GlobeNewswire Inc | Sep 23, 2020 04:00PM EDT

September 23, 2020

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 Companys 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 AOREs 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 LimitedConsolidated Balance Sheets(unaudited)As at June 30, 2020 and December 31, 2019(dollars in thousands) June 30, 2020 December 31, 2019Assets Investments: Fixed-maturity securities held as available for sale, $ 63,989 $ 129,748 at fair value Equity investments held as available for sale, 4,320 1,181 at fair value 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 199,802 210,405 receivable, net Salvage and subrogation - 386 recoverable Deferred policy acquisition 3,676 515 costs 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 5,660 5,071 liabilities Redeemable preference shares: ($0.10 par value and $1,000 redemption value; authorized shares - 75,000; issued 2,616 7,292 and outstanding shares - 13,600 and 38,600 at June 30, 2020 and December 31, 2019, respectively) 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 1,497 1,323 comprehensive income Retained deficit (149,754 ) (147,471 ) Total Shareholders' 45,435 47,472 Equity Non-controlling interest of preferred shares of 6,053 6,053 subsidiaries Total Equity 51,488 53,525 Total Liabilities and $ 524,685 $ 623,831 Equity See Notes to 2019 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com

American Overseas Group LimitedConsolidated 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 2 72 settlements Unrealized gains - 189 Net change in fair value of credit 2 261 derivatives Net investment income 592 1,336 Net realized gains on 1,500 87 investments Fair value adjustment 2,077 11,917 Other income - 31 Total revenues 13,860 9,302 Expenses Losses and loss 5,811 5,957 adjustment expenses 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 $ (2,066 ) $ (3,790 )shareholders Income tax (expense) (216 ) (2 ) Net (loss) before dividends (2,282 ) (3,792 ) Dividends on preference - - shares of subsidiary Net (loss) available to common $ (2,282 ) $ (3,792 )shareholders 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 June 30, 2020thousands) Net change Net income Net realized in available to loss on sales fair value Fair value Restructuring Operating common of of adjustments Charges income shareholders investments credit derivativesProperty and casualty: Net premiums $ 7,951 $ 7,951 earnedLosses andloss (4,234 ) (4,234 )adjustmentexpensesAcquisition (2,369 ) (2,369 )expensesProperty/Casualty 1,348 1,348 UnderwritingIncome Fee income 5,251 5,251 Operating (5,623 ) 362 (5,261 )expensesIncome tax (216 ) (76 ) (292 )Property and 760 - - - 286 1,046 casualty Financial guaranty: Net premiums (3,513 ) 3,703 190 earnedNet changein fairvalue of 2 (2 ) - creditderivativesLosses andloss (1,577 ) (19,546 ) (21,123 )adjustmentexpensesAcquisition 130 (153 ) (23 )expensesOperating (1,100 ) (1,100 )expensesFinancial (6,058 ) - (2 ) (15,996 ) - (22,056 )guaranty Corporateand Investing Netinvestment 592 592 incomeNet realizedloss on 1,500 (21,000 ) 19,500 - sales ofinvestmentsFair value 2,077 (2,077 ) - adjustmentOperating 33 33 expensesInterest (902 ) (902 )expenseOtherexpense, net (284 ) (284 )of otherincomeCorporateand 3,016 (21,000 ) - 17,423 - (561 )investing 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 June 30, 2019thousands) Net change Net income Net realized in available to loss on sales fair value Fair value Restructuring Operating common of of adjustments Charges income shareholders investments credit derivativesProperty and casualty: Net premiums $ 3,881 $ 3,881 earnedLosses andloss (972 ) (972 )adjustmentexpensesAcquisition (2,689 ) (2,689 )expensesProperty/Casualty 220 220 UnderwritingIncome Fee income 6,052 6,052 Operating (4,525 ) (4,525 )expensesIncome tax (2 ) (2 )Property and 1,745 - - - - 1,745 casualty Financial guaranty: Net premiums (14,263 ) 12,852 (1,411 )earnedNet changein fairvalue of 261 (189 ) 72 creditderivativesLosses andloss (4,985 ) (1,822 ) (6,807 )adjustmentexpensesAcquisition 3,133 (2,855 ) 278 expensesOperating (1,899 ) (1,899 )expensesFinancial (17,753 ) - (189 ) 8,175 - (9,767 )guaranty Corporateand Investing Netinvestment 1,336 1,336 incomeNet realizedloss on 87 (87 ) - sales ofinvestmentsFair value 11,917 (11,917 ) - adjustmentOperating (253 ) (253 )expensesInterest (902 ) (902 )expenseOtherincome, net 31 31 of otherexpenseCorporateand 12,216 (87 ) - (11,917 ) - 212 investing Group total $ (3,792 ) $ (87 ) $ (189 ) $ (3,741 ) $ - $ (7,810 )