insurance technology q4 market...
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INSURANCE TECHNOLOGYMARKET UPDATE | Q4 2019
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Additional Data & Analytics Group Contacts
Mark FisherManaging [email protected]
+44 (0) 20 7907 4203
Tim ShortlandManaging Director
[email protected]+44 (0) 20 7907 4213
Dear Clients and Friends,
Houlihan Lokey is pleased to present its Insurance Technology Market Update for Q4 2019.
• Insurtech continues to be a highly active category, with ~$6 billion in financing volume and ~$12 billion in M&A volume during 2019.
– 54 financings in Q4 2019 was ~11.5% lower than the same period in 2018, but total 2019 volume outpaced 2018 levels by ~50%.
– 12 M&A transactions in Q4 2019 was ~30% lower than the same period in 2018, but total 2019 volume outpaced 2018 levels by ~36%.
– While 2019 M&A volume was bolstered by a number of large deals, including Prudential/Assurance ($3.5 billion), Roper/iPipeline ($1.6 billion), and Willis/Tranzact ($1.4 billion), the number of transactions in 2019 (74) was about the same as in 2018 (73).
• Increase in larger financings as category leaders begin to differentiate themselves and investors look to back established players.
– Lots of Q4 financing activity for digital distribution businesses that maximize the customer experience obtaining insurance across a number of categories (including the Zebra, Vouch Insurance, and Next Insurance) as well as software and data and analytics (including Duck Creek and CyberCube).
• Data and analytics and benefits administration/payroll companies lead the public company pack, trading at 5.9x and 4.5x EV/2020E revenue, respectively.
We hope you enjoy this report, and please reach out if you have any questions. We look forward to staying in touch.
Regards,
Rob FreimanDirector
Kegan [email protected]
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Insurance Technology Market Update
Source: S&P Capital IQ. Market data as of 01/03/20
Craig MuirManaging [email protected]
Key Trends in the Insurtech Industry
Innovation Across the Insurtech Ecosystem
2
Trend Before Now Outcome
Upending of traditional
underwriting
Incumbents hampered by legacy
systems and high marketing costs
New entrants offer innovative solutions, e.g.
peer-to-peer, on-demand, and usage-
based insurance
Enhance margins by owning and distributing
own product
Distributors transforming into full stack
carriers
Partner with multiple carriers to distribute
product
Better customer engagement and
access to new markets and
niche/specialty risks
Monetize legacy institutional
distribution channels
Buy or build technology allowing instant access to
customer and policy information, better CRM
tools, and customer portals/mobile offerings
Proliferation of big data and
advanced analytics
Insurtechs offer algorithmic risk
assessment, predictive modelling, and pricing
segmentation
PAYD and PHYD models will become
mainstream and significantly reduce
the risk pool
Legacy carrier/broker systems unable to
harness power of in-house data
Brokers aggressively
adopting technology
Navigating regulatory regime is difficult and may delay full stack
transformation and/or capital raising for some
insurtechs
Better customer engagement and
improved expense/combined
ratios
Cooperation between carriers, brokers, and insurtechs has increased as participants welcome disruption and allocate larger budgets to invest in technology that reduces cost and complexity and/or enhances underwriting results.
Record Investment Into the Insurtech Sector
2019 financing volume outpaced 2018 levels by ~50%.
Select Major Insurtech Financings
Source: CB Insights; Pitchbook.com; S&P Capital IQMarket data as of 01/03/20(1)Oscar raised two rounds in 2014—worth $30 million and $80 million, respectively.
Number of Transactions
Financing Volume ($M)
$52M $103M
$400M
$160M
$60M
$65M
$110M(1)
$38M
$500M
$165M
$200M
$300M
$200M
$130M
$160M
$120M
$500M
$931M
$38M
$50M
$500M
$350M
$100M
$300M
$205M
3
$250m
$351 $702
$2,773 $2,694$3,185
$3,989
$6,003
55
88
127
163
206216
269
-20
30
80
130
180
230
280
$
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2013 2014 2015 2016 2017 2018 2019
88
216206
163
55
127
269
$899$621
$883
$1,586 $1,520 $1,519$1,155
$1,808
57
4355
61
90
63 62 54
0102030405060708090100
$$200$400$600$800
$1,000$1,200$1,400$1,600$1,800$2,000
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
Financing Market Remains StrongInsurtech financing volume in Q4 ‘19 was ahead of the previous three quarters with average deal size being significantly larger.
