American Overseas Group Limited Announces First Quarter 2013 Net Loss Available to Common Shareholders of $14.0 Million and

American Overseas Group Limited Announces First Quarter 2013 Net Loss
Available to Common Shareholders of $14.0 Million and Operating Income of $4.2
Million

HAMILTON, Bermuda, July 2, 2013 (GLOBE NEWSWIRE) -- American Overseas Group
Limited (BSX:AORE) (Pink Sheets:AORE) ("AOG" or the "Company") today reported
first quarter net loss available to common shareholders of $14.0 million, or
$5.13 per diluted share. This compares to net loss available to common
shareholders of $4.5 million, or $1.69 per diluted share, for the first
quarter 2012.

During the first quarter of 2013, operating income, a non GAAP financial
measure, was $4.2 million, or $1.53 per diluted share, compared to operating
income of $0.2 million, or $0.08 per diluted share, during the first quarter
of 2012.

The Company's net loss is calculated in conformity with U.S. generally
accepted accounting principles ("GAAP"). The Company also provides information
regarding its operating income, a non-GAAP financial measure, because the
Company's management and Board of Directors, as well as many research analysts
and investors, also evaluate financial performance on the basis of operating
income, which excludes non-operating items such as realized investment gains
or losses, unrealized gains or losses on credit derivatives and foreign
currency gains or losses. Please refer to "Explanation of Non-GAAP Financial
Measures" below for a description of operating income and for a reconciliation
of operating income to net loss.

Commenting on the financial results, the Company's Chief Executive Officer,
David Steel, noted that, "Our 2013 first quarter net loss was primarily the
result of a $18.3 million unrealized loss within the net change in fair value
of credit derivatives during the period. As noted in the past, we view
operating income, which excludes unrealized gains and losses on derivatives,
as a better measure of quarterly performance. Our 2013 operating income of
$4.2 million was primarily driven by public finance refunding activity and by
favorable loss development in our financial guaranty book related to our US
residential mortgage-backed securities ("RMBS") reinsurance contracts".

"In the first quarter of 2013 we continued to pursue our plan to write new
business in the short-tail, non-catastrophe property/casualty reinsurance
markets. We believe this new business fits well with the long-tail run-off of
the remaining financial guaranty portfolio. We intend to build our
property/casualty book prudently as our subsidiary American Overseas
Reinsurance Company Limited ("AORE") emerges from run-off."

Summary of Operating Results

The Company reported a net loss of $14.0 million for the quarter ended March
31, 2013.

Earned premiums in the first quarter 2013 of $6.8 million were 127% higher
than the $3.0 million of earned premiums in the first quarter 2012. After
eliminating property/casualty earned premiums of $3.2 million and accelerated
premiums from refundings of $1.3 million, core financial guaranty earned
premiums in the first quarter of 2013 were $2.3 million. This was consistent
with the core financial guaranty earned premiums of $2.3 million for the
comparable period of 2012 after eliminating the accelerated premiums from
refundings of $0.7 million. There were no property/casualty earned premiums in
the first quarter of 2012.

Net change in fair value of credit derivatives totaled a loss of $17.8 million
in the first quarter of 2013, compared to a $5.8 million loss in the first
quarter of 2012. Net change in fair value of credit derivatives for the first
quarters of 2013 and 2012 were comprised of $0.4 million and $0.6 million of
realized gains, respectively, and $18.3 million and $6.3 million of unrealized
losses, respectively, on derivatives. The net unrealized loss in the first
quarter 2013 was primarily attributable to (i) a decrease in the adjustment
for the Company's own non-performance risk of $31.9 million, and (ii) a
decrease in gross unrealized losses on credit derivative policies of $13.6
million. The decrease in gross unrealized losses on credit derivative policies
was primarily due to improvements in pricing across the majority of the
Company's portfolio. In accordance with the Financial Accounting Standards
Board ("FASB") Accounting Standards Codification 820 - "Fair Value
Measurements and Disclosures" ("ASC 820"), the Company calculates an
adjustment for its own non-performance risk. The effect of ASC 820 on the
Company's derivative liabilities on its balance sheet was a reduction of
approximately $37.9 million at March 31, 2013.

Net investment income for the first quarter 2013 was $1.3 million, 38% below
the $2.1 million recorded in the first quarter 2012. The decrease in
investment income in the first quarter 2013 was primarily due to a decrease in
the book yield on the portfolio from 2.71% as of March 31, 2012 to 2.66% as of
March 31, 2013 and the reduction of the size of the investment portfolio as a
result of the commutation payment made to Financial Guaranty Insurance Company
in the fourth quarter of 2012.

Realized gains on investments for the first quarter 2013 were $0.1 million.
There were no realized gains or losses for the same period in 2012.

