Results presentation Preliminary results for the 12 months ended 31 January 2018 Saga plc preliminary results for the 12 months ended 31 January 2018 1
Lance Batchelor Lance Batchelor Chief Executive Officer Chief Executive Officer Saga plc preliminary results for the 12 months ended 31 January 2018 2
Today’s Agenda Lance Batchelor Overview Chief Executive Officer Jonathan Hill Financials Chief Financial Officer Gary Duggan Retail Insurance Broking CEO, Retail Insurance Broking Lance Batchelor Summary Chief Executive Officer Q&A Saga plc preliminary results for the 12 months ended 31 January 2018 3
Key highlights Our 2017/18 results are inline with revised guidance • Our highly cash generative model and capital structure supports both • capital investments and dividends The Saga model is increasingly efficient and supports targeted • customer growth Early signs of customer growth from targeted investments • Saga plc preliminary results for the 12 months ended 31 January 2018 4
Full year numbers 2017/18 Underlying PBT (1) £190.1m +1.4% Retail broking Underlying PBT (1) £130.2m (5.7%) Travel Underlying PBT (1) £20.4m +36.9% Available operating cash flow £175.5m (19.3%) Debt ratio 1.7x (0.2x) Full year dividend 9.0p +5.9% (1) Profit before tax from continuing operations excluding derivatives, debt write-off costs, one-off restructuring costs and Ogden rate changes. Saga plc preliminary results for the 12 months ended 31 January 2018 5
Our strategy Expected profit contribution at IPO mid single digit % growth Strategic priorities Grow Underlying PBT by mid single • digit % Cash generation to reduce debt • Growing our broking business • supported by an expanded motor 15/16 16/17 17/18 18/19 footprint Actual earned profit contribution after £10m of investments Growing travel through a renewed • fleet and growth in tour passengers Invest in systems and capabilities • 15/16 16/17 17/18 18/19 Underwriting Travel Home & Other Motor Saga plc preliminary results for the 12 months ended 31 January 2018 6
Motor broking – a review What has gone right? Launch of the motor panel in 2015 with four external underwriters • Driven third-party panel share to approximately 30% of the renewal book • within two years of launch High levels of cross-sell between insurance products • Investment in IT platforms: Adobe Marketing Cloud, Guidewire • Motor premium inflation supported a 37% increase in 2017/18 written motor • profit, partially offsetting the WTE headwind What hasn’t? Limited investment in growing customers • Panel not fully optimised • Product differentiation limited by old platforms • Saga plc preliminary results for the 12 months ended 31 January 2018 7
Motor broking – our plans Strategic priorities Drive customer acquisition and • retention Expansion of our motor footprint • Take advantage of our increasingly • efficient operating model Gary Duggan, CEO Retail Broking Joined in September 2017 • Previously Managing Director • of Junction, BGL’s broking business Saga plc preliminary results for the 12 months ended 31 January 2018 8
Insurance in 2017/18 Retail broking Home broking trading continued to be challenging • – Limited premium inflation – Flexible panel of underwriters continue to offer margin protection Other broking was robust • Underwriting Excellent results driven by prior year • claims experience New quota share arrangement • demonstrates the high quality and stability of our underwriting business Saga plc preliminary results for the 12 months ended 31 January 2018 9
Travel in 2017/18 Tour Operations Growth in profits of 20% • A challenging period for our teams during the Monarch insolvency and • hurricane season Cruise Growth in profits of 94% from increased capacity days • Spirit of Adventure ordered for delivery in • August 2020 Current trading update Reservation IT platform development • underway Spirit of Discovery first 19 cruises now over • 50% sold at rates that meet our expectations Saga plc preliminary results for the 12 months ended 31 January 2018 10
Summary Underlying profits are up and inline with revised guidance • Cash generation strong and a further reduction in debt • Travel business continues to grow • Other broking was robust but motor and home underdelivered • Saga plc preliminary results for the 12 months ended 31 January 2018 11
Jonathan Hill Jonathan Hill Chief Financial Officer Chief Financial Officer Saga plc preliminary results for the 12 months ended 31 January 2018 12
