HAMILTON, Bermuda, Dec. 30, 2023 (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 $1.8 million, or $37.38 per diluted share, for the three months ended September 30, 2023. This compares to consolidated net income available to common shareholders of $0.5 million, or $11.58 per diluted share, for the three months ended September 30, 2020. Book value per weighted share at September 30, 2023 was $959.06, a decline from the book value per weighted share of $1,126.51 at September 30, 2020.
For the three months ended September 30, 2023, the Company had an operating loss of $1.8 million, or $37.68 per diluted share, compared to operating income of $0.6 million, or $11.90 per diluted share for the three months ended September 30, 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.
For the three months ended September 30, net earned property and casualty premiums increased $1.1 million from $4.3 million a year ago to $5.4 million, driven by an increase in existing and new programs. Fee income remained constant at $2.6 million quarter over quarter while gross written premiums increased $4.2 million, moving from $96.2 million to $100.4 million. Quarterly direct written premiums were positively impacted by continued expansion of new programs, rate increases, and overall economic recovery. Loss and loss adjustment expenses as a percentage of earned premium increased from 55.1% to 71.2%.
For the three months ended September 30, operating expenses increased $1.1 million from $2.6 million to $3.7 million primarily due to a $0.9 million increase in taxes, licenses and fees associated with program business written in Louisiana. For prior year quarterly results, the Company received credits associated with these expenses from its program partner. Additionally, the Company recognized latent charges related to current year to date expenses associated with Louisiana taxes, licenses and fees in the current quarter. The remaining $0.2 million increase in operating expense for the quarter is driven primarily by marketing activity returning to more normal levels in 2023 compared to 2020 expenditure levels, which were impacted by COVID related restrictions.
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
| American Overseas Group Limited | |||||||||||||||||
| Consolidated Balance Sheets | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| As at September 30, 2023 and December 31, 2020 | |||||||||||||||||
| (dollars in thousands) | |||||||||||||||||
| September 30, 2023 | December 31, 2020 | ||||||||||||||||
| Assets | |||||||||||||||||
| Investments: | |||||||||||||||||
| Fixed-maturity securities held as available for sale, at fair value | $ | 92,473 | $ | 72,642 | |||||||||||||
| Equity investments held as available for sale, at fair value | 3,574 | 4,143 | |||||||||||||||
| Cash and cash equivalents | 37,544 | 24,254 | |||||||||||||||
| Restricted cash | 3,968 | 548 | |||||||||||||||
| Accrued investment income | 443 | 355 | |||||||||||||||
| Premiums receivable | 80,015 | 73,073 | |||||||||||||||
| Deferred insurance premiums | 108,584 | 101,843 | |||||||||||||||
| Reinsurance balances receivable, net | 211,946 | 194,914 | |||||||||||||||
| Deferred policy acquisition costs | 5,045 | 3,590 | |||||||||||||||
| Intangible assets | 4,800 | 4,800 | |||||||||||||||
| Goodwill | 33,050 | 33,050 | |||||||||||||||
| Other assets | 3,708 | 3,767 | |||||||||||||||
| Total Assets | $ | 585,150 | $ | 516,979 | |||||||||||||
| Liabilities and Equity | |||||||||||||||||
| Liabilities: | |||||||||||||||||
| Loss and loss expense reserve | $ | 204,340 | $ | 192,943 | |||||||||||||
| Deferred commission income | 3,442 | 2,482 | |||||||||||||||
| Unearned premiums | 113,425 | 105,678 | |||||||||||||||
| Ceded premium payable | 82,833 | 71,989 | |||||||||||||||
| Payable to general agents | 7,576 | 4,331 | |||||||||||||||
| Funds withheld | 100,333 | 64,980 | |||||||||||||||
| Accounts payable and accrued liabilities | 10,873 | 7,922 | |||||||||||||||
| Notes payable | 16,521 | 16,521 | |||||||||||||||
