Member Info for Banburyboy

Olmsey
I think its generally a good update. Insurance looks steady and I think they have been very clear on cashflow.
Dissapointed by the market reaction - I thought it was worth +5% and we got -5%.

I think the mention of negotiating on ships debt repayment for next year has led to the fall and as you say some negative press.
I think the renegotiation of ship repayments at this stage is prudent and precautionary but there is no pressing need and no gun to our head. We would only do it if its on the right terms and benefits the business .
Carnival and Royal Caribbean both benefited from the covid corporate financing facility which is at appealingly low rates we chose not to use it as we got deferals from lenders .
There is no chance of a cash call and there is no distress here the market IMO has read something into this that's not there.
Banbury

Value the table blow is hard to read but ive compared the trading update to the last three accounts. A summary

Positive
Modest policy growth after big fall in year to Jan 20
Direct customers up from 51% in 2019 to 59% now
Customer retention up 5% to 80%
60% of all deals fixed for three years
Negative
Margin decline from £80 per policy in year to Jan 19 to £71 per policy this year.

I am assuming all the positives in time will feed through to a stabalised and improved margin.
They don't read too bad to me in a competitive environment

Saga Trading update Interims 2020 Finals 2020
Motor / Home policy growth +1% prior year +2.5% prior period Motor -4.8%
Home stable
Customer retention 80% (+5%) 80%(+5%) 75% (-2%)
Margins Line with expectations £71 in line wih expectations £7 below prior yr £74.30 (year before £80.30
Three year fix 596,000 501,000 320,000 launched April
Fix as % of total 60%
Direct customers 59% 57% (51% 2019)

Hi Mick have you pasted the article ? Cant get into the link.

Thanks Value - good points on margins and interested in what you find. Particularly on the 5 basis points.
Good point on the mixing of periods to .
Should get the finals in April and an update on the ship deferral. I'm assuming its precautionary rather than out of nessessity because of a fairly clear update on cash position.

Thompson
So it clear to you a further fund raising is required and at the same time you think the trading update is as clear as mud. Very paradoxical don't give up the day job.
There is no chance of a fund raise in the next 18 month based on fairly succinct information in the update on cash on hand, available facilities and a pretty clear reconciliation of cash outflows.
I am nervous about some aspects of the company but through research so as value says the FCA review, worried that claims windfall is negligible, worried about corporate bond in 2024, but base these observations on research and evidence.
Sorry but stating a TU is as clear as mud and then saying it is clear to you they will need a fund raise doesnt ring true to me

Thanks Value - any rough idea what 5 basis points might mean to the bottom line as it seems to stump most people ?
On your point on competitive markets - margins in line with expectations £71 a policy and total sales up by 1%. Sounds quite steller to me.
Albeit no information that cost reductions in interims were maintained .
On the re-financing ships see posts from Millionaire - don't really see that as a problem .

I'm a Saga fan but can be objective to the risks and my only negative on the TU is the insurance windfall it s complicated but I think it could be negligible.

Thompson
Not oftern I get hacked off by a poster.
Three months ago you posted another Oh dear thread citing agents were raking in 30% of our ticket price in commission. Beach and others with industry knowledge pulled you up on that . We now have your sequel its clear to me ….

Can you put some more diligence into your postings

Thompson - not sure I agree we will need more cash neither borrowing or a rights issue :

- overall cash burn in five months to 31st December £9m. This takes out proceeds from sale of Bennetts and fund raise
- available cash £51m on hand plus £100m on rolling scheme
- £9m on annual basis £20m pa so that keeps us going for just shy of eight years.

The issue as they highlight is
"As part of a package of measures available for the Cruise industry, separate discussions are underway in relation to a further debt deferral and covenant waiver for the two ship facilities. This could allow for deferral of up to £45m of principal payments due to be made from 1 April 2021 to 31 March 2022 and would be in addition to £32m already deferred, due in the period from 1 April 2020 to 31 March 2021. These are early stage discussions and we will provide an update with our full year results."

No reason to expect a deferral wont be forthcoming and even if it was not the end of the world based on the cash position I have outlined . Eight years becomes six.
I get the market has not reacted well but the maths does not support your proposition that its clear to you more funding is required ? How and what's your research / evidential base ?
Banbury

Rupans too complicated for me but :
- AICL is quite small compared to other insurers
- I had assumed maybe wrongly re-insurance related to anything not AICL.
- based on the interims we were underwriting a lot less through AICL compared to the prior six months
- don't understand the interface between reserve releases from AICL and the impact of the loss ratio. Is it double bubble or are they two sides of the same coin you cant get it twice.
On a more strategic point we had the debate on Industry gains of £4bn from reduced claims. Saga is 3% of the market so we started with our share being £120 (3%) .
I will profess to being out of my depth here but if we get more than £10m for our 5 basis points I will be really surprised

