(Alliance News) - General insurance provider Hastings Group Holdings PLC on Tuesday said it will record a GBP8.4 million one-off pretax charge in 2019 results due to changes in the discount rate applicable for personal injury damage awards.
The stock was 4.8% lower at 195.10 pence each in morning trade.
The UK government on Monday unveiled a cut to the rate used to calculate the amount insurers must pay for personal injury claims. The personal discount rate, or Ogden rate, has been raised to minus 0.25% from the minus 0.75% implemented in 2017.
The Ogden rate is a calculation used by courts to work out how much insurance companies need to pay out in the event of life-changing injuries to customers, taking into account the likely return from the investment of such awards.
The higher the rate, the better the outcome is for insurers.
Hastings Group said it will now update its best estimate - expected present value of future cash flows - to reflect the change in the Ogden rate to minus 0.25%. The company's insurance unit previously held its best estimate reserves consistent with an Ogden rate in the range of 0% to 1%.
The company expects to report an underlying loss ratio, excluding the rate change impact, for the six months to June 30 at the top of its 75% to 79% target range.
Hastings Group, which provides car, home and van insurance under the same name, confirmed that its total reserves continue to be held above the best estimate due to inherent uncertainty in claims patterns, particularly for bodily injury.
