February 27, 2020 / 7:50 AM / a month ago

UPDATE 1-Car insurer Hastings' profits plummet 42% in tough market

(Adds policy numbers, loss ratio, background on industry)

Feb 27 (Reuters) - UK-listed motor insurer Hastings reported a 42.4% plunge in 2019 adjusted profit on Thursday, as it struggled with intense competition and steep car repair costs as well as a change in British market rules.

“It’s not been an easy market environment, with lower prices and rising claims costs impacting our financial results for 2019,” Chief Executive Toby van der Meer said.

While the average cost of a motor insurance policy in Britain rose in 2019, competition and a change in the Ogden’s discount rate, which is used to calculate compensation for personal injuries, hurt insurers last year.

The change means companies will now have to make larger lump sum payments for such claims.

Hastings, which in January issued a profit warning due to rising claims costs, had said in the middle of 2019 that it would take an 8.4 million pound pre-tax charge due to the rate change.

The company’s adjusted operating profit dropped to 109.7 million pounds ($142.54 million) for the 12 months ended Dec. 31, from 190.6 million pounds.

Gross written premiums edged up to 961.6 million pounds from 958.3 million pounds, while live customer policies grew by 5% to 2.9 million.

Hastings, whose policies are mostly underwritten by its Gibraltar-based insurer Advantage Insurance, said loss ratio, which is the amount it spends on claims compared to how much it earns on premiums, rose to 81.6% from 75%.

But the insurer said it targets a 75-79% loss ratio in the current year.

$1 = 0.7696 pounds Reporting by Muvija M in Bengaluru; Editing by Bernard Orr and Patrick Graham

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