Slides
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CHESNARA ACQUIRES SCOTTISH WIDOWS EUROPE
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1 ANOTHER ACCRETIVE TRANSACTION WITH FUTURE CONSOLIDATION POTENTIAL Increased cash generation ➢ Expected incremental cash generation of ~€250m over the lifetime of the policies held in the Scottish Widows Europe portfolio ➢ ~€100m occurring in first five years post-acquisition Maintain balance sheet strength and resilience ➢ Fully financed with available cash ➢ Pro-forma solvency ratio of 173%, above normal operating range and pro-forma leverage ratio expected to be in line with investment grade rating Modern and scalable operating platform ➢ Closed life and pensions business led by an experienced management team ➢ Policy admin operation powered by leading European third-party technology provider New platform for future cross-border consolidation ➢ Attractive territory which broadens the opportunity set for future acquisitions ➢ Luxembourg market supports Chesnara's strategy of being a leading European life and pensions consolidator Significant value creation for investors ➢ Acquired for €110m, at an attractive multiple of 64% of Eligible Own Funds ➢ Second material acquisition in the last 12 months with firepower to continue to execute on pipeline
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€1.7bn AuA c.46,000 Policies 38 Employees (All based in Luxembourg) 2 SCOTTISH WIDOWS EUROPE IS A CLOSED LIFE AND PENSIONS BUSINESS ➢ Operations based in Luxembourg with an experienced management team ➢ Products Chesnara are familiar with and previously sold from UK into Europe ➢ Modern and scalable operating platform, creating leverage to grow the business through future M&A ➢ Policy admin operation powered by Lifeware, a leading European third-party technology provider ➢ Transaction is expected to close end 2026 OVERVIEW AuA BREAKDOWN KEY METRICS €173m Own Funds 179% Solvency II coverage ratio €97m Regulatory SCR Source: Company information, latest available financials as at Dec-24. Notes: Totals may not sum due to rounding. Endowments 79% Pensions 20% Post-vesting annuities 1% Unitised With- Profits 84% Unit-Linked 16% Germany 88% Austria 11% Italy 1% By product By type By geography
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ROBUST BALANCE SHEET MAINTAINED POST ACQUISITION 3 Coverage ratio 169% Chesnara Pro-forma HSBC Life (UK) (Dec-24) UT1 T2 & T3 173% Chesnara Pro-forma HSBC Life (UK), RT1 & Scottish Widows Europe (Dec-24) Own Funds Own Funds £682m £150m £246m £1,078m RT1 £637m £244m £881 m SOLVENCY T2 & T3 UT1 Our financial considerations for M&A remain consistent Maintained through Scottish Widows Europe transaction? Solvency Operating range of 140% to 160% Leverage Maintain our investment grade rating Liquidity Retain robust liquidity at group level Acquisition capacity Capacity to finance further transactions without external fundraising
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~30 providers of life insurance Long tail of sub-scale insurance businesses Few incumbent consolidators LUXEMBOURG – ADDITIONAL MARKET WITH MULTIPLE FUTURE M&A OPPORTUNITIES Benefits of the Luxembourg Market ➢ Dedicated insurance regulator with a strong supervisory framework, in line with European directives ➢ EU passport allows insurers in Luxembourg to offer their services throughout the European Single Market ➢ Cross border expertise in insurance and access to a highly qualified talent pool Potential Consolidation Catalysts 195% Average Solvency Coverage Ratio AAA Rated by all three major credit rating agencies 4 ~€235bn Total Life Insurance Liabilities(1) Sources: Luxembourg for Finance – Insurance for Luxembourg Report. Deloitte Luxembourg Insurance Market Outlook. Insurance Market Insights: 2024 Edition. (1) Solvency II Technical Provisions.
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5 AN ATTRACTIVE TRANSACTION BROADENING THE M&A OPPORTUNITY FOR CHESNARA Second material acquisition in the last 12 months creating value for investors while maintaining M&A firepower Entry to attractive additional market providing access to local and cross- border consolidation opportunities Modern, efficient and scalable operating platform with experienced local management team Strengthens our position as a leading European life and pensions consolidator Enhancing group lifetime cash generation by ~€250 million
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QUESTIONS
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APPENDIX
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8 TRACK RECORD OF SUCCESSFULLY EXECUTING TRANSACTIONS WITH LARGE FINANCIAL INSTITUTIONS UK 2005 Entity City of Westminster Assurance Life assurance and pensions solutions provider from Irish Life for £30m 2010 Entity Save & Prosper Funds Pension and life assurance provider for £63.5m 2013 Entity Direct Line Life Insurance, focused on non-linked products, for £39.3m 2021 Entity Unit-linked business for £39m gaining c.80,000 policies, doubling UK AuA 2023 Portfolio Individual onshore protection business with 47,000 policies 2024 Portfolio Closed portfolio of unit-linked onshore bonds and legacy pension business with 17,000 policies Europe 2014 Entity The Waard Group for £54m 2019 Portfolio Portfolio of life assurance business in run-off for £25m 2021 Portfolio Insurance portfolio consisting of c.9,000 mainly term assurance 2021 Entity Savings, mortgages and annuities provider for £13m 2022 Portfolio Insurance portfolio for a group capital contribution 2009 Entity Unit-linked pensions and savings business for £20m 2019 Portfolio Term life and endowment portfolio of c.6,500 policies 2016 Entity Legal & General Nederland for £138m Netherlands 2025 Entity Specialist investment bond and life protection provider with 454,000 policies
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9 STRENGTHENING OUR EXISTING BUSINESS Increases scale in Europe Maintains overall focus on managing unit- linked products AUA BY GEOGRAPHY Unit-linked Non-linked AUA BY PRODUCTS 55%29% 16% 88% 12% 51% 27% 15% 7% 1% UK Sweden Netherlands Germany Other 89% 11% 16% 84% 84% 16% Chesnara(1) Dec-24 Scottish Widows Europe Dec-24 Pro-Forma Chesnara Dec-24 Notes: (1) Includes Chesnara and HSBC Life (UK). (2) Includes Austria and Italy (2) £18bn £18bn €1.7bn £1.4bn €1.7bn £1.4bn £19bn £19bn
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