Chesnara Life (UK) Limited (CSN) Earnings Call Transcript & Summary

Good morning, and thanks for joining us for this Chesnara plc presentation call. I'm Steve Murray, Group Chief Executive, and with me is Tom Howard, our Group Chief Financial Officer. We're pleased to be here today to talk you through our proposed acquisition of HSBC Life (UK), which we announced to the market this morning. You can find all the relevant documentation associated with the acquisition via our microsite on chesnara.co.uk, which will be uploaded once we've received approval from the FCA of the prospectus expected later today. We believe this material transaction is strongly aligned with our stated strategy. It's attractive for investors and positively supports the long-term cash generation potential of the group. So what we cover this morning, well, I'll start by setting the scene with the strategic context and key highlights of the deal. I'll then hand over to Tom, who will take you through the financials in more detail, including how we'll be financing the transaction. I'll then finish with a summary of the transaction, including some brief comments on our outlook for future M&A activity. And there'll be plenty of time for questions, so please refer to the invitation details on how to ask these. So let me start with how our proposed acquisition fits strongly with our stated strategy. This deal is exactly the kind of transaction that we're set up to deliver and is a great fit against all of our acquisition criteria. HSBC Life (UK) is a high-quality business with products that we know well, and the scale of the opportunity meaningfully accelerates our strategy. And the price that we've agreed in combination with the upside potential that we see provides investors with a very attractive acquisition. In support of the financing of the deal, we've also announced a fully underwritten rights issue. And our financing package, which also includes an amended and increased RCF, maintains our balance sheet strength and also provide some capacity for further M&A in the future. The deal is compelling financially and strategically for us. On the financials, it increases the cash generation potential of the group with over GBP 800 million of incremental lifetime cash flow expected. That's 3x the acquisition price, and GBP 140 million of the GBP 800 million, we expect over the first 5 years of the transaction. We also maintain balance sheet strength and resilience remaining well above the Solvency II target operating range of 140% to 160%, while maintaining a leverage ratio commensurate with our investment grade rating. The total consideration accounts for around 83% of HSBC Life (UK)'s Eligible Own Funds, and we expect there to be a substantial value uplift from investors from the deal going forward. Furthermore, the addition of HSBC Life (UK) supports an anticipated step-up in our dividend in 2026 and the continuation of our excellent track record of 20 consecutive years of dividend growth. Strategically, this is the 15th and largest transaction since our listing in 2004, and it significantly increases our assets under administration and policy base in the U.K. Increase in scale also means that we expect to be eligible for FTSE 250 inclusion, a positive both for our profile and the liquidity of our shares. And today's announcement clearly reinforces our position as one of the leading life and pensions consolidators, and we continue to see further M&A opportunities in our pipeline. So what are we proposing to acquire in HSBC Life (UK)? Our due diligence has supported the reputation in the market that this is a high-quality business with product areas that we already know well. The business has approximately GBP 4 billion of assets under administration, over 450,000 policyholders and GBP 314 million of Eligible Own Funds. We've demonstrated over time that we can successfully run and integrate books like these, and we very much look forward to working with the HSBC Life (UK) team to affect a clean migration and ensure that customers continue to receive strong support. So with that, let me hand over to Tom who could talk you through our approach to financing and the wider value case in more detail. Over to you, Tom.

