Chesnara shares climb as brokers back acquisition-driven cash growth

Shares in Chesnara PLC (LSE:CSN), the FTSE Small Cap life insurance consolidator, rose 4% to 343p after first-half results showed its largest acquisition beginning to feed into capital generation. Two brokers reaffirmed buy recommendations following the numbers.

Panmure Liberum, which acts as corporate broker to the company, holds a target price of 400p, implying further upside of more than 16% from the new level. Peel Hunt is markedly more cautious, with a buy rating but a target price of 330p, now below where the shares are trading. The gap between the two reflects differing views on how much of the acquisition benefit is durable.

Operating capital generation, a measure of the cash the business throws off, reached £96 million in the first half, up 78% from £54 million a year earlier. Panmure Liberum analyst Abid Hussain noted that roughly £50 million of that was a one-off benefit from owning HSBC UK Life, now rebranded Chesnara Life UK. About £10 million came from diversification benefits, which reduce the capital the enlarged group must hold, with the remaining £40 million from extending a mass lapse reinsurance arrangement and optimising a deferred tax programme. That leaves around £45 million of recurring generation, covering the interim dividend 2.4 times on the recurring elements alone.

Adjusted operating profit before tax rose 48% to £31 million, from £21 million, helped by five months of contribution from the UK acquisition and solid performance in the Netherlands, partially offset by adverse persistency in Sweden.