- Spending is falling in absolute terms
- Solvency remains strong
Supply chain issues, including the current global shortage of semiconductors, have had unexpected repercussions. Auto insurance underwriter Saber Assurance (SBRE) notes that its revenue remains under pressure as slowing car sales, partly a consequence of the shortage, mean fewer new customers are looking to insure their vehicles. Chief Financial Officer Adam Westwood points out that matters have been made worse by “continued heavy price discounting in the market” so that gross written premiums for 2021 came in at 2.26% lower than the ‘last year.
Anyone who follows the auto insurance industry knows that claims volumes have been somewhat erratic since the pandemic took hold. The claims-to-premiums-earned ratio was 51.1%. This is within Saber’s target range, although prior year comparisons are not particularly telling given the reduction in claim frequency due to lockdowns in 2020. A 160 basis point increase in the ratio spending at 28.3% could also be slightly misleading in such spending. (excluding commissions) fell by £2.4m in absolute terms, although the ratio was well ahead of the pre-pandemic comparator. Either way, that meant the combined ratio stood at 79.4% compared to 75.3% in 2020, indicating that it pays more in claims than it receives in premiums.
There has been some claims inflation, but the main problem is clearly linked to “a lack of new drivers and slow car sales”. However, political growth improved in the second half of last year and continued into 2022 as some degree of normalcy returns to its core market, although there are questions about what impact might have rising fuel prices – another indirect obstacle perhaps? But given the strong solvency and a forward yield of 4%, we remain buyers. To buy.
IC Last Seen: Buy, 281p, Aug 5, 2020
|SABER INSURANCE (SBRE)|
|ORDER PRICE:||221p||MARKET VALUE:||£551 million|
|TO TOUCH:||221-222p||TOP OF 12 MONTHS:||276p||LOW: 173p|
|DIVIDEND YIELD:||3.8%||P/E RATIO:||18|
|NET ASSET VALUE:||101p||SOLVENCY II RATIO:||164%|
|Year at December 31||Gross premiums (£million)||Profit before tax (millions of pounds sterling)||Earnings per share (p)||Dividend per share (p)|
|Ex div:||to be determined|
|Payment:||to be determined|
|*Includes intangibles of £156 million, or 63 pence per share. NB: Year-end dividends do not include special dividends of 6p per share in 2018, 4.9p in 2020 and 4.6p in FY 2021. A dividend of 5.2p was paid in August 2020, this which represented the deferred special dividend in respect of 2019.|