Driven
by our
competitive
edge
Sabre Insurance Group plc
Annual Report and Accounts 2017
We are a UK private motor
insurer with a track-record of
market-leading underwriting
performance, as measured by
our combined operating ratio.
Continuing to focus on our
core strength, underwriting,
in order to deliver an attractive
dividend yield
We pride ourselves on
our expert underwriting
and our market leading
performance.
sabreplc.co.uk
To view further
information and
announcements
Sabre Insurance Group plc Annual Report and Accounts 2017 01
Sabre Insurance Group plc is a
motor insurer with a diversified,
multi-channel distribution strategy,
selling policies through a broad
network of brokers and three Direct
Brands – Go Girl, Insure 2 Drive
and Drive Smart.
£210.7m
GROSS WRITTEN PREMIUM
68.5%
COMBINED OPERATING RATIO
£53.3m
ADJUSTED PROFIT AFTER TAX
160%
EXCESS SOLVENCY CAPITAL
01
02
03
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
32 Chairman’s governance letter
34 Board of Directors
36 Governance Report
40 Audit and Risk Committee Report
44 Nomination Committee Report
Directors’ Remuneration Report
46
Directors’ Report and
57
Responsibilities Statement
Independent Auditor’s Report
61
02 Expert underwriting ability
04 Knowledge and experience
Diversified multi-channel
06
distribution network
08 Chairman’s letter
10 Dynamic market trends
12 How we create value
15 Chief Executive’s review
17 Our strategic priorities
18 How we drive future success
20 Key performance indicators
22 Principal risks and uncertainties
28 Chief Financial Officer’s review
30 Corporate Social Responsibility
Definition
66
67
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial position
68 Consolidated Statement of Cash Flows
69 Consolidated Statement
of Changes in Equity
Notes to the Consolidated
Financial Statements
Parent Company Statement
of Financial Position
92
70
93 Parent Company Statement
93
94
of Changes in Equity
Parent Company Statement
of Cash Flows
Notes to the Parent Company
Financial Statements
In this Annual Report, Sabre Insurance Group plc is defined as the “Company”, “Sabre” or, with its subsidiaries, the “Group”.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 02
Expert
underwriting ability
We have delivered consistently strong underwriting results,
utilising our unique data set, compiled over more than
15 years, focused on the higher premium segment
Underwriting
strengths
Broad underwriting footprint.
We believe there is a price for almost
every risk, and hence offer a price
across virtually the whole private car
insurance market.
Sabre Insurance Group plc Annual Report and Accounts 2017 03
15+ years
of unique
proprietary
data
Extensive dataset, compiled
from more than 15 years of
underwriting experience.
The Group’s pricing model relies on
an extensive proprietary dataset,
with broad coverage across the risk
spectrum, which is continually
updated to reflect the Group’s latest
claims experience. Policy and claims
data has been compiled consistently
over more than 15 years and is held
on the Group’s single policy
administration system, ensuring high
quality, reliable data is readily available.
Proprietary data is enhanced by third
party data validation and enrichment.
Sophisticated
pricing model
Disciplined, actuarially‑driven
pricing strategy utilising a
proprietary and agile model.
The Group prides itself on being
an underwriter first and foremost,
and when combined with claims
management expertise its consistent
and market-leading underwriting results
are strong evidence of its success.
The Group's proprietary pricing model
has been constructed in house by its
experienced actuarial team and refined
over time to enhance its accuracy.
<80%
COMBINED OPERATING
RATIO TARGET
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 04
Knowledge and
experience
An experienced senior leadership team supported by an
expert and committed management group, delivering a
track record of market leading underwriting profitability
Our team
The Group employs a team of circa
150 individuals operating from a
single owned site in Dorking, Surrey,
supported by third party providers
performing selected outsourced
functions.
The Group benefits from a claims
team of over 75 employees with
more than 600 years of collective
experience.
BASED IN
DORKING,
SURREY
Flexibility
Our streamlined operating model
gives us flexibility in our business.
We outsource certain areas where we
can leverage partners’ size, scale and
expertise. This means we also benefit
from a flexible pool of resources.
600
YEARS’ COMBINED EXPERIENCE
IN THE CLAIMS TEAM
Sabre Insurance Group plc Annual Report and Accounts 2017 05
Long-term growth
The Group increased its gross written
premium (“GWP”) and in‑force policy count
significantly over the 10‑year period
ended 31 December 2017.
Our primary focus is maintaining our
profitability, but we also anticipate
controlled, high single-digit growth
across the insurance cycle.
CIRCA 351k
2017 IN-FORCE POLICIES
2017
2007
141,506
351,316
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 06
Diversified multi-channel
distribution strategy
Sabre has a diversified, multi-channel distribution strategy,
selling policies through a broad network of over 1,000
valued insurance broker partners across the UK and three
Direct Brands – Go Girl, Insure 2 Drive and Drive Smart
Brokers
Account for approximately 70% of
gross written premium in the year
ended 31 December 2017.
Sabre sells primarily through insurance
brokers. The brokers themselves have
grown as the Price Comparison
Websites (PCWs) have grown. Our
broker partners add a combination of
strong consumer brands, distribution
expertise, retail pricing skills and
customer relationships. Combined
with our underwriting and claims skills
this is a powerful combination.
70%
BROKERS BUSINESS SPLIT
Business from Brokers
Business from Direct brands
1,000
THE APPROXIMATE NUMBER OF
INSURANCE BROKERS ACROSS
OUR BROAD NETWORK IN THE UK
Sabre Insurance Group plc Annual Report and Accounts 2017 07
30%
DIRECT BRANDS BUSINESS SPLIT
Direct
Brands
Accounting for
approximately 30% of
GWP in the year ended
31 December 2017.
Trading primarily through
the 'Go Girl' brand on
PCWs, Sabre has a growing
direct portfolio. This gives
strategic optionality and
direct line of sight into
the retail market.
Business from Direct brands
Business from Brokers
Go Girl was launched in November
2011 to target female drivers and
is primarily promoted via PCWs.
Go Girl is an official sponsor of
the England Netball Team.
Insure 2 Drive was launched in
November 2010 offering general
motor insurance and is almost
entirely promoted via PCWs.
Drive Smart was launched in
August 2013 offering telematics
car insurance which involves
a device being fitted into the
customer’s vehicle to monitor
a number of aspects of their
driving behaviour.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 08
Chairman’s
letter
The performance of the business over the years has
been underpinned by our culture, where we aim for the
highest standards of operational excellence and
financial reporting throughout the Company
Patrick Snowball
Chairman
2017 Performance
The Group has delivered results for 2017 in
line with the Board’s expectations at the time
of the Listing which demonstrate the strength
of Sabre’s business model.
As explained at the time of the Listing, our key
focus is on the profitability of the business and
as you will see from Geoff Carter’s Chief
Executive Officer’s (“CEO”) review, this
continued to be strong in 2017 and delivered
a combined operating ratio of 68.5%.
Further details regarding the Company’s
performance and operating model are set
out in the CEO’s review, the Chief Financial
Officer’s (“CFO”) review and in the other
sections of the Strategic Report on pages
2 to 31 of this Annual Report.
I would like to pay special thanks to our two
Executive Directors, Geoff Carter and Adam
Westwood, who together with the
management team maintained a clear focus
on delivering these 2017 results while also
leading the business through the IPO process
and achieving a successful Listing.
DEAR SHAREHOLDER
I am delighted to introduce Sabre Insurance
Group plc’s first annual report and accounts
(“Annual Report”) following its initial public
offering (“IPO”) and admission to the Main
Market of the London Stock Exchange on
11 December 2017 (the “Listing”).
Sabre operates in the private motor insurance
sector providing insurance through a broad
network of insurance brokers and through our
own Direct Brands – Go Girl, Insure 2 Drive
and Drive Smart. We have a multi-channel
distribution strategy, a diversified book of
business and a broad underwriting footprint
with a bias towards the higher average
premium segment.
The business has a long-established track
record of market-leading underwriting
profitability driven by some key differentiators
– underwriting discipline, claims management
skills, a proprietary and agile pricing model and
an extensive dataset which stretches back 15
years. It is these factors which give Sabre its
competitive edge and bright future.
The performance of the business over the
years has been underpinned by our culture,
where we aim for the highest standards of
operational excellence and financial reporting
throughout the Company and its subsidiaries
and from all Directors and employees. Central
to Sabre’s culture is that our people operate in
an honest, professional and ethical manner
and we see this as essential to building trust
and respect with our key stakeholders
including customers, business associates,
employees, communities, regulators and
shareholders. Our Code of Conduct can be
found on the Company’s website and
information regarding our risk management
processes can be found on pages 22 to 26.
Sabre Insurance Group plc Annual Report and Accounts 2017 09
Dividend policy
The Group’s dividend policy targets a mininium
70% dividend payout ratio. This reflects our
aim of generating sustainable value for
shareholders whilst ensuring that the
business retains sufficient capital to fund
growth and that we exceed our regulatory
capital requirement as our business is
subject to the Solvency II regime.
As indicated at the time of our Listing, the
Company will not be declaring a final dividend
in respect of the financial year ended
31 December 2017. However, it is our current
intention that the Company’s first dividend
payment will be an interim dividend for the six
months ending 30 June 2018, and that the
Company will pay a final dividend for the six
months ending 31 December 2018.
Our people
The progress made in 2017 was due to the
hard work of all our employees. As you can
see in our Corporate Social Responsibility
report on pages 30 and 31, we have a very
strong base of loyal employees and the
success of the business is due to their
experience and relentless focus on achieving
market-leading underwriting performance.
The Company’s commitment to promoting
all-employee share ownership and fostering
an ownership culture led it to introduce a
Share Incentive Plan at the time of the Listing.
Further details regarding employee
remuneration can be found in the Directors’
Remuneration Report on pages 46 to 56 of
this Annual Report.
We will continue to focus on our strategy of
delivering a market-leading underwriting
performance, controlled growth and strong
cash generation, and we look forward to
meeting our shareholders at the Company’s
2018 Annual General Meeting (“AGM”) on
24 May 2018.
Patrick Snowball
Chairman
The Board
Prior to the Listing, we established a strong
Board of seven Directors comprising two
Executive Directors and five Non-executive
Directors with a wide range of relevant skills
and experience which will help to drive the
development of the business.
Since the Listing the Board has been further
strengthened by the appointment of Andy
Pomfret, with his extensive public company
and insurance sector experience, who joined
the Board as our Senior Independent Director
(“SID”) on 28 February 2018.
Four of our Directors are independent
Non-executive Directors, being Catherine
Barton, Rebecca Shelley, Ian Clark and Andy
Promfret and, as recommended by the
UK Corporate Governance Code 2016
(the ”Code”), I was also considered
independent at the date of my appointment.
One of our Non-executive Directors, Matthew
Tooth, is not deemed independent as he was
appointed by the BC Partners Group pursuant
to the terms of a Relationship Agreement as
described on page 59 of this Annual Report.
Governance
The Board is committed to the highest
standards of corporate governance and this is
addressed in my Chairman’s governance letter
and the Governance Report set out on pages
32 to 39 of this Annual Report.
Dialogue with shareholders
I would like to thank all our shareholders for
their support during, and since, our Listing. I
look forward to maintaining an active dialogue
and the Board is committed to keeping you
informed of significant developments by
providing regular updates on our performance
and proactively engaging when appropriate.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 10
Dynamic
market trends
We operate in a competitive and dynamic marketplace.
Changes impacting the industry, including distribution
methods, pricing, technology and regulation, are
evolving the way in which we operate, and are
shaping customers’ expectations
£12 billion
APPROXIMATE VALUE OF THE UK
PRIVATE MOTOR INSURANCE MARKET
Distribution trends
The nature of private motor insurance
distribution in the UK has undergone
meaningful change in recent years. PCWs
(which allow users to compare tailored quotes
from a variety of insurers) have increased in
prominence significantly as a distribution
channel, owing to the convenience, choice
and transparency that they provide. In
addition, direct sales through insurer and
broker websites have increased as distribution
has continued to move online. The increasing
prominence of PCW and online sales has
had implications for other insurance policy
distribution channels, and sales through
branches, over the telephone and via banks
/ building societies have declined as a
proportion of total sales. Insurance brokers
have had to adapt to these changing
distribution channels to maintain their
relevance and now distribute products online
and through PCWs, alongside insurance
underwriters going direct to the consumer.
In this context, brands and retail
price optimisation abilities have grown
in importance; on PCWs, where multiple
quotes can be compared at once, price and
brand recognition are key differentiators for
consumers.
Pricing trends
In mid 2016, when reducing industry
profitability, continued claims inflation,
increases to insurance premium tax and
costs associated with the implementation
of Solvency II were impacting insurers,
prices began to rise. These premium increases
continued into 2017 with a reduction in the
Ogden Discount Rate in February 2017,
which increased lump sum payouts to injured
claimants, providing further impetus for
price increases.
More recently, the market has seen some
reduction in the total cost of personal injury
claims, which has countered some of these
inflationary factors.
Sabre Insurance Group plc Annual Report and Accounts 2017 11
Digitisation and technology
Technological advancements will continue
to bring changes to the motor market,
for example:
– Advanced safety features in modern cars
(automated emergency braking, forward
collision, blind spot and lane departure
warnings). These can potentially reduce the
frequency of claims and severity of injury
when accidents do occur, which should
reduce severity of liability claims over time,
but the cost of repair for cars with these
features is typically higher than those
without, so the cost of repairing vehicles in
the medium term may rise.
– Autonomous cars. While they are unlikely
to be viable for some time, reports suggest
purchasing autonomous vehicles will
become possible at some point between
2020 and 2025. That said, it is unclear
what level of automation these cars will
feature and therefore the impact on the
motor insurance market is more difficult
to predict.
Claims trends
In addition to pricing trends, the profitability of
underwriters is driven by claims experience. In
recent years, UK private motor insurers have
suffered sustained claims inflation stemming
from increases in costs associated with both
personal injury claims and damage to vehicles.
Personal injury claims costs have been
growing for a number of reasons in recent
years and the UK Government has recognised
the need to curtail this. It announced in 2015
its intention to reform whiplash claims. The
announcement was followed by the launch of
a consultation on the topic in November
2016, which led to a bill being introduced to
the UK Parliament the following year. The
reforms sought to introduce a tariff of fixed
compensation for whiplash injuries and block
claims that were not supported by medical
evidence. Having been delayed by the UK
general election held in June 2017, it was
announced in the Queen’s Speech of June
2017 that the reforms would be incorporated
as part of a new Civil Liability Bill. The
timescales for, and details of, this should be
confirmed in early 2018.
Alongside increasing personal injury claims,
UK private motor insurers have also been
faced with increasing costs associated with
vehicle repair. Whilst advanced safety features
incorporated in modern vehicles have resulted
in a decline in accident frequency, the cost of
repairing vehicles in the event of accidents
has increased.
Ogden
Discount Rate
The Ogden Discount Rate
represents an assumption of the
risk free interest rate that claimants
could earn on lump-sum payouts
and is used to determine the size
of such payouts.
The Ogden Discount Rate had
been fixed at 2.5% since 2001, but
on 27 February 2017 a reduction
to -0.75% was announced.
-0.75%
DISCOUNT RATE
The Group fully reflected the impact
of the Ogden rate change in its
2016 financial statements. As a
result of the rate change, gross and
net outstanding claims reserves
were increased by £26.2m and
£2.2m respectively.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
12
How we
create value
OUR INPUTS
OUR CHANNELS
HOW WE MANAGE RISK
LONG STANDING
MANAGEMENT
Indirect
distribution
The Group has established
a broad network of over
1,000 insurance brokers
across the UK over
the course of more than
20 years.
EXPERIENCED
SENIOR AND
OPERATIONAL
TEAM
Direct
distribution
Underwriting
discipline
Maintaining price discipline throughout
the insurance cycle.
72.3%
10 YEAR AVERAGE COMBINED
OPERATING RATIO
GoGirl
Launched in 2011 to appeal
to young female drivers.
Insure2Drive
Launched in 2010 as a general
motor insurance product.
Drive Smart
Launched in 2013 as a
telematics product.
Price Comparison
Websites
PCWs are websites that
enable customers to obtain
and compare quotes from
a wide variety of insurers
and brokers.
MARKET
LEADING
PROPRIETARY
DATA
BROKER
RELATIONSHIPS
ANALYSIS AND
PRICING EXPERTISE
din g
a
e
l
t
e
k
r
a
M
Proprietary
dataset
Extensive dataset, compiled from more than
15 years of underwriting experience.
15 years
CONSISTENTLY COMPILED DATASET
g
n
i
t
i
r
w
r
e
d
un
Sabre Insurance Group plc Annual Report and Accounts 2017
13
OUR OPERATING MODEL
VALUE CREATION
Strong cash
generation
Our underwriting discipline and
streamlined operating model give us
confidence that we can deliver our
target dividend payout ratio of a
minimum of 70% of profit after tax.
Customer growth
We anticipate high single-digit growth
in gross written premium across the
insurance cycle, while maintaining our
target combined operating ratio.
Maintaining expertise
We continue to refine our underwriting
model to drive increasingly accurate,
customer focussed pricing. We aim to
retain and develop superior levels of
expertise in underwriting and claims
management at all levels within our
business.
Strong balance sheet
Our focus on profitability allows us
to deliver value to shareholders while
maintaining a strong balance sheet,
operating with an excess regulatory
capital of 140% to 160% of our Solvency
Capital Requirement.
In-house
PRICING AND CLAIMS MANAGEMENT
The Group has a streamlined operating
model, with certain functions where
the Directors believe the Group has
significant expertise (such as pricing and
claims management) being maintained
in-house and certain other functions
outsourced to third party providers,
who the Directors believe can improve
efficiency and provide scale optionality.
Partners
CUSTOMER SUPPORT
Telephone sales and phone and email
based customer support for the Direct
Brands are outsourced to Right Choice,
a specialist motor insurance broker based
in the UK.
FNOL AND REPAIR MANAGEMENT
First Notice Of Loss and repair
management are outsourced to the
Innovation Group, which provides support
to the insurance, fleet, automotive and
property industries.
INFORMATION TECH
The Group’s IT system is in the process
of being outsourced to a cloud based
infrastructure as a service or “IaaS”
provider. As a result the Group’s IT
infrastructure will be hosted by a third
party on virtual servers with state of the
art security.
PRICE DISTRIBUTION
Policy prices are distributed to brokers via
a number of specialist software houses.
These software houses typically provide
brokers with sales and administration
systems, as well as enabling brokers to
access policy prices set by the Group.
Claims
experience
Dealing with our customers both fairly
and quickly whilst focusing on the
identification of fraud and effective
management of injury claims.
600 yrs
OF COLLECTIVE EXPERIENCE
72.3%
10 YEAR AVERAGE COMBINED
OPERATING RATIO
din g
a
e
l
t
e
k
r
a
M
g
n
i
t
i
r
w
r
e
d
un
Proprietary
and agile
pricing model
Disciplined, actuarially driven pricing strategy
utilising a proprietary and agile model.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
14
Continuing to build
on our competitive
edge to deliver
a sustainable
dividend and
profitable, controlled
growth over the
medium term”
£210.7m
GROUP GENERATED GWP IN 2017
+7%
Sabre Insurance Group plc Annual Report and Accounts 2017 15
Chief Executive’s
review
2017 was a great year for the business,
with strong results, and also an exciting stage
in our development with a successful IPO
Strategic progress and focus
Our strategy has been consistent for many
years – we focus on underwriting private
motor insurance in the UK, and our success is
underpinned by several core trading principles:
– Maintaining market leading underwriting
performance through a disciplined and
actuarially driven pricing strategy
– Expanding our extensive and proprietary
dataset combined with investment in data
enrichment
– Maintaining a broad underwriting footprint
with unique business model biased toward
the specialist, higher premium segments
– Utilising our robust and effective claims
management function to ensure a firm but fair
approach to claims
– Effectively leveraging our diversified,
multi-channel distribution network
– Targeting controlled attractive growth across
the cycle whilst maintaining our underwriting
discipline
– Using our streamlined operating model to
efficiently control expenses
– Ensuring a prudent case and a consistent
portfolio reserving approach
– Maintaining a conservative approach to risk
management through the use of reinsurance,
a simple and low risk investment strategy and
prudent solvency coverage ratio.
These principles have been used to inform our
key performance indicators (“KPIs”), the most
important of which is our combined operating
ratio which reflects the strength of our
underwriting capabilities. We will report on
these KPIs regularly and see these as the
means by which our success and progress
should be judged.
We are agnostic about the mix of business that
we underwrite and the proportion of business
from each distribution channel, although we
have traditionally attracted policies from the
higher average premium segment than the
more mainstream motor insurers.
We believe that our extensive and proprietary
data set which stretches back 15 years, our
sophisticated pricing model and our analytical
skills provide ample opportunity to deliver
controlled growth across the cycle within our
current market. Any expansion in our product
offering over the medium term would be
complementary to the business we already
write and supplement the strong profitability
and shareholder returns we achieve in our
core activities.
In summary, we generate high quality
profitability through our disciplined, actuarially-
driven underwriting strategy. This, combined
with a focus on operating efficiencies, means
we continually deliver strong organic capital
generation, underpinning our sustainable
dividend policy across the cycle.
Performance in 2017
Our key focus is the profitability of the
business that we underwrite. This was
positive in 2017 with a loss ratio of 46.5% and
combined operating ratio of 68.5%. Our strong
cost discipline across the organization resulted
in an expense ratio of 22.0%, including
distribution costs.
We saw an increase in GWP of 7.2% to a total
of £210.7m with strong contributions from
both our broker channel and direct brands with
little additional marketing expenditure.
At our IPO we announced our intention to
operate within a solvency coverage ratio
(“SCR”) range of 140% to 160%. Given this,
it is pleasing to report that at year end our
solvency position was 160%, evidence of our
strong balance sheet, organic surplus capital
generation and conservative approach to risk
management.
Our people
I would like to pay tribute to our people.
Sabre benefits from an incredibly talented,
long serving and committed workforce. Many
people have stepped up to ensure the business
continued to perform very strongly as the
directors led the IPO process.
Geoff Carter
Chief Executive Officer
I am pleased to present my first Chief
Executive’s review following our successful
listing on the Main Market of the London
Stock Exchange in December 2017. The
support we received from a wide range of
high quality investors is testament to the
strength of our business, the wider Sabre
team, and our prospects going forward.
I would like to welcome our new shareholders.
I am also pleased to announce another strong
financial and operational performance driven
both by underwriting discipline and our
competitive strengths. Reporting such a
strong business performance while also
completing a successful IPO is testament
to the strength of the Sabre team and a
great achievement.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 16
Chief Executive’s review
continued
The IPO in December allows us to continue to
build on our competitive advantages with
absolute consistency in our strategy and a
more diverse shareholder base. That is why
we are confident we can continue to deliver
attractive and consistent returns regardless of
the market environment.
We are confident that Sabre will prove to be
an attractive investment as we focus on
ensuring our activities continue to deliver
long-term shareholder value.
Outlook
The Group has delivered a strong financial
performance in 2017 and remains focused on
its core principles of market leading
underwriting performance and delivering
attractive returns. Whilst our strategy seeks to
deliver controlled growth across the cycle, we
will not drive short term growth at the
expense of underwriting profitability or
shareholder returns.
The impact of the Ogden rate uncertainty and
industry-wide reductions in personal injury
frequency resulted in competitive pricing
pressure in the last few weeks in 2017 and
this continued into the first two months of this
year, resulting in a modest reduction in
premium income relative to the equivalent
period last year. However, we have since
taken pricing actions, reflecting the reductions
in personal injury frequency, and as a result in
recent weeks, we have seen premium income
come back to the run rate seen in the same
period in 2017. Throughout the period we have
continued to focus on our high quality
underwriting performance, ensuring that new
business is written in line with a combined
ratio consistent with our historical average.
Looking into the rest of 2018, we are confident
that our focus on our core principles will
continue to deliver a strong underwriting
performance with a combined operating ratio
in line with, or better than, our historical
average. This will allow us to continue to
strengthen our capital position even further,
and underpins our confidence in delivering an
attractive dividend in 2018, per our stated
policy.
Geoff Carter
Chief Executive Officer
“Our strengths give us a
significant competitive
advantage to write
attractive and profitable
business across the UK
private motor insurance
market, and we’re
confident that the
business will continue
to deliver significant
value to shareholders.”
Given this, we were delighted to be able to
reward all staff employed at the point of listing
with share awards. All staff were granted at
least £3,600, with significant additional awards
based on years of service.
On behalf of all the staff I would also like to
thank Keith Morris and Angus Ball, the two
founders of the modern Sabre. They
established a unique and exceptionally
successful strategy and culture that the
management team have maintained and intend
to evolve in conjunction with our new board.
Life as a listed company
Looking to the years ahead I would like to
reiterate our strategic focus which will guide
everything we do. Sabre has historically
delivered strong returns for our shareholders.
Those returns have been the direct result of
our business having underwriting discipline
and a streamlined operating model, giving us
confidence we can continue to deliver our
targeted payout ratio of 70% going forward,
with additional distributions of surplus capital
to maintain our solvency ratio within our target
range.
Sabre Insurance Group plc Annual Report and Accounts 2017 17
Our strategic
priorities
The Group intends to continue to
build on its strategic priorities to deliver
continued success over the longer term
The Directors’ vision for the Group
is to maintain its focus on the UK
private motor insurance market,
continue to provide brokers and direct
customers with quotes across the
risk spectrum and ensure the Group
continues to deliver market leading
underwriting performance, together
with controlled growth over the
longer term. The Group will build
on its competitive strengths through
its focus on the following drivers
of value.
Underwriting
performance
Risk
management
Growth
Operations
Distribution
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 18
How we drive
future success
Our strategy has been consistent for
many years – we focus on underwriting
private motor insurance in the UK
Underwriting
performance
Continue to deliver market-leading
underwriting performance
Risk management
Maintain a conservative
approach to risk management
Growth
Target controlled growth
STRATEGIC FOCUS
STRATEGIC FOCUS
STRATEGIC FOCUS
– maintaining our simplicity of focus on
– a simple, low risk investment strategy
– continued expansion into all risk
the UK private motor insurance market;
– maintaining our disciplined and
actuarially-driven pricing strategy to
prioritise the delivery of the Group’s
target combined operating ratio;
– continuing development of our
proprietary and agile pricing model
to evolve pricing sophistication across
the risk spectrum;
– expanding our extensive and proprietary
dataset through additional underwriting
experience and the use of new data
enrichment sources;
– utilising our diversified multi-channel
distribution strategy to maintain
a broad underwriting footprint
and drive growth; and
– maintaining our robust and effective
claims management process and
counter-fraud capabilities through
continued investment in training
and capacity.
focused principally on capital
preservation to support the Group’s
profitable underwriting activities;
– the use of excess of loss reinsurance to
limit the Group’s exposure to large
insurance losses, whilst also reducing
the volatility of the Group’s loss ratio,
earnings and cash flow; and
– a continued consistent approach to both
reserving and claims management,
using “reasonable worst case”
estimates of future claims costs.
segments through further investment
in data enrichment and continued
research into identifying relevant risk
characteristics;
– the potential to expand into adjacent
insurance products (for example,
pay-as-you-go and temporary learner
cover) and areas within the Group’s
product range that have been relatively
unexploited to date (for example, van
and taxi cover);
– the ability to flex pricing whilst
still achieving the Group’s target
combined operating ratio; and
– taking advantage of technological
developments in the insurance market
(for example, insuretech businesses).
Sabre Insurance Group plc Annual Report and Accounts 2017 19
Operations
Maintain a streamlined operating
model with appropriate use
of third party providers.
Distribution
Enhance broker relationships
and continue to develop the
Direct Brands
STRATEGIC FOCUS
STRATEGIC FOCUS
– undertaking appropriate growth in
staff using available space at our
Dorking, Surrey site;
– retaining in-house functions where the
Group has significant expertise; and
– continuing to outsource to third parties
those functions where third party
providers can provide effective variable
cost control and high quality customer
service, whilst improving efficiency and
allowing the Group to leverage such third
party providers’ experience and scale.
– further strengthening existing
broker relationships;
– assessing new distribution
partner opportunities;
– continuing growth in the direct
channel as the Direct Brands mature
through the enhancement of marketing
initiatives; and
– further improving the Direct Brands’
customer proposition.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 20
Key performance
indicators
GROSS WRITTEN PREMIUM £000
LOSS RATIO %
EXPENSE RATIO %
COMBINED OPERATING RATIO %
£210,736
46.5%
22.0%
68.5%
2017
2016
2015
210,736
2017
196,619
2016
180,253
2015
46.5
47.7
50.8
2017
2016
2015
22.0
21.6
24.0
2017
2016
2015
68.5
69.3
74.8
Definition
Definition
Definition
Definition
The Group’s GWP comprises
all premiums in respect of
policies underwritten in a
particular financial period
regardless of whether such
policies relate in whole or in
part to a future financial period.
The ability to underwrite
policies and generate premium
is a key measure of the Group’s
implementation of its strategy,
and the Directors believe this
measure is an appropriate
quantification of how
successful the Group is at
achieving its strategy.
Loss ratio measures net
insurance claims (2017:
£92,912k, 2016: £92,721k, 2015:
£81,854k), less claims handling
expenses (2017: £6,044k, 2016:
£5,878k, 2015: £4,885k), relative
to net earned premium (2017:
£186,866k, 2016: £182,107k,
2015: £151,625k) expressed as
a percentage.
The Group’s expense ratio is
a measure of total expenses
(which comprises commission
expenses and operating
expenses) (2017: £34,994k,
2016: £33,488k, 2015:
£31,588k), plus claims handling
expenses (2017: £6,044k,
2016: £5,878k, 2015: £4,885k),
relative to NEP, (2017:
£186,866K, 2016: £182,107K
and 2015: £151,625K) expressed
as a percentage.
The Group’s combined ratio
is the ratio of total expenses
(which comprises commission
expenses and operating
expenses) (2017: £34,994k,
2016: £33,488k, 2015
£31,588k), plus net insurance
claims (2017: £92,912k,
2016: £92,721k, 2015: £81,854k)
relative to NEP, (2017:
£186,866K, 2016: £182,107K
and 2015: £151,625K),
expressed as a percentage.
Aim
Aim
Aim
Aim
To maintain growth in GWP
when this can be done without
compromising the underwriting
profitability or broader
efficiency of the Group.
To maintain our underwriting
discipline such that our loss ratio
remains broadly consistent,
contributing to a combined
operating ratio of 80% or better.
To minimise operating
expenditure within the business
and optimise the efficiency with
which we do business in order
to allow for achievement of a
combined operating ratio of
80% or better.
