Straight on. I'm very pleased to say we've got the same team here presenting. As usual, myself and Adam will run through the presentation fairly briefly, and any difficult questions we'll hand to Trevor and Matt at the end. The agenda is a fairly standard agenda for us. We'll run through briefly the highlights. Adam will run through the financial performance. I'll give my thoughts on the current state of the market. We'll touch on our competitive edge given that market environment. I'll look at the summary, and then we'll leave plenty of time for Q&A at the end. The highlights. Overall, we're really pleased. We're really finding ourselves at the half-year stage. Good performance, good profit performance, good dividend. We'll talk about it in a minute for the half-year.
Probably more important is what it suggests about the full year this year, maybe even more importantly what it suggests for 2026 and 2027 onwards. I think we're probably in a very strong position compared to many others in the market at this stage. To touch on the highlights briefly, very strong profit for the half-year, 26% up year on year, and that's in weak market conditions, which we'll discuss much more later. Margin of 19%, comfortably inside our range, and some pretty explicit guidance this time around that we expect our full-year profit to be very similar to that we delivered in 2024. Growth, I guess growth is a bit of a misnomer in some ways that we didn't grow terribly much in the first half-year, and that's a very deliberate management decision.
We're very happy that we've maintained our discipline through the bottom of the pricing cycle, and we think we're writing very healthy premium levels at this stage. Very comfortable with our premium position. Leaves us very well- positioned to return to growth as market conditions improve, which we still expect to be the second half of this year. Robust capital position, but very strong, I think might be a good description. Interim dividend 100% up on last year. Obviously, that is fairly formulaic. It's linked on the previous year's full dividend, and we are going well on our first ever share buyback. I think we're probably around halfway through that now. I had more to talk more about that later. On the strategy side, really good progress on Ambition 2030.
Everything we're talking about today suggests to us we're very firmly in line to deliver our GBP 80+ million profit by 2030. The Sabre Direct motorcycle product launched very well. The plan is still very much on track to start testing differentiated pricing on our core car product later this year. That's a very brief overview. Adam will now talk about the numbers in more detail. I then will talk about the market and a few more of these things in more detail a little later. Adam, you're going to nudge me when you want to change slides, I think, as we go through.
Thanks, Geoff. I will. I'll run through the financial results for the first half of 2025. Geoff, if we can move on to the first slide, please. Here's a snapshot of the results. We discussed in our first recent trading update that the market pricing could remain low in the first half of the year and that we'd protect margins and profits at the expense of a short-term dip in premium, which is clearly evident in the gross written premium number, which is down 20% on the same period in 2024, albeit against a very strong comparison. The very good news is that we're now able to show the positive side of maintaining this discipline with our margin now having improved to 19%, which is comfortably within our target 18%- 22% range.
This is a result of the 4.8 percentage point improvement in net loss ratio to 54.9%, slightly offset by a 1.4 percentage point increase in expense ratio, which is a natural consequence of letting our premium reduce for a period. This improved margin has generated a 26% increase in profit before tax to GBP 25.5 million, setting us on a great footing for the full year. Our interim dividend is at GBP 3.4 per share, which is in line with our policy to pay 1/3 of the prior year's ordinary dividend. Our solvency capital generation has been commensurate with the earnings for the period, and our position at the 30th of June is above our target 140%- 160% range. On to the next slide, please, Geoff. Here we show the progression of the group's margin since 2022.
As planned, the margin has recovered to within the target range, having almost got there last year. We now expect to maintain the margin within the range through continued price discipline and cost management. Next slide, please. Diving into our loss ratio performance across the portfolio, this slide shows how the loss ratio for the period breaks down into current year claims, being the impact of accidents that have happened in the period, and the prior year loss ratio, which shows the impact of movements in expected and incurred payments on accidents that happened in previous years but are not yet settled at the start of this year. We've included charts for both the first half of 2025 and the whole of 2024 on this slide.
It's normal for the current year loss ratio to be a bit higher than our target, particularly in the first half of the year, as there'll be a significant number of new open claims with reserves carrying margins reflecting uncertainty. The 61% current year loss ratio is absolutely fine on the plan for us. It's been pleasing to see a return to a more normal state of prior year movements, being negative, presenting its benefits profit rather than the small increase we saw in 2024. This movement represents a mixture of the runoff of risk adjustments on claims that were open at the start of the period and a reduction in the total amount of expected claims payments on previous years. Overall, our loss ratio is demonstrating good underwriting performance in line with our targets, while still reflecting our cautious views around claims inflation.
