Capital Markets Day 15 January 2015 Strategy Lance Batchelor - - PowerPoint PPT Presentation

Capital Markets Day

15 January 2015

Strategy

Lance Batchelor Chief Executive Officer

Today’s Agenda

09.00 – 10.00 Lance Batchelor

CEO

Introduction and Strategy 10.00 – 10.45 Stuart Howard

Chief Financial Officer

Financials, disclosure, motor underwriting 10.45 – 11.15 B R E A K 11.15 – 11.45 Roger Ramsden

CEO Saga Insurance

Insurance broking 11.45 – 12.15 Andrew Strong

CEO Saga Travel and Personal Finance

Travel 12.15 – 13.00 Lance Batchelor

CEO / All

Summary Q&A 13.00 – 14.00 L U N C H

3

What I have found

A strong business model Consistent financial delivery and cash generation A growth demographic, unique database and a great brand An excellent insurance business A travel business at the heart of the brand Scope for growth in personal finance A strong team 1 2 3 4 5 6 7

4

Customers Insights Product Design Third party Suppliers In-house

• Motor u/w
• Shipping

Strong Business Model: What Saga does

1

5

Strong Business Model: Group Structure

1

Saga Insurance Saga Travel Saga Healthcare

Saga Broking Saga Underwriting Saga Holidays Saga Cruises Titan Destinology

Personal Finance

Allied Healthcare Patricia White’s Country Cousins Private Pay Credit Cards Savings Equity Release Share Trading

6

74% 26%

Source of EBITDA*

in 6m to 31 Jul 2014 Manufactured Broked & Other

Strong Business Model: Where our earnings come from

1

7

*Manufactured represents AICL Underwriting + Cruising Broked and Other represents Saga Services + Personal Finance + ClaimFast + DC + Saga Holidays + Titan + Healthcare + Media & Central Costs

Strong Business Model: Where the model works best

 Where a trusted brand is important  Where we can differentiate our offer  Where service levels play a key role  Where our superior customer knowledge gives us a competitive edge  Where cross-selling opportunities can flow from the initial relationship

1

8

Consistent financial delivery and cash generation: Strong cash conversion from growing profits

2

0% 20% 40% 60% 80% 100% 120% £0m £50m £100m £150m £200m £250m 12m to Jan 2012 12m to Jan 2013 12m to Jan 2014 6m to Jul 2013 6m to Jul 2014 Trading EBITDA Available operating cash flow Available operating cash flow %

9

Contactable Database

Growth demographic, unique database & great brand: Saga’s unique database

• A powerful and efficient

marketing machine

• An unrivalled source of

predictive data

• Opportunity to do more

3

10.6m

Contactable names

5,000 6,000 7,000 8,000 9,000 10,000 11,000

Jan 2004 Jul 2004 Jan 2005 Jul 2005 Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014

Contactable Households Contactable People

Million

96%

Brand recognition

10

Growth demographic, unique database & great brand: An attractive place to operate

3

15% 9% 7% 18% 8% 8% 20.0m 18.1m 18% 9% 8% 22.4m 19% 10% 10% 26.7m 17% 11% 12% 29.1m 1993 2003 2013 2023 2033 35% of the population 40% of the population Age group 75+ 50-65 65-75 2013-2033 Growth 7% 39% 73% c.7m increase

More than 22m people over 50 in the UK. Expected to grow a further 30% by 2033

*CEBR (Centre for Economic and Business Research), based on the ONS wealth and assets survey (WAS), Ipsos MORI **ONS, Cebr Analysis

75%

Homeowners

66%

Business owners >50

48%

Household expenditure

11

Growth demographic, unique database & great brand: Brand

3

12

An excellent insurance business

4

• Strong broking

franchise –Clear delivery in all areas –Home, PMI, Travel

• Market leading

motor underwriting business –Consistently low COR –Prudent approach to reserving and pricing Trading EBITDA Split

For the 6 months to 31st July 2014 (Total £114.5m) Other FS Core UW £1.5m | 1.3% Motor Core UW £50.3m | 43.9% Home UW Ancillaries £5.3m | 4.6% Motor Ancillaries £11.9m | 10.4% Other Broked £17.4m | 15.2% Home Broked Co-insured £23.7m | 20.7% Motor Broked Other £4.4m | 3.8%

13

Travel at the heart of the Saga brand

Vital to the brand and to the customer experience

5

Holidays Cruises

14

44

Solid base in personal finance

• Broad range of

mainly broked products and services, including: – Equity Release – Credit Cards – Savings - £5bn

• f deposits

– Share trading

• An opportunity given

the demographics share of UK wealth

66% 68% 77% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% UK Property wealth UK household wealth UK financial wealth

6

People over 50 hold:

Source: The wealth of the over 50s 2015. A report for Saga by the CEBR.11

15

Team

7

Lance Batchelor Chief Executive Officer Stuart Howard Group Finance Director Andrew Strong CEO, Travel and Personal Finance Roger Ramsden CEO, Insurance Tim Pethick Chief Marketing Officer David Slater Group Chief Actuary

16

However…

More to be done

1. Growth in the core business 2. Greater use of the database 3. Improved disclosure 4. Capitalise on our position in motor insurance 5. Growth in travel 6. Drive progress in personal finance

18

Saga Insurance Saga Travel Saga Healthcare

Saga Broking Saga Underwriting Saga Holidays Saga Cruises Titan Destinology

Personal Finance

Allied Healthcare Patricia White’s Country Cousins Private Pay Credit Cards Savings Equity Release Share Trading

19

Allied Healthcare

• A quality business with solid financial performance
• Decision made to divest:

