Forum Archive Index - October 2002

["winner69 ." <wwinner69@hotmail.com>]

Obviously market sentiment winning the battle at the moment.

Some of the adverse sentiment driven by a couple of factors.

One being that the feeling that CLI has gained it's large market share from 
offering significantly higher yields than it's competitors - much like heavy 
discounting by a retailer to gain share. Competitor yields generally appear 
to be between 3-4% which means CLI is in effect discounting it annuities by 
10-15%.

No problem if the CLI business model can cope with this. For the annuities 
already written it probably can. The model currently works because of the 
spread between property yields and the annuity yields. Ongoing is the model 
viable if this spread narrows? - if property yields go down? or if say 
interest rates go up?. Would CLI be as competitive as they are now?.

Another is the concern (in these turbulent times) that investors have about 
reserves that such companies need. CLI reserves are apparently quite 
acceptable at the moment but the reserves have been built up by property 
revaluations. AMP is having troubles with the 'reserves; they need at Pearl 
because of falling equity prices - CLI could run into the same problem if 
property prices fall and they need to revalue these down.

Lastly it was fortunate CLI were able to revalue up another part of their 
business at the same time that they made the other adjustments. It was bad 
enough having to adjust profits post announcement but without this other 
revaluation this years profits would have been less than last year.

Those are sum of the issues driving the negative sentiment towards CLI.

But Dimebag, if you are convinced of the long term viability of the CLI 
business model and bearing in mind that the business is still in it's 
infancy go for it. Possibly the road to riches.


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