Saga Plc, which in April 2018 said it had not delivered the expected profit uplift in broking, continues to face tough times on that front.
In a trading update this morning, the over-50s insurer reported ongoing pressure on its broking numbers. “Motor and home markets continue to be competitive, with falling average premiums and some upward pressure on net rates in home, impacting broker revenue and profitability,” it said.
The update relates to the period from August 01 last year to January 15, 2019.
In the release the firm described its Saga-branded motor and home policy count as broadly stable year on year. It added that the strong result in underwriting is a continuation of the trend seen in the 2018 first half figures.
“In a challenging insurance market, the increase in new business has kept our policy count broadly stable,” noted group chief executive Lance Batchelor. “Our underwriting business has performed well during the year.”
Also a source of good news for Saga is its travel unit, which is now fully sold for the 2018-2019 year and has seen sustained strength in cruise demand.
“Healthy forward sales for our new cruise ships and the growth in membership are encouraging signs for the group,” said Batchelor, who cited progress with Saga’s strategy to invest in attracting new customers across the business.
Meanwhile, in a note, stockbroker Numis said it expects a lower baseline broking profit for January 2020.
“Saga says it has seen particularly positive experience for small and large motor personal injury claims, which we read as implying stronger than expected reserve releases,” commented Numis. “This appears to have been offset by further revenue pressure in home and motor broking, as panel rates have increased to reflect claims inflation but retail prices continue to be soft (closing jaws).
“We therefore expect a lower baseline broking profit for Jan-20, which we estimate will impact Jan-20 group PBT forecasts by around -5-10%.”
