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GER
ESP
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Key Points:
- Long-Term Partnership: Saga is negotiating a 20-year affinity partnership with Ageas to enhance its motor and home insurance offerings.
- Financial Considerations: Ageas will pay Saga £80 million upfront and up to £60 million in contingent payments, while acquiring AICL for £67.5 million.
- Strategic Shift: The deal aligns with Saga's aim to adopt a capital-light business model, optimize its insurance strategy, and enhance shareholder returns.
Saga PLC (LSE:SAGA) has announced that it is in exclusive negotiations with Ageas SA/NV to establish a strategic partnership focused on motor and home insurance. This proposed collaboration will not only include a 20-year affinity partnership but also the acquisition of Saga’s Insurance Underwriting business, Acromas Insurance Company Limited (AICL), by Ageas. Together, these moves are intended to enhance Saga’s insurance offerings while capitalizing on Ageas's robust UK insurance operations.
Partnership Overview
The partnership aims to leverage the strengths of both companies. Saga, renowned for its services tailored to individuals aged over 50, will utilize its brand recognition, marketing capabilities, and established customer base. In turn, Ageas brings significant experience in the UK insurance market, particularly in serving this demographic. This collaboration is expected to foster growth in Saga’s motor and home insurance business while maintaining high standards of customer service. The partnership builds upon an existing relationship between Saga and Ageas UK, which is already part of Saga's insurance panel.
As part of the Proposed Transaction, Ageas UK, a subsidiary of Ageas, will form a 20-year Affinity Partnership with Saga Services Limited (SSL), Saga's Insurance Broking division. Ageas UK is set to manage Saga's motor and home insurance products, which generated gross written premiums (GWP) exceeding £479 million in the 12 months leading up to July 31, 2024. Notably, SSL's current partnerships with Collinson for travel insurance and Bupa for private medical insurance will remain unaffected by this deal.
Strategic Rationale
Saga has a long-standing commitment to providing exceptional products and services to its customers, particularly those over 50. In line with this mission, Saga’s Board has been actively seeking opportunities to optimize its strategic position within the insurance sector. The Proposed Transaction aligns with Saga's goal to transition to a capital-light business model. This shift aims to facilitate growth, realize value, reduce debt, and enhance long-term returns for shareholders.
Proposed Terms
- Affinity Partnership
- The partnership is set for a 20-year term, with plans to go live by the end of 2025.
- Ageas UK will pay Saga an upfront consideration of £80 million around the time of the partnership's launch.
- Additionally, Saga may receive contingent payments of up to £30 million in 2026 and another £30 million in 2032, contingent upon meeting specific policy volume and profitability targets.
- SSL will continue to earn commission based on the GWP generated throughout the duration of the partnership.
- Acquisition of AICL
- Ageas UK will acquire AICL for a total consideration of £67.5 million, subject to standard completion adjustments.
- The completion of this acquisition is anticipated in the second quarter of 2025 and will be contingent upon finalizing transaction documentation and obtaining necessary regulatory approvals.
