Welcome to the Chesnara Full Year 2024 Results Presentation. I'm Steve Murray, Group Chief Executive. With me today is Tom Howard, our Group Chief Financial Officer. Tom and I are hosting the presentation today in London from RBC's offices, and we've got a good crowd with us here in person. We also have people dialing in from across the world, including Chesnara colleagues from the Netherlands, Sweden, and the United Kingdom. Thanks to you all for joining us today. What will we cover today? I'll start by recapping our areas of strategic focus, looking at our headline results, and covering some of the key activities we've undertaken over the past year or so. Tom will then cover those results in more detail, and I'll finish looking at some of the future areas of focus, including M&A.
will have plenty of time for questions at the end of our presentation. For those of you in the room, you can—those of you watching online, you can submit questions during the presentation itself. If you are in the room, we will come to you directly with microphones. Our strategy remains fully focused on the three areas set out on this slide: managing the books of business we have efficiently, looking to execute value-accretive M&A, and writing profitable new business. Embedded across these strategic priorities is our aspiration to become a sustainable Chesnara. This focus helps ensure we have a strong line of sight to future sources of value growth and long-term cash generation, which in turn supports our long-standing progressive dividend policy. I am pleased to report it has been another successful period of financial and operational delivery.
Looking at our financial results, we delivered strong cash generation of GBP 60 million, which represents a significant increase versus 2023. Our Solvency ratio at 203% remains well above our operating range, providing significant headroom to support further M&A. We saw an increase in ECV per share, supported by material economic value earnings growth, also up on last year. The contribution for new business was stable at GBP 9 million, and off the back of our strong cash generation and robust Solvency position, we've yet again announced a 3% increase in our final dividend. Our consistent dividend growth track record is the best across U.K. and European listed insurance companies, and it continues to provide our investors with a great yield at a growth rate that's consistently beaten inflation over the longer term.
Tom will highlight the line of sight we have to future sources of cash generation and how this will further support our long-standing progressive dividend approach going forwards. Our teams have continued to deliver right the way across the group. Some of you may have spotted that we do not have an early festive holiday here at Chesnara with the announcement on the 23rd of December of our fifth acquisition in the last three years, a second portfolio acquisition in the U.K. from Canada Life. We are already working hard on further potential opportunities in 2025. The formal legal transfer of U.K. individual protection policies from Canada Life into our U.K. insurance entity completed in quarter one of this year. This book was also successfully migrated onto our new strategic platform with SS&C, the first of a number that we expect to complete across 2025 and into 2026.
Now, this platform enables us to support customers with newer technology, simplify our own U.K. operation, and provides a positive commercial incentive for both SS&C and ourselves to bring on further U.K. books of business in the future. We've also taken some of the initial steps required to merge our two Dutch insurance businesses. This included some initial restructuring activity and cost reduction in Scildon in quarter four last year. The merger presents us with opportunities to drive further value upside in the future, as well as creating a larger, more sustainable business. In Sweden, Movestic has continued to expand its distribution partnerships with inflows at their highest levels for several years. We extended the group's FX hedge, and we implemented further Mass Lapse reinsurance in the U.K.
We have also taken the opportunity to make some small changes to the asset mix in Waard, which provides us with further cash generation upside potential. Finally, on sustainability, we are on track to deliver the 50% reduction in carbon emissions we previously highlighted to the market. We have improved some of the external sustainability ratings we have with third parties. You can find our annual sustainability report on our website. Our second deal with Canada Life again shows that large insurers are comfortable trusting Chesnara to support their customers. For shareholders, the expected additional cash generation and economic value uplift of GBP 11 million from the GBP 2 million of consideration paid continues to show that there is material upside from smaller portfolio deals. This GBP 11 million economic value uplift is higher than the initial GBP 8 million that we announced in December.
I will discuss the outlook for further M&A later in our presentation. With that, let me hand over to Tom to take you through these strong results in more detail. Over to you, Tom.
