REG - Sabre Insurance Grp - Half-year Report 2023
03/08/2023 07:00
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RNS Number : 1306I Sabre Insurance Group PLC 03 August 2023
Half-year Report 2023
Accelerating growth at target margins
Sabre Insurance Group plc (the "Group" or "Sabre"), one of the UK's leading
Motor insurance underwriters, reports its half-year results for the six months
ended 30 June 2023.
KEY HIGHLIGHTS
‒ Continued execution of core strategy to focus on margins, with
growth as an output
‒ Core Motor Vehicle book continues to grow strongly, with improving
profitability
‒ Pricing and underwriting actions reflected in net loss ratio
improvements across core Motor Vehicle and Motorcycle products compared to the
full year 2022, partially offset by underperformance of the developing Taxi
product
‒ Solvency coverage is strong and will remain above our preferred
operating range after the payment of the proposed interim dividend
‒ Interim dividend of 0.9p announced in-line with policy
‒ Figures quoted below are on an IFRS 17 basis, with reserve discounting
changing current and past period profits. Further discussion on this can be
found in the CFO review
SUMMARY OF RESULTS
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Gross written premium £99.5m £91.8m £171.3m
Net earned premium £71.8m £77.5m £153.2m
Net loss ratio 62.0% 65.4% 66.0%
Expense ratio 31.8% 27.3% 27.4%
Combined operating ratio 93.8% 92.7% 93.4%
Net profit margin 8.3% 9.3% 8.6%
Profit before tax £4.8m £8.6m £14.0m
Profit after tax £3.8m £6.7m £11.1m
Interim dividend per share 0.9p 2.8p 2.8p
Special dividend per share n/a n/a 1.7p
Solvency coverage ratio (pre-interim/final dividend) 173.0% 173.2% 161.4%
Solvency coverage ratio (post-interim/final dividend) 169.0% 159.7% 153.8%
A reconciliation between IFRS and non-IFRS measures is given in the Appendix.
Prior-period figures have been restated under IFRS 17
OUTLOOK
‒ Premium growth expectations in core Motor Vehicle business
increased to between 25% and 30% higher than 2022 based on current run-rates
‒ Guidance for reduction in gross written premium across Taxi and
Motorcycle reiterated as we maintain our underwriting discipline. We expect
the reduction across these two products to be in the region of 20%
‒ Overall, expect gross written premium for the full year to be 15%
to 20% ahead of 2022 with further growth anticipated in 2024
‒ Expense ratio strain in H1 due to low earned premium and one-off
development costs expected to improve in H2
‒ Combined operating ratio guidance at the upper end of 85% to 90%
range. This reflects the net effect of performance of the Taxi product and
additional growth strain. This also reflects the positive impact of
discounting under IFRS 17, and is supported by an emerging strong profit from
July, with further improvement expected in 2024 and beyond
‒ Strong growth at attractive margins this year will support profit
growth in future periods
Geoff Carter, Chief Executive Officer of Sabre, commented:
"I am pleased with the position we find ourselves in at the half year point,
and believe our long-term strategy of disciplined pricing, early assertive
corrective actions when required and a tight focus on emerging claims trends
continues to prove its value. In a challenging year for the wider market, we
continue to anticipate a strong result in our core Motor Vehicle book.
The half year results are in line with our expectations and support our full
year projections.
It is useful to consider our portfolio of products in three categories -
Established, Maturing and Developing.
In our established Motor Vehicle product account, we are having an excellent
year. We took early pricing action in response to inflation and are now
reaping the rewards as others in the market continue to catch up. Our
year-on-year weekly premium levels have increased from around +20% at Q1 to
circa +50% at the end of June. Crucially, this is being achieved despite
implementing a significant rate increase to ensure we cover future claims
inflation (still assessed as circa 10%) and move our margin back towards our
historic levels.
Our Motorcycle product is maturing well. As expected, premium levels are
slightly reduced as underwriting actions last year continue to take effect. We
nonetheless anticipate a profitable contribution in 2023 and, having optimised
our rates, we are now reviewing additional distribution opportunities.
The Taxi product is still in development phase. Underwriting action was
required in the first half of the year to get performance to our required
levels and new business is now being written in line with our profit targets.
Premium volumes are still being restricted due to market dynamics while the
combination of low premium and immature claims means the Taxi business is not
likely to deliver a meaningful contribution to profit until 2024. We are,
however, satisfied with the way this product is evolving.
Inflation continues to be a factor across the industry, as is a lack of
certainty on smaller personal injury claims given legal reviews. We are
pleased (and relieved) that this seems to have been more widely recognised by
competitors in 2023, resulting in elevated levels of price increases. The
market now appears to be pricing in a far more rational way, although we
continue to believe that more rate increases are required to get to a
sustainable position.
Our new Direct IT platform was delivered on time, and on budget - thanks to
our numerous Sabre colleagues who have been so committed to the platform's
delivery. This will now allow us to enhance our Direct product customer
service proposition whilst also reducing costs.
Looking forward we are anticipating a good year in 2023 with a combined ratio
within the expected range, supported by an emerging strong profit from July.
On an undiscounted basis, our expected combined ratio for 2023 has edged up
slightly from previous guidance, reflecting performance on Taxi and we have
the - entirely welcome - challenge of additional first year growth strain on
high levels of new business.
I am confident that we will benefit from continued improvements in 2024 as our
excellent core Motor Vehicle performance earns through and as the Motorcycle
and Taxi products mature into profitable positions."
There will be a call for analysts and investors at 0930hrs on Thursday, 3
August 2023. For details, please contact sabre@teneo.com or find registration
link here: https://www.sabreplc.co.uk/investors/results-centre/
(https://www.sabreplc.co.uk/investors/results-centre/)
ENQUIRIES
Sabre Insurance Group (investor.relations@sabre.co.uk)
Geoff Carter, Chief Executive Officer
Adam Westwood, Chief Financial Officer
Teneo (020 7353 4200)
James Macey White
Eleanor Pomeroy
DIVIDEND CALENDAR
2023 Interim Dividend Payment Dates
17 August 2023 Ex-dividend date
18 August 2023 Record date
20 September 2023 Payment date
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
CFO Report
FINANCIAL AND BUSINESS REVIEW
Highlights
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Gross written premium £99.5m £91.8m £171.3m
Combined operating ratio 93.8% 92.7% 93.4%
Net profit margin 8.3% 9.3% 8.6%
Profit after tax £3.8m £6.7m £11.1m
Solvency coverage ratio (post-interim/final dividend) 169.0% 159.7% 153.8%
*
The first half of 2023 has shown continued momentum in market pricing, which
has allowed for significant year-on-year growth in core Motor Vehicle premium,
particularly from late March. This growth has been achieved despite allowing
for inflationary price increases. Clearly, this additional premium will need
to 'earn' through, and therefore will enhance future profits rather than
having an immediate impact on the current period.
Having reported our results on an IFRS 17 basis, the combined operating ratio
has been restated and now includes the impact of discounting. We have also
presented a new key performance indicator ("KPI"), net profit margin, which
includes instalment income within the denominator and is therefore more
representative of the total insurance profitability. We have not set targets
against this KPI at this stage as we continue to monitor how this interacts
with the previously reported combined operating ratio targets.
The combined operating ratio for the first half of the year has been
negatively impacted by an increased expense ratio resulting from low earned
premium (resulting from low written premium in the preceding period) set
against some one-off expenditure related to the implementation of the new IT
developments and the office refurbishment, along with the usual H1 expense
strain of staff bonuses. Whilst the core Motor Vehicle book has performed
well, and the Motorcycle book has improved, Taxi loss ratio also continues to
be a drag on the overall combined operating ratio.
The prior-year comparative profit, as restated under IFRS 17, includes a
significant benefit from discounting, given the combined impact of growing
claims reserves and rapidly increasing discount rates.
Solvency coverage is strong and will remain above our preferred operating
range after the payment of the £2.25m proposed interim dividend.
Revenue
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Profit or loss
Gross written premium £99.5m £91.8m £171.3m
Insurance revenue £86.1m £90.8m £181.5m
Net earned premium £71.8m £77.5m £153.2m
Other income £0.7m £1.0m £1.8m
Customer instalment income £1.6m £1.8m £3.3m
Interest revenue calculated using the effective interest method £0.7m £0.8m £1.7m
Realised fair value gains on debt securities £0.0k £24.1k £22.5k
Other comprehensive income
Fair value losses on debt securities through OCI (£1.6m) (£8.2m) (£14.2m)
Gross written premium by product
Motor Vehicle £83.0m £69.7m £134.9m
Motorcycle £9.1m £16.9m £23.1m
Taxi £7.4m £5.2m £13.3m
Where relevant, the figures above present revenue items as restated under IFRS
17. Gross written premium is unchanged against IFRS 4. Insurance revenue is
equivalent to net earned premium plus instalment income, which previously was
recorded separately. Net earned premium is below that in the comparative
period as it primarily reflects premium written in the preceding period.
Improvements in overall market pricing have allowed for a recovery in both
market share and total premium written in the core Motor Vehicle book. This is
somewhat offset by expected reductions in Motorcycle volumes. In the two
months since our AGM trading update, core Motor Vehicle gross written premium
has been over 40% ahead of the same period last year. This rapid growth will
earn through over the next year, which should enhance overall earnings.
Other income remains proportionate to the amount of Direct business earned,
which decreased vs H1 2022. Investment returns are improving, albeit slowly,
as the portfolio churns naturally into new assets purchased at higher yields.