Quarterly Financing Activity ($M)(1)
Source: CB Insights; Pitchbook.com; S&P Capital IQMarket data as of 01/03/20(1)Includes private company equity financings and Everquote IPO in Q2 2018.
(1)
Selected Q3 2019 Financing Transactions ($M)
Announced Date Company
Selected Investor(s)
Amount Invested
Post-Money Valuation
Segment/Value Chain
12/20 $38.6 $208.6
12/17 $635.0 $2,235.0
12/11 $235.0 $1,885.0
12/09 $120.0 NA
12/03 $28.5 NA
11/29 $36.0 NA
11/25 $66.4 NA
11/20 $45.0 $210.0
11/15 $35.0 $140.0
10/07 $250.0 $1,000.0
Insurance Segment Insurance Value Chain
P&C Life Health Distribution and Customer
Engagement
Products, Pricing, and Underwriting
Software and Services
Data and Analytics
Average Deal Size ($M)
LTM financing volume: $6.0B across 269 deals
4
62636155
43
57
90
54
16.0 26.0 16.9 24.1 33.515.8 14.4 18.6
Healthy M&A Deal ActivityWhile 2019 M&A volume was bolstered by a number of large deals, including Prudential’s acquisition of Assurance IQ, the number of transactions was about the same as in 2018.
Selected Major Insurtech M&A Transactions
Source: CB Insights; Pitchbook.com; S&P Capital IQMarket data as of 01/03/20
Number of Transactions Financing Volume ($M)
$1.8B
$1.1B
$2.4B
$400M
$8.7B
$760M
$1.4B
$174M
$160M
$2.5B
$919M
$490M
$322M
$155M
Undisclosed
Undisclosed
$6.7B
$1.5B
$1.6B
$3.5B
Acquirer logo on top
$1.4B
5
$5,266 $7,444
$18,547
$5,052 $5,559$8,693
$11,805
58
85
67 71
8873 74
0
10
20
30
40
50
60
70
80
90
100
$
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
2013 2014 2015 2016 2017 2018 2019
67
…Driven by a Few Large TransactionsWhile Q4 was the quieter quarter of 2019, it still outperformed the same period in 2018.
Quarterly M&A Activity ($M)
Source: CB Insights; Pitchbook.com; S&P Capital IQ. Market data as of 01/03/20(1) Q2 ‘19 includes $140 million sale of an investment portfolio by Axiata Digital to Singaporean Fund managed by Gordian Capital, which included their stake in BIMA.
Selected Q4 2019 M&A Transactions ($M)
Announced Date Buyer TargetTransaction
ValueSegment/Value
Chain
12/4 $100.0
12/4 $193.5
12/4 NA
11/20 NA
11/20 $300.0
10/22 NA
10/15 NA
10/10 NA
10/07 NA
10/2 NA
Insurance Segment
P&C Life Health
Distribution and Customer
Engagement
Products, Pricing, and Underwriting
Software and Services
Data and Analytics
Insurance Value Chain
6
Carlyle’s $6.7B
acquisition of Sedgwick
Average Deal Size ($M)
Willis’s $1.4B acquisition of
Tranzact
$7,389
$1,876
Prudential’s $3.5B acquisition
of Assurance
$7,432
33.3 369.5 34.1 98.7 62.010.7 83.5 337.8
LTM M&A volume: $11.6B across 79 deals
(1)
$225$500 $689 $579 $476
$1,753
$3,932
$744
21
15
20
1719
21 22
12
0
5
10
15
20
25
$
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
0.0
50.0
100.0
150.0
200.0
250.0
300.0
90
100
110
120
130
140
150
160
170
180
Benefits Admin/Payroll Brokerage Data and Analytics Insurance SoftwareIT and BPO Services Online Distribution eHealth
Strong Insurtech Public Company PerformanceOnline distribution and data and analytics lead the insurtech pack. Excluding eHealth, online distribution has increased 125.3% over the past year.
