Saga plc (SAGA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Saga plc investor presentation for the interim results for the 6 months ended 31st of July 2021. And we do apologize for the slight delay in starting this morning. [Operator Instructions] I'd also like to remind you this presentation is being recorded. We'd now like to submit the following poll. I'd now like to hand over to Euan Sutherland, CEO of Saga plc. Good morning.

Thank you, and good morning, everybody. Thank you for joining the call. We're very pleased to be presenting to you this morning and also very keen to give access to both James and I regularly to as many investors as possible. So I'm very happy to be giving you the update and to also take and answer your questions. We're going to onto a presentation deck about 12, 15 slides, which we hope will give you the shape of our performance basically in the first half of this year, take a little bit of a look towards the second half of the year and a perspective on the future. So I'll open up. As per the overview, I'll hand over to James, our CFO, who will give you the more detailed financial performance. And then I'll come back and summarize just on some of the more strategic issues that we're working for the future of the organization before, as we said, opening up for questions. Thank you, and let us move on to the next slide. So I guess just to open up and set the scene for where the business has been. It has been, for every organization, a pretty testing time over the last 18 months to 2 years or so, Saga went into the COVID-19 crisis. We were, in fact, dealing with the repositioning and a strengthening challenge for our business anyway. So we had a mantra all the way through the pandemic, which was to emerge stronger from the COVID-19 pandemic and we went in. And I think the key takeaway from this presentation and the performance in the first half of 2021 is that there is lots of indications that we are achieving that objective. We have got good delivery against all of our five key priorities that we set out to the market last September with the equity capital raise and our run through progress on those. Our overall key results are in line with expectations. We have a good performance through quite a competitive insurance market in the first half with strong performance across the balance scorecard of KPIs that we set out 2 years ago. And absolutely critically, we have had a successful resumption of our cruise and holidays business as we emerge through the end of the first half of our financial year. We have a long-term focus on what we call data digital and brand. Those are essential building blocks to provide the future growth for the business. And there is a lot of the key deliverables landing in the second half of this year in front of customers. So we're very pleased at the progress behind the scenes for those major enablers for our future. With that, we have also continued exceptional support for colleagues and try to support our local communities, too, through this difficult time. And there's good evidence of that from the first half in particular and in our ESG plans going forward. We're continuing to strengthen our team. And Steve Kingshott will join us as the CEO of our insurance business on the November, and we're further strengthening the insurance pricing team with a key appointment announced on Wednesday, too. All of that was underpinned by a strengthening of our financial position as we were able to pay down our short-term covenant debt in the first half. And we have issued in April, the GBP 250 million bond. So we have a very strong liquidity position, a far improved cash position and that is in a much better place to be as we look forward. And to what continues to be a fairly uncertain cover position that we hope one that is generally on an improving trend. Thank you, Emily. So this slide is intended to pick up the headlines in the first half around our major insurance products and our major travel products. So just giving you the headlines of progress in the first half in particular. If I take insurance first, on the left-hand side, there is a lot of very positive headlines to report. So our policy growth continued, albeit smaller growth than we had exited at the end of last year, but still a positive performance. That's on the back of a very competitive motor market that we saw, especially in the first quarter. And if you remember the context of that is we had 7 years of negative performance in policies previous to last year. So continued stabilization in the top line policy growth. Underpinning that, retention is strong again at 80.6% across Home and Motor products, and that is up from just under 80% in the first half of last year. Our margin has also grown up to GBP 76 per policy, and that's up from GBP 71 in the previous period in the first half of last year. We've maintained our direct share of business flat at 58%, introduced Sabre to the motor panel and our flagship 3-year fixed-price product has continued to show growth and now 45% of policies sold in the first half. In our underwriter, we have returned to policies in forth and growth for the first time since 2012. So quite a milestone for the business as we turn the corner on the underwrite and the broker and getting back into growth. And our core operation ratio is also very positive, mainly because the -- because of lower claims frequency in the period due to the pandemic. So all in all, as you look across the insurance business, it's a pretty robust and positive performance in the first half. We'll come on and talk a little bit about the second half in the second. If I turn to travel then, we have had a strong resumption of crews. We started up the Spirit of Discovery 5 weeks before the end of the first half at the end