Inflation weighs heavily on results of UK motor insurer Sabre
By Matt Sheehan–‘UK motor insurer Sabre Insurance Group has reported that the “exceptional inflation event” experienced so far in 2022 has weighed heavily on its results for the first half of the year.
The company last year factored in claims inflation of approximately 8%, but believes that levels have now reached approximately 12%, putting it at the highest level since the early 1990s.
The increase in claims inflation applies across all of the key drivers of claims costs, including parts, labour, credit hire, paint, car values and availability, and provision of care.
Additional market-wide cost pressures include increases in industry levies and significant reinsurance cost increases at renewal, Sabre notes, driven by personal injury cost and Ogden rate concerns.
These pressures resulted in a net loss ratio of 71.6% for the H1 period this year, compared with 44.9% for the same period last year, with profit before tax similarly shrinking from £22.2 million to £4.3 million.
However, Sabre argues that this performance should not be extrapolated out to the full year, as it anticipates significant increases in pricing to offset such historic levels of inflation.
The company anticipates a loss ratio in the low-60%’s during the second half of 2022, and expects a “return towards our normal performance levels in 2023.”
But despite these assurances, shares in the insurer have already fallen by a third and it’s expected that it’s dividend will be cut.
“We have continued to execute on our strategic objectives this year,” commented Sabre CEO Geoff Carter. “The strong recent progress in the business will be impacted in 2022 by the need to reflect the current extraordinary inflationary pressures. We believe that taking prudent and assertive action now, in conjunction with our normal pricing discipline, means that we are protecting the underlying profitability of the business, and will allow a rapid rebound to our expected levels of performance.”
“Whilst our response to external factors has generated a poor expected result for 2022 by our own standards, we believe our performance will compare favourably to the wider market,” Carter continued.
“Having reflected claims inflation fully in our prices we are increasingly well positioned to take advantage of growth opportunities when market pricing turns.
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