Guidewire Software Inc., a provider of core operations software to property/casualty insurers, has agreed to acquire Cyence, a data science and risk analytics software company.
Guidewire will pay approximately $275 million in cash and stock.
Cyence applies data science and risk analytics to enable P/C insurers to underwrite “21st century risks” including cyber, reputation and new forms of business interruption risk that have gone underinsured or uninsured. These risks are new and evolving rapidly and typically lack extensive claims history to inform underwriting and pricing. Also, according to Cyence, their complexity and non-obvious patterns of risk linkage and risk accumulation require more diverse and dynamic data sets to be modeled effectively.
San Mateo, Calif.-based Cyence launched in September, 2016, when it announced it had raised $40 million from investors that included Dowling Capital Partners, New Enterprise Associates (NEA) and IVP.
Cyence offers a “data listening and risk analytics solution” combining Internet-scale collection and curation of external data with machine learning and risk modeling. Its services support product management, actuarial, underwriting,and enterprise risk management functions.
“Cyence is an exceptional technology company that, like Guidewire, focuses on serving the strategic needs of the P&C industry,” said Marcus Ryu, co-founder and CEO, Guidewire Software. “While Guidewire has focused on core operations, data management, and digital engagement, Cyence applies expertise in data science and machine learning to the modeling needs of insurance product design, pricing and underwriting for 21st century risks. As traditional actuarial approaches struggle to address the unique characteristics of emerging risks like cyber, Cyence’s next-generation approach will enable insurers to broaden the scope and value of the products their policyholders need.”
Cyence’s CEO Sees an Urgent Need to Model Cyber Risk
Arvind Parthasarathi, Cyence co-founder and CEO, said his firm started applying data science to cyber risk due to significant demand from the insurance industry on what is an existential threat for their insureds.
“We look forward to joining Guidewire and continuing our mission to enable insurers to enter new markets by insuring emerging risks like cyber,” said Parthasarathi.
The total consideration to be paid of approximately $275 million, or $265 million net of $10 million cash on hand, is subject to customary transaction adjustments. Consideration provided at closing will consist of net cash of approximately $140 million and approximately 1.6 million shares of newly issued Guidewire common stock. Of those shares, approximately 260,000 are in the form of deferred equity consideration, which are subject to the achievement of certain retention and operating milestones.
Guidewire has been expanding in part through acquisitions.
Guidewire announced plans to buy FirstBest last August, a move it said helped boost its capacity to serve property/casualty insurers focused on complex commercial risks. FirstBest produces an underwriting management system for P/C insurers. In February, Guidewire completed a $160 million acquisition of ISCS, a cloud computing technology outfit focused on areas including policy administration, underwriting, claims, billing, business intelligence, reinsurance and mobile products.
In 2016, Guidewire acquired EagleEye Analytics, a provider of SaaS-based predictive analytics products for property/casualty insurers.