Hastings’ (HSTG) half-year results have thrown into sharp focus the extent to which the recent Ogden discount rate change will hurt the UK’s insurers. Ogden is used to work out the size of the lump sum accident victims receive. Under the old -0.75 per cent rate, Hasting’s calendar net loss ratio (net claims paid out as a percentage of premiums earned) was 79.1 per cent. The new -0.25 per cent rate sends that figure up to 81.1 per cent. The group was also forced to take a one-off £8.4m charge as a result of the policy change.
The net loss ratio is already significantly higher than the 73.8 per cent reported last year owing to continued claims inflation. Hastings can blame increasingly extreme weather events for this. The underlying market, therefore, doesn’t look like it is going to be getting any easier.
But the company’s customer retention is improving, something management attributes to innovative renewal pricing and digital initiatives. Adding 100,000 live policies and increasing the average premium by 3 per cent in the first half of 2019 helped soften the blow from a challenging market. Still, adjusted operating profits fell 43 per cent to £59.7m, behind consensus forecasts. Earnings per share are now expected to fall to 16.4p in the year to December 2019, from 22.5p last year.
| HASTINGS (HSTG) | ||||
| ORD PRICE: | 191p | MARKET VALUE: | £1.26bn | |
| TOUCH: | 190-191p | 12-MONTH LOW/HIGH: | 170p | 277p |
| DIVIDEND YIELD: | 7.1% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 96.4p* | COMBINED RATIO: | 97% | |
| Half-year to 30 Jun | Gross Premiums (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 486 | 86.8 | 11.1 | 4.5 |
| 2019 | 499 | 46.1 | 5.8 | 4.5 |
| % change | +3 | -47 | -48 | - |
| Ex-div: | 3 Oct | |||
| Payment: | 8 Nov | |||
| *Includes intangible assets of £552m, or 83p a share | ||||