Sabre seeks to achieve a
combined operating ratio of
80% or better on all business
underwritten. Accordingly, the
loss and expense ratios need
to be managed to ensure they
contribute to the preferred level
of profitability.
Performance
Performance
Performance
Performance
See CFO review page 28
See CFO review page 28
See CFO review page 28
See CFO review page 28
How our KPIs link to Directors’ remuneration
Directors’ and senior management remuneration will focus on:
– Profit after tax
– Return on capital
– Total shareholder return
– Alongside personal performance assessments.
These performance metrics are directly linked to the Group’s
performance as measured by the KPIs.
Reconciliation of adjusted profit after tax
The Group uses “adjusted profit after tax” as the primary measure
of its profitability. This excludes any exceptional expenses, such as
transaction costs, as well as amortisation of intangible assets. A
reconciliation between the Group’s adjusted profit after tax and its
profit after tax is shown opposite:
Sabre Insurance Group plc Annual Report and Accounts 2017
21
ADJUSTED PROFIT AFTER TAX (£’000)
SOLVENCY COVERAGE RATIO (%)
RETURN ON TANGIBLE EQUITY (%)
£53,288
160%
81.8%
2017
2016
2015
53,288
53,912
37,130
2017
2016
160
128
2017
2016
81.8
96.3
Definition
Definition
Definition
The Group’s adjusted profit
after tax measures profit from
operations, net of tax (2017:
£45,343k, 2016: £52,293k,
2015: £34,030k), adjusted to
offset the effect of amortisation
of intangible assets (2017: £887k,
2016: £1,619k, 2015: £3,100k)
and exceptional expenses
excluding tax (2017: £7,058k,
2016: £0, 2015: £0) which do not
relate to the Group’s underlying
performance (such as fees
incurred in connection with
acquisitions or capital markets
transactions).
The Group is required to
maintain regulatory capital at
least equal to its SCR. The SCR
is calculated based upon the
risks presented by the Group’s
operations and the various
elements of its balance sheet.
The Group’s solvency coverage
ratio is the ratio of the Group’s
regulatory capital in a particular
period (2017: £97,873k. 2016:
£74,283k) to its SCR (2017:
£61,087k, 2016: £57,852k) for
the same period, expressed as
a percentage.
The ability to generate profits
while maintaining capital at an
appropriate level is an important
part of the Group’s strategy,
and the Directors believe that
Return on Tangible Equity is an
appropriate quantification of
how successful the Group is in
achieving this strategy. Return
on Tangible Equity is measured
as the ratio of the Group’s
adjusted profit after tax to its
average tangible equity over
the financial year (2017:
£65,181k, 2016: £55,981k),
expressed as a percentage.
Aim
Aim
Aim
This is a function of Sabre’s
other KPIs and we intend to
deliver sustainable profit growth
over the medium term.
To maintain a solvency ratio in
the range of 140-160%.
To make efficient use of the
capital available to the business
and achieve broadly consistent
returns year on year.
Performance
Performance
Performance
See CFO review page 28
See CFO review page 28
See CFO review page 28
Adjusted profit after tax
Average tangible equity
Profit after tax
Add:
£’k
45,343
IFRS net assets
Intangible assets
Amortisation of intangible assets
887
Goodwill
Exceptional items
Tax on exceptional items
Adjusted profit after tax
7,542
(484)
53,288
Tangible equity
Average tangible equity
2017 £’k
231,993
156,279
501
75,213
65,181
2016 £’k
212,816
156,279
1,388
55,149
55,981
2015 £’k
216,099
156,279
3,007
56,813
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
22
Principal risks
and uncertainties
Risk management
Framework
The Board is responsible for prudent oversight
of the Group’s business and financial
operations, ensuring that they are conducted
in accordance with sound business principles
and with applicable laws and regulations. This
includes responsibility to articulate and
monitor adherence to the Board’s appetite for
exposure to all risk types. The Board also
ensures that measures are in place to provide
independent and objective assurance on the
effective identification and management of
risk and on the effectiveness of the internal
controls in place to mitigate those risks.
The Board has set a robust risk management
strategy and framework as an integral element
in its pursuit of business objectives and in the
fulfilment of its obligations to shareholders,
regulators, customers and staff.
The Group’s risk management framework is
proportionate to the risks that we face. Our
assessment of risk is not static; we continually
reassess the risk environment in which the
Group operates and ensure that we maintain
appropriate mitigation in order to remain within
our risk appetite.
Risk appetite
The Group has adopted a straightforward risk
appetite reflective of its continued strategic
focus on generating returns through
underwriting activity while limiting exposure to
all other areas of risk. The Group considers risk
in the context of the core elements of its
Solvency Capital Requirement calculation,
which are summarised in the table
to the right:
Risk area
Risk appetite
Strategic and
governance
Insurance risk
(underwriting)
Counterparty
Operational
Market
The Group aims to operate a simple governance structure, with
clear reporting lines and direct accountability. The Group complies
fully with the Senior Insurance Managers Regime (“SIMR”) and
Solvency II (“SII”) rules which provide for an adequate framework
to manage the firm’s risk in this regard. In following these rules,
the Group ensures those setting strategy are fit and proper and
that the Board is sufficiently diverse and effective.
The Group acknowledges that accepting underwriting risk
is core to its business. The Group does, however, aim to ensure
that the only material risk accepted by the firm is “pure” pricing
risk and that this risk is kept within an acceptable tolerance.
Underwriting risk is managed in particular with reference to the
Group’s pricing and claims management activity, and through
prudent use of reinsurance.
The Group minimises counterparty risk where possible and
monitors the stability and performance of brokers closely. Sabre
does acknowledge that in allowing brokers credit terms, there
will always be some residual degree of counterparty default risk.
Sabre also accepts a degree of default risk on its direct instalment
policies, however the rate of default must remain acceptable in
the context of the interest rate gains on such policies.
In general, the Group attempts to minimise operational risk across
the business through close monitoring of key risk areas including
IT and systems, people, regulatory exposure, financial crime,
taxation and accounting.
The Group’s investment approach is to maintain suitable levels
of liquidity; to preserve the capital; and to invest in low risk stable
investments that attract a coupon that is sufficient to meet any
deterioration in the capital value. Proper regard is given to the
credit standing of custodians and counterparties.
Capital
management
The Group aims to retain sufficient capital such that in all
reasonably foreseeable scenarios it will hold regulatory capital in
excess of its Solvency Capital Requirement. The Board currently
considers that this is achieved through maintaining a regulatory
capital surplus of 140% to 160%.
Sabre Insurance Group plc Annual Report and Accounts 2017 23
Risk governance
Audit and Risk Committee
The Group operates a joint Audit and Risk
Committee which allows for effective
monitoring and management of the Group’s
exposure to risk. A separate Committee
report can be found on page 40 of this
Annual Report.
Internal Audit
The Group’s Internal Audit function, which is
outsourced, provides independent, objective
assurance on the internal control environment,
focusing on the design and operating
effectiveness of the governance processes,
risk management procedures, internal control
and information systems. The Head of Internal
Audit reports to the Chair of the Audit and
Risk Committee.
Operating management
The Group’s senior management team
assume primary responsibility for the
day-to-day risks that it takes in the pursuit
of our business objectives, and for adherence
to risk management practices, processes
and controls.
Assessment of
principal risks
and uncertainties
The Directors confirm that they have
undertaken a robust assessment of the
principal risks and uncertainties that the Group
faces – this includes those that threaten the
business model, future performance, solvency
or liquidity of the Group.
Set out in the table to the right is an overview
of the principal risks we believe could threaten
our strategy, performance and reputation and
the actions we are taking to respond to and
mitigate those risks.
As we listed on the London Stock Exchange
on 11 December 2017, we do not report on
any change in our current risk position against
previous periods.
Key elements
Description
Mitigation
Underwriting risk
Pricing
Failure to price risks
effectively can result in
worse than expected loss
ratios or significant
unexpected changes in
volumes of business written.
The Group operates a highly
sophisticated pricing model which is built
upon fully tested scientific principles. The
model is updated only when sufficient
data has been collected and analysed to
support such a change.
Claims
management
A consistent approach to
the management of claims is
essential for the accurate
pricing of policies based upon
claims experience and is key
to limiting the indemnity cost
of such claims.
Reserving
Inappropriate estimation
of the ultimate cost of
claims incurred can lead to
corrections in future periods
which could have a
detrimental impact on the
Group’s capital position and
profitability. Further, incorrect
reserving can lead to errors in
the pricing of new policies
due to a poor view of the
profitability of business
already written.
Large losses A small number of random
Reinsurance
very large claims could have
a significant impact on the
short-term profitability and
capital position of the Group.
Should reinsurance become
unavailable at an acceptable
cost, the Group’s profit
would become considerably
more volatile and its capital
position would suffer.
Management continually monitors
the market for pricing developments, but
prioritises maintenance of strong margins
over the volume of business written.
The Group ensures that all claims staff
are appropriately trained in the “Sabre
way” of managing claims, ensuring a fair
outcome for both the claimant and the
Group. Sabre ensures that the projected
volume of claims which will be handled
by the business is not in excess of the
capacity of skilled claims handlers
available to the claims team.
There is a consistent and cautious
approach to reserving with a risk appetite
to hold a margin above the actuarial best
estimate. The Group’s actuarial function
analyses and projects historical claims
development data and uses a number
of actuarial techniques to both test and
forecast claims provisions. In addition,
independent external actuaries assess
the adequacy of the Group’s reserves.
Reinsurance is purchased on an
excess-of-loss basis to limit the impact
of individually large losses and
catastrophic events.
The Group ensures that pricing decisions
are taken on the basis that the gross loss
ratio should be preserved in the long
term, such that reinsurers achieve
satisfactory returns through their
relationship with Sabre. This ensures the
greatest possible appetite for reinsurers
to renew with Sabre. Sabre maintains an
open and transparent relationship with all
reinsurers on its panel.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 24
Principal risks and uncertainties
continued
Key elements
Description
Market and counterparty risk
Mitigation
Interest rate
The Group invests primarily in UK government securities
and is therefore exposed to the impact of interest rate
movements on the value of these investments.
Default
The Group is exposed to counterparty default risk in
four main areas: investment assets, amounts due
from customers, amounts due from brokers and amounts
due from reinsurers. Failure to recover funds due from
counterparties could result in write-offs which would
reduce profit and damage the Group’s capital position.
Similarly, excess exposure to poorly rated counterparties
can increase Sabre’s capital requirement.
Liquidity
Inadequate monitoring of liquidity could result in the
inability to meet liabilities as they fall due.
Capital management
Solvency
position
Should the Group fail to maintain adequate solvency
capital, this could result in regulatory intervention which
may limit profitability or the ability of the Group to
distribute capital.
The investment portfolio is relatively short term, limiting the
impact of interest rate movements on profit. The maturity
profile of these investments is designed to match the
pattern of outgoing claims payments, such that on a
Solvency II basis the impact of any movement in interest
rates is mitigated by a converse movement in the value of
claims liabilities, which are discounted on the regulatory
balance sheet.
The Group invests primarily in UK government securities,
which carry extremely low risk of default.
The Group operates a robust programme of credit
control and performs due diligence on broker partners
as relationships are entered into and continually through
the life of those relationships.
The Group maintains sufficient cash reserves at all times
to meet its best estimate of short-term liabilities and
monitors this position continually. While the Group
considers its investment portfolio to be actively traded
and therefore liquid, it ensures that the maturity of its
investment portfolio is matched to its ongoing cash
requirement.
The Group has strong governance in place to monitor its
solvency position on a continual basis, including forecast
solvency and scenario testing, primarily as part of the
Group’s Own Risk and Solvency Assessment (“ORSA”)
process. The Group ensures that key elements of
judgement, such as reserving, are reviewed by the
Audit and Risk Committee and undergo appropriate
independent scrutiny.
Strategic and governance
Description
The Board must set an appropriate strategy which delivers
value to stakeholders while maintaining the financial and
operational stability of the Group. Management must
implement this strategy in a timely and effective manner.
The Group operates appropriate corporate governance, as
described in the Governance Report on page 36. Through
this, the Board maintains oversight of management and the
Group’s performance and financial position.
Sabre Insurance Group plc Annual Report and Accounts 2017 25
Key elements
Description
Operational risk
Mitigation
Insurance
market
exposure
The Group operates solely within the UK motor insurance
market. The ability to sell policies at an appropriate margin
is therefore impacted by new entrants offering discounted
policies or irrational behaviour by existing participants.
Regulatory
The Group is subject to a number of regulatory regimes,
including prudential regulation by the Prudential Regulation
Authority (“PRA”) and conduct regulation through the
Financial Conduct Authority (“FCA”). This regulation
dictates elements of the Group’s operational activity such
as the manner in which customers are treated and the
recruitment and development of staff.
Legal
The Group operates within the UK and is therefore
subject to the requirements of UK law. Further to those
regulatory and data protection laws discussed separately,
the Group is exposed to employment law, Companies
Act legislation and tax law.
The Group monitors the impact of its pricing decisions on
the volume of business written and has close relationships
with key broker partners and other industry bodies. The
Group’s strategy to maintain profitability over volume
dictates that extreme corrective action will not be taken
during any short-term reductions in market prices caused by
competitor activity.
The Group has an extremely low appetite for accepting any
risk other than that which relates to the underwriting of its
insurance policies, and therefore its decision-making reflects
this in relation to conduct risk and other regulatory matters.
The Group operates a simple risk framework which is
approved by the Board. The Group monitors legal and
regulatory developments in the UK and closely monitors its
exposure to regulatory risk. Our culture ensures the interests
of our customers and their fair treatment are paramount.
The Group has established a robust risk and control
framework and sets the clear objective to minimise the risk
of non-compliance with all laws and regulations.
IT systems
and
infrastructure
The Group operates bespoke IT systems and is reliant on
the accurate recording, storage and recall of
data. Failure of these systems could result in the business
being unable to price or process new business, or
manage claims effectively.
The Group operates a small number of key systems which
are overseen by a highly experienced team of bespoke
systems specialists. A robust backup and recovery plan is
in place to ensure continuity of systems in the event of local
system failure.
IT security
Loss of data, including personal data, could lead to
significant financial or reputational detriment. Theft of
the Group’s Intellectual Property could impact the ability
of the Group to compete in the market.
Financial
crime
Financial crime, whether internal or external, could result
in material loss of assets and significant reputational risk.
The Group addresses issues such as the General Data
Protection Requirements (“GDPR”) proactively, establishing
working groups which report to the Executive Committee
where required. The Group takes a zero-tolerance approach
to the risk of loss of personal data or its own Intellectual
Property and has a framework of system-level and other
operational controls to ensure it is appropriately
safeguarded.
Ownership and management of operational risks sit with
the first line business functions. While substantial internal
controls are in place to mitigate the risk of financial crime,
the Group considers its culture and “tone from the top” to
be key in limiting both awareness of external crime and the
occurrence of internal financial crime.
Outsourcing
The use of outsourced functions in routine operations, such
as customer services, exposes the Group to the practices
and procedures prevalent at the outsourced operation.
The Group monitors its outsourced operations closely,
through regular audits and monitoring of key performance
metrics.
Distribution While the Group accesses the market through almost all
brokers within the UK, much of its business is written
through a relatively small number of large brokers. It is
therefore exposed to the failure of those brokers.
The Group monitors its exposure to its broker partners on a
continual basis and continually reviews the financial stability
and solvency of its larger brokers.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 26
Principal risks and uncertainties
continued
Viability Statement
The Board has considered the Group’s
financial status and viability on a regular basis
as part of its programme to monitor and
manage risk. In accordance with provision
C.2.2 of the UK Corporate Governance Code
2016, the Directors have assessed the Group’s
prospects and viability for the three-year
period to 31 December 2020 (the “Viability
Period”), taking into account the Group’s
current position and the potential impact
of the principal risks.
The assessment period of three years has
been chosen as it is in line with our business
planning horizon. This is consistent with the
time horizon projected for most scenarios
assessed through the Group’s ORSA process.
The cyclical nature of the motor insurance
market means that projecting for periods
longer than three years creates material
uncertainty; however, we do review longer-
term strategic developments and emerging
risks over longer time periods.
Assessing viability
In making their assessment, the Board took
into account the potential impact of the
principal risks that could prevent the Company
from achieving its strategic objectives. The
assessment was based on the Group’s ORSA,
which brings together management’s view
of current and emerging risks with scenario-
based analysis and reverse stress testing to
form a conclusion as to the financial stability
of the Group.
Conclusion
Based on the consolidated financial impact
of the sensitivity analysis and associated
mitigating internal controls and risk
management actions, as described in detail
for each principal risk, the Directors concluded
that the Group will be able to operate within
its solvency capital appetite and maintain
sufficient liquid investments and cash
reserves to meet its funding needs over
the Viability Period.
Consideration was also given to a number
of other individual risks and events. In the
Board’s estimation these events would not
plausibly occur to a level of materiality that
would endanger the Company’s viability.
Consideration of longer‑term viability
The assessment of principal risks facing the
Company and robust downside sensitivity
analysis leads the Board to a reasonable
expectation that the Company will remain
viable, continue in operation and meet its
liabilities as they become due over the
Viability Period through to 31 December 2020.
Sabre Insurance Group plc Annual Report and Accounts 2017 27
The Board has
set a robust risk
management
strategy and
framework as an
integral element
in its pursuit of
business objectives”
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 28
Chief Financial
Officer’s review
Generating profits through underwriting while building
a strong financial position
Highlights
Revenue
2017
2016
£210.7m £196.6m
Gross earned premium
2017
2016
£203.1m £191.8m
Gross written premium
Net loss ratio
Combined operating ratio
Underwriting profit
Adjusted profit after tax
Profit after tax
Solvency II capital
Return on Opening SCR
Return on Tangible equity
46.5%
68.5%
£59.0m
£53.3m
£45.3m
160%
92.1%
81.8%
47.7%
69.3%
£55.9m
£53.9m
£52.3m
128%
93.2%
96.3%
Adam Westwood
Chief Financial Officer
The Group’s operations continued to achieve
strong profitability in 2017, reporting a
combined operating ratio for the year of
68.5%. Premium grew in line with expectation
during 2017, with favourable market conditions
allowing for an increase in written premium
while maintaining a consistent loss ratio on
business written. This allowed us to grow our
underwriting profit to £59.0m, from £55.9m in
2016. Adjusted profit before tax was adversely
affected by investment losses of £0.7m on the
Group’s portfolio of UK Government bonds,
compared to a gain of £3.5m in 2016. Group
profit after tax in 2017 includes £7.5m cost
related to the corporate transaction activity
carried out during the year.
The Directors have not proposed a final
dividend for 2017, in line with the dividend
strategy set out in the Group’s Prospectus at
the time of IPO. Further, the Group did not pay
an interim dividend in November 2017. As
such, the Group carries significant excess
regulatory capital, over its Solvency Capital
Requirement, into 2018.
The Group has introduced Return on Tangible
Equity (ROTE) as a key performance indicator,
as it provides a measure of the efficiency with
which the Group utilises its available
resources. The Group’s ROTE reduced to
81.8% at 31 December 2017 from 96.3% at
31 December 2016, primarily due to the
Group’s decision to increase the minimum
level of excess capital it holds over its
Solvency Capital Requirement.
Net earned premium
£186.9m £182.1m
Other technical income
Customer instalment
income
£1.9m
£3.8m
£2.2m
£3.4m
Investment return
(£0.7m)
£3.5m
The Group saw an increase in gross written
premium of 7.2% in 2017, across both the
broker and direct channels. Despite increasing
reinsurance costs resulting primarily from the
Ogden rate change in February 2017, net
earned premium also increased by 2.6%.
Other technical income continues to generate
a small contribution to profit, down on 2016
primarily due to a one-off credit in the prior
year. As the Group operates a primarily
broker-based business, it does not expect to
generate significant non-premium income.
Investment return was below that recorded in
2016, down by £4.2m. The Group invests
almost exclusively in UK Government bonds. It
generally holds these investments to maturity,
therefore any market value movements, which
can generate in-year gains and losses, are
unwound as the bonds regress towards par
value. In 2016, there was a significant increase
in the market value of low-risk investment
bonds following the UK’s vote to leave the
European Union. In 2017, bond values
decreased, possibly due to the increase in the
official rate of interest in November.
Operating expenditure
Net claims incurred
Current-year loss ratio
Financial year loss ratio
2017
£86.9m
57.0%
46.5%
2016
£86.8m
57.6%
47.7%
Net operating expenses
£41.0m
£39.4m
Expense ratio
Combined operating ratio
22.0%
68.5%
21.6%
69.3%
Net claims incurred and net operating
expenses are presented after reclassifying
£6.0m (2016: £5.9m) of claims expenses from
net claims incurred into operating expenses.
Sabre Insurance Group plc Annual Report and Accounts 2017 29
Dividends
The Group paid £31.7m to shareholders as
dividends in 2017 and £55.9m in 2016. In both
years, the Group operated a policy to pay out
all excess capital over the Solvency Capital
Requirement plus a suitable buffer. However,
in 2017 the last such dividend was in July, as
compared to November in 2016, hence the
lower overall dividend in 2017. This allowed
the Group to build significant excess capital
prior to IPO. Dividend policy post-IPO is to pay
out an ordinary dividend of 70% of profit after
tax, subject to a preferred operating window
of 140% to 160% of excess Solvency II net
assets. The Group will consider passing
excess capital to shareholders by way of a
special dividend.
Adam Westwood
Chief Financial Officer
Cash and investments
UK Government bonds
Corporate bonds
2017
2016
£243.5m £233.7m
£0.5m
£0.6m
Cash and cash equivalents
£34.4m
£10.5m
The Group continues to hold a low-risk
investment portfolio and cash reserves
sufficient to meet its future claims liabilities.
The increase in cash and financial investments
against the previous year is the result of the
decision to increase the level of solvency
capital held on an ongoing basis to 140%,
and the payment of an interim dividend in
November 2016, whereas no interim dividend
was paid in November 2017.
Insurance liabilities
Gross insurance liabilities
Reinsurers’ share of
insurance liabilities
2017
2016
£242.4m £182.9m
£103.0m
£46.8m
Net insurance liabilities
£139.4m £136.2m
The Group’s net insurance liabilities continue
to reflect the underlying profitability and
volume of business written. There was a
significant increase in gross insurance
liabilities in 2017, driven primarily by a small
number of large claims. As the Group holds
excess-of-loss reinsurance contracts across
its entire book at an excess of £1.0m, the
majority of these claims were absorbed by
the reinsurance market, which drove the
120.1% increase in the reinsurers’ share of
insurance liabilities.
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
Net claims incurred were reflective of the
Group’s strong underwriting performance
achieved in 2017. The loss ratio benefitted
from continued positive development on
prior-year claims and cautious pricing in
advance of the Group’s reinsurance renewal.
In line with prior years and the Group’s
expectation, the current accident-year loss
ratio continues to exceed the Group’s
expected ultimate loss ratio and the actual
financial-year loss ratio, reflective of the
reserve held against relatively uncertain
current-year claims. Net operating expenses
reflect a stable expense ratio over the year,
with the Group having maintained a tight
control of costs and favouring variable cost
bases through outsourcing operations, which
are heavily volume-dependent.
Taxation
In 2017 the Group paid £10.2m in corporation
tax, an effective tax rate of 18.3%, as
compared to an effective tax rate of 17.6% in
2016. The effective tax rate charged to the
Group is below the prevailing UK corporation
tax due to a deductible interest expense
incurred by the Group prior to IPO. Post-IPO,
the Group structure has been simplified such
that no such interest expense is incurred and
as such the effective tax rate should revert to
the marginal rate of UK corporation tax.
Earnings per share
Basic earnings per share
Diluted earnings per share
2017
14.5p
14.5p
2016
17.0p
17.0p
Earnings per share for the current and
comparative period are calculated on the basis
of the current capital structure, which is
described further in Note 30 to the Financial
Statements. Basic and diluted earnings per
share for 2017 is 14.5 pence compared to
17.0 pence for 2016. This reduction is primarily
a result of the one-off costs in 2017 associated
with the corporate transaction. Adjusted
earnings per share, which excludes these
adjusting items, is 17.5 pence, which better
reflects the earnings generated by the
underlying core business.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
30
Corporate social
responsibility
As a Group we focus on our people and contributing
to the communities in which we operate. We comply
with environmental protection laws and seek to minimise
detrimental effects that our activities may have
on the environment.
153
EMPLOYEES
76/153
EMPLOYEES HAVING BEEN WITH THE
COMPANY FOR 10 YEARS OR MORE
Our people
The Group operates out of one site in Dorking
and, as at 31 December 2017, employed
153 people.
The Company recognises that its people are
key to its success. The Company seeks to
create a positive and collaborative working
environment where all employees contribute
to, and participate in, the success of the
business in a culture which requires the
Company and its employees to operate in an
honest, professional and ethical manner with
a work ethic which recognises the importance
of a healthy work/life balance.
Communication is key to fostering this
environment, with the CEO, Geoff Carter,
conducting staff briefing and Q&A sessions
twice yearly and his direct reports engaging
with their teams on a regular basis, including
through appraisals which take place twice a
year. During the course of 2018, the Company
will be introducing an all-employee survey
which it plans to conduct on a regular basis
going forwards.
In addition to the Company’s Code of Conduct
(which can be found on our website at
www.sabreplc.co.uk), policies are in place to
support and develop the Group’s employees,
all of which are subject to regular review.
Examples of these include policies addressing
equal opportunities, anti-harassment, flexible
working, health and safety, maternity and
paternity leave, season ticket loans, training
and development, and modern slavery (and
a copy of our modern slavery statement can
be found on the Company’s website at
www.sabreplc.co.uk). Emphasis is also placed
on staff wellbeing, where all staff are offered
an annual health and wellbeing check, flu
vaccinations, free fruit and the government
cycle to work scheme.
The Company offers ongoing training to
all staff and external courses for newly
promoted staff where appropriate, as well
as encouraging staff to take professional
Chartered Insurance Institute exams for
their own development. At the end of 2017
the Company implemented an e-training
programme for all the Company’s employees
focusing on business needs including topics
such as anti-bribery and corruption,
whistleblowing and modern slavery. In
addition, a listed company teach-in by the
Company’s brokers, Numis Securities Limited
and Barclays Bank plc, was provided to certain
employees in connection with the carrying
out of their duties.
As a result of the Share Incentive Plan
introduced at the time of the Listing all
employees as at 31 December 2017 are
now shareholders and further details on this
scheme and the Board’s proposal to introduce
a Sharesave Plan as well as a Long Term
Incentive Plan can be found in the Directors’
Remuneration Report set out on pages 46 to
56 of this Annual Report.
Sabre Insurance Group plc Annual Report and Accounts 2017 31
Communities
During 2017, the Group supported local
charities such as Lennox Children’s
Cancer Fund and Delight (a children’s
charity assisting children from low
income families). The Group also
supported national charities such as
Shine, organised fundraising events for
We are Macmillan, and made a donation
to Save the Children.
The Group’s support for local schools
includes providing work experience,
with an induction to the Group and the
opportunity to work for each department
and gain an understanding of the
business to make it as valuable a learning
experience as possible for the students.
As set out in the Chairman’s governance
letter on page 32 of this Annual Report,
the Nomination Committee has reviewed the
position regarding diversity at Board level and
across the Group as at 31 December 2017 and
the Company will be putting a formal diversity
policy in place in 2018. The percentage of
women on the Board is set out in the
Chairman’s governance letter. Below the
Board, whilst the percentage of women on the
Company’s Executive Committee is 14% (1/7),
the percentage of women members of senior
management who report to the Executive
Committee is 33% (6/18) and the Company’s
overall percentage of female staff is 42%
(being 66 out of a total of 153).
One of the results of the Company’s focus
on its people is the high staff retention rates
that have been achieved. As of 31 December
2017, 76 out of the total headcount of 153
employees have been employed for over
10 years, and a further 34 staff have been
with the Company for between five and 10
years. As well as providing stability this results
in the availability on site of many years of
industry experience and expertise to support
colleagues and the performance of the
business.
The environment and emissions
The GHG emissions data for the Group for the
period from 1 January 2017 to 31 December
2017 is set out below.
The emissions data is measured in tonnes
of carbon dioxide equivalent (“tCO2e”) and
covers
i. Scope 1 emissions being direct emissions
resulting from combustion of fuel and
operation of facilities; and
ii. Scope 2 emissions being indirect emissions
from purchased grid electricity and other
energy for own use
Tonnes of CO2e
Scope 1
Scope 2
Total footprint
(Scope 1 and Scope 2)
Full time employees(“FTE”)
tCO2e per FTE
2017
0
138
138
151
0.92
2016
0
133
133
145
0.91
The footprint is calculated in accordance with
the GHG Protocol and Carbon Trust (“CT”)
guidance on calculating organisational
footprints. Activity data has been converted
into carbon emissions using published
emissions factors.
The footprint includes data for the Group’s
office in Dorking where its staff are located.
The footprint does not include outsourced
activities, for example repair shops and third
party suppliers. As the Group does not own
any vehicles and business travel through
private vehicles is limited, the data is not
available or accurate and accordingly transport
emissions have been excluded from the
reporting scope.
All emission sources have been reported on
as required under the Large and Medium
Sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended).
The reporting period is in line with the
Company’s financial year, which is the same
as the calendar year.
Whilst our insurance business is considered
to be an environmentally light services
product the Group works to minimise the
environmental impact of its operations where
it can and has a number of measures in place
or planned, including the following:
– heating and air conditioning timing
management systems to reduce switch
on times;
– low energy monitors and other technology;
and
– plans for 2018 include the installation of
electric charging points for electric and
hybrid vehicles.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 32
Chairman's
governance letter
We have established
a strong Board of
Directors with the
appropriate balance
of skills, experience and
knowledge of the
Company to oversee
the strategy of the Group.
Patrick Snowball
Non-executive Chairman
Patrick Snowball
Non-executive Chairman
Sabre Insurance Group plc Annual Report and Accounts 2017 33
DEAR SHAREHOLDER
Following the Company’s successful Listing
on the London Stock Exchange it is a pleasure
to present our first corporate governance
report. This report explains our current
governance framework and how we have
applied the provisions of the Code.
Governance
The Board is committed to the highest
standards of corporate governance. Whilst
the Group was regulated by the Financial
Conduct Authority and the Prudential
Regulation Authority prior to the Listing, the
governance practices in place have been
enhanced with the implementation of the
policies and procedures expected of
a public limited company following
admission to the premium segment of the
London Stock Exchange.
As disclosed in the prospectus issued at the
time of the Listing which can be found on the
Company’s website (the “Prospectus), at the
time of the Company’s Listing on 11
December 2017 (immediately prior to its year
end on 31 December 2017) the Company did
not fully comply with the recommendations of
the Code because until the Listing the Code
had not applied to the Company.
