Chesnara PLC · LSE:CSN
Chesnara — FY2021 Earnings Presentation
52 slides from Chesnara's earnings presentation, Mar 31, 2022
Slide 1: Full Year 2021 Results
Strong cash generation, robust solvency and growth FULL YEAR 2021 RESULTS 31 March 2022
Slide 2: Agenda for 2021 Results Presentation
AGENDA FOR 2021 RESULTS PRESENTATION OVERVIEW OF STRATEGIC DELIVERY STEVE MURRAY, GROUP CHIEF EXECUTIVE OFFICER DAVID RIMMINGTON, GROUP FINANCE DIRECTOR DELIVERY AGAINST STRATEGIC PRIORITIES STEVE MURRAY, GROUP CHIEF EXECUTIVE OFFICER AREAS OF FOCUS, OUTLOOK AND SUMMARY STEVE MURRAY, GROUP CHIEF EXE
Slide 3: Overview of Strategic Delivery
OVERVIEW OF STRATEGIC DELIVERY Steve Murray Group Chief Executive Officer CHESNARA | 2021 FINAL RESULTS PRESENTATION 2
Slide 4: Key strengths of the Chesnara story and development over 2021
KEY STRENGTHS OF THE CHESNARA STORY AND DEVELOPMENT OVER 2021 Long track record of building Economic Value, supporting sustainable long-term cash generation and shareholder dividends 1 • Significant pre-dividend EcV growth across all divisions including new business profits of £10m • Dividend increa
Slide 5: 2021 Financial Headlines
2021 FINANCIAL HEADLINES GROUP COMMERCIAL CASH GENERATION(1) OF £53M GROUP CASH GENERATION OF £20M CONTINUED ROBUST SOLVENCY AT 152% STRONG ECONOMIC VALUE EARNINGS OF £58M PRE FX AND DIVIDEND PROPOSED 3% FINAL DIVIDEND INCREASE COMMERCIAL NEW BUSINESS PROFITS OF £10M IFRS PRE-TAX PROFITS OF £29M Not
Slide 6: Continued delivery against core strategic objectives
CONTINUED DELIVERY AGAINST CORE STRATEGIC OBJECTIVES What have we done(1) • Strong underlying cash generation and EcV growth 01 • We have continued our dividend strategy of growth, with a proposed 3% increase • Increased solvency absolute surplus through management actions: UK annuity reinsurance (+
Slide 7: Dividend Growth
DIVIDEND GROWTH Dividend History (pence per share) 22.6 21.9 21.3 14.7 20.7 14.3 20.1 13.9 19.5 18.9 13.5 18.4 13.1 17.9 12.7 17.4 12.3 16.9 12.0 16.4 11.6 16.0 11.3 15.6 10.9 15.1 10.6 10.3 10.1 9.9 13.1 12.5 11.9 8.1 7.6 7.1 7.7 7.9 7.2 7.4 6.8 7.0 6.3 6.4 6.6 5.8 6.0 6.1 5.5 5.7 4.9 5.1 5.3 4.8 2
Slide 8: Recent Activity and Events
RECENT ACTIVITY AND EVENTS During 2021, we announced two acquisitions: Sanlam Life and Pensions UK Limited and Robein Leven NV. Completion activities for these two acquisitions have continued during 2022 and we expect to finalise them in Q2 2022. ACQUISITIONS In total they are expected to add £13m o
Slide 9: Delivery Against Strategic Priorities
DELIVERY AGAINST STRATEGIC PRIORITIES David Rimmington Group Finance Director Steve Murray Group Chief Executive Officer CHESNARA | 2021 FINAL RESULTS PRESENTATION 8
Slide 10: Financial Outcomes
DELIVERY AGAINST STRATEGIC PRIORITIES FINANCIAL OUTCOMES CASH GENERATION SOLVENCY IFRS GROWTH ESG STRATEGY AND DELIVERY CUSTOMER OUTCOMES CHESNARA | 2021 FINAL RESULTS PRESENTATION 9
Slide 11: Financial Outcomes: Highlights
FINANCIAL OUTCOMES: HIGHLIGHTS Financial performance 2021 2020 Dividends Dividends per share (1) 22.60p 21.94p Commercial cash generation(2) £53.0m £27.7m Cash Group cash generation £20.3m £27.7m Economic value Economic value earnings(3) £20.7m (£0.9m) IFRS Profit before tax £28.8m £24.6m Commercial
Slide 12: Financial Outcomes: Cash Generation
DELIVERY AGAINST STRATEGIC PRIORITIES FINANCIAL OUTCOMES CASH GENERATION SOLVENCY IFRS GROWTH ESG STRATEGY AND DELIVERY CUSTOMER OUTCOMES CHESNARA | 2021 FINAL RESULTS PRESENTATION 11
Slide 13: Cash Generation: 2021 Performance
CASH GENERATION: 2021 PERFORMANCE Group cash generation of £20.3m which includes the Cash generation - total and commercial (£m) temporary adverse impact of the symmetric adjustment (£26m) and FX losses of (£14m). 53.0 Looking through the symmetric adjustment and other less material technical impact
