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RNS
Sabre Insurance Group PLC  -  SBRE   

Half-year Report

Released 07:00 31-Jul-2018

RNS Number : 2259W
Sabre Insurance Group PLC
31 July 2018
 

 

Sabre Insurance Group plc

Half Year Report 2018

**Market leading underwriting performance and focus on profit continues through 2018**

Sabre Insurance Group plc (the "Group", or "Sabre"), one of the UK's leading private motor insurance underwriters, reports its half year results for the six months ended 30 June 2018.


Summary of Results






6 months to 30 June 2018

6 months to 30 June 2017

Full year to 31 December 2017

Gross written premium

£108.8m

£109.1m

£210.7m

Loss ratio

45.73%

49.59%

46.50%

Expense ratio

22.89%

22.06%

22.00%

Combined operating ratio

68.61%

71.65%

68.50%

Adjusted profit after tax

£26.1m

£23.5m

£53.3m

Return on tangible equity (annualised)

56.48%

72.13%

81.80%

 


As at 30 June  2018

As at 31 December 2017

 

 

Solvency coverage ratio (pre-interim/final dividend)

209% 

160%

 

 

Solvency coverage ratio (post-interim/final dividend)

179% 

160%

 

 

Highlights

·      The Group continued its strategy of maintaining a focus on combined operating ratio over growth, trading well in relatively weak market conditions. Pricing action taken earlier in 2018 to reflect improved claims trends allowed the level of gross written premium to return to 2017 levels whilst maintaining the Group's underwriting discipline.

 

·      The Group's combined operating ratio of 68.61% (HY 2017: 71.65%) reflects the strong profitability of business written in the period under review and prior-year releases. A financial year loss ratio of 45.73% (HY 2017: 49.59%) was achieved, with a current-year loss ratio of 59.00% (HY 2017 60.74%).

 

·      The Board has declared an interim dividend of £18.0m (7.2 pence per share), being 70% of the half-year profit after tax, in-line with the initial dividend programme outlined at the time of the Group's IPO.

 

·      A solvency coverage ratio of 209% (179% after payment of the interim dividend), above the Group's preferred normal operating range of 140% to 160% gives the Board the option to return surplus  capital to shareholders through a future special dividend.

 

·      The Group successfully completed its planned transition to a hybrid cloud IT infrastructure and redesigned its direct business websites to improve the customer experience. The Group has rolled-out a Company-wide Save As You Earn Plan for employees.

 

Geoff Carter, Chief Executive Officer of Sabre Insurance Group plc, commented

"I am pleased to present our first half-year report since our IPO last December. Sabre's core principle to focus on underwriting profitability over volume has allowed the Group to protect its combined operating ratio throughout the first half of the year, despite some downward pressure on pricing.

As previously announced, Sabre took pricing action to reflect observed reductions in the frequency of small claims earlier in the period under review. It is apparent that other insurers made similar adjustments, some earlier than Sabre, which meant that we lost some market share in the first few months of the year. The gross written premium performance over the full six-month period demonstrates the success of this pricing action, with gross written premium now in-line with the comparative period in 2017.

Whilst it does appear that the wider market has entered a phase of weaker pricing, I believe Sabre is positioned to trade well through the prevailing market conditions, and remains somewhat insulated from wider market movements due to its non-standard market positioning.

Having realigned our prices to reflect the current claims environment, without speculating on any future benefits, we believe claims inflation will persist from this new baseline.  We expect to cover this through price increases in the second half of 2018, maintaining our core, disciplined focus on underwriting profitability and continuing to treat volume as an output and not a target. We continue to investigate new rating factors in order to maintain our competitive advantage, and work with potential new distribution partners to ensure we achieve the best possible level of market coverage.

The Group's excess of loss reinsurance programme was renewed on 1 July 2018, with a high single-digit price increase, in-line with our expectation.

We continue to expect our 2018 gross written premium to be in line with 2017, with H2 2018 flat against the comparative period in 2017. While premium income in the last two months of the period under review has come in ahead of the comparative period in 2017, management does not currently consider this to be indicative of a continued upward trend in gross written premium throughout the second half of 2018. We expect claims inflation to continue throughout 2018 and therefore expect to increase our rates accordingly in order to preserve our underwriting margins. We anticipate delivering a financial year combined operating ratio better than our mid-70% target and slightly higher than for the full-year 2017.

The Group's profitability has allowed us to build significant regulatory capital, some of which will be distributed by way of the ordinary interim dividend announced today, in line with the policy outlined at IPO. Excluding the capital required to fund this dividend, the Group's Solvency capital ratio is at 179%, which provides the Board the option to return surplus capital to shareholders through a special dividend at the full-year, should the capital position improve further as expected throughout the remainder of 2018."

