#1SAGA Investor update 2 April 2020 SAGA Investor update 2 April 2020#2SAGA Investor update 2 April 2020 Introduction Euan Sutherland Chief Executive Officer 2#3Good progress last year, comprehensive response to COVID-19 2019/20 - good progress against business priorities • Underlying PBT of £110m in line with target range Net bank debt reduced by £30m Successful launch of differentiated products - three-year fixed price & Spirit of Discovery Strengthened Executive Team in place. 2020/21 Q1 - fast start Two disposals announced, expected to release £37m in cash in H1 £15m run rate cost savings delivered Positive momentum in Insurance COVID-19 comprehensive response . - Home and Motor insurance not expected to be significantly impacted 2,300 colleagues now able to work from home, including full customer service capabilities, with no interruption to customers Travel suspended until May; planning for a further delay Precautionary drawdown of £50m RCF; cash on hand at 31 March of £92m Debt covenants reset to 4.75x in the near- term Dividend suspended We have reduced debt, improved liquidity and renegotiated bank covenants in place SAGA Investor update 2 April 2020 3#4Insurance KPIs tracking positively Goal Actual . Policy count (M+H) Stable (3%) Direct share >50% 57% • Retention ~73% 75% Gross margin per policy £71-74 £74 Costs £99m £93m • • • Challenging market environment through most of 2019; we maintained a disciplined approach Success story with 3 year fixed - sold c320,000 policies, over 20% of the Home and Motor book Good retention, well above plan in home and slightly above plan for motor Margins overall at the top of the range, albeit in part due to lower new business volumes Overall, business stabilised after challenging 2018/19 Continued momentum for three year fixed with over 400,000 policies sold to end of March, external reinsurance solution in place to reduce inflation risks SAGA Investor update 2 April 2020 4#5Cruise transformation programme well advanced, despite the recent impact of Coronavirus Launch of Spirit of Discovery • Customer feedback is excellent • EBITDA generation of £20m in H2, supports the run-rate of £40m of EBITDA per ship per year Cruise NPS 59 £40m run-rate EBITDA Despite short-term impact, future demand is healthy Prior to Government shutdown load factors of over 80% • 58% load factors for September to January 66% booked for Sep-Jan targets* * % booked of our revenue targets for the stated period SAGA Investor update 2 April 2020 16% booked for 2021/22 targets* 5#6Opportunity to refocus and reposition the Saga Tour Operations business Saga Tour Operations • • Tour Ops impacted by a challenging environment Gross margins impacted by competitive markets and fixed cost commitments in the first half. Total passenger number down by 8.5% but with more resilient performance in Tours and River • Good performance from Titan Relaunch of the business in Autumn when restrictions lifted • Aligned with Cruise proposition • Smaller HQ, higher quality in field Great value for customer, differentiated and direct control of experience SAGA Investor update 2 April 2020 Tour passengers by product mix 10k 8k 22k 25k 64k 62k 66k 2019/20 Stays Tours River 80k 2018/19 Third-party cruise 6#7Impact of COVID-19 to date - Cruise • • • On 12 March we suspended Cruise operation until 1 May 2020 - The two ships are in Tilbury; significant actions taken to reduce near-term costs Estimated £15m impact on profit before tax, including £3m of losses on oil hedges 57% of customers on cancelled departures have rebooked Bookings for the remainder of the year have been resilient: 66% of target for last 5 months of 20/21 and 16% of target for 21/22 (with positive trends in recent weeks) Booked revenue for period from September 2020 to January 2021 of £49.5m, with passenger days of 173k (comparative figure for prior year was £44m, and passenger days of 166k) Total advance receipts at 31 March of £41m, of which £27m relates to departures from May to December 2020 and a further £7m relates to departures in 2021 SAGA Investor update 2 April 2020 Resilient demand for Cruise from loyal customers 7#8• Impact of COVID-19 to date - Tour Operations On 16 March we suspended all Saga Holidays and Titan departures until 31 May 2020 - Estimated £9m impact on profit before tax ~20% of customers on cancelled departures have rebooked Customer repayments met from CAA ring fenced Group cash £7m of cash provided by Saga Group to ensure headroom to CAA cash collateral requirements At the end of March there were £55m cash deposits corresponding to £69m of advanced receipts. Bookings for the remainder of the year have been impacted by COVID-19 uncertainty: 55% of target for last 5 months of 20/21 and 6.8% of target for 21/22 Booked revenue for period from September 2020 to January 2021 of £79m, with passengers of 33k (comparative figure for prior year was £89m, and passengers of 39k) SAGA Investor update 2 April 2020 The Tour Operations business is a ring fenced Group backed by £55m cash deposits against £69m advanced receipts 8#9Impact of COVID-19 to date - Operational resilience • • • Strong progress from largely unaffected Insurance business underpins cash flow and profitability. 