Slide 14: Cash Generation: Value Creation Sources
CASH GENERATION: VALUE CREATION SOURCES Cash Generation by Division Commercial(2) Cash Generation (2017 - 2021)(1) by Division 2021(1) Scildon Scildon £14m £6m Waard Waard £3m 10% £26m 5% Countrywide Countrywide 10% £181m 5% £48m Movestic 3% £2m 14% Movestic £35m 71% 81% Cumulative 5 year cash 2021
Slide 15: Cash Generation: Strong Visibility on Sources of Future Cash
CASH GENERATION: STRONG VISIBILITY ON SOURCES OF FUTURE CASH Sources of future cash generation composition (5 year estimate) Risk margin and SCR run off coupled with real world investment returns over and above The medium term cash impact of acquisitions risk free rates cover the majority of the cos
Slide 16: Financial Outcomes: Solvency
DELIVERY AGAINST STRATEGIC PRIORITIES FINANCIAL OUTCOMES CASH GENERATION SOLVENCY IFRS GROWTH ESG STRATEGY AND DELIVERY CUSTOMER OUTCOMES CHESNARA | 2021 FINAL RESULTS PRESENTATION 15
Slide 17: Solvency: Long Term Track Record of Stability
SOLVENCY: LONG TERM TRACK RECORD OF STABILITY Solvency 5 year summary (%) Normal operating solvency range 160% Chesnara continues to provide a strong and stable solvency performance, enhancing our capability to continue 146% 158% 155% 156% with our renewed focus on M&A, supported by a closing 2021 1
Slide 18: Solvency: 2021 Performance
SOLVENCY: 2021 PERFORMANCE 2021 year end including Tier 2 debt and acquisitions(1) 2021 year end position 182% 2020 year end 2021 year end excluding symmetric position position adjustment 156% 152% 160% 344 204 191 207 761 568 558 555 417 364 366 348 31 Dec 2020 31 Dec 2021 2021 Exc SA 2021 Inc tier
Slide 19: Financial Outcomes: IFRS
DELIVERY AGAINST STRATEGIC PRIORITIES FINANCIAL OUTCOMES CASH GENERATION SOLVENCY IFRS GROWTH ESG STRATEGY AND DELIVERY CUSTOMER OUTCOMES CHESNARA | 2021 FINAL RESULTS PRESENTATION 18
Slide 20: IFRS Pre Tax Profit & Total Comprehensive Income
IFRS PRE TAX PROFIT & TOTAL COMPREHENSIVE INCOME GROUP 2021 MOVEMENT 2021 2020 IFRS result breakdown £m £m Operating profits include a release of reserves (c£10m) in Scildon. Operating activities 40.7 30.6 Economic activities (11.8) 21.2 The loss on economic activities arises mainly from the adverse
Slide 21: Financial Outcomes: Growth
DELIVERY AGAINST STRATEGIC PRIORITIES FINANCIAL OUTCOMES CASH GENERATION SOLVENCY IFRS GROWTH ESG STRATEGY AND DELIVERY CUSTOMER OUTCOMES CHESNARA | 2021 FINAL RESULTS PRESENTATION 20
Slide 22: Growth: Operational Growth KPIs
GROWTH: OPERATIONAL GROWTH KPIS 3 YEAR POLICY COUNT (‘000s) 5 YEAR FUM (£BN) 5 YEAR GROUP EXPENSES (£M) 967 90 12.3 3.2 891 894 877 7.7 7.1 7.7 8.5 9.1 85.4 83.5 80.2 83.8 82.5 2019 2020 2021 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 2021 includes the pro forma impact of the current acquisit
Slide 23: Growth: Economic Value
GROWTH: ECONOMIC VALUE ECV MOVEMENT IN 2021 £m 57.8 (37.1) (33.3) EcV is calculated assuming risk free returns on shareholder and policy 657.5 636.8 624.2 holder assets. Over time, we expect average returns in excess of risk free and this is a key element of the Chesnara growth model. In 2021, we ha
Slide 24: Growth: Chesnara Value Drivers
GROWTH: CHESNARA VALUE DRIVERS Chesnara's reported Economic Value does not recognise a number of further areas of potential future growth Chesnara Fan (not drawn to scale) Risk margin The categories of potential upside (which are not shown to scale) will emerge over time Economic Value Total Potenti
Slide 25: Growth: Value Growth
GROWTH: VALUE GROWTH EcV Growth (£m) 267 329 362 396 EcV 298 237 Cumulative dividend 209 185 163 103 142 123 723(3) 670 637 85 603(2) 626 624 37 23 69 455 53 417 10 355 376 295 311 263 176 189 187 183 126 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Over
