This announcement contains inside information.

16 December 2024

Saga plc

Saga and Ageas agree new Insurance partnership and sale of Saga's Underwriting business

Further to the announcement on 11 October 2024, Saga plc (Saga) has entered into an agreement with wholly-owned subsidiaries in the UK of Ageas SA/NV (Ageas), to establish a 20-year partnership for motor and home insurance (the Affinity Partnership).

In addition, Ageas will acquire Saga's Insurance Underwriting business, Acromas Insurance Company Limited (AICL) (the AICL Sale) (the Affinity Partnership and the AICL Sale being together, the Transaction).

The Affinity Partnership will combine the strength of the Saga brand, Saga's marketing skills and customer base and Ageas's extensive and growing UK insurance operations. The Affinity Partnership will build on the existing successful relationship between the Saga group of companies (the Group) and Ageas (UK) Limited (Ageas UK), which is already a member of Saga's panel of insurers. The new partnership is designed to deliver best-in-class insurance services to Saga customers, driving growth in Saga's motor and home insurance business through differentiated products, first rate customer service and value for money.

Saga, with its specialist role as a leading provider of products and services for people over 50, is committed to providing best-in-class products and services to its customers across all its businesses. Against this backdrop, the board of directors of Saga (the Board) has been exploring opportunities to optimise, with partners, Saga's strategic position in Insurance. The Transaction is consistent with Saga's ambition to drive growth, crystallise value, reduce debt and enhance long-term value for shareholders.

Transaction highlights

Affinity Partnership

·      Wholly-owned subsidiaries in the UK of Ageas have entered into the Affinity Partnership with Saga Services Limited (SSL), Saga's Insurance Broking business, to operate Saga's motor and home insurance products.

·      Ageas will take on price-comparison website distribution, pricing and underwriting, claims and customer servicing activities, with Saga retaining responsibility for brand and direct marketing.

·      The Affinity Partnership, and therefore the sale of new policies and the renewal of existing ones, is targeted to commence in Q4 2025 (such milestone, when achieved, being the Operational Readiness Date).

·      The Affinity Partnership will be for a 20-year term from the Operational Readiness Date.

·      Pursuant to a business transfer agreement (BTA), SSL will transfer certain business assets and grant certain rights relating to its motor and home insurance business to Ageas.

·      Upfront consideration of £80.0m is payable to SSL under the BTA in two tranches, subject to the satisfaction of certain conditions¹.

·      Contingent consideration amounts of between nil and £30.0m in 2026, and the same again in 2032, are payable subject to certain policy volume and profitability targets being met and the satisfaction of certain conditions¹.

·      SSL will receive commission based on a percentage of the Gross Written Premiums (GWP) generated over the term of the Affinity Partnership.

·      SSL's existing partnerships with Collinson, for travel insurance, and Bupa, for private medical insurance, are unaffected by the Transaction.

¹ Conditions include the publishing of Saga's interim accounts for the six-month period ended 31 July 2025 on a going concern basis, without material uncertainty or an auditor qualification, and the extension or refinancing of Saga's existing corporate bond maturing in July 2026 and loan facility with Roger De Haan maturing in April 2026

AICL Sale

·      Pursuant to a share purchase agreement (SPA), Ageas UK will acquire AICL for a base consideration of £65.0m (subject to adjustments) payable at completion of the AICL Sale (Completion), and an additional consideration of £2.5m payable following the Operational Readiness Date.

·      Completion is expected to occur in Q2 2025 and is subject to the satisfaction of certain conditions, including receipt of regulatory approvals.

This summary should be read in conjunction with the whole of this announcement, including its Appendices. Further details of the terms of the Transaction can be found in the summary of material contracts in Appendix III.

Mike Hazell, Saga's Group Chief Executive Officer, said:

"Today's announcement represents an exciting next step for Saga Insurance. This is a complementary partnership which leverages the strength of the Saga brand and customer base, along with Ageas's extensive and growing UK insurance expertise.

