OXBRIDGE RE HOLDINGS LIMITED
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||
(Exact
name of registrant as specified in its charter)
|
Cayman
Islands
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|
98-1150254
|
(State
or other jurisdiction of incorporation or
organization)
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|
(I.R.S.
Employer Identification
No.)
|
Strathvale
House, 2nd
Floor90 North Church Street, GeorgetownP.O. Box 469
Grand
Cayman, Cayman Islands
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|
KY1-9006
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(Address
of principal executive offices)
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|
(Zip
Code)
|
Large
accelerated filer ☐
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|
Accelerated
filer ☐
|
Non-accelerated
filer ☐
|
|
Smaller
reporting company ☑
|
Emerging growth
company ☑
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|
Page
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||
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|
Item
1.
|
Financial
Statements
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|
|
|
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|
Consolidated
Balance Sheets
March
31, 2018 (unaudited) and December 31, 2017
|
3
|
|
|
|
|
Consolidated
Statements of Operations
Three
months Ended March 31, 2018 and 2017 (unaudited)
|
4
|
|
|
|
|
Consolidated
Statements of Comprehensive (Loss) Income
Three
months Ended March 31, 2018 and 2017 (unaudited)
|
5
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|
|
|
|
Consolidated
Statements of Cash Flows
Three
months Ended March 31, 2018 and 2017 (unaudited)
|
6
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|
|
|
|
Consolidated
Statements of Changes in Shareholders’ Equity
Three
months Ended March 31, 2018 and 2017 (unaudited)
|
8
|
|
|
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
9
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|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
32
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|
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|
Item
3.
|
Quantitative and
Qualitative Disclosures About Market Risk
|
43
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|
|
|
Item
4.
|
Controls and
Procedures
|
43
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PART II – OTHER INFORMATION
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|
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|
Item 1. |
Legal
Proceedings
|
44
|
|
|
|
Item 1A. |
Risk
Factors
|
44
|
|
|
|
Item 2. |
Unregistered Sales
of Equity Securities and Use of Proceeds
|
44
|
|
|
|
Item 3. |
Defaults Upon
Senior Securities
|
44
|
|
|
|
Item 4. |
Mine
Safety Disclosures
|
44
|
|
|
|
Item 5. |
Other
Information
|
44
|
|
|
|
Item 6. |
Exhibits
|
44
|
|
|
|
|
Signatures
|
46
|
|
At March 31,
2018
|
At December 31,
2017
|
|
(Unaudited)
|
|
Assets
|
|
|
Investments:
|
|
|
Fixed-maturity
securities, available for sale, at fair value (amortized
cost: $4,416 and $4,450,
respectively)
|
$4,396
|
4,433
|
Equity securities,
available for sale, at fair value (cost of $2,058 in
2017)
|
-
|
2,036
|
Equity securities,
at fair value (cost of $1,652 in 2018)
|
1,462
|
-
|
Total
investments
|
5,858
|
6,469
|
Cash
and cash equivalents
|
5,222
|
7,763
|
Restricted
cash and cash equivalents
|
6,240
|
3,124
|
Accrued
interest and dividend receivable
|
31
|
39
|
Premiums
receivable
|
3,582
|
3,798
|
Deferred
policy acquisition costs
|
40
|
48
|
Prepayment
and other assets
|
127
|
116
|
Property
and equipment, net
|
30
|
36
|
Total
assets
|
$21,130
|
21,393
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
Liabilities:
|
|
|
Reserve
for losses and loss adjustment expenses
|
$4,154
|
4,836 #
|
Loss
experience refund payable
|
270
|
135
|
Losses
payable
|
376
|
386
|
Unearned
premiums reserve
|
1,657
|
2,012
|
Accounts
payable and other liabilities
|
938
|
106
|
Total
liabilities
|
7,395
|
7,475
|
|
|
|
Shareholders’
equity:
|
|
|
Ordinary
share capital, (par value $0.001, 50,000,000 shares authorized;
5,733,587 shares issued and outstanding)
|
6
|
6
|
Additional
paid-in capital
|
32,131
|
32,100
|
Accumulated
Deficit
|
(18,382)
|
(18,149)
|
Accumulated
other comprehensive loss
|
(20)
|
(39)
|
Total
shareholders’ equity
|
13,735
|
13,918
|
Total
liabilities and shareholders’ equity
|
$21,130
|
21,393
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
|
|
|
|
|
|
Revenue
|
|
|
Assumed
premiums
|
$-
|
880
|
Change
in loss experience refund payable
|
(135)
|
(748)
|
Change
in unearned premiums reserve
|
355
|
1,416
|
|
|
|
Net
premiums earned
|
220
|
1,548
|
Net
income from derivative instruments
|
168
|
-
|
Net
investment income
|
72
|
86
|
Net
realized investment (losses) gains
|
(173)
|
2
|
Change
in fair value of equity securities
|
(172)
|
-
|
|
|
|
Total
revenue
|
115
|
1,636
|
|
|
|
Expenses
|
|
|
Losses
and loss adjustment expenses
|
-
|
(32)
|
Policy
acquisition costs and underwriting expenses
|
8
|
63
|
General
and administrative expenses
|
318
|
335
|
|
|
|
Total
expenses
|
326
|
366
|
|
|
|
Net
(loss) income
|
$(211)
|
1,270
|
|
|
|
|
|
|
(Loss) Earnings per share
|
|
|
Basic
and Diluted
|
$(0.04)
|
0.22
|
|
|
|
Weighted-average shares outstanding
|
|
|
Basic
and Diluted
|
5,733,587
|
5,891,926
|
|
|
|
|
|
|
Dividends paid per share
|
$-
|
0.12
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
|
|
|
|
|
|
Net
(loss) income
|
$(211)
|
1,270
|
Other
comprehensive (loss) income:
|
|
|
Change
in unrealized loss on investments:
|
|
|
Net
unrealized (loss) gain arising during the period
|
(176)
|
(41)
|
Reclassification
adjustment for net realized losses (gains) included in net (loss)
income
|
173
|
(2)
|
|
|
|
Net
change in unrealized loss
|
(3)
|
(43)
|
|
|
|
Total
other comprehensive loss
|
(3)
|
(43)
|
|
|
|
Comprehensive
(loss) income
|
$(214)
|
1,227
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
Operating activities
|
|
|
Net
(loss) income
|
$(211)
|
1,270
|
Adjustments
to reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
Stock-based
compensation
|
31
|
31
|
Net
amortization of premiums on investments in fixed-maturity
securities
|
7
|
21
|
Depreciation
and amortization
|
6
|
5
|
Net
realized investment losses (gains)
|
173
|
(2)
|
Change
in fair value of equity securities
|
172
|
-
|
Change
in operating assets and liabilities:
|
|
|
Accrued
interest and dividend receivable
|
8
|
14
|
Premiums
receivable
|
216
|
2,401
|
Deferred
policy acquisition costs
|
8
|
20
|
Prepayment
and other receivables
|
(11)
|
(13)
|
Reserve
for losses and loss adjustment expenses
|
(682)
|
(3,018)
|
Loss
experience refund payable
|
135
|
748
|
Losses
payable
|
(10)
|
-
|
Unearned
premiums reserve
|
(355)
|
(1,417)
|
Accounts
payable and other liabilities
|
832
|
(48)
|
|
|
|
Net
cash provided by operating activities
|
$319
|
12
|
|
|
|
Investing activities
|
|
|
Purchase
of fixed-maturity securities
|
(2,973)
|
(3,987)
|
Purchase
of equity securities
|
(5,804)
|
(3,032)
|
Proceeds
from sale of fixed-maturity and equity securities
|
9,033
|
3,577
|
|
|
|
Net
cash provided by (used in) investing activities
|
$256
|
(3,442)
|
|
|
|
Financing activities
|
|
|
Repurchases
of common stock under share repurchase plan
|
-
|
(338)
|
Dividends
paid
|
-
|
(705)
|
|
|
|
Net
cash used in financing activities
|
$-
|
(1,043)
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
|
|
|
Cash
and cash equivalents, and restricted cash and cash
equivalents:
|
|
|
Net
change during the period
|
575
|
(4,473)
|
Balance,
beginning of period
|
10,887
|
35,682
|
|
|
|
Balance,
end of period
|
$11,462
|
31,209
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
Interest
paid
|
-
|
-
|
Income
taxes paid
|
-
|
-
|
|
|
|
Non-cash investing activities
|
|
|
Net
change in unrealized loss on securities available for
sale
|
(3)
|
(43)
|
|
Ordinary Share Capital
|
Additional Paid-in
|
Accumulated
|
Accumulated Other
|
Total Shareholders'
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Comprehensive Loss
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
5,916,149
|
6
|
33,034
|
4,534
|
(411)
|
37,163
|
Cash
dividends paid
|
-
|
-
|
-
|
(705)
|
-
|
(705)
|
Repurchase
and retirement of common stock under share repurchase
plan
|
(54,277)
|
-
|
(338)
|
-
|
-
|
(338)
|
Net
income for the period
|
-
|
-
|
-
|
1,270
|
-
|
1,270
|
Stock-based
compensation
|
-
|
-
|
31
|
-
|
-
|
31
|
Total
other comprehensive loss
|
-
|
-
|
-
|
-
|
(43)
|
(43)
|
Balance
at March 31, 2017
|
5,861,872
|
6
|
32,727
|
5,099
|
(454)
|
37,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2017
|
5,733,587
|
6
|
32,100
|
(18,149)
|
(39)
|
13,918
|
Cumulative
effect of change in accounting for equity securities as of January
1, 2018
|
-
|
-
|
-
|
(22)
|
22
|
-
|
Net
loss for the period
|
-
|
-
|
-
|
(211)
|
-
|
(211)
|
Stock-based
compensation
|
-
|
-
|
31
|
-
|
-
|
31
|
Total
other comprehensive loss
|
-
|
-
|
-
|
-
|
(3)
|
(3)
|
Balance
at March 31, 2018
|
5,733,587
|
6
|
32,131
|
(18,382)
|
(20)
|
13,735
|
Level
1
|
Inputs
that reflect unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date;
|
|
|
Level
2
|
Inputs
other than quoted prices that are observable for the asset or
liability either directly or indirectly, including inputs in
markets that are not considered to be active; and
|
|
|
Level
3
|
Inputs
that are unobservable.
