viewChesnara PLC

Chesnara using balance sheet strength for more deals


  • A consolidator of closed life and pension funds
  • Operations in London, Sweden and the Netherlands
  • Growth through acquisition
stock market

Quick facts: Chesnara PLC

Price: 280.5 GBX

Market: LSE
Market Cap: £420.93 m

What Chesnara does

UK: Since 2004, Chesnara PLC (LON:CSN) has acquired like and pension books from City of Westminster Assurance, Save & Prosper and Direct Line Life.

Netherlands:  Scildon is an open life and pensions business that Chesnara acquired from Legal & General. The Waard Group is much smaller and a closed Life and Pension business.

Sweden: Movestic is a life and pensions business based in Stockholm


How is it doing

Chesnara has been using recent market volatility to throw up more opportunities for acquisitions, especially with its strong balance sheet.

As at August, the insurer's solvency ratio stood at 155%, which is a measure of how much the the value of the company exceeds the level of capital it is required to hold.

By November, the company announced it was adding life products and savings plans from the Netherlands operation of Belgian-owned Argenta Bank-en Verzekeringsgroep for £25mln.

The deal will be immediately earnings enhancing, being for a closed book of business consisting of 44,000 policies, acquired by Chesnara at a 22% discount to the estimated economic value of the business.

In the six months to June, overall net earnings rose to £47.1mln from £13.6mln, while it boosted the interim dividend by 3% to 7.43p.

In February, the company also appointed the former chief financial officer of Standard Life Aberdeen PLC, Luke Savage, as its new chairman to replace retiring chair Peter Mason.


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Inflection points

  • More acquisitions
  • Dividend set rise by 3%
  • Market conditions improve
  • Yield 5.8% at 357p



What the broker says: Peel Hunt

In August, broker Peel Hunt said Chesnara was is lower risk and more attractive than some of its peers, as it upgraded its rating on the company to ‘hold’ from ‘reduce’, keeping its target price of 290p.

Analysts said its high exposure to unit linked funds under management is coupled with no major exposure to annuities, low leverage and a more flexible cost base, making it a less risky option.

“This means that fee income is the main source of cash generation and the key risk is equity and credit market volatility, with some mortality and lapse risk.”

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