Analyst presentation webcast/conference call facility

 Sabre management will host a presentation for analysts today at 9:30am.

To register to access the meeting via live webcast please click here: https://3xscreen.videosync.fi/2018-07-31-sabre-half-year-results/

Alternatively, a conference call facility is available: +44 (0)20 3713 5011 (UK) - access code: 492-915-541

A replay will be made available on the Sabre website following the conclusion of the presentation.

For further information, please contact:

Tulchan Communications LLP
James Macey White/Roger Tejwani/David Ison
020 7353 4200
Sabre@tulchangroup.com

Sabre Insurance Group plc
Adam Westwood
Chief Financial Officer
07776 649 119
adam.westwood@sabre.co.uk

 



Forward-looking statements disclaimer

Cautionary statement

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of known and unknown risks and uncertainties that may cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements. Persons receiving this announcement should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, the Group does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

The Sabre Insurance Group plc LEI number is 2138006RXRQ8P8VKGV98.

Financial and Business Review

Highlights

 

6 months to 30 June 2018

6 months to 30 June 2017

Year to 31 December 2017

Gross written premium

£108.8m

£109.1m

£210.7m

Net loss ratio

45.73%

49.59%

46.50%

Combined operating ratio

68.61%

71.65%

68.50%

Underwriting profit

£32.2m

£28.4m

£59.0m

Adjusted Profit after tax

£26.1m

£23.5m

£53.3m

Profit after tax

£25.8m

£23.1m

£45.3m

Solvency II capital (pre dividend)

209%

132%

160%

Solvency II capital (post dividend)

179%

115%

160%

Return on opening SCR

42.68%

40.63%

92.10%

Return on tangible equity (annualised)

56.48%

72.13%

81.80%

 

The Group achieved a combined operating ratio of 68.61% for the first six months of 2018, an improvement on the comparative period and better than the target mid-70%'s combined operating ratio. This has been driven by consistent application of the Group's underwriting principles on new business, and strong run-off of prior-year claims reserves. Premium income is in-line with the same period of 2017, with the Group maintaining its objective to prioritise profit over volume across the insurance cycle.

Adjusted profit after tax is £2.6m ahead of the comparative period, primarily driven by an increase in gross earned premium and an improved combined operating ratio.

Return on the Group's Solvency Capital Requirement has improved due to higher profits in the first six months of 2018, with a consistent capital requirement. Despite the increase in profits during the period, the build-up of surplus capital following the Group's decision not to pay a final dividend in respect of 2017 has led to a decline in the Group's annualised return on tangible equity.

Revenue

 

6 months to 30 June 2018

6 months to 30 June 2017

Year to 31 December 2017

Gross earned premium

£102.9m

£97.7m

£203.1m

Net earned premium

£93.2m

£91.3m

£186.9m

Other operating income

£1.0m

£1.0m

£1.9m

Customer instalment income

£2.1m

£1.8m

£3.8m

Investment return

(£0.1m)

(£0.2m)

(£0.7m)

 

Despite similar gross written premium year-on-year, the Group's gross earned premium exceeded its net earned premium in the comparative period due to the growth in premium during 2017 earning through into 2018. The net earned premium was equal to 90.5% of the Group's gross earned premium for the first six months of 2018, whereas it was 93.4% of gross earned premium in the comparative period. This is due to the increase in reinsurance rate at the July 2017 renewal, following the change in Ogden discount rates earlier that year.

The Group continues to earn limited non-insurance income on its direct book of business, which is generally proportionate to the level of premium earned in the period. The Group remains exposed to temporary market movements in its investment portfolio, which is almost exclusively held in UK Government bonds. These investments are generally held to maturity, therefore any market value movements, which can generate in-year gains and losses, are unwound as the bonds regress towards par value.

 

 

 

 

Operating Expenditure

 

6 months to 30 June 2018

6 months to 30 June 2017

Year to 31 December 2017

Net insurance claims*

£42.6m

£45.3m

£86.9m

Current-year loss ratio

59.00%

60.74%

57.00%

Financial year loss ratio

45.73%

49.59%

46.50%

Net operating expenses

£21.3m

£20.0m

£41.0m

Expense ratio

22.90%

22.06%

22.00%

Combined ratio

68.63%

71.65%

68.50%

*Net insurance claims shown here excludes £3.4m (6 months 2017: £3.3m, 12 months 2017: £6.0m) of claims handling expenses.

The Group's loss ratio benefitted from prior-year releases as well as consistently strong current-year claims experience. As in the comparative period, the current-year loss ratio falls above the long-run average, as uncertainty in new and open claims generally leads to a more robust reserve, which should release over time. The level of prior-year reserve release is reflective of the Group's consistent reserving approach and positive developments in the claims environment, particularly in respect of small personal injury claims. The Group's expense ratio has remained stable, with a small uplift expected following the IPO in December 2017, reflecting the increased cost of running a listed entity.

