Chesnara Shares Surge on Acquisition of Scottish Widows Europe

Chesnara (LON: CSN) saw its shares rally on Tuesday following the announcement of its acquisition of Scottish Widows Europe SA from Lloyds Banking Group for €110 million.

The market reacted positively to the strategic move, anticipating enhanced cash generation and expansion opportunities for the life insurance consolidator.

The acquisition is projected to generate approximately €250 million in cash over the lifetime of the acquired policies, with around €100 million expected within the first five years. This influx of capital bolsters Chesnara’s financial position and provides resources for future growth initiatives.

Scottish Widows Europe brings with it €1.7 billion in assets under administration (AuA) and approximately 46,000 in-force policies. This significantly increases Chesnara’s scale and market presence, particularly in the European market.

The purchase price represents an attractive multiple of 0.64x Scottish Widows Europe’s FY24 Own Funds of €173 million. The markets see this as a financially sound deal, adding immediate value to Chesnara’s portfolio.

The acquisition marks Chesnara’s entry into Luxembourg, providing a platform for further consolidation and expansion across Europe. The company already has a presence in Sweden, the Netherlands and the UK. The new foothold allows Chesnara to tap into additional markets in Germany, Austria, and Italy.

Chesnara plans to finance the acquisition entirely from its existing cash reserves. The company will utilise proceeds from its £150 million RT1 bond issue from August 2025.

The pro-forma Group Solvency II ratio is expected to remain robust at 173%, exceeding the company’s normal operating range of 140% – 160%. The pro-forma leverage ratio is expected to remain in line with its investment grade rating.

Driver Breakdown:

• Cash Generation: The acquisition is expected to deliver substantial incremental cash generation, enhancing Chesnara’s financial flexibility.
• Strategic Expansion: Entry into Luxembourg broadens the company’s geographical footprint and opens doors for future cross-border consolidation.
• Scalable Platform: Scottish Widows Europe’s standalone operating business model and outsourced technology provide a scalable platform for further growth.

CEO Steve Murray stated, “We are delighted to announce Chesnara’s second significant acquisition in the past twelve months…It marks our entry into Luxembourg, providing a new platform for in-market and wider European consolidation and expansion,” reinforcing the company’s strategy of expanding its European presence through strategic acquisitions.