Since the Listing the Board considers that the
Company has applied all the main principles of
the Code and has complied with all of its
relevant provisions except in respect of
matters set out in the Governance Report on
page 36 of this Annual Report.
Other than in respect of the appointment of a
SID (which took place on the 28th February
2018 with the appointment of Andy Pomfret),
the matters where the recommendations of
the Code have not yet been implemented
relate to various items which would normally
be addressed through the annual cycle of
Board and Committee meetings and Board
activities during the course of a financial year
(such as my review of the training and
developments needs of each Director). As
explained in the Governance Report, since
the Listing the Board has addressed these
matters, provided explanations and put plans
in place for them to be undertaken during the
2018 annual cycle of meetings and activities.
The Board
We have established a strong Board of eight
Directors with the appropriate balance of skills,
experience, independence and knowledge of
the Company to oversee the strategy of the
Group, review management performance and
set the Company’s values and standards to
ensure that its obligations to its shareholders
and other stakeholders are met. Further
information about our Directors and the
experience they bring to the Company is set
out on pages 34 and 35 of this Annual Report.
The Board has established an Audit and Risk
Committee, a Remuneration Committee and a
Nomination Committee whose membership
complies with the recommendations of the
Code, as well as a Disclosure Committee.
Following the appointment of Andy Pomfret to
the Board as the SID, Andy will become a
member of the Audit and Risk, Nomination,
Remuneration and Disclosure Committees
with effect from the end of the 21st March
2018 Board meeting at which time I will stand
down as a member of the Audit and Risk
Committee and the Remuneration Committee.
Diversity
The Group is committed to the merits of
diversity throughout the business (including
recruiting across the widest possible pool of
talent irrespective of gender, social and ethnic
backgrounds) and we intend to put a formal
diversity policy in place during 2018.
The Nomination Committee has reviewed the
position at Board level and across the Group.
As regards the Board, of the eight Directors
two are female representing 25% of the Board
and, as regards gender diversity below the
Board, further details are set out in the
Corporate Social Responsibility report on
pages 30 and 31 of this Annual Report.
2018 Annual General Meeting
The Company’s 2018 AGM will provide
shareholders with the opportunity to vote on
the resolutions put to shareholders and, for
those shareholders who attend, to ask
questions of the Board of Directors, including
the Chairmen of the Committees. The Notice
of AGM will be sent to shareholders in a
separate document and the result of the AGM
voting on all resolutions will be published on
the Company’s website.
We look forward to engaging with you in the
future and to meeting shareholders at our
forthcoming AGM.
Patrick Snowball
Chairman
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 34
Board of
Directors
Patrick Snowball
Non-executive
Chairman
Geoff Carter
Chief Executive Officer
Adam Westwood
Chief Financial Officer
and Company Secretary
Catherine Barton
Independent
Non-executive Director
Appointed
Appointed
Appointed
Appointed
Director and Chief Executive Officer in
September 2017 (when the Company
was incorporated) and Director of Sabre
Insurance Company Limited since
December 2015. Joined as Chief
Operating Officer in November 2015
and became Chief Executive Officer in
May 2017.
Experience
Geoff joined the Group as Chief
Operating Officer in November 2015 and
was appointed Chief Executive Officer in
May 2017. Prior to joining the Group, he
was Chief Executive Officer of Tesco
Underwriting Limited and has over 20
years’ experience in managing insurance
operations. Prior to that, Geoff was
employed by Ageas Insurance UK as
Managing Director of Ageas Insurance
Solutions Limited. He also spent seven
years at Churchill Insurance, both prior to
and following its acquisition by Royal
Bank of Scotland plc (“RBS”), and was
subsequently seconded to
TescoCompare.com to launch a joint
venture between Tesco plc and RBS. He
is a Chartered Insurer and holds a Master
of Business Administration degree from
Sheffield Business School and a
Postgraduate Diploma in Marketing from
the Chartered Institute of Marketing.
Board meetings attended
4/4
Committee membership
– Disclosure Committee
Other roles
– Trustee of Spotlight YOPD
Independence
Not applicable
Non-executive Director in September
2017 (when the Company was
incorporated) and Chairman of the
Company in November 2017.
Non-executive Director of Sabre
Insurance Company Limited since
July 2017.
Experience
Patrick has extensive experience of the
insurance industry and has gained a
wealth of knowledge of many different
aspects of the sector acquired over a
30-year career in financial services. His
last executive role was as Chief
Executive Officer of Suncorp Group
Limited, an ASX20 Australian financial
services group, from 2009 until 2015.
Prior to that, he was Group Executive
Director at Aviva plc from 2001 until 2007
(as well as holding various other positions
in the Aviva group and its predecessor
companies). He also has significant
boardroom experience and was a
non-executive director of Jardine Lloyd
Thompson Group plc from 2008 to 2009
and Deputy Chairman at Towergate
Partnership between 2007 and 2009.
He was also a member of the FSA
Practitioner Panel from 2006 to 2008.
He holds an LL.D from the University of
East Anglia and a Masters degree in
History and Economics from the
University of Oxford.
Board meetings attended
4/4
Committee membership
– Nomination Committee (Chair)
– Audit and Risk Committee
– Remuneration Committee
– Disclosure Committee
Other roles
– Chairman of InterGrafin Holdings Plc
and Integrated Financial Arrangements
Limited
– Director of The Old Dove Dairy Limited
Independence
Independent on appointment
Director and Chief Financial Officer in
September 2017 (when the Company
was incorporated) and Director of Sabre
Insurance Company Limited since
September 2016. Joined as Financial
Controller in February 2014 and became
Chief Financial Officer in August 2016.
Experience
Adam is a qualified chartered accountant.
Having joined Ernst & Young LLP’s
insurance audit team in 2006 and
qualified as a chartered accountant in
2009, Adam has over 10 years’
experience of the insurance sector. He
joined the Group as Financial Controller in
February 2014 and has been Chief
Financial Officer of the Group since
August 2016. Adam holds a BSc (Hons)
degree in Physics and Business Studies
from the University of Warwick.
Board meetings attended
4/4
Committee membership
– Disclosure Committee
Other roles
None
Independence
Not applicable
Non-executive Director in October 2017.
Experience
Catherine has extensive insurance and
actuarial experience. She began her
career with Bacon & Woodrow,
becoming a fellow of the Institute of
Actuaries in 1999, before moving to
Deloitte LLP, where she became a
partner in 2005 and led the UK and
overseas markets retail insurance
actuarial team. Between 2010 and 2015,
she was a partner within the general
insurance actuarial team of Ernst & Young
LLP before joining Bupa in 2015 as the
Commercial & Finance Director of the UK
market unit, a post she held until 1
January 2018 when she took on the role
of General Manager for Bupa Dental Care
within the UK. She has significant and
relevant financial experience gained from
these roles and she holds a MA (Hons)
degree in Mathematics from the
University of Oxford.
Board meetings attended
4/4
Committee membership
– Audit and Risk Committee (Chair)
– Nomination Committee
– Remuneration Committee
– Disclosure Committee
Other roles
– General Manager for Bupa Dental Care
within the UK and Director of a number
of Bupa subsidiaries
– Non-executive director of Association
of Dental Groups
Independence
Independent
Sabre Insurance Group plc Annual Report and Accounts 2017 35
Ian Clark
Independent
Non-executive Director
Rebecca Shelley
Independent
Non-executive Director
Matthew Tooth
Non-executive Director
Andy Pomfret
Independent
Non-executive Director
and Senior Independent
Director
Appointed
Appointed
Appointed
Appointed
Non-executive Director in September
2017 (when the Company was
incorporated) and Non-executive Director
of Sabre Insurance Company Limited
since May 2014.
Experience
A chartered accountant, Ian has a strong
finance background and significant recent
and relevant accounting experience as
well as extensive knowledge of the UK
insurance market. Ian was a partner at
Deloitte LLP between 2001 and 2014,
where he led the Strategy and Corporate
Finance practice for the insurance sector.
Prior to that, he was an Insurance Partner
at Bacon & Woodrow, during which time
he spent three years as an independent
UK Government appointee on the
Insurance Brokers Registration Council,
then the regulator of insurance broking in
the UK. His early career was spent as a
partner at Arthur Anderson and its
predecessor firms where he specialised
in auditing clients in the insurance
industry. Ian is Chairman of Broker
Network Limited and also Chairman of
Mighty Quin Consulting Limited, a
company through which he provides
strategic advice within the insurance
industry.
Board meetings attended
4/4
Committee membership
– Audit and Risk Committee
– Nomination Committee
– Remuneration Committee
– Disclosure Committee
Other roles
– Chairman of Broker Network Limited
(and non-executive director of certain
of its subsidiaries) and Mighty Quin
Consulting Limited.
– Non-executive director of Vigilis
Holdings Limited, Pioneer Underwriting
Holdings Limited (and its subsidiary
Pioneer Underwriting Limited) and Full
Time Cover Limited.
Independence
Independent
Non-executive Director in October 2017.
Experience
Rebecca brings extensive commercial
and financial services experience to the
Board, as well as her background of
market-facing roles at listed companies.
Having been Investor Relations and
Corporate Communications Director at
Norwich Union plc from 1998-2000,
Rebecca moved to Prudential plc in 2000,
where she held a number of senior
positions, starting as Investor Relations
Director, and then becoming Group
Communications Director with a seat on
their Group Executive Committee. From
2012 to 2016, Rebecca was the Group
Communications Director of Tesco plc
and a member of their Executive
Committee. During this time she held
positions on the board of the British Retail
Consortium and was a trustee of the
Institute of Grocery Distribution. Rebecca
is now at TP ICAP plc as Group Corporate
Affairs Director, and is a member of the
Global Executive Committee. She holds a
BA (Hons) in Philosophy and Literature
from the University of Warwick, and a
MBA in International Business and
Marketing from Cass Business School.
Non-executive Director in September
2017 (when the Company was
incorporated) and Non-executive Director
of Sabre Insurance Company Limited
since September 2016.
Experience
Matthew is a managing partner of
BC Partners LLP (“BC Partners”),
a pan-European private equity house.
Prior to joining BC Partners in 2013,
Matthew spent nine years at Blackstone,
most recently as a managing director, and
six years at Credit Suisse in their
European sponsor coverage/leverage
finance and mergers and acquisitions
groups. He holds a degree in Economics
from the University of Exeter.
Board meetings attended
1/4
Committee membership
– Disclosure Committee
Other roles
– Member of BC Partners and
Non-executive director of a number
of BC Partners portfolio companies
(including Elysium Healthcare Group
and Cartrawler).
Board meetings attended
Independence
Not independent as appointed pursuant
to the Relationship Agreement described
on page 59 of this Annual Report.
4/4
Committee membership
– Remuneration Committee (Chair)
– Audit and Risk Committee
– Nomination Committee
– Disclosure Committee
Other roles
– Group Corporate Affairs Director
of TP ICAP plc
– Non executive director of The Game
and Wildlife Conservation Trust,
The Grange Festival and Marchdown
Securities Limited.
Independence
Independent
Non-executive Director and Senior
Independent Director in February 2018.
Experience
Andy has extensive experience of
working in the financial services sector
and with UK listed companies both as an
executive and non-executive director.
After qualifying as an accountant with
KPMG he spent over 13 years with
Kleinwort Benson as a corporate
financier, venture capitalist and finance
director of the investment management
and private banking division. In 1999 he
joined Rathbone Brothers plc as finance
director, and served as chief executive
from 2004 until February 2014. During
the last five years Andy has been a
non-executive director of Old Mutual
Wealth Management Limited and
Interactive Investor plc. He was also a
director of PIMFA (the Personal
Investment Management and Financial
Advice Association) and a founder
member of the Prudential Regulation
Authority Practitioner Panel. Andy holds
an MA from Queens’ College,
Cambridge.
Board meetings attended
1/1
Committee membership (with effect
from the end of the Board meeting
held on 21 March 2018)
– Audit and Risk Committee
– Nomination Committee
– Remuneration Committee
– Disclosure Committee
Other roles
– Chairman of Miton Micro-cap
Investment Trust plc and Square
Mile Investment Consulting and
Research Ltd
– Non-executive director of Sanne
Group plc (where he is the SID and
chairs its Audit Committee), ICG
Enterprise Trust plc, and Aberdeen
New Thai Investment Trust plc.
Independence
Independent
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 36
Governance
Report
The Board is committed to the highest standards
of corporate governance across the Group.
Governance Code compliance
The Board is committed to the highest
standards of corporate governance across
the Group.
The Chairman’s governance letter on page 32
of this Annual Report explains the position
at the time of the Company’s Listing on
11 December 2017, immediately prior to its
year end on 31 December 2017, and since
the Listing.
Since the Listing on 11 December 2017 the
Company has applied all the main principles of
the Code and complied with all of its relevant
provisions except in respect of the matters set
out below which, other than the appointment
of the SID, would normally be addressed
through the annual cycle of Board and
Committee meetings and Board activities
during the course of the financial year.
As set out in this report and in the reports of
the Committees, since the Listing a SID has
been appointed and the Board has addressed
these matters, provided explanations and put
plans in place for them to be undertaken
during the 2018 annual cycle of meetings
and activities.
Provision
A 4.1 Appointment of a SID
B 4.2 Chairman’s review of
Directors’ training and
development needs
B 6.1 Evaluation of the
performance of the Board, its
Committees and Directors
B 6.3 Evaluation of Chairman’s
performance by the
Non-executive Directors
Explanation
Page 9 and 33
Page 38
Page 38
Page 38
A copy of the Code is available on the Financial
Reporting Council’s website at www.frc.org.uk.
Leadership
The current Board members, details of their
experience and the date of their appointment
are set out on pages 34 and 35.
As at 31 December 2017, the Board
comprised seven Directors: the Chairman,
two Executive Directors, three independent
Non-executive Directors (“INEDs”) and one
Non-executive Director appointed by BC
Partners Group pursuant to the Relationship
Agreement described on page 59 of this
Annual Report.
remuneration of senior executives; material
corporate transactions; and any changes to
this schedule of reserved matters.
The Board considers Catherine Barton,
Rebecca Shelley and Ian Clark to be
independent in accordance with Provision
B.1.1 of the Code. Accordingly, half the Board
excluding the Chairman was independent as
at 31 December 2017.
Since 31 December 2017, Andy Pomfret has
been appointed to the Board as an INED and
the SID.
The independence of the INEDs is reviewed
annually in accordance with the criteria set out
within the Code.
Roles and responsibilities
The Board
The Board is collectively responsible for
setting the Company’s strategic aims and
providing the leadership to put them into
effect through the management of the
Group’s business within the Company’s
governance framework.
It does this by setting Group strategy and then
ensuring that appropriate standards, controls
and resources are in place for the Company to
meet its obligations, and reviewing
management’s performance. This includes a
Code of Conduct setting out the Group’s
policy of conducting all business affairs in a fair
and transparent manner and maintaining high
ethical standards in dealings with all relevant
parties (available on the Company’s website at
www.sabreplc.co.uk).
In order to ensure there is a clear division of
responsibilities between the Board and the
running of the business, the Board has a
formal schedule of matters specifically
reserved for its decision which is reviewed on
an annual basis. These reserved matters
include the Group’s strategic aims; objectives
and commercial strategy; governance and
regulatory compliance; structure and capital;
financial reporting and controls; internal
controls and risk management; major capital
commitments; major contracts and
agreements; shareholder engagement;
The Board plans to meet six times a year with
supplementary meetings as required. There is
a planned cycle of activities and a follow-up list
of matters arising from each meeting is
maintained. The Company Secretary acts as
secretary to the Board and to all of its
Committees. The appointment or removal of
the Company Secretary is a matter for the
Board as a whole.
Chairman and CEO
The roles of the Chairman and the CEO are
separate and their responsibilities are set out
in writing and approved by the Board.
The Chairman’s key responsibilities include:
– providing strong and effective leadership to
the Board;
– ensuring the Board as a whole plays a full
and constructive part in the development
and determination of the Group’s strategy
and overall commercial objectives;
– facilitating the effective contribution of the
Non-executive Directors;
– retaining and building an effective and
complementary Board with an appropriate
balance of skills and, as Chairman of the
Nomination Committee, considering
succession planning for Board
appointments;
– in conjunction with the CEO and Company
Secretary, ensuring that members of the
Board receive accurate, timely and clear
information;
– ensuring that the performance of individual
Directors and of the Board as a whole and
its Committees is evaluated regularly;
– ensuring the Company maintains effective
communication with shareholders and
other stakeholders; and
– promoting the highest standards of
integrity, probity and corporate governance
throughout the Group and particularly at
Board level.
Sabre Insurance Group plc Annual Report and Accounts 2017
37
The CEO’s key responsibilities include:
Senior Independent Director
– running the Group’s business within the
authority delegated by the Board;
– proposing and developing the Group’s
In addition to acting as a sounding board for
the Chairman, the role and responsibilities of
the SID include:
strategy and overall commercial objectives,
in close consultation with the Chairman and
the Board, and with regard to the Group’s
responsibilities to its shareholders,
customers and employees;
– implementing the decisions of the Board
and its Committees;
– consulting regularly with the Chairman and
Board on matters which may have a
material impact on the Group;
– ensuring the development needs of the
Group’s senior management team are met
and that succession planning meets the
needs of the Group;
– in conjunction with the Chairman and
Company Secretary, ensuring the Board
receives accurate, timely and clear
information; and
– promoting and conducting the affairs of
the Group with the highest standards of
integrity, probity and corporate governance.
The CEO is supported by a strong and
experienced Executive Committee chaired
by the CEO.
Non‑executive Directors
Along with the Chairman and Executive
Directors, the Non-executive Directors are
responsible for ensuring the Board and its
Committees fulfil their responsibilities. The
Non-executive Directors combine broad
business and commercial experience, in
particular in the financial services and
insurance sectors, with independent and
objective judgement and they provide
independent challenge to the Executive
Directors. The balance between Non-
executive and Executive Directors enables the
Board to provide clear and effective leadership
across the Group’s business.
– being available to shareholders if they have
concerns which contact through the normal
channels of Chairman, CEO or CFO has
failed to resolve or for which such contact
is inappropriate;
– attending sufficient meetings with major
shareholders and financial analysts to obtain
a balanced understanding of the issues and
concerns of such shareholders;
– chairing the Nomination Committee when it
is considering succession to the role of
Chairman of the Board; and
– meeting with the Non-executive Directors
at least once a year to appraise the
Chairman’s performance and on such other
occasions as are deemed appropriate.
Board Committees
In order to provide effective oversight and
leadership, the Board has delegated certain
aspects of its responsibilities to the following
committees of the Board (“Committees”). The
terms of reference of these Committees were
approved by the Board and are available on the
Company’s website:
– the Audit and Risk Committee;
– the Nomination Committee;
– the Remuneration Committee; and
– the Disclosure Committee.
The membership of the Nomination, Audit
and Risk, and Remuneration Committees are
set out on pages 34 to 35 as well as in the
Committee reports and comprise INEDs
as well as the Chairman. In accordance with
the Code provisions for companies outside
the FTSE 350, the Chairman may be a
member of the Audit and Risk Committee
and the Remuneration Committee as he
was considered independent on appointment
as Chairman.
As mentioned in the Chairman’s governance
letter on page 33, the Chairman will stand
down from the Audit and Risk Committee and
the Remuneration Committee with effect
from the end of the 21 March 2018 Board
meeting when Andy Pomfret will become a
member of these Committees as well as the
Nomination and Disclosure Committees.
As disclosed in the descriptions of the
Directors, the Board has satisfied itself that
the Audit and Risk Committee comprises
members with recent and relevant financial
and accounting experience.
Board and Committee meetings
Since the Listing:
– the Board has met four times
(in December 2017 and in January,
February and March 2018);
– the Nomination Committee has met
three times (in December 2017, January
2018 and March 2018);
– the Audit and Risk and Remuneration
Committees have each met twice
(in January and March 2018); and
– the Disclosure Committee has not met.
The Directors’ attendance at these Board
meetings is set out on pages 34 and 35.
Details of the membership of the Audit and
Risk, Remuneration and Nomination
Committees as at the date of Annual Report
and their attendance can be found on pages
40, 44 and 46.
The activities of the Board since the Listing are
set out below and the reports from each of
these Committees (other than the Disclosure
Committee) are set out on pages 40 to 56 of
this Annual Report.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 38
Governance Report
continued
At the meeting of the Board held in December
2017, the Board:
– reviewed the performance of the Company;
– reviewed the 2018 budget;
– approved the recommendations of the
Remuneration Committee regarding the
all-employee IPO share awards;
– was briefed on the process for the
recruitment of the SID by the Nomination
Committee; and
Decisions at Board meetings are taken by a
majority of the Directors and in the case of an
equality of votes the Company’s Articles of
Association (“Articles”) provide that the
Chairman has a second or casting vote. The
Board considers that no single Director can
dominate or unduly influence decision-making.
During the period since the Listing, the
Non-executive Directors have had the
opportunity to meet without the Executive
Directors at the end of each Board meeting.
– approved the appointment of the
Company’s brokers.
Induction and ongoing
professional development
The Board has developed an induction
programme which all new Directors participate
in upon joining the Board. This programme
is monitored by the Chairman and is the
responsibility of the Company Secretary.
Depending upon their qualifications and
experience, the programme will include
presentations and briefings, meetings with
Board members, senior management and
external advisors, and visits to the Company’s
office in Dorking.
Regarding ongoing professional development,
the Directors who joined the Company prior to
the Listing have been provided with advice
and guidance from their advisors regarding the
role of the Board, the business of the Group,
the Code, the Listing Rules and, specifically in
respect of the listed company environment,
the legal and regulatory duties of a UK listed
company, conflicts of interest, related party
transactions and the requirements of the
Market Abuse Regulation (including
procedures for dealing in Company shares
and inside information).
The ongoing professional development of the
Directors has been reviewed by the Board and
its Committees and will be further developed
during 2018. In addition, the Chairman will
review and agree training and development
needs with each of the Directors during the
course of the year. Directors will also have the
opportunity to highlight specific areas where
they feel their skills or knowledge would
benefit from development as part of the
Board evaluation process.
Following the year end the Board met in
January, February and March 2018 when it:
– reviewed the performance of the Company;
– approved the 2018 budget;
– received reports from the Audit and Risk
Committee relating to the matters set out
in the Audit and Risk Committee report on
pages 40 to 43;
– received reports from the Nomination
Committee relating to the matters set out
in the Nomination Committee report on
pages 44 and 45;
– received reports from the Remuneration
Committee relating to the matters set out
in the Remuneration Committee report on
pages 46 to 56;
– reviewed and approved the appointment of
Andy Pomfret as an INED and the SID;
– reviewed and approved the viability and
going concern statements and the
Annual Report;
– reviewed and approved the announcement
relating to the 2017 results and the Annual
Report; and
– reviewed the AGM Notice and appointed
a Committee of the Board to finalise and
issue such notice.
Board effectiveness
Board composition
At the time of the Listing the Board was
structured to provide the Company with an
appropriate balance of skills, experience,
knowledge and independence to enable it to
discharge its duties and responsibilities
effectively. Since the Listing, the Board has
been further strengthened by the appointment
of Andy Promfret. Given the nature of the
Group’s business, insurance, actuarial and
accounting experience as well as experience
of the financial services sector is clearly of
benefit and this is reflected in the composition
of the Board and its Committees.
Information and advice
Directors are provided with appropriate
documentation approximately one week in
advance of each Board or Committee
meeting. All Directors have access to the
advice and services of the Company Secretary
for information and guidance and Directors
may obtain independent professional advice at
the Company’s expense if they believe it may
be required in the furtherance of their duties.
Time commitment
As part of the appointment process the
Non-executive Directors confirm that they are
able to allocate sufficient time to the Company
to discharge their responsibilities effectively
and Directors are expected, where possible, to
attend all Board meetings, relevant Committee
meetings, the AGM and any general meeting
of the Company. The other commitments of
the Chairman and the other Directors are as
indicated in their profiles on pages 34 and 35.
Each Director is required to advise the
Chairman as early as possible and to seek
the agreement of the Board before accepting
additional commitments that might affect
the time that Director is able to devote to
his or her role as a Non-executive Director
of the Company.
The Board is satisfied that the Chairman
and each Non-executive Director are able
to allocate sufficient time to enable them
to discharge their duties and responsibilities
effectively.
Performance evaluation
The Board recognises the importance of
evaluating annually the performance and
effectiveness of the Board, its Committees
and individual Directors, which such evaluation
would normally be addressed through the
annual cycle of meetings. Given how recently
the Listing took place and the Board has been
established, the Board and its Committees
have concluded that the appropriate time to
carry out such an evaluation would be the
second half of 2018. Such evaluation will be
conducted through questionnaires and
discussions facilitated by the Chair of the
Board and each of its Committees (and the
SID in the case of the review of the Chairman).
As recommended by the Code, such
evaluation will be facilitated by an external
facilitator once every three years.
Sabre Insurance Group plc Annual Report and Accounts 2017 39
It is the intention of the Board to keep
shareholders informed including by way of
Annual Reports, half year results, and the
AGM. This information and other significant
announcements of the Group will be released
to the London Stock Exchange and will be
available on the Company’s website www.
sabreplc.co.uk.
The holdings of our major shareholders can
be found on page 58 of this Annual Report.
As regards the Company’s largest shareholder,
the BC Partners Group, the purpose of the
Relationship Agreement described on page 59
of this Annual Report is to ensure the
Company is capable of carrying on its
business independently of the BC Partners
Group and its associates.
The share register is managed on the Group’s
behalf by Equiniti who can be contacted at
Aspect House, Spencer Road, Lancing, West
Sussex BN99 6DA or by telephone on
0371 384 2030 or, if dialling internationally,
on +44 121 415 7047.
The Company’s 2018 AGM Notice will be
issued separately. The AGM will provide
shareholders with the opportunity to vote on
the resolutions put to shareholders and, for
those shareholders who attend, to ask
questions of the Board of Directors, including
the Chairmen of the Committees. The result
of the AGM voting on all resolutions will be
published on the Company’s website.
Appointment of Directors
Conflicts of interest
The Articles that provide Directors may be
appointed by the Board or by the Company by
ordinary resolution. A Director appointed by
the Board may only hold office until the next
following AGM of the Company after their
appointment and is then eligible for election by
the shareholders. The Articles require that
each Director shall retire at the third AGM held
after they were last elected (and annually
when they have been in office for nine years
or more), and retiring Directors Directors are
eligible to stand for re-election.
However, the Board through the Nomination
Committee has reviewed and adopted the
Code recommendation that all Directors
should be subject to annual re-election
notwithstanding the Company is not in the
FTSE 350 at the moment.
The Nomination Committee is responsible
for recruitment to the Board and a formal,
rigorous and transparent procedure using an
independent search firm has been undertaken
in connection with the recruitment of the SID.
Further details regarding the Nomination
Committee and the appointment process for
the SID can be found in the Nomination
Committee report on page 44.
Under the terms of the Relationship
Agreement, Matthew Tooth was appointed
as a Non-executive Director by the BC
Partners Group. Further details regarding
the Relationship Agreement are set out on
page 59.
Further details regarding the terms of
appointment for the Executive and Non-
executive Directors are set out in the
Directors’ Report and Responsibilities
Statement (on pages 57 to 60) and the
Directors’ Remuneration Report (on pages 46
to 56) and their service contracts and terms of
appointment are available for inspection in
accordance with the Code.
The Board has established a procedure to
deal with Directors’ conflicts of interest
which complies with the Company’s Articles
and the provisions in section 175 of the
Companies Act 2006. Schedules of a
Director’s actual or potential conflicts have
been compiled based on disclosures made by
the Director. These are updated and reviewed
on a regular basis in addition to conflicts or
potential conflicts being considered at the
beginning of Board meetings.
Accountability
The Board, through the Audit and Risk
Committee, receives reports regarding the
Company’s risk management and internal
control systems and has reviewed the
Company’s financial and business reporting,
the effectiveness of the Group’s systems of
risk management and internal control, and the
Company’s relationship with its auditors, the
details of which are set out in the Audit and
Risk Committee report on pages 40 to 43.
Remuneration
Details of the Directors’ remuneration and the
work of the Remuneration Committee as
required by the Large and Medium-sized
Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended) can
be found in the Directors’ Remuneration
Report on pages 46 to 56.
Relations with shareholders
Through this Annual Report and, as required,
through other periodic announcements, the
Board is committed to providing shareholders
with a clear assessment of the Company’s
position and prospects.
The Board recognises the importance of
engaging constructively with shareholders
and, during the Listing process, the CEO and
CFO engaged with many of the institutional
shareholders in the UK and the US who are
now shareholders in the Company.
The Board will be monitoring the views of
shareholders, and the Chairman and the SID
will remain available to meet shareholders to
discuss any issues or concerns.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 40
Audit and Risk
Committee Report
Catherine Barton
Audit and Risk
Committee Chair
COMMITTEE MEMBERS
The membership as at the date of this
report together with such members
appointment dates and attendance
record are set out below:
Committee
members
Meeting
attendance
Catherine Barton (Chair)
Appointed 4 October 2017
Patrick Snowball
Appointed 4 October 2017
Ian Clark
Appointed 4 October 2017
Rebecca Shelley
Appointed 4 October 2017
2/2
2/2
2/2
1/2
The Committee is chaired by Catherine Barton
and comprises two other independent
Non-executive Directors of the Company and
the Chairman of the Company, all of whom are
considered to be free of any relationship that
would affect their impartiality in carrying out
their responsibilities. As the Company is not a
FTSE 350 company, the Chairman, provided
he was independent on appointment, is
permitted to be a member of the Committee.
The composition of the Committee therefore
complies with the Code.
Details of the experience of all members of
the Committee are included on pages 34 and
35. The Chair of the Committee and Ian Clark
are considered to have recent and relevant
financial experience and competence relevant
to the sector in which the Company operates,
and, in the case of Ian Clark, competence in
accounting and auditing matters.
Two Committee meetings have been held
since the Listing, one in January and one in
March 2018. The attendance at these
meetings is recorded in the chart set out
above.
The Chairman of the Committee reports to
subsequent meetings of the Board and the
Board receives a copy of the minutes of each
Committee meeting once these have been
approved by the Committee. The Company
Secretary acts as the secretary to the
Committee.
Meetings of the Committee are normally
attended by the CEO and the CFO (who is
also the Chief Risk Officer and the Company
Secretary) as well as the Head of Internal
Audit and the external auditors (both of whom
have direct access to the Chairman of the
Committee). At the end of every meeting the
Committee has the opportunity to meet alone
with the Head of Internal Audit and the
external auditors.
The terms of reference of the Committee
can be found on the Company’s website
www.sabreplc.co.uk or obtained from the
Company Secretary.