LTM Share Price Performance
Public Insurtech Ecosystem
Source: Financials are calendarised as of 01/03/20. Trading multiples are based on share price and market data listed as at 01/03/20 and broker consensus future earnings estimates from S&P Capital IQ as at 01/03/20. Growth and multiples shown are median values for comp group.(1) Online Distribution share price performance excluding eHealth.
27.9% 35.9% 36.3% 32.6% 20.3% 125.3%LTM Share Price Performance
BrokerageInsurance Software
IT and BPO Services
Benefits Admin/ Payroll
Online Distribution
Data and Analytics
7
132.6127.9
120.3
225.3
135.9136.3
248.9
300
(1)
/
18.4x 18.1x 17.6x 15.9x
12.1x 10.0x
--
4.0x
8.0x
12.0x
16.0x
20.0x
BenefitsAdmin/Payroll
InsuranceSoftware
Data andAnalytics
Brokerage OnlineDistribution
IT and BPOServices
5.9x
4.5x 4.4x
3.4x 2.9x
1.9x
--
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
Data andAnalytics
BenefitsAdmin/Payroll
Brokerage InsuranceSoftware
OnlineDistribution
IT and BPOServices
…Drives High Valuations Across the BoardSelected insurtech subsectors and multiples.
Enterprise Value/2020E Revenue
Public Insurtech Ecosystem
Source: Financials are calendarised as of 01/03/20. Trading multiples are based on share price and market data listed as at 01/03/20 and broker consensus future earnings estimates from S&P Capital IQ as at 01/03/20. Growth and multiples shown are median values for comp group.
4.5x 18.4x
4.4x15.9x
5.9x17.6x
3.4x18.1x
1.9x10.0x
2.9x12.1x
2020E Revenue Multiple2020E EBITDA Multiple
Enterprise Value/2020E EBITDA
8
BrokerageInsurance Software
IT and BPO Services
Benefits Admin/ Payroll
Online Distribution
Data and Analytics
/
Proven Track Record in Fintech With Exceptionally Strong Momentum
*Selected transactions were executed by Houlihan Lokey professionals while at Quayle Munro, a firm acquired by Houlihan Lokey.
April 2019TCM Software
February 2019
Credit Information
Financial InformationMarch 2019 March 2019
TCM Software
April 2019TCM Software
December 2018
September 2019
July 2018September 2018 February 2018
Payments
Insurtech
Financial InformationTCM Software Insurtech/TCM Software
March 2017
March 2017July 2017July 2017 March 2017
TCM Software
TCM SoftwareFinancial InformationCore BankingTCM Software
October 2016February 2017
Credit InformationFinancial InformationJune 2016
TCM Software
9
February 2017
Insurtech
August 2017Insurtech
has been acquired by
Broadridge
Sellside Advisor*
has sold its Benelux operations to
Altares BV
a portfolio company of
Naxicap
Sellside Advisor*
has acquired
BISAM
Buyside Advisor*
has been acquired by
Broadridge
Sellside Advisor*
a portfolio company of
EQT
has been acquired by
Moody’s Corporation
Sellside Advisor*
has been acquired by
Equiniti Group PLC
Sellside Advisor*
has received an investment from
Francisco Partners
Sellside Advisor*
has been acquired by
Vermeg Group N.G.
Sellside Advisor*
a portfolio company of
has been acquired by
Sellside Advisor
a portfolio company of
has been acquired by
Sellside Advisor
has been acquired by
Sellside Advisor
has been acquired by
Sellside Advisor
has been acquired by
Sellside Advisor
a portfolio company of
has been acquired by
Sellside Advisor
a portfolio company of
has been acquired by
Sellside Advisor
has received an investment from
and
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