TIDMSBRE
RNS Number : 8776S
Sabre Insurance Group PLC
14 March 2023
Full year results 2022
Delivered growth and profitability despite challenging market conditions.
Well-positioned to recover margins, whilst growing further, thanks
to assertive rating response and focused strategy
Sabre Insurance Group plc (the " Group " , or " Sabre " ), one of the
UK ' s leading motor insurance underwriters, reports its results for
the year ended 31 December 2022 .
SUMMARY OF RESULTS
Year to Year to
31 December 31 December
2022 2021
--------------------------------------------- ------------- -------------
Gross written premium GBP171.3m GBP169.3m
Net loss ratio 68.7% 51.1%
Expense ratio 27.3% 28.3%
Combined operating ratio 96.0% 79.4%
Adjusted profit before tax GBP12.8m GBP37.2m
Profit before tax GBP12.8m GBP37.2m
Adjusted profit after tax GBP10.1m GBP30.1m
Profit after tax GBP10.1m GBP30.1m
Total dividend per share 4.50p 13.0p
Return on tangible equity (annualised) 12.4% 29.2%
Solvency coverage ratio (pre-interim/final
dividend) 161.4% 207.9%
Solvency coverage ratio (post-interim/final
dividend) 153.8% 164.0%
--------------------------------------------- ------------- -------------
Geoff Carter, Chief Executive Officer of Sabre, said:
"Whilst the 2022 result is disappointing by our own standards, due
to the impacts of extraordinary levels of inflation, I am hugely encouraged
by how quickly we identified and corrected for these challenges, and
the strong foundation we have maintained. The actions we have taken
have enabled us to grow supplementary product lines, deliver a profit
and announce a special dividend in what has been a highly challenging
market. I believe our performance is highly creditable in a market
context.
Our rapid response and focus mean that we still delivered a very strong
financial year loss ratio of 61.5% on our Motor book, and the new Motorcycle
and Taxi portfolios are firmly on track to deliver a meaningful contribution
to profit. We remain pleased with these new partnerships.
In recent weeks we are seeing some encouraging evidence of market
price increases resulting in weekly premium growth on the Motor line,
and we are already benefitting from improving loss ratios across the
portfolio.
As we move through 2023, and earn out the inflation and new-product
strain on Motorcycle & Taxi, we are confident we will be able to build
the business profitably into the medium-term through a combination
of organic growth if market price increases sustain, and our own development
initiatives.
We will continue to focus rigorously on treating volume as an output,
and not a target, and on maintaining our historic strengths. I look
forward to reporting on our progress."
STRATEGIC HIGHLIGHTS
* Continued adherence to strategic principles of
underwriting discipline, controlled growth when
market conditions allow and maintaining a wide
underwriting footprint
* Maintained profitable footprint in Motor business
through enhancement of rating factors, while
significantly enhancing position in Taxi and
Motorcycle markets
* Anticipating deployment of a new direct platform in
mid-2023, with a primary focus of migrating online
the majority of customer interactions and
re-investing savings into price
* Expecting mid-2023 initial rollout of Insurer Hosted
Pricing ('IHP'), which will allow us to avoid
'software house' rating restrictions and begin to
implement more sophisticated rating enhancements at
pace
FINANCIAL HIGHLIGHTS
* Dividend of 4.5p, consisting of the full-year payment
of 1.7p and interim dividend of 2.8p, in line with
the dividend policy, which is to distribute 70% of
profit after tax plus excess capital
* Strong capital generation led to a pre-dividend
solvency capital ratio of 161.4%, and a post-dividend
solvency capital ratio of 153.8%, comfortably within
our target range of 140% to 160%
* Year-on-year growth in gross written premium driven
by motorcycle and taxi business, with motor book
remaining supressed in 2022 due to continued
market-wide under-pricing
* Profit before tax of GBP12.8m (2021: GBP37.2m), the
year-on-year decrease primarily a result of pressure
on loss ratio due to rapid, unexpected inflation
* In-year performance for the early stage Motorcycle
and Taxi business was below expectation, with a drag
from a limited number of large losses against a
relatively low earned premium on Taxi, and higher
Motorcycle loss ratio on business written prior to
our more sophisticated pricing and rating being fully
embedded. Our underwriting actions and the
significant pricing action taken in 2022 are
anticipated to bring these loss ratios down
materially in 2023
MARKET PRICING
* Despite some market rate increases towards the end of
2022 and into 2023, our view is that the motor market
remains under-priced and that a material correction
is necessary
* Maintained a disciplined approach to pricing
throughout the year, deploying significant rate
increase of c.30% in 2022, and c.50% since January
2020, across the Motor book in order to cover
inflation and improve loss ratio
OUTLOOK
* Expecting to see an improvement in loss ratios across
our Motor, Motorcycle and Taxi business in the year
ahead
* Having allowed Motor business to shrink in 2022
against a back-drop of undisciplined market pricing,
we anticipate a return to growth in our traditional
market in 2023 if more robust market pricing seen in
recent weeks sustains
* Overall combined operating ratio is predicted to fall
to between 85% and 90% for 2023. Improvements in loss
ratio are expected to be partially offset by strain
on expenses due to residual impact of high inflation.
We remain focussed on minimising these impacts
* Post-dividend capital ratio is expected to grow as we
earn through profitable business in 2023
* The roll-out of new initiatives in mid-2023 likely to
benefit GWP and loss ratio in 2024
ENQUIRIES
Sabre Insurance Group 0330 024 4696
Geoff Carter, Chief Executive Officer
Adam Westwood, Chief Financial Officer
Tulchan Communications 020 7353 4200
James Macey White
Eleanor Pomeroy
ANALYST PRESENTATION
Sabre Insurance - 2023 Full Year Results - webcast & conference call
Date: 14 March 2023
Time: 9:30 am
Please join the event 5-10 minutes prior to scheduled start time.
When prompted, provide the confirmation code or event title.
Event Title: Sabre Full Year Results
Time Zone: Dublin, Edinburgh, Lisbon, London
Start Time/Date: 09:30 Tuesday, March 14, 2022
Duration: 60 minutes
Password: Quote 'Sabre Full Year Results' when prompted by the operator
Webcast:
https://stream.brrmedia.co.uk/broadcast/63d29bae777efd4a8b5165b1
Location Phone Type Phone Number
---------------- ----------- ---------------
United Kingdom, +44 (0) 33 0551
Local Local 0200
A replay will be made available on the Sabre website following
the conclusion of the presentation.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014.
DIVID TIMETABLE
Ex-dividend 20 April 2023
date:
Record date: 21 April 2023
Payment date: 1 June 2023
FORWARD-LOOKING STATEMENTS DISCLAIMER
Cautionary statement
This announcement may include statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking statements
may be identified by the use of forward-looking terminology, including
the terms "believes", "estimates", "plans", "projects", "anticipates",
"expects", "intends", "may", "will" or "should" or, in each case, their
negative or other variations or comparable terminology, or by discussions
of strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not historical
facts and involve predictions. Forward-looking statements may and often
do differ materially from actual results. Any forward-looking statements
reflect Sabre's current view with respect to future events and are
subject to risks relating to future events and other risks, uncertainties
and assumptions relating to Sabre's business, results of operations,
financial position, prospects, growth or strategies and the industry
in which it operates.
Forward-looking statements speak only as of the date they are made
and cannot be relied upon as a guide to future performance. Save as
required by law or regulation, Sabre disclaims any obligation or undertaking
to release publicly any updates or revisions to any forward-looking
statements in this announcement that may occur due to any change in
its expectations or to reflect events or circumstances after the date
of this announcement.
The Sabre Insurance Group plc LEI number is 2138006RXRQ8P8VKGV98.
CHIEF EXECUTIVE OFFICER'S REVIEW
Delivered growth and profitability despite challenging market conditions.
Well-positioned to recover margins, whilst growing further, thanks
to assertive rating and response and focused strategy.
Reflecting on my Review in the 2021 Annual Report, I was struck by
the sense of optimism as we looked into 2022. We had remained consistent
in our strategy of margin over volume, meaning that Sabre started to
emerge from the trough of a cyclical soft market and on-going Pandemic
issues with strong foundations in place. However, our industry - and
many others - have since been impacted by the unforeseen, once-in-a-generation
geopolitical event and subsequent extraordinary period of inflation.
The impacts of the rapid increase in inflation were as significant
for motor insurance as the impact of the pandemic. While we addressed
the inflationary impacts early and assertively - ahead of many of our
peers - this backdrop has still led to a disappointing performance
by our own standards. We do believe that our prompt action restricted
some of the potentially very significant financial impacts from the
rapid, unprecedented inflation, and we believe that Sabre will recover
fairly rapidly towards our target levels of performance whilst still
being able to capitalise on some exciting growth opportunities.
Looking back on 2022
The market backdrop has made 2022 a frustrating year. In the early
stages of the year we saw market price increases emerging, which we
believe was in response to the FCA pricing review. However, this encouraging
positive trend was interrupted by events out of our control.
At the start of Q2 the unfortunate events in Ukraine led to the now
well-publicised but unexpected and rapid increase in underlying cost
inflation. We, along with the rest of the market, were then faced with
a combination of challenges, either directly due to the conflict or
as a residual consequence from either the pandemic or Brexit. These
included:
* Inability to source parts for repairs, driving
extended repair times and consequent increases in car
hire costs
* Lack of new car supplies driving up used car prices -
dramatically increasing the cost of theft and total
losses
* Severe shortage of staff in the car repair and
healthcare industries resulting in cost increases
* The need to reflect increased healthcare costs across
all open claim reserves
* The fact that polices over the past 12 months had
been priced against claims inflation assumptions
which proved to be too low
* Other increases in overhead costs across the Group's
operations
This required a one-off adjustment to our reserves and an increase
in our (by market standards) already high claims inflation assumption.
Throughout, we have stuck rigorously to our underlying philosophy that
to ensure long-term success, volume must be an output not a target.
We have continued to have focus on ensuring all polices are priced
correctly for the current environment. In order to meet rises in the
cost of claims, we have increased prices by nearly 30% in 2022, and
by over 50% since January 2020.
In 2022 we continued to expand our position in the motorcycle and taxi
insurance markets through partnerships with MCE and Bennetts, and Freeway
Insurance respectively. We regularly review new business opportunities
but have a very high hurdle for returns before committing resources
to them. These partnerships increase our long-term growth opportunities
while maintaining margin discipline.
We saw benefits, in premium growth terms, from our new motorcycle and
taxi partnerships in 2022. In some ways the timing was slightly unfortunate,
in that we did not expect these to generate a significant contribution
to profit in the first year, but did not anticipate the concurrent
profit challenges on our motor book in the initial year of these relationships
as well as the claims inflation impacts on these portfolios.
While we knew elements of the motorcycle book required extensive re-underwriting
and pricing to get to a sustainably profitable level, the scale of
this was greater than anticipated and so the product performed below
expectations. However, our re-underwriting efforts have to date been
successful and the product is now on a firm pathway to profitability
in 2023. In conjunction with MCE insurance, we have since launched
an innovative subscription (pay-by-mile) product for motorcyclists.
The taxi portfolio got off to a slightly slower than assumed start
as our partner needed to re-platform their administration systems and
they share our philosophy of writing for profit not volume in a difficult
market. This re-platforming exercise is now complete and we focussing
on capitalising on the growth opportunities ahead as rates in this
market increase.
The overall impact of reduced 'core' motor volume meant these first-year
products were a greater than planned proportion of our total business
- putting additional pressure on the overall loss ratio.
Given the extraordinary market challenges the business had to operate
within, I am pleased with the motor loss ratio of 61%, and the progress
we have made in setting up motorcycle and taxi for a sustainable, profitable,
future.
Looking forward
Whilst the previous section is perhaps a little downbeat, that is not
at all how we feel as a business as we look ahead to 2023.
We anticipate that 2022 loss ratios across the market will be seen,
in retrospect, as a speedbump rather than the start of a trend.
At the end of 2022, we were writing new business across the portfolio
at around our target COR, with significantly improved expected loss
ratios for bike and taxi.
Our very early call on inflation and immediate pricing actions to correct
this, regardless of the effect on volumes, means we anticipate a relatively
rapid bounce back towards our target normal levels of profitability
through 2023 and into 2024, albeit that inflation will provide some
overhang in 2023.
Whilst some encouraging signs of market price increases started to
emerge towards the end of 2022, we expect that the market will still
need to implement further substantial increases to achieve underwriting
profitability, and while the timing is uncertain, we expect this will
provide attractive opportunities for organic growth. Indeed, this is
supported by our volumes in the most recent weeks of 2023, which have
been encouraging.
The irrational pricing decisions of some market participants means
our motor premium at the end of 2022 was a little less than planned,
which will clearly impact both 2023 earned premium and consequently
our expense ratio.
In 2022 we reviewed numerous new partnership opportunities, however
we always have a very high hurdle before we commit resources and are
especially wary of distraction in what is still a complicated market.
We will continue to review potentially attractive additional distribution
routes going forward, but our primary focus is on our current portfolios.
For our core motor product, we currently occupy less than 1% of the
market. We believe this position will provide additional medium-term
growth opportunities.
New developments
It is extremely pleasing that we are making great progress with the
deployment of two important new initiatives - insurer hosted pricing
and re-platforming our direct administration system. Both of these
are on schedule to be rolled out in Q3 this year, and are being implemented
entirely by our own teams without any consultancy support or spend.
Insurer hosted pricing has been a feature of the market for broker-based
insurers for several years, being introduced to speed up rate deployments
by avoiding 'software house' rate change processes. We have deliberately
waited until now to carry out this initiative - as we had no interest
in rapid price changes to manage volumes - and by waiting we have seen
costs and implementation challenges reduce significantly. Following
implementation, we will be able to begin the roll-out of more complex
rating models that have been developed by our pricing team.
Our existing direct administration platform has served us well for
many years, but lacks customer self-service functionality. Our ambition
following roll-out is to transition the vast majority of customer interactions
online, and invest the operational savings into pricing.
Market - Continuing uncertainty
There are still areas of ongoing uncertainty and opportunity.
Coming into early 2023 we have maintained a prudent view of claims
inflation, with a current forward-looking assumption of 8% to 10%.
For clarity, this is on top of our relatively high assumptions in previous
years, so others may experience higher cost inflation from a lower
assumed base. There are reasons to suspect some elements may soften
as the year develops, such as used car prices or parts availability,
but there is limited evidence of this so far. Conversely, care costs
may inflate further, and it feels unlikely that repair costs will reduce
dramatically.
We will maintain a cautious approach here - we were amongst the first
to spot adverse trends developing and will apply equal rigour to spotting
opportunities.
The recent Court of Appeal decision on mixed injury cases, and subsequent
ABI-facilitated decision to seek leave to appeal to the Supreme Court,
means there is a risk of an elongated period of uncertainty for the
total costs of small injury claims. We will maintain our conservative
view on the benefits of these reforms pending clarity.
We believe the 1 January 2023 motor reinsurance renewals (ours was
at 1 July 2022) resulted in average increases in the range of 15% to
20% across the broader market. We will monitor developments and reflect
any likely cost changes in reinsurance in our pricing.
People
Our people have shown considerable commitment during the recent challenging
years, for which we are extremely grateful, and we have sought to reciprocate.
We maintained full employment during the pandemic and have continued
to pay the annual Christmas and performance bonuses. Additionally,
we paid all staff an GBP800 cost of living allowance over the winter
period.
We continue to enjoy excellent engagement scores, and very low levels
of turnover.
During 2022 we have been actively recruiting in anticipation of future
growth opportunities, which has also created a need for several promotions.
Customers
During the recent periods we have remained focused on supporting customers
both through the COVID-19 challenges and the emerging cost of living
crisis. We have ensured our processes are appropriate for customers
who may find themselves in vulnerable circumstances.
In addition, we stepped in to offer cover to customers of MCE Insurance
following the previous underwriter being placed into administration
and policies cancelled.
Environmental, social and corporate governance ("ESG")
We have continued to make excellent progress in this important area.
Full details of our environmental and social reporting are contained
in the Sustainability and Responsibility report. We have enhanced our
corporate values, including a key value measure of 'Fair to the Planet'.
Alongside this we have taken several significant steps to improve our
impact on the environment, including a full refurbishment of our head
office. This investment will significantly enhance the working environment
for our people, and help us take further steps towards our net-zero
ambitions. We have also continued to support a number of charities.
Summary
While 2022 was a challenging year in terms of result, I am delighted
that we have maintained extremely firm foundations whilst delivering
growth and underwriting profit. We have demonstrated our strong solvency
position and proposed a special dividend - and have positioned ourselves
well for growth as many competitors seek to address their own performance.
I believe our 2022 performance will look creditable in market terms
and rebound quicker than many others.
We anticipate that market price changes, as well as our own development
initiatives. will support organic growth.
I very much hope to be able to report strong progress along these lines
next year.
GEOFF CARTER
Chief Executive Officer
13 March 2023
CHIEF FINANCIAL OFFICER'S REVIEW
High target margins allow headroom for unexpected events
HIGHLIGHTS
2022 2021
---------------------------------------- --------- ---------
Gross written premium GBP171.3m GBP169.3m
Net loss ratio 68.7% 51.1%
Expense ratio 27.3% 28.3%
Combined operating ratio 96.0% 79.4%
Adjusted profit after tax GBP10.1m GBP30.1m
Profit after tax GBP10.1m GBP30.1m
Solvency coverage ratio (pre-dividend) 161% 208%
Solvency coverage ratio (post-dividend) 154% 164%
Return on tangible equity 12.4% 29.2%
In my 2021 report, I highlighted the strong basis for growth that
had been set through prudent underwriting and cautious management throughout
the pandemic. This year, the same caution has allowed Sabre to generate
underwriting profit despite unprecedented economic challenges.
When the impact from the invasion of Ukraine fed through into rapid
inflation in the UK economy, it was clear that all insurers would face
a significant headwind in profitability. An insurance product by nature
reflects the insurer's best guess of the total cost of claims attaching
to that policy, which may not be fully realised for years after the
policy has expired. So, a rapid increase in costs will inevitably mean
that policies already sold will achieve less than planned profit margins,
and claims already recorded but not settled would cost more than expected,
leading to deterioration in prior-year reserves. This event occurred
after an already extended period of under-pricing in the motor insurance
market. Sabre was not immune to the effects of this, but was well-placed
to face into the challenge because:
* While the motor insurance market had been
systemically under-priced for several years, Sabre
had met increasing costs of claims with policy price
increases, meaning that the Group was on the 'front
foot' when further pressures emerged.
* Sabre's core margins were sufficient to absorb
deterioration and still generate an underwriting
profit.
* Sabre is an agile business with short feedback loops
and a sharp focus on motor insurance costs. As soon
as we identified the impact of rapidly increasing
inflation, pricing action was taken. The effects of
this pricing action show through the second half of
2022 and should support a strong recovery into 2023
and beyond.
Beyond the core motor book, we saw rapid growth in the motorcycle and
taxi lines during 2022, having entered into material partnership arrangements
in November 2021 and February 2022 respectively. Given the infancy
of these lines of business we did not expect a significant contribution
to profit in the first year, however we had planned to absorb this
through increased volumes in the core motor book. Such increased volume
did not materialise in 2022, a direct result of Sabre's decisive pricing
action set against the wider industry's slow response to inflation
- the Group again trading volume for resilience and long-term profitability.
The introduction of less profitable bike and taxi business set against
lower than expected volumes in motor therefore had a clear negative
contribution to the Group's net loss ratio.
The expense ratio has decreased year-on-year, to 27.3%, which has resulted
from an increased net earned premium and continued tight control of
costs.
The Group's profit before and after tax reflects the combined operating
ratio for the year of 96.0%. The year-on-year decrease in profit is
almost entirely attributable to the increase in net loss ratio.
The Board have announced a special dividend of 1.7p, bringing the total
distribution in respect of 2022 to 4.5p. This is reflective of the
Board's confidence in the strength of the Group's uncomplicated balance
sheet. Return on tangible equity was 12.4%, the reduction from the
prior-year a result of the Group's lower profit.
REVENUE
2022 2021
--------------------------------------------------------- ---------- ---------
Gross written premium GBP171.3m GBP169.3m
Gross earned premium GBP178.2m GBP165.9m
Net earned premium GBP153.2m GBP145.4m
Other technical income GBP1.8m GBP2.1m
Customer instalment income GBP3.3m GBP3.9m
Interest revenue calculated using the effective interest GBP1.4m GBP1.2m
method
Fair value (losses)/gains on debt securities through (GBP14.2m) (GBP5.6m)
OCI
The trend of reducing overall premium for the last few years has reversed,
with the Group increasing written premium year-on-year. Beyond the
headline figure, the motor line did not grow during 2022 as anticipated,
due to persistent market under-pricing in an extraordinary inflationary
environment. However, the motorcycle line generated significant additional
income of GBP23.1m (2021: GBP3.2m), while taxi contributed GBP13.3m
(2021: GBP1.5m) to the top line.
Other sources of income remained proportionate to the amount of business
written through the Direct channel, which had become proportionately
smaller during 2022 due to the introduction of the motorcycle and taxi
lines, both of which are sold exclusively through brokers.
Investment income, which reflects the effective interest across the
Group's 'buy and hold' bond portfolio, increased a little as reinvestments
were made at higher returns. We expect the yield to continue to increase
in the current environment as bonds gradually mature and are reinvested
at higher rates. We have included a breakdown of investments by maturity
on page 139.
While market value losses have been recorded across the bond portfolio,
we do not expect these losses to crystalise as the bonds are held to
maturity and will pull to their par value. The Group does not hold
any non-cash financial investments outside of this portfolio and so
is not exposed to movements in equity or property markets.
OPERATING EXPITURE
2022 2021
-------------------------- --------- ---------
Gross claims incurred GBP125.9m GBP105.0m
Net claims incurred GBP112.8m GBP81.0m
Current-year loss ratio 67.9% 56.0%
Prior-year loss ratio 0.8% (4.9%)
Financial year loss ratio 68.7% 51.1%
Net operating expenses GBP41.8m GBP41.2m
Expense ratio 27.3% 28.3%
Combined operating ratio 96.0% 79.4%
The year's underwriting result is best explained in terms of the current-year
loss and prior-year loss ratios, and the expense ratio, which together
make up the combined ratio, and split between motor, bike and taxi.
Given the infancy of the bike and taxi lines, their impact on prior-year
losses is negligible.
