Zurich hit by $289m Ogden charge in Q1

Switzerland-based Zurich Insurance Group has booked a charge of $289 million as a result of the UK’s decision to change the Ogden personal injury discount rate.

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.

This ruling had an exceptional financial impact on the UK property/casualty (P&C) insurance sector, Zurich said in its first quarter results statement.

Overall, Zurich’s operating profit dropped 13 percent year-on-year to $928 million in the first quarter of 2017. Similarly, net income fell 31 percent over the period to $607 million.

The company’s P&C combined ratio excluding Ogden improved by 1 percentage point to 97.2 percent, compared to full year 2016, driven by initiatives to strengthen underwriting and reduce absolute expenses, the insurer said.

“This is a good start to the year with strong performance from all of our businesses”, said group chief financial officer George Quinn.

“Underwriting performance is improving and we have delivered another absolute reduction in expenses. The stronger economic environment is also delivering a better than expected investment performance and, given the cautious position that we took last year, could positively influence the rest of this year. New business volumes and customer retention in P&C and Life are up, while the Farmers Exchanges continue to deliver growth.”

In the life business, non-traditional products combining protection, unit-linked and corporate pensions accounted for 89 percent of annual premium equivalent (APE) written in the quarter. New business value rose 21 percent on a local currency basis, with growth across all regions, particularly in EMEA. Life business operating profit increased 23 percent compared to the prior year quarter to $312 million.

Farmers business operating profit rose 2 percent from the prior year period to $396 million.

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