| Non-owned interest in VIE | 300 | 300 | |||||||||||||||
| Interest payable | 451 | 451 | |||||||||||||||
| Total Liabilities | 540,094 | 467,597 | |||||||||||||||
| Shareholders’ Equity: | |||||||||||||||||
| Common shares | 4,698 | 4,698 | |||||||||||||||
| Additional paid-in capital | 189,179 | 189,151 | |||||||||||||||
| Accumulated other comprehensive income | 1,382 | 1,962 | |||||||||||||||
| Retained deficit | (156,256 | ) | (152,482 | ) | |||||||||||||
| Total Shareholders’ Equity | 39,003 | 43,329 | |||||||||||||||
| Non-controlling interest of preferred shares of subsidiaries | 6,053 | 6,053 | |||||||||||||||
| Total Equity | 45,056 | 49,382 | |||||||||||||||
| Total Liabilities and Equity | $ | 585,150 | $ | 516,979 | |||||||||||||
| See Notes to September 30, 2023 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com | |||||||||||||||||
| American Overseas Group Limited | |||||||||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| (dollars in thousands, except share and per share amounts) | |||||||||||||||||||||||
| Three months ended September, | Nine months ended September, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Net premiums earned | $ | 5,397 | $ | 4,337 | $ | 15,935 | $ | 8,775 | |||||||||||||||
| Fee income | 2,644 | 2,645 | 8,667 | 7,896 | |||||||||||||||||||
| Net change in fair value of credit derivatives | – | – | – | 2 | |||||||||||||||||||
| Net investment income | 46 | 60 | 208 | 652 | |||||||||||||||||||
| Net realized gains on investments | 14 | 8 | 50 | 1,508 | |||||||||||||||||||
| Fair value adjustment | – | (23 | ) | – | 2,054 | ||||||||||||||||||
| Other income | 28 | – | 105 | – | |||||||||||||||||||
| Total revenues | 8,130 | 7,027 | 24,965 | 20,887 | |||||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Losses and loss adjustment expenses | 3,841 | 2,389 | 10,232 | 8,200 | |||||||||||||||||||
| Acquisition expenses | 1,931 | 1,537 | 5,506 | 3,775 | |||||||||||||||||||
| Operating expenses | 3,663 | 2,603 | 11,038 | 9,294 | |||||||||||||||||||
| Other expense | – | 46 | – | 330 | |||||||||||||||||||
| Interest expense | 451 | 451 | 1,352 | 1,352 | |||||||||||||||||||
| Total expenses | 9,886 | 7,026 | 28,128 | 22,951 | |||||||||||||||||||
| Net (loss) income available to common shareholders | $ | (1,756 | ) | $ | 1 | $ | (3,163 | ) | $ | (2,064 | ) | ||||||||||||
| Income tax (expense) | – | 539 | (26 | ) | 322 | ||||||||||||||||||
| Net (loss) income before dividends | (1,756 | ) | 540 | (3,189 | ) | (1,742 | ) | ||||||||||||||||
| Dividends on preference shares of subsidiary | – | – | (585 | ) | – | ||||||||||||||||||
| Net (loss) income available to common shareholders | $ | (1,756 | ) | $ | 540 | $ | (3,774 | ) | $ | (1,742 | ) | ||||||||||||
| Net (loss) income per common share: | |||||||||||||||||||||||
| Basic | $ | (37.38 | ) | $ | 11.64 | $ | (80.34 | ) | $ | (37.61 | ) | ||||||||||||
| Diluted | (37.38 | ) | 11.58 | (80.34 | ) | (37.17 | ) | ||||||||||||||||
| Weighted-average number of common shares outstanding: | |||||||||||||||||||||||
| Basic | 46,979 | 46,386 | 46,979 | 46,326 | |||||||||||||||||||
| Diluted | 46,979 | 46,620 | 46,979 | 46,870 | |||||||||||||||||||
| See Notes to September 30, 2023 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) | Three months ended September 30, 2023 | Nine months ended September 30, 2023 | |||||||||||||||||||||||||||||||||
| 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 | Restructuring Charges | Operating Income/(Loss) | 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 | Restructuring Charges | Operating Income/(Loss) | ||||||||||||||||||||||||
| Property and casualty: | |||||||||||||||||||||||||||||||||||
| Net premiums earned | $ | 5,397 | $ | 5,397 | $ | 15,935 | $ | 15,935 | |||||||||||||||||||||||||||
| Losses and loss adjustment expenses | (3,841 | ) | (3,841 | ) | (10,232 | ) | (10,232 | ) | |||||||||||||||||||||||||||
| Acquisition expenses | (1,931 | ) | (1,931 | ) | (5,506 | ) | (5,506 | ) | |||||||||||||||||||||||||||
| Property/Casualty Underwriting Income | (375 | ) | (375 | ) | 197 | 197 | |||||||||||||||||||||||||||||
