(Alliance News) - Hastings Group Holdings PLC on Wednesday agreed to a takeover bid from Dorset Bidco Ltd as well as reported a rise in revenue for the first half of 2020.
The East Sussex, England-based holding company has agreed to a 250 pence per share offer by Bidco which is a newly formed company jointly owned by a consortium comprising of Sampo PLC and Rand Merchant Investment Holdings Ltd. Sampo and RMI own 30% of Hastings' shares.
The value of the deal is approximately GBP1.66 billion.
Hastings shares were up 18% at 253.00 pence on Wednesday morning in London. In Johannesburg, Rand Merchant shares were 0.1% higher at ZAR31.62.
Sampo aims to expand further into property & casualty insurance. With this in mind it has been considering expanding geographically beyond its current footprint and sees the UK as an attractive opportunity to do so as the second largest retail and property & casualty market in Europe.
Within this context, the acquisition of Hastings is an attractive opportunity to advance its strategy.
RMI equally sees good opportunity in the UK property & casualty insurance market in the UK and Hastings in particular continue to offer growth and value creation potential.
Sampo and RMI have identified certain areas of Hastings' operations that they believe, with their experience and under private ownership, can be further developed. These include expansion into home insurance, increased customer retention and optimisation of reinsurance strategy.
In the six months ended June 30, Hastings posted a pretax profit of GBP63.5 million, up from GBP46.1 million the year before.
Gross written premiums for the half increased by 3.1% to GBP514.9 million from GBP499.2 million.
As a result of the lockdown measures the UK government introduced, motor vehicle traffic reduced by an average of 47% which meant the company saw fewer claims in the second quarter.
Hastings saw an increase in claims severity, due to higher property damage repair costs, reflecting increased vehicle sophistication, continued inflation of paint, parts and labour, and some disruption in the repair network as a result of the lockdown.
The company said that an increase in live customer policies, which grew 5% in the 12 months to June 30, was offset by a reduction in average premium primarily as a result of a change in the risk mix of business, and premium reductions to support customers during the Covid-19 pandemic in the second quarter.
The company has proposed an interim dividend of 4.5p per share, equal to the year prior.
Hastings will focus on pricing discipline while it continues to monitor claims developments carefully in the second half of the year and reflect these in pricing strategies consistent with its target loss ratio range, the company said.
Chief Executive Officer Toby van der Meer said: "We continue to make great progress on our strategic initiatives towards our vision, including our digital investments, with even more customers now using our online services and 950,000 downloads of our mobile app.
"Underlying business performance continues to be strong and, as always, I would like to thank the entire Hastings team for the hard work and commitment in supporting our customers and the communities in which we work."
By Greg Roxburgh; gregroxburgh@alliancenews.com
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