UK car insurer Hastings has warned on profits and cut its dividend because of rising claims costs.
The company said on Friday that it had experienced higher repair costs in the fourth quarter of last year, and had also faced a number of large bodily injury claims.
It said that adjusted operating profit for the year would be around £110m. According to Paul De’Ath, analyst at Shore Capital, that is 12 per cent lower than consensus forecasts.
Hastings also announced that the dividend for 2019 would be lower than the previous year, although it did not specify what the payout would be.
Numis analyst Nick Johnson has cut his dividend forecast from 11.6p to 9p per share.
Hastings chief executive Toby van der Meer said: “Whilst the market environment has been challenging, with elevated claims inflation in the fourth quarter, we remained focused on our strategy of maintaining pricing discipline, applying rate increases ahead of the market.”
Motor insurers have been complaining for some time that claims costs have been rising as today’s tech-filled cars are more expensive to repair than older models. They are also facing higher compensation payouts to people who are seriously injured in accidents after the government changed the way these damages payments are calculated.
Mr De’Ath said: “While the business is doing all the right things to improve its own claims handling and antifraud capabilities, the competitive nature of the motor insurance market means that the pricing cycle has yet to turn.”