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Each quarter, Evolve Capital Partners takes an in-depth look at the market and transaction themes occurring in the sectors we cover.  If you would like to be added to our research distribution list, please email research@evolve-capital.com.

Evolve Capital Partners // Winter 2023: Insurance Landscape Industry Deep Dive

Evolve is proud to release our refreshed insurance industry “Deep Dive” as a follow-up to our Summer 2021 release. 

We explore key trends within the insurance industry, including 1) the rise of third-party insurance service providers (TPAs, claims adjusters, etc.), 2) increased attention from investors and consumers towards specialty insurance providers, and 3) continued digitization of the insurance ecosystem. Both smaller agencies and larger diversified carriers are adapting to the shifting economic environment (rising interest rates, rising premiums, rising claims costs) and consumer preferences (digitization, user-friendly interfaces, more personalized/customized insurance solutions). Tertiary divisions such as claims processing, account management, and analytics are increasingly being outsourced as management teams and founders look to focus on core business activities and tackle rising labor and claims costs. 

2022 was a muted year in terms of capital markets, with M&A and financing activity declining from 2021 highs as markets faced significant headwinds from inflation and rising interest rates. M&A deals dropped from 947 in 2021 (an all-time high) to a more normalized 643 in 2022, in-line with 2020 figures. Notable transactions include Berkshire Hathaway’s $11B acquisition of Allegheny, as well as Corebridge’s $1.6B IPO ($13B market capitalization) in September – which was the only insurance IPO for the entire year. 

We expect digitization to be a continued trend across the broader industry, as both sponsor-backed and independent firms partner with innovative companies providing analytics, back-office management, and distribution solutions to strengthen their product offerings and keep up with the changing economy and consumer preferences.  

Download a copy of the report here

Evolve Capital Partners // Summer 2022: Lending Landscape Industry Deep Dive

Lending is an established and large market, with market size estimated to be in excess of $9 trillion in 2021 and growing at 13.1% CAGR to reach $29 trillion by 2030, driven by high demand for consumer and commercial credit, and low delinquency rates.

Our Summer 2022: Lending Landscape Industry Deep Dive explores key trends within the lending industry:

  1. Increasing market share by non-bank lenders using non-traditional credit worthiness models. Increased consumer liquidity from forbearance programs and government stimulus has resulted in lower originations and delinquency. To counter the softening credit demand, FinTech lenders leverage new technologies, such as AI-powered psychometrics, for credit underwriting to borrowers deemed subprime by traditional credit scoring models.
  2. Increasing partnerships between traditional and digital lenders. Dominating incumbents are facing competitive pressures from 1) the swift emergence of the digital lenders with cutting-edge technology and 2) the maturity of the FinTech pioneers (emerged at the heel of the Great Recession). The market softness in 2022 is a meaningful stress test to all market players, forcing the legacy to innovate and the disruptive to be cashflow-conscious. Common solution for both: partnerships.

Rising interest rates and economic uncertainties have slowed down transaction activity in 2022 after a robust 2021. Investors are increasingly risk averse as a result of rising costs of capital. Nonetheless, the average transaction size in 2021 through Q2:2022 doubles that of 2019, suggesting quality businesses are still commanding strong valuations as suitors seek market-proven solutions and solid customer bases to better navigate the market conditions.

Through this turbulence, those with leading value proposition will standout. Our research seeks to capture the competitive dynamics as the market identifies the “winners” from the “noise”.

Download a copy of the report here

Evolve Capital Partners // Fall 2021: Capital Markets Landscape Industry Deep Dive

We explore key trends within the capital markets industry, 1) recovery consolidation M&A activities to improve bottom line and 2) expanding in business services in personal finance advisory, data consulting and digital transformation. Both large strategy consulting firms and financial services incumbents have evolved in the business environment not only through rapid adoption of cloud consulting and more robust data analytics, but also through enhanced capabilities in growing areas such as risk and compliance consulting practices.

These sophisticated products and dynamic operational changes have created increase demand in services providers and outsourcing areas like alternative data sources, cyber security, risk management, and enterprise services. McKinsey & Company has strengthened its competitive positioning in the cloud consulting space through its acquisition of Atlanta-based cloud consulting provider Candid Partners, onboarding 100+ senior technical experts into the team.

2021 has so far been a robust year across the industry with strong IPO and M&A activity across nearly every vertical in the capital market chain. To name a few in the financial institution space, PNC acquired Spanish financial group Banco Bilbao Vizcaya Argentaria (BBVA)’s US operations for $11.6 billion to become the fifth largest bank in the US.