2022 2021
Motor Motorcycle Taxi All lines All lines
--------------------------------- ---------- ---------- ------- --------- ---------
Net earned premium GBP132.9m GBP15.1m GBP5.2m GBP153.2m GBP145.4m
Net claims incurred, excluding GBP81.7m GBP17.9m GBP5.6m GBP105.2m GBP74.2m
claims handling expenses
Current-year loss ratio 60.4% 118.0% 112.8% 67.9% 56.0%
Prior-year loss ratio 1.1% 0.4% (6.0%) 0.8% (4.9%)
Financial year loss ratio 61.5% 118.4% 106.8% 68.7% 51.1%
The underwriting result can be considered in the context of three key
numbers: the prior-year loss ratio, the current-year motor loss ratio
and the motorcycle and taxi loss ratios. Taking each in turn:
* The prior-year motor loss ratio, which is usually
negative and reflects the run-off of margins on
previously incurred but not settled claims, was
positive in 2022, which means that reserve
strengthening was in excess of any margin run-off.
This strengthening was required to reflect the
increase in expected costs due to the high-inflation
environment. This should not be required in future
periods (notwithstanding further rapid unexpected
inflation) as claims recorded since this adjustment
inherently reflect the new cost environment.
* The current-year motor loss ratio has increased by
c.4% against the same in 2021. This increase is a
result of inflation generating increased costs on
policies which were written prior to March 2022,
along with normal volatility in the current-year
result.
* In-year performance for motorcycle and taxi business
has been slightly disappointing, with significant
pricing action taken during the year, which we
anticipate to bring these loss ratios down materially
in 2023.
The Group's expense base has remained well under control, despite inflationary
pressures - although we expect these to feed through as contracts are
renewed over the next few years. Such increases are factored into our
current policy pricing. The reduction in expense ratio is largely due
to increasing net earned premium year-on-year
TAXATION
In 2022 the Group recorded a corporation tax expense of GBP2.6m (2021:
GBP7.1m), an effective tax rate of 20.7%, as compared to an effective
tax rate of 19.0% in 2021. The effective tax rate approximates to the
prevailing UK corporation tax rate. The Group has not entered into
any complex or unusual tax arrangements during the year.
EARNINGS PER SHARE
2022 2021
--------------------------- ----- ------
Basic earnings per share 4.06p 12.09p
Diluted earnings per share 4.03p 11.98p
Basic earnings per share for 2022 of 4.06p per share is proportionate
to profit after tax. Diluted earnings per share is similarly proportionate
to profit after tax, taking into account the potentially dilutive effect
of the Group's share schemes.
CASH AND INVESTMENTS
2022 2021
----------------------------- -------- --------
Government bonds GBP87.2m GBP86.2m
Government-backed securities GBP80.8m GBP83.9m
Corporate bonds GBP61.3m GBP64.6m
Cash and cash equivalents GBP18.5m GBP30.6m
The Group continues to hold a low-risk investment portfolio and cash
reserves sufficient to meet its future claims liabilities. This has
resulted in a stable yield across the portfolio. As most assets are
held to maturity, the yield achieved by the portfolio lags changes
in market yield, with funds generally being reinvested on maturity.
INSURANCE LIABILITIES
2022 2021
---------------------------- --------- ---------
Gross insurance liabilities GBP257.4m GBP232.5m
Reinsurance assets GBP106.3m GBP103.6m
Net insurance liabilities GBP151.1m GBP128.9m
The Group's net insurance liabilities continue to reflect the underlying
profitability and volume of business written. The slight relative increase
in gross insurance liabilities against 2021 was a result of additional
large claims being recorded against the continued relatively slow settlement
of personal injury claims. The level of net insurance liabilities held
remains broadly proportionate to the volume of business written, and
reflects inflationary increases in the cost of claims.
LEVERAGE
The Group continues to hold no external debt. All of the Group's capital
is considered 'Tier 1' under Solvency II. The Directors continue to
hold the view that this currently allows the greatest operational flexibility
for the Group.
DIVIDS AND SOLVENCY
The Directors have proposed a total final dividend of 1.7p per share
in respect of 2022. The total amount proposed to be distributed to
shareholders by way of dividends for 2022 is therefore 4.5p per share,
including the ordinary interim dividend of 2.8p per share already paid.
The total ordinary dividend due to be paid according to the Group's
policy is entirely covered by the interim dividend, therefore the entire
final dividend is considered 'special' according to the Group's policy.
Excluding the capital required to pay this dividend, the Group's SCR
coverage ratio at 31 December 2022 would be 154% This is consistent
with the Group's policy to pay an ordinary dividend of 70% of profit
after tax, and to consider passing excess capital to shareholders by
way of a special dividend.
ADAM WESTWOOD
Chief Financial Officer
13 March 2023
CONSOLIDATED PROFIT OR LOSS ACCOUNT
for the year ended 31 December 2022
2022 2021
----------------------------------------------------------
Notes GBP'k GBP'k
---------------------------------------------------------- ----- ---------- ----------
Gross written premium 19 171,257 169,322
Less: Reinsurance premium ceded (26,456) (21,233)
---------------------------------------------------------- ----- ---------- ----------
Net written premium 144,801 148,089
---------------------------------------------------------- ----- ---------- ----------
Less: Change in unearned premium reserve
Gross amount 3.1.1 6,918 (3,426)
Reinsurers' share 3.1.1 1,499 779
---------------------------------------------------------- ----- ---------- ----------
Net earned premium 153,218 145,442
---------------------------------------------------------- ----- ---------- ----------
Interest income on financial assets using effective
interest rate method 4.8 1,374 1,210
Net fair value gains/(losses) on derecognition
of financial assets measured at fair value through
OCI 22 (16)
Instalment income 3,300 3,924
Other operating income 7 1,784 2,098
---------------------------------------------------------- ----- ---------- ----------
Total income 159,698 152,658
---------------------------------------------------------- ----- ---------- ----------
Insurance claims 3.4 (125,893) (104,984)
Insurance claims recoverable from reinsurers 3.4 13,094 23,969
---------------------------------------------------------- ----- ---------- ----------
Net insurance claims (112,799) (81,015)
---------------------------------------------------------- ----- ---------- ----------
Finance costs 5.2 (5) (16)
Commission expenses (12,942) (12,942)
Operating expenses 8 (21,202) (21,486)
---------------------------------------------------------- ----- ---------- ----------
Total expenses (34,149) (34,444)
---------------------------------------------------------- ----- ---------- ----------
Profit before tax 12,750 37,199
---------------------------------------------------------- ----- ---------- ----------
Tax charge 10 (2,643) (7,059)
---------------------------------------------------------- ----- ---------- ----------
Profit for the year attributable to ordinary shareholders 10,107 30,140
---------------------------------------------------------- ----- ---------- ----------
Basic earnings per share (pence per share) 20 4.06 12.09
Diluted earnings per share (pence per share) 20 4.03 11.98
---------------------------------------------------------- ----- ---------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Notes GBP'k GBP'k
--------------------------------------------------- ----- --------- --------
Profit for the year attributable to ordinary
shareholders 10,107 30,140
Items that are or may be reclassified subsequently
to profit or loss
Fair value losses on debt securities 4.9 (14,207) (5,658)
Realised (gains)/losses transferred to profit
or loss account (22) 16
Tax credit 3,563 1,069
--------------------------------------------------- ----- --------- --------
Total other comprehensive loss for the year (10,666) (4,573)
--------------------------------------------------- ----- --------- --------
Total comprehensive (loss)/income for the year
attributable to ordinary shareholders (559) 25,567
--------------------------------------------------- ----- --------- --------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
2022 2021
Notes GBP'k GBP'k
--------------------------------------------- ----- --------- --------
Assets
Goodwill 14 156,279 156,279
Property, plant and equipment 9.1 3,996 4,066
Right-of-use asset 9.2 - 187
Reinsurance assets 3.1 116,526 112,312
Deferred tax assets 11 4,384 820
Deferred acquisition costs 3.1.2 13,354 13,791
Insurance receivables 3.2 31,427 38,003
Loans and other receivables 4.4 7 74
Current tax assets 1,255 -
Prepayments, accrued income and other assets 13 1,278 821
Financial investments 4.1 229,158 234,667
Cash and cash equivalents 4.5 18,502 30,611
--------------------------------------------- ----- --------- --------
Total assets 576,166 591,631
--------------------------------------------- ----- --------- --------
Equity
Issued share capital 15 250 250
Own shares (2,810) (2,257)
Merger reserve 48,525 48,525
FVOCI reserve (13,029) (2,363)
Revaluation reserve 831 831
Share-based payments reserve 2,407 1,841
Retained earnings 186,322 205,900
--------------------------------------------- ----- --------- --------
Total equity 222,496 252,727
--------------------------------------------- ----- --------- --------
Liabilities
Outstanding claims 3.1 257,443 232,516
Unearned premium reserve 3.1 83,858 90,776
Lease liability 5.1 - 193
Insurance payables 3.3 5,981 7,115
Trade and other payables 5.3 5,005 5,831
Current tax liabilities - 580
Accruals 1,383 1,893
--------------------------------------------- ----- --------- --------
Total liabilities 353,670 338,904
--------------------------------------------- ----- --------- --------
Total equity and liabilities 576,166 591,631
--------------------------------------------- ----- --------- --------
The financial statements were approved by the Board of Directors and
authorised for issue on 13 March 2023.
Signed on behalf of the Board of Directors by:
ADAM WESTWOOD
Chief Financial Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Notes GBP'k GBP'k
---------------------------------------------------------- ----- --------- ---------
ORDINARY SHAREHOLDERS' EQUITY - at 1 January 15 250 250
---------------------------------------------------------- ----- --------- ---------
At 31 December 250 250
---------------------------------------------------------- ----- --------- ---------
OWN SHARES - at 1 January 16 (2,257) (1,494)
Net movement in own shares (553) (763)
---------------------------------------------------------- ----- --------- ---------
At 31 December (2,810) (2,257)
---------------------------------------------------------- ----- --------- ---------
MERGER RESERVE - at 1 January 17 48,525 48,525
---------------------------------------------------------- ----- --------- ---------
At 31 December 48,525 48,525
---------------------------------------------------------- ----- --------- ---------
FVOCI RESERVE - at 1 January 17 (2,363) 2,210
Fair value losses on debt securities (14,207) (5,658)
Realised (gains)/losses transferred to profit
or loss account (22) 16
Tax credit 3,563 1,069
---------------------------------------------------------- ----- --------- ---------
At 31 December (13,029) (2,363)
---------------------------------------------------------- ----- --------- ---------
REVALUATION RESERVE - at 1 January 17 831 831
At 31 December 831 831
---------------------------------------------------------- ----- --------- ---------
SHARE-BASED PAYMENT RESERVE - at 1 January 17 1,841 1,817
Settlement of share-based payments (1,037) (1,051)
Charge in respect of share-based payments 1,603 1,075
---------------------------------------------------------- ----- --------- ---------
At 31 December 2,407 1,841
---------------------------------------------------------- ----- --------- ---------
RETAINED EARNINGS - at 1 January 205,900 214,261
Share-based payments 447 (115)
Profit for the year attributable to ordinary shareholders 10,107 30,140
Ordinary dividends paid (30,132) (38,386)
---------------------------------------------------------- ----- --------- ---------
At 31 December 186,322 205,900
---------------------------------------------------------- ----- --------- ---------
Total equity at 31 December 222,496 252,727
---------------------------------------------------------- ----- --------- ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Notes GBP'k GBP'k
---------------------------------------------------- ----- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax for the year 12,750 37,199
Adjustments for:
Depreciation of property, plant and equipment 9.1 108 136
Depreciation of right-of-use assets 9.2 187 249
Share-based payment - equity-settled schemes 16 1,603 1,075
Investment return, including realised net fair
value gains and losses on financial assets (1,590) (1,507)
Interest on lease liability 9.2 5 16
Expected credit loss 4.6 (34) 16
Operating cash flows before movements in working
capital 13,029 37,184
Movements in working capital:
Change in reinsurance assets (4,214) (12,391)
Change in deferred acquisition costs 437 1,000
Change in insurance receivables 6,576 (4,027)
Change in loans and other receivables 67 10
Change in prepayments, accrued income and other
assets (457) 47
Change in insurance liabilities 24,927 5,970
Change in unearned premium reserve (6,918) 3,426
Change in insurance creditors (1,134) 869
Change in trade and other payables (826) 301
Change in accruals (510) (552)
---------------------------------------------------- ----- --------- ---------
Cash generated from operating activities before
investment of insurance assets 30,977 31,837
Taxes paid (4,479) (5,988)
---------------------------------------------------- ----- --------- ---------
Net cash generated from operating activities
before investment of insurance assets 26,498 25,849
Interest and investment income received 3,383 4,273
Proceeds from the sale and maturity of invested
assets 37,734 68,178
Purchases of invested assets (48,214) (64,987)
---------------------------------------------------- ----- --------- ---------
Net cash generated from operating activities 19,401 33,313
---------------------------------------------------- ----- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment 9.1 (38) (28)
---------------------------------------------------- ----- --------- ---------
Net cash used by investing activities (38) (28)
---------------------------------------------------- ----- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of principal portion of lease liabilities 9.2 (198) (264)
Net cash used in acquiring and disposing of own
shares (1,142) (1,928)
Dividends paid 12 (30,132) (38,386)
---------------------------------------------------- ----- --------- ---------
Net cash used by financing activities (31,472) (40,578)
---------------------------------------------------- ----- --------- ---------
Net decrease in cash and cash equivalents (12,109) (7,293)
---------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at the beginning of
the year 30,611 37,904
---------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at the end of the year 4.5 18,502 30,611
---------------------------------------------------- ----- --------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
Corporate information
Sabre Insurance Group plc is a company incorporated in the United Kingdom
and registered in England and Wales. The address of the registered
office is Sabre House, 150 South Street, Dorking, Surrey, RH4 2YY,
England. The nature of the Group's operations is the writing of general
insurance for motor vehicles and motorcycles. The Company's principal
activity is that of a holding company.
1. Accounting policies
The principal accounting policies applied in the preparation of these
consolidated and company financial statements are included in the specific
notes to which they relate. These policies have been consistently applied
to all the years presented, unless otherwise indicated.
1.1. Basis of preparation
The financial statements of the Group have been prepared in accordance
with UK-adopted international accounting standards, comprising International
Accounting Standards ("IAS") and International Financial Reporting
Standards ("IFRS"), and the requirements of the Companies Act 2006.
Endorsement of accounting standards is granted by the UK Endorsement
Board ("UKEB").
The financial statements are prepared in accordance with the going
concern principle using the historical cost basis, except for those
financial assets that have been measured at fair value. The preparation
of the financial statements necessitates the use of estimates, assumptions
and judgements that affect the reported amounts in the statement of
financial position and the statement of profit or loss and other comprehensive
income. Where appropriate, details of estimates are presented in the
accompanying notes to the consolidated financial statements.
As the full impact of climate change is currently unknown, it is not
possible to consider all possible future outcomes when determining
the value of assets, liabilities and the timing of future cash flows.
The Group's view is that any reasonable impact of climate change would
not have a material impact on the valuation of assets and liabilities
at the year-end date.
The financial statements values are presented in pounds sterling (GBP)
rounded to the nearest thousand (GBP'k), unless otherwise indicated.
The Group presents its statement of financial position broadly in order
of liquidity. An analysis regarding recovery or settlement within 12
months after the reporting date (current) and more than 12 months after
the reporting date (non-current) is presented in the respective notes.
Financial assets and financial liabilities are offset and the net amount
reported in the statement of financial position only when there is
a legally enforceable right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the assets
and settle the liability simultaneously.
As permitted by IFRS 4 "Insurance Contracts", the Group continues to
apply the existing accounting policies that were applied prior to the
adoption of IFRS, with certain modifications allowed by the standard
effective subsequent to adoption for its insurance contracts.
1.2. Going concern
The consolidated annual financial statements have been prepared on
a going concern basis. The Directors have a reasonable expectation
that the Group has adequate resources to continue in operation for
at least the next 12 months to 31 March 2024 and that therefore it
is appropriate to adopt a going concern basis for the preparation of
the financial statements.
In making their assessment, the Directors took into account the potential
impact of the principal risks that could prevent the Group from achieving
its strategic objectives. The assessment was based on the Group's ORSA,
which brings together management's view of current and emerging risks,
with scenario-based analysis and reverse stress testing to form a conclusion
as to the financial stability of the Group. Consideration was also
given to what the Group considers its principal risks which are set
out in the Principal Risks and Uncertainties section on pages 19 to
28 of the Strategic Report of the Annual Report and Accounts. The assessment
also included consideration of any scenarios which might cause the
Group to breach its solvency requirements which are not otherwise covered
in the risk-based scenario testing.
We have assessed the short, medium and long-term risks associated with
climate change. Given the geographical diversity of the Group's policyholders
within the UK and the Group's reinsurance programme, it is highly unlikely
that a climate event will materially impact Sabre's ability to continue
trading. More likely is that the costs associated with the transition
to a low-carbon economy will impact the Group's indemnity spend, as
electronic vehicles are currently relatively expensive to fix. We expect
that this is somewhat, or perhaps completely, offset by advances in
technology reducing the frequency of claims, in particular bodily injury
claims which are generally far more expensive than damage to vehicles.
These changes in the costs of claims are gradual and as such reflected
in our claims experience and fed into the pricing of our policies.
However, if the propensity to travel by car decreases overall this
could impact the Group's income in the long term, but this is not expected
to be material within the viability period of three years. We do not
consider it plausible that such a decrease would be as severe as the
scenarios that we have modelled as part of our viability testing exercise.
1.3. New and amended standards and interpretations adopted by the
Group
Amendments to IFRS
The following amended IFRS standards became effective for the year
ended 31 December 2022:
* Annual Improvements to IFRS 2018-2020
* Amendment to IFRS 1 First-time Adoption of
International Financial Reporting Standards -
Subsidiary as a First-time Adopter
* Amendment to IFRS 9 Financial Instruments - Fees in
the '10 per cent' Test for Derecognition of Financial
Liabilities
* Amendment to IFRS 16 Leases - Lease Incentives
* Amendment to IAS 41 Agriculture - Taxation in Fair
Value Measurements
* Onerous Contracts - Cost of Fulfilling a Contract
(Amendments to IAS 37)
* Property, Plant and Equipment: Proceeds before
Intended Use (Amendments to IAS 16)
* Reference to the Conceptual Framework (Amendments to
IFRS 3)
None of the amendments have had a material impact to the Group.
1.4. New and amended standards and interpretations not yet effective
in 2022
A number of new standards and interpretations adopted by the UK which
are not mandatorily effective, as well as standards interpretations
issued by the IASB but not yet adopted by the UK, have not been applied
in preparing these financial statements. The Group does not plan to
adopt these standards early; instead it expects to apply them from
their effective dates as determined by their dates of UK endorsement.
The Group is still reviewing the upcoming standards to determine their
impact:
* IFRS 17: "Insurance Contracts" (IASB effective date:
1 January 2023)
* IFRS 10 and IAS 28: Amendment: "Sale or Contribution
of Assets between an Investor and its Associate or
Joint Venture" (IASB effective date: optional)
IFRS 17 - "Insurance Contracts"
The effective date for IFRS 17 is 1 January 2023. IFRS 17 will change
the way insurance contracts are accounted for and reported. Revenue
will no longer be equal to premiums written but instead reflect a change
in the contract liability on which consideration is expected. On initial
assessment the major change will be on the presentation of the statement
of profit or loss, with premium and claims figures being replaced with
insurance contract revenue, insurance service expense and insurance
finance income and expense. IFRS 17 also has additional disclosure
requirements.
IFRS 17 prescribes a comprehensive model, the general model, which
requires entities to measure an insurance contract at initial recognition
as the total of the fulfilment cash flows (comprising the estimated
future cash flows, an adjustment to reflect the time value of money
and an explicit risk adjustment for non-financial risk) and the contractual
service margin. The fulfilment cash flows are remeasured on a current
basis each reporting period. The unearned profit (contractual service
margin) is recognised over the coverage period.
IFRS 17 also provides a simplification to the general model, the premium
allocation approach ("PAA"). This simplified approach is applicable
for certain types of contracts, including those with a coverage period
of one year or less. The liability for remaining coverage is similar
to the current premium reserve profile recognised over time. The principles
of the general model remain applicable to the liability for incurred
claims.
All contracts issued by the Group are for one year or less and the
Group expects to apply the PAA model to all insurance contracts written.
The Group is continuously assessing the impact of the design decision
and relevant accounting policy choices. The Group's assessment of the
requirements of the standard against current data, processes and valuation
models does not indicate a material impact on the Group's financial
results.
The next steps for the Group are to incorporate changes required in
the internal management and financial statement reporting process to
report its results under IFRS 17 and finalise the accounting policies
and methodologies for the transitional approach that will be applied.
Management does not expect the transition to have a significant impact
on the Group's future profit or the net asset value.
Transitional Accounting
We intend to apply IFRS 17 fully retrospectively. As we intend to operate
all contracts under the premium allocation approach, we expect the
impact at transition to be limited.
DAC
Under IFRS 4, the Company deferred some of the cash flows from operational
expenses which were identified as acquisition costs. Under IFRS 17
the Company will assess those cash flows arising from the cost of selling,
underwriting and starting a group of insurance contacts (issued or
expected to be issued) that are directly attributable to the portfolio
of insurance contacts to which the group belongs. We expect the total
annual expenditure deferred under IFRS 17 to be lower than that under
IFRS 4. As a result, we expect the deferred acquisition cost asset
to be lower under IFRS 17, which will reduce net assets on transition
date. We expect this to be partially off-set by discounting of insurance
liabilities. We do not expect a significant impact on the earnings
profile of the Company, given the decrease in total deferred costs
will be offset by a decrease in the run-off of opening deferrals.
Reserving for outstanding claims liabilities
While there are some technical differences in the approach to reserving
between IFRS 4 and IFRS 17, we do not expect that there will be a material
difference in practice between the reserves held under the two bases,
with the exception of discounting and the application of a risk adjustment,
which are discussed below.
Discounting
Under IFRS 4 the measurement of the liability for outstanding claims
for non-life business is not discounted. Under IFRS 17, the Company
will recognise income and expenses at recognition and as a result of
changes in the carrying amount of the liability for incurred claims
due to:
* Insurance service expenses - for the increase in the
liability because of claims and expenses incurred in
the period, excluding any investment components
* Insurance service expenses - for any subsequent
changes in fulfilment cash flows relating to incurred
claims and incurred expenses
* Insurance finance income or expenses - for the effect
of the time value of money and the effect of
financial risk
Fulfilment cash flows are adjusted to reflect the time value of money
and financial risks related to those cash flows. The adjustment is
made by discounting estimated future cash flows. The discount rate
applied to fulfilment cash flows will be calculated at the reporting
date. The Company will use the IFRS 17 'top-down' approach to determine
the appropriate discount rates for insurance contracts based on a yield
curve that reflects the current market rates of return implicit in
a fair value measurement of a reference portfolio of assets.
