Annual Report (ESEF) • May 30, 2022
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At the he art of our bus iness m odel is th e drive to unders t and our cust omer s’ wan ts and needs s othat w ecanpro vide them wi th theproducts the y wa nt and the ex ceptio nal experienc e th eydeser ve. Our vis ion is to he lp lead a ndcreate a UK where olderpeople are valued fortheir experi ence and havegreater conf idence, contribution and connections. Alternative Performance Measures In addition to statutory performance measures, the Group also mea sures performance usin g Alternative Performance Measures. These are reconciled tos t at ut or y m eas ur es o f pe r fo rm anc e on p age 47 of t he G ro up C hi ef F ina nc ial O f fi ce r’s Re vi ew an d def ine d in fu ll o n pag e 20 1 . W e ha v e ma de stron g prog ress a ga in st ou r tur naro und strate g y , un locki n g the po ten tia l tha te xi st s with i n Sag a. In2 02 1 / 22 ou r In sura nce bu sin ess pe r for med resi l ien tly , del iv e ri ng th e secon d ye ar o f poli cy gro w th af ter se v era l y ears o f dec li ne. I n T rav e l, we res um ed opera tio ns, del iv e redastrong p ipe li ne o f Crui se book in gs f or 2022/ 23and be g an th e restruct ure ofo ur T o ur Op er ations busine ss . Dur in g the y ea r , we a ls o lau nch ed ou r ne w bran d approa ch, sho w case d by t hree ne w tel e vis ion a dv ert s , proud ly cele brat in g ou r au di ence a nd foc usi n g onthe ir a ttitud e, rather than a ge. In orde r to con v ert the fo und ati on s lai d in to su st ai na ble growth, we are fu r ther e volvi n g ou r strate gic a pproach, focused on maxim isin g our e xistin g busin esses, r educin g ou rdeb t an d de v elo pi ng n ew b usi nes ses i n a cap ital- li gh t wa ya nd crea ti ng ‘The S upe rbran d’ f or o lder pe opl e. TRANSFORMING S AG A See o ur CEO pre senting our g row th pla n See o ur new television advert here Our p urpo se is to d el iv er e x ce pti ona l e xper ie nces e v ery da y , wh il e bei ng a d ri ve r of po sit iv e cha ng e i n ou r mar ke ts and com mu nit ies. T R A N S FO R M I N G S AG A , B UILDI NG OUR FUTURE Sag a at a gla nce Ou r val ue s Our v alues re present w ho we are an d howw e wor k, br ough t to lif e ev ery day byou r colle agues. W e beli ev e tha t ev ery inter action , in whatever form th at t akes, should ref lect these values. Precision pace Always own ing an d mak ing th ing s hap pen We agre e cle ar goal s and p lans , we move q uick ly andb oldl y, and we act a nd t ake ow ner ship . Em pat hy Always awar e of o th ers We u nderstand and acknowled ge how someone else i s feeli ng and t heir exp eri enc e, an dwe walk in t heir s hoe s. Curiosit y Always a sk ing why We are o pen mi nde d, al ways se eking n ew insig ht s and learning about our customers , markets , competit ors andea ch ot her, and we welc ome an dpr ovid e cha llenge . Colla borat ion Always o ne t eam , th e Saga t ea m We are o ne t eam , work ing to gethe r , valuing inclusivit y and dif ferenc e. W e aim to bu ild e x cepti onal in sig ht tha t run s throughout our businesses, allowi ng us to understand our cust omers, the agein g process and l ife stag es better than an y one else. E very thin g we do f or our c ustomers, and indeed each other , is simple, personal and sp ecial . Through out 202 1/22, we deliver ed against our turnaroun d str ateg y, focused on f ive strat egic priorities: People and cultur e st ep change Max imising our exis ting busin esse s Data , digit al and br and tr ansformatio n St ep-c hanging our abilit y to s cale while reduc ing debt Optimising our busines ses Cre ating ‘The S uperbr and’ for older p eople Driving simplici t y and ef f icien cy Reducing our debt We are now well-placed t o return t he business to sus tainab le long- term gr ow th and will fo cus on thre e key areas to d o so: 1 1 2 2 3 3 4 5 This will continue t o be underp inned by our commitm ent to high Environment al, S ocial and Governance st and ards . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 2 Our businesses Sag a ’ s busines ses all f ocus on th e specific needs an d wishe s of our u niq ue custome rgroup. Insurance Tr a v e l Saga’s Insura nce b usin es s rem ains t he la rgest p ar t of the G r oup an d com pris es: • Retail Broking, which i ncludes principally motor , home, private medic al and travel insurance; and • Underwriting, represen ting the Group’ s in-house underwrit er , Acromas Insuranc e Company Limited (AI CL ), which si t s on th e pan el of ins ure rs an d unde rw rit es 70% o f Saga’s motor in sur anc e policies. Hig hlig ht s fo r 20 21/22 • Sec on d year of p oli cy gr ow t h foll owing s evera l years i n dec line , supp or t ed by i ncr ea sed c ust om er ret ention . • La unch o f our en hanc ed S aga Plu s thr ee-ye ar fixed-price motor and home insu rance. • AI CL p oli cies , in r elat ion t o th e Saga m ot or bo ok , ret urne d to g r ow th fo r the f irs t time s inc e 20 12 . Other Businesses The G ro up’ s O the r Businesses include : • Saga P ersonal Finance, of fering equity rele ase and savin gs products; • Saga Maga zine; and • Metr oMail , our in-house mailing and printing business. Hig hlig ht s fo r 20 21/22 • Of fer ed all shareholder s acom plim ent ar y subs crip tio n to t he dig it al magazine. • La unch o f Saga L ifet ime Mor tgage and E asy A cc ess Cas h ISA . Und erly ing Pr of i t Bef or e T a x 1 £1.8m 2020/21 – £2.8m 2019/20 – £4.6m The T ravel bu sine ss , whe re S aga beg an, h as always bee n at the h ear t o f the b ra nd an d con sis t s of: • Crui se, o f fer ing bo uti que o ce an and r iver cr uis es; and • T o ur Op er atio ns , of fe ring pa ck age hol idays incl uding e sc or t ed t ours , sp ec ial int er es t tri ps andho tel s t ays . Hig hlig ht s fo r 20 21/22 • T ravel b usiness successfully resumed operation s in Jun e 202 1 . • Crui se bu sine ss de liver ed s tr ong l oad f ac to r and per d iems , de spit e t ravel r es tri cti ons in p lac e. • St ro ng Cru ise b oo kings in to 20 2 2/23 wi th lo ad fac to r of 73% an d pe r diem of £ 3 1 9 at 20M ar ch 2022 . • Began t he r es tru ct ure o f T o ur Op er atio ns , to deli ver gr ow t h and cr e ate a l ower -c os t , mor e agi le, customer -focused business. Rea d mor e on p ages 3 9 -4 2 Rea d mor e on p ages 4 3- 4 4 Rea d mor e on p age 4 4 Und erly ing Pr of i t Bef or e T a x 1 £120 . 5m Underlying (Loss )/Profit Before T ax 1 (£79 .3m) 2 021/22 £120.5m 2020/21 £134.6m 2019/20 £130.8m (£79.3m) (£78.5m) £19.8m 2 021/22 2020/21 2019/20 1 Refer to Alternative Performance Measures Glossary on page 201 f or definition and explanation Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 3 Cha irman ’ s S t at em ent EMER G I NG S T R O N GER FR OM THE P ANDE MIC W e are emer gin g from the pandemic str onger than wew erewhen itbe ga n and wearepos ition in g Saga forsu stainab le growth . Ane xci tin gfuture li es ahead. I am ple ase d wit h the p ro gr ess we m ade l as t year despite the considerable challeng es of the extern al environment. Alt houg h it h as cle arl y bee n a par t icul arl y dif f icult p eri od fo r our T our Op erat ion s bus ines s and ou r crui se shi ps wer e onl y abl e to s t ar t saili ng wit h gue st s in l ate J une a nd , even the n, wit h signi f ic ant r es tric tio ns on t he num ber ofber ths we wer e ab le to f ill, we m ade go od pr ogr ess t hr ough out t he yea r wit h our turn ar ound s tr at eg y. Saga’ s Ret ail B r oking business ach ieved a second consecutive year ofmot or an d hom e po licy g row th foll owing sever al year s of de clin e and ou r Cru ise busi nes ssec ur ed a ver y enc our ag ing level ofbo oki ngs for 2 02 2/23 . Reasons to i nv est in Sa ga Our inv estment case is designed to create value for shareholders b y r eturn ing the business to sust ainable long -term grow th and r educing debt. How we are dif fer ent Saga fo cus es on p eo ple over 5 0, th e fas te st g row ing , mos t af f lu ent an d inf lue ntia l segm ent in t he U K . O ur deep c us to mer in sight g ives u s a uniqu e view in to ou r cus to mer s’ lives . We exis t to c re ate exc epti ona l experie nces for these customers every d ay, while be ing a dri ver for pos iti ve cha nge in our ma rket s an d communities. The mod el works We offer dif ferentiat ed produc ts and se r vic es , und erpin ned by a trus t ed br an d. O ur bus ine ss mo del is capital-ef f icient and hi ghly cash gener ati ve, pr ovi ding f l exibili t y to bala nc e invest ment i n our br an d and businesses with debt reduction and delivery of long- term returns to sharehol ders. Conf idence in future delivery We have a clea r and c omp ellin g str at eg y, foc use d on bu ilding o n the foun dati ons la id over th e pas t t wo years u nde r our tu rnar oun d pl an. Weare n ow foc use d on r eturn ing the b usin ess t o gr ow t h thr oug h maximising our exist ing businesse s, re duci ng debt w hile s te p- cha nging our ab ilit y t o sc ale an d po sit ionin g Saga as ‘ T he Su per br and’ fo r old er peo ple . Thi swill cr ea te a t ruly custom er-orient ated experienc e and c onti nue t o dri ve longer a nd deep er r ela tion ship s wit h our customers. Rea d mor e on p age 14 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 4 As a r esul t of th e turb ulen ce b eing exp eri enc ed by the t ravel in dus tr y, we are m aking s ignif icant change s to o ur T o ur O per ati ons b usin ess in or der t o cr eat e a lowe r- co st , mo re a gile a nd digi ta lly-l ed op er atio n, f ocu sed o n the evo lvi ng nee ds of ou r cus to mer s. T hes e cha nges will pla ce us i n a bet t er p osi tion a s our cu st om er dema nd r ebui lds an d will h elp us in f aci ng any fur ther ext ernal challenges, such as the current war in Uk ra ine. Duri ng the ye ar , we pr epa re d our sel ves for t he new r egul ato ry c hange s in thei nsur anc e indu str y t hat ca me int o for c e inJan uar y 20 22 . We also s tr eng t hen ed our s yst em s and se nior manage ment t eam s and wea re n ow ret ai ning mor e of ou r cus to mer s atthe p oint o f po licy ren ewal . We are n ow pla cing f ar gr eat er fo cus oncr os s-selli ng our p olic ies t o our c ust om ers . As a r esul t of r aising n ew cap it al in 20 20 an d the suc ce ssf ul is sue of o ur new b ond l as t Jul y, the Co mpany is i n a much s tr onge r f ina ncia l po siti on and we h ave ende d the ye ar wit h lowe r net de bt and more cash on our bala nce sheet. The c ultu re a cr oss S aga has c ont inue d to develop with colleagues reporting that they wer e feeli ng mor e engage d and s upp or t ed th an befo re . We anno unc ed th e intr od uct ion o f Gr andp ar ent s’ Leave, t he f i rs t init iati ve of it s kind a mong st m ajor U K emp loyer s. T his is p ar t of our wo rk to c hall enge p erc ept ion s of ageing whic h is a ce ntr al par t of our new Envi ro nment a l, Social and Governance (ESG) strateg y. Saga h as always h ad a s tr ong se nse of p urp ose and ha s embr ac ed o ur ESG r es po nsib ilit ies wit henthu sias m. We h ave a divers e r ange of ESG ini tiat ives a nd ar e cur ren tly e ngaged in develo ping a new a nd mo re a mbit iou s plan thatw ill have even g re ater i mpa ct . Shareholder ret urns As a sh ar ehol der mys elf, I full y und ers t and t hat som e invest or s co uld b e fru str at ed by t he curr ent s har e pri ce . I would l ike t o assu re yo u that t he B oar d is ver y fo cus ed on c re ating long-ter m sus ta inab le gr ow t h in th e value o f Saga . I be lieve tha t , wit h our s tr eng t hen ed t eam and th e gr ow t h st rat eg y w e now have in p lac e, we will b e suc c ess ful . In Ap ril 20 20, t o pr ot ect t he G rou p’ s f inan cia l pos iti on in lig ht of th e pan demi c, t he Bo ar d announced tha t it had s uspended dividend paym ent s to s har eh old ers an d tha t it did n ot expe ct t o re new th em unti l 2024 at t he ear lies t . Wi th thi s in mind , no d ivi dend i s pr op ose d for the 20 2 1/22 f inanci al yea r . We are ver y awar e ofthe i mpo r t anc e of an an nual d ivi dend t o ma ny of our s har eho lde rs an d will lo ok t o r eins t ate paym ent s whe n it is ap pr op riat e to d o so. The c ont inue d disr upti on ca use d by the pandemic has highlighted the f inancial and ope rat ion al r esili enc e of S aga and t he valu e of adiver sif ied bus ine ss . I am ver y pl eas ed wit h th e per f orma nc e of our l ead ers hip te am an d our achiev ements, despite the external challeng es we have fac ed . I am c onf i dent t hat we ar e emerging from the pandemic str onger than wewer e when i t bega n. We have m ade goo d pr ogr ess w ith o ur st ra teg y and I am c onf i dent that o ur new g row t h pl an will , in th e long t er m, benef it all our stakehol ders. Fin ally, I would l ike t o ext en d my tha nks t o everyo ne at S aga for t he r esi lienc e th ey have shown throughout what has been another ext ra or dina ry ye ar . Ou r col leag ues h ave worke d hard with dedication and determination to pr ovid e our cu st ome rs wi th th e ver y be st supp or t a nd se rv ic e. Sir R oger D e Haa n Non-E xecutive Chairman 22 M ar ch 20 22 “I wou ld l ik e to e x tend m y tha nks to e v eryo ne a t Sag a fo r the res il ien ce the y ha ve show n throughout what has been another ex tr ao r dinar y year . ” Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 5 Group Chief E xecutive Of f icer’ s St atement A year of tran sf ormation Duri ng 202 1/2 2, we c ont inue d to m ake s tr ong pr ogr ess ag ains t our tu rnar oun d st rat eg y, enhancing our capability in Insuranc e and deli vering an oth er year o f pos iti ve mom ent um, suc ce ssf ull y re suming C rui se op er atio ns an d beg inning t he r es tru ctu re of o ur T our Op er atio ns bus ines s . All of t his was a chieve d while d eli vering a n ew br and ca mpai gn aim ed atchan ging t he pe rc ept ions o f Saga . We were det ermined t o em erge str onger fr om th e pand emic than we w ent i n and, in s pite of the chal len ge s of 2021/ 22, I am ple ased that w e ha ve d one so, a nd are no w positionin g the business for grow th . POSI T IONING SA GA FO R G ROW T H “ Aga in st a back drop o f e x t ernal headwi nds, we are proud o f wha t w e ha v e achie v ed and acknowledg e tha t non e of th i s wou ld ha ve been p ossible without our colleagues ’ hard work and d edic ation . ” Euan Sutherland Gr oup C hief E xecu ti ve Of f ice r Se e our C EO discussing ourp ro gr es s Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 6 1 Refer to Alternative Performance Measures Glossary on page 201 f or definition and explanation Our co lleague s are t he cor e of our bu sines s This ye ar , we re main ed com mit t ed t o fos t ering a cult ur ewher e c olle agu es fe el like th ey bel ong , ar e hea rd an d re cog nise d for t he valu e they bring t o th e bus ines s. T hr oug h the provision of additional holiday entitlements, increased diver sit y, equi t y and in clu sion foc us and n ew co lleag ue r ewar d and r ec ogni tio n sch eme s, we are c re ating a c ult ure t hat we can al l be pr ou d of. Whil e 202 1/22 was a cha lleng ing yea r , we have ta ken a num ber o f key st eps t hat w ill r eturn Saga t o sus t aina ble g row th. Stron g strate gic progres s I am ple ase d wit h the p ro gr ess we h ave mad e against our turnaround strat eg y, T r ansforming Saga – E x per ienc e is Ever y thi ng. O ur br an d rel aunc h mea ns we have de liver ed o n our p ro mise to c re ate a r efr es hed , c ont emp or ar y and r eleva nt br and wh ich is at t he he ar t of a ll our wo rk to deli ver th e bes t po ssi ble exp eri enc e for o ur cus to mer s. T o do this , we wer e fo cus ed on deli ver yund er eac h of th e foll owing f ive pill ars . People and culture step change Our people and cu lture transformation continued to b e key, acknow led ging t hat our c oll eag ues a re pivot al t o th e suc ce ss of o ur bus ine ss . T o fo st er a cu ltur e wh er e co lleag ue s feel l ike they b elo ng, we c ont inue d to f ocu s on di versi t y, equi t y and in clus ion t hr ough even ts s uch a s ourWome n in Le ader ship c onf ere nc e and intr odu cing g ues t sp eak ers fo r Bl ack H ist or y Mon th, M en’s Healt h Mon th , LGBTQi+ and National Menopause Da y. Co lleag ue we llbe ing also c ont inue d to b e a fo cus , with support provided through additional holi day ent itl emen ts , f i nanc ial ai d for th os e in need and i ncreased emphasis on mental health. We also int ro duc ed a n ew col leag ue r ec ogni tio n sch eme , the ‘ S aga Sp otlig ht Awar ds’ , des igne d to c eleb r ate t he ac hieveme nt s of co lle ague s who s howca se ou r value s of pr eci sio n pac e, empathy , curiosit y and collaboratio n. In Ja nuar y 20 22 , we we re p ro ud t o be th e f ir st busi nes s of our k ind t o intr od uc e Gr andp ar ent s’ Leave, o f fer ing co lle ague s one w eek of p aid leavep er annu m foll owing th e bir t h of a new gr and chil d. T his new b enef it ref l ect s o ur be lief inthe va lue of ex per ienc e in th e work pla ce , along sid e a re cog niti on of t he r ole of grandpar ents t o their families and society. Our robust performance Agai nst t he ba ckd rop o f the C OVI D -19 pandemic, the Gr oup repor t ed an Underlying Los s Befo re T ax 1 of £6 .7m. Whil e we re por ted aro bus t per forman ce w ithi n Insu ran ce , this ref l ect s s usp ensi on of t he T ravel bus ines s for much o f the f irst h alf of t he yea r and t he ongoi ng impa ct of t he pa ndem ic on ce op er ati ons wer e able t o r esu me. A f t er all owing fo r one -of f ext ra neo us it ems , th e Gr oup r ep or t ed a lo ss befo re t a x of £ 23 . 5m . Duri ng 202 1/2 2, we m ade s tr ong p rog r ess inst re ng th ening t he In sur anc e bus ines s anden suring t hat we c ont inue d to d elive r exceptional experiences for our customers . The R et ail Br ok ing bus ine ss del iver ed a s ec ond year of p osi tive m om entum w ith 1 . 4% grow t h inmot or an d hom e po lici es af t er s evera l years indec line , sup por ted by in cr eas ed cu st ome r ret ention . Our in-house underwrit er , Acromas Insuranc e Co mpany L imit ed ( AI CL), r epo r t ed po sit ive momentum followi ng action taken to strengthen our pr icing c apa bilit y and expa nd our f oot print . AI CL p oli cies in f or ce in r el atio n to t he S aga bo ok , at 3 1 Ja nuar y 20 2 2, we re 3 % ahe ad of thep rior p eri od , the f irst ye ar of p oli cy gr ow t h sinc e 20 1 2. Thr oug hou t 202 1/2 2, o ur T r avel bu sine ss con tinu ed t o be imp ac te d by the p and emic . OurCrui se business remai ned suspended un til 27 J une 20 2 1 , at whi ch po int , we wer e ab le t o re sume s ailing w ith in the U K wi th a lim it ed numb er of g ues t s on b oar d. O nc e U K re str ict ion s were l if t ed in t he su mmer a nd we wer e able t o c omm enc e int ernat ion al sai ling , weco ntinu ed t o navigat e lo ca l re str ict ions a t our p or t s of ca ll, a mend ing it iner ari es an d reducing capaci t y as necessary . In spite of these headwinds, customer de mand rem aine d st ro ng, a nd for t he ye ar end ed 31J anu ar y 202 2 , we del iver ed p osi tive EB IT DA and c ash gen era tion i n the s ec ond h alf wi th aloa d fac to r of 6 8% and p er di em of £ 29 9. Loo king t o our T our Op er atio ns bu sine ss , our cus to mer s have be en cau tio us ab out r etu rning to t his for m of tr avel, w ith t he ne ed t o move thr oug h airp or t s and m ix wi th a gr ea ter r ange ofpe opl e. As s uch , we have t ake n a numb er of st eps t o am end ou r pr odu ct se t and en sur e that we ar e well-p osi tio ned t o of fer cus to mer s the holi days th ey want t od ay. W e ar e con f ide nt that this w ill hel p ret urn th e bus ine ss t o gr ow th a s custom er demand rebuilds . The Group’ s per formance was underpinned by our strong financial position follo wing actions ta ken in 20 2 1 , wit h Availab le C ash at 3 1 J anua ry 202 2 of £ 1 86 .6 m, a nd an un draw n revol vin g cr edit f aci lit y of £ 1 0 0.0m . Underlying (Loss ) / Pro f itB efor e T ax 1 (£6. 7m) 2020/21 – £17 . 1m 2019/20 – £109 .9m Los sBefo re T ax (£23.5m) 2020/21 – (£61.2m) 2019/20 – (£312.8m) Ava ilable Cash 1 £186. 6m 2020/21 – £75.4m 2019/20 – £40 .9m Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 7 2 Refer to Alternative Performance Measures Glossary on page 201 for definition and explanation Group Chi ef Ex ecutiv e Of f icer ’ s Statemen t continued In Ja nuar y 20 22 , t he new p ricin g rule s aris ing from the Financ ial Conduct Autho rity market stu dy c ame in to ef fect . E x per ien ce t o dat e forho me ins ur anc e is br oa dly in li ne wi th expe ct ati ons , whil e mot or in sur anc e pri cing hasr emai ned hig hl y com pet iti ve. Whil e we exp ect t he new p rici ng rule s to r ed uce mot or an d hom e pr of it s , it is h owever t oo ea rly to qu anti f y t he lo nger-t erm im pac t . We rem ain of the v iew th at we ar e well- pos iti one d to ope rat e in a m arket t hat is fo cus ed m or e on propositions and service, alongside price. In th e sec on d half o f 202 1/22 , we l aunc hed S aga Plus, our enhanced thre e-year fixed-price cover with added e x tras including our claims promise, onward taxi tr avel, legal and key cover as standard . Mor e r ec entl y, we were r ate d as th e numb er onein sur anc e br and i n the U K for c us tom er satisfaction and the th ird highest sector-wide, by The I nst itu te o f Cus t ome r Ser v ice . We were a lso pl eas ed t o welc om e St eve Kin gsho t t in Novem ber 2 02 1 wh o was ap poi nte d as C EO of Insu ran ce . St eve has a w ealt h of exp erie nce i n the insur an ce in dus tr y, most r ec ent ly fr om T esc o, and has hi t the g ro und ru nning in t erm s of opt imis ing our Insuran ce busine sses . Tr a v e l 202 1/22 w as a pivo ta l year fo r the T ravel busi nes s as our C ruis e op er atio n suc ce ss full y re st ar t ed in t he su mmer f ollow ing 15 m ont hs ofsus pen sion a nd we b egan th e re st ruc tur e ofour T our Op er atio ns bus ine ss . Thr oug hou t this t ime , cus to mer s afet y was o ur f irs t pr iori t y, ensuring t hat we wer e ab le t o ope rat e in a way wh ich n ot onl y kept c ust om ers safe , but a lso gave th em pe ac e of min d. I am incr ed ibl y pr oud of t he env iro nmen t we have cr eat ed an d the d eman d we have sub seq uent ly seen for our offering. In Ju ly 20 2 1, o ur newe st o ce an cru ise s hip, Spir itof A dvent ure , was of f icia lly n amed a nd sail ed he r inaug ur al cru ise . Wi th bo th oc ea n crui se shi ps now b ack i n ser vi ce an d op era ting our established hea lth and safe ty proto cols, we are receiving excep tionally posi tive feed back fr om our c us tom ers . O ur gu es t sati sf act ion sco re f r om r esum ptio n, up u ntil 3 1 J anua ry 202 2 was 9.1 ou t of 10. Sinc e we r esum ed C ruis e op era tion s on 26 J une 202 1 a nd up unt il 3 1 Jan uar y 20 22 , we c omp let ed 31 s uc ces sf ul sa ilings o n bo ard o ur t wo shi ps and we, an d our g ues t s, ar e le arni ng to li ve wit h COVI D -19 re st rict ion s. W hil e it was di sap poi nting for th ose o f our cu st om ers t hat wer e af f ect ed , wear e ple ase d that o nly o ne sai ling ha s bee n meanin g fully im pacted, with a cru ise to the Cari bbe an (which t oo k pla ce af ter th e f in anci al yearen d) cur tail ed fo llowi ng a limit ed o utb re ak , duet o the s tr ict p rot o col s at tho se p or t s . Followi ng the f ur t her pr og re ss ma de over t he pas t year, we contin ue to r e cei ve pos iti ve feedback from colleagues which is reflected thr oug h an inc re ase in o ur over all c olle agu e engageme nt . Th e sco re f r om our l ate st s ur vey was 7 .7 out of 10, a n inc re ase of 0. 4 f ro m the sam e poin t las t year. Data, digital and brand transformation As pa r t of our d at a, dig it al an d br and tr ans form atio n, in O ct ob er 20 2 1 , we re laun che d our br an d, sh owca sed t hr ough t hr ee new tel evisi on ad ver t s an d the r ela unch o f our websi te s and s oci al me dia a cc ount s . The ‘E x pe rien ce is Ever y t hing ’ cam paig n is aime d at reflecting the a ttitude of our customers rather than t heir a ge and r epr es ent s a mul ti-year init iati ve des igne d to t ra nsf orm th e views ofSaga ove r the l onger t erm . Our p rog re ss t o dat e ac ros s th e dat a, d igit a l and br an d spa ce c ont inue s to b e re cog nis ed byour cu st ome rs th ro ugh a num ber o f mea ns, incl uding an i ncr ea sed n et pr omo ter s co re o f 49 and mo re w ide ly th ough a n awar d nomi nati on for magazin e ‘cover of t he yea r’ and w ins in s even cat egorie s at th e Co nsum er Int elligen ce Awa rd s. In Febr uar y 20 22 , al tho ugh af t er t he en d of thef inanc ial yea r , we were p lea sed t o an noun ce the a cqu isit ion of T he B ig Win dow C ons ulti ng Limi te d ( the Bi g Window ), a specia lis t re sea rc h and ins ight b usin ess f ocu sed o n und ers t andi ng old er co nsum ers . H aving th e BigW ind ow as pa r t of the S aga G rou p allows u sto s tr eng then o ur insig ht and u nder st an ding of o ur co nsum ers a nd ensur e we ar e de liver ing the p ro du ct s and ser vi ce s that t hey want . Optimising our businesses Insuran ce Wi thin R eta il Br ok ing, we i ncr ea sed m oto r and hom e pol icie s in for c e by 1. 4%, r ep re sent ing th e sec on d year of g row th foll owing s evera l year s indec line . Cu st ome r ret ent ion im pr oved by 2. 3 ppt s t o 82 . 8% , s upp or t ed by in cr eas ed upt ake of o ur thr ee -year f ixed-pr ice p ro duc t s whic h now ac co unt for 47% of o ur mot or an d hom e bo ok . M oto r and h ome m argi ns per p ol icy rem aine d st ab le at £ 7 4 and t he pr op or t ion ofcus to mer s who c ame t o us d ire ctl y, rath er than through price- compariso n websites also remained stable, at 59% . Our U nde rw rit ing bus ines s, A I CL , r ep or t ed anUn derl ying P rof it Befo re T ax 2 of £ 5 4.1m , supp or t ed by £ 42.1m o f re ser ve r elea ses a nd acurr ent ye ar co mbin ed op er ating r at io ( excludin g re ser ve r elea ses) of 96 .3 % . O ver th e pas t t wo year s, we h ave signi f ic antl y enha nc ed our Underwrit ing capability, streng thening the team and implementing new pricing models whic h have allowe d us t o expa nd th e range o f busi nes s we und er writ e, f ur th er su ppo r ting theR et ail Br ok ing bus ine ss . Cus to mer n et promoter score (NPS ) 49 2020/21 – 44 2019/20 – 38 Over all c ol leag ue engagement 7.7 out of 10 2020/21 – 7 .3 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 8 3 Refer to Alternative P erformance Measures Glossary on pag e 201 for de finition and explana tion We began t he r est ru ctur e of o ur T o ur O per ati ons busi nes s, a dopt ing a new o per at ing mo del . T o max imis e the ef f ici ency w ithi n tou ring an d cr eat e a lower-cost , more agile busi ness, we hav e combined the o per ati ons of S aga H olid ays and T it an T ravel . In addi tio n, t he ma nageme nt ofour r iver cr uis e ope rat ion h as move d acr os s to o ce an cru ise . The se ac tio ns pl ac e us in a st ro ng po sit ion astr avel re st ric tio ns eas e and c ust om er demand rebuilds . Driving simplicit y and eff iciency In or der t o de liver aga ins t our s tr ateg y, it is ess enti al th at we co ntinu ally l oo k for opp or t unit ies t o sim plif y our bus ine ss an d maximis e our eff iciency. We cont inue d the r at iona lisat ion o f our of f ice spa ce an d re duc ed t he num ber of o f f i ces i n use fr om 11 t o seve n. Wepl an to r ed uc e this even fur t her w ith t hre e mo re cu rr entl y for s ale . For the p eri od of T ravel sus pe nsio n in the earl ypar t o f the ye ar , we init iall y pr ovid ed an indic ati ve co st r ange of £ 7 –9m p er mo nth acr os s bot h the C ruis e and T our Op er atio ns busi nes ses . As a r es ult of t ight c os t co ntr ol , we wer e ple ase d to r ep or t c ost s b elow t his r ange, at £ 5. 9 m per m ont h. F rom a customer perspectiv e, we introduced fun cti onal it y t o allow o ur T ravel gue st s t o pr ovid e thei r fee dbac k digi t ally, enab ling fa st er and de ep er insig ht int o cus t ome r sati sf act ion . We also la unch ed a mi d-ter m adju stm ent reb ro king p ro ce ss in I nsur anc e whi ch pr ovi des cus to mer s wit h gr eat er f lex ibili t y whe n maki ng apol icy ch ange mid-w ay thr ough t hei r ter m. Red uci ng our d ebt Thr oug hou t 202 1/2 2, d esp ite t he im pac t of thep and emic , our fo cus o n deb t re duc tion ands tr eng t heni ng our f i nanc ial p osi tio n rem aine d atth e for efr ont of o ur thi nking . In Ju ly 20 2 1, w e com plet ed a s eri es of f i nanc ing tr ansa ct ions w hich p rov ide d us wi th gr ea ter flexibility through less-restrictiv e terms a nd ample liqui dit y t o sup por t the bu sine ss th ro ugh any ongoing p erio d of un cer t ai nt y. These i nclu ded t he issu e of a new f i ve-yea r £2 50.0 m bo nd an d use of the p ro ce eds t o r epay ou r £70.0 m te rm lo an and £ 10 0.0 m of our exi st ing bo nd , wit h the r ema inde r held as Ava ilable Cash 3 . At 3 1 Janu ar y 20 22 , our n et deb t was £ 729.0 m , £3 1 . 2 m lower t han at 3 1 J anua ry 2 02 1 , r ef lec ting re silie nt cas h gener at ion wi thin R et ail Br ok ing and th e re st ar t of the C ruis e bus ines s whic h wer e only p ar t iall y of f set by su ppo r t pr ovi ded toT our Op er atio ns and d ebt se r vici ng co st s . Our gr ow th plan In 20 20, we ann ounc ed o ur st ra teg y to tr ans form S aga and s inc e the n, we h ave con tinu ed t o deli ver agains t ea ch of t hos e fivestrategic pri orities. In or der t o bu ild on o ur pr ogr es s to d at e and conver t the fou ndat ion s alr ead y laid i nto sus ta inab le gr ow t h, we a re f ur th er evol ving ours tr ateg ic ap pr oac h. T his wi ll see u s foc us onthr ee s tr at egi c prio rit ies , all of w hich a re co -de pen dent a nd alig ne d in app ro ach t o maximise shareh older value: 1. M aximise our exis ting business es Thr oug h spe cif ic gr ow th p lan s for ea ch , a fr anch ise s tru ct ure t o en able f ocu s, g ro w th , acc oun ta bili t y and ef f icie ncy, and th e deli ver y ofa co mmo n br and pu rpo se . 2. S t ep- cha nge our abilit y to sc ale whil e redu cing debt Gr ow exis ting b usin ess es whi le r edu cing de bt and devel op new b usin es ses t hro ugh in novati on in a cap it al-l ight way. 3. C re ate ‘ Th e Sup erbr and’ fo r old er pe ople Deliver a step- change in brand perception and loyal t y thr oug h foc us on fo ur ar eas: • Comme rcialising and g rowing our dat abase. • Buil ding excep tio nal ins ight s , sup po r te d by the a cqu isit ion of d at a and in sight s b usin ess , the Big Window. • Deli vering a b ra nd r e-p osi tio ning whe re ‘E xperien ce is E very t hing’ . • Cr eati ng a co nte nt plat f orm wh er e we re ach millio ns of cu st om ers ever y day. R ead m or e on page 2 2 Wel l-positioned for the future Followi ng the d isru ptio n cau sed by t he pa nde mic over the p as t tw o year s, we ar e em erg ing str on ger tha n we went in . Whil st mi ndf ul of th e hea dwin ds as we e nte r 202 2/23 , I am c onf ident t hat we have t he rig ht str at eg y, st ruc tur e and t ea m in pla ce t o unl oc k the p ot enti al tha t exist s w ithi n Saga an d cr eat e long-ter m sus ta inab le gr ow t h for o ur sharehol ders. Fin ally, I would l ike t o than k all of ou r co lleag ue s for th eir c onti nued c om mitm ent t hro ugh out what h as be en ano the r chal leng ing year. Agains t a bac kdr op of ex t ern al hea dwin ds , we ar e pr oud of what w e have achi eved and a ckn owle dge tha t non e of this w ould h ave bee n pos sib le wit hou t thei r har d work a nd de dic atio n. Euan Sutherland Gr oup C hief E xecu ti ve Of f ice r 22 M ar ch 20 22 Net d ebt £729 . 0m 2020/21 – £760 .2m 2019/20 – £593.9m Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 9 Insurance Underlying Profit Before T ax 1 Purpose and de f inition Ins ura nc e Und erl yi ng Pr of it B efo re Ta x 1 isth e prim ar y KP I of th e Ins ur anc e bus ine ss an d a sub set of U nd erl ying (Loss) /Prof it Before T ax 1 , ref l ec ting o nly the performance of tha t business. Performanc e 10 % re duc tio n in c omp aris on t o 20 20/21 due t o lowe r re newa l marg ins i n pri vat e medical in surance, increased motor clai ms fr e quen cy, tel evis ion a dve r tis ing cos t s an d the m ovem ent in t he wr it t en- to -e arn ed ad jus tm ent . Re fer t o page s 39 - 42 o f the G r oup C hief F ina nci al Of f ic er’s Revi ew for f ull d et ails . Net debt Purpose and de f inition Net d ebt r ep re sent s t he s um of th e car ry ing va lue of t he G ro up’s debt fac ilit ie s, l ess t he am oun t of Avail abl e Cash 1 it ho lds . R efer t o page 4 9 of t he Gr oup C hief F in anc ial O f f icer ’s Review fora f ull br e akdo wn . Performanc e Net d ebt r ed uc ed by £ 3 1m c omp ar ed wi th 31 J anu ar y 20 2 1 due t o t he un derl yi ng performance of the In surance business and t he r es ta r t of t he Cr uis e bus ine ss whic h ar e of f set i n par t by c ap it al expe ndi tur e, i nte re st p aym ent s an d sup por t prov ide d t o T o ur O per at ion s. Refe r to p ages 4 8- 4 9 of t he G ro up Ch ief Fin anc ial O f f ice r’s Review f or fu ll det ai ls . Underlyin g (Loss ) /Profit Befo reT ax 1 Purpose and de f inition Underlying (Loss ) /Profit Before T ax 1 is th e Gr oup’s prima r y KPI a nd a me anin g fu l re pr ese nt ati on of t he Gr o up’ s und erl yin g tr adin g per f orm anc e. I t r epr es ent s p rof it befo r e ta x exclu ding i te ms whi ch ar e no t expe ct ed t o r ecu r . Refe r to p age 20 1 fo r full definition and explanation. Performanc e Red uct io n of £ 23 . 8m in c om pari son t o 202 0/21 , large ly as a r es ult o f high er marketin g costs, the impact of increased mot or c laim s fr equ enc y as mil es dr iven returned closer to norm al levels and lower renewal margins in private medical insurance. Available Ope rating Ca sh Flow 1 Purpose and de f inition Availa ble O p era ting C as h Flow 1 repr esents net c ash f l ow fr om o pe rat ing ac ti vi tie s whic h is no t subj ec t to r eg ulat or y rest riction, af ter capit al expenditure but befo re tax, in terest, restru cturi ng co sts, proceeds from the disposal o f businesses and ot her n on -tra ding i te ms . Ref er to p age 201 for full def inition and explanation. Performanc e Sig nif i can t inc re ase i n Availa ble O p era ting Cas h Flo w due t o po sit ive C rui se c ash f l ow foll owin g the r es t ar t of o pe rat io ns , act ion s t aken t o r edu ce t he s upp or t re quir ed b y T o ur O per at ion s and a hi ghe r AI CL d ivi den d, o nly p ar t iall y of f se t by increase d capital expenditur e and lower T rading EBITDA 1 . Key performance indicators During the f inan cial year , the fo llowi ng key per formance indicators (KPIs ) we re used to assess the f inanci al and oper ational per form ance of the business ag ainst it s s tr at eg y . (£ 6 . 7 m) £7 5.8m Financial KPIs £ 1 2 0. 5 m £729 . 0m (£6.7m) £17.1m £109.9m 2 021/22 2020/21 2 019/20 £120.5m £134.6m £130.8m 2 021/22 2020/21 2 019/20 £75.8m £3.4m £92.7m 2 021/22 2020/21 2 019/20 £729.0m £760.2m £593.9m 2 021/22 2020/21 2 019/20 1 Refer to Alternative Performance Measures Glossary on page 201 f or definition and explanation 3 202 2 Bo nus K PIs Refer enc es t o our turna rou ndst rat eg y Peopl e and c ult ure st epch ange Dat a , digi ta l and b ran d transform ation Optimising our busin esses Driving simp licit y andeff iciency Reducing our debt 1 2 3 4 5 5 2 3 4 2 3 5 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 10 Customers Custo mer net promoter scor e(NPS) Purpose and de f inition Customer NPS represents the willin gness of cus t ome rs t o r eco mm end S aga pr odu ct s an d se rv ic es t o oth ers . I t is mea sur ed by c us to mer s ur vey re sp ons es , weig hte d by bu sine ss un it . Performanc e Cus t ome r NP S inc re ase d 5p t s to 4 9, ref l ec ting i mpr ovem ent s wi thi n our Insurance and Personal Financ e businesses. Co lleag ue engagem ent 3,4 Ove r all Purpose and de f inition Our overall colleague engagement metric pr ovid es an i ndi cat ion o f how c omm it t ed an d enth usi ast ic c oll eag ue s are t owa rd s bot h Saga a nd th eir wo rk . I t is me asur ed t hr oug h responses to regular colleague surve ys hos t ed by an i nde pen den t thir d p ar t y. Performanc e Overall colleag ue engag ement increase d to7. 7 fr om o ur ini tia l sc or e of 7 .0 in September 2020, with impr ovements arising from enhancement s to our performance reviews, i ncreased standard leave entitlements, rem oval of eligibilit y cri te ria f ro m our f amil y po lic ies a nd pr ovi ding colleagues with regular strateg y updates . Va l u e s Purpose and de f inition Our value s-bas ed col leagu e engagement met ric p rov ide s an in dic atio n of ho w engage d co llea gu es ar e wi th ou r four va lue s of pr eci sio n pac e, e mpa thy, curio sit y and co llab or at ion . Iti s mea sur ed a s par t o f the overall regular colleague engagement surveys hos t ed by an i nde pen den t thir d p ar t y. Performanc e The ove ra ll valu es s co re in cr ea sed t o 7.8 fr om our in iti al sc or e of 7.4 in Febru ar y 20 2 1 , whi ch iswh en we la unc hed o ur valu es . In o rd er t o emb ed ou r valu es af t er t he l aunc h, w e hos t ed av alues experience workshop for all colleagues and launched the Saga Spotlight A wards, our values-led colleague recognition programme. Insurance Mot or and ho me ret entio n Purpose and de f inition Mot or a nd ho me r et ent ion is a k ey indi cat or o f per f orm anc e wi thin t he Insurance business and represents the pr op or ti on of m ot or an d hom e cus t om ers that c ho os e to r em ain wi th S aga wh en the ir po lic y is due f or r enew al. Performanc e Mot or a nd ho me r et ent ion 2 . 3p pt s ah ead of 20 20/21 , sup po r t ed by in cr eas ed upt ake o f our t hr ee-ye ar f i xed-p ric e pr odu ct w hich n ow r epr es ent s 47% of allmo to r and h ome p ol ici es in fo rc e. Cruise Load factor Purpose and de f inition Load factor is the most se nsitive d river ofCr uis e pr of i t befo re t a x and r ep r ese nt s the b oo ked p r opo r ti on of t he t ot al cap aci t y ac ro ss ou r t wo cru ise s hips . Itisc alc ulat e d by div idi ng the n umb er ofbe r ths b oo ke d by the t ot al b er t hs ava ilable. Performanc e 2 Loa d fa ct or of 6 8% f or 20 2 1/22 , reflect ing i mposed capacity res trictions. St ro ng bo ok ed lo ad f act or f or 20 2 2/23 of73% a s at 20 M ar ch 20 2 2. Per diem Purpose and de f inition Per die m pr ovi des a n indi cat ion o f pri cing wit hin th e Cr uis e bus ine ss an d ref lect s the ave rage r evenu e ch arged p er g ue st per n ight o n bo ar dour o ce an cr uis e ship s . Performanc e 2 £2 9 9 per d iem f or 20 2 1/22 , an d £3 1 9 for20 2 2/23 (at 20 Ma rc h 20 22) r ef le ct enha nc eme nt s mad e t o the C rui se of fering. 82 . 8% Non -f inancial KPIs 6 8% 2021/22 £299 2021/22 49 7. 7 out of 1 0 7. 8 out of 1 0 82.8% 80.5% 75.1% 2 021/22 2020/21 2 019/20 49 44 38 2 021/22 2020/21 2 019/20 7.3 7.0 Feb 2021 Sep 2020 7.7 Nov 2021 7.8 7.4 Nov 2021 Feb 2021 73% 2022/23 £319 2022/23 2 N o co mp ar at ive d at a ha s be en p ro vi de d for C ru is e lo ad f ac to r an d pe r di ems a s op er at io ns we re s us pe nd ed f or mu ch o f 20 20/2 1 , wi th t he o f fe rin g pri or t o t hat n ot co mp ar ab le wi th o ur t wo c ur re nt s hip s 3 No te t ha t th e las t c oll ea gu e eng age men t su rv ey was c o ndu ct e d in N ovem be r 20 2 1 , wi th t he n ex t su rv ey du e in A pri l 20 2 2 4 D ur ing 2 02 0/21 , S aga a pp oin t ed a ne w th ir d-p ar t y s ur vey p ro vi der. As s uc h, t he re i s no c om pa ra bl e dat a av ail ab le p rio r t o Feb ru ar y 20 2 1 3 3 2 1 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 11 The Saga cu s to me r Our cu stomers are the core of o ur busi ness. It is th is f ocus thatd riv es usto constan tly ev olv e our i n-dep th unde rstandin g of thei r beha viou rs and se ntim ents, allo win g us to del ive r products the y desire with the unprecedented service that theydeserve. Saga p re domi nant ly op er ate s in th e insur an ce an d tr avel mar ket s whic h bot h fa cesig nif icant competition f or customers, particularly in the con text of hi ghly commoditised products and an evolv ing dig it al la nds cap e. We aim t o del iver di f fer ent iati ng pr odu ct s sp ec if ic all y ta ilor ed t o meet t he ne eds o f our cu st om ers wh ich , wit hin In sur anc e, in clud es ou r uniqu e Saga Pl us produc t, of fering f ixed-price 1 mot or an d hom e insur an ce fo r thr ee ye ars , and w ith in T r avel , incl ude s crui ses o n boa rd o ur lux ur y mid-s ized oc ea n ship s and pu rpo se- buil t river s hips . DELIVE R ING E X CE P T IONAL E XP E R IENCE S IN CHALLE NGING MARKE T S Sag a operates in a h ighly a ttractive mar ket with s igni f icant oppor tunity for grow th M a rk e t r evi ew …but people over 55 represent 62% of tot a l weal th in th e UK 3 1 C us t om er p re miu ms a re f i xed o ver t hr ee y ear s su bj ec t to n o cl aim s be ing m ad e, n o ne w co nvi ct io ns an d no c ha nge s to i nsu r anc e p re miu m t ax , ad dr es s , vehi cl eor d ri ver s. P oli cy ho ld er s may c an ce l th e po li cy at a ny ti me w it hou t an y obl iga ti on t o re ne w 2 O f f i ce f or N at ion al S t at is ti cs – 2 0 18 -b as ed p rin ci pal p r oje ct io ns 3 Of f ic e for N at io na l St a tis t ic s – T ot al in di vi dua l we alt h , inc lu din g pr iva te p en si on we al th , by ag e ba nd , Ap ri l 20 16 - M ar ch 2 01 8 4 O f f i ce f or N at io nal S t at is ti cs – R ec en t int er ne t us ers , U K , 2 0 11 a nd 2 01 9 There were.. . 25.9m indi vidu als in t he U K aged over 50 dur ing 202 1 2 …repr esenting 38% of the t ot al U K po pul atio n 2 …whi ch is only expect ed tog row 9% increase e xpected in the U K over 5 0 pop ulat ion by 2 03 1 2 1.5m Saga cu st om ers at 31 J anu ar y 202 1 60% incr ea se in int ern et usage am ong 6 5 - 7 4 year-olds (fr om 20 11 t o 20 1 9) 4 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 12 Regulatory and legislative dev elopments Background Our R et ail Br ok ing and Pe rso nal Fin anc e bus ines ses a re r eg ulat ed by the F inan cia l Co nduc t Aut hor it y (FCA), wit h the U nde rw rit ing bus ines s reg ulat ed by t he G ibr alt ar F ina ncia l Services Commission operating under the S ol vency I I Dir ec ti ve. Th e T o ur Op er atio ns bus ines s is r egul at ed by th e Civ il Avia tion A uth ori t y and is a m emb er of the A ss oci atio n of Br itis h T r avel Agent s ( ABT A), the Int erna tio nal A ir T r ans po r t As soc iati on an d the Feder ati on ofT our Op era to rs tr ad e bo dies . Th e Cr uise b usin ess i s reg ulat ed by t he M arit ime a nd Co ast gu ar d Agen cy (M CA) an d is amemb er of t he U K Ch amb er of Ship ping an d ABT A . S aga als o ope rat es pr oc ess es an d pr oc edur es t o c omp ly wit h othe r reg ulat ion s and l egis lati on that a ppl y to i ts b usi nes ses in clu ding , but n ot limi te d to, t he D ata P rot ec tio n Act 20 1 8 , UK G ene ral D at a Pr ote ct ion Regu lati on , the B rib er y Act 2 020, t he Equali t y Act 2 0 10 an d heal th an d safety legislation. Development s during t he year Duri ng 202 1 , S aga co mpl ete d th e work re quir ed t o me et the FCA r equ ire ment s for general insurance pricing pract ices to address the difference between new busi nes s and r enewa l pri cing fo r mot or and ho me p olic ies , whi ch ca me int o ef f ect on 1Ja nuar y 20 2 2. We b elieve th ese changes are positive for consume rs as a who le and w ill en cou rage m or e foc us on ser v ic e and cl aims h andli ng as prices become more aligned across the industry . In December 2021, the FC A published its sec on d con sult at ion p ape r ‘ A New Consumer Duty ’ , wh ich incorporates new con sume r pr ote ct ion s t and ard s in re ta il f ina ncia l ser vi ce s, d esig ned t o imp rove overa ll cus to mer o ut co mes an d to enc our age f irm s to ‘get it rig ht f irs t ti me’ . Itwil l be su ppo r t ed by a set o f rule s and required customer outcomes. These new rule s ar e expe ct ed t o be f i nalis ed in J uly 202 2 , wit h the i mple ment at ion p erio d running until April 2023 . Saga is well- positioned to meet these new st andards, building upon customer-orientated working practices already embedded andop er atin g to goo d ef f ect . Macroec onomic conditions COVID -19 pand emic 202 1 b egan w ith si gnif icant C OVI D -19 re str ict ion s in pla ce a cr oss m os t of the UK . The se r est ric tio ns be gan to b e lif t ed i n Mar ch , wit h mo st ac ti vit ies re suming by t he su mmer. During th is per iod , our c oll eag ues c ont inue d to ope rat e la rgely f ro m hom e, an d ser vi ce deli ver y in th e Insu ran ce b usin ess con tinu ed as us ual w ith mi nimal disruption und er our remot e working mod el r olle d out i n 2020 . Our C ruis e bus ines s was no t abl e to ope rat e fo rthe f irst h alf of 2 02 1 du e tot he pan dem ic. C ruis es r etu rned t o ser vi ce wi th S piri t of Dis cove ry ’s f irs t crui se on 2 7Ju ne 20 2 1 , foll owed a mont h lat er by S piri t of Adve ntur e on 26 Jul y 202 1. Pr ep arat ion s for r etur n to ser vi ce b egan at f ull pa ce in A pri l 202 1 wit h the c rew va cci nati on pr ogr am me to en sur e tha t 10 0% of c rew we re vac cinat ed b efor e ou rgue st s wer e invit ed b ack o n bo ard . Workin g closely with regula tors , new COVI D -19 pr oto c ols wer e de sig ned , impl emen te d and c er ti f ie d by Lloyd s Regi st er , wit h bot h ship s gaining t he Shield+ accreditation. All crew memb er s wer e tr aine d in the se pr oc edur es a swell as o ur st an dar d safety and emergency resp onse tr aining . Follow ing su cc ess fu l sea t rial s, the M CA ce r tif ied th e ship s to o per at e wit h gue st s on b oa rd . In Nove mbe r 202 1 , a f ur th er COV ID -19 varia nt , Omi cr on , was dis cover ed in t he UK , lead ing t o re cor d level s of ca ses . Whil e this d idn’t re sul t insign if ic ant re str ict ion s, it d id have an im pac t on abse nte eis m in all in dus trie s. O ur Insurance business suffer ed a short- ter m dimin utio n inc ont ac t cent re ser vi ce l evels, w hich w as add re sse d through increased recruitme nt and productivity measures. The Cruise busi nes s wasalr ea dy t es ting al l gue st s and cr ew pr ior t o, an d at key po int s during , ea ch cr uise . Th ese m eas ure s will c ont inue t o re main in f or ce fo r aslong a s nec es sar y t opr ot ect o ur guest s. Political unc er taint y Alt houg h st a r ting af ter t he end o f our f ina ncia l year, the Russ ian invas ion of Ukr ain e on 24 Febru ar y 202 2 ha s created heightened economi c and political uncertainty throughout the world. Whilst the situation continues to unfol d, a nu mbe r of pot ent ial ri sk s have bee n iden tif ied tha t cou ld imp act o ur abili t y to d elive r on our s tr at eg y t hat will r equ ire c los e mon it oring an d an agil e manage ment r es pon se sh oul d the sit uati on co ntin ue t o esc alat e. T he key risk s at th e tim e of wri ting in clu de increasing in flationar y pressures caus ed by ri sing c omm odi t y pric es , suc h as oil , foo d and m et als th at all af fe ct eit her o ur co st s of s upp ly, hous eho ld sp en ding pat t er ns or b oth . The re is a lso th e pot ent ial d isru ptio n of glo bal s to ck m arket s , whi ch c ombi ned wit h the inf latio nar y imp act s , may dr ive invest or s tow ard s a mor e ca uti ous out loo k and r edu ce d sp endi ng. We wil l respond to these changes as necessary, whils t mai nt aining ou r foc us on t he custom er and delivering optimal per formance under whatever cir cums t anc es p revail ove r the com ing year. Recruitment an d retentio n Duri ng the l at te r half o f 202 1 , U K com pani es s ta r te d to s uf fe r high l evels of re sign ati ons , co mmo nly r efer re d to as the ‘ Gr eat R esig nat ion’ . Thes e at tri tion r at es , not ed by ex t ern al exper ts as b eing t he hig hes t sin ce 200 9, have af fect ed a ll f ina nci al ser vi ce s f irms , in clud ing Saga . Inr esp ons e, we have en han ced o ur recruitment, inducti on and on boarding pr oc ess es , co ntinu ing to b uild o n our str ong c olle ague engagem ent , and rev iewed an d re sp ond ed t o key the mes amon g our le avers , to i dent if y opportunities for further improveme nt. This wo rk will c ont inu e into 2 02 2 and will b e clo sel y moni to re d to e nsur e our resp onse remains ef fective. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 13 Purpose and busi ness mo del Our co lleague s and cult ure Our c oll eag ues r ema in int egr al t o our br an d asthey d elive r except ion al expe rien ce s for ou r cus to mer s every d ay. Focus on ou r peo ple , and the c ultu re in w hich t hey wor k , isth ere for e a key prio rit y. Thr oug h invest ing in , and c ons t antl y develo ping th is cul tur e, we en co urage col leag ues t o do t he b es t work oft heir l ives whic h in tur n, b enef its o ur cus t ome rs . Our b rand The s tr eng th of th e Saga b ran d is a key dif ferentiato r in the highly competitive markets that we o pe rat e in . The r el aunc h of the b r and in202 1 w as aime d at r ef lec ting t he at t itu des andmin dse ts o f our cu st om ers r ath er th an justt hei r age. Thi s will al low Sa ga to ap pe al toawi der c ust om er ba se th an ever be for e, supp or t ing our d ire ct m arket ing mo del an d driv ing cu st ome r loyal t y. Our cus to mers an d insight Our c ust om ers a re t he co re o f our bu sine ss . Every t hing wed o is aime d at cr eat ing exceptional experiences for them every day . Itist his fo cus th at dri ves us t o gath er an in-depth und erst anding of their be haviours andse ntim ent s t o allow u s to d evelop p ro duc t s ta ilor ed s pe cif i call y for t his uni que g ro up. Supplier partnerships Our s uppl ier r elat ion ships a re p ar amou nt to o ur business model, providin g speciali st expertise, know ledge an d cap it al th at sup po r t us in deli vering t he be st p os sibl e out c ome fo r our customers. Proprie tar y dat a and t echno log y We are al ways lo oking t o en hanc e our s yst ems cap abili tie s and s tr eng t hen o ur abi lit y t o capt ur e insig ht at ever y op por t unit y with b oth our exis ting a nd p ote ntia l cus to mer s. T his app ro ach al lows us t o cr eat e b esp oke o f fer ings to su it th e sp ecif ic nee ds of ou r cus to mer s. Financial r esilienc e Insurance op erations rem ain the largest part ofthe G r oup,c onver ti ng muc h of it s pr of i t af t ert ax int o ca sh . Agai nst t he c onti nued bac kdr op of t he COV ID -19 pa nde mic , the G ro up has de mon str at ed t hat it is a ble t o ma int ain financial resilie nce through proactiv e actions ta ken , re spo ndi ng to t he devel oping l and sca pe in an agi leman ner. Our streng ths Our div erse business CR E A T IN G V AL UE USING OU R DI S TINC T S TR E NG TH S Insurance Wha t we do We prov ide o ur cus t omer s wit h ta ilor ed i nsur anc e pr od uct s , principa lly motor , home, priva te medical and travel insurance. How we ad d valu e • We dev elop dif ferentiat ed pr odu ct s , suc h as our S aga Plus t hre e-yea r f ixed -pri ce and C OVI D-19 in clu sive t ravel products to offer customers additional peace of m ind. • T o en sur e tha t cus to mer s re cei ve the b es t pri ce , we usea c omb inat ion of o ur ownin-h ous e und er writ er and a th ird -par t y panel o f underwrit ers. • We focu s on ac quir ing our customers directly , reduc ing the c os t of ac quis iti on. Marketplace and position We are t he U K’s spe cial ist in insur an ce pr o duc ts f or pe opl e over 50 in t he U K . Key compe titors: Admiral , Direc t Line, H astings , L V , RSAan d Aviva Motor and home policie s in force 1. 6m 2020/21 – 1 . 5m Tr a v e l Wha t we do We prov ide o ur cus t omer s withluxury travel experiences through oc ean and river cruises, esco rted tou rs, sp ecia l i ntere st trip s and h ote l st ays . How we ad d valu e • In oc ea n crui se, we o f fer anall-inclusive experience including our VI P chauf feur servi ce, all drinks and meals, balcony cabins as stan dard and selecte d ex cursions . • We maint ain t he hig hes t levelof he alt h and s afet y st an dar ds on b oar d ou r crui se shi ps , re cog nise d thr oug h the awa rd of t he Lloyd’s Shie ld+ a cc re dit ati on . • Cus to mer s be nef i t fr om pea ce o f mind t hro ugh t he incl usio n of tr avel insu ra nce and ou r pric e pr om ise guarant ee. Marketplace and position We are o ne of th e lea ding t ravel busi nes ses s er ving p eo ple over 50 in th e UK , foun ded o n our except iona l insig ht int o our customers’ e volving needs. Key compe titors: Royal Caribbean, Carnival, TU Iand O n th e Be ach Guest s trave lled 31k 2020 / 21 – 15k Our businesses ar e entrepreneurial and aut onomous , whilst lever aging o ur co re in tel lec tua l pr ope r t y t o buil d deep a nd long -lasting relationshi ps with our c ustomers . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 14 Our p urpo se is to d el iv er e x ce pti ona l e xper ie nces e v ery da y , wh il st bei ng a d ri ve r of po sit iv e cha ng e i n ou r mar ke ts and com mu nit ies. At ou r heart and in ou r her itage , we are a cap ital-l igh t, direct- to-custome r mark eti ng, content and distribution busi ness with long -term customer relationships. Custo mers At Saga , de liveri ng for ou r cus to mer s iswhat m oti vate s us . Our d ist inc t cus to mer g ro up kno ws what go od lo ok s like an d it’s tho se exp ec tat ion s that we aim to s urp ass . Thr oug h our un ique insight , we cr eat e dif fer entiat ed products, coupled with e xceptio nal ser vi ce t o cr eat e lo nger and d eep er relationships with our customers. Cus to mer N PS 49 2020/21 – 4 4 Colleagues We rec ogn ise th at our c oll eag ues ar e key to o ur suc c ess . It i s impo r t ant th at col leag ues f eel c omm it t ed t o Saga andengage d in th eir wor k to d eliver exceptional experiences for our cus to mer s. We c onti nue t o inves t in cr eati ng a diver se an d incl usi ve cult ur e so co lle ague s fee l supp or t ed , ar e recognise d and rewarded appro priately and have an o pp or tu nit y t o le arn and grow w ith S aga. Co lleag ue engagem ent 7 . 7 out of 10 Febru ar y 202 1 – 7.3 Communit y Saga is c omm it t ed t o driv ing p osit ive change within our communities through volunteer progr ammes, charit able giving , and minimising the envir onm ent al im pac t of our ope rat ion s. We ar e pr ou d to b oth rep re sen t and ad voc ate f or p eop le over50 in t he U K . Colleague v olunteering 3,283 hours 2020/21 – 3 0 1 hou rs 1 Partners and suppliers Our careful ly selected partners and suppliers sup por t our abilit y to deli ver ex ceptional products and services forou r cus to mer s. We aim t o se lec t partners and su ppliers tha t compl ement our in-house abili ty through speciali st skills, knowled ge orca pit al , or wh ose i nter es t s alig n tot hos e of our c ust om ers . In t urn , ourpa r tne rs an d supp lier s be nef i t fr omac ce ss t o the ex per t ise o f our col leag ues , ou r br and an d our d eep custom er insight. Shareholders Saga aim s to d elive r long-ter m value f or shar eh old ers by o ptim ising o ur co re busi nes ses , r etur ning t o sus ta inab le gr ow th a nd r educ ing our d ebt . In or der t o pr ot ec t the G ro up’ s f in anci al pos iti on in lig ht of th e COV ID -19 pandemic, the Boar d announced in April 2020 t hat i t had su sp end ed div ide nd paym ent s to s har eh old ers . Th e Bo ard doe s not exp ec t to p ay div iden ds unt il 2024 at th e ear lies t . Our div erse business Creat ing value Other Businesses Wha t we do The Group ’ s Other Busi nesses provide customers with personal finance product s, incl uding e quit y r el eas e and saving s ac cou nt s and m edia con ten t thr oug h the S aga Magazine, of fering enter tainment and insight into a range o f top ic s. We als o oper ate an in-house m ailing andpr intin g busi nes s. How we ad d valu e • We comp lem ent ou r in-ho use expertise by partnering wi th thir d par ties t o del iver personal finance product s that m eet t he ne eds of o ur customers. • Saga Maga zine deli vers ecl ect ic and i nte re st ing articles each month, keeping our sub sc ribe rs up t o dat e on the l ate st t opi cs . Personal finance customers 32k 2020/21 – 3 2k Paid magazine subscribe rs 162k 2020/21 – 1 7 4k Rea d mor e on T ravel on pages 3 an d 20 Read more on Insurance on pages 3 an d 20 F ur ther information 1 C o lle ag ue vo lu nt eer h ou rs d uri ng 20 20/2 1 we r e sig ni f ic ant ly i mp ac te d by t he ef fec t of C OV ID -19 l o ckd ow ns in t he U K Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 15 Engag ing wit h st ake ho ld ers U NDE R ST ANDIN G O U R ST A K EH O L D ER S What mat te rs to t hem • Pro duc t s and s er vic es t hat ares pe cif i cal ly t ailo re d to their needs. • Exceptio nal customer ser vic e and g re at value f or mo ney ac ro ss all our p ro duc t s and s er vic es . • Ease o f int era ct ion an d cle ar com munic ati on thr oug h ever y st ep of t he jou rney. How we en gage We aim to m aint ain an h one st dial ogue w ith o ur cus t ome rs through cust omer teleph one supp or t , s oci al me dia , th e Saga Magaz ine an d our cu st om er pan el. We track customer satisfactio n wit hin ea ch bus ine ss ar ea v ia a numb er of me tric s inc ludi ng net pr omot er s co re (N PS), whic h form s par t of t he b alan ce d sco re car d fo r our execu tive an nualb onu ses . How the Bo ard is k ept inform ed The B oar d r ec eive s reg ular r ep or t s fr om man ageme nt bas ed on cus to mer in sight s a nd fee dba ck , and r eviews N PS s co re s. Customer-facing colleagues are also inv it ed t o Bo ard m eet ings t o pr ese nt det ails o f cus to mer experiences . What mat te rs to t hem • A cult ur e wher e th ey feel t hey bel ong an d are v alue d for th e charact eristic s that make them individual . • Co mmuni cati on th at is r egul ar , cle ar and o pen a nd all ows col leag ues t o sp ea k up and behe ar d. • Rec eiv ing fa ir rewa rd an d recognition. How we en gage We aim to c re ate a n exciting cult ur e wher e c olle agu es fe el abl e to d o the b es twork of t hei r lives . We have ope n and ho nes t t wo-w ay communication with our colleagues through a number of channels, fur t her d et ail of whi ch is p rov ide d on page 25 . How the Bo ard is k ept inform ed Our nominated ‘People Cham pion’ is Eva Eisens chim mel , one o f our Non-Executive Directors, who reg ula rly at t end s our Peo ple Co mmit t ee m eeti ngs . The B oa rd is also kept informed through regular upd ate s fr om ou r Chief Pe opl e Of f ice r (CPO) on co lle agu e engageme nt , fee dba ck fr om o ur Saga S piri t Sur vey an d pr ogr ess agains t our p eop le s tr ateg y. What mat te rs to t hem • Maint aining open communications with us, ensur ing th at memb er s of th e com munit y are awar e of o ur str at eg y, as well a s any impa ct tot hem . • Opp or t unit y to sh are w hat mat t ers t o th em and h ow wemaybe a ble t o sup po r t . • Abi lit y t o sha re k nowl edge and skills be tween our colleagues andth e wid er co mmun it y. How we en gage Qua r te rly m eeti ngs ar e hos t ed byour G rou p CEO and C PO w ith key mem ber s of th e wide r te am . Abusi nes s upd ate i s pr ovid ed ateac h mee ting , gi ving o ur communit y stakeh olders the oppor tunity to ask questions andengage w ith u s on key t opi cs . This has been part icularly helpful during t he ma jor r efu rbis hment ofour Enb ro ok h ead quar t er s inFolkes t one . How the Bo ard is k ept inform ed Our C EO and CP O at t end e ach meeting, enablin g them to d irectly pr ovid e feed bac k to t he B oar d. Customers Our c ust om ers r em ain at th e hea r t of ourbr an d. Engag ing new c ust om ers a nd buil ding an d maint ain ing the l oyalt y of our exist ing cu st ome rs is key t o our s uc ce ss . Colleagues Our c oll eag ues r ema in int egr al t o the br and an d it is key t hat we cr ea te a welcomin g and s upportive culture, allow ing our c oll eag ues t o do t he be st work of t heir l ives . Com munities Par t of S aga’ s purp os e is to b e a dri ver of positive cha nge withi n our communiti es. We seek t o und ers t and a nd ca ref ully con sid er the i mpa ct of ever y de cisi on wemake . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 16 What mat te rs to t hem • St able relationships allowing them t o ac hieve th eir own str ateg ic goals . • F requ ent and transparent two -way communi catio n. • Pro mot ion of i nnovat ion , including new technologies, tosi mpli f y, st and ard ise an d automate wherev erpossible. How we en gage The Supplier Relationshi p Management and Supplier Risk Management Policies g overn ther ela tio nship s wit h our su ppl y chain , pr ovi ding a fo rmal f ra mewor k wit hin whic h we op er ate . Thisensures regular , appropriat e and mutually benef icial com munic ati on for b othp ar t ies , con tinu ousl y imp rov ing th e way we work t ogeth er . The b usin ess u nit s and functional are as are respo nsible forth e man agemen t and c ontr ol ofsup plie r rel atio nshi ps . How the Bo ard is k ept inform ed The R isk C omm it t ee is ke pt inform ed of a ny change s to s uppl ier risk management through the Executive Leadersh ip Risk Co mmit t ee an d by he aring f ro m our Chief R isk a nd C omp lian ce O f f icer. What mat te rs to t hem • Active e ngag ement with the Gr oup C EO, Grou p Chief Fin anci al O f f i cer (CFO) and Investor Rela tions (IR) T eam. • Regular communications pr ovidi ng upd ate s on th e Gr oup’s f inancial per formance and pr ogr ess ag ains t our s tr ateg y. How we en gage We have fre que nt co mmuni cati on with shareholders through results announcement s, pr ess releases , upd ate s to t he c orp or ate we bsi te , one- on -on e mee tings a nd gr oup event s . How the Bo ard is k ept inform ed An I R re por t i s rev iewed at e ach Boa rd m eet ing, p rov idin g an upd at e on sharehold er engag ement and feedback received. Our Non- E xecut ive C hairm an, G r oup C EO andG ro up CFO me et wi th our sharehol ders on a regular basis, assi st ed by ou r He ad of I R . In a ddi tio n, the C hair o f the R emun erat ion Committ ee meets with shareholders thr oug hou t the ye ar and p rov ide s the Boa rd w ith a ny feed bac k . The A nnu al General M eeting also provides an opp or t unit y fo r th e Boa rd t o me et sharehol ders and answer any questions they may ha ve. What mat te rs to t hem • Proactive a nd transparent communication. • Pro te cti on of ou r cus to mer s and the m arket s we o per at e in . • Inc re asing t he tr ust o f the p ubli c and encouraging market competition. How we en gage Regulator relationships are maint ain ed at su bsid iar y level a nd monitored by the respective audit, risk and compliance committees. How the Bo ard is k ept inform ed All material areas ar e overseen by the Risk Committee and escala ted to t he Bo ar d if ne ce ssa ry. Partner s and suppliers Our p ar tn ers an d sup plie rs pl ay a vit al ro lein he lping us t o de liver exc epti onal exper ien ces ever y d ay for ou r cus to mer s. We aim to b uild mu tu ally b enef icia l, lo ng- term relations hips with all key suppliers . Shareholders Saga is c omm it t ed t o cr eati ng long-ter m sustainable value for our shareholders. Weaim to t re at all sh ar eho lder s fair ly, providin g them with opportunities to express the ir vie ws. Reg ulat o rs Main tai ning s tr ong r elat ions hips w ith ourr egul ato rs is c ruc ial as t hey set t he fr amewo rk wit hin whi ch we op er at e. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 17 P eople and culture st ep chang e Our people and culture tr ansformation u nderpinned the success of our turnaround strategy . Af ter layi ng the f oun datio ns in 2 020 , we took great str ides i n 2021 towards creati ng a cu lture whe re collea gues fee l wel come and can a lwa y s be themse lvesa s part of a su pportive and e mpath etic tea m. Our stra teg y Grandpar ent s’ Leav e “I w as so ha ppy t o hea r that S aga was g iv ing gr andp ar ent s pai d leave. I t hink t he b ond youget ear ly on w ith yo ur gr and chil d is lovelya nd th e ex tr a tim e to sp en d wit h your daug hte r whic h you don’t in r ea l life of ten h ave. Irem emb er how i mpo r t ant it wa s to h ave my gr andp ar ent s ar oun d so th e fac t that S aga hasg iven me t his t ime of f means s o muc h tom e.It ’s nice t o know t hat I h ave the fu ll supp or to f my empl oyer in lo oki ng af t er my fami ly. I reall y woul d enc our age ever yone w ho has th e op por t unit y to t ake G ran dpa ren ts’ Lea ve. It’ s bee n the best e xper ience. ” Shelley Whittam (Saga coll eagu e ) 1 D EL IV ER Y A GAI NS T OUR TURNAR OUND S T R A TE G Y Object ive Res et and l aunc h Saga’s new purpo se, value s and l ead ers hip be havio urs t o engage co lle ague s in th e tru e Saga spir it and c re at e a cult ure t o de liver and maintain Saga ’s trans formation. KPI 7.7 Over all c ol leag ue engagement Relat ed risk s • Capabilit y • Regulatory landscape • Environmental, S ocial and Governance (ESG) Progr ess in 2 02 1/ 22 Culture and engag ement • Record levels of colleague engageme nt , sc oring 7. 7 out of 1 0 wit h a par t icip atio n rat eof 9 3% . • Inc re ase d aware nes s of dive rsi t y, equi t y andin clus ion t hr ough o ur Women in L ead ers hip event an d gue st s pea ker s for M en’ s He alth Mon th, B la ck Hi st or y Mo nth an d Menopause Da y , among others. • Inc re ase d engageme nt wit h our value s, d emo nst rat ed t hr ough o ur Saga S piri t Sur vey, scor ing 7 .8 o ut of10. Working@S aga • Won 202 1 H yb rid Work ing Awar d in the W orkplace Customer Success Awar ds . • Introduction o f Grandparents’ Leave , of fe ringup t o one w eek ’s leave per year fo rthe b ir th of a n ew gr and chil d. Per fo rm Le arn G row • Co ntinu ed t o supp or t t he development of female tal ent through par t ner ship w ith t he30 % Cl ub. • Co ntinu ed fo cus o n wellb eing through additional holi day enti tlem ent s an d the p rov isio n of f ina ncia l supp or t f or th ose i nnee d. Reward a nd recognition • Launched new v alues-led recognition programme. • La unch ed new r ewar d fr am ework fo r frontline colleagues, focused on providing exceptional experiences for customers. Se e mor e of Shelley’ s story Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 18 2021 was a tran sform ation al ye ar for o ur brand, wh ich w e relau nched th rough ou r ‘E xperie nce is E v ery thin g’ campai gn, ai med at reflecti ng the a ttitudeofou rcustomers ra ther than their a ge. Object ive T r ansform the digital experienc e for our cus to mer s, fo cu sing on a f ast er, easier and si mple r ser v ice . Devel op dat a solu tio ns t o cr eat e a sing le cus t ome r view. Enhance brand awareness and optimise mark eting t hro ugh t he r elau nch of o ur new Sagab r and . KPI 49 Customer NPS Relat ed risk s • Cy bercrime • Saga brand and relevance • F raud and f inancial crime • Br eac h of Dat a Pr ot ec tio n Act 20 1 8/ UK G ene ral D at a Pr ote ct ion Regulat ion Progr ess in 2 02 1/ 22 • Rela unch ed t he Saga b r and wi th a new identity and national ‘ Ex perience is E very thing ’ marketing campaign. • Websites redesigned, incorporating the n ew br and id enti t y, easier navig ation for mobile devices and improved ac cessib ilit y. • La unch ed dig it al ver sio n of th e Saga Magazine, including c ompliment ar y digital subscription for all sharehol ders. • Develo pe d the S aga ap p to in clu de mor e pr od uct s an d ad ded we bch at functionality. • NP S of 4 9, 5pt s hig her t han 31J anu ar y 202 1 , r ef le ct ing impr oveme nt s wit hin our I nsur an ce and Personal Finance businesses. • Migr at ed m arket ing dat a f ro m mult iple l egacy s yst em s to n ew modern infrast ructur e, enabling faster analy tics. • Launche d ‘E xperienc ed V oices’ , an onlin e pan el of 6 ,00 0 cu st om ers pr ovidi ng valua ble in sigh t into w hat they t hink of o ur pr odu ct s an d services , alongside what matters mos t tot hem . ‘E xperience is Ev ery thing’ We a re delighted with the positive feed back receiv ed in rela tion to ou r brand camp aig n aimed a t ref lecting the attitude of our customers rather than their a ge. “ S hows p eop le over 50 a re s til lact ive, p ar t icip ating inw hat life h as too f fer. Age is notaba rrie r to li ving a f ull li fe. Show s that S aga r esp ec ts t his wo rld v iew of ol der p eop le.” Fem a le , 6 8 “ As a 70 year -o ld, I a ppr ec iat e po sit ive at ti tud es t o bei ng old er . This a dver t d oes i t ver y well . ” Femal e, 70 “ A new co mpany l ogo whic h is mor e mo der n and t he s t yle of adve r tis ing is als o ce r ta inly d if fe ren t to w hat I expected. ” Male, 5 0 Da ta , di gi tal a nd bra nd t ransfo r ma ti on 2 Se e our n ew television adv ert Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 19 “E xc ell ent cove r for th re e year s – I nee ded t o ch ange my buil ding an d con tent s i nsur anc e as my exis ting in sur er was acting u nreasonably , hikin g the new pr emiu m to s tup id levels and was n’t pr epar ed t o negoti ate . I foun d tha t the S aga Plus c over of f ers ever y thing I nee d and I lik e the i dea o f a f ixed p re mium fo r thr ee ye ars , thus avoi ding th e annu al has sle over premium increases.” Mr Wi sb ey (home insurance cus tomer) “R etur ning t o Saga c ar insur an ce af ter f i ve-yea r br eak , competitive premium, three- year f i xed-p rem ium an d good cover age mak es a co mp elling pac kage , plus o nlin e sys tem easy t o nav igate .” Mr Packham ( motor insuranc e custom er ) Our strateg y continued Optimising our businesses W e are focuse d on opti mis ing o ur core busi nesses to en sure the y are the best th ey ca n be for bo th our cu stomers and o ur coll eagues. W e ai m to maximi se va lue crea tion an d eff ici ency in order to ret urn to lon g - term su stainabl e grow th. Object ive Re- es ta blis h Saga t hr ough exc epti onal ser vi ce an d by buil ding di f fer ent iat ed propositions for our cu stomers . St re ng th en th e foun dati ons of o ur co re businesses by sim plifying processes and addressing cust omer conc erns while k eep ing co st s dow n. Relat ed risk s • COVID -19 pandemic • Cy bercrime • Delivery and execution • Regulatory landscape • Oper ational resilienc e • Environmental, S ocial and Governance (ESG) • Third-pa rt y sup pliers • F raud and f inancial crime • Insurance risk Optimising Insurance Progr ess in 2 02 1/ 22 • Deli ver ed se co nd yea r of po sit ive momentum across motor and home: – Policies i n for ce in cr eas ed 1 . 4%. – 2.3 ppt i mpr oveme nt in cus t ome r ret ent ion t o 82 . 8% . – Gros s marg in p er po licy r ema ined st ab le at£ 7 4. – Grow t h in thr ee -year f ixed-pr ice products, representing 4 7% o f the bo ok (vs. 35% i n 2020/21 ). • La unch o f Saga Pl us , our enh anc ed thr ee-ye ar f i xed-pr ice c over wi th more featur es as standar d. • Suc ce ss ful im ple ment at ion of, and adjus tm ent t o, ch anges ari sing f ro m the FCA ma rket s tu dy. • AI CL p oli cies in f or ce in cr eas ed 3% year on ye ar , gr ow t h for th e f ir st t ime sinc e 20 1 2. • Ra nked hi ghe st U K ins ure r by The Insti tute of Custome r Service . Opt imising T r avel Progr ess in 2 02 1/ 22 • Successf ul resumption o f operations foll owing ea sing of t ravel r es tr ict ions . • Impl eme nte d ro bus t COV ID -19 pr oto co ls t o ensu re t he saf et y of colleagues and guests. • Crui se gen erat ed p os iti ve EBIT DA and c ash in t he se co nd hal f thr oug h loa d fac to r of 6 8% and p er di em of £2 99. • Sec ur ed Cr uise b oo king s for 202 2/23 o f 73% lo ad f act or an d £3 1 9pe r diem at 2 0 Mar ch 2 02 2 . • Achiev ed ex ceptional lev els of customer satisfacti on within Cruise of 9.1 out of 1 0. • E x te nsio n of our r iver cr uise proposition to include two new purpose-built river vessels, Spirit of the R hine a nd Sp irit o f the D anub e. 3 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 20 Object ive Ma ximis e ef f icien cy by co ntin uing t o re duc e co st an d co mplex it y ac ro ss th e Group . KPI Numb er of o f f ic es r edu ce d fr om 11 to 7 ( wit h a fur ther t hre e curr ent ly fo r sal e ) Relat ed risk s • Delivery and execution • Third-pa rt y sup pliers • Br eac h of Dat a Pr ot ec tio n Act 20 1 8/ UK G ene ral D at a Pr ote ct ion Regulat ion Progr ess in 2 02 1/ 22 • Enhancements launch ed in Insurance incl uding t he mid -term a djus tm ent reb ro ke pr o ces s and l aunc h of th e new motor pri ce-comparison website product. • Numb er of o f f ic es r edu ce d fr om 11t oseven , wit h a fur t her t hr ee curr ent ly for s ale . • Co mple tio n of Enbr oo k ref urbi shm ent , cr eat ing a collaborative hub f or colleagues. • Duri ng the p eri od of T ravel susp ens ion , kept b urn c os ts t o a minimu m (£5 . 9m p er mo nth), and bel ow the g uid ed r ange of £ 7 –9m . • Launched consistent, automated measurement of cust omer satisfaction and NPS, providin g up-t o- dat e insig ht on o ur cus t ome rs’ experience. The reducti on of de bt cont inue s to be a key pr iori t y for Sa ga. Object ive Co ntinu e to r edu ce d ebt ,t ak ing act ion tostrengthen the balance sheet and maintain f inan cial res ilience . KPI £729m Net d ebt at 3 1 Ja nuar y 20 2 2 Relat ed risk s • COVID -19 pandemic • Insurance risk Progr ess in 2 02 1/ 22 • Net d ebt r edu ced by £ 3 1m t o £ 729 m , fr om £ 760m a t 31 J anu ar y 202 1 . • Iss uan ce of £ 25 0m f i xed-r at e unse cur ed b ond a llowe d rep aym ent of £70 m coven ant ed t erm lo an an d ten der o f £ 10 0m o f exist ing b ond , while p r ovidin g ampl e liqui dit y a nd gre ater f lexibilit y. • Co mple te d disp os al of pr op er t y, gener atin g £ 4 .5 m of net s ale s proceeds. • Worked closely with lenders i n order to m anage th e re maini ng ship an d bank debt covenants, allowing f lexib ilit y t hro ugh t he ongoi ng disruption arising fr om COVI D-19. • Lever age rat io (e xclu ding Cr uise) of3 .0x , well w ith in the c ovena nt of 4. 25x asso cia te d wit h the r evolv ing credit facility. Driv ing s implicit y and ef f icie ncy W e aim to tran sform Sa ga i nto a lean er , sim pler a nd more eff ici ent b usine ss, layi ng th e founda tions for future gr ow th. 4 Reducing our debt 5 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 21 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 22 In orde r to bui ld on o ur pro gress to da te and co n v ert the fo und ati on s al ready la id i nto s ustai nabl e growth, we are fu r ther e volvi ng our strategic approach. OUR G R O W T H P L AN MO V ING F OR W ARD Our growth plan 1 2 3 Create ‘Th e Superbrand’ for older people • Gr ow exis ting b usin ess es whi le r edu cing debt . • Develo p new bu sine ss es thr oug h inn ovatio n, in a cap it al-l ight way. • Address the curr ent brand polarisatio n. • Commer cialise and grow our database . • Buil d except iona l insig ht s, d riven by t he acq uisi tio n of The B ig W indow C on sult ing Limit ed. • Deli ver a br an d re -po sit ioning w her e ‘E xperien ce is E very t hing’ . • Cr eat e a co nte nt pla tf orm wh er e we re ach millio ns of cu st om ers ever y day. Maximise our existing businesses Step - change our ab ility to scale wh ile reducing debt Specif ic growth plans for each business, enabl ing gr ow th , ac co unt abil it y, ef f ici ency a nd th e deli ver y of a co mmo n br and pu rpo se Insurance Move fr om r es et t o gr ow th , fo cus ed on o ptimi sing our pr o duct s a nd br oa deni ng the r ange, b uil d custom er relationship marketing capabilit y, shif t distribution from price-comparison w ebsites to dir ect a nd r efoc us ourp ro duc t sou rc ing app ro ach . Cruise Buil d oc ean c ruis e int o an except ion al expe rien ce every day, whilst ma ximising our returns . Build a r iver cruise proposition that mirrors ocean. Holidays Create a market -leadin g, more digital holida ys busi nes s fr om a low- c ost o per at ing pl at form t o acc el erat e g row th and m ode rnise t he b usin ess . Personal Fina nce At tr ac t new cus t omer s , acc ele rat e g row t h wit hin exist ing eq uit y r ele ase a nd sav ings pr od uct s a nd add n ew pr odu ct s t o deep en ou r cus to mer relationships . Our strateg y continued Environmental , S ocial and G ov ernance (ES G ) O ve r v i ew Saga exist s t o deli ver ex ception al experienc es for ou r customer s ev ery day , whi le bein g a driv ero f positiv e cha ng e in ou r mark ets and commu niti es. We h av e a div erse ran g e of ESGi niti ativ es and a re proud of wha t we ha veac hie ve d to date. At the sa me time , werecog nise th at we n eed to do more and arecur rently e ng ag ed in the d etaile d work necessa ry t o achi ev e a reset th at wi ll del ive r an approach t o ESG with greater sc ale, ambition – and impor tantly , impact . This repor t shows the direction of trav el for that a pproach, which wil l be un ve iled wi thin t he ne x t 12 month s, alongsi de the work carried out this yea r . At the h ear t o f our new a ppr oa ch wi ll be a fo cus onr educ ing our e nvir onm ent al imp ac t , with a par t icul ar emp has is on ou r Crui se bu sine ss wh er e our t wo new s hips ar e b ase d on sig nif i cant ly mo re mod ern an d ef f i cien t te chno log y than o ur pr evio us ship s. B uildi ng on th is suc ce ss ful f l eet r enewa l, we have engaged V.Shi ps , a lea ding ind ep ende nt ship manage ment c omp any, to help u s ass ess w hat mor e we ca n do in t his ar ea . We are m or e adva nce d wit h re gar ds to t he S in ESG . O ur Gr oup b usin ess s tr at eg y h as se en us work ing to r es et Sag a and it s o per ati ons . At it s hear t, t his st ra teg y req uir es us t o wor k har der, every d ay, to unde rs ta nd th e live s and ne eds o f peo ple i n our ma rket s an d the n deli ver for t hem . Central t o our approach to tr ansforming our busi nes s, is a f ocu s on ou r peo ple a nd th e st ep - change s bei ng mad e to s tr eng then ou r cult ur e of cus to mer d eliver y. Our en han ced E SG fo cus in t his are a will b e cl earl y tie d to t his s tr ateg ic ap pr oac h, to ou r cus to mer s and t o our c oll eag ues . Our di st inct c us to mer g rou p is one o f the m os t exper ien ced i n soc iet y ; however, all our work h as show n that t hey ca n fac e an up hill b at tle t o get thei r voic es he ard , t o be r epr es ent ed in s oci et y, and t o over com e th e pr ejudi ces p eo ple h ave abou t ageing. Pe opl e aged over 50 a re t he fa st es t gr owing d emog rap hic in t heU K : 28 . 2 mil lion people 1 will b e over th e ageof 50 by 20 3 1 and 6 3p 2 of ever y £ 1 will b e sp ent by p eop le over 6 5 in 20 4 0. But d esp it e the s ignif ican ce of t his gr ou p, age is of t en lef t out of t he nat ion al co nvers atio n. We are d ete rmine d to p lay ou r par t in t a ckli ng what we s ee as a hi dde n are a in th e disc rimin atio n deb ate at a t ime w hen s o much good wo rk is b eing do ne t o add re ss iss ues aro und r ac e, gen der an d disa bili t y. Saga is now foc use d on ch allen ging p er cep tion s of ageing and , sp ecif icall y, on bec omi ng the C ham pion s of E xpe rien ce in t he Work pla ce . This w ill b e the foc al po int of ou r work w ithin t he S oc ial el emen t of ESG an d lea d our w ider s tr at egic r es et . Th is will , of co urs e, b e unde rpinn ed by b es t-in-c las s governan ce an d by the d et aile d work n ec ess ar y to en sur e we ar e mee ting an d, w her e we can , exceeding all our environment al res ponsibili ties and en suring o ur bus ine sse s help l ead t he debates in their se ctors. Sag a ha s al wa y s bee n a pur pose -le d bus ine ss, so em braci n g ES G resp onsibil ities lies within our DNA . DELIVER ING A GAINST OU R E SG COM MITME NT S 1 O f f ice f or N at io nal S t at is ti cs – 2 0 18 -b as ed p rin ci pal p r oje ct io ns 2 M ax imi si ng th e lo ngev it y d iv id en d – ILC P ar tn er s Pr og ra mm e Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 23 ESG con tinued Whil e we work o n th e det ails o f our ESG str at eg y, incl uding t ar gets a gains t whic h we can be he ld t o acc oun t , our dir ec tio n of tr avel ha s bee n cle arly s et th is year by t wo m ome nt s. In Oc to be r 202 1 , we r ela unch ed ou r br and wi th a camp aign f ocu sed o n cha nging t he way p eop le think a bou t age and s howin g the m or e pos iti ve side o f get ting o lder. Euan Suth erl and , our Gr oup C hief E xecu ti ve Of f ice r (CEO ), enc apsu lat ed our a ppr oa ch at t he lau nch w ith the se wor ds: “ Pe opl e are l ivi ng longer t han ever befo re; t hey ar e work ing lo nger; t hey ar e help ing thei r fami lies; t hey ar e co ntri but ing to s oc iet y. We know ou r cus to mer s do not f eel o ld – th ey feel a s if th ey are exp eri enc ed . Th ey have lived full li ves , have so mu ch t o gi ve, and f ull y int end t o make t he mo st of e ach a nd ever y day. Our new br and s tr ate g y ch ampi ons ar e wh at we ar e calling ‘Generation E xperienc e’ – the discerning, shar p and s av v y ove r- 50s w ho r epr es ent over a thir d of th e UK p op ulat ion .” The s ec ond m ome nt was th e laun ch of o ur new col leag ue b enef it , a week of p aid l eave on th e bir th o f a gr and chil d. T his move , the f irst o f it skin d for a ma jor U K bu sine ss , has b een welc ome d by our c oll eag ues an d we wer e delig hte d whe n it sp arke d a nat iona l conver sat ion . Th e new be nef i t ref lect s o ur bel ief in the va lue of ex per ienc e in th e work pla ce , along sid e a re cog niti on of t he r ole of gr andp ar ent s to t hei r fami lies an d so ciet y. It was launched follo wing e xt ensive consultation with col leag ues , as we ll as r ese ar ch invol ving 2 , 50 0 peo ple ove r 50. Th at re se arc h show ed th at a quar t er of w orki ng gr andp ar ent s sa id they foun d it ‘dif f ic ult ’ to b alan ce wo rk wi th chi ldc ar e com mit ment s , sho wing th e valu e of po lici es th at star t to address this challe nge. We have bee n hear tene d by th e re spo nse s to bot h of the se m oves fr om cu st om ers , col leag ues , t he me dia an d wid er so ciet y. As we said w hen we l aunc hed o ur br and , it ’s time for busi nes ses a nd orga nisat ion s of all si zes t o have a conver sat ion a bou t age. As a p urp ose -le d busi nes s wit h mor e th an 70 year s’ experi enc e, it’s one t hat we th ink S aga is ide ally p la ced t o lea d. We lo ok fo rwa rd t o pu t ting t he ne ces sa ry rigour an d re por ting app ro ach b ehi nd thi s think ing , and ou r wid er ESG s tr at eg y an d upd ating in n ex t year ’s Annual R epo r t and Accoun ts. 20 2 1/22 in r ev iew The p ast 1 2 mo nths h ave see n Saga d eliver agains t it s ESG c om mitm ent s , in spi te o f the operational challeng es posed by COVID-19. Weare p ro ud of th e pr ogr es s we ar e maki ng and th e way in whi ch c onsi der ati on of ou r ESGr esp ons ibil itie s is be co ming m or e f irml y emb edd ed in how w e work an d the d eci sion s wemake . We set ou t the d et ail on t he follow ingpages . “ People are living long er than ev er bef ore ;the y are wor kin g lo ng e r; the y are helping t heir f amilies; t hey ar e con tri but in g to soci ety . W e know o ur custom ers d o not f ee l old – the y feel as i fthe y are e x peri ence d. The y ha v e liv e d ful lliv e s, ha v e so mu ch to giv e, and f ul ly in tend to m ake t he most o f eac h and e v e r y da y . Our ne w bra nd strate g y ch amp ion s are wh at w e a re calling ‘Gen eratio n E xperienc e ’ – the discerning, sharp and sav v y over- 50s w ho represe nt o v e r a thi rd of the UK population. ” Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 24 Hybrid working As a r esul t of th e COV ID -19 pan demi c, li ke many othe r bus ines ses , S aga has m oved t owar ds a hybri d way of wor king . Our n ew mo del is a b len d of hom e-b ase d work ing, w ith t he f l exibili t y to work f ro m our Lo ndo n of f ice or f ro m Enbr oo k , our mai n hub in K ent , whi ch has u nder gone a ra dica l tr ans form atio n over th e pas t 18 m onth s. The hu b is use d to m eet , c oll abo rat e, s oc ialis e and c eleb ra te – m oving away fr om d esk-based work ing, m ark ing a big tr an sfo rmat ion t o th e way we all wor k . Followi ng buil ding r enovat ion s, we s t ar t ed welc omin g col leag ues b ac k to t he Enbr o ok hub in summ er 20 2 1 , slow ly an d car efu lly, as par t of a pilot p r ogr amme , and i n line wi th govern ment guidance. Col leag ue engageme nt Saga S pir it Su rvey In 20 2 1, w e carr ied o ut r egul ar pul se sur veys , inte nde d to p rov ide u s wit h mor e fr eq uent feedback from colleagues, allowi ng manag ers to ta ke ac tio n quick er . In 20 2 1 , we re cei ved ou r high est r es po nse r at e of 93 % , and h ave see n asigni f ic ant imp rove ment in o ur over all colleague engagement and health and wellbeing sco re s, w ith t hem b oth i ncr eas ing fr om 7.3 in Febru ar y 202 1 t o 7 .7 in Novemb er 20 2 1 . The k ey act ions t a ken in 20 2 1 ce ntr ed ar oun d th e follow ing: Gr ow th – c are er path: Res etting per formanc e rev iews, e nab ling a be t ter c onver sat ion b et ween colleagues and managers ; speaking to manage rs to h elp th em devel op th eir t eams; c re ating personal development plans. Rewa rd: La unch ing our n ew value s-le d re cog niti on pr og ram me; inc re asing t he st an dar d annu al le ave allowan ce t o 25 days f or all colleagues; removing el igibility criteria from our fa mily p oli cie s; rev iewing b ase s alar ies in o ur Insurance O perations ar ea. St rat eg y, purpo se an d values: L au nchi ng an Exceptio nal Welcome experience for all new col leag ues ; ta king ever y c olle agu e thr oug h a V alues E xperience Workshop; actively engaging in co mmuni t y event s; usi ng col leag ue fo rums , T el l Euan Ab ou t ses sio ns and i nte rv iews t o communicate our plans with colleagues. Health and wellbeing : T r ain ing 35 0 man agers on our c oll eag ue sup po r t fr amewo rk ; runn ing a 30 - Day Ch alle nge to en co urage c oll eag ues t o form h ealt hy new ha bit s; c eleb ra ting di vers it y, equi t y and in clus ion ( DE& I) t hro ugh s pea ker event s and D E&I t ra ining fo r lea der s; impl emen ting p olic y cha nges tha t bet t er support colleagues. Workplace Our internal communications plat form, Workplace, keeps colleagues informed and con nec te d via a s ingl e, mo bil e-f irs t ch anne l. Workplace has transformed ou r colleague com munic ati ons , ena bling ever y c oll eagu e to b e par t of t he c onvers ati on, t o sh ar e the ir fee dba ck and id eas , and f or th eir voic es t o be h ear d , building an open cult ure. In the pa st 12 months, w e ha ve i mpleme nted a nu mber o f fundam ental cha ng es to the w ay we operate, including em bedding flexible and remote ways of wor king for all ou r colleagues and ha v e wide ned our e ng ag emen t with o ur comm unit ies. So cial Over all c ol leag ue engagement 7.7 out of 10 February 2021 – 7 .3 Participation inco lleag ue engagement sur veys 93% February 2021 – 92% Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 25 ESG con tinued People Committee and Colleague For ums We rem ain co mmit t ed t o cr ea ting on going conversations with our collea gues, allowing them t o have t heir s ay thr oug h mult ipl e channels incl uding the P eople Committee and our Colleague F orums. The People Committee • Chai re d by our C hief Peo ple O f f icer. • Attended by 10 Lead Collea gue Ambassadors fr om ac ro ss th e Gr oup. • T y pic ally m eet s du ring th e f ir st we ek of ever y month ( quart erly as a minimum ) . The Colleague F orums • Chaired by the Executive Leade rship T eam (EL T) m emb er of th e bus ines s unit /fun cti on . • Lead Colleague Ambassador( s ) f or the unit/ function also at tends . • Mee ts d uring t he thi rd we ek of ever y mo nth . • The Lead Colleague Ambassador( s ) for the business unit/ function are responsible for feeding back to the P eople Committee. The People Committee Colleague F orums Insurance Tr a v e l Peopl e and Prope rt y Fin anc e and Professional Services T echnolog y Strate gy, Bran d and Custo mer Risk 10 Lead Colleague Ambassadors from across the busi ness Accelerating chang e for colleagues and cust omers Our C laim s Cus to mer O p erat ion s saw signi f ic ant imp rove ment in t heir ove ral l engageme nt sc or e, in cr easi ng fr om 7 . 2 in Febru ar y to 8 .1 in Novem be r 202 1 . In thi s sho r t tim e, ma nageme nt intr od uc ed act ions i nclu ding a n ew rewar d sc hem e, an improv ed induction programme and piloted ourWork ing@ Saga p rog ra mme . Al ongsi de these, two customer focused in itiatives wer elaun che d, ‘ T ime t o be E xc epti ona l’ and‘ Say Y es to E xc ept ion al’ , giv ing c olle agu es the t ime t o deli ver ou r purp os e and li ve our values, empowering them to take ownership ofsay ing ‘ yes’ to ou r cus to mer s to d elive r bet t er ou tc om es . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 26 Diversit y , equit y and inclusion (D E&I) We are c omm it te d to a c ult ure w hich g ive s everyo ne th e op por tunit y t o be t hei r excepti ona l self, by buil ding a di vers e and in clu sive environment where all our colleagues feel like they belong. In 20 20, we ap poin te d our f ir st D iver sit y, Inc lusi on and B elo ngin g Man ager to h elp est ab lis h a cle ar st rat eg ic and t a cti cal ap pr oa ch . We have sinc e br oug ht in a He ad of D E&I t o fur t her l ead in t his sp ac e. T he ch ange of ti tle , to incl ude t he t erm ‘equi t y ’ , is it sel f an evolu tio n of the in clu sion age nda an d a bet t er a lignm ent t o the latest ex ternal thinking. In 20 2 1, t he fo cus h as be en on t ak ing th e DE& Iagend a for war ds , st ep -c hang ing th e conversation we hav e with colleagues and bring ing ch anges t o the b usi nes s whic h supp or t gre ater inclusio n. We are al so a co mmi t te d memb er of t he U K Government’s Disabilit y Conf ident scheme and rem ain su ppo r ti ve of the e mpl oyme nt and adva nce ment o f disa ble d per son s in th e UK . Gender pay gap At Saga , we’ve mad e it our m iss ion t o cr eat e a work ing envir on ment t hat ’s inclusi ve and e qual for all a nd has o ur valu es at t he he ar t of every thing t hat we do . We welc ome t he opp or t unit y t o expl or e our gen der p ay gap ea ch year, and we have f irm c ommi tme nt s in pla ce t o drive i mpr ovem ent s . The se inc lud e our c ommi tm ent to e qua l pay for equal wo rk, gender balanced short lists for al l ro les , and c ont inue d ups killi ng of le ader s in DE& I . A full u pd ate o n our gen der pay ga p and our c ommi tme nt s can b e foun d in our a nnua l gende r pay r eview pu blis hed o n our web sit e ( w w w.saga.c o.uk/ gender-p ay-review ). Male Female To t a l Actual % Actual % Board 4 4 57% 3 43% 7 Senior management 5 34 68% 16 32% 50 Other colleagues 6 2 ,1 8 9 57% 1,6 53 43% 3,842 All 2, 227 57% 1,67 2 43% 3,899 3 He ad co unt n um be rs r ef l ec t our c o lle ag ue s in ou r U K of f i ce s an d cr ew o n bo ar d ou r shi ps a s at 3 1 Ja nu ar y 20 2 2 4 Directors of the Company , includin g Executive and Non-Executive 5 All busi ness unit directors and collea gues with strategic input and influence 6 All S aga c ol le ag ues (excl ud ing B oa r d and s en io r man age me nt) Boar d 4 Senior management 5 Other colleagues 6 Our gender diversity 3 Mal e Female Mal e Female Mal e Female 57% 68% 57 % 43% 32% 43% Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 27 ESG con tinued Saga c ult ure Levelling t he p laying f iel d thr oug h an inclusive cultur e Weheld D E&I upskilling sess ions for all s enio r colleagues, cover ing unconscious bias, the r ol e of lea der s in driv ing ch ange, re crui tme nt and more. Saga t al ent Dive rsi t y of th ought help s us st ay relevant, expand our r eac h and cr eat e asust ainab le talent poo l In 20 2 1, w e act ivel y championed the developmen t of female colleagues wit h mor e th an ever ta king p ar t in th e 30% Club. #B e Y o u at Sag a Buil ding a rep ut ati on as an empl oyer of ch oic e for di vers e ta lent via engagement and communications We delive re d an annua l cycl e of broadcasts , celebr ating key dat es an d event s with colleagues and con tinu ed t o hol d our Inclusion For um s . Force for change Ensuri ng our br an d is inc lusi ve and c an be a p osi tive advo cat e for a diverse society Webec ame t he f irs t maj or U K empl oyer t o of fe r paid Grandpar ents’ Leav e. We enhanced our family friendly policies and associated paid leav e, introduced a Menopause Policy , Pregnancy Lo ss Policy and additional paid l eave to s upp or t the premature birth of a baby. Dat a an d ins ight s Bring ing transpar ency and acco untabili ty thr oug h reg ula r rev iews and meas uring o f dat a and impact Wecoll ate o ur colleague data toen sur e tha t we can m easu re t he suc ce ss of ou r DE& Iagend a. key focus ar eas 5 W e ha ve five ke y focus a reas for o ur DE&I w ork an d here are thehi ghl igh ts of what w e deli vered u nder eac h dur ing 2 021: How the Bo ard mo nitor s cultur e and how this l inks t o st rateg y The B oar d r egu larl y rev iews a r ange of info rmat ion t o ac tive ly mo nit or cul tur e. T he t ab le be low shows t he key s our ce s of dat a th e Bo ard t r ack s, w ith a v iew t o t ake ac tio n, w her e adju st ment s o r remedial action are needed. Cultural identifier Cultural priorities Promoting integrit y and openness Val u in g DE&I Being responsive to th e view s of stakeholders Culture aligne d to purpose and values Culture aligne d to stra tegy Co lleag ue S aga Sp irit S ur vey dat a People Committee and Colleague Forum s feedback Colle ague list ening groups Sp eak U p rep or t s Progress on DE&I Gen der p ay gap pr ogr es s Health and safet y per formance Internal Audit repo rt s and f indings Environmental t argets Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 28 Duri ng 202 1 , we wo rke d clo sely w ith t he c omm unit ies wh er e our c olle agu es li ve and wor k , wit h a summ ar y of th atact iv it y provided below . £184k of val ue do nat ed t o the com mun it y thr oug h ou r of f ic e furniture giveaway £38k rai sed by c oll eag ue s and customers for g ood causes Delivering vacc ination s Saga’s Thanet of f ice wa s use d by the N H S as a COV ID -19 vac cin atio n centre, delivering thousands of vaccination s each day . 123 families of our Filipino crew supported with educational bursaries We ext end ed ou r long-run ning sch eme , help ing the c hild re n and sibli ngs of ou r cr ew memb er s in the Philip pin es . We also pr ovi ded f ina ncia l supp or t t o cr ew wh ose pr ope r tie s wer e dam aged or des tr oyed by T ypho on R ai . 3, 283 volun te er ho urs g iven by colleagues £206k charitable donations made by Saga 12 volun te er days p er year n ow offered to uniformed v olunteers Increased the num ber of v olunteer days f or colleagues performing publ ic ser v ice r ol es , re cog nisi ng the im po r ta nc e of the se r ol es within our communi t y . 3 community meetings held during the y ear The se me eting s wer e hos t ed by our Group CEO , E uan Sutherland. The meet ings en abl e us t o have an op en foru m wher e we c an gi ve a busi nes s upd ate a nd und ers t and t he cur re nt nee ds of th e co mmuni t y and w her e we may be a ble t o sup po r t . By col lab or ating , we c an help a ddr es s som e of the i ssu es af f ect ing our local community. Communitie s Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 29 ESG con tinued In the pa st 12 months, as w el l as strengtheni ng ou r repor tin g, we ha ve i ncrease d ouru nderstand ing o f our e nvi ronmen tal and soci al imp act and i ntroduced h ybri d andel ectricv eh icles i n the fleet use d to transfer gue st s to and from the ir hol ida y . Envir onm ent Energ y and Carbo n St atem ent This s t ate ment h as be en pr ep are d in acc or da nce w ith o ur r egul ato r y obliga tion t o repor t Gr eenhouse Gas (GHG) emissions purs uant t o th e Co mpa nies ( Dir ec to rs’ Rep or t) and L imit ed L iab ilit y Pa r tne rsh ips (En erg y a nd Carbon Report) Re gulations 2018 which implement the Government’s policy on St re amlin ed Ene rg y a nd Car bo n Rep or ti ng. Emissions summary Duri ng the r ep or t ing pe rio d 1 Febru ar y 202 1 t o 31 J anu ar y 202 2 , our m easu re d Sc op e 1 and 2 emissions (location-bas ed) tot alled 82, 37 4 tCO 2 e and r ep or t ed S cop e 3 emi ssio ns t ot alle d 2,385 tCO 2 e. Over all , our S c ope 1 a nd 2 emi ssio ns have incr ea sed by 1 18 % com par ed t o 20 20/21 . Thisc an lar gely b e at trib ut ed t o an inc re ase inmari ne fu el c onsu mpti on by our c ruis e ship s as COV ID -19 tr avel r est ric tio ns wer e lif ted . Wehave bee n con tinui ng to o ptimi se ou r of f i ce buil dings fo r the p as t thr ee ye ars , lo okin g to max imis e the ir ene rg y ef f icien cy. The pa st ye ar has se en a la rge incr ea se in en erg y savings , amou nting t o an ap pr oximat e 9 42 t CO 2 e re duc tio n in emis sion s. T hes e sav ings have bee nachi eved th rou gh inc re asing t he nu mbe r ofbuil ding m anagem ent sys t em co ntr ol interventions, rela ted to plant schedu les and opti mising h eat ing and c oo ling pl ant on o ur key ass et s. We als o have a co lle ague e ngageme nt pr ogr amm e whic h deli vers c omm unic atio ns and tr aining t o co lle ague s in or der t o en co urage them t o r edu ce en erg y , wat er us e and was t e, and t o minim ise t ravel . We used ex t ern al ca mpaig ns su ch as Pl ast ic Free Jul y, World Envir onm ent Day an d Re cycling Week t o max imis e the se c ommu nicat ion s and pr ovid e tips a nd sh are b es t pr ac tic e ar oun d our buil dings an d at ho me. S aga pu rc hase s 97 % of it s ele ctr icit y fro m a 10 0% r enewa ble s upp ly fr om Have n Power , demo ns tr ating t hat we ar e maki ng ef fo r t s to r edu ce o ur clim at e impa ct thr oug h the p urc has e of ele ct rici t y gener at ed from cleaner sources. Scope 3 categories include bus iness trave l, fuel-and-ener g y related activities and workin g from home emission s. 7 Emissions from the consu mption of electricity outside the UK and emi ssions from the purchased electricity a re calculated usi ng the market-based approach, usi ng su pp li er -sp ec if ic emi ss io n fa ct or s an d ar e re po r t ed i n tC O 2 e 8 202 0/21 e mis si on s have b e en ve rif ied t o I SO 1 46 0 4 -3 s t an dar d by o ur s us t ain ab ili t y pa r tn er, Car bo n Int e llig enc e . Ou r 20 2 1/2 2 emi ss io ns wi ll b e ver if i ed i n th e coming quarter Gre enhous e gas emiss ions in t onnes o f carbo n dioxide ( tCO 2 e) Emissions scope 2021/22 emissions 2020/ 21 emissions Scope 1 80, 99 3 3 6 ,1 87 Scope 2 (loca tion- based ) 1,381 1,6 54 Scop e 2 ( market-based) 7 3 8 T ot al Scope 1 and 2 (location-based) 8 2 , 3 74 3 7, 8 4 1 Sc op e 1 and 2 t CO 2 e per £ m tr ad ing EBI TDA 8 1, 26 3 481 Scope 3 2,385 1,333 T ot al Scope 1, 2 and 3 (location-based) 84,7 59 3 9,1 73 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 30 Methodolog y We quant if y an d re po r t our or ganis atio nal GH Gemis sion s in alig nmen t wit h the Worl d Resources Institute’ s Greenhouse Gas Protocol Co rpo rat e Ac co untin g and Re po r ting S t and ar d and in al ignm ent wi th th e Sc op e 2 Gui danc e. Wecons olid at e our or ganis atio nal b ound ar y acc or ding t o th e op era tio nal c ontr ol a ppr oa ch , whic h incl ude s emis sion s fr om S aga plc . We have ado pte d a mat eri alit y t hr esh old o f 5% for GH G re por t ing pu rpo ses . Th e GH G so urc es that constituted our operational boundary for the ye ar ar e: • Sc ope 1 : Nat ur al gas c ombu st ion w ithi n boil ers , marin e fu el co mbu sti on wi thin s hips , r oad f uel combustion within v ehicles, fuel combustion within non-road mobi le machinery , and fugitive refrigerants fr om air-c onditioning equipment . • Sc ope 2 : Pur chased electricit y consumption for ou r own us e. • Sc ope 3 : Bu sine ss t ravel f ro m gr ey f leet , ta xis , r ail an d hot el st ays; t ra nsmi ssio n and distribution losses associa ted with electricity con sumpt ion; an d work ing fr om h ome emissions. The S co pe 2 G uida nc e re quir es t hat we qu antif y and r ep or t S cop e 2 emi ssio ns in ac c or danc e wit h tw o dif f ere nt met hod olo gie s ( dual re p or t in g ): • The location -based method, using a verag e emis sion s fac to rs fo r the c ount r y in whic h ther ep or t ed op er ati ons t ake p lac e. • The mark et-based method, whi ch uses the actual em issions factors of the e nergy pro cured . As in p revi ous ye ars , Sc op e 3 bus ine ss tr avel emis sion s fr om air h ave been i dent if i ed, b ut n ot incl ude d in our di scl osur e du e to a l ack of acc ur ate d at a. For t he f ir st t ime , rai l and ho tel st ays wer e inc lud ed in S co pe 3 bu sine ss t ravel emis sion s as ac cur at e dat a co uld b e obt ain ed . Emiss ions f ro m ene rg y p aid for i n ser vi ce char ges have be en exclud ed du e to l ack o f dat a and immaterialit y. Other GHG emissions Duri ng the r ep or t ing pe rio d, ou r Sc ope 1 a nd 2 methane emissions tot alled 35. 2 tCH 4 and Sc op e 3 tot all ed 0.1 tC H 4 . Of t his , 82 % orig inat es f rom m arin e fu el (Sco pe 1), 1 5% is fr om ele ct rici t y (Sco pe 2) an d 3% is f ro m natu ral ga s (Sco pe 1). Ou r nitr ou s oxide S co pe 1 and 2 em issi ons t ot alle d 1 ,07 4.0 t N 2 O and S co pe 3 tot al led 0.1 tN 2 O. Of t his , 99 % is fr om m arin e fue l (Sco pe 1). Emissions scope 2021/22 emissions 9 tCH 4 tN 2 0 Scope 1 30.0 1 , 0 6 5 .1 Scope 2 5.2 8.9 Scope 3 0.1 0 .1 T o t al S cop e 1 , 2 and 3 35.3 1 , 0 74 . 1 Energ y summar y Duri ng the ye ar , our t ot al fu el an d elec tri cit y con sumpt ion w as 3 43 ,0 35 , 924 kW h , com par ed wit h 152 ,6 6 4, 244 i n 2020/21 . T he sp lit b et ween fue l and el ect ric it y co nsum ptio n isdis playe d b el ow. Energy usage 20 2 1/2 2 kWh 2020 /21 kWh Elec tric it y 6,508,366 7 ,092,329 Fuels 10 336,527 ,558 145,571,915 T ot al energy 343,035,92 4 15 2 ,6 6 4 , 24 4 Assumptions an d estimations In so me ins t anc es , whe re d at a is miss ing , value s have be en es tim ate d using e ith er an ex tr ap olat ion of availab le d ata f ro m th e rep or t ing p erio d or dat a fr om 20 20/21 as a pr ox y. 9 Rep or t ing o n our w id er G H G emi ss ion s wa s int ro du c ed fo r 20 2 1/2 2 an d th er efo r e no c om par a bl e dat a i s avai lab le f or 2 02 0/21 10 Fuels comprise natural gas, diesel, petrol , marine fuel oil, marine gas oil and refrigerants Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 31 ESG con tinued Carbon Disclosure Project ( CDP) Saga m ade t he de cisi on in 20 1 5 to r es pon d to theC DP C lima te C hange Q ues ti onna ire t o b et ter understand and mana ge our climate-related impa ct s , risk s an d opp or t unit ies . In 20 2 1 , Sagas cor ed a ‘ B ’ whic h is cat egor ised a s the manage ment c ate gor y. This is a re duc tio n fr om an‘ A- ’ in 20 20 and r ef le ct s a ch ange in th e CD P rat ing sys te m to c ons ider t he m aturi t y of busines ses making volunta ry CD P disclos ures . Forexampl e, th e numb er of b usin ess es ac hievi ng an‘ A ’ rat ing de cr ease d fr om 28 0 in 20 20 to 2 00 in202 1 . Cruise Duri ng 202 1 , o ur oc ean s hips o nly o per at ed fr om th e end of J une a nd Ju ly, for Spi rit of Dis cover y an d Spi rit of A dvent ur e re spe ct ively. This c ont ribu te d to t he r edu cti on in ou r Sc op e 1 emissions. Marine fu el repres ented 92% of our Sc op e 1 carb on em issi ons w ith t he shi ps als o gener atin g an add iti onal 2 % S cop e 1 fu git ive carb on e miss ions . In t erm s of oth er S cop e 1 GH G emis sion s, o ur ship s re pr ese nt 99 % of Saga’ s CH 4 and N 2 0 emissions. Followi ng the ir re turn t o se rv ic e, we com men ce d a stu dy t o ass es s our op er atio nal pr act ice s on b oar d wi th th e aim of f ur th er re duci ng our c arbo n foo tpr int and i dent if y ing oppor tunities t o deliver eff iciency-enhan cing mod if ic ati ons t o our ves sel s. We ar e pl anning t o inst a ll sho re p ower c onn ect ion s on bo ar d bot h oc ean c ruis e ship s in the n ex t thr ee ye ars , whi ch will r edu ce t he ves sels’ em issi ons wh ile do ck ed in po r t s whic h are a ble t o pr ovi de sh or e powe r . Furt her t o this , we p lan t o buil d on th e re duc tion s alr ead y ma de by r emov ing all non- es sent ial s ingl e-us e pla st ics o n bo ard by theen d of 20 23 and w ill es t abl ish t arget s fo r garbage vo lume r ed uct ion a nd r ecycl ing. The e miss ions p er g ues t have inc re ase d fr om 2.91 t CO 2 e in 20 19/20 to 3 . 53 t CO 2 e in 202 1/2 2. This in cr eas e is a r esul t of UK G overn ment COVI D -19 re st rict ion s whic h limi te d our shi ps t o ope rat ing ini tial ly at no m or e tha n 50% c apa cit y on th eir r eturn t o s er vic e duri ng summ er 20 2 1. Whil st ou rgue st n umbe rs wer e lim it ed, f uel consumption wa s largely unchanged, resultin g inahigh er co nsum ptio n be ing re co rd ed on a perg ues t ba sis . Supply chain We sur veyed our t op su ppl iers t o de ter mine bot h thei r curr ent an d pla nne d app ro ach t o ESG and dev eloped a focused questionna ire to supp or t t he fo rmal p ro cur em ent pr o ces s for larg e contracts. Supplier cont ractual oblig ations to d eliver o n ESG c omm itm ent s ma de in th e ten der p ro ce ss wi ll be in tr odu ced a s appropriate. For 202 2 , we will ex pan d the b asel ining of ES G wit hin our s uppl y ch ain and d evelop r eq uir ed st an dar ds alig ne d to ou r new sup pli er relationship management banding. Head off ice refurbishment We comp let ed t he se co nd ph ase of o ur Enbr o ok hub refurbish ment , which included b ett er air quali t y int ake at l ower p ower c onsu mpti on an d the r ep lac eme nt of all lig ht s wit h LED s, improving th e building’s environment al performance. We dona ted redundant off ice furniture to charities a nd community projects , diver t ing 52 t onn es ofwa st e fr om la ndf ill and avoiding 4 4 t on nes ofC O 2 e. Wi th a fo cus on r ec ycling a nd a zer o to l and f ill p oli cy, we have co llec t ed 10 0 t onn es of was t e fr om our sit es , of whi ch 79 t onn es wer e r ecyc led a nd th e re sidu al dive r te d to a n energ y-fro m-was t e fac ilit y. Period General wast e Recycling To t a l wast e generated 2020 3 4 .1 78. 3 112.4 202 1 21.2 79.3 100. 5 To t a l 55.3 1 5 7. 