Car insurers see shares tumble as Sabre warns over hit from soaring costs
15 July 2022, 11:12
Sabre Insurance Group saw its stock plummet by as much as 39% at one stage after it said the cost of claims had jumped to around 12% from 8%.
Shares in car insurers were sent tumbling into the red on Thursday after motor insurer Sabre warned over a hit from soaring costs as rampant inflation begins to take its toll on the sector.
Sabre Insurance Group saw its stock plummet by as much as 39% at one stage after it said the cost of claims had jumped to around 12% – from 8% last year – due to rising costs across the board, including parts, labour, credit hire, paint and car values.
It said this is set to impact its profitability, sending shivers through the rest of the sector on the London Stock Exchange, with Admiral plunging 14% and Direct Line 10% lower.
Sabre said “extraordinary inflationary pressures” are set to see its combined operating ratio – a key measure of profitability for insurers showing costs and claims as a proportion of premiums – rise to 98.9% in the half-year to June 30 against the more profitable 74.4% seen a year ago.
It is set to report first half pre-tax profits slumping to £4.3 million from £22.2 million a year ago, and said shareholder dividend payments would be capped at a third of the profit after tax for the half-year.
Sabre still expects to pay a dividend overall for 2022, but said it will be at reduced levels before returning to more normal levels in 2023.
The group has been hiking prices in response – up 19% in the year to date – but this has in turn knocked demand, with gross written premiums on the motor book around 10.6% below the same levels seen a year earlier.
Chief executive Geoff Carter said: “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.”
It comes ahead of the sector’s half-year results next month, which will be in sharp focus to see what impact is being felt by the major players.