Risk adjustment
Under IFRS 4 the Company applied a risk margin to its liabilities for
outstanding claims. Under IFRS 17 the Company will replace the risk
margin with a risk adjustment for non-financial risk. This risk adjustment
represents the compensation that the Company requires for bearing the
uncertainty about the amount and timing of cash flows that arise from
non-financial risk. Non-financial risk is risk arising from insurance
contracts other than financial risk, which is included in the estimates
of future cash flows or the discount rate used to adjust the cash flows.
The risks covered by the risk adjustment for non-financial risk are
insurance risk and other non-financial risks such as lapse risk and
expense risk.
The risk adjustment for non-financial risk for insurance contracts
measures the compensation that the Company would require to make it
indifferent between:
* Fulfilling a liability that has a range of possible
outcomes arising from non-financial risk; and
* Fulfilling a liability that will generate fixed cash
flows with the same expected present value as the
insurance contracts
The impact of replacing the IFRS 4 risk margin with the IFRS 17 risk
adjustment is expected to have an insignificant impact on the net assets
of the Company.
Reinsurance
The Company does not run a complex reinsurance programme and one holds
a single group of 'loss occurring' reinsurance contracts, having a
coverage period of less than one year. Under IFRS 17 the company will
use the premium allocation approach, adapted to reflect the features
of reinsurance contracts held that differ from insurance contracts
issued.
Under IFRS 17 a group of reinsurance contracts held is recognised from
the earliest of the following:
* The beginning of the coverage period of the group of
reinsurance contracts held; and
* The date on which the Company recognises an onerous
group of underlying insurance contracts if the
Company entered into the related reinsurance contract
held in the group of reinsurance contracts held at or
before that date.
The Company does not expect any of the underlying contracts to be onerous
and will recognise the group of excess-of-loss reinsurance contracts
at the beginning of the coverage period, in-line with current treatment
under IFRS 4 and no impact on the net asset value of the Company on
transition to IFRS 17.
Defined IFRS 17 terms:
Contractual service margin - A component of the carrying amount of
the asset or liability for a group of insurance contracts representing
the unearned profit the entity will recognise as it provides insurance
contract service under the insurance contracts in the group.
Coverage period - The period during which the entity provides insurance
contract services. The period includes the insurance contract services
that relate to all premiums within the boundary of the insurance contract.
Fulfilment cash flows - An explicit, unbiased and probability-weighted
estimate (ie expected value) of the present value of the future cash
outflows minus the present value of the future cash inflows that will
arise as the entity fulfils insurance contacts, including a risk adjustment
for non-financial risk.
Liability for incurred claims ("LIC") - An entity's obligation to:
a) Investigate and pay valid claims for insured events that have already
occurred, including events that have occurred but for which claims
have not been reported, and other incurred insurance expenses; and
b) Pay amounts that are not included in (a) and that relate to:
i. insurance contract services that have already been provided; or
ii. any investment components or other amounts that are not related
to the provision of insurance contract services and that are not in
the liability for remaining coverage
Liability for remaining coverage ("LRC") - An entity's obligation
to:
a) investigate and pay valid claims under existing insurance contracts
for insured events that have not yet occurred (ie the obligation that
relates to the unexpired portion of the insurance coverage); and
b) pay amounts under existing insurance contracts that are not included
in (a) and that relate to:
i. insurance contract services not yet provided (ie the obligations
that relate to future provision of insurance contract services); or
ii. any investment components or other amounts that are not related
to the provision of insurance contract services and that have not been
transferred to the liability for incurred claims
2. Risk and capital management
2.1. Risk management framework
The Sabre Insurance Group plc Board is responsible for prudent oversight
of the Group's business and financial operations, ensuring that they
are conducted in accordance with sound business principles and with
applicable laws and regulations, and ensure fair customer outcomes.
This includes responsibility to articulate and monitor adherence to
the Board's appetite for exposure to all risk types. The Board also
ensures that measures are in place to provide independent and objective
assurance on the effective identification and management of risk and
on the effectiveness of the internal controls in place to mitigate
those risks.
The Board has set a robust risk management strategy and framework as
an integral element in its pursuit of business objectives and in the
fulfilment of its obligations to shareholders, regulators, customers
and employees.
The Group's risk management framework is proportionate to the risks
that we face. Our assessment of risk is not static; we continually
reassess the risk environment in which the Group operates and ensure
that we maintain appropriate mitigation in order to remain within our
risk appetite. The Group's Management Risk and Compliance Forum gives
Management the regular opportunity to review and discuss the risks
which the Group faces, including but not limited to any breaches, issues
or emerging risks. The Forum also works to ensure that adequate mitigation
for the risks the Group is exposed to are in place.
2.2. Underwriting risk
The principal risk the Group faces under insurance contracts is that
the actual claims and benefit payments, or the timing thereof, differ
from expectations. This is influenced by the frequency of claims, severity
of claims, actual benefits paid and subsequent development of long-term
claims. Therefore, the objective of the Group is to ensure that sufficient
reserves are available to cover these liabilities.
The Group issues only motor insurance contracts, which usually cover
a 12-month duration. For these contracts, the most significant risks
arise from under-estimation of the expected costs attached to a policy
or a claim, for example through unexpected inflation of costs or single
catastrophic events..
Refer to Note 3.5 for detail on these risks and the way the Group manages
them. Note 3.5 also includes the considerations of climate change.
Further discussion on climate change can be found in the Principal
Risks and Uncertainties section on pages 19 to 28 of the Strategic
Report and the Responsibility and Sustainability section on pages 38
to 49 of the Annual Report and Accounts.
2.3. Credit risk
Credit risk reflects the financial impact of the default of one or
more of the Group's counterparties. The Group is exposed to financial
risks caused by a loss in the value of financial assets due to counterparties
failing to meet all or part of their obligations. Key areas where the
Group is exposed to credit default risk are:
* Failure of an asset counterparty to meet their
financial obligations (Note 4.6)
* Reinsurer default on presentation of a large claim or
dispute of cover (Note 3.6)
* Reinsurers default on their share of the Group's
insurance liabilities (Note 3.6)
* Default on amounts due from insurance contract
intermediaries or policyholders (Note 3.6)
The following policies and procedures are in place to mitigate the
Group's exposure to credit risk:
* A Group credit risk policy which sets out the
assessment and determination of what constitutes
credit risk for the Group. Compliance with the policy
is monitored and exposures and breaches are reported
to the Group's Risk Committee
* Reinsurance is placed with counterparties that have a
good credit rating and concentration of risk is
avoided by following policy guidelines in respect of
counterparties' limits that are set each year by the
Board of Directors and are subject to regular
reviews. At each reporting date, management performs
an assessment of creditworthiness of reinsurers and
updates the reinsurance purchase strategy,
ascertaining suitable allowance for impairment
* The Group sets the maximum amounts and limits that
may be advanced to corporate counterparties by
reference to their long-term credit ratings
* The credit risk in respect of customer balances
incurred on non-payment of premiums or contributions
will only persist during the grace period specified
in the policy document or trust deed until expiry,
when the policy is either paid up or terminated.
Commission paid to intermediaries is netted off
against amounts receivable from them to reduce the
risk of doubtful debts
Refer to Notes 3.6 and 4.6 as indicated above for further information
on credit risk.
2.4. Liquidity risk
Liquidity risk is the potential that obligations cannot be met as they
fall due as a consequence of having a timing mismatch or inability
to raise sufficient liquid assets without suffering a substantial loss
on realisation. The Group manages its liquidity risk through both ensuring
that it holds sufficient cash and cash equivalent assets to meet all
short-term liabilities, and matching the maturity profile of its financial
investments to the expected cash outflows.
Refer to Note 6 for further information on liquidity risk.
2.5. Investment concentration risk
Excessive exposure to particular industry sectors or groups can give
rise to concentration risk. The Group has no significant investment
in any particular industrial sector and therefore is unlikely to suffer
significant losses through its investment portfolio as a result of
over-exposure to sectors engaged in similar activities or which have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic, political
or other conditions.
A significant part of the Group's investment portfolio consists primarily
of UK government bonds and government-backed bonds, therefore the risk
of government default does exist, however the likelihood is extremely
remote. The remainder of the portfolio consists of investment grade
corporate bonds. The Group continues to monitor the strength and security
of all bonds.
The Group's portfolio has a significant concentration of UK debt securities
and therefore is exposed to movements in UK interest rates.
Refer to Note 4.2 for further information on investment concentration
risk.
2.6. Operational risk
Operational risk is the risk of loss arising from system failure, human
error, fraud or external events. When controls fail to perform, operational
risks can cause damage to reputation, have legal or regulatory implications
or can lead to financial loss. The Group cannot expect to eliminate
all operational risks, but by operating a rigorous control framework
and by monitoring and responding to potential risks, the Group is able
to manage the risks. Controls include effective segregation of duties,
access controls, authorisation and reconciliation procedures, staff
education and assessment processes, including the use of internal audit.
Business risks such as changes in environment, technology and the industry
are monitored through the Group's strategic planning and budgeting
process.
2.7. Capital management
The Board of Directors has ultimate responsibility for ensuring that
the Group has sufficient funds to meet its liabilities as they fall
due. The Group carries out detailed modelling of its assets and liabilities
and the key risks to which these are exposed. This modelling includes
the Group's own assessment of its capital requirements for solvency
purposes.
The Group has continued to manage its solvency with reference to the
Solvency Capital Requirement ("SCR") calculated using the Standard
Formula. The Group has developed sufficient processes to ensure that
the capital requirements under Solvency II are not breached, including
the maintenance of capital at a level higher than that required through
the Standard Formula. The Group considers its capital position to be
its net assets on a Solvency II basis and monitors this in the context
of the Solvency II SCR.
The Group aims to retain sufficient capital such that in all reasonably
foreseeable scenarios it will hold regulatory capital in excess of
its SCR. The Directors currently consider that this is achieved through
maintaining a regulatory capital surplus of 140% to 160%. As at 31
December 2022, the Group holds significant excess Solvency II capital.
The Group's IFRS capital comprised:
As at 31 December
2022 2021
GBP'k GBP'k
--------------------- --------- --------
Equity
Issued share capital 250 250
Own shares (2,810) (2,257)
Merger reserve 48,525 48,525
FVOCI reserve (13,029) (2,363)
Revaluation reserve 831 831
Share-based payments 2,407 1,841
Retained earnings 186,322 205,900
--------------------- --------- --------
Total 222,496 252,727
--------------------- --------- --------
The Solvency II position of the Group both before and after final dividend
is given below:
As at 31 December
2022 2021
Pre-dividend GBP'k GBP'k
------------------------------------------------- ------------ --------------
Total tier 1 capital 91,191 110,114
SCR 56,516 52,955
Excess capital 34,675 57,159
Solvency coverage ratio (%) 161% 208%
------------------------------------------------- ------------ --------------
As at 31 December
2022 2021
Post-dividend GBP'k GBP'k
---------------------------- --------- --------
Total tier 1 capital 86,941 86,864
SCR 56,516 52,955
Excess capital 30,425 33,909
Solvency coverage ratio (%) 154% 164%
---------------------------- --------- --------
The following table sets out a reconciliation between IFRS net assets
and Solvency II net assets before final dividend:
As at 31 December
2022 2021
GBP'k GBP'k
------------------------------------------------ ---------------- ---------------
IFRS net assets 222,496 252,727
Less: Goodwill (156,279) (156,279)
------------------------------------------------ ---------------- ---------------
Adjusted IFRS net assets 66,217 96,448
Unearned premium reserve 83,858 90,776
Deferred acquisition costs (13,354) (13,791)
Solvency II premium provision (53,581) (64,011)
IFRS risk margin(1) 10,764 11,229
Discount claims provision 11,663 2,209
Change in life reserves 1,047 (1,903)
Solvency II risk margin (7,752) (7,638)
Change in deferred tax (7,671) (3,205)
------------------------------------------------ ---------------- ---------------
Solvency II net assets 91,191 110,114
------------------------------------------------ ---------------- ---------------
(1) In line with industry practice, the IFRS risk margin is an explicit
additional reserve in excess of the actuarial best estimate which is
designed to create a margin held in reserves to allow for adverse development
in open claims.
The adjustments set out in the above table have been made for the following
reasons:
* Adjusted IFRS net assets : Equals Group net assets on
an IFRS basis, less Goodwill.
* Removal of unearned premium reserve and deferred
acquisition costs : The unearned premium reserve and
deferred acquisition costs must be removed as they
are not deferred under Solvency II.
* Solvency II premium provision : A premium reserve
reflecting the future cash flows in respect of
insurance contracts is calculated and this must be
discounted under Solvency II.
* IFRS risk margin : Solvency II reserves must reflect
a true "best estimate" basis. Therefore, the IFRS
risk margin is removed from the claims reserve.
* Discount claims provision : The provision held
against future claims expenditure for claims incurred
is discounted in the same way as the Solvency II
premium provision.
* Solvency II risk margin : The Solvency II risk margin
represents the premium that would be required were
the Group to transfer its technical provisions to a
third party, and essentially reflects the SCR
required to cover run-off of claims on existing
business. This amount is calculated by the Group
through modelling the discounted SCR on a projected
future balance sheet for each year of claims run-off.
* Change in deferred tax : As the move to a Solvency II
basis balance sheet increases the net asset position
of the Group, a deferred tax liability is generated
to offset the increase.
Sabre Insurance Group plc's SCR, expressed on a risk module basis,
is set out in the following table:
as at 31 December 2022 as at 31 December 2021
---------------------------- ----------------------------
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
---------------------- -------- -------- -------- -------- -------- --------
Interest rate risk 5,548 3,359
Equity risk - -
Property risk 956 956
Spread risk 3,264 4,965
Currency risk 1,112 1,082
Concentration risk - -
Correlation impact (3,660) (3,449)
---------------------- -------- -------- -------- -------- -------- --------
Market risk 7,220 6,913
---------------------- -------- -------- -------- -------- -------- --------
Counterparty risk 2,333 3,403
Underwriting risk 52,421 51,985
Correlation impact (6,129) (6,422)
---------------------- -------- -------- -------- -------- -------- --------
Basic SCR 55,845 55,879
---------------------- -------- -------- -------- -------- -------- --------
Operating risk 6,372 6,515
Loss absorbing effect
of deferred taxes (5,701) (9,439)
---------------------- -------- -------- -------- -------- -------- --------
Total SCR 56,516 52,955
---------------------- -------- -------- -------- -------- -------- --------
The total SCR is primarily driven by the underwriting risk element,
which is a function of the Group's net earned premium (or projected
net earned premium) and the level of reserves held. Therefore, the
SCR is broadly driven by the size of the business.
The Group's capital management objectives are:
* to ensure that the Group will be able to continue as
going a concern
* to maximise the income and capital return to its
equity
The Board monitors and review the broad structure of the Group's capital
on an ongoing basis. This review includes consideration of the extent
to which revenue in excess of that which is required to be distributed
should be retained.
The Group's objectives, policies and processes for managing capital
have not changed during the year.
3. Insurance liabilities and reinsurance assets
ACCOUNTING POLICY
Claims incurred include all losses occurring through the year, whether
reported or not, related handling costs and any adjustments to claims
outstanding from previous years. Significant delays are experienced
in the notification and settlement of certain claims, particularly
in respect of liability claims, the ultimate cost of which cannot
be known with certainty at the balance sheet date. Reinsurance recoveries
(or amounts due from reinsurers) are accounted for in the same period
as the related claim.
A. Provision for claims outstanding
The provision for claims outstanding is based on information available
at the balance sheet date. Significant delays are experienced in
the notification and settlement of certain claims and accordingly
the ultimate cost of such claims cannot be known with certainty
at the balance sheet date. Subsequent information and events may
result in the ultimate liability being less than, or greater than,
the amount provided. Any differences between provisions and subsequent
settlements are dealt with in the profit or loss account. Claims
provisions are not discounted, with the exception of Periodic Payment
Orders ("PPOs"), which are discussed more fully in the Critical
accounting estimates and judgements section in Note 3.
The provision for claims outstanding includes the following:
* Claims Incurred and Reported (individual case
estimates)
* Claims Incurred but Not Reported ("IBNR")/Claims
Incurred But Not Enough Reported ("IBNER")
* Claims Handling Provision
(i) Claims Incurred and Reported (individual case estimates)
When claims are initially reported, case estimates are set at fixed
levels based on previous average claims settlements. As soon as
sufficient information becomes available, the case estimate is amended
by a claim handler within the Claims Department to reflect the expected
ultimate settlement cost of the claim, including external claims
handling costs. The case estimate will be amended throughout the
life of a claim as further information emerges. Case estimates generally
do not allow for possible reductions in our liability due to contributory
negligence, favourable court judgments or settlements until these
are known to a high probability. Because of this, the outstanding
case reserve recorded is generally greater than the probability-weighted
likely settlement amount of the claim.
(ii) Claims Incurred But Not Reported ("IBNR")/Claims Incurred
But Not Enough Reported ("IBNER")
The Claims IBNR provision consists of two elements:
* IBNR - An amount in respect of claims incurred but
not yet recorded on the policy administration system
('pure' IBNR), which is typically a 'positive'
* IBNER - An adjustment to open case reserves, booked
at a portfolio level, which converts the open reserve
recorded on our underwriting system to a true 'best
estimate' basis. If the case reserves held are in
excess of a 'best estimate' basis, this will result
in a 'negative' IBNER. If the case reserves are below
a 'best estimate' basis, this will result in a
'positive' IBNER
The Group refers to these collectively as 'IBNR' and unless stated
otherwise, when referring to IBNR this always include both elements.
These reserves are calculated using standard actuarial modelling
techniques such as chain ladder and Bornhuetter-Ferguson methods.
The IBNR adjustment is set after considering the results of these
statistical methods based on, inter alia, historical claims development
trends, average claims costs and expected inflation rates.
(iii) Claims Handling Provision
A provision for claims handling costs is estimated based on the
number of outstanding claims at the balance sheet date and the estimated
average internal cost of settling claims.
B. Provision for unexpired risks
Provision is made for unexpired risks when, after taking account
of an element of attributable investment income, it is anticipated
that the unearned premiums will be insufficient to cover future
claims and expenses on existing contracts. The expected claims are
calculated having regard to events which have occurred prior to
the balance sheet date. Unexpired risk surpluses and deficits are
offset when business classes are managed together and a provision
is made if an aggregate deficit arises.
At each reporting date, a liability assessment is performed to ensure
the adequacy of the claims liabilities net of deferred acquisition
costs and unearned premium reserves. In performing this assessment,
current best estimates of future contractual cash flows and claims
handling expenses are used. Any deficiency is immediately charged
to the statement of profit or loss, initially by writing off deferred
acquisition costs and subsequently by establishing a provision for
losses arising from the liability assessment ("unexpired risk provision").
There is currently no unexpired risk provision.
C. Deferred acquisition costs
Deferred acquisition costs represent a proportion of commission
and other acquisition costs that relate to policies that are in
force at the year end. Deferred acquisition costs are amortised
over the period in which the related premiums are earned. Such costs
are identified as being directly attributable to the acquisition
of business, or are indirectly attributed to acquisition activity
through an allocation exercise.
D. Gross written premiums
Gross written premiums comprise all amounts during the financial
year in respect of contracts entered into regardless of the fact
that such amounts may relate in whole or in part to a later financial
year. All premiums are shown gross of commission payable to intermediaries
(where applicable) and are exclusive of taxes, duties and levies
thereon. Insurance premiums are adjusted by an unearned premium
reserve which represents the proportion of premiums written that
relate to periods of risk subsequent to the balance sheet date.
E. Unearned premium reserve ("UPR")
Unearned premiums are those proportions of the premiums written
in a year that relate to the periods of risk subsequent to the balance
sheet date. They are computed principally on a daily pro-rata basis.
==============================================================================
Risk management
Refer to Notes 3.5 and 3.6 for detail on risks relating to insurance
liabilities and reinsurance assets, and the management thereof.
========================================================================
Critical accounting estimates and judgements
Valuation of insurance contracts
The three key elements impacting the valuation of insurance contracts
are:
i. Claims reserve
For the valuation of insurance contracts, estimates are made both
for the expected ultimate cost of claims reported at the reporting
date, consisting of a reserve for claims incurred and reported,
and an estimate of the sufficiency of these reserves (through the
calculation of an Incurred But Not Enough Reported ("IBNER") estimate,
and for the expected ultimate cost of claims incurred, but not yet
reported ("IBNR"), at the reporting date). It can take a significant
period of time before the ultimate claims cost can be established
with certainty. The claims reserve consists of an actuarial best
estimate and an appropriate, explicit risk margin. The Board has
set the explicit risk margin at 8% of the net best estimate claims
reserve (2021: 10%). The risk margin has been set having considered
short-term volatility in claims experience and having assessed estimation
uncertainty within the reserving process. Since the last reporting
period, the Group has carried out additional mathematical modelling
on effective confidence intervals within the reserving process,
which, along with our assessment of the impact of inflation, has
contributed to the selection of risk margin.
ii. Outstanding claims
The ultimate cost of outstanding claims is estimated by using a
range of standard actuarial claims projection techniques, such as
Chain Ladder and Bornhuetter-Ferguson methods. The main assumption
underlying these techniques is that the Group's past claims development
experience can be used to project future claims development and
hence ultimate claims costs. As such, these methods extrapolate
the development of paid and incurred losses, average costs per claim
and claim numbers based on the observed development of earlier years
and expected loss ratios. Historical claims development is analysed
by accident years and types of claim. In most cases, no explicit
assumptions are made regarding future rates of claims inflation
or loss ratios. Instead, the assumptions used are those implicit
in the historical claims development data on which the projections
are based. Additional qualitative judgement is used to assess the
extent to which past trends may not apply in the future, (e.g.,
to reflect one-off occurrences, changes in external or market factors
such as public attitudes to claiming, economic conditions, levels
of claims inflation, climate change, judicial decisions and legislation,
as well as internal factors such as portfolio mix, policy features
and claims handling procedures) in order to arrive at the estimated
ultimate cost of claims that present the likely outcome from the
range of possible outcomes, taking account of all the uncertainties
involved.
iii. Periodic Payment Orders ("PPO")
Liability claims may be settled through a PPO, established under
the Courts Act 2003, which allows a UK court to award damages for
future loss or any other damages in respect of personal injury.