Thanks, Steve, and good morning, everyone. I'm very pleased to be presenting the financial highlights of this attractive deal to you today. This transaction significantly strengthens the group's financial framework across our three pillars of cash generation, balance sheet strength and future value creation. We expect the deal to generate incremental lifetime cash of over GBP 800 million, and this is a step change for the group. An efficient deal financing package supports a strong group solvency coverage ratio and maintains our investment-grade leverage from deal completion. And we have clear line of sight to sources of future value from expense and capital synergies and new business activity. This strong financial profile supports an anticipated 1-year step-up in dividend. The final full year '25 dividend and the interim full year '26 dividend is expected to be increased by an adjusted 6%. I mentioned that the transaction represents a step change in the group's cash generation profile. And I look at this in three ways. Firstly, the overall cash generation of the group will increase materially. We expect the transaction to generate lifetime cash of more than GBP 800 million. Secondly, this lifetime cash projection does not allow for future incremental expense and capital synergies and other management actions. We have a clear line of sight to these future value opportunities, and I will cover these a little later. And finally, the transaction significantly enhances the sustainability of the group's cash generation, with over 80% of the lifetime cash expected to be generated from year 6 onwards and into the longer term. The GBP 260 million consideration will be funded through a combination of GBP 55 million from existing cash at group, a drawdown of GBP 65 million from our amended and increased GBP 150 million revolving credit facility, and the net proceeds of the GBP 140 million fully underwritten equity raise, also launched today. This financing package supports our existing financial framework, maintaining the group's robust solvency coverage and investment-grade leverage and significantly strengthening long-term cash generation. This means that we will continue to retain a level of financial firepower primarily through the remaining undrawn down RCF to support future M&A opportunities. At 169%, the group's pro forma solvency coverage ratio will remain above the upper end of our operating range of 140% to 160%. The group's risk profile will be largely unchanged, with no material effect on the resilience of our Solvency II ratio to macroeconomic and demographic stresses. Day 1 leverage will be maintained at investment grade levels, and we expect the group's leverage ratio to improve further in the medium term, following the repayment of the RCF drawn and the growth in the group's cash flow. We will also continue to explore opportunities to further optimize the group's debt stack, including, for example, via an RT1 debt issuance, which is under active consideration. This transaction provides the group with material sources of value from operating efficiencies and capital optimization. Cost efficiencies will be delivered through the migration of the HSBC Life (UK) operating model to our strategic outsourcing partner, SS&C Technologies. Capital efficiencies will arise through a range of actions, including but not limited to, the Part 7 transfer of the HSBC Life (UK) business into Chesnara's existing U.K. business Countrywide Assured, and broader risk management actions such as reinsurance and foreign exchange hedging. And finally, the transaction also offers the potential to generate further value from expanding Chesnara's new business opportunities in the U.K. Supported by the strong financial profile of the acquisition, it is anticipated that there will be a step-up in the group's dividend trajectory. This morning, we are announcing a proposed increase to both the final full year '25 and the 2026 interim dividend by 6%, and this represents a 1 year acceleration in our recent annualized dividend growth rate of 3%. This rebasing of future distributions, along with the attractive cash flow profile of today's transaction, positions the group strongly to continue its consistent record of delivering attractive returns to shareholders. As a standard practice, our dividends will be adjusted for a bonus factor following the rights issue. As a result, we expect the post-transaction restated full year '24 final dividend to be 13.9p compared to the 16.1p dividend per share we declared earlier this year. We've included a slide in the appendix, which provides more detail on the bonus factor calculation in relation to the rights issue and its impact on the per share metrics. I'll now provide a short summary of our rights issue and the key next steps. As we've set out alongside this morning's announcement, part of the funding mix is a fully underwritten rights issue to raise gross proceeds of GBP 140 million. The rights issue is a 10-for-19 issuance at an issue price of 176p, which reflects a discount of circa 30% to the theoretical ex-rights price of 253p. The FCA approved prospectus is expected to be published later today. The nil paid rights will then start trading on the 8th of July, which will kick off the rights issue offer period. The last date of acceptance and payment in full will be 22nd of July, followed by announcement of the results of the rights issue on the 23rd of July. An overview of the impact of the rights issue for shareholders and on the group's per share metrics is included in the appendix. We are targeting completion of the transaction in early 2026, which remains subject to customary regulatory approvals. We will be focusing on the efficient migration of HSBC Life (UK) to SS&C Technologies over a period of around 6 months from completion, and we will provide further detail on this in due course. So I'll now pass back to Steve to conclude.

