This is Jeff Haner. On 15 February 2015, Sapiens added to the recent string of insurance M&A announcements with the news that it plans to acquire StoneRiver for approximately $102 million in cash. This deal is really all about North America. By adding StoneRiver customers – some 200 – Sapiens is buying its way to a significant North American insurance footprint. These new customers are in addition to the smaller number of customers Sapiens gained with its acquisition of Maximum Processing in 2016. The acquired P&C core systems are complementary – StoneRiver’s StreamSuite competes for medium to larger P&C insurers and StoneRiver’s PowerSuite competes for Workers Compensation Insurers while the Stingray System from Maximum Processing competes for small, multi-line P&C insurers.
With this acquisition Sapiens also expands its options for small to medium life insurers. StoneRiver offers standalone solutions for life insurance new business: LifePortraits (illustration), Life Apply (eApp) and Life Suite (underwriting). StoneRiver also offers a reinsurance module. This is good news for StoneRiver. Over the past few years, its sales execution within P&C insurance has waned as the company focused on completing its StreamSuite core system. For life insurance, StoneRiver shifted its attention away from its older ID3 life insurance policy administration system which is no longer competitive. With this deal, access to additional Sapiens mobile / portal, and BI solutions will beef up the capabilities of the StoneRiver P&C core solutions. There are also cross-sell opportunities for the StoneRiver life insurance new business solutions with the Sapiens ALIS life insurance policy administration system…although, these solutions will not address the challenge Sapiens has had adapting the extreme product configuration flexibility of ALIS to the North American market (see also our Magic Quadrant for Life Insurance Policy Administration Systems for more information on Sapiens ALIS).
This deal also reflects a new trend in recent M&A activity for P&C core systems – a move toward a multi-core platforms. Rather than merging acquired solutions into their offerings, acquiring P&C core system vendors plan to support separate cores for specific markets – for example, one core for large insurers, another for small insurers, and perhaps another for a unique market like workers compensation, or a separate region. These cores are typically composed of the “big three” modules for policy, billing and claims. Vendors are surrounding these cores with shared solutions (for example mobile and portal capabilities, BI / analytics, underwriting and rating) to form insurance technology “platforms.” This allows P&C buyers to choose a core suited for their requirements, while the vendor can leverage common non-core solutions for their platform. Large P&C insurers may also adopt this multi-core approach within their single organization – using a common platform with different cores to support separate market segments or regions (see also our Insurance Predicts 2017 for more information on the impact of platforms).
StoneRiver customers on its current P&C core solutions – StreamSuite and PowerSuite – gain the most from this deal. Gartner does not anticipate significant changes for these customers, and they will benefit from additional resources within the larger Sapiens organization and access to additional noncore components. However, a significant percentage of StoneRiver customers are using older PolicyStar, Claims Workstation, and FAB Billing solutions. Customers and prospects should insist on a clear road map from Sapiens with an emphasis on these older solutions and non-core components. Sapiens has yet to demonstrate that it can deliver a platform with common components and consistent delivery that support multiple cores. It will be key for Sapiens to clearly communicate its plans and then execute on a platform model with shared components to maximize value to its customers and avoid assembling just a collection of redundant offerings.
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