Saga plc (SAGA) Earnings Call Transcript & Summary

All right. Good morning, everybody. Thank you for coming to our first in-person meeting for over 2 years. In fact, I think it was today 2 years ago that Boris called the first lockdown. So a great opportunity for us to headline our plans for growth going forward. For those of you that haven't had the chance to meet yet, I'm Euan Sutherland, Chief Executive of Saga, and it's great to see everybody here today. Our intent is to update you on our full year results for the financial year ending January 31, 2022. And then to give you more detail on our plans going forward. To do that, I'm joined by James Quin, our Group CFO; and Lisa Edgar, who is the CEO of the Big Window, the leading insight agency into aging. Saga acquired the Big Window in February 2022, and this underpins our vision of being experts and the best in understanding the experience of aging, ultimately making the U.K. the best place in the world in which to grow old. I'm also joined by Steve Kingshott, our Insurance CEO; and Nigel Blanks, our Cruises CEO, and we intend to take you through the details of our plans in both of these businesses later. Given time today, we won't cover holidays or personal finance, but John Constable, the CEO of Saga Travel Group, incorporating Saga Holidays, Saga Touring and Titan Touring is with us in the audience today and happy to take your questions. I'll headline the results from last year and hand over to James to cover the financials, and then we'll cover each element of the strategy between us and then open for questions. Apologies in advance, this presentation is slightly longer than an usual update, and we thought you'd appreciate some of the extra detail. So during '21-'22, Saga made strong progress in both addressing the legacy issues pre-pandemic and emerging from the pandemic stronger than we went in. We saw improvements in all businesses with insurance delivering a second year of policy growth and improvement across all of the balanced scorecard metrics we've been reporting since 2019. In addition, we've now significantly strengthened the insurance team under Steve Kingshott. Cruises successfully restarted in June last year, and we operated both ships without interruption through to year-end. We've also restructured the holidays business ready for a post-pandemic restart. Our focus on supporting colleagues continued during the year with engagement improving again and the successful national launch of Grandparents' Leave, which was the first initiative of its kind amongst major employers. Financially, Saga has a stronger position with GBP 187 million of available cash at year-end, allowing us to invest for growth as well as accelerating debt reduction despite some short-term headwinds as we move into the 2022-'23 financial year. Overall, we are well positioned for growth. In more detail on taking insurance and travel metrics separately. Insurance has delivered a second year of strong momentum, seeing growth in both [ SSL ] and AICL policies as they've moved forward by 1.4% and 3%, respectively. Retention step forward in Motor and Home again to 82.8% and 3-year fixed grew again to 47% of our combined book. Margins per policy were stable at GBP 74 and the proportion of direct business was also stable at 59%. In travel, Cruise had a positive second half after lockdown ended, delivering a load factor of 68% and per diems of GBP 299. The load factor was a couple of percentage points lower than expected due to a canceled South American Cruise in January due to COVID red-list status and the emergence of Omicron in December and January. This also adversely affected our per diems for that period. Our river ship program commenced in the second half of 2021. And as of today, we have 2 spirit class river ships in the fleet with 1 new ship per year in the plan for the next 4 years. In holidays, we've overhauled our operations in 2 ways. Firstly, making all businesses more digital, lowering the cost to sell and improving the product availability to customers. Secondly, we have combined the touring businesses of Saga Touring and Titan Touring with the aim of being the market leader in touring and significantly reducing costs and improving service and product. We now have only 1 holidays team driving single point accountability and expertise. Finally, in the year summary, I wanted to highlight our focus and progress on ESG. We are still working through the detail post-pandemic, and we recognize we have more to do here. Our cruise ships are already best in class for the industry, and we're exploring what more we can do to improve emissions for marine fuel. For colleagues, we've moved to a completely green car fleet, increased our volunteering hours and introduced Grandparents' Leave. We intend to be the champions of experience in the workplace for older people in the U.K., and this starts from within our own business. Let me now hand over to James to cover the financials.

