Saga set to sell underwriting arm to Aussies

SAGA is in crunch talks with an Australian insurance group about selling its underwriting business in order to pay down debt.

The cruise ship operator and financial services provider to the over-50s confirmed it was in ‘exclusive discussions’ with open Insurance Technologies over a possible sale of Acromas Insurance – a deal which, according to analysts, could be worth as much as £90m.

Saga said last month that it was hunting for a buyer for Acromas to raise cash. The company’s net debt was £721.3m as of July last year.

The Folkestone-based company said yesterday that ‘discussions are ongoing’.

But it added that there could ‘be no certainty that any transaction will occur’, adding that ‘a further announcement will be made in due course’.

Acromas Insurance is part of Saga’s wider insurance arm which offers products to 2.7m customers. Acromas underwrites about 30pc of Saga’s insurance business, which has been hit by spiking claims and increasing costs.

Saga was founded by businessman Sidney De Haan in 1951 and is run by former Coop Group and Superdry boss euan Sutherland.

It has been blighted by cash pressures due to a perfect storm of fierce competition in the insurance market and blistering losses from its travel business during the Covid-19 pandemic. Its share price has also taken a hammering to the tune of 43pc over the past year. Shares were buoyed yesterday, rising 3.7pc, or 6.4p, to 177.3p.

Confirming the pursuit of a sale last month, a spokesman said that the firm ‘concluded that a potential disposal of its underwriting business is consistent with group strategy’.

Sutherland said his team were pivoting Saga for growth and focusing on ‘building the largest and fastest-growing business for older people in the UK’. A successful sale of the underwriting business would serve as ‘as an injection to alleviate the immediate challenges,’ according to Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

The hit taken to Saga’s share price over the past year ‘still leaves a lot to be desired where Saga’s long-term plans for growth and shareholder value are concerned’, she added.

However, yesterday’s boost to shares was ‘a clear indicator that investors are supportive of the move’.