Chesnara Plc · LSE:CSN
Chesnara — H1 2023 Earnings Presentation
43 slides from Chesnara's earnings presentation, Sep 21, 2023
Slide 1: Chesnara HY 2023 Results
CHESNARA HY 2023 RESULTS 21 September 2023 Continued acquisition momentum drives economic value growth and positive cash generation
Slide 2: Agenda for HY23 Results Presentation
AGENDA FOR HY23 RESULTS PRESENTATION OVERVIEW OF STRATEGIC DELIVERY STEVE MURRAY, GROUP CHIEF EXECUTIVE OFFICER FINANCIAL OUTCOMES, INCLUDING IFRS 17 DAVID RIMMINGTON, GROUP FINANCE DIRECTOR AREAS OF FOCUS, OUTLOOK AND SUMMARY STEVE MURRAY, GROUP CHIEF EXECUTIVE OFFICER PRESENTERS Steve Murray David
Slide 3: Overview of Strategic Delivery
OVERVIEW OF STRATEGIC DELIVERY Steve Murray Group Chief Executive Officer 2
Slide 4: Chesnara continues executing its renewed strategy to deliver growth
CHESNARA CONTINUES EXECUTING ITS RENEWED STRATEGY TO DELIVER GROWTH 1 Delivery of sources of Economic Value growth, 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 framewor
Slide 5: Continued M&A momentum supporting further growth
CONTINUED M&A MOMENTUM SUPPORTING FURTHER GROWTH COMPLETION OF THE ACQUISITION AND INTEGRATION OF CONSERVATRIX IN M&A THE NETHERLANDS ACQUISITION OF A PROTECTION PORTFOLIO FROM CANADA LIFE IN THE UK ON 16 MAY 2023 GROUP COMMERCIAL CASH GENERATION OF £22M STRONG SOLVENCY AT 205%, WELL ABOVE NORMAL OP
Slide 6: Material operational change delivered and sustainability
MATERIAL OPERATIONAL CHANGE DELIVERED OPERATIONAL ACTIONS SIGNED A NEW LONG TERM, STRATEGIC PARTNERSHIP WITH SS&C TECHNOLOGIES IN THE UK WHICH ENHANCES SCALE AND CAPABILITY MOVE TO IFRS 17 REPORTING SUCCESSFULLY DELIVERED TRANSITION AND INTEGRATION ACTIVITY ON CASLP REMAINS ON TRACK WITH CONSERVATRI
Slide 7: Continued progress on integrations and transitions
CONTINUED PROGRESS ON INTEGRATIONS AND TRANSITIONS CASLP ROBEIN LEVEN CONSERVATRIX CANADA LIFE Date of completion April 2022 April 2022 January 2023 May 2023 Day 1 EcV gain £15m £6m £22m(2) £7m Announcement: £9m Announcement: £3m Announcement: £18m Announcement: £7m Discount to EcV(1) 19% 21% 34% 44
Slide 8: Financial Outcomes, including IFRS 17
FINANCIAL OUTCOMES, INCLUDING IFRS 17 David Rimmington Group Finance Director 7
Slide 9: Financial Outcomes: Market context & financial highlights
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 INTERIM RESULTS PRESENTATION 8
Slide 10: Steady market recovery seen in the first half of the year
STEADY MARKET RECOVERY SEEN IN THE FIRST HALF OF THE YEAR EQUITY MARKETS INTEREST RATES (10 YEAR) FTSE FTSE SWEDISH OMX NETHERLANDS 5.00% UK Sweden Dutch ALL SHARE ALL WORLD ALL SHARE AEX 4.50% 4.43% ALL SHARE 4.00% 31 Dec 2022: 4,075 31 Dec 2022: 400 31 Dec 2022: 782 31 Dec 2022: 945 3.50% 3.00% 2.
Slide 11: Macro economic impacts on the Group in line with sensitivities
MACRO ECONOMIC IMPACTS ON THE GROUP IN LINE WITH SENSITIVITIES In 2022, we saw significant market turmoil generating a large economic loss over the course of the year. In the first half of 2023, there has been some market recovery, of which the key impacts are below: IN LINE WITH MACRO CASH GENERATI
Slide 12: Financial highlights
FINANCIAL HIGHLIGHTS HY HY Financial performance 2023 2022 Dividends Dividends per share 8.36p 8.12p Divisional £2.3m £60.1m(3) Base Group £11.1m £21.9m Cash generation(1) Divisional £13.0m £18.6m Commercial Group £21.8m £(3.0)m Profit before tax £16.0m £(54.2)m(6) IFRS(4) CSM(5) movement (new metri
Slide 13: Financial Outcomes: Cash generation
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 INTERIM RESULTS PRESENTATION 12
Slide 14: Continued strong commercial cash generation in H1 2023
CONTINUED STRONG COMMERCIAL CASH GENERATION IN H1 2023 Base cash Commercial cash (includes symmetric adjustment) (excludes symmetric adjustment) Divisional base cash of £2.3m (1)(4) Divisional commercial cash of £13.0m (1)(2)(5) £m £m 2.8 Includes (£7m) local FX impacts Divisional commercial cash 4.