Good morning. It's great to be back, meeting analysts and investors again after 2 years. For those of you who don't know me, my name is James Quin, I've been Saga's CFO since the beginning of 2019. I'm now going to spend a few minutes providing an overview of our results and on the outlook for the current year. Results for the year were adversely impacted by the ongoing pandemic with our Cruise business suspended for most of the first half. And even post restart, we were operating at a much reduced capacity due to government restrictions and the ongoing impact of COVID. The tours business restarted in the autumn with very low volumes of departing passengers. Our travel business reported an underlying loss of GBP 79 million for '21-'22, a similar level to the year before. And this led to the Group as a whole reporting an underlying loss before tax of GBP 7 million. In terms of items below underlying profit before tax, we flagged in the January trading statement, around GBP 15 million of restructuring and impairment charges, mainly relating to actions we are taking to put the tours business on a much stronger footing. Overall, we reported a loss before tax of GBP 23.5 million for the year, which is, however, an improvement on the GBP 61 million loss in the previous year. We also see positive signs in our results, most notably with a strong rebound in our operating cash generation, which increased from GBP 3 million in 2020 -- '21 to GBP 76 million last year. This is due to a significant reduction in travel cash outflows from GBP 86 million in the prior year to GBP 14 million last year. A particular positive here was Cruise, where we were cash positive for the year. And we don't think there are many or indeed, possibly any major cruise operators who can make that statement. Our net debt continues to reduce due to the cash generated from operations, disposals and the capital raise in 2020. Over the last 3 years, net debt, excluding cruise has reduced from GBP 391 million to GBP 214 million at the end of January 2022. On the next slide, I set out underlying profit before tax by business unit. The insurance result reduced from a profit of GBP 135 million to GBP 121 million, with a GBP 9 million reduction in retail broking and a GBP 5 million reduction in underwriting profits. The reduction in the retail broking result is due to lower profitability in private medical insurance, investment in advertising and a GBP 2 million swing in the written to earned adjustment. Looking through these factors, the business continues to make good progress with a second year of growth in motor and home policies in force, a further improvement in customer retention and overall stable margins per policy. The underwriting result reduced as expected with motor claims frequency largely in line with pricing assumptions from May onwards compared to the prior year, during which motor claims were significantly below expectations due to the lockdowns in force for much of 2020. For the travel business, losses were overall at the same level as the prior year, but with a higher loss in Cruise due to the incremental cost of only 2 ships for the full year, resumption of service costs and a significant increase in marketing activities. Following the restart of the Cruise business from the end of June, travel results for the second half were much improved on the first half, with the underlying loss moving from GBP 51 million in the first half to GBP 28 million in H2. Our goal now is to continue the recovery from the pandemic and get the business back into profit. Net central costs increased due to GBP 3 million of higher marketing and brand expenses, a GBP 2 million increase in interest costs and lower recharges to the travel business compared to the previous year. I'll go into more detail on the moving parts of retail broking results on the next slide. Motor and Home written profits increased by GBP 2 million for the full year with a GBP 6 million reduction in new business profits and an GBP 8 million increase in the renewals contribution. The main reason for the reduction in new business profits was the GBP 6 million investment in above-the-line advertising. It takes time to build traction from a change in marketing approach and our new adverts only ran from October onwards. So very much at the back end of the year. We will continue to invest in above-the-line advertising to support our direct ambitions while, of course, monitoring the effectiveness of this spend in terms of brand awareness and consideration, quotes and ultimately, sales. The increase in renewals contribution was roughly 25% due to increasing volumes with a retention rate improving from 80.5% to 82.8% in the year. The other 75% was margin-related. And much of this is due to the 3-year fixed price product and low net rate inflation during the year, in turn due to the impact of COVID on motor claims frequency. We continue to take a prudent view of 3-year fixed profit recognition, and are deferring a higher proportion of related premiums given the likely higher inflationary outlook. Overall, the average margin per policy across Home and Motor of around GBP 74 was in line with the prior year. Continuing the trend of the first half and as flagged with interim results, PMI profits were GBP 6 million lower than in the prior year due to pricing actions as well as lower profit share payments as private hospitals started to clear treatment backlogs. In other factors, we had a onetime gain from a release of credit high provisions. And the last main factor was an GBP 8 million increase in operating expenses due mainly to higher IT costs and higher payroll costs as we invested in capability. Overall, this was a resilient performance, and we continue to make good progress against the strategy set out in 2019. From the start of 2022, we have moved into a new regulatory world in which renewal pricing cannot be higher than new business pricing. While this shouldn't longer-term encourage greater customer loyalty and more of a focus on product quality, which is exactly where we can differentiate. In the short term, this is likely to have an impact on broking profits. In this respect, the motor market in February and March has been volatile and very competitive. And while renewal volumes look to be in line with expectations, we have seen a decline in new business sales and are likely to see lower overall sales for H1. In terms of margins, while we are seeing higher revenues per policy on new business, that in part counter balances lower renewal pricing. The latter has a much bigger impact than the former, with us selling around 5x as many Home and Motor renewal policies and new business policies in February and March. As other insurers have noted, it would be premature to give any guidance as to what this will mean for the full year, and we may see the competitive motor environment start to change, especially given that claims inflation is running in the high single digits. Our focus remains on a disciplined approach to pricing and capitalizing on what differentiates us in the market, which is what Steve will be talking about shortly as well as capitalizing on opportunities outside of Motor and Home. On the next slide, I set out the results of the underwriting business. AICL earned premiums reduced by 12% due to lower volumes on non-Saga panels and a 9% decline in average Saga motor premiums. For the first time in years though, AICL is starting to grow its Saga book with a number of insured vehicles increasing from 608,000 to 629,000 last year. AICL profit before tax declined from GBP 59 million to GBP 54 million due to a higher current year loss ratio than in the prior year, during which time claims frequency was well below what we were pricing for. Claims frequency in the second half of 2021 has been broadly in line with ongoing pricing assumptions. Results in both years benefited from continued favorable experience on large bodily injury claims and settlement of specific open claims for less than they were reserved at. Of the GBP 42 million of reserve releases in 2021-'22, around GBP 12 million was due to the partial release of a prudent provision established in relation to the 2020 accident year. We remain prudently reserved. The overall level of conservatism is normalizing with an expectation that we will run from the implementation of IFRS 17 in February 2023 with a roughly 10-point margin above true best estimate reserves. This is likely to support a relatively high level of reserve releases in '22-'23, albeit lower than the last 2 years. Our view of the longer-term combined ratio remains unchanged at around 97%. Over the last few years, AICL has made real progress in enhancing core capabilities, and we have significantly strengthened the pricing team and pricing tools. This is now having a very positive impact with further pricing model enhancements in progress along with new initiatives to grow the AICL footprint, for example, in relation to electric vehicles. On the next slide, I set out the travel results for the year. While we are starting to emerge from the pandemic, the last 12 months have continued to be a very challenging period for all travel companies. The Cruise business restarted in June, and we've taken over 20,000 customers on our ships since then despite government restrictions and numerous operational challenges. Together with the restrictions on itineraries, high cancellations, additional operating costs and around GBP 5 million of cruise credits, we were not operating at close to expected profitability in the second half of last year. With that said, we were EBITDA positive for the second half and cash positive for the full year in Cruise, which we think is a much stronger position than for many of our competitors, who we believe are targeting EBITDA breakeven in Q2 of this year. For tour operations, the environment has been more challenging with any minimal levels of departing passengers. Bookings for this year are more positive, but we're still around 30% below pre-pandemic levels with our customers inherently more cautious about traveling through airports and getting on planes. We have restructured the business, improving efficiency and modernizing what we do, so this supports the brand and focuses on the areas we do well, such as River Cruise. This reduces short-term downside risks while enabling us to capitalize on what should be a much stronger recovery into 2023. On the next slide, I set out the change in total group costs. A key focus for the last year has been balancing cost efficiencies and discipline with the need to invest in the business to support post-pandemic growth potential. In this respect, as I indicated would be the case with interim results, costs in the second half were around GBP 20 million higher than in H1. Marketing costs increased by GBP 11.6 million compared to the previous year, excluding disposals and after allowing for some deferral of costs within the written-to-earn adjustment. Around GBP 7 million of this cost related to the new advertising campaign with a GBP 5 million increase in Cruise to support future bookings. Admin costs increased by GBP 10 million compared to '21-'22, mainly in the insurance business with the biggest factors being higher payroll costs and a small increase in IT expenses. While net central costs have increased, this is mainly because we are recharging fewer costs to the travel business. Gross central costs on a like-for-like basis were flat on the prior year, with a small investment in the magazine to build capability. On the next slide, I show a reconciliation of opening to closing net debt. Excluding travel, the group has continued to be highly cash generative with free cash flow of GBP 89 million for the full year, essentially unchanged from the prior year. Insurance cash benefited from positive working capital effects some of which are timing related and above likely run rate levels. We also paid an increased dividend from AICL this year on the back of strong underwriting results with future dividends likely to broadly track earnings. The travel business has continued to see a level of cash outflow with GBP 36 million of cash support provided to the tour operations business, offset by GBP 23 million operating cash inflow for Cruise. For Cruise, the key items are a GBP 29 million increase in advanced receipts, offset by GBP 3 million net trading payments and GBP 3 million CapEx. Further including GBP 15 million of interest costs, the Cruise business generated net positive cash of GBP 8 million despite operating well below run rate profitability. As a result of the resilient insurance cash flows and lower cash support to travel, net debt reduced by GBP 31 million during the last financial year. On the next few slides, I'll provide an update on the group's financial position. We've continued to take actions to give us the financial security to execute the group strategy, no matter what happens next in relation to COVID-19 or other uncertainties. Specifically, we announced a package of actions in June, including revision to the covenants attached to the RCF, an issuance of a new 5-year unsecured bond with the proceeds of the bond used to repay all outstanding drawn bank debt and GBP 100 million of our existing bond. In terms of our new bond, they are not materially dissimilar to those of the existing bond. While there are some limitations on issuing new debt in a few circumstances, the terms are not expected to put any limit on our plans for the next few years, and they are much more flexible than for comparable bank debt. The net result of these and all the other actions we have taken over the last 2 years is that we finished the year in a strong position. We have available cash of GBP 187 million on balance sheet, excluding the cash supporting a fully ring-fenced tour operations business. We have a further GBP 100 million credit facility, which is fully undrawn. We have no bank debt and no bond maturities until May 2024. While we cannot, of course, predict the path of COVID-19, our expectation is that we will significantly reduce our net debt over the next few years as set out on the next slide. This slide is an update of the debt trajectory we anticipate in the next few years. This modeling includes prudent allowance for downside risks to Cruise and Insurance based on certain adverse scenarios. We've updated these scenarios and include downside risks such as potential temporary layups of the 2 ships in the next year, which may be possible, but given the experience we've had in the last 8 months and the general direction of the pandemic, it should be fairly remote. As previously indicated, while we may not yet be back to full earnings capacity in travel for the current year, we expect debt to start to reduce more rapidly than it was the case in 2021. This should enable us to resume ship debt capital repayments from June 2022, catch up on all ship debt deferrals by early 2024 and repay the GBP 150 million balance of our remaining 2024 bond from available cash while retaining a prudent level of surplus cash for the next 2 years. We will continue to put a high priority on debt reduction and target a ratio of total leverage to EBITDA, including Cruise of less than 3.5x. I'll finish by providing some indications of how we see '22-'23. As already indicated, retail broking results for Home and Motor are likely to be affected by the impact of price equalization with higher new business profitability more than offset by lower renewal profitability. Providing more guidance at this stage is very hard to do based on only 7 weeks of data, but we will continue to take a disciplined approach to pricing. In underwriting, we expect another strong performance this year, albeit with lower profits than last year, given normalization of current year claims and lower reserve releases. For Cruise, we expect a much improved results and back to profitability. There remains quite a wide range of outcomes based on how quickly the pandemic proceeds. And we have seen some disruption to itineraries in the last few weeks. We expect a full year load factor of 75% or higher with around GBP 8 million of one-off costs from the earn-through of Cruise discounts and higher COVID-protocol costs in the first half of 2022. For tour operations, we're still aiming for breakeven while continuing to provide marketing support to drive a profit recovery in 2023. And in central costs, we're investing an additional GBP 4 million in insights and innovation, 2 fundamental pillars of the growth plan that Euan will set out shortly. Overall, while COVID, inflationary and market pricing uncertainties remain, we continue to focus on managing downside risks. We also expect to return to profit in all reasonable scenarios with faster debt paydown, and investment to support future growth. With that, I'll hand back to Euan.

