Oxbridge Re Holdings Limited

Good afternoon. Welcome to Oxbridge REIT's fourth quarter and year-end 2023 earnings call. My name is Shamali, 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 REIT's Chairman, President, and Chief Executive Officer, Jay Madhu, and Chief Financial Officer and Corporate Secretary, Brendan 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 REIT website at www.oxbridgereit.com. Now, I would like to turn the call over to Brendan Timothy, Chief Financial Officer of Oxbridge REIT, who will provide the necessary cautions regarding the forwarding statements that will be made by management during this call.

Thank you, operator. During today's call, there will be forward-looking statements made regarding future events, including Oxford Tree's future financial performance. These forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, 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 can 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 our chairman, president, and chief executive officer, Jay Madhu.

Jay? Thank you, Rendon, 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 in 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 developed software and offers fractional aircraft ownership Jet Card aircraft brokerage and charter through its fleet of private aircrafts and those of operating partner. It operates in two segments, software and aviation. The software segment features the B2C Charter GPT app and B2B Jet AI operator platform. The Charter GPT app uses natural language processing and machine learning to improve the private jet booking experience. The JetAI operator platform operates a suite of standalone software products such as ReRoute and DynoFlight to enable FAA Part 135 charter providers to add revenue, maximizing efficiency and reducing environmental impact. The aviation segment features jet aircraft fractionalization, jet cards, on-freet charter management, and buyer's brokerage. With the completion of the business combination in August of 2023, the company began trading with the NASDAQ Stock Exchange. Our interest in JetAI is recognized at fair value and in other investments on our balance sheet. In 2023, we expanded our business portfolio by establishing Assurance Plus Inc., a new subsidiary focused on Web3 technology. Assurance Plus 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 Assurance Plus 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 our WA 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, JetAI Insurance Plus, as we embrace the RWA market more comprehensively. I'll now turn things over to Rendon and take us through our financial results.

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 higher rates on our ratio of contracts enforced during the quarter and year ended December 31, 2023 when compared with the prior periods. Overnight investment and other income rules 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 Sean's Plus subsidiary. We recorded an unrealized loss of $8.9 million on our other investments, the result of our remeasurement of our investment in JetEI at fair value. We also recognized the $38,000 positive change in the 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 including loss and loss adjustment expenses, policy acquisition costs, and general and admin expenses for the year ended December 31, 2023 with $2.3 million down from $2.6 million in 2022. due to the triggering of limit loss on two reinsurance contracts in September 22, as a result of Hurricane Ian, which was partially offset by higher policy acquisition costs and increased general admin expenses in 2023, as a result of inflationary expense fluctuations and the recognition of previously deferred offering costs in relation to our S3 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 31 cents 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 JetAI, as well as increased general expenses associated with the recognition of previously deferred offering costs on its S3 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 on loss adjustment expenses incurred to next premiums earned. The loss ratio decreased to 0% for the year ending December 31, 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 premiums. Our acquisition cost ratio increased marginally to 11.2% for the year of 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 premium spend. The expense ratio increased to 185.2% for the year ended December 31, 2023, from 153.1% for the prior year due to higher general and admin expenses in 2023, primarily from the recognition of previously deferred expenses associated with companies from S3 registration, as well as marginal expenses associated with the successful launch of Sean's Plus private placement offerings. 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 $688,000 at December 31st, 2023, from $642,000 at the prior year end, due primarily to unrealized gains we experienced due to the improved global capital markets in the year. Our investments decreased due to the negative change in the fair value of our equity investment in JetEI. Cash-in-cash equivalents and restricted cash-in-cash equivalents 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?

Thank you, Brendan. As highlighted earlier in today's discussion, we have implemented decisive and substantial measures throughout this year to fortify and diversify our operations. In December 2022, we established Assurance Plus, our wholly owned subsidiary, with the objective of tokenizing securities representing fractionalized interest in reinsurance contracts underwritten by a reinsurance subsidiary. In the second quarter of 2023, we successfully concluded the initial offering of these tokens through a $2.4 million private placement. Furthermore, we are pleased to report that investors in our DeltaCat retoken are poised to achieve returns exceeding 45%, being the initial 42% projected, and despite the challenges posed by Hurricane Adalia, which made landfall as a Category 3 hurricane in 2023. We believe these are the first tokenized reinsurance securities backed by a publicly traded company. Assurance Plus is poised to democratize access to reinsurance as an alternative investment avenue, leveraging the inherent advantages of blockchain technology to craft sophisticated digital securities. Our tokens aim to facilitate broader investor participation, ensuring their interests are securely and transparently recorded on the blockchain. These opportunities, previously out of the reach of many investors due to extremely high barriers to entry, are now accessible through our innovative approach, essentially, and while repeating myself, we have democratized access to reinsurance. Subsequent to this, in mid-August 2023, our investment in a special purpose acquisition company, Oxbridge Acquisition Corp., culminated in a business merger with Jet AI, a company specializing in fractional aircraft ownership, jet card services, aircraft brokerage, and charter services, facilitated by its pre-deflate fleet of private aircraft. Notably, our own wholly owned subsidiary, Oxbridge Reinsurance Limited, assumed the role of lead investor and the SPAC sponsor. Concurrently, with the finalization of business merger, the company successfully listed its common shares and warrants on the NASDAQ. These compelling opportunities not only augmented our business, but also enhanced our risk profile, strategically positioning us to capitalize on the growth within emerging technologies. We are especially enthusiastic about the anticipated value of these investments hold and the benefits they offer to our shareholders. As previously mentioned, we are currently in the process of rebranding Oxbridge as a RWA Web3 focused company, leveraging the significant progress we have achieved this year. FOCUS suggests an extraordinary expansion of the tokenized RWA market over the next decade, with estimates exceeding $10 trillion. This growth trajectory is fueled by escalating adoption of blockchain technology across various traditional platforms, financial sectors, including fiat currencies, equities, government bonds, and real estate. Endorsements from institutions such as BlackRock and Bank of America further form the transformative potential of tokenization, enhancing financial infrastructure efficiencies, reducing costs, and optimizing supply chains. Moreover, industry analysis from firms such as Boston Consulting Group anticipate a substantial surge in the tokenized asset market. potentially reaching $16 trillion. As pioneers in this evolving landscape, we hold a strong sense of optimism regarding the value our rebranding efforts will unlock for our shareholders. We remain steadfast in our commitment to seizing the opportunities presented by this dynamic market. With that, we are now ready to address any questions you may have. Operator, please provide the appropriate instructions.

Thank you, sir. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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 star keys. One moment, please, while we poll for questions. And as a reminder, if anyone has any questions, you may press star one on your telephone keypad in order to join the question and answer queue. And at this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Madhu for his closing remarks. Mr. Madhu.

Thank you for joining us for today's call. Before we conclude, I would like to extend my gratitude to our employees, business partners, and investors for their unwavering support. I particularly want to acknowledge our dedicated Oxbridge team, whose extensive experience has been instrumental in navigating and advancing our business amidst these challenging circumstances. We anticipate providing you with further updates of our progress during our next call. And should you have any additional questions, please do not hesitate to reach out to us at any time. Once again, thank you for your time, attention today, and for your ongoing interest in Oxbridge. Operator?

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 Investors section of the company's website. Thank you for joining us today for our presentation. You may now disconnect.