Innovation Group to focus on insurance business processing

The Innovation Group (TiG) is focusing on providing business processing to insurance companies.

TiG chief executive Hassan Sadiq said the company's fortunes would begin to turn now that it was disposing of non-core activities, including an executive car hire company in Australia. This follows the disposal last year of two companies, Mead & McGrouther and IBS. He also said that the executive culture had changed.

"We have seen a 30% growth in revenue in our business processing system. Our claims and policy documentation technology is now being used by a number of insurance clients and we want to make sure the service and performance is right for them before trying to actively win other clients."

Since January, the company has won two contracts. Firstly, a US insurer converted an evaluation licence to a full licence worth £1.3m. This added to the £3m conversion deal signed with another US insurer in October 2003.

The second contract, signed in March 2004, is to supply the RAC with TiG's claims technology product. The contract will accrue the company £3m over a 36-month period. Approximately half will be paid in the first financial year, the company said.

TiG is also in talks with Halifax General Insurance to supply business processing systems.

In its six-month results to March 2004, the company posted an adjusted profit (the loss before tax) of £3m, an increase of 115% from the £1.4m posted for the same period in 2003.

The company's overall loss before tax was £3.4m, compared to £5.2m for 2003. The company said it would be another "seven financial quarters" before it could report "pure profit" under the FRS14 rule for loss making companies.

TiG's controversial founder and former chairman Rob Terry was paid £500,000 as a final settlement by the company last year. Sadiq made it clear Terry "was no longer a stakeholder in the company".

TiG is also negotiating licence agreements with 30% - 50% of the licence fee being recognised upon signing the contract.

"Insurers are not paying 100% up front for software projects anymore. Basically too many insurers know that the money spent may end up as a write-off two or three years down the line if the project is not delivered in time.

"Insurers have made it clear that software houses will be paid once recognisable predetermined milestones have been reached on the contract. This gives a clearer view of a company's revenues, which the City likes too," said Sadiq.

Analysts were positive on TiG's future outlook. Investec has forecast revenues of £31m for TiG during 2003/4.