WTG.L Regulatory News (WTG)

Embargoed to 7am on 7 April 2014

Quindell Plc

("Quindell" or the "Group")

Potential for Largest Telematics Rollout Globally

Quindell Plc (AIM: QPP.L), the provider of sector leading expertise in software, consultancy and technology enabled outsourcing in its key markets, being Insurance, Telecommunications and their related sectors is pleased to announce that it has signed the world's largest telematics contract to date. The contract takes the form of a joint investment with the RAC in a new company, Connected Car Solutions Limited ("CCS") to distribute Quindell and the RAC's combined connected car capabilities.

Scope of New Venture in Connected Car with the RAC

Quindell and the RAC have appointed CCS to distribute Quindell and the RAC's combined connected car capabilities within the UK and Canada, to vehicle manufacturers globally and to address together some other global opportunities, including fleet in Europe (the "Scope"). The RAC has also transferred intellectual property rights in relation to its connected car solutions. Whilst the joint investment is called Connected Car Solutions, the business will trade as both Quindell Connected Car Solutions and RAC Connected Car Solutions. The Quindell brand will primarily be used for existing insurance relationships, and the RAC brand, which has been licensed to CCS in relation to connected car solutions, will be used primarily for fleet, and consumer relationships.

Taking into account the proportion of CCS that is held by RAC, Quindell will reduce its profit retained by the Group on certain existing and future contracts, but this is more than offset by the increased opportunity brought in fleet in conjunction with the RAC and a number of other telematics contracts and opportunities that will transfer into CCS that are associated with this transaction.

To compensate the RAC for the unique positioning Quindell will achieve in the global connected car market, and in recognition of the value which the RAC brand and customer base brings to achieving a critical mass for connected car solutions globally, Quindell has agreed to issue further share warrants to the RAC. These new warrants, which will be over a further 250 million shares in the capital of Quindell, are exercisable at £0.50 per share, equating to a value of £125 million. The warrants will be exercisable at any time by the RAC during the following 24 months, subject to certain vesting conditions in relation to the consumer roll-out. Any profits achieved above the cost of the warrants will be subject to lock in arrangements ranging from 12 to 36 months. Quindell has also agreed to waive the requirement for the warrants issued to the RAC in June 2013 to be exercised at the time of Quindell's move to a full LSE Listing. 

Initial investment for Connected Car Solutions of £30 million

In order to fund CCS, both Quindell and RAC have agreed initial funding of approximately £15 million each, and have both committed, subject to certain events, to fund the business in combination up to approximately £100 million in order to maximise the opportunity available to it. CCS will be owned 51% by Quindell and 49% by the RAC. Quindell is able to meet its share of the initial funding as part of the £50 million it had set aside for acquisitions and investments from its recent £200 million fundraise, having spent approximately £30 million of this to date. The remaining £150 million raised was set aside to support £450 million of organic growth, with this target being exceeded having won new business valued at £500+ million per annum since the November 2013 fundraise.

Quindell does not foresee any requirement for it to raise new capital to meet its funding obligations for CCS, or to meet its planned organic growth. CCS is expected to have a small operating cash outflow in 2014, but be significantly operating cash flow generative from 2015 onwards.

Target for paying subscribers upgraded by 20%

The Group has previously highlighted the opportunity, led by the Group's telematics insurance and its other Connected Car initiatives, to build a 10 million subscriber base each paying between $5 to $15 per month. With CCS announced today, the Board is confirming that this opportunity is increased to 12 million subscribers due to existing contracts and opportunities working with RAC, equating to $720 million to $2.2 billion per annum in high margin recurring technology revenues in the medium to longer term. Of the 12 million target, approximately four million subscribers are being targeted by CCS longer term excluding RAC breakdown members. The result of sharing the profit on these subscribers within CCS is more than offset by the 2 million increase in target and other revenue opportunities that CCS provides. Joint work with major telecoms partners provides potential for further significant upgrades in the number of subscribers being targeted. The board would like to remind investors that this target is a base case target for Quindell and the market position that Quindell currently enjoys, taking into consideration its current global telematics related contract pipelines and the recent development in the US with regards to industry patents that this target has the potential to be significantly exceeded.

The roll out of RAC telematics proposition to 2.1 million individual members is commencing in July 2014, with additional members still to be addressed relating to RAC's corporate partnerships.

Potential cost of claims addressed over £4 billion

The joint investment announced today represents the largest contract that the Group has entered into to date as revenues grow during 2014 and beyond, enabling an offering to RAC members that own vehicles representing circa 10% of the UK auto market.

