TIDMCSN
RNS Number : 6650X
Chesnara PLC
31 August 2022
31 August 2022
LEI Number: 213800VFRMBRTSZ3SJ06
Chesnara plc
("Chesnara" or "the Company")
ACQUISITION MOMENTUM, CASH GENERATION AND STRONG SOLVENCY
SUPPORT 3% GROWTH IN INTERIM DIVID
Chesnara reports its 2022 half year results. Key highlights
are:
-- Completion of the Sanlam Life & Pensions and Robein Leven transactions
-- Proposed acquisition of Conservatrix's insurance portfolio in the Netherlands
-- Positive divisional commercial cash generation of GBP18.6m
-- Strong solvency of 195%, above usual 140-160% operating range
-- Economic value ("EcV") of GBP526.7m (351p per share)
-- 3% increase to the interim dividend to 8.12p per share
Commenting on the results, Steve Murray, Group CEO, said:
"The two acquisitions we completed in April and the recently
announced acquisition of Conservatrix's insurance portfolio in July
show we have real momentum behind our acquisition strategy. The
wider business has performed robustly despite the high level of
market volatility. We retain a strong and resilient solvency
position with substantial cash balances at the holding company
level, supporting our continued track record of growing our
dividend. We remain optimistic about our ability to participate in
future M&A and continue to be highly confident in our ability
to finance and execute such transactions on attractive terms for
both vendors and our shareholders."
A half year results presentation is being held at 9:30am on 31
August 2022 - participants can register here .
Further details on the financial results are as follows:
2022 HALF YEAR FINANCIAL AND STRATEGIC HIGHLIGHTS
CASH GENERATION AND DIVIDS - 18 YEARS OF DIVID GROWTH
-- Total divisional cash generation (1) for HY 2022 was GBP60.1m (HY 2021: GBP11.5m).
-- Divisional commercial cash(1) generation of GBP18.6m in HY
2022 despite volatile market conditions.
-- The results during the year to date, combined with the
Group's balance sheet strength, support a further year of dividend
growth. The Board has declared a 2022 interim dividend of 8.12p per
share (HY 2021 interim dividend of 7.88p), which is a 3% increase
compared to HY 2021 and extends the period of uninterrupted
dividend growth to 18 years.
FINANCIAL RESILIENCE - WELL POSITIONED FOR FUTURE M&A
-- Solvency II ratio of 195% as 30 June 2022 (31 December 2021:
152%), above our normal operating range of between 140-160%. The
increase has been driven in part by the issue of GBP200m of Tier 2
subordinated debt in February 2022.
-- Cash balances at Group holding companies increased over the
period to GBP155.4m (31 December 2021: GBP46.1m), providing
resources of over GBP100m for future acquisitions and to support
the dividend strategy.
-- Estimated Fitch leverage ratio(2) of 35.1% as at 30 June 2022
(31 December 2021: 6.4%) has increased as a result of the GBP200m
Tier 2 debt issuance.
DELIVERING VALUE - REVITALISED STRATEGY
-- The Sanlam Life & Pensions and Robein Leven transactions
completed in April 2022, adding further scale to the Group's UK and
Dutch businesses respectively and increasing expected annual steady
state cash generation by GBP6m per annum.
-- The Group also announced the acquisition of the insurance
portfolio of Conservatrix in the Netherlands in July, with the
transaction expected to double Waard's steady state cash generation
to GBP8m per annum.
-- Commercial new business profit(3) of GBP4.6m in HY 2022 (HY 2021: GBP6.6m).
-- In line with our FY 2021 sensitivities, Economic Value
("EcV") of GBP526.7m (31 December 2021: GBP624.2m) has reduced over
the year to date due to economic conditions, including the fall in
equity markets, partly offset by the positive impacts of the
acquisitions of Sanlam Life & Pensions and Robein Leven.
-- Multiple sources of growth create a long-term commercial
value which is significantly in excess of the reported Economic
Value.
IFRS PRE-TAX PROFITS
-- IFRS pre-tax losses were GBP104.6m in HY 2022 (HY 2021 IFRS
pre-tax profits: GBP20.8m), driven by adverse investment
conditions.
DIVID DETAILS
-- The interim dividend of 8.12p per share is expected to be
paid on 21 October 2022. The ordinary shares will be quoted
ex-dividend on the London Stock Exchange as of 8 September 2022.
The record date for eligibility for payment will be 9 September
2022.
ANALYST PRESENTATION
-- A presentation for analysts will be held at 9.30am on 31
August 2022 at the offices of Panmure Gordon & Co, One New
Change, London, EC4M 9AF which will be available to join online. A
replay will subsequently be posted to the corporate website at
www.chesnara.co.uk.
-- To join the webcast, please register using the following link here .
Investor Enquiries
Sam Perowne
Head of Strategic Development & Investor Relations
Chesnara plc
E - sam.perowne@chesnara.co.uk
Media Enquiries
Roddy Watt
Director, Capital Markets
FWD
T - 020 7280 0651 / 07714 770 493
E - roddy.watt@fwdconsulting.co.uk
Notes to Editors
Chesnara is a European life and pensions consolidator listed on
the London Stock Exchange. It administers approximately one million
policies and operates as Countrywide Assured and Sanlam Life &
Pensions in the UK, as The Waard Group and Scildon in the
Netherlands, and as Movestic in Sweden.
Following a three pillar strategy, Chesnara's primary
responsibility is the efficient administration of its customers'
life and savings policies, ensuring good customer outcomes and
providing a secure and compliant environment to protect
policyholder interests. It also adds value by writing profitable
new business in Sweden and the Netherlands and by undertaking
value-adding acquisitions of either companies or portfolios.
Consistent delivery of the Company strategy has enabled Chesnara
to increase its dividend for 18 years in succession. Further
details are available on the Company's website
(www.chesnara.co.uk).
Notes
Note 1 Divisional cash generation represents the cash generated
by the operating divisions of Chesnara (UK, Sweden and the
Netherlands), exclusive of group level activity.
Commercial cash generation is used as a measure of assessing how
much dividend potential has been generated, subject to ensuring
other constraints are managed. It excludes the impact of technical
adjustments, modelling changes and corporate acquisition activity;
representing the group's view of the Commercial cash generated by
the business. A comparative is not presented as a commercial cash
calculation was not produced for HY 2021.
Note 2 The estimated Fitch leverage ratio is a financial measure
that demonstrates the degree to which the company is funded by debt
financing versus equity capital, presented as a ratio. It is
defined as debt divided by debt plus equity, as measured under
IFRS.
Note 3 Commercial new business profit is a more commercially
relevant measure of new business profit than that recognised
directly under the Solvency II regime, allowing for a modest level
of return, over and above risk-free, and exclusion of the
incremental risk margin Solvency II assigns to new business. This
provides a fair commercial reflection of the value added by new
business operations and is more comparable with how new business is
reported by our peers, improving market consistency.
The Board approved this statement on 30 August 2022.
CAUTIONARY STATEMENT
This document may contain forward-looking statements with respect to
certain plans and current expectations relating to the future financial
condition, business performance and results of Chesnara plc. By their
nature, all forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances that are beyond
the control of Chesnara plc including, amongst other things, UK domestic,
Swedish domestic, Dutch domestic and global economic and business conditions,
market-related risks such as fluctuations in interest rates, currency
exchange rates, inflation, deflation, the impact of competition, changes
in customer preferences, delays in implementing proposals, the timing,
impact and other uncertainties of future acquisitions or other combinations
within relevant industries, the policies and actions of regulatory
authorities, the impact of tax or other legislation and other regulations
in the jurisdictions in which Chesnara plc and its subsidiaries operate.
As a result, Chesnara plc's actual future condition, business performance
and results may differ materially from the plans, goals and expectations
expressed or implied in these forward-looking statements.
HIGHLIGHTS
GROUP CASH GENERATION (exc. acquisition impact) GBP21.9 M SIX
MONTHSED 30 JUNE 2021 GBP5.4 M
DIVISIONAL CASH GENERATION GBP60.1 M SIX MONTHSED 30 JUNE 2021
GBP11.5 M
Positive cash generation continued in the first half of 2022
with group cash generation of GBP21.9m (excluding the day 1 impact
of the two acquisitions completed in the period), which includes
GBP60.1m cash generation from our divisions. These results have
benefitted from the positive impact of the symmetric adjustment
(which has been beneficial as a result of falling equity prices
during the period).
GROUP SOLVENCY 195% 31 DECEMBER 2021: 152%
The group solvency improvement is largely due to the impact of
the Tier 2 debt raised, being significantly higher than the strains
from the acquisitions completed in the period. Looking through
these transaction impacts, the underlying solvency has increased by
10%.
FUNDS UNDER MANAGEMENT GBP11.2 BN 31 DECEMBER 2021: GBP9.1
BN
FuM growth since the start of the year has been primarily
delivered through our two completed acquisitions. Volatile economic
conditions impacted asset values which has had an adverse impact on
FuM.
ECONOMIC VALUE GBP526.7 M 31 DECEMBER 2021 GBP624.2 M
The reduction in EcV is largely driven by material falls in
equity markets. Other factors include the impact of dividend
distributions (GBP22.1m) and acquisitions (EcV gains of
GBP13.9m).
ECONOMIC VALUE EARNINGS GBP(89.6) M SIX MONTHSED 30 JUNE 2021
GBP38.5 M
The year-on-year swing is predominantly due to changing economic
conditions.
COMMERCIAL NEW BUSINESS PROFIT GBP4.6 M SIX MONTHSED 30 JUNE
2021 GBP6.6 M
Profits from Scildon remain stable but challenging equity market
conditions in Sweden have had a negative impact on their new
business result.
IFRS PRE-TAX LOSS GBP(104.6) M SIX MONTHSED 30 JUNE 2021 GBP20.8
M
The result contains losses arising from economic conditions of
GBP105.1m (six months ended 30 June 2021: GBP7.4m). Our reserving
approach means that the result bears the full impact of interest
rate increases on asset values but no credit is recognised for the
associated reduction in liabilities.
IFRS TOTAL COMPREHENSIVE INCOME GBP(66.5) M SIX MONTHSED 30 JUNE
2021 GBP1.9 M
There is minimal foreign exchange impact in the period compared
(six months ended 30 June 2021: loss of GBP23.9m). Total
comprehensive income benefits from GBP36.4m of tax adjustments (6
months ended 30 June 2021: GBP3.0m loss).
INTERIM DIVID INCREASED FOR THE 18TH CONSECUTIVE YEAR
Increase in interim dividend of 3% to 8.12p per share (2021:
7.88p interim and 14.72p final) supported by strong underlying
commercial cash generation from our business units. The two
completed acquisitions and one recently announced acquisitions are
expected to positively support future cash generation.
2022 HAS SEEN VOLATILE ECONOMIC CONDITIONS WITH RISING INTEREST
RATES, FALLING EQUITY MARKETS AND INFLATIONARY PRESSURE
The financial results have been heavily impacted by the economic
conditions in the first half of 2022. Conflict in Ukraine and
uncertainty in financial markets has been reflected in falling
equity values and rising interest rates which, coupled with the
impact of inflationary pressures, has led to negative investment
returns and economic losses across the operating divisions. The
impact of these economic factors has been reflected, to varying
degrees, across all of our financial metrics.
THE GROUP CONTINUES TO EXPAND THROUGH M&A
During the first half of 2022 we completed the two acquisitions
announced late in 2021 and announced a further acquisition in the
Netherlands. The acquisitions of Sanlam Life & Pensions (UK)
Limited (SLP) and Robein Leven in the Netherlands, both completed
successfully during the second quarter, delivering a combined c9%
uplift in policies within the group portfolio. Work is due to
commence on delivering the transfer of the respective businesses
into the principal operating companies of the UK (CA plc) and Waard
Group (Waard Leven).
Expansion in the Netherlands continues within the Waard Group,
following the announcement of the acquisition of the insurance
portfolio of Conservatrix NV, expected to complete later in 2022
subject to regulatory approvals. It is anticipated this will
deliver a material increase in Waard's policies under
administration (c70%). We remain optimistic about the outlook for
future deals.
These financial highlights include the use of Alternative
Performance Measures (APMs) that are not required to be reported
under International Financial Reporting Standards.
1 - Economic profit is a measure of pre-tax profit earned from
investment market conditions in the period and any economic
assumption changes in the future.
2 - Operating profit is a measure of the pre-tax profit earned
from a company's ongoing core business operations, excluding any
profit earned from investment market conditions in the period and
any economic assumption changes in the future.
3 - Funds Under Management (FuM) represents the sum of all
financial assets on the IFRS balance sheet.
4 - Economic Value (EcV) is a financial metric derived from
Solvency II. It provides a market consistent assessment of the
value of existing insurance businesses, plus adjusted net asset
value of the non-insurance business within the group.
5 - Economic Value earnings are a measure of the value generated
in the period, recognising the longer-term nature of the group's
insurance and investment contracts.
6 - Commercial new business represents the best estimate of cash
flows expected to emerge from new business written in the period.
It is deemed to be a more commercially relevant and market
consistent measurement of the value generated through the writing
of new business, in comparison to the restrictions imposed under
the Solvency II regime.
7 - Group cash generation represents the surplus cash that the
group has generated in the period. Cash generation is largely a
function of the movement in the solvency position, used by the
group as a measure of assessing how much dividend potential has
been generated, subject to ensuring other constraints are
managed.
8 - Divisional cash generation represents the cash generated by
the three operating divisions of Chesnara (UK, Sweden and the
Netherlands), exclusive of group level activity.
9 - Commercial cash generation is used as a measure of assessing
how much dividend potential has been generated, subject to ensuring
other constraints are managed. It excludes the impact of technical
adjustments, modelling changes and corporate acquisition activity;
representing the group's view of the Commercial cash generated by
the business.
CHAIR'S STATEMENT
I am delighted to report that our divisions have continued to
deliver a strong level of cash generation despite significant
economic volatility during the period. This has supported an
increase in our interim dividend for an 18th consecutive year.
LUKE SAVAGE, CHAIR
CASH EMERGENCE, DIVID AND FINANCIAL STABILITY
Chesnara has a strong track record of delivering cash generation
across a variety of market conditions. The first half of 2022 has
been no different, with total divisional cash generation leaving us
well positioned to further extend our 18 years of continued
dividend growth for our shareholders (shareholders will receive
8.12p per share, an increase of 3%).
Financial stability is at the heart of the Chesnara business and
its financial model. First and foremost, it is fundamental to
providing financial security to our customers. Strong and stable
solvency is also critical to the investment case for both our
equity and debt investors.
In light of this, I am pleased to report our solvency position
remains robust, with a closing Solvency II ratio of 195%,
significantly above our target operating range, even after the
payment of consideration for our recent acquisitions. Our solvency
position remains underpinned by a well-diversified business model,
a focus on responsible risk-based management and resilient and
reliable cash flows from our businesses. Our previously announced
Tier 2 debt raise was also a material contributor to our improved
solvency ratio.
PEOPLE AND DELIVERY
Following the initial impact from the pandemic, operating
conditions have stabilised somewhat and across the group we have
settled into effective and flexible hybrid working conditions.
However, as operating conditions become less challenging we are
aware that our workforce is becoming increasingly challenged by the
wider cost of living crisis. With this in mind, we have supported
all UK staff whose salaries are below the higher rate tax threshold
with a one-off payment broadly in line with the estimated increase
in average household expenditure witnessed to date.
Across the group our people have continued to deliver. We have
completed the acquisitions of Sanlam Life & Pensions (UK)
Limited in the UK and Robein Leven in the Netherlands. On both
deals our teams have been working hard on the early stages of
integrating those new businesses into the group. Furthermore, in
July we announced the acquisition of the insurance portfolio of
Conservatrix in the Netherlands. This transaction will transform
our Dutch closed life business, Waard, increasing its policies
under administration by over 70% and creating a second material
closed book consolidation business alongside Chesnara's existing UK
platform.
In Sweden there has been a strong focus on improving the
transfer ratio where there has been a marked reduction in the rate
at which business transfers out from our portfolio. There are also
positive early signs of improved new business as local management
focus on maximising the expected opportunity from imminent
regulatory changes in Sweden.
We delivered a successful Tier 2 debt raise in February which
leaves us well placed to fund acquisition activity. Staff have also
been working hard to ensure we can meet the requirements of IFRS 17
for which the effective date is now less than six months away. Our
programme is progressing well as we move through our schedule of
dry runs and we are working with Deloitte to finalise the technical
and operational implementation.
Of course, these major developments are in addition to
continuing to deliver all customer and regulatory business-as-usual
responsibilities.
In short, it has been a period of significant operational
delivery and I would like to take this opportunity to thank staff
for their continued commitment and efforts.
PURPOSE
At Chesnara, we help protect customers and their dependents
through the provision of life, health, and disability cover or by
providing savings and pensions to meet future financial needs.
These are very often customers that have come to us through
acquisition, and we are committed to ensuring that they are
positively supported by us.
We have always managed our business in a responsible way and
have a strong sense of acting in a fair manner, giving full regard
to the relative interests of all stakeholders.
Our equity investors are a key stakeholder, and I am pleased
that we have announced a 3% increase in the interim dividend to
8.12 pence per share.
We have also been fully respectful of Environmental, Social and
Governance ('ESG') matters. In particular, we have positioned
governance as being a core foundation to the business model and
have a well-established governance framework.
Over recent years we have increased our focus on environmental
matters and we have accelerated and deepened this focus during the
first half of 2022. As we take stock of our environmental status we
continue to believe that our current position is relatively strong
across all divisions and there are many examples of positive
environmental actions. That said, we are also extremely conscious
that we need to more formally substantiate our environmental
footprint and, based on this assessment, agree and report targets
for how we commit to reduce to net zero.
A group wide sustainability programme has been initiated during
the period which is building on the excellent work done in the
divisions thus far. The programme has Executive and Non-Executive
sponsorship, with David Rimmington and Jane Dale being assigned to
oversee the programme, which will look to transform Chesnara into a
more sustainable business. The scale of the task for us and the
rest of the industry is huge and a priority for the programme
during the remainder of 2022 will be to formally measure our scope
3 financed emissions, to go with our understanding of the impact of
our operating framework. This will allow us to establish formal net
zero targets and an action-based transition plan to demonstrate how
we will deliver the associated real world change. We will report
targets and action plans for decarbonisation, as well as key
activities for the wider sustainability strategy, in our 2022
Annual Report and Accounts.
OUTLOOK
Sources of future growth remain strong. The reduction in
Economic Value during the period has been driven largely by the
impact the war in Ukraine and wider geopolitical factors have had
on equity markets. However, we retain our view that, despite such
short term market volatility, equities continue to offer a source
of long term value enhancement.
In addition, the outlook for acquisitions is positive. We
continue to expect the market to be active and we have taken
actions to enhance our ability to participate in that market,
including the issuance of our inaugural Tier 2 bond in February. In
addition, the recent appointment of Amanda Wright as Group General
Counsel and Company Secretary, with Al Lonie moving to a Chief of
Staff role, has further strengthened the group's capability and
capacity to undertake further M&A in future.
Luke Savage,
Chair
30 August 2022
CHIEF EXECUTIVE OFFICER'S REPORT
The acquisition of the Conservatrix insurance portfolio was the
third transaction Chesnara has announced over the past year and
shows the growth potential of the group.
STEVE MURRAY, CEO
INTRODUCTION & RESULTS
The extreme and volatile economic and geopolitical back-drop
over the first half of 2022 has yet again left many of us using the
word 'unprecedented'. As part of my annual 2021 report I commented
on Chesnara's track record of delivering through a very wide range
of market conditions over its history. I am pleased to report that
this has continued during the first six months of 2022 where we
have had a busy and successful start to the year. Our divisions
have generated approximately GBP18.6m of Commercial cash,
representing 153% coverage of the 2022 interim dividend and clearly
demonstrating the resilience of our business model. Our solvency
position remains robust and well above our target operating range
of 140%-160%.
We have re-energised our strategy whilst remaining focussed on
doing three things:
1. Running in-force insurance and pensions books efficiently and effectively.
- We now look after c941,000 policyholders and customers who
have cGBP11.2bn of their assets with us post the completion of the
acquisitions of Sanlam Life & Pensions (UK) Limited (SLP) and
Robein Leven. The acquisition of Conservatrix's insurance portfolio
is expected to add a further c70,000 policyholders to the group,
meaning we will have over 1m policyholders under our care for the
first time in our history.
- We have seen the benefits of positive retention activity. In
Sweden, we have seen a marked reduction in the rate at which
policies have been transferring out from the Movestic
portfolio.
2. Seeking out and delivering value enhancing M&A opportunities:
- This is an area where we have seen extensive activity across
the group compared to recent years. During the first half of 2022
we completed the acquisitions of SLP and Robein Leven and the
integration of these businesses within the group is well
underway.
- In July, we announced the acquisition of the insurance
portfolio of Conservatrix in the Netherlands. A capital
contribution of GBP35m will be provided by the group to support the
solvency position of the Conservatrix business, ensuring that
Conservatrix customers will benefit from becoming part of a well
capitalised group after a significant period of uncertainty. We
expect the transaction will add cGBP18m to Economic Value and
deliver steady state cash generation of cGBP4m each year,
supporting our dividend strategy. As a reminder, SLP and Robein
Leven combined added GBP13.9m in EcV and should deliver additional
steady state cash generation of GBP6m each year.
- Our February Tier 2 debt raise of GBP200m proved to be very
well timed to support this activity with capital resources required
to support our three announced transactions, totalling over
GBP100m. And it provides financial flexibility to support further
acquisitions where we continue to have material resources of over
GBP100m.
3. Writing focused, profitable new business where we are
satisfied an appropriate return can be made.
- During the period we have delivered record market shares of
Term new business in Scildon which has resulted in a 3.5% period on
period increase in total volumes. In Movestic we have seen
increments return to pre COVID-19 levels plus an encouraging trend
in new transfer business.
Remaining focussed on these three strategic aims has had a
positive impact on the results in the period and importantly
enhanced the outlook for the group. However, these positive impacts
have been more than offset by the adverse short term impacts of
very volatile economic and market conditions on the IFRS and
Economic Value (EcV) results during the period, where we have
reported losses of GBP104.6m and GBP89.6m respectively.
CONTINUED DELIVERY OF RESILIENT CASH GENERATION AND ROBUST
STABLE SOLVENCY
At the heart of the Chesnara financial model and investment case
is resilient cash generation and stable solvency.
RESILIENT CASH GENERATION
The total group cash generation (excluding the impact of
acquisitions) during the six months to 30 June 2022 was GBP21.9m
(six months to 30 June 2021; GBP5.4m). As a reminder, we define
cash as the movement in the group's surplus Own Funds above the
group's internally required capital. The surplus can be impacted by
equity markets and currency movements in the near term and by
consolidation adjustments. The divisional results pre-consolidation
are therefore, we believe, a better reflection of the dividend
potential than the consolidated group figures.
The total divisional cash generation for the six months to 30
June 2022 was GBP60.1m (six months to 30 June 2021: GBP11.5m)
creates significant dividend paying capacity. The headline
divisional cash generation was positively impacted by GBP41.5m by
technical factors such as the symmetric adjustment . This is a
feature of the Solvency II Standard Formula whereby reduced capital
levels need to be held following periods of sharp equity market
falls, such as we have seen this year.
To get a better sense of the inherent cash generation in
Chesnara, our alternative Commercial cash metric looks through the
symmetric adjustment and foreign exchange translation impacts,
along with other less material technical impacts (see Financial
Review section for more detailed cash generation analysis).
At a total divisional level we have generated GBP18.6m of
Commercial cash which more than covers the interim shareholder
dividend . In addition to the underlying cash expectations
Countrywide Assured has benefited from expense synergies resulting
from the acquisition of SLP. Countrywide Assured and Scildon have
also benefitted from the general increase in long term yields over
the period .
Symmetric adjustment: the Solvency II capital requirement
calculation includes an adjusting factor that reduces or increases
the level of the equity capital required depending on historical
market conditions. Following periods of market growth, the factor
tends to increase the level of capital required and conversely, in
falling markets the capital requirement becomes less onerous.
