Results of Operations for the Three Months Ended March 31, 2021 – American Overseas Group Limited Announces Net Income Of $1.0 Million and Operating Income of $0.9 Million For the Three Months Ended March 31, 2021
HAMILTON, Bermuda, June 30, 2021 (GLOBE NEWSWIRE) — American Overseas Group Limited (BSX: AORE.BH) (Pink Sheets: AOREF.PK) (“AOG” or the “Company”) today reported consolidated net income available to common shareholders of $1.0 million, or $20.81 per diluted share, for the three months ended March 31, 2021. This compares to consolidated net loss available to common shareholders of $0.8 million, or $17.97 per diluted share, for the three months ended March 31, 2020.
The result for the three months was driven by property and casualty growth in both existing and new programs. Book value per weighted share at March 31, 2021 was $1,055.01 a decline from the book value per weighted share of $1,062.22 at December 31, 2020.
For the three months ended March 31, 2021, the Company had operating income of $0.9 million, or $19.99 per diluted share, compared to an operating loss of $1.2 million, or $25.95 per diluted share for the three months ended March 31, 2020. The financial guaranty segment ended in April of 2020 due to a commutation of the remaining portfolio of financial guaranty reinsurance business it had assumed from Assured Guaranty Municipal Corp (“AGMC”). The aggregate outstanding par value of the reinsurance portfolio commuted was $345.0 million.
Net earned property and casualty premiums increased $1.2 million from $3.8 million in 2020 to $5.0 million in 2020, driven by an increase in existing and new programs. Loss and loss adjustment expenses as a percentage of earned premium declined slightly from 55.4% to 54.6%. Fee income increased slightly from $3.1 million to $3.3 million due to increase in gross written premiums year over year of $5.5 million, moving from $98.4 million to $103.9 million.
Operating expenses decreased $1.4 million or 35.9% from $3.9 million in 2020 to $2.5 million in 2021 mainly due to savings in the financial guaranty segment and improved operational efficiencies.
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 Statements
This 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.
Explanation of Non-GAAP Financial Measures
The 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 Company
American 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 Limited
info@aoreltd.com
| American Overseas Group Limited | |||||||||||||
| Consolidated Balance Sheets | |||||||||||||
| (unaudited) | |||||||||||||
| As at March 31, 2021 and December 31, 2020 | |||||||||||||
| (dollars in thousands) | |||||||||||||
| March 31, 2021 | December 31, 2020 | ||||||||||||
| Assets | |||||||||||||
| Investments: | |||||||||||||
| Fixed-maturity securities held as available for sale, at fair value | $ | 68,077 | $ | 72,642 | |||||||||
| Equity investments held as available for sale, at fair value | 4,336 | 4,143 | |||||||||||
| Cash and cash equivalents | 23,606 | 24,254 | |||||||||||
| Restricted cash | 796 | 548 | |||||||||||
| Accrued investment income | 353 | 355 | |||||||||||
| Premiums receivable | 87,154 | 73,073 | |||||||||||
| Deferred insurance premiums | 109,231 | 101,843 | |||||||||||
| Reinsurance balances receivable, net | 184,161 | 194,914 | |||||||||||
| Deferred policy acquisition costs | 5,096 | 3,590 | |||||||||||
| Intangible assets | 4,800 | 4,800 | |||||||||||
| Goodwill | 33,050 | 33,050 | |||||||||||
