August 8, 2019 / 6:42 AM / 4 months ago

Hastings profit plunges on new discount rate

(Reuters) - Insurer Hastings (HSTG.L) posted a first-half profit that missed market expectations on Thursday, as it set aside more money for claims following a government-ordered change in calculating compensation.

The company, with over 2.8 million live customer policies, reported a 47% fall in pretax profit to 46.1 million pounds for the six months ended June 30. That came in below the 50.7 million pounds estimated by analysts as per company-compiled consensus.

Britain announced plans to change the discount rate used to calculate compensation for personal injuries. The change means insurers will now have to make larger lump sum payments for those claims.

Hastings said the impact of the new rate had been included within the reserve calculations for personal injury claims, resulting in a one-off pre-tax charge of 8.4 million pounds.

The company said its loss ratio - the amount it spends on claims compared to how much it earns on premiums - including the impact of the new discount rate was 81.1%, compared with 73.8%.

Hastings’ gross written premiums grew 3% to 499.2 million pounds, also falling below the 503 million pounds estimated by analysts.

Hastings also said it had to pay more for property damage costs due to a rise in the cost of car parts as well as labour.

The cost of a motor insurance policy in the UK recovered in the latest quarter after falling in the first quarter of the year, but Britain’s largest motor insurer Direct Line last month reported a 36% slump in profit at its largest business due to tough competition.

Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Anil D'Silva

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