GlobeNewswire Inc | Jun 25, 2021 04:00PM EDT

June 25, 2021

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 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 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 LimitedConsolidated Balance Sheets(unaudited)As at December 31, 2020 and December 31, 2019 (dollars in thousands) December 31, December 31, 2020 2019Assets Investments: Fixed-maturity securities held as $ 72,642 $ 129,748 available for sale, at fair value Equity investments held as 4,143 1,181 available for sale, at fair value 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 7,922 5,071 liabilities Redeemable preference shares: ($0.10 par value and $1,000 redemption value; authorized shares - 75,000; issued - 7,292 and outstanding shares - nil 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 - 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 1,962 1,323 income Retained deficit (152,482 ) (147,471 ) Total Shareholders' Equity 43,329 47,472 Non-controlling interest of preferred 6,053 6,053 shares of subsidiaries 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 LimitedConsolidated 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 2 265 derivatives 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 - (585 ) subsidiary 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 December 31, 2020thousands) Net Change Net Income Net Realized in Available Loss Fair Value Fair Value Operating to Common on Sales of of Adjustments Income Shareholders Investments Credit DerivativesProperty and casualty: Net premiums $ 15,836 $ 15,836 earnedLosses andloss (8,945 ) (8,945 )adjustmentexpensesAcquisition (4,968 ) (4,968 )expensesProperty/Casualty 1,923 1,923 UnderwritingIncome Fee income 9,946 9,946 Operating (11,040 ) (11,040 )expensesIncome tax 322 322 Property and 1,151 - - - 1,151 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 (1,825 ) (1,825 )expensesFinancial (6,783 ) - (2 ) (15,996 ) (22,781 )guaranty Corporateand Investing Netinvestment 709 709 incomeNet realized 1,580 (29,814 ) 28,234 - gain/(loss)Fair value (173 ) 173 - adjustmentGain on thesale of real 323 323 estateOperating 64 64 expensesInterest (1,803 ) (1,803 )expenseOtherexpense, net (78 ) (78 )of otherincomeCorporateand 622 (29,814 ) - 28,407 (785 )investing Group total $ (5,010 ) $ (29,814 ) $ (2 ) $ 12,411 $ (22,415 )

AMERICAN OVERSEAS GROUP LTD. NET INCOME AND OPERATING INCOME BY SEGMENT (dollars in December 31, 2019thousands) Net Change Net Income Net Realized in Available Loss Fair Value Fair Value Operating to Common on Sales of of Adjustments Income Shareholders Investments Credit DerivativesProperty and casualty: Net premiums $ 8,824 $ 8,824 earnedLosses andloss (3,701 ) (3,701 )adjustmentexpensesAcquisition (4,752 ) (4,752 )expensesProperty/Casualty 371 371 UnderwritingIncome Fee income 11,591 11,591 Operating (10,741 ) (10,741 )expensesAmortization - - expenseIncome tax (287 ) (287 )Property and 934 - - - 934 casualty Financial guaranty: Net premiums (14,247 ) 13,129 (1,118 )earnedNet changein fairvalue of 265 (191 ) 74 creditderivativesLosses andloss (3,773 ) (3,644 ) (7,417 )adjustmentexpensesAcquisition 3,125 (2,868 ) 257 expensesOperating (2,753 ) (2,753 )expensesFinancial (17,383 ) - (191 ) 6,617 (10,957 )guaranty Corporateand Investing Netinvestment 2,447 2,447 incomeNet realized 1,824 (1,824 ) - gain/(loss)Fair value 10,586 (10,586 ) - adjustmentOperating (111 ) (111 )expensesInterest (1,803 ) (1,803 )expenseOtherincome, net 383 383 of otherexpenseCorporateand 13,326 (1,824 ) - (10,586 ) 916 investing Group total $ (3,123 ) $ (1,824 ) $ (191 ) $ (3,969 ) $ (9,107 )