of June. And our newest Spirit of Adventure came into service in the last week of the half. So for most of the half, we've had the ships tied up under government rules and regulations, but a very strong start. We were limited in the load factor, the number of people that we have on board the ships for all of the 5 weeks of the first half. We were capped at 50% of our potential capacity. We have significantly more demand than that. So we had to work with guests to move them into future cruises. If you look at some of the key numbers under that, we turned positive in the cash operating and cash flow for cruise in the period as we attracted the cash for bookings in. And the overall retained bookings across cruise and tour operations have been strong, and we understand that they are market-leading at 74% for cruise and almost 40% for tour operations. We managed our costs during the pandemic incredibly carefully with what we call burn costs or the cost of having the ships mainly tied up and not earning revenue under the expectation at about GBP 5.9 million per month. And after the end of the half, we have carried just over 3,000 cruise passengers as of last week where over 7,000 passengers safely carried and we're now into international waters and cruising with pool capacity. So a pretty good first half really for our operating businesses. If I turn to the wider progress across the other 3 strategic pillars on this slide, we're making good progress across all 3. So the people and cultural change really underpins everything that we do. This is about the hearts and minds of the colleagues who work in Saga. Our colleague engagement, we've measured 3x now in the last year, and it's improved every single time with a very high participation rate at 93% and getting really to the kind of upper median scores of 7.5%. We have supported colleagues with extra investments in their well-being and supporting them through the period of the pandemic, where all of us were working successfully from home. We have had challenges in the summer months in recruiting back up, in particular, in our call centers. So if any of you are customers as well and have tried to go through to our call centers, my apologies that the call wait times have been longer than we would have wanted to. We have been subject to the national labor shortage, which has emerged post the pandemic. And rather than just putting thumbs on seats, we have been very careful to put the best people we possibly can to serve our customers. That has led to longer call wait times than we would have liked, but we're largely coming out of the back end of that and able to move forward. On data, digital and brand information, lots of good progress. I'll talk about what's landing in the second half next. But these are incredibly important programs, which bring us up to speed with what all of our customers expect of us in a new digital world. And lastly, driving simplicity and efficiency is core to us to have a lean and efficient business. There are significant improvements being landed in the first half and the second half, underpinning the strong set of results that we've got. And underpinning everything really is our focus on reducing the level of debt. That has come down significantly with a leverage ratio, now at 2.4x, cruise which is coming down from the position last reported at the end of January. And as I've said, we have issued a new bond we paid GBP 70 million term loan and GBP 100 million of the existing bonds. So we're in a very strong cash position. So looking ahead to the second half and give you a little bit of an insight on what's coming in the second half of 2021, it's a busy time for Saga. There is a lot happening for customers and probably the biggest list of innovation that the company has seen in probably the last 10 years. We're relaunching and strengthening our Saga 3-year fixed Motor and Home plus product. So there's greater levels of cover and reassurance for all of our customers as we come into the FCA market study, which kicks in from January. All of our BU websites are relaunching starting with the travel websites, and you will have seen some of those change between on our websites in the last couple of weeks, that increases the capability because video content on there means it's faster for you to access the products that you want to see and gives us greater functionality. Our load factors in crews and our ordinance in the cruise business are also stepping forward as we emerge out of the pandemic. So we're already 70% sold for our 2 ships in the second half. And as you look forward into the first half of 2022, that load factor moves up again to an 80% already sold figure for that period. So we're very confident in the outcome there. There's a new easy access cash AICL for existing savings customers, launching in partnership with Goldman Sachs in the second half, alongside a new Saga lifetime mortgage equity release product as well, which has the market-leading features in terms of customer cooling off period and the fast access to cash. All our brands, all of our business changes its brand identity and brings it up to date in November, and we go back on TV and start to confidently advertise all of our products for the first time in about 2 or 3 years with the TV advertising campaign. And that along with the launch of our first-owned river boat, the Spirit of the Rhine which has set sale yesterday with good load factors on it, too. So there is a lot happening in front of customers as we come into the second half of 2021, and we're confidently pushing the boundaries and growing the organization. I'm going to hand over to James to talk you through a few slides of the detailed numbers, and then I'll come back and summarize with a future view of the half. Over to you, James.

