Final Results

27 March 2025

LEI Number: 213800VFRMBRTSZ3SJ06

Chesnara plc (CSN.L)

("Chesnara" or "the Company")

CONTINUED STRATEGIC DELIVERY DRIVING GROWTH IN CASH GENERATION, FUTURE VALUE AND DIVIDENDS

Chesnara reports its 2024 full year results. Key highlights are:

· Cash Generation1 of £60m (FY 20231: £52m) grew by 14%, providing strong coverage of 1.60x (FY 2023: 1.45x) against the full year dividend;

· Solvency Coverage Ratio of 203% (FY 2023: 205%) remained significantly above the upper-end of the Group's operating range of 140% - 160%, providing significant flexibility to allocate capital to M&A and other investment opportunities;

· Economic Value (EcV) Earnings of £69m (FY 2023: £59m) grew by 17% supporting growth in the Group's EcV per share to 352p (FY 2023: 348p) after dividend payments;

· IFRS pre-tax profits increased to £21m (FY 20232: £2m); with IFRS pre-tax Contractual Services Margin (CSM) growing to £176m (FY 20232: £157m), increasing the store of future value from the Group's insurance portfolio;

· New Business Contribution was stable at £9m (FY 2023: £10m);

· Ongoing M&A momentum with announcement of Canada Life portfolio transfer in December 2024, adding £11m of EcV which was £3m higher than previously announced;

· The Board is recommending a 3% increase in the final dividend to 16.1p per share. Total dividend for FY 2024 of 24.7p per share.

Commenting on the results, Steve Murray, Group CEO, said:

"We have again delivered a strong set of financial results with increased Cash Generation, positive organic EcV Earnings and a robust solvency position. This financial performance has allowed us to extend our track record of uninterrupted full year dividend growth to 20 years, unrivalled across listed UK and European insurers. Our people have also continued to deliver on our major operational programmes and our second portfolio acquisition from Canada Life again demonstrates our ability to grow through M&A and deliver very attractive returns for shareholders. Our M&A pipeline remains positive, and we continue to have significant firepower to deploy on opportunities."

A full year results presentation is being held at 10:00am on 27 March 2025 - participants can register here.

Further details on the financial results are as follows:

STRONG CASH GENERATION AND 20 YEARS OF FULL YEAR DIVIDEND GROWTH

· Group Commercial Cash Generation(1) of £60m in FY 2024 (FY 2023: £52m), driven by favourable market conditions, cost efficiencies and other management actions undertaken during the year.

· The Board has proposed a 2024 final dividend of 16.1p per share (2024 total dividend of 24.7p), a 3% increase compared to 2023, extending the period of uninterrupted dividend growth to 20 years.

· The Group's 20-year full year dividend growth track record is unrivalled across UK and European Listed insurers with Chesnara's business model delivering sustainable returns to shareholders, with c£502m of cumulative dividends paid over the 20-year period.

FINANCIAL RESILIENCE AND FLEXIBILITY IN FINANCING FUTURE M&A

· Solvency II Coverage Ratio of 203% at FY 2024 (FY 2023: 205%), materially above the upper end of the Group's operating range of between 140 - 160%. 

· Group Centre liquidity of £109m (FY 2023: £124m), with expected further divisional dividends of £57m during 2025. This combined with the Group's Revolving Credit Facility, provides £200m of immediately available resources to fund future acquisitions.

· Leverage ratio3 of 31% at FY 2024, broadly in line with prior year (FY 20232: 30%).

DELIVERING LONG TERM VALUE

· Acquisition of a portfolio of unit-linked bonds and legacy pensions from Canada Life announced in December 2024, increasing EcV by £11m in FY 2024, a £3m improvement on the expected day one gain and net of £2m consideration paid for the business. This was the second acquisition from Canada Life, with the Part VII transfer and migration of the Canada Life protection portfolio acquired in May 2023 onto our new strategic platform with SS&C completing in February 2025.

· Increased EcV of £531m as at FY 2024 (FY 2023: £525m), with strong growth in EcV Earnings of £69m (FY 2023: £59m) partly offset by the payment of dividends and the negative impact of foreign exchange rates over the period.

· Stable New Business Contribution4 of £9m over FY 2024 (FY 2023: £10m).

· Increased IFRS pre-tax profits of £21m in FY 2024 (FY 20232: £2m), driven by higher CSM releases, favourable investment returns and lower Group Centre costs.

· IFRS Capital Base2 of £449m at FY 2024 (FY 20232: £479m) with increased CSM and pre-tax Profits, offset by FX movements and the shareholder dividend.

· Process to merge our Dutch divisions is underway, with actions already taken to generate pre-merger cost savings and potential for future synergies.

DIVIDEND DETAILS

· The recommended final dividend of 16.1p per share is expected to be paid on 20 May 2025. The ordinary shares will be quoted ex-dividend on the London Stock Exchange as of 3 April 2025. The record date for eligibility for payment will be 4 April 2025.

ANALYST AND INVESTOR PRESENTATION

· A presentation for analysts and investors will be held at 10.00am on 27th March 2025 at the offices of RBC Capital Markets, 100 Bishopsgate, London, EC2N 4AA, which will be available to join online and 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 - [email protected]

Media Enquiries

Roddy Watt

Director, Capital Markets

FWD

T - 020 7280 0651 / 07714 770 493 

E - [email protected]

Notes to Editors

Chesnara (CSN.L) is a European life and pensions consolidator listed on the London Stock Exchange. It administers just under one million policies and operates as Countrywide Assured 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 focused, profitable new business in the UK, 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 20 years in succession. Further details are available on the Company's website (www.chesnara.co.uk).

Notes

Note 1 Commercial Cash Generation (referred to as Cash Generation) represents the surplus cash that the group has generated in the period and is used as a measure of assessing how much dividend potential has been generated, subject to ensuring other constraints are managed. It is largely a function of the movement in the solvency position, excluding the impact of technical adjustments, representing the group's view of the commercial cash generated by the business. Note, the 2024 result includes the day one impact of the most recent Canada Life acquisition, and the 2023 comparator has also been restated to include the day one impact of the acquisitions completed in 2023.

Note 2 IFRS restatement The IFRS prior year comparatives have been restated following a change in the accounting methodology applied to the portfolio transfer into the UK from Canada Life Ltd. Further details are set out in Note A2 in the IFRS Financial Statements.

IFRS Capital Base is the sum of IFRS Net Equity and CSM (net of tax and reinsurance).

Note 3 The 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 'net equity plus debt plus net of tax and reinsurance CSM', as measured under IFRS. As per note 2, the FY 2023 IFRS results were restated which has also resulted in a restated Leverage ratio for FY 2023.

Note 4 New Business Contribution 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.

The Board approved this statement on 26 March 2025.

2024 FINANCIAL HIGHLIGHTS

COMMERCIAL CASH GENERATION 1

£60M 

2023: £52M

SOLVENCY COVERAGE RATIO 6*

203%

31 DECEMBER 2023: 205%

ASSETS UNDER ADMINISTRATION (AuA) 2

£14BN Δ

31 DECEMBER 2023: £11BN

Δ Includes impact of Canada Life portfolio acquisition, expected to Part VII and migrate during 2025

ECONOMIC VALUE 3

£531M

31 DECEMBER 2023 £525M

ECONOMIC VALUE EARNINGS 4

£69M

2023: £59M

NEW BUSINESS CONTRIBUTION 5

£9M

2023: £10M

IFRS

£21M - IFRS PRE-TAX PROFIT

2023: £2M **

£449M - IFRS CAPITAL BASE

2023: £479M

These financial highlights include the use of Alternative Performance Measures (APMs) that are not required to be reported under International Financial Reporting Standards.

1 - Cash Generation is calculated as the movement in the group's surplus Own Funds above the group's internally required capital, as determined by applying the group's prudent Capital Management Policy, which has Solvency II rules at its heart. 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 and modelling changes; representing the Group's view of the commercial cash generated by the business. The 2023 comparator is shown as inclusive of day one acquisition impacts.

2 - Assets Under Administration (AuA) represents the sum of all financial assets on the IFRS balance sheet. Note - this measure was previously referred to as 'Funds under Management' (FuM). There has been no change to the basis of calculation.

3 - 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.

4 - 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.

5 - New Business Contribution 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 Note - this measure was previously referred to as 'commercial new business'. There has been no change to the basis of calculation.

6 - Solvency is a fundamental financial measure which is of paramount importance to investors and policyholders. It represents the relationship between the value of the business as measured on a Solvency II basis and the capital the business is required to hold - the Solvency Capital Requirement (SCR). Solvency can be reported as an absolute surplus value or as a ratio.

* On 31 December 2024 the PRA's restatement of Solvency II assimilated law came into force. Throughout the document we refer to the new regime as Solvency II, in line with the name of the prudential regime in PRA policy material.

*\* The IFRS prior year comparatives have been restated following a change in the accounting methodology applied to the portfolio transfer into the UK from Canada Life Ltd. Further details are set out in the Note A3 in the 'IFRS Financial Statements.

"The Group has delivered strong Commercial Cash Generation and value growth, including through a further UK acquisition, supporting a proposed 3% increase in our full year dividend, our 20th year of consecutive dividend increases."

LUKE SAVAGE, CHAIR

Increase in the full year dividend by 3%

I am pleased to report that we are proposing that our shareholders will receive a total dividend of 24.69p per share, an increase of 3% on the prior year, and the 20th consecutive year that we have increased the full year dividend.

Cash generation and financial strength

Our proposed dividend is underpinned by strong levels of cash generation and financial stability again in 2024, despite a continued backdrop of volatile geopolitical and macro-economic factors.

Each of our operating divisions contributed to the Group's Commercial Cash Generation of £60m, an increase of 14% compared to the same period in 2023 and against a total dividend cost of £37m.

