TIDMSBRE
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 6 months 12 months
ended ended ended
30 June 2023 30 June 2022 31 December
2022
============================================ ============= ============ ===========
Gross written premium GBP99.5m GBP91.8m GBP171.3m
Net earned premium GBP71.8m GBP77.5m GBP153.2m
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 GBP4.8m GBP8.6m GBP14.0m
Profit after tax GBP3.8m GBP6.7m GBP11.1m
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/
ENQUIRIES
Sabre Insurance Group (i nvestor.relations@sabre.co.uk)
Geoff Carter, Chief Executive Officer
Adam Westwood, Chief Financial Officer
Teneo (020 7353 4200)
James Macey White
Eleanor Pomeroy
DIVID CALAR
2023 Interim Dividend Payment Dates17 August 2023 Ex-dividend date
18 August 2023 Record date
20 September Payment date
2023
FORWARD-LOOKING STATEMENTS DISCLAIMER
Cautionary statement
This announcement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements may be identified
by the use of forward-looking terminology, including the terms "believes",
"estimates", "plans", "projects", "anticipates", "expects", "intends", "may",
"will" or "should" or, in each case, their negative or other variations
or comparable terminology, or by discussions of strategy, plans, objectives,
goals, future events or intentions. These forward-looking statements include
all matters that are not historical facts and involve predictions. Forward-looking
statements may and often do differ materially from actual results. Any forward-looking
statements reflect Sabre's current view with respect to future events and
are subject to risks relating to future events and other risks, uncertainties
and assumptions relating to Sabre's business, results of operations, financial
position, prospects, growth or strategies and the industry in which it operates.
Forward-looking statements speak only as of the date they are made and cannot
be relied upon as a guide to future performance. Save as required by law
or regulation, Sabre disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements in this
announcement that may occur due to any change in its expectations or to
reflect events or circumstances after the date of this announcement.
The Sabre Insurance Group plc LEI number is 2138006RXRQ8P8VKGV98
CFO Report
----------
FINANCIAL AND BUSINESS REVIEW
Highlights
Unaudited Unaudited Unaudited
6 months 6 months ended 12 months
ended ended
30 June 2023 30 June 2022 31 December
2022
-------------------------------------------- ------------- -------------- -----------
Gross written premium GBP99.5m GBP91.8m GBP171.3m
Combined operating ratio 93.8% 92.7% 93.4%
Net profit margin 8.3% 9.3% 8.6%
Profit after tax GBP3.8m GBP6.7m GBP11.1m
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 GBP2.25m proposed interim dividend.
Revenue
Unaudited Unaudited Unaudited
6 months 6 months ended 12 months
ended ended
30 June 2023 30 June 2022 31 December
2022
----------------------------------------------- ------------- -------------- -----------
Profit or loss
Gross written premium GBP99.5m GBP91.8m GBP171.3m
Insurance revenue GBP86.1m GBP90.8m GBP181.5m
Net earned premium GBP71.8m GBP77.5m GBP153.2m
Other income GBP0.7m GBP1.0m GBP1.8m
Customer instalment income GBP1.6m GBP1.8m GBP3.3m
Interest revenue calculated using the effective GBP0.7m GBP0.8m GBP1.7m
interest method
Realised fair value gains on debt securities GBP0.0k GBP24.1k GBP22.5k
Other comprehensive income
Fair value losses on debt securities through (GBP1.6m) (GBP8.2m) (GBP14.2m)
OCI
Gross written premium by product
Motor Vehicle GBP83.0m GBP69.7m GBP134.9m
Motorcycle GBP9.1m GBP16.9m GBP23.1m
Taxi GBP7.4m GBP5.2m GBP13.3m
----------------------------------------------- ------------- -------------- -----------
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 6 months ended 12 months
ended ended
30 June 2023 30 June 2022 31 December
2022
----------------------------------------- ------------- -------------- -----------
Profit or loss
Gross claims incurred GBP57.0m GBP44.2m GBP107.5m
Net claims incurred GBP44.5m GBP50.7m GBP101.1m
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 GBP22.9m GBP21.2m GBP42.0m
Expense ratio 31.8% 27.3% 27.4%
Combined operating ratio 93.8% 92.7% 93.4%
Net insurance finance expense (GBP2.7m) (GBP0.7m) (GBP2.8m)
Other comprehensive income
Net insurance finance expense GBP3.8m GBP5.4m GBP10.7m
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
GBP790k 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 6 months ended 12 months
ended 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 6 months ended 12 months
ended ended
30 June 2023 30 June 2022 31 December
2022
Government bonds GBP85.6m GBP82.3m GBP87.2m
Government-backed securities GBP80.5m GBP80.6m GBP80.8m
Corporate bonds GBP61.5m GBP64.3m GBP61.3m
Cash and cash equivalents GBP29.3m GBP27.8m GBP18.5m
---------------------------- ------------- -------------- -----------
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 6 months ended 12 months