Hi, Steve, and good morning, everyone. It's great to see you all here today. I've been with Chesnara now for almost a year, and I've been hugely impressed by the commitment of our colleagues right across the group. As Steve outlined just now, we've seen another year of delivery against our key priorities. This has allowed us to report a strong set of financial results to you this morning. Before going into the detail, a reminder that we'll again focus on the three key areas I outlined at our interim results. Firstly, cash. The group's cash generation has increased by 14% to GBP 60 million, with significant coverage of 1.6 times against the shareholder dividend.
Secondly, looking at our capital position, our Solvency coverage ratio of 203% remains comfortably above our operating range of 140%-160%, and it gives us ongoing flexibility to support M&A and other investments into the business. The group's leverage position remains broadly unchanged. Thirdly, we continue to have strong sources of future value from our In-force Business. Our assets under administration grew significantly over 2024, providing us with a larger base for future revenues from our investment business. The store of future value from insurance business benefited from an increase in the IFRS Contractual Service Margin. We also grew the overall economic value of the group after allowing for the payment of the shareholder dividend. I'm pleased to say that these results have supported the board's decision to increase the final dividend by 3% to GBP 24.7 per share.
Our operating divisions delivered a total of GBP 74 million in cash generation over 2024. Our U.K. business continues to be a significant contributor to the group results. The U.K. results benefited primarily from positive equity market growth over 2024 and a reduction in Solvency Capital Requirements through the extension of existing Mass Lapse reinsurance coverage. Our Swedish division had strong year-on-year growth, also driven by positive macroeconomic conditions, as well as higher new business performance and focused cost management. As Steve mentioned earlier, we have taken initial steps to simplify our business in the Netherlands. We are already seeing the early benefits of this work in the 2024 results. As we progress the merger of Scildon and The Waard Group, we expect that further operating efficiencies will drive ongoing improvements to both the level and the sustainability of future cash flow from the Netherlands.
We saw a day-one reduction in cash generation from the Canada Life portfolio transfer that we announced in December 2024. We expect this impact to fully reverse over the course of 2025 as the capital benefits of the deal earn through. After allowing for central items, the group's cash generation of GBP 60 million is 14% higher than the prior year, and at 1.6 times provides strong coverage against the full-year shareholder dividend. Turning to the balance sheet. Over the year, operating activities generated 16 percentage points in Solvency surplus, comfortably covering the 12 percentage point impact of the dividend. Management actions contributed a further 4 percentage points in Solvency surplus, mainly from the extension of existing Mass Lapse reinsurance coverage in our U.K. business. As I mentioned earlier, we also recognize an upfront Solvency charge in relation to the acquisition of the Canada Life portfolio.
This is a temporary impact, and we expect that this 3 percentage point charge will reverse out over 2025. After factoring in technical Solvency II adjustments and the dividend, the group's Solvency coverage ratio of 203% remains comfortably above our operating range of 140%-160%. It's also worth noting that the group's FX hedging arrangements fully protected the group's cash generation and Solvency II surplus from the strengthening of sterling relative to the euro and the Swedish krona over 2024. This strong and resilient capitalization continues to give us significant financial flexibility to deploy resources to M&A and to other investment opportunities as they arise. At GBP 109 million, our group's central liquidity sits comfortably above our risk appetite levels. This provides us with significant coverage for payment of the shareholder dividends, servicing the group's debt costs, and other central expenditure.
It also provides us with an excess buffer to deploy on M&A and other growth opportunities. After allowing for planned net cash remittances, we expect central liquidity to increase further to GBP 130 million by the half year. Now, a wave reminder, we use economic value to measure the assets we hold today, along with a prudent, risk-free projection of the future cash flows we expect to generate from the in-force book. The group's economic value grew in each of its key value areas. Economic earnings benefited from generally favorable market conditions in each of our operating divisions. Operating earnings were supported by cost management actions across the group. The new business activity in each of our divisions was a further source of incremental value. Finally, the Canada Life acquisition generated GBP 11 million in day-one economic value for the group.
Overall, the group's economic value earnings grew by 17% to GBP 69 million. Moving to IFRS, the Contractual Service Margin grew to GBP 176 million over 2024, reflecting positive impacts from the new business and the impact of assumption changes, primarily from cost efficiencies in the Netherlands. This continued growth in CSM increases the store of future value available from our insurance business. Profits before tax also increased.