Losses and loss adjustment expenses were $0.9 million in the first quarter
2013, contributing to a loss ratio of 13%, compared to losses and loss
adjustment expenses of $0.7 million and a loss ratio of 23% for the comparable
2012 period. The decrease in the quarter ended March 31, 2013 loss ratio was
primarily attributable to favorable development on RMBS policies.

Acquisition expenses were $1.9 million in the first quarter of 2013 compared
to $1.5 million for the comparable 2012 period. The increase in acquisition
expenses in the quarter ended March 31, 2013 as compared to the comparable
2012 period was primarily attributable to $0.8 million of acquisition expenses
related to the property/casualty business.

First quarter 2013 operating expenses of $1.3 million were $0.5 million, or
25%, below operating expenses in the first quarter of 2012. The decrease in
operating expenses for the period ended March 31, 2013 as compared to the
first quarter of 2012 was primarily due to a reduction in legal fees.

Balance Sheet

Total assets of $298.0 million at March 31, 2013 were $0.6 million, or 0.2%,
above the level of total assets at December 31, 2012. This increase was
primarily related to investment income and an increase in the recoveries of
paid losses. Shareholders' equity of $55.4 million at March 31, 2013 was $14.6
million, or 21%, below the level of shareholders' equity at December 31, 2012,
primarily due to the net loss in the first quarter 2013. Book value per share
was $20.5, a decrease of 22% from year-end 2012, when book value per share was
$26.2. Operating book value per share and adjusted operating book value per
share, both of which are non-GAAP financial measures, were $49.1 and $66.5,
respectively, at March 31, 2013, an increase of 1% and a decrease of less than
1%, respectively, from year-end 2012 when operating book value per share and
adjusted operating book value per share were $48.4 and $66.6, respectively.
The Company provides information regarding operating book value per share and
adjusted operating book value per share because the Company's management and
Board of Directors, as well as many research analysts and investors, evaluate
book value on the basis of operating book value, the calculation of which
includes adding back the unrealized gain or loss portion of the Company's
derivative liability, excluding the impact of credit impairments. Please refer
to "Explanation of Non-GAAP Financial Measures" below for a description of
operating book value per share and adjusted operating book value per share and
a reconciliation of those measures to book value per share.

Subsequent Events:

On May 6, 2013, Assured Guaranty Ltd. and its subsidiaries ("Assured")
announced that they had reached a settlement with UBS AG ("UBS") resolving
their claims with respect to various U.S. residential mortgage-backed
securities ("RMBS") transactions insured by Assured, including claims relating
to reimbursement for breaches of representations and warranties ("R&W"). Under
the settlement, UBS is required to make an initial cash payment to Assured of
$358 million. Additionally, UBS is required to reimburse Assured for a portion
of all future losses on certain transactions under a collateralized
loss-sharing reinsurance agreement to be put in place by the third quarter of
2013. Assured has announced that this settlement resolves all RMBS claims that
Assured has asserted against UBS, including those that have been in
litigation.

On June 21, 2013, Assured announced that they and Flagstar Bank have entered
into a Settlement Agreement concerning Assured's litigation against Flagstar
Bank for breaches of R&W in connection with insured RMBS. The agreement
follows a February 5, 2013 decision by the United States District Court for
the Southern District of New York in favor of Assured. As part of the
settlement, Flagstar Bank is required to make a cash payment to Assured of
$105 million. Flagstar also is required to reimburse Assured in full for all
future claims on certain of Assured's insurance policies. Additionally,
Flagstar Bank has agreed not to appeal the decision reached by the United
States District Court for the Southern District of New York. Assured has
announced that the comprehensive settlement resolves all of its RMBS claims
against Flagstar Bank and releases both parties from any and all other future
RMBS-related claims between the parties.

The Company has determined that a number of policies ceded to the Company by
Assured would be affected by these settlements. The Company anticipates that
approximately $1.5 million and $0.4 million, respectively, of its R&W credit
will be reduced by initial and future cash receipts on reinsurance ceded to
the Company's subsidiary, American Overseas Reinsurance Company Limited on the
UBS and Flagstar Bank policies; however, there is considerable uncertainty
regarding the timing and amount of these payments and the impact on the
Company's consolidated balance sheets and statements of operations at this
time. The Company expects to record the impact of these transactions in 2013.

