Results of Operations for the Year Ended December 31, 2021 - American Overseas Group Limited Announces Net Loss Of $5.5 Million and Operating Loss of $5.0 Million For the Year Ended December 31, 2021 - Insurance News

HAMILTON, Bermuda, April 29, 2022 (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 $5.5 million, or $117.07 per diluted share, for the year ended December 31, 2021. This compares to consolidated net loss available to common shareholders of $5.0 million, or $107.24 per diluted share, for the year ended December 31, 2020. Book value per weighted share at December 31, 2021 was $916.83, a decline from the book value per weighted share of $1,062.22 at December 31, 2020.

For the year ended December 31, 2021, the Company had an operating loss of $5.0 million, or $105.79 per diluted share, compared to operating loss of $22.1 million, or $473.66 per diluted share for the year ended December 31, 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 year ended December 31, 2021, net earned property and casualty premiums increased $5.0 million from $15.8 million a year ago to $20.8 million, driven by an increase in existing and new programs. Fee income increased $1.3 million from $9.9 million a year ago to $11.2 million while gross written premiums increased $55.6 million, moving from $364.9 million to $420.5 million. 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 56.5% to 69.1%.

For the year ended December 31, 2021, operating expenses increased $1.4 million from $12.8 million to $14.2 million due to several items. The Company incurred a $1.9 million increase in taxes, licenses and fees associated with program business written in Louisiana, of which $0.9 million of that increase was related to business written in the prior year, for which the Company received credits associated from its program partner in the prior year. Additionally, the Company recognized a one-time $1.2 million charge related to 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. While the Company no longer holds a receivable for the matter in question it continues to vigorously pursue its interests to recover expenses owed under the personal guarantee contract. Offsetting these non-recurring items were decreases in personnel costs of $1.3 million, depreciation of $0.2 million, and consulting and outsourcing costs of $0.2 million. The Company completed multiple steps that began in the second quarter of 2020 to reorganize and streamline its operations in mid 2021.

For the three months ended December 31, 2021, the Company had an operating loss of $1.7 million, or $36.85 per diluted share, compared to an operating loss of $1.1 million, or $23.58 per diluted share for the three months ended December 31, 2020.

For the three months ended December 31, 2021, net earned property and casualty premiums increased $1.4 million from $3.5 million a year ago to $4.9 million, driven by an increase in existing and new programs. Fee income increased $0.5 million from $2.1 million a year ago to $2.6 million while gross written premiums increased $18.1 million, moving from $83.4 million to $101.5 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 65.5% to 84.8% as loss costs significantly increased throughout 2021 due to both frequency and severity pressures.

For the three months ended December 31, 2021, operating expenses decreased $0.3 million from $3.5 million to $3.2 million primarily driven by reduced personnel costs.

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

[email protected]

American Overseas Group Limited
Consolidated Balance Sheets
(unaudited)
As at December 31, 2021 and December 31, 2020
(dollars in thousands)


	December 31, 2021			December 31, 2020
Assets

Investments:
Fixed-maturity securities held as available for sale, at fair value	$	102,678		$	72,642
Equity investments held as available for sale, at fair value		3,781			4,143
Cash and cash equivalents		31,908			24,254
Restricted cash		4,440			548
Accrued investment income		553			355
Premiums receivable		76,626			73,073
Deferred insurance premiums		108,904			101,843
Reinsurance balances receivable, net		223,982			194,914
Deferred policy acquisition costs		4,588			3,590
Intangible assets		4,800			4,800
Goodwill		33,050			33,050
Other assets		3,166			3,767
Total Assets	$	598,476		$	516,979


Liabilities and Equity

Liabilities:
Loss and loss expense reserve	$	215,642		$	192,943
Deferred commission income		3,210			2,482
Unearned premiums		113,423			105,678
Ceded premium payable		82,059			71,989
Payable to general agents		7,121			4,331
Funds withheld		104,257			64,980
Accounts payable and accrued liabilities		12,420			7,922
Notes payable		16,521			16,521
Non-owned interest in VIE		300			300
Interest payable		451			451
Total Liabilities		555,404			467,597

Shareholders' Equity:
Common shares		4,698			4,698
Additional paid-in capital		189,179			189,151
Accumulated other comprehensive income		1,124			1,962
Retained deficit		(157,982	)		(152,482	)
Total Shareholders' Equity		37,019			43,329
Non-controlling interest of preferred shares of subsidiaries		6,053			6,053
Total Equity		43,072			49,382


Total Liabilities and Equity	$	598,476		$	516,979


See Notes to December 31, 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 December 31,						Twelve Months ended December 31,
	2021			2020			2021			2020
Revenues

Net premiums earned	$	4,905		$	3,548		$	20,840		$	12,323
Fee income		2,582			2,050			11,248			9,946

Net change in fair value of credit derivatives		-			-			-			2

Net investment income		232			57			439			709
Net realized gains on investments		5			71			55			1,580
Fair value adjustment		-			(2,227	)		-			(173	)
Other income		22			323			128			323


