Quindell spending £150m a year on upfront case acquisition
Terry: sustainable level of cases
Alternative business structure Quindell plc is spending nearly £150m a year in upfront case acquisition costs, it has emerged.
The AIM-listed group is also developing a “collaboration protocol” with insurers that will lead to the pre-payment of legal costs.
Quindell offers insurers an end-to-end motor claims handling service, and the company’s preliminary results, issued earlier this week, said that to ensure the group does not need to raise any more capital to support its organic growth, it is “selective in terms of the work and the amount of growth we take on”.
This means turning away business beyond the 16,000 cases per month for which the legal services operation has budgeted and “incurs an upfront cost of acquisition of up to £800 per case (in aggregate being circa £12m per month)”. This equates to £144m a year.
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The report from executive chairman Rob Terry explained: “This is sustainable due to the significant cash generation that is already being achieved from historic cases and through the cash generation and working capital available within the rest of the group.
“This level of case acquisition within legal services remains our internal budget for 2014 and beyond and would represent a run rate of circa £650m per annum of legal services revenues on this volume of cases.”
The annual report also said that “legal services related sales” were £18.6m in 2013, up from £7.2m in 2012.
Legal Futures has repeatedly asked Quindell this week to discuss the report and how it complies with the referral fee ban – although there is no suggestion that it is in breach – but it has not returned any calls.
The report said that in 2013 new collaboration protocols on car hire enabled Quindell and at-fault insurers “to work together and for both parties to benefit in the reduction of costs”.
It continued: “A second collaboration protocol, for legal services leading to the prepayment of legal costs is also continuing to be developed by the group. Significant interest continues to be expressed by some major insurers in this protocol with the expectation that this will result in a change in the model for the industry that will reduce costs for insurers and accelerate payment of fees to Quindell without any net loss of profitability whilst maintaining protection for consumers.
“The group expects that ultimately up to 75-80% of insurers will be operating under this protocol by the end of the financial year 2014, but that roll-out will not commence until the collaboration protocol for hire has been completed as ultimately it is the same teams within insurers that will engage on both.”
Overall, Quindell’s revenue increased by 133% to £380m in 2013, with its adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) leaping 164% to £138m, and profits before tax going from £35m to £107m.
The group’s plan to move to the full list is on track, with its prospectus to be submitted to the UK Listing Authority by mid-April with a view to listing in the next two months.
Quindell’s current share price closed at 36.75p last night, having dipped slightly this week in the wake of the results.
Meanwhile, yesterday Quindell named leading insurance broker Swinton as one of its biggest motor claims customers after signing a contract that will see Quindell service all aspects of the claims process. The pair have been working together for a year. Today it said managing general agent Hawkwell Motor Ltd has also become a customer. Hawkwell is targeting brokers across the UK, and specialises in private car, commercial vehicle and taxi insurance.
Tags: ABS, Alternative business structures
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