"Together, we represent a winning combination. Our joint scale and unrivalled knowledge of the over 50s insurance market represents a strong platform from which we can serve even more customers with relevant, innovative and intuitive products.

"For Saga more broadly, this agreement is in-line with our stated partnership strategy. It demonstrates clear progress as we move to pay down debt and target long-term sustainable growth - for the benefit of all our stakeholders." 

Ant Middle, CEO of Ageas UK said:

"This agreement marks an important milestone in the development of Ageas UK and we are excited about the opportunities this partnership brings.

"Our combined strengths will enable us to serve the growing over 50s customer segment even more effectively, and I am confident that this collaboration will drive increased innovation and competitiveness, benefiting all our stakeholders.

"In particular, I would like to extend my thanks to the management team at Saga for their dedication and collaboration throughout this process."

Enquiries

For further information, please contact:

Saga plc

Emily Roalfe, Director of Investor Relations and Treasury   Tel: 07732 093 007

                                                                                                   Email: emily.roalfe@saga.co.uk

Headland Consultancy

Susanna Voyle                                                                       Tel: 07980 894 557

Will Smith                                                                                Tel: 07872 350 428

                                                                     Tel: 020 3805 4822

                                                                                                     Email: saga@headlandconsultancy.com

The person responsible for making this Announcement on behalf of Saga is Emily Roalfe, Director of Investor Relations and Treasury.

Advisers

Lazard & Co., Limited (Lazard) is acting as financial adviser to Saga. Herbert Smith Freehills LLP and Addleshaw Goddard LLP are acting as legal advisers to Saga.

Information on Saga

Saga, created over 70 years ago, is a specialist in the provision of products and services for people over 50. The Saga brand is one of the most recognised and trusted in the UK. Saga is known for its high level of customer service and its high-quality, award-winning products and services including cruises and travel, insurance, personal finance and media. www.saga.co.uk

Information on SSL

SSL is Saga's Insurance Broking business, providing tailored insurance products and services, principally motor, home, private medical and travel insurance, to Saga customers. Its role is to price its policies, by sourcing the lowest risk price, whether through its panel of motor and home underwriters, which includes AICL, or through solus arrangements for private medical and travel insurance.

In the twelve months ended 31 January 2024, SSL's motor and home products generated GWP of £472.0m and earned underlying profit before tax of £14.8m. SSL had 1,305k motor and home policies in force at that date.

For the six-month period ended 31 July 2024, SSL's motor and home products generated GWP of £234.2m and SSL had 1,213k motor and home policies in force at that date.

SSL is regulated by the Financial Conduct Authority.

Information on AICL

AICL is Saga's in-house underwriter, currently sitting on SSL's motor and home panels, competing for that business with other panel members on equal terms.

For the six-month period ended 31 July 2024, AICL underwrote c.62% of the motor and c.40% of the home policies sold by SSL and generated £102.0m of gross insurance underlying revenue. 

AICL had a Solvency II net asset value of £83.0m and gross assets of £531.7m as of 31 January 2024. In the twelve months ended 31 January 2024, AICL made a loss after tax of £9.6m.

AICL is incorporated in Gibraltar with a branch office in the UK and is regulated by the Gibraltar Financial Services Commission (GFSC).

Information on Ageas

Ageas is a listed international insurance group with a heritage spanning 200 years. It offers retail and business customers life and non-life insurance products and is also engaged in reinsurance activities. It has a staff force of about 50,000 people, and reported annual inflows of more than EUR 17 billion.

IMPORTANT NOTICES

No statement in this announcement is intended as a profit forecast and no statement in this announcement should be interpreted to mean that the future earnings per share, profits, margins or cash flows of Saga following the Transaction will necessarily match or be greater than the historical published earnings per share, profits, margins or cash flows of Saga.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions.

Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect Saga's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to Saga's business, results of operations, financial position, liquidity, prospects, growth and strategies. Forward looking statements speak only as of the date they are made.

You are advised to read this announcement in its entirety for a further discussion of the factors that could affect the Group's future performance. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.

