Results of Operations for the Three Months Ended June 30, 2021 - American Overseas Group Limited Announces Net Loss Of $3.0 Million and Operating Loss of $2.4 Million For the Three Months Ended June 30, 2021

Rhea-AI Summary

AOG reported a consolidated net loss of $3.0 million for Q2 2021, up from $1.4 million in Q2 2020, equating to $63.75 per diluted share. Book value per weighted share declined to $1,003.21 from $1,112.19 year-over-year. The operating loss improved to $2.4 million from $20.7 million. Despite an increase in net earned property and casualty premiums to $5.6 million, loss and adjustment expenses surged to 66.0% of earned premiums. Operating expenses rose to $4.9 million, primarily due to a one-time item related to a personal guarantee contract.

Positive

• Net earned property and casualty premiums increased by $1.5 million from $4.1 million to $5.6 million year-over-year.
• Fee income rose 28.6% from $2.1 million to $2.7 million, boosted by gross written premiums moving from $86.9 million to $114.7 million.

Negative

• Consolidated net loss increased to $3.0 million compared to $1.4 million the previous year.
• Book value per weighted share decreased from $1,112.19 to $1,003.21.
• Loss and adjustment expenses as a percentage of earned premium rose from 51.2% to 66.0%.
• Operating expenses grew by $2.1 million to $4.9 million due to a one-time write-off.

HAMILTON, Bermuda, Sept. 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 $3.0 million, or $63.75 per diluted share, for the three months ended June 30, 2021. This compares to consolidated net loss available to common shareholders of $1.4 million, or $30.97 per diluted share, for the three months ended June 30, 2020. Book value per weighted share at June 30, 2021 was $1,003.21 a decline from the book value per weighted share of $1,112.19 at June 30, 2020.  

For the three months ended June 30, 2021, the Company had an operating loss of $2.4 million, or $51.26 per diluted share, compared to an operating loss of $20.7 million, or $443.09 per diluted share for the three months ended June 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 June 30, net earned property and casualty premiums increased $1.5 million from $4.1 million a year ago to $5.6 million, driven by an increase in existing and new programs. Fee income increased 28.6% from $2.1 million to $2.7 million driven by an increase in gross written premiums year over year of $27.8 million, moving from $86.9 million to $114.7 million. Quarterly direct written premiums were positively impacted by continued expansion of new programs in Texas and other key states as well as overall economic recovery, causing volume increases in the personal auto market. Loss and loss adjustment expenses as a percentage of earned premium increased from 51.2% to 66.0%.

For the three months ended June 30, operating expenses increased $2.1 million from $2.8 million to $4.9 million primarily due to a one-time recognition of items previously held as a receivable against a personal guarantee contract. This contract is associated with a managing general agency program that was discontinued in the first quarter of 2020. Each quarter, the Company evaluates the collectability of the receivable, and has determined there to be a significant risk to collectability in the near term. The Company no longer holds a receivable balance for the matter in question, but continues to vigorously pursue its interests to recover expenses owed under the personal guarantee contract.

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 June 30, 2021 and December 31, 2020
(dollars in thousands)
	June 30, 2021				December 31, 2020
Assets
Investments:
Fixed-maturity securities held as available for sale, at fair value	$	64,496			$	72,642
Equity investments held as available for sale, at fair value		4,626				4,143
Cash and cash equivalents		26,940				24,254
Restricted cash		2,160				548
Accrued investment income		281				355
Premiums receivable		83,127				73,073
Deferred insurance premiums		114,583				101,843
Reinsurance balances receivable, net		199,565				194,914
Deferred policy acquisition costs		4,916				3,590
Intangible assets		4,800				4,800
Goodwill		33,050				33,050
Other assets		3,167				3,767
Total Assets	$	541,711			$	516,979
Liabilities and Equity
Liabilities:
Loss and loss expense reserve	$	198,810			$	192,943
Deferred commission income		3,283				2,482
Unearned premiums		119,370				105,678
Ceded premium payable		77,796				71,989
Payable to general agents		7,165				4,331
Funds withheld		60,660				64,980
Accounts payable and accrued liabilities		10,226				7,922
Notes payable		16,521				16,521
Non-owned interest in VIE		300				300
Interest payable		450				451
Total Liabilities		494,581				467,597
Shareholders' Equity:
Common shares		4,698				4,698
Additional paid-in capital		189,179				189,151
Accumulated other comprehensive income		1,700				1,962
Retained deficit		(154,500	)			(152,482	)
Total Shareholders' Equity		41,077				43,329
Non-controlling interest of preferred shares of subsidiaries		6,053				6,053
Total Equity		47,130				49,382
Total Liabilities and Equity	$	541,711			$	516,979

See Notes to June 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 June,								Six months ended June,
		2021			2020					2021				2020
Revenues
Net premiums earned	$	5,552			$	610			$	10,537			$	4,438
Fee income		2,736				2,084				6,022				5,251
Net investment income		65				92				162				592
Net realized gains on investments		(2	)			1,294				36				1,500
Fair value adjustment		-				2,635				-				2,077
Other income		44				-				77				-
Total revenues		8,395				6,715				16,834				13,860
Expenses
Losses and loss adjustment expenses		3,667				4,107				6,391				5,811
Acquisition expenses		1,799				956				3,575				2,239
Operating expenses		4,888				2,833				7,373				6,690
Other expense		-				(238	)			-				284
Interest expense		451				451				902				902
Total expenses		10,805				8,109				18,241				15,926
Net (loss) available to common shareholders	$	(2,410	)		$	(1,394	)		$	(1,407	)		$	(2,066	)
Income tax (expense)		-				(52	)			(26	)			(216	)
Net (loss) before dividends		(2,410	)			(1,446	)			(1,433	)			(2,282	)
Dividends on preference shares of subsidiary		(585	)			-				(585	)			-
Net (loss) available to common shareholders	$	(2,995	)		$	(1,446	)		$	(2,018	)		$	(2,282	)
Net (loss) per common share:
Basic	$	(63.75	)		$	(31.18	)		$	(42.96	)		$	(49.29	)
Diluted		(63.75	)			(30.97	)			(42.96	)			(48.96	)
Weighted-average number of common shares outstanding:
Basic		46,979				46,379				46,979				46,295
Diluted		46,979				46,689				46,979				46,605

