Broker challenged by regulatory crackdown on dual pricing and tough market conditions
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.
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.