HAMILTON, Bermuda, July 03, 2015 (GLOBE NEWSWIRE) -- American Overseas Group Limited (BSX:AOREF.BH) (Pink Sheets:AOREF.PK) (“AOG” or the “Company”) today reported consolidated net income of $38.4 million, or $1,797.58 per diluted share, for the year ended December 31, 2014. This compares to a consolidated net loss of $0.3 million, or $16.39 per diluted share, for the year ended December 31, 2013. The 2013 financial statements of AOG have been restated to reflect the fact that AOG and Orpheus Group Ltd. came under common voting control on June 26, 2013, and to include the results of Orpheus Group Ltd. from that date. The results for 2014 were impacted by fair value adjustments of $22.8 million and unrealized gains in credit derivatives of $18.2 million. Book value per share at December 31, 2014 was $1,327.28.
For the year ended December 31, 2014, the Company had an operating loss of $3.2 million, or $150.13 per diluted share, compared to operating income of $3.1 million, or $147.52 per diluted share for the year ended December 31, 2013 as restated.
Gross property and casualty premiums written, which are the primary driver of the Company’s fee income, were $418.3 million for 2014 compared to $224.9 million for 2013. Fees earned by the Company’s management companies were $13.6 million for 2014 compared to $7.0 million for 2013 before intercompany consolidation eliminations with their regulated affiliates. EBITDA margins earned on these fees were 34% for 2014 and 2013. Net earned property and casualty premiums were $36.5 million for 2014 compared to $35.1 million for 2013. The drop in net premiums earned is the direct result of the termination of a large assumed reinsurance treaty in May of 2014 in accordance with the Company’s decision to deemphasize the retention of underwriting risk.
The legacy financial guaranty portfolio of American Overseas Reinsurance Company Limited continues to run-off satisfactorily. Insured par outstanding (net of escrowed transactions) declined to $6.2 billion at December 31, 2014 from $7.6 billion at December 31, 2013, a 18.4% decline.
As part of its ongoing capital management efforts, the Company will continue to redirect excess capital within the group to debt reduction unless compelling acquisition or investment 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. Among the factors that could cause results to differ materially are: (i) the Company’s reviewing the results of our entire portfolio of polices. Management considers credit derivative policies as a normal extension of AORE’s financial guaranty business and reinsurance in substance.
Explanation of Non-GAAP Financial Measures
The Company believes that the following non-GAAP financial measures included in this press release serve to supplement GAAP information and are 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 | |||||||||||||||||
Consolidated Balance Sheets | |||||||||||||||||
(unaudited) | |||||||||||||||||
As at December 31, 2014 and 2013 | |||||||||||||||||
(dollars in thousands) | |||||||||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||||||||
Assets | |||||||||||||||||
Investments: | |||||||||||||||||
Fixed-maturity securities held as available for sale, at fair value | |||||||||||||||||
(Amortized cost: $122,812 and $172,903) | $ | 123,527 | $ | 171,842 | |||||||||||||
Equity investments, at fair value (Cost: $31,943 and $21,334) | 32,212 | 24,339 | |||||||||||||||
Cash and cash equivalents | 35,497 | 36,347 | |||||||||||||||
Restricted cash | 46,968 | 43,688 | |||||||||||||||
Unsettled trades | - | 9,068 | |||||||||||||||
Accrued investment income | 320 | 785 | |||||||||||||||
Premiums receivable | 57,194 | 72,581 | |||||||||||||||
Reinsurance balances receivable, net | 282,980 | 330,122 | |||||||||||||||
Salvage and subrogation | 2,662 | 6,684 | |||||||||||||||
Deferred policy acquisition costs | 452 | 941 | |||||||||||||||
