Saga insurance profits dive in ‘challenging market environment’

Saga’s insurance profits dived 22% in the first half of the year.

Earned underlying profits were £49.3m (2018 H1: £63.7m) as the business is being hit by lower margins on retail broking. 

Saga branded home and motor products profits fell £4.8m on new business profits and £4.4m on renewals.

Saga partly blames a proportional increase in customers renewing through price comparison sites, which are lower margin.

”The change in new business profitability is mainly due to a challenging market environment and shifting distribution trends, leading to an increase in acquisition costs per policy,” Saga said in its results today. 

Fixed premium product growth

The group has made a big strategic bet to move away from aggregators and sell insurance products direct to the customer.

It has launched a three-year fixed product, which in some good news for the business today, showed a encouraging signs of growth. 

Saga has sold more than 175,000 three-year fixed products, 70,000 new business and the 105,000 renewals.

More than 50% of customers came direct in the first six months of this year, compared to 44% in the last six months of 2018.

Saga has been hit hard by the regulator’s crackdown on dual pricing.

A new pricing strategy starting in July will lead to a lower gross margin on policies of between £71 and £74.

Gross written premium from broked and underwritten was largely flat £326m (2018 H1: £329m).

Chief executive Laurence Batchelor said: ”We have made good progress against our strategic reset. 

”The sales of our 3-year fixed price insurance are encouraging, and a higher proportion of customers are coming to us direct.”

Overall group profit before tax fell 52% to £52.6m.  The share price rose 1% today, with investors expecting the results in line with previous guidance.