'Poor investment returns' cut Sabre 2011 profit by 2.4%

Motor insurer Sabre’s 2011 profit dropped 2.4% to £18.2m (2010: £18.6m) thanks to “poor investment returns” the firm revealed in a Companies House filing.

Sabre chairman and chief executive Keith Morris has also expressed concern about a slowdown in motor insurance price increases seen at the year end.

“Whilst market conditions improved in 2011, the weakening of price increases towards the end of the year is concerning,” he wrote in the chairman’s statement accompanying the results. But he added: “We will maintain our disciplined approach to pricing and to other aspects of our business and, by doing so, we expect that we continue to outperform the market in 2012.”

Sabre made an investment loss of £963,000 (2010: profit of £2.1m) as £11.5m of realised and unrealised losses and expenses wiped out the company’s £10.6m investment income.

Morris said the vast majority of Sabre’s investment portfolio is in cash and low-yielding short-term gilts, and thus investment returns were “modest and predictable”. However, a small part of the portfolio is held in two properties, whose values suffered “a surprising and significant downward adjustment” following a valuation in 2011.

The results also reveal a 55% spike in claims incurred to £109m (2010: £70.3m). While this didn’t hit the underwriting profit, which increased by 8% to £25.7m (2010: £23.8m), Sabre’s combined ratio, calculated by Insurance Times, increased by four percentage points to 83.7% from 79.7%.

Morris said Sabre’s underwriting profit “remains strong, albeit against a background of both rising prices and rising claim costs.”

He pointed out that the UK insurance market is expected to undergo significant changes in 2012, with the expiry of the opt-out from the gender directive that prohibits gender-differential pricing and the introduction of the Jackson reforms, “which may bring some relief to the escalation in cost of bodily injury claims”.

“Sabre is preparing for both these changes,” Morris wrote.