Home emergency broker’s H1 results reveal signs of UK improvement
HomeServe has set aside a further £19m to pay for the cost of re-contacting customers that may have been mis-sold policies.
The company said in its first-half results this morning that it had taken the hit because the cost of the exercise was higher than originally estimated.
However, there are signs that the home emergency insurance broker is starting to put its UK troubles behind it.
HomeServe said it recorded a £19m “additional exceptional expenditure” in the six months to 30 September 2013 to complete the customer re-contact exercise and “finish addressing the legacy issues”.
The company is under investigation by the Financial Conduct Authority following accusations of poor complaints handling in the winter of 2010 and possible policy mis-selling.
The company said it has finished contacting those who felt their complaints were dealt with incorrectly and expects to finish contacting those who may have been mis-sold policies by the end of March 2014.
It said: “We are committed to delivering fair outcomes for all our customers and expect to complete the re-contact exercise by March 2014.
“The population of customers to be re-contacted remains unchanged, but we now have greater visibility of the expected total cost of the exercise, which we anticipate will be higher than originally expected.”
The additional £19m takes HomeServe’s total provision for dealing with UK legacy problems to £29.8m.
The FCA investigation continues, and is expected to take “a number of months” to complete. The company set aside a £6m provision in March 2013 to meet the costs of the investigation and a fine, should one be levied.
UK silver lining
HomeServe’s UK adjusted operating profit fell 15% to £22m in the first half of 2013/2014 from £26m in the same period last year.
This was mainly driven by a 5.4% drop in UK revenues to £127.2m (H1 2012/2013: £134.5m), caused by falling customer numbers as the company continues to restructure in the UK.
However, the company said that it now expects customer numbers to stabilise at two million in March 2014, up slightly from the 1.9 million it originally estimated.
The company also said that complaints were 47% lower at the first-half stage this year than they were in the same period last year, and customer retention has risen to 81% from 78%.
HomeServe chief executive Richard Harpin said: “Our UK business has made good operational progress, our retention rate is improving and we now expect customer numbers to stabilise at a slightly higher level during 2014 than previously anticipated.”