Results of Operations for the Three Months Ended September 30, 2021 - American Overseas Group Limited Announces Net Loss Of $1.8 Million and Operating Loss of $1.8 Million For the Three Months Ended September 30, 2021

Rhea-AI Summary

American Overseas Group Limited reported a consolidated net loss of $1.8 million, or $37.38 per diluted share, for Q3 2021, a stark contrast to a net income of $0.5 million in Q3 2020. Book value per share decreased from $1,126.51 to $959.06 year-over-year. Operating loss was also reported at $1.8 million, compared to an operating income of $0.6 million previously. Although net earned property and casualty premiums rose to $5.4 million, loss expenses surged from 55.1% to 71.2% of earned premiums. Operating expenses increased significantly due to higher taxes and the return of marketing activities.

Positive

• Net earned property and casualty premiums increased by $1.1 million to $5.4 million.
• Gross written premiums rose by $4.2 million from $96.2 million to $100.4 million.

Negative

• Consolidated net loss of $1.8 million, compared to net income of $0.5 million in the prior year.
• Operating loss of $1.8 million, compared to an operating income of $0.6 million previously.
• Book value per share dropped from $1,126.51 to $959.06.
• Loss and loss adjustment expenses increased significantly to 71.2% of earned premium.

HAMILTON, Bermuda, Dec. 30, 2021 (GLOBE NEWSWIRE) -- American Overseas Group Limited BSX: AORE.BH) (Pink Sheets: AOREF.PK) (“AOG” or the “Company”) today reported consolidated net loss available to common shareholders of $1.8 million, or $37.38 per diluted share, for the three months ended September 30, 2021. This compares to consolidated net income available to common shareholders of $0.5 million, or $11.58 per diluted share, for the three months ended September 30, 2020. Book value per weighted share at September 30, 2021 was $959.06, a decline from the book value per weighted share of $1,126.51 at September 30, 2020.  

For the three months ended September 30, 2021, the Company had an operating loss of $1.8 million, or $37.68 per diluted share, compared to operating income of $0.6 million, or $11.90 per diluted share for the three months ended September 30, 2020. The financial guaranty segment ended in April of 2020 due to a commutation of the remaining portfolio of financial guaranty reinsurance business it had assumed from Assured Guaranty Municipal Corp (“AGMC”). The aggregate outstanding par value of the reinsurance portfolio commuted was $345.0 million.

For the three months ended September 30, net earned property and casualty premiums increased $1.1 million from $4.3 million a year ago to $5.4 million, driven by an increase in existing and new programs. Fee income remained constant at $2.6 million quarter over quarter while gross written premiums increased $4.2 million, moving from $96.2 million to $100.4 million. Quarterly direct written premiums were positively impacted by continued expansion of new programs, rate increases, and overall economic recovery. Loss and loss adjustment expenses as a percentage of earned premium increased from 55.1% to 71.2%.  

For the three months ended September 30, operating expenses increased $1.1 million from $2.6 million to $3.7 million primarily due to a $0.9 million increase in taxes, licenses and fees associated with program business written in Louisiana. For prior year quarterly results, the Company received credits associated with these expenses from its program partner. Additionally, the Company recognized latent charges related to current year to date expenses associated with Louisiana taxes, licenses and fees in the current quarter. The remaining $0.2 million increase in operating expense for the quarter is driven primarily by marketing activity returning to more normal levels in 2021 compared to 2020 expenditure levels, which were impacted by COVID related restrictions.

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.

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 it measures 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

