Saga, the UK-based company specialising in products and services for those over 50, has reported a robust start to the year, thanks to strong demand for its river and ocean cruises. However, it was not plain sailing on the insurance side of the business.
The company highlighted that its ocean cruises have achieved an 83% load factor, while its river cruises have reached a 78% load factor, both surpassing last year’s figures. This positive trend has led to a 14% increase in booked revenue, driven by a higher number of passengers.
The surge in cruise bookings is a significant boost for Saga, which offers all-inclusive cruises, group tours, and holidays to various global destinations. Mike Hazell, Saga’s chief executive, stated: “Our ocean cruise business has traded exceptionally well and, in insurance, we have continued to take actions within a market which remains challenging.”
Despite the promising performance in travel, Saga’s insurance division continues to face difficulties. The company has been grappling with challenging market conditions, primarily due to net rate inflation affecting home insurance. While there are early signs of improvement in motor insurance, the overall impact of these actions has been limited by rising costs in the home insurance sector. “The pricing action taken in insurance underwriting continues to earn through, further improving the combined operating ratio,” Saga noted.
Saga’s insurance broking arm experienced a significant decline in underlying profit before tax, dropping to £39.8 million for the fiscal year ending January 31, 2024, down from £71.5 million in the previous year. The number of active policies also saw a reduction, decreasing by 9% to 1.5 million, highlighting the tough market conditions and the effects of inflation. Approximately 50% of these policies were in motor insurance, with another 40% in home insurance.
The company reported a substantial goodwill impairment of £104.9 million in its broking division during the year. Despite these challenges, the broking arm’s gross written premium increased by 7.6% year-on-year, reaching £606 million. This growth was largely driven by motor insurance, which contributed over £390 million, and home insurance, which accounted for £162.4 million.
Saga has been proactive in addressing these challenges, slashing marketing spent by £4.2 million this year, cutting investment in its insurance division, taking steps to stabilize its broking business and exploring partnership opportunities to support its growth ambitions.
Analysts at Peel Hunt emphasized the importance of these partnerships for Saga’s future, stating: “There is no further news on Saga’s partnership plans, which continue to be explored in order to delever the business…we maintain our Hold stance awaiting further strategic action to place Saga on a firmer financial footing.”
The company’s efforts to stabilise its insurance business are beginning to show results, particularly in the car insurance sector, which had previously been a drag on earnings. However, the broader insurance market remains under pressure due to inflation driving up the cost of claims, impacting Saga’s profitability.
Looking ahead, Saga says it is focused on sustainable business growth in a capital-light manner while expanding its customer base and strengthening customer relationships. The company’s interim results for the six months ending in July are set to be released on October 2, which will provide further insights into its performance and strategic direction.
Saga’s dual focus on boosting its successful cruise business and navigating the challenging insurance market demonstrates its commitment to maintaining a balanced and sustainable growth trajectory in a competitive environment.
