The over-50s are getting more adventurous. Saga, which sells insurance and holidays to the retired and soon-to-be-retired, said on Wednesday that its customers were increasingly shunning short-haul destinations in favour of trips to India, Africa and Australasia.
“People are looking forward to travelling to new and exciting places as they approach retirement,” said chief executive Lance Batchelor, adding that the move was a good one for Saga. “It is a higher-margin category for us.”
He added that customers were also changing their preferences when they did travel closer to home, with cruises to the eastern Mediterranean becoming less popular because of political problems in the area. Instead, he said, people prefer cruises to the western Mediterranean.
His comments came as Saga reported a rise in first-half results. The company raised its dividend by almost a quarter as it said it was making good progress towards cutting its debt.
Saga’s first-half profits rose 9 per cent to £110m, while earnings per share were up by a similar proportion to 7.9p. According to Citi analysts, that was 8 per cent ahead of consensus expectations. The dividend rose 23 per cent to 2.7p per share.
Mr Batchelor described it as a “robust financial performance”.
Shares in Saga were up 0.5 per cent on Wednesday morning.
Home [insurance] has been an extremely tough business over the past couple of years
– Jonathan Hill, chief financial officer
Profits in the core car insurance business — responsible for more than half of the group’s earnings — rose by a tenth. Saga has been changing its business model in car insurance, increasingly passing the risk on to a panel of other insurers rather than keeping it on its own balance sheet.
Jonathan Hill, chief financial officer, said: “Anything we underwrite today, we pass on the downside risk, so we’ve derisked significantly.”
The home insurance business had a more difficult first half, with profits down 12 per cent to £30m. “Home has been an extremely tough business over the past couple of years. Premiums have flattened out but there is claims inflation so there is a squeeze on margins,” said Mr Hill.
Despite customers’ growing preference for lucrative long-haul destinations, profits in the travel business also fell, by 16 per cent to £9m. The company blamed spending on the Saga Sapphire, a cruise ship, for the drop.