This announcement does not constitute and should not be construed as, an offer to purchase or sell or issue securities, or otherwise constitute an inducement, invitation, commitment, solicitation or recommendation to any person to purchase, subscribe for, or otherwise acquire securities in Saga, or constitute an inducement to enter into any investment activity in any jurisdiction. Nothing contained in this announcement is intended to, nor shall it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever and, in particular, must not be used in making any investment decision.

The distribution of this announcement in or from certain jurisdictions may be restricted or prohibited by the laws of any jurisdiction other than the UK. Recipients of this announcement are required to inform themselves of, and comply with, all restrictions or prohibitions in such other jurisdictions. Any failure to comply with applicable requirements may constitute a violation of the laws and/or regulations of such other jurisdictions.

Lazard, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to Saga and no one else in connection with the Transaction and will not be responsible to anyone other than Saga for providing the protections afforded to clients of Lazard nor for providing advice in relation to the Transaction or any other matters referred to in this announcement. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with the Transaction, this announcement, any statement contained herein or otherwise.

Further information

Effects of the Transaction on Saga

Use of proceeds

Proceeds from the Affinity Partnership will principally be used to offset the working capital impact associated with the transition to the Affinity Partnership. SSL has historically benefited from a favourable working capital profile. This arises from customers making largely annual payments at the start of their insurance policy, which in the case of motor and home are then remitted to panel underwriters between 30 and 90 days later. From the Operational Readiness Date, motor and home insurance policies will be written by Ageas and therefore, customers will pay Ageas their premiums directly and SSL's favourable working capital balance will unwind. The upfront consideration of £80.0m payable under the BTA, which will be received prior to any movement in working capital, is expected to be broadly offset by the working capital unwind.

For the AICL Sale, approximately £22m of the base consideration of £65.0m will be used for (i) the transfer from AICL to the Group of the Enbrook Park property, (ii) a deduction relating to the value of the remaining properties on AICL's balance sheet, (iii) the deduction of AICL's section 75 (s.75) debt, and (iv) transaction costs (see Appendix III Material Contracts for further details). The resulting net proceeds at Completion of approximately £43m will be used to reduce the Group's leverage and for other general corporate purposes, with an additional consideration amount of £2.5m payable following the Operational Readiness Date.

Impact on Group earnings

The Affinity Partnership will see SSL transition to a commission-based model for the distribution of motor and home insurance, with Ageas assuming responsibility for price-comparison website distribution, pricing and underwriting, claims and customer servicing activities. Relative to the current operating model for motor and home insurance, Saga will incur lower costs and receive a lower revenue per policy as a result of the Transaction.

From the Operational Readiness Date, SSL's existing revenues from motor and home insurance will be replaced by a commission from Ageas based on a percentage of GWP generated over the term of the Affinity Partnership.

Reflecting the transfer of services to Ageas, there will also be a reduction in SSL's operating expenses which will be phased during the transition years of 2025/26 and 2026/27 (the Transition Period) to ensure that quality of service for Saga customers is maintained. SSL's operating expenses are expected to reduce to approximately half of their level in 2024/25 in the first full financial year that reflects the run-rate cost base of SSL under the Affinity Partnership.

As a result of the above changes to revenues and costs during the Transition Period, SSL's underlying profit before tax is expected to fall in 2025/26 and then partially recover in 2026/27, before recovering to or exceeding 2024/25 profitability in the first full financial year following achievement of SSL's run-rate cost base under the Affinity Partnership.

As a result of the AICL Sale, which is expected to occur in Q2 2025, Saga will forego earnings from AICL.

As a result of the Transaction, the Group expects to incur:

·      an estimated £25m of intangible asset write-offs in 2024/25 (which are non-cash in nature) resulting from the transition of certain services to Ageas's technology platform; and

·      one-off transition costs during the Transition Period, estimated to be around £25m, including redundancy costs.

