HAMILTON, Bermuda, Sept. 23, 2020 (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 $2.3 million, or $48.97 per diluted share, for the six months June 30, 2020. This compares to consolidated net loss available to common shareholders of $3.8 million, or $82.18 per diluted share, for the six months ended June 30, 2019.

The results for the six months was driven 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 June 30, 2020 was $1,112.19, a decline from the book value per share of $1,159.08 at December 31, 2019.  

For the six months ended June 30, 2020, the Company had an operating loss of $21.6 million, or $462.85 per diluted share, compared to an operating loss of $7.8 million, or $169.26 per diluted share for the six months ended June 30, 2019. Operating income for the property and casualty segment in 2020 was $1.0 million, compared to the $1.7 million operating income in 2019 for this segment. The financial guaranty segment had operating losses of $22.1 million for 2020, compared to operating losses of $9.8 million for 2019.

Net earned property and casualty premiums increased $4.1 million from $3.9 million in 2019 to $8.0 million in 2020, driven primarily by increased reinsurance participation on underlying non-standard auto programs in Texas. Loss and loss adjustment expenses as a percentage of earned premium increased from 25.1% to 53.3% driven primarily by lower prior year favorable development, however underwriting income increased from $0.2 million to $1.3 million driven by higher volume. Fee income decreased from $6.1 million to $5.3 million as underlying direct written premium volumes declined primarily impacted by temporary business contractions related to COVID-19. P&C operating income declined from $1.7 million to $1.0 million primarily driven by allocation of operating expenses from American Overseas Reinsurance Company Limited (“AORE”) as it transitioned to an affiliate reinsurer of non-standard auto business.

In 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 $22.1 million in 2020, compared to operating losses of $9.8 million in 2019 which were driven by net losses associated with the commutation of $1.065 billion of outstanding par during the second quarter of 2019, as well as unfavorable development on outstanding losses. As of June 30, 2019, outstanding par within the financial guaranty segment was $372 million. As of June 30, 2020, AORE no longer has any financial guaranty exposure remaining.

Overall operating expenses excluding restructuring charges declined $0.4 million from $6.7 million to $6.3 million for the six months ended June 2020 and 2019.

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. Among the factors that could cause actual results to differ materially are: (i) the Company's reviewing the results of our entire portfolio of policies. 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 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, 2020 and December 31, 2019
(dollars in thousands)    
            
            
        June 30, 2020  December 31, 2019
Assets        
  Investments:      
   Fixed-maturity securities held as available for sale, at fair value $63,989   $129,748 
   Equity investments held as available for sale, at fair value   4,320    1,181 
  Cash and cash equivalents   22,497    22,602 
  Restricted cash   666    10,557 
  Accrued investment income   329    675 
  Premiums receivable   79,032    81,000 
  Deferred insurance premiums   107,834    125,728 
  Reinsurance balances receivable, net   199,802    210,405 
  Salvage and subrogation recoverable   -    386 
  Deferred policy acquisition costs   3,676    515 
  Intangible assets   4,800    4,800 
  Goodwill    33,050    33,050 
  Other assets   4,690    3,184 
   Total Assets  $524,685   $623,831 
            
Liabilities and Equity      
            
 Liabilities:      
  Loss and loss expense reserve  $194,855   $263,686 
  Deferred commission income   2,579    - 
  Unearned premiums   111,755    128,793 
  Ceded premium payable   80,116    89,078 
  Payable to general agents   3,582    3,087 
  Funds withheld   54,223    52,794 
  Accounts payable and accrued liabilities   5,660    5,071 
  Redeemable preference shares: ($0.10 par value and $1,000 redemption value;
authorized shares - 75,000; issued and outstanding shares - 13,600 and 38,600
at June 30, 2020 and December 31, 2019, respectively)		  2,616    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   539    322 
   Total Liabilities   473,197    570,306 
            
 Shareholders' Equity:      
  Common shares   4,638    4,618 
  Additional paid-in capital   189,054    189,002 
  Accumulated other comprehensive income   1,497    1,323 
  Retained deficit   (149,754)   (147,471)
   Total Shareholders' Equity   45,435    47,472 
    Non-controlling interest of preferred shares of subsidiaries   6,053    6,053 
  Total Equity   51,488    53,525 
            
