Saga’s (LON:SAGA) focus on car insurance and holidays is working well for the brand, analysts at Hargreaves Lansdown have said. The comments came as the company, which provides cruises-to-insurance for the over-50s, updated investors on its full-year performance yesterday, posting a rise in overall profits and hiking its payout to shareholders.
Saga’s share price lost ground in yesterday’s session, shedding 2.71 percent to close at 204.30p. The shares have gained more than seven percent over the past year.
Citywire quoted Hargreaves Lansdown analyst Nicholas Hyett as commenting yesterday that Saga’s strategy revolved around “using the strength of its holiday brand to sell a variety of more mundane products to its over-50s client base”. The comments came after the midcap lifestyle group unveiled that its profit before tax from continuing operations had climbed 9.7 percent to £193.3 million in the year ended January 31. Saga further proposed a full-year dividend of 8.5p, marking an 18.1-percent rise on the prior-year’s 7.2p.
Hyett pointed out that the strength of the company was partly to do with outsourcing of underwriting.
“Historically Saga underwrote its own insurance contracts, taking advantage of the lower risk profile of more mature customers,” the analyst explained, adding, however, that the company was “increasingly funnelling customers through to a panel of independent underwriters who compete to offer the best price, keeping only the lowest risk customers for itself”.
“It looks like that shift is paying off,” Hyett concluded.
Analysts at Peel Hunt have reiterated their bullish stance on Saga following the results, reaffirming the group as a ‘buy’ yesterday, and valuing the shares at 250p. According to MarketBeat, the midcap lifestyle group currently has a consensus ‘hold’ rating and an average price target of 228.33p.