Risks to Saga as a result of the Transaction

The Transaction may not proceed to Completion

The Transaction is conditional on the satisfaction of certain conditions. For instance, the AICL Sale is conditional upon approval by the GFSC, as well as the satisfaction of other conditions including the publishing of Saga's accounts for the 12-month period ended on 31 January 2025 on a going concern basis without material uncertainty. In addition, the BTA and, as a result the Affinity Partnership, is conditional upon the Operational Readiness Date being reached.

Whilst the expectation of the parties is that the Transaction will complete in accordance with its terms, there is no guarantee that each of these conditions will be satisfied and, as such, no certainty that the Transaction will proceed to Completion.

Ageas also has certain rights to terminate the Transaction in limited circumstances. For instance, Ageas may terminate the SPA if the conditions to the AICL Sale are not satisfied by 31 October 2025, and it may terminate the Transaction as a whole where Saga is in material breach of its obligations under the transaction agreements. If the Transaction does not complete, the Group will not receive the consideration from, and will not realise any of the potential benefits of, the Transaction.

The total consideration payable under the Transaction includes amounts that are contingent

In addition to the base consideration payable under the SPA and the upfront consideration payable under the BTA, the proceeds of the Transaction include both additional and contingent consideration which is only payable on the occurrence of certain events. For instance, additional consideration of £2.5m payable under the SPA is conditional upon certain matters occurring, including the Operational Readiness Date, and contingent consideration amounts payable under the BTA of between nil and £30.0m in 2026 and between nil and £30.0m in 2032 are contingent upon certain policy volume and profitability targets being met. Whilst this contingent and additional consideration provides potential significant upside for the Group, if such conditions are not satisfied or targets are not met either in whole or part, the Group will not receive the maximum proceeds payable under the Transaction.

Following completion of the Transaction, Saga's motor and home insurance business will be dependent solely on the Affinity Partnership during the term of the agreement

During the term of the Affinity Partnership, Saga will receive commission on motor and home insurance GWP generated. If the Affinity Partnership does not perform as successfully as Saga expects, Saga will receive less commission than expected and will not be able to sell motor or home products outside the Affinity Partnership for the 20-year term without the agreement of Ageas.

The Transaction may have a disruptive effect on the Group

The Transaction has required, and will continue to require, substantial amounts of investment, time and focus from the management teams and colleagues of the Group which could otherwise be spent operating the Group in the ordinary course. The preparation for the Operational Readiness Date and the provision of transitional services for a period following Completion will continue to utilise some of the Group's resources.

UK Listing Rules

The Transaction, because of its size in relation to Saga, constitutes a significant transaction for Saga under the UK Listing Rules. This announcement constitutes a notification pursuant to Chapter 7 of the UK Listing Rules. In accordance with the UK Listing Rules, the Transaction is not subject to shareholder approval.

Board recommendation

The Transaction is, in the Board's opinion, in the best interests of Saga and the Group's shareholders as a whole.

Appendix I

KEY FINANCIAL INFORMATION RELATING TO THE TRANSACTION

Sources of financial information and definitions

Sources of financial information

Unless otherwise stated, all financial information relating to AICL disclosed in this announcement (including these Appendices) has been extracted from AICL's audited annual reports and accounts for the 12 months ended 31 January 2023 and 31 January 2024 and unaudited interim report and accounts for the six months ended 31 July 2024.

AICL's reports and accounts have been prepared based on the same accounting standards and assumptions as Saga's published and audited annual report and accounts for the 12 months period ended 31 January 2024.

Differences in Insurance Underwriting insurance service expenses between Saga's published audited annual reports and accounts for the 12 months ended 31 January 2023 and 31 January 2024 and unaudited interim report and accounts for the six months ended 31 July 2024 and AICL's reports and accounts for the same periods reflect certain consolidation adjustments in the Saga reports and accounts. These consolidation adjustments reflect the removal of the impact of movements in provisions made by AICL for insurance and reinsurance contracts entered into with SSL which do not impact Group profitability.

Definitions

Gross profit for AICL is equal to the non-insurance revenue.

The insurance service result for AICL is calculated as the sum of insurance revenue, insurance services expenses and net expenses from reinsurance contracts held.

