Member Info for Banburyboy

Sorry never leaving what i know about crypto currency you could write on the head of a pin with a mars bar !!! Have you got the right board Saga. We operate in stones / miles / yards and guineas have just got the hang of decimalisation !!
RH Dogs barking ! If value doesnt sue i might !. I see value and i as the boards stags. You as a cat very needfull of nine lives !

Just to add
Imagine how funny it would be if after giving everyone the wisdom of my accounting advice we had a further write down of goodwill on Tuesday. Rogue would be chocking on his Sherry and I would need to slip away quietly as a poster :)

Thanks Value

Goodwill in accounts is covered by financial reporting standard (FRS102). The standard is all about ensuring that goodwill as stated in the accounts is at fair value.
Fair value is defined in the standard as "the amount at which an asset / liability or equity instrument could be exchanged or settled between knowledgeable and willing parties in an arms length transaction"
Our auditors who I trained with are KPMG and trust me they wont be overestimating goodwill.
The auditors will agree the insurance business is worth a minimum of £900m in an arms length transaction that's fair value . The broker Peel values underwriting (which uses all that capital) at £400m
The Bennetts sale was £26m (Fair value) and goodwill using the same metric as Saga was £13.6m. Auditors cautious and demonstrates my point. This will be on the audit file for this year as evidence.
The argument you are suggesting is that Saga insurance could not possibly fetch £900m as the market only values the company at £350m. Trust me since Carilion auditors have been all over goodwill and insurance is worth £900m.
Why then are we valued in the market at £350m ?
In my opinion because of uncertainty the market is valuing cruise / tour as nil (backed up by goodwill being written down to nil). Term debt due 2024 at £250m and long term liabilities on cruise ships as £300m. So insurance £900m the rest a liability of £550m
The valuation is incredibly depressed and still almost at liquidation values despite the recent rise.
With a fair wind the company should make £200m profit before tax when covid is in the rear mirror which in my opinion supports a market value of £1.1bn (three fold increase).
I don't get why you have such a downer on insurance, ive explained how the three year fixes are genius. Profit on insurance for the six months to July 19 was £70.6m and for the six months to July 20 was £70m. Up there with Hastings remember how much that sold for !! Same multiple from current goodwill as Bennetts. In terms of the 2020 interims
- Profit maintained despite big fall £4m in travel
- No recognition or windfall from lower claims in these figures
- Partial deferral of some income from three year deals in accordance with accounting matching principle
- huge reductions in premises as they work from home
Insurance is doing well and worth £900m +
I know some on here see through Saga sharp practices and move as they are charged through the teeth (I moved from them to). People on here are not typical of Saga customers financial awareness is not great in the UK and three years paying the same even if its expensive is seen by many as a good thing and brings piece of mind.
Sorry but I think you are far to gloomy on insurance.
Gooner great posts on vaccinations and far more intresting than boring goodwill. Welcome you view and Dofus as ex employees of Saga on my resume of the customer base.
Banbury

Value wise
I think my first paragrapgh was a little unkind so please accept my apology.
I meant to review your posts before sending and tone it down.
It's early and I forgot.
Your comments are detailed and well thought through and you are very complementary to posters on here. So sorry

Value - wise
You have a knowledge of insurance but (sorry) don't seem to back it up with detailed research and commentary.

You questioned my minimum basis of the business valuation £900m the goodwill. I provided some detailed point in support of it and noted Bennettts (our motor cycle insurer for newbies) sold at twice its goodwill valuation.
I think margins will stabilize because of the three year fixes - 60% take up for Saga branded. Your view is the fix is a pitfall !
1. fixing a premium at say £400 for three years in NOMINAL terms is excellent particularly in a world of low inflation low interest rates and as you are so keen to point out ultra competitive markets. We've locked the customers in at a good price in a falling market. Whats not to like !!
2. Why in the post (might be others not you) do we think the customers are smart enough to realise this and move on. They have done this consiously and because they want to. That's the whole point !
3 We also actually lock them into the much more profitable add ons e.g legal costs / recovery on the same three year basis and presumably pocket three lots of commission from the service provider !
4. The terms and conditions are below - but none of the risk is with Saga. Have an accident / get a conviction etc and the fix lapses.
5. The notes to the accounts indicate they are deferring recognising income up front on some aspects of the three year deal. This is a seriously good thing and means cash up front / no risk . It indicates benefit received on day one of a policy should be for accounting purposes be spread over the life of the fix.
Just like the first mover advantages on mandating vaccinations the three year insurance fix is appropriate to our client base and clever in terms of stabilising insurance margins . I would actually go as far as to say its genius and the best (maybe only !)legacy that Batcheler left us.
Insurance margins show signs of stabilising at the interims and that will continue in the TU as the greater proportion of three year fixes provides a floor (think of it like a hedge in a world of falling oil prices )

Here are the terms from the website
Why might your price change?
• You make a claim
• You get a driving conviction
• Insurance Premium Tax increases
• You make any other changes to your insurance, such as changing your car.

