Hastings agrees to £1.6bn takeover by consortium as profits rise

Hastings on Wednesday said it had agreed terms on a £1.6bn takeover by a consortium led by Finnish insurer Sampo and its biggest shareholder, Rand Merchant Investment Holdings.

South Africa’s Rand, which owns a 30% stake, made the joint approach with Sampo Oyj last week. The deal offers 250p a share alongside an interim dividend of 4.5 pence a share.

Sampo said it wanted to expand into non-life insurance and beyond Nordic markets. The terms of the offer, excluding the dividend, represent a 47.1% premium to Hastings' 170 pence closing share price on July 28, the last trading day before Hastings flagged an approach.

The company also reported an increase in first-half profits as higher premium and an improved loss ratio offset the impact of claims inflation due to the coronavirus pandemic.

Pre-tax profit rose to £63.5m in the six months to June 30 from £46.1m a year earlier on-year as gross written premiums increased 3% to £514.9m offset by a reduction in average premium due to a change in the risk mix of business, and premium reductions to support customers during the pandemic in the second quarter.

The calendar year loss ratio decreased to 75.6% from 81.1% owing to a reduction of claims frequencies resulting from the government lockdown.

However, claim severities continued to increase predominantly as a result of 'the underlying inflation in repair costs, combined with interruptions in the repair networks and supply of parts caused by Covid-19 and increased car rental costs, with repairs typically taking longer than anticipated”, the company said.

Hastings maintained its interim dividend at 4.5p a share.

Motor insurers face new challenges amid the coronavirus crisis, and will see fewer claims this year as people stopped driving during the lockdown. This could be offset by more expensive accident repairs due to spare parts shortages.