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Investment conditions in 2011 impact Chesnara's valuation
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The dividend remains attractive for income seekers
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The Share Centre continues to recommend investors ‘buy' Chesnara
As Chesnara reports mixed full year results, Sheridan Admans, investment research manager at The Share Centre, explains what they mean for investors.
"Results reported this morning showed adjusted pre-tax profit for the year was up to £22.4m from £18.3m in 2010, excluding £15.9m of profit arising from the acquisition. However, the company's valuation was down. These are the first set of results since the transfer of the Save and Prosper business acquired in December 2010.
"Chesnara's European Embedded Value (EEV), the standard calculation used to value insurance companies, fell to £294.5m in 2011 from £354.6m in 2010. The valuation makes certain assumptions about life expectancy, persistency and investment conditions and was mainly affected by investment conditions in 2011. As with most companies in the life insurance sector, business has been affected by falling equity markets and falling yields on Government securities.
"However, cash generation and solvency continues to be healthy for Chesnara. The company continues to seek out acquisition opportunities and remains committed to providing shareholders with an attractive dividend. The forecast yield is currently 9.26% and the company reported a final dividend of 10.9p per share, giving a yield for the year of circa 8.8%. We continue to recommend Chesnara as a ‘buy' for investors looking for a long-term niche play in the insurance sector."
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