Chesnara PLC's (LSE:CSN) latest acquisition from Canada Life UK marks a “highly attractive” deal for the pension group and paves the way for quick returns, analysts have said.
Chesnara last month agreed to buy a closed portfolio of unit-linked bonds and legacy pension business from Canada Life UK.
Panmure Liberum noted the deal would result in “an incredibly fast payback period and uplift to cash generation” for Chesnara.
“This acquisition adds to the predictable cash generation which ultimately supports the uninterrupted dividend growth trajectory,” analysts said.
Chesnara had said the portfolio, incorporating 17,000 policies and assets under management of £1.5 billion as of 2023, would generate £8 million over the next five years.
This would be transferred to its subsidiary, Countrywide Assured, by late 2025.
“This still leaves management with all the firepower to conduct a larger transaction next year should the opportunity present itself,” Panmure added.
“The new policy administration partnership bodes well for migrating policies at scale and generating further efficiencies over time.”
A ‘buy’ rating was reiterated for Chesnara, alongside a share price target of 420p.
Shares were down 0.4% at 263.50p on Thursday.