European Insurance Software Market Heats Up with Open GI/PowerPlace MBO

The deal follows Xchanging’s acquisition of Agencyport Europe and Total Objects and HG Capital’s acquisition of Sequel Business Systems.

(St. Paul’s Cathedral, London. Photo credit: Tony Duell.)

The management team of Open International Ltd., the parent company of Open GI, Open GI London and PowerPlace announced their acquisition of the company from its private shareholders with the backing of Montagu Private Equity LLP. The deal was the latest of several U.K./European deals within the last few months, which included Xchanging’s (London) acquisition of two U.K.-based companies, Agencyport Europe (which separated from the U.S. company on July 4) and Total Objects, as well as private equity firm HgCapital’s (London) investment in Sequel Business Solutions (London) during July. In June, Scandinavian private equity firm EQT Mid Market acquired multi-sector software and services company TIA Technology (Copenhagen), and in May, Netherlands-based life and pension solutions vendor Keylane acquired LeanApps, a supplier of software in that sector.

“This sector of the software market has seen many years of under investment resulting in poor experiences for the insurers,” comments Catherine Stagg-Macey, Novarica.
“This deal, along with other recent deals, shows this is changing and bodes well for insurers planning to replace core systems.”

Catherine Stagg-Macey, Associate Research Director, Novarica.

Catherine Stagg-Macey, Associate Research Director, Novarica.

Open GI supplies software and services to the general insurance market in the U.K. and Ireland, supporting roughly 19,000 users, including carriers, brokers and aggregators at over 2,000 sites, according to a statement from the investors. In 2013, Open International acquired PowerPlace, which the investors describe as a commercial insurance marketplace that distributes commercial insurance products electronically through about 1,200 broking firms, and which is integrated with the Open GI software platform.

“We have continued to build on our strong position in the market over the past few years and we are excited to be driving the group’s next phase of growth, notably in the commercial insurance market where PowerPlace is at the forefront of the move to standardise and transact products online, comments Chris Guillaume, CEO, Open International. We are delighted to be working again with Montagu. With their extensive knowledge of the business and experience backing the growth of other software and technology businesses, they are the ideal partners to support us as the business expands to take advantage of the changing market dynamics.”

Edward Shuckburgh, director, Montagu Private Equity LLP, comments:“We are impressed by Open International’s continued product innovation and its consistent growth and profitability, and it is a business that we know well, having invested previously in 2006. We look forward to working with Chris Guillaume and his team and supporting them in their strategy to continue the growth and development of this market leading business.”

(Related: Xchanging Debuts Mobile Claims Agreement Service on X-Presso Hub.)

The deal is less about the software product per se than the gradual evolution toward online trading for the commercial small- to medium enterprise market within the U.K., according to Jamie MacGregor, a Celent analyst based in the U.K. “Personal lines led the way and then quickly moved toward the aggregator way of doing business,” he comments. “Commercial lines SME is [similar] and is moving along a similar trajectory.”

Insurers are under pressure to simultaneously maximize their distribution opportunities and achieve greater efficiency, and moving business online when supported by the broker channel enables them to achieve both of these objectives, MacGregor observes. “It makes sense for a PE firm to want to invest in software firms focused on this segment,” he says. “It should continue to be a growing market for the next few years.”

Buoyant Market

Celent has observed a rise in the number of deals in the insurance software industry this year, which MacGregor speculates is a sign that the market is becoming more buoyant, and that vendors with good products are becoming more attractive.

Commenting on the season’s deals in July 22 blog post, Stagg-Macey referred to the market activity as speaking to optimism among software vendors and private equity firms active in the London Market. She wrote:

The Xchanging acquisitions fill out their portfolio of offerings with the addition of a cloud-based bordereau management system (Total Objects), MGA systems (Total Objects and Agencyport), a risk aggregation tool (Agencyport) and a system for Health Insurers (AgencyPort). The deals bring with them some duplication – two broker systems, two reinsurance systems, two MGA systems and two underwriting systems for both syndicate and companies.

Xchanging has made it clear to all users of all these products that they will continue to support all products for the foreseeable future. That said, we would expect to see some consolidation of the product portfolio in the coming years. At a minimum, this is needed to streamline the market messaging and at an operational level, it would not be surprising to see some reduction in duplication to reduce current operational costs and future product investment.

The co-investment in Sequel Business Systems, a competitor of Agencyport and Xchanging, will bring with it an injection of cash. No details have been published on where this might lead the company, but in conversations with clients of all these software companies, initial responses were mixed. A spate of deals like this always introduces uncertainty and it takes time for customers and prospects to embrace and understand the impact of these deals on their own technology investments.

Stagg-Macey’s entire commentary can be read Novarica’s blog (live link).

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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