Our Solvency II coverage ratio of 203% remained stable throughout 2024 and remains significantly above our normal operating range of 140% - 160%. The Group's diversified business model and our risk-based approach to financial management is fundamental to providing financial security to our customers. Our strong and resilient balance sheet continues to provide us with considerable strategic flexibility to invest in our businesses and pursue further M&A opportunities as they arise.

Operational delivery

Across the Group, our operating divisions continue to perform strongly in support of the Group's key strategic priorities.

In the UK, we announced our second portfolio acquisition from Canada Life UK - a closed portfolio of onshore bond and pensions products. We are pleased to continue our relationship with Canada Life following our acquisition of their UK life insurance policies and this latest transaction illustrates our ability to add scale and provide attractive returns to our UK business. 

The transfer of the earlier Canada Life UK Life insurance portfolio acquisition to our new outsource partner, SS&C, completed successfully in February 2025, marking a significant milestone for this programme.

The operational activities to transfer existing UK insurance portfolios to SS&C are also progressing, with plans to migrate the remaining in scope books within its portfolio over the next 18 to 24 months, including the recently announced deal with Canada Life.

In the Netherlands, we announced our intention to merge our Scildon and Waard businesses (subject to approval by De Nederlandsche Bank). The proposed legal merger is expected to take place in mid-2025 with further integration significantly simplifying our operating model in the Netherlands, alongside ongoing initiatives to upgrade the IT estate and improve customer and broker experiences.

In Sweden, we have seen strong growth in our custodian business as we continue to build new partnerships and further-diversify our distribution model. Overall new business sales momentum remains strong, benefiting from ongoing enhancements to our product offerings and the digitisation of our service offerings.

It has been another year of significant delivery across the Group and as ever, I want to thank staff for their continued efforts and dedication.

Our people

Over 2024, we maintained our focus on ensuring that the Group benefits from a broad range of skills and expertise on our Boards.

In April, we appointed Tom Howard as our Group CFO and Executive Director on the Chesnara Board and at the same time, we announced that Mark Hesketh was stepping off the Chesnara Board to allow his appointment as Chair of our UK life company, Countrywide Assured plc.

We also confirmed that as Jane Dale will have served her third successive three-year term, she will not be seeking re-election at our Annual General Meeting in May 2025, in line with UK Corporate Governance Code for listed companies. Jane, who has also been Chair of the Audit & Risk Committee, will have served 9 years as a non-executive director of the Group and has made an immense contribution to Chesnara's success over this period. On behalf of the board, I want to thank Jane for her dedication to Chesnara and she leaves with our best wishes for the future.

At the same time, I am delighted to announce that we have appointed Gail Tucker to the Chesnara Board. Gail brings a wealth of experience to Chesnara, particularly in the UK and European listed life insurance sector and I want to welcome her to Chesnara and very much look forward to working with her. Gail will chair the Chesnara Audit and Risk Committee and, subject to regulatory approval, will also join the CA Board where she will also chair their Audit and Risk Committee.

Purpose

At Chesnara, we help to protect customers and their dependants by providing life, health, and disability cover or savings and pensions solutions 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 remain 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.

Maintaining our strong capital position and delivering strong and sustainable financial returns will always remain of key importance. It underpins our desire to offer compelling returns to our shareholders, to meet our debt investor coupon payments and importantly, to ensure our customers can be confident in the ongoing financial strength of our business.

As a purpose-driven organisation, we continue to balance our responsibilities across the 3Ps - Profit, People and Planet. Sustainability is a key part of the strategy of the Group, and we are progressing well against our objectives. Sustainability is a key input into decision-making across the Group and all of our people completed mandatory sustainability training in 2024. Ongoing delivery of this training is now a key part of our people's broader learning journeys and professional development.

A key pillar of our commitments is to deliver a just transition to become a net zero group. During 2024, we announced our initial interim 2030 emission reduction target. By 2030, our target is to reduce the scope 1 and 2 emissions of the in-scope assets by 50% from a baseline of 2023. In-scope assets are corporate bonds and listed equity, which we can control or influence. All assets, alongside our operational activities, remain in scope of our 2050 net zero target. During 2024, we have seen a reduction of 13% in the calculated normalised emissions for our full portfolio against our 2023 baseline, together with a 25% reduction in our operational emissions, meaning we are on track to achieve our target. Absolute scope 3 emissions from our investments have increased during the year and so we also continued to engage with our key asset managers and partners in our value chain to be able to understand their own net zero journeys and identify areas of focus.

As a recent signatory to the Principles for Responsible Investment, and as a member of bodies such as the United Nations Global Compact, UK Sustainable Investment and Finance Association and the Institutional Investors Group on Climate Change, we continue to engage on initiatives that create solid foundations for longer term change together with shorter-term actions that will begin to make a real-world positive impact. 

Our Annual Sustainability Report (available on the Chesnara plc website) provides further details of our sustainability commitments, long-term targets and the activities underpinning our sustainability strategy.

Outlook

Our financial results in 2024 demonstrate that our diversified business model continues to deliver strong levels of Cash Generation, value growth and positive shareholder returns. 

Our outlook for M&A remains positive and we have a strong capital base and ambition to support further acquisitions.

Luke Savage,

Chair

26 March 2025

"Our strong financial performance and additional UK acquisition in 2024 underpin our positive outlook for 2025 and beyond."

STEVE MURRAY, CEO

We have again remained disciplined in driving delivery against our three areas of strategic focus namely:

1. Running our in-force insurance and pensions books efficiently and effectively;

2. Seeking out and delivering value enhancing M&A opportunities; and

3. Writing focused, profitable new business where we are satisfied an appropriate return can be made.

We have just under 1 million policies across the Group and our people take pride in the responsibility that comes with delivering for our policyholders every single day.

This focus helped us deliver a strong financial result for the year with Commercial Cash Generation of £60m, continued strong solvency of 203% and incremental EcV of £69m. And as Luke highlighted, this has supported us proposing an increase in the full year dividend of 3% to 24.69 pence per share. 

Operational delivery has continued

We have continued to make positive progress delivering the ambitious change agenda we set ourselves and that will help ensure we have modern and sustainable operating platforms right across the Group.

In the UK, work on our transition and transformation (T&T) programme, which will lead to the transfer of our various UK books of business to SS&C's more modern policy administration system, continues to progress well. Our first migration was successfully completed in February 2025. And we successfully met the UK Consumer Duty deadline for closed books in July 2024 and are making positive progress implementing our fully funded plan. As part of this activity, we have made further positive changes for a number of our UK customers and there has been no material financial impact on the Group from any of the changes we are making here. It was also pleasing to secure our second transaction with Canada Life UK in December 2024. The Part VII transfer of policies from our first deal with Canada Life completed in Q1 2025.

In the Netherlands, our teams have been working hard on the new DORA (Digital Operational Resilience Act) regulation and associated work required to meet this new standard. We have also begun the preparation work to bring our two Dutch businesses together to create bigger scale and more sustainable business. This merger, which is planned for July 2025 and remains subject to local regulatory approvals, should also enable us to drive further synergies above and beyond some of the local restructuring work that was completed in December 2024. Regulatory submissions have now been completed and we have consolidated our teams based in Hilversum into one single location in December 2024.

And in Sweden, our teams also worked hard on implementing the new DORA regulations, in advance of the January 2025 deadline. Further work has been completed to enable us to more effectively promote and sell our risk product offerings as well as enabling better integration with broker firms. The leadership team has also been strengthened in the year with joiners in our custodian business, operations and IT.

Creating a more sustainable Chesnara

We continue to make progress against our three sustainability commitments on our journey to transition to become a sustainable Chesnara. We strongly believe we have a responsibility to consider the needs of all our stakeholders, balancing people, planet and profit over the long term. We actively review our sustainability strategy and priorities to ensure that we are working to address the needs of our stakeholders and managing the risks and opportunities presented by a changing world. 

Our targets and key aspects of progress are:

- Net zero emissions by 2050 - in 2024, we published our initial interim 2030 decarbonisation target for a 50% intensity reduction from our 2023 baseline figures in the scope 1 and 2 emissions for our listed equity and corporate fixed income investments which we are able to influence or control. During 2024, we saw a 13% reduction in the calculated normalised scope 1 and 2 emissions from our investments and a 25% reduction in our absolute operational emissions, which are very positive movements. Absolute emissions from our investments did increase, however, driven by an increase in scope 3 emissions, which is partly due to increased assets under administration. Visibility of the causes of these movements is still limited but we are taking positive actions to reduce emissions and further detail on these is provided in our Annual Sustainability Report.

- Investments in nature and social impact solutions - during the year, we increased our investments in positive solutions and held £135m at the end of 2024, representing an increase of approximately 65% compared to 2023.

- A business where everyone feels welcome - we have continued to commit time and resource to ensuring the Group is an inclusive organisation. Activities including volunteering, internships, enhancing customer care, and focusing on employee wellbeing have been supplemented by delivering sustainability related training to all employees in the Group.

M&A continues alongside other management actions

We have proactively and diligently assessed a number of M&A opportunities across 2024. This has included our participation in multiple due diligence processes, primarily on a bilateral basis, as well as work on legal documentation. We announced another UK acquisition on 23 December and our second portfolio deal with Canada Life. Our latest deal involves the acquisition of a portfolio of c17k onshore bond and personal pensions. We expect an uplift in economic value of around £11m from the deal against the £2m of consideration paid. The first step of the deal has been executed by way of a reinsurance agreement between both parties.

We retain significant fire power for future acquisitions and can immediately deploy around £200m in support of deals. We have additional financing options available, should we have the opportunity to execute a larger value enhancing opportunity.

Alongside the extensive activity this year on M&A, we have continued to seek out other management actions to enhance Cash Generation and / or value. We extended the Group's FX hedge during the year and also extended the mass lapse reinsurance arrangements we have in the UK, both of which have reduced SCR and enhanced Cash Generation.

