Why did the Sabre Insurance share price just crash 40%?

Inflationary costs have hit the Sabre Insurance share price, as H1 profits plunge. And the contagion is spreading to others in the sector.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Stack of British pound coins falling on list of share prices

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The global economic crisis has put the insurance sector under pressure in 2022. But I wasn’t expecting to see a 40% one-day crash for the Sabre Insurance (LSE: SBRE) share price. Yet that’s what happened by early afternoon Thursday, in response to first-half figures.

The update opened with a headline announcing “strong progress against core strategic initiatives“. So what was the bad news hiding behind it?

Share price plunge

The Sabre share price had been picking up a bit in 2022, following on from a previous year of weakness. But then this happened, as the share price chart shows.

It’s all down to plummeting profits in the half, as the motor insurer reported inflationary pressure on its cost of claims.

The “extraordinary inflationary pressures” spoken of have led Sabre to change its strategy. It’s putting up prices in an effort to support profitability, at the expense of pursuing new customers to grow the business.

The bottom line is not pretty, with H1 profit after tax plunging to £3.5m. That’s after an £18m profit in the same period the previous year, and a profit of £30m for the whole of 2021.


The surprise news has already sent ripples through the motor insurance sector. At the time of writing, the Direct Line Insurance Group share price has dipped by 10%. And Admiral Group shares are down a heftier 14%.

Sabre said it continues “to expect to pay a dividend for 2022, albeit at a reduced level, before returning to more normal levels in 2023.

I’m not quite sure what normal levels mean, or whether this will instil any real confidence in investors. Sabre’s dividend did yield 4.6% last year. But the annual payments had been falling for a couple of years as earnings had been declining.

Rapid rebound?

So what next? Chief executive Geoff Carter said: “We believe that taking prudent and assertive action now, in conjunction with our normal pricing discipline, means that we are protecting the underlying profitability of the business, and will allow a rapid rebound to our expected levels of performance.”

So is Sabre Insurance an attractive recovery buy now, in the hope that these expected levels of performance will return?

Well, Sabre shares had been on a price-to-earnings (P/E) ratio of about 15. And in the current market, I can’t help seeing that as a bit high. Direct Line, by comparison, is on a multiple of approximately 10, while Admiral is down closer to seven.

Watching the sector

What the P/E might turn out like when full-year earnings are out is the big unknown. And it’s going to be very hard for investors to work out any kind of objective valuation until then.

Meanwhile, I’m sure all eyes will be peeled for first-half results from Sabre’s motor insurance rivals. Direct Line has first-half results due on 2 August. And Admiral is set to deliver its H1 figures the following week, on 10 August.

So what’s my take on the Sabre Insurance share price slump? Right now, it’s just too hard to form an opinion on whether it’s overdone and whether I’m looking at a recovery candidate. I’m just going to keep watching.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young black colleagues high-fiving each other at work
Investing Articles

2 FTSE 100 value stocks I’d buy for my Stocks and Shares ISA in March!

Now could be a great time for fans of FTSE 100 value stocks to go investing. Here are a couple…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Looking for value stocks? Here’s 1 I’d buy and 1 I’d avoid!

This Fool delves deeper into two value stocks she’s had her eye on and explains why she’s bullish on one,…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

With the Airtel Africa share price in pennies, is it a bargain?

With the Airtel Africa share price having slumped by a quarter in just one month, this shareholder considers some of…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Are these 2 defensive FTSE 100 stocks shrewd buys after recent updates?

This Fool takes a closer look at these FTSE 100 stocks. She admires their defensive traits -- but does that…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The FTSE 100 closes up after full-year results from leading UK firms – are they buys?

Earnings season brings about a lot of ups and downs for the FTSE 100. Yesterday had some particularly good releases,…

Read more »

artificial intelligence investing algorithms
Investing Articles

Should I buy NVIDIA stock as a British investor?

NVIDIA stock is up two-thirds this year alone. Our writer considers some pros and cons, specifically given that he is…

Read more »

Investing Articles

With £2,000 in excess savings, I’d buy 41 shares in this Warren Buffett dividend stock

Stephen Wright thinks one of the best dividend shares to buy right now might be a Warren Buffett stock that’s…

Read more »

Investing Articles

How many Aviva shares do I need to collect a £100 monthly income?

Aviva shares are well suited for passive income purposes. Our writer works out how many would be needed for a…

Read more »