Financial Services Sector Comment – February 2017

InsureTech

Technology continues to drive a paradigm shift for virtually all financial services sub-sectors and the insurance market is no exception. The digital generation is becoming a major customer segment for insurance businesses. With this in mind, the insurance industry is reshaping its offering to meet the expectations of its digitally-savvy clients. In addition to the demographic shift, insurance companies are investing in technological development to increase operational efficiency and risk assessment accuracy. Machine learning, Internet of Things, telematics, driverless cars and wearable tech are just a few of the technologies that act as catalysts for innovation in the insurance space.

Global non-public market financing in the InsureTech space first saw a major upswing in 2015 when total funds invested quintupled1 from the previous year. 2016 continued to see an increasing level of interest from investors with an even higher number of InsureTech financing deals.

The UK is, alongside the US, at the forefront of InsureTech innovation. This year we have already witnessed strategic and institutional investors reaffirming their confidence in the future of the sector.

A prime example is Inflexion Private Equity Partners announcing in January the backing of the management buyout of My Policy Ltd, a provider of broking, product design, pricing and monitoring of telematics motor insurance policies for first time drivers and other niches in the UK, for a consideration of €47m. In another instance, in mid-February Verisk Analytics, the US-based data analytics provider acquired Healix Risk Rating, a subsidiary of Healix International, which develops automated medical risk assessment solutions for the travel insurance industry. Furthermore, in February Charles Taylor InsureTech Ltd announced the acquisition of London-based start-up Otak Ltd, the developer of an insurance platform specialising in delegated authority solutions. Intellectual property rights to Otak’s Tide product were also included in the transaction which enabled Charles Taylor to embed Tide in its own delegated authority solution.

Venture Capital is also backing the growth of the sector as seen in the example of Bought by Many, the insurance buying platform that harnesses the power of bulk acquisitions to offer a better deal to its clients. The start-up has received €8.8m in its series A round of funding from Octopus Ventures, HSB Ventures, Munich Re Automation Solutions and other existing investors in January 2017.

Clearwater International expects this trend to continue throughout the year as insurance companies and investors continue to support the emergence of new insurance technology.

1 according to Financial Technology Partners Research

A selection of recent deals in the Financial Services sector:

AFH Financial Group has acquired the assets of financial advisors Aberdeen Wealth Management Ltd, Shield Direct Ltd, Taylor Frost Wealth Management Ltd and Bay Financial Management Ltd. The considerations are comprised of initial cash payments and additional contingent cash payments over the next 24 months in two tranches.

Marsh Ltd, a wholly-owned subsidiary of Marsh & McLennan Companies has completed the acquisition of Bluefin from AXA UK following the receipt of regulatory approval in February 2017. The deal was valued at €350m.

LCH has agreed to sell LCH.Clearnet SA, the multi-asset clearing house serving a broad number of major exchanges and platforms, to Euronext for a deal value of €510m in cash.

BGC Partners Inc. has agreed to acquire 100% stake in Besso Insurance Group. The enterprise value for Besso was €83m, subject to adjustments. Ongoing management and employees will roll over a proportion of their existing Besso shares into BGC shares.

A consortium consisting of private equity houses Bain Capital and Advent International announced the acquisition of ConCardis, the Germany-based digital payments solutions provider, for a total consideration of €700m.

Capital Professional Ltd (Bellpenny) has bought EFG Independent Financial Advisers Ltd, the financial advisory services provider from EFG Private Bank Ltd.

Equiniti acquired Gateway 2 Finance Ltd, the loan brokerage services provider.

Quilter Cheviot Ltd announced the acquisition of Attivo Investment Management Ltd, an investment management company, from Attivo Group Ltd. The deal is expected to close this quarter.

British Columbia Investment Management Corp. agreed to acquire a majority stake in Hayfin Capital Management LLP from TowerBrook Capital Partners LP, Public Sector Pension Investment Board, OMERS Private Equity and Australian Government Future Fund for approximately €260m.

Global Risk Partners acquired Higos Insurance Services Ltd, the insurance brokerage services company from founder Mr Ian Gosden.

Klarna Holding AB has announced the acquisition of Billpay GmbH, a Berlin, Germany-based short-term loan provider, from WDFC UK Ltd. Total consideration was reported at €70m.

HFF Inc, the US-based listed commercial real estate and capital market services, announced that it has successfully entered the UK market with the completed acquisition of Leon Partners Ltd, a London-based independent real estate advisory firm focusing on investment banking and corporate finance. The opening of the London operation represents HFF’s 24th office location and the first outside of the US.

St James’s Place plc has acquired HJP Independent Financial Advisers Ltd, a financial advisory service provider.