|
|
At March 31,
|
At December 31,
|
|
2018
|
2017
|
|
(in thousands)
|
|
|
|
|
Cash
on deposit
|
$701
|
$4,052
|
Cash
held with custodians
|
4,521
|
3,711
|
Restricted
cash held in trust
|
6,240
|
3,124
|
|
|
|
Total
|
11,462
|
10,887
|
|
Cost or
Amortized
Cost
|
Gross
Unrealized Gain
|
Gross
Unrealized Loss
|
Estimated
Fair
Value
($000)
|
|
($ in
thousands)
|
|||
As of March 31,
2018
|
|
|
|
|
Fixed-maturity securities
|
|
|
|
|
U.S. Treasury and
agency securities
|
$4,416
|
$1
|
$(21)
|
$4,396
|
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity securities
|
4,416
|
1
|
(21)
|
4,396
|
|
|
|
|
|
|
|
|
|
|
Total available for
sale securities
|
$4,416
|
$1
|
$(21)
|
$4,396
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2017
|
|
|
|
|
Fixed-maturity securities
|
|
|
|
|
U.S. Treasury and
agency securities
|
$4,450
|
$-
|
$(17)
|
$4,433
|
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity securities
|
4,450
|
-
|
(17)
|
4,433
|
|
|
|
|
|
Mutual
funds
|
400
|
29
|
-
|
429
|
Preferred
stocks
|
200
|
-
|
(1)
|
199
|
Common
stocks
|
1,458
|
12
|
(62)
|
1,408
|
|
|
|
|
|
Total equity securities (1)
|
2,058
|
41
|
(63)
|
2,036
|
|
|
|
|
|
|
|
|
|
|
Total available for
sale securities
|
$6,508
|
$41
|
$(80)
|
$6,469
|
|
Amortized
Cost
|
Estimated
Fair
Value
|
|
($ in
thousands)
|
|
As of March 31,
2018
|
|
|
Available
for sale
|
|
|
Due within one
year
|
$994
|
994
|
Due after one year
through five years
|
3,422
|
3,402
|
|
|
|
|
$4,416
|
$4,396
|
|
|
|
|
|
|
As of December 31,
2017
|
|
|
Available
for sale
|
|
|
Due within one
year
|
$3,007
|
$3,003
|
Due after one year
through five years
|
1,443
|
1,430
|
|
|
|
|
$4,450
|
$4,433
|
|
Gross proceeds
from sales
|
Gross
Realized Gains
|
Gross
Realized
Losses
|
|
($ in
thousands)
|
||
Three Months Ended March 31, 2018
|
|
|
|
Available-for-sale
fixed-maturity securities
|
$3,000
|
$3
|
$-
|
|
|
|
|
Equity
securities
|
$6,033
|
$418
|
$(594)
|
|
|
|
|
Three Months Ended March 31, 2017
|
|
|
|
Available-for-sale
fixed-maturity securities
|
$-
|
$-
|
$-
|
|
|
|
|
Equity
securities
|
$3,577
|
$192
|
$(190)
|
|
Less Than
Twelve Months
|
Twelve Months
or Greater
|
Total
|
|||
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair Value
|
As
of March 31, 2018
|
($ in
thousands)
|
($ in
thousands)
|
($ in
thousands)
|
|||
Fixed maturity securities
|
|
|
|
|
|
|
U.S. Treasury and
agency securities
|
$21
|
2,910
|
-
|
-
|
21
|
2,910
|
|
|
|
|
|
|
|
Total
fixed-maturity securities
|
21
|
2,910
|
-
|
-
|
21
|
2,910
|
|
|
|
|
|
|
|
Total available for
sale securities
|
$21
|
$2,910
|
$-
|
$-
|
$21
|
$2,910
|
|
Less Than
Twelve Months
|
Twelve Months
or Greater
|
Total
|
|||
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
As
of December 31, 2017
|
($ in
thousands)
|
($ in
thousands)
|
($ in
thousands)
|
|||
Fixed maturity securities
|
|
|
|
|
|
|
U.S. Treasury and
agency securities
|
$13
|
1,428
|
4
|
3,003
|
17
|
4,431
|
|
|
|
|
|
|
|
Total
fixed-maturity securities
|
13
|
1,428
|
4
|
3,003
|
17
|
4,431
|
|
|
|
|
|
|
|
Equity securities
|
|
|
|
|
|
|
Preferred
stocks
|
1
|
199
|
-
|
-
|
1
|
199
|
All other common
stocks
|
36
|
769
|
26
|
174
|
62
|
943
|
|
|
|
|
|
|
|
Total equity
securities
|
37
|
968
|
26
|
174
|
63
|
1,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for
sale securities
|
$50
|
$2,396
|
$30
|
$3,177
|
$80
|
$5,573
|
|
Fair Value
Measurements Using
|
|
||
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
Total
|
As of March 31, 2018
|
($ in
thousands)
|
|||
Financial
Assets:
|
|
|
|
|
Cash and cash equivalents
|
$5,222
|
$-
|
$-
|
$5,222
|
|
|
|
|
|
Restricted cash and cash equivalents
|
$6,240
|
$-
|
$-
|
$6,240
|
|
|
|
|
|
Fixed-maturity securities:
|
|
|
|
|
U.S. Treasury and
agency securities
|
4,396
|
-
|
-
|
4,396
|
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity securities
|
4,396
|
-
|
-
|
4,396
|
|
|
|
|
|
Mutual
funds
|
563
|
-
|
-
|
563
|
Preferred
stocks
|
198
|
-
|
-
|
198
|
All other common
stocks
|
701
|
-
|
-
|
701
|
|
|
|
|
|
Total equity
securities
|
1,462
|
-
|
-
|
1,462
|
|
|
|
|
|
Total
securities
|
5,858
|
-
|
-
|
5,858
|
|
|
|
|
|
Total
|
$17,320
|
$-
|
$-
|
$17,320
|
|
Fair Value
Measurements Using
|
|
||
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
Total
|
As of December 31, 2017
|
($ in thousands)
|
|||
Financial
Assets:
|
|
|
|
|
Cash and cash equivalents
|
$7,763
|
$-
|
$-
|
$7,763
|
|
|
|
|
|
Restricted cash and cash equivalents
|
$3,124
|
$-
|
$-
|
$3,124
|
|
|
|
|
|
Fixed-maturity securities:
|
|
|
|
|
U.S. Treasury and
agency securities
|
4,433
|
-
|
-
|
4,433
|
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity securities
|
4,433
|
-
|
-
|
4,433
|
|
|
|
|
|
|
|
|
|
|
Mutual
funds
|
429
|
-
|
-
|
429
|
Preferred
stocks
|
199
|
-
|
-
|
199
|
All other common
stocks
|
1,408
|
-
|
-
|
1,408
|
|
|
|
|
|
Total equity
securities
|
2,036
|
-
|
-
|
2,036
|
|
|
|
|
|
Total available for
sale securities
|
6,469
|
-
|
-
|
6,469
|
|
|
|
|
|
Total
|
$17,356
|
$-
|
$-
|
$17,356
|
|
At March 31,
|
At March 31,
|
|
2018
|
2017
|
|
(in thousands)
|
|
|
|
|
Balance,
beginning of period
|
$4,836
|
$8,702
|
Incurred
related to:
|
|
|
Current
period
|
-
|
-
|
Prior
period
|
-
|
(32)
|
Total
incurred
|
-
|
(32)
|
Paid
related to:
|
|
|
Current
period
|
-
|
-
|
Prior
period
|
(682)
|
(2,986)
|
Total
paid
|
(682)
|
(2,986)
|
Balance,
end of period
|
$4,154
|
$5,684
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
|
|
|
|
|
|
Numerator:
|
|
|
Net
(loss) earnings
|
$(211)
|
1,270
|
|
|
|
Denominator:
|
|
|
Weighted
average shares - basic
|
5,733,587
|
5,891,926
|
Effect
of dilutive securities - Stock options
|
-
|
-
|
Shares
issuable upon conversion of warrants
|
-
|
-
|
Weighted
average shares - diluted
|
5,733,587
|
5,891,926
|
(Loss)
Earnings per shares - basic
|
$(0.04)
|
0.22
|
(Loss)
Earnings per shares - diluted
|
$(0.04)
|
0.22
|
|
Number
of
Options
|
Weighted-Average
Exercise
Price
|
Weighted-Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
Outstanding
at January 1, 2018
|
250,000
|
$6.01
|
|
|
Outstanding
at March 31, 2018
|
250,000
|
$6.01
|
7.2 years
|
$-
|
Exercisable
at March 31, 2018
|
176,875
|
$6.01
|
7.2 years
|
$-
|
Outstanding
at January 1, 2017
|
215,000
|
$6.00
|
|
|
Granted
|
35,000
|
$6.06
|
|
|
Outstanding
at March 31, 2017
|
250,000
|
$6.01
|
8.2 years
|
$137,500
|
Exercisable
at March 31, 2017
|
114,375
|
$6.01
|
8.2 years
|
$62,906
|
|
2017
|
|
|
Expected
dividend yield
|
8%
|
Expected
volatility
|
35%
|
Risk-free
interest rate
|
2.48%
|
Expected
life (in years)
|
10
|
Per
share grant date fair value of options issued
|
$0.73
|
|
Weighted-Number
of
Restricted
Stock Awards
|
Weighted-Average
Grant Date Fair
Value
|
Nonvested
at January 1, 2018
|
15,000
|
$5.86
|
Vested
|
(3,750)
|
|
Nonvested
at March 31, 2018
|
11,250
|
$5.86
|
|
|
|
Nonvested
at January 1, 2017
|
30,000
|
|
Vested
|
(3,750)
|
|
Nonvested
at March 31, 2017
|
26,250
|
$5.86
|
|
At March
31,
2018
|
At December
31,
2017
|
|
(in
thousands)
|
|
Loss experience refund
payable
|
$270
|
$135
|
Unearned premium
reserve
|
$1,657
|
$2,012
|
|
Three Months Ended
March 31,
|
|
|
2018
|
2017
|
|
(in
thousands)
|
|
|
|
|
Revenue
|
|
|
Change in loss experience
refund payable
|
$(135)
|
$(630)
|
Change in unearned
premiums reserve
|
$355
|
$850
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
2017
|
|
|
|
|
|
|
Revenue
|
|
|
Assumed
premiums
|
$-
|
880
|
Change
in loss experience refund payable
|
(135)
|
(748)
|
Change
in unearned premiums reserve
|
355
|
1,416
|
|
|
|
Net
premiums earned
|
220
|
1,548
|
Net
income from derivative instruments
|
168
|
-
|
Net
investment income
|
72
|
86
|
Net
realized investment (losses) gains
|
(173)
|
2
|
Change
in fair value of equity securities
