Results Presentation Interim Results for the 6 months ended 31 July - PowerPoint PPT Presentation

Results Presentation Interim Results for the 6 months ended 31 July 2016

Lance Batchelor Chief Executive Officer Saga plc Interim Results for the 6 months ended 31 July 2016 1

Today’s Agenda Overview and strategy Lance Batchelor CEO Financials Jonathan Hill CFO Summary Lance Batchelor CEO Q&A Saga plc Interim Results for the 6 months ended 31 July 2016 2

Overview Strong financial results Profit Before Tax Consistent financial performance and significant £ 109.9m increase in dividend +8.5 %  Growth in Trading Profit from core insurance and Debt Ratio travel businesses 2.2x (2.4x at HY  Continued strong cash generation = further 2015) deleveraging and increased dividend Interim dividend 2.7p  Performance supports strength of Saga’s flexible business model +23% Saga plc Interim Results for the 6 months ended 31 July 2016 3

Consistently growing profit and reducing debt 3.1x 2.6x 2.4x 2.3x 2.2x IPO £184.8m PBT* £176.2m Net debt to £172.9m £172.1m EBITDA £163.8m Jan-15 Jul-15 Jan-16 Jul-16 Saga plc Interim Results for the 6 months ended 31 July 2016 4 *Reported PBT from continuing operations on a last 12 months basis, excluding IPO expenses in FY15

Growing the core businesses Insurance: strong performance in competitive environment  UK motor and home insurance markets remain Retail broking competitive model continues  Retail broking model continues to provide flexibility to provide  Motor panel performing effectively – around a quarter of net premium on renewals flexibility – 5 underwriters currently, intend to add more this year – efficiency increases as more join Motor panel  Solvency II position increased performing as  Home panel approaching full efficiency expected  Other insurance driven by strong performance of PMI and travel insurance Saga plc Interim Results for the 6 months ended 31 July 2016 5

Growing the core businesses Travel: robust trading performance and visibility  Tour operating businesses: <1% of customers – increase in revenue and profit – positive shift in mix to longer-haul, higher value products polled said travel – benefit of differentiated model without need for volume plans impacted commitments – continuing to broaden and target our offering by Brexit  Cruise business: – improvements in yield year on year – performance impacted by Saga Sapphire maintenance No discernible – focused on high levels of customer experience and satisfaction business impact  Current trading: substantial majority of CY sales targets post Brexit already met and ahead of prior year for departures in 2017/2018. Saga plc Interim Results for the 6 months ended 31 July 2016 6

The future Significant work to enhance customer understanding  Segmentation of the customer base: Continued – cohort of high value customers identified – insight allows for evolution of proposition and customer journey segmentation of database  Implementation of new marketing software to personalise communications and focus marketing resources Deeper customer  Deeper understanding will understanding – help reduce wasted marketing spend, improve targeted enables focused acquisition – improve offering for high value customers marketing spend and improved proposition  Compelling future opportunity Saga plc Interim Results for the 6 months ended 31 July 2016 7

Jonathan Hill Chief Financial Officer Saga plc Interim Results for the 6 months ended 31 July 2016 8

Financial Highlights Solid first six months vs. HY 2015 From continuing operations Profit before  Continued strong cash generation led to  £109.9m 8.5 % tax further reduction in debt ratio Profit before  £104.5m 3.9 % tax (excl. derivatives)  Strong Solvency II position 2.2x (0.2)x Debt ratio  Profit performance and deleveraging Proposed support increased dividend 22.7 %  2.7p interim dividend Saga plc Interim Results for the 6 months ended 31 July 2016 9

Group Results HY 2015 HY 2016  Revenue decrease reflects impact of quota £478.3m £437.2m Revenue (8.6)% share arrangement Trading  £117.5m £117.6m 0.1%  Trading Profit reflects Profit impact of Saga Sapphire and Profit £101.3m £109.9m  8.5% investment in emerging before tax businesses Profit £77.9m £87.9m  after tax  Lower finance cost 12.8% supports increased PBT 7.3p 7.9p  Basic EPS* 8.2% Saga plc Interim Results for the 6 months ended 31 July 2016 10 *Continuing operations

Growth in core businesses Increased profit from core businesses Trading Profit Trading Profit growth HY 2015 HY2016 from core business +2.0% Motor £127.5m  £65.6m £72.1m 9.9% Insurance £125.0m Home  £34.4m £30.4m (11.6)% Insurance Other £14.3m £16.0m 11.9%  Insurance Travel £10.7m £9.0m  (15.9)% HY 2015 HY 2016 Saga plc Interim Results for the 6 months ended 31 July 2016 11