Forward-Looking Statements

This release contains statements that may be considered "forward-looking
statements" within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements include, without
limitation, the Company's expectations respecting the volatility of its
insured portfolio, losses, loss reserves and loss development, the adequacy
and availability of its liquidity and capital resources, its current run off
strategy, its strategy for writing other reinsurance businesses and its
expense reduction measures. These statements are based on current expectations
and the current views of the economic and operating environment and are not
guarantees of future performance. A number of risks and uncertainties,
including economic competitive conditions, could cause actual results to
differ materially from those projected in forward-looking statements. The
Company's actual results could differ materially from those expressed or
implied in the forward-looking statements. Among the factors that could cause
actual results to differ materially are: (i) the Company's ability to execute
its business strategy, including with respect to new reinsurance businesses;
(ii) changes in general economic conditions, including inflation, foreign
currency exchange rates, interest rates and other factors; (iii) the loss of
significant customers with which AORE has a concentration of its reinsurance
in force; (iv) legislative and regulatory developments; (v) changes in
regulations or tax laws applicable to the Company or AORE or its customers;
(vi) more severe or more frequent losses associated with AORE's reinsured
portfolio; (vii) losses on credit derivatives; (viii) changes in the Company's
accounting policies and procedures that impact the Company's reported
financial results; (ix) the effects of ongoing and future litigation and (x)
other risks and uncertainties that have not been identified at this time. The
Company undertakes no obligation to revise or update any forward-looking
statement to reflect changes in conditions, events, or expectations, except as
required by law.

Explanation of Non-GAAP Financial Measures

The Company believes that the following non-GAAP financial measures included
in this press release serve to supplement GAAP information and are meaningful
to investors.

Operating income (loss): The Company believes operating income (loss) is a
useful measure because it measures income from operations, unaffected by
non-operating items such as realized investment gains or losses, unrealized
gains or losses on credit derivatives and foreign currency gains or losses.
Operating income (loss) is typically used by research analysts and rating
agencies in their analysis of the Company.

Operating book value per share and adjusted operating book value per share:
The Company believes the presentation of operating book value per share and
adjusted operating book value per share to be useful because they give a
measure of the value of the Company, excluding non-operating items such as
unrealized gains and losses on credit derivatives. The Company derives
operating book value by beginning with GAAP book value and adding back the
unrealized gain or loss portion of its derivative liability, excluding the
impact of credit impairments. Adjusted operating book value per share begins
with operating book value as calculated above and then adding or subtracting
the value of:

a. GAAP unearned premium reserves (on policies classified as financial
guarantee);

b. Deferred acquisition costs;

c. Unearned premiums reserves and the present value of estimated future
installment premiums net of ceding commissions on credit derivative policies
(discounted at 0.77% at March 31, 2013, and 0.72% at December 31, 2012);

d. Unrealized appreciation or depreciation of investments; and

e. Noncontrolling interest in subsidiary – Class B preference shares.

Credit impairments on insured credit default swap ("CDS") contracts:
Management measures and monitors credit impairments on AORE's credit
derivatives, which are expected to be paid out over the term of the CDS
contracts. The credit impairments are a non-GAAP financial measure which
management believes to be useful to analysts and investors in reviewing the
results of our entire portfolio of policies. Management considers credit
derivative policies as a normal extension of AORE's financial guarantee
business and reinsurance in substance.

Reconciliations of these non-GAAP financial measures to the most comparable
GAAP measures are set forth below.

Information About the Company

American Overseas Group Limited is a Bermuda-based holding company. Its
operating subsidiary, American Overseas Reinsurance Company Ltd., has
historically provided financial guaranty reinsurance for U.S. and
international public finance and structured finance transactions and in 2012
commenced writing short tail non-catastrophe property/casualty reinsurance.
More information can be found at www.aoreltd.com.

American Overseas Group Limited
Consolidated Balance Sheets
(unaudited)
As at March 31, 2013 and December 31, 2012
(dollars in thousands)
                                                           
                                                           
                                             March 31, 2013 December 31, 2012
Assets                                                      
Investments:                                                
Fixed-maturity securities held as available for sale, at fair value
(Amortized cost: $159,023 and $154,334)       $169,428     $165,758
Other investments at fair value               8,595         --
Cash and cash equivalents                     24,375        36,317
Restricted cash                               41,997        45,139
Accrued investment income                     1,109          1,189
Reinsurance balances receivable, net          11,900        11,561
Funds withheld                                4,200          1,533
Recoverables on paid losses                   7,479          6,687
Deferred policy acquisition costs             27,938         28,775
Deferred expenses                             324            346
Other assets                                  638            90
Total Assets                                  $297,983     $297,396
                                                           
                                                           
Liabilities and Equity                                      
Liabilities:                                                
Loss and loss expense reserve                 $21,873      $22,247
Unearned premiums                             69,932         72,538
Accounts payable and accrued liabilities      633            698
Derivative liabilities                        83,464        65,214
Redeemable Series A preference shares ($1,000
redemption value and $0.10 par value;
authorized shares - 75,000;issued and        59,700         59,700
outstanding shares - 59,700 at March 31, 2013
and December 31, 2012)
Total Liabilities                             235,602        220,397
                                                           
