Oxbridge Re Holdings Limited

Good afternoon. Welcome to Oxbridge-Ree's third quarter 2024 earnings call. My name is Joe, 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-Ree's chairman, president, and chief executive officer, Jay Madhu, and chief financial officer and corporate secretary, Rendon Timothy. Following the remarks, we will open up to call for your questions. I would like to remind everyone that this call will be available via telephone replay until November 26, 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 forward-looking 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 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 subject to various risks and uncertainties. A detailed discussion of risks and uncertainties that could cause accurate 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 on March 26, 2024, and our Form 10-Q filed 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 and trading volume fluctuations for our securities. Any forward-looking statements made on this conference call speak only as to 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 for 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're proud of the significant steps we have taken to fortify and diversify our business. While we are solidly entrenched in the RWA slash Web3 space, where we issue tokenized securities as an RWA, where the underlying asset is reinsurance. Our core business, however, remains reinsurance, where we write fully collateralized policies to cover property losses from specific catastrophes. And because we write fully collateralized contracts, we believe it 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 began to diversify our business in 2022. We expanded our business portfolio by establishing Insurance Plus, Inc., our new subsidiary focused on RWA slash WebTree technology. InsurancePlus 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 SEC guidelines, representing a significant advancement in the digital security market. Consequently, this initiative aims to broaden investor participation and extending opportunities beyond what traditionally has been a selective group of ultra-high net worth individuals. Crucially, the establishment of Assurance Plus was achieved without incurring new debt, 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 their progress in the forthcoming quarters. Looking ahead, we intend to position Oxbridge as a prominent player in the RWA real-world asset slash Web3 sector. In summary, we maintain a strong sense of optimism regarding the long-term outlook of our core reinsurance business alongside the successful integration of Assurance Plus as we embrace the RWA market more comprehensively. I'll now turn things over to Rendon to take us through our financial results.

