Blueprint
 
Prospectus Supplement Filed Pursuant to Rule 424(b)(3)
Registration No. 333-193577
 
 
PROSPECTUS SUPPLEMENT NO. 25
DATED MAY 15, 2017
(To Prospectus Declared Effective on February 28, 2014
and Dated March 21, 2014)
 
OXBRIDGE RE HOLDINGS LIMITED
 
Maximum of 4,884,650 Units
 
Minimum of 1,700,000 Units
 
Each Unit Consisting of One Ordinary Share and One Warrant
 
This Prospectus Supplement No. 25 supplements information contained in, and should be read in conjunction with, that certain Prospectus, dated March 21, 2014, of Oxbridge Re Holdings Limited, as supplemented by that certain Prospectus Supplement No. 1 through No. 24 thereto, relating to the offer and sale by us of up to 4,884,650 units, each unit consisting of one ordinary share and one warrant. This Prospectus Supplement No. 25 is not complete without, and may not be delivered or used except in connection with, the original Prospectus and Supplement No. 1 through No. 24 thereto.
 
This Prospectus Supplement No. 25 includes the following document, as filed by us with the Securities and Exchange Commission:
 
The attached Quarterly Report on Form 10-Q of Oxbridge Re Holdings Limited, as filed with the Securities and Exchange Commission on May 15, 2017.
 
Our units began trading on the Nasdaq Capital Market under the symbol “OXBRU.” When the units were split into their component parts, the units ceased trading and our ordinary shares and warrants began trading separately on the Nasdaq Capital Market under the symbols “OXBR” and “OXBRW” respectively.
 
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined if this Prospectus Supplement No. 25 (or the original Prospectus or Supplement No. 1 through No. 24 thereto) is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
The date of this Prospectus Supplement No. 25 is May 15, 2017.
 
 
[PRINTER TO INSERT FILING(S) REFERENCED ABOVE]
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2017
 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________
 
Commission File Number: 1-36346
 
OXBRIDGE RE HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)
 
 
 
Cayman Islands
 
98-1150254
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
Strathvale House, 2nd Floor90 North Church Street, GeorgetownP.O. Box 469
Grand Cayman, Cayman Islands
 
KY1-9006
(Address of principal executive offices)
 
(Zip Code)
 
 
Registrant’s telephone number, including area code: (345) 749-7570
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes             ☒
 
No            ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes             ☒
 
No            ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
☐  (Do not check if a smaller reporting company)
Smaller reporting company
☒ 
 
 
Emerging growth company

 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes            ☐
 
No             ☐
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
As of May 12, 2017; 5,836,643 ordinary shares, par value $0.001 per share, were outstanding.
 

 
 
 
OXBRIDGE RE HOLDINGS LIMITED
 
INDEX
 
 
PART I – FINANCIAL INFORMATION
Page
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
 
Consolidated Balance Sheets
(expressed in thousands of U.S. Dollars, except per share and share amounts)
 
 
 
At March 31,
2017
 
 
At December 31, 2016
 
 
 
(Unaudited)
 
 
 
 
Assets
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
Fixed-maturity securities, available for sale, at fair value (amortized cost: $10,027 and $6,060, respectively)
 $10,021 
  6,051 
Equity securities, available for sale, at fair value (cost: $4,799 and $5,543, respectively)
  4,351 
  4,941 
 Total investments
  14,372 
  10,992 
Cash and cash equivalents
  15,338 
  12,242 
Restricted cash and cash equivalents
  15,871 
  23,440 
Accrued interest and dividend receivable
  34 
  48 
Premiums receivable
  1,637 
  4,038 
Deferred policy acquisition costs
  68 
  88 
Prepayment and other receivables
  111 
  98 
Property and equipment, net
  49 
  54 
 Total assets
 $47,480 
  51,000 
 
    
    
Liabilities and Shareholders’ Equity
    
    
Liabilities:
    