Towards the end of your year’s insurance, we’ll send you a renewal invitation with the price for your next year’s policy. If nothing has changed, the price will be the same as last year.
Can I leave during the three years?
Of course! Your price may be fixed for three years, but you’re not tied in. It’s completely up to you if you choose to leave when your insurance runs out at the end of each 12-month term. If you wish to cancel your policy at any other time, you can but there’ll be cancellation fees to pay.

Hi value.
You have more knowledge than me of underwriting and yes concur they will need to set aside capital. I think the broker peel suggested sale represented a safety net on future liquidy and suggested a vslue of £400m.
Agree insuance market is competative but :
1.Nearly 40% of policys are three years providing security of margins in short term.
2. Very loyal customets
3. Traditionally saga cost base has been high. Others have been working from home in call centres for ages. Covid will significantly transform the cost of delivering services.
In iterims margins per policy stabalised at £74 i think that will be maintained or increased in finsls.
We will see Tuesday but i dont think my ptediction of insurance coveting both travel burn and ship tepayment in the second six months will be fat short.

Despite retrace today we are 10% up on close last Friday of £2.70 and 15% on close Thursday 14th Jan of £2.576. Think we would have all taken that.
Next week on the Trading update i'm looking for a steller update on Insurance. An indication of one off from clams reductions, margins stabalising / increasing as lower cost from working at home begin to push through.
An £80m cash positive contribution from insurance covers annual cash burn on travel and £40m will cover ships.
Conformation of a cash contribution of £120m from Insurance should provide a floor on the share price at current levels irrespective of the position on cruise / travel.
An added bonus would be positive forward booking on cruise and in particular ticket sales above the £234 per passanger per day in the business plan.
I had called £3.50 at close Tuesday after the trading update and am sticking with that.
Very interested in insurance and the possibility of that covering travel burn and ship repayments.
The business are incredabily complementary and I think this aspect gets overlooked and Saga is valued more as a travel company than an insurance and the reality is its somewhere in between. Banbury

Buffet the sage of Omaha
RDH the sage of Folkstone

Julian
I think we have all seen it before but a completely different class of posters on here who have been looking at this for months
FJ Gooner - ex employer
Dofus - ex senior manager Beachburn own a travel company
Banbury - chartered accountant - a crap one agreed !!
Millionaire / Value added /Rogue / Pianesta ?RH all considered and measured and very knowledgeable.
Apologies if I have missed anyone
Great Board loads of knowledgable punters and well researched.
Will you get the IPO price No. Will this go to £10. Absolutely yes but Covid is a worry. The businesses are incredibly complementary and Insurance definatly covers the cash burn on travel.
My only plea is don't judge this board until you read the anlayisis of those named on here.
Banbury

FJ
Concur on the blinder. Seems a long way from the days of captain calamity Lance Batchelor and Euan's CV from supedry was not exactly sparkling. Is it all down to the Sage of Folkstone ?
I have been biging up the TU for months now. We have all been bigging up the company. A poster on here did say buy on rumour sell on news !! I do think the TU will need to be extra special to sustain the rise.
Just a tinge of caution.
But long term an excellent proposition.
We fell out of the FTSE 250 in June 19 - I think we will be in again this year

RDH put £100m in the Company in October. He's now £16m up.
His valuation re his initial tranch was 27p old money or £4.05 new money. He got his average down to £2.71 by fully taking up his rights.
The sage of Folkstone looks like he's picked a good one

It closed at 231 on Monday 11th January. Currently 314 to sell so +36% in eight trading days.

1. Insurance profit £130m valuation £900m to £1.66bn. Based on goodwill / Hastings recent sale.
2. Potential one off from lower claims. Limited as we re-insure but £40m possible.
3. Recent capital raise and insurance covering cruise cash burn for as long as needed
4. Insurance Margins are £71 a policy but working from home will be transformational. Huge savings on facilities three buildings (£12m cost) up for sale. Staff in insurance 1,911 FTE’s Jan 19 1,766 FTE’s Jan 20. Watch out for Jan 21 less staff more margin.
5. Interim first half accounts. In insurance segment operating costs £46.5m and Marketing costs £15.5m both to fall in second half and the former permanently
6. 501k of customers locked in on three year deals. Prudent accounting policy deferring income (money in bank). 32.8% of all customers choosing a three year. 60% of branded.

