Sabre Insurance shares tanked 36% as the motor underwriter warned inflation was wreaking havoc on its claims estimates.
Premiums on its motor book have risen by 19% year to date to help meet the rising costs, said the Surrey-based insurer, with claims inflation rising from 8% in 2021 to 12% currently.
Costs of parts, labour, credit hire, paint, car values and availability, and provision of care are all soaring, it added, while market-wide expenses such as reinsurance, industry levies and personal injury rates are also on the up.
Even with the higher premiums, Sabre said there would be a significant impact on its current year loss ratio, which soared to 71.6% in the six months to June from 44.9% a year earlier.
The combined ratio (CoR), which includes costs, jumped to 98.9% from 74.4%, which cut interim profits to £4.3mln from £22.2mln.
Geoff Carter, Sabre's chief executive, added it was doing better than some of its rivals.
"This performance is being delivered in a very challenging period for the motor insurance industry with expert external commentators anticipating a market CoR of around 114% in 2022, with very little improvement in 2023.
"Whilst our response to external factors has generated a poor expected result for 2022 by our own standards, we believe our performance will compare favourably to the wider market.
This year’s dividend is being reduced, but there will still be a payment, Carter said, adding he expected the measures it is taking to see a return to near normal levels (mid-80%'s CoR) in 2023 and around 80% CoR in 2024.
Sabre’s shares slumped 70p to 118p with other motor insurers also in the firing line.
Admiral dropped 14% to 2,034p and Direct Line Insurance by 9% to 215p.