Oxbridge Re Q4 2023 Earnings Call Transcript

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March 26, 2024

There are 3 speakers on the call.

Operator

Good afternoon. Welcome to Oxbridge Reade's 4th Quarter and Year End 2023 Earnings Call. My name is Shumali, 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 Reeds' 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 broadcasted live via webcast and available via webcast replay until April 9, 2024, on the Investor Information section of the Oxbridge REIT website at www.oxbridgereit.com. Now, I'd like to turn the call over to Rhendon Timothy, Chief Financial Officer of Oxbridge Reade, 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 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 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 trend in 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.

Speaker 1

Jay?

Speaker 2

Thank you, Wrendon, 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 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.

Speaker 2

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, Ochsner's acquisition successfully completed its business combination with Jet AI Inc. The company develops 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 2 segments, software and aviation.

Speaker 2

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 Jet AI Operator platform operates a suite of standalone software products such as Revalve and Dynaflight to enable FAA Part 135 charter providers to add revenue, maximizing efficiency and reducing environmental impact. The aviation segment features The Aviation segment features jet aircraft fractionalization, jet cards on fleet charter management and buyer's brokerage. With the completion of the business combination in August of 2023, the company began trading on the NASDAQ Stock Exchange.

Speaker 2

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 SurencePlus 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.

Speaker 2

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 3 secondtor. 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, Jet AI Insurance Plus as we embrace RWA market more comprehensively. I'll now turn things over to Randon and take us through our financial results.

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 year ended December 31, 2023 increased to 1,200 and $55,000 from $995,000 in the prior year. The increases are due to higher rates on our range of contracts in force during the quarter and year ended December 31, 2023 when compared with the prior periods. Our net investment and other income rules in 2023 to $303,000 primarily due to higher rates on our money market funds.

Speaker 1

You can also see that we generated our incentive technology origination and management fee income of $330,000 in 2023 from our Schon's Plus subsidiary. We recorded an unrealized loss of $8,900,000 on our other investments, the result of our remeasurement of our investment in Jet AI at fair value. We also recognized a 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 $705,000,000 in 2023 compared to 800 and $50,000 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 $2,300,000 down from $2,600,000 in 2022 due to the triggering of limit loss on 2 reinsurance contracts in September 'twenty two 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 SG and A registration.

Speaker 1

We experienced a net loss of $9,900,000 or $1.69 per share in 2023 compared to net loss of $1,800,000 or $0.31 per share in fiscal 2022. The decline in the quarter on year ended December 31, 2023 is primarily due to the fair value changes in the company's equity investment in Jet AI as well as increased general expenses associated with the recognition of previously deferred offering costs on its ESRI 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 and losses and expenses incurred to net premium churn.

Speaker 1

The loss ratio decreased to 0% for the year ended December 31, 2023 compared to 107.8% in the prior year wholly due to the limit losses suffered on 2 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 earned. Our acquisition cost ratio increased marginally 11.2% for the year ended 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 premiums earned. The expense ratio increased to 185.2 percent 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 company's from S3 registration as well as marginal expenses associated with the successful launch of our shorts plus private placement offering.

Speaker 1

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 percent for the year ended December 31, 2023 from 260.9% for the prior year. The decrease is due to 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 $68,000 at December 31, 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.

Speaker 1

Other investments decreased due to the negative change in the fair value of our equity investment in Jet AI. Cash and cash equivalents and restricted cash and cash equivalents decreased to $3,700,000 at December 31, 2023 compared to $3,900,000 at December 31, 2022. Now I'd like to turn

Speaker 2

the call back over to Jay to wrap up before we take your questions. Jay? Thank you, Wrendon. 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 SurencePlus, our wholly owned subsidiary with the objective of tokenizing securities representing fractionalized interest and reinsurance contracts underwritten by reinsurance subsidiary.

Speaker 2

In the Q2 of 2023, we successfully concluded the initial offering of these tokens through a $2,400,000 private placement. Furthermore, we are pleased to report that investors in our Delta Cat REIT token are poised to achieve returns exceeding 45%, being the initial 42% projected and despite the challenges posed by Hurricane Adalya, which made landfall as a Category We believe these are the 1st tokenized reinsurance securities backed by a publicly traded company. Insurance 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 used to to extremely high barriers to entry are now accessible through our innovative approach essentially and while repeating myself, we had democratized access to reinsurance.

Speaker 2

Subsequent to this, in mid August 2023, our investment in a special 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 fleet of private aircraft. Notably, our wholly owned subsidiary, Oxbridge Reinsurance Limited, assumed the role of lead investor and the STACK 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.

Speaker 2

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. Forecast suggests an extraordinary expansion of the tokenized RWA market over the next decade with estimates exceeding $10,000,000,000,000 This growth trajectory is fueled by escalating adoption of blockchain technology across various traditional 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 and 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 16,000,000,000,000. As pioneers in this evolving landscape, we hold a strong sense of optimism regarding the value our rebranding efforts will unlock for our shareholders.

Speaker 2

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.

Operator

Thank you, sir. 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. And Mr.

Operator

Madhu?

Speaker 2

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.

Speaker 2

Once again, thank you for your time, attention today and for your ongoing interest in Oxbridge. Operator?

Operator

Before we conclude today's call, I would like to remind everyone that a recording of

Speaker 1

today's call will be available for replay

Operator

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.

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Earnings Conference Call
Oxbridge Re Q4 2023
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