Its shares plummeted 8% today after it was battered more so by winter weather claims than the previous year
By content director Saxon East
The bad news is piling up at Hastings and these are worrying times indeed.
It’s been a poor morning for Hastings - profits likely down 42% from last year, a lower dividend, the share price falling 8% - all caused by increasing claims.
Perhaps most revealing of all is the calendar year loss ratio now heading for 81% to 82%.
Hastings had previously warned it may go above the 75% to 79%, but few suspected it would deteriorate to this level.
Investors who thought they were buying into the new Admiral will be aghast at today’s announcement.
After a series of warnings and share price falls - the price now languishes barely above the original flotation - the question people are now asking is this: how bad will it get?
It’s a long way off Hastings actually making a loss and its solvency being weakened, but the direction right now is one of decline.
The narrative will soon start to grip that Hastings has simply grown too fast, and is now paying the price.
What the company desperately needs is the market to put through rate rises. That will go some way to helping mitigate the escalation in claims.
Hastings boss Toby Van der Meer is trying to doing the right thing by putting in rate increases, but perhaps he needs to be even more aggressive, even if that means giving up volume.
That could raise the expense ratio and lead to cost cutting on what is already a pretty lean business, but so be it.
That might also mean a continued lower dividend than 2018, so profits can be retained to stabilise the business in the long term.
It’s a tried and tested formula that works, however grim in the short term.
One thing is for sure: this downward trajectory cannot continue.
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