Slide 15: Significant cash reserves to fund future M&A
SIGNIFICANT CASH RESERVES TO FUND FUTURE M&A Chesnara and holding company cash reserves (£m) Reconciliation from FY 22 to HY 23 In addition to this, dividend receipts This covers head of £15m are office overheads expected in H2 (c45%) and acquisition/project costs (c55%) Notes: (1) Cash at bank incl
Slide 16: Strong visibility on sources of future cash
STRONG VISIBILITY ON SOURCES OF FUTURE CASH Sources of future cash generation composition (5 year estimate) Acquisitions(1) The four acquisitions Potential total highlighted on page 6 are future cash expected to add c£13m steady state annual cash generation generation Management Base cash actions(1)
Slide 17: Financial Outcomes: Solvency
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 INTERIM RESULTS PRESENTATION 16
Slide 18: Solvency materially above normal operating range post acquisitions
SOLVENCY MATERIALLY ABOVE NORMAL OPERATING RANGE POST ACQUISITIONS Solvency ratio and surplus Solvency II ratio Reconciliation of movement between FY 22 and HY 23 Conservatrix -9% Canada Life deal +1% Normal operating solvency range: 140% to 160% 155% 156% 152% 197% 205% In Q1 2023, there was a chan
Slide 19: Financial Outcomes: Growth
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 INTERIM RESULTS PRESENTATION 18
Slide 20: EcV growth in H1 following acquisitions and some economic recovery
ECV GROWTH IN H1 FOLLOWING ACQUISITIONS AND SOME ECONOMIC RECOVERY Group EcV (£m) Reconciliation from FY 22 to HY 23 Total EcV growth pre dividends and FX of £61.0m • Acquisition gain of £28.4m: £21.7m from Conservatrix and £6.7m from Canada Life • Operating activities have delivered earnings of £8.
Slide 21: Economic value does not recognise further areas of potential growth
ECONOMIC VALUE DOES NOT RECOGNISE FURTHER AREAS OF POTENTIAL GROWTH Chesnara fan (not drawn to scale) Value created Value driver Impact during H1 2023 1) Risk margin P £0.9m run off 2) Real world P £31.6m returns 3) Operating P £3.9m (inc synergies) 4) Commercial The categories of potential upside P
Slide 22: New business value has seen strong growth compared to 2022
NEW BUSINESS VALUE HAS SEEN STRONG GROWTH COMPARED TO 2022 Commercial VNB (£m) MOVESTIC • Occupational pension market share of 4.2% at June 2023 Total: £6.3m (December 2022 4.1%) 0.7 • Custodian market share of 7.7% at June 2023 (December 2022 9.5%) Total: £4.6m • Improved commercial VNB of £2.0m SC
Slide 23: Financial Outcomes: IFRS
FINANCIAL OUTCOMES MARKET CONTEXT & FINANCIAL HIGHLIGHTS CASH GENERATION SOLVENCY GROWTH IFRS CHESNARA | 2023 INTERIM RESULTS PRESENTATION 22
Slide 24: Our IFRS balance sheet has changed under IFRS 17
OUR IFRS BALANCE SHEET HAS CHANGED UNDER IFRS 17 OUR SPLIT OF INSURANCE AND INVESTMENT CONTRACTS IFRS 4 V IFRS 17 (INC IFRS 9) – 31 DECEMBER 2022 Reconciliation of movement in equity In scope of IFRS 17 42% Investment liabilities Insurance liabilities 58% IMPACT H1 2023 KEY METRICS The transition to
Slide 25: The HY 2023 results are the first to be reported under IFRS 17
THE HY 2023 RESULTS ARE THE FIRST TO BE REPORTED UNDER IFRS 17 Summary income statement HY HY £m 2023 2022 • We have delivered positive insurance profits in the period Net insurance service result 9.5 3.2 • Increase in investment returns primarily from improved Net investment result 25.0 (46.2) equi
Slide 26: Areas of Focus, Outlook and Summary
AREAS OF FOCUS, OUTLOOK AND SUMMARY Steve Murray Group Chief Executive Officer 25
Slide 27: Chesnara continues to build a strong base on which to grow