6 212 .9 Green Fleet We intr odu ce d a Gr een F leet C ar S chem e mean ing th at , fr om O ct obe r 202 1 , o ur co mpany car s chem e onl y of f ers t hre e t yp es of veh icl e – full b at te ry e lec tri cal veh icl es, p lug-in hybr id vehicl es or n on-p lug-in hybr id vehic les . By 2 024, onc e all exis ti ng com pany c ar dri vers h ave ren ewed t heir veh icle , all wi ll have move d to thesche me. Wast e diver ted fr omlan df i ll 52 tonnes (through donation of office furniture) Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 32 The T ask For ce o n Clim ate -Re lat ed F inan cial Dis clo sur es ( TCF D) has bec om e par t of t he reg ulat or y f ram ework i n many jur isdi cti ons . TheTCF D’s 11 disc los ure r ec om men dati ons span four differ ent areas: governance, strateg y, risk management, and metrics and targets . In ac co rd anc e wit h Lis ti ng Rule 9. 8 .6 (8), we ared iscl osi ng our ali gnm ent wit h th e TCFD recommendations. We are contin uously impr ovi ng and ali gning o ur int erna l pr oc ess es and pu blic d iscl osu re s wit h the TCF D and t his foll owing s ect ion s et s out o ur pr ogr es s agains t the fo ur pil lars o f the TCF D fr amewo rk . This is S aga’ s f ir st an nual TC FD re po r t . Inth epas t 12 m ont hs, w e have es ta blis hed anappropriate governance approac h for oversee ing cli mate-related risks and opp or t unit ies an d have ide ntif ied th e risk s fac ing Saga a s ar ti culat ed b el ow. We will fo cus in t he nex t r ep or t ing cycl e on rev iewing ou r met rics a nd t arget s , fur ther assessing the impact of these on our strateg y and assess ing the effectiveness of the key manage ment a cti ons t o mit igat e risk s . We will expla in how we h ave comp lie d wit h the re com men dati ons in o ur 20 23 An nual R epo r t and Accoun ts. Gove rn anc e Our B oar d of D ire ct or s has r esp on sibil it y over our risk management framework, including climate-r elat ed risk , monit oring the ef fe cti vene ss of t he Gr oup’s risk man agemen t and control sy stems. The Board established the Risk and Aud it Committ ees, each composed of three independent Non-Executive Directors, to oversee the principa l risks, tolerance thresholds and control fr amework. The R isk C omm it t ee me et s to d iscu ss th e Gr oup’s overa ll risk t ol er anc e, s tr ate g y an d abili t y to d ete ct new ri sks, including those related to clima te change, whic h is ref lect ed a s one of S aga’ s pri ncip al ris ks . The Committee Chair repor ts rec ommendations to t he Bo ar d, t ogeth er wit h an ann ual r ep or t outlining princip al risks and unc er tainti es, how they are identif ied, and mitigating actions . Also repor ting to t he Bo ar d, t he Au dit C ommi t te e mon it ors t he inte gri t y of the G r oup’s fina nci al st at eme nt s as well as work ing wi th th e Ris k Co mmit t ee t o over see t he ef f i cacy o f int erna l con tr ol sys t ems . The B oa rd commit s to inc luding climate-r elat ed risk formally on th e Bo ard age nda in clu ding an over sigh t of emissions per formance, emb edding climate resilience and risk management, as well as oversight of the w ide r ESG s tr ateg y as it deve lop s. We rec ognise that the r espo nsibilit y for ESG , including f ina ncia l risk s as soc iat ed wi th cl imat e cha nge, is t he resp onsibility of all Boar d members. Strate g y We engaged our T ravel an d Insu ran ce businesses separately to provid e a compr ehensive and robust analysis to identif y and assess climate-related risks and the re silie nc e of our bu sin ess es t o mana ge the lin ks between our cl imate-related risks a nd opp or t unit ies an d our b usin ess s tr at eg y. We will be se t ting t arget s fo r our over all e miss ions re duc tion d uring 20 2 2, w ith a c om mitm ent t o re duc e our c ont ribu tio n to cl imat e ch ange. Th is is a key man agemen t con tr ol for s ome o f our clim ate -re lat ed ris ks , su ch as o ur re put at iona l, energ y and market risks. Init ial as se ssm ent of th e clim at e-r elat ed ri sk s and op po r tuni tie s for b oth o ur Ins ura nce a nd T r avel businesses were determined over three dif f ere nt tim e hor izons: s hor t , m ediu m and long -term. Short-term risks and oppor tunities are a r tic ulat ed b elow, wi th th e full TC FD re po r t art iculating medium and longer- term risk s and oppor tunities a vailable on our corporate website (ww w.corporat e.saga.c o.uk/ about-us/ environmental-soc ial-and-go vernance ). Shor t-term risks and opportunities At the G r oup level , our b usin ess f ac es seve ral shor t-term transition risks: 1. Our T ravel bu sine ss wi ll fac e sh or t-te rm risk s inc ludi ng incr e ased f uel c os t s and f ina ncia l st rai n on Saga’s key third -par t y par t ner s ( suc h as airl ines) as carb on t axa tio n is use d to d rive cl imat e tr ans itio n, par ticularly on fossil-based fuels . 2. Dir ec t and in dir ect c arb on p ricing a nd c ost pas s-on w ithi n the s upp ly ch ain co uld r edu ce Saga’s fina nci al re turn s as ups tr eam s upp ly materials cos ts incr ease, specif ic ally on energ y and fuel-intensive materials. 3. Saga’ s marke t valuat ion m ay be im pac te d by inv estors challenging Sag a’ s commitment to, or progress on, climate-chang e commitment s. In th e sho r t-term , as a G ro up, we have th e following climate -relat ed oppo r tunities: 1. The T ravel bu sine ss c an ach ieve a high ES G pr of il e by re spo ndin g to cu st om ers’ int er es t in clim ate -re lat ed is sue s and by demonstrating a responsible a nd sustainable app ro ach t o ESG . T his ha s the p ot enti al t o enable increas ed investment capacity thr oug h new gr ee n f ina ncing o pp or tu niti es . T ask F orce on Climate- Related Financial Disclosures Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 33 ESG con tinued 2. For our sh ips , and o ur op era tio ns specifically, w e can achi eve increased clim ate l ead ers hip as wel l as a re duc tio n in our ca rbo n foo tpri nt by co llab or atin g wit h new low c arb on pa r tne rs an d explo ring an d ta king ad vant age of f uel- ef f icient technologies. 3. We can red uc e our exp osur e t o the r ising pric e of c arb on by r educ ing our c arb on foot prin t and ou r con trib uti on t o clim ate change t hr ough , for exam ple , uti lising technolog y to optimise fuel consumption on our shi ps; imp lem enti ng ener g y ef f icien t air hand ling in ou r Enbr oo k of f i ce hu b; and chang ing ou r col leag ue c ar sc heme t o hyb rid or electric cars only. Risk management We carried out eng agement workshops to hear from internal st akehold ers across the busines s unit s an d fun cti ons t o ide ntif y and r eview pot ent ial cl imat e imp act s o n the G ro up. We als o con sult ed w ith ex t ern al cli mat e risk ex per t s , Carbon Intelligence, to bet t er underst and sector-wide clima te-related risks and opp or t unit ies . T o progr es s our al ignm ent t o the TCFD fr am ework , we w ill be d evelop ing our clim ate ri sk ap pet it e during 2 02 2 to d ete rmin e the l evel to w hich we w ill ac ce pt , mit igat e, tr ans fer or c ont ro l our cl imat e-r ela te d risk s . Metric s and t arget s We under st an d the c rit ica l imp or t anc e of delivering sustainable gr owt h and we ha ve taken st eps t o me asur e our c urr ent im pac t on th e envir onm ent an d set t arget s t o mit igat e this . Our En erg y a nd Ca rbo n St at em ent has b ee n pr epar ed i n acc or da nce w ith o ur r egul ato r y obliga tio n to r ep or t gr ee nho use gas (GH G) emis sion s whic h can b e foun d on p age 30. T oensure transp arency and accur acy, we also com mit t o havi ng our ca rbo n foo tpr int verif ied by a thir d par ty a nd our 2 02 1 C DP r ep or t canb efoun d on ou r cor por at e webs it e ( www.co rpora te.sa ga.co .u k/ medi a/1 498/ sag a-cdp- subm issio n-2 021.pdf ). Duri ng the r ep or t ing pe rio d 1 Febru ar y 202 1 t o 31 J anu ar y 202 2 , our m easu re d Sc op e 1 and 2 emissions (location-bas ed) tot alled 82, 37 4 tCO 2 e and r ep or t ed S cop e 3 emi ssio ns t ot alle d 2,385 tCO 2 e. Saga ackno wledges that clima te risk and climate str at eg y a re in ter re lat ed an d shou ld b e manage d in unis on t o co ntr ol our e miss ion s. We will be s et tin g cle ar t arget s for o ur car bo n and G HG em issi ons , alig ned t o ou r busi nes s str at eg y. Whil e year o n year o ur Sc op e 1 and 2 emis sion s have inc re ase d by 118 % , thi s can largel y be at t ribu te d to a n incr ea se in m arin e fue l con sump tion by S aga’s cruise shi ps as t ravel re str ict ion s due t o COV ID -19 have be en lif te d, caus ing tr avel t o signi f ic antl y inc re ase . 2018/19 102,582 2019/20 104,622 2020/21 39,173 2021/22 84,759 2021/22 GHG emissions progress (Scope 1, 2 and 3 tCO 2 e) Scope 1 Scope 2 Scope 3 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 34 ESG T ask Force Gover nanc e is at t he he ar t of ou r sus ta inab ilit y ambi tio ns and , whil e re cog nisi ng that t her e was mor e th at nee ded t o b e don e to s pe ed up ou r app ro ach o n ESG , we m oved to a dap t our internal governance and o versight of this area and t o inc re ase t he numb er of p eo ple invo lved . Our Envi ro nmen ta l Co mmit t ee , whic h met fr equ entl y, was repl ac ed wi th an ES G T a sk Forc e, l ed by th e st rat eg y func tio n. The T ask For ce r ep or t s int o th e E xecut ive Leadership Risk Committee and has responsibility for setting the priorities on whic hSaga s houl d foc us t o deli ver an ap pr oac h to ES G wit h gr eat s cal e, amb iti on and i mpa ct . Pulling i n expe r tis e andr epr es ent ati on fr om acr os s the G ro up, th e T a sk For ce w ill be overse en by Paul a Ker rigan , Saga’s new Chief St rat eg y and Inn ovatio n O f f i ceran d He len Webb, S aga’ s Chief R isk a nd C omp lian ce O f f icer. Euan Su the rlan d, S aga’ s Gr oup C EOis the ES G representative on the Board. Risk management Our risk management framework has been desi gne d in co njunc ti on wit h ex te rnal r isk expertise to bri ng tog ether best practice risk management standar ds and draw upon risk stan dards and profes sional body guid ance. These st andards , framework s and guidelines supp or t s pe cif i c des ign c onsi der ati ons of o ur risk f ra mewor k , whic h can b e foun d on page75 . The R isk C omm it t ee c onsi der s the G ro up’ s over all risk tolerance, incl uding cl imate-related risks, ensuring that Saga ’ s exposure to environment al and clima te-related risks is clearly articulated, moni to re d and mi tigat ed a s par t of t he G ro up’ s overall risk management appro ach. Anti -brib ery an d corrup tion The G ro up valu es it s r epu t atio n for f i nanc ial pr obi t y and int eg rit y an d re cog nise s th at it has aprim ar y dut y t o pr ot ec t it s cus to mer s fr om al l f inancial crim e, including brib ery and c orruption . The G ro up t akes a ze ro -to ler anc e ap pr oac h to inci dent s invol ving b rib er y and c orr upti on an d has a p olic y whic h lays ou t cle ar gu idan ce fo r the approp riate assessment of any risk of bribery and corruption across all businesses. Allc oll eagu es ar e tr ain ed ann uall y to e nsur e thei r unde rs ta nding o f the r isk s and t he app rop riat e ac tio n to b e t aken i f they e nco unt er any act iv it y of c onc ern . Mod ern slavery, human right s and labour st andards Saga c ond uct s b usin ess i n an ethi cal an d tr ansp ar ent way. Policie s to s upp or t r ec ognis ed human ri ghts principles include those on non-discrimination , health, safet y and wellbeing and environmental issues . Our Modern Slavery St at eme nt can b e fou nd on o ur co rpo rat e we bsite ( www.co rpora te.sa ga.co .u k/ med ia/1 4 18 / modern-slavery-and-human-traf f icking- st at eme nt-202 1 .p df ) along sid e our L ab our St andar ds Policy ( w w w.corpo rate .saga .co.uk / media/1507 /labour-standards-policy -final.pdf ). Responsible in vestmen ts Our approach to inv estments continues to ensur e r obu st ES G fac t ors ar e c onsi der ed w hen maki ng invest men ts . S aga’ s subs idia ry b oa rds consider in vestment decisions, i ncluding requiring external investment managers to con sid er ESG ri sk fa ct ors a nd r epo r t on ES G metrics w here appropriate, and the plc Boa rd considers and appr oves all material in vestment s. Sag a has al wa ys take n go v erna nce seri ously an d conti nued to do so o v er the past 12 mon ths. As we de v elop o ur ESG stra teg y in detai l, we wi ll cons ider a ll g ov er nance im plica tion s. G o ve r n a n c e Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 35 A R ESILIEN T BUS INES S , O NC O U R SE F OR G R O W T H The T ravel r esul t sit s b et ween t he b ase c ase an d downside scenarios we modelled , consistent with an environment that remained const antly chal leng ing but , w her e fo r the C ruis e bus ines s, we wer e abl e to r es t ar t tr adi ng in mid-ye ar . Crui se was EB IT DA posi tive f or th e sec on d half, and c ash p osi tive fo r the f ull ye ar , whic h we beli eve put s us i n a much b et t er po sit ion t han many of ou r , of t en muc h large r , comp et ito rs . The hig her l oss o f the C rui se bu sine ss c ompa re d wit h the p rior ye ar was m ainl y due t o inc re ase d f ina ncing c os t s foll owing d eliver y of o ur se co nd ship in O ct ob er 20 20 and r et urn t o ser v ice cos t s in th e f ir st p ar t of 20 2 1 , par t iall y of f set by much i mpr oved r esu lt s foll owing t he r esu mpti on of tr ading f r om th e endof J une . Insu ran ce r es ult s wer e in lin e wit h expe ct ati ons , and wh ile pr of it was lowe r than i n the p rio r year , this wa s in par t d ue t o incr ea sed m arket ing invest ment a s we re turn ed t o tel evis ion adver tising in t he l ater p ar t of t he yea r . Given the t iming of t he sp en d, as we ll as th e lea d tim e in tr ansl ating i mpr oved b ran d awar ene ss an d con sid erat ion i nto h ard s ale s, t he b enef it s of almo st all o f this s pen d will b e in f utur e yea rs . Mor e gen era lly h owever , the b usin ess is i n a much s tr onge r pos iti on th an it was t hr ee yea rs ago, wit h a sec on d year of p oli cy gr ow t h in the cor e mo to r and ho me p ro duc t s, an d at st ab le margins. The r ep or t ed lo ss b efor e t ax fo r 202 1/22 of £2 3. 5 m was mat er iall y bet t er t han th e £6 1. 2m los s in the p rio r year, mainly due t o sig nif icant ly lower r es tru ct uring c os t s, as we ll as th e £ 59. 8m good will im pairm ent in clud ed in t he 20 20/21 results . Loo king t o th e fut ur e, 20 22 /23 sh ould s ee impr oved p er fo rman ce , but we a re s till navig ating e xt ernal challen ges. This is especially the c ase fo r T ravel, wh ere c us to mer c onf i den ce is impr ov ing but i s st ill imp act ed by C OVI D -19 unc er t aint y. For T o ur Op er atio ns , we ar e aiming to a chieve br ea k even af t er t wo yea rs of h eav y los ses , and c lea rly o ur amb itio n is t o achi eve amuch b et t er p er for manc e in t he fu tur e. Simil arl y for C ruis e, th e curr ent ye ar wil l sees ome im pac t fr om C OVI D -19 in ter ms of itin er ar y disr upti on , the c os t of th e meas ur es weare t a king t o pr ot ect c ust om ers a nd th e earn thr oug h of cus to mer d isc ount s of fer ed in 20 20. James Quin Gr oup C hief F inan cial Of f ic er Gr oup C hief Fin ancial O f f ic er’ s Review “The past 12 mont hs ha ve bee n atime of considerable progress, and I w ould l ike to tha nk e ve ryone inthe Fi nance T eam and al l our other s t akeholder s. ” 1 R ef er t o th e Al te rn ati ve Pe r fo rma nc e M ea sur es G l os sar y o n pa ge 20 1 fo r de f ini ti on a nd ex pl an ati on Whil e Saga i s in muc h bet t er sh ap e than i t was 12 m onth s ago, re sult s fo r 202 1/22 ref l ect t he ongoing im pac t of th e COV ID -19 pan demi c on our T ravel op erat ion s, w ith a n Und erly ing Lo ss B e f o r e Ta x 1 in the T ravel bu sine ss of £ 79. 3 m, in line wi th t he pr evio us yea r . As a re sul t , we rep or t ed a n Und erl ying L oss B efor e T ax 1 of £6 .7 m and a n overa ll los s bef or e ta x of £ 23 . 5m . The U nde rly ing Lo ss Be for e T a x 1 of £6 .7m com par es t o a pr of i t of £ 1 7 .1m in the pr evi ous year, with the c hange ma inly r el ating t o high er mark eting c os t s, as we ll as th e imp act of increased motor in surance claims frequency as miles driven returned closer to normal levels and ot her s mall er fa ct ors s uch as l ower p rivat e medical insur ance p rof it abilit y. Los s befo re t a x (£23.5m) 2021 – (£61.2m) Underlying (Loss ) / Pro f itB efor e T ax 1 (£6. 7m) 2021 – £17 .1m Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 36 However, Cruise d eman d co ntinu es t o be s tr ong and pr ice i ncr ea ses s houl d large ly of f set t he impa ct of inf latio n on our c os t s. I n Ret ail Br oking , a ver y c omp eti tive m ot or mar ket an d regulatory changes equalisi ng new business andr enewa ls pri cing wi ll ad verse ly imp ac t pr of it ab ilit y b ut th is sho uld r edu ce ove r time ascus t omer s se e les s nee d to s hop a rou nd on ren ewal , and wi th mo re f ocu s on pr o duc t and servi ce qualit y . Over all , th ese f ac to rs mak e pr ovid ing sp eci f ic earni ng gui dan ce ver y ch alle nging f or thi s year , but at a m inimum we ex pec t a r eturn t o p osi tive pr of it c ont ribu tio n, w ith g row th in sa les an d pr of it s in f ut ure ye ars f ro m 202 2 /23 levels . In t erms of o ur f in anci al p osit ion , thi s was a year of re al pr ogr es s . Des pit e th e Und erl ying an d rep or t ed l oss b efo re t a x, we ge ner ate d po sit ive Availab le Op er ati ng Cas h Flow 2 of £75 . 8m , com par ed w ith £ 3 . 4m in t he pri or yea r , and net debt r ed uce d fr om £ 760. 2m to £ 72 9.0m . Th e 202 1/22 ye ar b enef ite d fr om po sit ive wo rking capi t al movem ent s in C ruis e, as t he bu sine ss recommenced trading, compared with signi f ic ant ca sh inj ect ion s into t he T ravel busi nes ses in t he p rior ye ar . Availab leOp er ati ngCas h Flow 2 , excluding T r avel, w as £ 89. 4m c om par ed wi th £ 9 2. 3 m in the p rior ye ar , whic h again d emon st rat es h ow impo r t ant it h as be en fo r the G ro up to h ave a full y op era tion al In sur anc e bus ines s thr oug hou t thep and emic . In Ju ly 20 2 1, w e con clu ded t he is suan ce of a n ew f ive-ye ar £ 250 m f i xed-r ate u nse cur ed b ond , wit h the p ro ce eds u sed t o r epay £ 1 0 0m of exist ing b onds a nd t o re pay in fu ll the £ 70m term loan. Af t er cost s, the se transact ions increased A vailable Ca sh 2 by £76m . A s a re sult , we have mor e th an en ough l iquid it y t o cop e wi th potential shor t-term risks as we emerge from the p and emic; we h ave no co rpo rat e de bt matu riti es unt il 20 24 and th e bon ds of fer us much b et t er f lex ibili t y tha n bank d ebt . R educ ing debt r em ains a pr iori t y and we w ill r es ta r t rep aym ent s of shi p debt f ro m Jun e 202 2 . The p ast 1 2 mo nths h ave bee n a tim e of con sid era ble p rog re ss , and I wo uld li ke to t han k everyo ne in t he F inan ce T eam and all o ur oth er st ake hol der s, w ho have wor ked l ong ho urs in help ing us nav igate s ome c hop py wat ers . Ou r goal now i s to c apit al ise o n Saga’s oppor t unit ies , while k eep ing a tig ht foc us on d owns ide ris ks . 2 R efe r to t he A lt er na ti ve Per f or ma nc e Me as ur es G lo ss ar y on p age 2 0 1 for d ef i ni tio n an d exp la na tio n 3 Reve nu e is s ta te d ne t of c ed ed r ei nsu r anc e p re miu ms e arn ed o n bu si nes s un de rw ri t te n by t he G ro up o f £ 12 3 .7m (202 1 : £ 14 2. 8 m) 4 N et f i nan c e co st s exc lu de C ru ise f inan c e co st s , ne t fa ir va lue ( lo ss es)/ gai ns on d er iva ti ves a nd I AS 1 9 R pe ns io n int er es t c os t s Oper ating per f ormanc e Group income statement £m 12m to Jan 2022 Change 12m to Jan 2021 Reve nue 3 3 7 7. 2 11 .7 % 3 3 7. 6 Und erl ying ( Lo ss) /Pro f it Be for e T ax 2 T otal Retail Broking ( earned) 66.4 ( 1 2 . 5%) 75.9 Underw riting 5 4 .1 ( 7. 8 % ) 58 .7 T ot al Insurance 120. 5 ( 1 0 . 5%) 134 .6 Tr a v e l ( 7 9. 3) (1 . 0 %) ( 78 . 5) Other Businesses and Central Cost s (29 . 3) (3 0 . 8 %) (2 2 . 4) Net f inan ce costs 4 (1 8 .6) ( 1 2 . 0 %) (16 . 6) T o t al Un der ly ing (L os s )/Prof it B ef ore T ax 2 (6 .7 ) (139. 2% ) 1 7. 1 Net fair v alue (losses ) / gains on de rivatives (2 .7 ) 1 .7 (Impair ment ) / profit on disposal of assets (4 . 3 ) 2.0 Restructurin g costs ( 6.3 ) (3 0. 8) Charge on closure of defined benefit pension scheme (2 . 0) – Forei gn exchan ge gains on r iver cr uise s hip le ase s 0.9 – Cos ts incurr ed for ship debt holi day (2 . 4) – Net p rof it on dis po sal of b usin es ses – 8.6 Imp airme nt of T ravel good will – (5 9. 8) Loss before tax (23 . 5) 61 .6% ( 61.2) T ax expense (4 . 5 ) 31 .8% (6 . 6 ) Lo ss af t er t ax (2 8 . 0) 58.7 % ( 6 7. 8 ) Basic earni ngs per share: Underlying (Loss) /Earnings Per Share 2 (11.1p ) ( 1 8 4 . 1 %) 13 . 2p Los s per s har e (2 0 .1 p) 70.0 % ( 6 7. 0 p) Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 37 Gr oup C hief Fin ancial O f f ic er’ s Review continued 5 Re fer t o t he A lt er nat iv e Per f orm an ce M e asu r es G los s ar y on p age 2 01 f or d ef i nit io n an d exp la nat io n Loss before tax Los s befo re t a x for t he year o f £ 23 .5 m inc lud es a £2 .7m fair value l oss o n deri vati ves de - desi gnat ed i n the ye ar due t o th e sus pen sion ofT ravel oper at ions , £ 6. 3 m of re st ruc tur ing cos t s , mainl y re lati ng to t he T our Ope rat ion s busi nes s, a £ 2 .0 m char ge due t o the c los ure o f the d ef ine d be nef i t pen sion s ch eme an d £ 2. 4m of co st s in curr ed o n the s hip deb t hol iday, par t iall y of f set by £ 0. 9m f or eign excha nge gains on rive r crui se sh ip lea ses . The loss before tax for 2021/ 22 also includes anet imp airm ent of as set s of £ 4. 3m t hat rep re sen ts £ 10. 2m a nd £ 0. 5m of im pair ment s and lo ss on d isp osa ls of so f t war e and p ro pe r t y, plant and equipment respectively , mainly relating to t he T our Ope rat ion s busi nes s, £ 1 .0 m of impai rmen ts o n ass et s hel d for s ale, a £ 7 .1m pr of it o n disp os al of as set s , af t er c ost s o f £0.1m , in re lati on t o a sal e of pr op er t y an d a £0. 3 m gain on a lea se modification with in righ t-of -use assets. The p rior ye ar in clud es a £ 59. 8 m impa irme nt to T r avel goo dwil l and £ 30 .8 m of r es tru ctu ring cos t s , of fs et by an £ 8 .6 m pr of it o n the d isp osa l of non -c or e bus ines se s, £ 2 .0m n et gain s on th e disp os al of as set s and a £ 1.7m fair value gai n on derivatives de-designated in the pr ior year . T ax expense The G ro up’ s t ax ch arge for t he yea r was £ 4 . 5m (202 1: £ 6 .6m), repr es entin g a ta x ef fe ct ive rat eof ne gative 1 9.1% (202 1 : negati ve 471 .4% ), excluding t he goo dwi ll imp airme nt cha rge. Inbo th th e curr ent a nd pri or yea rs , the dif f ere nc e bet we en th e Gr oup’s tax ef f ect ive rat e and t he s t and ard r at e of co rp or atio n ta x of19 % , is m ainl y due t o the G ro up’ s Cr uise busi nes s ent ering t he t onna ge ta x reg ime on1Febr uar y 20 20. The re wa s an adju st ment in t he cu rre nt year f or the un der p rov isio n of pr ior -year t a x of £ 1 .0m (202 1: £ 1 .6 m un der pr ovi sio n ) and t he imp ac t of the c hange in t he t ax r at e on op ening d eferr ed ta x bal anc es of £ 2 .6 m cr edi t (202 1: £ 1.7m credi t) . Earnings pe r shar e The G ro up’ s Und erl ying B asic L os s Per Sh are 5 was 11 .1p (202 1: Prof it 13 . 2p ). The Gr oup’s rep or t ed b asi c los s per s har e was 20 .1p (202 1: los s of 67.0p ). The G ro up’ s bus ines s mo del is b ase d on providing high-qualit y and dif ferentiated pr odu ct s t o it s t arget dem ogr ap hic, pr edo mina ntly f ocu sed o n insu ran ce an d tr avel. The I nsur anc e bu sine ss op er at es mai nly as a broker , sourcin g underwriting capacity from select ed third-par t y insurance companies , and, for mo to r and ho me, a lso f ro m the G ro up’ s in-ho use u nder wr it er . T r avel is c omp os ed of T o ur Op er atio ns and C rui se. O t her B usin ess es comprises Saga Personal Finance, Sag a Publishing and Metr oM ail, a mailing and printingbusiness . Reve nu e Revenue i ncr ea sed by 1 1 .7% t o £3 7 7 .2m (20 2 1: £3 3 7 .6m) due to t he r es ta r t of th e T r avel busi nes s in the s ec ond h alf of t he ye ar , par t iall y of f set by low er Ret ail B ro king r evenu es , largel y as a re sult o f the s ale o f the B enn et t s busi nes s inAugu st 2 020. Underlyin g (Loss ) /Profit Before T ax 5 Und erly ing Pr of i t Bef or e T a x 5 decreased from £ 17 .1m to a n Und erl ying L oss B efor e T ax 5 of £6 .7 m. T his was p ar t ly due t o a r edu cti on in Ret ail B ro king pr of ita bili t y, mainly as a r es ult oflower r en ewal ma rgins i n pri vate m edi cal insur an ce (P MI) a nd inc re ase d te levis ion adver tising s pen d to s upp or t t he r elaun ch oftheb ra nd in t he O the r Bus ines se s and Centr al C ost s seg ment . Net f inanc e co st s in t he year w ere £ 18 .6m (2021: £16 .6m ), wh ich ex cludes finance cost s that a re in clu ded w ithin t he T ravel div isi on of £ 19. 5 m (202 1: £ 13 .6m). The inc re ase of 1 2 .0% was lar gely du e to t he hig her b ond in ter es t cos t s fol lowing t he c omp leti on of t he new b ond issu e in Jul y 20 2 1. T his was p ar t iall y of f set by are duc tion i n bank d ebt int er es t co st s du e to alower l evel of ban k debt i n the c urr ent year com par ed w ith t he pr ior ye ar . Bas ic los s pe r shar e (20 . 1p) 2021 – (67 .0p) Underlying Basic (Loss) / Pro f it Per S har e 5 (11. 1p) 2021 – 13.2p Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 38 Insurance Ret ail B ro king The Retail Broking business provides tailored insurance products and services, principal lymotor , home, private medical and tr avel insuranc e. It s r ole is t o pr ice t he p olic ies an d sou rc e th e lowes t co st o f risk , w heth er th ro ugh th e pan el ofmot or an d hom e und er writ er s or th ro ugh solus arrangements for private medical and travel insurance. The G ro up’ s in-h ous e insur er, Acrom as Insu ran ce C omp any L imit ed (A I CL), sit s o n the mot or an d hom e pan els an d com pet es fo r tha t busi nes s wit h othe r pan el mem ber s on e qual terms. A ICL of fers it s underwrit ing capacity onth e hom e pan el thr oug h a co insur an ce de al wit h a thir d par ty, and so t he G ro up t akes n o unde rw rit ing ris k forth at pr odu ct . Even if unde rw rit t en by a th irdp ar t y, the p ro duc t is pr ese nte d as a Sag apr odu ct an d the G ro up manages the customer rel ationship. Insurance, which comprises Retail Broking and Insurance Underwriting, per formed well inthey ear , gene ratin g strong ca sh flow . £m 12 m to J an 2 02 2 Change 12 m to J an 2 02 1 Motor Brok ing Home Brok ing Ot he r Brok ing To t a l Motor Brok ing Ho me Brok ing Other Brok ing To t a l Gross writ t en premiums (G WP): Broker ed 105.0 153. 2 96.5 3 5 4 .7 (5 .0%) 131 .3 151 .9 90. 2 3 73 .4 Underw ritt en 205. 5 – 3 .4 208.9 0 . 4% 20 4.6 – 3.5 20 8 .1 GWP 31 0.5 153. 2 99. 9 563.6 (3 . 1 %) 335.9 151 .9 93 .7 581 .5 Broker revenue 43.2 29.0 33.2 105.4 2. 8% 3 7. 6 28 .7 36.2 102.5 Inst alment revenue 6.6 3. 2 – 9.8 ( 1 1 . 7 %) 8 .1 3.0 – 11 .1 Add-on reven ue 1 1 .0 10. 9 – 21.9 (1 3 .1 %) 14. 5 10 .7 – 25 . 2 Other r evenue 2 7. 4 1 7. 1 2 .1 46.6 (12.9% ) 31 .3 1 7. 8 4.4 53.5 Written reven ue 88. 2 60. 2 35.3 18 3 .7 (4 . 5 %) 91.5 60. 2 40.6 192 .3 Wr itten g ross pro fit 85 .6 60. 2 35.6 181.4 (2 . 2 %) 88.8 60. 2 36.5 185.5 Marketing expenses ( 1 7. 5 ) ( 7. 1 ) (3 .6 ) (28 . 2) ( 8 . 5 %) ( 1 7. 3 ) (6 . 0) (2 .7 ) ( 26 .0) Writ ten g r oss p ro f it af t er marketin g expe nses 6 8 .1 5 3 .1 32 .0 153. 2 (3 . 9 %) 71.5 54.2 33.8 15 9. 5 Other op erating expenses (3 8 . 0) ( 2 7. 9 ) (2 0 .7 ) (8 6 .6 ) ( 1 .1 %) (4 0 . 1 ) (26 . 3) (1 9 . 3) (85 .7 ) Written Underl ying PBT 6 30 .1 25. 2 11.3 66.6 (9.8%) 31.4 2 7. 9 14 . 5 73.8 Written to earne d adjustment (0. 2) – – (0 . 2) ( 1 0 9 . 5 %) 2 .1 – – 2 .1 Earned Unde rlying P BT 29. 9 25.2 11.3 66 .4 (12.5% ) 33.5 2 7. 9 14. 5 75 . 9 Saga- br ande d po lici es in fo rc e 884k 6 8 2k 129k 1 ,695k 2.6 % 867k 67 7k 108k 1 ,6 52k Third-par t y panel share 7 3 0.1 % (0 . 3 p p t) 3 0 . 4% Gross writ t en pre miums £563. 6m 202 1 – £ 5 81 . 5m Retail B roking writ tenrevenue £183. 7m 202 1 – £ 192 . 3m 6 Refe r to t he A lt e rna ti ve Per f or ma nc e Me as ur es G lo ss ar y on p age 2 0 1 fo r def i ni ti on an d exp la na tio n 7 T hir d- pa r t y und er w rit e r’s sh ar e of t he m ot or p ane l fo r Sa ga- br an de d po li cie s Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 39 Retail Broking written gross pro f it ( a f ter marketing expenses ) £153.2m 2021 – £159.5m Gr oup C hief Fin ancial O f f ic er’ s Review continued Ret ail B ro king U nder lyi ng Pro f it B efor e T ax 8 onawri t te n basi s (which exclude s th e impa ct ofthe w rit t en t o ear ned a djus tm ent) redu ced t o £6 6 .6m f ro m £73 . 8m , an d on an e arne d bas is ( whi ch inc lud es th e impa ct of t he wr it te n to earned adj ustment ), reduced to £66 .4m fr om£ 75. 9 m. The w rit t en t o earn ed ad jus tme nt of negat ive £0. 2m in the c urr ent yea r co mpar es w ith a £2 .1m p osi tive a djus tme nt in th e pri or year. Thep rior ye ar br ok ing r esul t ben ef it ed f r om pric e r edu cti ons im plem ent ed by A IC L in 20 1 9 that im pr oved br ok ing mar gins , bu t wit h the se improvements par tially deferre d during 20 19/20 and ear ned d uring t he 20 20/21 f inancial year . A key met ric fo r the R et ail Br ok ing bus ines s is writ t en g ro ss pr of it , af t er de duc ting ma rket ing expenses, but before ove rheads. This reduced fr om £ 1 59. 5m i n the p rior ye ar t o £ 15 3 . 2m in the c urr ent f in anc ial yea r due t o the s ale o f Ben net t s in Aug us t 202 0. E xclud ing Be nnet t s , writt en gros s prof it af ter marketing expenses incr ea sed by £ 0. 3m , du e to a £ 3 . 2m impr oveme nt in mot or, off set by a £ 1.1m re duc tion i n hom e and a £ 1 . 8m r ed uct ion i n othe r br okin g. For Saga -br and ed mot or a nd ho me ins ura nc e, in ter ms of th e to ta l gr oss m arg in af t er ma rketi ng expen ses , new b usin ess p ro f it s r edu ce d by £6 . 2m , whi le th er e was a £ 8 .3 m impr ovem ent inre newal p rof it s. The r ed uct ion in n ew bus ines s pr of i ts i s due t o invest ment i n tel evis ion ad ver t ising an d lower mot or new b usin ess m arg ins due t o c omp eti tive market conditions . The increase in renewal pr of it s is p rin cipa lly du e to a 5% in cr eas e in mot or r enewa l pol icie s, c oup led w ith hi ghe r ren ewal ma rgin s drive n by the c ont inue d gr ow th of our t hre e-yea r f ixed -pri ce pr o duc ts . T he high er re newal m argi ns wer e, in p ar t , due t o low net r ate i nf lati on dur ing th e year c omp are d wit h the inf latio n assu mpti ons b uilt in to t hre e-yea r f ixed-price pr icing. The aver age gr os s marg in pe r po licy fo r Saga-branded motor and home combi ned, cal culat ed a s writ t en g ro ss p rof it les s mark eting expen ses d ivi ded by t he num ber o f po licie s sol d, was £ 7 4. 2 i n the ye ar , co mpar ed w ith £ 73 . 8 in the p rior ye ar . Whil e Ret ail B ro king e arning s have re duc ed ye ar on year, the Insu ra nce b usin ess h as sh own goo d progress in the past 12 month s: • Saga- br ande d mot or a nd ho me po lici es in for ce in cr eas ed by 1 . 4% in the year. • Sus t aine d impr ovem ent in cu st om er ret ent ion t o 82 . 8% a cr oss m oto r and h ome , whic h was 2 .3 ppt s hi ghe r than t he p rior ye ar and 7 .7 ppt s hig her t han 20 1 9/20. • 755k t hr ee-ye ar f i xed-pr ice p oli cie s wer e sol din the ye ar; 47% of t ot al m oto r and hom epol icie s in for c e, wi th 5 7% o f dir ect newbus ine ss t akin g the p ro duc t . • Dir ec t new bus ine ss sa les fo r mot or an d hom ewer e 59 % of the t ot al , st ab le on t he prio r year b ut ar oun d 9p pt s high er tha n in the20 1 8/1 9 year. Writ te n pr of it a nd gr os s mar gin p er po licy f or mot or an d hom e are s t at ed af t er a llowin g for defer ra l of par t o f the r evenu es fr om t hre e-yea r f ixed -pri ce p olic ies , whi ch is th en r ec ognis ed in pr of it o r los s whe n the o ptio n to r en ew tho se pol icie s at a pr ede ter mine d f ixe d pric e is exercis ed or l aps es , re cog nisi ng inf lat ion ri sk inher ent i n this p ro duc t . As at 3 1 J anua ry 2 02 2 , £8 .7m ( 202 1: £9. 9 m) of incom e had b ee n defer re d in re lati on t o thr ee -year f i xed-p ric e pol icie s, £ 7 .3 m (202 1: £ 5 .0 m) of which r elat ed to in co me wri t te n in the ye ar t o 3 1 Janu ar y 202 2 . The r e duct ion i n the a mount d efer re d is due t o new th re e-year f ixed-p ric e sal es dur ing the 20 2 1/22 ye ar bei ng lower t han in 2 0 19/20, the ye ar th e pr odu ct was l aunc hed , wi th th e lat t er gr oup o f pol icie s having a ll now p ass ed th e sec on d ren ewal . The r ed uct ion in t he num ber o f thr ee-ye ar f i xed-pr ice p ol icie s wit hin th e f irs t and se co nd r enewa l was pa r tial ly of fset by higher assumed inflation assumptions. Motor Broking Gr oss w rit t en pr em iums de cr eas ed by 7 .6 % due to t he sa le of th e Be nnet t s bu sine ss o n 7 Augu st 2020, t her efo re t he cu rre nt year r es ult s inc lud e no tr adi ng re sult s fo r Be nnet t s c omp are d wit h six m onth s’ wor th in clud ed in t he pr ior ye ar . Excluding Bennet ts , gross writ t en premiums dec re ase d by 0.3 % . Th is re duc tio n is due t o lower av erage premiums per policy, partially of f set by a 1 . 3% inc re ase i n the nu mbe r of co re Saga-branded po licies. Gr oss writ ten premiums fr om bu sine ss un der wri t te n by AI CL in cr eas ed 0.4% to £ 20 5. 5 m (202 1: £ 20 4 .6 m ), par tl y due to a 0. 3 ppt de cr eas e in thi rd- par t y p anel s har e to 3 0.1% (202 1: 3 0. 4% ) . O the r reven ue de clin ed by £3 . 9 m, du e prim aril y to t he s ale of B enn et t s. Written gr oss prof it minus marketing expenses was £ 68 .1m (202 1: £7 1 . 5m), contri but ing £7 2 .8/ pol icy (202 1: £6 6 .9/ po licy). Exclu ding B ennet t s re sult s f ro m the p rior ye ar , mot or w rit t en gr os s pr of it m inus m arket ing exp ense s for 20 2 1 was £6 5 .0m , co ntri but ing £ 70.3/policy. The in cr eas e in wri t te n gr oss p ro f it s exclu ding Ben net t s is ma inly du e to a 5% in cr eas e in mot or r enewa l pol icie s and hig her r en ewal marg ins on t he th re e-yea r f ixed- pric e pr o duct , par t iall y of f set by inves tm ent in t elev isio n adver tising of £ 3 .0 m and c omp et iti ve new business market conditions . Retail Broking earned Underly ing Prof it Befor e T ax 8 £66.4m 202 1 – £ 75 .9 m Retail Broking written Underly ing Prof it Befor e T ax 8 £66. 6m 202 1 – £ 73 . 8m 8 Refe r to t he A l te rn ati ve Pe r for ma nc e M eas ur es G lo ss ar y o n pag e 20 1 fo r def init io n an d exp la nat io n Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 40 Home Broking Gr oss w rit t en pr em iums in cr ease d by 0. 9% du e to a 0. 3% i ncr eas e in aver age pr emium s and a 0.6 % incr ea se in c or e po lici es . Written gr oss prof it minus marketing expenses was £ 53 .1m (202 1 : £ 54 . 2m ), and on a p er po licy basi s this wa s £76 . 2 / po licy (20 2 1: £ 78 . 2/poli cy). The d ecr ea se is du e to £ 1 .6 m of t elev isio n adver tising s pen d co mpar e d with z ero i n the prio r year. Other Bro king The Other Insurance Broking business pri marily comprises PMI and tr avel insurance. Gr oss w rit t en pr em iums in cr ease d 6 .6% a s a re sult of h ighe r sal es of t ravel in sur anc e, wi th pol icie s in for c e incr ea sing fr om 5 0k i n the p rior year t o 7 7k a s a re sult o f incr ea sed c us tom er conf iden ce in t he tr avel ou tlo ok an d fewer re str ict ion s on tr avel th an in th e prio r year. Gr oss p ro f it s af t er m arket ing c ost s r el ating t o tr avel insur an ce pr o duc ts i ncr ea sed by £ 1 .0 m . Sal es for t he PM I pr od uct w ere s t abl e; however, gr oss p ro f it af ter ma rket ing co st s was £ 6 .0 m lower. This red uct ion i s a re sult o f pric ing change s that h ave re duc ed r enewa l marg ins , along sid e a lower p ro f it sh ar e whic h is in lin e wit h expe ct ati ons as c laims h ave rise n pos t COVID-19 lockdowns. Pro f it ab ilit y of t he G ro up’ s clai ms man agemen t and cr ed it hir e bu sine sse s wer e adve rse ly impa ct ed dur ing th e prio r year d ue to l ower claim s volum es as a r es ult of r edu ce d re pair act ivi t y duri ng the C OVI D -19 loc kdow n, as w ell as the ex it fr om a c laim s hand ling co ntr ac t for athir d par ty. This h as again c ont inue d into t his year du e to a f ur th er COV ID -19 lo ck down , bu t was mo re t han of fset by b et t er-t han- exp ect ed re cover y again st p rev ious ly wr it t en dow n cr edit hire debt . Unde rwri ting £m 12 m to J an 2 02 2 Change 12 m to J an 2 02 1 Reported Quota share Underlying 9 Reported Quota share Underlying 9 Net earned premium 51. 5 (110.0 ) 161. 5 ( 1 1 . 9 %) 5 4 .7 ( 1 28 .7 ) 18 3.4 Other r evenue 33. 2 28.8 4.4 5 4 0.0% 1 9.7 2 0.7 (1 . 0) Reve nue a 84 .7 (81 . 2) 165 .9 (9 . 0 %) 74 . 4 ( 1 0 8 . 0) 182 . 4 Clai ms costs b (4 4 . 3 ) 8 7. 7 ( 1 3 2 .0) 4.6% (4 2 . 2) 96 .1 (1 3 8 . 3) Reserve releases c 18.3 (2 3 . 8) 42 .1 12 .0% 30.6 ( 7. 0 ) 3 7. 6 Ot her c os t of sa les d (3. 9) 1 2 .7 ( 16 . 6) 6 .7 % (4 . 9) 12.9 ( 1 7. 8 ) e (2 9 . 9) 76 .6 (1 06 . 5) 10.1% ( 16 . 5) 1 02 .0 (11 8. 5) Gross p rofit 54.8 (4 . 6 ) 5 9.4 ( 7. 0 % ) 5 7. 9 (6 . 0) 63.9 Oper ating expenses f (4 . 2 ) 6.9 (1 1 .1 ) (4 . 7 %) ( 2.9 ) 7. 7 (1 0. 6) Inv estment return 3.5 (4 . 3 ) 7. 8 ( 6 . 0 %) 3 .7 (4 . 6 ) 8.3 Quo ta s har e net c os t – 2 .0 (2. 0) 3 1 .0% – 2.9 ( 2.9 ) Underlying Profit Before T ax 10 5 4 .1 – 5 4 .1 ( 7. 8 % ) 5 8 .7 – 5 8 .7 Report ed loss ratio (b+c )/ a 30.7 % 54. 2% (1 .0ppt) 15 .6% 55. 2% Expense ratio (d + f ) /a 9.6 % 16 .7 % 1.1 p pt 1 0. 5% 15.6% Report ed COR (e + f )/a 40. 3% 70. 9 % 0.1 p pt 26 .1 % 70. 8 % Curr ent ye ar CO R (e + f- c)/a 6 1.9% 96.3% 4 . 9ppt 6 7. 2 % 9 1 . 4% Number of earned policies 71 1k (6 . 9 %) 76 4 k Polici es in fo rc e – Sa ga mot or 629k 3 . 5% 608k 9 Underlying within Insurance Underwriting sho ws the commercial position o f the busi ness by removing the impact of the proportional line- item accounting of the quota share reinsurance arrangements 10 R ef er t o th e Al te rn ati ve Pe r fo rma nc e M eas ur es G l oss ar y o n pa ge 20 1 fo r de f ini ti on a nd ex pl an ati on Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 41 Gr oup C hief Fin ancial O f f ic er’ s Review continued The G ro up’ s in-h ous e unde rw rit er , AI C L , con tinu es t o play an im po r t ant r ole o n the mot or pa nel , pr ovid ing a sign if ic ant so ur ce of competit ively priced underw riting. AIC L also unde rw rit es a p or t ion of t he ho me pa nel , alth oug h all ho me und er wri ting ri sk is p asse d tothird-p ar t y insuranc e and reinsur ance pr ovid ers . AI C L also h as exces s of lo ss and fun ds-wit hhe ld quo ta s har e r einsu ran ce arr angeme nt s in pla ce r el ating t o it s mo to r unde rw rit ing line o f busi nes s, w hich t ra nsf er asigni f ic ant pr op or t ion of m ot or ins ura nce r isk to thir d-par t y reinsur ers . E xcludi ng the i mpa ct of th e quot a s har e reinsuranc e arrangements 11 , net earned pr emium s dec re ase d by 11 . 9% t o £ 16 1. 5m (20 2 1: £ 18 3 .4 m) ref lec ting a 6 . 9% r edu ct ion in t he numb er of ea rne d pol icie s und er writ t en by A IC L cou ple d wit h a 5. 4% decr eas e in aver age earn ed pr emium s. T he r edu cti on in th e numb er of earn ed p olic ies was m ainl y due t o lowe r volum es on non-Saga panels. Als o excluding t he im pac t of th e quot a sh ar e arrangement 11 , AI CL s aw an inc re ase in t he curr ent ye ar und erly ing c ombi ned o per at ing rat io (COR) t o 9 6. 3% (20 2 1: 9 1 . 4% ) . The p rio r year b enef ite d fr om sig nif i cant ly r edu ce d mot or claim s fr equ enc ies du e to c ust om ers d riv ing fewer mil es dur ing COV ID -19 lo ckd owns . W hile this wa s also a f act or i n the f irst t hr ee mo nths o f 202 1/22 , m oto r clai ms exp erien ce f or th e lat t er nine m onth s of the 2 02 1/22 ye ar was b ro adl y in line with pricing assum ptions . Prio r year r ese r ve rel eas es of £ 4 2 .1m (202 1: £3 7 .6m) have res ult ed in a n unde rly ing r epo r te d CO R of 70.9 % (202 1 : 70.8%). The Gr oup r et ains an ec ono mic int er es t in mot or r es er ve developmen t with reserve releases on o ther line s t ypi call y having l imit ed n et imp act o n AI CL pr of it . R ese r ve rel eas es for t he p ast t wo ye ars can b e anal yse d as fol lows: £m 12 m to J an 2 02 2 Change 12 m to J an 2 02 1 Reported Quota share Underlying 11 Reported Quota share Underlying 11 Moto r insuranc e 16 .0 (26 . 5 ) 42.5 2 8 .1 (8 . 6) 3 6 .7 Home insur ance – 0.1 (0 .1 ) (0 . 4) – (0 . 4) Other insur ance 2.3 2.6 (0. 3) 2.9 1 .6 1.3 18.3 (2 3 . 8) 4 2 .1 12 .0% 3 0.6 ( 7. 0 ) 3 7. 6 Reserve releases reflect continued fav ourable exper ien ce on l arge bo dil y injur y cl aims r el ating to p rior a cc ident ye ars . In a ddi tio n, p ar t of th e additional component o f reserve margin for the incr ea sed u nce r t aint y over c laims d evelop men t held i n re spe ct of t he 20 20/21 ac cid ent yea r has bee n re leas ed in t he cu rre nt year. Whil e the G r oup r emai ns pru dent ly r es er ved and exp ec ts t o se e ongoing r es er ve re lea ses in 202 2/23 , t hes e ar e expe ct ed t o be at a l ower level th an in 20 2 1/22 . Beyon d 20 22 /23 , the Gr oup is t arget ing a r epo r t ed co mbi ned r ati o, befo re t he qu ot a shar e r eins ura nce arrangements 11 , of ar ound 9 7% , in line wi th previous expectations. E xcludi ng the i mpa ct of th e quot a s har e arrangement 11 , the inve stm ent r etur n dec re ase d by £0. 5 m to £ 7 .8 m (202 1: £ 8 . 3m) due to a re duc ed inves tm ent po r t fol io and l ower reinvestment yields. 11 Unde rlying withi n Insurance Underwriti ng shows the true commercial position of the bu siness by removing the impact o f the proportional line -item accounting of the quota share reinsurance arrangements 12 R efe r to t he A l te rna ti ve Pe r for ma nc e Me as ur es G lo ss ar y o n page 2 0 1 fo r def init io n an d exp la nat io n Under writing Underly ing Prof it Befor e T ax 12 £54. 1m 202 1 – £ 5 8.7m Curr ent year C OR 96.3% 202 1 – 9 1 . 4% Prior ye ar re ser ve releases £42. 1m 202 1 – £ 3 7 .6m Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 42 £m 12 m to J an 2 02 2 Change 12 m to J an 2 02 1 To u r Operations C ruise To t a l Tr a v e l To u r Operations C ruise To t a l Tr a v e l Reve nue 12. 2 82. 5 9 4 .7 83 . 5% 3 2 .7 18 .9 51 .6 Gross loss (0.5) ( 7. 7 ) (8 . 2) 50.3% (2 .6 ) ( 1 3 . 9) (1 6. 5) Marketing expenses (8 .7 ) (1 2 .1 ) (20. 8) ( 3 9 . 6 %) ( 7. 8 ) ( 7. 1 ) (1 4 . 9) Other op erating expenses (2 1 .7 ) (9. 2) ( 3 0 . 9) 8 .3% ( 2 6 . 4) ( 7. 3 ) (3 3 .7 ) Inv estment return – 0.1 0.1 (50.0%) – 0. 2 0. 2 Fina nce costs (0. 7 ) (1 8 .8) (1 9.5 ) (4 3 . 4%) (0.1 ) (13 .5) ( 13 . 6) Underlying Loss Before T ax 13 (3 1 .6 ) (4 7. 7 ) (7 9.3) ( 1 . 0 %) (36 . 9) (4 1 . 6 ) ( 78. 5) Average revenue per passenger (£ ) 1,356 3 ,75 0 3 ,0 55 12 . 5% 2, 515 3 ,1 5 0 2,7 16 T our Oper ations passengers (’ 000) 9 9 (3 0 . 8%) 13 13 Cruise pa ssengers (’00 0) 22 22 26 6 .7% 6 6 Cruise pa ssenger days (’00 0) 2 74 2 74 34 9. 2% 6 1 6 1 Load factor 68% 68% (1 5 .0ppt) 83% 83% Per diem (£) 299 299 24 .1% 241 241 The G ro up’ s T ravel busin ess es we re su sp ende d in mid-March 2020 following government re str ict ion s intr odu ce d as a r esul t of th e COVI D -19 pan demi c. T he Cr uise b usin ess re sume d on 2 7 Jun e 202 1 with t he f ir st s ailing ofSp irit of D isc over y, and Spi rit of A dvent ur e’ s inaug ur al cru ise on 2 6 Jul y 202 1 . T he Cr uise busi nes s op erat ed S pir it of D isc over y in UK waters through July with a government- enfor c ed lo ad fa ct or r es tric tio n of 50 % . Th is was r emoved f ro m th e end of J uly. In th e sec on d half, the C rui se bu sine ss op er ate d wit hou t interrupti on but in a continuall y changing envir onm ent th at re sul te d in lat e iti ner ar y change s for ou r cus to mer s and l oad f act or re str ict ion s at vario us po r t s in Eur ope . Th e T o ur Operations business commenced a small numb er of U K -base d ho lidays in J une 2 02 1 an d inte rnat ion al hol idays , t ours a nd ri ver cru ises , foc use d wit hin Euro pe , co mmen ce d in Sept em ber 2 02 1 , alb eit w ith ver y l ow volum es due t o ongoing C OVI D -19 tr avel res tr ict ions . Mar keting ex pen ses h ave incr eas ed by £ 5 . 9m t o £2 0. 8m (202 1 : £ 14 . 9m) to sup por t the r est a r t of op era tio ns and a r etu rn to a n orm alis ed tr ading in 2 02 2/23 , es pe cial ly in C ruis e. O th er ope rat ing exp ense s have de cr eas ed by £ 2 .8 m as a re sult o f act ion s ta ken af ter th e de cisio n to susp en d ope rat ion s in the p rio r year t o down size the over hea d co st ba se wh ilst o pe rat ions w ere paus ed . The ove rhea ds c ost b ase h as b egun t o sca le up t o sup por t the r eturn t o s er vic e, bu t not t o the s ame l evels as b efor e. A signi f ic ant num ber o f change s have be en ma de to h ow the T ravel bu sine sse s op era te t o pr ovi de pea ce o f mind an d ensu re t he sa fet y of customers and colleagues, includin g the re quir eme nt that a ll gu es ts m ust b e fu lly vac cinat ed aga inst C OVI D -19, whic h mea ns t wo dos es plu s a bo os ter f r om 1 Febru ar y 20 22 , atlea st 14 d ays befo re d epa r tur e. The T our Op er atio ns bu sine ss (compr ising SagaH oli days and T it an T ravel) c ont inue s to besig nif icant ly imp ac te d by COVI D -19, wit h passenger volumes well below pre-20 19 levels. We are r es pon ding t o the se c hall enges by com bining t he op er ati ons of S aga H olid ays and Tit a n to p osi tio n ours elve s for g row th and cr eat e a lower - cos t , mo re ag ile an d dy nami c ope rat ion w hich i s foc use d on th e chang ing nee ds of ou r cus to mer s. This w ill ma ximi se ef f icien cy in t ouri ng, w her e the produ ct of ferings are highly complementar y, and we wi ll cr eat e a new h ote l st ay pr op osi tio n to b e laun che d lat er in 20 2 2. M an agement o f our river cruise operation is being transferr ed to ou r Cru ise t eam , wh o have a dem ons tr abl e tr ack r ec or d of op er ating c ruis e ship s suc ce ssf ull y, both in t erms o f cus to mer s er vic e and commerci al outcome s. The se ac tio ns pl ac e us in a st ro ng po sit ion as travel restrict ions ease and customer deman d builds during 202 2. Tr a v e l T ravel Underlying Loss B efor e T ax 13 (£79 .3m) 202 1 – (£ 78 .5 m) Aver age r even ue perpassenger £3, 055 202 1 – £ 2 ,7 16 13 Re fer t o t he A lt er nat iv e Per f orm an ce M e asu re s Gl os sa r y on p age 20 1 f or d ef in it io n an d exp lan at io n Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 43 Gr oup C hief Fin ancial O f f ic er’ s Review continued Forward T ravel sales Crui se b ook ings fo r 202 2 /23 are h ighe r tha n the s ame p oint t wo ye ars ago by 4 6% a nd 9 ppt for r evenue an d lo ad fa ct or r esp ec tive ly due t o high leve ls of pe nt-up de man d for cr uise s and completion of the cruise transformation pr ogr amm e, wi th pe r diem s also 1 5% high er than a t the s ame p oint t wo ye ars ago. T o ur Op er atio ns bo ok ings fo r 202 2 /23 are bel ow the s ame p oint t wo ye ars ago by 3 0% an d 35% for reven ue and pa ssengers respectively . This is d ue t o con tinu ed cus t ome r cau tion i n rel atio n to ove rse as tr avel. The G ro up’ s O the r Busi nes ses i nclu de S aga Personal Finance, the Sag a Publish ing business and M etr oM ail , a mail ing and p rint ing bus ines s. Und erly ing Pr of i t Bef or e T a x 14 for O th er Busi nes ses c omb ine d is br oa dly in li ne wi th thep rior ye ar , wit h the p rio r year b enef iting fr om on e mont h’ s wor th of t ra ding f ro m the Hea lth car e bu sine ss th at was di ves te d in Mar ch2 020. Central op erating expenses increase d to £3 2 . 9m (20 2 1: £ 26 .3 m) . Admi nist ra tio n cos t s, adjus t ed fo r tr ans fers t o lo ca l busi nes s unit s , wer e f lat on t he pr ior ye ar , but n et co st s incr ea sed by £ 6 .6 m due t o lower G r oup re char ges to t he T ravel div isio n and a £ 3 . 2 m increase in centr al marketing costs . This l at te r incr ea se was d ue to t he G ro up’ s reb ra nding exer cis e as well a s pr odu cti on an d othe r set up co st s r elat ing t o the t elev isio n adver tising c amp aign l aunc hed in O ct ob er 20 2 1 . Net f inanc e co st s in t he year w ere £ 18 .6m (2021: £16 .6m ), wh ich ex cludes finance cost s that a re in clu ded w ithin t he T ravel div isi on of £ 19. 5 m (202 1: £ 13 .6m). The inc re ase wa s largel y due t o high er bo nd int er es t co st s fo llowi ng the com plet ion o f the n ew bon d iss ue in J uly 20 2 1 . This wa s par t iall y of f set by a r edu ct ion in b ank debt in ter es t co st s fo llow ing th e rep aym ent of all dr awn ba nk fac ilit ies in J ul y 202 1 . £m Current-year departures 20 M ar ch 2022 Change 22 M ar ch 2020 Crui se r evenue (£ m) 160. 5 4 5 .6% 110. 2 Load factor 73% 9p pts 6 4% Per diem s (£) 319 1 4 .7 % 278 Saga H oli days and T it an c om bine d reven ue (£m) 131. 9 ( 2 9 . 9 %) 1 8 8 .1 Saga H oli days and T it an c om bine d pas senger s ( ’0 00) 53.8 (3 5 . 3 %) 8 3 .1 Other Business and Cen tral Co sts Underlying Loss Befor e T ax 14 (£4 7 .9m) 202 1 – (£ 3 9.0m) 14 R efe r t o th e Al te rn ati ve Pe r fo rma nc e M eas ur es G lo ss ar y o n pag e 20 1 fo r de f ini ti on a nd ex pl ana ti on Other Businesses a nd Central Costs £m 12 m to J an 2 02 2 Change 12 m to J an 2 02 1 Other Businesses Central Costs To t a l Other Businesses Central Costs To t a l Reven ue: Personal Finance 5.9 – 5.9 ( 1 . 7 %) 6 .0 – 6 .0 Healthc are – – – ( 1 0 0 . 0 %) 0.9 – 0.9 Med ia an d print ing 9. 9 – 9.9 8 .8% 9.1 – 9.1 Other – 1.5 1.5 ( 2 5 . 0 %) – 2.0 2.0 T ot al revenue 15.8 1.5 1 7. 3 ( 3 . 9%) 1 6.0 2 .0 18 .0 Gross p rofit 5 .7 3.4 9.1 (2 . 2 %) 5.6 3 .7 9.3 Oper ating expenses (3 . 9) ( 32.9 ) (3 6 . 8) (2 6 . 5%) (2 . 8) (26. 3) (29 .1) IAS 1 9 R pen sion c harge – (1 . 6) (1 . 6) 3 8 . 5% – (2 . 6) (2. 6) Net f inan ce costs – ( 18 . 6) (1 8 .6) (1 2 . 0 %) – (1 6. 6) (1 6 .6) Underlying Profit/ (Loss ) Before T ax 14 1.8 (4 9 . 7 ) (4 7. 9 ) (2 2 . 8 %) 2 .8 (4 1 . 8) ( 3 9 .0) Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 44 Cas h f low and liqui dit y Available Ope rating Ca sh Flow 15 Availab le Op er ati ng Cas h Flow 15 is mad e up of the c ash f l ows of unr es tr ict ed b usin ess es an d the di vi dend s paid by r es tr ict ed c omp anie s, l ess any cas h inje cti ons t o th ose b usin ess es . Unrestricted businesses include Retail Broking ( excludin g spe cif ic ring-fence d fun ds t o sat isf y FCA reg ulat or y r equi re ment s) , O the r Busi nes ses a nd C entr al C os ts , an d the G r oup’ s Cruise business. Restricted businesses i nclude AI CL an d T o ur Op er ati ons . E xcludi ng cas h tr ans fers t o an d fr om th e T ravel busi nes s, G ro up ca sh f lows d emo nst ra te d con sid era ble r es ilien ce in t he yea r , with a n Availab le Op er ati ng Cas h Flow 15 of £ 89. 4m com par ed w ith £ 9 2 .3 m in th e prio r year. T ra ding EB I TDA 15 for unrestricted busi nesses reduced by £ 19. 9 m, p ar tl y due t o r edu ced r en ewal marg ins in PM I wi thin t he Ret ai l Br okin g segm ent an d inc re ase d tel evisi on ad ver ti sing spe nd t o supp or t t he b ran d. T his was l argel y of f set by an in cr eas e in wor king ca pit al i nf lows fr om £ 7 .0m to £ 15 . 2m , mainl y due t o th e Ret ail Br oking s egm ent an d a £ 10. 5 m inc re ase in div iden ds pai d by AI CL . Sinc e th e Gr oup’s T ravel b usin ess es wer e susp en ded in M ar ch 20 20, th e Gr oup h as pr ovid ed ad diti ona l liqui dit y int o th e T ravel busi nes ses t o me et sup plie r and ot her t ra ding paym ent s , and t o enab le r epay ment o f cus to mer refunds where requested. For T o ur Op er atio ns , whic h now op er at es as a ring-fence d fun d, t he G rou p pr ovid ed £ 36 . 4m of cas h to t he bu sine ss t o cover t ra ding c ash f lo ws in the c urr ent yea r . This is a r ed uct ion o f £2 7 .7 m when c om par ed wit h the £ 6 4 .1m fund ed in 20 20/21 , whi ch is mainl y due t o th e es ta blis hmen t of the s t and - alon e ring fe nc e in 202 0 as well as h igh level o f supp lier p ayme nt s in th e prio r year. At 31 January 202 2, the T our Operations ring- fenced busi nes s hel d cas h of £3 2 . 4m , of whi ch £ 23 .4 m is hel d in tru st . I n the s ec ond h alf of t he yea r , the Gr oup ag re ed wi th th e Ci vil Avi atio n Aut hori t y to h old a mi nimum of £ 5 .6 m of ca sh ou t side o f trust within the ring - fenced businesses. Duri ng the ye ar , the C rui se bu sine ss r epo r t ed an op er ating c ash inf l ow of £ 2 2. 8 m (202 1: c ash out f l ow £24 . 8m), with an inc re ase i n adva nce cus to mer r ec eipt s of £ 28 . 5m (20 2 1: r edu cti on of £ 8.1m), off set by n et tr adin g cos t s of £ 2 .7 m (202 1: £ 25 .7 m) and capi t al expe ndi tur e of £3 .0 m (202 1 : net inf l ow of £ 9.0 m) . Net of inte re st c os t s of £ 15 . 2m (202 1: £ 8 .6m), the Crui se bu sine ss r ep or t ed net c ash i nf low of £7 .6 m for 20 2 1/22 c omp are d to a n et out f l ow of£ 33 . 4m in t he pr ior ye ar . The im pr ovemen t com par ed w ith t he pr ior ye ar is a re sult o f the C ruis e bus ine ss r esum ing ope rat ion s in the l at te r par t o f the f irst h alf, enab ling th e bus ines s to s t ar t c oll ect ing paym ent s on t he cr uise s that s aile d in th e sec on d half of t he ye ar and t he b eginn ing of 2022 . As a r esul t of th e re duc tio n in cas h inje cti ons t o the T ravel bu sine ss in t he year w hen c omp ar ed wit h the p rior ye ar , Availab le O per at ing Cas h Flow 15 incr ea sed f ro m an inf l ow of £ 3. 4 m in the prio r year t o £ 75. 8m i n the c urr ent year. Available O pe rat ing Cash F low 15 ( excludingT r avel) £89 . 4m 202 1 – £ 9 2 .3 m Available O pe rat ing Cash F low 15 £75.8m 202 1 – £ 3 . 4m 15 Re fe r to t he A lt er na ti ve Per f or man c e Me as ur es G lo ss ar y on p age 2 0 1 for d ef i ni tio n an d exp la nat io n Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 45 Gr oup C hief Fin ancial O f f ic er’ s Review continued Oth er cash f l ow movements Non -op er atin g cas h f low move ment s in t he pr ior year in clud e sig nif ic ant c ash c os t s rel ating t o the restructurin g activities u ndert aken i n the f irs t hal f of th e prio r year, which pri ncip all y relate to redundancy cost s. Int er est a nd f in anc ing co st s in cr eas ed due t o the f inanc ing co st s r elat ing t o the S piri t of Adven tur e deb t faci lit y wh ich wa s draw n down at the en d of S ept emb er 20 20, co mbin ed wi th an incr ea se in de bt iss ue c ost s r el ating t o th e fees asso ci ate d wit h the n ew bon d iss ue, t he t end er of the ex ist ing bo nd an d the a men dment s t o theexi st ing revo lvi ng cr edit f aci lit y (R CF ), alo ng wit h the s ec ond s hip deb t holi day be ing mo re expen sive t han t he f ir st o ne in t he pri oryea r . Busi nes s and p ro per t y dispo sal s re lat e to thec ash r ec eive d fr om th e sal e of pr op er t y inthe c urr ent yea r and f ro m the s ale of t he Healthcare, Bennetts and Destinology busi nes ses in t he p rior ye ar , net of r el ate d sal ecos t s and ex pen ses . The G ro up co ntin ued t o mak e the ag r eed paym ent s to t he d ef ine d be nef i t pen sion f und a s par t of t he de f ici t re cover y p lan of £ 4. 2m (20 2 1: £ 4 .8 m) , wit h the p rior ye ar inc lud ing a po r tio n of the s ale s pr oc eed s re latin g to t he He alt hca re and B enne t ts b usin es ses p aid int o th e fun d. These are i ncluded with in other payments. Duri ng the ye ar , the G r oup agr e ed wit h th e FCA to h old an a ddi tio nal r es tric t ed ca sh ba lanc e of £5 .0 m on a t emp or ar y bas is . This wa s fun ded from Ava ilable Cash 16 and is in clu ded w ithi n othe r paym ent s . The G ro up exp ect s t o be a ble to r ele ase t his am ount f ro m re str ict ed c ash i n the f irst h alf of 2 02 2 . In Ju ne 20 2 1, t he G ro up iss ued a f ive-year £250m f ixed-rate unsecured bond. The pr oc eed s of th e bon d wer e use d to f und t he set tl eme nt of £ 1 00 m of th e exis ting b ond a nd tor epay i n full t he £ 70m t erm lo an . The b alan ce of the p ro c eed s, t ogeth er wit h th e Availab le Cash 16 br ought f or war d fr om th e pri or yea r , andth e und rawn R CF pr ov ides t he G ro up wit h signi f ic ant fr ee l iquid it y t o supp or t o pe rat ions inthe even t of a re -em ergen ce of C OVI D -19 in 202 2 or 20 23 . £m 12m to Jan 2022 Change 12m to Jan 2021 Ret ail B ro king T rading EB IT DA 73. 2 ( 1 0 %) 81.6 Ot her B usin ess es an d Ce ntr al C ost s T rad ing EBI TDA (2 1 . 5 ) (1 1 5 %) (1 0 . 0) T rading EBITD A from u nrestricted businesses 16 ,17 51 .7 ( 2 8 %) 7 1.6 Div ide nds p aid by Un der wr iting b usi nes s 35 .0 4 3% 24 . 5 Working capital and non-cash items 18 15. 2 117 % 7. 0 Capital expenditu re funded with A vailable Cash 16 (12. 5) ( 1 6 %) ( 1 0 . 8) Avai lable Operating Cash F low before cash injections to T ravel operations 16 89. 4 (3 %) 92 .3 Cas h injec ti on int o T o ur Op er ati ons bu sin ess (3 6 . 4) 4 3% (6 4 .1 ) Crui se Avail able O p erat ing C ash Fl ow 22.8 1 92% (24 . 8) Availa ble O pe rat ing Ca sh Fl ow 16 75. 8 2 ,1 29 % 3.4 Restructurin g costs paid (1 .7 ) 93% ( 23 .0) Interest and financing costs (4 2 . 4) ( 5 5 %) (2 7.3) Business and prop er ty disp osals 4. 5 ( 8 5 %) 3 0.1 T ax r eceipt s 5 .7 1 0 4% 2.8 Other paymen ts (1 0 .7 ) ( 5 %) ( 1 0. 2) Cha nge in cas h f low fr om o pe rat ions 31.2 2 29% (24 . 2) Net p ro ce eds f ro m cap it al r aise – ( 1 0 0 %) 13 8 .7 Cha nge in bon d deb t 150. 0 1 00% – Change in bank debt ( 70. 0) 13% (8 0 . 0) Cas h at 1 Febru ar y 75. 4 8 4% 40 .9 Availa ble C ash a t 31 J anu ar y 16 186.6 147 % 75 . 4 16 Refe r to t he A l te rn ati ve Pe r for ma nc e Me as ur es G lo ss ar y o n pag e 20 1 fo r def init io n an d exp la nat io n 17 T ra din g EB IT DA inc lu de s th e lin e-i t em im pa ct o f IF RS 1 6 wi th t he c o rr es po nd ing im pa ct t o n et f in an ce c os t s in cl ud ed in n et c as h f low s us ed i n f in anc ing activities 18 Adj us te d t o excl ude I A S 19 R p ens io n cu rr ent s er v ic e co st s Ava ilable Cash at31J anua ry 16 £186. 6m 202 1 – £ 75 .4 m Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 46 Reco nciliatio n bet ween oper ating and r epor t ed met rics Availab le Op er ati ng Cas h Flow 19 re con cil es t o net ca sh f low s fr om op er ating a cti vi ties a s foll ows: £m 12m to Jan 2022 12m to Jan 2021 Net c ash f l ow fr om op er ating a ct ivi tie s (repor ted ) 46.5 ( 7 8 . 4) E xclud e cas h impa ct of : T r ad ing of r est ric te d div isio ns 0.8 73 . 8 Non- tradi ng co sts 3.6 21 .6 Interest paid 34.2 24 .1 Ta x p a i d 4.6 10 .7 43.2 1 30. 2 Cas h rel eas ed pa id to r es tr ict ed di vis ion s ( 1 . 4) (2 6 . 8) Include capital e xpenditure funded from Avai lable Cash 19 (12. 5) (1 0 . 8) Include capital e xpenditure disposal proceeds – 6.9 Inc lude n et imp act o f Spir it of A dvent ure p ur cha se ca sh f lows – (5 . 2) Les s non -c ash ne t liab ilit ies dis po sed a s par t o f busi nes s disp os als – (12 .5) Availa ble O pe rat ing Ca sh Fl ow 19 75. 8 3.4 T r ad ing EBI TDA 19 reconciles to Underlying (Loss ) /P rof it Before T ax 19 as follows: £m 12m to Jan 2022 Change 12m to Jan 2021 Ret ail B ro king T rading EB IT DA 73. 2 81 .6 Und er writ ing T rading EB IT DA 54.3 59. 2 T o ur Op er atio ns T rading EB IT DA (28 .1 ) (3 2 . 6) Crui se T rading EB IT DA (1 2 .7 ) (1 9.5 ) Ot her B usin ess es an d Ce ntr al C ost s T rad ing EBI TDA (2 1 . 5 ) (1 0. 0) T r ading EBITDA 19 65.2 ( 1 7. 2 %) 78 .7 Depreciation and amortisation ( e xcludin g acquired intangibles ) (32 . 2) (28 . 8) Pensio n cha rge IAS 1 9 R (1 .6) (2. 6) Net f inanc e co st s ( inclu ding C ruis e ) (3 8 .1 ) (3 0. 2) Und erl ying ( Lo ss) /Pro f it Be for e T ax 19 (6 .7 ) (1 39. 2%) 1 7.1 Adjus t ed T rading EB IT DA 19 is use d in th e Gr oup’s leverage cal cul atio n and is c alc ulat ed as f ollo ws: £m 12m to Jan 2022 Change 12m to Jan 2021 T r ading EBITDA 19 65.2 ( 1 7. 2 %) 78 .7 Les s T r ad ing EBI TDA of dis pos ed c omp anie s not dis clo se d bel ow Und erl ying Pr of it B e f o r e Ta x 19 – (1 .6) Imp act of I FR S 16 ‘ L eas es’ (3 .1 ) (3 . 0) Spir it of D isc over y and S piri t of Ad ventu re T radi ng EBIT DA 20 11.5 18 .7 Adju st ed T ra ding E B ITDA 19 73.6 (20 .7%) 92 .8 19 Refe r to t he A l te rn ati ve Pe r for ma nc e Me as ur es G lo ss ar y o n pag e 20 1 fo r def init io n an d exp la nat io n 20 E BITDA includ es central Crui se over heads Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 47 Gr oup C hief Fin ancial O f f ic er’ s Review continued Goo dwill At 3 1 Janu ar y 20 22 , th e car ry ing valu e of theG ro up’ s good will a sset t ot all ed £ 7 18 .6 m (31Ja nuar y 20 2 1: £ 7 18 .6 m) and is who lly attributable to the Insurance bu siness. TheG ro up pe r form ed it s a nnual i mpai rment rev iew of th e good will as set a nd th e re sult s demo ns tr ate d suf f icie nt hea dr oom aga inst thec arr yi ng value o f the as set i n bot h management’ s base case and reason able worst-case (RWC) scenarios, and so has con clu ded t hat no i mpair ment i s re quir ed . Duri ng the p rio r year, the Gro up wr ot e down t he £5 9. 8m goo dw ill ass et at tr ibut ab le t o it s T ravel busi nes ses , th e impa irme nt rev iew for w hich wa s af fe ct ed ad vers ely by t he un cer t ai n out loo k for the T ravel bu sine ss at th at po int in ti me due t o impa ct of C OVI D -19. Carr ying value of oc ean crui se ships At 3 1 Janu ar y 20 22 , th e car ry ing valu e of th e Gr oup’s ocean c ruis e ship s tot a lled £ 6 2 1 .3 m (31Ja nuar y 20 2 1: £ 6 35 .0 m) . Due t o th e con tinu ed imp act o f the C OVI D -19 pand emic onth e T r avel bu sine ss an d the c ont inue d unc er t aint y in t he ou tlo ok fo r the T ravel indu str y, the G ro up car ried o ut an im pair ment rev iew of bo th of it s ve sse ls . The r esu lt s of th e rev iew show ed th at the re wa s hea dro om in b oth the c ent ral a nd st r ess t es t sc enar ios fo r bot h Spir it of D isc over y and S piri t of Ad ventu re , wit h no imp airm ent r equir ed . Pl eas e ref er to N ot e 2. 6 on page 14 2 for f ur th er det ai ls of th e rev iew that was undert aken. Inv estment portfolio The m ajor it y of t he Gr oup’s fi nanc ial as set s ar e held by i t s und erw rit ing ent it y an d rep re sen t pr emium in co me r ec eived a nd inves t ed t o set tl e claim s and t o me et re gul ato ry c api t al requir ements . The am ount h eld in i nvest ed f und s dec re ase d by £2 8. 9 m to £ 3 30 . 2m (31 J anu ar y 202 1 : £3 5 9.1m ) due t o paym ent of £ 3 5. 0m of d ivi dend s fr om AI CL in t he yea r . At 3 1 Janu ar y 202 2 , 98 % of th e f ina ncia l ass et s hel d by the G ro up wer e inves te d wit h cou nte rpar t ies w ith a r isk r ating o f BB B or above , whic h is in lin e wit h the p rior ye ar an d ref l ect s t he r elat ivel y st ab le cr ed it ris k rat ing ofthe G r oup’s in ves tme nt hol dings . Balanc e sheet £m Cr ed it ri sk r at ing At 3 1 Ja nua ry 2 0 22 AAA AA A BBB Unr ated To t a l Under writing investm ent por t folio: Deposits with f inancial institutions – – 1 4.0 – – 14 .0 Debt securi ties 20. 2 94.4 68 .0 98. 2 – 280. 8 Money market funds 2 9. 2 – – – – 2 9. 2 Loan funds – – – – 6. 2 6. 2 T ot al i nvest ed f und s 49. 4 94.4 82.0 98. 2 6. 2 330. 2 Hedging derivativ e assets – – 1.8 0.1 – 1.9 T ot al financial asset s 49. 4 94. 4 83 .8 98.3 6.2 3 3 2 .1 £m Cr ed it ri sk r at ing At 3 1 Ja nua ry 2 0 21 AAA AA A BBB Unr ated To t a l Under writing investm ent por t folio: Deposits with f inancial institutions – 24 . 2 – – – 24 . 2 Debt securi ties 23 .1 73 . 9 7 1. 5 9 3. 4 – 2 6 1 .9 Money market funds 66.8 – – – – 66.8 Loan funds – – – – 6 . 2 6. 2 T ot al i nvest ed f und s 89. 9 98 .1 7 1 .5 9 3. 4 6. 2 3 5 9.1 Hedging derivativ e assets – – 0. 2 0. 5 – 0 .7 T ot al financial asset s 8 9.9 98 .1 7 1 .7 9 3 . 9 6 . 2 3 5 9.8 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 48 The G ro up’ s to ta l insur an ce c ontr ac t lia bilit ies , ne t of re insur an ce as set s , have de cr eas ed by £ 33 . 4m in the ye ar t o 31 J anu ar y 202 2 f ro m the p rev ious year en d, p rima rily d ue to a £ 15 .3 m re duc tio n in rep or t ed n et cl aims r ese rve s, c oup le d with a £14 .9m decrease in net incurred but no t repor ted claims reserves. The reduction in net incurred but not r epo r t ed cl aims r ese r ves is du e to r es er ve releases that reflect continued fa vourable exper ien ce on l arge bo dil y injur y cl aims r el ating top rior a cc ident ye ars . In a ddi tio n, p ar t of th e additional component o f reserve margin held in re spe ct of t he 20 20/21 ac cid ent yea r has b een rel eas ed in t he cur re nt year. Financing At 3 1 Janu ar y 20 22 , th e Gr oup’s net debt was £7 29.0 m, w hich is £ 3 1 . 2m l ower t han at t he beg inning o f the f inanci al yea r . The G ro up iss ued a n ew f ive -year £ 250 m 5 .5% f ixed -rat e uns ecu re d bo nd in Ju ly 20 2 1 . The pr oc eed s of th e bon d wer e use d to f und t he set tl eme nt of £ 1 00 m of th e exis ting ou t st an ding unse cur ed 3 . 375% b ond a nd t o rep ay in fu ll the £70m t er m loan . Af ter t ra nsa cti on co st s , th ese actions increased the Group’ s Avai lable Cash 23 by £76m . As a t 31 J anu ar y 202 2 , th e £ 10 0m R CF remained und rawn and a vailable to the Group, a nd the m aturi t y of th e fa cilit y h as b een ex t end ed t o May 20 25 . The t erm s also i nclu de a r equi re ment to r epay t he RC F on 1 M ar ch 20 24 if the r em aining £ 15 0m of t he 3 . 375% bo nd no te s have not b een re deem ed p rior t o th is dat e. E xcludi ng the i mpa ct of de bt and e arnin gs rel ating t o th e oc ean c ruis e ship s, t he G ro up’ s lever age rat io was 3 .0 x as at 3 1 Jan uar y 20 22 (31 Ja nuar y 20 2 1: 2 .7x), well within t he 4 . 25x coven ant app lic abl e to t he Gr oup’s RCF . No r epay ment s we re m ade o n the s hip lo ans during t he yea r , with t he G rou p agr eei ng a sec on d debt h olid ay wit h it s len der s in Ma rc h 202 1 , as p ar t of a p ack age of pr op os als t o supp or t t he wi der c ruis e indus tr y. The s eco nd debt h olid ay allowe d for p ayme nt s due in t he year t o 3 1 Mar ch 2 02 2 to b e def err ed fo r a per iod of u p to f ive year s fr om th e orig inal rep aym ent dat e. T he G ro up int ends t o r esum e ship l oan de bt r epaym ent s af t er M ar ch 20 2 2, wit h the f irst p ayme nt due in J une 2 02 2 . Insurance reserves Ana lysi s of insu ran ce c ont ra ct lia bili tie s at 3 1 Janu ar y 202 2 an d 3 1 Janu ar y 20 2 1 is as fo llows: At 3 1 Ja nua ry 2 0 22 At 3 1 Ja nua ry 2 0 21 £m Gross Reinsurance assets 21 Net Gross Reinsurance assets 21 Net Report ed claims 2 11.3 ( 5 5 . 8) 155.5 228 .6 ( 5 7. 8 ) 170 . 8 Incurred but no t repor ted 22 73. 6 (3 . 3 ) 70. 3 92 .6 ( 7. 4 ) 85 . 2 Claims handling pr ovision 7. 9 – 7. 9 8. 3 – 8 .3 T otal claims outstanding 292.8 (5 9 .1) 23 3 .7 329. 5 (6 5 . 2) 26 4 . 3 Unearned pr emiums 93.9 ( 6.3) 8 7. 6 9 6 .8 (6 . 4) 90.4 To t a l 38 6 .7 ( 6 5 . 4) 321.3 42 6 . 3 (7 1 .6) 3 5 4 .7 2 1 Exc lu de s fun ds -wi th he ld qu ot a sh ar e ar r ange me nt (p le as e re fe r to N ot e 28 f or f ur t her d et ai l) 22 In cl ud es am ou nt s fo r re p or t ed c lai ms t ha t ar e exp ec t ed t o be co me p er io di ca l pay me nt or d er s 23 Ref er t o th e Al te rn at ive Pe r fo rm anc e M ea sur e s Gl os sa ry o n pa ge 20 1 fo r de f in iti on a nd ex pl an ati on 24 M atu ri t y dat e r ep re se nt s t he d at e th at th e pr in cip al m us t be r ep ai d, o th er th an t he s hip l oa ns , wh ic h ar e re pa id in i ns t alm en ts o ver t he n ex t 1 2 yea rs 25 T he t er ms al so i nc lud e a r equ ir em en t to r ep ay t he RC F o n 1 Ma rc h 20 24 if t he r em ai ning £ 150 m of t he 3 . 3 75% b on d not e s have n ot b ee n re de em ed p ri or t o th is da te 26 Refer t o N ot e 25 o f th e f in anc ia l st at e men t s for i nfo rm at ion a s t o how t hi s re co nc il es t o a st a tu to r y me asu re o f ca sh Net de bt £729 .0m 202 1 – £ 760. 2m Leve ra ge r ati o 3. 0x 202 1 – 2 .7x £m Maturit y date 24 31 January 2022 31 January 2021 5.5% Corporate bond July 2026 250.0 – 3.3 75% Corpor ate bond May 20 24 150. 0 250.0 T erm loan n /a – 70 .0 Revolvin g credit facility May 2 02 5 25 – – Spir it of D isc over y ship l oan Jun e 203 1 23 4 .8 23 4 . 8 Spir it of A dvent ure s hip lo an Septemb er 2032 280. 8 28 0.8 Less Av ailable Cash 23, 26 (1 86 . 6) ( 7 5 . 4) Net debt 72 9.0 760. 2 Adj usted Ne t Deb t 23 is use d in th e Gr oup’s leverage cal cul atio n and r ec onc iles t o ne t debt a s foll ows: £m 31 January 2022 31 January 2021 Net d ebt 729.0 76 0 . 2 Exclude ship loan s (51 5 .6) (515 . 6) Exclude Cruise A vailable Cash 4 .7 2. 3 Adjusted Net Debt 23 218. 1 2 46 . 9 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 49 27 R efe r to t he A l te rna ti ve Pe r for ma nc e Me as ur es G lo ss ar y o n page 2 0 1 fo r def init io n an d exp la nat io n Gr oup C hief Fin ancial O f f ic er’ s Review continued Pensions The G ro up’ s def i ned b enef it pe nsio n sch eme d ef ic it , as me asur ed o n an IA S 19 R ba sis imp rove d by £ 5. 4 m to a £ 1 .1m su rplu s at 31 J anu ar y 202 2 (£ 4 .3 m def icit as at 3 1 J anu ar y 202 1 ). £m 31 January 2022 31 January 2021 Fair value o f sch eme as set s 41 2 . 0 41 1 . 2 Pre sent v alue of d ef in ed b enef i t obl igatio n (41 0 . 9) (41 5 . 5 ) Defined benef it scheme sur plus/ (deficit ) 1 .1 (4 . 3 ) The p re sent va lue of d ef in ed be nef i t obl igatio ns dec re ase d by £ 4 .6m t o £ 410. 9 m, p rimar ily du e to a 70b ps in cr eas e in th e disc ount r at e bas ed on high -qu alit y bond y iel ds , that wa s par t iall y of f set by a 1 00 bps i ncr ea se in R PI inf lat ion , th e fair va lue of s chem e ass et s inc re ase d by £0 .8 m to £ 41 2.0 m . The in cr eas e in as set valu es ha s been largely driven by employer contributions of£ 8. 2m into t he sc hem e inc ludin g a £ 4. 2m def i cit f unding c ont rib uti on in Febr uar y 20 2 1 , par t iall y of f set by a d ecr eas e in as set val ues , largel y dri ven by the i ncr ea se in int er es t rat es inthe ye ar . Duri ng the ye ar , the p ens ion T rust ee s and t he Gr oup c onc lud ed th e trie nnia l valuat ion o f the sch eme at 3 1 J anua ry 2 020. T he C omp any and T r ust ee s agr ee d to a n ew def i cit r ec over y pla n tot al ling £ 39 .0m over t he nex t s even year s, w ith the f irst p ayme nt of £ 4 . 2m p aid in Feb rua ry 202 1 a nd sub seq uent p ayme nt s of £ 5. 8 m due each February ther eaf ter until February 202 7 . In Ju ly 20 2 1, f ollo wing th e co mpl etio n of a rev iew of the Group’ s pension arrangements, a consultation process wi th active members was laun che d. W it h ef fe ct fr om 3 1 O ct ob er 20 2 1, theG ro up clo se d bot h it s exis ting s che mes t o fut ur e acc rua l, t he Sag a Pensio n Sc hem e (it s defined benefit plan ) and the Saga W orkplace Pension Plan (its defined contribution plan ). Inth eir pl ac e, th e Gr oup int ro duc ed a n ew defined contribution pension scheme arrangement that is operated as a Master T rust. This m ove will r edu ce t he ris k of fu r the r def i cit s develo ping int he fu tur e on t he def ined b enef it sch eme , whil e moving t o a new s che me fo r all colleagues. Upon closure of the scheme in Oct ob er 20 2 1 , aone -of f charge o f £2 . 5m w as mad e to t he inc om e st at eme nt tha t cr yst al lise d fr om th e re basi ng of liab ilit y v aluat ion assumptions from act ive to deferred members . Net asset s Sinc e 3 1 Ja nuar y 20 2 1 , tot al a sse ts h ave incr ea sed by £ 8 9.7 m, w hich w as of f set by an incr ea se in t ot al lia bili tie s of £ 11 7 .5 m, r es ulti ng inan over all de cr eas e in net a sset s of £ 2 7 .8 m. The in cr eas e in t ot al ass et s is pri mari ly due t o an inc re ase in c ash a nd sh or t-te rm dep osi t s as the f inanc ing tr ans act ion c omp let ed in t he f i rs t half o f the ye ar re sul te d in an inc re ase i n Ava ilable Cash 27 of £76 m and an i ncr eas e of right- of-use ass et s of £ 33 . 2m follow ing del iver y of the S pir it of th e Rhi ne ri ver cru ise sh ip. The in cr eas e in t ot al liab ilit ies r ef le ct s a £ 10 9.6 m inc re ase in f inanc ial li abili tie s, w hich was due t o an in cr eas e in gr os s debt f ro m the re ceip t of th e £2 50m n ew bo nd pr oc ee ds of fset by rep aym ent of £ 1 00 m of t he exis ting b on d and the f ull £ 70m of t he out s t and ing te rm lo an, along w ith a £ 3 0. 9m in cr eas e in le ase li abili tie s foll owing th e del iver y of th e Sp irit of t he R hine river c ruis e ship . The re wa s also a n incr ea se in con tr act li abil itie s of £ 3 2. 4m a nd tr ad e and othe r payab les of £ 24 .6 m foll owing t he r est ar t of T ravel oper at ions i n the ye ar , of f set by a £3 9.6 m r edu cti on in ins ur anc e co ntr act liabilities dri ven by favourable claims fr equency. Impac t of COVI D -19 an d going conce rn The im pac t of COV ID -19 over t he pa st t wo ye ars has in cr eas ed th e level of un cer taint y and earni ngs vol atili t y for t he Gr ou p, as it ha s don e for ma ny busi nes ses , an d par t icul arly f or th e Gr oup’s T ravel bu sin ess . Sin ce t he s ta r t of th e pand emi c in the f irst h alf of 2 020, t he G ro up has in cr eas ed th e fr equ ency a nd dep th of it s long- term f inancial forec asting and scenario mod elling t o all ow th e Dir ec to rs t o ta ke app rop riat e ac tio n to e nsur e th e ongoing liquidity and solvency o f the business. Over this period, the Gr oup has undert aken aseri es of t ran sac tio ns t o re st ruc tur e it s ope rat ion s and c apit al s tr uct ur e. Th e Gr oup’s balance sheet has been strengthened to allow itto w ith st an d a fur t her p eri od of un ce r ta int y that m ay be fa ce d in 20 22 an d beyo nd. T he m ost not abl e of th ese t ra nsa cti ons wa s the r aisi ng of£ 13 9 m of net p ro c eeds f r om th e issu anc e of new equ it y sh ar es in S ept emb er 20 20, foll owed by the is sua nc e of a new £ 250 m uns ecur e d f ixed -rat e f i ve-year b on d in Jul y 20 2 1. T he se act ions a llowe d the G ro up t o full y re pay it s seni or se cur ed ba nk deb t fac ilit ies , bo ls ter Ava ilable Cash 27 re ser ves , whi ch wer e £ 1 87m at3 1 Janu ar y 202 2 , inc re ase f inanc ial f lex ibili t y and ex t end t he mat urit y prof ile of G ro up debt . On it s s hip de bt fac ilit ies , th e Gr oup d eferr ed anumb er of c apit al r ep ayme nt s and t her e is a coven ant t est ing ho liday o n the se fa cili tie s unti l 31 J uly 2 02 2 . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 50 The Group successful ly recommenced ope rat ion s in it s T ravel busi nes s during 2 02 1 , wit h UK -o nly c ruis es and h oli days op er ating fr om Ju ly 20 2 1 , and a r etur n to in ter nati ona l crui ses f ro m the e nd of Aug us t 202 1 a nd international tours fr om Septemb er 202 1. TheT ravel bu sine ss ha s con tinu ed t o ope rat e since, despite the increased disrupti on from theem ergen ce of t he O micr on v arian t in Novem ber 202 1 . The G ro up ann ounc ed at t he en d of Ja nuar y 202 2 it s p lans t o r est ruc tur e th e op er atio ns ofit s T ravel busi nes s. T he S aga Ho lidays a nd Tit a n T r avel op er atio ns ar e be ing co mbin ed tom axi mise ef f icie ncy in t our ing , wher e th e produc t offerings are highly co mplementar y, and t o cr eat e a new ho tel s t ay pr op osi tio n to bela unch ed la ter i n 202 2 . Th e river c ruis e pr odu ct is n ow bein g manage d by the C rui se management team, who have a demonstrable tr ack r ec or d of op er ating t he o ce an cru ise product successfully i n a CO VID -safe envir onm ent . T hes e act ions p la ce th e T ravel busi nes s in a st ro ng po sit ion as t ravel rest rictions ease and cust omer demand continues to recover . As in th e pri or yea r , the In sur anc e bus ine ss’ abili t y to t ra de c onti nues t o b e largel y unaf f ect ed by C OVI D -19, wit h re silie nt ear nings in the R et ail Br ok ing bu sine ss an d som e pos iti ve impa ct s on m oto r cla ims fr eq uenc y during t he f irs t hal f of 20 2 1 whe n the U K p opul atio n was inlo ckdo wn. T he I nsur anc e bu sine ss ha s also suc ce ssf ull y impl eme nte d cha nges to p ric ing inline w ith t he r equi re ment of t he r egu lati ons impo se d by the FCA fo llowi ng it s mar ket s tud y into i nsur anc e pr icing , whi ch ca me int o for c e on1 Ja nuar y 20 22 . In th e lat es t rou nd of l ong-term f i nan cial for ec ast ing , the G ro up up dat ed it s m ode lling assu mpti ons t o re f lec t on: • In th e bas e cas e, whi ch r epr es ent s th e Gr oup’s centr al pl an and b es t es tima te out loo k , Cru ise c ont inue s to s ee so me imp act of COV ID -19 in th e f ir st ha lf of 20 2 2/23 , wit hre duc ed lo ad fa ct or s and hig her r etu rn tos er vic e co st s , but t hen l argel y ret urns t o norm al op er atio n th ere af t er . Th e T o ur Op er atio ns bus ines s is t arget ing to b re ak even in 202 2 /23 and t hen r etur n to p re - pandemic contributio n levels fro m 2023/ 24, wit h a lower over hea d cos t ba se fo llowi ng completion of the recently annou nced rest ructuring plans. Insur ance plans include an es tim ate of t he im pac t of th e FCA marke t stu dy o n cus to mer p rici ng, w hich is ex pec t ed to have an a dver se im pac t on pr of it befo re t a x for 20 22 /23 and 2 023/24. • In th e RWC, w hich r ep re sent s t he Gr ou p’ s seve re, but plausible, downside scena rio, Cruise assu mes a l ayup of b oth s hips f or a fu r the r tw o-m onth p eri od dur ing 20 22 /23 due t o fur ther potential tr avel restrictions , and with suppressed load factors for the remainder o f 202 2/23 a nd 20 23/24, cap pe d at 75% and 80 % for ea ch yea r re sp ect ivel y. T our O per ati ons al so see s a muc h slowe r re cover y f ro m 2023/24 onwar ds th an in th e bas e cas e. I nsur anc e is assu med t o be i mpa ct ed by a num ber o f downside ri sks, including a more conservative out loo k for t he imp act o f the FCA m arket s tu dy compared to base case assum ptions. The G ro up has m ade a n init ial as ses sm ent of thep ot enti al imp act t hat th e Rus sia -U kr aine conf lict c ould h ave on it s ou tlo ok , an d pot ent ial downs ide s ar e con side re d to b e limi te d to sho r t-term r ed uct ion s to T ravel bo ok ings an d inflationar y pressure s that are suff iciently cover ed by t he as sumpt ion s wit hin th e bas e case and RWC. The Group has concluded d iscussions with its Crui se le nde rs t o amen d the c ovena nt s on th e tw o ship d ebt fa cili tie s as set o ut in th e t able bel ow. This is t o ensu re we h ave signi f ic ant headro om against all scenarios modelled. Aspa r t of th e mod elling , t he Gr oup c on side re d it s co mpli anc e wit h the m aint ena nce c oven ant s at ta ch ed to i t s ban king fa cili tie s, w hich a re summ aris ed in th e foll owing t ab le at e ach ofther eq uir ed t es ting da te s: Ship debt facilities RCF EB IT DA to d eb t repayment (mi n im u m) EB IT DA to cash interes t (mi n im u m) Ne t deb t to E B IT DA ( l e v e r ag e) (ma x i mu m) EB IT DA to c as h interes t (interes t c o v e r) (mi n im u m) Cruise interco mpany deb t ca p (ma x i mu m) 31 J uly 2 02 2 1.0 x 1 .7x 3 .75x 2 .0x £ 115m 31 Januar y 2023 1.0 x 2.0x 3.75 x 2. 5x £ 115m 31 J uly 2 023 1 .0x 2.0x 3.0 0x 3. 5x £115m 31 J anu ar y 2024 1.0 x 2.0x 3 .00 x 3. 5x £115m 31 J uly 2 024 onwa rds 1.2x 2.0x 3 .00 x 3. 5x £115m Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 51 Dividends Give n the G ro up’ s pri orit y of red ucing n et deb t , the B oar d of D ir ect or s doe s not r ec omm end paym ent of a f i nal di vid end fo r th e 202 1/22 f ina ncia l year, nor would t his cur ren tly b e per miss ible d uring t he pe rio d of th e ship de bt repayment hol iday . Financia l prioritie s for 20 22 /23 The G ro up’ s f in anci al pri ori tie s for th e curr ent f ina ncia l year ar e t o re duc e net d ebt , bu ild on the al re ady p os iti ve loa d fac to r and p er die ms in Crui se, c om plet e th e re st ruc tur e of th e T our Op er atio ns bus ines s , and t o co ntinu e pr ogr es s in execut ion of i t s Insu ran ce s tr at eg y. Given t he continue d uncer t aint y arising from COVI D - 19, the G ro up is not p r ovidin g any earn ings guid anc e for t he 20 2 2/23 f in anc ial yea r but would ex pec t a r eturn t o pr of it in bot h the b ase case and RWC scenarios. James Quin Gr oup C hief F inan cial O f f ice r 22 M ar ch 20 22 Dividends and f inanci al prior ities for 202 2/ 2 3 Gr oup C hief Fin ancial O f f ic er’ s Review continued 28 Refe r to t he A lt e rna ti ve Per f or ma nc e Me as ur es G lo ss ar y on p age 2 0 1 fo r def i ni ti on an d exp la na tio n Und er th e ter ms of th e ship d ebt f acil itie s, div iden ds r emain r es tr ict ed un til th e ship debtprincipal repayments that were deferre d as par t o f the s hip de bt re paym ent ho liday aref ull y rep aid . Und er th e ter ms of th e RC F , d ivi den ds als o rem ain r es tric t ed if leve rage (ex clu ding theC ruis e debt) is ab ove 3.0 x and t he G ro up rem ains s ubje ct t o a minim um liqui dit y re quir eme nt of £ 4 0m , whi ch ca n be m et eith er thr oug h cas h or und rawn a nd c ommi t te d fac ilit ies (such as th e RC F it sel f ). Th e ter ms als o incl ude a r equ ire ment t o r epay t he RC F on 1Mar ch 2 024 if th e re maini ng £ 15 0m of b on d not es th at ar e due t o mat ure i n May 20 24 have not b een r ede eme d pri or t o this d ate . Th e RCF is expe ct ed t o re main u ndr awn in b oth sc en ario s for th e for es eea ble f utu re , and i t can b e can cell ed wi th imm edi ate e f fec t at any p oint , whic h would r em ove all c ovenant s at t ac he d to it . The n ew unse cur ed b ond t hat is d ue t o matu re in Jul y 2026 i nclu des a n event-bas ed f i xed ch arge coven ant r atio, o f 2.0 x EBI TDA , w hich m ust b e sati sf i ed if, and w hen , the G ro up int end s to is sue new deb t . The G ro up has n o pl ans t o issu e any new debt . T he def initi on of t his cove nant is c om par abl e to t he int er es t cover c ovenan t wit hin th e RCF . In bo th th e sc enar ios mo del led , th e Gr oup exp ec t s to b e abl e to o per at e wit hin it s d ebt cove nant s an d to maintain ample A vailable Cash 28 rese rves until at lea st S ept emb er 20 23 , bein g 18 mo nths f ro m the d ate o f signi ng the f inanc ial s t atem ent s , whic h more than accommoda tes the min imum 12 -mon th assessment perio d for goin g concern . The Directors therefore have a reasonable expe ct ati on th at the G ro up wil l con tinu e to t ra de thr oug h the c ont inue d COV ID -19 dis rupt ion an d will have s uf f i cien t liqui dit y fo r at lea st t he nex t 1 2 months, and accordingly ha ve prepared the f inancial st atement s on a g oing concern basis . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 52 Pri ncipal risks and uncer t ainti es (PRUs ) The PRUs shown below are the principal ri sks facing the Company , includ ing those that wou ld threaten it s business model, futur e per formance, solvency or liq uidity. The t ab le als o inc lude s the m itiga ting ac ti ons b eing t aken t o ma nage th ese r isk s. T he ri sk exp osur e ou tlo ok d enot es t he ant icip ate d fut ur e dir ect ion o f eac h risk af ter mi tigat ion , whi ch is inf l uenc ed by k nown k ey ext er nal or i nte rnal f act or s. S aga t ake s a ‘bot t om -up’ and ‘ t op -do wn’ appr oac h tod evelop ing an d revi ewing it s P RUs , whi ch oc cur s at le ast t w ice a ye ar wit h overs ight f ro m the E xe cut ive Lea der ship T eam (EL T) a nd th e Bo ar d. Ea ch PR U has b een al igne d to t he mo st r el evant st rat eg ic pr iori tie s. Risk Mitigation Risk exposure outlook Lin k to gr ow th p la n Macroeconomic uncer tainty Heightened ec onomic uncer t ainty arising fr om th e Rus sian inva sion o f Ukr ain e leading to higher-than -expected inflation, delays i n the s upp ly ch ain, i ncr eas ed ri sk or de cr eas e in dem and fo r Saga’s travel products. Ongoing m oni to ring of t he ris ks w ith ag ilit y t o adap t quic kly t o ch anges in m arket c on diti ons; strong cash position. Worsen ing ( externally driven ) Group-wide COVID -19 pand emic Co ntinu atio n of COV ID -19, or e mergen ce of variants thereof, threatens the f inancial re silie nc e of the G r oup or v iab ilit y of t he T r avel bu sine ss . Co mple tio n of cap it al r es tru ctu ring an d con tinu atio n of re mot e work ing ca pab ilit y t hat is now int egr at ed int o our hy bri d work ing mo del . Imp rov ing Group-wide Cybercrime C ybe r sec urit y bre ach r es ulti ng in sys te m lockdown, ransom demands and/ or compromise of confidential and/ or personal data. Co ntinu ed inves tm ent in in dus tr y-le ading t oo ls an d tech nolo gies to m iti ga te c yber attacks, ind ustry benchmarking andexternal p enetration te st s. Co ntinu ed pr og ram me of c oll eagu e awar ene ss toid enti f y an d pr event cy ber t hr eat s and dec omm issi oning of l egac y syst em s, r edu cing ourfo otp rint of p ot enti al sys te m ta rget s. Worsen ing ( externally driven ) Group-wide Delivery and e xecuti on Key bus ine ss ch ange init iati ves fa il tob e deli vere d ef fe ct ivel y, or at all, du e to o ne, or a co mbin atio n of, thefo llowi ng: • Resource capability or capacity. • Unexpected business as usual risk issues. • New reg ulatio n. • Material defect s in the delivery. Rob ust p ro jec t governan ce c overing h ow signif icant changes are prioritised and delivered, wit h clos e overs ight f ro m the EL T and B oar d wit h 2 nd and 3 rd line as sur anc e c ondu ct ed fo rthe change in iti ative s car ry ing th e gr eat es t ris k . Imp rov ing Group-wide Capabilit y Our s tr at eg y an d purp os e have cr eat ed anew dem and fo r cap abi lit y t o deli ver thef ive-year p lan , whi ch r equir es n ew investment, leader ship commitment and lear ning cul tur e. T her e is a ri sk th at this st ep -ch ange is no t achi eved. Increas ed focus on talent management, recruitment and succession plann ing. Reset lear ning pr og ram me an d emb eddi ng a new rewar d f ram ework t hat dr ives c oll eagu e per formance and aligns to delivering fair customer outcomes . Worsen ing ( externally driven ) Group-wide Saga brand and relevance The S aga br an d and it s p ro duc t s do not app eal s uf f i cien tly t o our t ar get cus to mer gr oup r esu lting i n los s of app eal a nd market share. Followi ng the b ra nd r elau nch in 2 02 1 , we acq uir ed Th e Big W ind ow Co nsul ting L imit ed , anagency t hat s pec iali ses in u nde rst a nding o ur ta rget co nsum er dem ogr ap hic. T his all ows us toprior itise products and se rvices that most app eal t o our c ust om ers , wi th sp ec if ic f ocu s onide ntif icat ion an d re sol utio n of pa in poi nt s throughout the customer journey . Imp rov ing Group-wide Key for link t o st rat eg y Maxim ise our existing busines ses S t ep- ch ange our ab ilit y t o sc ale w hile reduc ing debt Cr eat e ‘ The S upe rbr and’ f or ol der p eop le Thr eat t o bus ine ss mo del Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 53 Risk Mitigation Risk exposure outlook Lin k to gr ow th p la n Regulatory landscape Ris k of cus to mer h arm b eca use of o ur actions /in-action or fail ure to impleme nt regulatory change correctly . Suc ce ss ful d elive ry o f Fin anci al C ondu ct Authority (FCA) changes. Continued focus on ef fe cti ve risk m anagem ent al igne d to o ur valu es and s tr ate g y al ongsi de 1 st line c ont ro l te sti ng wit hin tr adi ng enti tie s. H orizo n sc anning r ep or t s pr odu ce d to id enti f y up co ming r egu lat or y changes and necessary action. St able Group-wide Operational resilience Failur e in cri tic al ser v ice s or op er ati ons and in abili t y to r ec over wi thin d ef in ed par amet er s, m ade m or e co mpl ex by remote working arrangements . Enhancements t o technolog y and infrastructur e, includin g replacement of legacy platform through whic h col leag ues a cc es s our sys t ems . De liver y of an Op er atio nal R esil ienc e pr ogr am me t o meet FCA requirements . Change go vernance ensures system changes are delivered within risk appetit e. St able Group-wide Environ ment al, S ocial an d Governance (E SG) Failur e to ke ep pa ce w ith in cr eas ing regulation aro und carbon emissions, cou ple d wit h indu str y a nd so ciet al pressure causes reputational or f inancialdamage. New cr uise s hips b uilt i n line w ith l ate st reg ulat ion s and c an op er ate t o ne ar-zero su lphur oxide an d nit rogen ox ide exh aus t emis sion s. OurES G st rat eg y will be f ull y develo pe d and inte gr ate d int o our ris k fr amewo rk dur ing 20 22 . St able Group-wide Third- par t y supplier s Reputational impact, business interruption and f inancial losses arising fr om th e fail ure o f key thir d pa r tie s to deliver to required s tandar ds. Third-par t y risk management ensures an appropriate ri sk -ba sed approach for selecting third-party partners, for ov erseeing their per formance and for their oper ational and f inancial r esilienc e. St able Group-wide F raud a nd f inanci al crime Increas ed risk of internal or e x ternal fr aud an d f ina nci al crim e dri ven by remote workin g and macroeconomic conditions. 2 nd and 3 rd line as sur anc e r eviews c ond uct ed wit hno sig nif i cant is sue s ide ntif ied . Ongoing moni to ring of c laims f r aud in p lac e, r einfo rc ed by colleague awa reness communications. Operation of ef fe ct ive int ern al co ntr ols s ubje ct t o reg ula r te st ing an d overs ight . Saga’s Speak U p pr oc es s enhan ce d, w ith r egu lar data monitoring in place. St able Insurance and Personal Fina nce Insurance risk E xpo sur e t o re ser vi ng, p re mium an d large or cat as tr op hic cl aims r isk th ro ugh ou r underwrit er , Acromas Insuranc e Co mpany L imit ed . Th is may le ad t o insuff icient claims reser ves, higher losses than a ntic ipat ed du e to l arge or cat as tr oph ic los s event s or p rem iums being i nsuf f icie nt to c over cl aims a nd other cost s arising. The u se of c oins ura nce a nd r einsu ra nce a cr oss unde rw rit t en bu sine ss . Ensu ring cl aims r es er ves are s et wi th suf f ici ent mar gin t o cover unc er t aint y. Invest men t in adv anc ed ana ly t ic s acr os s pric ing and c laim s. Imp rov ing Insurance Brea ch of Dat a Pro tec tion Ac t 20 18/UK Gener al Dat a Pro tec tion Reg ulatio n Failur e to un der st an d dat a pri vac y reg ulat ion a nd t ake r eas ona ble s te ps t o ensur e p ers onal d at a can b e man aged in line w ith customer e xpectations. Prioriti sation of projects to improv e effective dat a man agemen t , cou ple d wit h simp lif i cat ion of our t ech nol og y es t at e and s tr eng t hen ing of our Data Privacy T eam and capabilit ies. St able Group-wide Pri ncipal risks and uncer t ainti es (PRUs ) continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 54 Viab ilit y St at em ent The D ir ect or s have co nsid er ed th e via bili t y ofthe G r oup over t he f i ve-year p eri od t o Janu ar y 202 7 . Th e COVI D -19 pan demi c and t he war be tw een Ru ssi a and U kr aine c ont inue s to cr eat e unc er t aint y in t he ou tl ook f or many businesses, a nd in pa r ticular , within the trave l sector . The Di rectors and Executive Leadershi p T e am re main f ocu sed o n pr ote ct ing th e Gr oup and have taken actions to streng t hen the Gr oup’s fina nci al po sit ion t o hel p it mit igat e the continue d uncer t aint y. The going conc ern disclosure on pag es 50-52 provides detail on the a cti ons t hat th e Dir ec to rs have t ake n over the p ast ye ar an d the key a ssum ptio ns th at underpin the Group’ s scenario modelling. On th e ass umpt ion t hat th e tr avel indu st ry con tinu es t o re cover du ring 20 22 , t he Directors have a reasonable expectation that the G ro up will b e ab le t o con tinu e in ope rat ion a nd me et it s lia bili ties a s they f all due over t he nex t f ive years . T he Di re ct ors re cog nise t hat un cer t ai nt y inc re ase s over time a nd th er efor e fu tur e ou tc ome s can not be g uar ant eed . Th e Dir ec to rs have determined the f ive-year period to Januar y 202 7 t o be an a ppr op riat e pe rio d over whic h to as ses s th e Gr oup’s viabili t y, as this pe riod: a) is c onsi st ent wi th t he pl anning h orizo n over whic h the D ir ect or s nor mall y co nsid er th e future p erform ance, capit al and solvency requirements of the business; b ) incl ude s the m atur it y of b oth un sec ure d bon ds in 20 24 and 20 26; an d c ) inc lude s full er c onsi der ati on of a r ange of pot ent ial ris ks , in clud ing th e pot ent ial ongoing im pac t of th e COV ID -19 pan demi c. In mak ing thi s st at eme nt , the D ir ect or s have con sid ere d the r es ilie nce o f the G ro up, ta king ac c ount of i t s curr ent p osi tio n, t he prin cipa l risk s fa cing t he bu sine ss in s evere , but plausi ble, scenarios and the effect of an y mitiga ting a ctions. The Directors ha ve con sid ere d eac h of th e Gr oup’s princip al risk s and u nc er t ainti es (P RUs) detai led o n pages 5 3- 54 a nd th e pot ent ial im pac t of the se ris ks o n the b usin ess m od el, f ut ure performance, solvency a nd liquid ity over the per iod . Th e Dir ec to rs have als o t aken in to acc oun t the avail abil it y of t he Gr oup’s debt fac ilit ies , whic h ar e co nsid er ed t o be suf f icien t to m eet th e Gr oup’s needs . The li st of P RUs , der ived f ro m a ro bus t rev iew of risk s , was r eviewe d by risk o wner s, F ina nc e and th e Ris k fun ct ion , to c ons ide r whic h risk s might t hr eat en th e Gr oup’s ongoing viab ilit y. The PR Us have b een c ons ider ed , an d sever e, but plausi ble, outcomes for each have bee niden tif ied, w ith a n est imat e of t he pot ent ial f i nanc ial im pac t of ea ch qua ntif ied . Assessments of the potential f inancial impact were derived from both internal cal culations and examp les o f simil ar inc ide nt s in the publ icdom ain . In as ses sing t he vi abili t y of theG ro up, th e Dir ec to rs have c onsi der ed appropriate man agemen t actions that ma y be t ake n in or der t o man age the s ol vency ofthe G r oup in t he event of s evere , but plausible, down side scenarios. The assessment assumes th at the Group is able to r epay t he £ 1 50 m bon d th at matu re s in May 20 24, bu t th at it woul d nee d to p ar t iall y ref inanc e th e £2 50m b on d whe n it mat ure s in July 2026 . The t hr ee lar gest s ensi ti vit ies in t erm s of f ina ncia l impa ct wer e id enti f ie d as th e follow ing: 1. T he c onti nued i mpa ct of C OVI D -19 on the T ravel busi ness. 2. T he imp ac t of fur ther r egu lati on ac ro ss th e business, incorporating cli mate change consider ations. 3. A f ailur e t o deli ver on t he In sur anc e str at eg y – I nsur an ce ha s co ntinu ed t o per f orm in li ne wi th exp ect at ions a nd continues to demonstrate good progress . Nonetheless, the business contin ues to navigat e a pe rio d of sig nif i cant c hange. In sc ena rios b eyond t hos e co nsi der ed in rel atio n to goi ng co nce rn, s uch a s a nee d to layup b oth o c ean cr uis e ships f or a p erio d longer t han fo ur mo nths d uring 20 2 2/23 , with more se vere load factor suppression, and wi th lo nger del ays to c oun trie s re op ening thei r bor de rs t o for eig n tr avel, th e Gr oup would l ikel y nee d to t ak e fur t her mi tigat ing act ions t o en sur e it s co ntin ued c omp lian ce wit h debt f acil it y agr ee ment s . W hile su ch scenarios are co nsidered r emote, such mitigating action s would likely include fur t her ren egotia tio n wit h the G ro up’ s len der s to rel ax d ebt cove nant s or c on side rat ion o f alternative funding options. As set o ut in t he Au dit C ommi t te e Rep or t o n pages 7 7 -81 , th e Dir ec to rs have r eviewe d and disc uss ed th e rat ion ale an d co ncl usio ns of management’ s viabilit y testing . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 55 Key disclosure st atem ents Non-f inan cial informatio n s t atem ent An overview of our approach to environment al, colleag ue, social, human rights , anti-corruption and anti-briber y matt ers canb e foun d in th e ta ble b elow. D et ails of o ur bus ines s mo del c an be f ound o n pages 1 4-15 , and ou r prin cipa l risk s an d unc er t aint ies ar e on p ages 53 -5 4 . Ou r app ro ac h an d key p ol ici es Outcomes of polici es and impacts of activities More information Environ ment al mat ter s Our Environmental Soc ial and Governance (ESG ) Policy set s ou t our i nte nti on t o minim ise t he im pac t of ou r ope ra tio ns on t he env ir onm ent , c omp ly w ith r el evant environmental legislati on and monitor and, where app lic abl e, r ep or t ou r usa ge of all t y pe s of en erg y . T o ensure that environment al matt ers are given suf fi cie ntfo cus , an d to a llow u s to s et an ES G st ra teg y wit hgr eat s ca le, a mbi tio n and i mpa ct , we s et up an ESGT ask For c e, wh ich r ep or t s int o t he E xec uti ve Leadership Risk Committee. • T o t al Sc op e 1 an d 2 (location-bas ed) 202 1/22 emis sio ns at 8 2, 3 7 4 tC O 2 e com par e d wit h 37,841 tC O 2 e in 2 02 1/22 . Se e pages 3 0 - 34 f or mo re information on environmental mat ter s. Read more about environm ental mat t ers o n our c or po rat e web si te ( ww w. corporate.sa ga.co .uk/ about-us/ environmental-social-and- governance/). Colleagues Our c ol leag ue s ar e co re t o our b us ines s an d the ir well bei ng is of ut mo st im po r t anc e to u s. We h ave a He alt h, S afet y a nd Wellb eing Po licy w hic h set s ou t a cl ear s et of pr inc ipl es an d com mit me nt s whic h app ly t o all c ol leag ue s, c on tr act or s and m emb ers o f the p ub lic . We aim to b e an i nclu si ve emp loyer w ith i ncr e ase d awar ene ss of d iver sit y , equ it y an d inc lus ion ( DE &I) whic hisse t out i n our Equ al O pp or tu nit ies Po licy. • We aim to b e ‘C ha mpi ons ofE xp eri enc e in t he Workplace ’ . • 43 % of ou r co lle agu es arefemale. Co lle agu es ar e on e of our k ey st ak eho lde rs , as se t out o n page s 16 -17 . Our c ult ur e is de scr ibe d on page 14 . Read more about o ur colleagues and as so cia te d po lici es wi thi n the ESG s ect io n of our c or po rat e website ( ww w.corporate.saga. co.uk/about-us / environmental- social-and-governance/). Socia l matt ers Par t of S aga’s purpo se is t o b e a drive r of p osi tive c han ge wit hin ou r co mmun iti es . We see k to u nde rs ta nd an d car ef ully c on sid er th e imp ac t of ever y de cisi on we m ake . We ensu re we h ave an op en di alog ue w ith t he c om muni t y and t hey ar e awar e of o ur st r ateg y, as well as any i mpa ct tot hem . • £206 k charitable donations mad e by Sag a. • 3, 283 hours vol unteered by colleagues. • Our T han et of fi ce w as us ed by the N H S as a C OVI D -19 vaccin ation c entre . Rea d mo re ab ou t our e ngagem ent wit h the c om muni tie s on p age 16 of this r ep or t a nd on o ur c orp or at e website ( ww w.corporate.saga. co.uk/about-us / environmental- social-and-governance/). Resp ect f or human rig hts Saga s upp or t s t he rig ht s of al l pe opl e as se t out i n the Uni vers al D ecl ar ati on of H uma n Rig ht s. O ur L ab ou r St an dar ds Po lic y set s ou t our h uma n righ ts p rin cip les whic h ar e ado pt ed a cr oss t he G ro up al ongs ide o ur com mit me nt s to wo rki ng re sp ons ibl y and w it h int egri t y. Our Modern Slavery St atement also provide s further det ailo n ris k , due d iligen ce , po lici es , tr ain ing and a udi t inth at ar ea . • No in cid ent s of h uman righ ts v io lat ion s or mo der n slave ry w ere i den tif ied in 20 2 1/2 2 . Our L ab ou r St an da rd s Polic y can befo und o n our c orp or at e web sit e ( ww w. corporate.sa ga.co .uk/ media/1507 /labour-standards- policy-final.pdf ) alongside our Modern Slavery St atement (ww w. corpor ate. saga.co.uk / modern- slavery-statem ent/). Anti-bribery and anti-corruption Saga takes a zero-toleran ce approa ch to bribery and cor rup tio n. T her e is a n Ant i-B rib er y an d Co rrup tio n Poli cy in pl ac e whic h lays o ut cl ear g uid an ce fo r the a pp ro pri ate ass ess me nt of any ri sk of b rib er y an d cor rup tio n acr os s allbu sin ess es . Th is is enf or ce d by man dat or y t ra ining foral lco lle agu es . • The re we n o f in es , penaltiesor settlements forc orr upt ion r ep or t ed in2 02 1/22 . • 94% com pl etio n of mandatory training. Rea d mo re ab ou t ant i-br ibe ry a nd cor rup tio n on pa ge 35 . Further information, inclu ding our Ant i-br ibe r y and C orr upt ion Po lic y can b e fou nd on o ur c orp or at e website ( ww w.corporate.saga. co.uk/about-us / environmental- social-and-governance/). Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 56 Sec tion 172(1) s t atement Dut y to p rom ote t he succ ess o f the C ompany The D ir ect or s have had r egar d fo r the m at te rs se t out in S ec tio n 172( 1)( a)–(f ) of th e Co mpan ies Ac t 20 06 (S 17 2(1)) when per f ormin g thei r dut y un der S ec tio n 172 . T he Dir e ct ors c ons ider t hat t hey have ac te d in goo d fait h in th e way that w ould b e mos t like ly t o pr omot e th e suc c ess of t he C omp any for t he b enef it of it s mem be rs as a wh ole , whil e also h aving r egar d t o the S1 72(1) matters r eferred to below. A des cript ion o f how th e Bo ar d engages wi th it s k ey st akeh ol ders c an b e foun d on page s 16 -17 and t he pr incip al de cisi ons mad e by the B oar d dur ing 20 2 1, h ow st ak eho lde rs wer e co nsi der ed an d the l ikel y con seq uenc es o f the se de cisi ons over t he longer -te rm ar e set o ut on p ages 6 3- 6 4 . Furt her inf orma tio n on how S 1 72(1) h as be en ap plie d by the B oa rd c an be f ound i n the table bel ow. S72(1) matter Furt he r in fo rma tio n in co rp or at ed in to t hi s st a te me nt by r ef er en ce Lik ely c ons equ en ces o f any decision in the long term Our st rat eg y Pages 18-2 1 Environmental, S ocial and Governance (ESG) Pages 33- 34 G roup C hief F ina nci al O f f ic er ’s Review Pages36 -52 Principal risk s and uncer t ainties (PRU s ) Pages 53-5 4 Chairman’ s introduction to governance Page59 Nomination Committee Repor t Pages 72 - 73 Audit Committee Repor t Pages 77 -8 1 Risk Committee Repor t Pages 82 -8 4 Annual St atement Pages 85- 87 The in ter es t s of t he Company’ s employe es Chairman’ s Statement Pages 4-5 Gr oup C hief E xecu ti ve Of f ice r’s St at ement Pages 6-9 Purp ose a nd bu sine ss mo del Pages 14-15 Our strate gy Pages 18-21 Environmental, S ocial and Governance Pages25 -28 Chairman’ s introduction to governance Page59 Governance in action Page 61 The n eed t o fo st er t he Company’ s business relationships with su ppliers, customers and others Purp ose a nd bu sine ss mo del Pages 14-15 Environmental, S ocial and Governance Pages23- 35 Governance in action Page 61 Risk Committee Repor t Pages 82 -8 4 Impact of the Compan y’s operations on the community and environment Purp ose a nd bu sine ss mo del Page 15 Environmental, S ocial and Governance (ESG) Pages 29- 34 Board lea dership and Company purpose Page66 Division of responsibilities Pages 67 -6 8 The Company’ s reputation for high s t and ar ds of b us ine ss conduct Gr oup C hief E xecu ti ve Of f ice r’s St at ement Pages 6- 9 Our strate gy Pages 18-21 Environmental, S ocial and Governance Pages23 -3 5 Governance st atement s Page 65 The n eed t o ac t fai rly a s between members of the Company Chairman’ s Statement Page 5 Chairman’ s introduction to governance Page59 Board lea dership and Company purpose Page66 This S tr at egi c Rep or t is p re sent ed t o info rm mem ber s of th e Co mpa ny and he lp the m ass ess h ow the D ir ect or s have per f orme d th eir dut y u nde r Sec ti on 17 2. I thas b ee n app roved by t he B oar d an d sign ed on i t s beh alf by Euan Sutherland Gr oup C hief E xecu ti ve Of f ice r 22 M ar ch 20 22 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 Additional informatio n Financial stat ements Governance Strategic Report 57 Chairman ’ s introduction to go ver nance OUR GO VE R NANCE STR U CTU R E I S W E L L P L A C E D T O R E T U R N THE BUS IN E S S T O G ROW T H “The prolonged uncer t ain t y ar ound the COVID - 1 9 pand emic affected al l of o ur st akeh older s as well aso ur bu si ness. The Boar d called additional meeti ngs to revie w the stra te g y req u i red to besucces sful i n th is challenging p eriod . ” Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 58 Dear shareholder , It was im po r t ant th at , in anot her c hall engi ng year, our go vernance structure supported the Company with its turn ar ound s tr at eg y. It did an d we ar e now wel l-pl ac ed t o ret urn th e bus ine ss t o gr ow th . Changes to Board and Committee composition The re wer e no c hange s to o ur Bo ar d or Co mmi t te e memb er ship du ring th e year an d I am pl eas ed t o co nf irm t hat Eva Eisens chim mel , Juli e Ho pes a nd G are th Ho ski n wer e re app oint ed fo r a fur t her t hr ee-ye ar te rm . In ad diti on t o the value t hey br ing to t he pl c Bo ar d, t hey pl ay an imp or t ant r ol e in act ing as o ur Peop le Ch ampi on , chai ring S aga Ser v ice s Limi te d (SS L), our Ret ail B ro king b usin ess , an d Acr om as Insurance C ompany Limited (AI CL), Saga ’ s Underwrit ing business, respective ly . The C omp any c ompl ies w ith t he U K Co rpo rat e G overnan ce Co de 20 18 (the C ode ) re quir em ent th at at lea st ha lf of it s Board memb ers, excluding the Chairman, are Independent Non-Executive Di rectors . The N omi nati on C ommi t te e con tinu ed t o ass ess t he sk ills wenee ded . As t he C omp any has a s tr at eg y fo r gr ow t h andbu sine ss di vers if ic ati on, i t is c onsi deri ng the s kill s that will b ere quir ed . It is r ec og nise d that t his wil l re quir e an entrepr eneurial mindset and marketing, data and digital experience. Board focus and decisions The p ro longe d unc er t aint y a rou nd th e COV ID -19 pan dem ic af fe ct ed all of o ur st a keho lde rs as wel l as our b usin ess . T he Boa rd c alle d add iti onal m eet ings t o rev iew th e st rat eg y re quir ed t o be s ucc es sf ul in th is cha lleng ing pe rio d. The B oar d c onsi der ed h ow and w hen C ruis e ope rat ion s cou ld re sume s afel y in line w ith c hang ing governm ent ad vi ce in t he UK an d lo cal r eq uir ement s i n the c ount ries w hic h would b e visi te d. I t was imp or t an t that t he G rou p maint ai ned f l exibil it y around it s finan cing arrangements. The Boar d consider ed and ap pr oved th e ex te nsio n of the d efer ral o f paym ent s of it s ship d ebt and a ppr oved t he s te ps whi ch r esul te d in iss uing a new f i ve-year £ 25 0m f i xed-r at e unse cur ed b ond . Th e Bo ar d consider ed and approved the triennial valuation of the Gr oup’s pensio n sch eme an d, fo llow ing a co nsul t atio n wit h col leag ues , t oo k the d ecis ion t o r epla ce t he exis ti ng sch eme s wit h a new def ined c ontr ibut ion p ens ion s che me th at is ope rat ed a s a Mas t er T rust . It c on side re d this t o be af air andequ itable result for colleagues. Co nsid era ble t ime wa s spe nt dis cuss ing a s tr ateg y that would a llow us t o op timis e our b usin ess es as we e merge fr omth e COV ID -19 pan dem ic. Risk management The A udit a nd Ri sk Co mmi t te es co ntin ued t o pl ay an impo r t ant r ole i n overse eing o ur f ina nci al re po r ting pr oc ess es an d int ernal c ont ro ls an d in mon it oring t he Grou p ’ s o ve rall ri sk st rategy . People and remuneration Eva Eisenschimmel, our Remuneratio n Commit tee Chair , at te nde d our Peo ple C omm it t ee me eting s t wic e during t he year ino rd er to ex plai n the B oar d’s appr oa ch t o rewa rd an d to h ear wh at our c oll eag ues t houg ht of S aga’ s cult ure , working environment, communicatio n, learning and develo pme nt init iati ves , rewa rd s and b enef it s. T his all owed Eva to re lat e the se vi ews to t he B oar d. O ur Au dit C omm it t ee Chai r , Gar eth H os kin , also a ct ed as o ur Sp eak U p Ch ampi on and en sur ed th at co lle ague s felt t hat t hey co uld s pea k fr eel y and se e th at , wher e ne ed ed, a ct ion was t a ken as a r esu lt . Our R emun erat ion Po licy wa s las t app rove d at our A nnua l Gen er al Me eting ( AGM) in J une 20 20. At t he 20 2 1 AGM , were cei ved a vot e of 7 7. 