– A B2B business, Saga is a B2C business – Very little overlap of customer base – No opportunity to differentiate Saga’s offer and deliver a premium service – Investment in technology and systems needed to move the business to the next level, it is not what Saga does

• We remain committed to private pay care

20

What we are going to do

The Saga Strategy

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Operate where our Model works best: Simple business model

1

Customers Insights Product Design Third party Suppliers In-house

• Motor u/w
• Shipping

23

Make more of the database: Not one homogenous group

2

Understanding

Our target market

Targeting

Resources effectively

Meeting

Customer needs

Segmentation Digital Marketing Adjacencies Cross Sell

24

Expanding our footprint in Insurance: Motor Panel

• Historic underwriting focus

– a great operation with a relatively narrow focus

• Missing out on addressable

‘Saga customers’

• Broaden conversion
• pportunities through motor

panel

• Positive experience with

home panel

• 2.5m Motor policies sold*
• 10.6m names on the database
• £250 average core premium

*twelve months to 31 July 2014

3

Motor 8.5%

Market share

(Of the over 50s ) * GfK NOP at 31 August 2014

25

Grow our Travel Business: Making Progress

• Refresh the existing business

and understand what we can sell to whom: – New channels – New products – New brands

• Margin improvement
• Good progress already made

4

• Tasked Andrew and his team to double EBITDA in five years from FY14

26

Expand our Personal Finance Offering: Opportunity

5

68%

UK household wealth

Saga

Trusted & credible

27

Expand our Personal Finance Offering: Wealth Management

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• Launch of Saga Investment Services, in

partnership with Tilney Bestinvest: –Harnesses complementary skills:

• Saga brand, database, customer

understanding

• TBI systems, investment expertise,

research, advisors, regulatory liability

• Inclusive proposition – “do it myself, do it with

me, do it for me”

• Truly Saga products, ready by Autumn 2015

5

Continue to Drive Innovation: Examples

6

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Continue to Drive Innovation: Legal Services

• Significant, but fragmented, market for legal services
• Successful launch phase completed, delivered through

the broker model: – Saga designed products – Saga marketing to source customers

6

30,000

Quotes

8,000

Instructions

30

Summary

Strategy

• 1. Operate where our

model works best

• 2. Make more of our

database

• 3. Expand our footprint

in Insurance

• 4. Grow our travel

business

• 5. Expand our personal

finance offering

• 6. Continue to drive

innovation

• 1. Capital light
• 2. Cash generative
• 3. Balanced and

sustainable growth 1. Profitable growth

• EBITDA
• Operating EPS

2. Progressive dividend policy

Strategy Balance Sheet Strategy Financial Outcome

32

Financials

Stuart Howard Chief Financial Officer

Key topics

Increased disclosure for Insurance and Financial Services Impact of expanding into Motor Insurance broking Impact of Allied decision More on our Motor Insurance underwriting capability Summary of strategic impacts on cash flow/balance sheet Trading update 1 2 3 4 5 6

34

Saga Plc consolidated P&L

£m 6m to 31 Jul 2014 6m to 31 Jul 2013 % Growth 12m to 31 Jan 2014 Revenue: Motor Insurance 160.0 182.2 (12.2%) 355.2 Home Insurance 43.7 44.3 (1.4%) 90.5 Other Financial Services 49.0 48.2 1.7% 96.9 Total Financial Services 252.7 274.7 (8.0%) 542.6 Travel 176.5 161.7 9.2% 331.0 Healthcare Services 145.5 161.9 (10.1%) 318.6 Media & Central Costs 8.8 8.8 0.0% 17.1 Total Revenue 583.5 607.1 (3.9%) 1,209.3 Trading EBITDA: Motor Insurance 66.6 62.9 5.9% 95.7 Home Insurance 29.0 31.4 (7.6%) 63.1 Other Financial Services 18.9 16.9 11.8% 37.3 Total Financial Services 114.5 111.2 3.0% 196.1 Travel 15.2 9.1 67.0% 20.1 Healthcare Services 1.9 1.7 11.8% 10.6 Media & Central Costs (1.2) (3.1) 61.3% (4.4) Total Trading EBITDA 130.4 118.9 9.7% 222.4 Profit before tax (like-for-like) 106.5 92.7 14.9% 146.5 Pro forma operating EPS 7.37p 6.16p 19.6% 8.84p Leverage ratio 2.5x

• Profit before tax is shown before IPO expenses and new debt finance costs to ensure a like-for-like comparison
• Prior year figures are shown on an underlying basis, as defined in the IPO prospectus

35

Increased disclosure for Insurance and Financial Services

Financial Services overview

• Predominantly broking

and ancillary revenue – 44% of EBITDA from motor underwriting

• EBITDA from

– 45% core underwriting – 40% broking – 15% ancillaries

• Prudent reserving

approach – Consistent track record

• f reserve releases

– Very strong motor COR

• f 68% in 6 months to

31 July 2014*

*This figure includes Motor and Motor Homes products underwritten in-house, including AA Motor panel. The COR reported in the interim statement excluded AA Motor panel.

