Chesnara agrees £62m deal for Direct Line life division

LANCASHIRE financial services investment group Chesnara has announced another major deal, this time snapping-up insurer Direct Line’s closed-book life division in a £60m+ deal.

Preston-based Chesnara is buying Direct Line Life (DLL) for £39m in cash, while Direct Line will also take a £23m dividend.

The proposed deal is subject to approval from regulators and Chesnara shareholders, and once complete Direct Line plans to pay out a special dividend of 4p a share.

DLL made a pre-tax profit of £6.9m and its parent company, which was spun off by Royal Bank of Scotland last year,  expected to make a gain of about £12m following its disposal.

The life firm, which closed to new business in July 2011, has about 150,000 policies in force.

Chesnara chief executive Graham Kettleborough said: “Adding this portfolio to our existing book of business brings extra security, from increased size and concentrated governance, to both existing and the newly-acquired policyholders.”

The company said Direct Line Life will be an attractive complementary addition to its UK portfolio.

“The acquisition is expected to have a positive impact on the embedded value and cash generation ability of Chesnara in the medium term once integrated,” it added.

As part of the funding for the deal Chesnara has agreed a new loan facility with Royal Bank of Scotland of £73.8m.