Cash generation by territory: 6 months ended 30 Jun 2022
Divisional cash generation
GBPm
============================ =====
UK 31.3
Sweden 14.2
Netherlands 14.6
Total 60.1
Commercial cash generation
GBPm
============================ ======
UK 11.0
Sweden (7.0)
Netherlands 14.6
Total 18.6
DIVISIONAL COMMERCIAL CASH GENERATION REPRESENTS 153% COVERAGE
OF THE 2022 INTERIM SHAREHOLDER DIVID
The Chesnara parent company cash (including Chesnara BV) and
instant access liquidity fund balance at 30 June 2022 has increased
to GBP155.4m (31 December 2021; GBP46.1m), which provides future
acquisition funding capacity and further supports the
sustainability of the funding of the group dividend. Cash reserves
have increased largely as a result of the post year end Tier 2 debt
raise offset by partial utilisation to repay existing RCF balances
of GBP31.3m and GBP62.9m funding for the Sanlam Life & Pensions
(UK) Limited (SLP) acquisition. Excluding these big ticket
movements the underlying balance has remained largely constant as
divisional dividend receipts have broadly matched the shareholder
dividend payment and other working capital outflows.
Looking forward, we continue to have a strong line of sight to
future cash generation over the longer term from the unwind of risk
margin and SCR, investment returns above risk free rates, wider
synergies and management actions. And that's before further
potential benefits from new business and further acquisitions.
STABLE AND ROBUST SOLVENCY
During the 6 months to 30 June 2022 we have seen a sharp
increase in the group solvency ratio to 195%. The table below
illustrates that this increase is largely due to the Tier 2 debt
issuance, partly offset by the capital resources (mainly the
payment of consideration) required to complete the SLP and Robein
Leven acquisitions, together with the impact of a swing in the
scale and direction of the symmetric adjustment. As a reminder, the
symmetric adjustment is an inbuilt 'shock absorber' that dampens
the impact of equity market rises and falls requiring us to hold
capital when markets rise significantly with this capital then
being released if markets fall or stabilise. Excluding these
individually material movements the ratio has continued to remain
stable with an underlying modest increase of 2%.
Solvency ratio
Solvency ratio %* Solvency surplus GBPm
=========== =================== ======================
2018 158 202.4
2019 155 210.8
2020 156 204.0
2021 152 190.7
Jun 2022 195 313.9
*Preferred operating solvency range = 140% to 160%
The closing headline solvency ratio of 195% is significantly
above our target operating range of between 140% and 160%. The
solvency ratio does not adopt any of the temporary benefits
available from Solvency II transitional arrangements (though we do
apply the volatility adjustment in our UK and Dutch divisions).
However, the ratio is impacted by the symmetric adjustment ; a
feature of the Solvency II Standard Formula whereby additional
capital needs to be held following periods of strong equity growth.
At the end of 2021 the symmetric adjustment was suppressing the
solvency ratio by 8%. We noted that this supressing impact was
likely to reverse out over time. This is indeed exactly what we
have observed during the first half of 2022 when equity markets
have fallen, with the symmetric adjustment shifting to a position
where it is now enhancing the headline ratio by 12%.
Solvency ratio movement
Solvency ratio %
====================== =================
SII % 31 Dec 2021 152
Tier 2 debt issuance 48
Acquisitions -
Robein Leven (2)
Acquisitions -
SLP (13)
Symmetric adjustment 12
Foreseeable dividend
impact (4)
Underlying business 2
SII % 30 Jun 2022 195
The closing solvency ratio of 195% will not be the new long-term
position as we expect to utilise this additional capital surplus as
we undertake acquisitions, which should result in the ratio
reverting back within the robust and stable 140% to 160% historical
range. For example, the recently announced Conservatrix acquisition
is expected to reduce the solvency ratio by approximately 14% on a
pro forma basis as at 30 June 2022. Strategically, its our
intention to deploy further capital in support of value enhancing
acquisitions in the future.
THE LONG TERM OUTLOOK FOR GROWTH REMAINS POSITIVE, PARTCULARLY
THROUGH M&A
In our 2021 full year accounts we introduced the concept of the
Chesnara 'fan' which illustrates the additional areas of growth
potential the group may benefit from that aren't reflected in our
Economic Value metric.
In the 2021 full year accounts we stated "Over the medium term,
we expect all components of the growth model to be positive,
although there can be a level of shorter-term volatility in each
element."
Although the time period is short it is worth looking at how the
results for the 6 months to 30 June 2022 fare against the value
growth components of the Chesnara 'fan'.
A key element of the growth model is real world investment
returns. The reported EcV of the group assumes risk free returns on
shareholder and policyholder assets. Given the direct link to
equity market performance this source of value is the most volatile
of the growth sources. In 2021 real world returns represented
growth of cGBP110m however, a large proportion of this has reversed
with a corresponding loss in the first half of 2022 of cGBP91.1m.
Despite this volatility in the short term, over the long term we
expect average returns in excess of risk free, as we have seen
historically. Whilst also a short period we have seen positive
momentum across most global equity indices in July and early
August. Valuing the group assuming relatively conservative returns
above the risk free yield, for example using an average of 5% total
equity returns per annum, would add significantly upwards of
GBP150m of incremental EcV. In addition, we might reasonably expect
a significant proportion of the recent losses to be reversed in the
event that markets recovered.
Over time, we expect improvements to operational effectiveness
to be a source of value creation, be that through M&A
synergies, scale or other positive management actions. During the
first half of the year Countrywide Assured in particular has
benefitted from synergies from the SLP acquisition. Over recent
years, including 2021, we have suffered some operational losses
particularly relating to investments made in IT systems (especially
in Scildon), some regulatory changes, and higher than expected
pension transfer outflows in Sweden. It is hugely encouraging to
report that there has been a marked reduction in the rate at which
business has transferred from the Swedish portfolio. The
Countrywide Assured expense synergies together with the positive
transfer experience in Sweden mean the outlook for operational
value growth is much improved.
The other value growth components have all been a source of
actual growth during the period. The Own Funds of the group have
increased by GBP14.6m directly as a result of risk margin
reductions. Acquisitions completed in the period have also added
GBP13.9m of EcV on a marginal costing basis.
FOCUSSED WRITING OF NEW BUSINESS
Writing new business is the third area of focus in the Chesnara
strategy. Not only is new business value adding in its own right,
importantly it adds scale which in turn enhances operational
effectiveness and improves the sustainability of the financial
model. During the 6 months to 30 June 2022 we have seen Commercial
new business profits of cGBP4.6m.
EQUITY MARKET PERFORMANCE HAS DRIVEN A MARKED REDUCTION IN
EcV
We have seen falls in equity markets over the period,
particularly in Sweden, and this has been the primary reason why we
are reporting a group EcV loss of GBP89.6m in the period. Since the
end of the half year period, equity market recovery suggests a
proportion of the reported economic loss will have reversed. The
overall movement in the group's EcV over the period includes a
GBP13.9m positive impact of the two acquisitions that we completed
in the year.
We have grown our Funds Under Management (FuM) in the first half
of 2022, largely through the completion of SLP and Robein Leven.
This growth was partially offset by the negative effects of
increasing yields and falling equity markets on the value of funds
over the first half of the year.
Growth in FuM
Funds Under Management GBPbn
======================== ======
2018 7.1
2019 7.7
2020 8.5
2021 9.1
Jun 2022 8.0
Acquisitions 2022 3.2
Pro forma acquisitions
2022 0.5
Jun 2022 Total 11.7
Growth in policies in force
Policies 000's
======================== ======
2019 891
2020 894
2021 877
Jun 2022 862
Acquisitions 2022 79
Pro forma acquisitions
2022 69
Jun 2022 Total 1,010
AN INCREASED FOCUS ON ACQUISITION ACTIVITY
The primary purpose of Chesnara when it was formed back in 2004
was to acquire other closed book businesses and acquisition
activity has been a core component of our historical EcV growth. As
well as the immediate benefit from any price discount to EcV,
acquisitions also improve the future growth outlook by enhancing
the potential from the other value elements of the Chesnara
'fan'.
Successful acquisitions have been key to Chesnara's development
and will remain so in the future. During 2022, we completed two
acquisitions, Robein Leven in the Netherlands and SLP in the UK.
Robein Leven added further scale to the Waard, the group's Dutch
closed book operations, and SLP increased the UK Funds Under
Management by GBP2.9bn. Together they added GBP13.9m of EcV on a
marginal cost basis and are expected to create additional steady
cash generation potential of cGBP6m per annum.
In July 2022 we announced the acquisition of Conservatrix in the
Netherlands. We expect this deal to deliver an immediate increase
of GBP18m of EcV, with further value generated from future real
world investment returns and the run-off of the risk margin. The
new portfolio is expected to generate cGBP4m of steady state
incremental cash per annum meaning the enlarged Waard business will
generate cGBP8m of cash per year, covering about one quarter of the
shareholder dividend. Taken together, accessing these value
enhancing acquisitions will require us to deploy over GBP100m of
capital resources primarily from the GBP200m inaugural Tier 2 debt
raise we executed in February.
CONFIDENCE IN OUR ABILITY TO EXECUTE M&A IN THE FUTURE
We remain optimistic about the prospect of future acquisitions
and believe that we can deliver further value accretive deals in
future. Even relatively small transactions can have a material
positive cumulative impact, as the group delivers synergies from
integrating businesses and portfolios into its existing
operations.
2022 has continued to see an active M&A market across
European insurance with sources of capital (particularly through
private equity firms) readily available to support transactions,
large international insurance groups refocusing their strategies
away from legacy businesses and management teams that actively
managed their business portfolios being rewarded by
shareholders.
Even with the current market volatility, we expect positive
activity levels in insurance M&A to continue. A market with
plenty of activity provides opportunities for Chesnara as a
consolidator. We continue to believe there is also likely to be a
little less competition in the sub GBP500m valuation deal end of
the market that we currently participate in. The three deals that
we have announced in recent times should provide positive reference
points for sellers and their advisors about our renewed ability to
execute M&A.
We continue to have material cash resources to deploy following
the GBP200m Tier 2 debt issue and, after paying down existing debt
and funding the SLP deal, we hold cash balances of GBP155.4m at a
group level (of which cGBP100m is readily available for deployment
post the impact of the Conservatrix insurance portfolio deal). Our
revolving credit facility creates an additional level of working
capital flexibility. For more transformational deals, we retain the
ability to raise equity and are mindful of the potential benefits
from other funding arrangements such as joint ventures or vendor
part-ownership.
We announced that Sam Perowne was joining our executive team
early this year who has extensive M&A experience along with two
new Independent NED appointments in February, Karin Bergstein and
Carol Hagh, who also have M&A experience. In August, we
announced two further changes to our senior leadership team with Al
Lonie currently our Company Secretary moving to become my Chief of
Staff and Amanda Wright joining from abrdn to become General
Counsel and Company Secretary. These changes will further enhance
the capacity, capability and experience we have available to pursue
further strategic opportunities.
Our assessment of the market potential, our track record of
delivery and the actions we have taken to enhance our ability to
execute M&A means we are confident that acquisitions will
continue to contribute to Chesnara's success in the future.
A SUSTAINABLE CHESNARA
Core to our beliefs of transitioning to a sustainable Chesnara
is that we need to consider the impact of our operations and
investments on our business but also, and arguably more
importantly, consider the impact of our operations and investments
on all of our stakeholders.
Positive outcomes for any particular stakeholder at the cost of
inappropriate outcomes for other stakeholders is not acceptable. We
want Chesnara to make a positive contribution to people, the
planet, and the natural world and our groupwide sustainability
programme will build on the work done by the divisions and their
individual strengths to deliver this. We really are stronger
together.
We are taking a number of positive actions across the group with
each one making a difference. We do however recognise that we are
only at the start of this journey and there remains a huge amount
to do for us, the industry, and the wider world. As a steward and a
safe harbour for our almost 1 million policyholders and over
GBP11bn of policyholder and shareholder assets, we have a real
responsibility to help drive the change needed to deliver
decarbonisation and a sustainable society and economy. We will take
responsibility for the things that we can influence and the actions
we can take.
My team and I are passionate about transforming the group into a
sustainable business but we recognise that we cannot do this alone
and so will need to work with other parties in the industry and
beyond to initiate and deliver the change needed. Thus far, we have
not sufficiently detailed what we do and why we do it and so my
team is working on developing and detailing our strategy. As I said
at year end, more formality is required around some of our
processes and disclosures to make sure we inform and educate our
stakeholders about what we are doing well. And I am determined that
not only will we talk about the good things we are doing but also
the things that we need to improve on or the things we are finding
difficult. It is only by talking about the whole range of
activities that we are doing and being open and honest about the
difficulties we face and the progress we are making that we can
tackle the challenge. An honest narrative will be key to us making
the required changes.
Our current focus is on determining our scope 3 financed
emissions so we can conclude on a credible transition plan to net
zero in line with the Paris Agreement, including those
all-important short and medium term targets for a just transition.
We will provide details of these plans in our 2022 full year report
and accounts.
OUTLOOK
Chesnara has an excellent track record of sustainable long term
cash generation over its history through recessions, pandemics,
global financial crisis and other variable market conditions. The
first half of 2022 has seen us continue this impressive record of
cash generation in difficult markets.
The war in Ukraine has played a large role in the volatile start
to the year we have seen across global markets. The Chesnara
business model has delivered positive cash generation in uncertain
markets before, and we have confidence it will continue to do so in
future. We are not dismissive of the material reduction in Economic
Value that equity market falls and interest rate rises have created
during 2022 but equally, we do not see the value loss in the period
as being a factor that compromises the medium to longer term
outlook.
We have ambitious plans to grow the business and the
achievements during the first half of 2022 leave us well positioned
to do so.
Finally, I want to thank our people across the UK, Sweden and
the Netherlands for all their remarkable efforts during what has
been another busy period. When I joined Chesnara just over one year
ago I strongly believed the group had some great opportunities in
front of it. A year on with the continued drive and determination
of our people, I have every confidence that the future remains
bright for Chesnara.
Steve Murray,
Chief Executive Officer
30 August 2022
MANAGEMENT REPORT
OVERVIEW OF STRATEGY
Our strategy focuses on delivering value to customers and
shareholders through our three strategic pillars, executed across
our three territories.
STRATEGIC OBJECTIVES
1. 2. 3.
MAXIMISE THE VALUE FROM ACQUIRE LIFE AND PENSIONS ENHANCE VALUE THROUGH
EXISTING BUSINESS BUSINESSES PROFITABLE NEW BUSINESS
Managing our existing Acquiring and integrating Writing profitable new
customers fairly and companies into our business business supports the
efficiently is core model is key to continuing growth of our group and
to delivering our overall our growth journey. helps mitigate the natural
strategic aims. run-off of our book.
========================================== ===============================
KPIs KPIs KPIs
Cash generation Cash generation EcV growth
EcV earnings EcV growth Customer outcomes
Customer outcomes Customer outcomes
Risk appetite
========================================== ===============================
OUR CULTURE AND VALUES -
RESPONSIBLE RISK BASED MANAGEMENT
RESPONSIBLE FAIR TREATMENT MAINTAIN PROVIDE A COMPETITIVE ROBUST REGULATORY
RISK BASED OF CUSTOMERS ADEQUATE RETURN TO OUR COMPLIANCE
MANAGEMENT FINANCIAL SHAREHOLDERS
FOR THE BENEFIT RESOURCES
OF ALL OUR
STAKEHOLDERS
BUSINESS REVIEW | UK
The UK division is made up of Countrywide Assured plc and Sanlam
Life & Pensions (UK) Limited (SLP). SLP was acquired by
Chesnara on 28 April 2022 following the announcement to purchase
the company in September 2021. The combined businesses manage
c279,000 policies covering linked pension business, life insurance,
endowments, annuities and some with profit business. Countrywide
Assured follows an outsourcer-based operating model, whereas SLP's
is largely delivered through internal resources.
MAXIMISE VALUE FROM EXISTING BUSINESS
CAPITAL AND VALUE MANAGEMENT
BACKGROUND INFORMATION
As a predominantly closed book, the division creates value
through managing the following key value drivers: costs; policy
attrition; investment return; and reinsurance strategy.
In general, surplus regulatory capital emerges as the book runs
off. The level of required capital is closely linked to the level
of risk to which the division is exposed. Management's risk-based
decision-making process seeks to continually manage and monitor the
balance of making value enhancing decisions whilst maintaining a
risk profile in line with the board's risk appetite.
At the heart of maintaining value is ensuring that the division
is governed well from a regulatory and customer perspective.
INITIATIVES AND PROGRESS IN 2022
- The acquisition of Sanlam Life & Pensions (UK) Limited
(SLP) was successfully completed on 28 April 2022. This increased
the number of policies by over 68,000 and added EcV of GBP52.8m to
the division.
- Combined UK division cash generation of GBP31.3m in the period.
- As a result of the acquisition, central overheads can now be
shared across a wider policy base, which has resulted in a benefit
to CA Own Funds of GBP8.1m.
- Work has started on delivering the planned target operating model for SLP.
- CA completed a transfer of GBP13.4m of capital out of its
with-profit funds. This increased solvency surplus by GBP9.9m
- Investment markets have influenced the results of the division
over the period. Falls in equity prices and rises in yields have
generally been positive to our solvency position, but less
favourable to the division's EcV.
- CA solvency has increased during the period, largely driven by
the aforementioned group cost sharing exercise, the with-profit
capital extraction and the positive benefits from increasing yields
and the fall in the symmetric adjustment.
FUTURE PRIORITIES
- Continue to progress our plans to integrate SLP into the
division, with a focus on delivering our longer-term target
operating model.
- Commence that work that is required to deliver the planned
transfer of the insurance business of SLP into the UK's principal
operating company, Countrywide Assured plc.
- Continue to focus on maintaining an efficient and cost-effective operating model.
- Support Chesnara in identifying and delivering UK acquisitions.
KPIs
Economic Value - UK
GBPm 2018 2019 2020 2021 Jun 2022
====================== ====== ====== ====== ====== =========
EcV 214.7 204.6 187.4 181.9 211.2
Cumulative dividends 59.0 88.0 121.5 149.0
====================== ====== ====== ====== ====== =========
Total 214.7 263.6 275.4 303.4 360.2
====================== ====== ====== ====== ====== =========
Cash generation - UK
GBPm 2018 2019 2020 2021 Jun 2022
----------------- ----- ----- ----- ----- ---------
Cash generation 55.8 33.6 29.5 27.4 31.3
From June 2022, the figure includes SLP.
CUSTOMER OUTCOMES
BACKGROUND INFORMATION
Treating customers fairly is one of our primary
responsibilities. We seek to do this by having effective customer
service operations together with competitive fund performance
whilst giving full regard to all regulatory matters. This supports
our aim to ensure policyholders receive good returns, appropriate
communication, and service in line with customer expectations.
INITIATIVES AND PROGRESS IN 2022
- Following the acquisition of SLP, the customer-facing website
was developed and we have ensured customers continue to receive the
same high quality standard of service. The division is in the
process of aligning, where appropriate, SLP's and CA's customer
governance framework.
- Our operational resilience programme has remained a key focus.
Work is in progress on the next phase of the work, which includes
identifying and remediating any weaknesses.
- We have continued with our activity of seeking to stay in
contact with customers and to reunite customers with unclaimed
assets. This will remain a priority throughout 2022.
- The activity on product reviews has continued in line with our
prioritisation schedule and remediation undertaken where
required.
- The FCA published their final paper on the Consumer Duty in
July 2022. An assessment of actions needed to meet the requirements
of the paper is being undertaken for the division, with no major
concerns identified to date.
FUTURE PRIORITIES
- The operational resilience programme will remain a priority,
with plans in place to ensure we achieve the regulatory deadline of
March 2025.
- Progress any actions needed to meet the requirements of the Consumer Duty for CA and SLP.
KPIs
Policyholder fund performance - CA plc
Jun 2022 Jun 2021
CA Pension Managed (2.8)% 17.9%
CWA Balanced Managed Pension (2.8)% 17.2%
S&P Managed Pension (3.3)% 18.8%
Benchmark - ABI Mixed Inv 40%-85% shares (6.8)% 16.7%
The division's main managed funds outperformed benchmark for the
12 months to 30 June 2022.
GOVERNANCE
BACKGROUND INFORMATION
Maintaining effective governance and a constructive relationship
with regulators underpins the delivery of the division's strategic
plans.
Having robust governance processes provides management with a
platform to deliver the other aspects of the business strategy. As
a result, a significant proportion of management's time and
attention continues to be focused on ensuring that both the
existing governance processes, coupled with future developments,
are delivered.
INITIATIVES AND PROGRESS IN 2022
- With the acquisition of SLP during the period a key focus has
been on integrating the business into the existing governance
framework.
- The division's IFRS 17 project has remained a key focus over
the period. Good progress has been made, both on the existing CA
project as well as integrating SLP's existing programme into the
wider group programme.
FUTURE PRIORITIES
- Continue the transition of SLP to align with the UK division's governance framework.
- Continue to deliver against our IFRS 17 plans in preparation
for the standard becoming effective from 1 January 2023.
- Support the group-wide ESG programme.
KPIs
SOLVENCY RATIO CA: 192%
Solvency is strong in both businesses with surplus generated in
the year to date increasing the solvency ratio from 130% to 192%
and 148% in CA and SLP respectively.
GBPm Solvency
Ratio
===================== ===== =========
31 Dec 2021 surplus 30.5 130%
Surplus generation 33.4
30 Jun 2022 surplus 63.9 192%
======================== ===== =========
SOLVENCY RATIO SLP: 148%
GBPm Solvency
Ratio
===================== ===== =========
31 Dec 2021 surplus 9.7 124%
Surplus generation 5.1
31 Mar 2022 surplus 4.6 112%
Surplus generation 14.3
30 Jun 2022 surplus 18.9 148%
======================== ===== =========
BUSINESS REVIEW | SWEDEN
Movestic is a life and pensions business based in Sweden and is
open to new business. From its Stockholm base, Movestic operates as
an innovative brand in the Swedish life insurance market. It offers
personalised unit-linked pension and savings solutions through
brokers and is well-rated within the broker community.
MAXIMISE VALUE FROM EXISTING BUSINESS
CAPITAL AND VALUE MANAGEMENT
BACKGROUND INFORMATION
Movestic creates value predominantly by generating growth in the
unit-linked Funds Under Management (FuM), whilst assuring a
high-quality customer proposition and maintaining an efficient
operating model. FuM growth is dependent upon positive client cash
flows and positive investment performance. Capital surplus is a
factor of both the value and capital requirements and hence surplus
can also be optimised by effective management of capital.
INITIATIVES AND PROGRESS IN 2022
- The first 6 months of 2022 have seen uncertainty in financial
markets, resulting in rising interest rates and inflation and
falling equity markets, driven by a number of international factors
such as Russia's invasion of Ukraine and China's zero tolerance
towards COVID-19.
- These events were reflected in the returns on the
policyholders' investment assets as well as Movestic's own
investments.
- We have strengthened our offering and distribution within our
custodian business, whereby we provide a life and pensions wrapper
to third party managed customers. The effect on incoming volumes is
positive compared to both previous year and expectations.
- Pension transfers continue to be a feature of the market
through new regulations, along with digitalisation, transparency,
lower fees, and new working processes. However, the negative
development due to competitors' aggressive activities, coupled with
retention initiatives, seems to have slowed down and the net
transfer outflow has improved compared to the same period previous
year.
- Favourable claims development within the risk insurance segment.
FUTURE PRIORITIES
- Continue to build a solid and long-term sustainable value
creation for customers and owners through a diversified business
model with continued growth of volumes and market shares in
selected segments.
- Continue to build the digital leadership in the industry
through the development of digitalised and tailored customer
propositions and experience. Movestic will also continue the
journey to digital and automated processes to further improve
efficiency and control.
- Focus on customer loyalty and attractive offerings to both
retain customers and reach more volumes on the transfer market.
