Results of Operations for the Year Ended December 31, 2020 - American Overseas Group Limited Announces Net Loss Of $5.0 Million and Operating Loss of $22.4 Million For the Year Ended December 31, 2020 as it exits financial guaranty line of business

HAMILTON, Bermuda, June 25, 2021 (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 $5.0 million, or $106.53 per diluted share, for the year ended December 31, 2020. This compares to consolidated net loss available to common shareholders of $3.7 million, or $80.13 per diluted share, for the year ended December 31, 2019.

The result for the year was heavily impacted 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 December 31, 2020 was $1,062.22 a decline from the book value per share of $1,159.08 at December 31, 2019.  

For the year ended December 31, 2020, the Company had an operating loss of $22.4 million, or $476.64 per diluted share, compared to an operating loss of $9.1 million, or $196.78 per diluted share for the year ended December 31, 2019. The financial guaranty segment produced a $22.8 million operating loss for 2020 which was $11.8 million above the prior year operating loss of $11.0 million. In April of 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 $22.8 million in 2020, compared to operating losses of $11.0 million in 2019. As of December 31, 2019, outstanding par within the financial guaranty segment was $362 million.   As of December 31, 2020, AORE no longer has any financial guaranty exposure remaining.

Operating income for the property and casualty segment in 2020 was $1.2 million, compared to the $0.9 million operating income in 2019 for this segment.  Despite lower written premiums in 2020 due to temporary business contractions related to COVID-19, net earned property and casualty premiums increased $7.0 million from $8.8 million in 2019 to $15.8 million in 2020, driven both by a full year of new programs in key states outside of Texas as well as increased reinsurance participation on underlying non standard auto programs in Texas. Loss and loss adjustment expenses as a percentage of earned premium increased from 41.9% to 56.5% primarily due to both lower favorable prior year loss and loss adjustment expense development and higher loss and loss adjustment expense on current accident year claims, however underwriting income increased from $0.4 million to $1.9 million driven by higher earned premiums. Fee income decreased from $11.6 million to $9.9 million as underlying direct written premium volumes declined primarily impacted by temporary business contractions related to COVID-19.

Operating expenses decreased $0.8 million or 5.9% from $13.6 million in 2019 to $12.8 million in 2020 mainly due to savings in the financial guaranty segment subsequent to the April 2020 exit from line of business.    

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.

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 December 31, 2020 and December 31, 2019
	(dollars in thousands)
					December 31, 2020				December 31, 2019
Assets
		Investments:
			Fixed-maturity securities held as available for sale, at fair value		$	72,642			$	129,748
			Equity investments held as available for sale, at fair value			4,143				1,181
		Cash and cash equivalents				24,254				22,602
		Restricted cash				548				10,557
		Accrued investment income				355				675
		Premiums receivable				73,073				81,000
		Deferred insurance premiums				101,843				125,728
		Reinsurance balances receivable, net				194,914				210,405
		Salvage and subrogation recoverable				-				386
		Deferred policy acquisition costs				3,590				515
		Intangible assets				4,800				4,800
		Goodwill				33,050				33,050
		Other assets				3,767				3,184
			Total Assets		$	516,979			$	623,831
Liabilities and Equity
	Liabilities:
		Loss and loss expense reserve			$	192,943			$	263,686
		Deferred commission income				2,482				-
		Unearned premiums				105,678				128,793
		Ceded premium payable				71,989				89,078
		Payable to general agents				4,331				3,087
		Funds withheld				64,980				52,794
		Accounts payable and accrued liabilities				7,922				5,071
		Redeemable preference shares: ($0.10 par value and $1,000 redemption value; authorized shares - 75,000; issued and outstanding shares - nil and 38,600 at June 30, 2020 and December 31, 2019, respectively)				-				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				-				322
			Total Liabilities			467,597				570,306
	Shareholders' Equity:
		Common shares				4,698				4,618
		Additional paid-in capital				189,151				189,002
		Accumulated other comprehensive income				1,962				1,323
		Retained deficit				(152,482	)			(147,471	)
			Total Shareholders' Equity			43,329				47,472
		Non-controlling interest of preferred shares of subsidiaries				6,053				6,053
		Total Equity				49,382				53,525
			Total Liabilities and Equity		$	516,979			$	623,831
		See Notes to 2020 Consolidated Financial Statements available on American Overseas Group Ltd . Website at www.aoreltd.com