72 % in favour o f our A nnua l Rep or t on Rem uner ati on . However, we were ke en to u nde rst a nd ther eas ons f or th ose w ho ha d vote d agains t it an d Eva contacted those shareholders and listened to their re ason sfor do ing so. Fo llowin g this val uab le exchange , theRemune ration Committ ee concluded that the main poin ts r ais ed ha d be en co nsi der ed wh en th e re levant bon usde cisi ons wer e ap pr oved and , wh enever p os sibl e, hadb een t ak en int o ac cou nt in set t ing t arget s . Environ ment al, S ocial an d Governance (E SG) Our ES G T ask Forc e co ntinu ed t o develo p our ES G st rat eg y . Repr es ent ati ves of t he T ask Forc e at t end ed Bo ar d mee tings on thr ee o c casi ons t o dis cus s it . M any of th eir ini tiat ives h ave st ar t ed , as de scr ibe d on page s 23- 3 5, a nd I am pl eas ed wit hthe p rog re ss we ar e ma king . Th e Boa rd r ec ogn ises t hat we nee d to d o even mor e an d we ar e curr ent ly engage d in develo ping a new p lan t hat wi ll be m or e ambi tio us and h ave greater impact. Boar d and Co mmit tee evaluatio n Duri ng the ye ar , we co mpl ete d an evalu atio n of th e Boa rd andit s C omm it t ees . It c on clu ded t hat th e Bo ar d had effectively tracked progress agai nst the tur naround strategy and th at th ere w as an imp rove d foc us on un der st an ding ou r cus to mer s. L ook ing fo rwa rd , th e Boa rd’s foc us will b e on moni to ring de liver y of t he g row th str at eg y i n all bu sine sse s. Shareholder engagement and our 202 2 AGM The B oar d was k een t o t ake s te ps t o engage fur ther wi th ou r ret ail s har eh old ers . Du ring th e year a nd for t he f i rs t time , we arr anged a li ve pr ese nt atio n, v ia th e Inves to r Mee t Co mpany platform, which allo wed all sha reholders to question our Gr oup C hief E xecu ti ve Of f ice r and G ro up Chi ef Fin anc ial Of f ice r . This p rov ide d valua ble in sigh ts w hich we re r ep or t ed to t he Bo ar d. O ur pl an is t o do th e sam e this ye ar . Our AGM w ill b e held o n 5 Jul y 202 2 at o ur of f ices at Enbr oo k Park , Folk est on e. Full det ail s will b e set o ut in th e Not ice o f AGM in due c our se . I am lo oking f or war d to inv iti ng shar eh old ers t o at t end in p er son fo r the f irst t ime s inc e 20 19 and , as ever , welc om e com ment s f ro m our s har eho lde rs at any time. Sir R oger D e Haa n Non-E xecutive Chairman 22 M ar ch 20 22 Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 59 Read more: Environmental , Social and Governance (ESG) , pages 23-35 Principal risks and uncer tainties (PRUs) , pages 53-54 Key di sc los ur e st at em ent s , pa ges 5 6- 5 7 Board leadership a nd Company pu rpose, page 66 Division of responsibilities, pages 67 -68 Composition, succession and e valuation, pa ge 69 Nomination Committee Report, pages 72 - 73 Aud it , ri sk an d int er nal c on tr ol , page s 74- 76 Audit Committee Report , pag es 77-81 Risk Committee Report , pages 82-84 Directors’ Remunerati on Report , pages 85-106 The C od e can b e fou nd on t he Fin anci alRep or t ing C ounc il’s websit e ( w w w.frc .org.uk). For full d et ails of h ow Saga h as c ompl ied wit h the C od e, pl eas e view o ur co mpli anc e schedule on ou r corporate website ( ww w. corpora te.saga. co.uk/ about -us / governance / ). Full deta ils of t he governa nce f r amewor k supp or t ing del iver y of ou r st rat eg y can also b e foun d on ou r cor po rat e web sit e toget her wi th t he do cum ent s lis te d bel ow ( ww w. corpora te.saga. co.uk/ about -us / governance / ). • Ar ticles of Association of the Company • Mat t ers r es er ved fo r the B oa rd • Commit tee T erms of Referenc e • Div isio n of du ties o f the C hair man , Gr oup C EO and re sp onsi bilit ies o f theSenior Independent Director • Remuner ation Policy • Votes cas t at ou r AGM Application of UK Corporat e Gov ernance Code Saga s eek s to c om ply w ith t he pr inci ple s set ou t in th e UK Co rpo rat e G overnan ce C od e (the Code ) to pro mot e goo d corporate gover nance which supports the long- term sus ta inab le su cc ess o f the G ro up. The f ive the mes c over ed by th e Co de, t hei r supp or t ing pr ovisi ons , and h ow Saga h as ap plie d the P rinc iple s and Prov isio ns of t he C ode t hr ough out t he yea r , are s et out o n the fo llow ing pages i n the C or por at e Gove rnan ce S t ate ment , with additional i nformation contained in the Strategic Report . The B oar d b elieves t hat , du ring 20 2 1/22 , the C om pany was i n full c omp lian ce w ith a ll app lica ble P rinc iple s and Pr ov isio ns of the C od e, save t hat : • Provision 3: W hile t he N on- E xecu tive C hair man di d meet wit h som e shar eh old ers du ring th e year, as he is a signi f ic ant sh ar ehol der i n the b usin ess , it wa s det ermi ned that i t woul d be mo re a ppr op riat e for t he G ro up Chi ef E xecut ive O f f icer (CEO) and Gr oup C hief F inan cial O f fi ce r (CFO) to engage wit h majo r sha reh old ers . • Prov isio n 9 (taki ng the c irc ums ta nc es set o ut in Pr ovi sion 10 int o ac co unt): Due to hi s sha reh old ing in th e Co mpa ny, the N on- E xecu tive C hair man wa s not c onsi der ed independent on appointment . T aking into acc ount Roger De H aan’s histo ry w ith t he S aga br and an d bus ine ss , his proposed time comm itment, the terms of the Re lationshi p Ag re emen t bet we en him an d the C om pany, and his l et ter of app oint ment , t he ap poi ntme nt was de eme d to b e in th e bes t int er es t s of the C om pany. Shar eh old ers s upp or t ed this w hen th ey vote d in favou r of his ap poi ntme nt at th e 202 1 Annual General M eeting (AGM) . Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 60 Gov ernance in action The B oar d c onsi der ed p rog re ss agai nst our s tr ateg y at eac h Bo ard m eet ing . The se me eting s play a n impo r t ant r ole i n allowin g for robust debate and challenge on elements of per formance and sp ecif ic pr ojec t s. T heC hairm an , Gr oup C EO andG ro up Co mpany S ec ret ar y ag re e standing ag enda items th roughout the year, such as th e Gr oup C EO Repo r t , Group CFO Repor t and management acco unts , trad ing updates for bu siness unit s , hea lth a nd saf et y mat t ers a nd f inancial per formance . Specif ic agenda it ems ar e th en add ed t o fa cilit at e discussion around strat egic priorities. People and culture st epch ange 1 Dat a , dig it al an d bra nd transformation 2 The B oar d he ar d dir ect ly f ro m the Chief Pe opl e O f f ic er an d dis cuss ed how: • the C omp any ’s purpo se and value s (pr ec isio n pac e, em pat hy, curiosity and collaboration ) could be em bed ded a nd how c ult ure should be meas ured; • results of colleague survey s should be int erp re te d; for examp le, h ow the positive colleague feedback reconciled with the high colleague turn over of c ont ac t cent re r ol es . The Board concluded that scores would b e even hig her if a ll iss ues wer e re sol ved; • col leag ue in sight wa s help ful in ident if ying fo cus ar ea s suc h as the nee d to fo cus o n dive rsi t y, equit y and in clus ion an d po sit ivel y enc our age ret ent ion a nd recruitment of older colleagues; and • the Peo pl e Com mit t ee an d Co lleag ue For ums pl ayed an impo r t ant r ole i n pr ovidi ng valua ble in sight i nto t he v iews of the wider w orkfor ce. The B oar d al so app rove d an awar d of Free S har es t o elig ible c oll eag ues unde r the S har e In cen tive Pl an (SI P). This wa s app roved f or th e sevent h year ru nning . Impact on st akeholder s: Ensuri ng we deli ver th e be st experiences for our colleagues andcu st om ers an d cr eat ing an inclusive cultur e. Delivery of long- term shar eholder value. Our C hief C ust om er O f f i ce r , Bra nd and In sigh t Dir ec tor, Insight Co nsult a nt and D at a and A nal y ti cs Director discussed the follo wing with the Board: • How t he r evit ali sed b ran d ha d tr ansi tio ned t o se eing th e worl d from our c ustomers’ perspectiv e. • The f indings o f a cus to mer resear ch panel, called ‘ Ex perience d Voices’ and h ow cus to mer fo cu s grou ps p rovi ded ins igh t i nto custom er preferenc es and ensured that t he new b ra nd image a nd t one of voic e was rig ht . • The p lan t o re infor c e the b ra nd through brand immersion sessions for colleagues. The Board asked w hether the pr of il e of the r es ear ch p ane l st ati st ical ly mat ch ed th e pr of il e of our cu st ome rs an d not ed th at th ere were suf f icient participant s to mat ch var ious c oh or t s of customers. Impact on st akeholder s: Bet t er un der st and ing of ou r cus to mer s and im pr oved cus t ome r experience. Improving our shareholders’ di gital j o u r n ey. MAKING P ROGR ES S A GA IN S T O U R S TR A TE G Y How governance link s to our s trat egic p riorities Regulat or s Customers Partn ers and suppliers Colleagues Shareho lders Communities Key stakeholder gr oups Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 61 Gov ernance in action continued Optimi sing our businesses 3 Driving simp licit y and ef f iciency 4 Reducing our debt 5 Our business CEOs , Op er atio ns Directors , Customer Proposition and D ist ribu tio n Dir ec to r of Insu ran ce , St rat eg y Dir ect or a nd CEO of The B ig W indow C on sult ing Limi te d ( the Bi g Window ) att end ed meet ings t o pr ovi de st ra teg ic busi nes s upd ate s, p re sent g r ow th plans and discuss: • the Executive Leadership T eam ’ s consideration of ‘ customer mom ent s’ e. g. ho w a sol o tr aveller ’s journey at S aga com par ed t o co mp etit or s’ , to ident if y how we co uld imp rove; • opportunities to strengthen the relationshi p with ou r customers; • the im pac t of th e Fin anc ial Conduct Auth orit y (FCA) general insurance pricing practices mark et st udy a nd wh at act ion would b e ne ce ssa ry ; • how t o rei nvigor ate t he T our Oper ations business and of fer ahigh-quality, differ entiated product port folio w ith aspiratio nal holiday s tailored specifically for our cu st ome rs; an d • how th e dat a ins ight wo rk of th e Big W indow a llowe d us t o re ally unde rs ta nd wh at our cu st om ers want , so t hat th is co uld b e linke d to p ro duc t and s er vic e of f ering s. Impact on st akeholder s: Creating exceptional experiences for ou r cus to mer s. Co mpli anc e wit h reg ulat or y requir ements . Delivering shareholder value. Providing ex ceptional ser vic e levels and devel op ment of n ew pr odu ct s and servic es. The Board: • considered the most effective ope rat ing mo del f or th e Gr oup todr ive ac co unt abil it y an d an entrepr eneurial mindset in the businesses; • discussed the proposal to restructure our T our Operations busi nes s to d elive r gr ow th a nd cr eat e a lower - cos t , mo re ag ile , customer -focused business; • continued to adopt a cost- conscious appr oach , ensuring that c os t s wer e re duc ed wh er e possible; • fur t her s impli f ie d the G ro up’ s structure, processes and pol icies; and • rev isit ed t he t empl at e use d for Boa rd r ep or t ing to e nsur e key mes sages , de cisi ons r equ ire d, a nd recommended actions were clear . Impact on st akeholder s: Providing clarit y. Mak ing Sag a easi er to d o bus ine ss with. Cr eating lo ng-term value . Co mpli anc e wit h law and r eg ulat ion which protects customers. The B oar d ap pr oved s tep s to ensure ma ximum f inancial f lexibili ty, including : • agr eem ent of a f ur th er pay ment deferral and covenant waiver until 31 M ar ch 20 2 2 in re sp ect o f the tw o ship d ebt fa cili tie s; • the is sua nc e of a new f i ve-year £250 m f ixed-rat e unsecur ed bon d in Ju ly 20 2 1 , with t he pr oc eed s use d to r ep ay £ 10 0m ofexis ting b ond s and t he £ 70m ter m loa n in full; a nd • disposals of prop er ty, generating £ 4 .5 m of net s ale s pr oc ee ds . Impact on st akeholder s: Streng thening and protectin g Saga’s abilit y t o adap t in achallenging en vironm ent. Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 62 Key Board decisions and Section 172(1) considerations during the y ear The fo llow ing exampl es sh ow how B oar d de cis ions we re m ade af ter c ons ider ing th e mat t ers s et out i n Se cti on 17 2(1) of t he Companies Act 2006. Imp ac t of th e COV I D -1 9 pandemic The o ngoing unc er t ain t y aro und t he COV ID -19 p ande mic af f ect e d not jus t our b usin ess b ut all o f our st ake hol der s. T he B oar d pl ayed a vi ta l ro le in ma nagi ng the s itu atio n and c alle d add iti onal m eet ings t o con sid er act ion t hat wa s nec ess ar y t o navigat e th rou gh thi s dif f icult t ime . St akeholder consid erations: • The un ce r t aint y cust omers fac ed an d re sult ing an xiet y c aus ed by c onfu sio n aro und t ravel r ules . The B oar d th oug ht car ef ully ab ou t how t o pr ote ct o ur cus to mer s and c omm unic ate c hanges . T he Boa rd h ear d how c ust om er sup po r t init iat ives wer e p rov ide d in Insu ra nce , for exam ple , by of fe ring f lexib le c over during c hange s of cir cum st an ce or f inanc ial su pp or t in c ases o f har dsh ip and a cc ess to additional services includin g mental well being support . In addition, the Acromas Insurance Co mpany L imit ed ( AI CL) b oa rd au tho ris ed sup po r t for c ust om ers t hr ough p rov iding a cc es s to t he fr aud he lplin e and m aint ainin g pric e cu ts f or lo nger . Saga al so pr ovi ded c omp lime nt ar y co pies o f the Saga M agazin e and gave ac c ess t o a GP h elpl ine fo r our vu lner ab le cus t ome rs . • The re wa s re cog niti on th at colleagues need ed t o be s upp or t ed in ways o f work ing and w ith t heir mental wellbeing. • Imp act o n suppliers was c onsi der ed a s par t of t he R isk C omm it te e’ s rev iew of sup pli er ris k management. • It was im po r t ant to k eep regulato rs informe d and wo rk wi th th em t o demo ns tr ate h ow cus to mer s wou ld be pro tected . • Shareholders’ needs we re c ons ider ed w hen we p lann ed ou r AGM . The s afet y o f this s t akeh old er gr oup was p ar amo unt , so t he Bo ar d dec ide d to h old o ur 202 1 AG M vir t uall y. The Bo ard a lso re cog nise d that t he wo rld wi ll be a di f fe ren t pla ce as we e merge f ro m the C OVI D -19 pand emic , anda pr op os al t o chan ge our Ar ticle s of As so ciat ion t o all ow for hyb rid m eet ings in th e fu tur e waspr es ent ed an d appr oved a t our 20 2 1 AGM as a r esu lt . Resumption ofcruisi ng The B oar d c aref ull y co nsid ere d how C ruis e op era tio ns co uld r esum e saf ely, in line w ith c hang ing governme nt adv ic e in the U K an d ac cor din g to l oca l re quir em ent s in th e cou ntri es whi ch woul d be visi te d. I niti all y, cruising c omm enc ed ar oun d th e UK w ith int er nati onal t ravel f ollo wing in Aug us t 202 1. Car efu l moni to ring of t he imp ac t of the c hang ing si tuat ion o n bo oki ngs, p er di ems an d loa d fa ct ors to ok pl ac e so th at the l ong-term i mpa ct on r evenue c oul d be c ons ide re d. St akeholder consid erations: • The B oar d c onsi der ed t he op tion s ar ound va cc inat ion r equi re ment s fo r our guests and cr ew memb er s. T his was a di f f i cult d eci sion w hich i nvolved c ons ide ring dif fering v iews an d the r es ulti ng rep ut ati ona l impa ct , bu t ult imat ely t he B oar d det erm ine d that t he sa fet y of g ues t s was pa ra mount and th at bo th gu es t s and cr ew sh oul d be f ully va cci nat ed . • Car e was t ake n to e nsur e th at the s t eps t ake n to va cci nat e the c rew d id not im pac t on lo ca l communities’ vaccination programmes . • The B oar d he ar d how c ont ac t cent r e colleagues were un der p re ssur e t o move guests to new itin er arie s and di scus se d the s t eps ne ede d to s upp or t colleague wellbeing . Environment al, Social and Governance (E S G) Our ES G T ask Forc e co ntinu ed t o pr ovid e the m ome ntum n eed ed t o develo p an ESG s tr at eg y w hich supp or t ed d elive ry o f the G ro up’ s over all s tr ateg ic dir ec tio n. St akeholder consid erations: • The Board noted and considered how: – customers were in cr eas ingl y co nce rne d wit h ESG ma t ter s suc h as cli mat e cha nge; – significant work was undert aken with local com munities ; – colleagues wer e kee n for S aga to d o the r ight t hing ; – shareholders e xp ect t hat ES G will b e at th e for efr ont o f our min ds as we wo rk t o deli ver our str ateg y; and – the Fin anci al S t abili t y Bo ar d had c re ate d a T a sk For ce o n Clim ate -R elat ed F inan cia l Dis clo sur es to im pr ove and in cr eas e rep or t ing of cl imat e-r ela te d f ina ncia l infor mati on . It was ag re ed t hat th e ESG s tr ate g y wou ld ne ed t o incl ude f act or s suc h as how t o ma ke use o f emer ging t ech nol ogie s, p ar t icul arly o n the o c ean sh ips an d river ve sse ls , and th e imp act o f colleagues work ing fr om ho me . Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 63 Pension consultation Duri ng the ye ar , the t rien nial va luat ion exer cise w ith t he p ensi on sc hem e T r ust e es to ok p lac e and t he Boa rd c ons ide re d and ap pr oved th is. I n add iti on, t he de cis ion was m ade t o r eview t he Gr ou p pen sion schemes which, fol lowing consultation with colleagues, resulted in the closure of the existin g schemes and th e intr o duc tion o f a new def ined c ont ribu tio n pen sion s che me th at is op er ate d as a M ast er T rust . St akeholder consid erations: • The va luat ion exer cise i s carr ied o ut ever y thr ee ye ars t o co mpl y wit h th e sch eme ru les an d reg ulat or y r equ ire ment s w ith a cti ve involve ment f ro m the p ens ions regulator . The B oar d con clu ded t hat th e over all valu atio n out c ome wa s in line w ith ex pec t atio ns , par t icul arl y give n theim pac t of COV ID -19. • Engagemen t with t he pension scheme T rust ees was foll owed by a colleague consultation. Feedb ack f ro m bot h of th ese s t akeh old er gr ou ps was t hen c are full y co nsid er ed and a re com men dati on was m ade t o th e Bo ar d to m ove the f utu re p ensi on pr ovi sion f or all c oll eag ues toan Av iva M ast er T rust . • The B oar d he ar d how th e rev iew ha d con sid ere d the i mpa ct on v ulnerable colleagues and asked the C hief Peo ple O f f ice r to s ummar ise h ow co lleag ue s had v iewed t he pr op os ed ch anges . Th ey hear d ho w the l evel of engagem ent th ro ugho ut th e co nsul tat ion h ad b een m onit or ed a nd was goo d . Som e dis app oint ment h ad be en voic ed at t he s t ar t of th e co nsul ta tio n but m ost c ol leag ues unde rs to od ho w the wo rld h ad ch anged an d unde rs to od t he ne ed for t he m ove. • The B oar d de cid ed th at the d eci sion t o cl ose t he exis ti ng sch eme wa s nec es sar y in t he int er es ts ofequi t y for a ll co llea gue s, w hile n oting t hat it m ay have a det rime nta l ef fe ct fo r a mino rit y of colleagues. Bank covenants, ship d ebt h oli day and bond refinancing It was im po r t ant th at the G ro up mai nta ined f lexibili t y ar oun d it s f in ancin g arr angeme nt s. T he B oar d con sid ere d and a ppr oved t he ex te nsio n of th e defe rra l of pay ment s in r ela tio n to t he shi p debt fac ilit ies so t hat n o capi t al r epaym ent s wou ld be m ad e fr om Ap ril 20 2 1 t o the e nd of M ar ch 20 22 . In Ju ne 20 2 1, t he B oar d ap pr oved th e st eps w hich r es ult ed in an i ssu anc e of a new f i ve-yea r £2 50 m f ixed -rat e uns ecu re d bo nd in Ju ly 20 2 1 , wit h the p ro ce eds u sed t o r epay £ 1 0 0m of t he exis tin g bon d and r epay t he £ 70m t erm lo an in f ull. Boa rd m emb ers r ec ogn ised t hat t his was a c hall enging d eci sion a s it r equi re d judgem ent ar oun d the pos sib le r est a r t dat e for T ravel op er atio ns . Give n the un ce r t ainti es cau sed by t he C OVI D-19 pand emi c, th is was dif f icul t to p re dic t . The B oa rd c onc lud ed th at it was i mpo r t ant t o have suf f icie nt hea dro om s houl d the p eri od of T ravel sus pe nsio n co ntinu e. St akeholder consid erations: • It was n ote d tha t the p ro pos ed b ond a rr angemen ts w ould p rov ide f l exibi lit y an d would m ean t hat ref inanc ing woul d not b e nec es sar y unt il 20 24; however , the im pac t to t he G ro up, over th e te rm ofthe b on d fac ilit y, nee ded c ar eful c ons ide rat ion . • In co ncl usio n, i t was agr ee d tha t the p ro pos ed c ovenan t pac kage wa s re ason abl e, did n ot ad d oner ou s co ndit ion s, wo uld no t af fe ct del iver y of t he C omp any’s st rat eg y a nd , ta king al l stakeholders’ views int o ac cou nt , woul d mat eria lly b enef it Saga . • The p osi tive i mpa ct of t he tr ans ac tion w as not ed as f oll ows: – The move away fr om c ovenan ts t hat h ad t o be t es te d ever y six m onth s would b e a sig nif i cant impr ovem ent . – The te rms all owed fo r ref inanc ing of sh ip debt i f cru ising wa s delaye d, p rot ec ting S aga’ s f in anci al pos iti on and t her efo re m inimis ing th e impa ct on cus tomers and s uppliers . • The d ownsi de of t he arr angem ent was n ot ed as b eing b ound by f ixed t erms fo r f ive ye ars a nd th e cos t t o put t he arr angem ent in p lac e bu t the B oar d c onc lude d th at the t ra nsa cti on pr ovi ded m or e ben ef it t han n ot . • Thr oug hou t the n egotiat ion s, t he Bo ar d re cog nis ed th at any new de bt po sit ion wo uld ne ed t o include consideration of regulatory requirements and communication. Gov ernance in action continued Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 64 Key st atem ent s Compliance Statement The B oar d is c omm it t ed t o high s t anda rd s of co rpo rat e govern anc e and m anages S aga’ s op er atio ns in ac cor da nc e wit h the U K C orp or ate G overn anc e Co de 20 1 8 (the Code ) . A full ver sio n of th e Co de can b e foun d on th e Fin anc ial Re po r ting C oun cil’s (FRC) websi te (w w w.fr c.o rg.u k). The C omp any appl ied t he Pri ncip les a nd co mpl ied wi th th e re levant Pr ov isio ns of th e Co de th ro ugho ut th e year ( wit ht wo except ion s ) as set o ut an d expl ained o n page 6 0. Viabilit y Statement The V ia bilit y St at ement c an b e foun d in the S t rat egi c Rep or t o n page 55 . Going concern The goi ng co nce rn bas is of pr ep ar atio n can b e foun d in N ote 2 .1 of th e f ina nci al st at eme nt s on pages1 26 -127. Fair , bal anc ed and understandable In ac co rd anc e wit h the C o de, t he Bo ar d has e st ab lish ed arr angem ent s t o evaluat e wh eth er the inform ati on pr es ent ed in th e An nual R epo r t and A cc ount s is f air , bal anc ed an d und ers t and abl e. Havi ng ta ken ad vic e fr om t he Au dit C omm it t ee, t he B oar d co nsid ers t hat t he An nual R epo r t and Acc oun ts , t ake n as a who le, i s fair, balanc ed an d und ers t and able a nd pr ovi de th e infor mati on necessary for shareholders to assess the Company’ s position and performance, business model ands tr ate g y. Assessment ofris k Thr oug h the r isk ma nageme nt pr oc es s det ail ed on p ages 7 4-75, the B oar d ca n co nf irm t hat it h as carr ied o ut a r obus t as ses sme nt of th e emer ging an d pri ncip al ris ks f acin g the C omp any, includ ing th ose whic h would t hr eat en our b usin es s mod el, f ut ure p er fo rma nce , sol venc y or liq uidit y and re put at ion . Statement ofr evi ew The r isk ma nageme nt pr oc es s det ail ed on p ages 7 4-75 was in plac e for t he yea r und er rev iew and upto t he da te of a ppr oval of t his r epo r t . The B oar d r ec ognis es t he imp or t an ce of a ppr op riat e sys t ems of int er nal c ontr ol a nd ris k man agement . The G ro up op er ate s a thr ee li nes of d efen ce ri sk man ageme nt fr amewo rk overs een a ndmo nit or ed by the R isk C omm it t ee (see pages 8 2-84) and Audi t Co mmit t ee (see page s 7 7 -8 1). Work co ndu ct ed by 2 nd and 3 rd lines, whilst i dentif ying some areas for improvemen t, provided reasonable assurance that the systems of risk management and internal control were bro adly ef fective. Section 172(1) T he S ect ion 1 72(1 ) st at eme nt can b e foun d in th e St ra teg ic Re por t o n page 5 7 . Gov ernance s t atement s Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 65 The Board is responsible for set ting Sag a ’ s strateg y, provi ding o veral l direction for management, and set t ing Saga ’ s purpos e, values and s t andar ds . B oard memb ers pl ay a ke y role in promo tin g our cu lture an d ensuring that ac tions t aken are for th e benef it of all s t akehold ers. Our Board The B oar d r eviewe d the d oc ument w hich s et s out m at t ers whic h are r es er ved fo r the B oa rd o n 20 Se pte mbe r 202 1 a nd to ok th e opp or t unit y t o s tr eng t hen t he me ss aging ar ou nd the n eed t o ens ur e str at eg y i s align ed wi th th e Gr oup’s cult ur e and th e re fer enc es t o our S pe ak Up p ro ce ss wh er e col leag ues c an r aise a ny mat t ers of c on cer n. T he govern anc e str uc tur e als o set s our d elegat ed a uth ori t y limit s c lea rly. Reserved matters include: • the s tr at egic d ire cti on of t he Gr ou p, incl uding o bje cti ves , budge ts and forecasts; • any dec isio n whic h may have a mat er ial imp ac t on th e Gr oup in clud ing , but n ot limi te d to, f inanc ial , ope rat ion al, str ateg ic or re put ation al; • any cha nge to, c omm enc eme nt or c ess ati on of, any of Saga ’ s activities ; • approval of Saga ’s material reg ulator y , f inancial and operational policies; • changes relating to Saga ’s capit al, corpo rate, management or control structu res; • material capit al or operating expenditure out side pr e- det ermin ed t ole ra nce s or b eyond t he del egat ed authorities; • majo r cap it al pr oje ct s (i nclu ding p os t-invest ment rev iewswhic h wer e not c ons ider ed i n det ail by t he Aud it orRi sk Co mmi t te es or w her e the B oa rd d ecid es a f ull rev ie w is req uire d) ; • pr ojec t s or inves tm ent s tha t have a f ina ncia l co st gr eat erth an th e amou nt set o ut in th e re levant d elegat ed authority limits; • any co ntr act w hich i s mat eria l st rat egi cal ly, or by rea son ofsize, n ot in th e or dina r y cou rse of b usi nes s, o r out si de agreed budg etary limits; and • joint ventures and material arrangements with custo mers or suppliers . The B oar d c onsi der s the b ala nce o f inte re st s b et ween stakeholders including shareholders, customers , colleagues and th e co mmuni tie s in whi ch Sag a ope rat es . S ee page s 16 -17 for de tai ls of th e Bo ar d’s role in s t akeh old er engagem ent , whic h supp or t s D ir ect or s’ dutie s und er Se ct ion 1 72(1) of t he Companies Act 2006. All D ire ct or s, m emb ers of t he E xec uti ve Lea der ship T eam (EL T ) and persons discharg ing managerial responsibilities re cei ve tr aining o n an ongoing b asi s. Shareholder engagement The Board activ ely monitors t he view s of ou r shareholders andsee ks their feedback on the Compan y’s performance agains t st rat eg y . Full det ails of h ow we engage wi th ou r shar eh old ers c an be f ound i n the S tr at egi c Rep or t onpage s16 -17 . In addi tio n, t he Bo ar d hea rs fr om o ur cor po rat ebr oke rs , who at t en d mee tings t o pr ovi de fee dbac kdir ec tly an d an Inves t or Re lati ons r ep or t is ta ble dateac h Bo ar d meet ing . We are mi ndf ul th at we have a sig nif ic ant nu mbe r of re ta il shar eh old ers , a num ber of w hic h are a lso cu st om ers an d weta ke st ep s to e ngage wit h this g ro up by sen ding t hem asumm ar y of our r es ult s . A live pr es ent ati on was h eld in Sept em ber 2 02 1 v ia th e Inves to r Mee t Co mpany p lat fo rm whic h allowe d all sh ar eho lder s to a sk ou r Gr oup C EO and Gr oup C FO any que sti ons t hey ha d. Duri ng the ye ar , a rev iew of our s har e r egis tr ati on se rv ic es to ok pl ac e and th e de cisio n was ma de t o move t o Equini ti Gr oup wh o be cam e our r egi str ar w ith ef fect f ro m 3 1 Janu ar y 202 2 . We to ok th e opp or t unit y t o as k tho se sh ar eho lder s who currently receive paper copies of shareholder communica tion if th ey would li ke to r ec ei ve suc h com munic ati on ele ct ro nica lly. This h as a numb er of a dvant age s, in clu ding inc re asing t he spe ed of c omm unic atio n, mi nimis ing our im pac t on th e environment and reducing print and distribution cos ts . AGM The AGM w ill b e held o n 5 Jul y 202 2 at 1 1 .00 am at Enb ro ok Park , S andgat e, Fol kes to ne, K ent CT2 0 3S E . Fulldet ails an d an expl anat ion of b usin ess t o b e con sid ere d at th e meet ing will b e pr ovid ed in t he No tic e of AGM . Ac opywil l be avail able on Sag a’ s websi te in d ue co urs e (ww w.co rp or ate .s aga .co .uk). Board leadership and Company pu rpose Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 66 Board C ommitt ees Nomination Committee Responsible for reviewing Board composition and diversity , proposing new Board appointment s and monitoring the Board’s succession needs. Se e page s 72- 73 Audit Committ ee Responsible for monitoring the integrity of th e f in anc ial s t at em ent s , re view ing the Group’ s framework of internal contr ols and maintaining the ex ternal auditor relationshi p. Se e page s 7 7-81 Risk Committee Responsible for monitoring the Group’ s risk management framework and ability to i den tif y and m ana ge new an d emerging risks and deal with any material breaches o f risk l imits. Se e page s 82-8 4 Remuneratio n Committ ee Responsible for Remuneration P olicy , per formance-linked pay schemes and share-base d incentive plans. Se e page s 85 -10 6 Division of responsibil ities Our governance fr amework Duri ng the ye ar , it was im po r t ant th at our govern anc e fr amewo rk co ntin ued t o sup po r t the o ngoing ch alle nges cau sed b y the unc er t aint y of t he C OVI D-19 p and emic an d th e incr ea sed r eg ulat ion in t he bu sine sse s in whi ch we op er at e. In or der t o en sur e that we r em aine d re sp onsi ve to t he ch angi ng sit uati on an d to c op e wit h the in cr eas e in th e fr equ ency o f Boa rd m eet ings , we ass ess ed h ow we co uld ens ur e our govern anc e was st r aight fo rw ard a nd sup po r te d our p urpo se . As a r esul t , we intr o duc ed sub - com mit t ee s to ou r E xecut ive L ead ers hip Ris k Co mmit tee – a D at a Gover nanc e C ommi t te e and Cyb er Securit y Forum. Our Environmental Commit t ee was also rebranded as an Environmental , Social and Governance (ESG) T a sk For ce . Our G ro up C EO is the ESG r ep re sent at ive on t he B oar d and ES G st ra teg y is also d iscu sse d at Bo ar d meeting s. Executive Leadership T eam (EL T ) Com mitte e (rep or t s t o the B o ar d via t he G r oup C EO and G r oup C FO) • Develop and recommend strategy tot he B oar d , an d the n execu t e it . • Set the Group’ s business principles, and dev elop and implement v alues, behaviours and stand ards. • Ensur e cu st om er s ar e tr ea te d fai rly, in lin e wi th th e S aga br an d val ues . • Revie w and monitor brand and custom er key performance indicators , trading and marketing per formance. • Revi ew f in anc ial f or ec as t s and performance of the Group. • Disc us s and a gr ee m ajo r di vis ion al issues and Group-wide resource allocation deci sions. • Review material projects and capit al expenditure pr oposals befor e consideration by the Board. • Revi ew and d isc us s ta le nt management and succession pla nni ng (p rio r to c on sid er at ion by the Nomination Committee) . • Revi ew and m oni t or cu lt ure , diversit y, equit y and inclusion and coll eague engagem ent metr ics . Board Executive Leadership Risk Committee Executive Leadership T eam Committee Board Committees Executive Leadership Risk Committ ee (rep or t s t o the R is k Co mmi t t ee v ia th e Ch ief R isk a nd C om pli anc e O f f i ce r) • Consider the Group’s approa ch to risk management. • Man age ris k an d co ndu ct , r evi ew Gr o up Ri sk an d Int er na l Aud it an d co mp lia nc e plans, and report potential or actual breaches of regulation or policy to the Board. • Link p rin ci pal r isk s an d unc er t a int ies t o s tr at eg y. • Over se e C yb er S ec uri t y Foru m, D at a G over nan ce C om mit t e e and E SG T ask Fo rc e. Cybe r Security Forum • Drive cyber security impr ovements, protect infor mation assets whilst limi ti ng Sag a’s e xp os ur e to c yb er ri sk . • Mee t ind ust r y be st p r act ic es , ag re e po lic y and e mb ed a p osi ti ve cy ber securit y culture . Data Governance Committee • Provide c lear guidance on how Saga use s dat a a nd ove rsi ght o f co nti nue d vali dit y a nd p urp os e of da ta s t or ed on sy st em s. • Supp o r t ini tia tiv es t o imp ro ve dat aqu ali t y. ESG T ask Force • Devel op an d mo nit or a n ES G st rat eg y and identif y priority ar eas. • Mon it or th e im pac t of ag r eed t a rget s . Disclosure Committee • Responsible for determining the treatment of material informati on and iden tif ying inside i nformation f or the purpose of maintaining the Co mpany’s project (insider) lists. Board • Approval of strategic d irection and ensuring its success ful implementatio n. • Overall leadership and management of the G r oup , inc lud ing s et ti ng th e Group’ s v alues and standar ds. • App ro val of t he G ro up’s Spe ak U p Policy and discussing an annual repor t presented by the Non-Executive Dir ec t or no min at ed a s Sp eak U p Champion. • Enco ur agi ng inn ovat io n to m eet t he needs of our stakeholders, includin g colleagues, customers and shareholders. • Ensur ing c omp li anc e wi th s t atu to r y and regulatory oblig ations. • Maintaining sound sys tems of internal contro ls and risk manag ement . • Assessing potential i mpact of decisions. Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 67 Independent Non-E xecutive Direct ors and Boardcomposition We cont inue t o c ompl y wit h th e Co de r ec omme ndat ion thatat l eas t hal f of our B oar d , excludin g the C hair man , ar e Non -E xec uti ve Dir ec to rs wh om th e Bo ar d con sid ers t o be independent . The Boar d considers Eva Eisenschimmel, Juli eHop es , G are th Ho ski n and O rna N iC hion na to b e inde pen dent N on- E xecu ti ve Dir ec to rs , fr ee fr om a ny busi nes s or oth er r elat ion ships t hat c oul d mat eria lly inter fere with the exercise of their independent judgement orobjective challeng e of manag ement. We rec ogn ised t hat o ur No n-E xec uti ve Ch airma n was not consider ed independent on appointment and this was car efu lly c onsi der ed at t hat t ime. T aking in to ac c ount RogerD e Haa n’ s hist or y wi th th e Saga b ra nd an d busi nes s, his pr op ose d tim e co mmit ment , a nd th e te rms of t he Relationship Agr eement and his letter of appointment , theDi rectors support ed the a ppointment, conclud ing thati twas in th e be st int er es t s of th e Co mpa ny. This was supp or t ed bys har eho ld ers , who vo te d to ap poi nt Rogeratou r 202 1AGM . Duri ng the ye ar , the B oa rd h eld si x sch edu led m eeti ngs and seven ad h oc m eeti ngs , for whi ch in div idua l at te ndan ce is s et out b elow. Th e addi tio nal m eet ings wer e ne ce ssa ry d ue t o the challenging external co nditions and it was not alwa ys pos sib le t o have all Di re ct ors i n at ten dan ce . All D ir ect or s also at t en ded t hr ee st ra teg y ses sion s. S uf f icient t ime i s pr ovid ed, p eri odi call y, for the N on- E xecu tive C hair man t o meet p riva tel y wit h the S eni or In dep end ent Di re ct or an d the Ind epe nden t Non -E xec uti ve Dir ec to rs t o disc uss a ny mat t ers arisi ng. For in form atio n on wh at the B oa rd di d during t he year, see pages 6 1 -6 4 . Division of responsibil ities continued Mem ber s of th e EL T , sen ior c oll eagu es an d ex ter nal a dvi ser s are a lso inv it ed t o at ten d Bo ar d meet ings , t o pr ese nt it ems of bus ines s and p rov ide i nsigh t into k ey st rat egi c issu es . The G ro up Co mpa ny Sec re ta ry a t ten ds ea ch me eting , assi st s th e Ch airma n of th e Boa rd a nd Co mmi t te e Chai rs inpla nning fo r eac h mee ting an d ensu re s that B oar d an d Co mmit t ee m emb ers r ec eive i nform atio n and p ape rs in atimely manner . Composition, succession and e valuation, pa ge 69 Bo ar d of Di re ct or s , page s 70-71 Board responsibil ities – allocation of time Strategy, including data, digital and brand transformation c.30% People and culture c.15% Optimising our businesses c.30% Driving simplicity and eciency c.10% Reducing our debt c.5% Oversight of risk management c.5% Environmental, Social and Governance c.5% Member Role Maximum possible meeting s Attendance Roger D e Haa n Non-Executive Cha irman (leadersh ip, Board g overna nce, sets the ag enda and facilitat es open Boar d discussions, per forman ce and sharehol der engag ement) 13 13 Euan Sutherland Gr ou p Chief E xe cut ive O f f i cer (Gr oup p er fo rman ce a nd devel ops s tr at eg y fo r Board appr oval) 13 13 Jam es Qu in G ro up Ch ief Fi nanc ial O f f icer (Gr oup f inanc ial p er for man ce, i nclu ding cr e atio n of the b udget an d f ive -year p lans f or r eco mme ndat ion t o th e Bo ard ) 13 12 Independent Non-Executive Directors Role Maximum possible meeting s Attendance Orna NiChionna ( Senior Independent D i r e c t o r) Participate i n, assess, challe nge and monitor Exec utive Dir ec to rs’ deli ver y of th e str at eg y (with in risk a nd governance structures) , finan cial controls and integrit y of f inancial st atement s, and Board diversit y. E valuate and app rais e th e per f orma nc e of the N on -E xec uti ve Cha irman , Executive Directors and seni or manag ement. 13 13 Eva Eisenschimmel (People Champion) 13 12 Julie Hop es 13 13 Gar et h Hos kin (Sp eak U p Ch ampi on) 13 13 Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 68 Composition , succ ession and eval uation The memb ers of t he Boar d The Board has co nsidered the indep endence of charac ter , integrit y, dif ferenc es of approac h and experience of all the Dir ec to rs and c on side rs it s over all s ize and c omp os iti on to be appropriate. The skills and experience of our individual members, par ticularl y in the areas of insurance, f inancial ser vices , custo mer servic e, brand management, s trateg y and risk manag ement, ar e fun dame nt al to t he p ursu it of ou r obje ct ives . In a ddit ion , th e extern al experience of members of the Board in a variety of sec to rs an d mark et s is invalu able t o S aga. Our Non-Executiv e Directors provide o bjective, r igorous and constru ctive challenge to management and met regularly without the Executiv e Directors. The Senior Independe nt Dir ec to r act s as a s oun ding bo ar d for t he No n- E xecut ive Chairman and led an appraisal of his performan ce. Annual re -el ection All D ire ct or s are r eq uir ed t o st an d for an nual r e- ele cti on at the C omp any ’s A GM . T he B oar d’s view is tha t eac h of th e Dir ec to rs st a nding fo r re -el ec tio n sho uld b e re- app oint ed . We believe t hat th ey have the s kill s re quir ed fo r th e Boa rd todi sch arge it s r esp ons ibil itie s, a s out line d in eac h of th eir biog rap hie s set ou t on page s 70-71 . The d et ails of t he sp ec if ic reasons why each Director’s contribution continues to be impo r t ant t o the C om pany ’s long-term su st ain abl e suc ce ss will b e inc lude d in our N oti ce of AGM . Diversit y , equit y and inclusion (D E&I) The G ro up has a D E& I Polic y, and, duri ng the ye ar , foru ms wer e held o n to pic s re lati ng to D E& I whic h pr ovid ed valu abl e insig ht ar ound h ow co lle ague s fel t rel ating t o mat t er s suc h asage, et hnici t y and gen der. The Bo ard r ec ogn ise s that i t isimp or t ant t o co nsid er , not ju st t he sk ills r equ ire d for t he Boa rd , bu t also t he ne ed t o have an in clus ive ap pr oac h for allcollea gues. Environmental, So cial and Governance (ESG) , pages 23-35 Nomination Committee Report, pages 72 - 73 Gend er on the B oard a nd in senior m anagement The B oar d r ec ognis es t he ne ed t o develo p a diver se pi pel ine in suc ce ssi on pl anning . Th e Co mpany c urr entl y has t hr ee wom en on it s Bo ar d ( 43 %) and seven in to ta l acr os s the c omb ine d Bo ard a nd Seni or M anagem ent (44% ). We met the t arget se t out in t he Hampton-Alexander review as more than 33% of Boar d members identif ied as female. We are also committ ed to appointing at least one B oar d me mbe r fr om an et hnic m inor it y ba ck gr oun d. (n) M al e % (n) Female % To t a l Board 4 57% 3 4 3% 7 Senior management 1 5 56 % 4 4 4% 9 Evaluation of th e Boar d, C ommit tee s and Dir ect ors The B oar d ef f ect iven ess a nd devel opm ent al r eview wa s co nduc t ed int ern ally t his yea r . This fo cus ed on m at te rs of s tr at egic impo r t anc e and a re as high light ed f or devel opm ent in t he 20 20/21 evaluat ion . We als o use d the eval uati on t o see k views o n the ef fect iven ess o f the B oar d C ommi t te es an d the p er fo rman ce o f the N on- E xecu tive C hair man . The Senior Independent Director and the other Non-Executive Directors also appraised the Non-Executive Chair man’ s per f orma nc e and th e No n-E xe cut ive Di re ct ors h ad r egul ar me eting s wit h the N on- E xecu ti ve Chai rman at w hich t hei r per formance was discussed . Act ion t a ken a s a re sult o f th e 20 20/ 2 1 evalua tio n The f indi ngs f ro m la st ye ar’s eval uat io n wer e he lpf ul in ide nti f y ing ar ea s for d evel op men t . As a r es ult , w e: • dedi cat e d tim e to e nsu rin g we pr ovi de exc ept io nal experiences for our customers; • focu se d on en sur ing t hat f oun dat io ns wer e in p la ce f or th e Gr oup t o b egi n to d eli ver s us ta ina bl e gr ow t h; and • revi ewe d our r isk m ana geme nt pr o ce dur es t o c hec k th es e were effective a nd embedded suf ficiently. Pro ce ss f or th e 20 21/22 B oa rd an d Co mmi tt ee eval uat ion • Nominati on Committee members di scussed how best toc on duc t th e eval uat ion o f th e Bo ar d in t erm s ofco mp os iti on . • A set of q ues ti on s was dr af ted b y the G r oup C om pa ny Se cr et ar y an d agr e ed wi th t he C hai rma n wit h in put f r om the Senior Independent Director . • Directo rs and Board/Committ ee members and atten dees completed the questionna ire on an anonymous basis. • Report produced and discussed with the Chair man and Commit t ee Chairs . • Findin gs discussed at Board mee ting. • Action pl an prepared. Ar eas o f fo cus f or 20 2 1/22 Qu es tio ns fo r th is yea r’s rev iew we re f oc us ed on t he f oll owi ng : • How e f fe ct ive we a re a t foc us ing on s tr at eg y and m oni to ring the k ey as pe ct s of C om pan y op er ati ons . • How we ll we mo ni to r pe r for man ce a gain st o ur st r at egi c goal s. • How we ll we un der s ta nd w hat o ur cu st om er s nee d an d the ir percepti on o f Sag a. • Whet he r we dis cu ss t he ri ght t hing s, a t th e rig ht ti me, a nd in su f f ic ien t det ai l. • How we ll th e Bo ar d co ll abo r ate s , work s w ith p r eci sio n pa ce , is cur io us an d sh ows em pat hy, in line w it h Sag a’s values . • How we ll th e Bo ar d mo nit or s ris k an d ens ur es th e Co mp any is no t to o ris k aver se . Conclusions and de velopment plan for 2022/23 The r ev iew c on clu de d tha t the B o ar d had e f fe ct ive ly tr a cke d pr ogr e ss aga ins t th e tur nar o und s tr at eg y and th at th er e wa s an imp r oved f oc us on u nde rs t and ing o ur cu st om er s. The dev elopment plan for 2022/23 i ncludes how: • we will m oni t or de liv er y of th e gr ow th st ra te g y in a ll bu sin es ses ; • the Board will continue to activ ely adopt a nd demonstrate the Company’ s value s; and • dat a wi ll b e use d to p r ovi de va lua ble i nsi ght i nto o ur cus t ome rs a nd dev elo p new p ro du ct s an d se rv ic es t hat t rul y dif ferentiate Saga. 1 Se nio r ma nag eme nt , f or t his p urp os e , is th e E xec ut iv e Le ad ers hi p T eam o r th e f ir st l aye r of m ana gem ent b el ow B oa rd l eve l, i nc lud ing t he G r oup C o mp any S ec re t ar y Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 69 Board of Di rectors Composition of the Board Key Audit Committee E xecutive Leadership T eam Committ ee Nomination Committee Remuneration Committee Risk Committee Committ ee Chair Roger De Haa n Non-E xecutive Chairman Appoin ted 5 Octo ber 2 020 Key streng ths and experience • Experienced business lea der an d bo ard d ire ct or with ext ensive experience in travel and financial ser vice s industries. • Sign if ic ant his t or y wit h Saga h aving wor ked h ere for 3 9 year s, i nclu ding over 20 year s as Ch airm an and Chief Executiv e. • Instrument al in transforming Saga f ro m a spe cia list t ou r ope rat or t o on e that o f fer ed it s own cr uise s and ex pand ed the b usin ess t o c over publishing, insur anc e and f inancial serv ices, cr eating the S aga br and . • Knig hte d in th e 20 14 New Y ear Hon ours L is t for ser vi ce s to e duc atio n and to c hari t y in Kent a nd overs eas . Other roles Dir ect or o f Folkes to ne Harb our c omp anie s, C re ative Folkes to ne and Frien ds of Folkestone Academy; T rus tee of Roger D e Haa n Cha rit abl e T ru st ; and T rust ee an d governor of T he Ki ng’s Schoo l, Canterbur y. Euan Sutherland Gr oup Ch ief E xecu tive Of f ic er Appoin ted 6 Januar y 20 20 Key streng ths and experience • Signif icant experience in leading ma jor consumer- facing businesses th rough per iod s of cha nge to de liver a mor e ef f icient organisatio n. • Leadership, senior operation al experience and marketing specialist . • Corpo rate strate gy cr eati on , br anding , l arge work fo rc e dir ec tio n and motivati on. • Imple menting s trat eg y foc use d on cus t ome r insig ht , digi t al inn ovatio n and wholesale expansion. • Prev iou s seni or ro le s incl ude: C EO of Supe rd ry plc , th e glo bal dig it al b ran d, and Th e Co -o p Gr oup; Gr oup C OO & C EO UK at Kingf isher plc; a nd bac kg ro und in g lob al fast-moving con sumer good s (FM CG) bra nds incl uding M ars a nd C oc a- Cola. Other roles Non-Executive Director and memb er of t he Aud it and Nomination Committees of Brit v ic pl c (appoint ed February 201 6). James Quin Gr oup Ch ief Fi nanc ial O f f i cer Appoin ted 1 Januar y 20 1 9 Key streng ths and experience • Fellow of t he In sti tut e of Cha r te re d Acc oun ta nt s in Engla nd and Wal es . • Seasoned insu rance executi ve wit h over 29 years o f seni or le ade rshi p experience. • Ex perience in delivering corp orate strate gy, inv estor communications and internal/ e x ternal analysis and repor ting. • Extensiv e st rateg ic, inv estor and operational f inance experience within the insuran ce indus try. • Prev iou s seni or ro le s incl ude: U K CFO, Gl ob al Li fe CFO an d Hea d of Inves t or Rela tion s at Zuric h Insurance Gr oup; Partner at P wC a nd Ma nagi ng Dir ec to r atCit igr oup G lob al Markets . Non-Executive Directors Executive Directors Non-Executive Chairman 4 2 1 Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 70 Orna NiChionna Senior Independ ent Non- Executive Director Appoin ted 31 Mar ch 2 01 7 (Senior Independent Dir ect or) and 29 May 20 14 (Non-Executive Director ) Key streng ths and experience • Subst antial experience as adv iso r to r et aile rs on str at eg y a nd op er atio ns . • Sign if ic ant exp erie nc e in plc governance and leadership. • Previous roles include : Senior Independ ent Dir ec to r of Royal M ail p lc, HM V pl c, N or th ern Foo ds plc an d Bup a; Non - E xecut ive Di re ct or of B ank of Ir elan d U K Hol dings p lc and B rist ol & We st pl c; Chai r of Found ers Intelligence Limited; Deput y Chai r of th e Nat iona l T r us t; T r ust ee o f Sir J ohn S oan e’ s Mus eum; and f orm er Par tn er at M cK insey & C o m p a n y. Other roles Non-Executive Director and Chai r of the R emune rat ion Commit te e at Burberry Gr oup pl c ( app oint ed Janu ar y 20 18); and T ruste e of the I nst itu te o f Fis cal St udie s ( app oint ed J uly 2020) . Ev a Eisenschimmel Independent No n-E xecutive Dir ect or a nd Peop le Champion Appoin ted 1 Januar y 20 1 9 Key streng ths and experience • Over 3 0 yea rs of experience as a brand and marketing professional . • Ex t ensive experience in custom er relations and all asp ect s of h uman resources and people str ateg y . • Previous roles include : Non-Executive Director ( and a m emb er of th e Audi t , Nomination, Remuneration and R isk C ommi t te es) of Vir gin M oney p lc; M anag ing Dir ec to r of Ma rketi ng, Br ands a nd Cu ltur e at Lloyd s Ban king G ro up plc; Chief C us to mer O f f icer a t Regu s plc; C hief Pe opl e and Br and O f f icer at ED F Energ y; an d seni or pos iti ons at A llie d Do mec q and B riti sh Ai rway s. Other roles Gr oup Ch ief Ris k O f f ic er ( app oint ed M ay 202 1) at Lowell ( pr eviou sly C hief of St af f appointed Februar y 20 1 6 ). Julie Hop es Independent No n-E xecutive Dir ect or, Chair of Sag a Ser vi ce s Limi te d and S aga Personal Finance Lim ited Appoin ted 1 Octo ber 2 01 8 Key streng ths and experience • Ass oci ate w ith t he Cha r te re d Ins tit ut e of Bankers. • Wealt h of insu ran ce exper ien ce c oupl ed wi th over 20 year s in a var iet y of ro les , sp eci alisi ng in gene ral insurance and predominantly in personal lines. • Highly cu stomer-focused, wit h a br ead th of f unc tio nal , memb er ship an d af f i nit y exper ien ce an d a tr ack re cor d of dr iv ing gr ow th . • Previous roles include : Chai r of Polic e Mu tu al and its Remuneration Committ ee; Non-Executive Dir ec to r and C hair of t he Ris k Com mit t ee of C o - ope rat ive In sur anc e; a variet y o f ro les at R SA an d T e sc o Bank ; an d CEO of Th e Co nser vat ion Volunt eer s, a UK com munit y volunteering charity. Other roles Dep ut y Ch air , Seni or Independent No n-E xecutive Dir ect or a nd Rem uner atio n Com mit t ee C hair of Wes t Br omwic h Buil ding So cie t y ( app oint ed A pril 20 1 6); and Non-Executive Director ( app oint ed Aug us t 202 1) a nd Chai r of the R isk C omm it te e ( appointed De cember 202 1) of MS A mlin U nde rw riti ng Limit ed. Gareth Hoskin Independent No n-E xecutive Director , Chair of Acromas Insuranc e Company Limited and S pea k Up Ch ampi on Appoin ted 11 Mar ch 20 1 9 Key streng ths and experience • Over 2 0 year s’ experi enc e in insu ran ce , ina vari et y of roles. • Cha r te re d Acc oun ta nt wit h recent and relevant f inancial experience and compe tence i n accou ntin g (Ins ti tut e of C har t er ed Acc oun ta nt s in Engl and an d Wales ). • Previous roles include : main Boa rd D ir ect or a nd CEO International , and financ e, ret ail m arke ting an d HR ro les in L egal & G ene ral; acc oun ta nt at P wC ; and T rustee, Non-E xecutive Dir ec to r and C hair of t he Audi t and R isk C omm it t ee at Dia bet es U K . Other roles Audi t Chair a nd S enior Independent Director at Lee ds Bui lding S oci et y ( appointed November 20 15). Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 71 Nomination Committee Repor t The Committee’ s responsibilities • Review t he s tru ctu re , size an d com po sit ion (inc lud ingthe n eed f or a pr og re ssi ve revi ew ofmem ber ship) of the B oar d. • Co nsid er how t o devel op a dive rse p ipe line in succes sion planning and talent development of Executive Directors a nd senior ex ecutives. • Eval uate the indep endence, experienc e, diversity andkn owle dge of th e Bo ard . • Ide ntif y and no mina te c andi dat es t o f ill B oar d andCommittee vacancies. • Review B oa rd p er for man ce evalu ati on r esul t s inre lati on t o Bo ard c om pos iti on . The C omm it t ee’s T erms of Referenc e were r evi ewed during t he yea r ( app rove d by the B oa rd o n 20Se pte mbe r 202 1 ) and ar e availa ble o n our c orp or at e website (ww w.corporat e.saga.c o.uk/ about-us/ governance ) . What we did during th e year Tim e spe nt on m at ter s Committee composition and attendance Members (major ity are independent Non- Executive Directors ) Member since Max. possible meeting s Attendance Orna NiChionna ( Chair ) 29 M ay 14 4 4 Roger D e Haa n 5 Oct 20 4 4 Eva Eisenschimmel 4 A pr 1 9 4 3 Julie Hop es 10 Sep 20 4 4 Gareth Hoskin 1 0 Sep 2 0 4 4 Commit tee evaluation An evalu atio n of th e Co mmit t ee’s eff ect iven ess t o ok pl ace during t he yea r , as par t o f the B oar d ef f ect iven ess r evi ew (for det ai ls se e page 6 9). The r eview i ndic at ed th at the C om mit t ee ha d righ tly foc use d on mat t er s con ce rning di vers it y, equit y a nd incl usio n during t he ye ar and h ad ma de sig nif i cant p ro gr ess in the se ar ea s. G oing fo r war d, it wa s agr ee d that t he Co mmit t ee s houl d enc our age gr eat er et hnic d iver sit y atbot h Co mmit t ee a nd Bo ar d level . Orna NiChionna Chair , Nomination Committee Dear shareholder , This ye ar co ntinu ed t o be c hall engi ng in light o f the o ngoing impa ct of t he COV ID -19 p ande mic . The C om mit t ee’s primar y foc us was t o ensu re t hat th e Bo ar d and it s C om mit t ees h ave the righ t balance of skills, exper ience and div ersity needed tod eliver t he s tr ate g y dur ing thi s time . TheC omm it t ee c onti nued t o fo cus o n the s uc ces sio n plan ning an d ta lent d evelop ment o f our execu tive a nd seni orle ader ship t ea ms whi ch has i nvolved w orki ng clo sel y with the Remune ration Committ ee. As we lo ok fo rw ard t o th e ski lls ne ede d on ou r fut ur e Bo ard , our prio rit y over t he n ext t hr ee yea rs wil l be t o add re ss th ecurr ent lac k of ethn ic dive rsi t y on our B oa rd w hile m aint aining o ur dep th and breadth of experience i n the functional and sectoral areas of mos t imp or t an ce t o th e Gr oup. Board composition The re wer e no c hange s to B oar d c omp osi tio n during t he year. Nevert hel ess , th e Co mmit t ee c ont inue d to a sse ss th e skil ls, d iver sit y an d cap aci t y re quir ed a t bot h the B oar d an d indi vidu al C ommi t te e levels . A s rep or t ed i n las t year ’s Co mmit t ee r ep or t , t he app oint men t of Roger D e Ha an br ought s igni f ic ant exp erie nce o f the t ravel in dus tr y an d addr es se d the gap i n this a re a on our B oar d . The C omm it t ee wor ked t o ide ntif y curr ent o r fut ur e skil ls gaps an d to c onf irm Co mmit t ee m emb ers hip ba sed o n the experience and skills of each Director a gainst each Co mmit t ee’s remit . We al so co nsid er ed th e UK C or po rat e Gover nanc e C ode 2 01 8 (the Code ) , gui danc e fr om t he Fin anci al Rep or t ing C ounc il (FR C) and bes t pr ac tic e. T owa rd s the ye ar end , th e Co mmit t ee s t ar t ed t o dis cuss what s kills w ill b e re quir ed t o sup po r t the s uc ces sf ul executi on of t he Gr ou p’ s evolvi ng st rat eg y. In th is pha se, theB oar d wou ld be nef i t fr om me mbe rs wh o brin g deep entrepr eneurial expertis e and experience of digital content management and distribution in consumer-facing businesses . Board composition c.30% Succession planning and talent management c.30% Diversity, equity and inclusion c.30% Board evaluation c.10% Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 72 The C omm it t ee’s succe ssi on pl anning ove r the c omin g year will take this think ing into acco unt. In las t yea r’s repo r t , we c onf ir med t hat Euan S ut herl and h ad assu med t he r esp ons ibili tie s of Int eri m CEO of Ins ura nc e until a suitable repla cement was appointed. The s ear ch fo r a suc ce sso r (le d by th e Saga S er vic es L imi te d (SSL ) and Ac ro mas I nsur anc e C omp any Lim it ed (A IC L) nomination committees ) resulted in the a ppointment of St eve King sho t t who jo ined S aga on 8 N ovemb er 20 2 1 . Asthi s was a key r ole w ith in the G r oup, th e Co mmi t te e was con sult ed t hr ough out t he pr o ce ss and k ept f ully up dat ed onth e pr ogr ess o f the s ear ch a nd sub seq uent ap po intm ent . Independence and election ofDirectors Af t er th e year e nd, b ut p rior t o pub lic atio n of thi s Ann ual Re por t and Ac c ount s , the C om mit t ee c onsi der ed t he pr of i les o f the Directors, each Director’s independence, contribution and time com mit ment n ec ess ar y to p er fo rm th eir dut ies a nd re com men ded t o th e Bo ard t hat al l sho uld b e put fo r war d for elec tio n at th e 202 2 A nnual G en er al Me eting ( AGM). In ad dit ion , the C omm it t ee un der t oo k a det ail ed r eview of t he pr op os al to re- app oint J ulie H op es , EvaEisens chim mel an d Ga ret h Ho skin as No n-E xe cut ive Di re ct ors w hen t hey wer e pr op ose d for re-appointm ent aft er serving their initial three-year terms . Indi vid uals d id not p ar ti cip ate in t he dis cus sio n whe n thei r own re-appointm ent was being considered. The C od e re quir es t hat at le as t half o f the B oar d , excluding the Chairman, are co nsidered t o be independent Non- E xecut ive Di re ct ors . A s of 3 1 Janu ar y 20 22 , fou r out of s even (57%) Board members were independent No n-E xecutive Directors, with other members bei ng the Non -E xecutiv e Chai rman a nd t wo E xecu tive D ir ect or s . Succession planning and talentde velopment Duri ng the ye ar , the C om mit t ee r ec eive d an up dat e fr om th e Gr oup C hief E xecu ti ve Of f ice r (CEO ) and t he Ch ief Peop le Of f ic er on how talent management was appr oached , including new pr oc es ses a nd fr am ework s tha t had b een p ut in p lac e toen sur e suc ce ss ful d elive ry o f the s tr at eg y. This r equi re d inte nse fo cu s on sk ills an d cult ur al cha nge in an org anisa tio n that i s considerably more streamlined tha n previously . In addition, the Committee considered an updated approach to eval uat e per f orma nc e, t ale nt and su cc es sio n and how adiver se an d high- qu alit y p ipe line wo uld b e cr eat ed . The Co mmit t ee is c om mit t ed t o overs ee an d see k assu ran ce o n how ma nageme nt is devel oping i t s fut ur e lea der s and t heir commitment s to driving great er female repre sentation at more senior levels. I at te nde d ( wit h Jul ie Ho pe s and Eva Eise nsc himm el as th e other female Board memb ers ) a Women in Leadership event, the m ain pur pos e of whi ch was t o br ing to gether c ol leag ues work ing in par tner ship (as ment ors a nd me nte es) with th e 30 % Club (fo r mo re d eta ils of t his init iat ive se e page 28), and fema le se nior execu ti ves to p rov ide a f orum f or net wo rking , ment ori ng and su pp or t . Diversit y , equit y and inclusion (D E&I) Bot h the B oar d an d Co mmit t ee c ont inue d to f ocu s on D E&I acr os s the G ro up. S aga bel ieves di versi t y is wi der t han gen der and eth nicity and strongly support s full cognitive diversity , which encompasse s all elements of cultural dif ferenc es. Committ ee members considered a de tailed repor t which inform ed t he st r ateg y to ac hieve a di vers e and eq uit ab le envir onm ent an d cr eat e a cult ur e whic h was mo re i nclu sive . We hear d how c oll eag ues h ad be en up skil led w ith t rain ing on unc ons ciou s bias , wi th a fo cus o n pr act ica l st eps w ith in the re crui tme nt pr oc es s to c re ate a m or e incl usi ve envir onm ent and ho w key event sp eake rs b eing invi te d to p re sent t o col leag ues h ad le d to m or e me aning f ul dis cus sio ns ar oun d how co lle agu es co uld fe el a gr ea ter s ens e of be long ing . The C omm it t ee was p lea sed t o r ec eive an up dat e r egar ding t he foc us on ‘Age Allys hip’ and how S aga ha d be co me th e f irs t ma jor UK f irm to of fer a wee k’s paid le ave for new g ra ndp are nt s. The Financial Conduct Authority (F CA) consultation on a chang e to t he Li st ing Rule s whi ch woul d re quir e dat a t o be p ubli she d on Board and E xecutive Commit tee diversit y was also consider ed. Simultaneously , the SSL remuneration and nom ination committ ees review ed the FC A , Prudential Regula tion Authority and th e Ban k of Engl and j oint dis cus sio n pap er on a cc eler at ing DE& I in th e reg ula te d sec to r . The C omp any ha s an Equal O pp or t unit ies Po licy in p lac e, w hich incl ude s pr act ica l st eps t o pr om ote a w orki ng envir onm ent in whic h all co lle agu es ar e tr eat ed e quall y. This po licy ap pli es t o the G ro up, inc ludi ng the B oar d of D ir ect or s, a nd is lin ked t o Co mpany s tr at eg y an d co mmuni cat ed t o all c olle agu es . All colleagues must repor t any breaches, whether actual or per c eived , t o thei r line m anager o r to t he Peo ple T eam. Whil e the p ol icy do es no t curr ent ly set s pe cif ic ta rget s, t he Co mmit t ee c onc lud ed th at th e st eps b eing t ake n to o bt ain an d meas ur e dat a and t he r esu lting i nsig ht will a ssis t in devel opi ng mean ing f ul t arget s . Dive rsi t y is co nsid er ed as p ar t of t he appointmen t process, with reference to diversity of perspective, includ ing g ender , social and e thnic backgrounds; the need for gender balance in sen ior manag ement; and the nee d to d evelop a di vers e pip elin e in suc c ess ion pl anni ng. The B oar d cu rre ntl y has a 4 3% gen der b alan ce of w omen and4 4% in the f irst l ayer of ma nageme nt bel ow Bo ar d level . Det ail s of gend er bal anc e of th ose i n the s enio r mana gement and th eir di re ct r epo r t s can b e fou nd on p ages 2 7 and 6 9. Board evaluation Committee members disc ussed the proposal for the Board evaluat ion an d ide ntif ied ar eas o f foc us . The se inc lud ed whet her t her e wer e suf f icie nt levels o f rep or t ing t o full y underst and the cust omer experience and monitor cus tomer sati sf act ion; B oar d dy nami cs as t he G rou p emer ged fr om theCOVID - 19 pandemic; and risk management. Commit t ee memb er s also c on clud ed th at it was i mpo r t ant t o asc er t ain whet her t he Bo ar d was se t ting t he rig ht cult ur al to ne , in line wit h the G ro up’ s value s . All D ire ct or s and t he Gr oup C om pany S ecr et ar y wer e as ked t o com plet e a qu es tion nair e ab out t he dy nam ics o f the B oar d an d how well B oa rd m eeti ngs sup po r te d disc uss ion of t he s tr ateg y and it s d elive ry. The eva luat ion r ep or t pr ep are d by th e Gr oup Co mpany S ec ret ar y was d isc uss ed and t his c onf i rmed t hat theB oar d dy nam ics we re s tr ong a nd ha d led t o high -qu alit y disc uss ion an d app ro pria te l evels of ch alle nge. It wa s re cog nise d that i t was imp or t ant t hat t he B oar d co ntinu e to a ct ively a dop t and demonstr ate the Company ’s values. Orna NiChionna Chair , Nomination Committee Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 73 Audit, risk and internal control Boar d asse ssment o f risk man agement andinte rnalcont rol Our B oar d ha s ulti mat e re sp onsi bilit y for the G r oup’ s ris k management and internal control, and for the Company ’ s riskc ultu re . Our B oa rd is a lso r esp on sibl e for r eview ing th e ef fectiveness of risk management and control systems , ensuring that: • ther e is a n ongoing sy st emat ic pr o ces s for i dent if y ing , evaluating and managing the emerging and principal risks fac ed by t he C omp any; • this s yst em was i n pla ce fo r the ye ar und er r eview an d up to t he dat e of ap pr oval of t his An nual R epo r t and A cc ount s; • the s yst em is r eg ularl y r eviewed by o ur Bo ar d; and • the s yst em ac c or ds wit h the F ina nci al Rep or t ing C ounc il (FRC) guidance on risk manag ement , internal control and related financial and bus iness reporting. Duri ng 202 1 , ri sk ma nageme nt act iv it y c onti nued t o fo cus onpr ot ect ing our f inanc ial an d op er atio nal r esi lien ce an d con tinui ng to s upp or t th e deli ver y of fa ir out c ome s to cus to mer s. O ur ris k fr amewo rk was f ur th er r ef in ed t o supp or t t his wor k and t o pr ovi de th e foun dati on for d eli vering our s tr ateg y. Improve ment s in r isk cul tur e, i nter nal c ont ro l ef fectiveness , risk go vernance and incident management wer e all ma de duri ng the ye ar sup po r te d by new r ole s cr eat ed wi thin t he bu sine ss t o impr ove th e qua lit y of ri sk inci dent r oot c aus e anal ysis a nd r eme diat ion in r es pon se t o operatio nal risk ev ents . Our s ubsi diar y b oar ds an d E xecut ive L ead ers hip T eam (EL T) had a cc ess t o mo re t imel y and c om pr ehen sive ri sk r epo r ting thr oug hou t the ye ar , fac ilit at ed , in par t, t hro ugh a n ew risk syst em l aunc hed i n the s ec ond qu ar t er of 20 2 1 . This h as enc our aged ris ks a nd in cide nt s to b e cap tur ed p ro mptl y and allow ed associated mitiga ting action s to be more e f fectively tr acke d to a ddr es s bot h imme diat e is sue s arisi ng and r oot caus es , wit h pri orit y towar ds dr ivi ng the ri ght ou tc om es forcu st ome rs . Risk s tr ateg y and plan The G ro up’ s risk s tr at eg y a nd pl an is alig ne d wit h the Co mpany ’s overar chi ng str at eg y a nd is c ons ider ed a nd approved annually. Risk framewor k processes Risk gov ernance – The main c on side rat ion w ithi n risk governance is the Boar d management of risk and subsequent dele gatio n to ri sk c ommi t te es an d othe r governan ce fo rums . This en sur es th at ris k is man aged ef f ect ivel y and t hat th er e is approp riate oversight through repor ting and acco untabilit y def in ed wi thin e ach c om mit t ee’s T erms of R efer enc e and thr oug h the ap pli cat ion of t he S enior M an agers an d Cer tif ic ati on Reg ime . Add itio nall y, the sui te of S aga ris k pol icie s, in clu ding , but n ot limi te d to , con duc t risk , i ncid ent management and internal control, def ine our risk management framework and high-lev el expectatio ns of the1 st and 2 nd line in r es pe ct of ri sk man ageme nt act iv it y. Incident management – The 1 st line b usin ess ar e as ar e re spo nsib le fo r rai sing any ri sk inc iden ts i dent if i ed in a ti mel y manner , conducting a ppropriate root cau se analysi s to pr event re curr en ce , and r eso lv ing inc ident s p ro mpt ly. The2 nd line over see s this a ct ivi t y to e nsur e fa ir cus to mer out co mes , an d that t he p ro ce ss is ma naged in l ine wi th p olic y. Risk and control registers – Each operating company and Group function is responsible f or identifying and managin g its risk s and a sso cia te d key co ntr ols , whi ch ar e cap tur ed o n risk and c ontr ol r eg ist er s and s cor ed u sing a ri sk sc ori ng matr ix that r at es ris k agains t bo th like liho od an d sever it y. Key controls are subject to desi gn and operational effectiveness te sti ng by the b usin ess a nd vali dat ed t hro ugh p erio dic 2 nd line assu ran ce r evi ews, wi th a cti on t aken w her e co ntr ols a re f ound to b e inef fect ive. O ur ri sk r egis te rs he lp toi dent if y t he t op risk s fa cing t he vari ous bu sin ess un it s, w hich i n turn in form ourpr inci pal ri sk s and un cer t ai ntie s (PRU s ). Our governance fr amework Ef fe cti ve risk m anagem ent an d co ntr ol is a chieved t hr ough a ppl icat ion of t he ‘ t hre e line s of def enc e’ model a s foll ows: GO VERNING BOD Y Account abilit y to st akeholders for organisational oversight MANAGEMENT Act ions ( inc ludi ng mana ging ri sk) t o achiev e organi sational objectives EX TERNAL ASSURANCE PROVIDERS 1 st line roles Pr ovis io n of pr o duc t s/ ser v ic es t o cli ent s a nd manag ing risk 2 nd line roles Exper tise, support, monitoring a nd challeng e onr isk -related matters INTER NA L AUDIT Independent assur ance 3 rd line roles Independent and objective ass ur anc e an d ad vi ce o n all mat t er s re lat ed t o t he achiev ement of objectives Gover ning b ody r ol es: int egrit y, leadership and tr ansparency Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 74 Our risk fr amework Risk appetites – Refer s to t he t yp e an d amou nt of ris k that we ar e willing t o t ake t o ac hieve our s tr at egic o bje cti ves . Boa rd -app rove d risk a ppe tit es exi st fo r all pr imar y ri sk t yp es including strategic, operational, insurance, liquidity , credit, mark et and r epu t atio nal ri sk , wi th a fu r the r sub div isio n of ope rat ion al ris k to en sur e our s ubsi diar y b oar ds an d our p lc Boa rd h as vis ibil it y and ove rsig ht of all t he key ar ea s of ris k and , in par ticul ar , to en sur e we pr omp tly r es po nd t o any risk smov ing t owar ds, o r alr ea dy ou t of, appet it e. O ur ris k app etit es s upp or t t he for mati on of o ur st rat eg y and our decision-m aking. PRUs – Th e PRUs a re inf orm ed by th e det ail ed fu nct ion al/ entity risk r egisters and t op risk assessment s and are linked bac k to t he r elevant s tr at egi c obje ct ives . Thi s give s vis ibili t y to m anagem ent of th e mo st sig nif icant ri sk s whic h may impe de ou r abili t y to a chi eve our st rat eg ic ob jec tive s. Risk mat urity – E ach o per ati ng enti t y is ass es sed per iodi call y agains t our r isk m aturi t y fr amew ork in b oth t he 1 st and 2 nd line s of defe nce , wit h ac tio ns agr ee d for any ar ea s wher e th er e is a de sir e to m ove fur t her up t he ri sk mat urit y sca le, w hich a re t ra cked t hr ough t o c omp leti on . Process feedback Out put s f ro m the r isk m anagem ent cycl e ar e fed b ack t o ourris k co mmit t ee s and b oar ds by exc epti on t o ensur e theri sk fr am ework r ema ins ef f ect ive an d supp or t s t he str at eg y, bus ines s mo del an d dec isio n-ma king p ro ce sse s ofthe C om pany. Purpose and vision Conduct risk fr amewo rk Our p urp ose i s to d elive r except io nal exp erie nc es ever y day, whil st b eing a drive r for p os iti ve cha nge in our m ark et s an d com mun itie s Sp ecif i c co ndu ct p olic y, appet ite , mat uri t y ass es sme nt , tr ain ing an d met ric s form p ar t of t he f ram ework Customers central to our behavi ours and subsequent decision-making Ri sk la ngu age is cl ear, simpl e and u nde rs to od by al l T ypes of risk STR A TEGIC INSUR ANCE CRE DIT OPERA TIONAL LIQUIDIT Y MARKET R E P U TAT I O N A L Gr ow th pl an priorities Environment al, Social and Governance (E S G) Maximise our e xisting businesses Sp ecif i c ES G st ra teg y, policy, appe tit e, m atu rit y as se ssm ent , t ra ining a nd me tri cs c overing eac hof th e thr ee e lem ent s o f Envi ron men t , So cia l and G overn anc e wit h clim at e bei ng specificallyprominent. St ep - ch ange ou r abil it y to scale while reducing debt Create ‘The Superbrand’ for older people Saga c ont ex t Supporting frameworks Risk framewor k processes Risk culture Op era te s acr os s all a spe ct s o f the a bove fr amewo rk an d alig ns t o our p urpo se o f cre ati ng ex ceptional experiences ev ery day Risk reporting, monitoring , oversight and measurement Risk gov ernance and accountabili ty Risk registers Risk appetites Incident management Control assurance T op risks Eme rgi ng ris k man ageme nt Adequacy of resources (incl uding Threshold Condition 2. 4 , Solvency II and wind-down plans ) Saga risk framewor k Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 75 Audi t , risk a nd in terna l control continued Independent process assurance Saga ’ s Internal Aud it function provides independen t assu ran ce o f the ef fect iven ess of t he ri sk ma nageme nt pr oc edur es at b oth G r oup an d bus ines s levels . Int erna l Audi t act s a s the 3 rd line of d efen ce wi thin S aga’ s ris k manage ment f ra mewor k . The o bje cti ve of Int ern al Aud it is t o help p rot ec t th e asse ts , r epu t atio n and su st ain abil it y of th e organisation by providing independent, reliab le, valued and time ly as sur anc e to t he B oar d an d EL T . T o p re ser ve t he independenc e of Internal Audit, the Int ernal Audit Direct or’s prim ar y re por ting line i s to t he Ch air of t he Au dit C ommi t te e, and th e Int ern al Aud it T eam is pr ohib it ed fr om p er fo rming operational duties for the business. All a cti vit ies o f the G ro up fal l wit hin th e re mit of I nte rnal Audi t , and t her e ar e no r es tric tio ns on t he sc op e of Int er nal Audit’ s work. Internal Audit fulfils its ro le and responsibilities by deli vering t he ann ual ri sk -bas ed aud it pl an. E ac h audit pr ovid es an op inio n on th e con tr ol envi ro nment a nd det ai ls of any issu es fo und . Int ern al Aud it work s wi th th e bus ine sse s to agr ee th e re med ial ac tio ns ne ce ssa ry t o imp r ove the c ontr o l envir onm ent , an d the se ar e tr ac ked t o co mpl etio n. T he Int erna l Audi t Dir ec to r subm it s r epo r t s to, a nd/ or at t end s, boa rd a nd aud it co mmi t te e meet ings fo r the s ubsi diar y S aga busi nes ses , as we ll as me eting s of the p lc Au dit an d Ris k Committ ees. Financial r epor ting The G ro up mai nta ins a co ntr ol e nvir onme nt th at is re gul arly rev iewed by t he Bo ar d. T he pr inci pal el emen ts o f the c ont ro l environment include compr ehensive management and f ina ncia l re por ting sys te ms and p ro c ess es , def in ed op er atin g con tr ols an d aut hori sat ion lim it s, r eg ular B oa rd m eeti ngs , cle ar sub sidi ar y bo ard a nd op er ating s tr uct ur es , and an Internal Audit function. Internal contr ol and risk management systems relating to the f ina ncia l re por ting pr oc es s and t he pr oc es s for p rep aring consolidated accounts ens ure the accuracy and timeliness ofinternal and e x ternal f inancial r epor ting. The G ro up und er t ake s an annu al s tr ateg y pr oc ess w hich upd ate s the p lan fo r th e nex t f ive ye ars a nd pr od uc es a det aile d bu dget for th e nex t f i nanc ial ye ar . Det ail ed refo re cas t s ar e pe r form ed by ea ch ar ea o f the G ro up reg ula rly an d ar e con soli dat ed t o pr ovid e an up dat ed v iew ofthe G r oup’s e xp ect ed p er fo rman ce a nd po sit ion fo r th e curr ent ye ar . Eac h ref or eca st c overs t he inc om e st at eme nt , cas h f low an d bal anc e she et po sit ions , ph ase d on a mo nthl y basi s thr oug h to t he en d of the f inanc ial ye ar . Regu lar we ekl y and m onth ly r epo r ting c ycle s allow management to assess per formance and identif y risk s andop po r tuni tie s at th e earli es t pos sib le tim e. T radi ng per f orma nc e is form all y revi ewed on a w eekl y bas is by them anagem ent of t he tr adi ng subs idia ries a nd th e EL T . Per form anc e is r ep or t ed t o the B oar d at e ach B oar d me eting and is as se sse d agains t bu dget and t he lat es t for ec as t . The G ro up has a m anagem ent s tru ct ure w ith d ocu ment ed levels fo r the a uth oris atio n of bu sine ss tr ans ac tio ns and c lea r bank m and ate s to c ont ro l the a ppr oval of p aym ent s. C ont r ol of the G r oup’s cash re sour c es is op er at ed by a ce ntr alis ed T r easur y functi on. Internal management repor ting and extern al statut ory repor ting timet ables and delivery re quirements ar e well- established and docume nted. Control of these is maintained centrally and communicat ed regularly. The G ro up mai nta ins IT s yst ems t o r ec or d and c ons olid ate a ll it s f in anci al tr ans act ion s. T hes e le dger sys te ms ar e use d to produce the in formation for the monthly man agemen t acc oun ts a nd for t he an nual s t atu to ry f inanc ial s t ate ment s . The t ra ding sub sid iari es wit hin th e Gr oup p re par e th eir acc oun ts e ith er und er Fi nan cial R epo r ting S t an dar d (FR S) 101 or UK -adopted Internationa l Financial Reporting St andards (IF RS) . The a cc ount s p ro duc tio n pr oc ess e nsur es t hat th er e is a cle ar audi t tr ail fr om t he ou tp ut of th e Gr oup’s fin anc ial rep or t ing sys t ems , thr oug h the m app ing and c on soli dati on pr oc ess es , to t he G rou p’ s f ina ncia l st at eme nt s. St atem ent of review As a r esul t of it s c onsi der ati on an d cont rib uti on t o risk manage ment an d int ern al co ntr ol ac ti vit ies , th e Bo ard i s sati sf i ed th at th ere i s an app ro pri ate f ra mewor k for ident if ying , evaluat ing and m anag ing th e Gr oup’s risks an d inte rnal c ont ro ls an d, up t o th e dat e of th e app roval o f this Annu al Re por t and Ac cou nt s, i t is re gul arly r evi ewed . The Boa rd’s st at emen t of rev iew of th e ef fe ct iven ess of S aga’ s risk m anagem ent an d inte rnal c ont ro l sys te ms is se t out onpage 6 5 . Our risk management framework and systems are designed to m anage, r ath er th an elim inat e ris k , and o per at e to fac ilit at e the a chi evement of o ur bu sine ss ob jec tive s wit hin our s ta te d risk ap pet it es . The re ha s be en re gul ar re po r ting t o th e Audi t and R isk Co mmit t ee s thr oug hou t the ye ar on t he imp rovem ent s tot he de sign of t he ri sk fr am ework , w hich is n ow co mpl ete aswe ent er th e 202 2 /23 f ina nci al year. Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 76 Financial statements (including key judgements and estimates) c.40% Internal financial controls c.10% Internal audit c.25% External audit c.20% Speak Up c.5% Audit C ommit t ee Rep or t The Committee’ s responsibilities • Consider integrit y of the f inancial st atement s. • Revie w the adequacy and effectiveness of the Company’s internal financi al controls and other internal contro l systems . • Monitor the e f fectiveness of the Company’ s Int erna lAudi t fun cti on , Fin anc e fun cti on an d the external auditor . • Review the Internal Audit work plan. • Review the Group’ s annual and half- yearly f inancial statemen ts and accoun tin g pol icies. • Review a nd ap pr ove key judgem ent s and e st imat es use d as a bas is for p re pari ng the G ro up’ s f in anci al st atem ent s. • Appr ove the remuneration and terms of engagement, and determine the independenc e of the external audit or . • Mon it or th e sc ope o f the an nual a udit a nd th e ex ten t of non-audit work undert aken by the external auditor. • Provide recommendation s on the fa ir , ba lanced and underst andable asses sment , going conc ern basis of prepar ation and viabilit y stat ements . • Ensur e th at whis tl eblow ing ( Speak Up ) and anti-fr aud syst em s are i n pla ce an d ar e mon ito re d. The C omm it t ee’s T erms of R efer enc e wer e rev iewed during t he yea r ( app rove d by the B oa rd o n 20Se pte mbe r 202 1 ) and ar e availa ble o n our c orp or at e website (ww w.corporat e.saga.c o.uk/ about-us/ governance ) . What we did during th e year Tim e spe nt on m at ter s Committee composition and attendance Members ( all are independent Non- Executive Directors ) Member since Max. possible meeting s Attendance Gar et h Hos kin (Chai r ) 4 Ap r 19 7 7 Julie Hop es 31 De c 20 7 6 Orna NiChionna 29 M ay 14 7 7 The B oar d is s atis f ie d tha t Gar eth H os kin h as re ce nt and relevant financial experienc e and competen ce in acc oun ting , re f lec te d by his pr ofe ssi ona l quali f ic atio n as a char tere d account ant and relevant e xperienc e during hi s car eer. The Bo ard i s also s atis f i ed th at the C om mit t ee members poss ess an appropriat e level of independen ce and offer a depth of f inancial and commer cial experience acr os s vario us ind ust rie s, in clu ding th e sec to rs in w hich t he Co mpany o per at es . Th e Boa rd of D ir ec tor s’ biog rap hies o n pages 70 - 7 1 co nt ain det ail s of eac h Co mmi t te e memb er’s skills and experience. Commit tee evaluation An evalu atio n of th e Co mmit t ee’s eff ect iven ess t o ok pl ace during t he yea r , as par t o f the B oar d ef f ect iven ess r evi ew (for det ai ls, s ee p age 69). The r eview c on clud ed th at th e Co mmit t ee wa s foc use d on mat eri al is sues a nd th at the external auditor provided g ood challeng e and helpful extern al market perspecti ves. Respon dents conf irmed that the C omm it t ee was we ll sup por ted by t he Int er nal Au dit fun cti on and t hat f inanci al c ontr ol s wer e con sid ere d to b e soun d. For 2 02 2/23 , it wa s agr ee d that t he pl anning pr oc ess s houl d be r evi ewed t o ensur e an o ptim um audi t pr oc ess b et wee n subs idia ries a nd th e Co mpany. Gareth Hoskin Chair , Audit Committee Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 77 Dear shareholder , Duri ng 202 1/2 2, we c ont inue d to d emo nst ra te f i nan cial an d ope rat ion al r esili enc e as th e unc er t aint y o f COV ID -19 con tinu ed, p ro gr ess ing our G ro up st ra teg y to f ur th er optimise our busin ess and re duce debt . The C omm it t ee c onti nues t o pr ovi de sup po r t to t he B oar d and in dep end ent sc rut iny of th e Gr oup’s fin anci al r epo r ting and internal controls in its businesses as colleagues continue to wo rk lar gely fr om h ome , main ta ining c olle agu e safet y with minimu m inte rrup tio n to bu sin ess fo r cus to mer s . Ther e was con tinu ed fo cus o n impr ovin g the f inanc ial f lex ibili t y of th e Gr oup by s tr eng t hen ing the b ala nce s he et and im pr oving t he Group’ s liquidit y. The G ro up co mpl ete d th e issu anc e of a new f ixed-r ate gua ran te ed uns ecu re d bon d, e nabl ing the G r oup t o re pay in full i t s exist ing t erm lo an an d make a mend ment s t o th e coven ant s on it s exi st ing revo lvi ng cr edit f aci liti es , whic h rem ain un draw n and ar e exp ec te d to r ema in undr awn fo r th e foreseeable future. The Group also reached agreement to amen d coven ant s on i ts c ruis e ship d ebt f acil itie s to acc om mod ate t he event uali t y of a pr ol onged f ur th er p erio d of disr upti on du e to C OVI D-19. The C omm it t ee r ec eives r eg ular u pda te s on th e ext er nal reg ulat or y l ands cap e and c ont inue s to r evi ew and an alys e emerging uncer tainties to ensur e strat egic alignment with current developments . Rep or ting Interim and full year result s The in ter im and f ull yea r re sult s we re r eview ed and challenged, together with the appropriat eness and appl icat ion o f key ac cou nting p oli cies a nd ar eas o f signi f ic ant judgem ent and h ow th ese we re m ade . KPM G pr ovi ded rep or t s t hr ough out t he yea r , with f ocu s on ar eas i dent if ie d ashavin g signi f ic ant aud it ris k . Let t er fr om t he Fi nan cial R ep or ti ng Co unc il (FR C) On 1 3 De cem ber 20 2 1 , th e Gr oup r ec eive d a let t er fr om theF RC re que sti ng fur t her i nform atio n on c er t ain mat t er s cover ed in t he A nnua l Rep or t an d Ac cou nt s for th e f in anci al year en ded 3 1 J anua ry 2 02 1 . Th e let t er r equ es te d informat ion r egar ding : • the a cc ount ing for c ash f l ow he dges in co nne ct ion wi th thep urc has e of th e oc ean c ruis e ship s; • river cruise lea se contract modifications ; and • the im pair ment r eview a nd us eful e co nomi c live s of the oc ean c ruis e ship s, wi th p ar tic ular r egar d t o what c lima te change c ons ide rat ions h ad b een m ade w hen se t ting t hes e judgement s and es timat es . The l et te r also l ist ed a nu mbe r of mino r obs er vati ons ar ou nd vario us oth er asp ec t s of th e Gr oup’s disclos ur e that management has taken into consideration when draf t ing thea cc ount s fo r 202 1/2 2. The Committee heard how mana gement had responded to the F RC’s inform atio n re que st o n 2 1 De cem ber 2 02 1 an d has sinc e r ece ived a r es po nse f ro m the F RC in Jan uar y 20 22 , than king t he Gr ou p for th e add iti onal i nform atio n and conf irming t hat th e mat t er ha s now b een cl ose d. Significant issues Consideration of the financial i mplications and on going impa ct o f COV ID -19 on li qui dit y, going co nc ern an d viabilit y The C omm it t ee r eviewe d and ch all enged th e ass ess ment that m anagem ent ma de, i nclu ding t he app r opri ate nes s of theun der lyi ng for ec ast a ssum ptio ns us ed in th e bas e and reasonab le worst-case scen arios and the mitigating actions that management would take. Not e 2 .1 of t he f in an cia l st at em ent s , pa ges 1 26 -12 7 Vi abi lit y S t at em ent , p age 5 5 Independent Auditor’s Report to the Members of Saga plc, p ag e s 1 1 2-1 20 Valuation of insuranc e contrac t liabilities The analysis and justif ication pr epared by management in supp or t o f the r es er ves for o ut s ta nding c laim s, in clu ding consider ation of an independent valuation prepared by P wC andan alys is pr epa re d by the G r oup’s e x te rnal a udit or, was rev iewed . The a nal ysis an d jus tif icati on wer e r eviewe d and challeng ed initially by the Acromas Insu rance Company Limited (AICL) reserv ing and audit committees, following wh ich, it was also t hen r eviewe d and c hall enged by t he C ommi t te e. Not e 28 o f th e f ina nc ial s t at eme nt s , page s 17 8-18 1 Independent Auditor’s Report to the Members of Saga plc, p ag e s 1 1 2-1 20 Valuation of goodwill The C omm it t ee c onsi der ed t he r ec overa bilit y of goodw ill anddis cus se d wit h manage ment t he ba sis of i ts i mpair ment assessment . The key items consider ed were the approp riateness of underlying forec ast cash f lows and potential stresses to those cash flows, and the selection o fan appropria te disc ount r at e and t erm inal g row th ra te , incl uding t he se nsit iv it y of the assessment to changes in those rates within a reasonable range . Th e revi ew co nclu ded t hat n o impai rmen t of the c arr y ing value o f good will was n ec ess ar y. Not e 1 6a o f th e f ina nc ial s t at eme nt s , page s 15 7- 158 Independent Auditor’s Report to the Members of Saga plc, p ag e s 1 1 2-1 20 Valuati on of t he p are nt co mp any’s inves tm ent in subsidiaries The C omm it t ee evalu ate d the r e cover abi lit y of t he ca rr ying value o f the inves tm ent in s ubsi diari es he ld on t he ba lan ce sh eet of the C om pany. The C omm it te e r eviewed a nd ch alle nged management’ s internal valuation of the Group. The Commit te e also considere d alternative valuation data based on market data pr ovid ed by br oke rs . Th e rev iew co nf irm ed th at no im pairm ent was r equir ed , no r was it a ppr op riat e t o rever se any p revi ous impai rmen ts a t this s t age. Not es 1 . 2 a nd 2 of t he C om pa ny f ina nc ial s t at eme nt s , page s 19 7 -198 Independent Auditor’s Report to the Members of Saga plc, p ag e s 1 1 2-1 20 Audit C ommit t ee Rep or t continued Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 78 Valuation of cruise ships The C omm it t ee r eviewe d indi cat ors o f impa irme nt and re sult ant i mpai rment r evi ews of th e Gr oup’s cruise sh ips . Thek ey ite ms co nsid er ed wer e th e app ro pri ate nes s of unde rly ing for ec as t cas h f lows an d pot ent ial s tr es ses t o tho se ca sh f low s, in clud ing , in par t icul ar , th e impa ct of COVI D -19 on th e re sump tio n of cru ising , th eir us eful eco nom ic live s and r es idua l value s, a nd th e app ro pria ten ess of the se in li ght of c limat e ch ange reg ula tio ns, a nd th e selection o f an appropri ate discoun t rate. The C omm it t ee als o co nsid er ed th e sen siti vi t y of th e assessment to chang es in tha t rate within a reasonable ra nge. Not e 1 7 of th e f in an cia l st at em ent s , pa ges 1 59 -16 1 Independent Auditor’s Report to the Members of Saga plc, p ag e s 1 1 2-1 20 Carr y ing valu e of o the r mat eri al as set s The C omm it t ee r eviewe d indi cat ors o f impa irme nt and re sult ant i mpai rment r evi ews of th e Gr oup’s other it ems of pr ope r t y, plant an d equi pme nt and so f t war e int ang ibl es . For land and buildings, the Committee considered whether an y buil dings r ec ogni sed a s held f or sa le at th e bal anc e she et dat e st ill met t he ne ce ssa r y crit eri a as p er IF RS 5 , and fo r tho se th at did , cha llenge d the b asis o f the up dat ed va luat ions obt ain ed. T he C omm it t ee als o co nsid er ed ass et s hel d in rel atio n to t he T our Op er atio ns bus ines s , and t oo k the dec isio n to wr it e down t o nil t he ca rr ying va lue of t hos e ass et s no lo nger dee med t o b e re cover abl e as pa r t of th e reo rgani sati on of t he T our Ope rat ion s busi nes s. Defined benef it pension scheme Duri ng the ye ar , the G r oup’ s def ined b enef it pen sion s ch eme was valu ed in a cc or dan ce wi th I AS 19 ‘ Em ploye e Ben ef it s’ by the G ro up’ s pen sio n sch eme a dvi ser s and it w as co nclu de d that t he sc hem e had m oved fr om a £ 4. 3m d ef ici t to a £ 1.1m surp lus . The C om mit t ee su pp or t ed th e Gr oup’s prop os al to con sult w ith m emb ers t o pr op os e the s che me b e clos ed t o future accruals and in its place, launch a new defined contribution p ension scheme arrangement for all colleagues ope rat ed by Av iva as a M as ter T rus t . Follow ing a co nsul ta tio n pr oc ess , th e def i ned b enef it pe nsio n sch eme wa s clo sed t o fut ur e acc rua ls , fur t her r edu cing t he ris k of fu tur e def icit s develo ping an d movi ng to a f air er sc heme f or all c oll eag ues . Not e 2 7 of t he f i nan cia l st at em ent s , p ages 1 74-17 7 The Committee considered the internal control observations ident if i ed by th e Gr oup’s exte rnal a udit or a s par t o f the au dit and ma nagem ent at t ende d Co mmi t te e meet ings t o pr ovi de con tex t an d assu ra nce r egar din g appr op riat e ac tio ns . The Co mmit t ee wa s sat isf i ed th at th e key ac cou nting p oli cy choi ce s and ju dgement s we re ap pr op riat e and p rov ide d a tru e and fa ir view o f the C omp any ’s fin anc ial p er for man ce and position. F air , balanced and understandable We adv ised t he B oar d th at we sup por ted t he s tat em ent ( seep age 65 ) that t his A nnua l Rep or t an d Ac cou nt s, t ak enas a whole, i s fair , balanced and understandable a ndprovides the inf orm atio n nec es sar y fo r shar eh old ers t oas ses s the Gr oup’s posit ion an d per f orm anc e, bu sine ss mo del a nd str at eg y. This wa s foll owing c ons ider at ion of w heth er: • the r ep or t was c lea r and p re sent ed a b alan ce d view ofsuccesses, challeng es, oppor tunities and risks; • key messages were prominent and an appropriate level ofkey pe r form anc e ind icat or s (KP Is) were dis clo sed; • busi nes s seg ment s , sig nif ic ant is sue s and key ju dgeme nt s rep or t ing was c ons ist ent w ith d iscl osu re s in the f inanc ial stat ements; and • def in itio ns pr ovi ded we re ex plai ned an d Al ter nati ve Performance Measures were reconciled with the closest IFR S me asur e in th e f in anci al st at em ent s . Going co ncern an d viabilit y The goin g con ce rn bas is of pr ep ara tio n disc los ure n ote i s set out o n pages 1 26 -127 a nd th e Vi abili t y S ta tem ent , an d the meth od olog y for as ses sing t he Gr oup’s ongoing via bilit y , ar e set ou t on page 5 5 . Our r eview t oo k ac co unt of th e Co mpa ny’s curr ent p osit ion and pr inci pal ri sk s and un cer taint ies ( PRUs) ( as rev iewed a nd ref re she d by the R isk C om mit t ee an d det ail ed on p ages 53-54) and the methodology used to provide an assessme nt of ongoing v iab ilit y over t he f i ve-yea r per iod of r evi ew. We con sid ere d the r el evant as ses sme nt tim e hori zon, s ever e, but plausi ble, potential outcomes and the appropriateness o f the s cen ario s mo dell ed . In par ticul ar , weco nsid er ed th e con tinu ed imp act t hat t he COV ID -19 pa nde mic c ould h ave on the G ro up’ s f ina nci al pe r form anc e and p osi tio n, a nd how t his cou ld af f ect b oth t he vi abil it y of t he Gr oup a nd th e going con ce rn bas is of pr ep ar atio n that un der pins t he Gr ou p’ s f ina ncia l st at eme nt s. B ase d on th is rev iew, we conf irme d to the B oar d th at we co nsi der ed th at it wa s re ason abl e for t he Dir ec to rs t o con tinu e to p rep ar e the f inanc ial s t ate ment s o n a going co nc ern ba sis an d make t he V iab ilit y S t at emen t on page 5 5 . Audit and control Internal controls The C omm it t ee r eviewe d the o ut co me of th e audi t s of key f inancial controls i ncluded in the In ternal Audit w ork plan. The Gr oup F inan ce D ir ect or al so pr ovi ded a n upd ate o n ac cou nting issu es an d key asp ec ts o f f ina nci al co ntr ols at e ach m eet ing. I n Augu st 20 2 1 , we re ce ived an u pd ate o n the wo rk whi ch ha d bee n pr ogr es sed by a 1 st line Financi al Contr ol Working Forum which had been established to improv e worki ng practices foll owing th e re sul ts o f a key f in anci al co ntr ols a udit c arr ied ou t in the f irst q uar t er. The Com mit t ee c ont inue d to r ec eive upd ate s on th e impl icat ion s of IF RS 1 7 , regu lat or y upd at e ses sion s wit h KPM G an d to b e bri efed o n pr ogr ess m ade w ith the G ro up’ s pr epa rat or y wo rk on it s a dopt ion , ah ead of i t s appl icat ion i n the f inanc ial yea r endi ng 31 J anu ar y 2024 . Financial crime and Speak Up reporting Policies covering f inancial crim e (including anti-brib ery, anti-corruption , anti- fraud , anti-money laundering and tr easu ry s anc tio ns an d ass et fr eezi ng ) wer e rev iewed a nd app roved . We rev iewed ex ist ing Sp eak U p pr oc es ses a nd pol icy again st b es t pr act ic e to en sur e co ntinu ed int eg rit y andef fect ivene ss an d to e nco ur age col leag ue enga gement . Iam re sp onsi ble fo r ens uring t he int egri t y, indep end enc e andef fect ivene ss of t he C omp any ’s Speak U p Polic y and pr oc edur es . Si nc e the ye ar end , th e Co mmit t ee h as r eviewed all r epo r te d inc ident s a nd co ncl ude d that t hes e hadb ee n handled appro priately, with no material issues identifie d. Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 79 Audit C ommit t ee Rep or t continued Intern al Audit We appr oved t he Int ern al Au dit wor k pla n and c ons ider ed t he inte rnal a udit s c on duct e d thr oug hout t he ye ar . Follow ing a ten der p ro ce ss , and in l ine wi th th e Ch ar t ere d Ins ti tut e ofInt ern al Aud ito rs (CI IA) S t and ar ds , P wC c arri ed ou t an E x te rnal Q ual it y As ses sm ent (EQ A). The r es ult s wer e pr ese nte d to t he C ommi t te e durin g the ye ar and c on clud ed that I nte rnal A udit m et th e nee ds of it s k ey st ake hol der s and was ahe ad of i t s pee rs in t his r egar d. Th e Co mmi t te e not ed that a l onger -ter m st rat eg y to inc lude t he t arget o per at ing mod el ( TOM ) had b een d esig ned a s a re sult o f the EQ A . The audi t plan w as re fr esh ed for t he s eco nd ha lf of t he year, with pr ogr ess b eing a ppr op riat el y rep or t ed by t he In ter nal Au dit Dir ec to r and am endm ent s t o the au dit p lan b eing ap pr oved by the C omm it t ee. We we re s atis f ie d that t he I nter nal Au dit fun cti on, a t ea m of eig ht peo ple w ith a b ro ad r ange of s kills , when c om bine d wit h the u se of ex t ern al re sou rc e for specialised audits, had appropriate resources. The Internal Audi t Dir ec to r at te nde d Co mmit t ee m eet ings an d pr ovid ed reg ula r rep or t s o n the p rog r ess of t he In ter nal Au dit p lan . The Committee monitor ed whether the Internal Audit fun cti on was in dep end ent of m anagem ent an d so abl e to exercise independent judgement through out the year and was sat isf ied th at thi s was th e cas e. A quality assur ance and improvement programm e, as re quir ed by t he CI IA w as co nsid er ed . The C om mit t ee concluded that the Internal Audit function complied with theC II A ’s def init ion of i nte rnal au dit ing , the c or e pri ncip les ofthe P rof ess ion al Pr act ic e of Int ern al Aud iting a nd th e Co de of Ethic s. T he C omm it te e (in c o- op er atio n wit h the R isk Co mmit t ee), monito re d th e work of t he R isk , C omp lian ce andIn ter nal Au dit f unc tio ns to e nsur e th at the ir ac tiv iti es complemented each other appropriately. KPIs included whether actions we re closed withi n agreed tim eframes ands atis fac tio n sur vey r esp ons e rat es . We app r oved th e Internal Audit Char ter , which is a vailable on our corporate website (ww w.corporat e.saga.c o.uk/ about-us/ g overnance ). Work co ndu ct ed over th e year wa s risk-based an d cove re d bot h f ina ncia l and n on-f in anci al co ntr ol s. A s ele cti on is show nbel ow: • Pricing (AI CL): Revi ew of th e des ign of t he r evise d pri cing fr amewo rk , inc ludin g pric ing st ra teg y and pr ac tic es an d emb eddi ng of th e new TOM . • Cus t ome r jou rneys (Sa ga Se rv ice s Lim it ed (S SL), cl aim s and customers in vulnerable circumstances): Revi ew of the c ust om er jou rney in va riou s busi nes s ar eas . • Cloud migration (Group ): Review of r ea dine ss an d planning for cloud mi gration, including the logical migration path and cost-benef it analysis. • T reasur y and cash management ( Group ): Management ofwork ing ca pit al t o me et sho r t-ter m debt s an d long-te rm gr ow th p lans . Whe re im pr ovemen ts w ere i dent if i ed, a n act ion p lan wa s agreed with management and appropri ately tracke d. Internal Audi t also p re sent ed t hei r annua l year en d rev iew of th e ef fectiveness of the risk management and controls fr amewo rk . Th ey found i t re aso nab le for t he C ommi t te e to con clu de th at , whil st ar ea s for imp rove ment we re i dent if ie d, the in ter nal ri sk and c ont ro l envir on ment is b ro adl y ef fe ct ive. The C hief R isk an d Co mpli anc e O f f i cer a lso pr es ent ed f ind ings of t he 2 nd line an nual r evi ew of the c ont ro l fr amewo rk andr ep or t ed th e sam e co nclu sio n. Aud it , ri sk an d int er nal c on tr ol , page s 74- 76 Risk Committee Report , pages 82-84 Subsidiar y audit commit tee s I have reg ula r meet ings w ith t he ind ep ende nt No n- E xecut iveDi re ct ors w ho ch air th e SS L , S agaPers ona l Fin anc e Lim it ed and A IC L au dit , ris k and c omp lia nce com mit t ee s to en sur e an ap pr opri ate l evel ofover sight a nd enab le a su f f ic ient l evel of tr ans par enc y. Minut es fr om t hes e meet ings we re al so not ed a t eac h Com mit t ee m eeti ng. Ex te rnal audit KPM G was ap po inte d as th e Co mpany ’s ext ern al aud it or forth e f in anci al year e nde d 3 1 Janu ar y 20 18 (fo llow ing acom pet iti ve te nde r pr oc ess in 2 0 16/1 7 ) and h as b een re-appoint ed annually since then. The curr ent audit partner , St uar t C ris p, has b een in p lac e sin ce i t s app oint ment . Theau dit p ar tn er is du e to b e ro tat e d af t er co mpl etio n oftheJ anu ar y 202 2 yea r- end r ep or t ing pr oc es s. Audit planning KPM G pr es ent ed an au dit pl an fo r the f inanc ial yea r , togeth er wit h an out line o f it s ris k ass ess ment s , mat eri alit y t hr esh old s and planned approach. The key aspects of the plan a re set out in t he In dep end ent Au dit or’s Rep or t t o the M emb er s of Saga p lc on p ages 11 2- 12 0. The C omm it t ee c onsi der ed t he aud it sc op e, ma ter iali t y and cover age, ar ea s of audi t fo cus an d KPM G’s planne d re sp onse to id enti f ie d sign if ic ant au dit ris ks , t ak ing size, c om plexi t y and su sc eptib ilit y t o f rau d and er ro r int o acc oun t . We also consider ed and approved KPMG’ s engagement terms and fee p ro pos al fo r 202 1/22 . Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 80 Auditor independence and non-audit services Duri ng the ye ar , the C om mit t ee m et t wic e wit h the ex t ern al audi to r with out m emb ers o f man agement b eing p re sent . The c hall enge, in dep end enc e and o bje cti vit y of KPM G was monitored continuously by the Committ ee and inde pendence was co nf irm ed by t he aud it or thr oug ho ut th e year in l et te rs addressed to the Committee . In ac co rd anc e wit h the R evis ed Ethic al S t and ard i ssu ed bythe F RC in 20 16 , th e Co mmi t te e has ad opt ed a r ob ust Auditor Independence Poli cy on non-aud it fees and empl oym ent of fo rmer e mpl oyees of t he ex t erna l audi to r . Thep oli cy inc lude s a lis t of no n-aud it se rv ic es for w hich we are s atis f i ed th at the ex t ern al aud it or ca n carr y o ut th ose servi ces without af fecting it s independenc e as external audi to r . Ther e ar e cle ar ap pr oval levels w her e th e Co mmit t ee Chai r ( or th e who le C ommi t te e) is requir ed t o au tho rise assignments . Compet itive tendering is used for substantial work . T he Au dit or In dep end enc e Polic y was r eviewe d on 20Aug ust 2 02 1 . The au dit f ees p ayabl e to K PMG i n re spe ct of t he yea r end ed 31 J anu ar y 202 2 wer e £ 1 . 8m (20 2 1: £ 1 .7 m) and non- audit ser vi ce fe es in curr ed we re £ 0. 2m (202 1: £ 0. 8m), the lat te r being i ncur re d for wo rk to r evi ew the G ro up’ s int erim r es ult s and es sen tial r ep or t ing to o ur ba nks a nd tr avel ind ust r y reg ulat or s. T his e quat es t o a non -aud it to a udit f ee r atio of0.1(202 1: 0. 5). A sum mar y of f ees p aid t o the ex t ern al audi to r is set ou t in No te 4 a t o the c ons olid at ed f in anc ial st at eme nts o n page 14 9. K PMG h as dis co ntinu ed t he pr ovisi on of n on-au dit s er vic es t o th e curr ent an d re ce nt memb er s of the F TSE 3 50 in dex th at they au dit , ot her t han tho se r equi re d by law or c los ely r elat ed t o th e audi t . Audit quality and effec tiveness of e xternal auditor The fo llow ing wer e co nsid er ed wh en ass es sing th e effectiveness of KPMG: • Our p er cep tio n of KPM G’s unders t and ing and i nsigh t into the G ro up’ s bus ines s mo del . • How key ar e as of judgem ent we re ap pr oa che d by KPM G , the ex t ent of c hall enge and t he qu alit y o f rep or t ing . • The c ont ent of (and man agemen t’s res po nsive nes s to) KPMG’s management letter. • Feedb ack f ro m man agement f ollow ing c ompl eti on of an eval uation survey on the audit proc ess (including audit scope, audit communicati on, independence and objectivity) . The eva luation concluded that the external auditor had ru n the au dit p ro ce ss well , r et aine d a high l evel of ind epe nden ce and ha d cha llenge d the k ey acc ount ing jud gement s an d estimates rig orously and fairly . Respondents said tha t the plan ning of t he aud it ha d impr oved b ec ause o f fee dbac k pr ovid ed in th e pr evio us year, par tic ular ly in th e Ins ura nce and T ravel bus ines se s. T he c onc lusi on was t hat th er e was an opp or t unit y t o imp rove c omm unic atio n and t he ef f icien cy ofthe a udit ove ral l. O ver all , the au dit wa s judged t o be high-qualit y. The C omm it t ee is s atis f ie d that t he au dit c onti nues t o b e ef fective and provides indepen dent and objective challenge to m anagem ent . A r ec omme nda tion w as mad e to t he B oar d for th e re -app oint men t of KPM G as t he C omp any’s audi to r atthe f or th co ming AGM . Gareth Hoskin Chair , Audit Committee Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 81 Managing and reporting c.35% Risk strategy, policy and appetite c.20% Compliance c.15% In-depth reviews c.30% Risk C ommitt ee Repor t The Committee’ s responsibilities • Review a nd ad vis e the B oa rd o n the G ro up’ s overa ll risk ap pe tit e, t ol era nc e and s tr ateg y and ri sk assessment processes. • Over se e and a dvi se th e Bo ard o n curr ent r isk expo sur e and f utu re ri sk s tr ateg y. • Mon it or th e ef fe cti vene ss of t he Gr oup’s risk management and internal control systems and conduct risk management proc edures . • Mon it or pri ncip al ris ks a nd unc er t ain ties ( PRU s ). • Co nsid er th e Gr oup’s capabil it y t o ident if y and manage new , and emerging, risk. • Prov ide q uali ta tive an d qua ntit at ive ad vic e t o the Remuneration Committee on risk w eightings. • Revie w material breaches o f risk l imits and adequacy of action. The C omm it t ee’s T erms of R efer enc e wer e rev iewed during t he yea r ( app rove d by the B oa rd o n 20Se pte mbe r 202 1 ) and ar e availa ble o n our c orp or at e website (ww w.corporat e.saga.c o.uk/ about-us/ governance ) . What we did during th e year Tim e spe nt on m at ter s Committee composition and attendance Members ( allare independent Non- Executive Directors ) Member since Max. possible meeting s Attendance Julie Hop es (Chair ) 4 Apr 1 9 4 4 Orna NiChionna 29 M ay 14 4 4 Gareth Hoskin 4 Apr 19 4 4 Commit tee evaluation An evalu atio n of th e Co mmit t ee’s eff ect iven ess t o ok pl ace during t he yea r , as par t o f the B oar d ef f ect iven ess r evi ew (for det ai ls, s ee p age 69). The r eview i ndic at ed th at the re wa s a hea lthy level o f challenge and robust discussion around risk management and th at key r egul ato r y develo pme nt s and PR Us wer e ade quat ely d iscu ss ed. T he fo cus f or 20 22 /23 will b e on ensur ing th at disc uss ions a ro und ris k in bu sine ss ar eas wer e br ought t o th e Co mmi t te e at the a ppr op riat e tim e tosu pp or t de liver y oft he s tr ateg y. Julie Hopes Chair , Risk Committ ee Dear shareholder , It ha s bee n anot her im po r ta nt and c hall engi ng year fo r the Ris k Com mit t ee . Dur ing the ye ar , we co nsi der ed th e ris ks and int er dep en denc ies w ithi n the G ro up and r evi ewed an d discussed emerging and principal risks and uncer t ainties, aiming t o ens ure t hat t hes e re main ed alig ned w ith t he Grou p ’ s stra tegy . A signi f ic ant am ount of t ime wa s dedi cat ed t o overs ight of our r egul at ed ent iti es and r eg ulat or r elat ion ship s. T he Co mmit t ee h eld r obu st d iscu ssi on on t he exp ect at ions o f our reg ulat or s, i nclu ding th e Fi nanc ial C ond uct A uth ori t y (FCA). We discu sse d re adin ess f or r egul ato r y develo pme nt s including the general insurance pricing pract ices market stu dy an d new r equ ire ment s in r el atio n to o per ati onal resilience and co nsumer duty. We also c onsi der ed t he ar eas t hat s houl d be t he sub jec t of det aile d r eview, ta king int o ac co unt th e ex te rnal r eg ulat or y and macroeconomic landscape. The Committee conducted deep-dive analyses into topics including operational resilience and supplier risk management. Management and reporting The C omm it t ee c onsi der ed t he r atio nale b ehi nd th e sele ct ion of P RUs , as well a s the r isk an d co nduc t ris k moni to ring pl ans fo r eac h bus ines s . The G ro up’ s PRU s wer e rev iewed an d ref r esh ed r egul arly d uring t he yea r , ensuri ng that n ew and em erg ing ris ks an d opp or t unit ies we re capt ur ed an d rem aine d at th e for efr ont of t he G ro up’ s str ateg ic plann ing. The im pac t s of th e COV ID -19 pan demi c on bu sine ss operations and sustainability of the ba lance sheet remained akey ar ea of fo cus . Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 82 The C omm it t ee als o dis cuss ed em erg ing tr end s in key ar eas incl uding d at a pr ote cti on ris k and c yb errisk . Risk s re levant to our busine ss trans formatio n progr amme, inclu ding culture and c apab ilit y, wer e also c ons ider ed . Th is inc lude d the organi sati ona l des ign of t he Gr ou p’ s Risk f unc tio n. The C omm it t ee r eviewe d the r isk s re lati ng to t he per f orma nc e of eac h bus ines s and t hos e aris ing fr om inci dent s in r ela tio n to c ontr o l failu re s or wea kne sse s. Wediscu sse d the se in cid ent s in th e con tex t of t he ris k framework to iden tif y causes, necessary actions, lessons lear nt and m onit or ing r equir em ent s . All b usin ess C hief E xecut ive O f f icer s cer t if i ed c omp lian ce wi th th e risk manage ment f ra mewor k atthe ye ar end . The C omm it t ee c onti nued t o r ec eive r ep or t s on , and p rov ide oversig ht of, risk m at te rs inc ludi ng tho se p er t aining t o cli mat e risk , t hr ough t he C ommi t te e’ s oversi ght of t he PRU s, a s well asthrough subsidiary risk governance commit tees , who escalate d material points for consid eration to the Co mmitt ee. Risk m anagement an d internal c ontr ols In co -o rd inat ion wi th th e Aud it Co mmi t te e, we dis cus sed t he ef fectiveness of the Group risk management framework and internal contro l systems , including reference to all material f inancial, oper ational and complianc e controls . The Committ ee concluded that the internal risk and control envir onm ent was ef fect ive , wit h con tr ols t o mit igate k ey risk s ope rat ing ef f ect ivel y. The Gr oup w ill co ntin ue to t a ke act ion to enhance the cust omer experience, s treng then supplier risk management processe s, embed management actions and enhance capabilit y and capacit y acros s the businesses . We rec omm end ed t o the B oa rd t hat th e app ro pri ate st at eme nts c oul d be m ade r egar ding r ob us t ass ess ment ofeme rging a nd pri ncip al ris ks f aci ng the G ro up and t he rev iew of th e ef fe cti vene ss of t he ris k man agement p ro ce ss ( see p ages 7 4 - 75). Risk s tr ateg y , policy and ap petit e The r isk r epo r ting f r amewor k co ntinu ed t o pr ovid e a hol ist ic app ro ach li nked t o th e Co mpany ’s str at eg y an d bus ines s mod el. T he C omm it t ee r eco gnis ed th e st re ng th o f our br an d and th e ec ono mic r esi lien ce of o ur cus t omer d emog r aphi c while appropriat ely considering oppor tunit ies and threats . Cha nges and a ddi tio ns to t he PR Us wer e sc rut inise d in lin e wit h the ag re ed s tr ate g y an d busi nes s mod el an d the r es ult s of this r evi ew are s hown i n the S tr at egi c Rep or t on p ages 53- 5 4 . The se for med t he b asis of t he sc en ario t es ting u sed to p ro duc e th e Vi abili t y St at em ent (see page 55 ). Our ris k managemen t processes are described on pag es 7 4- 7 6. The se ar e de sign ed t o man age, ra ther t han e limin ate , the r isk of fail ure t o ac hieve bu sine ss ob jec tive s and c an onl y pr ovi de reasonab le and not absolute assuranc e against material misst atement or loss. We revi ewed and r ec om men ded ap pr oval of t he Gr ou p risk app etit es a nd ris k fr amewo rk po licy d uring t he yea r . The Co mmit t ee over saw t he app lic atio n of key ris k indi cat or s and aler t l imit s fo r risk a pp etit es , t o ensur e th at any br ea che s ofagr ee d app eti te wo uld b e app ro pria tel y esc ala te d. The C omm it t ee als o rev iewed t he G rou p’ s f ive-ye ar pl an fr om a ris k man agement p er spe ct ive. We c ons ider ed con duc t risk a nd how o ur de cisi ons an d beh avio ur co uld impa ct ou r cus to mer s, o r af fe ct our r ep ut ati on wit h stakeh olders , including shareholders and regul ators . Busi nes s act ion s wer e rev iewed agai nst r isk ap pet it e and to ler anc e, an d we co ncl ude d that w her e sc ena rios we re out si de of ri sk app eti te , th e pr obab ilit y o f oc curr en ce wa s low an d that m itigati ng actions were appropria te. The Co mmit t ee r em ains sa tis f ie d that s uit abl e co ntr ols a re in pla ce, m ean ing tha t the ri sk of si gnif icant f ailur e ac ro ss th e business model is consider ed unlikely. The C omm it t ee is fo cus ed o n a cont inu ed r obus t r esp ons e aswe eme rge fr om th e COV ID -19 pa ndem ic and o ngoing re silie nt tr ading i n our In sur anc e bus ine ss alo ngsi de th e nee d for f i nanc ial f l exibili t y as un cer t ai nt y cau sed by t he p ande mic continue s in our T ravel busines s. We are al so fo cus ed on d elive ry o f good r eg ulat or y ou tc om es in key ar eas s uch as c om plia nce w ith t he gen er al insu ran ce pricin g practices marke t study . F urthermore, a process of ongoing improvement continue s in supplier risk management , wit h the C omm it t ee c ontin uing t o overs ee an d revi ew act ion out co mes i n this ar ea . A s a Co mmit t ee , we ar e acu tel y awar e of the n ee d for th e organ isat ion t o fo cus on t he ri sk s asso ci ate d wit h larger s upp lier s and t hos e that c arr y rep ut ati ona l risk , a s well as t heir r ol e in deli vering r ob us t ope rat ion al r esili enc e. T he Gr ou p has c onti nued t o r ef in e it sgovernan ce f ra mewor k , incl uding a s yst em of d elegat ed auth ori tie s that a llows t he Co mmi t te e to fo cus o n th e mat eria l issu es whi ch ar e es cal ate d to i t . In - d ep th r evi ews Duri ng the ye ar , the C om mit t ee c ond uct ed in -d epth r evi ews into k ey to pic s rel evant t o the G ro up’ s st rat eg y . Operational resilience The C omm it t ee c onsi der ed t he exp ect at ion f ro m the Group’ s regulators f or robust operational resilience, incl uding a fo cu s on bo th pr eventi ng inci dent s an d pr ac tisi ng response activities in preparation for potentia l failu res, sho uld th ey oc cur. The focu s of th e Co mmit t ee wa s on readiness for imple mentation of new rules on operational re silie nc e fr om Ma rc h 202 2 . We co nsid ere d th e vario us dimensions of operational resilience readiness, includ ing str at eg y, governan ce , the n eed f or a tr ans for mati on progr amme and implementation of an approp riate ope rat ingmo del . Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 83 The C omm it t ee r eviewe d the G ro up’ s op er atio nal r esi lien ce readiness plans, a nd provided feedback on the proposed timeline , third-party support and process map. We d iscussed crit er ia for t he sc re ening o f impo r t ant bu sine ss s er vic es an d consider ed the involvement of internal and extern al suppliers in operational readiness. The Committee made recommendations on the appropri ate go vernance structures for th e pr oje ct an d on th e suit ab le level s of ad vis er sup po r t . Supplier risk management The C omm it t ee r ec eived a d et aile d re po r t on th e f ind ings of a thir d-p ar t y sup pli er ass ura nc e rev iew co ndu ct ed by th e 2 nd and 3 rd line s of defe nce , bas ed o n indus tr y b es t pr act ic e. We not ed th e pe r form anc e of key sup pli er co ntr ols , in clud ing con tr act govern anc e, du e diligen ce , dat a se curi t y and au dit s . We also su ppo r t ed key ac tio ns agr ee d wit h man agement , incl uding im pr oved over sight t hr ough a p ro cur em ent for um , alongside implementation of a pro curement fram ework. We supp or t ed r ec omm end atio ns for s tr eng theni ng the Gr oup p ro cur eme nt fun cti on an d re que st ed f ur th er ac tion , including a gap analysis of third-p ar t y supplier management , by the in ter nal au dit f unc tion . COVID -19 pandemic The C omm it t ee c onti nued t o r eview t he Gr oup’s ongoing re spo nse t o th e COV ID -19 pan dem ic, in clu ding th e vari ous loc kdow n sc enar ios s et out by t he U K Gover nmen t . Thr oug h ongoing enga gement w ith r eg ulat or s, in clu ding th e FCA , S aga was fo cus ed on p rot ec ting o ur cus t omer s . Mor e r ec entl y, theC omm it t ee c onsi der ed t he ne ces sa ry s t eps t o eme rge str on ger fr om th e imp act of t he C OVI D-19 p and emic as theT ravel bu sine ss r esum ed op er ati ons . Conf lict s of interes t management The C omm it t ee r eviewe d pot ent ial c onf li ct s of int er es t that cou ld aris e fr om t he Gr ou p’ s organis ati onal s tr uct ur e, including cross-entity direct orships, and noted regulatory expe ct ati ons in t his ar ea . Th e Com mit t ee s upp or t ed ongoi ng fur t her a cti on t o ensur e a r obu st l evel of pr ot ect ion f ro m conf lict s, inc luding training for the le adership t eam, str eng then ing th e pol icy, and an imp rove d pr oc ess f or identifying, documen ting and mitig ating potential conflicts. Risk function design The Committee discussed the increasing dema nds and expe ct ati ons of r eg ulat ors o n ris k manage ment a nd supp or t ed a r evi ew of the d esig n of th e 2 nd line funct ion, toen sur e suf f icie nt cap aci t y exis ts t o f acili t ate s tr ong r isk management and g ood busines s and key stakeholder partnerships. Julie Hopes Chair , Risk Committ ee Risk C ommitt ee Repor t continued Corp orat e Governance S t atement Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 84 Annual S t atement Remuneration Policy c.15% Regulatory developments c.10% Senior management remuneration c.30% Share schemes c.25% Colleague compensation and benefits structure c.20% The Committee’ s responsibilities • Set an d mon it or th e Remu ner atio n Polic y for s enio r executives, considering relevant legal and regulat ory requirem ents and all relevant factors to ensur e alignment with delivery of value ov er the long term. • Determine and monito r remuneration pac kages forE xecu ti ve Dir ec to rs , the C hair man an d seniormanagement. • Work with the Nomination Commit tee regarding workforce structur e, reward incentiv es and conditions. • Review wo rk fo rc e re mune rat ion a nd inc ent ive pr ogr amm es t o enc our age des ira ble c ultu re , behaviour and respons ible risk - taking . • Determine all aspect s of share-base d incentivearrangements. • Review a nd adm inis te r empl oyee sh ar e sch eme s. • Set key p er fo rman ce in dic ato rs (K PI s ) for t he AnnualBonus Plan and long -term incentives. • Prepar e a Director s’ Remuneration Repor t annually . The C omm it t ee’s T erms of R efer enc e wer e rev iewed during t he yea r ( app rove d by the B oa rd o n 20Se pte mbe r 202 1 ) and ar e availa ble o n our corporatewebsite ( ww w.corporate.saga.co.uk/ about-us/ governance ). Commit tee evaluation An evalu atio n of th e Co mmit t ee’s eff ect iven ess t o ok pla ce du ring th e year as p ar t of t he B oar d ef fe ct iven ess rev iew ( se e page 6 9). The r eview i ndic at ed th at the C om mit t ee me mbe rs hadt he rig ht bal anc e of sk ills , dis char ged th eir key re spo nsib ilit ies ef fect ivel y and we re ab ly su pp or t ed by it s re mune rat ion c ons ult ant s . Th e foc us for 2 02 2/23 will in clud e fur ther c ons ider ati on of t he imp act o f policies and practices on a ll colleagues. What we did during th e year Tim e spe nt on m at ter s Committee composition and attendance Members ( all are independent Non- Executive Directors ) Member since Max. possible meeting s Attendance Eva Eisenschimmel (C h a i r) 4 Apr 1 9 7 7 Julie Hop es 4 Apr 1 9 7 7 Orna NiChionna 29 M ay 14 7 6 Cont ent s Annual Statem ent Pages 85- 8 7 Remun er atio n at a gl anc e Pages 88 -8 9 Directors’ Remuneration P olicy Pages 90 - 93 Annual Report on Remuneration Pages 9 4 -106 Sing le t ot al f ig ure o f rem uner at ion Page 94 Annual bonus outcomes Page 95 Scheme inter est s awarded Page 98 Directors’ shareholdi ngs Page 99 Wider workfor ce pay policies Page 100 Sha reh old er vot ing at th e Annu al General M eeting (AGM) Page 104 Ser v ice c ont ra ct s an d let t ers ofappointments Page 104 Co mpli anc e wit h UK C orp or at e Governance Code Pag es 105- 106 Eva Eisenschimmel Chair , Remuneration Committee Directors’ Remuneration Re por t Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 85 Dear shareholder , I am ple ase d to p re sent t o you t he D ire ct or s’ Remune rat ion Rep or t fo r the ye ar end ed 3 1 Ja nuar y 20 2 2 whic h has b een app roved by b ot h the R emun erat ion C om mit t ee (the Commit tee ) and the Bo ar d. Rising to the challeng es As r efer enc ed in t he S tr at egic R ep or t , thi s year h as con tinu ed t o be ch alle nging f or so ciet y g iven t he c onti nue d ef fe ct s of th e COV ID -19 pa ndem ic. D es pit e th ese p re ssur es , I am ple ase d to s ay tha t the C omp any is in a mu ch s tr onger pos iti on th an a year ago. Our L ead ers hip T eam has ma de sig nif i cant p ro gr ess , delivering robust per formance , and has worked intensively to ensur e th at th e executi on of o ur st rat eg y st ayed on c our se. Our I nsur anc e Br ok ing and U nd er writ ing bu sine sse s, t he mains t ays of our b usi nes s, h ave per fo rme d wit h re silie nc e, meet ing our ex pec t atio ns in al l key are as . In 20 2 1, b oth o ur o cea n ship s wer e able t o b egin s ailing w ith fewer r es tric tio ns an d achi eved sat isf ac to ry l evels of oc cupa ncy. We also be gan a ph ase d re sumpt ion o f our T our Op er atio ns. W hil e we have t aken f ewer cus t ome rs on h olid ay than i n pr eviou s tim es , we ar e enc our aged by th e loyal t y of our g ues t s, t he sig ns of r etur ning c onf i denc e in over sea s tr avel for nex t ye ar and t he c ont inue d rel axat ion of C OVI D -19 travel restrictions. In sum mar y, our Lea der ship T eam has f ac ed int o a r ange of com pet ing ch allen ges wit h ski ll and d edic ati on, e nab ling us t o be ag ile in o ur re sp ons e to C OVI D-19, w hile at t he s ame ti me deli vering o n our s tr ateg y and bu ildi ng the fo und atio ns for future growth. Comp any per forma nce in 20 21/22 The im ple ment at ion of o ur st rat eg y ( as out line d on pa ges 18-2 1 ) has b een m easu re d agains t the k ey per f orm anc e indic at ors ( KPI s) set out bel ow: • Und erly ing Pr of i t Bef or e T a x 1 dec re ase d by £2 3 .8 m to aLos sof (£6 .7 m) . • Availab le Op er ati ng Cas h Flow 1 increased to £75.8m. • Insu ran ce U nde rly ing Pr of it B efo re T ax 1 decreased 10% to £120.5m. • Net d ebt imp rove d to £ 72 9.0m . • Mot or an d hom e re ten tio n of 82 . 8% , 2 . 3p pt s ahe ad of2020 /21 . • Crui se lo ad f act or of 6 8% f or 20 2 1/22 and a s at 30J anua ry 2 02 2, 74 % for 20 22 /23 . • Crui se p er diem w as £ 29 9 for 2 02 1/22 an d as at 30J anua ry 2 02 2, £ 3 1 7 for 20 2 2/23 . • Cus to mer n et pr om ote r sc or e (NP S) incr eas ed t o 4 9. • Over all c ol leag ue engage ment in cr eas ed t o 7 .7 out of 10. • Co lleag ue en gagement w ith o ur valu es of 7 . 8 out of 1 0. Changes t o the Bo ard The re wer e no c hange s to t he B oar d duri ng the ye ar . Salar y incr eases f or 20 21/22 Euan Sutherland was awarded an inflationar y salary incr ease of 1 .5% fo r the f inanc ial ye ar 202 1/22 align ed wi th th e all- co lleag ue in cr eas e. In l ine wi th th e dis clos ur e in the 2 02 1 Dir ec to r’s Remune rat ion R epo r t , Jam es Q uin did n ot r ece ive an in f lationary increase a nd, instead, his salary w as increased fr om £ 370,0 00 t o £ 4 3 0,00 0, ef fect ive 1 Ja nuar y 20 2 1 . 2021/ 22 bonus In Ap ril 20 2 1 , t arget s wer e set f or th e 202 1/22 a nnua l bo nus , ta king int o ac co unt th e tur bule nt tr ading o utl oo k and t he Company’ s business plan. The specific targets are shown onpage s 96 -9 7 , togethe r wit h the d egr ee of a chieve ment forea ch . The C omm it t ee c onsi der ed t he level of b on use s achi eved in re spe ct of t he t arget s s et for 20 2 1/22 an d not ed t hat th e meas ur es and t a rget s had b een c ar eful ly sel ec te d to r ef le ct the c hall engin g out loo k for t he bus ine ss at th e tim e. Th e annua l bo nus me asur es s ele ct ed wer e se t out in l ast ye ar’s Dir ec to rs’ Remun er atio n Rep or t a nd wer e sp eci f ic ally ta ilor ed t o th e key ar eas w hich r eq uir ed st ro ng pe r form anc e during t his p erio d of ex te nde d unc er t aint y. The m anagem ent te am have del iver ed s tr ong ly again st th es e meas ur es and ta rget s. N oti ng that G overn ment s upp or t was n ot sou ght orus ed, t he C omm it t ee judge d it was ap pr op riat e to aw ard abon us payou t in lin e wit h the a chievem ent of t he b onus ta rget s whic h had b een s et . Page 95 se ts o ut th e cal cul atio n for t he 20 2 1/22 bo nus wh ich paid o ut at b et ween 8 5% and 8 7% o f max imum fo r theExec utive Directors. Euan Su the rlan d will r ec eive a b onu s of £ 9 09, 9 37 . Jam esQu in will r ec ei ve a bon us of £ 4 6 5,6 3 6. I n line w ith ourap pr oved Poli cy, all bonu s awar ds ar e paid o ne-t hir d in deferred share s and two-thirds in cash. 201 9 long-term inc entive pl an (L TIP) ves ting Jam es Qu in was g rant e d the 20 1 9 L TIP on 1 2 Aug us t 20 19 in line wi th t he C ompa ny’s norm al L TIP cyc le. Eu an Su ther lan d join ed par t-way thro ugh t he Co mpa ny’s norm al L TIP cyc le and was t her efo re g ra nte d a pr o-r at a awar d on 6 J anua ry 2020. It is cu rre ntl y anti cipat ed t hat t he r eturn o n cap it al em ploye d (ROC E ) pe r form anc e co ndi tio n will r esu lt in no p ro po r tio n of the awa rd ves ti ng (25% of the awa rd). N o pr opo r ti on of th e L T IP awa rd is c urr ent ly exp ect ed t o ves t in r esp ec t of th e total shar eholder r eturn (TS R) per formance of the Company over this p er fo rman ce p eri od (25% of th e awar d). Per form anc e again st th e re main der of t he L TIP awar d , whic h rel ate s to o pe rat ion al and s tr at egic m etri cs , is exp ec te d to re sult in 2 0% of t his pr op or t ion of t he awar d ves ting (5 0% ofthe awa rd ). This is exp ec te d to l ead t o an over all ve sti ng of10 % for t he 20 1 9 L TIP awar d ( on 1 2 Augu st 20 2 2 for Jam es and o n 6 Jan uar y 20 23 for Eu an) . 1 Refer to Alternative Performance Measures Glossary on page 201 f or definition and explanation Annual S t atement continued Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 86 Remune ratio n Policy ( the Policy) Our c urr ent Poli cy was ap pr oved by sh ar ehol der s at th e 2020 AG M wit h a vote of 9 7 .98 % . Ch anges we re m ade at that t ime t o bri ng the Po licy in l ine wi th 20 1 8 UK C orp or at e Gover nanc e C ode a nd be st p ra cti ce . We have bee n rev iewing the ap pr op riat ene ss an d alig nment o f our cu rre nt Polic y in light of t he evol ving b usin ess s tr at eg y a nd, i n par t icul ar , the gr ow th s tr at eg y, follow ing a p erio d whe re t he fou ndat ion s for gr ow th h ave bee n our fo cus . We ar e curr ent ly engag ing wi th major sharehol ders to determine whether to bring forwar d anew Poli cy in 20 22 , whi ch wou ld be a ye ar ah ead of t he normal three-year renewal period . What we achieved during the year – m att ers discussed, decisions made and actions taken • Approved Executiv e Director and Executive Leadership T e am sal ar y inc re ase s for 20 2 1/22 . • App rove d the b usi nes s and p ers onal m etr ics fo r the 202 1/22 a nnua l bo nus . Det ail s of th e per son al ob jec tive s for th e E xecu tive D ir ect or s can b e foun d on p ages 96 - 97 . • Mad e gr ant s in A pri l 202 1 un der t he Re st ric te d Sha re Pl an (RSP) for the Executive and Senior Leadershi p T eams. • Rec omm end ed th at the B oa rd ap pr ove th e award o f Free Sha re s to al l eligi ble c oll eag ues in N ovemb er 20 2 1 . • Reviewe d th e governan ce an d pr oc ess es of t he fo ur Saga Sha re Pl ans in o per at ion an d co nf irm ed th at th ey met th e necess ary st andar ds and were well communicated. • Reviewe d th e pr opo sal t o r evisi t the p ens ion s che me design for all colleagues, includin g the closure of the defined benefit scheme. • Consider ed the Environmental , Social and Governance agenda , r eviewe d pr ogr ess a gains t the a cti ons t o r edu ce our gend er pay ga p and di scus se d the w ider d iver sit y, equi t y and in clus ion ( DE& I) s tr ate g y. • Not ed t he voti ng re sult s o n our Re mune rat ion R epo r t atthe 2 02 1 AGM an d co nsul te d wit h the l arges t shareholders who v oted aga inst the resolution to seek clarity on the reasons for this. • Reviewe d th e 202 1 gen der p ay re por t . • Co nduc te d a mid-ye ar r eview of exec uti ves’ per son al objectives and agreed the timeli ne and a pproach to setting objectives for 2022/23. • Dis cuss ed h ow the C om mit t ee wou ld r eview wi der workfor ce pay and ensure alignment of incentives thr oug hou t the C omp any wi th it s cu ltur e an d st rat eg y . Wider workforce considerations In mak ing de cisi ons o n executi ve pay, the C ommi t te e considers wider w orkfor ce remuneration and conditions, asout line d on p ages 10 0 -101 . We co ntin ue t o be as f ocu sed on our c oll eag ues as w e are o n our c ust om ers a nd we r eview our r ewar d, b enef it s and c are ers p ack age t o ensu re we rem ain c omp eti tive in t he ma rket . We c onti nue t o engage wit h col leag ues o n execut ive r ewar d mat t ers t hr ough o ur Peopl e Co mmi t te e, whi ch I at t end r egu larl y. Deta ils of ou r Peopl e Co mmi t te e can b e foun d on page 2 6. As pa r t of our c omm itm ent t o fair nes s, t his r epo r t co nt ains det ails o f the p ay and c ond itio ns of ou r wid er work f or ce , the cas cad e of inc ent ives t hr ough out o ur bus ines s and o ur Gr oup C hief E xecu ti ve Of f ice r to c oll eag ue pay r ati o. Det ai ls of Saga’s gender pay r ep or t c an be fo und o n our web sit e ( w w w.saga.c o.uk/ gender-p ay-review ). Shareholder consultation and looking ahead The Committee consulted with shareholders at var ious poin ts t hr ough out t he ye ar as ap pr opri at e. At t he 20 2 1 AGM , shareholders support ed the Directors’ Rem uneration Report wit h a voting ou t com e of 7 7. 72 % . Wh ilst I a m ple ase d that t he majority of shareholders supported the resolution, it was impo r t ant t o us t o unde rs ta nd th e re aso ns be hind t he vot es agains t it . In th e week af ter t he AGM , I wr ot e to t he la rges t shareholders who v oted aga inst the resolution to understand the r eas ons f or th eir vot e. Th e Rem uner ati on C ommi t te e appreci ates and values time taken by shareholder s who expressed the ir vie ws and understands that these were prim aril y co nnec te d to t he p ayme nt of for mulai c bon use s in re spe ct of 2 020/21 , wh en t aking i nto a cc ount t he r ange of chal lenges ex per ienc ed by t he C omp any, our cust om ers a nd sharehol ders during the year . Follo wing this valuable e xchang e with shareholders, the Co mmit t ee d ete rmin ed th at the p oint s r ais ed wer e it ems whic h had b een c ons ide re d when t he r elevan t bon us dec isio ns wer e mad e and , whe re p os sibl e, ha d als o bee n ta ken int o ac co unt in th e set t ing of t arget s . In a ddit ion , th e Co mmit t ee c ons ider ed b on uses i n the b ro ade r co ntex t of the business and our stakeh olders when determining the level of b onus awa rd s and wi ll co ntinu e to d o so ea ch yea r . Wedid not , t her efor e, c on side r the vot ing ou tc om e to b e indic ati ve of a st ruc tur al o r sys tem ic pr ob lem w ith t he bo nus desi gn , nor t he Poli cy as a wh ole . Th e Com mit t ee w ill continue its constructive dialo gue with shareholders and see k to in co rpo rat e th is fee dba ck int o it s fu tur e remuneratio n decisions. Conclusion I hop e you f i nd th e inform ati on co nt aine d in thi s rep or t helpful, thou ghtful and clear . I welc ome a ny fee dbac k fr om t he C ompa ny’s shar eh old ers ,an d you can c ont a ct me at a ny time a t eva.e isen schi mmel @s aga .co .uk if you h ave any que st ions orco mme nt s on thi s rep or t . Eva Eisenschimmel Chair , Remuneration Committee Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 87 Remuneration at a glanc e Remune ratio n in the Gr oup 202 1/ 22 A nnual b onus and 2 01 9 long-term inc entive pla n (L TIP) out com es For 202 1/2 2, t he Gr ou p Chie f E xecut ive O f f i ce r (CEO ) and G rou p Chie f Fin anci al O f f i cer (CFO) had a m axi mum bo nus opp or t unit y o f 150 % of sa lar y an d 125% of s ala ry r es pe cti vely. The over all b on us out c ome i s set ou t in th e ta ble b elow. Nodis cr eti on was ap pli ed t o the fo rmul aic ou tc om e. Fur the r det ails a re s et out o n pages 9 6 -97 i n the A nnu al Rep or t onRem uner ati on . Performance condition Weig hting Threshold (20% pa yout ) Ta r g e t (50% p ayout) Maximum (100% payout ) Outcome achieved (% of aw ar d) 20 2 1/2 2 Annual bon us outcome Insurance Un derlying Pro f it B efor e T ax 1 2 1% 100% Sag a Service s Lim ited ret ention 1 4% 52% 2021/22 Cru ise load factor 3. 5% – 202 1/22 C rui se p erdiem 3 . 5% 100% 202 2/23 C rui se lo ad fa ct or ( at 30 J anu ar y 202 2) 3 .5% 100% 202 2/23 C rui se pe r diem ( at 30 J anu ar y 202 2) 3 .5% 100% Net d ebt 2 1% 85% Personal obj ectives 30% C EO : 9 6 % CFO : 1 00 % To t a l 100% C EO : 8 5 . 4% CFO : 86. 6% The c har t b elow s hows t he ou tc ome o f the 2 01 9 L TIP awar ds , fo r the p er fo rman ce p erio d en ded 3 1 J anuar y 2 02 2 . 20 19 L TIP outcome Relative total shar eholder return 25% – Retu rn on c apit al e mpl oyed 2 5% – Op er atio nal an d st rat egi c measur es 50% 20% To t a l 100% C EO : 1 0 % CFO : 1 0% T ot al s pe nd on p ay £118.3m 2020/21 – £ 130. 3 m 201 9/ 20 – £125 .6m CEO pay r atio t o th e medi an emp loye e 76:1 2020/21 – 76: 1 201 9/ 20 – 4 1:1 General incr ease for all e mpl oyees 1.5% 2020/21 – 1 . 5% 20 19/20 – 2.0 % 1 Refer to Alternative Performance Measures Glossary on page 201 f or definition and explanation Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 88 Euan S uth erl and Grou p CE O £ 2, 11 8 ,4 71 2, 38 6, 45 6 James Quin G rou p CF O £ 1,118,544 1,300,079 202 1/ 22 T otal singl e f igur e remun eratio n 202 1 RS P awards g rant ed Shareholding of the Executiv e Directors On 3 0 Ap ril 20 2 1 , the s ec ond R SP awa rd wa s gr ant ed t o the C EO and C FO. Det ails of t he awar d ar e set o ut b elow. Director Basis of award Dat e of g r ant Num be r of shares grant ed Fac e valu e pe r sha re 3 T ota l fa ce va lu e of award Gr oup C EO Euan Sutherland 10 0% o f sal ar y 3 0 A pril 2 02 1 1 84 , 258 £3 .856 0 £ 7 10, 50 0 Gr ou p C FO Jam es Qu in 85% of s alar y 30 Ap ril 20 2 1 9 4,7 8 7 £3 .8560 £365,500 The t ab le se ts o ut th e sha re hol dings of t he E xec uti ve Dir ec to rs at 3 1 Ja nuar y 20 2 2. Fur th er det ai l is set o ut on p age 99. Director Sharehol ding requirem ent (% of salary) Sh ar es ow ne d outrig ht (% of salary) 4,5 Sh ar es su bj ec t to continued employment (% of salary) 5,6 Gr oup C EO Euan Sutherland 250% 31% 100% Gr ou p C FO Jam es Qu in 200% 10% 9 4% 20 2 1/2 2 2020/21 20 2 1/2 2 2020/21 Salar y 710, 500 700 ,000 430,000 37 4,583 Benef its 12 ,889 13 ,6 41 1 3 ,1 4 3 13 ,03 5 Pension 42 ,63 0 42,000 25, 800 3 1 ,1 0 8 Bon us pai d in cas h 606 ,625 58 1,8 87 310, 4 24 306,2 12 Bonus deferred in shares 2 303,312 290,943 155, 212 153,106 Res tri ct ed Sh ar e Plan ( RS P) 2 710,50 0 490 ,000 365, 500 240 ,500 To t a l 2,386,456 2 , 1 1 8 , 47 1 1, 30 0,079 1,1 18,544 2 D efe rr ed b on us a nd R SP a war ds b ot h ve st a f te r th re e ye ar s 3 Rep r es ent s t he s ha re p ri ce o n th e day p ri or t o gr an t 4 R ep re se nt s ac tu al s ha re s own ed a t 3 1 Ja nua r y 20 22 5 Ba se d on a c lo sin g sh ar e pr ic e of £ 2 . 84 8 p at 3 0 Ja nu ar y 20 2 2 and t he y ea r- en d sa la rie s of t he E xe cu ti ve Di re c to rs 6 R epr e se nt s unve st e d RS P aw ar ds an d an nu al b onu s de fer re d sh ar e aw ar ds , as we ll a s L TI P awa rd s in t he t wo -ye ar h ol din g pe rio d ( inc lu de d on a n et oft axb as is) Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 89 Dir ect ors’ Remun erat ion Policy Summa ry of c urrent R emuner ation Policy an d implem entat ion in 20 22/23 The c urr ent Re muner at ion Pol icy (the Poli cy ) was appr oved by s har eho lde rs at th e Co mpa ny’s AGM on 2 2 Jun e 2020 . A summ ar y of th e Policy i s pr ovid ed be low an d the f ull ver sio n can al so be f ound o n our c orp or at e websi te ( w w w.c orp or ate . saga .c o.uk / abo ut-us/ governa nce) or fr om th e Gr oup C omp any S ecr et ar y at Sa ga’ s reg ist er ed of f ice . Key element s o f the Policy and t ime hori zon The g ra phic b elow i llus tr at es th e time h orizo n for e ach o f the key e leme nt s of our Po licy : Financial year 20 2 2 /2 3 20 2 3/2 4 2 0 2 4/2 5 2025/26 2026/27 Base salar y Benef it s and pension Annu al b onus – c ash Annual bonus – deferred shar es Res tri ct ed Sh ar e Plan ( RS P) Shareho lding requirement (Ongoing) All-colleague share pla n Chairman and Non-Executive Director fees Det ail s of eac h of th ese e lem ent s and t heir i mple ment at ion ar e in clud ed in t he t abl e be low, which p r ovide s th e foll owing information: • A summ ar y of th e key elem ent s of t he Poli cy. • The o per ati on of t he Poli cy in 20 2 1/22 and i t s pr op ose d op erat ion i n 202 2 /23. Policy element Summary of the Policy Operation in 2021/ 22 Proposed operati on in 2022/23 Base salary Prov ide s a bas e level of rem uner ati on t o sup por t re crui tme nt and r et enti on of Executive Directors with the necess ary experience and expertise to del iver the Grou p ’ s stra tegy . Sal arie s ar e set on appointment and reviewed annually. When determining an appropriat e level o f salar y , the Committee considers: • pay inc re ase s to ot her colleagues; • remuneration practices wit hin th e Gr oup; • any cha nge in sc ope , ro le orresponsibilities ; • the general per formance ofthe G r oup an d eac h individual; • the exp eri enc e of th e relevant Directo r; and • the economic environm ent. Euan Sutherland received asal ar y incr ea se of 1 . 5% , con sis te nt wit h othe r colleagues. Havi ng delaye d the i ncr eas e in the p rev iou s year, James Quin’s salar y inc re ase d fr om £3 70,00 0 to £ 4 30,0 0 0, ef fe cti ve 1 Jan uar y 20 2 1 . Sal arie s for t he E xecu tive Dir ec to rs wer e: • Euan Sutherland: £710,500 • Jam es Qu in: £ 4 30,0 0 0 Executive Directors received a 2. 5% inc re ase i n sal ar y, in line with the wider workforc e. As a r esul t , the s ala ries f or th e Executive Directors are: • Euan Sutherland: £728,262 • Jam es Qu in: £ 4 4 0,750 Benef its Provides a market-standar d level of b enef its . Ben ef it s m ay inclu de f amil y pri vate h eal th cove r , deat h in ser vi ce li fe ass ur anc e, a ca r allowance, subsisten ce expen ses a nd dis co unt s in line with o ther colleagues. Standard benef its provided. No chang e. Performanc e period: Vesting p erio d: Hol ding p erio d: Key Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 90 Policy element Summary of the Policy Operation in 2021/ 22 Proposed operati on in 2022/23 Pension Prov ide s a fair l evel of pe nsio n provision for all colleagues. Dir ec to rs may p ar ti cipat e in a defined contribution scheme. Ma ximum p ens ion contributions for Executive Dir ec to rs ar e alig ned w ith tho se of t he wid er wor k for ce (6% of sal ar y). Executive Directors received the fo llow ing : • Euan Sutherland: 6% of salary • Jam es Qu in: 6% of s ala r y No change. Bonus The A nnu al Bo nus Pl an pr ovid es a sig nif i cant incentiv e to the Executiv e Dir ec to rs , linke d to achievement in delivering goals t hat ar e clo sel y alig ned wit h the C omp any ’s stra teg y and th e cr eat ion of va lue fo r sharehol ders. In par ticul ar , the A nnu al Bon us Pla n supp or t s t he Company’ s objectiv es, allow ing th e set ti ng of annu al ta rget s bas ed on t he business ’ strategic o bjectives at that t ime , mea ning th at a wider range of performanc e metr ics c an b e use d that a re relevant. Awards are grant ed annually with per formance measur ed over one f inanc ial yea r . The R emun era tion Co mmit t ee w ill det erm ine th e maximum participation in the Annu al B onus P lan fo r eac h year, which will n ot excee d 150 % of sa lar y. 70% of awar ds wi ll be li nked to f i nan cial m easu re s. Specif ic measures , targets and weig htin gs may var y f ro m year t o year. At lea st o ne-thi rd of t he bon us will b e def err ed int o shar es ve st ing af t er t hre e years . Payout r ange is as f ollows (%of ma xim um payou t) : • Thr esh ol d: up to 20 % • T arget: 50 % • Maxim um: 100% Mal us and c lawb ack arrangements apply. Go od/ba d leaver p rov isi ons apply . Maxim um bonus oppor tunities were : • Euan Sutherland: 150% of salary • Jam es Qu in: 125% of s ala r y Performanc e measures and weight ings fo r the b onu s wer e as follows: • Insurance Un derlying Prof it B e f o r e Ta x 1 : 2 1% • Sag a Service s Lim ited ( SSL) reten tion : 14 % • 202 1/22 C rui se lo ad fa ct or and p er die m: 7% • 202 2/23 C rui se lo ad fa ct or and p er die m: 7% • Net d ebt: 2 1% • Personal obj ectives: 30% The maximu m opportunities for E xecu ti ve Dir ec to rs ar e unch anged an d ar e as fol lows: • Euan Sutherland: 150% of salary • Jam es Qu in: 125% of s ala r y The c urr ent int ent ion is t o set per formance measur es and weight ings fo r the 2 02 2/23 bonu s as follows: • Gr oup U nder lyi ng Pr of it Befo re T ax: 1 7 .5% • Net d ebt: 1 7 .5% • SSL re tent ion : 17 .5% • Crui se lo ad f act or an d pe r diems: 17 . 5% • Personal obj ectives: 30% The C omm it t ee is of t he v iew that t ar gets f or th e 202 2 /23 annual bonus are currently commer cially sensitive and the se t arget s wi ll be di scl ose d retrospectively i n the 2023 Directors’ Remuneration Report . Res tri ct ed S har e Plan (RS P) Awar ds ar e des igne d to incentivise the Executive Dir ec to rs over th e lon ger ter m to s ucc es sf ully impl emen t the C omp any ’s str ateg y . Awar ds of nil- c ost o pti ons ar e gr ant ed ann uall y up to a max imum of 1 0 0% of s alar y. RS P awar ds do n ot have any performance conditions but are s ubje ct t o an un derp in on vest ing . Awar ds ves t af t er th re e year s and ar e sub jec t to a f ur th er tw o-yea r hol ding p erio d, during w hich t ime s har es may not b e sol d othe r tha n for t ax . The R SP aw ard s wer e mad e at the normal levels: • Euan Sutherland: 100% of salary • Jam es Qu in: 85% of s alar y The C omm it t ee wil l rev iew share price p erform ance on vest ing t o det ermi ne whe the r any wind fal l gains wer e ma de. No change. 1 Refer to Alternative Performance Measures Glossary on page 201 f or definition and explanation Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 91 Remune ratio n Policy continued Policy element Summary of the Policy Operation in 2021/ 22 Proposed operati on in 2022/23 Shareh oldi ng re quire ment T o en sur e E xecu tive Dir ec to rs’ inte re st s ar e aligned w ith shareholders over the l ong t erm . The R emun era tion Co mmit t ee s et s form al shareholding guidel ines that will en co urage t he E xecu ti ve Dir ec to rs t o buil d up over a f ive-ye ar p erio d, an d th en subs equ entl y hol d, a sharehol ding equivalent to aper c ent age of sal ar y. • Euan Sutherland: 2 50% of salary • Jam es Qu in: 200 % of salary No change. All-c olleague share plan The C omp any op er ate s a HMReve nue an d Cus t oms Sha re I nce nti ve Plan(SI P). Sha re s that a re ke pt in th e plan f or f i ve year s will b e exempt fr om in com e t ax andna tion al ins ura nc e on thei r value . Saga c ont inue d to o per at e the S IP f or all c oll eag ues in 202 1 , wi th a Free S har e award o f £3 0 0 mad e in Novemb er 20 2 1 t o all elig ibl e full-time colle agues . Saga wi ll co ntinu e to p rov ide a ll colleagues with the opportunity to participate in colleague equit y arrangements . Chairman and Non- Executive Director fees Mon et ar y inc ent ives fo r the Chairman and Non-E xecutive Directors. The f ees fo r No n-E xe cut ive Directors are set at broadly the m edia n of th e com par at or gr oup. I n gener al , the l evel of fee in cr eas e for th e No n- E xecut ive Di re ct ors w ill b e set , t aki ng ac cou nt of any change in responsibility and considering the general rise in sal arie s acr os s the U K workforce. Fees fo r 202 1/22 w ere a s foll ows (Roger D e H aan waive d his fee f or 20 2 1): • Roger D e Haa n: Nil • Board memb er fee: £63,672 • Co mmit t ee C hair f ee: £ 10,0 00 • Senior Independ ent Dire ctor f ee : £40, 000 No ch ange t o Non -E xec uti ve Dir ec to rs or S enio r Independent Dir ector fee . Roger D e Haa n waive d his fe e up to O ct ob er 20 22 . Illus trat ion of app licatio n of the Policy The c har t b elow s hows an e st imat e of th e re mune rat ion t hat c ould b e r ec eived by E xe cut ive Di re ct ors u nder t he Pol icy an d is bas ed on t he no rmal R S P awar d level, r ath er th an th e lower i niti al awar d. 52% 38% 30% 28% Minimum Target Maximum Maximum (with 50% share price growth) 56% 43% 34% 32% Minimum Target Euan Sutherland Group CEO James Quin Group CFO Maximum Maximum (with 50% share price growth) 48% 27% 42% 34% 35% 28% 26% 13% £1,513 £2,059 £2,606 £2,823 44% 24% 33% 39% 27% 31% 25% 12% £855 £1,131 £1,406 £1,520 3,000 Fixed Figures shown (£’000) 2,500 2,000 1,500 1,000 500 0 Bonus RSP Share price growth Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 92 Ass umpt ions u sed i n det ermin ing the l evel of payo ut un der g iven sc en ario s are a s foll ows: Element Minimum Ta r g e t Maximum Ma xim um w ith 5 0% share price growth Fixed elements Bas e sal ar y for 20 2 1/22 . Ben ef it s p aid fo r 202 1/22 a nnua lise d for f ull yea r equi vale nt f igu re s. Pensio n in lin e wit h pol icy at 6 % of sa lar y. Annual bonus Nil . 5 0% of t he ma xim um oppor tunity. 10 0% of t he ma xim um oppor tunity. 10 0% of t he ma xim um oppor tunity. Restricted Shares 10 0% ve st ing of Restricted Shares . 10 0% ves ti ng of Restricted Shares . 10 0% ves ti ng of Restricted Shares . 10 0% ves ti ng of Restricted Shares plus the in cr eas e in valu e fr om 50 % sha re p ric e grow th. Awar d levels ar e 10 0 % of sal ar y for t he C EO, 85% of s alar y fo r the CFO. Awar d levels ar e 10 0 % of sal ar y for t he C EO, 85% of s alar y fo r the CFO. Awar d levels ar e 10 0 % of sal ar y for t he C EO, 85% of s alar y fo r the CFO. Awar d levels ar e 10 0 % of sal ar y for t he C EO, 85% of s alar y fo r the CFO. Sc enar io ch ar t s show m inimu m, t arget a nd ma ximu m sc enari os in a cc or dan ce wi th th e re gul atio ns, a s well as t he imp ac t of a50% s har e pri ce g row th on th e long-te rm inc enti ves fo r the m ax imum sc en ario. A ll sc en ario s do not a cc ount f or div ide nd equi vale nt s on Def err ed B onus P lan ( DB P) shar es o r RS P sha re s. Los s of of f ic e policy The C omm it t ee wil l hon our E xec uti ve Dir ec to rs’ con tr act ual e ntit lem ent s . Ser v ice c ont ra ct s do n ot co nt ain liq uidat ed dama ges cla use s. I f a co ntr act i s to b e te rmin ate d, t he Co mmi t te e will d ete rmine s uch m itiga tion a s it c onsi der s fair an d re ason abl e in eac h cas e. T her e ar e no c ontr ac tu al arr angem ent s th at woul d gua ran te e a pen sion w ith l imit ed , or no , abat eme nt on s everan ce o r earl y re tir eme nt . Th ere i s no agr ee ment b et wee n the C om pany an d it s Dir ec to rs or o the r col leag ues , p rov iding fo r co mpe nsat ion fo r los s of of fi ce o r empl oym ent th at oc cur s due t o a t akeover b id . The C om mit t ee re ser ves t he rig ht to m ake a ddit ion al pay ment s , whe re s uch p ayme nt s ar e mad e in good f ait h in dis char ge of an exis ting l egal obliga tio n ( or by way of d amages f or br ea ch of su ch an o bligat ion); or by way of set t leme nt or c omp ro mise o f any clai m aris ing in co nnec ti on wit h th e ter minat ion o f an E xecu tive D ir ect or ’s off ice or e mpl oyme nt . T o s ee t he f ull p oli cy o n los s of of f ic e, p lea se s ee p age 10 4 of t he 2 02 1 A nnu al R ep or t an d Ac co unt s w hic h is avai lab le o n our c or po ra te we bs it e ( www.cor porate.s aga. co.u k) . Recruitment an d promot ion policy The C omp any ’s princip le is t hat th e re mune rat ion o f any new r ecr uit wi ll be as se sse d in line w ith t he s ame p rinc iple s as for theE xec uti ve Dir ec to rs . Th e Co mmit t ee is m indf ul th at it wi she s to avoi d paying m or e th an it c onsi der s nec es sar y t o sec ur e apr eferr ed c and idat e wit h th e app ro pria te c alibr e an d expe rien ce n eed ed for t he r ol e. In s et ting t he r emun er atio n for new re crui t s, t he C ommi t te e will h ave regar d t o gui delin es an d sha reh ol der se ntim ent r egar ding on e- of f or e nhan ce d sho r t-term or long- term incentive payments as well as giving consideratio n to the approp riateness of any performan ce measures asso ci ate d wit h an awar d. Whe re a n exist ing c olle agu e is pr om ote d to t he B oar d, t he Poli cy woul d app ly f ro m the d ate o f pr omot ion b ut th er e woul d beno r et ro spe ct ive app lic atio n of th e Policy i n re lati on t o subs ist ing inc ent ive awar ds o r rem uner ati on arr angem ent s . Acc or ding ly, preva iling el ement s o f the r emu ner atio n pa ck age for an exi sti ng co lleag ue wo uld b e hon our ed an d for m par t of the o ngoing r emune rat ion o f the p ers on c onc ern ed . The se wou ld be d isc los ed t o shar eh old ers in t he D ire ct or s’ Remune rat ion Rep or t fo r the r el evant f in anci al year. The C omp any ’s policy w hen s et ting f ees f or th e app oint ment of a n ew Cha irma n or No n- E xecut ive Di re ct or is t o app ly t he pol icy whi ch ap plie s to c urr ent N on- E xecut ive D ire ct or s. T o s ee t he f ull p oli cy o n re cr uit men t and p r omo ti on , ple as e se e page s 107- 10 8 of t he 20 2 1 A nnu al Re po r t an d Ac co unt s wh ich i s avail ab le on o ur corpo rate webs ite ( w ww.cor porate.s aga. co.u k) . Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 93 Annual R epor t o n Remuner ation 202 1/ 22 A ctua l per form ance an d remun erati on out come s Sing le t ot al f ig ur e of r emu ner ati on fo r E xecut ive D ire ct or s for t he 2 02 1/22 f in anci al yea r ( aud ite d) The t ab le b elow s et s out t he sing le t ot al f ig ur e of r emune rat ion a nd br ea kdown f or ea ch Di re ct or in r esp ec t of th e 202 1/2 2 f ina ncia l year. Compa rat ive f ig ur es for t he 20 20/21 f in anc ial yea r have als o bee n pr ovid ed . Fig ur es pr ovid ed have b een cal culat ed i n acc or da nce w ith S ch edul e 8 of Th e L arge and M edi um-size d Co mpan ies an d Gr oup s (Ac co unt s and R epo r t s ) Regu lati ons 20 0 8, a s amen ded i n 20 13 . Period Salary £ Ta x a b l e benef its £ Pension £ Other £ To t a l f ixe d £ Bonus 1 £ RSP 2 £ LT I P 3 £ To t a l variable £ Single figure £ Euan Sutherland (Group CEO) 2021/22 710,500 12,889 42,630 – 766,019 909,937 710,500 – 1,620,437 2,386,456 2020/21 700,000 13,641 42,000 – 755,641 872,830 490,000 – 1,362,830 2,118,471 James Quin (Group CFO) 2021/22 430,000 13,143 25,800 – 468,943 465,636 365,500 – 831,136 1,300,079 2020/21 374,583 13,035 31,108 – 418,726 459,318 240,500 – 699,818 1,118,544 Roge r De H aa n (Non-Executive Chairman) 2021/22 Nil – – – Nil – – – Nil Nil 2020/21 Nil – – – Nil – – – Nil Nil Eva Eisenschimmel (Non-Executive Director, Remuneration Committee Chair) 2021/22 73,672 – – – 73,672 – – – – 73,672 2020/21 73,672 – – – 73,672 – – – – 73,672 Julie Hopes 4 (Non-Executive Director, Risk Committee Chair, Chair of SSL and SPF) 2021/22 176,511 – – – 176,511 – – – – 176,511 2020/21 178,216 – – – 178,216 – – – – 178,216 Gareth Hoskin 5 (Non-Executive Director, Audit Committee Chair, Chair of AICL) 2021/22 137,344 – – – 137,344 – – – – 137,344 2020/21 133,447 – – – 133,447 – – – – 133,447 Orna NiChionna (Senior Independent Non-Executive Director, Nomination Committee Chair) 2021/22 113,672 – – – 113,672 – – – – 113,672 2020/21 102,710 – – – 102,710 – – – – 102,710 1 A t hi rd o f th e bo nus a war d is d ef err e d int o sh ar es v es ti ng af t er t hr e e yea rs 2 T he f ac e val ue o n gr an t of th e R SP aw ar ds i s sh own i n th e t abl e ab ove a s th er e ar e no p er f or ma nc e co nd it ion s ot he r th an un de rpi ns t es t ed o n ves ti ng . Th eRS Pawa r d ves t s af t er t hr ee y ea rs 3 In 20 20/2 1 a nd 20 2 1/2 2 , no ne o f th e E xec ut ive D ir ec t or s ha d an L TI P aw ar d whi ch w as el ig ibl e t o ves t in t he ye ar Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 94 How we per forme d in 202 1/ 22 Bon us (audit ed in c onj unc tio n wit h det ai ls on p age 15 0) The d et ails of t he p er for manc e c ondi tio ns and o ut co mes aga ins t the t arget s fo r th e annua l bo nus in r esp ec t of th e 202 1/2 2 f ina ncia l year ar e sh own in t he t abl e bel ow. No dis cr etio n was ap plie d to t he fo rmul aic ou tc om e. Performance condition Weighting (based on 100% max) Threshold performance required 50% Target performance required Maximum performance required Actual performance Annual bonus value for threshold and maximum performance (% of max) Percentage of maximum performance achieved Actual annual bonus value ach iev ed ( % of s ala ry) 4 Euan Sutherland James Quin Insurance Underlying Profit Before Tax 5 21% £108m £113m £120m £120.5m 20% 100% 100% 31.5% 26.3% Saga Services Limited retention 14% 82% 83% 84% 83% 20% 100% 52% 10.9% 9.1% 2021/22 Cruise load factor 3.5% 75% 79% 85% 68% 20% 100% – – – 2021/22 Cruise per diem 3.5% £290 £292 £295 £299 20% 100% 100% 5.3% 4.4% 2022/23 Cruise load factor (at 30 January 2022) 3.5% 60% 64% 70% 74% 20% 100% 100% 5.3% 4.4% 2022/23 Cruise per diem (at 30 January 2022) 3.5% £285 £287 £290 £317 20% 100% 100% 5.3% 4.4% Net debt 21% £810m £760m £720m £729m 20% 100% 85% 26.8% 22.3% Personal objectives 30% 0% 100% 43.1% 37.5% Total 100% 128.1% 108.3% Total calculated (£) £909,937 £465,636 Total payable (£) £909,937 £465,636 4 T he a nnu al b on us p er ce nt age a ch ieve d fo r ea ch E xe cu ti ve Di re ct o r is b ase d on t he ir m ax imu m bo nu s po te nti al a nd s how n as a p er c ent ag e of an nu al sa la r y 5 Refer to Alternative P erformance Measures (APM) Glossary on page 201 for definition and e xplanation Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 95 Annual R epor t o n Remuner ation continued Individual performance assessment The R emun era tion C om mit t ee as se sse d E xecut ive D ire ct or s on th eir ind ivi dual p er fo rman ce i n the ye ar agains t fou r key are as: p eop le, g row th, r isk an d cus to mer a dvo cacy (f inanc ial r es ilien ce h as be en us ed as an a lte rnat ive t o cus to mer a dvo cac y for th e CFO). This und erpi ns th e lea der ship r esp on sibil it y t o cr eat e a risk-aware and r es po nsib le cul tur e, a nd t o ensur e th at aro bus t risk f ra mewor k was emb ed ded a cr oss t he G ro up. Det ail s of the i ndi vidu al’s achievem ent s ar e set ou t in th e t able b el ow. Objectives overview Committee assessment and basis of achiev ement for 2021/22 Euan Sutherland – Maxi mum: 30 % of over all b onus . A chievem ent: 2 8.75% of over all b onu s. People • Maint ain colle ague engagement • La unch o f Saga va lues • Working@ Saga fu tur e visi on an d str at eg y • Main tai ned s tr ong c oll eag ue engagem ent ac ro ss S aga: 93 % par t icip atio n in mo st r ec ent col leag ue enga gement s ur vey, scoring 7. 7 out of 1 0, 0. 4 high er th an in Febr uar y 20 2 1 . • Suc ce ss ful l aunc h of th e value s and fe edb ack t hat we ar e li ving t hem s co re d 7 .8 ou t of 10in t he mos t re ce nt co lleag ue e ngagement s ur vey. • The r en ovatio n of our Enb ro ok hu b was co mpl et ed on t ime an d to b udget . • The m os t re cent S aga S piri t Sur vey sh owed in cr ease d co lle ague s upp or t fo r Working @ Saga init iati ves , wit h 94 . 5% of re sp ond ent s pr efer ring a fo rm of hyb rid wo rking . • We are o per ati ng our hyb rid m ode l, wi th all c oll eag ues e nab led t o work f r om ho me, w ith t he pr ovisi on of a r enova te d Enbr oo k hub alo ng wit h co ntinu ed o per ati ons at s ate llit e of f ice s enabling collaborat ive working. • We publi she d our c olle agu e te chn olog y visi on and a re o n tr ack w ith t he de liver y of I Tto e nabl e Working@ S aga, s uch a s the A / V solu tion a nd Mi cr osof t T e ams int egr at ion . • We have delive re d a re duc tio n in our e st at e, mov ing t owar ds a hyb rid way of wo rki ng. Gr ow th • Deli ver th e Gr oup -wid e change priorities • Insurance market st udy improvements and T r avel exceptional experiences plan • Del iver im pr oved an d consist ent database visibilit y and r epor ting • New br an d iden tit y a nd to ne of voic e • The G ro up Ch ange Pr ogr amm e has b een d elive re d. T her e has b een a s igni f ic ant st ep -c hange in deli ver y of pr og ram mes a cr oss t he G rou p in 202 2 . • Insu ran ce m arket s tu dy pr o duc t develo pme nt was c ompl et ed on t ime . The F ina ncia l Co ndu ct Auth ori t y (FCA) c omm ente d po sit ivel y on S aga’ s rea dine ss ver sus ot her s in th e mark et . The ope rat ion al ser v ic e re quir eme nt s for la unch we re m et and t he s er vic e levels a rew ithi n planned paramet ers. The T ravel team has spe cif ied and delivered the exceptional experiences plan i n Cru ise an d has m ade go od pr ogr es s to war ds co mpl eting t he r ese t of T o urOp er ati ons to deliver exceptional e xperienc es for 2022 . • Fu ll database marketing ef fectivenes s audit completed and st andar dised monthly databas e rep or t ing now i n pla ce . Mar keting E f fec ti venes s Pr ogr amm e laun che d as a r esul t , lea ding t o a seri es of ini tiat ive s com plet ed t o im pr ove marke ting inves tm ent ef f icien cie s acr os s the G ro up. • New id enti t y ro lle d out a cr oss m arket ing , key ser v ice d ocu ment at ion , digi t al exp erien ce , internal communications and buildings. • Strategic brand platform, Experience is E verything, launched, incl uding ful l colleague la unch, media lau nch, and integrated mar keting campaign. Risk • Rol e mod el and p r omot e arisk c ultu re • St ep -c hange th e pa ce at which incidents/issues and r oot c aus es ar e identif ied • Imp rov ing tr end in s pe ed of r ep or t ing and c los ing inci dent s a cr oss S aga . • Effe ctive management of top risks. • Timely and effective closure o f audit actions. • Maintenanc e of effecti ve risk management system . • Promot ing a Speak Up/listening cult ure. Customer advocacy • Vulnerable customer group pr oject • Inc re ase n et pr omo ter sco re( NP S) • Insu ran ce c ont ac t ce ntr e remuneratio n • Vulnerabilit y polici es in place . • Sys t em r ede sign ed t o alig n re cor ding o f vuln er abili t y trig ger s and n eed s acr os s the G r oup, consistent with F CA categor ies. • Colle ague tr aining deliver ed. • Vu lnerability records contin ued to improv e steadily mo nth on mon th. Customer satisfaction and N PS fo r cus to mer s in vul ner abl e cir cums t anc es a re c ons ist ent ly hig her c omp ar ed wi th cus to mer s wit h no vu lner abi lit y f l ag. • Acc or ding t o an in dep end ent r eview by P w C, S aga has d one m or e to a lt er it s ap pr oac h to p eo ple in vulnerable circums tanc es than other companies , partic ularly regarding def ining vulnerable cus to mer s, c ust om er seg men tat ion , r ec or ding of v ulner ab ilit ies an d co lle ague t ra ining . • Inc re ase d NP S of 49 . • Co mple te d rev iew and im ple ment at ion of n ew st ruc tur e for b ase p ay in our c ont ac t ce ntr e to con tinu e to im pr ove align ment t o cus t ome r out co mes . Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 96 Objectives overview Committee assessment and basis of achiev ement for 2021/22 James Quin – Ma xim um: 30 % of over all bo nus . Ac hieveme nt: 3 0% of ove ral l bon us . People • Maint ain colle ague engagement • La unch o f Saga va lues • Working@ Saga fu tur e visi onan d str at eg y • Main tai ned s tr ong c oll eag ue engagem ent ac ro ss S aga: 93 % par t icip atio n in mo st r ec ent col leag ue enga gement s ur vey, scoring 7. 7 out of 1 0, 0. 4 high er th an in Febr uar y 20 2 1 . • Suc ce ss ful l aunc h of th e value s and fe edb ack t hat we ar e li ving t hem s co re d 7 .8 ou t of 10 in t he mos t re ce nt co lleag ue e ngagement s ur vey. • The r en ovatio n of our Enb ro ok hu b was co mpl et ed on t ime an d on bu dget . • The m os t re cent S aga S piri t Sur vey sh owed in cr ease d co lle ague s upp or t fo r Working @ Saga init iati ves , wit h 94 . 5% of re sp ond ent s pr efer ring a fo rm of hyb rid wo rking . • We are o per ati ng our hyb rid m ode l, wi th all c oll eag ues e nab led t o work f r om ho me, w ith t he pr ovisi on of a r enova te d Enbr oo k hub alo ng wit h th e con tinu ed op er atio ns at sa tel lit e of f i ce s, enabling collaborat ive working. • We publi she d our c olle agu e te chn olog y visi on and a re o n tr ack w ith t he de liver y of I T to e nabl e Working@ S aga, s uch a s the A / V solu tion a nd Mi cr osof t T e ams int egr at ion . • We have delive re d a re duc tio n in our e st at e, mov ing t owar ds a hyb rid way of wo rki ng. Gr ow th • Deli ver th e Gr oup -wid e change priorities • Performanc e monitoring for s tr ateg ic an d f inancial plans • Pension consultation • Insurance market st udy improvements and T r avel exceptional experiences plan • The G ro up Ch ange Pr ogr amm e has b een d elive re d. T her e has b een a s igni f ic ant st ep -c hange in deli ver y of pr og ram mes a cr oss t he G rou p in 202 1. • Rob ust f or eca st s th rou gho ut 20 2 1 , pr ompt ly r ef le cti ng the c hang ing and m or e cha lleng ing travel environment and enabling the right discussions aroun d tactic al and strateg ic changes ( e. g. c os t s and T ravel re set). • Cas h for ec ast s in li ne wi th pl an de spit e ch alle nges , highl ight ing tha t the rig ht ac tio ns wer e taken thro ughout the year . • Insu ran ce o n tr ack a cr oss a ll KPI s, h ighlig hti ng the r ight se t of tr adin g re spo nse s to challenging market environment. • In-year financ e transformation ac tions complet ed. • Much-im proved plan ning process and monthly repor ting. • Defined benef it pension scheme closed and new de f ined contribution scheme in place. Positive engageme nt wit h T r us te es th rou gh th e pr oc ess a nd c onsu lt atio n gener all y well- re cei ved by coll eagu es wit h str ong engagem ent thr ough out . • Insu ran ce m arket s tu dy pr o duc t develo pme nt was c ompl et ed on t ime . The FCA c omm ent ed pos iti vely o n Saga’s readi nes s versu s oth ers in t he ma rket . T he op er atio nal s er vic e re quir eme nt s for la unch w ere m et and t he s er vic e levels a re w ithi n plan ned p ar amet er s. TheT ravel t eam ha s sp ecif ied an d deli ver ed th e except iona l expe rien ce s plan i n Cru ise an d hasma de goo d pr ogr es s tow ard s co mple ting t he r eset o f the T our Op er atio ns t o deli ver exceptional experiences for 2022 . Risk • Rol e mod el and p r omot e arisk c ultu re • St ep -c hange th e pa ce at which incidents/issues and r oot c aus es ar e identif ied • Imp rov ing tr end in s pe ed of r ep or t ing and c los ing inci dent s a cr oss S aga . • Effe ctive management of top risks. • Timely and effective closure o f audit actions. • Maintenanc e of effecti ve risk management system . • Promot ing a Speak Up/listening cult ure. Financi al resilien ce • Financi al resilien ce • Str at egic man agement ofstakeholder s • Increase NPS • Str ess tes ts have withstoo d challenging external tr avel environment and have operated ef fectively as an early warning sy st em, suppor t ed by robust in-year forecast s . • Enhan ce d f ina ncia l f lexib ilit y t hat en abl es th e Gr oup t o app ro ac h 202 2/23 w ith m uch gr eat erco nf id enc e. • Pension valuation completed. • Main tai ned p osi ti ve rel atio nshi ps wi th th e bank s an d reg ula tor s . • Inc re ase d NP S of 49 . Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 97 Long -term incentiv es v esting in respect of 2021/ 22 performance The fo llow ing t abl e det ails t he 20 1 9 L TIP th at is due t o ves t on 9 Au gus t 20 22 . For mo re d et ails o n how we p er for med ag ains t the s pe cif i c con dit ions o f the awa rd , pl ease s ee ‘ Re mune rat ion at a g lan ce’ on page 8 8 . Name Face value of award (% of salary) Shares awarded 6 Value of award at grant (£) End of performance period Date of vesting Proportion of award vesting as percentage of maximum No. of shares vesting Value of the award attributable to share price growth (£) Value of award vesting (£) 9 Euan Sutherland 100% 99,113 7 700,000 31 January 2022 6 January 2023 10% 9,911 – 28,227 James Quin 200% 121,566 8 740,000 31 January 2022 12 August 2022 10% 12,156 – 34,620 Long-term incentives ( audited) Name Award type Basis on which award made Face value of award (% of salary) Shares awarded Percentage of award vesting at threshold performance Maximum percentage of face value that could vest (%) Performance conditions Euan Sutherland 2019 LTIP Annual 100% 10 99,113 11 25% 100% • Orga nis ati on al an d st ra te gic mea sur e s: 50 % • Comp arati ve total sharehol der return (TS R): 25% • Retu rn on c ap it al e mpl oyed (RO CE ): 2 5% 2020 RSP Annual 70% 198,831 11 No performance conditions 2021 RSP Annual 100% 184,258 11 No performance conditions James Quin 2019 LTIP Annual 200% 12 121,566 11 25% 100% • Orga nis ati on al an d st ra te gic mea sur e s: 50 % • Comp arati ve TSR: 2 5% • ROC E: 25% 2020 RSP Annual 65% 97,589 11 No performance conditions 2021 RSP Annual 85% 94,787 11 No performance conditions 6 Number of shares awarded post consol idation 7 S har e p ri ce u se d to c al cu lat e awa r d for E uan S ut he rl an d was r e- c alc ul at ed p os t c ons ol id ati on exe r cis e in 2 02 0. T he or ig ina l S aga mi d- mar ke t quo te ( M MQ ) on 2 Ja nua r y 20 20 wa s 0. 51 70, p os t co ns ol id ati on t he e qui va le nt sh ar e pr ic e wa s 706 . 2 6p 8 S ha re p ri ce u se d to c al cu lat e aw ar d fo r Ja mes Q ui n wa s re -c al cu lat e d po st c on so lid at io n exer ci se in 2 0 20. T he o rig in al S aga M M Q on 9 A ugu st 2 0 1 9 was 0.44 56, post consolidation the equiv alent share price was 608.72p 9 S har e p ri ce u se d to c al cu lat e awa r d ta ke n as M MQ o n 3 1 Ja nu ar y 20 2 2 was 2 84 . 8 p 10 1 0 0% LTIP ag r ee d on r ec ru it men t on t he s am e te rm s as th e 20 1 9 LTIP sc he me; t he a war d wa s of f i ci all y ma de o n 6 Ja nu ar y 20 20 11 P ost consolidation n umber of sha res 12 A s pa r t of J ame s Q uin’s re cr ui tm ent , i t was a gr ee d he w ou ld b e awa rd ed a 2 00 % of s al ar y on e- of f awar d. F oll ow ing t his , hi s L TI P r etu rn ed t o 15 0% o f sa la r y in line with the Remu neration Poli cy Annual R epor t o n Remuner ation continued Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 98 Directo rs ’ sha re in terests ( audite d) The fo llow ing t abl e and ch ar t s et out t he eq uit y int er es t s hel d by the E xec uti ve and N on- E xecu ti ve Dir ec to rs: Director Shareholding requirement (% salary) 13 Current shareholding (% salary) Shares counting towards shareholder requirements 15 Beneficially owned Unvested n il-cost options held Vested but unexercised nil-cost options held Unvested SIP shares not subject to performance conditions Shareholding requirement met? LTIP nil-cost options subject to performance conditions RSP nil-cost options not subject to performance conditions Deferred bonus nil-cost options subject to performance conditions Other awards Executive Directors Euan Sutherland 250% 131% 325,842 77,598 99,113 383,089 84,896 – – 212 No James Quin 200% 104% 156,838 14,825 121,566 192,376 75,173 – – 212 No Non-E xecutive Directors 14 Roger De Haan – – – 37,196,970 – – – – – – n/a Eva Eisenschimmel – – – 4,288 – – – – – – n/a Julie Hopes – – – 4,419 – – – – – – n/a Gareth Hoskin – – – 19,018 – – – – – – n/a Orna NiChionna – – – 3,027 – – – – – – n/a E xecut ive Di re ct ors a re r eq uir ed t o buil d up the ir sha re hol dings over a r ea son abl e amou nt of tim e, wh ich wou ldno rmal ly b e f ive ye ars , and t hen s ubse que ntly h old a s har eh oldi ng equi vale nt to a p er ce nt age of bas e sal ar y. The numb er of s har es in whic h curr ent D ire ct or s had a b enef icial i nte re st , an d det ails o f long-ter m inc enti ve int er est s at 3 1J anua r y 202 2 ar e set outb elow : 13 Sh ar eh ol din g re qu ir em ent s a re t ho se t ha t wer e in ex is t enc e t hr oug ho ut t he c ou rs e of t he ye ar a nd at 3 1 J an ua ry 2 02 2 14 V alues not calculated for Non-Executive Directors a s they are not su bject to shareholdin g requirements 15 T he nu mb er of s ha r es c oun ti ng t owa rd s th e sh ar eh ol din g re qu ir eme nt i s cal cu la te d by su mm ing b en ef i cia ll y own ed s ha re s wi th u nves t ed n il- c os t op tio ns whi ch a re n ot s ubj ec t to p e r for ma nc e co nd it io ns , on a n et of t a x ba sis a s wel l as a ny ves t ed b ut u nexe rc is ed o pti on s on a n et of t a x ba sis . T he M M Q sha r e pri c e of 2 . 84 8 p as at 3 1 J an uar y 2 02 2 h as b een u se d fo r th e pu rp os e of ca lc ul ati ng t he cu rr en t sh ar eh ol din g (i .e . val ue o f be nef i ci all y ow ne d sh ar es a nd va lu e of/ gain on in te re s ts o ver s ha re s) as a pe rc en t age of s al ar y. Unve s te d L TI P sh ar es a nd o pt io ns do n ot c ou nt t owa rd s sa tis f ac tio n of t he s ha re ho ld ing g ui del in es E uan S uth erl and ( % of sal ar y) J a me s Qu in ( % of sal ar y) 6 23 , 6 83 s ha r es 30 1, 966 s ha re s 3 25 , 84 2 s h ar es 15 6 ,8 38 sh a re s Valu e of/ gai n on i nt er es t s ov er s ha re s (i .e . unve s te d awa rd s su bj ec t to pe r for ma nc e c on d it io ns) Valu e of/ gai n on i nt er es t s ov er sh a re s (i .e . unve s te d awa rd s su bj ec t to pe r for ma nc e c on d it io ns) Cur r ent s ha re ho ld ing 15 (as pe r ta bl e ab ov e) Cur r ent s ha re ho ld ing 15 (as pe r ta bl e ab ov e) Sh ar eh ol din g re qu ir em en t Sh ar eh ol din g re qu ir em en t 52, 5 30 s ha r es 64 ,4 30 s ha r es 0% 5 0% 1 00 % 15 0% 20 0% 25 0% 300 % 0% 5 0% 10 0% 15 0% 20 0% 25 0% 300 % T axable benefits The t a xabl e ben ef it s fo r all E xec uti ve Dir ec to rs ar e in lin e wit h our C omp any po lici es . Bot h Euan Su th erla nd and Jam esQu inre ce ive pri vat e med ical i nsur an ce an d a com pany c ar . Pension entitlements Pensio n co ntri but ions f or all E xec uti ve Dir ec to rs ar e alig ne d wit h that of t he m ajor it y of c olle agu es (6% of s alar y). Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 99 Pa yments for loss of office ( audited) The re wer e no p aym ent s for l oss o f of f i ce in 20 2 1/22 . Payment s to pas t dir ect ors ( audit ed) As pr evi ousl y dis clo sed in t he 20 2 1 An nual R ep or t an d Acc ount s , Ch er yl A giu s, t he fo rmer C EO of Insu ra nce s t epp ed dow n fr om th e Bo ard o f Dir ec to rs , due t o pe rso nal r eas ons . He r leav ing arr angem ent s , whic h wer e full y disc los ed in t he 20 2 1 Annu al Re por t and Ac cou nt s, in clu ded b uyou t awar ds in r esp ec t of lo ng-term inc ent ives fo r fei te d fr om he r pr eviou s emp loyer. The se awar ds , whi ch wer e gr ant ed o n 1 Jun e 2020 a nd pr o -rat ed t o r ef le ct th e per iod f ro m the aw ard d ate t o th e te rmin atio n dat e, wil l vest a t thei r norm al ves ting d at es sub jec t to t he t erms of t he b uyou t agr eem ent . Duri ng the p eri od en ding 3 1 Ja nuar y 20 2 2, el eme nt 1 of th e buyo ut awar d ves te d on 1 6 Ap ril 20 2 1 . The t ab le b elow s et s out the nu mbe r of sha re s ves te d for th e form er C EO of Insur anc e. T he s eco nd an d f ina l elem ent of t he bu yout awa rd i s sch edul ed to ves t on 1 6 Ap ril 20 2 2 and th e numb er of s har es ve sti ng will b e dis clo sed in n ex t year ’s Annual R epo r t and A cc ount s . Award Pro - r at ed n umb er o f Sag a sh ar es s ubj ec t to the option Legal & General Performance Share Pla n (P SP) performance Num be r of S aga shares v esting Value o f S aga s har e s ves ti ng (£) 16 Buyo ut el ement 1 Awar ded 11,9 11 24. 2 % 4,6 4 9 13 ,116 Maxim um 19,212 Fees retained for e xternal non- ex ecutive directorships E xecut ive Di re ct ors m ay hol d po sit ions in o the r com pani es as n on- execut ive dir ec to rs an d ret ai n the fe es . Euan Su the rlan d is a No n- E xecut ive D ire ct or of B rit v ic pl c for wh ich h e re cei ves a fe e of £ 59, 8 25 per a nnum . Jam esQu indo esnot h old a ny ext er nal dir ec to rs hips . Governance o f remun erat ion Wider workforce For the C om mit t ee t o rev iew th e wide r work f or ce pay, po licie s and in ce ntive s, r ep or t s ar e r egul arl y con sid ere d at Remun er atio n Co mmit t ee m eet ings , set t ing ou t key det ails o f re muner at ion t hro ugh out t he Co mpa ny. Alongs ide it s r evi ew ofthe w ide r work fo rc e r emun era tion , th e Co mmit t e e con side rs th e app ro ach a ppl ied t o th e E xecut ive Di re ct ors a nd se nior manage ment . I n par t icul ar , the C om mit t ee is f ocu sed o n ensu ring th e app ro ach t o th e re mune rat ion o f the E xec uti ve Dir ec to rs and s enio r man agemen t is co nsis te nt wit h tha t appl ied t o th e wide r work f or ce . The t ab le sum mar ises s ome o f the k ey work fo rc e r eward e lem ent s tha t are r eg ular ly dis cus sed by t he C omm it t ee: Bonus Bon us sc hem es co nt ain bo th f in anc ial an d per son al me asur es . A uni vers al f in anc ial sco re car d is u sed fo r all c oll eagu es at S aga, i nclu ding E xec uti ve Dir ec to rs . Ma lus an d clawb ac k are i n pla ce fo r the c oll eag ues in o ur Se nior L ead ers hip T eam (SL T). Other incentive schemes Inc enti ve arr angem ent s th at ar e paid m or e fr equ entl y ar e also o per at ed in o ur con ta ct c entr es . Th es e inc enti ve sch eme s are r evi ewed r egul arl y to e nsur e be st pr act ice a nd ma rket al ignm ent . Th e met hod o f cal culat ion a nd fr eq uenc y of pay ment varie s, d epe nding o n bus ines s ar ea an d pr odu ct . Base pa y All c oll eagu es r ec eive d an inc re ase of 1 . 5% of b ase p ay in 202 1 . Nati onal li ving wage Saga c ont inue s to b e co mmit t ed t o pay ing 20 p above n atio nal li ving w age for all UKcolleagues. RSP RS P awar ds ar e gr ant ed a cr oss s enio r lea ders hip at S aga . Eligib le c olle agu es r ece ived an RS P gr ant in 2 02 1 , r angi ng fr om 20 % to 5 0% of s alar y. Free Shar es a nd Sh are I nce ntive Plan(SI P) We want all c olle agu es at S aga to f eel inves t ed in t he C ompa ny’s suc ce ss , hen ce we gave each f ull-ti me c olle agu e £3 0 0 of Free S har es in 20 2 1 . We also c ont inue t o promote our SIP , which enables colleagues to purchase shares through pa yroll. Pension Followi ng a 90 - day c onsu lt atio n per iod , Sa ga clo sed b oth t he def ined b ene f it s chem e and th e exis ting d ef ine d co ntri but ion s che me on 3 1 O ct ob er 202 1. From 1 N ovemb er 202 1 , S aga op er ate d a sing le def ined c ontr ibu tion M as te r T r us t arr angeme nt wit h Aviva; at 3 1 Ja nuar y 20 2 2 the re we re 2 , 2 20 c oll eag ues in t his sc hem e. 16 The v alu e fo r ele me nt 1 of t he b uy ou t awar d is b as ed o n th e C omp an y’s sh ar e p ric e of 2 . 8 2p b ein g th e sha r e pri c e on 20 J an ua ry 2 02 2 Annual R epor t o n Remuner ation continued Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 100 The C omm it t ee Ch air engage s reg ula rly w ith t he Peo ple C omm it t ee, gai ning r egul ar fe edba ck an d sha ring execu tive rem uner ati on . Feedb ack f ro m this e ngageme nt is sha re d wit h the R emun er atio n Co mmit t ee . Furt her d et ails of t he Peo ple Co mmit t ee c an be f ound o n page 26 . Competitive pa y and cascades of incentiv es Organisational le vel Num be r of colleagues 17 Ra nge b onu s (% o f sa lar y) Ma xim um proportion of bonus pa yable in cash Minimum proportion of bo nus deferrable in shares Ra nge o f RS P award (% o f sa lar y) SIP Group CEO 1 150% 67% 33% 100% Yes Group CFO 1 125% 67% 33% 85% Yes Executive Leadership Team 6 100% 67% 33% 50% Yes Senior Leadership Team 37 40-80% 100% – 18 20-40% Yes Senior Management Team 161 10-40% 100% – n/a Yes Other bonused colleagues 1,677 2.5-7.5% 100% – n/a Yes Other non-bonused colleagues 2,016 n/a n/a n/a n/a Yes Pay comparisons CEO rati o Our C EO to aver age col leag ue pay r at io for 20 2 1/22 is 76: 1 . T o g ive c ont ex t to t his r atio, w e incl ude d a char t below w hich tr ack s th e CEO to aver age co lle ague p ay rat io sin ce 2 01 4/1 5 along sid e Saga’s TSR per f orma nc e sinc e th e Com pany wa s list ed . We also sh ow this a gains t the p er fo rman ce o f the F TSE 25 0 during t he s ame ti me sp an . Jan-14 TSR rebased to 100 on IPO Jan-15 Jan-16 258:1 78:1 116:1 40:1 48:1 41:1 76:1 76:1 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 200 Saga TSR 150 100 50 0 FTSE 250 TSR CEO average employee pay ratio The R emun era tion C om mit t ee c ons ider s tha t the F TSE 25 0 is the a ppr op riat e in dex be caus e the C om pany ha s be en a long-st an ding me mbe r of this i ndex si nce t he In iti al Pub lic O f fe ring (I PO) and h as st ro ng asp ir atio ns to r e-jo in in th e fut ur e. Thisg ra ph has b ee n cal culat ed i n ac cor da nce w ith t he L ist ing Rul es . It sh ould b e not ed t hat t he C omp any lis te d on 23 M ay 20 14 and t her efo re o nly h as a lis te d sha re p ric e for th e pe riod o f 23May20 1 4 to 3 1 J anuar y 20 2 2. In sum mar y, ther e has b een s igni f ic ant vol atili t y in Gr oup C EO pay, and we bel ieve that t his is c ause d by th e fac to rs se t out bel ow. Pleas e not e th at , befo re 2 020/21 , pay f or L anc e Bat ch elo r (form er Gr oup C EO) has bee n use d for th is cal cul atio n. • Our G ro up CEO’s pay is mad e up of a hig her p ro po r tio n of inc ent ive pay t han th at of our c ol leag ues , in li ne wit h th e expe ct ati ons of o ur sha re hol der s and ac ce pt ed mar ket pr ac tic e for s enio r execut ive r ole s. T his int ro duc es a hig her d egr ee of vari abili t y in pay e ach ye ar , whic h in tur n af fec t s the r at io. • The va lue of l ong-term in ce ntive s whic h mea sur e pe r form anc e over thr ee ye ars i s disc los ed in t he year t hey ves t , whi ch incr ea ses t he G rou p CEO’s pay in that ye ar , again imp ac ting t he ra tio fo r that ye ar . • Long-ter m inc enti ves ar e pr ovi ded in s har es , and t her efo re a ny moveme nt in sha re p ric e over th e thr ee ye ars m agnif ies th e impa ct of a l ong-term in ce ntive awa rd ve sti ng in a year. • We rec ogn ise th at th e rat io is dri ven by th e dif fere nt st ruc tur e of p ay for our G r oup C EO versus t hat of ou r col leag ues , as well as t he mak e-up o f our wor k for ce . Thi s rat io vari es b et ween b usin ess es in t he sa me se ct or . Wh at is imp or t ant f r om our per sp ect ive is t hat th is rat io is inf l uen ced o nly by t he di f fer en ce s in st ruc tur e, an d not by di vergen ce in f ixed pay b et ween the G ro up CEO and w ide r work fo rc e. Whe re t he s tru ctu re of r em uner ati on is si mila r , as for th e E xecut ive L ead ers hip T eam (EL T) an d the G ro up C EO, the rat io is much m or e st ab le over t ime . 17 Co ll eag ue s at 3 1 J anu ar y 2 02 2 18 Co lle ag ue s in t he S L T wi thi n In sur an c e als o r ec ei ve on e-t hir d of t he ir b on us in d ef err ab le s ha re s Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 101 Colleague and E xecutiv e Committee ratios The t ab le b elow s et s out t he t ot al re mune rat ion r ec eive d by the G r oup C EO using th e meth od olog y appl ied t o th e singl e to ta l f igu re of r emu ner ati on . The R emun era tion C om mit t ee b elieves t hat t he r emun era tio n payabl e in it s e arlie r year s, as a p riva te com pany, to th e E xecu tive C hair man do es n ot be ar co mpa rat ive valu e to t hat wh ich ha s be en, a nd wil l be pa id to , the G ro up CEO and ha s the ref or e cho sen on ly t o disc los e re mune rat ion f or th e Gr oup C EO: Gr ou p Ch ief E xe cut iv e Of f i ce r 20 1 5/1 6 2 0 1 6/ 17 2 0 1 7/ 1 8 2 0 1 8/1 9 2019 /20 2020 /21 2 02 1/2 2 Total single figure £1,600,287 £2,490,617 £1,025,146 19 £1,191,743 £1,062,887 £2,118,471 £2,386,456 Annual bonus payment level achieved (percentage of maximum opportunity) 78.6% 67.5% – 35.1% 33.6% 83.1% 85.4% LTIP vesting level achieved (percentage of maximum opportunity) n/a 20 65.6% 26.0% – – n/a 22 10% Ratio of CEO single total remuneration figure to all colleagues 21,22 Option used Option B 21 Option B 21 Option B 21 Option B 21 Option B 21 25 th percentile n/a n/a 8:1 59:1 46:1 97:1 103:1 Median 78:1 116:1 40:1 23 48.1 24 41:1 25 76:1 26 76:1 27 75 th percentile n/a n/a 33:1 36.1 29:1 55:1 55:1 Ratio of single total remuneration figure shown to executive members 2:1 4:1 3:1 3:1 2:1 4:1 3:1 The c oll eag ue pay f i gur es us ed t o cal cul ate t he r atio a re a s foll ows: 25 th percent ile Median 75 th percent ile 20 2 1/2 2 Salar y £ 19, 978 £26, 317 £3 6 ,058 To t a l p a y £23 ,0 94 £31,494 £43,584 19 For 20 1 7 /1 8 , th e f in al va lu e of t he 20 1 5 LTIP awa rd a t ves ti ng d at e is sh ow n and h as b ee n r es t at ed f ro m th e 20 1 7 /1 8 A nnu al R ep or t a nd A cc ou nt s . Th e sh ar e pri ce a t ves t ing d at e of 3 0 Ju ne 2 01 8 wa s 12 5 .6 p 20 No LTIP aw ar ds e lig ib le t o ve st f or th e G ro up C EO in p os t dur ing 2 0 15/ 1 6 and 2 02 0/2 1 2 1 For th e co ll eag ue r at io , Sa ga ha s ch os en t o us e Op ti on B , id ent if yin g co lle ag ue s us ing o ur ge nd er pa y gap d at a . Thi s wa s th e pr efe rr ed o pt io n du e to t he avai lab il it y of d at a fo r ou r ma ny U K -b as ed , over s eas a nd p ar t-t im e co ll eag u es fo r wh om s ing le t ot a l f ig ur e dat a i s dif f icu lt t o ca lc ul at e. F ig ur es h ave b ee n co mp let e d for 2 0 17/18 , 2 01 8/ 19 , 20 1 9/20, 2 02 0/21 a nd 20 2 1/2 2 us ing t he A p ril g end er p ay ga p dat a f or t hat y ear. In o rd er t o mi tig at e any a no mal ie s, 11i ndi vi du als h ave b ee n id ent if i ed a t ea ch p er ce nt ile p oi nt f ro m th e gen de r pay g ap d at a, a nd t he m ed ian o f pay i n th e ye ar up t o 3 1 Ja nu ar y 20 1 8 , 20 1 9, 20 20 , 20 2 1 and 2 02 2 f or t he se c ol lea gu es c al cu lat e d in li ne wi th t he s ing le t o ta l f ig ur e me th od ol og y. For c o lle ag ue s wh o pa r tic ip at e in a d ef in ed b en ef i t pe ns io n sc hem e, t he v alu e of t he p en si on fo r th e pu rp os es of t o ta l pay h as b ee n es ti ma te d ba se d on t he in di vi du al’s ac cr ua l ra te a nd l eng th of s er v ic e 22 Th e me di an r at ios s ho wn fo r 20 1 5/1 6 an d 20 1 6/ 17 h ave b een r e ca lc ula te d t o all ow a c om par is on t o th e 20 1 7 /1 8 , 20 1 8/1 9, 2 0 19/2 0, 20 20/2 1 an d 20 2 1/2 2 figures which ha ve been calculated in line with the methodolo g y prescribed b y the regula tions 23 The f al l in t he r ati o in 2 0 17/18 i s due t o t he fo r fe it ur e of b on us by t he G r oup C EO an d th e re la ti vel y low p ayo ut o n th e L TI P . Thi s re f le ct s t he f ac t th at sha r eho ld er s wa nt exec ut iv es t o hav e a hig he r pr op or t io n of p ay at ri sk a nd t his i s re f le ct ed i n th e vol at ili t y in t he c ha r t . Th e pe rc en t age ch an ge in G ro up C EO re mun er at io n set o ut i n th e t abl e on p age 1 0 3 sh ows t hat y ear - on -ye ar, when t he v ol ati li t y of pa you t s fr om e qu it y- ba se d awa rd s is exc lud ed , t he c han ges i n re mun er at io n for t he G r ou p CEO an d ave ra ge co ll eag u e ar e br oa dl y in li ne . Th is de mo ns tr at e s th at th e un de rly in g co mp ens at io n ra ti o is no t in cr ea sin g yea r onye ar 24 Th e in cr ea se i n ra ti o for 2 0 18/ 1 9 is du e t o th e Gr ou p CEO r ec ei v ing a b on us in 2 0 18/ 1 9. Th is in cr e as e has r e mai ne d low d ue t o a r el ati vel y lo w bo nu s and L TI Ppay ou t 25 Th e fa ll in r at io f or 20 1 9/20 is d ue t o th e r eb ala nc ing o f ba se p ay an d co mm iss io n in o ur c ont a ct c en tr es 26 The in cr ea se i n ra ti o in 20 20/2 1 is d ue t o th e r el ati vel y hi gh b on us pa you t in 2 02 0/21 a nd R SP a war d g ra nt ed t o th e Gr o up C EO in 20 20/2 1 27 N o ch ang e in r ati o in 2 02 1/2 2 du e t o sim il ar p ayou t in b on us Annual R epor t o n Remuner ation continued Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 102 Annu al per c ent age change in r emuner ati on of Dir ec to rs and ot her c olle ague s The fo llow ing t abl e set s ou t the c hange in t he r emun er atio n paid t o ea ch Di re ct or fr om 2 01 9/20 to 202 0/ 2 1 and t hen t o 202 1/22 , c omp ar ed wi th th e average p er cen tage c hange fo r othe r co lleag ue s. The p er cen tage c hange fo r eac h Dir ec to rs’ re mune rat ion in t he t ab le be low is b ase d on th e f igu re s in the s ingl e tot a l f igu re ta ble o n page 9 4. Average c olle agu e pay ha s bee n cal cula te d using t he fo llowi ng elem ent s: • Annual salar y: base salar y and stan dard monthly allowances . • T axable ben efi ts: car allowance and private medical insuran ce premiums. • Annual bonus: company bonus , management bonus, commission and incentive payments . % increase / ( decrease) in remuneration in 2020 /21 compared with previous year (2019/ 20 ) % increase / ( decrease) in remuneration in 2021/ 22 compared with previous year (2020 /21) Salary/ fees T axable benefits Annual bonus Salary/fees T axable benefits Annu al bonus Euan Sutherland 0% 9. 3% 25 . 2 % 1 . 5% ( 5 . 5 %) 28 4.3% Jam es Qu in 1 .2% ( 48.9% ) 29 4 8 .7 % 14. 8% 4 .7 % 1 . 4% Roger D e Haa n n /a n/a n/a n /a n /a n /a Eva Eisenschimmel 1 5 .7 % 30 n /a n /a – n/a n /a Julie Hop es 41 .7 % 31 n /a n /a (1 . 0 %) 31 n /a n/a Gareth Hoskin 9.3 % 32 n /a n /a 2.9% 32 n /a n/a Orna NiChionna 9.6% 33 n /a n /a 10 .7 % 33 n /a n/a Average p er co lle ague 3. 2% 34 2 .7 % 6 7. 8 % 4 .1% 34 6.6% 5 . 4% Rel ati ve imp or t anc e of t he sp en d on pay The t ab le b elow s et s out t he r elat ive imp or t an ce of s pe nd on p ay in the 2 02 1/22 a nd 20 20/21 f ina nci al year s, c om par ed wi th othe r disb urs emen ts . A ll f ig ur es pr ovid ed ar e t ake n fr om th e re levant C omp any ac co unt s. Disbursements from pr of it i n 20 2 1/22 financial year £m Disbursements from pr of it i n 20 20/21 financial year £m Perc ent age ch ange Pro f it di str ibu te d by way of div ide nd – 0.1 ( 1 0 0 . 0 %) T ot al tax contribu tions 35 22.9 31 .1 (2 6 . 4 %) Over all s pe nd on p ay incl uding E xec uti ve Dir ec to rs 1 18.3 130. 3 (9 . 2 %) Advisers to the Remuneration C ommittee Duri ng the f inanc ial ye ar , P wC a dvi sed t he Re mune rat ion C omm it t ee on al l asp ect s o f the R emun era tion Po licy (the Po licy ) forE xecu ti ve Dir ec to rs and m emb ers o f the EL T . P wC is a m emb er of t he Rem uner at ion C ons ult ant s G rou p and t he volu nt ar y co de of c ond uct of t hat b od y is de sign ed t o ensur e ob jec tive a nd in dep ende nt ad vic e is gi ven t o re muner at ion c ommi t te es . O the r P wC t ea ms pr ovid e ce r t ain non -aud it ser vi ce s to t he Co mpa ny in ar eas of t a x and c ons ulti ng. T he C ommi t te e is sat isf ied th at no c onf li ct s of int er es t exis t in the pr ovisi on of t hes e ser vi ce s and th at th e adv ic e pr ovid ed is in dep end ent and o bje cti ve. Fee s of £ 83 ,750 (202 1 : £ 10 9,0 00) wer e pr ovid ed t o P wC du ring th e year in r es pe ct of r emu ner atio n ad vic e re ce ived . Th e dec re ase f ro m the p rior ye ar is du e to t he addi tio nal su pp or t in r elat ion t o th e re newal of R emun er atio n Polic y. The C omm it t ee r ec eives s upp or t f ro m Jan e St or m (Chief Peop le O f f icer (CP O) ) and Vi cki H ayn es (Gro up Co mpa ny Sec reta ry ) . 28 The d ec re as e in t ax ab le b ene f it s f or Eu an S ut he rla nd i s due t o h is mo ve to a r e du ce d co st e le ct ri c veh icl e fo r wh ich h e al so p ays a c api t al c on tri bu ti on 29 The de cr e ase i n t axa bl e be ne f it s f or J ame s Q uin i s due t o h is mo ve to a r e du ce d co st e le ct ri c veh icl e 30 Inc r eas e in s al ar y fo r Eva Ei se nsc hi mme l in 2 02 0/21 i s du e to b ec om ing C ha ir o f the R em un er ati on C o mmi t te e on 1 F ebr ua r y 20 20 31 In cr ea se i n sa lar y f or J uli e Ho p es in 2 02 0/21 i s du e to b ec o min g Ch air o f th e Sa ga Per so na l Fi na nc e (SP F ) Bo ar d o n 1 Feb rua r y 20 20 a nd as su min g th e po si ti on ofRi sk C om mi t te e Ch ai r on 3 1 D ec em be r 20 20. D ec r ea se in s al ar y in 2 02 1 /22 i s du e to t he r ed uc ti on i n th e fee f or t he C ha ir of S PF r o le o n 1 Ja nua r y 20 2 1 fol low in g a rev ie w of th e r ol e 32 Inc r eas e in s al ar y fo r Ga r eth H o ski n in 2 02 0/21 a nd 2 02 1/2 2 is d ue t o b ec om ing C ha ir of t he A ud it C om mit t e e on 2 2 Ju ne 2 02 0 33 Incr e as e in sa la r y for O rn a Ni C hio nn a in 20 20/2 1 an d 20 2 1/2 2 is d ue t o in cr ea sin g re sp o nsi bil it ie s as S eni or I nd ep en de nt Di re ct o r on 5 O ct ob er 2 0 20 34 Aver age s al ar y p er c oll ea gu e in cr ea se d du e to a c om bin at io n of t he an nu al s ala r y inc r ea se , Co mp any r es t ruc t uri ng wh ic h alt e re d ou r co lle ag ue b as e an d th eimp ac t s of t he C OVI D -19 p an de mic 35 T ota l ta x c ont ri bu ti ons i nc lu de c or po ra ti on t ax , n at ion al i nsu ra nc e c ont ri bu ti ons , VA T and a ir p as sen ger d ut y Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 103 Shareholder voting The c urr ent Di re ct ors’ Re muner at ion Pol icy was a ppr oved by s har eho lde rs at th e AGM he ld on 2 2 Ju ne 20 20. Out line d be low ar e th e voting ou tc om es fo r this , and i n re spe ct of, app rov ing th e Dir ec to rs’ Remu ner ati on Rep or t . Results of shareholder votin g at the Compan y’s Annual General Meetings Resolution Vot e s for % of vot es c as t Vot e s against % of vot es c as t Vot e s cast % of is su ed share capital vote d Vot e s withheld T o ap pr ove the Directors’ Remuneration Report 36 61,831,919 7 7. 7 2 17 , 72 5, 106 2 2 . 28 79,60 0,0 02 5 6. 81% 42 ,97 7 T o ap pr ove the Directors’ Remuner ation Policy 37 609,404,573 9 7. 9 8 12 ,534, 190 2 .02 6 47 ,0 40, 9 63 5 7. 6 7 % 25, 102, 200 Ser vice c ontr act s an d lett ers o f appoint ment s The R emun era tion C om mit t ee’s policy fo r set t ing not ic e per iods i s that n orm ally t hey wi ll be a m axi mum of 1 2 mon ths . Th e Remun er atio n Co mmit t ee m ay, in exceptio nal ci rc ums ta nce s aris ing on r ec ruit ment , a llow a l onger p erio d, w hich wo uld in any event re duc e to 1 2 m onth s foll owing th e f ir st ye ar of emp loy ment . T he N on- E xecut ive D ire ct or s of the C om pany d o not have ser vi ce c ont ra ct s and a re ap po inte d by let t er s of app oint ment . Each in dep end ent N on- E xecut ive D ire ct or’s te rm of of f ice runs fo r a thr ee -year p erio d. T he C omp any fol lows th e Co de’s reco mmen dat ion t hat all D ir ect or s be s ubje ct t o annu al re-appointm ent by shareholders. Executive Directors Name Date appoi nted Nature of contract Notice periods Compensation provisions for early terminatio n From Company F rom Director Euan Sutherland 6 Januar y 20 20 Rolling 12 months 12 months None Jam es Qu in 1 J anua ry 2 01 9 Rolling 12 month s 12 month s None Non- Executive Directors Name Original appointme nt Appointme nt of current term Arrangement Notice period/une xpired te rm at AG M Orna NiChionna 2 9 May 20 14 29 M ay 2020 Let ter of appointment 3 months/11 mon ths Julie Hop es 1 Oct ob er 20 18 1 Oc t obe r 202 1 Letter of appointment 3 months/ 28 mon ths Eva Eisenschimmel 1 Janu ar y 20 1 9 1 Ja nuar y 20 2 2 Let ter of appointment 3 months /30 mo nths Gareth Hoskin 11 M ar ch 20 1 9 11 M arc h 202 2 Let ter of appointment 3 months /32 mon ths The Board al lows Execu tive Directors to accept appropriate outside Non-E xecutiv e Director appoin tments provided the agg r egate c om mitm ent is c omp atib le wi th t heir du tie s as E xecu tive D ir ect or s. T he E xec uti ve Dir ec to rs c onc ern ed may r et ain fees p aid fo r the se s er vic es , whic h will b e sub jec t to a ppr oval by t he Bo ar d. Cons ider ation of em ployment c ondit ions el sewhere in t he Gr oup Eac h year, prior to r evi ewing th e re mune rat ion o f the E xec uti ve Dir ec to rs an d the m emb ers o f the EL T , t he R emune rat ion Co mmit t ee c ons ider s a r epo r t pr epa re d by the C hief Peo pl e Of f ice r (CPO) det ailin g bas e pay and s har e sc hem es pr ac tic e acr os s the C omp any. Ther epo r t pr ovid es an over v iew of ho w col leag ue pay c om par es t o the m arke t and any m ate rial c hanges during t he yea r and in clud es de ta iled a nal ysis of b asic p ay and va riab le pay c hanges w ith in the U K . Whil e the C om pany do es n ot dir ect ly c ons ult wi th c olle agu es as pa r t of th e pr oc ess o f rev iewing execu ti ve pay and fo rmul ating the Po licy, the C omp any do es r ece ive an up dat e an d fee dbac k fr om t he br oa der c oll eagu e po pula tio n on an an nual b asis u sing an engagem ent sur vey wh ich in clud es a num ber o f ques ti ons r elat ing t o re mune rat ion . Th e Co mpany d oes n ot us e remuneratio n comparison measur ements . The G ro up aims t o pr ovi de a r emun er atio n pac kage fo r all c olle agu es th at is ma rket- com pet iti ve and o per at es th e sam e co re str uc tur e as for t he E xec uti ve Dir ec to rs . Th e Gr oup op er at es co lle agu e shar e an d varia ble p ay pla ns, w ith p ens ion p rov isio ns pr ovid ed for a ll E xecu tive D ir ect or s and c oll eagu es . In a ddit ion , any sa lar y in cr ease s for E xec uti ve Dir ec to rs ar e exp ec te d to be gen era lly in li ne wi th th ose f or U K -base d co lleag ue s. T he C ommi t te e annu ally p ubli she s a sec tio n on fa irne ss , diver sit y, equity and inclusion and wider wor k force considerations as part of the Directors’ Remuneration Report. 36 T he v ot e to a pp ro ve th e Di r ec to r’s Re mun er at io n Re po r t was a t th e 20 2 1 AGM 37 Th e vot e t o ap pr ove t he D ir ec t or’s R emu ne ra tio n Po lic y was a t th e 20 20 AG M , th er efo r e th e vot es c as t we re p ri or t o th e sh ar e co ns ol id ati on Annual R epor t o n Remuner ation continued Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 104 Consideration of shareholder view s The R emun era tion C om mit t ee t ake s th e views of t he sh ar eho lder s ser iou sly an d th ese v iews ar e t aken in to a cc ount in s hapi ng rem uner ati on p olic y and p rac ti ce. S ha reh old er vi ews ar e con sid ere d whe n evaluat ing an d set ti ng rem uner at ion s tr ate g y an d the R emun era tion C om mit t ee wel co mes a n op en dial ogu e wit h it s sh are hol der s on all a spe ct s of r emun er atio n. T he Committ ee consulted its major shareholders and the main shareholder representative bodies, In vestment Association, Ins tit uti ona l Sha reh old er S er vic es an d Gl ass L ewis , prio r to p ro po sing th e Poli cy. The Co mmit t ee i s gr atef ul fo r the t ime ta ken t o co nsid er th e pr opo sal s and p rov ide fe edb ack . A t the e nd of th e co nsul ta tio n, th e maj orit y of shar eh old ers c ons ult ed indic at ed th ey wer e supp or t ive of t he Poli cy. Comp liance w ith UK C orpo rate G overnance C ode (the Co de ) The fo llow ing t abl e set s ou t how th e Polic y align s wit h the C od e, wh os e obje ct ive is t o ensu re t hat th e re mune rat ion o per at ed by the C omp any is al igne d wit h all s ta keho lde r int ere st s in clu ding th ose o f shar eh old ers: Key r em un er ati on e lem en t of t he C od e A lig nm en t wit h th e Po lic y Five -year p erio d be t ween t he dat e of gr ant and r e alisa tio n for eq uit y incentiv es The R SP m eet s t his r equir em ent th ro ugh th e imp leme nt atio n of th e tw o-yea r post- ve sting hold ing peri od. Phas ed r ele ase of e quit y awards Th e RS P me et s this r equ ire ment a s award s ar e mad e in an ann ual cyc le. Dis cr etio n to over ride f ormu laic outcomes Inc lude d in th e ter ms an d con dit ions o f the A nnu al Bo nus Pl an and t he R SP . Post-cessation shareholdin g requir ement The Po licy c ont ains a f ull in -em ploy ment r eq uir eme nt for t wo yea rs fo llowi ng ces sat ion of e mpl oyme nt . Pension alignment T he p ensio n co ntri but ion fo r all E xecu ti ve Dir ec to rs is alig ne d wit h the m ajor it y of col leag ues a t 6% of s ala ry. Ex tended malus and clawback T he m alus an d claw bac k pr ovis ions a lign w ith t he Fi nanc ial R epo r ting C oun cil’s Boa rd Effectiveness Guidance. Provision 40 element How t he Po li cy al ign s Clarit y – remuneratio n arrangements sho uld b e tr ansp ar ent an d pr omot e effective eng ageme nt with sharehol ders and the workfor ce. The A nnu al Bo nus Pl an pe r form anc e co ndi tion s ar e bas ed on t he c or e str at egi c obje ct ives an d th eref or e, th er e is a cle ar lin k to all s t ake hol der s bet we en the ir delivery and reward pr ovided to management. The R SP p rov ide s annu al gr ant s of s har es w hich h ave to b e ret ain ed fo r the l onger - ter m to e nsur e a fo cus on s us tai nab le pe r form anc e. T his pr ovi des c omp let e cl arit y o f the alignment of the interest s of management and shareholders. Simplicit y – remuneratio n structures sho uld avoid c omp lexi t y and t heir rationale and operation shou ld be easy to underst and. The p er fo rman ce c on diti ons fo r the A nnu al Bo nus Pl an ar e bas ed on t he C omp any ’s str at egi c obj ect ives . Th is alig nment o f rewa rd w ith t he de liver y of key m arke rs of t he suc ce ss of t he imp lem ent atio n of th e st rat eg y ensur es si mpli cit y. RS Ps ar e a simp le me cha nism a nd avoid th e set t ing of lo ng-term p er for man ce conditions which ten d to inherently make remuner ation more co mplex. Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 105 Provision 40 element How t he Po li cy al ign s Risk – remuneration arrangement s should ensure repu tational and other risk s fr om exc essi ve r eward s, a nd beh aviou ral r isk s th at can ar ise f ro m target-based incentive plans, are identif ied and mitigated. The Polic y includes: • set ti ng def in ed li mit s on t he ma xim um awar ds whi ch ca n be ea rne d; • re quirin g the d eferr al of a s ubs t anti al pr op or ti on of t he inc ent ives i n shar es f or a material period of time; • align ing the p er fo rma nce c on dit ions w ith t he s tr ateg y of the C om pany ; • ensuring a focus on long -term sustainable per formanc e through the RS P; and • ensur ing th ere i s suf f icien t f lexib ilit y t o ad just p aym ent s thr oug h mal us and clawb ac k and an over ridin g disc ret ion t o de par t f ro m form ulaic o ut co mes . The se el ement s m itigat e again st t he ris k of t arget-b ased i nc enti ves by : • limit ing th e max imum va lue t hat ca n be ea rne d; • defer ring th e valu e in sha re s for th e lon g ter m whic h help s ensu re t hat th e per formance earning the award was sustainable and ther eby discouraging shor t- term behaviours; • align ing any r eward t o th e agr ee d st rat eg y of the C omp any ; • the u se of an R SP w hic h supp or t s a fo cus o n the s us ta inab ilit y of t he p er for man ce over the l onger t erm; • re duci ng the awa rd s, or c anc ell ing the m, i f the b ehav iour s giv ing ri se t o the awa rds are inappro priate; and • re duci ng the awa rd s, or c anc ell ing the m, i f it app ea rs th at the c rit eri a on whi ch th e award w as bas ed do n ot r ef lec t th e unde rly ing pe r form anc e of th e Co mpa ny. Predict ability – t he ra nge of po ssib le value s of r eward s to i ndiv idu al Dir ec to rs and a ny othe r limit s o r disc ret ion s sho uld b e iden tif i ed andexp lain ed at th e tim e of app rov ing the Pol icy . The Po licy cl ear ly set s o ut th e ra nge of value s, l imit s an d disc re tio ns in r esp ec t of the remuneratio n of management. The in tr odu cti on of an R S P incr ea sed t he pr ed ict ab ilit y o f the r ewar ds r ec eive d by management. Proportionality – t he link b et wee n indi vidu al awar ds , th e deli ver y of str at eg y a nd th e long-ter m per f orma nc e of the C om pany sh oul d be cl ear. Outc om es sh ould n ot r eward poor per formanc e. The Po licy cl ear ly set s o ut th e ra nge of value s and d iscr et ions i n re spe ct of t he remuneratio n of management. The in tr odu cti on of an R S P incr ea sed t he pr ed ict ab ilit y o f the r ewar ds r ec eive d by E xecut ive Di re ct ors , an d the b onu s pla n, b eing ba sed o n annu al t arget s , ope rat es over a mor e pr ed ict ab le ti me cycl e co mpa re d wit h tr adit ion al L TIP sc hem es , the reby allow ing th e Remun er atio n Co mmit t ee t o mo re e f fec ti vely en sur e des ira ble rem uner ati on ou tc om es . The C om mit t ee’s overriding dis cr etio n to d epa r t fr om formu laic o ut co mes en sur es t her e is no r ewar d for p oo r per forman ce . Alignment to cult ure – inc enti ve sch eme s sho uld dri ve be havio urs con sis te nt wit h Co mpany p urp ose , value s and s tr at eg y. The b onu s pla n drive s beh aviou rs c onsi st ent wi th S aga’ s str at eg y. The R SP d rive s beh aviou rs co nsis t ent wi th th e Co mpa ny’s purp ose a nd valu es whi ch are f ocu sed o n the l ong-term f ut ur e of the b usin es s thr oug hout t he b usin ess c ycle . Eva Eisenschimmel Chair , Remuneration Committee 22 M ar ch 20 22 This r ep or t ha s be en pr epa re d in ac co rd anc e wit h Sc hedu le 8 of T he L arge an d Med ium-si zed C ompa nies a nd Gr ou ps (Ac cou nt s and R epo r t s ) Reg ulat ions 2 00 8 as am end ed in 20 1 3, 2 01 8 and 2 0 19, t he Pr ovis ions o f the c urr ent C ode a nd th e List ing Rules. Annual R epor t o n Remuner ation continued Directors’ Remuneration Re por t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 106 Directors’ Repor t Management Report The D ir ect or s’ Repo r t , to gether w ith t he S tr at egic R ep or t , set o ut on p ages 1 t o 57 f orm th e Ma nageme nt Rep or t fo r th e purp os es of Di scl osur e G uida nce a nd T ransp ar ency R ule ( DTR) 4.1 .5 R (the Management Report ). St atut ory inf ormatio n cont ained e lsewher e in the An nual Rep or t Infor mati on r equi re d to b e par t of this D ire ct ors’ Re po r t can b e foun d els ewher e in t he An nual R ep or t an d Acc ount s a s indic at ed in t he t abl e bel ow and is i nc orp or ate d int o this r ep or t by r efer en ce . Information Lo ca tio n in A nn ua l Re por t Like ly f utur e devel op ment s in t he bu sine ss of t he C omp any or it s su bsid iari es Page s 1-5 7 Envir onm ent al, S oc ial an d Gove rnan ce in clud ing T ask Forc e on C limat e- Rel ate d Financial Disclosures Pages 23- 35 Greenho use gas emissions Pages 30 -3 2 Suppliers , customer s and others in a business relationship engag ement Pages 16 -17 Colleague s ( employment of disabled persons, work forc e engag ement and policies) Pages 25 -28 an d 56 Corpor ate Governance S tatem ent Pages 58- 84 Dir ec to rs’ det ails ( inc ludin g change s mad e during t he ye ar ) Pages 59 a nd 6 9 - 73 Related-par t y transa ctions Not applicable Diversity Pages 2 7 , 28, 6 9 and 73 Share capit al Not e 3 3 on page 1 86 Employ ee share schemes (includin g long -term i ncentive schemes ) Note 3 6 on page s 18 8-189 Financial instrument s: information on the Group’ s financial ins truments and riskm anagem ent ob jec tive s and p oli cies , in clud ing our p oli cy for h edgi ng Not es 2 , 3 , 7 , 8, 1 9 and 20 o n pages1 26 -148 , 150 a nd 1 63 -172 Stat ements of responsibilities Page 111 Additional in formation Pages 20 1-204 Discl osur e tab le purs uant to L ist ingRule (LR) 9. 8. 4 C The fo llow ing t abl e pr ovid es r efer enc es t o wh ere t he info rmat ion r eq uir ed by L R 9.8 . 4 C R is disc los ed: Listing Rule Li sting Rule require ment Disclosure 9.8 . 4(1) Int ere st c api ta lise d by the G r oup an d any re lat ed t ax r eli ef No te 1 7 on page s 15 9-16 1 9. 8 . 4 (2) Unaudited financial information (LR 9.2 .18R) Gr oup C hief F inan cial O f f ice r’s Review, pages3 6 -52 9 . 8 . 4 (4) Long -term incentive schemes (LR 9.4.3 R) D irectors’ Remuneration Repor t, pages 85-106 9. 8 .4 (5) Directors’ waiv ers of e moluments Directors’ Remuneration Re por t, pages 85-106 9. 8 . 4 (6) Directors’ w aivers of future emol uments Direct ors’ Remuneration Report , pages 85-106 9.8 . 4( 7 ) Non -pr e- empt ive iss ues o f equi t y for c ash Direc to rs’ Rep or t o n page 11 0 9. 8 .4 (8) No n-p re- emp tive i ssue s of eq uit y fo r cas h by any unlis t ed major subsidia ry under t aking Not applicable 9. 8 . 4 (9) Par ent c ompa ny par t icip atio n in a pl acing by a l ist ed subsidiary Not applicable 9. 8 . 4 ( 1 0) Co ntr ac t of sign if ic anc e in wh ich a D ire ct or is , or wa s, materially inter este d Not applicable 9.8 . 4(1 1) Co ntr act o f sign if ic anc e be tw een t he Co mpa ny ( or one o f its subsidiaries ) and a controlling shareholder Not applicable 9.8.4( 12) Waiver o f div iden ds by a sh ar eho lder D ir ect or s’ Rep or t on p age 11 0 ( unde r par agr ap h ‘R ight s at t a ching t o sh are s’) 9. 8 . 4 (1 3) Waiver of f utu re di vid end s by a sha reh old er Dir ec to rs’ Rep or t on p age 11 0 ( und er par ag rap h ‘R ight s at t a ching t o sh are s’) 9 . 8 . 4 ( 1 4) Bo ar d st at eme nt in re sp ect o f rel ati onsh ip agr eem ent with a controllin g shareholder Not ap pli cab le. S ee D ir ect or s’ Repo r t on p age 10 8 ( unde r ‘R elat ion ship ag re eme nt wit h Director shareholder’) Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 107 Directors ’ R eport continued Results and dividends The G ro up ma de a lo ss af t er t a xatio n of £ 28 .0m fo r the f ina ncia l year en ded 3 1 J anu ar y 202 2 . Th e Boa rd di d not p ay an int erim di vi dend . Th e Bo ar d of Dir ec to rs is n ot in a pos iti on t o re com men d the p ayme nt of a f in al di vid end fo r the 20 2 1/22 f inanci al yea r . The D ir ect or s int end t o re sum e div iden d paym ent s in t he fut ur e, wh en fur ther p rog re ss ha s be en mad e wit h deleveraging and when current limitations, par ticularly in rel atio n to t he sh ip deb t , have be en re moved . Any d ecis ion t o dec lar e and p ay div iden ds is m ade at t he dis cr eti on of th e Dir ec to rs and d ep ends o n, a mong ot her t hings , ap plic abl e law, reg ulat ion , re st ric tio ns, t he G rou p’ s f ina ncia l pos iti on , regulato ry capit al requir ements , working capital requirem ents , financ e cost s, general ec onomic conditio ns and ot her f act or s the D ir ect or s dee m sign if ic ant f ro m time to time. Political dona tions No p olit ic al don atio ns wer e ma de dur ing the ye ar . Directo rs ’ in terests A list o f the D ir ect or s, t heir i nte re st s in th e lon g-term per formance shar e plan, contr act s and ordinary shar e capi t al of th e Co mpa ny are g iven i n the D ire ct or s’ Remuneration Report on pag es 85-106. Relationship agreement wi th Director shareholder Any p erso n who exer cis es or c ont ro ls , on th eir own o r toget her wi th any p ers on wi th wh om th ey ar e act ing in con ce r t , 30 % or mo re o f the vot es a ble t o be c as t at gener al meet ings of a c om pany ar e kn own as a ‘co ntr olli ng shar eh old er’ un der t he L ist ing Rul es . The L is ting Ru les re quir e co mpan ies w ith c ont ro lling sh ar eho lder s to e nte r into a n agr eem ent wh ich is in ten ded t o en sur e that t he controlling shareholders comply with cert ain independence pr ovisi ons s t ate d in th e Lis ting R ules . The B oar d c onf ir ms th at , in ac co rd anc e wit h the L is ting Rule s, t her e ar e no c ontr ol ling sh are hol der s in th e Co mpany. However, the Com pany en ter ed i nto a r el atio nship agr eem ent wi th Roger D e H aan on 1 0 Se pte mb er 202 0 (t h e Relationship Agreement ) as Roger De H aan ho lds 37 ,196 , 970 sha re s of 15 p eac h (const itu ting 26 . 5% of iss ued shar e c apit al a s of 3 1 Jan uar y 20 22). The R elat ion ship Agreement regulates the rela tionship between the Co mpanyan d Roger D e Ha an and c ont ai ns und er t aki ngs thatt ra nsa cti ons an d arr angem ent s will b e co ndu ct ed on anarm ’ s-leng th basis and on normal commercial t erms. Itals o pr ovid es th at dilu tio ns cau sed by n ew iss uanc es ofsha re s shal l be di sr egar ded w hen de ter mining i nvest or rights under it s terms. Rules on a ppointme nt and repl acement ofDir ect ors A Dir ec to r may be a ppo int ed by or din ar y re sol utio n of th e shar eh old ers in a ge ner al me eting f ollow ing no minat ion by the B oar d or a m emb er (or memb ers) entitl ed t o vote a t such a meet ing . In ad diti on , the D ir ect or s may ap poin t a Dir ec to r to f i ll a vac ancy, or as an a ddi tio nal Di re ct or , pr ovid ed t hat the in div idu al re tir es at t he nex t A nnua l Gen er al Me eting (AGM). A Dir ec to r may b e rem oved by t he C ompa ny in cer t ai n cir cums t anc es s et out in t he C omp any ’s Art icl es of Ass oci atio n or by an o rd inar y r eso lut ion of t he C omp any. TheR elat ions hip A gr eem ent b et ween t he C omp any and Roger D e Haa n pr ovid es for t he n omin atio n for ap poi ntme nt ( and r em oval or r e-n omin atio n ) to t he B oar d of o ne No n- E xecut ive Di re ct or fo r as long a s he ho lds at l eas t th e high er of (i ) 10% o r mo re of t he is sue d or dinar y s har e cap it al of t he Co mpany an d (ii ) th e per c ent age of th e issu ed or din ar y sha re capi t al of th e Co mpa ny rep re sent ed by 6 0 % of the i nvest or ’s hol ding of o rdi nar y sh are s imm ediat el y foll owing t he ca pit al rais e whi ch t ook p lac e in O ct ob er 202 0. All D ire ct or s will s eek r e- ele cti on at th e AGM in ac co rd anc e wit h the C omp any ’s Ar ticl es of A sso ci atio n and t he re com men dati ons of t he U K Co rp or ate G overn anc e Co de. Direc tor s’ indemnities At the d at e of this r ep or t , in dem niti es ar e in for c e und er whic h the C omp any ha s agr eed t o in demni f y t he Dir e ct ors , to t he ex te nt pe rmit t ed by l aw and t he Co mpa ny’s Ar t icle s of Ass oci atio n, i n re spe ct of a ll los ses a risin g out of, or in con nec tio n wit h, t he execut ion o f the ir powe rs , dut ies an d re spo nsib ilit ies , as D ire ct or s of the C om pany or a ny of it s subs idia ries . N o amou nt was pa id und er any of t hes e inde mnit ies du ring th e year. Change of co ntro l – signif ic ant agr eement s The re ar e so me ar range ment s wh ich g ive rig ht s to t hir d par t ies t o te rmin ate ag re eme nt s upo n a cha nge of co ntr ol ofthe C om pany, inclu ding fo llowi ng a t akeover b id, f or example insurance, commer cial contrac ts and distribut ion agr eem ent s . The re ar e a num ber o f con tr act s an d arr angeme nt s thr oug hou t the G ro up for w hich t he le gal ris k arisi ng out of a c hange of c ont ro l is ma naged as p ar t of t he contractual g over nance process. The G ro up’ s co rpo rat e de bt is uns ecu re d and in p lac e for gener al pu rpo ses . I t con sis t s of a £ 15 0m s even-year p ubli c list ed b on d at 3 .3 75% , due t o exp ire i n May 20 24, an d a £2 50m f ive-yea r publ ic lis te d bo nd at 5 . 50% , d ue t o expir e in Jul y 2026 . T he Gr oup a lso h as availab le an u ndr awn £ 1 00 m revol ving c re dit f acil it y, expiring in M ay 20 25 ( expir y d ate subj ect t o r epay ment of t he M ay 2024 b ond ). Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 108 T we lve-yea r E xp or t C re dit A gency b ack ed fu nding i s in pla ce to f i nan ce 80 % of th e co st of t he G ro up’ s tw o oc ean c ruis e ship s. T he f ir st o f the se fa cili tie s was dr awn on c omp let ion ofthe b uild o f Spi rit of D isc over y and i s sec ure d by way of achar ge over the a sset . T he s eco nd f acili t y was dr awn o n com plet ion o f the b uild o f Spir it of A dvent ure a nd is al so sec ure d by way of a ch arge over th e ass et . Th e Co mpany haspr ovi ded a g uar ant ee f or th e ship d ebt . Th e Gr oup a lso sec ure d a deb t holi day and c ovena nt waive r for th e ship d ebt up to 3 1 M ar ch 20 22 . In th e event of a ch ange of co ntr ol , the f aci lit ies wou ld eit her re quir e re paym ent or r en egotiat ion . If t he s hip f in anci ng is ter minat ed , sig nif i cant b re ak fe es may b e inc urr ed. Fur th er det ails o n ban king fa cili tie s ar e show n in Not e 3 0 to t he con soli dat ed f i nanc ial s t ate ment s o n pages 1 82-183 . The r ules o f the C omp any ’s employee s har e pl ans gen era lly pr ovid e for th e ac cel er ate d ves ting an d/ or re leas e of sh ar e award s in th e event of a ch ange of co ntr ol of t he C omp any. The C omp any do es no t have any agr ee ment s wi th c oll eagu es (inc lud ing Dir ec to rs) which wou ld pay c omp ens atio n in th e event of a ch ange of co ntr ol . Conf lict o f intere st Eac h Dir ec to r is obl iged to d isc los e any pot ent ial o r act ual conf lict of int er es t in ac co rd anc e wi th th e Co mpany ’s Co nf lict o f Int er est Po licy. The p oli cy is sub jec t to r evi ew and declaratio ns are made on an annual basis. Direct ors are also re quir ed t o upd at e any cha nges to d ecl ar atio ns as t hey oc cur. Interna l co ntr ols ar e in p lac e to e nsur e th at any related-p art y tr ansactions ar e conduct ed on an arm ’ s- leng thbas is. Shar e capit al an d inter est s invot ing right s The C omp any ’s share c api t al (in clu ding movem ent s dur ing the ye ar ) is set o ut on p age 18 6. O n 1 2 Novemb er 20 2 1 , 235 ,0 4 4 or din ar y sha re s of 15 p eac h wer e iss ued an d tr ans ferr ed int o an Em ploye e Ben ef it T rus t to s atis f y empl oyee in cent ive ar ran gement s . At th e dat e of th is re po r t , the C omp any ’s issued s har e ca pit al c omp ris ed a sing le cl ass of sha re c api ta l whic h is div ide d int o or dinar y s har es of 1 5p eac h. A s of 3 1 Jan uar y 20 22 , 14 0, 33 7 , 2 7 1 or dina ry s har es of 15 p eac h had b een is sue d, f ull y paid up a nd qu ote d on th e London Stock E xchang e (LSE). On 1 6 Novem ber 2 02 1 , Roger D e Ha an pu rc hase d 3 41,415 or dinar y s har es of 1 5p e ach , and h old s a tot a l of 37 ,19 6, 970 shar es , c ons tit ut ing 26 .5% of t he C omp any ’s issued s har e capi t al at th e dat e of sig ning of t his r epo r t 1 . In ac co rd anc e wit h Dis clo sur e and T rans par en cy Rul e (DTR) 5.1 , the C om pany mu st di scl ose w her e it ha s be en not if ie d of the in ter es t s in th e Co mpany ’s tot al vot ing rig ht s. T he obliga tio n to n otif y sit s wi th th e shar eh old er , and t he Co mpany mu st r ep or t on t he n otif icati ons r ec eive d, as a t the end of t he r epo r ting ye ar an d also t he dat e of s igning o f the Annual Repor t and Acco unts. Sinc e th e dat e of dis clo sur e to t he C omp any, the int er est o f any per son m ay have inc re ase d or de cr eas ed . The re is n o re quir eme nt to n otif y the C om pany of any in cr eas e or decrease unless the holding passes a notifiable threshold i n acc or da nce w ith DTR 5 .1. Infor mati on r egar ding ot her int er es t s in voti ng right s pr ovid ed t o the C omp any pur sua nt to t he F inan cial C on duc t Auth ori t y DTRs is p ubli she d on th e Co mpa ny’s cor por at e websi te a nd vi a a Reg ulat or y Inf orma tio n Ser v ice . The followi ng table summar ises shareholders who hold ov er 3%of t he Co mpa ny’s issu ed sh ar e cap it al (b ased o n Section793 requests) : Name Ordina ry shares of 15 p ea ch Percentage of c api t al held Nature of holding Chelverton Asset Management 5 , 0 7 7, 8 8 4 3.6 2% Indirect Roger D e Haa n 37 ,196,97 0 26. 51% Indirect In ac co rd anc e wit h DTR 5.1 , the C om pany ha d be en not if ie d of the f ollo wing int er es t s in the C om pany ’s tot al voti ng right s as of 3 1 Jan uar y 20 22 . T he C omp any is awar e tha t , of the l ist bel ow, only Ro ger De H aan h old s over 3% . T he C omp any has not b een fo rmal ly not if i ed of a c hange in ho ldi ngs by any oth er shareholder menti oned and is obliged to disclose actual notif ications received . Name Ordina ry shares of 15 p ea ch Percentage of c api t al as disclosed to t he Com pany Nature of holding Maj edie A ss et Management Limited 3 ,73 8 , 3 1 1 4.99% Indirect Ar temis Investment Management LLP 7 ,4 40,0 83 9. 98 % Indirect Royal L ond on As set Management Limited 3,6 85 ,4 89 4. 93% Direct Pelham Capital Ltd 3, 3 24 , 50 8 4 . 4 4% C ontract for Dif ferenc e BlackRock, Inc. 3,735, 633 4.99% Indirect Pictet Asse t Management Ltd 3 , 7 3 7, 6 5 6 4 .99% Direc t Roger D e Haa n 36 ,855,555 1 26.31% 1 Indirect Már io Nun o dos Santos Ferreira 2,244,000 3.0 0% Dir ec t (0 . 2 %) Indirect (2 . 8 %) 1 R oge r De H aa n no w ho lds 3 7,196 , 970 s ha re s , co ns ti tu ti ng 26 . 5% of t he C om pa ny ’s iss ue d sh ar e ca pit a l bu t was n ot r eq ui re d to n ot if y t he C o mp any un de r DTR5 .1 as th e sh ar e p ur ch ase d id n ot c ro ss a r ep or t a bl e th re sh ol d. T he C o mpa ny is a war e th at s om e sh ar eh ol din gs r efe re nc ed a bo ve ma y have b ee n di lut e d as a r es ult o f th e ca pi ta l r ais e th at t oo k pl ac e on 5 O ct o be r 20 20 an d ne w sh ar e iss ue s t o sat is f y e mpl oye e b ene f it s ch em es . Th e nu mb er of s ha r es qu ot ed a re dis cl os ed p os t th e c ons ol id ati on w hic h t oo k pl ac e on 1 3O ct ob er 2 02 0. W he re d isc lo su re s we re m ad e pr io r to s ha re c on so lid at io n, t he n umb er o f sh ar es h as been restated to post-consolidation nu mbers Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 10 9 Authority to allot/ purchase o wn shares A shar eh old ers’ r eso luti on was p ass ed at t he AGM on 14Jun e202 1 which au tho ris ed th e Co mpany t o mak e mark etpur cha ses w ith in the m eani ng of Se ct ion 6 9 3(4 ) ofthe C om pani es Ac t 20 06 (the Act ) ( up to £ 2,10 1 , 53 3 , rep re sen ting 1 0% of t he ag gr egat e no minal s har e ca pit al ofthe C om pany fo llow ing admi ssi on) . This i s subj ect t o a minimu m pric e of 1 5p an d a max imum p ric e of th e high er of10 5% of th e average mi d-mar ket qu ot atio ns for f ive busi nes s days pr ior t o pur ch ase o r the p ric e of th e las t indi vidu al tr ad e and hig he st cu rre nt indi vi dual b id as deri vedfr om t he L SE t ra ding sy st em . The C omp any did n ot exerc ise t his aut hor it y dur ing the year,and it will exp ire at t he fo r thc om ing AGM . A sp eci al re solu tio n to au th oris e the C om pany t o make m arke t purchase s repres enting 10% of current nominal share capi t alwill b e pr op os ed at th e 202 2 AGM . T he aut ho rit y tor epu rc has e the C omp any ’s ordin ar y shar es i n the mark etwill b e limi te d to £ 2 ,105 ,0 59 an d will s et out t he minimu m and ma xim um pri ce w hich wo uld b e paid . The D ir ect or s of th e Co mpany we re al so gr ant ed a uth orit y atthe 2 02 1 AGM t o all ot re levant s ecur iti es up t o a nom inal amou nt of £ 7 ,005 ,111 . T his aut hor it y was exer cis ed dur ing the year fo r the i ssue o f 23 5,0 4 4 or din ar y sha re s for t ran sfe r into a n empl oyee b enef it tru st t o sat isf y empl oyee in cent ive arr angeme nt s. T his aut ho rit y wi ll app ly unt il th e co nclu sion o f the 20 2 2 AGM , at whic h sha re hol der s will b e aske d to g r ant the D ir ect or s auth ori t y (for t he pur po ses of S ec tio n 551 o f the A ct) to allo t rel evant se curi tie s: (i ) up to a n ag gr egat e nomi nal am ount of £ 7 ,00 9, 8 4 7; and (ii) c omp ris ing equi t y sec urit ies (as def in ed in th e Act) up to a n ag gr egat e nomi nal amou nt of £ 14 ,0 19 ,6 93 (aft er d educ ting f ro m suc h limi t any rel evant se curi tie s issu ed un der ( i) in c onn ect ion w ith a r ight s issu e ). Thes e amo unt s wil l appl y unti l the c on clus ion of t he AGM to b e hel d in 20 23 , or , if ea rlier, 31 Jul y 202 3 . Sp ecia l re sol uti ons wi ll also b e pr op os ed t o give t he Directors authority to mak e non-pre-emptiv e issues wholly for ca sh in c onn ect ion w ith r ight s is sues a nd ot her wis e up t o an ag gr egat e nom inal am ount o f £ 1 ,052 , 529 a nd t o make non- pr e-e mpti ve iss ues w holl y for c ash in c on nec tio n wit h acq uisi tio ns or sp ec if ie d cap it al inves tm ent s up t o an agg regat e amo unt of £ 1 ,052 ,5 29. Right s at t aching t o share s The C omp any ha s a singl e cla ss of o rdi nar y sh are s in iss ue . The r ight s at t ac hed t o th e sha re s are gover ned by ap pli cab le law and t he C omp any ’s Art icl es of A sso ciat ion w hich a re avai lable on our corporat e website ( ww w.corporate.saga. co.uk/about-us / g overnance ). Or dina ry s har eh old ers h ave the rig ht to r ec ei ve noti ce , at te nd and vot e at gen er al mee tings; a nd t o re cei ve a co py of the C omp any ’s Annual R ep or t and A cc ount s a nd a di vid end when a ppr oved a nd pai d. O n a sho w of han ds, e ac h shar eh old er pr es ent in p ers on , or by pr ox y (or an autho ris ed representative of a corporate shareholder ) , shall have one vote . In th e event of a p oll , one vot e is at t ac he d to e ach s har e held . N o shar eh old er owns s har es w ith s pe cial r ight s as t o con tr ol. T he N otic e of AGM ( Notice ) sta tes d ea dline s for exercis ing voti ng right s an d for a ppo inting a p r ox y or pr oxie s. The S aga Emp loyee B enef it T r us t (the T r ust) is an Empl oyee Ben ef it T rust w hich h ol ds pr op er t y (the T rust Fund) in clu ding inte r-a lia m oney, and or din ar y shar es i n the C omp any, intru stin f avour or fo r th e ben ef it of c ol leag ues o f the S aga Gr oup. T he T rust ee of t he T rust h as the p ower t o exerc ise the ri ght s an d power s inc ident a l to, a nd t o act in r el atio n to, the T rust Fund in s uch m anne r as th e T r us te e in it s abs olu te disc ret ion t hink s f it . The T rust ee ha s waive d it s righ ts t o div iden ds on o rdi nar y sh ar es hel d by the T rus t . Det ail s of empl oyee sh ar e sch eme s are s et ou t in Not e 3 6 to t he consolidat ed f inancial stat ements . Restrictions on th e transfer ofshares Purs uant t o th e re lati onsh ip agr eem ent d ate d 10 S ept emb er 2020, R oger D e Haa n was limi te d in th e tr ans fer of hi s shar es prio r to 5 O ct ob er 20 2 1 (1 2 mon ths f ro m the d ate o f admis sio n) withou t the w rit t en c ons ent of th e Co mpa ny. Ot her t han t his arr angem ent , or w her e imp os ed by law o r reg ulat ion , or w her e the L is ting R ules r eq uir e cer tain per son s to o bt ain cle ar anc e bef or e deal ing , ther e ar e no re str ict ion s rega rdi ng the t ra nsf er of sh are s in th e Co mpany. The C omp any is n ot awar e of any fu r the r agr eem ent whi ch would r es ult in a r es tri cti on on t he tr an sfe r of sha re s or votin g righ t s. Articles of Association Any am endm ent t o the C om pany ’s Ar tic les of A ss oci atio n may onl y be m ade by p ass ing a sp eci al re sol uti on of t he shar eh old ers of t he C omp any. The Co mpa ny las t app rove d it s Ar t icl es of A sso ciat ion by s pe cial r es olu tio n at the AG M held o n 14 Ju ne 20 2 1 . Research and dev elopment The G ro up do es not u nde r ta ke any mat er ial ac ti vit ies in t he f ield of research and developmen t . Branches outside the UK The C omp any do es no t have any br anc hes o ut sid e th e UK . Post-balance sheet events There were no post -balance sheet even ts . Auditor KPM G LL P has c onf irmed i t s willi ngne ss t o co ntinu e in of f i ceas a udit or o f the C omp any and r es olu tio ns for i t s re-appointm ent and for the Audit Committ ee to determine it s re mune rat ion w ill be p ro po sed at t he fo r th com ing AGM . Annual Gener al Meeting The AGM w ill b e held o n 5 Jul y 202 2 at 1 1 .00 am at Enb ro ok Park , S andgat e, Fol kes to ne, K ent CT2 0 3S E . The N oti ce ofAGM will b e avail able o n our c orp or at e websi te ( w w w.corpor ate .saga .co.uk) in due cours e. By or der o f the B oar d Victo ria Haynes Gr oup C omp any Se cr et ar y 22 M ar ch 20 22 Saga p lc (Comp any no. 0 8 80 426 3) Directors ’ R eport continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 110 St atements of responsibiliti es Directors’ responsibilities The D ir ect or s ar e re spo nsib le fo r pr epar ing th e Ann ual Rep or t an d Acc ou nt s and th e Gr oup a nd pa rent c om pany f ina ncia l st at eme nt s in ac co rd anc e wit h app lica ble l aws and reg ulation s. Co mpany l aw re quir es th e Dir ec to rs t o pr epa re G ro up and parent company f inancial st atement s for each f inancial year . Und er th at law, they ar e r equi re d to p rep ar e the G r oup f ina ncia l st at eme nt s in ac co rd anc e wit h UK -ad opt ed international acc ounting standar ds and in conformity with the r equ ire ment s of t he C omp anie s Act 2 00 6 (the Act ) and have ele ct ed t o pr epar e th e par ent c om pany f i nanc ial st at eme nts i n ac cor da nc e wit h UK a cc ount ing st an dar ds , incl uding F inan cia l Rep or t ing St a ndar d (F RS) 10 1 (R edu ce d Disclosure F ramework) . Und er co mpa ny law, the Di re ct ors m ust n ot ap pr ove the f ina ncia l st at eme nt s unle ss th ey ar e sati sf i ed th at they g ive atru e and fa ir view o f the s t ate o f af fa irs of t he Gr ou p and par ent c omp any and o f thei r pr of it o r los s for t hat p erio d ( see G overn anc e st at eme nt s on page 6 5). In p re pari ng eac h of the G r oup an d par ent c omp any f in anci al st at em ent s, theD ir ect or s ar e re quir ed t o: • sele ct s uit abl e ac cou nting p oli cies a nd th en ap ply t hem consist ently; • make judgements and estimates that are re asonable, relevant, reliabl e and prudent; • for th e Gr oup f inanc ial s t atem ent s , st at e wh ethe r they have be en pr epa re d in ac co rd anc e wit h UK-adopt ed international acc ounting standar ds; • for th e par ent c omp any f in anc ial s ta tem ent s , st at e whether appl icable UK accountin g standards have been foll owed , subj ect t o any ma ter ial de par t ur es dis clo sed a nd explained in the parent company finan cial stat ements; • ass ess t he Gr ou p and pa re nt co mpany ’s abilit y t o c onti nue as a going c onc ern , dis clo sing , as app lic abl e, mat t er s related t o going conc ern; and • use t he going c onc ern b asis o f acc oun ting un les s they eith er int end t o liq uida te t he Gr oup o r th e par ent c omp any or t o cea se op er atio ns or h ave no re alis ti c alt erna tive b ut to d o so. The Directors are responsible for keeping adequate acc oun ting r ec or ds th at ar e suf f icien t to s how an d explai n the parent company’ s transaction s and di sclose with re ason abl e ac cur acy at any t ime t he f in anc ial p osi tio n of the parent company and enable them to ensure that it s f inancial st at eme nts c om ply w ith t he Ac t . Th ey are a lso r esp on sibl e for su ch int ern al co ntr ol as t hey de ter mine i s nec ess ar y t o enab le th e pr epa rat ion of f inanc ial s t ate ment s t hat ar e fr ee fr om mat eri al mis st at eme nt , whe ther d ue t o fr aud o r err or , and have gen er al re sp onsi bili t y for t ak ing suc h st eps a s ar e re ason abl y op en to t hem t o sa fegu ar d the a sset s of t he Gr oup an d to p reven t and de te ct fr aud a nd ot her irregularities . Und er app lic abl e law and r eg ulat ions , th e Dir ec to rs ar e als o re spo nsib le fo r pr epar ing a S tr ateg ic Re po r t , Dir ec to rs’ Report , Direct ors’ Remuneration Report and Corporate Gover nanc e S ta tem ent t hat co mpl y wit h tha t law and t hos e reg ulation s. Discl osur e of inform ation t o the audi tor Havi ng mad e the r eq uisit e en quiri es , so fa r as ea ch of th e Dir ec to rs is awar e, t her e is no r el evant aud it info rmat ion (as def in ed by s ect ion 418(3) of th e Act) of whic h the C omp any ’s audi to r is unawar e an d the D ir ect or s have t aken a ll the s t eps they ou ght t o have t aken a s Dir ec tor s t o make t hems elve s aware o f any re levant au dit inf orma tio n and t o ensu re t hat the C omp any ’s audit or is awar e of t hat info rmat ion . Mainten ance of websit e The D ir ect or s ar e re spo nsib le fo r the m aint enan ce a nd integrity of the corporate and financial inf ormation included on th e Co mpany ’s websit e . Leg islat ion i n the U K governing the prepar ation and dissemination of finan cial stat ements may dif fer fr om le gis lati on in ot her jur isdi cti ons . Direc tor s’ responsib ilit y st atement Eac h of the D ir ect or s , who wer e in of f ic e at the d ate o f this repor t, whose names and responsibilities a re listed on pages 70-71 , conf irm th at , to t he be st o f thei r know ledge: • the f inanc ial s ta tem ent s , pr epa re d in ac cor da nc e wit h the appl ica ble s et of ac co unting s t and ar ds , give a t rue a nd fai r view of t he as set s , liab ilit ies , f in anci al p osit ion a nd pr of i t or los s of the C om pany an d the u nde r ta kings i nclu de d in the consolidation t aken as a whole; and • the M anage ment R epo r t inc lude s a fair r evi ew of the develo pme nt and p er fo rman ce of t he bu sine ss an d the pos iti on of th e iss uer, and the und er t ak ings in clud ed in t he con soli dat ion t ake n as a who le , toget her wi th a de sc ripti on of the p rin cipa l risk s an d unc er t aint ies th at th ey fac e. By or der o f the B oar d Victo ria Haynes Gr oup C omp any Se cr et ar y 22 M ar ch 20 22 Saga p lc (Comp any no. 0 8 80 426 3) Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 111 Indep enden t Audi tor’ s Report t o the Membe rs of Sag a plc 1 Our opinion is unmodif ie d We have audit ed t he f i nanc ial s t ate ment s of S aga pl c (“ th eCo mpany ” ) for t he yea r end ed 3 1 Jan uar y 20 22 w hich comprise the Consol idated Income Statement, Consolidated St atement of Compr ehensive Income, Co nsolidated St atement of Financial Position, Co nsolidated S tatem ent ofCh anges in Equi t y and C on soli dat ed S t ate ment of C ash f lows , the P are nt Co mpa ny Bala nc e She et , Par ent C omp any St at eme nt of Ch anges in Equ it y, and th e rel ate d not es , incl uding t he ac co unti ng pol icie s in not e 2 t o the G ro up f ina ncia l st at eme nt s and no te 1 t o th e Par ent C ompa ny f inancial st atement s. In our o pini on: • the f inanc ial s ta tem ent s gi ve a tru e and f air vi ew of th e st at e of th e Gr oup’s and of the Par ent C om pany ’s af fair s asat 3 1 Jan uar y 20 22 a nd of th e Gr oup’s loss fo r the ye ar then ended ; • the G ro up f in anci al st at em ent s have b een pr op erl y pr epar ed i n acc or da nce w ith U K ad opt ed in ter nati ona l accounting st andards; • the Parent Company f inancial st atement s have been pr ope rly p re par ed in a cc or dan ce wi th U K ac co unting standards , includin g FRS 101 Reduced Disclosure F ramework ; and • the f inanc ial s ta tem ent s have b een p rep ar ed in acc or da nce w ith t he r equ ire ment s of t he C omp anie s Act20 0 6. Basis for opini on We conducted our audit in accordance with Interna tional St an dar ds on A udi ting ( UK ) ( “I SA s (U K )”) an d app lic abl e law. Our r es pon sibi liti es ar e de scri bed b el ow. We believe th at the audi t evide nc e we have obt ain ed is a su f f i cient a nd app rop riat e b asis fo r our op inio n. O ur aud it op inion i s con sis te nt wit h our r epo r t t o the A udit C om mit t ee . We were f irst a pp oint ed as au dit or by t he sh are hol der s on 22J une 20 1 7 . The p erio d of t ot al unint er rupt ed enga gement is for t he 5 f in anc ial yea rs en ded 3 1 J anua ry 2 02 2 . We have fulf illed o ur eth ical r es po nsib ilit ies un der, and we rem ain inde pen dent o f the G ro up in ac co rd anc e wit h, U K et hica l re quir eme nt s incl uding t he FRC Et hica l St an dar d as ap plie d to li st ed pu blic in ter es t ent iti es . No n on-au dit s er vic es pr ohibi te d by th at st an dar d wer e pr ovid ed . Over vi ew Materia lity : Gr oup f inancial st atement s as a who le £3. 5m ( 2021: £3.5m) 4.7 % (202 1: 3 .7 % ) of no rmal ise d pr of it befo re t a x Cover age 98 % (202 1: 9 5%) of tota l pr of it s a nd los ses t hat ma de up t he Gr ou p los s befo re t a x Key audit matter vs 20 2 1 Recurring risk s Valuatio n of cla ims ou ts t and ing – IB NR ( g ros s and n et) Rec over abili t y of Gr ou p Go odw ill and t he Par ent Co mpany ’s investm ent in subsidiaries Rec over abili t y of th e car ry ing value o f crui se shi ps 2 Key audit mat ter s: our as sess ment of ris ks ofmat erial miss t atem ent Key audi t mat t ers a re t hos e mat t ers t hat , in o ur pr ofe ssi onal judgem ent , wer e of mo st s ignif ican ce in t he au dit of t he f ina ncia l st at eme nt s and in clud e th e mos t sig nif ic ant assessed risk s of material misstat ement ( whether or not duet o fr aud ) ident if i ed by us , inc ludi ng tho se whi ch ha d the gr eat es t ef fe ct on: t he over all au dit s tr ateg y; t he all oc atio n ofre sou rc es in t he aud it; a nd dir ec ting t he ef f or t s of th e engageme nt te am . We summa rise b elo w the key au dit mat t ers , in de cr eas ing or der o f audi t signi f ic anc e, in ar riv ing at our au dit op inio n above , toget her w ith o ur key audi t pr oc edur es t o ad dr ess t hos e mat t ers a nd our f indings f r om tho se pr o ced ure s in or der t hat t he C omp any’s memb er s, a s a bo dy, may bet t er und ers t and t he pr o ce ss by whi ch we arri ved at our a udit o pini on . The se mat t er s wer e add re sse d, and ou r f ind ings ar e bas ed o n pr oc edur es u nder tak en, in t he con tex t of, and so lel y for t he pu rpo se of, our aud it of t he f ina ncia l st at eme nt s as a who le , and in fo rming o ur opi nion ther eo n, a nd co nse quen tly a re in cid ent al t o that o pini on, a nd we do not p rov ide a s epa rat e op inio n on th ese m at te rs . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 112 Area The risk Our response Valua ti on o f cl aim s out s t an din g – IB N R (g r os san d net) Cl aim s out s t an ding – I B NR is on ly a p or t io n of th e Cl aim s out s t an ding (G ro ss £2 9 2. 8 m ill ion , 20 2 1: £3 2 9. 5 mil lio n; N et £ 1 00 .7 mil lio n, 2 02 1 : £ 11 7.2 m ill ion) Ref er t o page s 7 7-8 1 (Au dit Committee Repor t) , note 2. 3 . r on p age 13 6 (acc oun tin g po lic ie s); note 2. 6 on p ages 1 4 0-14 3 (signi f ic ant a cc ou nt ing judgemen ts, estimates and ass ump ti ons), not e 28 o n page s 17 8–18 1 (f inan ci al disclosures ). Subjective valuation: Va luation of claims outstanding – incurred but not re po r te d (‘ I B NR ’ ) is hi gh ly ju dgem en ta l an d re qui re s anum be r of as sum pt ion s to b e m ade t ha t have h igh es tim at ion u nc er t ai nt y an d ca n have m at eri al i mpa ct s onthe valuation. Further , va luation of these liabilities inv olves selection of appropria te methods and inv olves complex calcu lations. Key assu mptions include developmen t patterns and es tim at es o f th e fr eq uen cy a nd se veri t y of c lai ms u sed to va lu e th e lia bil it ies , p ar t icu lar ly t ho se r el ati ng t o th e amo unt a nd t imi ng of I BN R c lai ms . Th e inh er ent r isk s o f mat er ial m is st at em ent r e lat ing t o the v alu at ion o f cl aim s ou ts t an din g has b ee n imp ac t ed by th e COV I D -19 pa nd emi c and c ur re nt ec on om ic co ndi ti on s. We ex pe ct t ha t re ce nt da t a use d t o det er min e th e as sum pti on s for s et t ing r es er ve es tim at es a re a f fe ct ed b y COV I D-1 9 and t he r efo re man agem en t have t o c ons id er th e ex t ent t o wh ic h thi s influences the choice of the a ssumptions. Ce r t ain ar e as of t he c lai ms o ut s ta nd ing – I BN R b ala nc e co nt ain s gr ea te r unc er tai nt y, for ex amp le , lar ge bo di ly inju r y (‘ B I’ ) c lai ms ex hib it g re at er va ri abi lit y a nd a re more long -tailed than the damag e classes. In particular , the allowance made for the likelihood of acla im t o set t le a s a Per io dic P aym ent O r der ( ‘ PP O’ ) rat he r th an a lu mp su m is un c er t ain a nd h as a hi gh re se rv ing r is k . Sim ila r es ti mat e s ar e re qui r ed in e st a bli shi ng th e re ins ur er s’ sha re o f cl aim s out s t an din g, i n par ticu la r thes ha re o f IB N R cl aim s. A mar gin i s ad de d to t he a ct ua ria l be st e st im at e (‘ABE ’ ) of claim s outstanding to make allowance f or risks and unc er t a int ies t ha t ar e not s pe ci f ic al ly al low ed fo r in es ta bl ish ing t he A BE . T he ap pr o pri at e ma rgi n to re co gni se i s a sub je ct ive ju dge men t and e s tim at e t ake n by th e dir e ct or s, b as ed o n th e pe rc ei ved u nc er t ai nt y and p ot en tia l fo r vol ati lit y in the u nd erl yi ng cl aim s , whi chh as al so b een i mp ac te d by C OVI D -19. Data captu re: The valua tion of these reserves depends on complete and a cc ur at e da ta a bo ut t he vo lum e, a mo unt a nd pat t er n of cu rr ent a nd h is to ric al c lai ms s inc e th ey ar e use d t o for m exp ec t ati on s ab out f ut ur e cl aim s . If t he dat a u sed i n ca lc ula tin g IB N R , or f or fo rm ing ju dge men t s over k ey as sum pti on s, i s not c om pl et e an d ac cur at e, then material impacts on the valuation o f claims outs tanding may arise. Th e ef fe ct o f th es e mat t er s is t hat , a s pa r t of ou r ris k assessment, we de termined that the valuation of claim s out s t an ding h as a h igh d eg re e of e st ima ti on un ce r t ain t y, wit h a po te nt ial r an ge of r ea son ab le o ut co me s gr e ate r tha n ou r mat er ial it y f or t he f in an ci al s ta te me nt s as a whole, and possibly man y times that amoun t. In th e au dit f or t he ye ar e nde d 3 1 Ja nu ar y 20 2 1 we included withi n the va luation of claims outstanding – lar ge BI c as e re se r ves , as p ar t of t hi s key au di t mat t er. We co nti nue t o p er fo rm p ro c edu r es ove r ca se r es er vi ng for l arg e BI c lai ms . Ho wever, we have r e- as se ss ed th at the e s tim at ion u nc er t ai nt y in r el at ion t o t his el em ent o f the reserves for claims outstanding is lower , therefore we have n ot a ss ess ed t his a s on e of t he m os t sig nif ica nt ris ks i n our c ur re nt ye ar au dit a nd , th er efo r e, it i s no t sep ar at el y id ent if i ed in o ur r ep or t t his y ear. Our procedures included: • C ontrol design, implementation and operating effectiveness: T esting the desi gn, implementation and op er ati ng ef f ec ti ven es s of key c o ntr ol s over t he completeness and accuracy of claims and premiums data use d in t he c al cul ati on o f th e IB NR c la ims ( in clu din g bo th cur re nt an d pr ior y ear c as e r ese r ve da ta) . Th e c ont ro ls included reconciliation s between data in the actuarial re se rv ing s ys te ms a nd da t a in th e po li cy ad min is tr at ion systems. We invo lve d our a ct ua ria l sp ec ial is t s to p er f orm t he f oll ow ing procedures: • Ev alu at e th e wor k of t he in de pe nd ent a nd i nt ern al actuaries: We e valuated the work of the independent and int er nal a ct ua rie s by an al ysi ng th e re su lt s of r es er v ing re po r t s iss ue d by th em a nd f ur t her a ss es se d the competence and the appropriateness of the methodology and the conclusions of the internal actuaries. • Benchmarking assumptions and methodology: Thr o ughc ri tic al a ss es sme nt of t he a ct ua ria l r epo r t s ands up po r tin g do cum en ta ti on , inc lu din g the u se o f benchmarking against ma rket data and through dis cu ssi on w it h th e act ua ri es , we an al yse d an d ch all enge d the r e se rv ing m et ho do log y as wel l as th e key a ss ump tio ns used – i ncluding cla ims frequency , claims severity , claims inflation, development patterns , PPO propensities , allowances for subrogati on and the impact of legislative and process dev elopments and considered the need for add it io nal a llo wan ce s as a r es ult o f th e ongo ing e f fe ct s of C OV I D -19 . • Independent re-per formance in respect of the actuarial best estimate: We us ed o ur ow n mo del lin g to ol s to r e- pr oj ec t ult im ate l os se s fo r sub st a nti all y al l per il s and co mpa r ed th is t o th e Gr ou p’s est ima te s. • M argin evaluation: We e valuated the appropriateness ofth e Gr o up r ec omm en de d mar gi n hel d at ye ar en d . In or de r to d o thi s, w e as ses se d th e di re ct or s’ ap pr oa ch , an d sup po r ti ng an al ysi s for m arg in t o b e hel d, h avi ng r ega rd t o additional al lowances that continue to be held this year for wha t is c ons id er ed o ngoi ng un ce r ta int y i n th e not if i ca tio n and d evel op me nt of c lai ms b ro ugh t ab ou t as a r esu lt o f COV I D-1 9 th at may n ot ye t be r ef l ec te d in t he d at a and ass ump ti ons u se d in d evel opi ng th e A BE . We eva lua te d thed ir ec t ors’ a ss ump tio ns a nd ju dgem en t in me as uri ng and u nwi ndi ng of a n ele me nt of t he a ddi ti on al COV I D -19 mar gin i n th e cur r ent ye ar a nd pl an f or f ut ur e pe rio ds . Wethe n fu r th er c on sid er ed t he r el at ive s tr en g th o f th e mar gin h el d agai ns t pe er s an d ver sus t he p rio r p eri od i n or de r to b e sa tis f i ed t hat n o ad dit io nal p ru de nc e ha d be en re co gni se d in th e lev el of ov er all r es er ve s he ld in cl udi ng margin. Additionally , we performed the followin g procedures: • Dat a comparisons: We ag re ed t he r el evan t f in anc ia l and non-financial clai ms and premiu ms data recorded in the cla ims a nd p re miu ms a dmi nis tr at io n sys t ems t o th e da ta use d in t he a ct uar ia l re se rv ing c al cu lat io ns , to a ss es s th e int eg rit y o f th e dat a u se d by th e int er na l ac tua ri es in t he ir ac tua ri al r es er vi ng pr o ce ss a nd in o ur ow n re pr oj ec tio ns and assessed tha t the output of the actuar ial re- projections reconciled with the reported balance in the f in anc ial s t at em ent s . • Ev alu at e ap pli ca tio n of r ei ns ur an ce c ont r ac t s: We al so assessed the risk transfer elements by inspecting the re ins ur anc e c ont r ac ts , a nd r ec al cul at ed a s amp le o f reinsurance recoveries recorded, including reins urance re cov eri es r el at ed t o IB N R , ag ain st t he t er ms of r el evan t reinsurance contracts. • Assessing transparency: W e assessed whether the Group’ s disclosu res about the de gree of estimation unc er t a int y an d th e se ns iti vi t y of t he b ala nc e t o ch ange s in key a ss ump tio ns r ef l ec te d th e ris k s inh er ent i n th e valuation of claims outst anding. Ou r f ind ing s: Ov er all we f ou nd th e r esu lt ing e st im at e of th e am oun t re co gni se d for c la ims o ut s t and ing – I B NR t o be m il dly cau ti ou s (202 1 fi nd ing : ca ut iou s). We foun d th e dis cl osu re s ofof t he s ens it iv it ies t o c han ges in k ey as sum pt ion s an d estimate as i nputs to the val uation to be proportionate (2021: proportionate) . Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 113 Indep enden t Audi tor’ s Report t o the Membe rs of Sag a plc continued Area The risk Our response Re cove ra bi lit y o f Gr ou p goo dw ill a nd t he Pa re nt Co mp any ’s inves t me nt insubsidiaries (Grou p good will: £718.6 mil lio n, 2 02 1 : £7 1 8 .6 m ill ion; Par ent C o mpa ny ’s investment in subsidiaries: £ 55 2. 3 mi lli on , 20 2 1: £5 52. 3 million) Ref er t o page s 7 7–81 ( Au dit Committee Repor t) , note 2. 3 . h on p ages 1 3 1-1 32 (acc oun tin g po lic ie s), note 2. 6 on p ages 1 4 0–14 3 (signi f ic ant a cc ou nt ing judgemen ts, estimates and ass ump ti ons), and n ot es 1 4 and 1 6 on p age s 15 5 an d 15 7- 15 8 (f in an cia l disclosures ). Forecast-based valu ation: Ins ur an ce go od wil l in t he G ro up an d th e ca rr yi ng am oun t of th e Par en t Co mp any ’s inve st men t in su bs idi ari es a re sig nif ica nt an d at ri sk of i rr ec over a bil it y if f or ec as t business performance for the Group’ s Insurance, Cruise and Tour Op er ati on s bu sin es se s, i n par t ic ul ar, were t o fall sign if icantly short of business plans. Th e es tim at ed r ec ove ra bl e am oun t of goo dw ill i n re la tio n to the Insurance business and the Parent Company’s inves t men t in su bs idi ari es a re s ubj ec ti ve du e to t he inh er ent u nc er t ai nt y invo lv ed in f or ec as ti ng an d dis co unt ing f ut ur e ca sh f l ows a nd au di to r jud gem ent isr equ ir ed t o as se ss w het he r th e dir ec t or s’ over all es tim at e, t a kin g int o ac co unt t he b el ow as su mpt io ns , fal ls wi th in an a cc ep t abl e r ange . Cu rr ent e co no mi c conditions and the outlook for geo-political u ncer tainty and t he i mpa ct t ha t thi s has o n th e sp ee d at w hic h th e Gr ou p’s T r avel b us in ess es c an r ec ove r als o have a significant impact on estimation uncertainty. Th e ass es sm ent o f th e re co ver ab ili t y of th es e as set s invo lve s a hig h deg r ee of s ub jec ti vi t y ar ou nd ass ump ti ons d ue t o th e su pp or t ing c al cul at ion s of Valu e in Us e (‘ VI U ’ ) be ing r el ian t on ex pe ct at io ns of f ut ur e performance. Multiple inputs in to the VIU calculations, suc h as we ig ht ed ave rag e co st o f cap it a l (‘ WAC C’ ) a nd te rmi nal g r ow t h ra te s ar e at ri sk of m an ipu lat io n in or de r to d em ons tr at e t hat t he va lu e of an u nde rl yi ng intangibl e assets is not impaire d. Th e ris k pr em ium in r e lat io n to t he se as se t s is im pa ct ed by un ce r ta int y i n th e ec on omi c ou tl oo k as a r esu lt o f theo ngo ing im pa ct o f COV I D-1 9 an d the r efo re t he re isri sk of i mp airm en ts t o go od wil l an d inves t men t s in sub sid ia rie s at t he Pa re nt C omp any l evel i f th e sh ar e pri ce d oe s no t re co ver ; and p ar t ic ula rl y if t he G ro up is not a bl e to d eli ver a t or ah ea d of p lan i n 20 22 /23 , a nd yea rs t o co me . Th e ef fe ct o f th es e mat t er s is t hat , a s pa r t of ou r ris k ass es sm ent , w e det er min ed t ha t the v alu at ion o f Gr ou p goo dw ill an d th e Par e nt Co mp any ’s inve st me nt in sub sid ia rie s ha s a hig h deg r ee of e st im ati on u nc er t ai nt y, wit h a po te nt ial r an ge of r ea son ab le o ut co me s gr e ate r tha n ou r mat er ial it y f or t he f in an ci al s ta te me nt s as a whole, and possibly man y times that amoun t. Our procedures included: • C ontrol design and implementation: We evalua te d th e des ig n and i mp lem ent a tio n of t he G ro up’s imp air men t assessment procedures, includin g those controls o ver the approvals of business plans. • His torical comparisons: We assessed the reasonableness of cash flow projections a gainst historical performance. • O ur s ec to r exp er ien ce : We eval uat e d and c ha lle nge d the ass ump ti ons u se d in c ash f low fo re ca st s u sin g our s ec to r knowledge and e xperience. • Benchmarking assumptions: We comp ar ed t he G r oup’s and t he P ar ent C om pa ny ’s assu mpt io ns t o ex te rn all y der ive d da ta i n re lat io n to k ey in pu ts s uc h as WACC a nd te rmi nal g r ow t h ra te s, w it h th e sup po r t of o ur va lua ti on speciali sts . • C omparing valuations: We comp ar ed t he r ec ove ra ble amo unt o f ea ch si gn if i can t Ca sh G en er ati ng Un it ( ‘C GU ’ ) by re fer e nc e to V I U re la ti ve to t he c ar ry ing v alu e an d evalua ted the outcome aga inst comparator industry mul tip le s; an d, f or t he Pa re nt C om pan y’s inve s tme nt insu bsi di ari es , we c om par e d the s um o f the V I Us f or allo fthe G r oup’s CG Us t o th e ca rr y ing va lue , ma rke t cap it al is ati on a nd im pli ed m ult ip le s of th e Gr o up’s businesses; a nd corroborated reasons for an y significant differ ences . • Sensitivity analysis: We used o ur an aly tic al t oo ls t o ass es s th e se nsi ti vi t y of t he go od wil l he adr o om an d concluded on the appropriateness of the valuation of goo dw ill an d th e ca rr yi ng va lue o f th e Par en t Co mp any ’s investment in subsi diaries. This included considerin g theo ngo ing im pa ct o f COV I D-1 9 on k ey ass um pti on s underlying the business plan s and chan ges therein. • Assessing transparency: W e assessed whether the Gr ou p dis cl osu re s ab ou t th e se nsi ti vi t y of t he ou t co me ofth e im pai rme nt as se ss me nt t o cha nge s in key ass ump ti ons r ef l ec t s th e ris k s inh er ent i n th e val uat io n ofgoo dw ill a nd i n th e car r yin g val ue of t he P ar ent Company’s inv estment in subsidiaries. We pe r for me d th e te st s a bov e rat he r th an s eek ing t o r el y onany o f th e Gr ou p’s cont r ols b ec au se t he n atu re o f th e bal an ce i s suc h th at we w oul d exp ec t t o obt ai n au dit ev id en ce primarily th rough the detailed procedures described. Ou r f ind ing s: We fou nd t hat t he r es ult ing e s tim at es ov er th e r ec over ab le amo unt o f Gr ou p goo dw ill a nd of t he P ar ent C om pa ny ’s inves t men t in su bs idi ari es t o b e bal an ce d (20 2 1 f in din g: bal an ce d). We fo un d th e dis cl osu re s of t he s ens it iv it ies o f goo dw ill h ead r oo m and t he c ar ry ing v alu e of t he Pa re nt Co mp any ’s inves tm en t in su bsi di ari es t o ch ange s in ke y assumptions, to be propor tionate (2 02 1: proportionate) . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 114 Area The risk Our response Re cove ra bi lit y o f th e car r yin g val ue o f cru is e ships (Cru ise s hip s: £ 6 2 1 .3 mil lio n, 2 02 1 : £6 3 5 .0 million) Ref er t o page s 7 7–81 ( Au dit Committee Repor t) , note 2. 3 h an d 2. 3 i on p ages 131-132 ( accoun ting po lic ie s), note 2 .6 o n pag es 140–143 ( signif icant acco unting judgement s, estimates and ass ump ti ons) an d not e 1 7 on pa ges 1 59 -16 1 (f ina nc ial disclosures ). Forecast-based valu ation: Th e es tim at ed r ec ove ra bl e am oun t of th e Gr ou p’s crui se shi ps is s ub jec ti ve du e to t he i nh er ent u nc er t ai nt y invo lve d in fo re ca st ing a nd d isc ou nti ng f ut ur e cas h f lo ws . Th e car r yin g amo unt o f th e cr uis e sh ips i s at ri sk of irr ec ove ra bil it y i f th e tr ad ing in C ru is e was t o be sig nif ica ntl y imp ac t ed b eyon d th at as su me d in th e la te st bus in es s pla n fo re ca st s a ppr ove d or i f th e sp ee d at whi ch t he bu si ne ss is ex pe ct e d to r ec ove r fel l sh or t o f expectations. Fur th er, ther e ar e mu lt ipl e inp ut s i nto t he e s tim at e of VI U, s uc h as t he p er sh ip c ash f l ows , es t ima te d us efu l li fe and r e sid ual v alu e of t he c rui se s hip s, WAC C and t he ann ual g r ow t h rat e , th at ar e at r isk o f man ip ula tio n in or de r to d em ons tr at e t hat t he va lu e of cr uis e sh ips asset s is not impaired. Th e ef fe ct o f th es e mat t er s is t hat w e det er min ed t hat the r e cov er abi lit y of the c ar r yin g val ue of c ru ise s hip s has a h igh d eg re e of e st ima ti on un ce r t ain t y, wit h a pot e nti al r ange o f re as on abl e ou tc o mes g r eat er t ha n our m at eri ali t y fo r th e f in anc ia l st at em en ts a s a wh ol e, and possibly many times that amount. Our procedures included: • C ontrol design and implementation: We evalua te d th e des ig n and i mp lem ent a tio n of t he G ro up’s co ntr ol s over the impair ment assessment procedures , includi ng those over t he c as h f low f or ec as t s app li ed t o th e cr uis e shi ps . • Valuation expertise: We worke d wit h ou r val uat io n sp eci al is ts t o in de pe nd ent ly d evel op a di sc ou nt r ate r a nge considered appropriate usin g market data for comparable ass et s , ad jus t ed by r isk f ac t ors s p eci f ic t o t he as se t . • Benchmarking assumptions: We chall en ged t he fo r ec as t cas h f lo w and g r ow t h ass um pti on s for t he c rui se s hip ass et s , in clu din g co mp ari son o f th e es ti mat ed u se ful l if e, re sid ua l val ues a nd a nnu al g ro w th r at es t o ex t er nal sources. • Reper formance: W e considered the a ppropriateness of, and a ss es se d th e int eg rit y o f, the V I U mo de ls ap pl ied b y the G r oup f or i mpa irm en t te st ing by p er f or min g recalculations and validation tests of the model. We co mpa r ed th e fo re ca st c as h f lo ws an d cap it a l exp end it ur e co nt ai ned i n th e VI U m od els t o t he B oar d approved f ive-y ear plan. • Sensitivity analysis: We asse ss ed th e se ns iti vi t y of t he re cov er abi li t y of th e ca rr yi ng va lue o f cr uis e shi ps a nd concluded on the appropriateness of no impairmen t bei ngr ec og nis ed by c on si der ing t he o ngoi ng imp ac t of COVID-19 on k ey assump tions includin g annual load fa ct or s, d is co unt r at es , pr ic e of f uel a nd t he s pe ed at whi ch c rui sin g is as sum ed t o r et urn t o pr e -C OV ID l evel s. • Assessing transparency: W e assessed whether the Group disclosures a round the valua tion of cr uise ships and the s en si ti vit y to ch ange s in k ey ass um pti on s re f le ct s th e ris ks i nh er ent i n the v alu at ion o f cr uis e shi p as set s . We pe r for me d th e te st s a bov e rat he r th an s eek ing t o r el y onany o f th e Gr ou p’s cont r ols b ec au se t he n atu re o f th e bal an ce i s suc h th at we w oul d exp ec t t o obt ai n au dit ev id en ce primarily th rough the detailed procedures described. Ou r f ind ing s: We fou nd t hat t he r es ult ing e s tim at es ov er th e r ec over ab le amo unt o f th e cr uis e shi ps t o be m il dly o pt imi st ic (20 2 1: optimistic). We fou nd t he di sc los ur es o f th e man age men t jud gem ent s and t he s en sit iv it ie s of he ad ro om t o ch ang es in k ey assumptions, to be propor tionate (2 02 1: proportionate) . In th e prio r year we r ep or t ed a k ey audit m at te r in r esp ect o f the goi ng co nce rn and d iscl osu re s due t o the u npr ec ede nte d level of un cer taint y a s a re sult o f COV ID -19 and i t s impa ct on t he G ro up. Foll owing th e devel opm ent s duri ng the ye ar , the natu re of t hes e unc er t aint ies h as ch anged . We cont inue t o p er for m pr oc edur es ove r going co nc ern th at we have inc lud ed insec tio n 5 of our r ep or t , h owever we no l onger c ons ider t he going c onc ern b asi s of pr epa rat ion t o be a s epa rat e key audi tmat t er . Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 115 3 Our app lication o f mate rialit y and an overv iew ofthe s cope o f our audit Mat eri alit y f or th e Gr oup f i nanc ial s t ate ment s as a w hol e was set at £ 3 . 5m (202 1: £3 . 5m), determ ine d with r efe re nce t o a ben chm ark of G ro up pr of i t befo re t a x, aver aged ove r the l ast four ye ars af ter no rma lising f or th e f luc tuat ion s in th e res ult s as a re sult o f COV ID -19, goo dwil l and ot her im pairm ent char ges re cog nis ed in pr ior ye ars , and o ther n on- re curri ng tr ansa ct ions w ithi n F Y2 2 , as dis clo sed in n ot es 3 , 17 , and 2 7b, of £ 15 m (202 1 : £6 5 .0m), which r epr es ent s 4 .7% (202 1 : 3.7 %) . Avera ge of nor mal ise d pr ofi t bef or e ta x £3.5m Wh ol e fin an ci al sta te me nt s mate ri ali t y (20 2 1: £3 . 5m) £0 .17m Mis s ta t eme nt s rep or t ed to the aud it com mi t te e (202 1: £0.1 4m) £ 74 . 7m (202 1: £ 95 .0 m) Group materialit y £3.5m (202 1 : £3 .5 m) Pr ofi t befo r e tax Group materiality £2.3m Per f orm an c e mat e ria li t y (20 2 1 : £ 2. 3 m) £0.6m-£2.8m (202 1 : £ 0.6 m -£ 2 . 6m) Ra nge of mat e ria li t y at 9 com po ne nt s (20 2 1: 8 com po ne nt s) Materialit y for the Parent Company f inancial st atement s as awho le was s et at £ 2. 2m (202 1: £ 2 . 2m), which r epr es ent s 0.3 % of net a sse ts o f £6 9 5.0 m (202 1: 0.3 % of net a sset s of£7 1 3 m ). In lin e wit h our aud it met ho dol og y, our pr oc ed ure s on indi vidu al ac co unt ba lan ces a nd dis clo sur es wer e p er for med to a l ower thr es ho ld, p er fo rman ce m ate rial it y, so as to re duc e to a n acc ept ab le level t he ri sk th at indi vid uall y immaterial misst atement s in individual account balanc es addup t o a mat er ial am ount a cr oss t he f in anc ial s ta tem ent s as a who le . Performanc e materialit y for both the Group and Parent Co mpany wa s set at 6 5% (202 1: 6 5%) of mater iali t y for t he f ina ncia l st at eme nt s as a who le , whic h equa tes t o £ 2 .3 m (202 1: £ 2 . 3m) and £ 1 .4 m (202 1: £ 1. 4m). We applied t his perc entage in our determination of performanc e materialit y bas ed on t he level o f cont r ol def icien cies a nd ch anges in key senior management during the prior period . We agre ed t o re po r t to t he Au dit C omm it te e any co rr ect ed or unc orr e ct ed id entif ied mis st at em ent s excee ding £ 0.17m (202 1: £ 0.14m), in addit ion t o oth er id entif ied mis st at em ent s that wa rr ante d re po r ting o n qual it ati ve gr ound s. The s co pe of t he aud it wor k per f orm ed was p re domi nat ely subs t anti ve as we pl ac ed lim ite d re lian ce up on t he Gr ou p’ s internal contro l over financial repo rt ing. Of t he G ro up’ s 9 (202 1: 8) re po r ting c omp on ent s, we subj ect ed 4 (20 2 1: 4) to full s cop e aud it s for G r oup pur po ses and 5 (20 2 1: 4) to spec if i ed ris k -focus ed aud it pr o ced ure s. The l at te r wer e not in div idua lly f i nanc iall y sign if ic ant en ough to r equ ire a f ull s cop e aud it for G r oup pu rpo ses b ut did present specific individual risks that needed to be addressed. For the r es idua l co mpo nent s , we co ndu ct ed r eviews o f f ina ncia l infor mati on (i nclu ding en quir y) at an agg r egate d Gr oup leve l to r e- examine o ur ass ess men t that t her e wer e no sig nif i cant r isk s of mat eri al mis st at eme nt wit hin th ese . The G ro up t eam ins tr uct ed c om pon ent au dit ors a s to t he signi f ic ant ar eas t o b e cover ed , inc ludi ng the r el evant ris ks det aile d ab ove and th e infor mat ion t o be r ep or t ed b ack . T he Gr oup t eam a ppr oved t he co mp one nt mat eria lit y, which range d fr om £ 0. 4m t o £ 2. 8m (20 2 1: £ 0.6 m to £ 2 .6 m) , having rega rd t o th e mix of s ize and r isk pr of ile of th e Gr oup a cr oss the c omp on ent s . The wo rk on 2 of t he 9 c omp one nt s (202 1: 2 of the 8 c om pon ent s) was per fo rmed by c om pon ent au dit ors and th e re st , i nclu ding th e audi t of th e Par ent C omp any, was per f orme d by th e Gr oup t eam . The g ro up te am p er for med p ro ce dur es on t he i tem s exclude d fr om no rma lise d gr oup p rof it befo re t a x . Whil st it w ould b e co nventi onal p ra ct ice t o vi sit th e com po nent t eam s, t he c onti nued i mpa ct of th e COV ID -19 re str ict ion s on tr avel r esul te d in a gr eat er de gr ee of r eli anc e on th e use of v ide o and t ele pho ne c onfer en ce m eeti ngs wi th all component a uditors. During these video a nd telephone conf er enc e mee tings , an as se ssm ent was m ade o f audi t risk and s tr ate g y, the f in dings r ep or t ed t o th e Gr oup au dit t eam wer e disc uss ed in mo re d et ail , key work ing pap er s wer e insp ec te d, an d any fur ther wo rk re quir ed by t he G ro up audi t te am was th en p er for med by t he c omp one nt audi to r . The se c omp one nt s wit hin th e sco pe o f our wor k ac cou nte d for th e foll owing p er ce nta ges of th e Gr oup’s resul ts : Gr oup reven ue 97 % (2021: 96%) 93% 93% Full sco p e for Gro up aud it pur po s es 202 2 Sp ec ifi ed ris k-foc us ed aud it procedures 2022 Full sco p e for Gro up aud it pur po s es 202 1 Sp ec ifi ed ris k-foc us ed aud it procedures 2021 Residual components Gr oup pro fit s and loss es that mad e up the Gro up loss befo re ta x 98 % (2021: 95%) Gr oup tot al ass et s 99 % (2021: 99%) 3% 2% 81% 13% 15% 9 4% 9 4% 5% 5% 85% Indep enden t Audi tor’ s Report t o the Membe rs of Sag a plc continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 116 4 The impac t of clim ate cha nge on our audit In pl anning o ur audi t , we pe r form ed a ri sk ass es sme nt , incl uding en quir ies of m anagem ent , t o det ermi ne how t he impa ct of c omm itm ent s ma de by th e Gr oup in r es pe ct of re duci ng carb on e miss ions , as we ll as th e physi cal ri sk s of clim ate c hange, a nd tr ans iti on ris ks f ac ed by th e Gr oup’s cus to mer b ase , cou ld imp act o n the f inanc ial s t ate ment s andou r audi t . We held di scu ssio ns wi th our o wn clim at e change professionals to challenge our risk assessment . Thr oug h the p ro ce dur es we p er fo rmed , we di d not id enti f y any mat eria l impa ct of c limat e ch ange on t he Gr ou p’ s mat eria l acc oun ting es ti mat es an d ther e was n o sig nif i cant impa ct of t his as ses sme nt on our k ey audi t mat t ers fo r the year en ded 3 1 J anua ry 2 02 2 . The in sur anc e bus ine ss wi thin t he Gr oup p r edo minan tly brokers and under writes mot or and home insurance risk s. Clim ate c hange m ay res ult in a n incr ea se in t he fr equ enc y and seve rit y of c limat e r elat ed even ts , le ading t o hig her insur an ce pay- ou ts . H owever , the s hor t-t erm n atur e of th e Gr oup’s insuran ce c ont ra ct s me ans th at th e impa ct of l oss es fr om su ch event s for t he ye ar end ed 3 1 Ja nuar y 20 2 2 is alr ead y re co rd ed wi thin t he Gr oup’s insur anc e co ntr act liabi lit ies at t he bal anc e sh eet da te . The G ro up co nsi ders thisl oss exp eri enc e in evalu ating in div idu al risk ex pos ur es , and th e set t ing of ins ur anc e pr emium r at es fo r bot h new pol icie s and t he pe rio dic r enewa l of it s exis ting i nsur anc e unde rw rit ing po r t foli o. Th e Gr oup exp ec ts a ny incr ea se in the f re quen cy an d severi t y of clim ate -r elat ed event s t o be ref l ect ed i n fut ur e mark et pr emiu m rat es . Als o, in r elat ion t o th e insur an ce bu sine ss , clim at e risk is a n issu e whic h is exp ect ed t o evol ve fur t her over t he me dium tol ong t erm , rat her t han have in st ant in cr eme nt al imp act s on th e insur an ce ou tlo ok , a nd th ere for e we ass ess ed n o signi f ic ant imp ac t at year -e nd on in sur anc e goo dwill , par t icul arly g iven t he h eadr o om in th e mos t r ec ent impairment test s per formed. The c ruis e bus ines s wit hin th e Gr oup ow ns cru ise s hip ass et s whic h meet a ll curr ent r eg ulat or y s ta nda rd s rega rdi ng emis sion s and cl imat e ch ange t arget s. W hil e the re w ill like ly be t ech nol og y a dvan ces i n year s to c ome t hat , w hen develo ped , wil l re quir e th e Gr oup t o lo ok t o incur i ncr em ent al cos t t o mod if y t he eng ine s on th ese c ruis e ship s to m eet lower em iss ions s t and ard s, t he c os t to in cur su ch ch anges would l ikel y ext en d the o per at ing life o f the se ves sel s. G iven this an d the f ac t that t his t ech nol og y is yet t o b e develo pe d, we ass ess ed th e ris k of clim ate c hange t o th e carr y ing amou nt of th e crui se shi p ass et s at the b ala nce s hee t dat e tob e not si gnif icant . We have also r ea d the di scl osur es o f clim ate r ela te d inform ati on in th e fr ont h alf of t he ann ual r ep or t and acc oun ts a s set ou t on p ages 30 - 3 4 and c ons ider ed con sis te ncy wi th th e f in anci al st at em ent s and o ur aud it know ledge . We have not b een enga ged to p rov ide a ssur an ce over the a cc ura cy of t hes e disc los ure s. 5 Going co ncern The di re ct ors h ave pr epar ed t he f i nanc ial s t ate ment s o n the going co nc ern ba sis as t hey do n ot int end t o liqu idat e th e Gr oup or th e Par ent Co mpa ny or t o cea se th eir op er ati ons , as th ey have co nclu ded t hat t he Gr oup’s and the Pa ren t Co mpany ’s f ina ncia l pos iti on me ans t hat thi s is re alis ti c. Th ey have als o con clu ded t hat th er e ar e no mat eri al unc er t ain tie s that c oul d have cas t sig nif i cant d oubt over t heir a bili t y to c ont inue a s a going co nc ern fo r at leas t a yea r fr om th e dat e of ap pr oval of th e f inancial st atement s (“the going concern perio d”). We used o ur kno wle dge of the G r oup an d Pare nt Co mpa ny, its indu str y, and th e gener al e co nomi c envir onm ent in w hich i t ope rat es t o id enti f y th e inhe re nt risk s t o it s bus ine ss mo del a nd anal yse d how th ose r isk s migh t af fe ct th e Gr oup an d Par ent Company’s f inancial resources or abi lity to continue operations over the g oing concern period . The risks that were consider ed mos t like ly t o adver sel y af fe ct t he Gr ou p’ s and Par ent Company’s ava ilable f inancial res ources over this period were: • the l eng t h of tim e tha t the im pac t of COV ID -19 wi ll con tinu e to di srup t the G ro up’ s T r avel op er ati ons an d con st rai n it s abil it y t o re cover, given the c urr ent restrictions imposed worldwide in respect of the freedom of movem ent a nd tr avel; • the f inanc ial an d ope rat ion al r esil ienc e of th e Gr oup’s Insu ran ce b usin ess a nd it s ab ilit y t o de liver i ts b usin es s plan i n light o f heig hte ned l evels of r egul ato r y chan ge and ongoing uncer t ainty fr om the pandemic; and • the c ons equ enti al imp act o n the G r oup’ s abi lit y t o mee t the t erm s of it s shi p debt a nd Gr oup b ank d ebt c ovenant s . Our c onc lus ions b ase d on thi s work : • we co nsid er th at the d ire ct ors’ us e of th e going co nc ern basi s of ac co unting i n the p rep ar atio n of th e f ina nci al stat ements is appr opriate; • we have not id enti f ie d, an d co ncur w ith t he dir e ct ors’ ass ess ment t hat th er e is not , a m ate rial u nce r t aint y rel ate d to eve nt s or co ndi tio ns tha t , indi vidu all y or col lec tive ly, may cas t sign if ic ant do ubt on t he G ro up’ s or Pare nt Co mpa ny’s abili t y to c ont inue a s a going co nc ern for the going conc ern period; • we have not hing mat eri al t o add o r draw at t ent ion t o in rel atio n to t he di re ct ors’ st at em ent in no te 2 .1 to t he f ina ncia l st at eme nt s on th e use of t he going c on cer n bas is of ac cou nting w ith n o mat eria l unc er t aint ies t hat may c ast signi f ic ant do ubt over th e Gr oup a nd Par ent C omp any ’s use of t hat b asis fo r the goi ng co nce rn pe rio d, an d we foun d the going c on cer n disc los ur e in not e 2 .1 to be accept able; and • the r ela te d st at eme nt unde r the L is ting R ules s et out o n page 6 5 is mat eri ally c ons ist ent w ith t he f i nanc ial st at eme nts a nd ou r audi t know ledge . However, as we cannot p re dic t all fu tur e event s or c on dit ions and as s ubse que nt event s may r esul t in ou tc ome s tha t are inc onsi st ent wi th ju dgement s t hat wer e r eas onab le at t he tim e they wer e ma de , the ab ove co ncl usio ns ar e not a g uar ant ee t hat the G ro up or t he Par ent C omp any will c ont inue i n op erat ion . Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 117 6 F raud a nd bre aches o f laws and reg ulation s – ability to detect Ide nti f yi ng and r es po nding t o ri sk s of ma te rial mis st at em ent du e to fr au d T o id ent if y ri sk s of mat eri al mis st at eme nt due t o fr aud (“ fr aud r isk s”) we a sse sse d event s or c ond iti ons th at co uld indic at e an inc ent ive or p re ssur e t o co mmit f ra ud or p rov ide an opp or t unit y to co mmit f r aud . Our r isk as ses sme nt procedures included: • enqu iring of di re ct ors , th e Aud it Co mmi t te e, th e Int erna l Audi t Dir ec to r , the C hief Ri sk O f f i cer a nd ins pe cti on of key pol icie s and p ape rs pr ovi ded t o th ose c harge d wit h governan ce as t o th e Gr oup’s high-level p oli cies a nd pr oc edur es t o pr event an d det ec t fr aud , inc luding t he Gr oup’s channel f or “ whis tle blow ing ” and t he pr o ces s for engagi ng loc al ma nageme nt to i dent if y f r aud ris ks s pe cif i c to t heir b usin ess un it s, a s well as w heth er th ey have knowledg e of an y actual, suspected, or a lleged fraud; • re ading B oar d , Audi t and R isk C omm it t ee minu te s and i n the c ase of A udi t and R isk C ommi t te e me etings f or th e Gr oup, at t en danc e of t he ex te rnal a udit p ar tn er at th es e meeting s; • considering remuner ation incentive schemes and per f orma nc e ta rget s for dir e ct ors an d sen ior management; • using a naly tic al pr oc edu re s to id ent if y any u sual o r unexpected relation ships; and • re ading b ro ker r ep or t s and o ther p ubl ic infor mat ion t o identif y third-par t y expect ations and concerns . We comm unic ate d ide ntif ied fr aud r isk s thr oug hou t the audi tte am and r em aine d aler t t o any in dic atio ns of fr au d thr oug hou t the au dit . T his inc lud ed c ommu nicat ion f ro m the gr oup t o co mpo nent a udit t ea ms of r elevant f r aud ris ks ident if i ed at th e Gr oup l evel and r eq ues t to c omp on ent au dit te ams t o re por t to th e gr oup au dit t eam any i nst an ce s of fr aud th at co uld g ive ris e to a m ate rial m iss t ate ment at Group . As r equi re d by audi ting s t anda rd s and t ak ing int o ac cou nt pos sib le pr es sur es t o mee t pr of it t ar gets , we p er fo rm pr oc edur es t o ad dr ess t he ris k of man agemen t overrid e of con tr ols , in pa r tic ular t he ris k that G r oup an d com po nent manage ment m ay be in a p osi tio n to m ake in appr op riat e acc oun ting ent rie s. O n thi s audi t we do not b eli eve ther e is a fr aud ris k re lat ed t o reven ue r ec ognit ion b ec aus e revenu e is not c omp lex in nat ure a nd th er e is no sig nif icant m anagem ent judgem ent or e sti mati on invol ved in r ec or ding th e reve nue transac tions. We also id enti f ie d fr aud ris ks r el ate d to i napp ro pri ate ass ess ment of t he r ec over abili t y of Gr ou p good will , the re cover abi lit y of t he ca rr ying va lue of c ruis e ship s and t he valuat ion o f clai ms out s t andi ng – IB NR , in re sp onse t o pos sib le pr es sur es t o mee t pr of it t ar gets . In det erm ining th e aud it pr oc edu re s to a ddr ess t he id enti f ie d fr aud ris ks , we t oo k int o acc oun t the r esu lt s of ou r evaluat ion and t es ting of t he op er atin g ef fe cti vene ss of th e Gr oup -wid e fr aud ris k man agemen t con tr ols . Furt her d et ail in r esp ec t of the p ro ce dur es p er for med ove r the r ec over abili t y of Gr ou p good will , the r ec over abil it y of t he car r ying val ue of cr uis e ship s and th e valu atio n of cla ims ou t st and ing – IB N R , incl uding h ow we have us ed sp eci alis t s to a ssis t in our chal lenge of m anagem ent is s et out in t he key au dit m at te r disc los ure s in se cti on 2 of t his re po r t . T o a ddr ess t he p er vasi ve risk a s it r elat es t o man agemen t override, we also per formed pr ocedur es including: • ident if ying jou rnal e ntrie s to t es t for a ll in sc op e component s, bas ed on risk criteria and comparing the identified entr ies to supporting documentation. These included those posted by se nior manag ement, those incl uding s pe cif i c wor ds ba sed o n our ris k cri te ria , tho se journ als w hich we re un bal anc ed , tho se p ost ed t o unu sual acc oun ts , th os e pos t ed at th e end of t he p erio d and/or post-closing entr ies with little or no descri ption and unusu al jo urnal e ntri es po st ed t o eit her c ash o r bor row ings; an d • ass ess ing sign if ic ant a cc ount ing es tima te s for bi as . Ide nti f yi ng and r es po nding t o ri sk s of ma te rial mis st at em ent du e to n on - com pli anc e wit h laws an d regulations We ident if ie d ar eas of l aws and r eg ulat ions t hat c ould re ason abl y be exp ec te d to h ave a mat erial e f fec t on t he f inancial st atement s from our general commer cial and sector exper ien ce, a nd th rou gh dis cus sio n with t he di re ct ors a nd othe r mana gement (as req uir ed by au diti ng st an dar ds) , and fr om ins pe cti on of th e Gr oup’s regul ato r y and l egal correspondence and discussed with the di rectors and other memb er s of man agement t he p olic ies a nd pr oc ed ure s rega rdi ng co mpli anc e wit h laws an d reg ulat ion s. As th e Gr oup is r eg ulat ed , our a sse ssm ent of ri sk s involve d gaining an u nde rst a nding of t he c ont ro l envir onm ent incl uding t he ent it y ’s pro ce dur es for c omp ly ing wit h reg ulato ry r equir ement s . We comm unic ate d ide ntif ied laws an d re gul atio ns thr oug hou t our t eam an d re main ed al er t t o any indi cati ons of n on- compliance throughout the audit. This included com munic ati on fr om t he gr ou p to f ull-sc op e co mp onen t audi t te ams of r eleva nt laws an d reg ulat ion s ident if i ed at th e Gr oup leve l, an d a re ques t for f ull s co pe c omp one nt audi to rs to r ep or t t o the g ro up t eam any in st an ces o f non -c omp lian ce wit h laws and r eg ulat ions t hat c oul d give r ise t o a mat eri al miss t ate ment at G r oup. The p ot enti al ef fe ct of t hes e laws an d reg ula tio ns on th e f inancial st atement s varies considerably. Fir st ly, the Gr oup i s subj ect t o laws a nd r egul atio ns th at dir ect ly af f ect t he f i nan cial s t ate ment s in clu ding f in anc ial repor ting legisla tion (including related companies’ legislation ) , distributable profit s legislation, taxation legi slat ion a nd pe nsio n leg islat ion a nd we as ses sed t he ex t ent of co mpli anc e wit h the se l aws and r egul ati ons as p ar t of ou r pr oc edur es o n the r el ate d f ina nci al st at em ent it ems . Sec on dly, the G ro up is sub jec t to m any oth er laws an d regulations w here the consequences of non-compliance cou ld have a mat er ial ef f ect o n amo unt s or dis cl osur es in t he f ina ncia l st at eme nt s, fo r ins t anc e thr oug h the i mpo sit ion of f ine s or lit igati on or t he lo ss of t he Gr ou p’ s lice nse t o ope rat e. We id ent if ie d the f ollow ing ar eas a s tho se mo st li kely to have s uch an e f fec t: r eg ulat or y ca pit al , re gul ato ry com plia nc e and li quidi t y, and cer t ai n asp ect s of c om pany legi slat ion r ec ogni sing t he f in anci al an d reg ulat ed n atur e of Indep enden t Audi tor’ s Report t o the Membe rs of Sag a plc continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 118 the G ro up’ s act iv iti es and i t s legal f orm , wit h the I nsur an ce business regula ted primarily b y the Financ ial Conduct Authorit y (‘FCA ’) and the Gibr altar Financi al Servic es Co mmiss ion ( ‘GF SC ’), wi th th e T r avel bu sine ss r egu lat ed by the C iv il Aviat ion Au tho rit y ( ‘CA A ’). Th e T r avel bu sine sse s ar e memb er s of the A ss oci atio n of Br itis h T r avel A gent s (‘ABT A’), the I nte rnat iona l Air T rans po r t As soc iati on (‘ I A T A ’ ) and t he Feder ati on of T our Op era to rs (‘ F TO’ ). The se ar e well- re cog nise d UK t ra de b odie s wit h co des o f co nduc t whi ch memb er s are r eq uir ed t o adh ere t o. A ll par ts of S aga ope rat e pr o ced ur es to c om ply w ith ot her k ey reg ulat ion s and legi slat ion in clu ding bu t not lim it ed t o the D at a Pr ote ct ion Act 20 1 8 , UK G ene ral D at a Pr ote ct ion R egul atio n, t he Brib er y Ac t 20 10, t he Equa lit y Ac t 20 10 a nd H ealt h and Safet y legis lati on . Audi ting s t and ard s limi t the r equ ire d audi t pr oc edur es t o id enti f y no n-c om plia nce w ith t he se laws an d reg ulat ion s to en quir y of t he dir ec to rs an d oth er manage ment an d ins pec tio n of r egul ato r y and l egal cor re sp ond enc e, if any. The refo re , if a br e ach of o per at iona l reg ulat ion s is not di scl ose d to u s or evid ent f rom r el evant correspondence, an audit will not detect that breach . Co ntex t of t he ab ilit y o f th e aud it to d et ect f rau d or breaches of law or regulation Owi ng to t he inh er ent limi t atio ns of an au dit , t her e is an unavoid abl e risk t hat we may n ot have det ec te d som e material misst atement s in the financ ial stat ements , even tho ugh we have p ro per ly pl anne d and p er fo rme d our au dit in accordance with auditin g standards. For e xample, the further rem oved no n- com plia nc e wit h laws and r eg ulat ions i s fr om the event s a nd tr ans ac tion s ref l ec te d in the f inanc ial st at eme nts , t he le ss like ly th e inhe re ntly l imit ed p ro ce dur es re quir ed by au dit ing st an dar ds wo uld id enti f y it . In ad diti on , as wit h any aud it , th ere r em aine d a high er ris k ofnon -d ete cti on of f rau d, as t he se may invol ve co llus ion , forgery, intentional omissions , misrepr esentatio ns, or the overrid e of int ern al co ntr ols . O ur audi t pr oc edu re s are desi gne d to d ete ct m ater ial mi ss tat em ent . We ar e not responsible for preve nting non-compliance or fraud and cann ot be ex pec t ed t o det ect n on- co mpli anc e wit h all l aws and reg ulati ons. 7 We hav e noth ing to re por t on th e other informat ion in the A nnual R epor t The di re ct ors a re r es pon sib le for t he ot her inf orma tion pr ese nte d in th e Annu al Re por t togeth er wit h th e f ina ncia l st at eme nts . O ur op inion o n the f inanc ial s t ate ment s d oes notc over the o the r inform atio n and , ac co rd ingl y, we do notexp re ss an au dit op inio n or , except a s explic itl y st at ed bel ow, any form of a ssur an ce c onc lusi on th er eon . Our r es pon sibi lit y is t o r ead t he oth er info rmat ion a nd, indoing s o, co nsi der wh eth er , bas ed on o ur f in anci al st at eme nts a udit w ork , t he info rmat ion t her ein is m ate riall y miss t ate d or in con sis te nt wit h the f inanc ial s t ate ment s or our aud it kn owle dge. B ase d sol ely on t hat wo rk we have no t identif ied material misst atement s in the other information. Strategic report and directors’ report Bas ed so lel y on our wo rk on t he ot her inf orma tion: • we have not id enti f ie d mat eria l miss t at emen ts i n the str at egi c re por t and the d ire ct or s’ rep or t ; • in our op inio n the i nform atio n gi ven in th ose r ep or t s fo r the f ina ncia l year is c ons ist ent w ith t he f i nanc ial s t ate ment s; and • in our op inio n tho se r epo r t s have be en pr ep ar ed in acc or da nce w ith t he C omp anie s Act 2 00 6 . Directors’ remuneration report In our o pini on th e par t of t he D ire ct or s’ Remune rat ion Rep or t t o be au dit ed h as be en pr op erl y pr epar e d in acc or da nce w ith t he C omp anie s Act 2 00 6 . Disclosures of emerging and principal risks and longer-term viabilit y We are r equ ire d to p er fo rm pr o ced ure s to i dent if y w het her ther e is a m ate rial i nco nsis t ency b et wee n the d ire ct ors’ disc los ure s in r esp ect o f emer ging an d pri ncip al ris ks a nd th e viabilit y stat ement, and the f inancial s tatem ents and our audit knowled ge. Bas ed on t hos e pr oc edu re s, we h ave nothi ng mat eria l to a dd or dr aw at te ntio n to in r el atio n to: • the di re ct ors’ c onf ir mati on wi thin t he vi abil it y st at em ent on page 5 5 tha t they have c arri ed ou t a ro bus t ass ess ment of the e merg ing an d prin cip al risk s fa cing t he Gr ou p, incl uding t hos e that w ould t hr eat en it s bu sine ss m ode l, future performance, solvency and liqui dity ; • the Pr inci pal R isk s and U nc er t aint ies di scl osur es des crib ing th ese ri sk s and h ow emer ging ri sk s are ident if i ed , and exp laini ng how th ey are b eing m anage d and mitig ate d; and • the di re ct ors’ exp lana tion i n the v iab ilit y s t ate ment of h ow they have as se sse d the p ro sp ect s of t he G ro up, over wh at per iod t hey have do ne so an d why th ey co nsid er ed th at per iod t o be a ppr op riat e, a nd th eir s tat em ent as t o whet her t hey have a r eas onab le exp ec tat ion t hat t he Gr oup wi ll be ab le t o co ntinu e in op er atio n and m eet it s liabi lit ies as t hey fa ll due over t he p erio d of th eir assess ment , including any relat ed disclosur es drawing att ention to any necessar y qualif ications or assumptions. We are al so r equi re d to r eview t he vi abil it y s tat em ent , se t out o n page 55 u nder t he L ist ing Rul es . Bas ed o n the ab ove procedures , we ha ve concluded that the above disclosures are materially cons istent with the f inancial st atement s and our audit knowledge. Our wo rk is lim it ed t o asse ssi ng the se ma t ter s in th e co ntex t of onl y the k nowl edge ac quir e d during o ur f in anci al st at eme nts a udit . As we can not pr ed ict a ll fut ur e event s or con dit ions a nd as su bse quen t event s may r esul t in out c ome s that are inconsistent w ith judge ments that were reasonable at the t ime t hey wer e ma de, t he abs enc e of any thing t o rep or t o n the se s t ate ment s is n ot a gu ara nte e as t o the Group’ s and Parent Company’s long er-term viabilit y. Additional informatio n Financial stat ements Gover nan ce Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 11 9 Corporate gov ernance disclosures We are r equ ire d to p er fo rm pr o ced ure s to i dent if y w het her ther e is a m ate rial i nco nsis t ency b et wee n the d ire ct ors’ corporate gover nance disclosures and the f inancial st at eme nts a nd ou r audi t know ledge . Based on those procedures, we hav e concluded that each ofthe f ollo wing is m ater iall y co nsis te nt wit h th e f ina ncia l st at eme nts a nd ou r audi t know ledge: • the di re ct ors’ s ta tem ent th at th ey con side r that t he an nual rep or t a nd f in anc ial s ta tem ent s t ake n as a who le is f air , balanced and u nderstandable, and provides the information necessary for shareholders to assess the Gr oup’s posit ion an d per f orm anc e, bu sine ss mo del a nd str ateg y; • the s ect ion o f the an nual r ep or t d esc ribin g the wo rk of th e Audit Committee, including the significant issues that the Audi t Co mmit t ee c ons ide re d in re lati on t o the f inanc ial st at eme nts , an d how th es e issu es wer e ad dre ss ed; and • the s ect ion o f the an nual r ep or t t hat de scr ibe s the r evi ew of the e f fec ti venes s of th e Gr oup’s risk man agement a nd internal contro l systems . We are r equ ire d to r evi ew the p ar t of t he C orp or ate Gover nanc e S ta tem ent r elat ing t o the G ro up’ s co mpli anc e wit h the p rov isio ns of th e UK C or po rat e Gove rnan ce C od e spe cif ied by th e Lis ting R ule s for ou r rev iew. We have nothing to r ep or t in t his r esp ec t . 8 We hav e noth ing to re por t on th e other m att ers on which we are r equir ed to r epo rt by exception Und er th e Co mpan ies Ac t 20 06 , we ar e r equi re d to r ep or t to you i f, in our opin ion: • ade quat e ac co unting r ec or ds h ave not be en kep t by the Pare nt Co mpa ny, or retur ns ad equa te fo r our au dit have not b een r ec eive d fr om br an che s not vi sit ed by u s; or • the Pa ren t Com pany f inanc ial s ta tem ent s an d the p ar t of the di re ct ors’ r emun er atio n rep or t t o b e audi te d are n ot in agr eem ent wi th th e ac cou nting r ec or ds an d ret urns; o r • cer t ai n disc los ure s of dir ec to rs’ re mune rat ion s pec if i ed by law ar e not m ade; or • we have not r ec eive d all th e infor mati on an d expla nati ons we re quir e for o ur aud it . We have nothi ng to r ep or t in t hes e re sp ect s . 9 Respective responsibilities Directors’ responsibilities As expl aine d mo re f ully i n thei r st at eme nt set ou t on pa ge 111 , the di re ct ors a re r es pon sibl e for : th e pr epar at ion of t he f ina ncia l st at eme nt s incl uding b eing s atis f ie d tha t they g ive a tru e and fa ir view ; su ch int ern al co ntr ol as t hey det er mine is necess ary to enable the pr eparatio n of financial st atement s that a re f re e fr om mat er ial mis st at em ent , whe the r due t o fr aud or e rr or; a sse ssing t he G ro up and Pa re nt Co mpany ’s abili t y to c ont inue a s a going co nc ern , disc los ing , as appl ica ble , mat t ers r el ate d to going c on cer n; and us ing th e going co nc ern ba sis of a cc ount ing unl ess t hey eit her in ten d to li quid ate t he Gr ou p or th e Par ent C ompa ny or t o cea se ope rat ion s, o r have no r eali sti c alt ern ative b ut t o do so . Auditor’ s responsib ilities Our o bjec ti ves ar e to o bt ain r eas onab le as sur anc e ab out whet her t he f in anc ial s ta tem ent s as a w hol e are f r ee fr om material misst atement , whether due to fraud or erro r , and toissue ou r opinion i n an auditor’ s report . Reasonable assu ran ce is a h igh level o f assu ran ce , but d oe s not gu ar ant ee that a n audi t con duc te d in ac co rd anc e wit h IS As (U K ) wi ll always detect a material misstat ement when it exists. Mis st at emen ts c an ar ise f rom f r aud or e rro r and a re con sid ere d mat eri al if, indiv idu ally o r in ag gr egat e, t hey co uld reasonably be e xpected to influence the economic dec isions of use rs t ake n on th e basi s of th e f inan cia l st at eme nt s. A fuller descr iption of ou r responsibilities is provided on the FRC’ s website at w w w.frc.org.uk/ auditorsresponsibilities. 10 The purp ose of ou r audit work and t o whom we ow e our responsi bilities This r ep or t is m ade s ole ly t o the C omp any ’s membe rs , asabo dy, in acc or da nce w ith C hap ter 3 o f Par t 1 6 of the Co mpani es Ac t 20 06 a nd th e ter ms of ou r engageme nt bythe c omp any. Our audi t work h as b een un der t ak en so thatwe m ight s t ate t o th e Co mpany ’s memb ers t hos e mat t ers we a re r equ ire d to s t at e to t hem in a n audit or ’s rep or t , a nd th e fur t her m at te rs we ar e r equi re d to s t ate t o them i n ac cor da nc e with t he t erm s agr eed w ith t he c omp any, and fo r no oth er pu rpo se. T o the f ulle st ex t ent pe rmit t ed by law, we do not a cc ept or a ssum e r esp ons ibili t y to a nyone othe r tha n the C omp any an d the C omp any ’s member s , as a bo dy, for our au dit wo rk , for t his r epo r t , or fo r the o pini ons we have form ed . Stu ar t C risp (Senior St atutory Auditor ) for and on beh alf of K PM G LL P , S t atut or y Au dit or Char ter ed Account ants 15 Canada Square, London E14 5 GL 22 M ar ch 20 22 Indep enden t Audi tor’ s Report t o the Membe rs of Sag a plc continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 120 Consolida ted income st atement for th e year e nde d 31 J anu ar y 202 2 Note 2022 £m 2021 £m Gross earne d premiums 3 203.0 221.7 Earned premiums cede d to reinsurers 3 (123.8) (142.8) Net earned premiums 3 79.2 78.9 Other r evenue 3 298.0 258.7 T ot al revenue 3 377.2 337.6 Gros s claims incurr ed 28 (94.6) (117.6) 1 Reinsurer s’ share of claims incurr ed 28 63.3 99.4 1 Net claims incurr ed 28 (31.3) (18.2) Decrease in credit loss allo wance 20 8.3 5.5 Ot her c os t of sa les (120.3) (87.5) T ot al c os t of sa les 3 (143.3) (100.2) Gross p rofit 233.9 237.4 Admini strative and sellin g expen ses 4 (212.8) (224.2) Impairme nt of assets 5 (11.2) (65.0) Gain o n lea se mo dif icati on 18 0.3 3.2 Net p rof it on dis po sal of a sse ts h eld f or sal e and b usin ess es 38, 13 7.2 8.6 Net (l oss) /prof i t on dis pos al of p ro per ty, plant a nd eq uipm ent , rig ht-of-use as set s andso f t war e 15, 17, 18 (0.4) 6.6 Investment income 6 0.3 0.7 Fina nce costs 7 (40.8) (30.2) Fina nce in come 8 – 1.7 Lo ss be fo re t ax (23.5) (61.2) T ax expense 10 (4.5) (6.6) Lo ss fo r th e year (28.0) (67.8) Attributable to: Equit y h old ers of t he pa re nt (28.0) (67.8) Lo ss pe r sh are : Bas ic 12 (20.1 p) (67.0 p) Dilute d 12 (20.1 p) (67.0 p) The N ot es on p ages 1 26 -192 for m an int egr al p ar t of th ese c on soli dat ed f i nanc ial s t ate ment s . 1 G r os s cl aim s inc ur re d an d re in sur er s’ sh ar e of c la ims i nc urr e d for t he y ea r end ed 3 1 J an uar y 2 02 1 h ave b ee n re st a te d du e to a n in co rr ec t al lo cat io n be t wee n th es e cla ss if i ca ti ons . G r oss c la ims i nc ur re d have d ec r ea se d by £ 13.8 m an d re ins ur er s’ sh ar e of c la ims i nc urr ed h as d ec r eas ed b y £ 13.8 m Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 022 121 Consolida ted s tatement of comprehensiv e income for th e year e nde d 31 J anu ar y 202 2 Note 2022 £m 2021 £m Lo ss fo r th e year (28.0) (67.8) Other comprehensive income Other comprehensive income to be reclassif ied to income statement in subsequent ye ars Net gai ns on he dgin g inst rum ent s duri ng the ye ar 19 2.1 22.3 Recyc ling of p rev ious ga ins t o inc ome s t at ement o n mat ure d hed ges 19 (1.2) (2.5) T ot al n et gains o n cas h f low h edges 0.9 19.8 Ass oci ate d t ax ef fect 0.3 (3.5) Net (l oss es) / gains on fai r value f inanc ial as set s du ring th e year (10.3) 3.2 Recyc ling of p rev ious l oss es t o inc om e st at eme nt on fai r value f inanc ial as set s du ring th e year 0.1 – T ot al n et (l oss es) / gains on fair va lue f i nanc ial as set s du ring th e year (10.2) 3.2 Ass oci ate d t ax ef fect 2.1 (0.8) T ot al o the r com pr ehen sive ( los ses) / gains wit h re cycli ng to in co me s tat em ent (6.9) 18.7 Other comprehensive income not to be reclassified to income statement in subsequent years Remeasurement gains/ (losses ) on define d benef it plan 27 4.8 (1.2) Ass oci ate d t ax ef fect (1.2) 0.2 T ot al o the r com pr ehen sive ga ins/ (lo sse s ) wit hou t re cycli ng to in co me s ta tem ent 3.6 (1.0) T ot al other comprehensi ve (losses )/ gains (3.3) 17.7 T ot al comprehensive losses for the year (31.3) (50.1) Attributable to: Equity holders of the parent (31.3) (50.1) The N ot es on p ages 1 26 -192 for m an int egr al p ar t of th ese c on soli dat ed f i nanc ial s t ate ment s . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 022 122 Conso lidated s t atement of f inancial p osition as at 3 1 Jan uar y 20 22 Note 2022 £m 2021 £m Assets Goodwill 14 718.6 718.6 Intangible asset s 15 47.1 56.6 Retirement benef it schem e surplus 27 1.1 – Proper t y, plant and equi pment 17 646.5 660.2 Right -of -use asse ts 18 36.0 2.8 Financial asset s 19 332.1 359.8 Current ta x assets 4.3 3.1 Deferred t ax asset s 10 12.3 12.5 Reinsurance asset s 28 65.4 71.6 Inve ntories 22 6.3 3.5 T rade and other receiva bles 23 169.5 183.1 T rust a ccounts 24 23.4 22.4 Cash and shor t-term deposits 25 226.9 101.6 Ass et s hel d for s ale 17, 38 12.9 16.9 T ot al assets 2,302.4 2,212.7 Liabilities Retirement benef it schem e obligations 27 – 4.3 Gros s insuranc e contr act liabili ties 28 386.7 426.3 Prov isi ons 31 6.7 11.7 Financi al liabilities 19 936.2 826.6 Deferred t ax liabilities 10 5.6 5.8 Contr act liabili ties 29 114.6 82.2 T rade and other pa yables 26 199.7 175.1 T ot al liabilities 1,649.5 1,532.0 Equity Issued capit al 33 21.1 21.0 Share pr emium 648.3 648.3 Retain ed earnings (22.4) 0.2 Share-based pa yment reserve 7.4 5.8 Fair value r es er ve (0.8) 7.3 Hedg ing re ser ve (0.7) (1.9) T ot al equit y 652.9 680.7 T ot al equit y and liabilities 2,302.4 2,212.7 The N ot es on p ages 1 26 -192 for m an int egr al p ar t of th ese c on soli dat ed f i nanc ial s t ate ment s . Sign ed fo r and o n beh alf of t he Bo ar d on 2 2 Ma rc h 202 2 by E A Sut he rlan d J B Qui n Gr oup C hief E xecu ti ve Of f ice r Grou p Chie f Fin anci al O f f i cer Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 022 123 Consolida ted s tatement of chang es in equ it y for th e year e nde d 31 J anu ar y 202 2 Attributable to the equity holders of the parent Issued capital £m Share pr emi um £m Re ta in ed earnings £m Share-base d payment reserve £m Fair va lue reserve £m Hedgi ng reserve £m To t a l £m At 1 Febru ar y 20 21 21.0 648.3 0.2 5.8 7.3 (1.9) 680.7 Los s for th e year – – (28.0) – – – (28.0) Other comprehensiv e income / (losses ) excluding recycling – – 3.6 – (8.2) 3.3 (1.3) Recyc ling of p rev ious l oss es/(gains) to inco me st ate ment – – – – 0.1 (2.1) (2.0) T otal comprehensive (losses ) /income – – (24.4) – (8.1) 1.2 (31.3) Iss ue of sh ar e cap it al (N ot e 33) 0.1 – – – – – 0.1 Sha re- bas ed pay ment c harge ( Not e 36) – – – 3.4 – – 3.4 E xerci se of s har e opt ions – – 1.8 (1.8) – – – At 31 J anu ar y 20 22 21.1 648.3 (22.4) 7.4 (0.8) (0.7) 652.9 At 1 Febru ar y 20 20 11.2 519.3 65.4 7.8 4.9 (20.4) 588.2 Los s for th e year – – (67.8) – – – (67.8) Other comprehensiv e (losses ) /i ncome excluding recycling – – (1.0) – 2.4 18.4 19.8 Recyc ling of p rev ious ga ins t o inc ome st atem ent – – – – – (2.1) (2.1) T otal comprehensive (losses ) /income – – (68.8) – 2.4 16.3 (50.1) Recognition of non -financial asset from hedg ing r ese rve ( Not e 1 9) – – – – – 2.2 2.2 Div ide nds p aid (N ot e 11) – – (0.1) – – – (0.1) Iss ue of sh ar e cap it al (N ot e 33) 9.8 140.6 – – – – 150.4 T r ans ac tio n cos t s ass oc iat ed wi th iss ue of share capit al – (11.6) – – – – (11.6) Sha re- bas ed pay ment c harge ( Not e 36) – – – 2.4 – – 2.4 E xerci se of s har e opt ions – – 3.7 (4.4) – – (0.7) At 31 J anu ar y 20 21 21.0 648.3 0.2 5.8 7.3 (1.9) 680.7 The N ot es on p ages 1 26 -192 for m an int egr al p ar t of th ese c on soli dat ed f i nanc ial s t ate ment s . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 022 124 Consolida ted s tatement of cash f low s for th e year e nde d 31 J anu ar y 202 2 Note 2022 £m 2021 £m Los s befo re t a x (23.5) (61.2) Dep re ciat ion , imp airm ent and l oss o n disp os al, o f pr op er t y, plant an d equ ipme nt , andright-of -use assets 22.2 14.9 Amo r tis ati on and i mpai rment o f int angi ble a sset s , and l oss o n dis pos al of s of t war e 20.6 72.5 Imp airme nt of ass et s hel d for s ale 38 1.0 – Gain o n lea se mo dif icati on (0.3) (3.2) Share-based pa yment transacti ons 3.4 2.4 Pro f it o n disp os al of as set s hel d for s ale 38 (7.2) (12.2) Loss on disposal o f subsidiaries – 3.6 Fina nce costs 7 40.8 30.2 Fina nce in come 8 – (1.7) Interest income from investments (0.3) (0.7) Inc re ase in t rus t ac co unt s (1.0) (22.4) Movements in other assets and liabilities 29.3 (66.5) 85.0 (44.3) Interest received 0.3 0.7 Interest paid (34.2) (24.1) Inc ome t a x pai d (4.6) (10.7) Net cash flows from /( used in ) operatin g activities 46.5 (78.4) Inv esting activities Pro ce eds f r om sa le of pr op er t y, plan t and eq uipm ent , an d right- of-use ass et s 0.3 8.3 Net p ro ce eds f ro m disp os al of as set s he ld for s ale 38 10.2 – Pur cha se of an d paym ent s for t he c ons tru ct ion of p ro pe r t y, plant and e quip ment a nd intangib le asset s (18.9) (285.1) Net di spo sal o f f ina ncia l ass et s (18.9) 41.9 Dis pos al of su bsid iari es , net of c ash in b usin es ses di spo se d of 13 – 23.1 Net cash flows used in in vesting activities (27.3) (211.8) Financin g activities Payme nt of pri ncip al po r ti on of le ase li abil iti es 32 (3.6) (4.0) Proceeds from borrow ings 32 250.0 330.8 Repayment of borrowings 32 (170.0) (130.0) Debt issu e costs 32 (6.8) (17.4) Pro ce eds f r om iss ue of s har e cap it al 33 – 150.3 T r ans ac tio n cos t s ass oc iat ed wi th iss ue of s har e cap it al – (11.6) Dividends paid – (0.1) Net cash flows from financing activities 69.6 318.0 Net increase in cash and cash equiv alents 88.8 27.8 Cas h and c ash e qui val ent s at t he s ta r t of th e year 166.9 139.1 Cas h and c ash e qui val ent s at t he en d of th e year 25 255.7 166.9 The N ot es on p ages 1 26 -192 for m an int egr al p ar t of th ese c on soli dat ed f i nanc ial s t ate ment s . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 022 125 Not es t o the f inancial s t atement s 1 Corporate Information Saga p lc (the Co mpa ny) is a public lim it ed c omp any incorporated and domiciled i n the United King dom under theC omp anie s Act 2 00 6 (regis tr ati on num ber 0 8 80 426 3). The C omp any is r egi st er ed in Eng lan d and it s r egi st er ed of f ice is lo cat ed at Enb ro ok Pa rk , Folke st one , Kent CT 20 3 SE . Saga of fers a w ide r ange of pr o duc ts a nd se rv ic es t o it s cus to mer b ase , whic h incl ude s gener al ins ur anc e pr odu ct s , pac kage an d cru ise h olid ays, p ers ona l f ina nce p r odu ct s and amonthly subsc ription magazine. 2 .1 Basis of preparation The c ons olid at ed f in anci al s tat em ent s of t he Gr oup h ave bee n pr epa re d in ac cor da nc e wit h UK -ad opt ed int er nati onal accounting st andards. The consolidat ed f inancial st atements have been prepar ed on a going c onc ern b asis a nd on a hi st ori cal c os t bas is except as oth er wise s t at ed . The G ro up has r evi ewed th e approp riateness of the going concern basis in preparing the f ina ncia l st at eme nt s, p ar ti cula rly in li ght of t he COV ID -19 pand emi c, det ai ls of whi ch ar e inc lud ed be low. Bas ed on those assumptions, the Director s hav e concluded that it rem ains a ppr op riat e t o ado pt the goi ng co nce rn bas is in preparing the f inancial st atement s. The G ro up’ s co nso lidat ed f inanc ial s t atem ent s ar e pr es ent ed in po unds s t erling , whi ch is al so th e par ent c omp any ’s fun cti onal c urr enc y, and all value s ar e ro unde d to t he ne ar es t hundred thousand (£m ), ex cept when o therwise indicated. Eac h com pany in t he G rou p det ermi nes i ts ow n fun ct iona l curr enc y and i tem s incl ude d in th e f ina ncia l st at eme nt s of eac h enti t y ar e meas ur ed usi ng that f unc tio nal c urr ency. The p re par ati on of f in anc ial s t atem ent s in c omp lian ce w ith UK -adopted i nternational accounting standards requires the use of c er t ain c rit ica l acc oun ting es ti mat es . It al so re quir es Gr oup ma nagem ent t o exercis e judgem ent in ap pl ying t he Gr oup’s accou nting p oli cies . T he ar eas w her e sig nif i cant judgem ent s and e st imat es have b een m ade in p r epar ing thef inanc ial s ta tem ent s an d thei r ef fe ct ar e dis clo sed i n Not e 2 .6 . The p rinc ipal a cc ount ing p olic ies ad opt ed , whi ch have be en appl ied c ons ist ent ly, unles s oth er wise s t at ed, a re s et out i n Not e 2 .3 b elow. Going co ncern The Directors ha ve consi dered the appropria teness of the going co nc ern ba sis of p re par atio n for t he f in anc ial st at eme nts p r epar ed t o 3 1 Ja nuar y 20 2 2 and in d oing so have co nsid ere d a ra nge of po ssib le s cen ario s that f ac to r in the p ot enti al ongoing i mpa ct of th e COV ID -19 pa ndem ic an d othe r key risk s an d unc er t aint ies . The Group ’ s busin ess activities, tog ether wit h the factors likel y to af fect i t s fut ur e develo pme nt and p er fo rman ce , it s expo sur e to r isk an d it s man agemen t of the se ri sk s, d eta ils of its f inancial inst ruments and derivative activi ties, and details of other financi al and non-financial liabilities , are described thr oug hou t the an nual r ep or t (see (i ) Prin cipa l risk s an d unc er t aint ies (P RUs) on pages 53 a nd 5 4; (ii ) Gr oup C hief Fin anci al O f f i cer ’s Review on page s 36 –52 ; (i ii) Au dit , riskan dint erna l co ntr ol on p ages 7 4 - 76; (iv) Audit C om mit t ee Rep or t on p ages 7 7 -81; (v) Risk Co mmit t ee R epo r t on p ages 82-8 4; and (vi) N ote s on page s 126 -19 2). TheDir ec to rs beli eve that t he Gr ou p is well p lac ed t o suc c ess full y man age its business risks. The im pac t of COV ID -19 over t he pa st t wo ye ars ha s increased the le vel o f uncert ainty and ea rnings volatility forth e Gr oup, a s it has d one f or ma ny busi nes ses , and par t icul arly f or th e Gr oup’s T ravel b usin ess . Si nc e the s t ar t of the p and emic i n the f irst h alf of 2 020, t he Gr ou p has incr ea sed t he fr e quen cy and d epth o f it s lo ng-term f in anci al for ec ast ing and s ce nari o mod elling t o all ow th e Dir ec to rs t o ta ke app ro pri ate a ct ion t o ensu re t he ongoi ng liqui dit y an d solvency of the busi ness. Over t his p erio d, t he G ro up has un der t ak en a se ries o f transac tions to res tructur e its oper ations and capit al structure. The Group ’s balance sheet has been strengthened to al low it t o wit hs ta nd a fu r the r per iod o f unc er t aint y t hat may be f ac ed in 20 2 2 and b eyond . Th e mos t not ab le of t hes e tr ansa ct ions wa s the r ais ing of £ 1 38 .7m of net pro c eed s fr om the is sua nc e of new eq uit y sh ar es in S ept emb er 20 20, foll owed by th e iss uan ce of a n ew £2 50.0 m unse cur ed f ixed -rat e f i ve-year b on d in Jul y 20 2 1. T he se ac tio ns all owed the G ro up to f ull y re pay it s se nior s ecu re d bank d ebt facilities, bolster A vailable Cash 2 re ser ves , whi ch wer e £ 18 6. 6m at 3 1 J anuar y 2 02 2, i ncr eas e f in anci al f lex ibili t y and ext en d the m atur it y pr of ile of Gr oup d ebt . O n it s sh ip debt fac ilit ies , the G r oup def err ed a nu mbe r of cap it al r epay ment s and th er e is a cove nant t es ting h olid ay on th ese f aci liti es unt il 31 J uly 2 02 2 . The G ro up su cc ess ful ly r ec omme nc ed op er atio ns in it s T r avel bu sine ss dur ing 20 2 1, w ith U K -on ly cr uise s and holi days op er ating f ro m Jul y 20 2 1, a nd a r etur n to inte rnat ion al cru ises f r om th e end of A ugus t 20 2 1 and inte rnat ion al to urs f ro m Sep tem ber 2 02 1 . Th e T ravel busi nes s has c ont inue d to o per at e sinc e, d esp it e the incr ea sed d isru ptio n fr om th e eme rgenc e of th e Omi cr on variant in Nov ember 202 1 . The G ro up ann ounc ed at t he en d of Ja nuar y 20 2 2 it s pla ns to r es tru ct ure t he op er ati ons of i ts T ravel bu sin ess . Th e Saga Hol idays an d Ti t an T ravel ope rat ions a re b eing c omb ined t o max imis e ef f i cien cy in t ouri ng, w her e th e pr odu ct of f ering s are h ighl y co mple ment ar y, and t o cr eat e a new ho tel s t ay pr opo sit ion t o be l aunc he d lat er in 20 22 . T he ri ver cru ise pr odu ct is n ow bein g manage d by the C rui se man ageme nt te am, w ho have a de mon st rab le tr ac k re co rd o f ope rat ing the o ce an cr uise p ro duc t suc ce ss full y in a COV ID -s afe envir onm ent . T hes e act ions p la ce th e T ravel busin es s in a str on g pos iti on as tr avel r es tri cti ons ea se an d cus to mer dema nd c onti nues t o r ec over . As in th e pri or yea r , the In sur anc e bus ine ss’ abili t y to t ra de con tinu es t o be la rgely un af fe ct ed by C OVI D-19, w ith r es ilient earni ngs in th e Ret ail B ro king b usin ess a nd so me p osit ive impa ct s on m oto r cla ims fr eq uenc y during t he f irst h alf of 202 1 w hen t he U K pop ulat ion wa s in lo ckd own . The I nsur anc e business has a lso successfully implemented chang es to pric ing in lin e wit h the r eq uir emen t of the r eg ulat ions impo se d by the FCA fo llowi ng it s mar ket s tud y int o insur an ce pric ing , whic h cam e into f or ce o n 1 Janu ar y 202 2 . 2 R efe r to t he A lt er na ti ve Per f or ma nc e Me as ur es G lo ss ar y on p age 2 0 1 for d ef i ni tio n an d exp la na tio n Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 126 In th e lat es t rou nd of l ong-term f i nan cial fo re cas ti ng, t he Gr oup up dat ed i ts m od elling a ssum ptio ns t o ref l ec t: • In th e bas e cas e, whi ch r epr es ent s th e Gr oup’s centr al pl an and best estimate outlook, Cruise continues to see some impa ct of C OVI D -19 in the f irst h alf of 2 02 2/23 , wi th r edu ce d loa d fac to rs an d high er re turn t o se rv ic e co st s , but t hen l argely returns to normal oper ation there af ter . The T our Oper ations busi nes s is t argeti ng to b re ak even in 20 22 /23 and t hen r et urn to p re- pan demi c con trib uti on level s fr om 20 23/24, wit h a lower over hea d co st ba se fo llowi ng co mple tio n of the r ec ent ly announced re struct uring plans. Insurance plans include an est imat e of t he imp act o f the FCA m arket s tu dy on c ust om er pric ing , whic h is expe ct ed t o have an ad vers e imp act o n pr of i t befo re t a x for 20 2 2/23 an d 2023/24. • In th e re ason abl e wor st-c as e (RWC), which r ep re sent s t he Gr oup’s severe, b ut pl ausib le, d owns ide s cen ario , Cru ise assu mes a l ayup of b oth s hips f or a fu r the r tw o-m onth per iod du ring 20 22 /23 due t o f ur th er pot ent ial t ravel restrictions, and with suppressed l oad factors for the rem aind er of 20 2 2/23 an d 202 3/24, capp ed at 75% an d 80% f or ea ch yea r res pe ct ively. T o ur Op er ati ons als o se es a much s lowe r re cover y fr om 2 023/24 onwar ds th an in th e bas e cas e. In sur anc e is as sume d to b e imp act ed by a numb er of dow nsi de ris ks , inc ludi ng a mor e c onse r vative out loo k for t he imp act o f the FCA m arket s tu dy c omp are d with base case assum ptions. The G ro up has m ade a n init ial as ses sm ent of th e pot ent ial impa ct th at th e Russ ia- Uk ra ine c onf lic t co uld have o n it s out loo k , and p ot enti al down sid es ar e co nsid er ed t o be limit ed t o sh or t-te rm r educ tio ns t o T r avel b ook ings an d inf lat ion ar y pr ess ure s tha t are s uf f icient ly c overe d by th e assu mpti ons wi thin t he b ase c ase an d RWC . The G ro up co ncl ude d disc uss ions w ith i t s Crui se le nde rs t o amen d the c ovena nt s on th e t wo ship d ebt fa cili tie s as set o ut in the t ab le b elow. Thi s is to e nsur e we have sig nif icant hea dro om agai nst a ll sc enar ios m ode lled . As p ar t of t he mod elling , th e Gr oup c ons ide re d it s co mpli anc e wit h th e maint ena nc e coven ant s at t ach ed t o it s ba nking f acil iti es , whic h are s umma rise d inth e foll owing t ab le at ea ch of t he required testing dates: Ship debt facilities RCF EB IT DA to d eb t repayment (mi n im u m) EB IT DA to cash interes t (mi n im u m) Ne t deb t to E B IT DA ‘lev erage ’ (ma x i mu m) EB IT DA to c as h interes t ‘intere st cover ’ (mi n im u m) Cruise interco mpany deb t ca p (ma x i mu m) 31 J uly 2 02 2 1.0 x 1 .7x 3 .75x 2.0x £115m 31 Januar y 2023 1.0 x 2.0 x 3 .75 x 2 . 5x £ 115m 31 J uly 2 023 1 .0x 2 .0x 3 .0 0x 3. 5x £115m 31 J anu ar y 2024 1.0 x 2.0 x 3 .00 x 3. 5x £ 115m 31 J uly 2 024 onwa rds 1.2x 2.0x 3 .00 x 3. 5x £115m Und er th e ter ms of th e ship d ebt f acil itie s, d ivi den ds r emain restricted until the ship debt pr incipal repa yments that were defer re d as par t of the s hip deb t rep aym ent ho liday ar e f ully rep aid . Un der th e te rms of t he r evolv ing cr edi t fa cilit y (RCF ), div iden ds als o re main r es tri ct ed if l everage is a bove 3 .0 x ( excludin g Crui se de bt) and the G ro up re mains s ubje ct t o a minimu m liqui dit y r equ ire ment o f £ 40 .0m , whi ch can b e me t eith er th ro ugh ca sh or u ndr awn and c om mit t ed f acili tie s ( suc h as the R CF i ts elf ). The t erms al so inc lud e a re quir eme nt to rep ay the R CF o n 1 Mar ch 2 024 if th e re maini ng £ 15 0.0m o f bon d not es t hat ar e due t o mat ur e in May 2 024 have not b een re deem ed p rior t o th is dat e. T he RC F is exp ect ed t o r emain undr awn in b oth s cen ario s for t he fo re see abl e fut ur e, and i t can be c anc elle d wit h imme diat e ef f ect at a ny poi nt , whic h woul d rem ove all c ovenant s at t a che d to i t . The n ew unse cur ed b ond t hat is d ue t o matu re in J uly 2 026 incl ude s an event-ba sed f ixed cha rge coven ant r atio, o f 2. 0x EBIT DA , whi ch mus t b e sati sf i ed if, and w hen , the G r oup int end s to is sue n ew debt . T he G ro up has n o curr ent p lans t o is sue any new deb t . The d ef ini tio n of thi s coven ant is c omp ara ble t o th e inte re st c over cove nant w ithi n the RC F . In bo th sc ena rios m od elle d, t he Gr oup ex pec t s to b e ab le to ope rat e wi thin a ll of it s de bt coven ant s an d to m aint ain su f f ic ient liqui dit y unt il at le as t Sept em ber 2 023 , b eing 18 m ont hs fr om t he dat e of sig ning th e f ina nci al st at eme nt s, w hich m or e tha n accommodates the m inimum 12- month assessme nt period for goin g concern. The Directors therefore have a reasonable expe ct ati on th at the G ro up wil l con tinu e to t ra de thr oug h th e con tinu ed COV ID -19 dis rupt ion a nd wil l have suf f icien t liqui dit y for at le as t the n ex t 12 m onth s, an d ac co rdi ngly h ave pr epar ed the f inancial st atement s on a g oing concern basis . 2 . 2 Basis of consolidation The consolidat ed f inancial st atements inc orpor ate the f inancial st at eme nts o f the C om pany an d enti tie s con tr olle d by th e Co mpany ( it s sub sidi arie s ) ma de up t o 3 1 Janu ar y eac h year. Co ntr ol is ac hieved w hen t he Gr ou p is expo sed , or h as rig ht s, t o variable returns from it s involvement with an investee entit y and has th e abil it y t o af fe ct th ose r et urns t hro ugh i ts p ower over t he invest ee e ntit y. The ex ist en ce an d ef fe ct of p ot enti al voting r ight s that are currently exercisable or convertible ar e considere d when assessing whether the Group controls another e ntity. Subs idi ar y com pani es ar e co nso lidat ed u sing t he ac quis iti on method. Subs idi arie s are f ull y con soli dat ed f ro m the d ate o f acq uisi tio n, b eing th e dat e on wh ich t he Gr oup o bt aine d con tr ol, a nd c ontin ue t o be c ons olid ate d unti l the d ate w hen such control ceases. In preparing these conso lidated f inancial st atement s, any intra-group rec eivables, payables , income and expenses arising from intr a-gro up trading ar e eliminated . Wher e acco unting pol icie s use d in ind ivi dual f inanc ial s t atem ent s ofa s ubsi diar y com pany di f fer f ro m Gr oup p oli cie s, a djus tme nt s ar e mad e to bring t hes e po lici es in lin e wit h Gr oup p oli cies . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 127 Notes to the f ina ncia l st atemen ts c ontinued The r es ult s of su bsid iari es ac quir ed , or di spo se d of, during the ye ar ar e inc lude d in th e con sol idat ed in co me st at em ent fr om th e ef fe cti ve dat e of ac quis iti on or u p to t he ef f ect ive dat e of dis pos al , as app ro pri ate . Wh er e a subs idia ry w hich con st itu te d a sep ara te m ajor li ne of b usin ess is d isp ose d of, itis disclosed as a discontinued operation. A change in t he ow ner ship int er es t of a sub sid iar y, witho ut alos s of co ntr ol , is ac co unte d for a s an equi t y tr ans act ion . If th e Gr oup l ose s co ntr ol over a su bsid iar y, it der ec ognis es the rel ated asset s (inc luding goodwill), liabilities , non- con tr olling i nte re st an d othe r co mpo nent s of e quit y while anyre sult an t gain or l oss is r ec ogn ise d in pr of i t or los s . Anyinves tm ent r eta ined i s re cog nise d at fai r value . 2 . 3 Summary of si gnificant acc ount ing po licies a. Revenue recognition Revenue r ep re sent s a mount s r ec eiv able f r om th e sal e or supp ly of go ods a nd ser v ic es pr ovid ed t o cus t omer s in th e or dinar y c our se of b usin ess a nd is r ec ognis ed t o the ex t ent that i t is pr ob able t hat t he fu tur e ec on omic b ene f it s wil l f low to t he Gr oup a nd th e reven ue ca n be r elia bly m eas ure d, rega rdl ess o f when p aym ent is r ec eive d. Th e r ecog nit ion pol icie s for t he Gr oup’s various r evenu e st re ams by se gme nt are as fo llows: i) Insurance The am ount s r ec eive d fr om cu st om ers fo r insu ran ce p oli cies com pris e thr ee m ain el emen ts : the p rem ium ch arged t o th e cus to mer in r es pe ct of t he ins ura nce c over ( gr os s pr emiu m) ; insurance pr emium tax (IP T ); and an arrang ement fee where appl ica ble (only ap plie d to p oli cies t hat ar e br ok er ed vi a a panel). The gross premium it self comprises t wo elements: the p re mium ch arged by t he un der wri te r of eac h po licy (net pr emium), which may b e pr ovid ed by th e Gr oup’s in-hous e unde rw rit er or by a t hir d-pa r t y und er wri ter, plus any adjus tm ent t o the n et pr emiu m that i s app lied by t he Gr oup’sbroke r during t he br ok ing se rv ic e ( st re et pri cing adjus tment). In ad diti on , wher e th e cus t ome r pays in ins t alm ent s, t he Gr oup may c harge in ter es t on t he ou t st and ing bal anc e. T he Gr oup may a lso ch arge ad dit iona l fee in co me fo r mid-t erm cancellations and adjustm ents made to p olicies mid-term. IP T is exclud ed fr om a ll reve nue r ec ognis ed by t he Gr oup . For 12-month ins ura nce p olic ies wi th no op tion t o f i x the pr emium at r enewal (annual pol icies): For insur an ce p olic ies un der wr it t en by th e Gr oup, t he gr os s insuranc e premium is r ecognis ed on a str aight-line time- app or ti one d bas is over th e per iod o f cover. The por t ion o f the p re mium c ede d to r eins ur ers is a lso r ec ognis ed o n a str aig ht-lin e time -app or t ion ed b asis over t he p erio d of cove r as a re duc tio n to r evenu e. Th is re cog nit ion b asis is i n line wi th the r equ ire ment s of I FR S 4 . For insur an ce p olic ies n ot und er writ t en by t he G rou p, the por tion of t he gr os s pr emiu m that i s ret ain ed by t he Gr oup , othe rw ise r efer re d to a s the s tr eet p rici ng adju stm ent , is re cog nise d on th e cover s t ar t da te of e ach p oli cy. The por tion of t he gr os s pr emiu m char ged by th e thir d-p ar t y underwrit er , otherwise referre d to as the net premium, isnotr ec ogni sed a s revenu e in th e inc ome s t ate ment . T his re cog niti on ba sis is in l ine wi th th e re quir em ent s of IF RS 1 5 . For 12-mon th insurance poli cies with the option to fix the premium o ver three y ears ( three-y ear fixed-price polic ies ): For thr ee -year f i xed-p ric e pol icie s, t he op tio n to f i x th e pr emium at t he f i rst a nd se co nd r enewa l poin ts i s dee med t o be a se par at e per f orm anc e obl igatio n as def ined by I FR S 15 . The G ro up th ere for e defe rs a p or ti on of th e gr os s pr emium re cei ved in t he f ir st ye ar of c over int o year s tw o and th re e, and a p or ti on of t he gr os s pr emium r ec ei ved in th e se con d year of c over int o year t hr ee, t o c oinc ide wi th wh en th e opti on ha s bee n exerci sed by t he cu st ome r and s o deem ed tob e ful f ill ed by th e Gr oup. T he c arr yin g value o f the r evenue defer re d is re cog nis ed wi thin c ont ra ct lia bili ties i n the stat ement of financ ial position . If a cu st ome r can cel s a thr ee-ye ar f i xed-p ric e pol icy mid - ter m or ch oos es no t to r enew i n the s ec ond o r thir d year s , any br ough t for war d inc om e defer ra l is re cog nise d in th e inc ome s t ate ment at t he p oint t he cove r ends , b eing th e poin t that t he G rou p is re lea sed f ro m the o bligat ion t o f i x the price at renewal. The G ro up us es a co st-p lus me tho dol og y t o ap pr oximat e ast an dalo ne se lling p ric e of the o pti on t o f ix t he cus t ome r pric e at r enewa l, by r efer enc e t o an ac tua rial e st imat e of thep re mium th at it wou ld c ost t he G ro up to t ra nsf er the obliga tio n to f i x to a t hir d par t y , plu s an app ro pri ate pr of itm arg in. The g ro ss pr em ium tha t is allo cat ed t o ea ch of t he th re e pol icy yea rs is t hen me asur e d as the g r oss p rem ium ch arged in eac h year, less any inc om e defe rre d to s ubs eque nt po licy years f or th e opt ion t o f ix , p lus any b ro ught fo rwa rd i nco me defer re d fr om ea rlier p ol icy yea rs . The a cc ount ing in ea ch pol icy yea r the n foll ows the s ame p rin cipl es as d esc ribe d above for annual policies. Whe re t her e is a sw it ch of un der wri te r bet we en th e Gr oup and a th ird -par t y under wr it er at eit her of t he r enewa l poi nt s wit hin th e thr ee-ye ar pr ice -f ix , th e Gr oup ap plie s the r el evant acc oun ting p olic y for t he sub seq uent p oli cy year in l ine wi th eith er of t he t wo met ho ds as de scr ibe d for an nual p oli cies . Management considers the def inition of per formance obliga tio ns for t hre e-yea r f ixed -pri ce p olic ies t o be a signif icant area of judgement. All insurance policies (both thre e-year fixed-price policies and annual policies) : For all ins ura nc e pol icie s, t he arr angem ent fe e tha t is char ged in r esp ec t of the b r oking s er vic e is r ec ogni sed o n, orbef or e, th e cover s t ar t d ate of e ach p oli cy on t he dat e thate ach p oli cy is arr ange d, b eing th e po int at whi ch th e per f orma nc e obliga tio n to b ro ker th e po licy is f ulf illed . It is meas ur ed by r efer enc e t o the exp lici t pri ce c harged t o cus to mer s for th is ser v ice . Ma nagem ent co nsid ers t he revenu e re cog nit ion t re atme nt of th e arr angem ent fee t o bea sig nif icant ar ea o f judgem ent . Gr oss p re miums r ec eive d in ad vanc e of th e cover s t ar t d ate of a po licy ar e tr ea te d as ad vanc e re cei pt s and in clu ded as con tr act li abil itie s in th e st at eme nt of f in anc ial p osit ion . Pre miums i n re spe ct of in sur anc e po lici es un der wri t te n bythe G ro up th at have a per iod o f unexp ire d risk a t the rep or t ing dat e, a nd whi ch r elat e t o the p eri od af t er t he repor ting da te, are treated as unear ned and incl uded in 2 . 