1

FS Trading EBITDA Split - £114.5m total

For the 6 months to 31 July 2014 Motor core UW £35.7m | 31% Other FS Core UW £1.5m | 1% Motor Core UW Underwriting vehicle £14.6m | 13% Home UW Ancillaries £5.3m | 5% Other Broked £17.4m | 15% Motor Ancillaries £11.9m | 10% Home Broked Co-insured £23.7m | 21% Motor Broked Other £4.4m | 4%

36

Increased disclosure for Insurance and Financial Services

New Motor Insurance disclosure

1

6m to 31 July 2014 6m to 31 July 2013 £m Core UW Ancillary Broking / Other Total Motor Core UW Ancillary Broking / Other Total Motor Revenue 123.7 17.8 18.5 160.0 142.9 20.9 18.5 182.2 Gross profit 62.8 15.7 6.8 85.3 59.0 19.0 5.7 83.6 Operating expenses (20.3) (3.8) (2.6) (26.7) (23.3) (4.0) (1.1) (28.4) Investment return 6.0 0.0 0.0 6.0 5.3 0.0 0.0 5.3 Operating profit 48.6 11.9 4.2 64.6 41.0 15.0 4.6 60.5 Add back D&A 1.7 0.0 0.2 1.9 2.2 0.0 0.2 2.4 Trading EBITDA 50.3 11.9 4.4 66.6 43.2 15.0 4.8 62.9 Number of policies sold in 12m to 31 Jul:

• core

919k 4k 91k 1,014k 1,012k 4k 74k 1,089k

• add-ons

n/a 1,394k 75k 1,469k n/a 1,673k 75k 1,748k

• Core includes the results of the Motor and Motor Homes products underwritten in house, including AA Motor panel
• Ancillaries includes all of the add-ons attributable to the Saga Core Motor and Motor Homes products
• Broking / Other includes the results of the Saga Select and Direct Choice panels and the credit hire and repair business

37

Increased disclosure for Insurance and Financial Services

Core Motor Insurance deep dive

1

£m 6m to 31 Jul 2014 6m to 31 Jul 2013 Net earned premium 119.7 138.0 A Instalment income 1.8 2.6 Other operating income 2.1 2.3 Revenue 123.7 142.9 Claims costs (85.3) (111.1) Reserve releases 29.8 33.0 B Claims handling (5.4) (5.7) C Total cost of sales (60.8) (83.8) D Gross profit 62.8 59.0 Total expenses (20.3) (23.3) E Investment return 6.0 5.3 Operating profit 48.6 41.0 Add back D&A 1.7 2.2 Trading EBITDA 50.3 43.2 Pure COR 92.7% 101.6% ((D – B) + E) / A Reported COR 67.8% 77.6% (D + E) / A Expense Ratio 21.4% 21.0% (C + E) / A

Expense Ratio

6m to 31 Jul 2014

Marketing costs (incl. aggregators) £4.1m Document fulfilment £1.0m Contact centre costs £6.1m Claims handling £5.4m Other direct costs £2.6m Levies £0.9m Allocation of centrally-managed

• verheads (management, property

costs, IT costs, etc.) £5.6m Total expenses (incl. claims handling) £25.6m Net earned premium £119.7m Expense ratio 21.4%

38

6m to 31 July 2014 6m to 31 July 2013 £m Ancillary UW Broking / Coinsured Total Home Ancillary UW Broking / Coinsured Total Home Revenue 8.0 35.7 43.7 8.0 36.2 44.3 Gross profit 5.5 35.4 40.9 6.1 36.1 42.2 Operating expenses (0.4) (12.8) (13.1) (0.3) (11.3) (11.6) Investment return 0.1 0.0 0.1 0.1 0.0 0.1 Operating profit 5.2 22.7 27.9 5.9 24.8 30.6 Add back D&A 0.1 1.0 1.1 0.1 0.7 0.8 Trading EBITDA 5.3 23.7 29.0 6.0 25.4 31.4 Number of policies sold in 12m to 31 Jul:

• core

n/a 1,292k 1,292k n/a 1,313k 1,313k

• add-ons

625k n/a 625k 536k n/a 536k

Increased disclosure for Insurance and Financial Services

New Home Insurance disclosure

1

• Ancillary includes financials for Home add-on products underwritten in-house.
• Broking / Coinsured includes financials for the Home panel and the Holiday Homes product

39

Increased disclosure for Insurance and Financial Services

New Other Financial Services disclosure

1

• Core includes products underwritten in-house (Caravan, Pet, PA & ADB), plus the underwriting

results for AA Road products.

• Broking / Other includes core products underwritten by third parties (PMI, HCP, Travel insurance,

Boat) and non-insurance products

6m to 31 July 2014 6m to 31 July 2013 £m Core UW Broking / Other Total Other FS Core UW Broking / Other Total Other FS Revenue 20.4 28.5 49.0 21.9 26.3 48.2 Gross profit 1.8 28.5 30.4 1.8 26.3 28.1 Op expenses (0.6) (11.8) (12.4) (0.5) (11.3) (11.8) Investment return 0.2 0.0 0.2 0.2 0.0 0.2 Operating profit 1.4 16.8 18.2 1.4 15.0 16.5 Add back D&A 0.1 0.6 0.7 0.1 0.4 0.5 Trading EBITDA 1.5 17.4 18.9 1.5 15.4 16.9 Number of policies sold in 12m to 31 Jul:

