Investing.com -- Sabre (NASDAQ:SABR) Insurance Group (LON:SBRE) saw its shares drop more than 8% on Tuesday as investors reacted to concerns over weakening market conditions in the motor insurance sector.
The decline comes despite the company’s latest earnings meeting expectations, with Jefferies noting that the biggest surprise was Sabre’s decision to issue a dividend of 13.0p per share—5.7% ahead of estimates.
The primary driver behind the stock’s sharp fall appears to be a broader industry downturn, particularly in motor insurance pricing, which remains under pressure.
Jefferies flagged that while Sabre’s near-term capital return measures, including a first-ever £5 million share buyback, demonstrate management’s confidence, these steps may not be enough to offset the challenging market conditions.
"Such near-term capital returns are necessary to bridge the gap between the current cyclical downswing in industry-wide motor insurance prices and the medium-term 2030 ambition to grow the business," the analysts said.
Although key financial metrics such as net earned premium and profit before tax slightly exceeded consensus estimates, other aspects of the company’s performance raised investor concerns.
Gross written premium came in at £236.4 million, which was 3.8% below expectations, and the discounted combined ratio was worse than forecast, pointing to ongoing challenges in underwriting profitability.
Jefferies maintained a ’hold’ rating on Sabre, with a price target of 145p, implying a potential 17% upside from the previous trading session’s close.
However, the brokerage’s assessment acknowledged the downside risks posed by sustained weakness in market premiums and underwriting pressures.
Notwithstanding the recent decline in share price, Sabre’s management maintains its commitment to its growth strategy, placing its confidence in capital returns and future improvements in premiums to navigate the prevailing challenging conditions.