CBL first-half profit falls 19% currency losses offset growth in premiums

Friday 26th August 2016

CBL Corp posted an 18 percent fall in first-half profit as losses on foreign exchange movements offset improved earnings and growth in the credit surety and financial risk insurer's gross written premiums.

Net profit fell to $18.6 million, or 8.49 cents per share, in the six months ended June 30, from $22.7 million, or 14.58 cents, a year earlier, the Auckland-based company said in a statement. That included a $4.4 million charge in foreign exchange revaluations, compared to a gain of $8.8 million a year earlier. At an operational level, the insurer's earnings were up 44 percent to $35.1 million and gross written premium climbed 43 percent to $179.2 million.

"We have invested considerable resources over the past six to nine months into developing several new programmes that we expect will generate additional future long-term sustainable revenue and profit," managing director Peter Harris said. "We will begin introducing these later this year, and aim to roll them out more broadly in 2017."

In June, the insurer announced plans to buy 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.

Harris said the UK's vote to leave the European Union opened up opportunities for CBL if British banks and insurers have to meet stricter criteria on the Continent, something CBL already does because of its existing presence in Europe.

It had put off investing in euro-denominated investments in the lead-up to the UK referendum, but was still looking for options that would lift profit without materially affecting solvency margins, he said. The solvency margin cover for the insurer's European business was 202.6 percent as at June 30, more than the 150 percent threshold required.

CBL said it's still on track to meet prospectus guidance for annual net profit of $40.4 million, which would be up from $35.5 million in 2015.

The board will declare its interim dividend in October.

The shares last traded at $2.82 and are up 27 percent this year. CBL listed on the NZX last year, raising $90 million at $1.55 a share to help fund the acquisition of Australian insurer Assetinsure.

BusinessDesk.co.nz

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