Friday, 17 August 2018

Announcement

MKTUPDTE: CBL: CBL UPDATES THE MARKET ON FY17 RESULTS EXPECTATIONS

05 Feb 2018 08:46NZX
Market Information
NZX Limited
Level 2, NZX Centre
11 Cable Street
Wellington
New Zealand

Company Announcements Office
Australian Securities Exchange Limited
Exchange Centre
Level 6, 20 Bridge Street
Sydney NSW 2000
Australia

5 February 2018

CBL UPDATES THE MARKET ON FY17 RESULTS EXPECTATIONS

CBL Corporation Limited (NZX/ASX: CBL) will report its FY17 result on 27
February 2018.
CBL expects to report a FY17 total revenue growth in excess of 35%, above
previous guidance of 12% - 15%.

CBL also expects to make a future claims reserve strengthening adjustment of
around $100m to the reserves of CBL Insurance Limited in respect of its
long-tail French construction insurance business, and another one-off
write-off of receivables of approx. $44m arising from
broker/insurer/reinsurer reconciliations and related differences arising from
a detailed post-acquisition examination of SFS throughout 2017.

These adjustments are expected to result in the CBL Group reporting a
consolidated FY17 after tax loss of $75m - $85m.

Of the approx. $100m reserve adjustment, less than $10m is in respect of the
FY17 year.  Normalising prior year components of the future claims reserve
strengthening, CBL expects its underlying overall Combined Loss Ratio across
the Group will be consistent across the current and prior years.

It is important to note that the Group has a strong and increasing cash
position with approx. $500m of available cash balances.

The Group has had strong operational performance in 2H17 and expects to
report growth in gross written premium of over $440m, an increase of more
than 35% for FY17, with significant growth from new core short tail business
products outside of France with well performing Combined Loss Ratios.
New business has been originated in Spain, Italy, USA, Mexico and Australia
generating over $5m per month in new annual premium.

After completing an extensive 4-month exercise intensely reviewing its French
construction business data in conjunction with its independent Appointed
Actuary PwC, and the draft conclusions coming out of this, the CBL board
determined that CBL Insurance should strengthen its reserves by revising the
actuarial assumptions applicable to ongoing French construction business, and
take a one-off future claims reserve catch-up adjustment to take into account
potential future claims over the next 10-12 years in respect of policies
written in previous years. The data exercise backs up the overall
profitability of the French construction business, but at lower levels than
recommended or reported in the past.

The exercise to review data and update actuarial assumptions was initiated
following CBL Insurance''s originating Insurer, Elite Insurance Company
Limited, going into solvent run-off in July 2017.  Questions arose around
Elite''s reserving on its French construction business. CBL put together a
task-force including its own and independent actuaries to cleanse, analyse
and report on nearly 10 years of policy data and claims incurred and paid
data on this business. This has resulted in accurate and consistent incurred
and paid results for the last four years at significant levels, and has
shown:
o Of the recommended $100m of non-cash FY 17 reserve strengthening,
about $10m relates to FY17, and around $90m relates to prior years.
o The quality of the data produced means that the potential volatility
and uncertainty about future ultimate loss modelling is expected to have been
removed.
o One of the key learnings from the data analysed has shown that claims
take much longer to get reported and paid for decennial liability product
than previously modelled. Since this is applied to total claims reserves
written over the last 10 years, even a small change results in material
movements in reserves.
o CBL achieves higher claims recovery levels than other French insurers
although the claims payment, closure and recovery phase is still in an early
stage of maturity.
o The data analysis has shown that a significant saving in claims
processing costs may be achieved by replacing a large Third-Party Claims
Administrator with a new provider.  CBL has been trialling this new provider
for the last 8-12 months and expects to improve recoveries and drive
significant claims handling cost savings of more than 40% pa.
As a result of Elite being placed in solvent run-off, the RBNZ has
commissioned an independent report by a skilled expert.  We are unaware of
when that report will be available.  We believe that this report will support
CBL''s decision to materially increase future claims reserves.

CBL Group CEO, Peter Harris, commented "The reserve strengthening is required
and although disappointing, clearly the recommended levels of reserving for
our French products have been too low in the past.  The better visibility
over our data from this long-tail business provides more certainty and allows
better focus on optimising levels of capital deployed to write this business.
The Group has performed well during 2H17 with all companies showing
significant and profitable growth in existing markets, expansion into new
markets, focused on short tail business enabling a greater balance in our
portfolio".

Capital review
As a result of the adjustments above, CBL Board considers that a capital
raising is appropriate to ensure sufficient capital strength and capacity for
CBL''s continued profitable growth. Further announcements are expected to be
made on this capital issue.

Outlook
CBL remains positive in its outlook for 2018, with new short risk product
lines that commenced in 2017 continuing to grow and become fully earning, and
the recently announced JV in India with SREI Infrastructure commencing the
writing of business.  The French market remains buoyant and it is expected
that will contribute positively to profit albeit at lower levels than
previously anticipated, and our new digitally-delivered builders warranty
business in Australia and business in US/Mexico is delivering strong
consistent results.
CBL will provide underlying operating profit guidance, together with more
detailed review of the reserve strengthening in further announcements.

ENDS

About CBL
CBL Corporation Limited (CBL) is a specialist insurer and reinsurer focused
on credit and financial risk. CBL has eight offices spread across 25
countries and almost 550 employees. The company has been operating since for
44 years, and is listed on the ASX and the NZX Main Board. CBL''s main
operating subsidiary is CBL Insurance Limited, which is a New Zealand
licensed non-life insurer supervised and regulated by the Reserve Bank of New
Zealand.
CBL also has a number of wholly owned subsidiary companies including CBL
Insurance Europe, which is a regulated insurer in Ireland, Assetinsure, an
Australian licensed non-life insurer supervised and regulated by Australian
Prudential Regulation Authority, European Insurance Services Limited, a
managing general agency (MGA) in Tunbridge Wells in the United Kingdom,
Securities & Financial Solutions a managing general agency (MGA) in France
and Professional Fee Protection, UKs leading fee protection provider offering
expertise and market-leading support to help accountancy practices strengthen
their client relationships and grow their revenue.
CBL specialises in writing building and construction related credit and
financial surety insurance, bonding and reinsurance. CBL Insurance currently
has a Financial Strength Rating of A- (Excellent) and an issuer rating of a-,
with both outlooks ''Stable'', from A.M. Best Ratings Agency.
To know more about CBL Group, visit our corporate website
www.cblcorporation.com

For investor queries:
Carden Mulholland
Chief Financial Officer
CBL Corporation Limited
Phone +64 9 303 4770
ARBN 604 999 466 Incorporated in New Zealand

For media queries:
Geoff Senescall John Redwood
Senescall Akers Ltd Senescall Akers Ltd
+64 21 481 234 +64 21 581 234
senescall@senescallakers.co.nz redwood@senescallakers.co.nz
End CA:00313727 For:CBL    Type:MKTUPDTE   Time:2018-02-05 08:46:44
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