Sabre Insurance Group PLC · LSE:SBRE
Sabre Insurance — H1 2019 Earnings Presentation
35 slides from Sabre Insurance's earnings presentation, Sep 19, 2019
Slide 1: Half Year Results Presentation 2019
Half Year Results Presentation 2019 Restricted - External
Slide 2: Presenting & Q&A
Presenting & Q&A Geoff Carter – CEO Adam Westwood – CFO Q&A Trevor Webb – Claims Director James Ockenden – Chief Actuary Restricted - External
Slide 3: Today's agenda
Today’s agenda 1 H1 2019 Highlights Geoff Carter 2 Financial Results Adam Westwood 3 Market context Geoff Carter 4 Sabre’s Strategic Approach – A Reminder Geoff Carter 5 Summary & Outlook Geoff Carter Q&A 6 All Restricted - External
Slide 4: H1 2019 Highlights
H1 2019 Highlights Geoff Carter Restricted - External
Slide 5: Financial highlights
Financial highlights Continued absolute focus on profitability delivering encouraging LOSS RATIO % results against what remains a competitive market backdrop: 47% 49% 48% ● Leading underwriting performance, with strong profitability and returns, and attractive organic capital generation 2017 2018 H1
Slide 6: Operational highlights
Operational highlights Current focus ● Tracking / covering long-run claims inflation with price increases ● Optimising profit within our mid-70%’s COR range ● Understanding possible changes following whiplash reforms and being ready to respond appropriately ● Continual refinement and enhancement of
Slide 7: Financial Results
Financial Results Adam Westwood Restricted - External
Slide 8: Results summary
Results summary 2019 H1 financial performance HY2019 HY2018 Change FY 2018 Gross written premium £101.2m £108.8m (£7.6m) £210.0m ● Premium income down 7.0% against the same period in 2018, while we continue Net earned premium £91.6m £93.2m (£1.6m) £188.2m to increase prices to match claims Combined
Slide 9: Leading underwriting performance
Leading underwriting performance Combined ratio evolution ● Financial year combined ratio below long-run mid- 70%’s target, driven by a strong loss ratio 22.1% 23.3% ● Current accident-year loss ratio represents claims 48.5% 48.2% 0.9pp incurred in the accident year to date and is FY 2018 HY 2019 co
Slide 10: Conservative approach to risk
Conservative approach to risk Investment portfolio breakdown ● Investments continue to be held in UK government 6.2% 0.2% bonds, in-line with our conservative approach to risk ● Investment portfolio managed in-house and focused Gilts Corporate bonds on capital preservation to support our profitable
Slide 11: Attractive capital generation
Attractive capital generation Return on Tangible Equity ● We continue to benefit from strong profitability and an efficient capital model 44% Annualised return on tangible equity 112.0 ● Strong capital generation led to a period-end solvency ratio of 200% 49.2 ● Dividend policy set out at IPO is to
Slide 12: Approach to capital management
Approach to capital management Our ● Prudent approach to regulatory capital with a minimum SCR of 140% approach ● Focus on underwriting discipline generating organic capital - target long term COR of mid-70s Continued ● Continued investment in business to enhance product capabilities and maintain op
Slide 13: Market Context
Market Context Geoff Carter Restricted - External
Slide 14: Sabre view: Overall inflation 7-8%
Sabre view Sabre view of market claims inflation is consistent with that shared at the full-year. Indications are that the industry is moving towards this view. Overall inflation 7-8% “Bent Metal” + PI frequency flat, Credit Hire severity circa 10% inflation circa 5% inflation Theft >25% inflation R
Slide 15: Premium inflation
Premium inflation Year-on-year premium delta consistent, despite continued rate increases ● Possible evidence of market rate increases ● Anecdotal feedback from brokers suggests a steady drip feed of inflationary monthly increases now underway… ● ….but we have not seen a step-change to materially cl
Slide 16: At the FY results, potential market impacts were balanced
At the FY results, potential market impacts were balanced.. Possible premium Possible premium deflation factors inflation factors • Whiplash reforms • Continued claims inflation • Ogden discount rate • Competitor margin squeeze • New MGA’s launching • Lawyer legal reforms response • FCA pricing revi
Slide 17: At H1 2019 our view is tilted in favour of rate increases
… and at H1 2019 our view is tilted in favour of rate increases Possible premium inflation factors • Continued claims inflation • Competitor margin squeeze Possible premium • Whiplash reforms impact deflation factors • Lawyer legal reforms response • Whiplash reforms • FCA pricing review • New MGA’s
Slide 18: Possible premium inflation factors
Possible premium inflation factors FCA Pricing Review Market claims / premium inflation • Initial report due (late) summer • Commentary suggests market moving towards Sabre • Believed to be a clear understanding that renewal view of long-run claims inflation at near 7-8% discounts will drive an equa
Slide 19: Possible premium inflation factors - Ogden
Possible premium inflation factors - Ogden Ogden discount rate Rate moved to (0.25%) from (0.75%) – announced 15th July 2019. Impact on Sabre • Estimated impact on Sabre recorded in H1 2019 financial result Ø Approximately £0.3m net P&L benefit Ø Gross reserves decreased by c £9.0m Impact on Insuran
Slide 20: Civil Liability Act (whiplash reforms) – where are we?