Operating Expenditure
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Profit or loss
Gross claims incurred £57.0m £44.2m £107.5m
Net claims incurred £44.5m £50.7m £101.1m
Current-year net loss ratio 61.5% 63.1% 61.9%
Prior-year net loss ratio 0.5% 2.3% 4.1%
Net loss ratio 62.0% 65.4% 66.0%
Total operating expenses £22.9m £21.2m £42.0m
Expense ratio 31.8% 27.3% 27.4%
Combined operating ratio 93.8% 92.7% 93.4%
Net insurance finance expense (£2.7m) (£0.7m) (£2.8m)
Other comprehensive income
Net insurance finance expense £3.8m £5.4m £10.7m
Undiscounted ratios
Undiscounted current-year net loss ratio 69.7% 66.5% 67.9%
Undiscounted prior year net loss ratio (3.5%) 4.0% 3.5%
Undiscounted net loss ratio 66.2% 70.5% 71.4%
Undiscounted combined operating ratio 98.0% 97.8% 98.8%
Net loss ratio by product
Motor vehicle 55.8% 60.9% 59.0%
Motorcycle 60.5% 109.1% 113.4%
Taxi 120.8% 143.2% 107.0%
The Group recorded a net loss ratio of 62.0% in H1 2023. This represents an
improvement in net loss ratio across Motor Vehicle and Motorcycle, with the
most material benefit coming from the improvement in Motor Vehicle net loss
ratio. The overall effect of discounting is a reduction in net loss ratio
across all periods against the undiscounted figures. However, the prior-year
loss ratio is negatively impacted by discounting in the periods presented. Our
expense ratio has increased from 27.3% in H1 2022 to 31.8% in H1 2023, with
the restatement to an IFRS 17 basis having minimal impact. This increase is
primarily due to a decrease in earned premium set against inflation in
expenses. We have incurred one-off expenses in H1 2023 of circa £790k which
relate to the development of the new Direct platform, Insurer Hosted Pricing
solution and much needed building refurbishment. Individually, these costs are
not particularly material, but the impact is felt more heavily against the
relatively low earned premium.
Whilst market practice varies, we have always reported an 'all-in' expense
ratio. If we were to exclude non-directly attributable expenses from our key
ratios, our combined ratio for H1 2023 would be 75.4% which is 18.4% lower
than our reported 'all-in' combined operating ratio. We do not believe that
excluding non-directly attributable operating expenses from our key ratios
truly reflects the cost of running the business and will continue to include
all expenses in our key ratios to reflect the performance of the business more
accurately.
We continue to report undiscounted net loss and combined operating ratios as
these present the most easily comparable performance measures year-on-year.
Earnings per Share
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Basic earnings per share 1.54p 2.69p 4.45p
Diluted earnings per share 1.52p 2.67p 4.42p
Earnings per share for the current and comparative period are calculated on
the basis of the current capital structure. Diluted Earnings per share for H1
2023 is 1.52p compared to 2.67p for the comparative period in 2022, reflecting
differences in profit after tax. The difference between basic and diluted
earnings per share reflects the maximum dilution effect of share awards which
have been granted but which have not vested.
Cash and Investments
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Government bonds £85.6m £82.3m £87.2m
Government-backed securities £80.5m £80.6m £80.8m
Corporate bonds £61.5m £64.3m £61.3m
Cash and cash equivalents £29.3m £27.8m £18.5m
The Group continues to hold a low-risk investment portfolio and sufficient
cash to meet its future claims liabilities. The Group operates a
'buy-and-hold' strategy in which a proportion of the portfolio is invested in
investment-grade corporate bonds, in order to achieve a steady return on
invested capital while maintaining a majority of government-backed assets. The
size of the overall invested portfolio has remained consistent with the prior
reporting period, while the amount of cash held remains high, reflecting the
continued importance of maintaining strong liquidity in the current
environment.
Insurance Liabilities and reinsurance contracts
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Insurance contract liabilities (£322.0m) (£304.0m) (£314.3m)
Reinsurance contract assets £138.3m £121.5m £137.0m
The Group's insurance liabilities continue to reflect the underlying
profitability and volume of business written. The Group continues to hold
excess-of-loss reinsurance contracts across its entire book at an excess of
£1.0m per claim. Note that these liabilities are now shown on a discounted
basis in-line with the financial statements.
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.
Dividends
Where the Board believes that the Group holds capital which it considers
surplus to the Group's requirements, the Group would intend to return such
surplus capital to shareholders. This assessment is generally made at
year-end, with capital distributed via a special full-year dividend. Under
normal circumstances, the Board considers a Solvency II capital coverage ratio
within the range of 140% to 160% to be appropriate, and will consider this
when determining the potential for special dividends. The Board may revise the
Group's dividend policy from time to time as it considers appropriate.
The Board has declared an ordinary interim dividend of 0.9p per share (HY
2022: 2.8p) in line with the Group's policy to pay an interim dividend equal
to one third of the previous year's ordinary dividend.
Transition to IFRS 17
A new accounting standard for insurance contracts, IFRS 17, came into force
for periods beginning on or after 1 January 2023. Therefore, these interim
accounts and all subsequent financial statements are presented on this basis.
All comparative information has been restated on this basis. There is
significant technical disclosure included within these Interim Accounts (and
subsequent Annual Report and Accounts) which covers the transition to the new
standard.
In order to assist with understanding the impact of this transition, I include
some additional high-level summary information here.
Overall impact of transition
Because the Group provides non-life insurance policies of one year or under,
and meets certain other relevant criteria, a 'simplified' approach can be
applied, which is the 'Premium Allocation Approach' ('PAA'). This is in
contrast to the more complex 'General Measurement Model' ('GMM') which is
applied by default where the PAA is not appropriate.
Because the PAA is being applied, the general recognition and measurement of
premium income and claims expense is similar to that under the previous
standard (IFRS 4). There are some key differences, which are explained below.
‒ Under IFRS 4, when an insurance policy was sold a 'gross written
premium' was recognised to the full amount of the premium, and an 'unearned
premium reserve' ('UPR') was created equal to the value of the premium, which
was then unwound over the life of the policy (typically one year) over which
time the revenue would be recognised to the profit and loss account. Under
IFRS 17, a 'liability for remaining coverage' ('LRC') is calculated on writing
a policy. Under the PAA, this LRC is exactly analogous to the UPR. As such,
the pattern of revenue generated by a policy is the same under IFRS 17 and
IFRS 4 in most cases.
‒ Under IFRS 17, premium is presented as part of 'net insurance revenue'
on the face of the profit and loss account. Given the above, this is analogous
to net earned premium under IFRS 4, except that it also includes all other
income related to the policy, which primarily includes instalment interest on
monthly payments.
‒ In calculating loss ratio, expense ratio and combined operating ratio,
we use 'net insurance revenue' less non-premium income as the denominator.
This means that the denominator in these ratios is equivalent to that under
IFRS 4.
‒ We have also introduced a new key performance indicator (profitability
ratio) which uses 'net insurance revenue' as the denominator, as we believe
this will be consistent with the approach taken by peers, and reflects the
true profitability of products sold.
‒ Under IFRS 17, there is no 'risk margin' applied to reserves, which
was a discreet amount of additional reserve booked by management to allow for
uncertainty in the reserving method used. Instead, a 'risk adjustment' is
applied to the best estimate reserve held. In practice, this is similar to the
risk margin applied under IFRS 4, however more disclosure is required as to
the derivation of the risk adjustment and the confidence interval that it
represents.
‒ Under IFRS 17, the 'liability for incurred claims' (i.e. the balance
held against claims incurred but not yet paid) is required to be discounted.
This is similar to treatment on the Group's regulatory balance sheet, but
different to the previous standard (IFRS 4) where non-life reserves were not
discounted.
CONDENSED CONSOLIDATED PROFIT OR LOSS ACCOUNT
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Notes Restated ((1)) Restated ((1))
Insurance revenue 3.4 86,119 90,818 181,477
Insurance service expense 3.4 (66,628) (53,990) (126,606)
Insurance service result before reinsurance contracts held 19,491 36,828 54,871
Reinsurance expense (12,655) (11,540) (24,958)
Change in amounts recoverable from reinsurers for incurred claims 12,498 (6,533) 6,305
Net expense from reinsurance contracts held 3.4 (157) (18,073) (18,653)
Insurance service result 19,334 18,755 36,218
Interest income on financial assets using effective interest rate method 4.4 720 815 1,667
Net gains on derecognition of debt securities measured at FVOCI 4.5 - 24 22
Total investment income 720 839 1,689
Insurance finance expenses for insurance contracts issued (4,736) (1,391) (6,043)
Reinsurance finance income for reinsurance contracts held 2,085 687 3,195
Net insurance finance expense (2,651) (704) (2,848)
Net insurance and investment result 17,403 18,890 35,059
Other income 6 682 1,045 1,784
Other finance costs - (4) (5)
Other operating expenses 7 (13,243) (11,362) (22,815)
Profit before tax 4,842 8,569 14,023
Income tax expense 8 (1,020) (1,877) (2,942)
Profit for the period attributable to ordinary shareholders 3,822 6,692 11,081
Basic earnings per share (pence per share) 1.54 2.69 4.45
Diluted earnings per share (pence per share) 1.52 2.67 4.42
(1) See Note 2.3.1 IFRS 17 "Insurance Contracts"
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Notes Restated ((1)) Restated ((1))
Profit for the period attributable to ordinary shareholders 3,822 6,692 11,081
Items that are or may be reclassified subsequently to profit or loss
Unrealised fair value losses on debt securities 4.5 (1,636) (8,212) (14,207)
Realised gains on derecognition of debt securities reclassified to profit of 4.5 - (24) (22)
loss
Tax credit 409 1,569 3,563
Debt securities at fair value through other comprehensive income (1,227) (6,667) (10,666)
Insurance finance income for insurance contracts issued 5,745 12,947 23,602
Reinsurance finance expenses for reinsurance contracts held (1,946) (7,549) (12,924)
Tax charge (925) (1,268) (2,509)
Net insurance finance income 2,874 4,130 8,169
Total other comprehensive income/(loss) for the period, net of tax 1,647 (2,537) (2,497)
Total comprehensive income for the period attributable to ordinary 5,469 4,155 8,584
shareholders
(1) See Note 2.3.1 IFRS 17 "Insurance Contracts"
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as at Unaudited as at
30 June 30 June 31 December 1 January
2023 2022 2022 2022
£'k £'k £'k £'k
Notes Restated ((1)) Restated ((1)) Restated ((1))
Assets
Cash and cash equivalents 4.1 29,327 27,796 18,502 30,611
Financial investments 4.2 227,667 227,224 229,158 234,667
Receivables ((2)) 4.3 6 39 7 74
Current tax assets 3,363 2,998 1,255 -
Reinsurance contract assets ((1)) 3 138,332 121,540 136,953 147,896
Property, plant and equipment 5,133 4,019 3,996 4,066
Right-of-use asset - 62 - 187
Deferred tax assets 1,215 959 2,391 1,634
Other assets ((2)) 2,097 1,381 1,278 821
Goodwill 156,279 156,279 156,279 156,279
Total assets 563,419 542,297 549,819 576,235
Liabilities
Payables ((2)) 5.1 8,345 5,097 5,107 5,873
Current tax liabilities - - - 580
Insurance contract liabilities ((1)) 3 321,965 304,039 314,340 317,621
Lease liability - 60 - 193
Other liabilities ((2)) 2,260 1,727 1,383 1,893
Total liabilities 332,570 310,923 320,830 326,160
Equity
Issued share capital 250 250 250 250
Own shares (2,552) (2,120) (2,810) (2,257)
Merger reserve 48,525 48,525 48,525 48,525
FVOCI reserve (14,256) (9,030) (13,029) (2,363)
Revaluation reserve 831 831 831 831
Insurance/Reinsurance finance reserve ((1)) 13,118 6,205 10,244 2,075
Share-based payments reserve 1,883 1,616 2,407 1,842
Retained earnings ((1)) 183,050 185,097 182,571 339,885
Total equity 230,849 231,374 228,989 388,788
Total liabilities and equity 563,419 542,297 549,819 714,948
(1) See Note 2.3.1 IFRS 17 "Insurance Contracts"
(2) The description of the line item has been updated. The change in
description has had no impact on the components of the balances.