   Total Liabilities and Equity  $524,685   $623,831 
            
            
  See Notes to 2019 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com
            



American Overseas Group Limited 
Consolidated Statements of Operations
(unaudited) 
For six months ended June 30, 2020 and 2019 
(dollars in thousands, except share and per share amounts) 
            
            
        Six Months ended June 30,
          2020   2019 
 Revenues       
            
  Net premiums earned   $4,438  $(10,382)
  Fee income    5,251   6,052 
            
 Change in fair value of credit derivatives      
  Realized gains and other settlements    2   72 
  Unrealized gains    -   189 
            
   Net change in fair value of credit derivatives    2   261 
            
  Net investment income    592   1,336 
  Net realized gains on investments    1,500   87 
  Fair value adjustment    2,077   11,917 
  Other income    -   31 
            
   Total revenues    13,860   9,302 
            
 Expenses       
  Losses and loss adjustment expenses    5,811   5,957 
  Acquisition expenses    2,239   (444)
  Operating expenses    6,690   6,677 
  Other expense    284   - 
  Interest expense    902   902 
            
   Total expenses    15,926   13,092 
            
Net (loss) available to common shareholders   $ (2,066) $ (3,790)
  Income tax (expense)    (216)  (2)
            
Net (loss) before dividends    (2,282)  (3,792)
  Dividends on preference shares of subsidiary    -   - 
            
            
Net (loss) available to common shareholders   $ (2,282) $ (3,792)
            
            
 Net (loss) per common share:      
 Basic     $(49.30) $(82.18)
 Diluted      (48.97)  (82.18)
            
 Weighted-average number of common shares outstanding:      
 Basic      46,295   46,142 
 Diluted      46,605   46,142 
            
 See Notes to 2019 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)June 30, 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		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 (2,369)     (2,369)
Property/Casualty Underwriting Income 1,348      1,348 
       
Fee income 5,251      5,251 
Operating expenses (5,623)    362  (5,261)
Income tax (216)    (76) (292)
Property and casualty 760  -  -  -  286  1,046 
       
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 (1,100)     (1,100)
Financial guaranty (6,058) -  (2) (15,996) -  (22,056)
       
Corporate and Investing      
       
Net investment income 592      592 
Net realized loss on sales of investments 1,500  (21,000)  19,500   - 
Fair value adjustment 2,077    (2,077)  - 
Operating expenses 33      33 
Interest expense (902)     (902)
Other expense, net of other income (284)     (284)
Corporate and investing 3,016  (21,000) -  17,423  -  (561)
       
Group total$ (2,282)$ (21,000)$ (2)$ 1,427 $ 286 $ (21,571)
       
       
       
AMERICAN OVERSEAS GROUP LTD.      
      
NET INCOME AND OPERATING INCOME BY SEGMENT     
       
       
(dollars in thousands)June 30, 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		Restructuring
Charges		Operating income
Property and casualty:      
       
Net premiums earned$3,881     $3,881 
Losses and loss adjustment expenses (972)     (972)
Acquisition expenses (2,689)     (2,689)
Property/Casualty Underwriting Income 220      220 
       
Fee income 6,052      6,052 
Operating expenses (4,525)     (4,525)
Income tax (2)     (2)
Property and casualty 1,745  -  -  -  -  1,745 
       
Financial guaranty:      
       
Net premiums earned (14,263)   12,852   (1,411)
Net change in fair value of credit derivatives 261   (189)   72 
Losses and loss adjustment expenses (4,985)   (1,822)  (6,807)
Acquisition expenses 3,133    (2,855)  278 
Operating expenses (1,899)     (1,899)
Financial guaranty (17,753) -  (189) 8,175  -  (9,767)
       
Corporate and Investing      
       
Net investment income 1,336      1,336 
Net realized loss on sales of investments 87  (87)    - 
Fair value adjustment 11,917    (11,917)  - 
Operating expenses (253)     (253)
Interest expense (902)     (902)
Other income, net of other expense 31      31 
Corporate and investing 12,216  (87) -  (11,917) -  212 
       
Group total$ (3,792)$ (87)$ (189)$ (3,741)$ - $ (7,810)
       

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Source: American Overseas Group, Ltd.

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