Saga updates guidance after successful debt refinancing

By Aidan Gregory

Jan 30 - (The Insurer) - Saga, the UK insurer focused on over 50s, has upgraded its guidance for its current financial year following “significant operational and financial progress," including the successful refinancing of its debt with HPS Investment Partners and a new 20 year partnership with Belgian insurer Ageas.

In a trading update on Thursday, covering the period of August to the end of January, Saga said that it now expects to report a marginally higher profit before tax for the 2024/25 financial year than the prior year, ahead of previous guidance.

The company said that its Ocean Cruise division had another “excellent year,” with a load factor of 91 percent, up 88 percent from the previous year. Its river cruise business also had a load factor of 89 percent, up 15 percent from the previous year.

In December, Saga formed a 20-year partnership with Ageas and agreed to sell its underwriting business to the Belgian insurer, which is expected to go live in the fourth quarter of 2025.

Under the terms of the agreement, Ageas will take on responsibility for pricing and underwriting of home and motor insurance, price comparison website distribution, and claims and customer service, while Saga will retain responsibility for marketing.

The Belgian insurer had been seeking to increase its exposure to the UK market after two rebuffed bids for Direct Line earlier in 2024.

"Throughout the last financial year, we made significant operational and financial progress,” said Mike Hazell, CEO of Saga, in the trading update on Thursday. “We concluded our review of opportunities that would optimise Saga's financial and strategic outlook and entered into the 20-year arrangement with Ageas for our motor and home insurance broking business, and the sale of AICL, our insurance underwriting business.”

Saga also said that it had completed a successful refinancing with HPS Investment Partners’ direct lending platform.

The refinancing comprises a new £335mn ($416mn) term loan facility that will be used to repay £325mn of debt due in 2026; a £100mn delayed-draw term loan facility over the next three years; and a new £50mn revolving credit facility.

“We successfully refinanced our corporate debt,” said Hazell. “We continued to generate strong demand for both our cruise and travel businesses and the group expects to report an underlying profit before tax that is marginally higher than the prior year on a like-for-like basis and ahead of our previous guidance.”

Saga has struggled for years with its high debt load, particularly following the collapse in travel during the pandemic. At the end of July, Saga's net debt was £614.6mn.

The company said the new debt facilities refinance its debt “in full” and follow the partnership with Ageas and the sale of its underwriting business.

It expects net debt to “materially reduce” in 2025 aided by strong cash generation from its core business and the proceeds from the sale of the underwriting division.

Saga is due to report its results for its financial year to the end of January on Wednesday, April 9.

Shares in Saga were trading at 117.91p as of 08:12 in London on Thursday, down 3.25 percent from the previous close, giving the insurer a market capitalisation of £169mn. The stock is down 15.7 percent over the past 12 months.