‒ Receivables (31 December 2022: Loans and other receivables)
‒ Other assets (31 December 2022: Prepayments, accrued income and other
assets
‒ Payables (31 December 2022: Trade and other payables)
‒ Other liabilities (31 December 2022: Accruals)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Own shares Merger reserve FVOCI reserve Revaluation reserve Insurance/ Share-based payments reserve Retained earnings Total equity
Reinsurance finance reserve
£'k £'k £'k £'k £'k £'k £'k £'k
Balance as at 31 December 2021, as previously reported 250 (2,257) 48,525 (2,363) 831 - 1,841 205,900 252,727
Impact of initial application of IFRS 17 - - - - - 2,075 - (4,726) (2,651)
Restated balance as at 1 January 2022 (unaudited) 250 (2,257) 48,525 (2,363) 831 2,075 1,841 201,174 250,076
Profit for the period attributable to ordinary shareholders - - - - - - - 6,692 6,692
Total other comprehensive (loss)/income for the period, net of tax: Items that - - - (6,667) - 4,130 - - (2,537)
are or may be reclassified subsequently to profit or loss
Share-based payment expense - - - - - - (225) 403 178
Net movement in own shares - 137 - - - - - - 137
Ordinary dividends paid - - - - - - - (23,172) (23,172)
Restated balance as at 30 June 2022 (unaudited) 250 (2,120) 48,525 (9,030) 831 6,205 1,616 185,097 231,374
Profit for the period attributable to ordinary shareholders - - - - - - - 4,389 4,389
Total other comprehensive (loss)/income for the period, net of tax: Items that - - - (3,999) - 4,039 - - 40
are or may be reclassified subsequently to profit or loss
Share-based payment expense - - - - - - 791 45 836
Net movement in own shares - (690) - - - - - - (690)
Ordinary dividends paid - - - - - - - (6,960) (6,960)
Restated balance as at 31 December 2022 (unaudited) 250 (2,810) 48,525 (13,029) 831 10,244 2,407 182,571 228,989
Profit for the period attributable to ordinary shareholders - - - - - - - 3,822 3,822
Total other comprehensive (loss)/income for the period, net of tax: Items that - - - (1,227) - 2,874 - - 1,647
are or may be reclassified subsequently to profit or loss
Share-based payment expense - - - - - - (524) 885 361
Net movement in own shares - 258 - - - - - - 258
Ordinary dividends paid - - - - - - - (4,228) (4,228)
Balance as at 30 June 2023 (unaudited) 250 (2,552) 48,525 (14,256) 831 13,118 1,883 183,050 230,849
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated ((1)) Restated ((1))
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax for the period 4,842 8,569 14,023
Adjustments for:
Depreciation of property, plant and equipment 45 50 108
Depreciation of right-of-use assets - 124 187
Share-based payment - equity-settled schemes 803 767 1,603
Investment return (523) (824) (1,590)
Interest on lease liability - 4 5
Expected credit loss - 17 (34)
Impact of movement in discount rates on insurance/reinsurance contracts 3,799 5,398 10,678
Operating cash flows before movements in working capital 8,966 14,105 24,980
Movements in working capital:
Change in reinsurance contract assets (1,379) 26,357 10,943
Change in receivables 1 35 67
Change in other assets (819) (560) (457)
Change in payables 3,236 (774) (765)
Change in insurance contract liabilities 7,625 (13,581) (3,281)
Change in other liabilities 878 (166) (510)
Cash generated from operating activities before investment of insurance assets 18,508 25,416 30,977
Taxes paid (2,468) (4,480) (4,480)
Net cash generated from operating activities before investment of insurance 16,040 20,936 26,497
assets
Interest and investment income received 1,431 1,451 3,383
Proceeds from the sale and maturity of invested assets 4,400 29,547 37,734
Purchases of invested assets (5,452) (30,985) (48,213)
Net cash generated/(used) from operating activities 16,419 20,949 19,401
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (1,182) (3) (38)
Net cash generated/(used) by investing activities (1,182) (3) (38)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of principal portion of lease liabilities - (137) (198)
Net cash used in acquiring and disposing of own shares (184) (452) (1,142)
Dividends paid (4,228) (23,172) (30,132)
Net cash generated/(used) by financing activities (4,412) (23,761) (31,472)
Net increase/(decrease) in cash and cash equivalents 10,825 (2,815) (12,109)
Cash and cash equivalents at the beginning of the period 18,502 30,611 30,611
Cash and cash equivalents at the end of the period 29,327 27,796 18,502
(1) See Note 2.3.1 IFRS 17 "Insurance Contracts
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The condensed consolidated interim financial statements comprise the results
and balances of the Group for the six-month period ended 30 June 2023, the
comparative period for the six months ended 30 June 2022 and the year ended 31
December 2022. The information in the condensed consolidated interim financial
statements is unaudited and does not constitute statutory accounts as defined
in s.434 of the Companies Act 2006. The independent auditor's report on the
Group accounts for the year ended 31 December 2022 is unqualified, does not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying their report and does not include a statement
under s.498(2) or (3) of the Companies Act 2006.
2. ACCOUNTING POLICIES
2.1. Basis of preparation
The condensed consolidated interim financial statements have been prepared and
approved by the Directors in accordance with UK-adopted International
Accounting Standard 34 ('Interim Financial Reporting'). As required by the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority,
these interim financial statements have been prepared applying the accounting
policies and presentation that will be applied in the preparation of the
annual financial statements of the Group and will be prepared in accordance
and fully comply with UK-adopted international accounting standards,
comprising International Accounting Standards ('IAS') and International
Financial Reporting Standards ('IFRSs'). The annual financial statements were
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 Group has applied IFRS 17 from 1 January 2023, restating the opening and
closing balance sheet positions for 2022. For details on new accounting
policies, significant judgements and estimates, refer to Notes 2.3.1 and 3. As
a consequence the restated figures have been labled as unaudited.
The condensed consolidated financial statements values are presented in Pounds
Sterling (£) rounded to the nearest thousand (£'k), unless otherwise
indicated. The Group does not consider it is exposed to material seasonal
volatility in its financial results.
2.2. Going concern
Having assessed the Group's forecasts, projections and principal risks of the
Group over the full duration of the planning cycle, the Directors have a
reasonable expectation that the Group will continue in operational existence
for a period of not less than twelve months. Accordingly, the results for the
period ended 30 June 2023 have been prepared on a going concern basis.
The Group's principal risks and uncertainties are outlined on pages 19 to 28
of the 31 December 2022 Annual Report and Accounts and have not changed since
the last reporting date. The principal risks are:
- Insurance risk
- Operations
- Finance and Capital
- Governance and Compliance
- People
- Macro risks
- Economic disruption
- Climate and ESG
2.3. 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 2023:
- Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
- Definition of Accounting Estimates (Amendments to IAS 8)
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
- IFRS 17 "Insurance Contracts"
- Amendments to IFRS 17
- Initial Application of IFRS 17 and IFRS 9 - Comparative
Information
In these financial statements, the Group has applied IFRS 17 "Insurance
Contracts" for the first time from 1 January 2023. The Group had not elected
to defer the implementation of IFRS 9 and has implemented IFRS 9 from 1
January 2020.
Other than IFRS 17 "Insurance Contracts" which is discussed below, none of the
amendments have had a material impact to the Group.
2.3.1 IFRS 17 "Insurance Contracts"
IFRS 17 "Insurance Contracts" replaced IFRS 4 "Insurance Contracts" for annual
periods starting on 1 January 2023.
The Group has restated comparative information for 2022 applying the
transitional provision in Appendix C to IFRS 17. The nature of the changes in
accounting policies can be summarised, as follows:
2.3.1.1 Changes to classification and measurement
The adoption of IFRS 17 did not change the classification of the Group's
insurance contracts as insurance contracts.
Under IFRS 4, the Group was permitted to account for insurance contracts using
its previous accounting policies under 'old' UK GAAP. However, IFRS 17
establishes specific principles for the recognition and measurement of
insurance contracts issued and reinsurance contracts held by the Group.
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 IFRS 4 premium
reserve profile recognised over time. The principles of the general model
remain applicable to the liability for incurred claims.
Under IFRS 17, the Group's insurance contracts issued and reinsurance
contracts held are all eligible to be measured applying the Premium Allocation
Approach. The PAA simplifies the measurement of insurance contracts in
comparison with the general model in IFRS 17.
