CBL Corp FPO (ASX: CBL) shares were in focus on Monday after the specialist insurance company filed a trading update with the ASX.
CBL Corporation is a $700 million specialist insurance and reinsurance company with offices around the world, including in parts of Europe and New Zealand.
This morning, CBL Corp announced that revenue for its 2017 financial year would be 35% higher than last year, up from its previous guidance of between 12% and 15% growth.
Unfortunately, a $100 million adjustment to its future claims reserves and a $44 million write-off of receivables will push the group towards a loss between $75 million to $85 million for its full year.
These “one-off” items are a result of the long-tail in its French construction insurance business and a detailed examination of its SFS business, CBL Corp said.
“Of the approx. $100m reserve adjustment, less than $10m is in respect of the FY17 year,” CBL Corp noted. “Normalising prior year components of the future claims reserve strengthening, CBL expects its underlying overall Combined Loss Ratio across the Group will be consistent across the current and prior years.”
However, as a result of the adjustments, CBL Corp will require a capital raising to bolster its capital position. It will update the market in time.
“The reserve strengthening is required and although disappointing, clearly the recommended levels of reserving for our French products have been too low in the past,” CBL Group CEO, Peter Harris said.
“The better visibility over our data from this long-tail business provides more certainty and allows better focus on optimising levels of capital deployed to write this business.”
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