The court may order that the damages either partly or fully take
the form of a PPO. To date, the Group has four PPOs within its reserve
for claims incurred and reported. Reinsurance is applied at the
claim level, and therefore as PPOs generally result in a liability
in excess of the Group's reinsurance retention, the net liability
on acquisition of a PPO is not significantly different to that arising
in a non-PPO situation. Management will continue to monitor the
level of PPO activity. Where Management expect the total probability-weighted
cash flows for actual and potential PPOs to generate a net outflow
following settlement of reinsurance recoveries, this is reflected
within gross outstanding claims liabilities and the related reinsurance
recoverable.
---------------------------------------------------------------------------------
The Group's insurance liabilities and reinsurance assets are sumarised
below:
2022 2021
Notes GBP'k GBP'k
--------------------------------------------------- ----- ---------- ----------
Outstanding claims 3.1 257,443 232,516
Unearned premium reserve 3.1.1 83,858 90,776
Deferred acquisition costs 3.1.2 (13,354) (13,791)
Reinsurance assets 3.1 (116,526) (112,312)
Receivables arising from insurance and reinsurance
contracts 3.2 (31,427) (38,003)
Payables arising from insurance and reinsurance
contracts 3.3 5,981 7,115
--------------------------------------------------- ----- ---------- ----------
Total 3.7 185,975 166,301
--------------------------------------------------- ----- ---------- ----------
A reconciliation between the opening and closing balances is provided
in Note 3.7.
3.1 Insurance liabilities and reinsurance assets
2022 2021
Notes GBP'k GBP'k
---------------------------------------------------------- ---------- ----------
GROSS
Claims incurred and reported 327,334 309,892
Claims incurred but not reported (74,115) (81,272)
Claims handling provision 4,224 3,896
----------------------------------------------------------- ---------- ----------
Outstanding claims liabilities 3.1.1 257,443 232,516
Unearned premium reserve 3.1.1 83,858 90,776
--------------------------------------------------- ------ ---------- ----------
Total insurance liabilities - Gross 341,301 323,292
----------------------------------------------------------- ---------- ----------
Expected to be settled within 12 months (excluding
UPR) 106,486 112,975
Expected to be settled after 12 months (excluding
UPR) 150,957 119,541
---------- ----------
RECOVERABLE FROM REINSURERS
Claims incurred and reported (124,477) (127,812)
Claims incurred but not reported 18,134 24,184
----------------------------------------------------------- ---------- ----------
Outstanding claims liabilities 3.1.1 (106,343) (103,628)
Unearned premium reserve 3.1.1 (10,183) (8,684)
--------------------------------------------------- ------ ---------- ----------
Total reinsurers' share of insurance liabilities (116,526) (112,312)
----------------------------------------------------------- ---------- ----------
Expected to be settled within 12 months (excluding
UPR) (31,936) (43,546)
Expected to be settled after 12 months (excluding
UPR) (74,407) (60,082)
---------- ----------
NET
Claims incurred and reported 202,857 182,080
Claims incurred but not reported (55,981) (57,088)
Claims handling provision 4,224 3,896
----------------------------------------------------------- ---------- ----------
Outstanding claims liabilities 3.1.1 151,100 128,888
Unearned premium reserve 3.1.1 73,675 82,092
--------------------------------------------------- ------ ---------- ----------
Total insurance liabilities - Net 224,775 210,980
----------------------------------------------------------- ---------- ----------
3.1.1 Movement in insurance liabilities and reinsurance
assets
2022 2021
-------------------------------- --------------------------------
Gross RI share Net Gross RI share Net
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
----------------------------- --------- ---------- --------- --------- ---------- ---------
CLAIMS AND CLAIMS HANDLING
EXPENSES
Claims incurred and reported 309,892 (127,812) 182,080 313,164 (123,440) 189,724
Claims incurred but not
reported (81,272) 24,184 (57,088) (90,267) 31,424 (58,843)
Claims handling provision 3,896 - 3,896 3,649 - 3,649
----------------------------- --------- ---------- --------- --------- ---------- ---------
Total at the beginning
of the year 232,516 (103,628) 128,888 226,546 (92,016) 134,530
----------------------------- --------- ---------- --------- --------- ---------- ---------
Cash paid for claims
settled in the year (93,353) 10,379 (82,974) (92,247) 12,357 (79,890)
Increase in liabilities
- arising from current
year claims 124,604 (20,640) 103,964 89,480 (8,072) 81,408
- arising from prior
year claims (6,324) 7,546 1,222 8,737 (15,897) (7,160)
----------------------------- --------- ---------- --------- --------- ---------- ---------
Total at the end of
the year 257,443 (106,343) 151,100 232,516 (103,628) 128,888
----------------------------- --------- ---------- --------- --------- ---------- ---------
Claims incurred and reported 327,334 (124,477) 202,857 309,892 (127,812) 182,080
Claims incurred but not
reported (74,115) 18,134 (55,981) (81,272) 24,184 (57,088)
Claims handling provision 4,224 - 4,224 3,896 - 3,896
----------------------------- --------- ---------- --------- --------- ---------- ---------
Total at the end of
the year 257,443 (106,343) 151,100 232,516 (103,628) 128,888
----------------------------- --------- ---------- --------- --------- ---------- ---------
Amounts due from reinsurers in respect of claims already paid by the
Group on the contracts that are reinsured are included in Note 3.2.
2022 2021
--------------------------------- ---------------------------------
Gross RI share Net Gross RI share Net
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
------------------------- ---------- --------- ---------- ---------- --------- ----------
UNEARNED PREMIUM RESERVE
At the beginning of the
year 90,776 (8,684) 82,092 87,350 (7,905) 79,445
Written in the year 171,257 26,456 197,713 169,322 21,233 190,555
Earned in the year (178,175) (27,955) (206,130) (165,896) (22,012) (187,908)
------------------------- ---------- --------- ---------- ---------- --------- ----------
Total at the end of
the year 83,858 (10,183) 73,675 90,776 (8,684) 82,092
------------------------- ---------- --------- ---------- ---------- --------- ----------
3.1.2 Movement in deferred acquisition costs
2022 2021
GBP'k GBP'k
----------------------------------------- --------- ---------
DEFERRED ACQUISITION COSTS
At the beginning of the year 13,791 14,791
Additions 27,699 28,643
Recognised in the profit or loss account (28,136) (29,642)
----------------------------------------- --------- ---------
Total at the end of the year 13,354 13,791
----------------------------------------- --------- ---------
3.2 Receivables arising from insurance and reinsurance
contracts
ACCOUNTING POLICY
Insurance receivables are recognised when due and measured on initial
recognition at the fair value of the consideration received or receivable.
Subsequent to initial recognition, insurance receivables are measured
at amortised cost, using the effective interest rate method. The
carrying value of insurance receivables is reviewed for impairment
whenever events or circumstances indicate that the carrying amount
may not be recoverable, with the impairment loss recorded in the
profit or loss account.
==============================================================================
2022 2021
GBP'k GBP'k
---------------------------------------------------------- ------- -------
Due from brokers and intermediaries 14,334 17,954
Due from policyholders 17,093 20,139
Less: provision for impairment of broker and intermediary
receivables - (90)
---------------------------------------------------------- ------- -------
Total at the end of the year 31,427 38,003
---------------------------------------------------------- ------- -------
The carrying value of insurance and other receivables approximates
to fair value. There are no amounts expected to be recovered more than
12 months after the reporting date.
3.3 Payables arising from insurance and reinsurance
contracts
ACCOUNTING POLICY
Payables are recognised when due. Reinsurance payables represent
premiums payable to reinsurers in respect of contracts which have
been entered into at the date of the financial position.
=====================================================================
2022 2021
GBP'k GBP'k
----------------------------- ------ ------
Insurance creditors 1,471 1,244
Amounts due to reinsurers 4,510 5,871
----------------------------- ------ ------
Total at the end of the year 5,981 7,115
----------------------------- ------ ------
Payables arising from insurance and reinsurance contracts are expected
to be settled within 12 months. The carrying value of payables approximates
fair value.
3.4 Insurance claims
2022 2021
----------------------------- ----------------------------
Gross RI share Net Gross RI share Net
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
----------------------------- -------- --------- -------- -------- --------- -------
Movement in claims provision 117,953 (13,094) 104,859 97,970 (23,969) 74,001
Movement in claims handling
provision 327 - 327 247 - 247
Claims handling expenses
allocated 7,613 - 7,613 6,767 - 6,767
----------------------------- -------- --------- -------- -------- --------- -------
Net insurance claims 125,893 (13,094) 112,799 104,984 (23,969) 81,015
----------------------------- -------- --------- -------- -------- --------- -------
3.4.1 Claims development tables
The presentation of the claims development tables for the Group is based
on the actual date of the event that caused the claim (accident year
basis).
Gross outstanding claims liabilities
Accident
year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total
-----------
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
----------- --------- --------- --------- --------- --------- --------- ---------- --------- --------- --------- --------
Estimate of
ultimate
claims
costs
At the end
of
the
accident
year 84,939 75,649 103,599 111,518 165,707 120,077 126,981 101,965 89,233 124,277
- One year
later 70,567 65,639 90,133 100,935 131,803 108,089 122,663 97,953 87,555
- Two years
later 63,197 62,039 82,537 94,294 123,651 107,988 127,225 88,755
- Three
years
later 65,313 60,301 79,845 91,336 122,674 113,257 125,608
- Four
years
later 68,763 59,149 77,095 90,789 124,128 115,403
- Five
years
later 64,290 58,367 77,038 92,629 124,264
- Six years
later 63,153 58,718 77,469 96,596
- Seven
years
later 63,088 58,438 77,480
- Eight
years
later 63,213 58,361
- Nine
years
later 63,271
Current
estimate
of
cumulative
claims 63,271 58,361 77,480 96,596 124,264 115,403 125,608 88,755 87,555 124,277
Cumulative
payments
to date (59,880) (58,203) (75,753) (89,434) (87,759) (94,578) (101,313) (61,066) (53,419) (42,496)
----------- --------- --------- --------- --------- --------- --------- ---------- --------- --------- --------- --------
Liability
recognised
in balance
sheet 3,391 158 1,727 7,162 36,505 20,825 24,295 27,689 34,136 81,781 237,669
2012 and
prior 15,550
Claims
handling
provision 4,224
----------- --------- --------- --------- --------- --------- --------- ---------- --------- --------- --------- --------
Total 257,443
----------- --------- --------- --------- --------- --------- --------- ---------- --------- --------- --------- --------
Net outstanding claims liabilities
Accident
year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total
-----------
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
----------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------
Estimate of
ultimate
claims
costs
At the end
of
the
accident
year 77,316 74,609 97,288 104,808 106,478 111,433 115,011 85,723 81,161 103,637
- One year
later 64,071 65,639 85,814 93,664 96,446 99,649 111,550 81,882 81,826
- Two years
later 59,301 60,953 81,164 87,824 91,806 98,641 111,347 80,602
- Three
years
later 57,739 59,741 77,869 85,243 91,179 99,071 111,121
- Four
years
later 56,947 59,008 76,409 84,995 88,545 100,853
- Five
years
later 56,892 58,259 76,254 84,891 88,690
- Six years
later 56,593 58,481 76,011 84,987
- Seven
years
later 56,572 58,198 76,578
- Eight
years
later 56,685 58,146
- Nine
years
later 56,813
Current
estimate
of
cumulative
claims 56,813 58,146 76,578 84,987 88,690 100,853 111,121 80,602 81,826 103,637
Cumulative
payments
to date (54,565) (57,986) (75,567) (83,091) (83,597) (91,210) (96,127) (60,751) (53,419) (42,496)
----------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------
Liability
recognised
in balance
sheet 2,248 160 1,011 1,896 5,093 9,643 14,994 19,851 28,407 61,141 144,444
2012 and
prior 2,432
Claims
handling
provision 4,224
----------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------
Total 151,100
----------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------
3.5 Underwriting risk
The principal risk the Group faces under insurance contracts is that
the actual claims and benefit payments, or the timing thereof, differ
from expectations. This is influenced by the frequency of claims, severity
of claims, actual benefits paid and subsequent development of long-term
claims. Therefore, the objective of the Group is to ensure that sufficient
reserves are available to cover these liabilities.
The Group only issues motor insurance contracts, which usually cover
a 12-month duration. For these contracts, the most significant risk
which arises is under-estimation of the expected costs attached to
a policy or a claim, for example through unexpected inflation of costs
or single catastrophic events.
The above risk exposure is mitigated by diversification across a large
portfolio of policyholders and geographical areas within the UK. The
variability of risks is improved by careful selection and implementation
of underwriting strategies, which are designed to ensure that risks
are diversified in terms of type of risk and level of insured benefits.
This is largely achieved through diversification across policyholders.
Furthermore, strict claim review policies to assess all new and ongoing
claims, regular detailed review of claims handling procedures and frequent
investigation of possible fraudulent claims are all policies and procedures
put in place to reduce the risk exposure of the Group. The Group further
enforces a policy of actively managing and promptly pursuing claims,
in order to reduce its exposure to unpredictable future developments
that can negatively impact the business. Inflation risk is mitigated
by taking expected inflation into account when estimating insurance
contract liabilities.
The Group purchases reinsurance as part of its risk mitigation programme.
Reinsurance ceded is placed on a non-proportional basis. This non-proportional
reinsurance is excess-of-loss, designed to mitigate the Group's net
exposure to single large claims or catastrophe losses. The current
reinsurance programme in place has a retention limit of GBP1m, with
no upper limit. Amounts recoverable from reinsurers are estimated in
a manner consistent with the outstanding claims provision and are in
accordance with the reinsurance contracts. Although the Group has reinsurance
arrangements, it is not relieved of its direct obligations to its policyholders
and thus a credit exposure exists with respect to ceded reinsurance,
to the extent that any reinsurer is unable to meet its obligations
assumed under such reinsurance agreements. Refer to Note 3.6 for insurance-related
credit risk.
Key assumptions
The principal assumption underlying the liability estimates is that
the Group's future claims development will follow a similar pattern
to past claims development experience. This includes assumptions in
respect of average claim costs, claim handling costs, claim inflation
factors and claim numbers for each accident year. Additional qualitative
judgements are used to assess the extent to which past trends may not
apply in the future, for example: one-off occurrence; changes in market
factors such as public attitude to claiming; economic conditions; and
internal factors such as portfolio mix, policy conditions and claims
handling procedures. Judgement is further used to assess the extent
to which external factors such as judicial decisions and government
legislation affect the estimates.
Other key circumstances affecting the reliability of assumptions include
variation in interest rates and delays in settlement.
Sensitivities
The motor claim liabilities are primarily sensitive to the reserving
assumptions noted above. It is not possible to quantify the sensitivity
of certain assumptions such as legislative changes or uncertainty in
the estimation process.
The following analysis is performed for reasonably possible movements
in key assumptions, including inflation, with all other assumptions
held constant, showing the impact on profit before tax and equity.
The correlation of assumptions will have a significant effect in determining
the ultimate claims liabilities, but to demonstrate the impact due
to changes in assumptions, assumptions had to be changed on an individual
basis. It should be noted that movements in these assumptions are non-linear.
The table shows the impact of a 10% increase in the gross loss ratio
applied to all underwriting years which have a material outstanding
claims reserve, and a 10% increase in gross outstanding claims across
all underwriting years, taking into account the impact of an increase
in the operational costs associated with handling those claims. We
have considered the impact of excess inflation in setting the threshold
for this sensitivity analysis.
Decrease Decrease
in profit after In total equity
tax
------------------- -------------------
2022 2021 2022 2021
At 31 December GBP'k GBP'k GBP'k GBP'k
---------------------------------------------- --------- -------- --------- --------
Insurance risk
Impact of a 10% increase in gross loss
ratio (9,315) (7,921) (9,315) (7,921)
Impact of a 10% increase in gross outstanding
claims and claims provision (10,078) (8,710) (10,078) (8,710)
---------------------------------------------- --------- -------- --------- --------
A substantial increase in individually large claims which are over
our reinsurance retention limit, generally will have no impact on profit
before tax. The table shows the impact of a 10% increase on a net basis.
Decrease Decrease
in profit after In total equity
tax
-------------------- --------------------
2022 2021 2022 2021
At 31 December GBP'k GBP'k GBP'k GBP'k
-------------------------------------------- --------- --------- --------- ---------
Insurance risk
Impact of a 10% increase in net loss
ratio (11,597) (9,739) (11,597) (9,739)
Impact of a 10% increase in net outstanding
claims and claims provision (12,239) (10,440) (12,239) (10,440)
-------------------------------------------- --------- --------- --------- ---------
Climate change
Management has assessed the short, medium and long-term risks which
result from climate change. The short-term risk is low. Given the geographical
diversity of the Group's policyholders within the UK and the Group's
reinsurance programme, it is highly unlikely that a climate event will
materially impact the Group's ability to continue trading. More likely
is that the costs associated with the transition to a low-carbon economy
will impact the Group's indemnity spend in the medium term, as electronic
vehicles are currently relatively expensive to fix. This is somewhat,
or perhaps completely, offset by advances in technology reducing the
frequency of claims, in particular bodily injury claims which are generally
far more expensive than damage to vehicles. These changes in the costs
of claims are gradual and as such reflected in the Group's claims experience
and fed into the pricing of policies. However, if the propensity to
travel by car decreases overall this could impact the Group's income
in the long term.
Further discussion on climate change can be found in the Principal
Risks and Uncertainties section on pages 19 to 28 and the Responsibility
and Sustainability section on pages 38 to 49 of the Annual Report and
Accounts.
3.6 Insurance-related credit risk
Key insurance-related areas where the Group is exposed to credit default
risk are:
* Reinsurers default on presentation of a large claim
or dispute of cover
* Reinsurers default on their share of the Group's
insurance liabilities
* Default on amounts due from insurance contract
intermediaries or policyholders
Sabre uses a large panel of secure reinsurance companies. The credit
risk of reinsurers included in the reinsurance programme is considered
annually by reviewing their credit worthiness. The Group's placement
of reinsurance is diversified such that it is not dependent on a single
reinsurer. There is no single counterparty exposure that exceeds 25%
of total reinsurance assets at the reporting date. Sabre's largest
reinsurance counterparty is Munich Re. The credit risk exposure is
further monitored throughout the year to ensure that changes in credit
risk positions are adequately addressed.
The following tables demonstrate the Group's exposure to credit risk
in respect of overdue insurance debt and counterparty creditworthiness.
Unearned premium reserve ("UPR") is excluded as there are no credit
risks inherent in them.
Overdue insurance-related debt
Neither Past due Past due Assets Carrying
past due 1-90 days more than that have value in
nor impaired 90 days been impaired the balance
sheet
At 31 December 2022 GBP'k GBP'k GBP'k GBP'k GBP'k
------------------------------ ------------- ---------- ---------- -------------- ------------
Reinsurance assets (excluding
UPR) 106,343 - - - 106,343
Insurance receivables 31,364 63 - - 31,427
------------------------------ ------------- ---------- ---------- -------------- ------------
Total 137,707 63 - - 137,770
------------------------------ ------------- ---------- ---------- -------------- ------------
Neither Past due Past due Assets Carrying
past due 1-90 days more than that have value in
nor impaired 90 days been impaired the balance
sheet
At 31 December 2021 GBP'k GBP'k GBP'k GBP'k GBP'k
------------------------------ ------------- ---------- ---------- -------------- ------------
Reinsurance assets (excluding
UPR) 103,628 - - - 103,628
Insurance receivables 37,840 163 - - 38,003
------------------------------ ------------- ---------- ---------- -------------- ------------
Total 141,468 163 - - 141,631
------------------------------ ------------- ---------- ---------- -------------- ------------
Exposure by credit rating
AAA AA+ to A+ to BBB+ to BB+ and Not rated Total
AA- A- BBB- below
At 31 December GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
2022
---------------------- ------ ------- ------- ------- ------- --------- --------
Reinsurance assets
(excluding UPR) - 71,318 35,025 - - - 106,343
Insurance receivables - - - - - 31,427 31,427
---------------------- ------ ------- ------- ------- ------- --------- --------
Total - 71,318 35,025 - - 31,427 137,770
---------------------- ------ ------- ------- ------- ------- --------- --------
AAA AA+ to A+ to BBB+ to BB+ and Not rated Total
AA- A- BBB- below
At 31 December GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
2021
---------------------- ------ ------- ------- ------- ------- --------- --------
Reinsurance assets
(excluding UPR) - 72,498 31,130 - - - 103,628
Insurance receivables - - - - - 38,003 38,003
---------------------- ------ ------- ------- ------- ------- --------- --------
Total - 72,498 31,130 - - 38,003 141,631
---------------------- ------ ------- ------- ------- ------- --------- --------
3.7 Reconciliation of opening to closing balances
The below table reconciles the opening and closing balances of insurance
liabilities and reinsurance assets.