|
(172)
|
-
|
|
|
|
Total
revenue
|
115
|
1,636
|
|
|
|
Expenses
|
|
|
Losses
and loss adjustment expenses
|
-
|
(32)
|
Policy
acquisition costs and underwriting expenses
|
8
|
63
|
General
and administrative expenses
|
318
|
335
|
|
|
|
Total
expenses
|
326
|
366
|
|
|
|
Net
(loss) income
|
$(211)
|
1,270
|
|
|
|
|
|
|
(Loss) Earnings per share
|
|
|
Basic
and Diluted
|
$(0.04)
|
0.22
|
|
|
|
Dividends paid per share
|
$-
|
0.12
|
|
|
|
|
|
|
Performance
ratios to net premiums earned:
|
|
|
Loss
ratio
|
0.0%
|
-2.1%
|
Acquisition
cost ratio
|
3.6%
|
4.1%
|
Expense
ratio
|
84.0%
|
25.7%
|
Combined
ratio
|
84.0%
|
23.6%
|
Exhibit No.
|
|
Document
|
|
|
|
|
Certifications
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the
Securities Exchange Act of 1934.
|
|
|
|
|
|
Certifications
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the
Securities Exchange Act of 1934.
|
|
|
|
|
|
Written
Statement of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. §1350.
|
|
|
|
|
101
|
|
The
following materials from Oxbridge Re Holdings Limited’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2018
are filed herewith, formatted in XBRL (Extensible Business
Reporting Language): (i) the Consolidated Balance Sheets, (ii) the
Consolidated Statements of Income, (iii) the Consolidated
Statements of Comprehensive Income, (iv) the Consolidated
Statements of Cash Flows, (v) the Consolidated Statements of
Changes in Shareholders’ Equity and (vi) the Notes to
Consolidated Financial Statements.
|
|
OXBRIDGE
RE HOLDINGS LIMITED
|
|
|
|
|
|
|
Date: May 15, 2018 |
By:
|
/s/
JAY
MADHU
|
|
|
|
Jay
Madhu
|
|
|
|
Chief
Executive Officer and President (Principal Executive
Officer)
|
|
|
|
|
|
Date: May 15,
2018
|
By:
|
/s/
WRENDON
TIMOTHY
|
|
|
|
Wrendon
Timothy
|
|
|
|
Chief
Financial Officer and Secretary (Principal Financial Officer and
Principal Accounting Officer)
|
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 11, 2018 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | OXBR | |
Entity Registrant Name | OXBRIDGE RE HOLDINGS Ltd | |
Entity Central Index Key | 0001584831 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,733,587 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Fixed-maturity securities, available for sale, at fair value amortized cost | $ 4,416 | $ 4,450 |
Equity securities, available for sale, at fair value cost | $ 2,058 | |
Equity securities, at fair value cost | $ 1,462 | |
Ordinary share, par value | $ 0.001 | $ 0.001 |
Ordinary shares, authorized | 50,000,000 | 50,000,000 |
Ordinary shares, issued | 5,733,587 | 5,733,587 |
Ordinary shares, outstanding | 5,733,587 | 5,733,587 |
Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenue | ||
Assumed premiums | $ 0 | $ 880 |
Change in loss experience refund payable | (135) | (748) |
Change in unearned premiums reserve | 355 | 1,416 |
Net premiums earned | 220 | 1,548 |
Net income from derivative instruments | 168 | 0 |
Net investment income | 72 | 86 |
Net realized investment (losses) gains | 173 | (2) |
Change in fair value of equity securities | (172) | 0 |
Total revenue | 115 | 1,636 |
Expenses | ||
Losses and loss adjustment expenses | 0 | (32) |
Policy acquisition costs and underwriting expenses | 8 | 63 |
General and administrative expenses | 318 | 335 |
Total expenses | 326 | 366 |
Net (loss) income | $ (211) | $ 1,270 |
(Loss) Earnings per share Basic and Diluted | $ (0.04) | $ 0.22 |
Weighted-average shares outstanding: Basic and Diluted | 5,733,587 | 5,891,926 |
Dividends paid per share | $ 0 | $ 0.12 |
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net (loss) income | $ (211) | $ 1,270 |
Change in unrealized loss on investments: | ||
Unrealized (loss) gain arising during the period | (176) | (41) |
Reclassification adjustment for net realized losses (gains) included in net (loss) income | 173 | (2) |
Net change in unrealized loss | (3) | (43) |
Total other comprehensive loss | (3) | (43) |
Comprehensive (loss) income | $ (214) | $ 1,227 |
Organization and Basis of Presentation |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2018 | |||||
Accounting Policies [Abstract] | |||||
Organization and Basis of Presentation |
Oxbridge Re Holdings Limited (the “Company”) was incorporated as an exempted company on April 4, 2013 under the laws of the Cayman Islands. Oxbridge Re Holdings Limited owns 100% of the equity interest in Oxbridge Reinsurance Limited, an entity incorporated on April 23, 2013 under the laws of the Cayman Islands and for which a Class “C” Insurer’s license was granted on April 29, 2013 under the provisions of the Cayman Islands Insurance Law. Oxbridge Re Holdings Limited also owns 100% of the equity interest in Oxbridge Re NS Ltd., an entity incorporated as an exempted company on December 22, 2017 under the laws of the Cayman Islands to facilitate potential future hedging and investment activities with respect to our reinsurance risks but that does not yet have any operations, assets, or, liabilities as of December 31, 2017. The Company, through its subsidiaries (collectively “Oxbridge Re”) provides collateralized reinsurance in the property catastrophe market and invests in various insurance-linked securities. The Company operates as a single business segment through its wholly-owned subsidiaries. The Company’s headquarters and principal executive offices are located at Strathvale House, 90 North Church Street, Georgetown, Grand Cayman, Cayman Islands, and have their registered offices at P.O. Box 309, Ugland House, Grand Cayman, Cayman Islands.
The Company’s ordinary shares and warrants are listed on The NASDAQ Capital Market under the symbols “OXBR” and “OXBRW,” respectively.
The accompanying unaudited, consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying interim consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s consolidated financial position as of March 31, 2018 and the consolidated results of operations and cash flows for the periods presented. The consolidated results of operations for interim periods are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ended December 31, 2018. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2017 included in the Company’s Form 10-K, which was filed with the SEC on March 13, 2018.
In preparing the interim unaudited consolidated financial statements, management was required to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the financial reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective and complex and consequently actual results may differ from these estimates, which would be reflected in future periods.
Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the reserve for losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make these estimates. In addition, accounting policies specific to valuation of investments, assessment of other-than-temporary impairment (“OTTI”) and loss experience refund payable involve significant judgments and estimates material to the Company’s consolidated financial statements. Although considerable variability is likely to be inherent in these estimates, management believes that the amounts provided are reasonable. These estimates are continually reviewed and adjusted if necessary. Such adjustments are reflected in current operations.
All significant intercompany balances and transactions have been eliminated. |
Significant Accounting Policies |
3 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | |||||||||||
Accounting Policies [Abstract] | |||||||||||
Significant Accounting Policies |
Cash and cash equivalents: Cash and cash equivalents are comprised of cash and short term investments with original maturities of three months or less.