The insurance component of the result benefited from the release of the higher CSM and positive operating variances. The investment result was supported by the growth in assets under administration over the year. Finally, lower group center costs contributed to the growth in PBT to GBP 21 million for the year, compared to GBP 2 million in the prior period. The year-on-year growth in CSM and profits increased the group's IFRS capital base by 10% to GBP 528 million before foreign exchange, tax, and the dividend.
We continue to have a clear line of sight to future sources of long-term sustainable cash generation. Today's results demonstrate that we continue to deliver against each of these. Firstly, the runoff of the capital requirements and risk margin that we hold against our in-force portfolio continues to be a predictable, sustainable source of future cash generation. Secondly, investment returns on assets under administration have been higher than the prudent risk-free rates assumed in our projections. We expect this to be a recurring, reliable source of future surplus, albeit with some volatility from year to year, depending on market conditions. Thirdly, we've implemented management actions to further optimize our capital position. It's worth noting that we did not exercise any new management actions in 2024. Rather, these were an extension of actions that we already had in place.
We have a wide range of management actions available to us into the longer term. Finally, we've written new business in each of our territories. We've maintained M&A momentum with the Canada Life deal, and we've generated early-stage synergies from the planned merger of our Dutch divisions. To conclude, it's been another period of strong cash generation for the group, and we're confident in our outlook for future growth. We continue to have multiple levers at our disposal, including management actions and M&A, to generate new sources of future cash generation. Finally, we've got a well-capitalized and resilient balance sheet with significant resources available to deploy on M&A and other investment opportunities as they arise. With that, I'll pass back to Steve.
Thanks, Tom. I wanted to highlight where we see further opportunities for action across our three strategic areas of focus. At the start of our presentation, I highlighted some of the activity underway to ensure that we have operating platforms that are fit for the future. Looking forward, we expect the majority of our U.K. in-force book to be migrated onto our new platform in the early part of 2026. That should also provide us with a more efficient platform and a more consistent digitally enabled customer experience. If we can secure further books of business via acquisitions, this can help further improve our U.K. operating leverage. In the Netherlands, our recent acquisitions are now fully integrated, and we're pushing ahead with a combination of our Dutch businesses with a legal merger targeted for the start of H2 this year.
This should create a larger, more sustainable business and provide us with further opportunities for cost synergies and capital management actions, including on our investment portfolio. We are also taking the opportunity to review and likely simplify our product set there. We have identified a wider set of management actions that we can take in the future, which will provide strong support to the cash generation potential of the group in the short, medium, and longer term. On M&A, I will discuss our thoughts on the potential for future activity very shortly. On new business, the strong flows into Movestic that we saw in 2024 have continued into 2025. We have opportunities to further expand our distribution partnerships and utilize the recent IT developments we have made around our life and health offering.
In the U.K., there are opportunities for us to extend the platform partnerships we have for our Onshore Bond. In the Netherlands, we're seeing some early signs of improvement in term insurance new business flows, and the merger and associated cost savings can support a further increase in our new business margin there. While there are opportunities to incrementally increase the value of new business that we write, we expect the main growth for Chesnara to come from M&A. Finally, on sustainability, we expect to publish our first transition plan in H2 of this year. We continue to believe it's crucial for all businesses and society to become sustainable and will continue to make our decisions considering the needs of all of our stakeholders, including the planet.
We enter 2025 following a period of more intensive work on M&A in 2024, where there was a lot of activity across multiple deal processes. This included us progressing to detailed due diligence and legal negotiations on some more material acquisition opportunities. Looking forward, we continue to see the key drivers for M&A activity being those highlighted at the top of this slide. Whilst there will often be competition for acquisitions, particularly larger ones, we believe the market environment is one that we can successfully compete in based on our market intel and experience over the last few years. We've already been working hard on a number of opportunities in the early part of this year, some of which are more material in size than our recent acquisitions.
Looking at our pipeline, which we map out over a three-year time horizon, we continue to expect a healthy set of opportunities to evaluate in the U.K. and wider Benelux region that includes the Netherlands. That is both in the short and medium term. In Sweden, there is the prospect of one or two portfolios coming to market over the next 12-24 months, albeit with less immediate opportunity for acquisitions in the near term. Overall, we are having to be more focused on how we deploy our resources given the positive pipeline that we are seeing, and that is a really good problem for us to have. With that backdrop, we believe it remains important that we retain material firepower to ensure that we can access these value-enhancing opportunities for our investors.
