IDEAS OF THE WEEK

This growing insurer offers a ‘tasty’ 15% yield

The share price may be soft this year, but strong annual results and dealmaking offer investors an opportunity

Published on April 1, 2026by Christopher

Insurance stocks have had a tough March amid geopolitical turmoil and concerns about the sector’s private credit exposure after the collapse of mortgage lender Market Financial Solutions (MFS), with the Stoxx Europe 600 Insurance Index down by around 6 per cent over the past month.

But while the current situation highlights sectoral risks, it also presents opportunities.

Life insurance and pensions specialist Chesnara (CSN) entered the FTSE 250 last year, 21 years after its London listing. Its shares are up by almost a fifth over the past 12 months but are in the red so far in 2026, caught in the general insurance market downturn.

This provides an opportune moment to look at a group that has grown its dividend consistently for more than two decades and has strong momentum in the wake of recent deals, including its £260mn acquisition of HSBC Life’s UK arm (now renamed Chesnara Life).

Chesnara was formed in 2004 when Countrywide Assured demerged its life assurance division and the vehicle was listed on the London Stock Exchange. The group specialises in the consolidation of European closed books (in which policies aren’t sold to new customers but are maintained for existing ones), and now administers around 1.4mn policies.

Chesnara bull points

Two decades of consistent dividend growth

Healthy acquisition pipeline

Strong capital position

A frequent buyer

Chesnara has made 16 acquisitions since its formation, from the purchase of books from City of Westminster Assurance in 2005 to its latest move to buy Scottish Widows Europe’s closed life insurance business from Lloyds (LLOY), which was announced in February. This is a group that is very much about growth through dealmaking (acquiring and managing life books), although it is open to new business, which includes the sale of onshore bonds in the UK.

When it comes to reporting, the group recently rejigged its financial framework to be more comparable with UK and European peers. It now reports the cash generation metric of operating capital generation (OCG) along with adjusted operating profit in its results. It has de-emphasised other measures such as group base cash generation and economic value earnings.

Chesnara booked most of its operating profit in the Netherlands in its latest year (FY2025), followed by the UK then Sweden. It will soon enter the Luxembourg market, via the Scottish Widows Europe deal.

In the Netherlands, the group merged its Waard and Scildon businesses last year and now trades under the Scildon name there. It also disposed of the lossmaking Scildon pensions business. The Dutch unit has a portfolio of long-term savings, protection business and some non-life operations.

The UK unit contains the Countrywide Assured subsidiary, Chesnara’s domestic life insurance and pensions business. The group’s strategic outsourcing partnership with SS&C Technologies (US:SSNC), which started in 2023, is positive for costs and operating leverage. Progress is being made with the consolidation of the UK policy administration, finance and investment processes on one SS&C platform. Four migrations have been completed so far, with the integration of Chesnara Life to come.

Over in Sweden, the group operates its life and pensions work under the Movestic brand and there is also an investment fund management company.

Plenty in reserve

Chesnara’s annual results, released last week, highlight why investors should take notice. The group reported strong OCG and higher operating profit, disclosed a solid capital position and raised its dividend by 6 per cent. Management also pointed to a “very healthy” acquisition pipeline.

For the year to 31 December 2025, OCG was up 19 per cent to £94mn as performance improved by double digits across the group’s geographic markets. Adjusted operating profit climbed 42 per cent to £56mn.

Supportive factors included UK and Dutch investment returns, merger synergies, reinsurance arrangements that reduce capital requirements and foreign exchange hedging changes.

Chesnara bear points

Inflation backdrop could delay new deals

Cash generation could slow if deals wither

Assets under administration (AUA) rose by 10 per cent to £15bn, boosted by Swedish custodian inflows and the relative depreciation of sterling. AUA on a pro-forma basis was more than £20bn if the HSBC deal was included.

CSN:LSE

Chesnara PLC

1mth

Today change

+1.60%

Price (GBp)

305.31

While statutory pre-tax profit was down 10 per cent from £21mn to £19mn, this was due to investment movements and restructuring and financing charges. This was a slightly lower result than analysts had anticipated, coming in 4 per cent below Peel Hunt’s forecast.

Even so, Chesnara’s results highlighted its fundamentally strong balance sheet, which provides the resources for continued dividend growth and M&A.

