Over-50s insurance and holiday firm Saga has seen shares plunge by more than a third after it warned over profits for the coming year amid an overhaul to return to growth.
The group said it is launching a “fundamental” strategy rethink which will see it change tactics in the insurance business to address “increasing challenges” in its markets.
Shares tumbled as much as 40% at one stage as it said this will knock profit margins, which, together with changes to premium renewal prices and investment in new products, will see underlying pre-tax profits slump up to 42% in 2019-20.
It is now pencilling in profits of between £105 million and £120 million for 2019-20.
The group also slashed its shareholder dividend payouts and took a £310 million write-down on the value of its insurance business.
The profit alert comes as annual results show Saga slumped to a pre-tax loss of £134.6 million for the year to January 31, down from profits of £180.9 million the previous year.
On an underlying basis, pre-tax profits dropped 5.4% to £180.3 million.
Lance Batchelor, group chief executive, said: “Over recent years Saga has faced increasing challenges from the commoditisation of the markets in which we operate, especially in insurance.
“This has had an impact on both customer numbers and profitability.
“The fundamental changes we are making are essential to address the long-term challenges facing our business.”
In insurance, Saga said it is “moving the conversation from price to value”, while it also launched a new three-year fixed price offering.
But Saga’s results show a better performance from the travel arm, with underlying pre-tax profits up 2.4% to £21.1 million, although it cautioned “Brexit is putting a clear dampener on customers’ willingness to commit to holidays in 2019”.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said Saga’s turnaround plan for the insurance arm may be “too little too late”.
He added: “In a market where insurance has become highly commoditised, Saga will need to work hard if it’s to create a reason for older drivers to knock directly on its door.”