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Hastings cuts dividend as claims costs rise

The insurer has warned that profits for 2019 will be lower than market expectations
January 17, 2020

Hastings (HSTG) has warned that adjusted operating profits for 2019 will come in at around 13 per cent below consensus due to higher-than-expected claims costs. The insurer guided to profits in the region of £110m, below the £191m earned in 2018, after expectations for the claims loss ratio rose to between 81 and 82 per cent, from the 79 per cent anticipated in October. 

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The motor and home insurance group blamed elevated claims costs in the fourth quarter, following increases in repair and third-party credit hire costs, marginally higher winter frequencies than the prior year, and a small number of larger bodily injury losses. 

Efforts to maintain prices meant live customer policies remaining broadly flat over the second half of 2019 at 2.85, but were up 5 per cent over the whole year on 2018. 

Management warned the dividend paid in respect of 2019 would be lower than the 13.5p a share level returned to shareholders the prior year, but the payout ratio will likely be higher than the targeted level of paying out 65-75 per cent of adjusted profits after tax. Analysts at Numis lowered their dividend forecast to 9p a share, from 11.6p, which equates to payout ratio of 85 per cent.