Its well and truely done.
They mispredicted long-tail claims in a segment that was over 50% of their business. Not sure what the numbers are, but to mock an example if CBL generated 1 billion of revenue on 10 year warranty, they'd get acturial estimates for expected claims, at say 50m against 100m of recognised revenue, and deduct 20m admin to arrive at 30m profit. Actuarially they require a buffer for adverse claims, eg an additional 50m pa... Thus must maintain liquidity of approx 1b, reinsure a portion of the exposure, and hold the rest in the balance sheet.
Instead claims turn out to be 75m, and reserve provisioning requires the keep capital to cover up to 125m pa. So now have a 250m exposure, less the reinsurance. Which is fine, the business still generates a profit (50m over 10 years), and generates interest from funds held in trust... They just need additional reserves to fill the funding gap.
However, this is the story CBL have released, which given their track record with RBNZ we should ascribe very little confidence... 3rd party investor comes in, and judges that claims in the french construction segment are trending and will blow out. Project 95m pa over the next 10 years, leading to a operating loss of 15m over the next 10 years, and requiring an additional 200m of reserves.
So they need to book in a net loss of 150m , and raise an additional 300m+ in this example.
Thats where we were on the 8th... Now we are in liquidation mode, a sizeable discount to fair value on the assets of the business, so any "shareholder value" is eroded. That plus the fees of liquidators, lawyers, every single creditor jumping down the throat, not to mention the run on claims (the house you thought might be leaky but holds a 10 year CBL warranty, all of a sudden is definately leaky).
Credit downgrade from BBB(whatever it was) to E says it all. Its junk, and thats the Debt, equity sits down the pecking-order. At this stage its just a question of whether policy-holders funds are adequately ringfenced.