Saga cuts forecasts as inflation drives up value of claims

Saga, the UK insurance coverage and journey enterprise targeted on clients over 50, reduce its full-year revenue forecasts on Tuesday, sending the group’s shares down greater than 12 per cent.

The corporate blamed the gloomier outlook on inflation, which has pushed up the price of paying claims. Saga now expects underlying income of £20mn to £30mn for the 12 months to January 31, down from a earlier vary of £35mn to £50mn.

Euan Sutherland, chief govt, attributed the reduce to the forecasts to the impact on Saga’s insurance coverage underwriting enterprise of the “underlying inflationary setting round insurance coverage claims”.

“This impacted our underwriting enterprise greater than we thought,” Sutherland mentioned.

Nonetheless, Sutherland insisted that different elements of the enterprise had been doing nicely and that the first-half outcomes had exceeded market expectations.

The corporate introduced underlying income for the primary six months — a measure excluding sure monetary changes, together with goodwill impairments — of £14mn, in contrast with a £2.8mn loss for the primary half of 2021. Income rose 65 per cent, largely because of the restarting of the corporate’s cruise enterprise following the coronavirus pandemic, to £258mn.

Within the underwriting enterprise, underlying first-half income fell to £16.4mn, from £31.1mn, on underlying income down 13 per cent to £75.7mn. The corporate blamed a lot of elements, together with elevated charges of automobile crashes because the variety of miles pushed rose and the impact of inflation on claims. The corporate mentioned claims inflation was presently working at an annual charge of round 13 per cent.

“This will increase the price of insurance coverage claims which is having some affect on our profitability,” the corporate mentioned.

Nonetheless, Sutherland mentioned that in different elements of the enterprise, together with cruises, the corporate was managing to move on raised prices to clients.

“We’re seeing very important inflation coming by means of,” Sutherland mentioned.

The corporate was in a position to increase costs as a result of it already had a programme to boost “per diems” — the speed it fees per day for cruises — to mirror high quality upgrades.

“We have now been in a position to go forward of plan on that and offset inflation,” Sutherland mentioned.

Alongside the outcomes, Saga introduced plans for a revamp of its journey enterprise to supply clients extra flexibility underneath a programme known as “Tailored by Saga”. The operator may even provide new, “skilled gap-year” merchandise supposed to supply clients higher objective of their journeys.

The corporate introduced a £257mn pre-tax loss for the primary half, in contrast with a £700,000 pre-tax revenue for the primary half of 2021, because of a beforehand introduced £269mn impairment of insurance coverage goodwill ensuing from anticipated tighter future insurance coverage margins.