Positive sales momentum in Sweden and the UK with discipline maintained in the Netherlands

Overall, New Business Contribution remained broadly flat this year at £9m vs £10m in 2023.

Movestic has continued to see strong sales in both our group pension and custodian business where total sales are at their highest level for 5 years. We have continued to see transfers out at a higher level than our longer-term assumption (albeit in line with the short-term provision we made in the balance sheet in 2024). Overall, it has been a stronger year than 2023, being the first full year under Sara Lindberg's leadership, and we see further opportunities to expand our partnerships in 2025.

It was a tougher market in the Netherlands for our main term life product with overall new business materially lower compared to the same period in 2023. However, it has been pleasing to see the team maintain their disciplined approach to pricing against this more challenging market backdrop. 

In the UK, we have continued to see positive flows into our intermediated onshore bond proposition and we have been engaging positively with other platforms in the market with a view to potentially expanding our distribution of this product.

Continued work to strengthen our team

Luke highlighted the additional talent that has joined the Chesnara Board including Tom Howard who joined us from Aviva in April. As a reminder, Tom has held a variety of senior roles within Aviva plc, including Director of Mergers & Acquisitions for Aviva Group and CFO for Aviva's Life and General Insurance business in Ireland. Tom brings with him an extensive European actuarial and financial reporting background. He has made a positive start to life at Chesnara and is focussed on improving our capital allocation discipline as well as helping to drive further M&A momentum.

We also announced Edwin Bekkering's appointment to the position of CFRO (Chief Financial & Risk Officer) in Scildon, following the appointment of Pauline Derkman as our new CEO 18 months ago. Edwin has extensive experience in senior finance roles in major financial institutions including at Athora, Vivat, SNS Reaal and ABN AMRO. Pauline and Edwin are also proposed as the CEO and CFRO of the planned merged business in the Netherlands.

Outlook

It has been pleasing to see continued strong cash and economic earnings generation in 2025. Whilst the volatile geopolitical and macro-economic backdrop persists, and will continue to be a material factor in all our markets, we remain confident that the Chesnara business model will continue to generate cash across a wide variety of market conditions, as it has done this year and over its history.

We also remain positive on the outlook for further M&A where we remain very active and continue to see a positive pipeline of opportunities. We believe we are well placed to execute further value accretive deals for shareholders.

Our people have continued to deliver across a number of material operational programmes and for our customers in the period. I thank them again for their efforts.

As I highlighted in the interim results, we celebrated our 20th anniversary as a listed company in May 2024. Chesnara has delivered 20 years of positive returns for shareholders and I look forward to continuing to deliver for our investors going forward. And the excellent work of our teams again this year further supports my belief that there is a lot to look forward to here at Chesnara.

Steve Murray,

Chief Executive Officer

26 March 2025

"2024 has been another year of growth for Chesnara. Our diversified business model continues to deliver strong and resilient financial performance, supporting increased returns to our shareholders"

TOM HOWARD, CFO

Overview

I am delighted to have joined Chesnara at this exciting stage of the company's development. I have been incredibly impressed by the drive and commitment of the team and want to express my thanks to colleagues for the warm welcome they have given me since joining the Group in April 2024.

I am pleased to say that 2024 was another year of strong and resilient Cash Generation for the Group, with £60m of Commercial Cash generated, an increase of 14% compared to 2023. Each of our operating divisions contributed positively to this result, supporting strong coverage of the dividend and our debt servicing costs.

The Solvency Coverage Ratio of 203% remains comfortably above our operating range of 140% to 160% and continues to be resilient to a wide range of financial scenarios and provides the Group with significant scope to pursue M&A and other investment opportunities as they arise.

The Group continues to grow, with AuA increasing to £14bn (2023: £11bn), benefiting from positive investment returns on existing business, the addition of the Canada Life portfolio acquisition and value generated from new business written.

The Economic Value of the Group grew from £525m to £531m with positive contributions from operating activities, acquisitions and market conditions, partially offset by stronger expense and demographic assumptions.

This strong set of financial results underpin the Board's recommendation to increase the full year dividend by 3% to 24.69p per share.

Business performance

United Kingdom

Own Funds increased by £29m (2023: £51m) and SCR reduced by £5m (2023: increase of £2m), resulting in a pre-dividend solvency coverage ratio of 182% (2023: 179%). The growth in Own Funds arose primarily from the impact of positive economic conditions on the in-force book, the second acquisition from Canada Life and the writing of profitable new business over the period. The extension of existing mass-lapse reinsurance arrangements alongside existing book run off supported the reduction in SCR. The UK division held a Solvency II surplus (before foreseeable dividends) of £60m above its Boards risk appetite level (2023: £60m) and made remittances of £35m to Group Centre over 2024. IFRS Pre-Tax Profit of £28m (2023: £3m) arose from strong investment returns albeit lower than prior year and a much-improved positive insurance result in the year, with the combined effect of these broadly netting off. The prior year pre-tax profits were suppressed by a £21m impairment of AVIF (Acquired Value of In Force) related to the CASLP book.

Sweden

Solvency surplus generation of £10m arose from an increase in Own Funds of £15m (2023: £10m) offsetting an increase in SCR of £5m (2023: £13m), with a closing solvency coverage ratio (before foreseeable dividends) of 153% (2023: 153%). The increase in Own Funds and SCR were both largely driven by positive market movements, alongside an adverse consolidation impact on surplus due to depreciation of SEK against the pound and elevated levels of short-term persistency experience. The business unit held a pre dividend Solvency II surplus of £40m above its Board's risk appetite level (2023: £39m) and made remittances of £3m to Group Centre. IFRS Pre-Tax Profit of £10m (2023: £5m) arose from higher AUA generating higher fee income and fund rebates. A positive contribution from the risk business also meant that the insurance result was much improved compared to the prior year.

Netherlands

Solvency surplus generation of £3m arose from a reduction in Own Funds of £4m (2023: £32m) and a reduction in SCR of £7m (2023: £19m), with a closing solvency coverage ratio (before foreseeable dividends) of 237% (2023: 230%) noting the 2023 comparators included the day one impact of the Conservatrix acquisition. Own Funds benefited from the impact of cost management actions in Scildon, but were more than offset by the impact of foreign exchange movements on consolidation. The reduction in SCR was driven primarily by lower expense risk with partial offset from higher market risk due to a lower interest rate environment. The Group's Dutch entities held a Solvency II surplus of £68m above its Board's risk appetite levels and made remittances of £7m to Group Centre (2023: £4m). IFRS Pre-Tax Profit of £5m (2023: £23m) with the reduction primarily being driven by a positive but less favourable investment return in the year compared to 2023, whilst the 2023 result also included a £7m day one gain from the Conservatrix acquisition.

Capital & cash management

Solvency II Capital Position

At 31 December 2024, Group Solvency II surplus was £327m and the Group's Solvency II Coverage Ratio was 203% (2022: £351m and 205% respectively). The change in surplus since 31 December 2023 is driven by the positive impacts of capital generation from the Group's operating activities and market conditions in addition to management actions taken in the year offset by dividend payments, the application of Tier 2/3 valuation restrictions and foreign exchange impacts. The solvency capital requirement of £316m includes a £93m benefit from Group diversification and the benefits of the Group's foreign exchange hedging arrangements.

Cash Generation

Commercial cash generation by territory:

Commercial Cash Generation of £60m (2023: £52m) comprised contributions of £66m from the operating divisions, partially offset by net surplus usage at Group Centre to fund M&A activities, debt financing costs and central overheads.

The contribution from the operating divisions of £66m (2023: £73m) benefited from favourable market conditions across our operating territories, robust new business performance and stronger operating performance relative to 2023. Group Centre surplus usage reflected Group Centre and debt servicing costs, partially offset by capital benefits from Group diversification and foreign exchange hedging facilities.

Commercial Cash Generation represents 1.60x coverage of the total 2024 dividend, demonstrating that the Group has ample resources to finance ongoing debt and dividend commitments whist maintaining a strong solvency coverage ratio.

Centre Liquidity

Group Centre held liquid resources of £109m at FY 2024, and this is expected to increase to £130m by half year 2025 following the receipt of planned Dividend Remittances from our operating divisions, net of Group Centre costs over the same period. This illustrates that we are continuing to generate sufficient cash from our operating divisions to fund our dividends, debt and Group Centre costs without impacting the Solvency Coverage Ratio.

Sensitivities

The Group regularly assesses the resilience of the Solvency II coverage ratio against a range of scenarios as part of its internal risk management processes.

Market risks largely arise from foreign exchange rate movements, changes in equity valuations and movements in interest rates and inflation. Solvency surplus is most sensitive to the effect of equity movements on the value of the Group's AuA and the consequent impact on future earnings from charges levied on these AuA.

The Group reviews the matching profile of its liabilities relative to their matching assets on an ongoing basis. As a result, the impact on solvency surplus of interest rate movements is not significant. The inflation stress measures a permanent increase in inflation in all future years. This significantly increases the Group's exposure to future costs and reduces solvency surplus accordingly. It is worth noting that the sensitivities make no allowance for recovery management actions that the Group would apply in case of a prolonged stress event. These potential actions are regularly reviewed as part of the Group's ongoing risk management processes.

Demographic risks mainly comprise lapse risk from early surrenders and mortality risk on our protection and investment books. The Group manages lapse risk through a combination of active customer engagement, high levels of customer service and mass-lapse reinsurance arrangements. The Group manages mortality and longevity risk through its reinsurance arrangements and reviews the overall reinsurance programme on a regular basis.

Leverage

Leverage of 31% remained broadly unchanged as the impact of the increased CSM largely offset the decrease in IFRS equity. Our leverage ratio remains in line with our long-term preference of 30% or less and we continue to see opportunities to manage leverage in line with or below our preferred level into the longer term.

