* Saga shares hit record low after results
* Tour margins hit by competitive discounting
* Sees early progress for new insurance products (Adds details, analyst comment, shares, background, graphic)
By Pushkala Aripaka and Muvija M
June 19 (Reuters) - Britain's Saga warned on Wednesday that discounting was taking a heavy toll on its tours business, while an overhaul of its insurance arm has yet to take effect, sending shares in the company catering for the over-50s to a record low.
Saga, which is looking to find a new chief executive after Lance Batchelor announced his departure last week, has been trying to shake off its image as only serving "old people" and had begun rebranding after a profit warning in April.
Saga's shares, widely held by retail investors since it floated at 185 pence in 2014, have slumped 66% this year. They had dropped 12.2% to 33 pence by 0907 GMT after Saga said full year booked revenues had dropped by 4% year-on-year.
The results and continuing fall in Saga's market value have raised concerns about Saga's debt position.
"In the current trading environment ... nervousness around debt levels are likely to remain – covenants could be tested if tour profits fell to zero," Investec analysts said.
Saga has been trying to reduce its net debt, which stood at 391.3 million pounds ($492 million) at the end of January, compared to 429.7 million pounds as at July 31 2018. The company has a market capitalisation of 422 million pounds.
In April Saga said older Britons were cutting back on travel because of uncertainty over Britain's planned exit from the European Union and its bookings were being hit.
It said margins in its tours business were still being crimped by competitive discounting, which has also hurt rivals such as Thomas Cook, the world's oldest travel firm, which has issued several profit warnings since last summer.
Batchelor is set to retire as Saga CEO next year, the latest in a series of management changes in the last two years that have included its chief financial officer and chairman.
Saga said trading was broadly in line with expectations despite the challenges, helped by early progress in the launch of new insurance products such as home and motor policies with three-year fixed pricing, which it flagged in April.
Insurance prices have been pressured by competition from bigger players like Admiral, RSA Insurance, Direct Line and Hastings.
Saga, which is set to launch a new cruise ship called the Spirit of Discovery next month, forecast an operating loss of around 3 million pounds for its cruise business for the half-year, partly due to marketing costs for the new vessel.
In insurance, it said total home and motor policies were flat at 564,000 at May 31, due to slightly improved retentions. ($1 = 0.7959 pounds)
(Reporting by Muvija M and Pushkala Aripaka in Bengaluru; editing by Bernard Orr and Alexander Smith)