Good afternoon, and welcome to Oxbridge Re's third quarter 2021 earnings call. My name is Matthew, and I'll be your conference operator this afternoon. At this time, all participants will be on a listen-only mode. Joining us for today's presentation is Oxbridge Re's Chairman, President, and Chief Executive Officer, Jay Madhu, and Chief Financial Officer and Corporate Secretary, Wrendon Timothy. Following their remarks, we will open the call up for your questions. I would like to remind everyone that this call is also being broadcast live via webcast and available via webcast replay until December 12th, 2021 on investor information section of the Oxbridge Re's website at www.oxbridgere.com.
Now I'd like to turn the call over to Wrendon Timothy, Chief Financial Officer of Oxbridge Re, who will be providing the necessary cautions regarding the forward-looking statements that will be made by management during this call. Sir, please proceed.
Thank you, operator. During today's call, there will be forward-looking statements made regarding future events, including Oxbridge Re's future financial performance. These forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan, project, and other broadly similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. A detailed discussion of such risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled Risk Factors contained in our Form 10-K that was filed with the Securities and Exchange Commission on March 30th, and on our Form 10-Q to be filed with the SEC today, November 12, 2021.
The occurrence of any of these risks and uncertainties could have a material adverse effect on the company's business, financial condition, and the volatility of our earnings, which in turn can cause significant market price and trading volume fluctuation for securities. Any forward-looking statements made on this conference call speak only as of the date of this conference call. Except as required by law, the company undertakes no obligation to update any forward-looking statements contained on this call or in any company presentation, even the company's expectations or any related events, conditions or circumstances change. In addition, on March 11th, 2020, the WHO characterized the outbreak of COVID-19 as a global pandemic.
The disruption of global commercial activities across all market sectors and the significant declines and volatility in the financial markets as a result of COVID-19 pandemic could result in a material adverse impact on our financial position, results of operations and cash flows. Possible effects may include, but are not limited to, uncertainties with respect to current and future losses, reduction in interest rates, equity market volatility and ongoing business and financial market impacts of an economic downturn. The insurance industry is likely to experience material losses resulting from COVID-19, which will reduce available capital and we expect will help to sustain the upward pricing trend for reinsurers that we are seeing across many lines of business before COVID-19. However, the ultimate impact on current business in force as well as risks and potential opportunities on future business remains highly uncertain.
Now, I would like to turn the call over to our Chairman, President, and Chief Executive Officer, Jay Madhu. Jay?
Thank you, Wrendon, and welcome everyone. Thank you for joining us today. Despite signs that the global COVID-19 pandemic are easing in a number of regions, we continue to monitor and adapt to the pandemic as we have for the last two years. We continue to remain vigilant and cautious. Fortunately, the pandemic has had little negative impact on our business. However, we continue to monitor our markets and the insurance industry in general to ensure we continue to deliver value to our shareholders. As we do each quarter, before we get into our results, I would like to take a moment to provide a brief overview of our company. Oxbridge Re Holdings Limited was founded over eight years ago with a mission to provide reinsurance solutions primarily to property and casualty insurers in the Gulf Coast region of the United States.
Through our licensed reinsurance subsidiary, Oxbridge Reinsurance Limited, and our licensed reinsurance sidecar, Oxbridge Re NS, we write fully collateralized policies to cover property losses for specific catastrophes. As some of you already know, because we write fully collateralized contracts, we can compete effectively with large carriers. We specialize in underwriting low frequency, high severity risks where we believe sufficient data exists to efficiently analyze the risk return profile of reinsurance contracts. Our objective is to achieve long-term growth in book value per share by writing business on a selective and opportunistic basis that generate attractive underwriting profits relative to risk. Regarding our investment portfolio, we remain opportunistic and deploy our capital when favorable return opportunities arise that can contribute to the growth of capital and surplus in our licensed reinsurance subsidiaries over time.
We are also very pleased to have completed our investment in Oxbridge Acquisition Corp in early August, a special purpose acquisition company or SPAC focused on disruptive technology. We believe innovators and entrepreneurs in such businesses as blockchain, insurance technology or Insurtech, and artificial intelligence offer a real and significant opportunity to build value for our investors over the long term. We look forward to keeping you updated on the progress in the quarters ahead. Turning to our results for the third quarter and first nine months of 2021, we are pleased to report continued growth and progress.
