Insurance company Hastings today blamed claims inflation rising faster than premiums, along with the new discount rate, for sharply reduced profitability.
The listed business announced adjusted operating profit of £59.7m for the first six months of 2019, compared to £105m last year – this included the previously announced £8.4m hit the company has taken as it had calculated its reserves on the basis of the new discount rate being 0%, not -0.25%.
Profit after tax for the six months was £38.2m, as against £72.9m in 2018.
It told shareholders: “The calendar year loss ratio excluding the impact of the Ogden rate change is 79.1%, at the top end of the group’s target loss ratio of 75% to 79%.
“The year-on-year increase in loss ratio is due to market wide claims inflation and lower earned premiums.
“Claims inflation remains at 6% to 7% and ahead of earned premium inflation, reflecting increased cost in vehicle repairs due to enhanced vehicle sophistication, continued inflation in paint, parts and labour and third-party credit hire cost increases.
“The calendar year loss ratio including the impact of the Ogden rate change, which increased claims reserves for current period and previous years, is 81.1%.”
Hastings did report a 4% increase in customer policies to 2.81m, giving it a 7.8% share of the car insurance market, with gross written premiums up 3% to £499m
Chief executive Toby van der Meer said: “I am pleased by the strong progress we have made on our strategic initiatives whilst navigating current market conditions. We remain focused on pricing discipline, and have increased underlying average premiums by 3% in the six months to 30 June 2019.”
Fellow insurer Ageas, by contrast, has said the new discount rate has had a “positive impact” totaling €30m, but this was offset by “large losses in motor”.