Chesnara Plc (LON:CSN), the owner of Countrywide’s old pension arm, raised its dividend for the 12th consecutive year on the back of strong cash generation and a positive outlook.
The company - which in November agreed to buy Legal and General’s Dutch insurance business for €160mln - lifted its final dividend 2.9% to 12.69p per share from 12.33p per share.
Chesnara posted profit before tax of £40.7mln for the year to 31 December, compared to £42.8mln the previous year.
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Total comprehensive income increased to £55.4mln from £39.6mln, boosted by a foreign exchange gain of £20.1mln.
The company boosted its cash reserves with an £70mln equity raise in December to help fund the acquisition of Legal and General Nederland.
As a result of the fundraising, Total cash generation rose to £85.4mln from £82.4mln.
Excluding the fundraising, however, cash generation fell to £36.5mln from £50.9mln reflecting an increase in capital requirements due to growing asset values.
Swedish subsidiary Movestic made negative cash contribution as it invested in its new business Aspis Försäkringar Liv AB, acquired in 2010.
The group’s Netherlands-based insurer, Waard Group, made a positive cash contribution, including one-off gains from asset disposals and foreign exchange tailwinds.
The economic value rose 33% to £602.6mln from £453.4mln, including the positive impact of its equity raise and favourable foreign exchange. Excluding the fundraising, the economic value increased 18%.
The company expects the acquisition of Legal & General Nederland to create an economic value gain of $56mln on completion.
Chief executive John Deane said the Dutch business will also enhance ongoing cash generation, which will support the continuation of dividend growth.
“The value of our existing businesses has grown across all territories, with cash emergence sufficient to fund a further increase in the annual dividend, the twelfth successive year of dividend growth,” he said.
“The increase in value includes an increasingly material contribution from new business profits in Sweden where we have delivered our best ever results.”
Panmure Gordon reiterated a ‘buy’ rating and raised its target price to 409p from 405p, saying Chesnara had a “busy but successful 2016” and expects the economic value to improve in 2017 on the back of the acquisition of Legal & General.
“It has continued to deliver good IFRS pre-tax profit and strong cash generation that, in turn, has enabled it to increase the full year dividend to 19.49p (+2.9%),” said Panmure analyst Barrie Cornes.
Chesnara was formed in 2004 to run the life and pensions policies issued by estate agency Countrywide. Since then the company has bought portfolios from firms wanting to offload their legacy business including JP Morgan and Direct Line.