Closed-life specialist Chesnara's (CSN) shares slipped 9 per cent on the day these figures appeared. But that had nothing to do with performance. It instead reflected reports that the Financial Conduct Authority (FCA) is planning to probe closed-life fund players.
The FCA is worried that companies might be unfairly using returns from their closed books to cover costs from other parts of their business. But Chesnara's chief executive Graham Kettleborough says he’s "not too worried". That's because the UK operation comprises closed funds, so there isn't any new business to subsidise. He also says Chesnara honours the terms of the contracts as written and doesn't shift charges around. Nor do the Budget day reforms - scrapping the compulsory purchase of annuities - present an issue, in his view, because closed-book Chesnara doesn't write new annuity business.
The political backdrop obscured impressive operational progress. Earnings rose strongly, reflecting improved investment market conditions that helped boost profit in the S&P unit by 149 per cent to £36.4m. Gross cash generation rose 46 per cent to £49.7m. And turnaround efforts helped drive new business sales at the Swedish operation, Movestic, up by 62 per cent. After buying Direct Line's life unit, Chesnara also remains in acquisitive mode.
Broker Panmure Gordon expects EPS of 21.3p for 2014.
CHESNARA (CSN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 297.8p | MARKET VALUE: | £342m | |
| TOUCH: | 297.5-297.8p | 12-MONTH HIGH: | 363p | LOW: 223p |
| DIVIDEND YIELD: | 6.0% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 215p* | EMBEDDED VALUE: | 328p | |
| Year to 31 Dec | Net premiums (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 75.1 | 44.7 | 45.3 | 16 |
| 2010 | 79.3 | 34.2 | 29.1 | 16.4 |
| 2011 | 87.0 | 22.4 | 22.4 | 16.85 |
| 2012 | 80.2 | 19.7 | 24.3 | 17.35 |
| 2013 | 74.5 | 60.6 | 43.0 | 17.88 |
| % change | -7 | +208 | +77 | +3 |
Ex-div: 9 Apr Payment: 22 May *Includes intangible assets of £123m, or 107p a share | ||||
