Sabre Insurance Group Plc · LSE:SBRE
Sabre Insurance — H1 2020 Earnings Presentation
37 slides from Sabre Insurance's earnings presentation, Jul 28, 2020
Slide 1: 2020 Half-year results presentation
2020 Half-year results presentation 28 July 2020
Slide 2: Presenting and Q&A
Presenting and Q&A Presenters and Q&A Geoff Carter Adam Westwood CEO CFO Q&A Trevor Webb James Ockenden Hanro van Heerden Claims Director Chief Actuary Q&A Moderator 2
Slide 3: Today's agenda
Today’s agenda 2020 – H1 Highlights 1 Geoff Carter Financial results 2 Adam Westwood Market context / COVID-19 impacts 3 Geoff Carter Sabre’s strategic approach – a reminder 4 Geoff Carter Summary and outlook 5 Geoff Carter Q&A 6 All 3
Slide 4: 2020 - H1 Highlights
2020 - H1 Highlights Geoff Carter
Slide 5: Financial highlights
Financial highlights Continued absolute focus on profitability delivering LOSS RATIO % encouraging results as we begin to exit from lockdown 48.2% 51.5 % 45.1% Leading underwriting performance, strong profitability, organic capital generation H1 FY H1 2019 2019 2020 Weekly premium levels on roll
Slide 6: Operational highlights
Operational highlights Current focus Continue to support customers as lockdown eases – charge the correct price and assist direct customers on payment issues Unwinding temporary price discounts in line with increase in traffic and claims volumes Continue to cover underlying claims and cost inf
Slide 7: Best in class combined ratio
Best in class combined ratio 2019 Market average: 100.8% * 2,000 * = At the time of compiling information, some insurers have not yet reported. Not all 1,800 insurers are being displayed on this graph. 1,600 Net earned premium (£m) 1,400 1,200 1,000 800 600 400 200 GWP £197 NEP £183m Sabre 73.4% 0 7
Slide 8: Financial results
Sabre INSURANCE GROUP Financial results
Slide 9: Results summary
Results summary HY 2020 financial performance Premium income down 14.1% against the same H1 2020 H1 2019 FY 2019 period in 2019, while we continue to adjust prices to reflect the cost of claims Gross written premium £86.9m £101.2m £197.0m Net earned premium £84.7m £91.6n £183.2m Combined ratio i
Slide 10: 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 21.9% 26.6% Current accident-year loss ratio represents claims 51.5% 45.1% incurred in the accident year to date and has 1.7pp benefitted from lo
Slide 11: Conservative approach to risk
Conservative approach to risk Investment portfolio breakdown Investments continue to be held in mainly UK government bonds, in-line with our conservative 37.3 UK government debt approach to risk, with new corporate bond element 27.7 £m Corporate bonds Cash H1 2020 investment return represents ef
Slide 12: Attractive capital generation
Attractive capital generation We continue to benefit from strong profitability Return on Tangible Equity 39.9% Return on tangible equity and an efficient capital model 110.0 112.7 Strong capital generation led to a period-end solvency ratio of 218% Dividend policy is to pay an interim dividend
Slide 13: 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-70%’s Continued Continued investment in business to enhance product capabilities and maintain
Slide 14: Market context
Sabre INSURANCE GROUP Market context
Slide 15: Sabre's view of claims inflation
Sabre’s view of claims inflation No change in our view of underlying claims and cost inflation Likely to be camouflaged in 2020 due to COVID-19 related reduction in claims Likely that mix of business underwritten will see competitors in a range around this Overall inflation 7.5% - 8.5% First &
Slide 16: Overall cost inflation – No change in view
Overall cost inflation – No change in view 115% 110% 105% Claims and expenses Base costs for 2019 100% 95% 90% Claims and expenses One-off release of Increase in the cost Reinsurance cost Increase in industry for 2019 accrual of claims increases levies We intend to cover potential cost increases of
Slide 17: Relative claims frequency
Sabre claims volumes in recent months Number of non- windscreen claims indexed to 2019 average, adjusted for exposure Time 100% Relative claims frequency 17
Slide 18: Premium impact on Sabre
Premium impact on Sabre % Reduction in GWP during 2020 20.0% 10.0% % Difference in premium vs prior-year 0.0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 -10.0% -20.0% -30.0% -40.0% -50.0% Week Year on year delta 4- week rolling week on week delta 18
Slide 19: Possible future premium inflation factors
Possible future premium inflation factors These issues have not gone away Possible premium deflation factors Modest (at best) Whiplash reforms Possible premium inflation factors Now delayed to April 2021 Continued claims inflation Competitor margin squeeze Whiplash reforms impact Lawyer le