Taxation

The Group's tax charge for the period was equal to 19.3% of the Group's profit before tax, excluding amortisation of intangible assets. The Group has not entered into any complex structural arrangements and therefore generally expects to pay corporation tax at the prevailing marginal rate.

Earnings per Share

 

6 months to 30 June 2018

6 months to 30 June 2017

Year to 31 December 2017

Basic earnings per share

10.4p

7.2p

14.5p

Diluted earnings per share

10.3p

7.2p

14.5p

Adjusted earnings per share

10.4p

7.4 p

17.5p

 

Earnings per share in for the current and comparative period are calculated on the basis of the current capital structure. Diluted Earnings per share for H1 2018 is 10.3 pence compared to 7.2 pence for the comparative period in 2017, reflecting higher profit after tax reported in H1 2018 and that in the comparative period approximately £5.2m of earnings was attributable to preference shareholders, of which there are none in H1 2018.

 

Cash and Investments

 

As at 30 June 2018

As at 31 December 2017

UK Government bonds

£261.4m

£243.5m

Corporate bonds

£0.5m

£0.5m

Cash and cash equivalents

£42.6m

£34.4m

 

The Group continues to hold a low-risk investment portfolio and sufficient cash to meet its future claims liabilities. The increase in cash and financial investments against the previous year is the result of the decision not to pay a final dividend in respect of 2017.

Insurance liabilities

 

As at 30 June 2018

As at 31 December 2017

Gross insurance liabilities

£224.0m

£242.4m

Reinsurers' share of insurance liabilities

£84.2m

£103.0m

Net insurance liabilities

£139.8m

£139.4m


The Group's net insurance liabilities continue to reflect the underlying profitability and volume of business written. Following a significant increase in gross insurance liabilities in 2017, driven primarily by a small number of large claims, the Group's gross liability position has fallen as those claims have been settled or the reserves have been revised downwards. The Group continues to hold excess-of-loss reinsurance contracts across its entire book at an excess of £1.0m.

Leverage

The Group continues to hold no external debt. All of the Group's capital is considered 'Tier 1' under Solvency II. The Directors continue to hold the view that this currently allows the greatest operational flexibility for the Group.

Dividends

The Board has declared an ordinary interim dividend of 7.2 pence per share (£18.0m) (2017: N/A), representing 70% of the Group's half-year profit after tax, in-line with the Group's stated policy. The Group's Solvency II capital coverage ratio before paying this dividend is 209%, and is 179% after deducting this dividend. The Group's dividend policy and capital management targets remain unchanged since IPO. Under normal circumstances, the Group expects to operate within a Solvency II capital coverage ratio range of 140% to 160%, and will take this into account when considering the potential to pay special dividends. In the normal course of events the Board will consider whether or not it is appropriate to pay a special dividend once a year, with reference to the full-year results

The Group's dividend policy, which was set at IPO, remains unchanged. In the normal course of business the Group will pay an ordinary dividend of 70% of profit after tax, with approximately one third paid during the year as an interim dividend. As indicated at IPO, the Board has resolved that for 2018 only the Group will pay an interim dividend equal to 70% of the Group's profit after tax for the 6 months ended 30 June 2018.

Where the Board believes that the Group holds capital which it considers surplus to the Group's requirements, it would intend to return such surplus capital to shareholders. Under normal circumstances, the Board considers a Solvency II capital coverage ratio within the range of 140% to 160% to be appropriate, and will consider this when determining the potential for special dividends. The Board may revise the Group's dividend policy from time to time as it considers appropriate.

IFRS and Regulatory Capital

As at 30 June 2018 the Group's IFRS capital comprised:

 

As at 30 June 2018

As at 31 December

2017

 

£'k

£'k

Equity

 

 

Share capital

249

249

Own shares

1

1

Share premium

-

205,241

Merger reserve

48,524

48,404

Share-based payments reserve

355

-

Retained earnings

209,043

(21,902)

Total

258,172

231,993

 

There have been no changes to the Group's capital structure since the last year-end reporting date of 31 December 2017. All of the Group's Solvency II capital remains Tier 1, as described in the Group's Solvency and Financial Condition Report for the year ended 31 December 2017. On 26th June 2018, Sabre Insurance Group plc received confirmation by an Order of the High Courts of Justice, Chancery Division, for the reduction of its share premium account, effective as at that date.

The Solvency II position of the Group as at 30 June 2018 is given below:


As at 30 June 2018

(post-interim dividend)

As at 30 June 2018

(pre-interim dividend)

As at 31 December

2017


£'k

£'k

£'k

Total Tier 1 capital

108,126

126,126

97,873

SCR

60,566

60,458

61,087

Excess capital

47,560

65,668

36,786

Solvency coverage ratio (%)

179%

209%

160%

 

The Group remains well-capitalised, with a Solvency II capital coverage ratio in excess of its preferred operating range of 140% to 160%.

