CBL’s full year performance was strong and surpassed guidance. The group’s IPO raised equity and bolstered regulatory capital while the main insurance subsidiary, CBL Insurance Limited’s rating was upgraded by agency AM Best
The group reported strong performance for FY15, surpassing the guidance given as part of its October IPO. The equity raising was credit positive bringing $90m of new funds into the business and increasing the group’s regulatory capital ratios. Claims ratios have fallen and profitably has improved. A measure of profitability, the combined ratio improved to a strong 79.7%. Further, the group’s main insurance subsidiary, CBL Insurance Limited was upgraded by AM Best during the period.
The CBL 8.25% fixed rate bond with a maturity date of 17 April 2019 (callable at the company’s discretion at $103.00 on 17 April 2017 or $101.50 on 17 April 2018) has performed extremely well since it was issued in April 2014. It is currently offered at an indicative price of $106.30 or a yield to maturity of 6.00%. Given its improving credit metrics the bond is still considered to be good value at these levels.
| NZ$m | FY15 | FY14 |
| Income statement
|
|
Gross written premiums
|
294.2
|
241.8
|
|
Net premiums
|
243.0
|
181.5
|
|
Net claims expense
|
-74.7
|
-68.1
|
|
EBITDA
|
59.5
|
35.7
|
|
NPAT
|
35.5
|
19.4
|
| Balance sheet |
|
Cash and equivalent
|
296.0
|
166.2
|
|
Total assets
|
743.9
|
405.3
|
|
Total debt
|
65.2
|
65.6
|
|
Total equity
|
193.7
|
67.5
|
| Ratios |
|
Combined ratio
|
79.7%
|
83.8%
|
|
Debt to equity
|
0.3x
|
0.9x
|
|
EBITDA interest cover
|
9.4x
|
7.7x
|
|
Regulatory capital margin (CBL insurance)
|
155.2%
|
138.7%
|
Source: Company results, FIIG Securities
FY15 highlights:
- In October, CBL successfully listed on the NSX raising $90m in new capital from the $125m listing. As well as supporting the group's $46m acquisition of Australian specialty insurer Assetinsure Holdings, funds have been used to increase regulatory capital and support future growth
- Gross written premium (GWP) for the three insurance entities (CBL Insurance, CBLIE and Assetinsure) and the MGA’s (EISL and PFP) increased 21.7% in FY15 to $294.2m driven by the successful acquisition of Assetinsure, PFP and the 35% investment into Fiducia
- EBITDA increased 66.7% to $59.5m in FY15 and NPAT increased 83.0% to $35.5m
- The claims ratio declined to 35.0% from 40.0% in FY14
- The combined ratio improved to 79.7% in FY15 from 86.2% in FY14. The combined ratio is a measure of how profitable the insurance operations are before any investment income of premiums. 100% is breakeven and the lower the measure the more profitable the insurance operations. Most large insurers run in high 90% or even over 100% and rely on investment income from the large volume of premiums held to make a profit
- Strong improving solvency margins in all three insurance entities with all capital at the upper end of targeted levels:
- CBL Insurance 155.2% (FY14: 138.7%)
- Assetinsure 278%
- CBL Insurance Europe 1,205%
- AM Best rating agency upgraded CBL Insurance Limited’s credit rating in June 2015 from ‘B+’ positive outlook to ‘B++’ stable outlook – for further information see Rating Agency A.M. Best upgrades CBL Corporation