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Insurer CBL buys its French customer

NZN 22/06/2016

CBL Corp plans to buy France's Securities and Financial Solutions Europe SA (SFS) for 94 million euros ($NZ150m), taking over its biggest customer in a deal expected to lift earnings.

The Auckland-based credit and financial risk insurer has been granted exclusivity to pursue the acquisition, which would include IMS Expert Europe SA, a related claims management operation, it said on Thursday.

The deal is subject to regulatory processes and consents and is expected to be wrapped up before October 31.

SFS is France's biggest specialist producer of construction sector insurance and, with the IMS claims management operation, generated normalised operating earnings of 8.2m euros on revenue of 41m euros in 2015.

Buying SFS will help remove the distribution concentration risk that SFS represented to CBL in being such a large client, and would further vertically integrate and consolidate CBL's market position in Europe, says managing director Peter Harris.

Reinsurance business originated from SFS accounted for about 41.4 per cent of CBL's gross written premiums in 2015, down from 49.9 per cent in 2014. The NZX-listed insurer posted an annual profit of $35.5m last year, beating the forecast in its initial public offering prospectus for earnings of $26.1m.

CBL will pay for the acquisition through cash, bank debt and vendor funding.

The transaction comes at a volatile time in Europe, with the UK set to vote on whether or not to quit the European Union economic bloc. CBL this week downplayed the impact a 'Brexit' would have on its business, with its European insurer based in Ireland.

If the UK does vote to leave, CBL's UK-based European Insurance Services will keep operating in Tunbridge Wells, but CBL would shift its legal domicile, probably to Ireland.

CBL listed on the NZX last year, raising $90m at $1.55 a share to help fund the acquisition of Australian insurer Assetinsure. Since then, the shares have climbed to $2.49.

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