Thanks very much, Tom. So this proposed acquisition aligns strongly with our stated strategy of seeking out and delivering value-enhancing M&A. HSBC Life (UK) is a high-quality business, operating in familiar product areas that we're confident in integrating and managing going forward. And the deal is expected to add GBP 800 million of incremental cash generation to the group. This expected cash generation as well as our continued balance sheet strength and resilience supports an anticipated step-up in the dividend level in 2026 and should enhance the longer-term sustainability of the dividend. And given the scale and value creation that we see from the proposed transaction, we also expect to be eligible for FTSE 250 inclusion, which will be beneficial for the liquidity of our shares. And I'm very much looking forward to welcoming HSBC Life (UK)'s people and policyholders to the Chesnara Group. Now I referenced our wider M&A pipeline earlier in the presentation. As an acquisitive business, we continue to regularly evaluate and assess opportunities across multiple territories, while, of course, maintaining a disciplined approach to executing M&A. At the full year results, I flagged that there was a positive M&A pipeline in 2025 and beyond, and we're very much continuing to see that today. Today's announced changes to our financing structure, including our increased RCF, mean that we maintain the ability to execute on further value-enhancing opportunities as they arise. And we continue to actively assess further financing options, including the potential issuance of an RT1 bond. So we're excited about what today's announcement means for the group, and I very much continue to believe there's a lot to look forward to here at Chesnara. So we'll now open up for questions. We have Ben as the call operator who's going to help take calls from the conference call, and we have [ Tilly ] in the room with us here who will look at questions coming in on the webcast. So I think we'll hand over to Ben for any questions that are coming in on the lines.

[Operator Instructions] The first question comes from the line of Abid Hussain calling from Panmure Liberum.

Firstly, congratulations on the deal. I know investors have been waiting for a material transaction, so congrats on that. I've got a few questions. First one is on expense synergies. Can you give any additional color on the sources of those synergies, so people, systems, migrating to the SS&C platform and...

Okay. So what I'll say upfront, and I hand over to Tom is...

Still left to come on the expense synergies. And then...

Sorry, Abid, you're in a bad line. So we caught the first question. I think you said you might have a couple more. So do you just want to repeat that for us?

Yes, yes. Sorry. So the first question was on expense synergies. I think you called that one. The second question is on the capital synergies. I just wanted to know what you have assumed on day 1 and then what have you assumed in terms of what comes after the Part 7 transfer or thereafter. Just any -- so any color on the capital synergy. That's the second question. The first one was on expense synergies. And then I've got a third question, if I may, and I'll leave it to three to give others a chance. I think this business comes with a new business franchise. Could you sort of give a sense or dimension of what that franchise looks like today and whether you intend to retain that capability or even invest and develop that capability further?

Thanks, Abid. So I'll maybe make a couple of remarks and Tom can talk through sort of how we view the cash flows and what sort of drives those, and I'll come back on new business. And what I'll say upfront is what you've seen from Chesnara over the last 20 years when we look at M&A is we've got a number of value levers that are available to us, which flow through into both value creation and then ultimately into cash generation. And we've talked to investors about those. So we're not reliant on one source of value creation when we look at the cash flows. And you've outlined a couple of the areas that we look at. But Tom, why don't you sort of give us your views on sort of efficiencies and capital synergies.

Yes. And I can pick off the expense and capital points as part of that. So Abid, yes, I mean maybe stepping back, we talked about the GBP 800 million cash flow. So the -- how we think about that is entirely consistent with how we think about the cash flow profile of our existing unit book. So we use very similar assumptions as regards to long-term market investment rates, persistency rates, et cetera. So those are all very, very consistent. Then when we look at the HSBC Life book and the opportunity around expense and capital synergies, on the expense side, what we've been able to factor into the cash flows, because we have very, very clear line of sight, are the operating efficiencies that we expect to generate when we bring the HSBC Life book into our existing U.K. platform in SS&C. So those are factored in. On the capital side, we don't have material levels of capital synergies on day 1. I think you asked that specifically. The capital synergies will emerge a little bit more slowly over time, particularly between day 1 and when we Part 7 the business. So what will happen between day 1 and the Part 7 is we'll get some diversification benefits as the risks come in, and we have factored in some of those. But also, we will have other management actions that we will be applying over that period, and we have not fully factored those in yet. We'll assess what's in the art of the possible between signing and completion, and we'll update on that in due course, but it will be a further source of value upside for us.