We continue to have a broad range of financing options that can support us in delivering a wide range of deals in terms of their product set, structure, and size. We will continue to ensure that any deals meet the financial framework set out on the top left of this slide. We also have a large degree of financing flexibility, including the ability to utilize our RCF facility and the potential issuance of RT1 debt up to around GBP 130 million. The material divisional remittances up to group over the period have ensured that we continue to retain immediately available cash resources of around GBP 200 million. With a high degree of financial flexibility and a strong pipeline, we continue to feel very positive about our ability to find and deliver value-enhancing M&A opportunities.
I thought our investors would find this slide a useful reminder of the step-up in acquisition and broader activity that we've been undertaking over the last few years. Our people have been pushing hard to bring in acquisitions, which have added over GBP 60 million of additional economic value to the group. There has been lots of work to improve the operating platforms that we have so they're fit for the future. We have set out clear targets to reduce our carbon emissions. We have taken thoughtful steps to ensure we can efficiently and effectively finance strategic opportunities, as well as improving our approach to assessing and taking management actions. We have also strengthened the senior leadership team, meaning we now have far stronger foundations to support us taking the actions I highlighted earlier, which will increase cash generation and grow the value of the group in the future.
In 2024, we've seen strong cash generation of GBP 60 million, a continued robust Solvency position, an increase in the group store of future value, and another 3% increase in our full-year dividend. We've seen continued momentum on M&A with the delivery of our second deal with Canada Life, and we're working hard on other potential opportunities. We remain optimistic about the prospect of delivering value-adding acquisitions in the future. I continue to be impressed and inspired by the efforts our people right across the group are making every day to support our customers and to drive our strategy forward. I want to thank all our colleagues for everything that they're delivering across Chesnara. We've achieved a lot. We still have plenty more to do, but there continues to be a lot to look forward to here at Chesnara. Thanks for listening.
What we're going to do now is open up for questions. I suggest we start here in the room in London to allow people online the chance to type into their devices. I think, Al, you're going to find people with a microphone. Tom's going to decide who got their hand up first for the first question.
I'll give it to Abid.
Abid, great title in your note this morning.
Thank you. Thanks for taking my questions. I'm glad that you like the title as well. It was a team effort. I've got three questions. The first one is actually in two parts. The first one is on Canada Life. Just wondering what was driving the uplift in the ECV on that acquisition that you did. You have it to GBP 11 million on the ECV uplift, which was more than what we had booked and what you had previously said. Just any color on that. The second part is just sticking with Canada Life. You clearly have a very strong relationship with the team at Canada Life. I'm just wondering what's the opportunity set going further to do additional transactions there. Sorry, that's sort of two questions wrapped in one. The second question is on the management actions.
Can you explain what you've done in terms of extending the FX hedge and the Mass Lapse hedge? More broadly, what other opportunities do you have for further management actions? If I can squeeze in the third question on the Dutch merger, any color on the timeline and the sense of the quantum from the merger and the quantum on the synergies, please? Thank you.
Sure. That was definitely four questions, just to be clear.
I don't know.
I'll maybe take the first part of Canada Life and Tom can give the explanation around the GBP 11 million. Yeah, look, we're pleased to have done a second deal. The team, our U.K. CEO, Jackie Ronson, is in the room with us. I think her and the team have developed a really good relationship with Canada Life. That's certainly been played back to us again off the back of the second acquisition. Whenever we engage with them, we make it clear that if there are other books of business that are attractive and actually could help them drive their strategy forward and help us drive value for our shareholders, we'd be delighted to look at those. It's a very large, important insurance company in the U.K. I'm sure there will be opportunities to have further conversations in the future. Do you want to pick up the GBP 11 million?