See Notes to June 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 June 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
Property and casualty:
Net premiums earned	$	5,552												$	5,552
Losses and loss adjustment expenses		(3,667	)												(3,667	)
Acquisition expenses		(1,799	)												(1,799	)
Property/Casualty Underwriting Income		86													86
Fee income		2,736													2,736
Operating expenses		(4,468	)												(4,468	)
Income tax		-													-
Property and casualty		(1,646	)		-			-		-			-		(1,646	)
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		65													65
Net realized gain/(loss)		(2	)		2										-
Operating expenses		(420	)												(420	)
Interest expense		(451	)												(451	)
Other income, net of other expense		44													44
Corporate and investing		(764	)		2			-		-			-		(762	)
Group total	$	(2,410	)	$	2		$	-	$	-		$	-	$	(2,408	)
(dollars in thousands)	Three months ended June 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
Property and casualty:
Net premiums earned	$	4,120												$	4,120
Losses and loss adjustment expenses		(2,111	)												(2,111	)
Acquisition expenses		(1,085	)												(1,085	)
Property/Casualty Underwriting Income		924													923
Fee income		2,084													2,084
Operating expenses		(2,483	)												(2,483	)
Income tax		(53	)												(53	)
Property and casualty		472			-			-		-			-		472
Financial guaranty:
Net premiums earned		(3,510	)							3,510					-
Net change in fair value of credit derivatives		-						-							-
Losses and loss adjustment expenses		(1,995	)							(18,657	)				(20,652	)
Acquisition expenses		129								(129	)				-
Operating expenses		37													37
Financial guaranty		(5,339	)		-			-		(15,276	)		-		(20,615	)
Corporate and Investing
Net investment income		92													92
Net realized gain/(loss)		1,293			(20,793	)				19,500					-
Fair value adjustment		2,635								(2,635	)				-
Operating expenses		(386	)												(386	)
Interest expense		(451	)												(451	)
Other income, net of other expense		238													238
Corporate and investing		3,421			(20,793	)		-		16,865			-		(507	)
Group total	$	(1,446	)	$	(20,793	)	$	-	$	1,589		$	-	$	(20,650	)

AMERICAN OVERSEAS GROUP LTD.
NET INCOME AND OPERATING INCOME BY SEGMENT
(dollars in thousands)	Six months ended June 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
Property and casualty:
Net premiums earned	$	10,537														$	10,537
Losses and loss adjustment expenses		(6,391	)														(6,391	)
Acquisition expenses		(3,575	)														(3,575	)
Property/Casualty Underwriting Income		571															571
Fee income		6,022															6,022
Operating expenses		(6,745	)														(6,745	)
Income tax		(26	)														(26	)
Property and casualty		(178	)		-			-			-			-			(178	)
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		162															162
Net realized gain/(loss)		36			(36	)											-
Operating expenses		(628	)														(628	)
Interest expense		(902	)														(902	)
Other income, net of other expense		77															77
Corporate and investing		(1,255	)		(36	)		-			-			-			(1,291	)
Group total	$	(1,433	)	$	(36	)	$	-		$	-		$	-		$	(1,469	)
(dollars in thousands)	Six months ended June 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
Property and casualty:
Net premiums earned	$	7,951														$	7,951
Losses and loss adjustment expenses		(4,234	)														(4,234	)
Acquisition expenses		(2,370	)														(2,370	)
Property/Casualty Underwriting Income		1,347															1,347
Fee income		5,251															5,251
Operating expenses		(5,625	)											362			(5,263	)
Income tax		(217	)											(76	)		(293	)
Property and casualty		756			-			-			-			286			1,042
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		(67	)														(67	)
Financial guaranty		(5,024	)		-			(2	)		(15,996	)		-			(21,022	)
Corporate and Investing
Net investment income		592															592
Net realized gain/(loss)		1,500			(21,000	)					19,500						-
Fair value adjustment		2,077									(2,077	)					-
Operating expenses		(998	)														(998	)
Interest expense		(902	)														(902	)
Other income, net of other expense		(283	)														(283	)
Corporate and investing		1,986			(21,000	)		-			17,423			-			(1,591	)
Group total	$	(2,282	)	$	(21,000	)	$	(2	)	$	1,427		$	286		$	(21,571	)

FAQ

What was the consolidated net loss for AOG in Q2 2021?

AOG reported a consolidated net loss of $3.0 million for Q2 2021.

How much did the book value per weighted share decline for AOG?

The book value per weighted share declined from $1,112.19 to $1,003.21.

What were the net earned property and casualty premiums for AOG in Q2 2021?

Net earned property and casualty premiums were $5.6 million in Q2 2021.

By how much did AOG's fee income increase year-over-year?

AOG's fee income increased by 28.6% from $2.1 million to $2.7 million.

What was the increase in operating expenses for AOG in Q2 2021?

Operating expenses increased by $2.1 million to $4.9 million in Q2 2021.