Thanks, Tom. On new business, Abid, I know you're right to highlight that HSBC Life writes new business across those two main product areas. On the onshore bond side, it's around the #2 player in that market. And you'll certainly see the protection products available on sites like MoneySuperMarket and what have you. You've seen the approach that we've taken to previous acquisitions is that we always look at the short, medium and long-term sort of cash flow and returns that we think are available. However, we deploy capital, including new business, and we'll apply that lens to the new business capability that HSBC Life (UK) has. But the fact that whatever that potential value upside is, is an interesting part of the deal for us. Thanks, Abid.

The next question comes from the line of Michael Huttner calling from Berenberg.

Fantastic. Congratulations, too. And I had three questions, actually four. Solvency, leverage, some kind of measure of ROE. I don't know how you would look at that. And finally, what is an insurance bond? There we are. That's it.

Sorry, Michael, we missed the last question. We heard give us a perspective on solvency, leverage and return, and then we missed your last point.

What is an insurance bond? I should know and I'm blank on that one.

Yes. Got you, okay. So do you want to?

Yes. Thanks, Michael. I can pick off the solvency, leverage and return part of your question. So as you know, we operate or we have a defined operating range when it comes to the group solvency coverage ratio of between 140% to 160%. So immediately on day 1, we will still be operating above the upper end of that level at 169%. And as the benefits of the deal accrue over time, we expect to at least maintain, if not improve on that level. On leverage, again, hopefully, you'll have seen the numbers in the presentation, but immediately post deal, we maintain our investment-grade level and that is an important aspect of how we think about deals. And in fact, when we were thinking about the optimal financing structure, the consideration around maintaining that strong solvency level and maintaining that investment-grade leverage level was a critical factor in terms of our decision around the optimal financing package to go for. On returns, look, we don't disclose returns, but what I can say is that this deal has met and exceeded all of our financial hurdle rates and the criteria that we apply when we're looking at capital allocation. And hopefully, you have a sense from us having heard us talk about how we think about capital allocation over quite a period of time that we are super disciplined when it comes to the types of criteria that we apply when we're assessing deals like this.

Yes. And Michael, your question on...

No, no, wait, wait, wait. No, before that. If you were to do an RT1 of GBP 150 million, how much would that add to our solvency?

We can come back to you with the percentage point number on that, Michael. But I mean, it will obviously be accretive because it will count towards our Tier 1 stack. But we can come back and we can give you the uplift.

Lovely.

Thanks, Michael. I think your other question -- sorry, I think Michael's other question was on what is onshore bonds. So it's a unit-linked product, where you tend to see the onshore bond, Michael, is as a part of investment platforms like Nucleus, which is where our existing onshore bond that we acquired as part of the Sanlam Life & Pensions acquisition sort of sits, and IFAs recommend that to customers. Why is it attractive? It has an amount of flexibility around when you can sort of add and draw down from that product. It allows you to use sort of some tax allowances at a different point and flexibility to pension. So it's a product that we know well. It's an area of the market that we've seen growing. And I know that the team at HSBC Life (UK) has seen growing as well. So it's an interesting product and one that we like.

And then may I ask, I'm really sorry, I'm being a bit persistent. Blame me. The leverage, what is an investment-grade leverage rate? Or what sort of levels are we looking at there?

Yes. So the -- so when we look at the rating that we have from Fitch, their sort of guidance is maintaining a leverage ratio at 31% or below. So when we're talking about maintaining the leverage ratio commensurate with that, we're expecting the pro forma position based on the December '24 numbers to be around 29%. And we've assumed in the business case for this deal that we also repaid down the RCF, and that would mean that in the medium term, you'd see the leverage ratio coming down further.

