LSL Property Services Surveying & Valuation Division PI provision (2741A)
December 19 2014 - 2:00AM
UK Regulatory
TIDMLSL
RNS Number : 2741A
LSL Property Services
19 December 2014
For Immediate Release 19(th) December 2014
LSL Property Services plc
("LSL")
Surveying & Valuation Division Professional Indemnity (PI)
Provision
LSL, a leading provider of residential property services
incorporating estate agency and surveying businesses, today
announced the following update on its professional indemnity (PI)
provision in relation to its valuation services.
LSL's Annual Report & Accounts 2013 (AR&A 2013) included
an additional professional indemnity (PI) provision of GBP12.0m
(GBP9.2m after tax) due to the deterioration in claims experience
relating to the 2004 to 2008 high risk lending period. High levels
of claims relating to this period have continued to be an industry
wide problem. The additional provision included an increase in the
'Incurred But Not Reported' (IBNR) provision required for
notifications and claims estimated to be received in the future for
the 2004 to 2008 period. The primary statutory limitation for this
period has now ended. It was noted in the AR&A 2013 that this
was the Board's best estimate of future claims but that the process
of resolving open claims and estimating future claims was on-going.
It was also noted that the conclusions on the appropriate level of
IBNR provision were sensitive to small changes in assumptions and
were therefore highly subjective.
As part of the 2014 year end process, LSL is undertaking a
detailed review on a case by case basis of all notifications and
claims relating to the 2004 to 2008 period and a number of material
issues have been identified. This review has included an assessment
of the notifications and claims by specialist PI lawyers. The
review identified that a greater proportion of existing
notifications are deteriorating into claims, and the average cost
per claim is greater than anticipated due to higher legal costs and
a number of larger notifications/claims.
In addition, in the November 2013 IMS, LSL stated that it
assumed that the run rate of new notifications and claims relating
to the high risk lending period would significantly reduce during
2014 and would not be material by the end of the year. Despite the
end of the primary limitation period and the fact that the run rate
of new notifications has reduced significantly, LSL now expects to
receive new notifications and claims relating to the high risk
period in 2015 and beyond.
Taking into account current trends and the factors arising from
the case by case review, the Board has concluded that further
provisions are required. This is currently expected to result in an
additional exceptional charge in LSL's financial accounts for the
year ending 31(st) December 2014 in the range of GBP20m to GBP25m
(GBP15.7m to GBP19.6m after tax) to increase the overall PI
provision. The final number is subject to further review as well as
external audit and will be disclosed with the 2014 full year
results. The additional provision will represent the Board's
current best estimate of likely claims costs and will include a new
Incurred But Not Reported (IBNR) provision for notifications and
claims yet to be received for the 2004 to 2008 high risk lending
period. The review has been conducted with the overall aim of
ensuring a high degree of confidence that the total PI provision
will be adequate to cover the remaining risk relating to the 2004
to 2008 high risk lending period.
The underlying business remains extremely cash generative and
balance sheet leverage remains at modest levels, and as a result
the Board remains confident in its current dividend policy.
For further information, please contact:
Ian Crabb, Group Chief Executive Officer
LSL Property Services plc 0207 382 0360
Richard Darby, Sophie McNulty and Sophie Cowles
Buchanan 0207 466 5000
Notes to Editors:
For further information, please visit our website:
www.lslps.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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