Insurers

Smith & Nephew Plc
20 December 2004

Smith & Nephew - excess insurers decline coverage

20 December 2004

Smith & Nephew plc announces that two of its excess layer product liability
insurers have informed it that they are declining coverage in respect of their
share of the liability arising from patients who require revision surgery
related to the macrotextured femoral knee component implant product.  The
company's primary insurer, who is also a participant in excess layers, is
continuing to provide cover.

Smith & Nephew strenuously refutes the grounds cited for declining coverage,
which centres around the level of initial disclosure made by the company to the
insurers.  The company is pursuing all avenues to enforce its coverage rights.

At 30th November 2004, of the total of 2971 macrotexture products originally
implanted, 676 revisions have been carried out and settlements agreed with
patients in respect of 447 of those revisions amounting to £37m.  The insurance
coverage being disputed of this amount is £12m.

In order to comply with the requirements of FRS12, the company is likely to
record an exceptional charge in its fourth quarter results on the basis that all
disputed claims and future claims are treated as irrecoverable.  Whilst it is
too early to be able to make a firm statistical prediction of the ultimate
number of revisions, the exceptional charge may be in the region of £80m
(pre-tax), inclusive of the £12m of disputed coverage referred to above.

Commenting on the announcement, Sir Christopher O'Donnell, Chief Executive,
said:

'Our first priority is to treat the affected patients fairly and promptly.
It is very concerning that two insurers have now declined coverage at this late
stage.  We will take all steps available to us to enforce this coverage and to
bring this matter to a satisfactory conclusion.'

A conference call for analysts to discuss today's announcement will be held at
5.00pm GMT/12.00pm EST today.  This will be broadcast live on the web and will
be available on demand shortly following the close of the conference call at
http://www.smith-nephew.com/confcall.  If interested parties are unable to
connect to the web, a listen-only service is available by calling 020 7019 9504
in the UK or 718 354 1153 in the US.

Analysts should contact Julie Allen on [phone] or via email at
[e-mail] for conference call details.

Enquiries

Investors
Peter Hooley                                        Tel: [phone]
Smith & Nephew Finance Director

Investors/Media
Liz Hewitt                                          Tel: [phone]
Smith & Nephew Group Director Corporate Affairs

Angie Craig                                         US Tel: [phone]
Smith & Nephew Vice President US Investor and Media 
Relations

Financial Dynamics
David Yates - London                                UK Tel: [phone]
Jonathan Birt - New York                            US Tel: [phone]



                      This information is provided by RNS
            The company news service from the London Stock Exchange