    
Reserve for losses and loss adjustment expenses
 $5,684 
  8,702 
Loss experience refund payable
  2,218 
  1,470 
Unearned premiums reserve
  2,044 
  3,461 
Accounts payable and other liabilities
  156 
  204 
 Total liabilities
  10,102 
  13,837 
 
    
    
Shareholders’ equity:
    
    
Ordinary share capital, (par value $0.001, 50,000,000 shares authorized; 5,861,872 and 5,916,149 shares issued and outstanding)
  6 
  6 
Additional paid-in capital
  32,727 
  33,034 
Retained earnings
  5,099 
  4,534 
Accumulated other comprehensive loss
  (454)
  (411)
Total shareholders’ equity
  37,378 
  37,163 
Total liabilities and shareholders’ equity
 $47,480 
  51,000 
 
    
    
 
The accompanying Notes to Consolidated Financial Statements are an integral
part of the Consolidated Financial Statements.
 
 
3
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
 Consolidated Statements of Income
(Unaudited)
(expressed in thousands of U.S. Dollars, except per share and share amounts)
 
 
 
Three Months Ended
 
 
 
 March 31,  
 
 
 
 2017
 
 
2016
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
Assumed premiums
 $880 
  503 
Change in loss experience refund payable
  (748)
  (2,088)
Change in unearned premiums reserve
  1,416 
  2,966 
 
    
    
Net premiums earned
  1,548 
  1,381 
Net realized investment gains
  2 
  56 
Net investment income
  86 
  94 
 
    
    
Total revenue
  1,636 
  1,531 
 
    
    
Expenses
    
    
Losses and loss adjustment expenses
  (32)
  63 
Policy acquisition costs and underwriting expenses
  63 
  61 
General and administrative expenses
  335 
  364 
 
    
    
Total expenses
  366 
  488 
 
    
    
Net income
 $1,270 
  1,043 
 
    
    
 
    
    
Earnings per share
    
    
Basic and Diluted
 $0.22 
  0.17 
 
    
    
 
    
    
Dividends paid per share
 $0.12 
  0.12 
 
    
    
 
The accompanying Notes to Consolidated Financial Statements are an integral
part of the Consolidated Financial Statements.
 
 
4
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
 Consolidated Statements of Comprehensive Income
(Unaudited)
(expressed in thousands of U.S. Dollars)
 
 
 
 
Three Months Ended  
 
 
 
March 31,    
 
 
 
 2017
 
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 $1,270 
  1,043 
Other comprehensive (loss) income:
    
    
Change in unrealized loss on investments:
    
    
Unrealized (loss) gain arising during the period
  (41)
  344 
Reclassification adjustment for net realized gains included in net income
  (2)
  (56)
 
    
    
Net change in unrealized loss
  (43)
  288 
 
    
    
Total other comprehensive (loss) income
  (43)
  288 
 
    
    
Comprehensive income
 $1,227 
  1,331 
 
    
    
 
The accompanying Notes to Consolidated Financial Statements are an integral
part of the Consolidated Financial Statements.
 
 
5
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
 Consolidated Statements of Cash Flows
(Unaudited)
(expressed in thousands of U.S. Dollars)
 
 
 
 
Three Months Ended
 
 
  March 31,      
 
 
 2017
 
 
2016
 
Operating activities
 
 
 
 
 
 
Net income
 $1,270 
  1,043 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
    
Stock-based compensation
  31 
  30 
Net amortization of premiums on investments in fixed-maturity securities
  21 
 
Depreciation and amortization
  5 
  5 
Net realized investment gains
  (2)
  (56)
Change in operating assets and liabilities:
    
    
Accrued interest and dividend receivable
  14 
  (6)
Premiums receivable
  2,401 
  2,462 
Deferred policy acquisition costs
  20 
  35 
Prepayment and other receivables
  (13)
  (2)
Reserve for losses and loss adjustment expenses
  (3,018)
  63 
Loss experience refund payable
  748 
  2,088 
Unearned premiums reserve
  (1,417)
  (2,965)
Accounts payable and other liabilities
  (48)
  (72)
 
    
    
