Chesnara agrees £260m HSBC Life acquisition

Written by Adam Cadle

03/07/2025

European life and pensions consolidator, Chesnara, has announced that it has agreed to acquire HSBC Life (UK) from HSBC Bank plc for a total consideration of £260m.

The acquisition is Chesnara's largest transaction to date, with approximately £4bn of assets under administration (AUA) and approximately 454,000 policies being acquired by Chesnara, creating a combined group with approximately £18bn of total AUA and approximately 1.4 million policies.

The acquisition is also expected to result in Chesnara's inclusion in the FTSE 250 index and further bolster the group's position as one of the leading life and pensions consolidators.

The total consideration for the acquisition of £260m represents 83% of HSBC Life (UK)'s Eligible Solvency II Own Funds as at 31 December 2024.

Chesnara said that it has used an efficient financing structure for the deal, utilising £55m of its own cash resources; £65m from the group's Amended RCF which is currently completely undrawn; and a fully underwritten rights issue to raise gross proceeds of £140m from its shareholders.

In the medium term, the group's leverage ratio is expected to reduce further as Chesnara pays down the Amended RCF.

However, with lifetime cash generation in excess of £800m, achieved through the delivery of future profits and runoff of capital requirements over time, the acquisition is expected to enhance the future cash generation of the group.

In particular, the group estimated that around £140m of cash generation will emerge during the first five years post-acquisition over the period 2025 - 2029, with "significant" cash generation also expected in future years, enhancing the sustainability and longevity of the Group's cash generation.

Supported by the strong financial profile of the acquisition, the group is also predicting an increase in its dividend trajectory, with the final FY25 dividend and interim FY26 dividend is set to be increased by 6%, representing a one-year acceleration in the group's recent historic track record of 3% per annum increase.

The acquisition is also expected to create value for shareholders through operating efficiencies from the migration of the policy administration of the HSBC Life (UK) policies to the group's strategic outsourcing partner SS&C Technologies Limited ("S&C).

This activity will be part of the ongoing migration of the policy administration for Chesnara's UK business from the existing range of outsourced providers to SS&C.

In addition to this, the deal is intended to enable incremental value creation for shareholders through management actions and capital synergies including, for example, the transfer of HSBC Life (UK) to a single UK entity over time, mass lapse reinsurance, FX hedging and capital diversification benefits.

Commenting on the acquisition, Chesnara chief executive officer, Steve Murray, said: “The proposed acquisition of HSBC Life (UK) represents 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.

"This highly accretive transaction will allow us to build on our strong, 20-year track record of uninterrupted dividend growth. It is also a further example of a major financial institution choosing to work with us, enhancing our reputation as a leading life and pensions consolidator.

"We are continuing to see a strong M&A pipeline across our group which we are well-positioned to execute on.

"We look forward to welcoming HSBC Life (UK) policyholders and the HSBC Life (UK) team to Chesnara and working closely with HSBC Bank plc to ensure the smooth transition of the business into the Group.”

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