LONDON (Reuters) -Shares in Saga soared 11% on Friday after the British over-50s holiday group and Belgian insurer Ageas said they were in exclusive talks to set up a 20-year motor and home insurance broking partnership and after Saga reported underlying profits which more than tripled from a year earlier.
Under their deal, Ageas would also buy Saga's insurance underwriting business for 67.5 million pounds ($88.1 million).
Ageas, which abandoned attempts to take over British insurer Direct Line earlier this year, is looking to build on its non-life presence in Europe, and focus on products for an ageing population, it said in a statement.
"This transaction allows us to grow in a market where we already have real strength and expertise," said Ageas CEO Hans Cuyper.
Saga also reported underlying pre-tax interim profit surged to 27.2 million pounds on Friday from 8 million pounds the previous year on strong performance in its cruise and travel units. The group said earlier this year that its insurance business was weighing on its results.
The Ageas deal "would create a winning combination," Saga Chief Executive Mike Hazell said in a separate statement.
The partnership would see Ageas UK operate Saga's motor and home products broking business, which distributed products with gross written premiums of more than 479 million pounds in the year to July 31, 2024, the companies said.
Ageas UK would pay Saga 80 million pounds upfront and Saga may receive up to 30 million pounds in 2026 and up to 30 million pounds in 2032, subject to volume and profitability targets.
The deal would have a negative impact on Ageas' solvency position of 5%, Ageas said.
Saga shares rose to their highest since January. The shares already had a lift last week when Saga confirmed a Sky News report of partnership talks with Ageas, without giving more details.
KBC analysts said in a note that they expected Ageas to pursue further UK insurance acquisitions, in addition to the Saga deal.
"Ageas' current activities in the UK are too small to operate at an acceptable efficiency level," they said.
Ageas shares were little changed.
($1 = 0.7666 pounds)