If you’re faced by pricing issues and unpredictable meteorological events, you may as well try to counter the challenges rather than gripe about them. So, while participants across a range of industries have bemoaned the extreme winter weather and its impact on trading, Hastings Group (HSTG) simply increased volumes and market share - and booked a 22 per cent rise in adjusted half-year operating profits in the process.
The insurer shrugged off a softening price environment and “continued fraud activity” to increase its share of the UK private car insurance market by 50 basis points to 7.5 per cent, while boosting the number of policyholders by 6 per cent to 2.7m.
Hastings has also held margin compression at bay. The price of motor insurance premiums in the UK has been driven down because of changes in the rate used to calculate compensation for personal injuries, as well as a reduction in the overall volume of claims. Despite these challenges, the group managed to increase its average written premiums by 2 per cent over the 2017 half-year.
JPMorgan Cazenove forecasts NAV of 99.6p a share for the year-end, rising to 109.9p in 2019.
|ORD PRICE:||264p||MARKET VALUE:||£1.74bn|
|TOUCH:||264-264.8p||12-MONTH HIGH:||337p||LOW: 230p|
|DIVIDEND YIELD:||4.9%||PE RATIO:||12|
|NET ASSET VALUE:||95p*||COMBINED RATIO:||89.3|
|Half-year to 30 Jun||Gross premiums (£m)||Pre-tax profit (£m)||Investment return (£m)||Dividend per share (p)|
|*Includes intangible assets of £552m, or 84p a share|
The industry backdrop isn't entirely favourable, but Hastings is snaring market share through a tech-driven approach. The financial position has strengthened, with "group free cash generated" up nearly two-thirds to £108m, which facilitated the dividend hike. Gearing also fell, while the Solvency II coverage ratio was up 4 percentage points to 171 per cent. The shares yield more than 5 per cent, yet trade 10 per cent below the group’s historical price to book ratio. Buy.
Last IC view: Buy, 291p, 6 March 2018