Thank you, Euan. So I'll just give you a quick overview of some of the key highlights from the first half results. Starting with this slide here, which summarizes some of the key metrics. Revenue was down in the first half of this year compared to the first half of last year, and that's mainly because in the first half of last year, we were trading in travel through all of February and most of March as well. And that obviously means that year-on-year, we did have lower revenues in the travel business than it was the case including here. In terms of the underlying result for the first half, so the underlying result was a loss of GBP 3 million. That compares to a GBP 15.9 million profit in the preceding year. The difference between the two is also due with cruise, and that's not because we are managing the cruise business any less effectively. It's because of a number of reasons, one of which is the fact that we were trading in cruise for about 7 weeks in the preceding year compared to the fact that in this year, we only had 5 weeks of cruise discovery and 1 week of the Spirit of Adventure. It's also because when we did start, we only were able to trade with a cat load factor on the cruise ships of 50%. It's also because of all of the costs that we incurred in getting the crew vaccinated, given the crew rehired and brought back and other ships and restarting the ships more generally. So you can't just restart a cruise ship in -- with 1 week's notice. So there's a lot of training and practicing rehearsals that we would need to do in advance of the restart. And then the last point here is that we did have 2 ships for all of the first 6 months, whereas in the preceding year, we only had 1 ship for some of the time. We also have the financing costs of Spirit of Adventure included in the first half of this year. So it's a long list of reasons, but the actual results for the first half were very much consistent, probably grow slightly better than we have been planning for. In terms of the reported results, we do have a reported profit for the first half. We made a small gain on the sale of a property, which is difference really between the underlying results and the reported profit. A much better result than the preceding year. The preceding year, we had quite a high level of restructuring costs, and we also wrote down the goodwill relating to the travel business in full. And that was the reason that we made a GBP 55.5 million loss in the preceding first half period. The number I'm probably the most pleased with in all of our results is the next one, which is the cash flow line. So last year, we had an available cash outflow of GBP 23 million. Naturally, we had a lot of money we needed to come into the travel business to sustain it through that first period of lockdown. And also because we had essentially a higher working capital outflow in that proceeding period, i.e., we're giving customers their money back on the holidays or cruises, which they had booked. In the current year, we had the opposite. So we actually have, in the cruise business, a GBP 25 million increase in cruise and finance receipts. That's part of that GBP 42 million. And on the other part of the travel business, which is the Tour business, we operate that now on a fully ring-fenced basis. So essentially customer money coming in or going out conversely actually has almost no impact on our results. The money that we provide to the tours business now is even essentially overly to fund operating expenses. So either way, a significant improvement in operating cash year-on-year. And what that has helped us to do is to further reduce our net debt. Our net debt decreased by about GBP 20 million in the first half. And when you take it together with the capital raise last year, our adjusted net debt, excluding cruise, is significantly lower. So on to the next slide. This shows a breakdown of results by division. I think what it shows is that the insurance result was pretty much flat year-on-year. And the travel business did have an increase loss, but that was due to all of the factors I just talked about in relation to cruise. And our central costs were pretty much flat compared to the first half of last year. On to the next slide. This shows a breakdown of our -- of the movers in net debt between the 1st of February this year, so the start of the year and the 31st of July. So taking all the results of the insurance business and essentially net of our central costs, those operations contributed a net GBP 52 million of positive cash inflow. We then put GBP 20 million into the tours business to help fund the operating expenses of that business during this period of suspension, and that's the business which really didn't trade very much indeed at all in the first half period. The cruise, we had a GBP 9.7 million cash inflow. That cash inflow is heavily influenced by the GBP 25 million increase in advanced receipts. So that more than offset the training costs that we had for the cruise business during that period when we were still in suspension. We didn't have GBP 23 million of debt service costs. Essentially, those are the moving pieces between the opening net debt and the closing net debt with the closing of GBP 20 million lower than where we started. One thing you may have seen during the -- towards the end of the first half is that we announced actions -- further actions we are taking to strengthen our financial position. This involved issuing a new 5-year volume at 5.5%. So it's a GBP 250 million at fixed rate. It's unsecured bond. And we used socially about GBP 170 million of that to repay debt. So GBP 70 million are for banking loans, which are all of the remaining banking loans and GBP 100 million of the existing 2024 bond. What that means is that we have now no bank debt in issue. And the good thing about that is that, that gives us a lot more security, a lot more flexibility. So the volumes are far through more flexible terms attached to them and know what we call maintenance covenants including, which again allows us to plan ahead given the remaining uncertainties from COVID in a very secure position. It also means we have a substantial amount of cash on the balance sheet that will help us to absorb whatever bumps in the road may lie ahead. So when we look at the position at 31st of July, we have GBP 175 million of cash. The ST&H business, which is our Tools business is fully ring-fenced. So there's GBP 26 million of cash there supporting GBP 21 million of advanced receipts. We don't know -- there are no debt maturities until May 2024. And in fact, no payments also during our cruise ship facilities until next June. So all in all, it gives us a strength and financial position and again, gives us that confidence to ride out whatever bumps in the road may lie ahead.

