INVESTMENTS

3 Months Ended

Mar. 31, 2023

Investments, All Other Investments [Abstract]

INVESTMENTS

4. INVESTMENTS

The Company from time to time invests in fixed-maturity debt securities and equity securities, with its fixed-maturity debt securities classified as available-for-sale. At March 31, 2023 and December 31, 2022, the Company did not hold any available-for-sale securities.

Proceeds received, and the gross realized gains and losses from sale of equity securities, for the periods ended March 31, 2023 and 2022, are as follows:

	Gross proceeds from sales		Gross Realized Gains		Gross Realized Losses
	($ in thousands)
Three Months Ended March 31, 2023
Equity securities	$	-	$	-	$	-
Three Months Ended March 31, 2022
Equity securities	$	208	$	7	$	-

Other Investments

In connection with Oxbridge Acquisition Corp. (“OXAC”) initial public offering (“IPO”) in August 2021, the Company’s affiliate OAC Sponsor Ltd. (“Sponsor”) purchased an aggregate 4,897,500 private placement warrants from OXAC (“Private Placement Warrants”) at a price of $1.00 per warrant. Each Private Placement Warrant is exercisable for one of OXAC’s Class A ordinary share at a price of $ 11.50 per share, and as such meets the definition of a derivative as outlined within ASC 815, Derivatives and Hedging. The Sponsor also purchased an aggregate of 2,875,000 of OXAC’s Class B ordinary shares (the “Class B shares”) par value $0.0001 per share for $25,000. The Class B shares and Private Placement Warrants were issued to and are held by Sponsor. The Class B shares of OXAC held by Sponsor will automatically convert into shares of OXAC’s Class A ordinary shares on a one-for- one basis at the time of OXAC’s initial business combination and are subject to certain transfer restrictions.

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

March 31, 2023

4. INVESTMENTS (continued)

On August 11, 2021, the Company acquired an aggregate of 1,500,000 ordinary shares and 3,094,999 preferred shares of Sponsor for an aggregate purchase price of $2,000,000. In connection with the organization of Sponsor, the Company placed approximately 34.7% of the risk capital and owns approximately 49.6% and 63.1% of the ordinary shares and preferred shares, respectively, of the Sponsor (the “Sponsor Equity Interest”). The preferred shares of Sponsor are nonvoting shares and generally entitle the holders thereof to receive the net proceeds, if any, received by Sponsor from the sale, exchange, or disposition of the Private Placement Warrants or the shares issuable upon the exercise thereof, and the ordinary shares of Sponsor (which are voting shares in Sponsor) are equivalent to the value of the Class B Shares of OXAC held by Sponsor.

The registration statement for OXAC’s IPO was declared effective on August 11, 2021 and on August 16, 2021, OXAC consummated the IPO with the sale of 11,500,000 units (the “Units”) at $10.00 per Unit, generating gross proceeds of $115,000,000. The Units trade on the NASDAQ Capital Market under the ticker symbol “OXACU”. After the securities comprising the units began separate trading on October 1, 2021, the Class A ordinary shares and public warrants were listed on NASDAQ under the symbols “OXAC” and “OXACW,” respectively.

On November 9, 2022, the OXAC held an extraordinary general meeting (the “EGM”) of shareholders. At the EGM, the OXAC’s shareholders were presented the proposals to extend the date by which OXAC must consummate a business combination from November 16, 2022 to August 16, 2023 (or such earlier date as determined by OXAC’s Board) by amending OXAC’s Amended and Restated Memorandum and Articles of Association (the “Extension Amendment Proposal”). The Extension Amendment Proposal to amend OXAC’s Amended and Restated Memorandum and Articles of Association (“Charter Amendment”) was approved.

In connection with the Extension Amendment Proposal, the Sponsor has agreed to contribute to OXAC a loan of $575,000 (the “Extension Loan” or “Promissory Note”), to be deposited into OXAC Trust Account to extend the Termination Date from November 16, 2022 to August 16, 2023. On November 14, 2022, the Company subscribed for additional ordinary shares in the Sponsor for an amount of $285,000, representing the Company’s pro-rata portion of the Extension Loan. As such, the Company’s Sponsor Equity Interest remained at approximately 49.6% and 63.1% of the ordinary shares and preferred shares, respectively, of the Sponsor.

The Company’s beneficial interests in OXAC’s Class B shares, the Private Placement Warrants and Extension Loan are recorded at fair value and are classified in “Other Investments” on the consolidated balance sheets. The fair value calculation of the Company’s beneficial interest in OXAC’s Class B shares and Private Placement Warrants is dependent on company-specific adjustments applied to the observable trading prices of OXAC Class A ordinary shares and public warrants. The fair value calculation of the Company’s beneficial interest in the Extension Loan is dependent on company-specific adjustments applied to the pro-rata original principal amount of the Extension Loan. The Company’s management estimates that a specific discount of 25.11% sufficiently captures the risk or profit that a market participant would require as compensation for i) the lack of marketability of the Company’s beneficial interests in the OXAC and ii) assuming the inherent risk of forfeiture and default if a business combination doesn’t occur within OXAC’s stipulated time frame. The Company has selected a discount of 25.11% based on recent fair value measurements by an independent valuation expert, and due to the unobservable nature of this company-specific adjustment, the Company classifies the Other Investment as Level 3 in the fair value hierarchy. Subsequent changes in fair value will be recorded in the consolidated statement of operations during the period of the change.