Restricted cash and cash equivalents: Restricted cash and cash equivalents represent funds held in accordance with the Company’s trust agreements with ceding insurers and trustees, which requires the Company to maintain collateral with a market value greater than or equal to the limit of liability, less unpaid premium.
Investments: The Company’s investments consist of fixed-maturity securities and equity securities, and for which its fixed-maturity securities are classified as available-for-sale. The Company’s investments are carried at fair value with changes in fair value included as a separate component of accumulated other comprehensive loss in shareholders’ equity with respect to its fixed-maturity securities. For the Company’s investment in equity securities, the changes in fair value are recorded within the consolidated statements of income.
Unrealized gains or losses are determined by comparing the fair market value of the securities with their cost or amortized cost. Realized gains and losses on investments are recorded on the trade date and are included in the consolidated statements of income. The cost of securities sold is based on the specified identification method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities are recognized in investment income using the interest method over the remaining term of the security.
The Company reviews all fixed-maturity securities for other-than-temporary impairment ("OTTI") on a quarterly basis and more frequently when economic or market conditions warrant such review. When the fair value of any investment is lower than its cost, an assessment is made to see whether the decline is temporary of other-than-temporary. If the decline is determined to be other-than-temporary the investment is written down to fair value and an impairment charge is recognized in income in the period in which the Company makes such determination. For a debt security that the Company does not intend to sell nor is it more likely than not that the Company will be required to sell before recovery of its amortized cost, only the credit loss component is recognized in income, while impairment related to all other factors is recognized in other comprehensive income. The Company considers various factors in determining whether an individual security is other-than-temporarily impaired (see Note 4).
Fair value measurement: GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under GAAP are as follows:
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. For debt securities, inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, broker quotes for similar securities and other factors. The fair value of investments in common stocks and exchange-traded funds is based on the last traded price. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company’s investment custodians. The investment custodians consider observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant markets. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument.
Derivative Financial Instruments
The Company may from time to time enter into underwriting contracts such as industry loss warranty contracts (“ILW”) that are treated as derivatives for U.S. GAAP purposes. U.S. GAAP requires that an entity recognize all derivatives in the balance sheet at fair value. It also requires that unrealized gains and losses resulting from changes in fair value be included in income or comprehensive income The Company’s derivative financial instrument assets are included in prepayments and other assets. Derivative financial instrument liabilities are included in accounts payable and other liabilities.
Deferred policy acquisition costs (“DAC”): Policy acquisition costs consist of brokerage fees, federal excise taxes and other costs related directly to the successful acquisition of new or renewal insurance contracts, and are deferred and amortized over the terms of the reinsurance agreements to which they relate. The Company evaluates the recoverability of DAC by determining if the sum of future earned premiums and anticipated investment income is greater than the expected future claims and expenses. If a loss is probable on the unexpired portion of policies in force, a premium deficiency loss is recognized. At March 31, 2018, the DAC was considered fully recoverable and no premium deficiency loss was recorded.
Property and equipment: Property and equipment are recorded at cost when acquired. Property and equipment are comprised of motor vehicles, furniture and fixtures, computer equipment and leasehold improvements and are depreciated, using the straight-line method, over their estimated useful lives, which are five years for furniture and fixtures and computer equipment and four years for motor vehicles. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or remaining lease term. The Company periodically reviews property and equipment that have finite lives, and that are not held for sale, for impairment by comparing the carrying value of the assets to their estimated future undiscounted cash flows. For the three-month period ended March 31, 2018, there were no impairments in property and equipment.
Allowance for uncollectible receivables: Management evaluates credit quality by evaluating the exposure to individual counterparties; where warranted management also considers the credit rating or financial position, operating results and/or payment history of the counterparty. Management establishes an allowance for amounts for which collection is considered doubtful. Adjustments to previous assessments are recognized as income in the year in which they are determined. At March 31, 2018, no receivables were determined to be overdue or impaired and, accordingly, no allowance for uncollectible receivables has been established.
Reserves for losses and loss adjustment expenses: The Company determines its reserves for losses and loss adjustment expenses on the basis of the claims reported by the Company’s ceding insurers and for losses incurred but not reported (“IBNR”), management uses the assistance of an independent actuary. The reserves for losses and loss adjustment expenses represent management’s best estimate of the ultimate settlement costs of all losses and loss adjustment expenses. Management believes that the amounts are adequate; however, the inherent impossibility of predicting future events with precision, results in uncertainty as to the amount which will ultimately be required for the settlement of losses and loss expenses, and the differences could be material. Adjustments are reflected in the consolidated statements of income in the period in which they are determined.
Loss experience refund payable: Certain contracts include retrospective provisions that adjust premiums or result in profit commissions in the event losses are minimal or zero. In accordance with GAAP, the Company will recognize a liability in the period in which the absence of loss experience obligates the Company to pay cash or other consideration under the contracts. On the contrary, the Company will derecognize such liability in the period in which a loss experience arises. Such adjustments to the liability, which accrue throughout the contract terms, will reduce the liability should a catastrophic loss event covered by the Company occur.
Premiums assumed: The Company records premiums assumed, , net of loss experience refunds, as earned pro-rata over the terms of the reinsurance agreements, or period of risk, where applicable, and the unearned portion at the consolidated balance sheet date is recorded as unearned premiums reserve. A reserve is made for estimated premium deficiencies to the extent that estimated losses and loss adjustment expenses exceed related unearned premiums. Investment income is not considered in determining whether or not a deficiency exists.
Subsequent adjustments of premiums assumed, based on reports of actual premium by the ceding companies, or revisions in estimates of ultimate premium, are recorded in the period in which they are determined. Such adjustments are generally determined after the associated risk periods have expired, in which case the premium adjustments are fully earned when assumed.
Certain contracts allow for reinstatement premiums in the event of a full limit loss prior to the expiration of the contract. A reinstatement premium is not due until there is a full limit loss event and therefore, in accordance with GAAP, the Company records a reinstatement premium as written only in the event that the reinsured incurs a full limit loss on the contract and the contract allows for a reinstatement of coverage upon payment of an additional premium. For catastrophe contracts which contractually require the payment of a reinstatement premium equal to or greater than the original premium upon the occurrence of a full limit loss, the reinstatement premiums are earned over the original contract period. Reinstatement premiums that are contractually calculated on a pro-rata basis of the original premiums are earned over the remaining coverage period.
Unearned Premiums Ceded: The Company reduces the risk of future losses on business assumed by reinsuring certain risks and exposures with other reinsurers (retrocessionaires). The Company remains liable to the extent that any retrocessionaire fails to meet its obligations and to the extent that the Company does not hold sufficient security for their unpaid obligations.
Ceded premiums are written during the period in which the risk incept and are expensed over the contract period in proportion to the period of protection. Unearned premiums ceded consist of the unexpired portion of the reinsurance obtained.
Uncertain income tax positions: The authoritative GAAP guidance on accounting for, and disclosure of, uncertainty in income tax positions requires the Company to determine whether an income tax position of the Company is more likely than not to be sustained upon examination by the relevant tax authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For income tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements, if any, is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The application of this authoritative guidance has had no effect on the Company’s consolidated financial statements because the Company had no uncertain tax positions at March 31, 2018.
Earnings per share: Basic (loss) earnings per share has been computed on the basis of the weighted-average number of ordinary shares outstanding during the periods presented. Diluted (loss) earnings per share is computed based on the weighted-average number of ordinary shares outstanding and reflects the assumed exercise or conversion of diluted securities, such as stock options and warrants, computed using the treasury stock method.
Stock-Based Compensation: The Company accounts for stock-based compensation under the fair value recognition provisions of GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors, including stock options and restricted stock issuances based on estimated fair values. The Company measures compensation for restricted stock based on the price of the Company’s ordinary shares at the grant date. Determining the fair value of share purchase options at the grant date requires significant estimation and judgment. The Company uses an option-pricing model (Black-Scholes option pricing model) to assist in the calculation of fair value for share purchase options. The Company's shares have not been publicly traded for a sufficient length of time to solely use the Company's performance to reasonably estimate the expected volatility. Therefore, when estimating the expected volatility, the Company takes into consideration the historical volatility of similar entities. The Company considers factors such as an entity's industry, stage of life cycle, size and financial leverage when selecting similar entities. The Company uses a sample peer group of companies in the reinsurance industry as well as the Company’s own historical volatility in determining the expected volatility. Additionally, the Company uses the full life of the options, ten years, as the estimated term of the options, and has assumed no forfeitures during the life of the options.
The Company uses the straight-line attribution method for all grants that include only a service condition. Compensation expense related to all awards is included in general and administrative expenses.
Recent adopted accounting pronouncements: Accounting Standards Update No. 2016-01. In January 2016, the FASB revised U.S. GAAP with the issuance of Accounting Standards Update 2016-01 (“ASU 2016-01”), Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities to improve the recognition and measurement of financial instruments. The new ASU requires certain investments in equity securities to be measured at fair value with changes in fair value reported in earnings and requires changes in instrument-specific credit risk for financial liabilities recorded at fair value under the fair value option to be reported in Other Comprehensive Income (“OCI”). The company adopted this ASU on January 1, 2018, and applied it prospectively without prior period amounts restated . As a result of the adoption, $22 thousand of unrealized losses on equity securities was reclassified on January 1, 2018, from accumulated other comprehensive loss to retained earnings. Results of operations were impacted as changes in fair value of equity securities are now reported as a separate component in net income (loss) instead of reported in other comprehensive income (loss). As a result of the adoption of this ASU, the first quarter 2018 net loss of $211 thousand in the consolidated statements of income included $172 million from the fair value change of equity securities.
