Chesnara (CSN) benefited from acquisitions both past and present during 2016. Including a net £48.9m boost from December's equity raising to help fund its purchase of Legal & General 's (LGEN) Dutch business, cash generation increased slightly to £85.4m. Swedish business Movestic also paid its first dividend to the group since it was acquired in 2009, with foreign exchange gains helping cash generation. Overall the life assurance consolidator increased its economic value (EcV) - the present value of future insurance profits plus non-insurance net assets - to £603m, from £453m a year earlier.
Management expects the addition of Legal & General’s Dutch business, made at a 33 discount to the business's economic value, should add £56m to Chesnara's group EcV when the deal completes. It should also contribute excess capital, supporting further growth in the dividend. Chief executive John Deane says the large number of life assurance companies within the Dutch market means further consolidation is likely. During the year management reduced the capital requirements for its Netherlands portfolio by revising reinsurance contracts and diversifying its asset portfolio. It also invested in a portfolio of mortgage loans.
After stripping out the one-off gain from the acquisition of Netherlands-based Waard Group in the previous year, adjusted pre-tax profits increased by more than half to £40.7m. Low gilt yields pushed up the value of liabilities for the UK business, but rising markets lifted assets to offset this effect. Overall, the economic value of domestic operations increased by 10 per cent to £423m. However, an increase in equities also means higher capital requirements, which reduced cash generation.
Movestic, which is open to new business, grew assets under management by £300m to £2.5bn. Waard Group's profit contribution grew from £0.9m to £6.2m. Overall, forex gains accounted for £34m of added economic value over the year.
Analysts at Shore Capital expect economic value of 420p a share at December 2017, up from 390p (ex-dividend) at the period-end.
CHESNARA (CSN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 357.75p | MARKET VALUE: | £536m | |
| TOUCH: | 357.25-357.75p | 12-MONTH HIGH: | 367p | LOW: 248p |
| DIVIDEND YIELD: | 5.4% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 263p* | SOLVENCY II RATIO: | 158% | |
| Year to 31 Dec | Net premiums (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 80.2 | 19.7 | 24.3 | 17.35 |
| 2013 | 74.5 | 60.6 | 43.0 | 17.88 |
| 2014 | 76.7 | 28.8 | 22.1 | 18.40 |
| 2015 | 67.9 | 42.8 | 31.5 | 18.94 |
| 2016 | 64.6 | 40.7 | 22.7 | 19.49 |
| % change | -5 | -5 | -28 | +3 |
Ex-div: 13 Apr Payment: 24 May *Includes intangible assets of £119m, or 79p a share | ||||
