Oxbridge Re Holdings Ltd. :OXBR-US: Earnings Analysis: 2016 By the Numbers : March 21, 2017

Oxbridge Re Holdings Ltd. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Oxbridge Re Holdings Ltd. – Fairfax Financial Holdings Limited, Blue Capital Reinsurance Holdings Ltd., Validus Holdings, Ltd. and RenaissanceRe Holdings Ltd. (FRFHF-US, BCRH-US, VR-US and RNR-US) that have also reported for this period.

Highlights

  • Year-on-year change in operating cash flow of -94.88% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from operating margin decreases as well as from unusual items

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 N/A N/A
Relevant Numbers (Annual)
Revenues 19.06 6.78 5.56 N/A N/A
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 2.58 4.6 4 N/A N/A
Earnings Growth (YOY) -43.9 15.03 N/A N/A N/A
Net Margin 13.54 67.87 71.96 N/A N/A
EPS 0.43 0.76 0.82 N/A N/A
Return on Equity 6.96 12.48 10.9 N/A N/A
Return on Assets 4.98 8.99 8.05 N/A N/A

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Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

The company’s year-on-year decline in earnings has been influenced by the following factors: (1) Decline in premiums earned as a percent of total revenues from 99.82% to 94.73% and (2) issues with underwriting policies. As a result, loss ratio went from 5.08% to 83.40% in this period. For comparison, premiums earned as a percent of revenues were 99.82% and the loss ratio 5.08% in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

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Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

OXBR-US‘s change in operating cash flow of -94.88% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s fall in earnings have been influenced by the following factors: (1) Contraction in operating margins after interest from 73.76% to 13.54% and (2) One-time items that contributed to a weakening of pretax margins from 67.87% to 13.54%.

EBIT Margin Versus PreTax Margin

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Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Oxbridge Re Holdings Ltd. is engaged in the provision of reinsurance business solutions to property and casualty insurers in the Gulf Coast region of the United States. Through its subsidiaries, it fully collateralized policies to cover property losses from specified catastrophes. The company was founded on April 4, 2013 and is headquartered in George Town, Cayman Islands.

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