On to the next slide, please, Geoff. Here we show our usual breakdown of underwriting profitability by product. Firstly, we can see that the main core car product has performed incredibly well with a 48.81% loss ratio, having shown strong current year performance and being the main beneficiary of those prior year reserve movements. The focus on preserving margin and maximizing absolute profit has meant that we've allowed policy volumes to dip through the soft part of the cycle. Motorcycle and taxi remain a very small part of the book, with the low earned premium in a six-month period being particularly susceptible to the impact of large claims. This year, our large claims experience has been relatively good overall, but the large claims happen to have occurred on the motorcycle and taxi books.
Hence, the high loss ratios on those small products, but we've no reason not to expect the performance of those products to improve for the full year of 2025. On to our capital position, please, Geoff. We've seen a small dip in our solvency capital requirements since the end of last year, while the capital generation has been reflective of the profit during the period. We started the buyback program, announced at our year-end results, and the full impact of it is reflected in the period-end capital position. The interim dividend at GBP 0.034 per share is in line with our policy. As in previous years, we will assess the capital position at year-end and determine the total level of capital distribution for the year, as well as how that capital will be distributed. With that, back to you, Geoff. Thank you.
Thanks, Adam. We'll now spend a few minutes talking about our view of the current state of the U.K. market. I guess I do feel I'm a bit of a stuck record on this sometimes. We think the market is substantially underpriced at the moment, and that risks a pretty silly price correction down the line. We probably have some insurers on a bit of a land grab, possibly ahead of M&A type activity to maintain value. Others may just take advantage of some distraction in the market as acquisitions come together. It's pretty hard to argue with some of the external views that if prices don't move soon, then 2026 is going to be a pretty ugly year for industry profitability. If we look at this slide on here, this is a slide, and thank you to Geoffrey as he allowed us to use this slide.
It perfectly sums up how we view this. This shows the premium versus claims deficit by underwriting year. You'll see, having clawed back to a good position at the end of 2023- 2024, the market has perhaps slightly sadly given all that away again to the point where there's now a deficit opening up between premium and claims. From a Sabre perspective, we've continued to fully cover claims inflation. We've not allowed ourselves to get into a deficit. We are very happy with the volume that we're able to write while fully covering claims inflation while it would appear the market isn't. That'll be different for different insurers depending on how much of a deficit they've allowed to open up.
I guess the message from us is the industry should be okay for this year in profitability, but next year's going to look difficult if prices don't start to move fairly soon. Look at claims inflation. Claims inflation is a bit more interesting perhaps than in some previous years in that there's things you can see in point and count now, and then things involved with a bit of crystal ball goes in. If we look at the slide here on the left, you can see things that we would call items in the data. Frequency is definitely down. There's definitely increased capacity in the body shop. Parts and paint inflation is slightly offset by some of the parts supply. You can already see some of the cost of care increases and underlying inflation.
On a simplistic view, that would suggest that near-term inflation would be somewhere around 5% or so. There's genuinely good news on claims inflation coming through. There's quite a lot of items not yet in the data. We know that the injury portal tariffs are increasing. We think there could be a bit of a false read on frequency. We think there's an element customer source and fairly high premium increases in recent years. We think there might be a crash-and-rock claim mindset, because if you've had a relatively minor prang, you choose to either drive the car around with it or pay to get it fixed yourself. That may change as those premium increases fade a little bit in customers' memory. It's possible that frequency dips back the other way again. There's definitely a continued lack of resource in care and specialist care industries.
We know there's all sorts of macro things happening around tariffs, shipping delays, tsunamis happening now, just to add to the mix, persistent highly economic inflation. Our realistic assumption would suggest you probably look at another couple of points on top for things that you can't yet quantify, but are out there in the world. We would view a claims inflation assumption of around 7% to be sensible. We think it would be very bold or slightly mad to boost your inflation assumptions going forward just on things you can see today at 5%. Happy to take any questions on that later. These are our favorite scales on what we think should happen to premium in the market. One might, premiums deflate, or claims frequency is definitely down, and there is a reduction in overall claims inflation. That's good news.
