Hastings shares tumble as insurer issues profit warning
Hastings shares plummeted this morning after it warned that it expects a 42 per cent drop in annual profit because of high claims costs in the final quarter.
The motor insurer said it plans to lower its annual dividend, citing a challenging market.
Shares fell 6.3 per cent this morning to 173.5p.
Hastings said claims expenses rose in the fourth quarter, with increases in repair and third party credit hire costs.
It also cited higher winter claim frequencies than the prior year, and a small number of larger bodily injury losses.
The London-listed company operates in the highly competitive UK motor insurance market.
Its update comes after Direct Line, Britain’s biggest motor insurer, said in November that it will cut expenses and bolster digital presence in response to stagnant prices and stinging competition.
It said it expects adjusted operating profit to come in at around £110m for 2019, versus the previous year’s figure of £190.6m.
It expects 2019 loss ratio – the amount it spends on claims compared to how much it earns on premium – to be in the range of 81 per cent to 82 per cent before the impact of the July Ogden rate change.
The weak expectations come after a warning from the insurer in October that its loss ratio may move above a target range of 75 per cent to 79 per cent.
In addition to the cost rises, British insurers have also had to adjust to a change in Ogden rate, which is used to calculate compensation for personal injuries.
Nevertheless, Hastings said 2020 trading had started in line with expectations.