Saga hit as soaring inflation drives up the cost of claims

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Over 50 Insurance Company Saga Hit by Rising Inflation Driving Up Claims Cost

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Over-50 insurance company Saga has been forced to lower its profit forecasts as rising inflation drives up claims costs.

The group, which also operates a tour company, including cruises, said profits for the year to the end of January next year would be between £20 million and £30 million, lower than previous forecasts of £35 million to £50 million.

Blaming the rising costs of insurance claims, Saga added that market pressures from rising prices are “expected to continue”.

Saga said profit for the year to the end of January next year would be between £20m and £30m, lower than previous forecasts of £35m to £50m

Saga said profit for the year to the end of January next year would be between £20m and £30m, lower than previous forecasts of £35m to £50m

The rating sent shares down 24.1 percent, or 32.4p, to a record low of 101.8p.

It sent shockwaves through the insurance industry, with shares in Admiral falling 2.6 percent and Legal & General falling 3.7 percent.

The update overshadowed the company’s half-year results of a profit of £14 million in the six months to the end of July, from a loss of £2.8 million in the same period a year ago.

The figure, which was ahead of market forecasts, was boosted by Saga’s travel arm, which restarted cruises after Covid curbs eased. Revenues also rose 65 percent to £258 million.

But Saga’s insurance business underperformed, with insurance profits falling 47 percent to £16.4 million, attributed to factors such as inflation.

Chief executive Euan Sutherland said the company’s pricing for its insurance products “did not fully reflect the expected cost of claims after the inflation peak” and the company was still facing a “challenging market environment”.

Analysts were divided on Saga’s outlook. Russ Mould, of AJ Bell, said it had turned a “once trusted brand into something many people now associate primarily with profit warnings.”

But Charlie Williams, of Hargreaves Lansdown, said in the long run, the group’s offerings to over-50s “work well,” as many had already paid off their mortgages.