- Provide a predictable and sustainable dividend to Chesnara.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
Economic Value
GBPm 2018 2019 2020 2021 Jun 2022
====================== ====== ====== ====== ====== =========
Reported value 208.7 248.5 220.6 240.1 190.3
Cumulative dividends 2.7 8.8 14.0 17.1
---------------------- ------ ------ ------ ------ ---------
Total 208.7 251.1 229.4 254.1 207.4
---------------------- ------ ------ ------ ------ ---------
CUSTOMER OUTCOMES
BACKGROUND INFORMATION
Movestic provides personalised long-term savings, insurance
policies and occupational pensions for individuals and business
owners. We believe that recurring independent financial advice
increases the likelihood of a solid and well-planned financial
status, hence we continue to offer our products and services
through advisors and licenced brokers.
INITIATIVES AND PROGRESS IN 2022
- A new concept "Movestic Frihet", which includes personal
advice on savings and insurance for customers approaching
retirement, was launched during the period with positive response
from the market.
- A new partnership with Lexly, who delivers online legal
advisory services, provides Movestic customers with access to legal
advice.
- A new concept for onboarding of individuals within the direct
market segment was launched during the first half year.
- Increased demands for digital processes and availability have
also led to increased efforts to create services, such as
customised advice, for both customers and brokers.
- A new survey demonstrates the importance of occupational
pension as the most important benefit when choosing a new employer,
hence an important tool for employers to stay attractive.
FUTURE PRIORITIES
- Continued development of new digital self-service solutions
and tools to support the brokers' value enhancing customer
proposition, and to facilitate smooth administrative processes
making Movestic a partner that is easy to do business with.
- Further strengthen the relationship with brokers through
increased presence, both physical and digital.
- Seek to capitalise on the new rules that came into effect in
July 2022 that mean transferring pensions between providers will be
easier for customers in future.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
Broker assessment rating (out of 5)
2017 2018 2019 2020 2021
======== ===== ===== ===== ===== =====
Rating 3.7 3.8 3.5 3.3 3.6
POLICYHOLDER AVERAGE INVESTMENT RETURN:
-16.5%
GOVERNANCE
BACKGROUND INFORMATION
Movestic operates to exacting regulatory standards and adopts a
robust approach to risk management.
Maintaining strong governance is a critical platform to
delivering the various value-enhancing initiatives planned by the
division.
INITIATIVES AND PROGRESS IN 2022
- The IFRS17 programme has continued during the period in
preparation for the standard becoming effective from 1 January
2023.
- Sustainability has remained a focus area and Movestic has
hired a Sustainability manager to support our activities. Efforts
have been made to integrate sustainability risk in various internal
processes in order to be compliant with changes in the Solvency II
delegated regulation which enter into force in August 2022.
FUTURE PRIORITIES
- Deliver the remaining aspects of the division's IFRS 17 programme.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
SOLVENCY RATIO: 172%
Solvency remains strong despite adverse economic conditions in
the first half of the year
GBPm Solvency
Ratio
===================== ===== =========
31 Dec 2021 surplus 74.4 148%
Surplus generation 2.0
30 Jun 2022 surplus 76.4 172%
======================== ===== =========
ENHANCE VALUE THROUGH PROFITABLE NEW BUSINESS
BACKGROUND INFORMATION
As an "open" business, Movestic not only adds value from sales
but as it gains scale, it will become increasingly cash generative
which will fund further growth or contribute towards the group's
attractive dividend. Movestic has a clear sales focus and targets a
market share of 6% -10% of the advised occupational pension market.
This focus ensures we are able to adopt a profitable pricing
strategy.
INITIATIVES AND PROGRESS IN 2022
- Sales volumes have developed positively, and are well above
the same period last year. There has been positive sales
development in the core broker distributed occupational pension,
and from the newer custodian business through the partnership with
Carnegie.
- Commercial new business profit of GBP1.5m (30 June 2021:
GBP2.7m). The prior period included higher pension increments
profit, largely due to salary and bonus processes being postponed
in 2020 to 2021, which is not the case in 2022.
- Movestic will continue to develop its offering to increase
competitiveness and build customer loyalty. A special focus will
also be put on new volumes that will be available on the Swedish
transfer market from the second half-year.
- The intense competition in the advised occupational pension
market continues, resulting in Movestic's market share of new
business currently being below the long-term target. That said
Movestic saw some positive sales development in the broker
channel.
FUTURE PRIORITIES
- Launch new risk product offerings in the broker channel,
including a new technical solution for administration.
- Strengthen distribution capacity within the direct business
area, as a complement to the broker channel and partner distributed
custodian business.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
Occupational pension market share %
% 2017 2018 2019 2020 2021
============== ===== ===== ===== ===== =====
Market share 7.6 6.6 6.5 4.5 3.6
New business profit*
GBPm 2018 2019 2020 2021 Jun 2022
===================== ===== ===== ===== ===== =========
New business profit 10.6 6.6 1.6 4.1 1.5
*New business figures from 2018 onwards represent commercial new
business. Values prior to this are retained at that which they were
previously reported.
BUSINESS REVIEW | NETHERLANDS
Our Dutch businesses aim to deliver growth and earnings through
their dual closed and open book approach and through the group
acquisition strategy will integrate portfolios and businesses into
their operations.
MAXIMISE VALUE FROM EXISTING BUSINESS
CAPITAL AND VALUE MANAGEMENT
BACKGROUND INFORMATION
Both Waard and Scildon have a common aim to make capital
available to the Chesnara group to fund further acquisitions or to
contribute to the dividend funding. Whilst their aims are common,
the dynamics by which the businesses add value differ:
- Waard is in run-off and has the benefit that the capital
requirements reduce in-line with the attrition of the book.
- As an "open business", Scildon's capital position does not
benefit from book run-off. It therefore adds value and creates
surplus capital through writing new business and by efficient
operational management and capital optimisation.
INITIATIVES AND PROGRESS IN 2022
- Waard completed the acquisition of Robein Leven on 28 April
and integration is underway, which is expected to conclude before
the end of 2022.
- In July 2022, we announced the acquisition of the insurance
portfolio of Conservatrix, our 7th acquisition in the Netherlands,
also under the Waard Group, which is expected to complete during
the second half of 2022. This acquisition will add 70,000 policies
and GBP0.5bn of assets under management.
- Scildon launched an IT system improvement project for
individual products that is expected to run until 2024 and generate
cost efficiencies.
- Implementation for Waard of an actuarial tool for the majority of portfolios.
- Both businesses report strong solvency of 213% (Scildon) and
364% (Waard), despite adverse market movements seen during the
first half of 2022.
FUTURE PRIORITIES
- Continue to integrate Robein Leven
- Complete the acquisition of the Conservatrix portfolio and start the integration process
- Effective management of the closed book run off in Waard.
- Continue to progress the ongoing IT projects to generate capital efficiencies.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
Economic Value - The Netherlands
GBPm 2018 2019 2020 2021 Jun 2022
====================== ====== ====== ====== ====== =========
EcV 214.6 222.9 209.7 218.0 203.8
Cumulative dividends 42.2 47.2 47.2 58.6
====================== ====== ====== ====== ====== =========
Total 214.6 265.1 256.9 265.2 262.4
====================== ====== ====== ====== ====== =========
CUSTOMER OUTCOMES
BACKGROUND INFORMATION
Great importance is placed on providing customers with high
quality service and positive outcomes.
Whilst the ultimate priority is the end customer, in Scildon we
also see the brokers who distribute our products as being customers
and hence developing processes to best support their needs is a key
focus.
INITIATIVES AND PROGRESS IN 2022
- Scildon's focus has been providing flexible solutions and
offerings to our clients and continuing to meet the needs of our
customers during the impacts of the war in Ukraine and the cost of
living crisis.
- Work has continued on the group pension portal making
improvements and efficiencies. Scildon has commenced work to
improve the existing system that services all other products
providing improved functionality for customers.
FUTURE PRIORITIES
- Regular engagement with customers to improve service quality
and to enhance and develop existing processes, infrastructure and
customer experiences in Scildon.
- Continue to progress the IT development programme in Scildon
to enhance functionality for customers.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
Scildon client satisfaction rating (out of 10)
2017 2018 2019 2020 2021
======== ===== ===== ===== ===== =====
Rating 7.6 7.7 7.8 8.1 8.1
GOVERNANCE
BACKGROUND INFORMATION
Waard and Scildon operate in a regulated environment and comply
with rules and regulations both from a prudential and from a
financial conduct point of view.
INITIATIVES AND PROGRESS IN 2022
- The IFRS 17 work has continued to progress, with significant
strides being made during the first half of 2022. We have continued
to work with our auditors on the technical decisions and the
operational processes underpinning the implementation.
FUTURE PRIORITIES
- The remaining time to live reporting for IFRS 17 will be spent
performing further dry runs and working with Deloitte to complete
their audit work. We will also integrate new acquisitions into the
programme.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
SOLVENCY RATIO: SCILDON 213%; WAARD 364%
Solvency is robust in both businesses with solvency ratios of
213% and 364% for Scildon and Waard respectively. The Waard Group
solvency reported above includes that of its immediate holding
company. The reported year-end dividend was paid from Waard Leven
(GBP6.0m) and Scildon (GBP5.0m) to its immediate holding company
during the first half of the year, but was not remitted up to
Chesnara plc as it is being retained to support future corporate
activity.
Scildon
GBPm Solvency
Ratio
===================== ====== =========
31 Dec 2021 surplus 77.0 192%
Surplus generation (1.9)
30 Jun 2022 surplus 75.1 213%
======================== ====== =========
Waard
GBPm Solvency
Ratio
===================== ===== =========
31 Dec 2021 surplus 34.1 399%
Surplus generation 5.9
31 Dec 2022 surplus 40.1 364%
======================== ===== =========
ENHANCE VALUE THROUGH PROFITABLE NEW BUSINESS
BACKGROUND INFORMATION
Scildon brings a "New business" dimension to the Dutch division.
Scildon sell protection, individual savings and group pensions
contracts via a broker-led distribution model. The aim is to
deliver meaningful value growth from realistic market share. Having
realistic aspirations regarding volumes means we are able to adopt
a profitable pricing strategy. New business also helps the business
maintain scale and hence contributes to unit cost management.
INITIATIVES AND PROGRESS IN 2022
- Despite a tough and uncertain market, we continued to generate
commercial new business profits with GBP3.1m earned during H1
2022.
- Average term market share over the first half year of 19%.
- We continue to grow our portfolio through a white labelling
relationship with our distribution partner, Dazure demonstrating a
positive additional route to market to enable us to service more
policyholders. This relationship has continued to grow during H1
2022.
FUTURE PRIORITIES
- Continue to deliver product innovation and cost management actions.
- Consider alternative routes to market that do not compromise
our existing broker relationships, such as further product white
labelling.
KPIs ( all comparatives have been presented using 2022 exchange
rates)
Scildon - term assurance market share %
% 2018 2019 2020 2021 Jun 2022
============== ===== ===== ===== ===== =========
Market share 7.6 11.6 14.2 16.1 19.0
Scildon - new business profit*
GBPm 2018 2019 2020 2021 Jun 2022
===================== ===== ===== ===== ===== =========
New business profit 2.0 1.9 4.8 7.9 3.1
*New business figures from 2018 onwards represent commercial new
business. Values prior to this are retained at that which they were
previously reported.
BUSINESS REVIEW | acquire life and pension businesses
During the period we completed the acquisitions of Sanlam Life
& Pensions and Robein Leven and announced the purchase of
Conservatrix.
Well considered acquisitions create a source of value
enhancement and sustain the cash generation potential of the
group.
HOW WE DELIVER OUR ACQUISITION STRATEGY
- Identify potential deals through an effective network of
advisers and industry associates, utilising both group and
divisional management expertise as appropriate.
- We primarily focus on acquisitions in our existing
territories, although will consider other territories should the
opportunity arise and this is supportive of our strategic
objectives.
- We assess deals by applying well established criteria which
consider the impact on cash generation and Economic Value under
best estimate and stressed scenarios.
- We work cooperatively with regulators.
- The financial benefits are viewed in the context of the impact
the deal will have on the enlarged group's risk profile.
- Transaction risk is reduced through stringent risk-based due
diligence procedures and the senior management team's acquisition
experience and positive track record.
- We fund deals with a combination of own resources, debt or
equity depending on the size and cash flows of each opportunity and
commercial considerations.
HOW WE ASSESS DEALS
Cash generation
- Collectively our future acquisitions must be suitably cash
generative to continue to support Chesnara delivering attractive
dividends.
Value enhancement
- Acquisitions are required to have a positive impact on the
Economic Value1 per share in the medium term under best estimate
and certain more adverse scenarios.
Customer outcomes
- Acquisitions must ensure we protect, or ideally enhance, customer interests.
Risk appetite
- Acquisitions should normally align with the group's documented
risk appetite. If a deal is deemed to sit outside our risk appetite
the financial returns must be suitably compelling.
INITIATIVES AND PROGRESS IN 2022
In July 2022, Chesnara announced the acquisition of the
insurance portfolio of Conservatrix, a specialist provider of life
insurance products in the Netherlands that was declared bankrupt on
8 December 2020. The insurance portfolio will increase Waard's
number of policies under administration by over 50%, transforming
Waard into a second material closed book consolidation business
alongside Chesnara's existing UK platform.
This is the third acquisition announced by Chesnara over the
past year and the seventh transaction undertaken in the Dutch
market. Conservatrix's savings, annuity and funeral plan products
are well aligned with Chesnara's existing life and pension
liability mix in the Netherlands,and will add approximately 70,000
additional policies and GBP0.5 billion of assets to the group.
A capital contribution of GBP35 million will be provided by the
group to support the solvency position of the Conservatrix business
and Conservatrix customers will benefit from becoming part of a
well capitalised Group, after a significant period of
uncertainty.
Future cash generation from the acquisition under steady state
conditions is expected to be c.GBP4 million per annum, supporting
Chesnara's progressive dividend strategy. Waard will become a
material contributor to the group's dividends, with expected total
annual cash generation of GBP8 million following completion of the
acquisition.
The Conservatrix transaction is expected to increase the group's
EcV by GBP18 million and provides further EcV accretion potential
from future real world investment returns and the run-off of the
risk margin.
In addition, we also completed two transactions during April
2022 that were originally announced in 2021: Robein Leven in the
Netherlands (announced in November 2021) and SLP in the UK
(announced in September 2021).
ACQUISITION OUTLOOK
- We have continued to see a healthy flow of acquisition
activity in the year across European insurance including UK and the
Netherlands. Sources of capital particularly from private equity
have remained high.
- We recognise that the consolidation markets in these countries
are mature but the key drivers for owners to divest portfolios
continue to remain relevant and create a strong pipeline. These
include better uses of capital (e.g. return to investors or
supporting other business lines), operational challenges (e.g. end
of life systems), management distraction, regulatory challenges,
business change (e.g. IFRS 17) and wider business and strategic
needs.
- Our expectation is that sales of portfolios will continue;
with a number of transactions already announced during 2022. Our
strong expertise and knowledge in the markets, good regulatory
relationships and the flexibility of our operating model means that
Chesnara is very well placed to manage the additional complexity
associated with these portfolio transfers and provide beneficial
outcomes for all stakeholders. These transactions may not be
suitable for all potential consolidators, in particular those who
do not have existing licences in these territories.
- Chesnara will continue its robust acquisition assessment model
which takes into account; (a) the strategic fit; (b) the cash
generation capability; (c) the medium term impact on EcV per share;
and (d) the risks within the target. We will also continue to
assess the long-term commercial value of acquisitions as part of
our objective to maximise the value from in-force business.
- The GBP200m Tier 2 subordinated debt issue in February 2022
together with the existing GBP100m Revolving Credit Facility
arrangement (with an additional GBP50m accordion option) provides
funding capability on commercially attractive terms. We will
continue to explore how we can increase our funding capability
further, including consideration of partnerships.
- Our good network of contacts in the adviser community, who
understand the Chesnara acquisition model, supported by our
engagement activity with potential targets, ensures that we are
aware of viable opportunities in the UK and Western Europe. With
this in mind, we are confident that we are well positioned to
continue our successful acquisition track record in the future.
CAPITAL MANAGEMENT | Solvency II
Subject to ensuring other constraints are managed, surplus
capital is a useful proxy measure for liquid resources available to
fund items such as dividends, acquisitions or business investment.
As such, Chesnara defines cash generation as the movement in
surplus, above management buffers, during the period.
GROUP SOLVENCY
SOLVENCY POSITION
GBPm 30 Jun 2022 31 Dec 2021
====================== ============ ============
Own funds 644 558
SCR 330 367
Buffer 33 37
Surplus above buffer 281 154
Solvency ratio % 195% 152%
SOLVENCY SURPLUS
GBPm
======================================= =======
Group solvency surplus at 31 Dec 2021 190.7
CA 33.4
SLP (8.8)
Movestic 5.1
Waard 0.9
Scildon 3.2
Chesnara / consol adj (21.2)
Tier 2 165.0
Acquisition (43.1)
Exchange rates 1.0
Dividends (12.2)
======================================= =======
Group solvency surplus at 30 Jun 2022 313.9
======================================= =======
Surplus:
The group has GBP280.9m of surplus over and above the group's
internal capital management policy requirements, compared to
GBP154.0m at the end of 2021. The group solvency ratio has
increased from 152% to 195%.
Dividend:
The closing solvency position is stated after deducting the
GBP12.2m proposed interim dividend (31 December 2021:
GBP22.1m).
Own Funds:
Own Funds have risen by GBP98.6m (pre-dividends). The most
material driver is the introduction of GBP200m Tier 2 debt of which
GBP165.0m is recognised as eligible Own Funds. This is offset by a
reduction in divisional Own Funds, largely due to the fall in
equity markets.
SCR:
The SCR has fallen by GBP36.8m, owing mainly to a material fall
in equity risk (due to the fall in equity markets), currency risk
(following the fall in Own Funds of overseas divisions) and the
positive benefits of rising interest rates.
What is solvency and capital surplus?
- Solvency is a measure of how much the value of the company
exceeds the level of capital it is required to hold.
- The value of the company is referred to as its "Own Funds"
(OF) and this is measured in accordance with the rules of the newly
adopted Solvency II regime.
- The capital requirement is again defined by Solvency II rules
and the primary requirement is referred to as the Solvency Capital
Requirement (SCR).
- Solvency is expressed as either a ratio: OF/SCR % or as an absolute surplus OF less SCR
WHAT ARE OWN FUNDS?
A valuation which reflects the net assets of the company and
includes a value for future profits expected to arise from in-force
policies.
The Own Fund valuation is deemed to represent a commercially
meaningful figure with the exception of:
- Contract boundaries: Solvency II rules do not allow for the
recognition of future cash flows on certain policies despite a high
probability of receipt.
- Risk margin: The Solvency II rules require a "risk margin"
liability which is deemed to be above the realistic cost.
- Restricted with profit surpluses: Surpluses in the group's
with-profit funds are not recognised in Solvency II Own Funds
despite their commercial value.
We define Economic Value (EcV) as being the Own Funds adjusted
for the items above. As such our Own Funds and EcV have many common
characteristics and tend to be impacted by the same factors.
Transitional measures, introduced as part of the long-term
guarantee package when Solvency II was introduced, are available to
temporarily increase Own Funds. Chesnara does not take advantage of
such measures, however we do apply the volatility adjustment within
our Dutch and UK divisions.
How do Own Funds change?
Own Funds (and Economic Value) are sensitive to economic
conditions. In general, positive equity markets and increasing
yields lead to OF growth and vice versa. Other factors that improve
OF include writing profitable new business, reducing the expense
base and improvements to lapse rates.
WHAT IS CAPITAL REQUIREMENT?
The solvency capital requirement can be calculated using a
"standard formula" or "internal model". Chesnara adopts the
"standard formula".
There are three levels of capital requirement:
Minimum dividend paying requirement/risk appetite
requirement
The board sets a minimum solvency level above the SCR which
means a more prudent level is applied when making dividend
decisions.
Solvency Capital Requirement
Amount of capital required to withstand a 1 in 200 event. The
SCR acts as an intervention point for supervisory action including
cancellation or the deferral of distributions to investors.
Minimum Capital Requirement
The MCR is between 45% and 25% of the SCR. At this point
Chesnara would need to submit a recovery plan which if not
effective within three months may result in authorisation being
withdrawn.
How does the SCR change?
Given the largest component of Chesnara's SCR is market risk,
changes in investment mix or changes in the overall value of our
assets has the greatest impact on the SCR. For example, equity
assets require more capital than low risk bonds. Also, positive
investment growth in general creates an increase in SCR. Book
run-off will tend to reduce SCR, but this will be partially offset
by an increase as a result of new business.
A review of the UK's application of Solvency II is currently
underway, led by HM Treasury. In 2021 the PRA oversaw a
Quantitative Impact Study (QIS) to inform a potential
"comprehensive package of reforms". In April 2022 the PRA published
a statement indicating its agreement with the view that the risk
margin and matching adjustment can be reformed so as to reduce
overall capital levels for life insurers by around 10% to 15% in
current economic conditions. We are monitoring this closely and
future financial statements will report on the UK specific
application of Solvency II as it diverges from the EU's regime. We
see no specific reason to expect the PRA to use their enhanced
freedoms take a route that systemically makes it harder to do
business in the UK.
We are well capitalised at both a group and subsidiary level. We
have applied the volatility adjustment in Scildon, Waard Leven, CA
and SLP, but have not used any other elements of the long-term
guarantee package within the group. The Volatility Adjustment is an
optional measure that can be used in solvency calculations to
reduce volatility arising from large movements in bond spreads.
The numbers that follow present the divisional view of the
solvency position which may differ to the position of the
individual insurance company(ies) within the consolidated numbers.
Note that year end 2021 figures have been restated using 30 June
2022 exchange rates in order to aid comparison at a divisional
level.
UK - CA
GBPm 30 Jun 2022 31 Dec 2021
=========================== ============ ============
Own funds (post dividend) 133 131
SCR 69 102
Buffer 14 20
Surplus 50 10
Solvency ratio % 192% 130%
Surplus: GBP50.0m above board's capital management policy.
Dividends: Dividend of GBP27.5m was paid to Chesnara in Q2 2022.
Own Funds: Increased by GBP2.2m due to an extraction of WP
capital, reduced expense assumptions, offset by the fall in equity
markets.
SCR: Decreased by GBP31.2m due to sharp fall in equity risk and
moderate fall in currency, spread and insurance risks.
SWEDEN
GBPm 30 Jun 2022 31 Dec 2021
=========================== ============ ============
Own funds (post dividend) 182 230
SCR 106 156
Buffer 21 31
Surplus 55 43
Solvency ratio % 172% 148%
Surplus: GBP55.2m above board's capital management policy.
Dividends: Dividend of GBP3.1m was paid to Chesnara in Q2 2022.
Own Funds: Decreased by GBP47.8m largely due to fall in equity
markets, although slightly offset by the rise in yields.
SCR: Decreased by GBP49.9m due to sharp fall in equity risk and
moderate falls in spread, currency and lapse risks, due to the
market movements.
NETHERLANDS - WAARD
GBPm 30 Jun 2022 31 Dec 2021
=========================== ============ ============
Own funds (post dividend) 55 46
SCR 15 11
Buffer 5 4
Surplus 35 30
Solvency ratio % 364% 399%
Surplus: GBP34.7m above board's capital management policy.
Dividends: No foreseeable dividend is proposed.
Own Funds: Increased by GBP9.6m. The main driver is the receipt
of GBP5.2m dividend from Scildon to support acquisition activity in
Waard Group. There is also a small gain on acquisition of Robein
Leven.
SCR: Risen by GBP3.7m, mainly due to acquisition of Robein
Leven, which has mostly impacted equity, expense and concentration
risk.
NETHERLANDS - SCILDON
GBPm 30 Jun 2022 31 Dec 2021
=========================== ============ ============
Own funds (post dividend) 142 150
SCR 67 78
Buffer 50 59
Surplus 25 13
Solvency ratio % 213% 192%
Surplus: GBP25.2m above board's capital management policy.
Dividends: Dividend of GBP5.2m was paid in Q2 2022.
