Hastings' chief says motor insurance price war is at an end

Hastings' chief says the motor insurance industry's long-running price war is at an end as the Goldman Sachs-backed business prepares for a possible £1bn float.

Gary Hoffman, the former Northern Rock chief executive hired to run Hastings two and a half years ago, acknowledged the sector remained "fiercely competitive". But he added: "We would expect that the cycle has turned or is turning."

Hastings is expected to join recently floated UK motor insurance rivals Direct Line and Esure on the stock market after it appointed advisers at Goldman and Credit Suisse.

The subsector has had a mixed record. Although shares in Direct Line, which floated at 175p a share in October 2012, have since rallied to 323p, Esure has disappointed.

Since floating at 290p a share two years ago, Esure has dropped to 214½p, hurt by higher claims and pressure on premium income.

However, Mr Hoffman argued Hastings was more "agile" than its peers and not "distracted" by ventures overseas. "We're able to react swiftly and nimbly to changes in market conditions."

He added that the group was in "no rush" to list and had "no definitive timetable or deadline", but insiders have said the company could proceed within months.

They have said Hastings, which has net debt of £380m, does not need to raise additional cash, although a float would crystallise gains for its backers.

Goldman acquired a 50 per cent stake in the insurer for approximately £150m about 18 months ago in a deal that gave Hastings an enterprise value of about £700m.

A group of individuals led by Neil Utley, one of Britain's richest men, as well as Edward Fitzmaurice, chairman, continued to hold the remaining equity stake.

Split from Australian insurer IAG in 2009 through a management buyout, Hastings had been eyeing a listing two years ago but scrapped the plan before the deal with Goldman's merchant banking division.

The company, which provides car, van, motorbike and home insurance, has sought to take market share. On Thursday the group released figures showing it wrote £483m in premiums last year, up 19 per cent from 2013. Pre-tax profits jumped from £56m to £102m.

Mr Hoffman recognised that much of this was because of Hastings taking on more business - last year it added another 290,000 customers, bringing its total to 1.7m - although he added that the group had also been able to "selectively increase prices". "We're small enough to grow; big enough to compete".

Hastings is based on the Sussex coast, but its underwriting is done through Gibraltar - an offshore centre for insurance companies, which has offered lower capital requirements and a more favourable tax regime.

Yet Gibraltar's regulatory advantages are set to become less pronounced as the British Overseas Territory is complying with the EU-wide Solvency II regime. Furthermore, Ed Miliband, Labour party leader, recently included Gibraltar on a list of offshore tax havens that he planned to crack down on.

Even so, Mr Hoffman said Hastings had no plans to move its underwriting away from Gibraltar.

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