• core

34k 309k 343k 36k 299k 335k

• add-ons

n/a 5k 5k n/a 4k 4k

40

Increased disclosure for Insurance and Financial Services

Summary of Financial Services

1

6m to 31 July 2014 6m to 31 July 2013 £m Core UW Ancillary UW Broking / Other Total FS Core UW Ancillary UW Broking / Other Total FS Gross revenue 144.1 26.1 163.4 333.7 164.8 29.2 148.0 341.9 Revenue 144.1 25.9 82.8 252.8 164.8 29.0 81.1 274.8 Gross profit 64.7 21.2 70.7 156.7 60.8 25.1 68.1 154.0 Op expenses (20.9) (4.2) (27.1) (52.2) (23.8) (4.2) (23.7) (51.8) Investment return 6.2 0.1 0.0 6.3 5.5 0.1 0.0 5.6 Operating profit 50.0 17.1 43.6 110.8 42.5 20.9 44.4 107.7 Add back D&A 1.8 0.1 1.8 3.8 2.3 0.1 1.2 3.7 Trading EBITDA 51.8 17.2 45.5 114.5 44.8 21.0 45.6 111.4 Less Trading EBITDA from underwriting vehicle (26.6) (24.0) Working capital and non-cash items (include dividends paid from underwriting vehicle) 31.6 32.1 Capital expenditure from available cash (3.0) (4.4) Available operating cash flow 116.5 115.1 Available operating cash % 102% 103%

41

Impact of expanding into Motor Insurance broking

Impact of expanding into Motor Insurance broking

2

6m to 31 July 2014 £m Core UW Ancillary Broking / Other Total Motor Revenue 123.7 17.8 18.5 160.1 Gross profit 62.8 15.7 6.8 85.4 Operating expenses (20.3) (3.8) (2.6) (26.7) Investment return 6.0 0.0 0.0 6.0 Operating profit 48.6 11.9 4.2 64.7 Add back D&A 1.7 0.0 0.2 1.9 Trading EBITDA 50.3 11.9 4.4 66.6

• Aim to retain current underwritten book whilst taking on new broked risks with

higher margin: – Expansion of motor footprint – Higher margin broked business – Reduction in accounting revenue as net premium paid to underwriter will not be recognised in the books – One-off benefit from accelerating the earnings from broked policies – Transfer of underwriting margin

42

Impact of Allied decision

Impact on financials

• Going forward, Allied will:

– No longer be treated as part of the continuing business – Be held for sale

• In the 2014/15 preliminary results, there will be a significant, one-off write-down of historic

goodwill and potentially other related balance sheet items: – Current key items held on the balance sheet are as follows:

• Goodwill: £178m
• Intangible assets: £19m
• Intercompany debtor: £27m
• The private pay businesses of Country Cousins, Patricia White’s and Saga SOS will be

retained within continuing operations

3

43

Impact of Allied decision

Restated interim results

3

Continuing Operations As Reported £m 6m to Jul 2014 6m to Jul 2013 12m to Jan 2014 6m to Jul 2014 6m to Jul 2013 12m to Jan 2014 Revenue 440.1 447.7 895.5 583.5 607.1 1,209.3 Trading EBITDA 129.6 118.7 214.8 130.4 118.9 222.4 Operating profit 116.3 104.9 182.4 110.0 95.5 169.6 PBT (like-for-like) 115.9 105.3 167.9 106.5 92.7 146.5 Revenue growth (1.7%) (3.9%) Trading EBITDA growth 9.2% 9.7% Operating profit % 26.4% 23.4% 20.4% 18.9% 15.7% 14.0% Number of employees 4,796 5,288 5,224 20,495 22,512 22,301 Intangibles amortisation (0.1) (0.1) (0.1) (5.2) (8.0) (17.8)

44

Impact of Allied decision

Healthcare

3

Continuing Operations As Reported £m 6m to Jul 2014 6m to Jul 2013 12m to Jan 2014 6m to Jul 2014 6m to Jul 2013 12m to Jan 2014 Revenue 2.1 2.5 4.8 145.5 161.9 318.6 Gross profit 2.0 2.4 4.6 43.9 47.4 94.1

• Gross profit %

95.4% 96.3% 96.1% 30.2% 29.3% 29.5% Trading EBITDA 1.1 1.5 3.0 1.9 1.7 10.6

• Trading EBITDA %

53.9% 61.4% 62.6% 1.3% 1.1% 3.3% Operating profit 1.0 1.4 2.7 (0.1) (0.1) 7.5

• Operating profit %

47.6% 56.0% 57.0% (0.1%) (0.1%) 2.4% Number of employees 39 37 37 15,738 17,261 16,844

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More on our Motor Insurance underwriting capability

Delivery of quality underwriting

• Track record
• Data quality
• Effective pricing
• Efficient claims handling
• Focus on over 50s:

– The Saga Underwriting Business commenced writing business on 1 January 2004 – Separate from Saga Broking; management focused on:

• Claims handling
• Net pricing for Saga risks
• Aim to price to cover underwriting risk, claims handling

costs and a fixed margin, not to chase volume

4

46

More on our Motor Insurance underwriting capability

Consistency of delivery

• Achieved profit every year
• Target margin achieved even

in 2009 and 2010: – Identified personal injury issue well ahead of many insurers – Proactively addressed through targeted price increases and additional focus on successful repudiation of fraudulent personal injury claims

• Motor is majority of portfolio but

also successfully underwrite house, pet, home emergency

0% 2% 4% 6% 8% 10% 12% 14% 16% 2011/12 2012/13 2013/14 Reported pricing return Target return

Reported Profit as a %

• f Net Earned Premiums

4

47

Reported Combined Operating Ratio* More on our Motor Insurance underwriting capability

Track record

77.3% 79.3% 82.2% 76.1% 74.5% 85.5% 87.3% 81.7% 72.1% 67.4% 56.6% 46.4% 22.5% 18.8% 15.4% 16.1% 17.2% 20.4% 17.0% 16.6% 17.3% 21.0% 21.0% 21.4%

0% 20% 40% 60% 80% 100% 120%

12m to Jan 2005 12m to Jan 2006 12m to Jan 2007 12m to Jan 2008 12m to Jan 2009 12m to Jan 2010 12m to Jan 2011 12m to Jan 2012 12m to Jan 2013 12m to Jan 2014 6m to Jul 2013 6m to Jul 2014

Reported loss ratio Expense ratio

98.4% 89.3% 88.4% 77.6% 67.8% 104.3% 105.9% 91.7% 92.2% 97.7% 98.0% 99.8%

• Financial years prior to the 12m to Jan 2012 are based
• n UK GAAP internal management accounting data

4

48

*Includes Motor and Motor Homes products underwritten in-house, including AA Motor panel. The COR reported in the interim statement excluded AA Motor panel.

