an uptick in recognition. So we're looking forward to that. We hope that – actually, just yesterday, the SEC comments went in yesterday and got filed with the SEC, the second round of comments. The first round of comments, rather. And if all goes well, we expect this to close by the end of Q2 of this year. So everything looks on track, and we're good to go there. In relation to your first question, how do we monetize Assurance Plus, that will be a work in progress. But what we have done is we have developed a Web3 company internally. We don't go out. There was no solution. We don't raise capital. We don't raise cash. We developed it all in-house. So shareholders have owned 100% of that company at the moment. As we go forward, and it will definitely be board approval, et cetera, but there's definitely an opportunity to maybe do something much bigger. But once we go forward with Insurance Plus and we issue the reinsurance token, there's definitely opportunity to go raise funds and do various different other tokens of the like as well. So absolutely, we're very excited.

A lot of opportunity, a lot of potential. Following you all for a long time, and it looks like we're finally on the cusp of doing something.

Yes, yes. This has been an extremely busy year, extremely busy last year, but now we're almost there. Looking forward to it.

Look forward to the upcoming conference calls.

Thank you, Ken. Thank you, Ken.

As a reminder, if you would like to ask a question, it is star one on your telephone keypad. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Madhu 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 continuing support. I especially want to express our gratitude to the Oxbridge 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. If you have any further questions, please contact me anytime. Thank you again for your time and attention today and your interest in Oxbridge. Operator?

Thank you. Before we conclude today's call, I would like to remind everyone that a recording of today's call will be available for replay via a link available in the investor section of the company's website until May 26, 2023. Thank you for joining us today for our presentation. You may now disconnect.