Civil Liability Act (“whiplash reforms”) – where are we? Reminder of Reforms Implementation progress • Significantly reduced tariff based damages for soft tissue • Target implementation remains as April 2020 claims • Motor Insurers Bureau well underway in designing and • Small claims limit increased
Slide 21: Civil Liability Act (whiplash reforms) – where are we?
Civil Liability Act (“whiplash reforms”) – where are we? Risks – Implementation Risks - Behaviours • Change of Government • Changes to current CMC behaviours • Rules and policy decisions cannot be supported by • Emergence of new representation models, including planned portal IT build. (IT having to
Slide 22: Smoothed Cumulative Rate Change
What has our approach been in YTD 19? • Sabre has continued to execute its strategy of focusing on profitability not volume • Price increases in H2 2018 to reflect unattractive claims inflation trends • Sabre rates hardened further over H1 2019 due to increased pressure from ‘bent metal’ claims infl
Slide 23: Reinsurance
Reinsurance Consistent reinsurance programme limits volatility ● Reinsurance renewed successfully on existing structure (£1m excess of loss) for 1st July 2019 ● Very consistent panel of reinsurers and level of security ● Renewed at a small discount, reflecting good long-term performance ● Reinsurers
Slide 24: Sabre's Strategic Approach – A Reminder
Sabre’s Strategic Approach – A Reminder Geoff Carter Restricted - External
Slide 25: Strategy and key business principles
Strategy and key business principles Maintain wide Continue to develop Market leading Mid-70s underwriting defensive non- underwriting COMBINED RATIO footprint standard positioning performance TARGET £ 70% Strong returns Controlled and Premium BASE DIVIDEND PAYOUT and cash attractive growth growth a
Slide 26: Likely scenarios – no change from full year assessment
Likely scenarios – NO change from full year assessment Possible outcomes Sabre current cautious approach is correct Sabre current view is too cautious ● Potential market margin compression leads to ● Data will demonstrate too much prudence in price increases pricing assumptions, allowing prices to b
Slide 27: Summary & Outlook
Summary & Outlook Geoff Carter Restricted - External
Slide 28: Summary
Summary We remain focused on our long-term and well established strategy; prioritising underwriting profitability over premium volume and centred on a mid-70%’s COR target Despite the year-on-year reduction in premium, our response to market conditions has been to accelerate the increase in prices t
Slide 29: Outlook
Outlook Premium outturn for the year will depend on market conditions. Assuming current market conditions persist, relative year end premium position is expected to be broadly similar to half year position On track to deliver existing full year guidance of a combined ratio slightly better than our l
Slide 30: Q&A
Q&A Geoff Carter - CEO Adam Westwood – CFO Trevor Webb – Claims Director James Ockenden – Chief Actuary Restricted - External
Slide 31: Appendices
Appendices Restricted - External
Slide 32: Reconciliation to KPIs
Reconciliation to KPIs Adjusted Profit Before Tax HY 2019 FY 2018 HY 2018 £'k £'k £'k Profit before tax 30,472 61,363 32,208 Add: Amortisation of goodwill - 501 251 Exceptional items - - - Adjusted profit before tax 30,472 61,864 32,459 Adjusted Profit After Tax HY 2019 FY 2018 HY 2018 £'k £'k £'k P
Slide 33: Reconciliation to KPIs
Reconciliation to KPIs Expense Ratio HY 2019 FY 2018 HY 2018 £'k £'k £'k Total expenses 17,804 35,191 17,960 Plus: Claims handling expenses 3,592 6,536 3,383 21,396 41,727 21,343 Net earned premium 91,618 188,235 93,209 Expense Ratio 23.4% 22.2% 22.9% Combined Operating Ratio HY 2019 FY 2018 HY 2018
Slide 34: Reconciliation to KPIs
Reconciliation to KPIs Solvency Coverage Ratio - Post-Dividend HY 2019 FY 2018 HY 2018 £'k £'k £'k Solvency II net assets 119,813 130,019 126,126 Less: Final/interim dividend expected (11,750) (32,000) (18,000) Solvency II net assets inc. dividend 108,063 98,019 108,126 Solvency Capital Requirement
Slide 35: 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
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