Sabre Insurance Group plc (SBRE) Earnings Call Transcript & Summary

We want to give you an update on our half year trading. We've got this off the press following the very recent completion of our half year reserve exercise. Just if we can get screen to move on. These are the people on the call, myself, Adam, Trevor and Matt and Hanro will coordinate questions. If you have questions as we go through, please feel free to type them in or raise your hand function at the end. These slides have been loaded on to our corporate website now if people need to address them after. Today's agenda, we'll go through the highlights. The summary of trading with Adam, we'll give some context especially market context, which we'll present in these results and then our outlook going forward. The highlights. Underlying strong progress against our core strategic initiatives. Taxi and bike are growing well. We're continuing to focus on a forward-looking basis on pricing within our normal target operating -- combined operating range target. However, there are challenges presented by the very rapid increase in inflation to 30-year high. And we tackled that head on, which is really the reason for this presentation this morning. That has an inevitable impact in the current financial year. But it also means we have a very, very rapid bounce back to normal levels of performance after this year is behind us. We've got 17% growth in gross written premium coming through in the first half of the year with significant motorcycle and taxi business. That's been slightly offset by reduction in Motor as we continue to price their disciplined way against what still seems a fairly undisciplined market. Following our recent pricing adjustments, and we'll talk about the fact we've now increased prices by 19% so far this year. Our current policies are being written in line with our normal 75% to 80% combined operating range. We're taking the corrective steps to ensure policies we write today are at the correct level in line with our normal performance targets. The adverse movement on the prior year claims is entirely -- it was entirely driven by inflationary impacts, inflation has taken off as, people obviously know, that has inevitable knock on consequences onto our view of the cost of open claims, and we'll talk about that more as we go through this presentation. But the reserve movement is to do with inflation, and we've already corrected for this in our new business prices. So the top line is actually relatively healthy as we sit here today, but lower than planned to persist the low market pricing. The expense ratio is under control and improving the growth despite inflation, we've managed to control inflation within our expense ratio. As I mentioned, inevitable consequence this year from inflation, but a very strong bounce back in '23, a little bit above our normal target as some of the sort of relative under price in the first half of this year of washes through and then back to normal in '24. So loss ratio up 71% for half 1, above our expectation due to the inflation impacts that loss ratio will improve in the second half. Adam will talk more about that in a second. And despite these inflation challenges, we do expect to pay an interim and a final dividend for the year. Adam, at that point, I think you're going to talk about the numbers.

