Chesnara Regulatory News (CSN)

Chesnara plc

LEI Number: 213800VFRMBRTSZ3SJ06

22 July 2022

ACQUISITION OF CONSERVATRIX'S INSURANCE PORTFOLIO

CHESNARA ENHANCES SCALE IN THE NETHERLANDS WITH SEVENTH ACQUISITION IN DUTCH MARKET

Chesnara plc ("Chesnara", the "Company" or, together with its subsidiaries, the "Group") is pleased to announce the acquisition of the insurance portfolio of Nederlandsche Algemeene Maatschappij van Levensverzekering "Conservatrix" N.V. ("Conservatrix"), a specialist provider of life insurance products in the Netherlands that was declared bankrupt on 8 December 2020 (the "Acquisition"). The insurance portfolio will be acquired by Waard, Chesnara's Dutch closed book operation.

Acquisition highlights

§ Third acquisition announced by Chesnara over past year and seventh transaction undertaken in Dutch market

§ Increases Waard's number of policies under administration to 165,000, transforming Waard into a second material closed book consolidation business alongside Chesnara's existing UK platform

§ Conservatrix customers to benefit from becoming part of a well capitalised Group, after a significant period of uncertainty

§ A Capital Contribution of £35 million to be provided by the Group to support the solvency position of the Conservatrix business, financed from the Group's existing resources

§ Waard to become a material contributor to the Group's dividends following the completion of the Acquisition and the recent Robein Leven transaction, further supporting Chesnara's progressive dividend strategy

Steve Murray, Chief Executive Officer of Chesnara, stated: 

"We are delighted to announce the acquisition of Conservatrix's insurance portfolio and to welcome the Conservatrix customers and staff to the Chesnara Group. We recognise that the bankruptcy of Conservatrix has caused significant uncertainty for its customers and employees, but we hope that today's announcement provides certainty and a clear way forward for them.

"This transaction is Chesnara's third over the past year and seventh in the Dutch market, and will further expand the scale of our Dutch operations following the recent completion of the acquisition of Robein Leven in April 2022. Together, these will deliver material value creation for Chesnara and the expected incremental cash generation will enhance the sustainability of our progressive dividend strategy. Conservatrix's portfolio is well aligned to Chesnara's acquisition strategy and will be integrated within Waard, our existing Dutch closed book operation."

"We believe that acquisition opportunities across our target markets remain strong, and we continue to be highly confident in our ability to finance and execute such transactions on attractive terms for both vendors and our shareholders."

Transaction background and benefits for Conservatrix policyholders

In December 2020, the Dutch Central Bank, De Nederlandsche Bank ("DNB"), filed for bankruptcy of Conservatrix following a deterioration of the Solvency II capital position and limited feasibility of recovering this in the short term. The court declared Conservatrix bankrupt on 8 December 2020 and appointed two trustees (the "Trustees") who are authorised to administer the estate.

The Acquisition will be effected through the transfer of the insurance portfolio (together with certain other assets and liabilities) to a subsidiary of Waard, after which that subsidiary will be merged into Waard. However, in order to support the solvency position of the Conservatrix insurance portfolio, a Capital Contribution of £35 million will be provided by the Group, consisting of a £21 million contribution from Chesnara and £14 million of existing Waard resources.

Following completion of the Acquisition, Conservatrix customers will benefit from becoming part of a solvent and well capitalised company, providing security after a significant period of uncertainty. In addition, Waard has proven expertise in integrating businesses whilst continuing to provide high levels of customer service.

The Acquisition is expected, subject to certain conditions including regulatory and court approvals, to complete during Autumn 2022.

Strategic rationale for the Group

Key benefits to the Group include:

§ Enhanced Group scale through the acquisition of a sizeable closed book: Conservatrix's savings, annuity and funeral plan products are well aligned with Chesnara's existing life and pension liability mix in the Netherlands. The Acquisition adds approximately 70,000 additional policies and increases Group Assets under Administration ("AuA") by £0.5 billion to £12.8 billion as at the end of 2021(1).

