Chesnara H1 Earnings Call Highlights

Chesnara LON: CSN reported higher operating capital generation, cash remittances and adjusted operating profit for the first half of 2026, supported by the January acquisition of HSBC Life UK, now renamed Chesnara Life UK.

Group Chief Executive Steve Murray said the company delivered “another very strong set of financial results” during the period and raised its interim dividend by 6% to 8.16 pence per share. The increase represented a one-off acceleration of Chesnara’s historic dividend-growth trajectory, following a 6% increase in the full-year 2025 dividend announced in March.

Operating capital generation, or OCG, rose 79% to £96 million, while cash remittances increased 31% to £73 million. Group CFO Tom Howard said the results reflected robust business-unit performance, contributions from capital optimization measures and the addition of Chesnara Life UK.

Acquisition boosts capital generation and future profits

Chesnara Life UK generated £51 million of operating capital generation and £20 million of cash remittances during its first five months under Chesnara ownership. Howard said the £51 million OCG contribution was non-recurring, arising from day-one acquisition effects as the acquired portfolio was incorporated into Chesnara’s reinsurance arrangements and solvency capital framework.

The company said it remained on track to generate £140 million of cash in the first five years of ownership of Chesnara Life UK. Murray said the group also expects Chesnara Life UK and the planned acquisition of Scottish Widows Europe to contribute around £1 billion of lifetime cash flows.

Data migration from HSBC remains scheduled for completion by the end of 2026. Chesnara said it had completed staff consultation required for its new U.K. target operating model, identified the combined U.K. leadership team and completed the first planned transfer of employees to outsourcing provider SS&C.

The group’s Contractual Service Margin, a measure of future insurance profits under IFRS accounting, increased to £327 million at the half-year from £131 million at the end of 2025. Howard said the increase primarily reflected the inclusion of the Chesnara Life book, where the CSM recognized on acquisition exceeded the company’s pro forma estimates.

Balance sheet remains above target range

Chesnara’s Solvency II coverage ratio stood at 185%, above its operating range of 140% to 160% and ahead of the 180% pro forma guidance provided at its full-year 2025 results. Own Funds rose 14% to £976 million, including a £79 million increase on the first day of the Chesnara Life acquisition.

Howard said operating capital generation contributed 73 percentage points to the solvency ratio during the half, while non-operating items added a further five percentage points. Favorable investment markets more than offset integration and restructuring costs, he said.

Group central liquidity totaled £271 million after funding the acquisition. Howard said Chesnara retained sufficient firepower for a transaction comparable in size to the planned Scottish Widows Europe deal, estimating available headroom at about £130 million before considering debt or equity financing. Murray added that the group may have about £150 million of debt capacity, depending on the characteristics of a potential acquisition.

• Assets under administration increased to £21 billion.
• Adjusted operating profit increased to £31 million, compared with £22 million in the prior-year period.
• The IFRS capital base increased 22% to £850 million.
• Capital optimization actions contributed £12 million, including an extension of foreign-exchange hedging arrangements.

Recurring capital generation and operating trends

Howard said £33 million of first-half OCG came from recurring operating performance, broadly in line with £32 million a year earlier. He said this performance benefited from stronger new business and continued cost control, partly offset by adverse mortality experience in the Netherlands in the first quarter and adverse persistency experience in Sweden.

The CFO said management actions are expected to account for about 30% of total annual OCG on average. These actions include foreign-exchange hedging, mass-lapse reinsurance and potential changes to investment portfolio risk. He said the group’s larger and more diversified portfolio following recent acquisitions could expand opportunities to optimize investments.

In the Netherlands, Scildon delivered £30 million of cash remittances, its largest remittance to date. The company said the result was partly supported by synergies from the merger of its Dutch entities. Remaining anticipated cost savings are expected in the second half, although management said they would be smaller than those already delivered over the past 18 months.

On mortality in the Netherlands, Howard said a first-quarter adverse variance appeared seasonal, with second-quarter experience returning broadly to long-term expectations. In Sweden, Murray said Movestic continued to record positive client cash flows and added about £700 million in assets under administration, though transfers out of higher-margin legacy unit-linked business remained a drag on net economics.

Scottish Widows Europe and M&A pipeline

Chesnara said its application for change-of-control approval for Scottish Widows Europe has been submitted to the Central Bank of Ireland. Legal completion readiness testing with Lloyds Banking Group has been completed, and the company continues to anticipate approval and completion around the end of 2026.

Murray said the group remains active in assessing acquisition opportunities in the U.K. and Europe. He described the U.K. market as active, citing continuing portfolio optimization by large insurers and financial institutions, while characterizing Sweden as less active and the Dutch market as quieter in the near term. He also said Chesnara sees a potential long-term opportunity set in Luxembourg and continues to monitor other jurisdictions, including Germany and Belgium.

New-business value rose to £12 million, aided by Chesnara Life UK. Murray said the group expects full-year 2026 new-business value to be about double the previous year’s level, although acquisitions are still expected to account for the majority of long-term growth.

About Chesnara (LON:CSN)

Chesnara (CSN.L) is a European life and pensions consolidator listed on the London Stock Exchange. It administers approximately one million policies and operates as Countrywide Assured 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.

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