HAMILTON, Bermuda, Sept. 28, 2015 (GLOBE NEWSWIRE) -- American Overseas Group Limited (BSX:AOREF.BH) (Pink Sheets: AOREF.PK) (“AOG” or the “Company”) today reported consolidated net income of $7.0 million, or $165.63 per diluted share, for the six months ended June 30, 2015. This compares to consolidated net income of $7.0 million, or $254.83 per diluted share, for the six months ended June 30, 2014. On October 28, 2014, the Company acquired Orpheus Group Ltd. (“OGL”) for a combination of common stock and senior notes. As a result, the previously reported 2014 consolidated balance sheet, consolidated statement of operations, consolidated statement of comprehensive income, and the consolidated statement of cash flows of the Company have been adjusted to consolidate the operations of the Company with OGL. The results for the first six months of 2015 were impacted by fair value adjustments of $3.4 million and unrealized gains in credit derivatives of $15.3 million. The results for the first six months of 2014 were impacted by fair value adjustments of $11.4 million and unrealized losses in credit derivatives of $2.4 million. Book value per share at June 30, 2015 was $1,532.61.
For the six months ended June 30, 2015, the Company had an operating loss of $9.4 million, or $220.97 per diluted share, compared to an operating loss of $0.4 million, or $15.09 per diluted share for the six months ended June 30, 2014 as restated.
Gross property and casualty premiums written, which are the primary driver of the Company’s fee income, were $195.3 million for the first six months of 2015 compared to $227.7 million for the first six months of 2014. Fees earned by the Company’s management companies were $6.8 million for the first six months of 2015 compared to $7.2 million for the first six months of 2014 before intercompany consolidation eliminations with their regulated affiliates. EBITDA margins earned on these fees were 35.8% and 41.4% for the first six months of 2015 and 2014, respectively. Net earned property and casualty premiums were $4.1 million for the first six months of 2015 compared to $27.5 million for the first six months of 2014. 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, notwithstanding loss reserve increases mainly due to the Company's continued exposure to Puerto Rico credits. Insured par outstanding (net of escrowed transactions) declined to $5.3 billion at June 30, 2015 from $6.2 billion at December 31, 2014, a 14.5% 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.
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 June 30, 2015 and December 31, 2014 | ||||||
| (dollars in thousands) | ||||||
| June 30, 2015 | December 31, 2014 | |||||
| Assets | ||||||
| Investments: | ||||||
| Fixed-maturity securities held as available for sale, at fair value | $ | 105,558 | $ | 123,527 | ||
| Equity investments, at fair value | 34,625 | 32,212 | ||||
| Cash and cash equivalents | 46,557 | 35,497 | ||||
| Restricted cash | 39,696 | 46,968 | ||||
| Accrued investment income | 283 | 320 | ||||
| Premiums receivable | 60,589 | 57,194 | ||||
| Reinsurance balances receivable, net | 292,352 | 282,980 | ||||
| Salvage and subrogation | 1,067 | 2,662 | ||||
| Deferred policy acquisition costs | 201 | 452 | ||||
| Intangible assets | 5,919 | 7,038 | ||||
| Goodwill | 33,050 | 33,050 | ||||
| Assets held in segregated accounts | - | 537 | ||||
