Join our community of smart investors

Sabre safeguards margins over growth

The motor insurer expects the impact of claims inflation to result in flat premiums at the full-year
July 30, 2019

In the first six months of 2019, Sabre Insurance (SBRE) sacrificed premium growth in order to protect margins, as cost inflation remained high. The non-prime motor insurer raised prices to reflect heightened claims, but with 80 per cent of business originated via brokers that came at a cost: a 7 per cent dip in gross written premiums.

IC TIP: Hold at 272.5p

Chief executive Geoff Carter said this result was slightly better than he expected, as stronger reserve releases contributed almost £15m to pre-tax profits. However, if current claims inflation of between 7 and 8 per cent persists, management expects premiums at the full year to be flat on the first half. 

The combined operating ratio – that is, claims costs as a proportion of premium income – may have ticked up slightly at 71.5 per cent, but it remained within the target range. Management used these results to reiterate guidance for a slightly improved result at the full year. 

Analysts at Peel Hunt expect adjusted net tangible assets of 45.5p a share at full-year results, up from 43.5p at the end of 2018.

SABRE INSURANCE (SBRE)   
ORD PRICE:272.5pMARKET VALUE:£681m
TOUCH:272-273p12-MONTH HIGH:295pLOW: 235p
DIVIDEND YIELD:4.2%^PE RATIO:14
NET ASSET VALUE:103p*COMBINED RATIO:71.5%
Half-year to 30 JunGross premiums (£m)Pre-tax profit (£m)Investment return (£m)Dividend per share (p)
201810332.0-0.17.2
201910230.51.74.7
% change-1-5--35
Ex-div:22 Aug   
Payment:19 Sep   
^Excludes 2018 special dividend of 6p a share. *Includes intangible assets of £156m, or 62p a share