Final Results

Full-year results 2024

Profit doubled - Record premium income

- Profit before tax up 105.9% year-on-year

- Highest ever annual gross written premium - up 5% year-on-year

- Total dividend in respect of 2024 at 13.0p - up 44.4% on 2023

- Share buyback of £5m proposed

- Confident in delivery of our Ambition 2030 growth strategy

Sabre Insurance Group plc (the "Group", or "Sabre"), one of the UK's leading motor insurance underwriters, reports its results for the year ended 31 December 2024.

Year to31 December 2024

Year to31 December 2023

Change

Gross written premium

£236.4m

£225.1m

5.0%

Net insurance margin

17.6%

10.6%

7.0 ppts

Net loss ratio

58.7%

61.6%

(2.9) ppts

Combined operating ratio

84.2%

91.6%

(7.4) ppts

IFRS Profit before tax

£48.6m

£23.6m

105.9%

IFRS Profit after tax

£36.0m

£18.1m

98.9%

Total dividend per share

13.0p

9.0p

44.4%

Return on tangible equity (annualised)

38.2%

22.7%

15.5 ppts

Solvency coverage ratio (pre-final and special dividend)

216.7%

205.3%

5.6 ppts

Solvency coverage ratio (post-final and special dividend)

171.2%

170.9%

0.2 ppts

Solvency coverage ratio (post-dividend and share buyback*)

163.1%

N/A

N/A

Geoff Carter, Chief Executive Officer of Sabre, said:

"We are extremely pleased with our performance in 2024, demonstrating strong cycle management over the past twelve months. We grew strongly in the first half of the year when market conditions were attractive, and we maintained our strict underwriting discipline despite a steep decline in market prices during the second half.

This allowed Sabre to deliver a strong financial performance and robust capital position for the business. We were delighted to announce our Ambition 2030 growth strategy in December last year and are encouraged by the early progress we have made as we continue to invest in the growth of the business.

Loss ratios on core Motor Vehicle and Motorcycle are excellent and underpin this strategy, while our complementary growth initiatives are progressing as planned. Sabre Direct, our in-house Motorcycle brand, is being soft launched in March, and core Motor Vehicle pricing tests are planned for H2 2025, in-line with the timeline set out at our recent Capital Markets Event. We continue to expect profit growth from Ambition 2030 to be weighted towards the second half of the six-year period as these initiatives gain further traction and momentum - complementing our core business.

As a result of our strong performance, we have proposed a significantly increased dividend of 13p per share alongside our first share buyback programme, through which we intend to distribute a further £5m of excess capital during 2025. This is an evolution of our existing capital management framework and reflects our view that the strategic objectives set out in Ambition 2030 will generate, rather than require, additional capital.

While our plans to deliver sustainable growth will not be a "straight-line" evolution, the next few years will be exciting as we build on the strong 2024 result and deliver sustainable medium-term growth in GWP, profit and shareholder returns."

FINANCIAL HIGHLIGHTS

- Profit before tax more than doubled year-on-year - up 105.9% year-on-year

- Highest ever annual gross written premium - up 5% against 2023

- Dividend increased to 13.0p per share - up 44.4% year-on-year

- Announcing the Group's intention to launch a share buyback programme of £5m, subject to regulatory approval

- Very strong capital position, at 171.2% post-dividend, and 163.2% after dividend and proposed share buyback

STRATEGIC HIGHLIGHTS

- Underwriting discipline maintained - increased prices in 2024 in-line with our view of high single-digit claims inflation

- Ambition 2030 growth strategy launched: initiatives on schedule and core product price testing will begin in H2 2025

- Sabre Direct, our new direct, online-only motorcycle product is being soft launched in March

- Core Motor Vehicle and Motorcycle products delivered target margins supported by excellent loss ratios

- More cautious loss picks on 2024 accident year to reflect ongoing inflationary environment

MARKET

- Clear signs of price reductions across the market in 2024 and into 2025

- Market now appears to have returned to a normal dynamic competitive environment following more volatile pricing actions seen in recent years

- Slight softening of claims inflation, although still at high single-digit levels

- Sabre is well-placed to manage through the soft part of the pricing cycle. Having been strongly priced in 2024, we have headroom to optimise the volume/margin mix, particularly given the slight softening in claims inflation. We are comfortable with volumes being written and the margins achieved at what may be the softest part of the cycle

- We continue to expect market prices will need to increase to reflect current levels of inflation. Central assumption of market pricing increases later in 2025 as firms look to protect profit in 2026

- Any regulatory developments are expected to have a limited impact on Sabre given the Group's underwriting profit-focussed business model

2025 OUTLOOK AND BEYOND

- Good volume momentum later in Q1 but against a very high growth comparative period in 2024

- Anticipate strong underwriting performance and profitability in 2025 as polices written at good margins in 2024 earn through

- Ambition 2030 growth strategy launched with initiatives on track. As previously guided, there will be modest impact on premium in H2 2025 with the more material contribution to premium coming through from 2026 onward

- Sabre will maintain underwriting discipline, whilst maximising absolute profit as market pricing finds equilibrium, and expect 2025's margin to be within our target 18% to 22% range

ENQUIRIES

Sabre Insurance Group 0330 024 4696

Geoff Carter, Chief Executive Officer

Adam Westwood, Chief Financial Officer

Teneo 020 72602700

James Macey White

Ffion Dash

ANALYST PRESENTATION

Please join the event 5-10 minutes prior to scheduled start time. When prompted, provide the confirmation code or event title.

A replay will be made available on the Sabre website following the conclusion of the presentation.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

Ex-dividend date:

17 April 2025

Record date:

22 April 2025

Payment date:

4 June 2025

FORWARD-LOOKING STATEMENTS DISCLAIMER

Cautionary statement

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect Sabre's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to Sabre's business, results of operations, financial position, prospects, growth or strategies and the industry in which it operates.

Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, Sabre disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.

The Sabre Insurance Group plc LEI number is 2138006RXRQ8P8VKGV98.

Chief Executive Officer's Review

"We have delivered some excellent financial results for the year - a doubling of profit compared to the previous year and growth of over 5%."

Record premium levels, profit doubled and attractive capital returns

In our 2023 Report we outlined our key expectations for 2024:

- Business we wrote in 2023 would earn through at attractive margins, delivering an increase in profitability in 2024.

- Market pricing discipline would hold, allowing us to grow further.

