Profit fears wipe £462m off Saga

FEARFUL traders wiped £462m off Saga after the travel and insurance firm said it had been hit by the collapse of airline Monarch.

Saga customers booked on Monarch flights – which went bust with debts of £466m in October – had to be brought home at a cost of £2m.

And it revealed in a trading update that fierce competition in the home and travel insurance markets has dealt a further blow to profits.

The over-50s specialist firm added that it had finished a review of operations, which should save £10m a year but will have a one- off cost of £4m.

The announcement sent investors running for the hills, with shares down 21.4pc, or 38.8p, to 142.5p.

Saga has switched from handling its car insurance policies in-house to using other firms to underwrite them. This gave profits a short-term boost because of different accounting rules, and because it freed some reserves, but both these benefits are now dropping away.

As a result, Saga said overall profit growth this year will be between 1pc and 2pc – a major drop from the 5.5pc figure in the first half of 2017.

It also vowed to spend an extra £10m annually to bring in new customers, which will cut profits by 5pc next year.

Saga boss Lance Batchelor said: ‘Now is the right time for Saga to invest in growing the customer base and the business.’