Growth in Underlying PBT of 1.4% FY 2018 FY 2017 Free cash flow before • £1,209m Customer £1,182m +2.3% financing activities of spend £145.2m giving a dividend Revenue £860.1m £871.3m (1.3%) coverage of 1.4x Net Debt of £432.0m (FY Underlying £190.1m £187.4m +1.4% • 2017: £464.9m) PBT (1) Profit before £178.7m £193.3m (7.6%) Dividend supported by • tax stability of our highly cash generative model 1.7x Debt ratio 1.9x (10.5%) Dividend 9.0p 8.5p 5.9% (1) Profit before tax from continuing operations excluding derivatives, debt write-off costs, one-off restructuring costs and Ogden rate changes. Saga plc preliminary results for the 12 months ended 31 January 2018 13
Written profits from broking and travel of £143.6m Written retail broking and Written retail broking and Written UPBT (1) FY 2018 FY 2017 travel PBT growth travel PBT growth Motor broking £39.0m £28.4m +37.3% +8.0% Earned £42.4m £45.2m (6.2%) £53.0m Home broking £58.1m (8.8%) Earned £56.6m £61.2m (7.5%) Other broking £31.2m £31.6m (1.3%) £143.6m £133.0m Underwriting £79.2m £77.1m +2.7% £20.4m Travel £14.9m +36.9% FY 2017 FY 2018 (1) Written profit before tax excluding derivatives, debt write-off costs, one-off restructuring costs and Ogden rate changes. Saga plc preliminary results for the 12 months ended 31 January 2018 14
Retail broking Total retail FY 2018 (Written) Motor broking Home broking Other broking broking Revenue £117.8m £81.4m £76.2m £275.4m Underlying PBT £39.0m £53.0m £31.2m £123.2m Profit per core policy £30.4 £44.7 £99.4 £44.3 Core policies sold 1,281k 1,186k 314k 2,781k FY 2017 Revenue £112.0m £86.7m £80.4m £279.1m Underlying PBT £28.4m £58.1m £31.6m £118.1m Profit per core policy £20.8 £46.3 £82.9 £39.4 Core policies sold 1,366k 1,254k 381k 3,001k Written broking performance driven by motor • On an earned basis, profitability of the broking business declined 5.7% due to a • reduction in the motor written to earned adjustment Saga plc preliminary results for the 12 months ended 31 January 2018 15
Written to earned adjustment FY 2018 £m FY 2017 FY 2016 Motor £3.4m £16.8m £7.4m £3.6m Home £3.1m - Total £7.0m £19.9m £7.4m Decline in WTE in FY 2018 driven by: • – Reduction in policies and ancillary products underwritten by AICL; and – the introduction of the arrangement fee in 2015 WTE expected to reduce • Saga plc preliminary results for the 12 months ended 31 January 2018 16
Continued strength in underwriting performance Reduction in underwritten policies and lower Comparable Expense and Combined Operating Ratios* reserve releases FY 2018 FY 2018 FY 2017 UK Market UK Market** ** FY 2017 FY 2018 FY 2018 FY 2017 FY 2018 FY 2018 £225.4m £223.5m 102.3% FY 2018 FY 2018 99.6% FY 2017 97.7% 71.4% 71.1% £79.2m £77.1m Underlying revenue Underlying PBT Pure COR COR Increase in Underlying PBT driven by an improved Pure COR, offset by marginally • lower underlying reserve releases of £60m (FY 2017: £63m) Reserve releases are driven by favourable small and large PI claims • * Figures exclude the impact of the quota share arrangement and Ogden impacts ** ABI Statistics to the end of December 2016 Saga plc preliminary results for the 12 months ended 31 January 2018 17
Quota share – reduces risk and volatility Underwriting Reported Quota Underlying Growth Underlying P&L FY2018 share FY 2018 FY 2017 £225.4m Revenue £98.8m (£126.6m) +0.9% £223.5m Underlying PBT £79.2m - £79.2m +2.7% £77.1m Reported COR 30.4% 71.1% (0.3%) 71.4% Pure COR 91.1% 97.7% (1.9%) 99.6% 916k No of earned 955k policies YOY decrease in number of earned policies driven by improvement in share of • external panel New quota share arrangement to cover 80% of underwriting risk of motor • policies, effective 1 February 2019 on a rolling three years Adds Hannover Re to our current reinsurance partner NewRe, and replaces our • existing quota share arrangement which is due to expire on 31 January 2019 Saga plc preliminary results for the 12 months ended 31 January 2018 18
Strong Solvency II position Solvency II coverage Surplus £57.1m 171% £137.0m £79.9m 143% 31 January 2017 31 January 2018 SCR Solvency II Capital SCR reduced to £79.9m from £102.9m at 31 January 2017 • The Solvency II coverage increased to 171% after payment of a dividend from • AICL of £70m (FY 2017: £115m) Saga plc preliminary results for the 12 months ended 31 January 2018 19
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