Saga hit by pressure from Omicron and insurance rules

Saga warned the impact of the Omicron variant and the Ukraine war on its travel businesses, and a hit to its insurance division from changes to pricing rules, were hampering its recovery from the pandemic.

The company cited a “challenging” environment for its cruise business, although bookings for the coming year remained strong. Demand for its other holidays, however, was 30 per cent below pre-pandemic levels.

Saga, which specialises in leisure and financial products for the over-50s, also warned that changes to insurance rules, which require renewal customers to receive the same price as new customers, would reduce its motor and home profits. Though it was “too early to quantify the longer term impact”, the group said motor pricing, in particular, had been highly competitive since the introduction of the rules in January.

The company has been hit hard by the health crisis and suffered another 4 per cent decline in its share price after the release of its annual results on Wednesday.

It swung to an underlying pre-tax loss of £6.7mn for the year ending January 2022, from a £17.1mn profit in the previous 12 months, following a suspension of its travel business for most of the first half of the year.

Steve Kingshott, the group’s head of insurance, told the Financial Times that inflationary trends on claims would make it hard for other insurers to maintain any tactical positions of holding prices down. “Driving patterns are returning to pre-Covid levels . . . and then there is inflation from parts, labour, energy,” he added.

On cruises, management cited the pressure on bookings created by the “evolution” of the Omicron variant — which is being closely monitored by authorities — as well as from Russia’s war in Ukraine.

The group has already redirected vessels away from the Baltic Sea and the Black Sea and has taken St Petersburg off its itinerary list.

Chief executive Euan Sutherland said the company and its customers were “learning to live with Covid-19 restrictions”. It completed 31 sailings on its two cruise ships between the resumption of operations in June 2021 and the end of the financial year, and only had one cruise to the Caribbean curtailed after a limited outbreak.

Saga also announced an expansion to its river cruise business, with four new ships to be added on rivers including the Rhône and Moselle in Europe.

Given the uncertainties on sentiment, the group declined to provide an earnings forecast for the third year running.

“There are a lot of moving pieces at the moment,” said James Quin, Saga’s chief financial officer.

It is hedged against the rise in the oil price this year, but management said that at current prices, hedging next year’s fuel costs would cost an extra $3mn.

“We had already built more caution in our numbers recently, but will have to test our assumptions against Saga’s cautious outlook again,” said analysts at Peel Hunt.

Source: Financial Times