Net cash provided by operating activities
 $12 
  2,625 
 
    
    
Investing activities
    
    
Change in restricted cash and cash equivalents
  7,569 
  1,479 
Purchase of fixed-maturity securities
  (3,987)
  (3,111)
Purchase of equity securities
  (3,032)
  (1,683)
Proceeds from sale of fixed-maturity and equity securities
 3,577
 1,447
 
    
    
Net cash provided by (used in) investing activities
 $4,127 
  (1,868)
 
    
    
Financing activities
    
    
Repurchases of common stock under share repurchase plan
  (338)
  - 
Dividends paid
  (705)
  (727)
 
    
    
Net cash used in financing activities
 $(1,043)
  (727)
 
 
6
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
 Consolidated Statements of Cash Flows, continued
(Unaudited)
(expressed in thousands of U.S. Dollars)
 
 
 
 
Three Months Ended
 
 
  March 31,      
 
 
 2017
 
 
2016
 
 
 
 
 
 
 
 
Net change in cash and cash equivalents
  3,096 
  30 
Cash and cash equivalents at beginning of period
  12,242 
  8,584 
 
    
    
Cash and cash equivalents at end of period
 $15,338 
  8,614 
 
    
    
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
  (43)
  288 
 
    
    
 
The accompanying Notes to Consolidated Financial Statements are an integral
part of the Consolidated Financial Statements.
 
 
 
7
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders’ Equity (unaudited)
 Three Months Ended March 31, 2017 and 2016
(expressed in thousands of U.S. Dollars, except per share and share amounts)
 
 
 
 
Ordinary Share Capital
 
 
Additional Paid-in
 
 
Retained
 
 
Accumulated Other
 
 
Total Shareholders'
 
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Earnings
 
 
Comprehensive Loss
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
  6,060,000 
  6 
  33,657 
  4,838 
  (1,474)
  37,027 
Cash dividends paid
  - 
  - 
  - 
  (727)
  - 
  (727)
Net income for the period
  - 
  - 
  - 
  1,043 
  - 
  1,043 
Stock-based compensation
  - 
  - 
  30 
  - 
  - 
  30 
Total other comprehensive income
  - 
  - 
  - 
  - 
  288 
  288 
Balance at March 31, 2016
  6,060,000 
  6 
  33,687 
  5,154 
  (1,186)
  37,661 
 
    
    
    
    
    
    
 
    
    
    
    
    
    
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 
 
 
The accompanying Notes to Consolidated Financial Statements are an integral
part of the Consolidated Financial Statements.
 
 
 
 

8
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
 
1.
ORGANIZATION AND BASIS OF PRESENTATION
 
(a)
Organization
 
Oxbridge Re Holdings Limited 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 (the “Subsidiary”), 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 and the Subsidiary (collectively, the “Company”) 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 Company operates as a single business segment through the Subsidiary, which provides collateralized reinsurance to cover excess of loss catastrophe risks of various affiliated and non-affiliated ceding insurers, including Claddaugh Casualty Insurance Company, Ltd. (“Claddaugh”) and Homeowners Choice Property & Casualty Insurance Company (“HCPCI”), which are related-party entities domiciled in Bermuda and Florida, respectively.
 
(b)
Basis of Presentation
 
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, 2017 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, 2017. 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, 2016 included in the Company’s Form 10-K, which was filed with the SEC on March 13, 2017.
 
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.
 
 
9
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
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.
 
2.
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 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.
 
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 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 (loss) income. The Company considers various factors in determining whether an individual security is other-than-temporarily impaired (see Note 4).
 
 
10
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
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:
 
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.
 
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.
 
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, 2017, 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, 2017, there were no impairments in property and equipment.
 
 
11
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
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, 2017, 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 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.
 
 
12
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
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, 2017.
 
Earnings per share: Basic earnings per share has been computed on the basis of the weighted-average number of ordinary shares outstanding during the periods presented. Diluted 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. 
 