Accounting Standards Update No. 2016-18. In November 2016, the FASB revised U.S. GAAP, Statement of Cash Flows (Topic 230): Restricted Cash with the issuance of the ASU 2016-18, to reduce diversity in the classification and presentation of changes in restricted cash in the statement of cash flows. The new ASU requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company is required to reconcile such total to amounts on the Condensed Consolidated Balance Sheets and disclose the nature of the restrictions. The Company adopted this ASU effective January 1, 2018, which only resulted in a change in the presentation of the Condensed Consolidated Statements of Cash Flows.
Accounting Standards Update No. 2017-09. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The effective date of ASU 2017-09 was for interim and annual reporting periods, beginning after December 15, 2017, and was applied prospectively. The company adopted this ASU effective January 1, 2018, and it did not have a material impact on our company's consolidated financial position, cash flows or results of operations.
Pending Accounting Updates
Accounting Standards Update No. 2016-13. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends the guidance on reporting credits losses and affects loans, debt securities, trade receivables, reinsurance recoverables and other financial assets that have the contractual right to receive cash. The amendments are effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for any organization for annual periods beginning after December 15, 2018 and interim periods within those annual periods. The Company is in the process of evaluating the impact of the requirements of ASU 2016-13 on the Company’s consolidated financial statements and anticipates implementing ASU 2016-13 during the first quarter of fiscal year 2020.
Accounting Standards Update No. 2016-02. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," which supersedes Topic 840 and creates the new lease accounting standards for lessees and lessors, primarily related to the recognition of lease assets and liabilities by lessees for leases classified as operating leases. ASU 2016-02 is effective for all public entities for reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements.
Segment Information: Under GAAP, operating segments are based on the internal information that management uses for allocating resources and assessing performance as the source of the Company’s reportable segments. The Company manages its business on the basis of one operating segment, Property and Casualty Reinsurance, in accordance with the qualitative and quantitative criteria established under GAAP.
Reclassifications: Certain reclassifications of prior period amounts have been made to conform to the current period presentation.
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Cash and Cash Equivalents and Restricted Cash and Cash Equivalents |
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Cash and Cash Equivalents [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents |
Cash and cash equivalents are held by large and reputable counterparties in the United States of America and in the Cayman Islands. Restricted cash held in trust is custodied with SunTrust Bank and is held in accordance with the Company’s trust agreements with the ceding insurers and trustees, which require that the Company provide collateral having a market value greater than or equal to the limit of liability, less unpaid premium.
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Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | The Company holds investments in fixed-maturity securities and equity securities, with its fixed-maturity securities classified as available-for-sale. At March 31, 2018 and December 31, 2017, the cost or amortized cost, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:
(1) Effective January 1, 2018, the Company adopted ASU No. 2016-01 and equity securities are no longer classified as available-for-sale. Prior periods have not been restated to conform to the current presentation. See Note 2, Accounting Policies, for additional information.
At March 31, 2018 and December 31, 2017, available-for-sale securities with fair value of $2,413,000 and $1,430,000, respectively, are held in trust accounts as collateral under reinsurance contacts with the Company’s ceding insurers.
Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities at March 31, 2018 and December 31, 2017 are as follows:
Proceeds received, and the gross realized gains and losses from sales of available-for-sale fixed-maturity securities, and equity securities, for the three months ended March 31, 2018 and 2017 were as follows:
The Company regularly reviews its individual investment securities for OTTI. The Company considers various factors in determining whether each individual security is other-than-temporarily impaired, including:
Available-for-sale securities with gross unrealized loss positions at March 31, 2018 and December 31, 2017, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:
At March 31, 2018, there were 4 securities in an unrealized loss position of which none of these positions had been in an unrealized loss position for 12 months or greater.
At December 31, 2017, there were 8 securities in an unrealized loss position of which 2 of these positions had been in an unrealized loss position for 12 months or greater.
The Company believes there were no fundamental issues such as credit losses or other factors with respect to its fixed-maturity securities. It is expected that the securities would not be settled at a price less than the par value of the investments and because the Company has the ability and intent to hold these securities and it is probable that the Company will not be required to sell these securities until a market price recovery or maturity, the Company does not consider any of its fixed-maturity securities to be other-than-temporarily impaired at March 31, 2018 and December 31, 2017.
In determining whether equity securities are other than temporarily impaired, the Company considers its intent and ability to hold a security for a period of time sufficient to allow for the recovery of cost, along with factors including the length of time each security had been in an unrealized loss position, the extent of the decline and the near-term prospect for recovery. Based on management’s evaluation, the Company did not consider any of its equity securities to be other-than-temporarily impaired at December 31, 2017. Additionally, upon adoption of ASU 2016-10, changes in fair value of equity securities are now recorded within the consolidation statements of income, and as such, no OTTI considerations are no longer made with respect to equity securities.
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, 2018 and December 31, 2017:
As disclosed in Note 5, the Company is a counterparty to an investment in an industry loss warranty swap. The swap was valued on the basis of models developed by the counterparty, which represent unobservable (Level 3).
There were no transfers between Level 1, Level 2 and Level 3 during the three months ended March 31, 2018.
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Derivative Instruments |
3 Months Ended |
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Mar. 31, 2018 | |
Derivative Instruments | |
Derivative Instruments | Inward Industry Loss Warranty ("ILW") Swap
In January 2018, the Company entered into an inward ILW swap (the "2018 Inward ILW Swap") with a third-party under which qualifying loss payments are triggered by reference to the level of losses incurred by the insurance industry as a whole, rather than by losses incurred by the insured. In return for a fixed payment received of $1 million, the Company is required to make a floating payment in the event of certain losses incurred from specified natural catastrophes in North America, Caribbean, Europe, Japan, Australia, New Zealand and Latin America from January 2018 to December 2018. The Company’s maximum payment obligation under the 2018 Inward ILW Swap is $4 million. During the quarter ending March 31, 2018, the Company was not aware of any industry loss event occurring that would have triggered a payment obligation under the 2018 Inward ILW Swap.
The Inward ILW Swap was valued on the basis of models developed by the counterparty, which represent unobservable (Level 3) inputs. As of March 31, 2018, the fair value of the 2018 Inward ILW Swap was $0.83 million, and was recorded with "accounts payable and other liabilities" on the Company's March 31, 2018 Consolidated Balance Sheet.
During the three months ended March 31, 2018 and 2017, the Company recognized a gain from derivative instruments of $0.17 million and $Nil, respectively, pursuant to the 2018 Inward ILW Swap. |
Taxation |
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Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Taxation | Under current Cayman Islands law, no corporate entity, including the Company and the Subsidiary, is obligated to pay taxes in the Cayman Islands on either income or capital gains. The Company and the Subsidiary have an undertaking from the Governor-in-Cabinet of the Cayman Islands, pursuant to the provisions of the Tax Concessions Law, as amended, that, in the event that the Cayman Islands enacts any legislation that imposes tax on profits, income, gains or appreciations, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to the Company and the Subsidiary or their operations, or to the ordinary shares or related obligations, until April 23, 2033 and May 17, 2033, respectively.
The Company and its subsidiary intend to conduct substantially all of their operations in the Cayman Islands in a manner such that they will not be engaged in a trade or business in the U.S. However, because there is no definitive authority regarding activities that constitute being engaged in a trade or business in the U.S. for federal income tax purposes, the Company cannot assure that the U.S. Internal Revenue Service will not contend, perhaps successfully, that the Company or its subsidiary is engaged in a trade or business in the U.S. A foreign corporation deemed to be so engaged would be subject to U.S. federal income tax, as well as branch profits tax, on its income that is treated as effectively connected with the conduct of that trade or business unless the corporation is entitled to relief under an applicable tax treaty.
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Losses and Loss Adjustment Expenses |
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Losses and Loss Adjustment Expenses | The following table summarizes the Company’s loss and loss adjustment expenses (“LAE”) and the reserve for loss and LAE reserve movements for the three-month periods ending March 31, 2018 and 2017:
The reserves for losses and LAE are comprised of case reserves (which are based on claims that have been reported) and IBNR reserves (which are based on losses that are believed to have occurred but for which claims have not yet been reported and include a provision for expected future development on existing case reserves). The Company uses the assistance of an independent actuary in the determination of IBNR and expected future development of existing case reserves.
The uncertainties inherent in the reserving process and potential delays by cedants and brokers in the reporting of loss information, together with the potential for unforeseen adverse developments, may result in the reserve for losses and LAE ultimately being significantly greater or less than the reserve provided at the end of any given reporting period. The degree of uncertainty is further increased when a significant loss event takes place near the end of a reporting period. Reserve for losses and LAE estimates are reviewed periodically on a contract by contract basis and updated as new information becomes known. Any resulting adjustments are reflected in income in the period in which they become known.
The Company’s reserving process is highly dependent on the timing of loss information received from its cedants and related brokers.
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Earnings Per Share |
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Earnings Per Share | A summary of the numerator and denominator of the basic and diluted (loss) earnings per share is presented below (dollars in thousands except per share amounts):
For the three-month periods ended March 31, 2018 and 2017, options to purchase 250,000 ordinary shares were anti-dilutive as the sum of the proceeds, including unrecognized compensation expense, exceeded the average market price of the Company’s ordinary share during the periods presented.
