CBL Insurance IPO

[JoeGrogan]

http://www.junoinvesting.co.nz/marke...ing-cbl?rq=CBL

"The alignment of the management and the board, and their belief in the business, was shown by the limited sell-down of holdings at the IPO by Peter Harris and Alistair Hutchinson – they relinquished only 12 per cent and 16 per cent of their holdings respectively. Their combined shareholding is worth NZ$412.5 million (based on a NZ$3.75 share price)."

Nice to see management have a decent amount of 'skin in the game'.

Edit: On second thought forecasting a 2017 PE ratio of 11 seems to be a stretch when the guidance is only a 18-22% improvement on this years operating profit.

[JoeGrogan]

http://www.4-traders.com/CBL-CORPORA...78/financials/

Yeah i just can't see a 64 million dollar net profit being reached on a 18-22% improvement in operating earnings.

[Joshuatree]

CBL ANNOUNCES CONDITIONAL AGREEMENT TO BUY US INSURER
Download Document 630.94KB

[melsmith90210]

Yeah i just can't see a 64 million dollar net profit being reached on a 18-22% improvement in operating earnings.

Reading through the reports SFS acquisition was in for 3 months of 2016 so 2017 will see a full 12 months of earnings flow through for that entity to the bottom line. The segment report gives some good detail of the entity splits.

US acquisition might add a little but they seem to be talking that down for anything meaningful in 2017, looks like a sharp price negotiated though.

I also see they are now included in the ASX 300 index as of 20 March 2017, not sure how much demand from indexes this puts on the stock.

Like what I see though. Tough to find good growth performing companies.

[BlackPeter]

just to move this to the appropriate thread:

Have a look at CBL - they do quite nicely

Picture a chart of a Turkey being fattened up for Christmas.
It starts in the bottom left hand corner on 1st January.Each day you feed the turkey, and it puts on weight,and each day you mark on your chart,and the chart starts heading for the top right hand corner.Looks fantastic.But then on the 13th December you chop off the turkeys head.Chart drops to Zero.Insurance companies are the same.Fat profits until a huge underwriting disasterous loss cuts off their head.!
Read the history of Lloyds.

Are you saying that it might not be a good idea to invest into insurance companies who underwrite life insurance policies for turkeys without excluding the risk of intentional cultural mass-killings of said turkeys?

I absolutely agree.

However - looking at the larger picture of insurance companies do I think that your post just highlights the problem of insufficient diversification combined with underestimating the likelihood and damage of one particular insured event.

I don't think that the insurance business is that much different to the finance business - and we both are quite heavily invested into some examples of the latter kind. The trick is in both industries to properly manage and cost risk - and to diversify sufficiently to make sure that one (or a series of) super accident(s) does not kill the business.

I probably need to do still some more research on CBL (and this is stuff for a different thread), but I don't see any reason why insurance in general should be more risky or less profitable than any other well managed business in the financial world.

Do you?

Read the history of Lloyds.
9/11 I only sold one share and it was Tower.
You are right about finance companies.I think Banks in Australasia have better government controls on them now,but the wild west days of finance companies is exactly what insurances companies are like.
We still have to watch bad loans with HBL and TNR.Both currently have few.
I think back to Re-Insure in Aussie,years of great profits,holding mainly cash.Went broke.AMI in NZ,a great history of profits.One earthquake broke them. CBL just remember those who do not follow history are doomed to repeat it.Be careful.If you can understand insurance compay's accounting you are doing well.If you can't,don't buy something you don't understand.

And when in a low interest enviroment, their profits from investments are low they "appear to have a problem".
And if claims excede underwriting,they " appear to have a very big problem".

Hi Percy, I did buy some CBL during the recent drop (it just looked like a typical market overreaction and the fundamentals look good), and so far seemed to have done quite well with them. I agree however that I probably need to do some more due diligence before I move these shares to my bottom drawer.

Couple of initial reactions to your concerns: If I look at their insurance portfolio, than I don't see at this stage huge systematic risks (like the close sequence of devastating earthquakes which killed e.g. AMI). The only area I might be a bit concerned about is their underwriting of "builders warranty". Need to look deeper into the conditions, but something like that could probably turn into a problem if NZ builders create the next fad after "leaky buildings".

Having said that ... these are no 9/11 problems or earthquakes which let share values drop over night. A bit of basic TA and regular monitoring should catch issues like that before the company goes down the river.

Anyway I do appreciate your warning and intend to do a bit more homework on this one.

[percy]

I have given you general warnings about insurance companies.
I rang a friend, who is an insurance agent, and asked him about CBL ,when they listed.His advice was to be very careful, as they are at the high risk end of the insurance business.That was enough for me to avoid them.
Take care.
ps an earlier poster on this thread did mention long tails,something to remember.I would just add very long tails.!!

[Snow Leopard]

I have given you general warnings about insurance companies.
I rang a friend, who is an insurance agent, and asked him about CBL ,when they listed.His advice was to be very careful, as they are at the high risk end of the insurance business.That was enough for me to avoid them.
Take care.
ps an earlier poster on this thread did mention long tails,something to remember.I would just add very long tails.!!

And yet you throw your money at tiny dodgy little banks like Heartland despite the repeated warnings and the even dodgier finance company: Turners !

You will be buying into Airlines next !!

Best Wishes
Paper Tiger

[percy]

And yet you throw your money at tiny dodgy little banks like Heartland despite the repeated warnings and the even dodgier finance company: Turners !

You will be buying into Airlines next !!

Best Wishes
Paper Tiger

The money I threw at the dodgy little bank, is being thrown back in big chunks,and the even dodgier finance company is starting to do the same..
No I will leave the airlines to others.

ps.Just remembered Turners have an insurance company.

[macduffy]

The money I threw at the dodgy little bank, is being thrown back in big chunks,and the even dodgier finance company is starting to do the same..
No I will leave the airlines to others.

ps.Just remembered Turners have an insurance company.

But is it their (Turners') risk? Policies are underwritten by Vero.

[percy]

But is it their (Turners') risk? Policies are underwritten by Vero.

Thank you macduffy.
So just another ticket for Turners to clip.
They are big ticket clippers.