The measurement principles of the PAA differ from the 'earned premium
approach' used by the Group under IFRS 4 in the following key areas:
- the liability for remaining coverage reflects premiums received less
deferred insurance acquisition cash flows less amounts recognised in revenue
for insurance services provided
- measurement of the liability for remaining coverage involves an explicit
evaluation of risk adjustment for non-financial risk when a group of contracts
is onerous in order to calculate a loss component (previously these may have
formed part of the unexpired risk reserve provision)
- measurement of the liability for incurred claims (previously claims
outstanding and incurred-but-not-reported (IBNR) claims) is determined on a
discounted probability-weighted expected value basis, and includes an explicit
risk adjustment for non-financial risk. The liability includes the Group's
obligation to pay other incurred insurance expenses
- measurement of the asset for remaining coverage (reflecting reinsurance
premiums paid for reinsurance held) is adjusted to include a loss-recovery
component to reflect the expected recovery of onerous contract losses where
such contracts reinsure onerous direct contracts
The Group allocates the acquisition cash flows to groups of insurance
contracts issued or expected to be issued using a systematic and rational
basis. Insurance acquisition cash flows include those that are directly
attributable to a group and to future groups that are expected to arise from
renewals of contracts in that group. Where such insurance acquisition cash
flows are paid (or where a liability has been recognised applying another IFRS
standard) before the related group of insurance contracts is recognised, an
asset for insurance acquisition cash flows is recognised. When insurance
contracts are recognised, the related portion of the asset for insurance
acquisition cash flows is derecognised and subsumed into the measurement at
initial recognition of the insurance liability for remaining coverage of the
related group.
For an explanation of how the Group accounts for insurance and reinsurance
contracts under IFRS 17, see Note 3.
There has been no change in the Group's segments or how the Group reports on
these segments internally.
2.3.1.2 Changes to presentation and disclosure
For presentation in the statement of financial position, the Group aggregates
insurance and reinsurance contracts issued and reinsurance contracts held,
respectively and presents separately:
- portfolios of insurance contracts issued that are assets
- portfolios of insurance contracts issued that are liabilities
- portfolios of reinsurance contracts held that are assets
- portfolios of reinsurance contracts held that are liabilities
The portfolios referred to above are those established at initial recognition
in accordance with the IFRS 17 requirements.
The line item descriptions in the profit or loss account and statement of
other comprehensive income have been changed significantly compared with the
previous accounting basis. Previously, the Group reported the following line
items:
- Gross written premium
- Net written premium
- Changes in unearned premium reserves
- Gross insurance claims
- Net insurance claims
Instead, IFRS 17 requires separate presentation of:
- Insurance revenue
- Insurance service expenses
- Allocation of reinsurance premiums
- Amounts recoverable from reinsurers for incurred claims
- Insurance finance income/(expenses) for insurance contracts issued
- Reinsurance finance income/(expenses) for reinsurance contracts held
The Group provides disaggregated qualitative and quantitative information
about:
- amounts recognised in its financial statements from insurance contracts
- significant judgements, and changes in those judgements, when applying
the standard
2.3.1.3 Transition
Changes in accounting policies resulting from the adoption of IFRS 17 have
been applied using a full retrospective approach. Under the full retrospective
approach, at 1 January 2022, the Group:
- has identified, recognised and measured each group of insurance and
reinsurance contracts as if IFRS 17 had always applied
- Has identified, recognised and measured assets for insurance acquisition
cash flows as if IFRS 17 has always applied. However no recoverability
assessment was performed before the transition date. At transition date, a
recoverability assessment was performed and no impairment loss was identified
- derecognised any existing balances that would not exist had IFRS 17
always applied
- recognised any resulting net difference in equity (see Statement of
Changes in Equity)
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 (i.e. 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 (i.e. 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 (i.e. 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
2.4. New and amended standards and interpretations not yet
effective in 2023
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 10 and IAS 28: Amendment: "Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture" (IASB effective date:
optional)
3. Insurance liabilities and reinsurance assets
ACCOUNTING POLICY
For the purpose of this accounting policy, the term 'motor insurance' covers
all the Group's products, which includes Motor Vehicle, Motorcycle and Taxi
insurance.
A. Insurance and reinsurance contracts classification
The Group issues insurance contracts in the normal course of business, under
which it accepts significant insurance risk from a policyholder by agreeing to
compensate the policyholder if a specified uncertain future insured event
adversely affects the policyholder.
As a general guideline, the Group determines whether it has significant
insurance risk, by comparing benefits payable after an insured event with
benefits payable if the insured event did not occur.
The Group issues only non-life insurance to individuals and businesses.
Non-life insurance products offered by the Group are Motor Vehicle, Motorcycle
and Taxi insurance. These products offer protection of a policyholder's assets
and indemnification of other parties that have suffered damage as a result of
a policyholder's accident.
In the normal course of business, the Group uses reinsurance to mitigate its
risk exposures. A reinsurance contract transfers significant risks if it
transfers substantially all of the insurance risk resulting from the insured
portion of the underlying insurance contacts, even if it does not expose the
reinsurer to the possibility of a significant loss.
B. Insurance and reinsurance contracts accounting treatment
(i) Separating components from insurance and reinsurance contracts
The Group assesses its non-life insurance and reinsurance products to
determine whether they contain distinct components which must be accounted for
under another IFRS instead of under IFRS 17. After separating any distinct
components, the Group applies IFRS 17 to all remaining components of the
(host) insurance contract. Currently, the Group's products do not include any
distinct components that require separation.
(ii) Aggregation and recognition of insurance and reinsurance contracts
Insurance contracts
Insurance contracts are aggregated into groups for measurement purposes.
Groups of insurance contracts are determined by identifying portfolios of
insurance contracts, each comprising contracts subject to similar risks and
managed together, and dividing each portfolio into annual cohorts (i.e. by
year of issue) and each annual cohort into three groups based on the expected
profitability of contracts:
- any contracts that are onerous on initial recognition
- any contracts that, on initial recognition, have no significant
possibility of becoming onerous subsequently
- any remaining contracts in the annual cohort
The Group recognises groups of insurance contracts it issues from the earliest
of:
- the beginning of the coverage period of the group of contracts
- when the first payment from a policyholder in the group becomes due or
when the first payment is received if there is no due date
- when facts and circumstances indicate that the contract is onerous.
The Group adds new contracts to the group in the reporting period in which
that contract meets one of the criteria set out above.
The profitability of groups of contracts is assessed by actuarial valuation
models that take into consideration existing and new business. The Company
assumes that no contracts in the portfolio are onerous at initial recognition
unless facts and circumstances indicate otherwise. For contracts that are not
onerous, the Company assesses, at initial recognition, that there is no
significant possibility of becoming onerous subsequently by assessing the
likelihood of changes in applicable facts and circumstances. The Company
considers facts and circumstances to identify whether a group of contracts are
onerous based on:
- Pricing information
- Results of similar contracts it has recognised
- Environmental factors, e.g., a change in market experience or
regulations
Reinsurance contracts
Some reinsurance contracts provide cover for underlying contracts that are
included in different groups. However, the Group concludes that the
reinsurance contract's legal form of a single contract reflects the substance
of the Group's contractual rights and obligations, considering that the
different covers lapse together and are not sold separately. As a result, the
reinsurance contract is not separated into multiple insurance components that
relate to different underlying groups.
The Group recognises a group of reinsurance contracts held at the earlier of
the following:
- The beginning of the coverage period of the group of reinsurance
contracts held
- The date the Group recognises an onerous group of underlying insurance
contracts if the Group entered into the related reinsurance contract held in
the group of reinsurance contracts held at or before that date
The Group adds new contracts to the group in the reporting period in which
that contract meets one of the criteria set out above.
(iii) Measurement
Summary of measurement approaches
The Group uses the following measurement approaches to its insurance and
reinsurance contacts.
Product classification Measurement model
Insurance contracts issued
Motor insurance Insurance contracts issued Premium Allocation Approach ("PAA")
Reinsurance contracts held
Motor insurance - excess of loss reinsurance Reinsurance contracts held Premium Allocation Approach ("PAA")
The Group applies the premium allocation approach to all the insurance
contracts that it issues and reinsurance contracts that it holds, as the
coverage period of each contract in the group is one year or less, including
insurance contract services arising from all premiums within the contract
boundary. The Group does not expect significant variability in the fulfilment
cash flows that would affect the measurement of the liability for remaining
coverage during the period before a claim is incurred.
All the Group's insurance contracts have a coverage period of one year or
less. The Group's reinsurance contracts held are excess of loss contracts and
are loss occurring. The Group does not have any reinsurance contracts issued
to compensate another entity for claims arising from one or more insurance
contracts issued by that other entity.
Insurance contracts issued
On initial recognition of each group of contracts, the carrying amount of the
liability for remaining coverage ("LRC") is measured at:
- the premiums received on initial recognition
- minus any insurance acquisition cash flows allocated to the group at
that date
- adjusted for any amount arising from the derecognition of any assets or
liabilities previously recognised for cash flows related to the group
(including assets for insurance acquisition cash flows)
The Group has chosen not to expense insurance acquisition cash flows when they
are incurred.
Subsequently, the Group measures the carrying amount of the LRC at the end of
each reporting period as the LRC at the beginning of the period:
- plus premiums received in the period
- minus insurance acquisition cash flows
- plus any amounts relating to the amortisation of insurance acquisition
cash flows recognised as an expense in the reporting period
- minus the amount recognised as insurance revenue for the services
provided in the period
On initial recognition of each group of contracts, the Group expects that the
time between providing each part of the services and the related premium due
date is no more than a year. Accordingly, the Group has chosen not to adjust
the liability for remaining coverage to reflect the time value of money and
the effect of financial risk.
If at any time during the coverage period, facts and circumstances indicate
that a group of contracts is onerous, then the Group recognises a loss in
profit or loss and increases the liability for remaining coverage to the
extent that the current estimates of the fulfilment cash flows that relate to
remaining coverage exceed the carrying amount of the liability for remaining
coverage. The fulfilment cash flows are discounted (at current rates) if the
liability for incurred claims is also discounted.
The Group recognises the liability for incurred claims ("LIC") of a group of
insurance contracts at the amount of the fulfilment cash flows relating to
incurred claims. The future cash flows ("FCF") are discounted (at current
rates) unless they are expected to be paid in one year or less from the date
the claims are incurred.
