SUMMARY OF RESULTS

* = Share buyback subject to regulatory approval

DIVIDEND TIMETABLE

Chief Executive Officer's Review

"Our profitability clearly demonstrates the benefit of our on-going commitment to disciplined underwriting"

Geoff Carter

Chief Executive Officer

Healthy premium levels, increased profit and attractive capital returns

2025 was another strong year for Sabre. We delivered an increased profit from a lower premium base and made significant progress with our Ambition 2030 initiatives.

Our profitability clearly demonstrates the benefit of our on-going commitment to disciplined underwriting, treating profit as the target and volume an output. We priced prudently for potential claims inflation on business written in the year, despite soft market conditions, and benefitted from positive experience as inflation moderated in the latter part of the year which allowed us to drive growth in both premium and policy count in Q4 and into 2026.

1 Alternative performance measure. For reconciliations to alternative performance measures, see pages 212 to 216 of the 2026 Annual Report and Accounts

Within this we delivered a very positive core motor loss ratio of 50.5%. We have seen both Motorcycle and Taxi loss ratios improve in the second half of the year and continue to expect these products to deliver useful additional profit for the business. Our overall financial year loss ratio of 54.1% was a 4.6ppts improvement on 2024 and delivered a net insurance margin of 19.2%, well inside our target range.

We have continued to ensure our prices fully cover our view of claims costs and are calculated to deliver our target margins. In our view, claims inflation moderated during the year and we believe it is now at a mid-single digit level.

Reflections on 2025

In my 2024 Review, I outlined our hopes and expectations for 2025. These included:

‒         We would deliver a strong financial result through our differentiated and focused approach to pricing

‒         We would test the first stages of our Ambition 2030 plans

‒         We would expand our Motorcycle distribution

‒         We would demonstrate continued focus on customer experience through development of a self-service portal

‒         Market rates would be competitive in H1, and increase in H2 to protect margins across the market

‒         Premium levels would be partially impacted by market pricing levels

I'm delighted that we delivered on the majority of these objectives. While market pricing stabilised in H2, there were no signs of meaningful increases, which is discussed further in the Market section.

Ambition 2030 plans - Test new pricing models

As hoped, we successfully conducted our initial pricing tests, gathering valuable feedback that will allow us to begin the ramp-up of initiatives in 2026. Given that market pricing was generally not supportive of growth, the increase in our in-force policy count in Q4 indicates that our refreshed strategy allows us to grow profitably even in more challenging market conditions.

Motorcycle

Our new direct product launched on schedule, attracting business almost entirely through Price Comparison Websites. "Sabre Direct" was launched with a restricted footprint in order to allow us to test and learn, and to amend prices as we gathered more data. We are now confident in our pricing proposition and will continue to expand our footprint through 2026.

We are also servicing all polices in-house rather than outsourcing. This is supported through low fixed costs, with the product being entirely on-line, with web-chat support and no call centre. 

Customer Portal/Experience

We have continued to develop and refine our online portal and are benefitting from an increasing volume of customers using this as their preferred servicing model. This has supported positive customer experience as well as laying the foundations to reduce direct product servicing costs over time.

Regulation

Our approach is to operate in-line with both the spirit and the letter of all relevant regulation, with a continued focus on delivering good customer outcomes.

We were pleased to see the conclusions of the Government Taskforce on Insurance in late 2025. This concluded that the market functioned well and that price increases were reflective of increased claims costs - which were primarily driven by external factors. This has always been our view as outlined in previous result announcements, and we hope this removes a cloud over the industry.

We continue to believe we have low exposure to on-going areas of regulatory focus, which appear to be primarily poor value ancillary products, high APR's for premium finance and certain claims management activities.

Market

In our view the market is currently over-competing and risks undermining margins. This is not something we will allow to happen at Sabre, and we remain focussed on underwriting discipline.

As noted earlier, we believe claims inflation is returning to historical norms of mid-single digit levels, whilst overall there has been little compensating market level rate increase in 2025. 

At an overall level this is likely to drive reduced market-level profitability in 2026 although this may look very different for individual competitors, such as Sabre, where underwriting profitability has remained the focus.

Capital and dividend

We have increased our dividend to 13.5p per share for 2025, reflecting increased profits and strong capital generation. While our post-dividend solvency ratio of 161.5% is below 2024, this remains above our preferred operating range. The Board has elected to use additional capital, paying down into the range, to execute a buyback of £5m, the same amount as in the previous year. This is indicative of the Board's confidence in the Group's robust capital position and ability to generate further capital as we look to grow through to our Ambition 2030 target.

People

Our success in 2025 and confidence about the future are entirely due to the efforts and commitment of all Sabre's people. In 2025 the whole business excelled in pushing to deliver the in-year result as well as continuing to develop our Ambition 2030 plans.

