7. Chesnara Plc
Insuring the Future – Profiting from Life and Pensions
Chesnara Plc is a UK-based company that makes money by managing life insurance and pension policies, often taking over older ones from other firms. It operates in the financial services industry – specifically the life assurance and pensions sector – focusing on providing security for people’s savings and retirement plans while generating steady returns for itself.
The company’s main business is buying up “closed books” of life insurance and pension policies. These are portfolios of policies that insurers no longer sell new versions of, so they’re happy to offload them. Chesnara takes on these books, manages the policies, and collects premiums from policyholders – think monthly payments for life insurance or pension contributions. It then pays out claims or pensions when due, aiming to make a profit from the difference between what it collects and what it pays out, plus any investment returns on the funds it holds. Chesnara also earns fees for managing these policies, keeping costs low to boost margins.
Chesnara operates through three main subsidiaries: Countrywide Assured in the UK, Movestic in Sweden, and Waard in the Netherlands. Countrywide Assured handles UK life and pension policies, often for older customers. Movestic offers modern pension products in Sweden, including unit-linked plans where returns depend on market performance. Waard, in the Netherlands, manages smaller closed books of life insurance. The company’s strategy is to grow by acquiring more books – in 2024, it bought a £1.2 billion pension portfolio from Aegon’s Dutch arm – while keeping a tight grip on expenses. It also invests policyholder funds in safe assets like bonds to ensure it can meet future payouts.
Based in Preston, Chesnara was founded in 2004 and manages £11 billion in assets for over 1 million policyholders across Europe. In 2024, it reported revenues of £250 million, with profits bolstered by rising interest rates that improve investment returns. Chesnara’s focus on stable, long-term cash flows makes it a steady player – though it faces risks from market dips or regulatory changes in the insurance world.
Chesnara operates a business built on acquiring commoditised books of insurance policies. Sellers understand their value and offload them primarily to free up balance sheet capacity. There is nothing fundamentally wrong with this model, and for investors seeking a reliable income yield with minimal volatility, it may be a suitable option. However, this type of business is unlikely to generate exceptional returns.
On the plus side, Chesnara offers a high dividend yield and has a strong track record of consistent growth. At times, it may trade at an attractive valuation, but Wonder Stocks focuses on truly exceptional investment opportunities. Chesnara simply does not fit that profile and will not be subject to further investigation.