Yes. Thanks, Geoff. I'll just very quickly take everyone through the numbers that we're planning to report in our interim accounts. I should know these will remain subject to review until the interim accounts are filed in a couple of weeks' time. So the top line, as Geoff said, looking pretty strong, 17.4% ahead of where it was in H1 last year. That clearly is being driven primarily by the motorcycle and taxi business, and I will breakdown of how that works through in the next slide. Net earned premium will trail. Gross written premium as that new agreement writing starts to entry. Loss ratio, which is clearly a focus of this presentation. We'll delve into throughout what factors are driving that up to 71.6%, which clearly is above where we might have expected it to be. What's driving that, prior year loss ratio is an adverse movement of 4.3%, whereas normally, we see runoff as you can see from the last sort of couple of periods, 4% to 5% range. So clearly, there is a difference there, I guess, what we might normally expect. Current year loss ratio of 67.3% is a bit higher as well. And what's driving that? So in the prior year, the big story there is innovation. So we have taken a look at our prior year claims. They are settling relatively slowly. So there are a fair amount of claims open at the moment. They're all being subject to inflation, and we're reflecting what we think the cost of those claims is now through the actuarial best estimate that we're booking into our reserves plus the usual 10% risk margin. So nothing has changed in the way that we're thinking about booking reserves, our methodology is the same, but we just think that those claims are going to be more expensive than we thought last time we report something which is why there's that movement in the prior year. The impact of inflation comes through on the reinsurance indexation, which in a nutshell, means that the attachment points for the amount of the reinsured claims that we hold on to increases by inflationary amounts each year until when inflation is higher, the amount we're holding on to is more. So there's a direct impacts of inflation on that as well. So prior year, clearly significantly affected by inflation -- rapid inflation within this period. On the current year side, there are some things which are driving that up, some expected, some less expected. So the earn-through of COVID-19 discounts where we were selling policies more cheaply during the earlier parts of last year with an expectation that there would be lower frequency, which will then build to a higher frequency as the policy term went on, and this is the sort of high frequency bit, so those would naturally be, I think, grew at a slightly higher loss ratio. Clearly, the rapid levels of inflation that we've seen going through I mean that the policy that we wrote, say, this time last year and an expectation of a slightly lower inflation is actually earning through an environment where inflation is much higher than we expected, so that's going to have a direct impact to the current year losses that we're experiencing as well. There's always going to be a bit of volatility in a shorter period in terms of claims experience. And of course, we've got a growth strain coming through on the motorcycle and taxi business as we record the first claims on those books as well. So all of those things are coming together to drive this loss ratio, which is as I said, it's going to be dealt into further in some of the later slides that we'll talk through on inflation. So that is the combined ratio of 98.9%. So clearly, expenses were under control, benefiting a little bit from some growth but also a tight control of where those expenses are at the moment as well. That clearly feeds through to profit and the [ draft ] profit we're reporting here of GBP 4.3 million is a consequence of that for the first half. Geoff, would you mind moving on to the next slide, please? So this is just a breakdown of how our premium looks with regards to the motorcycle and taxi business and also the policy count. And what we can see here is motorcycle and taxi going break guns in terms of the amount of premium that we're writing. Books are building relatively quickly on those. There is some seasonality in motorcycle and taxi, which is why we're retaining our guidance at sort of GBP 20 million mark, but most likely even though we've already written almost GBP 17 million. The motor book which, I guess, is our sort of legacy core motor, well see it has been under pressure in the past few weeks. And that really is a result of all the pricing actions that we've taken to make sure that we get that combined ratio into just the right place into the future against the backdrop of what we feel is still a very soft market pricing relative to the levels of inflation and that's why you can see a slight drop off in premium almost there. That's it for the sort of financial summary now. So I'll hand back to Geoff to sort through some of these stats.