Own Funds: Decreased by GBP8.6m due to the rise in interest
rates and adverse mortality and lapse experience. This is partly
offset by a variance on spreads, as the volatility adjustment
increased more than the spread on bonds held.
SCR: Decreased by GBP11.8m, largely due to falls in equity and
lapse risk, due to the fall in equities and rising yields,
respectively.
UK - SLP
GBPm 30 Jun 2022 Acquisition
=========================== ============ ============
Own funds (post dividend) 58 59
SCR 39 43
Buffer 8 9
Surplus 11 7
Solvency ratio % 148% 137%
Surplus: GBP11.1m above board's capital management policy.
Dividends: No foreseeable dividend is proposed.
Own Funds: In Q2 , post-acquisition, Own Funds fell by GBP1.2m,
largely due to economic conditions with equity market decline,
widening spreads and falling asset values.
SCR: Fallen by GBP4m in the post-acquisition period, mainly due
to reductions in equity and lapse risks.
CAPITAL MANAGEMENT | Sensitivities
The group's solvency position can be affected by a number of
factors over time. As a consequence, the group's EcV and cash
generation, both of which are derived from the group's solvency
calculations, are also sensitive to these factors.
The table below provides some insight into the immediate impact
of certain sensitivities that the group is exposed to, covering
solvency surplus and Economic Value. As can be seen, EcV tends to
take the 'full force' of adverse conditions whereas solvency is
often protected in the short term and, to a certain extent, the
longer term due to compensating impacts on required capital.
The Tier 2 debt raise has had a material impact on the reported
sensitivities because, as capital requirements move, the amount of
the Tier 2 debt able to be recognised in the Own Funds also moves,
creating a new moving part. For example, where FX movements reduce
the SCR, we now also experience a corresponding reduction in base
Own Funds and also Own Funds relating to Tier 2 capital. The total
surplus is now more exposed to downside risks but, importantly, the
Tier 2 itself has created more than sufficient additional headroom
to accommodate this.
Whilst cash generation has not been shown in the table below,
the impact of these sensitivities on the group's solvency surplus
has a direct read across to the immediate impact on cash
generation.
Solvency ratio Solvency surplus EcV
Impact % Impact range GBPm Impact range GBPm
============================ ========================== ============================= =============================
20% sterling (3.2)% (67.5) to (57.5) (99.9) to (89.3)
appreciation
20% sterling 3.2% 67.5 to 57.5 89.3 to 99.3
depreciation
25% equity fall 0.6% (52.8) to (22.8) (78.8) to (58.8)
25% equity rise (11.2)% 17.9 to 47.9 69.8 to 89.8
10% equity fall (0.7)% (23.5) to (13.5) (33.3) to (23.3)
10% equity rise (2.9)% 9.9 to 19.9 24.2 to 34.2
1% interest rate 7.5% 8.7 to 13.7 (3.2) to 2.8
rise
1% interest rate (6.0)% (22.6) to (2.6) (11.7) to 3.3
fall
50bps credit (3.0)% (14.4) to (9.4) (16.4) to (11.1)
spread rise
25bps swap rate (6.0)% (22.4) to (12.4) (20.6) to (10.6)
fall
10% mass lapse (1.9)% (29.7) to (24.7) (52.5) to (37.5)
1% inflation (8.7)% (32.5) to (22.5) (30.5) to (20.5)
10% mortality (5.2)% (20.6) to (15.6) (21.2) to (16.2)
increase
INSIGHT*
20% sterling appreciation: A material sterling appreciation
reduces the value of surplus in our overseas divisions and any
overseas investments in our UK entities, hence has an immediate
impact on group solvency surplus and EcV. There is also a large
fall in the amount of Tier 2 capital that can be recognised, due to
the reduced size of the balance sheet.
Equity sensitivities: The equity rise sensitivities cause both
Own Funds and SCR to rise, as the value of the funds exposed to
risk is higher. The increase in SCR can be larger than Own Funds,
resulting in an immediate reduction in surplus, depending on the
starting point of the symmetric adjustment. The converse applies to
an equity fall sensitivity, although the impacts are not fully
symmetrical due to management actions and tax. The Tier 2 debt
value also changes materially in these sensitivities. The change in
symmetric adjustment can have a significant impact (25% equity
fall: -GBP9m to the SCR, 25% equity rise: +GBP37m to SCR). The EcV
impacts are more intuitive as they are more directly linked to Own
Funds impact. CA and Movestic contribute the most due to their
large amounts of unit-linked business, much of which is invested in
equities.
Interest rate sensitivities: An interest rate rise is generally
positive across the group. An interest rate fall results in a
larger impact on Own Funds than an interest rate rise, given the
current low interest rate environment. CA, SLP, Movestic and
Scildon all contribute towards the total solvency surplus
impact.
50bps credit spread rise: A credit spread rise has an adverse
impact on surplus and future cash generation, particularly in
Scildon due to corporate and non-local government bond holdings
that form part of the asset portfolios backing non-linked insurance
liabilities. The impact on the other divisions is less severe.
25bps swap rate fall: This sensitivity measures the impact of a
fall in the swap discount curve with no change in the value of
assets. The result is that liability values increase in isolation.
The most material impacts are on CA and Scildon due to the size of
the non-linked book.
10% mass lapse: In this sensitivity Own Funds fall as there are
fewer policies on the books, thus less potential for future
profits. This is largely offset by a fall in SCR, although the
amount of eligible Tier 2 capital also falls. The division most
affected is Movestic as it has the largest concentration of
unit-linked business.
1% inflation rise: A rise in inflation increases the amount of
expected future expenses. This is capitalised into the balance
sheet, thus hits the solvency position immediately.
10% mortality increase: This sensitivity has an adverse impact
on surplus and cash generation, particularly for Scildon due to
their term products.
*BASIS OF PREPARATION ON REPORTING:
Although it is not a precise exercise, the general aim is that
the sensitivities modelled are deemed to be broadly similar (with
the exception that the 10% equity movements are naturally more
likely to arise) in terms of likelihood. Whilst sensitivities
provide a useful guide, in practice, how our results react to
changing conditions is complex and the exact level of impact can
vary due to the interactions of events and starting position.
FINANCIAL REVIEW
The key performance indicators are a reflection of how the
business has performed in delivering its three strategic
objectives.
Summary of each KPI:
CASH GENERATION
GROUP CASH GENERATION excluding the impact of acquisitions
GBP21.9 M 30 JUNE 2021: GBP5.4 M
DIVISIONAL CASH GENERATION GBP60.1 M 30 JUNE 2021: GBP11.5 M
What is it?
Cash generation is calculated as being the movement in Solvency
II Own Funds over the internally required capital, excluding the
impact of tier 2 debt. The internally required capital is
determined with reference to the group's capital management
policies, which have Solvency II rules at their heart. Cash
generation is used by the group as a measure of assessing how much
dividend potential has been generated, subject to ensuring other
constraints are managed.
Why is it important?
Cash generation is a key measure, because it is the net cash
flows to Chesnara from its life and pensions businesses which
support Chesnara's dividend-paying capacity and acquisition
strategy. Cash generation can be a strong indicator of how we are
performing against our stated objective of 'maximising value from
existing business'. However, our cash generation is always managed
in the context of our stated value of maintaining strong solvency
positions within the regulated entities of the group.
Risks
The ability of the underlying regulated subsidiaries within the
group to generate cash is affected by a number of our principal
risks and uncertainties. Whilst cash generation is a function of
the regulatory surplus, as opposed to the IFRS surplus, it is
impacted by similar drivers, and therefore factors such as yields
on fixed interest securities and equity and property performance
contribute significantly to the level of cash generation within the
group.
GBPm Jun 2022
============================ =========
UK 31.3
Sweden 14.2
Netherlands - Waard 2.2
Netherlands - Scildon 12.4
============================ =========
Divisional cash generation 60.1
Other group activities (38.2)
Group cash generation 21.9
============================ =========
Divisional cash generation
- The operating businesses have delivered a strong divisional
cash result for the period, exceeding prior year performance.
- As expected, the UK result was the largest component with cash
generation of GBP31.3m, but material contributions were also
supplied from all operating divisions.
- In each division the value of Own Funds was adversely impacted
by investment market conditions, particularly rising interest rates
and falling asset values, culminating in economic losses.
Conversely, these economic factors also had a beneficial effect for
each business, with favourable movements in market risks and
symmetric adjustment driving reductions in SCR.
Group cash generation
- Total group cash generation contains acquisition activity,
being the Own Funds impact of the capital outlay and incremental
capital requirements. Other group activities is largely
consolidation adjustments and the dynamic of buffer movements in
calculating the group SCR, central costs, including Tier 2 related
costs and some non-recurring SCR items.
IFRS
PRE-TAX LOSS: GBP(104.6) M 30 JUNE 2021: PRE-TAX PROFIT GBP20.8
M
TOTAL COMPREHENSIVE INCOME: GBP(66.5) M 30 JUNE 2021: GBP1.9
M
What is it?
Presentation of the results in accordance with International
Financial Reporting Standards (IFRS) aims to recognise the profit
arising from the longer-term insurance and investment contracts
over the life of the policy.
Why is it important?
The IFRS results form the core of reporting and hence retain
prominence as a key financial performance metric. There is however
a general acceptance that the IFRS results in isolation do not
recognise the wider financial performance of a typical life and
pensions business, hence the use of supplementary Alternative
Performance Measures to enhance understanding of financial
performance.
Risks
The IFRS profit/(loss) can be affected by a number of our
principal risks and uncertainties. Volatility in equity markets and
bond yields can result in volatility in the IFRS pre-tax
profit/(loss), and foreign currency fluctuations can affect total
comprehensive income. The IFRS results of Scildon can be relatively
volatile from interest rate and spread changes, in part, due to the
different approach used by the division for valuing assets and
liabilities, as permitted under IFRS 4. The dynamics of our IFRS
results will change once IFRS 17 comes in force, which will be
effective from 1 January 2023.
GBPm 30 Jun 2022
================================== ============
Operating loss (10.4)
Economic loss (105.1)
Profit/ on portfolio acquisition 10.9
---------------------------------- ------------
Profit before tax (104.6)
Tax 36.4
Forex impact 1.7
Total comprehensive income (66.5)
- Pre-tax losses were reported in each territory with economic
conditions underpinning the results.
- The loss on economic activities was in excess of GBP105m for
the period, with the divisions all suffering the impact various
economic factors such as rising interest rate and reductions in
bond values, coupled with falling equity markets and negative
investment returns.
- The result also includes profit on acquisitions of GBP10.9m,
comprising gains arising on the SLP and Robein Leven deals in the
UK and Netherlands.
- Total comprehensive income includes a positive movement in tax
liability (owing to the operating losses) and a small foreign
exchange gain on translation of the Dutch and Swedish divisional
results.
ECONOMIC VALUE (EcV)
GBP526.7 M 31 DECEMBER 2021: GBP624.2 M
What is it?
Economic value (EcV) was introduced following the introduction
of Solvency II at the start of 2016, with EcV being derived from
Solvency II Own Funds. EcV reflects a market-consistent assessment
of the value of the existing insurance business, plus the adjusted
net asset value of the non-insurance businesses within the
group.
Why is it important?
EcV aims to reflect the market-related value of in-force
business and net assets of the non-insurance business and hence is
an important reference point by which to assess Chesnara's value. A
life and pensions group may typically be characterised as trading
at a discount or premium to its Economic Value. Analysis of EcV
provides additional insight into the development of the business
over time.
The EcV development of the Chesnara group over time can be a
strong indicator of how we have delivered to our strategic
objectives, in particular the value created from acquiring life and
pensions businesses and enhancing our value through writing
profitable new business. It ignores the potential of new business
to be written in the future (the franchise value of our Swedish and
Dutch businesses) and the value of the company's ability to acquire
further businesses .
Risks
The Economic Value of the group is affected by economic factors
such as equity and property markets, yields on fixed interest
securities and bond spreads. In addition, the EcV position of the
group can be materially affected by exchange rate fluctuations. For
example, a 20.0% weakening of the Swedish krona and euro against
sterling would reduce the EcV of the group within a range of
GBP89m-GBP99m , based on the composition of the group's EcV at 30
June 2022.
GBPm
================== =======
EcV 31 Dec 2021 624.2
EcV earnings (89.6)
Forex 0.3
Acquisitions 13.9
------------------ -------
Pre-dividend EcV 548.8
Dividends (22.1)
================== =======
2021 Group EcV 526.7
================== =======
- Prior to any dividend payment impact Economic Value fell by
12% since the start of the year. The reported position does not
include the positive impact of the Tier 2 debt capital.
- The closing position reflects an earnings loss of GBP89.6m,
driven by adverse investment market conditions, with some operating
losses including group level expense strain.
- The change in EcV during the period includes the impact of the
payment of the final 2021 dividend and the benefit of the SLP and
Robein Leven acquisitions.
- A marginal forex gain arose on translation of the Dutch and
Swedish divisional results, representing Swedish krona depreciation
and euro appreciation against sterling, largely mitigating one
another.
ECV EARNINGS
GBP(89.6) M 30 JUNE 2021: GBP38.5 M
What is it?
In recognition of the longer-term nature of the group's
insurance and investment contracts, supplementary information is
presented that provides information on the Economic Value of our
business.
The principal underlying components of the Economic Value result
are:
- The expected return from existing business (being the effect
of the unwind of the rates used to discount the value
in-force);
- Value added by the writing of new business;
- Variations in actual experience from that assumed in the opening valuation;
- The impact of restating assumptions underlying the
determination of expected cash flows; and
- The impact of acquisitions.
Why is it important?
A different perspective is provided in the performance of the
group and on the valuation of the business. Economic Value earnings
are an important KPI as they provide a longer-term measure of the
value generated during a period. The Economic Value earnings of the
group can be a strong indicator of how we have delivered against
all three of our core strategic objectives. This includes new
business profits generated from writing profitable new business,
Economic Value profit emergence from our existing businesses, and
the Economic Value impact of acquisitions.
Risks
The EcV earnings of the group can be affected by a number of
factors, including those highlighted within our principal risks and
uncertainties and sensitivities analysis. In addition to the
factors that affect the IFRS pre-tax profit and cash generation of
the group, the EcV earnings can be more sensitive to other factors
such as the expense base and persistency assumptions. This is
primarily due to the fact that assumption changes in EcV affect our
long-term view of the future cash flows arising from our books of
business .
GBPm Jun 2022
========================== =========
Total operating earnings (20.7)
Economic earnings (91.1)
Other 22.2
========================== =========
Total EcV earnings (89.6)
========================== =========
- An EcV loss of GBP89.6m was reported in the opening six months of the year.
- The total operating earnings loss contains group level expense
strain, including finance costs relating to debt servicing and also
non-maintenance expenditure. In Movestic, a deterioration in fund
rebate income also contributes and while transfer activity has
reduced, levels were still above short-term expectations.
- Other operating components are, predominantly, favourable movements in risk margin and tax.
- Economic conditions during the period, with the adverse impact
of rising interest rates, falling bond values and negative equity
market returns, resulted in substantial economic losses of GBP91.9m
(30 Jun 2021: gain of GBP73.0m).
CASH GENERATION
GROUP CASH GENERATION excluding the impact of acquisitions
GBP21.9 M 30 JUNE 2021: GBP5.4 M
DIVISIONAL CASH GENERATION
GBP60.1 M 30 JUNE 2021: GBP11.5 M
A strong divisional cash result exceeding GBP60m was supported
by contributions from each territory, while the group result
includes the impact of acquisitions completed in the period. Cash
is generated from increases in the group's solvency surplus, which
is represented by the excess of own funds held over management's
internal capital needs. These are based on regulatory capital
requirements, with the inclusion of additional 'management
buffers'.
Definition: Defining cash generation in a Life and Pensions
business is complex and there is no reporting framework defined by
the regulators. This can lead to inconsistency across the sector.
We define cash generation as being the movement in Solvency II
surplus own funds over and above the group's internally required
capital, which is based on Solvency II rules.
Implications of our cash definition:
Positives
- Creates a strong and transparent alignment to a regulated framework.
- Positive cash results can be approximated to increased dividend potential.
- Cash is a factor of both value and capital and hence
management are focused on capital efficiency in addition to value
growth and indeed the interplay between the two.
Challenges and limitations
- In certain circumstances the cash reported may not be
immediately distributable by a division to group or from group to
shareholders.
- Brings the technical complexities of the SII framework into
the cash results e.g. symmetric adjustment, with-profit fund
restrictions, model changes etc, and hence the headline results do
not always reflect the underlying commercial or operational
performance.
- At a group level the result includes complex consolidation
adjustments relating to buffers, which can compromise how well the
figure truly reflects performance.
Jun 2022 GBPm Jun 2021
GBPm
Movement Movement Forex Cash Cash generated
in in management's impact generated / (utilised)
Own Funds capital requirement / (utilised)
UK (8.7) 40.0 - 31.3 12.2
Sweden (44.8) 59.8 (0.8) 14.2 (23.6)
Netherlands - Waard Group (1.7) 3.5 0.4 2.2 3.7
Netherlands - Scildon (8.4) 20.2 0.6 12.4 19.1
============================= ========== ==================== ======= ============= ==============
Divisional cash generation
/ (utilisation) (63.6) 123.5 0.2 60.1 11.5
Other group activities (7.0) (32.2) 1.0 (38.2) (6.1)
Group cash generation
/ (utilisation) (70.6) 91.3 1.2 21.9 5.4
============================= ========== ==================== ======= ============= ==============
GROUP
- The group activities cash includes consolidation adjustments
to remove capital buffer movements, as well as direct movements in
central costs and SCR.
- The buffer adjustment is a volatile and relatively arbitrary
technical item and is hence removed from the Commercial cash
results.
- Central costs of approximately GBP13m include a large
proportion of exceptional non-recurring expenditure.
- Central SCR movements have minimal real cash flow
implications, being a more solvency dynamic. The central SCR
movement in the period includes cGBP6m of non-recurring items.
UK
- Another strong period of cash generation has been delivered by
the division, albeit largely due to the symmetric adjustment
creating capital requirement reductions following a significant
decline in equity values, which offset the adverse impact of
investment conditions on Own Funds.
- Economic conditions and their associated impact, primarily
falling equity and interest rate risk, drive the positive movement
in capital requirements. Conversely, Own Funds suffered the effect
of a corresponding reduction in asset values.
- Own Funds include a GBP13.4m capital transfer from the
with-profit funds, although GBP5.5m of surplus has built up in this
fund in the period which is not recognised in the result.
SWEDEN
- Movestic has reported a solid cash result for the period, with
a substantial reduction in capital requirements overshadowing a
sizeable decrease in Own Funds.
- The division is particularly sensitive to investment market
movements and economic condition during the period underpin the
cash result. Own Funds bear the impact of economic conditions and
negative investment returns (particularly equity driven). This loss
in value was offset by a larger decrease in market-risk related
capital requirements, including the impact of the symmetric
adjustment.
NETHERLANDS - WAARD
- Waard again delivered a period of stable cash generation in
line with expectations, following a reduction in capital
requirements that exceeded a fall in Own Funds.
- Economic losses due to the negative effect of rising interest
rates on bond values and mortgage portfolio, was the main component
of the value reduction. This also had a positive impact on capital
requirements, aiding a material decrease in equity risk and
symmetric adjustment in the period.
NETHERLANDS - SCILDON
- Scildon posted healthy cash generation for the first half of
2022, a result dominated by economic factors which drive reduction
in both Own Funds and required capital.
- Rising interest rates with falling bond and equity values had
a negative impact on Own Funds, with the division suffering
economic losses of GBP22.0m. However, these factors also supported
a larger in reduction in SCR, particularly market risks and fall in
the symmetric adjustment, as well as lapse risk with lower exposure
to the cost of guarantees.
CASH GENERATION - ENHANCED ANALYSIS
The format of the analysis draws out components of the cash
generation results relating to technical complexities, modelling
issues or exceptional corporate activity (e.g. acquisitions). The
results excluding such items are deemed to better reflect the
inherent commercial outcome (Commercial cash generation).
DIVISIONAL COMMERCIAL CASH GENERATION
GBP18.6 M
COMMERCIAL CASH GENERATION
GBP(3.0) M
UK SWEDEN NETHERLANDS NETHERLANDS DIVISIONAL GROUP TOTAL
WAARD SCILDON TOTAL ADJ
=========================== ====== ====== =========== =========== ========== ====== ======
Base cash generation 31.3 14.2 2.2 12.4 60.1 (38.2) 21.9
=========================== ====== ====== =========== =========== ========== ====== ======
Symmetric adjustment (12.4) (21.2) - - (33.6) 2.8 (30.8)
WP restriction look
through (7.9) - - - (7.9) - (7.9)
Group buffer difference - - - - - 13.8 13.8
Commercial cash generation 11.0 (7.0) 2.2 12.4 18.6 (21.6) (3.0)
=========================== ====== ====== =========== =========== ========== ====== ======
The total commercial divisional result is impacted by several
different external economic factors. The net effect of these is
that about half of the total profit of GBP18.6m is directly due to
economic conditions. The residual gain from operating items is
broadly in line with expectations. The negative group adjustment
contains several material non-recurring items including cGBP7m of
project costs covering IFRS 17, Tier 2 and other acquisition costs.
The central loss also includes over GBP5m of one-off SCR
increases.
UK
In the main, the UK result relates to expected steady-state
operating surplus emergence, largely due to book run-off. The
result has also benefited from modest economic gains of cGBP3m,
which is slightly lower than the steady-state average
expectation.
The commercial cash outcome illustrates that UK remains at the
heart of the cash generation model. The acquisition of SLP will
positively contribute to the longevity of this core source of
cash.
SWEDEN
The Swedish result, which excludes the large benefits from the
symmetric adjustment, is largely a direct consequence of the sharp
decline in equity values and a widening of credit spreads during
the period, which are partially offset by benefits from yield
increases. A modest underlying operating result is broadly in line
with expectation, in light of the natural level of new business
strain of an open business.
WAARD
The Waard Commercial cash gain is mainly due to synergies
arising on the acquisition completed in the period.
SCILDON
Scildon has benefited from the increasing interest rates during
the period, with the vast majority of their Commercial cash
generation being directly due to how yields have reduced capital
requirements. A modest underlying operating gain is broadly in line
with expectations.
EcV EARNINGS
GBP(89.6) M 30 JUNE 2021: GBP38.5 M
The EcV earnings of the group reflect the economic conditions in
the first half of the year, with negative equity returns, rising
interest rates and falling bond values, delivering economic losses
across the operating divisions.
Analysis of the EcV result in the period by earnings source:
GBPm 30 Jun 30 Jun 31 Dec
2022 2021 2021
=============================== ========== ========= =========
Expected movement in period (0.8) (0.8) (1.7)
New business 3.6 4.0 2.4
Operating experience variances (23.4) (7.8) (19.2)
Operating assumption changes (1.0) (4.6) (13.9)
Other operating variances 0.9 (23.2) (26.4)
Total operating earnings (20.7) (32.4) (58.8)
Economic experience variances (221.7) 45.6 79.5
Economic assumption changes 130.6 27.3 30.1
=============================== ========== ========= =========
Total economic earnings (91.1) 73.0 109.6
Other non-operating variances 0.8 0.8 4.5
Risk margin movement 14.6 5.1 10.8
Tax 6.8 (8.0) (8.2)
=============================== ========== ========= =========
EcV earnings (89.6) 38.5 57.8
=============================== ========== ========= =========
Analysis of the EcV result in the year by business segment:
GBPm 30 Jun 30 Jun 31 Dec
2022 2021 2021
============================ ========= ======== =======================
UK (20.8) 13.7 28.0
Sweden (46.8) 14.0 26.1
Netherlands (15.0) 11.8 8.3
Group and group adjustments (7.0) (1.0) (4.6)
============================ ========= ======== =======================
EcV earnings (89.6) 38.5 57.8
============================ ========= ======== =======================
Total economic earnings: The EcV result is sensitive to
investment market conditions, reflecting significant economic
losses in the period. The result includes the adverse impact of
movements in interest rates and spreads, alongside falling equity
markets. Key movements in investment market conditions during the
year that have contributed to the economic loss are:
- CPI (consumer price index) increased by 4.0% to 9.4% (30 June 2021: 2.5%)
- FTSE All Share index decreased by 6.3% (6 months to 30 June 2021: increased by 9.3%);
- Swedish OMX All Share index decreased by 29.2% (6 months to 30
June 2021: increased by 19.3%);
- The Netherlands AEX All Share index decreased by 18.8% (6
months to 30 June 2021: increased by 15.0%); and
- 10-year UK gilt yields have increased by 133bp from 0.98% to 2.31% during the period.