Wonderful, and congratulations. It's really exciting. And yes, my last question is very cheeky, when is the next call on your next deal?

Analysts always want more, Michael, don't they?

Yes.

[Operator Instructions] The next question comes from the line of Barrie Cornes calling from Panmure Liberum.

And I'll add my congratulations to the guys for the deal, excellent deal. Three questions, if I may. First of all, how quickly do you intend to pay back the RCF? Second question, in terms of cash flow, although it's good in the first 5 years, it seems to be back-end weighted. I just wondered what sort of duration is the HSBC book, please? And thirdly, I know with interest, the dividends increased for 20-odd years, I think you mentioned, Steve. After this step-up in the dividend as a result of the deal in the short term, could we expect a further enhancement to the dividend, do you think, over the years from a year forwards?

Thanks, Barrie. Why don't I pick up dividend, Tom, and you can pick up the sort of payback of the RCF and that sort of flow question. So thanks for sort of reminding us, Barrie, of the 20 years of consecutive dividend growth. We're happy with the -- we're happy with that track record. We know that our investors have been pleased with the consistency of delivery around that. You're right as well to call out that 6% step-up, which represents a sort of 1 year acceleration of that dividend profile. When we're then looking at the dividend policy and progressive dividend that we've had in place, look, we think the economics here and the incremental cash generation that we've talked about should support the continuation of that sort of dividend track record that you've seen historically. And the longer-term duration of the cash flow is very helpful. I think when we've spoken to investors previously, we've been talking about the fact that we had strong line of sight over the next 5 years to cash generation. And that one of the things that Tom and I were looking for, particularly from acquisition opportunities, is how we added to that long-term cash generation, and we certainly see that from the HSBC (UK) acquisition. Tom, do you want to talk about what we're expecting -- when we're expecting to repay RCF and then the cash flows?

Yes. Thanks, Barrie. So the base case assumption is we repay the RCF in 3 years' time because that's the term we've agreed as part of the facility. As I mentioned in my remarks earlier, I mean, we are actively looking at further opportunities to optimize the debt stack and that may well affect that timing. But the current assumption is that, that happens in 2028. In terms of the question of the cash flow duration, it's actually some way linked -- in many ways, linked to what Steve was just talking about around the dividend. But I'd say two things. 80% of the lifetime cash flows are emerging post year 5. So that would give you a sense that the average duration across the portfolio is extremely lengthy. So it's a mixture of long-term protection, long-term book and overall -- increases the overall length of the -- the duration of the portfolio in the U.K. and actually at a group level as well. And I'd also actually point to the fact that because the risk profile is actually very, very similar to the risk profile we have in the U.K. as well as being a longer portfolio in terms of duration, it's also as resilient, if not more resilient, actually, in some respects than the portfolio we currently hold in the U.K. So not only does it extend the lifetime of the cash flows, it also increases the certainty of our ability to get our hands on those cash flows into the long term as well.

We have another follow-up question from Abid Hussain calling from Panmure Liberum.

It was really just about the M&A pipeline and your firepower. So I know I'm sort of getting a little bit ahead of myself, but I'm just wondering what's the M&A pipeline looking like beyond this deal? And was this deal that you've announced today in the original pipeline that you quoted sort of 6, 12 months ago? Or was this sort of more opportunistic given what's happening with HSBC at the group level? And then sort of the subquestion is, after this deal, how much firepower do you have left on the balance sheet.

