Just looking at the chart we might be due for an upturn here now all other things being equal, but I can't see it getting much above 270p this time around, the trading range is very compressed lately. |
Not the best performing share price in my portfolio despite it being one of the best dividend payers. |
..OK
Thanks for that analysis and comment. |
 This has never been a share to hold for long term capital growth, but it used to have a very reliable trading range though, and I used to place buy and sell limit orders accordingly. They generally used to trigger a couple of times a year. All i need to do was consider whether to cancel them temporarily as we approached ex div dates.
That trading range seems to be a thing of the past, and has been for quite some time now.
I don't take much comfort from solvency ratios. if the bottom drops out of the bond markets and companies like this become forced sellers when there are no buyers they are toast, short of a bail out, however 'safe' they have been assessed to be.
I don't understand how it can be possible for them to have balanced their assets and liabilities when interest rates rose so quickly after more than a decade of low and negative rates. Frankly on a 'mark to market' basis, i doubt they have. So if there is a crisis which destroys confidence and turns them into forced sellers they are in trouble. Unless and until that happens, they are fine. I think that is what is impacting the share price. We are walking along the cliff edge, sufficiently far from the edge to be safe from stumbling over the edge, but if there were to be a cliff fall occur under our feet that would be curtains.
In my view no business which is based on debt and subject to counterparty risk can ever be safe from systemic failure. Systemic risk is notoriously difficult to gauge. Rather like Assad in Syria, the regime can last for ages, and survive many potentially terminal events, then one day the ground disappears from underfoot and the collapse is as swift and complete as it (or at least its date) was unexpected.
I think the most important point is to rcognise that such risk is not much dib=versified by holding a number of companies in the sector. Be careful to make sure that you are comfortable with the complete sector weighting in your portfolio rather than merely the individual company weightings. |
New Hardman note. |
Exactly Aleman. Well done for exlaining it so succinctly.
EPS is generally a useful guide, just not an adequate way to value businesses like insurance and closed pensions. |
They don't need earnings to cover the dividend. They have regulatory capital released each year from the closed pension funds as they shrink. Having said that, released capital shrinks over time and that cashflow needs replacing, so they need earnings and released regulatory capital to exceed the dividend by enough to reinvest and replace the shrinking capital - or they need earnings from conventional insurance business to grow enough to replace it. |
OK! So they are sitting on a shrinking amount of cash - currently circa £130m down from £205m (Stockopedia figs.)
Net debt up from £8m to £76m.
That said, and again according to Stocko they are expecting Earnings this year of 22p up from 10p on no increase in revenue! 22p would nearly cover the divi for once but I think is rather optimistic.
Still WTFDIK! I shall wait to see Full years results first before dipping in. |
The eps is not the whole story.
FINANCIAL RESILIENCE - FLEXIBILITY IN FINANCING FUTURE M&A
- Solvency II ratio of 201% as at 30 June 2024 (31 December 2023: 205%), materially above our normal operating range of between 140 - 160%.
- Pro forma cash balances at group holding companies increased over the period (taking into account accrued divisional dividends) to £137.0m (31 December 2023: £124.1m), providing substantial resources to both support dividends and fund future acquisitions.
- Leverage ratio(2) of 30% as at 30 June 2024 has remained broadly consistent when compared to FY 2023 (31 December 2023: 29%). |
I have a lot more faith in CSN management than the current or last UK Govt!!! |
Kier Starmer says he has a strategy. Say no more! |
Egg,
CSN appears to have a credible management strategy and is consistently moving forward.
There is also the (strong imo) possibility of a bidder approaching at some point. |
9.6% dividend looks good but has not been covered by earnings since 2019.
I would not consider this a good investment until revenue and earnings start to show a sustained increase. |
I got this from Proactive
quote
CSN’s latest acquisition from Canada Life UK is small but 'highly attractive' according to analysts at Panmure Liberum.
The life and pensions group is acquiring £1.5bn assets under administration across 17,000 unit-linked policies for a total consideration of £2 million.
By focusing on unit-linked policies, Chesnara should see “an incredibly fast payback period and uplift to cash generation,” adds the broker, adding to its predictable cash generation, which ultimately supports the uninterrupted dividend growth trajectory.
“Moreover, this still leaves management with all the firepower to conduct a larger transaction next year should the opportunity present itself.”
“To this end, the new policy administration partnership bodes well for migrating policies at scale and generating further efficiencies over time.
Although not a large deal, Panmure Liberum suggests it is one of Chesnara’s most attractive on a purely financial metrics basis.
The discount to EcV [economic value] means an immediate uplift of £8 million via a reinsurance agreement, while the deal should generate £8 million of cash over five years.
More M&A is likely, adds Panmure, with Chesnara having a liquidity position of £200 million through ready cash and a revolving credit facility.
In addition, “assuming management keeps its debt leverage at around 30% of its IFRS capital base”, the broker suggests an acquisition with c£300 million of value could provide for an additional debt capacity of c£100 million.