More on our Motor Insurance underwriting capability

Data quality

• High quality data:

– Fast, accurate and granular, for example

• Every item of data captured from each policy transaction

(e.g. new business, adjustments etc.) is downloaded to the actuarial database overnight

• The actuarial claims database contains every item
• f claim data captured and is at most 20 minutes

behind the live database – System designed in 2003 when Saga Underwriting established – No legacy systems or multiple sources of data

• Key to both pricing and claims handling

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More on our Motor Insurance underwriting capability

Focused pricing

• Rating analysis based on Saga

customer experience – Allows targeted pricing for this part of the market

• e.g. no upper age limit for

new business – Typical customers are older, retired and drive low mileages

• Extensive use of standard rating

factors (age, car, mileage etc), internal data (other products) and external data

• Pricing is based on the claims

data, database insight and known changes to legislation

• Saga Motor

– Aggregators perform similarly to other business: – 44% of new business policies are sourced from aggregators

6m to 31 Jul 2014 Loss Ratio Retention Rate

Aggregators 68% 72% Non-aggregators 67% 73% Total 67% 73%

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50

More on our Motor Insurance underwriting capability

Excellence in risk pricing

• AA Motor Panel:

– Met our target return every financial year – One of largest insurers on panel – Lowest loss ratio on the panel in 2012 and 2013

• Saga Home:

– Largest insurer on Saga Home panel1 – Loss ratio (to net premiums) of 44% in 2012 and 50% in 2013 – Lowest loss ratio for standard underwriters on the panel in 2012 and 2013

• Saga Pet:

– Took Saga book in-house in 2012 – Net premium well below best external insurers – Delivered target return in 2012, 2013 and 2014

• 1. 99% co-insured and remaining 1% reinsured to New India, so no underwriting risk remains with the Group.

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More on our Motor Insurance underwriting capability

Conservative approach to reserving

• We do not want to suffer a significant loss on underwriting

– We reserve on the available claims data together with known changes to legislation

• Consistent stream of reserve releases totalling £207m over 10 years

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Reserve Releases as at 31 January

£m

0.2 5.2 20.9 26.1 5.5 16.3 45.8 57 29.8 10 20 30 40 50 60 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2015

More on our Motor Insurance underwriting capability

Analysis of current year claims costs

Saga Underwriting Reported Claim Cost 6 months to July 2014

Third Party Damage 24% Accidental Damage 19% Theft 1% Large Personal Injury 24% Small Personal Injury 31% Windscreen 1%

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Attention to detail drives effective claims handling More on our Motor Insurance underwriting capability

Best-in-class claims management

Source: Management information 1 Peers results for are average of years ended 31-Dec-2010, 2011 and 2012. Saga relates to average of years ended 31-Jan-2011, 2012 and 2013. 2 Average of LV=, Ageas, NFU, esure, AXA, Co-op, RSA, Admiral, Aviva and Direct Line.

Claims handling costs ratio for private motor (3-year average)

5.4% 3.7% Saga Market Average2

Very strong process at first notification of loss Dedicated fraud Detection capabilities Dynamic personal injury claims management Very strong process for third party recoveries Own network garage Penetration of 95%+ Over £50 million of cumulative claims fraud savings Average small personal injury claim below material peers Greatly increased recovery

• f AD costs

4

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More on our Motor Insurance underwriting capability

Personal injury claims management

• Used an external firm to benchmark our claims performance

– Peer group which includes most of the key players in the UK motor market – Personal injury claims represent around 55% of claims costs – For 2013, Saga had an average personal injury claim cost which was only 82% of the average for the peer group – Saga was the best performing underwriter in the benchmarking exercise – Saga Underwriting achieved a 7% reduction in average claims 2013 compared to 2012, compared to a 1% increase for other insurers – This has been enabled through a number of initiatives:

• In Jan 2012, the Saga Underwriting business implemented a data-led project to reduce the amount it paid to third

party solicitors for small value personal injury claims

• Since the MOJ Personal Injury reforms, the Saga Underwriting business has been tracking our average cost of

the general damage element of PI claims against the market. At the time of project implementation (Jan 12), Saga’s costs were c. 88% of that of the Market, post implementation it has consistently been c. 82%.

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More on our Motor Insurance underwriting capability

Regulation and capital

• Regulated by FSC in Gibraltar
• No capital injections since Saga Underwriting Business commenced writing business on 1 January 2004
• Pay dividends with consent of regulator:

– £20m in 2013/14 and £25m in 2014/15

• Available capital has remained above 200% of Solvency I requirement
• Our Solvency II calculations using both the internal model and the standard formulae indicate that we do

not need to inject any additional capital into the underwriting vehicle

Well capitalised insurer

£m As at Jul 2014 As at Jul 2013 As at Jan 2014 Solo statutory solvency capital Total invested equity 156.7 164.6 161.2 Regulatory adjustments (17.0) (18.7) (17.4) Total regulatory capital resource 139.7 145.9 143.8 European Insurance Directive Requirement (Solvency I) Required minimum margin 58.7 62.5 64.0 Capital resources in excess of Required Minimum Margin 81.0 83.4 79.8 Coverage ratio 238% 233% 225%