| Fee income | 2,644 | 2,644 | 8,667 | 8,667 | |||||||||||||||||||||||||||||||
| Operating expenses | (3,307 | ) | (3,307 | ) | (10,052 | ) | (10,052 | ) | |||||||||||||||||||||||||||
| Income tax | – | – | (26 | ) | (26 | ) | |||||||||||||||||||||||||||||
| Property and casualty | (1,038 | ) | – | – | – | – | (1,038 | ) | (1,214 | ) | – | – | – | – | (1,214 | ) | |||||||||||||||||||
| 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 | 46 | 46 | 208 | 208 | |||||||||||||||||||||||||||||||
| Net realized gain/(loss) | 14 | (14 | ) | – | 50 | (50 | ) | – | |||||||||||||||||||||||||||
| Operating expenses | (356 | ) | (356 | ) | (986 | ) | (986 | ) | |||||||||||||||||||||||||||
| Interest expense | (451 | ) | (451 | ) | (1,352 | ) | (1,352 | ) | |||||||||||||||||||||||||||
| Other income, net of other expense | 29 | 29 | 105 | 105 | |||||||||||||||||||||||||||||||
| Corporate and investing | (718 | ) | (14 | ) | – | – | – | (732 | ) | (1,975 | ) | (50 | ) | – | – | – | (2,025 | ) | |||||||||||||||||
| Group total | $ | (1,756 | ) | $ | (14 | ) | $ | – | $ | – | $ | – | $ | (1,770 | ) | $ | (3,189 | ) | $ | (50 | ) | $ | – | $ | – | $ | – | $ | (3,239 | ) | |||||
| (dollars in thousands) | Three months ended September 30, 2020 | Nine months ended September 30, 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 | Restructuring Charges | Operating Income/(Loss) | 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 | Restructuring Charges | Operating Income/(Loss) | ||||||||||||||||||||||||
| Property and casualty: | |||||||||||||||||||||||||||||||||||
| Net premiums earned | $ | 4,337 | $ | 4,337 | $ | 12,288 | $ | 12,288 | |||||||||||||||||||||||||||
| Losses and loss adjustment expenses | (2,388 | ) | (2,388 | ) | (6,622 | ) | (6,622 | ) | |||||||||||||||||||||||||||
| Acquisition expenses | (1,536 | ) | (1,536 | ) | (3,906 | ) | (3,906 | ) | |||||||||||||||||||||||||||
| Property/Casualty Underwriting Income | 413 | 413 | 1,760 | 1,760 | |||||||||||||||||||||||||||||||
| Fee income | 2,645 | 2,645 | 7,896 | 7,896 | |||||||||||||||||||||||||||||||
| Operating expenses | (2,200 | ) | (2,200 | ) | (7,383 | ) | 362 | (7,021 | ) | ||||||||||||||||||||||||||
| Income tax | 539 | 539 | 322 | (76 | ) | 246 | |||||||||||||||||||||||||||||
| Property and casualty | 1,397 | – | – | – | – | 1,397 | 2,595 | – | – | – | 286 | 2,881 | |||||||||||||||||||||||
| Financial guaranty: | |||||||||||||||||||||||||||||||||||
| Net premiums earned | – | – | (3,513 | ) | 3,703 | 190 | |||||||||||||||||||||||||||||
| Net change in fair value of credit derivatives | – | – | 2 | (2 | ) | – | |||||||||||||||||||||||||||||
| Losses and loss adjustment expenses | – | – | (1,577 | ) | (19,546 | ) | (21,123 | ) | |||||||||||||||||||||||||||
| Acquisition expenses | – | – | 131 | (153 | ) | (22 | ) | ||||||||||||||||||||||||||||
| Operating expenses | – | – | (509 | ) | (509 | ) | |||||||||||||||||||||||||||||
| Financial guaranty | – | – | – | – | – | – | (5,466 | ) | – | (2 | ) | (15,996 | ) | – | (21,464 | ) | |||||||||||||||||||
| Corporate and Investing | |||||||||||||||||||||||||||||||||||
| Net investment income | 60 | 60 | 652 | 652 | |||||||||||||||||||||||||||||||
| Net realized gain/(loss) | 8 | (8 | ) | – | 1,508 | (21,008 | ) | 19,500 | – | ||||||||||||||||||||||||||
| Fair value adjustment | (23 | ) | 23 | – | 2,054 | (2,054 | ) | – | |||||||||||||||||||||||||||
| Operating expenses | (403 | ) | (403 | ) | (1,402 | ) | (1,402 | ) | |||||||||||||||||||||||||||
| Interest expense | (451 | ) | (451 | ) | (1,352 | ) | (1,352 | ) | |||||||||||||||||||||||||||
| Other income, net of other expense | (48 | ) | (48 | ) | (331 | ) | (331 | ) | |||||||||||||||||||||||||||
| Corporate and investing | (857 | ) | (8 | ) | – | 23 | – | (842 | ) | 1,129 | (21,008 | ) | – | 17,446 | – | (2,433 | ) | ||||||||||||||||||
| Group total | $ | 540 | $ | (8 | ) | $ | – | $ | 23 | $ | – | $ | 555 | $ | (1,742 | ) | $ | (21,008 | ) | $ | (2 | ) | $ | 1,450 | $ | 286 | $ | (21,016 | ) | ||||||
