UBS takes cautious stance at Saga despite "unique exposure"

3rd Jul 2014 10:56

UBS has initiated coverage of Saga with a 'neutral' rating, saying it is cautious on near-term newsflow despite the company's "unique exposure to a growing demographic".The over 50s-focused insurance, holdings and magazine group is "one of the UK's most well-known and trusted consumer brands", UBS said."The UK population is ageing, financial wealth is increasing, the role of the state shrinking and new lifestyle patterns are emerging. Saga offers unique exposure to these themes through a customer database of 10.4m names that reaches 46% of the over-50s population."While it does have competitive advantages, the bank said it is uncertain how the brand will "age in the digital world"."Saga's strength has been in building its database off the back of holidays and a magazine, supplemented with exceptional customer service. While this hold will be difficult to break, there may well be other ways for competitors to access this demographic in today's world."Meanwhile, UBS said that its important car insurance division faces challenges and margin pressure over the medium term, reflecting the normalisation of reserve development and better use of data by peers.The bank gave a 177p target for the share price, was trading around this level on Thursday morning.BC