LONDON: Chesnara plc announced Thursday it has agreed to acquire HSBC Life (UK) Limited from HSBC Bank plc for £260 million, in a transaction that marks the UK life insurer’s largest acquisition to date.
The deal is expected to significantly expand Chesnara’s scale in the United Kingdom, adding approximately £4 billion in assets under administration and more than 450,000 policies. HSBC Life (UK), a specialist in life protection and investment bonds, held £314 million in eligible own funds as of Dec. 31, 2024.
Chesnara will finance the purchase through a combination of £55 million in internal cash, a £65 million drawdown from its newly expanded £150 million revolving credit facility, and a £140 million fully underwritten rights issue priced at 176 pence per share.
“This highly accretive transaction will allow us to build on our 20-year track record of uninterrupted dividend growth,” said CEO Steve Murray. “HSBC Life (UK) is a high-quality business with products we know well. Under our ownership, it is capable of generating substantial cash flows for many years.”
The acquisition is expected to generate more than £800 million in lifetime cash and over £140 million in the first five years following completion, which is scheduled for early 2026, subject to regulatory approval. Chesnara anticipates a 6% increase in dividends for FY25 and interim FY26, supported by the enhanced cash trajectory.
The insurer also plans to migrate HSBC Life’s policy administration to its strategic outsourcing partner SS&C Technologies, pursue further capital synergies including a potential Part VII transfer, and explore new business growth from the acquired product suite.
Chesnara expects the transaction will improve its eligibility for FTSE 250 index inclusion and bolster its position as a leading life and pensions consolidator. On a pro forma basis, the group’s Solvency II surplus would rise to £361 million and the coverage ratio would remain well within its operating range.