CBL says first-half revenue growth encouraging

Auckland-based credit surety and financial risk insurer CBL Corp said first half revenue growth was encouraging, despite the 36 percent drop in operating profit due to increasing its insurance reserves.

Last week, the company flagged its $16.5 million increase in CBL Insurance's reserves to cover future claims, leading operating profit to fall to $22.4 million from $35.1 million in the same period a year earlier, some $17.5 million below expectations. CBL had previously projected annual earnings of between $89.9 million and $93 million for calendar 2017.

Today it said net profit fell 32 percent to $12.6 million in the six months ended June 30, while gross written premium climbed 29 percent to $204.5 million.

CBL won't meet previous annual guidance for underlying operating profit growth between 18-and-22 percent as operating profit is below expectations in the first half, though "a resurgence is targeted for FY18". Still, it maintained previous revenue guidance of between 12-and-15 percent growth.

"Whilst it was disappointing that our performance was tainted by the requirement to take an adjustment covering up to a 20-year span all in the half year, the board took the prudent decision to do so and based on independent actuarial advice," managing director Peter Harris said. "Moreover, it strengthens the company against unexpected claim activity."

Harris said that $10 million of the $16.5 million reserve increase "related to a decrease in the discount rate for euro denominated claims which could easily be turned around should euro bond yields increase in the future."

In the first half, CBL completed its purchase of 71 percent of France's Securities and Financial Solutions Europe SA (SFS) for 94 million euros, taking over its biggest customer in a deal expected to lift the credit and financial risk insurer's earnings.

The shares dipped 0.3 percent to $3.22. They have dropped 15 percent since the earnings warning last Friday, and are down 11 percent this year. CBL listed on the NZX in 2015, raising $90 million at $1.55 a share to help fund the acquisition of Australian insurer Assetinsure.

The company will pay a 1.5 cents per share dividend, down from the 3 cents first half dividend it paid in 2016.

(BusinessDesk)