Total revenues		7,746			3,822			32,710			24,710

Expenses
Losses and loss adjustment expenses		4,161			2,322			14,392			10,522
Acquisition expenses		1,624			1,062			7,130			4,837
Operating expenses		3,200			3,508			14,238			12,802
Other expense		-			(252	)		-			78
Interest expense		451			451			1,803			1,803

Total expenses		9,436			7,091			37,563			30,042


Net (loss) available to common shareholders	$	(1,690	)	$	(3,269	)	$	(4,853	)	$	(5,332	)
Income tax (expense) benefit		(36	)		-			(62	)		322

Net (loss) before dividends		(1,726	)		(3,269	)		(4,915	)		(5,010	)
Dividends on preference shares of subsidiary		-			-			(585	)		-


Net (loss) available to common shareholders	$	(1,726	)	$	(3,269	)	$	(5,500	)	$	(5,010	)


Net (loss) per common share:
Basic	$	(36.73	)	$	(69.58	)	$	(117.07	)	$	(107.76	)
Diluted		(36.73	)		(69.24	)		(117.07	)		(107.24	)

Weighted-average number of common shares outstanding:
Basic		46,979			46,979			46,979			46,490
Diluted		46,979			47,208			46,979			46,719

See Notes to December 31, 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 December 31, 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)
Property and casualty:

Net premiums earned	$	4,905											$	4,905
Losses and loss adjustment expenses		(4,161	)											(4,161	)
Acquisition expenses		(1,624	)											(1,624	)
Property/Casualty Underwriting Income		(880	)											(880	)

Fee income		2,582												2,582
Operating expenses		(2,958	)											(2,958	)
Income tax		(36	)											(36	)
Property and casualty		(1,292	)		-			-		-		-		(1,292	)

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		232												232
Net realized gain/(loss)		5			(5	)								-
Operating expenses		(242	)											(242	)
Interest expense		(451	)											(451	)
Other income, net of other expense		22												22
Corporate and investing		(434	)		(5	)		-		-		-		(439	)

Group total	$	(1,726	)	$	(5	)	$	-	$	-	$	-	$	(1,731	)


AMERICAN OVERSEAS GROUP LTD.
NET INCOME AND OPERATING INCOME BY SEGMENT


(dollars in thousands)	Three months ended December 31, 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)
Property and casualty:

Net premiums earned	$	3,547											$	3,547
Losses and loss adjustment expenses		(2,323	)											(2,323	)
Acquisition expenses		(1,062	)											(1,062	)
Property/Casualty Underwriting Income		162												162

Fee income		2,050												2,050
Operating expenses		(1,580	)											(1,580	)
Income tax		(0	)											(0	)
Property and casualty		632			-			-		-				632

Financial guaranty:

Net premiums earned		-								-				-
Net change in fair value of credit derivatives		-								-				-
Losses and loss adjustment expenses		-								-				-
Acquisition expenses		(1	)							1				-
Operating expenses		(1,316	)							-				(1,316	)
Financial guaranty		(1,317	)		-			-		1		-		(1,316	)

Corporate and Investing

Net investment income		57												57
Net realized gain/(loss)		72			(8,806	)				8,735				-
Fair value adjustment		(2,227	)							2,227				-
Gain on the sale of real estate		323												323
Operating expenses		(611	)											(611	)
Interest expense		(451	)											(451	)
Other income, net of other expense		253												253
Corporate and investing		(2,584	)		(8,806	)		-		10,962		-		(429	)

Group total	$	(3,269	)	$	(8,806	)	$	-	$	10,962	$	-	$	(1,113	)

AMERICAN OVERSEAS GROUP LTD.
NET INCOME AND OPERATING INCOME BY SEGMENT


(dollars in thousands)	Twelve months ended December 31, 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)
Property and casualty:

Net premiums earned	$	20,840														$	20,840
Losses and loss adjustment expenses		(14,392	)														(14,392	)
Acquisition expenses		(7,130	)														(7,130	)
Property/Casualty Underwriting Income		(682	)														(682	)

Fee income		11,248															11,248
Operating expenses		(13,010	)														(13,010	)
Income tax		(62	)														(62	)
Property and casualty		(2,506	)		-			-			-			-			(2,506	)

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		440															440
Net realized gain/(loss)		55			(55	)											-
Operating expenses		(1,228	)														(1,228	)
Interest expense		(1,803	)														(1,803	)
Other income, net of other expense		127															127
Corporate and investing		(2,409	)		(55	)		-			-			-			(2,464	)

Group total	$	(4,915	)	$	(55	)	$	-		$	-		$	-		$	(4,970	)


AMERICAN OVERSEAS GROUP LTD.
NET INCOME AND OPERATING INCOME BY SEGMENT


(dollars in thousands)	Twelve months ended December 31, 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)
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		(8,963	)											362			(8,601	)
Income tax		322												(76	)		246
Property and casualty		3,228			-			-			-			286			3,514

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		(2,013	)														(2,013	)
Interest expense		(1,803	)														(1,803	)
Other income, net of other expense		(78	)														(78	)
Corporate and investing		(1,455	)		(29,814	)		-			28,407			-			(2,862	)

Group total	$	(5,010	)	$	(29,814	)	$	(2	)	$	12,411		$	286		$	(22,129	)