 
13
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
Recent accounting pronouncements:
 
Accounting Standards Update No. 2016-18. In November 2016, the  Financial Accounting Standards Board ("FASB") issued Accounting Standards Board ("ASU") 2016-18, “Statements of Cash Flows - Restricted Cash (Topic 230)” (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents in the consolidated statement of cash flows and disclose the nature of the restrictions on cash and cash equivalents. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company currently separately discloses the restrictions on cash and cash equivalents in Note 3 of the consolidated financial statements and expects to continue these disclosures since ASU 2016-18 does not change the requirement in Regulation S-X (Rule 5-02) to separately disclose cash and cash equivalents that have restrictions on withdrawal or use. The Company currently presents changes in restricted cash and cash equivalents under investing activities in the consolidated statements of cash flows. Upon adoption of ASU 2016-18, the Company will amend the presentation in the consolidated statement of cash flows to include the restricted cash and cash equivalents with cash and cash equivalents in the statements of cash flows and will retrospectively reclassify all periods presented.
 
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. 2016-09. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718), which affects all entities that issue share-based awards to their employees. Among the amendments affecting share-based payment transactions are their income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for all public entities for reporting periods beginning after December 15, 2016 and interim periods within those fiscal years.  Early adoption is permitted for all entities. The Company does not expect a material impact of this guidance on the Company’s consolidated financial statements.
 
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.
 
 
14
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
Accounting Standards Update No. 2016-01. In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Subtopic 825-10), which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. One of the changes is to require certain equity investments to be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for all public entities for reporting periods beginning after December 15, 2017 and interim periods within those fiscal years. For all other entities, the amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2018, and for interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for financial statements that have not been previously issued. 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.
 
3. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
 
 
 
At March 31,
 
 
At December 31,
 
 
 
 2017
 
 
2016
 
 
  (in thousands)      
 
 
 
 
 
 
 
Cash on deposit
 $9,234 
 $6,868 
Cash held with custodians
  6,104 
  5,374 
Restricted cash held in trust
  15,871 
  23,440 
 
    
    
Total
  31,209 
  35,682 
 
    
    
 
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 Bank of New York Mellon and Wells Fargo 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.
 
4. INVESTMENTS
 
The Company holds investments in fixed-maturity securities and equity securities that are classified as available-for-sale. At March 31, 2017 and December 31, 2016, 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:
 
 
 
Cost or
 
 
Gross
 
 
Gross
 
 
Estimated
 
 
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Fair
 
 
 
Cost
 
 
Gain
 
 
Loss
 
 
Value ($000)
 
 
  ($ in thousands)                
As of March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
 $10,027 
 $27 
 $(33)
 $10,021 
 
    
    
    
    
 
    
    
    
    
Total fixed-maturity securities
  10,027 
  27 
  (33)
  10,021 
 
    
    
    
    
Mutual funds
  400 
  5 
  (1)
  404 
Preferred stocks
  785 
  17 
  (1)
  801 
Common stocks
  3,614 
  90 
  (558)
  3,146 
 
    
    
    
    
Total equity securities
  4,799 
  112 
  (560)
  4,351 
 
    
    
    
    
 
    
    
    
    
Total available for sale securities
 $14,826 
 $139 
 $(593)
 $14,372 
 
    
    
    
    
 
    
    
    
    
As of December 31, 2016
    
    
    
    
Fixed-maturity securities
    
    
    
    
U.S. Treasury and agency securities
 $6,060 
 $28 
 $(37)
 $6,051 
 
    
    
    
    
 
    
    
    
    
Total fixed-maturity securities
  6,060 
  28 
  (37)
  6,051 
 
    
    
    
    
Mutual funds
  400 
  2 
  (6)
  396 
Preferred stocks
  687 
  8 
  (4)
  691 
Common stocks
  4,256 
  126 
  (528)
  3,854 
 
    
    
    
    
Total equity securities
  5,343 
  136 
  (538)
  4,941 
 
    
    
    
    
 
    
    
    
    
Total available for sale securities
 $11,403 
 $164 
 $(575)
 $10,992 
 
 
At March 31, 2017 and December 31, 2016, available-for-sale securities with fair value of $7,484,000 and $3,502,000, respectively, are held in trust accounts as collateral under reinsurance contacts with the Company’s ceding insurers.
 