Hi Pianesta
I think I'm firmly with Jo Soap great move by Saga
- 85% of UK population is supportive of vaccinations (I would say 95% in the older age range).
- complementary and supportive of the Lloyds covid shipping accreditation.
First mover advantage on announcing this has got Saga loads of free publicity and others will swiftly follow suit - but who will they remember as the leader !! Who gets to be associated with this and whose brand is associated with it - Saga's ?
I think the customers will almost entirely see this as a good thing and those who perhaps were a little uncertain will not be now and confirm bookings.
Unliklely but I would not be surprised to see in the TU the following line
"Whilst it is too early to assess the overall impact since Saga announced a requirement to mandate vacinations prior to travel on 20th January enquiries have risen by x% and firm bookings by y%"
We all know insurance is in a good space this to me feels pretty transformational on travel. Even better because they moved first. Excellent management by Saga.
Had not picked up this news until this morning but elated with it

volumes 287k in 35 minutes

About to go 299.39 to sell

That would be nice. Volumes seem very high 180k in 25 minutes assuming a 15 min time lag.
Definitely momentum - April sailing of GB would be fab

Hi Value

A good post and well researched.

Whilst I would not argue that Hastings £1.6bn is aspirational I note that in the last full year’s accounts both business made a spookily similar £109m adjusted operating profit from insurance.
£900m is an absolute floor (give away price) on the insurance business value and I would use as evidence:
1. Auditors are really strict now on goodwill and assumptions are really prudent
2. Bennett’s sold for £26m – goodwill was £13.6m (my point 1 above)
3. Management have explicitly stated they have ignored a large reduction in claims in assessing goodwill (my point 1 as above)
4. I disagree 9% is a really high hurdle rate in a context of a low interest rate environment and a 9% return would be an attractive proposition to anyone it was at Hastings !
5. Your point on underwriting is taken but Saga can switch between the two according to risk. You may have noticed in the interims they have underwritten less. They have that option two strings.
6. Margins are £71 a policy but working from home will be transformational. Huge savings on facilities three buildings up for sale. Staff in insurance 1,911 FTE’s Jan 19 1,766 FTE’s Jan 20. Watch out for Jan 21 less staff more margin.
7. Interim first half accounts. In insurance segment operating costs £46.5m and Marketing costs £15.5m both to fall in second half and the former permanently
8. 501k of customers locked in on three year deals. Prudent accounting policy deferring income (money in bank). 32.8% of all customers choosing a three year. 60% of branded. All of these mean risk factor the 9% has come down

The list is endless the only doubt in my mind is the risk premium of decoupling insurance and travel which will be a negative in two areas cross selling and travel insurance as a stand alone product. But presumably any disaggregation would have some sort of gentleman’s agreement as it’s in the interests of both.

Rogue beacon hill. Justin lewis !!! In its final days they introduced a new investor to lull shareholders into a false sense of security. If i recollect someone on the board traked them down to a hairdressing chain in slough !! Mate of the chairman - perils of aim !@

Pint
To be clear I am not recommending going all in on Saga merely responding to a question from a known poster.
Everyone's circumstances are unique - I get 40% tax relief and gamble in a SIPP. I have a good pension that kicks in at 60. I've recklessly lost 70-80k BHR and Hawk mostly to blame If anyone remembers them. And to add insult to injury Hawk still sits worthless in my SIPP just to dig in the knife.
Allways fancied this company and brought in from 80p downwards. Took the plunge when it dropped to £1.30 (new money ) and went all in. Not a conscious decision it just happened. Was down to my last 20k now up to 40k am I happy yes. Would I recommend it no but I really think this one has a fair wind for any newbie.
Many posters on here know me and this is a company I have really researched and theres more to come on the property portfolio !!!!. The bear case is allways a worry so what is that case ?
- RDH takes its private - unlikely but possible but you would think above £6,
- As you say Cruise delays for say another year. The two businesses insurance and cruise are incredibly complementary in a pandemic. Reduced claims add £40m to an insurance business that generates £120m already paying for cruise being idle (£6-8m a month cash burn ) Its like ice creams and umbrella's allways a sale
- Regulation in market for insurance nothing on the horizon
- Funding ship repayment can be deffered and probably qualify for government support if it came to that
- £250m bond refinacing. That's 2024 so some time yet.
I would never recommend all in theres just a story how I got here. Unlike RH I wont trade but i'm pretty happy with where we are.
Banbury