Oxbridge Re Holdings Ltd. :OXBR-US: Earnings Analysis: Q3, 2016 By the Numbers : November 21, 2016

Oxbridge Re Holdings Ltd. reports financial results for the quarter ended September 30, 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

  • Summary numbers: Revenues of USD 2.17 million, Net Earnings of USD 2.99 million.
  • Year-on-year change in operating cash flow of -99.32% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements 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):

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 2.17 3.53 1.53 0.87 1.58
Revenue Growth (%YOY) 37.18 71.04 -32.47 -59.83 -14.69
Earnings (mil) 2.99 0.87 1.04 0.37 0.74
Earnings Growth (%YOY) 302.29 -47.37 -43.01 -77.99 -46.08
Net Margin (%) 137.81 24.69 68.13 42.86 46.99
EPS 0.5 0.14 0.17 0.06 0.12
Return on Equity (%) 30.3 9.18 11.17 4.04 8.06
Return on Assets (%) 20.4 6.26 7.94 2.79 5.38

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Market Share Versus Profits

Revenues History
Earnings History

OXBR-US‘s change in revenue this period compared to the same period last year of 37.18% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that OXBR-US is holding onto its market share. Also, for comparison purposes, revenues changed by -38.67% and earnings by 242.32% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

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Leader, Earnings Focus, Laggard, Revenues Focus

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.

Premiums Earned Percent History
Loss Ratio History

The company’s premiums earned as a percent of total revenues showed no year-on-year improvement and went from 113.49% to 88.55%. In spite of this, the company’s earnings went up – influenced primarily by the improvement in loss ratio from 4.74% to -60.74%. For comparison, premiums earned as a percent of revenues were 94.73% and the loss ratio 68.23% in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

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 -99.32% 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 earnings growth has also been influenced by the following factors: (1) Improvements in operating margins after interest from 72.26% to 137.81% and (2) One-time items. The company’s pretax margins are now 137.81% compared to 46.99% for the same period last year.

EBIT Margin Versus PreTax Margin

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Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Oxbridge Re Holdings Ltd. engages 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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