Slide 20: Impact of Sabre's prudent views
Impact of Sabre’s prudent views Possible outcomes Sabre’s current cautious approach is Sabre’s current view is too cautious correct Claims and other cost inflation leads to market Data will demonstrate too much prudence in margin compression pricing assumptions, allowing prices to be This lead
Slide 21: COVID-19 impacts: June 2020 view
Full year 19 results presentation COVID-19 impacts June 2020 view Possible cost inflation factors Possible cost reduction factors Parts availability and cost Short term reduction in claims frequency Bodyshop capacity - during and post social distancing Increase in miles driven post social di
Slide 22: New COVID-19 considerations
New COVID-19 considerations Possible Issues Concerns…. could be offset by… Traffic/Claims volumes increase more than Reduced traffic volumes sustain longer than assumed assumed Different claims patterns and costs Transition away from public transport brings new Market fails to raise prices
Slide 23: COVID-19 related claims factors
COVID-19 related claims factors Variations emerging across geographic regions – driven by car use patterns and different national approaches to lockdown? Increase in proportion of accidents involving cyclists Some pent up demand being released – e.g. unsubmitted glass claims Some evidence of
Slide 24: Other Non-COVID-19 factors
Other Non-COVID-19 factors Need to continue to ensure a tight focus on underlying claims / cost inflation drivers Impact of Whiplash reforms and competitors utilising optimistic assumption in pricing Impacts from a potentially disorderly Brexit – although we do not anticipate material impacts Other
Slide 25: Sabre's strategic approach – summary
Sabre’s strategic approach – summary
Slide 26: Strategy and key business principles
Strategy and key business principles Maintain wide Continue to develop Market leading Mid-70%’s underwriting defensive non- underwriting footprint standard positioning performance LONG-TERM COMBINED RATIO TARGET 70% - 80% RANGE £ 70% Strong returns BASE DIVIDEND PAYOUT Controlled and Premium and cas
Slide 27: Pricing approach
Pricing approach In 2020 will seek to move 2019 written position towards the “bullseye” in soft market ahead of volume growth 70% low-end where 75% “Bullseye” in 80% COR growth outstrips stable market Ceiling operational capacity conditions At any point in time we seek to optimise long term profit
Slide 28: Summary and outlook
Summary and outlook Geoff Carter
Slide 29: Summary
Summary We remain focused on our long-term and well established strategy; prioritising underwriting profitability over premium volume and centred on a 70% - 80% COR range and mid-70%’s long-term target Market conditions have improved significantly since our AGM trading statement We are comfortable w
Slide 30: Outlook
Outlook Premium outturn for the year uncertain – likely to be in a range of 0% to minus 15% COR expected to be within our target 70% - 80% corridor, close to our long-term mid- 70%’s target Continued strong organic capital generation will support an attractive dividend 30
Slide 31: Q&A
Q&A Geoff Carter Adam Westwood Trevor Webb James Ockenden
Slide 32: Appendices
Sabre INSURANCE GROUP Appendices
Slide 33: Reconciliation to KPIs
Reconciliation to KPIs Adjusted Profit Before Tax 31 December 30 June 2020 30 June 2019 2019 £'k £’k £’k Profit before tax 27,750 30,472 56,479 Add: Amortisation of Intangible assets - - - Exceptional items - - - Adjusted profit before tax 27,750 30,472 56,479 Adjusted Profit After Tax 31 December 3
Slide 34: Reconciliation to KPIs
Reconciliation to KPIs Net Loss Ratio 31 December 30 June 2020 30 June 2019 2019 £'k £’k £’k Net insurance claims 42,122 47,743 101,990 Less: Claims handling expenses (3,977) (3,592) (7,558) Net claims incurred 38,145 44,151 94,432 Net earned premium 84,672 91,618 183,238 Net loss ratio 45.1% 48.2%
Slide 35: Reconciliation to KPIs
Reconciliation to KPIs Solvency Coverage Ratio – Pre Dividend 31 December 30 June 2020 30 June 2019 2019 £'k £’k £’k Solvency II net assets 127,859 119,813 127,086 Solvency capital requirement 58,624 59,839 59,495 Solvency coverage ratio 218.1% 200.2% 213.6% Solvency Coverage Ratio – Post Dividend 3
Slide 36: Reconciliation to KPIs
Reconciliation to KPIs Return on Tangible Equity 31 December 30 June 2020 30 June 2019 2019 £'k £’k £’k IFRS net assets at period end 271,770 258,187 267,417 Less: Intangible assets at period end - - - Goodwill at period end (156,279) (156,279) (156,279) Closing tangible equity 115,491 101,908 111,1
Slide 37: 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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