- We would continue to develop insurer-hosted pricing ("IHP"), allowing us to deliver increasingly sophisticated pricing.

- Expected to add new Motorcycle distribution partners.

- Continued focus in 2024 would be on 'below the radar' developments as we continued to invest in our pricing and claims capabilities to maintain our position as a leading motor insurer.

I am pleased that many of these happened as we hoped. Business written in 2023 and 2024 did indeed earn through at attractive margins, market pricing discipline held in the first half of the year, facilitating good growth. We have been able to put our IHP development into context, alongside our motorcycle development plans, as part of our Ambition 2030 strategy. More details on these are provided on pages 14 to 17 of the Annual Report.

Reflections on 2024

2024 was a considerably more straight forward year than the recent, turbulent past. In the past year we have been able to focus fully on developing the business rather than having to deal with the consequences of generational shocks such as COVID or extraordinary increases in cost inflation.

We have delivered some excellent financial results for the year - a doubling of profit before tax compared to the previous year and growth of over 5% despite market pricing softening in H2. This is clear evidence of a strong return to form for the business.

Within this result we are particularly pleased with the core Motor Vehicle performance at a 56.1% loss ratio and that Motorcycle is now delivering the planned performance at a 58.6% loss ratio.

While Taxi is much improved there are further improvements that are required if this is to be a long-term product for us.

We have continued to take a differentiated approach compared to the wider market. We deployed rate increases in line with our view of ongoing high single digit claims inflation, contrasting to a double-digit rate decrease across the market. This gives us confidence that strong financial performance is underpinned well into the medium term.

We were delighted to bring our growth plans together in our Ambition 2030 strategy and to showcase the excellent progress the Sabre team has made in putting in place the supporting technology stack. Core to the ambition is our intention to deliver a profit after tax in excess of £80m in 2030. Full details can be found on our website (https://sabreplc.co.uk/investors/results-centre/). Some key elements of this strategic evolution are:

- Flexing margins in a limited and controlled way on our existing core non-standard Motor Vehicle book to maximise absolute profit in different market environments.

- Drive growth by optimising the benefits of our IHP development by additionally targeting a slightly lower risk customer segment at an appropriately modestly reduced margin.

- Expand our Motorcycle distribution through bringing on new partners and the launch of a new direct brand.

Nothing here will undermine our ongoing commitment to underwriting and pricing discipline. Growth will not be linear and will accelerate/decelerate in different parts of the market cycle, while tracking towards our 2030 target. We will remain true to our core belief: "Profitability is the target, volume is an output".

Customers

We have continued to focus on delivering positive customer outcomes in several ways, which we believe also positions us well in the context of current regulatory focus.

Our pricing approach has always been to price all customer segments to a consistent margin requirement, and to minimise our dependency on ancillary product sales. To support this we have ensured our margins on all ancillary products are now in line with the margins we earn on the core product. The margin we earn on providing premium finance to our direct customers is consistent with this.

Much effort has been expended on enhancing our direct customer service offering, most specifically on the usability of our online customer service portal. This will improve the customer experience while reducing cost, allowing us to reduce premiums.

Regulatory

We believe we have a low exposure to current areas of regulatory focus. Ancillary income is not a material part of profits and, as outlined above, we have ensured margins are modest compared to market norms and in line with our core products.

The change during the year to the Ogden discount rate, used in the valuation of large value personal injury claims, was welcome. While the direct financial impact is modest it should be helpful for future reinsurance costs.

Finally, the team has made excellent progress on the emerging operational resilience requirements.

Market

The UK motor insurance market remains a competitive and dynamic environment that delivers good value for the customers. We believe the market is still seeking equilibrium in pricing - it appears that some insurers believe that the pendulum swung too far with rate increases in late 2023/early 2024. However, it is clear to us that this has now swung too far the other way, with the continued price decreases later in 2024.

Our current view is that ongoing claims inflation has softened slightly as we have come through the year-end, but remains elevated. Our current best estimate is mid to high single-digit. Given this, our central assumption is that market rates will remain suppressed in H1, before increasing in H2 to protect 2026/27 results. Our approach will be unchanged - charge the appropriate price for our margin requirements. Our Ambition 2030 strategy outlines how we will flex slightly in different market conditions.

Capital and dividend

Our financial results have resulted in another period of strong capital generation. This performance has allowed us to declare a total dividend for the year of 13.0p per share, which is an increase of 44.4% on prior year total dividend of 9.0p per share.

I have also been pleased to announce our intention to execute our first share buy-back in 2025, through which we expect to return an additional £5m of excess capital to shareholders. As we set out in our 'Ambition 2030' strategy, our medium-term growth plans do not require this capital to be retained within the business.

People

Our success would clearly not be possible without the dedicated support of the whole Sabre team. We seek to recognise this hard work by maintaining a generous reward approach, including paying inflation-linked pay rises, annual performance-related and Christmas bonuses, employee share plans and free breakfasts. Moreover, we seek to treat people as individuals and to provide appropriate support where required.

We continue to operate a hybrid work approach with people expected to be in the office a minimum of three days a week (many are in much more). This works well for us, our people and our customers.

Environmental, Social and Governance ("ESG")

We continue to build on our ESG programme, with continued efforts across the firm to understand, monitor and minimise our impact on the environment. We have robust Governance in place across the firm and consideration of all stakeholders is taken into account when making key decisions. With people being core to Sabre's success, we strive to make Sabre a welcoming and rewarding workplace for all and value greatly the range of contributions that can be made through employing a diverse workforce.

Outlook for 2025

We anticipate another strong year for profitability across Motor Vehicle and Motorcycle. Total gross written premium levels will be influenced by market dynamics, but we expect we will continue to write a good level of business. After a relatively slow start we have seen increasing momentum in later Q1 and are comfortable with the volume of business we are currently writing.

In the second half of 2025 we will start to roll out our Ambition 2030 pricing developments - we described at our recent Capital Markets Event that this will be on a cautious, staged basis. We would not expect a meaningful financial impact this year, but certainly do expect this to enhance growth in profit into the medium term.

We are genuinely excited by our future prospects, and I would like to extend my thanks to all my colleagues and the Board for support in these endeavours.

Geoff Carter

Chief Executive Officer

17 March 2025

Chief Financial Officer's Review

"Delivering top and bottom line growth while staying true to our core strengths."