The cost of claims for the UK auto market is over £10 billion pounds per annum and the offering addresses over 5% of this UK auto claims cost per annum, subject to claims reported and expected conversion into service. Consequently, the potential addressable claims spend in relation to this investment is over £4 billion of UK auto claims costs in the first 10 years post roll out. This is in addition to Quindell's existing outsourcing contract with the RAC which remains in place for non-connected car breakdown consumers. The RAC and Quindell have agreed that CCS will take 100% of the benefit from addressing the cost of claims from RAC connected car consumers whilst focusing on driving down the cost of claims and improving the customer journey following an accident or breakdown related event

RAC is one of the UK's most trusted and progressive motoring organisations with over 7 million members and this significant new agreement will see the RAC members using Quindell's end to end proposition, led by telematics, of a complete supply chain offering for Personal Injury claims, Medical Reporting, Multi Disciplined Rehabilitation plus Auto Accident Repair including Vehicle Hire Services and other Brand Extension Services.

The joint investment follows a successful year of operation of Quindell's existing outsourcing contract with the RAC, which had resulted in improved member awareness of the service offering for RAC compared with the levels of performance over the previous 3 years. This has resulted in significant improvements in members' customer journeys whilst still ensuring that the service offered is operated in an ethical manner and delivers a 20% reduction in the total cost of claims. This is achievable by addressing the total cost of claims, including the provision of a quality legal and rehabilitation service for members, rather than simply focusing on recovering and repairing members' vehicles.

Value created for ingenie in under 25's and over 25's in UK with significant growth potential

The Connected Car Solutions joint investment is expected to create significant growth and resultant value for ingenie with the opportunity to quote, subject to consumer opt-in, for insurance to a unique segment of the market which represents up to 10% of UK drivers with a target of switching a large proportion of these to telematics insurance.

Quindell, Himex and ingenie, through CCS will work with the RAC to develop a connected car RAC Driver Score, RAC Journey Score and RAC Care Score feature within the Himex Digital World technology. Using these, RAC members who choose to opt in to this RAC Score feature will, through the Himex Digital World Technology, be able to see the savings they could generate by switching their insurance to telematics, whilst maintaining the privacy of their data. Initial providers of telematics insurance are ingenie and RAC, with further providers being invited to offer insurance over time. Significant support has already been indicated from key existing and prospective underwriters of ingenie. This has been due to the typical 49% saving for ingenie customers by renewal and the improvement in underwriting result that can be offered through telematics. The success of the ingenie proposition's influence on driver behavior was recognised with ingenie being awarded the prestigious Prince Michael International Road Safety Award for 2013.

Kerry Michael, RAC Commercial Director, said: "RAC has been looking after our members and their needs for more than 115 years. The formation, in association with Quindell, of Connected Car Solutions will enable us to continue delivering groundbreaking solutions into the future. Together, we will continue to improve the customer journey for our members whilst driving down the cost of claims for the industry as a whole.

Quindell's technology and integrated outsourcing offering is outstanding and we believe offers our members and commercial partners a best of breed solution that will enhance their driving experience."

Rob Terry, Founder and Executive Chairman of Quindell said: "We are delighted to announce this significant new contract with such a distinguished and respected brand as RAC. This agreement once again validates Quindell's significant market leading model, which we believe will revolutionise the insurance industry, through a combination of innovative technology and integrated supply chain stamping down the cost of claims whilst above all improving the customer experience for the brands who choose to partner with Quindell.

After working on this development for many years building the foundation of our combined Quindell business offering; this contract demonstrates the value of our complete strategy in connected car bringing together Quindell's technologies to enable the proposition, Quindell's outsourcing to drive down the cost of claims for the industry, the Quindell Himex digitial platform to deliver an outstanding customer experience and an engaging environment for RAC members and lastly, leveraging the significant expertise and proven track record of ingenie and RAC in improving road safety, whilst delivering to our mutual underwriting partners an exceptional loss ratio well below industry norms, thereby reducing the cost of insurance for members that choose to use the RAC score as the basis for future insurance purchases."

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About Quindell Plc

Quindell Plc is a provider of sector leading expertise in software, consultancy and technology enabled outsourcing in its key markets being insurance, telecommunications and their related sectors. Quindell enters 2014 with a run rate of gross sales approaching £600 million and approaching £200 million of EBITDA, and has announced new contract wins since the start of 2014 that amount to a further £500+ million due to start during 2014. Our award winning business transformational, software, consultancy and outsourcing solutions are recognised as delivering significant savings and additional sales to our customers every year. For further information, please visit www.quindell.com.