Chesnara

We outlined the rationale for our holding in Chesnara in the FY23 annual report. Since that time, the shares have performed strongly, while paying an annual dividend yield of more than 7%. We have added to our holding, taking part in their July 2025 rights issue, making it our 4th largest holding as at 31st March 2026. The fact that we have owned Chesnara since 2014 reflects our confidence in the business model and the ability of successive management teams to execute their strategy. 

Chesnara is a well-managed niche life insurance platform that has a consistent M&A track record, making £440 million of acquisitions of legacy life books over the past 5 years, most recently HSBC Life UK and Scottish Widows Europe. This reflects the inclination of large financial services groups to shift towards a focused and simplified strategy, selling off non-core assets, often at large discounts to their intrinsic value. Private equity businesses have tended to focus their M&A efforts on bulk purchase annuity assets, rather than the unit-linked products that Chesnara tends to specialise in.

By looking for deals where others aren’t looking and refusing to over-pay for assets, Chesnara is building a reputation for earnings-accretive deals. The steady stream of deals also allows Chesnara to re-fill the hopper as the policies of their older books run off. Chesnara has grown in scale meaningfully in the past 5 years from 0.9 million policies in 2020 to 1.4 million following their most recent deals. Over that period, their assets under administration have grown from £8.5 billion to over £20 billion. Their reputation as a reliable and responsible operator is spreading across Europe, with Chesnara now operating in Sweden and Benelux, as well as the UK. Management are confident in their ability to consummate more acquisitions in the coming years, with more than £100 million firepower on their balance sheet and proforma Solvency 2 capital ratio at 180%, well above their target 140-160% target range. 

In addition to M&A, Chesnara generates value for shareholders by maximising the value of its existing business, releasing cash by managing the operations efficiently, while also generating attractive investment returns, in excess of the risk-free returns that are assumed in their actuarial models. 

Even after the recent rally, the valuation does not reflect the Company’s track record of acquiring closed books at discounts to their intrinsic value and then managing these closed books efficiently, identifying ways to create value for shareholders. At more than 7%, the dividend yield is amongst the highest in the UK and well above its long-term average, despite the dividend per share growing at a compound annual rate of +3.3% over the past 5 years and dividend cover growing from 1.0x in 2020 to 1.5x in 2025. This underlines the scope for further re-rating as management delivers on its strategy in the years ahead.