Chesnara Share Discussion Threads

[luderitz] 11/4/2011 17:53

Thanks JW, very informative.

[jonwig] 11/4/2011 15:24

LUDERITZ ...

Phoenix Group [PHNX] is the UK's largest closed life company - FTSE250. Formed from old Pearl Group. If you're interested:



Some of us moved out of CSN into PHNX a good while ago - look back at the posts - I kept a few of these.

Of course, CSN isn't a 'pure' run-off company any longer, as it bought Moderna which still writes business. However, that's not a significantly large part of the business, and anyone considering CSN as a play on divis and capital growth needs to understand where the divis come from - from maturing policies, ie. a repayment of capital.

[luderitz] 11/4/2011 14:24

Does anyone on here know what other PLC's in their sector do similar type of business to CSN please?

[drewz] 02/4/2011 02:14

I must have misread the results!

Must say I expected a good bout of profit taking for several sessions. See what next week brings.

[chairman2] 01/4/2011 17:59

EEV NAV over £3 a share

now that's an impressive number

drewz more likely to see 300p
rather than 200p dont you think?

[huntie2] 01/4/2011 17:30

Quality rise! All time high I think....

[drewz] 31/3/2011 15:54

This may become a BUY again, but only once it's retreated to its long-term support at 200p.

[luderitz] 31/3/2011 15:47

Chesnara downgraded to hold rating at Collins Stewart.. Oh really -):

[chairman2] 29/3/2011 17:52

Jonwig - interesting choice of word...

[jonwig] 29/3/2011 10:26

In this morning's webcast of PHNX's FY results, one questioner mentioned that "a number of" closed-life funds were currently for sale and being marketed in the UK. Given CSN's acquisitive nature, it would be interesting to learn if they have any current intentions.

[chairman2] 28/3/2011 19:53

fingers crossed they should be great
on the back of greatly reduced impairments and expected future liabilities

[ursus] 28/3/2011 19:00

Results on Thurs.

[chairman2] 10/2/2011 12:22

year end results must be known
internally by now but still
six weeks before prelims -

possibility of another deal b4 then?
(not that I would welcome that)

[rcturner2] 01/2/2011 08:21

The consensus earnings for 2011 are 12p (TD Waterhouse consensus). This does not even cover the dividend. What is the explanation for the expected drop in profits this year?

[chri5 wright] 31/1/2011 16:28

DAVEOFDEVON - why not just buy ic yourself ?

[daveofdevon] 31/1/2011 14:04

Many thanks for that APAD

[apad] 31/1/2011 13:44

Enduring appeal of Chesnara

BULL POINTS:

■ Attractive dividend yield

■ Strong solvency position

■ Low cost base

■ Shares trade far below embedded value

BEAR POINTS:

■ Swedish business is loss-making

■ Strong competition for closed-end funds

Chesnara is involved principally in running life insurance funds that are closed for new business; the idea being to buy tranches of policies and run them using its existing infrastructure. This works well - Chesnara has only about 50 employees yet they handle £100m-worth of premiums each year.

IC TIP RATING
Tip style Value
Risk rating Medium
Timescale Long term
What do these mean? Find out in our guide to tip ratings

As a result, Chesnara throws off a lot of cash, which is good news for shareholders because it can pay out most of its profits as dividends, yet the yield on its shares remains nice and fat at 7.1 per cent. Cash generation also means the company's solvency position is strong. Both the UK and the Swedish sides of the business target reserves of at least 150 per cent of their regulatory capital requirements, but in November these reserves stood at 307 per cent and 176 per cent of requirements respectively. The Swedish figure is down from 220 per cent in June, because, in a departure from buying closed life businesses, Chesnara bought Moderna Forsakringar, which writes new business in pensions and life insurance, and that move increased regulatory capital requirements. Moderna is slowly re-establishing its position in Sweden but remains loss-making and is expected to absorb cash until 2013. However, its performance is improving as a result of a subsequent acquisition, Swedish life and health insurer Aspis.

CHESNARA (CSN)
ORD PRICE: 238p MARKET VALUE: £273m
TOUCH: 235-238p 12-MONTH HIGH: 252 p LOW: 195p
DIVIDEND YIELD: 7.1% PE RATIO: 16
NET ASSET VALUE: 150p EMBEDDED VALUE: See text

Year to 31 Dec Net premiums (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2007 85 27.7 24.3 15.1
2008 77 22.7 19.2 15.6
2009 75 44.7 45.3 16.0
2010* 107 30.5 21.0 16.4
2011* 101 22.0 15.0 16.8
% change -6 -28 -29 +2

Normal market size: 1,250

Matched bargain trading

Beta: 0.4

*Collins Stewart estimates

Back on more familiar territory, Chesnara recently bought the Save & Prosper insurance group from JPMorgan Asset Management for £63.5m, 32 per cent below estimated embedded value. The S&P acquisition brings with it 174,000 policies, and this steady growth through acquisition has done wonders for the group's embedded value. This is a measure of value that takes into account future profits from business already written, or in Chesnara's case, acquired. At the end of the third quarter of 2010, this was 279p a share, and broker Collins Stewart reckons that, even before taking into account cost savings from the S&P deal, embedded value at the end of 2010 will have risen to 351p a share, putting the share price 32 per cent below embedded value.

Chesnara continues to look for attractive acquisitions, but it will need to raise fresh funds for further deals. These are likely to be at the smaller end of the scale because competition further up is likely to be fierce from bigger so-called zombie funds. Smaller deals are less likely to attract competition, and the prospects seem reasonable as mounting regulatory burdens encourage various organisations to offload their life insurance arms.

Naturally, a stronger performance in investment markets has boosted income, but Chesnara has also benefited from favourable persistency rates, which means that premium income was maintained because fewer policyholders cashed in their policies. What's more, policyholders continue to live longer, so there are fewer policy claims.
SHARE TIP SUMMARY:
Buy

True, we have tipped Chesnara's shares often enough, but their charm persists - chiefly thanks to the company's ability to absorb more business without increasing its costs, which provides plenty of cash to reward shareholders. Sure, Chesnara offers little in the way of profits growth, but the downside looks limited because its shares trade so far below underlying asset value. Buy.

[fenners66] 28/1/2011 16:46

You would expect them to go down in response then!!

[daveofdevon] 28/1/2011 13:12

Investor's Chronicle tipped these again today according to Citywire. Anybody able to post the detail ?

[sandbank] 20/12/2010 16:26

Interesting lift in the price again today

[chri5 wright] 17/12/2010 16:51

some strange large order buys, and a second after hours auction period allowed. strange goings on's.

[bullsvbears] 17/12/2010 16:14

Livelier than of late. Something aired at the GM, perhaps.....

[chri5 wright] 17/12/2010 14:38

i feel a bid in the air........

[chairman2] 26/11/2010 23:13

too right - not what us income jukies want to see