22nd Jun 2020 09:16
(Alliance News) - Saga PLC on Monday reported a 5% drop in its total number of insurance policies following a pause in its cruise and holiday business and said that it has refunded GBP44 million to customers due to holiday cancellations up to and including August.
Shares in Saga were up 3.0% at 19.12 pence each in London but are down 65% so far in 2020.
The Kent-based over-50's insurance and holidays provider recorded total policies of 620,000 for the period from February 1 to June 21, down 5% year-on-year due to a "significant decline in the number of new travel policies sold from mid-March".
Motor and Home policies for the period were 1% higher at 567,000 due to higher retention rates, partially offset by a continued "disciplined approach" to new business.
Market conditions continue to be challenging, Saga said, but there are signs of a return to more competitive conditions in motor and home business in May.
Claims frequency in motor insurance from March onwards has been much reduced as a result of lower miles driven following the start of the Covid-19 lockdown, and the company has not recognised any virus-related claims upside in current year results or financial projections, Saga noted.
For its travel business, the company expects some travel to resume in 2020. Saga said it is focused on ensuring customer holidays are re-booked on future trips, or customers are offered cash refunds. The company has retained over 70% of advance receipts on cancelled Cruise departures, and new bookings for 2021 have been very positive, it said.
For Cruise, customer loyalty has been "exceptional", the company said, adding that advance receipts at the end of May were GBP43 million, which is GBP5 million lower than at the end of March but well ahead of expectations.
As a result of the travel suspension, Saga predicts a GBP20 million reduction in Travel business costs due to a reduction in near-term marketing and other costs. This is over and above other savings made to reduce the combined cash 'burn' cost of the Tour and Cruise businesses to between GBP6 million and GBP8 million per month.
Saga, in its annual general meeting statement, said it is working with "industry bodies and the government to establish operational practices that would enable a return of operations in both Tour and Cruise businesses as the current restrictions are lifted".
Chief Executive Officer Euan Sutherland said: "Saga has made good progress against the priorities set last year and we have accelerated this change given the backdrop of the Covid-19 crisis. Our Insurance business has been resilient and continues to make progress while within Travel, more than 70% of Cruise guests have moved their booking to later sailings, showing the continued demand for our specialist boutique offer."
At May 31, Saga had cash balances, which exclude the Saga Tour CAA ring fenced group, of GBP30 million and continued to have access to a further undrawn GBP50 million on the group's revolving credit facility. The available cash balances have reduced by GBP62 million from GBP92 million at March 31, due to GBP56 million in cash support to the Travel businesses, GBP7 million in restructuring costs, and GBP7 million in interest payments, partially offset by cash inflow relating to the normal trading activity of the group.
By Tapan Panchal; [email protected]
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