Okay. Good morning, everyone. Thank you very much to people who are joining us in the room and online. Welcome to our results presentation. I'm pleased to say we got consistency in presenters. My colleagues there are being gently fried by the giant screen just behind their head. As normal, Adam and I will do the presentation, and then we'll leave all the difficult questions to Matt and Trevor to handle at the end. Adam tells me it's our ninth annual results presentation now, and that's for the three of us. We'll be getting a cake out for next year's one, I think. Very briefly outline the agenda. We're gonna run through the highlights. Adam will then run through the financial performance and our ESG credentials.
I'm gonna spend a few minutes going through our strategy, which we've tried to present in a slightly different way this year. I'll then look at the outlook and summary, and we'll leave plenty of time at the end for Q&A as ever. Overall, I think as the title suggests here, we think we had a very good year last year. And as importantly, we've got very good momentum coming into this year as well in terms of premium. We seem to have turned the corner from having to manage for margin into now we are back into a slight growth mode as well. For recent annual reports, I seem to have stood here with a doom-laden message to impart be it Brexit or COVID or Ogden discount or high inflation. Almost boringly, I don't have any of that this year.
The horizon seems as clear as it's been for quite some time. Hopefully we can focus on our own numbers and what we think are some good things coming through, both for the sector and ourselves. To touch on some of the highlights. Profit before tax up almost 5%. Margin very comfortably within our range, and excellent net loss ratio across the portfolio at 54%. For motor itself, core motor vehicle, that's effectively 50%, which is probably as good or better than we would normally hope to achieve. Those results have been delivered against just pretty unattractive market conditions, where we think the market has still continued to underprice against ongoing claims inflation for most of the last couple of years.
We've maintained our pricing discipline, and as we say, we've seen return to growth in the last quarter, and that growth has carried on. We've mentioned in here that our premium is up by 5% to the end of February, year on year. Very robust capital position still. Total dividend of GBP 13.5 , and we've also announced another share buyback of GBP 5 million in addition to the GBP 13.5 total dividend. We've delivered a good year in terms of numbers. We've also made really good progress well up in terms of on track with our timetable here for Ambition 2030. Two big things this year. One is the launch of Sabre Direct Bike, which we'll talk more about later.
We've continued testing the differentiated price for our core motor product, which we think will drive the big volume as we go towards 2030. Having stolen most of his interest and thunder, I'm now gonna hand to Adam to run through the numbers and ESG.
All right. Thanks, Geoff, and good morning, everyone. I'll take us through some of the key numbers from 2025 in a little bit more detail. Our results this year perfectly reflect Sabre's core strategy. As expected and in line with performance reported to date, we've allowed our premium to drop in unfavorable market conditions, ending at GBP 202.9 million of premium for the year. Since our last report in Q3, we have seen some momentum in premium in Q4. Our net insurance margin is now comfortably within our target range of 18%-22%, and at 19.2% reflects the continued discipline and control applied across the year.
The net loss ratio has improved by 4.6 percentage points to 54.1%, in line with our long-term target and reflective of strong underwriting throughout soft market conditions. Our expense ratio is up by 1.9 percentage points, primarily due to the net term premium having reduced and reflecting some cost inflation during the year. As a result of the improving margin, as well as increased investment returns, our total profit before tax is up 4.9% to GBP 51 million. This has allowed us to declare an increased dividend per share of GBP 13.5, leaving us with solvency capital ratio slightly above our preferred range at 161.5% and around 154% after the proposed GBP 5 million share buyback.
This chart shows the stabilization of our margin since the period of very high inflation. As a reminder, our net insurance margin is a function of both claims experience and expenses incurred as a proportion of insurance-related income, which is primarily premium, but also includes installment income. In this chart, the growing blue bars show improving margin, and we're now operating at a comfortable level and expect to maintain our net insurance margin within this target 18%-22% range all the way through to 2030. For clarity, if comparing across peers, none of our headline performance ratios, including the net insurance margin, include any discounting benefit under IFRS 17. This slide breaks down the loss ratio into current and prior year performance with a comparison to last year. It shows the total claims cost divided by earned premium, net of the impact of reinsurance.
The current year ratio reflects the book position for claims in 2025, and the prior year ratio reflects movements in the actual and expected ultimate claims costs for claims already on the books at the start of 2025. Overall, the 4.6 percentage point improvement in net loss ratio has been driven by a return of prior year releases during the year, with the amount for 2025 a little above our long-run expectation for the run-off of risk adjustment. Our current year loss picks naturally reflect the greater level of uncertainty attached to the most recent year due to the larger number of new and undeveloped claims and allows for above normal inflation in the short term. The current year will always carry a risk adjustment, which means the current year loss ratio is expected to be above the ultimate loss ratio achieved by that business.
This chart shows the relative contribution from our motor vehicle and other products during the year. Performance in motor vehicle has improved further in 2025, delivering a loss ratio of 50.5%. Motorcycle and taxi remain much smaller, with loss ratios impacted by the individually large claims reported at the half year stage. Although both have shown much improved loss ratios in the last six months. As is demonstrated in the policy counts, we've allowed motor vehicle and taxi books to shrink in 2025 while market conditions were unfavorable. Although we note that the motor vehicle book did return to policy count growth during the end of 2025 and throughout 2026 to date. Motorcycle policy count has grown as we've introduced more volume through our direct brand, for which we're controlling the rate of growth as the product matures.