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More on our Motor Insurance underwriting capability

Investment – low risk, stable return portfolio

• Stable returns in

recent years

• Portfolio just below

£700 million

• Average duration of

investments (excl. property) of 2.5 years

Return % 2011/12 2.5 2012/13 2.4 2013/14 2.1 2014/15 2.2

4

Investment portfolio as at 30 November 2014

Bank deposits 68% Infrastructure 1% Hedge funds 2% Property 7% Money market funds 9% Sovereign/ suprabonds 10% Senior secured loans 3%

57

More on our Motor Insurance underwriting capability

Underwriting summary

• We are a high quality and conservative underwriter
• Met target return every year
• Delivering high quality pricing and effective and efficient

claims handling

• We do not expect Solvency II to result in additional capital

being put into the underwriting vehicle

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58

Summary of strategic impacts on cash flow/balance sheet

Balance sheet strategy

• Strategy is focused on developing broking / capital light model
• Deleveraged rapidly from 3.1x EBITDA at IPO to 2.5x as at 31 July 2014
• Dividend for 2014/15 expected to be at top end of 40-50% of the Group’s

net income, excluding the impact of exceptional expenses and one-off items, that has accrued since the date of the IPO

5

£m At IPO As at 31 Jul 2014 Bank debt 700 700 Available cash (10) (104) Net debt 690 596 12m rolling EBITDA 225 242 Leverage ratio 3.1 2.5 £m 6m to 31 Jul 2014 Profit before tax 32.8 Exceptional expenses 55.1 Exceptional finance costs 12.9 NCI (0.2) Tax (21.5) Net income 79.1

• With the leverage now reduced to 2.5x EBITDA, going

forward we will seek to maximise returns to investors by

• ptimising the balance between reinvestment, dividends

and debt reduction

59

Trading update

6

Overall trading in line with market expectations

Financial Services Motor Home Other FS Travel Saga Healthcare Services Media & Central Costs

• Strong underwriting performance, reserve releases similar to last year
• Revenues slightly lower than H1, as lower premiums earn through
• Seasonality – claims costs higher in second half of year
• Expect good earnings growth this year
• Stronger revenue in H2 vs. H1
• Investing in growing policies in a competitive market
• Profit broadly flat year-on-year
• Revenue similar to H1
• Profitability slightly stronger than H1
• H2 revenue boosted by Destinology acquisition August 2014 adding c. £27m to H2
• H2 lower profitability than H1 due to seasonality and Saga Sapphire refit
• Good year-on-year earnings growth
• Allied excluded from core business going forward but improved margin and profitability
• n lower revenues
• Retained private pay business, H2 performance similar to H1
• Revenue consistent with H1
• Significant increases in cost in H2 vs. H1 due to
• Plc costs
• Investment in innovation team
• Normal phasing of central cost base and recharges

60

Saga Insurance

Roger Ramsden Chief Executive Officer

Saga Insurance Saga Travel Saga Healthcare

Saga Broking Saga Underwriting Saga Holidays Saga Cruises Titan Destinology

Personal Finance

Allied Healthcare Patricia White’s Country Cousins Private Pay Credit Cards Savings Equity Release Share Trading

62

The Broker Model

Customers Insights Product Design Third Party Underwriters In-house Underwriting

Insurance Broking

63

Saga customer service standards

Underwriter

The Broker Model

Revenue Customer Insight Product design Market price Costs Channel: Contact centre / Online Policy administration Customer care Sourcing Profit Profit Risk price Underwriting Claims Profit Saga Broker My focus as the broker is the customer and efficient customer delivery

64 Best priced product to our specification

In-house Panel Third Party Solus

Saga Insurance – financials

65

FS Trading EBITDA Split - £114.5m total*

For the 6 months to 31 July 2014 Motor core UW £35.7m | 31% Other FS Core UW £1.5m | 1% Motor Core UW Underwriting vehicle £14.6m | 13% Home UW Ancillaries £5.3m | 5% Other broked £17.4m | 15% Motor Ancillaries £11.9m | 10% Home broked Co-insured £23.7m | 21% Motor broked Other £4.4m | 4%

*Total Financial Services segment, which includes insurance and other personal finance products

Saga Insurance – contribution

Market shares

Notes 1. GfK NOP at 31 August 2014 2. TGI, Laing Buisson and company data at 31 December 2013 3. TGI and company data at 30 June 2014 4. Majority Travel

Financial Services new names by product

(12m to 31 January 2014 – total c.420k)

20 40 60 80 100 120 140 160 180 200 Motor Home Other 4

6.8%

Home1

8.5%

Motor1

7.8%

PMI2

5.5%

Travel3

66

Fresh look at the Saga Broker business

Highly profitable / strong margins Customer insight Product design Efficient Flexible sourcing options Success of Home panel

1 2 3 4 5 6 Strengths

Expand customer base through Motor panel Continued growth in Travel Insurance and PMI Expand the product offer Maximise the digital channel Further efficiencies

1 2 3 4 Opportunities 5

67

Award Winning Award Winning

Customer insight drives product and service

Product differentiation

Motor Emergency ‘any driver’ cover Home Extended unoccupancy cover Travel No upper age limit PMI Range of products to suit all budgets

Service differentiation

Bereavement service – 50k+ calls p.a. Claims intervention – 24k customers in 2014 UK only call centres No IVRs (push-button menus)

2/3

68

Home Insurance: Commission and Acquisition Expenses Ratios1 Motor Insurance: Commission and Acquisition Expenses Ratios1

