Shares in Saga (LON:SAGA) have jumped in London in today’s session as the cruises-to-insurance company for the over-50s announced that it had inked a new quota share agreement with NewRe and Hannover Re. The new deal marks a boost for the lifestyle group, whose shares plunged in December after the company cautioned on profits, disclosing that it had seen more challenging trading environment, and was impacted by the collapse of Monarch Airlines.
As of 13:07 GMT, Saga’s share price had added 2.77 percent to 114.90p, outperforming the FTSE 250 index which currently stands 0.83 percent higher at 19,376.49 points. The lifestyle group’s shares have lost nearly 38 percent of their value over the past year, as compared with about a 3.5-percent rise in the mid-cap index.
Share quota deal
Saga announced in a statement today that it had entered into a new quota share arrangement with NewRe and Hannover Re to cover 80 percent of the underwriting risk of motor policies of AICL, its in-house underwriter. The new deal is set to take effect from February 1, 2019.
“The new quota share arrangement and the addition of Hannover Re as a partner provides further evidence of the stability and high quality of our underwriting business,” Saga’s chief executive Lance Batchelor commented in the statement. The company further noted that the increase of its quota arrangement from 75 percent to 80 percent was in line with its overall strategy, and reduced its exposure to underwriting risk.
Analysts weigh in
Reuters quoted Peel Hunt as noting that the agreement provided AICL with further capital relief and downside protection.
“This new program is a positive and shows that the underwriting quality within the insurance business remains high, albeit moving to 80 percent risk transfer gives the reinsurance panel more say in the underwriting strategy,” the analysts pointed out.