TIDMSBRE
RNS Number : 0005P
Sabre Insurance Group PLC
14 October 2021
14 October 2021
SABRE INSURANCE GROUP PLC
Q3 Trading Update
Sabre Insurance Group plc (the "Group" or "Sabre"), one of the
UK's leading motor insurance underwriters, today provides an update
on trading for the period to 30 September 2021.
Statement from Geoff Carter, Chief Executive Officer:
"Sabre has shown a great deal of resilience during recent
challenging times, when our addressable market significantly and
temporarily reduced in size. Whilst this has had an anticipated
impact on our short-term financial performance, we are very
confident about the medium-term and longer-term growth outlook. We
are currently working through a number of growth initiatives that
we will discuss further at the Full Year results. We are confident
that these initiatives, combined with anticipated market pricing
increases and an expansion in our addressable market, will deliver
growth in FY22 and beyond. By taking the hard decisions to allow
volumes to reduce during the recent, unprecedented period, we have
maintained our core strengths and are very well positioned to
benefit from these opportunities."
Key highlights:
- Pricing discipline retained through extended soft market conditions
- Market-level demand for policies remains subdued due to
gradual recovery in number of new drivers, continued soft market
pricing environment ahead of FCA pricing reforms, and supply-chain
impacted car sales leading to short-term reduction in volumes
- The business remains well positioned to take advantage of
anticipated growth opportunities, as a result of both internal
initiatives already underway and market tailwinds anticipated in
2022
- Gross written premium for the nine months ending 30 September
2021 was GBP126.7m(1) (nine months ending 30 September 2020:
GBP139.2m). Net earned premium for the same period was GBP108.8m(1)
(nine months ending 30 September 2020: GBP127.3m)
- Combined operating ratio for 2021 expected to be towards the
upper end of our target 75% - 80% range
- Continued organic capital generation with a solvency coverage
ratio of 175% (1) as at 30 September 2021 (30 September 2020:
186%)
- Strong balance sheet with no debt obligations
- Guidance: we anticipate that profit before tax in FY 2021 will
be moderately below the range of analysts' forecasts of
GBP41m-GBP46m but with dividend levels supported by the strength of
our capital position. Having maintained pricing discipline, we
remain well-placed to grow through a recovering market in 2022
(1) Numerical information not subject to audit
Business Update
Recovery in motor insurance pricing during the third quarter has
been slightly slower than we expected as COVID-related restrictions
unwind. There have been a range of responses to regulatory changes,
such as the upcoming implementation of the FCA pricing review,
which we believe has resulted in significant divergence in policy
pricing amongst insurers. We have also seen tension across the
market between the need to increase rates due to ongoing uncovered
claims inflation and the commercial realities faced by many
insurers who would lose considerable policy volume if they were to
increase prices ahead of the market.
As anticipated, the post-lockdown recovery in market policy
volumes has also been relatively slow. This may have affected us
disproportionately as our customer-base is, compared to many
competitors, indexed more heavily towards new business and new
drivers, and so we have seen a temporary COVID-19 driven reduction
in our normal target market due to the backlog of driving tests and
significant delays in new car registrations, which has a knock-on
impact on second-hand car sales. We have chosen not to engage in
inappropriate price discounting to chase volume during this period,
instead maintaining pricing discipline in order to preserve the
strength of the business across the medium-term.
Outlook
We have continued to treat volume as an output from disciplined
pricing, not a target, and believe this leaves us strongly
positioned to benefit from forthcoming growth opportunities.
Throughout the past quarter, we have seen some further tentative
signs that market prices may be starting to correct, however we
have not yet seen significant price movements indicative of a
market 'turn'.
As we have disclosed previously, we had been writing business
near the top-end of our preferred combined operating ratio range
pre-COVID and we would expect to deliver results reflecting that
position, and the temporary reduction in volume, in the
short-term.
Looking further forward, we are working through a number of
innovative development projects and expect to continue to deliver
strong underwriting results and generate capital while returning to
growth. We have not identified any structural market changes that
would adversely impact this view.
As well as the initiatives that are currently underway, we see
three pricing tailwinds within the market, which we believe should
further facilitate organic growth in FY22 and over the medium term,
and may be more positive for us than some competitors due to our
disciplined approach to pricing:
- Reversal of 'COVID discounts' - With claims frequency
returning closer to pre-pandemic levels, insurers must unwind
'COVID discounts' applied to policies sold during, or in
anticipation of, periods of reduced traffic
- Cost inflation - We expect that the market will have to
respond to a significant period of cost inflation through price
increases in order to avoid significant losses in 2022 and
beyond
- FCA pricing review - We expect that the FCA pricing review,
through which motor insurers will be required to equalise prices
for new and renewing business, will have an inflationary impact on
new business prices at a market level
Investor enquiries 01306 747272
Sabre Insurance Group plc investor.relations@sabre.co.uk
Geoff Carter / Adam Westwood
Media enquiries 020 7353 4200
Tulchan Communications sabre@tulchangroup.com
James Macey White / Simon Pilkington
The Sabre Insurance Group plc LEI number is
2138006RXRQ8P8VKGV98
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