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Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Results of Operations for the Year Ended December 31, 2020 - American Overseas Group Limited ...

June 25, 2021 GMT

HAMILTON, Bermuda, June 25, 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 $5.0 million, or $106.53 per diluted share, for the year ended December 31, 2020. This compares to consolidated net loss available to common shareholders of $3.7 million, or $80.13 per diluted share, for the year ended December 31, 2019.

The result for the year was heavily impacted by losses in the Company’s financial guaranty segment related to a commutation of the remaining portfolio of financial guaranty reinsurance business it had assumed from Assured Guaranty Municipal Corp (“AGMC”). Book value per share at December 31, 2020 was $1,062.22 a decline from the book value per share of $1,159.08 at December 31, 2019.  

For the year ended December 31, 2020, the Company had an operating loss of $22.4 million, or $476.64 per diluted share, compared to an operating loss of $9.1 million, or $196.78 per diluted share for the year ended December 31, 2019. The financial guaranty segment produced a $22.8 million operating loss for 2020 which was $11.8 million above the prior year operating loss of $11.0 million. In April of 2020, the financial guaranty reinsurance business at AORE was eliminated as a result of the commutation with AGMC. The aggregate outstanding par value of the reinsurance portfolio commuted was $345.0 million. This commutation was the primary driver of the operating loss of $22.8 million in 2020, compared to operating losses of $11.0 million in 2019. As of December 31, 2019, outstanding par within the financial guaranty segment was $362 million.   As of December 31, 2020, AORE no longer has any financial guaranty exposure remaining.

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Operating income for the property and casualty segment in 2020 was $1.2 million, compared to the $0.9 million operating income in 2019 for this segment.  Despite lower written premiums in 2020 due to temporary business contractions related to COVID-19, net earned property and casualty premiums increased $7.0 million from $8.8 million in 2019 to $15.8 million in 2020, driven both by a full year of new programs in key states outside of Texas as well as increased reinsurance participation on underlying non standard auto programs in Texas. Loss and loss adjustment expenses as a percentage of earned premium increased from 41.9% to 56.5% primarily due to both lower favorable prior year loss and loss adjustment expense development and higher loss and loss adjustment expense on current accident year claims, however underwriting income increased from $0.4 million to $1.9 million driven by higher earned premiums. Fee income decreased from $11.6 million to $9.9 million as underlying direct written premium volumes declined primarily impacted by temporary business contractions related to COVID-19.

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Operating expenses decreased $0.8 million or 5.9% from $13.6 million in 2019 to $12.8 million in 2020 mainly due to savings in the financial guaranty segment subsequent to the April 2020 exit from line of business.    

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 December 31, 2020 and December 31, 2019
  (dollars in thousands)
               
          December 31, 2020   December 31, 2019
Assets        
    Investments:        
      Fixed-maturity securities held as available for sale, at fair value   $ 72,642     $ 129,748  
      Equity investments held as available for sale, at fair value     4,143       1,181  
    Cash and cash equivalents     24,254       22,602  
    Restricted cash     548       10,557  
    Accrued investment income     355       675  
    Premiums receivable     73,073       81,000  
    Deferred insurance premiums     101,843       125,728  
    Reinsurance balances receivable, net     194,914       210,405  
    Salvage and subrogation recoverable     -       386  
    Deferred policy acquisition costs     3,590       515  
    Intangible assets     4,800       4,800  
    Goodwill     33,050       33,050  
    Other assets     3,767       3,184  
      Total Assets   $ 516,979     $ 623,831  
                       
                       
Liabilities and Equity                
  Liabilities:                
    Loss and loss expense reserve   $ 192,943     $ 263,686  
    Deferred commission income     2,482       -  
    Unearned premiums     105,678       128,793  
    Ceded premium payable     71,989       89,078  
    Payable to general agents     4,331       3,087  
    Funds withheld     64,980       52,794  
    Accounts payable and accrued liabilities     7,922       5,071  
    Redeemable preference shares: ($0.10 par value and $1,000 redemption value;
authorized shares - 75,000; issued and outstanding shares - nil and 38,600 at
June 30, 2020 and December 31, 2019, respectively)
    -       7,292  
    Derivative liabilities     -       10  
    Notes payable     16,521       16,521  
    Non-owned interest in VIE     300       300  
    Interest payable     451       451  
    Fair value adjustment     -       2,901  
    Deferred tax liability     -       322  
      Total Liabilities     467,597       570,306  
                       
  Shareholders' Equity:                
    Common shares     4,698       4,618  
    Additional paid-in capital     189,151       189,002  
    Accumulated other comprehensive income     1,962       1,323  
    Retained deficit     (152,482 )     (147,471 )
      Total Shareholders' Equity     43,329       47,472  
    Non-controlling interest of preferred shares of subsidiaries     6,053       6,053  
    Total Equity     49,382       53,525  
                       