Thanks, Adam. So let's give some market context and why we're sort of facing into a challenging year. This, I guess, is the crux of the issue. This is underlying CPI inflation. Currently, I think heading to 9%. This is, I believe, the highest inflation in sort of 30 years. But in context highest inflation since I was at school and a lot people here probably were in short and trousers, and this is unprecedented levels of inflation in, I think, most people's working career. If we look at what that means for claims inflation, our view of claims inflation, you may recall, we were talking around 10%, the last time we spoke. We're now looking at, we believe, a claims inflation of nearly 12%. I might have talked -- in a few minutes talking through some of these factors and Trevor can maybe throw some detail at the end if there's more questions. These are market impacts is our belief, rather than specific things to Sabre. Then we start at the top of the right-hand corner, in meant pressure on labor rates in body shops. So we previously saw about 7% inflation there. We believe with some of the inflation in credit repair especially and the body shop resource issues, we could be seeing a 25% inflation on labor rates. The ABP labor rates, ABP is sort of acting body, a trade body almost or a trade clump for body shop repairers. Their rate tend to get used as a benchmark and not as a contract. That has increased in the last month from GBP 50 to GBP 62.50 an hour as a benchmark labor rate, that's a startling increase in labor rates. We come down the page to mobility costs. The vehicle repair delays continue, so car supply limitations, labor restrictions, body shop capacity, highly limited. We already see a higher price up to 30%. For the higher periods build and mobility, 35% increase on half 1 last year. Again, market impact is not specific to Sabre. Our injury, I guess, is what drives a lot of the reserve movement we've made today. We are seeing some care costs increasing by up to 30%. They're long-term increases within the compound. General damages and claim valuations are viewed against RPI. Well, let's talk about CPI in this context. So we can in line with 10% increases coming through on some of those injury factors further increases, we think, over the next 18 months. New car values. I think most people know, up by 30%. That clearly impacts total loss and theft. Again, absolutely market impact there, parts inflation, previously we saw this as a sort of temporary increase to 40%, which I see no signs of that tapering off so far. So looking at all parts of the sort of claims cost, it's very hard to see reason for optimism in terms of the severity of claims coming through. And that's what we're facing into -- we have faced into over the last few weeks. There's other nonbank inflation elements, the MIB levy, the new core was announced this week, a 30% increase on that levy. The reinsurance rates that we believe -- we've just done our 17 renewal and saw an increase of over 15%. We believe that will actually compare fairly favorably to increases that may come through towards the end of the year. We're aware of other insurers who've seen significantly higher increases than that. Why are the insurance rates increasing so much? Concerned about your -- the discount rate due to change in 2024, but that means policies that we're writing today will generate claims that may be paid in 2024. And probably as importantly, reinsurers are as concerned about the injury cost inflation on their large claims as claims settle over the next 2 or 3 years. So a highly inflationary U.K. environment with some specific extra drivers on motor claims inflation. We've upped our inflation assumption to 12%, and we've now fully priced for that in our policies looking forward. There is some evidence, in fact reasonable evidence that our claims volumes are lower. The other side of the coin. That will be influenced by the MOJ whiplash reforms. We consider it very optimistic to make that reduction into total plans costs so far. We think the frequency reduction will be significantly outweighed by cost increases. We're very cautious about the continuing benefit here. I think I'm right in saying 65% of cases are coming through with a non-tariff element on them. That tariff element. We don't know what the non-tariff claim value will be until that's been tested by the court. Very low settlement rates so far for cases presented through the MOJ. And I think I'm right in saying only 9% of claimants are self-represented with all the rest continuing to be represented by legal companies. So lots of room for those numbers to be uncertain at this point. A bit of market backdrop. EY did what's a pretty well-respected market seminar about a month ago. They have market pricing down. This is both on ABI stats, down 5% to Q1 2022, the lowest levels since 2015. Pearson Ham did a presentation, I think, last week over a call, which you can find on YouTube, talking about the lowest rates for 8 years. The EY analysis suggests a market combined ratio of 114% for '22 and 111% in '23. Importantly, '22 being supported by above average reserve releases and an assumption of 20% premium growth in '22 and '23. And why I'm predicting that to come through mainly in '23, Pearson Ham, listen to them, are a bit more bullish that may come forward into '22. Overall, if you look through these numbers, we believe EY are calling claims inflation at somewhere over 10% as well. So clearly, the EY external analysis and our own internal data are landing in fairly close proximity. This is a combined ratio bridge to sort of show what's happened during this year. We start at the bottom, as we came into the year, we were thinking fairly confidently that we were writing at around an 80% combined. We've built in an inflation assumption of 7.5%, 8.5%. There's some growth in the motor book coming through as rates turned. Modest reinsurance rate increase, some reduction in frequency post COVID and some benefit from the MOJ reforms. We have a look what's happened as we've come through this year. Firstly, the reinsurance cost increase that I mentioned, damage inflation is now exceeding that, we assume when pricing the policies. So policies where the claims were paid to them are more expensive than we expected. That is exacerbated by supply chain issues pushing out the power -- periods. Inflation and injury cost has taken off more than anyone could have predicted having done the half year reserve review and watch that through the prior years. That is what gives us our prior year movement, reflecting our current year of inflation across all open and back years. The motor book has not grown as much as we expected because market pricing is still weak. So a bit of strain on the expense ratio compared to our expectations. And as Adam mentioned, some of the COVID discounted policies were always going to be impact in half year. I think we then have a thoughtful slot at the top, which basically says in a highly inflationary development, are there things that could still impact that are not yet in our numbers. For example, as a cost of living crunch hit, what people will be making claims that they otherwise have funded themselves. Could there be more fraudulent claims come through. So our view is it's important to maintain element of caution as we look forward for the guidance for this year, as these are pricing into our policies. I guess the key message here is we've already taken the steps needed to fix this challenge. We've taken very assertive, very robust, very quick actions. Price increase of 19% is, I suspect, significantly above the market, and that is ensuring policy, if you like to make, repeat myself, are now priced at the right level. We've taken appropriate reserve position to reflect our current view of inflation. We've got continued focus on development opportunities. We do see scope for similar deals to bike and taxi. We have some conversations underway some of these may land and others may drift away, but we certainly see opportunity for all those sort of deals. And we continue to enhance our pricing function. We recruited into that team. We're looking to roll out some of the machine learning analysis that we've been doing over the last couple of years and just frankly getting even more granular to pricing sophistication. This is reiterating what we've done on price, and we have accelerated our price increases over the last couple of months as our sort of views of inflation have hardened. On the material growth initiatives, motorcycle and taxi are growing very strongly. We're taking quite significant market share at the same time as implementing significant and correct price increases on those portfolios. The price increases haven't been able to fully protect against the rapid and extreme rise inflation. There's been a catch-up through this year. We came into the year expecting settlement up 10% inflation for Q1. That's increased again. We've had to chase that inflation up. We believe we've now caught up with our future view of inflation. We do consider underpricing must correct. I think all external commentators would agree with us on that. And going forward, we'll continue to balance the loss ratio with growth in policy numbers. Absolutely, our view is that the volume is an output, not a target and we are focused on pricing correctly as we go forward. To leave briefly the summary, we've taken assertive actions following the recent analysis of impacts on claims reserves. We've absolutely faced into the inflationary environment, and we believe we've now taken the actions to correct for this extraordinary inflation period we find ourselves in. We expect a very strong bounce back having taken those actions towards our near normal performance in '23, a little amount of drag just to some of the policies that we wrote earlier in this yet aren't through but moving back very close to our normal levels of performance. In '24, we expect to be back fully in our normal range. The full year loss ratio expected to be in the range 65% to 70%, full year combined around mid-90s, having taken these actions. We're retaining our guidance on motorcycle and taxi growth. We anticipate material growth in the motor book in the medium term. We've positioned ourselves well now that we're sort of fully funded. I don't believe that's the case across the rest of the market necessarily. So we should be able to take growth opportunities as market pricing corrects. And capital, we retained a very strong capital position comfortably at the upper end or higher of our capital range. We'll control those numbers in a couple of weeks' time in the normal course of events. And we do expect to pay an interim and the full year dividend for 2022 despite these assertive moves that we've made. That, I think, is all we wanted to say. We're now very happy to answer any questions on anything we've said in the presentation. I know may be people typing stuff through or hands up and we'll also load you on the screen.