Profit/(loss) before tax is calculated as the sum of gross profit, insurance service result, impairment of assets, net finance expense from insurance contracts, net finance income/(expense) from reinsurance contracts and investment income.

Income statement - AICL

Balance sheet - AICL

Appendix II

SIGNIFICANT CHANGE

AND

LEGAL AND ARBITRATION PROCEEDINGS

AND

RELATED PARTY TRANSACTIONS

1.    Significant change

Saga

There has been no significant change in the financial performance or financial position of Saga since 31 July 2024, the end of the last financial period for which financial information for Saga was published.

AICL

There has been no significant change in the financial performance or financial position of AICL since 31 July 2024, the end of the last financial period for which financial information for AICL was published.

2.    Legal and arbitration proceedings

Saga

There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Saga is aware) during the period covering the 12 months preceding the date of this document which may have, or have had in the recent past, significant effects on the financial position or profitability of Saga or the Group.

AICL

There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Saga is aware) during the period covering the 12 months preceding the date of this document which may have, or have had in the recent past, significant effects on the financial position or profitability of AICL.

3.    Related party transactions

Saga's annual reports and accounts for the 12 months ended 31 January 2023 and 31 January 2024 and unaudited interim report and accounts for the six months ended 31 July 2024 contain details of related party transactions entered into by Saga and the Group during such periods.

Save as disclosed in Saga's unaudited interim report and accounts for the six months ended 31 July 2024, there were no related party transactions entered into by Saga or the Group during the period since 31 July 2024.

Appendix III

MATERIAL CONTRACTS

Part A

Material Contracts of the Group

No contracts have been entered into by the Group (not being contracts entered into in the ordinary course of business): (i) within the period of two years immediately preceding the date of this announcement that are, or may be, material to the Group; or (ii) that contain any provisions under which any member of the Group has any obligation or entitlement that is, or may be, material to the Group, save as disclosed below.

Section 1

The Transaction

Affinity Partnership

1. Affinity Partnership Agreement

On 16 December 2024, Saga Leisure Limited (Saga Leisure), Ageas Insurance Limited (AIL), Ageas Retail Limited (ARL), Saga and SSL entered into an Affinity Partnership Agreement (the APA), which will operate for a 20-year term from the Operational Readiness Date.

Term and scope

The APA will cover the manufacture, sale, servicing and support of Saga-branded motor and home insurance (the In-Scope Products).

Ageas will take on price-comparison website distribution, pricing and underwriting, claims and customer servicing activities for In-Scope Products.  Saga will retain responsibility for brand and direct marketing.

Exclusivity

SSL will not be permitted to market In-Scope Products other than through the Partnership.

Commission

SSL will receive a commission based on a percentage of GWP generated over the term of the Affinity Partnership.

By 1 March 2031, Ageas shall determine an amount of up to £20.0m (the First Volume Underperformance Amount) which may be withheld from commission payments, if the number of policies in force for In-Scope Products were to fall below certain target levels in 2029 and 2030.

By 1 March 2036, Ageas shall determine an amount of up to £20.0m (the Second Volume Underperformance Amount) which may be withheld from commission payments, if the number of policies in force for In-Scope Products were to fall below certain levels in 2034 and 2035.

Brand

Ageas has been granted a royalty-free licence of the Saga brand for use in relation to In-Scope Products until the end of the 20-year term and any exit period. AIL will be required to ensure quality control of its use of the Saga brand, including compliance with Saga brand guidelines. 

2. Business Transfer Agreement

On 16 December 2024, SSL, AIL and ARL entered into the BTA, pursuant to which SSL has agreed to sell certain business assets and grant certain rights to AIL and ARL, relating to the motor and home insurance business carried on by the Group.

Upfront consideration of £80.0m is payable to SSL in two tranches:

·      £60.0m is payable on the 3^rd business day following the Operational Readiness Date or 31 January 2026, whichever comes first; and

·      £20.0m is payable on the 3^rd business day following the Operational Readiness Date or 31 July 2026, whichever comes first.

