Chesnara results well-received as analysts say market is underestimating its potential

Chesnara PLC’s (LSE:CSN) prelims have been welcomed by analysts, who argue the insurer’s solid fundamentals and consistent delivery are not fully reflected in its share price.

The life and pensions group posted a 14% rise in commercial cash generation to £60 million in 2024, supporting a 3% increase in its full-year dividend to 24.7p. It marks the company’s 20th consecutive year of dividend growth, a feat unmatched among listed insurers in the UK and Europe.

Chief executive Steve Murray said the group’s performance was underpinned by “positive organic economic value earnings and a robust solvency position,” which have enabled continued investment in both operations and acquisitions.

Chesnara is maintaining a clear focus on acquisition-led growth. In December, it completed its second portfolio deal with Canada Life, contributing £11 million in economic value – £3 million above expectations. The group now has up to £200 million in deployable capital, including £109 million in liquidity.

The company ended the year with a Solvency II coverage ratio of 203%, well above its operating range of 140–160%, providing significant flexibility for future deals.

Pre-tax profit under IFRS standards rose sharply to £21 million from £2 million in 2023, while economic value earnings increased by 17% to £69 million. Although new business contribution held steady at £9 million, the group remains focused on disciplined capital deployment.

Murray said the outlook for mergers and acquisitions “remains positive” and reiterated Chesnara’s readiness to pursue further opportunities in line with its strategy.

“Management delivered strong cash generation to support the uninterrupted dividend growth, debt interest, and central costs of the group,” said Panmure Liberun in a note to clients.

“The recent acquisition of Canada Life’s unit-linked book has been even more value accretive to the economic value than initially thought, which is now reflected in our numbers.

“We continue to expect management to seek out further consolidation across the European Life insurance markets in a disciplined manner given the substantial firepower to hand – this will ultimately grow the economic book value.”

Panmure, reiterating its ‘buy’ advice, raised its price target by 20p to 400p. While slightly less ‘gung-ho’ with its 300p valuation, Peel Hunt is also a ‘buyer’.

In late morning trading, the shares were flat at 270p.

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