Baltic Sea

Saga under pressure from Omicron and insurance rules

Saga warned that the impact of the Omicron variant and the war in Ukraine on its travel business, as well as a hit to its insurance division from changes in pricing rules, were hampering its recovery from the pandemic.

The company called a “challenging” environment for its cruise business, although bookings remained strong for the coming year. However, demand for its other holidays was 30 percent below pre-pandemic levels.

Saga, which specializes in leisure and financial products for the over-50s, also warned that changes in insurance rules that require renewal customers get the same price as new customers would hurt its auto and home profits. Although it is “too early to quantify the longer-term impact,” the group said engine prices in particular have been very competitive since the rules were introduced in January.

The company was hit hard by the health crisis and suffered another 4 percent drop in its share price after releasing its full-year results on Wednesday.

Following a suspension of travel business for most of the first half, the company went from a profit of £17.1m in the previous 12 months to an underlying pre-tax loss of £6.7m for the year to January 2022.

Steve Kingshott, the group’s head of insurance, told the Financial Times that inflationary trends in claims would make it difficult for other insurers to maintain tactical positions to keep prices down. “Driving patterns are returning to pre-Covid levels. . . and then there’s parts, labor, energy inflation,” he added.

On cruises, management cited the pressure on bookings stemming from the “development” of the Omicron variant – which is being closely monitored by authorities – as well as Russia’s war in Ukraine.

The group has already diverted ships from the Baltic and Black Seas and removed St. Petersburg from its itinerary list.

Chief Executive Euan Sutherland said the company and its customers were “learning to live with the restrictions of Covid-19”. Between resuming operations in June 2021 and the end of the fiscal year, the company completed 31 voyages on its two cruise lines and only one Caribbean cruise was restricted following a limited outbreak.

Saga also announced an expansion of its river cruise business, with four new ships to be added on rivers such as the Rhône and Moselle in Europe.

Given the uncertain mood, the group declined to provide earnings guidance for the third straight year.

“There’s a lot of moving things going on right now,” said James Quin, Saga’s chief financial officer.

It’s hedged against the rise in oil prices this year, but management said hedging next year’s fuel costs would cost an additional $3 million at current prices.

“We have been more cautious about our numbers of late, but we need to retest our assumptions against Saga’s cautious outlook,” said analysts at Peel Hunt.