info@aoreltd.com

American Overseas Group Limited
Consolidated Balance Sheets
(unaudited)
As at September 30, 2021 and December 31, 2020
(dollars in thousands)
								September 30, 2021					December 31, 2020
Assets
		Investments:
			Fixed-maturity securities held as available for sale, at fair value					$	92,473				$	72,642
			Equity investments held as available for sale, at fair value						3,574					4,143
		Cash and cash equivalents							37,544					24,254
		Restricted cash							3,968					548
		Accrued investment income							443					355
		Premiums receivable							80,015					73,073
		Deferred insurance premiums							108,584					101,843
		Reinsurance balances receivable, net							211,946					194,914
		Deferred policy acquisition costs							5,045					3,590
		Intangible assets							4,800					4,800
		Goodwill							33,050					33,050
		Other assets							3,708					3,767
			Total Assets					$	585,150				$	516,979
Liabilities and Equity
	Liabilities:
		Loss and loss expense reserve						$	204,340				$	192,943
		Deferred commission income							3,442					2,482
		Unearned premiums							113,425					105,678
		Ceded premium payable							82,833					71,989
		Payable to general agents							7,576					4,331
		Funds withheld							100,333					64,980
		Accounts payable and accrued liabilities							10,873					7,922
		Notes payable							16,521					16,521
		Non-owned interest in VIE							300					300
		Interest payable							451					451
			Total Liabilities						540,094					467,597
	Shareholders' Equity:
		Common shares							4,698					4,698
		Additional paid-in capital							189,179					189,151
		Accumulated other comprehensive income							1,382					1,962
		Retained deficit							(156,256	)				(152,482	)
			Total Shareholders' Equity						39,003					43,329
		Non-controlling interest of preferred shares of subsidiaries							6,053					6,053
		Total Equity							45,056					49,382
			Total Liabilities and Equity					$	585,150				$	516,979
		See Notes to September 30, 2021 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com

American Overseas Group Limited
	Consolidated Statements of Operations
	(unaudited)
	(dollars in thousands, except share and per share amounts)
								Three months ended September,								Nine months ended September,
									2021				2020				2021				2020
		Revenues
			Net premiums earned					$	5,397			$	4,337			$	15,935			$	8,775
			Fee income						2,644				2,645				8,667				7,896
			Net change in fair value of credit derivatives						-				-				-				2
			Net investment income						46				60				208				652
			Net realized gains on investments						14				8				50				1,508
			Fair value adjustment						-				(23	)			-				2,054
			Other income						28				-				105				-
				Total revenues					8,130				7,027				24,965				20,887
		Expenses
			Losses and loss adjustment expenses						3,841				2,389				10,232				8,200
			Acquisition expenses						1,931				1,537				5,506				3,775
			Operating expenses						3,663				2,603				11,038				9,294
			Other expense						-				46				-				330
			Interest expense						451				451				1,352				1,352
				Total expenses					9,886				7,026				28,128				22,951
	Net (loss) income available to common shareholders							$	(1,756	)		$	1			$	(3,163	)		$	(2,064	)
			Income tax (expense)						-				539				(26	)			322
	Net (loss) income before dividends								(1,756	)			540				(3,189	)			(1,742	)
			Dividends on preference shares of subsidiary						-				-				(585	)			-
	Net (loss) income available to common shareholders							$	(1,756	)		$	540			$	(3,774	)		$	(1,742	)
		Net (loss) income per common share:
		Basic						$	(37.38	)		$	11.64			$	(80.34	)		$	(37.61	)
		Diluted							(37.38	)			11.58				(80.34	)			(37.17	)
		Weighted-average number of common shares outstanding:
		Basic							46,979				46,386				46,979				46,326
		Diluted							46,979				46,620				46,979				46,870
See Notes to September 30, 2021 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com