Thank you, James. Let me now turn to headlining the strategy and to introducing the team. In summary, we're now moving to the next phase for Saga, moving from hard one stability in the last 2 years to a focus on growth. We're emerging from the pandemic stronger and we have put in place building blocks to grow, resetting our financials, investing in our brand and in our people and refocusing our businesses. While we are seeing some short-term headwinds like many in the market, we are committed to long-term growth. As a brand that uniquely serves older people, it is essential that we keep up with the growing demands of every new generation of customers as they enter our target demographic. This is something that we've done throughout our history, albeit that the business lost focus on this in the last 8 to 9 years. By understanding and appealing to our customers' changing needs, we can return to being their first choice. We understand that today's older generation do not, in fact, see themselves as old. And they certainly don't want to be seen as old by others. We've spoken before about perceived age and our ability to measure how old people really feel and want to be seen. We now know that ignoring these desires and pigeonholing people with terms or in categories they don't identify with has a detrimental impact on their sense of well-being and even their health. It is certainly a driver or detractor of brand value depending on how much you understand it. Saga will drive products and services that play into how older people see themselves. And we'll use this in all of our advertising. These are some of the current advertising stills on the slides today. So if our customers are not old, what are they? What they tell us is that they are experienced. The idea of our customers as experienced celebrates the positive aspect of aging. Everyone wants to be experienced and our customers have more experience than anyone. It's a key advantage our customers have that no one can argue with. And as Lisa will reference shortly, as we age, we gain a sense of adaptability of purpose and wisdom. It is this experience that facilitates not just strong judgment, but a sense of perspective about what really matters in life and how we want to spend our time. Experience really is everything. And when we tested this idea of experience with our customers, including those who had not previously bought from Saga, we had very strong positive reaction. Put simply, when we show older people as they see themselves, they have a greater affinity for Saga and see it as a brand for them. They've become more likely to inquire and see what we have to offer. This is already evident from our brand tracking, which has shown positive consumer reaction, standout, appeal, a sense of Saga changing for the better and rebuilding of trust, along with a modern and exciting image. The brand campaign is already achieving our aims. This insight and the positive customer reaction has been at the heart of our brand relaunch. The idea experience is everything underpins how we communicate with and serve our customers. We know already that by celebrating age and focusing on the positive associations you see on the right-hand side of this slide, the Saga brand is standing out from other advertising. Customers who have not previously considered Saga are responding to the campaign because it's engaging and different and speaks to them. In short, customers have been waiting for a brand to portray aging in a far more positive light. Older people in the U.K. today are sharp. They are savvy and they're influential. They are contributing to society, to families and the economy, and they demand exceptional service. This helps grow our reach well beyond paid advertising. As one small example, when we launched Grandparents' Leave, we generated over 100,000 views on LinkedIn without $0.01 of marketing investment. And this is just the start of a platform to reestablish Saga as the leading brand understanding our age group. Saga will be the super brand for older people. Let's just remind ourselves of one of the TV creatives. [Presentation]

I hope you all agree that that's a great advert, it's certainly what our feedback is showing and with overwhelmingly positive response from our consumers so far. It's still early days, but we are seeing improvements in brand consideration and more consumers are searching directly for Saga, increasing the traffic and inquiries we generate. So how does that translate into our business formula? We've spent a lot of time understanding this, and this page is an important defining point for Saga over the coming years. So let me outline our vision, our purpose and our positioning. Our vision is to help lead and create a U.K. where older people are valued for their experience, where they have greater confidence, contribution and connections and changing the negative perception of older age in the wider population. Our purpose is to achieve exceptional experiences every day whilst being a driver of positive change in our markets and communities. This is a stretching goal and sets the expectation for every colleague, every product and service every day. To be clear, exceptional means always standing out and being memorable. Experience is an event that leaves a positive impression on someone and every day because consistency for our customers every day is incredibly important. Our positioning is important, too. Our customers want peace of mind, quality and reassurance. They want good value for money, but not necessarily the cheapest price. And this is where we are positioned towards the quality end of our markets, where our customers remember our quality and service long after the price is forgotten. To help in your clarity of thinking about Saga, I wanted to outline both our business model and our business structure in the next couple of slides. First, the business model. We're moving to a capital-light, high-growth, lifetime-value model, which is focused on a number of key metrics across all business units serving our older customer base. Typically, we get most of our customers around the age of 60 to 65, and we have the opportunity of a 30-year relationship with them, where our job is to deliver exceptional experiences every day in products and services, which are important as you age. We do not think of ourselves as a sum of the parts business, but rather a marketing content and distribution business serving older people. There is a formula which will create our lifetime value model, and I've summarized it in simple form here today. This is what our colleagues and teams are focused on delivering across Saga as we step into the next stage of our growth. We're focused on consistent customer growth in all businesses through our product and service improvements, through our brand repositioning and from consenting and reconsenting customers on to our database. Our database is large, and we have returned to delivering growth in customers opting in to a broad range of businesses. Retention is already strong at Saga, and we're building even more capability into this today. We're having success in cross-selling customers within business units, for example, from motor to home insurance and from touring to cruise. And we're building our content business, starting with investment in our magazine and web offer, which has the capability to connect customers with more products and services. We're then improving our frequency of purchase from mainly once per year to once a week with our new magazine format and ultimately moving to introducing new products and services that drive high-frequency contact data points. Not only to serve our older customers in an exceptional way, but provides us with valuable data to drive into our lifetime model. All of this will lower costs, maximize margin and create new connections across a potential 30-year lifetime serving our customers. In doing this, 2 things are key, lifetime value thinking and executional excellence, and this is where the business has failed in the past, so as our focus going forward. To deliver lifetime value model, we need to organize ourselves differently and we've implemented this structure across the group. We will be low capital direct-to-customer marketing content and distribution business. Our core Saga IP is brand data, insight and innovation, which drives all of our businesses. Our businesses will all be entrepreneurial mindset, leveraging our IP and creating long-lasting lifetime relationships with our growing customer base. So what does that mean for our strategy? We've delivered our operational turnaround plan over the last 2 years and have reported progress in the 5 pillars that you see on this page. There has been strong progress in each of them from consistent growth and colleague engagement, double-digit customer NPS improvement, growth in customer numbers, efficiencies and lower net debt. As we pivot from stability to growth, it is time to set a new growth framework and we've summarized this in 3 steps on the right-hand side of this page. Firstly, moving from optimizing to maximizing our existing business units; secondly, step changing our ability to scale whilst lowering debt and thirdly, creating the super brand for older people. Firstly, turning to maximizing our existing business units. We have specific growth plans in place for each business and Steve and Nigel will take you through the details of these in insurance and cruise in a few minutes. The headlines for our existing businesses are as follows: For insurance, Steve has a 4-point plan to move insurance into more growth optimizing the product range and adding new products, building out the CRM capabilities, moving from even more direct and refocusing our product sourcing approach. Nigel will take the already higher load factor and high per diem ocean cruise business and improve it further and take this into rivers with a strong pipeline of growth. John has created a combined low-cost, high choice digital model for touring and stays in the new holidays company and we will relaunch in the autumn peak season when consumer demand and confidence is back. And in Personal Finance, we're in the market looking for a CEO to lead this business, which is forecasting another strong year of growth for '22/'23. There are 2 parts of step 2 in our growth plan. Firstly, step changing our ability to scale by innovating for our customers with the creation of an innovation hub set up in January this year. This is supporting innovation in our existing businesses with new concepts, products and services like high-end private jet touring, innovations in PMI and health and well-being and creating multiproduct capability across insurance. We're also looking at adjacent markets where there is a clear commercial opportunity where older people are underserved and where the Saga model can provide differentiated customer value across these new areas. At the same time, we're working hard with all business units to reduce the levels of debt across the business and to repay the bond falling due in 2024 with available free cash; thirdly, we believe that Saga should be the super brand for older people, and this builds on a step change in data insight alongside the brand repositioning that is already underway, while building this into a content platform that both recruits and delight millions of customers and drives commercial advantage into our businesses. To tell you a little bit more about our insight approach, let me hand over to Lisa Edgar, CEO of the Big Window.