SSL will receive contingent consideration of between nil and £30.0m by 30 June 2026 (the First Contingent Consideration Date), subject to certain conditions, where the amount payable shall be determined based on the number of policies in force for In-Scope Products at one month prior to the First Contingent Consideration Date.

Additionally, SSL will receive contingent consideration of between nil and £30.0m by 1 March 2032, subject to certain profitability targets, where the amount payable shall be determined based on the average number of policies in force for In-Scope Products for the Ageas financial years 2027 to 2031.

The payment of the upfront consideration and contingent consideration is subject to certain conditions regarding, amongst other things, the publishing of Saga's interim accounts for the six months period ended 31 July 2025 on a going concern basis, without material uncertainty or an auditor qualification, and the extension or refinancing of Saga's existing corporate bond maturing in July 2026 and loan facility with Roger De Haan maturing in April 2026.

3. Transitional Services Agreement

Under the SPA, it is agreed that, at Completion, Saga Group Limited (SGL), and AICL will enter into a Transitional Services Agreement (TSA), pursuant to which SGL will provide certain services to AICL on a transitional basis.

4. Employee Transfer Agreement

On 16 December 2024, SSL, AICL, CHMC Limited and ARL entered into an Employee Transfer Agreement (ETA), which operates to transfer the employment of those colleagues assigned to the claims handling services for AICL to an Ageas entity, subject to consultation. The ETA contains the usual pre-transfer/post-transfer and other market standard Transfer of Undertakings (Protection of Employment) regulations (TUPE) indemnities.

AICL Sale

5. Share Purchase Agreement

On 16 December 2024, Saga, Saga Mid Co Limited (Saga Mid Co), Saga Leisure and Ageas UK entered into the SPA, pursuant to which Saga Mid Co agreed to sell to Ageas UK, and Ageas UK agreed to purchase, the entire issued share capital of AICL (the Shares).

Consideration

The total consideration to be paid for the Shares is £67.5m, comprising a base consideration of £65.0m (the Base Consideration) and an additional consideration of £2.5m (the Additional Consideration).

The Base Consideration payable will reflect certain adjustments (resulting in the Adjusted Base Consideration) and has been agreed on the basis of a "completion accounts" closing mechanism which will be based on AICL's balance sheet immediately prior to Completion.

At Completion, Ageas UK will pay Saga Mid Co an amount equivalent to 90% of the estimated Adjusted Base Consideration (the Estimated Adjusted Base Consideration). The difference between the Adjusted Base Consideration and the Estimated Adjusted Base Consideration, shall be settled following the finalisation of the completion accounts.

The Adjusted Base Consideration is capped at £85.0m and will include the following adjustments to the Base Consideration:

·      A net asset value (NAV) adjustment reflecting any excess or shortfall of AICL's Solvency II NAV at Completion.

·      A potential Solvency Coverage Ratio (SCR) shortfall adjustment.

·      A deduction equivalent to 25% of the Solvency II value of any real estate properties remaining on AICL's balance sheet at Completion (the Remaining Properties).

o  Following Completion, Saga will have a period of two years to market the Remaining Properties for sale on arm's length terms. Following the sale of a property, if the sale price is below 75% of the Solvency II value of the property (the Property Residual Value), Saga will pay Ageas UK the amount by which the sale price is less than the Property Residual Value. If following the sale of a property, the sale price is above the Property Residual Value, Ageas UK will pay Saga the amount by which the sale price exceeds the Property Residual Value. Saga will purchase any Remaining Property not sold within the two-year period at its Property Residual Value.

·      The deduction of AICL's s.75 debt which represents debt due to Saga Pensions Trustee Limited (the Trustee) under, and calculated in accordance with, s.75 or 75A of the Pensions Act 1995.

The Additional Consideration is payable to Saga subject to the Completion of the AICL Sale, the Operational Readiness Date having occurred and certain amounts due to AICL from SSL having been satisfied in full.