Maximum marketing efficiency

Database helps drive Saga’s best in class acquisition costs

£m (2013A)2 Ratio (3-yr average)3 £m (2013A)2 Ratio (3-yr average)3

6.0% 7.2% 8.4% 8.9% 9.9% 11.1% 12.3% 13.6% 15.2% 16.3% 17.6% 21.8% Saga Hastings Admiral DLG CIS esure LV= NFU Axa Ageas Aviva RSA 7.1% 16.3% 16.6% 26.1% 29.4% 34.2% 35.0% 35.3% 35.6% 39.7% 39.8% Saga NFU CIS DLG LBG L&G Axa Ageas RSA Aviva Allianz

12 126 50 122 27 89 152 225 121 13 30 234 288 108 162 132 250 259 72 7 Average 13.0% Average 30.8% 31 34 49

• Source: PRA returns as per Standard & Poor’s SynThesys, Company Reports
• Note:

(1) Based on commission and other acquisition expenses incurred net of reinsurance commissions. Ratios stated on the basis of net earned premia. Motor insurance based on direct and facultative personal lines motor insurance. Home insurance based on direct and facultative household and domestic risk. Hastings relates to Advantage Insurance Company Limited; Admiral relates to Admiral Group; Ageas based on cumulative values for AICL, GICL and Ageas ownership of Tesco Underwriting; LV based on summation of LVIC and Highway. Saga data relates to Home and Motor only (i.e. excluding SBA, SHE, Van and Holiday Homes); (2) For peers relates to year ended 31-Dec-13, for Saga relates to year ended 31-Jan-14; for Hastings relates to 31-Dec-12; (3) Peers results are for average of years ended 31-Dec-11, 2012 and 2013. Saga relates to average of years ended 31-Jan-12, 2013 and 2014;

4

69

Home broking – current position

• The competitive dynamics of the

panel have been driven by: – Quality and attractiveness of Saga’s book, with 1.2m policies – Introduction of new underwriting capital – ‘Saga factor’ – proprietary data that cannot be replicated by other insurers – Net rates have fallen faster than the market

6

9 10 11 12 13 14 15 16 Launch (July 2009) Dec-10 Oct-11 Feb-12 Dec-12 Nov-13 Apr-14 Oct-14

Cumulative membership of Home Panel

70

Cumulative movement in Home rates since February 2012

• 30%
• 25%
• 20%
• 15%
• 10%
• 5%

0% 5% Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Saga net premiums Market (AA BIPI)

Opportunities

Expand customer base through Motor panel Continued growth in Travel Insurance and PMI Expand the product offer Maximise the digital channel Further efficiencies

1 2 3 4 5

71

Expand Customer base through Motor Panel

1

In-house underwriter is very effective but has a relatively narrow risk appetite:  Likes low mileage older cars  Dislikes younger drivers, high mileage, expensive cars

72

0% 10% 20% 30% 40% 50% 60% 70% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95%

Proportion of Sales Proportion of Quotes

Proportion of quotes and sales according to propensity of risk to be 'best price' on an aggregator

Saga Underwriting Strength Other underwriters’ risk appetite

• 1. Experience through open market

panel – Saga Select growth

• 2. Strength of the Saga brand – over

60% of aggregator sales are achieved when Saga is not the cheapest price

• 3. Saga is low cost distribution
• 4. Home panel has worked:

1. 10 to 16 insurers 2. Lower than market loss ratios on average 3. Lower rates than market 4. Unique data from Saga to assist pricing 5. Significant extra value captured on creation from solus arrangement

• 5. AICL competes effectively against
• ther insurers
• 6. Underwriters have different risk /

return appetites

Expand Customer base through Motor Panel

1

AICL share of Home in force policies 30th Nov 2014

0% 5% 10% 15% 20% 25% Buildings Contents

73

Continued growth in Travel Insurance and Private Medical Insurance

Travel Insurance

• Tailored product to meet the needs of the over 50s

traveller:

– No upper age limit – Almost all medical conditions covered – Significantly higher than market average premium – Major source of new names

• Increase online distribution
• Enhance product to cover serious illness

Private Medical Insurance

• Wide range of tailored schemes for over 50s.

– Gaining share in the declining individual PMI market

• Cancer cover offered as an add on
• Range of cash payment options

2

50,000 100,000 150,000 200,000 250,000 300,000 2007/082008/092009/102010/112011/122012/132013/142014/15 10,000 20,000 30,000 40,000 50,000 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 40,000 140,000 240,000 FY11 FY12 FY13 FY14 FY15 Est New names % of total

Travel total sales volumes by year New names generated by Travel insurance PMI total sales volumes by year 74

Expand the product offer

Recent examples:

• Motorbike
• Landlord insurance
• Opportunity identified through customer interaction

and database analysis.

• Bespoke Landlord product developed:

– Multiple policy discounts – Tailored Home Emergency product – Rent guarantee

New opportunities:

• Explore ways to develop additional brands using
• ur capabilities

– Direct Choice – Home, Travel and expand Motor

• Work from Home insurance
• Healthcare in the Home insurance

3

2000 4000 6000 8000 10000 12000 12/13 13/14 14/15

Saga branded Motorcycle Insurance sales volumes

75

Maximise the digital channel

Opportunity

• Upsell of add-ons
• Cross sell

insurance

• Group cross sell
• Contact centre

efficiency and interaction

4

0% 20% 40% 60% 80% 100% 2011/12 2012/13 2013/14 2014/15 Motor Home 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Agggregators Other internet Offline 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Agggregators Other internet Offline

We have a growing online presence driving efficiency:

Saga Motor channel mix Saga Home channel mix Saga proportion of quotes sent by email 76

Drive efficiency

• Excellent record of improving broker

efficiency

• Price optimisation
• Contact centre productivity
• Marketing efficiency
• Product development
• Supply chain management

Case study: Application of speech analytics

• What?

