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American Overseas Group Limited - Results of Operations for the Year Ended December 31, 2018

18 July 2019

Hamilton, Bermuda – 18 July 2019 - In a filing with the Bermuda Stock Exchange, American Overseas Group Limited (“AOG” or the “Company”; Ticker: AORE.BH; Pink Sheets: AOREF.PK) announced the results of operations for the Year Ended December 31, 2018.  The filing stated:

 

Results of Operations for the Year Ended December 31, 2018 - American Overseas Group LimitedAnnounces Net Loss Of $3.2 Million and Operating Loss of $0.6 Million For The Year Ended December 31, 2018.

 

HAMILTON, Bermuda, - American Overseas Group Limited (BSX: AOREF.BH) (Pink Sheets: AOREF.PK) (“AOG” or the “Company”) today reported consolidated net loss available to common shareholders of $3.2 million, or $69.12 per diluted share, for the year ended December 31, 2018. This compares to consolidated net loss available to common shareholders of $10.6 million, or $233.62 per diluted share, for the year ended December 31, 2017.

 

Year over year improvement in results were driven by improved results associated with the Company’s reinsurance of Puerto Rico-related credits in its financial guaranty segment, as well as improved underwriting results in the property and casualty segment. Book value per share at December 31, 2018 was $1,212.83, a decline from the book value per share of $1,308.58 at December 31, 2017.

 

For the year ended December 31, 2018, the Company had an operating loss of $0.6 million, or $11.97 per diluted share, compared to an operating loss of $20.8 million, or $456.94 per diluted share for the year ended December 31, 2017. Operating income for the property and casualty segment in 2018 was $2.9 million, compared to the $1.1 million operating income in 2017 for this segment. The financial guaranty segment had operating losses of $4.5 million for 2018, compared to financial guaranty operating losses of $21.2 million for 2017.

 

Net earned property and casualty premiums were $2.4 million for 2018, which is 31.4% lower compared to $3.5 million for 2017. Loss and loss adjustment expenses were $1.1 million for 2018, which was $2.9 million lower than 2017. Operating income in the property and casualty segment increased $1.9 million primarily due to improved underwriting margin.

 

The legacy financial guaranty portfolio of American Overseas Reinsurance Company Limited (“AORE”) continues to run-off satisfactorily. The financial guaranty operating loss of $4.5 million in 2018 is significantly lower than the operating loss of $21.2 million in 2017 primarily due to reduced unfavorable development on outstanding losses.

 

Operating expenses of $13.4 million in 2018 were comparable to 2017 of $13.8 million.

 

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. Among the factors that could cause actual results to differ materially are: (i) the Company's reviewing the results of our entire portfolio of policies. Management considers credit derivative policies as a normal extension of AORE’s financial guaranty business and reinsurance in substance.

 

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 itmeasures 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

 

Consolidated Balance Sheets

 

(unaudited)

 

As at December 31, 2018 and December 31, 2017

 

(dollars in thousands)

 

 

 

December 31, 2018

December 31, 2017

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed-maturity securities held as available for sale, at fair value

$

135,896

$

81,028

Equity investments held as available for sale, at fair value

 

5,730

 

 

 

6,437

Cash and cash equivalents

 

34,708

 

 

 

40,173

Restricted cash

 

6,554

 

 

 

66,535

Accrued investment income

 

662

 

 

 

256

Premiums receivable

 

78,610

 

 

 

81,264

Reinsurance balances receivable, net

 

322,338

 

 

 

340,700

Salvage and subrogation recoverable

 

333

 

 

 

1,708

Deferred policy acquisition costs

 

161

 

 

 

101

Intangible assets

 

4,800

 

 

 

4,800

Goodw ill

 

33,050

 

 

 

33,050

Other assets

 

1,712

 

 

 

1,899

 

 

 

 

 

 

 

Total Assets

$

624,554

$

657,951

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Loss and loss expense reserve

$

266,727

$

304,773

Unearned premiums

 

110,812

 

 

 

105,690

Ceded premium payable

 

94,330

 

 

 

95,195

Payable to general agents

 

1,428

 

 

 

1,479

Funds w ithheld

 

54,440

 

 

 

44,985

Accounts payable and accrued liabilities

 

2,524

 

 

 

3,057

Redeemable preference shares: ($0.10 par value and $1,000 redemption value;