Thanks, James. I'll just spend just a couple of last minutes just going through a bit of a longer-term view. And on this page, we try and capture our long-term growth plan on 1 page. Clearly, our business is all about creating a great country to grow older. And we're very clear on our purpose, which is creating and driving exceptional experiences every day whilst being a driver of positive change in our markets and communities and some good evidence of that already in the first half and into the second half plans. We exist to uniquely fulfill the needs of our older customers, and that's by aligning all of our colleagues and our businesses together behind our purpose. At the heart of our business is exceptional insight. We're building that to greater levels now where we understand our customers better than anybody else in the marketplace and almost better than they understand themselves. And that manifests itself through in everything that we do for customers and also every colleague being simple, personal and special. We created the five pillars of our strategy last year, and we're delivering against the people encounter change, some brand transformation well underway and optimizing our current businesses while we drive simplicity and efficiency and drive our debt down, too. And we're well progressed as we've updated in the first half on all of those. That's driven by a clear and shared set of values across our business, Precision, pace, empathy, curiosity and collaboration, and that's owned by every colleague. And as a result of all of that, we believe that this will deliver a consistent growth and growth in 3 things: customer numbers, revenue and profitability as we turn the corner out of the pandemic and into long-term growth. So just leaving you, I guess, with a summary slide before we go to questions. We have even more confidence in the future of Saga now. So strong progress against each of the priorities we set out last year. We are a team and a business that does what it says it's going to do. And the brand relaunch that was planned last year and aimed for this autumn is taking place, and that will be on our screens and throughout marketing mix and in all products from November. The pipeline of future travel bookings is looking strong. It's looking stronger as we come through the second half of this year and very strong for '22, '23. And even that is mindful of the fact that as we exit the pandemic, it's not all plain sailing, and there may be some uncertainties ahead. Our focus remains on driving down the level of debt in the business and executing the plans, and we're very much set to do that. That then provides us with the platform for more exciting future growth for the organization. So I'll pause at that point, and we can move across to Q&A.

[Operator Instructions] Euan and James, before we move on to questions received during the meeting, we did have 1 presubmitted question, if I may, I'll read that out. It reads as follows: what's the expected profitability per ship once the cruises are fully up and running? I believe I've seen GBP 40 million EBITDA per ship in previous presentation, is that still accurate? And how much is that reduced by the imposed reduced capacity and restrictions due to COVID?

That's a great question. So I'll kick off with that. So in the -- in this half presentation, we were very careful to reiterate our confidence in the GBP 40 million EBITDA per ship number. As we come through the second half of this year, we will not be at that number because we're slightly lower on our load factors at just about 70%, then that business case just as we ramp up. And we're also keeping some of the COVID safe protocols on board the ship as we emerge from the pandemic. That felt like it was the most sensible thing to do to protect guest and crew safety. So slightly higher costs as we come through the second half of this year, slightly lower load factor. As you project into 2022 and 2023 seasons, we are seeing load factor and per ahead of that business case. Clearly, we'll make a call at the right time to reduce some of the additional safety costs as we come through the months, January, February, March next year. But overall, we have reconfirmed our commitment for that level of profitability from each ship.

