Results of Operations for the Three Months Ended September 30, 2023 – American Overseas Group Limited Announces Net Loss Of $1.8 Million and Operating Loss of $1.8 Million For the Three Months Ended September 30, 2023

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

[email protected]

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 )
                             

American Overseas Group Ltd