Capital Management Actions

Management actions are an important component of our strategy to maximise value from existing business. In 2024, we renewed the Group's foreign exchange derivative instrument, further reducing capital requirements relating to the risk of extreme foreign exchange movements. In our UK division, mass-lapse reinsurance arrangements were extended to provide the Group with further capital relief against the risk of extreme lapse events. Taken in aggregate, these actions increased the Group's Solvency Ratio by 5%

IFRS

IFRS Pre-Tax Profit

Group IFRS Pre-Tax Profit of £20.8m is £19.1m higher than 2023 (£1.7m) with an improved Insurance service result, a positive but lower investment result and an improvement in fee income net of expenses.

IFRS Insurance Result

The insurance service result comprises the revenue and expenses from providing insurance services to policyholders and excludes economic impacts. Assumption changes only apply to the insurance service result to the extent that they relate to groups of onerous contracts in a 'loss component' position. 

The insurance service result of £8.6m (2023: loss of £5.2m) comprises a relatively stable and positive contribution from the release of the CSM and the Risk Adjustment of £22.2m (2023: £23.0m). This is offset by some adverse experience primarily in the Netherlands and assumption changes on lines of onerous contracts also in the Netherlands, with these impacts being much more significant in the prior year, resulting in the overall loss.

IFRS Investment Result

The investment result comprises the economic result from all the Group's assets together with the impacts to its insurance and investment contract liabilities.

The positive investment result of £52.7m (2023: £71.7m) reflects the strong market performance in the year, although the investment returns from equities and fixed income securities did not reach the levels seen in 2023.

Fee, commission and other operating income

Fee, commission and other operating income mainly comprises the fee income generated in the UK and Sweden from unit-linked contracts measured under IFRS 9.

The income generated in the year after removing the effects of Swedish policyholder yield tax, which has an equal and opposite offset within 'Other Operating Expenses', was £73.4m (2023: £71.5m) with equity market returns in the UK and Sweden being the largest contributory factors to the result.

Other Operating Expenses and Financing costs

Other operating expenses comprises those costs incurred by the group that are not incurred from servicing insurance contracts, with such costs being reported within the insurance result.

After stripping out the impact of the policyholder yield tax noted above, the total other operating expenses and finance costs in the year was £113.9m (2023: £143.0m) with the prior year amount also being impacted by an impairment of AVIF in the UK segment of £21.0m.

IFRS Capital Base 

Before allowing for the 2024 dividend, the IFRS Capital Base of £449.1m increased by £6.2m over 2024 as a result of the positive IFRS profit after tax of £3.9m, the increase in CSM net of tax of £15.2m and negative impacts going through 'other comprehensive income' or directly to shareholder equity of (£12.8m), these being mainly in respect of foreign exchange impacts.

In December 2024, the group announced that agreement had been reached with Canada Life to transfer an in-force portfolio to Chesnara's UK division. This acquisition contributed £0.7m to the increase in CSM gross of tax, however this amount reflects the profits to be earned in the reinsurance phase only, during which it will be accounted for at the reinsurance contract level under IFRS 17. Following the legal transfer of the underlying policies, IFRS 9 will then apply, as the policies are investment contracts and profits will therefore be recognised as the fee income is earned.

A further £6.8m of CSM gross of tax arose from new business in Scildon, offset by £18.9m released to the income statement. The closing CSM on the balance sheet will be earned over the coverage period of the policies to which it relates, and the expected earnings pattern is such that after 10 years more than 40% will remain to be earned.

Economic Value Earnings

The Economic Value of the Group represents the present value of future profits from existing business, plus the adjusted net asset value of non-insurance business within the Group. Group EcV Earnings of £69m increased by £10m (2023: £59m) with economic earnings being the largest component of Economic Value Earnings, reflecting favourable market conditions throughout 2024.

EcV Economic Earnings

Positive global equity market movements contributed strongly to the growth in the value of AuA over 2024, increasing the store of future value available from investment-linked portfolios. This was partially offset by the impact of foreign exchange movements, primarily from the strengthening of Sterling against the Euro and the Swedish Krona.

EcV Operating Earnings

EcV Operating Earnings of £10m (2023: £6m) were supported by strong contributions from the Group's Dutch businesses, and a small year-on-year increase in contribution from new business.

The contribution from the in-force portfolio and new business was partially offset by a strengthening of short-term lapse assumptions in the Group's Swedish division, mortality assumptions in the Netherlands and expense assumptions in the UK. Whilst these effects had the impact of reducing EcV Operating Earnings by £8m, this is less marked than the prior-year (2023: (£15m)), reflecting cost-containment and risk-management actions taken throughout 2024.

Other EcV Earnings

The acquisition of the Canada Life portfolio results in an up-front EcV gain of c£11m. Other non-operating items include the positive impact or risk margin releases (£23m), offsetting central financing costs (including Tier 2 coupon payments) of £11m.

Economic Value as at 31 December 2024

Before allowing for dividends of £37m, the Economic Value of the Group grew to £568m (2023: £525m)

Dividend

Our continued strong performance along with our strong and resilient solvency position has supported the directors' decision to recommend a 3% increase in the total dividend to 24.69p per share (2023: 23.97p).

Outlook

Chesnara has now delivered 20 years of consecutive dividend increases to our shareholders. Looking forward, we continue to have a strong line of sight to future Cash Generation over the medium and longer term. We have opportunities to further optimise future value generation from our existing portfolio through continued capital and investment management actions.

Our capital and liquidity resources remain strong and resilient to market movements and position us strongly to generate further sources of future value through acquisitions and investment in our operating divisions.

Tom Howard,

Chief Financial Officer

26 March 2025

OUR STRATEGY

Our strategy focuses on delivering value to customers and shareholders, mindful of the interests of other stakeholders, through our three strategic objectives, executed across our three territories.

BUSINESS REVIEW | UK

The UK division manages c290k policies covering linked pension business, life insurance, endowments, annuities and some with-profit business. The division is largely closed to new business, generating future value through small levels of new business, investment returns on unit-linked policies, increments to existing policies and periodic acquisitions.

MAXIMISE VALUE FROM EXISTING BUSINESS

CAPITAL AND VALUE MANAGEMENT

- The division has continued the programme of migrating the existing books of business to SS&C Technologies as part of the long-term strategic partnership entered into in 2023. This now includes the migration and integration of the Canada Life acquisitions. In December, the UK division extended the scope of its existing mass-lapse reinsurance arrangements, further reducing its associated capital requirements.

CUSTOMER OUTCOMES

- The division met the 31 July 2024 deadline for the closed-book operations to comply with the FCA's Consumer Duty regulation. This regulation sets high standards for consumer protection and focuses on ensuring firms act in a way to deliver good outcomes for customers. The division is also on track to meet the 31 March 2025 deadline for the FCA's Operational Resilience regulation.

GOVERNANCE

- The insurance business of CASLP was transferred to Countrywide Assured on 31 December 2023. CASLP Limited was de-authorised in Q3 2024, and the remaining assets were subsequently transferred to Countrywide Assured. The company was dissolved in January 2025. The division has supported the wider Group's sustainability programme over the course of the year and rolled out training for staff across the business to help embed sustainability into day-to-day decision making.

KPIs

- Commercial Cash Generation: £40m (2023: £49m)

- SII ratio (pre dividend) 182% (2023: 183%)

- SII ratio (post dividend) 135% (2023: 149%)

- EcV Earnings: £20m (2023: £38m)

- IFRS Profit Before Tax: £28m (2023: £3m, noting the 2023 result included a one-off impairment charge of £21m).

- Dividend remittances in 2024: £35m

FUTURE PRIORITIES

- Continued migration of the majority of the existing and the acquired books of business to SS&C.

- Implementation of Identified potential capital management actions.

- Finalisation of the operational resilience programme to ensure the regulatory deadline of 31 March 2025 is met.

- Continued focus on delivering good customer outcomes and maintaining strong customer service performance

- Continued engagement with our asset managers on progress towards net zero and investing in positive solutions and wider support of the Group-wide sustainability programme including focus on operations, social purpose and reporting.

ACQUIRE LIFE AND PENSIONS BUSINESSES

- In December 2024, the UK division reached agreement with Canada Life UK to acquire a closed portfolio of unit-linked bonds and legacy pension business with a total AuA of £1.5bn. This transaction is initially executed via a reinsurance agreement, with the policies expected to transfer to the Group through a Part VII insurance business transfer process following court approval.

- During 2024, work progressed on the Part VII transfer of the Canda Life individual protection business acquired in May 2023 under a reinsurance agreement. The transfer completed on 24 February 2025 following court approval.

KPIs

Acquisitions in the year have added:

- Day 1 OF: £10m

- Day 1 EcV: £11m (in excess of the expected day 1 gain as quoted in the announcement of £8m)

- AuA: £1.5bn

- Policies: 17,000

In the last three years, acquisitions have added £39m of EcV at Group level.

FUTURE PRIORITIES

- Support the Group in identifying and delivering UK acquisitions.

- Continue to deliver strong financial outcomes from past acquisitions.

ENHANCE VALUE THROUGH PROFITABLE NEW BUSINESS

- The division generated positive new business profits, through significantly increased volumes of the on-platform onshore bond. This resulted in a New Business Contribution of £m.

- Increased demand for the onshore bond is being driven in part by changes to personal tax allowances. The Autumn Budget 2024 strengthened the attractiveness of the product due to changes in capital gains tax and inheritance tax.

- The division has developed a suite of adviser-facing technical product documents and a tax tool which will go live in early 2025 and continues to work on opportunities to improve the adviser and customer proposition with platform partners.

