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UK insurer Aviva to take $478 mln charge after discount rate cut
February 28, 2017 / 2:36 PM / 10 months ago

UK insurer Aviva to take $478 mln charge after discount rate cut

Feb 28 (Reuters) - British insurer Aviva said it expects to take an exceptional charge of 385 million pounds ($478 million) to its 2016 profit after tax after Britain changed the rate at which compensation payments are calculated in personal injury claims.

Some UK insurance stocks fell and analysts warned of higher insurance motor premiums after Britain’s Ministry of Justice on Monday cut the discount rate used to calculate lump sum payouts to minus 0.75 percent from 2.5 percent.

The change will increase the size of lump sum pay outs, a threat to UK motor insurers’ profitability.

“Aviva supports this review process and recognises the minus 0.75 percent rate announced by the Lord Chancellor may be revised,” the insurer said in a statement on Tuesday.

Chief executives of 15 of Britain’s biggest motor and commercial liability insurers were meeting finance minister Philip Hammond on Tuesday to ask him to stop the “crazy” decision, the Association of British Insurers said.

The exceptional charge will not affect Aviva’s 2016 operating profit or dividend, the insurer said. It is due to report its 2016 results on March 9.

$1 = 0.8053 pounds Reporting by Rahul B in Bengaluru; editing by Carolyn Cohn in London

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