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  • Sapiens Makes Big North America Move with StoneRiver Acquisition

    February 17, 2017 by Anthony R. O'Donnell

    Counting all that StoneRiver brings in systems, industry credibility, and client base, the vendor believes it now has what it needs to face the challenges of succeeding in the North American insurance systems market.

    If Sapiens’ mid-2016 acquisition of Maximum Processing was a foothold in the North American insurance systems market, the vendor’s announcement yesterday that it will acquire StoneRiver (Denver) for approximately $102 million is more like a full-scale invasion. Having sought for some time to enlarge its North American presence, the StoneRiver deal will give the Holon, Israel-based vendor a substantially enhanced solution profile for both the life and property/casualty sectors, and an employee base increased from about 200 to over 550. Perhaps most significantly Sapiens gains a large North American customer base that nearly doubles its overall revenue.

    “With this transaction, Sapiens gains a large US insurer client base and team, jumping over one of the biggest hurdle facing international solution providers who try to enter the US market through organic growth,” comments Matthew Josefowicz, CEO, Novarica. “The StoneRiver organization and client base gains strategic certainty as it exits private equity ownership and becomes a key part of a publicly traded software company focused on the industry with resources to invest in additional product development.”


    The StoneRiver acquisition comes within the larger context of Sapiens’ ambition to be a global leader as not merely an insurance software provider but also a systems integrator—or a partner through the entire systems implementation and modernization process, according to Roni Al-Dor, Sapiens president and CEO. “We don’t come with a generic professionals services organization—customers see an end-to-end solution, with industry specific expertise,” he comments.

    Sapiens entered the North American market with the 2011 acquisition of FIS Software, which brought the ALIS life and pensions system and a client base that included U.S. clients. With the Maximum Processing acquisition in 2016, Sapiens gained the Stingray solution, a P&C core system suite aimed at lower-tier insurers, and about 30 North American customers.

    Three Important Life System Components

    With StoneRiver, Sapiens gains extensive institutional knowledge, in both systems and staff, along with an expanded client base, Al-Dor acknowledges. The acquisition also adds three important components to its life and pensions processing arsenal: underwriting, illustration and e-application.

    The sum of capabilities Sapiens now enjoys gives the vendor three options for approaching the North American market, according to Al-Dor: to cross sell StoneRiver system clients to ALIS; to cross sell StoneRiver solutions to clients that don’t already have them; and to drive new business, increasing the chance to win deals with a more comprehensive solution.

    One the most important gains from the StoneRiver acquisition is credibility in the American market, according to Al-Dor. “In the U.S., many life insurance customer still see us as a non-U.S. company—it doesn’t matter that we have almost 200 people in the country,” he says. “After this acquisition we’ll have more than 500 local people, and that gives more confidence to local insurers. It’s not an issue with every customer, but it does get raised, so I think this will improve our chances to win more deals.”

    With regard to the P&C market, Al-Dor vaunts Sapiens as a “dominant” player, largely on the strength of its IDIT product. The vendor faced the question of whether it could introduce its IDIT system (also acquired in 2011) into the North American market or whether it made more sense to acquire a company, he says. The vendor’s leadership concluded that the years of marketing required to enable a non-U.S. system to penetrate the market was not the right course of action.

    Sapiens entered the U.S. P&C market with Maximum Processing/Stingray, aimed at the lower tiers of the market. “We’re doing very good business and we don’t see a lot of competition in that area,” Al-Dor reports. “We’re seeing the fruits of the investment Maximum Processing made in Stingray, and this is a very good business that we can grow—but it’s lower tier.”

    Stream Suite for P&C

    StoneRiver gives Sapiens access to the upper tier North American property/casualty market, through the vendor’s Stream Suite, which was completed in Oct. 2015 with the delivery of its policy component. The value of the system resides in both its recent development and its incorporation of intellectual property from StoneRiver’s legacy solution, Al-Dor notes. He characterizes the offering as in the early stages, market wise, now in production at five clients. “We believe Steam will improve time-to-market for Sapiens in the North American market as a viable newer-technology alternative to some of our major competitors’ offerings,” Al-Dor comments.

    StoneRiver also brings a workers’ compensation system that was recently upgraded and is installed at several clients. “It’s another segment where StoneRiver is very strong and knowledgeable, and which we want to be in,” says Al-Dor.

    Sapiens also gains a reinsurance solution from StoneRiver which is competitive rather than complementary to its own offering, as well as a financial and compliance system.

    Becoming One Company

    Counting all that StoneRiver brings to complement Sapiens’ Maximum Processing acquisition, the vendor now has what it needs to face the challenges of succeeding in the North American insurance systems market, Al-Dor says. In addition to the specific system gains, the StoneRiver establishes a large physical presence in North America, with over 550 associates. “Now we begin integration with StoneRiver and become one company,” comments Al-Dor.

    The deal also transforms Sapiens’ overall revenue profile, with North American now making up about half of the global total. However, Al-Dor insists that M&A is not the major instrument of Sapiens’ strategy. “We are not playing as a holding company,” he stresses. “We have many new customers every year.”

    Originally Posted at Insurance Innovation Reporter on February 17, 2017 by Anthony R. O'Donnell.

    Categories: Industry Articles