Sabre misses 1H profit estimates, but analysts say outlook positive

The motor insurance outfit reported a drop in its adjusted profits before tax from £27.8m one year ago to £22.2m (consensus: £23.7).

In parallel, the group's combined ratio, a measure of what it pays out relative to what it earns, increased from 71.7% to 74.4% (consensus: 73.6%) on the back of a higher expense ratio.

Commenting on Sabre's performance, its boss, Geoff Carter, expressed "cautious optimism" despite the "unprecedented temporary shift in market conditions" and "an unforeseen extension of the historically soft market conditions."

However, Carter said that Sabre was continuing to increase rates in response to claims inflation and pointed to "encouraging signs" that its competitors too were beginning to recognise the building industry-wide pressures.

Some competitors were also reacting to the FCA's pricing reforms.

Hence, said Carter: "We would anticipate we will be a beneficiary of these market-level actions later in 2021 and into 2022."

The company's post-interim solvency coverage ratio slipped from 178% to 169%.

On the outlook, Sabre's boos guided towards a full-year 2021 combined operating ratio of 75-80%.

"Despite our optimism, we remain cautious that market-level price increases always take longer than logic would suggest and so the timing of more substantial growth is still slightly uncertain at this stage," Carter added.

"We remain committed to using our strong capital range to support an attractive dividend as we earn through the lower premium volumes, ahead of anticipated growth."

In line with group policy, the board declared an interim dividend of 3.7p per share, as expected by analysts.

Analysts at Numis judged that the outlook remained "promising" despite the "stubborn headwinds".

They cut their estimate for the firm's full-year 2021 earnings per share by 12% to 13.8p after trimming their own forecast for Sabre's full-year premium income by 3% and in reaction to its new guidance for the combined ratio.

They also marked down their 2022 EPS estimate by 8% to 15.1p given their assumption now of a slower recovery in premium income.

Nevertheless, they kept their recommendation on the shares at 'add'.

As of 1401 BST, shares of Sabre Insurance were down by 2.45% at 258.50p.