ended ended
30 June 2023 30 June 2022 31 December
2022
------------------------------ ------------- -------------- -----------
Insurance contract liabilities (GBP322.0m) (GBP304.0m) (GBP314.3m)
Reinsurance contract assets GBP138.3m GBP121.5m GBP137.0m
------------------------------ ------------- -------------- -----------
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 GBP1.0m 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
GBP'k GBP'k GBP'k
Notes Restated Restated
(1) (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
GBP'k GBP'k GBP'k
Notes Restated Restated
(1) (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
loss 4.5 - (24) (22)
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 shareholders 5,469 4,155 8,584
--------------------------------------------- ----- ------------ ------------ -----------
(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
GBP'k GBP'k GBP'k GBP'k
Notes Restated Restated Restated
(1) (1) (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
-----------------------------------------------------
Insurance/
Reinsurance Share-based
Share Own Merger FVOCI Revaluation finance payments Retained Total
capital shares reserve reserve reserve reserve reserve earnings equity
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'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 are or
may be
reclassified
subsequently
to profit or (2,537
loss - - - (6,667) - 4,130 - - )
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 are or
may be
reclassified
subsequently
to profit or
loss - - - (3,999) - 4,039 - - 40
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 are or
may be
reclassified
subsequently
to profit or
loss - - - (1,227) - 2,874 - - 1,647
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
GBP'k GBP'k GBP'k
Restated Restated
(1) (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 assets 16,040 20,936 26,497
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 (GBP) rounded to the nearest thousand (GBP'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 Premium Allocation Approach
issued ("PAA")
Reinsurance contracts
held
Motor insurance - excess Reinsurance contracts Premium Allocation Approach
of loss reinsurance held ("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
Reinsur ance 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 3 5 10 1 3 5 10 1 3 5 10
year years years years year years years years year years years 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.
--------------------------------------------------------------------------------------------------
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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
Unaudited as at as at
31 December
30 June 2022 2022
GBP'k GBP'k GBP'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
GBP'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 Unaudited for the 6 months ended
30 June 2023 30 June 2022
Motor
vehicles Motorcycle Taxi Total Motor vehicles Motorcycle Taxi Total
GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'k GBP'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
claims recovery 854 (2,266) 85 (1,327) (15,879) (12) (305) (16,196)
------------------ --------- ---------- --------- --------- -------------- ---------- -------- ---------
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
GBP'k GBP'k GBP'k GBP'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
claims recovery (19,337) 30 (220) (19,527)
------------------------------------------------------------------ -------------- ---------- -------- ----------
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 GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k % holdings GBP'k % holdings GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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 or loss - 24 22
---------------------------------------------------- ------------ ------------ -----------
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 income (1,636) (8,212) (14,207)
---------------------------------------------------- ------------ ------------ -----------
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 GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'k
Restated Restated
(1) (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 GBP'k pence GBP'k pence GBP'k
per share per share per share
-------------------------------------- ---------- -------- ---------- ------- ---------- -------
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 GBP22k (30 June 2022: GBP78k and 31 December 2022 GBP118k ).
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.
INDEPENT 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
APPIX - 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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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
GBP'k GBP'k GBP'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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