“We get the sense management may be willing to participate in larger M&A than in the recent past, especially if traditional competitors and PE houses are focused elsewhere.
“Larger peers are trying to focus on organic new business opportunities, while private equity-backed players now have a higher regulatory hurdle.
Management has carried out due diligence on several possible transactions, adds Panmure Liberum, with a strong pipeline for the next 6-12 months for value-enhancing transactions.
Regulatory metrics are also strong with a Solvency II coverage ratio of 201% at 1H24 (FY23: 205%), compared to a target range of 140%-160%, which implies excess capital above the top end of the target range of £134 million.
“This was partly helped by a well-timed tier 2 debt issuance in 2022 and points to the M&A capacity management has on a standalone basis.”
Panmure adds that with £200 million of firepower “We expect management to acquire additional insurance portfolios”.
Now is a sensible time to be an acquirer as life insurers continue to battle inflation, legacy systems and operational challenges associated with run-off books, it adds.
“We also continue to expect a steady flow of new business, which has historically supported around one-third of the dividend cost.
“The move to the new outsourcing policy administration partner SS&C will allow for the migration of future acquisitions at scale and bodes well for efficiency improvements.”
In conclusion, Panmure says that Chesnara is underrated given trends currently in the life sector.
“With a well-timed Tier 2 debt issue and solid balance sheet, management is well positioned to take advantage of closed Life Insurance consolidation.
“The Economic Value (EcV) is not immune to market volatility, but a clear vision and focus on value & dividend enhancing acquisitions and new business gives us confidence the EcV will continue to grow through the cycle.”
Currently, Panmure estimates the shares trade on a 23% discount to June’s EcV number of 337p, “Which fails to reflect the growth opportunities, outlook, and realistic value of the business”.
In addition, the estimated 2024 dividend yield is an attractive 9.6% and 'likely to continue to grow'.
'Buy' with a target price of 420p is its recommendation. Shares today were unchanged at 258p.
The formal transfer via the UK courts of the Canada Life portfolio is scheduled to take place at the end of 2025. |
Its still lovely when you are only paying 2 million though.
Nice little investment...
I love sensible steady management teams... |
Not a lot of reaction
but adding £8m cash generation is no biggie |
23 December 2024
CHESNARA plc
("Chesnara" or "the Company")
ANNOUNCEMENT OF A SECOND PORTFOLIO ACQUISITION FROM CANADA LIFE UK
Chesnara plc, the European life and pensions consolidator, today announces it has reached an agreement with Canada Life Limited ("Canada Life UK") to acquire a closed portfolio of unit linked bonds and legacy pension business with approximately 17,000 policies and total assets under management of £1.5 billion as at 31 December 2023. As a result of the acquisition, the policies are expected to transfer to Chesnara's UK subsidiary, Countrywide Assured plc ("Countrywide Assured") at the end of 2025 (subject to the completion of a court-approved Part VII transfer). This transaction follows the previous acquisition of an individual onshore protection business from Canada Life in 2023.
In the interim period, Canada Life UK will reinsure the portfolio to Countrywide Assured, effective from 31 December 2023. The consideration as part of the reinsurance agreement is £2 million, funded from internal Group resources, and we expect the transaction to provide an uplift in the Group's Economic Value of at least £8 million, contribute £8 million of cash generation over a five year period, with a small initial reduction to the Group's Solvency II ratio of approximately 2 percentage points.
Steve Murray, Group Chief Executive, commented:
"We are pleased to continue our relationship with Canada Life through the agreement of our second recent transaction, following the acquisition of 47,000 protection policies that we announced last year. I am looking forward to welcoming these new customers and their advisors to Chesnara and they can be confident we will continue to provide high levels of customer service as part of a financially strong and growing group.
"This transaction, the sixth deal implemented in the past three years, will add additional scale to our UK business which now looks after over 300,000 policies, and provides an attractive return on investment for our shareholders. We continue to see a range of M&A opportunities and are highly confident in our ability to finance and execute such transactions on attractive terms for vendors, customers and our shareholders." |
Have had CSN sitting in my portfolio for ages and rarely look at it - just happy with the high dividend yield it provides. The directors seem to be buying up stock too, another 10,000 shares director buy RNS'd today. |
Hope your right, topped up today |
Boring is beautiful and Chesnara is boring. Always has been, always will be. That is until the day that a bid comes out of the blue from a larger fish happy to swallow up this lesser morsel. At which point you will be able to revel in the satisfaction of a nice capital gain as well as all those juicy dividends that you have accumulated over the years. Until that time I for one will continue to sleep easy with this holding in my portfolio. |
Always been thinly traded, moving up and down on small trades. Very frustrating as I have always seen this as an undervalued company. I would certainly be buying if I didn't already have a full allocation. |
The share price opened well up on no apparent volume, since which it's eased it way back down on low volume, trading here is different to any I've experienced in the last 20 years. |
No but the other I've had for years and it pays a damned good dividend, it's share price is always terrible between ex divi dates.
I'm rather hoping this share price will will have a similar profile. |
...You only have one? :-| |
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