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

March 31, 2023

4. INVESTMENTS (continued)

As a result of the re-measurement of our investment in OXAC, we recognized for the three months ended March 31, 2023 and 2022, an unrealized gain (loss) on other investments of $381,000 and $(230,000), respectively, within our consolidated statements of operations.

Other investments consist of the following (in thousands):

	March 31, 2023
Oxbridge Acquisition Corp. Promissory Note	$	214
Oxbridge Acquisition Corp. Class B Ordinary Shares		11,590
Total	$	11,804

	December 31, 2022
Oxbridge Acquisition Corp. Promissory Note	$	214
Oxbridge Acquisition Corp. Class B Ordinary Shares		11,209
Total	$	11,423

	Three Months Ended March 31, 2023		Three Months ended March 31, 2022
Beginning of period	$	11,423	$	11,173
Unrealized gain (loss) on investment in affiliate		381		(230	)
End of period	$	11,804	$	10,943

If OXAC does not complete a business combination by August 16, 2023, the proceeds from the sale of the Private Placement Warrants (after OXAC IPO transaction costs) will be used to fund the redemption of the shares sold in the OXAC IPO (subject to the requirements of applicable law), and the Private Placement Warrants will expire without value. The Sponsor holds approximately 20% of the total ordinary shares (Class A and Class B) in OXAC along with the 4,897,500 Private Placement Warrants, and the Promissory Note of $575,000. OXAC is managed by the Company’s executive officers.

Assets Measured at Estimated Fair Value on a Recurring Basis

The following table presents information about the Company’s financial assets measured at estimated fair value on a recurring basis that is reflected in the consolidated balance sheets at carrying value. The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of March 31, 2023 and December 31, 2022:

	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
	($ in thousands)
As of March 31, 2023
Financial Assets:
Cash and cash equivalents	$	729	$	-	$	-	$	729
Restricted cash and cash equivalents	$	2,891	$	-	$	-	$	2,891
Other investments	$	-	$	-	$	11,804	$	11,804
Equity securities	$	718	$	-	$	-	$	718
Total	$	4,338	$	-	$	11,804	$	16,142

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

March 31, 2023

4. INVESTMENTS (continued)

Assets Measured at Estimated Fair Value on a Recurring Basis (continued)

	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
	($ in thousands)
As of December 31, 2022
Financial Assets:
Cash and cash equivalents	$	1,207	$	-	$	-	$	1,207
Restricted cash and cash equivalents	$	2,721	$	-	$	-	$	2,721
Other investments	$	-	$	-	$	11,423	$	11,423
Equity securities	$	642	$	-	$	-	$	642
Total	$	4,570	$	-	$	11,423	$	15,993

At December 31, 2022, the Company utilized the services of an independent valuation expert (“Valuation Expert”) to determine the fair value of the Company’s indirect investment in OXAC. The Valuation Expert observed that the Class A shares of OXAC trades in a relatively liquid market at the measurement date, and the Company’s share of OXAC’s Class B shares were convertible to OXAC’s Class A Shares on a 1 to 1 basis. The Valuation Expert applied this ratio to the value of OXAC’s Class A shares and then applied an additional 25.11% discount to account for the lack of marketability and the inherent risk of forfeiture should a business combination not occur. At March 31, 2023, management determined the discount rate of 25.11% was reasonable due to no significant variations in the lack of marketability of the securities at December 31, 2022 through to present. Additionally, management concludes that with respect to OXAC, there is reduced inherent risk of forfeiture and reduced default probability due to OXAC’s additional extension through to August 16, 2023 as well as the proposed business combination as disclosed in Note 17.

Historically, the Black-Scholes option pricing model to determine the fair value of the Company’s beneficial interest in OXAC’s private placement warrants with a strike price of $11.50. The Valuation Expert observed volatility at 2.97%, term of 0.67 years, expected dividend yield of 0% and the risk-free rate of 4.85%. At March 31, 2023 and December 31, 2022, the fair value of the Private Placement Warrants were determined to be $0.

Management has estimated the fair value of the Company’s beneficial interest in the Promissory Note to be equivalent to the discount rate of 25.11%, as determined above, applied to the pro-rata original principal amount of the Promissory Note.

There were no transfers between Levels 1, 2 or 3 during the three months ended March 31, 2023 or 2022.

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the other investments classified as Level 3:

	Other
	Investments
	(in thousands)
Fair value of Level 3 other investment at January 1, 2023	$	11,423
Change in valuation inputs or other assumptions		381
Fair value of Level 3 other investment at March 31, 2023	$	11,804

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

March 31, 2023