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 Introduction and Strategy 09.00 – 10.00 Lance Batchelor CEO Financials, disclosure, 10.00 – 10.45 Stuart Howard motor underwriting Chief Financial Officer 10.45 – 11.15 B R E A K Insurance broking 11.15 – 11.45 Roger Ramsden CEO Saga Insurance Travel 11.45 – 12.15 Andrew Strong CEO Saga Travel and Personal Finance Summary 12.15 – 13.00 Lance Batchelor Q&A CEO / All 13.00 – 14.00 L U N C H 3

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

Strong Business Model: 1 What Saga does Third party Suppliers Product Customers Insights Design In-house - Motor u/w - Shipping 5

Strong Business Model: 1 Group Structure Saga Insurance Saga Travel Saga Healthcare Personal Finance Saga Saga Saga Saga Credit Patricia Allied Savings White’s Broking Underwriting Holidays Cruises Cards Healthcare Equity Share Country Private Titan Destinology Release Trading Cousins Pay 6

Strong Business Model: 1 Where our earnings come from Source of EBITDA* in 6m to 31 Jul 2014 Broked & Other 26% Manufactured 74% *Manufactured represents AICL Underwriting + Cruising Broked and Other represents Saga Services + Personal Finance + ClaimFast + DC + Saga Holidays + Titan + Healthcare + Media & Central Costs 7

Strong Business Model: 1 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 8

Consistent financial delivery and cash generation: 2 Strong cash conversion from growing profits £250m 120% 100% £200m 80% £150m 60% £100m 40% £50m 20% £0m 0% 12m to 12m to 12m to 6m to 6m to Jan 2012 Jan 2013 Jan 2014 Jul 2013 Jul 2014 Trading EBITDA Available operating cash flow Available operating cash flow % 9

Growth demographic, unique database & great brand: 3 Saga’s unique database Contactable Database 96% 11,000 Brand recognition 10,000 9,000 Million 10.6 m 8,000 7,000 Contactable names 6,000  A powerful and efficient 5,000 marketing machine 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  An unrivalled source of predictive data Contactable Households Contactable People  Opportunity to do more 10

Growth demographic, unique database & great brand: 3 An attractive place to operate More than 22m people over 50 in the UK. 75% Expected to grow a further 30% by 2033 35% of the 40% of the population population Homeowners 1993 2003 2013 2023 2033 2013-2033 Growth c.7m increase 29.1m 26.7m 66% 73% 12% 10% 22.4m 20.0m 8% 18.1m Business owners >50 8% 11% 10% 7% 39% 9% 8% 9% 48% 17% 18% 19% 18% 7% 15% Household expenditure Age group 50-65 65-75 75+ *CEBR (Centre for Economic and Business Research), based on the ONS wealth and assets survey (WAS), Ipsos MORI **ONS, Cebr Analysis 11

Growth demographic, unique database & great brand: 3 Brand 12

4 An excellent insurance business  Strong broking Trading EBITDA Split franchise For the 6 months to 31 st July 2014 – Clear delivery in all (Total £114.5m) areas Motor Motor Core UW Ancillaries – Home, PMI, Travel £50.3m | 43.9% £11.9m | 10.4%  Market leading Other Broked motor underwriting £17.4m | 15.2% business – Consistently low Home COR Other FS Broked Core UW Co-insured – Prudent approach £1.5m | 1.3% £23.7m | 20.7% to reserving and Home UW Motor pricing Ancillaries Broked Other £5.3m | 4.6% £4.4m | 3.8% 13

Travel at the heart of the Saga brand 5 Vital to the brand and to the customer experience Holidays Cruises 14

6 Solid base in personal finance  Broad range of People over 50 hold: mainly broked 100% products and 90% services, including: 80% – Equity Release 77% 70% – Credit Cards 68% 66% 60% – Savings - £5bn 50% 44 of deposits 40% – Share trading 30% 20%  An opportunity given 10% the demographics 0% share of UK wealth UK Property wealth UK household UK financial wealth wealth Source: The wealth of the over 50s 2015. A report for Saga by the CEBR.11 15

7 Team Lance Batchelor Stuart Howard Andrew Strong Roger Ramsden Tim Pethick David Slater Chief Executive Group Finance CEO, Travel and CEO, Insurance Chief Marketing Group Chief Officer Director Personal Finance Officer 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 Personal Finance Saga Saga Saga Saga Credit Patricia Allied Savings White’s Broking Underwriting Holidays Cruises Cards Healthcare Equity Share Country Private Titan Destinology Release Trading Cousins Pay 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 22

Operate where our Model works best: 1 Simple business model Third party Suppliers Product Customers Insights Design In-house - Motor u/w - Shipping 23

Make more of the database: 2 Not one homogenous group Understanding Segmentation Our target market Digital Marketing Targeting Adjacencies Resources effectively Meeting Cross Sell Customer needs 24

Expanding our footprint in Insurance: 3 Motor Panel  Historic underwriting focus 8.5 % Motor – a great operation with a relatively narrow focus Market share  Missing out on addressable ( Of the over 50s ) * GfK NOP at 31 August 2014 ‘Saga customers’  2.5m Motor policies sold*  Broaden conversion  10.6m names on the database opportunities through motor panel  £250 average core premium  Positive experience with *twelve months to 31 July 2014 home panel 25

Grow our Travel Business: 4 Making Progress  Tasked Andrew and his team to double EBITDA in five years from FY14  Refresh the existing business and understand what we can sell to whom: – New channels – New products – New brands  Margin improvement  Good progress already made 26

Expand our Personal Finance Offering: 5 Opportunity 68% UK household wealth Saga Trusted & credible 27

Expand our Personal Finance Offering: 5 Wealth Management  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 28

Continue to Drive Innovation: 6 Examples 29

Continue to Drive Innovation: 6 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 30,000 8,000 Quotes Instructions 30

Summary

Strategy Strategy Balance Sheet Strategy Financial Outcome 1. Operate where our 1. Capital light 1. Profitable growth model works best • 2. Cash generative EBITDA 2. Make more of our • 3. Balanced and Operating EPS database sustainable growth 2. Progressive 3. Expand our footprint dividend policy in Insurance 4. Grow our travel business 5. Expand our personal finance offering 6. Continue to drive innovation 32

Financials Stuart Howard Chief Financial Officer

Key topics Increased disclosure for Insurance and Financial Services 1 Impact of expanding into Motor Insurance broking 2 Impact of Allied decision 3 4 More on our Motor Insurance underwriting capability Summary of strategic impacts on cash flow/balance sheet 5 Trading update 6 34