Outlook

The Group continues to expect 2018 gross written premium to be in line with 2017, whilst maintaining our current underwriting margins, and to deliver a financial year combined operating ratio better than our mid-70% target, slightly higher than for the full-year 2017. The Group's profitability has allowed us to build significant regulatory capital, some of which will be distributed by way of the ordinary interim dividend announced today, in line with the policy outlined at IPO. Excluding the capital required to fund this dividend, the Group's excess Solvency capital is at 179%, which should provide the Board the option to return surplus capital to shareholders through a future special dividend, should the capital position improve further as expected throughout the remainder of 2018.

 

Financial Calendar - Dividend dates

Ex-dividend date

23 August 2018

Record date

24 August 2018

Payment date

20 September 2018

 

The Group's financial calendar can be found at:

https://www.sabreplc.co.uk/investors/financial-calendar/

 

 



 

Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2018

 



6 months 2018

6 months 2017

Full year 2017


Notes

£'k

£'k

£'k

Gross earned premium

4

 102,886

 97,703

203,139

Reinsurance premium ceded

4

(9,677)

Net earned premium


 93,209

 91,344

186,866

Investment return

5

(89)

(233)

(749)

Instalment income


 2,052

 1,795

3,837

Other operating income

     6

 1,008

Total income


 96,180

Insurance claims

7

(27,837)

(65,207)

(151,456)

Insurance claims recoverable from reinsurers

7

(18,175)

Net insurance claims


(46,012)

Commission expenses


(8,188)

(9,109)

(16,884)

Operating expenses

8

(9,772)

Total expenses


(17,960)

Operating profit before exceptional items and amortisation of intangible assets


 32,208

Amortisation of intangible assets


(251)

(444)

(887)

Exceptional expenditure

9

-

Profit before tax


 31,957

 28,000

55,512

Tax charge

10

(6,133)

Profit for the period attributable to owners of the company


 25,824






Total other comprehensive income for the year


-

-

-

Total comprehensive income for the year attributable to the owners of the company


25,824

23,063

45,343






Basic earnings per share (pence)


10.4

7.2

14.5

Diluted earnings per share (pence)


10.3

7.2

14.5

 



 

Condensed consolidated statement of financial position
For the 6 months ended 30 June 2018



30 Jun 2018

31 Dec 2017


Notes

£'k

£'k

Assets




Goodwill


156,279

156,279

Intangible assets


251

501

Property, plant and equipment


3,807

3,874

Reinsurance assets

12

84,193

110,488

Deferred tax assets


76

20

Deferred acquisition costs


15,747

14,673

Insurance and other receivables


48,075

38,808

Prepayments, accrued income and other assets


3,703

2,854

Financial investments

13

261,938

244,031

Cash and cash equivalents


42,636

34,425

Total assets


616,705

605,953





Equity




Issued ordinary share capital


249

249

Share premium account

16

-

205,241

Own shares


1

1

Merger reserve


48,524

48,404

Share-based payment reserve


355

-

Retained earnings


209,043

(21,902)

Total Equity


258,172

231,993





Liabilities




Insurance liabilities

14

224,034

242,388

Unearned premium reserve

14

111,060

105,122

Trade and other payables including insurance payables


12,257

15,876

Deferred tax liabilities


-

-

Current tax liabilities


5,277

907

Accruals


5,905

9,667

Total liabilities


358,533

373,960

Total equity and liabilities


616,705

605,953

 

 



 

Condensed consolidated cash flow statement
For the six months ended 30 June 2018


6 Months 2018

6 Months 2017

Full year 2017


£'k

£'k

£'k

Net cash generated from operating activities before investment of insurance assets

26,243

33,605

60,666

Cash (used by)/generated from investment of insurance assets

(17,997)

2,034

(10,490)

Net cash generated from operating activities

8,246

35,639

50,176

Cash flows from investing activities




Purchases of property, plant and equipment

(35)

(47)

(77)

Net cash used by investing activities

(35)

(47)

(77)

Cash flows from financing activities




Issue of ordinary share capital

-

-

205,333

Redemption of preference shares

-

-

(202,719)

Corporate reorganisation

-

-

2,916

Dividends paid

-

(19,332)

(31,696)

Net cash used by financing activities

-

(19,332)

(26,166)

Net decrease in cash and cash equivalents




Cash and cash equivalents at the beginning of the year

34,425

10,492

10,492

Effect of foreign exchange rates

8,211

16,260

23,923

Cash and cash equivalents at the end of the year

42,636

26,752

34,425

 



 

Condensed consolidated statement of changes in equity
For the six months to 30 June 2018


