Good afternoon. Welcome to the Oxbridge Re's Fourth Quarter and Year-end 2020 Earnings Call. My name is John, 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 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 Wednesday, March 30, 2022, 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 go ahead..

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 filings with the SEC. The occurrence of any of these risks and uncertainties that 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 presentation, even the Company's expectations or any related events, conditions or circumstances changes.

In addition, on March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic.

The disruption of global commercial activities across all market sectors and the significant declines in volatility in financial markets as a result of the COVID-19 pandemic could result in a material adverse impact on our financial position, results of operations and cash flows.

Possible effects may include, but are not limited to, uncertainties with respect to current and future losses, reduction in interest rates, equity market volatility, and ongoing business and financial market impacts of an economic downturn.

The insurance industry is likely to experience material losses resulted from COVID-19, which will reduce available capital, and we expect we'll continue to sustain the upward pricing trends for reinsurers that we were seeing across many lines of business before COVID-19.

However, the ultimate impact on current business in force as well as risk and potential opportunities on future business remains highly uncertain. 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. It has been a full year since COVID-19 pandemic began, affecting so many lives and businesses around the world. Our goal over the past year was to ensure the health and safety of our employees and our community and to ensure the resilience of the continuation of our business.

Fortunately, the pandemic has little or no impact on our business. However, we continue to monitor the markets and the insurance industry in general to ensure we continue to derive value to our shareholders. 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 seven 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 a 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 can compete effectively with large carriers.

We specialize in underwriting low-frequency, high-severity risk where we believe sufficient data exists to efficiently analyze the risk return profile of our reinsurance contracts.

Our objective is to achieve long-term growth in 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. Our focus and top priority remains on profitable underwriting.

We also generated a significant increase in net income for the fourth quarter of the year, building momentum as we enter 2021. In addition, we continue to make progress on our reinsurance sidecar, Oxbridge RE NS. For contract year-ended May 31, 2020, a sidecar investors earned an attractive return of approximately 36%.

So far this year, we are on track to deliver investors in our Series 2020-1 participating notes ending May 31, 2021, with projected returns between 24% to 40%. I'll now turn it over to Wrendon and take us through our financial results.

Wrendon?.

Thank you, Jay. As I remind you that our typical contract period is from June 1 to May 31 of the following year. Net premiums earned for the year ended December 31, 2020, increased to $893,000 from $617,000 in the prior year.

The increase is due primarily to 27 months of premiums we recognized in the prior year as a result of previous accelerated premium recognition when compared to normal premium recognition during 2020. Fourth quarter net premiums earned increased marginally to $247,000 from $245,000 last year.

Net investment and other income in 2020 total $102,000 compared to $230,000 last year. Net realized gains of $374,000, was significantly higher than $3,000 last year. Therefore, we experienced the $155,000 decline in fair value of equity securities in 2020 coming in the fourth quarter compared to a gain of $25,000 in 2019.

Total expenses including loss and loss adjustment expenses, both the acquisition costs as well as general and admin expenses in 2020 were consistent with the prior year at approximately $1.1 million. The reduction in our G&A cost during 2020 was partially offset by an increase in policy acquisition costs and underwriting expenses during the year.

The higher revenues and stable expenses we generated a significantly reduced net loss in 2020 of only $50,000, down from $305,000 in the prior year. As Jay mentioned, net income in the fourth quarter increased significantly to $181,000 or $0.03 per share from only $61,000 or $0.01 per share in the fourth quarter of 2019.

As discussed before, 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 and combined ratio.

Our loss ratio, which measures underwriting profitability, is the ratio of losses and loss adjustment expenses incurred to net premiums earned. All those ratios for both 2020 and 2019 was zero as there were no loss or loss adjustment expenses in either years.

Our acquisition cost ratio, which measures operational efficiency, compares policy acquisition costs and net premium earned. Our acquisition cost ratio was 10.9% and 11% for the fourth quarter and year ended December 31, 2020, respectively, compared to 9.4% and 10.4% for the same period in the prior year.

The increases in 2020 were due to marginally higher weighted average acquisition costs on the reinsurance contracts that were enforced during the year. Our expense ratio, which measures operating performance, compares policy acquisition costs and general and admin expenses with net premiums earned.

The expense ratio for the fourth quarter and year ended December 31, 2020, were 117% and 126.1%, respectively, compared to 115% and 183.3% for the same period in the prior year. The significant decrease in 2020 was due primarily to a higher denominator in net premiums earned as recorded in 2020 when compared with 2019.

Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio. The combined ratio for the three months and year ended December 31, 2020, were 117% and 126.1%, respectively, compared to 115.1% and 183.3% for the same period in 2019.

The improvement in 2020 is due to a higher denominator in net premiums earned and reduced total expenses in 2020 compared with the prior year. Now turning to the balance sheet. Total investments, which represent investments in equity securities totaled $787,000 at December 31, 2020, up from $692,000 at December 31, 2019.

The increase is due to the purchase of equity securities during the year. At December 31, 2020, cash and cash equivalents and restricted cash and cash equivalents totaled $7.5 million, which is stable over $8 million at December 31, 2019. Total shareholders' equity at December 31, 2020 was $8 million, consistent with the prior year.

I'll now turn the call back over to Jay to wrap up before we take any of your questions.

Jay?.

Thank you, Wrendon. 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. We're very pleased with the returns generated for the contract year ending May 31, 2020, where our sidecar investors earn an attractive return of 36%.

So far this year, investors in our Series 2020 participating notes are on track to achieve a projected return of between 24% to 40%. Looking ahead, we remain opportunistic about the long-term prospects of both our core business and our reinsurance side car.

We continue to evaluate additional opportunities for growth as well as diversification of our risk profile. So in closing, G&A costs have been reduced and are relatively stable at these levels. Our sidecar investors continue to earn an attractive return. Our shareholder equity is mostly in cash. We are debt-free.

We have a strong balance sheet with a solid cash position. And most importantly, we have real opportunity for growth based on a stable and viable business model. With that, we are ready to open the call for questions. Operator, please provide the appropriate instructions..

[Operator Instructions] Your first question is coming from Kent Engelke from Capitol Securities..

How do your marketing for the 2021 sidecar coming along?.

Kent, it's coming along fine. I'll tell you, it's -- these last few years have been very strange because we've had various different forces and various different things go wrong, not only in the financial markets, but also due to the pandemic, right, but the financial markets are looking at things slightly differently.

But we are very pleased with how returns are coming through and happening. Anybody who's an accredited investor can take part in this thing. So it's -- so we're pleased with the way things are going so far. But again, we're always opportunistic in what we do. We don't take risk at any -- just because there's an opportunity for return.

It has its calculated risk. So I suppose short answer to your question, it's going well..

[Operator Instructions] There are no questions in queue at this time. 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 for joining us on today's call. Before we wrap up, I want to thank our employees, business partners and investors for their continued support. I especially want to express our gratitude to our Oxbridge team who continue to leverage their significant experience to manage and build our business during these challenging times.

It's their dedication and expertise that will take us through these days. And we look forward to updating you on our next call. If you have any further questions, please feel free to give me a call anytime. Thank you again for your time and attention today and your interest in Oxbridge.

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 link available in the Investors Section of the Company's website. Thank you for joining us today for our presentation. You may now disconnect..