This slide shows how our capital was generated during the year, with the total dividend for the year being slightly above the net of the capital generated, less the increase in capital requirement, reflecting the very strong position coming into the year. Post-dividend, the solvency coverage ratio was above our preferred operating range. The board has elected to propose a GBP 5 million share buyback subject to regulatory approval, which will take the post-buyback solvency coverage ratio at the end of 2025 to 154%, which is comfortably within our preferred operating range. The group's policy remains simple.
To pay an ordinary dividend in the range of 70%-80% of profit after tax, and to consider paying a special dividend or utilizing buybacks to distribute excess capital, generally moving the post-dividend capital to within the group's range of 140%-160%. Importantly, this is a genuine range and will be utilized in the right circumstances. In this case, considering the current share price and the comfort in the group's ability to generate future capital in the coming year. A quick update on our sustainability practices. We continue to monitor our progress towards our ambition to hit Net Zero by 2050, and we publish our Net Zero roadmap on our website. We've taken steps to minimize our direct emissions from operations, and our largest emissions base is the assets in which we invest.
Which currently we expect, the related emissions to decrease naturally over time, but we'll consider taking active steps to manage this as we move towards 2050. Along with most of the industry, we carefully monitor risks and opportunities related to climate, both transitional and physical. We are well-placed to support the transition to electric vehicles and having collected significant data over a number of years, which is aided by our willingness to cover almost all vehicles. With that, back to Geoff.
Thanks, Adam. Okay, we're gonna spend a few minutes, just on a recap of our strategy, which as I mentioned earlier, we've tried to set out in a slightly different way this year, just so you don't get completely bored in the room for hearing it for the ninth time. I guess the headline here is key to us. We think we are a high margin business with good growth opportunities, and as one of our shareholders once said, "Why would you not wanna own someone who's got those characteristics?" We think we're a strong company in an attractive market. As an underwriting-focused business, we think we're also in the best subsector of that attractive market. To pick on a few strengths, to state the obvious, motor insurance is a mandatory product for all U.K. drivers.
That doesn't look like that's changing anytime soon. We can talk about autonomous vehicles and how that might impact later. We specialize in high premium, high margin policies. We don't really use the word non-standard 'cause we consider everyone is a writable policy, providing they're paying the correct margin. Our premium is roughly twice that of the U.K. average. We provide policies across the U.K. for car, van, and motorcycle. We've got a very long track record of delivering the results. Deep, accurate, and relevant data, very consistent data-driven underwriting, and expert claims handling. I think importantly, we've also got a very consistent, thoughtful, and long-term approach to reserving, which avoids as many shocks as we can manage. What we've tried to put here, people often ask what's the sort of secret to our success?
What's the sort of KFC formula that we keep locked in a vault? How do we do it? We don't have a KFC formula. What we've tried to do here is unpack what would be in it if we did have one. This also gives some context into why we're confident about Ambition 2030. This is the way we work. The top one here, I'll go from the top and work around to the right. One version of the truth. That's consistency on the key assumptions across all departments. Now, that might sound obvious, but that's not the way that a lot of insurance companies work.
This is the first company I've ever worked at where you don't have at least a twice annual bust-up between the pricing and the reserving actuary on who's got the best view of the loss ratio. We have one version of the truth, that we as a management team all buy into. Very high quotability. We quote for almost everything. That gives us really good access and insight into the market and what's going on with pricing and where we think opportunities might lie. Probably the really key thing is margin management. We have no premium targets in the business at all. The only targets we have are related to margin and profit. That's a DNA that's like the sort of goes through the middle of the stick of rock inside, but everyone I think in the business would say the same thing.
Every policy we underwrite, we validate both using automated tools and through a sniff test from humans looking at those as well. Similarly, claim screening. Every claim that comes in, while we try and deal with claims very quickly, very fairly, everything gets screened for fraud and accuracy. Again, both using automated techniques and using human skills on that as well. Very fast feedback loops. Matt and Trevor are sitting incredibly close to each other as actuaries and Claims Director today, and that's about as close as they sit most days as well. Some very fast feedback loops from things we're seeing in the claims environment into things we need to. Yeah. Well, there you go. Someone's trying to phone us. I'll just pause for a few seconds. Looks like someone's getting a phone call in the presentation booth.
Anyone wants to about the West Ham result last night, I'm very happy. Tremendous penalty victory, I think you'll find. Perhaps that's why I'm not feeling very chirpy because of that today because of the result. Are we going to burst back? This is a first. Maybe if I just describe why we're confident about how this is gonna translate into Ambition 2030. Ambition 2030, as you know, has two key elements. One is to expand our motor quotability. In fact, you're right, people in the room have got it in the pack here. People online, I doubt you'll have access to presentation on the website if it's uploaded. For core motor, the key thing here is we're looking to expand our competitive footprint.
We already quote for everything in that expanded footprint today, so we're not trying to go into uncharted territory. We already underwrite policies in all elements of that expanded footprint, just to a greater or lesser degree. What we're really doing here is expanding them to change our margin to hit the optimum point between volume and margin in that extended footprint. On motorcycle, the new rating structure we're putting in place, which we're doing on direct first, is really taking some of the skills and data that we're developing on car and applying that to motorbike as well. We've got a new pricing infrastructure that Matt and his team have put in place over the last six months. That has been tested through last year, and we're now increasingly expanding our footprint on motorbike as we go through this year.