Thank you, T. Thank you. I'd like to remind you that our typical contract period is from June 1 to May 31st of the following year. Net premiums earned for the quarter ended September 30th, 2024 with 595,000 compared to 549,000 in last year's third quarter. For the first nine months of 2024, net premiums earned were 1.7 million up from 760,000 in the same period last year. The increases are due to the reinsurance contracts enforced during the full periods ended September 3rd, year 2024, when compared with the prior year. There have been no losses to date, including in 2024 or 2023. Our net investment and other income decreased in the quarter and the first nine months of 2024 due to less cash being held in money market funds. We also recorded an unrealized loss of 1.93 million on our other investments, the result of our re-measurement of our investment in JetAI at fair value. We also recognized 188,000 negative change in the fair value for equity securities as of September 30th, 2024, decreasing from 34,000 negative change in the prior year. All these factors together resulted in total revenues of 205,000 for three months ended September 30th, 2024, compared to negative 6.38 million in the prior year's third quarter. For the first nine months of 2024, total revenue of 124,000 compared to 5.1 million negative for the same period last year. Total expenses including loss and loss-adjustment expenses, policy acquisition costs and general and admin expenses were down in the third quarter and close nine months of 2024 compared to last year. The decrease in 2024 was due primarily to the decrease in offering costs associated with TransPlus being recognized when compared with the same period last year. With respect to net income, primarily due to negative change in the fair value of equity securities and investment in the third quarter, we generated a net loss of 540,009 cents per share compared to net loss of 7.3 million or $1.24 per share in the last year's third quarter. For the nine months ended September 3rd, 2024, the net loss was 2.26 million compared to 0.37 cents per share compared to net loss of $7.24 million, or $1.23 per share, in the same period last year. The improved results this year was due to the higher revenue driven by the decrease in unrealized loss on other investments, more than outweighing higher premium levels and management-free income from insurance plus offering. 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 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 losses and loss adjustment expenses incurred to net premiums earned. With no losses or loss adjustment expenses in either 2024 or 2023, the loss ratio was 0% in both periods. Our acquisition cost ratio, which measures operational efficiency, compares policy acquisition costs to net premiums earned. The acquisition cost ratio increased marginally to 11.1% for the three-month period ended September 30th, 2024, and 11% for the nine-month ended September 30th, 2024, from 10.9% for the three- and nine-month period ended September 30th, 2023. The increases primarily to premiums being earned during the full periods ended September 30th, 2024, when compared with partial period in the prior periods. Our expense ratio, which measures operating performance compared to policy acquisition costs, and general admin expenses with net premiums earned. The expense ratio decreased from 125.3% for the three-month period ended September 6th, 2023 to 83.7% for the three-month period ended September 6th, 2024. The decrease is due to the higher levels of premiums earned and lower general admin expenses incurred during the three months ended September 6th, 2024 when compared to the prior period. The expense ratio decreased from 244.3% for the nine-month period ended September 3, 2023 to 98% for the nine-month period ended September 3, 2024. The decrease is due to higher level of premiums as well and lower general earning expenses incurred during the nine-month period ended September 3, 2024 when compared to the prior period. 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 from 125.3% for the three-month period ended September 30th, 2023 to 83.7% for the three-month period ended September 30th, 2024. The decrease is due to high levels of premiums earned and lower general admin expenses, including the nine-month period ended September 30th, 2024. The combined ratio decreased from 243, 44.3 for the nine-month period ended September 30th, 2023 to 90% for the nine-month period ended September 30th, 2024 Again, the decrease is due to high level of premiums in and low general added expenses during the nine-month period ended September 3rd, 2024 when compared with the prior period. Now turning to the balance sheet, our investment portfolio decreased to $185,000 at September 3rd, 2024 from $688,000 at the prior year end, primarily as a result of the sale of equity securities and the decrease in the fair value of equity securities during the quarter. Value investments decreased significantly from $2.4 million to $541,000 due to the fair value change in our investment in JetAI, which the company has an equity investment measured at fair value. Cash-in-cash equivalents and restricted cash-in-cash equivalents increased to $4.82 million at September 30, 2024, compared with $3.74 million at December 31, 2023. Now I'll 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, and last, to fortify and diversify our operations. In December 2022, we established Assurance Plus 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 security tokens, Delta Capri. This was issued on the Avalanche blockchain. Furthermore, as previously reported, investors in Delta Qatari received an exceeding 49%, surpassing the initial 42% projection, 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. InsurancePlus 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 investment investor participation, ensuring their interests are securely and transparently recorded on the blockchain. By opening access to an asset class historically limited to a select few due to high financial entry barriers, Assurance Plus is breaking new ground. Leveraging Reg D and Reg S frameworks, investors can now enter this unique asset class within minutes, effectively completing AML KYC and document signing requirements. Essentially, we have democratized access to reinsurance. Additionally, Oxbridge Holdings has initiated a strategic review process, forming a special committee of the board to consider a full range of strategic alternatives for the company and its Web 3.0 division subsidiary, Insurance Plus Holdings Limited. This process may include a sales, spin-out, merger, divestiture, recapitalization, or other strategic transactions, or continuing to operate as a public independent company. In recent developments, Assurance Plus completed a private replacement of 287,705 participation shares represented by digital token Epsilon Cat Read under a three-year participation share investment contract, raising approximately $2.9 million. The Epsilon Cat Read participation shares represented by digital tokens issued on an Avalanche blockchain have a targeted return of 42%. This follows the success of last year's token, Delta Catry, which, while targeting a 42% return, paid out a remarkable 49.11% return, surpassing initial projections. While the season has been an extremely active one, we don't believe we will be impacted by Hurricane Helene. On Hurricane Milton, we cannot comment on the outcome, as we have not yet received finalized data due to the hurricane being recent. On updates for our business, Assurance Plus previously announced a strategic partnership with Zonix, a pioneer in digital asset management, which has issued over $4 billion in assets on-chain to date. This strategic partnership is set to further expand our footprint. This collaboration aims to enhance our RWA tokenization and Web3 capabilities. As we go forward, we aim to pursue additional relevant strategic partnerships. Assurance Plus is well-positioned with substantial growth potential for our shareholders. We are proud of this accomplishment and look forward to this exciting new entity diversifying and accelerating our growth in the RWS space in coming years. These compelling opportunities not only augment our business but also enhance our risk profile, strategically positioning us to capitalize on growth with emerging technologies. We are especially enthusiastic about the anticipated value these investments hold and benefits they offer to our shareholders. As previously mentioned, we have made the turn positioning Oxbridge as an RWA Web3-focused company, leveraging the significant progress we have achieved over the last two years. Forecast suggests an extraordinary expansion to expand RWA tokenization. This growth trajectory is fueled by the escalating adoption of the tokenized RWA market over the next decade, with estimates exceeding $10 trillion. This has been reinforced further recently as Securitize announced they have secured a $47 million round of funding led by BlackRock in blockchain technology across various traditional financial sectors, including fiat currencies, equities, government bonds, and real estate. Endorsements from institutions like BlackRock, Bank of America, UBS, State Street, Franklin Templeton, Deutsche Bank, Credit Suisse, further affirm the transformative potential of tokenization and enhancing financial infrastructure efficiency, reducing costs, and optimizing supply and distribution chains. To enhance our offerings and appeal to a varied investor mindset, going forward, we plan to issue two tranches of tokenized securities, a high-yield tokenized security targeting an approximate 42% return, and a balance-yield tokenized security targeting an approximate 22% return. Moreover, industry analysis from firms such as Boston Consulting Group anticipate a substantial surge in the tokenized asset market, potentially reaching $16 trillion by the year 2030. As pioneers in this evolving landscape, we hold a strong sense of optimism regarding the value of our rebranding efforts will unlock for our shareholders. We remain steadfast in our commitment to seizing the opportunity presented by this dynamic market shift. With that, we are ready to open the call 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 the 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 handset before pressing the star keys. And our first question comes from the line of Kent Engelke with Capital Markets, Capital Securities. Please proceed.