Key areas of responsibility
In accordance with its terms of reference the
Board has delegated to the Committee
responsibility for overseeing key areas of
responsibility which include the following:
– Financial reporting – this area of
responsibility includes monitoring the
integrity and compliance of the Company’s
financial statements and any formal
announcements or publications relating to
the Group’s financial performance as well
as reviewing significant financial reporting
issues and judgements made in connection
with them.
– Reserve review – the establishment of
insurance liabilities in respect of reported
and unreported claims is the most
significant area of judgement within the
financial statements. The Committee
maintains oversight of the reserving
process and assumptions used in setting
the level of insurance liabilities, which is
assessed by the Group’s actuaries on a
quarterly basis.
– Risk management – this area includes
reviewing and monitoring the effectiveness
of the procedures for the identification,
assessment and reporting of risk as well as
the nature and extent of the risks that the
Group is facing and should be willing to
take in achieving its strategic objectives.
– Compliance – this area includes reviewing
the Group’s compliance policies and
procedures to ensure that the Group
complies with relevant regulatory and legal
requirements including the arrangements
in place for the reporting and investigation
of concerns.
Sabre Insurance Group plc Annual Report and Accounts 2017 41
1. Valuation of insurance liabilities
The Committee agreed with management’s
assessment that the most significant area of
estimation within the financial statements
continues to be the estimation of insurance
liabilities. This comprises an estimate of the
ultimate cost of claims incurred at the date of
the statement of financial position, both
reported and not yet reported, along with an
estimate of the associated reinsurance
recoveries. The Committee reviewed the
Company’s policy to hold sufficient reserves
to meet insurance liabilities as they fall due,
plus a risk margin reflective of the uncertainty
within such calculation.
The Committee reviewed the Chief Actuary’s
annual reserving report and challenged the
appropriateness of the process, key
judgements and assumptions supporting the
projection of the best estimate claims
expense. The Committee also discussed such
matters with the Group’s external auditors.
The Chair of the Committee has met with the
Group’s Chief Actuary without other members
of Group’s management present. The
Committee noted the inherent uncertainty
associated with the estimation of claims costs,
in particular with reference to the changing
legal environment and uncertainty around the
Ogden Discount Rate.
2. Recognition of revenue
The Committee reviewed the Company’s
accounting policy with respect to the
recognition of income from both insurance
contracts and other sources, such as the sale
of add-on products sold to direct customers.
The Committee concluded that premiums
were earned on an appropriate basis and that
other income was recognised to the extent
that the related services had been fulfilled, in
accordance with the appropriate accounting
standards.
– Internal audit – this area includes monitoring
the role and effectiveness of the Group’s
Internal Audit function including approving
the annual programme of internal audit
work, monitoring the reports arising from
internal audits and the status of actions
resulting therefrom and the appointment
or removal of the Head of Internal Audit.
– Whistleblowing – reviewing arrangements
by which staff may in confidence raise
concerns about possible improprieties
regarding financial reporting and other
matters.
– Internal controls – this area includes
reviewing the effectiveness of the Group’s
system of internal controls and ensuring
timely action is taken by management to
address matters arising from the risk and
internal audit assessments.
– External audit – this area includes
considering and making recommendations
to the Board on the appointment of the
external auditors (including approving the
remuneration and terms of appointment)
as well as reviewing the external auditors’
annual audit programme and the results
therefrom, reviewing the quality and
effectiveness of the audit and reviewing
and confirming the policy on non-audit
services carried out by the external auditors
and auditor independence.
The Committee has a planned cycle of
activities to ensure that it addresses its
responsibilities in the current financial year.
Activities of the Committee during
the period under review and
following year end
Since the Listing the Committee has held two
meetings and addressed its responsibilities
primarily by:
– reviewing the external auditors’ plan for the
audit of the Group’s financial statements,
which included key areas of scope of work,
key risks on the financial statements,
confirmation of auditor independence and
the proposed audit fee;
– reviewing the accounting issues and
significant judgements related to the
financial statements;
– reviewing the process and stress testing
undertaken to support the Group’s viability
and going concern statements;
– reviewing the appropriateness of the
Group’s accounting policies;
– reviewing reports regarding risk
management, compliance and internal audit
including the procedures and plan relating
to each area;
– reviewing and approving the risk
management framework and risk appetite,
the corporate risk register and the Group’s
principal risks and uncertainties;
– reviewing arrangements by which staff may
in confidence raise concerns about possible
improprieties;
– reviewing the Group’s system of controls
and its effectiveness using information
drawn from a number of different sources
including management, compliance and risk
management reports, and independent
assurance provided by internal audit
(through its annual audit plan) and the
external auditors;
– approving the policy on non-audit services
carried out by the Group’s external auditors;
– recommending to the full Board, which
adopted the recommendation, the
appointment of Ernst & Young (“EY”) as
the Group’s external auditors;
– reviewing and confirming to the Board that,
based on its review of the Annual Report
and Accounts and internal controls that
support the disclosures, the Annual Report
and Accounts, taken as a whole, are fair,
balanced and understandable and provide
the necessary information for the
shareholders to assess the Company’s
position and performance and its business
model and strategy;
– reviewing the ongoing professional
development of Committee members; and
– reviewing its terms of reference.
Significant areas considered by
the Committee in relation to financial
reporting matters for the period
under review
The Committee pays particular attention to
matters it considers to be important by virtue
of their impact on the Group’s results, the
internal control environment or the level of
complexity, and matters of judgement or
estimation involved in their application to the
consolidated financial statements. The main
areas of focus for the period under review are
set out below:
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 42
Audit and Risk Committee report
continued
3. Corporate reorganisation
When the Group listed on the London Stock
Exchange, a number of transaction steps were
taken in order to reorganise the Group, as set
out in the Prospectus. This resulted in the
formation of the Group as it currently stands
with the primary steps being the acquisition of
Binomial Group Limited by the Company and
the unwinding of the previous holding
company structure. The Committee reviewed
the accounting policies applied in respect of
these transactions and ensured that the
resultant financial statements are accurate and
relevant. The accounting policies selected
present the consolidated Group accounts as if
the holding company structure has always
been in place to allow accurate assessment of
the Group’s performance in the current and
previous accounting period. The Committee
also reviewed the recognition of costs incurred
as part of the IPO process.
4. Share‑based payments
The Group operates two Employee Benefit
Trusts (EBTs) and has implemented a number
of share schemes since IPO. The Committee
has confirmed that the appropriate accounting
policies have been selected and applied in
respect of the establishment of the EBTs and
share-based payments made during the year.
5. Other matters
The Committee reviewed certain matters
which were individually less significant to the
financial statements such as the upcoming
implementation of new and updated
accounting standards, which will impact the
recognition, measurement and disclosure of
insurance contracts and financial investments.
Risk management and
internal controls
The Board has delegated to the Committee
responsibility for monitoring and reviewing the
Group’s risk management framework, the
risks that the Group should be willing to take in
achieving its strategic objectives, and the
controls in place within this framework to
ensure that the Group has robust procedures
for financial reporting and preparing its
consolidated accounts. Since the Listing, the
Committee has reviewed the effectiveness of
the Group’s risk management and internal
controls systems, and reported on such
review to the Board. In conducting its review
the Committee focused on material risks,
including the determination of the nature and
extent of the principal risks, and controls in the
context of reports it received regarding risk
management, compliance and internal audit as
well as reports from the Company’s external
auditors. Details of the Group’s principal risks
and uncertainties are set out on pages 22 to
26 together with information about the
management and mitigation of such risks.
Internal audit
The Group’s Internal Audit function is
outsourced to an independent consultant who
reports directly to the Chairman of the Audit
and Risk Committee. The primary objective of
the function is to systematically and
objectively assess: (i) the effectiveness of the
business controls over the Group’s operations,
financial reporting, risk and compliance areas
and (ii) the adequacy of these systems of
control to manage business risk and safeguard
the Group’s assets and resources.
The Committee has reviewed and approved
the internal audit role and risk-based internal
audit plan, and received updates on the
internal audit activity and engagement results
to help form a view on internal audit
effectiveness.
The Committee has satisfied itself that the
quality, experience and expertise of the
Internal Audit function are appropriate for the
Group but following the Listing will continue
to review its suitability during 2018.
External audit effectiveness
and independence
The Committee is also responsible for
managing the relationship with the Company’s
external auditors, EY, on behalf of the Board.
Overall effectiveness of the external audit
process is dependent upon open
communication between the Group and the
auditors, which allows each party to raise
potential accounting and financial reporting
issues as and when they arise, rather than
limiting this exchange to only during regularly
scheduled meetings.
Whilst the Committee has reviewed
arrangements for ensuring the external
auditors’ independence and objectivity
(including the external auditors’ fulfilment of
the agreed audit plan and any variations from
the plan, and EY’s confirmation of its
independence as set out in a letter to the
Directors of the Company), given the recent
Listing of the Company it has not had the
opportunity to conduct a formal evaluation of
the effectiveness of the external auditors prior
to the date of this report. During 2018 the
Committee plans on developing a formal
process for reviewing the effectiveness and
independence of the external audit which is
aligned with best practice.
Regarding the Listing, EY was considered to
be the appropriate advisor in relation to
specific aspects of the Group’s initial public
offering given the scale and complexity of the
work involved. The work did not represent a
threat to EY’s independence as it was
permissible work under audit independence
guidelines and was performed by a different
and independent engagement team; did not
relate to production of financial statements;
did not result in decisions being made by EY
on behalf of management; and the fee
arrangements were not dependent on the
results of the work. EY also complied with the
independence requirements as set out by the
APB Ethical Standards of Reporting
Accountants. The Listing-related non-audit
fees incurred to EY are not expected to recur
in 2018.
Sabre Insurance Group plc Annual Report and Accounts 2017 43
Committee evaluation
The Committee reviewed the position
regarding the evaluation of the Committee’s
performance and effectiveness and, as
described under “Performance evaluation”
on page 38 of this Annual Report, concluded
that such evaluation would be carried out in
the second half of 2018 through
questionnaires and discussions facilitated by
the Chairman of the Committee.
Catherine Barton
Audit and Risk Committee Chair
The Committee has reviewed and approved a
policy regarding non-audit work and fees
which requires all non-audit work proposed
to be carried out by the external auditors to be
pre-authorised by the Committee or, if
required urgently between Committee
meetings, the Chair of the Committee in order
to ensure that the provision of non-audit
services does not impair the external auditors’
independence or objectivity. Certain services
cannot be provided by the external auditors or
members of its network without the possibility
of compromising its independence and as
such are not permitted to be provided by the
external auditors. These prohibited non-audit
services include, but are not limited to, certain
tax services, bookkeeping and payroll
services, designing and implementing internal
control and risk management procedures or
the design or implementation of information
technology systems relating to the production
of financial statements, valuation services,
actuarial valuation services, and the provision
of certain legal services, HR services and
financing, capital structuring and investment
strategy services. Other types of non-audit
work can be undertaken by the external
auditors, subject to the implementation of
adequate safeguards and the total fees for
these non-audit services must not exceed
70% of the average audit fees billed to the
Company by the external auditors in the past
three years. A summary of fees paid to the
external auditors is set out in Note 8 to the
Consolidated Financial Statements. In the
period from the Listing to 31 December 2017,
the external auditors did not undertake any
material non-audit work for the Company.
External audit appointment
and tendering
The Committee has concluded that the
external auditors have demonstrated
appropriate qualifications and expertise and
have remained independent of the Group.
Accordingly, the Committee recommended to
the Board that EY be reappointed as the
Group’s auditors for a further year. The Board
has accepted this recommendation and a
resolution to shareholders proposing the
reappointment of EY will be set out in the
AGM Notice which will be sent separately to
shareholders.
The Committee also reviewed EY’s
engagement letter and determined its
remuneration in accordance with it’s
obligations under the Code, such
remuneration being considered appropriate
by the Committee.
EY have been the auditors of Sabre Insurance
Company Ltd and of the previous parent
companies of Sabre Insurance Company Ltd
since 2001. Given that Sabre Insurance
Company Ltd, the principal subsidiary of the
Group, is now considered a Public Interest
Entity (“PIE”), the transitional rules under the
EU legislation require Sabre Insurance
Company Ltd to run a tender process for the
external audit by 2023, after which Sabre
Insurance Company Ltd will be required to
change its external auditors. It is anticipated,
given the material nature of Sabre Insurance
Company Ltd within the Group, that the
Directors would tender the external audit of
the Group at that time. In addition under these
regulations, the external audit engagement
partner is now required to rotate every five
years. The current external audit engagement
partner is Stuart Wilson, who was appointed
to lead the audit of Sabre Insurance Company
Ltd in 2016.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 44
Nomination
Committee Report
Patrick Snowball
Nomination Committee
Chairman
COMMITTEE MEMBERS
The membership as at the date of this
report together with such members
appointment dates and attendance
record are set out below:
Committee
members
Meeting
attendance
Patrick Snowball (Chair)
Appointed 4 October 2017
Catherine Barton
Appointed 4 October 2017
Ian Clark
Appointed 4 October 2017
Rebecca Shelley
Appointed 4 October 2017
3/3
3/3
2/3
2/3
The Committee is chaired by the Chairman,
Patrick Snowball, and comprises three other
independent Non-executive Directors of the
Company, all of whom are considered to be
free of any relationship that would affect their
impartiality in carrying out their responsibilities.
Three Committee meetings have been held
since the Listing, one in December 2018,
one in January and one in March 2018. The
attendance at these meetings is recorded in
the chart set out above.
The chairman of the Committee reports to
subsequent meetings of the Board and the
Board receives a copy of the minutes of each
meeting once these have been approved by
the Committee. The Company Secretary acts
as the secretary to the Committee.
The terms of reference of the Committee
can be found on the Company’s website
(www.sabreplc.co.uk) or can be obtained from
the Company Secretary.
Role of the Committee
The Committee leads the process for:
(a) reviewing the structure and composition of
the Board; (b) overseeing succession planning
for the Directors and other senior executives;
(c) reviewing the Company’s policy on
diversity; (d) identifying, evaluating and
recommending candidates to join the Board;
and (e) making recommendations regarding
their election and re-election by shareholders.
A formal, rigorous and transparent procedure
using independent external search consultants
or firms is undertaken before candidates are
recommended to the Board. The Committee
recognises the importance of diversity and,
when recruiting, ensures that there are no
obstacles to the Committee having visibility of
suitable candidates for possible appointment
to the Board and, in particular, that such
appointments are based on merit regardless
of gender, social and ethnic backgrounds.
The Committee has a planned cycle of
activities to ensure that it addresses its
responsibilities in the current financial year.
Activities during the year
During the period from the Listing to the
date of this report, the Committee held
three meetings. During these meetings,
the Committee:
– oversaw the recruitment process for the
SID using an independent search firm,
Korn Ferry, to conduct the search for an
independent Non-executive Director with
extensive financial services sector and UK
listed company experience in businesses of
a comparable scale and complexity to the
Company who would be appropriate to be
designated as the SID;
– reviewed the position regarding succession
planning for the Executive Directors and
senior management of the Company and
its principal subsidiary Sabre Insurance
Company Limited;
– reviewed the position regarding diversity in
the context of the Hampton Alexander
Review at Board level and across the Group
as at 31 December 2017, and the Board
approved a recommendation by the
Committee to put in place a formal diversity
policy during 2018;
Sabre Insurance Group plc Annual Report and Accounts 2017 45
– reviewed the position regarding the
evaluation of the Committee’s performance
and effectiveness and, as described under
“Performance evaluation” on page 38 of
this Annual Report, concluded that such
evaluation would be carried out in the
second half of 2018 through questionnaires
and discussions facilitated by the Chairman
of the Committee; and
– reviewed the terms of reference of the
Committee.
Patrick Snowball
Nomination Committee Chairman
– reviewed the ongoing professional
development of Committee members
and the induction of new Directors;
– reviewed and adopted the Code
recommendation that all Directors
should be subject to annual re-election
notwithstanding the Company is not
in the FTSE 350 at the moment;
– reviewed and recommended the election of
Directors at the AGM of the Company to be
held on 24 May 2018 and considered the
information set out in the Notice of AGM to
be sufficient to enable shareholders to
make an informed decision on their
election. In considering the independence
of each Non-executive Director, the
Committee took into consideration the
guidance provided by the Code and
considered Catherine Barton, Rebecca
Shelley, Ian Clark and Andy Promfret to be
independent, and considered the Chairman
Patrick Snowball to have been independent
on appointment, in each case in accordance
with Provision B.1.1 of the Code. Matthew
Tooth was not considered to be
independent as he was appointed by the
BC Partners Group in accordance with the
Relationship Agreement. As the Directors
have all been recently appointed a formal
evaluation of their performance has not
taken place, however the Committee
concluded and recommended to the Board
that all the Directors standing for election
continue to be effective and demonstrate
the appropriate commitment to their roles;
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 46
Directors’
Remuneration Report
Rebecca Shelley
Remuneration Committee
Chair
COMMITTEE MEMBERS
The membership as at the date of this
report together with such members
appointment dates and attendance
record are set out below:
Committee
members
Meeting
attendance
Rebecca Shelley (Chair)
Appointed 4 October 2017
Patrick Snowball
Appointed 4 October 2017
Catherine Barton
Appointed 4 October 2017
Ian Clark
Appointed 4 October 2017
2/2
2/2
2/2
2/2
POLICY AND FRAMEWORK
Annual statement from the
Remuneration Committee Chair
I am delighted to introduce the first Directors’
Remuneration Report for Sabre, for the year
ended 31 December 2017.
2017 was a year of continued progress for
the Group which culminated in an initial public
offering in December, reflecting the
Company’s attractive investment proposition.
This was only possible because of the hard
work of the management team which built
Sabre into a business with market leading
profitability through controlled growth.
Looking forward, the Committee’s role is
to ensure that senior management are
appropriately incentivised to deliver
sustainable growth to shareholders over
the long term. The Committee will support
this objective by structuring and deploying
remuneration in a cost-effective manner,
embedding a clear link between pay and
performance in the Group’s remuneration
framework. The principles on which the
Committee has designed the Group’s
Remuneration Policy are discussed
further on page 48.
Introduction
The report has been prepared in accordance
with the directors’ remuneration reporting
regulations for UK incorporated companies set
out in Schedule 8 of the Large and Medium
sized Company and Groups (Accounts and
Reports) Regulations 2008 (as amended).
The report is presented in three sections:
– This Remuneration Committee Chair’s
annual statement;
– The Directors’ Remuneration Policy – as
our first remuneration policy this will be
subject to a binding shareholder vote at the
2018 Annual General Meeting; and
– The Annual Report on Remuneration –
this sets out the remuneration outcomes
for 2017 and how the Policy will be
implemented during 2018. This report
will be subject to an advisory shareholder
vote at the 2018 AGM.
Executive Directors’ 2017 outcomes
The Remuneration Committee discussed
and approved the remuneration outcomes
in respect of 2017 shortly after the year end.
Further details can be found on pages
53 to 56.
The Remuneration Policy
Following the Company’s admission to the
premuim listing segment of the official list
on 11 December 2017 (“Admission”) the
Committee designed the Company’s
Remuneration Policy to embed the corporate
governance principles shareholders expect of
a quoted company. I would particularly like to
draw shareholders’ attention to the following
features:
– Bonus deferral: to ensure the alignment
of Executive Directors with shareholders’
interests a portion of the annual bonus
payable in respect of financial years 2018
and beyond, will be deferred.
– Long Term Incentive Plan: to reward
Executive Directors for the creation of
long-term, sustainable shareholder value
the Committee introduced a Long Term
Incentive Plan (“LTIP”).
– Malus and clawback: to further embed
pay for performance, malus and clawback
will apply to all awards made under the
Deferred Bonus Plan (“DBP”) and the LTIP.
Clawback provisions will also apply to all
Bonus awards.
Sabre Insurance Group plc Annual Report and Accounts 2017 47
Conclusion
The Committee believes the proposals set
out in this report will incentivise Executive
Directors to deliver sustainable growth over
the long term to shareholders while doing so
in a cost-effective manner. The Committee
believes that a key part in doing so will be
fostering an owner mind-set amongst
management, and indeed both the Executive
Directors have significant shareholdings which
align them with shareholders’ interests. This
continues into the wider workforce with all
employees being awarded free shares on IPO
in order to create a shareholding culture.
I welcome any feedback shareholders might
have on the proposals and look forward to
seeing shareholders at the 2018 AGM,
where I hope you will support our proposals.
Rebecca Shelley
Remuneration Committee Chair
– Shareholding requirements: to further
align Executive Directors with shareholders’
interests, all Executive Directors will be
expected to build up and maintain
shareholdings having a value of at least
200% of salary. Until this has been
achieved, Executive Directors will retain
50% of all shares vesting from both the
DBP and LTIP (after tax liabilities have been
settled).
Executive remuneration in 2018
The salaries for both the CEO and CFO were
disclosed in the Prospectus, and no increase is
proposed to these for 2018. Going
forward, shareholders should note that the
CFO’s salary is currently positioned below
the comparator market range. As such
the Committee reserves the right to
make increases above those granted to all
employees as the CFO grows in the role.
The Committee is mindful of the scrutiny
around executive pay and wishes shareholders
to note that although the Policy maximum
for the annual bonus is 125%, in line with
the Prospectus, both the CEO’s and the CFO’s
maximum bonus for 2018 will be 100%
of salary.
Reflecting the Committee’s commitment
to a remuneration framework which aligns
Executive Directors with long-term value
creation, the maximum 2018 Long Term
Incentive for the CEO will be 125% of salary,
and for the CFO this will be 100% of salary.
Wider considerations
The Committee regularly monitors
developments in corporate governance, the
evolution of best practice, and updates to
regulatory guidance to ensure that our
approach remains appropriate. For instance,
whilst the Group currently has too few
employees to be required to submit a formal
statement on its gender pay gap, this is
something that the Committee is already
engaging with.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 48
Directors’
remuneration policy
This section of the Directors’ Remuneration Report
contains the Directors’ Remuneration Policy (the “Policy”)
Introduction
In accordance with section 439A of the
Companies Act 2006, the Company is
required to submit the Policy to a binding
shareholder vote at the AGM to be held in
2018. Subject to its approval by shareholders
at the 2018 AGM, the Policy is intended to
take effect from the date of the 2018 AGM
and the current intention is that it would
remain in place for three years. The Board
would then put the Policy to shareholders
again no later than the 2021 AGM.
Our approach
The Executive Directors’ remuneration
has five main components: a base salary,
benefits, employer pension contributions,
a performance-related annual bonus
(normally including a deferred element)
and LTIP awards. They are also entitled
to participate in all-employee share plans
on the same basis as other Group employees.
Detail in relation to each of these elements is
set out in the following policy table. In
proposing the structure of the Executive
Directors’ remuneration the Committee has
been guided by the three following principles:
01.
02.
Cost effectiveness
Sabre intends to pay no more than
is necessary to attract, retain and
incentivise high calibre management,
whilst also aligning the interests of
senior employees and shareholders.
Pay for performance
Performance-related pay will make
up a significant proportion of the
Executive Directors’ remuneration
packages and will be assessed
based on stretching targets.
03.
Long‑term alignment
There will be an appropriate balance
of remuneration to the delivery of
longer-term performance targets. In
doing so the Committee has taken into
account the relevant regulatory and
governance principles.
The Policy governing each element
of the Executive Directors’ pay is
outlined opposite:
Sabre Insurance Group plc Annual Report and Accounts 2017 49
Operation
Opportunity
Performance measures
Policy table
Element and link
to strategy
Salary
To attract, incentivise
and retain Executive
Directors of a high
calibre.
Base salaries will be reviewed at least annually
taking into account the scope and requirements of
the role, the performance and experience of the
incumbent Executive Director and the individual’s
total remuneration package.
Account will also be taken of remuneration
arrangements at Sabre’s peer companies (and other
companies of an equivalent size and complexity)
and for other Group employees.
None.
The Committee has decided not to set an overall
maximum monetary opportunity or increase.
However, the Committee intends that Executive
Directors’ salary increases will normally be in line
with salary increases offered to the wider employee
population.
There are however specific circumstances in which
the Committee could award increases outside this
range which may include:
– a change in the Executive Director’s role and/or
responsibilities;
– performance and/or development in role of the
Executive Director; and
– a significant change in the Group’s size,
composition and/or complexity.
Where an Executive Director has been appointed to
the Board at a below-market starting salary, larger
increases may be awarded as their experience
develops, if the Committee considers such
increases to be appropriate.
Current salaries for the Executive Directors are set
out in the Annual Report on Remuneration.
As the costs of benefits are dependent on the
Executive Directors’ individual circumstances, the
Committee has not set a maximum monetary
value. However, in approving the benefits paid, the
Committee will ensure that they do not exceed a
level which is, in the Committee’s opinion,
appropriate given the Executive Director’s particular
circumstances.
None.
The amount of payments made by the Group will
not exceed 17% of the individual’s salary less
Employer National Insurance Contribution without
shareholder approval.
Details of the current contribution levels are set out
in the Annual Report on Remuneration.
None.
The maximum bonus opportunity for Executive
Directors is 125% of base salary.
Actual awards made each year to Executive
Directors will be set out in the Annual Report on
Remuneration in respect of that year.
Bonuses will be subject
to a mixture of financial
and non-financial
performance targets set
by the Committee at the
start of the financial year
to encourage delivery of
the Company’s strategy.
At least half of the annual
bonus will be based on
financial measures.
Performance measures
may include strategic
and/or personal
objectives.
No payments will be
made under the bonus
for less than threshold
performance, at which
25% of bonus is payable.
The measures for 2018
are set out in the Annual
Report on Remuneration.
Benefits
To provide a benefits
package to recruit
and retain Executive
Directors of a high
calibre.
Pension
To support the
Company’s strategy
of recruiting and retaining
Executive Directors of a
high calibre for
the long term.
The Committee’s policy is to provide Executive
Directors with competitive levels of benefits, taking
into consideration the benefits provided to Sabre’s
employees and the external market.
Benefits currently include (but are not limited to)
life insurance and private medical insurance.
If an Executive Director is required to relocate as a
result of his/her duties the Company may provide
the Executive Director with additional benefits such
as assistance with relocation, travel
accommodation or education allowances or
professional tax advice, along with any associated
tax liabilities.
The Group may make employer pension
contributions to a registered pension plan (or such
other arrangement the Committee considers have
the same economic effect) set up for the benefit
of each of the Executive Directors.
Alternatively, an Executive Director may be
awarded some/all as an equivalent cash allowance
in lieu of pension contributions.
Annual bonus and Deferred Bonus Plan (“DBP”)
To incentivise and reward
the delivery of annual
corporate and/or
individual financial and
non-financial targets.
To align the interests
of Executive Directors
with shareholders
through the deferral
of a portion of the
bonus into shares.
The Committee will set the performance measures
and targets (as well as the weighting of the
performance targets) for each financial year of the
Company. Annual bonus outcomes will be
determined by the Committee after the end of each
financial year. In exceptional circumstances the
Committee may use its discretion to adjust the
formulaic outcome of the performance targets to
reflect corporate and individual performance during
the year.
The Committee may defer a proportion of any
bonus award (no more than 50%) into a share
award under the DBP. DBP awards will normally
vest on the second anniversary of grant (or such
other date as the Committee determines on grant).
Malus and clawback provisions will apply (see
section below for further details).
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 50
Directors’ remuneration policy
continued
Element and link
to strategy
Operation
Long Term Incentive Plan (“LTIP”)
To incentivise and
reward delivery of the
Group’s longer-term
strategic objectives for
the business.
The vesting of awards will be subject to the
satisfaction of performance conditions set by the
Committee measured over a performance period of
at least three years.
The Committee may determine that awards may be
subject to a post-vesting holding period before any
underlying shares may be sold.
Malus and clawback provisions will apply to
unvested and vested awards respectively (see
section below for further details).
All-employee share plans
To align the Executive
Directors with the wider
workforce.
Executive Directors are eligible to participate in any
all-employee share plans in place, which will be
operated in line with HMRC guidance.
These are currently a share acquisition and free
share plan, known as a UK share incentive plan, the
SIP, and a savings-related share option plan, known
as the Sharesave plan.
Non‑executive Directors
Opportunity
Performance measures
The maximum award in respect of any financial year
will be 175% of salary.
Actual awards made each year to Executive
Directors will be set out in the Annual Report on
Remuneration in respect of that year.
The majority of
performance measures
used to assess
performance under the
LTIP will be financial. A
portion will be based on
relative Total Shareholder
Return.
No payments will be
made under the LTIP for
less than theshold
performance, at which
25% of the award vests,
rising to 100% for
maximum performance.
Participation in the Group’s all-employee share
plans will be subject to any applicable maximum
limits as set by HMRC.
None.
Approach to fees
Operation
Opportunity
Other items
Fees paid to the Chairman and Non-executive Directors
To attract
Non-executive
Directors of an
appropriate calibre
and with sufficient
experience to
ensure the effective
management of the
Company.
Fee levels will normally be reviewed (though not
necessarily increased) annually. Fees will be set with
reference to the time commitment and responsibilities
of the position.
The fee for the Chairman will be determined by the
Committee. Fees for Non-executive Directors will be
determined by the Chairman and the Executive
Directors.
Details of the current fee of the Chairman and the fee
levels for the Non-executive Directors are set out in the
Annual Report on Remuneration.
There is no prescribed maximum fee or annual increase.
Total fees will not exceed the limit set out in the
Company’s Articles of Association.
Further fees may be paid for additional responsibilities
(such as being a member of or chairing a Board
Committee or acting as the Senior Independent
Director) or for an increased time commitment during
the year.
Each Non-executive
Director will be
entitled to be
reimbursed for all
reasonable costs
incurred in the course
of his/her duties,
including travel and
accommodation
expenditure, along
with any related tax
liabilities.
Notes to the policy table
Selection of performance conditions
For the annual bonus plan, the Committee believes that a mix of
financial and non-financial targets is most appropriate for the Group.
Strategic and personal objectives may be included where appropriate to
ensure delivery of key business milestones. Targets are set by the
Committee taking into account internal and external forecasts.
For the LTIP, the Committee believes that awards should be linked to
the value created for shareholders over the period. Therefore the
majority of performance measures used to assess performance under
the LTIP will be financial, with a portion based on TSR.
Prior arrangements
The Board reserves the right to make any remuneration payments
and/or payments for loss of office (including exercising any discretions
available to it in connection with such payments) notwithstanding that
they are not in line with the Policy set out above where the terms of the
payment were agreed (i) before the Policy came into effect; or
(ii) at a time when the relevant individual was not a Director of the
Group and, in the opinion of the Committee, the payment was not in
consideration for the individual becoming a Director of the Group.
