Hastings blames claims inflation for faltering profits

van der Meer: Strong progress

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”.

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