Slide 26: Growth: New Business
GROWTH: NEW BUSINESS Growth potential Investment return above New business Acquisitions risk free Commercial value of new Incremental long term cash Market share(1) business generation 2021 2020 2021 2020 2021 2020 Scildon £5.2m £8.8m £11.9m £15.9m 16.1% 14.2% Movestic £4.3m £1.6m £6.7m £4.8m 3.6% 4
Slide 27: Growth: Investment Return Above Risk Free
GROWTH: INVESTMENT RETURN ABOVE RISK FREE Investment return is an important source of value growth and has provided substantial EcV gains of £110m(1) in the period Growth potential Investment return above New business Acquisitions risk free Own funds and Economic Value are both calculated assuming r
Slide 28: Growth: Our Track Record
GROWTH: OUR TRACK RECORD The analysis below looks at the acquisitions of our three overseas divisions and compares the purchase price to the current EcV (with dividend and capital injections added back). It also considers what are the key drivers of that value growth since acquisition. £m Movestic S
Slide 29: Growth: M&A Approach
GROWTH: M&A APPROACH Growth potential Investment return above New business Acquisitions risk free Our M&A assessment criteria: Key steps in our M&A process: Criteria Why this matters Collectively, acquisitions must be suitably cash generative Cash to continue to fund the group’s long-term cash Gener
Slide 30: Growth: M&A Outlook
GROWTH: M&A OUTLOOK M&A Pipeline: Market Opportunity by Strategic Priorities Our USPs Geography Deal size and financing ✓ UK listing and high standards of governance Back-Book FUM by Geography, £Bn(1) • Chesnara has been in a strong position to ✓ Positive and long standing relationships with derive
Slide 31: ESG Strategy and Delivery
DELIVERY AGAINST STRATEGIC PRIORITIES FINANCIAL OUTCOMES CASH GENERATION SOLVENCY IFRS GROWTH ESG STRATEGY AND DELIVERY CUSTOMER OUTCOMES CHESNARA | 2021 FINAL RESULTS PRESENTATION 30
Slide 32: Our ESG Strategy and Delivery
OUR ESG STRATEGY AND DELIVERY What have we done What are doing ENVIRONMENTAL: The group supports the UN SDGs and the UN In 2022, our key tasks are: PRI. Movestic is a signatory to both the UN PRI and the UN Global • Launch a fully funded group wide programme to further Compact Principles progress ou
Slide 33: Customer Outcomes
DELIVERY AGAINST STRATEGIC PRIORITIES FINANCIAL OUTCOMES CASH GENERATION SOLVENCY IFRS GROWTH ESG STRATEGY AND DELIVERY CUSTOMER OUTCOMES CHESNARA | 2021 FINAL RESULTS PRESENTATION 32
Slide 34: Customer Outcomes
CUSTOMER OUTCOMES Broader and improved methods of communication Delivering through the pandemic We have enhanced our digital A key focus was ensuring that the offering to ensure that we ongoing needs of customers were communicate with customers in the met Customers manner in which they want, whilst
Slide 35: Areas of Focus, Outlook and Summary
AREAS OF FOCUS, OUTLOOK AND SUMMARY Steve Murray Group Chief Executive Officer CHESNARA | 2021 FINAL RESULTS PRESENTATION 34 34
Slide 36: Areas of Focus
AREAS OF FOCUS • Evaluate further opportunities to optimise the balance sheet, such as Proactive balance sheet reinsurance and hedging management • Options to take some risk onto the balance sheet with material capital diversification benefits • Consider opportunities to achieve a better risk / rewa
Slide 37: Outlook
OUTLOOK Chesnara has delivered cash generation across severe and volatile market conditions in the past and we are confident it can in the future Line of sight to strong cash generation over the next five years Optimistic about our prospects to participate in M&A and we are well positioned to do so.
