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CBL’s reserve strengthening to hit profit

CBL Corporation says first-half operating profit will miss company expectations by $NZ17.5 million ($16.1 million) due to a strengthening of insurance reserves.

The Auckland-based insurer’s operating profit is expected to be $NZ22.5 million ($20.7 million) for the six months to June 30, compared with $NZ35.1 million ($32.4 million) in the corresponding period last year.

“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,” CEO Peter Harris said.

The $NZ16.5 million ($15.2 million) adjustment represents a strengthening of 7.2% in CBL’s total net claims reserves of $NZ229 million ($211 million).

Actuaries examined policies issued up to 10 years ago, plus forecasts for the next 10 years in assessing reserve levels.

“The full amount of that strengthening adjustment will be taken through current-period earnings,” Mr Harris said.

CBL expects first-half gross revenue of $NZ205 million ($189 million), up 29%.

“Much of the benefit of that substantial uplift in revenue will flow through into earnings numbers over the next 12-18 months,” Mr Harris said.

CBL will announce its half-year results on Thursday.