CBL sees customers up for grabs in Brexit uncertainty

CBL managing director Peter Harris. Photo / Dean Purcell

CBL Corp expects to pick up new British customers wanting greater certainty from their insurance providers as the UK exits from the European Union.

The Auckland-based credit surety and financial risk insurance firm has exceeded regulated solvency requirements in its Dublin-domiciled European business, which chairman John Wells says led to "positive outcomes" last year and contributed to "substantial organic growth" in the European division.

Almost three-quarters of CBL's gross written premiums came from its European businesses in calendar 2016, and the company beefed up its presence in the region with the acquisitions of UK tax investigation insurance provider Professional Fee Protection, and France's largest specialist producer of construction-sector insurance Securities and Financial Solutions Europe SA.

Managing director Peter Harris told shareholders at today's annual meeting in Auckland the UK's decision to quit the EU opened up the door for CBL to grab customers who were seeking "more clarity and certainty than British and Gibraltar insurance providers are currently able to offer about where they will be domiciled and pay claims from in the future".

CBL focused on its regulatory requirements in response to Brexit, having delayed investing in euro-denominated investments in the lead-up to the referendum.

"A commitment to the highest levels of corporate governance and strong solvency capital alignment throughout the group has always been a key feature of our business," Harris said in notes published on the NZX.

"We have moved quickly to respond to these opportunities and are working with a number of new clients as a result."

In March, the insurer said it expected annual earnings growth of up to 22 per cent in 2017 in what it anticipates will be "a strong year with a developing pipeline of new business" and would refocus "on business development opportunities across the group and consolidating acquisitions".

Harris today said the company is shifting the majority of its European business into CBL Insurance Europe rather than its current Gibraltar-based provider.

"This transition will continue during 2017 and once completed in 2018 is expected to add both revenue and profit to CBL Insurance Europe and to CBL Insurance by way of reinsurance," he said.

Harris also downplayed the company's reported net profit falling 14 per cent to $30.7 million, saying it was reduced by one-off costs from buying SFS and repaying debt early, and foreign exchange movements that don't affect the underlying operation.

A commitment to the highest levels of corporate governance and strong solvency capital alignment throughout the group has always been a key feature of our business.

Peter Harris, CBL managing director

"We hold premiums in the currencies that they are earned in because that is the currency in which future claims and expenses will be paid," Harris said. "This means that we are naturally hedged. This also means that our reporting and translations into NZ dollars will always be susceptible to currency adjustments."

Shareholders will vote on re-electing chairman John Wells and director Ian Marsh, authorising a payment to Wells that exceeded the remuneration cap, and lifting the pool for directors' fees to $1.5 million from $750,000 plus 30,000 euros.

Wells said the proposed increase in the fee pool was due to CBL's international growth that "increased responsibilities for the board of directors".

CBL shares last traded at $3.48, more than twice the $1.55 price the shares were sold at in an initial public offering in late 2015.