For these purposes “payments” includes the Committee satisfying
awards of variable remuneration and, in relation to an award over
shares, the terms of the payment are “agreed” at the time the
award is granted.
Terms common to the LTIP and DBP
Awards under the LTIP and DBP may:
a)
b)
c)
be granted as conditional share awards or nil-cost options or in
such other form that the Committee determines has the same
economic effect;
have any performance conditions applicable to them amended or
substituted by the Committee if an event occurs which causes the
Committee to determine an amended or substituted performance
condition would be more appropriate and not materially less
difficult to satisfy;
incorporate the right to receive an amount (in cash or additional
shares) equal to the value of dividends which would have been paid
on the shares under an award that vests up to the time of vesting
(or where the award is subject to a holding period, the end of that
holding period). This amount may be calculated assuming that the
dividends have been reinvested in the Company’s shares on a
cumulative basis;
d)
be settled in cash at the Committee’s discretion; and
e)
be adjusted in the event of any variation of the Company’s share
capital or any demerger, delisting, special dividend or other event
that may materially affect the current or future value of the
Company’s shares.
Sabre Insurance Group plc Annual Report and Accounts 2017 51
Malus and clawback
Malus and clawback applies to all awards granted under the DBP and
LTIP. In addition to this, clawback provisions will apply to all awards
made under the bonus. These provisions may be invoked at the
Committee’s discretion at any time prior to the third anniversary of the
grant of a cash bonus or DBP award, or to the fifth anniversary of the
grant of an LTIP award. In these circumstances, the Committee may
reduce or impose additional conditions on an award or require that the
participant returns some or all of the value acquired under the award.
The Committee has the discretion to invoke these provisions where
there has been:
– a material misstatement of any Group member’s audited accounts;
– an error in assessing the relevant performance conditions or the
information or assumptions on which the award was granted or
vested;
– misconduct on the part of the Executive Director; or
– serious reputational damage to, or a material failure of risk
management by, a member or business unit of the Group
Within the period beginning on:
a)
b)
in the case of LTIP awards, the start of the performance period and
ending on the fifth anniversary of the date of grant; and
in the case of cash bonus and DBP awards, the start of the financial
year in respect of which the award is granted and ending on the
third anniversary of the date of grant.
The Board will retain the discretion to calculate the amount to be
recovered, including whether or not to claw back such amount gross or
net of any tax or social security contributions applicable to the award.
Remuneration scenario charts
The charts below illustrate the amount the Executive Directors
could receive for differing levels of performance, in the first year in
which the Policy is in operation. The charts are based on the following
assumptions:
Pay scenario
Minimum
On-target
Maximum
Basis of calculation
Fixed pay only, consisting of the salaries for 2018,
benefits received in 2017 and the proposed pension
policy applied to 2018 salary
Fixed pay, plus the potential value of the annual bonus
at target (50% of the maximum) and the LTIP award
vesting at threshold (25% of the maximum)
Fixed pay, plus the maximum potential opportunity for
the annual bonus and the LTIP award vesting
All scenarios exclude share price growth and dividends.
CHIEF EXECUTIVE OFFICER
Approach to recruitment remuneration
The Committee intends to set any new Executive Director’s
remuneration package in line with the Policy outlined earlier in this
section.
When determining the design of the total package in a recruitment
scenario, the Committee will consider the size and scope of the role,
the candidate’s skills and experience and the market rate for such a
candidate, in addition to the importance of securing the preferred
candidate. In some circumstances, the Board may be required to take
into account common remuneration practices in another country and, if
applicable, may consider awarding payments in respect of relocation
costs. In line with the Policy, in relation to annual bonus and LTIP
awards, maximum variable remuneration will not exceed 300% of
salary.
In the event that Sabre wish to hire a candidate with unvested
long-term incentives accrued at a previous employer which would be
forfeited on the candidate’s leaving that company, the Committee
retains the discretion to grant awards with vesting on a comparable
basis to the likely vesting of the previous employer’s award. The LTIP
rules have been drafted to permit the grant of recruitment awards on
this basis to an individual on one occasion (which will not be counted
towards the annual 175% LTIP limit and which will be subject to such
vesting schedules and performance conditions (if any) as the
Committee may determine). If it is not possible or practical to grant
recruitment awards under the LTIP, the Committee may rely on the
provisions of Listing Rule 9.4.2 to grant the awards. For internal
candidates, LTIP awards granted in respect of the prior role would be
allowed to vest according to their original terms, or adjusted if
appropriate to take into account the appointment.
For the appointment of a new Chairman or Non-executive Director, the
fee would be set in accordance with the Policy. The length of service
and notice periods would be set at the discretion of the Committee,
taking into account market practice, corporate governance
considerations and the skills and experience of the particular candidate
at that time.
Departure of Directors
Service agreements
Director
Geoff Carter
Adam Westwood
Patrick Snowball
Rebecca Shelley
Catherine Barton
Ian Clark
Matthew Tooth
Date of
appointment
21/09/2017
21/09/2017
21/09/2017
04/10/2017
04/10/2017
21/09/2017
21/09/2017
Notice
period
12 months
12 months
3 months
3 months
3 months
3 months
–
Unexpired
term
–
–
33 months
33 months
33 months
33 months
–
Minimum
100%
On-target
59%
25%
16%
Maximum
34%
29%
37%
CHIEF FINANCIAL OFFICER
Minimum
100%
On-target
59%
27%
14%
Maximum
35%
32%
32%
Fixed pay
Annual bonus
LTIP
£460,000
£785,000
£1,360,000
£247,500
£416,250
£697,500
Matthew Tooth is appointed under the terms of the relationship
agreement between Sabre Insurance Group plc and BC Partners
Holding Ltd.
Shareholders may inspect the Executive Directors’ contracts or the
Non-executive Directors’ terms of appointment at the Company’s
registered offices.
Both Geoff Carter and Adam Westwood have written service contracts
with the Company with no fixed end date but which are terminable
by either the Company or the Executive Director on not less than
12 months’ notice.
In the event notice is given to terminate an Executive Director’s
contract, the Company may make a payment in lieu of notice equal to
the value of the Executive Director’s salary for the notice period. Any
such payments may be made, at the Committee’s discretion, as a lump
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
52
Directors’ remuneration policy
continued
sum or in instalments, subject to mitigation by the Executive Director.
It is the Committee’s intention that the service contracts for any new
Executive Directors will contain equivalent provisions.
The Chairman and each of the independent Non-executive Directors
have a notice period of three months and may receive fees in respect of
any notice period.
In the event that an Executive Director leaves the Group, entitlement
they have to any variable pay will be determined in accordance with the
relevant incentive plan rules.
Annual Bonus
Executive Directors will not have any automatic entitlement to a bonus
for the financial year in which they leave the Group. The Committee
may however pay a bonus if it considers it appropriate, which will
normally be time pro-rated to reflect the proportion of the financial year
served. Any such bonus may be paid out in such proportions of cash
and share awards as the Committee considers appropriate.
Unvested DBP awards will normally lapse when an Executive Director
leaves the Group. However, if an Executive Director’s departure is a
result of their ill-health, injury, disability or redundancy or their
employing company or business being sold out of the Group or in such
other circumstances as the Committee may determine, (excluding
gross misconduct) (known as “Good Leaver Reasons”) their award will
normally vest on the original vesting date, although the Committee has
the discretion to allow awards to vest earlier if the Committee
considers it appropriate.
LTIP awards
Unvested LTIP awards will also normally lapse when an Executive
Director leaves the Group. However, if the Executive Director’s
departure is as a result of a Good Leaver Reason, their LTIP awards will
normally vest (and be released from any applicable holding period) on
the original timetable set, although the Committee has the discretion to
accelerate the vesting and release of awards. The extent to which
unvested LTIP awards vest in these circumstances will be determined
by the Committee, taking into account the extent to which the relevant
performance conditions have, in its opinion, been satisfied (over the
original performance period, where the vesting of the award is not
being accelerated) and, unless the Committee determines otherwise,
the proportion of the performance period that has elapsed at the time
the Executive Director leaves.
If an Executive Director leaves the Group holding vested LTIP awards
which are subject to a holding period, these awards will normally be
released at the end of the original holding period, unless the Committee
allows the holding period to be shortened. However, if the Executive
Director is dismissed for gross misconduct, all his or her LTIP awards
will lapse.
If an Executive Director dies, their DBP and LTIP awards will normally
vest (and be released from any holding periods) as soon as reasonably
practicable after their death. The extent to which unvested LTIP awards
vest in these circumstances will be determined by the Committee in
the same way as for other Good Leaver Reasons described above.
The Committee reserves the right to make any other payments in
connection with a Director’s cessation of office or employment where
the payments are made in good faith in discharge of an existing legal
obligation (or by way of damages for breach of such an obligation) or by
way of settlement of any claim arising in connection with the cessation
of a Director’s office or employment. Any such payments may include
but are not limited to paying any fees for outplacement assistance and/
or the Director’s legal and/or professional advice fees in connection
with his cessation of office or employment.
Change of control
In the event of a change of control of the Company, LTIP and DBP
awards will normally vest and be released early. The proportion of any
unvested LTIP awards which vest will be determined by the
Committee, taking into account the extent to which it determines that
any performance conditions have been satisfied at the time, and,
unless the Committee determines otherwise, the proportion of the
performance period that has elapsed. DBP awards will normally vest
in full.
Alternatively, the Board may permit an Executive Director to exchange
their awards for equivalent awards of shares in a different company
(including the acquiring company). If the change of control is an internal
reorganisation of the Group or in other circumstances where the
Committee considers it appropriate, Executive Directors may be
required to exchange their awards.
If other corporate events occur such as a winding-up of the Company,
demerger, delisting, special dividend or other event which, in the
opinion of the Committee, may materially affect the current or future
value of the Company’s shares, the Committee may determine that
awards will vest and be released on the same basis as for a change
of control.
Consideration of shareholder views
The terms of the Policy are in line with those set out in the Company’s
Prospectus which was issued on 23 November 2017.
The Committee will consult with major shareholders prior to any
significant changes to the Policy and will continue to monitor their
views when deciding on future executive remuneration strategy.
Consideration of employment conditions at Sabre
In setting the Policy which would apply for Executive Directors, the
Committee was led by the same principles which determined
all-employee remuneration: cost effectiveness, pay for performance
and long-term alignment.
These principles evidence themselves in all-employee remuneration
as follows:
Cost effectiveness
As with the Directors, in setting compensation across the Group,
Sabre intends to pay no more than is necessary to attract, retain and
incentivise high calibre individuals, setting remuneration competitively
but not excessively.
Pay for performance
Many full-time Group employees are eligible to receive some form of
share-based incentive. Selected key individuals below Board level have
been invited to participate in the LTIP, in order for there to be alignment
between senior management and the Executive Directors’ objectives.
Long‑term alignment
Following Admission, in line with our philosophy of encouraging our
workforce to see themselves as investors in the Group, all eligible
employees were offered an award of free shares under the Share
Incentive Plan. The Company is in the process of introducing a
Sharesave plan to further facilitate employee investment in the
Group and their long-term alignment.
The Committee has not formally consulted employees on the Policy.
However, as a result of the implementation of the all-employee share
plans referred to above, many of the Group’s employees are Sabre
shareholders and can express their views through the same means
as any other shareholder.
Sabre Insurance Group plc Annual Report and Accounts 2017 53
Annual report
on remuneration
This section of the Directors’ Remuneration Report sets out
the remuneration paid to Sabre’s Directors in respect of
the year ending 31 December 2017
As both Executive Directors commenced duties for Sabre on Admission, the information contained in this section refers to their remuneration
from 11 December to 31 December 2017. The Annual Report on Remuneration will be put to an advisory shareholder vote at the 2018 AGM.
Sections which are subject to audit are indicated as such.
Single figure of remuneration (audited)
The table below sets out the total remuneration received by Executive Directors and Non-executive Directors in respect of the period
11 December to 31 December 2017. As the Company listed during 2017, there is no disclosure in this report of past years’ information.
£000s
Individual
Executive Directors
Geoff Carter1
Adam Westwood2
Total
Non-executive Directors
Patrick Snowball4
Catherine Barton4
Ian Clark4
Rebecca Shelley4
Matthew Tooth5
Total
Salary/fees
Taxable
benefits
Pension
Annual
bonus
Long-term
incentives
IPO
awards
Total
remuneration
22
12
34
8
4
3
4
3
56
03
03
03
–
–
–
–
–
03
2
1
3
–
–
–
–
–
3
9
4
13
–
–
–
–
–
13
–
–
–
–
–
–
–
–
–
217
217
435
100
–
–
–
–
251
235
486
108
4
3
4
3
535
607
1 Geoff Carter was employed by the Company with effect from 11 December 2017.
2 Adam Westwood was employed by the Company with effect from 11 December 2017.
3 Total taxable benefits recieved by Executive Directors in the period 11 December to 31 December 2017 were £142 for the CEO and £93 for the CFO.
4
Patrick Snowball is the Chairman of the Company who was independent on appointment. Catherine Barton, Ian Clark and Rebecca Shelley are independent Non-executive Directors.
Their fees have been pro-rated for the period from 11 December to 31 December 2017.
Matthew Tooth is a non-independent Non-executive Director. His fees are paid to BC Partners LLP as part of a Relationship Agreement and were pro-rated for the period 11 December
to 31 December 2017.
5
Notes to the table (audited)
Base salary
The Executive Directors’ salaries were reviewed at the time of the
Group’s Admission. Their annualised salaries were published in Sabre’s
Prospectus and were as follows:
Performance in the year was determined based on the Company’s
principal subsidiary, Sabre Insurance Company Ltd’s, ROCE1. For the
year ending 31 December 2017 the Company achieved a return
of 89%.
This led to the following payouts for Executive Directors:
Base salary
Geoff Carter
Adam Westwood
Annualised
£400,000
£225,000
Geoff Carter
Adam Westwood
2017 bonus2
£9,182
£3,566
Details of the salaries that will apply in 2018 are provided on page 55.
2017 annual bonus
The annual bonus paid to Executive Directors in respect of 2017
was wholly determined by the bonus scheme in operation prior
to Admission.
Annual incentive awards for 2018 will be based on a combination of
financial and non-financial measures as described on page 55.
1
2
For the purposes of the 2017 bonus scheme ROTE is defined as the Company’s profit after
tax as a percentage of the Company’s opening capital for the relevant accounting period.
Pro-rated for the period from 11 December to 31 December 2017 and inclusive of
all-employee bonus paid in December 2017.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 54
Annual report on remuneration
continued
Performance Share Plan
Shortly prior to Admission, shareholders approved the introduction of
the Sabre 2017 Long Term Incentive Plan. Awards under this plan are
expected to be made annually from 2018.
No Sabre performance share awards were due to vest in 2017.
IPO awards
In recognition of their role in bringing the Company to IPO, both Geoff
Carter and Adam Westwood were awarded IPO awards on Admission.
The IPO awards were cash awards, funded by the sale of existing
ordinary shares by the Employee Benefit Trust on Admission. The
quantum of these awards is detailed below:
Sourcing of shares (dilution limits)
The terms of the Group’s share plans set limits on the number of newly
issued shares that may be issued to satisfy awards. In accordance with
guidance from the Investment Association, these limits restrict overall
dilution under all plans (the LTIP, the DBP, the Sharesave Plan, the
Share Incentive Plan and any other employee share scheme adopted by
the Group) to under 10% of the Company’s issued share capital over a
10-year period. Furthermore, the LTIP and DBP set a further limitation
that not more than 5% of the Company’s issued share capital may be
issued in any 10-year period on discretionary plans.
As of the year end Sabre is operating within these limits.
Geoff Carter
Adam Westwood
IPO awards
£217,450
£217,450
Outstanding share awards (audited)
No awards are outstanding. No awards vested or lapsed in
the year.
As set out in the Prospectus, Patrick Snowball also received a
£100,000 cash award in recognition of his significant contribution
to bringing the Company to IPO.
Extrenal appointments (audited)
Neither of the Executive Directors currently hold any paid
external appointments. Geoff Carter’s appointment with Spotlight
YOPD is unpaid.
Payments to past Directors (audited)
There were no payments to past Directors in the year.
Payments for loss of office (audited)
There were no payments to Directors for loss of office in
the year.
Directors’ shareholdings and share interests (audited)
To further align Executive Directors with shareholders, the Committee
has elected to introduce shareholding requirements for Executive
Directors. Executive Directors will be expected to build and hold
shareholding having a value of at least 200% of their base salary.
To support the implementation of this measure Executive Directors
will be required to retain 50% of any share awards vesting (after settling
any tax liability) until the 200% requirement is met.
Shareholding requirements and the number of shares held by
Directors during the year and as at 31 December 2017 are set out
in the table below:
Current Directors
Geoff Carter
Adam Westwood
Rebecca Shelley
Patrick Snowball
Catherine Barton
Ian Clark
Matthew Tooth
Shares owned
outright on
11 December
(at Admission)
Shares owned
outright at
31 December
2017
1,965,372
842,303
–
105,288
–
265,761
–
1,965,372
842,303
–
105,288
–
265,761
–
Interests in
share incentive
schemes subject
to performance
conditions at
31 December
2017
Shareholding
requirement as a
% of salary
Shareholding as
a % of salary
achieved at
31 December
20171
–
–
–
–
–
–
–
200%
200%
–
–
–
–
–
1336%
1018%
–
–
–
–
–
1 Calculated using a share price of £2.72 (as at 31 December 2017).
Sabre Insurance Group plc Annual Report and Accounts 2017 55
Total shareholder return performance
The graph below shows Sabre’s TSR performance from Admission to
31 December 2017 against the TSR performance of the FTSE 250
Index (excluding investment trusts). This index was chosen because it
is a broad equity market index, which Sabre management consider to
be most relevant at this time.
Implementation of the Policy in 2018
Salaries
The Executive Directors’ salaries were set on Admission in December
2017. No increase to the salaries disclosed in the Prospectus is
proposed for 2018.
TSR PERFORMANCE VS FTSE 250 OVER INITIAL FINANCIAL PERIOD
120
100
80
60
40
20
0
11 Dec 2017
21 Dec 2017
31 Dec 2017
Sabre
FTSE 250 (Excluding investment trusts)
Geoff Carter
Adam Westwood
Salary as at
11 December
2017
£400,000
Salary as at
1 January
2018
£400,000
£225,000
£225,000
Increase
0%
0%
As per the Policy the Committee will continue to review salaries on an
annual basis, and may make further increases in future years in line
with the Policy.
Pension
The maximum employer contribution is 17% of salary. For 2018, the
Chief Executive Officer will receive cash in lieu of pension equal to 17%
of salary less Employer National Insurance Contributions and the Chief
Financial Officer will receive a contribution of 10% of salary as a
combination of plan contribution and cash in lieu.
The following table shows the Chief Executive’s Officer’s remuneration
for 2017:
Benefits
These will be awarded in line with the Policy.
Chief Executive Officer
Chief Executive Officer single figure of remuneration
Annual bonus payout (as a % of maximum opportunity)
PSP vesting out-turn (as a % of maximum opportunity)
2017
£251,122
N/A
N/A
No data for prior years is provided.
Percentage change in Chief Executive Officer’s
remuneration
Geoff Carter was appointed as Chief Executive Officer of Sabre
Insurance Group plc during the course of 2017 and, as such, there
is no prior year data from which to draw a comparison. Full disclosure
will be included when there is prior year data available next year.
Arrangements for the wider workforce
The Committee seeks to align the remuneration of the Executive
Directors and other senior executives with reward practices throughout
the Group. This can be clearly seen in its attitude towards the IPO
awards, where awards to the Executive Directors and senior
management were coupled with free share awards to all employees.
It can be further evidenced by the fact that employees all receive a
salary at or above the National Living Wage, and many full-time
employees are eligible to receive a performance-related incentive.
Relative importance of spend on pay
The following table illustrates total remuneration for all employees
compared to distributions to shareholders in respect of the last two
financial years.
Measure
Shareholder distributions
Total employee remuneration1
1 Total personnel cost.
2017
£31.7m
£13.2m
2016
£55.9m
£9.5m
Annual bonus
The Chief Executive Officer and the Chief Financial Officer will be
entitled to a maximum annual bonus equal to 100% of salary for 2018.
The performance measures will be as follows:
Element
Financial
Non-financial
Measure
Adjusted profit after tax
Weighting
40%
Return on Tangible Equity
Customer
Personal / strategic objectives
20%
25%
15%
The details of the performance targets are commercially sensitive and
will be disclosed retrospectively in the 2018 Directors’ Remuneration
Report.
50% of any bonus earned will be deferred into shares under the
Deferred Bonus Plan, vesting on the second anniversary of the grant.
Long Term Incentive Plan
The maximum LTIP opportunity under the Policy is 175% of salary.
The Committee intends to award shares of 125% of salary to the Chief
Executive Officer and 100% of salary to the Chief Financial Officer in
2018. Awards will not be made until after the remuneration policy has
been approved by shareholders at the 2018 AGM and the performance
conditions for 2018 awards will be disclosed in the relevant RNS
announcement and the 2018 Directors’ Remuneration Report.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
56
Annual report on remuneration
continued
Chairman and Non‑executive Director fees
The fees for the Chairman and Non-executive Directors were set on
Admission and no increases are proposed for 2018. The fees which will
apply in 2018 are as follows:
Chairman fee (all-inclusive fee)
Non-executive Director base fee
Senior Independent Director supplementary fee
Committee Chair supplementary fee
Committee member supplementary fee
£150,000
£60,000
£10,000
£10,000
None
The Remuneration Committee
The Remuneration Committee’s Terms of Reference were approved on
9 November 2017 and can be viewed at www.sabreplc.co.uk.
The Committee is responsible for setting the remuneration policy for all
Executive Directors, senior employees, the Company Secretary and the
Company’s Chairman, including pension rights and any compensation
payments. It is also responsible for reviewing all share incentive plans
which will be put to either the Board or shareholders for approval.
Support for the Committee
The Chairman, Chief Executive Officer, Chief Financial Officer (who is
also Company Secretary) may attend meetings by invitation, except
when their own remuneration is discussed. No Director is involved in
setting his or her own remuneration. The Committee members did not
have any personal financial interest in the topics discussed, except as
shareholders.
During the year, Deloitte LLP (“Deloitte”) was appointed to advise
the Remuneration Committee. Deloitte is a founder member of the
Remuneration Consultants Group and voluntarily operates under the
Code of Conduct in relation to executive remuneration consulting in
the UK. As such, the Committee is satisfied that the advice provided
by Deloitte is independent and objective.
The total fees paid to Deloitte in relation to the remuneration advice
provided to the Committee during December were £1,700. Fees were
charged on a time and materials basis. During the year the wider
Deloitte firm also provided corporate restructuring and corporate tax
advisory services.
Chair
Rebecca Shelley
Members
Patrick Snowball
Catherine Barton
Ian Clark
Rebecca Shelley
Chair of the Remuneration Committee
For and on behalf of the Board
Sabre Insurance Group plc Annual Report and Accounts 2017 57
Directors’ Report and
Responsibilities Statement
The Directors’ Report for the period ended 31 December 2017
comprises the report set out on pages 57 to 60 together with the
following sections of this Annual Report which are included by
reference:
Directors
Board membership – The members of the Board of Directors, their
biographical details and the dates of their appointment are set out on
pages 34 and 35 of this Annual Report.
Appointment and replacement of Directors – The appointment and
replacement of Directors is governed by the Company’s Articles, the
Relationship Agreement (as discussed on page 59 of this Annual
Report), the Companies Act 2006 (the “Companies Act”) and related
legislation. The Articles provide that Directors may be appointed by
ordinary resolution of the shareholders or by the Board. The Board has
decided to comply with best corporate governance practice, and all
Directors will seek re-election at each AGM. In addition to any powers
of removal conferred by the Companies Act, the Company may by
special resolution remove any Director before the expiration of his
period of office. The Nomination Committee is responsible for
overseeing the recruitment of Directors and recommending
appointments for approval by the Board of Directors. Further details
regarding the appointment and replacement of Directors is set out in
the Governance and Nomination Committee reports on pages 36 to 39
and 44 to 45 of this Annual Report, respectively.
Powers – Subject to the provisions of the Articles, the Companies Act
and related legislation, and any directions given by special resolution of
the shareholders, the business of the Company shall be managed by
the Board, which may exercise all the powers of the Company including
the Company’s powers to borrow money and to issue new shares.
Executive Directors service contracts – Executive Directors are
employed under the terms of their service contracts. Details of the
effective dates of the service contracts for the current Executive
Directors as well as their compensation are set out in the Directors’
Remuneration Report on pages 46 to 56 and the contracts are available
for inspection by shareholders at the Company’s registered office.
– the Strategic Report set out on pages 1 to 31 which includes:
– the Chairman’s letter on pages 8 and 9;
– the CEO’s review on pages 15 and 16; and
– the CFO’s review on pages 28 and 29; and
– the Principal risks and uncertainties on pages 22 to 26;
– the Corporate Social Responsibility report on pages 30 and 31;
and
– the Chairman’s governance letter and the Governance report on
pages 32 to 39 including the reports of the Audit and Risk,
Nomination and Remuneration Committees on pages 40 to 56.
Corporate structure
The Company is a public company limited by shares and was
incorporated in England and Wales on 21 September 2017 with
registered number 10974661. Its registered office and principal place
of business is at Sabre House, 150 South Street, Dorking, Surrey
RH4 2YY. The Company has no branches.
The Company is the holding company of the Sabre group of companies.
Details of the Company’s subsidiaries are set out in Note 3 of the
Parent Company Financial Statements contained in this Annual Report.
Significant changes and events
On 11 December 2017, the ordinary shares of the Company were
admitted to the premium listing segment of the Official List, in
accordance with the Listing Rules, and to trading on the London Stock
Exchange’s main market for listed securities, in accordance with the
Admission and Disclosure Standards. Further details regarding the
Listing can be found in the Prospectus published by the Company on
23 November 2017 in connection with the Listing, which is available
on the Company’s website at www.sabreplc.co.uk.
Principal activity and number of employees
The Company is a FTSE Small Cap listed motor insurance underwriter.
Less than 250 individuals were employed by the Company in each
week during the financial year to which this Annual Report relates
(further details regarding the Company’s employees are set out in
the Corporate Social Responsibility report on pages 30 and 31 of
this Annual Report).
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 58
Directors’ Report and
Responsibilities Statement
continued
Non‑executive Directors appointments – Non-executive Directors
are appointed pursuant to a letter of appointment except in the case
of Matthew Tooth who is appointed pursuant to the terms of the
Relationship Agreement. Such appointments are for an initial period
of three years, which is renewable. A Non-executive Director’s
appointment is terminable by the Non-executive Director or the
Company by giving written notice. Details of the effective dates of the
letters of appointment for the current Non-executive Directors as well
as their fees are set out in the Directors’ Remuneration Report and the
terms of appointment are available for inspection by shareholders at
the Company’s registered office.
Directors’ indemnities – Each of the Company’s Directors has been
granted a qualifying third party indemnity pursuant to which the
Company agrees to indemnify the Directors against any liabilities that
they may incur as a result of their office as Director, to the extent
permitted by the Companies Act.
Directors’ insurance – Directors’ and officers’ liability insurance is
provided for all Directors of the Company.
Compensation for loss of office – The Company does not have
arrangements with any Director that would provide compensation for
loss of office or employment resulting from a takeover, except that
provisions of the Company’s share plans may cause options and
awards granted under such plans to vest on a takeover. Further
information is provided in the Directors’ Remuneration Report on pages
46 to 56 of this Annual Report.
Articles of Association
The Company may alter its Articles by special resolution of the
shareholders at a general meeting of the Company. The Articles
are available on the Company’s website at www.sabreplc.co.uk.
Share capital
Shares – The Company has one class of ordinary voting shares
in issue. As at 31 December 2017, the issued share capital of the
Company comprised 250,000,000 ordinary shares of £0.001 each,
all of which are fully paid (“ordinary shares”).
Further details regarding the reorganisation which took place in
connection with the Listing are contained in Note 28 to the
Consolidated Financial Statements on page 89 of this Annual Report.
Rights and obligations attaching to shares – The rights and
obligations attached to the Company’s shares are governed by the
Articles and prevailing legislation. Each ordinary share ranks equally and
carries the same rights to receive all shareholder documentation
(including notices of general meetings), attend, speak and vote at
general meetings, and participate in any distribution of income or
capital. All shareholders entitled to attend and vote at a general meeting
may appoint a proxy or proxies to attend, speak and vote in their place.
None of the ordinary shares carry any special rights with regard to
control of the Company and there are no specific restrictions on voting
rights, save where the Company is legally entitled to impose such
restrictions (for example, where the shareholder is in default of an
obligation to the Company). Major shareholders have the same voting
rights per share as all other shareholders.
Restrictions on transfer – There are no restrictions on the transfer or
holding of shares in the Company other than (i) as set out in the lock up
arrangements described below; (ii) as set out in the Articles; and (iii)
certain restrictions which may from time to time be imposed by laws
and regulations and pursuant to the Listing Rules of the Financial
Conduct Authority (the “Listing Rules”) whereby Directors and certain
officers and employees of the Company require approval to deal in the
ordinary shares in accordance with the Company’s share dealing
policies and the Market Abuse Regulation.
Lock up arrangements – In connection with the Listing, certain
shareholders of the Company entered into lock up agreements with the
Company which provide for lock up periods of either 180 or 365 days
(or, in the case of one employee, up to three years) from the date of
Listing. During the relevant lock up period these individuals have agreed
not to dispose, lend, mortgage or assign any securities in the Company.
Additionally, certain shareholders entered into lock up agreements with
the underwriting banks for a lock up period of 180 days from the date
of the Listing. Certain of the underwriting banks may waive the
restrictions in respect of these lock up periods after the 90th day but
before they expire. Further details regarding the lock up agreements
outlined above can be found in Part 12 of the Prospectus.
Power to allot and purchase shares – By a resolution passed at a
general meeting of the Company on 21 November 2017 (the “General
Meeting”), the Company was granted a general authority to allot shares
up to the lower of (i) an aggregate nominal amount of £83,333 and (ii)
33.33% of the Company’s ordinary share capital immediately following
the Listing. At the General Meeting, the Company was also granted
authority to allot shares up to the lower of (i) an aggregate nominal
amount of £166,666 and (ii) 66.67% of the Company’s ordinary share
capital immediately following the Listing in connection with an offer by
way of a rights issue to ordinary shareholders in proportion to their
existing shareholdings (with such amount to be reduced to the extent
that the general authority is utilised (if any)). The Company also received
authority to allot shares for cash on a non pre-emptive basis up to the
lower of (i) an aggregate nominal amount of £12,500 and (ii) 5% of the
Company’s ordinary share capital immediately following the Listing.