We'll see a fairly rapid ramp-up in our direct motorcycle distribution. Don't know who [Daryl Legg] is, but I do wish they'd go away. There we go. Right, we're back. Good. I think I managed to cover that almost not seamlessly at all. We're in the bottom right-hand box on motorcycle. We were saying there that we have the new distribution in place for direct motor. New pricing infrastructure has gone in place. That has been tested through last year and into this year. We're now increasingly confident in that new, very sophisticated motorcycle set of rates, and we'll increasingly open up our competitive footprint on bike as we go through this year. There are large amounts of cross-fertilization between car and bike.
If someone's injured handling a personal injury claim, makes no difference if they've been hit by a bike or by a car. A lot of the skill set we already have as a business can be exported straight into the bike product. We're very confident our existing strengths translate directly into what we're trying to do on Ambition 2030. Okay. Data advantage. Sabre has been doing high-premium business for over 25 years in a very specialist footprint. That means we've generated a vast volume of very accurate data. We produce over 200 million quotes a year at the moment, direct quotes. That's an extraordinary amount of data that we can capture on potential new business. People ask why we're confident going into this new footprint.
When we're generating that many quotes, we have a really good starting point into there. We've underwritten about 6.5 million vehicle years in the last 20 years. While we have a relatively small policy base at, say, 200-odd thousand, we've underwritten a lot of policies. All of that data is complete and consistent and has been captured on one system. We don't have a multitude of legacy systems that we can't reconcile. We keep all our data on one system, so it's accurate, available, and speedy. The analysis, as we mentioned earlier, we have our pricing and reserving integrated, so we have a very robust view of pricing and how reserving is knocking through to forward-looking pricing as well. Much more integrated, I think, than most companies. Specialist underwriting data.
We've built our rates off the data that we've obtained over 20 years. Very difficult for someone to capture that data, as we've discussed before, unless you've underwritten it and you've taken the pain of the claims. You need to write the policy to understand how it's gonna perform going forward. Our growth plans are completely on track. As a reminder, that's to make at least GBP 80 million by 2030. The core bits that we've done so far, we'll go through in the next couple of slides. On core motor, we're looking to become more efficient on our direct distribution. That really means looking to expand customer portals. We're looking to push more people onto a portal. More people on the portal, much cheaper to deal with. Good for customers, good for us.
Expand our market position, which we've spoken about, testing the rates. On motorcycle, that launched in H1 last year. We think we're in a unique position that product is serviced entirely online and customer service via chatbots. We think that's the first time that's been done in the U.K. Once we're happy and we're fully bedded in the direct book, we'll then look to expand to motorcycle brokers. There's 3 or 4, maybe 5 large motorcycle brokers that we'll look at maybe towards the end of this year or into 2027 once we've fully bedded down the direct product first. Here's how we're getting on so far. On core motor, the base IT systems are all in place to allow this to happen, to allow Matt's team to start to roll out.
Well, they have rolled out the pricing tests and to continue to evolve those pricing tests. Good progress last year. We've learned a lot. It's left us more confident that we are definitely gonna hit the Ambition 2030 numbers. On motorcycle, all the IT is in place for that. Direct is going really well, as I mentioned. The customer service, we're looking to expand, probably into AI-driven chat as well going forward. At the moment, it's more of an old-fashioned online chat with individuals dealing with responses. We think over time, we can take that down an AI route as well. Our motorcycle pricing, as I mentioned, we're expanding our quotability as we go through the rest of this year.
Alongside all this, it's important that we maintain our expense base at a low level, and that's a large part of the work as well. Automated vehicles. It's impossible to do a presentation at the moment without talking about automated vehicles. I have to say it does look like a bunch of overhyped nonsense, some of the stuff that we've seen in recent weeks, if I put it bluntly. We saw Admiral's slides last week to reference the competitor, and we could have crossed off their logo and ours] , and I think it feels like we're in a similar place. Near-term impacts feel massively exaggerated to me. True Level 5 autonomy. So Level 1, not much autonomy in the car at all, maybe a bit of cruise control.
Level 5, you can curl up in the back of the car and go to sleep. I think we're a very long way from Level 5 autonomy. We think cars at a meaningful degree of autonomous capability are gonna be less than 5% of new car sales by 2035, is the best research we've seen on that. Importantly, the average car age in the U.K. is 10 years old and aging. As it is, people don't want to buy electric cars, particularly. If you've got a good petrol car, you're tending to try and hang on to it. A material impact on the insurance market, as in when a truly automated AV becomes a large part of the car park, feels decades away, I would say. This is certainly not a near-term risk.
That assumes there's a customer demand for full-time Level 5 autonomy in the first place. Personally, I would get bored to tears if my hour-long journey each way to work involved me just sitting there feeling gently car sick, trying to read a report. I don't think that's at all certain. Clearly, everyone would like autonomy going up the M6 in a traffic jam. That makes all sorts of sense. The first and the last mile I don't think makes so much sense for Level 5 autonomy. The legislative framework requires individuals to insure those vehicles and for us to recover from the manufacturer if we think the vehicle is at fault. Therein lies a really interesting question of there is no mechanism yet to capture that data from the manufacturer.