The carrying amount of a group of insurance contracts issued at the end of
each reporting period is the sum of:
- the LRC
- the LIC
Risk adjustment for non-financial risk
An explicit risk adjustment for non-financial risk is estimated separate from
the other estimates. Unless contracts are onerous, the explicit risk
adjustment for non-financial risk is only estimated for the measurement of the
LIC.
This risk adjustment represents the compensation that the Group 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 Group 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
Reinsurance contracts held
The excess of loss reinsurance contracts held provide coverage on the motor
insurance contracts originated for claims incurred during an accident year and
are accounted for under the PAA. The Group measures its reinsurance assets for
a group of reinsurance contracts that it holds on the same basis as insurance
contracts that it issues. For reinsurance contracts held, on initial
recognition, the Group measures the remaining coverage at the amount of ceding
premiums paid. For reinsurance contracts held, at each of the subsequent
reporting dates, the remaining coverage is:
- increased for ceding premiums paid in the period; and
- decreased for the amounts of ceding premiums recognised as reinsurance
expenses for the services received in the period
For reinsurance contracts held, the risk adjustment for non-financial risk
presents the amount of risk being transferred by the Group to the reinsurer.
Asset for insurance acquisition cash flows
The Group includes the following acquisition cash flows within the insurance
contract boundary that arise from selling, underwriting and starting a group
of insurance contracts and that are:
a. costs directly attributable to individual contracts and groups of
contracts; and
b. costs directly attributable to the portfolio of insurance contracts to
which the group belongs, which are allocated on a reasonable and consistent
basis to measure the group of insurance contracts
The Group does not pay or incur insurance acquisition cash flows before a
group of insurance contracts is recognised in the statement of financial
position.
Modification and derecognition
The Group derecognises insurance contracts when:
- extinguished (i.e. when the obligation specified in the insurance
contract expires or is discharged or cancelled); or
- the contract is modified and certain additional criteria are met.
When an insurance contract is modified by the Group as a result of an
agreement with the counterparties or due to a change in regulations, the Group
treats changes in cash flows caused by the modification as changes in
estimates of the FCF, unless the conditions for the derecognition of the
original contract are met. The Group derecognises the original contract and
recognises the modified contract as a new contract if any of the following
conditions are present:
a. There have been no transfers between levels during the year if the
modified terms had been included at contract inception and the Group would
have concluded that the modified contract:
i. is not in scope of IFRS 17;
ii. results in substantially different separable components;
iii. results in a substantially different contract boundary; or
iv. belongs to a substantially different group of contracts;
b. the original contract was accounted for under the PAA, but the
modification means that the contract no longer meets the eligibility criteria
for that approach
When an insurance contract accounted for under the PAA is derecognised,
adjustments to the FCF to remove relating rights and obligations and account
for the effect of the derecognition result in the following amounts being
charged immediately to profit or loss:
a. if the contract is extinguished, any net difference between the
derecognised part of the LRC of the original contract and any other cash flows
arising from extinguishment;
b. if the contract is transferred to the third party, any net difference
between the derecognised part of the LRC of the original contract and the
premium charged by the third party;
c. if the original contract is modified resulting in its derecognition,
any net difference between the derecognised part of the LRC and the
hypothetical premium the entity would have charged had it entered into a
contract with equivalent terms as the new contract at the date of the contract
modification, less any additional premium charged for the modification.
(iv) Presentation
The Group has presented separately, in the statement of financial position,
the carrying amount of portfolios of insurance contracts issued and portfolios
of reinsurance contracts held.
The Group has elected to disaggregate part of the movement in LIC resulting
from the changes in discount rates and present this in the statement of other
comprehensive income. The Group disaggregates the total amount recognised in
the statement of profit or loss and other comprehensive income into an
insurance service result, comprising insurance revenue and insurance service
expense, and insurance finance income or expenses.
The Group does not disaggregate the change in risk adjustment for
non-financial risk between a financial and non-financial portion and includes
the entire change as part of the insurance service result.
The Group separately presents income or expenses from reinsurance contracts
held from the expenses or income from insurance contracts issued.
AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS
Insurance service result from insurance contracts issued
Insurance revenue
As the Group provides insurance contract services under the group of insurance
contracts, it reduces the LRC and recognises insurance revenue. The amount of
insurance revenue recognised in the reporting period depicts the transfer of
promised services at an amount that reflects the portion of consideration that
the Group expects to be entitled to in exchange for those services.
The Group measures all insurance contracts under the PAA and recognises
insurance revenue based on the passage of time over the coverage period of a
group of contracts.
Insurance service expenses
Insurance service expenses include the following:
- incurred claims and benefits, excluding investment components
- other incurred directly attributable expenses
- amortisation of insurance acquisition cash flows
- changes that relate to past service - changes in the FCF relating to the
LIC
- changes that relate to future service - changes in the FCF that result
in onerous contract losses or reversals of those losses
Amortisation of insurance acquisition cash flows is based on the passage of
time.
Other expenses not meeting the above categories are included in other
operating expenses in the statement of profit or loss.
Insurance service result from reinsurance contracts held
Net income/(expenses) from reinsurance contracts held
The Group presents financial performance of groups of reinsurance contracts
held on a net basis in net income (expenses) from reinsurance contracts held,
comprising the following amounts:
- reinsurance expenses
- for groups of reinsurance contracts measured under the PAA, broker fees
are included within reinsurance expenses
- incurred claims recovery, excluding investment components reduced by
loss-recovery component allocations
- other incurred directly attributable expenses
- changes that relate to past service - changes in the FCF relating to
incurred claims recovery
- effect of changes in the risk of reinsurers' non-performance
- amounts relating to accounting for onerous groups of underlying
insurance contracts issued
Reinsurance expenses are recognised similarly to insurance revenue. The amount
of reinsurance expenses recognised in the reporting period depicts the
transfer of received insurance contract services at an amount that reflects
the portion of ceding premiums that the Group expects to pay in exchange for
those services. Broker fees are included in reinsurance expenses.
All groups of reinsurance contracts held are measured under the PAA and
reinsurance expenses are recognised based on the passage of time over the
coverage period of a group of contracts.
AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Insurance finance income or expenses
Insurance finance income or expenses comprise the change in the carrying
amount of the group of insurance contracts arising from:
- The effect of the time value of money and changes in the time value of
money
- The effect of financial risk and changes in financial risk
For contracts measured under the PAA, the main amounts within insurance
finance income or expenses are:
a. interest accreted on the LIC; and
b. the effect of changes in interest rates and other financial assumptions
The Group disaggregates insurance finance income or expenses on motor
insurance contracts issued between profit or loss and OCI. The impact of
changes in market interest rates on the value of the insurance assets and
liabilities are reflected in OCI in order to minimise accounting mismatches
between the accounting for financial assets and insurance assets and
liabilities. The Group's financial assets backing the motor insurance
portfolios are predominantly measured at FVOCI.
The Group applies the premium allocation approach to all the insurance
contracts that it issues and reinsurance contracts that it holds, as the
coverage period of each contract in the group is one year or less, including
insurance contract services arising from all premiums within the contract
boundary. The Group does not expect significant variability in the fulfilment
cash flows that would affect the measurement of the liability for remaining
coverage during the period before a claim is incurred.
All the Group's insurance contracts have a coverage period of one year or
less. The Group's reinsurance contracts held are excess of loss contracts and
are loss occurring. The Group does not have any reinsurance contracts issued
to compensate another entity for claims arising from one or more insurance
contracts issued by that other entity.
Insurance contracts issued
On initial recognition of each group of contracts, the carrying amount of the
liability for remaining coverage ("LRC") is measured at:
- the premiums received on initial recognition
- minus any insurance acquisition cash flows allocated to the group at
that date
- adjusted for any amount arising from the derecognition of any assets or
liabilities previously recognised for cash flows related to the group
(including assets for insurance acquisition cash flows)
The Group has chosen not to expense insurance acquisition cash flows when they
are incurred.
Subsequently, the Group measures the carrying amount of the LRC at the end of
each reporting period as the LRC at the beginning of the period:
- plus premiums received in the period
- minus insurance acquisition cash flows
- plus any amounts relating to the amortisation of insurance acquisition
cash flows recognised as an expense in the reporting period
- minus the amount recognised as insurance revenue for the services
provided in the period
On initial recognition of each group of contracts, the Group expects that the
time between providing each part of the services and the related premium due
date is no more than a year. Accordingly, the Group has chosen not to adjust
the liability for remaining coverage to reflect the time value of money and
the effect of financial risk.
If at any time during the coverage period, facts and circumstances indicate
that a group of contracts is onerous, then the Group recognises a loss in
profit or loss and increases the liability for remaining coverage to the
extent that the current estimates of the fulfilment cash flows that relate to
remaining coverage exceed the carrying amount of the liability for remaining
coverage. The fulfilment cash flows are discounted (at current rates) if the
liability for incurred claims is also discounted.
The Group recognises the liability for incurred claims ("LIC") of a group of
insurance contracts at the amount of the fulfilment cash flows relating to
incurred claims. The future cash flows ("FCF") are discounted (at current
rates) unless they are expected to be paid in one year or less from the date
the claims are incurred.
The carrying amount of a group of insurance contracts issued at the end of
each reporting period is the sum of:
- the LRC
- the LIC
Risk adjustment for non-financial risk
An explicit risk adjustment for non-financial risk is estimated separate from
the other estimates. Unless contracts are onerous, the explicit risk
adjustment for non-financial risk is only estimated for the measurement of the
LIC.
This risk adjustment represents the compensation that the Group 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 Group 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
Reinsurance contracts held
The excess of loss reinsurance contracts held provide coverage on the motor
insurance contracts originated for claims incurred during an accident year and
are accounted for under the PAA. The Group measures its reinsurance assets for
a group of reinsurance contracts that it holds on the same basis as insurance
contracts that it issues. For reinsurance contracts held, on initial
recognition, the Group measures the remaining coverage at the amount of ceding
premiums paid. For reinsurance contracts held, at each of the subsequent
reporting dates, the remaining coverage is:
- increased for ceding premiums paid in the period; and
- decreased for the amounts of ceding premiums recognised as reinsurance
expenses for the services received in the period
For reinsurance contracts held, the risk adjustment for non-financial risk
presents the amount of risk being transferred by the Group to the reinsurer.
