Life insurance consolidator Chesnara has agreed to acquire HSBC Life (UK) from HSBC Bank for £260 million, marking the company's largest acquisition to date and significantly expanding its operations in the UK market.

The Preston-headquartered group announced on Thursday that it will take control of HSBC Life (UK), a specialist provider of life protection and investment bond products with eligible own funds of £314 million as of 31 December 2024. The transaction is expected to generate more than £800 million in lifetime cash flows and over £140 million within the first five years after completion.

The acquisition will add approximately £4 billion in assets under administration and around 454,000 policies to Chesnara's portfolio, creating a combined group with approximately £18 billion of total assets under administration and about 1.4 million policies.

"This highly accretive transaction will allow us to build on our strong, 20-year track record of uninterrupted dividend growth," said Chesnara chief executive Steve Murray. "HSBC Life (UK) is a high-quality business operating in products that we know well and is capable, under our ownership, of generating substantial cash flows for many years."

Chesnara will finance the deal through a combination of £55 million in internal cash resources, a £65 million drawdown from its expanded £150 million revolving credit facility, and approximately £140 million raised via a fully underwritten rights issue. The rights issue will be priced at 176p per share, with shareholders receiving 10 new ordinary shares for every 19 shares they currently hold.

The acquisition is projected to support a 6 per cent increase in Chesnara's final FY25 and interim FY26 dividend. The company also expects to benefit from cost and capital synergies, as well as further opportunities in management and new business lines.

For HSBC, the sale represents the latest in a series of asset disposals as the banking giant seeks to streamline its operations and focus more on Asia. The bank has previously agreed to sell its custody business and private banking operations in Germany to BNP Paribas, and last year signed a deal to sell its French life insurance unit to Matmut Société d'Assurance Mutuelle for €925 million ($1.1 billion).

Murray added that the deal was "a further example of a major financial institution choosing to work with us, enhancing our reputation as a leading life and pensions consolidator."

The transaction is subject to regulatory approval and is expected to complete in early 2026. Chesnara anticipates that a greater free float could boost the liquidity of its shares and improve its prospects for FTSE 250 inclusion.

The announcement comes shortly after HSBC Life (UK) expanded its adviser support operations, hiring three new business development managers and launching a dedicated protection adviser support team. The firm reported £93 million in life and critical illness payouts in 2024, with claim acceptance rates of 97.53 per cent for life insurance and 94.44 per cent for critical illness.

Chesnara, established in 2004, operates as a life insurance and pension consolidator with a presence in the UK, Sweden and the Netherlands. The company administered around 1 million life and pension policies and had £14 billion of assets under administration as of the end of 2024.

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