Yeah. I mean, it really is a function of taking the deal formally through our year-end valuation process. Basically, when we had full size, I think we announced the deal on December 23, which was just before our year-end cutoff. As we were going through the year-end process and we had access to the information we needed and our actuaries could form a view on the reserving and so on, they formed a view, which was just basically slightly better than what we had anticipated we would get when we struck the deal. Mainly to do with our ability to service that book a little bit more cheaply than perhaps we had assumed even actually at the pricing stage, which goes back to some of the benefits that we're already seeing from the SS&C platforming in the U.K.
Pick up management actions.
Yeah. So yeah, you've pointed to the Group FX Hedge and Mass Lapse. Group FX Hedge, we renewed in November. Just by way of reminder, the primary purpose of the hedge is to hedge us against movements in the Solvency II service position. We actually renewed on slightly better terms than the existing hedge. It was a renewal with a slight uplift. We had a slight Solvency II benefit from that because we had a slightly higher SCR release than we had under the previous hedging arrangements. On Mass Lapse, that was an extension of arrangements that we have in place. Jackie and the team in the U.K. have Mass Lapse reinsurance treaties on part of the book. We took the opportunity to bring more of the in-force book into that treaty, and that gave us more SCR relief for that extreme lapse event.
Do you want to take the third question as well?
Just worrying about the third question. So sorry.
I'll maybe do timing and maybe you can do one of them.
I'll take it.
We have made the required regulatory submissions that we need to do in that market when you bring insurance companies together. I think I said in the presentation, we expect the legal merger to happen at the midpoint of the year. We are well on track to doing that. The teams are working hard towards that deadline. In terms of when we may be able to realize synergies, we would expect some of those to come through in the second half of 2025 with further opportunities in 2026. We have not given a sort of quantum in terms of those numbers, not least because we are still working through the regulatory sort of process, but it may be worth assessing some of the cost savings we made in Scildon to give you an idea of the size and scale that these might be at.
Yeah. As Steve said, we took the opportunity to simplify one of the existing business units, Scildon, ahead of the merger. That piece of work generated run rate savings of about GBP 1 million per annum. That gets capitalized through to about GBP 10 million as a positive in own funds.
Thanks, Howard.
Mandeep.
Hey, good morning. Mandeep Jagpal, RBC Capital Markets. Three from me, please. First one is I appreciate you've delivered on a number of smaller deals, but why are the bigger deals not getting done? If there's sellers in the market that want to free up capital and reduce operational complexity, and you have very capable buyers in the market such as yourself, why is there such a sticking point in getting the deals done? Is it valuation, risk of execution, or something else? The second one is on the underlying commercial cash generation from here. In a scenario where markets are flat, there's no M&A or management actions, would the commercial cash generation trend down evenly, or are there any kind of step-downs or cliff edges as certain cohorts of policies run off? Just the final one on management actions, a follow-up.
How do you think about the balance between the cost of enacting this reinsurance and hedging versus the benefit to smoothing the cash generation?
Do you want to take the second two? Shall I deal with M&A first?
Yeah.
It's a great question. I think where I'd start actually is some of these deals, whilst they're very material for us, they're actually not particularly large deals for the sellers if you think about the size of the organizations that we're dealing with. Part of the challenge can be these remaining an important enough strategic priority for the seller. If we look at some of the things that we worked on last year, I would say one of the examples of a deal that we got a long way through and very close to doing, there was a change in strategic priority, and that didn't remain as something that the insurance company wanted to do. Maybe they'll look at that this year or the next year. It's not as if that's gone somewhere else.
You can see some things like that sort of interfering. When it's a portfolio transaction, the separation can be quite complicated. Again, you can see from the seller's perspective some competing demands sometimes against other operational sort of programs as well. I suppose what I'm reflecting in my positive outlook, if I think about when I joined Chesnara three years ago and I look at the amount that's in the pipeline, the quality of opportunities, and again, the sort of weighted average, all of that has improved. I think the overall competition in the market has lessened slightly from where I was. It's not that these things are sort of easy to do, but ultimately that's part of the DNA and the things that we deliver at Chesnara. I think we'll have good opportunities to continue to assess and push forward with those opportunities.
Before somebody asks me the question, I've got too much gray hair to predict exactly when they'll land, but we're doing everything that we can to simply evaluate and push forward with those.