For the three-month periods ended March 31, 2018 and 2017, 8,230,700 warrants to purchase an aggregate of 8,230,700 ordinary shares were not dilutive because the exercise price of $7.50 exceeded the average market price of the Company’s ordinary share during the periods presented.
GAAP requires the Company to use the two-class method in computing basic (loss) earnings per share since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. These participating securities effect the computation of both basic and diluted (loss) earnings per share during periods of net (loss) income.
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Shareholders' Equity |
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Mar. 31, 2018 | |
Equity [Abstract] | |
Shareholders' Equity | On February 28, 2014, the Company’s Registration Statement on Form S-1, as amended, relating to the initial public offering of the Company’s units was declared effective by the SEC. The Registration Statement covered the offer and sale by the Company of 4,884,650 units, each consisting of one ordinary share and one warrant (“Unit”), which were sold to the public on March 26, 2014 at a price of $6.00 per Unit. The ordinary shares and warrants comprising the Units began separate trading on May 9, 2014. The ordinary shares and warrants are traded on the Nasdaq Capital Market under the symbols “OXBR” and “OXBRW,” respectively. One warrant may be exercised to acquire one ordinary share at an exercise price equal to $7.50 per share on or before March 26, 2019. At any time after September 26, 2014 and before the expiration of the warrants, the Company at its option may cancel the warrants in whole or in part, provided that the closing price per ordinary share has exceeded $9.38 for at least ten trading days within any period of twenty consecutive trading days, including the last trading day of the period.
The initial public offering resulted in aggregate gross proceeds to the Company of approximately $29.3 million (of which approximately $5 million related to the fair value proceeds on the warrants issued) and net proceeds of approximately $26.9 million after deducting underwriting commissions and offering expenses.
There were 8,230,700 warrants outstanding at March 31, 2018 and 2017. No warrants were exercised during the three-month periods ended March 31, 2018 and 2017.
As of March 31, 2018, none of the Company’s retained earnings were restricted from payment of dividends to the company’s shareholders. However, since most of the Company’s capital and retained earnings may be invested in the Subsidiary, a dividend from the Subsidiary would likely be required in order to fund a dividend to the Company’s shareholders and would require notification to the Cayman Islands Monetary Authority (“CIMA”).
Under Cayman Islands law, the use of additional paid-in capital is restricted, and the Company will not be allowed to pay dividends out of additional paid-in capital if such payments result in breaches of the prescribed and minimum capital requirement. See also Note 11.
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Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | The Company currently has outstanding stock-based awards granted under the 2014 Omnibus Incentive Plan (the “Plan”). Under the Plan, the Company has discretion to grant equity and cash incentive awards to eligible individuals, including the issuance of up to 1,000,000 of the Company’s ordinary shares. At March 31, 2018, there were 690,000 shares available for grant under the Plan.
Stock options
The Company accounts for share-based compensation under the fair value recognition provisions of ASC Topic 718 – “Compensation – Stock Compensation.” Stock options granted and outstanding under the Plan vests quarterly over four years, and are exercisable over the contractual term of ten years.
A summary of the stock option activity for the three-month periods ended March 31, 2018 and 2017 is as follows:
Compensation expense recognized for the three-month periods ended March 31, 2018 and 2017 totaled $10,000. Compensation expense is included in general and administrative expenses. At March 31, 2018 and 2017, there was approximately $44,000 and $83,000, respectively, of total unrecognized compensation expense related to non-vested stock options granted under the Plan. The Company expects to recognize the remaining compensation expense over a weighted-average period of fourteen (14) months.
No options were granted during the three-month periods ended March 31, 2018. During the three-month periods ended March 31, 2017, 35,000 options were granted with fair value estimated on the date of grant using the following assumptions and the Black-Scholes option pricing model:
Restricted Stock Awards
The Company has granted and may grant restricted stock awards to eligible individuals in connection with their service to the Company. The terms of the Company’s outstanding restricted stock grants may include service, performance and market-based conditions. The fair value of the awards with market-based conditions is determined using a Monte Carlo simulation method, which calculates many potential outcomes for an award and then establishes fair value based on the most likely outcome. The determination of fair value with respect to the awards with only performance or service-based conditions is based on the value of the Company’s stock on the grant date.
Information with respect to the activity of unvested restricted stock awards during the three-month periods ended March 31, 2018 and 2017 is as follows:
Compensation expense recognized for the three-month periods ended March 31, 2018 and 2017 totaled $22,000 and is included in general and administrative expenses. At March 31, 2018 and 2017, there was approximately $66,000 and $154,000, respectively, of total unrecognized compensation expense related to non-vested restricted stock granted under the Plan. The Company expects to recognize the remaining compensation expense over a weighted-average period of nine (9) months.
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Net Worth for Regulatory Purposes |
3 Months Ended |
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Mar. 31, 2018 | |
Text Block [Abstract] | |
Net Worth for Regulatory Purposes | The Subsidiary is subject to a minimum and prescribed capital requirement as established by CIMA. Under the terms of its license, the Subsidiary is required to maintain a minimum and prescribed capital requirement of $500 in accordance with the Subsidiary’s approved business plan filed with CIMA. At March 31, 2018, the Subsidiary’s net worth of $5.7 million exceeded the minimum and prescribed capital requirement. For the three-month periods ended March 31, 2018 and 2017, the Subsidiary’s net income was approximately $9 thousand and $1.1 million respectively.
The Subsidiary is not required to prepare separate statutory financial statements for filing with CIMA, and there were no material differences between the Subsidiary’s GAAP capital, surplus and net income, and its statutory capital, surplus and net income as of March 31, 2018 or for the period then ended.
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Fair Value and Certain Risks and Uncertainties |
3 Months Ended |
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Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value and Certain Risks and Uncertainties | Fair values
With the exception of balances in respect of insurance contracts (which are specifically excluded from fair value disclosures under GAAP) and investment securities as disclosed in Note 4 of these consolidated financial statements, the carrying amounts of all other financial instruments, which consist of cash and cash equivalents, restricted cash and cash equivalents, accrued interest and dividends receivable, premiums receivable and other assets and accounts payable and other liabilities, approximate their fair values due to their short-term nature.
Concentration of underwriting risk
A substantial portion of the Company’s current reinsurance business ultimately relates to the risks of two entities domiciled in Florida in the United States, one of which is under common directorship; accordingly the Company’s underwriting risks are not significantly diversified.
Concentrations of Credit and Counterparty Risk
The Company’s derivative instruments are subject to counterparty risk. The Company routinely monitor this risk.
The Company markets retrocessional and reinsurance policies worldwide through its brokers. Credit risk exists to the extent that any of these brokers may be unable to fulfill their contractual obligations to the Company. For example, the Company is required to pay amounts owed on claims under policies to brokers, and these brokers, in the Company. In some jurisdictions, if a broker fails to make such a payment, the Company might remain liable to the ceding company for the deficiency. In addition, in certain jurisdictions, when the ceding company pays premiums for these policies to brokers, these premiums are considered to have been paid and the ceding insurer is no longer liable to the Company for those amounts, whether or not the premiums have actually been received.
The Company remains liable for losses it incurs to the extent that any third-party reinsurer is unable or unwilling to make timely payments under reinsurance agreements. The Company would also be liable in the event that its ceding companies were unable to collect amounts due from underlying third-party reinsurers.
In addition, the Company is exposed to credit risk on fixed-maturity debt instruments to the extent that the debtors may default on their debt obligations.
The Company mitigates its concentrations of credit and counterparty risk by using reputable and several counterparties which decreases the likelihood of any significant concentration of credit risk with any one counterparty. Additionally, the Company invests in fixed-maturity securities that are investment grade or higher.
Market risk
Market risk exists to the extent that the values of the Company’s monetary assets fluctuate as a result of changes in market prices. Changes in market prices can arise from factors specific to individual securities or their respective issuers, or factors affecting all securities traded in a particular market. Relevant factors for the Company are both volatility and liquidity of specific securities and markets in which the Company holds investments. The Company has established investment guidelines that seek to mitigate significant exposure to market risk.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | The Company has an operating lease for office space located at Strathvale House, 2nd Floor, 90 North Church Street, Grand Cayman, Cayman Islands. The term of the lease is thirty-eight months and commenced on April 17, 2015. Rent expense under this lease for the three-month period ended March 31, 2018 was $16,000 and lease commitments at March 31, 2018 were $16,000.
The Company also has an operating lease for residential space at Britannia Villas #616, Grand Cayman, Cayman Islands that currently runs on a month-to-month basis. Rent expense under this lease for the three-month period ended March 31, 2018 was $12,900. There are currently no lease commitments under this lease as at March 31, 2018.
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Related Party Transactions |
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Related Party Transactions | The Company has entered into reinsurance agreements with Claddaugh which is a related entity through common directorship. At March 31, 2018 and December 31, 2017, included within loss experience refund payable and unearned premiums reserve on the consolidated balance sheets are the following related-party amounts:
During the three-month period ended March 31, 2018 and 2017, included within assumed premiums, change in loss experience refund payable and change in unearned premiums reserve on the consolidated statements of income are the following related-party amounts:
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | We evaluate all subsequent events and transactions for potential recognition or disclosure in our consolidated financial statements. There were no other events subsequent to March 31, 2018 for which disclosure was required.
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Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||
Cash and cash equivalents | Cash and cash equivalents: Cash and cash equivalents are comprised of cash and short term investments with original maturities of three months or less. |
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Restricted cash and cash equivalents | Restricted cash and cash equivalents: Restricted cash and cash equivalents represent funds held in accordance with the Company’s trust agreements with ceding insurers and trustees, which requires the Company to maintain collateral with a market value greater than or equal to the limit of liability, less unpaid premium.