Highlights

* = Alternative performance metrics are reconciled to IFRS reported figures on pages 208 to 212 of the Annual Report and Accounts

Gross written premium

£236.4m 

2023 | £225.1m 

IFRS profit before tax

£48.6m 

2023 | £23.6m 

Executive summary

Sabre's financial performance in 2024 represents a strong return to form, with profit before tax - which remains the Group's primary metric and key focus for Ambition 2030 - having more than doubled since 2023, a result of higher written premium in 2023 and 2024 earning through and an improved net insurance margin resulting from stronger underwriting performance. Overall, we are just a fraction of a percentage point outside the Group's recently restated net insurance margin target of 18%-22%, with the year's strong improvement in current-year performance result being slightly offset by a small increase in prior-year claims costs.

This result is a great stepping-stone towards the Group's ambitious medium-term target - to reach a profit before tax of at least £80m in 2030. Alongside this, Sabre has generated significant capital and increased the total dividend payout by 44.4% while maintaining a very strong balance sheet, being well positioned to deal with whatever market conditions prevail during 2025 and to keep delivering market-leading profitability.

The Group has announced its intention to execute its first share buyback programme, worth around £5m, in 2025, subject to regulatory approval. This is an effective use of excess capital and underlines the Board's confidence in the Group's balance sheet strength and its capital-light strategic plan.

Insurance revenue

Headline premium growth of 5.0% across 2024 was weighted towards the first half of the year, with growth being allowed to slow as market conditions became less favourable from Q2 onwards, representing a cyclical softening of market prices. Having achieved sufficient growth in the first half, Sabre was able to avoid chasing market pricing down in the second half, preserving strong margins across the book while accepting a dip in premium and policy volumes, exactly in line with the Group's strategy.

The Motorcycle business remained healthy during 2024, with the last policies written by the Group's previous distribution partner having completely run off during the year, the gap in policies being completely filled by the Group's other distribution partner.

The Taxi book remained relatively stable, with further underwriting enhancements allowing a core of profitable business to be written, while not yet being ready to accelerate growth in the product given continued under-pricing in the Taxi segment.

The 'unearned' element of the liability for remaining coverage' represents the element of written premium covering future periods, which has the effect of smoothing gross earned premium ("GEP") (and therefore insurance revenue) over time, so where there is a big change in written premium, insurance revenue will change more slowly. Customer instalment income reflects the interest income charged on instalment policies and remains a relatively small percentage of the Group's total insurance revenue.

Insurance expense

(1) Includes discounting on Period Payment Orders ("PPOs")

(2) Calculation of undiscounted net loss ratio allows for the impact of discounting on long-term non-life annuities, Periodic Payment Orders ("PPOs"), consistent with presentation under IFRS 4

2024 saw a continuation of the strong loss ratio improvement trends from 2023, with Motor Vehicle continuing to perform at a loss ratio in line with our target and Motorcycle and Taxi both improving, albeit from a weaker position in the previous year. The current year loss ratio, which is a measure of the claims experience on policies which were in force during the year has improved across the board, with an overall improvement of 6.1% The prior year loss ratio has shown a small outward movement in 2024 - this means that the amount held for claims on the books at the end of the prior year has increased a little, whereas in 2023 it decreased (as is usual). This reflects some adverse experience on open claims within the year and we expect prior year experience to return to normal negative loss ratios in future years.

Directly attributable and acquisition costs have increased by c24.8% , which is primarily driven by a proportionate increase in insurance revenue, given these costs are mostly broker commissions and other directly attributable variable costs.

Other operating expenditure

The expense ratio has improved significantly, by 4.5ppts, in 2024. This is mainly due to the recovery in expense leverage following a period of low premium in the preceding years. Absolute expenses have increased by approximately 8.0%, which is in part due to the impact of variable expenses, such as policy administration costs, certain data costs and levies. It is also a consequence of the high levels of inflation during the past three years, with the impact of high inflation not being felt immediately as contracts are renewed at staggered intervals.

Total staff costs, which is Sabre's largest category of expense, has increased by 10.8% year-on-year. This is partly a function of a 4.3% increase in average full-time equivalent headcount and an average pay increase of just over 6.7%. Staff bonuses were increased by approximately 26% in 2024, returning closer to 'normal' (pre-2022) levels, and executive bonuses, which are paid from a pool calculated as a proportion of profit before tax, also increased (see pages 105 to 117 of the Annual Report for more details of executive remuneration).

Other income

Other technical income, related to non-insurance revenue earned such as product fees (excluding instalment interest) and commissions, remains a very small element of the Group's income. Interest revenue reflects the yield achieved across the Group's investment portfolio. The significant increase in interest revenue reflects the higher yield gained through reinvesting matured assets as well as an increase in the total assets invested during the year. The Group's investment strategy remains unchanged, being invested in a low-risk mix of UK Government bonds, other government-backed securities and diversified investment-grade corporate bonds.

Fair value gains and losses are taken through other comprehensive income and largely reflect market movements in the yields of risk-free and low-risk assets. We do not expect to realise any of these market value movements within profit, as we continue to hold invested assets to maturity.

Insurance and reinsurance finance income/(expense) reflects the run-off of discounting applied to insurance liabilities under IFRS 17. As cash flows move towards settlement, the total level of discounting is reduced and this reduction is reflected here. The slight reduction in this cost in 2024 reflects the discount rates applied at the point claims were incurred and is a function of the run-off patterns applied to claims costs when they are incurred.

Taxation

In 2024 the Group recorded a corporation tax expense of £12.6m (2023: £5.5m), with an effective tax rate of 25.9%, (2023: 23.5%). The increase in effective tax rate is primarily due to the increase in the UK rate of corporation tax in April 2023. It is slightly higher than the current 25% UK rate of corporation tax because of a small (£0.6m) tax charge in respect of prior periods, related to the implementation of IFRS 17. The Group has not entered into any complex or unusual tax arrangements during the year.

Earnings per share

Basic earnings per share of 14.48p is proportionate to profit after tax. Diluted earnings per share is similarly proportionate to profit after tax, taking into account the potentially dilutive effect of the Group's share schemes. No shares have been issued or cancelled during the year.

Cash and investments

Total cash and investment holdings have increased given the growth in the business across 2024. The level of cash retained reflects Sabre's normal liquidity requirements and there has been no change in the overall investment strategy, with gilts and government-backed assets remaining the majority of the portfolio, with c.30% of invested assets held in investment-grade corporate bonds.