2,300 colleagues set up to work from home Call centre colleagues fully enabled to work from home with no disruption Call answer rates excellent in circumstances, above 98% Very quick adoption of new ways of working - Both ships rapidly put into Tilbury dock – significant logistical effort All cruise colleagues have been able to return back to their home location 3,000 Tour Ops customers repatriated - only 80 passengers still overseas Government furlough of colleagues is underway Operational resilience tested – so far we are doing well - SAGA Investor update 2 April 2020 9#10SAGA Investor update 2 April 2020 Financials James Quin Chief Financial Officer 10#11Unaudited trading update for 2019/20 2019/20 2018/19 Customer spend £1,198.0m £1,210.1m (1.0%) Revenue £797.3m £841.5m (5.3%) Underlying PBT £109.9m £180.1m (39%) Reported PBT (£300.9m) (£134.8m) (123.2%) Available operating £92.7m £182.3m (49.1%) cash flow Debt ratio (ex cruise) 2.4x 1.7x 0.7x • SAGA Investor update 2 April 2020 • Underlying PBT in line with target range despite challenging market environment Underlying PBT excludes: • Impairments of goodwill Impairments of assets of c.£17m £4m one-off costs incurred due to administration of Thomas Cook One-off restructuring costs relating to non-core businesses of c£6m Available operating cash flow above expectations Short term priority is on liquidity and reducing leverage given COVID-19 risks 11#12Unaudited operating results consistent with expectations Underlying PBT (unaudited) 2019/20 2018/19 Retail Broking £90.2m £105.8m (15%) • Underwriting £40.6m £86.7m (53%) Insurance £130.8m £192.5m (32%) Travel £19.8m £21.6m (8%) Other businesses £4.6m £3.1m 48% Central costs £(45.3)m £(37.1)m (22%) Underlying PBT £109.9m £180.1m (39%) SAGA Investor update 2 April 2020 Insurance results in line with expectations No reliance on 'extra' reserve releases Good year for Cruise Tour Operations impacted by challenging trading conditions Central costs reflect an investment into IT, consultancy costs and the centralisation of back office teams 12#13Retail Broking results in line with expectations Year on year movements in Retail Broking Underlying PBT (Unaudited) £105.8m (£4.4m) (£13.0m) £0.4m (£1.8m) £3.2m 1 2 £90.2m 2018/19 Saga branded new Saga branded business renewals Other broking Opex Other 2019/20 Retail Broking profitability consistent with expectations set in April 2019 1 Decline in new business profitability is mainly due to a highly competitive market and higher acquisition costs, including investment in above the line advertising 2 Reduction in renewal profitability is due to an increase in the proportion of lower margin policies sourced from PCWs in the prior year and lower pricing for long-tenured customers SAGA Investor update 2 April 2020 13#14Underwriting also in line with expectations • . Performance in line with expectations. 2018/19 2019/20 £204.8m 2018/19 £196.2m YOY movement in reserve margin (unaudited) £19.8m £23.5m (£40.0m) Underlying revenue 2019/20 £32.7m £86.7m £40.6m Underlying PBT £36.0m Jan-19 Basis change Favourable Reserve releases experience Jan-20 Net earned premiums decreased 4% in line with lower broking policy volumes underwritten by AICL Reserve releases of £40.0m (2019: £77.9m) in line with expectations Movement in reserve margin driven by: Recognition of improved development patterns within actuarial 'best estimate' reserving methodology Continued favourable experience on large bodily injury claims Reserve releases for 2020/21 are expected to be in the range of £15-£25m From 2021/22, COR is expected to be 97% in line with indications from April 2019 • AICL continues to focus on investing in underwriting and pricing capability SAGA Investor update 2 April 2020 14#15Continued strong cash generation Movement in net debt February 2019 to January 2020 1 £391.3m £4.5m £19.8m £25.8m £10.4m £17.2m (£15.0m) (£22.7m) £9.5m (£181.7m) £100.0m 1 2 3 £359.1m Available operating cash flow £92.7m Opening net Trading debt EBITDA Restricted Transfers Working Capital businesses from capital expenditure EBITDA restricted