KPIs

- APE: £13m (2023: £7m)

- New Business Contribution: £2m (2023: £2m)

FUTURE PRIORITIES

- Continue to enhance the customer and advisor proposition.

- Expand distribution of the onshore bond with existing and new platform partners.

- Work with our strategic outsource partner to leverage technology to generate administrative efficiencies.

BUSINESS REVIEW | SWEDEN

Our Swedish division consists of Movestic, a life and pensions business which is open to new business. It offers personalised unit-linked pension and savings solutions through brokers, together with custodian products via private banking partners and is well regarded within both communities.

MAXIMISE VALUE FROM EXISTING BUSINESS

CAPITAL AND VALUE MANAGEMENT

- Over 2024, the division saw growth in AuA driven by positive total net client cash flows and favourable investment markets. High transfer activity within the Swedish occupational pension segment has continued, affecting both inward and outward transfer flows. Inflows within both the unit-linked and the custodian lines grew compared to the prior year, generating a positive net client cash flow.

CUSTOMER OUTCOMES

- During 2024, Movestic released an updated version of its digital service which helps customers to plan their retirement, start withdrawing and change how they receive their occupational pension. To enable increased individual adaptation, more flexible terms for pension withdrawals were launched during the year. An additional digital service within salary sacrifice savings was launched during the year and more customers than ever signed up for individual pension advice within the "Movestic Freedom" concept.

GOVERNANCE

- Movestic's sustainability programme is aligned to the Group's strategy and commitments, forming the basis of Movestic's own sustainability work and targets. The EU commission adopted a new regulatory framework, Digital Operational Resilience Act (DORA), and over 2024, work progressed on this project to ensure compliance when it came into force. Work in the year also concluded that Movestic is outside the scope of the EU-adopted Corporate Sustainability Reporting Directive and the Global Minimum Tax regulations which were implemented in Swedish law in 2024.

KPIs

- Commercial Cash Generation £11m (2023: £nil)

- SII ratio (pre dividend) 153% (2023: 153%)

- SII ratio (post dividend) 151% (2023: 147%)

- EcV Earnings: £31m (2023: £7m)

- IFRS Profit Before Tax: £10m (2023: £5m)

- Dividend remittances in 2024: £7m (payment in Q4 2024 and Q1 2025)

FUTURE PRIORITIES

- Continue building solid and long-term sustainable value creation for customers and investor stakeholders through a diversified business model. 

- Continue offering modern and individually adapted high-quality solutions within pension, savings and health insurance, and expand customer-focused digital services.

- Increase the use of automation, streamline processes, and improve administrative efficiency and control.

- Ensure Group sustainability reporting processes are embedded into everyday operations

- Monitor developments in the regulatory landscape.

ACQUIRE LIFE AND PENSIONS BUSINESSES

- We have been engaging with other market participants and investment bank advisers in order to better understand potential opportunities for inorganic growth in the market.

FUTURE PRIORITIES

- Seek out opportunities to bring in additional scale through M&A.

ENHANCE VALUE THROUGH PROFITABLE NEW BUSINESS

- New Business Contribution of £5m over 2024 which is an increase on the prior year result of £3m.

- The division expanded its custodian distribution network in 2024, two new partner collaborations were launched in 2024 and a project to onboard another new partner in custodian sales is ongoing, the launch is planned for early 2025.

- To improve distribution and sales within the life and health insurance segment, the division launched a new, updated risk insurance offering, as well as new technical integrations for brokers and partners during the year.

- A new partnership for the distribution of the digital life insurance product has also been entered into over the course of the year.

KPIs

- APE: £100m (2023: £65m)

- New Business Contribution: £5m (2023: £3m)

- Occupational pension market share: 4.4% (2023: 4.4%)

- Custodian accounts market share: 12.2% (2023: 7.7%)

FUTURE PRIORITIES

- Continue to build customer value and loyalty through further enhancement of the division's offering, consisting of individually adapted pension and savings and life and health products, and associated digital services. Focus on both growing new business and retention activities.

- Continued development and enhancement of partnerships with our intermediaries within both the unit-linked and custodian business.

- Continued focus on growing the life and health insurance business to diversify and offer our customers a broader selection.

BUSINESS REVIEW | NETHERLANDS

Our Dutch businesses deliver growth through our acquisitive closed-book business, Waard, and our open-book business, Scildon, which seeks to write profitable term, investments and annuity business.

MAXIMISE VALUE FROM EXISTING BUSINESS

CAPITAL AND VALUE MANAGEMENT

- Scildon's enhancement of its IT infrastructure completed in 2024, generating operating and cost efficiencies. Scildon also conducted asset reviews to provide implement more efficient interest rate hedges, replaced short-duration government bonds with investments in money market funds to improve its overall return profile and increasing its investment in mortgage funds to improve its asset/liability matching positions. Waard also made changes to its asset mix to improve longer-term expected returns. The proposed merger of the two Dutch businesses will result in a division stronger than the sum of its parts, through scale and synergies.

CUSTOMER OUTCOMES

- Scildon has continued to make improvements to its customer offering through new products and digitalisation options. Waard launched its digital customer portal, making it easier for customers to access their documents in digital format.

GOVERNANCE

- During 2024, the businesses progressed the implementation of the requirements of the Digital Operational Resilience Act (DORA), becoming compliant by the January 2025 implementation date. Work progressed over the year in respect of the implementation of the Corporate Sustainability Reporting Directive (CSRD), with both companies completing their double materiality assessments and gap analyses in 2024. We are considering the impact of the EU Omnibus proposals announced in February 2025, which would mean we would no longer have to implement CSRD across the group.

- In January 2024, Chesnara Holdings BV was dissolved resulting in Scildon, Waard Leven and Waard Schade becoming directly owned by Chesnara plc. Chesnara Holdings BV was de-registered in April 2024. During the year, the division prepared all of the required documents relating to the potential merger and submitted these to the local regulator for approval in January 2025.

KPIs

- Commercial Cash Generation £16m (2023: £24m)

- SII ratio (pre dividend) Waard 350% and Scildon 205% (2023: Waard 377% and Scildon 184%)

- SII ratio (post dividend): Waard 324% and Scildon 205% (2023: Waard 353% and Scildon 184%)

- EcV Earnings: £21m (2023: £41m of which £21m related to the day 1 gain from Conservatrix)

- IFRS Profit Before Tax: £5m (2023: £23m)

- Dividend remittances in 2024: £7m

FUTURE PRIORITIES

- Complete the proposed merger of the Waard and Scildon businesses (subject to regulatory approvals), enhancing the scale, efficiency and longer-term sustainability of the Group's Netherlands division

- Identify potential capital management actions, focusing on those that generate the appropriate balance of value and Cash Generation.

- Ensure customers continue to receive high-quality service throughout the change period of the merger.

- Regular engagement with customers to improve service quality, as well as enhance existing processes, infrastructure, and customer experiences.

- Consider the impact of the EU Omnibus proposals announced in February 2025 on the business's requirements under the Corporate Sustainability Reporting Directive (CSRD).

- Prepare the roadmap for investments to become net zero in 2050.

ACQUIRE LIFE AND PENSIONS BUSINESSES

- The division has continued to support the Group's acquisition strategy by assessing M&A opportunities and processes, including due diligence activity, as appropriate.

FUTURE PRIORITIES

- Continue to remain active in seeking acquisitions and have actively examined opportunities during the year

- Will continue to engage with possible vendors during 2025 on opportunities

ENHANCE VALUE THROUGH PROFITABLE NEW BUSINESS

- Scildon generated a New Business Contribution of £2m (2023: £5m) , against a backdrop of continued suppressed term market volumes and pressure on pricing. Scildon has maintained a disciplined approach to pricing, albeit at lower volumes.

- In April 2024, Scildon launched a Stop Smoking lifestyle proposition on new business reflecting its focus on expanding offerings to customers. The initiative won an award in the Customer Interest category of the Adfiz Performance Survey 2025.

KPIs

- New Business Contribution: £2m (2023:£5m)

- Term assurance market share: 10.6% (2023: 11.2%)

FUTURE PRIORITIES

- Simple focused product portfolio offering primarily sold through IFAs with digital options where preferred by customers.

- Look to offer more sustainable solutions for our unit-linked proposition.

CAPITAL MANAGEMENT | SOLVENCY II

The Group's Solvency Coverage Ratio of 203% is significantly above our operating range of 140% to 160%.

GROUP SOLVENCY 203%

SOLVENCY POSITION

SOLVENCY COVERAGE MOVEMENT

Group Solvency II surplus is £327m (2023: £351m) with a solvency coverage ratio of 203% (2023: 205%), which includes the proposed final 2024 dividend of £24m and payment of the interim 2024 dividend of £13m.

Own Funds include the impact of a £32m rise in the Tier 2/3 restriction and a £10m day 1 gain from the acquisition of the policy portfolio from Canada Life. The SCR reduced in 2024, mainly due to a general fall in market and life underwriting risk, with a rise in LACDT in UK and Dutch businesses.

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 2023 figures have been restated using 31 December 2024 exchange rates in order to aid comparison at a divisional level.

UK

The rise in surplus (pre-foreseeable dividend of £45m) to £60m (2023: £29m) includes growth in Own Funds and an SCR reduction during 2024. Key drivers of the increase in Own Funds included the portfolio acquisition from Canada Life, new business profits and economic returns (rising equities and bond income).

SWEDEN

Surplus growth of £11m (pre-foreseeable dividend of £2.5m) was underpinned by economic factors, with unit linked equity returns driving the increase in Own Funds, offsetting adverse lapse experience. An increase in the SCR was also largely attributable to the impact of positive market conditions on the equity risk component of the SCR.

NETHERLANDS - WAARD

The reduction in Solvency II surplus (£10m) includes the Own Funds impact of a foreseeable dividend (£7m) and a transfer of capital to Group, following liquidation of Chesnara BV. The reduction in SCR was primarily due a fall in life underwriting risks and an increase in LACDT, offsetting a rise in market risks.

