LONDON (Reuters) – Shares in Saga, the British travel and insurance group catering to the over-50s, jumped by 11% on Friday following news that the company has entered exclusive discussions with Belgian insurer Ageas to form a 20-year motor and home insurance broking partnership. This development came after Saga reported a significant rise in underlying profits, which more than tripled compared to the same period last year.
As part of the proposed deal, Ageas is set to acquire Saga’s insurance underwriting business for £67.5 million ($88.1 million).
Ageas, which earlier this year abandoned plans to acquire British insurer Direct Line, aims to strengthen its non-life insurance presence in Europe and focus on providing products for the ageing population. “This transaction allows us to grow in a market where we already have real strength and expertise,” Ageas CEO Hans Cuyper said in a statement.
Saga also announced that its underlying pre-tax interim profit had surged to £27.2 million, a substantial increase from £8 million the previous year, driven by strong performances in its cruise and travel divisions. Earlier in the year, Saga acknowledged that its insurance business had been weighing on its overall financial results.
In a separate statement, Saga Chief Executive Mike Hazell expressed optimism about the deal, stating that the partnership with Ageas would “create a winning combination.”
Under the proposed agreement, Ageas UK would manage Saga’s motor and home insurance broking operations, which generated gross written premiums of over £479 million in the year to July 31, 2024. In return, Ageas UK would make an upfront payment of £80 million to Saga, with additional payments of up to £30 million in 2026 and another potential £30 million in 2032, contingent upon meeting volume and profitability targets.
Ageas noted that the deal would negatively affect its solvency position by 5%.
Saga’s shares hit their highest level since January following the announcement. The company had already seen a boost last week after confirming a Sky News report about its partnership discussions with Ageas, though no details were disclosed at the time.
Analysts from KBC noted that Ageas is likely to pursue further insurance acquisitions in the UK, in addition to the Saga deal. They added that Ageas’ current UK operations are “too small to operate at an acceptable efficiency level.”
Meanwhile, Ageas shares remained relatively unchanged.
($1 = £0.7666)
(Reporting by Shanima A in Bengaluru and Carolyn Cohn in London; Editing by Sonia Cheema, Emelia Sithole-Matarise, and Sharon Singleton)
