FTSE 250 closed-book life insurance specialist Chesnara (CSN) served up a solid set of interim results for the six months to June, boosted by the £260mn acquisition of HSBC Life’s UK arm (now called Chesnara Life), which completed in January.
Operating capital generation, which measures the cash produced from the group’s day-to-day business, was up 79 per cent against the same period last year to £96mn, with £51mn of that down to the acquisition.
Adjusted operating profit rose 46 per cent to £31mn on progress in the UK and Dutch markets, with the small Swedish business (where Chesnara operates under the Movestic brand) the one area where profit went backwards.
Chesnara Life drove the group’s new business contribution up to £12mn, more than double the £5mn last time around, on higher demand for UK onshore bonds.
Chief executive Steve Murray said the integration of Chesnara Life “continues at pace”. The migration of IT data is expected to be completed by the end of this year, with the transfer of customers’ insurance business to follow next year.
The acquisition allowed a one-off boost to the interim dividend, which was up 6 per cent as expected.
The group is also working towards the completion of the acquisition of Scottish Widows Europe’s closed-life insurance business from Lloyds (LLOY). It expects the €110mn (£94mn) deal, which takes the group into the Luxembourg market, to complete around the end of the year and boost cash generation by €250mn over the lifetime of the policies.
When it comes to future M&A, the group has more than £100mn of firepower for an immediate move. Berenberg analyst Michael Huttner said the group’s “strong cash position means Chesnara is ready now to look at more deals in the UK as well as Europe”.
Chesnara’s Solvency II coverage ratio was 185 per cent at the period end, down from 257 per cent last year but still nicely above management’s target range of 140-160 per cent.
Chesnara shares offer a forward dividend yield of 7 per cent. RBC Capital Markets flagged a free cash flow yield of more than 13 per cent, at the “top of the peer group”, while a book valuation of 1.2 times price/unrestricted tier-one equity (which measures high-quality capital under the Solvency II framework) looks attractive against the peer group average of 1.5 times. Buy.
Last IC view: Buy, 289p, 1 Apr 2026
CHESNARA (CSN) ORD PRICE:342pMARKET VALUE:£792mnTOUCH:342-343p12-MONTH HIGH:352pLOW: 265pDIVIDEND YIELD:6.7%PE RATIO:NANET ASSET VALUE:226p*SOLVENCY II: 185%Half-year to 30 JunInsurance revenue (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)2025136-4.6-7.147.70202625661.00.228.16% change+88–+6Ex-div:3 SepPayment:16 Oct *Includes intangible assets of £159mn, or 68p a share