(Reuters) - Sabre Insurance Group lost more than a third of its market cap on Thursday, with the motor insurer's shares hitting a record low after it issued a profit warning and flagged dividend cuts as the industry struggles with higher claim costs.
The company also dragged down shares of other insures including Admiral Group (LON:ADML) and Direct Line Insurance, which tumbled 12% and 7%, respectively.
The motor insurance industry, which saw premiums fall for a year until the autumn of 2021 as lockdowns kept drivers off the roads while competition intensified, is now battling higher claim volumes and a rise in vehicle repair costs.
Sabre said its full-year combined operating ratio, a key measure of profitability, will be around mid-90%, before it reaches near-normal profitability in 2023.
The insurance firm said its claims inflation has reached 12% compared with about 8% in 2021.
Sabre said despite a rise in premium rates, the current inflationary period will have an impact on its bottom-line this year.
"Sabre is struggling to keep pricing ahead of rapidly rising claims inflation and is taking sensible measures to contain the impact of inflation," said analysts at Peel Hunt.
Analysts at Jefferies said non-life insurance prices were already rising and inflation has tended to spark further premium rate hikes, adding that the key question was the extent to which this can keep track with rising claims.
The company also cited increase in industry levies and significant reinsurance cost increases at renewal as headwinds.
Sabre shares were down as much as 39% as of 0911 GMT.