Chesnara delivers in growing market

Chesnara pleased the market with its half-year results on Friday, resulting in a 1.22% lift to shares in afternoon trading.

Pre-tax profits at the insurance group rose by 134%, to £21.8 million, while net cash generation stood at £21.9 million, up from £12.4 million last year. Chief executive officer Graham Kettleborough pointed to "good investment market performance, underpinned by the resilience of our underlying UK business and good progress in Sweden" as drivers for the performance.

Movestic, the company's Swedish outfit, performed well, with a pre-tax profit of £1 million compared to £100,000 during the first half of 2012.

The group was optimistic in its outlook: "Recent UK financial results combined with the results of financial projection modelling indicate continued healthy cash generation and a solvency surplus in both the base case and in a range of adverse stress scenarios."

Analyst view

Panmure Gordon analyst Barrie Cornes pointed out that Chesnara has benefited from the general improvements in the investment markets. The surge in pre-tax profits meant he raised his earnings per share forecasts for the full year, by 34% to 21.1p.

"The valuation remains highly attractive with a 2013 dividend yield of 6.9%," noted Barrie, adding that the current 12% discount to June's embedded value of 294p per share was too high.

Shares are trading on a price/earnings multiple of 12 times for the full year, which is undemanding on the back of this yield, said Cornes. He maintained a 'buy' rating on the stock and a 315p target price.