As at the date of this report, no shares have been issued under these
authorities. These authorities will expire at the conclusion of the 2018
AGM and, accordingly, the Board is proposing to renew these
authorities at that AGM.
The Company was granted authority by its shareholders at the General
Meeting to purchase up to the lower of (i) 25,000,000 ordinary shares
and (ii) 10% of the Company’s maximum ordinary share capital
immediately following the Listing. This authority will expire at the
conclusion of the 2018 AGM. No shares have been bought under this
authority. The Company does not have any current intention to
purchase any of its own ordinary shares and, accordingly, the Board is
not proposing to renew this authority at the 2018 AGM.
Directors’ interests in shares – Details of the Directors’ interests in
shares in the Company are set out in the Directors’ Remuneration
Report on pages 46 to 56 of this Annual Report.
Major interests in shares – Information on major interests in shares
notified to the Company under the Disclosure Guidance and
Transparency Rules (DTRs) of the UK Listing Authority is published via a
Regulatory Information Service and on the Company’s website at
www.sabreplc.co.uk.
At 31 December 2017, the Company had been notified, in accordance
with Chapter 5 of the DTRs, of the following voting rights in respect of
3% or more of the issued share capital of the Company.
Shareholder
BC European Capital IX Fund
Mr Angus Ball
Companies owned by Old Mutual plc
Number of
Ordinary Shares
72,619,567
% of voting
rights
29.05%
22,188,321
12,870,464
8.88%
5.14%
During the period between 31 December 2017 and 21 March 2018,
being the latest practicable date prior to publication of this Annual
Report, the Company did not receive any notifications under Chapter 5
of the DTRs.
Sabre Insurance Group plc Annual Report and Accounts 2017 59
As at the last practicable date prior to the publication of this Annual
Report the Sabre Insurance Group Employee Benefit Trust held
681,700 ordinary shares. It is anticipated that these ordinary shares
will be used to satisfy awards made under the Company’s employee
incentive plans. Further details regarding the Company’s employee
incentive plans can be found in the Directors’ Remuneration Report
on pages 46 to 56 of this Annual Report.
Relationship Agreement
In connection with the Listing, CIE Management IX Limited, BC
European Capital IX Limited and BC Partners Holdings Limited
(together, the “BC Partners Group”) and the Company entered into
a relationship agreement on 23 November 2017 (the “Relationship
Agreement”) the purpose of which is to ensure the Company is
capable of carrying on its business independently of the BC Partners
Group and its associates. The Relationship Agreement continues until
the BC Partners Group and its associates cease to own, in aggregate,
at least 10% of the ordinary shares in the Company or the voting rights
attaching to such shares.
The Relationship Agreement entitles the BC Partners Group to
nominate one person to be a Non-executive Director of the Company
for so long as the BC Partners Group hold in aggregate at least 10% of
the ordinary shares and sets out the terms and conditions upon which
any such person may be appointed, removed or replaced as a Director
of the Company. Under the terms of the Relationship Agreement, for
so long as Matthew Tooth (or another person) is appointed as a
Non-executive Director by the BC Partners Group, the Company shall
pay to BC Partners LLP (or as it may direct) a fee at the rate equal to
the basic Non-executive Director fee payable from time to time to the
Company’s independent Non-executive Directors (currently £60,000).
Further details regarding the Relationship Agreement can be found in
Part 12 of the Company’s Prospectus which is available on the
Company’s website.
Dividends
As indicated in the Prospectus, the Directors will not be recommending
a final dividend for the financial period ended 31 December 2017. As
also indicated in the Prospectus, the first dividend to be paid by the
Company is expected to be an interim dividend in respect of the six
months ending 30 June 2018.
Significant agreements and change of control.
With the exception of the Relationship Agreement, there are no
material contracts (other than contracts entered into in the ordinary
course of business) to which the Group is a party.
The Group is not a party to any material agreements that would take
effect, alter or terminate upon a change of control of the Group
following a takeover bid.
Employees and communities
Details regarding the Company’s approach to its employees and
community matters are set out in the Corporate Social Responsibility
report on pages 30 and 31 of this Annual Report.
Environment and emissions
Information on the Group’s greenhouse gas emissions is set out in
the Corporate Social Responsibility report on pages 30 and 31 of this
Annual Report.
Research and development
The Group does not undertake any material activities in the field of
research and development.
Financial instruments and risk management
The Group’s financial risk management objective and policies, including
information about its use of financial instruments, are contained in
Note 3 to the Consolidated Financial Statements on page 74 of this
Annual Report.
Post balance sheet events
There are no post balance sheet events required to be disclosed in the
Financial Statements.
Charitable donations
The donations made by the Group to the charities referred to on
page 31 of this Annual Report amounted, in aggregate, to £1,500.
Political donations
The Group made no political donations during the year.
The Annual General Meeting (the “AGM”)
Full details about the 2018 AGM, including the venue and explanatory
notes, will be contained in the Notice of AGM which will be sent to
shareholders in a separate document. The Notice of AGM will set out
the resolutions to be proposed at the AGM and an explanation of each
resolution. All documents relating to the AGM will be available on the
Company’s website at www.sabreplc.co.uk.
The AGM is the Company’s principal forum for communication with
shareholders and the Directors will be available to answer shareholders’
questions at the meeting.
Independent auditors
The auditors of the Company, Ernst & Young LLP (“EY”), have indicated
their willingness to continue in office, and resolutions to appoint EY and
to authorise the Directors to fix their remuneration will be proposed at
the 2018 AGM.
Statement of disclosure of information to the auditors
Each of the Directors who held office at the date of the approval of this
Annual Report confirms that, so far as they are each aware, there is
no relevant audit information of which the Company’s auditors are
unaware, and each Director has taken all the steps that he or she ought
to have taken as a Director in order to make himself or herself aware
of any relevant audit information and to establish that the Company’s
auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with
the provisions of section 418 of the Companies Act.
Corporate governance
The Board is committed to the highest standards of corporate
governance across the Group. As disclosed in the Prospectus and
explained the Chairman’s governance letter on page 32 of this Annual
Report, at the time of the Company’s Listing on 11 December 2017
(immediately prior to its year end on 31 December 2017) the Company
did not fully comply with the recommendations of the Code because
until the Listing the Code had not applied to the Company. Since the
Listing the Board considers that the Company has applied all the main
principles of the Code and has complied with all of its relevant
provisions except as detailed in the Governance Report on page 36 of
this Annual Report. Other than in respect of the appointment of a SID
which took place on 28 February 2018, the matters where the
recommendations of the Code have not yet been implemented relate
to various items which would normally be addressed through the
annual cycle of Board and Committee meetings and Board activities
during the course of the financial year. As explained in the Governance
and Committee reports, since the Listing the Board has addressed
these matters, provided explanations and put plans in place for them to
be undertaken during the 2018 annual cycle of meetings and activities.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 60
Directors’ Report and
Responsibilities Statement
continued
Responsibility Statement
Each of the Directors, whose names and functions are listed on pages
34 and 35 of this Annual Report, confirms that, to the best of their
knowledge:
– the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and loss of the Group; and
– the Strategic Report and Directors’ Report contained in this Annual
Report include a fair review of the development and performance of
the business and the position of the Group, together with a
description of the principal risks and uncertainties that it faces.
The Directors consider that the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
performance and position, business model and strategy.
The Annual Report and Accounts including the Strategic Report
and Directors’ Report have been approved by the Board of Directors
and authorised for issue on 21 March 2018.
Signed on behalf of the Board by:
Geoff Carter
Director and
Chief Executive Officer
Adam Westwood
Director,
Chief Financial Officer
and Company Secretary
Going concern
The Board has considered the business activities of the Group and the
factors likely to affect its future performance as well as the Group’s
principal risks and uncertainties, including the Directors’ statement on
the viability of the Group over a three-year period which is set out in the
Strategic Report at pages 1 to 31 of this Annual Report and, on the
basis of these considerations, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operation for at least the next 12 months from the date of this report
and that therefore it is appropriate to adopt a going concern basis for
the preparation of the financial statements.
Responsibility and accountability
The Directors are responsible for preparing the Annual Report,
the Directors’ Remuneration Report and the financial statements,
comprising the consolidated financial statements and the Company
financial statements, in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the Group and the Company’s financial statements in accordance with
International Financial Reporting Standards (“IFRSs”) as adopted by
the European Union and applicable law and have elected to prepare
the Company’s financial statements in accordance with UK Accounting
Standards including FRS 101 “Reduced Disclosure Framework”.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company and of the profit or
loss of each of the Group and the Company for that period. In preparing
these financial statements, the Directors are required to:
– select suitable accounting policies and then apply them consistently;
– make judgements and accounting estimates that are reasonable and
prudent;
– state whether applicable IFRSs as adopted by the European Union
and applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
– prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and the Group and enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and that the Group financial statements
comply with Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the Company and the Group, including
taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are also responsible for the maintenance and integrity
of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Sabre Insurance Group plc Annual Report and Accounts 2017 61
Independent
Auditor’s report
to the members of Sabre
Insurance Group plc
Opinion
In our opinion:
– Sabre Insurance plc’s group financial statements and parent
company financial statements (the “financial statements”)
give a true and fair view of the state of the group’s and of
the parent company’s affairs as at 31 December 2017 and
of the group’s profit for the year then ended;
– the group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
– the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union as applied in accordance with the provisions
of the Companies Act 2006; and
– the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006, and,
as regards the group financial statements, Article 4 of the
IAS Regulation.
We have audited the financial statements
of Sabre Insurance Group plc which comprise:
Group
Consolidated Statement of
Comprehensive income for the
year ended 31 December 2017
Parent Company
Statement of Financial Position
as at 31 December 2017
Consolidated Statement of Financial
Position as at 31 December 2017
Statement of Changes in Equity
as at 31 December 2017
Consolidated Statement of Cash Flows
for the year ended 31 December 2017
Statement of Cash Flows
as at 31 December 2017
Consolidated Statement of Changes
in Equity for the year ended
31 December 2017
Related notes 1 to 11 to the financial
statements, including a summary of
significant accounting policies
Related notes 1 to 32 to the financial
statements, including a summary of
significant accounting policies
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report below. We
are independent of the group and parent company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Use of our report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 62
Independent
Auditor’s report
continued
Conclusions relating to principal risks, going
concern and viability statement
We have nothing to report in respect of the following information in
the annual report, in relation to which the ISAs (UK) require us to report
to you whether we have anything material to add or draw attention to:
– the disclosures in the annual report set out on page 22 that describe
the principal risks and explain how they are being managed or
mitigated;
– the directors’ confirmation set out on page 23 in the annual report
that they have carried out a robust assessment of the principal risks
facing the entity, including those that would threaten its business
model, future performance, solvency or liquidity;
– the directors’ statement set out on page 60 in the financial
statements about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the entity’s ability to
continue to do so over a period of at least twelve months from
the date of approval of the financial statements;
– whether the directors’ statement in relation to going concern
required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained
in the audit; or
– the directors’ explanation set out on page 26 in the annual report
as to how they have assessed the prospects of the entity, over what
period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the entity will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Overview of our audit approach
Key audit matters
– Valuation of Insurance liabilities (Gross and Net IBNR)
Audit scope
– We performed an audit of the complete financial
information of the whole Group and Sabre Insurance
Company Limited.
– The components where we performed full audit
procedures accounted for 100% of Profit before tax
(“PBT”), 100% of gross written premium and 100%
of Total items.
Risk
Valuation of Insurance liabilities (£242.4m gross and £139.4m net,
PY comparative £182.9m gross and £136.2m net value).
– Refer to the Audit and Risk Committee Report (page 41); Accounting
policies (page 70); and Note 24 of the Consolidated Financial Statements
(page 86).
– Management is required to make an estimation of Insurance liabilities.
– This estimate consists of a provision for additional development in
excess of the case reserves reported by insureds or ceding companies,
as well as a provision for claims which have occurred but which have
not yet been reported.
– There is a risk that inappropriate assumptions or projections are used.
This could lead to insurance liabilities not falling within a reasonable
range of possible estimates, resulting in a misstatement in the
financial statements.
– These balances, by nature, are also subject to a risk of management
manipulation. Given the magnitude of the balance, a small manipulation of
an assumption could have a significant impact on the financial statements.
Our response to the risk
Utilising our actuarial specialist we performed the following procedures:
Control design and implementation: We gained a detailed
understanding of the end to end reserving and claims process and
assessed the design and implementation of key controls within the
Group’s reserving and claims processes. We evaluated the competence,
capabilities and objectivity of the Sabre internal actuaries, based on
discussions with them, our knowledge of their qualification and the
professional standards that their work is subject to.
Market knowledge and benchmarking: We evaluated management’s
methodology against market practice and challenged management’s
assumptions and their assessment of major sensitivities, based on our
market knowledge and industry data where available.
Independent re‑projections and sensitivity analysis: We
independently re-projected the Insurance liabilities on both a gross and
net basis, investigated significant differences between our projections
and those of management and we then considered whether the insurance
liabilities held as at 31 December 2017 fall within a reasonable range of
possible estimates. We have compared management estimates to both
a paid and incurred chain ladder approach to identify if they show
contradictory conclusion that would result in management’s best
estimate lying outside our reasonable range.
Materiality
– Overall group materiality of £3.2m which represents 5%
of PBT excluding exceptional items.
In addition to the above we have performed procedures to assess the
completeness and accuracy of data which include:
Key audit matters
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a
whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
Test of details: Re-performed reconciliations between the claims paid
and outstanding data recorded in the policy administration systems and
the data used in the actuarial calculations.
For a sample of claims paid and outstanding we corroborated
the paid claims and outstanding back to supporting 3rd party evidence
including bank statements for paid claims and for a sample of outstanding
claims we agreed this back to supporting evidence where possible and
rationale behind how the claims have been defined.
Review of disclosure in the financial statements: We have
audited the insurance liabilities disclosures in the financial statements
to ensure they are consistent with underlying records and applicable
accounting standards.
Key observations communicated to the Audit Committee
We consider that managements judgements in the areas highlighted are
reasonable. The group’s booked insurance liabilities lie within what we
consider to be a reasonable range of estimates.
In addition we consider that the disclosures made are satisfactory, and
they provide information that assists in understanding the uncertainty
inherent in the valuation of insurance liabilities.
Sabre Insurance Group plc Annual Report and Accounts 2017 63
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our
allocation of performance materiality determine our audit scope for
each entity within the Group. Taken together, this enables us to form an
opinion on the consolidated financial statements. We take into account
size, risk profile, the organisation of the group and effectiveness of
group-wide controls, changes in the business environment and other
factors such as recent Internal audit results when assessing the level of
work to be performed at each entity.
In assessing the risk of material misstatement to the Group financial
statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, we have selected
Sabre Insurance Company Limited which represent the principle trading
entity within the Group and whole Group. We performed an audit of the
complete financial information of Sabre Insurance Company Limited
and whole group (“full scope components”) which was selected based
on is size or risk characteristics.
Our application of materiality
We apply the concept of materiality in planning and performing the
audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in
the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a
basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £3.2 million, which is
5% of profit before tax excluding exceptional items which related
directly to the Initial Public Offering of Sabre Insurance Group Limited.
Our aim is that materiality should not exceed 5% of profit before tax
for the annual period. We base our materiality on PBT performance
measure as this is the key metric used by management in measuring
and reporting on the performance of the business. We have adjusted
PBT only for exceptional items which we considered to be non-
recurring. This provided a basis for determining the nature, timing and
extent of risk assessment procedures, identifying and assessing the
risk of material misstatement and determining the nature, timing and
extent of further audit procedures.
During the course of our audit, we reassessed initial materiality and
concluded that materiality assessed at the planning stages of our audit
remained appropriate.
Performance materiality
The application of materiality at the individual account or balance level. It
is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together with our assessment
of the Group’s overall control environment, our judgement was that
performance materiality was 50% of our planning materiality, namely
£1.6m. Our objective in adopting this approach is to ensure that total
uncorrected and undetected audit difference do not exceed our
materiality of £3.2m for the financial statements as a whole.
Reporting threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to
them all uncorrected audit differences in excess of £0.2m, which is set
at 5% of planning materiality, as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual
report set out on pages 1 - 60, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other
information.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement
in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of the other information,
we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in the
other information and to report as uncorrected material misstatements
of the other information where we conclude that those items meet
the following conditions:
– Fair, balanced and understandable set out on page 60 – by
the directors that they consider the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the group’s performance, business model and strategy, is materially
inconsistent with our knowledge obtained in the audit; or
– Audit committee reporting set out on page 40; or
– Directors’ statement of compliance with the UK Corporate
Governance Code set out on page 36 – the parts of the directors’
statement required under the Listing Rules relating to the company’s
compliance with the UK Corporate Governance Code containing
provisions specified for review by the auditor in accordance with
Listing Rule 9.8.10R(2) do not properly disclose a departure from
a relevant provision of the UK Corporate Governance Code.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 64
Independent
Auditor’s report
continued
Opinions on other matters prescribed by the Companies
Act 2006
In our opinion, the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
– the Strategic Report and the Directors’ Report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic
Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in
our opinion:
– adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
– the parent company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law are
not made; or
– we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement
set out on page 60, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group and parent company’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 the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of these financial statements.
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and
assess the risks of material misstatement of the financial statements
due to fraud; to obtain sufficient appropriate audit evidence regarding
the assessed risks of material misstatement due to fraud, through
designing and implementing appropriate responses; and to respond
appropriately to fraud or suspected fraud identified during the audit.
However, the primary responsibility for the prevention and detection
of fraud rests with both those charged with governance of the entity
and management; and in respect to irregularities, considered to be
non-compliance with laws and regulations, are to obtain sufficient
appropriate audit evidence regarding compliance with the provisions
of those laws and regulations generally recognized to have a direct
effect on the determination of material amounts and disclosures in the
financial statements (‘direct laws and regulations’), and perform other
audit procedures to help identify instances of non-compliance with
other laws and regulations that may have a material effect on the
financial statements. We are not responsible for preventing non-
compliance with laws and regulations and our audit procedures cannot
be expected to detect non-compliance with all laws and regulations.
Our approach was as follows:
– We obtained a general understanding of the legal and regulatory
frameworks that are applicable to the group and determined that
the direct laws and regulations related to elements of group law
and tax legislation, and the financial reporting framework. Our
considerations of other laws and regulations that may have a
material effect on the financial statements included permissions
and supervisory requirements of the Prudential Regulation Authority
(‘PRA’) and the Financial Conduct Authority (‘FCA’).
– We obtained a general understanding of how group complies
with these legal and regulatory frameworks by making enquiries
of management, internal audit, and those responsible for legal and
compliance matters. We also reviewed correspondence between
the Company and UK regulatory bodies; reviewed minutes of the
Board and Executive Risk Committee; and gained an understanding
of the Company’s approach to governance, demonstrated by the
Board’s approval of the Company’s governance framework and the
Board’s review of the Group’s risk management framework (‘RMF’)
and internal control processes.
– For direct laws and regulations, we considered the extent
of compliance with those laws and regulations as part of
our procedures on the related financial statement items.
– For both direct and other laws and regulations, our procedures
involved: making enquiry of those charged with governance and
senior management for their awareness of any non-compliance
of laws or regulations, inquiring about the policies that have been
established to prevent non-compliance with laws and regulations
by officers and employees, inquiring about the group’s methods of
enforcing and monitoring compliance with such policies, inspecting
significant correspondence with the FCA and PRA.
Sabre Insurance Group plc Annual Report and Accounts 2017 65
– The Group operates in the insurance industry which is a highly
regulated environment. As such the Senior Statutory Auditor
considered the experience and expertise of the engagement team
to ensure that the team had the appropriate competence and
capabilities, which included the use of specialists where appropriate.
– We assessed the susceptibility of the Group’s financial statements
to material misstatement, including how fraud might occur, by
considering the controls that the Group has established to address
risks identified by the entity, or that otherwise seek to prevent, deter
or detect fraud. We also considered areas of significant judgement,
complex transactions, performance targets, economic or external
pressures and the impact these have on the control environment.
Where this risk was considered to be higher, we performed audit
procedures to address each identified fraud risk. These procedures
included testing manual journals and were designed to provide
reasonable assurance that the financial statements were free from
fraud or error.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Other matters we are required to address
– We were appointed by the company on 8 March 2018 to audit
the financial statements for the year ending 31 December 2017
and subsequent financial periods.
– The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company and we
remain independent of the group and the parent company in
conducting the audit.
– The audit opinion is consistent with the additional reporting to
the audit committee
Stuart Wilson (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
21 March 2018
1. The maintenance and integrity of the Sabre Insurance plc web site is the responsibility
of the directors; the work carried out by the auditors does not involve consideration of
these matters and, accordingly, the auditors accept no responsibility for any changes that
may have occurred to the financial statements since they were initially presented on the
web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 66
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
Gross earned premium
Reinsurance premium ceded
Net earned premium
Investment return
Instalment income
Other operating income
Total income
Insurance claims
Insurance claims recoverable from reinsurers
Net insurance claims
Commission expenses
Operating expenses
Total expenses
Operating profit before exceptional items and amortisation of intangible assets
Exceptional items
Amortisation of intangible assets
Profit before tax
Tax charge
Profit for the year attributable to the owners of the Company
Other comprehensive Income
Total other comprehensive income for the year
Total comprehensive income for the year attributable to the owners of the Company
Basic earnings per share (pence per share)
Diluted earnings per share (pence per share)
The attached notes on pages 70 to 91 form an integral part of these financial statements.
Notes
4
4
5
6
7
7
8
9
10
2017
£’k
203,139
(16,273)
186,866
(749)
3,837
1,893
191,847
(151,456)
58,544
(92,912)
(16,884)
(18,110)
(34,994)
63,941
(7,542)
(887)
55,512
(10,169)
45,343
–
45,343
14.50
14.50
2016
£’k
191,773
(9,666)
182,107
3,478
3,433
2,242
191,260
(112,245)
19,524
(92,721)
(16,349)
(17,139)
(33,488)
65,051
–
(1,619)
63,432
(11,139)
52,293
–
52,293
16.99
16.99
Sabre Insurance Group plc Annual Report and Accounts 2017
Consolidated Statement of Financial Position
As at 31 December 2017
Assets
Goodwill
Intangible assets
Property, plant and equipment
Reinsurance assets
Deferred tax assets
Deferred acquisition costs
Insurance and other receivables
Prepayments, accrued income and other assets
Financial investments
Cash and cash equivalents
Total assets
Equity
Issued ordinary share capital
Issued preference share capital
Share premium account
Own shares
Merger reserve
Retained earnings
Total equity
Liabilities
Insurance liabilities
Unearned premium reserve
Trade and other payables including insurance payables
Deferred tax liabilities
Current tax liabilities
Accruals
Total liabilities
Total equity and liabilities
67
Notes
2017
£’k
2016
£’k
22
23
14
15
12
16
17
18
19
20
21
24
24
25
12
11
26
156,279
156,279
501
3,874
110,488
20
14,673
38,808
2,854
244,031
34,425
605,953
249
–
205,241
1
48,404
(21,902)
231,993
242,388
105,122
15,876
–
907
9,667
373,960
605,953
1,388
4,034
51,529
–
14,028
37,042
2,166
234,290
10,492
511,248
45,396
202,719
–
–
–
(35,299)
212,816
182,941
97,525
9,108
5
3,077
5,776
298,432
511,248
The attached notes on pages 70 to 91 form an integral part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 21 March 2018.
Signed on behalf of the Board of Directors by:
Adam Westwood
Director
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
68
Consolidated Statement of Cash Flows
for the year ended December 2017
Net cash generated from operating activities before investment of insurance assets
Cash used by investment of insurance assets
Net cash generated from/(used by) operating activities
Notes
29
Cash flows from investing activities
Purchases of property, plant and equipment
Net cash used by investing activities
Cash flows from financing activities
Issue of ordinary share capital
Redemption of preference shares
Redemption of ordinary share capital
Corporate reorganisation
Dividends paid
Net cash used by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the end of the year
2017
£’k
60,666
(10,490)
50,176
(77)
(77)
205,333
(202,719)
–
2,916
(31,696)
(26,166)
10,492
23,933
34,425
2016
£’k
49,816
(52,813)
(2,997)
(1,775)
(1,775)
532
–
(200)
–
(55,908)
(55,576)
70,840
(60,348)
10,492
Sabre Insurance Group plc Annual Report and Accounts 2017
69
Consolidated Statement of Changes in Equity
for the year ended December 2017
Ordinary
shareholders’
Preference
share
equity
£’k
45,064
capital
£’k
202,719
Notes
Share
premium
account
£’k
Own
shares
£’k
Merger
reserve
£’k
Retained
earnings
£’k
Total
equity
£’k
–
–
–
532
(200)
–
–
–
–
–
–
–
45,396
202,719
–
–
–
250
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
–
–
–
–
–
–
–
–
48,404
48,404
(31,684)
216,099
52,293
52,293
–
–
52,293
52,293
–
–
(55,908)
(35,299)
45,343
–
532
(200)
(55,908)
212,816
45,343
–
45,343
45,343
(250)
–
(31,696)
(31,696)
–
5,530
(21,902)
231,993
Establishment of Sabre Insurance Group plc
Dividends
Corporate reorganisation
Balance at 31 December 2017
28
13
28
(45,397)
(202,719)
249
–
205,241
205,241
Balance at 1 January 2016
Profit for the year
Other comprehensive income
Total comprehensive income
Shares issued
Shares redeemed
Dividends
Balance at 31 December 2016
Profit for the year
Other comprehensive income
Total comprehensive income
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
70
Notes to the Consolidated Financial Statements
As at 31 December 2017
Corporate information
Sabre Insurance Group plc is a company incorporated in England and Wales. The address of the registered office is Sabre House, 150 South
Street, Dorking, Surrey, RH4 2YY, England. The nature of the Group’s operations is the writing of general insurance for motor vehicles. The
Company’s principal activity is that of a holding company. All of the Company’s subsidiaries are located within the United Kingdom, and share a
registered office with the Company, with the exception of Barbados TopCo Limited, which is located in Guernsey, registered office Heritage Hall,
Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.
1. Accounting policies
1.1 Corporate reorganisation
Sabre Insurance Group plc was incorporated as a limited company on 21 September 2017. On 11 December 2017, Sabre Insurance Group plc
acquired the entire share capital of the former ultimate holding company of the Group, Barbados TopCo Limited. Sabre Insurance Group plc was
introduced as a new parent to the Sabre Insurance Group by the principal investors who were the same before and after the reorganisation.
Sabre Insurance Group plc’s ordinary shares were admitted to trading on the London Stock Exchange on 11 December 2017. On the basis
that the transaction was effected by creating a new parent that is itself not a business, the transaction is considered to be outside the scope of
IFRS 3 Business Combinations. It has therefore been accounted for using the pooling of interest method as a continuation of the existing Group.
The result is that the Consolidated Financial Statements of Sabre Insurance Group plc are the same as those previously presented by Barbados
TopCo Limited, except for the share capital being that of Sabre Insurance Group plc.
1.2 Basis of preparation
These financial statements present the Sabre Insurance Group plc group financial statements for the year ended 31 December 2017, comprising
the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity,
consolidated statement of cash flows and related notes, as well as the comparatives.
The financial statements of the Group have been prepared in accordance and fully comply with International Financial Reporting Standards
(IFRSs), as issued by the International Accounting Standards Board (IASB) and adopted by the EU.
The financial statements have been prepared on an historical cost basis, except for investment properties and those financial assets that have
been measured at fair value.
The financial statements values are presented in Pounds Sterling (£) rounded to the nearest thousand (£’k), unless otherwise indicated.
The Group presents its statement of financial position in order of liquidity. An analysis regarding recovery or settlement within 12 months after
the reporting date (current) and more than 12 months after the reporting date (non-current) is presented in the respective notes.
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position only when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settled the
liability simultaneously.
As permitted by IFRS 4 Insurance Contracts, the Group continues to apply the existing accounting policies that were applied prior to the adoption
of IFRS, with certain modifications allowed by the standard effective subsequent to adoption for its insurance contracts.
1.3 Summary of significant accounting policies
(a) Premiums
Insurance and reinsurance written premiums comprise all amounts during the financial year in respect of contracts entered into regardless of the
fact that such amounts may relate in whole or in part to a later financial year. All premiums are shown gross of commission payable to
intermediaries (where applicable) and are exclusive of taxes, duties and levies thereon. Insurance and reinsurance premiums are adjusted by an
unearned premium provision which represents the proportion of premiums that relate to periods of cover after the balance sheet date as
described in (b) below.
Insurance liabilities
(b)
Claims incurred include all losses occurring through the year, whether reported or not, related handling costs and any adjustments to claims
outstanding from previous years. Significant delays are experienced in the notification and settlement of certain claims, particularly in respect of
liability claims, the ultimate cost of which cannot be known with certainty at the balance sheet date. Reinsurance recoveries (or amounts due
from reinsurers) are accounted for in the same period as the related claim.
(i)
(ii)
Unearned premiums are those proportions of the premiums written in a year that relate to the periods of risk subsequent to the balance
sheet date. They are computed principally on a daily pro-rata basis.
The provision for claims outstanding includes individual case estimates, an incurred but not reported (“IBNR”) provision and a provision for
related claims handling costs. When claims are initially reported, case estimates are set at fixed levels based on previous average claims
settlements. As soon as sufficient information becomes available, the case estimate is amended by a claim handler within the Claims
Department to reflect the expected ultimate settlement cost of the claim, including external claims handling costs. The case estimate will
be amended throughout the life of a claim as further information emerges. Case estimates generally do not allow for possible reductions
in our liability due to contributory negligence, favourable court judgments or settlements until these are known to a high probability.
The IBNR provision includes the estimated cost of claims incurred, but not reported, at the balance sheet date (“pure IBNR”) and any
difference between the case estimates and the estimated ultimate cost of reported claims (“IBNER”). The IBNR is set after considering
the results of various statistical methods based on, inter alia, historical claims development trends, average claims costs and expected
inflation rates. The provision for claims handling costs is estimated based on the number of outstanding claims at the balance sheet date
and the estimated average internal cost of settling claims.
Sabre Insurance Group plc Annual Report and Accounts 2017
71
The provision for claims outstanding is based on information available at the balance sheet date. Significant delays are experienced in the
notification and settlement of certain claims and accordingly the ultimate cost of such claims cannot be known with certainty at the
balance sheet date. Subsequent information and events may result in the ultimate liability being less than, or greater than, the amount
provided. Any differences between provisions and subsequent settlements are dealt with in the consolidated statement of comprehensive
income. Claims provisions are not discounted, with the exception of PPOs (periodic payment orders), which are discussed more fully in
Note 2.1.
