Oxbridge Re Q3 2023 Earnings Call Transcript

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November 14, 2023

There are 4 speakers on the call.

Operator

Good afternoon. Welcome to Oxbridge Re's Third Quarter 2023 Earnings Call. My name is David, 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, Brendan Timothy.

Operator

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 November 28, 2023, on the Investor Information section of the Oxbridge Re website at www dotoxbridgere.com. Now, I'd 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.

Speaker 1

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.

Speaker 1

A detailed discussion of these 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 ks filed on March 30, 2023, and our Form 10 ks 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 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 are to confirm this change. Now, I would like to turn the call over to our Chairman, President and Chief Executive Officer, Jay Madhu.

Speaker 1

Jay?

Speaker 2

Thank you, Wrendon, and welcome everyone. Thank you for joining us today. Oxfordshire Holding 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 also proud of the significant steps we have taken this year to fortify and diversify our business. Our core business remains our licensed reinsurance subsidiary, Oxbridge Reinsurance Limited and our licensed reinsurance sidecar, Oxbridge Re NS, who write fully collateralized policies to cover property losses from specific catastrophes.

Speaker 2

And because we rightfully collateralized contracts, we believe we can compete effectively with large carriers. We specialize in underwriting low frequency, high severe re 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, began 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 this year, Oxbridge Acquisition successfully completed its business combination with JET Token Inc.

Speaker 2

JET Token developed software and offers fractional aircraft ownership, JET Card, aircraft brokerage and charter through its fleet of private aircraft and those of operating partners. It operates in 2 segments, software and aviation. The software segment features the B2B charter GPT app and the B2B Jet dotai 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 operates a suite of standalone software products to enable FAA Part 135 charter providers to add revenue, maximize efficiency and reduced environmental impact.

Speaker 2

The aviation segment features jet aircraft fractionalization, Jet Cards, on fleet charter, management and buyer's brokerage. With the completion of the business combination on August, the company renamed to Jet AI Inc. And its common shares and warrants began trading on the NASDAQ Stock Exchange. Our interest in Jet AI is recognized at fair value in other investments on our balance sheet. We also diversified our business in 2023 with the creation of our new Web3 subsidiary, Assurance Plus Inc, a provider of tokenized real world assets or RWAs, initially in the form of tokenized reinsurance securities.

Speaker 2

These are alternative investment opportunities leveraging key qualities of watching technology to create a well designed digital security under the SEC guidelines possessing complete transparency and compliance. This new thrust in our entity in our entry into the digital securities markets, which puts real world assets on chain and opens an entirely new avenue of democratizing reinsurance and potentially other opportunities in the future. We believe we have issued the 1st tokenized reinsurance security backed by a publicly traded company. Importantly, Assurance Plus was created with no debt and no equity dilution for our shareholders. We are very proud to have achieved this diversification so efficiently.

Speaker 2

We are very excited about both of these investments and look forward to keeping you appraised of their progress in the coming quarters. Looking ahead, it is our intention to rebrand Oxbridge as an emerging and successful player in the Kokanized Real World Assets or RWA's Web3 business. I will have more to say on this later. In short, we remain highly optimistic about the long term transform more fully into the RWA tokenization market. I'll now turn things over to Brendan to take us through our financial results.

Speaker 2

Brendan?

Speaker 1

Thank you, Jay. I would like to remind you that our typical contract period is from June 1 to May 31st the following year. With respect to net premiums earned, net premiums earned for the quarter ended September 30, 2023 were $549,000 slightly lower than last year's Q3. For the 1st 9 months of 2023, net premiums earned $732,000 compared to $995,000 last year. Decreases are due to the acceleration of premium recognition on 2 of our reinsurance contract last year due to a limit loss that was suffered.

Speaker 1

With respect to investment income, our net investment income and other income rose in the quarter and the full 9 months of 2023 due to higher rates on money market funds. You can also see that we generated incentive technology origination and management fee income of $300,000 in 2023 from our Plus subsidy. In the Q3 of 2023, we recorded an unrealized loss of $6,400,000 on our investments, the result of our remeasurement of our investment in jets.ai. We also recognized a 34,000 negative change in fair value of our equity securities as of September 30, 2023, much improved from the 355,000 negative change in the prior year. While these factors taken together resulted in consolidated total revenue of negative $5,100,000 for the 9 months ended September 30, 2023 compared to negative $119,000 in the prior year.

Speaker 1

Total expenses including loss and loss adjustment expenses, policy acquisition costs and general and admin expenses were down in the 3rd quarter and the 1st 9 months of 2023 compared to last year due to the triggering of a limited loss on 2 of the company's reinsurance contracts in September 2022 related to the impact of Hurricane Ian. The current year has seen lower policy acquisition costs and underwriting expenses, offset by increased general and admin expenses due to inflationary expense fluctuations as well as the recognition of previously deferred offering costs, Primarily due to the unrealized loss resulting from our remeasurement of our investment in Jet AI in the Q3, so we generated a net loss of $7,300,000 or $1.24 per share compared to net loss of $2,200,000 or $0.37 per share in last year's 3rd quarter. For the 9 months ended September 2023, the net loss was $7,200,000 or $1.23 per share compared to a net loss of $2,500,000 or $0.43 per share last year. 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, acquisition ratio, expense ratio and combined ratio.

Speaker 1

Our loss ratio, which measures underwriting profitability, is the ratio of loss and loss adjustment expenses incurred in net premiums earned. The loss ratio decreased to 0% for the 9 months ended September 30, 2023 from 107.8% in the prior year, wholly due to the limit losses suffered on 2 of our reinsurance contracts as a result of Hurricane Eon in September last year. Our acquisition ratio, which measures operational efficiency compares policy acquisition cost to net premiums earned. The acquisition ratio decreased marginally from 11.1 percent for the 9 month period ended September 30, 2022 to 10.9% for the 9 month period ended September 30, 2023. Our expense ratio, which measures operating performance compared to policy acquisition costs and general admin expenses with net premiums earned, expense ratio increased to 44.4% for the 9 months ended September 30, 2023 from 1 16 percent.

