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American Overseas Group Limited Issues Supplement Information and Updated Earnings Release Regarding Net Income and Operating Loss for the Year Ended December 31, 2014

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%


Contact: American Overseas Group Limited info@aoreltd.com

Source:American Overseas Group, Ltd.