Over-50s group says ‘challenging trading’ to limit current year profit growth
Saga said “challenging trading” in insurance broking will limit growth in the group’s underlying profit for the current year to 31 January 2018 to between 1% and 2%. And it warned that next year’s underlying pretax profit will be 5% lower than this year’s.
The over-50s services company said current year group profits will also show a £2m impact from the Monarch Airlines administration, which affected the group’s tour operator business.
Saga said its retail broking business will show an improvement in written profit for the current year, with a strong motor performance partly offset by a “challenging trading environment” in home and travel insurance. Earned profit for retail broking is expected to be marginally lower than the prior year due to a lower written to earned benefit, the company said in a trading statement to the London Stock Exchange.
It added that the group’s in-house underwriter “has continued to have an excellent experience in small and large personal injury claims and we now expect reserve releases to be at a similar level to the previous year”.
It said the level of reserve releases related to historical claim years is expected to decline by £10m-£15m next year.
Saga said that the underlying performance of the broking and travel businesses will improve next year, helped by £10m of cost savings already made.
However, a lower level of written to earned benefit and a declilne in reserve releases, along with investment of an additional £10m in customer acquisition, means that underlying profit next year is expected to fall by about 5% from the current year.
“Against a backdrop of some challenging trading conditions in our final quarter, we continue to develop the business for the long term,” said chief executive Lance Batchelor.
“With greater customer insight and a stronger business platform, now is the right time for Saga to invest in growing the customer base and the business.
“We are confident that the actions taken will ultimately see a better quality of earnings and profit growth across the business, supporting our progressive dividend policy for the benefit of our shareholders.”