2022 2021
GBP'k GBP'k
------------------------------------------------------------- ---------- ----------
Insurance liabilities and reinsurance assets - at the
start of the year
Outstanding claims 232,516 226,546
Unearned premium reserve 90,776 87,350
Deferred acquisition costs (13,791) (14,791)
Reinsurance assets (112,312) (99,921)
Receivables arising from insurance and reinsurance contracts (38,003) (33,976)
Payables arising from insurance and reinsurance contracts 7,115 6,246
------------------------------------------------------------- ---------- ----------
166,301 171,454
------------------------------------------------------------- ---------- ----------
Profit or loss account movements
Net earned premium (153,218) (145,442)
Current year net incurred claims 103,964 81,408
Movement in prior year net incurred claims 1,222 (7,160)
Claims handling expenses 7,613 6,767
Change in deferred acquisition costs 437 1,000
(39,982) (63,427)
------------------------------------------------------------- ---------- ----------
Cash flow movements
Premiums received 178,060 165,505
Reinsurance premiums paid (27,817) (20,574)
Claims and other claims expenses paid (90,587) (86,657)
------------------------------------------------------------- ---------- ----------
59,656 58,274
------------------------------------------------------------- ---------- ----------
Insurance liabilities and reinsurance assets - at the
end of the year
Outstanding claims 257,443 232,516
Unearned premium reserve 83,858 90,776
Deferred acquisition costs (13,354) (13,791)
Reinsurance assets (116,526) (112,312)
Receivables arising from insurance and reinsurance contracts (31,427) (38,003)
Payables arising from insurance and reinsurance contracts 5,981 7,115
------------------------------------------------------------- ---------- ----------
185,975 166,301
------------------------------------------------------------- ---------- ----------
4. Financial assets
Risk management
Refer to the following notes for detail on risks relating to financial
assets:
Investment concentration risk - Note 4.2
Credit risk - Note 4.6
Liquidity risk - Note 6
==========================================================================
The Group's financial assets are summarised below:
2022 2021
Notes GBP'k GBP'k
------------------------------------------------- ----- -------- --------
Debt securities held at fair value through other
comprehensive income 4.1.1 229,158 234,667
Loans and receivables 4.4 7 74
Cash and cash equivalents 4.5 18,502 30,611
------------------------------------------------- ----- -------- --------
Total 247,667 265,352
------------------------------------------------- ----- -------- --------
4.1 Debt securities at fair value
4.1.1 Debt securities held at fair value through other
comprehensive income
ACCOUNTING POLICY - FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE
Classification
The Group classifies the following financial assets at fair value
through other comprehensive income ("FVOCI"):
* Debt securities
A debt instrument is measured at FVOCI only if it meets both of
the following conditions and is not designated at fair value through
the profit or loss account ("FVTPL"):
* The asset is held within a business model whose
objective is achieved by both collecting contractual
cash flows and selling financial assets
* The contractual terms of the financial asset give
rise to cash flows that are solely payments of
principal and interest ("SPPI") on the principal
amount outstanding on specified dates
Recognition and measurement
At initial recognition, the Group measures debt securities through
other comprehensive income at fair value, plus the transaction costs
that are directly attributable to the acquisition of the financial
asset. Debt securities at FVOCI are subsequently measured at fair
value.
Impairment
At each reporting date, the Group assesses debt securities at FVOCI
for impairment. Under IFRS 9 a "three-stage" model for calculated
Expected Credit Losses ("ECL") is used, and is based on changes
in credit quality since initial recognition. Refer to Note 4.6.
========================================================================
The Group's debt securities held at fair value through other comprehensive
income are summarised below:
2022 2021
----------------------- ----------------------
GBP'k % holdings GBP'k % holdings
---------------------------------- ---------- ----------- --------- -----------
Government bonds 87,151 38.1% 86,192 36.8%
Government-backed securities 80,753 35.2% 83,878 35.7%
Corporate bonds 61,254 26.7% 64,597 27.5%
---------------------------------- ---------- ----------- --------- -----------
Total 229,158 100.0% 234,667 100.0%
---------------------------------- ---------- ----------- --------- -----------
4.2. Investment concentration risk
Excessive exposure to particular industry sectors or groups can give
rise to concentration risk. The Group has no significant investment
concentration in any particular industrial sector and therefore is
unlikely to suffer significant losses through its investment portfolio
as a result of over-exposure to sectors engaged in similar activities
or which have similar economic features that would cause their ability
to meet contractual obligations to be similarly affected by changes
in economic, political or other conditions.
A significant part of the Group's investment portfolio consists primarily
of UK government bonds and government-backed bonds, therefore the risk
of government default does exist, however the likelihood is extremely
remote. The remainder of the portfolio consists of investment grade
corporate bonds. The Group continues to monitor the strength and security
of all bonds. The Group does not have direct exposure to Ukrainian
and Russian assets.
The Group's exposure by geographical area is outlined below:
Government Government-backed Corporate Total
bonds securities bonds
At 31 December 2022 GBP'k GBP'k GBP'k GBP'k % holdings
---------------------- ---------- ----------------- --------- -------- ----------
United Kingdom 87,151 101 25,942 113,194 49.4%
Europe (excluding UK) - 48,295 25,972 74,267 32.4%
North America - 32,357 9,340 41,697 18.2%
---------------------- ---------- ----------------- --------- -------- ----------
Total 87,151 80,753 61,254 229,158 100.0%
---------------------- ---------- ----------------- --------- -------- ----------
Government Government-backed Corporate Total
bonds securities bonds
At 31 December 2021 GBP'k GBP'k GBP'k GBP'k % holdings
---------------------- ---------- ----------------- --------- -------- ----------
United Kingdom 86,192 105 28,460 114,757 48.9%
Europe (excluding UK) - 55,786 26,446 82,232 35.0%
North America - 27,987 9,691 37,678 16.1%
---------------------- ---------- ----------------- --------- -------- ----------
Total 86,192 83,878 64,597 234,667 100.0%
---------------------- ---------- ----------------- --------- -------- ----------
The Group's exposure by investment type for government-backed securities
and corporate bonds is outlined below:
Agency Supranational Total
At 31 December 2022 GBP'k GBP'k GBP'k
-------------------------------------- --------- ----------------- ---------
Government-backed securities 37,989 42,764 80,753
% of holdings 47.0% 53.0% 100.0%
-------------------------------------- --------- ----------------- ---------
Financial Industrial Utilities Total
At 31 December 2022 GBP'k GBP'k GBP'k GBP'k
-------------------- --------- ---------- --------- -------
Corporate bonds 31,229 28,121 1,904 61,254
% of holdings 51.0% 45.9% 3.1% 100.0%
-------------------- --------- ---------- --------- -------
Agency Supranational Total
At 31 December 2021 GBP'k GBP'k GBP'k
----------------------------- ------- ------------- -------
Government-backed securities 48,987 34,891 83,878
% of holdings 58.4% 41.6% 100.0%
----------------------------- ------- ------------- -------
Financial Industrial Utilities Total
At 31 December 2021 GBP'k GBP'k GBP'k GBP'k
-------------------- --------- ---------- --------- -------
Corporate bonds 30,642 31,863 2,092 64,597
% of holdings 47.5% 49.3% 3.2% 100.0%
-------------------- --------- ---------- --------- -------
4.3. Fair value
ACCOUNTING POLICY
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, or in its absence,
the most advantageous market to which the Group has access at that
date.
The Group measures the fair value of an instrument using the quoted
bid price in an active market for that instrument. A market is regarded
as active if transactions for the asset take place with sufficient
frequency and volume to provide pricing information on an ongoing
basis.
The fair value of financial instruments traded in active markets
is based on quoted market prices at the statement of financial position
date. A market is regarded as active if quoted prices are readily
and regularly available from the stock exchange or pricing service,
and those prices represent actual and regularly occurring market
transactions on an arm's length basis. The quoted market price used
for financial assets held by the Group is the closing bid price.
===========================================================================
Fair value measurements are based on observable and unobservable inputs.
Observable inputs reflect market data obtained from independent sources,
while unobservable inputs reflect the Group's view of market assumptions
in the absence of observable market information.
IFRS 13 requires certain disclosures which require the classification
of financial assets and financial liabilities measured at fair value
using a fair value hierarchy that reflects the significance of the
inputs used in making the fair value measurement.
Disclosure of fair value measurements by level is according to the
following fair value measurement hierarchy:
* Level 1 : fair value is based on quoted market prices
(unadjusted) in active markets for identical
instruments as measured on reporting date
* Level 2 : fair value is determined through inputs,
other than quoted prices included in Level 1 that are
observable for the assets and liabilities, either
directly (prices) or indirectly (derived from prices)
* Level 3 : fair value is determined through valuation
techniques which use significant unobservable inputs
Level 1
The fair value of financial instruments traded in active markets is
based on quoted market prices at the statement of financial position
date. A market is regarded as active if quoted prices are readily and
regularly available from the stock exchange or pricing service, and
those prices represent actual and regularly occurring market transactions
on an arm's length basis. The quoted market price used for financial
assets held by the Group is the closing bid price. These instruments
are included in Level 1 and comprise only debt securities classified
as fair value through other comprehensive income.
Level 2
The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available
and rely as little as possible on entity specific estimates. If all
significant input required to fair value an instrument is observable,
the instrument is included in Level 2. The Group has no Level 2 financial
instruments.
Level 3
If one or more of the significant inputs are not based on observable
market data, the instrument is included in Level 3. The Group has no
Level 3 financial instruments.
The following table summarises the classification of financial instruments:
Level Level Level Total
1 2 3
As at 31 December 2022 GBP'k GBP'k GBP'k GBP'k
-------------------------------------- ------------ -------- ------- -----------
Assets held at fair value
Financial investments 229,158 - - 229,158
-------------------------------------- ------------ -------- ------- -----------
Total 229,158 - - 229,158
-------------------------------------- ------------ -------- ------- -----------
Level Level Level Total
1 2 3
As at 31 December 2021 GBP'k GBP'k GBP'k GBP'k
-------------------------- -------- ----- ----- --------
Assets held at fair value
Financial investments 234,667 - - 234,667
-------------------------- -------- ----- ----- --------
Total 234,667 - - 234,667
-------------------------- -------- ----- ----- --------
Transfers between levels
There have been no transfers between levels during the year (2021:
no transfers).
4.4. Loans and receivables
ACCOUNTING POLICY
Classification
The Group classifies its loans and receivables as at amortised cost
only if both of the following criteria are met:
* The asset is held within a business model whose
objective is to collect the contractual cash flows
* The contractual terms give rise to cash flows that
are solely payments of principle and interest
Recognition and measurement
Loans and receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest
method, less provision for expected credit losses.
Impairment
The Group measures loss allowances at an amount equal to lifetime
ECL. To measure the expected credit losses, loans and receivables
have been grouped based on shared credit risk characteristics and
the days past due to create the categories namely performing, underperforming
and not performing. The expected loss rates are based on the payment
profiles of receivables over a period of 36 months before year end.
The loss rates are adjusted to reflect current and forward-looking
information on macro-economic factors, such as the socio-economic
environment affecting the ability of the debtors to settle the receivables.
Receivables that are 30 days or more past due are considered to
be 'not performing' and the default rebuttable presumption of 90
days prescribed by IFRS 9 is not applied.
Performing
Customers have a low risk of default and a strong capacity to meet
contractual cash flows.
Underperforming
Loans for which there is a significant increase in credit risk.
A significant increase in credit risk is presumed if interest and/or
principal repayments are past due.
Not performing
Interest and/or principal repayments are 30 days past due.
=================================================================================
The Group's loans and receivables comprises of:
2022 2021
GBP'k GBP'k
-------------------------------------- ----- -----
Other debtors 7 76
Provision for expected credit losses - (2)
-------------------------------------- ----- -----
Total 7 74
-------------------------------------- ----- -----
The estimated fair values of loans and receivables are the discounted
amounts of the estimated future cash flows expected to be received.
The carrying value of loans and receivables approximates fair value.
Provision for expected credit losses are based on the recoverability
of the individual loans and receivables.
ECL ECL method Gross Provision (Released)/ Provision Net
rate opening raised closing
balance in the balance
period
At 31 December % GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
2022
---------------- ----- ---------- ----- --------- ----------- --------- -----
Performing 2.5% Lifetime 7 (2) 2 - 7
Underperforming 25.0% Lifetime - - - - -
Not performing 50.0% Lifetime - - - - -
---------------- ----- ---------- ----- --------- ----------- --------- -----
Total 7 (2) 2 - 7
---------------- ----- ---------- ----- --------- ----------- --------- -----
ECL ECL method Gross Provision (Released)/ Provision Net
rate opening raised closing
balance in the balance
period
At 31 December % GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
2021
---------------- ----- ---------- ----- --------- ----------- --------- -----
Performing 2.5% Lifetime 76 (2) - (2) 74
Underperforming 25.0% Lifetime - - - - -
Not performing 50.0% Lifetime - - - - -
---------------- ----- ---------- ----- --------- ----------- --------- -----
Total 76 (2) - (2) 74
---------------- ----- ---------- ----- --------- ----------- --------- -----
The forward-looking information considered was deemed to have an immaterial
impact on expected credit losses.
4.5. Cash and cash equivalents
ACCOUNTING POLICY - CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits held on
call with banks and money market funds. Cash and cash equivalents
are carried at amortised cost.
=====================================================================
2022 2021
GBP'k GBP'k
-------------------------- ------- -------
Cash and cash equivalents 18,502 30,611
-------------------------- ------- -------
Total 18,502 30,611
-------------------------- ------- -------
Cash and cash equivalents include money market funds with no notice period
for withdrawal.
The carrying value of cash and cash equivalents approximates fair value.
The full value is expected to be realised within 12 months.
4.6. Credit risk
ACCOUNTING POLICY
Impairment of financial assets
At each reporting date, the Group assesses financial assets measured
at amortised cost and debt securities at FVOCI for impairment. Under
IFRS 9 a 'three-stage' model for calculated Expected Credit Losses
("ECL") is used, and is based on changes in credit quality since
initial recognition as summarised below:
Performing financial assets
* Stage 1: From initial recognition of a financial
asset to the date on which an asset has experienced a
significant increase in credit risk relative to its
initial recognition, a stage 1 loss allowance is
recognised equal to the credit losses expected to
result from its default occurring over the earlier of
the next 12 months or its maturity date ("12-month
ECL").
* Stage 2: Following a significant increase in credit
risk relative to the initial recognition of the
financial asset, a stage 2 loss allowance is
recognised equal to the credit losses expected from
all possible default events over the remaining
lifetime of the asset ("Lifetime ECL"). The
assessment of whether there has been a significant
increase in credit risk, such as an actual or
significant change in instruments external credit
rating; significant widening of credit spread;
changes in rates or terms of instrument; existing or
forecast adverse change in business, financial or
economic conditions that are expected to cause a
significant change in the counterparty's ability to
meet its debt obligations; requires considerable
judgement, based on the lifetime probability of
default ("PD"). Stage 1 and 2 allowances are held
against performing loans; the main difference between
stage 1 and stage 2 allowances is the time horizon.
Stage 1 allowances are estimated using the PD with a
maximum period of 12 months, while stage 2 allowances
are estimated using the PD over the remaining
lifetime of the asset.
Impaired financial assets
Stage 3: When a financial asset is considered to be credit-impaired,
the allowance for credit losses ("ACL") continues to represent lifetime
expected credit losses, however, interest income is calculated based
on the amortised cost of the asset, net of the loss allowance, rather
than its gross carrying amount.
Application of the impairment model
The Group applies IFRS 9's ECL model to two main types of financial
assets that are measured at amortised cost or FVOCI:
Other receivables , to which the simplified approach prescribed
by IFRS 9 is applied. This approach requires the recognition of
a Lifetime ECL allowance on day one.
Debt securities , to which the general three-stage model (described
above) is applied, whereby a 12-month ECL is recognised initially
and the balance is monitored for significant increases in credit
risk which triggers the recognition of a Lifetime ECL allowance.
ECLs are a probability-weighted estimate of credit losses. The probability
is determined by the estimated risk of default which is applied
to the cash flow estimates. On a significant increase in credit
risk, from investment grade to non-investment grade, allowances
are recognised without a change in the expected cash flows (although
typically expected cash flows do also change) and expected credit
losses are rebased from 12-month to lifetime expectations.
The measurement of ECLs considers information about past events
and current conditions, as well as supportable information about
future events and economic conditions.
Presentation of impairment
Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets. For debt
securities at FVOCI, the loss allowance is recognised in the profit
or loss account and accounted for as a transfer from OCI to profit
or loss, instead of reducing the carrying amount of the asset.
Write-offs
Loans and debt securities are written off (either partially or in
full) when there is no realistic prospect of the amount being recovered.
This is generally the case when the Group concludes that the borrower
does not have assets or sources of income that could generate sufficient
cash flows to repay the amounts subject to the write-off.
==============================================================================
Exposure by credit rating
AAA AA+ to A+ to BBB+ to BB+ and Not rated Total
AA- A- BBB- below
At 31 December GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
2022
------------------ ------- ------- ------- ------- ------- --------- --------
UK Government
bonds - 87,151 - - - - 87,151
Government-backed
securities 80,031 722 - - - - 80,753
Corporate bonds - 2,839 41,235 17,180 - - 61,254
Loans and other
receivables - - - - - 7 7
Cash and cash
equivalents 5,340 52 13,110 - - - 18,502
------------------ ------- ------- ------- ------- ------- --------- --------
Total 85,371 90,764 54,345 17,180 - 7 247,667
------------------ ------- ------- ------- ------- ------- --------- --------
AAA AA+ to A+ to BBB+ to BB+ and Not rated Total
AA- A- BBB- below
At 31 December GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
2021
------------------ ------- ------- ------- ------- ------- --------- --------
UK Government
bonds - 86,192 - - - - 86,192
Government-backed
securities 75,294 8,584 - - - - 83,878
Corporate bonds - 3,128 39,417 22,052 - - 64,597
Loans and other
receivables - - - - - 74 74
Cash and cash
equivalents 368 51 30,192 - - - 30,611
------------------ ------- ------- ------- ------- ------- --------- --------
Total 75,662 97,955 69,609 22,052 - 74 265,352
------------------ ------- ------- ------- ------- ------- --------- --------
With exception of loans and other receivables, all the Company's financial
assets are investment grade (AAA to BBB).
Analysis of credit risk and allowance for expected credit loss
The following table provides an overview of the allowance for ECL provided
for on the types of financial assets held by the Group where credit
risk is prevalent.
Gross Allowance Net amount
carrying for ECL
amount
At 31 December 2022 GBP'k GBP'k GBP'k
----------------------------- --------- --------- ----------
Government bonds 87,151 (3) 87,148
Government-backed securities 80,753 (2) 80,751
Corporate bonds 61,254 (27) 61,227
Loans and other receivables 7 - 7
Cash and cash equivalents 18,502 - 18,502
----------------------------- --------- --------- ----------
Total 247,667 (32) 247,635
----------------------------- --------- --------- ----------
Gross Allowance Net amount
carrying for ECL
amount
At 31 December 2021 GBP'k GBP'k GBP'k
----------------------------- --------- --------- ----------
Government bonds 86,192 (8) 86,184
Government-backed securities 83,878 (4) 83,874
Corporate bonds 64,597 (52) 64,545
Loans and other receivables 74 (2) 72
Cash and cash equivalents 30,611 - 30,611
----------------------------- --------- --------- ----------
Total 265,352 (66) 265,286
----------------------------- --------- --------- ----------
4.7. Interest rate risk - financial assets
Interest rate risk is the risk that the value or future cash flows
of a financial instrument will fluctuate because of changes in market
interest rates. Floating rate instruments expose the Group to cash
flow interest risk, whereas fixed interest rate instruments expose
the Group to fair value interest risk. Currently the Group holds only
fixed rate securities.
The Group's interest risk policy requires it to manage the maturities
of interest-bearing financial assets and interest-bearing financial
liabilities. Interest on fixed interest rate instruments is priced
at inception of the financial instrument and is fixed until maturity.
The Group has a concentration of interest rate risk in UK government
bonds and other fixed-income securities.
The analysis that follows is performed for reasonably possible movements
in key variables with all other variables held constant, showing the
impact on profit before tax and equity. The correlation of variables
will have a significant effect in determining the ultimate impact on
interest rate risk, but to demonstrate the impact due to changes in
variables, variables had to be changed on an individual basis. It should
be noted that movements in these variables are non-linear.
Note that the Group's investment portfolio has been designed such that
the cash flows yielded from investments match, as far as possible,
the projected outflows inherent primarily within the claims reserve.
The impact of any movement in market values, such as those caused by
changes in interest rates, is taken through other comprehensive income
and has no impact on profit after tax.
Decrease Decrease
in profit after in total equity
tax
2022 2021 2022 2021
-------------------------------------------- -------- ------- -------- --------
At 31 December GBP'k GBP'k GBP'k GBP'k
Interest rate
Impact of a 100-basis point increase
in interest rates on financial investments - - (1,940) (3,861)
Impact of a 200-basis point increase
in interest rates on financial investments - - (3,881) (5,781)
-------------------------------------------- -------- ------- -------- --------
4.8. Investment income
ACCOUNTING POLICY
Investment income from debt instruments classified as FVOCI are
measured using the effective interest rate which allocates the interest
income or interest expense over the expected life of the asset or
liability at the rate that exactly discounts all estimated future
cash flows to equal the instrument's initial carrying amount. Calculation
of the effective interest rate takes into account fees payable or
receivable that are an integral part of the instrument's yield,
premiums or discounts on acquisition or issue, early redemption
fees and transaction costs. All contractual terms of a financial
instrument are considered when estimating future cash flows.
=============================================================================
2022 2021
GBP'k GBP'k
---------------------------------------------------- ------ ------
Interest income on financial assets using effective
interest rate method
Interest income from debt securities 1,567 1,507
Investment fees (293) (308)
Interest income from cash and cash equivalents 100 11
Total 1,374 1,210
---------------------------------------------------- ------ ------
4.9. Net gains/(losses) from fair value adjustments on financial
assets
ACCOUNTING POLICY
Movements in the fair value of debt instruments classified as FVOCI
are taken through OCI. When the instruments are derecognised, the
cumulative gain or losses previously recognised in OCI is reclassified
to profit or loss.
==========================================================================
2022 2021
GBP'k GBP'k
---------------------------------------------------------- --------- --------
Profit or loss
Realised fair value gains/(losses) on debt securities 22 (16)
---------------------------------------------------------- --------- --------
Realised fair value gains/(losses) on debt securities
reclassified to profit or loss 22 (16)
---------------------------------------------------------- --------- --------
Other comprehensive income
Unrealised fair value losses on debt securities (14,175) (5,674)
Expected credit loss (32) 16
---------------------------------------------------------- --------- --------
Unrealised fair value losses on debt securities through
other comprehensive income (14,207) (5,658)
---------------------------------------------------------- --------- --------
Net losses from fair value adjustments on financial
assets (14,185) (5,674)
---------------------------------------------------------- --------- --------
5. OTHER liabilities
The Group's other liabilities are summarised below:
2022 2021
Notes GBP'k GBP'k
-------------------------------------------------- ----- ------ ------
Other liabilities at amortised cost
Lease liabilities 5.1 - 193
Trade and other payables, excluding insurance
payables 5.3 5,005 5,831
-------------------------------------------------- ----- ------ ------
Total 5,005 6,024
-------------------------------------------------- ----- ------ ------
5.1. Lease liability
2022 2021
GBP'k GBP'k
------------------------------------ ------ ------
As at the beginning of the year 193 194
Cash movements
Lease payments (198) (264)
Non-cash movements
Lease extension during the year - 247
Interest 5 16
------------------------------------ ------ ------
As at 31 December - 193
------------------------------------ ------ ------
Current - 193
Non-current - -
------------------------------------ ------ ------
5.2. Finance costs
ACCOUNTING POLICY
Finance costs are recognised using the effective interest method.