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Investments | Investments: The Company’s investments consist of fixed-maturity securities and equity securities, and for which its fixed-maturity securities are classified as available-for-sale. The Company’s investments are carried at fair value with changes in fair value included as a separate component of accumulated other comprehensive loss in shareholders’ equity with respect to its fixed-maturity securities. For the Company’s investment in equity securities, the changes in fair value are recorded within the consolidated statements of income.
Unrealized gains or losses are determined by comparing the fair market value of the securities with their cost or amortized cost. Realized gains and losses on investments are recorded on the trade date and are included in the consolidated statements of income. The cost of securities sold is based on the specified identification method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities are recognized in investment income using the interest method over the remaining term of the security.
The Company reviews all fixed-maturity securities for other-than-temporary impairment ("OTTI") on a quarterly basis and more frequently when economic or market conditions warrant such review. When the fair value of any investment is lower than its cost, an assessment is made to see whether the decline is temporary of other-than-temporary. If the decline is determined to be other-than-temporary the investment is written down to fair value and an impairment charge is recognized in income in the period in which the Company makes such determination. For a debt security that the Company does not intend to sell nor is it more likely than not that the Company will be required to sell before recovery of its amortized cost, only the credit loss component is recognized in income, while impairment related to all other factors is recognized in other comprehensive income. The Company considers various factors in determining whether an individual security is other-than-temporarily impaired (see Note 4). |
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Fair value measurement | Fair value measurement: GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under GAAP are as follows:
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. For debt securities, inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, broker quotes for similar securities and other factors. The fair value of investments in common stocks and exchange-traded funds is based on the last traded price. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company’s investment custodians. The investment custodians consider observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant markets. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument.
Derivative Financial Instruments
The Company may from time to time enter into underwriting contracts such as industry loss warranty contracts (“ILW”) that are treated as derivatives for U.S. GAAP purposes. U.S. GAAP requires that an entity recognize all derivatives in the balance sheet at fair value. It also requires that unrealized gains and losses resulting from changes in fair value be included in income or comprehensive income The Company’s derivative financial instrument assets are included in prepayments and other assets. Derivative financial instrument liabilities are included in accounts payable and other liabilities. |
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Deferred policy acquisition costs ("DAC") | Deferred policy acquisition costs (“DAC”): Policy acquisition costs consist of brokerage fees, federal excise taxes and other costs related directly to the successful acquisition of new or renewal insurance contracts, and are deferred and amortized over the terms of the reinsurance agreements to which they relate. The Company evaluates the recoverability of DAC by determining if the sum of future earned premiums and anticipated investment income is greater than the expected future claims and expenses. If a loss is probable on the unexpired portion of policies in force, a premium deficiency loss is recognized. At March 31, 2018, the DAC was considered fully recoverable and no premium deficiency loss was recorded. |
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Property and equipment | Property and equipment: Property and equipment are recorded at cost when acquired. Property and equipment are comprised of motor vehicles, furniture and fixtures, computer equipment and leasehold improvements and are depreciated, using the straight-line method, over their estimated useful lives, which are five years for furniture and fixtures and computer equipment and four years for motor vehicles. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or remaining lease term. The Company periodically reviews property and equipment that have finite lives, and that are not held for sale, for impairment by comparing the carrying value of the assets to their estimated future undiscounted cash flows. For the three-month period ended March 31, 2018, there were no impairments in property and equipment. |
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Allowance for uncollectible receivables | Allowance for uncollectible receivables: Management evaluates credit quality by evaluating the exposure to individual counterparties; where warranted management also considers the credit rating or financial position, operating results and/or payment history of the counterparty. Management establishes an allowance for amounts for which collection is considered doubtful. Adjustments to previous assessments are recognized as income in the year in which they are determined. At March 31, 2018, no receivables were determined to be overdue or impaired and, accordingly, no allowance for uncollectible receivables has been established. |
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Reserves for losses and loss adjustment expenses | Reserves for losses and loss adjustment expenses: The Company determines its reserves for losses and loss adjustment expenses on the basis of the claims reported by the Company’s ceding insurers and for losses incurred but not reported (“IBNR”), management uses the assistance of an independent actuary. The reserves for losses and loss adjustment expenses represent management’s best estimate of the ultimate settlement costs of all losses and loss adjustment expenses. Management believes that the amounts are adequate; however, the inherent impossibility of predicting future events with precision, results in uncertainty as to the amount which will ultimately be required for the settlement of losses and loss expenses, and the differences could be material. Adjustments are reflected in the consolidated statements of income in the period in which they are determined. |
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Loss experience refund payable | Loss experience refund payable: Certain contracts include retrospective provisions that adjust premiums or result in profit commissions in the event losses are minimal or zero. In accordance with GAAP, the Company will recognize a liability in the period in which the absence of loss experience obligates the Company to pay cash or other consideration under the contracts. On the contrary, the Company will derecognize such liability in the period in which a loss experience arises. Such adjustments to the liability, which accrue throughout the contract terms, will reduce the liability should a catastrophic loss event covered by the Company occur.
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Premiums assumed | Premiums assumed: The Company records premiums assumed, , net of loss experience refunds, as earned pro-rata over the terms of the reinsurance agreements, or period of risk, where applicable, and the unearned portion at the consolidated balance sheet date is recorded as unearned premiums reserve. A reserve is made for estimated premium deficiencies to the extent that estimated losses and loss adjustment expenses exceed related unearned premiums. Investment income is not considered in determining whether or not a deficiency exists.
Subsequent adjustments of premiums assumed, based on reports of actual premium by the ceding companies, or revisions in estimates of ultimate premium, are recorded in the period in which they are determined. Such adjustments are generally determined after the associated risk periods have expired, in which case the premium adjustments are fully earned when assumed.
Certain contracts allow for reinstatement premiums in the event of a full limit loss prior to the expiration of the contract. A reinstatement premium is not due until there is a full limit loss event and therefore, in accordance with GAAP, the Company records a reinstatement premium as written only in the event that the reinsured incurs a full limit loss on the contract and the contract allows for a reinstatement of coverage upon payment of an additional premium. For catastrophe contracts which contractually require the payment of a reinstatement premium equal to or greater than the original premium upon the occurrence of a full limit loss, the reinstatement premiums are earned over the original contract period. Reinstatement premiums that are contractually calculated on a pro-rata basis of the original premiums are earned over the remaining coverage period. |
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Unearned premiums ceded | Unearned Premiums Ceded: The Company reduces the risk of future losses on business assumed by reinsuring certain risks and exposures with other reinsurers (retrocessionaires). The Company remains liable to the extent that any retrocessionaire fails to meet its obligations and to the extent that the Company does not hold sufficient security for their unpaid obligations.
Ceded premiums are written during the period in which the risk incept and are expensed over the contract period in proportion to the period of protection. Unearned premiums ceded consist of the unexpired portion of the reinsurance obtained. |
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Uncertain income tax positions | Uncertain income tax positions: The authoritative GAAP guidance on accounting for, and disclosure of, uncertainty in income tax positions requires the Company to determine whether an income tax position of the Company is more likely than not to be sustained upon examination by the relevant tax authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For income tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements, if any, is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The application of this authoritative guidance has had no effect on the Company’s consolidated financial statements because the Company had no uncertain tax positions at March 31, 2018. |
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Earnings per share | Earnings per share: Basic (loss) earnings per share has been computed on the basis of the weighted-average number of ordinary shares outstanding during the periods presented. Diluted (loss) earnings per share is computed based on the weighted-average number of ordinary shares outstanding and reflects the assumed exercise or conversion of diluted securities, such as stock options and warrants, computed using the treasury stock method.
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Stock-Based Compensation | Stock-Based Compensation: The Company accounts for stock-based compensation under the fair value recognition provisions of GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors, including stock options and restricted stock issuances based on estimated fair values. The Company measures compensation for restricted stock based on the price of the Company’s ordinary shares at the grant date. Determining the fair value of share purchase options at the grant date requires significant estimation and judgment. The Company uses an option-pricing model (Black-Scholes option pricing model) to assist in the calculation of fair value for share purchase options. The Company's shares have not been publicly traded for a sufficient length of time to solely use the Company's performance to reasonably estimate the expected volatility. Therefore, when estimating the expected volatility, the Company takes into consideration the historical volatility of similar entities. The Company considers factors such as an entity's industry, stage of life cycle, size and financial leverage when selecting similar entities. The Company uses a sample peer group of companies in the reinsurance industry as well as the Company’s own historical volatility in determining the expected volatility. Additionally, the Company uses the full life of the options, ten years, as the estimated term of the options, and has assumed no forfeitures during the life of the options.
The Company uses the straight-line attribution method for all grants that include only a service condition. Compensation expense related to all awards is included in general and administrative expenses. |
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Recent accounting pronouncements | Recent adopted accounting pronouncements: Accounting Standards Update No. 2016-01. In January 2016, the FASB revised U.S. GAAP with the issuance of Accounting Standards Update 2016-01 (“ASU 2016-01”), Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities to improve the recognition and measurement of financial instruments. The new ASU requires certain investments in equity securities to be measured at fair value with changes in fair value reported in earnings and requires changes in instrument-specific credit risk for financial liabilities recorded at fair value under the fair value option to be reported in Other Comprehensive Income (“OCI”). The company adopted this ASU on January 1, 2018, and applied it prospectively without prior period amounts restated . As a result of the adoption, $22 thousand of unrealized losses on equity securities was reclassified on January 1, 2018, from accumulated other comprehensive loss to retained earnings. Results of operations were impacted as changes in fair value of equity securities are now reported as a separate component in net income (loss) instead of reported in other comprehensive income (loss). As a result of the adoption of this ASU, the first quarter 2018 net loss of $211 thousand in the consolidated statements of income included $172 million from the fair value change of equity securities.