Fantastic. Thank you very much, indeed. And as you said, investors have submitted a number of questions during the presentation today. And Emily, if I may hand back to you to respond to those where it's appropriate to do so. If I may just ask you to read out the question and say who it's from, that will be fantastic.

Fantastic, Paul. Thank you. This is probably a question for yourself, James, from David[indiscernible] We've already covered the second part of it. So I'll just read out the first half, which is you said in the cruise business currently incurring additional COVID-related costs? How much of those costs on an annualized basis?

So we said that the higher cost in the second half would be about GBP 6 million, which is over and above, if you like, the sort of planned cost level. It would probably be fair to say that on an annualized basis, you would double that. Having said that, we do also think that some of those costs are a one-off function of where we are in terms of COVID. So a significant portion of those costs are directly related to, for example, the COVID protocols that we have in place. So those COVID protocols involved in very extensive testing of both the passengers and the crew. It would also include things like running the car service in a different way to how we would have done it pre COVID. So pre-COVID, we would have turned to book group together who lived in the same area in terms of transporting them from home ships. But now each sort of individual booking essentially have managed individually, which means that we run export costs in terms of transporting people too and ships. So those are things that we would anticipate would go on forever. So I think that you probably want to extrapolate those into the future. Now will all of those go from the 1st of February? It's obviously a bit hard to predict that right now. It is possible they may go on. But having said that, certainly, in terms of testing, in terms of the other things that we are doing we'll directly encourages the cost, you wouldn't extrapolate those at the same pace that we're carrying.

Thank you, James. Sticking with cruise, what are the main components of market cash flow in the cruise business are up?

So the -- in the full investor appendix -- investor slides that we put out, on Wednesday, so we do explain the derivation of our monthly burn cost. It is for both pieces of the travel business. So looking at the first half of the year, the cash burn cost was GBP 35.6 million. And that is actually the essentially the cash costs of cruise and then the earnings before interest tax and depreciation for the tours business. That's the way we did it last year, and we carried that forward into this year. So on the GBP 35.6 million , GBP 14.8 million related to the tools business and GBP 20.8 million relates to cruise business. That does -- I should stress, exclude the working capital for the cruise business or certainly the change in advanced receipts. So if you actually look at the actual cash outflow through the first half has only GBP 10 million. Burn cost, I think, is a helpful thing to look at when the ships are not trading and when is not trading. I think once we get into a place where the cruise business is operating as it is, then actually, we don't have burn costs going forward because obviously we will be generating cash rather than burning it. So it's probably the last time we're going to be talking about it.

Thank you. Question is on David is on Cruise. Have you been adding sailings to your cruise alternative to respond to the [indiscernible]

James, just sorry, going to do so. We -- the main aim was to get back to the itinerary plan that we had already planned because clearly, lots of guests have already booked those. So the least amount of disruption is better for us. During the summer, we had to switch from actually some international sailings while the government retain the international sailing ban to a higher number of shorter cruises around the U.K. Those proved to be incredibly successful for us. They principally introduced a new set of customers and guests into our cruise operation. So the level of first-time buyers was incredibly high. So that will be something that we will introduce into future years' itineraries. We do tend to be quite well planned. So we publish itineraries that are 18 months ahead. So the simplicity of the cruise business is to fill those to maximize the returns for each of the ships. So we are capped at the fact that both ships sail every single day, but we've optimized the mix as we've come through quite uncharted waters due to government restrictions in the summer.

Brilliant. Thank you, Euan. Moving over up to the Tour operations business, asks how rooster the line revenues been?

Look, it's a lot less material than an ocean cruise liner. It's a much smaller operation for us. So -- but it's an interesting option for us, I think, for a couple of reasons. It puts our brand, in our control into that segment of the market, which is very interesting for customers. There is a natural crossover between the experience that you would expect to get on the ocean ship and then come on to the river ship. So there's an opportunity to cross-sell and to add to the revenues. The key thing there is to get that operation up and running. We got spirit the value going live next March and then to look to grow the number of river cruise ships that we have. It's a very interesting segment for us, and it's the first time that we've actually put our hardware down. But relative to ocean cruise, it's a much smaller contribution.

