Over-50s group Saga has slashed its profit targets for the year due to a “challenging” insurance market.
The group saw shares plunge after it told shareholders that it was now expecting to post a full-year pre-tax profit of between £20 million and £30 million.
Saga had previously said it was set for a profit between £35 million and £50 million for the year.
It downgraded its expectations after facing high levels of claims inflation, currently about 13%, in its underwriting business.
The group said the cost of claims is expected to remain high while “sales of motor and home insurance policies” are also due to stay at current levels in the next half of the financial year, having an impact on profitability.
It came as Saga tumbled to a £257.5 million pre-tax loss for the six months to July 31, compared with a £0.7 million profit over the same period last year, after it was dragged down by a £269 million impairment in its insurance operations.
Meanwhile, revenues surged by 65% to £258.3 million following the recovery of its cruise and travel operations after pandemic restrictions eased.
Euan Sutherland, Saga’s group chief executive, said: “Following the launch of our multi-year three-step growth plan and the strengthening of our leadership team, we are focused on delivery of step one, maximising our existing businesses, step two, reducing our debt, and step three, creating the superbrand for older people in the UK.
“Looking ahead, while we are mindful that the external environment remains challenging, we are confident that Saga is now in a stronger position than it was before the pandemic.
“We are determined to build Saga into the largest and fastest-growing commercial network for older people in the UK, building a customer lifetime value model and creating long-term value for our investors.”
Shares were 12.3% lower at 117.7p in early trading.