The payout increase made it the 21st year in a row of dividend per share (DPS) growth. The group’s level of OCG provides a dividend cover ratio of 1.8 times, which comfortably covers the return of capital to shareholders and interest on debt.

Management is dividend-focused when it comes to shareholder returns and Chesnara is not currently buying back shares. Its view is that the returns on offer from acquisitions are more attractive than buybacks.

Chesnara disclosed a Solvency II coverage ratio of 257 per cent at its year end, up from 203 per cent the year before and well above its target range of 140-160 per cent. While the HSBC deal is expected to reduce the ratio to around 180 per cent, that is still comfortably north of target.

Cash remittances (amounts paid from subsidiaries to the group) rose by 30 per cent to £58mn last year.

The group extended its three-year, £150mn revolving credit facility (RCF) during 2025 and also raised £150mn through bond with a pre-tax coupon of 8.5 per cent, which will be used to support future M&A.

Meanwhile, leverage is falling. The leverage ratio was down to 22 per cent at the year end, from 31 per cent in 2024. Management expects this to remain below its long-term 30 per cent target after the Scottish Widows deal completes.

Of the deals Chesnara has completed since its founding, the HSBC acquisition was its biggest so far. Management expects this to deliver £800mn of cash generation over the lifetime of the books through £5bn of AUA. The deal completed in January and was funded by a £140mn rights issue and existing resources.

The group’s most recent move, buying Scottish Widows Europe for €110mn (£95mn), is also significant. It is expected to complete this year and bring in around €1.7bn of AUA and 46,000 policies, with lifetime cash generation of around €250mn expected.

As for future deals, the group still has around £100mn of firepower.

Chief executive Steve Murray tells Investors’ Chronicle that potential new deals being looked at include those of a “larger size and scale” than in recent years, with multiple opportunities being considered in the UK and overseas markets.

Chesnara’s business model, with its focus on acquisitions and expertise in areas of the market where larger rivals may not look, means it is well-placed to deliver attractive future M&A.

A tasty yield

Its shares offer an attractive forward dividend yield of 8 per cent for 2026, which is higher than European peers such as M&G (MNG), Aviva (AV), NN (NL:NN) and ASR Nederland (NL:ASRNL). Of major London-listed insurance players, only Legal & General (LGEN) and Standard Life (SDLF)offer a higher yield this year.

Its forward free cash flow yield sits at an attractive 15 per cent, according to Abid Hussain at joint house broker Panmure Liberum.

Meanwhile, Chesnara’s book valuation of 1.1 times price/unrestricted tier one equity (a measure of high-quality capital under the Solvency II framework) looks undemanding against its peer group.

All in all, this new FTSE 250 insurance option looks set to deliver consistent returns given its strong record and pipeline of opportunities.

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Company Details	Name	Mkt Cap	Price	52-Wk Hi/Lo
	Chesnara (CSN)	£666mn	289p	335p / 207p
Size/Debt	NAV per share*	Net Cash / Debt(-)	Net Debt / Ebitda	Op Cash/ Ebitda
	180p	-£208mn	-	-
Valuation	Fwd PE (+12mths)	Fwd DY (+12mths)	FCF yld (+12mths)	CAPE
	10	8.1%	14.2%	19.8
Quality/ Growth	EBIT Margin	ROCE	5yr Sales CAGR	5yr EPS CAGR
	-	-	9.1%	-
Forecasts/ Momentum	Fwd EPS grth NTM	Fwd EPS grth STM	3-mth Mom	3-mth Fwd EPS change%
	840%	-13%	-2.5%	-13.2%

Year end 31 Dec	Revenue* (£bn)	Profit before tax (£mn)	EPS (p)	DPS (p)
2023	156	1.8	10.7	20.8
2024	166	20.9	2.2	21.4
2025	186	32.1	-5	22.3
f’cst 2026	225	45.5	28.8	23.3
f’cst 2027	227	72.5	23.6	24.1
chg (%)	1	59	-18	3
*Net of investment result (forecasts by Peel Hunt). Source: FactSet, adjusted PTP and EPS figures. NTM = Next Twelve Months. STM = Second Twelve Months (ie one year from now)

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