Cruise boom helps Saga profits double offsetting weaker performance in its insurance business

Saga has said profits will more than double as retired and wealthy Britons book cruises – offsetting weaker performance in its insurance business.

The company has said it expects profits to hit at least £43million for the year to the end of January, up from the £21.5million it made the year before.

Revenues are also set to grow between 10 per cent to 15 per cent compared to the previous year as ocean and river cruises make a comeback, the company said.

Saga, which specialises in insurance and holidays for the over-50s, has been enjoying a significant revival in its travel arm in recent years as it bounces back from the pandemic.

‘Our cruise and travel businesses have had an outstanding year, having taken around 120,000 passengers on holiday, with customers continuing to be drawn to the strength of the Saga brand and offer,’ said chief executive, Mike Hazell, the company’s former chief financial officer who took over from Euan Sutherland in November.

‘As a result, these businesses will return to profitability, in line with expectations.’

This stood in contrast to its US rival Carnival, which warned yesterday that its profits would be hit as it re-routes itineraries due to Red Sea disruption. The owner of P&O Cruises said it still had ‘robust’ bookings for the coming months. 

The outlook for Saga’s insurance business for the year to January was less cheery, with the market remaining ‘challenging’.

Policy sales are expected to be 9 per cent behind the year before, the company revealed, whilst customer retention is set to hit 81 per cent, compared with the previous 84 per cent.

The insurance arm has suffered in an era of high inflation, ultimately driving up the price of payouts for home and motor.

Vehicle insurers are being significantly affected by surging claims due to more expensive repair and labour costs and semiconductor shortages pushing up second-hand car prices.

In addition, they are banned from price walking – giving cheaper premiums to new customers while making loyal customers pay more for renewals. 

Shares in Saga surged as much as 7 per cent in early morning trade, but were down 2.6 per cent, or 3.8 p, at 141.2 p when the markets closed.

And the trading update comes hot on the heels of speculation that debt-laden Saga could be selling off parts of the firm.

Last week the group said it was ‘exploring opportunities’ for its cruises business, which could even result in its sale.

Its two flagship vessels, Spirit of Adventure and Spirit of Discovery, run cruises across the British Isles, the Mediterranean, the Nordics and the Caribbean, with prices ranging from £1,300 to £15,000.

The firm said on Friday that it was looking at a ‘partnership agreement’ as it tries to drive down its spiralling debts.

Analysts at Peel Hunt said that the travel arm has ‘turned a corner’ but added that the company needed to consider restructuring the insurance business.

Saga was reportedly in talks to sell its underwriting business last year to Open, an Australian insurer, but the deal failed to get over the line.