Results Presentation Preliminary Results for the year ended 31 - PowerPoint PPT Presentation

Results Presentation Preliminary Results for the year ended 31 January 2017

Lance Batchelor Chief Executive Officer Saga plc Preliminary Results for the year ended 31 January 2017 1

Today’s Agenda Overview Lance Batchelor CEO Financials Jonathan Hill CFO Capital markets presentation: Lance Batchelor Evolution of the model to drive growth CEO Project Connect Matt Atkinson Chief Marketing Officer Insurance Broking Roger Ramsden CEO, Insurance Broking Tour Operations Jeannette Linfoot MD, Tour Operating Division Cruise Robin Shaw CEO, Cruise Summary Lance Batchelor CEO Q&A Saga plc Preliminary Results for the year ended 31 January 2017 2

Saga investment case – key takeaways 1. Differentiated model 2. Consistent earnings growth 3. Enhanced confidence in future delivery 3 Saga plc Preliminary Results for the year ended 31 January 2017

How we’re different – our model 1.Focus on growing demographic 2.Strong customer relationships and loyalty 3.Multiple businesses with differentiated products Saga plc Preliminary Results for the year ended 31 January 2017 4

Consistent delivery of profit growth and deleveraging 3.1x 2.6x 2.4x 2.3x 2.2x 1.9x PBT* £193.3m Net £184.8m debt to £176.2m EBITDA £176.2m £172.1m £163.8m *Reported PBT from continuing operations on a last 12 months basis, excluding IPO expenses in FY15 IPO Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Profit up and debt down since IPO Saga plc Preliminary Results for the year ended 31 January 2017 5

Clear strategy 1. Become increasingly customer centric 2. Grow earnings from core insurance and travel businesses 3. Maintain our efficient operating model 4. Invest for future growth = Confidence in consistent financial performance and progressive dividends Saga plc Preliminary Results for the year ended 31 January 2017 6

Evolution of our model Driven by project connect Retain and deepen our customer relationships  Increased persistency  Better cross-sell  Rewarding retention Improve new customer targeting  More efficient acquisition spend Generate increased profits at lower risk, with less capital  Higher quality of earnings Saga plc Preliminary Results for the year ended 31 January 2017 7

Consistent group results vs. FY 2016  Retail insurance  Retail insurance broking +9% broking PBT   Travel PBT +10% Travel =  Underlying PBT (1) +5.6% Underwriting Reserve  Debt ratio 1.9x releases Finance  FY dividend 8.5p +18% costs  Profits (1) Profit before tax excluding derivatives and Odgen Impact Saga plc Preliminary Results for the year ended 31 January 2017 8

Motor insurance Growing profits from broking, de-risking underwriting  58% PBT growth in motor broking – increased marketing and operational efficiencies Strong broking – panel benefit performance – pricing optimisation – Full year of Bennetts  Underwriting revenue decreased as expected – external underwriters taking higher risk, higher premium policies, as expected Significant  Strong underwriting profit and cash delivery capital release – continued competitive advantage of AICL in lower risk drivers from underwriter – solid in year profit performance – historic reserves reducing – quota share – less capital and less risk – solvency II – robust SCR Saga plc Preliminary Results for the year ended 31 January 2017 9

Home broking and other broking Home broking Home broking  Continued competitive environment in home insurance model continues – Limited premium inflation – Panel flexibility enabled stable policy volumes with limited profit to provide reduction flexibility Other broking  Travel insurance – Differentiated product has remained popular despite industry Other insurance wide reduction in H2 travel demand and currency impacts on performing risk pricing robustly  PMI – Enhanced proposition has led to robust performance Saga plc Preliminary Results for the year ended 31 January 2017 10

Robust travel performance  On track to beat ambitious growth targets  Strong growth in tour operating profitability with improved mix and business efficiencies  Solid year in cruise as expected with planned maintenance Travel Trading Profit and EBITDA Travel EBITDA Travel Trading Profit £33.4m £30.3m £26.0m £19.7m* £17.8m £17.2m £13.6m £4.8m* FY14 FY15 FY16 FY17 *FY14 figures have been adjusted to exclude the effect of the Saga Ruby that was retired in that year and reduced the Cruising fleet from 3 to 2 vessels Saga plc Preliminary Results for the year ended 31 January 2017 11

Launch of Spirit of Discovery Saga plc Preliminary Results for the year ended 31 January 2017 12