Thank you. also asked about can get back to its GBP 350 million revenue made a pre-COVID?

Do you want to answer that, Euan?

So I think the -- so the answer there is we won't go by GBP 350 million for a couple of reasons. And one is I think because we sold was about GBP 50 million on that as our revenue has gone. That was, however, pretty low margins on the gross margin it shouldn't have much impact on -- well, I know in fact on a definitely doesn't make any money even before COVID. In relation to -- can we get back to GBP 300 million, I mean I think it's really fair to say I don't think it's going to happen open because that business was already facing some headwinds even before COVID. So I think even if COVID hadn't happened, we're probably be looking at revenues probably around about GBP 250 million last year. And I think one of the points that we are looking at here is that not all aspects of that business haven't necessarily lived up to the standards that we want it to. So I think there's an element here of us the business back a bit in order to really focus on the areas that we really add value from a customer perspective. So what you will probably see in the future in a somewhat smaller business the one that is essentially offering much more differentiated propositions to customers and therefore, which should be able to generate a higher gross margin than the gross margin that we've generated in the past, and clearly, one that is also going back to merging profit together.

Brilliant. Thank you, James.[indiscernible] asked whether you could confirm his understanding that customer cash is held in trust for the tour business, but not held in trust for the Cruise business?

Yes, I can confirm that is the case. There is a reason for that, and that is mainly because in the tour business, we are essentially an intermediary between the customer and sometimes the travel agents and the hotel or the airline. And I think in that sense, keeping that cash interest is a good idea and something that we would probably support. And to be honest, that is the direction of travel that the entire industry is going to go in. There's not much ambiguity on that. So we think that, that actually is quite a -- it's a helpful place for us to be because there is still plenty of tour companies out there that use customer cash to fund their operations. And those companies, I think they're going to have a tougher time of it in the next few years because that isn't something that is sustainable. On the cruise side of things, it is a different situation. We own the hardware. We have obviously paid a lot of money for the hardware. And therefore, because we control all aspects of that proposition, we're more comfortable or we are comfortable, very comfortable with the idea that the customer cash is our cash.

Fantastic. Thank you, James. Moving over to insurance that [indiscernible] asked what proportion of our other broking revenues come from in travel insurance?

So in the first half, not very much because we saw very, very few travel insurance policies in the first half. So most of these revenues relate either to the BMI business or they relate to the sort of claims handling function that we've had, which is also included in that line. The freestanding revenues were driver. So most of it -- to most in the first half was relating to the BMI business.

Fantastic. Thank you, James. And just a follow-up to that question. How connect to the cruise and tour operations businesses are those policies?

Not very. So the travel insurance policies are essentially the sort of the independent travel insurance that we always sell to customers. It's not the travel insurance that's included as part of the proposition for crude or for tour operations.

Fantastic. Thank you. Another one from David on insurance. Gross margin for policy and insurance profit has been in decline for several years, what is the reason for that? And how the long-term declining trend in the growth going forward?

I can take that one. So I mean that number has been in decline for reasons that we set out at the beginning of 2019, which is when essentially we did have to reset expectations for that business. There are essentially a variety of reasons for back. One is that the -- we had to take some actions in terms of pricing for customers. We were long tenured. So we reduced prices there. That was one thing that we started doing in the middle of 2019. The other feature to notice is a bit more of a structural one, and that is because, if you look historically, the company was very successful in selling by direct mail. Direct mail has a very low cost of acquisition. So the cost of acquisition for direct mail is a very low number. And so if you look at the overall kind of acquisition for the broking business in the aggregate, it was very low. What you have seen in the last few years, there's a variety of reasons for this is that, that cost of acquisition has grown quite substantially, whether it's to do with selling via price comparison websites, whether it's due to the competitive nature of trying to sell online, so by paying for pay-per-click and things like that. The cost of acquiring a customer is probably double what it was 4 or 5 years ago. So that has had a pretty significant impact on our logic. We did say when we had that reset in 2019 that we expected margins to stabilize, and we said they would stabilize the sort of 70 -- I think actually 67 to 70, I think where we said they would stabilize. They're a little bit higher than that. There are a few reasons for that, mainly due to the fact that we have some benefits, for example. So I would say that the margins that we had in the first half were very consistent with what we were expecting to see when we did that we set back in 2019. Looking into next year, those margins may edge down a bit. That's because of the change in the regulatory environment, which will flatten out new business and renewal pricing. That, however, will be in a long time of good because it certainly is helpful if you're trying to sell a proposition based on quality, which is clearly what we are trying to do, and it should also reduce customer churn. So it will improve retention. In fact, while it won't necessarily have a big impact next year should start to be a positive feature from sort of the second half of next year onwards.