Yes, Geoff. So the first question we have is from a Greig Paterson. So Greig, I'll just allow you to talk.

Can you hear me, everybody?

We can.

Two questions. Just looking at the combined ratio in the first half, 98.9%. If you strip out the prior year delta, which is about 8, 9 percentage points. You get down to about 90% for sort of the -- on a normalized basis. So you have been guiding previously to effectively just above 80%. So there's a 10 percentage points unexplained item in the current year. And if you track the story with inflation versus pricing and most the delta there was about 4 percentage points. So what explains the gap? That's my first question. And the second question, you have done some -- your combined ratio guidance for '23 and '24 on mid-80s and around 80%. That is higher than your 70% to 80% typical range, and that's in the long term. So am I correct in that, that guidance is prudent in a sense that you're not including any assumption about the industry cycle -- pricing cycle turning?

Yes, I'll take the second one and Adam you can take the first one in a minute. Thanks, Greig. I think we are being pretty prudent on our core loan growth. It's outside our control. We -- I think, once bitten twice shy on this. We've made comments in the past that we think the market turned and it's not sustained. I think we won't call that until we see it. There is some reasonably weak evidence over the last month or so that the rate is starting to go in, not from all players. I think some players still have a pretty aggressive growth strategy. That will clearly limit some of the price increase in the short term. So yes, we haven't, Greig, built in a spectacularly optimistic growth assumption into our plans. Adam, do you want to take the first one on...

