OXRE(OXBR) - 2023 Q4 - Annual Results

Executive Summary & Business Highlights Operational milestones include pioneering tokenized reinsurance securities and establishing a Web3 subsidiary for RWA tokenization growth CEO's Strategic Vision & Operational Achievements The CEO highlighted SurancePlus's inaugural Tokenized Reinsurance Securities and SurancePlus Inc.'s establishment, with 2023 Delta CatRe token investors expecting over 45% returns - SurancePlus issued the inaugural Tokenized Reinsurance Securities sponsored by a publicly-traded company[3] - SurancePlus Inc., a new Web3-focused division, was established as a wholly-owned subsidiary without debt or shareholder dilution[3] - Investors in 2023 Delta CatRe tokens are expected to realize returns exceeding 45%, surpassing initial expectations of 42%[6] RWA Tokenization & SurancePlus Inc. Developments Oxbridge Re is actively venturing into Real-World Asset (RWA) tokenization via SurancePlus Inc., aiming for substantial growth as a premier RWA Web3-focused entity - The company is enthusiastic about RWA tokenization, positioning SurancePlus for substantial growth as a premier Web3-focused entity[4] - Blackrock's intention to tokenize $10 trillion of assets reinforces Oxbridge Re's RWA market strategy[5] - The company considers itself a pioneer in the RWA market, energized by its repositioning and expansion into new business lines[5] Financial Performance Analysis The company's financial performance in 2023 was marked by increased net premiums earned but a significant net loss, primarily due to investment fluctuations and SurancePlus launch expenses Net Premiums Earned Net premiums earned significantly increased for both Q4 and full year 2023, driven by higher rates on reinsurance contracts | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------ | :-------------------------- | :-------------------------- | :---------------------- | :---------------------- | | Net Premiums Earned | $523,000 | $nil | $1,255,000 | $995,000 | - Increases in net premiums earned are due to higher rates on reinsurance contracts in force during Q4 and full year 2023[7] Net Loss and EPS The company reported a significant net loss for both Q4 and full year 2023, contrasting with Q4 2022 net income and an increased full year net loss | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :---------------------- | :---------------------- | | Net Loss | $(2.67) million | $678,000 | $(9.9) million | $(1.8) million | | Basic and Diluted EPS | $(0.46) | $0.12 | $(1.69) | $(0.31) | Factors Affecting Financial Results Decreased financial results for 2023 were primarily due to fair market value fluctuations of the Jet.AI investment and increased SurancePlus launch expenses - The decrease in financial results for Q4 and full year 2023 is mainly attributed to fluctuations in the fair market value of the Company's equity investment in Jet.AI[9] - Slight increases in general expenses incurred during the launch of SurancePlus throughout 2023 also contributed to decreased financial results[9] Total Expenses Total expenses increased for Q4 2023 due to deferred offering costs but decreased for the full year, primarily from lower loss and loss adjustment expenses | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :----------- | :-------------------------- | :-------------------------- | :---------------------- | :---------------------- | | Total Expenses | $536,000 | $363,000 | $2.3 million | $2.6 million | - The increase in total expenses for Q4 2023 was due to the recognition of previously deferred offering costs[10] - The decrease in total expenses for full year 2023 was due to lower loss and loss adjustment expenses (no Hurricane Ian losses), offsetting increased general and administration expenses[11] Financial Position The company's financial position at year-end 2023 showed a slight decrease in cash and cash equivalents Cash and Cash Equivalents Cash and cash equivalents, including restricted cash, slightly decreased at year-end 2023 compared to 2022 | Metric | At December 31, 2023 | At December 31, 2022 | | :---------------------------------------------------- | :------------------- | :------------------- | | Cash and cash equivalents, and restricted cash and cash equivalents | $3.7 million | $3.9 million | Key Financial Ratios Key financial ratios for 2023 reflect improved underwriting profitability with a significantly lower loss ratio, despite an increased expense ratio Loss Ratio The loss ratio significantly decreased to 0.0% for 2023 from 107.8% in 2022, indicating improved underwriting profitability due to no significant losses | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--------- | :---------------------- | :---------------------- | | Loss Ratio | 0.0% | 107.8% | - The decrease in loss ratio was due to no limit losses on reinsurance contracts in 2023, unlike losses from Hurricane Ian in the prior year[13] Acquisition Cost Ratio The acquisition cost ratio marginally increased to 11.2% for 2023, reflecting a slight change in operational efficiency | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------ | :---------------------- | :---------------------- | | Acquisition Cost Ratio | 11.2% | 11.1% | Expense Ratio The expense ratio increased to 185.2% for 2023, primarily due to higher general and administrative expenses from Form S-3 registration and SurancePlus Inc. launch | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :---------- | :---------------------- | :---------------------- | | Expense Ratio | 185.2% | 153.1% | - The increase in expense ratio was due to higher general and administrative expenses in 2023, primarily from deferred expenses related to Form S-3 registration and the SurancePlus Inc. private placement offering launch[15] Combined Ratio The combined ratio significantly decreased to 185.2% for 2023, primarily driven by the lower loss ratio due to the absence of underwriting losses | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :----------- | :---------------------- | :---------------------- | | Combined Ratio | 185.2% | 260.9% | - The decrease in the combined ratio is due to the decrease in the loss ratio during 2023, resulting from no underwriting losses compared to 2022 (Hurricane Ian)[16] Consolidated Financial Statements The consolidated financial statements for 2023 show a significant decrease in total assets and shareholders' equity, alongside an increased net loss, primarily due to unrealized investment losses Consolidated Balance Sheets The consolidated balance sheet shows total assets decreased from $16.616 million in 2022 to $8.253 million in 2023, driven by reduced "Other Investments," with increased liabilities and decreased shareholders' equity | Balance Sheet Item | At December 31, 2023 | At December 31, 2022 | | :-------------------------------------- | :------------------- | :------------------- | | Total Assets | $8.253 million | $16.616 million | | Total Liabilities | $2.921 million | $1.627 million | | Total Shareholders' Equity | $5.332 million | $14.989 million | | Other Investments | $2.478 million | $11.423 million | | Notes payable to DeltaCat Re Token Holders | $1.523 million | - | | Reserve for losses and loss adjustment expenses | - | $1.073 million | | Unearned premiums reserve | $915 thousand | - | Consolidated Statements of Operations Consolidated statements show increased net premiums earned for 2023, but total revenue turned negative due to substantial unrealized investment losses, leading to a higher net loss | Income Statement Item | Year Ended Dec 31, 2