Yeah. On the cash gen question, I think the first thing to say is the run-off profile of the in-force is actually pretty linear. There are a number of reasons for that. One of the key reasons, the simplest reason is that the bulk of our business is an investment-based business. We do not run big portfolios where we have fixed cutoff dates, fixed maturity dates, and we are exposed to that cliff edge risk. This is actually something we model very actively through internal processes like our business planning and ORSA and so on. In situations where market returns are volatile, we do have the ability to flex between the management actions and the market piece of the value equation to deliver cash generation.
Actually, I think 2024 was a really good example of that where we saw returns which were materially in excess of our risk-free assumptions, and we did not actually have to put any new management actions on the table. We dialed up a little bit on Mass Lapse, as I said earlier, and we had a slightly beneficial outcome on group hedging. That is a good example of where we did not have to do a huge amount there. I think as well, Mandeep, you talked about the trade-off then between sort of the hedging instrument cost and the benefit we get. We absolutely want to hedge the Solvency II service position because ultimately that is the main determinant of things like dividend cover and our ability to support that increase in cash generation profile.
Obviously, not at any cost, but that we have a very, very competitive hedging arrangement in place, and it does that actually at minimal cost, and we get a very significant SCR benefit. We could go further in theory. For example, we could hedge market risk. We do not want to do that. The reason for that is twofold, really. I think we quite like the alignment of our outcomes with our policyholder outcomes because we have mainly unit-linked investment contracts within the portfolio. Number two, my view is that, yeah, frankly, it just introduces too much volatility into the IFRS accounting as well. If we are running market hedge positions, for example, elsewhere in the balance sheet, it makes the IFRS outcome extremely unpredictable when the markets are moving around.
Barrie.
Good morning. It's Barrie Cornes from Panmure Liberum, and congratulations on a very good set of figures again. I've got three questions. First of all, in terms of the war chest, obviously it's increasing in size. At what point would you consider that you can't do a decent, a larger acquisition and maybe start thinking about returning the capital? Is there a point at which you would consider that? Secondly, on slide 19, there's a box in there which talks about potential new strategic partners. I just wondered if you could put some color around that and what you mean by it, please. Last of all, again, coming back to the M&A question, if a large deal doesn't land, would you consider looking at slightly different strategic direction?
I suppose what I'm thinking of is something like ramping up new business sales in one of the areas or something slightly different.
Yeah. I'll maybe take that together with the question about the sort of capital resources. I think I've maybe said this before, Barry, but I'm sort of delighted that people are asking what we might do with the excess capital rather than whether the dividend can continue. I think hopefully we've done a good job of showing the strong sort of sources of cash generation. It's been another strong period of cash. I think what we've consistently said, and we've said this directly to investors, is the market that we're seeing, the pipeline that we're seeing is very strong. Retaining those resources, we think is important. What would change that?
I think if we started to see a highly competitive market where we were seeing sort of valuations in a place that we didn't think we could make the right returns for shareholders, you could see, I suppose, a change in regulatory dynamics that perhaps people weren't encouraging consolidation, or we just saw far less pipeline coming through. I think we've become slightly more sophisticated in the way that we're mapping out the group's pipeline. I mentioned that we're sort of trying to take a three-year view. It's probably a three to five-year view working and sort of understanding where companies might be across the U.K. and wider Europe.
If we were sat engaging with the board and looking at that opportunity set and saying we didn't think it was there, we'd be very transparent and come back, and clearly then we'd need to consider whether we would return that capital in what form. To your second point, are there other strategic opportunities perhaps that could be available that we could deploy sort of capital onto? I suppose we're sat here today in the fortunate position that we can say very strongly that we've got a good pipeline and we think there are great opportunities for deploying that capital. If that didn't happen, we'd absolutely have to look at what we then did with that war chest. Sorry, your.
The other one was on new strategic partners.
Yeah. We've kind of looked at this on some deals. There are some different ways that this could manifest itself. Actually, if you look at a recent deal in Germany, Viridium, there was a broad consortium of people that came together to acquire a consolidation platform in that market. I think what that's done is it's brought together some different skills and capabilities from different people and looks like a very good way to have done that transaction with hallmark names like Allianz and Generali, part of that, the asset management capability of BlackRock. You have a major reinsurer as part of that consortium, plus a Japanese strategic investor as well. When we look at some opportunities in the market, it may make sense for us to partner with asset managers, private capital providers.
