Good afternoon. Welcome to Oxbridge Re's Second Quarter 2019 Earnings Call. My name is Cynthia, 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 Re's Chairman, President and Chief Executive Officer Jay Madhu, and Chief Financial Officer and Corporate Secretary, Wrendon Timothy. Following their remarks, we’ll open up the call for your questions.

I would like to remind everyone that this call is also being broadcast live via webcast and available via webcast replay until September 1, 2019 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. Sir, please proceed..

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.

Words 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 are subject to various risks and uncertainties.

Some of these risks and uncertainties are identified in the company's filing with the SEC. The occurrence of any of these risks and uncertainties could have a material adverse effect on the company's business, financial condition and results of operations.

Any forward-looking statement made on this conference call, speaks only as of the date of this conference call.

And 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 CEO, Jay Madhu.

Jay?.

Thank you, Wrendon, and welcome, everyone. Thank you for joining us today. As we do each quarter, before we get into our results, I would like to take a moment to provide a brief overview of our company.

Oxbridge Reinsurance Holding Limited was founded over six years ago with a mission to provide reinsurance solutions, primarily to property and casualty insurers in the Gulf Coast region of the United States.

Through our licensed reinsurance subsidiary, Oxbridge Reinsurance Limited and licensed reinsurance sidecar, Oxbridge Re NS, we write fully collateralized policies to cover property losses from specific catastrophes and as some of you already know, because we write fully collateralized contracts, we are able to compete effectively with larger carriers.

We specialize in underwriting low frequency; high severity risk where we believe sufficient data exists to efficiently analyze the risk/return profile of the insurance contracts.

Our objective is to achieve long-term growth and book value per share by writing business on a selective and opportunistic basis that will generate attractive underwriting profits relative to risk.

Regarding our investment portfolio, we remain opportunistic and will deploy our capital when favorable return opportunities arise, which we believe in turn drive our results through supplemental investment income. That being said, our focus and top priority remains on profitable underwriting.

With that overview now behind us and before going into our results for the second quarter of 2009, I will -- 2019 sorry, I will now turn it over to Wrendon to take us through our financial results for the period.

Wrendon?.

Thank you, Jay. I will now get into our financials for the three and six months ended June 30, 2019. The point to note is our typical contract period is from June 1 to May 31 of the following year. With respect to net premiums earned for the second quarter of 2019, net premiums decreased 241,000 to 93,000 from 334,000 in the second quarter of 2018.

The decrease in net premiums earned was wholly due to the previous acceleration of premium recognition due to full limit losses being incurred on all the company's reinsurance contracts during the last quarter of 2018 as well as lower capital being deployed in the current period when compared with the prior year.

Net premiums earned for the six months ended June 30, 2019 decreased 461,000 to 93,000 from 554,000 for the six months ended June 30, 2018. The decrease in net premium was due primarily to the lower capital being deployed during the full six months of 2019, when compared to the same period in the prior fiscal year.

With respect to net investment income for the second quarter of 2019, net investment income totaled 64,000 which was offset by 48,000 of change in fair value of equity securities. This compares with 108,000 of investment income, plus 73,000 of change in the fair value of the equity securities in the second quarter of 2018.

For six months ended June 30, 2019, net investment income totaled 128,000 plus 3,000 net realized investment gain and 3,000 of change in fair value of equity securities.

This compares with 180,000 of net investment income which was offset by 176,000 of net realized investment losses and 96,000 of change in fair value of equity securities for the first six months of 2018.

With respect to total expenses, total expenses for the second quarter of 2019 including loss and loss adjustment expenses, policy acquisition costs and general and admin expenses were 298,000, compared with 396,000 in the second quarter of 2018.

The decrease in expenses was due to decrease in policy acquisition costs, and a result of decrease in net premium earned during the current quarter as well as the decrease in general and admin expenses as a result of cost savings initiative implemented by the company when compared to the prior year period.

For the six months ended June 30, 2018, total expense were 554,000 compared with 722,000 for the first six months of 2018. The decrease in total expenses was due to cost savings initiative implemented by the company during the six months ended June 30, 2019 compare to the prior year period.

With respect to net income, for the second quarter of 2019, net loss totaled 205,000 or $0.04 per basic and diluted share with net income of 255,000 or $0.054 per basic and diluted share in the second quarter 2018.