 
15
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
4. 
INVESTMENTS (continued)
 
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, 2017 and December 31, 2016 are as follows:
 
 
 
Amortized
 
 
Estimated
 
 
 
Cost
 
 
Fair Value
 
 
  ($ in thousands)      
As of March 31, 2017
 
 
 
 
 
 
Available for sale
 
 
 
 
 
 
Due within one year
 $6,040
    6,036
Due after one year through five years
    3,987
    3,985 
 
    
    
 
    
    
 
 $10,027 
 $10,021 
 
    
    
 
    
    
As of December 31, 2016
    
    
Available for sale
    
    
Due within one year
 $2,970 
 $2,998 
Due after one year through five years
  3,090 
  3,053 
 
    
    
 
 $6,060 
 $6,051 
 
    
    
 
Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the three months ended March 31, 2017 and 2016 were as follows:
 
 
 
Gross
 
 
Gross
 
 
Gross
 
 
 
proceeds from
 
 
Realized
 
 
Realized
 
 
 
 sales
 
 
Gains
 
 
Losses
 
 
  ($ in thousands)           
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
 
 
Fixed-maturity securities
 $- 
 $- 
 $- 
 
    
    
    
Equity securities
 $3,577 
 $192 
 $(190)
 
    
    
    
Three Months Ended March 31, 2016
    
    
    
Fixed-maturity securities
 $- 
 $- 
 $- 
 
    
    
    
Equity securities
 $1,447 
 $188 
 $(132)
 
 
 
16
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
 
4. 
INVESTMENTS (continued)
 
 
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:
 
the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or income;
 
the length of time and the extent to which the market value of the security has been below its cost or amortized cost;
 
general market conditions and industry or sector specific factors;
 
nonpayment by the issuer of its contractually obligated interest and principal payments; and
 
the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.
 
Securities with gross unrealized loss positions at March 31, 2017 and December 31, 2016, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:
 
 
 
Less Than Twelve      
 
 
Twelve Months or    
 
 
         
 
 
 
Months        
 
 
Greater        
 
 
Total           
 
 
 
Gross
 
 
Estimated
 
 
Gross
 
 
Estimated
 
 
Gross
 
 
Estimated
 
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
As of March 31, 2017
 
Loss
 
 
Value
 
 
Loss
 
 
Value
 
 
Loss
 
 
Value
 
 
  ($ in thousands)      
  ($ in thousands)      
  ($ in thousands)      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
  3 
  3,985 
  30 
  3,039 
  33 
  7,024 
 
    
    
    
    
    
    
Total fixed-maturity securities
  3 
  3,985 
  30 
  3,039 
  33 
  7,024 
 
    
    
    
    
    
    
Equity securities
    
    
    
    
    
    
Mutual funds
  1 
  199 
  - 
  - 
  1 
  199 
Preferred stocks
  1 
  199 
  - 
  - 
  1 
  199 
All other common stocks
  30 
  538 
  528 
  1,004 
  558 
  1,542 
 
    
    
    
    
    
    
Total equity securities
  32 
  936 
  528 
  1,004 
  560 
  1,940 
 
    
    
    
    
    
    
 
    
    
    
    
    
    
Total available for sale securities $
  35 
 $4,921 
 $558 
 $4,043 
 $593 
 $8,964 
 
    
    
    
    
    
    
 
At March 31, 2017, there were 15 securities in an unrealized loss position of which 6 of these positions had been in an unrealized loss position for 12 months or greater.
 
