British motor insurance firm Sabre Insurance Group PLC (LON:SBRE) said it would distribute excess capital to shareholders through a special dividend as it reported a 6% drop in adjusted pre-tax profit for 2018.
The FTSE 250 company, which floated on the stock market in December 2017, ended the year with a solvency capital ratio of 213%, well ahead of its target range of 140% - 160%.
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That meant it had excess capital to pay a special dividend of 6p each. Together with a final ordinary dividend of 6.8p and an interim dividend of 7.2p, the total payout is 20p or £50mln, compared to no dividends paid in 2017.
Adjusted profit before tax fell to £61.9mln last year from £63.9mln, reflecting investment costs, and exceptional charges.
As expected, the gross written premium was broadly flat at £210mln amid a challenging motor insurance market.
Prices in motor insurance have been pushed down by tough competition, changes to the Odgen rate – used to calculate compensation for personal injuries – and the Civil Liability Bill, which includes reforms likely to reduce claims for whiplash injuries.
Sabre said its combined operating ratio – a measure of total expenses and insurance claims against the net earned premium – rose to 70.6% from 68.5%.
The net loss ratio, which measures the net earned premium against net insurance claims and handling expenses, increased to 48.5% from 46.5%.
The expense ratio was little changed at 22.1%.
Return on tangible equity dropped to 54.4% from 81.8%, due to a slight fall in profits and an increase in the average tangible equity held by the group.
“The underlying challenging dynamics and changes in the UK private car insurance market have been well publicised,” Sabre said.
“Whilst it appears that these dynamics have continued into early 2019, the board remains very confident in the outlook for Sabre.”
Shares fell 1.7% to 289p in morning trading.