The market or people in the market may over-rely on short-term trends. On the other side, things we've just discussed, claims inflation is still elevated. Premium increases definitely needed to maintain industry profitability. Overall, good news on inflation generally, but apply any sensible level of prudence. You still need to be looking at an elevated level of claims inflation and to cover that through premium increases. Our view, really, the market is down, what, 9%- 15% depending on which track you look at over 12 months, and claims inflation are up anywhere between 5% and 10% depending on where you are as an insurer. Quite a delta opening up at an industry level, and to reiterate, we've not allowed ourselves to drift into that place. Interesting regulatory developments in the last couple of weeks.
I draw the short straw and be the first one to talk about this as a results session. Two things really from the FCA. One on the retail market review, second one on the interim premium finance review. I think both generally positive and helpful for the industry. On the retail market review, the FCA really confirmed that claims inflation is real, and it's driven by factors outside insurers' control. The premium increases were matching claims inflation rather than any form of profiteering. The second report also confirmed the importance of premium finance to customers in terms of ability to pay for premiums, and it specifically ruled out some of the market-wide interventions.
It feels to us like the likely way forward from here is for the fair value assessments to do quite a lot of the heavy lifting from here, in that the reports we have to send back are very detailed. The FCA gets a very granular view on where people's margins are coming from, and I suspect conversations from here may go on behind closed doors. Worth restating where Sabre are on this. We took a view a couple of years ago that the fair thing to do was to earn exactly the same margin on our core product as all our ancillary products and premium finance, and that's exactly what we do. That has clearly cost us some profit, but we think leaves us in a very stable, very defendable, very good, very customer-focused position on fair value that it's the same margin on our core and core products.
Hopefully, at an investor level, this takes away quite a lot of regulatory risk overhang. If we're looking at our competitive edge given those market dynamics, where does that leave us? We think we are a strong player in a pretty attractive and perhaps undervalued market sector. Motor insurance is a mandatory product. I think we've taken away some of the regulatory overhang in the last couple of weeks. We're in a niche part of that market. We're happy to stay in our lane. We're not looking to become a mass market insurer. We specialize in high premium, high margin policies. Probably high premium, higher risk, high margin policies would be an accurate description. High return on equity. That's due to being very focused on margins, efficient capital management, and consistent smart underwriting and claims handling. We're very focused on dividend.
We want to pay a reliable and growing dividend based on 70%- 80% of profit after tax, plus a regular return of surplus capital. We've now updated our policies so that it can be through special dividends or buybacks as a decision we'll make every year. Really key to us is we've been doing this a very long time. The management team here have all been here at least seven, eight years. Very experienced staff sitting outside my door here. You've also been here a long time and add a huge amount of value every day. We've got an incredible depth of accurate, reliable, relevant data and very consistent expert claims handling. I think Trevor Webb is only, say, the second only Claims Director. That level of consistency means we don't get unexpected claim movements or reserving shocks.
A very cautious, prudent, well-informed, and consistent reserving methodology lessens the impact of adverse developments. I was talking to an investor recently. He said the eighth wonder of the world was insurance accounting. I disagree slightly. I think the eighth wonder of the world is claims reserving. Claims reserving is the question investors should be asking of how solid, how safe, how cautious are you on the claims reserving because that drives everything else that we do. We've got an ambitious but we think very achievable five-year plan. We've grown consistently since 2002. I say consistently. We've grown on average since 2002. You'll see from these dips, we're very happy to let premium subside in unattractive market conditions and then pick up the pace again later. We're not obsessed with keeping top line growing with consistent bases. Overall, we want the average to be growing like that.
Growth is going to come from two things. Expanding our addressable market, that's becoming slightly more competitive, perhaps a slightly lower premium, lower risk business, and the launch of the direct motorcycle product and expanding motorcycle integrated panels as well. Very good progress to date. The Sabre Direct motorcycle product launched in April. It's quite unusual in that it's online only, web chat supported rather than call center. We think that might be unique in the market. Very good sales volumes on restricted products so far. We're restricting our profitability as we test and roll out and evolve the routes on that. We'll gradually increase those volumes through the second half of this year and into next year. All the systems working incredibly well, rock solid, and really good support by the in-house team.
