Insurance giant Direct Line has posted a 30 per cent slump in annual profits after taking a hit of more than £217 million (€250 million) following British government changes to the way personal injury claims are calculated.
The firm reported pre-tax profits of £353 million for 2016, down sharply on the £507.5 million seen a year earlier after a cut to the so-called Ogden discount rate calculation.
The insurance sector was sent reeling last week after Lord Chancellor Liz Truss put forward changes to the discount rate calculation, which is expected to increase payments given to victims of life-changing injuries through medical negligence, car crashes and other incidents.
Ms Truss said, from March 20th, the rate would be cut from 2.5 per cent to minus 0.75 per cent, reflecting the changes in gilt yields. But boss Paul Geddes insisted Direct Line had a successful year in a market "disrupted" by the change.
Direct Line added it does not expect any “material” further impact in 2017 from the Ogden rate. The change to the Ogden rate is now being consulted on and Direct Line said it hoped this would lead to a“better and fairer framework for claimants and defendants”.
PA