NETHERLANDS - SCILDON

Growth in Solvency II surplus arose from higher Own Funds with a broadly flat SCR over the period. Growth was driven by positive operating variances and operating assumption changes from cost management actions. An increase in LACDT outweighed rises in expense and lapse risks, resulting in a small reduction in SCR (£1m).

CAPITAL MANAGEMENT | SENSITIVITIES

The group's solvency position remains strong and we proactively evaluate the main factors that can affect our solvency.

The table that follows provides some insight into the immediate impact of certain sensitivities on the Group's Solvency Coverage Ratio and Solvency Surplus.

Foreign exchange: 

Appreciation of sterling relative to our overseas currencies reduces the value of overseas surplus with partial mitigation from the Group currency hedge.

Equity ealuations: 

Lower equity valuations reduce the Group's AuA. In turn, this decreases the value of Own Funds and the associated SCR as the value of the funds exposed to market risk reduce. The reduction in SCR is limited by the impact of the Solvency II symmetrical adjustment. 

Interest rates: 

An interest rate fall has a more adverse effect on surplus than an interest rate rise. Group solvency is less exposed to rising interest rates as a rise in rates causes capital requirements to fall, increasing solvency.

Credit spreads:

Higher spreads reduce surplus as the rise in spreads decreases the value of Own Funds.

Swap rates: 

A reduction in the swap discount rate profile reduces the Group's surplus by increasing the time-value of the projected future liabilities associated with the in-force book. This sensitivity assumes that this change applies with no change in the value of the assets backing the liabilities.

Mass lapse: 

A 10% mass-lapse event drives an immediate reduction in the Group's projection of future surpluses, largely offset by the reduction in the associated SCR.

Inflation: 

A permanent increase in inflation for all future years increases the Group's future expense profile, reducing Own Funds and surplus.

Mortality rates:

A 5% increase in mortality rates across the Group will reduce the future surplus projections from the in-force book, leading to lower Own Funds and a reduction in Group's surplus.

FINANCIAL REVIEW

FINANCIAL REVIEW | CASH GENERATION

COMMERCIAL CASH GENERATION £59.6M

2023: £52.4M

BASE CASH GENERATION £51.6M

2023: £31.9M

Continued strong Cash Generation was reported in 2024, with total Commercial Cash of £59.6m, benefitting from surplus generation from operating activities and positive market conditions. Cash generation is the increase in the Group's Solvency II surplus, after allowing for 'prudent management buffers', as defined by the Group's Capital Management Policy.

UK

- The UK reported another strong year of Cash Generation, contributing £39.6m in 2024 (203: £48.5m). This was delivered through both Own Funds growth and a reduction in capital requirements. Economic conditions (mainly the positive impact of rising yields) supported both the growth in Own Funds and the reduction in SCR, predominantly lapse risk (resulting from management action on mass lapse reinsurance).

SWEDEN

- In Movestic, cash generation of £10.6m (2023: £0.3m) was stronger with economic returns on the division's unit-linked business the primary factor in Own Funds growth, exceeding a rise in SCR and underpinning the cash result. The rise in SCR was also attributable to the equity market-driven growth, with an increase in market-risk related capital requirements.

NETHERLANDS - WAARD

- Waard recorded modest Cash Generation of £1.6m (2023: £15.8m), with positive movements in both Own Funds and SCR. Own Funds growth, delivered through operating profits, was restricted due to economic losses (mainly the negative impact on bond holdings of interest rates). An increase in LACDT offset a rise in market risk, owing partly to the purchase of government bonds (with longer duration increasing interest rate SCR) and proactive re-risking through an increase in corporate bond holdings (increasing spread SCR). The divisional result also includes a material FX loss on consolidation owing to sterling appreciation versus the euro.

NETHERLANDS - SCILDON

- Scildon generated an increased cash return £14.6m for the period (2023: £8.2m). Operating profits, including management actions on cost efficiencies, were the primary driver of Own Funds growth. This action also had a positive effect on capital requirements, driving a reduction in SCR, offsetting the adverse impact of economic conditions and lower interest rates.

GROUP

- The Group Centre component of Cash Generation include Tier 2 debt coupon payments (c£10m) and other central costs.

FINANCIAL REVIEW | EcV

The Economic Value of the Group represents the present value of future profits of the existing insurance business, plus the adjusted net asset value of the non-insurance businesses within the Group. 

ECONOMIC VALUE (EcV) £531.0M

2023: £524.7M

Value movement: 1 Jan 2024 to 31 Dec 2024:

EcV Earnings: 

EcV profits of £59m have been driven primarily by positive market conditions during 2024, supported by operating profits.

Acquisitions: 

The Group completed the acquisition of a closed portfolio from Canada Life, the transaction delivering a day 1 EcV gain of £11m.

Foreign exchange: 

The closing EcV of the Group reflects a foreign exchange loss in the period, which is a consequence of sterling appreciation against both the Swedish krona and also the euro.

Dividends: 

Under EcV, dividends are recognised in the period in which they are paid. Dividends of £37m were paid during the year, representing the final dividend from 2023 and interim dividend for 2024.

EcV by segment at 31 Dec 2024 £m

The above table shows that the EcV of the Group remains diversified across its different geographical markets.

EcV to Solvency II - £m

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 applying to our European businesses 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% (UK: 4%) cost of capital to a 3.25% cost of capital, risk tapering is subsequently applied in line with the parameters and approach used in the calculation of the risk margin under Solvency II in the UK.

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 final dividend of £24.3m 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 as debt. Under SII this debt is recognised at fair value, while for EcV this remains at book value.

Tier 3:

Under Solvency II the eligibility of Tier 3 Own Funds is restricted in accordance with regulatory rules. For EcV the Tier 3 Own Funds are recognised at a deemed realistic value.

FINANCIAL REVIEW | EcV EARNINGS

Continued strong EcV Earnings have been delivered through economic profits, new business gains and delivery of our acquisition strategy

EcV EARNINGS £69.2M

2023: £59.1M

Analysis of the EcV Earnings by source of value:

¹Prior year comparators have been restated following a reallocation of components, with total EcV earnings remaining unchanged.

Total Operating Earnings:

Operating earnings of £10.4m were reported in 2024, driven by positive results in our Dutch and Swedish businesses, offsetting an operating loss in the UK.

Total Economic Earnings:

The economic result continues to be the largest component of the total EcV earnings, with a profit of £50.3m in the year. The result is in line with our reported sensitivities and is driven by the following key market movements:

Equity indices:

- FTSE All Share index increased by 5.6% (year ended 31 December 2023: increased by 3.7%)

- Swedish OMX all share index increased by 5.6% (year ended 31 December 2023: increased by 15.6%)

- The Netherlands AEX all share index increased by 7.5% (year ended 31 December 2023: increased by 13.4%)

Credit spreads:

- UK AA corporate bond yields decreased to 0.68% (31 December 2023: decreased to 0.71%)

- European AA credit spreads decreased to 0.56% (31 December 2023: increased to 0.63%)

Yields:

- 10-year UK gilt yields increased to 4.64% (31 December 2023: decreased to 3.64%)

- 10-year euro swap yield decreased to 2.37% (31 December 2023: decreased to 2.49%)

Other costs:

The result also includes Group Centre, primarily associated with the M&A strategy and development of the Group, and other non-operating items, including the release of risk margin and financing costs, such as Tier 2 debt servicing.

Analysis of the EcV result by business segment:

UK 

The UK's result of £19.6m was driven primarily by favourable market conditions, predominantly the long-term impact of rising yields and equities with an offset from non-recurring costs of investment in outsourcing arrangements and the business acquisitions. The result was also supported by higher year-on year new business earnings. 

Sweden

Movestic result of £30.9m benefitted from favourable market conditions in Sweden and Europe. New business volumes contributed further earnings of £2.3m (on an EcV basis). The operating result was partially offset by the impact of transfers out.

Netherlands: 

The Dutch businesses reported combined growth of £21.4m, with positive operating profits offsetting economic losses, primarily due to the impact of rising interest rates on the value of bond holdings. Scildon generated EcV growth of £14.0m, driven by positive operating variances, including the impact of management actions driving cost efficiencies. New business profits were muted, due to market pricing pressures and a smaller term market. In Waard, the negative impact of economic conditions on the bond portfolio, was offset by positive operating earnings and release of risk margin, delivering overall growth of £7.0m.

Group: 

This component includes Group Centre personnel costs; the cost of funding the Group's acquisition strategy; debt financing costs and investment returns on Group Centre assets.

FINANCIAL REVIEW | IFRS BALANCE SHEET

The transition to IFRS 17 is now fully embedded in the reporting of the group's IFRS results and balance sheet. As at 31 December 2024, total net equity is £314.4m and the CSM, which represents unearned future profits from insurance contracts, is £175.8m (net of reinsurance and gross of tax).

HOW THE CSM HAS MOVED IN THE PERIOD

The CSM represents future profits that are expected to be released to the income statement over the lifetime of the portfolio. The CSM (net of reinsurance and gross of tax) has increased by £18.9m from £156.9m to £175.8m during 2024.

Positive experience and assumption changes across the group have added £32.0m of CSM. New business in Scildon and the portfolio acquisition in the UK has also added £7.5m of CSM, reflecting the future profits arising on profitable new business added in the period. These additions are offset by the £18.9m release to profit in the period as the insurance services have been provided with other smaller net negative movements including the impact of foreign exchange and the interest accretion totalling £1.7m making up the total movement. 

The CSM values are shown net of reinsurance but gross of tax. When calculating the IFRS capital base† a net of reinsurance and net of tax figure is used. The equivalent net of reinsurance and tax movement of CSM during 2024 is an increase of £15.2m. 

