Adverse weather conditions and continuing claims inflation may have hampered trading for Hastings (HSTG) last year, but strong cash generation and a robust capital position enabled management to boost the target dividend payout ratio to between 65 and 75 per cent of adjusted profits after tax, from 59 per cent in 2018.
After stripping out £14.6m in VAT recoveries and £7m in losses from adverse weather conditions during the first quarter, adjusted operating profits were flat. Subdued premium inflation, which has lagged the frequency and cost of claims, pushed up the insurer’s loss ratio to 75 per cent, from 73 per cent, although that was still at the bottom-end of the target range.
Increasing market share is a priority, with the live customer policies rising 2.5 per cent to 2.71m. However, in a competitive market, the insurer is focusing on “growing sensibly at this point in the cycle” and maintaining underwriting discipline, says chief financial officer Richard Hoskins. Cost savings associated with its Guidewire programme – which updated its customer and broker online platform – should feed through from 2020, according to Mr Hoskins.
Analysts at Numis are forecasting adjusted pre-tax profits of £145m for 2019 and EPS of 18.7p, down on £149m and 19.2p in 2018.
| HASTINGS (HSTG) | ||||
| ORD PRICE: | 219.8p | MARKET VALUE: | £ 1.45bn | |
| TOUCH: | 219.6-220p | 12-MONTH HIGH: | 314p | LOW: 170p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 99p* | COMBINED RATIO: | 89.4% | |
| Year to 31 Dec | Gross premiums (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014** | 475 | -1.4 | 3.7 | nil |
| 2015 | 615 | 5.0 | 5.3 | 2.2 |
| 2016 | 769 | 94.3 | 7.2 | 9.9 |
| 2017 | 931 | 149 | 19.3 | 12.6 |
| 2018 | 958 | 153 | 19.9 | 13.5 |
| % change | +3 | +3 | +3 | +7 |
| Ex-div: | 18 Apr | |||
| Payment: | 31 May | |||
| *Includes intangible assets of £551m, or 84p a share. **Pre-IPO figures | ||||
