Confirmation that Saga PLC (LSE:SAGA) would sell its underwriting wing and enter a 20-year insurance partnership with Ageas saw shares erupt into life on Monday.
Shares surged 9.2% to 135p in the wake of the news Ageas would take on Saga’s price-comparison website, pricing, underwriting, claims and customer servicing activities.
AJ Bell analyst Russ Mould noted the move would allow Saga to focus on its successful travel and financing operations, but still benefit from insurance business.
“While its travel and cruises divisions were the problem during the pandemic, more recently it is the insurance business which has struggled,” he said.
“In that context, putting it in the hands of an experienced operator, as well as receiving a useful injection of cash, has been well-received by the market.”
Ageas would pay £80 million upfront as part of the deal and also purchase Saga’s Acromas Insurance Company Ltd for up to £67.5 million, an announcement said.
In turn, Saga would receive commission from gross written premiums and further performance-based considerations of up to £30 million in each of 2026 and 2032.
“In theory, this could increase the scope for growth and should also help trim a hefty debt pile,” Mould added.
“This seems a sensible approach and the Ageas deal is an important step forward.”