Hastings Group Holdings plc (LON:HSTG), the technology driven insurance provider, today announced its annual results for the year ended 31 December 2018.
Hastings’ solid results and strong cash generation in a competitive market demonstrates the Group’s agility, digital focus and underwriting discipline that have been maintained whilst continuing to build enhanced capability for future growth.
Financial highlights
· Continued strong profitability with a 4% increase in adjusted operating profit1 to £190.6m (2017: £184.1m). Excluding £14.6m of prior year VAT recovery and the £7.0m impact from adverse weather in the first quarter, adjusted operating profit was broadly flat at £183.0m.
· Growth in live customer policies to 2.71 million, increasing 2.5% from 2.64 million last year.
· Increase in gross written premiums to £958.3m for the year, up 3% from £930.8m last year, and a 6% growth in net revenue to £756.4m (2017: £715.6m).
· Profit after tax increased by 3% to £130.6m for the year (2017: £126.7m).
· Calendar year loss ratio3 of 75.0%, at the bottom of the target range of 75% to 79% (2017: 73.0%), an increase over the prior year due to adverse weather in the first quarter and claims inflation being higher than premium inflation.
· Strong free cash generation4 of £167.7m, a 42% increase over the prior year enabling the Group to achieve its net debt leverage multiple5 target of around 1.0x during the year.
· Strong solvency position, with Underwriting subsidiary achieving Solvency II coverage ratio of 161% (2017: 167%), or 194% before deducting the anticipated dividend of £55.0m for the year ended 31 December 2018.
· Diversification of debt structure with a successful seven year £250m 3% fixed rate senior bond issue, replacing funds drawn under the Revolving Credit Facility and providing longer term financing and protection from interest rate increases.
· Final dividend proposed for 2018 of 9.0p per share (2017: 8.5p per share), which together with the interim dividend equates to a dividend payout ratio of 58.8% of adjusted profit after tax6 (2017: 55.5%), and a 7% increase over the prior year.
Operational highlights
· Successful completion of the Guidewire programme, with the car and home build complete and majority of customers to be on the new platform in the first half of 2019, supporting operational efficiency.
· New anti-fraud capabilities introduced including digital fraud tracking systems. Action taken against 99 ghost broking rings this year.
· Roll out of a new mobile app and enhanced functionality on the customer portal enabling the most common policy changes to be made online, with additional functionality to be launched in 2019.
· Launch of our electronic claims notification system and digital claims tracking capability, enabling customers to both report a claim digitally and then track its progress online. 26% of total loss claims are now being settled through our end to end digital total loss tool.
· Became a founder member of the UK Smart Mobility Living Lab, a working group of select brands focusing on research and development in vehicle technology and the future of personal mobility solutions.
· RAC partnership launched in the summer, providing market leading breakdown service to customers.
· Launch of gender, ethnic and age workforce diversity programmes, strengthening the diversity and power of the workforce.
· Expanded panel of home underwriters with additional 3 underwriters, demonstrating good performance since launch.
· Additions to leadership team and Board with appointment of John Worth as Chief Financial Officer, Mark Parker as Chief Operating Officer and Elizabeth G. Chambers as an independent non-executive director, further enhancing capability and diversity.
Notes1 to 6 refer to the end of the Financial review section for definitions and explanations.
Toby van der Meer, Chief Executive Officer, commented:
“I am pleased to announce a solid set of results for 2018, continuing our track record of profitable growth. We have grown adjusted operating profit by 4% to £190.6m and our customer numbers by 2.5% to 2.7 million, whilst maintaining our underwriting discipline with premium inflation ahead of the market. Our strong capital position and continuing cash generation means we are proposing a 7% increase in our full year dividend over last year, and are increasing our target dividend payout ratio to a range of 65% to 75% going forward.
“We remain focused on long term profitable growth, with our price comparison website and digital focused business model built to take advantage of an increasingly digital landscape.
“We have made good progress on building our next generation technology solutions including our core platform, pricing, anti-fraud and digital capabilities in particular. Now our Guidewire programme is complete, it provides us with a scalable platform for future growth and we continue to deliver major milestones for customer digitalisation. This includes the launch of our new mobile app that has already been downloaded over 150,000 times, and our new online self-serve functionality and digital claims notification and tracking. I am also delighted that our colleagues have given us our highest ever colleague engagement score, at a level associated with best in class employers.
“I would like to thank Richard Hoskins for everything he has done in overseeing Hastings’ early years as a public company, and I look forward to welcoming John Worth as our new Chief Financial Officer in the coming months.
“As ever, my personal thanks also go to my 3,400 colleagues for what they do for our customers and each other, every day. It is their hard work, support and the culture they have created that makes Hastings different.”
Outlook statement
The Group’s outlook and guidance for the full year 2019 is unchanged. The Board remains confident in the Group’s profitable growth opportunities driven by its competitive advantages of agile pricing, anti-fraud capabilities and digital distribution.