Asset for insurance acquisition cash flows
The Group includes the following acquisition cash flows within the insurance
contract boundary that arise from selling, underwriting and starting a group
of insurance contracts and that are:
a. costs directly attributable to individual contracts and groups of
contracts; and
b. costs directly attributable to the portfolio of insurance contracts to
which the group belongs, which are allocated on a reasonable and consistent
basis to measure the group of insurance contracts
The Group does not pay or incur insurance acquisition cash flows before a
group of insurance contracts is recognised in the statement of financial
position.
Modification and derecognition
The Group derecognises insurance contracts when:
- extinguished (i.e. when the obligation specified in the insurance
contract expires or is discharged or cancelled); or
- the contract is modified and certain additional criteria are met.
When an insurance contract is modified by the Group as a result of an
agreement with the counterparties or due to a change in regulations, the Group
treats changes in cash flows caused by the modification as changes in
estimates of the FCF, unless the conditions for the derecognition of the
original contract are met. The Group derecognises the original contract and
recognises the modified contract as a new contract if any of the following
conditions are present:
a. There have been no transfers between levels during the year if the
modified terms had been included at contract inception and the Group would
have concluded that the modified contract:
i. is not in scope of IFRS 17;
ii. results in substantially different separable components;
iii. results in a substantially different contract boundary; or
iv. belongs to a substantially different group of contracts;
b. the original contract was accounted for under the PAA, but the
modification means that the contract no longer meets the eligibility criteria
for that approach
When an insurance contract accounted for under the PAA is derecognised,
adjustments to the FCF to remove relating rights and obligations and account
for the effect of the derecognition result in the following amounts being
charged immediately to profit or loss:
a. if the contract is extinguished, any net difference between the
derecognised part of the LRC of the original contract and any other cash flows
arising from extinguishment;
b. if the contract is transferred to the third party, any net difference
between the derecognised part of the LRC of the original contract and the
premium charged by the third party;
c. if the original contract is modified resulting in its derecognition,
any net difference between the derecognised part of the LRC and the
hypothetical premium the entity would have charged had it entered into a
contract with equivalent terms as the new contract at the date of the contract
modification, less any additional premium charged for the modification.
(iv) Presentation
The Group has presented separately, in the statement of financial position,
the carrying amount of portfolios of insurance contracts issued and portfolios
of reinsurance contracts held.
The Group has elected to disaggregate part of the movement in LIC resulting
from the changes in discount rates and present this in the statement of other
comprehensive income. The Group disaggregates the total amount recognised in
the statement of profit or loss and other comprehensive income into an
insurance service result, comprising insurance revenue and insurance service
expense, and insurance finance income or expenses.
The Group does not disaggregate the change in risk adjustment for
non-financial risk between a financial and non-financial portion and includes
the entire change as part of the insurance service result.
The Group separately presents income or expenses from reinsurance contracts
held from the expenses or income from insurance contracts issued.
AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS
Insurance service result from insurance contracts issued
Insurance revenue
As the Group provides insurance contract services under the group of insurance
contracts, it reduces the LRC and recognises insurance revenue. The amount of
insurance revenue recognised in the reporting period depicts the transfer of
promised services at an amount that reflects the portion of consideration that
the Group expects to be entitled to in exchange for those services.
The Group measures all insurance contracts under the PAA and recognises
insurance revenue based on the passage of time over the coverage period of a
group of contracts.
Insurance service expenses
Insurance service expenses include the following:
- incurred claims and benefits, excluding investment components
- other incurred directly attributable expenses
- amortisation of insurance acquisition cash flows
- changes that relate to past service - changes in the FCF relating to the
LIC
- changes that relate to future service - changes in the FCF that result
in onerous contract losses or reversals of those losses
Amortisation of insurance acquisition cash flows is based on the passage of
time.
Other expenses not meeting the above categories are included in other
operating expenses in the statement of profit or loss.
Insurance service result from reinsurance contracts held
Net income/(expenses) from reinsurance contracts held
The Group presents financial performance of groups of reinsurance contracts
held on a net basis in net income (expenses) from reinsurance contracts held,
comprising the following amounts:
- reinsurance expenses
- for groups of reinsurance contracts measured under the PAA, broker fees
are included within reinsurance expenses
- incurred claims recovery, excluding investment components reduced by
loss-recovery component allocations
- other incurred directly attributable expenses
- changes that relate to past service - changes in the FCF relating to
incurred claims recovery
- effect of changes in the risk of reinsurers' non-performance
- amounts relating to accounting for onerous groups of underlying
insurance contracts issued
Reinsurance expenses are recognised similarly to insurance revenue. The amount
of reinsurance expenses recognised in the reporting period depicts the
transfer of received insurance contract services at an amount that reflects
the portion of ceding premiums that the Group expects to pay in exchange for
those services. Broker fees are included in reinsurance expenses.
All groups of reinsurance contracts held are measured under the PAA and
reinsurance expenses are recognised based on the passage of time over the
coverage period of a group of contracts.
AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Insurance finance income or expenses
Insurance finance income or expenses comprise the change in the carrying
amount of the group of insurance contracts arising from:
- The effect of the time value of money and changes in the time value of
money
- The effect of financial risk and changes in financial risk
For contracts measured under the PAA, the main amounts within insurance
finance income or expenses are:
a. interest accreted on the LIC; and
b. the effect of changes in interest rates and other financial assumptions
The Group disaggregates insurance finance income or expenses on motor
insurance contracts issued between profit or loss and OCI. The impact of
changes in market interest rates on the value of the insurance assets and
liabilities are reflected in OCI in order to minimise accounting mismatches
between the accounting for financial assets and insurance assets and
liabilities. The Group's financial assets backing the motor insurance
portfolios are predominantly measured at FVOCI.
significant judgements and estimates
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below. The Group based its assumptions
and estimates on parameters available when the financial statements were
prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising that are
beyond the control of the Group. Such changes are reflected in the assumptions
when they occur. The Group disaggregates information to disclose major product
lines namely, Motor Vehicle, Motorcycle and Taxi.
The Group applies the PAA to simplify the measurement of insurance contracts.
When measuring liabilities for remaining coverage, the PAA is broadly similar
to the Group's previous accounting treatment under IFRS 4. However, when
measuring liabilities for incurred claims, the Group now discounts cash flows
that are expected to occur more than one year after the date on which the
claims are incurred and includes an explicit risk adjustment for non-financial
risk.
A. Liability for remaining coverage ("LRC")
Insurance acquisition cash flows
The Group applies judgement in determining the inputs used in the methodology
to systematically and rationally allocate insurance acquisition cash flows to
groups of insurance contracts. This includes judgements about the amounts
allocated to insurance contracts expected to arise from renewals of existing
insurance contracts in a group and the volume of expected renewals from new
contracts issued in the period.
At the end of each reporting period, the Group revisits the assumptions made
to allocate insurance acquisition cash flows to groups and where necessary
revises the amounts of assets for insurance acquisition cash flows
accordingly.
B. Liability for incurred claims ("LIC")
The ultimate cost of outstanding claims is estimated by using a range of
standard actuarial claims projection techniques, such as Chain Ladder and
Bornheutter-Ferguson methods.
The main assumption underlying these techniques is that a Group's past claims
development experience can be used to project future claims development and
hence ultimate claims costs. These methods extrapolate the development of paid
and incurred losses, average costs per claim (including claims handling
costs), and claim numbers based on the observed development of earlier years
and expected loss ratios. Historical claims development is mainly analysed by
accident years, but can also be further analysed by geographical area, as well
as by significant business lines and claim types. Large claims are usually
separately addressed, either by being reserved at the face value of loss
adjuster estimates or separately projected in order to reflect their future
development. 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 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, 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 probability weighted expected value
outcome from the range of possible outcomes, taking account of all the
uncertainties involved.
The Group has the right to pursue third parties for payment of some or all
costs. Estimates of salvage recoveries and subrogation reimbursements are
considered as an allowance in the measurement of ultimate claims costs. Other
key circumstances affecting the reliability of assumptions include variation
in interest rates and delays in settlement.
Other key circumstances affecting the reliability of assumptions include
variation in interest rates, delays in settlement and changes in foreign
currency exchange rates.
C. Discount rates
Insurance contract liabilities are calculated by discounting expected future
cash flows at a risk-free rate, plus an illiquidity premium where applicable.
Risk free rates are determined by reference to the yields of highly liquid
AAA-rated sovereign securities in the currency of the insurance contract
liabilities. The illiquidity premium is determined by reference to observable
market rates.
Discount rates applied for discounting of future cash flows are listed below:
30 June2023 30 June 2022 31 December 2022
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
Motor insurance 6.4% 5.9% 5.3% 4.5% 2.8% 2.9% 2.8% 2.7% 4.8% 4.6% 4.4% 4.0%
D. Risk adjustment for non-financial risk
The risk adjustment for non-financial risk is the compensation that the Group
requires for bearing the uncertainty about the amount and timing of the cash
flows of groups of insurance contracts. The risk adjustment reflects an amount
that an insurer would rationally pay to remove the uncertainty that future
cash flows will exceed the expected value amount.
The Group has estimated the risk adjustment using a confidence level
(probability of sufficiency) approach at the 82nd percentile. That is, the
Group has assessed its indifference to uncertainty for all product lines (as
an indication of the compensation that it requires for bearing non-financial
risk) as being equivalent to the 82nd percentile confidence level less the
mean of an estimated probability distribution of the future cash flows. The
Group has estimated the probability distribution of the future cash flows, and
the additional amount above the expected present value of future cash flows
required to meet the target percentiles.
D. Risk adjustment for non-financial risk
The risk adjustment for non-financial risk is the compensation that the Group
requires for bearing the uncertainty about the amount and timing of the cash
flows of groups of insurance contracts. The risk adjustment reflects an amount
that an insurer would rationally pay to remove the uncertainty that future
cash flows will exceed the expected value amount.