Revenues are up and net income increased significantly with a $6.5 million unrealized gain recognized in the third quarter of our investment in our SPAC. We incurred an underwriting loss of $158,000 in one of our reinsurance contracts due to the impact of Hurricane Ida on our book of business. Looking ahead, we are confident our core reinsurance business will continue to grow and are excited about the potential investment in the SPAC and the unlocking of full mark-to-market value that is anticipated to bring to our shareholders in the future. In addition, we continue to make progress with our wholly-owned subsidiary, Oxbridge Re NS, our reinsurance sidecar. For the contract year- end of May 31st, 2021, our sidecar investors earned a healthy return of approximately 17%.
I'll now turn it over to Wrendon Timothy to take us through our financial results. Wrendon Timothy?
Thank you, Jay. I remind you that our typical contract period is from June 1st to May 31st of the following year. With respect to net premiums, earned net premiums for the three and nine months ended September 30th, 2021 increased due primarily to the triggering of a limit loss on one of our reinsurance contracts due to the impact of Hurricane Ida on our book of business, which resulted in the acceleration of earned premiums. With respect to investment income for the third quarter and for the first nine months of 2021, our net investment income, along with unrealized gain on our investments in our SPAC rose significantly, primarily due to the $7.1 million unrealized gain that was recorded in the third quarter due to the successful IPO with our SPAC.
Net realized investment gains rose to $755,000 through the first nine months of the year due to gains recognized in the second quarter. We also recognized a $512,000 negative change in the fair value of our equity securities in the third quarter. Including all these factors, total recognized gains were approximately $7 million for the nine months ended September 30th, 2021 from $718,000 for the same period last year. With respect to total expenses, total expenses, including loss and loss adjustment expenses, policy acquisition costs, and general and admin expenses were up in the third quarter and the first nine months of 2021, due primarily to losses suffered during the quarter and the nine-month period as a result of Hurricane Ida, as well as overall increase in corporate expenses.
With respect to net income, largely due to the unrealized gain on our investments in Oxbridge Acquisition Corp. measured at quarterly fair value, net income rose to just under $6.5 million, or $1.14 per common share in the third quarter of 2021 compared to a loss of $33,000 in last year's third quarter. For the first nine months of 2021, net income increased to $7 million or $1.20 per share compared to a loss of $252,000 or $0.04 per common share last year. As we have discussed before on our investor calls, we use various measures to analyze the growth and profitability of our business operations. For our Insurance business, we measure underwriting profitability by examining our loss ratios, acquisition ratio, expense ratio, and our combined ratio.
Our loss ratio, which measures underwriting profitability, is the ratio of loss and loss adjustment expenses to net premiums earned. For the ten months, nine months ended September 30th, 2021, our loss ratios increased to 22.7% and 20.9% respectively, compared to 0% in the comparable prior year period. The increases were due to the limited losses suffered on one of our reinsurance contracts from Hurricane Ida, which was partially offset by a higher denominator in net premiums earned compared with the prior period. Our acquisition cost ratio, which measures operational efficiency compared to policy acquisition costs to net premiums earned.
The acquisition cost ratio increased marginally to 11.1% for this quarter from 11% for last year's quarter, and increased marginally to 10.9% for the nine months ended September 30th, 2021 from 11% for the same year's period. These changes are not considered material. Our expense ratio, which measures operating performance compared to policy acquisition costs and general and administrative expenses in net premiums earned, decreased for the three and nine months ended September 30th due to a higher denominator in net premiums earned resulting from premium acceleration, which was partially offset by increased policy acquisition costs and general and administrative expenses in the current period. Our combined ratio, which is used to measure underwriting performance, is the sum of the loss ratio and the expense ratio.
This ratio increased for the three and nine months ended September 30th, 2021 due to the increase in the loss ratio this year resulting from the limit loss suffered under one of our reinsurance contracts. Now turning to the balance sheet. Our equity securities totaled $770,000 at September 30th, broadly consistent with the 2020 year-end. Cash and cash equivalents, unrestricted cash and cash equivalents totaled $5.6 million, compared to $7.5 million at the end of 2020. Restricted cash and cash equivalents decreased at September 30th, 2021 due to the withdrawal of the majority of collateral on the prior year contracts in 2021, partially offset by the deposits under the 2021-2022 two-year contract.
