Sabre Insurance Group Plc · LSE:SBRE
Sabre Insurance — FY2023 Earnings Presentation
32 slides from Sabre Insurance's earnings presentation, Mar 19, 2024
Slide 1: 2023 Full-Year Results
2023 Full-Year Results 19 March 2024
Slide 2: Presenters and Q&A
Presenters and Q&A Geoff Carter Adam Westwood CEO CFO Trevor Webb Matt Wright Claims Director Chief Actuary 2
Slide 3: Today's agenda
Today’s agenda 1 Highlights Geoff Carter 2 Full-year 2023 financial performance Adam Westwood 3 The UK motor insurance market Geoff Carter 4 Claims inflation in UK motor Geoff Carter 5 Outlook and summary Geoff Carter 6 Q&A All 3
Slide 4: Highlights
Highlights Geoff Carter INSURANCE
Slide 5: Successful execution of strategy
Successful execution of strategy ‒ Strict adherence to “profitability is a target, volume an output” philosophy maintained and proving its effectiveness, producing a good performance in 2023 ‒ Enhanced loss ratio resulting from careful and well-timed pricing action ‒ Record GWP in 2023, followed by
Slide 6: Financial highlights
Financial highlights ‒ Enhancing margins whilst showing very strong growth in core Motor Vehicle book GWP +47.5% ‒ Overall GWP growth of +31.4% impacted by anticipated volume reduction in Motorcycle portfolio, and Taxi as challenging market conditions persist ‒ Continued improvement in net loss rati
Slide 7: Full-year 2023 financial performance
Full-year 2023 financial performance Adam Westwood
Slide 8: Full-year 2023 financial performance
Full-year 2023 financial performance Disciplined underwriting is delivering profitable growth and strong capital generation Full-year Full-year (Restated) * 2023 2022 Change Gross written premium £225.1m £171.3m 31.4% Insurance revenue £188.2m £181.5m 3.7% Net loss ratio 56.3% 66.0% (9.7)ppts Expens
Slide 9: Underwriting performance
Underwriting performance ‒ Loss ratios benefit from early management action to reflect inflation in pricing ‒ Improvement in current-year loss ratio as expected given rate increases and normal pricing enhancements ‒ Prior-year loss ratio reflects run-off of risk adjustment, very little movement in p
Slide 10: Underwriting by product
Underwriting by product ‒ Core Motor Vehicle are higher proportion of business ‒ Loss ratio improvements across core Motor Vehicle written in 2023, expect impact to earn through in and Motorcycle 2024 ‒ Taxi market continues to be challenging Motor Vehicle Motorcycle Taxi FY 2023 FY 2022 FY 2023 FY
Slide 11: Capital position
Capital position ‒ Pre-dividend regulatory net assets 205.3% above solvency capital requirement ‒ Post-year-end distribution of 8.1p ‒ Post-dividend solvency capital ratio at 170.9% ‒ Year-end distribution reflects rapid capital generation during 2023, including one-off capital benefit from changes
Slide 12: Capital allocation and distribution priorities
Capital allocation and distribution priorities Capital management decision driven by 140% to 160% solvency coverage target Organic investment Ordinary dividend Investment in capabilities and Attractive and consistent ‒ Policy to pay out 70% of profit efficiencies through a returns- payout ratio afte
Slide 13: The UK motor insurance market
The UK motor insurance market Geoff Carter
Slide 14: Market backdrop
Market backdrop ‒ Very high levels of claims inflation persisted through 2023 ‒ Many moving parts impacting claims inflation – central view of 10% balancing potential and negative movements ‒ Extraordinary level of rate increases since Q2 2023 correcting an extended period of irrational, unprofitabl
Slide 15: What might happen?
