- Downgrades profit outlook to 20 mln-30 mln pounds
- H1 pretax loss 257.5 mln pounds
- Shares down as much as 25% to record low
Sept 27 (Reuters) - British holidays group Saga Plc (SAGA.L) slashed its annual earnings forecast on Tuesday as its insurance unit grappled with rising claims that pushed it to a half-year loss and sent shares to a record low.
Saga, which sells cruise holidays as well as insurance to over 50-year-olds, said its underwriting business has experienced high levels of claims inflation, currently around 13%, increasing costs and hitting profitability.
"Trading conditions in the UK insurance market continue to be challenging," Chief Executive Euan Sutherland said in a statement.
Shares in the company plunged as much as 25% to a record low of 101.1 pence, before paring losses. By 0854 GMT shares were down 15%.
"Insurance has been the bane of its existence for many years, and big plans to grow the travel arm have been derailed by COVID," AJ Bell analyst Russ Mould wrote in a note.
"Something about its current formula isn't right, although it's fair to say that some events have been out of its control."
Saga said insurance claims inflation has intensified and is expected to persist.
On the brighter side, demand for holidays were still growing, with load factor for its cruises seen at 84% in the second half of this year and almost half full for the whole of next year, Sutherland said.
Underlying pretax profit is expected to be between 20 million pounds and 30 million pounds ($21.6 million-$32.4 million) for the year ending January, down from its earlier forecast of 35 million to 50 million pounds.
Saga posted a first-half pretax loss of 257.5 million pounds, compared to a profit of 0.7 million pounds a year earlier.
($1 = 0.9275 pounds)
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