Intangible assets | 7,038 | 9,745 | |||||||||||||||
Goodwill | 33,050 | 33,050 | |||||||||||||||
Assets held in segregated accounts | 537 | 2,364 | |||||||||||||||
Other assets | 1,063 | 1,055 | |||||||||||||||
Total Assets | $ | 623,500 | $ | 742,611 | |||||||||||||
Liabilities and Equity | |||||||||||||||||
Liabilities: | |||||||||||||||||
Loss and loss expense reserve | $ | 265,439 | $ | 323,604 | |||||||||||||
Unearned premiums | 95,277 | 108,948 | |||||||||||||||
Ceded premium payable | 56,135 | 77,751 | |||||||||||||||
Payable to general agents | 355 | 401 | |||||||||||||||
Funds withheld | 2,568 | 3,816 | |||||||||||||||
Accounts payable and accrued liabilities | 4,149 | 3,386 | |||||||||||||||
Liabilities related to segregated accounts | 537 | 2,364 | |||||||||||||||
Redeemable preference shares: ($0.10 par value and $1,000 redemption value; authorized shares - 75,000; issued and outstanding shares - 59,700 at December 31, 2014 and 2013) | 9,446 | 9,429 | |||||||||||||||
Derivative liabilities | 46,696 | 64,973 | |||||||||||||||
Notes payable | 60,890 | 47,750 | |||||||||||||||
Non-owned interest in VIE | 300 | 300 | |||||||||||||||
Interest payable | 1,188 | 318 | |||||||||||||||
Dividend payable | - | 75 | |||||||||||||||
Fair Value Adjustment | 22,104 | 26,640 | |||||||||||||||
Deferred tax liability | 31 | 24 | |||||||||||||||
Total Liabilities | 565,115 | 669,779 | |||||||||||||||
Shareholders' Equity: | |||||||||||||||||
Common shares | 4,399 | 1,533 | |||||||||||||||
Additional paid-in capital | 185,638 | 233,211 | |||||||||||||||
Accumulated other comprehensive income | 893 | 6,056 | |||||||||||||||
Retained deficit | (138,598 | ) | (177,021 | ) | |||||||||||||
Total Shareholders' Equity | 52,332 | 63,779 | |||||||||||||||
Non-controlling interest of preferred shares of subsidiaries | 6,053 | 9,053 | |||||||||||||||
Total Equity | 58,385 | 72,832 | |||||||||||||||
Total Liabilities and Equity | $ | 623,500 | $ | 742,611 | |||||||||||||
See Notes to 2014 Consolidated Financial Statements available on American Overseas Groups Ltd. Website at www.aoreltd.com | |||||||||||||||||
American Overseas Group Limited | |||||||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
For years ended December 31, 2014 and 2013 | |||||||||||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||||||||
Year ended December 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Net premiums earned | $ | 36,298 | $ | 35,839 | |||||||||||||||||||
Fee income | 12,818 | 6,263 | |||||||||||||||||||||
Change in fair value of credit derivatives | |||||||||||||||||||||||
Realized gains and other settlements | 587 | 1,755 | |||||||||||||||||||||
Unrealized gains | 18,173 | 162 | |||||||||||||||||||||
Net change in fair value of credit derivatives | 18,760 | 1,917 | |||||||||||||||||||||
Net investment income | 4,363 | 5,000 | |||||||||||||||||||||
Net realized gains on investments | 4,844 | 2,337 | |||||||||||||||||||||
Fair value adjustment | 4,519 | 1,652 | |||||||||||||||||||||
Other income | - | 99 | |||||||||||||||||||||
Total revenues | 81,602 | 53,107 | |||||||||||||||||||||
Expenses | |||||||||||||||||||||||
Losses and loss adjustment expenses | 12,685 | 31,235 | |||||||||||||||||||||
Acquisition expenses | 6,932 | 9,281 | |||||||||||||||||||||
Operating expenses | 16,337 | 10,008 | |||||||||||||||||||||
Amortization of intangible assets | 2,707 | 2,290 | |||||||||||||||||||||
Other expense | 500 | - | |||||||||||||||||||||
Interest expense | 2,535 | 640 | |||||||||||||||||||||
Total expenses | 41,696 | 53,453 | |||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 39,906 | $ | (346 | ) | ||||||||||||||||||
Income tax expense | (7 | ) | (4 | ) | |||||||||||||||||||
Net income (loss) before dividends | 39,899 | (350 | ) | ||||||||||||||||||||
Dividends on preference shares | (1,476 | ) | - | ||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 38,423 | $ | (350 | ) | ||||||||||||||||||