CHESNARA CONTINUES TO BUILD A STRONG BASE ON WHICH TO GROW MAXIMISE THE VALUE ACQUIRE LIFE AND ENHANCE VALUE FROM EXISTING PENSION THROUGH PROFITABLE BUSINESS BUSINESSES NEW BUSINESS • Over 1 million policies post • Two transactions delivered • Continued strong market completion of Conservatrix in t
Slide 28: UK and European closed book M&A activity continues to be resilient
UK AND EUROPEAN CLOSED BOOK M&A ACTIVITY CONTINUES TO BE RESILIENT KEY DRIVERS EXAMPLES OF SIGNIFICANT RECENT M&A ACTIVITY IN THE UK AND EUROPE Operational simplicity Disposals of non-core products to Sale of Canada Life’s release capital Sale of portfolio from Sale of the run-off individual onshore
Slide 29: Chesnara is well positioned to navigate the current environment
CHESNARA IS WELL POSITIONED TO NAVIGATE THE CURRENT ENVIRONMENT CHESNARA’S KEY STRENGTHS ✓ StrongOUR record KEY of customer service and governance STRENGTHS ✓ Comfortable managing wide range of books including unit linked, life insurance, with profit and individual annuities ✓ Positive and long-stan
Slide 30: We are committed to becoming a sustainable Chesnara
WE ARE COMMITTED TO BECOMING A SUSTAINABLE CHESNARA Our sustainability commitments: Our targets: Our 2023 plans: Baselining our financed emissions and creating our transition plan to be a net 1 zero group To support a sustainable future, including our net zero transition plans Establishing our frame
Slide 31: Continued acquisition momentum drives EcV growth & cash generation
CONTINUED ACQUISITION MOMENTUM DRIVES ECV GROWTH & CASH GENERATION Strong divisional commercial Improved new business profits cash generation of £20m(1) of £6m Strong EcV growth of £61m(2) Multiple value levers available with all areas of the Chesnara with a positive outlook for fan contributing pos
Slide 32: Questions
QUESTIONS 31
Slide 33: Appendices
APPENDICES 32
Slide 34: 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 30 June 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 European
Slide 35: 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 by product 4% 5% Unit linked 2% 4% Products with guarantees 3% UK Other 7% 91% By division 1% Unit linked Sweden Other 99% 84% 5% 8% 5% Unit linked Products with guarantees Unit linked Products with guarantees No
Slide 36: 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* of £11bn 14% Linked UK Non linked FUM: £4.1bn £2bn (18%) 86% 2% By division Excluding £0.1bn of assets held in Chesnara Sweden Linked FUM: £4.0bn Non linked £9bn (82%) 98% 46% Linked Netherlands Linked Non lin
Slide 37: 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 BY ASSET CLASS CREDIT QUALITY OF NON-LINKED & SHAREHOLDER DEBT SECURITIES Total non linked assets of £2bn at the end of June 2023 Non rated: 2% AAA: 1% £bn 0.3 AA: 14% BBB: 25% 0.6 Government bonds
Slide 38: Appendix 2: Dividend growth
APPENDIX 2: DIVIDEND GROWTH Dividend History (pence per share) 23.3 22.6 21.9 21.3 15.2 20.7 14.7 20.1 14.3 19.5 13.9 18.9 13.5 18.4 13.1 17.9 12.7 17.4 12.3 16.9 12.0 16.4 11.6 15.6 16.0 11.3 15.1 10.9 10.6 10.1 10.3 13.1 9.9 12.5 11.9 8.1 7.6 7.1 8.4 8.1 8.4 7.7 7.9 7.2 7.4 6.6 6.8 7.0 6.1 6.3 6.4
Slide 39: Appendix 3: Commercial cash
APPENDIX 3: COMMERCIAL CASH DIVISIONAL BASE CASH DIVISIONAL BASE CASH COMMERCIAL CASH COMMERCIAL CASH GENERATION: £11.1m GENERATION: £2.3m GENERATION: £21.8m GENERATION: £13.0m (£20.0m excluding FX) NETHERLANDS DIVISIONAL GROUP £m UK SWEDEN TOTAL TOTAL ADJUSTMENTS WAARD SCILDON Base cash generation
Slide 40: Appendix 4: Sensitivities (1 of 2)
APPENDIX 4: 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 4: Sensitivities (2 of 2)
APPENDIX 4: 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