Chesnara Plc · LSE:CSN
Chesnara — FY2023 Earnings Presentation
43 slides from Chesnara's earnings presentation, Mar 28, 2024
Slide 1: Chesnara 2023 Results
28 March 2024 CHESNARA 2023 RESULTS Continued strong cash generation with positive outlook for further M&A
Slide 2: Agenda for our 2023 results presentation
AGENDA FOR OUR 2023 RESULTS PRESENTATION OVERVIEW OF STRATEGIC DELIVERY STEVE MURRAY, GROUP CHIEF EXECUTIVE OFFICER FINANCIAL OUTCOMES DAVID RIMMINGTON, GROUP FINANCE DIRECTOR AREAS OF FOCUS, OUTLOOK AND SUMMARY STEVE MURRAY, GROUP CHIEF EXECUTIVE OFFICER Steve Murray David Rimmington Group Chief Ex
Slide 3: Overview of strategic delivery
Steve Murray Group Chief Executive Officer OVERVIEW OF STRATEGIC DELIVERY 2
Slide 4: Chesnara continues executing its renewed strategy to deliver growth
CHESNARA CONTINUES EXECUTING ITS RENEWED STRATEGY TO DELIVER GROWTH 1 Multiple levers available to grow Economic Value, supporting sustainable long-term cash generation and shareholder dividends 2 Strong Solvency II position with high resilience to market volatility Disciplined yet flexible M&A fram
Slide 5: M&A momentum supporting further growth
M&A MOMENTUM SUPPORTING FURTHER GROWTH COMPLETION OF THE ACQUISITION AND INTEGRATION OF CONSERVATRIX IN THE NETHERLANDS M&A ACQUISITION OF A PROTECTION PORTFOLIO FROM CANADA LIFE IN THE UK WITH INTEGRATION PROGRESSING WELL COMMERCIAL CASH GENERATION OF £53M ECV GROWTH WITH CLOSING ECV PER SHARE OF 3
Slide 6: Significant operational delivery achieved in the year
SIGNIFICANT OPERATIONAL DELIVERY ACHIEVED IN THE YEAR OPERATIONAL & SUSTAINABILITY ACTIVITY PART VII TRANSFER OF SANLAM BOOK COMPLETED IN DECEMBER WORK PROGRESSING WELL ON THE MIGRATION OF POLICY ADMINISTRATION TO SS&C TECHNOLOGIES IN THE UK MOVE TO IFRS 17 REPORTING SUCCESSFULLY DELIVERED ON TRACK
Slide 7: Financial outcomes
David Rimmington Group Finance Director FINANCIAL OUTCOMES 6
Slide 8: Market context & financial highlights
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 FULL YEAR RESULTS PRESENTATION 7
Slide 9: Macro slowly returning to normal but remains volatile
MACRO SLOWLY RETURNING TO NORMAL BUT REMAINS VOLATILE EQUITY MARKETS INTEREST RATES (10 YEAR) FTSE FTSE SWEDISH OMX NETHERLANDS Reference is for the end of the quarter, therefore, Q4 2023 5.00% is the rate at 31 December 2023 etc. ALL SHARE ALL WORLD ALL SHARE AEX ALL SHARE 4.00% 31 Dec 2023: 4,232
Slide 10: H2 2023 saw limited recovery following a more positive first half
H2 2023 SAW LIMITED RECOVERY FOLLOWING A MORE POSITIVE FIRST HALF 2023 has been a tale of two halves, with initial reasonable market recovery from the losses seen in 2022 slowing in the second half of the year. IN LINE WITH MACRO CASH GENERATION ECV SENSITIVITIES?(1) With SA(2): Without SA(2): Equit
Slide 11: Financial highlights
FINANCIAL HIGHLIGHTS CASH GENERATION ECV SOLVENCY II Group base £32.5m Closing EcV £524.7m Group SII ratio 205% FY 2022: £82.7m FY 2022: 197% FY 2022: £511.7m Group commercial £53.0m EcV earnings(1) £59.1m Absolute surplus £351.0m FY 2022: £46.6m FY 2022: £(84.7)m FY 2022: £298.4m GROWTH IFRS(2) BAL
Slide 12: Cash generation
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 FULL YEAR RESULTS PRESENTATION 11
Slide 13: Continued strong commercial cash generation over 2023
CONTINUED STRONG COMMERCIAL CASH GENERATION OVER 2023 Base cash generation Commercial cash generation Divisional base cash of £50.1m (1)(2) Divisional commercial cash of £72.8m (1)(3) £m £m 24.0 UK Sweden Netherlands 0.3 48.5 Group base cash of £32.5m (4) Group commercial cash of £53.0m (3)(4) Inclu
Slide 14: Significant cash reserves to fund future M&A
SIGNIFICANT CASH RESERVES TO FUND FUTURE M&A Chesnara and holding company cash reserves(1) (£m) Reconciliation from FY 22 to FY 23 We expect divisional dividends of £50m in 2024(2) Notes: (1) Chart above reflects physical cash balances at respective dates and includes cash held as collateral (2) Fin
