Saga today revealed it has been hit by the sqeeze between rising net rates given by panel insurers and the competitive price they sell products on the market.
Motor and home products have been hit on revenue and profitability by the squeeze, according to the trading update.
As well as the upward net pressure, analysts believe Saga is remaining competitive on pricing at point of sale to drive new business volumes, something it successfully did according to the trading update.
Saga, which last year revealed its challenges following the FCA renewals crackdown, has had its broking profit forecasts downgraded by Numis.
Analysts at Peel Hunt said: ”The insurance broking activities remain under pressure (as we expected), offset by a good performance of the underwriter, as reserve releases remain high in a period of benign claims inflation.
”Policy count in the broker is stable, albeit that margins remain under pressure; Saga is becoming more competitive in order to drive new business growth, explaining the pressure on broker margins.”
A bright spot for the Saga was the performance of its underwriting division, which is having a positive experience managing small and large personal injury claims - ’implying stronger than expected reserve release’, according Numis.
Overall, the Saga group’s trading remains in line with expectations.
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