2 Basis of consolidation continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 128 gr oss in sur anc e co ntr ac t liab ilit ies in t he s tat em ent of f ina ncia l pos iti on . The p or t ion o f tho se une arn ed pr emiu ms ced ed t o exces s of lo ss r einsu rer s is r ec ognis ed as a rei nsur anc e as set on t he fa ce o f the s t ate ment o f f inan cia l pos iti on . The p or t ion of t hos e une arne d pr emiu ms ce ded t o quot a sh ar e rei nsur er s is re cog nise d as an as set n et te d of f against reinsurance pr emiums withheld within trade payab les , sin ce t her e is a rig ht of set- of f w ithi n the c ont ra ct . Subsequent changes to premiums mid-term are recog nised on th e ef fe cti ve dat e of th e mid-t erm a djus tme nt . For th ose pol icie s that a re u nder wr it t en by th e Gr oup, t hes e cha nges are r ec ogn ise d on a st ra ight-li ne tim e-ap po r tio ned b asis ove r the p erio d of c over r emain ing on th e po licy. Redu ct ion in premiums from mid-term cancell ations are recog nised on the ef fect ive da te of t he ca nc ellat ion . Any f ee inc om e cha rged for a mi d-ter m can cell atio n or ad jus tme nt is r ecog nis ed on the d ate t he ad jus tme nt is mad e, b eing th e po int th at the mid-term ser vice is fulf illed. Inc ome f r om cr edi t pr ovid ed t o cus to mer s to f aci lit at e payment of their insurance premiums by instalment s over the li fe of th eir p olic y is tr eat ed a s par t of t he r evenue f ro m insur an ce op er ati ons an d re cog nise d over th e per iod o f the pol icy in p ro por tion t o th e out s ta nding p re mium b alan ce . Prof it commissio ns due under coinsurance or reinsur ance arrangements are r ecognised and valued in accor dance with the c ont ra ctu al t erms t o whi ch th ey are s ubje ct , wh en it i s highl y pr ob able t hat a si gnif icant r evers al of r evenu e will no t oc cur , and o n the s ame b asi s, wh er e app ro pri ate , as th e relat ed reinsur ed liabilit ies. For reven ue ear ned f ro m cr edi t hir e and r epa ir ser v ice s for non-fau lt claims ( c redit hire and cr edit repair ) , the G ro up init iall y re cog nise s the r evenu e at fair va lue, w hic h is bas ed on a hist or ical a sse ss ment of d ebt r ec over y and di sc ount level s. Cr edi t hire r evenu e is r eco gnis ed fr om t he da te t hat a vehi cle is pla ce d on hir e eq uall y over the d ura tio n of the h ire . Cr edi t rep air r evenue r ep re sent s in co me fr om t he r ec over y of the cos t s of r epai r of cus t omer s’ vehicl es . Cr edi t re pair r evenu e is re cog nise d whe n the w ork ha s bee n co mpl ete d. L at e paym ent pe nal tie s af for de d und er th e ter ms of th e Associatio n of British Insurers Gener al T erms of Agre ement (AB I GT A) ar e r eco gnis ed as t hey be co me paya ble by t he insurance comp any . i i ) Tr a v e l Revenue f ro m T our Ope rat ions a nd Cr uis e, wh ere t he G ro up doe s not op er at e the c ruis e ship, i s re cog nise d in lin e with t he per f orma nc e obliga tio ns tha t are i nclu ded i n a pac kage holi day, namel y the p rov isio n of f lig ht s, a cc omm od atio n, transfer s and travel insurance. Revenue is rec ognised as and when e ach p er fo rma nce o bligat ion i s sati sf i ed , whic h is deem ed t o be w hen e ach s er vic e t o the c ust om er t ake s place. The standalone sell ing price o f each performance obliga tio n is es tima te d as the c os t t o pr ovid e eac h obliga tio n plus a p ro f it m argin a ppr op riat e t o the n atur e of e ach ser vi ce . The p ric e cha rged t o eac h cus to mer i s then apportioned to each performance obliga tion based on the rel ati ve est imat ed s t and alo ne se lling pr ice s, i n line w ith t he re quir eme nt s of IF RS 1 5. For T o ur Op er atio ns , reven ue in r elat ion t o f lig ht s and f lig ht upgr ad es is r ec ognis ed o n the d ate o f eac h f light ; r evenue in rel atio n to a cc omm od atio n is re cog nis ed over th e dur ati on of the h olid ay; r evenu e in re lati on t o tr ans fers i s re cog nise d on the d ate t hat th e tr ans fer s oc cur b efor e an d af t er ea ch holi day ; and r evenue i n re spe ct of t ravel i nsur anc e (which is unde rw rit t en by a th ird -par t y under wr it er ) is re cog nis ed on the c over s ta r t dat e of th e insur an ce . Revenue i n re spe ct of C rui se ho lidays w her e th e Gr oup ope rat es t he cr uise s hip is al so r ec ognis ed in li ne wi th th e per f orma nc e obliga tio ns, b eing t he cr uise i t self, f lig ht s ( where applicab le ), trav el insurance and tr ansfers. Th e por tion of r evenu e allo cat ed t o th e crui se it s elf is r ec ogni sed on a pe r diem b asis ove r the du rat ion of t he c ruis e in line w ith when t he p er for man ce ob ligat ion is s atis f ie d. T he p or ti on of revenu e allo ca te d to f lig ht s and f l ight up gr ade s (where appl ica ble) and tr ans fers i s re cog nise d on th e dat e th at eac h trip is f ulf illed , whi ch is c onsi st ent wi th t he app ro ac h ado pte d by the T our Op er atio ns bu sine ss . Revenu e fr om tr avel insur an ce fo r crui sing ho lid ays is re cog nise d at th e cover st ar t d ate o f the p oli cy, which is us uall y at th e poin t the cus to mer m akes a b oo king . An el emen t of reven ue whi ch r epr es ent s th e non- ref und abl e dep osi t re cei ved at th e tim e of bo ok ing is r ec ognis ed in t he inc ome s t ate ment i mmed iat ely in l ine wi th th e pr evailing r at e of cancellations . Reven ue from sales in resort , for e xample f or optional excursi ons , or on b oa rd a c ruis e ship o per at ed by th e Gr oup, for examp le ba r sal es or o ptio nal excur sio ns, i s re cog nise d as it is ea rned. Revenue f ro m to ur op er atio ns and c ruis ing ho lidays r ec ei ved in adv anc e of whe n eac h per forman ce o bligat ion i s sati sf i ed is incl ude d as defe rr ed r evenue wi thin c ont ra ct li abili tie s in th e stat ement of financ ial position . iii) Other Businesses and Central Costs Personal finance Revenue f ro m pe rso nal f i nanc e pr o duct s i s re cog nise d whe n the c ust om er co ntr ac t s wit h the p rov ider o f the r el evant per son al f in anc e pr odu ct w her e the r evenu e co mpri ses a one-off payment by the provider of the product. Whe re t he p ers onal f inanc e pr od uct i s one t hat de liver s a re curri ng inc ome s tr ea m, t he pr es ent valu e of th e fut ur e expe ct ed r evenue t o be r ec ei ved is r ec ognis ed wh en th e cus to mer c ont ra ct s wit h th e pr ovid er of th e re levant per son al f in anc e pr odu ct , an d it is hig hly p ro bab le th at a signi f ic ant r evers al of r evenue r ec ogni sed w ill not o cc ur . For the S aga sav ings pr o duc t , com miss ions a re e arne d over th e dur atio n of th e cont r act in l ine wi th th e co ntr act ual a moun t due t o the C om pany. Magazine subscr iptions Magazine subscript ion revenue is rec ognised on a st raight- line b asis over t he p erio d of th e subs cri ptio n. R evenue gener at ed fr om a dver t ising w ith in the m agazin e is re cog nise d when t he ma gazine i s pr ovid ed t o the c ust om er . The element of subscriptions and advertising revenue rel ating t o th e pe riod a f t er the r ep or t ing dat e is r ec ogni sed as defe rr ed r evenue wi thin c ont ra ct li abili tie s in th e stat ement of financ ial position . Printing and mailing Revenue f ro m pri nting an d mail ing ser v ice s is r ec ognis ed in line wi th t he pe r form anc e ob ligati ons wi thin c ust om er contracts. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 29 Notes to the f ina ncia l st atemen ts c ontinued b. Cos t re cognit ion i) Insurance acquisition cost s Acq uisi tio n cos t s aris ing fr om t he se lling or r en ewing of insur an ce p olic ies un der wr it t en by the G r oup ar e r ec ognis ed on a st ra ight-li ne tim e-ap po r tio ned b asi s over the p eri od of the p oli cy in whi ch th e re lat ed r evenue s are e arn ed. T he pr opo r ti on of ac quis iti on c ost s r el ating t o pr emiu ms tr eat ed as une arne d at th e rep or t ing dat e ar e def err ed an d incl ude d as oth er r ece ivab les in t he s t ate ment of f inanc ial p osi tio n. Inc rem ent al c os t s of obt aini ng an ins ura nce c ont ra ct n ot unde rw rit t en by th e Gr oup, n ame ly fe es ch arged by pric e- co mpar iso n websi te s, a re r ec ogni sed a s an ass et wit hin tr ade an d oth er r ece ivab les o n the f ac e of th e st at emen t of f ina ncia l pos iti on . Suc h co st s ar e am or ti sed in l ine wi th th e pat t ern of r evenu e for th e re lat ed ins ur anc e con tr act , w hich inc orp or ate s the p ro pe nsit y f or th at co ntr act t o r enew in fut ur e per iod s bas ed on t he pr evaili ng rat e of r enewa l for these types of contract. If the expected amortisation period is one ye ar or l ess , th en inc re ment al c os t s ar e expen sed when incu rred. ii) C laim s co st s Clai ms co st s in curr ed i n re spe ct of i nsur anc e po lici es underwritt en by the Group include estimates for claims made for lo sse s re po r te d as oc cur ring dur ing th e per iod t ogeth er wit h the r ela te d hand ling co st s , any ad jus tmen ts t o cl aims out s ta nding f ro m pr evio us pe rio ds , and an e st imat e for t he c ost of cla ims inc urr ed dur ing th e per iod b ut not r ep or t ed a s at the rep or t ing dat e . The p or t ion of c os t s re cover ed f ro m rei nsur anc e is r ec ognis ed as a r ed uct ion t o th ose c os t s in th e sam e per iod in w hich t he c os ts a re r ec ogn ised . Furt her de ta il is pr ovi ded in N ot e 28 . iii) Finance cost s Fin anc e co st s c ompr ise int er es t pai d and p ayabl e that i s cal culat ed u sing t he ef f ect ive int er es t rat e (EI R) m etho d, a nd it is r ec ognis ed in t he in com e st at eme nt as it a cc rue s. Acc rue d int er est i s incl ude d wit hin th e carr y ing valu e of th e interes t-bearing financial liabilit y in the st atement of finan cial position. Finance cost s also i nclude debt i ssue cost s that wer e initi all y re cog nise d in th e st at emen t of f in anci al po sit ion and am or ti sed ove r the li fe of th e deb t , debt is sue c os t s in respect of reneg otiati ng e xisting fac ilities th at are imme diat ely r e cog nise d in the i nc ome s t ate ment an d net f air value losses on derivative financi al instruments . iv ) All oth er expe nses All ot her exp ens es ar e r ec ognis ed in t he in com e st at eme nt as they a re in curr ed . c. Re cognit ion of ot her inc ome st at ement it ems i) Interest income Inves tme nt inc ome i n the fo rm of int er es t is r ec ognis ed in t he inc ome s t ate ment a s it ac cru es an d is cal cul ate d using t he EIR m etho d. I nte re st in co me is e arne d by the G r oup on b oth ass et s held at f air val ue th rou gh pr of i t or lo ss , and a sset s held a t fair val ue th ro ugh ot her c omp reh ens ive inc om e. Fee s and c ommi ssio ns whi ch ar e an int eg ral p ar t of t he ef f ect ive yiel d of th e f ina nci al ass et or li abili t y ar e re cog nise d as an adjus tm ent t o the E IR of t he ins tr ument . ii) Dividend income Inc ome i n the f orm of di vi dend s is r ecog nis ed wh en th e right to r ec eive p ayme nt is es t ablis he d. For li st ed se cur itie s, t his is the d ate t hat th e se curi t y is lis te d as ex-divid end . iii) G ain s and l os ses o n f ina nci al inves tm ent s at f air va lue Real ise d and unr ea lise d gains a nd lo sse s on f in anc ial invest ment s a re r ec or ded a s invest men t inc ome in t he inc ome s t ate ment , a nd r epr es ent net f air valu e gains a nd los ses ar ising f ro m cha nges in fa ir valu e during t he yea r . d. T ax es i) Cu rre nt in com e t ax Inc ome t a x ass et s and li abil iti es for t he cu rre nt per iod a re meas ur ed at th e amo unt exp ect ed t o b e re cover ed f ro m, o r paid t o, th e t axat ion au tho rit ies . Th e t ax r ate s and t a x laws use d to c omp ut e the a moun t are t hos e tha t are e nac te d or subs t anti vely e nac te d at the r ep or t ing dat e. C urr ent in co me ta x ass et s and l iabil iti es als o incl ude a djus tm ent s in r esp ec t of t ax exp ect ed t o b e payab le or r ec over abl e in re sp ect o f pr eviou s per iod s. C urr ent in co me t ax r ela ting t o it ems re cog nise d in oth er co mpr eh ensi ve inc ome (OC I) an d dir ect ly in e quit y i s re cog nise d in OC I or e quit y a nd not i n the inco me st ate ment . ii) D efe rre d t ax Deferred t ax is provided on temp orar y dif ferences b etween the t a x bas es of as set s an d liab ilit ies an d the ir car ry ing amou nt s for f i nanc ial r ep or ti ng purp os es at th e rep or t ingdat e . Defe rr ed t ax li abili tie s ar e re cog nise d for al l ta xabl e tempor ary dif fer ences and deferred t ax asset s are re cog nise d to t he ex t ent th at it is p ro babl e th at ta xab le pr of it w ill b e availab le again st wh ich t he de duc tibl e tem po rar y di f fer en ce s and t he car r y for war d of unu sed t a x cr edit s a nd unus ed t a x los ses c an be u tili sed . The c arr yi ng amou nt of def err ed t ax a sset s is r evi ewed at eac h rep or t ing dat e an d re duc ed t o th e ext ent t hat it i s no longer p ro bab le th at suf f icie nt t axab le pr of it will b e availab le to al low all , or pa r t of, the def err ed t ax a sse t to b e uti lise d. Unr ec ogni sed d eferr ed t a x ass et s ar e re ass ess ed at ea ch rep or t ing dat e an d ar e re cog nise d to t he ex t ent th at it has bec om e pr oba ble t hat f utur e t ax able p ro f it s wi ll allow t he defer re d t ax as set t o be r ec over ed . Defe rr ed t ax as set s an d liab ilit ies ar e me asur e d at the t a x rat es t hat ar e exp ect ed t o ap ply in t he ye ar whe n the a sset i s re alise d or t he lia bilit y is set tl ed , bas ed on t ax r at es (and ta x laws) that have be en ena ct ed or s ubs t anti vely en act ed a t the rep or t ing dat e . Defe rre d t ax is c harge d or cr edi te d in th e inc ome s t ate ment , exc ept wh en it r elat es t o it ems c harge d or cr edi te d in oth er c ompr eh ensi ve inc om e or equ it y, in whic h cas e the d eferr ed t a x is r eco gnis ed in ot her compr ehensive income or equit y as appropriat e. Defe rr ed t ax as set s an d defe rre d t ax li abili tie s ar e of fs et if a legall y enfo rc eab le rig ht exis t s to s et-of f curr ent t ax as set s agains t curr ent t a x liab ilit ies an d the d efer re d ta xes r elat e t o the s ame t a xabl e enti t y and t he sa me t axat ion au th orit y. 2 . 3 Summary of si gnificant acc ount ing po licies continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 130 e. Foreign curr encie s T r ans ac tio ns in for eig n curr en cies a re i niti ally r ec or de d by the G ro up at th eir r esp ec tive f unc tio nal cu rr ency s pot r at e at the d ate t hat t he tr ans ac tio n f irs t qua lif i es for r ec og niti on . Mon et ar y ass et s and li abil iti es den omin ate d in fo reig n curr enc ies a re r etr ans lat ed at t he fu nct ion al cur ren cy sp ot rat e of excha nge pr evalent at t he r ep or ti ng dat e. f. Intangibl e asset s Int ang ible a sset s a cqu ire d ar e mea sur ed on i niti al re cog niti on at c os t and su bse quent t o ini tia l re cog niti on , are carr ied at c os t les s any ac cumu lat ed am or ti sat ion an d acc umul ate d impa irme nt los ses . T he co st of i nt angib le as set s acq uir ed in a bu sin ess c omb inat ion is t heir f air val ue at th e dat e of ac quis itio n. I nte rnal ly gene rat ed i nt angib les , excluding internally developed sof t ware, are not capit alised and th e re lat ed exp end itur e is r ef le ct ed in t he in com e st at eme nt in the p eri od in w hich t he exp end itur e is in curr ed . The u sefu l lives o f int angi ble a sset s an d goo dwill a re a sse sse d as eit her f inite o r ind ef ini te . Es timat ed u sef ul live s ar e as follows: Goodwill Indefinite Sof twa re 3 -10 year s Int ang ible a sset s w ith f init e lives a re am or t ise d over the ir usef ul ec ono mic li fe on a b asis a ppr op riat e t o the consumptio n of the asset and are assessed for impa irment when ever th ere i s an indi cat ion t hat th e int ang ible a sset m ay be impai red. The amortisation per iod and the amortisation meth od fo r an int ang ibl e ass et wit h a f ini te us efu l life ar e rev iewed at l eas t at the e nd of e ach r ep or t ing per iod . Cha nges in th e expe ct ed us eful l ife or t he exp ec te d pat t ern of co nsum ptio n of fu tur e ec ono mic b enef it s emb odi ed in th e ass et ar e con side re d to m odi f y th e amo r tis ati on pe rio d or meth od , as ap pr opr iat e, and a re t re ate d as ch anges in accounting estimates. The a mor tisation expense on int angib le as set s wi th f i nit e live s is re cog nise d in th e inc ome st at eme nt in the ex pen se ca tegor y t hat is c ons ist ent w ith t he function o f the in tangible asse ts . Go odw ill and i nt angib le as set s wi th in def in it e usef ul live s aren ot amo r tis ed b ut ar e te st ed fo r imp airme nt at le ast annua lly, eith er ind ivi dual ly or at t he ca sh gen erat ing uni t (CGU) l evel. W her e th e carr y ing valu e of th e ass et excee ds the r ec over abl e amou nt , an imp airm ent lo ss is r ec ognis ed in the income statement immediately . The assessmen t of indef init e life i s revi ewed an nuall y to d et ermin e whet her thein def i nit e life c ont inue s to b e sup po r t able . If n ot , the change i n usef ul lif e fr om ind ef ini te t o f in it e is mad e on a prospective basi s. Gain s or lo sse s aris ing fr om d ere cog nit ion of a n int angi ble ass et ar e meas ur ed as t he dif fere nc e bet we en th e net disp os al pr oc ee ds and t he c arr ying a moun t of the a sse t and are r ec ogn ise d in the i nco me s t ate ment w hen th e ass et is derecognised. g. Bu sines s combin ations a nd goodwill Busi nes s co mbin atio ns ar e ac cou nte d for us ing th e acq uisi tio n meth od . Th e cos t of an a cqu isit ion is m eas ur ed as the ag g rega te of t he c onsi der ati on tr ans fer re d mea sur ed at acq uisi tio n dat e at fair va lue an d the a moun t of any no n- con tr olling i nte re st s in th e ac quir ee . For eac h bus ine ss com bina tion , th e Gr oup e lec t s whet her t o me asur e th e non- c ontr oll ing int er es ts i n the a cqu ire e at fai r value o r at the pr opo r ti onat e sh are o f the a cqu ire e’ s iden tif iable n et ass et s . Whe n the G ro up ac quir es a b usin ess , it a sse sse s th e f ina ncia l and non-financial ass ets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and per t ine nt con dit ion s as at th e acq uisi tio n dat e. Any c ontin gent co nsid er atio n to b e tr ans ferr ed by t he acq uir er will b e r ec ognis ed at f air valu e at the a cq uisi tion dat e. C onti ngent co nsi der atio n cla ssi f ied a s an ass et or liabi lit y t hat is a f i nanc ial in st rume nt wit hin th e sc ope o f IF RS 9 ‘F ina nci al Ins tru ment s’ is me asur ed a t fair val ue wi th th e change s in fai r value r ec ogni sed i n the in co me s ta tem ent . Any exce ss of th e co st of a cqu isit ion ove r the f air valu es of the i dent if ia ble a sset s a nd lia bilit ies i s re cog nise d as goo dwill . If th e co st of a cqu isit ion is l es s than t he f air valu es of th e ident if i abl e ass et s and li abili tie s of th e acq uir ed bu sine ss , the dif f ere nc e is re cog nis ed dir ec tly i n the in co me s ta tem ent in the ye ar of ac quis iti on . Acquisition-r elated cos ts are expense d as incurred and included in adminis trat ive expenses . Af t er ini tia l re cog niti on , good will is m eas ure d at co st l ess a ny acc umul ate d impa irme nt los ses . G oo dwil l is allo cat ed t o CGU s at th e poin t of ac quisi tio n and is r evi ewed at le as t annually for impairment. h. Im pairment of n on-f in ancial a sset s Go odw ill and i nt angib le as set s th at have an in def i nit e usef ul life ar e no t subj ect t o am or tis ati on an d are t es t ed ann uall y for imp airm ent , or m or e fr equ entl y if event s or c hange s in cir cums t anc es in dic ate t hat th ey might b e imp air ed . If su ch an indi cat ion exis t s , the r ec over abl e amou nt is es tim ate d and com par ed w ith t he ca rr ying a mount . If the r ec over abl e amou nt is le ss th an th e carr y ing amo unt , th e ass et is con sid ere d imp aire d and i s writ t en d own t o it s re cove rab le amou nt and t he imp airm ent lo ss is r ec ogni sed im med iat ely in the in co me s tat em ent . Ot her a sset s a re t es te d for im pair ment w heneve r event s or change s in cir cum st an ces i ndic at e that t he ca rr ying a mount may not b e re cove rab le . If th er e is any ind icat ion t hat an ass et may be i mpai re d, a r ec overa ble a mount i s es tima te d for th e indi vi dual as set . I f it is n ot po ssib le t o es tim ate t he re cover abl e amo unt of t he ind ivi dual a sset , t he r ec over able amou nt is det erm ined o f the C GU t o whi ch th e ass et bel ongs . For impa irme nt te st ing, a sse ts a re g ro upe d toget her i nto t he smal les t gr oup o f ass et s that gen er ate c ash i nf lows f rom con tinui ng use t hat ar e lar gely in dep end ent of th e cas h inf lows of o the r ass et s or CG Us . Go od will ar ising f ro m a busi nes s co mbin atio n is allo cat ed t o C GUs o r gr oup s of CGU s tha t are ex pec te d to b en ef it f ro m the s yne rgie s of th e combination. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 13 1 Notes to the f ina ncia l st atemen ts c ontinued Rec over able a mou nt is cal cul ate d as th e high er of fa ir value les s cos t s t o sell , and va lue-i n-us e. In a sse ssin g value -in-us e, est imat ed f ut ure c ash f lows ar e disc ount ed t o th eir pr es ent value u sing a pr e-t ax d isc ount r at e that r ef l ect s c urr ent mark et ass ess ment s of t he t ime val ue of mo ney an d the ri sk s spe cif ic to t he ass et . In d ete rmini ng fair va lue le ss c os ts o f disposal, r ecent market transac tions are taken into ac count . If no s uch t ra nsa cti ons c an be i dent if ie d, a n appr op riat e valuat ion m od el is us ed . The se ca lcul ati ons ar e co rr ob or ate d by va luation multiples, quo ted share prices for publicly tr ade d com pani es or ot her avai lab le fai r value in dic ato rs . TheG ro up bas es it s va lue-i n-us e cal cula tio ns on de ta iled budget s , pl ans an d long-ter m gr ow th a ssum ptio ns , whic h are pr epar ed s epa rat el y for ea ch of t he G rou p’ s CGU s to w hich individual asset s are allocate d. i. Pro per t y, plant and equipme nt Pro per ty, plan t and eq uipm ent ar e s tat ed a t cos t , net o f acc umul ate d dep re ciat ion an d imp airme nt los se s. W her e an it em of pr op er t y, plant a nd eq uipm ent c ompr ise s majo r com po nent s hav ing dif fere nt use ful li ves , they ar e ac c ount ed for separatel y . Assets in the course of construction at the statement of financial position date are class if ied separately . These assets are trans ferred to other asset categories when they becom e ava ilable for their in tended use. Dep re ciat ion is c harge d to t he in com e st at em ent on a str aig ht-lin e basi s so as t o wri te -of f the dep r ecia ble a mount of pr op er t y, plant an d equ ipme nt over th eir es tim ate d us eful lives . Th e dep re cia ble am ount i s the c os t of an as set l ess i ts re sidu al valu e. L and a nd as set s in t he co urs e of co ns tru cti on are n ot dep re cia te d. Es tim at ed us eful li ves ar e as fo llows: Buil dings , pr op er t ies an d re lat ed f i x tur es: Buil dings 50 year s Fix tur es and f it ting s 3-20 yea rs Crui se sh ips 30 yea rs Co mput er s 3- 6 yea rs Plant , ve hicl es and o the r equip men t 3 -10 year s Cos t s r elat ing to c ruis e ship m and ato r y dr y-do ck ings ar e capi t alis ed and d epr ec iat ed over t he pe rio d up to t he n ext dry-docking, where appropriate. The International Co nventio n for th e Saf et y of L ife at S ea r egul atio ns s tipu lat e that s hips h ave to b e dr y-do ck ed t wic e in an in ter val o f f ive years , wi th th e int er val b et ween c ons ecu ti ve dr y-do ck ings being n ot le ss th an t wo year s and n ot mo re t han t hre e year s. All ot her r ep airs an d main ten anc e co st s ar e r ec ognis ed in the in co me s tat em ent as in curr ed . An it em of p ro pe r t y, plant an d equip men t is der ec ogni sed upo n disp os al, o r whe n no fu tur e ec ono mic b enef it s ar e expe ct ed fr om i t s use o r disp os al. A ny gain or l oss a risi ng on der ec ogni tio n of an as set (calcul ate d as th e dif f er enc e bet we en th e net dis po sal p ro ce eds an d th e carr y ing amo unt of the a sse t) is include d in th e inc ome s t at emen t when t he asset i s derecognised. Est imat ed r es idua l value s and u sef ul live s are r evi ewed ann uall y. In r elat ion t o the a nnua l rev iew of es tim ate d re sid ual val ues and us eful l ives of o c ean cr uise s hips , p ote ntia l envir onm ent al reg ulat or y c hanges a re al so co nsi der ed . The s hipp ing indu str y h as mad e a co mmit men t to r edu ce C O 2 emissions by 40 % by 203 0 (fr om a 20 0 8 bas elin e ), and the U K Gover nment h as ma de c ommi tme nt s to r ea ch net ze ro emis sion s by 205 0. Th e EE XI (carbo n des ign/t ech nica l ef f iciency indicator ) and CII (in-ser vice/ operational carbon inte nsit y ef f ici ency i ndic at or ) re gul atio ns ar e bei ng intr odu ce d int erna tion all y to en abl e the in dus tr y t o mee t the 203 0 t arget , an d the G ro up’ s oc ean c ruis e ship s will exc eed the r equ ire ment s of t he se r egul atio ns on im ple ment at ion in 2023 . T he en d of th eir us eful e con omi c lives o f 30 ye ars wi ll have be en re ach ed by 20 4 9 in th e cas e of Sp irit o f Dis cover y and 20 51 in th e cas e of Sp irit o f Adve ntur e. j. No n- curr ent asse ts h eld for s ale The G ro up cl assi f ie s non- cur re nt ass et s as hel d for s ale i f thei r carr y ing amo unt wi ll be r ec over ed pr incip all y thr oug h a sal e tr ansa ct ion r ath er tha n thr oug h co ntinu ing use . T o be clas sif ied as he ld fo r sal e, an as set mu st b e availa ble fo r imme diat e sa le in it s p re sent c on diti on sub jec t onl y to t erm s that a re us ual a nd cus t omar y fo r th e sal e of suc h ass et s, a nd the s ale mu st b e high ly pr ob abl e. A s ale is c ons ider ed t o b e highl y pr ob able w hen m anagem ent is c omm it te d to a p lan t o sell an a sse t and an a cti ve pr ogr amm e to l oc ate a b uyer a nd com plet e th e pl an has b een i niti ate d at a pri ce t hat is re ason abl e in re lati on t o it s cur ren t fair va lue, a nd th er e is an expe ct ati on th at the s ale w ill b e com plet ed w ith in one ye ar fr om th e dat e of cl assi f ic atio n. N on- cur re nt ass et s cla ssif ied as hel d for s ale ar e ca rrie d on th e Gr oup’s stat em ent of f ina ncia l pos iti on at th e lowe r of the ir car ry ing am ount an d fair va lue le ss c ost s t o se ll. Pro per ty, plan t and eq uipm ent an d int angi ble a sset s , on ce clas sif ied as he ld fo r sal e, ar e not d epr eci at ed or am or t ise d. 2 . 3 Summary of si gnificant acc ount ing po licies continued h. Im pairment of n on-f in ancial a sset s continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 132 k . Financial ins trument s i) Financial assets On ini tia l re cog niti on , a f ina nci al ass et is cl ass if ie d as eit her a mor t ise d co st , fa ir valu e thr oug h othe r co mpr ehe nsive i nco me (F VO CI ); or fair va lue t hro ugh p rof it or lo ss (F V T PL). The c las sif i cat ion of f inanc ial as set s is b ase d on th e bus ines s mo del in whic h a f ina ncia l ass et is man aged , and i ts c ont ra ct ual c ash f lo w char ac te ris tic s. D eri vati ves em bed ded i n con tr act s w her e the h ost i s a f ina nci al ass et in th e sc op e of the s t and ar d are n ever sep ar ate d. I nst ea d, t he hyb rid f inanc ial ins tr umen t as a whole is assessed for classification. Initial recognition Subsequent measurement Amortised cost A f inanc ial as set is m eas ure d at am or tis ed c os t (plus a ny di rectly attributable transaction cost s ) ifitme et s bo th of th e foll owing c on diti ons an d is not elec t ed to b e de sign ate d as F V TP L : • It is he ld wi thin a b usin ess m od el who se ob jec ti ve is to h old a sset s t o c olle ct c ontr ac tu al cas h f lows . • It s co ntr ac tua l ter ms gi ve rise o n sp eci f ied d at es to c ash f l ows that a re s ole ly pay ment s of p rin cipa l and int er es t on th e pri ncip al am ount ou t st an ding . The G ro up cl assi f ie s tr ade r ec eiva ble s, ot her receivables and deposits with financial institutions as hel d at amo r tis ed c ost . These asse ts are subsequen tly measured a t amor tise d cos t us ing the E IR me tho d. T he amor tise d cos t is r edu ce d by any imp airme nt losses ( see (ii) below ). In teres t income, foreign exchange gain s and lo ss es and i mpair ment s ar e re cog nise d in pr of i t or lo ss as t hey ar e incu rr ed. Any gain o r los s on de re cog niti on is r ec ogni sed in pr of i t or lo ss imm edia tel y. F VO CI A de bt inves tme nt is me asur ed at F VOCI ( plu s any directly attributable transaction costs ) if it meets bot h of the f ollo wing c ondi tio ns an d is not el ect ed tob e des igna te d as F V TPL : • It is he ld wi thin a b usin ess m od el who se ob jec ti ve is ach ieved by b oth c olle ct ing co ntr act ual c ash fl ows and sellin g f inancial asset s. • It s co ntr ac tua l ter ms gi ve rise o n sp eci f ied d at es to c ash f l ows that a re s ole ly pay ment s of p rin cipa l and int er es t on th e pri ncip al am ount ou t st an ding . On ini tia l re cog niti on of an e qui t y invest ment t hat is not he ld for t ra ding , th e Gr oup m ay irrevo cab ly elec t to p r esen t subs equ ent ch anges in t he invest ment ’s fair valu e in OC I . This e lec tio n is ma de on an inves tm ent-by-inves tm ent ba sis . The G ro up cl assi f ie s debt s ecur iti es as F VOCI . Debt i nst rum ent s ar e subs equ entl y me asur ed at fair va lue. I nt ere st in co me ca lcu lat ed usi ng the EIR m etho d, f or eign excha nge gains an d los ses and imp airm ent s ar e r ecog nis ed in pr of it or lo ss . Ot her n et gains a nd lo sse s ar e re cog nise d in OC I . On de re cog nit ion , gains an d los se s acc umul ate d in OC I ar e re cycl ed t o pr of i t or loss. Equit y inves tm ent s ar e me asur ed at f air valu e. Div ide nds ar e r ec ognis ed as i nco me in p ro f it or loss unless the dividend clearly represents a re cover y of p ar t of t he co st of t he inves tm ent . Ot her n et gains a nd lo sse s ar e re cog nise d in OC I and ar e never r ec las sif i ed t o pr of i t or lo ss . F V TPL All f inan cial a sse ts n ot cl assi f ie d as amo r tis ed c os t or F VO CI a s des crib ed ab ove ar e cla ssi f ied a s F V TPL an d hel d at fair va lue . This in clu des al l derivative finan cial assets . On ini tia l re cog niti on , the G ro up may ir revo cab ly elec t to d esig nat e a f in anc ial as set t hat oth er wis e meet s t he r equi rem ent s t o be m easu re d at amor tise d cos t or F VOCI a s F V TPL if d oing s o elimin ate s, o r sig nif ic ant ly r edu ces , an a cc ount ing mism atc h that w ould o ther wi se ari se. T his el ect ion is mad e on an in div idu al ins tru ment b asis . The G ro up cl assi f ie s loan f und s, m oney m arket fun ds and f or eign excha nge for war d co ntr ac ts n ot desi gnat ed i n a hedg ing r elat ions hip, as F V T PL . These asse ts are subsequen tly measured a t fair value . Net ga ins an d los ses , inc ludi ng any int er est or div ide nd in com e, ar e r ec ognis ed in p rof it or los s, un les s suc h ins trum ent is d esig nat ed in a hedging relationship ( see ( vi) below ) . Derecognition A f ina ncia l ass et is der ec og nise d when t he rig ht s to r e cei ve cas h f lows f ro m the as set h ave expir ed or w hen t he Gr ou p has tr ans ferr ed su bs ta ntia lly all t he ri sk s and r ewar ds r elat ing to t he as set t o a thi rd p ar t y. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 13 3 Notes to the f ina ncia l st atemen ts c ontinued 2 . 3 Summary of si gnificant acc ount ing po licies continued k . Financial ins trument s continued ii) Impairmen t of financial assets The exp ec te d cr edi t los s (ECL) imp airm ent mo del a ppl ies t o f ina ncia l ass et s mea sur ed at am or t ised c os t and d ebt invest ment s at F VOC I. The G ro up me asur es l oss al lowan ce s at an amo unt eq ual t o 12-mont h ECL s, exce pt for t he fo llowi ng, w hich a re m easu re d as life time ECL s: • Debt s ec urit ies t hat ar e det erm ined t o have hig h cr edi t risk at t he r ep or tin g dat e. • Ot her d ebt se cur itie s and b ank b alan ce s for whi ch cr ed it risk h as inc re ase d sign if ic antl y sin ce ini tia l re cog nit ion . • T r ad e re cei vabl es an d co ntr act a sset s t hat r esu lt fr om tr ansa ct ions w ithi n the s co pe of I FR S 15 . Whe n det ermi ning wh ethe r the c re dit ri sk of a f i nanc ial as set has in cr eas ed sig nif i cant ly si nce i niti al r eco gnit ion a nd wh en est imat ing ECL s, t he G ro up co nsid ers r ea son able a nd supp or t ab le info rmat ion t hat is r el evant and avai labl e wit hou t undu e cos t or ef for t . T his inc lude s bot h qua ntit at ive an d quali t ative i nform atio n and a naly sis , bas ed on t he G rou p’ s historical experienc e and informed credit assessm ent and including for ward-lo oking information . The G ro up co nsid ers a d ebt s ecur it y t o have low cr ed it ris k when i t s cr edit r isk r atin g is equi vale nt to t he de f init ion o f ‘invest men t gr ade’ . The G ro up co nsi ders t his t o be B BB - or high er as pe r cr edi t-rat ing sc ale s. Measurem ent of E CL s ECLs a re m easu re d as a pr ob abili t y-weig hte d es tima te of credit losses. Credit losses are measured as the probabilit y of def ault in c onju nct ion w ith t he pr es ent val ue of th e Gr oup’s expo sur e. Lo ss al lowan ces f or ECL s on f i nanc ial as set s meas ur ed at am or ti sed c os t ar e ded uct ed f ro m the g ro ss carr y ing amo unt of t he as set s , wit h a cor re spo ndi ng char ge to t he inc om e st at eme nt . For deb t ins trum ent s me asur ed at F VOC I , th e los s allowa nc e for de bt inves tme nt s at F VO CI is re cog nise d in pr of i t or lo ss an d re duc es th e fair va lue l oss , or incr ea ses t he fa ir valu e gain, o ther w ise r ec ognis ed in t he stat ement of other comprehensi ve income. iii) Financial liabilities Initial recogniti on and measu rement All f inanci al lia bili tie s are c las sif ied as f in anc ial li abili tie s at amortised cost on initial recognition e xcept for derivatives, whic h are c las sif ied at F V TPL , the gain s or lo sse s for wh ich are r ec ogn ise d thr oug h OC I if th e ins trum ent is d esig nat ed as a hed ging in str ume nt in an ef f ect ive c ash f l ow hedge . All f inanci al lia bili tie s are r ec ogn ise d initi all y at fair va lue an d, in the c ase o f loa ns and b orr owi ngs , net of di re ctl y attribut able tr ansaction c ost s. The G ro up’ s f in anci al liab ilit ies i nclu de tr ad e and ot her payables, loans and borr owings, derivative financial instrum ents and le ase liabilitie s. Subsequent measur ement Af ter initial rec ognition, inter est-bearing loans and bor row ings an d othe r payab les a re s ubse que ntly m eas ure d at amo r tis ed co st u sing th e EIR m eth od . Am or ti sed c os t is cal culat ed by t a king int o ac co unt any dis co unt or p re mium on acq uisi tio n and fe es or c os t s that a re a n inte gr al par t of the EIR . The EI R amo r tis atio n is inc lud ed in f i nanc e c ost s in t he inco me st ate ment . Derecognition A f ina ncia l liab ilit y is d er ec ognis ed wh en th e obl igatio n und er the li abil it y is dis cha rged , can cel led o r expir es . Whe n an exis ting f inanc ial li abili t y is r epl ace d by anot her f ro m the same lender on subst antially dif ferent terms , or the ter ms of an exi st ing liab ilit y a re s ubs ta ntia lly m odif ied , suc h an exchange o r mod if ic ati on is tr eat e d as a der ec ogni tio n of the o rigin al lia bili t y and t he r eco gnit ion o f a new lia bilit y . The dif f ere nc e in the r es pe cti ve car r ying am ount s is r ec ogn ised in the i nco me s t ate ment . iv ) Deriv atives Der ivati ves ar e me asur ed at f air val ue bo th ini tial ly an d subs equ entl y to in iti al re cog nit ion . Al l change s in fai r value of non- de sign ate d der ivat ives ar e r ec ognis ed in t he in com e st at eme nt imme diat el y. Changes in f air valu e of der ivat ives desi gnat ed a s cas h f low he dges ar e ini tial ly r eco gnis ed in O CI until s uch a p oint t hat t hey ar e re cycl ed t o pr of it o r los s in the s ame p eri od as t he he dged it em is r ec ogni sed i n pr of it o r los s, o r imme diat el y if the h edged i te m is no l onger exp ect ed to occu r . Der ivati ves ar e pr es ent ed as a sset s w hen t he fai r value s ar e pos iti ve and as l iabi liti es wh en th e fair va lues a re n egati ve. Aderi vati ve is pr es ente d as a no n- curr ent as set o r a non- cur re nt liab ilit y i f the r em aining m aturi t y of th e inst rum ent is m or e than 1 2 mo nths a nd it i s not exp ect ed tob e re alis ed or s et tl ed wi thin 1 2 mo nths . v) F air val ues The G ro up me asur es al l f ina ncia l ins trum ent s at f air valu e at eac h rep or t ing dat e, o the r than t hos e ins tru ment s m easu re d at amortised cost. Fair value is t he p ric e that wo uld b e re quir ed t o se ll an as set or to transfer a liabilit y in an orderly transa ction bet ween mark et par t icip ant s at th e me asur eme nt dat e. T he fa ir value measurement is based on the presu mption tha t the transac tion to sell the asset or transfer the liabilit y take s pla ce ei the r in the p rin cipa l mark et ac ces sib le by th e Gr oup for th e ass et or li abili t y or, in the abse nc e of a pri ncip al mark et , in th e mos t ad vant ageou s mark et ac ces sib le by th e Gr oup fo r the a sset o r liab ilit y. The f air valu es ar e quo te d mark et bid p ric es wh er e ther e is an ac tive m arket , o r ar e bas ed on va luati on t ech niqu es wh en ther e is n o act ive ma rket o r the in st rume nt s ar e unlis te d. Valuatio n te chniq ues in clu de th e use o f re cent a rm’ s leng th market transact ions, discount ed cash fl ow analysis and other commonly used val uation techniques. For ass et s and li abili tie s that a re r ec ogn ised i n the f inanc ial st at eme nts o n a re cur ring ba sis , the G ro up det erm ine s whether transfer s have occurred between levels in the hier ar chy by r eas ses sing c atego risat ion at t he en d of ea ch repor ting period . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 134 vi) Hedg e accountin g The G ro up de sign ate s cer tain d eri vative f inanc ial inst rum ent s as c ash f l ow hedge s of ce r ta in for ec ast transactions. These transactions are h ighly probable to oc cur an d pr ese nt an exp osur e t o varia tio ns in ca sh f lows that c oul d ult imat ely af fect a moun ts d et ermin ed in p rof it orloss. The G ro up has e lec te d to a dop t the gen er al hed ge acc oun ting mo de l in IFR S 9. Th is re quir es t he G rou p to ensur e th at he dge acc oun ting r elat ion ship s are a lign ed wi th it s risk m anage ment o bjec ti ves and s tr at eg y a nd t o appl y a qualitativ e and fo rward-looking approach to assessin g hedg e effectiveness. The G ro up us es for war d fo reig n exchange a nd co mmo dit y swap c ontr ac t s to h edge th e vari abili t y in ca sh f lows a risin g fr om ch anges in fo re ign cu rre ncy r at es and o il pri ce s re spe ct ivel y. F or fo reig n exchange c ont ra ct s , the G ro up desi gnat es t he fa ir valu e change o f the f ull for wa rd p ric e as the h edgi ng ins trum ent in c ash f l ow hed ging r elat ion ship s. For co mmo dit y h edgi ng, t he Gr ou p desi gnat es t he fa ir valu e change o f the b enc hmar k oil pr ice . Th e ef fe cti ve po r tio n of change s in fai r value of h edg ing ins tru ment s is a cc umula te d in a cas h f low h edge re ser ve as a s epa rat e c omp one nt of equi t y. Any inef fe ct ive p or ti on of th e fair v alue gai n or lo ss is recognised i mmediately wi thin the income statement. Whe n a hedg ing ins tr umen t no lo nger mee ts t he cr it eria f or hedge a cc ount ing (throu gh mat urit y , sal e, or o ther terminati on ), hedge accounting is discon tinued prospective ly. If th e hedge d for ec ast t ra nsa cti on is s till ex pe ct ed t o oc cur , the as so ciat ed c umul ative ga in or lo ss r emai ns in th e hedg ing re ser ve and i s re cog nise d in ac co rd anc e wit h the a bove pol icy wh en th e hedge d for ec ast t ra nsa cti on o ccu rs . If th e hedge d for ec ast t ra nsa cti on is no l onger exp ec te d to o cc ur , the c umula tive un re alis ed gain o r los s is re cog nis ed in th e income statement immediately . l. Lea ses The G ro up le ases v ario us rive r crui se shi ps , buil dings , equip men t and vehi cle s. T he c ontr ac t leng th of th e lea se varies considerabl y and may include e x tension or termination options as described below . At the i nce pti on of a c ontr ac t , the G r oup as ses ses w het her a con tr act is , or c ont ai ns, a l eas e. A c ontr ac t is , or c ont ains , a leas e if th e co ntr ac t conveys t he rig ht to c ont ro l the u se of a n ident if i ed as set fo r a per iod of t ime i n exchange for con sid erat ion . T o asses s whet her a c ont ra ct c onveys the right t o c ontr ol t he us e of an id enti f ie d ass et , the G ro up assesses whe ther: the con tract inv olves the use of an ident if i ed as set ; the G ro up has t he rig ht t o obt ain subs t anti ally a ll of th e ec ono mic b enef its f ro m use o f the ass et thr oug hou t the p eri od of us e and t he G ro up has t he right t o dir ec t the u se of t he as set . Lea ses ar e ini tia lly r ec ognis ed as a r ight- of-use ass et and a cor re sp ondi ng leas e lia bilit y at the dat e at wh ich t he le ase d ass et is availa ble fo r use by t he G ro up. Th e lea se lia bili t y is initial ly measured a t the presen t value of the lease payme nts that a re n ot paid a t the c omm enc eme nt dat e. W her e it i s re ason abl y cer tain t hat an ex t ens ion o ptio n will b e trig ger e d in a con tr act , l eas e paym ent s t o be ma de in r es pec t of th e opt ion will b e inc lude d in th e mea sur emen t of the l eas e liab ilit y. The l eas e paym ent s ar e dis cou nte d using t he int er es t ra te impli cit in t he le ase . If t hat r ate c ann ot be r ea dily d et ermin ed , whic h is gener all y th e cas e for le ase s in th e Gr oup, t he Gr oup’s increm ent al b orr owing r at e is us ed . This is t he r at e that t he G rou p would h ave to p ay to b orr ow th e fun ds nec ess ar y t o obt ain an a sse t of simi lar val ue t o the ri ght-o f - use as set , in a s imil ar ec ono mic env iro nme nt , wit h simil ar terms, sec urity and con ditions. Lease payment s are allocated b etween principal and f inance cos t . Th e f in anc e cos t is c harged t o th e inc om e st at eme nt over the l eas e per iod u sing t he EIR m eth od an d the l eas e liabi lit y is m eas ure d at amo r tis ed c os t using t he EI R met hod . Righ t-of-use ass et s ar e init iall y mea sur ed at c os t , co mpri sing the p re sent va lue of f ut ure l eas e paym ent s plu s any init ial dir ect c os t s and r es to rat ion c os t s. R ight- of-use ass et s ar e depr e ciat ed over t he le ase t erm o n a st raig ht-lin e bas is except fo r the G ro up’ s rive r crui se shi ps . The u nit of pr odu cti on met ho d is use d to d epr ec iat e rive r cruis e shi ps in or der t o ac cur ate ly r ef le ct th e usage o f the as set , w hich i s seasonal. Payme nt s asso ci ate d wit h sho r t-term l eas es of e quip ment and all l eas es of l ow-value a sset s a re exp ens ed in p rof it or los s as inc urr ed in lin e wit h the exemp tio n allowe d und er par agr ap h 6 of IF RS 1 6. S hor t-term le ase s are l eas es wi th a leas e te rm of 1 2 mon ths or l es s wit hout a p ur cha se opt ion . Low-valu e ass et s co mpri se IT e quip ment a nd sm all it ems o f of f ice fur niture . E x te nsio n and t erm inati on op tion s ar e incl ude d in a numb er of pr ope r t y and r iver c ruis e ship l ease s acr os s th e Gr oup. T hes e are u sed t o ma xim ise o per ati onal f lexibili t y in t erms o f manag ing th e ass et s use d in th e Gr oup’s oper atio ns . The majorit y of extension and termination optio ns held are exercis abl e onl y by the G r oup an d not by th e re sp ect ive le sso r . The G ro up r emea sur es th e le ase li abili t y (and makes a cor re sp ondi ng adju stm ent t o th e rel ate d rig ht-of-use as set) whenever: • the l eas e ter m has c hanged o r the re is a s igni f ic ant event or ch ange in cir cum st an ces r es ult ing in a ch ange in th e ass ess ment of exer cis e of a pur ch ase o ptio n, i n whic h cas e the l eas e liab ilit y is r em easu re d by disc oun ting t he r evise d leas e pay ment s us ing a r evise d dis cou nt rat e; or • a leas e co ntr ac t is mo dif i ed an d the l eas e mod if ic atio n is not ac co unt ed fo r as a sep ar ate l eas e, in wh ich c ase t he leas e liab ilit y i s re meas ur ed ba sed o n the l eas e te rm of th e modified lease by discounti ng the revised lease payments using a r evis ed di sco unt r ate at t he ef fect ive dat e of t he modif ication. m. B orrowing co st s Bor row ing co st s dir e ctl y at tri but ab le t o the a cqu isit ion , construction or production of a n asset t hat necessarily takes a subs t anti al pe rio d of tim e to get r ea dy fo r it s int end ed us e or sa le ar e cap it alis ed as p ar t of t he co st o f the r es pec ti ve ass et . All o ther b or row ing co st s ar e exp ense d in th e per iod i n whic h they o cc ur . Bor row ing co st s c ons ist of i nte re st an d fee s that a n enti t y incur s in c onne ct ion wi th t he bo rr owing of f und s. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 135 Notes to the f ina ncia l st atemen ts c ontinued 2 . 3 Summary of si gnificant acc ount ing po licies continued n. Cash and short-term deposits Cas h and sh or t-t erm de pos it s in th e st at eme nt of f in anc ial pos iti on co mpr ise c ash at b ank an d in han d, an d sho r t-ter m dep osi ts w ith a m atur it y of t hre e mo nths o r les s fr om th eir inceptio n date. For the p urp ose o f the c ons olid ate d st at em ent of c ash f lo ws, cash and cash equivalents co nsist of cash, shor t-term dep osi ts a s def i ned ab ove and s hor t-term hig hly li quid invest ment s ( inc luding m on ey marke t fun ds) with orig inal matu riti es of t hre e mo nths o r les s that a re su bje ct t o an insig nif i cant r isk of c hange in va lue, n et of ou t st an ding bankoverdraft s . o. T rust ac count s All c ust om er mo nies r ec eive d in ad vanc e in r elat ion t o Ai r T r avel Organ iser’s Licence (A TOL) licensable bo okings are held i n tru st ac co unt s unt il af t er th e cus t omer h as tr avelle d, when t he G ro up has f ulf i lled a ll it s p er for manc e ob ligati ons with customers. The t rus t arr angem ent is govern ed by a de ed b et ween t he Gr oup, t he Ci vil Av iati on Aut hor it y A ir T ravel T ru st ee s and an inde pen dent T rust ee , P T T r ust ee s Lim it ed, w hich d et ermin es the inf lows and o ut f lows f ro m the a cc ount s . Th e Gr oup d oe s not us e adv anc e re cei pt s fr om cu st ome rs in it s T our Op er atio ns bus ines s to f und i t s bus ines s op er atio ns. p. T rade and other receiv ables T r ad e and ot her r ec eiva ble s ar e init iall y re cog nise d at fair value and subseq uently meas ured at a mortised cost . Loss allowa nce s ar e mea sur ed as li feti me ECL s . q. Inventorie s Invent orie s ar e st at ed at t he lowe r of co st an d net r eal isab le value . Co st s in clud e all c os ts i ncur re d in bri nging e ach p ro duc t to its present location and condition. Net reali sable value i s bas ed on e sti mat ed se lling p ric e les s any fur t her c os t s expe ct ed t o be in curr ed p rio r to c omp leti on an d disp os al. r . Insurance c ontr act liabilit ies Insuran ce cont ract liab ilities inclu de an outs t anding claims pr ovisi on , a pr ovisi on for u nea rned p re miums a nd, i f re quir ed , a pr ovisi on for p r emium d ef ici ency. Outs tanding claims provision The p rov isio n for o ut st an ding cl aims is s et on a n indi vidu al claim b asi s and is b ase d on th e ult imat e co st of a ll cla ims noti f ie d but n ot set t led , le ss amo unt s alr ea dy pa id by th e rep or t ing dat e, t oget her wi th a pr ovi sion f or r elat ed c laim s handling cost s. The provision also includes the estimated cos t of cl aims in cur re d but n ot re por ted at t he s ta tem ent of f ina ncia l pos iti on dat e, w hich i s es tima te d using a ctu aria l meth ods . T he ou ts t and ing cla ims pr ovi sion i s not dis co unt ed for th e tim e value o f mon ey, with th e excepti on of c laims sett led as periodical payment orders (PP Os ). The am ount o f any anti cipa te d rei nsur anc e, s alva ge or subrogation rec overies is separately identif ied and repor t ed within reins uranc e asset s and insuranc e contr act liabili ties respectively . Dif fere nc es bet we en th e pr ovis ions a t the r ep or ti ng dat e and set tl eme nt s and p rov isio ns in th e foll owing ye ar (kn own as run- of f deviations ) are r ec ogn ise d in the i nco me s t ate ment as they arise. Provision for unearned premiums The p rov isio n for un ear ned p rem iums r epr es ent s th e po r tio n of pr emium s re cei ved o r re cei vabl e that r el ate s to r isk s that have not yet exp ir ed at th e re por ting dat e. T he pr ovi sion i s re cog nise d whe n con tr act s ar e ent er ed in to an d pr emium s are c harge d, an d is r ec ognis ed in t he inc om e st at eme nt as pr emium in co me over t he t erm of t he co ntr ac t on a s tr aight- line basis . Provision for premium deficiency At eac h re po r ting d ate , the G ro up r eviews it s u nexpir e d risk s and a li abili t y ade qua cy t est i s per f orm ed to d et ermin e whet her t her e is any over all exce ss of ex pec te d cla ims an d deferred acquisitio n cost s over unearned premiums. This cal culat ion u ses c urr ent es tim at es of f utur e c ontr ac tu al cas h f lows af ter t aki ng ac cou nt of th e invest ment r et urn exp ect ed to ar ise o n asse ts r el ating t o th e re levant in sur anc e te chni cal pr ovisi ons . If t hes e es tim ate s show t hat t he car r ying am ount of the u nearned premiums (less related de ferred acquisition cos t s) is inadeq uat e, th e def i cien cy is r ec ogni sed in t he inc ome s t ate ment by s et ting u p a pr ovisi on fo r pr emium def i cien cy. The defe rr ed ac quis iti on co st s ar e wr it t en of f befo re a ny prov isi on is ma de . s. R einsur ance as set s Co ntr act s en ter ed i nto by t he G ro up wit h re insur er s unde r whic h the G ro up is c omp ens ate d for l oss es on in sur anc e con tr act s is sue d, ar e cl ass if ie d as r eins ura nce c ont ra ct s . Acon tr act is o nly a cc ount ed f or as a r eins ura nc e cont r act where ther e is significant insuran ce risk transfer bet ween theinsurer and reinsurer . Reins ur anc e ass et s incl ude b alan ce s due f ro m rei nsur anc e companies for ceded insurance liabilities under ex cess of loss cover. Amount s r ec overa ble f ro m re insur er s ar e est imat ed i n a con sis te nt mann er wi th th e out s t andin g claim s pr ovis ions in ac cor da nc e wit h the r eleva nt re insur an ce c ontr ac t . The G ro up ass es ses i ts r ein sur anc e ass et s for i mpair ment at eac h st at eme nt of f in anci al po sit ion d ate . For as set s th at ar e dir ect ly exp ose d to l ong-tai l PPO li abil iti es , a gener al pr ovisi on for i mpai rment i s pr ovid ed , cal culat ed o n a wholesale basis by reference to published credit rati ng defau lt cur ve s. For a ll oth er re insur an ce as set s , th e carr y ing value i s writ t en d own t o it s re cover ab le am ount on ly if t her e is objectiv e e vidence of i mpairmen t. For the f und s-wit hhel d quot a s har e agr eem ent in m oto r insur an ce, t he o bligat ion t o pay f unds a nd th e right t o r ec eive rei mbur sem ent fo r incur re d cla ims ar e pr es ent ed on a n et basi s bec aus e the re i s a legall y enfo rc eab le rig ht to o f fs et the se am ount s an d the re is a n inte ntio n to s et tl e on a net basi s or r ealis e bo th th e ass et and s et tle t he li abili t y simul t aneo usl y. The rei nsur anc e as set s r ec ognis ed un der the se agr ee ment s a re t her efor e r ec ognis ed as a n of f set agains t pr emium c ed ed un der t he sa me agr ee ment , w ithi n trade and other payables. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 136 t. Share-bas ed pa yme nts The G ro up pr ovi des b enef it s to em ploye es (i nclu ding Executive Directors ) in the form of share-based payment transac tions, wher eby employees render servic es as consideration for equ it y instruments ( e quity-settled transactions ) . The cost of equi t y-se ttled transactions is meas ur ed by r efer enc e t o the f air valu e on th e gr ant d ate an d is re cog nise d as an exp ens e over th e re levant ves tin g per iod , endin g on th e dat e on whi ch th e emp loyee b ec ome s full y enti tle d to t he awar d. Fair v alues of share-based payment tr ansactions ar e calculated using Black -Scholes and Monte-Carlo modellin g techniques. In valu ing equity-settled transactions, ass ess ment is m ade o f any ves ting c ond iti ons t o cat egori se these into market per formance co nditions, non-market per formance con ditions and serv ice conditions . Where the equit y-set tled transa ctions have market per f orma nc e con dit ions (that i s, p er fo rman ce wh ich is d ire ct ly or ind ire ct ly link ed t o the s har e pr ice), the fair val ue of th e awar d is ass ess ed at t he tim e of gr ant a nd is no t chan ged, r egar dl ess of the a ct ual leve l of ves ting ac hieved , excep t wher e th e empl oyee c eas es t o be em ploye d prio r to t he ves tin g dat e. For service con ditions and non-market per formance con dit ions , th e fair v alue of t he awar d is as se sse d at the t ime of gr ant an d is r eass es sed at e ach r ep or t ing dat e t o ref l ect upd ate d expe ct ati ons fo r the l evel of ves ting . N o expe nse is re cog nise d for awar ds t hat ul tima tel y do no t vest . At eac h re po r ting d ate p rior t o ves tin g, t he cum ulat ive expen se is c alc ulat ed , re pr ese nting t he ex t ent to w hic h the vest ing p erio d has exp ire d and , in th e cas e of no n-ma rket con dit ions , th e be st e sti mat e of th e numb er of e quit y inst rum ent s th at will ul tim ate ly ves t or, in the cas e of inst rum ent s sub jec t to m arket c on diti ons , th e fair va lue on gr ant ad just ed o nly f or le avers . The m oveme nt in th e cumul ati ve expen se sin ce t he pr evi ous r ep or ti ng dat e is re cog nise d in th e inc ome s t ate ment , w ith t he c orr esp on ding increase in share-based payments reserve. Upo n ves ting of a n equi t y ins tru ment , t he cum ulat ive co st in the s har e-b ase d paym ent s r eser ve is r ec las sif ied to r et ain ed earni ngs in eq uit y. The di lut ive ef f ect of o ut s ta nding o ptio ns is r ef le ct ed as additional share dil ution in the computation of diluted (loss ) / earnings per share. u. Retirement benef it schemes Duri ng the ye ar , the G r oup op er ate d a def ined b enef it pen sion p lan t hat r equi re s co ntrib uti ons t o be m ade t o sep arat el y admi nist er ed f und s. T he c ost o f pr ovid ing ben ef i ts unde r the d ef in ed be nef i t pla n is det erm ined s epa rat el y using the projected unit credit valua tion method. Act uari al gain s and lo sse s aris ing in th e year a re c re dit ed/ char ged to O C I and c omp rise t he ef f ect s o f change s in actuarial assumptions and experience adjus tments due to dif ferenc es between the pr evious actuarial assumptions and what h as ac tual ly o ccu rre d. I n par t icul ar , th e dif f ere nc e bet we en th e inte re st in co me and t he a ctu al r eturn o n pla n ass et s is re cog nise d in OC I . Ot her m ovemen ts i n the n et surp lus o r def i cit , wh ich in clud e the c urr ent se rv ic e cos t , any pa st s er vic e co st a nd th e ef fe ct of any cur t ai lment o r set t lem ent s, a re r ec ogni sed i n the inc ome s t ate ment . Pa st s er vic e co st s ar e r ec ognis ed in t he inc ome s t ate ment o n the e arli er of th e dat e of pl an cur t ailm ent an d the d ate t hat t he Gr ou p re cog nise s re str uc turin g-relat ed c os t s. T he int er es t co st , l ess in ter es t inc ome o n ass et s held i n the p lans , is a lso ch arged t o th e inco me st ate ment . The d ef ine d be nef i t sch eme s ar e fun ded , wit h ass et s of th e sch eme s held s epa rat el y fr om th ose o f the G ro up, in separat e T rust ee-administer ed funds . Scheme asset s are measured using market values and scheme liabilities are meas ur ed usi ng the p ro jec te d unit a ctu aria l met hod a nd ar e disc ount ed a t the cu rr ent r ate of r et urn on a hi gh- qual it y cor po rat e bo nd of e quiva lent t erm a nd cur re ncy t o the liabi lit y. Full actu arial v aluat ion s are o bt aine d at le ast trie nnial ly an d are u pda te d at eac h re por ting dat e. T he re sult ing def ined b enef it ass et or lia bili t y is pr es ent ed sep arat el y on th e fa ce of t he s tat em ent of f inanci al p osit ion . The va lue of a p ens ion b enef it ass et is re st ric te d to t he amou nt that m ay be r ec over ed , eith er th ro ugh r edu ce d contributions, or agreed refunds from the scheme. For de f ined contribution schemes, the amounts charged tot he inc om e st at eme nt ar e the c ont ribu tio ns payab le in theye ar . v . Provisions Prov isio ns ar e r eco gnis ed wh en th e Gr oup ha s a pr ese nt obliga tio n (legal o r co nst ru cti ve ) as a r esul t of a pas t event , and it i s pr oba ble t hat an o ut f low of r es our ce s emb od ying eco nom ic be nef i t s will b e re quir ed t o set t le t he ob ligati on and a r elia ble e st imat e can b e ma de of t he am ount of t he obliga tio n. T he exp ense r el ating t o any pr ovi sion i s pr ese nte d in the i nco me s t ate ment n et of any r eimb urs ement . If the ef fe ct of t he tim e valu e of mon ey is mat eri al, p rov isio ns ar e disc ount ed u sing a cu rr ent pr e-t ax r at e that r ef le ct s t he risk s sp eci f ic t o th e liab ilit y. Whe re di sc ount ing is us ed, t he incr ea se in t he pr ovis ion du e to t he p ass age of tim e is re cog nise d as a f in anc e co st . A pr ovisi on is r ec ogni sed fo r one ro us co ntr ac t s in whic h the unavoid abl e cos t s of me eting t he ob ligat ions u nder t he contract ex ceed the economic bene f its expected to be re cei ved un der it . T he un avoidab le c os ts r ef l ect t he le as t net cos t of exi ting t he co ntr ac t , whic h is th e lower of t he c os t of fulf illing it a nd any c omp ens atio n or p enal tie s arisi ng fr om failure t o fulf il it . w . T rade and other pa yables T r ad e and ot her p ayabl es ar e init iall y re cog nis ed at fa ir value and sub sequently mea sured at amortised cost . They rep re sen t liabi liti es t o pay for go ods o r ser v ice s tha t have bee n re cei ved or s upp lied i n the n orm al co urs e of bus ines s, invoice d by th e supp lier b efo re t he year e nd , but fo r whic h paym ent has n ot yet b een m ade . x. Equit y The G ro up has o rd inar y sh ar es th at ar e clas sif ied as e quit y. Increment al ext ernal cost s that are directl y attribut able to the is sue o f the se sh ar es ar e re cog nis ed in eq uit y, net of t ax . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 137 Notes to the f ina ncia l st atemen ts c ontinued 2 . 4 St andards issu ed but not yet e f fe c t i ve The fo llow ing is a lis t of s ta nda rd s and am endm ent s t o st an dar ds th at ar e in iss ue bu t are n ot ef f ect ive or a dop te d as at 3 1 Jan uar y 20 22 . E xc ept wh er e sep arat el y disc los ed , the se s ta ndar ds a re yet t o b e endo rs ed by th e UK Endorsemen t Board. a. I FRS 17 ‘ In suran ce Co ntra ct s’ IFR S 17 i s a com pr ehe nsive n ew ac cou nting s t and ard t hat applies to all insurance and reinsur ance contr act s covering the p rinc iple s of r ec ognit ion a nd me asur em ent , f in anc ial st at eme nt pr ese nt atio n and dis cl osur e. I t was is sue d in May20 1 7 and e st abl ishe s a pri ncip les- bas ed ac co unting app ro ach fo r insu ran ce c ont ra ct s th at will r ep lac e IF RS 4 ‘I nsur an ce C ont ra ct s’ . ‘ Amen dmen ts t o I FRS 1 7 ’ wa s issu ed inJun e 202 0 and am end s IFR S 17 t o ad dr ess c on cern s and implementation challe nges tha t were identified aft er IFRS 17 ‘Insurance Contracts’ was pu blished. The standard is ef fe cti ve for an nual r ep or t ing pe riod s beg innin g on or af ter 1Janu ar y 202 3, s o it b ec ome s ef fe cti ve for t he Gr ou p fr om 1Febru ar y 202 3. I t is exp ect ed t o have a m ater ial im pac t onth e Gr oup’s fin anci al st at em ent s as it r ep re sent s a signif icant change to current insurance and reinsuranc e acco unting requir ement s. The G ro up has b ee n unde r t aking a m ulti-ye ar pr oje ct t o pr epar e fo r the a dopt ion o f the n ew st an dar d and h as now largel y co nclu ded t he t ec hnic al ana lysis r eq uir ed t o app rai se the im pac t tha t this w ill have on t he Gr ou p’ s f inan cia l st at eme nts . A s a gener al in sur er onl y, the Gr oup is ex pe ctin g to be ab le t o app ly th e simp lif i ed pr em ium allo ca tion a ppr oa ch per mit t ed by th e st an dar d , inst ea d of th e mor e c omp lex general measurement model . As such, the re cognition and meas ur emen t of pr emium i nco me is ex pec te d to r em ain la rgely unch anged f ro m curr ent a cc ount ing. T he o nly p ote ntia l signi f ic ant ch ange to e arni ngs tha t is expe ct ed is t he ne ed t o acc el erat e any an tici pat ed f utur e lo ss es fr om un expir ed r isk s from the new onerous contract assessment required under the new st an dar d , alth oug h the G ro up do es not a ntic ipat e th at ther e wi ll be t he ne ed t o re cog nise a ny signi f ic ant level o f suc h onerous contract losses. The r ec ogni tio n and m eas ure ment of i nsur anc e c ontr ac t liabi lit ies in r ela tion t o c overa ge prov ide d bef or e the st at eme nt of f in anci al po sit ion d ate , now r efer re d to as t he liabilit y for incurr ed claims , is likely to change signif icant ly unde r the n ew st an dar d. T he G ro up expe ct s t o mor e cl ose ly align i t s mea sur emen t of thea ct uari al be st e st imat e of cl aims liabi lit ies fo r f ina ncia l re por ting to t he p rinc iple s of So lven cy II , wi th a ch ange to t heap plic ati on of dis co unti ng and th e deri vatio n of an ap pr op riat e dis cou nt rat e in lin e wit h th e re quir eme nt s of the n ew st an dar d . The d eriv atio n of the re ser ve mar gin h eld fo r unc er t aint y a bove th e act uar ial b es t est imat e, n ow re ferr ed t o as th e ris k adju stm ent , wi ll also change , and w ill be b ase d on se lec ting a n app ro pria te conf iden ce int er val u sing t he exp ect ed l oss d ist ribu tio n for outst anding claims. The G ro up is s till as se ssing w het her t o exerci se th e opt ion toexp ens e ac quisi tio n co st s imm edi ate ly an d the o ptio n to re cog nise d isc ount r at e moveme nt s thr oug h OC I . The G r oup inte nds t o f in alis e it s view o f the se, a nd th e app ro ach t o all o f the key ju dgeme nt s and es ti mat es , towa rd s the en d of th e calendar year 2022 . The s t and ard i s also ex pec te d to h ave a signi f ic ant imp ac t onth e pr ese nt atio n of the G r oup’s fina nci al st at eme nt s, particularly the Group’ s income statement, where the des cript ion o f line i tem s will c hange, a nd th e re cog nit ion of cer t ai n tr ansa ct ions w ill b e ref l ect ed w ith in dif f er ent lin e it ems to t he on es th ey are n ow. The s t anda rd w ill als o re quir e new, andch anges t o exis ting , dis clo sur e not es in r el atio n to insurance and reinsur ance contr act s. b. Clas sif icat ion of liab ilities a s current o r non- c urrent ( amen dment s to I AS 1) The am end ment s aim t o p rom ot e co nsis te ncy in a ppl ying t he requirem ents by helping companies determine whether , in the st at eme nt of f in anci al po sit ion , deb t and ot her li abili tie s wit h an unc er t ain se t tle ment d ate s houl d be c las sif i ed as c urr ent (due or po ten tial ly due t o b e set t led wi thin o ne yea r ) or no n-c urr ent . The amendments ar e effe ctive for annual periods beginning on or af t er 1 J anua ry 2 023 a nd ar e not li kely t o have a ma ter ial ef fe ct on t he Gr ou p’ s f inan cia l st at eme nt s. c. Re fere nce t o the C oncep tual Framework ( amendment s t o IFR S 3) The am end ment s up dat e an ou td at ed r efer enc e t o the Co nce ptu al Framewo rk in I FRS 3 w ith out s ignif icant ly chang ing th e re quir em ent s in th e st an dar d. T he am end ment is ef fe cti ve for a nnua l rep or t ing pe rio ds be ginni ng on or af ter 1 January 2 022 and apply prospectively . The ame ndment w ill have no ef f ect o n the G r oup’s fina nci al st at eme nt s. d. Pro per t y, plant and equipm ent – pro ceed s befo re intend ed use (amendment s to IA S 16) The am end ment s p ro hibit d edu cti ng fr om th e co st of a n it em of pr op er t y, plant an d equ ipme nt , any pr oc ee ds fr om s elling it ems pr od uc ed whi le bri nging t hat as set t o th e loc ati on andc ond itio n nec es sar y fo r it t o be c apab le of o per at ing inthe m ann er int end ed by man ageme nt . Ins te ad , an ent it y re cog nise s the p ro ce eds f ro m sel ling su ch it ems , an d thec os t of pr od ucing t hos e it ems , in pr of it or lo ss . The amendments ar e effec tive for annual repor ting periods beg inning o n or af t er 1 J anua r y 202 2 . The a men dment s aren ot exp ect ed t o have a ma ter ial im pac t on th e Gr oup’s f inancial st atement s. e. On erou s contr act s – c ost o f fulf illing a c ontra ct ( amendment s t o IAS 3 7 ) The am end ment s s pec if y t hat t he “cos t of f ulf il ling ” a contract comprises the “ costs that relate di rectly to the con tr act ” . Co st s th at r elat e dir ec tly t o a c ontr ac t can e ith er be in cr emen ta l cos t s of f ulf il ling th at co ntr act (example s would b e dir ec t lab our an d mat eri als) or an allo cat ion of o ther cos t s th at rel at e dir ect ly t o ful f illi ng con tr act s (an example would b e th e allo cat ion o f the d epr eci atio n cha rge for an it emof pr op er t y, plant a nd eq uipm ent us ed in f ulf i lling thec ont ra ct). The amen dmen ts a re ef fect ive fo r annu al rep or t ing p erio ds be ginn ing on or af ter 1 J anu ar y 202 2 . Theam end ment s ar e no t expe ct ed t o have a mat eri al impa cton t he G ro up’ s f ina ncia l st at eme nt s. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 138 f. Annual impr ovements t o IFR S 20 18 -20 20 Mak es min or am endm ent s to t he fo llow ing st an dar ds: I FR S 1, IFR S 9, I FRS 1 6 and I AS 41. T he am endm ent s ar e ef f ect ive fo r annual repor ting periods beg inning on or a f ter 1 Januar y 202 2 . The a men dmen ts w ill have no e f fec t on t he Gr oup’s f inancial st atement s. g. Di sclos ure of a ccou nting polic ies ( amendm ent s to IAS 1 and I FRS Pr act ice S tat ement 2) The am end ment s r equ ire t hat an e ntit y discl ose s it s mat eri al acc oun ting p olic ies , ins te ad of i t s signi f ic ant ac co unti ng pol icie s. Fur th er am endm ent s expl ain how a n enti t y can ident if y a mate rial a cc ount ing po licy. The a mend ment s ar e ef fe cti ve for an nual r ep or t ing pe riod s beg innin g on or af ter 1Janu ar y 202 3 . The am end ment s ar e no t expe ct ed t o have amat eria l impa ct on t he G ro up’ s f ina nci al st at eme nt s. h. Definition of accoun ting estima tes ( amendme nts to IAS 8) The am end ment s r epl ac e the d ef ini tio n of a ch ange in acc oun ting es ti mat es wi th a def initi on of ac co unti ng estimates. Under the new def inition, accounting estimates are “m onet ar y am ount s in f inanc ial s t ate ment s t hat ar e subject to measur ement uncer taint y”. The amendment s clar if y t hat a ch ange in ac c ounti ng es tima te t hat r esul t s fr om new info rmat ion or n ew devel opm ent s is not t he c orr ec tio n of an error . The amendments are ef fective for annual rep or t ing p erio ds be ginn ing on or af ter 1 J anu ar y 202 3. T he amen dmen ts a re n ot exp ect ed t o have a mat er ial imp ac t on the Group’ s f inancial stat ements . i. COVI D -19 - rel ated r ent co nces sions b eyond 30Jun e 202 1 ( amendm ent to I FRS 1 6) The am end ment ex t end s, by o ne yea r , the M ay 202 0 amendment tha t provides lessees with a n ex emption from ass ess ing whet her a C OVI D -19-r el ate d re nt co nc ess ion is a lease modification. The amendmen t is e f fective f or annua l rep or t ing p erio ds be ginn ing on or af ter 1 A pr il 202 1 . T he amen dmen t has b een en dor se d by the U K End ors eme nt Boa rd . Th e Gr oup d oes n ot int end t o t ake a dvant age of t he exemp tion available under this amendment. The amendment will have n o ef fe ct on t he G rou p’ s f inan cia l st at eme nt s. j. Def erre d ta x relat ed to a sset s and li abilitie s arising fro m a single t rans act ion ( amendm ent s toIAS 1 2) The am end ment s c lari f y th at th e initi al r ec ogni tion exemptio n doe s not ap pl y to t ran sa cti ons in w hich e qual amounts of deductibl e and taxable temp orar y dif ference s aris e on init ial r ec ogn itio n. T hey wi ll t ypi call y app ly t o tr ansa ct ions s uch a s leas es of l ess ees a nd wil l re quir e th e recognition of additional deferred tax assets and liabil ities. The amendments ar e effe ctive for annual repor ting periods beg inning o n or af t er 1 J anua r y 2023 . T he am endm ent s ar e not exp ect ed t o have a m ate rial im pac t on th e Gr oup’s f inancial st atement s. 2 . 5 First time adop tion of ne w st andar ds and am endment s The G ro up has a dop te d ‘I nt ere st r at e ben chm ark r efor m – phas e 2 (amendme nt s to I FR S 9, IAS 3 9, I FR S 7 , IFR S 4 and IFR S 16)’ duri ng the ye ar . The se am endm ent s , issu ed in Augu st 20 20, int ro duc e a pr ac tic al exp edie nt for mod if ic ati ons r equ ire d by the r efo rm, c lar if y t hat he dge acc oun ting is n ot dis cont inu ed so lely b ec aus e of th e inte r- bank o f fer ed r at e (I BOR ) refo rm , and int ro duc e dis clo sur es that a llow us ers t o und ers t and t he na tur e and ex t ent of r isk s arisi ng fr om th e IB OR r efor m to wh ich t he ent it y is exp os ed, how th e enti t y man ages th ose r isk s, t he ent it y ’s prog re ss in transitio ning from IBOR s to alternative benchmark r ates and how th e enti t y is man aging t his t ran sit ion . Th e amen dmen ts are ef fec tive fo r annu al r epo r ting p eri ods b egi nning on o r af t er 1 Ja nuar y 20 2 1 . In th e UK , the L ond on Int erb ank O f f er ed R ate ( LI BO R) was rep lac ed by t he S t erling O vern ight I ndex Aver age (SON IA) fr om th e end of 2 02 1 . SO N IA is b ase d on ac tua l tr ans act ions and r ef le ct s th e average of t he int er es t ra tes t hat b ank s pay to b orr ow p ound s st erli ng overnig ht fr om ot her f i nanc ial institutions and other institutional inv estors. The amen dmen ts h ave not ha d a mat eri al imp act o n the G ro up’ s f inancial st atement s. Subs equ ent t o the se am endm ent s b eing ad opt ed: ( a) int er es t payab le on t he Gr ou p’ s RCF , if draw n down , is incur re d at a vari abl e rat e of S ON IA pl us a ba nk marg in whic h is linke d to t he G ro up’ s lever age rat io (N ot e 30); (b) inte re st p ayable o n th e Gr oup’s cruise sh ip debt d efer ral s is incu rr ed at a vari abl e rat e of S ON IA p lus a ba nk mar gin (No te 3 0); and ( c ) inte re st r etur n on f lo ating r at e inves tme nt s hel d by the Group’s insura nce under writing bu siness is linked to SO NI A (No te 1 9). The a dopt ion o f the se am endm ent s has h ad no i mpa ct on t he Gr oup’s hedge acc ount ing . In ad diti on , no ad diti ona l risk s have aris en fr om t he IB OR r efo rm whic h the G r oup wou ld be exposed to. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 139 Notes to the f ina ncia l st atemen ts c ontinued 2 .6 Significant accou ntin g jud ge ments, es tima tes and assum ptions The p re par ati on of f in anc ial s t atem ent s r equi re s the G ro up t o sele ct a cc ount ing po lici es an d make e st imat es an d assu mpti ons t hat af f ect i te ms re po r te d in the p rim ar y co nsol idat ed f inanc ial s ta tem ent s an d Not es t o th e con soli dat ed f inancial st atement s. The m ajor a re as of jud gement u sed a s par t of a cc ount ing p olic y appl icat ion a re su mmar ise d bel ow: Signif icant ju dgements Acc. policy It ems involving judgement Critical accounting judgement 2.3a Rev enue recognition – identif ication of per formance obligations wit hin insu ran ce c ont ra ct s not un der wri t te n by the Group Ide ntif icat ion of p er fo rman ce o bligat ions w ith in insu ran ce c ont ra ct s wi th custom ers. In par ticular , management has e xercised judgement in defining sep arat e p er for man ce ob ligat ions a s par t of t he G ro up’ s insur an ce b ro king servi ces, namely : • the o ptio n to f ix the c us tom er’s pr emium at r en ewal for t hr ee-ye ar f ixe d- pric e ins ura nce p ol icie s, w hich r es ult s in th e defe rr al of a po r ti on of r evenue fr om po licy ye ars o ne an d t wo to p oli cy year s t wo and t hr ee; and • the ar ra ngement o f eac h insur an ce p olic y at the p oint t he in sur anc e cover i s arr anged , as se par ate f r om th e pr emium c harge d in re sp ect o f the in sur anc e cover, which oc cur s on , or be for e, th e cover s t ar t d ate of e ach p ol icy an d re sult s in a p or t ion of r evenu e bei ng re cog nise d a numb er of d ays in ad vanc e of the c over s t ar t dat e. Plea se r efer t o No te 2 . 3a fo r fur ther inf orma tion o n th e Gr oup’s per form anc e obligation s relating to re venue recognition. 2. 3 ai, 2 . 3r and 2 . 3s Classif ication of insurance contracts Man agemen t has exerc ise d judgem ent in de f ining w hich in sur anc e po lici es th at it arr anges a nd und er wri te s con st itu te a n insur an ce p olic y that i s subje ct t o the a cc ount ing pri ncip les o f IFR S 4 . This a sse ssm ent is b ase d on wh ethe r signif icant insurance risk is transferr ed under each insuranc e contract and also incl ude s the as se ssm ent of r eins ura nc e con tr act s t hat th e Gr oup en ter s int o. Polici es th at ar e arr anged , and n ot und er wri t ten , by th e Gr oup, p rima rily a por tion of t he mo to r and ho me in sur anc e pan els , pri vate m edi cal in sur anc e and tr avel insur an ce, a re n ot de emed t o c ons tit ut e insu ran ce p oli cie s as def i ned by IFR S 4 , and so t hey ar e ac co unt ed for i n line w ith t he pr incip les o f IFR S 15 . Polici es th at ar e bot h arr anged a nd und er wri t ten by t he G ro up, pri mari ly a por tion of t he mo to r and ho me in sur anc e pan els , ar e dee med t o co ns tit ut e insur an ce p olic ies as d ef in ed by I FRS 4 a nd so ar e a cc ount ed fo r in line w ith t he requirem ents of that stan dard. The G ro up’ s exces s of los s and f und s-wit hhel d quot a s har e re insur an ce arr angeme nt s rel ating t o it s m oto r und er writ ing lin e of bus ine ss ar e dee med tot ran sfe r signi f ic ant ins ur anc e risk t o th e re insur er, and so they ar e al so acc oun te d for in li ne wit h th e re quir eme nt s of IF RS 4 . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 140 Acc. policy It ems involving judgement Critical accounting judgement 2.3h Im pairm ent t es ting of good will an d oth er maj or classes o f assets Followi ng the c ont inue d imp act of t he C OVI D -19 pand emic o n the G ro up’ s ope rat ion s, p ar ti cula rly in T ravel, m anagem ent c onc lud ed th at indi cat or s of impai rmen t exist a nd c ondu ct ed im pairm ent r eviews at 3 1 J anu ar y 202 2 , 31J uly 2 02 1 an d 3 1 Jan uar y 20 2 1 of th e Gr oup’s two cru ise sh ips , Sp irit of Dis cover y an d Spi rit of A dvent ur e. M anagem ent has c on side re d a ra nge of sce nari os an d use d it s judgem ent t o co nclu de th at no im pair ment wa s nec ess ar y. Pleas e ref er t o Not e 17a for fur th er det ai l. Give n the d elay in t ak ing del iver y of th e rive r crui se shi p, Spi rit of t he R hine , along w ith t he o ngoing ad vers e impa ct s of th e COV ID -19 pa ndem ic on t he wide r tr avel indu st ry, mana gement c on clud ed th at ind icat or s of imp airm ent exist a nd de eme d it ne ce ssa ry t o c ondu ct an i mpair ment r evi ew of the ve ss el at 31 Januar y 2022 . Management has considered a range of scenarios and used it s judgem ent t o co nclu de th at no im pairm ent was n ec ess ar y. Pleas e ref er to Not e 18 a for f ur th er det ai l. The G ro up det erm ines w het her goo dwi ll nee ds t o be im pair ed o n an annu al basi s, o r mor e fr eq uent ly as r equ ire d. I n the ye ar t o 3 1 Janu ar y 202 2 , manage ment di d not d eem it n ec ess ar y t o impai r good will . In th e year t o 31J anu ar y 202 1 , m anagem ent de eme d it ne ce ssa ry t o imp air th e goo dwill allo cat ed t o th e Cru ise an d T o ur Op er ati ons C GUs in f ull . Followi ng the c ont inue d imp act of t he C OVI D -19 pand emic o n the t ravel indu str y, manage ment d ecid ed t o re st ruc tur e th e Gr oup’s T our O per ati ons CGU . In lig ht of thi s exercis e, ma nagem ent has exer cis ed it s ju dgement i n rel atio n to t he im pairm ent of s of t war e as set s an d per f orm ed an im pairm ent rev iew of sof twa re a sset s u sed by t he T our Op era tio ns bus ines s . In th e year t o 3 1 Jan uar y 20 2 1, i n light o f the G ro up’ s dec isio n to va cat e mo st of it s pr op er ti es , mana gement exer cis ed it s ju dgement i n rel atio n to t he impairme nt of the freehold land and buildings. In th e year t o 3 1 Jan uar y 20 22 , in lig ht of th e Gr oup o bt aining u pdat e d fr eeho ld prop ert y market valuation repor t s, management exercised its judgement in rel atio n to t he im pairm ent of t he as set s he ld for s ale . Ple ase r efe r to N ote 3 8 for fur ther det ail. In th e year t o 3 1 Jan uar y 20 2 1, i n re lati on t o the D es tin olog y busin es s, manage ment a lso exerc ise d it s judgem ent in r el atio n to t he imp airm ent of prop ert y, plant and equipment and right-of -use assets . 2.3r Insuran ce contr act liab ilities Judgem ent as t o ar eas o f unc er t aint y t hat may g ive ris e t o claim s co st s in excess o f the a ctu ari al be st e sti mat e of cl aims in curr ed , and t he level o f addi tio nal r es er ve marg in t o re cog nise in t he f i nanc ial s t ate ment s ab ove thate st imat e. In th e year s to 3 1 J anuar y 20 2 2 and 3 1 J anua ry 2 02 1 , th e Gr oup c ons ider ed the a ddit ion al lat en cy ris k to cl aims c os t develo pm ent cau sed b y the im pac t of COVI D -19 and r ec ogni sed a n addi tio nal c laims r es er ve ab ove act uari al be st est imat e t o cover t his sp ec if ic r isk . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 41 Notes to the f ina ncia l st atemen ts c ontinued 2 .6 Significant accou ntin g jud ge ments, es tima tes and assum ptions continued Signif icant e stim ates All e sti mat es ar e ba sed o n mana gement ’s knowle dge of cur re nt fac t s and ci rc ums ta nce s, a ssum pti ons ba sed o n tha t know ledge an d pr edi cti ons of f ut ure even ts a nd ac tio ns . Act ual r es ult s may t her efor e di f fer f ro m tho se es ti mat es . The t ab le b elow s et s out t hos e it ems th e Gr oup c ons ide rs sus ce ptib le t o cha nges in cri tic al es tim at es and a ssum pti ons toget her wi th t he r elevant a cc ount ing po licy. Acc. policy Items involvi ng estimation Sourc es of estimation uncert ainty 2. 3ai Revenue recognition – three-year f ixed-pr ice insurance policies The s t and alon e sel ling pr ice of t he o ptio n to f ix wit hin th e Gr oup’s three -year f ixed -pri ce ins ur anc e pol icie s has b een e st imat ed u sing th e expe ct ed c os t plus a marg in app ro ac h as set o ut in pa rag ra ph 79 ( b ) of IF RS 1 5. An all owanc e ha s also b een m ade f or th e likel iho od th at the o pti on wil l be exercis ed by f act or ing in th e expe ct ed r ate o f ren ewal at t he f ir st a nd se con d ren ewal dat es . T he amo unt of r evenue d efer re d upo n init ial r ec ogni tio n is ther efo re r ed uc ed t o the ex t ent t hat it is e st imat ed t hat cu st ome rs wi ll not exercis e th e opti on b ecau se th ey eit her de cid e not t o re new, or th ey make a claim t hat r ele ase s the G r oup fr om i t s obli gatio n to f ix the c ust om er pr ice . 2. 3 f and 2 . 3i U sef ul ec ono mic li ves an d re sidu al valu es of so f t war e, int angib le as set s an d oc ean cruise ships The u sefu l ec ono mic li ves and r es idua l value s of sof tw are a sse ts c las sif ied as int angib le as set s (N ot e 15 ), and oc ean c ruis e ship a sset s c las sif i ed as p ro per t y , plan t and eq uipm ent (N ot e 17 ) a re as se sse d upo n the c api ta lisa tio n of eac h ass et and at e ach r ep or t ing dat e and a re b ase d upo n the ex pec te d con sumpt ion o f fut ur e ec ono mic b enef its o f the a sset . 2.3h Go odwill impairm ent tes ting Th e Gr oup de ter mine s whet her go odw ill ne eds t o b e impai re d on an an nual basi s, o r mor e fr eq uent ly as r equ ire d. T his r equ ire s an es tim atio n of th e value -in-us e of th e CG Us t o whic h good will is a llo cat ed . The va lue-i n-us e cal culat ion r eq uir es th e Gr oup t o es tim ate t he f utur e c ash f l ows expe ct ed t o aris e fr om th e CGU s, d isc ount ed at a s uit ab ly ris k -adjus t ed r ate t o ca lcu lat e present value. In th e prio r year, the out co me of t he imp airm ent r eviews c onc lud ed th at an impai rmen t char ge of £ 59. 8m b e re cog nis ed again st th e Gr oup’s Cruise a nd T o ur Op er atio ns CG Us , ef fe ct ivel y writ ing th em dow n to nil . Th is was du e to incr ea sed e st imat ion un cer taint y in the T our Op era tio ns and C ruis e CG Us in light of t he C OVI D-19 p and emic . Sensitiv ity analysis was under taken t o determine the ef fect of changing the disc ount r at e, t he t ermin al valu e and f utu re c ash f l ows on th e pr es ent valu e cal culat ion , whi ch is s hown in N ot e 16 a on p ages 15 7 -158. 2.3h Im pairm ent of o ce an an d river c ruis e ship s Followi ng the c ont inue d imp act of t he C OVI D -19 pand emic o n the G ro up’ s ope rat ion s, m anagem ent co ndu ct ed im pairm ent r eviews at 3 1 J anu ar y 202 2 , 31 J uly 2 02 1 an d 3 1 Jan uar y 20 2 1 of th e Gr oup’s two oc ean c ruis e ship s, S pir it of Dis cover y an d Sp irit of A dvent ur e. B ase d on th ese im pair ment r evi ews, andlo ok ing at th e pr oba bilit y of a range of o ut co mes , th e Gr oup r ema ins com for t ab le th at the re is h ea dro om over a nd ab ove the c arr yi ng value o f the tw o oc ean c ruis e ship as set s , and t her efo re c onc lud ed th at no imp airm ent charges were necessary. Sensitiv ity analysis was under taken t o determine the ef fect of changing the re sidu al valu e, lo ad fa ct or an d usef ul ec on omic l ife on t he p res ent val ue cal culat ion , whi ch is s hown in N ot e 17a on pages 16 0 -16 1. At 3 1 Janu ar y 20 22 , ma nageme nt co nduc t ed an im pairm ent r eview of i t s river crui se shi p, Spi rit of t he Rh ine . Bas ed on t his r eview, the G ro up is c omfo r t abl e that t her e is su f f i cient h ead ro om over an d above t he c arr ying v alue of t he ri ver crui se shi p ass et , and t her efor e c onc lude d tha t no imp airm ent ch arge was necessary. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 142 Acc. policy Items involvi ng estimation Sourc es of estimation uncert ainty 2.3r Valuation o f insur an ce contr act liabilit ies For insur an ce c ont ra ct s, e st imat es h ave to b e mad e for th e exp ect ed c os t of claim s know n but n ot yet se t tle d ( cas e re ser ves) and for t he exp ec te d cos t of claim s inc urr ed bu t not yet r ep or t ed (I BN R), as at th e re por ting dat e. I t can ta ke a sig nif i cant p eri od of t ime b efor e th e ulti mat e clai ms co st c an be established with certainty. The ul tim ate c os t of ou ts t and ing cl aims is e sti mat ed by us ing a ra nge of st an dar d act uar ial cl aims p ro jec tion t e chniq ues , su ch as t he Ch ain- L add er andB ornh uet t er -Ferg uso n meth od s. T he mai n assu mpti on un derl ying t hes e te chniq ues i s that p ast c laim s develo pme nt expe rien ce c an be u sed t o pr oj ect fut ur e clai ms develo pm ent and h enc e ult imat e cl aims c os t s. A s suc h, t hes e meth ods ex t ra po lat e the d evelop ment o f paid a nd inc urr ed lo ss es , average cos t s pe r clai m and cl aim num ber s bas ed on t he o bser ve d develo pme nt of earlier years. Hist orical claims development is primarily analysed by accident year, g eog rap hic al ar ea , sign if ic ant bu sine ss lin e and p eri l. Ad dit iona l qual it ati ve judgem ent is us ed t o ass ess t he ex t ent t o whic h pas t tr end s may not a ppl y in the f utu re (e.g . to r ef l ect o ne- of f o cc urr enc es , cha nges in ex t erna l or ma rket factors such as public attitudes to claiming, economic conditions, le vels o f claim s inf lat ion , jud icia l dec isio ns and l egis lat ion , as well a s inte rnal f ac to rs su ch as po r t foli o mix , p olic y feat ure s and c laims h and ling pr oc ed ure s ) in or de r to arri ve at the b es t es tim ate of t he ul tim ate c os t of cl aims . The ul tim ate c os t of cl aims is n ot dis cou nte d, exce pt for t hos e in r esp ec t of PPO s, w hich h ave bee n disc oun te d at -1.5% fo r th e year en ded 3 1 J anua ry 202 2 (202 1 : -1.5%). The valuat ion o f the se cl aims invo lves m aking a ssum ptio ns abo ut th e rat e of inf l ati on and t he exp ec te d rat e of r etu rn on as set s t o det ermin e th e disc ount r at e. D ue t o the s ize of PP O cla ims , the ul tim ate c os t ishigh ly se nsit ive t o cha nges in th ese a ssum ptio ns . The a ssu mpti ons ar e rev iewed at e ach r ep or ti ng dat e, an d the s ens iti vit y o f this as sum ptio n is sh own in Not e 20 d on p ages 17 1 -172 . In ca lcul ating t he level o f re ser ve ma rgin t o r ec ognis e above t he ac tu arial b es t est imat e of in curr ed c laim s, t he Gr ou p con sid ere d an arr ay of ri sk s (inc lud ing cos t inf l atio n) to futu re c laim s exper ienc e, a nd es tim ate d the f inan cial im pac t that t hos e risk s c ould h ave, t o deri ve an app r opri ate l evel of ma rgin t o ho ld . This in clu ded an a sse ssm ent of t he mag nit ude o f the c laim s lat ency r isk du e tot he imp act o f the C OVI D -19 pand emic . 2.3u Valuat ion o f pen sion b ene f it obligation The c os t of def ined b enef it pen sion p lan s and t he pr es ent valu e of th e pen sion obligation are determined using actuarial valuations. Act uarial valuations involve m aking a ssum ptio ns ab out di sc ount r at es , expe ct ed r ate s of r eturn o n ass et s, f utu re s alar y in cr eas es , mor t a lit y r ate s and f ut ure p ens ion in cr eas es . Due t o th e co mpl exit y of t he valu ati on, t he un derl ying a ssum pti ons an d it s long-ter m natu re , a def in ed b enef it oblig atio n is high ly se nsit ive t o cha nges inthe se as sump tio ns. A ll as sump tio ns ar e rev iewed at e ach r ep or t ing dat e. All s ignif icant a ssum ptio ns an d est imat es invo lved in a rri ving at t he valu atio n ofthe p ens ion s che me ob ligati on ar e set o ut in N ote 2 7 on p age 176 . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 143 Notes to the f ina ncia l st atemen ts c ontinued 3 Segmental informati on For man agement p urp ose s, t he G rou p is orga nise d into b usi nes s unit s ba sed o n the ir pr odu ct s an d ser v ice s. T he G ro up has three rep or tabl e operating segment s as follows: • Insurance: comprises the provision of general insuranc e produc ts . Revenue is derived primarily from insur ance premiums and brokin g reve nues. This se gment i s further analysed into fou r product sub- segments: – Ret ail br oking, c onsist ing of: • Motor Broking • Home Broking • Other Broking – Un derwrit ing. The G ro up cl assi f ie s the C GU at it s l owes t level t o be at t he In sur anc e seg ment l evel. • T r avel: co mpri ses t he op er ati on and d elive r y of pac ka ge tour s and c ruis e ho liday p ro duc t s. T he Gr ou p owns an d op era tes tw o oc ean c ruis e ship s. A ll oth er ho liday p ro duc t s ar e pac kage d toget her w ith t hir d-pa r t y sup plie d ac com mod ati on, f light s and other transpor t arr angements. • Other Businesses and Central Cost s: comp rise s the G r oup’ s oth er bu sine sse s and i t s cent ra l cos t ba se. T he ot her busi nes ses in clu de th e f ina nci al ser v ice s pr odu ct of fering , a mo nthl y sub scr iptio n magaz ine an d the G ro up’ s mail ing and printing busines s. Seg ment p er fo rman ce is eva luat ed u sing th e Gr oup’s key per for manc e me asur e of U nde rly ing (Lo ss) /Prof it Bef or e T a x 3 . It ems no t allo cat ed t o a seg men t rel at e to t ran sac tio ns th at do no t form p ar t of t he ongoin g segm ent p er for man ce or w hich are m anage d at a Gr oup l evel. T r ansfer prices bet ween operating segment s are set on an arm ’s leng th basis in a manner similar to transactions with thir d par t ies . Se gme nt inc ome , expe nse s and r esu lt s inc lude t r ansf ers b et wee n busi nes s seg ment s wh ich ar e th en elim inat ed o n consolidation. Go odw ill, c or por at e bo nds an d ban k loa ns ar e not all oc at ed t o segm ent s as t hey ar e man aged on a G ro up bas is . 3 Ref er t o th e Al t ern at ive P er fo rm an ce M ea su re s Gl os sa r y on p age 20 1 f or d ef in it io n and ex pl an at ion Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 14 4 2022 Insurance Tr a v e l £m Other Businesses and Central Costs £m Adjustments £m To t a l £m Motor broking £m Home broking £m Other insurance broking £m Under- writing £m To t a l £m Reve nue 85.0 6 0. 2 35 .3 84 .7 265 .2 94 .7 21.5 (4 . 2 ) 3 7 7. 2 Cost of sales (2 . 6) – 0.3 (2 9 . 9) (32 . 2) (102.9) (8 . 2) – (1 4 3 . 3) Gross prof it/ (loss ) 82 .4 60. 2 35 .6 54 .8 23 3.0 (8 . 2) 13.3 (4 . 2 ) 23 3.9 Administr ative and selling expenses (5 2 . 4) (3 5 . 0) (24 . 3) (4 . 2 ) (115.9) (5 4 . 9) (4 6 . 2 ) 4. 2 ( 2 1 2 . 8) Impairme nt of assets – – – ( 1 . 0) (1 .0) (9.7 ) (0. 5) – (1 1 . 2) Gain o n lea se mo dif icati on – – – – – – 0. 3 – 0.3 Net p rof it on dis po sal of ass et s held f or sa le – – – – – – 7. 2 – 7. 2 Net (loss ) / profit on disposal of sof twa re an d righ t-of-use assets (0. 1) – – – (0 .1 ) 0.1 (0 . 4) – (0 . 4) Investment income/ (loss ) – – – 3.5 3.5 0.1 (3 . 3) – 0. 3 Fina nce costs – – – – – (2 2 . 2) (1 8 .6) – (4 0 . 8) Profit/ (loss ) before tax 29. 9 25.2 11 .3 53 .1 1 19. 5 (9 4 . 8) (4 8 . 2 ) – (2 3 . 5) Reconciliation to Underlying Profit/ (Loss ) Before T ax 4 Pro f it/(loss) befo re t ax 29. 9 25 .2 11 .3 53 .1 1 19. 5 (9 4 . 8) (4 8 . 2 ) – (2 3 . 5) Net f air valu e los s on derivative finan cial instrum ents – – – – – 2 .7 – – 2 .7 Impairment/ loss on disposal of asse ts – – – 1.0 1 .0 9. 8 0 .7 – 11. 5 Restructurin g costs – – – – – 3.9 2.4 – 6.3 Net p rof it on dis po sal of ass et s held f or sa le – – – – – – ( 7. 2 ) – ( 7. 2 ) Forei gn exchan ge moveme nt on lease lia bilities – – – – – (0. 9) – – (0. 9) Cos t s inc urr ed fo r crui se ship loan holiday – – – – – – 2.4 – 2.4 Charge on closure of defined benef it pension schem e – – – – – – 2.0 – 2.0 Underlying Profit/ (Loss ) Before T ax 4 29. 9 25 .2 11 .3 5 4 .1 1 20. 5 ( 79. 3) (4 7. 9 ) – (6 .7 ) T o t al as set s l es s liab ilit ies 261.7 (6 3 . 2) 134.8 31 9.6 652 .9 All r evenue i s gener at ed so lel y in th e UK . 4 R efe r to t he A lt e rna ti ve Pe r for ma nc e Me as ur es G lo ss ar y o n page 2 0 1 fo r def init io n an d exp la nat io n Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 145 Notes to the f ina ncia l st atemen ts c ontinued 3 Segmental informati on continued 2021 Insurance Tr a v e l £m Other Businesses and Central Costs £m Adjustments £m To t a l £m Motor broking £m Home broking £m Other insurance broking £m Under- writing £m To t a l £m Reve nue 92 .7 6 0. 2 40 .7 74 . 4 26 8 .0 51.6 2 2 .6 (4 . 6 ) 3 3 7. 6 Cost of sales (2 .7 ) – (4 . 2 ) (16. 5) (2 3 . 4) (6 8 . 1) (8 .7 ) – (1 00 . 2) Gross prof it/ (loss ) 90.0 6 0. 2 36.5 5 7. 9 2 44 .6 ( 16 .5) 13.9 (4 . 6 ) 2 3 7. 4 Administr ative and selling expenses (5 6. 5 ) (32 . 3) (2 2 .0) ( 2.9 ) (113. 7) ( 6 4 . 4) (5 0.7 ) 4.6 (224 . 2) Impairme nt of assets – – – – – (0. 2 ) ( 5 . 0) (5 9 . 8) (6 5 . 0) Gain o n lea se mo dif icati on – – – – – – 3.2 – 3. 2 Net (loss ) / profit on disposal of businesses – – – – – (1 .7 ) 10.3 – 8 .6 Net profit/(loss ) on disposal of pr op er t y, plant an d equipment , right-of -use assets and sof t ware – – – – – 6.8 (0. 2) – 6.6 Investment income/ (loss ) – – – 3 .7 3 .7 0. 2 (3 . 2 ) – 0 .7 Fina nce costs – – – – – (1 3 .6) (1 6 .6) – (3 0 . 2) Fina nce in come – – – – – 1 .7 – – 1 .7 Profit/ (loss ) before tax 33.5 2 7. 9 14 .5 58 .7 1 34 .6 ( 8 7. 7 ) (4 8 . 3 ) (5 9. 8) ( 61.2) Reconciliation to Underlying Profit/ (Loss ) Before T ax 5 Pro f it/(loss) befo re t ax 33 .5 2 7. 9 14 .5 58 .7 1 34 .6 ( 8 7. 7 ) (4 8 . 3 ) (5 9. 8) ( 61.2) Net f air valu e gain on derivative finan cial instrum ents – – – – – (1 .7 ) – – (1 .7 ) Imp airme nt of goo dwil l – – – – – – – 59. 8 59.8 (Prof it) on disposal/ impair ment of assets – – – – – (3 . 8) 1.8 – (2 . 0) Restructurin g costs – – – – – 13.0 1 7. 8 – 30. 8 Net loss/ (pr ofit) on disposal of businesses – – – – – 1 .7 ( 1 0. 3) – (8 .6 ) Underlying Profit/ (Loss ) Before T ax 5 33.5 2 7. 9 14 .5 58 .7 1 34 .6 ( 78. 5) ( 3 9 .0) – 1 7. 1 T o t al as set s l es s liab ilit ies 284. 4 1 9.3 ( 18 .0) 3 9 5.0 6 80.7 All r evenue i s gener at ed so lel y in th e UK . T ot al a sse ts l ess l iabi liti es det ai led as a djus tm ent s r elat es t o th e foll owing un allo cat ed i te ms: 2022 £m 2021 £m Go odw ill (N ot e 14 ) 7 18 .6 7 18.6 Gr oup b ond s and b ank lo ans (3 9 9 . 0) (3 2 3 . 6) 31 9.6 39 5.0 5 Re fer t o t he A lt er nat iv e Per f orm an ce M e asu r es G los s ar y on p age 2 01 f or d ef i nit io n an d exp la nat io n Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 146 a) Disagg regation o f revenue 2022 Major product lines Insurance Tr a v e l £m Other Businesses and Central Costs £m To t a l £m Earned pr emi um o n ins ur an ce underwritt en by th e Gr ou p £m Ot he r reven ue £m To t a l insurance £m Gross earne d premium on insurance under writ ten by the G ro up 203 .0 20 3.0 20 3 .0 Les s: ce ded t o r einsu re rs (1 2 3 . 8) (1 2 3 . 8) (1 2 3 . 8) Net r evenue o n: Motor broking 26 .7 58.3 85 .0 85 .0 Home broking – 60. 2 60. 2 60. 2 Other broking 1.0 34.3 35.3 35.3 Underw riting 51. 5 33. 2 8 4 .7 8 4 .7 T our Oper ations 12. 2 12.2 Cruise 82.5 82.5 Personal Finance 5.9 5.9 Media 9.9 9. 9 Other 1.5 1.5 79. 2 186 .0 265 . 2 9 4 .7 1 7. 3 3 7 7. 2 2021 Major product lines Insurance Tr a v e l £m Other Businesses and Central Costs £m To t a l £m Earned pr emi um o n ins ur an ce underwritt en by th e Gr ou p £m Ot he r reven ue £m To t a l insurance £m Gross earne d premium on insurance under writ ten by the G ro up 2 2 1 .7 22 1 .7 2 2 1 .7 Les s: ce ded t o r einsu re rs (1 4 2 . 8) ( 14 2 . 8) ( 1 4 2 . 8) Net r evenue o n: Motor broking 23. 2 6 9. 5 9 2 .7 9 2 .7 Home broking – 60. 2 60. 2 60. 2 Other broking 1.1 39. 6 4 0.7 40 .7 Underw riting 54 .6 1 9.8 74 . 4 74 . 4 T our Oper ations 3 2 .7 3 2 .7 Cruise 18.9 18.9 Personal Finance 6 .0 6 .0 Healthc are 0. 9 0.9 Media 9.1 9 .1 Other 2 .0 2 .0 78. 9 18 9 .1 2 68 .0 51 .6 18 .0 3 3 7. 6 Inc lude d in ins ura nce b ro king ot her r evenu e is ins t alme nt int ere st in co me on p re mium f i nanc ing of £ 9. 8m (20 2 1: £ 1 1 .1m ). Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 47 Notes to the f ina ncia l st atemen ts c ontinued b ) Contract bala nces The fo llow ing t abl e pr ovid es info rmat ion ab ou t con tr act a sset s a nd co ntr ac t liab ilit ies f ro m con tr act s wi th cu st om ers as acc oun te d for un der I FR S 15 (the amo unt s st at ed h er e do not i nclu de am ount s ac c ount ed fo r und er IF RS 4): 2022 £m 2021 £m Co ntr act c os t ass et s (N ote 2 3) 2.6 2.9 Co ntr act l iabil iti es (N ot e 29) 114.6 82. 2 The c ont ra ct c ost a sse ts r el ate t o c ommis sio ns pai d to p ric e- com pari son we bsi te s to a cqui re n ew busi nes s po licie s not unde rw rit t en by th e Gr oup . Man agemen t expe ct s th at incr em ent al c ommi ssi on fee s pai d to p ric e-c omp aris on web sit es a s a re sult of o bt aining i nsur anc e con tr act s ar e r ec overa ble . The G r oup ha s the refo re c api t alise d th em as c ontr ac t ass et s amo unting t o £ 1 .7m for the year ende d 3 1 Jan uar y 20 22 (20 2 1: £ 4 . 5m). These f ees ar e am or t ised ove r the p eri od of t he exp ect ed r en ewal cycl e. In t he ye ar to 31 J anu ar y 202 2 , the a mou nt of amo r tis ati on was £ 2 .0 m (202 1: £ 4 . 2m ) and t her e was no i mpai rment l os s in re lati on t o the cost s capi talis ed. App ly ing th e pr act ica l expe dient i n par agr ap h 94 of I FR S 15 , th e Gr oup r ec ogni ses t he inc re ment al c os t s of obt ai ning con tr act s as a n expe nse wh en inc urr ed if t he am or t isat ion p erio d of th e ass et s tha t the G ro up oth er wis e would h ave re cog nise d is on e year or l ess . The c ont ra ct lia bili tie s rel at e to t he def err al of r evenue fo r per forma nce o bligat ion s not s atis f ie d as at 3 1 Jan uar y 20 22 a nd the a dvan ce c ons ider ati on r ec eive d fr om cus t ome rs for h oli days or c ruis es b ook ed bu t not tr avell ed, a nd ins ura nc e pr emium s re cei ved in a dvan ce of t he c over st ar t d ate . Th er e was no r evenue r ec ogn ise d in the c urr ent r ep or tin g year th at r elat ed t o per f orma nc e obliga tio ns tha t were s ati sf i ed in a p rior ye ar . Sign if ic ant ch anges in t he c ontr ac t ass et s and t he c ontr ac t liab ilit ies d uring t he year a re a s foll ows: 2022 2021 Co nt ra ct cost assets £m Co nt ra ct liabilities £m Co nt ra ct cost assets £m Co nt ra ct liabilities £m Balance as at 1 February 2.9 82.2 2.6 153 . 2 Rele ase d to t he in com e st at em ent in th e pe riod ( 2 . 0) ( 66. 6) (4 . 2 ) (8 6 . 2) Additional contr act balanc es incurred during the period 1 .7 148 .6 4.5 149.9 Amo unt s r efun ded t o cu st ome rs – (4 9 . 6) – ( 1 3 3 .1 ) Dis pos ed of w ith s ubsi diar y un der t ak ings – – – ( 1 .6) Balance as at 31 January 2 .6 114 .6 2.9 82 . 2 c ) T rans acti on price a llocat ed to t he re maining per fo rmanc e obligation s The transac tion price allocat ed to thre e-year fixed-price insuranc e policy renewal options, wher e the remaining per formance obliga tio ns ar e not exp ec te d to b e sat isf ied wi thin t he nex t 1 2 mo nths , is £ 0.7 m (202 1: £ 1.0 m) . This i s expe ct ed t o be re cog nise d as r evenue in t he sub seq uent o ne t o thr ee ye ars . The t ra nsa cti on pri ce al loc at ed t o cus to mer c ont ra ct s wi thin t he T ravel seg ment , w her e the r em aining p er fo rman ce obliga tio ns ar e not exp ec te d to b e sat isf ied wi thin t he nex t 1 2 mo nths , is £ 0. 8m (202 1: £ 14. 3 m) . This i s expe ct ed t o be re cog nise d as r evenue in t he sub seq uent o ne t o t wo year s. The G ro up app lie s the p ra cti cal exp ed ient in p ar agr aph 1 2 1 of I FR S 15 an d doe s not di scl ose inf orm atio n abo ut r emai ning per f orma nc e obliga tio ns tha t have orig inal exp ec te d dur ati ons of o ne year o r les s . 3 Segmental informati on continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 148 4 Admi nistrative a nd selli ng e xpenses 2022 £m 2021 £m Staf f cost s ( ex cluding restru cturing costs ) 85. 8 9 0.1 Marketing and fulf ilment cost s 49.6 41 . 4 Shor t-term lease rentals 0.1 0. 2 Auditors’ remune ration 2 .1 1.8 Other admin istrative costs 64 .7 6 0.0 Amounts ceded under reinsurance contracts (6 . 9) ( 7. 7 ) Dep re ciat ion – p ro per ty, plan t and eq uipm ent (N ot e 17 ) 2.2 3.8 Dep re ciat ion – r ight-o f -us e ass et s (N ote 1 8) 0.7 1.5 Amo r tis ati on of int ang ibl e ass et s (N ote 1 5) 9.7 11 .8 Restructurin g costs 4.8 21.3 212 .8 224. 2 a. Audit ors’ remuneration 2022 £m 2021 £m Audit of the parent company and consolidate d financ ial stat ements 0.8 0.6 Audit of subsidiary f inancial st atement s 1 .1 1.0 Audit-related assur ance serv ices 0. 2 0. 2 T ot al auditors’ remuneratio n 2 .1 1.8 In th e prio r year, in addit ion t o the a udit or s’ rem uner ati on dis clo sed a bove, a f ur t her £ 0.6 m was pa id by th e Gr oup in r el atio n to c orp or at e f ina nce s er vic es p rov ide d. T hes e co st s wer e exp ens ed again st th e sha re p re mium r ese rve a s par t o f the tr ansa ct ion c os ts a sso cia te d wit h the is sue o f shar e c apit al d uring t he pr ior yea r . 5 Impairment of asset s a) Impairment s during the year end ed 31 J anuar y 202 2 As expl aine d in N ote 1 6b , foll owing th e co ntinu ed im pac t of th e COV ID -19 pan demi c on th e tr avel indu st r y, management dec ided t o r es tru ctu re t he Gr ou p’ s T ou r Op er atio ns CG U. As a r es ult of t his r est ruc tur ing exerc ise, m anage ment p er fo rme d an imp airme nt rev iew of so f t war e ass et s us ed by th e T o ur Op er atio ns bu sine ss . Th e out co me of t he imp airm ent r eview con clu ded t hat an im pair ment c harge of £ 9. 4m ( Not e 1 5) be r ec ogn ise d agains t the G r oup’ s sof twa re a sset s a s at 31 J anu ar y 202 2 . Furt her mor e, t he Gr ou p con clu ded t hat an im pair ment c harge of £ 0. 5m ( Not e 1 5) to s of t wa re as set s wa s re quir ed in the G ro up’ s Ce ntr al C ost s b usin ess u nit . In ad diti on , foll owing m anagem ent’s dec isio n to r es tru ct ure t he G ro up’ s T o ur Op er atio ns CG U, th e Gr oup im pair ed p ro pe r t y, plan t and eq uipm ent in i ts T our Op er ati ons C GU by £ 0.3 m (N ot e 17 ). In lig ht of th e Gr oup ob ta ining up dat ed f re eho ld pr op er t y m arket va luat ion r ep or t s , mana gement im pair ed a sse ts h eld fo r sal e by £ 1 .0m ( Not e 3 8). b ) Impairment s during t he year ended 3 1 Janu ary 2 02 1 Duri ng the ye ar end ed 3 1 J anuar y 2 02 1 , th e Gr oup im pair ed t he ca rr ying va lue of t he goo dwil l bal anc e allo cat ed t o th e T o ur Op er atio ns CG U by £ 15 .0 m and t he Cr uise C GU by £ 44 . 8m . Duri ng the ye ar end ed 3 1 J anuar y 2 02 1 , in lig ht of th e Gr oup’s decisio n to v acat e mo st of i t s pr op er ti es, i t es tim ate d the re cover abl e amo unt ba sed o n the f air valu e les s co st s t o sel l of eac h pr op er t y th e Gr oup p lann ed t o dis pos e of. The ou tc om e of the i mpai rment r evi ews co nclu ded t hat an i mpair ment c harge of £ 4. 5m b e r eco gnis ed again st t he Gr oup’s free hol d lan d and bu ildin gs ass et s as at 3 1 Ja nuar y 20 2 1 (N ot e 17 ). Th ese p ro per ties wer e su bse quent ly t ran sfe rr ed t o ass et s held f or sal e(Not e 3 8). In ad diti on , during t he yea r end ed 3 1 Jan uar y 20 2 1 , the G ro up imp air ed pr op er t y, plan t and eq uipm ent an d sof twar e in i ts Cent r al Co st s di vis ion by £ 0. 4m an d £0 .1m res pe cti vely, and al so imp air ed pr op er t y, plan t and eq uipm ent an d right- of-use ass et s in it s De st ino log y b usin ess b y £0.1m an d £ 0.1m re spe ct ively. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 149 Notes to the f ina ncia l st atemen ts c ontinued 6 Inv estment income 2022 £m 2021 £m Int er est i nco me r ec ogni sed u sing th e EIR m eth od 4.4 5 .0 Gain s on as set s me asur ed at F V T PL 0. 2 0.3 Amounts ceded under reinsurance contracts (4 . 3 ) (4 . 6 ) 0.3 0.7 7 Finance cost s 2022 £m 2021 £m Interest and charges on debt and borrowings 3 7. 4 2 9.4 Net f air valu e los s on de rivat ive f i nanc ial in str ume nt s 2 .7 – Net interest and finance charges payable on lease liabilities 0.7 0.8 40. 8 30. 2 8 Finance income 2022 £m 2021 £m Net f air valu e gain on d eri vative f inanc ial in str ume nt s – 1 .7 – 1 .7 9 Direc tors and employ ees Amo unt s ch arged t o th e inc ome s t ate ment fo r th e year ar e as fo llows: 2022 £m 2021 (restated) £m Wag es and salaries 97 .0 1 0 7. 5 6 Social secu rity costs 9.3 11 .6 Pensio n co st s (N ot e 27 ) 1 2 .0 11. 2 T o t al s ta f f co st s 118 .3 1 30. 3 St af f cos ts ( inc ludi ng re st ruc turi ng and r edu ndan cy c ost s) of £2 7 .7 m (202 1: £ 1 8 .9 m 6 ) and £ 9 0.6 m (202 1: £ 111 . 4m) have been allo cat ed t o co st o f sal es and t o ad minis tr ati ve and s elling exp ens es r esp ec tive ly. St af f c os t s above exclu de sh ar e-ba sed paym ent ch arges of £ 3 . 4m (20 2 1: £ 2. 4 m ). Furth er det ai l on sh are -ba sed p ayme nt s can b e foun d in No te 3 6. Average mo nthl y numb er of e mpl oyees: 2022 £m 2021 £m Insurance 1,51 9 1 ,50 9 Tr a v e l 1 ,70 5 1 ,0 01 Other Businesses and Central Cost s 552 697 T ot al employee numbers 3 ,7 76 3, 207 The aver age emp loyee n umb ers fo r T r avel have in cr eas ed due t o th e ad vers e impa ct s of t he COV ID -19 pa nde mic on hea dc ount in t he pr ior yea r st ar t ing t o rever se in t he yea r ende d 3 1 Jan uar y 20 22 . In a ddi tio n, t he Gr oup t o ok del iver y of it s sec on d new ship , Spir it of Ad vent ure , in Se pt emb er 202 0, and t her efor e aver age hea dc ount fo r the ye ar pr ior ye ar did n ot rep re sen t a full ye ar’s wor th of c rew ing for t his ves sel . 6 Wage s an d sa la rie s c os t s for t he y ear e nd ed 3 1 J an uar y 2 02 1 h ave b ee n re st a te d to £ 107.5 m (fr om £ 102 . 5 m pr ev iou sl y r ep or t ed ) to r ef lec t th e in clu si on of cr ew c os t s re lat in g to t he G r oup’s Cr ui se s hip s whi ch w er e pr ev iou sl y om it t ed i n er ro r Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 150 Director s’ remuneration The inf orm atio n re quir ed by t he C omp anies A ct 20 0 6 and t he Li st ing Rul es of th e FCA is co nt aine d on page s 85 -106 in t he Directors’ Remuneration Re por t . Comp ensat ion of key man agement pers onnel o f the Gr oup Key man agemen t per son nel ar e def ined as t hos e pe rso ns havi ng auth ori t y and r es po nsibi lit y fo r pla nning , dir ec ting an d con tr olling t he ac ti vit ies of t he G ro up and c omp ris e the D ir ect or s of th e Co mpany a nd th e Chie f E xecut ive O f f i cer s of th e major bu sinesses with in the tradi ng segme nts. The am ount s r ec ogn ised a s an exp ense d uring t he f in anc ial yea r in re sp ect o f key man agement p er sonn el ar e as fo llows: 2022 £m 2021 £m Shor t-term benef its 6 .0 6 .6 T ermination cos ts 0.3 0.4 Share-based pa yments 1 .0 0. 4 7. 3 7. 4 10 T ax The m ajor c om pon ent s of t he inc om e ta x exp ense a re: 2022 £m 2021 £m Consolidated income stat ement Curr en t inc ome t a x Curr ent i nco me t ax c harge 3.4 3.5 Adjus tm ent s in r esp ec t of pr evi ous yea rs (0. 1) (3 .7 ) 3.3 (0 . 2) Deferred tax Relating to origination and reversal of temporar y dif ferenc es 2 .7 3. 2 Ef fe ct of t ax r at e cha nge on op ening b ala nce (2 .6) (1 .7 ) Adjus tm ent s in r esp ec t of pr evi ous yea rs 1.1 5.3 1.2 6.8 T a x expe nse i n the i nc ome s t ate me nt 4.5 6 .6 Rec onc iliat ion o f ta x exp ense t o lo ss b efor e t ax mul tip lied by t he U K co rp ora tio n ta x ra te: 2022 £m 2021 £m Los s befo re t a x (23 . 5 ) (6 1 . 2) T a x at r ate of 1 9.0 % (202 1: 1 9.0 % ) (4 . 5 ) (1 1 .6) Adjus tm ent s in r esp ec t of pr evi ous yea rs 1.0 1.6 Ef fe ct of t ax r at e cha nge on op ening b ala nce (2 .6) (1 .7 ) Exp enses not deductible for tax purposes: Imp airme nt of goo dwil l – 11.4 Other non-deductible e xpenses/ non- taxed income 1.5 (0 . 5 ) Ef fe ct of C ruis e bus ines s ent ering t onn age t ax r egim e 9.1 7. 4 T a x expe nse i n the i nc ome s t ate me nt 4.5 6.6 The G ro up’ s t ax exp ens e for th e year wa s £ 4 .5 m (202 1 : £6 .6 m expe nse) repr es enti ng a ta x ef f ect ive r ate o f negat ive 1 9.1% befo re t he imp airm ent of goo dw ill and a sso ciat ed d efer re d ta x (202 1 : negat ive 471 .4% ). In bot h the c urr ent an d prio r year s, the di f fe ren ce b et wee n the G ro up’ s t ax ef f ect ive r at e and th e st an dar d r ate o f cor por at ion t ax o f 19 % , is m ainly d ue t o the Gr oup’s Cruise b usin ess e nte ring th e to nnage t ax r eg ime on 1 Feb rua ry 2 020 . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 51 Notes to the f ina ncia l st atemen ts c ontinued Adjus tm ent s in r esp ec t of pr evi ous yea rs in clud e a cha rge for th e und er -pr ovis ion of t a x char ge in prio r year s of £ 1 .0 m (202 1: £ 1 .6m un der -p rov isio n char ge ) and t he imp act o f the c hange in t he t ax r at e on op ening d efer re d ta x bal anc es of £ 2 .6 m cr edi t (2021: £ 1 .7 m credit) . No t ax c harge o r cr edit a ro se in t he pr ior yea r on th e disp os al of th e Be nnet t s , De st inol og y a nd He alt hca re b usin ess es . Deferred tax Consolidated statement of financial position Consolidated income statement 2022 £m 2021 £m 2022 £m 2021 £m Exces s of depreciation over capital allowances 4.4 3.9 (0 . 