Chesnara Pitches Scottish Widows Europe Deal: €250M Cash Boost, Funded in Cash, 173% Solvency Pro Forma

Core Viewpoint - Chesnara is set to acquire Scottish Widows Europe from Lloyds Banking Group, which is expected to enhance the company's cash generation and maintain strong solvency ratios post-transaction [1][3][4]. Financial Metrics - The pro forma solvency coverage ratio for Chesnara is projected at 173%, exceeding the company's operational range [1]. - The acquisition is anticipated to add approximately EUR 250 million in lifetime cash generation, with around EUR 100 million expected in the first five years [3][5]. - The agreed consideration for the acquisition is EUR 110 million, representing about 64% of Scottish Widows Europe's eligible own funds [3]. Strategic Rationale - Chesnara views the acquisition as a continuation of its M&A momentum, following the HSBC Life U.K. acquisition completed in January [4]. - The company aims to leverage its experience and local management team to integrate Scottish Widows Europe into its existing operations [2][8]. Market Context - Chesnara identifies Luxembourg as an attractive market due to its stable regulatory environment and significant life insurance liabilities [7]. - The market is characterized as fragmented, with opportunities for consolidation, which Chesnara aims to capitalize on [8]. Cash Flow and Dividend Implications - The acquisition is expected to increase the group's cash flow profile by about 20% on average over the first five years [5]. - The long-term cash generation from this acquisition is expected to support the sustainability of dividends, with plans to increase dividends by 6% by full-year 2025 [14]. Regulatory and Operational Considerations - The acquisition is subject to regulatory approvals, with Chesnara already in discussions with the Luxembourg regulator [2]. - The transaction will be fully funded from available cash resources, including proceeds from a previous issuance [2].