The Group has estimated the risk adjustment using a confidence level
(probability of sufficiency) approach at the 82nd percentile. That is, the
Group has assessed its indifference to uncertainty for all product lines (as
an indication of the compensation that it requires for bearing non-financial
risk) as being equivalent to the 82nd percentile confidence level less the
mean of an estimated probability distribution of the future cash flows. The
Group has estimated the probability distribution of the future cash flows, and
the additional amount above the expected present value of future cash flows
required to meet the target percentiles.
3.1 Composition of the Statement of Financial Position
An analysis of the amounts presented on the Statement of Financial Position
for insurance contacts is included in the table below, along with the current
and non-current portions of the balances.
Unaudited as at Unaudited as at
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Insurance contract liabilities
Insurance contract liabilities
Motor vehicle insurance 273,168 281,584 276,169
Motorcycle insurance 31,462 18,082 26,928
Taxi insurance 24,469 10,551 17,205
Asset for insurance acquisition cash flows
Motor vehicle insurance (5,204) (5,034) (4,324)
Motorcycle insurance (926) (571) (629)
Taxi insurance (1,004) (573) (1,009)
Total Insurance contract liabilities 321,965 304,039 314,340
Reinsurance contracts assets
Motor vehicle insurance 120,160 117,137 125,030
Motorcycle insurance 11,147 450 7,789
Taxi insurance 7,025 3,953 4,134
Total reinsurance contract assets 138,332 121,540 136,953
3.2 Movements in insurance and reinsurance contract balances
3.2.1 Insurance contract liabilities
Unaudited as at Unaudited as at
30 June 2022 31 December 2022
£'k £'k £'k
Notes Restated Restated
Opening insurance contract liabilities 314,340 317,621 317,621
Changes in the Profit or Loss Account
Insurance revenue (86,119) (90,818) (181,477)
Insurance service expenses
Incurred claims and other directly attributable expenses 60,945 61,811 126,951
Amortisation of insurance acquisition cash flows 6,636 6,626 12,943
Changes that relate to past service - adjustment to the LIC (953) (14,447) (13,288)
66,628 53,990 126,606
Insurance service result (19,491) (36,828) (54,871)
Net finance (income)/expense for insurance contracts issued 4,736 1,391 6,043
Total changes in the Profit or Loss Account (14,755) (35,437) (48,828)
Changes in the Statement of Other Comprehensive Income
Net finance (income)/expense for insurance contracts issued (5,745) (12,947) (23,602)
Total changes in Statement of Other Comprehensive Income (5,745) (12,947) (23,602)
Cash flows
Premiums received 87,493 90,758 181,302
Claims and other insurance services expenses paid (51,560) (49,469) (99,565)
Insurance acquisition cash flows (7,808) (6,487) (12,588)
Total cash flows 28,125 34,802 69,149
Closing insurance contract liabilities 321,965 304,039 314,340
3.2.2 Reinsurance contract assets
Unaudited as at Unaudited as at
30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Opening reinsurance contract assets 136,953 147,896 147,896
Changes in the Profit or Loss Account
Net income/(expense) from reinsurance contracts held
Reinsurance expense (12,655) (11,540) (24,958)
Incurred claims recovery 13,825 9,663 25,832
Changes that relate to past service - changes to the LIC (1,327) (16,196) (19,527)
(157) (18,073) (18,653)
Net finance (income)/expense for insurance contracts issued 2,085 687 3,195
Total changes in the Profit or Loss Account 1,928 (17,386) (15,458)
Changes in the Statement of Other Comprehensive Income
Net finance (income)/expense for insurance contracts issued (1,946) (7,549) (12,924)
Total changes in Statement of Other Comprehensive Income (1,946) (7,549) (12,924)
Cash flows
Premiums paid 6,409 4,502 27,819
Recoveries received (5,012) (5,923) (10,380)
Total cash flows 1,397 (1,421) 17,439
Closing reinsurance contract assets 138,332 121,540 136,953
3.3 Assets for insurance acquisition cash flows
£'k
Restated balance as at 1 January 2022 (Unaudited) 6,317
Amounts incurred during the period 6,487
Amounts derecognised and included in measurement of insurance contracts (6,626)
Restated balance as at 30 June 2022 (Unaudited) 6,178
Amounts incurred during the period 6,101
Amounts derecognised and included in measurement of insurance contracts (6,317)
Restated balance as at 31 December 2022 (Unaudited) 5,962
Amounts incurred during the period 7,808
Amounts derecognised and included in measurement of insurance contracts (6,636)
Balance as at 30 June 2023 (Unaudited) 7,134
3.4 Insurance revenue and expenses - Segmental disclosure
An analysis of insurance revenue, insurance service expenses and net expenses
from reinsurance contracts held is included in the tables below. Additional
information on amounts recognised in profit or loss and OCI is included in the
movements in insurance and reinsurance contract balances in Note 3.2. Details
of related insurance contract liabilities and reinsurance assets for each line
of business can be found in Note 3.1
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 Vehicle insurance business. The Group does not
have a single client which accounts for more than 10% of revenue.
Unaudited for the 6 months ended 30 June 2023 Unaudited for the 6 months ended 30 June 2022
Motor vehicles Motorcycle Taxi Total Motor vehicles Motorcycle Taxi Total
£'k £'k £'k £'k £'k £'k £'k £'k
Restated Restated Restated Restated
Insurance revenue
Insurance revenue from contracts measured under the PAA 69,616 9,132 7,371 86,119 83,129 6,254 1,435 90,818
Total insurance revenue 69,616 9,132 7,371 86,119 83,129 6,254 1,435 90,818
Insurance service expense
Incurred claims and other directly attributable expenses (39,911) (11,242) (9,792) (60,945) (52,929) (6,764) (2,118) (61,811)
Amortisation of insurance acquisition cash flows (4,580) (1,111) (945) (6,636) (6,200) (337) (89) (6,626)
Changes that relate to past service - changes in the FCF relating to the LIC (888) 2,659 (818) 953 14,027 (3) 423 14,447
Total insurance service expense (45,379) (9,694) (11,555) (66,628) (45,102) (7,104) (1,784) (53,990)
Net income/(expenses) from reinsurance contracts held
Reinsurance expenses - contracts measured under the PAA (10,183) (1,368) (1,104) (12,655) (10,284) (1,000) (256) (11,540)
Incurred claims recovery 5,475 5,545 2,805 13,825 8,969 438 256 9,663
Changes that relate to past service - changes in the FCF relating to incurred 854 (2,266) 85 (1,327) (15,879) (12) (305) (16,196)
claims recovery
Total net expenses from reinsurance contracts held (3,854) 1,911 1,786 (157) (17,194) (574) (305) (18,073)
Total insurance service result 20,383 1,349 (2,398) 19,334 20,833 (1,424) (654) 18,755
Unaudited for the 12 months ended 31 December 2022
Motor vehicles Motorcycle Taxi Total
£'k £'k £'k £'k
Restated Restated Restated Restated
Insurance revenue
Insurance revenue from contracts measured under the PAA 157,465 17,826 6,186 181,477
Total insurance revenue 157,465 17,826 6,186 181,477
Insurance service expense
Incurred claims and other directly attributable expenses (94,492) (26,185) (6,274) (126,951)
Amortisation of insurance acquisition cash flows (11,371) (879) (693) (12,943)
Changes that relate to past service - changes in the FCF relating to the LIC 13,258 (358) 388 13,288
Total insurance service expense (92,605) (27,422) (6,579) (126,606)
Net income/(expenses) from reinsurance contracts held
Reinsurance expenses - contracts measured under the PAA (21,257) (2,734) (967) (24,958)
Incurred claims recovery 17,862 7,611 359 25,832
Changes that relate to past service - changes in the FCF relating to incurred (19,337) 30 (220) (19,527)
claims recovery
Total net expenses from reinsurance contracts held (22,732) 4,907 (828) (18,653)
Total insurance service result 42,128 (4,689) (1,221) 36,218
Other than reinsurance assets and insurance liabilities (see Note 3.1), 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.
4. Financial assets
The Group's financial assets are summarised below:
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Notes £'k £'k £'k
Cash and cash equivalents 4.1 29,327 27,796 18,502
Financial investments 4.2 227,667 227,224 229,158
Receivables 4.3 6 39 7
Total 257,000 255,059 247,667
4.1. Cash and cash equivalents
Unaudited as at Unaudited as at
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Cash and cash equivalents 29,327 27,796 18,502
Total 29,327 27,796 18,502
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.
4.2 Financial investments
4.2.1 Debt securities at fair value through other comprehensive income
The Group's debt securities held at fair value through other comprehensive
income are summarised below:
Unaudited as at Unaudited as at
30 June 2023 30 June 2022 31 December 2022
£'k % holdings £'k % holdings £'k % holdings
Government bonds 85,605 37.60% 82,260 36.20% 87,151 38.03%
Government-backed securities 80,548 35.38% 80,620 35.48% 80,753 35.24%
Corporate bonds 61,514 27.02% 64,344 28.32% 61,254 26.73%
Total 227,667 100.00% 227,224 100.00% 229,158 100.00%
Fair value measurements are based on observable and unobservable inputs.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Company'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 Company 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 Company 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 Company has no Level 3
financial instruments.
The Group's debt securities are all classified as Level 1. There have been no
transfers between levels during the period (30 June 2022: no transfers / 31
December 2022: no transfers)
4.3. Receivables
The Group's loans and receivables comprises of:
Unaudited as at Unaudited as at
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Other debtors 6 41 7
Provision for expected credit losses - (2) -
Total 6 39 7
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.
