CBL says 1H earnings dropped 36% due to increased reserves

Friday 18th August 2017

Auckland-based credit surety and financial risk insurer CBL Corp says first half operating earnings fell 36 percent, largely due to a $16.5 million increase in CBL Insurance's reserves to cover future claims, although revenue growth was still strong.

Internal operating profit was $22.5 million in the six months to June 30, down from $35.1 million in the same period a year earlier, and $17.5 million below expectations, CBL said in a release to the stock exchange ahead of its first half result announcement on Aug. 24. CBL has previously projected annual earnings of between $89.9 million and $93 million for calendar 2017.

"The decision by the board to strengthen reserves in certain lines is seen as a prudential and appropriate approach and takes into account advice from CBL’s external actuarial consultants," said chief executive Peter Harris. He emphasised that the move wasn't a restatement of existing reported and open claims but rather "is an adjustment that CBL's independent actuaries consider is prudent to make to our future claim forecasts."

Harris said the $16.5 million adjustment to CBL Insurance reserves represents a strengthening of 7.2 percent of its total net claims reserves of $229 million.

CBL said gross revenue was $205 million in the first half, an increase of 29 percent versus the same period a year earlier, when revenue was $159 million. “Much of the benefit of that substantial lift in revenue will flow through into earnings numbers over the next 12-to-18 months,” said Harris.

The shares last traded at $3.77 and are up 36 percent over the past 12 months.

(BusinessDesk)

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