Insurer Hastings saw shares fall seven per cent this morning as profits were slashed nearly in half over the first six months of the year.
Last month, the government changed the Ogden discount rate, which determines how much insurers have to pay out to people who have been injured in accidents, to a level which is unfavourable to insurers but guarantees better payouts to accident victims. This hit profits at Hastings, which provides car, bike, van and home insurance.
Pre-tax profit tumbled to £38.2m, a 47 per cent fall on a year-on-year basis. Net revenue was down slightly at £370.3m.
Even excluding the impact of the Ogden rate change, adjusted operating profit fell 25 per cent to £68.1m. Net debt fell to 218.2m, while the firm had a £31.8m cash deficit, up from £17m the year before.
Hastings did, however, attract a four per cent growth in customers, with live policies up to 2.81m. Gross written premiums rose three per cent to £499.2.
Why it’s interesting
Insurers last month accused the government of being “misleading and wholly disingenuous” in its decision about the Ogden rate last week, saying it would cost the industry hundreds of millions of pounds and potentially hike car insurance premiums as a result.
This morning, Hastings’ results reinforced the view that it was unhelpful to insurers. Insurers across the board already saw shares fall when the rate was set, but Hastings slid again this morning.
Hastings said its outlook and guidance for the year was unchanged, after it maintained its share of new business on price comparison websites.
What Hastings said
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.
“Our focus on digital initiatives continues, resulting in both improvements in our net promotor scores and an 11% reduction in customer service phone calls per policy.”
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