We would need near real-time instant who was driving, was the vehicle in charge, or we in charge. Without that, there's gonna be an enormous transition friction for the industry as we argue and arm wrestle with manufacturers. A bit of a throwaway comment, but no one's talking about autonomous motorbikes. I guess is a way of saying there are other things out there to insure as well. Even if our successors are sitting here in 30 years' time, I think the world will have developed. E-bikes are becoming bigger. There's all sorts of other personal transport modes coming through. We're not gonna run out of things to insure.
Yeah, I think autonomous automated vehicles definitely gonna be a role for sort of robo-taxis in the [M25], Zone 1, Zone 2 maybe, and in big cities. I struggle to see that in the country, and I struggle to see personal individual vehicles being a massive, significant part anytime soon. I guess impossible to do a presentation without talking about AI recently. We've been using the elements of AI for many years. We have a very skilled, very dedicated team in Sabre. I guess we're looking at four main use cases for AI. Some of these are in place, some of them are in trial, some of them are being rolled out. One of those is coding support and pricing. We already use machine learning techniques in our pricing. There's new tools coming through like Claude.
All of those we're investigating. Do they add value to our pricing approach? We're gonna enhance the skilled human efficiency. If I take Trevor's team, for example, when a very thick medical report comes in, useful to get someone to scan that and pull out instantly the very big injuries. That allows us to put an even more accurate reserve on very quickly. That's enhancing the human skills of claims handling. Chatbot development for direct customer service and preparing for possible medium-term distribution changes, which we'll talk about more in the next slide. We're also very thoughtful about the risks that get presented by AI. Advanced phishing. You know, phishing is one of the biggest cyber risks most businesses face. AI helps with that from the bad guys' point of view. Unintended consequences, modified claims evidence can come through, and regulatory change.
I think my current favorite story here, you know, I've read about this, is the man who was trying to wire up his robo-hoover or robo-vacuum cleaner to his PlayStation controller and inadvertently gained control of the other 7,000 vacuum cleaners in the world, including access to the camera. That sort of shows a thing that can happen. I've seen a demonstration recently where a firm demonstrated how they could access the car controls, but all they were able to do, all they did on that day, was to make the indicators go on and off and make the windows go up and down. They made it very clear they could have controlled a lot of other things had they wanted to.
If you wanna scare yourself, go and look at the common bits of electronics between a household appliance and a car. One of the risks here is someone doesn't try and hack a car at all. They try and hack a fridge freezer, and at the same time, they inadvertently hack a car. There's quite a lot we need to watch around automated vehicles, AI, and how this might roll out in the future. I think AI may impact the industry. We think if it's gonna impact anywhere, it's probably in distribution, not as a product manufacturer. As we mentioned earlier, if you haven't got any data, you still can't use AI to optimize it. Distribution, I think different in the U.K. potentially compared to other European countries.
The PCW solution works incredibly well for most customers in terms of a one-stop shop to compare the market. Customer interaction may evolve for some cohorts into people using AI-generated search rather than search engine optimization, generative engine optimization. We're making sure that we're positioned so that we can open up our quotation systems wherever a customer wants to go. If we do see a part of the population wanna quote through AI, we'll be ready to accept those quotes on a direct basis. That does lead to some challenges. One of which is data accuracy. When we go live on a new comparison website, we spend an enormous amount of time making sure the data maps across correctly from the price comparison website into our system, so we're pricing accurately.
How is that gonna work with an AI engine, which we know can hallucinate already some of the answers? Customer understanding. If you've just said, "Go and buy me the best policy," what's gonna happen when you try and make a claim and that policy wasn't the policy you thought you were buying? How is that gonna flow through? Payment processes. Are you gonna trust putting your credit card in and just say, "Go and buy me a car insurance policy or holiday or anything else"? There's a customer issue there and a payment process issue. An interesting one could be product disaggregation. At the moment, obviously, a lot of companies make a lot of money from cross-selling and upselling ancillary products.
How will that work if you say, "Go and buy me a product with breakdown and personal accident and key cover attached to it," if the AI agent can buy those products from different suppliers? Regulation. No. How is the regulator gonna feel if someone hasn't signed a form, hasn't confirmed that they know what the policy is they're buying? There's a whole bunch of stuff here that means this isn't gonna happen very quickly, and there's some stuff to be worked through first. We think we're well-positioned. We make the vast majority of our profits through underwriting. We're a product manufacturer rather than distributor at heart. We're well used to partnering with a variety of distributors.
We have over a thousand brokers that we partner with and having conversations on a weekly basis with what I might describe as the next generation of brokers who feel they are generating AI-enabled engines that they may embed into other sales processes. We're always happy to talk to people and understand how that might work for us. Where our focus internally is to make AI complement to our existing skill set. We see AI as an opportunity for us, not a threat, I would say. Pricing. Well, I guess the simplest. I mean, thank you to Jefferies for letting us use this slide. We think the market's been underpriced and has been for quite some time.
Listening to commentary recently, it feels like other people are in the same opinion, and there's a lot of talk of pricing needing to move. We think if you look at this graph on the far right-hand side, there's a meaningful delta between where claims are and where premium is. We haven't allowed that to happen at Sabre. We have continued to fully cover claims inflation all the way through the last few periods, and that's what's helping us drive growth now. Claims inflation we think has actually moderated. Last time we spoke, I think we were at high single digit. We're now at mid-single digit. So what are the key drivers of claims cost? We still need to be careful about care costs and wage inflation. Increasing complexity of car parts.