5 ) 4.6 Retirement benef it schem e liabilities (0 . 3) 0. 8 (0. 1) 0.3 Shor t-term tempor ary dif feren ces: – Des igna te d hedge s re cog nise d thr oug h OC I 0.5 0. 2 – – – Share-based payment reserve 1.6 1 .0 0.6 0. 2 – Gen er al ba d debt p rov isio n 1.6 2.8 1. 2 1 .1 – Capi t alis ed bo rr owing c os t s (2 . 8) (2 . 2) 0.6 0 .7 – IFR S 16 t ra nsit ion a djus tm ent s 1.4 1 .7 0. 3 0. 2 – Ot her 0.3 (1.5 ) (0 . 9) (0. 3 ) Deferred tax charge 1.2 6.8 Net deferred tax assets 6 .7 6 .7 Defe rr ed t ax is r ef le ct ed in t he s t atem ent of f inanc ial p osi tio n as foll ows: 2022 £m 2021 £m Deferred t ax asset s 12.3 12.5 Deferred t ax liabilities (5 .6) (5 . 8) Net deferred tax assets 6 .7 6.7 Reco nciliatio n of net de ferre d ta x asset s 2022 £m 2021 £m At 1 Febru ar y 6.7 1 8 .1 T a x cha rge re cog nise d in th e inc ome s t at ement (1 . 2) (6. 8) T a x cha rge re cog nise d in oth er c omp reh ensi ve inc om e 1.2 (4 . 1 ) T a x cha rge re cog nise d dir ec tly in to t he he dging r es er ve – (0 . 5) At 31 January 6.7 6 .7 On 3 M ar ch 20 2 1, i t was an noun ce d that t he c orp or atio n t ax r ate w ill in cr ease f r om 1 9% t o 25% fr om 1 A pril 2 023 . T his inc re ase was sub st ant ivel y ena ct ed on 24 M ay 202 1 . A s a re sult , t he cl osin g defer re d ta x ba lanc es at t he s t atem ent of f inanc ial p osi tio n dat e have be en re f lec te d at 25% . N et defe rre d t ax as set s/(liabilit ies) are exp ec te d to b e nor mall y set t led i n mor e th an 12 m ont hs . 11 Dividends Give n the r es tri cti ons o n the d ecl ara tio n of div ide nds de sc ribe d be low, the B oar d of D ire ct or s doe s not r ec omm end t he paym ent of a f i nal di vid end fo r th e 202 1/22 f inanc ial ye ar (202 1: n il pe nce p er s har e ). For the c urr ent an d prio r year, no interi m or f in al di vid ends we re d ecl ar ed or p aid dur ing th e year. Divide nd eq uival ent s of £ nil have be en pai d during t he yea r (202 1: £ 0.1m). Divid end eq uiva lent s pa id in th e pri or year r el ate t o pr evi ousl y de clar ed div iden ds whi ch on ly be co me paya ble w hen c er t ain s har e opt ions a re exer cis ed . The di st ribu ta ble r es er ves of S aga pl c ar e £ 18 .1m as at 3 1 Ja nuar y 20 2 2, w hich a re e qual t o th e re ta ined e arning s re ser ve . Ifne ce ssa ry, it s sub sidi ar y co mpan ies ho ld sig nif icant r es er ves fr om w hich a d ivi den d can b e paid . S ubsi diar y dis tr ibut ab le re ser ves ar e avail abl e imme diat el y, with the exc epti on of c omp anie s wit hin th e T o ur Op er atio ns an d Und er writ ing seg me nts , whic h re quir e re gul ato ry a ppr oval b efor e any di vid end s can b e dec lar ed a nd pai d. U nde r the t erm s of th e ship d ebt fa cili tie s, div iden ds r emain r es tr ict ed un til th e ship d ebt p rinc ipal r ep ayme nt s that we re d eferr ed a s par t of t he s hip deb t rep aym ent holi day ar e ful ly r epai d (No te 3 0). In addit ion , und er th e ter ms of t he RC F , d ivi den ds als o rem ain r es tric t ed whil e lever age is above 3 .0 x ( excludi ng Cru ise de bt). The Gro up mai nt ained s uf f icient h ea dro om un der t he RC F coven ant dur ing the ye ar . 10 T ax continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 152 12 Loss per share Bas ic los s pe r shar e is c alc ulat ed by di vid ing th e los s af t er t ax fo r the ye ar at tr ibut ab le t o or dina r y equi t y hol der s of th e par ent by the we ight ed aver age numb er of o rdi nar y sh are s out s t and ing durin g the p erio d. D ilu te d los s per s har e is c alcu lat ed by als o incl uding t he weig hte d avera ge numb er of or din ar y sha re s that wo uld b e iss ued o n conver sio n of all p ot enti ally di lut ive opt ion s. The re have b een n o oth er tr ans act ion s involv ing or din ar y shar es o r pot ent ial o rd inar y sh ar es be tw een t he r epo r ting d ate a nd the d ate o f auth oris ati on of th es e f ina ncia l st at eme nt s. The c alc ulat ion of b asic a nd dil ut ed lo ss pe r sha re is a s foll ows: 2022 £m 2021 (restated) £m Loss attributable to ordinary equity holders (2 8 . 0) ( 6 7. 8 ) Weight ed aver age numb er of o rdi nar y sh are s m m Or dina ry s har es a s at 1 Febru ar y 139.4 1, 119.4 Long- term incentive plan (L TIP) share options ex ercised 0.1 – Iss ue of sh ar es – 5 O ct obe r 202 0 (No te 3 3) Firs t Firm Placing – 224.4 Second Firm Placi ng – 1 24 . 2 Placing and Open Of fer – 6 23. 3 Sha re c ons olid atio n – 13 O ct ob er 20 20 (N ote 3 3) – (1, 951.9 ) Or dina ry s har es a s at 3 1 Janu ar y 1 3 9.5 13 9. 4 7 Weight ed aver age numb er of o rdi nar y sh are s for b asic l oss p er s har e and d ilut ed l oss p er sh ar e 1 3 9.5 101. 2 Basic loss per sha re ( 2 0 .1 p) ( 6 7. 0 p ) Dil ute d lo ss p er sh are ( 2 0 . 1 p) ( 6 7. 0 p) The t ab le b elow r ec onc ile s bet we en bas ic lo ss pe r sha re an d Un derl ying B asi c (Los s) /Earning s Per Sh are 8 : 2022 202 1 Basic loss per sha re (2 0 . 1 p) ( 6 7. 0 p) Adjusted for: Derivativ e losses / (gains ) 1 .4p ( 1 . 9 p) Imp airme nt , and l oss/(prof it) on dispo sal , of as set s 2.3p ( 2 . 2 p) Impairment of goodwill and associated deferred t ax – 5 9.1 p Net p rof it on dis po sal of b usin es ses – (8 . 5 p) Charge on closure of defined benefit pension scheme 1 .1p – Foreign e xchan ge mov ement on lease liabilities (0 . 5 p) – Cos t s inc urr ed fo r crui se shi p loa n holi day 1.3p – Restructurin g costs 3.4p 3 3 .7p Und erl ying B as ic (L os s )/Earning s Per S har e 8 ( 1 1 . 1 p) 13. 2p 7 O rd in ar y sh ar es a s at 3 1 J anu ar y 20 2 1 ha ve be en r es t at ed t o 1 3 9. 4m r ef l ec ti ng th e in co rr ec t in cl usi on o f 0. 5m s ha re s is su ed o n 18 N ove mb er 2 02 0 in th e 13 9. 9 m to t al r ep or t ed p r evi ou sl y. Opt io ns r el ati ng t o th es e sh ar es h ad n ot b ee n exer ci se d as at 3 1 J anu ar y 2 02 1 a nd t he re for e s hou ld n ot h ave be en i nc lu ded in th e t ot al o rd in ar y sh ar es p re vi ous ly r e po r te d at t his d at e 8 R efe r to t he A l te rn ati ve Pe r for ma nc e Me as ur es G lo ss ar y o n pag e 20 1 fo r def init io n an d exp la nat io n Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 153 Notes to the f ina ncia l st atemen ts c ontinued 13 Business c ombinations and disposals a) Acquisit ions The re wer e no b usi nes s acq uisi tio ns in th e year s end ed 3 1 Jan uar y 20 22 a nd 3 1 Jan uar y 20 2 1 . b ) Dispos als during t he year ended 3 1 Janu ary 2 02 2 The re wer e no b usi nes s disp os als in t he year e nde d 3 1 Janu ar y 20 22 . c ) Dispos als during t he year ended 3 1 Janu ary 2 02 1 i) Healthcare business Duri ng the ye ar end ed 3 1 J anuar y 2 020, t he Gr ou p mad e the d ecis ion t o exit h eal thc ar e and ini tia te d an act ive p rog ra mme tol oca te a b uyer fo r it s He alt hca re o per at ion . Hav ing met t he r equi rem ent s of I FR S 5, t he as soc iat ed as set s an d liabi liti es wer e con seq uent ly pr es ent ed as a h eld fo r sal e disp os al gr oup i n the s t ate ment o f f ina ncia l po siti on as at 3 1 J anua ry 2 020 . The di sp osa l gr oup di d not me et th e re quir eme nt s of IF RS 5 t o be c las sif i ed as a di sc ontin ued o per at ion . On 3 M ar ch 20 20, th e Gr oup r ea che d agr eem ent for t he s ale of i t s Cou ntr y C ousi ns and Pa tric ia Wh it e’ s bra nde d hea lth car e busi nes ses t o L imer st on C apit al L L P for an e nter pris e valu e of £ 14 .0 m. C ount r y Co usins a nd Pat rici a Whi te’s were intr od uct or y car e agenc ies , and r ep re sent ed t wo o f the t hr ee div isi ons c omp risin g the G ro up’ s He alt hcar e bu sin ess . Th e re maini ng div isio n, Saga C ar e at Hom e, wa s sol d on 3 1 May 20 20 t o a thir d-p ar t y c ar e pr ovid er , Car e By Us , fo r a nom inal su m of £ 1 . Thi s com plet ed the G ro up’ s exit f ro m heal th car e. Det ail s of the s ale o f the H eal thc ar e bus ine ss op er atio n ar e as foll ows: 2021 £m Cas h con sid erat ion r ec ei ved (net of tr ansa ct ion c os ts) 12.8 Cas h and sh or t-t erm de pos it s dis pos ed of a s par t of t he t ran sac tio n ( 1 . 4) Carr y ing valu e of net a sset s di sp ose d (1 .0) Gain o n disp os al b efor e t ax 10.4 T a x expe nse o n gain – Gai n on di spo sa l af te r ta x 10. 4 ii) Bennetts Duri ng the ye ar end ed 3 1 J anuar y 2 020, t he Gr ou p mad e the d ecis ion t o ini tiat e an ac ti ve pr ogr amm e to l oc ate a b uyer fo r it s insur an ce bi king br an d wit hin th e Insu ra nce s egm ent , B ennet t s M ot or cyclin g Ser v ice s Lim it ed ( B ennett s ). Having me t the re quir eme nt s of IF RS 5 , th e asso ci ate d ass et s and li abili tie s wer e co nseq uent ly pr es ent ed as a h eld fo r sal e dis pos al gr ou p in the s t ate ment o f f inan cia l pos iti on as at 3 1 J anua ry 2 020. T he di spo sal g ro up did n ot me et the r eq uir emen ts o f IF RS 5 t o be clas sif ied as a di sco ntin ued o per ati on . On 1 7 Febru ar y 202 0, the G ro up ann ounc ed t hat it h ad r eac he d agr eem ent for t he s ale of B enn et t s for an e nte rpri se valu e of£ 26m t o At lant a Inves tm ent H old ings C L imit ed ( Atlant a ). Atlan ta i s par t of T he A rd onag h Gr oup, o ne of t he la rges t inde pen dent i nsur anc e br oke rs in t he U K . C omp let ion was s ubje ct t o r ece ivi ng reg ulat or y ap pr oval an d oth er clo sing c ond iti ons . On 7 Aug us t 202 0, the d isp osa l of Be nnet t s t o Atl ant a was c omp let ed fo llowi ng the r ec eipt o f reg ulat or y ap pr ovals , gener atin g net dis po sal p ro ce eds of £ 24 .0 m. Det ail s of the s ale o f Ben net t s ar e as fo llows: 2021 £m Cas h con sid erat ion r ec ei ved (net of tr ansa ct ion c os ts) 24. 0 Cas h and sh or t-t erm de pos it s dis pos ed of a s par t of t he t ran sac tio n (9. 5) Carr y ing valu e of net a sset s di sp ose d (1 2 .7 ) Gain o n disp os al b efor e t ax 1.8 T a x expe nse o n gain – Gai n on di spo sa l af te r ta x 1.8 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 154 iii) Destinology Duri ng the ye ar end ed 3 1 J anuar y 2 02 1 , th e Gr oup m ade t he de cisi on t o init iat e an act ive p rog ra mme t o lo cat e a bu yer for i t s T r avel seg men t busi nes s, D es tin olog y. On 20 Oct ob er 20 20, th e Gr oup a nnou nc ed th at it ha d sol d De sti nol og y L imit ed t o Br ook ly n T r avel L imit ed fo r a nom inal s um of £ 1 . Ne t tr ansa ct ion c os ts o f £0. 2m wer e incu rre d in r elat ion t o th e disp os al. Det ail s of the s ale o f De sti nol og y ar e as fo llows: 2021 £m Cas h con sid erat ion r ec ei ved (net of tr ansa ct ion c os ts) (0. 2) Cas h and sh or t-t erm de pos it s dis pos ed of a s par t of t he t ran sac tio n (1 . 6) Ex pense of non-cash it ems relating to disposal (1 .0) Carr ying value of net liabilities disp osed 0. 2 Los s on dis po sal b efor e t ax (2. 6) T a x expe nse o n gain – Loss on disposa l after tax (2 .6) (iv ) Other Duri ng the ye ar end ed 3 1 J anuar y 2 02 1 , tr ans ac tion c os t s of £ 1 .0 m wer e incu rre d in r elat ion t o oth er bu sine ss dis po sals t hat did not c om plet e. 14 G oodwill Goodwill £m Cost At 1 Febru ar y 202 0 1 , 47 1 . 4 At 31 J anu ar y 20 21 a nd 3 1 Jan uar y 20 2 2 1,4 71. 4 Impairment At 1 Febru ar y 202 0 693. 0 Cha rge for th e pri or yea r (Not e 1 6a) 5 9. 8 At 31 J anu ar y 20 21 a nd 3 1 Jan uar y 20 2 2 752 . 8 Net b oo k valu e At 31 J anu ar y 20 22 71 8.6 At 3 1 Janu ar y 20 2 1 71 8.6 Go odw ill de duc tib le for t a x purp os es am ount s t o £n il (202 1: £ nil ). Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 155 Notes to the f ina ncia l st atemen ts c ontinued 15 Int angible assets Brands £m Customer relationships £m Software £m To t a l £m Cost At 1 Febru ar y 202 0 12 .7 7. 4 14 4. 4 16 4.5 Additions and internally de veloped soft ware – – 13 . 2 13. 2 Disposals – – ( 1 . 2) (1 . 2) Dis pos ed of w ith s ubsi diar y un der t ak ings (1 2 .7 ) ( 7. 4) (4 . 8 ) ( 24 . 9) At 31 J anu ar y 20 21 – – 151. 6 1 51.6 Additions and internally de veloped soft ware – – 11. 2 11 . 2 Disposals – – (5 3 . 9) (5 3 . 9) At 31 J anu ar y 20 22 – – 108. 9 108 .9 Amortis ation and impairment At 1 Febru ar y 202 0 12 .7 7. 4 8 7. 3 1 0 7. 4 Amortisation – – 12.4 12.4 Imp airme nt of ass et s (N ote 1 6 b ) – – 0 .1 0 .1 Disposals – – ( 1 .0) ( 1 . 0) Dis pos ed of w ith s ubsi diar y un der t ak ings (1 2 .7 ) ( 7. 4) (3 . 8) ( 23 . 9) At 31 J anu ar y 20 21 – – 95 .0 95.0 Amortisation – – 1 0.6 10. 6 Imp airme nt of ass et s (N ote 1 6 b ) – – 9. 9 9. 9 Disposals – – (5 3 .7 ) (53 .7 ) At 31 J anu ar y 20 22 – – 61.8 61.8 Net b oo k valu e At 31 J anu ar y 20 22 – – 4 7. 1 47. 1 At 3 1 Janu ar y 20 2 1 – – 56.6 5 6.6 The n et bo ok val ue of so f t war e at 3 1 Jan uar y 20 22 i nclu des i nte rnall y gener at ed s of t war e of £ 26 .0 m (202 1: £ 28 .7m ) relat ing to t he Gr oup’s Guidew ire p lat fo rm. S of twar e a ddit ion s in the ye ar inc lud e int ernal ly gene rat ed s of t wa re of £ 0. 2m (202 1: £3 .1m) relat ing t o the G ro up’ s Gui dewir e pl at for m. G uidew ir e is the G r oup’ s insu ra nce b ro king , p olicy a dmini st rat ion an d billin g plat fo rm . The G uid ewir e plat f orm ha s an exp ect ed u sef ul ec ono mic lif e of 10 ye ars , wi th si x year s of pha se on e expen dit ur e rem aining at 3 1 J anu ar y 202 2 . Imp lem ent ati on and t he c omm enc eme nt of amo r tis ati on of th e Gui dewir e plat fo rm is o n a phas ed b asis , bas ed o n pr odu ct r e-pl at for ming , and b egan in t he yea r ende d 3 1 Jan uar y 20 1 9. The n et bo ok val ue of so f t war e at 3 1 Jan uar y 20 22 a lso in clud es int er nall y gener at ed sof tw are o f £2 . 3 m (202 1: £ 1 0. 3m) rel ating t o th e Gr oup’s Tigerbay p lat fo rm. S of t w are a ddi tio ns in th e year in clud e int erna lly gen er ate d sof twar e of £ 1 . 6m (202 1: £ 3 . 4m) relat ing t o the G ro up’ s Tige rbay pl at form . T igerb ay is the G ro up’ s tr avel bo oki ng re ser vat ion p lat for m. T he Tiger bay pl at form h as an exp ec te d usef ul ec ono mic li fe of 1 0 year s, w ith s even year s of pha se on e expe ndi tur e re maini ng at 31J anu ar y 202 2 . Imp lem ent ati on and t he c omm enc eme nt of amo r tis ati on of t he T igerbay p lat for m is on a p hase d bas is , bas ed on p ro duc t re -pla t formi ng, a nd be gan in th e year en ded 3 1 J anu ar y 2020 . As expl aine d in N ote 1 6b , foll owing th e co ntinu ed im pac t of th e COV ID -19 pan demi c on th e tr avel indu st r y, management dec ided t o r es tru ctu re t he Gr ou p’ s T ou r Op er atio ns bus ine ss . As a r esul t of th is re st ruc turi ng exercis e, m anagem ent per f orme d an imp airm ent r eview of s of t war e as set s us ed by t he T our Ope rat ion s busi nes s. T he ou tc om e of th e impai rment rev iew co nclu ded t hat an i mpair ment c harge of £ 9 .4 m be r ec ogni sed aga inst t he G ro up’ s sof t w are a sset s a s at 3 1 Janu ar y 202 2 , all of wh ich r ela te d to t he T igerbay p lat for m. I n addi tio n, t he G rou p co nclu ded t hat an i mpair ment c harge of £ 0. 5 m to sof t wa re a sset s wa s re quir ed in t he G rou p’ s Cent r al Co st s di vis ion . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 156 The am or t isat ion c harge fo r the ye ar is an alys ed as f ollow s: 2022 £m 2021 £m Cost of sales 0.9 0.6 Admini strative and sellin g expen ses (Note 4 ) 9 .7 11. 8 10.6 12 .4 Duri ng the ye ar , the G r oup dis po sed of a sse ts w ith a n et bo ok va lue of £ 0. 2 m (202 1: £ 0. 2m ). The lo ss ari sing on d isp osa l was £0.1m (20 2 1: £ 0. 2m l oss). Duri ng the p rio r year, borrow ing co st s of £ 1.1m wer e ca pit ali sed in s of t wa re w ithi n int angib le as set s . Th e cap it alis atio n rat e use d to d ete rmine t he am ount of b or row ing co st s t o be c api ta lise d was th e weigh te d average int er es t ra te ap pli cab le to t he Gr oup’s general b orr owi ngs duri ng the p rio r year , be ing 4. 0% . 16 I mpairm ent o f int ang ible asse t s a) Goodwill Go odw ill ac quir ed t hr ough b usin ess c om binat ion s has b een a llo cat ed t o CG Us for t he pu rpo se of im pair ment t es ting . Th e carr y ing valu e of goo dwill by C GU is a s foll ows: 2022 £m 2021 £m Insurance 71 8.6 7 18 .6 71 8.6 7 18 .6 The G ro up t est s a ll good will b alan ce s for im pairm ent at l eas t annu ally, and t wi ce-ye arl y if th ere ex ist in dic ato rs of im pair ment at the in ter im r epo r ting d ate o f 31 J uly. The G r oup ha s duly t es te d th e Insu ran ce C GU goo dwi ll bal anc e for im pair ment as a t 31 J anu ar y 202 2 . In t he pri or yea r , due t o the im pac t of th e COV ID -19 pan dem ic on t he Gr oup’s earnings , th e Gr oup t es t ed good will fo r impa irme nt as at 3 1 Jul y 20 20 and 3 1 J anua ry 2 02 1 . Th e imp airme nt te st c omp ar es th e re cover ab le am ount of eac h CGU t o th e car ry ing val ue of it s n et ass et s inc luding t he val ue of th e all oca te d good will . The G r oup now o nly h as goo dwil l allo cat ed t o it s In sur anc e CG U, fol lowing t he wr it e-o f f in f ull of goo dwi ll allo cat ed t o it s T our Op er atio ns and C rui se CG Us as at 3 1 Jul y 2020 . The r ec over abl e amou nt of th e Insu ran ce C GU h as be en det erm ined b ase d on a val ue-in -use c alc ulat ion u sing ca sh f lo w pr ojec tio ns fr om t he Gr ou p’ s lat est f ive-yea r f ina ncia l for ec ast s t o 20 26/27 , which ar e de rive d using p as t exper ienc e of t he Gr oup’s trading , c omb ined w ith t he ant icip at ed imp act o f cha nges in ma cr oec on omic a nd r egul ato r y fac to rs . A te rmin al valu e has b een c alc ulat ed us ing th e Gor do n Gr ow t h Mo del b ase d on th e f if th year of t hos e pr oje cti ons an d an ann ual gr ow t h ra te of 2.0 % ( Jan uar y 20 2 1: 2 .0%) as the exp ec te d long-ter m average g row th rat e of t he U K eco nomy. The c ash f l ows have th en be en disc ount ed t o pr es ent val ue usi ng a suit a bly ri sk -adju st ed di sc ount r at e bas ed on a m arket-p ar ti cipa nt view o f the c os t of capi t al and d ebt r elevan t to t he ins ura nc e indus tr y. As at 3 1 Ja nuar y 20 2 2, t he pr e-t ax d isc ount r at e use d for th e Ins ura nc e CGU w as 11 . 5% (202 1: 9. 8%). The Gr oup’s fi ve-year f ina ncia l for ec ast s in co rpo rat e th e mo dell ed imp ac t of the p ubl icat ion of t he FCA’ s fi nding s fr om it s ma rket s tud y int o gener al insur an ce pr icing a nd th e impa ct t his will l ikel y have on new b usin ess p ric ing and r et enti on r ate s. A s pe r IAS 3 6 .4 4 , incr em ent al ca sh f low s dir ect ly at t ribu ta ble t o gr ow t h init iat ives n ot yet ena ct ed at t he bal anc e sh eet da te have t hen al so bee n re moved fo r the p urp ose o f the va lue-in -us e cal culat ion . Furt herm or e, th e Gr oup a lso c onsi der ed a n arr ay of st re ss t es ts , b oth in t erm s of ad verse i mpa ct s t o the c ash f l ow pr ojec tio ns and t o th e dis cou nt rat e. Fo r the c ash f l ow st re ss t es ts , th e imp act o f a mor e pr uden t out loo k for t he imp act o f the FCA ma rket s tu dy, fur th er imp act t o tr avel ins ura nc e sal es fr om C OVI D -19 disru ptio n and f ur th er net r at e pr es sur es wer e assu med , in c ombi nati on wi th a mo re c aut ious t erm inal g row th ra te of 1 . 5% r ef lec ting a m or e co nser vat ive ou tlo ok fo r gr ow th in t he U K ec ono my. For the dis cou nt rat e s tr ess t es t , th e Gr oup ap plie d ris k pr emia o f c.+1. 5 ppt . Af t er c onsi deri ng the i mpa ct of c ash f l ow and di sco unt r ate s tr es ses t o th e re cover ab le am ount , t he Gr oup r em ains com for t ab le th at the re r em ains he adr oo m over and a bove th e car r ying val ue of th e net as set s in clu ding goo dwil l allo cat ed tot he Ins ur anc e CGU . This wa s the c ase a t bot h the 3 1 J anua ry 2 02 2 and 3 1 J anua ry 2 02 1 t es ting p oint s . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 157 Notes to the f ina ncia l st atemen ts c ontinued In th e prio r year, as a resul t of th e co ntinu ed un cer t ai nt y and a dver se imp ac t of the C OVI D -19 pan demi c on th e tr avel indu str y, the G ro up det erm ined t hat t he r ecove rab le am ount s of t he goo dwi ll allo cat ed t o th e T o ur O per ati ons an d Cru ise CGU s wer e bel ow th eir r esp ec tive c arr yi ng value s and t oo k the d eci sion t o imp air in f ull th e £ 59. 8m go odw ill all oc ate d to T our Op er atio ns and C ruis e in th e Gr oup’s July 20 20 int erim r es ult s . Whil st t he ou tlo ok fo r the t ravel in dus tr y ha s impr oved s inc e then, char acterised by an improvement in industry bet as and cost of debt levels, goodwill impairments are irreversible. The h eadr o om for t he I nsur anc e CG U agains t th e br ough t for war d car ry ing val ue is as fo llows: Headroom/( deficit) £m Central scenario Ca sh f low s t re ss te st s ce na rio Di sc oun t ra te s tr e ss te st s ce na rio 31 January 2022 31 January 2021 31 January 2022 31 January 2021 31 January 2022 31 January 2021 Insurance 146. 3 216.4 89 .7 72 . 4 ( 10. 2) 10 8.0 The h eadr o om ca lcul ate d is mo st s ensi tive t o th e dis cou nt rat e an d ter mina l gr ow th r at e ass umed , or t o ch anges in t he pr ojec te d cas h f low of t he C GU. A qu anti t ative s ensi ti vit y a naly sis fo r eac h of the se as at 3 1 J anu ar y 202 2 , and i ts i mpa ct on the h eadr o om again st th e br oug ht for war d goo dwil l carr y ing valu e, is as f ollow s: Pre - ta x di sc ou nt r at e T er min al g row th ra te Cash flow ( annual) +1. 0p pt £m –1. 0p pt £m +1. 0p pt £m –1. 0p pt £m +1. 0p pt £m –1. 0p pt £m Insurance (1 36 . 6) 1 20.5 89. 4 (113.1) 6 9.6 (121.4) Give n the se he adr oo m numb ers , th e Dir ec to rs c onsi der t hat th er e is no r eas ona ble p os sibl e cha nge in the k ey assum pti ons made in their i mpairmen t assessment that w ould give rise to a n impai rment. b ) Other int ang ible as set s Sep ar ate ly ide ntif iabl e int angi ble as set s ar e val ued an d th eir app r opri ate u sef ul live s es ta blis hed at t he t ime of a cqui sit ion . The c arr yi ng value s of th ese a sset s a nd th eir r emain ing use ful li ves ar e r eviewed a nnua lly fo r indi cat ors o f impa irme nt . Followi ng the c ont inue d imp act of t he C OVI D -19 pand emic o n the t ravel i ndus tr y, managem ent de cid ed t o re st ruc tur e th e Gr oup’s T our Op er ati ons C GU. A s a re sult of t his r es tru ct uring exer cise , man agement p er fo rme d an imp airm ent r eview of sof t wa re a sset s u sed by t he T our Op era tion s bus ines s. T he o ut com e of th e impa irme nt rev iew co ncl ude d that a n impai rmen t char ge of £ 9.4 m (N ote 1 5) b e re cog nise d agains t th e Gr oup’s sof t war e ass et s as at 3 1 Jan uar y 20 22 . I n addi tio n, t he Gr ou p con clu ded t hat an im pair ment c harge of £ 0. 5m ( Not e 1 5) agains t so f t war e ass et s was r equ ire d in th e Gr oup’s Centr al Cos t sdi visi on . In th e prio r year t he G rou p co nclu ded t hat an i mpair ment c harge of £ 0.1m t o sof twa re as set s wa s re quir ed in t he Gr ou p’ s Cent ral Co sts div isi on. 16 I mpairm ent o f int ang ible asse t s c ontinued a) Goodwill continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 158 17 Proper t y , plant and equipment Freehold lan d an d buildings £m Lo ng leasehold lan d an d buildings £m Cruise shi ps £m As se ts i n th e co urs e of construction £m Pla nt an d equipment £m To t a l £m Cost At 1 Febru ar y 202 0 39. 8 9.5 384.6 72. 8 69.0 5 75 .7 Additions – – – 27 1 .6 2.4 27 4.0 Disposals – (0 .1 ) (80 .7 ) – (1 2 .0) ( 9 2 . 8) Dis pos ed of w ith s ubsi diar y un der t ak ings – (0 . 2) – – ( 1 .0) ( 1 . 2) T r ansfer of asset class – – 3 44.4 (3 4 4 . 4) 3. 2 3.2 Rec lass if i cati on t o ass et s hel d for s ale (N ot e 38) (2 4 . 4) – – – – (2 4 . 4) At 31 J anu ar y 20 21 15.4 9. 2 648.3 – 6 1 .6 73 4 . 5 Additions – – 2 .7 – 4.4 7. 1 Disposals (0 . 1) – – – ( 1 8 . 9) ( 1 9. 0) T r ansfer of asset class – 0. 3 (0.5) – (0. 9) ( 1 .1 ) Rec lass if i cati on fr om a sse ts h eld fo r sal e (N ote 3 8) 3.8 – – – – 3.8 Rec lass if i cati on t o ass et s hel d for s ale (N ot e 38) (4 . 0 ) – – – – (4 . 0) At 31 J anu ar y 20 22 15 .1 9. 5 6 50. 5 – 46.2 721 .3 Depreciation and i mpairment At 1 Febru ar y 202 0 4.6 5.6 80 .7 – 5 9. 8 1 5 0.7 Prov ide d durin g the ye ar 0.7 0. 2 8.3 – 4.3 13 .5 Impairme nt of assets 4.5 0.1 – – 0.4 5 .0 Disposals (0. 1) (0.1 ) ( 75 .7 ) – ( 1 2 .1) (8 8 .0) Dis pos ed of w ith s ubsi diar y un der t ak ings – (0 . 3) – – (0 . 6) (0 . 9) T r ansfer of asset class – – – – 1.5 1.5 Rec lass if i cati on t o ass et s hel d for s ale (N ot e 38) ( 7. 5 ) – – – – ( 7. 5 ) At 31 J anu ar y 20 21 2.2 5.5 13. 3 – 53. 3 74 . 3 Prov ide d durin g the ye ar 0. 2 0 .1 1 6 .1 – 2 .9 1 9. 3 Impairme nt of assets 0. 2 – – – 0.1 0. 3 Disposals – – – – ( 1 8 . 4) ( 1 8 . 4) T r ansfer of asset class – 0. 3 (0 . 2 ) – (0 . 6) (0.5) Rec lass if i cati on fr om a sse ts h eld fo r sal e (N ote 3 8) 0. 8 – – – – 0.8 Rec lass if i cati on t o ass et s hel d for s ale (N ot e 38) ( 1 . 0) – – – – ( 1 . 0) At 31 J anu ar y 20 22 2.4 5.9 29. 2 – 3 7. 3 74 . 8 Net b oo k valu e At 31 J anu ar y 20 22 12 .7 3.6 621.3 – 8.9 6 46.5 At 3 1 Janu ar y 20 2 1 13.2 3.7 6 35 .0 – 8.3 660.2 The d epr ec iati on ch arge for t he yea r is anal yse d as fol lows: 2022 £m 2021 £m Cost of sales 1 7. 1 9.7 Admini strative and sellin g expen ses (Note 4 ) 2.2 3 .8 19. 3 13. 5 Duri ng the ye ar , the G r oup dis po sed of a sse ts w ith a n et bo ok va lue of £ 0.6 m (202 1 : £ 4. 8 m) . The l oss a rising o n disp os al was £0. 4m (20 2 1: £ 7 . 2m pr of i t) . Duri ng the p rio r year, borrow ing co st s of £ 2 .1m wer e ca pit ali sed in p ro pe r t y, plant an d equip ment . The ca pit ali sat ion r ate use d to d ete rmine t he am ount of b or row ing co st s c apit al ised w as th e weight ed aver age int er es t rat e ap plic abl e to t he Gr oup’s general b orr owi ngs duri ng the p rio r year , be ing 4. 0% . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 159 Notes to the f ina ncia l st atemen ts c ontinued a) Impairment review of pr oper t y, plant and equip ment Due t o th e co ntinu ed im pac t of th e COVI D -19 pan demi c on th e Gr oup’s oper atio ns , with t he su sp ensi on of th e Cr uise busi nes ses b et wee n Mar ch 2 020 an d Jun e 20 2 1 and an o ngoing imp ac t on th e level of cu st om er dem and , man agemen t con clu ded t hat th er e co ntinu ed t o exis t indic at ors o f impai rmen t for b oth of i ts o c ean cr uise s hips , S piri t of Dis cover y an d Spir it of A dvent ure . Ma nagem ent th ere for e co nduc t ed imp airm ent r eviews at 3 1 J anuar y 2 02 2 for b oth ve sse ls, f ollow ing pr eviou s rev iews co ndu ct ed at 3 1 J uly 20 2 1 and 3 1 J anua r y 202 1 . The r ec over abl e amou nt of ea ch cr uise s hip was d ete rmine d bas ed o n a value -in-us e cal cul atio n using c ash f low pr ojec tio ns fr om th e Gr oup’s fi ve-year f inanc ial fo re cas t s to 2 026/27 an d app ly ing a co nst an t annua l gr ow th r at e of 2 % the re af t er for subs equ ent pe rio ds unt il the e nd of t he shi p’ s usef ul ec ono mic li fe of 3 0 years , at w hich p oint a r es idua l value of 1 5% of or igin al cos t has b ee n assu med . Thi s has t hen b een di sc ount ed b ack t o pr es ent valu e using a s uit ab ly ris k -adjus t ed dis co unt r ate . The unde rly ing for ec as t cas h f lows wer e up dat ed fo r the l at est i mpa ct of t he COV ID -19 pa nde mic. I n add iti on , a str es s te st o f the pot ent ial ad vers e me dium-t erm imp ac t that t he p ande mic may h ave on dem and fo r cru ises w as als o con side re d, by a ssum ing the n eed f or a fur ther t wo -mo nth lay up of b oth s hips du ring Ap ril an d May 20 2 2, a nd wi th lo ad fa ct ors c ap ped at 75% fo r th e rem aind er of 20 2 2/23 an d at 80 % for th e dur atio n of 20 23/24. Th e annua l gr ow th r at e beyo nd th e f if th year of m anagem ent for ec ast s wa s also r edu ce d to 1 . 5% in th e st re ss t es t sc enari o, r ef lec ting a m or e cau tio us out lo ok fo r long-ter m gr ow th in t he UK economy . Poten tial e nvir onm ent al r egul ato r y cha nges have als o be en co nsid er ed as p ar t of th is ass ess ment . The shi pping i ndus tr y ha s mad e a com mit ment t o r edu ce C O 2 emis sion s by 40 % by 203 0 (fr om a 2 00 8 bas elin e ), and the U K G overnm ent ha s mad e com mit ment s t o re ach n et zer o emis sio ns by 20 50. Th e EE XI/CI I reg ula tion s ar e being i ntr odu ce d int ernat ion ally t o en abl e the in dus tr y t o meet t he 20 30 t ar get , and b oth of S aga’ s cru ise s hips wi ll excee d the r eq uir emen ts o f the se r egu lati ons on impl emen tat ion i n 202 3. T he en d of th eir us eful e co nomi c lives o f 30 ye ars wi ll have be en r eac hed by 2 04 9 in t he ca se of Spir it of D isc over y and 20 51 in t he ca se of S piri t of Ad ventur e. The G ro up has n ot fa ct or ed in any p ot enti al fu el mo dif i cat ions t hat may o cc ur in th e fu tur e int o the c ash f l ow for ec as t s use d for th e imp airme nt ass ess ment o f eit her sh ip. W hils t alt ern ative f uel s may pr es ent a vi abl e ro ute t o de car bo nisat ion f or th e Crui se bu sine ss , th ere a re s ignif icant u pst re am sup pl y chal lenges w hich w ill ne ed t o be r es olve d befo re t he se be co me vi abl e for de ploy ment . T he m ain eng ines c urr entl y ins t alle d in th e Gr oup’s ocean c ruis e ship s ar e cap able o f bei ng mod if ie d for u se wit h cer t ai n alt erna tive f uel s. B eing new ve sse ls , the d esig n and s pec if i cati on of t he Gr ou p’ s cruis e ship s was g uide d by a desi re t o ma ximi se ef f icien cy th rou gh de ploy ment o f the m os t up-t o- dat e te chn olog y. Their hull d esig n ma ximis es f uel ef f iciency, on boar d technolog y minimises fuel consumpt ion and cataly tic c onverters r educe carbo n emissions. Additionall y , the G ro up is pl anning t o r etr o-f i t sho re p ower c onn ec tion s to b oth ve sse ls, a llow ing the m to u se cl ean en erg y wher e availa ble in po r t s of cal l and ha s com men ce d a st udy t o evalu ate ot her e merg ing t ech nol ogie s. T he c apit al ex pen dit ure r eq uir ed fo r the sho re p ower c onn ect ion s has b een in clud ed in t he fo re cas t cas h f lows u sed in t he as se ssm ent . The re is a lso cu rre ntl y no t echn olo gic al alt ern ati ve to ei the r oil or ga s to p ower l arge vess els an d it is n ot cle ar if s uch te chno log y will ever b e com mer cia lly v iab le, o r in what t ime -fra me thi s might b e ac hieved . The c ash f l ows wer e dis cou nte d to p re sent va lue us ing a pr e-t ax di sc ount r at e of 9. 9% ( Ja nuar y 20 2 1: 1 1. 8%) for bot h vess els . As at 3 1 Ja nuar y 20 2 2, t he he adr oo m for e ach of t he sh ips again st t he ca rr ying va lue was a s foll ows: He adr o om £ m Central scenario R WC s tr es s te s t sc en ari o Spi rit of D is cover y 11 9. 2 83.3 Spir it of A dvent ure 7 1.0 34.5 The h eadr o om ca lcul ate d is mo st s ensi tive t o th e dis cou nt rat e an d the l oad f act or a ssum ed wi thin t he fo re cas t ca sh f lows . Give n bot h ship s are r el ative ly new, and s o have r elat ively l ong r ema ining us eful l ives , th e hea dr oom is n ot se nsit ive t o eit her change s in th e usef ul ec ono mic li fe or t he r esid ual va lue of t he ves sel du e to t he de gr ee of di sco unti ng that i s appl ied in t he impai rmen t cal culat ion . A qu anti tat ive s ensi tiv it y an alys is has b ee n set ou t bel ow to i llus tr ate t he im pac t tha t change s in key assu mpti ons wi thin t he val ue-in -use c alc ulat ion wo uld b ring ab out o n the c alc ulat ed h ead ro om as at 3 1 J anua ry 2 02 2: Di sc oun t ra te Residual value Load factor Useful economic life +1. 0p pt £m –1. 0p pt £m +5% £m -5% £m +1% £m -1% £m +5 years £m -5 years £m Spi rit of D is cover y (3 4 . 8) 40.4 0. 2 (0 . 2) 1 1 .1 ( 1 3 . 3) 16 .6 (2 3 . 9) Spir it of A dvent ure (3 6 .1) 42 .1 0. 2 (0 . 2) 11.5 ( 14 . 2) 15 .4 (2 2 . 2) Bas ed on t hes e imp airme nt te st s , and l ook ing at th e like liho od of a r ange of o ut com es , th e Gr oup is s atis f ie d tha t the re wa s hea dro om over a nd ab ove the c arr yi ng value s of bo th Sp irit o f Dis cover y an d Spi rit of A dvent ur e. Gi ven th e hea dr oom i n the te st fo r bot h vess els an d the d egr ee of c aut ion a lre ady a dop te d in th e RWC st r ess s cen ario , the D ir ect or s co nclu ded t hat no impai rmen t of eit her ves sel w as nec es sar y, and th at the re wo uld n eed t o be a r ea son abl y signi f ic ant ch ange in th e key assu mpti ons fo r this t o b e the c ase . 17 Prope r t y , plant and equ ipmen t continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 160 In th e prio r year, as a resul t of th e Gr oup p lann ing to va cat e mo st of i t s pr ope r tie s (N ote 3 8), managem ent co ncl ude d that t his con st itu te d an ind icat or of i mpai rment a nd dul y co ndu ct ed an im pairm ent r eview of t he G ro up’ s fr eeh old l and an d buil dings a s at 3 1 Janu ar y 202 1, wi th th e except ion of t he ma in He ad O f f i ce b uild ing whic h was no t inte nde d to b e vac ate d. I n re lati on t o the se fr ee hol d pr op er ti es, v alue -in-us e was ne glig ible a nd so t he G rou p obt ain ed ma rket val uati ons t o det erm ine th e fair value o f eac h buil ding . The o ut co me of th es e impai rment r evi ews co nclu ded t hat an i mpai rment c harge t ot alli ng £ 5.0 m sh ould be r ec ognis ed agai nst t he G rou p’ s ass et s as at 3 1 Jan uar y 20 2 1 . At 3 1 Janu ar y 20 2 1, t he G ro up re cla ssi f ied f re eho ld la nd an d buil dings w ith a n et bo ok valu e of £ 1 6. 9 m to a sset s h eld fo r sal e (No te 3 8). Duri ng the c urr ent yea r , the G rou p dec las sif i ed on e of th e pr op er tie s cla ssi f ie d as hel d for s ale at 3 1 J anuar y 2 02 1 , t o pr ope r t y, plant an d equi pme nt sinc e it wa s no lo nger bei ng act ivel y mar kete d for d isp osa l (No te 3 8). The car ry ing val ue of th is pr ope r t y as at 3 1 Ja nuar y 20 2 1 was £ 3 .0 m. 18 R ight- of- use ass et s Lo ng leasehold lan d an d buildings £m Ri ver cruise ships £m Pla nt an d equipment £m To t a l £m Cost At 1 Febru ar y 202 0 13.5 2 9.4 8 .3 51 . 2 Additions – – 0. 8 0. 8 Disposals ( 1 . 9) – (0. 5 ) ( 2 . 4) Dis pos ed of w ith s ubsi diar y un der t ak ings ( 1 .1) – – (1 .1 ) T r ansfer of asset class – – (3 . 2) (3 . 2) Ef fe ct of mo dif icat ion of l eas e ter ms (8 . 4) ( 2 9. 4) – (3 7.8) Other movement s – – 0. 5 0.5 At 31 J anu ar y 20 21 2 .1 – 5.9 8 .0 Additions 1.3 33.5 1.0 35.8 Disposals (0 .7 ) – ( 1 . 2) ( 1 . 9) T r ansfer of asset class 4 .0 – 0.9 4 .9 Ef fe ct of mo dif icat ion of l eas e ter ms (5 .1) – – (5 .1 ) At 31 J anu ar y 20 22 1.6 33.5 6 .6 41 .7 Depreciation and i mpairment At 1 Febru ar y 202 0 3.6 18.4 3.5 25. 5 Prov ide d durin g the ye ar 0.7 0. 9 1.5 3 .1 Impairme nt of assets 0.1 – – 0.1 Disposals (1. 5) – (0 . 4) ( 1 . 9) Dis pos ed of w ith s ubsi diar y un der t ak ings (0. 6 ) – – (0 . 6) T r ansfer of asset class – – (1 .5) (1. 5) Ef fe ct of mo dif icat ion of l eas e ter ms (0.7 ) (1 9 . 3) – ( 20 . 0) Other movement s – – 0. 5 0.5 At 31 J anu ar y 20 21 1 .6 – 3.6 5. 2 Prov ide d durin g the ye ar 0.1 0.7 1.5 2 .3 Disposals (0 .7 ) – (0 . 4) ( 1 .1) T r ansfer of asset class 4 .1 – 0. 2 4.3 Ef fe ct of mo dif icat ion of l eas e ter ms (5 .0) – – (5 . 0) At 31 J anu ar y 20 22 0 .1 0.7 4.9 5 .7 Net b oo k valu e At 31 J anu ar y 20 22 1.5 32 .8 1 .7 36 .0 At 3 1 Janu ar y 20 2 1 0.5 – 2.3 2.8 Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 16 1 Notes to the f ina ncia l st atemen ts c ontinued The d epr ec iati on ch arge for t he yea r is anal yse d as fol lows: 2022 £m 2021 £m Cost of sales 1.6 1.6 Admini strative and sellin g expen ses (Note 4 ) 0.7 1.5 2.3 3 .1 Duri ng the ye ar , the G r oup dis po sed of a sse ts w ith a n et bo ok va lue of £ 0. 8m (20 2 1: £ 0. 5m). The pro f it ar ising o n disp os al was £0.1m (20 2 1: £ 0.4 m lo ss) . The t ot al c ash ou t f low fo r lea ses a mount ed t o £ 4 . 4m (20 2 1: £ 5. 0m). In th e year en ded 3 1 J anua r y 202 1 , mo dif icat ion of l eas e ter ms r elat ing to r iver c ruis e ship s re sult ed f ro m the i mpa ct of t he COVI D -19 pan demi c on th e T r avel bu sin ess . Th e Gr oup en ter ed i nto m ulti-ye ar agr ee ment s t o le ase t he us e of rive r cruis e ves sels to o per at e it s rive r crui se t our s. A s suc h, t he Gr ou p re cog nise d a right- of-use ass et and c orr es po nding l eas e liab ilit y w hen t hos e leas e agr ee ment s b eca me ef f ect ive . From Ma rc h 202 0, the G ro up sus pe nde d it s T ravel ope rat ions , in clud ing it s ri ver cru ise t our s, as a re sul t of the r es tr ict ions p lac ed o n int ernat ion al tr avel fr om t he imp ac t of the C OVI D -19 pan demi c. Th e Gr oup t hen subs equ entl y cur t ail ed it s r iver cr uise a gr eem ent s duri ng the f inanc ial yea r , and ac co rd ingl y der ec ogni sed t he rig ht-of-use as set s held o n the s t at emen t of f in anci al po sit ion in r es pe ct of t hos e agr eem ent s . The G r oup als o der ec ogni sed t he c orr es pon ding le ase liabi lit ies , whic h co ntrib ut ed t o a re duc tio n in le ase li abili tie s durin g the f inanc ial yea r ende d 3 1 Jan uar y 20 2 1 (N ote 3 7 a) . Lea se agr eem ent s th at wer e mod if ie d in th e year en de d 31 J anu ar y 202 1 , al so en ded w ithin t he s ame f inanc ial yea r . Rive r crui se shi p addi tio ns in th e year e nde d 3 1 Janu ar y 202 2 r elat e t o the r iver c ruis e vess el, S pir it of th e Rhin e (N ote 3 7 a) . In th e year en ded 3 1 J anua r y 202 1 , mo dif icat ion of l eas e ter ms r elat ing to l ong le ase hol d lan d and bu ildi ngs r esul te d fr om theG ro up’ s dec isio n to in iti ate a n act ive pr og ram me t o lo cat e buye rs fo r a numb er of it s f re eho ld pr op er t ies (N ot e 38) du e toa r elat ion ship exi st ing bet we en th e use o f one of t hes e fr eeh ol d pr ope r tie s and t he us e of one o f the l ong le ase hol d lan d buil dings . In a ddit ion , th e mo dif i cati on of l eas e ter ms r elat ing to l ong le ase hol d lan d and bu ildin gs re sul te d in a gain of £ 3 . 2m being r ep or t ed in t he in co me s tat em ent in t he pri or yea r . In th e year en ded 3 1 J anua r y 202 2 , the m odi f ic atio n of le ase t erms r el ating t o lo ng lea seh old l and an d buil dings r es ult ed in again of £ 0. 3m b eing r epo r t ed in th e inc om e st at eme nt in the p rio r year. a) Impairment review of right- of- use a sset s Duri ng the ye ar , the G r oup t ook d eli ver y of the r iver c ruis e ship, S piri t of th e Rhin e, un der a 1 0 -year le ase . Th e ship’s fir st crui se se aso n was init iall y pl anne d to c omm enc e on 1 A pri l 202 1 , bu t due t o th e impa ct of t he C OVI D-19 p and emic , the s t ar t ofthe f irs t seas on was d elaye d for s everal m ont hs . The G ro up did n ot the ref or e ta ke co ntr ol of t he as set un til th e ship’s inaug ur al cru ise t oo k pla ce in S ept emb er 20 2 1 , at whic h po int a rig ht-of-use as set was r ec ogn ised a nd c orr esp on ding le ase liabi lit y wa s capi t alis ed on t he s tat em ent of f inanci al p osit ion . Give n the c arr yi ng value o f the as set i s quant it ati vely m ate rial t o th e Gr oup, c omb ine d wit h the o ngoing ad vers e impa ct s of the C OVI D -19 pand emic o n the w ide r tr avel indus tr y, which c on st itu te an i ndic ato r of imp airm ent , ma nageme nt dee med i t nec ess ar y t o con duc t an imp airm ent r eview on S pir it of t he Rhi ne at 3 1 Ja nuar y 20 2 2. The r ec over abl e amou nt of th e vess el was d ete rmine d bas ed on a v alue -in-us e cal cul atio n using c ash f l ow pr oje cti ons f ro m the G ro up’ s f ive-ye ar f in anc ial fo re cas t s to 2 026/27 an d app ly ing a co nst an t annua l gr ow th r at e of 2 % the re af t er for s ubs eque nt pe rio ds unti l the end of t he sh ip’ s usef ul ec ono mic li fe of 1 0 year s. T his has t hen b ee n disc ount ed b ack t o p res ent val ue us ing a sui ta bly r isk -adj ust ed disc ount r at e. T he und erl ying fo re cas t ca sh f low s wer e upd ate d for t he lat es t imp act o f the C OVI D -19 pand emic . In a ddit ion , a s tr ess te st of t he p ote ntia l adver se m edium -ter m impa ct th at th e pand emi c may have on d eman d for ri ver cr uise s was als o co nsid er ed, b y assu ming th e nee d for a t wo -mo nth lay up of t he ves sel in A pri l and M ay 202 2 , and w ith l oad f ac to rs ca ppe d at 75% for t he r emain der of 202 2 /23 and at 8 0% fo r the d urat ion o f 2023/24. T he an nual g row th rat e b eyond t he f i f th ye ar of ma nageme nt for ec ast s wa s also re duc ed t o 1 .5% in t he s tr ess t es t sc ena rio, r ef le cti ng a mor e ca uti ous ou tlo ok fo r lon g-term gr ow t h in the U K ec on omy. The c ash f l ows wer e dis cou nte d to p re sent va lue us ing a pr e-t ax di sc ount r at e of 5. 2% , w hich ef fect ivel y re pr ese nt s a mark et-par t icip ant ’s view of the p re -ta x co st of d ebt of t he ri ver cru ise bu sin ess . Thi s is be cau se by th e ver y natu re of h ow th e carr y ing valu e of th e right- of-use ass et aris es as t he pr es ent val ue of f utur e le ase p ayme nt s at th e inc epti on of th e lea se, a mark et-par t icip ant wo uld exp ect t o f i nanc e su ch an as set p ure ly wi th de bt . As at 3 1 J anua ry 2 02 2 , the h eadr o om for t he sh ip against i ts c arr ying valu e was as foll ows: He adr o om £ m Central scenario R WC s tr es s te s t sc en ari o Spir it of t he Rh ine 7. 9 6.5 Bas ed on t hes e imp airme nt te st s , and l ook ing at th e like liho od of a r ange of o ut com es , th e Gr oup is s atis f ie d tha t the re wa s hea dro om over a nd ab ove the c arr yi ng value o f Spi rit of t he Rh ine. M an agement c on side re d that t her e was n o re aso nabl e pos sib le ch ange in th e key ass umpt ions m ade in i t s impa irme nt ass ess ment t hat wo uld gi ve ris e to an i mpai rment o f the carr y ing valu e of thi s vess el. 18 Right -of-use assets continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 162 19 Financial asset s and f inancial liabilities a ) Financial assets 2022 £m 2021 £m F V TPL Foreign e xchan ge forward contracts 0.4 0.6 Loan funds 6.2 6.2 Money market funds 29. 2 66. 8 35.8 73 .6 F V TPL designated i n a hedging relationship Foreign e xchan ge forward contracts 0.3 0.1 Fuel oil swaps 1.2 – 1.5 0 .1 F VO CI Debt securi ties 280.8 26 1 . 9 280. 8 261.9 Amortised cost Deposits with f inancial institutions 14.0 24. 2 14 .0 24.2 T ot al financial asset s 3 3 2 .1 359. 8 Current 110.0 105. 2 Non-curr ent 222. 1 254 .6 3 3 2 .1 359. 8 2022 £m 2021 £m T ot al f inanc ial as set s (as above and p r esen te d on th e fac e of th e st at em ent of f i nanc ial p osi tio n ) 332. 1 3 59. 8 T r ad e re cei vabl es (N ot e 23) 112. 2 1 1 7. 7 Ot her r ec ei vable s (N ote 2 3) 1 7. 3 3 3 .0 Cas h and sh or t-t erm de pos it s (N ote 2 5) 226. 9 101 .6 T ot al financial assets (including cash and short-term deposits, trade and other receivables ) 688. 5 6 1 2 .1 Debt s ec urit ies , lo an fun ds , mon ey mark et fun ds an d dep osi ts w ith f inanc ial in sti tu tion s re lat e to m onie s hel d by the G ro up’ s Insu ran ce b usin ess , ar e sub jec t to c ont ra ctu al r es tric tio ns and a re n ot re adi ly availa ble t o b e use d for ot her pu rpo ses w ith in the G ro up. Debt s ec urit ies , whe re t he c ontr ac tu al cas h f lows a re so lel y pri ncip al and i nte re st , an d the o bje cti ve of th e Gr oup’s busine ss mod el is ac hieved b oth by c oll ec ting c ontr ac tu al cas h f lows a nd se lling f in anc ial as set s , ar e clas sif ied as F VOCI . O n dis pos al ofthe se de bt se curi tie s, any r el ate d bal anc e wit hin th e fair va lue r es er ve is re cla ssi f ied t o ot her gain s/ (los se s ) wit hin pr of i t orloss. Dep osi t s wit h f ina nci al ins tit uti ons , wh ere t he c ontr ac tu al cas h f lows a re s olel y pri ncip al an d inte re st an d the o bje cti ve of theG ro up’ s bus ines s mo del is a chieve d by hol ding th e ass et in or de r to c oll ect c ont ra ctu al ca sh f lo ws, ar e cl ass if ie d as meas ur ed at am or ti sed c os t . Th e fair va lues o f f ina ncia l ass et s hel d at amo r tis ed co st a re n ot mat eria lly di f fer ent f r om th eir carry ing amounts. Int er est r et urn on f l oat ing rat e inves tm ent s hel d by th e Gr oup’s insuran ce un der wr iting b usi nes s was link ed t o LI BOR . The Gr oup ad opt ed ‘ I nter es t r ate b en chma rk re form – p has e 2 ( ame ndme nt s to I FR S 9, IAS 3 9, I FR S 7 , IFR S 4 and I FRS 1 6)’ during the ye ar (N ote 2 . 5). In t he U K , L IB OR was r ep lac ed by S ON IA f ro m the e nd of 20 2 1 . Sub seq uent t o th ese a men dment s b eing ado pte d, in ter es t r etur n on f lo ating r at e inves tmen ts h eld by t he G rou p’ s insur an ce un der wri ting b usin ess i s linke d to S ON IA . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 163 Notes to the f ina ncia l st atemen ts c ontinued b ) Financial liabilities 2022 £m 2021 £m F V TPL Foreign e xchan ge forward contracts 1.3 1.3 1.3 1.3 F V TPL designated i n a hedging relationship Foreign e xchan ge forward contracts 2 .7 2 .1 Fuel oil swaps – 0. 2 2 .7 2.3 Amortised cost Bon ds an d bank l oan s (Not e 3 0) 896.5 8 1 7. 1 Lease liabili ties 35 .3 4.4 Bank overdraf ts 0.4 1.5 932 .2 823 .0 T ot al financial liabilities 936.2 826 .6 Current 56 .1 10.4 Non-curr ent 8 8 0 .1 8 16. 2 936. 2 826.6 2022 £m 2021 £m T ot al f inanc ial li abili tie s (as above and pr es ent ed on t he f ace o f the s t at ement o f f ina ncia l po sit ion) 936. 2 826.6 T r ad e payab les ( Not e 26) 124 . 8 115.5 Ot her p ayabl es (N ot e 26) 8 .1 5.1 T ot al financial liabi lities (including trade and other pa yables ) 1,0 69. 1 9 4 7. 2 E xcept f or th e Gr oup’s bonds , th e fair va lues o f f ina ncia l liab ilit ies h eld at am or t ise d cos t ar e not m ate riall y dif fere nt fr om thei r carr y ing amo unt s , sinc e th e int ere st p ayabl e on th ose l iabi liti es is cl ose t o cu rre nt mar ket r ate s. T he fa ir value o f the Gr oup’s bonds (N ot e 30) at 3 1 Jan uar y 20 22 i s £3 8 2. 5 m (202 1: £ 2 26 . 8m). All f inanci al as set s th at ar e mea sur ed at F V TP L ar e mand at oril y mea sur ed at F V TP L and al l f ina ncia l liab ilit ies t hat ar e meas ur ed at F V TP L meet t he de f init ion o f held f or tr ad ing. c ) F air values Fin anci al ins tru ment s h eld at f air valu e ar e value d using q uot ed ma rket p ric es or ot her va luat ion t ec hniqu es . Valuatio n te chniq ues in clu de net p re sen t value a nd dis cou nte d cas h f low m ode ls, a nd c omp ariso n to s imil ar ins tru ment s fo r which marke t observable prices e xist . Assumptions and market observable inputs used in v aluation techniques include foreign curr enc y exchange r ate s and f ut ure o il pri ce s. The o bje cti ve of usi ng valuat ion t ec hniq ues is t o arr ive at a fa ir valu e det ermin atio n th at ref l ec ts t he pr ic e of the f inanc ial inst rum ent at th e re po r ting d ate , whic h woul d have be en det erm ined by m arke t par t icip ant s ac ting at ar m’ s leng th. Obs er vab le pri ce s are t hos e th at have be en se en eit her f ro m cou nte rpar ties o r fr om mar ket pr icing s our ce s, in clu ding Blo omb erg . Th e use of t hes e dep en ds up on th e liqui dit y of t he r elevan t mark et . Fin anci al ins tru ment s h eld at f air valu e have be en cat egor ised i nto a f air valu e me asur eme nt hier ar chy as f ollows : i) L evel 1 The se ar e valu atio n te chni que s that ar e b ase d entir el y on quo te d mark et pri ces i n an ac tivel y tr ad ed ma rket an d are t he m ost rel iabl e. A ll mo ney mar ket fu nds , lo an fun ds an d debt s ecu riti es ar e cat egor ised a s Level 1 as t he fa ir value i s obt ain ed dir ec tl y fr om th e quot ed a cti ve mar ket pr ice . 19 Financial asset s and f inancial liabilities c ontinued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 164 ii) L evel 2 The se ar e valu atio n te chni que s for whi ch all s igni f ic ant inp ut s ar e ta ken f ro m obs er vabl e mark et dat a . The se in clud e valu atio n mod els us ed t o cal cul ate t he pr es ent val ue of exp ec te d fut ur e cas h f lows an d may b e empl oyed ei ther w hen n o act ive ma rket exist s o r whe n ther e ar e qu ote d pri ces avai labl e for s imila r ins trum ent s in a cti ve mark et s. The m ode ls inc orp or at e vario us inp ut s inc ludi ng the c re dit qu ali t y of co unt erpa r tie s, in ter es t r ate c ur ves and f or war d rat e curves of the und erlying inst rument . All t he der ivat ive f in anc ial ins tr umen ts a re c ate gorise d as Leve l 2 as the f air val ues ar e ob ta ined f r om th e cou nte rpar t y , brokers or valued using observable input s . Where material , credit valuation adjustment (CV A) / debit val uation adjustment (DVA) risk adjus tm ent is f act or ed i nto t he fa ir value s of th ese i nst rum ent s. A s at 3 1 Ja nuar y 20 22 , t he mar ked-t o-m arke t value s of der ivat ive ass et s ar e net of a c re dit va luat ion ad jus tme nt at tri but ab le t o deri vati ve cou nte rpar ty d efaul t risk . The f air valu es ar e pe rio dic ally r eview ed by th e Gr oup’s T re asur y C ommi t te es . iii) L evel 3 The se ar e valu atio n te chni que s for whi ch any on e or m or e signi f ic ant inp ut s ar e not b ase d on ob ser vab le ma rket da ta . The fo llow ing t abl es pr ovi de th e quant it ati ve fai r value hi er arc hy of th e Gr oup’s fin anci al ass et s and f inanc ial li abili tie s that areh eld at f air val ue: At 3 1 Ja nua ry 2 0 22 At 3 1 Ja nu ar y 20 2 1 Leve l 1 £m Leve l 2 £m Leve l 3 £m To t a l £m Leve l 1 £m Leve l 2 £m Leve l 3 £m To t a l £m Fina nci al as set s m eas ure d at f air val ue Foreign e xchan ge forwards – 0.7 – 0 .7 – 0 .7 – 0 .7 Fuel oil swaps – 1. 2 – 1.2 – – – – Loan funds 6. 2 – – 6.2 6. 2 – – 6. 2 Debt s ec urit ies 280.8 – – 280. 8 261 . 9 – – 26 1 .9 Money market funds 29. 2 – – 29. 2 66.8 – – 66.8 Financial liabilities measured at fair value Foreign e xchan ge forwards – 4 .0 – 4.0 – 3 .4 – 3.4 Fuel oil swaps – – – – – 0. 2 – 0. 2 Fina nci al as set s f or wh ich f air val ues a re disclosed Deposits with institutions – 14 .0 – 14.0 – 24 . 2 – 24 . 2 Financial liabilities for which fair values are disclosed Bonds and bank loans – 8 79.0 – 879.0 – 793 .9 – 793.9 Lease liabili ties – 35.3 – 35.3 – 4 .4 – 4.4 Bank overdraf ts – 0.4 – 0. 4 – 1.5 – 1.5 The re have b een n o tr ans fer s bet we en Level 1 an d Level 2 an d no no n-r ec urring f air valu e me asur eme nt s of ass et s and liabi lit ies dur ing th e year (20 2 1: no ne) . The G ro up’ s po licy is t o r ec ognis e tr ans fer s int o, and o ut of, fair val ue hier ar chy l evels as at th e end of t he r epo r ting p eri od . The va lues o f the d ebt se curi tie s, m oney m arket f und s and l oan f unds a re b ase d upo n pub licl y availab le ma rket p ric es . Forei gn exchan ge for war ds ar e valu ed usi ng curr ent s pot a nd for war d r at es dis cou nte d to p re sent v alue . They a re al so adjus t ed fo r cou nte rpar t y cre dit ris k usi ng cr edit d efau lt swap (CD S) cur ves . Fuel oil swap s ar e value d wit h ref er enc e to t he valuat ion s pr ovid ed by thi rd p ar ti es , whic h use c urr ent Pla t ts i ndex r ate s, d isc ount ed t o pr es ent valu e. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 165 Notes to the f ina ncia l st atemen ts c ontinued d) Cash f low hedges i) F orward currency r isk Duri ng the ye ar end ed 3 1 J anuar y 2 02 2, t he G ro up des igna te d 298 f or eign exch ange for war d cur re ncy c ontr ac t s as he dges of high ly pr ob abl e for eign c urr enc y cas h expen ses i n fut ur e per iod s. T hes e co ntr act s a re en ter ed i nto t o mini mise t he Gr oup’s e xp osur e t o for eig n exchange ris k . For eig n cu rre nc y ca sh f lo w hed gi ng in st ru me nt s De sig na te d in t he ye ar At 3 1 Ja n 20 2 2 At 31 Ja n 20 2 1 Vol ume £m Volume £m Volu me £m Euro (EUR) 78 (0 . 8) 133 (2 . 5) 92 (0.7 ) US do lla r (U SD) 58 0. 2 86 0 .1 82 (1 . 2) Other curr encies 162 – 212 – 113 (0.1 ) To t a l 298 (0 . 6 ) 431 (2 . 4) 287 ( 2 .0) Hed ging in str ume nt s for ot her cu rre nci es ar e in r esp ect o f Aus tr alia n doll ars , Ca nad ian do llar s, S wi ss fr an cs , Jap ane se yen , New Zeal and dollars, Norwegian krone, Thai baht, Chinese yuan, Danish krona and South African rand. ii) Commodity price risk The G ro up us es der ivat ive f in anci al ins tr ument s t o mit igat e the r isk of a dver se ch anges in t he pr ice o f fue l. T he Gr oup e nte rs into f ixed pr ice c ont ra ct s (swaps ) in th e mana gement o f it s fu el pri ce exp osu re s. T hes e co ntr act s a re exp ec te d to r ed uce t he volat ilit y at t rib ut abl e to p ric e f luc tua tion s of fu el and a re d esig nat ed as c ash f l ow he dges . Hedg ing th e pri ce vo lati lit y of for ec ast f uel p urc has es is in a cc or dan ce w ith t he ris k man agement s tr at eg y o utli ned by t he B oar d of Di re ct ors . Co mm od it y ca sh f l ow he dg ing in s tr ume nt s De sig na te d in t he ye ar At 3 1 Ja n 20 2 2 At 31 Ja n 20 2 1 Vol ume £m Volume £m Volu me £m Hedging inst rument s 36 1 .6 36 1.2 22 (0 . 2) iii) Hedge maturity prof ile The t ab le b elow su mmar ise s the p re sent va lue of t he hig hly p ro bab le for ec as t cas h f lows t hat have b een de sig nat ed in a hedg ing r elat ions hip as at 3 1 J anua ry 2 02 2 . The se c ash f l ows ar e expe ct ed t o be com e det erm ined i n pr of it o r los s in th e sam e per iod in w hich t he c ash f l ows oc cur. Determ ination perio d EUR £m USD £m Other currencies £m Curre ncy hedges £m Fue l hedges £m To t a l £m 1 Febru ar y 202 2 t o 3 1 Jul y 202 2 2 2 .1 1 7. 0 2.5 41 . 6 0. 8 42 .4 1 Augu st 20 2 2 to 3 1 J anuar y 20 23 15 .6 16. 5 3.8 35.9 0.4 36.3 1 Febru ar y 202 3 to 3 1 Ju ly 20 23 12.5 1.4 0. 6 14 .5 – 14.5 1 Augu st 20 23 t o 3 1 Janu ar y 2024 10.0 0.7 0. 2 1 0.9 – 10. 9 To t a l 60. 2 35 .6 7. 1 102 .9 1. 2 104.1 Duri ng the ye ar , the G r oup r ec ognis ed ne t gains of £ 2 .1m (202 1 : £6 .0 m gains) on cash f l ow he dging in st rume nt s thr oug h OC I into t he he dgi ng re ser ve. A ddi tion all y, the Gr oup r ec ognis ed n et gains of £ nil (20 2 1: £ 1 6. 3 m gains) thro ugh O CI int o th e hedg ing r ese rve , in r elat ion t o the s pe cif ic hedg ing ins tru ment fo r th e acq uisi tio n of t wo new sh ips . The ove ral l net gain s wer e £2 .1m (202 1: £2 2 . 3m gain s ). The G rou p has r ec ogni sed £ nil ga ins (202 1 : £n il) th rou gh th e inc ome s t at ement i n re sp ect of t he inef f ect ive p or t ion of h edges m easu re d during t he ye ar . Duri ng the ye ar , the G r oup ha s de- des ignat ed 9 6 fo re ign cur re ncy fo rwa rd c ont ra ct s , wit h a tr ansa ct ion val ue of £ 1 8 .8 m, wher e fo re cas t cas h f lows a re n o longer ex pec t ed t o oc cur wi th a su f f ic ient ly hig h deg re e of ce r ta int y t o meet t he re quir eme nt s of IF RS 9. T he ac cumu lat ed gain s in re lati on t o the se c ontr ac t s of £ 0.7 m have be en r ecl assi f ie d fr om th e hedg ing r ese rve in to p rof it or lo ss dur ing th e year. The Gr oup ha s not de -de sig nat ed any f uel oi l swaps d uring t he year. During the ye ar , the G ro up r eco gnis ed a £ 1 . 2 m gain (202 1 : £2 . 5m ga in) throug h th e inc ome s t ate ment in r es pe ct of m atur ed h edges whic h have be en re cycl ed fr om O C I. I n the p rio r year t he Gr ou p also r ec ogni sed a £ 2 .7m loss in pr op er t y, plant a nd equip men t , in re sp ect of m atur e d hedges w hic h have be en re cog nise d dir ec tly f ro m the h edg ing r eser ve . 19 Financial asset s and f inancial liabilities c ontinued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 166 20 Financial ri sk managemen t objectives and policies The G ro up’ s prin cip al f in anci al lia bili ties c om pris e loa ns and b or row ings , and t ra de and o the r payab les . Th e main p urp ose of the l oans a nd b orr owing s f inan cia l liab ilit ies is t o f in anc e th e Gr oup’s opera tion s and t o pr ovi de gu ar ant ees t o sup po r t it s operatio ns. The Gro up’ s principal financial asset s include debt securities, dep osit s with finan cial institutions , money market fun ds, l oan f und s, an d tr ad e and ot her r ec eiva ble s, an d cas h and s hor t-t erm d epo sit s . Th e Gr oup al so ent ers i nto d eri vative tr ansa ct ions s uch a s for eign exch ange for war d c ontr ac t s, f uel a nd gas oi l swaps a nd int er es t rat e swa ps t o manage i t s expo sur es t o vario us ris ks . The G ro up is exp ose d to m arke t risk , c re dit ri sk , liq uidit y risk , ins ura nc e risk a nd op er atio nal ri sk . Th e Gr oup’s senior manage ment over se es th ese r isk s, s upp or t ed by t he Gr oup T re asur y fu nct ion a nd T reasu ry C om mit t ees w ith in the k ey are as of the G r oup th at ad vis e on f in anci al ris ks a nd th e app ro pria te f inanci al ris k governan ce f ra mewor k for th e Gr oup . The se fun cti ons an d Co mmit t ee s ensu re t hat th e Gr oup’s fin anc ial ris ks a re govern ed by ap pr op riat e po lici es and p ro c edur es an d that f inanc ial ris ks a re i dent if ie d, m eas ure d and m anaged i n ac cor da nc e with t he G ro up’ s po licie s and r isk ob jec tive s. A ll deri vati ve act iv itie s ar e for ri sk man ageme nt purp os es an d are c arri ed ou t by the G r oup’s T rea sur y fu nct ion . It is t he G ro up’ s pol icy th at no t ra ding in de rivat ives f or sp ecu lati ve pur pos es may b e und er t ake n. The G ro up man ages c onc entr at ion ri sk on i ts f inanc ial as set s t hro ugh a p oli cy of dive rsi f ic atio n that i s out line d in the G r oup T r ea sur y Polic y and ap pr oved by t he Bo ar d. T he p olicy d ef in es th e expo sur e limi t by ass et cla ss an d to t hir d-par ty in st itu tio ns bas ed on t he cr ed it ra tings o f the in div idu al co unt erpa r tie s, c omb ine d wit h the v iews of t he Bo ar d. O n a mon thl y basi s, expo sur e to e ach a sset c las s and c ount erp ar t y is c alc ulat ed an d re po r te d, an d co mpli anc e wit h th e pol icy is m onit or ed . The B oar d of D ir ect or s rev iews and ag r ees p oli cies f or man aging e ac h of the se ri sk s, wh ich ar e sum mar ised b el ow. a) Market risk Mar ket ris k is th e risk t hat th e fair va lue of f ut ure c ash f lows of a f in anci al ins tr ument w ill f lu ctu ate d ue t o cha nges in mar ket pric es . Th e Gr oup is ex pos ed t o th e foll owing ma rket ri sk fa ct ors : • Foreign currency risk • Co mmo dit y p ric e risk • Equity pric es • Inte rest rate risk The G ro up has p oli cie s and lim it s app rove d by the B oa rd fo r man aging t he ma rket ri sk exp osur e. T hes e set o ut th e prin cip les that t he bu sine ss sh oul d adhe re t o for m anag ing ma rket ri sk and e st ab lish ing th e max imum li mit s th at the G r oup is wi lling t o acc ept c ons ide ring s tr ateg y, risk app etit e an d cap it al r eso urc es . Th e Gr oup h as th e abili t y to m oni tor m arke t risk exp os ure on a dai ly ba sis an d has es t abl ishe d limi ts f or ea ch c omp one nt of mar ket ris k . The G ro up us es der ivat ives fo r hedg ing it s exp os ure t o fo reig n cur ren cy an d fue l oil pr ice r isk s. T he m arket r isk p olic y explic itl y pr ohib it s th e use of d eri vati ves for s pe culat ive p urpo se s. For r isk exp osu res t hat t he Gr ou p hedge s and fo r whic h the G ro up app lie s hedge a cc ount ing, i nef f ect iven ess m ay aris e if th e timing o f the f or eca st t ran sac tio n cha nges fr om w hat was orig ina lly es ti mat ed , or if th er e ar e chan ges in th e cr edit r isk of t he de rivat ive c ount erp ar t y. Hedge ef fect iven ess is determined at the inception o f the hed ge rela tionship, and throu gh periodic prospective effectiveness a ssessments, to ensur e th at an ec on omic r el atio nshi p exist s b et wee n the h edged i tem a nd he dging i nst rum ent . Th e hedge r ati o of th e hedg ing rel atio nsh ip is th e sam e as tha t re sult ing fr om t he qu anti t y of the h edged i te m that t he G ro up act ual ly he dges an d the quant it y of t he he dging i nst rum ent th at the G r oup ac tua lly us es t o he dge that qu anti t y of he dged it em . Equit y exp osu re s ar e manage d wit hin all oc atio n par ame ter s agr ee d by the B oa rd an d wit h re fer enc e to ag r eed b enc hmar ks . i) F oreign currency r isk Forei gn cur re ncy ris k is th e risk t hat t he fai r value o f fut ur e cas h f lows of a f inanc ial as set o r liabi lit y wi ll f luc tu ate b ec ause o f change s in for eig n exchange r ate s . The G ro up’ s expo sur e to t he ri sk of ch anges in f or eign exch ange rat es r el ate s prim aril y tot he Gr oup’s oper ating a ct ivi tie s (when revenu e or exp ens e is den omin ate d in a dif fer ent cur ren cy fr om t he G ro up’ s functional curr ency) . The G ro up us es for eig n exchange fo rwa rd c ont ra ct s t o mana ge the ma jori t y of it s t ran sa cti on exp osur es . Th e for eig n exchange fo rwa rd c ont ra ct s , som e of whic h ar e form ally d esig nat ed as h edg ing ins tru ment s , ar e ent er ed int o for p eri ods con sis te nt wit h the fo re ign cu rre ncy exp os ure o f the un der lyi ng tr ansa ct ions , gen era lly f ro m one t o 24 mont hs . The f or eign exchange fo rwa rd c ont ra ct s var y wi th th e level of exp ec te d for eig n curr enc y sal es an d pur cha ses . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 16 7 Notes to the f ina ncia l st atemen ts c ontinued 20 Financial ri sk managemen t objectives and policies continued a) Market risk continued i) F oreign currency r isk continue d The fo llow ing t abl e dem ons tr ate s the s ens iti vit y o f the f air valu e of for wa rd exch ange co ntr act s t o a 5% cha nge in US d oll ar and Eur o exchange r at es , wit h all oth er vari abl es he ld co ns ta nt . The G r oup’s e xp osur e t o for eign c urr enc y chan ges for al l othe r curr en cies i s not mat er ial . The im pac t is sh own ne t of t ax at th e curr ent r at e. Se ns iti vi t y of +/– 5% forex rat e c han ge in Ef fe ct o n th e fa ir va lu e of for wa rd exc ha nge contracts Ef fe ct o n pr of i t af t er t a x and equity 2022 EUR +/– £ 3 . 5 m + /– £ 0 . 7 m USD +/– £ 2 . 1 m + /– £ 0 . 4 m 202 1 EUR + /– £ 3 . 5 m +/– £ 1 . 4 m USD +/– £ 2 . 5 m +/– £ 0 . 5 m T o t he ex t ent th at for war d exchange c ont ra ct s ar e hel d as pa r t of ef fe ct ive he dging r el atio nship s, a ny change t o th e fair va lue of the i nst rum ent wil l be of fset by an e qua l and op po sit e ch ange to t he c ost o f the h edged i te m, r esu lting i n no ef f ect o n pr of i t af t er t ax an d equi t y. ii) Commodity price risk The G ro up is af f ect ed by t he p ric e volat ilit y o f cer t ai n com mo diti es . It s op er ating a ct ivi tie s re quir e th e ongoing p urc has e of fue l and gas o il to s ail it s c ruis e ship s and t her efor e r equ ire a c ont inuo us sup ply o f fue l and gas o il. T he vol atil it y in t he pri ce of fue l and gas o il has l ed t o the d ecis ion t o ent er int o c omm odi t y fue l and gas o il swap c ont ra ct s . The se c ont ra ct s ar e expe ct ed to r edu ce t he vol atili t y at tr ibut ab le t o pri ce f lu ct uati ons of f uel a nd gas oi l. M anag ing th e pric e vol atili t y of fo re cas t oil pur cha ses is i n ac cor da nc e with t he ri sk ma nageme nt st rat eg y outli ned by t he B oar d of Di re ct ors . The G ro up man ages th e pur ch ase p ric e using fo r war d com mod it y pu rc has e cont r act s b ased o n fu tur e for ec as t fue l oil r equi rem ent s . The fo llow ing t abl e shows t he s ensi tiv it y of t he fa ir valu e of fue l oil swa ps t o chan ges in th e unde rly ing fu el oil p ric e (U S dol lar) wit h all oth er vari abl es he ld co ns ta nt . The i mpa ct is s hown n et of t ax at t he cur re nt rat e. Se ns iti vi t y of +/– 5% rate change in Ef fe ct o n pr of i t af t er t a x and equity 2022 US D – Fuel oi l pric e +/ – £ 0.0m 202 1 US D – Fuel oil pr ice + /– £ 0 . 0 m iii) I nt ere st r at e ris k Int er est r at e ris k aris es pri mari ly fr om m ediu m and lo ng-term inves tm ent s in f i xed int er est s ecu rit ies . Th e mark et value o f the se inves tm ent s is af f ect ed by t he move ment in i nte re st r ate s . This is m anage d by a pol icy of h oldi ng the m ajo rit y of invest ment s t o mat urit y by clos ely m atc hing as set an d liab ilit y d urat ion . It is al so ens ure d tha t the inve stm ent p or t fo lio ha s a diver sif ied r ange of inves tme nt s suc h that t her e is a c omb inati on of f ixed and f l oati ng rat e se curi tie s, as w ell as ot her t y pe s of inves tme nt suc h as Ret ail P ric e Ind ex (RPI ) linke d sec urit ies . Int er est r at e ris k also ar ise s in re sp ect o f the G ro up’ s bo rro wings w her e th e inte re st r at e at t achin g to t hos e bor row ings is not f i xed. W her e t he Gr oup p er ce ives t her e t o be a sig nif icant int er es t r ate ri sk , it m anages i t s expo sur e to s uch r isk s by pur cha sing int er es t rat e c aps t o limi t the r isk . The fo llow ing t abl e shows t he s ensi tiv it y of f inanc ial as set s an d liab ilit ies t o cha nges in , SO NI A as at 3 1 Ja nuar y 20 2 2, an d LI BOR a s at 3 1 Janu ar y 20 2 1 (No te 2 . 5). The i mpa ct is sh own n et of t ax at t he cur ren t rat e. Se ns iti vi t y of +/– 1% rat e c han ge in Ef fe ct o n pr of i t af t er t a x and equity 2022 SONIA +/– £ 0 . 6 m 202 1 LIBOR +/– £ 0 . 2 m Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 168 b ) Credit ri sk Cr edi t risk is t he ri sk th at a co unte rpar ty w ill not m eet i ts o bliga tion s und er a f in anci al ins tru ment o r cus to mer c ont ra ct , lea ding t o a f ina ncia l los s. T he G ro up is exp ose d to c re dit ri sk in r elat ion t o it s f i nanc ial an d re insur an ce as set s , out s t and ing deri vati ves , and tr ad e and o ther r ec ei vabl es . The G ro up as ses ses i t s cou nter par t y exposu re in r el atio n to t he inves tm ent of surp lus ca sh , fue l oil an d for eign c urr ency c ont ra ct s , and u ndr awn cr edi t fac ilit ies . Th e Gr oup p rima rily u ses p ubli she d cr edi t rat ings t o ass ess c oun ter par t y s tr eng th and t her efor e de f ine t he cr ed it limi t for e ach c ount er par t y in a cc or dan ce w ith approved treasury po licies. The c re dit ri sk in r esp ec t of tr ad e and ot her r ec eiva ble s is gener all y limi te d as pay ment f ro m cus to mer s is gene ral ly r equi re d befo re s er vic es a re p rov ide d. At 3 1 J anua ry 2 02 2 , the m axi mum exp osur e t o cr edi t risk fo r tr ade r e cei vabl es by op er ating segm ent was a s foll ows: 2022 £m 2021 £m Insurance 42.6 3 9. 9 Tr a v e l 2.3 2. 2 Other Businesses and Central Cost s 2.3 5. 2 47. 2 4 7. 3 The va rian ce b et ween t he qu antu m of the m ax imum exp osu re t o cr edi t ris k for tr ad e re cei vab les (above ) and t ot al of t ra de recei vables present ed in ‘T r ade and other recei vables’ (Note 23) primarily relates to insurance inst alment gros s premium debt or s due f ro m cus to mer s, fo r whic h a co rr esp ond ing re lat ed cr ed it or exis t s wit h thir d-p ar t y in sur ers fo r the n et pr emiu m. In th e event of pay ment o bligat ion d efaul t by a cus t omer n o lon ger on ris k , the i mpai rment o f the d ebt or ba lan ce by th e Gr oup would l ead t o a c orr es pon ding r edu ct ion in t he r elat ed c re dit or wi th , or r efun d of net p re mium fr om , th e thir d-p ar t y in sur er . In th e event of pay ment o bligat ion d efaul t by a cus t omer r em aining o n risk , t he im pairm ent of t he de bto r bal anc e by th e Gr oup wo uld not l ea d to a c orr es pon ding r edu ct ion in t he r elat ed c re dit or wi th , or r efun d of net p re mium f ro m, t he thi rd- par t y in sur er , and t he G rou p woul d bea r the c re dit ri sk r elat ing to t he d ebt or bal anc e. The G ro up us es an all owanc e mat rix t o me asur e th e ECL s of tr ad e re cei vabl es fr om i ndiv idu al cus t ome rs , whic h com pris e a ver y large num ber o f sma ll bal anc es . Th e los s allowa nc e re quir ed fo r the se r ec eivab les i s cal cula te d in line w ith t he sim pli f ied meth od fo r tr ade r ec ei vabl es pe r IFR S 9, wh er eby life time EC Ls a re r ec ogni sed i rre levant of t he cr ed it ris k . The l oss allowa nce i s bas ed on a c omb inat ion of : ( i) aged d ebt or an alys is; (ii ) his to ric al expe rien ce of w rit e- of f s for e ach r ec eiva ble; (iii )any sp eci f ic in dic ato rs of c re dit det er ior ati on ob ser ved; an d (i v) managemen t judgem ent . Lo ss r ate s ar e bas ed on t he pr oba bilit y of a rec ei vable p r ogr ess ing thr oug h su cc ess ive st age s of deli nqu ency t o wri te -of f. Financ ial as set s ar e wri t te n of f when t her e is n o re ason abl e expe ct ati on of r ec over y, such as a de bto r fai ling t o engage in a r epay ment p lan wi th th e Gr oup . On th at bas is , the l oss a llowan ce as a t 31 J anu ar y 202 2 an d 3 1 Janu ar y 202 1 was det ermin ed as f ollows f or tr ad e re cei vabl es: 31 January 2022 C urrent < 30 days 30- 60 days 61-90 days 91 -1 20 days > 12 0 days To t a l Expect ed loss ra te 1% 13% 4% 6% 4% 39% Gr oss c arr yi ng amo unt – tr ad e re cei vabl es (No te23) £ 1 0 1 .7m £ 1. 2m £ 0. 5m £0. 4m £ 0.4m £ 1 0 .7m £ 1 14. 9m Lo ss al lowanc e (N ot e 23) £0.6m £0. 2m £0.0 m £0.0m £0.0 m £4. 2m £5 .0m 31 January 2021 Current < 30 days 30- 60 days 61-90 days 91 -1 20 days > 12 0 days To t a l Expect ed loss ra te 0% 25% 38% 29% 22% 63% Gr oss c arr yi ng amo unt – tr ad e re cei vabl es (No te23) £107 .5m £ 1 .6m £ 0. 8m £ 0 . 7m £0.9m £ 2 0.1 m £13 1.6 m Lo ss al lowanc e (N ot e 23) £0 .1m £0.4 m £0.3 m £0. 2m £0. 2m £ 1 2 .7m £13.9m Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 169 Notes to the f ina ncia l st atemen ts c ontinued The loss allo wance for trade receivables reconciles to the open ing allo wances as follo ws: 2022 £m 2021 £m Op ening l oss al lowan ce at 1 Feb ruar y 13.9 21. 2 Dec re ase i n loan l oss a llowa nce r ec og nise d in pr of i t or lo ss duri ng the ye ar (8 . 3) (5. 5 ) Rec eiva ble s writ t en o f f duri ng the ye ar as un co llec t abl e (0. 5 ) ( 1 .7 ) Unused amo unt rev ersed (0.1) (0.1 ) Clo sin g los s all owanc e at 3 1 Jan uar y 5.0 13.9 The G ro up’ s los s allo wanc e has r edu ce d durin g the c urr ent year f ollo wing th e out s our cing of t he In sur anc e seg ment ’s cre dit hire b usi nes s during t he p erio d. Cr edi t risk in r el atio n to d epo sit s , deb t sec urit ies an d der ivat ive co unt erpa r tie s is man aged by th e Gr oup’s T re asur y f unc tio n in ac cor da nc e wit h the G ro up’ s po licy. Invest men ts o f surp lus f unds a re m ade o nly wi th ap pr oved c ount erp ar ti es and w ith in cr edit l imit s as sign ed t o ea ch co unt erpa r t y. Count erp ar t y cr ed it limi t s ar e rev iewed on a r eg ular b asi s and up dat ed thr oug hou t the ye ar sub jec t to ap pr oval by th e Bo ar d. T he limi t s are s et t o minimi se th e co nc entr ati on of ris ks a nd th er efor e mitigate f inancial loss through any potential count erpar ty failur e. The G ro up is exp ose d to t he ri sk of def ault o n th e rei nsur anc e arr angem ent s in it s in sur anc e bus ine ss wh en amo unt s re cover abl e und er th ose a rra ngement s b ec ome d ue. T he G ro up has e nte re d into a f und s-wit hhel d quot a s har e re insur an ce con tr act t o r edu ce it s exp os ure t o cr ed it ris k . Cr edi t risk i n re spe ct of r ein sur anc e arr angem ent s is as ses sed at t he t ime of ent ering int o a r eins ura nce c ont ra ct . T he Gr ou p’ s rein sur anc e pr ogr amm e is on ly pl ac ed wi th r einsu rer s whi ch me et the Group’ s fin ancial streng t h criteria. The G ro up’ s ma ximum ex pos ur e to c re dit ris k for t he c omp one nt s of the s t at emen t of f in anci al po sit ion at 3 1 J anua ry 2 02 2 and 3 1 Ja nuar y 20 2 1 is t he gr os s carr y ing am ount exce pt for d eriva tive f inanc ial ins tr ument s . Th e Gr oup’s maxim um expo sur e for f i nanc ial g uar ant ees a nd f i nanc ial de rivat ive in str ume nt s is not ed un der li quid it y ris k . No ne of th e f in anci al ass et s wer e impai re d at the r ep or t ing dat e. The G ro up’ s f in anci al ass et s and r ein sur anc e ass et s ar e anal yse d by Mo od y’s cr edit r isk r ating a s foll ows: Ratings analysis 31 January 2022 £m AAA AA A BBB Unr ated To t a l Debt securi ties 20. 2 94.4 6 8 .0 98. 2 – 28 0.8 Money market funds 2 9. 2 – – – – 29. 2 Deposits with f inancial institutions – – 14.0 – – 1 4.0 Derivativ e assets – – 1.8 0.1 – 1.9 Loan funds – – – – 6. 2 6. 2 49. 4 94.4 83. 8 98.3 6.2 332.1 Reinsurance asset s – 36.3 2 9.1 – – 65.4 To t a l 49. 4 1 3 0.7 112 .9 98 .3 6.2 3 9 7. 5 31 January 2021 £m AAA AA A BBB Unr ated To t a l Debt securi ties 2 3 .1 73 . 9 71.5 93. 4 – 26 1 .9 Money market funds 66.8 – – – – 66.8 Deposits with f inancial institutions – 24 . 2 – – – 24 . 2 Derivativ e assets – – 0. 2 0. 5 – 0 .7 Loan funds – – – – 6. 2 6. 2 89. 9 98 .1 7 1 .7 93. 9 6. 2 359. 8 Reinsurance asset s – 3 9.7 31.9 – – 7 1 .6 To t a l 89. 9 1 3 7. 8 103 .6 93. 9 6.2 431. 4 20 Financial ri sk managemen t objectives and policies continued b ) Credit ri sk continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 70 c ) Liquidit y risk Liq uidit y risk is t he ris k that t he G rou p, alt houg h sol vent , ei the r doe s not have avail abl e suf f icie nt f ina nci al re sou rc es t o enab le it to m eet i t s obliga tio ns as th ey fall d ue or c an se cur e the m onl y at exces sive c os t . The G ro up’ s app ro ac h to m anag ing liqui dit y ri sk is t o evaluat e cu rre nt and exp ec te d liqu idit y r eq uir emen ts t o en sur e that i t maint ai ns suf f icie nt re ser ves o f cas h or availa bili t y on it s RC F . The Gr oup m anages i t s oblig atio ns to p ay cla ims t o pol icyh ol ders a s they f all du e by mat ching t he matu rit y of inve st ment s t o the ex pe ct ed mat urit y of claim s paym ent s . The t ab le b elow an alys es t he mat urit y o f the G ro up’ s f in anci al lia bilit ies a nd ins ura nc e con tr act li abil itie s on c ontr ac tu al paym ent s . The a naly sis of n on- deri vati ve f ina nci al liab ilit ies is b ase d on t he r emain ing pe riod a t the r ep or ti ng dat e to t he con tr act ual m aturi t y dat e. T he an alys is of cl aims ou t st an ding is b ase d on th e expe ct ed da tes o n whi ch th e claim s will b e set tl ed an d is bef or e disc ount ing , gr os s of re insur an ce . 31 January 2022 £m On demand Less than 1 year 1 to 2 years 2 to 5 years Over 5 years To t a l Bonds and bank loans – 46.4 62.2 572 .0 235.0 9 15 .6 Interes t on bonds and bank loans – 3 2 .7 31.3 65.4 20.0 149. 4 Insuran ce cont ract liab ilities – 8 8 .0 5 0.1 76 . 8 115. 9 3 30. 8 Derivativ e liabi lities – 3 .7 0.3 – – 4.0 – 170. 8 14 3. 9 714 . 2 370. 9 1,399.8 31 January 2021 £m On demand Less than 1 year 1 to 2 years 2 to 5 years Over 5 years To t a l Bonds and bank loans 9 – – 46.4 50 0 .1 28 9 .1 835 .6 Interes t on bonds and bank loans – 2 7. 4 26 .5 46.9 2 7. 9 1 2 8 .7 Insuran ce cont ract liab ilities – 88.9 64.3 92 .7 144 .8 3 9 0.7 Derivativ e liabi lities – 2 .1 1.5 – – 3 .6 – 118 .4 13 8 .7 6 3 9.7 461.8 1,358.6 d) Insur ance ri sk Insu ran ce r isk ari ses f ro m the i nher ent u nce r t ainti es as t o th e oc curr enc e, c os t and t iming of i nsur ed event s t hat c ould l ea d to si gnif icant in div idu al or ag g regat ed c laim s in te rms of q uant it y or va lue. T his c oul d be fo r a numb er of r eas ons , inc ludi ng weath er -re lat ed event s , large i ndiv idu al cl aims , cha nges in cl aima nt beh aviou r pat t erns s uch a s incr ea sed l evels of f rau dule nt activities, the u se of PPOs, prospective or retrospective legislativ e chang es, unresponsiv e and i naccurate pricin g or reserving meth od olog ies a nd th e det erio rat ion i n the G ro up’ s abil it y t o ef fe cti vely a nd ef f icient ly ha ndle c laim s whil e deli vering exce llent custom er servic e. The G ro up man ages ins ura nc e risk w ithi n it s ris k manage ment f ra mework a s set ou t by th e Boa rd . Th e key po lici es and proc esses of mitigating these risks have been implemented, which include under writing part nership arrangements , rei nsur anc e exces s of lo ss c ontr ac t s, p rici ng po licie s and c laim s manage ment , an d adm inis tr atio n po licie s. i) Underwriting and pricin g risk The G ro up pri mari ly und er wri te s mot or ins ur anc e for pr ivat e ca rs in th e UK . The b oo k co nsis t s of a la rge numb er of in div idua l risk s whi ch ar e wid ely s pr ead ge ogr aphi call y, which he lps t o minim ise c onc ent rat ion r isk . Th e Gr oup h as co ntr ols i n pla ce t o re str ict a cc ess t o it s p ro duc t s to o nly t hos e risk s th at it wi she s to un der wr it e. The G ro up has m anagem ent inf orma tion t o all ow it t o mon it or und er wri ting p er for man ce on a c ont inuo us ba sis an d the a bilit y to m ake pr icing an d und er writ ing ch anges qu ick ly. The Gr oup u nde r ta kes d et aile d st ati sti cal a naly sis of un der wr iting exper ien ce fo r eac h rat ing fa ct or an d com bina tion o f rat ing fa ct ors , t o enab le it t o ad jus t pric ing for e merg ing tr en ds . ii) Reserving risk Res er ving ri sk is t he ris k that i nsuf f icie nt fun ds have b een s et asid e to s et tl e clai ms as th ey fall d ue. T he G ro up und er t akes reg ula r inte rnal a ct uari al rev iews an d com miss ion s ext er nal ac tu aria l revi ews at le ast o nc e a year . Th ese r evi ews est imat e th e fut ur e liab ilit ies in o rd er to c on side r the a deq uacy o f the p rov isio ns . Clai ms whi ch ar e subj ec t to PP Os a re a s ignif icant s our ce o f unc er t aint y in t he cl aim’s reser ves . Ca sh f low p r ojec tio ns ar e unde r t aken fo r PP O claim s to e st imat e th e gr oss a nd net o f rei nsur anc e pr ovi sion s re quir ed . PP O pr ovisi ons ar e dis co unt ed to r ef le ct exp ec tat ion s of fu tur e inves tme nt re turn s and c os t inf lat ion . In th e year t o 3 1 Jan uar y 20 22 , th e Gr oup c ons ider e d the a ddit ion al lat en cy risk t o cl aims c os t develo pm ent cau sed by t he impa ct of t he COV ID -19 p ande mic an d re cog nise d an ad dit iona l clai ms r eser ve ab ove ac tua rial b es t es tima te t o cove r this spe cif ic risk . T he lat en cy ris k pr ovis ion in r ela tion t o th e COV ID -19 pa nde mic has b ee n re duc ed si nce 3 1 J anu ar y 202 1 reflective of the improv ement i n the CO VID - 19 outlook. 9 I n Ma rc h 20 2 1 , th e Gr ou p re ac he d ag re em en t of a on e- yea r ex te ns io n to t he d ebt d ef err a l on it s c ru is e shi p fa cil it ie s (N ot e 30). T his h as r es ul te d in t he d ebt re pay me nt s on t he c ru is e shi p fa ci lit ie s wi thi n th e bo nd s an d ba nk lo an s pr of i le d is clo se d ab ove b ei ng am en de d fo r thi s on e-y ear d ef err al Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 17 1 Notes to the f ina ncia l st atemen ts c ontinued iii) Reinsurance The G ro up pur ch ase s rei nsur anc e t o re duc e th e impa ct of in div idu al large l oss es or a cc umula tion s fr om a sin gle c at ast ro phi c event . Dur ing 20 18 , th e Gr oup e nte re d int o a fun ds-wit hhe ld quot a s har e r einsu ran ce c ont ra ct th at re insur es 8 0% of t he Gr oup’s motor c laims r isk s limi te d by a los s rat io ca p of 13 0% , ef fec tive f ro m 1 Febru ar y 20 1 9. Prio r to t his , the G ro up ha d a fun ds-wit hhe ld quo ta s har e r einsu ran ce c ont ra ct in p lac e tha t rei nsur ed 75% of t he Gr ou p’ s mot or cl aims ris ks l imit ed by a l oss rat io ca p of 12 0% . T he Gr ou p also p ur chas es in div idua l excess o f los s pr ote ct ions f or th e mot or p or t fo lio t o limit t he im pac t of asingl e large c laim . Sim ilar p ro te cti ons ar e in p lac e for al l year s for wh ich th e Gr oup h as und er wri t ten m ot or bu sine ss . Reins ur anc e re cover ies on i ndi vidu al exces s of lo ss pr ot ec tio ns can t ak e many ye ars t o co lle ct , pa r tic ularl y if a cl aim is su bje ct to a PP O. This m ean s that t he G ro up has exp os ure t o r einsu ra nce c re dit ri sk fo r many yea rs . Rein sur ers ar e th er efor e re quir ed t o have st ro ng cr edi t rat ings an d th eir f in anci al he alt h is reg ula rly m onit or ed . iv ) Sensitivities The fo llow ing t abl e dem ons tr ate s the i mpa ct on p ro f it an d los s and e quit y o f a f ive- per c ent age poi nt vari atio n in the r ec or de d los s rat io at 3 1 Ja nuar y 20 2 2 and 3 1 Ja nuar y 20 2 1 . Th e impa ct of a 5% ch ange in cl aims o ut st an ding is a lso sh own at t he sa me dat es . The i mpa ct is sh own ne t of re insur an ce an d t ax at th e cur ren t rat e. T he imp ac t to t he st at em ent of f i nan cial p osi tio n as at 3 1 Janu ar y 202 2 an d 3 1 Janu ar y 202 1 of a 0. 25% p erc ent age p oint ch ange in dis co unt r ate fo r PP Os is al so sh own . 2022 202 1 Imp act of a f ive-p er cent age p oint c hange in l oss r ati o + / – £3.3m +/– £ 3 . 2 m Imp act of 5% c hange in c laims o ut s ta nding +/– £ 4 . 1 m +/– £ 4 . 6 m Imp act of a 0 . 25 p er cent age p oint c hange in di sco unt r ate f or PP Os +/– £ 2 . 2 m +/– £ 3 . 2 m e ) Operat ional ris k Ef fe cti ve op erat ion al ris k man agement r eq uir es th e Gr oup t o id entif y, asses s, m anage, m onit or, repo r t and m itigat e all a re as of expo sur e. T he Gr ou p ope rat es a cr oss a r ange of s egm ent s and o pe rat ion al risk i s inhe ren t in all of t he Gr ou p’ s pro du ct s and servic es, arising from the oper ation of assets , from ext ernal events and dependencies , and from internal pro cesse s andsys t ems . The G ro up man ages it s o per ati ona l risk t hro ugh t he ris k man agement f r amewor k agr ee d by the B oar d , and t hro ugh t he us e ofrisk m anage ment t oo ls whi ch, t oget her, ensure t hat op er atio nal ri sk s ar e ident if i ed , manage d and mi tigat ed t o th e level acc ept ed , and t hat c ont ingency p r oc ess es an d disa st er r ec over y plan s ar e in pla ce . Reg ular r ep or t ing is un der t ake n to segm ent b oar ds an d inc lude s det ail s of new an d emer ging ri sk s, as w ell as m onit ori ng of exis ting r isk s. T est ing of c onti ngency pr oc ess es an d disa st er r ec over y pla ns is und er t ake n to en sur e th e ef fe cti vene ss of th es e pr oc ess es . The r es ilie nce o f the Gr oup’s disast er r ec over y pla ns was d emon st rat ed d uring t he COV ID -19 lo ckd own . The G r oup was a ble t o qui ckl y move of f i ce- bas ed co lle agu es t o worki ng fr om ho me ar range ment s , ens uring th at it wa s able t o c onti nue t o sup por t existi ng and new c ustomers through the contact centre and support functions. All of t he G ro up’ s ope rat ion s are d ep ende nt on: th e pr op er fun ct ioning o f it s IT an d co mmuni cati on sys t ems; it s p ro pe r tie s and othe r infr as tru ctu re a sset s; t he ne ed t o ade quat el y maint ai n and pr ot ec t cus to mer a nd emp loyee d at a and ot her in form atio n; and th e abil it y of t he Gr ou p to at t ra ct an d ret ain c oll eag ues . S pec if i c are as of o per ati onal r isk by s egm ent inc lud e: i) Insurance The I nsur anc e se gme nt is re quir ed t o c omp ly wi th vari ous o per ati ona l reg ulat or y r equ ire ment s , pri mari ly in th e UK b ut al so wit hin Gib ra lt ar fo r it s Und er wri ting b usin ess . T o the ex ten t that s ignif icant ex t ern al event s c ould i ncr eas e th e inci denc e of claim s, t hes e woul d pla ce a ddit ion al s tr ain on t he cl aims ha ndling f unc tio n but a ny f ina ncia l impa ct of s uch a n event is consider ed to be an insurance risk . i i ) Tr a v e l The T ravel seg men t ope rat es t wo c ruis e ship s, w hich a re t he Gr ou p’ s larges t tr adi ng ass et s. R isk t o th e op erat ion o f the se crui se shi ps aris es f ro m the im pac t of me cha nica l or oth er ma lfu nct ion , non -c omp lian ce w ith r eg ulat or y r equir em ent s , and fr om gl oba l weat her an d so cio -ec on omic even ts . T he t our ho liday s ope rat ed by t he se gme nt ar e also af fect ed by g lo bal weath er an d soc io- ec on omic event s w hich i mpa ct eit her t he G rou p dir ect ly, or it s sup pli ers . Th e T r avel seg me nt is in ope rat ion w ith m ulti ple su ppl iers w hich m inimis es t he imp act o f any so cio -ec on omic eve nt s af fe ctin g it s sup plie rs . The COVI D -19 pan demi c has c re ate d an unp re ce dent ed c hall enge for t he Gr ou p and a hig h level of un ce r ta int y for a ll co mpa nies . Furt her de ta il re lati ng to t his is pr ovi ded w ith in the b asis o f pr epar at ion an d going c onc ern s ect ion s in Not e 2 .1 on pages1 26 -127. iii) Other Businesses and Central Costs The f inanc ial se rv ic es bu sine ss is r eq uir ed t o com ply w ith va riou s op erat ion al r egul ato r y re quir eme nt s in th e UK . 20 Financial ri sk managemen t objectives and policies continued d) Insur ance ri sk continued Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 172 21 Interest s in unconsolida ted structured entities A str uc tur ed ent it y is d ef in ed as an e ntit y t hat h as be en de sign ed so t hat vot ing or si milar r ight s ar e not t he d omin ant fa ct or in dec iding w ho co ntr ol s the en tit y, suc h as whe n any voting r ight s r elat e t o the a dmini str at ive t ask s on ly and t he r eleva nt act ivi tie s ar e dir ect ed by m ean s of co ntr act ual ag r eem ent s. T he G ro up has in ter es t s in un con soli dat ed s tru ct ure d enti tie s in the fo rm of inves tm ent f unds c omp risi ng : • bank loan funds; and • money market funds. The n atur e and p urp ose o f the b ank lo an f unds a re t o dive rsi f y th e inves tme nt por tfo lio an d enha nc e the over all y iel d, wh ils t maint ain ing an ac ce pt abl e level of ri sk for t he p or t fo lio as a wh ole . Bank l oan f und s invest i n sec ure d lo ans t o com pani es r ate d bel ow inves tme nt gr ad e. The n atur e and p urp ose o f the m oney m arket f und s is to p rov ide m ax imum s ecur it y an d liqui dit y fo r the f und s invest ed w hils t also p rov iding a n ade quat e r eturn . Th e mon ey mar ket fun ds us ed by th e Gr oup a re a ll memb er s of th e Ins tit uti ona l Mon ey Mar ket Funds As so ciat ion . Th ey are t hus r equ ire d to m aint ain s pe cif i ed liq uidit y and dive rsi f ica tio n char ac te ris tic s of th eir underlying portfolios, which comprise in vestment grade in vestments in financial institutions. The G ro up inves t s in unc ons olid ate d st ruc tur ed e ntit ies a s par t of i t s inves tmen t act iv itie s. T he G ro up do es not s po nsor a ny of the unconsolidated structured entities. At 3 1 Janu ar y 20 22 , th e Gr oup’s tota l int ere st in u nc onso lid ate d st ruc tur ed en tit ies was £ 3 5 .4 m anal yse d as fol lows: Carry ing value £m Interest income £m Fai r va lu e gains £m Loan funds 6.2 0. 2 – Money market funds 29. 2 – – The se inves tm ent s ar e t ypi call y man aged un der cr ed it ris k man agement a s des crib ed in N ot e 20. T he Gr oup’s maxim um expo sur e to l oss o n the i nter es t s pr es ent ed ab ove is th e carr y ing amo unt of t he Gr ou p’ s invest ment s . No f ur t her lo ss c an be mad e by the G ro up in r elat ion t o th ese i nvest ment s . For thi s re ason , th e to ta l ass et s of the e ntit ies a re n ot co nsid er ed mean ing f ul for t he pu rpo ses o f unde rs ta nding t he r elat ed r isk s and s o have not b een p re sent ed . 22 Inven tories 2022 £m 2021 £m Raw materials 0.3 0. 2 T echnical st ock s 2.3 1.5 Finished g oods 3 .7 1.8 6.3 3.5 T e chni cal s to ck s ar e sp are p ar t s for t he G ro up’ s oc ean c ruis e ship s. F inis hed s t ock s pr imar ily r elat e t o oc ean c ruis e ship f uel , foo d, b ar and s undr y s to ck s . 23 T r ade and other rec eivables 2022 £m 2021 £m T r ad e re cei vabl es (N ot e 20b) 114. 9 1 31 .6 Los s allowa nc e (No te 20 b) (5 . 0) (1 3 . 9) 10 9.9 1 1 7. 7 Other receivables 1 7. 3 3 3 .0 Prepayment s 16.8 11 .4 Co ntr act c os t ass et s (N ote 3 b) 2.6 2.9 Defe rred a cquis ition costs 18. 2 1 5 .1 Ot her t a xes and s oci al se curi t y co st s 4 .7 3 .0 16 9. 5 18 3 .1 An exp lana tio n of how th e Gr oup m anage s and me asur es t he c re dit ris k of tr ad e re cei vabl es c an be fo und in N ot e 20 b. The Gr oup exp ec ts t ra de an d oth er re ce ivab les t o be n orm ally s et tl ed wi thin 1 2 mo nths . Du e to t he s hor t-t erm nat ur e of th e curr ent r ec eiva ble s, t heir c arr yi ng amo unt is c onsi der ed t o be t he s ame as t heir f air val ue. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 173 Notes to the f ina ncia l st atemen ts c ontinued 24 T rust accounts The C iv il Aviat ion Au th orit y (CA A ) and A sso ciat ion o f Bri tish T ravel A gent s (A BT A) regul ate d the T ravel bu sin ess c ond uct ed by the G ro up in th e UK d uring t he year. T o co mpl y wit h it s re gul ato ry o bligat ion s, t he Gr ou p is re quir ed t o arr ange f i nanc ial sec urit y t o pr ot ec t cus to mer m onie s, in a ddi tio n to m aking A TOL Pro te cti on C ontr ibut ion s, wh ich t he Gr ou p pays int o th e AirT ravel T rust Fund. From 25 Se pt emb er 202 0, the G r oup ch anged it s m eth od of cu st om er pr ot ect ion f or A T OL l ice nsab le b ook ings f ro m f ina ncia l sec urit y b on ds t o paying c us to mer m onie s into t rus t ( T rust Account ing ). Under T rus t Acc oun ting , all m onie s the Gr oup r ec eive s fr om cus t ome rs in r esp ec t of A TOL licen sab le ho liday p ack ages s old , ar e hel d in tru st un til su ch ti me as t he Gr oup ha s ful f ill ed all i ts o bligat ion s to t he cu st ome r . The t rus t is adm inis ter ed a nd c ontr ol led by an i ndep en dent T rust ee , PTT rust ee s Lim it ed. I nt ere st a rising f ro m the f und s hel d on tr ust b el ongs t o th e Gr oup. Wi th th e intr od uct ion of T rus t Acc oun ting dur ing th e prio r year, the Gr oup is n o longe r re quir ed t o hol d f in anci al se curi t y bon ds in r elat ion t o A TOL boo kings . In r el atio n to A BT A book ings a b ond ing re quir em ent s till exi st s (N ot e 37 c) . 25 Cash and c ash equivalen t s 2022 £m 2021 £m Cas h at bank a nd in ha nd 1 74 . 6 94.4 Shor t- term deposits 52. 3 7. 2 Cash and short-term deposits 226 .9 10 1.6 Money market funds 29. 2 66. 8 Bank overdraf t (0 . 4) (1.5 ) Cash and cash equivalents in the cash flow statement 25 5 .7 166.9 Inc lude d wit hin ca sh an d cas h equi vale nt s are a moun ts h eld by t he G rou p’ s T r avel and I nsur an ce b usin ess es , whic h ar e subj ect t o co ntr ac tua l or r egul ato r y re st rict ion s (No te 3 5). The se am ount s h eld ar e not r ea dil y availab le t o be us ed fo r oth er purp os es wit hin th e Gr oup a nd t ot al £ 69.1m (20 2 1: £ 9 1 .5 m). A vaila ble C ash 10 exclude s the se am ount s an d any amo unt s hel d by disp os al gr oup s. Cas h at bank e arns i nte re st at f l oati ng rat es b ase d on da ily ba nk dep os it r ate s. S hor t-term de pos it s ar e mad e for va ry ing per iod s of bet we en on e day and t hr ee mo nths , de pen ding on t he im med iat e cas h re quir eme nt s of the G r oup, an d earn interest at the respective short-term deposit rates. The b ank over dr af t is s ubje ct t o a gu ara nte e in favour o f the G r oup’ s ban kers a nd is li mit ed t o the a moun t draw n. T he ba nk overdraf t is repayable on demand. 26 T rade and other pay ables 2022 £m 2021 £m T rade payables 1 24 . 8 115.5 Other payables 5.8 5 .1 Ot her t a xes and s oci al se curi t y co st s 9.4 8.4 Assets in the course of construction 3.8 4.4 Accruals 55 .9 41 . 7 199. 7 1 75 .1 All t ra de and o the r payab les ar e cu rre nt in nat ur e. Th e car ry ing am ount s of t ra de and o the r payab les ar e c onsi der ed t o be t he sam e as th eir fai r value s, du e to t hei r sho r t-term n atur e. 27 Retirement ben ef it schemes The G ro up op er ate s ret ir emen t ben ef it s che mes f or th e empl oyees o f the G ro up co nsis ti ng of def i ned c ont ribu tio n pla ns and a defined benefit plan. a) Define d cont ribution p lans The re ar e th re e def i ned c ont ribu tio n sch eme s in the G r oup at 3 1 Ja nuar y 20 2 2 (202 1: t wo). The tot al c harge fo r the ye ar in re spe ct of t he def ined c ont ribu tio n sch eme s was £ 4 . 5m (20 2 1: £ 3 . 2m). The a sset s of t hes e sc hem es ar e hel d sep ara tel y fr om t hos e of th e Gr oup in f und s unde r the c ont ro l of T rust ees . 10 R ef er t o th e Al te rn ati ve Pe r fo rma nc e M eas ur es G l oss ar y o n pa ge 20 1 fo r de f ini ti on a nd ex pl an ati on Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 74 b ) Def ined be nef it pla n The G ro up op er ate d a fun ded d ef in ed be nef i t sch eme , the S aga Pen sion S ch eme , whic h was cl ose d to f utu re a cc rual o n 31O ct ob er 20 2 1 (see bel ow) . From 1 Novem ber 2 02 1 , me mbe rs move d fr om ac ti ve to d eferr ed s t atus , wi th f utur e in dexatio n of defe rre d pe nsio ns be for e ret ir emen t mea sur ed by r efer enc e t o the C on sume r Pric e Ind ex (CPI). Duri ng the ye ar , a net expen se of £ 2 .0 m was r eco gnis ed as a p ast s er vic e c ost (with in admi nist r ative a nd sel ling exp ense s) relatin g to t he cl osur e. The a sset s of t he s chem e ar e hel d sep ara tel y fr om t hos e of the G r oup in in dep end entl y adm inis ter ed f und s. The s che me is govern ed by th e emp loym ent laws o f the U K . T he l evel of be nef i ts p r ovide d dep end s on th e mem ber ’s leng th ofser v ice a nd aver age sal ar y whils t a me mbe r of the s ch eme . The s che me r equi re s cont rib uti ons t o be m ade t o a se par at ely admin ist er ed f und wh ich is gover ned by a B oar d of T rust ee s and c ons ist s of a n equ al numb er of e mploye r and em ploye e rep re sen tat ive s. T he Bo ar d of T rust ees i s re spo nsib le fo r the a dmini str at ion of t he pl an as set s and f or th e def i niti on of t he investme nt str ateg y . The l ong-term inve stm ent o bjec ti ves of th e T rust ees an d the G r oup ar e t o limit t he ri sk of th e ass et s fail ing to m eet t he liabi lit ies of t he sc hem e over th e long t erm , and t o ma xim ise r etu rns c onsi st ent wi th an a cc ept ab le level of r isk so t o c ontr ol the l ong-term c os t s of the s ch eme . T o m eet th os e obje ct ives , th e sch eme’s asset s ar e inves te d in dif f er ent cat egor ies of ass et s, wi th di f fer ent m atur iti es de sign ed t o mat ch li abili tie s as th ey fall du e. T he inves tme nt st rat eg y will co ntin ue t o evolve over tim e and is exp ec te d to m at ch th e liab ilit y p rof ile inc re asing ly c los ely. The p ensi on lia bili t y is exp ose d to inf latio n rat e risk s and c hange s in the l ife exp ec ta ncy of m emb ers . A s the p lan as set s in clud e inves tme nt s in quot ed e quit ies , th e Gr oup is expo sed t o equ it y ma rket ri sk . Th e Gr oup h as pr ovid ed su per s ecu rit y t o th e T r ust ee s of th e sch eme , whic h ra nks b efo re any liabi lit ies un der t he sen ior f acil itie s agr ee ment (as det aile d in Not e 3 0). The value of t he se curi t y has b ee n incr ea sed f ro m being c app ed at £ 3 2 . 5m , to b eing c app ed at £ 47 .5m , und er th e lat es t trie nnial v aluat ion of t he s chem e as at 3 1 Ja nuar y 20 20, whic h was co mpl ete d ear ly in t he cur ren t year. The f air valu e of th e ass et s and p re sent va lue of t he ob ligati ons of t he S aga def i ned b enef it sch eme a re a s foll ows: 2022 £m 2021 £m Fair value o f sch eme as set s 41 2 .0 41 1 . 2 Present value of defined benefit obligation (41 0 . 9 ) (41 5 . 5 ) Defined benef it scheme asset / (liability ) 1 .1 (4 . 3) The p re sent va lues o f the d ef in ed be nef i t obl igatio n, t he r elat ed c urr ent se rv ic e cos t an d any pas t ser v ic e cos t s have be en measured usin g the projected un it credit val uation method. The fo llow ing t abl e summ aris es th e co mpo nent s of t he ne t ben ef it ex pen se r eco gnis ed in t he inc om e st at eme nt , OC I and amou nt s re cog nise d in th e st at eme nt of f in anci al po sit ion fo r th e sch eme fo r the ye ar en ded 3 1J anua ry 2 02 2: Fair va lue o f scheme assets £m De f ine d ben ef i t obligation £m De f ine d ben ef i t scheme (liability)/ surplus £m At 1 Febru ar y 202 1 41 1 . 2 (4 1 5 . 5 ) (4 . 3) Pension cost charg e to income statement Curr ent s er vic e c ost p aid in c ash d uring t he pe rio d – (3 . 9) (3 . 9) Non-cas h current servic e cost uplif t – (1 .6) ( 1 .6) T ot al current servic e cost – (5. 5 ) (5 . 5) Past service costs – (2 .0) (2 .0) Net interest 5.9 ( 5 . 9) – Included in i ncome stat ement 5.9 ( 1 3 . 4) ( 7. 5 ) Ben ef it s p aid ( 7. 5 ) 7. 5 – Retu rn on pl an as set s (e xclu ding am ount s in clud ed in n et int ere st exp ens e) ( 5 . 8) – ( 5 . 8) Actuarial changes arising from changes in demographic assumptions – (5 . 3) (5 . 3) Actuarial changes arising from changes in financial assumptions – 16. 2 16. 2 Ex perience adjust ments – (0 . 3) (0 . 3) Sub -tot al in clu ded in o the r com pr ehe nsive i nco me ( 13 . 3) 1 8 .1 4.8 T ot al c ont rib utio ns by em ployer 8.2 (0.1 ) 8 .1 At 31 J anu ar y 20 22 41 2 .0 (4 1 0 . 9) 1 .1 Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 75 Notes to the f ina ncia l st atemen ts c ontinued 27 Retirement ben ef it schemes continued b. Def ine d bene f it plan continued The fo llow ing t abl e summ aris es th e co mpo nent s of t he ne t ben ef it ex pen se r eco gnis ed in t he inc om e st at eme nt , OC I and amou nt s re cog nise d in th e st at eme nt of f in anci al po sit ion fo r th e sch eme fo r the ye ar en ded 3 1J anua ry 2 02 1: Fair va lue o f scheme assets £m De f ine d ben ef i t obligation £m De f ine d ben ef i t scheme liability £m At 1 Febru ar y 202 0 372. 3 (3 7 7. 8) (5 . 5) Pension cost charg e to income statement Curr ent s er vic e c ost p aid in c ash d uring t he pe rio d – ( 5 . 4) ( 5 . 4) Non-cas h current servic e cost uplif t – (2 . 6) (2 .6) T ot al current servic e cost – ( 8 . 0) (8 . 0) Net interest 6.3 (6.3 ) – Included in i ncome stat ement 6.3 (14 . 3) (8 .0) Ben ef it s p aid (9.6 ) 9.6 – Retu rn on pl an as set s (e xclu ding am ount s in clud ed in n et int ere st exp ens e) 31.5 – 31.5 Actuarial changes arising from changes in demographic assumptions – 6.2 6.2 Actuarial changes arising from changes in financial assumptions – (24.7 ) (24 .7 ) Ex perience adjust ments – (1 4 . 2) (1 4 . 2) Sub -tot al in clu ded in o the r com pr ehe nsive i nco me 21.9 (2 3 .1 ) (1 . 2) T ot al c ont rib utio ns by em ployer 1 0.7 (0. 3 ) 10. 4 At 31 J anu ar y 20 21 41 1 . 2 (41 5 . 5 ) (4 . 3 ) The m ajor c at egorie s of ass et s in th e Saga s che me ar e as fo llows: 2022 £m 2021 £m Equities 50. 2 51 .7 Bonds 159.4 203 .0 Proper t y and alternatives 58 .4 3 9.6 Hedge fu nds 133.5 99. 8 Insured annuities 5.3 6 .1 Cash and other 5.2 11 .0 To t a l 412 .0 411 . 2 Equit ies an d bo nds ar e all q uot ed in a cti ve mark et s, w hils t pr op er t y an d hedge f unds a re n ot . Th e impa ct of C OVI D -19 over the p ast t wo ye ars h as inc re ase d the l evel of un cer t ai nt y and vo lati lit y in g lob al f in anc ial ma rket s an d the se c onti nue t o re act to t he pan dem ic. T he C OVI D-19 p and emic c ont inue s to b e an unp re ce dent ed event a nd th e eventu al imp act o n the g lo bal eco nomy a nd ma rket s wil l largel y dep end o n the s cal e and d urat ion o f the o utb re ak and r el ate d vari ant s . Whil st t he ult imat e ext ent o f the ef fect o f this o n the a sset p or t f olio is n ot po ssi ble t o qua ntif y at this t ime , mana gement h as us ed th e lat es t availab le fu nd pr icing d at a to d erive t he val uati ons of a sset s w hich ar e n ot quot ed in a ct ive mar ket s . The p rinc ipal a ssum ptio ns us ed in d ete rmining p ens ion b enef it obl igatio ns for t he S aga sc heme a re s hown b elo w: 2022 202 1 Real r at e of in cr ease i n sal arie s – 2 .60% Real r at e of in cr ease o f pen sion s in pay ment 3 . 45% 2 .70% Real rate of increas e of pensions in deferment 3. 30% 2 . 55% Dis cou nt rat e – p ensi oner 2. 20% 1 . 3 5% Discount rat e – non-pensioner 2 .1 5 % 1. 4 5% Inflatio n – pensioner 3.80% 2 . 80% Inflatio n – non-pensioner 3.6 0% 2 .60% Lif e expe ct anc y of a mem ber r et iring in 2 0 years’ ti me – M ale 27 .8 yrs 27 . 2 yrs Lif e expe ct anc y of a mem ber r et iring in 2 0 years’ ti me – Fema le 29.5 yrs 2 9.0 yrs Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 76 In th e curr ent ye ar , mana gement d eci ded t o t ake a m or e pru dent ap pr oa ch to t he d eriva tion o f the i nf lati on r ate a ssum ptio n, align ing this t o th e mos t r ec ent T rust ees’ valu atio n by r emovi ng the i nf lati on ris k pr emiu m app lied p rev ious ly. The imp ac t of this c hange in as sump tio n was a £ 1 9.0m u plif t in the d ef in ed be nef i t obl igatio n as at 3 1 Ja nuar y 20 22 . Mor tali t y ass umpt ions a re s et usi ng st an dar d t abl es bas ed o n spe cif ic exper ienc e, w her e availa ble , and al low fo r fut ur e mor t al it y imp rove ment s . Th e Saga s che me ass umpt ion is t hat a m emb er curr ent ly age d 60 w ill live o n average fo r a fur ther 26. 2 years i f they a re m ale an d on aver age for a f ur th er 28 .0 year s if th ey ar e fema le. A quant it ati ve sen sit ivi t y anal ysis f or sig nif i cant a ssum ptio ns as at 3 1 J anua ry 2 02 2 and t heir i mpa ct on t he sc hem e liab ilit ies is as follows: Assumption s Di sc oun t ra te Future inflation Life e xpectancy Sensitivity +/– 0 . 2 5% +/– 0 . 2 5 % +/– 1 year Increase Decrease Increase Decrease Increase Decrease Impact £m (23 .3) 25 . 2 11.9 (1 0. 3) 14 .4 ( 14 .0) Not e: a po sit ive imp act r ep re sent s a n incr ea se in th e net d ef ine d be nef i t liab ilit y. The s ensi tiv it y an aly ses ar e ba sed o n a cha nge in an as sumpt ion w hile h old ing all ot her as sump tio ns co nst an t . Wh en cal culat ing th e sen sit ivi t y of th e def in ed b enef it obl igatio n to s ignif icant a ct uari al ass umpt ions , th e sam e met ho d has b een appl ied as w hen c alc ulat ing th e pen sion l iabil it y r ec ognis ed wi thin t he s t atem ent of f inanc ial p osi tio n. T he met ho ds and t y pe s of ass umpt ion us ed in p re pari ng the s ensi tiv it y a naly sis did n ot ch ange co mpar ed t o th e pri or p erio d. The exp ec te d co ntrib ut ion , in re sp ect o f the a cc rual o f ben ef it s , paya ble t o th e Saga s che me for t he n ext f inanc ial ye ar is £ nil and th e avera ge dura tion o f the d ef in ed be nef i t pla n obli gatio n at the e nd of t he r epo r ting p eri od is 2 2 t o 23 year s. Fo rmal actuarial valuations take pla ce every three years for the scheme. The assumptions ado pted for actuarial valuations are det ermin ed by t he T rust ees a nd ar e agr ee d wit h the G ro up, an d are n orm ally m or e pru dent t han t he as sumpt ion s ado pte d for I AS 19 p urp ose s, w hich a re b es t es tima te . Wh ere a f und ing def icit is id enti f ie d, t he Gr ou p and th e T rust ees m ay agr ee a deficit recovery plan to pa y additional contributions above those needed to fund the scheme. The G ro up’ s lat es t tri ennia l valua tion o f the S aga S chem e def ined b enef it plan a s at 3 1 Janu ar y 20 20 was c omp let ed dur ing the ye ar . Saga p lc , and c er t ain g uar ant or sub sid iari es in th e Gr oup, h ave prov ide d a sup er se curi t y to t he T rust ee s of th e Saga Sch eme , whic h ra nks b efo re any l iabil iti es und er th e Gr oup’s bank fac ilit ies . Th e value o f the s ecu rit y h as be en inc re ase d fr om being c app ed at £ 3 2 . 5m , to b eing c app ed at £ 47 .5m un der t he lat es t tr ienni al valu atio n. Fur th er to t his val uati on , a re cover y plan i s in pla ce f or th e sch eme . Und er an ag re ed de f ici t re cover y p lan t ot alling £ 3 9.0 m, t he G rou p mad e an ad diti ona l paym ent of £ 4 . 2m during th e year e nde d 3 1 Janu ar y 202 2 an d will m ake ann ual p ayme nt s of £ 5. 8 m tot al ling a fu r the r £3 4 . 8m over the n ex t six f inanc ial yea rs , wit h the l ast p aym ent be ing ma de on 2 9 Febru ar y 202 7 . The t ot al exp ec te d co ntrib ut ions in the ye ar end ing 3 1 Jan uar y 20 23 ar e £ 5. 8 m and ent ir ely r ela te t o th e £5 . 8m a ddi tion al pay ment . The G ro up has a lso ag re ed t o pay ad dit iona l amou nt s int o an Esc row a cc ount s hou ld as set r etur ns fal l bel ow an agr ee d level over set p erio ds of t ime . Dep en dent up on t he level o f ret urn on t he s chem e’ s ass et s bet we en 3 1 Jan uar y 20 20 and 3 1 J anu ar y 202 7 , any amou nt in th e Esc row a cc ount w ill be r el eas ed t o eith er th e Gr oup o r the s che me by 3 0 Jun e 202 7 . The I nte rnat iona l Fin anc ial Re por ting Int erp re tat ion s Co mmit t ee ( IFR I C) has publ ishe d an int erp re tat ion o f IAS 1 9 (I FR IC 14) whic h is ef fe ct ive for a cc ount ing yea rs co mme ncing o n or af ter 1 J anuar y 2 00 8. I t co nc erns t he tr ea tmen t of surp lus es and the im pac t of s tat ut or y fu nding r eq uir emen ts . H aving t ake n ex ter nal l egal ad vic e wit h re gar d to t he rig ht s of the G r oup un der the T rust d eed s and r ules , ma nageme nt is co mfor tab le th at the G r oup ha s an unc on diti ona l right t o a r efun d of a sur plus . c. Pension consultation In Ju ly 20 2 1, f ollo wing th e co mpl etio n of a rev iew of t he Gr oup’s pensi on arr angem ent s , a con sult at ion p ro ce ss wi th ac ti ve memb er s was lau nch ed. T he c ons ult ati on pr o ces s co nclu ded d uring O ct ob er , and w ith ef fect f ro m 3 1 Oc to ber 2 02 1 , th e Gr oup cl ose d bo th it s exis tin g sch eme s to f utu re a ccr ual: t he Sa ga Pensio n Sc hem e (it s d ef ine d be nef i t pla n ) and t he S aga Workplace Pension Plan (its defined contribution plan ). In their place, the Group launched a new defined contribution pension sch eme ar ra ngement , o per at ed as a M as te r T r us t . This m ove ser ved t o r edu ce th e ris k of fur t her d ef ic it s devel oping i n the fut ur e on th e def in ed b enef it sch eme , whil st mov ing t o a fair er s che me for a ll co lle ague s. As a r esul t of th e Saga Pen sion S ch eme c los ure , a £ 2. 0m ne t expen se ha s cr yst al lise d in th e inc ome s t ate ment a s a pas t ser vi ce c os t . This ex pens e was dr iven by a £ 2 . 5m de bit f ro m an inc re ase in s ch eme li abili tie s due t o all m emb ers b ec oming defer re d mem ber s upo n clo sur e. T his was of fset by a £ 0. 