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By Tom Winnifrith, The Sheriff of AIM | Friday 27 June 2014
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.
I am urged by various bulls to reconsider my questions on Quindell with reference to data provided by the Institute of Actuaries on Industrial deafness. I have referenced that data and it bears out my thesis 100% in that it shows that there is not a cat in hell’s chance of Quindell hitting its target of 72,000 cases a year settling at £9,000 + on average.
A bull posted on the comments thread:
I suggest you read this. Very interesting and numbers are rising and well above the 20,000 you quote. If you look back as well they were peaking at 85,000. Could we be returning to those days. Most likely given this is probably the new whiplash.
Okay Mr Bull lets go to the paper from the actuaries which you can find here – pages 44 and 45 are what to look at.
The numbers for 2012 show 55,000 claims being made.
The numbers settling at nil (i.e. losing so generating no income for firms like Quindell) are c50% - that is a consistent number over many years. So the number of actual cases where a firm could make £9,000 is 27,500.
But the bulls say what if we go back to peak years. The highest year in terms of claims was 1992-3 but how many were successful? Perhaps let’s look at the highest year in terms of settlements – that is 1995/1996 – which incidentally suggests that the idea that Rob Terry can turn his claims around in 9-12 months rather than the industry norms of 20-36 months is a little ambitious.
In the peak settlement year the number of claims settled at nil (i.e. lost) was just over 50%. Bang in line with long term trends.
Now I accept that the number of claims may be increasing rapidly. But in 2012 you would be looking at c 27,500 successful claims with total claims increasing by 20,000 in that year. If the increase was the same in 2013 and 2014 you would have 95,000 claims being made this year. Assume that 50% are nil claims ( and incidentally the anecdotal evidence is that the percentage of nil claims is increasing thanks to the ambulance chasers drumming up marginal business) then the TOTAL market for successful claims this year will be ….c47,500.
The total market will be 47,500 while Quindell as a new player will be processing 72,000 successful claims. That appears to give it a market share of c150%. I am probably missing something here - perhaps a Bulletin Board Moron might assist?
As I noted before I find this hard to understand but if this is the best that the bulls can come up with…perhaps a Bulletin Board moron or, heaven forbid, even Quindell can explain how it has justified its assumptions.
Perhaps Cenkos and Killick who have published gushing BUY notes on the back of the QLS Presentation predicting 72,000 wins a year might care to talk me through their assumptions at the same time?
Incidentally page 46 indicates an average claim size of successful claims of c£5500 – a stable number. So claimants get £5500 (minus 25% success fee to Quindell) so call that £4000 while Quindell reckons it will get just over £9,000. Hmmmmm….sounds a bit like Whiplash and we know how that all ended.
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