Life and pensions consolidator Chesnara PLC’s (LON:CSN) is in a "terrific place" for the potential to deliver value and dividends for shareholders, according to analysts at Shore Capital.
"Management across the group are highly focused, ‘best in class’ in their respective areas, in our view, and well positioned to drive synergies across the company," ShoreCap analyst Eamonn Flanagan said following the company's capital markets day in November.
ShoreCap said it was evident from presentations of the bosses of operating entities in the UK, Sweden and Netherlands during the capital markets day that all units are focused on delivering economic value (EcV).
The company is looking to deliver value through either acquisitions, selling new business and/or maximising the value of the total value of life assurance policies that the company manages, the broker said. This, it said, translates to the conversion of EcV to cash, which can then be returned to shareholders, as appropriate.
Chesnara's progress is reflected in its shares price, which has risen more than 12% on the year and 73% over the past five years.
L&G deal boosts results
At its latest set of results in August, Chesnara revealed a leap in profits and cash generation in the first half of fiscal year 2017.
Powering that momentum was Legal & General Nederland, renamed Sclidon and bought earlier this year for £137.5mln.
WATCH: Chesnara boss hails significant boost to profits and cash generation
“Good operational delivery” was also cited for the stellar performance, which saw its earnings (measured using IFRS accounting standards) rocket to £51.6mln from £200,000 for the same period last year.
Cash generation
The business generated almost £43mln in cash, which allowed it to pay a dividend of 7 pence a share, up 2.9% on the same period 12 months ago.
Its solvency II coverage ratio, which measures an insurer’s ability to cope with significant losses, was 143%. The company’s broker, Shore Capital, said the divisional ratios remained “very resilient”.
The company, which owns Countrywide Assured here in the UK and Movestic in Sweden, was upbeat on prospects and is unperturbed by Britain’s negotiations to leave the EU.
No Brexit worries
“The structure of the group, having established regulated entities in several European countries together with the fact we do not trade or share resource across territories, means I remain of the view that whatever the outcome from the Brexit negotiations, we expect it to have little direct impact on our business model,” said chairman Peter Mason in a statement.
He told investors the UK business remained a “robust source of cash”, that Movestic now has the scale to continue contributing to this growing bank balance and that Scildon has significant surplus capital.
READ: Chesnara's L&G Nederland acquisition is the "write" stuff
Chesnara has its eye on further acquisition opportunities, Mason added.
“We also remain open minded about new territories but the benefits would need to outweigh the inherent challenge of adding another regulatory environment into our business model,” he told investors.
“Our balance sheet has further capacity for debt, we have significant levels of surplus capital and recent experience suggests we retain shareholder support for further equity for the right deal.”