Yes. So on the sort of H1 current year loss ratio, there are a few things going on. Firstly, we expected H1 current years are coming worse than H2. That would have happened due to the earn-through of COVID discounts into H1 anyway, which would add a little to the expected loss ratio. The proportion of motorcycle business earning through relative to car is higher than we would have expected that the last time we guided to this, which will create strain -- grow strain into the first half as well. Inflation is clearly hitting both those strains that are open and settled in the first year. One of those is damage which is coming through quite quickly. And so that's impacting the current year as well. And then -- there is some volatility in that. So currently a loss ratio of 67%, I suppose, if we were writing that and assumed ultimate loss ratio of 55%, we would probably have a whole new risk margin, et cetera, on that business, so the current year would look more like 60% so that's maybe 7 points over a normal current year. And I think those reasons probably explain why we got there in the first half. We would expect that to improve into the second.

Could you just -- your point about a strain associated with taxi and bike. Can you hear me?

Okay. Ye.

Yes. I thought that was a prior year development component. Just can you just explain what you mean by bike is creating strain in the current year?

I can. And there's 2 things going on there. One is that bike is written on purpose at a higher loss ratio than car. That's just our assessment of how the market works just to maximize our profit in that space. So we've always guided to higher loss ratios on bike anyway. Also, because it's new, we're finding our way through. So we're booking loss ratios and experiencing claims and learning how they settle as we go. And there's no prior year development effectively on bike and taxi at the moment because they've primarily been earning through into this year, and that's what the exposure is. So those things mean that the overall loss ratio we're reporting on bike is high, and that's going to bring out the loss ratio for the group and in the short term.

And is that the same [indiscernible].

Yes, it's actually the same, Greig. I mean the other bit on bike is that we're currently in peak season to claims. Everyone has the bikes out the garage and is riding around peak season claims are certainly not at the peak of our own premium pattern for that yet. So as we go through the year, we'd expect the earned premium to grow significantly and the claims to drop quite significantly. So we have a sort of short-term impact as well that we fully expect.

Next question is from Thomas Bateman. Thomas, you can speak.

Good morning, everyone. Can you hear me?

Yes.

I guess one of the things that confuses me a little bit is you're saying inflation is around 12% now, but everything on your slide is something in the region of 20% to 30%. And in terms of why is everything up, but you certainly seen inflation only 12%. And the second question is, I guess inflation is higher than your expectations, so 12% versus 8%. But what has gone wrong or what's changed so much since your trading update, which was only 6 weeks ago?

Yes, I take the second one. Matt, Trevor, you might want to comment on some of the claims drivers you've been seeing. I guess what's changed since the last update, Tom, is having done the half year reserve review and fully watched the inflationary impacts we see through the prior year reserves. Matt, anything you want to sort of say around that?

No, I think you've got it on there, but it's -- since the trade update we've done the half year reserve so we've been able to somehow position on prior year movements.

Yes. That's the key thing that's changed, Tom. I guess we've got further evidence of the inflation moments we see coming through here and now. Trevor, do you want to talk about some of the things you're seeing?

Yes. I guess what we've put in that slide is elements that make up the components to the claim, but not all of the elements. So those particular points are the ones which are moving, but there are aspects to a claim that aren't moving. So for example, legal costs are moving up in the same way. And some of those are predictions in terms of where future costs are going. So if we look at those ABP rates, those have only recently been announced, so they're unlikely to impact on the outstanding clients. So there's lots of moving parts in there. So it would be wrong to aggregate all of those individual components to arrive at an inflation number. So that overall inflation really is a blend of all of the elements in that claim that makeup across first-party, third-party property and third-party injury.

And maybe just one final question. I guess I always hear you guys is on the more conservative side. What's the risk of peers having -- maybe I'm not thinking about the larger peers but smaller peers having similar or potentially much worse results for the course of this year.

I, obviously, am not going to comment on other people's results. I think what I can say is that any industry you're going to the #1 topic of the conversation is claims inflation. And I think, Trevor, you've seen that in the sort of claims round tables and functions you go to as well?