Insurance liabilities

The Group's net insurance liabilities continue to reflect the underlying profitability and volume of business written. Generally, the gross insurance liabilities are more volatile and impacted by the receipt and settlement of individually large claims. The level of net insurance liabilities held remains broadly proportionate to the volume of business written along with the inflation applied to claims costs.

Leverage

The Group continues to hold no external debt. All of the Group's capital is considered Tier 1 under the UK regulatory regime. The Directors continue to hold the view that this allows the greatest operational flexibility for the Group.

Dividends and solvency

The dividend proposed is in line with the Group's current policy to pay an ordinary dividend of 70% of profit after tax, and to consider passing excess capital to shareholders by way of a special dividend.

Along with these financial results, the Group has announced an increase in the maximum ordinary dividend to 80% of profit after tax, effective from 2025 onwards. This allows for an ordinary dividend much closer to historical levels of distribution.

Excluding the capital required to pay this dividend, the Group's SCR coverage ratio at 31 December 2024 is 171.1% .

We have announced this year that the Group intends to operate its first share buyback programme in 2025, distributing around £5m of excess capital, subject to regulatory approval. The Group's year-end SCR coverage ratio, excluding the capital required to fund this buyback, is 163.1%.

Adam Westwood

Chief Financial Officer

17 March 2025

Financial Statements

Consolidated Profit or Loss Account

For the year ended 31 December 2024

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2024

Consolidated Statement of Financial Position

As at 31 December 2024

(1) Opening balance has been restated - Refer to Note 3.9

Consolidated Statement of Changes in Equity

For the year ended 31 December 2024

(1) Opening balance has been restated - Refer to Note 3.9

Consolidated Statement of Cash Flows

For the year ended 31 December 2024

Notes to the Consolidated Financial Statements

For the year ended 31 December 2024

Corporate information

Sabre Insurance Group plc is a company incorporated in the United Kingdom and registered 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, including taxis and motorcycles. The Company's principal activity is that of a holding company.

1. Accounting Policies

The principal accounting policies applied in the preparation of these Consolidated and Company Financial Statements are included in the specific notes to which they relate. These policies have been consistently applied to all the years presented, unless otherwise indicated.

1.1. Basis of preparation

The financial statements of the Group have been prepared in accordance with UK-adopted international accounting standards, comprising International Accounting Standards ("IAS") and International Financial Reporting Standards ("IFRS"), and the requirements of the Companies Act 2006. Endorsement of accounting standards is granted by the UK Endorsement Board ("UKEB").

The financial statements are prepared in accordance with the going concern principle using the historical cost basis, except for those financial assets and owner-occupied properties that have been measured at fair value. The preparation of the financial statements necessitates the use of estimates, assumptions and judgements that affect the reported amounts in the Statement of Financial Position and the Profit or Loss Account and Statement of Comprehensive Income. Where appropriate, details of estimates are presented in the accompanying notes to the Consolidated Financial Statements.

As the full impact of climate change is currently unknown, it is not possible to consider all possible future outcomes when determining the value of assets, liabilities and the timing of future cash flows. The Group's view is that any reasonable impact of climate change would not have a material impact on the valuation of assets and liabilities at the year-end date.

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 broadly 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 settle the liability simultaneously.

1.2. Going concern

The Consolidated Financial Statements have been prepared on a going concern basis. The Directors have a reasonable expectation that the Group has adequate resources to continue in operation for at least 12 months from the date the Directors approved these Financial Statements and that therefore it is appropriate to adopt a going concern basis for the preparation of the Financial Statements. In making their assessment, the Directors took into account the potential impact of the principal risks that could prevent the Group from achieving its strategic objectives.

The assessment was based on the Group's Own Risk and Solvency Assessment ("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. Consideration was also given to what the Group considers its principal risks which are set out in the Principal Risks and Uncertainties section on pages 24 to 33 of the Strategic Report of the Annual Report. The assessment also included consideration of any scenarios which might cause the Group to breach its solvency requirements which are not otherwise covered in the risk-based scenario testing.

We have assessed the short, medium and long-term risks associated with climate change. Given the geographical diversity of the Group's policyholders within the UK and the Group's reinsurance programme, it is highly unlikely that a climate event will materially impact Sabre's ability to continue trading. More likely is that the costs associated with the transition to a low-carbon economy will impact the Group's indemnity spend, as electric vehicles are currently relatively expensive to fix. We expect that this is somewhat, or perhaps completely, offset by advances in technology reducing the frequency of claims, in particular bodily injury claims which are generally far more expensive than damage to vehicles. These changes in the costs of claims are gradual and as such reflected in our claims experience and fed into the pricing of our policies.

1.3. New and amended standards and interpretations adopted by the Group

Amendments to IFRS

The following amended IFRS standards became effective for the year ended 31 December 2024:

- Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

- Amendments to IAS 1 Presentation of Financial Statements

o  Classification of Liabilities with Covenants

o  Non-current Liabilities with Covenants

o  Removed the requirement that the right to defer settlement be unconditional

o  Deferral of Effective Date Amendment

- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)

None of the amendments have had a material impact to the Group.

1.4. New and amended standards and interpretations not yet effective in 2024

A number of new standards and interpretations adopted by the UK which are not mandatorily effective, as well as standards' interpretations issued by the IASB but not yet adopted by the UK, have not been applied in preparing these financial statements. The Group does not plan to adopt these standards early; instead, it expects to apply them from their effective dates as determined by their dates of UK endorsement. The Group is still reviewing the upcoming standards to determine their impact:

- Lack of Exchangeability (Amendments to IAS 21) - Effective 1 January 2025

- IFRS 18 Presentation and Disclosure in Financial Statements - Effective 1 January 2027, with retrospective application - IFRS 18, which replaces IAS 1 "Presentation of Financial Statements", introduces new requirements for presentation and disclosure in the financial statements, with a focus on the Profit or Loss Account. Items in the Profit of Loss Account will be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations, of which the first three are new. It also requires the disclosure of newly defined management-derived performance measures, how these are calculated and why these provide useful information, reconciled to the IFRS reporting. As a presentation and disclosure standard, the implementation of IFRS 18 will not affect the Group's results. The Group is currently working to identify all impacts the amendments will have on the primary financial statements and notes to the financial statements.

2. Risk and Capital Management

2.1. Risk management framework

The Sabre Insurance Group plc 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, and ensure fair customer outcomes. 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 employees.

