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 it's doing
Chesnara has been using recent market volatility to scour for more opportunities for acquisitions, especially with its strong balance sheet.
That strong financial position will enable it to continue to pay dividends despite coronavirus (COVID-19) pandemic disruption, it said.
The life insurance and pensions group raised its dividend by 3% to 21p for the year ended December 31, 2019, as its economic value - which includes the value of future policies - rose by 7% to £690mln.
Chesnara said its financial solvency ratio had increased to 163% at the end of March from 155% at the year-end.
What the boss says: John Deane, chief executive:
“Prudent, yet progressive, historical dividend payments, a low gearing ratio (11%) and a keen focus on operational resilience have resulted in the business being able to cope well with the challenges of COVID-19.
“The solvency of the group has held up well which has enabled us to continue our dividend strategy without compromising the financial stability of the business."
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Inflexion points
- More acquisitions
- Dividend set to rise by 3%
- Market conditions improve
What the broker says
In September, Peel Hunt issued 'hold' advice with a target price of 280p.
Cash release covers dividend, said the broker, and while investment markets will drag down the economic value (EcV) of the life funds in 2020 from 2019 levels, there is enough cash within the holding company together with the dividends up-streamed from the life funds to cover the divided in the medium term.
"Management actions are having a greater impact on EcV, but the contribution from new business remains lacklustre, so we still estimate cash releases will decline over time as the life funds unwind.
"We have lowered EcV by -2% in 2020E and modestly lift cash generation by 2%. Chesnara is fairly valued at 0.8x P/SII NAV, but offers an attractive 8% yield," the broker concluded.