5 m cr edit f ro m the r em oval of t he ill- heal th b enef it pos t cl osur e. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 17 7 Notes to the f ina ncia l st atemen ts c ontinued 28 Insurance c ontract liabilities and reinsurance asset s The an aly sis of g ro ss and n et ins ura nce l iabi liti es is as f ollow s: 2022 £m 2021 £m Gross Claims outstanding 292.8 32 9.5 Provision fo r unearned pr emiums 93.9 96.8 T ot al gro ss liabilities 38 6 .7 426.3 2022 £m 2021 £m Recoverable from reinsurers Claims outstanding 5 9 .1 65. 2 Provision fo r unearned pr emiums 6.3 6.4 T o t al r eins ur ers’ sh ar e of in sur anc e lia bili tie s ( as p re sent ed o n th e fac e of t he s ta te ment o f financial position ) 65.4 7 1 .6 Amo unt s r ecove rab le un der f und s-with hel d quot a sh ar e agr eem ent s r ec ognis ed wi thin t ra de paya ble s: – Claims outst anding 13 3.0 1 47. 1 – Prov isio n for un ear ned p re miums 50 .7 55.9 T ot al reinsurers’ share of insurance l iabilities after funds-withheld quota share 2 4 9.1 2 74 . 6 Analysed as: Claims outstanding 1 92 .1 212.3 Provision fo r unearned pr emiums 5 7. 0 62 .3 T ot al reinsurers’ share of insurance l iabilities after funds-withheld quota share 2 4 9.1 2 74 . 6 2022 £m 2021 £m Net Claims outstanding 23 3 .7 26 4. 3 Provision fo r unearned pr emiums 8 7. 6 90.4 T ot al net insuran ce liabilities 321.3 3 54 .7 Amo unt s r ecove rab le un der f und s-with hel d quot a sh ar e agr eem ent s r ec ognis ed wi thin t ra de paya ble s: – Claims outst anding (1 3 3 .0) ( 1 4 7. 1 ) – Prov isio n for un ear ned p re miums (50 .7 ) (5 5 . 9) T ot al net insu rance liabilities a ft er funds-withheld q uota share 1 3 7. 6 1 51 .7 Analysed as: Claims outstanding 1 0 0 .7 1 1 7. 2 Provision fo r unearned pr emiums 36.9 34.5 T ot al net insu rance liabilities a ft er funds-withheld q uota share 1 3 7. 6 1 51 .7 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 178 Reconciliat ion of movements in claims outst anding 2022 £m 2021 £m Gr oss c laim s out s ta nding a t 1 Febru ar y 32 9.5 35 2 .1 11 Les s: re insur an ce cl aims o ut st an ding (2 1 2 . 3) (2 0 3 .0) 11 Net c laims o ut st a nding at 1 Feb rua ry 1 1 7. 2 14 9.1 Gros s claims incurr ed 9 4.6 1 1 7. 6 11 Less: reinsuranc e recoveries (6 3 . 3) ( 9 9 . 4) 11 Net claims incurr ed 31.3 18. 2 Gr oss c laim s paid ( 1 3 1 . 3) ( 14 0. 2) Les s: re cei ved f ro m rei nsur anc e 83.5 90 .1 Net c laims p aid (47. 8 ) ( 50 .1) Gr oss c laim s out s ta nding a t 31 J anu ar y 292.8 32 9.5 Les s: re insur an ce cl aims o ut st an ding (1 9 2 .1 ) (2 1 2 . 3) Net c laims o ut st a nding at 3 1 J anua ry 10 0 .7 1 1 7. 2 Re co nci li ati on o f move me nt s in t he p ro vi sio n fo r ne t une ar ne d pr emi um s 2022 £m 2021 £m Gross unearne d premiums at 1 F ebruar y 96.8 105. 3 Less: unearned reinsur ance premiums (6 2 . 3) ( 70 . 8) Net unearned premiums at 1 February 34.5 34.5 Gross pr emiums writt en 20 0 .1 2 13. 2 Less: outwar d reinsuranc e premium (1 18. 5) ( 1 3 4 . 3) Net premiums writ ten 81.6 78.9 Gross pr emiums earned (2 0 3 . 0) ( 2 2 1 .7 ) Less reinsuran ce premium earned 1 23. 8 142 .8 Net p rem iums e arne d (N ote 3 a) ( 79. 2) (78.9 ) Gross unearn ed premiums at 31 Januar y 93 .9 96.8 Less: unearned reinsur ance premiums ( 5 7. 0 ) (6 2 . 3) Net unearned premiums at 31 Januar y 36.9 3 4.5 The n et co st of p ur chas ing r einsu ran ce in 2 02 2 was £ 7 .7 m (202 1: £ 7 .8m). The in sur anc e liab ilit ies p re sent ed h er e, an d on th e fac e of th e Gr oup’s stat em ent of f inanc ial p osit ion , ar e bas ed o n an Ogden disc ount r at e of – 0. 25% . a) Discounting Clai ms ou ts t and ing pr ovis ions a re c alc ulat ed o n an undi sc ount ed b asis , wit h th e excepti on of PP Os m ad e by the c our t s as par t of a b od ily in jur y clai m set tl eme nt . Cl aims ou t st an ding pr ovi sion s for PP Os a re di sc ount ed at a r at e of –1. 5% (202 1: –1.5%) repr es ent ing the G r oup’s view on long-ter m car er wage inf l ati on, l ess t he exp ec te d ret urn o n hol ding th e inves te d financial assets ass ociated with the se claims. The va lue of c laims o ut s ta nding b efor e dis co unti ng was £ 33 0. 8m (20 2 1: £ 3 90.7m ) gro ss of r ein sur anc e and £ 1 0 9. 2m (20 2 1: £ 13 3 .4 m) net of rei nsur anc e. The p eri od b et ween t he st at em ent of f i nan cial p osi tio n dat e and t he es tim at ed f in al pay ment d ate wa s cal cul ate d using O gden life exp ec ta ncy t ab les , wi th ap pr opr iat e adjus tm ent s wh er e nec ess ar y for i mpai re d life . The aver age lif e expe ct anc y fr om PP O set tl eme nt dat e to t he f i nal PP O pay ment wa s 38 ye ars (20 2 1: 3 7 year s ) and t he r ate o f invest ment r et urn us ed t o det ermi ne the di sc ount ed val ue of cl aims p rov isio ns was 2 .0 % (202 1: 2 .0 % ). 11 Gr os s cl aim s in cu rr ed a nd r ein su re rs’ s ha re o f cl aim s inc ur re d fo r th e yea r en de d 3 1 Jan ua r y 20 2 1 have b ee n r es t at ed du e t o an in co rr e ct al lo ca ti on b et we en th es e cla ss if i ca ti ons . G r oss c la ims i nc ur re d have d ec r ea se d by £ 1 3. 8 m an d re ins ur er s’ sh ar e of c la ims i nc urr ed h as d ec r eas ed b y £ 13 . 8 m. A s a r esu lt o f th es e cha nge s, g r os s cl aim s ou t st an di ng at 1 Fe br uar y 2 02 0 have i nc re as ed b y £ 13 . 8 m and r e ins ur an ce c la ims o ut s t and ing a t 1 Feb ru ar y 20 20 h ave in cr e ase d by £13 .8m Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 179 Notes to the f ina ncia l st atemen ts c ontinued 28 Insuran ce contract lia bili ties and re insuran ce assets continued b ) Analysis o f claim s incurre d: claim s development t able s The fo llow ing t abl es det ai l the G ro up’ s init ial e sti mat e of ult imat e gr os s and n et cla ims inc urr ed over t he pa st 1 0 year s and t he re-es timation at subsequent f inancial period ends . The fo llow ing t abl e (re-pr es ent ed) an alys es th e gr os s incu rre d cla ims (b efor e de duc ting r eins ur anc e re cover ies) on an acc ide nt year b asis: Analysis of cla im s incurred Financial year ended 31 January To t a l £m Claims paid £m Gross claims out- sta nding £m 2013 £m 2014 £m 2015 £m 2016 £m 2017 £m 2018 £m 2019 £m 2020 £m 2021 £m 2022 £m Accident year 20 13 an d earlier 279. 0 (4 8 . 7 ) (5 1 .7 ) (4 3 . 5 ) (51 .0) (2 8 . 2 ) (1 5 .7 ) ( 1 1 . 9) (9 .7 ) (1. 5) n/a n /a 35. 2 2014 2 8 7. 1 ( 1 5 .1) (2 1 . 6) (1 4 . 3) ( 8 . 4) (9 . 8) (3 . 2) (3 .7 ) (0. 2) 2 10. 8 (196.2) 14.6 201 5 23 1 .6 12.9 (1 2 . 2) ( 1 4 . 0) (1 6.5 ) (8 .6) (8 . 5 ) (1 . 2) 183. 5 ( 1 7 8 . 0) 5 . 5 201 6 250.0 2.2 ( 1 1 .0) (3 3 .1 ) ( 7. 3 ) (1 . 9) ( 9.7 ) 18 9. 2 ( 1 7 1 .6) 1 7. 6 201 7 204.2 (1 .7 ) (1 3 .7 ) (9. 5 ) (14 .6) (2 . 2) 162.5 ( 15 4 . 6) 7. 9 2018 196. 9 5.4 ( 1 0 . 9) ( 1 0 . 8) ( 7. 0 ) 173 .6 ( 1 5 7. 3 ) 16.3 201 9 185.4 4. 5 (1. 5) (9. 6) 178 . 8 ( 14 0. 0) 3 8 . 8 2020 182.4 9 .1 (9 . 9) 18 1 .6 ( 1 4 2 . 4) 3 9. 2 202 1 14 2.9 (1 5 .0) 1 2 7. 9 (8 4 . 8) 4 3 .1 2022 136 .6 13 6.6 (6 9 . 9) 66. 7 27 9.0 238 . 4 16 4 .8 1 9 7. 8 128.9 1 3 3. 6 102.0 1 35 . 5 10 1 .3 80. 3 284.9 Clai ms handling costs 1 7. 5 1 7. 2 18.0 2 1 . 4 20.6 20 .8 18 .0 16 .7 16.3 14 .3 7. 9 29 6 . 5 25 5 .6 18 2 . 8 2 19. 2 1 49. 5 1 5 4 . 4 120.0 1 52 . 2 1 1 7. 6 94 .6 2 9 2 . 8 Favourab le cl aims d evelop ment over t he ye ar has r es ult ed in a £ 56 . 3m (20 2 1: £ 41 .7 m ( r e-pr es ent ed)) redu cti on in t he gr os s claim s inc urr ed in r esp ec t of pr ior yea rs . The an aly sis of g ro ss inc urr ed cl aims ( befo re d edu cti ng rei nsur anc e r ec overie s ) on an a cci dent ye ar bas is ab ove has b een re- pr ese nte d due t o err or s in th e allo cat ion of c laim s acr os s ac cide nt year s, g ro ss cl aims in curr ed i n re spe ct of P PO s and claim s han dling c os ts i n the t ab le pr evi ous ly r epo r te d for t he yea r ende d 3 1 Jan uar y 20 2 1 . Due t o th e valu e of indi vid ual PP O cl aims in curr ed , th ese a re f ully r ec over abl e und er exces s of los s r einsur an ce an d th eref or e this am end ment h as had n o imp act o n net as set s or n et cl aims in curr ed in e ach f inanc ial ye ar . For the f inanc ial ye ar end ed 31J anu ar y 202 1 , g ro ss cl aims in curr ed h ave dec re ased b y £ 13 . 8m , wit h a co rr esp ond ing de cr eas e to t he r einsu rer s’ shar e ofgr oss c laim s incu rr ed. The r e-p re sent ed d evelo pmen t of the a sso cia te d los s rat ios o n the s ame b asis i s as foll ows: Financial year ended 31 January 2013 £m 2014 £m 2015 £m 2016 £m 2017 £m 2018 £m 2019 £m 2020 £m 2021 £m 2022 £m Acc iden t year 201 3 78 % 75% 68% 6 4% 60% 57% 56% 55% 5 4% 5 4% 2014 76 % 72% 67% 63% 6 1% 58% 57% 56% 56 % 201 5 70% 73% 70 % 66% 6 1% 58% 5 5% 55% 201 6 77% 78% 75% 65% 62% 62% 59% 201 7 70% 69% 65% 6 1% 56% 56% 2018 76% 78% 74 % 70% 67% 201 9 78% 80% 79% 75% 2020 78% 82% 78% 202 1 6 4% 58% 2022 67% Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 180 The fo llow ing t abl e (re-pr es ent ed) an alys es th e net in curr ed c laim s ( af t er de duc ting r ein sur anc e re cover ies) on an ac cide nt year ba sis: Analysis of cla im s incurred Financial year ended 31 January To t a l £m Claims paid £m Net claims out- sta nding £m 2013 £m 2014 £m 2015 £m 2016 £m 2017 £m 2018 £m 2019 12 £m 2020 12 £m 2021 12 £m 2022 £m Accident year 20 13 an d earlier 26 9.6 ( 5 7. 0 ) (4 3 . 1 ) (4 9 . 4) ( 42.9 ) (2 5 . 5) ( 1 7. 2 ) ( 1 0 . 4) ( 7. 3 ) (2 . 3) n /a n/a 14 .8 2014 2 76 . 8 (1 4 .7 ) (2 3 . 4) ( 1 1 . 0) (9. 8) ( 1 0 . 9) (2 . 6) (3 . 8) – 200.6 (1 9 2 .7 ) 7. 9 201 5 2 1 9 .1 5. 3 (9. 2) ( 1 1 .1) ( 1 6 . 4) (5 .0) ( 7. 9 ) ( 1 . 0) 173 . 8 ( 1 6 8 .7 ) 5 .1 201 6 2 20 .9 3 . 2 ( 15 .1) (2 2 . 5) (9.1 ) (5 . 8) (4 . 6 ) 1 6 7. 0 (159.4 ) 7. 6 201 7 94 .0 1. 5 (3 . 8) (1 . 9) (3 . 6) (0 . 5 ) 8 5 .7 ( 7 7. 1 ) 8.6 2018 78 . 8 (0 . 8) (1 .6) (2 .7 ) (1 .7 ) 7 2 .0 ( 6 7. 2 ) 4 .8 201 9 72 .3 (0. 2) (0 .1 ) ( 2 . 0) 70 .0 ( 58.9 ) 1 1 .1 2020 5 5 .9 0. 6 ( 1 . 4) 55 .1 (4 8 . 1 ) 7. 0 202 1 41 . 8 (4 . 9) 3 6. 9 (28 . 2) 8 .7 2022 4 3 .7 43 .7 (26 . 5) 1 7. 2 26 9.6 2 1 9.8 16 1. 3 153 . 4 3 4.1 1 8. 8 0.7 25 .1 1 1. 2 25 . 3 92 . 8 Clai ms handling costs 1 7. 4 1 7. 2 18 .0 2 1 . 5 1 1 .5 1 0. 5 8.9 5 .7 13 7. 0 13 6.0 7. 9 287 . 0 2 3 7. 0 179. 3 1 74 . 9 45.6 29. 3 9.6 30. 8 1 8 . 2 3 1 .3 100 .7 The r e-p re sent ed d evelo pmen t of the a sso cia te d los s rat ios o n the s ame b asis i s as foll ows: Financial year ended 31 January 2013 £m 2014 £m 2015 £m 2016 £m 2017 £m 2018 £m 2019 £m 2020 £m 2021 £m 2022 £m Acc iden t year 201 3 76 % 72% 67% 62% 58% 56 % 5 5% 5 4% 53% 53% 2014 75% 7 1% 65% 62% 59% 56 % 5 5% 5 4% 5 4% 201 5 67% 6 9% 66% 63% 58% 56 % 5 4% 53% 201 6 70 % 7 1% 66% 59% 56% 5 4% 53% 201 7 56 % 56% 5 4% 53% 51% 51% 2018 66% 6 5% 6 4% 62% 60% 201 9 7 1% 7 1% 7 1% 69% 2020 63% 6 4% 62% 202 1 53% 47 % 2022 55% Favourab le cl aims d evelop ment over t he ye ar has r es ult ed in a £ 1 8 .4 m (202 1: £ 3 0.6 m) reduc tio n in th e net cl aims in curr ed i n re spe ct of p rio r years . 12 N et c lai ms in cu rr ed b y f in anc ia l yea r hav e be en am en de d an d re -p re se nt ed d ue t o an i nc or re ct a ll oc ati on o f cl aim s ac ro ss a cc id en t yea rs 13 Cl aim s ha nd ling c o st s fo r f in an ci al ye ar s en de d 31 J an ua ry 2 02 0 an d 3 1 Ja nua r y 20 2 1 have b e en am en de d to c o rr ec tl y in co rp or at e cl aim s ha nd ling c o st s bo rn e by co mp an ies a cr o ss t he G ro up Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 181 Notes to the f ina ncia l st atemen ts c ontinued 29 C ontr ac t liabili ties 2022 £m 2021 £m Deferred revenue (Note 3b) 114.6 82. 2 114.6 82. 2 Current 113.0 66.9 Non-curr ent 1.6 15.3 114 .6 82 . 2 Defe rr ed r evenue c omp rise s amo unt s re cei ved wi thin t he T ravel seg ment f or ho lidays a nd cr uise s wit h dep ar tur e d ate s af t er the r ep or t ing dat e, an d insu ran ce p re miums an d sal es r evenue s re cei ved in t he In sur anc e seg ment i n re spe ct of in sur anc e pol icie s whic h co mmen ce af ter t he r epo r ting d at e, and r ep re sent s t he p er for manc e ob ligati ons n ot yet sat isf ied as at 31J anu ar y 202 2 . Co ntr ac t liab ilit ies h ave incr eas ed on t he p rior ye ar due t o th e par t ial r evers al in t he cur re nt year of t he adver se im pac t of th e COV ID -19 pan dem ic on t he T ravel busi nes s whic h oc curr ed i n the ye ar end ed 3 1 Ja nuar y 20 2 1 . 30 Loans and bor row ings 2022 £m 2021 £m Bonds 400.0 25 0.0 Bank loan – 70 .0 Ship loans 51 5.6 51 5. 6 Revolvin g credit facility – – Accrued interest payable 5.9 8.3 921. 5 843.9 Less: defer red issue costs (2 5 . 0) (2 6 . 8) 896.5 8 1 7. 1 T erm loan , RC F and bon ds As at 3 1 Ja nuar y 20 2 1 , the G r oup’s fina ncing f aci liti es c onsi st ed of a £ 25 0.0m s even-yea r seni or uns ecu re d bon d (repayab le May 20 24 ), a £20 0.0 m f ive -year t erm l oan f acili t y (repayab le M ay 202 3) and a £ 1 00.0 m f i ve-year R CF (expiry i n May 20 23). The b ond i s lis te d on th e Iris h St o ck E xcha nge. In Ma rc h 202 1 , t he Gr ou p re ach ed agr ee ment w ith i t s bank s t o amen d coven ant s on t he t erm lo an an d RCF . Subs equ entl y, the se wer e am ende d again in J une 2 02 1 , wh en the G r oup ann oun ce d a seri es of f i nanc ing tr ans ac tio ns int end ed t o impr ove it s f in anci al f lexi bilit y by incr eas ing availa ble li quidi t y, ext endi ng debt m atur iti es and p rov iding g r eat er he adr oo m agains t coven ant s. O n 2 Ju ly 20 2 1 , the G ro up co mpl ete d th e of fe ring of a n ew £25 0.0 m f ive-ye ar se nior u nsec ur ed b ond an d ten der ed £ 100 .0m of t he exis tin g seven-ye ar £ 250.0 m sen ior un sec ure d 20 24 bond . Th e new b ond is g ua rant e ed by Sag a Ser v ice s Lim it ed and S aga M id Co L imi te d. T he pr oc ee ds of t he new b ond o f fer ing wer e use d by th e Gr oup t o re pay in f ull it s exist ing £ 70.0m t erm l oan , to f und t he se t tle ment of £ 100 .0m of i t s exis ting ou t st an ding uns ecu re d 2024 b ond an d for general corpor ate purpose s. As pa r t of th e above t ran sac ti ons , the G r oup als o ann ounc ed t hat it h ad r eac hed ag r eeme nt wit h it s ba nks t o am end t he coven ant s on it s RC F . The coven ant s wi thin t he Gr ou p’ s RCF wer e am end ed as fo llows: • Inc re ase in t he lever age r atio (excluding C ruis e debt) covena nt at 3 1 Jul y 202 2 an d 3 1 Janu ar y 202 3 fr om 3 .0 0x t o 3 .75x. • Redu ct ion in t he G rou p int ere st c over c ovenant at 3 1 J anua ry 2 02 2 fr om 1 . 5x to 1 . 25x, at 3 1 J uly 2 02 2 fr om 3 . 5x to 2 .0 x and at 3 1 Janu ar y 202 3 fr om 3 . 5x to 2 . 5x . In ad diti on , the fo llow ing ame ndm ent s wer e als o mad e: • Div ide nds r ema in re st ric te d while l ever age ( excluding C rui se deb t) is above 3. 0x . • The G ro up r emain s subj ect t o a mini mum liq uidi t y re quir eme nt of £ 4 0.0 m, w hich c an be m et eit her t hr ough c ash o r undrawn and co mmit ted fa cilities . • The m axi mum am ount of li quid it y th at can b e us ed t o fun d the C ruis e bus ines s was in cr eas ed fr om £ 5 5 .0m t o £ 1 15 .0m . • The RC F mat uri t y was ex t ende d to 3 1 M ay 202 5. A r eq uir ement t o r epay t he RC F on 1 M ar ch 20 24 if the exi st ing 2024 bon d has n ot be en r ede eme d prio r to t his dat e . Int er est o n the 2 024 bo nd is in curr e d at an annu al int er es t rat e of 3 . 375% . I nte re st o n the 20 26 b ond i s incur re d at an ann ual inte re st r at e of 5 .5% . I nte re st o n the t erm l oan a nd RC F was inc urr ed at a var iab le r ate of L I BOR p lus a b ank mar gin w hich is linke d to t he Gr ou p’ s levera ge rat io. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 182 The G ro up ad opt ed ‘ Int er es t ra te b enc hmar k refo rm – ph ase 2 (amend ment s t o IF RS 9, I AS 3 9, IF RS 7 , IF RS 4 an d IFR S 16)’ during t he yea r (No te 2 . 5). In th e UK , LI BO R was r epla ce d by SO NI A fr om t he end o f 202 1 . T he Gr ou p to ok th e dec isio n to tr ansi tio n to S ON IA f ro m LI BOR a t the t ime it r ea ch ed agr ee ment w ith i ts b ank s t o amen d the c ovena nt s on it s RC F (see above). Subseq uent t o th ese am end ment s b eing ad opt ed , int er es t payab le on t he Gr oup’s RCF , if drawn do wn, i s incu rre d at avaria ble r at e of SO NI A plu s a bank m arg in whic h is link ed t o the G r oup’ s lever age ra tio. At 3 1 Janu ar y 20 22 , th e Gr oup’s fin anci ng fac ilit ies c ons ist o f a £ 150 .0m s even-year s enio r uns ecur ed b on d (repayab le M ay 2024) , a £ 250.0 m f ive -year s enio r unse cur ed b ond (rep ayabl e Jul y 202 6) and a £ 1 00.0 m f i ve-yea r RCF (expiry i n May 20 25). The b ond s ar e lis te d on th e Iris h St o ck E xcha nge. At 3 1 Janu ar y 20 22 , th e Gr oup h ad dr awn £ nil of i ts £ 100 .0m RC F an d sinc e th e May 20 1 7 ref inanc ing , the £ 20 0.0 m f ive -year ter m loa n has b een r ep aid in f ull. Acc rue d int er est p ayabl e on th e Gr oup’s term lo an , RCF an d bo nds at 3 1 J anua ry 2 02 2 is £ 2 .8 m (202 1 : £ 5.1m). Cruise ship loans In Ju ne 20 1 9, the G ro up dr ew down t he f i nanc ing for i t s crui se shi p, Sp irit of D isc over y, of £24 5 .0m . Th e f ina ncing f or Sp irit o f Dis cover y r epr es ent s a 1 2-year f ixed-r at e st erl ing lo an, b ack ed by an exp or t c re dit g uar ant ee . The i niti al lo an was r epaya ble i n 24 bro adl y equ al ins t almen ts , wi th th e f ir st p ayme nt of £ 10 . 2m p aid in D ece mbe r 20 19. T his f i nan cing is s ecur ed aga ins t Spir it of Dis cover y c ruis e ship as set . The B oar d an noun ce d on 2 2 Jun e 2020 t hat i t had s ecur ed a d ebt h olid ay and c ovenant w aiver fo r the G r oup’s ship facil iti es . The G ro up’ s len der s agr eed t o a de ferr al of £ 3 2 .1m in prin cipa l paym ent s un der th e ship f aci liti es th at wer e due up t o 31M ar ch 20 2 1 . Th ese d eferr ed a moun ts w ere t o b e paid b et wee n Jun e 202 1 a nd De ce mbe r 2024 fo r Spi rit of D isc over y and bet we en Se pte mbe r 202 1 a nd M arc h 202 5 for S piri t of Adve ntur e, a nd int er es t rem ains p ayabl e. On 2 9 Sep tem ber 2 020, t he G rou p drew d own th e f in anci ng for it s n ew crui se shi p, Spi rit of A dvent ur e, of £ 28 0.8 m . The f ina ncing f or Sp irit of A dven tur e re pr ese nt s a 12-year f i xed-r ate s t erlin g loan , ba cke d by an exp or t cr ed it gu ar ant ee. T he lo an is re payab le in 24 br oa dly e qual in st alm ent s , wit h the f irst p aym ent orig ina lly du e six m onth s af t er del iver y in M ar ch 20 2 1 , but init iall y defer re d to S ept emb er 20 2 1 as a r esu lt of th e deb t holi day de scri be d above . This f inanc ing is se cur ed agai nst S pir it of Adventu re cruise s hip asse t. In Ma rc h 202 1 , t he Gr ou p re ach ed agr ee ment o f a one-ye ar ex t ensi on t o the d ebt def err al on i ts c ruis e ship f aci lit ies . As p ar t of an ind ust r y-wid e pac kage of m eas ure s to s upp or t t he cr uise in dus tr y, an ext ens ion of t he exi sti ng debt d eferr al wa s agr ee d to 3 1 M ar ch 20 22 . Th e key t erms of t his de ferr al ar e: • all pr incip al pay ment s t o 3 1 Ma rc h 202 2 (£ 51 .8 m) are defe rr ed and r ep aid over f ive year s; • all f in anci al c ovenant s unt il 3 1 Ma rc h 202 2 ar e wai ved; • dividends remain r estrict ed while the deferred principal is outs tanding ; and • the G ro up is now s ubje ct t o a minim um liqu idit y r eq uir emen t of £ 4 0.0 mill ion , whic h can b e met t hr ough e ith er ca sh or undrawn and co mmit ted fa cilities . Af t er th e year e nd, t he G ro up co nclu de d disc ussi ons w ith i ts C rui se le nder s to a men d the c ovena nt s on th e tw o ship d ebt facil itie s as follows: • Redu ct ion in t he EB ITDA t o debt r ep aymen t rat io fr om 1 . 2x t o 1 .0x f or th e per iod s fr om 3 1 Jul y 20 22 t o 3 1 Jan uar y 20 24. • Redu ct ion in t he EB ITDA t o cas h inte re st r ati o fr om 2 .0x t o 1 .7x as at 31 J uly 2 02 2 . Plea se r efer t o No te 2 .1 for f ur th er det ail . Int er est o n the S pir it of D isc over y ship l oan is i ncur re d at an ef fe ct ive ann ual int er es t ra te of 4 . 3 1% (in clu ding arr angem ent and c ommi tme nt fee s) . Int ere st o n the S pir it of Ad ventu re s hip lo an is in curr ed at a n ef fe cti ve annu al int er est r at e of 3 . 30 % (including arrangement and commitment fees ). Int er est o n the G r oup’s cruise shi p debt d eferr al s was inc urr ed at a var iab le r ate of L IB OR p lus a ba nk mar gin . As n ote d above , the G ro up ad opt ed ‘ Int er es t ra te b enc hmar k ref orm – ph ase 2 (amend ment s t o IF RS 9, I AS 3 9, IF RS 7 , IF RS 4 an d IFR S16)’ duri ng the ye ar (N ote 2 . 5). In t he U K , L IB OR was r ep lac ed by S ON IA f ro m the e nd of 20 2 1 . Sub seq uent t o th ese amen dmen ts b eing a dop te d, int er es t payab le on t he G ro up’ s crui se shi p debt d eferr al s is incu rr ed at a vari abl e rat e of S ON IA plus a b ank m argin . A men dment s t o th e crui se shi p debt f aci liti es wer e execut ed i n De cem ber 20 2 1 . Acc rue d int er est p ayabl e on th e Gr oup’s Cruise s hip lo ans at 3 1 J anua ry 2 02 2 is £ 3 .1m (202 1: £ 3 . 2m). T ot al debt a nd f inanc e cos t s At 3 1 Janu ar y 20 22 , de bt issu e co st s wer e £ 25 .0m (20 2 1: £ 26 . 8m). The moveme nt in th e year r epr es ent s an in cr eas e foll owing th e iss uan ce of t he 20 26 bo nd in J uly 20 2 1 , be ing mor e th an of fset by exp ens e amo r tis atio n for t he p erio d. Duri ng the ye ar , the G r oup ch arged £ 3 7 .4m (20 2 1: £ 29. 4m) to t he inc om e st at eme nt in re sp ect o f fee s and int er es t asso ci ate d wit h the b on ds, t er m loan , sh ip loa ns and R CF . In addi tio n, f inanc e co st s r ec ognis ed in t he in com e st at em ent incl ude £ 0.7m ( 202 1 : £0. 8 m) relati ng to int er es t and f inanc e ch arges o n leas e lia bilit ies a nd net f air val ue lo sse s on der ivat ives are £ 2 .7m ( 202 1 : £n il). The G ro up has c om plie d wit h the f inanc ial c ovenant s o f it s bo rro wing fa cili tie s during t he cu rre nt year and pr ior ye ar . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 183 Notes to the f ina ncia l st atemen ts c ontinued 31 Provisions PMI £m Other £m To t a l £m At 1 Febru ar y 202 0 3 .7 4.0 7. 7 Utilise d during the year (2 . 8) (1 . 2) (4 . 0 ) Release d unutilised during the year – (1 .1 ) (1 .1 ) Cha rge for th e year 4 .0 5 .1 9.1 At 31 J anu ar y 20 21 4.9 6.8 1 1 .7 Utilise d during the year (4 . 8) (8 . 5 ) (1 3 . 3) Release d unutilised during the year – ( 0 . 4) (0 . 4) Cha rge for th e year 0.7 8 .0 8 .7 At 31 J anu ar y 20 22 0.8 5.9 6.7 PMI £m Other £m To t a l £m Current 0.8 5.6 6.4 Non-curr ent – 0. 3 0.3 At 31 J anu ar y 20 22 0.8 5.9 6.7 PMI £m Other £m To t a l £m Current 4.9 6.2 1 1 .1 Non-curr ent – 0.6 0.6 At 31 J anu ar y 20 21 4.9 6.8 1 1 .7 The C OVI D -19 pand emic c ont inue s to l ead t o a hig h level of di srup tio n to p rivat e me dic al inp atien t app oint ment s , wit h app oint ment s an d op erat ion s init iall y bei ng delaye d and r es che dule d. I n the c urr ent yea r , a prov isi on has b een r e cog nise d rel ating t o th e und er writ ing p er for manc e of t he pri vat e med ica l insur an ce (P MI) p ro duc t due t o th e high er level of c laim s incur re d durin g the ye ar and t he li abili t y to t he un der wri te r that t his gi ves ri se t o. In th e pri or yea r , delayed a pp ointm ent s ha d a favour abl e imp act o n the un der wr itin g per f orma nc e of PMI , r es ult ing in a pr of i t sha re du e fr om t he und er writ er. Due to t he Gr oup’s public c ommi tme nt to n ot pr of i t fr om th e imp act s of C OVI D -19, a pr ovisi on t o of f set th is pr of i t shar e was m ade during t he pr ior ye ar . Ot her p rov isio ns pr imar ily c omp rise: p rov isio ns for t he r etur n of ins ura nce c om miss ion in r es pe ct of p olic ies c anc elle d mid-t erm af t er t he r epo r ting d at e or as a r esu lt of b eing ca nce lle d during t he s ta tut or y c ool ing-of f p erio d af t er t he r epo r ting dat e; cre dit hi re an d re pair c laim s hand ling an d litiga tio n cos t s on in co me bo oke d as at th e re po r ting d ate; f l eet ins ur anc e at the e st imat ed c os t of set t ling all o ut st an ding in cid ent s at th e rep or t ing dat e; cus t ome r rem edi atio n re lati ng to ar ea s whe re ther e is li kely t o b e a re quir eme nt to r em edy v ariou s err or s that h ave had an a dver se imp ac t on cus t ome r out co mes; a nd an employer liability provision r elating to various Group-rel ated, self- funded insuranc e arrangements . All p rov isio ns ar e expe ct ed t o be f ull y util ised ove r the n ex t 12 m onth s wit h the exc epti on of th e f le et insur an ce , cr edit h ire a nd rep air cl aims h andli ng and li tigat ion c os t s, an d emp loyer li abili t y pr ovis ions . T he tim ing of f le et ins ura nce c os t s is unc er t ain and wi ll dep end u pon t he na tur e of ea ch inc ide nt . The c os t s of deb t re cover y o n cr edit h ire a nd r epair c laim s han dling an d litiga tio n cos t s ar e unc er t ain an d will d epe nd up on th e nat ure a nd ti ming of ea ch cl aim . The s et tl eme nt cas h out f l ows fr om th e empl oyer lia bili t y pr ovisi on de pen d on th e timi ng of th e set tl eme nt of cl aims . The se it ems a re r evi ewed and u pd ate d annu ally. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 184 32 Rec onciliatio n of liabilities arising fr om f inanc ing act ivit ies The fo llow ing t abl es ana lys e the c ash an d no n-c ash m ovemen ts f or lia bilit ies a risin g fr om f in anc ing act iv iti es: 2021 £m Cash flows £m Non-cash changes 2022 £m New l ea ses and l ea se modific ations (N ot e 18) £m Other £m Lea se lia bilit ies ( Not e 3 7 ) 4.4 (3 .6) 33 .5 – 34.3 Bank loans (Note 30) 70. 0 ( 70 .0) – – – Ship l oans ( Not e 3 0) 515.6 – – – 515.6 Bon ds (N ot e 30) 250.0 1 50.0 – – 40 0.0 Defe rr ed iss ue c ost s ( Not e 30) ( 26 . 8) (6 . 8) – 8 .6 ( 2 5 . 0) 2020 £m Cash flows £m Non-cash changes 2021 £m New l ea ses and l ea se modific ations (N ot e 18) £m Other £m Lea se lia bilit ies ( Not e 3 7 ) 28.6 (4 . 0 ) (20 . 2) – 4.4 Bank loans (Note 30) 140.0 ( 70. 0) – – 70 .0 Ship l oans ( Not e 3 0) 234.8 280. 8 – – 515 .6 Revolv ing cr ed it fa cili t y (No te 3 0) 10.0 (1 0. 0) – – – Bon ds (N ot e 30) 250.0 – – – 25 0.0 Defe rr ed iss ue c ost s ( Not e 30) (14 . 2) ( 1 7. 4 ) – 4.8 (26 . 8) Inc lude d wit hin ‘O t her’ i s the a mor t isat ion o f defer re d issu e co st s of £ 8 .6 m (202 1: £ 4. 8m). Cas h f lows r elat ing t o bank l oan s com pris e r epaym ent of b orr owi ngs of £ 70.0m (20 2 1: £ 70.0m). In th e curr ent ye ar , cas h f lows r elat ing t o bo nds c omp rise p ro c eeds f r om bo rr owings o f £2 50.0 m, r el ating t o a new f i ve-yea r seni or uns ecur ed b on d, l ess r ep aymen t of bo rr owings o f £ 10 0.0 m, r ela ting t o the ex ist ing seven -year s enior u nse cur ed 2024b ond . In th e prio r year, cash f lows r el ating t o shi p loan s co mpri se pr o cee ds fr om b or row ings of £ 28 0.8 m . In th e prio r year, cash f lows r el ating t o th e RCF c omp ris e pr oc eed s fr om b orr owing s of £ 50.0 m le ss r epay ment of b orr owi ngs of £6 0.0 m . Acc rue d int er est p ayabl e on th e loa ns , RCF an d bo nds a bove is di scl ose d in Not e 3 0. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 185 Notes to the f ina ncia l st atemen ts c ontinued 33 Called up s hare capital Ordinary shares Number Nominal value £ Val u e £m All ot te d, c all ed up a nd fu lly p aid At 1 Febru ar y 202 0 1 , 122,003,328 0.0 1 11. 2 Iss ue of sh ar es – 5 O ct obe r 202 0 Firs t Firm Placing 224,400 ,000 0.0 1 2.2 Second Firm Placi ng 12 4 ,1 8 3 ,0 2 6 0.01 1.2 Placing and Open Of fer 623,335, 182 0.0 1 6.3 97 1, 9 18 , 20 8 0.0 1 9.7 Sub-total before share consolidation 2, 093,9 21,536 0.0 1 20. 9 Sha re c ons olid atio n – 13 O ct ob er 20 20 ( 1 , 9 5 4 , 3 2 6 ,76 7 ) Iss ue of sh ar es – 18 N ovemb er 20 20 5 0 7, 4 5 8 0 .1 5 0 .1 At 3 1 Janu ar y 20 2 1 140 , 102,227 0.1 5 2 1.0 Iss ue of sh ar es – 1 2 Novem ber 2 02 1 235,044 0.1 5 0 .1 At 31 J anu ar y 20 22 14 0,337 ,27 1 0.1 5 2 1 .1 On 3 0 Augu st 20 20, t he Gr ou p anno unc ed th at it was at t he a dvan ced s t age of a pr os pe cti ve £ 15 0.0m e qui t y cap it al r aise inor der t o st re ng t hen it s s t ate ment o f f ina ncia l po siti on , impr ove liq uidi t y and su ppo r t th e execut ion of i t s str at egi c pla n. Thep ro sp ect ive £ 1 50.0 m equ it y r aise wa s laun che d on 10 S ept em ber 20 20, s tru ct ure d as a F irm Pla cing an d Op en O f f er . The G ro up’ s Fir m Pla cing was m ade u p of t wo f irm p lac ings , bot h of whi ch invol ved is suing s har es t o the C hai rman , Roger DeH aan . Th e Fir st F irm Pl acing r es ult ed in R oger De H aan s ubs crib ing for 2 24, 4 00,0 0 0 new or din ar y sha re s at a pri ce of 2 7p per o rd inar y sh ar e. Th e Se co nd Fi rm Pla cing r esu lte d in Roger D e H aan su bsc ribing f or 1 24,18 3,0 26 new o rd inar y sh ar es at 12p p er or din ar y sha re (the O f f er Pric e as if h e wer e par ticip ating in t he O pen O f fer as a qu alif ying sh are hol der) . Th e Firm Plac ing was int er - con dit ion al wit h the P lac ing and O pe n Of fer . Und er th e Plac ing and O p en O f fer, the Co mpany i nvit ed it s s har eho lde rs t o subs cri be t o the i ssu e of 6 23 ,3 3 5,18 2 or dina ry shar es at a n iss ue pri ce of 1 2p p er or din ar y shar e on t he b asis of f ive new sh ar es for eve ry ni ne or din ar y sha re s held . In addi tio n to t he F irm Pla cing d esc rib ed ab ove, Roger D e H aan su bsc ribe d for 2 04 , 25 0, 307 new s har es in t he Pl acing a nd Op enO f fe r , and, a s a re sult , f ro m admi ssi on hel d 26 .4% of the en large d shar e c apit al o f the C om pany. Und er th e Fir m Plac ing and O p en O f fer, on 5 Oct ob er 20 20 the C om pany is sue d 97 1 ,9 1 8 , 20 8 new or din ar y sha re s, r aisi ng £ 15 0.3 m of f unds w hich we re u tili sed t o r epay pa r t of th e Gr oup’s term lo an and r ep ay in ful l the dr awn RC F , with th e bal anc e of the proceeds raised increasing A vaila ble Cash 14 . The is sue w as ful ly sub scr ibe d. The s har e pr emiu m arisi ng on th e iss ue of th e new or din ar y sha re s was £ 14 0.6 m. T ran sac tio n co st s as soc iat ed wi th th e iss ue of the s har e ca pit al of £ 11 .6m w ere d edu ct ed fr om s har e pr emi um. On 1 3 Oc to ber 20 20, t he C omp any und er to ok a c ons olid atio n of it s s har es , whe reb y for ever y 15 o rd inar y sh ar es he ld of 1p nominal v alue, shareholders received one ne w consolidated sha re of 15p nominal value. On 1 8 Novemb er 20 20, S aga pl c issu ed 507 ,4 5 8 new or din ar y sha re s of 15 p eac h, w ith a va lue of £ 0.1m , for t ran sfe r into a n Employe e Be nef i t T r us t (EBT ) t o sat isf y empl oyee inc ent ive arr angem ent s . On 1 2 Novem ber 2 02 1 , S aga plc i ssu ed 23 5,0 4 4 n ew or dina ry s har es of 1 5p e ach , wi th a valu e of £ 0.1m, fo r tr ans fer int o an EBT to s atis f y em ploye e inc enti ve arr angem ent s . 14 R efe r t o th e Al te rn ati ve Pe r fo rma nc e M eas ur es G lo ss ar y o n pag e 20 1 fo r de f ini ti on a nd ex pl ana ti on Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 186 34 R eserves Share -based payment reserve Prio r to ves ti ng, t he sh ar e-ba sed p ayme nt re ser ve is u sed t o r eco gnis e the va lue of e quit y-set tle d sha re -bas ed pay ment s pr ovid ed t o empl oyees , in clud ing key man ageme nt per son nel , as par t of thei r rem uner ati on . Mo re d et ail is pr ovi ded in Not e36 . Fair value reser ve The f air valu e re ser ve c omp rise s the u nr ealis ed gain s or lo sse s of F VOCI as set s p endi ng subs equ ent r ec ognit ion i n pr of it o r los s onc e th e invest ment i s der ec ognis ed . Hedg ing r eser ve The h edgi ng re ser ve c omp rise s the ef fect ive p or t ion of t he cum ulat ive net c hange in t he f air valu e of hed ging in str ume nt s use d in cas h f low h edges p endi ng subs equ ent r ec ogni tion i n: ( a) prof i t or lo ss as t he he dged ca sh f lows o r it ems af fect p rof it or lo ss; or ( b ) the s t ate ment o f f ina ncia l po sit ion as t he he dged ca sh f low s or it ems af fect p ro pe r t y, plant and e quip ment . 35 C apital management The G ro up’ s obj ect ives w hen m anag ing ca pit al ar e t o safe gua rd t he Gr ou p’ s abili t y to c ont inue as a go ing co nce rn in or de r to pr ovid e ret urns fo r sha re hol der s and b enef it s for ot her s ta keho ld ers an d to m aint ain an o ptim al ca pit al s tr uct ur e to r edu ce the c os t of ca pit al . For the p urp ose s of th e Gr oup’s capit al ma nageme nt , cap it al c omp rise s tot a l equi t y of £ 652 . 9 m (202 1: £ 6 80.7m ) as shown o n the c ons olid at ed st at em ent of f i nanc ial p osi tio n. T he Gr ou p ope rat es in a n umb er of r egul at ed mar ket s and i nclu des subs idia ries w hich a re r equ ire d to c om ply w ith s pe cif i c re quir eme nt s in re sp ect o f cap it al or ot her r es our ce s. The G ro up’ s f in anci al ser v ice s bus ine sse s are r eg ulat ed p rima rily by t he F inan cia l Ser v ice s Co mmis sion ( FSC) in Gi br alt ar an d by the FCA in t he U K ; and th e cas h r equir em ent s of it s T ravel bu sine sse s ar e reg ulat ed by t he CA A in the U K . It is th e Gr oup’s pol icy t o co mpl y wit h the r equ ire ment s of t he se r egul ato rs in r es pec t of c apit al a deq uac y or oth er sim ilar t es t s at all t imes . The G ro up’ s reg ul ate d Und er writ ing bu sine ss is b ase d in Gib ra lt ar an d reg ulat ed by t he FS C. T he Un der wri ting b usin ess i s re quir ed t o ensu re t hat it h as a su f f ic ient l evel of cap it alis ati on in ac co rd anc e wi th So lven cy II . The G ro up (and its s ubs idiar ies) has co mpli ed wi th ex te rnal ly-imp os ed ca pit al r equ ire ment s du ring th e year. (T he amo unt s set ou t in th e foll owing th re e par agr ap hs ar e pr ovis ion al and un audi te d.) The G ro up mo nit or ed it s ab ilit y t o c omp ly wi th th e re quir eme nt s of So lven cy II t hr ough out t he yea r to 3 1 J anua ry 2 02 2 , having p rev ious ly r ec eive d app roval f r om th e FSC fo r the U nde r t aking o f Sp ecif ic Par amet er s when a ppl ying t he s t anda rd formu la t o mea sur e cap it al r equi rem ent s fo r this b usin ess un der S ol vency I I rul es . Un der S olve ncy I I , AI CL r ema ined w ell capi t alis ed, a nd at 3 1 Ja nuar y 20 2 2 availab le ca pit al wa s £ 11 5 .1m agains t a So lvenc y Cap it al Re quir eme nt of £ 5 4.1m , gi ving 2 13 % cover age. A s at 3 1 Janu ar y 20 2 1, avai lab le ca pit al wa s £ 12 3. 9 m agains t a So lven cy Ca pit al R equir em ent of £ 7 7.0m, giv ing 16 1% cover age. The G ro up’ s reg ul ate d Insu ran ce d ist ribu tio n bus ines s is bas ed in t he U K and r eg ulat ed by t he FCA . D ue t o th e natu re of t he busi nes s, t he ca pit al r eq uir ement s a re s ignif icant ly le ss t han th e Un der wri ting b usin ess b ut th e Gr oup is r eq uir ed t o co mpl y wit h the A dequ at e Res our ce s re quir eme nt s of Thr es hol d Co ndi tion 2 . 4 of th e FCA Han db ook . T he G rou p und er t akes a rigor ous as ses sm ent agains t th e re quir em ent s of th is Co ndit ion o n an ann ual b asis an d, a s a con seq uenc e of t his, c al culat es and ho lds a n app ro pria te am ount o f capi t al in r esp ec t of th e insur an ce dis tr ibut ion b usin ess . T he Min imum Re gul ato ry C api t al re quir eme nt of thi s busi nes s at 3 1 Janu ar y 20 22 wa s £ 11 .7m ( 202 1 : £ 5. 3 m ). The r eg ulat ed T ravel bus ines se s are r eq uir ed t o co mpl y wit h a main t es t bas ed on l iquid it y. The CA A liquid it y t es t is a re quir eme nt to h old at l eas t 70% of a dvan ce d cus to mer r ec eipt s in c ash o n the l as t day of ea ch mo nth . The G r oup mo nit or s it s co mpli anc e wit h this t es t on a m onth ly ba sis in clud ing for war d-l oo king c omp lian ce us ing bu dget s and fo re cas t s. A s at 31J anu ar y 202 2 an d 31J anu ar y 202 1 , t he T ravel bus ines ses h ad su f f i cient c over age agains t thi s coven ant . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 187 Notes to the f ina ncia l st atemen ts c ontinued 36 Shar e- based payments The G ro up has g ra nte d a numb er of d if fe ren t equi t y-bas ed awar ds t o em ploye es and c us to mer s whic h it has d ete rmin ed t o be share-based payments: a. S hare o ption s and Free Shar es of fe r gra nted at t he time o f the IP O • On 2 9 May 20 14 , nil c os t opt ions over 1 3 ,13 2, 410 sha re s wer e gr ant ed t o cer tain D ir ect or s and e mploye es wi th no exer cis e price and no serv ice or per formance vesting condit ions. Ther e are no cash sett lement alternatives . • Eligib le cu st ome rs an d empl oyees w ho ac qui re d thei r sha re s unde r the C us to mer or Em ploye e O f fer s in th e Pr osp ect us re cei ved on e bo nus sh ar e for ever y 20 sh ar es th ey acq uir ed an d hel d cont inu ousl y for o ne yea r to 2 9 May 20 1 5. A s th ese were bonus share s, there was no exercise price and no cash settlem ent alternative. b. Res tric ted S hare Pl an (RS P) • The R SP i s a disc ret ion ar y execut ive sh ar e pla n unde r whic h the B oar d may g ra nt opt ions ove r shar es i n Saga p lc . • On 9 A pril 2 02 1 , nil c os t opt ions ove r 7 13 , 34 3 s har es wer e is sue d unde r the R S P to c er t ain D ire ct or s and ot her s enior empl oyees w hich ve st an d be co me exerc isab le o n the t hir d annive rs ar y of the g r ant dat e, s ubje ct t o co ntinu ing employment . c. Lo ng-term incent ive plan (L TI P) • The L TIP i s a disc ret ion ar y execut ive sh are p lan u nder w hich t he B oar d may, with in ce r ta in limi ts a nd sub jec t to a ppl icab le per f orma nc e con dit ions , g rant o pti ons over s har es in S aga pl c. • Up t o 31 J anu ar y 20 17 , the se o ptio ns ar e 50% l inke d to a n on-m arket ve st ing co ndi tion , ea rnings p er s har e, an d 50% l inked to a m arket ve st ing co ndit ion , t ot al sha re hol der r etu rn ( TS R). • From 1 Febru ar y 20 17 t o 3 1 Ja nuar y 20 1 8, t hes e opt ion s wer e 60 % linke d to n on-m arke t vest ing c ondi tio ns (30% l inked t o basi c earn ings p er sha re a nd 30 % link ed t o organ ic ear nings p er sh are) and 40 % link ed t o a mark et ves ting c ond itio n, T SR . • From 1 Febru ar y 20 18 , th es e opti ons we re 6 0% li nked t o no n-ma rket ve sti ng co ndit ion s (30% lin ked t o orga nic ear nings per s har e and 3 0% l inked t o r etur n on ca pit al e mploye d (RO CE )) and 40 % linke d to a m arket ve st ing co ndi tio n, TS R . • From 1 Febru ar y 20 1 9, the se op tio ns ar e 75% linke d to no n-m arket ve st ing co ndit ion s (50% li nked t o op er atio nal a nd str at egi c mea sur es an d 25% linke d to RO CE ) a nd 25% link ed t o a mark et ves ting c ond iti on, T SR . d. De ferre d Bonu s Plan (DBP) • On 2 9 Apr il 20 2 1, n il co st op tio ns over 23 6, 8 15 s har es we re is sue d und er th e DB P to t he E xecu tive D ir ect or s re f lec ting thei r defer re d bo nus in r es pec t of 20 20/21 , whic h vest a nd b eco me exer cisa ble o n the t hir d anni vers ar y of th e gr ant dat e . Und er th e DB P sch eme , execut ives r ec eive t wo -thir ds of t he b onus awa rd in c ash a nd on e-thir d in t he for m of rig ht s to shar es o f the C om pany. e. Other share options • On 2 D ec emb er 20 15 , nil c os t opt ions ove r 99, 5 52 sha re s wer e issu ed t o the C hief M ark eting O f f icer a t the t ime wh ich wer e to ves t on t he se co nd ann iver sar y of hi s app ointm ent , su bje ct t o con tinui ng empl oym ent . Foll owing t he ce ss atio n of his empl oym ent , th e vest ing p erio d was ex t ende d to 1 M ay 20 20. f . Employee Free Shares • On 1 6 Novem ber 2 02 1 , 2 1 2, 3 26 sh are s wer e awar ded t o elig ibl e empl oyee s on th e seventh a nnive rsa ry o f the I P O and all oc ate d atnil co st ; th ese s har es b ec ome b enef icial ly own ed over a t hre e-yea r per iod f ro m allo cat ion , sub jec t to c ont inuing s er vi ce. Eac h empl oyee sh ar e opt ion c onver t s int o on e or dinar y s har e of th e Co mpany o n exerci se. N o am ount s ar e pai d or paya ble bythe r ec ipien t on r ece ipt of t he opt ion . Th e opt ions c arr y ne ith er rig ht s to di vid end s nor vot ing rig ht s. O pti ons m ay be exercis ed at any t ime f ro m the d ate o f vest ing t o the d ate o f the ir expir y. Wit h the exc epti on of s har e opt ions g ra nte d at th e time o f the I PO, i f an emp loyee c eas es t o be e mploye d by th e Gr oup, t he opt ion r ight s wi ll be fo r fei te d, excep t in limi te d cir cums t anc es t hat ar e app rove d by the B oa rd o n a cas e-by- cas e bas is. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 188 The t ab le b elow su mmar ise s the m ovement s in t he nu mbe r of sha re o ptio ns ou ts t and ing for t he G rou p and t heir we ight ed average exercise price: IPO options RSP LT I P DBP Ot he r options Employee F ree Sha res To t a l At 1 Febru ar y 202 1 8,437 812,967 84 1,235 1 3 0 , 74 0 6,63 6 40 9,9 29 2 , 2 09, 94 4 Gran ted – 7 13, 3 4 3 – 23 6, 815 – 212,3 26 1,162, 484 Forfeited – (163,9 72 ) (2 2 1 , 2 3 0) – (6 ,6 3 6) (3 7, 2 5 6 ) (429,09 4 ) E xer c is ed – – (1, 8 0 2) (2 , 05 3) – (24 ,4 3 3) (28, 288) At 3 1 Janu ar y 20 22 8,437 1,362,338 6 18 , 203 365,50 2 – 560,566 2,9 15,046 Exercise pric e £ nil £nil £ nil £nil £ nil £nil £ nil E xerci sab le at 3 1 Ja nuar y 20 2 2 8,437 – 9,7 8 3 3,115 – 71 ,0 34 92 ,369 Average remaining contra ctual life 0.0 years 1. 9 yea rs 0.7 years 1. 8 yea rs 0.0 year s 1 . 8 year s 1 . 4 year s Average fa ir valu e at gr ant £ 2 7. 7 5 £ 3. 25 £6. 96 £ 4 .1 0 £30. 3 3 £6.09 £ 5 .1 4 The aver age fai r value s at gr ant da te h ave been r es t at ed t o ref l ect t he im pac t of th e shar e c ons olid atio n. The we ight ed aver age sha re p ric e at the d at e of exerci se for s har e op tion s exerci sed d uring th e year e nde d 3 1 Janu ar y 202 2 was £ 3 .8 5 (202 1: £ 2 . 42). The fo llow ing info rmat ion is r el evant in th e det ermi nati on of th e fai r value of o pti ons g ran te d during t he yea r unde r the equity-settled and cash -settled share-based remunerati on schemes operated b y the Group. RSP DBP Employee F ree Sha res Mo del us ed Black - Scholes Black - Scholes Black - Scholes E xpe ct ed li fe of sh ar e opt ion 3 years 3 ye ars 3 year s Weight ed aver age sha re p ric e (£) £3.86 £ 3 .7 1 £2. 87 As at 3 1 Ja nuar y 20 2 2, t he Gr ou p did not h ol d any liab ilit y in r el atio n to c ash -set tl ed sh ar e-ba sed r em uner ati on th at had vest ed by t he en d of th e year. As on ly limi te d his to rica l dat a for t he G ro up’ s sha re p ric e is availab le , the G ro up has e st imat ed t he C omp any’s shar e p ric e volat ilit y a s an average o f the vo lati liti es of it s T SR c omp ar ato r gr oup over a hi st ori cal p eri od c omme nsur at e wit h the expe ct ed lif e of th e award i mme diat ely p rio r to t he dat e of t he gr ant . For fut ur e valua tio ns, at a d at e when s uf f icient S aga sh ar e pric e dat a b ec ome s availab le , the G ro up int end s to e sti mat e the Company volatil ity directly from this data. The t ot al am ount c harge d to t he inc om e st at eme nt in th e year en ded 3 1 J anua ry 2 02 2 is £ 3 .4 m (202 1: £ 2 . 4m). This has b een charged to administrative and selling expenses. The G ro up did n ot ent er int o any sh ar e-ba sed p ayme nt tr ans act ion s wit h par t ies ot her t han em ploye es dur ing th e curr ent p erio d. Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 18 9 Notes to the f ina ncia l st atemen ts c ontinued 37 C ommitments and c onting encies a ) Lease commitment s The G ro up le ases v ario us rive r crui se shi ps , of f i ce s, war eh ous es , equi pme nt and vehi cle s. T he c ont ra ct len g th s of the l eas es vary considerably and ma y include e xt ension or termi nation options. Where it is reasonably cert ain that an extension option will b e trig ger ed i n a cont r act , l eas e paym ent s to b e ma de in r es pec t of th e opt ion ar e in clud ed in t he me asur em ent of th e leas e liab ilit y. Futur e minimu m lea se pay ment s un der l eas e con tr act s , t ogethe r wit h the p re sent va lues o f the n et minim um leas e pay ment s , ar e as fol lows: 2022 £m 2021 £m Wi thin o ne year 5.4 2.3 Bet we en one a nd f i ve year s 19. 5 2.2 Af t er f i ve year s 18.0 0 .1 T ot al minimum lease payments 42.9 4 .6 Less amounts representing finance charges ( 7. 6 ) (0. 2) Pre sen t value o f min imum l eas e paym ent s 35 .3 4.4 Plea se r efer t o No te 1 8 for f ur th er det ail s on mo dif icati on of l ease t er ms duri ng the p rio r year . As at 3 1 Ja nuar y 20 2 2, t he valu e of le ase li abil itie s co ntr ac te d for , bu t not pr ovi ded f or , in the f inanc ial s t ate ment s in r es pe ct of righ t-of-use ass et s amo unt ed t o £ 42 . 5m (20 2 1: £ 92 .7m ). As at 31 J anua ry 2 02 1 , th ese l eas e co mmit ment s r ela te t o th e river c ruis e vess els , Sp irit of t he R hine a nd Sp irit of t he D anub e. A s at 3 1 Janu ar y 20 22 , th ese l eas e co mmit ment s r ela te t o the ri ver cr uise ve sse l, S piri t of th e Danu be . b ) Commitment s As at 3 1 Ja nuar y 20 2 2, t he ca pit al a mount c ont ra ct ed fo r , but n ot pr ovid ed for, in the f in anci al s tat em ent s in r esp ec t of pr ope r t y, plant an d equi pme nt , amou nte d to £ nil (20 2 1: £ nil). c ) Contingent liabilities The CA A and A BT A regul ate t he G ro up’ s UK T our Op er atio ns bu sine ss . ABT A req uir es th e Gr oup t o pu t in pla ce b on ds to pr ovid e cus to mer p rot ec tio n. A t 31 J anu ar y 202 2 , the G r oup ha d £ 1 9.4 m (202 1: £ 2 1 .0 m) of tour op er atin g-relat ed b on ds inplace. 38 Assets held for sale At the e nd of t he year e nde d 3 1 Janu ar y 20 2 1, t he G ro up mad e the d eci sion t o ini tiat e an a cti ve pr ogr amm e to l oc ate b uyer s for a num ber o f it s fr eeh old p r ope r tie s. I mme diat ely b efo re t he cl ass if ic atio n of th e pr op er ti es t o be he ld for s ale , th eir re cover abl e amo unt s wer e asc er t ain ed an d this r es ult ed in an i mpai rment c harge o f £ 4 .5 m bei ng re cog nise d agains t th e Gr oup’s freeh old l and a nd bui lding s ass et s (No te 1 7 a ). At the p oint o f re clas sif icati on t o hel d for s ale, t he c arr ying v alue s of£ 16 . 9m we re c ons ide re d to b e equ al t o, or b elow, fair va lue l ess c os t s to s ell, a nd he nce n o reva luat ion at t he po int of re clas sif icati on was r eq uir ed . The se pr op er t ies ar e pr es ent ed wi thin t he In sur anc e seg ment o f the G r oup, an d as at 31J anu ar y 202 1 w ere b eing a cti vely m arke te d and th e dis pos als we re exp ec te d to b e co mpl ete d wit hin 1 2 mon ths of theen dofth e f in anci al year. No gains or l oss es wer e r ec ognis ed wi th r es pec t to t he p ro per t ies . Duri ng the ye ar , the G r oup de cla ssif ied on e of th e pr op er ti es cla ssi f ie d as hel d for s ale at 3 1 J anuar y 2 02 1 , t o pr ope r t y, plant and eq uipm ent si nce i t was no l onger b eing ac ti vely m arket ed fo r dis pos al . The c arr yi ng value o f this p ro per ty as a t 31 J anu ar y 202 1 wa s £3 .0 m . Ot her t han t his on e pr op er t y, ther e have be en no c hange s in re lati on t o the G ro up’ s int enti on t o sell any o f the p ro per t ies c las sif ied as he ld for s ale a t 31 J anu ar y 202 1 , an d so th e hel d for s ale d esig nati on is c onsi der ed t o r emain app rop riat e fo r the r em aining p ro per t ies a s at 3 1 Janu ar y 202 2 . Duri ng the ye ar , the G r oup dis po sed of a p r ope r t y cla ssi f ie d as hel d for s ale in t he p erio d. C ash c ons ider at ion r ec eive d (netoftra nsa cti on co st s) was £ 10. 2m and th e carr y ing valu e of th e pr op er t y at th e dat e of dis po sal wa s £3 .0 m . Pro f it ar ising on dis pos al was £ 7 . 2m . Man agemen t con duc te d an imp airm ent r eview of t he fr ee hol d pr op er t y as set s he ld for s ale a s at 3 1 Janu ar y 202 2 . In r ela tio n to t hes e fr eeh old p ro per ties , valu e-in-u se c onti nued t o b e neg ligib le an d so th e Gr oup ob t aine d upd ate d mark et valu atio ns tod ete rmine t he f air valu e of eac h bui lding . Th e out co me of t hes e imp airme nt rev iews c onc lude d tha t an impa irme nt char getot all ing £ 1 .0m s hou ld be r ec og nise d agains t the G r oup’s prop er t y as set s hel d for s ale a s at 31 J anu ar y 202 2 . Asat3 1Ja nuar y 20 2 2, t he ca rr ying va lues o f the p ro per ties c lass if i ed as he ld fo r sale , to ta lling £ 1 2 . 9m , ar e rep r esen tat ive ofeit her e ach p ro per t y’s fair valu e or his to ric c os t , whic hever is l ower . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 190 39 Sub sidiaries The e ntit ies li st ed b elow ar e su bsid iari es of th e Co mpa ny or Gr oup . All o f the un der t a kings a re wh oll y owne d and in clu ded wit hin th e con soli dat ed f i nanc ial s t ate ment s . Th e reg is ter ed o f f i ce ad dr ess fo r all ent it ies r egis t er ed in Eng land i s Enbr oo k Park , S andgat e, Fol kes to ne, K ent CT2 0 3S E , Uni te d Kingdo m. T he r egi st er ed of fi ce a ddr ess o f Acr om as Ins ur anc e Co mpany Limi te d is 5 7 / 63 L ine Wall R oad , Gib r alt ar. The reg ist er ed of f ice a ddr es s of Sag a Crui ses G mb H is Ind ust riege biet S üd , 268 7 1 , Pape nburg , N iede rs achs en , Ger many. The r egis t er ed of f ice a ddr ess o f Saf fro n Mar itim e Li mit ed is A spir e C orp or at e Ser v ice s Lim it ed, P O B ox 19 1 , Eliza bet h Hou se, R uet t es B rayes , S t Pet er Por t , G uern sey, G Y1 4H W. Company name Co unt r y of registration Nature of business Saga P ersonal Finance Limited England Delivery of regulated in vestment products Sag a Service s Lim ited England Regulated Insurance distri bution Acromas Insurance Company Limited Gibralt ar Insuran ce underwrit ing CHMC Li mited 15 England Mot or accident management PE C Se rvices Li mited 15 England Repairer of automotive vehicles ST& H L im it e d England T o ur operat ing Tit an T ransp or t (UK ) Limite d England T o ur operat ing Tit a n T r avel (U K ) L imit ed En gland T our op erating Titan T rav el Group Lim ited England T o ur operat ing Tit an T ransp or t Limited (formerly Saga T r anspor t Limit ed) England T our operating Saga C ruis es L imit ed England C ruising Saga C ruis es I V Lim it ed E ngland C ruising Saga C ruis es V L imit ed England Cruising Saga C ruis es V I Lim it ed E ngland C ruising Saga C ruis es Gm bH Germany C ruising Sag a Crew ing Services Limi ted England Cruising Saf fro n Maritime Limite d Guernsey Cruising Metr oM ail Limit ed 15 England Mailing hous e Saga M id Co L imi te d E ngland D ebt servic e provider Saga Publishing Limit ed 15 England Publishing Sag a Membe rshi p Lim ited 15 England Cust omer loya lt y scheme Driveline Gr oup Limit ed England Holding company CH MC H ol dings L imit ed England Holding compan y Saga G ro up Lim it ed England Holding company Saga Leisure L imite d England Holding company ST&H Gr oup L imi te d E ngland Holding compan y Conf ident Services Limited England Dormant company Driveline Europ e Limit ed England Dormant comp any Driveline T ravel Limited England Dormant company Enbr oo k Cru ises L imi te d England Dormant company Saga C ruis es I L imit ed England D ormant company Saga Fl ight s .c om L imit ed En gland Dormant company Saga Healthcar e Limited En gland Dormant company Saga Holida ys Limited England Dormant company Saga Properties Limited En gland Dormant company Saga R ad io (N or th We st) Limit ed England Do rmant company Saga S hipp ing Co mpa ny Limi te d En gland Dormant company Spir it of A dvent ure L imi te d England D ormant company ST&H T ransp or t L imit ed England D ormant company Titan Aviation Limited England Dormant comp any Tit a n T r avel H oldi ngs Li mit ed England Dormant comp any Tit an T ravel Limited England Dorm ant company 15 T hes e su bs idi ar ie s wil l t ake a dv ant ag e of th e au di t exem pti on s et o ut wi th in s ec ti on 479A of t he C o mpa ni es A ct 20 0 6 fo r th e yea r en de d 3 1 Ja nua r y 20 22 . Asr eq uir e d, S aga p lc , t he ul ti mat e p ar ent u nd er t ak in g and c o ntr o lli ng pa r t y of t he G ro up , gu ar ant e es al l ou t st an di ng li ab ili ti es t o wh ich t he se s ub si dia r y co mp ani es a re s ub jec t at t he e nd of t he f ina nci al ye ar, unt il t hey a re s at is f ie d in f ull . Th is is i n ac c or da nc e wi th S ec ti on 479 C of t he C om pa nie s Ac t 20 0 6. Th egu ar ant e e is en for c ea bl e aga ins t S aga p lc as t he u lt im at e par e nt un de r t aki ng , by an y pe rs on t o wh om t he s ubs id iar y c om pa nie s li st ed a bo ve ar e li ab le inr es pe ct o f th os e lia bi lit ie s Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 191 Notes to the f ina ncia l st atemen ts c ontinued 40 Related part y transactions On 6 A pril 2 02 1 , th e Co mpany e nte re d int o a work ing cap it al fa cili t y agr eem ent wi th Roge r De H aan , th e Non -E xec uti ve Chai rman o f Saga p lc, t o all ow th e Co mpany t o dr aw down u p to £ 1 0.0 m wit h 20 days’ not ice t o f und th e sh or t-ter m liqui dit y nee ds of it s C ruis e bus ines s . The ag re eme nt allow ed th e Co mpany t o se lec t a loa n per iod of o ne , tw o, thr ee o r six m onth s, o r any oth er pe riod ag r eed w ith R oger De H aan . Int er es t on t he wor king c apit al f aci lit y ag re emen t would b e inc urr ed at a va riab le rat e of L IBO R plu s a ban k marg in th at is link ed t o the G ro up’ s lever age rat io. I nte res t wou ld ac cru e on th e fa cilit y and be payab le on t he las t day of t he p erio d of th e lo an. T he fa cili t y was se t to m atur e on 9 M ay 202 3, a t whic h poin t any out s t andin g amou nt s, in clu ding int er es t , mus t be r epa id. As expl aine d in N ote 3 0, in J une 20 2 1 , the G ro up ann oun ced a n umb er of f in anc ing tr ans act ion s inte nde d to im pr ove it s f ina ncia l f lexib ilit y by i ncr eas ing availa ble l iquid it y, ext end ing debt m atur iti es an d pr ovidi ng gr eat er he adr oo m agains t coven ant s. Fo llowi ng the c omp let ion of t hes e tr ans act ion s, t he wor king c apit al f aci lit y ag re eme nt wit h Roger D e Ha an was subs equ entl y can cel led w ith ef fect f ro m Jul y 202 1. 4 1 E ve nts af ter the reporting per iod Af t er th e year e nd, t he G ro up co nclu de d disc ussi ons w ith i ts C rui se le nder s to a men d the c ovena nt s on th e tw o ship d ebt facil itie s as follows: • Redu ct ion in t he EB ITDA t o debt r ep aymen t rat io fr om 1 . 2x t o 1 .0x f or th e per iod s fr om 3 1 Jul y 20 22 t o 3 1 Jan uar y 20 24. • Redu ct ion in t he EB ITDA t o cas h inte re st r ati o fr om 2 .0x t o 1 .7x as at 31 J uly 2 02 2 . Plea se r efer t o No te 3 0 for f ur th er det ai ls re lati ng to t he Gr ou p’ s cruis e ship d ebt f acil itie s . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 192 Compan y financ ial statemen t s of Sag a plc Balance sheet Note 2022 £m 2021 £m Non- current assets Investment in subsidia ries 2 552 .3 552 .3 Current assets Debt or s – amo unt s fal ling du e af t er mo re t han on e year 3 50 1. 8 41 2 . 5 Debt or s – amo unt s fal ling du e with in one ye ar 3 3 .0 2.2 Cash and shor t-term deposits 38 .0 0.1 542 .8 41 4 . 8 Cr edi tor s – am ount s f alli ng due w ith in on e year 4 (3 . 9) (4 . 8 ) Net current assets 538.9 410.0 Cr edi tor s – am ount s f alli ng due a f te r mor e th an on e year 5 (3 9 6 . 2 ) ( 2 4 8 . 9) Net assets 695.0 7 13.4 Capital and reser ves Called up share capit al 6 2 1 .1 2 1 .0 Share pr emium account 648.3 648.3 Prof it and loss reser ve 18 .1 38. 2 Share-based pa yment reserve 7. 5 5.9 T ot al shareholders’ funds 69 5.0 7 13.4 The C omp any ha s not pr es ent ed it s ow n pr of it a nd lo ss ac co unt as p ermi t te d by se cti on 4 08(3) of the C om pani es Ac t 20 06 (t h e Act ) . The l oss i nclu ded i n the f inanc ial s ta tem ent s of t he Co mpa ny, determ ined i n acc or da nce w ith t he Ac t , was £ 2 1 . 9m (2021: £ 14 . 2m ). Compa ny number: 08 804 263 The N ot es on p ages 1 95 -20 0 form a n integ r al par t o f the se f i nanc ial s t ate ment s . Sign ed fo r and o n beh alf of t he B oar d on 2 2 Ma rc h 202 2 by E A Sut he rlan d J B Qui n Gr oup C hief E xecu ti ve Of f ice r Grou p Chie f Fin anci al O f f i cer Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 193 Compan y financ ial statemen t s of Sag a plc St atement of cha ng es in equity Cal le d up share capital £m Share premium account £m Retaine d earnings £m Share-base d payment reserve £m To t a l equity £m At 1 Febru ar y 20 20 11. 2 519.3 48 .8 8 .0 587 .3 Los s for th e f in anci al year – – (1 4 . 2) – (1 4. 2) Dividends paid – – (0. 1) – (0 .1 ) Iss ue of sh ar e cap it al (N ot e 6) 9. 8 14 0.6 – – 1 50. 4 T r ans ac tio n cos t s ass oc iat ed wi th iss ue of s har e cap it al – (1 1 .6) – – ( 1 1 .6) Share-bas ed payment charge – – – 2.3 2 .3 E xerci se of s har e opt ions – – 3 .7 (4 . 4) (0 .7 ) At 31 J anu ar y 20 21 21 .0 648.3 38. 2 5.9 7 13.4 Los s for th e f in anci al year – – ( 2 1 . 9) – (2 1 . 9) Iss ue of sh ar e cap it al (N ot e 6) 0.1 – – – 0.1 Share-bas ed payment charge – – – 3.4 3.4 E xerci se of s har e opt ions – – 1.8 ( 1 . 8) – At 31 J anu ar y 20 22 21 .1 648. 3 1 8 .1 7. 5 69 5.0 The N ot es on p ages 1 95 -20 0 form a n integ r al par t o f the se f i nanc ial s t ate ment s . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 194 1 .1 Acco unting p olicie s a) Accounting convention The se f in anc ial s t atem ent s wer e pr ep ar ed in ac co rd anc e wi th Fi nanc ial R epo r ting S t an dar d 10 1 ‘ Re duc ed D iscl osu re Framewor k’ ( FRS 1 0 1). In preparing these f inancial st atement s, the C ompany applies the recognitio n, measurem ent and disclosure requirem ents ofUK-adopt ed int ern atio nal a cc ount ing st an dar ds , bu t make s ame ndme nt s whe re n ece ss ar y in or der t o c ompl y wit h Co mpani es Ac t 20 06 (the Act ) and has s et out b elow w her e ad vant age of th e FR S 10 1 dis clo sur e exempti ons h as be en t aken . The f inancial st atement s are prepar ed under the historic al cost convention, as modif ied by derivative finan cial assets and f ina ncia l liab ilit ies m easu re d at fair va lue t hro ugh p rof it or lo ss , and in a cc or dan ce w ith t he C omp anies A ct 20 0 6, a nd ar e pr epar ed o n a going c onc ern b asis ( ple ase r efer t o N ote 2 .1 of th e Saga p lc c onso lid ate d ac cou nt s on page s 126 -12 7 for an ass ess ment of t he going c on cer n bas is for t he Gr oup a nd th e Co mpa ny) . The C omp any ’s fin anc ial s ta tem ent s ar e pr es ent ed in s te rling an d all valu es ar e r ound ed t o th e near es t hun dr ed th ous and (£’m ) except w hen ot her wi se ind icat ed . The a cc ount ing po lici es whi ch fo llow se t out t hos e po licie s whic h app ly in p re pari ng the f inanc ial s ta tem ent s fo r the ye ar ende d 3 1 Jan uar y 20 22 . The C omp any ha s ta ken ad vant age of t he fol lowing d iscl osu re exempt ion s unde r FR S 10 1: • The r eq uir ement s o f IFR S 7 ‘ Fin anc ial In st rume nt s: Dis clo sur es’ . • The r eq uir ement i n par agr ap h 38 of I AS 1 ‘ Pr es ent ati on of F inan cial S t at eme nts’ t o pr es ent co mpa rat ive info rmat ion inre sp ect o f par agr aph 7 9(a )(iv) of IAS 1 . • The r eq uir ement s o f par agr aph s 10 ( d), 10(f ), 16, 3 8A , 38 B- D, 40A- D, 111 a nd 1 34 -136 o f IAS 1 ‘ Pr es ent ati on of FinancialSt atement s’ . • The r eq uir ement s o f IAS 7 ‘ S t atem ent of C ash F lows’ . • The r eq uir ement s o f par agr aph s 30 an d 3 1 of IA S 8 ‘ Acc ount ing Poli cie s, C hanges i n Acc oun ting Es ti mat es an d Erro rs’ . • The r eq uir ement s o f par agr aph s 17 an d 18A o f IAS 24 ‘ Re lat ed Par t y D isc los ure s’ . • The r eq uir ement s in I AS 24 ‘ Rel ate d Par t y D isc los ure s’ to dis clo se r elat ed p ar t y t ran sac tio ns ent er ed int o b et ween tw oormo re m emb ers of a g r oup, pr ovi ded t hat any s ubsi diar y wh ich is a p ar t y t o the t ra nsa cti on is wh oll y owne d by suc hamemb er. • The r eq uir ement s o f par agr aph s 4 5(b) and 46 -52 o f IFR S 2 ‘ Sha re -bas ed Paym ent ’ . b ) In vestmen ts in subsidia ries Inves tme nt s in subs idia ries a re a cc ount ed f or at th e lower o f cos t le ss imp airm ent an d net r eali sab le valu e and r eviewe d for impai rmen t when even ts o r cha nges in cir cu mst an ce s indi cat e th e carr y ing valu e may not b e r ecove rab le . c) D e b t o r s T r ad e and ot her d ebt ors a re in iti ally r ec ogni sed at f air val ue and , wh er e the t ime val ue of m oney is m ate rial , sub seq uent ly meas ur ed at am or ti sed c os t usin g the ef fect ive int er es t rat e (EI R) m etho d. P rov isio n for im pairm ent is m ade u sing th e simp lif i ed app r oac h set ou t in IF RS 9, w her eby no c re dit l oss a llowan ce is r ec og nise d on init ial r ec ogn iti on, a nd th en at ea ch subs equ ent r epo r ting d ate t he lo ss al lowan ce wi ll be t he pr es ent val ue of th e expe ct ed c ash f l ow sho r t fal ls over th e rem aining life of t he de bto rs ( i.e . life time ex pec t ed cr edi t los ses ( ECL s ) ). Bala nc es ar e wri t ten o f f wh en th e pr oba bilit y of rec over y is assessed as being remote. Amo unt s due f ro m Gr oup u nder tak ings ar e cl ass if ie d as deb to rs . They h ave no f ixe d dat e of pay ment an d ar e payab le on dema nd . The a mount s d ue fr om G ro up und er t aki ngs ar e dis clos ed at a mor t ise d cos t . d) Deferr ed t ax Defe rr ed t ax is p rov ide d on t emp or ar y dif f er enc es b et ween t he t ax b ase s of ass et s and li abil iti es and t heir c arr y ing amo unt s for f i nanc ial r ep or ti ng purp os es at th e re por ting dat e. Defe rr ed t ax li abili tie s ar e re cog nise d for al l ta xabl e te mpo ra ry d if f ere nc es and d eferr e d ta x ass et s ar e re cog nise d to t he ext ent t hat i t is pr oba ble t hat t axa ble p ro f it wi ll be avai labl e agains t whi ch th e ded uct ibl e tem po rar y di f fer en ce s, an d th e carr y for war d of unu sed t a x cr edit s a nd unu sed t a x los ses , ca n be ut ilis ed . The c arr yi ng amou nt of def err ed t ax a sset s is r evi ewed at e ach r ep or ti ng dat e and r ed uce d to t he ex t ent th at it is n o longer pr oba ble t hat su f f ic ient t a xabl e pr of it w ill be avai lab le t o allow a ll or pa r t of th e defer re d t ax as set t o be u tilis ed . Unr ec ogn ise d defer re d t ax as set s ar e re ass es sed at e ach r ep or t ing dat e and a re r ec ogn ised t o th e ex te nt that i t has b ec ome p ro bab le th at fut ur e ta xab le pr of i t s will al low th e defer re d t ax as set t o be r ec over ed . Defe rr ed t ax as set s an d liab ilit ies ar e me asur e d at the t a x rat es t hat ar e exp ect ed t o ap ply i n the ye ar whe n the a sset i s re alise d or t he lia bilit y is set tl ed , bas ed on t ax r at es (and ta x laws) that have b een en act ed o r sub st ant ivel y enac te d at th e rep or t ing dat e . Defe rre d t ax is c harge d or cr edi te d in th e inc ome s t ate ment , exc ept wh en it r elat es t o it em s char ged or cr edit ed i n othe r co mpr ehe nsive i nco me (OC I), in whic h cas e the d eferr ed t a x is de alt wi th in t he OC I . Notes t o the C ompany financial st atements Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 195 Notes t o the C ompany financial st atements c ontinued 1 .1 Acco unting p olicie s c ontinued Defe rr ed t ax as set s an d defe rre d t ax li abili tie s ar e of fs et if a l egally e nfor ce abl e righ t exist s t o set o f f cur re nt ta x as set s agains t curr ent t a x liab ilit ies an d the d efer re d ta xes r elat e t o the s ame t a xabl e enti t y and t he sa me t axat ion au th orit y. e ) Share-base d pa ymen ts The C omp any pr ovi des b enef it s to e mploye es ( incl uding D ir ect or s ) of S aga plc a nd it s su bsid iar y un der t ak ings , in th e form of share-base d payment transactio ns, whereby employees render ser vice s as consideration for equit y instrument s ( equi t y-set t led t ra nsa cti ons) . Th e cos t of e quit y-s et tl ed tr ans ac tion s is me asur ed by r efer en ce t o th e fair va lue on t he g ran t dat e and is r ec ogn ised a s an exp ense ove r the r eleva nt ves ting p erio d, e nding o n the d at e on whi ch th e empl oyee b ec ome s full y enti tle d to t he awar d . Fai r values o f share-based payment transactions are calculated using Black -Scholes modellin g techniques. In valu ing equi t y-set t led t ra nsa cti ons , ass es smen t is mad e of any ves tin g con dit ions t o ca tegor ise t hes e int o mark et per formance con ditions, non-market per formanc e conditions and ser vice co nditions. Whe re t he eq uit y-s et tle d tr ans act ion s have mark et per forma nce c on dit ions (that is , p er for man ce whi ch is di re ctl y or indir ec tl y linke d to t he sh ar e pric e) , the f air valu e of th e awar d is ass ess ed at t he ti me of g rant a nd is n ot cha nged, r egar dl ess of the a ct ual leve l of ves ting ac hieved , excep t wher e th e emp loyee c eas es t o be e mploye d pri or t o the ve st ing dat e. For ser vi ce c ond iti ons an d non -mar ket pe r form anc e co ndi tio ns, t he f air valu e of th e award i s ass ess ed at t he tim e of gr ant and is r eas se sse d at eac h re po r ting d ate t o r ef lec t up dat ed exp ect at ion s for th e level of ve st ing. N o exp ense i s re cog nise d for award s tha t ulti mat ely d o not ves t . At eac h re po r ting d ate p rior t o ves tin g, t he cum ulat ive exp ense i s cal culat ed , r epr es enti ng the ex t ent t o whi ch th e vest ing per iod h as expir ed a nd , in the c ase o f non -mark et co ndi tion s, t he b est e st imat e of t he numb er of e quit y inst rume nt s that w ill ulti mat ely ve st or, in the cas e of ins tr ument s s ubje ct t o mark et co ndi tio ns, t he fa ir valu e on gr ant a djus te d onl y for l eavers . The m ovemen t in the c umul ative ex pens e sin ce t he pr evio us r epo r ting d at e is re cog nise d in th e inc ome s t at emen t , wit h the corre sponding increas e in share-based payment s reser ve. Upo n ves ting of a n equi t y ins tru ment , t he cum ulat ive co st in t he s har e-b ase d paym ent s re ser ve is r ec las sif ied to r es er ves . f ) Financia l instrument s i) Financial assets On ini tia l re cog niti on , a f ina nci al ass et is cl ass if ie d as eit her a mor t ise d co st , fa ir valu e thr oug h othe r co mpr ehe nsive i nco me (F VO CI ) or fai r value t hr ough p ro f it an d los s (F V TP L). The cl ass if ic ati on of f in anc ial as set s is b ase d on th e bus ines s mo del in whic h a f ina ncia l ass et is man aged , and i ts c ont ra ct ual c ash f lo w char ac te ris tic s. The C omp any me asur es a ll f ina nci al ass et s at fai r value at e ach r ep or t ing dat e, ot her t han t hos e ins trum ent s me asur ed a t amortised cost. The C omp any ’s fin anc ial as set s at am or t ised c os t inc lud e amou nt s due fr om G r oup un der t ak ings . Th e Com pany d oes n ot hol d any f ina nci al ass et s cla ssi f ied a s F VO CI o r F V TPL . Fina ncial a sset s at am or tis ed c ost Initial re cogni tion and measur ement A f ina ncia l ass et is cl assi f ie d at amo r tis ed c ost i f it me et s bot h of th e foll owing c ond iti ons an d is not e lec te d to b e des ign ate d as F V TPL : • It is he ld wi thin a b usin ess m od el who se ob jec ti ve is to h old a sset s t o co lle ct c ontr ac tu al cas h f lows . • It s co ntr ac tua l ter ms gi ve rise o n sp eci f ied d at es t o cas h f lows th at ar e sol ely p ayme nt s of pri ncip al and i nte re st on t he principal amo unt outs t anding. Subsequ ent measure ment These asse ts are subsequen tly measured a t amortised cost usi ng the E IR method. The amortised cost is reduced b y impai rmen t los ses (see (ii ) be low). Impairme nt los se s are r ec ogn ise d in pr of it o r los s as th ey ar e incu rre d. A ny gain or l oss o n der ec ogni tio n is re cog nise d in pr of it or los s imm edia tel y. Dere cognit ion A f ina ncia l ass et is der ec og nise d when t he rig ht s to r e cei ve cas h f lows f ro m the as set h ave expir ed or w hen t he C omp any has tr ans ferr ed su bs ta ntia lly all t he ri sk s and r ewar ds r elat ing to t he as set t o a thi rd p ar t y. ii) Impairmen t of financial assets The exp ec te d cr edi t los s (ECL) imp airm ent mo del a ppl ies t o f in anci al ass et s me asur ed at a mor t ise d cos t an d debt invest ment s at F VOC I. The C omp any me asur es l oss a llowan ce s at an am ount eq ual t o 1 2-month ECL s , except fo r tr ade r ec eiv able s and c ont ra ct ass et s that r es ult fr om t ra nsa cti ons w ithi n the s cop e of I FR S 15 . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 196 Whe n det ermi ning wh ethe r the c re dit ri sk of a f i nanc ial as set h as inc re ase d sign if ic antl y sin ce ini tia l re cog nit ion an d whe n estimating E CLs, the Company considers reasonable and support able informa tion that is relevant and ava ilable without undue cos t or ef for t . Th is inc lude s bot h qua ntit at ive an d quali t ative i nform atio n and a naly sis , bas ed on t he C omp any ’s histo rica l experience and informed credit a ssessment and includ ing forward-looking information. Measur ement of ECLs ECLs a re m easu re d as a pr ob abili t y-weig hte d es tima te of c re dit l oss es . Cr edi t los ses a re m eas ure d as th e pr oba bili t y of def ault in con junc tio n wit h the p re sent va lue of t he G rou p’ s expo sur e. Lo ss all owan ces f or ECL s on f i nanc ial as set s m easu re d at amo r tis ed cos t ar e de duc te d fr om th e gr oss c arr yi ng amo unt of th e ass et s, w ith a c orr es po nding c harge t o th e inc ome s t at ement . iii) Financial liabilities Initial re cogni tion and measur ement All f inanci al lia bili tie s are c las sif ied as f in anc ial li abili tie s at amo r tis ed c ost o n init ial r ec ogni tio n. All f inanci al lia bili tie s are r ec ogn ise d initi all y at fair va lue an d, in t he ca se of l oans a nd b orr owing s, n et of dir ec tly at t rib ut abl e transaction costs. The Company’s financi al liabilities comprise loans and borr owings. Subsequ ent measure ment Af ter initial rec ognition, inter est-bearing loans and borrowings and other payables are subsequently meas ured at amor tised cos t us ing the E IR me tho d. A mo r tis ed co st is c al culat ed by t ak ing int o ac co unt any dis co unt or p rem ium on a cqu isit ion a nd fees o r co st s th at ar e an int egr al p ar t of t he EIR . The EI R am or ti sat ion is in clu ded in f inanc e c ost s in t he in co me st at em ent . Dere cognit ion A f ina ncia l liab ilit y is d er ec ognis ed wh en th e obl igatio n und er th e liabi lit y is d isch arged o r can cel led o r expir es . Whe n an exis ting f inanc ial li abili t y is r epl ace d by anot her f ro m th e sam e lend er on s ubs t anti ally di f fe ren t ter ms , or th e ter ms of anexis ting li abili t y ar e sub st ant iall y mod if ie d, s uch a n exchange or m odi f ic atio n is tr eat ed a s a der ec ogni tio n of the o rig inal li abili t y and th e re cog nit ion of a n ew liab ilit y. The d if fe re nce i n the r es pe cti ve car ry ing am ount s is r ec ogni sed in t he in co me st at em ent . g ) Audit remuner ation Amo unt s r ece ivab le by th e Co mpa ny’s audit or a nd it s as so ciat es in r es pe ct of s er vic es t o the C om pany an d it s as soc iat es , othe r tha n the au dit of t he C omp any ’s fin anci al st at em ent s, h ave not b een di scl ose d as th e infor mati on is r equi re d ins te ad t o be dis clo se d on a co nso lidat ed b asi s in the c on soli dat ed f in anc ial s t atem ent s . 1. 2 Signi f icant a ccountin g jud ge ments, estimates and assu mptions The p re par ati on of f in anc ial s t atem ent s r equi re s the C om pany t o sel ect a cc ount ing p olic ies an d make e st imat es an d ass umpt ions that af fect i te ms re po r te d in th e prim ar y Co mpa ny f inan cia l st at emen ts a nd N ote s to t he C omp any f in anci al st at em ent s. Signif icant e stim ates All e sti mat es ar e ba sed o n mana gement ’s knowle dge of cur re nt fac t s and ci rc ums ta nce s, a ssum pti ons ba sed o n tha t know ledge an d pr edi cti ons of f ut ure even ts a nd ac tio ns . Act ual r es ult s may t her efor e di f fer f ro m tho se es ti mat es . The t ab le b elow s et s out t hos e it ems th e Co mpa ny con side rs su sc eptib le t o cha nges in cr iti cal e sti mat es an d assu mpti ons toget her wi th t he r elevant a cc ount ing po licy. Acc. policy Items involvi ng estimation Sourc es of estimation uncert ainty 1 .1b Investment i n subsidiaries impairment te sting The C omp any det er mine s whet her inve stm ent in s ubsi diar ies ne eds t o b e impai re d whe n indic at ors o f impai rment ex ist . T his r equ ire s an es tim atio n of the va lue-in -us e of the s ubs idiar ies ow ned by t he C omp any. The value -in-u se cal culat ion r eq uir es th e Co mpany t o es tim at e the f utu re c ash f l ows exp ect ed to ar ise f ro m the s ubsi diari es , disc oun te d at a suit ab ly ri sk -adju st ed r at e in or der t o cal cul ate p re sent va lue . Sensitiv ity analysis has been under t aken to determine the ef fect of changing the di sc ount r at e, th e ter mina l value a nd fu tur e ca sh f lows o n th e pr ese nt value cal culat ion , whi ch is s hown in N ot e 2 on page 1 98 . Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 1 97 Notes t o the C ompany financial st atements c ontinued 2 In vestment i n subsidi aries £m Cost At 1 Febru ar y 202 0 4 ,1 3 2 .7 At 31 J anu ar y 20 21 a nd 3 1 Jan uar y 20 2 2 4,132.7 Amounts provided for At 1 Febru ar y 202 0 3,5 80.4 At 31 J anu ar y 20 21 a nd 3 1 Jan uar y 20 2 2 3 , 580. 4 Net b oo k valu e At 31 J anu ar y 20 22 552 .3 At 3 1 Janu ar y 20 2 1 552 .3 See N ot e 3 9 to t he c onso lida te d f ina ncia l st at eme nt s for a lis t of t he C ompa ny’s invest ment s . Man agemen t has t es te d the inve stm ent in s ubsi diar ies b alan ce fo r impa irme nt at 3 1 Janu ar y 20 22 du e to t he ne t ass et s of the C omp any b eing in exce ss of it s m arket c api t alis atio n; thus c ons ti tut ing an in dicat or o f impa irme nt . The i mpai rment t es t com par es t he r ec overa ble am ount o f invest ment t o it s c arr yi ng value . The r ec over abl e amou nt of th e invest ment h as b een de ter mine d bas ed on a s um- of- the -par ts val uati on , by deri ving a va lue-i n- use fo r eac h of th e Gr oup’s busine sse s, u sing ca sh f low p r ojec tio ns fr om t he Gr ou p’ s Boa rd- app roved f ive-yea r plan t o 2026/27. T ermin al valu es have b een in clud ed us ing 2 .0% as t he exp ec te d long-ter m average g row th rat e of t he U K ec ono my, and c alcu lat ed us ing the G or do n Gr ow t h Mo del . The c ash f l ows have th en be en dis co unt ed t o pr ese nt value u sing a su it abl y risk-adjust ed di sc ount r at e deri ved fr om t he G ro up’ s weight ed aver age c ost o f cap it al, a nd ris k adju st ed fo r eac h of th e Gr oup’s busines se s bas ed on r ela tive in dus tr y be ta s and c os t of deb t levels . Th e re cover ab le amo unt is t he valu e-in- use , being the s um of th e value -in-u se of th e Gr oup’s cash gene rat ing uni ts a nd th e pr es ent valu e of ce ntr al co st s l ess t he ma rket val ue of ex te rnal d ebt an d the n et ass et s of th e Co mpany (excluding th e car ry ing valu e of th e inves tme nt in sub sidi arie s ). In th e curr ent ye ar , the r ec over abl e amou nt whe n com par ed aga ins t the c arr yin g value o f the inves tm ent in s ubsi diari es re sult ed in h ead ro om of £ 487. 7 m in a c entr al sc en ario. W he n con side ring an a rray o f str es s te st s t o th e Gr oup’s proje ct ed cas h f lows in li ne wit h th e re ason abl e wors t-c as e (RWC) ass umpt ions o utli ned in N ot e 2 .1 of the S aga pl c con soli dat ed acc oun ts o n pages 1 26 -12 7 , combi ned w ith a l ower t ermin al gr ow t h ra te of 1 . 5% , th e level of h ead ro om r edu ce d to £ 1 29.1m . Man agemen t ther efo re c on clud ed th at it is n ot ne ces sar y t o imp air th e inves tmen t in subs idi arie s, n or woul d it b e app ro pria te to r evers e any imp airme nt alr ead y r eco gnis ed in p rev ious ye ars at t his p oint . The s urplu s cal cul ate d is mo st se nsit ive t o th e disc ount r at e and t erm inal g row th ra te as sum ed . A quant it ati ve sen sit ivi t y anal ysis fo r eac h of th ese a s at 3 1 Janu ar y 202 2 an d it s imp act o n th e hea dro om agai nst t he c arr ying va lue of i nvest ment in subs idia ries i s as foll ows: Pre - ta x di sc ou nt r at e T er min al g row th ra te +1. 0p pt £m –1. 0p pt £m +1. 0p pt £m –1. 0p pt £m Impact (22 0.7 ) 286 .4 22 1.3 (1 7 1. 2) 3 Debtors 2022 £m 2021 £m Amo unt s fa lling du e af t er mo re t han on e year Amo unt s due f ro m Gr oup u nder tak ings 50 1. 8 41 2 . 5 501. 8 41 2 . 5 2022 £m 2021 £m Amo unt s fa lling du e wit hin one ye ar Deferred t ax asset 1.7 1.0 Other debt ors 1.3 1.2 3.0 2.2 Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 198 4 Creditors – amo unts falli ng due i n less than on e ye ar 2022 £m 2021 £m Other creditors 2.0 3 .0 Accrued interest payable 1.9 1.8 3.9 4 .8 5 Creditors – amo unts falli ng due i n more than one y ea r 2022 £m 2021 £m Bonds 400.0 25 0.0 Unamortised issue cost s (3 . 8) (1 .1 ) 396. 2 248 .9 Plea se r efer t o No te 3 0 of th e Saga p lc c onso lid ate d ac cou nt s on page s 18 2- 183 fo r fur ther d eta ils r elat ing t o the b ond s. 6 Calle d up share cap ital Ordinary shares Number Nominal value £ Val u e £m All ot te d, c all ed up a nd fu lly p aid At 1 Febru ar y 202 0 1 , 122,003,328 0.0 1 11. 2 Iss ue of sh ar es – 5 O ct obe r 202 0 Firs t Firm Placing 224,400 ,000 0.0 1 2.2 Second Firm Placi ng 12 4 ,1 8 3 ,0 2 6 0.01 1.2 Placing and Open Of fer 623,335, 182 0.0 1 6.3 97 1, 9 18 , 20 8 0.0 1 9.7 Sub-total before share consolidation 2, 093,9 21,536 0.0 1 20. 9 Sha re c ons olid atio n – 13 O ct ob er 20 20 ( 1 , 9 5 4 , 3 2 6 ,76 7 ) Iss ue of sh ar es – 18 N ovemb er 20 20 5 0 7, 4 5 8 0 .1 5 0 .1 At 3 1 Janu ar y 20 2 1 140 , 102,227 0.1 5 2 1.0 Iss ue of sh ar es – 1 2 Novem ber 2 02 1 235,044 0.1 5 0 .1 At 31 J anu ar y 20 22 14 0,337 ,27 1 0.1 5 2 1 .1 On 3 0 Augu st 20 20, t he C omp any anno unc ed th at it wa s at the a dvan ce d st age of a p ros pe ct ive £ 1 50.0 m equi t y cap it al r aise i n or der t o st re ng th en th e Gr oup’s stat em ent of f i nanc ial p osi tio n, im pr ove liqui dit y an d sup por t t he execu tio n of it s s tr ateg y pla n. The p ro sp ect ive £ 1 50.0 m equ it y r aise wa s laun che d on 10 S ept em ber 20 20, s tru ct ure d as a F irm Pla cing a nd Op en O f f er . Und er th e Fir m Plac ing and O p en O f fer, on 5 Oct ob er 20 20 the C om pany is sue d 97 1 ,9 1 8 , 20 8 new or din ar y sha re s, r aisi ng £ 15 0.3 m of f unds w hich we re u tili sed t o r epay pa r t of th e Gr oup’s term lo an and r ep ay in ful l the dr awn r evol ving c re dit facility, with the bala nce of the proceeds raised increasing A vaila ble Cash 16 . The is sue w as ful ly sub scr ibe d. The s har e pr emiu m arisi ng on th e iss ue of th e new or din ar y sha re s was £ 14 0.6 m. T ran sac tio n co st s as soc iat ed wi th th e iss ue of the s har e ca pit al of £ 11 .6m w ere d edu ct ed fr om s har e pr emi um. On 1 3 Oc to ber 20 20, t he C omp any und er to ok a c ons olid ati on of it s s har es , whe reb y for ever y 15 o rd inar y sh ar es he ld of 1p nominal v alue, shareholders received one ne w consolidated sha re of 15p nominal value. On 1 8 Novemb er 20 20, S aga pl c issu ed 507 ,4 5 8 new or din ar y sha re s of 15 p eac h, w ith a va lue of £ 0.1m , for t ran sfe r into a n Employe e Be nef i t T r us t (EBT ) t o sat isf y empl oyee inc ent ive arr angem ent s . On 1 2 Novem ber 2 02 1 , S aga plc i ssu ed 23 5,0 4 4 n ew or dina ry s har es of 1 5p e ach , wi th a valu e of £ 0.1m, fo r tr ans fer int o an EBT to s atis f y em ploye e inc enti ve arr angem ent s . Plea se r efer t o No te 3 3 of th e Saga p lc c ons olid ate d ac co unt s on page 1 86 fo r fur ther d eta ils on t he move ment s in s har e capi t al duri ng the p rio r year. 16 Refe r t o th e Al te rn ati ve Pe r fo rma nc e M eas ur es G lo ss ar y o n pag e 20 1 fo r de f ini ti on a nd ex pl ana ti on Additional informatio n Financial statement s Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 199 Notes t o the C ompany financial st atements c ontinued 7 Co mmitment s The C omp any ha s pr ovid ed gu ar ant ees fo r the G r oup’s bonds , te rm lo an, s hip de bt , RCF a nd ba nk over draf t (pl ease r efe r to Not es 25 a nd 30 o f the S aga pl c co nso lidat ed a cc ount s o n pages 1 7 4, an d 18 2- 18 3, r es pe cti vely fo r fur ther de ta ils) . Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 200 Alternative P er formance M easures Glos sar y The G ro up us es a numb er of A lt ern ative Pe r form anc e Mea sur es (A PM s ), which ar e no t re quir ed o r com mon ly repor t ed under International Financ ial Repor ting St andards , the G ene ra lly Ac ce pte d Ac co unting P rinc iple s (GA A P) und er whic h the G ro up pr ep are s it s f in anc ial s ta tem ent s , but w hich are u sed by t he G ro up to h elp th e use r of th e acc oun ts bet ter underst and the f inancial per formanc e and position ofthe b usin es s. Def i niti ons fo r the p rim ar y APM s use d in th is re por t are se t out b elow. AP Ms ar e us uall y deri ved f rom f inan cial s t ate ment line i tem s and ar e ca lcu lat ed us ing co nsis te nt ac co unting pol icie s to t hos e app lied i n the f inanc ial s ta tem ent s , unle ss otherwise stated. APM s may no t nec ess ari ly be d ef in ed in a c ons ist ent m anne r to si mila r APM s use d by th e Gr oup’s compet it or s. T hey sho uld b e con sid ere d as a sup pl ement , r at her th an a substitute, for GA AP measures. Underlyin g (Loss ) /Profit Before T ax Und erly ing (L oss) /Pr of it B efo re T ax re pr ese nt s the l oss befo re t a x excludin g unr ealis ed f air valu e gains an d los ses o n deri vati ves , the n et pr of i t on dis pos al of a sset s , imp airm ent of the c arr y ing valu e of ass et s inc luding go odw ill , char ge on closure of defined benefit pension scheme, foreign exchan ge gains on r iver c ruis e ship l eas es , cos t s inc urr ed fo r ship de bt holi day and r es tr uct uring c os t s. I t is r ec onc iled t o s ta tut or y los s befo re t a x wit hin th e Gr oup C hief F inan cial O f f ice r’s Review o n page 3 6. This m easu re is t he G ro up’ s key pe r form anc e indi cat or an d isusef ul fo r pr ese nting t he Gr ou p’ s under ly ing tr ading per formance, as it excludes non-cash technic al accounting adjus tm ent s an d one -of f fi nan cial im pac t s that a re n ot expected to recur . T ra ding EB ITDA/ Adjust ed T r ading E BITDA T r ad ing EBI TDA is def i ned a s earni ngs bef or e int ere st payable, tax, depreciation and a mor tisation, and e xcludes the amor tisat ion of a cq uir ed int ang ibl es , non-t ra ding c ost s an d impai rmen ts . Ad jus te d T r ad ing EBI TDA also excl ude s the impa ct of I FR S 16 an d the T rad ing EBI TDA re latin g to t he t wo crui se shi ps , Spir it of D isc over y and S piri t of Ad ventur e in line wi th t he cove nant o n the G ro up’ s revo lvi ng cr edit f aci lit y (RC F ). It is r ec onci led t o Un derl yin g (Los s) /Prof it Befo re T ax wit hin th e Gr oup C hief F inan cial O f f ice r’s Review on p age 4 7 . Und erly ing (L oss) /Pr of it B efo re T ax is r eco nci led t o st at ut or y los s befo re t a x wit hin th e Gr oup C hief F inan cial O f f ice r’s Review o n page 3 8 . This m easu re is l inke d to t he cove nant o n the G ro up’ s RCF , being t he d enom inat or in t he Gr ou p’ s lever age rat io cal cul atio n. Underl ying Bas ic (Los s ) /Earnings Per Shar e Underlying Basic (Loss) /Earnings Per Share repr esent s basic los s per s har e exclud ing the p os t-ta x ef fe ct of u nre alis ed fa ir value ga ins and l oss es o n deri vati ves , the n et pr of i t on disp os al of as set s , impa irmen t of the c arr y ing valu e of ass et s including goodwill, char ge on closu re of defined benef it pen sion s che me, f or eign exch ange gains o n river c ruis e ship leas es , co st s in curr ed fo r ship d ebt h olid ay and r es tru ctu ring cos t s . This m easu re is r ec on cile d to t he s t atut or y b asic l oss per s har e in N ote 1 2 t o the a cc ount s o n page 15 3 . This m easu re is l inke d to t he Gr oup’s key per fo rman ce indic at or Un der lyin g (Los s) /Prof it Befo re T ax and r ep re sent s what m anagem ent c onsi der s to b e the u nde rly ing sharehol der value generated in the year . Av ailable Cash Availab le Ca sh r epr es ent s cas h hel d by subs idia ries w ith in the G ro up th at is not s ubje ct t o reg ulat or y r es tri cti ons , net of any over dra f t s hel d by tho se su bsid iari es . This m eas ure i s re con cil ed t o the s t atut or y m easu re o f cas h in Not e 25 t o the acc oun ts o n page 1 7 4. Available Ope rating Ca sh Flow Availab le Op er ati ng Cas h Flow is n et ca sh f low f ro m ope rat ing ac tiv it ies af ter c apit al ex pen dit ure b ut b efor e t ax , inte re st p aid , re str uc turin g cos t s, p ro c eed s fr om bu sine ss and pr op er t y d isp osa ls and o ther n on-t ra ding it ems , whi ch isavailab le t o be u sed by t he G rou p as it c hoo ses a nd is no t subj ect t o r egul ato r y re str ict ion . It i s re con cil ed t o st atu to r y net ca sh f low f r om op er ating a cti vit ies w ith in the G r oup Ch ief Fin anci al O f f i cer ’s Review on page 47 . Adjus ted N et Deb t Adjus t ed N et Deb t is th e sum of t he car r ying val ues of t he Gr oup’s debt faci liti es le ss th e amo unt of Avail able C ash i t hol ds bu t exclude s the s hip de bt and t he Cr uis e busi nes s Availab le Ca sh . It is lin ked t o th e coven ant on t he Gr ou p’ s RCF , being t he num er ato r in the G r oup’s leverage rat io cal culat ion , an d is anal yse d fur t her w ithi n the G ro up Ch ief Fin anci al O f f i cer ’s Review on page 4 9. Additional information Financial stat ements Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 20 1 Glos sar y ABTA (Ass oc iat ion o f Bri ti sh T ravel A gent s) the trade a ssociation for t our o pe rat or s an d tr avel agent s in t he U K Accident year the f in anci al ye ar in wh ich an i nsu ran ce l os s oc cur s Add-on an insurance policy that is actively marketed and sold as an add iti on t o a co re p oli cy AGM (Annual General Meeting) t o be h eld at 1 1 .0 0a m on 5 Ju ly 202 2 at En br oo k Park , S and gat e, Folk es to ne, K ent CT 20 3 SE AICL (Acromas Insurance Company Limi ted) t h e G r o up ’s underwriting business A TOL (A ir T rave l Org ani ser ’s Lice nc e ) government-run f inancial protection scheme operated by the Civil A viation A uthority Beta me asur es t he m arke t ris k of th e Co mpa ny exclud ing th e impa ct o f debt Board Saga p lc B oa rd of D ir ec to rs CAA (Civil Aviati on Authority ) one of th e bo die s tha t reg ul ate s th e Gr oup’s T r avel bu sin ess , r es pon sib le fo r the m ana geme nt of th e Ai r T r avel Organisers Licence (A TOL) scheme CDP ( Carbon Disclosure Project ) char it y that ma nages companies’ disclosure of thei r environmental im pact s CEO (Ch ief E xec ut ive O f f ic er) E uan Sutherland for the 202 1/ 22 f inancial year CFO ( Chief Financial Off icer ) Jame s Qu in for t he 20 2 1/22 f inan cia l year CG U ( ca sh gen er ati ng uni t) grou p of as set s th at gen er ate c ash inf lows CIIA ( Cha rtered Inst itute of In ternal Aud itors ) body representing int ern al aud it ors i n the U K Claims frequency th e numb er o f cla ims in curr e d div ide d by th e numb er of p ol icie s ear ne d in a gi ven p erio d Claims reserves acc oun ting p rov isi ons t hat h ave be en set t o m eet outst anding insurance claims, incurred but no t report ed and associ ated claims handling co st s Code the U K C orp or at e Gove rna nc e Co de pu bli she d by th e UK Fin anc ial R ep or ti ng Co unc il set t ing o ut gu ida nc e in th e for m of prin cip le s and p rov isi ons t o ad dr ess t he p rinc ipa l asp ec t s of corpor ate governance Companies Act th e U K Co mpa nies A ct 2 00 6 , as am end ed fr om time to ti me Company Saga plc COR ( combined operating ratio ) th e rat io of t he c laim s co st s an d expenses incurred to under write insuranc e ( numerator) , to the reven ue ea rne d by Ac ro mas I nsu ran ce C om pany L imi t ed (A IC L) ( den omi nat or) in a given p er iod . Ca n oth er wis e be c alc ulat e d as th e sum of t he l oss r at io and ex pe nse r at io Co re p oli cy an insurance policy that is actively marketed and sold on it s ow n, ir re sp ec tive o f any ad d-o ns p urc has ed Cruise passenger days the to ta l numb er of d ays pa ss enger s have tr avelle d on a s hip, or s hip s, i n a give n pe rio d Cruise passengers th e number of passen gers tha t hav e trav elled on a Sa ga cru ise i n a give n pe rio d DB P (De fe rre d Bo nus P lan) reward scheme used to incen tivise colleagues over the longer term, ensuring ali gnment with Company goals DE&I (div ersit y, equit y and inclusion) the ag enda under which Saga i s co mmit t e d to c re atin g an inc lus ive cu ltu re w her e all co llea gu es ca n bri ng the ir fu ll and a uth ent ic se lve s to wo rk Discontinued operations operations divested or those that have be en cl ass if ie d as h eld fo r sa le DTRs (Disclosure a nd T rans parency Rules ) ru les published by the UK F ina nci al C ond uc t Aut hor it y (FCA ) re lat ing to t he d isc los ur e of infor mat ion by a c om pany l ist ed i n the U K Earned pre mium insur an ce p re mium s tha t ar e re cog nis ed in t he inc om e st at eme nt over t he p erio d of c over t o whi ch th e pr emi ums relate, deferr ed on a 365ths basis Ear ning s pe r sha re r epres ents underlying shareh older value generated in a given period E BI TDA e arn ings b efor e in ter e st , t ax , d epr ec iat ion a nd amo r tis ati on of a cq uir ed int a ngib le s, n on-tr a ding c os t s and impairment s EB T (Em ploye e Be ne f it T rus t) trust established to hold assets to provide benefit s for em ployees ECL ( e xpected credit loss ) impairment model applied to financial assets EI R (eff ec tive i nt er es t rat e) metho d us ed t o cal cul at e int er est paid a nd p ayabl e EL T (E xecu ti ve Le ade rs hip T eam) the f irs t layer o f man ageme nt below Board level EQA (Ex ternal Quality Asses sment ) an assessment carried out by Pw C under the Chart ered Ins titute of Internal Audit ors St andards ES G (Env ir onm ent a l, S oc ial a nd G overn anc e) cen tral factors in mea suri ng th e sus t aina bili t y an d soc iet al i mpa ct of t he b usin es s Executive Director of Saga pl c ( unl ess o the rw ise s t at ed) Expense ratio th e rat io of ex pen se s incu rr ed t o und er wri te insu ra nce (num er ato r ) to t he r evenu e ear ned b y Acr om as Ins ura nc e Co mpa ny Lim it ed (A I CL) (deno min ato r ) in a g iven p eri od FCA (Financial Conduct Authority) the ind epe nde nt U K bo dy t hat regulate s the financial ser vice s industry, including g eneral insuranc e FRC (Financial Reporting Council) the in de pen den t bo dy th at reg ul ate s aud it ors , ac c ount an ts a nd a ctu ari es in t he U K FRS (Financial Reporting St andard) accounting standards issued by the International Financial Repor ting St andards Foundation FSC (Financial Services Commission ) reg ula to r for t he no n-b ank financial services sector and global business FTO ( Fede rat io n of T our O pe rat or s) body t hat r eg ulat e s the Gr oup’s T ou r Op er ati ons b usin es s FVOCI (fair value through other comprehensive income ) one of thr ee c las sif icat ion c at egori es fo r f ina nci al as set s un de r IFR S 9 F V TP L (fa ir val ue th ro ugh p ro f it a nd lo ss) one of t hr ee classification categories for financial assets under IFRS 9 GA A P ( Gener ally Accep ted Acco unting Principles) a co mmo n set of accountin g principles, standards and procedures issued by the Financial Acc ounting Standar ds Board GFSC ( Gibraltar Financial Services Commission ) independent Gib ra lt ar b od y tha t reg ula te s the G r oup’s Unde rw rit ing bu sin ess GHG (greenhou se gas ) a typ e of gas f or whi ch S aga pr ov ide s annual repor ting on its emissions Group th e Saga p lc g ro up GWP ( g ro ss w rit te n pr emi ums) the t ot al p re mium c har ged t o cus to me rs fo r a cor e in sur an ce p ro duc t , exclu ding in sur anc e pr emiu m ta x bu t bef or e the d ed uct ion o f any ou t war d re insu ra nc e pr emiu ms , mea sur ed w ith r efe re nc e to t he c over s t ar t dat e of t he policy Holidays passeng ers the nu mber of pa ssengers that ha ve tra velled on a Sa ga or T it an h oli day in a g iven p eri od IAS (International Accounting Standard s ) accounting standards issued by the International Accounti ng Standards Commit tee Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 202 IA T A (Internatio nal Air T ransport Associations ) trade association of th e worl d’s airlin es IBNR (incurred but not report ed) a claim s re ser ve p rov id ed t o mee t the e st imat e d cos t of c laim s th at have o ccu rr ed , but h ave not yet be en r ep or t ed t o th e insu re r IBOR ( inter-ban k offered rate ) a gr oup o f wid ely a cc ept ed i nte re st rate benchm arks IFRS (International Financial Repor ting Standards) a ccount ing stan dards issued by the International Acc ounting Standar ds Board Int er es t cove r th e rat io of t ot al n et ca sh int er es t t o Adju st ed T rading EBITDA IPO (Initial Public Of fering) th e f ir st s ale o f sha re s by a pr evi ous ly unlis t ed c omp any t o inves to rs o n a sec uri tie s excha nge IPT (insurance premium tax) tax payable on g eneral insuranc e pr emiu ms in th e U K IR (I nves to r Re lat ion s) team responsible for facilitating com muni cat ion b et we en S aga pl c and i t s sha reh ol der s KPI (ke y performance indicator ) quantifiable measure used to evaluate performanc e Leve rage r at io th e rat io of A dju st ed N et D ebt t o Adj ust ed T ra ding EB IT DA LIBOR (London inter-bank offered rate ) benchmark intere st rate estimated from London banks Listing Rule s a set of m and ato r y reg ul atio ns of t he U K Fi nan cia l Co ndu ct Au th ori t y app lic abl e to a c om pany l ist ed o n th e Lon do n Stock E xchang e Load factor the t ot al nu mb er of C ruis e pas se ngers b oo ked i n pr op or ti on t o th e tot a l cru ise s hip ca pa cit y Loss ratio a r atio o f the c lai ms co st s (nume rat o r ) to t he ne t ear ned premium ( denominator) in a given period LSE (London Stock Exchange ) th e st o ck exch ange up on wh ich Saga p lc is l ist ed L TIP (lo ng-t erm in ce nt ive pl an) reward sche me used to i ncentivise colleagues over the longer term, ensuring ali gnment with Company goals Malus an arrangement that permits the forfeit ure of unvested re mune rat io n awar ds in c irc ums t anc es t he C omp any c ons ide rs appropriate MCA ( Mar iti me an d Co as tg ua rd A gen cy) ex ecutive agency of the UK wo rki ng to p r event th e los s of li ves Mental Health First Aider a sp ec iali st g ro up of f i rs t aid ers w ith in Saga p lc , fo cus ed on m ent al h eal th Net claims the co st o f cla ims in curr e d in th e per iod l es s any cl aims cos t s r ec over ed un der r ein sur an ce c ont ra ct s an d af t er t he r ele ase of any cl aims r e ser ves Net e arn ed p re mium e arned premium net of any out ward earned reinsuranc e premium paid Net interest expense finance costs less f inance income NPS ( net promoter score ) represents the w illingness of cus to me rs t o re co mme nd S aga pr od uc ts a nd se r vic es t o ot her s OCI ( other comprehensive income ) revenues, expenses, gains and losses under International Fin ancial Repor ting Stan dards that are excl uded from the income statement Ogden discount rate th e dis cou nt r ate s et by th e re levan t government bodies , the Lord Chanc ellor and Scott ish Ministers , and u sed t o ca lcu lat e lum p sum awa rd s in bo dil y inju r y cas es Open Of fer the of fer th at to ok p la ce in O ct ob er 20 20 a s par t o f the c api t al r aise , all owing q ual if y ing s har eho ld ers t o su bsc rib e for new sh ar es at a r ati o of f i ve new sh ar es fo r ever y nin e exis tin g shares held PBT (p ro f it b efo re t a x) on e of th e Gr oup’s prima r y key per formance indicato rs Per diem the total amount of Cruise revenue earned per passenger per d ay PMI ( pri vat e me dic al in sur an ce) one of t he pr o duc t s of fe re d wit hin th e Gr ou ps Re ta il Br ok ing bu sin ess Poli cie s in fo rc e th e num ber o f co re in sur an ce p oli cie s in for c e at any gi ven ti me PPO ( per io dic p ayme nt or de r ) a co ur t or de r pr es crib ing set t lem ent of a n insu ra nce c lai m thr oug h r egu lar p ayme nt s PRUs (principal risk s and uncer tainties) the mos t sig nif ican t ris ks thr eate ning Saga plc RC F (revol ving c re dit f ac ili t y) the fac ili t y tha t Saga h as in p lac e wit h it s le ndin g ban ks , all owing d raw d own of f un ds up t o £ 1 00 m Reinsuranc e contract ual arrangements where an insurer trans fers par t , o r all , of th e ins ura nc e ris k wri t ten t o an oth er in sur er, in exchange f or a sh ar e of th e cus t ome r pr emi um RO CE (re turn o n ca pit al e mp loye d) a f in anc ial r ati o us ed as a per formance condi tion under the legacy long -term incentive plan RS P (R es tr ict ed S ha re P lan) share scheme, and corresponding sha re awa rd s use d to i nc ent ivi se c oll eag ues ove r th e longe r te rm, ensuring alignment with Company g oals RWC ( reasonable worst-case ) the Group’ s se vere, but pla usible, downside scenario Shareholder Reference a uniqu e r efer en ce c od e iss ued t o inves to rs of S aga p lc SI P (Sh ar e Inc en ti ve Plan) a pl an avail abl e to a ll c oll eag ues a llow ing the m to p ur cha se sh ar es in S aga p lc th ro ugh a m ont hly p ayr oll deduction SL T (Senior Leadership T eam) the se co nd l ayer of ma nagem ent below Board level SMT (S aga M an agem ent T eam) the t hir d laye r of ma nagem ent below Board level So lven cy ca pit a l/Sol venc y II insurance regulations d esigned to harmonise European Union insuranc e regulation. Primarily this concerns the amount of capital that European insur ance companies mus t ho ld und er a m eas ure o f cap it al a nd ris k SO NI A (St erl ing O vern igh t In dex Aver age) a replacement for the Lon don i nt er- ban k of fe re d r ate , int ro duc ed i n the U K in 2 02 1 Speak Up a pol icy wh ich a llows c ol lea gue s to r ai se any m at te rs of concern within the workplace SS L (Sa ga Se rv ic es L imit ed ) th e Gr oup’s Ret ail Br o king B usin es s tCO 2 e tonn es of c arb on di oxid e equ ival ent , a m eas ur e that a llow s comparison of the emissions of other greenhouse gases relati ve to one u nit of C O 2 T ell Euan About a communi cations forum allowing colleagues to int er act w ith t he G ro up C hief E xec ut ive O f f i ce r TOM (ta rget o per at ing m od el) description of the des ired ope ra ting m od el for S aga p lc TSR ( total shareholder return ) the t heo re tic al g row th in val ue of a sharehol ding ov er a period, by reference t o the beginning and endi ng sh are p ric e, a ssu ming t hat di vi den ds , inc lud ing sp ec ial div ide nds , ar e r einves t ed t o pur ch ase a ddi ti ona l unit s of t he e qui t y Unearned premium an amount of insurance premium that has been written but not yet ea rned Working@S aga a co llab or at ive ini ti ati ve to d esig n, r ef it and re purp os e our o f f ic e sp ac e to s upp or t n ew ways of w ork ing Additional information Financial stat ements Governance Str ategic Repor t Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 203 Shareholder information Financial calendar 202 2 An nual G en era l Me eting – 5 J uly 2 02 2 Shareholder information onli ne The C omp any wil l publ ish an nual r ep or t s , not ice s of shar eh old er me eting s and ot her d ocu ment s wh ich we ar e required to send to sha reholders ( shareholder information ) on our we bsi te . Co nsen ting sh ar eho lder s will b e not if i ed eith er by p ost o r emai l, if p re ferr ed , eac h tim e the C om pany publishes shareholder infor mation. This allows us to increase the s pe ed of c ommu nicat ion , r edu ce ou r impa ct on t he environment and keep cost s to a minimum. Y ou can cha nge your c ommun icat ion p ref er enc e using Eq uinit i (EQ) ’ s Shareview Port folio ( accessed via ww w.sagashareholder . co.u k) or by c ont ac ting EQ. T o regis t er , you will n eed yo ur Sha reh old er Ref er enc e and A cti vati on Co de . Y ou can f in d your Activation Code on the introductory communica tions from EQand your Sh ar eho lde r Refer en ce c an be f ound o n mos t doc umen ta tion , in clud ing your s har e ce r tif icat e. Y ou can also m anage yo ur sha reh ol ding onl ine v ia Sh ar eview Por t fol io. It i s fr ee t o use , sec ure , eas y to a dmini st er an d allows yo u to up dat e you r UK b ank ac co unt det ai ls , send yo ur voting in st ruc tio ns in ad vanc e of gene ra l meet ings , kee p your con ta ct de ta ils up t o dat e and b uy an d sell s har es e asil y. Shareholder fraud Sha reh old ers a re a dvi sed t o b e war y of any uns olic it ed ad vi ce or of f ers , wh ethe r over the t el eph one , thr oug h the p os t or by email . If a ny suc h unso lici te d com munic ati on is r ec eive d, ple ase c hec k that t he c omp any or p erso n co nt act ing you is properly authorised by the Fina ncial Conduct Authority (FCA) bef or e get ting invol ved . Frauds t ers us e pe rsu asi ve and high- pr ess ure t a cti cs t o lur e inves to rs int o sc ams . Th ey may of fe r to s ell sh are s tha t turn o ut t o be wo r thl ess o r non - exist ent , o r to b uy sh ar es at an in f lat ed pr ice i n ret urn fo r an upfr ont p ayme nt . Wh ile hig h pr of it s a re p ro mise d, i f you bu y or sel l shar es i n this way, you may lo se you r mon ey. F or m or e inform ati on, o r if you a re ap pr oa che d by fr auds t ers , pl eas e visi t the FCA we bsi te (ww w.fca. org .uk / con sume rs/ sc ams) , wher e you c an r epo r t and f ind ou t mor e ab out inve stm ent sca ms . Y ou can also c all t he FCA Co nsum er H elpli ne on 0 80 0 11 16 768 . If yo u have alr ea dy pai d mon ey to s har e fr aud st ers , you sh ould c ont ac t Ac tio n Fraud on 0 30 0 1 23 20 40 . Advisers Joint corporate brokers Inves te c Bank p lc 30 G re sham S t re et London E C2V 7QP Numis Securi ties Ltd The London Stock Exchange Bui lding 10 Paternost er Square London E C4M 7L T Media relati ons advisers Headland Consultancy Cannon Gre en 1 Suf folk Gr ee n London E C4R 0A X Independent auditors KPMG LLP 15 Canada Square Canary W harf Lon don E 14 5G L Lega l ad vis ers Herber t Smith Freehills LLP Exchange House Primrose Street Lon don EC2 A 2 EG Registrars Equiniti Group For sha reholder enquiries, please contact: Equiniti Group Aspect House Spenc er Road La ncing West S uss ex BN 99 6 DA + 4 4 (0 ) 37 1 38 4 26 40 Plea se us e the c oun tr y co de wh en ca lling fr om o ut si de th e UK . Line s ar e op en 8 .3 0a m to 5 . 30 pm ( UK t ime) , Mo nday toFriday (excluding pub lic ho lid ays in Engl and an d Wales). customer@ equiniti.com Information for shareholders Information for shareholders is provided on the inte rneta spar tof t he G ro up’ s co rpo rat e web sit e ( w w w.corpor ate .saga .co.uk /investor s ). Registered off ice Saga pl c Enbrook Park Sandgat e Folkestone Kent CT2 0 3S E Regi st er ed in Eng lan d. C omp any Num ber : 08 80 42 63 Corp orat e website s Information made ava ilable on the Group ’ s websites does not ,an d is not int en ded t o, fo rm pa r t of this A nnu al Re por t and Accoun ts. Sag a plc A nn ual R ep or t a nd Ac c ount s 2 02 2 204 F orwa rd-looki ng statemen ts This A nnu al Rep or t an d Ac co unt s co nta ins c er t ain fo rwa rd- loo king s t ate ment s wi th r esp ec t to S aga’ s exp ect at ions , includi ng strategy, ma nageme nt objectiv es, future developments andf inancial position and per formanc e. The ses tat em ent s ar e sub jec t to as sump tio ns, r isk s and unc er t aint ies , many ofw hich r el ate t o fa ct or s that a re beyon d Saga’s abilit y t oco ntr ol an d whic h cou ld ca use a ctu al result s and per formance to dif fer materiall y from those expr ess ed o rimpli ed by th ese f or war d-lo ok ing st at em ent s. Any for wa rd- loo king s t ate ment s m ade ar e ba sed u po n thek nowl edge and i nform atio n availa ble t o Dir e ct ors o n thed ateo f this A nnua l Rep or t an d Ac cou nt s and ar e su bjec t to chang e without noti ce. Shareholders are cautioned not top lac e undu e re lian ce o n the fo r war d-lo oki ng st at eme nt s. Not hinginth is An nual R epo r t and A cc ount s s houl d be con st rue d asapr of i test imat e or f or eca st . This p ubli cati on is p ro duc ed by a CarbonN eutral® company and Carbon Bal anc ed wi th Worl d La nd T rust . Bal anci ng is deli ver ed by Worl d La nd T rus t, an international co nservation charit y, who of fset carbon emissions through the purchase and preservation of high c ons er vati on valu e lan d. Thr oug h pr ote ct ing st an ding fo re st s , unde r thr eat of c lea ra nce , car bo n is loc ked in t hat wo uld ot her wis e be rel eas ed . The se pr ot ec te d for es t s are then able to contin ue absorbing carbon fr om th e atmo sp her e, r efer re d to as RED D (Re duc ed Emis sio ns fr om Deforestation and forest Degradation ). This is n ow re cog nis ed as on e of th e mos t co st- ef fe cti ve and s wif t es t ways to ar re st t he ris e in atm osp heri c CO 2 and global warming effect s . Additional to t he ca rbo n ben ef it s is t he f l or a and faun a this l and p re ser ves , inc ludi ng a numb er of sp ec ies id enti f ie d at risk o f ext inc tio n on th e IU C N Red L is t of Threatened Species. CBP00019082504183028 Des ign ed and p ro duc ed by Fr i e n d ww w.friendstudio.c om This r ep or t ha s be en pri nte d on Ama deu s Silk w hich is F SC ® cer t if i ed and ma de f ro m 10 0% Ele ment al Chl orin e Free (ECF ) p ulp. The mi ll and p rint er ar e bo th c er ti f ied to I SO 14 0 0 1 envir onm ent al management system. The rep or t was print ed u sing veget ab le-b ase d ink s byaCarb on Neu tr al® pr int er . SAGA PLC Enbrook Park Sandgat e Folkestone Kent CT20 3S E
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