=====================================================================
2022 2021
GBP'k GBP'k
------------------------------ ----- -----
Interest on lease liabilities 5 16
------------------------------ ----- -----
Total 5 16
------------------------------ ----- -----
5.3. Trade and other payables, excluding insurance payables
ACCOUNTING POLICY
Trade and other payables are recognised when the Group has a contractual
obligation to deliver cash or another financial asset to another
entity, or a contractual obligation to exchange financial assets
or financial liabilities with another entity under conditions that
are potentially unfavourable to the entity. Trade and other payables
are carried at amortised cost.
============================================================================
2022 2021
GBP'k GBP'k
-------------------------- ------ ------
Trade and other creditors 657 321
Other taxes 4,348 5,510
-------------------------- ------ ------
Total 5,005 5,831
-------------------------- ------ ------
6. Liquidity risk
Liquidity risk is the potential that obligations cannot be met as they
fall due as a consequence of having a timing mismatch or inability
to raise sufficient liquid assets without suffering a substantial loss
on realisation. The Group manages its liquidity risk through both ensuring
that it holds sufficient cash and cash equivalent assets to meet all
short-term liabilities and matching, as far as possible, the maturity
profile of its financial investments to the expected cash outflows.
The liquidity of the Group's insurance and financial liabilities and
supporting assets is given in the tables below:
Total Within 1-2 years 3-4 years 5-10 years Over 10
1 year years
At 31 December 2022 GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
------------------------------ -------- -------- --------- --------- ---------- -------
Reinsurance assets, excluding
UPR(1) 106,343 31,936 26,290 25,330 22,787 -
Government bonds 87,151 14,463 26,470 38,992 7,226 -
Government-backed securities 80,753 5,119 69,693 5,941 - -
Corporate bonds 61,254 4,426 44,514 12,314 - -
Insurance receivables 31,427 31,427 - - - -
Loans and other receivables 7 7 - - - -
Cash and cash equivalents(2) 18,502 18,502 - - - -
------------------------------ -------- -------- --------- --------- ---------- -------
Total 385,437 105,880 166,967 82,577 30,013 -
------------------------------ -------- -------- --------- --------- ---------- -------
Total Within 1-2 years 3-4 years 5-10 years Over 10
1 year years
At 31 December 2022 GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
------------------------------ -------- -------- --------- --------- ---------- -------
Insurance liabilities,
excluding UPR(1) 257,443 106,486 77,890 44,025 29,042 -
Insurance payable 5,981 5,981 - - - -
Trade and other payables 5,005 5,005 - - - -
------------------------------ -------- -------- --------- --------- ---------- -------
Total 268,429 117,472 77,890 44,025 29,042 -
------------------------------ -------- -------- --------- --------- ---------- -------
Management have considered the liquidity and cash generation of the
Group and are satisfied that the Group will be able to meet all liabilities
as they fall due.
(1) Unearned premiums are excluded as there are no liquidity risks
inherent in them.
(2) Includes money market funds with no notice period for withdrawal.
Total Within 1-2 years 3-4 years 5-10 years Over 10
1 year years
At 31 December 2021 GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
------------------------------ -------- -------- --------- --------- ---------- -------
Reinsurance assets, excluding
UPR(1) 103,628 43,546 34,496 18,393 7,193 -
UK Government bonds 86,192 27,313 22,845 35,001 1,033 -
Government-backed securities 83,878 8,479 64,752 10,647 - -
Corporate bonds 64,597 2,203 14,034 48,360 - -
Insurance receivables 38,003 38,003 - - - -
Loans and other receivables 74 74 - - - -
Cash and cash equivalents(2) 30,611 30,611 - - - -
------------------------------ -------- -------- --------- --------- ---------- -------
Total 406,983 150,229 136,127 112,401 8,226 -
------------------------------ -------- -------- --------- --------- ---------- -------
Total Within 1-2 years 3-4 years 5-10 years Over 10
1 year years
At 31 December 2021 GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k
------------------------------ -------- -------- --------- --------- ---------- -------
Insurance liabilities,
excluding UPR(1) 232,516 112,975 75,661 32,848 11,032 -
Insurance payables 7,115 7,115 - - - -
Lease liabilities 193 193 - - - -
Trade and other payables 5,831 5,831 - - - -
------------------------------ -------- -------- --------- --------- ---------- -------
Total 245,655 126,114 75,661 32,848 11,032 -
------------------------------ -------- -------- --------- --------- ---------- -------
(1) Unearned premiums are excluded as there are no liquidity risks
inherent in them.
(2) Includes money market funds with no notice period for withdrawal.
7. Other operating income
ACCOUNTING POLICY
Other operating income consists of marketing fees, commissions resulting
from the sale of ancillary products connected to the Group's direct
business, and other non-insurance income such as administrative
fees charged on direct business. Such income is recognised once
the related service has been performed. Typically, this will be
at the point of sale of the product.
============================================================================
2022 2021
GBP'k GBP'k
------------------------------------------------------------ ------ ------
Marketing fees 384 463
Fee income from the sale of auxiliary products and services 261 196
Administration fees 1,139 1,439
------------------------------------------------------------ ------ ------
Total 1,784 2,098
------------------------------------------------------------ ------ ------
8. Operating expenses
2022 2021
Notes GBP'k GBP'k
-------------------------------------------------- ----- -------- --------
Employee expenses 8.1 12,536 12,338
Property expenses 428 331
IT expense including IT depreciation 5,043 5,125
Other depreciation 17 33
Industry levies 5,913 5,000
Policy servicing costs 2,164 2,282
Other operating expenses 2,665 2,189
Expected credit loss on financial assets (34) 16
Before adjustments for deferred acquisition costs
and claims handling expenses 28,732 27,314
Adjusted for:
Claims handling expense reclassification (7,613) (6,767)
Movement in deferred acquisition costs 83 939
-------------------------------------------------- ----- -------- --------
Total operating expenses 21,202 21,486
-------------------------------------------------- ----- -------- --------
8.1. Employee expenses
ACCOUNTING POLICY
A. Pensions
For staff who were employees on 8 February 2002, the Group operates
a non-contributory defined contribution Group personal pension scheme.
The contribution by the Group depends on the age of the employee.
For employees joining since 8 February 2002, the Group operates
a matched contribution Group personal pension scheme where the Group
contributes an amount matching the contribution made by the staff
member.
Contributions to defined contribution schemes are recognised in
the profit or loss account in the period in which they become payable.
B. Share-based payments
The fair value of equity instruments granted under share -- based
payment plans are recognised as an expense and spread over the vesting
period of the instrument. The total amount to be expensed is determined
by reference to the fair value of the awards made at the grant date,
excluding the impact of any non -- market vesting conditions. Depending
on the plan, the fair value of equity instruments granted is measured
on grant date using an appropriate valuation model or the market
price on grant date. At the date of each statement of financial
position, the Group revises its estimate of the number of equity
instruments that are expected to become exercisable. It recognises
the impact of the revision of original estimates, if any, in the
profit or loss account, and a corresponding adjustment is made to
equity over the remaining vesting period. The fair value of the
awards and ultimate expense are not adjusted on a change in market
vesting conditions during the vesting period.
C. Leave pay
Employee entitlement to annual leave is recognised when it accrues
to employees. An accrual is made for the estimated liability for
annual leave as a result of services rendered by employees up to
the statement of financial position date.
===========================================================================
The aggregate remuneration of those employed by the Group's operations
comprised:
2022 2021
GBP'k GBP'k
------------------------------------------------------- -------- --------
Wages and salaries 8,988 9,417
Issue of share-based payments 1,603 1,075
Social security expenses 1,213 1,193
Pension expenses 508 475
Other staff expenses 224 178
------------------------------------------------------- -------- --------
Before adjustments for deferred acquisition costs and
claims handling expenses 12,536 12,338
Adjusted for:
Claims handling expense reclassification (5,860) (5,239)
Movement in deferred acquisition costs 92 535
------------------------------------------------------- -------- --------
Employee expenses 6,768 7,634
------------------------------------------------------- -------- --------
8.2. Number of employees
The table below analyses the average monthly number of persons employed
by the Group's operations.
2022 2021
----------------------------------------- ---------------- ----------------
Operations 123 124
Support 28 30
----------------------------------------- ---------------- ----------------
Total 151 154
----------------------------------------- ---------------- ----------------
8.3. Directors' remuneration
Amounts paid to Directors are disclosed within the "Annual Report on
Director's Remuneration" on pages 78 to 87 of the Annual Report and
Accounts.
8.4. Auditors' remuneration
The table below analyses the Auditor's remuneration in respect of the
Group's operations.
2022 2021
GBP'k GBP'k
------------------------------------------------------------- ----- -----
Audit of these financial statements 180 124
Audit of financial statements of subsidiaries of the
Group 175 255
------------------------------------------------------------- ----- -----
Audit fees in relation to IFRS 17 transition 85 -
------------------------------------------------------------- ----- -----
Total audit fees 440 379
------------------------------------------------------------- ----- -----
Fees for non-audit services - Audit-related assurance
services 79 80
Fees for non-audit services - Other non-audit services - -
------------------------------------------------------------- ----- -----
Total non-audit fees 79 80
------------------------------------------------------------- ----- -----
Total auditor remuneration 519 459
------------------------------------------------------------- ----- -----
The above fees exclude irrecoverable VAT of 20%.
9. Property, plant and equipment
Property, plant and equipment consists of owned and leased
assets that do not meet the definition of investment property.
2022 2021
GBP'k GBP'k
----------------------------------------------------- ------ ------
Property, plant and equipment - owned 3,996 4,066
Property, plant and equipment - leased (Right-of-use
assets) - 187
----------------------------------------------------- ------ ------
Total 3,996 4,253
----------------------------------------------------- ------ ------
9.1. Owned assets
ACCOUNTING POLICY
A. Owner-occupied property
Owner-occupied properties are held by the Group for use in the supply
of services or, for its own administration purposes.
Owner-occupied property is held at fair value. Increases in the
carrying amount of owner-occupied properties as a result of revaluations
are credited to other comprehensive income and accumulated in a
revaluation reserve in equity. To the extent that a revaluation
increase reverses a revaluation decrease that was previously recognised
as an expense in profit or loss, such increase is credited to income
in profit or loss. Decreases in valuation are charged to profit
or loss, except to the extent that a decrease reverses the existing
accumulated revaluation reserve and therefore such a decrease is
recognised in other comprehensive income.
A fair value assessment of the owner-occupied property is undertaken
at each reporting date with any material changes in fair value recognised.
Valuation is at highest and best use. Owner-occupied property is
also revalued by an external qualified surveyor, at least every
three years. UK properties do not have frequent and volatile fair
value changes and as such, more frequent revaluations are considered
unnecessary, as only insignificant changes in fair value is expected.
Owner-occupied land is not depreciated. As the depreciation of owner-occupied
buildings is immaterial and properties are revalued every three
years by an external qualified surveyor, no depreciation is charged
on owner-occupied buildings
B. Fixtures, fittings and computer equipment
Fixtures, fittings and computer equipment are stated at historical
cost less accumulated depreciation and impairment charges. Historical
cost includes expenditure that is directly attributable to the acquisition
of property and equipment.
Depreciation is calculated on the difference between the cost and
residual value of the asset and is charged to the profit or loss
account over the estimated useful life of each significant part
of an item of fixtures, fittings and computer equipment, using the
straight-line basis.
Estimate useful lives are as follows:
Fixtures and fittings 5 years
Computer equipment 5 years
The assets' residual values and useful lives are reviewed at each
statement of financial position date and adjusted if appropriate.
An asset's carrying amount is written down to its recoverable amount
if the asset's carrying amount is greater than its estimated recoverable
amount. Gains and losses on disposals are determined by comparing
the proceeds with the carrying amount of the assets and are included
in profit or loss before tax.
Repairs and maintenance costs are charged to the profit or loss
account during the financial period in which they are incurred.
The cost of major renovations is included in the carrying amount
of the asset when it is probable that future economic benefits from
the renovations will flow to the Group.
=================================================================================
Owner- Fixtures Computer Total
occupied and fittings equipment
GBP'k GBP'k GBP'k GBP'k
---------------------------------------- --------- ------------- ---------- ------
Cost/Valuation
At 1 January 2022 4,250 240 848 5,338
Additions - 27 11 38
Disposals - (226) (450) (676)
Revaluation - - - -
---------------------------------------- --------- ------------- ---------- ------
At 31 December 2022 4,250 41 409 4,700
---------------------------------------- --------- ------------- ---------- ------
Accumulated depreciation and impairment
At 1 January 2022 425 218 629 1,272
Depreciation charge for the year - 17 91 108
Disposals - (226) (450) (676)
Impairment losses on revaluation - - - -
---------------------------------------- --------- ------------- ---------- ------
At 31 December 2022 425 9 270 704
---------------------------------------- --------- ------------- ---------- ------
Carrying amount
---------------------------------------- --------- ------------- ---------- ------
As at 31 December 2022 3,825 32 139 3,996
---------------------------------------- --------- ------------- ---------- ------
All items disposed where either donated to charity or recycled at GBPNIL.
Owner-occupied Fixtures Computer Total
and fittings equipment
GBP'k GBP'k GBP'k GBP'k
---------------------------------------- -------------- ------------- ---------- ------
Cost/Valuation
At 1 January 2021 4,250 235 825 5,310
Additions - 5 23 28
Disposals - - - -
Revaluation - - - -
---------------------------------------- -------------- ------------- ---------- ------
At 31 December 2021 4,250 240 848 5,338
---------------------------------------- -------------- ------------- ---------- ------
Accumulated depreciation and impairment
At 1 January 2021 425 185 526 1,136
Depreciation charge for the year - 33 103 136
Disposals - - - -
Impairment losses on revaluation - - - -
---------------------------------------- -------------- ------------- ---------- ------
At 31 December 2021 425 218 629 1,272
---------------------------------------- -------------- ------------- ---------- ------
Carrying amount
---------------------------------------- -------------- ------------- ---------- ------
As at 31 December 2021 3,825 22 219 4,066
---------------------------------------- -------------- ------------- ---------- ------
The Group holds two owner-occupied properties, Sabre House and The
Old House, which are both managed by the Group. In accordance with
the Group's accounting policies, owner-occupied buildings are not depreciated.
The properties are measured at fair value which is arrived at on the
basis of a valuation carried out on 1 December 2020 by Hurst Warne
and Partners LLP. The valuation was carried out on an open-market basis
in accordance with the Royal Institution of Chartered Surveyors' requirements,
which is deemed to equate to fair value. While transaction evidence
underpins the valuation process, the definition of market value, including
the commentary, in practice requires the valuer to reflect the realities
of the current market. In this context valuers must use their market
knowledge and professional judgement and not rely only upon historical
market sentiment based on historical transactional comparables.
The fair value of the owner-occupied properties was derived using the
investment method supported by comparable evidence. The significant
non-observable inputs used in the valuations are the expected rental
values per square foot and the capitalisation rates. The fair value
of the owner-occupied properties valuation would increase (decrease)
if the expected rental values per square foot were to be higher (lower)
and the capitalisation rates were to be lower (higher).
Management has performed a fair value assessment of the owner-occupied
property which includes a review of current market rental costs. Expected
rental costs per square foot are above the rates as at the date of
the last external valuation and do not indicate a decrease in the fair
value of the owner-occupied property.
The fair value measurement of owner-occupied properties of GBP3,825k
(2021: GBP3,825k ) has been categorised as a Level 3 fair value based
on the non-observable inputs to the valuation technique used.
The following table shows reconciliation to the closing fair value
for the Level 3 owner-occupied property at valuation:
2022 2021
Owner-occupied GBP'k GBP'k
----------------------------------------- ------------- -------------
At 1 January 3,825 3,825
Revaluation losses - -
Impairment losses - -
----------------------------------------- ------------- -------------
At 31 December 3,825 3,825
----------------------------------------- ------------- -------------
The fair value of owner-occupied includes a revaluation reserve of
GBP800k (2021: GBP800k) (excluding tax impact) and is not distributable.
Revaluation losses are charged against the related revaluation reserve
to the extent that the decrease does not exceed the amount held in
the revaluation surplus in respect of the same asset. Any additional
losses are charged as an impairment loss in the profit or loss account.
Reversal of such impairment losses in future periods will be credited
to the profit or loss account to the extent losses were previously
charged to the profit or loss account.
The table below shows the impact a 15% decrease in property markets
will have on the Company's profit after tax and equity:
Decrease Decrease
in profit after In total equity
tax
------------------------------------------
2022 2021 2022 2021
At 31 December GBP'k GBP'k GBP'k GBP'k
------------------------------------------ -------- -------- -------- --------
Owner-occupied property
------------------------------------------ -------- -------- -------- --------
Impact of a 15% decrease in property
markets (131) (131) (465) (465)
------------------------------------------ -------- -------- -------- --------
Historical cost model values
If owner-occupied properties were carried under the cost model (historical
costs, less accumulated depreciation and impairment losses), the value
of owner-occupied properties in the balance sheet would have been GBP2,816k
(2021: GBP2,845k ).
9.2. Leased assets
ACCOUNTING POLICY
Right-of-use assets
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying assets
or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term.
The estimated useful lives of right-of-use assets are determined
on the same basis as property and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
Lease liabilities
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot
be readily determined, the Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability
comprise the following:
* Fixed payments, including in-substance fixed payments
* Variable lease payments that depend on an index or a
rate, initially measured using the index or rate as
at the commencement date
* Amounts expected to be payable under a residual value
guarantee
* The exercise price under a purchase option that the
Group is reasonably certain to exercise, lease
payments in an optional renewal period if the Group
is reasonably certain to exercise an extension option,
and penalties for early termination of a lease unless
the Group is reasonably certain not to terminate
early
The lease liability is measured at amortised cost using the effective
interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there
is a change in the Group's estimate of the amount expected to be
payable under a residual value guarantee, or if the Group changes
its assessment of whether it will exercise a purchase, extension
or termination option.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases of machinery that have a lease
term of 12 months or less and leases of low-value assets, including
IT equipment. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the
lease term.
==============================================================================
Right-of-use assets
Additional information on the right-of-use assets by class of assets
is as follows:
Computer Total
equipment
GBP'k GBP'k
----------------------------------------- ------------------- ----------
As at 1 January 2022 187 187
Additions - -
Depreciation (187) (187)
----------------------------------------- ------------------- ----------
As at 31 December 2022 - -
----------------------------------------- ------------------- ----------
The Group's right-of-use asset has expired during 2022 and no new lease
for IT equipment has been entered into. The right-of-use asset has
therefore been derecognised.
Computer Total
equipment
GBP'k GBP'k
----------------------- ---------- ------
As at 1 January 2021 189 189
Additions 247 247
Depreciation (249) (249)
----------------------- ---------- ------
As at 31 December 2021 187 187
----------------------- ---------- ------
Lease liabilities
Lease liabilities are presented in the statement of financial position
as follows:
2022 2021
GBP'k GBP'k
----------------------------------------------- ------------- ------------
As at 1 January 193 194
Additions - 247
Accretion of interest 5 16
Payments (198) (264)
----------------------------------------------- ------------- ------------
As at 31 December - 193
----------------------------------------------- ------------- ------------
Current - 193
Non-current - -
----------------------------------------------- ------------- ------------
The following are the amounts recognised in the profit or loss account:
2022 2021
GBP'k GBP'k
-------------------------------------------------------------- ----- -----
Depreciation expense of right-of-use assets 187 249
Interest expense on lease liabilities 5 16
Expenses relating to short-term leases (included in - -
IT expenses)
Expenses relating to low-value assets (included in other
operating expenses) 14 14
Variable lease payments - -
-------------------------------------------------------------- ----- -----
Total 206 279
-------------------------------------------------------------- ----- -----
The Group had total cash outflows for leases of GBP212k in 2022 (2021:
GBP278k ). The Group had no non-cash additions to right-of-use assets
or lease liabilities. The lease contract expired during 2022.
10. Tax charge
ACCOUNTING POLICY
The taxation charge in the profit or loss account is based on the
taxable profits for the year. It is Group policy to relieve profits
where possible by the surrender of losses from Group companies with
payment for value.
=======================================================================
2022 2021
GBP'k GBP'k
-------------------------------------------------- ------ ------
Current taxation
Charge for the year 2,644 6,935
-------------------------------------------------- ------ ------
2,644 6,935
-------------------------------------------------- ------ ------
Deferred taxation (Note 11)
Origination and reversal of temporary differences (1) 124
-------------------------------------------------- ------ ------
(1) 124
-------------------------------------------------- ------ ------
Current taxation 2,644 6,935
Deferred taxation (Note 11) (1) 124
-------------------------------------------------- ------ ------
Tax charge for the year 2,643 7,059
-------------------------------------------------- ------ ------
Tax recorded in other comprehensive income is as follows:
2022 2021
GBP'k GBP'k
------------------------------- -------------- -------------
Current taxation - -
Deferred taxation (3,563) (1,069)
------------------------------- -------------- -------------
(3,563) (1,069)
------------------------------- -------------- -------------
The actual income tax charge differs from the expected income tax charge
computed by applying the standard rate of UK corporation tax of 19.00%
(2021: 19.00%) as follows:
2022 2021
GBP'k GBP'k
----------------------------------------------------------- ------- -------
Profit before tax 12,750 37,199
Expected tax charge 2,423 7,068
Effect of:
Expenses not deductible for tax purposes 9 6
Adjustment of deferred tax to average rate of 23.5% (2) -
Other permanent difference - -
Adjustment in respect of prior periods 9 (99)
Income/loss not subject to UK taxation 6 8
Other Income Tax Adjustments 198 76
----------------------------------------------------------- ------- -------
Tax charge for the year 2,643 7,059
----------------------------------------------------------- ------- -------
Effective income tax rate 20.73% 18.98%
----------------------------------------------------------- ------- -------
11. Deferred tax charge
ACCOUNTING POLICY
Deferred tax is recognised in respect of all temporary differences
that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that will
result in an obligation to pay more, or a right to pay less or to
receive more, tax, with the following exception.
Deferred tax assets are recognised only to the extent that the Directors
consider that it is more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying
timing differences can be deducted.