On in-house pricing for the core product, the technology stack is sort of ready now, and that testing is going to be, we'll be testing those rates later this year. There won't be much impact on the premium, if any, this year. That will start to impact from next year. We're still very confident in our ability to get to at least GBP 80 million in profit by 2030. I think importantly, we're going to stay very true to our DNA as we grow. That really means higher margin business. We're not looking to drift into the mass market. Low cost operating structure. We're going to continue to take profit as the target and volume as the output. I know it's a bit of a strap line, but it's one we truly live by. We'll continue to maintain cautious assumptions to ensure long-term and sustainable profitability.
We don't want to get into a boom and bust, I assume. To summarize this brief run-through, quite a simple story in some ways. Good profit for the half-year, well up on last year. Full-year earnings, we've given some pretty tight guidance. We expect them to be very similar to last year, despite the market price and weakness. Ambition 2030, projects on track. Growth in half two will depend on the market. Not particularly pivotal. We're not particularly bothered by that. We expect to write a bit more in the second half than the first half, but let's see where that goes. A good margin. Overall, quite a simple story. We're very happy where we are and very happy what it suggests for full year and into next year. At that point, I am going to pause. I can already see some hands going up.
[Hanrow], I will pass to you to introduce and unmute people as we go.
Yes, Geoff. First person with a question is Ivan Bokhmat from Barclays. Ivan, you can unmute yourself.
Hi, good morning. I hope you can hear me now. Thank you very much. My first question actually is more of a big picture one regarding the Ambition 2030. Since then, since December when it was published, we've seen a bit of a decline both in the GWP , which I'm sure you're fine with, but also in policy count. Do you think that retention needs to increase for you to hit that target? That clearly implies some punchy growth. On the side comment there, the regulator seems to be quite happy with how loyal customers have been treated. Do you think that will make acquiring new customers harder for you? A couple more questions. One, perhaps you could comment on the outcome of the July 1 reinsurance renewals and maybe give some outcome, you know, the shape of your reinsurance program.
The final one, I think you say that you sound quite pleased with how the share buyback's been going. We're almost halfway through it right now. Does it look like for you it's a preferred way to return capital? You know, like the special dividend is less attractive than the share buyback. Thanks.
Okay. I'll start. Please team, kick in as we go. Policy count and harder to get new customers. That's different for us compared to some, Ivan, in that we tend to attract people who've got quirky circumstances. Those people will continue to come to market. We don't expect to be in the mass market sort of trading people for the sake of GBP 10 or GBP 15 every year annually. We have new drivers coming to market. We have people who've bought new types of cars, people who maybe picked up new convictions, a whole host of things. I don't think we're going to find it harder to attract new business. I do understand why that might be a market phenomenon in the completely straightforward mass market. Matt, is there anything you want to add to that?
On the reinsurance side, we had a good placement. I don't know. Do we talk about it? I'll say it anyway. We had a price. Our price went down for reinsurance this year based on our generally good results and good market conditions. We were very pleased with our reinsurance. We are gradually, very gently increasing our retention, but only moderately. That's a path we'll probably continue on for a couple of years. A good reduction and a very slight increase in retention. The buyback has gone well. I don't think it'll be our preferred way forward. I think our policy will always be ordinary dividend, good special dividend. Anything surplus, we'll consider a special special dividend or a buyback at that point. Buyback will be definitely part of our thinking, but not at the expense of a good dividend. Ivan, does that answer your question? I was conscious there's a few in there, but I hit them all.
No, you did, to be sure. Maybe I can just follow up on the reinsurance answer. I think in the past you've had a GBP 1 million retention. Where are we now on that? An individual excessive loss.
Trevor, would you want to take that one?
Yeah, Ivan. We've still got an index retention of GBP 1 million, but we partially placed that GBP 1 million over GBP 1 million layer. It's a way of us taking on more of the risk at that lower layer, but not exposing ourselves to a frequency.
Thanks a lot.
Thanks, Ivan.
Next question is from Amalie Zdravkovic from Deutsche [Mühle].
Yes, hello, good morning. It's Amalie from Deutsche Bank. Thank you for taking my questions and well done today. Just on GWP, I mean, it's down again, but it's sort of slowing from the first four months of the year. If we think about the sort of the full year guidance, how should we think about that in terms of volume and price increases for GWP? If I can just ask a bit on the very strong reserve release. Adam, you spoke a bit about it, but if we can have sort of any color on this, are there any one-offs or is this predominantly from sort of prudent reserving in prior years? Thank you.
