Oxbridge Re (ticker: OXBR) disclosed a net loss of $9.9 million for the year 2023 during its Fourth Quarter and Year End Earnings Call, largely due to fair value changes in its equity investment in Jet.AI Inc. Despite the loss, the company announced significant strategic moves, including the establishment of SurancePlus Inc., a subsidiary focusing on Web3 technology and tokenized real-world assets (RWA), and a business combination with Jet.AI Inc.
Oxbridge Re also highlighted the successful initial offering of its Delta CatRe tokens, which are expected to deliver returns exceeding 45%. The firm is optimistic about its rebranding as a RWA Web3 company and the potential growth of the tokenized asset market.
Key Takeaways
- Oxbridge Re reported a net loss of $9.9 million in 2023.
- The loss was primarily due to fair value changes in the equity investment in Jet.AI.
- The company established a subsidiary, SurancePlus Inc., focused on Web3 and tokenized assets.
- SurancePlus completed a $2.4 million initial offering of Delta CatRe tokens.
- Oxbridge Re became a lead sponsor of Oxbridge Acquisition Corp, which merged with Jet.AI.
- The company listed its common shares and warrants on NASDAQ.
- Oxbridge Re is rebranding to focus on the RWA Web3 sector, with optimism for the tokenized asset market.
Company Outlook
- Oxbridge Re is repositioning to become a prominent player in the RWA Web3 sector.
- The company anticipates significant growth in the tokenized RWA market, potentially reaching $10 trillion.
- The adoption of blockchain in traditional financial sectors is expected to drive this growth.
Bearish Highlights
- The company faced challenges from Hurricane Idalia.
- A net loss of $9.9 million was reported for the year.
Bullish Highlights
- Oxbridge Re believes its tokenized securities can democratize access to reinsurance.
- The initial offering of Delta CatRe tokens suggests strong returns for investors.
Misses
- The financial performance was impacted by the fair value changes in Jet.AI investment.
Q&A Highlights
- The call emphasized the company's innovative approach to reinsurance through tokenization.
- Oxbridge Re expressed confidence in the value its rebranding efforts will bring to shareholders.
- A recording of the call will be available for replay, indicating transparency and accessibility for investors and interested parties.
Oxbridge Re faces a pivotal moment as it navigates losses while betting on the burgeoning tokenized asset industry. The company's strategic initiatives in the Web3 space and its role in the Jet.AI merger reflect a forward-thinking approach to traditional reinsurance. The successful NASDAQ listing and the optimistic outlook on tokenized RWAs suggest that Oxbridge Re is poised to leverage technological advancements to create new investment opportunities in the reinsurance sector. The company's leadership expressed gratitude to its employees, business partners, and investors, underscoring the collaborative effort behind its strategic pivot. As Oxbridge Re embarks on its rebranding journey, the market will closely watch the real-world impact of its tokenized reinsurance securities and the broader adoption of blockchain technology in the financial industry.
InvestingPro Insights
As Oxbridge Re (ticker: OXBR) embraces its strategic shift towards the RWA Web3 sector, several key metrics and insights from InvestingPro provide a deeper understanding of the company's financial health and market performance. Notably, Oxbridge Re's market capitalization stands at a modest $6.34 million, reflecting its position in the market.
An InvestingPro Tip highlights the company's rapid cash burn, which is a critical factor for investors to consider, especially as Oxbridge Re invests in new ventures like SurancePlus Inc. Additionally, despite the company's recent endeavors, it has not been profitable over the last twelve months, emphasizing the importance of the strategic moves Oxbridge Re is making to potentially reverse this trend.
The price to book ratio, as of the last twelve months ending Q3 2023, is 0.74, suggesting that the company's stock is trading below its book value, which could be of interest to value investors. Meanwhile, the strong return over the last month, with a 14.07% price total return, indicates a recent uptick in investor confidence, possibly due to the company's innovative focus on tokenized assets and Web3 technology.
For those interested in further insights and tips, InvestingPro offers more detailed analysis on Oxbridge Re, including additional InvestingPro Tips that can be found at https://www.investing.com/pro/OXBR. Investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a wealth of financial data and expert insights that could inform investment decisions.
Full transcript - Oxbridge Re (OXBR) Q4 2023:
Operator: Good afternoon. Welcome to Oxbridge Re’s Fourth Quarter and Year End 2023 Earnings Call. My name is Shomali 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 April 9th, 2024 on the Investor Information section of the Oxbridge Re website at www.oxbridgere.com. Now, I 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.
Wrendon Timothy: 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. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled Risk Factors contained in our Form 10-K filed with the Securities and Exchange Commission today, March 26 2024. The occurrence of any of these risks and uncertainties could have a material adverse effect on the company's business, financial condition and the volatility of our earnings, which in turn can cause significant market price and trading volume fluctuation for our securities. 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 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?