4.4. Investment income
Unaudited as at Unaudited as at
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Interest income on financial assets using effective interest rate method
Interest income from debt securities 523 800 1,567
Interest income from cash and cash equivalents 197 15 100
Total 720 815 1,667
4.5. Net gains/(losses) from fair value adjustments on financial assets
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Profit or loss
Realised fair value gains/(losses) on debt securities - 24 22
Realised fair value gains/(losses) on debt securities reclassified to profit - 24 22
or loss
Other comprehensive income
Unrealised fair value losses on debt securities (1,636) (8,229) (14,175)
Expected credit loss - 17 (32)
Unrealised fair value losses on debt securities through other comprehensive (1,636) (8,212) (14,207)
income
Net losses from fair value adjustments on financial assets (1,636) (8,188) (14,185)
5. OTHER liabilities
The Group's other liabilities are summarised below:
Unaudited as at Unaudited as at
30 June 2023 30 June 2022 31 December 2022
Notes £'k £'k £'k
Other liabilities at amortised cost
Payables 5.1 8,345 5,097 5,107
Total 8,345 5,097 5,107
5.1. Payables
Unaudited as at Unaudited as at
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Trade and other creditors 1,643 (400) 759
Other taxes 6,702 5,497 4,348
Total 8,345 5,097 5,107
6. Other operating income
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Administration fees 379 704 1,139
Brokerage and other fee income ((1)) 303 341 645
Total 682 1,045 1,784
Other income relates to auxiliary products and services, including marketing
and administration fees, all relating to the Motor Vehicle product.
(1) Restated from previous reporting periods. This line now combines both
'Marketing' and 'Fee income from the sale of auxiliary products and services'
disclosed separately in previous reporting period.
7. Operating expenses
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Notes Restated Restated
Employee expenses 7.1 7,237 6,458 12,536
Property expenses 469 155 427
IT expense including IT depreciation 3,077 2,316 5,045
Other depreciation 4 6 17
Industry levies 2,973 2,989 5,912
Policy servicing costs 1,010 1,123 2,164
Other operating expenses 1,464 1,505 2,958
Expected credit loss on financial assets - 17 (34)
Before adjustments for claims handling expenses 16,234 14,569 29,025
Adjusted for:
Claims handling expense reclassification (2,991) (3,207) (6,210)
Total operating expenses 13,243 11,362 22,815
7.1. Employee expenses
The aggregate remuneration of those employed by the Group's operations
comprised:
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated()) Restated
Wages and salaries 5,216 4,733 8,988
Issue of share-based payments 803 767 1,603
Social security expenses 745 680 1,213
Pension expenses 292 273 508
Other staff expenses 181 5 224
Before adjustments for claims handling expenses 7,237 6,458 12,536
Adjusted for:
Claims handling expense reclassification (2,081) (2,498) (4,783)
Employee expenses 5,156 3,960 7,753
8. Tax charge
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated())
Current taxation
Charge for the period 360 901 2,644
360 901 2,644
Deferred taxation
Origination and reversal of temporary differences 660 976 298
660 976 298
Current taxation 360 901 2,644
Deferred taxation 660 976 298
Tax charge for the period 1,020 1,877 2,942
Tax recorded in other comprehensive income is as follows:
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated ((1)) Restated ((1))
Current taxation - (1,565) -
Deferred taxation 516 1,264 (1,054)
516 (301) (1,054)
From 1 April 2023, The Finance Act 2021 increased the UK corporation tax from
19% to 25%. This means that for any temporary differences reversing on or
after 1 April 2023, the new tax rate of 25% will be relevant. The Group has
deferred tax balances accordingly. The impact of this adjustment on the
deferred tax balances is not material.
9. Dividends
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
pence per share £'k pence per share £'k pence per share £'k
Amounts recognised as distributions to equity holders in the period
Interim dividend for the current year - - - - 2.8 6,960
Final dividend for the prior year 1.7 (4,228) 9.3 23,172 9.3 23,172
1.7 (4,228) 9.3 23,172 12.1 30,132
Proposed dividends
Final dividend ((1)) 0.9 2,250 2.8 7,000
(1) Subsequent to 30 June 2023, the Directors declared an interim dividend
for 2023 of 0.9p per ordinary share. This dividend will be accounted for as an
appropriation of retained earnings in the year ended 31 December 2023 and is
not included as a liability in the Statement of Financial Position as at 30
June 2023.
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 period ended 30
June 2023 by £22k (30 June 2022: £78k and 31 December 2022 £118k).
10. Related party transactions
During the period 1 January 2023 to 30 June 2023, the following related party
companies have been dissolved/liquidated:
‒ Barbados TopCo Limited
‒ Barb IntermediateCo Limited
‒ Bard MidCo Limited
‒ Bard BidCo Limited
‒ Barb HoldCo Limited
Other than the above, there has been no change to the relationships as
disclosed in Note 18 of the 31 December 2022 Annual Report and Accounts.
No related party transactions have taken place in the period ending 30 June
2023 that have materially affected the financial position or the financial
performance of the Group.
11. EVENTS AFTER THE BALANCE SHEET DATE
Other than the declaration of an interim dividend as disclosed in Note 9,
there have been no material changes in the affairs or financial position of
the Group and its subsidiaries since the Statement of Financial Position date.
INDEPENDENT REVIEW REPORT TO SABRE INSURANCE GROUP PLC
Report on the Condensed Consolidated Interim Financial Statements
Our conclusion
We have reviewed Sabre Insurance Group plc's condensed consolidated interim
financial statements (the "interim financial statements") in the Half-Year
Report 2023 of Sabre Insurance Group plc for the 6 month period ended
30 June 2023 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
‒ the Condensed Consolidated Statement of Financial Position as
at 30 June 2023;
‒ the Condensed Consolidated Profit or Loss Account and the
Condensed Consolidated Statement of Comprehensive Income for the period then
ended;
‒ the Condensed Consolidated Statement of Cash Flows for the
period then ended;
‒ the Condensed Consolidated Statement of Changes in Equity for
the period then ended; and
‒ the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-Year Report 2023 of
Sabre Insurance Group plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half-Year Report 2023 and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half-Year Report 2023, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half-Year Report 2023 in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half-Year Report 2023, including
the interim financial statements, the directors are responsible for assessing
the group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half-Year Report 2023 based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
2 August 2023
DIRECTORS' RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
The condensed consolidated financial statements for the six months ended 30
June 2023 have been prepared in accordance with International Accounting
Standard 34 ("IAS 34") as adopted by the UK.
The interim management report includes a fair review of the information as
required by:
‒ DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of the important events that have occurred during the first six
months of the current financial year and their impact on the condensed set of
consolidated financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
‒ DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially impacted the financial
position or performance of the Group during the period; and any changes in the
related party transactions from the Group's consolidated financial statements
for the year ended 31 December 2022 that could do so.
Signed on behalf of the Board of Directors
Geoff Carter Adam Westwood
Chief Executive Officer Chief Financial Officer
2 August 2023 2 August 2023
APPENDIX - FINANCIAL RECONCILIATIONS
IFRS numbers in the below reconciliations have been restated. For more
information refer to See Note 2.3.1 IFRS 17 "Insurance Contracts".
GROSS WRITTEN PREMIUM
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Insurance revenue 86,119 90,818 181,477
Less: Instalment income (1,630) (1,771) (3,300)
Less: Movement in unearned premium 14,976 2,735 (6,920)
Gross written premium 99,465 91,782 171,257
NET LOSS RATIO
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Insurance service expense 66,628 53,990 126,606
Less: Amortisation of insurance acquisition cash flows (6,636) (6,626) (12,943)
Less: Amounts recoverable from reinsurers for incurred claims (12,498) 6,533 (6,305)
Less: Directly attributable claims expenses (2,991) (3,207) (6,210)
Net claims incurred 44,503 50,690 101,148
Insurance revenue 86,119 90,818 181,477
Less: Instalment income (1,630) (1,771) (3,300)
Less: Reinsurance expense (12,655) (11,540) (24,958)
Net earned premium 71,834 77,507 153,219
Net claims incurred 44,503 50,690 101,148
Net earned premium 71,834 77,507 153,219
Net loss ratio 62.0% 65.4% 66.0%
EXPENSE RATIO
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Other operating expenses 13,243 11,362 22,815
Add: Amortisation of insurance acquisition cash flows 6,636 6,626 12,943
Add: Directly attributable claims expenses 2,991 3,207 6,210
Total operating expenses 22,870 21,195 41,968
Insurance revenue 86,119 90,818 181,477
Less: Instalment income (1,630) (1,771) (3,300)
Less: Reinsurance expense (12,655) (11,540) (24,958)
Net earned premium 71,834 77,507 153,219
Total operating expenses 22,870 21,195 41,968
Net earned premium 71,834 77,507 153,219
Expense ratio 31.8% 27.3% 27.4%
COMBINED OPERATING RATIO
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Net loss ratio 62.0% 65.4% 66.0%
Expense ratio 31.8% 27.3% 27.4%
Combined operating ratio 93.8% 92.7% 93.4%
UNDISCOUNTED NET LOSS RATIO
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Net claims incurred 44,503 50,690 101,148
Add: Net impact of discounting 3,045 3,956 8,278
Undiscounted net claims incurred 47,548 54,646 109,426
Net earned premium 71,834 77,507 153,219
Undiscounted net loss ratio 66.2% 70.5% 71.4%
UNDISCOUNTED COMBINED OPERATING RATIO
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Undiscounted net loss ratio 66.2% 70.5% 71.4%
Expense ratio 31.8% 27.3% 27.4%
Undiscounted combined operating ratio 98.0% 97.8% 98.8%
NET PROFIT MARGIN
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Restated Restated
Net claims incurred 44,503 50,690 101,148
Total operating expenses 22,870 21,195 41,968
Total insurance expense 67,373 71,885 143,116
Insurance revenue 86,119 90,818 181,477
Less: Reinsurance expense (12,655) (11,540) (24,958)
Net insurance revenue 73,464 79,278 156,519
Net profit margin 8.3% 9.3% 8.6%
SOLVENCY COVERAGE RATIO - PRE-DIVIDEND
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Solvency II net assets 97,091 90,203 91,191
Solvency capital requirement 56,113 52,090 56,516
Solvency coverage ratio - pre-dividend 173.0% 173.2% 161.4%
SOLVENCY COVERAGE RATIO - POST-DIVIDEND
Unaudited Unaudited
6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
£'k £'k £'k
Solvency II net assets 97,091 90,203 91,191
Less: Interim/Final dividend (2,250) (7,000) (4,250)
Solvency II net assets - post-dividend 94,841 83,203 86,941
Solvency capital requirement 56,113 52,090 56,516
Solvency coverage ratio - post-dividend 169.0% 159.7% 153.8%
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