Interim Management Statement

RNS Number : 2110G

Chesnara PLC

19 November 2015

 

Cash generation proves reasonably resilient to the falls in equity market values during the third quarter ^{Note 1}

Cash generation ^{Note 2}

Despite adverse investment market conditions, a further £6.6m of gross cash has been generated during the third quarter, including £2.1m from Movestic, and cash generation remains in line with full year expectations.

Embedded Value

The Embedded Value is more sensitive than cash generation to any short term movements in equity market values and market volatility.  The third quarter figures have been adversely impacted by investment market conditions, resulting in a Group Embedded Value loss of £22.4m in the quarter, which includes a £10.6m increase in the cost of policy-holder guarantees.  The Group Embedded Value of £425.5m as at 30 September remains higher than at the beginning of the year despite the loss in Q3 and after the payment of the 2014 closing dividend. A large proportion of the adverse equity market impact to the UK cost of guarantee reserve and the Group Embedded Value will have reversed based on equity market recovery in both the UK and Sweden subsequent to the 30 September reporting date.

Movestic New Business

Seasonal effects mean that Q3 new business levels are naturally suppressed although total new business profits have increased by a further £1.0m during the third quarter with a year to date profit of £3.5m (Q3 2014: £7.2m).  We are encouraged by the Q3 volumes recovering to be broadly in line with the corresponding period in 2014 following period on period shortfalls in the first half of the year. Recruitment to our sales team together with a gradual improvement in the relative attractiveness of Unit Linked contracts compared to traditional contracts, means we are expecting the improvements seen during Q3 to continue into the final quarter.

Solvency II

Standard Model

Given the risk profile of our business we have adopted the standard model with the agreement of our Regulator. We are accordingly not subject to the current process of regulatory approval of internal models.

Use of transitional arrangements and matching adjustments

We have not applied to use transitional arrangements nor matching adjustments in any of our group businesses.

We are well advanced in our preparation for the transition to Solvency II.  Analysis continues to suggest that we expect the impact on the Group solvency and hence cash generation potential to be broadly neutral as we transition to Solvency II.  We will report our near final Solvency II numbers for the first time in our full year results in March 2016.

Note 1: During the third quarter the FTSE all-share index fell by 6.6% and the Swedish OMX all-share by 5.8%. In addition there was a general increase in volatility measures.

Note 2: The cash generation figures referred to in this IMS are on a Solvency I basis. Any cash transfer at year end will need to recognise both Solvency I and Solvency II constraints. Current projections suggest that Solvency II is not expected to be a more onerous constraint and hence Solvency I based cash generation figures remain appropriate for the purpose of this IMS.

Enquiries

John Deane, Chief Executive, Chesnara plc - 01772 972079

Roddy Watt, Newgate Threadneedle - 0207 653 9855 / 07714 770 493

Notes to Editors

Chesnara plc ('Chesnara'), which listed on the London Stock Exchange in May 2004, is the owner of Countrywide Assured plc ('CA plc'), Protection Life Company Limited ('PL'), Movestic Livförsäkringar AB ('Movestic') and Chesnara Holdings BV, the intermediate holding company of the 'Waard Group'.

CA plc is a UK life assurance subsidiary that is closed to new business.  In June 2005 Chesnara acquired a further closed life insurance company - City of Westminster Assurance - for £47.8m.  With effect from 30 June 2006, CWA's policies and assets were transferred into CA plc.  Save & Prosper Insurance Limited and its subsidiary, Save & Prosper Pensions Limited, were acquired on 20 December 2010 for £63.5 million.  With effect from 31 December 2011, the business of Save & Prosper was transferred into CA plc.  On 28 November 2013 Chesnara acquired Direct Line Life Insurance Company Limited (subsequently renamed Protection Life Company Limited) from Direct Line Group plc for £39.3m.  On 31 December 2014 the PL business transferred into CA plc.  CA plc operates an outsourced business model.

Movestic, a Swedish life assurance company which originally focused on pensions and savings, was acquired on 23 July 2009 for £20 million.  The company is open to new business and seeks to grow its position in the Swedish unit-linked market.  Its proposition was strengthened in February 2010 with the acquisition of the operations of Aspis Försäkringar Liv AB which has a risk and health product bias.

The Waard Group, a Netherlands-based Group comprising three closed book insurance companies and a servicing company, was acquired on 19 May 2015 for €69.9m.  The Waard Group, comprising Waard Leven N.V., Hollands Welvaren Leven N.V., Waard Schade N.V. and Tadas Verzekeringen B.V. was previously owned by DSB Beheer B.V., a Dutch financial services Group.  The policy base of the Waard Group is predominantly term life policies, with some unit linked policies and some non-life policies. 

Further details are available on the Company's website (www.chesnara.co.uk).

 

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