Thanks. I'll let you take the reserve question in a second. On the price increases, I mean, we, as I mentioned, have fully covered claims inflation. We need to keep articulating prices forward during the second half of the year, but we don't have any price correction to do. Our view is there is a catch-up price correction for many in the market, which we don't need to do. When premiums will increase in the second half is an unknown point. They should be increasing now. They may not. Our view, if they don't happen, I think we'll see a very similar thing to the last market upturn. The longer it takes, the steeper that increase will be when it happens. We're pretty relaxed about this. For us, we'll just keep tickling prices forward in the second half. We don't expect a big correction.
We think the market does, which is where our increased competitiveness will come from. We think at some point in half two. Matt, reserve reduces, one-offs or prudent?
It's twofold, I think. We'd expect the prior years to have the risk adjustment run-off. We'd expect to see prior years always release a little bit each quarter. There is also some one-off prior releases from experience being more favorable than expected.
Thank you.
Did that answer the question?
Yeah, thank you. Very clear.
Thank you.
Next up is Carl Lofthagen from Berenberg.
Yes, hi, morning all, and thank you for taking my question. On the prior year, sorry to follow up again, are you able to highlight which accident years this relates to? I mean, sorry if I misunderstood. Are you saying there's, is this a few large claims, you know, essentially settling more favorably? On the inflation piece, we've seen a pretty big jump in Chinese electric vehicle sales over the past 12 months. Essentially from zero to now accounting for almost 5% of new car sales. I appreciate it's still small, but are you seeing some early kind of issues there, concerns with access to parts and higher repair costs from these cars? Just thinking around, as this grows, what could be the impact? Thank you.
Yeah, thanks. I'll answer the second one and Matt, you can pick up the reserve one again. I think the Chinese vehicles are really interesting. I'm not sure if you want to come listen in a second in that they're very cost-effective to buy. I think the repair, we were very concerned about a year ago that there weren't repair methods being published. Talking to that and that's improving. There is, I think, some questions around the possibility of parts between models. I know if you have a, so the Ford Focus and the Ford Fiesta, they may have had common parts between those vehicles in the past. I think there's less of that on Chinese vehicles. Parts supply is definitely going to be an issue. Depreciation is pretty steep on some of these things. They're quite cheap cars.
A relatively small claim could lead to things like an increase in write-offs for total loss. Trevor, anything you want to pick up from there?
I guess there are sort of EV issues and then there are Chinese issues or Chinese vehicle issues. The EV issues really are around the weight of these vehicles, the transportation issues, and the specialist repairs and what the body shops need. I think pretty much now the issues that we've seen with the Chinese vehicles, just to expand on that in part, a lot of the panels or a lot of components, for example, bumpers, will come as huge pressed components, whereas they may, in some more traditional vehicles, be made up of a number of smaller parts. We end up having to replace a larger, more expensive component than perhaps is necessary. That's probably something that is specific to Chinese EVs.
I think, Carl, it sounds like conservatism needs to be concerned when we get the premium. Right. That's our general approach. As much as I've seen it's a bad risk for a bad car, it's just a bad price for it. Matt, we'll just follow up on prior year reserve release.
The prior year reserve release is predominantly driven by the most recent action here. As the claims develop, we get less uncertainty, so we get more certain in the eventual result. Where we've seen in the first half this year is that some of that uncertainty has unwound. We're more confident in the absolute level of the ultimate claims now. That's multiple perils, not just one driver.
It isn't one just big claim that's driven it. It's just a general confidence in the year.
Great. Thank you.
Geoff, I'd like to add in there quickly on the prior year reserve release. It's just a small point. At the half year, the impact of individual pound movement prior year reserve changes is more significant on the ratio. If we were to look at 2024, for example, absent year, and you move in the ultimate expected claims cost by, say, GBP 1 million, that might have a 1% prior year impact at the six-month period, but a 0.5% at the full-year period because the net earned premium that it's offset against is lower. It may not be quite as large a change as it looks just because it's a half-year period and not a full-year period we're looking at.