(iii)
Provision is made for unexpired risks when, after taking account of an element of attributable investment income, it is anticipated that the
unearned premiums will be insufficient to cover future claims and expenses on existing contracts. The expected claims are calculated
having regard to events which have occurred prior to the balance sheet date. Unexpired risk surpluses and deficits are offset when
business classes are managed together and a provision is made if an aggregate deficit arises.
(c) Deferred acquisition costs
Deferred acquisition costs represent a proportion of commission and other acquisition costs that relate to policies that are in force at the year
end. Deferred acquisition costs are amortised over the period in which the related premiums are earned. Such costs are identified as being
directly attributable to the acquisition of business, or are indirectly attributed to acquisition activity through an allocation exercise.
Investment income, realised and unrealised investment gains and losses
(d)
Investment income consists of interest receivable for the year. Income is credited to the consolidated statement of comprehensive income
at the amounts receivable, with no associated tax credit for income from the United Kingdom. Interest receivable is accounted for on an
accruals basis.
Net realised gains / (losses) on investments are calculated as the difference between net sales proceeds and the cost of acquisition.
Unrealised gains / (losses) on investments represent the difference between the carrying value at the year end and the carrying value at the
previous year end or purchase value during the year. Net movements in the year are taken to the profit and loss account and disclosed as
unrealised gains / (losses) on investments.
Investment expense and charges
(e)
Investment expenses and charges consist of the expenses relating to the management of the investment portfolio.
Taxation
(f)
The taxation charge in the income statement is based on the taxable profits for the year. It is Company policy to relieve profits where possible
by the surrender of losses from Group companies with payment for value.
Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where
transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with
the following exception.
Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse,
based on tax rates and laws enacted or substantively enacted at the balance sheet date.
(g) Valuation of investments
Listed securities and equities at market bid price at the date of the statement of financial position less accrued interest where applicable.
Financial investments are classified according to their nature and use. All financial investments held by the Company are classified as being
held at fair value through the statement of comprehensive income. While it is the Company’s intention to hold the bonds within its portfolio to
maturity, the Company recognises that certain assets may be sold in the normal course of business in order to enhance short-term liquidity.
The Company invests only in financial assets which are quoted on liquid markets, therefore all investments are classified as ‘Level 1’ under the
IFRS hierarchy.
(h) Tangible assets
Expenditure on computer equipment and fixtures and fittings is capitalised and depreciated over five years, the estimated useful economic
lives of the assets on a straight line basis. Depreciation is charged to the consolidated statement of comprehensive income and is included in
administrative expenses. Owner-occupied property is held at fair value, with subsequent revaluation gains taken through other comprehensive
income. A fair value assessment of the owner-occupied property is undertaken at each reporting date with any material changes in fair value
recognised. Owner-occupied property is also revalued by an external qualified surveyor, at least every three years.
(i) Goodwill
Goodwill only arises upon a business combination and is initially measured as the residual cost of the business combination after recognising
the acquiree’s identifiable assets, liabilities and contingent liabilities. After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated
to each of the Group’s cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other
assets or liabilities of the acquiree are assigned to those units.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
72
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
1. Accounting policies continued
(j) Intangible assets
Acquired businesses are reviewed to identify assets that meet the definition of an intangible asset in accordance with IAS 38 ‘Intangible Assets’.
The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. The useful economic lives of
intangibles assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that
the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are
reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the consolidated statement of
comprehensive income in the expense category consistent with the function of the intangible asset.
Intangible assets relating to customer relationships are amortised over a five-year period.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such
intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life
assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the consolidated statement of comprehensive income when the asset is derecognised.
(k) Pensions
For staff who were employees on 8 February 2002, the Company operates a non-contributory defined contribution Company personal pension
scheme. The contribution by the Company depends on the age of the employee.
For employees joining since 8 February 2002, the Company operates a matched contribution Company personal pension scheme where the
Company contributes an amount matching the contribution made by the staff member.
Contributions to defined contribution schemes are recognised in the consolidated statement of comprehensive income in the period in which
they become payable.
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits with banks together with short-term highly liquid investments that are
readily convertible to known amounts of cash and subject to insignificant risk of change in value.
Insurance and other receivables
(m)
Insurance and other receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or
receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective interest rate method. The
carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not
be recoverable, with the impairment loss recorded in the statement of comprehensive income.
(n) Trade and other payables, including insurance payables
Trade and other payables consist primarily of reinsurance balances and indirect taxes due. Reinsurance payables represent premiums payable to
reinsurers in respect of contracts which have been entered into at the date of the financial position.
Instalment income
(o)
Instalment income comprises the interest income earned on policyholder receivables, where outstanding premiums are settled by a series of
instalment payments. Interest is earned over the term of the policy using the effective interest method.
(p) Other operating income
Other operating income consists of marketing fees, commissions resulting from the sale of ancillary products connected to the Group’s direct
business, and other non-insurance income such as administrative fees charged on direct business. Such income is recognised once the related
service has been performed. Typically, this will be at the point of sale of the product.
(q) Basis of consolidation
The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. Subsidiaries are entities over which the Group has control. Subsidiary companies are
consolidated using the acquisition method. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group
obtained control, and continue to be consolidated until the date when such control ceases. In preparing these consolidated financial statements,
any intra-group balances, unrealised gains and losses or income and expenses arising from intra-group trading are eliminated. Where accounting
policies used in individual financial statements of a subsidiary company differ from Group policies, adjustments are made to bring these policies
in line with Group policies.
Sabre Insurance Group plc Annual Report and Accounts 2017 73
(r) Share-based payments
The fair value of equity instruments granted under share-based payment plans are recognised as an expense and spread over the vesting period
of the instrument. The total amount to be expensed is determined by reference to the fair value of the awards made at the grant date, excluding
the impact of any non-market vesting conditions. At the date of each statement of financial position, the Group revises its estimate of the
number of equity instruments that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in
the income statement, and a corresponding adjustment is made to equity over the remaining vesting period. The fair value of the awards and
ultimate expense are not adjusted on a change in market vesting conditions during the vesting period.
(s) Earnings per share
Basic earnings per share are calculated by dividing profit after tax attributable to equity shareholders of the parent company by the weighted
average number of ordinary shares in issue during the period. Diluted earnings per share requires that the weighted average number of ordinary
shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These arise from awards made under share-based
incentive schemes. Share awards with performance conditions attaching to them are not considered to be dilutive unless these conditions have
been met at the reporting date. Shares held in employee share trusts are excluded from the weighted average number of shares in issue until
they have vested unconditionally with the employees.
1.4 New standards, amendments and interpretations not yet effective and not early adopted
At the date of authorisation of these financial statements, the following standards and interpretations were assessed to be relevant and are
effective for annual periods beginning on or after 1 January 2018:
Description
Effective date (period beginning)
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 9 Financial Instruments
IFRS 17 Insurance Contracts
1 January 2018
1 January 2019
1 January 2021 (Deferred elected)
1 January 2021
The Group intends to adopt the standards and interpretations in the reporting period when they become effective. The Board does not anticipate
that the adoption of these standards and interpretations in future periods will materially impact the Group’s financial results in the period of initial
application although there will be revised presentations to the financial statements and additional disclosures.
The Group has not early adopted these standards and their impact is yet to be fully assessed. However, based on the Directors’ current
assessment, the impact is not expected to be significant. IFRS 17 was released in May 2017; therefore the Directors are yet to assess the
implications of this standard on the subsequent financial reporting of the Group.
IFRS 9 Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and
Measurement and all previous versions of IFRS 9 and which was endorsed by the EU in 2016. IFRS 9 addresses the classification, measurement
and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial
assets and is effective for annual periods beginning on or after 1 January 2018. The Board does not anticipate that the introduction of this
standard would have a material impact on the Group’s financial results. In September 2016, the IASB published amendments to IFRS 4 Insurance
Contracts that address the accounting consequences of the application of IFRS 9 to insurers prior to the adoption of IFRS 17, the forthcoming
accounting standard for insurance contracts. The amendments to IFRS 4 include a deferral approach that provides an entity, if eligible, with a
temporary exemption from applying IFRS 9 until 1 January 2021. The Group is eligible to apply the deferral approach. The Group expects to take
advantage of this deferral approach and delay its adoption of IFRS 9 until 1 January 2021 to align with the effective date of IFRS 17 as introduced
by the amendments to IFRS 4 Insurance Contracts.
IFRS 17 Insurance Contracts
The effective date for IFRS 17 is 1 January 2021. Following the issuance of the full and final version of IFRS 17, the Group plans to perform a
detailed impact assessment of the implementation of IFRS 17 and IFRS 9 on its results, financial position and cash flows during 2018.
IFRS 16 Leases
IFRS 16 is effective for periods beginning on or after 1 January 2019. The standard provides a single lessee accounting model, requiring lessees
to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. This is in
contrast to the current standard which differentiates between operating and finance leases. The Group’s current analysis is that this will not have
a material impact on the Group’s results.
IFRS 15 Revenue from Contract with Customers
IFRS 15 is effective for periods beginning on or after 1 January 2018. The standard specifies how and when an IFRS reporter will recognise
revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures. The standard
provides a single, principles based five-step model to be applied to all contracts with customers. The Group’s current analysis is that this will not
have a material impact on the Group’s results.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 74
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
2. Critical accounting estimates and judgements
2.1 Valuation of insurance contracts
For the valuation of insurance contracts, estimates are made both for the expected ultimate cost of claims reported at the reporting date,
consisting of a claims reserve and estimate of the sufficiency of these reserves (through the calculation of an Incurred But Not Enough Reported
(IBNER) estimate, and for the expected ultimate cost of claims incurred, but not yet reported, at the reporting date (IBNR). It can take a
significant period of time before the ultimate claims cost can be established with certainty.
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 the Company’s past claims development
experience can be used to project future claims development and hence ultimate claims costs. As such, these methods extrapolate the
development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and
expected loss ratios. Historical claims development is analysed by accident years and types of claim. 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 likely
outcome from the range of possible outcomes, taking account of all the uncertainties involved.
The gross carrying value at the reporting date of insurance liabilities is £242,388k (2016: £182,941k).
Liability claims may be settled through a Periodic Payment Order (“PPO”), established under the Courts Act 2003, which allows a UK court to
award damages for future loss or any other damages in respect of personal injury. The court may order that the damages either partly or fully
take the form of a PPO. To date, the Company has two PPOs within its outstanding claims reserve. Reinsurance is applied at the claim level, and
therefore as PPOs generally result in a liability in excess of the Company’s reinsurance retention, the net liability on acquisition of a PPO is not
significantly different to that arising in a non-PPO situation. Management will continue to monitor the level of PPO activity. Once the level of
projected PPO activity, and the volume of historical data available for modelling, becomes sufficient the firm will apply statistical modelling in
respect of PPOs within the IBNR reserve.
3. Risk management
3.1 Risk and capital management
The Board of Directors has ultimate responsibility for ensuring that the Group has sufficient funds to meet its liabilities as they fall due. The
Group carries out detailed modelling of its assets and liabilities and the key risks to which these are exposed. This modelling includes the Group’s
own assessment of its capital requirements for solvency purposes. Prior to 1 January 2016 the assessment was submitted to the PRA as the
Individual Capital Assessment (“ICA”). The ICA quantified the insurance market, counterparty, liquidity and operational risk within the Group.
From 1 January 2016, the Group has managed its solvency with reference to the Solvency Capital Requirement (“SCR”) calculated using the
Standard Formula. The Group has developed sufficient processes to ensure that the capital requirements under Solvency II are not breached,
including the maintenance of capital at a level higher than that required through the Standard Formula. In previous years Sabre Insurance
Company Limited managed its capital position on both a Solvency II basis and on the previous regulatory basis. From 1 January 2016, the Group
considers its capital position to be its net assets on a Solvency II basis and monitors this in the context of the Solvency II SCR. As at 31
December 2017, the Company holds significant excess Solvency II capital.
The Group’s IFRS capital comprised:
Equity
Ordinary share capital
Preference share capital
Share premium
Own shares
Merger reserve
Retained earnings
Total
The Solvency II position of the Group is given below:
Total tier 1 capital
SCR
Excess capital
Solvency coverage ratio (%)
As at
31 December
2017
£’k
As at
31 December
2016
£’k
249
–
205,241
1
48,404
(21,902)
231,993
45,396
202,719
–
–
–
(35,299)
212,816
As at
31 December
2017
£’k
97,873
61,087
36,786
160%
As at
31 December
2016
£’k
74,283
57,852
16,431
128%
Sabre Insurance Group plc Annual Report and Accounts 2017 The following table sets out a reconciliation between IFRS net assets and Solvency II net assets:
Adjusted IFRS net assets
Unearned premium reserve
Deferred acquisition costs
Solvency II premium provision
IFRS risk margin (1)
Discount claims provision
Solvency II risk margin
Change in deferred tax
Solvency II net assets
75
As at
31 December
2017
£’k
As at
31 December
2016
£’k
75,213
105,122
(14,673)
(68,199)
12,389
1,822
(8,486)
(5,315)
97,873
54,638
97,525
(14,028)
(63,562)
12,004
1,604
(8,987)
(4,911)
74,283
(1) In line with industry practice, the IFRS risk margin is an explicit additional reserve in excess of the actuarial best estimate which is designed to create a margin held in reserves to allow for
unforeseen adverse development in open claims.
The adjustments set out above have been made for the following reasons:
– Adjusted IFRS net assets: Equals Group net assets on an IFRS basis, less goodwill and intangibles.
– Removal of unearned premium reserve and deferred acquisition costs: The unearned premium reserve must be added back as premium
and deferred acquisition costs must be removed as they are not deferred under Solvency II.
– Solvency II premium provision: A premium reserve reflecting the future cash in and outflows in respect of insurance contracts is calculated
and this must be discounted under Solvency II.
– IFRS risk margin: Solvency II reserves must reflect a true “best estimate” basis. Therefore, the IFRS risk margin is removed from the
claims reserve.
– Discount claims provision: The provision held against future claims expenditure for claims incurred is discounted in the same way as the
Solvency II premium provision.
– Solvency II risk margin: The Solvency II risk margin represents the premium that would be required were the Group to transfer its technical
provisions to a third party, and essentially reflects the SCR required to cover run-off of claims on existing business. This amount is calculated
by the Group through modelling the discounted SCR on a projected future balance sheet for each year of claims run-off.
– Change in deferred tax: As the move to a Solvency II basis balance sheet increases the net asset position of the Group, a deferred tax liability
is generated to offset the increase.
The Group’s SCR, expressed on a risk module basis, is set out in the following table:
Interest rate risk
Equity risk
Property risk
Spread risk
Currency risk
Concentration risk
Correlation impact
Market risk
Counterparty risk
Underwriting risk
Correlation impact
Basic SCR
Operating risk
Loss absorbing effect of deferred taxes
Total Solvency Capital Requirement
The Group’s capital management objectives are:
– to ensure that the Group will be able to continue as a going concern; and
– to maximise the income and capital return to its equity.
As at
31 December
2017
£’k
As at
31 December
2016
£’k
1,482
–
859
88
204
–
(815)
1,818
3,306
56,860
(2,982)
59,002
7,400
(5,315)
61,087
495
–
859
94
185
–
(519)
1,114
1,444
56,043
(1,591)
57,010
5,753
(4,911)
57,852
The Board monitors and reviews the broad structure of the Group’s capital on an ongoing basis. This review includes consideration of the extent
to which revenue in excess of that which is required to be distributed should be retained.
The Group’s objectives, policies and processes for managing capital have not changed during the historical period.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 76
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
3. Risk management continued
3.2 Principal risks from insurance activities and the use of financial instruments
The Strategic Report sets out the principal risks faced by the Group. Detailed below is the Group’s risk exposure arising from its insurance
activities and use of financial instruments specifically in respect of insurance risk, market risk and counterparty risk.
3.2.1 Underwriting
The Group has identified that, in general, recognition from revenue in insurance contracts can be complex. However, given the short-term nature
of the Group’s policies, this is not a source of material risk to the Group.
The principal risk the Group faces under insurance contracts is that the actual claims and benefit payments, or the timing thereof, differ from
expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long-term
claims. Therefore, the objective of the Group is to ensure that sufficient reserves are available to cover these liabilities.
The Group issues only motor insurance contracts, which usually cover 12 months’ duration. For these contracts, the most significant risks arise
from severe weather conditions or single catastrophic events. For longer-tail claims that take some years to settle, there is also inflation risk.
The above risk exposure is mitigated by diversification across a large portfolio of policyholders and geographical areas within the UK. The
variability of risks is improved by careful selection and implementation of underwriting strategies, which are designed to ensure that risks are
diversified in terms of type of risk and level of insured benefits. This is largely achieved through diversification across policyholders. Furthermore,
strict claim review policies to assess all new and ongoing claims, regular detailed review of claims handling procedures and frequent investigation
of possible fraudulent claims are all policies and procedures put in place to reduce the risk exposure of the Group. The Group further enforces a
policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can
negatively impact the business. Inflation risk is mitigated by taking expected inflation into account when estimating insurance contract liabilities.
The Group purchases reinsurance as part of its risk mitigation programme. Reinsurance ceded is placed on a non-proportional basis. This
non-proportional reinsurance is excess-of-loss, designed to mitigate the Group’s net exposure to single large claims or catastrophe losses.
Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the
reinsurance contracts. Although the Group has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus a
credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations assumed under such
reinsurance agreements. The Group’s placement of reinsurance is diversified such that it is not dependent on a single reinsurer. There is no
single counterparty exposure that exceeds 25% of total reinsurance assets at the reporting date.
Key assumptions
The principal assumption underlying the liability estimates is that the Group’s future claims development will follow a similar pattern to past
claims development experience. This includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and
claim numbers for each accident year. Additional qualitative judgements are used to assess the extent to which past trends may not apply in the
future, for example: one-off occurrence; changes in market factors such as public attitude to claiming: economic conditions; and internal factors
such as portfolio mix, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors
such as judicial decisions and government legislation affect the estimates.
Other key circumstances affecting the reliability of assumptions include variation in interest rates and delays in settlement.
Sensitivities
The motor claim liabilities are primarily sensitive to the reserving assumptions noted above. It has not been possible to quantify the sensitivity of
certain assumptions such as legislative changes or uncertainty in the estimation process.
The following analysis is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing
the impact on profit before tax and equity. The correlation of assumptions will have a significant effect in determining the ultimate claims
liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be
noted that movements in these assumptions are non-linear.
The table shows the impact of a 10% increase in the loss ratio applied to all underwriting years which have a material outstanding claims reserve
and a 10% increase in net outstanding claims across all underwriting years, taking into account the impact of an increase in the operational costs
associated with handling those claims.
At 31 December
Insurance risk
Impact of a 10% increase in loss ratio
Impact of a 10% increase in net outstanding claims and claims provision
Increase/(decrease)
in profit before tax
Increase/(decrease)
in total equity
2017
£’k
(13,228)
(11,511)
2016
£’k
(14,078)
(13,616)
2017
£’k
(13,228)
(11,511)
2016
£’k
(14,078)
(13,616)
Sabre Insurance Group plc Annual Report and Accounts 2017
77
3.2.2 Financial risks
(1) Counterparty credit risk
Counterparty credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an
obligation. The two main sources of counterparty risk for the Company are investment counterparties and reinsurance recoveries.
The following policies and procedures are in place to mitigate the Company’s exposure to credit risk:
– A Company credit risk policy which sets out the assessment and determination of what constitutes credit risk for the Company. Compliance
with the policy is monitored and exposures and breaches are reported to the Company’s Audit and Risk committee. The policy is regularly
reviewed for pertinence and for changes in the risk environment.
– Reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by following policy guidelines in
respect of counterparties’ limits that are set each year by the Board of Directors and are subject to regular reviews. At each reporting date,
management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable
allowance for impairment.
– The Company sets the maximum amounts and limits that may be advanced to corporate counterparties by reference to their long-term credit
ratings.
– The credit risk in respect of customer balances incurred on non-payment of premiums or contributions will only persist during the grace period
specified in the policy document or trust deed until expiry, when the policy is either paid up or terminated. Commission paid to intermediaries
is netted off against amounts receivable from them to reduce the risk of doubtful debts.
The following tables demonstrate the Company’s exposure to credit risk in respect of overdue debt and counterparty creditworthiness.
Overdue debt
At 31 December 2017
Reinsurance assets
Deferred tax assets
Insurance and other receivables
Corporate bonds
UK government debt
Cash at bank and in hand
Total
At 31 December 2016
Reinsurance assets
Insurance and other receivables
Corporate bonds
UK government debt
Cash at bank and in hand
Total
Neither past
due nor
impaired
£’k
Past due 1-90
days
£’k
Past due more
than 90 days
£’k
Assets that
have been
impaired
£’k
Carrying value
in the balance
sheet
£’k
110,488
20
38,806
547
243,484
34,425
427,770
–
–
–
–
–
–
–
–
–
2
–
–
–
2
–
–
–
–
–
–
–
110,488
20
38,808
547
243,484
34,425
427,772
Neither past
due nor
impaired
£’k
Past due 1-90
days
Past due more
than 90 days
£’k
Assets that
have been
impaired
£’k
Carrying value
in the balance
sheet
£’k
51,529
37,019
576
233,714
10,492
333,330
–
–
–
–
–
–
–
23
–
–
–
23
–
–
–
–
–
–
51,529
37,042
576
233,714
10,492
333,353
There were no material financial assets that would have been past due or considered for impairment at the year end.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 78
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
3. Risk management continued
Exposure by credit rating
At 31 December 2017
Reinsurance assets
Deferred tax assets
Insurance and other receivables
Corporate bonds
UK government debt
Short-term deposits with credit institutions
Cash at bank and in hand
Total
At 31 December 2016
Reinsurance assets
Insurance and other receivables
Corporate bonds
UK government debt
Cash at bank and in hand
Total
AAA
£’k
–
–
–
–
–
–
–
–
AAA
£’k
–
–
–
–
–
–
AA+ to
AA-
£’k
83,408
–
–
–
243,484
–
6,796
333,688
AA+ to
AA-
£’k
38,800
–
–
233,714
4
272,518
A+ to A-
£’k
27,080
–
–
–
–
–
–
27,080
A+ to A-
£’k
12,729
–
–
–
399
13,128
BBB+ to
BBB-
£’k
BB+ and
below
£’k
–
–
–
547
–
–
27,629
28,176
BBB+ to
BBB-
£’k
–
–
576
–
10,089
10,665
–
–
–
–
–
–
–
–
BB+ and
below
£’k
–
–
–
–
–
–
Not rated
£’k
–
20
38,511
–
–
–
–
38,531
Not rated
£’k
–
37,042
–
–
–
37,042
Total
£’k
110,488
20
38,511
547
243,484
–
34,425
427,475
Total
£’k
51,529
37,042
576
233,714
10,492
333,353
Credit rating is determined with reference to an external credit rating agency, primarily Standard and Poor’s.
(2) Liquidity risk
Liquidity risk is the potential that obligations cannot be met as they fall due as a consequence of having a timing mismatch or inability to raise
sufficient liquid assets without suffering a substantial loss on realisation. The Company manages its liquidity risk through both ensuring that it
holds sufficient cash and cash equivalent assets to meet all short-term liabilities, and matching the maturity profile of its financial investments to
the expected cash outflows.
The liquidity of the Company’s insurance liabilities and supporting assets is given in the tables below.
At 31 December 2017
Corporate bonds
UK government debt
Cash and cash equivalents
Insurance and other receivables
Total
Total
£’k
547
243,483
34,425
38,511
316,966
Within 1 year
£’k
1 – 3 years
£’k
3 – 5 years
£’k
5 – 10 years
£’k
Over 10 years
£’k
–
105,951
34,425
38,511
178,887
547
93,146
–
–
–
34,666
–
–
–
9,720
–
–
93,693
34,666
9,720
–
–
–
–
–
At 31 December 2017
Insurance liabilities
Trade and other payables including insurance payables
Total
At 31 December 2016
Corporate bonds
UK government debt
Cash and cash equivalents
Insurance and other receivables
Total
299,609
19,834
319,443
Total
£’k
576
233,714
10,492
37,042
281,824
Total
£’k
Within 1 year
£’k
3 – 5 years
£’k
5 – 10 years
£’k
Over 10 years
£’k
141,001
19,834
160,835
43,568
–
5,503
–
5,503
–
–
–
109,537
43,568
1 – 3 years
£’k
109,537
–
Within 1 year
£’k
1 – 3 years
£’k
3 – 5 years
£’k
5 – 10 years
£’k
Over 10 years
£’k
–
128,372
10,492
37,042
175,906
576
71,311
–
–
–
26,354
–
–
–
7,677
–
–
71,887
26,354
7,677
–
–
–
–
–
At 31 December 2016
Insurance liabilities
Trade and other payables including insurance payables
Total
Total
£’k
Within 1 year
£’k
1 – 3 years
£’k
3 – 5 years
£’k
5 – 10 years
£’k
Over 10 years
£’k
236,882
17,961
254,843
103,962
17,961
121,923
86,874
32,230
12,371
–
–
–
86,874
32,230
12,371
1,445
–
1,445
The above tables include the expected claims on unearned premiums within insurance liabilities. The maturity of insurance liabilities is based
upon an estimate of expected settlement date.
Sabre Insurance Group plc Annual Report and Accounts 2017 79
(3) Investment concentration risk
Excessive exposure to particular industry sectors or groups can give rise to concentration risk. The Company has no significant investment in any
particular industrial sector and therefore is unlikely to suffer significant losses through its investment portfolio as a result of over-exposure to
sectors engaged in similar activities or which have similar economic features that would cause their ability to meet contractual obligations to be
similarly affected by changes in economic, political or other conditions.
The Company’s portfolio consists primarily of UK government debt, therefore the risk of government default does exist, however the likelihood is
extremely remote. The Company continues to monitor the strength and security of these government bonds.
The Company’s exposure by geographical area is outlined below.
At 31 December 2017
UK
Total
At 31 December 2016
UK
Total
Corporate
£’k
547
547
Corporate
£’k
576
576
Sovereign
£’k
243,484
243,484
Sovereign
£’k
233,714
233,714
Total
£’k
244,031
244,031
Total
£’k
234,290
234,290
(4) Interest rate risk
Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value
interest risk. Currently the Company holds only fixed rate securities.
The Group’s interest risk policy requires it to manage the maturities of interest bearing financial assets and interest bearing financial liabilities.
Interest on fixed interest rate instruments is priced at inception of the financial instrument and is fixed until maturity.
The Group has no significant concentration of interest rate risk.
The analysis that follows is performed for reasonably possible movements in key variables with all other variables held constant, showing the
impact on profit before tax and equity. The correlation of variables will have a significant effect in determining the ultimate impact on interest rate
risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that
movements in these variables are non-linear.
Note that the Company’s investment portfolio has been designed such that the cash flows yielded from investments match the projected
outflows inherent primarily within the claims reserve. While these insurance liabilities are shown on an undiscounted basis under IFRS, their
economic value will move broadly in line with the underlying assets.
At 31 December
Interest rate
Increase/(decrease)
in profit after tax
Increase/(decrease)
in total equity
2017
£’k
2016
£’k
2017
£’k
2016
£’k
Impact of a 100 basis point increase in interest rates on financial investments
(1,984)
(4,539)
(1,984)
(4,539)
Owner-occupied property
Impact of a 15% decrease in property markets
(515)
(515)
(515)
(515)
3.2.3 Operational risk
Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational
risks can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. The Company cannot expect to eliminate
all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Company is able to
manage the risks. Controls include effective segregation of duties, access controls, authorisation and reconciliation procedures, staff education
and assessment processes, including the use of internal audit. Business risks such as changes in environment, technology and the industry are
monitored through the Group’s strategic planning and budgeting process.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
80
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
4. Net earned premium
Gross earned premium:
Gross written premium
Movement in unearned premium reserve
Reinsurance premium ceded:
Premium payable
Movement in unearned premium reserve
Total
2017
£’k
2016
£’k
210,736
(7,597)
203,139
(19,017)
2,744
(16,273)
186,866
196,619
(4,846)
191,773
(10,020)
354
(9,666)
182,107
Information is reported to the chief operating decision makers and the Board on an aggregated basis. Strategic and financial management
decisions are determined centrally by the Board. The company provides only one product to clients, which is motor insurance, which is written
solely in the UK. The company has no other lines of business, nor does it operate outside of the UK. The Gross Written Premium for the year is
£210,736k. Other income are relates to auxiliary products and services, including marketing and administration fees, all relating to the motor
insurance business. Refer to note 6. The Group does not have a single client which accounts for more than 10% of revenue.
5.
Investment return
Investment income:
Interest income from debt securities
Cash and cash equivalent interest income
Investment property income
Investment fees
Net realised gains/(losses)
Revaluation loss on investment property
Debt securities at fair value through profit and loss
Net unrealised gains/(losses)
Revaluation loss on investment property
Debt securities at fair value through profit and loss
Total
6. Other operating income
Marketing fees
Fee income from the sale of auxiliary products and services
Other technical income
Administration fees
Total
7. Net insurance claims
Current accident year claims paid
Prior accident year claims paid
Movement in insurance liabilities
Total
Gross
£’k
46,976
45,033
59,447
151,456
2017
Reinsurance
£’k
–
(2,328)
(56,216)
(58,544)
Net
£’k
46,976
42,705
3,231
92,912
Gross
£’k
44,856
44,712
22,677
112,245
2016
Reinsurance
£’k
–
(3,296)
(16,228)
(19,524)
Claims handling expenses for the year ended 31 December 2017 of £6,045k (2016: £5,878k) have been included in the above. Note that the
gross and net movements in insurance liabilities as at 31 December 2016 include amounts of £26,241k and £2,184k respectively directly related
to the increase in case reserves following the announcement of a reduction in the Ogden Discount Rate made in February 2017.
2017
£’k
2016
£’k
4,647
4,469
7
–
(76)
4,578
–
(944)
(944)
–
(4,383)
(4,383)
(749)
2017
£’k
1,040
131
–
722
1,893
182
3
(50)
4,604
–
(3,609)
(3,609)
(515)
2,998
2,483
3,478
2016
£’k
955
134
300
853
2,242
Net
£’k
44,856
41,416
6,449
92,721
Sabre Insurance Group plc Annual Report and Accounts 2017
8. Operating expenses
Staff costs
Property costs
IT expense including IT depreciation
Other depreciation
Industry levies
Other operating expenses
Total
The table below analyses the average monthly number of persons employed by the Company’s operations.