Conditions precedent to Completion

Completion of the AICL Sale is expected to occur in Q2 2025 and is conditional on certain regulatory approvals and Saga's financial statements for the 12-month period ending on 31 January 2025 (the Accounts Date) having been prepared on a going concern basis, without material uncertainty for the 15-month period following the Accounts Date and without an auditor qualification.

Prior to Completion, the Enbrook Park property in Folkestone will be transferred from AICL to SGL at its Solvency II value.

Termination

Saga Mid Co and Ageas UK each have the right to terminate the SPA if:

·      the conditions have not been satisfied (or waived, if applicable) by 31 October 2025;

·      there is a material breach by either party of its obligations under the key transaction documents prior to Completion; or

·      the APA terminates in accordance with its terms prior to Completion.

Ageas UK also has the right to terminate the SPA if:

·      an insolvency event occurs in relation to AICL, Saga Mid Co, Saga, SSL or Saga Leisure; or

·      certain specified warranties are breached at signing or would at Completion be breached and such breach would have a material adverse effect on AICL or its business.

6. Tax Indemnity

Under the SPA, Saga Mid Co has agreed that, at Completion, it will give a tax indemnity (the Tax Indemnity) in favour of Ageas UK which covers any taxation in respect of the period prior to Completion, subject to usual exclusions for a transaction of this nature.

7. Parent Company Guarantees

Pursuant to the terms of the legal agreements summarised above, Saga has given to the relevant Ageas entities an irrevocable and unconditional guarantee in respect of the payment of amounts by the relevant Group companies and performance of the relevant Group companies' obligations under each of the APA, BTA, SPA, TSA, ETA, and the Tax Indemnity.

8. Deed of Cessation

Under the SPA, it is agreed that, at Completion, SGL, AICL and the Trustee will enter into an agreed form of deed of cessation (the Deed of Cessation), pursuant to which AICL gives notice that it will cease to be involved with Saga's Defined Benefit Pension Scheme (the Scheme) and hence trigger liability to pay its share of the Scheme's deficit. Following payment, AICL will have no further liability to the Scheme. The deed also makes changes to the Scheme's rules to facilitate this mechanism and to clarify that AICL will have no further liability to the Scheme.

Section 2

Material financing arrangements entered into within the period of two years immediately preceding the date of this announcement

1.    Revolving Credit Facility

(i)   Pursuant to an amendment dated 23 January 2023, the following amendments to the Group's Revolving Credit Facility between, amongst others, Saga and Mizuho Bank, Ltd., dated 9 May 2017, as amended (RCF), were agreed, in addition to smaller, immaterial changes:

-  Introduction of a restriction whereby no utilisation of the facility is permitted either (i) prior to the repayment of the 2024 senior unsecured bonds or (ii) if both the leverage ratio for the relevant quarter is below 5.5x and free liquidity is below £170.0m.

-  Amendment of the required ratios of adjusted EBITDA to total net cash interest for all testing periods.

-  Amendment of the leverage ratio for all testing periods.

(ii)  Pursuant to an amendment dated 26 September 2023, the RCF was amended to include the £85.0m facility provided by Roger De Haan (see section 2 below) as permitted financial indebtedness, subject to certain conditions including that such facility is unsecured.

(iii) Pursuant to an amendment dated 21 December 2023, the covenants under the RCF were amended to increase the leverage ratio (excluding Ocean Cruise) covenant for 31 January 2024 from 5.5x to 6.25x.

(iv)  Pursuant to an amendment dated 5 March 2024, the following amendments were made to the RCF, in addition to smaller, immaterial changes:

-  Increase to the leverage ratio for all remaining testing periods to 6.25x.

-  Quarterly covenant testing, irrespective of whether the loan is drawn.

-  Introduction of a restriction whereby, post repayment of the 2024 bond, no utilisation of the facility is permitted if free liquidity is below £40.0m.

-  Consent requirement for any early repayment of corporate debt or payment of shareholder dividends.

(v)   Pursuant to an amendment dated 23 September 2024, the following amendments were agreed, in addition to other smaller changes:

-  Extension of the expiry date of the facility from 31 May 2025 to 31 March 2026.

