Car insurer Hastings said today its adjusted profit plummeted 42 per cent in 2019 which it blamed on tough market conditions.
Chief executive Toby van der Meer said: “The market environment was challenging in 2019, particularly due to elevated claims inflation which has impacted our loss ratio for the year and our adjusted operating profit.”
While the average cost of a motor insurance policy in Britain rose in 2019, competition and a change in the Ogden’s discount rate, which is used to calculate compensation for personal injuries, hurt insurers last year.
The change means companies will now have to make larger lump sum payments for such claims.
Hastings warned on profit in January, saying it would take an £8.4m pre-tax charge due to the rate change.
Today it said its adjusted operating profit for 2019 was £109.7m, down from £190.6m the previous year.
It said profit after tax was £69.7m, a fall from £130.6m in 2018.
Analysts at the Royal Bank of Canada said: “In our view, the UK motor insurance market is likely to remain challenging in the near term, given high levels of claims inflation with pricing unable to keep up.
“Hastings has the most exposure to the UK motor market amongst our coverage universe, and therefore we think the company will face an unavoidable trade-off between margin and volume in the near term.”
Hastings’ shares fell 2.5 per cent to 168p today.