Source: Sharecast
Berenberg said three elements of Chesnara's first‑half update pointed to an active M&A pipeline heading into 2027 - the smooth integration of HSBC Life UK with no operational or regulatory issues, a 185% solvency ratio, and a buoyant acquisition landscape across the UK, Germany, Sweden and Belgium.
The German bank stated management was likely to raise its targets for the HSBC Life UK deal at the full‑year stage, with the company reiterating expected benefits of more than £140m in cash remittances over five years and over £800m across the life of the acquisition. HSBC Life UK generated £51m of operating capital in H1, including one‑off merger benefits, with £20m upstreamed as cash.
Chesnara also delivered strong organic capital generation of £96m, well ahead of Berenberg's forecast due to the one‑off merger benefit, while cash upstreaming of £73m beat expectations thanks to a £30m contribution from the Netherlands. Solvency again surprised to the upside at 185%, though adjusted operating profit was slightly weaker due to higher lapses in Sweden.
Berenberg estimates around £280m of potential M&A capacity, comprising roughly £130m of excess cash and £150m of debt headroom, and said the success of the HSBC Life UK rights issue suggested strong investor appetite for any future equity raise.
As a result, Berenberg raised its target price to 437p, arguing that additional equity funding for deals could support dividend growth of around 6%, compared with Chesnara's usual 3% pace.
Reporting by Iain Gilbert at Sharecast.com