Chesnara to buy HSBC Life UK in £260m deal

(Sharecast News) - Chesnara announced an agreement to acquire HSBC Life UK from HSBC on Thursday, for £260m, in a move that it said would materially expand its scale in the UK life insurance market. The London-listed firm said the transaction, which remained subject to regulatory approval and was expected to complete in early 2026, would be funded through a combination of existing cash resources, an amended revolving credit facility, and a fully underwritten £140m rights issue.

It said the acquisition would add around £4bn of assets under administration and approximately 454,000 policies, increasing Chesnara's total assets under administration to £18bn and customer base to roughly 1.4 million.

The deal was expected to generate over £800m of incremental lifetime cash, including £140m within the first five years post-completion.

Chief executive Steve Murray described the deal as "a material step up in scale for Chesnara Group.

"HSBC Life UK is a high-quality business operating in products that we know well and is capable, under our ownership, of generating substantial cash flows for many years," he said.

"This highly accretive transaction will allow us to build on our strong, 20-year track record of uninterrupted dividend growth."

The acquisition would be financed using £55m of Chesnara's internal cash, a £65m drawdown from its newly upsized £150m revolving credit facility, and the rights issue.

It said the fundraising would be offered at 176p per share on the basis of 10 new shares for every 19 existing shares - a 40% discount to the previous day's closing price.

Chesnara said the acquisition was attractively priced at 83% of HSBC Life UK's eligible own funds, which stood at £314m at the end of 2024.

On a pro forma basis, Chesnara's Solvency II surplus would rise to £361m, though the solvency coverage ratio would decline to 169% from 203%, remaining above the company's target range of 140% to 160%.

The company said it anticipated a 6% uplift in both its final 2025 and interim 2026 dividends, accelerating its historical 3% per annum increase.

Chesnara said it expected further value creation from operating efficiencies and capital optimisation, including the migration of policy administration to SS&C Technologies and potential benefits from reinsurance and capital synergies.

If the acquisition did not proceed, Chesnara said it would use the rights issue proceeds for alternative acquisitions or return the funds to shareholders.

The board unanimously backed the deal, calling it "strategically compelling" and a strong fit with Chesnara's growth model.

It said it would also position the company for potential inclusion in the FTSE 250 index due to its enlarged scale and liquidity.

At 0937 BST, shares in Chesnara were down 0.56% at 291.85p.

Reporting by Josh White for Sharecast.com.