Fantastic. Thank you, James. Does the 88.4% combined ratio includes the effect of reserve releases and what is the combined ratio if they are excluded.

Yes. So another one for me. I think the 88.4% does indeed exclude reserve releases. It is somewhat influenced, obviously, by the fact that we have lower same frequency during the period of lockdown, particularly in February and March. So there was probably about 8-point benefit to the combined ratio from that. So if you were to add that back, you will be sort of 96.4%. What we did say a few years ago is that we were aiming for around about the sort of 97% combined ratio on an ongoing basis. But you're right that we still have the benefits in the first half of the fact that we are pretty prudently reserved, and that played out in terms of GBP 18 million of reserve releases. So that was sort of over and above the 88% of the -- just to be -- doesn't include the reserve releases.

Thank you, James. Still on insurance,[indiscernible] has asked how do we see added value to the insurance business?

Perhaps if I take that one. So Steve has a vast experience, insurers professional having worked for some of the largest insurers across the country. He's got experience across booking and underwriting and has also worked most recently for underwriting. So it's worked in a kind of mix activity business. So he's perfectly placed to kind of to the Saga exec team and also lead the next stage of growth for Saga insurance. So we're all looking forward to him joining in about 6 weeks' time.

Thank you, Euan. David asks start joining cash in what order should we expect your various instruments to be repacked?

That's one for you James.

Yes. So I mean, the first -- I mean, so there's no need for us to repay any of our bonds at any time. So we don't have any bank debt. So there's sort of no immediate priority to use that cash for that. So what we probably would use to do is to reduce the cruise debt. And that would be, I guess, in two senses. So one is when we emerge from -- or by sort of next April, we'll have about GBP 85 million of cash on the cruise debt that would have ordinarily have been expected to have been but essentially, we have deferred during the period of the COVID crisis. So I guess, priority #1 is probably to repay that. We then have about GBP 45 million each year, which we would repay in terms of the ongoing capital repayments for the cruise business. The question after that, I think, is there an ability to repay some other debt. Now at the moment, we've got no debt due for maturity until 2024. And in fact, if we look to repay that ordinarily before February 2020, we have various penalties that we would have to pay, which essentially means that you have to pay all of the interest until maturity, which obviously wouldn't be particularly good idea. Question then is, is there a potential for our bondholders to look to tender their bonds at an earlier stage? That obviously is entirely up to them, but it will be something that's worth thinking about, but probably not one for this year or indeed even next year, where the priority really at the moment is holding an additional cash balance just to give us that extra buffer against the -- who knows what in terms of what happens next week

Thank you, James. We move on to looking to the strategic questions that we had asked markets like pensions and retirement home lags that are [indiscernible]

So I guess if we start to look forward, then we have a platform and a proposition now within Saga that we can start to think about where we could add value to our older customers lives beyond the businesses that we're in now. We haven't done a lot of thinking in that space yet because we've been stabilizing the businesses that we've got today and putting them into growth. I'm not sure that the businesses mentioned in that question would be particularly high harnessed as we'd be looking for higher growth and low capital businesses to invest in. And there's plenty of those to support the lines of the over 65s in the U.K. It's a little bit early for us to comment on any further business interest beyond optimizing the businesses that we're in now.

Thank you, Euan.[indiscernible] asks the over 70 market insurance is poorly covered. Might this be a higher-margin opportunity for you or is your sweet spot of 60 to 69?