Ordinary s'holders' equity

Preference share capital

Share premium account

Own shares

Merger reserve

Share-based payments reserve

Retained earnings

Total equity


£'k

£'k

£'k

£'k

£'k

£'k

£'k

£'k

Balance at 1 January 2017

45,396

202,719

-

-

-

-

(35,299)

212,816

     Profit for the year

-

-

-

-

-

-

23,063

23,063

     Other comprehensive income


-

-

-

-

-

-

-

Total comprehensive income







23,063

23.063

Dividends

-

-

-

-

-

-

(19,332)

(19,332)

Balance at 30 June 2017

45,396

202,719

-

-

-

-

(31,568)

216,547

     Profit for the year

-

-

-

-

-

-

22,280

22,280

     Other comprehensive income


-

-

-

-

-

-

-

Total comprehensive income

-

-

-

-

-

-

22,280

22,280

Establishment of Sabre Insurance Group plc

250

-

-

-

-

-

(250)

-

Corporate reorganisation

(45,397)

(202,719)

205,241

1

48,404

-

-

5,530

Dividends

-

-

-

-

-

-

(12,364)

(12,364)

Balance at 31 December 2017

249

-

205,241

1

48,404

-

(21,902)

231,993

     Profit for the year

-

-

-

-

-

-

25,824

25,824

     Other comprehensive income

-

-

-

-

-

-



Total comprehensive income

-

-

-

-

-

-

25,824

25,824

Capital reduction (see note 16)

-

-

(205,241)

-

120

-

205,121

-

Share-based payments

-

-

-

-

-

355


355

Dividends

-

-

-

-

-

-

-

-

Balance at 30 June 2018

249

-

-

1

48,524

355

209,043

258,172


Notes to the condensed consolidated financial statements

Corporate information

Sabre Insurance Group plc  is a company incorporated in England and Wales.  The address of the registered office is Sabre House, 150 South Street, Dorking, Surrey, RH47 2YY, England. The condensed consolidated interim financial statements comprises the parent company and its subsidiaries.  All of the Company's subsidiaries are located within the United Kingdom, and share a registered office with the Company, with the exception of Barbados TopCo Limited, which is located in Guernsey, registered office Heritage Hall, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.

1.    General information

The condensed interim financial statements comprise the results and balances of the Group for the six months period ended 30 June 2018 and the comparative period for the six months ended 30 June 2017 and  the year ended 31 December 2017. The comparative figures for the financial year ended 31 December 2017 do not constitute statutory accounts as defined in s.435 of the Companies Act 2006, but has been abridged from the statutory accounts for that year which have been delivered to the Registrar of Companies. The independent auditor's report on the Group accounts for the year ended 31 December 2017 is unqualified, does not include a reference to any matters to which the auditors drew attention  by way of emphasis without qualifying their report and does not include a statement under s.498(2) or (3) of the Companies Act 2006.

2.    Accounting policies

2.1   Basis of preparation

The condensed consolidated financial statements have been prepared and approved by the directors in accordance with International Accounting Standard 34 ('Interim Financial Reporting') as adopted by the EU. These interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the annual financial statements of the Company have been prepared in accordance and fully comply with International Financial Reporting Standards (IFRSs), as issued by the International Accounting Standards Board (IASB) and adopted by the EU. The annual financial statements have been prepared on an historical cost basis, except for investment properties and those financial assets that have been measured at fair value. The Group has applied IFRS 15 since its implementation date of 1 January 2018. The Group has not adopted any other new standard, interpretation or amendment since 31 December 2017.

The condensed consolidated financial statements values are presented in Pounds Sterling (£) rounded to the nearest thousand (£'k), unless otherwise indicated. The Group does not consider it is exposed to material seasonal volatility in its financial results.

2.2   Going concern

The condensed consolidated interim financial statements of Sabre Insurance Group plc have been prepared on a going concern basis. The Directors of the company having assessed the principal risks of the Group over the full duration of the planning cycle, consider it appropriate to adopt the going concern basis of accounting in preparing the interim condensed consolidated financial statements. The principle risks and uncertainties faced by the group remain consistent with those risks and uncertainties discussed and disclosed on page 22 to 26 of the group's 2017 annual report and accounts.

2.3   Accounting policies

The same accounting policies, presentation and methods of computation are followed in the condensed consolidated interim financial statements as applied in the Group's consolidated financial statements for the year ended 31 December 2017. While there are amendments to existing standards and interpretations that are mandatory for the first time for financial periods beginning 1 January 2018, these are not currently relevant for the Group and do not impact the annual consolidated financial statements of the Group or the condensed interim consolidated financial statements of the Group.

