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Hastings Holdings Group PLc

Hastings Group Holdings plc strong set of results

Hastings Group Holdings plc (LON:HSTG), the technology driven insurance provider, today announced its interim results for the six months ended 30 June 2018.

Hastings’ strong results and continued profitable growth in a competitive market demonstrates the agility, digital focus and underwriting discipline that has driven the growth of the Group from a market disruptor in 2011 into the successful listed group that it is today.

Financial highlights

· Sustained growth of live customer policies to 2.70 million as at 30 June 2018, a 6% year on year increase (30 June 2017: 2.54 million).

· Increased share of the UK private car insurance market to 7.5% as at 30 June 2018 (30 June 2017: 7.0%).

· Continued growth in gross written premiums of 5% to £485.6m for the six months ended 30 June 2018 (30 June 2017: £462.0m).

· A 9% increase in net revenue to £376.3m for the six months ended 30 June 2018 (30 June 2017: £345.2m).

· Strong growth in adjusted operating profit1 up 22% to £105.1m (30 June 2017: £86.5m) after including £14.6m of prior year VAT recovery and £7.0m impact from adverse weather in the first quarter, or up 13% to £97.5m before the adverse weather and prior year VAT.

· Underwriting discipline maintained during a period of market price reductions, with the Group’s average written premiums 2% above the six months ended 30 June 2017.

· Calendar year loss ratio2 for the period ended 30 June 2018 of 73.8% (30 June 2017: 73.4%), better than the target range of between 75% and 79%, despite the claims impact from adverse weather experienced in the first quarter.

· Continued reduction in net debt leverage multiple3 to 1.1x adjusted operating profit at 30 June 2018 (31 December 2017: 1.4x) and achieved target level of around 1.0x during the six months to 30 June 2018.

· Diversification of debt structure with a successful 7 year £250m investment grade senior bond issue, replacing funds drawn under the Revolving Credit Facility and providing longer term financing and protection from interest rate increases.

· Strong solvency position, with a Solvency II coverage ratio of 171% (31 December 2017: 167%).

· Significant increase in free cash generated, up £42.0m to £107.8m for the six months to 30 June 2018 (30 June 2017: £65.8m).

· Interim dividend for 2018 of 4.5p per share (30 June 2017: 4.1p per share), 10% higher than last year. Achieving the leverage target in the period allows a move towards a policy of increasing distributions to shareholders over time.

Operational highlights

· Continuing phased rollout of the next generation Guidewire platform, with home policies now live on selected price comparison websites and car renewals migration underway. Guidewire will enable continued delivery of operational efficiencies.

· Market leading anti-fraud programme enhanced with Iovation digital fraud tracking and action taken against over 30 ghost broking rings so far this year.

· Introduction of a new mobile app and enhanced functionality on customer portal enabling 80% of policy changes to be made online and as of May 2018, digital customer contacts now exceed telephone contacts.

· Additional digital capability for total loss claims processing rolled out as the customer journey continues to be simplified and electronic claims notification currently in testing.

· Joined a partnership with 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 strategic partnership now live, providing market leading breakdown service to customers and to be included as standard cover for the Hastings Premier product.

Notes1,2&3 refer to the end of the Business highlights section for definitions and explanations.

Hastings Group, Toby van der Meer, Chief Executive Officer, commented:

“I am pleased to announce a strong set of results for the first half of 2018 that has seen us grow our customer numbers to 2.7 million and adjusted operating profit by 22% to £105.1m. This has been in an environment where we have seen market prices come down from the highs of 2017, driven by lower claims frequencies, the prospect of regulatory reform, and competition. We have also seen adverse weather, continued fraud activity across the market, and some increase in the cost of repairs and mid-range bodily injury claims, resulting in a claims inflation outlook for the full year towards the upper end of a 3% to 5% range.

“We remain excited about the future – a fast moving and increasingly digital landscape plays to our strengths. Our capabilities in agile pricing, analytics and anti-fraud combined with our disciplined underwriting and strong capital position means we are well positioned to continue to identify and grow in profitable parts of the market. These core attributes have transformed our business from a small disruptor in 2011 into the household name we are today and will continue to drive our strategy in a large market with over 50 million car and home policies.

“Looking forward, we will continue to invest in technology. Alongside the continued rollout and enhancements to our core Guidewire platform, we have developed new digital capabilities over the last few months and very recently, launched our new Hastings mobile app. Our pricing and anti-fraud platforms also continue to develop and we have identified and taken action against over 30 different fraud rings so far this year. Today we are also announcing our participation in a mobility and vehicle technology research programme alongside a range of other partners from the automotive and mobility sectors.

“Our strong financial position and continuing cash generation means we are declaring an interim dividend of 4.5p per share, a 10% increase over last year and allows us to move towards a policy of increasing distributions to shareholders over time now our leverage target has been achieved.

We remain on track to meet all our 2019 targets and I would like to thank my 3,400 colleagues for what they do for our customers and each other, every day. It is their hard work, passion and commitment that has achieved a set of results that we can all be proud of.”

Outlook statement

The Group has continued to deliver profitable growth over the six months to 30 June 2018 and the Board is pleased to confirm that Hastings is well positioned to deliver in line with all of its targets during 2019 despite the competitive market and expected claims inflation.