Shares in Sabre Insurance (SBRE) drifted lower despite the group announcing a first quarter update which revealed a 30% increases in premiums.
Sabre says it has increased prices by 12% year-on-year, materially ahead of the market. This decision reflects the focus on maintaining profitability over volume against a backdrop of claims inflation estimated to be at least 10%.
Premiums of £59.8 million were up 30% for the first quarter of 2022, ahead of a consensus forecast figure of £57 million.
This was driven by solid top-line performance from the new motorcycle and taxi partnerships as well as modest growth in the core motor book.
Sabre continues to project material top-line growth in 2022 and anticipates the combined ratio for 2022 to be around 80%.
NEGATIVE IMPACT OF MOTOR INSURANCE PRICING
A combination of a sharp drop in motor insurance premiums and record-high claims inflation has created a toxic backdrop for the sector.
Lower levels of traffic on the roads as a result of Covid-19 have resulted in a 15% decline in UK motor insurance premiums since March 2020, according to CPI data provided by the Office for National Statistics.
Headwinds including claim inflation have been compounded by new rules introduced by the Financial Conduct Authority that ban insurance companies from charging existing customers more than new ones.
Looking forward Sabre says it expects a significant correction in car insurance market pricing, as inflation is materially exceeding current market price increases.
In addition to this expected tailwind, the company continues to anticipate an increase in the addressable market as new drivers return to the market and the supply of new cars starts to improve.
That said, the company flags a risk of short-term demand reduction due to increased cost of living.
Following the first quarter update Numis has reduced its 2022 full-year pre-tax profit forecast by 6% due to slower car income. For 2023 pre-tax profit estimates comes down by 9%.