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. The Group's Management Risk and Compliance Forum gives Management the regular opportunity to review and discuss the risks which the Group faces, including but not limited to any breaches, issues or emerging risks. The Forum also works to ensure that adequate mitigation for the risks the Group is exposed to are in place.

2.2. Underwriting risk

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 a 12-month duration. For these contracts, the most significant risks arise from under-estimation of the expected costs attached to a policy or a claim, for example through unexpected inflation of costs or single catastrophic events.

Refer to Note 3.6 for detail on these risks and the way the Group manages them. Note 3.6 also includes the considerations of climate change. Further discussion on climate change can be found in the Principal Risks and Uncertainties section on pages 24 to 33 of the Strategic Report and the Responsibility and Sustainability section on pages 44 to 64 of the Annual Report.

2.3. Credit risk

Credit risk reflects the financial impact of the default of one or more of the Group's counterparties. The Group is exposed to financial risks caused by a loss in the value of financial assets due to counterparties failing to meet all or part of their obligations. Key areas where the Group is exposed to credit default risk are:

- Failure of an asset counterparty to meet their financial obligations (Note 4.4)

- Reinsurers default on their share of the Group's insurance liabilities (Note 3.7)

- Default on amounts due from insurance contract intermediaries or policyholders (Note 3.7)

The following policies and procedures are in place to mitigate the Group's exposure to credit risk:

- A Group credit risk policy which sets out the assessment and determination of what constitutes credit risk for the Group. Compliance with the policy is monitored and exposures and breaches are reported to the Group's Risk Committee

- 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 a suitable allowance for impairment

- The Group 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

Refer to Notes 3.7 and 4.4 as indicated above for further information on credit risk.

2.4. 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 Group 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.

Refer to Note 6 for further information on liquidity risk.

2.5. Investment concentration risk

Excessive exposure to particular industry sectors or groups can give rise to concentration risk. The Group 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.

A significant part of the Group's investment portfolio consists primarily of UK government bonds and government-backed bonds; therefore, the risk of government default does exist, however the likelihood is extremely remote. The remainder of the portfolio consists of investment grade corporate bonds. The Group continues to monitor the strength and security of all bonds.

The Group's portfolio has a significant concentration of UK debt securities and therefore is exposed to movements in UK interest rates.

Refer to Note 4.2.1 for further information on investment concentration risk.

2.6. Operational risk

Operational risk is the risk of loss arising from system failure, cyber attack, 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 Group cannot expect to eliminate all operational risks, but by operating a rigorous control framework and by monitoring and responding to potential risks, the Group 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.

2.7. 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.

The Group has continued to manage 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. 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.

The Group aims to retain sufficient capital such that in all reasonably foreseeable scenarios, it will hold regulatory capital in excess of its SCR. The Directors currently consider that this is achieved through maintaining a regulatory capital surplus of 140% to 160%. As at 31 December 2024, the Group holds significant excess Solvency II capital.

The Group's IFRS capital comprised:

The Solvency II position of the Group both before and after proposed final dividend is given below:

The following table sets out a reconciliation between IFRS net assets and Solvency II net assets before proposed final dividend:

The adjustments set out in the above table have been made for the following reasons:

- Adjusted IFRS net assets: Equals Group net assets on an IFRS basis, less Goodwill.

- Removal of liability for remaining coverage and insurance acquisition cash flow asset: Liability for remaining coverage is not treated as a liability under Solvency II.

- Removal of insurance acquisition cash flow asset: Insurance acquisition cash flow asset is not deferred under Solvency II.

- Removal of IFRS risk adjustment: Solvency II risk margin replaces IFRS risk adjustment.

- Addition of 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.

- Addition of Solvency II premium provision: A premium reserve reflecting the future cash flows in respect of insurance contracts is calculated and this must be discounted under Solvency II.

- Changes in valuation differences: Valuation differences of technical differences between IFRS 17 and Solvency II, including discounting.

- 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.

Sabre Insurance Group plc's SCR, expressed on a risk module basis, is set out in the following table:

The total SCR is primarily driven by the underwriting risk element, which is a function of the Group's net earned premium (or projected net earned premium) and the level of reserves held. Therefore, the SCR is broadly driven by the size of the business.

The Group's capital management objectives are:

- To ensure that the Group will be able to continue as a going concern

- To maximise the income and capital return to its equity

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 year.

3. Insurance Liabilities and Reinsurance Assets

ACCOUNTING POLICY

For the purpose of this accounting policy, the term 'motor insurance' covers all the Group's products, which includes Motor Vehicle, Motorcycle and Taxi insurance.

A. Insurance and reinsurance contracts classification

The Group issues insurance contracts in the normal course of business, under which it accepts significant insurance risk from a policyholderby agreeing to compensate the policyholder if a specified uncertain future insured event adversely affects the policyholder.

As a general guideline, the Group determines whether it has significant insurance risk, by comparing benefits payable after an insured event with benefits payable if the insured event did not occur.

The Group issues only non-life insurance to individuals and businesses. Non-life insurance products offered by the Group are Motor Vehicle, Motorcycle and Taxi insurance. These products offer protection of a policyholder's assets and indemnification of other parties that have suffered damage as a result of a policyholder's accident.

In the normal course of business, the Group uses reinsurance to mitigate its risk exposures. A reinsurance contract transfers significant risks if it transfers substantially all of the insurance risk resulting from the insured portion of the underlying insurance contacts, even if it does not expose the reinsurer to the possibility of a significant loss.

B. Insurance and reinsurance contracts accounting treatment

(i) Separating components from insurance and reinsurance contracts

The Group assesses its non-life insurance and reinsurance products to determine whether they contain distinct components which must be accounted for under another IFRS instead of under IFRS 17. After separating any distinct components, the Group applies IFRS 17 to all remaining components of the (host) insurance contract. Currently, the Group's products do not include any distinct components that require separation.

(ii) Aggregation and recognition of insurance and reinsurance contracts

Insurance contracts

Insurance contracts are aggregated into groups for measurement purposes. Groups of insurance contracts are determined by identifying portfolios of insurance contracts, each comprising contracts subject to similar risks and managed together, and dividing each portfolio into annual cohorts (i.e. by year of issue) and each annual cohort into three groups based on the expected profitability of contracts:

- Any contracts that are onerous on initial recognition

- Any contracts that, on initial recognition, have no significant possibility of becoming onerous subsequently

- Any remaining contracts in the annual cohort

The Group recognises groups of insurance contracts it issues from the earliest of:

- The beginning of the coverage period of the group of contracts

- When the first payment from a policyholder in the group becomes due or when the first payment is received if there is no due date

- When facts and circumstances indicate that the contract is onerous

The Group adds new contracts to the group in the reporting period in which that contract meets one of the criteria set out above.