| Other assets | 1,339 | 1,063 | ||||
| Total Assets | $ | 621,236 | $ | 623,500 | ||
| Liabilities and Equity | ||||||
| Liabilities: | ||||||
| Loss and loss expense reserve | $ | 264,347 | $ | 265,439 | ||
| Unearned premiums | 95,476 | 95,277 | ||||
| Ceded premium payable | 64,229 | 56,135 | ||||
| Payable to general agents | 569 | 355 | ||||
| Funds withheld | 5,131 | 2,568 | ||||
| Accounts payable and accrued liabilities | 1,692 | 4,149 | ||||
| Liabilities related to segregated accounts | - | 537 | ||||
| Redeemable preference shares: ($0.10 par value and $1,000 redemption value; authorized shares - 75,000; issued and outstanding shares - 59,700 at June 30, 2015 and December 31, 2014) | 9,616 | 9,446 | ||||
| Derivative liabilities | 31,548 | 46,696 | ||||
| Notes payable | 59,252 | 60,890 | ||||
| Non-owned interest in VIE | 300 | 300 | ||||
| Interest payable | 1,471 | 1,188 | ||||
| Fair Value Adjustment | 20,730 | 22,104 | ||||
| Deferred tax liability | 34 | 31 | ||||
| Total Liabilities | 554,395 | 565,115 | ||||
| Shareholders' Equity: | ||||||
| Common shares | 4,361 | 4,399 | ||||
| Additional paid-in capital | 186,095 | 185,638 | ||||
| Accumulated other comprehensive income | 1,888 | 893 | ||||
| Retained deficit | (131,556 | ) | (138,598 | ) | ||
| Total Shareholders' Equity | 60,788 | 52,332 | ||||
| Non-controlling interest of preferred shares of subsidiaries | 6,053 | 6,053 | ||||
| Total Equity | 66,841 | 58,385 | ||||
| Total Liabilities and Equity | $ | 621,236 | $ | 623,500 | ||
| American Overseas Group Limited | ||||||
| Consolidated Statements of Operations | ||||||
| (unaudited) | ||||||
| For six months ended June 30, 2015 and 2014 | ||||||
| (dollars in thousands, except share and per share amounts) | ||||||
| Six Months ended June 30, | ||||||
| 2015 | 2014 | |||||
| Revenues | ||||||
| Net premiums earned | $ | 4,174 | $ | 27,883 | ||
| Fee income | 6,538 | 6,821 | ||||
| Change in fair value of credit derivatives | ||||||
| Realized gains and other settlements | 251 | 559 | ||||
| Unrealized gains (losses) | 15,288 | (2,401 | ) | |||
| Net change in fair value of credit derivatives | 15,539 | (1,842 | ) | |||
| Net investment income | 1,485 | 2,284 | ||||
| Net realized gains on investments | 49 | 25 | ||||
| Fair value adjustment | 1,204 | 2,260 | ||||
| Other income | 29 | 124 | ||||
| Total revenues | 29,018 | 37,555 | ||||
| Expenses | ||||||
| Losses and loss adjustment expenses | 7,887 | 15,980 | ||||
| Acquisition expenses | 850 | 5,695 | ||||
| Operating expenses | 7,638 | 6,659 | ||||
| Amortization of intangible assets | 1,119 | 1,353 | ||||
| Other expense | 172 | - | ||||
| Interest expense | 3,136 | 619 | ||||
| Total expenses | 20,802 | 30,306 | ||||
| Net income available to common shareholders | $ | 8,216 | $ | 7,249 | ||
| Income tax expense | (4 | ) | - | |||
| Net income before dividends | 8,212 | 7,249 | ||||
| Dividends on preference shares | (1,170 | ) | (239 | ) | ||
| Net income available to common shareholders | $ | 7,042 | $ | 7,010 | ||
| Net income per common share: | ||||||
| Basic | $ | 166.65 | $ | 257.28 | ||
| Diluted | 165.62 | 254.83 | ||||
| Weighted-average number of common shares outstanding: | ||||||
| Basic | 42,256 | 27,247 | ||||
| Diluted | 42,518 | 27,508 | ||||