For the six months ended June 30, 2019, net loss totaled 351,000 or $0.06 per basic and diluted share compared income of 54000 or $0.01 per basis and diluted to commercial for 2018.

The increase in net loss during both periods was primarily due to lower net premium earned resulting from decrease capital deployed in the first three and six months of 2019 compared to the prior year period, respectively.

During the six months ended June 30, 2019, the company settled its payment obligation of 4 million on June 1, 2018 industry loss warranty, which was originally entitled to in January, 2018. Now, turning to our financial results for the three and six months ended June 31, 2019.

We use various measures to analyze the growth and profitability of our business operations. For our reinsurance business, we measure underwriting profitability by examining our loss ratio, acquisition ratio, underwriting expense ratio and combined ratio.

Our loss ratio, which measures underwriting profitability is the ratio of loss and loss adjustment expenses incurred to net premiums earned. Our loss ratio for the second quarter of 2019 and 2018 was 0%. For the six months ended June 30, 2019, the loss ratio was 0% compared with the loss ratio of 0% in the prior year period.

The loss ratio results during both periods were due to no loss and loss adjustment expenses incurred in the three and six months ended June 30, 2019 and June 30, 2018 respectively. Our acquisition cost ratio, which measures operational efficiency compares policy acquisition costs to net premiums earned.

The acquisition cost was 10.8% for the second quarter of 2019, compared with 3.7% for the same year ago period. For the first six months of 2019, the acquisition cost was 10.8% compared with 6.9% for the same year-ago period.

The increase in acquisition cost ratio during both periods was due to the overall higher weighted-average acquisition cost on reinsurance contracts in force during the three and six-month period ended June 30, 2019, when compared to the same period a year ago.

Our expense ratio, which measures operating performance, compares policy acquisition costs, general and admin expenses with net premium earned. The expense ratio was 311.8% during the second quarter of 2019, compared with 73.1% for the second quarter of 2018.

For the six months ended June 30, 2019, the expense ratio was 595.7% compared with 77.6% for the first six months of 2018.

The increase in the expense ratio during both periods was primarily due to the lower denominator in net premiums earned and net income from our industry loss warranties, as recorded during three and six month period ended June 30, 2019, when compared with the same period a year ago.

Our combined ratio, which is used to measure underwriting performance, is a sum of the loss ratio and the expense ratio. If the combined ratio is at or above 100%, underwriting is not profitable. The combined ratio totaled 311.8% for the second quarter of 2019 and 73.1% in same year ago period.

For the six months ended June 30, 2019, the combined ratio was 595.7% compared with 77.6% for the same year ago period.

The increase in the combined ratio for both periods was wholly due to a lower denominator in net premium earned and net income from our industrial warranty instruments, as recorded during the three and six month period ended June 30, 2019, when compared for the three and six month period ended June 30, 2018. Now, turning to the balance sheet.

Total investment, which includes investments in fixed maturity and equity securities totaled 567,000 at June 30, 2019, compared with 1.2 million at December 31, 2018. Total shareholder’s equity at June 30, 2019, was 8 million, down from 8.3 million at December 31, 2018, and at current book value of $1.39.

At June 30, 2019, cash and cash equivalents and restricted cash and cash equivalents totaled 8 million compared with 11.3 million at December 31, 2018. Now with that, I’d like to turn the call back over to Jay.

Jay?.

Thank you, Wrendon. In the second quarter, we took another step in the right direction. While we always employ a conservative approach on our underwriting, for this treaty here we exercised additional caution in facing our new reinsurance contracts with the goal of further improving our risk management and ensuring long-term durability.

We successfully placed reinsurance contracts with a new treaty here, which as Wrendon previously stated, began on June 1, 2019 and continues to May 31, 2020. Additionally, through our reinsurance sidecar business, Oxbridge Re NS reissued series 2019-1 participating notes in a private placement.

We've been deployed the proceeds into a quota share reinsurance agreement with Oxbridge Reinsurance Limited. The notes are due on January 1, 2022. Through our reinsurance sidecar, we've been able to add a degree of diversity to our reinsurance streams and risk, while still having the ability to achieve attractive returns.

Going forward, we continue to assess and evaluate what are the most attractive opportunities. We successfully placed reinsurance contracts in accordance with our underwriting strategy and we generated modest sum through investment income.