businesses Cruise carve Dividends Tax out Debt service Non-trading Closing net items & other debt Group net bank debt reduced by £32m over the year. This includes £40m of dividends from AICL offset by a £25m subordinated loan to the Travel business to fund the final instalments for Spirit of Adventure 2 Reversal of a £15m positive working capital inflow from the prior year 3 ③ Removal of the Cruise business from the CAA ringfenced group released £23m of available cash Adjusted for capital and interest payments on the Spirit of Discovery, underlying operating cash flow was around 60% of Trading EBITDA Note: Closing net debt stated above excludes the Spirit of Discovery ship loan (£234.8m was outstanding at 31 January 2020) SAGA Investor update 2 April 2020 15#16We have considered several adverse stress test scenarios for the development of the COVID-19 crisis Central scenario assumptions • Cruise suspended from mid-March to mid-September Delay for Spirit of Adventure of 3 months until November • Impacts 26 departures • • • • • Tour Ops suspended from 16 March until the end of August Significant adverse impact on passenger volumes for the rest of the year across Cruise (eg 54% load factor in December 2020) and Tour Ops (eg 40% reduction in pax September-January) Approximately 65% reduction in FY Tour Ops and Cruise revenues (vs plan) Expect 'drop through rate' from reduced travel revenues to full year Underlying PBT of 15-20% for Tour Ops and 55%-60% for Cruise (vs plan levels, net of divisional mitigation actions) Insurance results expected to remain resilient, but a level of prudent stress test included Very prudent approach to travel rebooking, makes no allowance for cruise debt 'holiday' or other payment deferrals, and before other cost mitigation actions SAGA Investor update 2 April 2020 16#17Insurance cash flows expected to remain resilient Some areas of potential downside • • Although we do not underwrite travel insurance, we expect demand for travel insurance to decline significantly in the next 6 months Motor claims costs exposed to supply chain issues Full service PMI proposition may be temporarily impacted, and mid-term claims costs may significantly increase Neutral factors . AICL solvency II ratio estimated to be slightly above 140% at the end of March, in line with planning assumptions; no change to dividend plans Some areas of potential upside • Prudent reserving position • • Motor claims frequency likely to decline in short term Customer retention on 3 year fixed product Strong operational position and good momentum SAGA Investor update 2 April 2020 17#18Strong starting point enables the group to absorb additional short-term liquidity requirements Shareholder cash resources of £92m at 31 March 2020 • • This includes the £14m cash received from sale of healthcare companies Precautionary £50m drawdown on RCF in March • Less £7m cash injection to ST&H ring fenced Further £55m of cash resources in ST&H ring fenced fund at 31 March 2020 • £55m of cash supporting £69m of advance receipts • Voluntarily holding cash to 80% collateral level, higher than regulatory requirement Prudent approach to planning short-term liquidity needs • • • • Working capital requirements expected to peak in next 3-4 months We assume circa 20% of cruise customers defer bookings: in practice >50% customers are rebooking No allowance included for Tour Ops customers rebooking to later departures: in practice >20% are rebooking; no allowance made for potential introduction of a voucher scheme No allowance for any provision of government support outside of the potential to furlough Travel colleagues SAGA Investor update 2 April 2020 18#19Group debt facilities support strong liquidity position Summary of our banking facilities Outstanding (as at 31 March) Expiry Corporate bond £250m May 2024 Spirit of Discovery £234m June 2031 Term loan RCF SAGA Investor update 2 April 2020 £140m May 2022 £50m May 2023 (£50m available) • Corporate bond maturity > 4years Spirit of Discovery loan repayments of £20m per annum No payments on Spirit of Adventure until at least February 2021 £20m to be repaid on term loan in January 2021; full repayment of the balance of £120m in May 2022 £50m drawdown on RCF in March, further £50m potential if needed 19#20Amended covenants provide the flexibility needed to respond to this challenging market environment Key covenants are in the term loan and RCF Covenants Corporate bond None 1.2x interest cover Spirit of Discovery 2x debt service Term loan Net debt to EBITDA (excluding Cruise) 2020/21 4.75x ― Interest cover reset Term loan and RCF Short-term amendments agreed to banking covenants