Technology - 2010 retrospective: Software houses moving forward steadily

Much of the talk over the last few years has been of mergers and acquisitions in both the broker and software markets. Yet with Open GI bought by Towergate and SSP, which bought firms now owned by private equity house Hellman & Friedman, and Acturis gaining a minority private equity backer, it appears that the days of high growth down this route in the software market are on hold. Instead, the main five players are trying to win business in a relatively static broker market.

Similarly, there has been less M&A activity in the broking sector with funding harder to obtain. One example of a shift between software houses, albeit in 2009, was Swinton's acquisition of Equity, which saw seats shift from Open GI to SSP, although Equity's Northern Ireland business remained with Open GI. There has not been a similarly large acquisition this year, though there have been plenty of smaller deals and opportunities around commercial e-trading.

Outlook met
Commenting on 2010, Simon Hughes, marketing manager at Open GI, said: "We are where we expected to be; we have had a pretty good year by picking up a few wins and holding onto everybody." Contract wins included Markerstudy's broking business, while it has re-signed Footman James (owned by Aon) and MCE on long-term contracts. It has also benefitted from the stream of acquisitions made by Cullum Capital Ventures, with 80% of its brokers now on Open GI. Open GI has been investing in imarket and SME trading platform Open Trader, which links to sister company PowerPlace. Hughes expects "modest growth" in 2011.

Hunkering down
SSP has had a similar year to its largest rival. Laurence Walker, chief executive officer at SSP, said: "Many SME brokers have been hunkering down, waiting for a turn in the market. We have been performing better in volume transactions and had a 380% increase in commercial lines e-trading activity in October over January, although volumes overall are still low, despite being given the largest drumroll in history."

Walker added that SSP had kept its brokers, as well as benefitted from Swinton making acquisitions and expanding the number of call centres it services. Despite the presence of a private equity house, Walker seemed content with a small increase in revenues and profit overall, although its year-end is not until March.

Newcomer Transactor has grown 30% in the first six months of this year, with a turnover of £3m and profit of £0.4m. In the year to 31 March 2010, Transactor had revenue of £4.5m with a similar profit. Managing director Ray Vincent said: "While this is stronger than planned, it has arisen from better-than-forecast new business sales, which have added more than 1,000 new licensed seats in the first six months. It appears that innovative UK brokers are placing greater emphasis on agile, modern technology in the selection process." Vincent has outlined ambitious growth plans to move from 55 to 200 brokers by 2016.

Funding
Another software house to have grown is Acturis, which added 1,200 users through client wins such as Coventry-based Circle, an increase in users at Willis and being appointed preferred software suppliers to Marsh ProBroker's members. It also benefited in the summer from an undisclosed amount of minority investment from private equity house Summit Partners. The investment is expected to help Acturis expand into Europe. Simon Ronaldson, sales and marketing director at Acturis, commented: "It has been an outstanding year and our customers are happy; we have seen a continued drift towards Acturis."

Insurecom
Meanwhile, Insurecom has had a steady year, with chief executive officer Phillip Walter saying that he had managed to double earnings before interest tax depreciation and amortisation to £1m as it became a "tighter-run ship". He said that the highlights of the year had been his firm's broker business conference and the development of a major commercial lines platform to be unveiled next year. Walter also commented that a lot of start-ups were coming through and that this trend would continue in 2011. He added that he was set to unveil a new four-year "very detailed" growth plan for the software house.

As 2010 comes to an end, we can expect some decent Christmas parties for the software houses' employees, though perhaps not too many bottles of Krug. Next year is shaping up to provide a similar scenario.