Net income (loss) per common share: | |||||||||||||||||||||||
Basic | $ | 1,813.44 | $ | (16.61 | ) | ||||||||||||||||||
Diluted | 1,797.58 | (16.39 | ) | ||||||||||||||||||||
Weighted-average number of common shares outstanding: | |||||||||||||||||||||||
Basic | 21,188 | 21,056 | |||||||||||||||||||||
Diluted | 21,375 | 21,345 | |||||||||||||||||||||
* Shares outstanding and net income per share as of December 31, 2014, reflect the effects of a 1 for 100 reverse stock split on | |||||||||||||||||||||||
October 14, 2014. For comparative purposes, the outstanding shares along with the net income per common share for the | |||||||||||||||||||||||
year ending December 31, 2013, have been adjusted to reflect the change in capital structure as if the reverse stock split had | |||||||||||||||||||||||
occurred in that period. | |||||||||||||||||||||||
See Notes to 2014 Consolidated Financial Statements available on American Overseas Groups Ltd. Website at www.aoreltd.com | |||||||||||||||||||||||
AMERICAN OVERSEAS GROUP LIMITED | |||||||||||||||
OPERATING INCOME BY SEGMENT | |||||||||||||||
December 31, 2014 | |||||||||||||||
Property/ | Financial | ||||||||||||||
(dollars in thousands) | Casualty | Guaranty | Corporate | Total | |||||||||||
Net premiums earned | $ | 36,466 | $ | (168 | ) | $ | - | $ | 36,298 | ||||||
Net change in fair value of credit derivatives | - | 18,760 | - | 18,760 | |||||||||||
Losses and loss adjustment expenses | (35,897 | ) | 23,211 | - | (12,686 | ) | |||||||||
Acquisition expenses | (7,107 | ) | 175 | - | (6,932 | ) | |||||||||
Underwriting gain (loss) | (6,538 | ) | 41,978 | - | 35,440 | ||||||||||
Fee income | 12,818 | - | - | 12,818 | |||||||||||
Net investment income | - | - | 4,363 | 4,363 | |||||||||||
Net realized gains on sales of investments | - | - | 4,844 | 4,844 | |||||||||||
Fair value adjustment | - | - | 4,520 | 4,520 | |||||||||||
Operating expenses | (8,614 | ) | (7,019 | ) | (704 | ) | (16,337 | ) | |||||||
Interest expense | - | - | (2,535 | ) | (2,535 | ) | |||||||||
Amortization expense | (2,707 | ) | - | - | (2,707 | ) | |||||||||
Other expense | - | - | (500 | ) | (500 | ) | |||||||||
Income tax | (7 | ) | - | - | (7 | ) | |||||||||
Net income (loss) before noncontrolling interest | $ | (5,048 | ) | $ | 34,959 | $ | 9,988 | $ | 39,899 | ||||||
Net income (loss) before noncontrolling interest | $ | (5,048 | ) | $ | 34,959 | $ | 9,988 | $ | 39,899 | ||||||
Less after tax adjustments: | |||||||||||||||
Net realized gains on sales of investments | - | - | (4,844 | ) | (4,844 | ) | |||||||||
Net change in fair value of credit derivatives | - | (18,173 | ) | - | (18,173 | ) | |||||||||
Fair value adjustments | - | (18,278 | ) | (4,520 | ) | (22,798 | ) | ||||||||
Amortization of intangibles | 2,707 | - | - | 2,707 | |||||||||||
Operating income (loss) | $ | (2,341 | ) | $ | (1,492 | ) | $ | 624 | $ | (3,209 | ) | ||||
As Adjusted December 31, 2013 | |||||||||||||||
Property/ | Financial | ||||||||||||||
(dollars in thousands) | Casualty | Guaranty | Corporate | Total | |||||||||||
Net premiums earned | $ | 35,128 | $ | 711 | $ | - | $ | 35,839 | |||||||
Net change in fair value of credit derivatives | - | 1,917 | - | 1,917 | |||||||||||
Losses and loss adjustment expenses | (33,794 | ) | 2,559 | - | (31,235 | ) | |||||||||
Acquisition expenses | (8,512 | ) | (769 | ) | - | (9,281 | ) | ||||||||
Underwriting gain (loss) | (7,178 | ) | 4,418 | - | (2,760 | ) | |||||||||
Fee income | 6,264 | - | - | 6,264 | |||||||||||
Net investment income | - | - | 5,000 | 5,000 | |||||||||||
Net realized gains on sales of investments | - | - | 2,337 | 2,337 | |||||||||||
Fair value adjustment | - | - | 1,652 | 1,652 | |||||||||||
Operating expenses | (4,411 | ) | (5,458 | ) | (139 | ) | (10,008 | ) | |||||||
Interest expense | - | - | (640 | ) | (640 | ) | |||||||||
Amortization expense | (2,290 | ) | - | - | (2,290 | ) | |||||||||
