Guidewire to Acquire Insurance Cloud Software Firm ISCS for $160 Million

Guidewire Software, which serves property/casualty insurers, has agreed to acquire another insurance software firm, San Jose, California-based ISCS, for $160 million in cash.

The deal gives Guidewire entry into the small carrier market and additional expertise in cloud-based products.

The agreement is between Guidewire’s California subsidiary Igloo Acquisition Sub Inc. and the owners of ISCS, Andrew Scurto and Timothy Shelton.

Whereas Guidewire targets large P/C insurers, ISCS has carved out a niche selling cloud-based programs to smaller P/C insurers, two-thirds of which have less than $100 million in revenues.

Guidewire’s software helps P/C insurers with their core operations, data and analytics and digital management. The company has more than 260 customers globally. Guidewire also offers some cloud-based products but ISCS has specialized in that area for longer.

ISCS, which also focuses on core products, has 40 customers and earns revenues from licensing, servicing and hosting fees, with much of that revenue deferred due to its perpetual licensing and services models. In 2016, the ISCS will take in about $41.2 million in revenues, reported Richard Hart, Guidewire chief financial officer, in a call with analysts.

ISCS has been growing revenues at 20 percent a year, as has Guidewire, according to Hart.

Guidewire, which is based in Foster City, California, said it will be bringing on 220 ISCS employees as part of the deal.

Marcus Ryu, Guidewire chief executive officer, said Guidewire has done well in the larger carrier market but that the “economic opportunity is just as great with smaller insurers.” Ryu said Guidewire seeks to be the industry standard and smaller insurers make up a large part of the industry.

“After the acquisition, Guidewire will be better positioned to address the entirety of our market opportunity,” he said in the call with analysts.

He praised ISCS as having “hands down” the best tech offering available for smaller insurers.

In addition, Ryu said the deal represents an opportunity for Guidewire to cross sell some of its data products to ISCS customers as well as to “internationalize” ISCS products to sell to small insurers in foreign countries. Guidewire itself now sells in 20 countries.

Guidewire CFO Hart said smaller insurers are more likely to buy a cloud-based model. He said there is “very little overlap” with Guidewire’s current customer base.

“We look forward to joining Guidewire and continuing our mission of serving P&C insurers,” said ISCS CEO and founder Scurto in the announcement. “The breadth of Guidewire’s offerings and the scale of its organization will enable us to provide additional value to our customers. We also appreciate the strong affinity between the companies in terms of focus and culture.”

ISCS will become a wholly-owned subsidiary of Guidewire,

The parties anticipate closing on the transaction in approximately 60 days.

It has been a busy year for Guidewire. In August, Guidewire announced it would acquire First Best, a Massachusetts commercial lines insurance software firm. In March, it acquired EagleEye Analytics, a provider of SaaS-based predictive analytics products for property/casualty insurers.

Hart said Guidewire will now be focusing on integration of its acquisitions.

Topics California Mergers & Acquisitions Carriers Property Casualty