Good afternoon. Welcome to Oxbridge Re's Third Quarter 2019 Earnings Call. My name is Jess, 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 will 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 December 5, 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 and Litigation Reform Act of 1995.

Words such as anticipates, estimates, expects, intend, plan, 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 filings 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 statements made on this conference call speak 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 presentations 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 Chief Executive Officer, 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 Re Holdings 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 our 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 exist to efficiently analyze the risk-return profile of reinsurance 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 will 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, 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 nine months ended September 30, 2019. First, a point to note is our typical contract period is from June 1 to May 31 of the following year. Net premiums earned for the third quarter of 2019 decreased $421,000 to $279,000 from $700,000 in the third quarter of 2018.

The decrease was wholly due to the strategic deployment of lower capital in the current period when compared to the prior year period. Net premiums earned for the nine months ended September 30, 2109, decreased $882,000 to $372,000 from $1,254,000 last year.

The decrease, again, was primarily due to the strategic deployment of lower capital being deployed during the first nine months of 2019 when compared to the same period in the prior year. Net investment income for the third quarter of 2019 totaled $54,000 which was coupled with a $17,000 change in fair value of equity securities.

This compares with $100,000 of net investment income, plus $118,000 of change in fair value of equity securities, offset by $61,000 of net realized investment losses for the third quarter of 2018.

For the nine months ended September 30, 2019, net investment income totaled $182,000, plus $3,000 of net realized investment gains and a $20,000 change in the fair value of equity securities.

This compares with $280,000 of net investment income, plus $22,000 of change in fair value of equity securities, offset by $257,000 of net realized investment losses for the first nine months of 2018.

Total expenses for the third quarter of 2019, including loss and loss adjustment expenses, policy acquisition costs and underwriting expenses and general and admin expenses, were $295,000 compared with $368,000 in the third quarter of 2018.

The decrease in expenses was due to a decrease in policy acquisition costs as a result of decrease in net premiums earned during the quarter as well as a decrease in general and administrative expenses as a result of further cost-saving initiatives implemented by the company when compared to the prior year.

For the nine months ended September 30, 2019, total expenses were $849,000 compared with $1,090,000 in the first nine months of 2018. The decrease in total expenses was primarily due to cost-saving initiatives implemented by the company this year.

Net loss totaled $15,000 or $0 per basic and diluted share for the third quarter of 2019 compared with net income of $652,000 or $0.11 per basic and diluted share in the third quarter of 2018.

For the nine months ended September 30, 2019, net loss totaled $366,000 or $0.06 per basic and diluted common share compared with net income of $706,000 or $0.12 per basic and diluted common share in 2018.

The net loss in 2019 was due primarily to lower net premiums earned, resulted from decreased capital deployed during the first three and nine months of 2019 compared to the prior period.

During the nine months ended September 30, 2019, the company settled its payment obligation of $4 million under the 218 industry loss warranty swap, which was originally entered into in January 2018. Now turning to our financial ratios for the three and nine months ended September 30, 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 expense ratio, underwriting expense ratio and combined ratio.

Our loss ratio, which measures underwriting profitability, is the ratio of losses and loss adjustment expenses incurred to net premiums earned. Our loss ratio for the third quarter of 2019 was 0% compared to 0% for the third quarter of 2018.

For the nine months ended September 30, 2019, the loss ratio was also 0% compared to a loss ratio of 0% in the prior year period. The loss ratio results in both periods were due to no losses and loss adjustment expenses incurred.

Our acquisition cost ratio, which measures operational efficiency, compares policy acquisition costs and underwriting expenses to net premiums earned. Our acquisition cost ratio was 11.1% for the third quarter of 2019 compared with 9% last year.

For the first nine months of 2019, the acquisition cost ratio was 11% compared with 8.1% for the same year ago period.

The increase in acquisition cost ratio was due to the overall higher weighted-average acquisition costs on reinsurance contracts in force during the three and nine months ended September 30, 2019 when compared with the same period a year ago.

Our expense ratio, which measures operating performance, compares policy acquisition costs or the underwriting expenses and general and admin expenses with net premiums earned. The expense ratio was 105.7% during the third quarter of 2019 compared with 33.5% for the third quarter of 2018.