============================================================================
Provisions Depreciation Share-based Fair value Total
and other in excess Payments movements
temporary of capital in debt
differences allowances securities
at FVOCI
GBP'k GBP'k GBP'k GBP'k GBP'k
-------------------------------------- ------------ ------------ ----------- ----------- ------
At 1 January 2021 21 (24) 347 (469) (125)
-------------------------------------- ------------ ------------ ----------- ----------- ------
(Debit)/Credit to the profit
or loss (2) (2) (114) (6) (124)
(Debit)/Credit to other comprehensive
income - - - 1,069 1,069
-------------------------------------- ------------ ------------ ----------- ----------- ------
At 31 December 2021 19 (26) 233 594 820
-------------------------------------- ------------ ------------ ----------- ----------- ------
(Debit)/Credit to the profit
or loss (19) 6 20 (6) 1
(Debit)/Credit to other comprehensive
income - - - 3,563 3,563
-------------------------------------- ------------ ------------ ----------- ----------- ------
At 31 December 2022 - (20) 253 4,151 4,384
-------------------------------------- ------------ ------------ ----------- ----------- ------
2022 2021
GBP'k GBP'k
------------------------------------- ------ -----
Per statement of financial position:
Deferred tax assets 4,404 846
Deferred tax liabilities (20) (26)
------------------------------------- ------ -----
4,384 820
------------------------------------- ------ -----
From 1 April 2023, The Finance Act 2021 increases the UK corporation
tax from 19% to 25%. This means that for any temporary differences
expected to reverse on or after 1 April 2023, the new tax rate of 25%
will be relevant. The Group has adjusted deferred tax balances accordingly.
The impact of this adjustment on the deferred tax balances is not material.
12. Dividends
ACCOUNTING POLICY
Dividend distribution to the Group's shareholders is recognised
as a liability in the Group's financial statements in the period
in which the dividend is approved.
====================================================================
2022 2021
pence GBP'k pence GBP'k
per share per share
----------------------------------------- ----------- ------- ---------- -------
Amounts recognised as distributions
to equity holders in the period
Interim dividend for the current year 2.8 6,960 3.7 9,218
Final dividend for the prior year 9.3 23,172 11.7 29,168
----------------------------------------- ----------- ------- ---------- -------
12.1 30,132 15.4 38,386
----------------------------------------- ----------- ------- ---------- -------
Proposed dividends
----------------------------------------- ----------- ------- ---------- -------
Final dividend (1) 1.7 4,250 9.3 23,250
----------------------------------------- ----------- ------- ---------- -------
(1) Subsequent to 31 December 2022, the Directors declared a final
dividend for 2022 of 1.7p per ordinary share. This dividend will be
accounted for as an appropriation of retained earnings in the year
ended 31 December 2022 and is not included as a liability in the Statement
of Financial Position as at 31 December 2022.
The trustees of the employee share trusts waived their entitlement
to dividends on shares held in the trusts to meet obligations arising
on share incentive schemes, which reduced the dividends paid for the
year ended 31 December 2022 by GBP118k (2021: GBP114k ).
13. Prepayments, accrued income and other assets
2022 2021
GBP'k GBP'k
------------------------------- ------ -----
Prepayments and accrued income 1,278 821
------------------------------- ------ -----
Total 1,278 821
------------------------------- ------ -----
The carrying value of prepayments, accrued income and other assets
approximates to fair value. There are no amounts expected to be recovered
more than 12 months after the reporting date.
14. Goodwill
ACCOUNTING POLICY
Goodwill has been recognised in acquisitions of subsidiaries and
represents the difference between the cost of the acquisition and
the fair value of the net identifiable assets acquired. Goodwill
is stated at cost less any accumulated impairment losses.
Impairment of goodwill
The Group perform an annual impairment review which involves comparing
the carrying amount to the estimated recoverable amount and recognising
an impairment loss if the recoverable amount is lower than the carrying
amount. Impairment losses are recognised through the profit or loss
account and are not subsequently reversed.
The recoverable amount is the greater of the fair value of the asset
less costs to sell and the value in use.
The value in use calculations use cash flow projections based on
financial budgets approved by management.
===========================================================================
On 3 January 2014 the Group acquired Binomial Group Limited, the parent
of Sabre Insurance Company Limited, for a consideration of GBP245,485k
satisfied by cash. As from 1 January 2014, the date of transition to
IFRS, goodwill was no longer amortised but is subject to annual impairment
testing. Impairment testing involves comparing the carrying value of
the net assets and goodwill against the recoverable amount.
The goodwill recorded in respect of this transaction at the date of
acquisition was GBP156,279k. There has been no impairment to goodwill
since this date, and no additional goodwill has been recognised by
the Group.
The Group performed its annual impairment test as at 31 December 2022
and 31 December 2021. The Company considers the relationship between
the Group's market capitalisation and the book value of its subsidiary
undertakings, among other factors, when reviewing for indicators of
impairment.
Key assumptions
The market capitalisation of the Company as at 31 December 2022 had
reduced to GBP266,000k from GBP459,500k at 31 December 2021. This provided
an indication that the underlying value had been impaired, and therefore
the Directors carried out an impairment assessment based on the Cash
Generating Units ("CGUs") within the Group.
The group has identified one CGU, for which goodwill has been fully
allocated. The Group has assessed the recoverable amount of the CGU
as its "value-in-use". Value-in-use is defined as the present value
of the future cash flows expected to derive from the CGU and represents
the recoverable amount for the CGU.
We have used a dividend discount model to estimate the value-in-use,
wherein dividend payments are discounted to the present value. Dividends
have been estimated, based on forecasted financial information, over
a four-year forecast period with and terminal growth rate applied.
The key assumptions used in the preparation of future cash flows are:
plan-period financial performance, dividend payout ratio, long-term
growth rates and discount rate.
The key assumptions used in the calculation for the value in use is
set out below
* Plan period financial performance set in-line with
the Group's expectations
* Dividend payout ratio in line with the Group's
strategy
* Long-term growth rate beyond the plan period of 2%
* Discount rate of 9.5%, being a calculated cost of
capital using market rate returns of Sabre and
comparable insurers
These calculations use post-tax cash flow projections based on the
Group's capital models. As the value-in-use exceeds the carrying amount,
the recoverable amount remains supportable.
The Group has conducted sensitivity testing to the recoverable amount,
in order to understand the relevance of these various factors in arriving
at the value in use.
* Dividend within the plan period - To assess the
impact of reasonable changes in performance on our
base case impairment analysis and headroom, we flexed
the dividend within the plan period by +10% and -10%.
In doing so, the value in use varied by approximately
10.0% around the central scenario.
* Long term growth rate - To assess the impact of
reasonable changes in the long-term growth rate on
our base case impairment analysis and headroom, we
flexed the long-term growth rate by +1% and -1%. In
doing so, the value in use varied by approximately
7.1% around the central scenario.
* Discount rate - To assess the impact of reasonable
changes in the dividend payout ratio on our base case
impairment analysis and headroom, we flexed the
average discount rate by +2% and -2%. In doing so,
the value in use varied by approximately 13.0% around
the central scenario.
When applying these stressed factors, no scenario suggested an impairment
of goodwill would be required.
15. Share capital
2022 2021
GBP'k GBP'k
----------------------------------------------- ----- -----
Authorised share capital
250,000,000 ordinary shares of GBP0.001 each 250 250
Issued ordinary share capital (fully paid up):
250,000,000 ordinary shares of GBP0.001 each 250 250
----------------------------------------------- ----- -----
All shares are unrestricted and carry equal voting rights.
As at 31 December 2022, The Sabre Insurance Group Employee Benefit
Trust held 1,431,576 (2021: 866,855) of the 250,000,000 issued ordinary
shares with a nominal value of GBP1,431.58 (2021: GBP866.86) in connection
with the operation of the Group's share plans. Refer to Notes 16 and
17 for additional information on own shares held.
16. Share-based payments
The Group operates equity-settled share-based schemes for all employees
in the form of a Long-Term Incentive Plan ("LTIP"), Deferred Bonus
Plan ("DBP") and Share Incentive Plans ("SIP"), including Free Shares
and Save As You Earn ("SAYE"). The shares are in the ultimate parent
company, Sabre Insurance Group plc.
Free shares donated at Shares bought/(sold) Total
listing on open market
--------------------------- ---------------------------------- ------------
Number Average GBP Number Average GBP GBP
of shares price of shares price
(pence) (pence)
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
As at 31 December
2020 63,031 0.001 63 541,208 275.975 1,493,601 1,493,664
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
Shares purchased - - - 928,186 256.295 2,378,897 2,378,897
Shares disposed - - - (176,672) 255.443 (451,296) (451,296)
Shares vested (39,901) 0.001 (40) (448,997) 259.367 (1,164,550) (1,164,590)
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
As at 31 December
2021 23,130 0.001 23 843,725 267.463 2,256,652 2,256,675
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
Shares purchased - - - 807,981 141.293 1,141,621 1,141,621
Shares disposed - - - - - - -
Shares vested (23,130) - (23) (220,130) 267.463 (588,766) (588,789)
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
As at 31 December
2022 - - - 1,431,576 196.253 2,809,507 2,809,507
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
In thousands GBP'k GBP'k GBP'k
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
As at 31 December
2021 - 2,257 2,257
As at 31 December
2022 - 2,810 2,810
------------------ ---------- -------- ----- ---------- -------- ------------ ------------
As at 31 December 2022 there were NIL (2021: NIL) exercisable shares
outstanding.
The Group recognised a total expense in the profit or loss for the
year ended 31 December 2022 of GBP1,603k (2021: GBP1,075k ), relating
to equity-settled share-based plans.
Long-Term Incentive Plan ("LTIP")
The LTIP is a discretionary share plan, under which the Board may grant
share-based awards ("LTIP Awards") to incentivise and retain eligible
employees.
LTIP Awards - Awards with performance conditions
The LTIP with performance conditions is a discretionary share plan,
under which the Board may grant share-based awards ("LTIP Awards")
to incentivise and retain eligible employees. The vesting of LTIP Awards
may (and, in the case of an LTIP Award to an Executive Director other
than a Recruitment Award, will) be subject to the satisfaction of performance
conditions. Any performance condition may be amended or substituted
if one or more events occur which cause the Board to consider that
an amended or substituted performance condition would be more appropriate
and would not be materially less difficult to satisfy.
LTIP Awards which are subject to performance conditions will normally
have those conditions assessed as soon as reasonably practicable after
the end of the relevant performance period and, to the extent that
the performance conditions have been met, the LTIP Awards will vest
either on that date or such later date as the Board determines. LTIP
Awards (other than Recruitment Awards) granted to the Executive Directors
will normally be subject to a performance period of at least three
years. LTIP Awards (other than Recruitment Awards) which are not subject
to performance conditions will normally vest on the third anniversary
of the date of grant or such other date as the Board determines.
The LTIP Awards issued by the Group for 2020 has two performance metrics
with a 50%/50% weighting, being Total Shareholder Return ("TSR") and
Earnings Per Share ("EPS").
The Group's TSR is compared to the TSR of the constituents of the FTSE
250 Index (excluding investment trusts and extractive industries).
The TSR tranche will vest in accordance with the following schedule:
2020 LTIP
grant
TSR performance
---------------------------------------------------- --------------------
Below median 0%
Median (Threshold) 25%
Between median and upper quartile Straight-line
Upper quartile (Stretch) 100%
----------------------------------------------------- -------------------
The Group's EPS performance is the Groups cumulative EPS over the performance
period.
2020 LTIP
grant
EPS performance
------------------------------------------------------ ------------------------
Below 48.6p 0%
48.6p (Threshold) 25%
Between threshold and target Straight-line
54.0 (Target) 60%
Between target and stretch Straight-line
66.7p or higher (Stretch) 100%
------------------------------------------------------- ------------------------
Shares granted under the 2019 LTIP did not meet the required performance
measures and shares granted under the plan were forfeited in 2022.
The following table lists the inputs to the model used to value the
remaining LTIP plan for the year ended 31 December 2022. The TSR fair
value of the award granted is measured using the Monte Carlo method
and the Black-Scholes model is used for the EPS fair value. The amount
recognised as an expense under IFRS 2 is adjusted to reflect the actual
number of share awards that vest.
2020 LTIP
grant
--------------------------------------------------------------- -------------
Weighted average fair value per award at grant date 226 pence
Share price at grant date 282 pence
Expected term 4.43 years
Expected volatility(1) 30.09%
Expected exercise price on outstanding awards NIL
Grant-date TSR performance of the Group (2.73%)
Average risk - free interest rate 0.10%
---------------------------------------------------------------- -------------
(1) Volatility has been estimated using the historical daily average
volatility of the share price of similar companies to Sabre over a
period of time. This assumption has no impact on the fair value of
the EPS tranche, as the Awards were granted with a nil-cost exercise
price.
Shares granted under the LTIP with performance conditions have a three-year
vesting period. The Leadership Team Awards are subject to a two-year
post-vesting holding period. To reflect the lack of liquidity of the
two-year holding period, a discount rate of 15.40% for the 2020 LTIP
grant has been applied in determining the fair value of the grant to
the Leadership Team.
The tables below detail the movement in the LTIP:
LTIP with performance
conditions
-----------------------
Number and WAEP
-----------------------
Number GBP
---------------------------------------------- ------------------ ---
Outstanding at 1 January 2022 1,149,359 NIL
---------------------------------------------- ------------------ ---
Granted - NIL
Forfeited (541,079) NIL
Vested - NIL
---------------------------------------------- ------------------ ---
Outstanding at 31 December 2022 608,280 NIL
---------------------------------------------- ------------------ ---
(1) Weighted average exercise price - as a proxy for fair value.
LTIP with performance
conditions
-----------------------
Number and WAEP
-----------------------
Number GBP
------------------------------- ----------------- ----
Outstanding at 1 January 2021 1,935,124 NIL
------------------------------- ----------------- ----
Granted - NIL
Forfeited (499,442) NIL
Vested (286,323) NIL
------------------------------- ----------------- ----
Outstanding at 31 December 2021 1,149,359 NIL
------------------------------- ----------------- ----
LTIP Awards - Restricted Share Awards ("RSA")
From 2021 the Group no longer issues awards under the LTIP Awards with
performance conditions, but instead issues RSAs.
The RSAs are structured as nil-cost rewards, to receive free shares
on vesting. Shares will normally vest three years after grant date,
subject to continued employment and the satisfaction of pre-determined
underpins. Awards are also subject to an additional two-year holding
period, so that the total time prior to any potential share sale (except
to meet any tax liabilities arising from the award) will generally
be five years.
The total number of shares awarded under the scheme was 540,574 (2021:
441,684 ) with an estimated fair value at grant date of GBP1,238k (2021:
GBP1,170k ). The fair value is based on the average closing share price
of the five trading days before the grant date.
The awards granted during the year ended 31 December 2022 are subject
to the following underpins:
* Maintaining a solvency ratio in excess of 140%
* Achieving a Return of Tangible Equity in excess of
10%
* No material regulatory censure
* Overall Committee discretion
Future dividends are accrued separately and are not reflected in the
fair value of the grant.
Deferred Bonus Plan ("DBP")
To encourage behaviour which does not benefit short-term profitability
over longer-term value. Directors and some key staff were awarded shares
in lieu of a bonus, to be deferred for two years, using the market
value at the grant date. The total numbers of shares awarded under
the scheme was 171,234 (2021: 278,084 ) with an estimate fair value
of GBP404k (2021: GBP672k ). Of this award, the number of shares awarded
to Directors and Persons Discharging Managerial Responsibilities ("PDMRs")
was 144,659 (2021: 247,007 ) with an estimated fair value of GBP341k
(2021: GBP597k ). Fair values are based on the share price at grant
date. All shares are subject to a two-year service period and are not
subject to performance conditions.
Future dividends are accrued separately and are not reflected in the
fair value of the grant.
The DBP is recognised in the profit or loss account on a straight-line
basis over a period of two years from grant date.
Share Incentive Plans ("SIPs")
The Sabre Share Incentive Plans provide for the award of free Sabre
Insurance Group plc shares, Partnership Shares (shares bought by employees
under the matching scheme), Matching Shares (free shares given by the
employer to match partnership shares) and Dividend Shares (shares bought
for employees with proceeds of dividends from partnership shares).
The shares are owned by the Employee Benefit Trust to satisfy awards
under the plans. These shares are either purchased on the market and
carried at fair value or issued by the parent company to the trust.
Matching Shares
The Group has a Matching Shares scheme under which employees are entitled
to invest between GBP10 and GBP150 each month through the share trust
from their pre-tax pay. The Group supplements the number of shares
purchased by giving employees 1 free matching share for every 3 shares
purchased up to GBP1,800. Matching shares are subject to a three-year
service period before the matching shares are awarded. Dividends are
paid on shares, including matching shares, held in the trust by means
of dividends shares. The fair value of such awards is estimated to
be the market value of the awards on grant date.
In the year ended 31 December 2022, 12,317 (2021: 6,987 ) matching
shares were granted to employees with an estimated fair value of GBP13k
(2021: GBP13k ).
As at 31 December 2022, 28,826 (2021: 16,838 ) matching shares were
held on behalf of employees with an estimated fair value of GBP31k
(2021: GBP31k ). The average unexpired life of Matching Share awards
is 1.5 years (2021: 1.1 years).
Save as You Earn ("SAYE")
The SAYE scheme allows employees to enter into a regular savings contract
of between GBP5 and GBP500 per month over a three-year period, coupled
with a corresponding option over shares. The grant price is equal to
80% of the quoted market price of the shares on the invitation date.
The participants of the SAYE scheme are not entitled to dividends and
therefore dividends are excluded from the valuation of the SAYE scheme.
Estimated fair value of options at grant date:
SAYE 2020: 71p
SAYE 2021: 55p
SAYE 2022: 40p
The following table lists the inputs to the Black-Scholes model used
to value the awards granted in respect of the 2022 SAYE scheme.
2022 SAYE
------------------------------------------------------ ---------------
Share price at grant date 216 pence
Expected term 3 years
Expected volatility(1) 31.0%
Continuously compounded risk-free rate 1.5%
Continuously compounded dividend yield 6%
Strike price at grant date 181.3 pence
------------------------------------------------------- ---------------
(1) Volatility has been estimated using the historical daily average
volatility of the share price of the Group for the year immediately preceding
the grant date.
17. RESERVES
Own shares
Sabre Insurance Group plc established an Employee Benefit Trust ("EBT")
in 2017 in connection with the operation of its share plans. The investment
in own shares as at 31 December 2022 was GBP2,810k (2021: GBP2,257k
). The market value of the shares in the EBT as at 31 December 2022
was GBP1,523k (2021: GBP1,593k ).
Merger reserve
Sabre Insurance Group plc was incorporated as a limited company on
21 September 2017. On 11 December 2017, immediately prior to the Company's
listing on the London Stock Exchange, Sabre Insurance Group plc acquired
the entire share capital of the former ultimate parent company of the
Group, Barbados TopCo Limited ("TopCo"). As a result, Sabre Insurance
Group plc became the ultimate parent of the Sabre Insurance Group.
The merger reserve resulted from this corporate reorganisation.
FVOCI reserve
The FVOCI reserve records the unrealised gains and losses arising from
changes in the fair value of debt securities at FVOCI. The movements
in this reserve are detailed in the consolidated Statement of Comprehensive
Income.
Revaluation reserve
The revaluation reserve records the fair value movements of the Group's
owner-occupied properties. Refer to Note 9 for more information on
the revaluation of owner-occupied properties.
Share-based payments reserve
The Group's share-based payments reserve records the value of equity
settled share-based payment benefits provided to the Group's employees
as part of their remuneration that has been charged through the income
statement. Refer to Note 16 for more information on share-based payments.
18. Related party transactions
Sabre Insurance Group plc is the ultimate parent and ultimate
controlling party of the Group. The following entities included
below form the Group.
Name Principle Business Registered Address
------------------------- -------------------- ---------------------------------------
Binomial Group Limited Intermediate holding Sabre House, 150 South Street, Dorking,
company Surrey, United Kingdom, RH4 2YY
Sabre Insurance Company Motor insurance Sabre House, 150 South Street, Dorking,
Limited underwriter Surrey, United Kingdom, RH4 2YY
Barbados TopCo Limited(1) Non-Trading Floor 2, Trafalgar Court, Les Banques,
St Peter Port, Guernsey, GY1 4LY
Barb IntermediateCo Non-Trading 26 New Street, St Helier, Jersey,
Limited(2) JE2 3RA
Barb MidCo Limited(2) Non-Trading 26 New Street, St Helier, Jersey,
JE2 3RA
Barb BidCo Limited(2) Non-Trading 26 New Street, St Helier, Jersey,
JE2 3RA
Barb HoldCo Limited(2) Non-Trading 26 New Street, St Helier, Jersey,
JE2 3RA
Other controlled
entities
EBT - UK SIP Trust Ocorian, 26 New Street, St Helier,
Jersey, JE2 3RA
The Sabre Insurance Trust Ocorian, 26 New Street, St Helier,
Group EBT Jersey, JE2 3RA
------------------------- -------------------- ---------------------------------------
(1) In process of liquidation
(2) Dissolved in February 2023
No single party holds a significant influence (>20%) over Sabre Insurance
Group plc.
Both Employee Benefit Trusts ("EBTs") were established to assist in
the administration of the Group's employee equity-based compensation
schemes. UK registered EBT holds the all-employee SIP. The Jersey-registered
EBT holds the Long-Term incentive Plan ("LTIP") and Deferred Bonus
Plan ("DBP").
While the Group does not have legal ownership of the EBTs and the ability
of the Group to influence the actions of the EBTs is limited to a trust
deed, the EBT was set up by the Group with the sole purpose of assisting
in the administration of these schemes, and is in essence controlled
by the Group and therefore consolidated.
During the period ended 31 December 2022, the Group donated no shares
to the EBTs (2021: NIL).
Key Management compensation
Key Management includes Executive Directors, Non-executive Directors
and Directors of subsidiaries which the Group considers to be senior
management personnel. Further details of Directors' shareholdings and
remuneration can be found in the "Annual Report on Director's Remuneration"
on pages 78 to 87 of the Annual Report and Accounts.
The aggregate amount paid to Directors during the year was as follows.
2022 2021
----------------------------------------------------------------- ------- ------
Remuneration 1,894 2,317
Contributions to defined contribution pension scheme 7 3
Shares granted under LTIP 864 692
----------------------------------------------------------------- ------- ------
Total 2,765 3,012
----------------------------------------------------------------- ------- ------
19. SEGMENT INFORMATION
The Group provides short-term motor insurance to clients, which comprises
three lines of business, motor vehicle insurance, motorcycle insurance
and taxi insurance, which are written solely in the UK. The Group has
no other lines of business, nor does it operate outside of the UK.
