Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Tom Winnifrith's BearCast 31st October

By Tom Winnifrith

31 October 2014 12:46

More:

Equities are up. In this podcast, I discuss why but why this is not the start of a bull market. It is temporary coke and hookers time in the City and on Wall Street but only for a while. Next up I look at: Fitbug, ULS Technology & the failings of AIM, Leni Gas & Oil and the failings of AIM, Arian Silver and other gold and silver producers, Coms and - in detail following a long chat with a former bull and insurance guru - Quindell.

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Comments

GA

1 November 2014, 03:05

Re Quindell, I agree with you Tom that if they are running out of cash they will have to turn away business (you also mention a scenario of them not writing business and so won’t realise cashflows in the future). I note also that you think they’ll be lucky for revenues to be£775m – you seem to suggest they’ll be a bit less.

What I can’t reconcile is that given revenues of c.£560m year to date, then this means revenues of £200m upwards in Q4. How is this consistent with restricting business to the degree to which you seem to imply? I would have thought that in the dire straits that it is suggested Quindell are in they would need to reduce business volumes fast, not increase them.

Also note that the ‘dilution rate’ for NIHL claims has been increased from c.31% to c.61%. Doesn’t this explain the reduction in projected revenues that you mention (from £900m to £750m-£800m)? Hence rather than reducing actual business volumes from those previously expected it is just how they accrue the revenue that has changed, and this has become considerably more prudent. It would therefore seem that business volumes aren’t being restricted compared to previous projections.

Would appreciate your thoughts on these specific points.