The following management discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our Consolidated Financial Statements and the related notes contained elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
We are a Cayman Islands specialty property and casualty reinsurer that provides reinsurance solutions through our reinsurance subsidiaries, Oxbridge Reinsurance Limited and Oxbridge Re NS. Our more recently organized subsidiary, Oxbridge Re NS, was incorporated on December 22, 2017 to function as a reinsurance sidecar which increases the underwriting capacity of Oxbridge Reinsurance Limited. Oxbridge Re NS commenced operations on June 1, 2018 and has since issued participating notes to third-party investors, the proceeds of which was utilized to collateralize a quota-share of Oxbridge Reinsurance Limited’s reinsurance obligations. We focus on underwriting fully-collateralized reinsurance contracts primarily for property and casualty insurance companies in the Gulf Coast region of the United States. We specialize in underwriting medium frequency, high severity risks, where we believe sufficient data exists to analyze effectively the risk/return profile of reinsurance contracts.
The property and casualty reinsurance industry historically has been cyclical in nature, owing to fluctuations in the supply of capital. During 2020, several developments have caused an increase in the demand for capital, including natural catastrophes in the Caribbean and Japan, increased capital requirements at some Lloyd’s syndicates, and the voluntary withdrawal of capital from some under-performing business.
The following table summarizes our results of operations for the years ended December 31, 2020 and 2019 (dollars in thousands, except per share amounts):
Comparison of the Year Ended December 31, 2020 to Year Ended December 31, 2019
General. Net loss for the year ended December 31, 2020 was $50 thousand or ($0.01) basic and diluted loss per share compared to a net loss of $305 thousand or ($0.05) basic and diluted earnings per share for the year ended December 31, 2019. The decrease in net loss is primarily due net realized gains on investments earned during the year ended December 31, 2020.
Losses Incurred. There were no losses incurred during the years ended December 31, 2020 and December 31, 2019.
General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2020 decreased by $39 thousand to $1.03 million from $1.07 million for the year ended December 31, 2019. The decrease is due to general cost savings initiatives implemented by the Company.
Expense Ratio. The expense ratio is the ratio of policy acquisition costs, other underwriting expenses and general and administrative expenses to net premiums earned. We use the expense ratio to measure our operating performance. The expense ratio decreased from 183.3% for the year ended December 31, 2019 to 126.1% for the year ended December 31, 2020. The decrease is due primarily to reduced general and administrative expenses coupled with a higher denominator in net premiums earned as recorded during the year ended December 31, 2020, when compared with the prior fiscal year.
FINANCIAL CONDITION - DECEMBER 31, 2020 COMPARED TO DECEMBER 31, 2019
Restricted Cash and Cash Equivalents. As of December 31, 2020, our restricted cash and cash equivalents decreased by $140 thousand, or 6.8%, to $1.9 million, from $2 million as of December 31, 2019. The decrease is the net result of the withdrawal of collateral deposit on expiry of contract during the year and collateral deposits made during the year ended December 31, 2020.
Investments. As of December 31, 2020, our total investments increased by $95 thousand, or 13.7%, to $787 thousand, from $692 thousand as of December 31, 2019. The increase is primarily a result of net purchase of equity securities during the year ended December 31, 2020.
Reserve for Losses and Loss Adjustment Expenses. As of December 31, 2020, there was no change in reserve for losses and loss adjustment expenses from December 31, 2019. The reserve remained at $0 due to the fact that there were no significant events and no reported claims in the year to necessitate a reserve.
Notes Payable. As of December 31, 2020, our notes payable decreased to $216 thousand, from $600 thousand at December 31, 2019. The decrease is the net result of the redemption of Series 2019-1 participating notes coupled with issuance of Series 2020-1 participating notes by our reinsurance sidecar subsidiary, Oxbridge Re NS, during the year ended December 31, 2020.
We are organized as a holding company and provide administrative and management services to our subsidiaries. Our insurance operations are conducted through our reinsurance subsidiaries, Oxbridge Reinsurance Limited and Oxbridge Re NS which underwrites risks associated with our property and casualty reinsurance programs. We have minimal continuing cash needs at the holding company level, with such expenses principally being related to the payment of administrative expenses, and shareholder dividends, if any. There are restrictions on Oxbridge Reinsurance Limited’s and Oxbridge Re NS’ ability to pay dividends which are described in more detail below.
As of December 31, 2020, we believe we had sufficient cash flows from operations to meet our liquidity requirements. We expect that our operational needs for liquidity will be met by cash, investment income and funds generated from underwriting activities. We have no plans to issue debt and expect to fund our operations for the foreseeable future from operating cash flows, as well as from potential future equity offerings. However, we cannot provide assurances that in the future we will not incur indebtedness to implement our business strategy, pay claims or make acquisitions.
Although Oxbridge Re Holdings Limited is not subject to any significant legal prohibitions on the payment of dividends, Oxbridge Reinsurance Limited and Oxbridge Re NS are subject to Cayman Islands regulatory constraints that affect their ability to pay dividends to us and include a minimum net worth requirement. Currently, the minimum net worth requirement for each subsidiary is $500. As of December 31, 2020, Oxbridge Reinsurance Limited and Oxbridge Re NS exceeded the minimum required. By law, Oxbridge Reinsurance Limited and Oxbridge Reinsurance NS are restricted from paying a dividend if such a dividend would cause its net worth to drop to less than the required minimum.
Our cash flows from operating, investing and financing activities for the years ended December 31, 2020 and 2019 are summarized below.
Cash Flows for the Year ended December 31, 2020 (in thousands)
Net cash used in operating activities for the year ended December 31, 2020 totaled $267, which consisted primarily of cash received from investments and net written premiums less cash disbursed for operating expenses. Net cash provided by investing activities of $111 was primarily due to the net proceeds from sale of equity securities. Net cash used in financing activities totaled $384 which is the net result of redemption of Series 2019-1 participating notes and proceeds on issuance of Series 2020-1 participating notes.
As at December 31, 2020 we had no reserves for loss and loss adjustment expenses due to no significant events occurring during the year and no reported claims on contract in force. See Note 7 to the consolidated financial statements.