Hastings Group Holdings PLC (LON:HSTG) has been downgraded to ‘hold’ from ‘add’ as analysts at Peel Hunt warned that the insurer could see its rate of new business hit by lower economic activity as a result of the coronavirus pandemic.
In a note on Thursday, the broker also cut its target price for the FTSE 250 firm to 185p from 195p, saying they expected the company’s motor insurance book will “not be immune to the impacts of [coronavirus]” as the positive effects of lower claims costs due to less miles driven would be “more than offset” by lower economic activity and a subsequent decline in new business.
“As such, we expect [2020 adjusted earnings per share] to be 6% lower than we had previously anticipated”, Peel Hunt said, adding that they also thought Hastings will set aside provisions for non-performing premium payments.
“Hastings has proven to be a defensive stock amidst the [coronavirus] fallout, but we believe the underlying positive claims trends will be neutralised by the justified regulatory pressure to pass any benefits on to consumers”, the broker said.
Following their EPS cut, Peel Hunt said the shares were now fairly, justifying the rating downgrade.
Shares in Hastings were 2% lower at 179.7p in late-morning trading.