given exceptional circumstances Headroom to amended covenants in central scenario Ship facilities • RCF No plc dividends if leverage >3.0x • Note: Full details are included in the appendices The covenants are effectively tested at the plc level 12 month waiver offered on all ECA backed cruise debt One-year debt holiday also on offer SAGA Investor update 2 April 2020 20#21Debt expected to significantly reduce over the next few years Deleverage profile with stress test applied IPO 2015/16 2016/17 2017/18 2018/19 2019/202020/21 2021/22 2022/23 2023/24 2024/25 Group net debt S of D ■S of A Resilient balance sheet after applying stress test scenarios and allowing for mitigating actions, including: Suspension of dividends inline with our banking covenants Announced disposals Cost efficiencies Consideration given to further mitigating actions in scenarios of longer travel disruption • Net bank debt expected to reduce over the course of the 20/21 year 'Headroom' available to revised bank debt covenants in central scenario, with further mitigating actions available in event of longer travel suspension SAGA Investor update 2 April 2020 21#22SAGA Investor update 2 April 2020 Priorities Euan Sutherland Chief Executive Officer 22#23Current priorities Current focus is on navigating COVID-19 challenges • Supporting customers and colleagues. • Operational resilience and business continuity continues • Ensuring we have sufficient short term liquidity • Mitigating actions taken in travel business • Tight control of costs and cash flows We will continue to make progress as a business • . Continuing the progress made in 2019/20 to improve insurance performance Completing cruise transformation . Rebooting Saga Holidays and Membership . De-leveraging over next 2-3 years and planning for a return to paying dividends Given COVID-19 we cannot provide any earnings guidance or targets for the year SAGA Investor update 2 April 2020 23#24SAGA Investor update 2 April 2020 Q&A 24 24#25SAGA Investor update 2 April 2020 Appendix 25 25#26Insurance goodwill impairment expected of £370m due to an increase in the pre-tax discount rate from 9.6% to 12.6% • Accounting standards require an annual impairment test for goodwill • Goodwill assessment is based on latest internal plans and cash flow projections - Underlying cash flows little changed from the prior year including allowance for further risk Exclusion of all benefits from future profit improvement initiatives Anticipated cost savings fully excluded from the current year calculation The discount rate applied in the goodwill calculation has increased significantly Pre-tax discount rate increased from 9.6% to 12.6% - Mainly due to updated external market inputs, reflecting the lower share price New discount rate reduces insurance valuation by £320m COVID-19 is not expected to lead to a further insurance goodwill impairment Recent share price is not expected to have a further impact Long-term insurance plans expected to be largely unaffected SAGA Investor update 2 April 2020 26#27Simplified the Group with £37m of non-core disposals and £15m of cost savings for 2020/21 Non-core disposals Bennetts Signed in February Completion expected in May/June £23m net proceeds COUNTRY COUSINS PATRICIA WHITE'S ROUND THE CLOCK CARE IN YOUR HOME Costs efficiencies Simplified our organisation Completed in March £14m net proceeds £15m cost savings* Review of all non-essential capex £5m capex saving * Before further Travel mitigating actions SAGA Investor update 2 April 2020 27#28Amended term loan and RCF covenants Leverage Interest ratio cover • Covenants tested quarterly if leverage. July 2020 4.75x 2.5x (excluding Cruise) is greater than 4.0x Oct 2020 4.75x 1.75x • No plc dividends if leverage (excluding Cruise) is greater than 3.0x Jan 2021 4.75x 1.0x • Included the ability to provide £50m of intercompany loans to Cruise until July 2021, dropping to £25m £40m available immediately Further £10m if the ship financing standstill is not provided Best endeavours for us to obtain standstill Apr 2021 4.75x 2.0x Jul 2021 4.25x 3.0x Jan 22 4.00x 3.5x Jul 22 & onwards 3.00x 3.5x SAGA Investor update 2 April 2020 28#29ST&H Limited (Saga Tours) balance sheet and ring fence • Ring fenced Group Saga Transport Ltd ST&H Transport Ltd Destinology Ltd Titan Travel (UK) Ltd Titan Transport (UK) Ltd SAGA Investor update 2 April 2020 ST&H Limited The CAA require us to hold cash and bonding within the ring fence to support customers advanced receipts. At the end of March balances included: Advanced receipts £69m Cash deposits £55m % held as cash 80% Bonding in favour of. CAA £32.8m ABTA £18.8m IATA £7.8m £59.4m 29