Oxbridge Re Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 8, 2024

There are 4 speakers on the call.

Operator

Good afternoon. Welcome to Oxbridge Re's Second Quarter 2024 Earnings Call. My name is Sachi, 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 will be available via telephone replay until August 22, 2024, on the Investor Information section of the Oxbridge Re website at www. Oxbridgere.com. Now, I would 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. Wounds 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.

Speaker 1

A detailed discussion of these risks and uncertainties that could cause actual results and events to differ materially from forward looking statements is included in the section entitled Risk Factors contained in our Form 10 ks filed on March 26, 2024, 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 volumes of operations for our securities. Any forward looking statements made on this conference call speak only as of the date of this conference call. Except as required by law, the company undertakes no obligation to update any forward looking statements contained on this call or in any company's 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, Geomatic.

Speaker 1

Jay? Thank you, Wrendon,

Speaker 2

and welcome, everyone. Thank you for joining us today. Let me start by saying we are proud of the significant steps we have taken in the last year to fortify and diversify our business. Our core business remains reinsurance, where we rightfully collateralize policies to cover property losses from specific catastrophes. And because we rightfully collateralize contracts, we believe we can compete efficiently with large carriers.

Speaker 2

We specialize in underwriting low frequency, high severity risk, where we believe sufficient data exists to efficiently analyze a 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 sustainable reinsurance foundation, we began to diversify our business in 2021 as a lead sponsor of Oxbridge Acquisition Corp, a special purpose acquisition company or STACK, following focusing on investing in disruptive technologies. In August of 2023, Oxbridge 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 aircraft and those of its operating partners.

Speaker 2

It operates in 2 segments, software and aviation. The software segment features the B2B 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 such as Reroute, Dynaflight Reroute and Dynaflight to enable FAA Part 135 charter providers to add revenue, maximize efficiency and reduce environmental impact. The aviation segment features jet aircraft fractionalization, jet cards, on fleet charter, management and buyer's brokerage.

Speaker 2

With the completion of the business combination in August of 2023, the company began trading on the NASDAQ Stock Exchange. Our interest in Jet AI is recognized at fair value in other investments on our balance sheet. In 2022, we expanded our business portfolio by establishing Insurance Plus Inc, our new subsidiary focused on Web3 technology. Insurance 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 SEC guidelines, representing a significant advancement in the digital security market.

Speaker 2

Consequently, this initiative aims to broaden investor participation, extending opportunities beyond what traditionally has been a select group of ultra high net worth individuals. Crucially, the establishment of Assurance Plus was achieved without incurring new debt or diluting equity for our shareholders, reflecting our effective approach to diversification. We are enthusiastic about the prospects of these new investments and remain committed to keeping our stakeholders informed of their progress in the forthcoming quarters. Looking ahead, we intend to position Oxbridge as a prominent player in the Real World Asset or IWA Web3 secondtor. Further details on the strategic direction will be shared later in the call.

Speaker 2

In summary, we maintain a strong sense of optimism regarding the long term outlook of our core reinsurance business along the successful integration of Assurance Plus as we embrace the RWA market more comprehensively. I'll now turn things over to Randon to take us through our financial results. Thank you, Jay. I'd like

Speaker 1

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 June 30, 2024 were 5 100 and $4,000 compared to $183,000 in last year's Q2. For the 1st 6 months, our 2024 net premiums in was $1,100,000 dollars up from $183,000 in the same period last year. The increases are due to the prior year recognizing only 1 month of premiums because of the 2022, 2023 treaty year premium acceleration on reinsurance contracts in force due to Hurricane Ian. In contrast, for the quarter and the 6 months ended June 30, 2024, we recognized the full 3 6 months of premiums, respectively.

Speaker 1

There have been no losses to be incurred in 2024 or 2023. Regarding investment income, our net investment income and other income decreased in the quarter and the 1st 6 months of 2024 due to less cash being held in our money market accounts. We also recorded an unrealized loss of $1,500,000 on our other investments resulting from our remeasurement of our investment in Jet AI at fair value. We also recognized a $160,000 negative change in the fair value of our equity securities as of June 30, 2024, decreasing from $81,000 positive change in the prior year. All of these factors taken together resulted in total revenue to 44 $1,000 for the 3 months ended June 30, 2024, compared to $691,000 in the prior year Q2.

Speaker 1

For the full 6 months of 2024, total revenue was $81,000 negative compared to $1,230,000 for the same period last year. Total expenses, including loss and loss adjustment expenses, policy acquisition costs and general and admin expenses were up in the Q2 and the full 6 months of 2024 compared to last year. The increase was due primarily to higher policy acquisition costs incurred during the 6 month period. Own net income, primarily due to negative change in the fair value of equity securities and investments in the 2nd quarter, we generated a net loss of $821,000 or $0.14 per share to a net loss of $85,000 or $0.01 per share in last year's Q2. For the full 6 months ended June 30, 2023, the net loss was $1,720,000 compared to net profit of $57,011 per share in the same period last year.

Speaker 1

The recent result this year was due to lower revenue driven by the increase in unrealized loss and other investments and equity securities more than outweighed higher premium levels and management fee income from Sean's Bluffs' offering. As we have discussed in following investor calls, we use various measures to analyze the growth and profitability of our business operations. For our reinsurance business, we measure underwriting the ratio of loss and loss adjustment expenses incurred in the premiums earned. With no losses or loss adjustment expenses in year 24. In 2024, 2023, the loss ratio was 0% in both periods.

Speaker 1

Our acquisition cost ratio, which measures operational efficiency compares policy acquisition costs to net premiums earned. The acquisition ratio increased marginally to 11% for the 6 month period ended June 30, 2024, compared to 10.9% in the same period last year. Our expense ratio measures operating performance compared to post the acquisition costs and general and admin expenses with net premiums earned. The expense ratio for the 3 month period ended June 30, 2024 decreased from 3 0.9% to 111.3 percent and for the 6 months ended June 30, 2024 from 61 point 6% to 105.5% when compared to prior periods. The decreases were due to higher premium levels recognized during the 3 6 month periods ended June 30, 2024.

Speaker 1

Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and expense ratio. The combined ratio for the 3 month period ended June 30, 2024, increased from decreased from 380.9% to 111.3% and for 6 months from 61.6 percent to 105.7 percent when compared to prior periods. The increases were due to higher premium levels recognized during the 3 6 months ended June 30, 2024. Now turning to the balance sheet. Our investment portfolio decreased to 230,000 at June 30, 2024 from 63,000 at prior year, primarily as a result of the sale of Equity Securities and the decrease in the fair value of the Equity Securities during the quarter.

Speaker 1

Our other investments decreased significantly from $2,400,000 to 965 ks due to the fair value change in our investment in Jet AI, in which the company has an equity investment measured at fair value. Cash and cash equivalents and restricted cash and cash equivalents increased to $3,900,000 at June 30, 2024, compared with $3,700,000 at December 31, 2023. Now I'd like to turn the call back over to Jay to wrap up before we take any of your questions. Jay?

Speaker 2

Thank you, Brendan. As highlighted earlier in today's discussion, we have implemented decisive and substantial measures to fortify and diversify our operations. In December of 2022, we established Assurance Plus, our wholly owned subsidiary, with the objective of tokenizing securities representing fractional interest and reinsurance contracts underwritten by our reinsurance subsidiary. In the Q2 of 2023, we successfully concluded the initial offering of these security tokens, Delta Cat 3. This was issued on the Avalanche blockchain.

Speaker 2

Furthermore, as previously reported, investors of Delta CATRI received returns exceeding 49%, surpassing the initial 42% projection. Despite the challenges posed by Hurricane Nadalia, which made landfall as a Category 3 hurricane in 2023. 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.