Total operating earnings: Operational profits in CA and Waard
were offset by central group expenses, including non-recurring and
finance investment cost, as well as a small operating loss in
Movestic. The profit in Waard was delivered largely from favourable
mortality experience and resultant changes in assumptions, while
growth in CA was the result of synergies arising from the SLP
acquisition (and a reduction in future expenses). Group level
expenses includes finance costs relating to Tier 2 debt arrangement
and interest fees (GBP7.3m), as well as non-maintenance related
activity (corporate activity and major projects). The loss in
Movestic includes the effect of a general deterioration in fund
rebate income in 2022, while Scildon was adversely impacted by
higher mortality payments and guarantees within certain
policies.
UK: Operating earnings in CA were overshadowed by economic
factors with the UK division reporting a combined loss of GBP20.8m,
as both CA and SLP were impacted by economic conditions in the
period. As indicated above, operational profits were driven by
positive movements in expense assumptions, coupled with mortality
assumption and risk margin releases. Rising interest rates and
decreasing bond values, alongside equity market falls, resulted in
material economic losses that underpin the divisional result. SLP
posted an operational loss though this was largely due to a one-off
strengthening of expense assumptions as part of the
post-acquisition process.
Sweden: Movestic recorded a significant loss, with the division
heavily impacted by economic factors. Investment market conditions,
particularly rising interest rates and falling equity values,
resulted in negative economic returns (GBP48.4m). Operational
activities were hampered by a reduction in fund rebate income and
continued adverse experience in transfers (although to a much
lesser extent than the prior year). Modest new business profits of
GBP0.7m were reported (30 June 2021: GBP1.8m), reflecting difficult
market conditions and margin pressures in the first half, due to
sharp equity falls.
Netherlands: The Dutch businesses posted a combined loss of
GBP15.0m for the opening half of 2022, as both divisions suffered
economic losses that underpin the result. In Scildon, economic
experience was GBP(100.2)m with rising interest rates adversely
impacting bond values. This was partly offset by the reduction in
liabilities corresponding to changes in assumptions (GBP78.2m). As
indicated earlier, Scildon has reported a small operating loss,
which includes the impact of guarantee related costs and higher
mortality driven outgoings than anticipated.
Waard, despite the operating gains mentioned above, has reported
an EcV loss of GBP1.7m, with economic experience being the main
component. The impact of rising interest rates on yields and
falling bond values outweighing subsequent changes to economic
assumptions and profit from operating activities.
Group: This component includes various group-related costs and
includes: non-maintenance related costs (such as acquisition
costs); the costs of the group's IFRS 17 programme; and some
material economic-related items such as financing costs, primarily
in relation to the Tier 2 debt servicing fees.
EcV
GBP526.7 M (31 DEC 2021: GBP624.2 M )
The Economic Value of Chesnara represents the present value of
future profits of the existing insurance business, plus the
adjusted net asset value of the non-insurance business within the
group. EcV is an important reference point by which to assess
Chesnara's intrinsic value.
Value movement: 1 Jan 2022 to 30 Jun 2022:
GBPm
================== =======
EcV 31 Dec 2021 624.2
EcV earnings (89.6)
Forex 0.3
Acquisitions 13.9
------------------ -------
Pre-dividend EcV 548.8
Dividends (22.1)
================== =======
EcV 30 Jun 2022 526.7
================== =======
EcV earnings: A loss of GBP89.6m has been reported for the
opening half of 2022. Significant economic losses arising from the
adverse economic investment market conditions witnessed during the
period, drive the result.
Dividends: Under EcV, dividends are recognised in the period in
which they are paid. Dividends of GBP22.1m were paid during the
first half of the year, being the final dividend from 2021.
Foreign exchange: The closing EcV of the group reflects a
marginal foreign exchange gain in the period, a consequence of the
sterling appreciation against Swedish krona being offset by
depreciation versus the euro.
EcV by segment at 30 Jun 2022
GBPm
======================== =======
UK 211.2
Sweden 190.3
Netherlands 203.8
Other group activities (78.6)
------------------------ -------
EcV 30 Jun 2022 526.7
------------------------ -------
The above table shows that the EcV of the group is diversified
across its different markets.
EcV to Solvency II:
GBPm
=========================== =======
EcV 30 Jun 2022 526.7
Risk margin (36.8)
Contract boundaries 1.2
Tier 2 200.0
Tier 2 restrictions (35.0)
Dividends (12.2)
=========================== =======
SII Own Funds 30 Jun 2022 643.9
=========================== =======
Our reported EcV is based on a Solvency II assessment of the
value of the business but adjusted for certain items where it is
deemed that Solvency II does not reflect the commercial value of
the business. The above waterfall shows the key difference between
EcV and SII, with explanations for each item below.
Risk margin: Solvency II rules require a significant 'risk
margin' which is held on the Solvency II balance sheet as a
liability, and this is considered to be materially above a
realistic cost. We therefore reduce this margin for risk for EcV
valuation purposes from being based on a 6% cost of capital to a
3.25% cost of capital.
Contract boundaries: Solvency II rules do not allow for the
recognition of future cash flows on certain in-force contracts,
despite the high probability of receipt. We therefore make an
adjustment to reflect the realistic value of the cash flows under
EcV.
Ring-fenced fund restrictions: Solvency II rules require a
restriction to be placed on the value of surpluses that exist
within certain ring-fenced funds. These restrictions are reversed
for EcV valuation purposes as they are deemed to be temporary in
nature.
Dividends: The proposed interim dividend of GBP12.2m is
recognised for SII regulatory reporting purposes. It is not
recognised within EcV until it is actually paid.
Tier 2: The tier 2 debt is treated as "quasi equity" for
Solvency II purposes. For EcV, consistent with IFRS, we continue to
report this is debt.
IFRS
IFRS PRE-TAX LOSS
GBP(104.6) M 30 JUNE 2021 : PRE-PROFIT GBP20.8 M
IFRS TOTAL COMPREHENSIVE INCOME
GBP(66.5) M 30 JUNE 2021 : GBP1.9 M
The group IFRS results reflect the natural dynamics of the
segments of the group, which can be characterised in three major
components: stable core, variable element and growth operation.
Executive summary
Stable core: At the heart of surplus, and hence cash generation,
are the core UK (excluding the S&P book) and Waard Group
segments. The requirements of these books are to provide a
predictable and stable platform for the financial model and
dividend strategy. As closed books, the key is to sustain this
income source as effectively as possible. During the year, two new
acquisitions were added to this stable core; Sanlam Life and
Pensions (UK) Limited (SLP) and Robein Leven.
Variable element: Included within the CA segment is the S&P
book. This can bring an element of short-term earnings volatility
to the group, with the results being particularly sensitive to
investment market movements due to product guarantees. The IFRS
results of Scildon are potentially relatively volatile although
this is, in part, due to reserving methodology rather than 'real
world' value movements.
Growth operation: The long-term financial models of Movestic and
Scildon are based on growth, with levels of new business and
premiums from existing business being targeted to more than offset
the impact of policy attrition, leading to a general increase in
assets under management and, hence, management fee income.
IFRS results
The financial dynamics of Chesnara, as described above, are
reflected in the following IFRS results:
Unaudited Year
6 months ended Ended
30 Jun 22 30 Jun 21 31 Dec 21
GBPm GBPm GBPm Note
==================================================================== ========== ========== ========== =====
UK (16.2) 15.0 35.6 1
Movestic (1.5) 6.7 12.1 2
Waard Group (6.4) 1.3 0.1 3
Scildon (76.0) 6.0 (0.5) 4
Chesnara (12.7) (5.1) (12.6) 5
Consolidation adjustments (2.7) (2.9) (5.8) 6
==================================================================== ========== ========== ========== =====
(Loss)/profit before tax
and acquisitions (115.5) 20.9 28.9
Post completion gain/(loss) on acquisition of subsidiary/portfolio 10.9 (0.1) (0.1) 11
==================================================================== ========== ========== ========== =====
(Loss)/profit before tax (104.6) 20.8 28.8
Tax 36.4 (3.0) (1.5) 7
==================================================================== ========== ========== ========== =====
(Loss)/profit after tax (68.2) 17.8 27.3
Foreign exchange 1.7 (15.9) (23.9) 8
Other comprehensive income - - 0.4
==================================================================== ========== ========== ========== =====
Total comprehensive income (66.5) 1.9 3.8
==================================================================== ========== ========== ========== =====
Unaudited Year
6 months ended Ended
30 Jun 22 30 Jun 21 31 Dec 21
GBPm GBPm GBPm Note
==================================================================== ========== ========== ========== =====
Operating (loss)/profit (10.4) 28.3 40.7 9
Economic (loss) (105.1) (7.4) (11.8) 10
==================================================================== ========== ========== ========== =====
(Loss)/profit before tax and acquisitions (115.5) 20.9 28.9
Post completion gain/(loss) on acquisition of subsidiary/portfolio 10.9 (0.1) (0.1) 11
==================================================================== ========== ========== ========== =====
(Loss)/profit before tax (104.6) 20.8 28.8
Tax 36.4 (3.0) (1.5)
==================================================================== ========== ========== ========== =====
(Loss)/profit after tax (68.2) 17.8 27.3
Foreign exchange 1.7 (15.9) (23.9) 8
Other comprehensive income - - 0.4
==================================================================== ========== ========== ========== =====
Total comprehensive income (66.5) 1.9 3.8
==================================================================== ========== ========== ========== =====
All divisions have recorded IFRS losses in the first half of
2022, predominantly as a result of the adverse economic conditions
prevailing in the period, which have been underpinned by
inflationary pressures and the Ukraine conflict.
Note 1: The UK results include the post-acquisition result of
SLP. Both CA and SLP have reported IFRS losses, underpinned by
investment market related losses, offset by modest operating
profits in the period.
Note 2: The Movestic result also reflects adverse investment
returns due to adverse inflation and interest rate movements,
partially offset by a favourable operational result in relation to
claims development and reduced operational expenses.
Note 3: The Waard Group result reflects economic losses arising
from rising yields in the period. Whilst rising yields are
generally good for the business, under IFRS 4 reserving methods in
the Netherlands, liabilities do not generally reduce in a rising
yield environment, but the associated backing assets tend to fall.
Additionally, the division also incurred some adverse lapse
experience on its mortgage related business. The results also
include the post-acquisition results of its newly acquired Robein
Leven subsidiary which completed in the period.
Note 4 : The Scildon result has been severely impacted by the
impact of adverse spread movements and interest rate increases in
the period. This has been partially offset from operational gains
made from positive mortality and lapse experience.
Note 5 : The Chesnara result largely represents holding company
expenses. The current year loss is higher than last year due to
Tier 2 arrangement and debt servicing costs of GBP7.3m in the
period.
Note 6: Consolidation adjustments relate to items such as the
amortisation and impairment of intangible assets.
Note 7 : The large tax credit in the period is reflective of the
large pre-tax losses that have been recorded in the first half of
the year.
Note 8: Sterling movements against both the euro and Swedish
krona in the period, created a modest exchange gain at the end of
the half-year.
Note 9: The current year operating profit, has seen a decline
across all divisions, in what has been a difficult trading period
for the group.
Note 10: Economic profit, represents the components of the
earnings that are directly driven by movements in economic
variables. These are markedly worse than the prior year
comparative, which reflected a less unstable year for global
investment markets.
Note 11 : This includes the acquisition gains arising on the SLP
and Robein Leven deals in the UK and Netherlands, of GBP10.9m.
RISK MANAGEMENT
Managing risk is a key part of our business model. We achieve
this by understanding the current and emerging risks to the
business, mitigating them where appropriate and ensuring they are
appropriately monitored and managed.
HOW WE MANAGE RISK
RISK MANAGEMENT SYSTEM
The risk management system supports the identification,
assessment, and reporting of risks to monitor and control the
probability and/or impact of adverse outcomes within the board's
risk appetite or to maximise realisation of opportunities.
Strategy: The risk management strategy contains the objectives
and principles of risk management, the risk appetite, risk
preferences and risk tolerance limits.
Policies: The risk management policies implement the risk
management strategy and provide a set of principles (and mandated
activities) for control mechanisms that take into account the
materiality of risks.
Processes: The risk management processes ensure that risks are
identified, measured/ assessed, monitored and reported to support
decision making.
Reporting: The risk management reports deliver information on
the material risks faced by the business and evidence that
principal risks are actively monitored and analysed and managed
against risk appetite.
Chesnara adopts the "three lines of defence" model with a single
set of risk and governance principles applied consistently across
the business.
In all divisions we maintain processes for identifying,
evaluating and managing the material risks faced by the group,
which are regularly reviewed by the divisional and group Audit
& Risk Committees. Our risk assessment processes have regard to
the significance of risks, the likelihood of their occurrence and
take account of the controls in place to manage them. The processes
are designed to manage the risk profile within the board's approved
risk appetite.
Group and divisional risk management processes are enhanced by
stress and scenario testing, which evaluates the impact on the
group of certain adverse events occurring separately or in
combination. The results, conclusions and any recommended actions
are included within divisional and group ORSA Reports to the
relevant boards. There is a strong correlation between these
adverse events and the risks identified in 'Principal risks and
uncertainties'. The outcome of this stress testing provides context
against which the group can assess whether any changes to its risk
appetite or to its management processes are required.
ROLE OF THE BOARD
The Chesnara board is responsible for the adequacy of the design
and implementation of the group's risk management and internal
control system and its consistent application across divisions. All
significant decisions for the development of the group's risk
management system are the group board's responsibility.
Risk and Control Policies
Chesnara has a set of Risk and Control Policies that set out the
key policies, processes and controls to be applied. The Chesnara
board approves the review, updates and attestation of these
policies at least annually.
Strategy and Risk Appetite
Chesnara group and its divisions have a defined risk strategy
and supporting risk appetite framework to embed an effective risk
management framework, culture and processes at its heart and to
create a holistic, transparent and focused approach to risk
identification, assessment, management, monitoring and
reporting.
The Chesnara board approves a set of risk preferences which
articulate, in simple terms, the desire to increase, maintain, or
reduce the level of risk taking for each main category of risk. The
risk position of the business is monitored against these
preferences using risk tolerance limits, where appropriate, and
they are taken into account by the management teams across the
group when taking strategic or operational decisions that affect
the risk profile.
Risk Identification
The group maintains a register of risks which are specific to
its activity and scans the horizon to identify potential risk
events (e.g., political; economic; technological; environmental,
legislative & social).
On an annual basis the board approves the materiality criteria
to be applied in the risk scoring and in the determination of what
is considered to be a principal risk. At least quarterly the
principal and emerging risks are reported to the board, assessing
their proximity, probability and potential impact.
Own Risk and Solvency Assessment (ORSA)
On an annual basis, or more frequently if required, the group
produces a group ORSA Report which aggregates the divisional ORSA
findings and supplements these with an assessment specific to group
activities. The group and divisional ORSA policies outline the key
processes and contents of these reports.
The Chesnara board is responsible for approving the ORSA,
including steering in advance how the assessment is performed and
challenging the results.
Risk Management System Effectiveness
The group and its divisions undertake a formal annual review of
and attestation to the effectiveness of the risk management system.
The assessment considers the extent to which the risk management
system is embedded.
The Chesnara board is responsible for monitoring the Risk
Management System and its effectiveness across the group. The
outcome of the annual review is reported to the group board which
make decisions regarding its further development.
COVID-19
Although COVID-19 has been a material event, and continues to
have economic as well as demographic impacts, restrictions are now
substantially lifted. It is not documented here as a principal risk
in its own right, as the impacts from COVID-19 are already covered
by other principal risks, for example, market risks, mortality risk
and other risks associated with operational failure and business
continuity. The Chesnara group has continued to remain
operationally and financially stable throughout the COVID-19
pandemic, providing a high level of assurance regarding operational
resilience processes and the suitability of the approach taken.
CLIMATE CHANGE RISK WITHIN CHESNARA'S RISK FRAMEWORK
Climate change is not considered as a standalone principal risk.
Instead, the risks arising from climate change are integrated
through existing considerations and events within the framework.
The information in the following pages has been updated to reflect
Chesnara's latest views on the potential implications of climate
change risk and wider developments and activity in relation to
Environmental, Social and Governance (ESG).
Chesnara has embedded climate change risk within the group's
risk framework during the past few years and includes a detailed
assessment as part of the group's regular ORSA exercise, to date
concluding that the group is not materially exposed to climate
change risk.
GEOPOLITICAL UNREST
With the continued Russian attack of Ukraine and more recently
the threat of a Chinese invasion of Taiwan, this is considered as
an emerging risk for Chesnara group in the sense they are rapidly
evolving situations and has potential implications for Chesnara's
Principal risks.
principal risks and uncertainties
The following tables outline the principal risks and
uncertainties of the group. It has been drawn together following
regular assessment, performed by the Audit & Risk Committee, of
the principal risks facing the group, including those that would
threaten its business model, future performance, solvency or
liquidity. The impacts are not quantified in the tables. However,
by virtue of the risks being defined as principal, the impacts are
potentially significant. Those risks with potential for a material
financial impact are covered within the sensitivities.
PR1 INVESTMENT AND LIQUIDITY RISK
DESCRIPTION Exposure to financial losses or value reduction arising from
adverse movements in currency, investment markets, counterparty
defaults, or through inadequate asset liability matching.
-------------------------------------------------------------------
RISK APPETITE The group accepts this risk but has controls in place to prevent
any increase or decrease in the risk exposure beyond set levels.
These controls will result in early intervention if the amount
of risk approaches those limits.
-------------------------------------------------------------------
POTENTIAL Market risk results from fluctuations in asset values, foreign
IMPACT exchange rates and interest rates and has the potential to affect
the group's ability to fund its commitments to customers and
other creditors, as well as pay a return to shareholders.
-------------------------------------------------------------------
COVID-19 Chesnara continues to monitor this closely given the heightened
level of uncertainty and volatility but remains within risk
appetite in terms of its exposures.
-------------------------------------------------------------------
CLIMATE CHANGE Chesnara's risk analysis of transition risk demonstrates that
RISK this is well within its risk appetite and within its standard
economic sensitivities.
-------------------------------------------------------------------
UKRAINE CONFLICT The group has limited exposure in terms of investments in Russian
funds or companies via customer unit linked funds, and we are
working with customers that are exposed to help them.
-------------------------------------------------------------------
PR2 REGULATORY CHANGE RISK (INCLUDING BREXIT)
DESCRIPTION The risk of adverse changes in industry practice/regulation,
or inconsistent application of regulation across territories.
------------------------------------------------------------------------
RISK APPETITE The group aims to minimise any exposure to this risk, to the
extent possible, but acknowledges that it may need to accept
some risk as a result of carrying out business.
------------------------------------------------------------------------
POTENTIAL Chesnara currently operates in three regulatory domains and
IMPACT is therefore exposed to potential for inconsistent application
of regulatory standards across divisions, such as the imposition
of higher capital buffers over and above regulatory minimum
requirements. Potential consequences of this risk for Chesnara
are the constraining of efficient and fluid use of capital within
the group or creating a non-level playing field with respect
to future new business/acquisitions.
Regulatory developments continue to drive a high level of change
activity across the group, with items such as operational resilience,
climate change and IFRS17 being particularly high profile. Such
regulatory initiatives carry the risk of expense overruns should
it not be possible to adhere to them in a manner that is proportionate
to the nature and scale of Chesnara's businesses. The group
is therefore exposed to the risk of:
* incurring one-off costs of addressing regulatory
change as well as any permanent increases in the cost
base in order to meet enhanced standards;
* erosion in value arising from pressure or enforcement
to reduce future policy charges;
* erosion in value arising from pressure or enforcement
to financially compensate for past practice; and
* regulatory fines or censure in the event that it is
considered to have breached standards or fails to
deliver changes to the required regulatory standards
on a timely basis.
------------------------------------------------------------------------
PR3 ACQUISITION RISK
DESCRIPTION The risk of failure to source acquisitions that meet Chesnara's
criteria or the execution of acquisitions with subsequent unexpected
financial losses or value reduction.
------------------------------------------------------------------------
RISK APPETITE Chesnara has a patient approach to acquisition and generally
expects acquisitions to enhance EcV and expected cash generation
in the medium term (net of external financing), though each
opportunity will be assessed on its own merits.
------------------------------------------------------------------------
POTENTIAL The acquisition element of Chesnara's growth strategy is dependent
IMPACT on the availability of attractive future acquisition opportunities.
Hence, the business is exposed to the risk of a reduction in
the availability of suitable acquisition opportunities within
Chesnara's current target markets, for example arising as a
result of a change in competition in the consolidation market
or from regulatory change influencing the extent of life company
strategic restructuring.
Through the execution of acquisitions, Chesnara is also exposed
to the risk of erosion of value or financial losses arising
from risks inherent within businesses or funds acquired which
are not adequately priced for or mitigated as part of the transaction.
------------------------------------------------------------------------
PR4 DEMOGRAPHIC EXPERIENCE RISK
DESCRIPTION Risk of adverse demographic experience compared with assumptions
(such as rates of mortality, morbidity, persistency etc.)
---------------------------------------------------------------------
RISK APPETITE The group accepts this risk but restricts its exposure, to the
extent possible, through the use of reinsurance and other controls.
Early warning trigger monitoring is in place to track any increase
or decrease in the risk exposure beyond a set level, with action
taken to address any impact as necessary.
---------------------------------------------------------------------
POTENTIAL In the event that demographic experience (rates of mortality,
IMPACT morbidity, persistency etc.) varies from the assumptions underlying
product pricing and subsequent reserving, more or less profit
will accrue to the group.
The effect of recognising any changes in future demographic
assumptions at a point in time would be to crystallise any expected
future gain or loss on the balance sheet.
If mortality or morbidity experience is higher than that assumed
in pricing contracts (i.e. more death and sickness claims are
made than expected), this will typically result in less profit
accruing to the group.
If persistency is significantly lower than that assumed in product
pricing and subsequent reserving, this will typically lead to
reduced group profitability in the medium to long-term, as a
result of a reduction in future income arising from charges
on those products. The effects of this could be more severe
in the case of a one-off event resulting in multiple withdrawals
over a short period of time (a "mass lapse" event).
---------------------------------------------------------------------
COVID-19 Chesnara does not expect the pandemic to have a material impact
on mortality experience and costs in the long-term.
---------------------------------------------------------------------
PR5 EXPENSE RISK
DESCRIPTION Risk of expense overruns and unsustainable unit cost growth.
-----------------------------------------------------------------------
RISK APPETITE The group aims to minimise its exposure to this risk, to the
extent possible, but acknowledges that it may need to accept
some risk as a result of carrying out business.
-----------------------------------------------------------------------
POTENTIAL The group is exposed to expenses being higher than expected
IMPACT as a result of one-off increases in the underlying cost of performing
key functions, or through higher inflation of variable expenses.
A key underlying source of potential increases in regular expense
is the additional regulatory expectations on the sector.
For the closed funds, the group is exposed to the impact on
profitability of fixed and semi-fixed expenses, in conjunction
with a diminishing policy base.
For the companies open to new businesses, the group is exposed
to the impact of expense levels varying adversely from those
assumed in product pricing. Similar, for acquisitions, there
is a risk that the assumed costs of running the acquired business
allowed for in pricing are not achieved in practice, or any
assumed cost synergies with existing businesses are not achieved.
-----------------------------------------------------------------------
COVID-19, Inflation has materially increased during 2021 and 2022 in all
BREXIT & UKRAINE territories including primarily due to economic supply and demand
impacts of Brexit, COVID-19 and the Ukraine War. Expense assumptions
have been updated appropriately, though it is acknowledged that
there is a greater level of uncertainty regarding the assumption
for future inflation levels.