HOW DOES IFRS COMPARE TO ECV AND SOLVENCY II?

EcV and IFRS share common principles. However, for investment contracts, expected future profits on existing policies are not recognised in the IFRS balance sheet, with profits being reported as they arise. This differs to the approach in EcV, where these future profits are fully recognised on the balance sheet, subject to contract boundaries. 

LEVERAGE 

Applying the Fitch gearing definition of debt divided by debt plus equity, with the equity denominator adding back the net of tax CSM liability, the leverage of the group as at 31 December 2024 was 30.9% (31 December 2023 restated: 29.5%). 

FINANCIAL REVIEW | IFRS INCOME STATEMENT

IFRS PRE-TAX PROFIT £20.8M 

31 DECEMBER 2023 RESTATED: £1.7M 

TOTAL COMPREHENSIVE INCOME £(11.0)M 

31 DECEMBER 2023 RESTATED: £10.2M 

Analysis of IFRS result

Net insurance service result

The net insurance service result comprises the revenue and expenses from providing insurance services to policyholders and ceding insurance business to reinsurers and is in respect of current and past service only.

Assumption changes, relating to future service, are excluded from the insurance result (as they adjust the CSM), unless the CSM for a given portfolio of contracts falls below zero; thereby in a 'loss component' position. Economic impacts are also excluded from the insurance service result.

The net insurance service result of £8.6m is broken down into the following elements:

- gains from the release of risk adjustment and CSM of £22.2m (2023 restated: £23.2m). These gains represent a consistent source of future profits for the group.

- losses of £13.6m (2023 restated: £28.5m loss) caused by experience impacts and loss component effects where portfolios of contracts with no CSM have suffered adverse impacts that would otherwise be offset in the balance sheet if the CSM for those portfolios were positive.

Net investment result

The net investment result contains the investment return earned on all assets together with the financial impacts of movements in insurance and investment contract liabilities. The investment results include policyholder tax impacts in the UK of £13.9m (2023: £14.2m) and the impact of effect of locked-in discount rates has contributed a further £4.3m (2023: £12.8m), largely in respect of groups of contracts in a loss component position and therefore partly offsetting the losses noted above in the insurance service result.

Fee, commission and other operating income

The most significant item in this line is the fee income that is charged to policyholders in respect of the asset management services provided for investment contracts. There is no income in respect of insurance contracts in this line, as this is all now reported in the insurance result.

Total fee, commission and operating income in the year was £104.2m (2023: £89.4m) and was £73.4m net of Swedish policyholder yield tax (2023: £71.5m). The year-on-year values are comparable with equity market returns in the UK and Sweden, with the retention of pension business in Sweden being the largest contributory factor.

Other operating expenses

Other operating expenses consist of costs relating to the management of the group's investment contracts, non-attributable costs relating to the group's insurance contracts and other certain one-off costs such as project costs. 

Other items of note are the impairment and amortisation of intangible assets in respect of investment business and the payment of yield tax relating to policyholder investment funds in Movestic, for which there is a corresponding offset within the fee income line.

After removing the impacts of policyholder yield tax (£30.8m in 2024 and £17.9m in 2023) and the impact of the AVIF impairment (£21.0m) from the prior year the other operating expenses in the year are £102.8m (2023: £111.0m).

Financing costs

This predominantly relates to the cost of servicing our Tier 2 corporate debt notes which were issued in early 2022. Further details can be found in Note C5 of the financial statements.

Profit arising on business combinations and portfolio acquisitions

The portfolio acquisition of unit-linked bond and pension business from Canada Life in December 2024 is not classed as a business combination under IFRS accounting and has therefore been accounted for as an 'asset and liability' transfer at cost, with no day 1 gain. The acquisition of the Conservatrix insurance portfolio in 2023 did meet the requirements of a business combination and the resulting day 1 gain is reported within the 2023 income statement.

Foreign exchange

The IFRS consolidated result of the group reflects a foreign exchange loss of £15.3m in the period, a consequence of sterling appreciation, against both the Euro and the Swedish krona. The loss is partly offset by a £4.0m gain from foreign exchange rate hedges, reported within the investment result.

Other comprehensive income

This represents the impact of movements in the valuation of land and buildings held in our Dutch division.

Income tax

Income tax consists of both current and deferred taxes.

The income tax expense of £16.9m in 2024 predominately arises from a UK deferred tax charge, driven by the investment returns on assets backing policyholder liabilities. Under current UK tax legislation, these investment returns are taxed over a seven-year period, leading to the deferred tax impact.

Although current tax charges are being offset by carried-forward tax losses (Excess Expenses) from prior periods, these losses had already been fully recognized as a deferred tax asset by year-end 2023. As a result, their utilisation in 2024 does not reduce tax expense but instead triggers a deferred tax charge.

RISK MANAGEMENT

"We continue to monitor the volatile global economic and geopolitical backdrop that appears to have become the new normal. Our solvency position remains strong, and our financial sensitivities remain well within the Board's Risk Appetite."

GAVIN HUGHES

GROUP CHIEF RISK OFFICER

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

Risk management system review and development

Clear accountabilities and responsibilities

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. 

The Group 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 all material risks faced by the Group, which are regularly reviewed by the divisional and Group Senior Leadership teams and 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 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 testing provides context against which the Group and divisions can assess whether any changes to its risk appetite or to its management processes are required.

RISK MANAGEMENT | ROLE OF THE BOARD

The Group Board is responsible for monitoring the Group Risk Management System and carrying out a review of its effectiveness on an annual basis. 

Risk Strategy and Risk Appetite

The Group and its divisions have a defined risk strategy and supporting risk appetite framework to embed an effective risk management framework, with culture and processes at its heart, and to create a holistic, transparent and focused approach to risk identification, assessment, management, monitoring and reporting.

On the recommendation of the Audit & Risk Committee 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.

Risk and Control Policies

The Group has a set of Risk and Control Policies that set out the key policies, processes and controls to be applied. Senior Management are responsible for the day-to-day implementation of the Risk and Control Board Policies. Subject to the materiality of changes, the Chesnara Board approves the review, updates and attestation of these policies at least annually.

The Board is considering the provisions of the new UK Corporate Governance Code, including the arrangements to implement and report on Provision 29 (effective for accounting periods beginning on or after 1 January 2026) in relation to the effectiveness of internal controls.

Risk Identification

The Group maintains a Risk Register of risks which are specific to its activity and reports these, along with the Principal Risks of each Business Unit, to the Group A&RC on at least a quarterly basis.

On an annual basis the Board approves, on the recommendation of the Audit & Risk Committee, 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 relevant Boards, 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.

The primary objective of the ORSA is to support the company's strategic decision-making, by providing insights into the Company's risk profile over the business planning horizon. Effective ORSA reporting supports the Board, in its role of protecting the viability and reputation of the company, reviewing and challenging management's strategic decisions and recommendations.

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.

RISK MANAGEMENT | EMERGING RISKS

On a regular basis the Senior Management teams scan the horizon to identify potential risk events (e.g. political; economic; technological; environmental, legislative & social), assessing potential outcomes in terms of threats and opportunities. This section provides details on some of the emerging risks that have been kept under close watch during 2024.

GEOPOLITICAL RISK

Geopolitical risk continues to create a greater level of uncertainty across the Group risk profile, for example market volatility and investment performance. To name some examples, the ongoing conflict between Ukraine and Russia, unrest in the Middle East and growing tensions between China and Taiwan all continue to be areas of emerging risk for the Group, in the sense that these are evolving situations which have potential implications for the Group's Principal risks.

During 2024, more than 40 countries, accounting for over 40 percent of the world held national elections, making it the largest year for global democracy. Against a backdrop of geopolitical tensions and economic instability, significant political change is happening:

- The UK's Conservative Party was heavily defeated after 14 years in power. Labour's first Budget announced significant changes impacting business owners and employers with an anticipated inflationary impact.

- In the US former president Donald Trump was re-elected with a decisive victory. Pledges made around tariffs and trade wars could impact inflation, global markets and economic growth. The long-term effects of his policies are unpredictable but could bring significant turbulence.

MACROECONOMIC VOLATILITY

Global economic growth is experiencing fluctuations due to various factors, including geopolitical tensions, supply chain disruptions, and changes in consumer behaviour. It was anticipated that 2024 would see a number of interest rate cuts but inflation proved persistent, meaning central banks have been reluctant to ease interest rates too quickly. The future path of inflation remains difficult to predict with most commentators forecasting a continuation of disinflation but with potential for smaller shocks or further persistence in some areas. 

Economic uncertainty remains a prominent emerging risk for the Group, with inflation driven expense risk and future market risk exposures being the potential key areas with greatest potential impact. 

- Many of the Group's material supplier contracts, as well as a majority of the Group's internal costs, are directly linked to wage/price inflation measures.

- Changes in market conditions can affect the Group's capital position, future growth and long-term investment performance.

ARTIFICIAL INTELIGENCE (AI)

Developments in the field of AI mean companies are looking towards both self-developed and externally acquired AI applications, often with the aim to automate or optimise existing processes and sub-processes. As a result, financial services organisations are entering the AI space with many looking at incorporating it into their long-term strategies.

The Group are exploring the use of Artificial Intelligence, including the risks and opportunities arising from developments in the field of AI.

The EU Artificial Intelligence Act officially came into force in August 2024. The regulations are designed to ensure that AI systems are safe, transparent, and respect fundamental rights while promoting innovation within the EU.

In 2024, the UK has continued to develop its approach to AI regulation with a focus on balancing innovation and security. The UK government has adopted a principles-based, cross-sector framework for AI regulation. Various regulators, including the FCA and the Information Commissioner's Office (ICO) have been updating their strategic approaches to AI.