	AMERICAN OVERSEAS GROUP LTD.
	NET INCOME AND OPERATING INCOME BY SEGMENT
	(dollars in thousands)	Three months ended September 30, 2021																Nine months ended September 30, 2021
		Net Income Available to Common Shareholders			Net Realized (Gain)/Loss on Sales of Investments			Net Change in Fair Value of Credit Derivatives		Fair Value Adjustments		Restructuring Charges		Operating Income/(Loss)				Net Income Available to Common Shareholders			Net Realized (Gain)/Loss on Sales of Investments			Net Change in Fair Value of Credit Derivatives			Fair Value Adjustments			Restructuring Charges			Operating Income/(Loss)
	Property and casualty:
	Net premiums earned	$	5,397											$	5,397			$	15,935														$	15,935
	Losses and loss adjustment expenses		(3,841	)											(3,841	)			(10,232	)														(10,232	)
	Acquisition expenses		(1,931	)											(1,931	)			(5,506	)														(5,506	)
	Property/Casualty Underwriting Income		(375	)											(375	)			197															197
	Fee income		2,644												2,644				8,667															8,667
	Operating expenses		(3,307	)											(3,307	)			(10,052	)														(10,052	)
	Income tax		-												-				(26	)														(26	)
	Property and casualty		(1,038	)		-			-		-		-		(1,038	)			(1,214	)		-			-			-			-			(1,214	)
	Financial guaranty:
	Net premiums earned		-												-				-															-
	Net change in fair value of credit derivatives		-												-				-															-
	Losses and loss adjustment expenses		-												-				-															-
	Acquisition expenses		-												-				-															-
	Operating expenses		-												-				-															-
	Financial guaranty		-			-			-		-		-		-				-			-			-			-			-			-
	Corporate and Investing
	Net investment income		46												46				208															208
	Net realized gain/(loss)		14			(14	)								-				50			(50	)											-
	Operating expenses		(356	)											(356	)			(986	)														(986	)
	Interest expense		(451	)											(451	)			(1,352	)														(1,352	)
	Other income, net of other expense		29												29				105															105
	Corporate and investing		(718	)		(14	)		-		-		-		(732	)			(1,975	)		(50	)		-			-			-			(2,025	)
	Group total	$	(1,756	)	$	(14	)	$	-	$	-	$	-	$	(1,770	)		$	(3,189	)	$	(50	)	$	-		$	-		$	-		$	(3,239	)
	(dollars in thousands)	Three months ended September 30, 2020																Nine months ended September 30, 2020
		Net Income Available to Common Shareholders			Net Realized (Gain)/Loss on Sales of Investments			Net Change in Fair Value of Credit Derivatives		Fair Value Adjustments		Restructuring Charges		Operating Income/(Loss)				Net Income Available to Common Shareholders			Net Realized (Gain)/Loss on Sales of Investments			Net Change in Fair Value of Credit Derivatives			Fair Value Adjustments			Restructuring Charges			Operating Income/(Loss)
	Property and casualty:
	Net premiums earned	$	4,337											$	4,337			$	12,288														$	12,288
	Losses and loss adjustment expenses		(2,388	)											(2,388	)			(6,622	)														(6,622	)
	Acquisition expenses		(1,536	)											(1,536	)			(3,906	)														(3,906	)
	Property/Casualty Underwriting Income		413												413				1,760															1,760
	Fee income		2,645												2,645				7,896															7,896
	Operating expenses		(2,200	)											(2,200	)			(7,383	)											362			(7,021	)
	Income tax		539												539				322												(76	)		246
	Property and casualty		1,397			-			-		-		-		1,397				2,595			-			-			-			286			2,881
	Financial guaranty:
	Net premiums earned		-												-				(3,513	)								3,703						190
	Net change in fair value of credit derivatives		-												-				2						(2	)								-
	Losses and loss adjustment expenses		-												-				(1,577	)								(19,546	)					(21,123	)
	Acquisition expenses		-												-				131									(153	)					(22	)
	Operating expenses		-												-				(509	)														(509	)
	Financial guaranty		-			-			-		-		-		-				(5,466	)		-			(2	)		(15,996	)		-			(21,464	)
	Corporate and Investing
	Net investment income		60												60				652															652
	Net realized gain/(loss)		8			(8	)								-				1,508			(21,008	)					19,500						-
	Fair value adjustment		(23	)							23				-				2,054									(2,054	)					-
	Operating expenses		(403	)											(403	)			(1,402	)														(1,402	)
	Interest expense		(451	)											(451	)			(1,352	)														(1,352	)
	Other income, net of other expense		(48	)											(48	)			(331	)														(331	)
	Corporate and investing		(857	)		(8	)		-		23		-		(842	)			1,129			(21,008	)		-			17,446			-			(2,433	)
	Group total	$	540		$	(8	)	$	-	$	23	$	-	$	555			$	(1,742	)	$	(21,008	)	$	(2	)	$	1,450		$	286		$	(21,016	)

FAQ

What was the net loss reported by American Overseas Group Limited for Q3 2021?

The net loss was $1.8 million, or $37.38 per diluted share.

How did the book value per share change from Q3 2020 to Q3 2021 for AOREF?

The book value per share decreased from $1,126.51 to $959.06.

What were the changes in operating income for AOREF in Q3 2021 compared to Q3 2020?

Operating income declined from $0.6 million to an operating loss of $1.8 million.

How much did net earned property and casualty premiums increase for AOREF in Q3 2021?

Net earned property and casualty premiums increased by $1.1 million to $5.4 million.

What significant expenses contributed to the increase in operating expenses for AOREF in Q3 2021?

The increase was primarily due to a $0.9 million rise in taxes, licenses, and fees related to business written in Louisiana.