It might be actually the seller becomes a partner depending on the size of that, if they took an equity stake or maybe there was an exchange of books and capabilities. When we're sort of calling out that new strategic partnership, we think there's quite a broad range of things that we could consider, and we think we'd make a great partner, not least because we don't tend to be a big competitor in the new business space with lots of insurers. The idea of partnering with us, I think, is quite straightforward perhaps versus other people. I think it again just plays to the broad range of flexibility that we have when we're thinking about these opportunities and hopefully plays again to the strong sense here, hopefully getting from us that we're positive about the pipeline and ability to execute M&A.
Other questions in the room? Ming, great to see you.
Thank you. Great set of numbers. I'm going to keep my questions easy. At half year, I think I asked you this question. Your tone on M&A outlook was stronger than you were at full year last year. You were honest. You did deliver the Canada Life just before Christmas. However, the size was very small. My question now I'm going to ask is your M&A tone outlook the same as strong as you were at half year or stronger in both of opportunities as well as deal size? My second question is really a follow-up of a comment you've just made that with bigger deal size, it's more complexity.
Another angle to look at it is, say you do a GBP 200 million deal, yes, it's complex, but isn't that more efficient or easier in some sense rather than you do ten GBP 20 million size deals?
Yeah, I think that's a fair comment that one of the things that we are absolutely assessing the whole timing is that trade-off between, I suppose, the sort of value accretion that you can get from some of the smaller deals that you've seen. If you look at the recent deals that we've done, if we take the last one, there's GBP 2 million of consideration. There's an economic value uplift of GBP 11 million. I think it's pretty straightforward to demonstrate that's an attractive return. Actually, you can sometimes find with larger deals that they're actually less complicated than some of the smaller ones because the smaller ones invariably are sort of portfolio carve-outs. There's separation activity and migration activity that you have to do. We are actively, I suppose, looking at those trade-offs and particularly thinking about the physical resources we have at Chesnara.
Is it better deploying those on sort of one larger opportunity or a series of smaller ones? I mean, we're just optimizing that every day. There's not an immediate answer for what that looks like. What I would say is in terms of the sort of commentary from the half year, I think the pipeline's stronger. The weighted average sort of size, I think it said it moved up. I'd say it probably is remaining in the same sort of space. The couple of sort of larger deals that we got very close with last year, I think were sort of helpful fire drills, as it were.
I think that's given us confidence that when we think about things that might be a little bit larger than certainly some of the things we've done over the last few years, there shouldn't be any challenges with us sort of thinking about the financing of those and particularly taking those on operationally. Yeah, we're conscious, I think people probably thought we were warming them up to something a little bit larger last year. What we're trying to be is transparent about what we're seeing in the market and what we're working on. Yeah, we were happy to do that deal in the second half of the year, and we're happy that we've got good opportunities to work on already in 2025. Other questions in the room? Shall we maybe go to any questions that we've had online? There's no hands shooting up.
The first question online comes from Michael Huttner Berenberg, who asks, "Please, could we have more on deals, i.e., how full is the pipeline and what is the annual capacity in terms of deals? Also, how far are you from the level where operational leverage would seriously crystallize, particularly in the U.K.? Finally, in terms of risk-reward, is there a deal size where you would consider pausing or resetting the dividend?
Thanks, Michael. I think you're in the States, so thank you for getting up early to dial into the presentation. I think in terms of the risk-reward, again, I think we can only look at what's in front of us. We don't see a tension at the moment between the opportunities that we're looking at in the pipeline and the dividend policy. We're in a fortunate position in that regard. That's in part helped by the strong Solvency position that Tom talked about, the strong cash generation that's coming from the business. I think if that tension ever became more acute, it would be incumbent on us to speak to investors about that. Based on what we're seeing at the moment, I don't think we see any tension between those two things.