For nine months ended September 30, 2019, the expense ratio was 228.2% compared with 53.8% for the first nine months of 2018.

The increase in expense ratio in 2019 was due primarily to lower net premiums earned and net income from derivative instruments during the three- and nine-month period ended September 30, 2019 when compared with the same period a year ago.

Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio. The combined ratio totaled 105.7% for the third quarter of 2019 and 33.5% in the same year-ago period. For the nine months ended September 30, 2019, the combined ratio was 228.2% compared with 53.8% for the year ago period.

The increase in the combined ratio in 2019 was wholly due to lower net premiums earned and net income from derivative instruments during the three- and nine-month periods ended September 30, 2019 when compared with three- and nine-month periods ended September 30, 2018. Now turning to the balance sheet.

Total investments, which include investments in fixed-maturity and equity securities, totaled $584,000 at September 30, 2019, compared with $1.2 million at December 31, 2018.

Total shareholders' equity at September 30, 2019, was approximately $8 million down from $8.3 million at December 31, 2018, with a current book value of $1.39 per share at September 30, 2019. At September 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. During the third quarter, we experienced a major storm, namely Hurricane Dorian, that wrecked our station at the Bahamas as a category five hurricane before making landfall in the United States. Our thoughts and prayers are with the families that have lost lives and those who have been significantly affected.

Despite Hurricane Dorian having significant estimated insured losses, we have not been directly impacted by this event due to our limited exposure to the Carolinas and the Caribbean.

Although we have not been affected by – additionally, sorry, additionally, we have not been affected by other major catastrophic events such as Typhoon Hagibis in Japan and the recent California wildfires.

This quarter, our risk management underwriting focus allowed us to remain unaffected by various catastrophic events worldwide and allowed us to effectively break even while strategically taking less risk.

We remain optimistic about the long-term prospects of our reinsurance business as we continue to evaluate additional opportunities for growth as well as diversification of risk. Through our reinsurance sidecar, we've been able to add a degree of diversity to our revenue stream and risk while still having the ability to achieve attractive returns.

Going forward, we will continue to assess and evaluate opportunities. Through our reinsurance – through our reinsurance contracts in place, during the third quarter, we were able to generate premium income at a modest sum through investment income.

Although our results for the quarter were in line with our expectations, given the strategic – altogether, pardon me, altogether, results for the quarter were in line with our expectations given the strategic reduction of risk this year.

Going forward, we will continue to opportunistically evaluate new opportunities with a firm focus on long-term value creation above all else. So in closing, we continue to reduce our G&A costs. We are debt-free. Our book value per share is $1.39, of which 93% is in cash. We have a strong cash position.

And most importantly, we have an opportunity and a viable business model. With that, we are ready to open the call for questions. Operator, please provide the appropriate instructions..

Thank you. The floor is now open for questions. [Operator Instructions] Our first question will come from Kent Engelke of Capitol Securities..

Hey, good afternoon, gentlemen.

Can you give us a little bit more color about the sidecar, approximately the amount that may be invested in it if we took on the yields and the like?.

Yes. Hi, Kent. The sidecar, this is our second year of going into the sidecar. The first year, unfortunately, just like the remaining contracts and a lot of what's happened in the industry, the sidecar wasn't profitable. However, this year, we went back in. Some of the investors went back in with a small toe in the water.

It was a very small dollar amount. However, we definitely declared success on that because we were able to deploy the sidecar. That sidecar probably would pay off investors somewhere about 40% to 50% return on investment. And that number would – that number is on an annualized basis. The sidecar is a one-year program.

We would be looking again to possibly do the sidecar – definitely – excuse me, not possibly, but definitely looking to the sidecar in June 1 of next year and possibly in January 1 of this coming year..

Okay. Thank you..

Thank you, Kent..

[Operator Instructions] With no other questions holding, that will conclude our question-and-answer session. I'd now like to turn the call back to Mr. Madhu for his closing remarks..

Thank you all. I'd like to take the time to thank everybody, our employees, business partners and investors for their continuing support. We look forward to updating you on our next call. Thank you, 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 Investors section of the company's website. Thank you for joining us for today's presentation. You may now disconnect..