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LONDON, March 2 (Reuters) - British insurer Hastings Group Holdings Plc on Thursday reported a 5 percent jump in 2016 operating profit, as it increased customer numbers and market share, but a charge for a rule change on payments on certain claims ate into profits.
Hastings said its results included a one-off pre-tax charge of 20 million pounds ($24.55 million) after Britain’s justice ministry this week changed the rate for calculating lump sum payments for personal injury claims. This is expected to lead to sharp increases in the payouts.
“We do not see any material impact on 2017,” chief executive Gary Hoffman told Reuters but he also said: “This puts up claims costs and as a consequence, premiums are likely to continue to go up.”
Consultants PwC said insurance premiums were likely to rise by 50-75 pounds on an average policy after the discount rate was cut to -0.75 percent from 2.5 percent, with young drivers likely to be most affected.
Hastings has already increased its premiums as a result of the discount rate cut, Hoffman said, though he declined to disclose the size of the increases.
Hastings, which listed on the London Stock Exchange in 2015, offers private car insurance, home insurance, motorbike and van insurance and premium financing and ancillary products.
It has made headway in a competitive sector by focusing on selling motor insurance via price comparison websites.
The company, which mainly operates in the UK motor market, said operating profit rose to 132.1 million pounds ($162.18 million) for the year ended Dec 31, after taking account of the discount rate charge.
Gross written premiums rose by 25 percent to 769 million pounds, with active customer policies rising by 15 percent to 2.35 million.
It said it was on track to meet or beat its initial public offering targets and introduced new targets for 2019, including increasing customer policies to 3 million, compared with a target of 2.5 million by the end of 2017.
The discount rate change should support Hastings’ business model in comparison with other insurers as it would encourage more switching, RBC analysts said in a note, reiterating their “perform” rating on the stock.
Hastings’ shares rose 0.3 percent to 233.3 pence at 0823 GMT, compared with a 0.13 percent drop in the FTSE mid-cap index . Hastings’ shares have risen nearly 40 percent since the company listed.
Hastings said it would pay a final dividend of 6.6 pence per share and total dividend of 9.9 pence. ($1 = 0.8145 pounds) (Reporting by Carolyn Cohn and Noor Zainab Hussain, editing by Maiya Keidan and Jane Merriman)