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Hastings cuts dividends as claims inflation bites

The insurer's loss ratio exceeded the target range last year
February 28, 2020

Hastings' (HSTG) final dividend was cut by more than a third for 2019 after the motor and home insurer’s loss ratio rose to 82.6 per cent, above a target range of 75-79 per cent. Management blamed rises in repair and third-party credit hire costs, which elevated claims inflation, as well as a small number of large bodily injury losses.

IC TIP: Sell at 166p

The group managed to push through rate rises, with average motor premium prices rising 5 per cent. However, this was offset by a change in the mix of business aimed at lower risk segments and fewer younger drivers, resulting in flat gross written premiums. However, an improvement in customer retention resulted in the insurer boosting its share of the UK car market to 7.7 per cent, from 7.5 per cent the prior year.

The group also made progress on expanding its home insurance business, growing policies by more than a quarter to 209,000 and gross written premiums by more than a third.   

Analysts at Numis forecast adjusted earnings per share of 11.9p for 2020, rising to 12.7p the following year.

HASTINGS (HSTG)   
ORD PRICE:166pMARKET VALUE:£1.1bn
TOUCH:166-166.2p12-MONTH HIGH:235pLOW: 166p
DIVIDEND YIELD:6%PE RATIO:16
NET ASSET VALUE:97p*COMBINED RATIO:98%
Year to 31 DecGross premiums (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20156155.005.302.2
201676994.37.209.9
201793114919.312.6
201895815319.913.5
201996282.110.610.0
% change+0.4-46-47-26
Ex-div:16 Apr   
Payment:29 May   
*Includes intangible assets of 558m, or 84p a share