Hey, Brendan. Hey, Jay. How are you all being received on the presentations you've been making abroad? And you used the word well-entrenched in regards to the RWAs. Who are your competitors?

Yeah, hey, Kat. Thanks for dialing in. To take it from the beginning, we've attended various different events. I was part of a speaker panel and a speaker at some of these events as well. We were – it was viewed exceedingly well. In the RWA space, there are various folks that have come up with some very interesting propositions. However, there aren't that many that are actually straight out RWAs where the underlying asset is something extremely direct and tangible. In this case, the RWA real world asset is a reinsurance contract. It follows the fortunes of an actual reinsurance contract and which is aggregated with the various different contracts that we take. So it's not marked up. It's not... uh, it is extremely well put together and, and, uh, we, we got, we, we got tremendous, uh, uh, tremendous feedback from those attending over there.

Great. Cool. And, you know, who are you, can you name any of your competitors? Um, you said you're well entrenched in that arena and a lot of getting some great publicity and getting some, you know, um, you know, strong people that are interested in what you're doing. Um, Who are some of the competitors that you're going up against?

Yeah, so there are a few folks. I'd rather not take any names. There are a few folks who are issuing some RWAs and reinsurance. However, I think where we stand out is in a market that people, the general public, is always worried about trust and transparency. I believe we stand out. As a publicly traded company, We not only have PCAOB audited financials on the holding company, but we strategically have PCAOB audited financials on Shores Plus itself, the RWA entity. So not only do we have PCAOB audited financials, but then we're also, because everything is rolled up at the POPCO, there's strict adherence from the SEC as well. In terms of saying who are our competitors, there are a few, but I don't believe there are anybody like us. I think we're just because of where we stand and what we have.

I could say your immediate reaction to your earnings report is positive. On the bid side, you're up about 8%. On the offering side, you're up about 15%. On the aftermarket, we'll see how it trades tomorrow. It sounds very, very promising. Thank you.

Thank you, Ken.

I appreciate it.

Operator? Thank you, ladies and gentlemen. There are no further questions at this time. I'll turn the call back to Mr. Maddy for his closing remarks.

Thank you for joining us on 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 expertise has been instrumental in navigating and advancing our business amidst these challenging circumstances. We anticipate providing you with further updates on our progress during our next call. And should you have any additional questions, please do not hesitate to reach out to us anytime. Once again, thank you for your time and 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 investor section of the company's website. Thank you for joining us today for our presentation. You may now disconnect.