Restructuring costs push Hastings profit down by 21%

Hastings Insurance Group made a profit after tax of £34.7m in 2013, down 20.6% on the £43.7m profit it made in 2012.

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 6% to £67.7m (2012: £72.4m). This was despite a 24% increase in the personal lines broking and insurance group’s net revenue to £342.4m (2012: £276.3m).

The main cause of the decline was £22.6m of one-off restructuring and transaction costs following Goldman Sachs’s purchase of 50% of Hastings. The deal completed on 8 January 2014.

Excluding the restructuring costs, Hastings’s 2013 EBITDA would have been £90.3m – up 25% on 2012’s £72.4m.

‘Strong growth’

Hastings chief executive Gary Hoffman said: “2013 was another year of very strong growth for the group and we have already witnessed two landmarks in 2014 – our equity investment from Goldman Sachs in early January and, in March, we passed the 1.5 million customers mark. This was thanks to record levels of new business sales, improved customer retention and cancellation rates.

“Moving forward, we expect healthy price competition to continue. We have implemented small price increases in the first quarter of this year and we still have strong momentum in growing customer policy numbers and gross written premium.”

Underwriting performance

Hastings Insurance Group comprises Gibraltar-based motor insurer Advantage and UK-based broker Hastings Insurance Services.

Advantage was able to boost both revenue and profitability. The insurer’s profit after tax of £30m in 2013 was almost double the £15.9m profit it made in 2012.

Its combined operating ratio (COR) improved by two percentage points to 88.3% (2012: 90.3%).

Gross written premium increased by 17% to 415.7m (2012: £354.2m).

Broking performance

Hastings’s broking  profit after tax dropped by 2.4%, mainly because this division paid £9.8m of the Goldman Sachs restructuring costs.

EBITDA also fell 2% to £42m (2012: £43m).

If one-off costs are excluded, 2013 broking EBITDA would have been  £51.8m,. up 20% on 2012’s £43m.