As autonomous vehicles roll out, frequency might come down, but severity will probably go the other way. These cars are very expensive to fix. Used car prices are stabilized and cost of compensating victims of uninsured drivers is still going up. There's some interesting stuff in the industry for things like e-bikes are not insured, but they do get picked up by the MIB, which we all had to contribute to. There's some interesting claims pressures coming through. Claims frequency. We've seen a drop in frequency. We think it's settled. We don't think it's carrying on going down. We think it's reached a new level.
Interesting question of is that because of increased safety or is it 'cause people didn't want to claim because they'd seen very high premium increases in 2023 and chose not to put their NCD at risk or not to, so they were self-insured for a period? If it is behavioral and people do start to claim again, you may see frequency tick back the other way again. That's something that we're watching very closely. I guess we should touch on the current conflict in Iran, which obviously is awful for all the people involved. From our perspective, we think there may be some impact on gas. Well, anyway, there will be some impact on gas and energy prices if it goes on. That's not a first order issue for us, and it's not a significant issue for us.
Very different to the situation in Ukraine, and we'll happily deal with that in Q&A in terms of some more background on why we think this feels so different. We don't see that as dramatically changing our view of claims inflation in the near to medium term. Regulatory developments. Good news here. The U.K. government task force came out and basically said they felt the U.K. market performed well, was competitive and innovative, and that the cost pressures driving premiums had been caused by external factors. Similarly, the FCA has taken a view there's no market-wide intervention, and they'll deal with outliers individually. We try and keep our APR very much in the middle of the pack. We have no wish to be taking advantage of customers or to be above the radar on that one.
Outlook and summary. Profit up really well. Ambition 2030 on track. We've returned to growth. We mentioned we're growing into this start of this year at the end of February, the last numbers we're quoting. This year we expect to grow premium and profit compared to last year. Growing the top and the bottom line this year with our margin remaining within our target range. What I would say is I think our staff have done a fantastic job this year. Some of them are sitting in the room today at the back there. You know, the pricing team have done a great job in terms of getting the developments moving. Claims are doing a great job controlling costs.
All the support teams are doing a brilliant job this year for us to keep us moving to deliver on the core business and get Ambition 2030 firmly on track as well. At that point, I will pause, and we're now able to take any questions at all. Abid, I think you were just about first there, if that's okay. While Abid's getting ready, I should say if you're watching online, if you put any questions into the webcast, they'll appear as if by magic beside me, apparently.
Morning. It's Abid Hussain from Panmure Gordon. I've got three questions if I can. The first one on pricing. I think some of your peers said last week, some of the larger peers, that they expect pricing to increase over the rest of this year. You've said something similar this morning.
Yeah
as well. I'm just wondering, what does it actually take for pricing to move up? Because I know there's a long tail of of insurers. While pricing should increase, what will it actually take for it to increase and to reflect that claims inflation? That's the first question. The second one is on the new strategy rollout. Can you just give us some more color in terms of where you are on the car insurance bit of the rollout into the broader footprint? When do you expect that to impact the bottom line? Just finally on the Iran conflict. I think you said that there's no real read across from the Ukraine-Russia conflict. Can you just sort of talk to why there isn't any?
Yeah, of course. I'll take the first one, then maybe Matt and Trevor. I mean, what does it take for prices to increase? Well, I guess, you know, combined ratios going past 100% is always a bit of a mark. A lot of external surveys have combined ratio for the market going to 110% or so this year. It doesn't feel unrealistic with where pricing's being compared to where claims inflation is. I think what it takes is people to stop talking about it and start changing prices fundamentally. We've put our money where our mouth is for the last two years. We've taken the volume hit to make sure we price properly. We can only control our own destiny on that one.
It does feel like people are talking about it, and hopefully that translates into action. Matt, do you wanna say a thing a bit more on Ambition 2030?
Yeah. On Ambition 2030, the IHP rollout continues through brokers. During Q4 last year, we started our price testing on the expanded competitive footprint for car and van. It's currently in a test and learn phase, so kind of test, learn, refine. We continue to do that at the start of this year, and that will probably continue through most of this year before rolling out more growth in that segment over the coming years.
Yeah. Trevor, jump in on Iran.
Yes. So I guess the similarities are that there's been an impact on energy or on oil and gas from both, you know, slightly different reasons. The Ukrainian invasion that really caused problems to the supply chain. We had the semiconductor issue, wiring harness issues, and that was really driving inflation. If you remember, new cars couldn't be produced, so residual values on used cars were very, very strong, if not inflationary. Those factors all sort of very strongly fed into RPI. We don't see Iran and the surrounding areas as being those centers of manufacturing the same way. The Suez, which is a sort of obviously a main distribution route, has been circumnavigated now for quite some time by a lot of the supply chains. They've also moved away from having a sole source manufacturing zone post Ukraine.
At the moment, we're not seeing or foreseeing those same impacts that we saw before.
That's all.
Mm-hmm.
Hi. Thank you very much. It's Ivan Bokhmat from Barclays. My first question would be on growth. I mean, you're suggesting that in the first two months of the year, we're talking about 5% growth. If indeed the market does accelerate and they're applying price and you've been ahead of that, maybe you can talk about, you know, how much can you accelerate? Separately, because the motorcycle now seems to have been fixed, you know, the direct brand rolled out, how much do you think that could contribute to growth? 'Cause right now it's about 5% of your top line. Could it double in absolute terms for the year?