Thank you, Euan. Good morning, everyone. I'm Lisa Edgar. I've spent 30 years in insight and the last 10 to 15 of them exploring older consumers' changing needs. I recognized back then that people do indeed change the age, not just physically or because they've moved into a different life stage, but because age changes them emotionally and psychologically. And this matters. It matters because changing emotions and psychologies mean changing needs and purchasing behaviors. And this is essentially when my team joined the Saga group just 4 weeks ago. I've personally worked with Saga at different times for around 20 years. I've always felt Saga are in a unique position with a huge opportunity to not simply understand cohorts of older consumers, but to understand the process they go through as they age and what that means in terms of needs. Over the last year or so, working with Euan and the team, it became clear to me that this was their vision too. So I'm absolutely delighted that my passion is married with Saga's commitment to investing in bringing it to fruition. Together, we know that this will increase both consumer and commercial value as a result. So our vision recognizes the unique position that Saga is in. Our plan is built around ensuring that every Saga stakeholder and every product and service will increasingly reflect customers' needs as they age in a way that no other provider does. And this is because, yes, we do currently have a strong understanding of our customer base. But moving forward, we are making strides towards being the experts in aging, what it means to get older and how Saga can credibly, meaningfully and relevantly fulfill the needs for aging spawns. We will drive excellence and expertise through our colleagues, products, services and thought leadership. Each of these 3 pillars will reflect a truth about aging such that customers and stakeholders absolutely know that Saga knows how to and delivers on making getting older in the U.K., the best and positive experience it can be. So I said that we're already in a strong position as far as understanding customers per se is concerned, and that gives us a solid platform to work from. For example, in the last year alone, we've built a group-wide segmentation to give us a clear view of our key targets. We have launched and are now growing our customer panel, 5,000 strong and working towards 10,000. And of course, we have a strong legacy in effective performance marketing. So we've recognized those that what will make Saga completely unique and compelling to our customers is our understanding of what it really means to get older. When the key aging moments come to the fore, when the hope spears and aspirations and challenges develop and critically, how they manifest themselves in terms of consumers' needs and what it means to fulfill them. So as I said, whilst we're acquired just a few weeks ago, we've been working for Saga for some time and more intensely over the last year or so. And that really gives me the opportunity to cover 3 real commercial examples from the last year alone that demonstrate how our knowledge of and expertise in aging has translated to real consumer and commercial benefits. So starting with the aging of mind. Our knowledge and work on the aging mind helped us to shed light on the accumulation of wisdom. As a society, we typically focus on what declines as we age. And yes, some cognitive faculties do decline. But the significant offset is that we crystallized our intelligence with age. We build knowledge units, and we store very effectively those units such that we can rely on them going forward. And with that, we make our best financial and complex decisions from our early to mid-50s and retain this wisdom, experience a knowledge store into our older years. Experience really is everything. And this knowledge gave us a grounded basis for our brand position leading it to have an intuitive truth about aging, which resonated with our customers and wider consumer audience. And this is why we believed it performed so well. So the complexity and familiarity dimensions. Deep insight fueled by the latest academic thinking built on our award-winning work with a financial regulator into what becomes more fundamental as we age, i.e., that as we age, we seek familiarity and predictability and look to simplify our decision-making. And this mapping, you see and what lies behind it helped us identify meaningful, relevant and commercially successful consumer solutions, such as 3-year fixed price, and it will help us identify others too. And finally, the third of the examples, Saga talks to consumers at a key turning point in their lives, and I'm going to show you that. We are consistently seeing a strong relationship between age and different measures of well-being, for example, happiness, feeling worthwhile, life satisfaction and so on. And the bottom of this shoe shape is around 48 years, after which, across several [indiscernible] analysis, there is a consistent upturn. In other words, consumers undergo a positive change of outlook just as Saga wants to talk to them. As a result, Saga is absolutely focused and is building products around reflecting this change in mindset. We are developing products that liberate not lament the aging experience. And further, we now understand the key drivers for what sustains this upward curve and our contribution to delivering on those. For example, it's [ longer goal ] the extrinsic aspirations or goals, career, wealth, et cetera, received as more intrinsic goals, well-being, satisfaction, a sense of purpose, start to dominate around the 50-year mark. In other words, and again, at that Saga moment. So of course, identifying trigger moments is always key in successful proposition development. And this is why, ultimately, we will build on our aging expertise such that we can identify the pivotal aging moments as our customers and potential customers transition through the main retirement phases. We will then translate those moments into the needs that Saga will be in a unique position to satisfy. Effectively, we're building a lifetime map of consumers' experience of aging. A longer, more detailed version of what you can see in front of you now. And this map plots what we already know about the key moments in the aging process. And further, as you can see, it superimposes on them, the typical stages that people go through before and post retirement. So you can see here, preretirement, active retirement in the orange, passive retirement and then supported retirement. In fact, these are the stages being used in the retirement planning sector now. So plotting further onto these stages, the protected population numbers for 2026, you can see at the bottom here, we can start to see where the opportunities are and what needs we must speak to unlock them. But what I want to emphasize is this map, I show you now is a strong start, but it's not enough. We will build it out. We will add more detail. We will overlay the changing socioeconomic context and key, we will develop it into solutions that solve problems and fulfill the aspirations that present themselves. As a part of this plan, I'm delighted to announce that from April, a charter psychologist will join my permanent team of insight specialist. Her job will be to work with me and the brightest minds from across the U.K. and overseas and continually refresh our knowledge of aging and build out this map to a much more detailed tool to drive commercial ideas and translate to real solutions. So finally, a plan for leading the way. So what I've described this morning is now cemented into our plan for the next 5 years. The acquisition of the Big Window was just the first step. In our first 4 weeks with Saga, we've developed and begun to enact our 4-stage cycle for driving aging expertise through the organization and what it delivers on. Stage 1, top left, become experts in aging. As I've intimated, we are building both a team and an external network capable of not synthesizing the very latest thinking on age and aging, but translating that thinking into a compelling, continuing solution and solutions. We seek to be the knowledge engine for Saga and have started on that process. Stage 2, top right, we plan to open up the funnel of consumers' needs through the lens of aging. We're about to embark on a flagship insight program and exploring relevant life areas and understanding how aging manifests itself through these areas. For example, aging in the home, a much wider funnel than aging and home insurance, allowing a broader set of needs to come through. This, of course, may include consumers' needs in relation to insurance, but it won't be confined to them. This will be the first of a whole series of such programs, and the planning for this is already underway. Stage 3, bottom right, driving that knowledge through the business units such that every colleague in every part of the organization knows how people age and what that means for their roles and interactions with customers. Again, we've started with a training and engagement plan capable of ensuring new colleagues get the basics of aging as they joined. Practitioners know what it means to apply some of the principles I've spoken about today to communications and products. And senior teams are always making decisions through the lens of aging. Further, it's key that we automate and habitualize this knowledge. Propositions will be developed through the lens of what we know because we will embed it not just through decisions, but through business processes. This work is planned for later this year. And finally, Stage 4, the final stage of our cycle, thought leadership. We will be savvy about its application but we want to be out and proud about our market-leading knowledge. We want to attract the best minds and input, and we recognize that in part, this means driving the industry forward as a whole. Being first and being respected. This will help us continue to fuel our engine, enabling us to keep traveling around this virtuous circle. Our understanding of what getting older means and desire to make the U.K. the best place to get older will pervade everything we do. I'll now hand over to Steve.

