Sabre Insurance still profitable in 'disappointing' year

The London-listed company said its 2022 dividend totalled 4.5p, consisting of a full-year payment of 1.7p and an interim dividend of 2.8p.

That was in line with its policy to distribute 70% of profit after tax plus excess capital.

Sabre also reported strong capital generation, leading to a pre-dividend solvency capital ratio of 161.4% and a post-dividend solvency capital ratio of 153.8%, comfortably within its target range of 140% to 160%.

The firm’s growth in gross written premium, to £171.3m from £169.3m, was driven by motorcycle and taxi business, with the motor book remaining suppressed in 2022 due to continued market-wide under-pricing.

It reported a profit before tax of £12.8m, a year-on-year decrease from £37.2m, primarily due to pressure on loss ratio resulting from rapid, unexpected inflation.

However, Sabre said it was expecting to see an improvement in loss ratios across its motor, motorcycle, and taxi business in the year ahead.

Having allowed its motor business to shrink in 2022 against a backdrop of undisciplined market pricing, the board said it expected a return to growth in its traditional market in 2023 if more robust market pricing seen in recent weeks was sustained.

Sabre predicted that its overall combined operating ratio would fall to between 85% and 90% for 2023.

Improvements in its loss ratio were expected to be partially offset by a strain on expenses due to the residual impact of high inflation, but the firm said it remained focussed on minimising those impacts.

The post-dividend capital ratio was expected to grow as Sabre earned through profitable business in 2023.

“Whilst the 2022 result is disappointing by our own standards, due to the impacts of extraordinary levels of inflation, I am hugely encouraged by how quickly we identified and corrected for these challenges, and the strong foundation we have maintained,” said chief executive officer Geoff Carter.

“The actions we have taken have enabled us to grow supplementary product lines, deliver a profit and announce a special dividend in what has been a highly challenging market.

“I believe our performance is highly creditable in a market context.”

Carter said the firm’s “rapid response and focus” meant it still delivered a “very strong” financial year loss ratio of 61.5% on the motor book, with the new motorcycle and taxi portfolios “firmly on track” to deliver a meaningful contribution to profit.

“In recent weeks we are seeing some encouraging evidence of market price increases resulting in weekly premium growth on the motor line, and we are already benefitting from improving loss ratios across the portfolio.

“As we move through 2023, and earn out the inflation and new-product strain on motorcycle and taxi, we are confident we will be able to build the business profitably in the medium-term through a combination of organic growth if market price increases sustain, and our own development initiatives.

“We will continue to focus rigorously on treating volume as an output, and not a target, and on maintaining our historic strengths. I look forward to reporting on our progress.”

At 0946 GMT, shares in Sabre Insurance Group were down 1.05% at 95.68p.

Reporting by Josh White for Sharecast.com.