| * Shares outstanding and net income per share as of June 30, 2015, 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 six months ending June 30, 2014, have been adjusted to reflect the change in capital structure as if the reverse stock split had occurred in that period. | ||||||
| AMERICAN OVERSEAS GROUP LIMITED | ||||||||||||
| OPERATING INCOME BY SEGMENT | ||||||||||||
| June 30, 2015 | ||||||||||||
| Property/ | Financial | |||||||||||
| (dollars in thousands) | Casualty | Guaranty | Corporate | Total | ||||||||
| Net premiums earned | $ | 4,111 | $ | 63 | $ | - | $ | 4,174 | ||||
| Net change in fair value of credit derivatives | - | 15,539 | - | 15,539 | ||||||||
| Losses and loss adjustment expenses | (4,661 | ) | (3,225 | ) | - | (7,886 | ) | |||||
| Acquisition expenses | (859 | ) | 9 | - | (850 | ) | ||||||
| Underwriting gain (loss) | (1,409 | ) | 12,386 | - | 10,977 | |||||||
| Fee income | 6,538 | - | - | 6,538 | ||||||||
| Net investment income | - | - | 1,485 | 1,485 | ||||||||
| Net realized gains on sales of investments | - | - | 49 | 49 | ||||||||
| Fair value adjustment | - | - | 1,204 | 1,204 | ||||||||
| Operating expenses | (4,081 | ) | (2,950 | ) | (608 | ) | (7,639 | ) | ||||
| Interest expense | - | - | (3,136 | ) | (3,136 | ) | ||||||
| Amortization expense | (1,119 | ) | - | - | (1,119 | ) | ||||||
| Other expense, net of other income | - | - | (143 | ) | (143 | ) | ||||||
| Income tax | (4 | ) | - | - | (4 | ) | ||||||
| Net income (loss) before noncontrolling interest | $ | (75 | ) | $ | 9,436 | $ | (1,149 | ) | $ | 8,212 | ||
| Net income (loss) before noncontrolling interest | $ | (75 | ) | $ | 9,436 | $ | (1,149 | ) | $ | 8,212 | ||
| Less after tax adjustments: | ||||||||||||
| Net realized gains on sales of investments | - | - | (49 | ) | (49 | ) | ||||||
| Change in unrealized gain of credit derivatives | - | (15,288 | ) | - | (15,288 | ) | ||||||
| Fair value adjustments | - | (2,185 | ) | (1,204 | ) | (3,389 | ) | |||||
| Amortization of intangibles | 1,119 | - | - | 1,119 | ||||||||
| Operating income (loss) | $ | 1,044 | $ | (8,037 | ) | $ | (2,402 | ) | $ | (9,395 | ) | |
| As Adjusted June 30, 2014 | ||||||||||||
| Property/ | Financial | |||||||||||
| (dollars in thousands) | Casualty | Guaranty | Corporate | Total | ||||||||
| Net premiums earned | $ | 27,494 | $ | 388 | $ | - | $ | 27,882 | ||||
| Net change in fair value of credit derivatives | - | (1,842 | ) | - | (1,842 | ) | ||||||
| Losses and loss adjustment expenses | (25,738 | ) | 9,758 | - | (15,980 | ) | ||||||
| Acquisition expenses | (5,513 | ) | (182 | ) | - | (5,695 | ) | |||||
| Underwriting gain (loss) | (3,757 | ) | 8,122 | - | 4,365 | |||||||
| Fee income | 6,821 | - | - | 6,821 | ||||||||
| Net investment income | - | - | 2,284 | 2,284 | ||||||||
| Net realized gains on sales of investments | - | - | 25 | 25 | ||||||||
| Fair value adjustment | - | - | 2,260 | 2,260 | ||||||||
| Operating expenses | (4,223 | ) | (2,679 | ) | 244 | (6,658 | ) | |||||
| Interest expense | - | - | (619 | ) | (619 | ) | ||||||
| Amortization expense | (1,353 | ) | - | - | (1,353 | ) | ||||||
| Other income, net of other expense | - | - | 124 | 124 | ||||||||
| Income tax | - | - | - | - | ||||||||
| Net income (loss) before non controlling interest | $ | (2,512 | ) | $ | 5,443 | $ | 4,318 | $ | 7,249 | |||
| Net income (loss) before non controlling interest | $ | (2,512 | ) | $ | 5,443 | $ | 4,318 | $ | 7,249 | |||
| Less after tax adjustments: | ||||||||||||
| Net realized gains on sales of investments | - | - | (25 | ) | (25 | ) | ||||||