 

 

 

 

 

 

authorized shares - 75,000;  issued and outstanding shares - 38,600 and 58,600

 

7,038

 

 

 

10,312

at December 31, 2018 and December 31, 2017, respectively)

 

 

 

 

 

 

Derivative liabilities

 

266

 

 

 

342

Notes payable

 

16,521

 

 

 

16,521

Non-ow ned interest in VIE

 

300

 

 

 

300

Interest payable

 

451

 

 

 

451

Fair value adjustment

 

13,741

 

 

 

15,199

Deferred tax liability

 

35

 

 

 

31

 

 

 

 

 

 

 

Total Liabilities

 

568,613

 

 

 

598,335

Shareholders' Equity:

 

 

 

 

 

 

Common shares

 

4,613

 

 

 

4,556

Additional paid-in capital

 

188,729

 

 

 

188,331

Accumulated other comprehensive income

 

237

 

 

 

1,190

Retained deficit

 

(143,691)

 

 

 

(140,514)

 

 

 

 

 

 

 

Total Shareholders' Equity

 

49,888

 

 

 

53,563

Non-controlling interest of preferred shares of subsidiaries

 

6,053

 

 

 

6,053

 

 

 

 

 

 

 

Total Equity

 

55,941

 

 

 

59,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Equity

$

624,554

$

657,951

 

 

 

 

 

 

 

 

See Notes to 2018 Consolidated Financial Statements available on American Overseas Group Ltd. Website at w w w .aoreltd.com

 

American Overseas Group Limited

 

 

 

 

Consolidated Statements of Operations

 

 

 

(unaudited)

 

 

 

 

For years ended Decmeber 31, 2018 and 2017

 

 

(dollars in thousands, except share and per share amounts)

 

 

 

 

Year ended Decmeber 31,

 

 

2018

 

2017

Revenues

 

 

 

 

Net premiums earned

$

(215)

$

1,947

Fee income

 

11,470

 

11,531

Change in fair value of credit derivatives

 

 

 

 

Realized gains and other settlements

 

14

 

113

Unrealized gains

 

61

 

8,125

Net change in fair value of credit derivatives

 

75

 

8,238

Net investment income

 

2,809

 

1,762

Net realized gains on investments

 

8

 

154

Fair value adjustment

 

332

 

1,452

Other income

 

532

 

591

Total revenues

 

15,011

 

25,675

Expenses

 

 

 

 

Losses and loss adjustment expenses

 

2,593

 

19,783

Acquisition expenses

 

(577)

 

447

Operating expenses

 

13,392

 

13,772

Other expense

 

-

 

-

Interest expense

 

2,191

 

2,304

Total expenses

 

17,599

 

36,306

Net (loss) available to common shareholders

$

(2,588)

$

(10,631)

Income tax (expense) benefit

 

(4)

 

14

Net (loss) before dividends

 

(2,592)

 

(10,617)

Dividends on preference shares of subsidiary

 

(585)

 

-

Net (loss) available to common shareholders

$

(3,177)

$

(10,617)

Net (loss) per common share:

 

 

 

 

Basic

$

(69.12)

$

(233.62)

Diluted

 

(69.12)

 

(233.62)

Weighted-average number of common shares outstanding:

 

 

 

 

Basic

 

45,965

 

45,444

Diluted

 

45,965

 

45,444

See Notes to 2018 Consolidated Financial Statements available on American Overseas Group Ltd. Website at w w w .aoreltd.com

AMERICAN OVERSEAS GROUP LTD.

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME AND OPERATING INCOME BY SEGMENT

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

December 31, 2018

 

 

 

 

 

Net income available

 

Net realized loss

 

Net change in

Fair value

 

 

 

 

 

 

to common

 

on sales of

 

fair value of

adjustment

 

Amortization

 

 

 

 

shareholders

 

investments

credit derivatives

 

s

of intangibles

 

Operating income

Property and casualty:

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

$

2,361

 

 

 

 

 

 

 

 

$

2,361

Losses and loss adjustment expenses

 

(1,060)

 

 

 

 

 

 

 

 

 

(1,060)

Acquisition expenses

 

(556)

 

 

 

 

 

 

 

 

 

(556)

Fee income

 

11,470

 

 

 

 

 

 

 

 

 

11,470

Operating expenses

 

(9,278)

 

 

 

 

 