Thanks, Lisa. Good morning. I'm Steve Kingshott. I joined the business at the beginning of November last year. I've been in the U.K. general insurance sector for 35 years, and the bulk of my time has been spent in personal lines. I've led businesses in direct broker and affinity distribution. I had 2 spells with RSA, also Direct Line Group. And most recently, I was with Tesco Insurance for the last 6 years. There's a number of reasons I joined Saga. The 2 that mean the most to me are the opportunity to build an insurance business, which genuinely put customer understanding and exceptional service at its heart. And secondly, because I believe that with the unique assets we have in our brand and in our insight into what all the people want for insurance, we can grow to become the leading insurer for all the people in the U.K. So turning to those assets where Saga can differentiate to grow. We have a brand heritage with older people based on quality and service. That heritage appeals uniquely to older consumers looking for reassurance from a brand they can trust. Our latest campaign is building on that heritage and repositioning Saga as a business that understands the positive aspects of aging. We know that repositioning resonates with older consumers, and it builds cook through for Saga in insurance. Other insurers aren't appealing to all the people in the way that we are. The most exciting, as Lisa has talked about, is the unique insight that we have into the experience of aging and the data that we have, our insight as the human understanding of older people, their attitudes and beliefs to that data and we're using this combination of insights and data throughout our customer touch points, whether it's in our product innovation, the design of our customer journeys, the tone of voice in our communications and the way our colleagues talk to our customers to turn service calls into cross-sell opportunities. We're excited about the advantages we have to work with these assets to grow our insurance business significantly. I'd just like to touch on a couple of observations for months in. As Euan and James said, we have real momentum in insurance and cut through in the product and service parts of our insurance offering. We've had real success with our 3-year fixed home and motor products, which we've now enhanced with our Saga Plus offering, which includes the claims promise, which removes price increases following most claims. And the focus we brought to exceptional service has been recognized externally by the Institute of Customer Service, where we're ranked #1 insurance company and more recently by which, who have awarded us recommended provider status for Home and Motor insurance. We've also invested in building the technical platform to support our growth, our technology infrastructure, our online presence and our pricing and underwriting tools. The most exciting, as Lisa has talked about, is the unique insight that we have into the experience of aging and the data that we have. Our insight adds the human understanding of older people, their attitudes and beliefs to that data. And we're using this combination of insights and data throughout our customer touch points, whether it's in our product innovation, the design of our customer journeys, the tone of voice in our communications and the way our colleagues talk to our customers to turn service calls into cross-sell opportunities. We're excited about the advantages we have to work with these assets to grow our insurance business significantly. I'd just like to touch on a couple of observations four months in, as Euan and James said, we have real momentum in insurance and cut through in the product and service parts of our insurance offering. We've had real success with our 3-year fixed home and motor products. which we've now enhanced with our Saga Plus offering, which includes the claims promise, which removes price increases following most claims. And the focus we brought to exceptional service has been recognized externally by the Institute of Customer Service, where we're ranked #1 insurance company and more recently by which who have awarded us recommended provider status for home and motor insurance. We've also invested in building the technical platform to support our growth, our technology infrastructure, our online presence and our pricing and underwriting tools. In general, we know that people are paying for a promise when they buy an insurance policy. They're trusting that they've chosen insurer will put everything right if things go wrong. We also know that it's something of a good purchase, certainly ensuring our cars, and that's less the case for our homes unless again for our pets where the purchase becomes more emotional. From a Saga perspective, we know that as people age, they lean towards brands they trust for quality, for peace of mind and great service. And they look for reassurance and these of purchase they want certainty that once they protected themselves, they can forget about what they bought until they need it. And this is where Saga's insurance offering plays most strongly from the trust in our brand and our ability to deliver exceptional experience when buying and we're making a claim. We also know that the importance older people place on familiarity means that when we deliver those things consistently, it drives long-standing and deeper relationships with our customers. To bring that to life, I'd like to share the example of our 3-year fixed price home and motor product. A few points to make here. The 3-year fixed product was based on an insight into our customers' desire for predictability of price for more than the standard 12 months of a typical insurance [indiscernible] policy. We use that insight to create a compelling product offering, which, as you can see, has reversed the shrinkage of our home and motor policy numbers and put us back into growth. The product also helped improve our retention levels materially, and it increased the proportion of our business that we generate direct. And once we have a direct customer relationship, we're able to leverage higher propensity to buy other products from us and to market to those customers in a more effective and intimate way. I'd just like to touch on our perspective on the FCA changes to home and motor pricing that were introduced in January. The slide in front of us uses data before the changes were implemented. And it shows the preferences of Saga demographic customers compared to the general public when buying car insurance. Two things to bring out here: Firstly, as the slide shows, the Saga customer demographic shows a stronger preference towards trust, having used the insurer before and the reputation of the insurer than the rest of the market when choosing their car insurance. That's also true of their attitude towards price. Secondly, we share the view of many in the market that the reforms will reduce the shop around pool in the medium-term because the fear of being penalized for loyalty at renewal will subside Saga's trusted brand and our insight into all the people's insurance needs will allow us to improve our retention levels even further and whereas customers in Saga's demographic are still shopping around our ability to identify them and position our service offering to meet their preferences because we know what insurance requirements are for older people we'll be better placed to become the insurance choice for all the customers. So we believe that the reforms are a positive development for Saga in the medium-term. I'd just like to step back now to focus on the key areas for insurance. I mentioned several of the assets Saga has that give us differentiation. Our brand, our unique insights into aging our data and our ability to deliver exceptional experiences for our customers. Our plan now is to bring those things to bear in 4 areas of our competitive strategy. In products, we'll be putting our insight into the heart of our product design to innovate and to strengthen our product range. We'll be accelerating our investment in data capture and analytics to build a world-class customer relationship marketing capability. This will grow our customer base, extend customer loyalty, drive increased product holdings per customer and create greater frequency of contact with our customers. We'll continue to drive our distribution shift towards direct from Saga and increasing our capability in digital channels. And finally, we'll be looking at all of our product sourcing options, whether we deliver those in-house or whether we partner externally, and we'll make sure that they are capital efficient and can deliver the exceptional service we need consistently. We're also making good progress on the enablers of those aims. We've made several key hires into the senior insurance leadership team, particularly in pricing, people and marketing. We're working on further digitalization and organization to align our operating model to our strategy. And we're looking at whether we do need any technology investment to build on the platform we already have. So to conclude, as we use Saga assets through those 4 areas, we've made a number of milestones in mind, and I've highlighted a number of those here and in your packs. The basis for our value creation model for insurance is identical to Saga Group. And just to recap, we're confident, we'll take a greater share of the market for all the people. We're not putting a target on that at this stage beyond the growth rate that will outpace the natural growth of Saga's demographic. We'll build deeper relationship direct with our customers, which will drive greater loyalty, increased product holdings and a greater number of touch points. In combination, they will help us grow and drive the lifetime value, which Euan talked about earlier. I'm now going to hand over to Nigel, who will talk about our cruise business.

Thank you, Steve. Good morning, everyone. I'm Nigel Blanks, the CEO of Cruise. I've been working for Saga for 37 years in a variety of roles and have been running the Cruise business since 2018. I last spoke to analysts and investors in 2019 when we held a Capital Markets Day on boat Spirits of Discovery, and I'm delighted to be here today. It's fair to say that in all my time in the travel industry, the last 2 years have been the most challenging. At the same time, we've come out of the pandemic stronger than we went in and we have learned a great deal. In many ways, the experience of COVID has made me more confident than ever before with the strength of our Cruise business. Let me start by setting out the Saga difference. In Saga, our offer is tailored for other people, including meaningful differentiation based on an understanding of what is important. After all, experience is everything. We treat our guests as individuals and not as numbers, be that on their first cruise with us or they're 100th. Our ships are small by modern standards, a maximum 987 guests. The design is contemporary and they are built with our guest needs in mind. We even have a wrap-around [indiscernible] deck, just like traditional cruise ships used to have. We invest in our crew and their well-being, so much so that many have sail with us for more than 15 years. We include so much more than food and entertainment, be that COVID testing before you embark, travel turn from the ship, all-inclusive drinks and even travel insurance. We have industry-leading health and safety protocols and with the first cruise line to be awarded Shields Plus verification by Lloyd's Register for our health and hygiene standards board. Our NPS score is 71, and our guest satisfaction score is 9.1 out of 10, something which we have maintained since we started sailing again, which I think you will agree is an incredible achievement when guests are still not having the full onboard experience. All of this adds up to an incredible loyalty. Many people come back year after year. In fact, we have one guest who has already cruised more than 2,500 nights with us and is currently making more bookings for 2023. Let me talk you through why we are well placed in a post-pandemic world. With two new small luxury cruise ships, we have a high guest to [ puppet ] space ratio allowed us to comfortably operate safely and quickly in a world of social distancing. All of our cabins not only have their own balconies, but are also individually air conditioned. All of our guests and crew are fully vaccinated. We led the industry being the first cruise line to make this a prerequisite of travel, providing both reassurance and peace of mind to our guests and crew. Our guests have remained resilient throughout the pandemic. Many of them just happy to be back on board. Many of them have told us they do not care where they cruise so long as they are cruising. After all, in many ways, we are floating 5-star hotel that can change its itineraries as needed. We have found that our guests not only have time on their hands, but many of them save money through lockdown and post-pandemic and are more determinant ever to live their lives to the full and cruise the world. I characterize our approach to cruising with a simple phrase. At Saga, nothing is too much travel. Nothing has changed as far as we're concerned with regards to our ability to deliver EBITDA per ship of GBP 40 million per annum. What has changed is the timing due to the external landscape we are operating in. 2021 was severely impacted by COVID. We returned to service in June with a reduced maximum capacity of 50% because of the rules imposed on our industry. There were further restrictions from the ever-changing rules in our destinations as countries came to terms living with COVID too. COVID, of course, has not been away. And like all businesses, we are learning to live with it. Our first half performance will be impacted by continued COVID protocols and their associated costs by ongoing restrictions in destinations and by the wider inflationary environment. In addition, we have the war in Ukraine. In practical terms, we have adapted all cruises that were scheduled to call to either Russia or the Ukraine. We do not yet know how long the war will go on and what its wider impacts will be. What I am confident of is that we can be as flexible as needed to keep on cruising. Next chart sets out the load factors in per diems. Chart on the left shows how strong forward bookings position means that load factors are ahead of pre-pandemic levels. Confidence in cruising remains high, underpinned by high levels of first-time buyers at 40%. On the right, you can see how our strategic approach to create a truly differentiated offer based on an all-inclusive approach has been driving up per diems. The average per diems for the U.K. cruise market have remained roughly flat for many years. At Saga, we have brought about a step change in our per diems by adding meaningful differentiation, whilst maintaining our reputation in the marketplace for delivering great value for money with a highly inclusive cruise proposition. So what are our priorities as we look forward? Firstly, of course, remaining on track to deliver the stated EBITDA target from '23, '24. In ocean, our focus remains on driving our value for money credentials by adding further inclusions over time, again, leveraging customer insight. As Euan said, I have recently taken charge of our river cruise operation, which was previously managed as part of our holidays business. We have a strong offer to build, not at least with 2 brand new river cruise ships, which were named only last week in Arnhem. Our aim is to create a center of excellence across both propositions, providing a boutique cruising experience. Our first priority is ensuring the river's proposition more consistently mirrors the ocean experience by being highly differentiated and offering exceptional value for money. We will continue further expansion of our Rivers operation with a capital-light approach that will drive greater returns, adding further ships over the next 4 years. I hope this gives you a good overview of where we are and where we are going. I look forward to taking any questions you have at the end of the presentation. Thank you very much. I'll now hand you back to Euan.

