Briefing: Hastings seals a good deal

Hastings has enjoyed strong growth in the last decade. But the last two years have been challenging. 

Hastings has missed its projections on loss ratios, or ended up in the higher end of its target range, several times. 

Furthermore, majority owner Goldman Sachs has been selling its stock, and combined with soft motor pricing, this has caused the share price to dive.

The Bexhill-based motor insurer floated at 168p in 2015. 

The share price nearly doubled by the middle of 2017, but then it came crashing down amid the claims problems to 171p - pretty much where it started five years ago. 

Last week it was bought out by a consortium-led by Finnish insurer Sampo for a 47% premium to the 171p share price. 

So the sale will give Hastings time to resolve its claims issues.

As a bonus, the broking group would have already been boosted by the lower frequency claims during Covid. 

It will also mean there is time to work on some of its ambitious growth targets, which are not easy to achieve unless the market is hardening. 

Fast growth, claims challenge

It is not unusual to see fast growing motor insurers run into problems. 

Even Admiral, which has given shareholders stellar returns since floating in 2004, had its claims issues after years of growth.

Its claims department doubled from 1,000 to 2,000 people in just a couple of years, and the claims experience was spread too thinly, as ex-chief executive Henry Engelhardt admitted in interview with Insurance Times. 

By November 2011, this has caught up with them.

Unusually, Admiral had to do some reserve strengthening and the share price lost around a third of its value during that year. 

Coming back to Hastings, the deal makes sense on a number of levels. 

For Sampo, it has an activist investor, and Hastings is a good platform for growth, as my colleague Matt Scott will discuss in Thursday’s briefing.