| Other assets | 4,980 | 3,767 | |||||||||||
| Total Assets | $ | 525,641 | $ | 516,979 | |||||||||
| Liabilities and Equity | |||||||||||||
| Liabilities: | |||||||||||||
| Loss and loss expense reserve | $ | 194,812 | $ | 192,943 | |||||||||
| Deferred commission income | 3,425 | 2,482 | |||||||||||
| Unearned premiums | 114,055 | 105,678 | |||||||||||
| Ceded premium payable | 71,052 | 71,989 | |||||||||||
| Payable to general agents | 5,621 | 4,331 | |||||||||||
| Funds withheld | 59,724 | 64,980 | |||||||||||
| Accounts payable and accrued liabilities | 10,117 | 7,922 | |||||||||||
| Notes payable | 16,521 | 16,521 | |||||||||||
| Non-owned interest in VIE | 300 | 300 | |||||||||||
| Interest payable | 451 | 451 | |||||||||||
| Total Liabilities | 476,078 | 467,597 | |||||||||||
| Shareholders’ Equity: | |||||||||||||
| Common shares | 4,698 | 4,698 | |||||||||||
| Additional paid-in capital | 189,151 | 189,151 | |||||||||||
| Accumulated other comprehensive income | 1,165 | 1,962 | |||||||||||
| Retained deficit | (151,504 | ) | (152,482 | ) | |||||||||
| Total Shareholders’ Equity | 43,510 | 43,329 | |||||||||||
| Non-controlling interest of preferred shares of subsidiaries | 6,053 | 6,053 | |||||||||||
| Total Equity | 49,563 | 49,382 | |||||||||||
| Total Liabilities and Equity | $ | 525,641 | $ | 516,979 | |||||||||
| See Notes to March 31, 2021 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com | |||||||||||||
| American Overseas Group Limited | |||||||||||
| Consolidated Statements of Operations | |||||||||||
| (unaudited) | |||||||||||
| For three months ended March 31, 2021 and 2020 | |||||||||||
| (dollars in thousands, except share and per share amounts) | |||||||||||
| Three Months ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Revenues | |||||||||||
| Net premiums earned | $ | 4,985 | $ | 3,828 | |||||||
| Fee income | 3,286 | 3,166 | |||||||||
| Net change in fair value of credit derivatives | – | 2 | |||||||||
| Net investment income | 97 | 500 | |||||||||
| Net realized gains on investments | 39 | 207 | |||||||||
| Fair value adjustment | – | (558 | ) | ||||||||
| Other income | 33 | – | |||||||||
| Total revenues | 8,440 | 7,145 | |||||||||
| Expenses | |||||||||||
| Losses and loss adjustment expenses | 2,724 | 1,704 | |||||||||
| Acquisition expenses | 1,776 | 1,283 | |||||||||
| Operating expenses | 2,485 | 3,857 | |||||||||
| Other expense | – | 523 | |||||||||
| Interest expense | 451 | 451 | |||||||||
| Total expenses | 7,436 | 7,818 | |||||||||
| Net income (loss) available to common shareholders | $ | 1,004 | $ | (673 | ) | ||||||
| Income tax (expense) | (26 | ) | (164 | ) | |||||||
| Net income (loss) before dividends | 978 | (837 | ) | ||||||||
| Dividends on preference shares of subsidiary | – | – | |||||||||
| Net income (loss) available to common shareholders | $ | 978 | $ | (837 | ) | ||||||
| Net income (loss) per common share: | |||||||||||
| Basic | $ | 20.81 | $ | (18.10 | ) | ||||||
| Diluted | 20.81 | (17.97 | ) | ||||||||
| Weighted-average number of common shares outstanding: | |||||||||||
| Basic | 46,979 | 46,214 | |||||||||
| Diluted | 46,979 | 46,554 | |||||||||
| See Notes to March 31, 2021 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com | |||||||||||
| AMERICAN OVERSEAS GROUP LTD. | |||||||||||||||
| NET INCOME AND OPERATING INCOME BY SEGMENT | |||||||||||||||
| (dollars in thousands) | March 31, 2021 | ||||||||||||||