In September 2016, the IASB published amendments to IFRS 4 Insurance Contracts that address the accounting consequences of the application of IFRS 9 to insurers prior to the adoption of IFRS 17, the forthcoming accounting standard for insurance contracts. The amendments to IFRS 4 include a deferral approach that provides an entity, if eligible, with a temporary exemption from applying IFRS 9 until 1 January 2021. The Group is eligible to apply this and therefore has taken advantage of this deferral approach and delayed its adoption of IFRS 9 until 1 January 2021 to align with the effective date of IFRS 17 as introduced by the amendments to IFRS 4 Insurance Contracts.

Implementation of IFRS 15 Revenue From Contracts With Customers has had no material impact on the Group's financial statements.

 

3.    Critical Accounting Estimates and Judgements

There have been no significant changes to the principles, estimates and judgements used in applying the Group's accounting policies during the period. Full details of these critical estimates and judgements are disclosed in page 74 of the Group's Annual Report and Accounts 2017.

4.    Net earned premium


6 months 2018

6 months 2017

12 months 2017


£'k

£'k

£'k

Gross earned premium:




Gross written premium

108,824

109,103

210,736

Movement in unearned premium reserve

(5,938)

(11,400)

(7,597)


102,886

97,703

203,139

Reinsurance premium ceded:




Premium payable

(2,187)

(1,614)

(19,017)

Movement in unearned premium reserve

(7,490)

(4,745)

2,744


(9,677)

(6,359)

(16,273)

Total

93,209

91,344

186,866


Information is reported to the chief operating decision makers and the Board on an aggregated basis. Strategic and financial management decisions are determined centrally by the Board. The company provides only one product to clients, which is motor insurance, which is written solely in the UK. The Company has no other lines of business, nor does it operate outside of the UK. The Gross Written Premium for the period is £108,824. Other income relates to auxiliary products and services, including marketing and administration fees, all relating to the motor insurance business. Refer to note 6. The Group does not have a single client which accounts for more than 10% of revenue.

5.    Investment return


6 months 2018

6 months 2017

12 months 2017


£'k

£'k

£'k

Investment income:




Interest income from debt securities

3,244

2,058

4,647

Cash and cash equivalent interest income

51

1

7

Investment property income

-

-

-

Investment fees

(24)

(24)

(76)


3,271

2,035

4,578

Net realised gains/(losses)




Debt securities at fair value through profit and loss

-

326

(944)


-

326

(944)

Net unrealised gains/(losses)




Debt securities at fair value through profit and loss

(3,360)

(2,594)

(4,383)


(3,360)

(2,594)

(4,383)

Total

(89)

(233)

(749)

 

6.    Other operating income


6 months 2018

6 months 2017

12 months 2017

Continuing operations

£'k

£'k

£'k

Marketing fees

725

562

1,040

Fee income from the sale of auxiliary products and services

70

68

131

Administration fees

213

355

722

Total

1,008

985

1,893

 

7.    Net insurance claims


6 months 2018

6 months 2017


Gross

Reinsurance

Net

Gross

Reinsurance

Net


£'k

£'k

£'k

£'k

£'k

£'k

Current accident year claims paid

18,937

-

18,937

18,208

-

18,208

Prior accident year claims paid

27,254

(630)

26,624

28,668

(96)

28,572

Movement in insurance liabilities

(18,354)

18,805

451

18,331

(16,489)

1,842

Total

27,837

18,175

46,012

65,207

(16,585)

48,622


Claims handling expenses for the 6 months ended 30 June 2018 of £3,383k (HY 2017: £3,328k) have been included in the above.


12 months 2017


Gross

Reinsurance

Net


£'k

£'k

£'k

Current accident year claims paid

46,976

-

46,976

Prior accident year claims paid

45,033

(2,328)

42,705

Movement in insurance liabilities

59,447

(56,216)

3,231

Total

151,456

(58,544)

92,912

Claims handling expenses for the 12 months ended 31 December 2017 of £6,045k have been included in the above.

8.    Operating expenses


6 months 2018

6 months 2017

12 months 2017


£'k

£'k

£'k

Staff costs

3,058

2,145

5,912

Property costs

53

126

137

IT expense including IT depreciation

1,888

1,592

3,728

Other depreciation

23

24

47

Industry levies

1,988

1,963

3,851

Other operating expenses

2,762

1,866

4,435

Total

9,772

7,716

18,110

 

9.    Exceptional items


6 months 2018

6 months 2017

12 months 2017

Continuing operations

£'k

£'k

£'k

Discounted and free shares issued to employees

-

-

1,513

Management bonus on IPO

-

-

1,000

IPO costs

-

-

5,029

Total

-

-

7,542


Exceptional costs represent expenses incurred in relation to the Group's Listing on the London Stock Exchange during 2017, and staff expenses generated through the issue of shares at undervalue to certain members of staff and one-off cash-settled bonuses paid to Management on IPO.