Operations
Support
Total
The aggregate remuneration of those employed by the Company’s operations comprised:
Wages and salaries
Social security costs
Pension costs
Other staff costs
Total
81
2016
£’k
5,342
218
3,937
29
2,523
5,090
17,139
2016
122
24
146
2016
£’k
4,472
516
241
113
5,342
2017
£’k
5,912
137
3,728
47
3,851
4,435
18,110
2017
128
25
153
2017
£’k
4,916
601
255
140
5,912
Wages and salaries of £4,535k (2016: £4,447k) have been classified as part of claims handling expenses (Note 7). Wages and salaries include a
net movement in deferred acquisition costs (Note 16) of £246k (2016: (£302k)). Exceptional items (Note 9) include a further £2,513k (2016: £nil)
of one-off staff costs funded through the issue of share capital prior to IPO. The total staff cost for the year is £13,206k (2016: £9,487)
The table below analyses the auditor’s remuneration in respect of the Company’s operations.
Fees for audit services
Audit of these financial statements
Audit of financial statements of subsidiaries of the company
Total audit fees
Fees for non-audit services
Audit related assurance services
Other non-audit services relating to corporate finance transactions
Total non-audit fees
Total Group auditor remuneration
2017
£’k
2016
£’k
40
130
170
40
495
535
705
30
116
146
85
127
212
358
Amounts paid to Directors are disclosed within the Directors’ Remuneration Report on page 46 of the Annual Report and Accounts.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017 82
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
9. Exceptional items
Discounted shares issued to employees
Management bonus on IPO
IPO costs
Total
2017
£’k
1,513
1,000
5,029
7,542
2016
£’k
–
–
–
–
Exceptional costs relate to expenses incurred in relation to the Group’s Listing on the London Stock Exchange during 2017, and staff expenses
generated through the issue of shares at undervalue to certain members of staff and one-off cash-settled bonuses paid to management on IPO.
10. Tax charge
Current taxation:
Charge for the year
Deferred taxation (note 12):
Origination and reversal of temporary differences
Effect of tax rate change on opening balance
Over-provision in respect of the previous year
Current taxation
Deferred taxation (note 12)
Tax charge for the year
Tax recorded in Other Comprehensive Income is as follows.
Current taxation
2017
£’k
10,194
10,194
(25)
–
–
(25)
10,194
(25)
10,169
2017
£’k
–
–
2016
£’k
11,129
11,129
10
–
–
10
11,129
10
11,139
2016
£’k
–
–
The actual income tax charge differs from the expected income tax charge computed by applying the standard rate of UK corporation tax of
19.25% (2016: 20.00%) as follows:
Profit before tax
Expected tax charge
Effect of:
Disallowable expenses
Adjustment of deferred tax to average rate of 19.25%
Adjustment in respect of prior periods
Other differences
Income not subject to UK taxation
Tax charge for the year
Effective income tax rate
2017
£’k
55,512
10,686
691
2
116
(5)
(1,321)
10,169
2016
£’k
63,432
12,686
6
–
–
–
(1,553)
11,139
18.32%
17.56%
Sabre Insurance Group plc Annual Report and Accounts 2017
11. Current tax
Per balance sheet:
Current tax assets
Current tax liabilities
12. Deferred tax
83
2017
£’k
–
(907)
(907)
2016
£’k
–
(3,077)
(3,077)
The following are the deferred tax liabilities recognised by the Company, and the movements thereon, during the current and prior reporting
years.
At 1 January 2017
Charge to the income statement on continuing operations
At 31 December 2017
Per balance sheet:
Deferred tax assets
Deferred tax liabilities
Provisions and
other
temporary
differences
£’k
Depreciation in
excess of
capital
allowances
£’k
(17)
(8)
(25)
22
(17)
5
2017
£’k
20
–
20
Total
£’k
5
(25)
(20)
2016
£’k
–
(5)
(5)
On 1 April 2017 the UK rate of corporation tax changed from 20% to 19%, and will reduce further to 17% from 1 April 2020. Note that the
closing deferred tax attributes are recognised with reference to the 17% rate as there is insufficient certainty to know when the various items
on which deferred tax is recognised will unwind.
13. Dividends
Amounts recognised as distributions to equity holders in the period:
First interim ordinary dividend paid
Second interim ordinary dividend paid
Third interim ordinary dividend paid
Preference dividends paid
£ per
share
0.06
0.03
–
0.04
2017
£’k
14,167
8,171
–
9,358
31,696
2016
£’k
17,535
10,418
17,736
10,219
55,908
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
84
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
14. Property, plant and equipment
Cost
At 1 January 2016
Additions
Revaluation
At 1 January 2017
Additions
At 31 December 2017
Accumulated depreciation and impairment
At 1 January 2016
Charge for the year
Impairment losses on revaluation
At 1 January 2017
Charge for the year
At 31 December 2017
Carrying amount
As at 31 December 2017
As at 31 December 2016
Owner
occupied
£k
Fixtures and
fittings
£k
Computer
equipment
£k
2,450
1,500
–
3,950
–
3,950
–
–
515
515
–
515
3,435
3,435
525
153
–
678
25
703
478
29
–
507
47
554
149
171
1,779
122
–
1,901
52
1,953
1,259
214
–
1,473
190
1,663
290
428
Total
£k
4,754
1,775
–
6,529
77
6,606
1,737
243
515
2,495
237
2,732
3,874
4,034
The Company holds two owner occupied properties, Sabre House and the Old House, which are both managed by the Company. The properties
are measured at fair value which is arrived at on the basis of a valuation carried out on 19 October 2015 by Hurst Warne and Partners LLP.
The valuation was carried out on an open-market basis in accordance with the Royal Institution of Chartered Surveyors’ requirements, which
is deemed to equate to fair value. Property was purchased in January 2016 at a premium above the fair value, determined in the October 2015
valuation exercise and, as such an impairment loss has been recorded. The fair value measurement of owner occupied property of £3,435k
(2016: £3,435k) has been categorised as a Level 3 fair value based on the non-observable inputs to the valuation technique used. The following
table shows a reconciliation to the closing fair value for the Level 3 owner occupied property at valuation:
At 31 December 2016
Purchase
Revaluation
At 31 December 2017
Owner
occupied
£’k
3,435
–
–
3,435
The fair value was derived using a methodology based upon recent transactions for similar properties, which have been adjusted for the specific
characteristics of the property. The significant non-observable inputs used in the valuation are expected rental value per square foot (2016: £213/
sq.ft, 2015: £201/sq.ft) and estimated marketing and letting void. The fair value of the owner occupied property would increase/(decrease) if the
expected rental value per foot were to be higher/(lower) and the marketing and letting void were to be lower (higher).
The carrying amount of revalued assets had they been held at cost is as follows:
At 31 December 2016
At 31 December 2017
15. Reinsurance assets
Reinsurers’ share of general insurance liabilities
Reinsurers’ share of UPR
Impairment provision
Total
Owner occupied
Cost
£’k
3,250
3,250
Fair value
£’k
3,435
3,435
2017
£’k
102,998
7,490
–
2016
£’k
46,783
4,746
–
110,488
51,529
Sabre Insurance Group plc Annual Report and Accounts 2017
16. Deferred acquisition costs
At 1 January
Net increase/decrease during the year
At 31 December
17. Insurance and other receivables
Receivables arising from insurance and reinsurance contracts:
Due from policyholders
Due from brokers and intermediaries
Impairment of broker and intermediary receivables
Other loans and receivables:
Other debtors
Total
85
2016
£’k
14,834
(806)
14,028
2016
£’k
18,657
17,768
(100)
717
37,042
2017
£’k
14,028
645
14,673
2017
£’k
17,296
21,504
(100)
108
38,808
The carrying value of insurance and other receivables approximates to fair value. There are no amounts expected to be recovered more than 12
months after the reporting date.
18. Prepayments, accrued income and other assets
Accrued interest
Prepayments and accrued income
Total
2017
£’k
2,135
719
2,854
2016
£’k
1,388
778
2,166
The carrying value of prepayments, accrued income and other assets approximates to fair value. There are no amounts expected to be recovered
more than 12 months after the reporting date.
19. Financial investments
Debt securities held at fair value through the profit and loss account
Corporate
Sovereign
Total
2017
£’k
2016
£’k
547
243,484
244,031
576
233,714
234,290
All financial investments are classified as Level 1 under the fair value hierarchy. The fair value classification of owner occupied property is
discussed in Note 14.
20. Cash and cash equivalents
Cash at bank and in hand
Total
2017
£’k
34,425
34,425
2016
£’k
10,492
10,492
The effective interest rate on short-term deposits with credit institutions for the year ended 31 December 2017 was 0.02% (2016: 0.19%) and
average maturity was one day (2016: one day).
21. Share capital
Authorised, issued and fully paid: equity shares
250,000,000 ordinary shares of £0.001 each
42,631,874 ordinary A shares of no par value
1,905,000 ordinary B shares of no par value
202,719,126 preference shares of no par value
All shares are unrestricted and carry equal voting rights.
2017
£’k
2016
£’k
250,000
–
–
–
–
42,632
2,764
202,719
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
86
22. Goodwill
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
On 3 January 2014 the Group acquired Binomial Group Limited, the parent of Sabre Insurance Company Limited, for a consideration of
£245,485k satisfied by cash. As from 1 January 2014, the date of transition to IFRS, goodwill was no longer amortised but is subject to annual
impairment testing. The recoverable amount of the insurance business unit is based on its fair value less cost to sell.
The Goodwill recorded in respect of this transaction at the date of acquisition was £156,279k. There has been no impairment to Goodwill since
this date, and no additional Goodwill has been recognised by the Group.
The Group performed its annual impairment test as at 31 December 2017 and 31 December 2016. The Group considers the relationship
between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December
2017, the Group’s securities were traded on a liquid market, therefore market value could be used as a definitive indicator of market
capitalisation. As at 31 December 2016, the market capitalisation of the Group calculated using price-to-earnings ratios observed in industry was
significantly above the book value of its equity due to the overall increase in insurance activity and demand for its product, thus providing no
indication of potential impairment of goodwill or other intangible assets.
Key assumptions
The key assumptions on which management have based this value are:
– Market capitalisation of the Group at 31 December 2017 of £680,000k
– Profit forecast for the next year
– P/E multiples observed in industry – 1 December 2016: 11.7 to 15.5
The estimate of the recoverable amount of the insurance business unit using the lower end of the P/E multiple range and using a profit forecast
for the next year derives a fair value significantly more than the carrying value of the goodwill and intangible assets as at the reporting date.
Goodwill is categorised as Level 3 under the IFRS hierarchy.
The Directors conclude that the recoverable amount would remain in excess of its carrying value even after reasonably possible changes in the
key inputs and assumptions affecting its profit before tax, such as a significant fall in demand for its product or a significant adverse change in the
volume of claims and increase in other expenses, before the recoverable amount of the business units would reduce to less than its carrying
value. Therefore the Directors are of the opinion that there are no indicators of impairment as at 31 December 2017.
23. Intangible assets
Cost
At 1 January
Additions
At 31 December
Accumulated amortisation
At 1 January
Charge for the year
At 31 December
Carrying amount
2017
£’k
14,838
–
14,838
13,450
887
14,337
2016
£’k
14,838
–
14,838
11,831
1,619
13,450
501
1,388
Upon acquisition of Binomial Group Limited in January 2014 the acquired client book of business was recognised as an intangible asset with a
fair value of £14,833k in line with IFRS. As at 31 December 2017, the remaining life was determined to be one year.
24. Insurance liabilities, unearned premium reserve
Insurance liabilities
Gross insurance liabilities (including unearned premium reserve)
Gross insurance liabilities
Unearned premium reserve
Total
Reinsurers’ share of insurance liabilities (including unearned premium reserve)
Reinsurers’ share of insurance liabilities
Unearned premium reserve
Total
Net insurance liabilities (including unearned premium reserve)
Net insurance liabilities
Unearned premium reserve
Total
2017
£’k
2016
£’k
242,388
105,122
347,510
(102,998)
(7,490)
(110,488)
139,390
97,632
237,022
182,941
97,525
280,466
(46,783)
(4,746)
(51,529)
136,158
92,779
228,937
Sabre Insurance Group plc Annual Report and Accounts 2017
87
-The development of gross and net general insurance liabilities is shown below.
Gross insurance liabilities
Accident year
Estimate of ultimate claims costs:
At end of accident year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Current estimate of cumulative claims
2010
£’k
2011
£’k
2012
£’k
2013
£’k
2014
£’k
2015
£’k
2016
£’k
2017
£’k
Total
£’k
77,415
74,349
77,740
73,686
72,141
71,540
74,822
72,660
72,660
98,735
103,139
95,818
103,989
90,631
84,962
81,715
80,514
80,738
94,297
92,478
97,170
94,150
84,939
70,567
63,197
65,313
68,763
80,738
94,150
68,763
75,649
103,599
111,518
165,707
65,639
62,039
60,301
90,133
100,935
82,537
60,301
(51,961)
82,537
100,935
165,707
(60,451)
(61,981)
(40,909)
Cumulative payments to date
(69,252)
(80,052)
(77,555)
(52,248)
Liability recognised in balance sheet
3,408
686
16,595
16,515
8,340
22,086
38,954
124,798
231,382
2009 and prior
Claims handling provision
Total
Net insurance liabilities
Accident year
Estimate of ultimate claims costs:
At end of accident year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Current estimate of cumulative claims
7,900
3,106
242,388
2010
£’k
2011
£’k
2012
£’k
2013
£’k
2014
£’k
2015
£’k
2016
£’k
2017
£’k
Total
£’k
61,912
69,055
72,475
69,649
68,001
67,100
66,926
66,791
66,791
94,171
90,742
87,494
81,950
78,509
77,534
77,496
89,901
81,403
75,938
73,606
74,304
72,731
77,316
64,071
59,301
57,739
56,947
74,609
65,639
60,953
59,741
97,288
104,808
106,478
85,814
81,164
93,664
77,496
72,731
56,947
59,741
81,164
93,664
106,478
Cumulative payments to date
(65,570)
(76,806)
(70,279)
(52,248)
(51,961)
(60,451)
(61,981)
(40,907)
Liability recognised in balance sheet
1,221
690
2,452
4,699
7,780
20,713
31,683
65,571
134,809
2009 and prior
Claims handling provision
Total
1,475
3,106
139,390
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
88
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
24. Insurance liabilities, unearned premium reserve continued
Movements in insurance liabilities, unearned premium reserve and reinsurance assets
At 1 January 2016
Cash paid for claims during the year
Increase/(decrease) in liabilities:
Arising from current-year claims
Arising from prior-year claims
At 31 December 2016
Claims reported
Incurred but not reported
Claims handling provision
At 31 December 2016
Cash paid for claims during the year
Increase/(decrease) in liabilities:
Arising from current-year claims
Arising from prior-year claims
At 31 December 2017
Claims reported
Incurred but not reported
Claims handling provision
At 31 December 2017
Gross
£’k
Reinsurance
£’k
160,264
(83,675)
113,512
(7,160)
182,941
186,284
(6,499)
3,156
182,941
(85,942)
167,670
(22,281)
242,388
297,477
(58,195)
3,106
242,388
(30,555)
3,293
(6,709)
(12,812)
(46,783)
(26,487)
(20,296)
–
(46,783)
2,332
(59,229)
682
(102,998)
(122,644)
19,646
–
(102,998)
Net
£’k
129,709
(80,382)
106,803
(19,972)
136,158
159,797
(26,795)
3,156
136,158
(83,610)
108,441
(21,599)
139,390
174,833
(38,549)
3,106
139,390
Note that £26,241k of the gross and £2,184k of the net year-on-year increases in the general insurance liabilities in 2016 is directly attributable to
the decrease in the Ogden Discount Rate announced in February 2017.
25. Trade and other payables, including insurance payables
Insurance creditors
Due to reinsurers
Trade and other creditors
Other taxes
Total
2017
£’k
1,031
4,555
4,812
5,478
15,876
2016
£’k
890
3,041
501
4,676
9,108
The carrying value of trade and other payables, including insurance payables, approximates to fair value. There are no amounts expected to be
settled more than 12 months after the reporting date.
26. Accruals
Accruals in respect of industry levies
Accruals in respect of IPO costs
Other accruals
Total
All accruals are due to be paid within one year.
27. Classification and valuation of financial assets
The following table summarises the classification of financial instruments:
2017
£’k
4,212
3,958
1,497
9,667
2016
£’k
3,482
–
2,294
5,776
Financial investments
Total assets
Financial assets/liabilities
At fair value
£’k
244,031
244,031
AFS
£’k
–
–
Loans and
receivables
£’k
At amortised
cost
£’k
–
–
–
–
Non-financial
assets /
liabilities
£’k
–
–
2017
£’k
244,031
244,031
Sabre Insurance Group plc Annual Report and Accounts 2017
89
Fair value measurement
The carrying value of financial assets is in all cases equal to their fair value. All financial investments are classified as Level 1 under the
IFRS hierarchy. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities which can be accessed at the
measurement date. As such market value has been determined with reference to a reliable third party valuation. Owner occupied property
is valued based upon an independent third party valuation and is classified as Level 3 under the IFRS hierarchy, as discussed in Note 14.
28. Corporate reorganisation
On 11 December 2017 certain steps were taken to restructure the Group immediately prior to the Admission of the ultimate parent to the
Main Market of the London Stock Exchange. This included the issue of £250m new ordinary share capital and the redemption of £203m of
preferences share capital in the Group’s previous ultimate parent company, Barbados TopCo Limited. As the transaction was effected by creating
a new parent that is itself not a business, it has been accounted for using the pooling of interest method as a continuation of the existing Group.
29. Notes to the consolidated cash flow statement
Profit for the year
Adjustments for:
Depreciation
Unrealised valuation losses on investment property
Amortisation of intangible assets
Investment return
Operating cash flows before movements in working capital
Movements in working capital:
Change in reinsurance assets
Change in insurance and other receivables
Change in prepayments and other assets
Change in insurance liabilities including DAC and UPR
Change in trade and other payables
Cash generated from operations
Taxes paid
Net cash flow generated from operating activities before investment of insurance assets
Interest and investment income received
Purchases of invested assets
Proceeds from sale of invested assets
Total
30. Earnings per share
2017
£’k
55,512
237
–
887
749
57,385
(58,959)
(1,469)
(688)
66,102
10,659
73,030
(12,364)
60,666
4,578
(139,608)
124,540
50,176
2016
£’k
63,432
243
515
1,619
(3,993)
61,816
(16,582)
(4,198)
(112)
28,329
(8,777)
60,476
(10,660)
49,816
4,808
(127,298)
69,677
(2,997)
Earnings per share shows the profit for each share our shareholders own. The numbers of shares used for calculating the earnings per share and
net assets per share are those of Sabre Insurance Group plc. The number of Barbados TopCo Limited shares in the comparative periods have
been converted into the equivalent number of Sabre Insurance Group plc shares to reflect the corporate reorganisation on 11 December 2017.
For further information refer to Note 28.
The calculations for basic and diluted earnings per share from continuing operations are based on the following figures
Profit on ordinary activities after tax (£’k)
Preference dividend (£’k)
Basic weighted average number of shares (number in thousands)
Diluted weighted average number of shares (number in thousands)
Basic earnings per share (pence per share)
Diluted earnings per share (pence per share)
The calculations for total basic and diluted earnings per share are based on the following figures
Profit on ordinary activities after tax (£’k)
Preference dividend (£’k)
Basic weighted average number of shares (number in thousands)
Diluted weighted average number of shares (number in thousands)
Basic earnings per share (pence per share)
Diluted earnings per share (pence per share)
2017
2016
45,343
9,358
248,229
248,234
14.50
14.50
52,293
10,219
247,567
247,567
16.99
16.99
2017
2016
45,343
9,358
248,229
248,234
14.50
14.50
52,293
10,219
247,567
247,567
16.99
16.99
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
90
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
31. Share-based payments
The Group has chosen to reward its employees through various share-based payment schemes. This note describes the different schemes used
to facilitate those share-based payments and the charges recognised, and to be recognised, in the consolidated statement of comprehensive
income. A one-off expense of £2,513k has been recorded in the income statement in respect of pre-IPO share-based payments outside of these
schemes. These are disclosed in Note 8.
The compensation costs recognised in the income statement under IFRS 2 Share-Based Payment are shown below:
Equity-settled plans
Long Term Incentive Plan
Share Incentive Plan
Total
2017
£’k
–
–
–
As disclosed in the Group’s IPO Prospectus, the Board has approved but not yet initiated two further incentive plans during 2018, a Deferred
Bonus Plan (“DBP”) and a Sharesave scheme, to be made available to employees.
Share Incentive Plan (“SIP”)
The Sabre Share Incentive Plan provides for the award of free Sabre Insurance Group plc shares, Partnership Shares, Management Shares and
Dividend Shares. On 29 December 2017, Free Share awards were granted with a vesting period of three years from the award date. Vesting is
unconditional for participants still in service at the vesting date. Participants will also receive Dividend Shares which represent the value of
reinvested dividends which would have accrued over the vesting period on the shares in the Free Share award. No Partnership, Matching or
Dividend shares had been awarded by 31 December 2017.
The fair value of the Sabre Share Incentive Plan awards is equal to the share price on the date of grant. Dividends are not deducted in the
calculation of fair value because dividends will be accumulated over the vesting period and repaid against equivalent dividend shares.
Reconciliation of movement in the number of SIP awards
Outstanding at 21 September 2017
Granted
Forfeited
Vested
Outstanding at 31 December 2017
2017
–
213,792
–
–
213,792
Long Term Incentive Plan (“LTIP”)
The LTIP is a discretionary share plan, under which the Board may grant share-based awards (“LTIP Awards”) to incentivise and retain eligible
employees. The vesting of LTIP Awards may (and, in the case of an LTIP Award to an Executive Director other than a Recruitment Award will) be
subject to the satisfaction of performance conditions. Any performance condition may be amended or substituted if one or more events occur
which cause the Board to consider that an amended or substituted performance condition would be more appropriate and would not be
materially less difficult to satisfy.
LTIP Awards which are subject to performance conditions will normally have those conditions assessed as soon as reasonably practicable after
the end of the relevant performance period and, to the extent that the performance conditions have been met, the LTIP Awards will vest either
on that date or such later date as the Board determines. LTIP Awards (other than Recruitment Awards) granted to the Executive Directors will
normally be subject to a performance period of at least three years. LTIP Awards (other than Recruitment Awards) which are not subject to
performance conditions will normally vest on the third anniversary of the date of grant or such other date as the Board determines.
On 29 December 2017, LTIP Awards not subject to performance conditions were issued to eligible employees.
Reconciliation of movement in the number of LTIP Awards
Outstanding at 21 September 2017
Granted
Forfeited
Vested
Outstanding at 31 December 2017
2017
–
576,169
–
–
576,169
Sabre Insurance Group plc Annual Report and Accounts 2017
91
Notes to the Consolidated Financial Statements continued
As at 31 December 2017
32. Related parties
Sabre Insurance Group plc is the ultimate parent and ultimate controlling party of the group. The following entities included below form the
group.
Name
Binominal Group Limited
Sabre Insurance Company Limited
Barbados Topco Limited
Other controlled entities
EBT – UK SIP
The Sabre Insurance Group Employee Benefit Trust
Principle Business
Intermediate holding company
General insurance business
Non-Trading
Trust
Trust
Registered Address
Sabre House, 150 South Street, Dorking,
Surrey, United Kingdom, RH4 2YY,
As above
Heritage Hall, Le Marchant Street, St Peter
Port, Guernsey, GY1 4HY
Ocorian, 26 New Street, St Helier, Jersey,
JE2 3RA
26 New Street, St Helier, Jersey, JE2 3RA
Funds advised by BC Partners LLP are the only party to hold a significant influence (>20%) over Sabre Insurance Group plc, holding 29.05% of
the group.
Both Employee Benefit Trusts (EBTs) were established to assist in the administration of the Group’s employee equity based compensation
schemes. UK registered EBT holds the all-employee Share Incentive Plan (SIP) to which each employee of Sabre Insurance Company Limited
was issued with £3,600 of shares. The Jersey-registered EBT holds the long Term incentive Plan (LTIP) discretionary shares awarded on IPO.
While the Group does not have legal ownership of the EBTs and the ability of the Group to influence the actions of the EBTs is limited to a trust
deed, the EBT was set up by the Group with the sole purpose of assisting in the administration of these schemes, and is in essence controlled
by the Group and therefore consolidated.
During the period ended 31 December 2017, the Group donated 1,315,538 shares to the EBTs. While an amount of these shares were sold on
admission, 213,792 shares were retained in the UK EBT in relation to the SIP and 576,169 shares were retained in the Jersey EBT in relation to
the LTIP. The total value of the shares gifted to the EBTs by Sabre Insurance Group plc on admission was £3,025k.
Key Management Compensation
Key Management includes executive directors, non-executive directors and other senior management personnel. Further details of directors’
shareholdings and remuneration can be found in the directors’ remuneration report on pages 46 to 56.
Salaries and other short term benefits
Fees
Contribution to pension scheme
2017
£’k
3,510
75
25
3,610
2016
£’k
1,964
120
41
2,125
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
92
Parent Company Statement of Financial Position
As at 31 December 2017
Assets
Investments
Debtors
Cash and cash equivalents
Total assets
Equity
Issued share capital
Share premium account
Own shares
Merger reserve
Retained earnings
Total equity
Liabilities
Creditors: Amounts falling due within one year
Total liabilities
Total equity and liabilities
Notes
3
4
6
5
2017
£’k
576,000
1,870
–
577,870
249
205,241
1
369,395
(4,047)
570,839
7,031
7,031
577,870
No income statement is presented for Sabre Insurance Group plc as permitted by Section 408 of the Companies Act 2006. The loss after tax
of the parent company for the period was £4,047k.
The notes on pages 94 to 95 form part of these financial statements.
These financial statements were approved by the Board on 21 March 2018 and signed on its behalf.
Adam Westwood
Director
Sabre Insurance Group plc Annual Report and Accounts 2017
93
Parent Company Statement of Changes in Equity
As at 31 December 2017
Balance as at 21 September 2017
Issue of preference share capital
Redemption of share capital
Issue of ordinary shares
Corporate reorganisation
Profit/(loss) for the period
Balance as at 31 December 2017
Share
capital
£’k
Share
premium
£’k
Own
shares
Merger
reserve
£’k
Retained
earnings
£’k
–
50
(50)
–
–
–
250
205,241
(1)
–
–
–
249
205,241
–
–
–
–
1
–
1
–
–
–
–
369,395
–
369,395
–
–
–
–
–
(4,047)
(4,047)
Total
£’k
–
50
(50)
205,491
369,395
(4,047)
570,839
Parent Company Statement of Cash Flows
As at 31 December 2017
Net cash flow from operating activities
Cash flows from financing activities
Expense incurred in issue of share capital
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
2017
£’k
1,116
(1,116)
–
–
–
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017
94
Notes to the Parent Company Financial Statements
As at 31 December 2017
1. Accounting policies
1.1 Basis of preparation
These financial statements present the Sabre Insurance Group plc company financial statements for the period ended 31 December 2017,
comprising the parent company statement of financial position, parent company statement of changes in equity, parent company statement of
cash flows, and related notes.
The financial statements of the Group have been prepared in accordance and fully comply with International Financial Reporting Standards
(IFRSs), as issued by the International Accounting Standards Board (IASB) and adopted by the EU. In accordance with the exemption permitted
under section 408 of the Companies Act 2006, the Company’s income statement and related notes have not been presented in these separate
financial statements.
The financial statements have been prepared on an historical cost basis, except for investment properties and those financial assets that have
been measured at fair value.
The financial statements values are presented in Pounds Sterling (£) rounded to the nearest thousand (£’k), unless otherwise indicated.
The accounting policies that are used in the preparation of these separate financial statements are consistent with the accounting policies used
in the preparation of the consolidated financial statements of Sabre Insurance Group plc as set out in those financial statements.
As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the parent company is not presented.
The additional accounting policies that are specific to the separate financial statements of the Company are set out below.
1.2 Summary of significant accounting policies
(a)
Investment in subsidiaries is stated at cost less any impairment.
Investment in subsidiaries
(b) Dividend income
Dividend income from investment in subsidiaries is recognised when the right to receive payment is established.
2. Taxation
Loss before taxation
Taxation calculated at 19.25%
Effect of:
Non-taxable income
Taxation credit
3.
Investments
Investment in subsidiary undertakings
As at 21 September
Additions
As at 31 December
2017
£’k
(4,047)
(779)
779
–
2017
£’k
–
576,000
576,000
The subsidiary undertakings of the Company are set out below. Their capital consists of ordinary shares which are unlisted. In all cases,
the Company owns 100% of the ordinary shares, either directly or through its ownership of other subsidiaries.
Name of subsidiary
Directly held by the Company
Binomial Group Limited
Barbados TopCo Limited
Indirectly held by the Company
Place of incorporation
Principal activity
United Kingdom
Guernsey
Intermediate holding company
Non-trading company
Sabre Insurance Company Limited
United Kingdom
Motor insurance underwriter
The registered office of each subsidiary is disclosed within the ‘Corporate Information’ section of the Group accounts.
Sabre Insurance Group plc Annual Report and Accounts 2017
4. Debtors
Due within one year
Amounts owed by Group undertakings
As at 31 December
5. Creditors
Due within one year
Trade and other payables
As at 31 December
6. Share capital and reserves
Full details of the share capital and capital reserves of the Company are set out in Note 21 to the consolidated financial statements.
7. Dividends
Full details of the dividends paid and proposed by the Company are set out in Note 13 to the consolidated financial statements.
8. Related parties
Sabre Insurance Group plc, which is incorporated in England and Wales, is the ultimate parent undertaking of the Sabre Insurance Group
of companies.
The following balances were outstanding with related parties at year end:
Income from related parties
Due from Sabre Insurance Company Limited
As at 31 December
95
2017
£’k
1,870
1,870
2017
£’k
7,031
7,031
2017
£’k
1,870
1,870
The outstanding balance represents cash transactions effected by Sabre Insurance Company Limited on behalf of its parent company, and will be
settled within one year.
9. Share-based payments
Full details of share-based compensation plans are provided in Note 31 to the consolidated financial statements.
10. Risk management
The risks faced by the Company, arising from its investment in subsidiaries, are considered to be the same as those presented by the operations
of the Group. Details of the key risks and the steps taken to manage them are disclosed in Note 3 to the consolidated financial statements.
11. Directors and key management remuneration
The Directors and key management of the Group and the Company are the same. The aggregate emoluments of the Directors are set out
in Note 8 to the consolidated financial statements, the compensation for key management is set out in Note 8 to the consolidated financial
statements and the remuneration and pension benefits payable in respect of the highest paid Director are included in the Directors’
Remuneration Report in the Governance section of the Annual Report and Accounts.
STRATEGIC REPORT | CORPORATE GOVERNANCE | FINANCIAL STATEMENTSSabre Insurance Group plc Annual Report and Accounts 2017