 

 

 

 

(9,278)

Amortization expense

 

-

 

 

 

 

 

 

 

 

 

-

Income tax

 

(4)

 

 

 

 

 

 

 

 

 

(4)

Property and casualty

 

2,933

 

-

 

-

 

-

 

-

 

2,933

Financial guaranty:

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

(2,576)

 

 

 

 

 

8,649

 

 

 

6,073

Net change in fair value of credit derivatives

 

75

 

 

 

(60)

 

 

 

 

 

15

Losses and loss adjustment expenses

 

(1,533)

 

 

 

 

 

(3,848)

 

 

 

(5,381)

Acquisition expenses

 

1,133

 

 

 

 

 

(2,360)

 

 

 

(1,227)

Operating expenses

 

(3,975)

 

 

 

 

 

 

 

 

 

(3,975)

Financial guaranty

 

(6,877)

 

-

 

(60)

 

2,441

 

-

 

(4,495)

Corporate and Investing

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

2,809

 

 

 

 

 

 

 

 

 

2,809

Net realized loss on sales of investments

 

8

 

(15,608)

 

 

 

15,600

 

 

 

-

Fair value adjustment

 

332

 

 

 

 

 

(332)

 

 

 

-

Operating expenses

 

(139)

 

 

 

 

 

 

 

 

 

(139)

Interest expense

 

(2,191)

 

 

 

 

 

 

 

 

 

(2,191)

Other expense, net of other income

 

532

 

 

 

 

 

 

 

 

 

532

Corporate and investing

 

1,351

 

(15,608)

 

-

 

15,268

 

-

 

1,011

Group total

$

(2,592)

$

(15,608)

$

(60)

$

17,709

$

-

$

(551)

AMERICAN OVERSEAS GROUP LTD.

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME AND OPERATING INCOME BY SEGMENT

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

December 31, 2017

 

 

 

 

 

 

Net income available

 

Net realized loss

 

Net change in

Fair value

 

 

 

 

 

 

to common

 

on sales of

 

fair value of

adjustment

 

Amortization

 

 

 

 

shareholders

 

investments

credit derivatives

 

s

of intangibles

 

Operating income

Property and casualty:

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

$

3,497

 

 

 

 

 

 

 

 

$

3,497

Losses and loss adjustment expenses

 

(3,960)

 

 

 

 

 

 

 

 

 

(3,960)

Acquisition expenses

 

(430)

 

 

 

 

 

 

 

 

 

(430)

Fee income

 

11,531

 

 

 

 

 

 

 

 

 

11,531

Operating expenses

 

(9,593)

 

 

 

 

 

 

 

 

 

(9,593)

Amortization expense

 

-

 

 

 

 

 

 

 

 

 

-

Income tax

 

14

 

 

 

 

 

 

 

 

 

14

Property and casualty

 

1,060

 

-

 

-

 

-

 

-

 

1,060

Financial guaranty:

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

(1,550)

 

 

 

 

 

7,242

 

 

 

5,692

Net change in fair value of credit derivatives

 

8,238

 

 

 

(8,125)

 

 

 

 

 

113

Losses and loss adjustment expenses

 

(15,823)

 

 

 

 

 

(4,078)

 

 

 

(19,901)

Acquisition expenses

 

(17)

 

 

 

 

 

(3,580)

 

 

 

(3,597)

Operating expenses

 

(3,532)

 

 

 

 

 

 

 

 

 

(3,532)

Financial guaranty

 

(12,684)

 

-

 

(8,125)

 

(416)

 

-

 

(21,225)

Corporate and Investing

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

1,762

 

 

 

 

 

 

 

 

 

1,762

Net realized loss on sales of investments

 

154

 

(1,034)

 

 

 

880

 

 

 

-

Fair value adjustment

 

1,453

 

 

 

 

 

(1,453)

 

 

 

-

Operating expenses

 

(648)

 

 

 

 

 

 

 

 

 

(648)

Interest expense

 

(2,304)

 

 

 

 

 

 

 

 

 

(2,304)

Other expense, net of other income

 

591

 

 

 

 

 

 

 

 

 

591

Corporate and investing

 

1,008

 

(1,034)

 

-

 

(573)

 

-

 

(599)

Group total

$

(10,617)

$

(1,034)

$

(8,125)

$

(989)

$

-

$

(20,764)

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