Accounting Standards Update No. 2016-18. In November 2016, the FASB revised U.S. GAAP, Statement of Cash Flows (Topic 230): Restricted Cash with the issuance of the ASU 2016-18, to reduce diversity in the classification and presentation of changes in restricted cash in the statement of cash flows. The new ASU requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company is required to reconcile such total to amounts on the Condensed Consolidated Balance Sheets and disclose the nature of the restrictions. The Company adopted this ASU effective January 1, 2018, which only resulted in a change in the presentation of the Condensed Consolidated Statements of Cash Flows.
Accounting Standards Update No. 2017-09. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The effective date of ASU 2017-09 was for interim and annual reporting periods, beginning after December 15, 2017, and was applied prospectively. The company adopted this ASU effective January 1, 2018, and it did not have a material impact on our company's consolidated financial position, cash flows or results of operations.
Pending Accounting Updates
Accounting Standards Update No. 2016-13. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends the guidance on reporting credits losses and affects loans, debt securities, trade receivables, reinsurance recoverables and other financial assets that have the contractual right to receive cash. The amendments are effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for any organization for annual periods beginning after December 15, 2018 and interim periods within those annual periods. The Company is in the process of evaluating the impact of the requirements of ASU 2016-13 on the Company’s consolidated financial statements and anticipates implementing ASU 2016-13 during the first quarter of fiscal year 2020.
Accounting Standards Update No. 2016-02. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," which supersedes Topic 840 and creates the new lease accounting standards for lessees and lessors, primarily related to the recognition of lease assets and liabilities by lessees for leases classified as operating leases. ASU 2016-02 is effective for all public entities for reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements. |
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Segment Information | Segment Information: Under GAAP, operating segments are based on the internal information that management uses for allocating resources and assessing performance as the source of the Company’s reportable segments. The Company manages its business on the basis of one operating segment, Property and Casualty Reinsurance, in accordance with the qualitative and quantitative criteria established under GAAP. |
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Reclassifications | Reclassifications: Certain reclassifications of prior period amounts have been made to conform to the current period presentation. |
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents (Tables) |
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Summary of Cash and Cash Equivalents and Restricted Cash and Cash Equivalents |
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Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Available-for-sale Securities |
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Schedule of Contractual Maturities of Fixed-maturity Securities |
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Summary of Proceeds Received, and Gross Realized Gains and Losses from Sales of Available-for-sale Securities |
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Summary of Securities with Gross Unrealized Loss Positions |
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Fair Value of Assets Measured on Recurring Basis |
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Losses and Loss Adjustment Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of loss and loss adjustment expenses |
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Earnings Per Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Earnings Per Share |
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Share-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity |
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Estimated Fair Value of Options Granted using Black-Scholes Option-Pricing Model with Weighted-Average Assumptions |
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Summary of Unvested Restricted Stock Awards |
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Related Party Transactions (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Premium Receivable, Loss Experience Refund Repayable and Unearned Premiums |
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Summary of Related Party Transactions |
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Organization and Basis of Presentation (Details Narrative) |
3 Months Ended |
---|---|
Mar. 31, 2018
Segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Equity Method Investment, Ownership Percentage | 100.00% |
Number of business operating segments | 1 |
Significant Accounting Policies (Details Narrative) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Furniture and Fixtures [Member] | ||
Significant Accounting Policies [Line Items] | ||
Fixed asset, Estimated useful life | 5 years | |
Computer Equipment [Member] | ||
Significant Accounting Policies [Line Items] | ||
Fixed asset, Estimated useful life | 5 years | |
Motor Vehicles [Member] | ||
Significant Accounting Policies [Line Items] | ||
Fixed asset, Estimated useful life | 4 years | |
Employee Stock Option [Member] | ||
Significant Accounting Policies [Line Items] | ||
Estimated term of options | 10 years |
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Cash and Cash Equivalents [Abstract] | ||
Cash on deposit | $ 701 | $ 4,052 |
Cash held with custodians | 4,521 | 3,711 |
Restricted cash held in trust | 6,240 | 3,124 |
Total | $ 11,462 | $ 10,887 |
Investments (Details 1) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Cost or Amortized Cost, Total available-for-sale securities | $ 4,416 | $ 6,508 |
Total estimated fair value available for sale | 4,396 | 4,433 |
Fixed Maturities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Due within one year | 994 | 994 |
Due after one year through five years | 3,422 | 3,402 |
Cost or Amortized Cost, Total available-for-sale securities | 4,416 | 4,396 |
Due within one year | 3,007 | 3,003 |
Due after one year through five years | 1,443 | 1,430 |
Total estimated fair value available for sale | $ 4,450 | $ 4,433 |
Investments (Details 2) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Fixed Maturities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Proceeds | $ 3,000 | $ 0 |
Gross Realized Gains | 3 | 0 |
Gross Realized Losses | 0 | 0 |
Equity Securities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Proceeds | 6,033 | 3,577 |
Gross Realized Gains | 418 | 192 |
Gross Realized Losses | $ (594) | $ (190) |
Investments (Details Narrative) $ in Thousands |
Mar. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
---|---|---|
Amortized Cost and Fair Value Debt Securities [Abstract] | ||
Fair value of securities held in trust accounts | $ 2,413 | $ 1,430 |
Number of securities in unrealized loss position | 8 | |
Number of positions held for greater than twelve months | 2 |
Derivative Instruments (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Derivative Instruments Details Narrative | ||
Gain from derivative instruments | $ 170 | $ 0 |
Losses and Loss Adjustment Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Balance, beginning of period | $ 4,836 | $ 8,702 |
Incurred related to: Current period | 0 | 0 |
Incurred related to: Prior period | 0 | (32) |
Total incurred | 0 | (32) |
Paid related to: Current period | 0 | 0 |
Paid related to: Prior period | (682) | (2,986) |
Total paid | (682) | (2,986) |
Balance, end of period | $ 4,154 | $ 5,684 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Numerator: | ||
Net (loss) earnings | $ (211) | $ 1,270 |
Denominator: | ||
Weighted average shares-basic | 5,733,587 | 5,891,926 |
Effect of dilutive securities-Stock options | 0 | 0 |
Shares issuable upon conversion of warrants | 0 | 0 |
Weighted average shares-diluted | 5,733,587 | 5,891,926 |
Basic (loss) earnings per share | $ (0.04) | $ 0.22 |
Diluted (loss) earnings per share | $ (0.04) | $ 0.22 |
Earnings Per Share (Details Narrative) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Mar. 31, 2018 |
|
Warrants exercise price | $ 7.50 | $ 7.50 | |
Options | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share | 250,000 | 250,000 | |
Warrants | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share | 8,230,700 | 8,230,700 |
Share-Based Compensation (Details 1) - Employee Stock Option [Member] |
3 Months Ended |
---|---|
Mar. 31, 2017
$ / shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected dividend yield | 8.00% |
Expected volatility | 35.00% |
Risk-free interest rate | 2.48% |
Expected life (in years) | 10 years |
Per share grant date fair value of options issued | $ 0.73 |
Share-Based Compensation (Details 2) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Weighted Number of Restricted Stock Awards, Nonvested Beginning Balance | 15,000 | 30,000 |
Weighted Number of Restricted Stock Awards, Vested | (3,750) | (3,750) |
Weighted Number of Restricted Stock Awards, Nonvested Ending Balance | 11,250 | 26,250 |
Weighted Average Grant Date Fair Value, Nonvested Beginning Balance | $ 5.86 | |
Weighted Average Grant Date Fair Value, Nonvested Ending Balance | $ 5.86 | $ 5.86 |
Net Worth for Regulatory Purposes (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Regulated Operations [Abstract] | ||
Minimum prescribed capital requirement | $ 500 | |
Subsidiary net worth | 5,700,000 | |
Subsidiary's net income | $ 9,000 | $ 1,100,000 |
Commitments and Contingencies (Details Narrative) |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Operating Lease One [Member] | |
Other Commitments [Line Items] | |
Lease term | 38 months |
Rent expense | $ 16,000 |
Lease commitments | $ 16,000 |
Lease Commencement date | Apr. 17, 2015 |
Operating Lease Two [Member] | |
Other Commitments [Line Items] | |
Rent expense | $ 12,900 |
Related Party Transactions (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Related Party Transaction [Line Items] | ||
Loss experience refund payable | $ 270 | $ 135 |
Unearned premiums reserve | 1,657 | 2,012 |
Claddaugh And Hcpci [Member] | ||
Related Party Transaction [Line Items] | ||
Loss experience refund payable | 270 | 135 |
Unearned premiums reserve | $ 1,657 | $ 2,012 |
Related Party Transactions (Details 1) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenue | ||
Change in loss experience refund payable | $ 135 | $ 748 |
Change in unearned premiums reserve | 355 | 1,417 |
Claddaugh And Hcpci [Member] | ||
Revenue | ||
Change in loss experience refund payable | (135) | (630) |
Change in unearned premiums reserve | $ 355 | $ 850 |
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