Thanks, Adam. That's a good point. Thank you for that.
Okay. Next up is Abid Hussain from Panmure.
Hi, morning all. Thanks for the question. I've got three. Some of them are follow-ups. The first one is on growth versus the pricing environment. You're suggesting that prices might increase in the second half, and it looks like there's some evidence of that starting to come through. Great if it does. I'm just wondering, on the flip side, what would you do if prices stay flat or even continue to nudge down? Are you willing to let the top line reduce further? Any more color on your thoughts on how you're going to manage that . That's the first question. The second one is a quick follow-up on the reserve releases. I think you're suggesting that if we look at a full-year basis, there's a long-term average that we should be thinking about. I'm just wondering, what is that long-term average for all reserve releases?
Is that around the 2%- 3% mark? That's the second question. The third question is on the motorcycle book. I think the undiscounted combined ratio was around 104%, above 100%. What's your thinking around when that business might break even? More broadly, how are you thinking about the profitability of both the bike and the taxi business? Thank you.
Sure. If I start, Adam, maybe you sent the long-term reserve release, and Matt, you want to talk about the sort of motorcycle and how it looks like for a five-year type period? On growth versus purchasing, thanks a bit for the question. I suppose we're fairly chilled out about when premium actually moves. We know our profit is going to be good for this year. Even if we wrote the same level of premium going forward, we'd be pretty happy with how that looks for the next year or so. Would we reduce the top line? Yes, we absolutely would. If we needed to, we'll focus on the profitability. Top line will always bounce back. It's very easy to grow an insurance company. We just don't want to do anything stupid.
I think another thing we should probably say a bit is that we haven't unpacked any of our new pricing innovations yet. We'll start to test those in the second half of the year, but they'll have much more impact in the next year. We think we've got plenty of levers to pull to hit medium-term growth. We don't see short-term market softness as being any inhibitor on our 2030 strategy at all. It's just the timing thing. If we're the wrong one, that is inflation, and others are right, then we're going to deliver some fantastic fluctuations going forward and be able to cut prices. If we're right, and we think we are, others will have to increase their prices at some point. On the reserve release long-term average, Adam, do you want to take that one? I'll come off mute first. Adam, you're on mute.
Thank you. I know I'll be the first. Abid is absolutely right. If we were reserving absolutely perfectly on the best estimate with no additional prudence on the best estimate, then we would have a run-off of the risk adjustment every year, and that would probably be in the region of sort of 3% depending on some of the other factors, but thereabouts now. Historically, it's always been above or below that, and it sort of always will be, but that is, I guess, a good way of thinking about the kind of quantum of risk adjustment run-off that we might have. We tend not to sort of book any or bank any additional run-off beyond the risk adjustment, although as we've seen in the first half of this year, that can't happen.
Matt, do you want to talk about how you sort of think about bike as it grows as an account?
Yeah. If we look at the bike performance in the first half of this year, the poor loss ratio is driven by a couple of larger claims. What we look at at bike is the long-term average. We know with bike, due to the size of the accounts, that it will be a bit more volatile. If we have a large claim, loss rate will be quite poor. Other years where we don't have those large claims, we expect loss ratios to be quite good. Over that three to five-year horizon, we expect the loss ratios to deliver along that target. Some years will be slightly better, some years will be much worse. We're quite comfortable where we are in the first half of this year, given the drivers of that poor performance.
Yeah, exactly. As that account grows over time, those peaks and troughs will sort of shrink a bit. As there's more premium, we'll get a bit less volatility. As Matt says, we're very happy with the underlying performance on bike. On taxi, we think the market's still even more underpriced than private car. We're happy with the volumes we're writing. We're happy with the underlying loss rates. We're very happy with our distributor and the product. We're happy to keep our footing on this one for a bit. If I look at some of the profitability I can see on other players in that market, it doesn't look great from an underwriting perspective, so you would have to hope that that corrects at some point.
Thank you.
Thanks, Abid. Hanrow.
No more questions from the audience, and I cannot see anything in Q&As.
I'll just pause for 10 seconds and make sure no one changes their mind. No, in that case, thank you very much for your time and for your questions this morning. Over the next couple of weeks, if you have any follow-up questions, very happy to pick them up. If not, speak to you again at the full year, I guess.
Catch you later.
Cheers now. Bye.