§ Transformation of Waard into a second material closed book consolidation business alongside Chesnara's existing UK platform: The Conservatrix insurance portfolio will be integrated into Waard, Chesnara's Dutch closed book platform, increasing its policies by approximately 70% to 165,000 and AuA by approximately 90% to over £1.0 billion(2). The Acquisition is the seventh transaction undertaken in the Dutch market by the Group and will provide Waard with the scale and capacity to undertake a wider range of closed book acquisitions in future.

§ Cash generation supporting Chesnara's dividend strategy: A Capital Contribution of £35 million will be provided by the Group to support the solvency position of the Conservatrix business. Future cash generation from the Acquisition under steady state conditions is expected to be £4 million per annum, supporting Chesnara's progressive dividend strategy. Waard will become a material contributor to the Group's dividends, with expected total annual cash generation of £8 million following the Acquisition.

§ Enhancement of Economic Value: The Acquisition is expected to increase the Group's Economic Value ("EcV") by £18 million and provides further EcV accretion potential from future real world investment returns and the run-off of the risk margin.

§ Continued robust solvency position and financial flexibility: The Capital Contribution will be funded from the proceeds of Chesnara's Tier 2 Debt raise in February 2022 and existing funds within Waard. Including the impact of the Acquisition, the Group's pro-forma estimated year-end 2021 Solvency II ratio would remain strong at 171%(1), above the Group's normal operating solvency range of 140 -160%, providing security for customers and continued financial flexibility for future acquisitions.

About Conservatrix

Established in 1872, Conservatrix is a specialist provider of life insurance and mortgages based in Utrecht, Netherlands. Conservatrix was declared bankrupt in December 2020 following a filing by the DNB as a result of a deterioration in the Solvency II capital position of the Company and limited feasibility of recovery in the short term.

For the year ended 31 December 2019 (being the date of Conservatrix's latest financial information published prior to entering insolvency), Conservatrix generated a pre-tax loss of €161.8 million and had gross assets of €638 million at period end. For the year ended 31 December 2021, Conservatrix generated unaudited pre-tax profit of €75.6 million and, at period end, had unaudited gross assets of €614 million. The Conservatrix asset portfolio consists of a range of investments, including cash, government bonds, corporate bonds and mortgages.

Conservatrix's employees are expected to remain with the business following completion of the Acquisition.

Investor Enquiries

Sam Perowne

Head of Strategic Development & Investor Relations

Chesnara plc

E - sam.perowne@chesnara.co.uk

Media Enquiries

Roddy Watt

Director, Capital Markets

FWD

T - 020 7280 0651 / 07714 770 493 

E - roddy.watt@fwdconsulting.co.uk

Notes

(1)  Proforma as at 31 December 2021 for the estimated impacts of the acquisitions of Sanlam Life & Pensions UK Limited and Robein Leven N.V. completed in April 2022 and the issue of the £200 million Tier 2 Debt in February 2022.

(2)  Including the impact of the acquisition of Robein Leven N.V. by Waard, completed in April 2022.

Information on Chesnara

Chesnara is a European life and pensions consolidator listed on the London Stock Exchange. It administers approximately one million policies and operates as Countrywide Assured and Sanlam Life & Pensions in the UK, as The Waard Group and Scildon in the Netherlands, and as Movestic in Sweden.

Following a three pillar strategy, Chesnara's primary responsibility is the efficient administration of its customers' life and savings policies, ensuring good customer outcomes and providing a secure and compliant environment to protect policyholder interests. It also adds value by writing profitable new business in Sweden and the Netherlands and by undertaking value-adding acquisitions of either companies or portfolios.

Consistent delivery of the Company strategy has enabled Chesnara to increase its dividend for 17 years in succession.

Further details are available on the Company's website (www.chesnara.co.uk).

Important Notice

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (as it forms part of retained EU law as defined in the European Union (Withdrawal) Act 2018).

This announcement contains forward-looking statements with respect to the operations, performance and financial condition of Chesnara. By their nature, these statements are subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied because they relate to future events. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not undertake to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. Nothing in this document should be construed as a profit forecast.

Nothing contained in this announcement constitutes or shall be deemed to constitute an offer or invitation to invest in otherwise deal in any shares or other securities of Chesnara.

The person responsible for arranging for the release of this announcement on behalf of Chesnara is Al Lonie, Group Company Secretary.