My second question, well, I don't wanna be picking up on what you said too much, but I think in your introduction, you suggested that the combined ratio and the loss ratio is as low or better than we've hoped. Yet your margin is in the middle of the range, you know, sort of, you can even say towards the lower end of it. I'm just wondering where you think improvements can come through the components of your combined ratio. Is it expenses? Do we need just to see more volumes going through? Maybe finally, just to pick up on the Iran point, I wanted to check. As we go back to the previous instances of fuel price shocks, do you notice any visible reduction in miles driven?
Can that be somewhat of an offset in terms of frequency?
Yeah. I'll take the sort of like more reverse order, and then you guys chip in, if that's okay. Yes, we would expect frequency to be an offset potentially to any claims inflation costs. It's hard to point directly at a comparative 'cause we can't find a completely clean period where you only had fuel prices going on. Yeah, I think I'm absolutely with you. If we do see fuel prices go up, you would expect driving miles to come down, therefore frequency to fall as well. On the bike question, I think we always said that we thought bike would be realistically maybe GBP 20 million. Didn't seem an unrealistic target. I think we'd still say that doesn't feel too mad to us. You know, it's going really well. If we can write more than that, we'll write more than that.
If we hit our target margin at a certain volume, we'll stop there. No, I don't think 20% sounds ridiculous at all. How much can we accelerate? That was on the car question, wasn't it? Do you wanna say anything more on that one particularly?
We've covered the inflation in our ratings, so we're currently writing our target margins for car. That means if the market does put significant rating above inflation, there's potential opportunities for us to grow slightly, similar to what we saw in 2023 when the prices took off.
Yeah, that's exactly right. We don't have to cover a delta. We think the industry needs to cover the delta, and then it needs to cover forward-looking inflation of 5%. We only need to cover the forward-looking element. There's no delta to fill for us. We think there is for probably most other people. There is a chance of quite high growth coming through. The margin question, Adam, do you wanna take that one?
Yeah. I mean, I guess motor, you know, it probably wouldn't be necessary or desirable to get a loss ratio better than we currently have this year, which is around 50%. You know, it can be a bit volatile year on year, so, you know, it could go up or could go down. That, that's certainly, you know, comfy and I wouldn't look to see any massive improvements in motor into the future. Motorcycle and taxi are clearly that bit higher, and, you know, I would hope they would come down more towards our target loss ratios as time goes on. You know, the expense ratio has gone up this year. As I said, you know, premium's lower. We've had a lower end premium, and that's come through in this expense ratio.
I expect that to continue to be the case for a while as we sort of have that earnings catch up relative to expense inflation. I do see over the sort of Ambition 2030 period, certainly, that expense ratio does improve as we start to get the benefit from leverage and keep a cap on our costs. I mean, we've given ourselves a range of margin target because it, you know, it allows what naturally happens in insurance, which is loss ratios to move about a bit. Expense ratio is a bit more predictable. I think, you know, we're not sort of calling a big move sort of up in our margin range.
You know, it's quite a comfortable place where it currently is, and we'll sort of see how the market develops and react accordingly to that.
Yeah. What I would say just is we should also always be aware that while bike and taxi are small and growing accounts, a couple of large losses can have an outsized impact in any one period. There's every chance we might at some point, while they're still growing, get a bad year followed by a really good year. We're looking through the middle and saying, "What does our rating strength and structure look like into the medium term?" Ben, I think you were sort of just about there. Come to you next in the room.
Hi there. Ben Cohen at RBC. I had two things that I wanted to ask you, please. First, it was just about the mix, in 2025 on the motor vehicle. It looks like, you know, the average premium was down sort of double digits, and you talked about putting through, I guess, mid to high single digit.
Yep
Claims inflation. Could you talk about what has happened on the other side that we've ended up with a pretty significant decline in average premium? The second question was just on the reinsurance recoveries in the year. It looked like there was a big increase both in terms of receivables, but also just in the P&L. What drove that, and does that have any implications for the cost of your reinsurance going forward? Thank you.
Sure. I'll take the first one. Maybe Adam or Matt that second. I guess on average premium, it's really quite simple. We just become more competitive for cheaper premiums. We're thinking of the world as a Venn diagram. That Venn diagram closes up a little bit, and we become more likely to convert a premium at GBP 800 than just the ones at GBP 1,000. Matt, anything to add?
Should I start on the mechanics of the reinsurance?
Yeah
Maybe you can give some content in terms of what's happening. You know, we do have this sort of gross position and the net position. Clearly, the net position is what impacts our P&L. The gross position reflects the impact of large claim movements. It is generally very volatile, so we'll see years where that is very small and years where it's very big. You know, in this year, you know, the gross has moved out, and that's been swallowed by the reinsurance, and that's why the recoverability is that much bigger. In a one-year period, it doesn't tell you a huge amount about what's gone on other than that it's just quite a volatile number, which obviously is why the reinsurance program is there in the first place.
Do you guys wanna mention anything on the program itself?
Well, I think I'd add we're not anticipating any adverse impact from that in terms of our reinsurance renewal.
Well, the market saw some pretty significant reinsurance premium reductions in January, probably over 10% across the piece. We have our renewal on the first of July, and we'd be hopeful of something similar. That's not yet in our numbers. Definitely saw your hand. Keep going up there.
