N Brown says Allianz Insurance wants to add £36mln to JDW court claim
The pair have been involved in a litigation regarding JD Williams (JDW), a subsidiary of the retailer.
Between 1985 and 2015, JDW sold general insurance policies to its retail customers that were underwritten by Allianz.
However, the Financial Ombudsman Service decided that Allianz should be responsible for PPI complaints instead of JDW, following complaints from customers.
Allianz ended up paying £27mln to customers that were mis-sold payment protection insurance (PPI) and sued JDW over this in January 2020.
Two months later, JDW issued a counterclaim saying that Allianz is equally liable for the PPI claims it paid before 2005, according to Lexology.
In April 2020, Allianz demanded £28mln plus interest, but claims remain subject to final determination by the court.
The case is currently scheduled for trial in March 2022 and N Brown stressed it is at an early stage of the legal process.
It added that at the moment it’s not possible to calculate any potential financial outcomes so it didn’t add any provision to its latest financial results.
Legal fees are expected to continue to be incurred during financial year 2022 but it is likely that the cashflows resulting from the claim and/or counterclaim may not arise until 2023.
“There will undoubtedly be a feeling of frustration on behalf of N Brown shareholders in reading this news as the group has been through a sustained period where legacy matters have involved cash outlays from a dispute with HMRC through to a series of exceptional items and provisions that drew heavily on company resources,” said house broker Shore Capital.
“As such, the very good re-engineering work undertaken in financial year 2021 delivered a much stronger Group financial constitution and a platform for CEO, Steve Johnson, to see through his sensible and encouraging change programme.”
Analysts added that this is a “process that does not change the credible operating plan nor place the business under financial duress should the worst case contingent liability emerge; N Brown is a low underlying indebted business, stripping out a loan book that is of the highest quality in many years.”
Shares slipped 9% to 57.48p on Wednesday morning.
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