UK Saga shares drop to record low after profit warning

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  • Lowers earnings outlook to £20-30m
  • First half pre-tax loss of £257.5m
  • Shares down 25% to record high

Sep 27 (Reuters) – British holiday group Saga Plc (SAGA.L) slashed its full-year profit forecast on Tuesday as its insurance unit grappled with a rise in claims that pushed it to a half-year loss and caused stocks to fall to an all-time high.

Saga, which sells cruise vacations as well as insurance to the over-50s, said its underwriting business had seen high levels of claims inflation, currently around 13%, driving up costs and hurting profitability. .

“Trading conditions in the UK insurance market continue to be difficult,” chief executive Euan Sutherland said in a statement.

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The company’s shares plunged as much as 25% to a record low of 101.1 pence, before paring losses. As of 0854 GMT, shares were down 15%.

“Insurance has been the bane of its existence for many years, and major travel arm development plans have been derailed by COVID,” AJ Bell analyst Russ Mold wrote in a note.

“Something in his current formula is not correct, although it is fair to say that some events are beyond his control.”

Motor insurers such as Admiral Group (ADML.L), Direct Line (DLGD.L) and Saber Insurance (SBRE.L), which have all previously warned of claims inflation, fell between 2.4% and 4.5%.

Saga said insurance claims inflation has intensified and is expected to persist.

On the bright side, vacation demand continues to grow, with a load factor for its cruises of 84% in the second half of this year and nearly half full for the whole of next year, Sutherland said.

Underlying profit before tax is expected to be between 20 and 30 million pounds ($21.6 to 32.4 million) for the year to January, down from its previous forecast of 35 to 50 million pounds.

Saga posted a pre-tax loss of 257.5 million pounds in the first half, compared with a profit of 0.7 million pounds a year earlier.

($1 = 0.9275 pounds)

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Reporting by Amna Karimi and Yadarisa Shabong in Bengaluru; Editing by Savio D’Souza, Rashmi Aich and Jan Harvey

Our standards: The Thomson Reuters Trust Principles.

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