I'm a little disappointed by the market reaction here as I think the statement was solid.
Not sure if trying to defer the £45m on ship repayments next year has spooked the market ? It seems a pretty sensible thing to do if you ask me especially as part of an industry scheme.
Rupans I am not getting a warm feeling on the 5 basis points on the loss ratio. looking at Hastings who had a similer 5% reduction the vast majority of reduced claims is attributable to reinsures based on June 20 (claims reduction in six months 142m - attributable to reinsurers £133m and Hastings £9m)
Saga has even more re-insured !! Not sure who the re-insurers are ? My suspicion is Lloyds syndicates ? But unless there is some sort of dividend / profit share arrangement I am not sure there is any benefit to Saga.
I'm at the very limits of my knowledge and some of this might be joining the dots but welcome views

Olmsey - cruise has allways been ring fenced but Tour was not until July 20. That caused horrific cash outflow in the period to July 20 as Saga had spent the cash. The policy was changed and tour are now ring fenced (see interims). My worry was some of this would overhang into the second half it has not and cash flow not impacted by customer deposits etc which are entirely separate.
Homer1234 I and others have lived and breathed this company for too long. might be an issue for other companies but not this one post July
Banbury

Yes but then the say in the RNS reserve releases from underwriting wont be as high as prior six months to July 20.
The interface between retail / underwriting / re-insurance and the various measures of loss ratio is really hard.
My start point was to look at other insurers who give an absolute £ figure as well as a ratio to see if I can establish a read across !

Rupans that's what I,ve been looking at but its conjecture. Value is good on the industry and has some contacts.

Lots to digest but does look solid.
Key statement to me is on cash
"Available cash balances have increased by £22m since 31 July 2020 due to the capital raise (£139m) and disposal proceeds (£12m), partially offset by repayment of the drawn portion of the RCF and half of the term loan (£120m in aggregate), and a net £9m of other trading items."
I had to read this a few times but overall group cash burn in the second six months is £9m . I suspect a little bit of tour one off (my many previous posts).
Even if covid goes on for the whole of the year this company is safe.

Good call bulls- up it seems to be at 282 to sell now so 17p up on the intra day low.

Pianesta that would put the cat amogst the pigeons.
Company no debt two cruise ships making £40m each and £70m retail insurance business with no capital tied up.
Not saying never but really hard to supress that news and tie it in with a date annouced seven weeks ago for a TU.

TU's are normally pretty thin on detail
Last years was - profit in line with guidance some update on three year insurance fixes and direct business mix and confirmation of margins at £71- £74 a policy.
This year with no guidance I am hoping for slightly more but I suspect it could be a bit dull:
We should get
- some metric on future cruise booking which we all agree will be good.
- normal stuff on three year fixes / margins and direct sales all of which will hopefully be fine.
We might get
- some FY profit guidance albeit in a range with the first half £15.9m being the start point
- some estimate on the potential windfall from reduced claims I shall go for £20m
- I think the profit range will be £40 - £50m.
I would like to see
- some statement on how we are getting on with the £20m run rate savings. I think £15m were delivered at the interims. This is my wild card and I think they will say its actually more as we adapt to perminantly working at home.
- notification that in the second half cash burn on travel was slightly lower than the £6-8mper month estimate as we began to move into mothball steady state.
- I would love to see net debt (but don't think we will get it) As in previous post anything below £254.7m (excluding ships) means cash in exceeds cash out.
IMO it is thislast piece of data that confirms what we all think insurance more than covers Travel and cruise being mothballed. If that's provided I think this will fly. But not that hopefull it will be so forthcoming at the TU - that's not to say its not the case .
Not long now
Banbury

Olmsey concur. Im hoping they repaid all of tour before the interims in July. If they did we should be caah flow positive. If they did not then might be more pain.
The tour cash issue is a real scandel and i was really hacked off as there was no warning in the accounts that cash was gross of tour receipts that we had not paid the supplies for or could be repatrited. They quickly changed the policy in the interims to ring fencing. But it was this that led to the companies perolous position as much ad the pandemic !!

Pianesta be pleased with £50m PBT but think that is very top end.
Remember the £15m profit in half one had two months of cruising in the second had none.
If we can turn £50m it would be a strong indication to me insurance could support cruise in perpetuity.
Pbt and cashflow are different but also "stand " some degree of repayments on ships without running down cash
I spent a long time talking to my self about how the group had used tour booking advances to fund ordinary business and were caught cold and red handed and have now changed the policy and ring fence them. IMO had they not done that we would not need RDH. I was livid and water under the bridge.
Key metric to look out for is net debt excluding shio. It was £361.7m in jan 20 and rose £49m to £410.7m in july 20 all increase support to tour !@
Bennets brought in £16.4m in august and the rights £140m in september meaning the baseline is £254.7m. Anything above this we have burned cash in half two anything below we have accumulated. Anything below £240m would be excellent meaning we are repaying debt even with cruise fully laid up.
The market i think has missed on its radar the very real and valuable safty net of insurance.

Think trading update will be good but i think part of the rise is anticipation so sticking with 350 close.
Next leg up will be uk government sanctioing cruises which i think will sdd a further £1.
Someone said we might flog the underwriters thats a wild card and no real prediction on that