AIG unveils large Ogden rate hit
Ogden rate hit to affect troubled insurer’s first quarter results
Troubled US insurer AIG will take a $100m (£78m) pre-tax hit to its first quarter results because of the cut in the UK personal injury discount rate to -0.75% from 2.5%.
Lord Chancellor Liz Truss cut the discount rate, also known as the Ogden rate, to its new level on 20 March.
AIG had assumed in its reserving that the Ogden rate would only fall to 1%, in common with many of its peers, and so will have to boost reserves by $100m to account for the rate cut to -0.75%.
The Ogden rate hit will mainly fall on the liability and financial lines business within the commercial insurance unit in the UK, AIG said.