American Overseas Group Limited
Consolidated Statements of Operations
(unaudited)
For twelve months ended December 31, 2020 and 2019
(dollars in thousands, except share and per share amounts)
				Twelve Months ended December 31,
						2020				2019
	Revenues
		Net premiums earned			$	12,323			$	(5,423	)
		Fee income				9,946				11,591
	Change in fair value of credit derivatives
		Realized gains and other settlements				2				74
		Unrealized gains				-				191
			Net change in fair value of credit derivatives			2				265
		Net investment income				709				2,447
		Net realized gains on investments				1,580				1,824
		Fair value adjustment				(173	)			10,586
		Other income				323				383
			Total revenues			24,710				21,673
	Expenses
		Losses and loss adjustment expenses				10,522				7,474
		Acquisition expenses				4,837				1,627
		Operating expenses				12,802				13,605
		Other expense				78				-
		Interest expense				1,803				1,803
			Total expenses			30,042				24,509
Net (loss) available to common shareholders					$	(5,332	)		$	(2,836	)
		Income tax benefit (expense)				322				(287	)
Net (loss) before dividends						(5,010	)			(3,123	)
		Dividends on preference shares of subsidiary				-				(585	)
Net (loss) available to common shareholders					$	(5,010	)		$	(3,708	)
	Net (loss) per common share:
	Basic				$	(107.76	)		$	(80.34	)
	Diluted					(106.53	)			(80.13	)
	Weighted-average number of common shares outstanding:
	Basic					46,490				46,161
	Diluted					47,027				46,281
	See Notes to 2020 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)	December 31, 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			Operating Income
Property and casualty:
Net premiums earned	$	15,836											$	15,836
Losses and loss adjustment expenses		(8,945	)											(8,945	)
Acquisition expenses		(4,968	)											(4,968	)
Property/Casualty Underwriting Income		1,923												1,923
Fee income		9,946												9,946
Operating expenses		(11,040	)											(11,040	)
Income tax		322												322
Property and casualty		1,151			-			-			-			1,151
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		(1,825	)											(1,825	)
Financial guaranty		(6,783	)		-			(2	)		(15,996	)		(22,781	)
Corporate and Investing
Net investment income		709												709
Net realized gain/(loss)		1,580			(29,814	)					28,234			-
Fair value adjustment		(173	)								173			-
Gain on the sale of real estate		323												323
Operating expenses		64												64
Interest expense		(1,803	)											(1,803	)
Other expense, net of other income		(78	)											(78	)
Corporate and investing		622			(29,814	)		-			28,407			(785	)
Group total	$	(5,010	)	$	(29,814	)	$	(2	)	$	12,411		$	(22,415	)
AMERICAN OVERSEAS GROUP LTD.
NET INCOME AND OPERATING INCOME BY SEGMENT
(dollars in thousands)	December 31, 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			Operating Income
Property and casualty:
Net premiums earned	$	8,824											$	8,824
Losses and loss adjustment expenses		(3,701	)											(3,701	)
Acquisition expenses		(4,752	)											(4,752	)
Property/Casualty Underwriting Income		371												371
Fee income		11,591												11,591
Operating expenses		(10,741	)											(10,741	)
Amortization expense		-												-
Income tax		(287	)											(287	)
Property and casualty		934			-			-			-			934
Financial guaranty:
Net premiums earned		(14,247	)								13,129			(1,118	)
Net change in fair value of credit derivatives		265						(191	)					74
Losses and loss adjustment expenses		(3,773	)								(3,644	)		(7,417	)
Acquisition expenses		3,125									(2,868	)		257
Operating expenses		(2,753	)											(2,753	)
Financial guaranty		(17,383	)		-			(191	)		6,617			(10,957	)
Corporate and Investing
Net investment income		2,447												2,447
Net realized gain/(loss)		1,824			(1,824	)								-
Fair value adjustment		10,586									(10,586	)		-
Operating expenses		(111	)											(111	)
Interest expense		(1,803	)											(1,803	)
Other income, net of other expense		383												383
Corporate and investing		13,326			(1,824	)		-			(10,586	)		916
Group total	$	(3,123	)	$	(1,824	)	$	(191	)	$	(3,969	)	$	(9,107	)