Speaker 1

In the prior period, the change is due to higher G and A costs this year caused by inflationary elements and recognition of previously deferred offering costs. 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 marginally to 244.4 percent for the full year 9 months of 2023 compared to 224.4 percent last year due again to the higher G and A costs in 2023 caused by inflationary elements and the recognition of previously deferred offering costs. Now turning to the balance sheet. Our investment portfolio was valued at $648,000 at September 30, 2023 compared to $642,000 at prior year end decreased due to unrealized loss on experienced this year.

Speaker 1

Other investments decreased due to the negative change in the fair value of our investment in Jet AI measured at fair value. Cash and cash equivalents and restricted cash and cash equivalents decreased to $3,600,000 at September 30, 2023 from 3,900,000 at December 31, 2022. I will now turn the call back over to Jay to wrap up before we take your questions. Jay?

Speaker 2

Thank you, Wrendon. As I mentioned on the outset of today's call, we have taken decisive and significant steps this year to strengthen and diversify our business. In December 2022, we incorporated our wholly owned subsidiary, Assurance Plus. Assurance Plus will issue tokenized securities that indirectly represent fractionized interest and reinsurance contracts underwritten by our reinsurance subsidiary. During the Q2 of this year, we completed the first offering of these tokens with $2,400,000 private placement.

Speaker 2

Assuming there are no catastrophe losses incurred by Oxbridge, our Delta Catri token investors are expected to receive a significant return of up to 42% on their investment in this treaty year. Again, we believe these are the first tokenized reinsurance securities backed by a publicly traded company. Assurance plus will democratize access to reinsurance as an alternative investment opportunity that leverages the key qualities of blockchain technology to create a well diverse and well designed digital security. Our token will enable more investors to participate and have their interest permanently and transparently recorded on the blockchain. These opportunities were typically unavailable to investors in the past due to high barriers to entry.

Speaker 2

Following this exciting investment opportunity, in mid August 2023, we utilized our special purpose acquisition company, Oxbridge Acquisition Corp, to complete a business transaction with JET Token Inc, a company offering fractional aircraft ownership, jet card, aircraft brokerage and charter services through its fleet and private aircraft. Our wholly owned subsidiary, Oxbridge Reinsurance Limited was a lead investor in the SPAC sponsor. In conjunction with the completion of the business combination with JET Token in August, the company was renamed JET AI Inc. And listed its common shares and warrants on the NASDAQ. These exciting new investment opportunities further diversify our business and risk profile, positioning us to capitalize on growth in emerging technologies.

Speaker 2

We are very excited about the future value of these investments and the potential they bring to our shareholders. As I mentioned on the outset, we will be positioning our company to exponentially grow our Assurance plus subsidiary as a pure RWA tokenization Web3 focused company by leveraging the significant steps we have taken this year. This will be done alongside the maintenance of our core and complementary reinsurance business solutions to insurers in Florida and the Gulf Coast States. According to Boston Consulting Group, the tokenized RWA market is expected to grow significantly over the next decade with estimates as high as $16,000,000,000,000 by 2,030. This comes as traditional financial institutions including fiat currencies, equities, government bonds and real estate continue to adopt blockchain technology.

Speaker 2

For example, Bank of America recently stated that the tokenization would transform existing financial infrastructure, increase efficiencies, reduce costs and optimize supply chain. As an early entrant into this growing market, we are very excited about the potential our rebranding and new business lines will bring to our shareholders. With that, we are ready to open the call for questions. Operator, please provide the appropriate instructions.

Operator

Thank you, sir. And our first question will come from Kent Engelke with Capital Securities Management. Sir, you may proceed.

Speaker 3

Thank you. Hey, Jay, Renan. How are you all going to be marketing the tokenized securities, the RWAs?

Speaker 2

Yes. Hi, Ken. So that will be marketed through various different folks. We hope to get some of the folks through FINRA regulated agencies, but there will also be a huge thrust of marketing it ourselves internally to high net worth individuals. So, like a Reg D in the U.

Speaker 2

S. And a Reg S outside of the U. S.

Speaker 3

How what sort of growth rate do you anticipate in the foreseeable future? Or you can't extrapolate that out as of yet?

Speaker 2

Yes. What we've done over the last few years is we had our SPV that we were taking capital from individuals and putting those putting that capital to work and we've shown a track record of doing that. Over the last few years, it's worked out quite well. This year, we took that same thought process, rolled it out into a much more scalable platform for Assurance Plus, giving us access to the world over, if you would. So, while there's always worry about how this will grow, we expect this will grow quite well, especially with folks this year.

Speaker 2

Again, we've changed the nature of the tops of the contracts that we take. So, we take contracts that are higher up in the tower, etcetera. But nonetheless, this year, investors are going to get 42%. We're almost to the end of hurricane season. This is looking good.

Speaker 2

We expect that to grow to a fairly sizable event next year, amount rather.

Speaker 1

Okay.

Operator

And there are no further questions on the line at this time. I will turn the program to our speakers.

Speaker 2

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 our Roxbridge team who continue to leverage their significant experience to manage and build our during these challenging times. We look forward to updating you on our next call. If you have any further questions, please contact us anytime.

Speaker 2

Thank you again for your time and attention today and your interest in Oxbridge. Operator?

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 your presentation. You may now disconnect.

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Earnings Conference Call
Oxbridge Re Q3 2023
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