The profitability of groups of contracts is assessed by actuarial valuation models that take into consideration existing and new business. The Group assumes that no contracts in the portfolio are onerous at initial recognition unless facts and circumstances indicate otherwise. For contracts that are not onerous, the Group assesses, at initial recognition, that there is no significant possibility of becoming onerous subsequently by assessing the likelihood of changes in applicable facts and circumstances. The Group considers facts and circumstances to identify whether a group of contracts are onerous based on:

- Pricing information

- Results of similar contracts it has recognised

- Environmental factors, e.g. a change in market experience or regulations

Reinsurance contracts

Some reinsurance contracts provide cover for underlying contracts that are included in different groups. However, the Group concludes that the reinsurance contract's legal form of a single contract reflects the substance of the Group's contractual rights and obligations, considering that the different covers lapse together and are not sold separately. As a result, the reinsurance contract is not separated into multiple insurance components that relate to different underlying groups.

The Group recognises a group of reinsurance contracts held at the earlier of the following:

- The beginning of the coverage period of the group of reinsurance contracts held

- The date the Group recognises an onerous group of underlying insurance contracts if the Group entered into the related reinsurance contract held in the group of reinsurance contracts held at or before that date

The Group adds new contracts to the group in the reporting period in which that contract meets one of the criteria set out above.

(iii) Measurement

Summary of measurement approaches

The Group uses the following measurement approaches to its insurance and reinsurance contacts.

The Group applies the premium allocation approach to all the insurance contracts that it issues and reinsurance contracts that it holds, as the coverage period of each contract in the group is one year or less, including insurance contract services arising from all premiums within the contract boundary. The Group does not expect significant variability in the fulfilment cash flows that would affect the measurement of the liability for remaining coverage during the period before a claim is incurred.

All the Group's insurance contracts have a coverage period of one year or less. The Group's reinsurance contracts held are excess of loss contracts and are loss occurring. The Group does not issue any reinsurance contracts.

Insurance contracts issued

On initial recognition of each group of contracts, the carrying amount of the liability for remaining coverage ("LRC") is measured at:

- The premiums received on initial recognition

- Minus any insurance acquisition cash flows allocated to the group at that date

- Adjusted for any amount arising from the derecognition of any assets or liabilities previously recognised for cash flows related to the group (including assets for insurance acquisition cash flows)

The Group has chosen not to expense insurance acquisition cash flows when they are incurred.

Subsequently, the Group measures the carrying amount of the LRC at the end of each reporting period as the LRC at the beginning of the period:

- Plus premiums received in the period

- Minus insurance acquisition cash flows

- Plus any amounts relating to the amortisation of insurance acquisition cash flows recognised as an expense in the reporting period

- Minus the amount recognised as insurance revenue for the services provided in the period

On initial recognition of each group of contracts, the Group expects that the time between providing each part of the services and the related premium due date is no more than a year. Accordingly, the Group has chosen not to adjust the liability for remaining coverage to reflect the time value of money and the effect of financial risk.

If at any time during the coverage period, facts and circumstances indicate that a group of contracts is onerous, then the Group recognises a loss in Profit or Loss and increases the liability for remaining coverage to the extent that the current estimates of the fulfilment cash flows that relate to remaining coverage exceed the carrying amount of the liability for remaining coverage. The fulfilment cash flows are discounted (at current rates) if the liability for incurred claims is also discounted.

The Group recognises the liability for incurred claims ("LIC") of a group of insurance contracts at the amount of the fulfilment cash flows ("FCF") relating to incurred claims. The fulfilment cash flows are discounted (at current rates) unless they are expected to be paid in one year or less from the date the claims are incurred.

The carrying amount of a group of insurance contracts issued at the end of each reporting period is the sum of:

- The LRC

- The LIC

Risk adjustment for non-financial risk

An explicit risk adjustment for non-financial risk is estimated separate from the other estimates. Unless contracts are onerous, the explicit risk adjustment for non-financial risk is only estimated for the measurement of the LIC.

This risk adjustment represents the compensation that the Group requires for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risk. Non-financial risk is risk arising from insurance contracts other than financial risk, which is included in the estimates of future cash flows or the discount rate used to adjust the cash flows. The risks covered by the risk adjustment for non-financial risk are insurance risk and other non-financial risks such as lapse risk and expense risk.

The risk adjustment for non-financial risk for insurance contracts measures the compensation that the Group would require to make it indifferent between:

- Fulfilling a liability that has a range of possible outcomes arising from non-financial risk

- Fulfilling a liability that will generate fixed cash flows with the same expected present value as the insurance contracts

Reinsurance contracts held

The excess of loss reinsurance contracts held provide coverage on the motor insurance contracts originated for claims incurred during an accident year and are accounted for under the PAA. The Group measures its reinsurance assets for a group of reinsurance contracts that it holds on the same basis as insurance contracts that it issues. For reinsurance contracts held, on initial recognition, the Group measures the remaining coverage at the amount of ceding premiums paid. For reinsurance contracts held, at each of the subsequent reporting dates, the remaining coverage is:

- Increased for ceding premiums paid in the period

- Decreased for the amounts of ceding premiums recognised as reinsurance expenses for the services received in the period

Assets for reinsurance contracts consist of the asset for remaining coverage ("ARC") and the asset for incurred claims ("AIC") being the reinsurers' share of claims that have already been incurred.

For reinsurance contracts held, the risk adjustment for non-financial risk presents the amount of risk being transferred by the Group to the reinsurer.

Asset for insurance acquisition cash flows

The Group includes the following acquisition cash flows within the insurance contract boundary that arise from selling, underwriting and starting a group of insurance contracts and that are:

a. Costs directly attributable to individual contracts and groups of contracts

b. Costs directly attributable to the portfolio of insurance contracts to which the group belongs, which are allocated on a reasonable and consistent basis to measure the group of insurance contracts

Insurance acquisition cash flows arising before the recognition of the related group of contracts are recognised as an asset. Insurance acquisition cash flows arise when they are paid or when a liability is required to be recognised under a standard other than IFRS 17. Such an asset is recognised for each group of contracts to which the insurance acquisition cash flows are allocated. The asset is derecognised, fully or partially, when the insurance acquisition cash flows are included in the measurement of the group of contracts.