Total shareholder equity at September 30th, 2021 was $16.1 million, up from $8 million at the end of 2020, due primarily to the unrealized gain on our investment in Oxbridge Acquisition Corp. Now I'd like to turn the call back over to Jay to wrap up before we take your questions. Jay?
Thank you, Wrendon. Through our reinsurance sidecar, we've been able to continue to add a degree of diversity to our revenue stream and risk while still having the ability to achieve attractive returns. We're very pleased with the returns generated for the contract year- ending May 31st, 2021, where our sidecar investors earned an attractive return of 17% despite a record-breaking 2020 hurricane season, following a solid return of 36% the prior year. We look for another year of strong investor returns in the current contract year. As previously mentioned, in any given year through our reinsurance subsidiary, we look to invest close to 50% of our equity. This year was no different. Between our reinsurance contracts and investment in the OAC Sponsor Ltd., which is the sponsor of the SPAC, we have stuck to that resolve.
While Oxbridge Re is a lead investor in the SPAC, some of the risk capital was laid off to additional investors in the sponsor at a higher share price. The result being that despite the fact Oxbridge Re contributed approximately 34.7% of the risk capital, Oxbridge economics have significantly maximized in that it owns approximately 49.6% and 63.1% of the ordinary shares and preferred shares, respectively, of the sponsor, which tracks the Class B shares and private placement warrants in the SPAC. Thus, our investment further diversifies our business and positions us to capitalize on growth in the emerging disruptive technologies being developed. We are very excited about the future, unlocking of the full mark-to-market value of our investment and the potential that Oxbridge Acquisition Corp intends to bring to our shareholders over the long- term.
Looking ahead, we remain optimistic about the long-term prospects of our business. As always, we continue to evaluate additional opportunities for growth as well as future diversification of our risk profile. In closing, our business and our results are solid. Our sidecar investors continue to earn an attractive return. Our investment in Oxbridge Acquisition offers an entry into new technology business and a focus on blockchain, Insurtech, and artificial intelligence. We remain debt-free. We have strong balance sheets with solid cash position. Most importantly, we have real opportunity for growth based on viable business model. With that, we are ready to open the call for questions. Operator, please provide the appropriate instructions.
Thank you, sir. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press Star one on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press Star one on your phone. Please hold while we poll for questions. Your first question is coming from Kent Engelke from Capitol Securities Management. Your line is live.
Thank you. Hey, Jay. Hey, Wrendon. Jay, you made a statement. I really wanna make sure I understand this. You commented something about the full mark-to-market value of the SPAC. Is the unrealized gains discounted, or can you give me some color on that comment that you made about the full mark-to-market value?
Yes, I can. Yeah, no, very good question, and thank you for that. In accordance with GAAP, what we have done is we've taken a discount to the mark- to- market.
What is that discount?
Pardon me?
What is that discount?
Say that again.
What is that discount?
Yeah.
Yeah.
Kent, in the 10-Q that will be filed yet, it gives a lot more color on this, but the discount that is actually taken is 40%.
Holy cow. You made about $11 million with $2 a share?
Yeah.
Again, that's rough math.
Yeah. We've taken that, and I wanted to make sure that it was proportional, right? That is a discount to mark to market. It is all in accordance to GAAP. When I say we have opportunity, we definitely have opportunity.
This is a very good Friday afternoon.
Thank you.
Thank you, Jay. Thank you, Wrendon.
All right. Thanks, Kent.
Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press Star one on your phone at this time. Please hold while we poll for questions. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Madhu for his closing remarks.
Thank you for joining us on today's call. Before we wrap up, I want to thank our employees, business partners, and investors for our continued support. I especially want to express our gratitude to our Oxbridge team, who continue to leverage their significant experience to manage and build our business during these challenging times. It is their dedication and expertise that will get us through these days, and we look forward to updating you on our next call. If you have any further questions, please give us a call anytime. Thank you again for your time and attention today and your interest in Oxbridge. Operator?
Before we conclude today's call, I would like to remind everyone that a recording of today's call will be available for replay via a link available on the investors section of the company's website. Thank you for joining us today for our presentation. You may now disconnect.