Chesnara PLC (LSE:CSN) CEO Steve Murray talked with Proactive about the company’s €110 million acquisition of Scottish Widows Europe and why the deal is expected to generate approximately €250 million in lifetime cash.
Murray explained that lifetime cash generation remains a core attraction in Chesnara’s acquisition strategy. Of the €250 million expected from the transaction, around €100 million is forecast within the first five years, supporting early capital return alongside long-term cash flow sustainability. He noted that the deal marks Chesnara’s 16th acquisition in around 20 years, with roughly half completed in the last four to five years, highlighting an acceleration in M&A activity.
The acquisition also represents Chesnara’s first entry into Luxembourg, bringing with it a local administrative platform that could support further consolidation opportunities both within Luxembourg and across Europe. Murray pointed to the broader M&A pipeline, stating: “We continue to see a really big opportunity for the group,” citing a more active market and increased strategic focus from large financial institutions.
Chesnara now manages 1.4 million policies and administers around £18 billion in assets. Murray emphasised the company’s dividend track record, describing it as “the best dividend growth track record in UK and European insurance,” with a planned 6% increase for full-year 2025.
Proactive: Steve, very good to speak with you today. You're paying €110 million for a business expected to generate €250 million in cash. What makes this such an attractive deal?
Steve Murray: When we look at these deals — and you and I spoke about the HSBC Life UK transaction that we announced last July and completed in January — one of the first things we talked about was the lifetime cash generation that can come from these books of business. That’s certainly something within this deal that we think is attractive for investors. Alongside the €250 million you’ve pointed to, we expect around €100 million in the first five years. So you’re seeing good capital return in the early years as well as cash coming through.
Another element to this deal is that with the Scottish Widows Europe business, there’s a local team and an administrative platform in Luxembourg, which we believe could be utilised to look at further consolidation opportunities, both within the Luxembourg market — which has a long tail of smaller insurance companies that haven’t yet reached scale — and also cross-border opportunities in Europe. The administrative capability of that platform is a little different to those in our Dutch business, Scildon, and our Swedish business, Movestic.
Proactive: You mentioned strong capital generation. How does that support dividend growth?
Steve Murray: We’ve talked previously about the fact that we have the best dividend growth track record in UK and European insurance. We’re proud of having consecutively increased the dividend over the last 20 years. Off the back of the HSBC Life UK deal, we also announced a planned acceleration of that step-up.
We expect the full-year 2025 dividend to increase by 6% versus the usual circa 3% delivered over the last 20 years, and the interim 2026 dividend is also likely to step up by 6%. When we look at the €250 million lifetime cash generation from this book, on top of the €800 million of additional lifetime cash generation from HSBC, we think that clearly demonstrates that this dividend track record can continue going forward.
Proactive: This marks your first entry into Luxembourg, but policyholders are further afield. How big is the consolidation opportunity across Europe?
Steve Murray: We continue to see a really big opportunity for the group. This is the 16th deal we’ve announced in around 20 years, and around half of those have been in the last four or five years — so there’s been a real acceleration in our M&A strategy.
Part of that is because of the pipeline opportunity we’re seeing and a more active M&A market. Large financial services groups are looking again at the assets they own and focusing more closely on strategy. Scottish Widows Europe is another example of that.
We’re proud that Lloyds Banking Group, HSBC, Sanlam, and Canada Life have trusted us with policyholders to look after them going forward. We see further attractive opportunities across Europe and also in the UK.
Proactive: You now manage 1.4 million policies and administer around £18 billion in assets. Where do you take it from here?
Steve Murray: There has been significant scaling up in the group. We’re proud to look after around 1.4 million customers across the UK, Netherlands and Sweden, with customers now joining via Luxembourg and also across Germany, Italy and Austria.
We believe there are further opportunities to scale from here. We retain over €100 million of deployable firepower at a group level. We’ve demonstrated that we can access support from debt capital markets and shareholders — including the £140 million rights issue for the HSBC Life UK deal and the RT1 bond raised last year — which gives us financial flexibility.
In Europe, we have administrative platforms that can take more scale. In the UK, we are focused on the migration of HSBC Life UK, expected to complete by the end of 2026, which positions us to look at further M&A opportunities.