RBC Capital Markets has raised its cash generation forecasts for Chesnara PLC (LSE:CSN) and reiterated its 'outperform' rating on the closed-book life insurance consolidator.
It argues that recent acquisitions have pushed dividend coverage to the top of the UK life peer group and extended its dividend runway to more than ten years.
The bank, which acts as corporate broker to Chesnara, lifted its operating capital generation (OCG) forecasts by 9% for 2026 and 8% for 2027 following the company's full-year 2025 results, reflecting new guidance that strengthens dividend coverage to approximately 1.8 times, against around 1.3 times previously.
RBC said the acquisitions of Chesnara Life, formerly HSBC Life UK, and Scottish Widows Europe have materially boosted the group's cash generation profile, with post-acquisition 2027 OCG forecast at approximately £117 million.
The broker described the 8.1% forward dividend yield as both attractive and sustainable, placing Chesnara second in the UK life peer group on dividend coverage behind Standard Life, and said the stock's free cash flow yield of 14.7% for 2027 also ranks towards the top of its competitive set.
RBC said the balance sheet remains flexible, with more than £100 million of deployable capital and the ability to target acquisitions of up to £1 billion in consideration through a combination of cash, revolving credit and equity issuance.
Management highlighted the Benelux region as particularly active in terms of pipeline opportunities, and the broker said it expects another deal within the next 12 to 24 months.
RBC trimmed its price target slightly to 360p from 370p, with higher cash generation forecasts and a one-year valuation roll offset by a 30 basis point increase to its discount rate, implying around 20% upside from the current 300p share price.