 

 

 

 

 

10.  Tax charge


6 months 2018

6 months 2017

12 months 2017


£'k

£'k

£'k

Current taxation:




Charge for the year

6,188

4,937

10,194


6,188

4,937

10,194

Deferred taxation:




Origination and reversal of temporary differences

(55)

-

(25)

Effect of tax rate change on opening balance

-

-


Over-provision in respect of the previous year

-

-



-

-






Current taxation

6,188

4,937

10,194

Deferred taxation

(55)

-

(25)

Tax charge for the year

6,133

4,937

10,169

 

11.  Dividends


£ per share

6 months 2018

6 months 2017

12 months 2017


£'k

£'k

£'k

Amounts recognised  as distributions to equity holders in the period:





First interim dividend

-

-

14,167

14,167

Second interim dividend

-

-

-

8,171

Preference dividends paid

-

-

5,165

9,358



-

19,332

31,696

 

12.  Reinsurance assets


30 June 2018

31 December 2017


£'k

£'k

Reinsurers' share of general insurance liabilities

84,193

102,998

Reinsurers' share of UPR

-

7,490

Impairment provision

-

-

Total

84,193

110,488

 

13.  Financial investments


30 June 2018

31 December 2017


£'k

£'k

Debt securities held at fair value through the profit and loss account



Corporate

532

547

Sovereign

261,406

243,484

Total

261,938

244,031


All financial investments are classified as level 1 under the fair value hierarchy.

 

 

 

14.  Insurance liabilities, unearned premium reserve


30 June 2018

31 December 2017


£'k

£'k

Insurance liabilities



Gross insurance liabilities (including unearned premium reserve)



Gross insurance liabilities

224,034

242,388

Unearned premium reserve

111,060

105,122

Total

335,094

347,510

Reinsurers' share of insurance liabilities (including unearned premium reserve)



Reinsurers' share of insurance liabilities

(84,193)

(102,988)

Unearned premium reserve

-

(7,490)

Total

(84,193)

(110,488)

Net insurance liabilities (including unearned premium reserve)



Net insurance liabilities

139,841

139,390

Unearned premium reserve

111,060

97,632

Total

250,901

237,022


Movements in insurance liabilities, unearned premium reserve and reinsurance assets


Gross

Reinsurance

Net


£'k

£'k

£'k

At 1 January 2017

182,941

(46,783)

136,158

Cash paid for claims during the year

(85,942)

2,332

(83,610)

Increase/(decrease) in liabilities:




Arising from current-year claims

167,670

(59,229)

108.441

Arising from prior-year claims

(22,281)

682

(21,599)

At 31 December 2017

242,388

(102,998)

139,390





Claims reported

297,477

(122,644)

174,833

Incurred but not reported

(58,195)

19,646

(38,549)

Claims handling provision

3,106

-

3,106

At 31 December 2017

242,388

(102,998)

139,390

Cash paid for claims during the year

(42,875)

628

(42,247)

Increase/(decrease) in liabilities:




Arising from current-year claims

63,960

(7,784)

56,176

Arising from prior-year claims

(39,439)

25,961

(13,478)

At 30 June 2018

224,034

(84,193)

139,841





Claims reported

292,605

(108,354)

184,251

Incurred but not reported

(71,906)

24,161

(47,745)

Claims handling provision

3,335

-

3,335

At 30 June  2018

224,034

(84,193)

 139,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.  Related parties

Sabre Insurance Group PLC is the ultimate parent and ultimate controlling party of the group. The following entities included below form the group. 

Name

Principle Business

Registered Address 

Binominal Group Limited

Intermediate holding company

Sabre House, 150 South Street, Dorking, Surrey, United Kingdom,  RH4 2YY,

Sabre Insurance Company Limited

General insurance business

As above

Barbados Topco Limited

Non-Trading

Heritage Hall, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY

Other controlled entities



EBT - UK SIP

Trust

Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA

The Sabre Insurance Group Employee Benefit Trust

Trust

26 New Street, St Helier, Jersey, JE2 3RA

 

Both Employee Benefit Trusts (EBTs) were established to assist in the administration of the Group's employee equity based compensation schemes. UK registered EBT holds the all-employee Share Incentive Plan (SIP) to which each employee of Sabre Insurance Company Limited was issued with £3,600 of shares. The Jersey-registered EBT holds the Long Term Incentive Plan (LTIP) discretionary shares awarded on IPO.

While the Group does not have legal ownership of the EBTs and the ability of the Group to influence the actions of the EBTs is limited to a trust deed, the EBT was set up by the Group with the sole purpose of assisting in the administration of these schemes, and is in essence controlled by the Group and therefore consolidated.