In return we were delighted to be able to pay a Christmas Bonus as well as performance bonuses. In addition, in the year we agreed an extra day's holiday for all staff to be taken on or around their birthday.

Our hybrid way of working with all staff spending a minimum of 3 days in the office continues to work well for the business and our people and we have no plans to change this. 

Environmental, Social and Governance ("ESG")

Environmental, social and governance matters remain integral to how we make decisions as a business. We continue to uphold our environmental commitments and values, ensuring fairness to our people, customers, partners and the planet. During the year, we have made continued progress towards our net-zero ambitions, as outlined in the 'Responsibility and Sustainability' section of this report on pages 54 to 66 of the 2026 Annual Report and Accounts.

Artificial intelligence

Throughout the year we continued to position the business to benefit from potential AI driven opportunities and to manage the threats arising from AI. This includes running numerous efficiency tests, utilising large language models and other novel pricing and analysis models and preparing for possible medium-term changes in distribution - for example AI driven premium comparisons. Overall, we believe that as a focused product manufacturer AI will benefit rather than threaten our business.

Outlook for 2026

We will continue to focus on writing business at our target margins, with overall premium levels being influenced by market pricing dynamics. As the year progresses, we expect to begin seeing the noticeable positive premium impact of our Ambition 2030 plans. We expect the Group to continue premium growth in 2026, and to deliver a profit slightly ahead of 2025 as the high-margin business written in 2025 earns through. I anticipate we will continue to deliver sustainable profitable growth as we move towards 2030.

In my next report I look forward to providing more detail on the development and impact of this work, as well as reporting another strong in year performance. Huge thanks to all our people for making this happen, and to the board members for their continuing support and constructive challenge.

Geoff Carter

Chief Executive Officer

9 March 2026

Chief Financial Officer's Review

"Demonstrating Sabre's strengths through the market cycle."

Adam Westwood

Chief Financial Officer

Highlights

* Alternative performance metrics are reconciled to IFRS reported figures on pages 212 to 216 of the 2026 Annual Report and Accounts

Executive summary

Sabre's performance in 2025 has demonstrated the strength of the Group's core strategy and delivered a strong result despite challenging market conditions. The Group has grown profit before tax by 4.9% and improved margin by 1.6ppts through deploying strict pricing discipline and balancing profitability with the volume of business written, allowing the top-line to decrease as market pricing has remained below inflation.

Whilst the motor insurance market is expected to experience a drop in profitability in 2026, Sabre's approach has provided a strong foundation for continuing profitable growth as the Group delivers consistent profitability and capital returns.

Insurance revenue

The 14.2% decline in premium was as expected given market pricing decreases during the year, with Sabre pricing to ensure bottom-line stability and allowing volumes of business written to drop in unfavourable conditions, in line with our long-term strategy. The dip in premium was weighted towards the first half of the year, with conditions stabilising in the second half allowing a gradual return to growth in the fourth quarter.

Whilst the Taxi business has been in a holding pattern to preserve profitability in a difficult market, we have started to grow the Motorcycle business, which now operates through an established broker relationship and the Sabre Direct brand, launched in 2025 and a cornerstone of the Group's Ambition 2030 initiatives. The Sabre Direct brand remains deliberately restricted as we gain comfort in the product, and we expect to continue to release these restrictions and grow the product throughout 2026.

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.

1 Alternative performance measure. For reconciliations to alternative performance measures, see pages 212 to 216 of the 2026 Annual Report and Accounts

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

The Group delivered excellent profitability in its core product in 2025, with a 5.6ppts improvement in Motor loss ratio reflecting strong pricing in both 2024 and 2025 earning through. Performance of the Motorcycle business, which being small is subject to natural volatility, improved significantly in the second half of 2025 and delivered an acceptable result with strong underwriting profitability expected to be shown over the medium term. The Taxi loss ratio improved on 2024 and this product is being written in line with our target margins. As with Motorcycle, this product will show big shifts in loss ratio given the small size of the book.

There was a 5.5% favourable movement on prior-year reserves - a combination of normal levels of IFRS risk adjustment run-off and some positive development of prior years in 2025. The current-year loss ratio is in line with our expectations and reflects our continued cautious view of inflation.

Overall, the financial-year loss ratio of 54.1% has allowed us to deliver a net insurance margin of 19.2%, well within our target range.

Other operating expenditure

The significant proportion of variable cost within the business has meant that the expense ratio has moved out by only 2.7ppts despite adverse operating leverage given the 9.2% reduction in net earned premium in 2025 and ongoing economic cost inflation.

