Adverse economic conditions take their toll on life insurance firm
Preston-based life insurance firm Chesnara was subject to a year of “adverse economic conditions” which saw profits and income fall in the 12 months to December 31, 2018.
However, it said solid cash generation will pay for a 3% boost in the final dividend of 13.46p per share, the 14th annual consecutive increase.
Total comprehensive income of £23.7m compared with £86.9m the previous year, while a pre-tax profit of £27m was down from £89.6m in 2017.
Chesnara said the underlying core operating profit improved to £42.5m, from £38.4m in 2017. Economic losses of £15.5m compare to a corresponding profit of £30.9m in 2017. The 2017 result included a £20.3m gain arising on the acquisition of Legal & General Nederland.
Economic value of £626.1m was a drop from £723.1m a year before. The company said the movement includes the earnings for the year, and is stated after recognising £30.4m of dividend payments and a foreign exchange loss of £5.8m during the year.
But group cash generation of £47.8m was an improvement on the previous year’s £28.6m figure.
Today’s announcement also confirmed that the FCA investigation into the fair treatment of long standing customers in the UK was closed without further action.
Chief executive John Deane said: “It is pleasing to report that in 2018 we continued to generate cash in excess of our dividend costs and we ended the year with a strong solvency ratio of 158% (2017: 146%).
“This was achieved against a backdrop of adverse economic conditions, especially during the last quarter of the year. Economic Value has been impacted by the market conditions in line with our sensitivities.”
He added: “The adverse economic conditions, primarily reduced equity and bond values and the strengthening of sterling against the Swedish krona, contributed to a reduction in total Economic Value from £723.1m at the start of the year to a closing value of £626.1m. The closing value recognises the payment of £30.4m of dividends during the year.
“Good progress on operational performance developments during the year has resulted in improvements in business resilience and higher new business volumes compared to 2017.”
And he said: “In the early part of 2019, markets have recovered somewhat but uncertainty remains as a result of political, economic and business conditions.
“For Chesnara, with our structure of separate subsidiary companies in each European territory, debt capacity and management capability, we remain open to the opportunities this uncertainty could bring to us as a disciplined buyer with a focus on cash generation and long term value.”
