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Shares in Hastings plunged as much as 16pc on Thursday after the company warned that a more competitive insurance market and higher costs of claims would hit its performance this year.
Although the number of people taking out policies with Hastings rose by around 4pc to 2.7 million in the last 12 months, the amount they are paying for premiums is not rising as much as the value of claims being made.
Hastings, which specialises in home and motor insurance, had tried to combat this with a "disciplined pricing strategy", it said. But it now expects its loss ratio, a measure of claims paid as a proportion of income from premiums, to be at the lower end of its target range of 75pc to 79pc this year.
Shares in the FTSE 250 company plunged as much as 16.7pc in early trading to 183.6p, before recovering slightly to around 198p, putting the company’s stock on track for its lowest price since August 2016.
Toby van der Meer, Hastings’ chief executive, said he thought the business was "well positioned in a very large market".
"Our focus remains on continuing to profitably grow our successful, technology-led business with sophisticated and disciplined pricing at its core," he added.
The value of Hastings’ premiums rose 3pc to £738.5m for the nine months to the end of September, while its revenues rose 7pc to £574.1m.
In the longer term, the company said its board and management remained confident in its opportunities for growth and it would continue to invest in data and technology, including its anti-fraud capabilities.
Mr van der Meer had previously spoken of his concerns about so-called ghost broking rings, which offer customers fake cover with well-known insurance brands.
Paul De’Ath, analyst at Shore Capital, said the slowdown in the last quarter’s trading would do little to reassure investors.
"Unfortunately for Hastings, there is little in this trading update to indicate a turnaround in fortunes in the short-term, in our view," he added.
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