Chesnara (CSN) M&A announcement summary

Deal rationale and strategic fit

• Acquisition of 100% of MetLife UK Limited, adding scale and diversification to U.K. life and pensions operations.

• Closed book comprises unit-linked investment policies with optional guarantees and variable annuities; it closed to new business in 2017.

• Adds £1.7bn of assets under administration and ~18,000 policies; fully reinsured guarantee-bearing policies behave economically like unit-linked products and diversify the existing U.K. portfolio.

Financial terms and conditions

• At completion under the target operating model, Own Funds and Contractual Service Margin are expected to increase by ~£45m; uplift equals ~5% of total Own Funds and nearly 10% of UT1.

• Expected lifetime cash flows of ~£90m, with ~half expected to emerge in the first five years after completion.

• Consideration is subject to customary completion adjustments and is not expected to be material; no material financing or capital contribution is expected, and available firepower is unchanged.

• Group Solvency II ratio impact is expected to be broadly neutral; sensitivities are largely unaffected as portfolio risks diversify with the existing U.K. business.

Synergies and expected cost savings

• Migration to the modern SS&C platform and associated rate card supports value creation; cash-flow projections use a prudent assumption for the long-term cost profile after migration.

• Projected lifetime cash flows exclude future capital management actions, including potential mass-lapse actions, which remain possible sources of upside.