Sabre Insurance confident despite market challenges

Sabre Insurance reported an improvement in gross written premiums in a trading update on Thursday, to £135.7m for the first nine months of the year, from £126.7m year-on-year.

The London-listed firm said gross written premiums in motor fell to £105.2m in the period ended 30 September, from £125.5m a year ago.

Gross written premiums in motorcycle totalled £20.9m, having been nil in the same period last year, while in taxi, gross written premiums surged to £9.6m from £1.2m.

The company’s post-dividend solvency capital ratio was 163%, compared to 175% after the first nine months of 2021.

Sabre said its analysis suggested the broader market rate increases reported for the year to date were between 10% and 11%, with about half of the market rate rise put down to the new FCA pricing rules, and the other half a direct response to claims inflation.

However, it said it believed that claims inflation itself was currently running at around 12%, meaning that it was still anticipating a market-wide correction through the final quarter of the year, and the first quarter of next year.

The board said there were “some early signs” of an acceleration of price increase by many competitors in recent weeks.

In response to this inflationary environment - and in contrast to the broader market - Sabre said it had continued to increase prices to reflect claims inflation fully, increasing motor policy prices by 24% to the end of September, and by 31% over the past 12 months.

Its volumes were still in line with expectation.

As a result, it reiterated its guidance for the full year, expecting a combined operating ratio in the mid-90 percentage points, that it expected would improve “significantly” in 2023.

Looking at the longer term, Sabre said it had a “strong” market position within its motor business, and had proven its ability to mitigate inflation with price increases through the cycle.

It said its diversification into the complementary motorcycle and taxi businesses had created new areas of specialist growth, and would make profitable contributions going forward.

The board said the strategy was underpinned by a well-funded balance sheet, with no debt, and with a “strong” ongoing solvency capital position, above its target range of 140% to 160%.

Additionally, Sabre said its investment portfolio was “low risk”, and operated a matching policy to ensure movements in interest and risk-free rates had a “minimal impact” on its solvency position.

The board said it remained “very confident” in the long-term prospects of the business.

“I am pleased with the resilience of our performance through to the end of the third quarter,” said chief executive officer Geoff Carter.

“We have continued to focus on both margin over volume and fully covering the ongoing high levels of claims inflation through price increases that are significantly higher than the market.

“This consistent strategy ensures that Sabre remains on a sound financial and operational footing for the times ahead.”

Carter said it was “encouraging” that, despite the firm’s above-market price increases, it was still delivering volumes in line with its expectations.

“It is pleasing that we are seeing the planned improvement in our motor loss ratio.

“We have benefitted from writing more motorcycle business than planned which will generate some natural first year growth strain.”

As the growth strain subsided, Geoff Carter said the volumes written in the company’s motorcycle and taxi businesses would make “attractive” ongoing profit contributions, as its pricing discipline and underwriting initiatives flowed through.

“The resilience of our motor performance, and future profit streams from motorcycle and taxi, mean that despite the ongoing macro and geopolitical uncertainties, we are looking forward with confidence as our specialist offering and discipline over the recent challenging periods pays dividends.”

At 1035 BST, shares in Sabre Insurance Group were down 0.22% at 90.7p.

Reporting by Josh White at Sharecast.com.