What might happen? Possible Challenges positive factors ‒ Market price discipline ‒ Risk that some competitors maintained lose price discipline ‒ Reduction in used car prices ‒ Costs reviews – Judicial ‒ Continued improvements in College Guidelines and NHS parts supply ‒ Inflation moves small claims
Slide 16: Claims inflation in UK motor
Claims inflation in UK motor Geoff Carter
Slide 17: Inflationary factors
Inflationary factors Used Car prices ‒ Very different experience by car type. Small and city cars holding value, EVs not ‒ As used prices soften total loss becomes more prevalent than repair Used car price inflation Jan 2022 - present 140 120 Indexed to 2015 100 80 60 40 20 0 Source: “CPI INDEX 07.1
Slide 18: Inflationary factors
Inflationary factors Continued lack of resources in Bodyshops and Care industries ‒ Continued labour rate pressures and lack of capacity in body shops ‒ Over 150k vacancies in the care industry – this will also impact the ASHE index Costs of parts continue to rise ‒ Increasing complexity and remaini
Slide 19: Inflationary factors
Inflationary factors Global conflicts ‒ Rerouting shipping to avoid the Red Sea adds 8.5 days to journey time and £1m to a return journey increasing costs and delaying repairs Source: www.fleetmon.com 19
Slide 20: Inflationary factors
Inflationary factors Judicial College Guidelines (“JCG”) review ‒ Reflect and guide injury awards in court. Last reviewed in 2021. Confirmed at 22% increase in awards on 13 March 2024. Tariff due to be reviewed May 2024 ‒ Example impact of JCG review increases Injury Revised rate Previous rate Incre
Slide 21: Inflationary factors
Inflationary factors NHS costs review ‒ Recoverable costs are uplifted annually in line with Hospital and Community services inflation. However, last year increased in April AND October Supreme court decision on mixed tariff injuries (“Whiplash reforms”) ‒ Case heard on 20th February 2024, but could
Slide 22: Other considerations into 2024
Other considerations into 2024 FCA focus on instalment income ‒ Believe FCA focus is primarily on APR outliers. We believe our APR represents fair value and in line with the cost / risk of providing this facility Consumer Duty ‒ Focus on total loss value. Sabre have always taken a customer focused a
Slide 23: Outlook and Summary
Outlook and Summary Geoff Carter
Slide 24: Outlook
Outlook Maintain focus on “profitability, not volume” strategy ‒ Strong performance in 2023 validates strategy and is a staging post to further improved performance in 2024 ‒ Overall cost pressure likely to remain from both “fixing vehicles” and “fixing people” ‒ We remain vigilant in identifying cl
Slide 25: Summary
Summary Good profit for the year Strong growth in GWP 2023 Attractive dividend and strong balance sheet Further GWP growth and improvement in profitability expected in 2024 25
Slide 26: Q&A
Q&A Geoff Carter, Adam Westwood, Matt Wright, Trevor Webb
Slide 27: Appendices
Appendices INSURANCE
Slide 28: Reconciliation to KPIs
Reconciliation to KPIs Gross written premium 31 Decem ber 2023 31 Decem ber 2022 Insurance revenue 188,246 181,476 Less: Instalment income (3,738) (3,300) Less: Movement in unearned premium 40,590 (6,919) Gross w ritten prem ium 225,098 171,257 Net loss ratio 31 Decem ber 2023 31 Decem ber 2022 Insu
Slide 29: Reconciliation to KPIs
Reconciliation to KPIs Expense ratio 31 Decem ber 2023 31 Decem ber 2022 Other operating expenses 26,587 22,815 Add: Amortisation of insurance acquisition cash flow s 14,057 12,942 Add: Directly attributable claims expenses 6,085 6,210 Total operating expenses 46,729 41,967 Insurance revenue 188,246
Slide 30: Reconciliation to KPIs
Reconciliation to KPIs Net loss ratio - Undiscounted 31 Decem ber 2023 31 Decem ber 2022 Net claims incurred 87,823 101,151 Add: Net impact of discounting 8,201 7,593 Undiscounted net claim s incurred 96,024 108,744 Net earned prem ium 156,002 153,218 Undiscounted net loss ratio 61.6% 71.0% Combined
Slide 31: Reconciliation to KPIs
Reconciliation to KPIs Solvency coverage ratio - pre-dividend 31 Decem ber 2023 31 Decem ber 2022 Solvency II net assets 121,099 91,191 Solvency capital requirement 58,998 56,516 Solvency coverage ratio - pre-dividend 205.3% 161.4% Solvency coverage ratio - post-dividend 31 Decem ber 2023 31 Decem b
Slide 32: Disclaimer
Disclaimer LEGAL NOTICE This presentation has been prepared to inform investors and prospective investors in the secondary markets and other market participants about Sabre Insurance Group plc and its subsidiaries (the "Group") and does not constitute an offer of securities under any applicable legi