Over 50s insurance provider Saga (SAGA) has hiked its interim dividend by 22.7% to 2.7p in upbeat first-half results, supported by on-going deleveraging. Yet despite strong interims highlighting more active customers and core policies, Saga shares are trading just 1.6% higher at 225.3p.
Profit before tax from continuing operations is up 8.5% from £101.3 million on 31 July 2015 to £109.9 million in the first half of the year. Trading profit has risen by 2%, which includes a £4.7 million negative profit impact in the first half for scheduled maintenance of the Saga Sapphire cruise ship, which also hit profit in the travel insurance division.
Debt ratio, a representation of the proportion of a company’s assets financed by debt, has fallen from 2.4-times to 2.2-times over the same period.
Numis says Saga is showing solid on-going growth as underlying core trading profit is 3% ahead of its forecasts, while pre-tax profit was supported by fuel derivative gains.
It expects derivative gains to contribute to increased headline forecasts in January 2017 and believes the company is on track to meet its full year targets. The broker also notes a decline in trading profit from home insurance by £4 million due to lower margins in a competitive market, although this has been partially offset higher profit in other areas.
Saga says trading profit for motor insurance has risen 9.9% from £65.6 million to £72.1 million with strong performance in underwriting. The insurer is paying less money in claims compared to income from premiums as the combined operating ratio fell from 65.5% to 58.6%.