-----------------------------------------------------------------------
PR6 OPERATIONAL RISK
DESCRIPTION Significant operational failure/business continuity event.
--------------------------------------------------------------------
RISK APPETITE The group aims to minimise its exposure to this risk, to the
extent possible, but acknowledges that it may need to accept
some risk as a result of carrying out business.
--------------------------------------------------------------------
POTENTIAL The group and its subsidiaries are exposed to operational risks
IMPACT which arise through daily activities and running of the business.
Operational risks may, for example, arise due to technical or
human errors, failed internal processes, insufficient personnel
resources or fraud caused by internal or external persons. As
a result, the group may suffer financial losses, poor customer
outcomes, reputational damage, regulatory intervention or business
plan failure.
Part of the group's operating model is to outsource support
activities to specialist service providers. Consequently, a
significant element of the operational risk arises within its
outsourced providers.
--------------------------------------------------------------------
COVID-19 In response to COVID-19, Chesnara, its subsidiaries and outsourced
service providers all adapted to remote working conditions,
utilising communication technology as required and implementation
of additional controls. Most parts of the business have adopted
hybrid working arrangements which has become a "new normal"
working practice, with suitable additional risk controls deployed
as appropriate.
--------------------------------------------------------------------
PR7 IT / DATA SECURITY & CYBER RISK
DESCRIPTION Risk of IT/ data security failures or impacts of malicious cyber-crime
(including ransomware) on continued operational stability.
-------------------------------------------------------------------------
RISK APPETITE The group aims to minimise its exposure to this risk, to the
extent possible, but acknowledges that it may need to accept
some risk as a result of carrying out business.
-------------------------------------------------------------------------
POTENTIAL Cyber risk is a growing risk affecting all companies, particularly
IMPACT those who are custodians of customer data. The most pertinent
risk exposure relates to information security (i.e. protecting
business sensitive and personal data) and can arise from failure
of internal processes and standards, but increasingly companies
are becoming exposed to potential malicious cyber-attacks, organisation
specific malware designed to exploit vulnerabilities, phishing
attacks etc. The extent of Chesnara's exposure to such threats
also includes third party service providers.
The potential impact of this risk includes financial losses,
inability to perform critical functions, disruption to policyholder
services, loss of sensitive data and corresponding reputational
damage or fines.
-------------------------------------------------------------------------
COVID-19 The move to remote working, as a result of COVID-19, had the
potential to increase cyber risk for businesses and therefore
various steps were taken to enhance security, processes and
controls to protect against this.
-------------------------------------------------------------------------
UKRAINE CONFLICT Cyber-crime campaigns originating from Russia have increased,
with some suppliers reporting an increase in information security
threats, which some are saying is state sponsored. Although
Chesnara is not necessarily considered to be a direct target
of any such campaigns, all business units have confirmed that
they have increased monitoring and detection/ protection controls
in relation to the increased threat.
-------------------------------------------------------------------------
PR8 NEW BUSINESS RISK
DESCRIPTION Adverse new business performance compared with projected value.
---------------------------------------------------------------------
RISK APPETITE Chesnara does not wish to write new business that does not generate
positive new business value (on a commercial basis) over the
business planning horizon.
---------------------------------------------------------------------
POTENTIAL If new business performance is significantly lower than the
IMPACT projected value, this will typically lead to reduced value growth
in the medium to long-term. A sustained low level performance
may lead to insufficient new business profits to justify remaining
open to new business.
---------------------------------------------------------------------
COVID-19 Overall volumes during the pandemic were lower than historic
levels, largely as a result of restrictions on face-to-face
sales meetings and customer demand. There is potential for COVID-19
to influence the operating environment on a long-term basis
and drive changes in competitor, regulator or counterparty (e.g.
broker) behaviours. For example, any restrictions on Brokers
meeting new customers face to face could result in increased
focus on the existing customers and risk of churn.
---------------------------------------------------------------------
PR9 REPUTATIONAL RISK
DESCRIPTION Poor or inconsistent reputation with customers, regulators,
investors, staff or other key stakeholders/counterparties.
-----------------------------------------------------------------------
RISK APPETITE The group aims to minimise its exposure to this risk, to the
extent possible, but acknowledges that it may need to accept
some risk as a result of carrying out business.
-----------------------------------------------------------------------
POTENTIAL The group is exposed to the risk that litigation, employee misconduct,
IMPACT operational failures, the outcome of regulatory investigations,
press speculation and negative publicity, disclosure of confidential
client information (including the loss or theft of customer
data), IT failures or disruption, cyber security breaches and/or
inadequate services, amongst others, whether true or not, could
impact its brand or reputation. The group's brand and reputation
could also be affected if products or services recommended by
it (or any of its intermediaries) do not perform as expected
(whether or not the expectations are realistic) or in line with
the customers' expectations for the product range.
Any damage to the group's brand or reputation could cause existing
customers or partners to withdraw their business from the group,
and potential customers or partners to elect not to do business
with the Group and could make it more difficult for the group
to attract and retain qualified employees.
-----------------------------------------------------------------------
CLIMATE CHANGE The group is exposed to strategic and reputational risks arising
RISK from its action or inaction in response to climate change as
well the regulatory and reputational risks arising from its
public disclosures on the matter.
-----------------------------------------------------------------------
UKRAINE CONFLICT In relation to the Ukraine / Russia conflict, no material exposure
has been identified in terms of the group's key counterparty
connections. There are limited indirect connections through
third parties who have a presence in Russia.
-----------------------------------------------------------------------
GOING CONCERN
After making appropriate enquiries, including consideration of
the ongoing high inflation environment, the impacts of the ongoing
invasion of Ukraine and to a lesser extent, the reducing impact of
COVID-19 on the group's operations and financial position and
prospects, the directors confirm that they are satisfied that the
company and the group have adequate resources to continue in
business for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in the preparation of the financial
statements.
In performing this work, the board has considered the current
solvency and cash position of the group and company, coupled with
the group's and company's projected solvency and cash position as
highlighted in its most recent business plan and Own Risk and
Solvency Assessment (ORSA) process. These processes consider the
financial projections of the group and its subsidiaries on both a
base case and a range of stressed scenarios, covering projected
solvency, liquidity, EcV and IFRS positions. In particular these
projections assess the cash generation of the life insurance
divisions and how these flow up into the Chesnara parent company
balance sheet, with these cash flows being used to fund debt
repayments, shareholder dividends and the head office function of
the parent company. The directors believe these scenarios will
encompass any potential future impact of high inflation, the
Ukraine crisis and COVID-19 on the group, as Chesnara's most
material ongoing exposure to these potential threats are any
associated future investment market impacts. Underpinning the
projections process outlined above are a number of assumptions. The
key ones include:
- We do not assume that a future acquisition needs to take place to make this assessment.
- We make long term investment return assumptions on equities and fixed income securities.
- The base case scenario assumes exchange rates remain stable,
and the impact of adverse rate changes are assessed through
scenario analysis.
- Levels of new business volumes and margins are assumed.
- The projections apply the most recent actuarial assumptions,
such as mortality and morbidity, lapses and expenses.
The group's strong capital position and business model, provides
a degree of comfort that although the high inflation environment,
ongoing Ukraine crisis and COVID-19 all have the potential to cause
further significant global economic disruption, the group and the
company remain well capitalised and has sufficient liquidity. As
such we can continue to remain confident that the group will
continue to be in existence in the foreseeable future. The
information in the Capital Management section indicates a strong
Solvency II position as at 30 June 2022 as measured at both the
individual regulated life company levels and at the group level. As
well as being well-capitalised the group also has a healthy level
of cash reserves to be able to meet its debt obligations as they
fall due and does not rely on the renewal or extension of bank
facilities to continue trading. This position has been further
enhanced in early 2022, when the company announced the successful
pricing of its inaugural debt capital markets issuance of GBP200m
Tier 2 Subordinated Notes, the net proceeds of which are being
utilised for corporate purposes, including investments and
acquisitions.
The group's subsidiaries rely on cash flows from the maturity or
sale of fixed interest securities which match certain obligations
to policyholders, which brings with it the risk of bond default. In
order to manage this risk, we ensure that our bond portfolio is
actively monitored and well diversified. Other significant
counterparty default risk relates to our principal reinsurers. We
monitor their financial position and are satisfied that any
associated credit default risk is low.
Whilst there was some short-term operational disruption from
dealing with the restricted operating environment in light of
COVID-19, our assessment has shown that both our internal functions
and those operated by our key outsourcers and suppliers adapted to
these restrictions and do not cause any issues as to our going
concern.
DIRECTORS' RESPONSIBILITIES STATEMENT
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in
accordance with United Kingdom adopted IAS 34 'Interim Financial
Reporting';
- the management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
- the management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the board
Luke Savage Steve Murray
Chairman Chief Executive Officer
30 August 2022 30 August 2022
INDEPENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF CHESNARA
PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated statement of cash
flows and related notes 1 to 9.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE (UK), however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the group a conclusion on the
condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. Our work
has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the
conclusions we have formed.
Deloitte LLP
Birmingham
United Kingdom
30 August 2022
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
Unaudited Year ended 31 December
Six months ended
30 June
2022 2021 2021
Note GBP000 GBP000 GBP000
=============================================== ====== ============= ========= ======================
Insurance premium revenue 160,421 152,291 312,046
Insurance premium ceded to reinsurers (22,392) (20,610) (115,881)
======================================================= ============= ========= ======================
Net insurance premium revenue 138,029 131,681 196,165
Fee and commission income 46,272 45,732 89,975
Net investment return (1,517,897) 621,272 1,172,988
Other operating income 22,898 23,491 46,568
======================================================= ============= ========= ======================
Total income net of investment return (1,310,698) 822,176 1,505,696
======================================================= ============= ========= ======================
Insurance contract claims and benefits incurred
Claims and benefits paid to insurance contract holders (240,339) (255,462) (506,490)
Net increase/(decrease) in insurance contract
provisions 419,640 (38,308) (23,577)
Reinsurers' share of claims and benefits 7,714 14,149 60,168
============= ========= ======================
Net insurance contract claims and benefits 187,015 (279,621) (469,899)
============= ========= ======================
Change in investment contract liabilities 1,092,743 (470,272) (902,579)
Reinsurers' share of investment contract liabilities (2,755) 2,635 4,110
============= ========= ======================
Net change in investment contract liabilities 1,089,988 (467,637) (898,469)
============= ========= ======================
Fees, commission and other acquisition costs (19,322) (11,848) (24,023)
Administrative expenses (44,338) (33,316) (67,925)
Other operating expenses
Charge for amortisation of acquired value of in-force
business (3,508) (4,107) (8,184)
Charge for amortisation of acquired value of customer
relationships (23) (28) (55)
Other (5,410) (3,698) (5,964)
======================================================= ============= ========= ======================
Total expenses net of change in insurance contract
provisions and investment contract liabilities 1,204,402 (800,255) (1,474,519)
======================================================= ============= ========= ======================
Total income less expenses (106,296) 21,921 31,177
Post completion gains/(losses) on acquisitions 7 10,866 (94) (93)
Financing costs (9,180) (990) (2,272)
======================================================= ============= ========= ======================
(Loss)/profit before income taxes 4 (104,610) 20,837 28,812
Income tax credit/(expense) 36,418 (2,982) (1,518)
======================================================= ============= ========= ======================
(Loss)/profit for the period 4 (68,192) 17,855 27,294
Foreign exchange translation differences arising on
the revaluation of foreign operations 1,666 (15,948) (23,879)
Revaluation of land and building 25 (3) 369
======================================================= ============= ========= ======================
Other comprehensive income for the year, net of tax 1,691 (15,951) (23,510)
======================================================= ============= ========= ======================
Total comprehensive income for the period (66,501) 1,904 3,784
======================================================= ============= ========= ======================
Basic earnings per share (based on profit for
the period) 2 (45.42)p 11.90p 18.18p
=============================================== ========= ============= ========= ======================
Diluted earnings per share (based on profit for
the period) 2 (44.87)p 11.81p 18.00p
=============================================== ========= ============= ========= ======================
CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
Unaudited Year ended
as at 31 December
30 June
2022 2021 2021
Note GBP000 GBP000 GBP000
================================================================= ===== ========== ========= ============
Assets
Intangible assets
Deferred acquisition costs 62,724 65,417 63,327
Acquired value of in-force business 112,000 54,701 49,629
Acquired value of customer relationships 292 358 320
Software assets 8,743 8,486 8,885
Property and equipment 7,363 7,635 7,830
Investment properties 81,478 1,073 1,071
Reinsurers' share of insurance contract provisions 222,523 190,737 247,750
Amounts deposited with reinsurers 34,147 38,014 38,295
Financial assets
Equity securities at fair value through income 229,103 5,562 6,352
Holdings in collective investment schemes at fair value through
income 8,181,768 6,871,529 6,858,054
Debt securities at fair value through income 963,168 1,002,546 978,199
Policyholders' funds held by the group 858,010 502,051 990,700
Financial assets held at amoritised cost 302,637 319,652 293,811
Derivative financial instruments 25 137 264
========== ========= ============
Total financial assets 10,534,711 8,701,477 9,127,380
========== ========= ============
Insurance and other receivables 49,528 44,135 35,613
Prepayments 14,495 12,431 13,245
Reinsurers' share of accrued policyholder claims 14,737 18,096 16,340
Income taxes 11,449 5,978 7,233
Cash and cash equivalents 209,482 72,595 70,087
======================================================================== ========== ========= ============
Total assets 4 11,363,672 9,221,133 9,687,005
================================================================= ===== ========== ========= ============
Liabilities
Insurance contract provisions 3,845,631 3,874,578 3,818,412
Other provisions 12,110 681 992
Financial liabilities
Investment contracts at fair value through income 5,776,414 4,135,734 4,120,572
Liabilities relating to policyholders' funds held by the group 858,010 502,051 990,700
Lease contract liabilities 1,651 2,361 2,019
Borrowings 5 214,782 51,574 47,185
Derivative financial instruments 473 126 -
========== ========= ============
Total financial liabilities 6,851,330 4,691,846 5,160,476
========== ========= ============
Deferred tax liabilities 41,111 16,450 15,699
Reinsurance payables 59,265 4,403 70,414
Payables related to direct insurance and investment contracts 121,497 101,988 129,262
Deferred income 2,591 3,061 2,809
Income taxes 10,832 6,002 6,527
Other payables 48,448 52,312 23,991
Bank overdrafts 790 1,918 256
======================================================================== ========== ========= ============
Total liabilities 4 10,993,605 8,753,239 9,228,838
================================================================= ===== ========== ========= ============
Net assets 370,067 467,894 458,167
======================================================================== ========== ========= ============
Shareholders' equity
Share capital 7,496 7,496 7,496
Merger reserve 36,272 36,272 36,272
Share premium 142,085 142,172 142,085
Other reserves 8,953 14,821 7,262
Retained earnings 3 175,261 267,133 265,052
================================================================= ===== ========== ========= ============
Total shareholders' equity 370,067 467,894 458,167
======================================================================== ========== ========= ============
Approved by the Board of Directors and authorised for issue on
30 August 2022 and signed on its behalf by:
Luke Savage Steve Murray
Chairman Chief Executive Officer
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Unaudited Year ended 31 December
Six months ended
30 June
2022 2021 2021
GBP000 GBP000 GBP000
--------------------------------------------------------------- ---------- --------- ----------------------
(Loss)/(profit for the period (68,192) 17,855 27,294
Adjustments for:
Depreciation of property and equipment 355 351 749
Amortisation of deferred acquisition costs 4,082 6,818 13,370
Amortisation of acquired value of in-force business 3,098 3,684 8,184
Amortisation of acquired value of customer relationships 23 28 55
Amortisation of software assets 895 36 1,382
Depreciation on right of use assets 346 320 739
Interest on lease liabilities 17 23 95
Share based payment 504 282 593
Tax (recovery)/paid (36,417) 2,961 1,518
Interest receivable (5,696) (1,268) (2,269)
Dividends receivable (1,461) (1,529) (614)
Interest expense 9,163 967 2,177
Fair value gains/(losses) on financial assets 1,280,945 (597,225) (990,914)
Profit on business combination (10,565) - -
Increase in intangible assets related to insurance and
investment contracts (314) (6,484) (8,938)
Interest received 6,216 2,395 2,493
Dividends received 1,292 2,401 1,930
Changes in operating assets and liabilities:
Decrease/(Increase) in financial assets (13,825) 68,929 (187,975)
Decrease/(increase) in reinsurers share of insurance contract
provisions 27,363 2,857 (37,747)
Decrease/(increase) in amounts deposited with reinsurers 4,148 (988) 5,858
Decrease/(increase) in insurance and other receivables 9,298 (2,172) 5,980
(Increase)/decrease in prepayments (1,236) 275 (873)
(Decrease) /increase in insurance contract provisions (268,001) 21,089 15,534
(Decrease) /increase in investment contract liabilities (986,315) 482,409 1,098,809
Increase in provisions 1,327 102 445
(Decrease) /increase in reinsurance payables (11,152) 1,674 67,766
(Decrease) /increase in payables related to direct insurance and
investment contracts (18,639) 7,128 35,701
Increase/(decrease) in other payables 6,472 2,708 (24,950)
------------------------------------------------------------------ ---------- --------- ----------------------
Cash (utilised)/generated from operations (66,269) 15,626 36,392
Income tax paid 9,390 (9,440) (9,796)
------------------------------------------------------------------ ---------- --------- ----------------------
Net cash generated from operating activities (56,879) 6,186 26,596
------------------------------------------------------------------ ---------- --------- ----------------------
Cash flows from investing activities
Business combinations 59,766 - -
Development of software - (1,209) -
Purchases of property and equipment (1,005) 741 (3,636)
Net cash generated/(utilised) by investing activities 58,761 (468) (3,636)
------------------------------------------------------------------ ---------- --------- ----------------------
Cash flows from financing activities
Proceeds from issue of share premium - 87 -
Proceeds from Tier 2 debt 200,000 - -
Repayment of borrowings (32,097) (12,777) (16,102)
Repayment of principal under lease liabilities (361) (404) (598)
Dividends paid (22,103) (21,445) (33,276)
Interest paid (9,178) (989) (2,271)
------------------------------------------------------------------ ---------- --------- ----------------------
Net cash generated/(utilised) by from financing activities 136,261 (35,528) (52,247)
------------------------------------------------------------------ ---------- --------- ----------------------
Net increase/(decrease) in cash and cash equivalents 138,143 (29,810) (29,287)
Cash and cash equivalents at beginning of period 69,831 103,706 103,706
Effect of exchange rate changes on cash and cash equivalents 718 (3,219) (4,588)
================================================================== ========== ========= ======================
Cash and cash equivalents at end of the period 208,692 70,677 69,831
------------------------------------------------------------------ ---------- --------- ----------------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
Unaudited six
months ended
30 June 2022
Merger Other Treasury Retained
Share capital Share premium reserve reserves shares earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------------- ------------- ------------- ------------- ------------- ------------ --------
Equity
shareholders'
funds at 1
January 2022 7,496 142,085 36,272 7,262 - 265,052 458,167
Loss for the
period - - - - - (68,192) (68,192)
Dividends paid - - - - - (22,103) (22,103)
Foreign
exchange
translation
differences - - - 1,666 - - 1,666
Revaluation of
land and
building - - - 25 - -- 25
Issue of share
capital - - - - - - -
Issue of share
premium - - - - - - -
Share based
payment - - - - - 504 504
-------------- ------------- ------------- ------------- ------------- ------------- ------------ --------
Equity
shareholders'
funds at 30
June 2022 7,496 142,085 36,272 8,953 - 175,261 370,067
-------------- ------------- ------------- ------------- ------------- ------------- ------------ --------
Unaudited six
months ended 30
June 2021
Merger Other Treasury Retained
Share capital Share premium reserve reserves shares earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------- ------------- ------------- ------------- ------------ ------------ --------
Equity
shareholders'
funds at 1
January 2021
(as previously
stated) 43,768 142,085 - 30,772 - 270,442 487,067
Transfer to
merger reserve (36,272) - 36,272 - - - -
Equity
shareholders'
funds at 1
January 2021
(restated) 7,496 142,085 36,272 30,772 - 270,442 487,067
Profit for the
year - - - - - 17,855 17,855
Dividends paid - - - - - (21,446) (21,446)
Foreign
exchange
translation
differences - - - (15,948) - - (15,948)
Revaluation of
land and
building - - - (3) - -- (3)
Issue of share -
capital - - - - - -
Issue of share
premium - 87 - - - - 87
Share based
payment - - - - - 282 282
--------------- ------------- ------------- ------------- ------------- ------------ ------------ --------
Equity
shareholders'
funds at 30
June 2021 7,496 142,172 36,272 14,821 - 267,133 467,894
--------------- ------------- ------------- ------------- ------------- ------------ ------------ --------
Year ended 31
December 2021
Merger Other Treasury Retained
Share capital Share premium reserve reserves shares earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------- ------------- ------------- ------------- ------------ ------------ --------
Equity
shareholders'
funds at 1
January 2021
(as previously
stated) 43,768 142,085 - 30,772 - 270,442 487,067
Transfer to
merger reserve (36,272) - 36,272 - - - -
Equity
shareholders'
funds at 1
January 2021
(restated) 7,496 142,085 36,272 30,772 - 270,442 487,067
Profit for the
year - - - - - 27,294 27,294
Dividends paid - - - - - (33,277) (33,277)
Foreign
exchange
translation
differences - - - (23,879) - - (23,879)
Revaluation of
land and
building - - - 369 - -- 369
Issue of share -
capital - - - - - -
Issue of share -
premium - - - - -
Share based
payment - - - - - 593 593
--------------- ------------- ------------- ------------- ------------- ------------ ------------ --------
Equity
shareholders'
funds at 31
December 2021 7,496 142,085 36,272 7,262 - 265,052 458,167
--------------- ------------- ------------- ------------- ------------- ------------ ------------ --------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Basis of presentation
The annual financial statements of Chesnara are prepared in
accordance with United Kingdom adopted International Financial
Reporting Standards. This condensed set of consolidated financial
statements has been prepared in accordance with United Kingdom
adopted IAS 34 'Interim Financial Reporting'. As required by the
Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed set of consolidated financial statements
has been prepared applying the accounting policies and presentation
which were applied in the preparation of the group's published
consolidated financial statements for the year ended 31 December
2021.
Any judgements and estimates applied in the condensed set of
financial statements are consistent with those applied in the
preparation of the group's published consolidated financial
statements for the year ended 31 December 2021.
The financial information shown in these interim financial
statements is unaudited and does not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006.
The comparative figures for the financial year ended 31 December
2021 are not the company's statutory accounts for that financial
year. Those accounts have been reported on by the company's auditor
and delivered to the Registrar of Companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
Going concern
After making appropriate enquiries, including detailed
consideration of the impact on the group's operations and financial
position and prospects, the directors confirm that they are
satisfied that the company and the group have adequate resources to
continue in business for the foreseeable future, a period of not
less than 12 months from the date of this report. Accordingly, they
continue to adopt the going concern basis in the preparation of
these half year financial statements. Further detail on the key
considerations made by the directors in making this assessment has
been included in the 'Going Concern' section of this interim
report.
IFRS 17
The new accounting standard for insurance contracts, IFRS 17, is
effective for periods ending on or after 1 January 2023. IFRS 9
Financial Instruments is also effective for insurers from that
date. IFRS 17 will significantly change how the group measures and
reports its insurance contracts. Implementation activities
continued during the period with the groupwide calculation engine
going live and divisions completing dry runs and system/process
refinements. We have also continued to work with our auditors on
the technical decisions and operational processes underpinning the
implementation. These implementation activities are ongoing and the
remaining time to live reporting for IFRS 17 and IFRS 9 will be
spent performing further dry runs. Beyond the information above, it
is not practicable to provide a reasonable estimate of the effect
of these standards until further work is performed.