That is a mixture of the sort of the nature of the books that we are seeing, the cash generator of nature, and some other things that we think we can do there. I think I have given a little bit of color on sort of pipeline and the sort of size and scale of things that we are looking at. I mean, I will repeat what I said. It is a good pipeline that we have. Some of what we think that we are seeing across the various markets that we are operating in is parts of the conversations that we have been having now for the last two or three years with management teams and organizations so that they understand what Chesnara can do.
We have got early sight of potentially books that no longer fit well strategically for large insurance companies and when they might look to execute those. I think we're quite happy with the sort of relationships that we have, that pipeline, and certainly that outlook of pipeline over the next three years. Anything you'd want to add to that?
No, I think there was a point on operating leverage as well on there. I think actually we're not really sitting here waiting to generate operationally. It's basically not sort of a situation where we're flatlining and then all of a sudden, once we hit a critical scale, we start seeing this benefit come through. I mean, a good example actually is I mentioned a moment ago that one of the reasons we recorded a higher day-one ECV contribution from the Canada Life deal is actually part of it was because once we had full line of sight on what we were bringing in and also we had the full discussions with SS&C, we were actually able to administer that more cheaply than perhaps we had expected as we were going through the deal negotiation process.
You're actually seeing the benefits of leverage come through both in terms of our ability to execute M&A, but also to an extent on the in-force book as well. It is more linear than something we're waiting to generate, I would say.
I think part of the work that we have been doing, if you think about some of the drivers bringing the two Dutch insurance businesses together, you automatically get some further operating leverage. If we can then find further M&A opportunities, you can increase that as well. You can see a lot of the activity that we have been doing is to sort of simplify some of the operating model, but give us the potential to further improve that operating leverage in the future. Thanks, Michael.
The next question comes from Marcus Rivaldi at Jefferies. Please, could you provide a view on how the FY24 results address the factors Fitch highlighted that could drive a potential ratings downgrade?
Thanks, Marcus. Do you want to take that?
Yeah. So look, I think the areas that Fitch pointed to were focused around our ability to focus on delivering transformation in the U.K. We have talked about where we are on the SS&C migration. That is progressing to plan, on budget. I think we have demonstrated operationally that we are ticking that box. I think the second point was around M&A momentum. We have done the Canada Life deal. We want to do more deals. I think that is really clear. We have done a deal, so there is a level of momentum there. Another was just more broadly around cost management within the group.
Actually, within our 2024 results, if you look at the three operating divisions in Group Center, we've actually had expense efficiencies in Group Center, our Swedish division, and the Netherlands because that's been a core area of focus for us as a group over 2024. I guess sitting here and looking at how we've performed in 2024 against the areas of focus that Fitch highlighted in their rating reports, I would say that we've done pretty well against those three areas.
The next question comes from Brian Moretta at Hardman & Co. Lapses in Sweden are still higher than long-term assumptions. Any signs of improvement?
Yeah. I think if you look at the overall rate, it's come down from where we were certainly around 18 months ago. We have sort of an additional provision held against increases above that long-term rate of assumption. What we're seeing in the market at the moment is a lot more focus on that sort of transfer activity from unit-linked books. I think I've spoken before that there's certainly regulatory surveys going on and what have you. I think there are signs that people understand that sort of having those rates going down to a more normalized level, albeit our long-term assumption doesn't assume the transfers go back to pre-COVID rates. We assume they'll stay higher, actually, as you saw in the U.K. post RDR as well. I think, look, one of the key sort of mitigants against that is making sure that we've got strong sales performance.
I think the team have done a great job in 2024. I talked about inflows being sort of the highest point that they have been at for a number of years. That's a result of distribution partnerships that we've expanded, the quality of the offer, the work of the sales teams there as well. Actually, against an operating platform there that's got good operational leverage, the team have done a good job of sort of managing costs at a lower level at which the sort of volumes have been increasing as well.
That concludes questions from the webcast. I'll hand back to Steve for closing remarks.
Okay. Thanks everybody for joining us today. Hopefully, you can see from the results, it's been another strong year of performance for Chesnara with strong cash generation. We've seen a stable Solvency position. We've grown the future store of value of the business and yet another 3% dividend increase for another 20 years. Hopefully, you've also felt from us that we're positive about the outlook for M&A. Thanks again for listening and hope the rest of your day goes well.