Jay Madhu: Thank you, Wrendon, and welcome, everyone. Thank you for joining us today. Let me start by saying we are proud of the significant steps we have taken this year to fortify and diversify our business. Our core business remains reinsurance, where we write fully collateralized policies to cover property losses from specific catastrophes. And because we write fully collateralized contracts, we believe we can compete effectively with large carriers. We specialize in underwriting low-frequency, high-severity risks, where we believe sufficient data exists to effectively 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. Building on the stable reinsurance foundation, we begin to diversify our business in 2021 as a lead sponsor of Oxbridge Acquisition Corp., a special purpose acquisition company, or SPAC, focusing on investing in disruptive technologies. In August of 2023, Oxbridge Acquisition successfully completed its business combination with Jet.AI Inc. The company develops software and offers fractional aircraft ownership, jet card, aircraft brokerage and charter to its fleet of private aircraft and those of operating partners. It operates in two segments: software and aviation. The software segment features the B2B CharterGPT app and the B2B Jet.AI operator platform. The CharterGPT app uses natural language processing and machine learning to improve the private jet booking experience. The Jet.AI operator platform operates a suite of stand-alone software products such as ReRoute and DynoFlight to enable FAA Part 135 charter providers to add revenue, maximize efficiency and reduce environmental impact. The aviation segment features jet aircraft fractionalization, jet cards, on free charter, management and buyers brokerage. With the completion of the business combination in August of 2023, the company began trading on the NASDAQ stock exchange. Our interest in Jet.AI is recognized at fair value and in other investments on our balance sheet. In 2023, we expanded our business portfolio by establishing SurancePlus Inc. a new subsidiary focused on Web3 technology. SurancePlus specializes in democratizing tokenized real-world assets or RWAs, offering tokenized reinsurance securities as alternative investment opportunities. These securities leverage blockchain technology to ensure complete transparency and compliance with the SEC guidelines, representing a significant advancement in the digital security market. Consequently, this initiative aims to broaden investor participation, extending opportunities beyond a select group of ultra-high net worth individuals. Crucially, the establishment of SurancePlus was achieved without incurring new debt or diluting equity in our shareholders, reflecting our efficient approach to diversification. We are enthusiastic about the prospects of these new investments and remain committed to keep our stakeholders informed of the progress in the forthcoming quarters. Looking ahead, we intend to reposition Oxbridge as a prominent player, the real-world asset to RWA Web3 sector. Further details of the strategic direction will be shared later in the call. In summary, we maintain a strong sense of optimism regarding the long-term outlook of our core reinsurance business alongside the successful integration of our new ventures, Jet.AI and SurancePlus, as we embrace RWA market more comprehensively. I'll now turn things over to Wrendon and take us through our financial results.
Wrendon Timothy: Thank you, Jay. I would like to remind you that our typical contract period is from June 1 to May 31 of the following year. With respect to net premiums earned, net premiums earned for the year ended December 31, 2023 increased to $1,255,000 from $995,000 in the prior year. The increases are due to the higher rates on reinsurance contracts in force during the quarter and year ended December 31, 2023, when compared with the prior periods. Our net investment and other income rose in 2023 to $303,000, primarily due to higher rates on our money market funds. You can also see that we generated our incentive technology origination, and management fee income of $300,000 in 2023 from our SurancePlus subsidiary. We recorded an unrealized loss of $8.9 million on our other investments, the result of our remeasurement of our investment in Jet.AI at fair value. We also recognized a $38,000 positive change in fair value of our equity securities as of December 31, 2023, well up from the $338,000 negative change in the prior year. All these factors taken together resulted in consolidated total revenues of negative $7.05 million in 2023 compared to $850,000 in the prior year. Total expenses include loss and loss adjustment expenses, policy acquisition costs, and general and admin expenses for the year ending December 31, 2023 with $2.3 million, down from $2.6 million in 2022 due to the triggering of limit loss on two re-insurance contracts in September 2022 as a result of Hurricane Ian, which was partially offset by higher policy acquisition costs and increased general and admin expenses in 2023 as a result of inflationary expense fluctuations and the recognition of previously deferred offering costs in relation to our S-3 registration. We experienced a net loss of $9.9 million, or $1.69 per share in 2023 compared to net loss of $1.8 million, or $0.31 per share in fiscal 2022. The decline in the quarter and year ended December 31, 2023 is primarily due to the fair value changes in the company's equity investment in Jet.AI, as well as increased general expenses associated with the recognition of previously deferred offering costs on its S-3 registration. As we have discussed before on our investor calls, we use various measures to analyze growth and profitability of our business operations. For our reinsurance business, we measure underwriting profitability by examining our loss ratio, acquisition ratio, 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. The loss ratio decreased to 0% for the year ending December 31st, 2023 compared to 107.8% in the prior year, wholly due to the limit losses suffered on two of our reinsurance contracts as a result of Hurricane Ian in September of 2022. Our acquisition cost ratio, which measures operational efficiency, compares policy acquisition costs to net premium earned. Our acquisition cost ratio increased marginally to 11.2% for the year ended December 31, 2023 compared with 11.1% in the prior year. Our expense ratio, which measures operating performance, compares policy acquisition costs and general and admin expenses with net premiums. The expense ratio increased to 185.2% for the year end of December 31, 2023 from 153.1% for the prior year due to higher general and admin expenses in 2023, primarily from the recognition of previous differed expenses associated with companies from S-3 registration, as well as marginal expenses associated with a successful launch of our SurancePlus private placement offering. Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio. The combined ratio decreased to 185.2% for the year ended December 31, 2023 from 260.9% for the prior year. The decrease is due to a decrease in our loss ratio during the year ended December 31, 2023, as a result of no underwriting losses suffered in 2023 when compared with underwriting losses suffered in 2022, as a result of Hurricane Ian. Now turning to our balance sheet, our investment portfolio increased to $680,000 at December 31, 2023 from $642,000 at the prior year end, due primarily to unrealized gaines we experienced due to the improved global capital markets in the year. Other investments decreased due to the negative change in the fair value of our equity investment in Jet.AI. Cash and cash equivalent and restricted cash and cash equivalent decreased to $3.7 million at December 31, 2023 compared to $3.9 million at December 31, 2022. Now I'd like to turn the call back over to Jay to wrap up before we take your questions. Jay?