Emerging businesses Saga is learning its way into three new categories, all of which have the capacity to contribute materially for us in the future: Saga Money  Based on our customer insight we have expanded our product offering during year and will continue to explore new product offerings. Healthcare  The private pay trial in Hertfordshire continues to delight our customers.  We will be cautiously exploring expanding the business in the future. Retirement Villages  We have successfully worked with Wadswick Green and are now considering expanding deeper into the category. Saga plc Preliminary Results for the year ended 31 January 2017 13

The future – investments to support profit growth 1.Cruise ship 2.Modernised insurance platform 3.New claims platform 4.Customer insight tools Saga plc Preliminary Results for the year ended 31 January 2017 14

Jonathan Hill Chief Financial Officer Saga plc Preliminary Results for the year ended 31 January 2017 15

Another consistent year of profit growth From continuing operations vs. FY 2016  Strong PBT growth despite Ogden Profit before  £193.3m 9.7 % tax impact Profit before  Continued high cash generation  £187.4m 5.6 % tax (excl. enabled further deleveraging. Now derivatives within medium-term target range and Ogden) 1.9x (0.4)x Debt ratio  Net debt of £464.8m (FY2016: £547.7m) Proposed  8.5p 18 % full year  Increased dividend underlines dividend confidence in future performance Saga plc Preliminary Results for the year ended 31 January 2017 16

Strong group results  Strong customer spend increase reflecting FY 2016 FY 2017 attractive propositions Customer  £1,128.5m £1,182.2m 4.7% spend (1)  Revenue decrease reflects impact of quota £963.2m £871.3m Revenue (9.5)% share Profit  Lower finance costs £176.2m £193.3m  9.7% before tax from reduced average debt Profit £141.2m £157.3m  after tax 11.4%  PY includes £6.9m loss on discontinued 13.3p 14.1p  Basic EPS (2) operations 6.0% (1) Customer spend represents the total amount that customers spent on products provided by the Saga group of companies, including gross written premiums, ancillary income and Insurance Premium Tax for all of the core policies and add-ons sold in the period (2) From continuing operations Saga plc Preliminary Results for the year ended 31 January 2017 17

Increased profit from retail insurance and travel businesses Profit before tax FY 2016 FY 2017 PBT growth from retail broking Motor £28.6m £45.2m +9.1% 58.0% broking £138.0m Home £63.4m £61.2m (3.5)% broking £126.5m Other broking £34.5m £31.6m (8.4)% Underwriting £84.1m £77.1m (8.3)% Travel £13.5m £14.9m 10.4% FY 2016 FY 2017 Saga plc Preliminary Results for the year ended 31 January 2017 18

Insurance – Focus on broking Other insurance Total retail FY2017 Motor broking Home broking broking broking Revenue £127.5m £89.8m £80.4m £297.7m PBT £45.2m £61.2m £31.6m £138.0m Profit per core policy £33.1 £48.8 £82.9 £46.0 Core policies 1,366k 1,254k 381k 3,001k FY2016 Revenue £89.5m £90.0m £82.4m £261.9m PBT £28.6m £63.4m £34.5m £126.5m Profit per core policy £23.1 £49.3 £90.1 £43.5 Core policies 1,238k 1,287k 383k 2,908k  Enhanced disclosure facilitates identification of broked earnings  Allows improved assessment of higher quality earnings stream Saga plc Preliminary Results for the year ended 31 January 2017 19

Strong in-house motor underwriting performance – Revenue decreased 10% due Reducing revenue and lower reserve releases to 3 rd party underwriters on FY 2016 FY 2017 FY 2016 FY 2017 motor panel £248.2m £223.5m £84.1m – Resulted in lower claims costs £77.1m – Favourable small and large PI NEP Profit before tax claims enabled reserve releases of £63.0m pre-Ogden (FY 2016: £68.0m) Comparable Expense and Combined Operating Ratios* 100.5% 99.6% 99.4% UK Market** 72.0% 71.4% Saga (FY 2016) Saga (FY 2017) Pure COR COR *2017 figures exclude the impact of the new quota share arrangement and Ogden impact to ensure a like-for-like comparison **EY statistics to end of December 2015 Saga plc Preliminary Results for the year ended 31 January 2017 20

Quota share – reduces risk and volatility 12m to Quota Share 12m to Underwriting P&L Growth Underlying Jan 2016 + Ogden Jan 2017 Revenue £248.2m (10.0%) £223.5m (£111.2m) £112.3m Profit before tax £84.1m (8.3%) £77.1m (£4.0m) £73.1m Reported COR 72.0% (0.6%) 71.4% Pure COR 99.4% 0.2% 99.6%  Net cost of £1.6m for quota share Saga plc Preliminary Results for the year ended 31 January 2017 21