Chesnara plc (LON:CSN) is the topic of conversation when Hardman & Co’s Analyst Dr Brian Moretta caught up with DirectorsTalk for an exclusive interview.
Q1: Brian, Chesnara recently announced 2024 results. Can you just tell us what the main features were?
A1: Chesnara delivered a strong financial performance in 2024.
Main features were a 17% increase in economic value earnings to £69.1 million, up from £59.1 million in 2023. Cash generation was robust, rising to £60 million, which provides comfortable dividend cover. The solvency ratio remained exceptionally strong at 203%, comfortably above the company’s target range, reinforcing that the group’s got financial resilience.
Finally, the dividend increased by 3%, marking the 20th consecutive year of dividend growth.
Q2: What were the main factors driving the changes in economic value?
A2: Well, improvement in economic value was primarily driven by strong market returns, especially in equity markets and some favourable interest rate movements. These positives were partly upset by some operational variances, notably the elevated lapse rates in Sweden and some expense adjustments across the business.
Additionally, acquisitions made a meaningful contribution, particularly the latest Canada Life portfolio, which added approximately £11 million in immediate economic value.
Q3: Now, the group has placed a greater emphasis on acquisitions recently. What news is there in that area?
A3: Well, Chesnara announced another strategic acquisition in late 2024, acquiring a portfolio from Canada Life UK comprising unit linked bonds and legacy pensions. This acquisition added £1.5 billion to assets under administration and approximately £11 million in immediate economic value, outperforming the initial estimates due to improved cost efficiencies.
The transaction structure mirrors their previous Canada Life deal, which was completed in early 2025. This involves initial reinsurance ahead of a Part 7 transfer, which is expected in 2026. Although it is small, it highlights Chesnara’s disciplined approach and its capability to extract value through acquisitions.
Q4: Can you give us an update on the operational performance?
A4: Well, operationally, Chesnara had more of a mixed year. While expense management improved, particularly in the Netherlands, through some pre-merger initiatives, lapses remained challenging in Sweden due to continued competitive pressure in occupational pensions.
The UK made some progress with migrating operations to SS&C’s outsourced platform, which is expected to yield more efficiency over time. Regulatory changes continue to add complexity but were well managed.
Overall, the group continues to invest in digital enhancements across its operations, aiming to position the business for future efficiencies.
Q5: You touched on this earlier, but we know the dividend is important to investors. Can you tell us more about cash generation and the dividend?
A5: As I mentioned, Chesnara achieved robust cash generation of £60 million in 2024, covering the dividend by approximately 1.6 times. The dividend itself increased by 3% to 24.69p per share, marking a remarkable 20th consecutive year of dividend growth, unmatched amongst listed UK and European insurers.
This consistent performance, supported by strong cash generation and a solid solvency position, highlights their sustained dividend capability.
