This year has seen troubling times for insurance companies, with a lot of uncertainty surrounding potential claims made by clients hit hard by COVID-19. Many insurance stocks have gone down considerably since the sector started taking a hit from the pandemic. Increasingly, insurance providers seeking to rise above these precarious times need to become more dependent on technology in order to reach their customers. At the same time, customers want more products that give them access to their own information whilst cutting costs for the insurers. This environment poses a big opportunity for startups such as Duck Creek Technology, which operates as a software-as-a-service (SaaS) company providing core systems solutions to the P&C and General Insurance industry. This opportunity was reflected in the company’s trading debut.
Last Friday, Duck Creek Technologies Inc. shares jumped 55.5% in their Nadsaq debut, raising $405 million in its upsized initial public offering. With a target range of $23-$25 per share, Duck Creek instead sold 15 million shares at $27 apiece, whilst the stock opened at $42 per share. Backed by private-equity firm Apax Partners, LLP, the IPO now values Duck Creek at $3.46 billion. Alongside startups such as SoftBank-backed Lemonade Inc. (LMND – which recently also priced its IPO well above target), this contributes to the upward trend of 71% in global insurtech investments for the second quarter of the year - a welcome change from the pandemic-related slowdown of the first months of the year. According to the new Quarterly InsurTech Briefing from insurer Willis Towers Watson, $1.56 billion has been raised in the second quarter, 68% of which is attributed to property and casualty insurance.
Founded in Boston, Duck Creek’s products are aimed particularly at property and casualty insurance providers, serving companies that sell coverage for automobile, rental, and homeowners’ insurance. It claims to be “one of the first companies to provide carriers with an end-to-end suite of software solutions for the insurance industry.” Today, Duck Creek is a leading provider. The company’s clients have access to Duck Creek OnDemand, their enterprise SaaS solution that allows insurance providers to resolve uncertainty whilst identifying and seizing market opportunities faster than their rivals. Insurers can access Duck Creek’s functionally rich products on a standalone basis, or as a full suite.
Currently, some of the biggest companies in insurance are listed as customers of Duck Creek. These include Liberty Mutual, Progressive, AIG, and Geico, along with 150 other customers worldwide. Whilst there is a risk factor involved with some of these clients potentially dropping off during the aftermath of COVID-19 insurance claims, Duck Creek remains optimistic. With the IPO, they reported that revenue is up 25% compared to a year ago, with an estimated market opportunity for its services projected at $6 billion in the U.S. and $15 billion globally. The company also shared that Apax Partners will own around 33.8% of its common stock after the IPO, whilst IT consulting firm Accenture will own about 22.5%.