Yes. I think a number of events that I've been to have held anonymous sort of views in terms of where claims leaders that see inflation going and the majority said at 10 plus. So one would hope that they're taking those messages back into their businesses and they're starting to reflect them. I guess, Thomas, the overall message is what the Weiss say and if we're at the left-hand side of sort of the Weiss predictions, and inevitably, there are going to be people to the right-hand side.

We have another question. Unfortunately, I can't see the name. But if you got your hand up and you end in grow 6, you can speak.

It's Will Hardcastle from UBS. I guess -- thanks very much for the clarity from this call. I've got to say it makes an awful lot of sense. But just trying to split the 10 percentage points or so broadly the reserve uplift between BI and damage. Is that almost -- we can just literally take that slide up from where you've got sort of 5 points and 3.5 points. That sort of breakup between PI and parts? And then could you also help us with some more clarity on the indexation and how that works, for example? Perhaps just to understand also whether the higher reinsurance spend is all on excess of loss or is it also proportional. And the final one, sorry. Just it was really helpful when you said was about -- you've done your H1 reserve review. That's what's led to this, makes sense as well. Just trying to understand how proactive auditors are in this respect? Could you have probably got away with kicking the can down the road, not that you want to, you want to be upfront and clear, but is that possible? Or is this -- are auditors drawing a pretty firm hand at this point in time?

Okay. Thanks. I'll take those in the reverse order. Trevor you can talk about indexation when we get there. You'll be our resident expert. And Adam, you can take the sort of breakdown of reserve, if that's okay. So I think we should say this are pre-audited. These are not -- this is not a move that's been forced on us by auditors. This is a move that we think, as a management team, is the right thing to do given the inflation environment we're facing into. And we've discussed with other firms, not [indiscernible] in order to see what their views are on inflation I don't think auditors or the companies have any different view on some of the pressures that are coming through than we do. But for clarity, this is now our management move, not a move that's been forced on us by the audit teams. On the insurance, that is entirely excess loss. We don't have any other reinsurance arrangements. Our belief is that reinsurance views have hardened very substantially during the first half year. Reinsurers view on inflation is very similar to ours, adding cost of the care inflation. We're aware that other people who renewed policy has probably got similar increases around the 16, 17 renewals. Some of those are likely to hit people who we know at the end of the year, I would say. Trevor maybe that's a point to hand to you on indexation?

Yes. So the indexation is really -- it's relatively straight forward as far as the contract starts with an attachment point of GBP 1 million. So any claims cost on an individual claim excess of GBP 1 million we recover from our reinsurer or reinsurers but over time, that indexation point is adjusted against an inflation measure. So as inflation comes through, that reinsurance attachment point moves up. So a claim that may be 3, 4 years old instead of having an attachment point of GBP 1 million may have a touch point at 1.2, 1.3, 1.4, et cetera. As though that then applies across all outstanding claims, so it effectively reduces the recoverable under the contract.

And we believe that's a market standard?

My understanding is that excess of loss contracts, I'm not familiar with any excess loss contracts. We wouldn't have that indexation clause in there.

Yes. And that's a number that is represented to us on a sort of quarterly basis effect.

We will review our positions quarterly.

Yes. And Adam the first question.

Yes. So we're always really asking whether or combined ratio bridge slide to gain a steer as to how much the prior year reserves moved as a result of PI versus sort of other parts of part inflation. The -- I guess 2 things to note on that slide. One is the numbers are fairly indicative. It's quite hard to pull those together with any great degree of detail. So in sort of order of magnitude rather than pinning a precise number on it. The slide also aggregates the prior year and current year impacts. So we're saying inflation has had just sort of order of impact on our expected combined ratio for the year, but we haven't really broken down between prior year and current year in that sense.

Any other questions?

Yes, we've got another one from Alex Evans from Credit Suisse.

Just one quick one around what you're saying about the 19% price increases. I was interested about sort of the COVID benefits and your view on frequency and timing of that. Is that basically 19% a year-on-year comparison? And it's sort of adds the frequency benefits you had in the last year? Or do we need to add the frequency benefits on top and therefore, you're basically above 19%, if that makes sense?

I think it does. Matt, do you want to sort of just say when we say 19%, how we define that?