 
17
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
4. 
INVESTMENTS (continued)
 
 
 
Less Than Twelve      
 
 
Twelve Months or    
 
    
 
 
Months        
 
 
Greater        
 
  
              Total           
 
 
 
Gross
 
 
Estimated
 
 
Gross
 
 
Estimated
 
 
Gross
 
 
Estimated
 
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
As of December 31, 2016
 
Loss
 
 
Value
 
 
Loss
 
 
Value
 
 
Loss
 
 
Value
 
 
  ($ in thousands)      
  ($ in thousands)      
  ($ in thousands)      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
  37 
  3,053 
  - 
  - 
  37 
  3,053 
 
    
    
    
    
    
    
Total fixed-maturity securities
  37 
  3,053 
  - 
  - 
  37 
  3,053 
 
    
    
    
    
    
    
Equity securities
    
    
    
    
    
    
Mutual funds
  6 
  193 
  - 
  - 
  6 
  193 
Preferred stocks
  4 
  396 
  - 
  - 
  4 
  396 
All other common stocks
  84 
  1,142 
  444 
  1,088 
  528 
  2,230 
 
    
    
    
    
    
    
Total equity securities
  94 
  1,731 
  444 
  1,088 
  538 
  2,819 
 
    
    
    
    
    
    
 
    
    
    
    
    
    
Total available for sale securities $
  131 
 $4,784 
 $444 
 $1,088 
 $575 
 $5,872 
 
    
    
    
    
    
    
 
At December 31, 2016, there were 17 securities in an unrealized loss position of which 5 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, 2017 and December 31, 2016.
 
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 does not consider any of its equity securities to be other-than-temporarily impaired at March 31, 2017 and December 31, 2016.
 
 
 
18
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
4. 
INVESTMENTS (continued)
 
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, 2017 and December 31, 2016:
 
 
 
Fair Value Measurements Using        
 
 
     
 
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
Total
 
As of March 31, 2017
  ($ in thousands)           
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $15,338 
 $- 
 $- 
 $15,338 
 
    
    
    
    
Restricted cash and cash equivalents
 $15,871 
 $- 
 $- 
 $15,871 
 
    
    
    
    
Fixed-maturity securities:
    
    
    
    
U.S. Treasury and agency securities
  10,021 
  - 
  - 
  10,021 
 
    
    
    
    
Total fixed-maturity securities
  10,021 
  - 
  - 
  10,021 
 
    
    
    
    
Mutual funds
  404 
  - 
  - 
  404 
Preferred stocks
  801 
  - 
  - 
  801 
All other common stocks
  3,146 
  - 
  - 
  3,146 
 
    
    
    
    
Total equity securities
  4,351 
  - 
  - 
  4,351 
 
    
    
    
    
Total available for sale securities
  14,372 
  - 
  - 
  14,372 
 
    
    
    
    
Total
 $45,581 
 $- 
 $- 
 $45,581 
 
 
19
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
4. 
INVESTMENTS (continued)
 
 
 
Fair Value Measurements Using        
 
 
   
 
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
Total
 
As of December 31, 2016
  ($ in thousands)           
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $12,242 
 $- 
 $- 
 $12,242 
 
    
    
    
    
Restricted cash and cash equivalents
 $23,440 
 $- 
 $- 
 $23,440 
 
    
    
    
    
Fixed-maturity securities:
    
    
    
    
U.S. Treasury and agency securities
  6,051 
  - 
  - 
  6,051 
 
    
    
    
    
Total fixed-maturity securities
  6,051 
  - 
  - 
  6,051 
 
    
    
    
    
 
    
    
    
    
Mutual funds
  396 
  - 
  - 
  396 
Preferred stocks
  691 
  - 
  - 
  691 
All other common stocks
  3,854 
  - 
  - 
  3,854 
 
    
    
    
    
Total equity securities
  4,941 
  - 
  - 
  4,941 
 
    
    
    
    
Total available for sale securities
  10,992 
  - 
  - 
  10,992 
 
    
    
    
    
Total
 $46,674 
 $- 
 $- 
 $46,674 
 
5.  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.
 