Slide 15: Strong visibility on sources of future cash
STRONG VISIBILITY ON SOURCES OF FUTURE CASH Sources of future cash generation composition (5 year estimate) Potential total Acquisitions(1) future cash generation Management Group base cash actions generation Real world investment returns over & above risk Five year free rates dividend and debt serv
Slide 16: Solvency
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 FULL YEAR RESULTS PRESENTATION 15
Slide 17: Material solvency headroom provides M&A capacity
MATERIAL SOLVENCY HEADROOM PROVIDES M&A CAPACITY Solvency II position Including a reconciliation of movement between FY 22 and FY 23 Normal operating solvency range: 140% to 160% Conservatrix -9%(1) Canada Life deal +1% Change in the reported value of the T2 loan from face value (£200m) to fair valu
Slide 18: Growth
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 FULL YEAR RESULTS PRESENTATION 17
Slide 19: EcV has grown even after FX impacts and payment of the dividend
ECV HAS GROWN EVEN AFTER FX IMPACTS AND PAYMENT OF THE DIVIDEND Group EcV (£m) Reconciliation from FY 22 to FY 23 £21.7m from Conservatrix & £6.7m from Canada Life Total EcV growth pre dividends and FX of £59.1m • Operating variances in the period relate to strengthening of assumptions, including in
Slide 20: Pre FX & dividends, we generated 12% EcV growth over 2023
PRE FX & DIVIDENDS, WE GENERATED 12% ECV GROWTH OVER THE COURSE OF 2023 THE CHESNARA FAN Not drawn to scale Area of the fan 2023 result M&A £28m Commercial VNB(1) £10m Synergies £24m Real-world returns £43m Risk margin run-off £1m Operating variances Debt servicing costs 31 Dec 2022: £512m 31 Dec 20
Slide 21: New business has remained resilient despite market pressures
DESPITE MARKET PRESSURES OVER 2023, NEW BUSINESS HAS REMAINED RESILIENT Group Commercial VNB (£m) MOVESTIC 10.1 Primarily sells brokered occupational 9.5 pensions in addition to custodian and risk products. 1.8 For the second year in a row, been awarded ‘Unit-linked Insurance Company of the Year’ fo
Slide 22: IFRS
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 FULL YEAR RESULTS PRESENTATION 21
Slide 23: Our IFRS capital base has increased
OUR IFRS CAPITAL BASE HAS INCREASED Movement in our IFRS capital base (£m) IFRS capital base = net equity + CSM (net of reinsurance and tax) CSM release nets to nil IFRS 6.1 IFRS 57.2 capital capital 19.8 0.9 base: base: (3.0) 469.2 (11.4) 487.4 9.4 (9.5) 3.9 (19.8) (35.4) Net Net CSM CSM Total CSM
Slide 24: Areas of focus, outlook & summary
Steve Murray Group Chief Executive Officer AREAS OF FOCUS, OUTLOOK & SUMMARY 23
Slide 25: Chesnara has a strong base on which to grow
CHESNARA HAS A STRONG BASE ON WHICH TO GROW MAXIMISE THE VALUE ACQUIRE LIFE AND ENHANCE VALUE FROM EXISTING PENSION THROUGH PROFITABLE BUSINESS BUSINESSES NEW BUSINESS • c1 million policies post completion • Two transactions delivered in • Continued strong market share of Conservatrix and addition o
Slide 26: UK and European closed book M&A activity continues to be vibrant
UK AND EUROPEAN CLOSED BOOK M&A ACTIVITY CONTINUES TO BE VIBRANT KEY DRIVERS EXAMPLES OF SIGNIFICANT RECENT M&A ACTIVITY IN THE UK AND EUROPE Operational simplicity Disposals of non-core products to release capital Sale of Scottish Widows Sale of AIG’s UK Sale of portfolio from bulk annuity portfoli
Slide 27: Chesnara is well positioned to execute further M&A
CHESNARA IS WELL POSITIONED TO EXECUTE FURTHER M&A CHESNARA’S KEY STRENGTHS FINANCING CONSIDERATIONS ✓ Strong record of customer service and governance SOLVENCY Normal operating range of 140% to 160% ✓ OURmanaging Comfortable KEY STRENGTHS wide range of books including unit linked, life insurance, w
Slide 28: We are committed to becoming a sustainable Chesnara
WE ARE COMMITTED TO BECOMING A SUSTAINABLE CHESNARA Our sustainability commitments: Our targets: Our 2023 activity: Baselining our financed emissions and creating our net zero transition plan 1 ✓ Baselined our financed emissions To support a sustainable ✓ Set our initial interim targets to reduce th