Recoverability assessment

At each reporting date, if facts and circumstances indicate that an asset for insurance acquisition cash flows may be impaired, then the Group:

a. Recognises an impairment loss in Profit or Loss so that the carrying amount of the asset does not exceed the expected net cash inflow for the related group

b. If the asset relates to future renewals, recognises an impairment loss in Profit or Loss to the extent that it expects those insurance acquisition cash flows to exceed the net cash inflow for the expected renewals and this excess has not already been recognised as an impairment loss under (a)

The Group reverses any impairment losses in Profit or Loss and increases the carrying amount of the asset to the extent that the impairment conditions have improved.

Modification and derecognition

The Group derecognises insurance contracts when:

- The contract is extinguished (i.e. when the obligation specified in the insurance contract expires or is discharged or cancelled)

- The contract is modified and certain additional criteria are met

When an insurance contract is modified by the Group as a result of an agreement with the counterparties or due to a change in regulations, the Group treats changes in cash flows caused by the modification as changes in estimates of the FCF, unless the conditions for the derecognition of the original contract are met. The Group derecognises the original contract and recognises the modified contract as a new contract if any of the following conditions are present:

a. If the modified terms had been included at contract inception and the Group would have concluded that the modified contract:

i. Is not in scope of IFRS 17

ii. Results in different separable components

iii. Results in a different contract boundary

iv. Belongs to a different group of contracts

b. The original contract was accounted for under the PAA, but the modification means that the contract no longer meets the eligibility criteria for that approach

When an insurance contract accounted for under the PAA is derecognised, adjustments to the FCF to remove relating rights and obligations and account for the effect of the derecognition result in the following amounts being charged immediately to Profit or Loss:

a. If the contract is extinguished, any net difference between the derecognised part of the LRC of the original contract and any other cash flows arising from extinguishment

b. If the contract is transferred to the third party, any net difference between the derecognised part of the LRC of the original contract and the premium charged by the third party

c. If the original contract is modified resulting in its derecognition, any net difference between the derecognised part of the LRC and the hypothetical premium the entity would have charged had it entered into a contract with equivalent terms as the new contract at the date of the contract modification, less any additional premium charged for the modification

(iv) Presentation

The Group has presented separately, in the Statement of Financial Position, the carrying amount of portfolios of insurance contracts issued and portfolios of reinsurance contracts held.

The Group has elected to disaggregate part of the movement in LIC resulting from the changes in discount rates and present this in the Statement of Comprehensive Income. The Group disaggregates the total amount recognised in the Profit or Loss Account and the Statement of Comprehensive Income into an insurance service result, comprising insurance revenue and insurance service expense, and insurance finance income or expenses.

The Group does not disaggregate the change in risk adjustment for non-financial risk between a financial and non-financial portion and includes the entire change as part of the insurance service result.

The Group separately presents income or expenses from reinsurance contracts held from the expenses or income from insurance contracts issued.

AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS

Insurance service result from insurance contracts issued

Insurance revenue

As the Group provides insurance contract services under the group of insurance contracts, it reduces the LRC and recognises insurance revenue. The amount of insurance revenue recognised in the reporting period depicts the transfer of promised services at an amount that reflects the portion of consideration that the Group expects to be entitled to in exchange for those services.

The Group measures all insurance contracts under the PAA and recognises insurance revenue based on the passage of time over the coverage period of a group of contracts.

Insurance service expenses

Insurance service expenses include the following:

- Incurred claims and benefits

- Other incurred directly attributable expenses

- Amortisation of insurance acquisition cash flows

- Changes that relate to past service - changes in the FCF relating to the LIC

- Changes that relate to future service - changes in the FCF that result in onerous contract losses or reversals of those losses

Amortisation of insurance acquisition cash flows is based on the passage of time.

Other expenses not meeting the above categories are included in other operating expenses in the Profit or Loss Account.

Insurance service result from reinsurance contracts held

Net income/(expense) from reinsurance contracts held

The Group presents separately on the face of the Profit or Loss Account and the Statement of Comprehensive Income, the amounts expected to be recovered from reinsurers, and an allocation of the reinsurance premiums paid. The net income/(expense) from reinsurance contract held comprise:

- Reinsurance expenses

- For groups of reinsurance contracts measured under the PAA, broker fees are included within reinsurance expenses

- Incurred claims recovery

- Other incurred directly attributable expenses

- Changes that relate to past service - changes in the FCF relating to incurred claims recovery

- Effect of changes in the risk of reinsurers' non-performance

Amounts relating to accounting for onerous groups of underlying insurance contracts issued

Reinsurance expenses are recognised similarly to insurance revenue. The amount of reinsurance expenses recognised in the reporting period depicts the transfer of received insurance contract services at an amount that reflects the portion of ceding premiums that the Group expects to pay in exchange for those services. Broker fees are included in reinsurance expenses.

All groups of reinsurance contracts held are measured under the PAA and reinsurance expenses are recognised based on the passage of time over the coverage period of a group of contracts.

AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Insurance finance income or expenses

Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts arising from:

- The effect of the time value of money and changes in the time value of money

- The effect of financial risk and changes in financial risk

For contracts measured under the PAA, the main amounts within insurance finance income or expenses are:

a. Interest accreted on the LIC

b. The effect of changes in interest rates and other financial assumptions

The Company disaggregates insurance finance income or expenses on motor insurance contracts issued between Profit or Loss and OCI. The Company has made an accounting policy choice to disaggregate insurance finance income or expenses for the period to include within OCI an amount which reflects the difference between the carrying amount of a group of contracts and the amount that the group would have been measured at using the discount rates in effect on initial recognition, effectively reflecting the impact of discount rate changes on the opening liability for incurred claims through other comprehensive income. The amount recognised in other comprehensive income over the duration of a group of contracts will always total zero.

The impact of changes in market interest rates on the value of the insurance assets and liabilities are reflected in OCI in order to minimise accounting mismatches between the accounting for financial assets and insurance assets and liabilities. The Company's financial assets backing the motor insurance portfolios are predominantly measured at fair value through Other Comprehensive Income ("FVOCI").