SUSTAINABILITY

Sustainability and the response to the challenges and opportunities presented continues to be a key focus in the UK and Europe and is an evolving area of potential risk for the business. The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, however in early 2025 the United States of America withdrew from the United Nations Sustainable Development Goals. The agenda provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries - developed and developing - in a global partnership. The SDGs and the potential risks they look to address cover areas including poverty, inequality, climate change, environmental degradation, peace, and justice. 

Of these, a prominent area of focus across the UK and the EU is the financial risks of climate change. 2024 was the hottest year on record and the first calendar year to exceed the 1.5°C warming threshold of the Paris Agreement, with the global average at 1.6°C, and an understanding of the potential impacts on businesses is developing. 

The need for organisations, businesses and wider society to take action is clear and to support this, the Group has published its sustainability strategy together with its initial targets. This is an integral part of the company's overall strategy and will look to address current and forthcoming sustainability-related risks.

The risk information that follows includes specific commentary, where appropriate, on the impact of emerging events on our principal risks.

RISK MANAGEMENT | PRINCIPAL RISKS AND UNCERTAINTIES

The following tables outline the principal risks and uncertainties of the Group and the controls in place to mitigate or manage their impact. 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. 

DIRECTORS' REsponsibilities STATEMENT

With regards to this preliminary announcement, the Directors confirm to the best of their knowledge that:

The financial statements have been prepared in accordance with United Kingdom adopted international accounting standards and give a true and fair view of the assets, liabilities, financial position and profit for the Company and the undertakings included in the consolidation as a whole;

Pursuant to Disclosure and Transparency Rules Chapter 4, the Chairman's Statement and Management Report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced by the business.

On behalf of the Board

Luke Savage Steve Murray

Chairman Chief Executive Officer

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF CHESNARA PLC ON THE PRELIMINARY ANNOUNCEMENT OF CHESNARA PLC

As the independent auditor of Chesnara plc we are required by UK Listing Rule LR 9.7A.1(2)R to agree to the publication of Chesnara plc's preliminary announcement statement of annual results for the period ended 31 December 2024.

The preliminary statement of annual results for the period ended 31 December 2024 includes disclosures required by the Listing Rules and additional content such as 2024 highlights, the Chair's Statement and Chief Executive Officer's Report, narrative disclosures, the Management Report, Business Review, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Cash flows, Consolidated Statement of Changes in Equity and certain notes to the consolidated financial statements. We are not required to agree to the publication of presentations to analysts.

The directors of Chesnara plc are responsible for the preparation, presentation and publication of the preliminary statement of annual results in accordance with the UK Listing Rules.

We are responsible for agreeing to the publication of the preliminary statement of annual results, having regard to the Financial Reporting Council's Bulletin "The Auditor's Association with Preliminary Announcements made in accordance with UK Listing Rules".

Status of our audit of the financial statements

Our audit of the annual financial statements of Chesnara plc is complete and we signed our auditor's report on 26 March 2025. Our auditor's report is not modified and contains no emphasis of matter paragraph.

Our audit report on the full financial statements sets out the following key audit matters which had the greatest effect on our overall audit strategy; the allocation of resources in our audit; and directing the efforts of the engagement team, together with how our audit responded to those key audit matters and the key observations arising from our work:

Expense assumptions used in the valuation of insurance contract liabilities

Key audit matter description

The group's insurance contract liabilities are one of the largest balances on the balance sheet, held at £4.1bn (2023: £4.2bn) at 31 December 2024. The valuation of insurance contract liabilities is determined using actuarial assumptions that require complex judgments and forward-looking estimates to be made by management. A number of the assumptions, such as mortality and morbidity, economic assumptions and lapse rates, are made with reference to industry tables and actual experience, and hence market benchmarking highlights material deviations from industry practices.

The expense assumptions require management to make significant judgments and estimates relating to the future expenses attributable to insurance contracts. The risk associated with the expense assumptions is higher than other actuarial assumptions as a result of:

· planned changes to the policy administration outsourcing arrangements of CA plc, including the anticipated project costs of migration and termination;

· the impact of inflation on future expenses in the short- and long-term, particularly given recent changes in the group's macroeconomic environments; and

· uncertainties in the costs of maintaining insurance portfolios in run-off, particularly where variable cost assumptions are used.

Given the significance of the insurance contract liabilities held within CA plc (£1.3bn), Scildon (£1.9bn) and Waard (£0.7bn), our key audit matter was pinpointed to the expense assumptions within these divisions. As the expense assumptions are susceptible to manipulation by management, impacting its reported profit before taxation, we determined that there was a risk of material misstatement due to fraud and therefore identified this area as a key audit matter.

The group's accounting policy relating to its insurance contract liabilities has been presented in Note A4, with details of the balance and movement from 31 December 2023 set out within Note F2. The expense assumptions used in determining insurance contract liabilities are also referred to in the Audit & Risk Committee Report.

How the scope of our audit responded to the key audit matter

In respect of the expense assumptions used in the valuation of insurance contract liabilities, we performed the following procedures:

· obtained an understanding of relevant controls in place around management's assumption setting processes at the group and divisional-level;

· with the involvement of actuarial specialists, evaluated the appropriateness of expense assumptions and methodology. Our assessment considered the reasonableness of forecasts for future periods with reference to the group's internal and external business environments, the impacts of any planned management actions, and whether the assumptions have been subject to management bias.;

· tested actual expenses in the year-ended 31 December 2024 and compared these to management's previous forecasts to understand the predictive accuracy of management's process;

· assessed the mechanical accuracy of management's underlying expense calculations, verifying that management's selected methodology had been applied correctly; and

· assessed the appropriateness of the disclosures within the financial statements in relation to expense assumptions used in the valuation of the underlying insurance contract liabilities.

Key observations

Based on the procedures performed, we consider the expense assumptions used in the valuation of insurance contract liabilities and related disclosures to be appropriate.

Valuation of Chesnara plc's investment in Countrywide Assured plc ('CA plc')

Key audit matter description

Chesnara plc holds investments in subsidiaries totalling £389.9m (2023: £399.6m) on its company balance sheet, measured at cost less cumulative impairment losses.

In line with IAS 36 'Impairment of Assets', management are required to carry out an impairment assessment if there is an indication of impairment loss at the balance sheet date. Through its assessment, management evaluated whether the investment in CA plc was carried at more or less than its recoverable amount, which is the higher of fair value less costs of disposal and value in use, and therefore whether an impairment is required. Management have historically deemed economic value ('EcV') to be an appropriate proxy for recoverable amount, with management's definition of EcV.

In recent years, the CA plc EcV has been on a downwards trend as dividends paid to the parent company have exceeded EcV growth, with this dynamic being a function of CA plc being a closed book insurer. The impairment assessment performed by management at the balance sheet date highlighted £4.0m (2023: £14.4m) of impairment over the carrying value of the investment.

Due to the potential for management to introduce inappropriate bias to judgments made in the impairment assessment when determining the EcV, with impairment losses impacting the parent company income statement and balance sheet, we determined that there was a risk of material misstatement due to fraud and therefore identified this area as a key audit matter.

The parent company's accounting policy relating to its subsidiary investments has been presented in Note A4, with details of the impairment sensitivities included in Note A5. The carrying value of Chesnara plc's investment in CA plc is also referred to in the Audit & Risk Committee's report.

How the scope of our audit responded to the key audit matter

In respect of the valuation of Chesnara plc's investment in CA plc, we performed the following procedures:

· obtained an understanding of relevant controls in place around management's impairment assessment and EcV valuation processes;

· evaluated management's methodology for determining the recoverable amount of CA plc in accordance with IAS 36 'Impairment of Assets', including the appropriateness of using EcV as a proxy for recoverable amount;

· with the involvement of actuarial specialists, evaluated the accuracy and completeness of adjustments made to CA plc's IFRS balance sheet in order to determine the EcV and considered whether the adjustments have been subject to management bias;

· performed a stand-back assessment of management's impairment assessment against our knowledge and understanding of changes in CA plc's internal and external business environment;

· evaluated management's impairment assessment by performing benchmarking against other recent industry transactions to gain corroborative and contradictory evidence; and

· evaluated the appropriateness of disclosures included in Note J1 of the financial statements.

Key observations

Based on the procedures performed, we consider the carrying value of Chesnara plc's investment in CA plc to be appropriate.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we did not provide a separate opinion on these matters.

Procedures performed to agree to the preliminary announcement of annual results

In order to agree to the publication of the preliminary announcement of annual results of Chesnara plc we carried out the following procedures:

(a)  checked that the figures in the preliminary announcement covering the full year have been accurately extracted from the audited or draft financial statements and reflect the presentation to be adopted in the audited financial statements;

(b)  considered whether the information (including the management commentary) is consistent with other expected contents of the annual report;

(c)  considered whether the financial information in the preliminary announcement is misstated;

(d)  considered whether the preliminary announcement includes a statement by directors as required by section 435 of CA 2006 and whether the preliminary announcement includes the minimum information required by UKLA Listing Rule 9.7A.1;

(e)  where the preliminary announcement includes alternative performance measures ("APMs"), considered whether appropriate prominence is given to statutory financial information and whether:

· the use, relevance and reliability of APMs has been explained;

· the APMs used have been clearly defined, and have been given meaningful labels reflecting their content and basis of calculation;

· the APMs have been reconciled to the most directly reconcilable line item, subtotal or total presented in the financial statements of the corresponding period; and

· comparatives have been included, and where the basis of calculation has changed over time this is explained.

(f) read the management commentary, any other narrative disclosures and any final interim period figures and considered whether they are fair, balanced and understandable.

Use of our report

Our liability for this report, and for our full audit report on the financial statements is to the company's members as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's 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 and the company's members as a body, for our audit work, for our audit report or this report, or for the opinions we have formed.

Matthew Bainbridge (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

Leeds, United Kingdom

26 March 2025

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET