Chesnara (CSN), which is focused on buying and running down closed life books, delivered solid earnings progress in the first half, helped by a contribution from November’s acquisition of Direct Line's life business.
Although no further acquisitions were identified in the period, management sound confident that there should be more deals to do. Indeed, chief executive Graham Kettleborough thinks the number of operations being put up for sale could rise as regulatory change - such as the Budget Day decision to scrap compulsory annuity purchases - leaves some players looking to exit the UK market.
The changes don’t appear to threaten Chesnara, however. As the group doesn’t write new business in the UK, the Chancellor’s annuity reforms shouldn’t have an impact. For the same reason, the FCA’s fair treatment probe - which is exploring whether closed life book customers are being unfairly charged to subsidise new business - should be benign for Chesnara.
In Sweden, Chesnara’s Movestic operation does write new business, and that operation is recovering well after a failed systems migration a few years back upset relationships with IFAs. In fact, the group’s new business contribution to profits grew from £2.3m last year to £5.8m.
Broker Panmure Gordon expects full-year operating EPS of 28.9p (down from 43p in 2013) and embedded value - net asset value, plus the profit stream from life policies - of 353p a share.
CHESNARA (CSN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 331p | MARKET VALUE: | £380m | |
| TOUCH: | 330-333p | 12-MONTH HIGH: | 363p | LOW: 256p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 219p* | EMBEDDED VALUE: | 348p | |
| Half-year to 30 Jun | Net premiums (£m) | Pretax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 38 | 21.8 | 15.0 | 6.25 |
| 2014 | 40 | 27.4 | 19.9 | 6.42 |
| % change | +5 | +26 | +33 | +3 |
Ex-div:10 Sep Payment:15 Oct *Includes intangible assets of £116m or 101p a share | ||||