– Digital analysis of all 5m calls

• Impact

– Restructured contact centre teams – Redesigned coaching

• Outcome

– 1-2% increase in retention across Home and Motor

5

Operational excellence delivery by year*

Value created through a combination of increased efficiency and productivity, pricing optimisation and cost reductions

2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 11/12 12/13 13/14 14/15

‘m

77

*Figures are on a written basis and based on internal management accounting data. They represent the total incremental revenue generated and cost savings delivered through management initiatives enacted in each year in the Saga Broker business only and are not cumulative year-on-year.

Summary

Expand customer base through Motor panel Continued growth in travel insurance and PMI Expand the product offer Maximise the digital channel Further efficiencies

1 2 3 4 5

The broking business can grow

Today

Broking EBITDA Motor market (-) New products Operational excellence Broking EBITDA Launch of panel Digital Home panel

79

Travel & Personal Finance

Andrew Strong Chief Executive Officer

Saga Insurance

Saga Travel

Saga Healthcare

Saga Broking Saga Underwriting Saga Holidays Saga Cruises Titan Destinology

Personal Finance

Allied Healthcare Patricia White’s Country Cousins Private Pay Credit Cards Savings Equity Release Share Trading

81

Four key business areas

Holidays

• Founded 1951
• Package holidays around the World
• Average passenger age: 73
• 119k Passengers
• £168M Revenue

Cruises

• First voyage 1997 – Saga Rose
• Niche operator with 2 owned ships
• Small ships
• Personal service
• Average passenger age: 76
• 23k Passengers/315k Passenger Days
• £74M Revenue
• Acquired 2009
• Touring expert
• Worldwide tours
• River & Ocean Cruises
• Average passenger age: 64
• 37k Passengers
• £89M Revenue
• Acquired 2014
• Online to offline expertise
• Expert in luxury resort stays
• Average passenger age: 45
• 31k Passengers*
• £48M Revenue*

* 12 months to October 31 2013

82

What works well in Travel

• Attractive proposition to a key market segment
• Tour operating business model – no commitment, flexible, resilient
• Service excellence

83

Our businesses are voted number one by customers & suppliers

Travel Trade Gazette Best Escorted Tour Operator 2014 Travel Network Group Best Touring Operator

• f the Year 2014

Which ? Recommended Cruise Company 2014 Cruise International Best Value for Money Cruise Line 2014 Travel Trade Gazette Luxury Travel Agency

• f the Year 2014

84

Most awarded at the British Travel Awards

85

What works well in Travel

• Attractive proposition to a key market segment
• Tour operating business model – no commitment, flexible, resilient
• Service excellence
• High levels of customer satisfaction and repeat business
• A passionate team dedicated to both Saga and its customers

86

Improvements

A drive and appetite for growth Realising the potential of the Saga Group Database

1 2

87

Attitude to Life

Flexibility Reputation Personal care Expert service Low prices Planners Worriers Connectors Experiencers Maximisers

Evolving the customer proposition

Buying Motivations

88

Improvements

A drive and appetite for growth Realising the potential of the Saga Group Database Digital presence Net margin improvement Next generation of cruise proposition & profitability

1 2 3 4 5

89

Progress to date

6m to Growth 6m to 12m to Jul 2014 Jul 2013 Jan 2014 Revenue: Holidays £133.2m 7.8% £123.6m £256.8m Cruising £43.3m 13.6% £38.1m £74.2m £176.5m 9.2% £161.7m £331.0m Gross Profit: Holidays £29.1m 7.0% £27.2m £56.1m Cruising £8.6m 91.6% £4.5m £6.1m £37.7m 19.0% £31.7m £62.2m Gross Profit % 21.4% 1.8% 19.6% 18.8% Trading EBITDA £15.2m 67.0% £9.1m £20.1m Trading EBITDA % 8.6% 3.0% 5.6% 6.1% Operating Profit £9.1m 250.0% £2.6m £3.5m Operating Profit % 5.2% 3.6% 1.6% 1.1% Number of holidays passengers 78k 1.3% 77k 156k Number of ship passenger days 174k 8.1% 161k 315k

90

Future key initiatives

Cruises

• Increased capacity
• Grow Third Party Cruise
• Continued optimisation of revenue

management

• Optimisation of digital platform
• Saga Pearl II refit
• Maintain high customer satisfaction

Holidays

• Build trade sales volume
• Launch third party ‘Holiday World’
• New product innovation
• Optimisation of digital platform
• Building brand consideration
• Improved aviation proposition
• Re-defining the “Saga Rep”
• Next Generation Contact Centre
• Continued optimisation of revenue

management

91

Future key initiatives

• Building brand awareness
• New website launch
• Exploiting the database
• Pilot ‘Net Margin’ initiative
• New product launches
• Launch ‘Lite’ product
• New product launches
• Exploiting the database
• Increased marketing efficiency

& focus

92

Future growth: Doubling EBITDA within five years

Existing FY2014 Third Party Cruises Trade Sales Acquisitions New Cruise Capacity Potential FY19

93

Underlying Growth

Conclusions

Lance Batchelor Chief Executive Officer

Conclusions

Clarity on the business model Scope for growth in the core business Commitment to innovation Consistent profit growth driving cash generation

1 2 3 4

Q&A