Sabre reports 62.1% COR in 2013 after ‘excellent year’

Specialist motor insurer Sabre has reported a market-beating combined operating ratio (COR) of 62.1% in 2013 despite competitive conditions and falling motor rates.

The 2013 ratio was a 14.8 percentage point improvement over 2012’s COR of 76.9%, according to Insurance Times calculations.

As a result of the improved underwriting performance, Sabre’s 2013 profit after tax leapt by 47% to £43.4m (2012: £29.7m).

The improved profitability came despite a 7% drop in gross written premium (GWP) to £140m (2012: £150.5m).

A 13% drop in net investment income to  £2.7m (2012: £3.1m) also failed to tarnish Sabre’s overall performance for the year.

In a statement in Sabre’s results filing to Companies House, chairman Keith Morris described 2013 as an “excellent year for Sabre” and attributed the “superior underwriting result” to “higher than expected prior-year reserve releases coupled with reduced loss frequency in the current underwriting year”.

Speaking to Insurance Times following the release of the results, Morris said that the 62% 2013 COR, while in keeping with Sabre’s history of beating the market, was not necessarily a typical performance for the company.

He said: “Over a long period our combined ratio has been good but it will fluctuate depending on the prevailing rates in the market and what reserve releases come through in any particular year.

“Everything came together very nicely in 2013.”

He added that the 7% GWP drop was caused by the company being more disciplined on pricing than its rivals. “We have got a very strict pricing policy,” he said.

Rate strength to come

Morris noted in the results filing that the improved performance came amid heavy competition and price cutting in the motor market.

He said: “Market conditions deteriorated throughout [2013], further weakening prices that had been falling since mid-2012.

“We suspect that the price reductions have been in part because of relatively strong underwriting performance of our competitors in 2012 and in part in anticipation of reduced claims costs following the implementation of Laspo.

“We expect the weakness in the market conditions to persist for the first half of 2014, with rates likely to strengthen after that.”

He added: “Some uncertainty exists because of the Competition Commission study into private motor insurance, in particular as to the impact on credit hire and credit repair costs, but we anticipate the impact on Sabre to be small.”

PE takeover

Sabre’s parent firm Binomial Group was bought on 3 January this year by private equity firm BC Partners for €285m (£237m).

Morris said: “Following the change in control we do not expect any significant change to the business.”