Analysts initiate coverage of Hastings as numbers impress

Perhaps unsurprisingly, analysts at Goldman Sachs, Credit Suisse and Barclays were all upbeat, with HSBC a little more cautious, after Hastings posted a 19% rise in operating profit for the first nine months of the year, as gross written premiums grew 26%.

Goldman started coverage of the stock at ‘buy’ with a 12-month price target of 204p. “Its combination of a low-cost model, a data-driven underwriting approach and strong counter-fraud/claims capabilities should enable continued growth in both market share and profitability,” said the bank.

It noted that since listing on 12 October, the shares have underperformed UK motor insurance peers by 9%. They now trade at 10.3x 2016 price-to-earnings versus a sub-sector average of 15x, which GS reckons is an unwarranted discount.

Credit Suisse initiated coverage at ‘outperform’ with a 200p price target, saying Hastings offers attractive growth and an appealing price. The bank said growth is underpinned by ambitious targets for policy count expansion through 2017 and a cyclical upswing in motor insurance pricing.

Barclays started the stock at ‘overweight’ with a 198p price target.

It said Hastings was “one of the new breed of disruptors in the market.” The success of Direct Line 20 years ago and Admiral 15 years ago shows that even in a highly competitive and commoditised sector like UK Motor, disruptors can be successful, said the bank.

“The Q3 results are further evidence that Hastings is winning the battle of UK Motor,” it added.

Finally, HSBC started its coverage of the stock at ‘hold’ with a 176p price target. It said the target price implies 7% upside, which is insufficient to compensate for a weaker balance sheet versus other UK non-life insurers.

At 1058 GMT, Hastings shares were up 3.4% to 173.75p.