Saga losses skyrocket to £259m as recovery in travel costs offset by impairments from insurance business
- The over-50s revealed losses more than increased ninefold to £259.2 million
- Saga took a £269m write-down on goodwill after home and motor insurance sales fell
- Shares of the over-50s specialist fell sharply in early trading on Tuesday
Saga’s losses exploded last year after fierce competition in the auto market and regulatory changes led to a significant impairment of its insurance business.
The over-50s revealed that losses more than increased ninefold to £259.2 million for the 12 months ended January, compared to £23.5 million in the previous year.
For the first half of last year, the company took a £269 million goodwill write-off after home and motor insurance sales fell in a more competitive market environment.
Results: Over-50s specialist Saga revealed losses more than nine-fold to £259.2m for the 12 months ended January, compared to £23.5m in the previous year
This followed the implementation of new rules from the Financial Conduct Authority designed to prevent ‘price walking’, where new customers pay less than old ones for the same services.
Auto insurers are also finding it more difficult to absorb rising costs due to semiconductor shortages limiting the supply of new-manufactured engines and a rise in used vehicle prices.
In addition, repairs have become more expensive due to delays in receiving new parts, rising raw material costs and a shortage of car technicians since the UK left the European Union.
However, the Kent-based company reported returning to an underlying pre-tax profit of £21.5m, thanks to a rebound in overseas travel, which reduced losses in the cruise and travel divisions.
Revenues in Saga’s ocean cruise business doubled after a solid performance in the second half, while growing more than tenfold to £108.4 million in the travel segment.
Trade in these two divisions has been impacted over the past two years by the imposition of heavy cross-border travel restrictions by governments seeking to halt the spread of Covid-19.
Chief executive Euan Sutherland said: “In the past year, despite a still very challenging external backdrop, Saga has made progress against its strategy, while delivering significant sales growth and returning to underlying profit.”
The company’s revenue remains below pre-pandemic levels, but Sutherland noted that bookings in its travel business were well above equivalent levels last year and said demand for ocean cruises for fiscal year 2023/24 is expected to exceed its targets. will get.
But Saga warned that sales of motor and home insurance are expected to fall given the challenges in the insurance market, with margins reaching around £60 per policy.
Saga Shares plunged 8.3 percent to 125.8 p Tuesday morning, making them the worst performing FTSE 350 index.
Over the past five years, they have plummeted by more than 90 percent, not only because of the pandemic, but also because of Brexit-related uncertainty, investments in new products and tighter margins in the insurance business.
Russ Mold, director of investment at AJ Bell, said, “In theory, Saga’s proposal makes sense. The over-50s are a growing and relatively wealthy demographic that, if they own their homes outright, are less exposed to recent interest rate hikes.
“However, Saga never lived up to the promise that came with its IPO nine years ago. A series of operational failures has stumbled the company and damaged its credibility.