Yes. I'll -- maybe I'll do sort of M&A pipeline more broadly and Tom can just pick up, I suppose, the remaining sort of immediately available firepower and then some of the other levers that we have available to us as well. And you're right, Abid. I know we spoke about this at the full year results presentation back in March. We highlighted there that we were seeing a strong M&A pipeline across multiple territories, also that the weighted average of the opportunities was larger. We were talking about opportunities in the range of sort of GBP 150 million to GBP 300 million of consideration. This opportunity clearly is very much within that range. And we've also been working, as you know, to map out the acquisition pipeline over the next sort of 3 or 4 years. Still today, that remains a strong pipeline. We're positive about the opportunities that we're seeing, and we expect to be able to review further opportunities. Being candid, we didn't have the HSBC Life (UK) in that pipeline of opportunities. So this just shows that sometimes there's opportunities that can emerge that haven't come out of the broader market mapping and the conversations that we were having. But this is a very high-quality business. We like the products, we know them well, and you can see the results of the transaction today, we believe, are financially attractive. But we are certainly continuing to be active in the M&A space, that's for sure. Tom, do you want to talk about sort of existing firepower and some of the other levers that we have?

Yes. Abid, you'll remember I was talking previously about having capital and liquidity headroom of about GBP 200 million. So we were in a position where we could support a GBP 200 million deal immediately. So immediately post this deal that will become more like GBP 100 million to GBP 150 million of that range, and that's on day 1. What I would say is we do expect that one of the features of this deal is that we will start building -- rebuilding capital headroom quite quickly, particularly as we recognize the impact of expense synergies and capital synergies as well. And I think that, alongside some of the considerations we're making as well around the debt stack and so on, means that we do expect the capital and liquidity headroom to actually increase relatively quickly from that GBP 100 million to GBP 150 million range post completion of the deal.

There is another follow-up question coming from Michael Huttner from Berenberg.

Yes. Sorry about that. And just remind me, so the timing for the rights issue now closes 22nd of July, and then you would have the deal itself closes beginning of '26. When would the Part 7 transfer be?

Yes. So those timings are absolutely right, Michael. That's what we're highlighting the sort of target time line. What we then expect to happen sort of after completion is a migration of the book of business in sort of 6 months, 9 months from that point of completion and then a Part 7 sometime after that. That's a sort of court process that we need to go through, an engagement with the regulator, that can take somewhere between sort of 12 and 18 months depending on what's in the sort of court's diary and those sorts of things. So from sort of completion, I would expect that to be around 12 to 18 months post that for the Part 7.

Ladies and gentlemen, there are no further questions coming from the telephone line. So I'm going to hand over to Tilly to take questions from the webcast. Tilly, please, the floor is yours.

Thanks, Ben. Yes, we've got a few questions on the webcast. First question is from Brian at Hardman & Co. Congratulations on the deal. You mentioned retaining resources, future acquisitions. Roughly how much do you expect? When will you be ready for more acquisitions? Over what sort of time scale do you expect to pay down the RCF? And will the acquisition affect the timing of the migration of Countrywide to SS&C?

Yes. So there's a few questions in one, Brian, thanks for joining. So why don't we -- so if I sort of talk about when we'll be ready for more acquisitions, so that's today. So part of the benefits that we have from the operating models that we operate is that the sort of U.K., Netherlands and Swedish operating models are relatively stand-alone. So from an operational perspective, obviously, we have a material deal coming into the U.K. business, and we've set out the time lines that we expect to be sort of migrating those books of business. But we have operational capacity immediately, both in the Netherlands and Sweden if we find attractive M&A opportunities there. And we do also look outside the existing operations. We've talked before in wider Benelux, some of the sort of offshore businesses with similar product structures that we would look. So there is certainly capacity there to look at M&A. In terms of how we're looking at the migration path for this book of business and the wider activity. You might remember we updated the market earlier this year that we've already completed three migrations from -- of that Countrywide book on to SS&C. They've gone well, on time and on budget. That's been very helpful for us to see. And we've also had SS&C heavily involved in this transaction already. So this deal will be taken account as part of the wider migration plans that we have there. So we've got a good degree of confidence that the sort of approach and the time scales that we've set out are achievable. Tom, I know we've just sort of talked about sort of M&A firepower, but it's maybe worth just reiterating sort of where we see our capacity for Brian's benefit as well.

