During its first-quarter 2017 financial release insurer Travelers reported a core income decline of $84 million, driven by lower net favourable prior year reserve development that includes a $51 million hit from the change to the Ogden Discount rate in the UK.
After the UK’s Lord Chancellor and Justice Secretary, Liz Truss, announced earlier in 2017 that the Ogden discount rate, which is applied to lump sum bodily injury payouts, would be cut to -0.75%, a number of re/insurers subsequently announced the expected impact on earnings.
The latest to announce the impact is insurer Travelers, which has reported a $51 million ($62 million pre-tax) increase in reserves in relation to the Ogden rate change, during the first-quarter of 2017.
As a result of the company experiencing lower net favourable reserve development when compared with the previous year, the firm’s reduced core income of $614 million resulted in a lower net income of $617 million in Q1 2017, down by $74 million on the previous year.
