CBL Corp is hiring advisers to sell the French construction insurance division that's seen it fall foul of regulators over solvency concerns and is pursuing legal action against the vendors of Securities and Financial Solutions Europe SA (SFS).
The Auckland-based credit surety and financial insurance risk firm expects to exit the French business within 90 days after a board-led strategic review found the high level of capital needed to meet estimated future claims posed "a disproportionate level of risk for the wider business", it said in a statement. CBL said the French unit is profitable and all options are on the table, including the sale of the insurance book, and the distribution and operational networks of the managing general agents as a going concern.
The insurer said it has triggered legal rights against the vendors of SFS under the purchase agreement, and that alongside other remedies it has recourse to $40 million to recover against its balance sheet. CBL bought SFS for 94.5 million euro through cash, bank debt and vendor funding, and retained executive chair and shareholder Antoine Guiget while the principal shareholder Patrice Gilles exited and became an advisory chair to the unit.
"The board considers this exit of the French Construction Business to be a significant and positive decision made in the interests of ensuring CBL's long-term growth and profitability," it said. "This will enable the business to move forward with CBL's core business lines which have continued to perform strongly during 2017."
CBL's stock has been suspended from trading on the NZX as the stock market operator tries to work out whether it's kept the market informed of material information and met continuous disclosure obligations. Trading in the stock was halted before the suspension with details eked out over subsequent days that prudential regulators in New Zealand and abroad questioned the adequacy of reserves for its French construction insurance division, prompting a credit rating downgrade and prospective capital raise.
