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New Zealand bourse suspends CBL Corp. shares amid disclosure concerns

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New Zealand bourse suspends CBL Corp. shares amid disclosure concerns

Trading in CBL Corp. Ltd.'s shares on the New Zealand stock exchange was suspended from 2:09 p.m. local time on Feb. 8 amid concerns raised by the exchange over whether the company has provided all material information regarding its overseas insurance operations to the market.

NZX Ltd.'s decision to suspend trading in the New Zealand-based company's shares came after two trading halt announcements by CBL Corp. on Feb. 2 and Feb. 5, recent disclosures by the company and engagement between the company, the stock exchange's regulation department, the Financial Markets Authority, the Reserve Bank of New Zealand and a number of foreign regulators regarding the overseas operations.

The NZX's regulation department said it was unable to confirm the likely duration of the trading suspension.

Earlier on Feb. 7, CBL Corp. announced that the New Zealand central bank instructed it to maintain unit CBL Insurance Ltd.'s minimum solvency ratio at 170% in July 2017 after a review of the adequacy of the unit's reserving for its French construction insurance business. In November 2017, the central bank required CBL Corp. and its subsidiaries to consult on any non-business as usual transactions larger than NZ$5 million.

The central bank's orders included a confidentiality order preventing the company from making an announcement to the market while the orders were in force. They have since been lifted, the company said.

The New Zealand regulator's review was in turn triggered by concerns raised by the Gibraltar regulator on reserves at originating insurer Elite Insurance Co. Ltd., which has since been placed into voluntary run-off and sold. In February 2016, CBL Insurance announced a move to transition the majority of its European business away from Elite Insurance to CBL Insurance Europe.

Meanwhile, the Central Bank of Ireland launched an engagement process with the company given the exposure of CBL Insurance Europe to CBL Insurance. The Irish regulator has since issued directions to CBL Insurance Europe aimed at strengthening its capital base, reserves and reinsurance security.

In light of concerns about the French business, CBL Corp. had commissioned a review that determined that the company should make an approximately NZ$100 million reserve strengthening adjustment to CBL Insurance's reserves and a one-off write-off of receivables of around NZ$44 million from broker/insurer/reinsurer reconciliations and related differences, according to the company's Feb. 5 filing.

The company expects these adjustments to results in an after-tax loss of NZ$75 million to NZ$85 million for fiscal 2017. It said less than NZ$10 million of the NZ$100 million reserve adjustment will be taken in fiscal 2017 and that it expects the underlying combined loss ratio across the group to be consistent across current and prior years. CBL Corp. will report earnings on Feb. 27.

As a result, CBL Corp.'s board decided to conduct a capital raising to ensure sufficient capital strength and capacity for its continued growth, with further announcements to be made.

Rating agency A.M. Best on Feb. 6 downgraded CBL Corp. and CBL Insurance's ratings due primarily to the company's decision to make the reserve charge.

As of Feb. 7, US$1 was equivalent to NZ$1.37.