Ogden hits LV= 2016 results with £139m reserve increase
Mutual insurer Liverpool Victoria (LV=) recorded an 81 percent fall in operating profit for 2016 due to the UK's personal injury Ogden discount rate change.
Operating profit was £20 million in 2016 compared to £107 million in the previous year.
“The reduction in Ogden discount rate has had a significant one-off impact on the Group’s financial results as we have increased our reserves by £139 million to reflect higher claims costs,” said CEO Richard Rowney. “We’ve long argued that the methodology used to set the new rate is obsolete and will work with the Government to ensure a fair outcome for all and that car insurance premiums aren’t unjustly hit.”
Pre-Ogden operating profit was up 49 percent year-on-year at £159 million.
The UK’s Lord Chancellor and Justice Secretary Elizabeth Truss has decided on February 27 to change the Ogden discount rate to -0.75 percent from 2.5 percent. The so-called Ogden tables are used to calculate compensation awards for serious personal injuries. The change exceeded the level expected by the industry. Motor insurers and reinsurers are expected to bear the brunt of the impact.
The UK’s Chancellor Philip Hammond has agreed to a consultation on the framework for setting future personal injury (Ogden) rates after a severe rate reduction alarmed the industry.
LV= reported net earned premiums up 16 percent in 2016 at £2.2 billion. The combined ratio in the general insurance business was at 105.8 percent in 2016 compared to 96.1 percent in 2015. Excluding the Ogden rate impact the combined ratio would have been 94.1 percent in 2016.
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