We expect the digitalization of capital market to be a pervasive transformation, as both strategic players and sponsor-backed firms incorporate innovative analytics, back-office management, and distribution solutions into their offerings through acquisitions. The US capital markets are the strongest in the world, funding over 70% of all economic activity in the US and we are committed to continuously sharpening our expertise and understanding of this specific domain.

Download a copy of the report here

Evolve Capital Partners // Summer 2021: Insurance Landscape Industry Deep Dive

We explore key trends within the insurance industry, 1) pandemic-induced acceleration in digital transformation and 2) heightened risk factors related to increased cyber breaches, pandemic, and climate change (see page 11). Both smaller agencies and large incumbents such as Marsh & McLennan and Chubb have adapted to this shifting risk environment not only through rapid adoption of insurance management software and more robust data analytics, also through a consequent specialization in growing areas such as cybersecurity insurance.

These sophisticated products and operational changes have created a rush to outsourcing areas like claims settlement and account management in order to focus on their core revenue-generating activities. Private equity-backed ZyWave has met this demand by building an all-in-one management software and outsourcing platform through the acquisition of a swathe of insurance software including Modgic, Enquiron, and Advisen.

2021 has so far been a robust year across the industry with strong IPO and M&A activity across nearly every vertical in the insurance value chain. To name a few in the carrier space, Allstate’s life insurance unit was acquired by Blackstone in January for $2.8 billion. Digital distribution and carriers continue to soar to higher valuations as The Zebra raised $150 million in April at a $1 billion valuation, and Pie Insurance raised $118 million in March at an $876 million valuation.

We expect the digitalization of insurance to be a pervasive transformation, as both strategic players and sponsor-backed firms incorporate innovative analytics, back-office management, and distribution solutions into their offerings through acquisitions. The insurance market represented a sizeable 11% of U.S. GDP. and we are committed to continuously sharpening our expertise and understanding of this specific domain.

Download a copy of the report here

Evolve Capital Partners // Q4:2020 Quarterly Newsletter

In this quarter’s Executive Research Note, we dive into the Insurance Management System (IMS) space. IMS providers attracts ~40% of InsurTech investments, with a strong upward trajectory. Two major M&A deals were announced recently: Roper Technologies’ $5.4 billion acquisition of Vertafore and Thoma Bravo’s $729 million purchase of Majesco.

Alternative lending firms are gradually recovering in the public markets, led by consumer lending. COVID-19 has drove demand for BNPL companies, which provide attractive financing plans. Collectively, they have raised over $2.3 billion in 2020 thus far, including Klarna’s $650 million raise in September. In contrast, online lenders face a challenging time, with several prominent P2P lenders already pivoting away from P2P lending.

The COVID-19-driven surge in retail trading has staying power into the future, driven by the Work-from-Home extension and the convenience of online brokerages. Leading tech-enabled education platforms, most noticeably Tastytrade and Simpler Trading, play a significant role in attracting retail traders. Robinhood dominates trading activity while rivals E*TRADE and TD Ameritrade got acquired recently by larger asset management firms. Financial and technological innovations have pushed down fees drastically, adding to consolidation pressures.

Download: Q4 2020-Newsletter

Evolve Capital Partners // Q3:2020 Quarterly Newsletter

In our third quarterly Executive Research Note of 2020, we focus on the revival of IPO markets after an initial period of lull early this year. Tech IPOs have led the rebound, including the highly anticipated offering by nCino in July. We provide coverage on nCino’s banking solutions, offering a glimpse as to why the IPO was so well-received. In addition, Ant Group’s upcoming $30 billion IPO, at a $200 billion valuation, is set to be the largest deal in history.

Quicken Loans has grown extremely quickly, becoming the market leader merely a few years after launching its flagship Rocket Mortgage product. The company’s market share of mortgage origination exceeds the share of the long-reigning leader Wells Fargo, just as it prepares for its imminent IPO. With plans to raise over $3 billion, the IPO could lead the wave for more mortgage tech companies to go public in the near future.

Historically low mortgage rates are a boon for prospective homeowners. However, over the past decade mortgage-related laws have faced a series of revisions and have become increasingly complicated. Companies like DocMagic are tapping into the demand for technology solutions to automatically generate mortgage documents, considering the nuances and complexities at the federal, state and local levels. Auditing solutions also help to flag out inappropriate financing terms offered by lending firms.

The Enterprise Software / Data & Analytics sector continue to grow at a healthy pace. Last quarter, we reported a 4.7% growth in the price of stocks for this sector since the start of the year. By the end of July, stock prices for these companies have surged, leading to a 26.2% growth compared to early January. SaaS companies like DocuSign continue to take advantage of the work-from-home trends by acquiring companies that can help to scale essential products. To acquire new capabilities to support these efforts, the company acquired Liveoak Technologies in July for $38 million.