Thank you, Nigel. And to Lisa, Steve and James for your presentations and updates. I appreciate that we've given you quite a lot of information this morning, so let me now very briefly just recap. Over the past 2 years, we have addressed the legacy issues within the business whilst navigating the challenges of the pandemic. This means that we've now reached a point of stabilization. With this in mind, all our businesses are well positioned for growth and will be supported by data, insight, brand and innovation, as I've mentioned previously. . Now that we're emerging stronger from the pandemic, we've been able to increase our focus on ESG and are committed to becoming the champions of experience in the workplace for older people and challenging the perceptions of aging. So what does this mean for '22, '23? Well, first, there are some short-term headwinds heading into the new financial year, even under our most stress scenarios, we expect to return to profit this year and accelerate the reduction in debt, whilst also investing to support the future of growth. We'll now move on to questions and answers. We'll start with questions from the room. [Operator Instructions]

Ben?

Ben Cohen, Investec. I had a couple of questions. I just wondered if you could say more about your confidence in ability to grow in both in retail broking and on the underwriting side, given the competitive challenges that are out there? And maybe you could say more about how the 3-year product is faring in this environment with the regulatory changes and maybe with a higher outlook for inflation? The second question was on the cruise margin, I think, Nigel, when you presented a few years ago, at that day, there was a similar margin target. But now you need to achieve a higher load factor to be able to hit that. Does that reflect kind of underlying inflation in the business? And is there a concern that these inflationary pressures could put more pressure on margin in the medium-term?

Great. Thanks, Ben. Well, I guess it's great to have Steve on the panel to be able to pick up the broking and underwriting. I mean I think just a general comment is that we're seeing some extra competitiveness in motor as we come into the first 6 weeks of the of the financial year. Retention is still in good place. And we're 3-year fixed, it's still a little early in that cycle to see the full impact that Steve will be able to give you some more update on that. On cruise margin, again, we've seen costs move forward. That was a fairly historic set of numbers that I've given COVID, but we're fairly inflation proof certainly in the short term. Again, perhaps James update on that. Do you want to add anything to the broking bit?

Shall I take the insurance bit? Ben, last year, we grew both the underwriting policy numbers and the retail broker numbers. So the market was probably as competitive as I have seen it last year. What we're seeing post-market study, we think is tactical responses to trading positions as people adjust -- as firms adjust their prices. We don't believe that that's sustainable given the underlying inflationary pressures coming through car insurance, in particular, but also home insurance. So that should settle down this year, probably towards the end of the third quarter if I was a betting man. And so the competitive landscape we're playing into kind of normalize is our view. And then on 3-year fixed price, we know it was incredibly successful for us. We still think that will grow because of the appeal that we've talked about to all the people, and we still think it will be a key part of our armory. And on the inflation impact on it, Ben, I mean, clearly, we had a view of forward inflation when we designed the product. And we're on top of that, and we had margins built into it to see ourselves through any inflationary environment. Clearly, we look at that all of the time. And as James mentioned, we recognized the earnings of the 3-year fixed on a smooth basis, so it doesn't give us a profit chunk.

James, do you want to update on the cruise business please?

Yes. I think just to add on the 3 effects I remember -- someone did buy 3 years ago when we launched the product, and we were talking about how we were accounting for it then and the fact that we were being quite prudent in essentially deferring part of the revenues on an assumption that inflation was going to be high-single-digits. So what we've seen in the last couple of years is that inflation has been lower than that, and that's obviously helped our margins. As we go into next year, we've actually increased the inflationary assumptions, so they're now into double-digit territory. So I think within the 3-year fixed, profitability, we should be able to cope with inflation going up higher than it is right now. So at the moment, it's still high single digits. And I say, we are assuming within the 3-year fix that it is going to be higher than that a number of percentage points higher is up. On the Cruise side of things, I think those numbers that were, I think, put out a couple of years ago were based on the original business plan. And the numbers we've sort of updated are almost sort of element of retro fitting based on the cost base of what sort of load factor you would need to get to a GBP 40 million of EBITDA. The point I think there is that, that isn't the limit of what we would want to do. So I think we would be aiming at any sort of normal environment to be doing better than 85% load factor. Having said that, after the experience over the last couple of years, I think a load factor would be quite a good place to be. So -- but you're right. I mean fundamental there has been a bit of an increase in cost. But I think, hopefully, what that chart shows is that on relatively unheroic assumptions around load factor, the original business case very much stacks up. And based on what we think is a reasonable level of customer demand, actually, we would really be able to do better than that as we get into next year.

Nick?

It's Nick Johnson from Numis. I've got three questions, please. Firstly, on cruise. So we're getting close now, I guess, to lapping the sort of bookings you took post the restart last year. Just wondering what you're seeing in terms of repeat bookings for the second half of this year? And you can say in terms of what proportion of bookings in the second half are repeat bookings? Second question is on broking. You say you're focused on disciplined pricing. Just wondered how disciplined can we expect the margin to be reasonably stable at expense of customer numbers? Or will there be some margin compression? Just trying to get a feel for the sort of the composition of the comments around profits being lower in broking this year. And then on super brand. You see that older customers are underserved. I'm talking all about Saga's expertise, which is great. Just wanted to in practice, perhaps we could just flip it around the other way, in practice what aspects of what competitors do, maybe frustrate older customers in terms of -- so what might be the easy wins in terms of doing things better that some of the competitors focusing on younger generations don't do well for older the customers?

Great. Thanks, Nick. I mean I guess just taking that in reverse order. There's quite a lot of insight that we are getting into now, and it can be quite subtle changes. The basic premise or the basic easily understood access into this thinking is it is very difficult for all of us in this room to understand what is like to be 73 until it's probably too late because we're not going to be sitting in rooms like this at age 73. So understanding those life stages that we're going to go through is quite alien to us because we're just not there yet. So the work that we've put up and Lisa showed in terms of the segmentation and the phases that we will all go through as we retire, as we move on to fixed income, as we become a little bit less sure, need more reassurance, there are subtleties in that where there is huge commercial opportunity for us as a company and also therefore, to serve customers better, perhaps Lisa if you got any other thoughts on some examples there, but...

Yes, yes, absolutely. It's about using crystallizing the latest thinking about how kind of people perceive themselves as they get old and translating that into consumer solutions. But what we found through the eyes and the mouth of consumers themselves is they can often feel patronized by competitors as they go into their older years, both in terms of the products that are offered and in the way that they're positioned to them. So I think in both of those ways we can really kind of resonate with them in terms of what we offer and how we offer it.

[indiscernible] I think I mean the -- I mean I think you've brought a lot of insight into how a lot of companies marketing for older customers generally has them sitting on safe drinking cups of tea. And that's a really patronizing approach, which many companies don't get because they're populated by people who aren't 73.