| Change in unrealized loss of credit derivatives | - | 2,401 | - | 2,401 | ||||||||
| Fair value adjustments | - | (9,133 | ) | (2,260 | ) | (11,393 | ) | |||||
| Amortization of intangibles | 1,353 | - | - | 1,353 | ||||||||
| Operating income (loss) | $ | (1,159 | ) | $ | (1,289 | ) | $ | 2,033 | $ | (415 | ) | |
| AMERICAN OVERSEAS GROUP LIMITED | ||||||||||||||||
| RESULT FOR P&C SEGMENT | ||||||||||||||||
| June 30, 2015 | ||||||||||||||||
| Eliminations and | ||||||||||||||||
| U.S. | Non-U.S. | Subtotal | adjustments | Total | ||||||||||||
| Direct premiums written | $ | 195,284 | $ | - | $ | 195,284 | $ | - | $ | 195,284 | ||||||
| Reinsurance assumed (ceded) | (192,269 | ) | 2,349 | (189,920 | ) | - | (189,920 | ) | ||||||||
| Net premiums written and assumed | 3,015 | 2,349 | 5,364 | - | 5,364 | |||||||||||
| Net premiums earned | 673 | 3,438 | 4,111 | - | 4,111 | |||||||||||
| Loss and loss adjustment expenses | 794 | 3,867 | 4,661 | - | 4,661 | |||||||||||
| Acquisition costs | 103 | 756 | 859 | - | 859 | |||||||||||
| 897 | 4,623 | 5,520 | - | 5,520 | ||||||||||||
| Underwriting gain (loss) | $ | (224 | ) | $ | (1,185 | ) | $ | (1,409 | ) | - | $ | (1,409 | ) | |||
| Loss and loss adjustment expense ratio | 118.0 | % | 112.5 | % | 113.4 | % | - | 113.4 | % | |||||||
| Expense ratio | 15.3 | % | 22.0 | % | 20.9 | % | - | 20.9 | % | |||||||
| Combined ratio | 133.3 | % | 134.5 | % | 134.3 | % | - | 134.3 | % | |||||||
| Fee income | $ | 6,141 | $ | 708 | $ | 6,849 | (311 | ) | $ | 6,538 | ||||||
| Operating expenses | 3,460 | 971 | 4,431 | (350 | ) | 4,081 | ||||||||||
| Less depreciation | (17 | ) | (19 | ) | (36 | ) | - | (36 | ) | |||||||
| 3,443 | 952 | 4,395 | (350 | ) | 4,045 | |||||||||||
| EBITDA | $ | 2,698 | $ | (244 | ) | $ | 2,454 | 39 | $ | 2,493 | ||||||
| EBITDA margin | 43.9 | % | -34.5 | % | 35.8 | % | - | 38.1 | % | |||||||
| As Adjusted June 30, 2014 | ||||||||||||||||
| Eliminations and | ||||||||||||||||
| U.S. | Non-U.S. | Subtotal | adjustments | Total | ||||||||||||
| Direct premiums written | $ | 227,682 | $ | - | $ | 227,682 | $ | - | $ | 227,682 | ||||||
| Reinsurance assumed (ceded) | (227,019 | ) | 23,382 | (203,637 | ) | - | (203,637 | ) | ||||||||
| Net premiums written and assumed | 663 | 23,382 | 24,045 | - | 24,045 | |||||||||||
| Net premiums earned | 538 | 26,956 | 27,494 | - | 27,494 | |||||||||||
| Loss and loss adjustment expenses | 478 | 25,260 | 25,738 | - | 25,738 | |||||||||||
| Acquisition costs | 71 | 5,442 | 5,513 | - | 5,513 | |||||||||||
| 549 | 30,702 | 31,251 | - | 31,251 | ||||||||||||
| Underwriting gain (loss) | $ | (11 | ) | $ | (3,746 | ) | $ | (3,757 | ) | $ | - | $ | (3,757 | ) | ||
| Loss and loss adjustment expense ratio | 88.8 | % | 93.7 | % | 93.6 | % | - | 93.6 | % | |||||||
| Expense ratio | 13.2 | % | 20.2 | % | 20.1 | % | - | 20.1 | % | |||||||
| Combined ratio | 102.0 | % | 113.9 | % | 113.7 | % | - | 113.7 | % | |||||||
| Fee income | $ | 6,350 | $ | 885 | $ | 7,235 | $ | (414 | ) | $ | 6,821 | |||||
| Operating expenses | 3,403 | 857 | 4,260 | (37 | ) | 4,223 | ||||||||||
| Less depreciation | (3 | ) | (18 | ) | (21 | ) | - | (21 | ) | |||||||
| 3,400 | 839 | 4,239 | (37 | ) | 4,202 | |||||||||||
| EBITDA | $ | 2,950 | $ | 46 | $ | 2,996 | $ | (377 | ) | $ | 2,619 | |||||
| EBITDA margin | 46.5 | % | 5.2 | % | 41.4 | % | - | 38.4 | % | |||||||