 
20
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
6.  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, 2017 and 2016:
 
 
 
 
At March 31,
 
 
At March 31,
 
 
 
 2017
 
 
2016
 
 
  (in thousands)      
 
 
 
 
 
 
 
Balance, beginning of period
 $8,702 
 $- 
Incurred related to:
    
    
     Current period
  - 
  63 
     Prior period
  (32)
  - 
           Total incurred
  (32)
  63 
Paid related to:
    
    
     Current period
  - 
  - 
     Prior period
  (2,986)
  - 
           Total paid
  (2,986)
  - 
Balance, end of period
 $5,684 
 $63 
 
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.

 
21
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
7.  EARNINGS PER SHARE
 
A summary of the numerator and denominator of the basic and diluted earnings per share is presented below (dollars in thousands except per share amounts):
 
 
    Three Months Ended       
 
   March 31,      
 
 
 2017
 
 
2016
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
     Net earnings
 $1,270 
  1,043 
 
    
    
Denominator:
    
    
    Weighted average shares - basic
  5,891,926 
  6,060,000 
    Effect of dilutive securities - Stock options
  - 
  - 
    Shares issuable upon conversion of warrants
  - 
  - 
    Weighted average shares - diluted
  5,891,926
  6,060,000 
Earnings per shares - basic
 $0.22 
  0.17 
Earnings per shares - diluted
 $0.22 
  0.17 
 
    
    
 
For the three-month periods ended March 31, 2017 and 2016, options to purchase 250,000 and 215,000 ordinary shares, respectively, 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, 2017 and 2016, 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 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 earnings per share during periods of net income.
 
 
22
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
8.  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.
 
On January 24, 2017, our Board of Directors declared a quarterly cash dividend of $0.12 per share payable on March 30, 2017 to shareholders of record on March 17, 2017.
 
On May 12, 2017, our Board of Directors declared a quarterly cash dividend of $0.12 per share payable on June 30, 2017 to shareholders of record on June 23, 2017.
 
In May 2016, the Company’s Board of Directors authorized a plan to repurchase up to $2,000,000 of the Company’s common shares, inclusive of commissions and fees. During the three months ended March 31, 2017, the Company repurchased and retired a total of 54,277 shares at a weighted-average price per share of $6.20 under this authorized repurchase plan. The total cost of shares repurchased, inclusive of fees and commissions, during the three months ended March 31, 2017 was $338,000, or $6.23 per share.
 
As of March 31, 2017, 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”).
 
 
23
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
8.  SHAREHOLDERS’ EQUITY (continued)
 
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 10.
 
 
9.              
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, 2017, 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, 2017 and 2016 is as follows:
 
 
 
 
 
 
 
   
 
Weighted-
 
   
 
 
 
 
 
 
Weighted-
 
Average
 
   
 
 
 
Number
 
 
Average
 
Remaining
 
Aggregate
 
 
 
 of
 
 
Exercise
 
Contractual
 
Intrinsic
 
 
 
Options
 
 
Price
 
Term
 
Value ($000)
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
   
 
   
 
   
 
Outstanding at January 1, 2017
  215,000 
 
   
 
   
 
   
 
Granted
  35,000 
 
   
 
   
 
   
 
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 
Outstanding at January 1, 2016
  180,000 
    
   
    
Granted
  35,000 
 $6 
   
    
Outstanding at March 31, 2016
  215,000 
 $6 
   8.9 years
 $- 
Exercisable at March 31, 2016
  58,438 
 $6 
   8.9 years
 $- 
 
 
24
 
 
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements (unaudited)
March 31, 2017
 
9.              
SHARE-BASED COMPENSATION (continued)
 
Compensation expense recognized for the three-month periods ended March 31, 2017 and 2016 totaled $10,000 and $8,000, respectively, and is included in general and administrative expenses. At March 31, 2017 and 2016, there was approximately $83,000 and $91,000, 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 twenty-six (26) months.
 
During the three-month periods ended March 31, 2017 and 2016, 35,000 options in each period, were granted with fair value estimated on the date of grant using the following assumptions and the Black-Scholes option pricing model:
 
 
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Expected dividend yield
  8%
  9.6%
Expected volatility
  35%
  35%
Risk-free interest rate
  2.48%
  2.03%