Jay Madhu: Thank you, Wrendon. As highlighted earlier in today's discussion, we have implemented decisive and substantial measures throughout this year to fortify and diversify our operations. In December 2022, we established SurancePlus, our wholly owned subsidiary, with the objective of tokenizing securities representing fractionalized interest in reinsurance contracts underwritten by a reinsurance subsidiary. In the second quarter of 2023, we successfully concluded the initial offering of these tokens through a $2.4 million private placement. Furthermore, we are pleased to report that investors in our Delta CatRe tokens are poised to achieve returns exceeding 45%, being the initial 42% projected. And despite the challenges posed by Hurricane Idalia, which made landfall as a category three hurricane in 2023. We believe these are the first tokenized reinsurance securities backed by a publicly traded company. SurancePlus is poised to democratize access to reinsurance as an alternative investment avenue, leveraging the inherent advantages of blockchain technology to craft sophisticated digital securities. Our tokens aim to facilitate broader investor participation, ensuring their interests are securely and transparently recorded on the blockchain. These opportunities, previously out of the reach of many investors used to extremely high barriers to entry are now accessible through our innovative approach essentially and while repeating myself, we have democratized access to reinsurance. Subsequent to this, in mid-August 2023, our investment in a special purpose acquisition company, Oxbridge Acquisition Corp, culminated in a business merger with Jet.AI, a company specializing in fractional aircraft ownership, jet card services, aircraft brokerage, and charter services, facilitated by its fleet of private aircraft. Notably, our own wholly owned subsidiary, Oxbridge Reinsurance Limited, assumed the role of lead investor and the stack sponsor. Concurrently with the finalization of business merger, the company successfully listed its common shares and warrants on the NASDAQ. These compelling opportunities not only augmented our business, but also enhanced our risk profile, strategically positioning us to capitalize on the growth within emerging technologies. We are especially enthusiastic about the anticipated value of these investments hold and the benefits they offer to our shareholders. As previously mentioned, we are currently in the process of rebranding Oxbridge as a RWA Web3 focused company, leveraging the significant progress we have achieved this year. Forecast suggests an extraordinary expansion of the tokenized RWA market over the next decade with estimates exceeding $10 trillion. This growth trajectory is fueled by escalating adoption of blockchain technology across various traditional financial sectors including fiat currencies, equities, government bonds and real estate. Endorsements from institutions such as BlackRock (NYSE:BLK) and Bank of America further affirm the transformative potential of tokenization, enhancing financial infrastructure efficiencies, reducing costs, and optimizing supply chains. Moreover, industry analysis from firms such as Boston Consulting Group anticipate a substantial surge in the tokenized asset market, potentially reaching $16 trillion. As pioneers in this evolving landscape, we hold a strong sense of optimism regarding the value our rebranding efforts will unlock for our shareholders. We remain steadfast in our commitment to seizing the opportunities presented by this dynamic market. With that, we are now ready to address any questions you may have. Operator, please provide the appropriate instructions.
Operator: Thank you, sir. At this time, we will be conducting a question-and-answer session. [Operator Instructions] And 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. Mr. Madhu.
Jay Madhu: Thank you for joining us for today's call. Before we conclude, I would like to extend my gratitude to our employees, business partners, and investors for their unwavering support. I particularly want to acknowledge our dedicated Oxbridge team whose extensive experience has been instrumental in navigating and advancing our business amidst these challenging circumstances. We anticipate providing you with further updates of our progress during our next call. And should you have any additional questions, please do not hesitate to reach out to us at any time. Once again, thank you for your time, attention today, and for your ongoing interest in Oxbridge. Operator?
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 today for our presentation. You may now disconnect.
End of Q&A:
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