Yes. So we're talking about 19% year's data since January. So the prices are currently 19% higher than they were in December. So this is kind of post removing our excess COVID benefits. So there shouldn't be any frequency benefits, which means offsetting to get that 19% increase.

And I guess, Matt, given we were increasing prices at the back end of last year, a year-on-year increase with individual policy will be somewhat more than 19%.

Yes. So we removed all the COVID benefits mid last year. So we believe we are now -- 19% it's purely on the risk rate measure of COVID.

Did that answer the question, Alex?

Yes, it was very helpful.

Any other questions, Hanro?

Yes, there's one in the Q&A, if you want to have a look. And then Greig just want to ask another question.

Okay let's take Greig first. That's okay.

Yes. Just 2 quick questions. One is you've been talking about inflation and all the factors you put into pricing, but you haven't spoken about where -- and you said you price within the 70% to 80% combined ratio range. I was just wondering at this moment, am I correct that your pricing at the top of that range adjusted for inflation and all that? That's question one. The second one is the solvency II ratio. The release said comfortably above 140 to 160. And Geoff, you said at the top of the range. So I wonder if you could just be a little bit more accurate in terms of your solvency II number for the half year and just explain whether that's pre or post dividend?

[indiscernible] on the first one, Greig you're right, towards the upper end of our normal COI range, slowed over 70s, low 80s or 80-ish on is our best estimate of where writing policies as we sit here today. And that's what will earn through into [ GBP 23 million ], Adam?

Yes. On your question on SCR range, it's unfortunate that we've had to come out when we have and therefore, the -- I'm not publishing the SCR position coverage at this point but it is above the 140 to 160 range, both potentially pre and post dividend, obviously depending on how much interim dividend is paid out, but in the strongest year from this presentation is that the interim divided won't be limited by the level of earnings that we had in the first half of the year. So yes, read that as above the range, not within the range, both pre and post dividend.

Any other questions in person, Hanro? If not, I can see a couple in the [indiscernible].

No further questions.

Okay. Trevor, do you mind taking this first one, which is can you explain the drivers for the 30% increase in care costs, that seems to be much higher than underlying inflation?

Yes. So that's going to be straightforward. We're seeing this as examples on claims that are coming through today. And it's a basic issue that there are not carers there to provide the needs of the seriously injured claimants that need care. So it's an exit of effectively resource from that market, which is driving up labor rates. And we are seeing sort of hotspots around labor rates in specific sectors. So where there are shortfalls of scale. So we've also seen in body shops. So there are a number of other sort of areas, but some -- this is -- these are absolute examples of what we are seeing today.

And Trevor, there's a follow-up actually just come through on the chat, which is, is the indexation causing reinsurance linked to the overall sort of general inflation index? Or the care work or wage inflation?

It's linked to wage inflation. There are some specific indexes. It's not care work wage inflation, care work wage inflation issues as an index in periodical payments, but not in the reinsurance contracts.

The final question I have on the chat is you mentioned some insurers are still being quite competitive when aggressive on pricing. Could you provide color on which insurers are pushing rates down and which insurers do you see acting sensibly? Not a chance I'm going to answer. I'm going to answer that, I want to go to walk out to building in one piece later. I suppose what I would say is if you take our comments that with CPI at 9% and additional pressures in the car insurance motor markets. To my mind, anyone who's calling a very low claims inflation number, I don't fully understand. I'm sure there'll be different views on where that inflation number is over the next few weeks and months, but I struggle to see why it's a low number. But at the moment, that's probably as much as I can say on that one. So I guess in closing, what I would say is, clearly, we don't like taking short-term impacts. Our approach is we'll always do the right thing to protect the medium and longer-term health of the business. We view this very much as a speed bump. It's a speed bump, we think we've dealt with it totally. We've moved the reserves appropriately, we're now pricing appropriately. We want to put this behind us. Actually, the action has been taken in half 1, half 2 will start to improve, and then we'll see a very rapid rebound as we go to '23 and '24. So these slides are now on website, I believe. I'm happy to answer any other questions afterwards. I guess, just thank you for your time, and thank you for coming on a late notice. Thanks very much.