Other expense | - | - | 99 | 99 | |||||||||||
Income tax | (4 | ) | - | - | (4 | ) | |||||||||
Net income (loss) before non controlling interest | $ | (7,619 | ) | $ | (1,040 | ) | $ | 8,309 | $ | (350 | ) | ||||
Net income (loss) before non controlling interest | $ | (7,619 | ) | $ | (1,040 | ) | $ | 8,309 | $ | (350 | ) | ||||
Less after tax adjustments: | |||||||||||||||
Net realized gains on sales of investments | - | - | (2,337 | ) | (2,337 | ) | |||||||||
Net change in fair value of credit derivatives | - | (162 | ) | - | (162 | ) | |||||||||
Fair value adjustments | - | 5,360 | (1,652 | ) | 3,708 | ||||||||||
Amortization of intangibles | 2,290 | - | - | 2,290 | |||||||||||
Operating income (loss) | $ | (5,329 | ) | $ | 4,158 | $ | 4,320 | $ | 3,149 | ||||||
AMERICAN OVERSEAS GROUP LIMITED | ||||||||||||||||||||
RESULT FOR P&C SEGMENT | ||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||
U.S. | Non-U.S. | Subtotal | Eliminations and adjustments | Total | ||||||||||||||||
Direct premiums written | $ | 418,292 | $ | - | $ | 418,292 | $ | - | $ | 418,292 | ||||||||||
Reinsurance assumed (ceded) | (416,585 | ) | 28,894 | (387,692 | ) | - | (387,692 | ) | ||||||||||||
Net premiums written and assumed | 1,707 | 28,894 | 30,600 | - | 30,600 | |||||||||||||||
Net premiums earned | 1,292 | 35,174 | 36,466 | - | 36,466 | |||||||||||||||
Loss and loss adjustment expenses | 937 | 34,960 | 35,897 | - | 35,897 | |||||||||||||||
Acquisition costs | 157 | 6,950 | 7,107 | - | 7,107 | |||||||||||||||
1,094 | 41,910 | 43,004 | - | 43,004 | ||||||||||||||||
Underwriting gain (loss) | $ | 198 | $ | (6,736 | ) | $ | (6,538 | ) | $ | - | $ | (6,538 | ) | |||||||
Loss and loss adjustment expense ratio | 72.5 | % | 99.4 | % | 98.4 | % | - | 98.4 | % | |||||||||||
Expense ratio | 12.1 | % | 19.8 | % | 19.5 | % | - | 19.5 | % | |||||||||||
Combined ratio | 84.7 | % | 119.2 | % | 117.9 | % | 117.9 | % | ||||||||||||
Fee income | $ | 11,819 | $ | 1,775 | $ | 13,594 | $ | (776 | ) | $ | 12,818 | |||||||||
Operating expenses | 7,133 | 1,890 | 9,023 | (409 | ) | 8,614 | ||||||||||||||
Less amortization and depreciation | (7 | ) | (37 | ) | (43 | ) | - | (43 | ) | |||||||||||
7,126 | 1,853 | 8,979 | (409 | ) | 8,570 | |||||||||||||||
EBITDA | $ | 4,692 | $ | (78 | ) | $ | 4,614 | $ | (367 | ) | $ | 4,247 | ||||||||
EBITDA margin | 39.7 | % | -4.4 | % | 33.9 | % | - | 33.1 | % | |||||||||||
December 31, 2013 | ||||||||||||||||||||
U.S. | Non-U.S. | Subtotal | Eliminations and adjustments | Total | ||||||||||||||||
Direct premiums written | $ | 224,866 | $ | - | $ | 224,866 | $ | - | $ | 224,866 | ||||||||||
Reinsurance assumed (ceded) | (224,695 | ) | 35,885 | (188,810 | ) | - | (188,810 | ) | ||||||||||||
Net premiums written and assumed | 171 | 35,885 | 36,056 | - | 36,056 | |||||||||||||||
Net premiums earned | 844 | 34,284 | 35,128 | - | 35,128 | |||||||||||||||
Loss and loss adjustment expenses | 1,215 | 32,579 | 33,794 | - | 33,794 | |||||||||||||||
Acquisition costs | 84 | 8,428 | 8,512 | - | 8,512 | |||||||||||||||
1,299 | 41,007 | 42,306 | - | 42,306 | ||||||||||||||||
Underwriting gain (loss) | $ | (455 | ) | $ | (6,723 | ) | $ | (7,178 | ) | $ | - | $ | (7,178 | ) | ||||||
Loss and loss adjustment expense ratio | 143.9 | % | 95.0 | % | 96.2 | % | - | 96.2 | % | |||||||||||
Expense ratio | 9.9 | % | 24.6 | % | 24.2 | % | - | 24.2 | % | |||||||||||
Combined ratio | 153.9 | % | 119.6 | % | 120.4 | % | - | 120.4 | % | |||||||||||
Fee income | $ | 5,918 | $ | 1,068 | $ | 6,986 | $ | (722 | ) | $ | 6,264 | |||||||||
Operating expenses | 3,662 | 945 | 4,606 | (195 | ) | 4,411 | ||||||||||||||
Less amortization and depreciation | (3 | ) | (8 | ) | (11 | ) | - | (11 | ) | |||||||||||
3,659 | 936 | 4,595 | (195 | ) | 4,400 | |||||||||||||||
EBITDA | $ | 2,259 | $ | 132 | $ | 2,391 | $ | (527 | ) | $ | 1,863 | |||||||||
EBITDA margin | 38.2 | % | 12.3 | % | 34.2 | % | - | 29.7 | % | |||||||||||