Saga confirms underwriting sale talks

In a statement on the London Stock Exchange this morning, Saga detailed there was no certainty that a deal for Acromas would take place.

Saga has 1.69m policies in force across insurance and Acromas underwrites 25% to 30% of its business.

The news was first revealed by The Sunday Times which reported that Saga was seeking up to £90m as it looks to pay down its £721m group debt but did not name any potential suitors.

Results

In its most recent half-year results, up to 31 July 2022, Saga warned of a loss before tax of £257.5m reflecting a £269m hit to insurance goodwill.

This, Saga said in September, reflected an updated view of potential motor and home margins.

The underwriting arm was experiencing high levels of claims inflation, Saga added in the results putting the figure at around 13%. The current year underlying combined operating ratio was 110.2%, up from 88.4% in the first half of 2021.

Net earned premium for the six months, excluding the impact of the quota share reinsurance arrangements was £74.4m, down 11.5% year-on-year. This was due to a 5.3% fall in policies underwritten and a 6.5% drop in average premiums.

Broking

Any sale would still leave Saga involved with broking.

However, the group’s in-house underwriter plays an important role on the motor panel. Acromas also underwrites a portion of the home panel, although all home underwriting risk is passed to third-party insurance and reinsurance providers.

The half-year results showed broking gross written premium was up 1.7% to £178.8m.

Motor and home policies in force decreased by 3% in the first half of the year. Motor stood at 840,000 while home was recorded at 658,000 with ‘other broking’ – which includes travel and private medical insurance – making up the remainder of the overall total.

Retail broking underlying profit before tax reduced to £37m for the half-year from £39.5m in the previous comparable period.

Saga flagged that the changes in profitability of motor and home business were, in part, attributable to the equalisation of pricing after the Financial Conduct Authority banned dual pricing.

Motorcycle

The business sold motorcycle broker Bennetts to Ardonagh in August 2020 – the consolidator eventually sold it on to Right Choice after the Competition and Markets Authority opened an investigation into the deal.

After the latest announcement, at the time of writing, Saga’s share price was up 4.5% at 156.52p.

In the announcement the company wrote: “The board has looked at the opportunities to optimise Saga’s operational and strategic position in the insurance market, in line with the evolution to a capital-light business model and the stated objective to reduce debt.

“It has concluded that a potential disposal of its underwriting business is consistent with group strategy and would crystalise value and enhance long-term returns for shareholders.”

Saga added that a further announcement will be made “in due course”.

For all the latest industry news direct to your inbox, sign up for our daily newsletter.