Will Saga be hit by the Ogden rate?

Wednesday, 29th March 2017 15:23 - by Rajan Dhall

The over 50's insurer gets it results tomorrow (29th Mar) and motor insurance premiums make up GBP 72mln of the GBP 117.6mln in revenue they posted in the first half of last year. At the end of February this year the Lord Chancellor announced that the Ogden rate would fall dramatically, leaving insurers having to make much larger payouts when clients claim.

 Interestingly enough, due to the older client base of the Co. they stated that the change in the rate will have less of an impact of them compared to their competitors. Another string to the Co.'s bow is the move into cruises which has been proving fruitful, I believe this provides some much needed diversification and could well be an asset in the future. However to get things off the ground, the initial stages can be expensive and tomorrows report could provide us with clues to how costly this venture could be. Lastly Saga is looking at ways it can utilise its database so maybe we could see the beginnings of some revenue from advertising and referrals.

In terms of broker recommendations, one out of the four analysts surveyed is in the strong buy category, one recommends a buy and two remain neutral. With an average price target of GBP 215 (currently 209) and this level matches up the the previous wave high in the chart. Since the end of Feb the share price has picked up some momentum and pushed to hold firmly above the 200 handle. I believe this is where we could look to for support if the results are negative. If we are to see a bullish report we could look to break the 215 wave high and retest the highs of 225 seen last Sept but keep an eye on all of the key support and resistance levels in the chart.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.