Funds advised by BC Partners LLP are the only party to have held a significant influence (>20%) over Sabre Insurance Group plc during the period, holding approximately 29.0% of the group until 30 May 2018, when funds advised by BCP Partners LLP reduced their shareholding to approximately 14.5% of the outstanding ordinary share capital of the company.

16.  Cancellation of share premium account

On 26th June 2018, Sabre Insurance Group plc received confirmation by an Order of the High Courts of Justice, Chancery Division, for the reduction of its share premium account, effective as at that date.

17.  Post-balance sheet events

On 31 July 2018 the Company announced an ordinary interim dividend of 7.2p per share.

 



 

Directors' responsibility statement

 

We confirm that to the best of our knowledge:

 

The condensed consolidated financial statements for the six months ended 30 June 2018 have been prepared in accordance with International Accounting Standard 34 ("IAS 34") as adopted by the EU.

 

The interim management report includes a fair review of the information as required by:

 

·      DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of the important events that have occurred during the first six months of the current financial year and their impact on the condensed set of consolidated financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially impacted the financial position or performance of the Group during the period; and any changes in the related party transactions from the Group's consolidated financial statements for the year ended 31 December 2017 that could do so.

 

Signed on behalf of the Board

 

 

 

 

 

Geoff Carter                                                                                          Adam Westwood

Chief Executive Officer                                                                        Chief Financial Officer

30 July 2018                                                                                           30 July 2018

 



 

Independent review report to Sabre Insurance Group plc

 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows the condensed consolidated statement of changes in equity, and the related notes 1 to 17. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

 

Stuart Wilson

for and on behalf of Ernst and Young LLP

London

30 July 2018

 



 

Alternative performance metrics

 

Alternative performance metric

Description and adjustment to reconcile to primary statements

Gross written premium

Comprises all amounts during the financial year in respect of contracts entered into regardless of the fact that such amounts may relate in whole or in part to a later financial year. This is equal to gross earned premium less the movement in unearned premium reserve

Loss ratio

The Group's loss ratio measures net insurance claims, less claims handling expenses, relative to net earned premium, expressed as a percentage.

Expense ratio

The Group's expense ratio is a measure of total expenses (which comprises commission expenses and operating expenses), plus claims handling expenses, less exceptional expenses which do not relate to the Group's underlying performance (such as fees incurred in connection with acquisitions or capital markets transactions), relative to NEP, expressed as a percentage.

Combined operating ratio

The Group's combined ratio is the ratio of total expenses (which comprises commission expenses and operating expenses), plus net insurance claims less exceptional expenses which do not relate to the Group's underlying performance (such as fees incurred in connection with acquisitions or capital markets transactions), relative to NEP, expressed as a percentage. The Group uses the combined ratio to evaluate overall underwriting profitability. A combined ratio below 100 per cent. is indicative of an underwriting profit (without taking into account investment return or any income from insurance premium instalment financing or other operating income)

Adjusted profit after tax

The Group's adjusted profit after tax measures profit from operations, net of tax, adjusted to offset the effect of amortisation of intangible assets and exceptional expenses which do not relate to the Group's underlying performance (such as fees incurred in connection with acquisitions or capital markets transactions).

Solvency Coverage Ratio

The Group's solvency coverage ratio is the ratio of the Group's regulatory capital in a particular period to its Solvency Capital Requirement for the same period, expressed as a percentage.

Return on tangible equity

Return on Tangible Equity is measured as the ratio of the Group's adjusted profit after tax to its

average tangible equity (IFRS net assets less goodwill and intangible assets) over the financial year. Average tangible equity for a period is equal to the average of the opening and closing tangible equity for that period.

Annualised return on tangible equity

Annualised return on tangible equity is equal to the return on tangible equity for the period multiplied by 12, divided by the number of months in the period. The closing tangible equity figure used in this calculation is equal to the closing tangible equity as at the period end,  adjusted to reflect 12 months' trading with reference to the current period's profit after tax and any interim dividend to be paid.

Adjusted earnings per share

Adjusted earnings per share is equal to the adjusted profit after tax for the period divided by the basic weighted average number of ordinary shares.

 

Reconciliation of return on tangible equity:

 

 

30 June 2018

30 June 2017


£'k

£'k

Opening IFRS tangible equity

75,213

55,149

Closing tangible equity

N/A

75,213

Annualised closing IFRS tangible equity*

109,467

N/A

Average IFRS tangible equity

92,340

65,181

Adjusted profit after tax

26,075

23,507

Annualised Return on tangible equity

56.48%

72.13%

 

* Annualised closing tangible equity is a proxy of the expected closing IFRS tangible equity as at 31 December 2018. This is equal to the closing tangible equity as at 30 June 2018, plus the profit after tax for the 6 months to 30 June 2018, less the interim dividend paid of £18,000k.


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Half-year Report - RNS