                       
      Total Liabilities and Equity   $ 516,979     $ 623,831  
               
               
    See Notes to 2020 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com
               
American Overseas Group Limited
Consolidated Statements of Operations
(unaudited)
For twelve months ended December 31, 2020 and 2019
(dollars in thousands, except share and per share amounts)
               
               
        Twelve Months ended December 31,
            2020       2019  
  Revenues        
               
    Net premiums earned   $ 12,323     $ (5,423 )
    Fee income     9,946       11,591  
               
  Change in fair value of credit derivatives        
    Realized gains and other settlements     2       74  
    Unrealized gains     -       191  
               
      Net change in fair value of credit derivatives     2       265  
               
    Net investment income     709       2,447  
    Net realized gains on investments     1,580       1,824  
    Fair value adjustment     (173 )     10,586  
    Other income     323       383  
               
      Total revenues     24,710       21,673  
               
  Expenses        
    Losses and loss adjustment expenses     10,522       7,474  
    Acquisition expenses     4,837       1,627  
    Operating expenses     12,802       13,605  
    Other expense     78       -  
    Interest expense     1,803       1,803  
               
      Total expenses     30,042       24,509  
               
               
Net (loss) available to common shareholders   $ (5,332 )   $ (2,836 )
    Income tax benefit (expense)     322       (287 )
               
Net (loss) before dividends     (5,010 )     (3,123 )
    Dividends on preference shares of subsidiary     -       (585 )
               
               
Net (loss) available to common shareholders   $ (5,010 )   $ (3,708 )
               
               
  Net (loss) per common share:        
  Basic   $ (107.76 )   $ (80.34 )
  Diluted     (106.53 )     (80.13 )
               
  Weighted-average number of common shares outstanding:        
  Basic     46,490       46,161  
  Diluted     47,027       46,281  
               
  See Notes to 2020 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) December 31, 2020
  Net Income Available
to Common
Shareholders
Net Realized Loss
on Sales of
Investments
Net Change in
Fair Value of
Credit Derivatives
Fair Value
Adjustments
Operating Income
Property and casualty:          
           
Net premiums earned $ 15,836         $ 15,836  
Losses and loss adjustment expenses   (8,945 )         (8,945 )
Acquisition expenses   (4,968 )         (4,968 )
Property/Casualty Underwriting Income   1,923           1,923  
           
Fee income   9,946           9,946  
Operating expenses   (11,040 )         (11,040 )
Income tax   322           322  
Property and casualty   1,151     -     -     -     1,151  
           
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   130         (153 )   (23 )
Operating expenses   (1,825 )         (1,825 )
Financial guaranty   (6,783 )   -     (2 )   (15,996 )   (22,781 )
           
Corporate and Investing          
           
Net investment income   709           709  
Net realized gain/(loss)   1,580     (29,814 )     28,234     -  
Fair value adjustment   (173 )       173     -  
Gain on the sale of real estate   323           323  
Operating expenses   64           64  
Interest expense   (1,803 )         (1,803 )
Other expense, net of other income   (78 )         (78 )
Corporate and investing   622     (29,814 )   -     28,407     (785 )
           
Group total $ (5,010 ) $ (29,814 ) $ (2 ) $ 12,411   $ (22,415 )
           
 
AMERICAN OVERSEAS GROUP LTD.
           
NET INCOME AND OPERATING INCOME BY SEGMENT
     
           
           
(dollars in thousands) December 31, 2019
  Net Income Available
to Common
Shareholders
Net Realized Loss
on Sales of
Investments
Net Change in
Fair Value of
Credit Derivatives
Fair Value
Adjustments
Operating Income
Property and casualty:          
           
Net premiums earned $ 8,824         $ 8,824  
Losses and loss adjustment expenses   (3,701 )         (3,701 )
Acquisition expenses   (4,752 )         (4,752 )
Property/Casualty Underwriting Income   371           371  
           
Fee income   11,591           11,591  
Operating expenses   (10,741 )         (10,741 )
Amortization expense   -           -  
Income tax   (287 )         (287 )
Property and casualty   934     -     -     -     934  
           
Financial guaranty:          
           
Net premiums earned   (14,247 )       13,129     (1,118 )
Net change in fair value of credit derivatives   265       (191 )     74  
Losses and loss adjustment expenses   (3,773 )       (3,644 )   (7,417 )
Acquisition expenses   3,125         (2,868 )   257  
Operating expenses   (2,753 )         (2,753 )
Financial guaranty   (17,383 )   -     (191 )   6,617     (10,957 )
           
Corporate and Investing          
           
Net investment income   2,447           2,447  
Net realized gain/(loss)   1,824     (1,824 )       -  
Fair value adjustment   10,586         (10,586 )   -  
Operating expenses   (111 )         (111 )
Interest expense   (1,803 )         (1,803 )
Other income, net of other expense   383           383  
Corporate and investing   13,326     (1,824 )   -     (10,586 )   916  
           
Group total $ (3,123 ) $ (1,824 ) $ (191 ) $ (3,969 ) $ (9,107 )