Judgements and estimates
Critical accounting judgements and key sources of estimation and
uncertainty remain largely unchanged from those described in Note 3
of the 2021 Annual Report and Accounts. The potential impact on the
group has been considered in the preparation of these half year
condensed financial statements, including management's evaluation
of critical accounting judgements and estimates, which has led to
the following assessments being undertaken: -
Estimate of future operating expenses - Sanlam Life &
Pensions (UK) Limited ( SLP): One of the key components
underpinning the acquisition accounting for SLP, is the estimation
of future operating expenses under Chesnara ownership and in
particular, those relating to the cost of outsourcing the day to
day operations of the business to a third party service provider.
At the time of calculating the initial impact of the acquisition,
we have estimated those costs based upon a range of quotes obtained
from prospective service providers. It is however recognised, that
until an outsource partner has been selected and contract terms put
in place, these estimated costs are potentially subject to
change.
2. Earnings per share
Earnings per share are based on the following:
Unaudited Year ended 31 December
Six months ended
30 June
2022 2021 2021
=============================================================== =========== =========== ======================
Profit/(loss) for the period attributable to shareholders
(GBP000) (68,192) 17,855 27,294
Weighted average number of ordinary shares 150,153,465 150,091,045 150,118,548
Basic earnings per share (45.42)p 11.90p 18.18p
Diluted earnings per share (44.87)p 11.81p 18.00p
The weighted average number of ordinary shares in respect of the
six months ended 30 June 2022 is based upon 150,145,602 shares in
issue at the beginning of the period and 150,157,451 at the end of
the period. No shares were held in treasury.
The six months ended 30 June 2021 is based upon 150,065,457
shares in issue at the beginning of the period, and 150,145,602
shares in issue at the end of the period. No shares were held in
treasury.
The weighted average number of ordinary shares in respect of the
year ended 31 December 2021 is based upon 150,145,602 shares. in
issue at the beginning of the period and 150,061,567 shares in
issue at the end of the period. No shares were held in
treasury.
There were 1,815,601 share options outstanding at 30 June 2022
(30 June 2021: 1,092,286). Accordingly, there is dilution of the
average number of ordinary shares in issue. There were 1,501,566
share options outstanding as at 31 December 2021.
3. Retained earnings
Unaudited
Six months ended
30 June Year ended 31 December
2022 2021 2021
GBP000 GBP000 GBP000
=============================================================== =========== ========== ======================
Retained earnings attributable to equity holders of the parent
company comprise:
Balance at 1 January 265,052 270,442 270,442
(Loss)/profit for the period (68,192) 17,855 27,294
Share based payment 504 282 593
Dividends:
Final approved and paid for 2020 - (21,446) (21,446)
Interim approved and paid for 2021 - - (11,831)
Final approved and paid for 2021 (22,103) - -
================================================================== =========== ========== ======================
Balance at period end 175,261 267,133 265,052
================================================================== =========== ========== ======================
The interim dividend in respect of 2021, approved and paid in
2021 was paid at the rate of 7.88p per share.
The final dividend in respect of 2021, approved and paid in
2022, was paid at the rate of 14.72p per share so that the total
dividend paid to the equity shareholders of the company in respect
of the year ended 31 December 2021 was made at the rate of 22.60p
per share.
An interim dividend of 8.12p per share in respect of the year
ending 31 December 2022 payable on 21 October 2022 to equity
shareholders of the company registered at the close of business on
9 September 2022, the dividend record date, was approved by the
Directors after the balance sheet date. The resulting dividend of
GBP12.2m has not been provided for in these financial statements
and there are no income tax consequences.
The following table summarises dividends per share in respect of
the six-month period ended 30 June 2022 and the year ended 31
December 2021:
Six months ended Year ended 31
30 June 2022 December 2021
Pence Pence
============================================= ================== =============
Interim - approved/paid 8.12 7.88
Final - proposed/paid - 14.72
================================================ ================== =============
Total 8.12 22.60
================================================ ================== =============
4. Operating segments
The group considers that it has no product or distribution-based
business segments. It reports segmental information on the same
basis as reported internally to the Chief Operating Decision Maker,
which is the Board of Directors of Chesnara plc.
The segments of the group as at 30 June 2022 comprise:
UK: This segment represents the group's UK life insurance and
pensions run-off portfolio and comprises the original business of
Countrywide Assured plc, the group's principal UK operating
subsidiary, and of City of Westminster Assurance Company Limited
which was acquired in 2005 and the long-term business of which was
transferred to Countrywide Assured plc during 2006. This segment
also contains Save & Prosper Insurance Limited which was
acquired on 20 December 2010 and its then subsidiary Save &
Prosper Pensions Limited. The S&P business was transferred to
CA during 2011. This segment also contains the business of
Protection Life, which was purchased on 28 November 2013 and the
business of which was transferred to CA effective from 1 January
2015. This also includes the acquisition of Sanlam Life and
Pensions (UK) Limited (SLP) on 28 April 2022. CA & SLP are
responsible for conducting unit-linked and non-linked business.
Additionally CA has a with-profits portfolio, which carries
significant additional market risk, as described in note 6
'Management of financial risk' of the 2021 Annual Report and
Accounts.
Movestic: This segment comprises the group's Swedish life and pensions business, Movestic Livförsäkring AB (Movestic) and its subsidiary and associated companies, which are open to new business and which are responsible for conducting both pensions, savings, including unit-link and custodian business, and providing some life and health product offerings.
Waard Group: This segment represents the group's Dutch life and
general insurance business which is in run-off, acquired on 19 May
2015 and which comprises the two insurance companies Waard Leven
N.V. and Waard Schade N.V., and a servicing company, Waard
Verzekeringen B.V. On 25 November 2021, Waard entered into an
agreement with Monument Re Group to acquire a Robein Leven, a
specialist provider of traditional and linked savings products,
mortgages and annuities in the Netherlands. The acquisition was
successfully completed on 28 April 2022, thereby extending the
existing group. The Waard Group's policy base is predominantly made
up of term life policies, although also includes unit-linked
policies and some non-life policies, covering risks such as
occupational disability and unemployment. This segment is closed to
new business.
Scildon: This segment represents the group's open Dutch life
insurance business, which was acquired on 5 April 2017. Scildon's
policy base is predominantly made up of individual protection and
savings contracts. It is open to new business and sells protection,
individual savings and group pension contracts via a broker-led
distribution model.
Other group activities: The functions performed by the ultimate
holding company within the group, Chesnara plc, are defined under
the operating segment analysis as Other group activities. Also
included therein are consolidation and elimination adjustments.
The accounting policies of the segments are the same as those
for the group as a whole. Any transactions between the business
segments are on normal commercial terms in normal market
conditions. The group evaluates performance of operating segments
on the basis of the profit before tax attributable to shareholders
and on the total assets and liabilities of the reporting segments
and the group. There were no changes to the measurement basis for
segment profit during the six months ended 30 June 2022.
(i) Segmental income statement for the six months ended 30 June 2022
Movestic Waard Group Scildon Other Group Activities Total
(UK) (Sweden) (Netherlands) (Netherlands)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- --------- ---------- ------------- ------------- ---------------------- -----------
Insurance premium
revenue 17,063 6,123 16,296 120,939 - 160,421
Insurance premium ceded
to reinsurers (7,247) (2,244) (1,877) (11,024) - (22,392)
Net insurance premium
revenue 9,816 3,879 14,419 109,915 - 138,029
Fee and commission
income 14,362 7,546 75 24,289 - 46,272
Net investment return (349,385) (891,034) (14,264) (265,356) 2,142 (1,517,897)
Other operating income 6,106 16,792 - - - 22,898
----------------------- --------- ---------- ------------- ------------- ---------------------- -----------
Segmental revenue, net
of investment return (319,101) (862,817) 230 (131,152) 2,142 (1,310,698)
----------------------- --------- ---------- ------------- ------------- ---------------------- -----------
Net insurance contract
claims and benefits
incurred 122,531 (186) (2,918) 67,588 - 187,015
Net change in
investment contract
liabilities 200,186 889,802 - - - 1,089,988
Fees, commission and
other acquisition
costs (8,593) (11,235) (208) (259) - (20,295)
Administrative
expenses:
Amortisation charge
on software assets - (899) - - - (899)
Depreciation charge
on property and
equipment (37) (52) (29) (266) - (384)
Other (11,249) (5,621) (3,506) (11,922) (10,757) (43,055)
Operating expenses (1) (5,409) - - - (5,410)
Financing costs (13) (5,067) (1) - (4,099) (9,180)
Profit/(loss) before
tax and consolidation
adjustments (16,277) (1,484) (6,432) (76,011) (12,714) (112,918)
----------------------- --------- ---------- ------------- ------------- ---------------------- -----------
Other operating
expenses:
Charge for
amortisation of
acquired value of
in-force business (436) (1,088) (410) (1,574) - (3,508)
Charge for
amortisation of
acquired value of
customer
relationships - (23) - - - (23)
Fees, commission and
other acquisition
costs - 850 - 123 - 973
----------------------- --------- ---------- ------------- ------------- ---------------------- -----------
Segmental income less
expenses (16,713) (1,745) (6,842) (77,462) (12,714) (115,476)
Post completion profit
on acquisition 10,565 - 301 - - 10,866
(Loss)/profit before
tax (6,148) (1,745) (6,541) (77,462) (12,714) (104,610)
Income tax
(expense)/credit 12,339 3 1,715 19,942 2,419 36,418
----------------------- --------- ---------- ------------- ------------- ---------------------- -----------
Profit/(loss) after tax 6,191 (1,742) (4,826) (57,520) (10,295) (68,192)
----------------------- --------- ---------- ------------- ------------- ---------------------- -----------
(ii) Segmental balance sheet as at 30 June 2022
Other Group
Movestic Waard Group Scildon Activities Total
(UK) (Sweden) (Netherlands) (Netherlands)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
===================== =========== =========== ============= ============= ==================== ============
Total assets 5,005,658 3,749,599 555,873 1,891,226 161,316 11,363,672
Total liabilities (4,833,372) (3,650,154) (512,678) (1,791,787) (205,614) (10,993,605)
===================== =========== =========== ============= ============= ==================== ============
Net assets 172,286 99,445 43,195 99,439 (44,298) 370,067
===================== =========== =========== ============= ============= ==================== ============
Additions to
non-current assets - 4,884 39 335 - 5,258
===================== =========== =========== ============= ============= ==================== ============
(iii) Segmental income statement for the six months ended 30
June 2021
Movestic Waard Group Scildon Other Group Activities Total
(UK) (Sweden) (Netherlands) (Netherlands)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Insurance premium revenue 18,674 7,200 13,822 112,595 - 152,291
Insurance premium ceded to
reinsurers (7,846) (2,880) (975) (8,909) - (20,610)
Net insurance premium
revenue 10,828 4,320 12,847 103,686 - 131,681
Fee and commission income 11,081 8,856 39 25,756 - 45,732
Net investment return 106,481 419,302 5,208 90,278 3 621,272
Other operating income 6,740 16,751 - - - 23,491
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Segmental revenue, net of
investment return 135,130 449,229 18,094 219,720 3 822,176
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Net insurance contract
claims and benefits
incurred (63,348) (656) (14,637) (200,980) - (279,621)
Net change in investment
contract liabilities (48,673) (418,964) - - - (467,637)
Fees, commission and other
acquisition costs (171) (11,729) (210) (933) - (13,043)
Administrative expenses:
Amortisation charge on
software assets - (1,453) - (204) - (1,657)
Depreciation charge on
property and equipment -- (125) (51) (459) - (635)
Other (7,923) (5,311) (1,895) (11,160) (4,735) (31,024)
Operating expenses (1) (3,698) - - 1 (3,698)
Financing costs -- (609) (1) - (380) (990)
Profit/(loss) before tax
and consolidation
adjustments 15,014 6,684 1,300 5,984 (5,111) 23,871
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Other operating expenses:
Charge for amortisation
of acquired value of
in-force business (721) (1,247) (423) (1,716) - (4,107)
Charge for amortisation
of acquired value of
customer relationships (28) - - - (28)
Fees, commission and
other acquisition costs 901 - 294 - 1,195
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Segmental income less
expenses 14,293 6,310 877 4,562 (5,111) 20,931
Post completion loss on
portfolio acquisition - - (94) - - (94)
Profit/(loss) before tax 14,293 6,310 783 4,562 (5,111) 20,837
Income tax
(expense)/credit (2,603) (8) (228) (1,125) 982 (2,982)
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Profit/(loss) after tax 11,690 6,302 555 3,437 (4,129) 17,855
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
(iv) Segmental balance sheet as at 30 June 2021
Other Group
Movestic Waard Group Scildon Activities Total
(UK) (Sweden) (Netherlands) (Netherlands)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
===================== =========== =========== ============= ============= ===================== ===========
Total assets 2,523,294 4,114,246 420,281 2,098,354 64,958 9,221,133
Total liabilities (2,410,052) (4,004,127) (376,299) (1,929,613) (33,148) (8,753,239)
===================== =========== =========== ============= ============= ===================== ===========
Net assets 113,242 110,119 43,982 168,741 31,810 467,894
===================== =========== =========== ============= ============= ===================== ===========
Additions to
non-current assets - 31 - 2,272 - 2,303
===================== =========== =========== ============= ============= ===================== ===========
(v) Segmental income statement for the year ended 31 December
2021
Movestic Waard Group Scildon Other Group Activities Total
(UK) (Sweden) (Netherlands) (Netherlands)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Insurance premium revenue 36,004 13,796 32,546 229,700 - 312,046
Insurance premium ceded to
reinsurers (87,353) (5,374) (3,406) (19,748) - (115,881)
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Net insurance premium
revenue (51,349) 8,422 29,140 209,952 - 196,165
Fee and commission income 22,140 18,029 76 49,730 - 89,975
Net investment return 179,662 821,381 11,928 160,006 11 1,172,988
Other operating
income/(expense) 13,681 32,887 - - - 46,568
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Segmental revenue, net of
investment return 164,134 880,719 41,144 419,688 11 1,505,696
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Net insurance contract
claims and benefits
incurred (34,545) (2,787) (35,849) (396,718) - (469,899)
Net change in investment
contract liabilities (77,568) (820,901) - - - (898,469)
Fees, commission and other
acquisition costs (316) (23,598) (713) (1,816) - (26,443)
Administrative expenses:
Amortisation charge on
software assets - (1,306) - (36) - (1,342)
Depreciation charge on
property and equipment - (115) (54) (577) - (746)
Other (16,090) (12,794) (4,407) (20,992) (11,554) (65,837)
Operating
(expenses)/income 5 (5,972) - - 3 (5,964)
Financing costs - (1,179) (1) - (1,092) (2,272)
Profit/(loss) before tax
and consolidation
adjustments 35,620 12,067 120 (451) (12,632) 34,724
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Consolidation adjustments:
Charge for amortisation
of acquired value of
in-force business (1,443) (2,467) (838) (3,436) - (8,184)
Charge for amortisation
of acquired value of
customer relationships - (55) - - - (55)
Fees, commission and
other acquisition costs - 1,878 - 542 - 2,420
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Segmental income less
expenses 34,177 11,423 (718) (3,345) (12,632) 28,905
Post completion gain on
portfolio acquisition - - (93) - - (93)
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Profit/(loss) before tax 34,177 11,423 (811) (3,345) (12,632) 28,812
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Income tax
(expense)/credit (4,979) (1) 188 444 2,830 (1,518)
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
Profit/(loss) after tax 29,198 11,422 (623) (2,901) (9,802) 27,294
-------------------------- -------- ---------- ------------- ------------- ---------------------- ---------
(vi) Segmental balance sheet as at 31 December 2021
Other Group
Movestic Waard Group Scildon Activities Total
(UK) (Sweden) (Netherlands) (Netherlands)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
===================== =========== =========== ============= ============= ===================== ===========
Total assets 2,551,611 4,568,400 389,846 2,122,474 54,674 9,687,005
Total liabilities (2,420,861) (4,462,163) (347,961) (1,963,052) (34,801) (9,228,838)
===================== =========== =========== ============= ============= ===================== ===========
Net assets 130,750 106,237 41,885 159,422 19,873 458,167
===================== =========== =========== ============= ============= ===================== ===========
Additions to
non-current assets - 11,590 197 4,483 - 16,270
===================== =========== =========== ============= ============= ===================== ===========
5. Borrowings
Unaudited
30 June 31 December
2022 2021 2021
GBP000 GBP000 GBP000
================================================ ======= ======== ===========
Bank loan - 30,437 31,273
Tier 2 Debt 200,000 - -
Property mortgages 2,584 - -
Amount due in relation to financial reinsurance 12,198 21,137 15,912
=================================================== ======= ======== ===========
Total 214,782 51,574 47,185
=================================================== ======= ======== ===========
In February 2022, the outstanding bank loans (both the sterling
and euro loans) in the form of a Revolving Credit Facility (RCF)
was re-paid in full. The facility, which was put in place in July
2021 still exists. The RCF is operated on a syndicated basis and
provides an unsecured multi-currency debt facility up to the value
of GBP100m sterling equivalent. The facility is initially for a
term of 3 years from July 2021, extendable by up to two 12 month
periods upon request. The RCF also has an accordion option which
can extend the loan capacity by up to a further GBP50m upon
request. This facility provides further financial flexibility above
and beyond the Tier 2 debt raised in February 2022 and will enable
us to fulfil our appetite of financing future deals up to the
maximum levels of gearing set out in our debt and leverage policy,
in a timely and efficient manner.
In 2022, a Tier 2 Subordinated Notes Debt was launched.
The fair value of the sterling bank loan at 30 June 2022 was
GBPnil (31 December 2021: GBP12.0m).
The fair value of the euro denominated bank loan at 30 June 2022
was GBPnil (31 December 2021: GBP18.5m).
The fair value of the Tier 2 debt was GBP200.0m (31 December
2021: GBPnil).
The fair value of amounts due in relation to financial
reinsurance was GBP12.1m (31 December 2021: GBP16.4m).
The property mortgage balance within SLP, comprises of capital
amounts outstanding on mortgage bonds taken out over properties
held in the Unit-linked policyholder funds. The mortgage over each
such property is negotiated separately, varies in term from 5 to 20
years, and bears interest at fixed or floating rates that are
agreed at the time of inception of the mortgage.
Bank loans are presented net of unamortised arrangement fees.
Arrangement fees are recognised in profit or loss using the
effective interest rate method.
6. Financial instruments fair value disclosures
The table below shows the determination of the fair value of
financial assets and financial liabilities according to a
three-level valuation hierarchy. Fair values are generally
determined at prices quoted in active markets (Level 1). However,
where such information is not available, the group applies
valuation techniques to measure such instruments. These valuation
techniques make use of market-observable data for all significant
inputs where possible (Level 2), but in some cases it may be
necessary to estimate other than market-observable data within a
valuation model for significant inputs (Level 3).
The group held the following financial instruments at fair value
at 30 June 2022 .
Fair value measurement at 30 June 2022
Level 1 Level 2 Level 3 Total
Financial assets GBP000 GBP000 GBP000 GBP000
================================================== ========= ========= ======= ==========
Equities
Listed 229,103 - - 229,103
Holdings in collective investment schemes 8,015,413 - 166,355 8,181,768
Debt securities - fixed rate
Government Bonds 514,692 20,752 - 535,444
Corporate Bonds 360,607 63,356 - 423,963
Debt securities - floating rate
Listed 3,761 - - 3,761
========= ========= ======= ==========
Total debt securities 879,060 84,108 - 963,168
========= ========= ======= ==========
Policyholders' funds held by the group 858,010 - - 858,010
Derivative financial instruments - 25 - 25
================================================== ========= ========= ======= ==========
Total 9,981,586 84,133 166,355 10,232,074
================================================== ========= ========= ======= ==========
Current 2,204,789
Non-current 8,027,285
================================================== ========= ========= ======= ==========
Total 10,232,074
================================================== ========= ========= ======= ==========
Financial liabilities
================================================== ========= ========= ======= ==========
Investment contracts at fair value through
income - 5,776,414 - 5,776,414
Liabilities related to policyholders' funds held
by the group 858,010 - - 858,010
Derivative financial instruments - 473 - 473
================================================== ========= ========= ======= ==========
Total 858,010 5,776,887 - 6,634,897
================================================== ========= ========= ======= ==========
Fair value measurement at 31 December 2021
Level 1 Level 2 Level 3 Total
Financial assets GBP000 GBP000 GBP000 GBP000
================================================================ ========= ========= ======= =========
Equities
Listed 6,352 - - 6,352
Holdings in collective investment schemes 6,602,615 65,210 190,229 6,858,054
Debt securities - fixed rate
Government Bonds 554,146 96 - 554,242
Corporate Bonds 406,608 - - 406,608
Debt securities - floating rate
Listed 17,349 - - 17,349
========= ========= ======= =========
Total debt securities 978,103 96 - 978,199
========= ========= ======= =========
Policyholders' funds held by the group 990,700 - - 990,700
Derivative financial instruments - 264 - 264
================================================================ ========= ========= ======= =========
Total 8,577,770 65,570 190,229 8,833,569
================================================================ ========= ========= ======= =========
Current 2,309,678
Non-current 6,523,891
================================================================ ========= ========= ======= =========
Total 8,833,569
================================================================ ========= ========= ======= =========
Financial liabilities
================================================================ ========= ========= ======= =========
Investment contracts at fair value through income - 4,120,573 - 4,120,573
Liabilities related to policyholders' funds held by the group 990,700 - - 990,700
Total 990,700 4,120,573 - 5,111,273
================================================================ ========= ========= ======= =========
Holdings in collective investment schemes
The fair value of holdings in collective investment schemes
classified as Level 3 also relate to our Scildon operation, and
represent investments held in a mortgage fund. These are classified
as level 3 as the fair value is derived from valuation techniques
that include inputs that are not based on observable market data.
There is also a small holding of assets classified as level 3
GBP22.1m (December 2021: GBP16.3m) from our Movestic operation
which are unlisted. The valuation of the vast majority of these
assets is based on unobservable prices from trading on the
over-the-counter market.
Debt securities
The debt securities classified as Level 2 are traded in active
markets with less depth or wider-bid ask spreads. This does not
meet the classification as Level 1 inputs. The fair values of debt
securities not traded in active markets are determined using broker
quotes or valuation techniques with observable market inputs.
Financial instruments valued using broker quotes are classified at
Level 2, only where there is a sufficient range of available
quotes.
These assets were valued using counterparty or broker quotes and
were periodically validated against third-party models.
Derivative financial instruments
Within derivative financial instruments is a financial
reinsurance embedded derivative related to our Movestic operation.
The group has entered into a reinsurance contract with a third
party that has a section that is deemed to transfer significant
insurance risk and a section that is deemed not to transfer
significant insurance risk. The element of the contract that does
not transfer significant insurance risk has two components and has
been accounted for as a financial liability at amortised cost and
an embedded derivative asset at fair value.
The embedded derivative represents an option to repay the
amounts due under the contract early at a discount to the amortised
cost, with its fair value being determined by reference to market
interest rate at the balance sheet date. It is, accordingly,
determined at Level 2 in the three-level fair value determination
hierarchy set out above.
Investment contract liabilities
The Investment contract liabilities in Level 2 of the valuation
hierarchy represent the fair value of non-linked and guaranteed
income and growth bonds liabilities valued using established
actuarial techniques utilising market observable data for all
significant inputs, such as investment yields.
Significant unobservable inputs in level 3 instrument
valuations
The level 3 instruments held in the group are in relation to
investments held in an Aegon managed Dutch Mortgage Fund that
contains mortgage-backed assets in the Netherlands. The fair value
of the mortgage fund is determined by the fund manager on a monthly
basis using an in-house valuation model. The valuation model relies
on a number of unobservable inputs, the most significant being the
assumed conditional prepayment rate, the discount rate and the
impairment rate, all of which are applied to the anticipated
modelled cash flows to derive the fair value of the underlying
asset.
The assumed conditional prepayment rate (CPR) is used to
calculate the projected prepayment cash flow per individual loan
and reflects the anticipated early repayment of mortgage balances.