-  Leverage ratio test for all remaining testing periods reduced to 6.0x, based on a revised definition of the calculation, performed on a consolidated Group basis inclusive of amounts relating to the Ocean Cruise business.

(vi)  Pursuant to an amendment dated 26 November 2024, certain amendments were agreed in order to permit, amongst other things, the guarantees to be granted in relation to the Transaction.

2.    Loan facility with Roger De Haan

(i)   On 3 April 2023, Saga Mid Co (as borrower), Saga and SSL (both as guarantors) entered into a forward starting loan facility agreement with Roger De Haan (RDH Facility), such facility being provided by him on an arm's-length basis and commencing on 1 January 2024, under which Saga could draw down up to £50.0m with 30 days' notice to support the general corporate purposes of the Group. Per the original terms of agreement, interest will accrue on the drawn total of the RDH Facility at the rate of 10% and is payable on the last day of the period of the loan. The RDH Facility was originally due to mature on 30 June 2025, at which point any outstanding amounts, including interest, were due to be repaid. The RDH Facility is subject to a 2% arrangement fee, payable upon entry into the arrangement. A drawdown fee of 2% on any amount drawn down under the RDH Facility is payable on the drawing date. Milestone fees of 2% on any uncancelled amount of the RDH Facility were payable on 31 March 2024 and are payable on 31 December 2024 respectively.

(ii)  On 23 September 2023, the Group agreed an increase and extension to the RDH Facility. This increase was for the value of £35.0m, taking the total RDH Facility to £85.0m, and it was extended to expire on 31 December 2025. The purpose of the loan was amended to provide that the interest rate paid on funds drawn under the RDH Facility to finance the repayment of notes issued by Saga, or to provide cash collateral demanded by providers of bonding facilities to the Group, remained at 10%, but increased to 18% for any amounts drawn to support general corporate purposes. In addition, the previous arrangement fees and milestone fees of 2% remained payable; however, the drawdown fee of 2% increased to 5% on drawdowns for general corporate purposes while remaining at 2% for the repayment of notes issued by Saga, or the provision of cash collateral demanded by providers of bonding facilities to the Group. The amended RDH Facility was provided on the basis of certain conditions being met; including that no professional advisers may be appointed to or retained by Saga without prior approval of the Board.

(iii) On 15 April 2024, a reduction of the notice period required for drawdown of the loan to 10 business days was agreed, in addition to a further extension to the termination date of the RDH Facility, from 31 December 2025 to 30 April 2026.

(iv)  On 22 September 2024, an increase to the maximum number of permitted facility utilisation requests was agreed, from three to 10.

(v)   On 26 November 2024, certain amendments were agreed in order to permit, amongst other things, the guarantees to be granted in relation to the Transaction and the disposals forming part of the Transaction.

3.    Cruise Ship Loans

(i)   The Group has two debt facilities in place in respect of its Ocean Cruise ships, Spirit of Discovery and Spirit of Adventure (the Cruise Ship Loans).

(ii)  On 3 April 2023, the Group concluded discussions with its lenders in respect of the covenant restrictions attaching to the Cruise Ship Loans. Lenders agreed to a waiver of the EBITDA to debt repayment covenant ratio for the 31 July 2023 testing date.

(iii) On 26 September 2023, the lenders agreed to amend the covenants on the Cruise Ship Loans to reduce the EBITDA to debt repayment ratio from 1.2x to 1.0x for period from 31 January 2024 up to, and including, 31 January 2025.

Part B

Material Contracts of AICL

No contracts have been entered into by AICL (not being contracts entered into in the ordinary course of business): (i) within the period of two years immediately preceding the date of this announcement that are, or may be, material; or (ii) that contain any provisions under which AICL has any obligation or entitlement that is, or may be, material as at the date of this announcement, save as disclosed below.

1.    Employee Transfer Agreement

Please refer to the summary in Part A above.  

2.    Deed of Cessation

Please refer to the summary in Part A above.