Tuesday 14 June 2016 by William Arnold Company updates

CBL Insurance receives its second upgrade within a year

THIS CONTENT IS SUITABLE FOR WHOLESALE INVESTORS ONLY

A.M. Best has upgraded the financial strength rating and the issuer credit rating of CBL Insurance Limited (CBL). The outlook for each rating remains stable. This follows the group’s previous ratings upgrade in June 2015

The rating actions reflect significant improvement in CBL’s capital position and risk adjusted capitalisation in 2015, due to continued strong earnings and additional capital contributions from its parent company.

This is illustrated by the strong solvency margins in all three insurance entities as at December 2015:

  • CBL Insurance 155.2% (FY14: 138.7%)
  • Assetinsure 278%
  • CBL Insurance Europe 1,205%

In addition, CBL successfully listed on the NSX raising $90m in new capital, which vastly improved the insurance group’s financial flexibility through its access to capital markets.

A.M. Best also notes the group’s strong interest coverage ratio and moderate debt to tangible capital ratio on a consolidated basis.

A higher rating will also allow the company access to additional business opportunities, including some which CBL has been targeting for some time.

The CBL 8.25% fixed rate bond has a maturity date of 17 April 2019, however is first callable at the company’s discretion at $103 on 17 April 2017. We expect the group to call this issue given its much improved credit profile and therefore potential ability to access cheaper funding.

CBL is offered at an indicative bid/ask of $104.1/$105.4 which equates to a yield to call of 6.66%/5.11% and a yield to maturity of 6.63%/6.14%. Given its improving credit metrics, the bond is still considered to be good value at these levels.

Note: The actual rating cannot be disclosed to retail investors, if you are wholesale please call your dealer for more information. The A.M. Best press release is available here.External link - opens in a new window

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