Well, no, our sweet spot is actually in that sort of 65 plus. The average age of a home and motor insurance customer with Saga today is 72. So we're right in that sweet spot of the kind of 70s if you look at where we trade. Clearly, we trade from 50 all the way up to 90, but the average is already in the kind of mid-70s. I agree with you. I think there is a big opportunity for us to trade well there and the 3-year fixed product in Motor and Home is particularly trading well with that age group as it provides reassurance peace of mind for a relatively low interest category. So we're, I think, making some good progress there.

Thank you, Euan. David asked is the new branding launch going to come with improved loyalty offerings for customers? How many products per customer do you can give? And where are you aiming to take this to?

We got a number of elements in that. The first theme of the new branding launches to increase consideration of the 17 million people that are over 65 in to reconsider Saga if they're not currently a customer of us within the product development and then with the product interactions and a focus on cross-sell, which will come through 2022, we'll start to see the multiproduct holding or the number of products held by each customer hopefully grow. We're around 1.1 in the number of customers who have more than in the total and customer product holdings on average. So it's relatively low at the moment. Clearly, we have very loyal customers that can have 5 or 6 products with us. But on average, it's still an opportunity at 1.1.

Thank you, Euan. Final few questions then if we may. David says your share price appears to be quite with the progress in the business. He asks why you think about is when a lot of other travel companies have re-rated them aggressively?

Gosh, it's one of those questions is very difficult for us to ask because we believe, like you, that share price is undervaluing the company as it is today. Hopefully, we see progress in the share price as more shareholders understand the progress that we're making. It's incredibly important to us to demonstrate to shareholders that we're committed to long-term at growth and delivery. If I was to offer a guess, I think there've been a number of core starts at Saga in the past, potentially previous teams over promising and not delivering everything. That's very much live in our minds. So that's our focus on doing what we said we were going to do. So hopefully, the confidence will return for shareholders to invest in larger levels as we go forward. But we certainly think that the company is undervalued as it is today.

Thank you, Euan. Steve asked move will Roger De Haan take the company private?

There's no intention for Roger to do that. He is a massive supporter of the strategy that we are delivering today. Indeed, that's why he engaged with us as a management team. So he's completely aligned with the plan that we are delivering. He's realistic in terms of the time it takes to turn a business like this around, but we're all impatient for the results to come through. So there's no indication or need at the moment for Roger to take it private. He is just committed to serving our customers as we are in the best way that we can.

Thank you, Euan. The final question that we have is from Richard who asks cash shareholders receive discounts on travel insurance products?

That's an interesting point. Actually, we have this half extended a new benefit to shareholders in that if you're not a subscriber to the magazine, then you can do so. Actually, we sent e-mails and matches out in the last couple of days and have been inundated with shareholders wanting to take part in that. That is giving us an insight into shareholder appetite to become larger customers as well. So while we don't have a plan at the moment for that to be the case, it's certainly something given the reaction that we've had this week that we will look at.

That's absolutely fantastic. Thank you so much, indeed, Emily, for hosting the questions. Euan and James, thank you again. You covered off every single question you received from investors. So thank you for your time, and thank you to all the attendees who submitted them. Perhaps just before you redirect attended to give you some feedback. If I may just ask you just for a sort of a closing snapshot, please?

Great. Thank you. Well, I guess four very quick statements to leave you with in four different time frames. Firstly, this is a strong performance in the first half of the year, in line with expectations through a pretty difficult trading period with COVID and a very competitive insurance market. So we're pleased with progress there. Looking ahead, I can point to further progress in half 2. There's a lot happening. And while it may not be a straight line because of COVID, we're very confident and we're very secure in our financial position. Third point is that if you look further ahead into '22, '23, the outlook is positive, both in terms of the travel bookings and demand that we've got for our propositions and also in the outlook for insurance. And at that point, we're really getting to the point where some of the questions were coming in, so what next? And the business being stronger and stabilized allows us to think what next into more sustainable and interesting growth. So it's an exciting time to be part of Saga today, and thank you for joining the call.

That's absolutely fantastic. You and James, thank you so much for updating investors today. Could I please ask investors not to close the session as you will be automatically redirected for the opportunity to provide your feedback in order that the company can better understand your views and expectations. It's going to take a few minutes and be greatly valued by the company. On behalf of the management team of Saga plc, thank you for attending today's session. Good morning.

Thank you.