Slide 29: Continued strong cash generation with positive outlook for more M&A
CONTINUED STRONG CASH GENERATION WITH POSITIVE OUTLOOK FOR MORE M&A Strengthened senior Strong commercial cash leadership team and new generation of £53m strategic partnership with SS&C EcV growth of £59m(1) Two deals in the period and positive acquisition pipeline Chesnara Strong and resilient solv
Slide 30: Questions
QUESTIONS 29
Slide 31: Appendices
APPENDICES 30
Slide 32: Appendix 1: An introduction to Chesnara (1 of 4) - Background
APPENDIX 1: AN INTRODUCTION TO CHESNARA (1 OF 4) - BACKGROUND WHO WE ARE FINANCIAL KEY METRICS THREE CORE STRATEGIC OBJECTIVES 31 December 2023 • Chesnara plc was formed in 2004 and is listed on the London Stock Exchange. Group Solvency II Ratio: 205% 01 MAXIMISE THE VALUE FROM • The group is a Euro
Slide 33: Appendix 1: An introduction to Chesnara (2 of 4) – Product split
APPENDIX 1: AN INTRODUCTION TO CHESNARA (2 OF 4) – PRODUCT SPLIT Split of Group SII BEL(1) by product Divisional split 4% 5% 4% Unit linked 2% 3% Products with guarantees UK 6% Other 91% 1% Unit linked Sweden Other 99% 85% 5% 8% 5% Unit linked Products with guarantees 10% Netherlands 52% Non-linked
Slide 34: Appendix 1: An introduction to Chesnara (3 of 4) – FUM split
APPENDIX 1: AN INTRODUCTION TO CHESNARA (3 OF 4) – FUM SPLIT Split of our total group FUM(1) of £11.5bn Divisional split 14% Linked UK Non-linked FUM: £4.2bn £2.0bn (17%) 86% 2% Linked Sweden Non-linked FUM: £4.4bn £9.5bn (83%) 98% 45% Linked Netherlands Non-linked FUM: £2.9bn Linked Non-linked 55%
Slide 35: Appendix 1: An introduction to Chesnara (4 of 4) – Non-linked assets
APPENDIX 1: AN INTRODUCTION TO CHESNARA (4 OF 4) – NON-LINKED ASSETS Breakdown of investment portfolio Credit quality of our bonds £bn 0.1 % of total 5% 0.3 11% 28% 0.7 Total non-linked Total value of bonds assets of £2bn at (government & corporate 0.4 the end of 2023 issued): £1.2bn 27% AAA Governm
Slide 36: Appendix 2: Dividend growth
APPENDIX 2: DIVIDEND GROWTH Dividend history (pence per share) Interim Final 24.0 23.3 22.6 15.6 21.9 15.2 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 8.1 8.4 7.7 7.9 7.2 7.4 6.8
Slide 37: Appendix 3: Commercial cash
APPENDIX 3: COMMERCIAL CASH DIVISIONAL BASE CASH DIVISIONAL BASE CASH COMMERCIAL CASH COMMERCIAL CASH GENERATION: £32.5m GENERATION: £50.1m GENERATION: £53.0m GENERATION: £72.8m CENTRAL DIVISIONAL £m UK SWEDEN NETHERLANDS ITEMS & TOTAL TOTAL ADJUSTMENTS Base cash generation 45.0 (7.0) 12.1 50.1 (17.
Slide 38: Appendix 4: Solvency deeper dive
APPENDIX 4: SOLVENCY DEEPER DIVE Solvency position (FY 2021 to FY 2023) SII ratio: 205% SII ratio: 197% SII ratio: 152% T2 & T3: £166m T2 & T3: Absolute £153m surplus: Absolute £351m surplus: Absolute £191m surplus: £298m Available own funds: Available £558m own funds: Available £518m own funds: SCR
Slide 39: Appendix 5: IFRS summary group consolidated income statement
APPENDIX 5: IFRS Summary group consolidated income statement £m FY 2023 FY 2022 Net insurance result is a small loss underpinned by gains from the release of the CSM and Risk Adjustment offset by losses from Net insurance service result (5.1) 13.3 a combination of experience and loss component impac
Slide 40: Appendix 6: Sensitivities (1 of 2)
APPENDIX 6: 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 41: Appendix 6: Sensitivities (2 of 2)
APPENDIX 6: SENSITIVITIES (2 of 2) Explanatory notes on the sensitivities on the previous slide are provided below: 20% sterling appreciation/depreciation: A material sterling appreciation reduces the value of surplus in our overseas divisions and any overseas 1 investments in our UK entities, howev
Slide 42: 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 43: Chesnara | 2019 Final Results Presentation
CHESNARA | 2019 FINAL RESULTS PRESENTATION 42