Shareholders' Equity:                                       
Common shares                                 2,707          2,677
Additional paid-in capital                    232,180        231,891
Accumulated other comprehensive income        10,500         11,424
Retained deficit                              (190,017)      (176,004)
Total Shareholders' Equity                    55,370         69,988
                                                           
Noncontrolling interest- Class B preference  7,011          7,011
shares of subsidiary
Total Equity                                  62,381         76,999
Total Liabilities and Equity                  $297,983     $297,396
                                                           

                                                               
American Overseas Group Limited
Consolidated Statements of Operations
(unaudited)
For the three months ended March 31, 2013 and 2012
(dollars in thousands except share and per share amounts)
                                                               
                                                               
                                                 Three Months Ended March 31,
                                                 2013           2012
Revenues                                                        
Net premiums earned                               $6,813       $3,026
                                                               
Change in fair value of credit derivatives                      
Realized gains and other settlements              426           574
Unrealized (losses)                               (18,258)      (6,334)
Net change in fair value of credit derivatives    (17,832)      (5,760)
Net investment income                             1,320         2,078
Net realized gains on sale of investments         46            --
Total other-than-temporary impairment losses      --            --
Portion of impairment losses recognized in other  --            --
comprehensive income (loss)
Net other-than-temporary impairment losses        --            --
(recognized in earnings)
                                                               
Foreign currency (losses) gains                   (224)         190
Total revenues                                    (9,876)       (466)
                                                               
Expenses                                                        
Losses and loss adjustment expenses               942           739
Acquisition expenses                              1,862         1,498
Operating expenses                                1,333         1,760
Total expenses                                    4,137         3,997
Net income (loss) available to common             $(14,013)    $(4,463)
shareholders
                                                               
Net (loss) per common share:                                    
Basic                                             $(5.18)      $(1.69)
Diluted                                           (5.13)        (1.69)
Weighted average number of common shares                        
outstanding:
Basic                                             2,706,279     2,643,243
Diluted                                           2,733,241     2,644,132
                                                               

                                                               
Reconciliation of net income (loss) to operating income (loss):
(Dollars in thousands except share and per share amounts)
                                                 Three Months Ended March 31,
                                                 2013           2012
Operating income                                                
                                                               
Net (loss) available to common shareholders       $(14,013)    $(4,463)
Less: Realized (gains) on sale of investments and (46)          --
other-than-temporary impairment losses
Less: Unrealized losses on credit derivatives     18,258        6,334
Add back: credit impairment on derivatives        (238)         (1,464)
Less: Foreign currency losses (gains)             224           (190)
                                                               
Operating income                                  $4,184       $217
                                                               
                                                               
Net (loss) per diluted share                      $(5.13)      $(1.69)
Less: Realized (gains) on sale of investments and (0.02)         0.00
other-than-temporary impairment losses
Less: Unrealized losses on credit derivatives     6.68           2.40
Add back: credit impairment on derivatives        (0.09)         (0.55)
Less: Foreign currency losses (gains)             0.08           (0.07)
Operating income per diluted share                $1.53        $0.08
                                                               

                                                          
Reconciliation of book value per share
to operating book value per shareand                      
adjusted operating book value per share:
(Dollars in thousands except per share                     
amounts)
                                        As at              As at
                                        Mar 31, 2013       Dec 31, 2012
                                                          
Shares outstanding                       2,707             2,677
Book Value Per Share                     20.46             26.15
Shareholders' Equity (Book Value)        55,370            69,988
Derivative liability ^(1)                83,211            64,953
Credit impairments on derivatives        (5,776)           (5,537)
Operating book value per share           49.07             48.35
Noncontrolling interest in subsidiary -  7,011             7,011
Class B preference shares
Unearned premiums ^(2)                   70,582            73,205
Deferred acquisition costs               (27,938)          (28,775)
Present value of installment premiums    8,011             8,942
^(3)
Unrealized gains on investments          (10,500)          (11,424)
Adjusted operating book value per share  $ 66.49           $66.64
                                                          
(1) Represents only the unrealized gains (losses) portion of the derivative
liability.
                                                          
(2) Includes unearned premium balances on financial guaranty, property
casualty and credit derivative policies.The unearned premiums on financial
guaranty policies include the present value of future installment premiums,
net of ceding commissions.
                                                          
(3) Estimated present value of future installments, net of ceding commissions,
on policies written in credit derivative form only.At March 31, 2013 and
December 31, 2012, the discount rate was 0.77% and 0.72%, respectively.

The Company has posted its first quarter 2013 financial results to its website
at www.aoreltd.com under "Investor Information". If you are a shareholder of
American Overseas Group Limited and wish to receive a hard copy of the
financial statements by mail, please contact:

American Overseas Group Limited
Maiden House, 1^st Floor
131 Front Street
Hamilton, HM 12
Bermuda

Attention: David Steel
Telephone: 441-296-6501
Email: info@aoreltd.com
 
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