Software house looks to organic growth and acquisitions to justify £182m price tag

The pressure is on Misys General Insurance (MGI) to deliver growth following its £182m acquisition by a private equity house.

This week, Montagu Private Equity signed an agreement with Misys to acquire its general insurance arm.

According to a senior industry source, Montagu will now be looking to MGI for a good return on its investment. "The pressure to deliver growth and quality earnings is going to be very high," said the source.

Phillip Bell, who is to remain as MGI chief executive, told Insurance Times that growth would be achieved organically and through acquisition.

He said: "I cannot talk about names for obvious commercial reasons, but acquisitions are clearly the intention."

Bell confirmed that acquisitions or partnerships in other areas "outside classical software houses" and the issue of efficient electronic trading were also under consideration.

He added: "There is a big opportunity [with electronic trading], which at the moment is being headed by the Imarket initiative, but it is not exclusively about Imarket to say the least.

"There are many insurers that are not part of that initiative and many brokers that need to be linked electronically with all insurers. We as a software house have a requirement to connect all our customers to all the relevant insurers."

Final completion of the Montagu sale is expected within three months, subject to consent from the FSA.

Montagu pays high price for slice of broker software market
In November 2005, MGI was reportedly valued at £100m. Five months on and its price tag, seen by many in the market as too expensive, has nearly doubled to £182m.

Despite the high price a private equity house, Montagu, became the purchaser.

But Montagu will be looking for a return on its investment and the management team will be expected to deliver results.

It is rumoured that chief executive Phillip Bell has already made noises that he will take MGI down the 'virtual insurer' route and will offshore much of the business in India.

Bell says he is looking to make acquisitions, and rivals Sirius or Acturis are likely to be seen as potential targets given their customer bases.

Misys reported revenues of £34m and an operating profit of £16m for the year to 31 May 2005.