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Investing.com -- Fitch Ratings has revised the outlook on Chesnara plc and its subsidiary Countrywide Assured plc to stable from negative, while affirming Countrywide’s Insurer Financial Strength Rating at ’A’.
The rating action follows Chesnara’s agreement to acquire HSBC Life (UK) Limited for £260 million, with completion expected by early 2026. The deal will be financed through a combination of a fully underwritten £140 million rights issue, existing cash resources, and a partial drawdown of Chesnara’s revolving credit facility.
Fitch expects Chesnara’s pro forma financial leverage ratio to improve to 29% from 31% at the end of 2024 after the proposed acquisition. The rating agency noted that the impact from the facility drawdown will be temporary, as the facility is expected to be repaid in the near to medium term.
The acquisition, Chesnara’s largest to date, will enhance the company’s operating scale by adding approximately £4 billion to its £14 billion assets under administration as of end-2024. Despite this growth, Fitch continues to view Chesnara’s post-acquisition scale as modest compared to similarly rated peers.
Chesnara’s Solvency II ratio is expected to decrease to 169% on a pro forma basis following the acquisition, down from 203% at the end of 2024. This reduction primarily reflects HSBC Life UK’s lower Solvency II ratio of 149% at end-2024 and the planned funding mix.
The company’s pre-tax net income rose to £21 million in 2024 from £1.7 million in 2023, mainly due to improved net insurance service results, higher fee and commission income from policyholders, and reduced operating expenses.
Fitch indicated that a negative rating action could result from weakening financial performance, deterioration in the company profile, a financial leverage ratio above 30%, or a fall in the Solvency II ratio below 140% on a sustained basis. Conversely, a significant improvement in the company profile through a substantial increase in size could lead to a positive rating action.
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