Slide 38: Strong Cash Generation, Robust Solvency and Growth
STRONG CASH GENERATION, ROBUST SOLVENCY AND GROWTH Clear line of sight to future Strong commercial cash cash generation more than generation of £53m and 3% covering potential future increase in dividend dividend and interest payments Further value to come from Strong and stable solvency at announced
Slide 39: Questions
QUESTIONS CHESNARA | 2021 FINAL RESULTS PRESENTATION 38
Slide 40: Appendices
APPENDICES CHESNARA | 2021 FINAL RESULTS PRESENTATION 39
Slide 41: Appendix 1: An Introduction to Chesnara
APPENDIX 1: AN INTRODUCTION TO CHESNARA WHO WE ARE FINANCIAL KEY METRICS THREE CORE STRATEGIC OBJECTIVES As at 31 December 2021 • Chesnara plc was formed in 2004 and is UK listed on the London Stock Exchange. NETHERLANDS 01 MAXIMISE VALUE FROM • The group is a life assurance and pensions EXISTING BU
Slide 42: Appendix 2: M&A Recent Activity
APPENDIX 2: M&A RECENT ACTIVITY In the second half of 2021, we announced two acquisitions which we expect to complete in the first half of 2022 Sanlam Life and Pensions Robein Leven N.V UK Limited Consideration: £39m Consideration: £13m Discount to EcV: 19% Discount to EcV: 21% FUM: Adding approxima
Slide 43: Appendix 3: Operational Delivery & Management Actions
APPENDIX 3: OPERATIONAL DELIVERY & MANAGEMENT ACTIONS Countrywide Assured Movestic Scildon and Waard Continued to meet the needs of our customers and support our staff during the Covid-19 pandemic Entered into an agreement to purchase Sanlam Life and Pensions UK Limited, Movestic has strengthened it
Slide 44: Appendix 4: Measuring Our Performance
APPENDIX 4: MEASURING OUR PERFORMANCE Throughout the Report & Accounts and FINANCIAL ADDITIONAL METRICS this presentation, we use measures to STATEMENTS assess and report our performance. Solvency II valuation I IFRS net assets Capital requirements (own funds) R The range of measures is broad and So
Slide 45: Appendix 5: Commercial Cash
APPENDIX 5: COMMERCIAL CASH BASE CASH GENERATION: COMMERCIAL CASH DIVISIONAL COMMERCIAL CASH £20.3m GENERATION: £53.0m GENERATION: £58.5m NETHERLANDS UK SWEDEN WAARD SCILDON GROUP TOTAL Base cash generation 27.4 (14.4) 2.9 15.2 (10.8) 20.3 Symmetric adjustment 9.8 16.2 - - - 26.1 With-profits restri
Slide 46: Appendix 6: Tier 2 Debt
APPENDIX 6: TIER 2 DEBT In February 2022, we completed our inaugural Tier 2 debt issuance. The Group has an ‘Insurer Financial Strength Rating’ of A (for Countrywide Assured) and has a Long-term Insurer Default Rating of A-. The Tier 2 Notes were rated BBB- (all ratings were from Fitch). Terms of th
Slide 47: Appendix 7: Asset Analysis
APPENDIX 7: ASSET ANALYSIS BREAKDOWN OF INVESTMENT PORTFOLIO BY ASSET CLASS CREDIT QUALIY OF NON-LINKED & SHAREHOLDER DEBT SECURITIES Total non linked assets of £908m at the end of 2021 Non rated: 1% AAA: 2% Government issued BBB: 15% Corporate issued AA: 15% 394 514 Total value of non- linked asset
Slide 48: Appendix 8: Sensitivities (1 of 2)
APPENDIX 8: SENSITIVITIES (1 of 2) The charts below provide some insight into the potential range of impacts of certain sensitivities that the group is exposed to, covering surplus and economic value Whilst cash generation has not been shown in the diagrams below, the impact of these sensitivities o
Slide 49: Appendix 8: Sensitivities (2 of 2)
APPENDIX 8: SENSITIVITIES (2 of 2) Explanatory notes on the sensitivities on the previous slide are provided below: EcV tends to take the “full force” of adverse conditions whereas solvency surplus is often protected in the short term due to compensating 1 impacts on our required capital. 20% sterli
Slide 50: Appendix 9: Historical Performance
APPENDIX 9: HISTORICAL PERFORMANCE Dec-21 Dec-20 Dec-19 Dec-18 Dec-17 Dec-16 IFRS profit £m (pre-tax) 28.8 24.6 96.1 27.0 89.6 40.7 EcV / EEV profit / (loss) £m (after tax) 1 57.8 (37.6) 104.0 (60.9) 139.5 72.5 EcV / EEV Shareholder equity £m 1 624.2 636.8 670.0 626.1 723.1 602.6 Solvency II ratio (
Slide 51: Disclaimer
Disclaimer This presentation has been issued by Chesnara plc (“Chesnara” or the “Company”) and is being made only to and directed at: (a) persons who have professional experience in matters relating to investments falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Pr
Slide 52: CHESNARA | 2019 FINAL RESULTS PRESENTATION
CHESNARA | 2019 FINAL RESULTS PRESENTATION 51