Quindell Portfolio has announced that multiple contract terms have been agreed for the direct operation of one of the UK’s largest insurers.
The initial contracts, for up to three years, forge a multi-year relationship and in combination are expected to generate approaching £20m of revenue. These will see the Group provide a range of business process outsourcing services to the client including medical reporting and rehabilitation, credit hire and deployment of repair, all underpinned by the Group’s SaaS-based technology.
The contract follows a competitive tender against other leading outsourcing players in the market and most importantly has the further potential for the relationship to broaden to other distribution channels over time, as further success in improving conversion into service is demonstrated within the direct channel. If all distribution channels are contracted this will become one of the most significant clients for Quindell in 2014.
Rob Terry, chairman and group chief executive of Quindell, said “We are delighted to be working with one of the UK’s largest and most valuable direct insurance brands. This win is another example of the growing momentum of our insurance services offering and we look forward to developing the relationship further over time, helping insurers to refine their business model, improve their service levels whilst above all improving the customer experience, whilst driving down the cost of claims.”
The company also announced an exclusive partnering agreement, with immediate effect, and the acquisition subject to FSA approval of Crusader Assistance Group Holdings, a specialist provider of full claims management services for a number of the UK’s leading motor insurance brokers.
The acquisition is expected to provide circa £6m revenue and circa £15m synergistic revenue for Quindell outsourcing per annum.
The terms of the acquisition, which is subject to regulatory approval, will be satisfied by the issue at completion of 34,285,714 Quindell shares representing approximately 1% of the Group's issued share capital, together with the payment of £1mn cash and two further payments of £1m after the end of each of the two warranted profit periods. Based on the agreed valuation of £9m, the transaction gives an implied value of 17.5p per Quindell share. The shares are subject to lock in of between 12 and 36 months from the date of issue. In return, Crusader has warranted that the business independently will make a minimum profit after tax of £1.5m and operating cash flow of £1.5m for each of the two years ending 31st December 2014.
Operating for over twenty years, Crusader manages hundreds of thousands of policies per annum on behalf of their broker customers, developing brand extension services via the offering of white labelled niche policy products such as excess protect and reward, vehicle replacement, motor breakdown and legal assistance policies. Crusader, which will operate as a business within Quindell’s Outsourcing Division, will assist Quindell to increase the volume that it can take on during this period of significant organic growth and further enhance the Group's ability to deliver its insurance market offering maintaining its leading position in an evolving market place in light of the recent Ministry of Justice costs reforms and LASPO implementation.
Quindell has been working within the hire area of the supply chain for Crusader during the last quarter of 2012 and the full operational model that will be in place following this announcement has been running on test since the start of the current year.
Terry comments "Crusader is already one of the most innovative claims outsourcers for the UK broker community. Quindell has validated that Crusader’s operations are well respected in the industry for delivering value to its clients, and is both ethical and market leading in its approach. The acquisition, once completed, will be in line with our stated strategy of only issuing stock at a premium to today’s market valuation and it is expected to be earnings enhancing in the current year and significantly earnings enhancing in 2014.”
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