Is a very simple one, a very small example, which is kind of easily accessible is that we've got a dating website, which has got a Saga name on it. It's a white labeled service. It's really not going anywhere right now. The unlock for that is not about dating, it's about connections. So when we're older, there's a higher divorce rate, there's quite a number of our customers who are single because their partner has died. And therefore, connections is a far more interesting and inclusive and widespread opportunity for us than dating. Now you might date after that. but just a difference, which is quite a subtle difference tends to open up individual markets. And when we start to look at that across health and well-being across the aging population who probably need to work for longer, who want to enjoy a different type of luxury on cruises and everything else. There are lots and lots of these that when you put them together, there's pretty significant advantage for us, and we don't think other competitors are particularly looking at that slice of the market in that way. Cruise just a head in on that, and perhaps Nigel will be able to update a bit more on it. We've got a very healthy '22, '23 season. So I think we're probably over obsessed in the last 24 hours around the 4 cruises that were in the Baltic Sea, and we've had to move those around a little bit because obviously, we're not supporting Russia and stopping at St. Petersburg. We've got very high retention, and we're very good at consolidating cruises, having gone through COVID now. So we've got kind of 97% of those customers who have been affected on -- those 4 cruises only have either already booked into other cruises in '22 or are waiting into the '23 impact. And in terms of first-time buyers, it's actually still a very healthy proportion of our business, about 40%. So we've got high repeating customers, but we've got lots of very good interest from first-time bookers into Saga. And I think we have one market share because we have been so focused on guest and crew safety first. So it is a very safe place to see the world. Nigel, I'll probably take most of the headlines there, but anything else that you want to add to that?

Yes, I think just to add to that, the guest book quite cyclical as well. So what we're seeing is that people that booked last year with us which was in a more sort of protracted cruise product proposition because it's quite limited what we could offer because of COVID and now coming back to experience more of the further proposition. We still have some constraints. But obviously, it's -- they like what they saw what they liked was the modern contemporary cruise ships that we built to challenge and change the perception of Saga or paying dividends. So that's really supporting. And most importantly, we haven't turned off the loyal guests that we had as well. So we're getting a good mix of the 2 cohorts now. So it's a really strong position.

Great. And Steve, James, do you want to cover the disciplined approach?

I will give a perspective on that, Nick. That balance between scale and margin, that's what's behind the discipline point. It's really important for us that our customers don't get big price shocks because that fundamentally unwinds the 3-year fixed contract where it's all about stability. So as we see inflation come through, we will be drip feeding that into our price so that we don't hold back on price increases and then have to move quickly. And we see that kind of underlying the market behavior at the moment. So COVID unwind, inflationary pressures in the supply chain, building up into prices at the moment. And so we would on the side of margin rather than scale economically, but also to protect our customers in terms of price increases over the medium-term And we think that will play out to our advantage, whether it's in the next 6 months, we will see.

The only thing I'd add to that is that -- so I don't -- it's not like we're trying to engineer to a specific margin. So it's not like we're aiming for GBP 74 a policy, it's the margin. That's very much the output of the mix of new business and the mix of renewals and the new business margin is lower because you've got all of the cost of acquisition that you need to incur. So the new business margin, even in a price equalized world, is lower than the renewal market. So that sort of mix effect has some impact on where the margin will land. And obviously, unless new business that will help the margin. And conversely, if you add more new business, that will reduce the renewal margin. But either of those two outcomes could be absolutely the right thing to do in terms of where we're seeing the business, which is on a sort of 3-year economic view. Andreas?

Andreas van Embden, Peel Hunt. I just want to pick up on to two points. First one, the lifetime value you raised as a strategic point. Maybe Lisa, could you maybe talk around what your experience is with customers shopping around in sort of the older age demographic and how that has changed over the last maybe 10 years. Is there more shopping around or perhaps even less. And then just thinking about winning customers, Euan, do you think that with your new strategy, particularly the marketing strategy I think Saga in the past has struggled to grow its customer base in line with the demographic. Could you maybe longer term highlight whether you think that's achievable to grow in line with your demographic and when that might happen? The second point I want to raise is on the capital-light sort of strategy. And just thinking about insurance rather than the cruise business first. But obviously, Saga has built up the panel and the panel is now fully up and running. It's diverse and the broker is pulling risk from that panel. Could you maybe explain on that you've joined essentially from another broker Tesco with a panel. Could you just explain what the synergies are between AICL and Saga going forward and whether you would need to own AICL to continue your strategy or whether it would make sense to divested of that panel is fully up and running?

Excellent questions. Lisa, do you want to pick up their kind of shopping habits really interesting point I think.

So what we see is people get older is that they're really conscious of how they're perceived by others in relation to the savviness of them being a consumer. So they're really conscious of not being a incoach stupid consumer and still being a saavy consumer. And that couples with and makes a nice tension with the fact that they actually kind of don't want to shop around. They want to find a brand that they trust. But at the same time, they don't want to be seen as a stupid consumer because they're more cognizant of how they're seen by the outside world. So what we see in kind of in shopping around inclination is not wanting to do it, but feeling like they are forced into it in the search of a brand that they can trust and I think that's the direction that we've been heading in and we're heading towards is further is ensuring that we offer a suite of products that resonate with them and they feel kind of liberated by. So I hope that makes sense.

So I guess if I pick up the next one in order. You're absolutely right. We've been a bit schizophrenic. We've been bouncing around who is our customer, to be honest. We've been saying is it the over 50s? is it the 65 or over? Is it back and forward? It's really important for us to understand who is in the laser point of our customer segmentation and really customers join us about the age of 60, 65, when you get to that point where you need that extra reassurance quality. And so therefore, while we will serve people from over 50, it really gets into a sweet spot from 65 to 75 and then after that. So therefore, looking at growth, we've obviously got a short-term rebound that will come into the travel businesses, and we're seeing that with crews already. We're starting to see that build for the second half of the year with holidays and touring too. And then we've got ambition with the holidays business, which is a completely different business to what it looked like going into the pandemic and we'll give a deep dive on that to the next update in September. So we've moved to a very low-cost digital format, which expands the product portfolio for all of our customers. So therefore, it will appeal to more people with a Saga wraparound, which is very similar to cruise positioned in a very similar quality aspect. We believe that will then allow us to serve many more customers who want to go on holiday. The available market to us is about 33 million trips per year for our over 65 audience. And so even at a relatively low market share of that, then there is a significant number of passengers that we can satisfy with a new digital model. In cruise, it's all about maximizing load factor. As we've said, we're probably leading the way in the cruise industry today in terms of the load factors achieved and the booking format that we've got into '22, and we've got our normal waiting list for the 2023 season already waiting there. Rivers is an interesting aspect for growth. And obviously, today, we updated with four more river ships. That won't be the end of that. So that grows customer numbers, too. The final point, I guess, I would -- or two points I would make is that, we have a very large database, which has been going through quite a lot of deep surgery over the last 2 years, moving it from an old legacy platform into the cloud and giving it massive computing power. It's now being used for lots of use cases across all of our business units. But in broad terms of the 12 million people in our target segment of over 65, we have 6.5 million of the marketable today. That's the base. What we've then recommitted to is a program of reconsenting those customers post-GDPR to the maximum consent. And we're getting about a 70% positive hit rate for every contact that we make today. So we bottomed out the decline in the database and we're now flat and moving into growth, which will give us the opportunity to grow. So the final comment is in line with Steve's comment in insurance around growing ahead of the segment and market growth. We want to be growing ahead of that for the whole of Saga to over the next 5 years. That gives you some context on that. And then capital-light, James, do you want to give your views and then perhaps Steve as well?