Motor Insurance Solid profit growth HY 2015 HY 2016  Trading Profit growth driven by: – positive claims experience Revenue £157.2m £120.4m (23.4)% – introduction of motor panel – impact of Bennetts Trading £65.6m £72.1m 9.9% Profit  Revenue decreased with introduction of quota share Core 1,112k 1,369k 23.1% Policy  Core policy increase due to new business numbers sales and inclusion of Bennetts Motor core policies (000s)  Motor market remains competitive 1,369 1,238 1,153 1,114 1,089 1,061 1,014 1,112 1,077 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Saga plc Interim Results for the 6 months ended 31 July 2016 12

Motor Underwriting Strong underwriting result – Profitability of motor underwriting Comparable Trading Profit and Net Earned Premiums has improved, driven by: HY 2015 HY 2016 HY 2015 HY 2016 – improved risk index for AICL £113.8m policies and an earned to written £105.4m benefit of arrangement fee £57.3m £49.8m – motor panel meaning more higher- premium policies placed with third- NEP Trading Profit party underwriters – reduction in claims costs Comparable Expense, Loss and Combined Operating Ratios* 100.5% 100.3% 93.0% UK Market** 65.5% Saga (HY 2015) 58.6% 41.5% 33.0% Saga (HY 2016) Pure COR Loss Ratio COR Saga plc Interim Results for the 6 months ended 31 July 2016 13 *2016 figures exclude the impact of the new quota share arrangement to ensure a like-for-like comparison **EY Statistics to end of December 2015

Impact of quota share Motor Core 6m to Quota 6m to Growth Underlying Underwriting P&L Jul 2015 Share Jul 2016 Revenue £118.3m 0.3% £118.7m (£48.0m) £70.7m Gross profit £60.8m 16.1% £70.6m £1.9m £72.5m Trading Profit £49.8m 15.1% £57.3m (£0.9m) £56.4m Reported COR 65.5% (6.9%) 58.6% 25.3% Pure COR 100.3% (7.3%) 93.0% 83.8%  Quota share is on a funds withheld basis  Arrangement resulted in reduction in revenue and some cost lines, with a limited impact on Trading Profit Saga plc Interim Results for the 6 months ended 31 July 2016 14

Reserve releases Consistent year on year HY 2016 Total Group Reserve  Consistent level of reserve Releases by Accident Year (£m)* releases with no deterioration in reserve margin 12.0  Releases in H2 expected to be lower YoY 8.0 8.0  2015/16 releases originate from Other Insurance 5.0 4.0  Releases are expected to reduce over time 2.0 – impact of motor panel 1.0 1.2 – more efficient pricing in AICL 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 *Origin of releases: £40m from Motor Insurance, £1.2m from Other Insurance Saga plc Interim Results for the 6 months ended 31 July 2016 15

Solvency II Robust position Solvency II coverage 196% 196% £104.9m 170% £214.6m £109.7m SCR Solvency coverage Solvency II capital FY 15/16 HY 16 SCR Surplus Solvency II capital  Group’s Solvency II position improved as quota share arrangement taken into account  Coverage ratio of 196% supports further deleveraging in H2 Saga plc Interim Results for the 6 months ended 31 July 2016 16

Home Insurance Continued competitive environment HY 2015 HY 2016  Continued competitive environment, no premium Revenue £50.6m £47.5m (6.1)% inflation  Revenue decreased due to a Trading £34.4m £30.4m (11.6)% reduction in profit share and a Profit limited fall in average premiums Core  Panel close to full efficiency,  2.0% 1,258k 1,283k policy future margin improvements numbers expected to be more in line with wider market rate rises Saga plc Interim Results for the 6 months ended 31 July 2016 17

Other Insurance Strong profit growth Trading Profit and Revenue (£m) Core policy numbers (000s) 10.5% 47.0 46.5 Revenue Trading Profit 399k 16.0 361k 14.3 HY 15 HY 16 HY 2015 HY 2016  Revenue growth driven by: – increase in travel insurance volumes – lower net rates on private medical insurance due to supply chain improvements and strong retention  Trading Profit growth driven by: – increase in profit on private medical insurance – marketing spend on Saga Legal Services in prior year Saga plc Interim Results for the 6 months ended 31 July 2016 18