Insurance software on the block as private equity looks to cash in – sources

By Amy-Jo Crowley and Pablo Mayo Cerqueiro

LONDON, March 3 (Reuters) - European buyout houses Montagu Private Equity and Astorg Partners are preparing to hang the "for sale" sign on their UK insurance software investments, hoping to woo insurers and fellow private capital funds with their technology.

Montagu is exploring a sale of Open GI, which offers software for insurance brokers to run their operations, in a deal likely to be worth several hundred million pounds, five sources familiar with the matter told Reuters.

The sponsor has been working with advisers on a strategic review of the business, in preparation for a formal sale as soon as the second quarter of the year, sources said.

London-based rival Acturis, minority-backed by Astorg, is also getting ready for a sale, which may formally kick off in the latter part of 2023, three of the sources said.

Montagu declined to comment. Acturis, Astorg and Open GI did not respond to requests for comment.

Private equity funds were investing in insurance IT suppliers long before a new breed of so-called 'InsurTech' companies started to emerge in the second half of the last decade with a mission to displace traditional insurers.

In January, Vista Equity Partners agreed a $2.6 billion deal to take U.S.-based Duck Creek Technologies private, in a sign of investor appetite for the sector.

Some, like Montagu, are now looking to monetise their investments after revamping their portfolio companies' technology stack.

Montagu backed a management buyout of UK-based Open GI in 2014, having previously owned and sold the business to insurance broker Towergate in 2007.

It last attempted to sell the business in 2018 and has since strived to transform it into a software-as-a-service (SaaS) platform, which could attract fellow private equity funds with existing investments in the insurance industry, sources said.

For its part, Astorg bought a minority stake in employee-owned Acturis for an undisclosed sum in 2019.

Open GI could be worth up to 12 times its expected core earnings of more than 30 million pounds ($35.96 million) expected for 2023, two sources said.

Meanwhile, Acturis could trade at a premium thanks to its stronger earnings and higher growth profile, they said.

Open GI generated earnings before interest, tax depreciation and amortisation (EBITDA) of around 25 million pounds for the year to May 31, 2022, slightly below the previous financial year after accounting for exceptional expenses, according to Reuters' calculations.

Meanwhile, Acturis generated EBITDA of more than 60 million pounds in the year to Sept. 30, 2021, according to Reuters' calculations based on latest available figures.

Revenue rose to 111.9 million pounds from 102.4 million pounds the previous year, as the company added new brokers and insurers to its eponymous SaaS platform.

($1 = 0.8344 pounds)

(Reporting by Pablo Mayo Cerqueiro and Amy-Jo Crowley; Editing by Susan Fenton)

((Pablo.MayoCerqueiro@thomsonreuters.com; amy-jo.crowley@thomsonreuters.com ))