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Hastings shares pranged by margin caution

Claims inflation remains high across the general insurance industry, driven by repair costs and third-party property damage costs

Hastings shares were down 15% on Friday

Insurer Hastings Insurance Group PLC (LON:HSTG) warned that margins could come under pressure this year if current motor market trends persist.

The FTSE 250 group reported gross written premiums were up 4% to £235.5m for the three months to 31 March, in what remains a “competitive” market environment.

READ: Hastings and Saga shares boosted by JP Morgan upgrade

Claims inflation remains high across the industry, Hastings said, pushed up by repair costs and further increases in third-party property damage costs.

If current levels of premium and third-party property damage costs continue throughout 2019, the company said it full-year loss ratio “would be expected to move towards the higher end of the 75% to 79% target range”.

Directors said they remain “confident in the group's profitable growth opportunities”, having made progress on customer renewals, with total live customer policies up 3% to 2.75mln, plus with 200,000 downloads of its customer app, allowing 35% of total loss claims to be settled digitally.

There were also new repair and claims servicing developments, with three new claims service partners signed up with “improved commercial terms, better customer experience and new digital functionality”.

Chief executive Toby van der Meer said he was very pleased with progress made on the plans set out with February’s full year results.

“We have clear areas of momentum that leave us very well positioned for ongoing profitable growth in 2020 and beyond. Alongside many other initiatives underway, our new claims supplier deals, increased customer retention and digital enhancements demonstrate the significant progress made in the first quarter of 2019,” he said.

"The motor market continued to be competitive in the first quarter of 2019, but as always, we will trade through this environment with discipline whilst remaining focused on the execution of our strategy.

Hastings shares were down 15% to 185.89p just before midday on Friday.

Broker Peel Hunt said there were no major changes to underwriting trends during the quarter, noting that claims inflation continues to run well ahead of motor rates, which are relatively flat during what is traditionally a more competitive first quarter. "In a plateauing cycle, Hastings grew policy numbers slightly ahead of our estimates during 2019Q1 and continues to win some market share. The company will continue to invest in technology and we believe will remain ahead of the curve in PCW distribution."

Quick facts: Hastings Group Holdings PLC

Price: 196.4 GBX

Market: LSE
Market Cap: £1.3 billion

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