RISK MANAGEMENT

Refer to Notes 3.6 and 3.7 for detail on risks relating to insurance liabilities and reinsurance assets, and the management thereof.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of these consolidated financial statements requires the Group to select accounting policies and make estimates, assumptions and judgements. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. The Group based its assumptions and estimates on information and facts available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. The Group disaggregates information to disclose major product lines, namely Motor Vehicle, Motorcycle and Taxi.

Accounting judgements

A. Level of aggregation and measurement model for insurance contracts

For measurement purposes, insurance contracts are aggregated into groups based on an assessment of risks and dividing each portfolio into annual cohorts by year of issue. Judgement is required in assessing if the contracts have similar risks that are managed together. Each annual cohort Is then divided into three groups based on the expected profitability of contracts, being contracts that are onerous on initial recognition, have no significant possibility of becoming onerous, or any other contracts which do not fall into those categories. Judgement is applied to determine the profitability of contracts at initial recognition. The Group applies the default assumption that no groups of contracts are onerous unless facts and circumstances indicate otherwise. Further judgement is applied to determine how contracts will be measured. The Group applies the PAA to simplify the measurement of all insurance contracts issued and reinsurance contracts held. The judgement around the PAA has been disclosed in section B(iii) of the Group's accounting policies for insurance liabilities and reinsurance assets.

B. Insurance acquisition cash flows

IFRS 17 requires an entity to include a portion of its overhead costs that are directly attributable in fulfilling the obligations under an insurance contract, in the fulfilment cash flows of the related liability.

The Group applies judgement in determining the inputs used in the methodology to systematically and rationally allocate insurance acquisition cash flows to groups of insurance contracts. This includes judgements about the amounts allocated to insurance contracts expected to arise from renewals of existing insurance contracts in a group and the volume of expected renewals from new contracts issued in the period.

At the end of each reporting period, the Group revisits the assumptions made to allocate insurance acquisition cash flows to groups, and where necessary, revises the amounts of assets for insurance acquisition cash flows accordingly.

C. Discount rates

As there are no referenced asset portfolios backing the LIC, because of the volatility and uncertainty of claims on short term insurance contracts, the Group deemed it more appropriate to use the bottom-up approach under IFRS 17 for discounting. This reflects a risk-free yield curve and an illiquidity premium. The standard does not specify how to calculate the illiquidity premium.

The Group uses the risk-free curves published by the Bank of England. The Solvency II GBP risk-free yield curve is based on 6-month SONIA swap rates, corrected using an adjustment defined by the PRA for credit risk. SONIA-based yield curves are considered to contain negligible credit risk, according to the Bank of England, as the contracts that make it up settle overnight.

The Group has performed a number of analyses in determining the choice of the illiquidity risk component, including using the Solvency II volatility adjustment ("VA"). The analyses did not identify any material differences in reserves. Given the nature of the liabilities and that there is no penalty or surrender value to exit the insurance contracts, the Group applied judgement in setting the illiquidity risk component and has selected the VA to be an appropriate proxy for the illiquidity adjustment.

Discount rates applied for discounting of future cash flows are listed below:

See Note 3.6 for the impact of a 1% increase or decrease in the discount rates used.

D. Risk adjustment for non-financial risk

The risk adjustment for non-financial risk is the compensation that the Group requires for bearing the uncertainty about the amount and timing of the cash flows of groups of insurance contracts. The risk adjustment reflects an amount that an insurer would rationally pay to remove the uncertainty that future cash flows could exceed the expected value amount.

The Group has estimated the risk adjustment using a methodology which targets a confidence level (probability of sufficiency) approach between the 80th and 90th percentile. At 31 December 2024, the net risk adjustment applied equates to an approximate confidence interval of 80.6% (31 December 2023: 81.3%). That is, the Group has assessed its indifference to uncertainty for all product lines (as an indication of the compensation that it requires for bearing non-financial risk) as being equivalent to the 80th to 90th percentile confidence level less the mean of an estimated probability distribution of the future cash flows. The Group has estimated the probability distribution of the future cash flows, and the additional amount above the expected present value of future cash flows required to meet the target percentiles.

Sabre uses a 'bootstrapping' method to create a distribution of outcomes for the outstanding claim amounts. This distribution is assessed to calculate the risk adjustment at a chosen confidence level. Bootstrapping involves taking random samples of the data for analysis, rather than using the full dataset. Multiple random samples are selected, with each random sample selected from the full dataset.

See Note 3.6 for the impact of moving the confidence interval of the booked risk adjustment up or down by 5ppts.

Critical accounting estimates

E. Liability for incurred claims ("LIC")

The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as Chain Ladder and Bornheutter-Ferguson methods.

The main assumption underlying these techniques is that a Group's past claims development experience can be used to project future claims development and hence ultimate claims costs. These methods extrapolate the development of paid and incurred losses, average costs per claim (including claims handling costs), and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by geographical area, as well as by significant business lines and claim types. Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historical claims development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (e.g., to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the probability weighted expected value outcome from the range of possible outcomes, taking account of all the uncertainties involved.

The Group has the right to pursue third parties for payment of some or all costs. Estimates of salvage recoveries and subrogation reimbursements are considered as an allowance in the measurement of ultimate claims costs. Other key circumstances affecting the reliability of assumptions include variation in interest rates and delays in settlement.

The key estimates in calculating the LIC are the amount and timing of future claims payments in relation to claims already incurred. This is primarily assessed with reference to past performance, including past settlement patterns, as per the actuarial methodology outlined above. This includes estimating the likely changes in inflation as relates to claims already incurred, as well as the expected frequency of claims which have occurred but which have not yet been reported. The ongoing cost of handling claims already incurred is estimated with reference to the historical cost-per-claim calculated over the past 12 months.

See Note 3.6 for the impact of a 5ppts increase in loss ratio and the impact of a 5% increase in outstanding claims.

3.1. Composition of the Statement of Financial Position

An analysis of the amounts presented on the Statement of Financial Position for insurance contacts is included in the table below.

3.2. Movements in insurance and reinsurance contract balances

3.2.1. Insurance contracts issued

Reconciliation of liability for remaining coverage and the liability for incurred claims

3.2.2. Reinsurance contracts held

Reconciliation of assets for remaining coverage and the assets for incurred claims

3.3. Assets for insurance acquisition cash flows

The following table sets out when the Group expects to derecognise assets for insurance acquisition cash flows after the reporting date: