Results of Operations for the Six Months Ended June 30, 2020 – American Overseas Group Limited Announces Net Loss of $2.3 Million and Operating Loss of $21.6 Million for the Six Months Ended June 30, 2020

HAMILTON, Bermuda, Sept. 23, 2020 (GLOBE NEWSWIRE) — American Overseas Group Limited (BSX: AORE.BH) (Pink Sheets: AOREF.PK) (“AOG” or the “Company”) today reported consolidated net loss available to common shareholders of $2.3 million, or $48.97 per diluted share, for the six months June 30, 2020. This compares to consolidated net loss available to common shareholders of $3.8 million, or $82.18 per diluted share, for the six months ended June 30, 2019.
The results for the six months was driven by losses in the Company’s financial guaranty segment related to a commutation of the remaining portfolio of financial guaranty reinsurance business it had assumed from Assured Guaranty Municipal Corp (“AGMC”). Book value per share at June 30, 2020 was $1,112.19, a decline from the book value per share of $1,159.08 at December 31, 2019.  For the six months ended June 30, 2020, the Company had an operating loss of $21.6 million, or $462.85 per diluted share, compared to an operating loss of $7.8 million, or $169.26 per diluted share for the six months ended June 30, 2019. Operating income for the property and casualty segment in 2020 was $1.0 million, compared to the $1.7 million operating income in 2019 for this segment. The financial guaranty segment had operating losses of $22.1 million for 2020, compared to operating losses of $9.8 million for 2019.Net earned property and casualty premiums increased $4.1 million from $3.9 million in 2019 to $8.0 million in 2020, driven primarily by increased reinsurance participation on underlying non-standard auto programs in Texas. Loss and loss adjustment expenses as a percentage of earned premium increased from 25.1% to 53.3% driven primarily by lower prior year favorable development, however underwriting income increased from $0.2 million to $1.3 million driven by higher volume. Fee income decreased from $6.1 million to $5.3 million as underlying direct written premium volumes declined primarily impacted by temporary business contractions related to COVID-19. P&C operating income declined from $1.7 million to $1.0 million primarily driven by allocation of operating expenses from American Overseas Reinsurance Company Limited (“AORE”) as it transitioned to an affiliate reinsurer of non-standard auto business.In 2020, the financial guaranty reinsurance business at AORE was eliminated as a result of the commutation with AGMC. The aggregate outstanding par value of the reinsurance portfolio commuted was $345.0 million. This commutation was the primary driver of the operating loss of $22.1 million in 2020, compared to operating losses of $9.8 million in 2019 which were driven by net losses associated with the commutation of $1.065 billion of outstanding par during the second quarter of 2019, as well as unfavorable development on outstanding losses. As of June 30, 2019, outstanding par within the financial guaranty segment was $372 million. As of June 30, 2020, AORE no longer has any financial guaranty exposure remaining.Overall operating expenses excluding restructuring charges declined $0.4 million from $6.7 million to $6.3 million for the six months ended June 2020 and 2019.As part of its ongoing capital management efforts, the Company will continue to redirect excess capital within the group to debt reduction unless other compelling opportunities present themselves.Forward-Looking StatementsThis release contains statements that may be considered “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, the Company’s expectations respecting the volatility of its insured portfolio, losses, loss reserves and loss development, the adequacy and availability of its liquidity and capital resources, its current run off strategy, its strategy for writing other reinsurance businesses and its expense reduction measures. These statements are based on current expectations and the current views of the economic and operating environment and are not guarantees of future performance. A number of risks and uncertainties, including economic competitive conditions, could cause actual results to differ materially from those projected in forward-looking statements. The Company’s actual results could differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) the Company’s reviewing the results of our entire portfolio of policies. Management considers credit derivative policies as a normal extension of AORE’s financial guaranty business and reinsurance in substance.Explanation of Non-GAAP Financial MeasuresThe Company believes that the following non-GAAP financial measure included in this press release serve to supplement GAAP information and is meaningful to investors.Operating income (loss): The Company believes operating income (loss) is a useful measure because it measures income from operations, unaffected by non-operating items such as realized investment gains or losses. Operating income (loss) is typically used by research analysts and rating agencies in their analysis of the Company.Information About the CompanyAmerican Overseas Group Limited is an insurance holding company incorporated in Bermuda and a tax resident of the United Kingdom. Its operating subsidiaries provide specialty property/casualty insurance, reinsurance and insurance management services. More information can be found at www.aoreltd.com.American Overseas Group Limitedinfo@aoreltd.com