In absolute terms, expenses (before adjustment for directly attributable claims expenses) have increased by 5.1% during the year. This increase is driven primarily by employee expenses. Since the prior year, employee numbers have increased by approximately 3%, reflecting continued investment in the business ahead of expected growth in 2026 and beyond. The average pay rise in 2025 was approximately 3.7% (including individual one-off salary increases). Staff bonus costs incurred in 2025 - which were based on salaries paid in 2024 - increased due to relatively high pay rises given to staff in 2024. Employee expenses also impacted by the increase in National Insurance from April 2025.

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 continued increase in interest revenue reflects the higher yield gained through reinvesting matured assets.
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 increase in 2025 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 2025 the Group recorded a corporation tax expense of £13.0m (2024: £12.6m), with an effective tax rate of 25.6%, (2024: 25.9%). The effective tax rate is slightly higher than the current 25% rate of corporation tax in the UK, reflecting the tax impact of the Group's employee share schemes. The Group has not entered into any complex or unusual tax arrangements during the year.

Earnings per share

Basic earnings per share of 15.37p is largely proportionate to profit after tax, with a slight improvement due to the reduction in total shares in issue from 250.0m to 246.6m following the share buyback executed during the year. 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 during the year.

Cash and investments

Total cash and investment holdings have increased slightly, reflecting normal variances in these balances throughout the year. 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 policy to pay an ordinary dividend of 70% to 80% of profit after tax, and to consider passing excess capital to shareholders by way of a special dividend. We also consider using excess capital to fund a share buyback where this is considered to be appropriate.

For 2025, the Group has announced a total ordinary dividend of 12.3p, 80% of profit after tax, and a special dividend of 1.2p, taking the total dividend in respect of 2025 to 13.5p (2024: 13.0p).

The Group's post-dividend SCR coverage ratio at 31 December 2025 is 161.5% (2024: 171.1%).

We have announced this year that the Group intends to operate its second share buyback programme, having completed the first in 2025. This is expected to distribute an additional £5.0m of excess capital, subject to regulatory approval. The Group's year-end post-dividend and post-buyback SCR coverage ratio is 154.0%.

Adam Westwood

Chief Financial Officer

9 March 2026

Consolidated Profit or Loss Account

For the year ended 31 December 2025

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2025

Consolidated Statement of Financial Position

As at 31 December 2025

Consolidated Statement of Changes in Equity

For the year ended 31 December 2025

Consolidated Statement of Cash Flows

For the year ended 31 December 2025

Notes to the Consolidated Financial Statements

For the year ended 31 December 2025

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 22 to 30 of the Strategic Report in the 2026 Annual Report and Accounts. 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 2025:

Amendments to IAS 21 "The Effects of Changes in Foreign Exchange Rates": "Lack of Exchangeability"

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

1.4. New and amended standards and interpretations not yet effective in 2025

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. These standards are not expected to have a significant impact on the results within the financial statements.

Annual improvements to IFRS - Volume 11 (effective 1 January 2026). Annual improvements are limited to changes that either clarify the wording in an Accounting Standard or correct relatively minor unintended consequences, oversights or conflicts between the requirements in the Accounting Standards. This includes minor clarifications to IFRS 7 "Financial Instruments: Disclosures", IFRS 9 "Financial Instruments", IFRS 10 "Consolidated Financial Statements", and IAS 7 "Statement of Cash Flows".

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 or 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.

Amendment to IFRS 9 and IFRS 7 (effective 1 January 2026). These amendments clarify the requirements for the timing of recognition and derecognition of some financial assets and liabilities, clarify and add further guidance for assessing whether a financial asset meets the solely payments of principal and interest ("SPPI") criterion, add new disclosures for certain instruments with contractual terms that can change cash flows and make updates to the disclosures for equity instruments designated at Fair Value through Other Comprehensive Income ("FVOCI").

IFRS 19 "Subsidiaries without Public Accountability: Disclosures" (effective 1 January 2027). This new standard reduces the disclosure requirements for subsidiaries while maintaining the usefulness of the information for users of their financial statements. Subsidiaries are eligible to apply IFRS 19 if they do not have public accountability and their parent company applies IFRS in their consolidated financial statements. As the principal subsidiary of the Group is a public interest entity, the Group does not expect any significant impact from IFRS 19.

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 22 to 30 of the Strategic Report and the Responsibility and Sustainability section on pages 41 to 67 of the 2026 Annual Report and Accounts.

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)

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 2025, 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 policyholder
by 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 contracts, 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 contracts.

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 contracts 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 Group disaggregates insurance finance income or expenses on motor insurance contracts issued between Profit or Loss and OCI. The Group 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 Group'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 six-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 2025, the net risk adjustment applied equates to an approximate confidence interval of 81.4% (31 December 2024: 80.6%). 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 in the Statement of Financial Position for insurance contracts 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