Regulatory change to personal injury awards has made for a volatile year for the UK motor insurance market, but Sabre Insurance will be hoping that doesn’t deter IPO investors. The motor insurer hopes to raise net proceeds of around £206m by listing on the premium segment of the London Stock Exchange in December. The price range for the offer has been set at between 220p and 240p a share, which would give the group a market capitalisation of £550m to £600m. Retail investors can participate via intermediaries.
The funds will be used to redeem preference shares owned by private equity group BC Partners – which acquired its majority share three years ago – and the group’s two founders. There's an over-allotment option for the investment house to sell more of its stake; it will retain close to a 40 per cent holding of the share capital, whatever happens.
The insurer was founded in 1982 and operates three online brands – ‘Insure2Drive’, ‘Drive Smart’, which uses telematics to reward safe drivers, and ‘Go Girl’, a brand aimed at young women.
The insurer is prepared to take on high-risk business, writing quotes for around 96 per cent of the risk in the UK market. Chief executive Geoff Carter says the group will take on anything that is not “completely bog standard risk”. High-value cars, young male drivers and those with an impaired credit history are welcome. This higher-risk strategy has propelled growth in premiums – gross written premiums have increased at a compound annual growth rate of 11 per cent between 2006 and 2016.
Its combined operating ratio – of claims and expenses as a percentage of premium income – for 2016 was a highly profitable 69 per cent, against a target of 80 per cent. That compared with rival motor insurer Hastings (HSTG) at 91 per cent during the same period, which itself is an outperformance of the wider market.
Price comparison websites (PCWs) have become crucial to the ability of insurers to drive new business. For Sabre, 70 per cent of gross written premiums last year were gained via its broker network, and half of the latter comes from just two brokers. That means there is some intermediary risk, although about half of broker business comes via PCWs.
