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Hastings under the cosh as premium growth slows, claims costs rise
(WebFG News) - FTSE 250 insurer Hastings Group was under the cosh on Thursday as it said bad weather pushed up claims costs in the first quarter and reported a slowdown in gross written premium growth.
In the quarter to the end of March 2018, gross written premiums were up 5% to £226m, while live customer policies rose 10% on the year to 2.67m and the company's market share of UK private car insurance rose to 7.4% from 6.7% as at 31 March 2017. Net revenue increased 12% in the three months to £184.5m.
For the 12 months to 31 March 2018, gross written premiums were up 16% to £942.2m, while net revenue was 19% higher at £735.6m. RBC Capital Markets analyst Kamran Hossain said the first-quarter figures show a slowdown in the growth trajectory for the year.
Hastings said snow and icy weather conditions in the quarter led to higher claim costs than expected, but it still remains confident of delivering a calendar year loss ratio just below or within the target range of 75% to 79%.
The insurer said the market pricing environment was "challenging" in the first two months of 2018 but there has been an improvement since then, including policy count growth.
Chief executive Toby van der Meer said: "We remain on track to deliver on our targets, including achieving 3m customers during 2019 whilst maintaining our underwriting discipline and strong capital position.
"During the quarter we further enhanced our digital capabilities and continued the successful rollout of our new operational platform. We effectively traded through another competitive period for UK motor insurance, seeing good growth, in particular, in March and April. Our digital, data driven and agile business model leaves us well positioned to take advantage of continued consumer switching and growth of digital channels."
Mike van Dulken, head of research at Accendo Markets, said: "Hastings today admits to being the latest victim of the Beast from the East, with March's snow and ice resulting in higher than expected Q1 claims costs.
"Management also pointed to challenging price competition in January and February, which is code for 'we had to offer lower premiums to secure business'. This trend may have since improved, but any return of more 'challenging' pricing conditions could weigh on FY profitability. The same is true of any further inclement weather. The group remains confident in a FY loss ratio just below or within the target range of 75-79%, however, this would still represent a deterioration on last year's better than expected 73%."
At 0900 BST, the shares were down 6.6% to 260.74p.