Speaker 2

These opportunities previously out of the reach of many investors due to the extreme high barrier to entry are now accessible through our innovative approach. Essentially, we have a democratized access to reinsurance. In the mid-twenty 23, 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 car services, aircraft brokerage and charter services, facilitated by its fleet of private aircraft. And currently, with the finalization of the business merger, the company successfully listed its common shares and warrants on NASDAQ. Additionally, Oxbridge Re Holdings has initiated a strategic review process, forming the special committee of the Board to consider a full range of strategic alternatives for the company and its Web3 division subsidiary, Assurance Plus Holdings Limited.

Speaker 2

This process may include a sales, Finanac merger, divestiture, recapitalization or strategic transactions or continue to operate as a public independent company. In recent developments, Insurance Plus completed a private placement of over 287,000 participating shares represented by digital token Epsilon Cat Re and a 3 year participation share investment contract, raising approximately $2,900,000 The Epsilon Cat REIT participation shares represented by digital tokens issued on the Avalanche blockchain have a targeted return of 42%. This follows the success of last year's token, DentalCat REIT, which while targeting a 42% return paid out a remarkable 49.11 percent return, surpassing initial projections. Recently, Assurance Plus announced a strategic partnership with Xonix, a pioneer in digital asset management, which has issued over $4,000,000,000 in assets on chain to date. This strategic partnership is set to further expand our footprint.

Speaker 2

The collaboration aims to enhance our RW tokenization and Web3 capabilities. Assurance plus is well positioned with substantial growth potential for our shareholders. We are proud of this accomplishment and look forward to this new exciting entity diversification and accelerating our growth in the RW space in the coming years. These compelling opportunities not only augment our business, but also enhance our profile our risk profile, strategically positioning us to capitalize on 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 an 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 has been further reinforced recently as Securitize announced they have secured $47,000,000 funding led by BlackRock to expand RWA tokenization. This growth trajectory is fueled by the escalating adoption of blockchain technology across various traditional financial sectors, including fiat currencies, equities, bonds and real estate. His endorsements from institutions like BlackRock and Bank of America further affirm the transformative potential of tokenization in enhancing financial infrastructure efficiencies, reducing costs and optimizing supply and distribution 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 by the year 2,030.

Speaker 2

As pioneers in the subvolving landscape, we hold a strong sense of optimism regarding the value of our rebranding efforts we'll unlock for our shareholders. We remain steadfast in our commitment seizing the opportunities presented by this dynamic market shift. With that, we are ready to open the call for questions. Operator, please provide the appropriate instructions. Thank

Operator

you. We will now be conducting a question and answer The first question is from Kent Engelke from Capital Securities Management. Please go ahead.

Speaker 3

Hey, Jay. Hey, Wrendon. Question on how much of a market penetration do you all think that you can get on this $10,000,000,000,000 market?

Speaker 2

Hey, Ken. Thanks for tuning in.

Speaker 3

No problem, Randall. It's beautiful out here in Southern California.

Speaker 2

Yes. Currently, the size of company we are, there is the market, the market is in trillions. We're not saying we're going to go up, we could be 5% or 10 percent or what have you. The size that we are, the market is so vast that a few percentage points is an unfathomable number for us, right? So I'll leave it at that saying, the market is so vast and the playing field ahead of us is so immense.

Speaker 2

We are, in my opinion, solidly entrenched in looking forward to this opportunity.

Speaker 3

How are you all marketing it and stuff like that? Because as you said, it's a huge market, even 1%, the Oxford shareholders will make a gazillion dollars. How are you marketing it all?

Speaker 2

Yes. In the weeks to come, we'll hopefully next week, we'll just make that a little bit more available to shareholders. But we have a whole plan of how we're rebranding and how we're doing things. There'll be various different events that we will be going to. We have also been talking to various different banks that are interested in investment banks that are interested, shareholders that are interested.

Speaker 2

But it will take quite a bit. It is a challenging effort. We're up to it. 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.

Speaker 2

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. 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?

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 by telephone 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 Q2 2024
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