Although, our results for the quarter, while modest in nature, they were in line with our expectations given the reduction of risk this treaty year. Going forward, we will continue to opportunistically evaluate new opportunities with a firm focus on long-term value creation and above all else.

So, in closing, we have worked on reducing our G&A, we are debt-free. Our book value per share is a $39, most of that begin in cash, thus we have a strong cash position. But most importantly, we have opportunity and a viable business model. With that, we're ready to open the call for questions. Operator, please provide the appropriate instructions..

Thank you, sir. The floor is now open for your questions. [Operator Instructions] We will take our first question from Kent Engelke of Capitol Securities Management..

Hey, Jay. Hey, Wrendon. Couple of questions, try to group them all in once.

First is where are you seeing yields on reinsurance contracts and the like -- obviously, we've had a couple record years of losses within the catastrophic community, where are yields? Secondly, what are the -- obviously, will this be a third year in a row of Category 3 Hurricanes. Of course you don't know that, that's an abnormality.

Things happen once since like 1950 or something like that. The second question is in regards to on the sidecar, what sort of profitability metrics are on the sidecar? If I am not mistaken that's something like a hedge fund of the 2 and 20 model. And third, I don't know if you can comment on this.

What about that outrageous volume that we saw couple of times when the turnover of the shares were incredible.

Any comments on any of those?.

Yes, absolutely. So your first question was yield on reinsurance contracts. You're correct. Our reinsurance yields going up. Our contract yield is going up. So, while a few years back, it was said that, yields may or may not be where they're supposed to.

What we're seeing is, we're seeing a contracts achieve the double-digit return yields, since last year. And that's how last year with double-digit as well, this year's double-digit. What happens the next year? We don't know. But where we are, we feel that yields are, you know yields definitely have pick up.

So, it all depends as to what happens with the hurricane season this year. If you take a look at the last 11 years or the last 13 years, the first 11 years wind didn't blow. There were some minor storms here and there. But it was the last two years, year 12 and 13 that were catastrophic for this industry.

So we've seen yields tick up significantly since then. What happens going forward? We don't know. But where we stand currently are -- we are in El Nino year. And the statistics that point to reinsurance contracts or weather statistics since 1951 they definitely favor us to being a strong year.

But, again, all it takes is one storm and things will go wrong, right. So, but so far so good yields are up. El Nino year things look good so far. Yeah we've had a -- we've had a minor category one storm. And that was a non-event for us. And for most folks in our industry, so that bodes well for us. Your other question was the sidecar metrics.

The sidecar metrics are the same as last year. So it’s somewhat in the thought process of the hedge fund business anybody can -- anybody with the high net worth individual or an accredited individual accredited investor.

I could be individual, it could be a company, it could be hedge fund, it could be anybody as long as they meet the -- as long as they meet the various KYC requirements can invest in this. And it gives it gives an investor to come in at a lower dollar amount.

And when I say lower dollar amount, they don't have to invest $10, $20, $30, $40, $50 million in reinsurance contracts. And they can do that because of our size and get a very attractive return. So the metrics are strong. And it all depends as to each year what they are. We don't make those public.

But they're extremely attractive and those sidecar contract, the sidecar contract goes hand in hand or side alongside what the company invests in. Its pro-rata share of what the company invests, is what goes into that sidecar.

So it’s very attractive for somebody of high net worth and like I said a high net worth individual or an accredited investor or a company of sorts. The last question you asked was the outrageous volume. At this point, it's speculation. We're not quite sure where that volume came from, but I can speculate on it. But I'd rather not.

I'll leave that to some you folks on the line..

I appreciate your candour on this, Jay I appreciate it. Wish you best of luck this year. We've had one heck of a last two years. And, hey, I know what the odds are and wishing for the best..

Thank you very much, Kent..

And at this time, there are no further questions. This concludes our question and answer session. I'd now like to turn the call back over to Mr. Madhu for his closing remarks..

Thank you and joining -- thank you for joining us on the call today. I especially want to thank our employees, business partners and investors for their continuing support. We look forward to updating you on our next call.

Operator?.

Before we conclude today's call, I would like to remind everyone that a recording of today's call will be available for replay via a link available in the Investor section of the company's website. Thank you for joining us today for our presentation. You may now disconnect..