Aviva to gain hundreds of millions in Ogden reform - analyst

Aviva could make a one-off gain of between £100m and £200m if plans to reform the discount rate are taken up. 

Last week, the Lord Chancellor presented to parliament Ogden reform changes that could see the discount rate set between 0% and 1%.

Analysts at Jefferies said: “We estimate that if the new methodology results in a rate between 0% and 1%, then Aviva could benefit from a one-off gain of between £100m - £200m (approximately 2.5p-5.0p per share).”

Jefferies added that any Ogden change, if enacted, would be ‘deflationary for motor insurance prices.’

However, the firm said it could be challenging to get the changes made.

“While this might appear to be a minor change, we believe that the legal obstacles to this change will be considerable, because if the new methodology does presume that victims take some investment risk, then it could challenge the fundamental principle of full compensation, whereby tort law seeks to put the victims in the position they were in before the tort,” the firm said in its note.