Other income relates to auxiliary products and services, including
marketing and administration fees, all relating to the motor insurance
business. The Group does not have a single client which accounts for
more than 10% of revenue.
2022
Motor vehicle Motorcycle Taxi Total
Note GBP'k GBP'k GBP'k GBP'k
----------------------------------------- ------------- ---------- --------- ----------
Profit or Loss Account information
Gross written premium 134,903 23,062 13,292 171,257
Less: Reinsurance premium ceded (21,440) (3,694) (1,322) (26,456)
------------------------------------------ ------------- ---------- --------- ----------
Net written premium 113,463 19,368 11,970 144,801
------------------------------------------ ------------- ---------- --------- ----------
Gross written premium 134,903 23,062 13,292 171,257
Less: Change in unearned premium
reserve 19,260 (5,236) (7,106) 6,918
Gross earned premium 154,163 17,826 6,186 178,175
------------------------------------------ ------------- ---------- --------- ----------
Reinsurance premium ceded (21,440) (3,694) (1,322) (26,456)
Less: Change in unearned premium
reserve 184 960 355 1,499
------------------------------------------ ------------- ---------- --------- ----------
Reinsurance premium payable (21,256) (2,734) (967) (24,957)
------------------------------------------ ------------- ---------- --------- ----------
Net earned premium 132,907 15,092 5,219 153,218
------------------------------------------ ------------- ---------- --------- ----------
Insurance claims, excluding claims
handling expenses (88,266) (24,253) (5,761) (118,280)
Insurance claims recoverable from
reinsurers 6,522 6,385 187 13,094
------------------------------------------ ------------- ---------- --------- ----------
Net insurance claims (81,744) (17,868) (5,574) (105,186)
------------------------------------------ ------------- ---------- --------- ----------
Net loss ratio 61.5% 118.4% 106.8% 68.7%
------------------------------------------ ------------- ---------- --------- ----------
Segment reinsurance assets 106,519 6,385 3,622 116,526
Segment insurance liabilities (297,873) (26,299) (17,129) (341,301)
------------------------------------------ ------------- ---------- --------- ----------
Segment net insurance liabilities (191,354) (19,914) (13,507) (224,775)
------------------------------------------ ------------- ---------- --------- ----------
Other than reinsurance assets and insurance liabilities, the Group
does not allocate, monitor or report assets and liabilities per business
line and does not consider the information useful in the day-to-day
running of the Group's operations. The Group also does not allocate,
monitor, or report other income and expenses per business line.
Restated 2021
Motor vehicle Motorcycle Taxi Total
Note GBP'k GBP'k GBP'k GBP'k
----------------------------------- ----- ------------- ---------- ------ ---------
Profit or Loss Account information
Gross written premium 164,582 3,231 1,509 169,322
Less: Reinsurance premium ceded (21,019) (30) (184) (21,233)
------------------------------------------ ------------- ---------- ------ ---------
Net written premium 143,563 3,201 1,325 148,089
------------------------------------------ ------------- ---------- ------ ---------
Gross written premium 164,582 3,231 1,509 169,322
Less: Change in unearned premium
reserve (622) (2,941) 137 (3,426)
Gross earned premium 163,960 290 1,646 165,896
------------------------------------------ ------------- ---------- ------ ---------
Reinsurance premium ceded (20,814) (238) (181) (21,233)
Less: Change in unearned premium
reserve 574 208 (3) 779
------------------------------------------ ------------- ---------- ------ ---------
Reinsurance premium payable (20,240) (30) (184) (20,454)
------------------------------------------ ------------- ---------- ------ ---------
Net earned premium 143,720 260 1,462 145,442
------------------------------------------ ------------- ---------- ------ ---------
'Taxi' was not shown as a separate line of business in the 2021 Annual
Report and Accounts, as it was not considered to be a separate, material
element of premium income. Following the partnership with Freeway,
premium from the provision of taxi insurance has increased significantly
and as such it is now considered both useful and relevant to disclose
this separately. The 31 December 2021 business lines have been restated
to split Taxi from Motor vehicle.
The Group did not report claims information per business line in prior
years as the contribution of motorcycle and taxi business lines were
considered immaterial and a breakdown of claims numbers was not considered
meaningful.
20. Earnings per share
Basic earnings per share
2022 2021
------------------ ------------------
After Per share After Per share
tax pence tax pence
GBP'k GBP'k
------------------------------------------- ------- --------- ------- ---------
Profit for the year attributable to equity
holders 10,107 4.06 30,140 12.09
------------------------------------------- ------- --------- ------- ---------
Diluted earnings per share
2022
------------------------------
After Weighted Per share
tax average pence
GBP'k number
of shares
GBP'k
-------------------------------------------------------- ------- ---------- ---------
Profit for the year attributable to equity holders 10,107 248,865 4.06
Net share awards allocable for no further consideration 1,880 (0.03)
-------------------------------------------------------- ------- ---------- ---------
Total diluted earnings 250,745 4.03
-------------------------------------------------------- ------- ---------- ---------
2021
------------------------------
After Weighted Per share
tax average pence
GBP'k number
of shares
GBP'k
------- ---------- ---------
Profit for the year attributable to equity holders 30,140 249,221 12.09
Net share awards allocable for no further consideration 2,320 (0.11)
-------------------------------------------------------- ------- ---------- ---------
Total diluted earnings 251,541 11.98
-------------------------------------------------------- ------- ---------- ---------
21. Contingent liability
In the 2021 Annual Report and Accounts, the Group disclosed a contingent
liability regarding a contested determination in relation to the 2015,
2016 and 2017 corporation tax filings of a subsidiary of the Group,
which is currently dormant. During 2022 HMRC accepted the Group's appeal
against their determination and as such, the matter is now fully closed
with no change in the tax position of the Group.
22. EVENTS AFTER THE BALANCE SHEET DATE
Other than the declaration of a final dividend as disclosed in Note
12, there have been no material changes in the affairs or financial
position of the Company and its subsidiaries since the Statement of
Financial Position date.
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
2022 2021
Notes GBP'k GBP'k
----------------------------------------------- ----- -------- --------
Assets
Investments 2 450,000 580,963
Debtors 4 3 128
Prepayments 211 204
Cash and cash equivalents 861 915
----------------------------------------------- ----- -------- --------
Total assets 451,075 582,210
----------------------------------------------- ----- -------- --------
Equity
Issued share capital 5 250 250
Own shares (2,810) (2,257)
Merger reserve 236,949 369,515
Share-based payments reserve 2,407 1,841
Retained earnings 212,581 212,794
----------------------------------------------- ----- -------- --------
Total equity 449,377 582,143
----------------------------------------------- ----- -------- --------
Liabilities
Creditors: Amounts falling due within one year 3 1,607 -
Accruals 91 67
----------------------------------------------- ----- -------- --------
Total liabilities 1,698 67
----------------------------------------------- ----- -------- --------
Total equity and liabilities 451,075 582,210
----------------------------------------------- ----- -------- --------
No income statement is presented for Sabre Insurance Group plc as permitted
by section 408 of the Companies Act 2006. The loss after tax of the
parent company for the period was GBP103,094k (2021: GBP40,846k profit
after tax).
The financial statements were approved by the Board of Directors and
authorised for issue on 13 March 2023.
Signed on behalf of the Board of Directors by:
ADAM WESTWOOD
Chief Financial Officer
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Notes GBP'k GBP'k
---------------------------------------------------- ---------- ---------
ORDINARY SHAREHOLDERS' EQUITY - at 1 January 250 250
----------------------------------------------------- ---------- ---------
At 31 December 250 250
----------------------------------------------------- ---------- ---------
OWN SHARES - at 1 January (2,257) (1,494)
Net movement in own shares (553) (763)
----------------------------------------------------- ---------- ---------
At 31 December (2,810) (2,257)
----------------------------------------------------- ---------- ---------
MERGER RESERVE - at 1 January 369,515 369,515
Transfer from retained earnings (132,566) -
----------------------------------------------------- ---------- ---------
At 31 December 236,949 369,515
----------------------------------------------------- ---------- ---------
SHARE-BASED PAYMENT RESERVE - at 1 January 1,841 1,817
Settlement of share-based payments (1,037) (1,051)
Charge in respect of share-based payments 1,603 1,075
----------------------------------------------------- ---------- ---------
At 31 December 2,407 1,841
----------------------------------------------------- ---------- ---------
RETAINED EARNINGS - at 1 January 212,794 210,449
Share-based payments 447 (115)
Profit for the year (103,094) 40,846
Transfer to merger reserve 132,566 -
Ordinary dividends paid (30,132) (38,386)
----------------------------------------------------- ---------- ---------
At 31 December 212,581 212,794
----------------------------------------------------- ---------- ---------
Total equity at 31 December 449,377 582,143
----------------------------------------------------- ---------- ---------
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
2022 2021
GBP'k GBP'k
------------------------------------------------------ --- ---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit after tax for the year (103,094) 40,846
Adjustment for:
Impairment of subsidiary 2.1 132,566 -
------------------------------------------------------ --- ---------- ---------
Operating cash flows before movements in working
capital 29,472 40,846
------------------------------------------------------ --- ---------- ---------
Movements in working capital:
Change in debtors 124 (47)
Change in prepayments (7) (36)
Change in trade and other payables 1,607 (183)
Change in accruals 24 (96)
------------------------------------------------------ --- ---------- ---------
Net cash generated from operating activities 31,220 40,484
------------------------------------------------------ --- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in acquiring and disposing of own
shares (1,142) (1,928)
Dividends paid (30,132) (38,386)
------------------------------------------------------ --- ---------- ---------
Net cash used by financing activities (31,274) (40,314)
------------------------------------------------------ --- ---------- ---------
Net (decrease)/ increase in cash and cash equivalents (54) 170
------------------------------------------------------ --- ---------- ---------
Cash and cash equivalents at the beginning of
the year 915 745
------------------------------------------------------ --- ---------- ---------
Cash and cash equivalents at the end of the year 861 915
------------------------------------------------------ --- ---------- ---------
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
1. Accounting policies
The principal accounting policies applied in the preparation of these
consolidated and company financial statements are included in the specific
notes to which they relate. These policies have been consistently applied
to all the years presented, unless otherwise indicated.
1.1 Basis of preparation
These financial statements present the Sabre Insurance Group plc company
financial statements for the period ended 31 December 2022, comprising
the parent company statement of financial position, parent company
statement of changes in equity, parent company statement of cash flows,
and related notes.
The financial statements of the Company have been prepared in accordance
with UK-adopted international accounting standards, comprising International
Accounting Standards ("IAS") and International Financial Reporting
Standards ("IFRS"), and the requirements of the Companies Act 2006.
Endorsement of accounting standards is granted by the UK Endorsement
Board ("UKEB").
In accordance with the exemption permitted under section 408 of the
Companies Act 2006, the Company's income statement and related notes
have not been presented in these separate financial statements.
The financial statements are prepared in accordance with the going
concern principle using the historical cost basis, except for those
financial assets that have been measured at fair value.
The financial statements values are presented in pounds sterling (GBP)
rounded to the nearest thousand (GBP'k), unless otherwise indicated.
The accounting policies that are used in the preparation of these separate
financial statements are consistent with the accounting policies used
in the preparation of the consolidated financial statements of Sabre
Insurance Group plc as set out in those financial statements.
As permitted by section 408 of the Companies Act 2006, the statement
of comprehensive income of the parent company is not presented. The
additional accounting policies that are specific to the separate financial
statements of the Company are set out below.
2. Investments
The Company's financial assets are summarised below:
2022 2021
GBP'k GBP'k
-------------------------------------- -------- --------
Investment in subsidiary undertakings 450,000 580,963
-------------------------------------- -------- --------
Total 450,000 580,963
-------------------------------------- -------- --------
2.1 Investment in subsidiary undertakings
ACCOUNTING POLICY - INVESTMENT IN SUBSIDIARY UNDERTAKINGS
Investment in subsidiaries is stated at cost less any impairment.
=====================================================================
2022 2021
GBP'k GBP'k
------------------ ---------- --------
As at 1 January 580,963 579,889
Additions 1,603 1,074
Impairment (132,566) -
------------------ ---------- --------
As at 31 December 450,000 580,963
------------------ ---------- --------
The only operating insurance subsidiary of the Company is Sabre Insurance
Company Limited, from which the value of the Group is wholly derived,
as there are no other trading entities within the Group. The Company
performed its annual impairment test as at 31 December 2022 and 31
December 2021. The Company considers the relationship between the Group's
market capitalisation and the book value of its subsidiary undertakings,
among other factors, when reviewing for indicators of impairment. As
at 31 December 2022 and 31 December 2021, the Company's securities
were traded on a liquid market, therefore market capitalisation could
be used as an indicator of value.
The Group performed its annual impairment test as at 31 December 2022
and 31 December 2021. The Company considers the relationship between
the Group's market capitalisation and the book value of its subsidiary
undertakings, among other factors, when reviewing for indicators of
impairment.
Having carried out this assessment the Board concluded, on the basis
of the cautious assumptions outlined below, that the value of the investment
in subsidiary should be set at GBP450,000k (2021: GBP580,963k ). This
impairment has been taken to the parent company profit or loss account,
and transferred to the merger reserve. There is no impact on the distributable
capital available to the Group or Sabre Insurance Group plc as a result
of this adjustment.
Key assumptions
The market capitalisation of the Company as at 31 December 2022 had
reduced to GBP266,000k from GBP459,500k at 31 December 2021. This provided
an indication that the underlying value had been impaired, and therefore
the Directors carried out an impairment assessment.
We have used a dividend discount model to estimate the value-in-use,
wherein dividend payments are discounted to the present value. Dividends
have been estimated, based on forecasted financial information, over
a four-year forecast period, with a terminal growth rate applied. The
key assumptions used in the preparation of future cash flows are: plan-period
financial performance, dividend payout ratio, long-term growth rates
and discount rate.
The key assumptions used in the calculation for the value in use is
set out below:
* Plan period financial performance set in-line with
the Group's expectations
* Dividend payout ratio in line with the Group's
strategy
* Long-term growth rate beyond the plan period of 2%
* Discount rate of 9.5%, being a calculated cost of
capital using market rate returns of Sabre and
comparable insurers
These calculations use post-tax cash flow projections based on the
Group's capital models. As the value-in-use exceeds the carrying amount,
the recoverable amount remains supportable.
The Group has conducted sensitivity testing to the recoverable amount,
in order to understand the relevance of these various factors in arriving
at the value in use.
* Dividend within the plan period - To assess the
impact of reasonable changes in performance on our
base case impairment analysis and headroom, we flexed
the dividend within the plan period by +10% and -10%.
In doing so, the value in use varied by approximately
10.0% around the central scenario.
* Long term growth rate - To assess the impact of
reasonable changes in the long-term growth rate on
our base case impairment analysis and headroom, we
flexed the long-term growth rate by +1% and -1%. In
doing so, the value in use varied by approximately
7.1% around the central scenario.
* Discount rate - To assess the impact of reasonable
changes in the dividend payout ratio on our base case
impairment analysis and headroom, we flexed the
average discount rate by +2% and -2%. In doing so,
the value in use varied by approximately 13.0% around
the central scenario.
Name of subsidiary Place of incorporation Principal activity
------------------------------ ---------------------- ----------------------------
Directly held by the
Company
Binomial Group Limited United Kingdom Intermediate holding company
Barbados TopCo Limited(1) Guernsey Non-trading company
Barb IntermediateCo Limited(2) Jersey Non-trading company
Barb MidCo Limited(2) Jersey Non-trading company
Barb BidCo Limited(2) Jersey Non-trading company
Barb HoldCo Limited(2) Jersey Non-trading company
Indirectly held by the
Company
Sabre Insurance Company United Kingdom
Limited Motor insurance underwriter
------------------------------ ---------------------- ----------------------------
(1) In process of liquidation
(2) Dissolved in February 2023
The registered office of each subsidiary is disclosed within Note 18
of the consolidated Group accounts.
3. Creditors
2022 2021
GBP'k GBP'k
---------------------------------- ------ -----
Due within one year
Creditors - -
Amounts due to Group undertakings 1,607 -
As at 31 December 1,607 -
---------------------------------- ------ -----
4. Debtors
2022 2021
GBP'k GBP'k
------------------------------------ ----- -----
Due within one year
Amounts due from Group undertakings - 126
Other debtors 3 2
------------------------------------ ----- -----
As at 31 December 3 128
------------------------------------ ----- -----
5. Share capital and reserves
Full details of the share capital and the reserves of the Company are
set out in Note 15 and Note 17 to the consolidated financial statements.
6. Dividend income
ACCOUNTING POLICY - DIVID INCOME
Dividend income from investment in subsidiaries is recognised when
the right to receive payment is established.
======================================================================
7. Related party transactions
Sabre Insurance Group plc, which is incorporated in the United Kingdom
and registered in England and Wales, is the ultimate parent undertaking
of the Sabre Insurance Group of companies.
The following balances were outstanding with related parties at year
end:
2022 2021
GBP'k GBP'k
--------------------------------------------------- ----------- -------
Due (to)/from
Sabre Insurance Company Limited (1,607) 126
Total (1,607) 126
--------------------------------------------------- ----------- -------
The outstanding balance represents cash transactions effected by Sabre
Insurance Company Limited on behalf of its parent company, and will
be settled within one year.
8. Share-based payments
Full details of share-based compensation plans are provided in Note
16 to the consolidated financial statements.
9. Risk management
The risks faced by the Company, arising from its investment in subsidiaries,
are considered to be the same as those presented by the operations
of the Group. Details of the key risks and the steps taken to manage
them are disclosed in Note 3 to the consolidated financial statements.
10. Directors and key management remuneration
The Directors and key management of the Group and the Company are the
same. The aggregate emoluments of the Directors and the remuneration
and pension benefits payable in respect of the highest paid Director
are included in the Directors' Remuneration Report in the Governance
section of the Annual Report and Accounts.
FINANCIAL RECONCILIATIONS
AS AT 31 DECEMBER 2022
Adjusted Profit Before Tax
2022 2021 2020
GBP'k GBP'k GBP'k
---------------------------------- ------- ------- -------
Profit before tax 12,750 37,199 49,122
Add:
Amortisation of intangible assets - - -
Exceptional items - - -
---------------------------------- ------- ------- -------
Adjusted profit before tax 12,750 37,199 49,122
---------------------------------- ------- ------- -------
Adjusted Profit After Tax
2022 2021 2020
GBP'k GBP'k GBP'k
---------------------------------- ------- ------- -------
Profit after tax 10,107 30,140 39,798
Add:
Amortisation of intangible assets - - -
Exceptional items - - -
Tax on exceptional items - - -
---------------------------------- ------- ------- -------
Adjusted profit after tax 10,107 30,140 39,798
---------------------------------- ------- ------- -------
Net Loss Ratio
2022 2021 2020
GBP'k GBP'k GBP'k
------------------------------- -------- -------- --------
Net insurance claims 112,799 81,015 88,110
Less: Claims handling expenses (7,613) (6,767) (7,637)
------------------------------- -------- -------- --------
Net claims incurred 105,186 74,248 80,473
------------------------------- -------- -------- --------
Net earned premium 153,218 145,442 165,707
------------------------------- -------- -------- --------
Net loss ratio 68.7% 51.1% 48.6%
------------------------------- -------- -------- --------
Expense Ratio
2022 2021 2020
GBP'k GBP'k GBP'k
------------------------------- -------- -------- --------
Total expenses 34,149 34,444 36,670
Plus: Claims handling expenses 7,613 6,767 7,637
------------------------------- -------- -------- --------
Net operating expenses 41,762 41,211 44,307
------------------------------- -------- -------- --------
Net earned premium 153,218 145,442 165,707
Expense ratio 27.3% 28.3% 26.7%
------------------------------- -------- -------- --------
Combined Operating Ratio
2022 2021 2020
GBP'k GBP'k GBP'k
------------------------- -------- -------- --------
Total expenses 34,149 34,444 36,670
Net insurance claims 112,799 81,015 88,110
------------------------- -------- -------- --------
146,948 115,459 124,780
Net earned premium 153,218 145,442 165,707
------------------------- -------- -------- --------
Combined operating ratio 96.0% 79.4% 75.3%
------------------------- -------- -------- --------
Solvency Coverage Ratio - Pre-Dividend
2022 2021 2020
GBP'k GBP'k GBP'k
--------------------------------------- ------- -------- --------
Solvency II net assets 91,191 110,114 122,500
Solvency capital requirement 56,516 52,955 60,327
--------------------------------------- ------- -------- --------
Solvency coverage ratio - pre-dividend 161.4% 207.9% 203.1%
--------------------------------------- ------- -------- --------
Solvency Coverage Ratio - Post-Dividend
2022 2021 2020
GBP'k GBP'k GBP'k
---------------------------------------- -------- --------- ---------
Solvency II net assets 91,191 110,114 122,500
Less: Final dividend (4,250) (23,250) (29,250)
---------------------------------------- -------- --------- ---------
Solvency II net assets (post-dividend) 86,941 86,864 93,250
Solvency capital requirement 56,516 52,955 60,327
---------------------------------------- -------- --------- ---------
Solvency coverage ratio - post-dividend 153.8% 164.0% 154.6%
---------------------------------------- -------- --------- ---------
Return on Tangible Equity
2022 2021 2020
GBP'k GBP'k GBP'k
---------------------------- ---------- ---------- ----------
IFRS net assets at year end 222,496 252,727 266,400
Less:
Goodwill at year end (156,279) (156,279) (156,279)
---------------------------- ---------- ---------- ----------
Closing tangible equity 66,217 96,448 110,121
Opening tangible equity 96,448 110,121 111,138
Average tangible equity 81,333 103,285 110,630
Adjusted profit after tax 10,107 30,140 39,798
---------------------------- ---------- ---------- ----------
Return on tangible equity 12.4% 29.2% 36.0%
---------------------------- ---------- ---------- ----------
Dividend Payout Ratio
2022 2021 2020
GBP'k GBP'k GBP'k
---------------------------------------------- ------- ------- ---------
Adjusted profit after tax 10,107 30,140 39,798
Dividend declared in respect of the financial
year 11,250 32,500 53,000
2019 deferred special dividend - - (13,000)
---------------------------------------------- ------- ------- ---------
Effective dividend declared in respect of the
financial year 11,250 32,500 40,000
---------------------------------------------- ------- ------- ---------
Dividend payout ratio 111.3% 107.8% 100.5%
---------------------------------------------- ------- ------- ---------
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END
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March 14, 2023 03:00 ET (07:00 GMT)
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