Hastings pushes ahead with dividend payment plan

Twenty-pound notes

Hastings Group has confirmed it will propose a final dividend of 5.5p per share at its AGM on 21 May despite calls from regulators for the industry to suspend payments during the coronavirus pandemic.

On 31 March in a Dear CEO letter Bank of England deputy governor and Prudential Regulation Authority CEO Sam Woods set out the regulators expectations and warned insurers to “pay close attention” to upcoming payments.

A matter of days later the European Insurance and Occupational Pensions Authority urged insurers to “temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders”.

Since the guidance Aviva, Direct Line, Hiscox and RSA have paused dividend pay outs while Legal & General has confirmed its intention to pay out a final dividend of 12.64p.

Last week Sabre delayed its special dividend pointing to a need for greater clarity around the Covid-19 crisis but confirmed plans to press ahead with a final ordinary dividend of 8.1p.

Hastings noted that it has no business lines such as travel or business interruption insurance with direct claims exposure to Covid-19.

The business reported that its board “continues to monitor market developments, financial implications, and related stress scenarios, and remains confident of the group’s robust capital position, current outlook and ongoing ability to support policyholders and continue to invest in the wider economy”.

According to the firm, taking all factors into account it will seek shareholder approval for the final dividend. The payout is set to be 39% lower than a year ago.

The decision came as Hastings’ trading update for the first quarter of 2020 showed a 1% fall in gross written premium to £234.3m.

Net revenue for the three months was down 2% at £179.2m.

However, live customer policies were up 4% year on year to 2.87 million. The firm stated that policy growth was more than offset by lower earned premiums and reduced investment income.

In response to the Covid-19 crisis nearly all Hastings employees are now working from home.

The company also detailed that with the UK in lockdown motor insurance accident frequencies reduced during March, with this trend expected to continue for the duration of Covid-19 restrictions.

Hastings added that it was monitoring claims inflation and forecast that once the restrictions are eased costs could be hit by disruption to repair networks and supply of parts.

The business also said it was keeping an eye on the potential for trading to impacted by reduced mid-term policy adjustment income and actions it might take to support policyholders.

Toby van der Meer, CEO of Hastings commented: “The first quarter of 2020 has been unprecedented with the Covid-19 outbreak placing additional operational challenges on top of recent industry headwinds. Against this backdrop, Hastings has been agile in responding to customers’ needs and I am immensely proud of how all colleagues have adapted to new ways of working.”

He added: “We intend to continue to employ all of our colleagues on their full salaries, and do not currently intend to take advantage of any government funding support.”

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