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looking at dlg today the market has taken the view that the pricing of car/bike etc insurance is unsustainable at present levels and will force all underwriters to increase premiums but this will take time to filter through to customers. everyone should expect increases over the next year. the winner's of this will be the comparison sites as every man and his dog will be on them looking for the best deals available.
That I think is why the SP fell - Sabre, who have a great track record suddenly reported figures that are poor for them and a reduction in private car business. So where did that business go and if Sabre couldn't make money out of it do we thing that Admiral (or others) would be able to do that? Or, as I think the stock market concluded, has someone else picked up business at rates that will lose them money. Ernst & Young predict ratios of over 100% for the motor insurance market for this year and next so if they are right then you need to be confident the insurer where you are invested isnt one of those making up that 100% plus figure. The Sabre story is actually more positive in that they have got the rate increases in that they need - they should hopefully be well placed to take advantage when the rest of the market (including Admiral?) does the same.
DYOR
I think that the flaw in your argument is that you assume that the risks will change in the way you outlined but premiums will remain the same. If the claims statistics reveal a significant change towards the scenarios you have outlined then insurers will adjust premiums higher in accordance with the changes in risk. ADM is an extremely well run & innovative company but its SP has been overvalued for the last year or two. IMO the fall back is just a overdue correction that brings it into line with the company's fair value.
Agreed. The SP looks below the long-term trend line for ADM. It's a well managed company & the drop looks overdone to me. I've been topping up on the falls.
Its sad to see the dip in the price but if you are investing your money in these companies you need to know a bit more about their challenges - it really isn't a money making machine. A scenario that scares me about investing in a motor insurer might be as follows -
- Customer pays £400 for cover for his car that is worth £1,000
- Bad person steals car
- Bad person, possibly taking some substances, hits another car/people causing serious injuries
Outcome (with provisos but is not uncommon) -
- Insurer pays value of car assuming a total loss - £1000 therefore already losing a wee bit (but dont get too may)
- Insurer pays £5m for the damage/injuries caused to the property and people the thief hit
- Changes in rules means that the injured parties costs (plus recent inflation) could be even higher
Its a little simplistic as an example but believe me these are at least one of the things that will impact on your potential investment here (if you are in fact invested) - there is a large compulsory requirement imposed on insurers (as laid out above) that mitigates the joy that it is a compulsory insurance
My personal thoughts in investing in motor insurers (and DYOR) is to understand the impact of regulation because that changes them from a 'normal' business into one where government regulation via RTA rules is then further impacted by requirements imposed by the FCA
I dont have any current investments here but I do work in that world
They HAVE cars oop North?
(joke - I was born in Salford, lived in Openshaw & Gorton & AUL before moving "Sowf"))
I have read that only one third of cars in Manchester are insured, we must assume this is similar in other towns & cities. A blatant disregard of English law is now commonplace but as many cannot or will not read or speak English(other than words such as 'social' or 'gimmee') it come as little surprise. Any attempt to enforce law is of course '******'.
Another way of looking at it is, looking at the long-term SP line, it is right now bang on that straight line, filtering out the noise. This is a boring industry, and it yields nearly 6% div long-term.
"Go compare" .. LOL. But seriously, you have a point. It looks overdone.
Insurance alwasy make as legal requirement to have insurance when drivong etc. Its a legal way to rob people they always win. Over reqction yesterday will now calm down over mext few days.
tut..top up time.
If you want to drive legally you must have insurance. Admiral ( and others) will simply adjust their models to compensate...that is, put up insurance prices. If they all do it, what choice do you have but to pay it ?
if sabre lost all that business where do people think it went is it not possible Admiral poached it from Sabre through offering a better deals.
Huge over reaction hopfully some reocvery today.
Sabre rattling is the cause. Misjudged inflationary pressures, greatly reduced profit and a slashed dividend.
I’m already holding ADM in the family stable so on a day like this you simply have to top up!
Albeit in the same sector but a panic induced drop based upon the results of another company!!
Investing is a long term game.
come on now, this is fubar.
New price target 2366 ?
insurer Admiral was the worst performer, down 14%, in a negative read-across after smaller rival Sabre Insurance issued a profit warning. FTSE 250-listed insurers Direct Line, Hiscox and Beazley were off 9.2%, 2.2% and 1.9% respectively.
Sabre shares were down 36% after the motor insurer warned inflation will have a bigger effect on the underwriting margins of its core Motor book than it had previously assumed.
For the six months to June 30, pretax profit slumped 81% to GBP4.3 million from GBP22.2 million a year ago. While gross written premiums increased 17% to GBP91.8 million from GBP78.2 million, the net loss ratio widened to 72% from 45%, and the combined operating ratio worsened to 99% from 74%. Any combined ratio below 100% indicates underwriting profit, so the lower the better, and a ratio of 99% is bordering on loss-making.
In May, the firm had said it expected the combined ratio to be around 80% for 2022. Looking ahead, Sabre expects to achieve a range of between 75% and 80% in 2024.
In addition, Sabre still expects to pay a dividend for 2022, but one "at a reduced level", before returning to "more normal" levels in 2023.
time to top up
Any fall below this level likely to be short term. I'm going in big for this one.
This seems like a huge overreaction or some more info has been leaked regarding results.
Sabre insurance read across
why the drop this morning?
May have bottomed out. Been rising last month.
Every time I think this cannot fall any further it proves me wrong.
I've averaged down to £24.72 now, but too heavy on this stock to risk chasing it down any further.