Yes. I mean, Brian, I'll give you a very similar answer. I mean I think we -- pre deal, we were consistently talking about the GBP 200 billion headroom both from a capital and liquidity perspective. And I do expect that to be more like GBP 100 million to GBP 150 million immediately post deal. And -- but do expect that, that headroom will increase over time as we recognize some of the early benefits of the deal. And I think you also asked a question about the RCF paydown, which I think we covered earlier as well in my response to Barrie.

Good. Thank you. Next question is from Marcus at Jefferies. Could you discuss arrangements for ongoing distribution of new business products through the HSBC network post completion? Are you hopeful that the current negative outlook from Fitch will be removed as a result of this transaction?

Thanks for the questions, Marcus. We put up a slide earlier that gave an overview of the HSBC Life (UK) business. The large part of the distribution of the products currently are actually through IFAs, either through the investment platforms that we talked about predominantly for that onshore bond, but also for protection. And then there's -- they've got good positions on things like MoneySuperMarket as well. Some of the existing sort of panel positions within HSBC, we expect to continue as well. So -- but as I say, actually, most of the business, when we've been speaking to Mark and the team at HSBC, they've seen good opportunities for growth through that IFA channel. Tom, do you want to pick up the Fitch rating?

Yes. And I think we covered this in some detail at the full year presentation as well, but just maybe to recap quickly on some of the areas that we've been focused on in our discussions with Fitch. So three areas, really. The first was around the progress on the U.K. transformation projects. And what I can say on that is that we are currently progressing on time, on budget. We've completed three migrations. So obviously, we're monitoring that because it's a major initiative for the group, but it's progressing very well. The second observation interestingly actually was around the frequency and pace of M&A deals. So I think the fact that we're here announcing an M&A deal addresses that question quite well, I think. And the third was around the financial profile of the business, and in particular, just looking at our expense management, but also just the strength of our IFRS results going forward. And again, what we're presenting here today actually is a deal which materially improves the financial profile of the group going forward. So I expect that to be something we can positively bring back to the conversation with Fitch in due course as well.

Great. Thank you. Next question is from [ Louise ] at [indiscernible]. Congratulations on the deal announcement. Can you give us a bit of color on the type of synergies you think you can extract in the first year? Does HSBC already hedge equity exposure in the unit-linked business? And what is HSBC's cost base?

So I'll maybe pick up a couple of general remarks and Tom, maybe you can pick up some of the detail. We talked earlier on about, I suppose, overall, how we've run the business historically, how we see acquisitions and how we see sort of value emerging from them. We have this excellent sort of 20-year dividend growth track record of consecutive sort of dividend increases. And part of what supported that is, is making sure that we run the business in a financially prudent way, and that we sort of take actions as and when we see fit to do so. So when we think about how overall management actions, capital synergies and efficiency savings flow through into the cash flows, we see those coming through over time, albeit there are a couple of things that we can do more immediately in the short term around that. HSBC, through this business, they're not doing any material sort of hedging of things like equity risk on that unit-linked business. You can see that from their public exposures. Do you want to just pick up anything else on sort of how we see synergies and value levers here, Tom, and then what we can and can't say on the expense base?

Yes. I mean, I think on synergies, Steve, you've covered it. And we will be coming back and just talking about how we're thinking about the phasing of synergies in due course. Yes, look, on the cost base, I mean, the prospectus does contain details of the financials for the combined group. So I think if you want to look at the detail, it's absolutely there. But I think the real message on costs here is that -- and I think it was one of the earliest questions we were asked actually, was around the potential for pretty significant operating efficiencies to arise when we bring the HSBC Life platform into our U.K. business. And I think that's what we're focused on. But we'll -- obviously, we'll be coming back and updating on pro forma costs as we work through the post-completion updates and process.

Thank you. There are no further questions from the webcast. So I'll hand over to you for any closing remarks.

Okay. Thanks, Tilly. Well, thanks, everyone, again, for joining our acquisition call today. We're pleased to have had the chance to talk to you in more detail about this transaction. And we continue to believe there's a lot to look forward to here at Chesnara. Thanks for now.