The CPR is based on 4 variables:
- Contract age - The CPR for newly originated mortgage loans
will initially be low, after which it increases for a couple of
years to its maximum expected value, and subsequently diminishes
over time.
- Interest rate differential - The difference between the
contractual rates and current interest rates are positively
correlated with prepayments. When contractual rates are higher than
interest rates of newly originated mortgages, we observe more
prepayments and the vice versa.
- Previous partial repayments - Borrowers who made a partial
prepayment in the past, are more likely to do so in the future.
- Burnout effect - Borrowers who have not made a prepayment in
the past, while their option to prepay was in the money, are less
likely to prepay in the future.
The projected prepayment cash flows per loan are then combined
to derive an average expected lifetime CPR, which is then applied
to the outstanding balance of the fund. The conditional prepayment
rate used in the valuation of the fund as at 30 June 2022 was 6.1%
(31 December 2021: 6.1%).
The expected projected cash flows for each mortgage within the
loan portfolio are discounted using rates that are derived using a
matrix involving the following three parameters:
- The remaining fixed rate term of the mortgage
- Indexed loan to value (LTV) of each mortgage
- Current (Aegon) mortgage rates
At 30 June 2022 this resulted in discounting the cash flows in
each mortgage using a range from 3.39% to 4.45% (31 December 2021:
1.29% to 2.02%).
An impairment percentage is applied to those loan cashflows
which are in arrears, to reflect the chance of the loan actually
going into default. For those loans which are one, two or three
months in arrears, an impairment percentage is applied to reflect
the chance of default. This percentage ranges from 0.60% for one
month in arrears to 13.70% for loans which are 3 months in arrears
(31 December 2021: 0.60% for one month in arrears to 13.70% for
loans which are 3 months in arrears). Loans which are in default
receive a 100% reduction in value.
The value of the fund has the potential to decrease or increase
over time. This can be as a consequence of a periodic reassessment
of the conditional prepayment rate and/or the discount rate used in
the valuation model.
A 1 per cent increase in the conditional prepayment rate would
reduce the value of the asset by GBP0.3m (31 December 2021:
GBP0.3m).
A 1 per cent decrease in the conditional prepayment rate would
increase the value of the asset by GBP0.4m (31 December 2021:
GBP0.5m).
A 1 per cent increase in the discount rate would reduce the
value of the asset by GBP11.4m (31 December 2021: GBP13.7m).
A 1 per cent decrease in the discount rate would increase the
value of the asset by GBP13.1m (31 December 2021: GBP15.8m)
Sensitivity of level 3 instruments measured at fair value on the
statement of financial position to changes in key assumptions
There is a risk that the value of the fund decreases or
increases over time. This can be as a consequence of a periodic
reassessment of the constant prepayment rate and the discount rate
used in the valuation model.
Reconciliation of Level 3 fair value measurements of financial
instruments
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
At start of period 190,229 185,424 185,424
Transfers into level 3 - - 16,314
Total gains and losses recognised in the income statement (27,155) (279) 796
Purchases - - -
Settlements - - -
Exchange rate adjustment 3,281 (8,464) (12,305)
---------------------------------------------------------- ---------------- ------------- -----------------
At the end of period 166,355 176,681 190,229
---------------------------------------------------------- ---------------- ------------- -----------------
Except as detailed in the following table, the directors
consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial
statements are approximately equal to their fair values:
Carrying amount Fair value
30 June 30 June 31 December 30 June 30 June 31 December
2022 2021 2021 2022 2021 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
======================= ======= ======= =========== ======== ======= ===========
Financial liabilities:
Borrowings 214,782 51,574 47,185 214,696 52,461 46,588
Borrowings consist of bank loans, tier 2, property mortgage and
an amount due in relation to financial reinsurance.
The fair value of the bank loans are taken as the principal
outstanding at the balance sheet date.
The amount due in relation to financial reinsurance is fair
valued with reference to market interest rates at the balance sheet
date.
There were no transfers between levels 1, 2 and 3 during the
period.
The group holds no Level 3 liabilities as at the balance sheet
date.
7. Business combination
Sanlam Life & Pension s (UK) Limited (SLP)
On 13 September 2021, Chesnara entered into an agreement with
Sanlam UK Limited to acquire Sanlam Life & Pensions (UK)
Limited (SLP), a specialist provider of insurance and long-term
savings products in the UK. The acquisition was successfully
completed on 28 April 2022.
The transaction has given rise to a provisional post completion
profit on acquisition of GBP10.6m calculated as follows:
Fair value
GBP'000
Assets
Acquired value of in-force business 69,212
Property and equipment 25
Investment properties 79,618
Reinsurers' share of insurance contract provisions 1,014
Financial assets 2,733,120
Other assets and receivables 26,967
Cash 67,866
Total assets 2,977,822
Liabilities
Insurance contract provisions 241,715
Other provisions 9,809
Investment contracts at fair value through income 2,590,918
Derivative financial instruments 2,771
Deferred tax liabilities 62,776
Other payables 21,418
Total liabilities 2,929,407
Net assets 48,415
Net assets acquired 48,415
Total consideration paid (37,850)
Post completion profit on acquisition 10,565
The table above represents a provisional assessment of the
impact of the business combination on the group and is based upon
provisional figures as at 31 March 2022 rather than as at the
actual acquisition date. Work is ongoing to produce an accurate
assessment of the assets, liabilities and acquired value of
in-force business as at the 28 April 2022 and as a consequence, the
numbers presented above will undergo refinement during the second
half of the year and a re-stated business combination note will be
presented in our full-year 2022 annual accounts. Although we do not
expect the final business combination impact to be materially
different to the numbers presented above, based upon our initial
assessment of the surplus merging between the 31 March and the 30
June 2022, it is highly likely that the individual assets and
liability captions above will change in value (particularly
financial assets and insurance/investment contract provisions), due
to factors such as financial market movements and claims and lapse
experience.
Acquired value of in-force business: The acquisition has
resulted in the recognition of intangible asset amounting to
GBP69.2m, which represents the present value of the future post-tax
cash flows expected to arise from policies that were in force at
the point of acquisition. The asset has been valued using a
discounted cash flow model that projects the future surpluses that
are expected to arise from the business. The model factors in a
number of variables, of which the most influential are; the
policyholders' ages, mortality rates, expected policy lapses,
expenses that are expected to be incurred to manage the policies
and future investment growth, as well as the discount rate that has
been applied. This asset will be amortised over its expected useful
life.
Insurance contracts provision: Upon acquisition, the insurance
contract provision was reassessed, and as a result the insurance
contract provision was aligned to reserving basis applied in
Chesnara.
Profit on acquisition: A provisional profit of GBP10.6m has been
recognised on acquisition. This profit on acquisition has been
recorded as a "post completion profit on acquisition" on the face
of the statement of comprehensive income.
Acquisition-related costs: Chesnara concluded the deal and
obtained control of SLP as of 28 April 2022. The consideration
transferred by Chesnara for the acquisition of SLP consisted of
cash totalling to GBP37.8m. There was also a capital contribution
made by Chesnara to SLP amounting to GBP25m.
The assets and liabilities acquired are included within changes
in insurance provisions and financial assets within operating cash
flows on the face of the cash flow statement.
Robein Leven
On 25 November 2021, Waard entered into an agreement with
Monument Re Group to acquire Robein Leven, a specialist provider of
traditional and linked savings products, mortgages and annuities in
the Netherlands. The acquisition was successfully completed on 28
April 2022.
The transaction has given rise to a post completion profit on
acquisition of GBP0.3m calculated as follows:
Fair value
GBP'000
Assets
Financial assets 197,086
Other assets and receivables 4,301
Deferred tax asset 2,155
Cash 7,960
Total assets 211,502
Liabilities
Insurance contract provisions 196,935
Total liabilities 196,935
Net assets 14,567
Net assets acquired 14,567
Total consideration paid (14,266)
Post completion profit on acquisition 301
Profit on acquisition: A profit of GBP0.3m has been recognised
on acquisition. This profit on acquisition has been recorded as a
"post completion profit on business combination" on the face of the
statement of comprehensive income.
Acquisition-related costs : Waard concluded the deal and
obtained control of Robein Leven as of 28 April 2022. The
consideration transferred by Waard Leven for the acquisition of
Robein Leven consisted of cash totalling EUR16.5m.
The assets and liabilities acquired are included within changes
in insurance provisions and financial assets within operating cash
flows on the face of the cash flow statement .
8. Post balance sheet event
On 22 July 2022, Chesnara announced the acquisition of the
insurance portfolio of Conservatrix, a specialist provider of life
insurance products in the Netherlands that was declared bankrupt on
8 December 2020. The insurance portfolio will increase Waard's
number of policies under administration to approximately 165,0000.
A Capital Contribution of GBP35 million will be provided by the
group to support the solvency position of the Conservatrix
business, financed from the Group's existing resources.
9. Approval of consolidated report for the six months ended 30 June 2022
This condensed consolidated report was approved by the Board of
Directors on 30 August 2022. A copy of the report will be available
to the public at the Company's registered office, 2nd Floor,
Building 4, West Strand Business Park, West Strand Road, Preston,
PR1 8UY and at www.chesnara.co.uk
FINANCIAL CALAR
31 August 2022
Results for the six months ended 30 June 2022 announced
08 September 2022
Interim ex-dividend date
09 September 2022
Interim dividend record date
23 September 2022
Last date for dividend reinvestment plan elections
21 October 2022
Interim dividend payment date
31 December 2022
End of financial year
KEY CONTACTS
Registered and head office
2(nd) Floor, Building 4
West Strand Business Park
West Strand Road
Preston
Lancashire
PR1 8UY
T : 01772 972050
www.chesnara.co.uk
Advisors
Ashurst LLP
Broadwalk House
5 Appold Street
London
EC2A 2HA
Addleshaw Goddard LLP
One St Peter's Square
Manchester
M2 3DE
Auditor
Deloitte LLP
Statutory Auditor
Four Brindleyplace
Birmingham
B1 2HZ
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Joint Stockbrokers and Corporate Advisors
Panmure Gordon
One New Change
London
EC4M 9AF
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Bankers
National Westminster Bank plc
135 Bishopsgate
London
EC2M 3UR
The Royal Bank of Scotland
8(th) Floor, 135 Bishopsgate
London
EC2M 3UR
Lloyds Bank plc
3(rd) Floor, Black Horse House
Medway Wharf Road
Tonbridge
Kent
TN9 1QS
Public Relations Consultants
FWD
145 Leadenhall Street
London
EC3V 4QT
ALTERNATIVE PERFORMANCE MEASURES
Throughout this report we use alternative performance measures
(APMs) to supplement the assessment and reporting of the
performance of the group. These measures are those that are not
defined by statutory reporting frameworks, such as IFRS or Solvency
II.
The APMs aim to assess performance from the perspective of all
stakeholders, providing additional insight into the financial
position and performance of the group and should be considered in
conjunction with the statutory reporting measures such as IFRS and
Solvency II.
The following table identifies the key APMs used in this report,
how each is defined and why we use them.
APM What is it? Why do we use it?
Group cash Cash generation is used by the group Cash generation is a key
generation as a measure of assessing how much measure, because it is the
dividend potential has been generated, net cash flows to Chesnara
subject to ensuring other constraints from its life and pensions
are managed. businesses which support
Group cash generation is calculated Chesnara's dividend-paying
as the movement in the group's surplus capacity and acquisition
own funds above the group's internally strategy. Cash generation
required capital, as determined can be a strong indicator
by applying the group's capital of how we are performing
management policy, which has Solvency against our stated objective
II rules at its heart. of 'maximising value from
existing business'.
Divisional Cash generation is used by the group It is an important indicator
cash generation as a measure of assessing how much of the operating performance
dividend potential has been generated, of the business before the
subject to ensuring other constraints impact of group level operations
are managed. and consolidation adjustments.
Divisional cash generation represents
the movement in surplus Own Funds
above local capital management policies
within the three operating divisions
of Chesnara. Divisional cash generation
is used as a measure of how much
dividend potential a division has
generated, subject to ensuring other
constraints are managed.
Commercial Cash generation is used by the group Commercial cash generation
cash generation as a measure of assessing how much aims to provide stakeholders
dividend potential has been generated, with enhanced insight into
subject to ensuring other constraints cash generation, drawing
are managed. out components of the result
Commercial cash generation excludes relating to technical complexities
the impact of technical adjustments, or exceptional items. The
modelling changes and corporate result is deemed to better
acquisition activity; representing reflect the group's view
the inherent commercial cash generated of commercial performance,
by the business. show key drivers within that.
Economic EcV is a financial metric that is EcV aims to reflect the
Value (EcV) derived from Solvency II Own Funds. market-related
It provides a market consistent value of in-force business
assessment of the value of existing and net assets of the non-insurance
insurance businesses, plus adjusted business and hence is an
net asset value of the non-insurance important reference point
business within the group. by which to assess Chesnara's
We define EcV as being the Own Funds value. A life and pensions
adjusted for contract boundaries, group may typically be characterised
risk margin and restricted with-profit as trading at a discount
surpluses. As such, EcV and Own or premium to its Economic
Funds have many common characteristics Value. Analysis of EcV provides
and tend to be impacted by the same additional insight into the
factors. development of the business
over time. The EcV development
of the Chesnara group over
time can be a strong indicator
of how we have delivered
to our strategic objectives.
Economic The principal underlying components By recognising the market-related
Value (EcV) of the Economic Value earnings are: value of in-force business
earnings * The expected return from existing business (being the (in-force value), a different
effect of the unwind of the rates used to discount perspective is provided in
the value in-force); the performance of the group
and on the valuation of the
business. Economic Value
* Value added by the writing of new business; earnings are an important
KPI as they provide a longer-term
measure of the value generated
* Variations in actual experience from that assumed in during a period. The Economic
the opening valuation; Value earnings of the group
can be a strong indicator
of how we have delivered
* The impact of restating assumptions underlying the against all three of our
determination of expected cash flows; and core strategic objectives.
* The impact of acquisitions.
EcV operating This is the element of EcV earnings EcV operating earnings are
earnings (see above) that are generated from important as they provide
the company's ongoing core business an indication of the underlying
operations, excluding any profit value generated by the business.
earned from investment market conditions It can help identify profitable
in the period and any economic assumption activities and also inefficient
changes in the future. processes and potential management
actions.
EcV economic This is the element of EcV earnings EcV economic earnings are
earnings (see above) that are derived from important in order to measure
investment market conditions in the additional value generated
the period and any economic assumption from investment market factors.
changes in the future.
Commercial A more commercially relevant measure This provides a fair commercial
new business of new business profit than that reflection of the value added
profit recognised directly under the Solvency by new business operations
II regime, allowing for a modest and is more comparable with
level of return, over and above how new business is reported
risk-free, and exclusion of the by our peers, improving market
incremental risk margin Solvency consistency.
II assigns to new business.
Funds under FuM reflects the value of the financial FuM is important as it provides
management assets that the business manages, an indication of the scale
(FuM) as reported in the IFRS Consolidated of the business, and the
Balance Sheet. potential future returns
that can be generated from
the assets that are being
managed.
Operating A measure of the pre-tax profit Operating earnings are important
profit, excluding earned from the company's ongoing as they provide an indication
AVIF impairment business operations, excluding any of the underlying profitability
profit earned from investment market of the business. It can help
conditions in the period and any identify profitable activities
economic assumption changes in the and also inefficient processes
future. This also excludes any intangible and potential management
asset adjustments that are not practicable actions.
to ascribe to either operating or
economic conditions.
Economic A measure of pre-tax profit earned Economic earnings are important
profit, excluding from investment market conditions in order to measure the surplus
AVIF impairment in the period and any economic assumption generated from investment
changes. This also excludes any market factors.
intangible asset adjustments that
are not practicable to ascribe to
either operating or economic conditions.
Acquisition Acquisition value gains reflect The EcV gain from acquisition
value gain the incremental Economic Value added will be net of any associated
(incremental by a transaction, exclusive of any increase in risk margin.
value) additional risk margin associated The risk margin is a temporary
with absorbing the additional business. Solvency II dynamic which
will run off over time.
Leverage A financial measure that demonstrates It is an important measure
/ gearing the degree to which the company as it indicates the overall
is funded by debt financing versus level of indebtedness of
equity capital, presented as a ratio. Chesnara, and it is also
It is defined as debt divided by a key component of the bank
debt plus equity, as measured under covenant arrangements held
IFRS. by Chesnara.
GLOSSARY
AGM Annual General Meeting.
ALM Asset Liability Management - management of risks that arise due to mismatches between
assets
and liabilities.
APE Annual Premium Equivalent - an industry wide measure that is used for measuring the annual
equivalent of regular and single premium policies.
CA Countrywide Assured plc.
CALH Countrywide Assured Life Holdings Limited and its subsidiary companies.
BAU Cash Generation This represents divisional cash generation plus the impact of non-exceptional group
activity.
BLAGAB Basic life assurance and general annuity business
Cash Generation This represents the operational cash that has been generated in the period. The cash
generating
capacity of the group is largely a function of the movement in the solvency position of
the
insurance subsidiaries within the group and takes account of the buffers that management
has
set to hold over and above the solvency requirements imposed by our regulators. Cash
generation
is reported at a group level and also at an underlying divisional level reflective of the
collective performance of each of the divisions prior to any group level activity.
Commercial Cash Generation Cash generation excluding the impact of technical adjustments, modelling changes and
exceptional
corporate activity; the underlying commercial cash generated by the business.
Divisional Cash Generation This represents the cash generated by the three operating divisions of Chesnara (UK,
Sweden
and the Netherlands), exclusive of group level activity.
DNB De Nederlandsche Bank is the central bank of the Netherlands and is the regulator of our
Dutch
subsidiaries.
DPF Discretionary Participation Feature - A contractual right under an insurance contract to
receive,
as a supplement to guaranteed benefits, additional benefits whose amount or timing is
contractually
at the discretion of the issuer.
Dutch Business Scildon and the Waard Group, consisting of Waard Leven N.V., Waard Schade N.V. and Waard
Verzekeringen
B.V.
Economic Profit A measure of pre-tax profit earned from investment market conditions in the period and any
economic assumption changes in the future (alternative performance measure - APM).
EcV Economic Value is a financial metric that is derived from Solvency II Own Funds that is
broadly
similar in concept to European Embedded Value. It provides a market consistent assessment
of the value of existing insurance businesses, plus adjusted net asset value of the
non-insurance
business within the group.
FCA Financial Conduct Authority.
FI Finansinspektionen, being the Swedish Financial Supervisory Authority.
Form of Proxy The form of proxy relating to the General Meeting being sent to shareholders with this
document.
FSMA The Financial Services and Markets Act 2000 of England and Wales, as amended.
Group Chesnara plc and its existing subsidiary undertakings.
Group Cash generation This represents the absolute cash generation for the period at total group level,
comprising
divisional cash generation as well as both exceptional and non-exceptional group activity.
Group Own Funds In accordance with the UK's regulatory regime for insurers it is the sum of the individual
capital resources for each of the regulated related undertakings less the book-value of
investments
by the group in those capital resources.
Group SCR In accordance with the UK's regulatory regime for insurers it is the sum of individual
capital
resource requirements for the insurer and each of its regulated undertakings.
Group Solvency Group solvency is a measure of how much the value of the company exceeds the level of
capital
it is required to hold in accordance with Solvency II regulations.
HCL HCL Insurance BPO Services Limited.
IFRS International Financial Reporting Standards.
IFA Independent Financial Adviser.
LACDT Loss Absorbing Capacity of Deferred Tax
KPI Key performance indicator.
Leverage (gearing) A financial measure that demonstrates the degree to which the company is funded by debt
financing
versus equity capital, usually presented as a ratio, defined as debt divided by debt plus
equity, as measured under IFRS
London Stock Exchange London Stock Exchange plc.
LTI Long-Term Incentive Scheme - A reward system designed to incentivise executive directors'
long-term performance.
Movestic Movestic Livförsäkring AB.
Modernac Modernac SA, a previously associated company 49% owned by Movestic.
New business The present value of the expected future cash inflows arising from business written in the
reporting period.
Official List The Official List of the Financial Conduct Authority.
Operating Profit A measure of the pre-tax profit earned from a company's ongoing core business operations,
excluding any profit earned from investment market conditions in the period and any
economic
assumption changes in the future (alternative performance metric - APM).
Ordinary Shares Ordinary shares of five pence each in the capital of the company.
ORSA Own Risk and Solvency Assessment
Own Funds Own Funds - in accordance with the UK's regulatory regime for insurers it is the sum of
the
individual capital resources for each of the regulated related undertakings less the
book-value
of investments by the company in those capital resources.
PRA Prudential Regulation Authority.
QRT Quantitative Reporting Template.
ReAssure ReAssure Limited.
Resolution The resolution set out in the notice of General Meeting set out in this document.
RMF Risk Management Framework.
Robein Leven Robein Leven N.V.
Scildon Scildon N.V.
Shareholder(s) Holder(s) of Ordinary Shares.
SLP Sanlam Life & Pensions (UK) Limited
Solvency II A fundamental review of the capital adequacy regime for the European insurance industry.
Solvency
II aims to establish a set of EU-wide capital requirements and risk management standards
and
has replaced the Solvency I requirements.
Standard Formula The set of prescribed rules used to calculate the regulatory SCR where an internal model
is
not being used.
STI Short-Term Incentive Scheme - A reward system designed to incentivise executive directors'
short-term performance.
SCR In accordance with the UKs regulatory regime for insurers it is the sum of individual
capital
resource requirements for the insurer and each of its regulated undertakings.
Swedish Business Movestic and its subsidiaries and associated companies.
S&P Save & Prosper Insurance Limited and Save & Prosper Pensions Limited.
Transfer ratio The proportion of new policies transferred into the business in relation to those
transferred
out.
TCF Treating Customers Fairly - a central PRA principle that aims to ensure an efficient and
effective
market and thereby help policyholders achieve fair outcomes.
Tier 2 Term debt capital (Tier 2 Subordinated Notes) issued in February 2022 with a 10.5 year
maturity
and 4.75% coupon rate.
TSR Total Shareholder Return, measured with reference to both dividends and capital growth.
UK or United Kingdom The United Kingdom of Great Britain and Northern Ireland.
UK Business CA and S&P.
UNSDG United Nations Sustainable Development Group
VA The volatility adjustment is a measure to ensure the appropriate treatment of insurance
products
with long-term guarantees under Solvency II. It represents an adjustment to the rate used
to discount liabilities to mitigate the effect of short-term volatility bond returns.
Waard The Waard Group
NOTE ON TERMINOLOGY
As explained in the IFRS financial statements, the principal reporting segments of the group
are:
CA which comprises the original business of Countrywide Assured plc, the group's original UK
operating subsidiary; City of Westminster Assurance Company Limited, which was acquired by
the group in 2005, the long-term business of which was transferred to Countrywide Assured
plc during 2006; S&P which was acquired on 20 December 2010. This business was transferred
from Save & Prosper Insurance Limited and Save & Prosper Pensions Limited to Countrywide
Assured
plc on 31 December; and Protection Life Company Limited which was acquired by the group in
2013, the long-term business of which was transferred into Countrywide Assured plc in 2014;
CASLP - 'SLP' Sanlam Life & Pensions (UK) Limited which was acquired 28 April 2022 and includes subsidiaries
CASFS Limited and CASLPTS Limited;
Movestic which was purchased on 23 July 2009 and comprises the group's Swedish business, Movestic
Livförsäkring
AB and its subsidiary and associated companies;
The Waard Group which was acquired on 19 May 2015 and comprises two insurance companies; Waard Leven N.V.
and Waard Schade N.V.; and a service company, Waard Verzekeringen; and Robein Leven NV
acquired
on 28 April 2022;
Scildon which was acquired on 5 April 2017; and
Other group activities which represents the functions performed by the parent company, Chesnara plc. Also included
in this segment are consolidation adjustments.
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IR WPUGGRUPPGRU
(END) Dow Jones Newswires
August 31, 2022 02:01 ET (06:01 GMT)
Chesnara (AQSE:CSN.GB)
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Chesnara (AQSE:CSN.GB)
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