Interim Management Statement

Chesnara plc - Interim Management Statement

Chesnara plc

Interim Management Statement for the period from 1 January 2009 to 18 May 2009

19 May 2009

This statement is to update investors on the financial position of Chesnara plc
(the `Group') as at 31 March 2009 and on its financial performance during the
first quarter. Where events and transactions have occurred since the first
quarter end, which are estimated to have a material impact on management's core
expectation of the financial position and financial performance of the Group,
then these are identified, together with a broad indication of their impact.

The key determinant of Group performance in the first quarter was the
continuing decline in investment markets, with the leading UK equity market
indices showing an 11% reduction over the period and with returns on cash
deposits reducing. The effect of these factors was a £6.4m net of tax reduction
in European Embedded Value (`EEV'). However, the subsequent recovery in equity
investment markets, which has, up until 16 May 2009, virtually eliminated all
of the first quarter decline, is estimated to have offset the net of tax
reduction in EEV by some £3.6m.

In addition, a widening of the differential between gilt returns and swap rates
has, in the absence of the re-calibration of the Risk Discount Rate (RDR) used
to discount the cash flows underlying the value in-force component of EEV, led
to a further net of tax reduction in the order of £3.8m in EEV. It is expected
that this effect will be largely reversed when the RDR is next re-calibrated as
at 30 June 2009.

Apart from the impact of market performance in the first quarter, the business
is, based on fundamentals, performing ahead of expectations. Key contributors
are:

  * favourable lapse experience across both investment and protection products,
    leading to a net of tax EEV increase of £1.3m.
   
  * favourable mortality experience, leading to a net of tax EEV increase of 
    £0.5m
   
With the return from the in-force business, by way of the unwind of the RDR, in
line with expectation, the overall position over the quarter is a reduction in
the EEV of £6.5m net of tax from £182.7m to £176.2m. Both amounts are stated
before adjustment for the appropriation of the final 2008 dividend of £10.2m
payable on 20 May 2009. As indicated earlier, the recovery of investment
markets since the quarter end and the expected recalibration of the RDR as at
30 June 2009 are together estimated to offset this reduction to the extent of
some £7.4m.

In contrast to the volatility of the EEV result, the IFRS result of £4.1m
pre-tax (£3.0m net of tax) for the quarter has proved more resilient. While
first quarter investment market effects have adversely impacted the pre-tax
result by some £2.3m, the impact of this has been sheltered by favourable
expense and mortality experience of just under £1.0m pre tax. It is expected
that equity investment market recovery from the end of the quarter to 16 May
2009 will have reduced the adverse pre-tax impact by more than £1m.

In terms of solvency, the emergence of surplus from the life business has
remained strong such that the ratio of regulatory capital resource to
regulatory capital requirements in the life company has improved from 177% as
at the 2008 year end to 185% at the end of the first quarter 2009.

Whilst, we remain cautious about the impact of continuing volatility in equity
markets and about declining cash deposit yields, the results have clearly
benefited from the favourable effects of fundamentals, such as lapses,
mortality and expenses.

Acquisition

As announced on 17 April 2009 the Company has agreed to acquire (subject to
shareholder approval) Moderna Forsakringar Liv and a circular in relation to
this will be sent shortly.

Market Opportunity

We believe that attractively priced assets are now becoming available as a
result of turbulence in financial markets. We continue to examine such
opportunities as they arise and believe that we have a strong financial
platform from which to pursue them and we will continue to apply strict
financial and risk criteria to any prospective acquisitions.

Notes to editors:

Chesnara plc, which listed on the London Stock Exchange in May 2004, is the
owner of Countrywide Assured plc (`CA'). CA is a life assurance subsidiary that
is substantially closed to new business. In June 2005 Chesnara acquired City of
Westminster Assurance (`CWA') for GBP47.8m. With effect from 30 June 2006,
CWA's policies and assets were transferred into CA plc. Chesnara's operating
model is to maintain a relatively small governance team. Chesnara continues to
seek acquisition opportunities in the financial services sector in areas
related to its core life operations.

For further enquiries, please contact:

Chesnara plc

Graham Kettleborough, CEO

Tel: [phone]

Press

Michael Henman, Cubitt Consulting

Tel: [phone]