(Alliance News) - Over-50s travel operator Saga PLC is seeking buyers for its in-house insurance underwriting business, the company said early Monday, confirming a report by the Sunday Times.
Saga said it is in discussions for a possible disposal of Acromas Insurance Co Ltd, the underwriter within its larger home and motor insurance business. However, Saga said it remains committed to providing insurance to its customers.
Saga noted that Acromas underwrites 25% to 30% of its overall insurance business. Selling it would move the risk associated with those policies elsewhere.
"The board has looked at the opportunities to optimise Saga's operational and strategic position in the insurance market, in line with the evolution to a capital-light business model and the stated objective to reduce debt," Saga said.
"It has concluded that a potential disposal of its Underwriting business is consistent with group strategy and would crystallise value and enhance long-term returns for shareholders."
The underwriting business made underlying pretax profit of GBP16.4 million in the six months that ended July 31 last year, halved from GBP31.1 million a year before, hurt by inflation in motor damage claims. The combined operating ratio of the business was 110%, with a reading above 100% indicating a loss on underwriting.
The Sunday Times reported that Saga hoped to raise GBP90 million from the disposal to pay down debt and is being advised by City broker and investment bank Numis Corp PLC. However, Saga didn't confirm these details on Monday.
Saga reported net debt of GBP721.3 million as of July 31, which is more than triple the company's current stock market value of GBP216.1 million. The stock was up 3.0% at 155.00 pence early Monday in London.
"Discussions are ongoing and there can be no certainty that any transaction will occur," Saga said.
By Tom Waite, Alliance News editor
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Saga (SAGA)