Ageas to buy Saga's underwriting business as part of 20-year partnership

Saga said on Monday that it has entered into an agreement with Ageas to establish a 20-year partnership for motor and home insurance which includes the acquisition of its underwriting business.

As part of the Affinity Partnership, Ageas will take on price-comparison website distribution, pricing and underwriting, claims and customer servicing activities, with Saga retaining responsibility for brand and direct marketing.

Saga will receive an upfront payment of £80m and contingent considerations of up to £30m in 2026, and the same again in 2032, subject to certain policy volume and profitability targets being met and the satisfaction of certain conditions.

Ageas will pay £67.5m for Saga’s underwriting business, Acromas Insurance Company Limited (AICL).

Saga chief executive Mike Hazell said: "Today's announcement represents an exciting next step for Saga Insurance. This is a complementary partnership which leverages the strength of the Saga brand and customer base, along with Ageas's extensive and growing UK insurance expertise.

"Together, we represent a winning combination. Our joint scale and unrivalled knowledge of the over 50s insurance market represents a strong platform from which we can serve even more customers with relevant, innovative and intuitive products.

"For Saga more broadly, this agreement is in-line with our stated partnership strategy. It demonstrates clear progress as we move to pay down debt and target long-term sustainable growth - for the benefit of all our stakeholders."

Saga and Ageas announced in October that they were in exclusive talks about setting up a 20-year motor and home insurance broking partnership.

At 1100 GMT, the shares were up 9% at 134.78p.

Russ Mould, investment director at AJ Bell, said: "Shareholders will hope Saga’s insurance partnership with Belgian institution Ageas will remove an anchor on its share price and free it up to take sail as a successful travel and finance brand.

"Saga’s business model involves selling tailored services to a growing over-50s demographic. However, it has endured a litany of issues since its IPO more than a decade ago.

"While its travel and cruises divisions were the problem during the pandemic, more recently it is the insurance business which has struggled. In that context, putting it in the hands of an experienced operator, as well as receiving a useful injection of cash, has been well-received by the market.

"Saga wants to use partnerships to exploit the value of its brand but without having to employ so much capital. In theory, this could increase the scope for growth and should also help trim a hefty debt pile.

"This seems a sensible approach and the Ageas deal is an important step forward. However, the business has a long way to go to fix its balance sheet and repair its credibility with the market, with the post-IPO highs for the share price a distant fleck on the horizon."