Panmure Liberum has reaffirmed its 'buy. rating and 400p target price on Chesnara PLC (LSE:CSN), the life insurance consolidator, implying 34% upside from the current share price of 296p, after the company reported a 19% rise in operating capital generation (OCG) to £94 million for 2025.
OCG, the measure the broker considers the most reliable proxy for cash generation in a life insurance business, covered the dividend 1.8 times in FY25 and is forecast to rise to £117 million by FY28, pushing dividend cover from cash to 2.0 times.
The results land against the backdrop of two transformational acquisitions completed in 2026. The purchase of HSBC UK Life, the largest deal in Chesnara's history at £260 million.
The deal added approximately £4 billion of assets under administration, which is expected to contribute around £28 million of incremental cash annually over the next five years.
The acquisition of Scottish Widows Europe, a Luxembourg-based provider of offshore pensions serving mainly German policyholders, will add a further £17 million of annual cash from FY27.
Together, the two deals extend the group's predictable cash flow runway well beyond the next five years, a feature Panmure Liberum argues directly underpins the sustainability of the dividend, which has grown without interruption for 21 consecutive years since the company's IPO.
The reported IFRS loss after tax of £10.4 million is likely to cause some confusion but reflects a tax charge attributable to policyholders arising from strong investment returns, rather than any underlying weakness in the business.
At 296p, the stock trades on roughly one-times pro forma unrestricted tier 1 equity (the insurance sector's equivalent of tangible book value) and offers a forward yield of around 8%, growing at approximately 3% annually.