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Cruise booking recovery gives Saga a boost

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The return of older people “cooped up in the pandemic” is behind a recovery in demand for cruises and other holidays, Saga’s chief executive has said, after a rise in bookings provided a boost to the company’s struggling share price.

A trading update on Tuesday showed higher passenger numbers on Saga’s cruise ships, which were on track to double their revenue for the year to January. Bookings at its travel business are also rising.

The company said it was on track to deliver underlying pre-tax profit of £20mn to £30mn for the year to January, in line with guidance that was downgraded when the company issued a profit warning in September. Its shares have fallen nearly 40 per cent fall over the past year but were up 5 per cent in morning trading on Tuesday.

Chief executive Euan Sutherland said there had been a “strong bounceback from older customers” after the pandemic interruption, and that worries about travelling caused by Russia’s invasion of Ukraine also seemed to have lessened. “They have health, they have wealth and they have time,” he said of the group’s customers.

Sutherland said Saga’s insurance division continued to be “buffeted” by market forces. Its underwriting unit is expected to post an underlying full-year combined operating ratio — claims and expenses as a proportion of premiums — of 125 per cent, higher than expected.

The company cited an above-average level of large losses and an increase in the frequency of claims. Inflation in the cost of claims, it said, was running at 13 per cent.

“I think we’re in line with the market,” Sutherland said, adding that he expected the impact of inflation on the insurance business to “tail off into the end of the year”. That would mean a probable peak in the second quarter for motor and in the summer for home insurance, he predicted. Another UK insurer Direct Line scrapped its dividend earlier this month after claims costs surged.

Saga confirmed on Monday that it was considering a sale of its AICL unit, which underwrites 25-30 per cent of its insurance business. Sutherland said the sale, first reported in the Sunday Times newspaper, could raise about £80mn to £90mn, and would leave the group as a broker providing access to its panel of insurers.

Saga is also launching a new website aimed at the over 50s, Saga Exceptional, as part of its media strategy for consumers that it said remained “significantly underserved online”. Sutherland said this would generate digital revenues including from affiliate links and “bring vast numbers of customers into the Saga world”, including from outside the UK.

Official projections expect outbound tourism to have surpassed pre-pandemic levels by 2024. In August last year, UK residents made 9mn overseas visits, 22 per cent below the number of trips made in the same month in 2019, according to official data.

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