So I think the questions you asked just coming back from the previous ones. I think lifetime value around shopping around and why Saga is struggling to grow the customer place. I mean those are really good questions because those are at the heart of, I think, what we've been thinking about in the last 6 months. And I think if you look at the last 2 years, a lot of what we've been doing has been around building the basics -- or rebuilding the basics, better way putting it, but in the sense of data, a single customer view, having more a wider variety of data sets that can inform how we market to people and how we design propositions. Obviously, the investment in the brand has been another piece of this. So addressing that perception that Saga is not for me, and that is squarely what the new brand work is designed to do. Focusing on content, rebuilding magazine. That's going to be relaunched in the next few months using that as a distribution tool insight with Lisa. There's a lot of sort of basic building blocks, which we've needed to do. to turn the corner on that. And hopefully, in the next 12 months, you start to see the benefits of that. On the capital-light. So I think the -- I think exactly where we're going here, Andreas, and I think it's a good question. I think for us, there's elements of what AICL does that are really important, to us being able to fully understand and service the customer base. So I think there are elements of, for example, pricing, where we can really differentiate ourselves relative to what others can do. There is a question, I think, do we need to have all elements of the capital provision? And I think we'd probably say we don't need to. I think AICL is probably in a position now where it is actually, there's a lot of really good capability in AICL, which wasn't there a few years ago. So I think that, that positions us to really think long and hard. I think this is belly where Steve was going in his fourth pillar of his strategy. which is around what is the right product sourcing. Because I think from that probably comes in the debate around, is it panel? Is it solar? Is it something else? And so that -- and I think we're completely agnostic on what the right outcome is on that one. And yes, I mean -- Steve, I'll probably have to...

Just building on that, Andreas. It's reinforcing really what James has said. If I look into the competitors from whom Saga customers buy today, they have a far neater mix of the manufacturing part of the business and the risk carrier and the distributor that we do. And we've got better at over time. And as James says, AICL does do some great things on risk selection, risk pricing that are important for that delivery of the ultimate price customers. Turning to the panel. What's the panel given us? It's given us an opportunity to put a competitive price in front of as many Saga customers as we can. But achieving consistency of service, achieving the right sort of product development that we envisage and being able to cross-sell more effectively. It's not impossible to do through multiple relationships like that, but it makes life harder. And so we'd want to look at the panel arrangements alongside those ambitions to drive lifetime value and differentiate our product and make our service consistent. And so I'd want a panel to be complementary with AICL rather than in direct competition with it because that doesn't really serve Saga's customers. And it is, as James said, it's the fourth pillar of the insurance strategy to look at. And the other thing to bear in mind, that thinking is to do with travel, PAT, PMI and then any other product that we might innovate in, that we might not want to underwrite or control ourselves in-house.

Great. Thank you. Second row.

Alex Evans, Credit Suisse. Just a couple on insurance, please. Just maybe on the growth side of things. Do you think you've seen a retention impact from the FCA pricing measures in January or past that? And then just about maybe a little bit more about the growth, if you're pricing for double-digit claims inflation in the 3 years, are we assuming that new business is going to be a bit of a struggle, but then you're improving on the retention side of things. And then what you've seen for renewal pricing for the market or yourselves so far? And then just on the combined ratio moving parts year-over-year. It sounds like you're looking at relatively flat combined ratios. But I mean, if you could just give some guidance on how you think about pricing relative to claims inflation for that?

In terms of retention, it is too early to say, but we haven't seen anything beyond what we were expecting in the first few months of market study going in. As we said before, we have seen some tactical pricing dynamics in new business, but we think they'll have to settle down given the underlying inflationary pressures. In terms of guidance around I think it's just too early to say at this stage, James, I don't know if you want to add anything.

I mean retention will also be equal or to be better, given that obviously there's going to be lower year-on-year price increases. I guess two things there, though, one is our retention is already very good. So it's a bit hard, certainly on home for it to get that much better than it always be a bit better, but I don't think it's going to be in a different place altogether. This year is also the first year when we have 3 FX policies coming up for renewal. So I think that invariably, you'll probably see a bit more shopping around as that first cohort starts to renew those policies. And the retention -- I mean retention has been off the charts on 3 FX It might be slightly lower this year. But I mean, I don't think we would see it as being dramatically different compared to what we had last year. Maybe it should be thereabouts or a bit better. In terms of the inflation, so I think the -- I mean we've always priced 2 FX on the assumption that inflation would be sort of high single digits. And then we've accounted for it an assumption that inflation will be even higher than that. So I think that certainly from that profit recognition point of view, even if inflation were 12%, I don't think it would have a particular bearing on our -- the sort of the earnings of that cohort of business that is already on our books. In terms of combined ratio, pricing versus claims inflation. So within AICL stand-alone, so they would be pricing for sort of the high single digits in terms of inflation. And that probably is more or less where we're seeing claims inflation right now. In terms of the combined ratio this year is probably going to be still a bit more skewed towards reserve releases. And I think on that front, reserve releases will be lower than they were last year. but still probably above that sort of run rate level of the future.

Ruchi Gupta from Western Asset Management. I have just a few questions on your medium-term guidance that you had given in terms of financials. You mentioned that you have modeled various scenarios under which the headroom for your covenants under the bank debt -- under the shipping debt looks fine. Could you just give us some color on what's the base case assumption and worst-case assumptions that, if you can. Also, I think in the Slide 16, you show cash flow that's debt reduction. I assume it's coming from cash flow, which is available for debt reduction. And it looks like to me, I mean, I know if it's not scale or not, but if GBP 30 million reduction of debt was achievable between last year and this year, and it grows 3x next year, so I'm assuming a 100 million cash flow coming for debt reduction from the operations. And on cruise business, can you elaborate if you have any fuel hedging in place. And also, I think I was just wondering, I think new business acquired in broking business has stayed stable at 59% over this year and last year. So what's the scope of improvement there from current level? And my last question is on medical insurance business. Do you expect any improvement going into 2022 there?

James, looks like it's for you.

Let me just run all down. Start at the top. So on the debt reduction chart, so the assumption is there. So we've got a base case and then we've got some downside scenarios, which we've built into that. And then you can sort of see the shading sort of takes you from one to the other effectively. In terms of the assumptions around the ships. I don't want to get too specific because I think that's probably giving sort of undue because also undue emphasis on one or other assumption. But what we've assumed is that certainly for this year that there is several periods of sort of times that we would need to put the ships into a suspension mode for a couple of months and then beyond that, a lower level of load factor beyond this year. So we think that the sort of the downside assumption there is quite a cautious one, given what we're seeing today. So I think we would certainly hope that, that cautious assumption that we've built into that debt trajectory chart is a reasonably pessimistic one for the cruise business specifically. In terms of cash for debt reduction, again, I'd sort of rather not get into sort of trying to guide too specifically on that one. But I would say that the debt reduction chart is a pretty -- quite a robust process around how those numbers put together. So I think we would feel comfortable with the overall direction and I think the numbers you are raising are probably consistent with that. On the cruise and the fuel hedging. So we're hedged for this year. So we hedged before Christmas at much lower levels than where the oil price is now. We're not on sale for 2023 yet, so we're not hedged for 2023. There is probably about a $3 million extra cost that we would have in 2023 versus 2022 if oil prices were to stay where they were on Monday. That's the last time we checked. So it's not, to be honest, a huge consideration for us. And I don't think we feel any great urgency to go and hedge at current levels either. On new business and direct. So I think this is -- I think there's probably a difference between short-term and the medium-term. So short-term, I think post-market study, this could be -- it's probably a bit more of a volatile situation. But as you can see, I think, from Steve's own slides, that second -- is it second or third I can't remember the pillar of your strategy.

Three.

Three, is around further shifting towards a direct model, which is not to say that we then want to cut off price comparison websites because they still have a role to play. But through all of the things that we're doing in terms of the brand investment through content investment through other things, the aim is really to pull people more in from a direct basis. So we would certainly want to build on that 59% level and see that as a higher number. And then on medical insurance. So last year, part of the impact was from essentially private hospitals clearing backlogs in claims. Part of it was more pricing decisions. So it was probably about half-half in terms of the impact. So the medical treatment backlogs, I think, are largely cleared by now. So that should be less of a factor in this year.

Great. Thank you. Any other questions from the floor? Emily, is there anything online that we need to pick up.

Yes. So we've had 3 questions from Leopold Bian at Tresidor Investment Management. The first is on the impact of the FCA market study on broking margins, which we've already answered. The second question is on other broking. What do you expect for profitability in that division going forward?

Okay. Steve, do you want to pick that up? We're seeing some positive signs in travel insurance. Do you want to update?

Yes. In terms of scale in the early months of the year, we've seen a significant increase in demand on travel, and that's played very helpfully to offset any of the noise we've seen in some areas on direct motor. So that's been positive. And our outlook for margins from the retail business is still relatively strong. The big uncertainty, as we've said, is the impact of market study, and we just think it's too early to call that. And we don't think that we are seeing -- what we're seeing at the moment will continue.

Great. Thanks, Emily. Thanks, everybody, for coming today. Great to see you all. I'm happy to update as we go through the day with any other questions that you might have. Thank you.