Over-50s specialist Saga sees losses skyrocket to £259m

• The over-50s specialist revealed losses soared more than ninefold to £259.2m
• Saga took a £269m goodwill charge after home and vehicle insurance sales fell
• Shares in the over-50s specialist fell significantly in early trading on Tuesday 

Saga’s losses ballooned last year after strong competition in the motor market and regulatory changes led to a significant impairment in its insurance business.

The over-50s specialist revealed losses soared more than ninefold to £259.2million for the 12 months ending January, compared to £23.5million in the previous year.

For the first half of the last year, the firm took a £269million goodwill charge after home and vehicle insurance sales dropped amid a more competitive market environment.

This followed the implementation of new Financial Conduct Authority rules designed to prevent ‘price walking’, whereby new customers pay less than old ones for the same services.

Car insurers are also finding it harder to absorb rising costs due to semiconductor shortages limiting the supply of new motors produced and a surge in used vehicle prices.

On top of that, repairs have become more expensive because of delays in receiving new parts, increasing raw material costs, and a shortage of vehicle technicians since the UK left the European Union.

However, the Kent-based business reported returning to an underlying pre-tax profit of £21.5milion, thanks to a rebound in overseas travel reducing losses in its cruise and travel divisions.

Revenues in Saga’s ocean cruise business doubled on a solid second-half performance, while they soared by more than tenfold to £108.4million in the travel segment.

Trading in these two divisions was impacted during the prior two years by the imposition of onerous cross-border travel restrictions by governments trying to stop the spread of Covid-19.

Chief executive Euan Sutherland said: ‘Over the past year, through what continued to be a particularly challenging external backdrop, Saga made progress against its strategy while achieving significant revenue growth and returning to underlying profit.’ 

The firm’s turnover remains below pre-pandemic levels, but Sutherland noted bookings in its travel arm were far above their equivalent levels last year and said demand for ocean cruises for the 2023/24 fiscal year was anticipated to meet its targets. 

But Saga warned that motor and home insurance sales were expected to fall given the challenges in the insurance market, with margins moving to around £60 per policy.

Saga shares dived by 8.3 per cent to 125.8p on Tuesday morning, making them the FTSE 350 Index’s worst performer. 

During the past five years, they have plummeted by over 90 per cent, not just because of the pandemic but also Brexit-related uncertainty, investment in new products and tighter margins in its insurance business.

Russ Mould, investment director at AJ Bell, said: ‘In theory, Saga’s proposition makes sense. The over-50s are a growing and relatively wealthy demographic who, if they own their homes outright, are less exposed to the recent increases in interest rates.

“However, Saga has never delivered on the promise which accompanied its market listing nine years ago. A series of operational failures have tripped the company up and damaged its credibility.