Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sabre Insurance Group PLC (LSE:SBRE, Financial) reported a significant increase in profit for the first half of 2024, with a profit before tax of just over £20 million, more than four times the amount in the first half of the previous year.
- The company achieved a 26% increase in premiums compared to H1 2023, with motor premiums up by 35%.
- The combined operating ratio improved by 10.2 percentage points versus H1 2023, indicating better operational efficiency.
- The expense ratio decreased to 26.3% from 31.8% in the first half of the previous year, primarily due to operating leverage and tight cost control.
- Sabre Insurance Group PLC (LSE:SBRE) maintained a strong capital position with a post-dividend solvency coverage ratio of 185.2%, allowing for a comfortable interim dividend payout.
Negative Points
- The company acknowledged ongoing high claims inflation, which is expected to remain elevated into 2025, potentially impacting future profitability.
- Market price increases have slowed in the second quarter of 2024, which could affect future revenue growth.
- There is uncertainty regarding the impact of regulatory and political focus on the insurance market, which could introduce additional challenges.
- The company faces potential risks from irrational pricing behavior in the market, which could disrupt their strategic plans.
- Sabre Insurance Group PLC (LSE:SBRE) noted that prior year development has been less favorable than in 2023, partially offsetting the improvement in the current year's loss ratio.
Q & A Highlights
Highlights of Sabre Insurance Group PLC (LSE:SBRE) Earnings Call
Q: When did you start and that 10% claims inflation number and you've given what you're actually currently seeing or is there some margin in that to account for and the uncertainties that you listed out in the presentation?
A: The 10% claims inflation is our best view on what we think the claims inflation will be going forward. This accounts for what we're seeing and what we expect to see. We have reflected all uncertainties, such as tariff applications, into our reserves.
Q: How should we think about the combined ratio range on an undiscounted basis, and do you think about writing at target margins on a discounted or undiscounted basis?
A: Our guidance is on a discounted basis, and the discounting credit is the unknown factor. The undiscounted combined ratio might come in above 80%, but we are comfortable with that. Our focus remains on writing at the most profitable margins, regardless of discounted versus undiscounted.
Q: Can you share your target margin on an undiscounted combined ratio basis going forward?
A: We always aim to be transparent and comparable. While there is a market steer towards an undiscounted number, our overall focus is on achieving the most profitable margins. We will consider guiding on an undiscounted basis as we move forward.
Q: Which areas do you think the regulator might get involved with in terms of another review across the motor insurance industry, and how exposed is Sabre to such a review?
A: The FCA has been looking at ancillary products and fair value assessments. We are well-placed on these fronts and do not consider ourselves exposed. The government is also concerned about premiums for the least affluent, but we apply the same target margin across all customer segments.
Q: How quickly do you want to get back to a 160% solvency coverage ratio through additional capital distributions?
A: We don't want to hang on to excess capital and will take a sensible view on our capital requirement towards the end of the year. We aim to return excess capital to investors as soon as possible.
Q: How dependent is your expected growth in the second half on current market prices increasing?
A: The most important thing for us is to cover claims inflation first. We have a strong platform and options to optimize margin or volume. If the market goes up, we can achieve both margin and growth. If not, we have other levers to ensure continued growth.
Q: Can you share more about the insurer-hosted pricing and its benefits for growth or loss ratio?
A: Insurer-hosted pricing allows additional sophistication and improves the speed to market for sequential improvements. It will help us gradually expand our competitive footprint over time.
Q: Are the pricing dynamics in the mass market spilling over into the nonstandard market?
A: The impact is much less in the nonstandard market. We have written healthy levels of business and continue to see some MGAs struggle for capacity. We feel secure within our competitive moat in the nonstandard business.
Q: How has your reinsurance program and cost changed for the year ahead?
A: We received a decent discount on our reinsurance program, which was in line with our expectations and already factored into our assumptions. We are pleased with the result and have good relationships with our reinsurers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
