Saga joins Hastings in revealing claims inflation challenge

Saga today revealed overall claims inflation is running at around 7%, as costs in third-party damage and theft continue to rise.

This was higher than its overall long-term expectation of 5% claims inflation, Saga said today in a trading update. 

Last week Hastings share price plummeted as it revealed a cocktail of factors in rising claims inflation would hit profits.

Saga’s current year margins will remain solid - home and motor margins are expected at the higher end of the £71 to £74 range - but future year margins could erode if the trend continues.

Home and motor policies will be 3% lower as pricing remains disciplined amid tough market conditions. 

Despite the challenging trading conditions, Saga highlighted reserves tracking in line with expectations and favourable development on large bodily injury.

It’s strategy to eschew price comparison sites and steer business direct was working, with around 57% of new business coming direct comapred to 50% a year ago.

The share price was up 7% this morning as investors reacted well to the indication of higher broker margins.

Stockbroker Numis upgraded profit forecast for the year from £101m to £108m, describing it as a ‘solid trading update’. 

Chief executive Euan Sutherland said: ”Although Saga continues to face challenging markets in insurance and travel, we have a clear focus on improving performance and cost efficiencies within the Group, while strengthening our financial position and reducing debt.”