Chesnara 2025 results: scale up, stronger cash, bigger dividend
Chesnara has posted what it calls a transformational year. Two sizeable deals, stronger cash generation and a sturdier balance sheet headline the 2025 full-year update, alongside a proposed 6% increase in the final dividend to 14.80p per share (total FY 2025 dividend: 22.50p).
Why it matters: more policies, more assets and more potential for future cash flows. The completed acquisition of HSBC Life (UK) – now rebranded as Chesnara Life – landed in January 2026, and a second deal, Scottish Widows Europe SA, was announced in February 2026. Both are expected to lift the group’s long-term cash generation.
Key numbers investors will care about
| Metric | FY 2025 | FY 2024 | Change |
|---|---|---|---|
| Operating Capital Generation (OCG) | £94m | £79m | +19% |
| Cash Remittances | £58m | £45m | +30% |
| Solvency Coverage Ratio | 257% | 203% | +54 ppts |
| Own Funds | £859m | £643m | +34% |
| Adjusted Operating Profit (AOP) | £56m | £39m | +42% |
| Assets under Administration (AUA) | £15bn | £14bn | +10% |
| IFRS profit before tax | £19m | £21m | -£2m |
| Leverage | 22% | 31% | -9 ppts |
Quick jargon buster
- Operating Capital Generation (OCG) – Solvency II capital created by day-to-day operations. Think of it as the engine that supports future cash and dividends.
- Adjusted Operating Profit (AOP) – IFRS profit with market swings and one-off items stripped out to show underlying earnings.
- Solvency Coverage Ratio – a core prudential metric: Own Funds divided by the capital regulators require. Higher means a thicker safety cushion.
Two deals change the scale of the business
Chesnara Life (formerly HSBC Life UK) – completed January 2026
- Rebranded as Chesnara Life and described as the group’s largest ever transaction.
- Expected to add about £5bn of AUA and deliver £140m of Cash Generation in the first five years, with over £800m over its lifetime.
- Integration is underway, with a Part VII transfer targeted for 2027.
Scottish Widows Europe SA – announced February 2026
- Consideration of €110m; expected to add ~€1.7bn of AUA and ~46,000 policies.
- Forecast Cash Generation of €250m over the lifetime of the portfolio, with €100m in the first five years.
- Creates a Luxembourg foothold to support future European consolidation. Expected completion around the end of 2026.
These deals are why the board is comfortable stepping up the dividend again. On a pro-forma view after completing Chesnara Life, management expects Own Funds to be around £1bn, AUA to about £20bn and the Solvency Coverage Ratio to settle near ~180% – still above the 140%-160% operating range.
Cash, capital and value: what drove the improvement
Cash metrics moved up
OCG rose 19% to £94m, with contributions from all units and capital optimisation in the UK and Group Centre. Cash Remittances to Group Centre climbed 30% to £58m, led by a strong UK remittance of £45m.
Capital position fortified
Solvency Coverage improved to 257% (+54 ppts), helped by equity and debt raises, positive operating and economic variances, and risk management actions (notably mass-lapse reinsurance and foreign exchange hedging in the UK). Leverage dropped to 22% after a £140m equity raise and a £150m RT1 issuance at an 8.5% pre-tax coupon.
Underlying earnings stepped on
AOP increased 42% to £56m, reflecting robust operating experience and Dutch merger synergies. Do note, IFRS profit before tax dipped slightly to £19m from £21m as integration and restructuring costs – including M&A – flowed through.
Business unit snapshot: UK, Sweden, Netherlands
- UK: OCG £41m (FY 2024: £32m); Cash Remittances £45m (FY 2024: £35m). Capital actions included extending mass-lapse reinsurance and introducing a new FX hedge. Solvency Coverage Ratio 155% pre-remittance.
- Sweden: OCG £14m (FY 2024: £10m); Cash Remittances £6m (FY 2024: £4m). Strong custodian inflows and product initiatives, albeit with a lower AOP (£11m) reflecting investment return dynamics.
- Netherlands: OCG £36m (FY 2024: £30m); Cash Remittances £7m (flat). Scildon-Waard merger completed, delivering synergies and a higher AOP (£23m).
Dividend raised, timetable set
The board recommends a final dividend of 14.80p per share, up 6%, taking the FY 2025 total to 22.50p. Key dates:
- Ex-dividend date: 2 April 2026
- Record date: 7 April 2026
- Payment date: 20 May 2026
My take: what’s to like, and what to watch
Reasons to be positive
- Scale and cash potential: Chesnara Life and Scottish Widows Europe SA materially lift long-term cash generation potential. Pro-forma AUA of ~£20bn is a step change.
- Capital discipline intact: Even after deals, solvency expected around ~180% – still above the operating range. Leverage sits at 22%, below the 30% ambition.
- Cash coverage of dividends: OCG of £94m provides 1.8x coverage of the annual dividend cost, which supports a progressive payout.
- Operational delivery: Dutch merger done, UK platform migrations progressing, and Swedish distribution broadening – all supportive of unit costs and persistence.
Balanced by a few caveats
- Execution risk: Integrating Chesnara Life and later Scottish Widows Europe SA is non-trivial. The Part VII timeline (2027) means synergy realisation takes time.
- IFRS optics: Profit before tax fell slightly to £19m and EPS was negative due to one-offs, policyholder tax and integration costs. AOP tells a stronger story, but the statutory line will matter to some.
- Solvency normalisation: Today’s 257% reflects capital issuance and market moves; management guides to ~180% post-Chesnara Life. Still healthy, but lower than the headline number.
- Market and FX: Sensitivities show sterling moves and equity swings can influence surplus, though hedging provides partial mitigation.
What the new reporting tells us
Chesnara has refreshed its financial framework with OCG and AOP front and centre. In plain English: OCG focuses on the recurring capital the business generates, while AOP strips out market noise and one-offs. For a consolidation-led life group, these are arguably the right anchors – they map more directly to solvency surplus, cash remittances and, ultimately, dividends.
Outlook: more M&A and bigger cash engine
Management highlights a “positive M&A pipeline” and expects the two recent transactions to add more than £1bn of future lifetime Cash Generation. Pro-forma leverage is around 20% and solvency around 180% post-Chesnara Life, leaving headroom to keep investing and paying the dividend.
Bottom line from me: this is a classic consolidation play doing what it says on the tin – buying well, integrating methodically, and growing the future cash engine. Short-term integration costs are the price of that strategy. If management delivers on the synergies and cash generation outlined, today’s higher scale should translate into a sturdier dividend stream over time.