Yes. Hello. Amelia from Deutsche Bank. Thank you for taking my question. I just have two.
Mm-hmm.
If I think about the solvency ratio, I mean, given sort of capital consumption in any given year and the growth that you want to achieve with Ambition 2030, how should I think about the solvency growth in a given year, and that's sort of in terms of solvency points?
Yep.
I appreciate you spoke about autonomous vehicles and the impact on motor and motorbikes.
Yeah.
What about taxi?
Mm-hmm.
I would appreciate sort of any comments around that, in particular, given sort of the big companies testing taxis, for example, in Central London.
Yeah.
Thank you.
I'll take the second one. Adam, you can then take the much more difficult one on solvency. Taxis, yeah, I think absolutely there must be an impact in the inner city bits. Something like Waymo, having done a bit of research on this fairly recently, is doing extensive actually mapping of the streets. It's not just relying on cameras. It's actually mapping the routes. It's mapping. That would be an enormously expensive thing to do outside a fairly tight part of the city center. They're interesting. There's some behavioral stuff here. If you fancy enjoying yourself, you see a Waymo, just step out in front of it and see what happens, 'cause it just stays there and doesn't do anything. You know, they're not hard to bully as a car, 'cause they're programmed not to do anything dangerous.
It's gonna be quite an interesting part there. If you're a black cab driver, you're gonna get around a bit quicker when there's a Waymo waiting for you to move. I do think it's gonna have an impact. It must have an impact on city centers controlled. You know, London is different to some of the grid systems in the States. It's much more difficult, intuitive how you get around. We'll see how that goes. Much longer to impact country towns I would've thought on that sort of thing. Adam, has that given you time to think of a good answer on solvency?
Almost enough, yeah. I think when we came out with the Ambition 2030 strategy in December 2024 and in the subsequent results, we were quite clear that one of the good things about this strategy is that it doesn't really use a huge amount of capital. We're still writing business at great margins. That business brings capital in, and the capital requirement potentially catches up over time.
We also said that the kind of 100% of earnings distributions that we'd had going up to that point were driven by very specific reasons, and we would normally expect that amount of sort of maximum distribution to be lower to maintain the capital at a decent place and indeed to look at the sort of dividend this year and it's in the high 80s% of profit, which is a bit more sustainable. You know, that remains the case over the long term. You know, this business should be capital generative. It should allow us to be able to distribute a good amount of that and sort of keep the flow of dividends going. What we've seen this year is a couple of things.
One is that the solvency capital requirement has increased as it will do. It'll do it in kind of fits and spurts because it is a little bit volatile and depends on, you know, things like the settlement rate claims and all kinds of things that aren't necessarily related to earnings. But over the long run, that's fairly predictable. We've also demonstrated that we're very happy to operate within that range. That's why the range is there, because the capital position can be a little bit volatile. We've got this 140-160% range. 140% is the floor, not 160%. This year we came in, we paid, you know, we agreed the dividend. That was 161.5% of capital at that point.
We decided to propose a buyback, which took us down to 154%, which is a very, very comfortable place. You know, there's no concerns on sort of capital constraints at that level. You know, it clearly indicates that we're looking to generate further capital through 2026, as we write whatever we do during that year.
Thank you, Darius.
Hi, I'm Darius Satkauskas with KBW. Congratulations on a good set of numbers today. Two questions, please. The first question is on your inflation expectations changed from 7%-8% to 5%. I'm wondering if you can give us any color on how many months of sort of business written at that high inflation you've got in the back book that's yet to earn through. That's the first question. The second question, I'm just sort of trying to reconcile the bigger picture. I understand the detail and everything, but if I step back, the industry is saying that the U.K. motor market is at its lows, and the combined ratio is terrible, and it needs to turn. Here we are with Sabre being competitive right at the bottom and growing. What am I missing?
You know, I get the detail, but why now is a good time to grow? Because everyone else is saying it's a terrible business, needs to improve. Sabre's saying, "Well, it's great business for us. We're writing it.
Yeah, sure. I'll take the second one. I guess we've been feeling a bit lonely for the last two years saying that the market's been in a terrible place and people should be pricing properly. This is, I guess, a bit of a countercyclical impact to that. We've priced properly for the last two or three years. We've not let ourselves get into that delta. We've said going all the way back to our IPO, our strategy is if we're prudent and cautious on pricing, when the market starts to turn, we spin off some really good margins from business we've written, which goes to the first part of your question, and it means we have to put prices up a lot less than the market at that point. At the point everyone else, I guess it's a bit of a Warren Buffett thing.
It's the only way I compare myself to Warren Buffett in any way, shape, or form. You know, be greedy when everyone else is nervous, and the flip side. We stayed very cautious when we thought the market was being too greedy on volume. We can now accelerate when the market's feeling pain. That's exactly what we expect to do as a business. Matt, there was a question about how many months we got in the bank, sort of without giving away too much on pricing strategy there, clearly.
At Q3, we talked about inflation being down to mid-single digit. Therefore, you can assume that there's consideration given at that point. We are now pricing our expected loss ratio at that mid-single digits inflation number.
I guess we've got quite a lot of last year at the higher inflation number. Andreas.
Thank you. Andreas from Peel Hunt. You mentioned in your annual report that there still appears to be poor value in ancillary products across the industry. I just wondered which product, products are you thinking of where you still see poor value? My second question attached to that is, do you see any pricing pressure on the ancillary products, either from manufacturers or brokers, in 2025 and could that continue in 2026? Thank you.
