The foresight Saga

But everything comes at a cost, so underlying pre-tax profits were suppressed, down 4 per cent to £107m. The analysts at UBS will have noted, however, that following a period of contraction, customer numbers have recovered to levels seen during the same period last year, thanks to a 19 per cent rise in motor and home new business volumes. For what might be deemed a ‘slow burn’ business model, this represents genuine progress.

Retail broking profits were down 7 per cent, with lower net rates from the group’s motor panel members unable to offset a reduction in average retail premiums. However, profitability has improved on the second half of last year, thanks to improved retention rates and a lower cost base. Management has also been focusing on increasing the proportion of new motor business earned via customers under 65 – that demographic accounted for just over two thirds of the growth in new business volumes.

Overall, the group’s underwriting performance ties in with the “supportive trends” noted by UBS, but in-house efficiencies are also driving the investment case. Administrative and selling expenses were down 5 per cent to £120m, again, a relatively modest improvement, but material given strengthening new business growth and an improved outlook for UK motor pricing.

The transition of Saga’s travel business to higher margin products, with fewer passengers, meant that underlying profits were flat, but that constitutes a decent showing given commitments linked to fuel hedges and a £1.5m investment in marketing.

Management was keen to highlight that construction of Saga’s new cruise ship, Spirit of Discovery, is progressing to plan, with the keel already laid in Lower Saxony, the anticipated maiden voyage still pencilled in for July 2019. Interest is high, with almost two-thirds of berths already booked on the first 19 cruises at what Saga describe as “attractive rates”.