| Net Income Available to Common Shareholders | Net Realized (Gain)/Loss on Sales of Investments | Net Change in Fair Value of Credit Derivatives | Fair Value Adjustments | Operating Income | |||||||||||
| Property and casualty: | |||||||||||||||
| Net premiums earned | $ | 4,986 | $ | 4,986 | |||||||||||
| Losses and loss adjustment expenses | (2,724 | ) | (2,724 | ) | |||||||||||
| Acquisition expenses | (1,776 | ) | (1,776 | ) | |||||||||||
| Property/Casualty Underwriting Income | 486 | 486 | |||||||||||||
| Fee income | 3,286 | 3,286 | |||||||||||||
| Operating expenses | (2,277 | ) | (2,277 | ) | |||||||||||
| Income tax | (26 | ) | (26 | ) | |||||||||||
| Property and casualty | 1,469 | – | – | – | 1,469 | ||||||||||
| Financial guaranty: | |||||||||||||||
| Net premiums earned | – | – | |||||||||||||
| Net change in fair value of credit derivatives | – | – | |||||||||||||
| Losses and loss adjustment expenses | – | – | |||||||||||||
| Acquisition expenses | – | – | |||||||||||||
| Operating expenses | – | – | |||||||||||||
| Financial guaranty | – | – | – | – | – | ||||||||||
| Corporate and Investing | |||||||||||||||
| Net investment income | 97 | 97 | |||||||||||||
| Net realized gain/(loss) | 39 | (39 | ) | – | |||||||||||
| Operating expenses | (209 | ) | (209 | ) | |||||||||||
| Interest expense | (451 | ) | (451 | ) | |||||||||||
| Other income, net of other expense | 33 | 33 | |||||||||||||
| Corporate and investing | (491 | ) | (39 | ) | – | – | (530 | ) | |||||||
| Group total | $ | 978 | $ | (39 | ) | $ | – | $ | – | $ | 939 | ||||
| AMERICAN OVERSEAS GROUP LTD. | |||||||||||||||
| NET INCOME AND OPERATING INCOME BY SEGMENT | |||||||||||||||
| (dollars in thousands) | March 31, 2020 | ||||||||||||||
| Net Income Available to Common Shareholders | Net Realized (Gain)/Loss on Sales of Investments | Net Change in Fair Value of Credit Derivatives | Fair Value Adjustments | Operating Income | |||||||||||
| Property and casualty: | |||||||||||||||
| Net premiums earned | $ | 3,831 | $ | 3,831 | |||||||||||
| Losses and loss adjustment expenses | (2,123 | ) | (2,123 | ) | |||||||||||
| Acquisition expenses | (1,285 | ) | (1,285 | ) | |||||||||||
| Property/Casualty Underwriting Income | 423 | 423 | |||||||||||||
| Fee income | 3,166 | 3,166 | |||||||||||||
| Operating expenses | (3,142 | ) | (3,142 | ) | |||||||||||
| Amortization expense | – | – | |||||||||||||
| Income tax | (164 | ) | (164 | ) | |||||||||||
| Property and casualty | 283 | – | – | – | 283 | ||||||||||
| Financial guaranty: | |||||||||||||||
| Net premiums earned | (3 | ) | 193 | 190 | |||||||||||
| Net change in fair value of credit derivatives | 2 | (2 | ) | – | |||||||||||
| Losses and loss adjustment expenses | 418 | (889 | ) | (471 | ) | ||||||||||
| Acquisition expenses | 2 | (24 | ) | (22 | ) | ||||||||||
| Operating expenses | (103 | ) | (103 | ) | |||||||||||
| Financial guaranty | 316 | – | (2 | ) | (720 | ) | (406 | ) | |||||||
| Corporate and Investing | |||||||||||||||
| Net investment income | 500 | 500 | |||||||||||||
| Net realized gain/(loss) | 207 | (207 | ) | – | |||||||||||
| Fair value adjustment | (558 | ) | 558 | – | |||||||||||
| Operating expenses | (613 | ) | (613 | ) | |||||||||||
| Interest expense | (451 | ) | (451 | ) | |||||||||||
| Other income, net of other expense | (521 | ) | (521 | ) | |||||||||||
| Corporate and investing | (1,436 | ) | (207 | ) | – | 558 | (1,085 | ) | |||||||
| Group total | $ | (837 | ) | $ | (207 | ) | $ | (2 | ) | $ | (162 | ) | $ | (1,208 | ) |
