Insurance and travel giant Saga (GB:SAGA) warned that underlying profits will be lower than earlier predictions, writing down the value of its insurance division by £269 million – and shares plunged 24% on the news.
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The company posted a pre-tax loss of £257.5 million on account of the £269 million of goodwill impairment costs in its insurance segment.
Excluding this, the company made underlying profits of £14 million, as compared to a loss of £2.8 million in the last year.
The profits were mainly driven by its travel business where operations were back to normal post-Covid. In its cruise business, the company was able to pass on the higher costs to its customers.
The insurance business, on the other hand, suffered due to higher claims costs and lower volumes. Total policies grew by just 3% as compared to the first half of 2021.
Looking into the share prices, performance does not look good. The stock has lost more than 70% of its value in the last year. After the results, shares further dipped by 24%, adding to the shareholder’s worries.
What does Saga do?
Saga is a UK-based insurance and leisure company. It is focused on delivering products and services to people over the age of 50.
Its divisions include insurance and travel, personal finance, media, and more.
Shaky outlook
Saga remains cautious about rising inflation that has increased the cost of paying claims. Its insurance business will face some headwinds, and sales for the second half are expected to remain at similar levels as the first half.
As a result, the company has cut its full year profit expectation from £35-£50 million to £20-£30 million now.
On the plus side, the company expects a continued recovery in its travel business as customer demand is back to pre-pandemic levels.
Ending notes
Euan Sutherland, chief executive of Saga said, “Looking ahead, while we are mindful that the external environment remains challenging, we are confident that Saga is now in a stronger position than it was before the pandemic.”