Yeah. I mean, I think that the fair value rules should smooth some of this out. You have to be able to convince yourself as a business that you're providing fair value through any product that you sell. I do struggle a bit with some of the prices I see charged for maybe something like personal accident, where you know it's been generated at Lloyd's, and there's been quite a chain of distribution before it gets sold to the end consumer. I do think there's some of those products I suspect the FCA will have on their radar to say, "Are you sure you're providing fair value?" The companies actually justify that, those premiums. Yeah, I haven't seen much on that so far. I think the focus has been on premium finance for the last year or so.
I haven't seen a lot going on with other ancillaries. Anything else from up front here? Sure.
Just coming back on reserve releases.
Mm.
You know, pricing for mid-single digit claims inflation since 3Q. How should we think about reserve releases going forward? I mean, you know, 2025 was quite a lot of release compared to, for example, 2024, where you added a bit. Just maybe a bit of guidance on how we should think about that going forward. Thank you.
Sure. Adam, do you wanna or Matt, do you wanna start?
Okay, I'll start. I mean, I think I'll say the same thing that I say every year when asked that question is just that we should be reserving at a best estimate basis, and then the releases that we get come through will be the run off of the risk adjustment at the sort of normal risk adjustment rate. This year, the reserve release was a little bit more, so clearly we'd had some favorable development on those claims. It would be nice to have continued favorable development, but as I said, we reserve on best estimate basis. Is that fair?
Okay. Ivan. Sorry, Carl, you go first. You have.
Hi. [Tryggvi Gudmundsson], Berenberg. I just had a quick one. On the kinda within your core market, motor market, are there any pockets of the non-standard section where you're seeing maybe a bit more growth opportunities, whether that's sort of classic cars or sort of younger drivers or where you're maybe seeing a bit more dislocation and you think there's some attractive room for growth? Thank you.
Yeah, we don't really target any individual sectors in that way. We don't really define a competitive footprint. It's important that we don't do individually our handwritten policies. The ultra-high net worth classic car stuff, that's not really us. That involves individual underwriting as it's more system driven pricing. Telematics has been astonishingly competitive through last year. That's not a market we're particularly focused on. We have taken our first steps back into telematics through a broker called MyFirst this year. That's, you know, for the first time in a long time we've taken a look at telematics, and we're just feeling our way around that market. That does feel very, very competitive for classically sold telematics at the moment. I don't think, Matt, anything particularly to call out in individual pockets of the core market.
As we know where we're quoting, and we think we know where we can amend our margin and pick up more business. Ivan, did I answer your question? What did you have for the further one? Yeah.
Thank you. Well, the follow-up would be just firstly on the pricing rollout.
Mm-hmm.
I mean, forgive me if I'm being difficult, but we're talking about the impact being meaningful in 2027.
Mm-hmm.
This was rolled out over a year ago or announced as a plan.
Mm-hmm.
I'm just wondering why it takes so long. Does it need a different market environment to properly deploy-
Mm-hmm.
It just feels like, especially now in a world where everything can be developed in about an hour with AI, that is a very long lead. Secondly, also sort of related to new technology, I think something intriguing you said about the cyber risk and the motor insurance. Is it actually something that's covered for new cars? Would it be part of a, like a standard U.K. motor coverage?
Yeah. Well, I mean, yes, things can be rolled out now, and they can be broken in an hour and a half, I guess, is the flip side of that. Until you've paid the claims or seen some claims with it, you don't really know whether you've got your prices completely accurate. It'd be. We could go bold. We could say we're completely confident we're gonna roll this out, and then we could be sitting here in a year's time going, "We got that slightly wrong, and we've destroyed all our profits." I think it's a cautious rollout, Matt, would be way we do it.
It's that test and learn approach that we'll do a little bit. We'll analyze it, understand what's going on, and work out how we can refine it to improve it going forward. As Geoff said, if we went big bang and we got it wrong, it'd be quite painful, so we just need to be sensible. Waiting for the long term, not the short term. It's our Ambition 2030. Trying it all in one year would be a dangerous move.
Yeah. Terrorism is a really interesting one. Terrorism is covered by the MIB primarily. You know, I think when's terrorism not terrorism? Someone's trying to hack their sort of robo hoover, and accidentally makes every Tesla turn left. Is that terrorism or just some horrible mistake that's happened? They're the sort of untested things in the industry. Be covered by our reinsurance. If it's not terrorism, our reinsurance picks it up. If it is terrorism, the MIB pick it up. We're not exposed, I guess, is the key thing there.
What about cyber? Like, you know, a failure of car system because of a hack or something like this. Failure of, I don't know, some central depository.
Well, Trevor, you might wanna answer that one. You're probably slightly more technical on that.
One incident that's covered by our reinsurance is one incident. If it's, as Geoff says, if it's declared a terrorist incident, then that goes into the central fund of the MIB. Is it covered? Yes. There are policy conditions to ensure that you take in all the updates, et cetera, that get pushed out by the manufacturers.
Yeah. Okay. Anything else? I'm conscious we are probably at time. Thank you very much for bearing with us during whatever was going on with the screen earlier. I'm still very happy to talk about the West Ham result if you wanna hang around afterwards. Thank you for your time, and thank you, online as well. Thanks a lot.