Shares in over-50s insurer and travel operator Saga (SAGA) fall as much as 11% to a new all-time low of 33.5p after the firm’s latest trading update fails to impress.
Trading in the period from 1 February to 18 June is ‘broadly in line with expectations’ and there is ‘good early progress’ with its new insurance products, but the tour operation is under-performing due to competitive pressures and political uncertainty which has dented consumer confidence.
Saga warned in April that customers were cutting back on travel and tour bookings were down due to concerns over Brexit, and it seems that the slump has continued with booked revenues for the full year down 4%. It also says margins for this year will be ‘impacted by competitive discounting’.
Cruise bookings are ‘more resilient’ and the firm is stepping up its marketing this quarter for the launch of its new vessel Spirit of Discovery, but the cruise business will report a £3m loss for the half-year due to launch and other costs.
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The insurance division is performing better following an overhaul, with own-branded home and motor policies flat at 564,000 at the end of May thanks to ‘slightly improved retentions’.
The launch of three-year fixed-price motor and home products is ‘progressing in line with expectations’. As of mid-June 60,000 fixed-price policies are in place of which half are new business, in line with the firm’s target.
This new product is starting to shift Saga back to being a direct distributor: for Saga-branded home and motor insurance around 60% of new policies are now being written on a direct basis up from 50% in the previous financial year.
Meanwhile the retail broking insurance business saw a big dip in volumes due to lower demand for travel insurance and a decision to cut back on motorcycle policies. The firm also flags rising claims inflation, which although it doesn’t put a number on is rising by well over 5% according to most other insurers.