Download: Q3 2020-Newsletter

Evolve Capital Partners // Q2:2020 Quarterly Newsletter

Our second quarterly Executive Research Note of 2020 discusses how FinTech lending platforms and RegTechs can better process PPP loans for SMEs, followed by an overview of our nine coverage sectors, then dives deeper into the performance of the Enterprise Software sector in the pandemic.

SMEs need capital more than ever, and traditional lending sources are generally incapable of providing loans in a fast and efficient manner, as evidence by the first PPP tranche. On the other hand, FinTech firms are built for scale, speed and bring to the table a new level of accuracy not previously tested. We also believe these types of firms can do the job at a lower cost than convention players. Lendio and Accuity are two such examples.

As we consider the performance of the nine sectors, we observe that technology investment is an extremely effective hedge against risk exposure. Most of our sector coverage has weathered the storm better than the broad market indices. Transactions are still closing with investors competing for providers with solid technology infrastructure.

Within Enterprise Software, verticals with practical adoption of cloud technology will weather the pandemic well. AvidXchange, HyperScience, Zoom, and Slack are some of the success stories. Private equity and investment firms will start paying a lot more attention to these types of firms due to their resiliency. AvidXchange raised $128 from 52 investors from its latest funding round in April 2020.

Download: Q2 2020-Newsletter

Evolve Capital Partners // Q1:2020 Quarterly Newsletter

Our first quarterly issue of 2020 discusses trends and observations occurring in the public entity insurance arena (an overlooked area), low-code environment and we revisit the SME lending space which is showing signs of promise that is sticking.

The insurance space is rapidly innovating but an area overlooked by investors is the public entity space. The current addressable market has more than 90,000 public entities, with 80% in one or more out of a total of approximately 450 risk pools. The space is starting to evolve with big data being a trend as pool executives realize the need of data mining and analytics.

Low-Code, despite being a relatively new concept, has established its importance in creating enterprise solutions that improve efficiency and productivity by a large margin. Front-runners in the space (e.g. SalesforceMicrosoftTemenos) actively evolve their technology infrastructure by acquiring smaller, visionary companies (e.g. AppSheetKony)

Until recently, SME lending was largely ignored by big banks post-financial crisis. The $5 trillion gap between SME’s financing needs and the available financing creates opportunities for FinTechs to emerge and disrupt the market. Following the success of digital lenders (e.g. KabbageIOU FinancialBlueVineOnDeck), SME lending is finally regaining attention and interest from the bigger players. Deal activities are picking up with growing deal size.

Download: Q1 2020-Newsletter

Evolve Capital Partners // Q4:2019 Quarterly Newsletter

We share our perspectives and observations on B2B Payments (with a focus on payment automation), Healthcare Technology in Latin America and the evolution of Mortgage Technology.

We expect to see strong growth of B2B payments technology in the middle market to fill in a gap between companies’ priorities to embrace automation and the current situation that the $22 trillion B2B market in the U.S. which still largely relies on analog processes. Bill.com and MineralTree are two of the market leaders.

Healthcare Technology in Latin America is becoming more relevant with the rise of healthcare expenditures from a quickly aging and obese population. Larger hospitals are mostly served by international and North American healthcare solution provider such as Cerner and Allscripts. Smaller hospitals and clinics have been largely under-served until the emergence of local service providers (Huli, TNH Health, etc.) and smaller North American companies (ecaresoft, Kareo, etc.)

The Mortgage Technology market has been steadily growing since the housing crisis with the emergence of players with disruptive technologies. We think that the next stage in the revolution of technology will surround compliance. Asurity, DocStar and ComplianceTech are some of the forerunners.

Download: Q4 2019-Newsletter

Evolve Capital Partners // Q3:2019 Quarterly Newsletter

We dive into the evolving and growing crowdfunding sector, which has over 600 platforms globally. The traditional players (e.g. LendingClub) dominated in the early years but there is strong growth of platforms catering to alternative investments across multiple asset categories (e.g. GroundFloor, Roofstock or YieldStreet).  We sense consolidation around the corner.

Dental billing shines in a fragmented medical billing space. Dental practices, while exhibiting a level of stability and growing at rates well beyond GDP growth, have diverse needs that are unmet. The recent HIG investment into Medisund is a possible bellwether of activity to come.

Finally, the InsurTech space is nicely maturing, as are its transactions. The sector is no longer to be marginalized, as a slew of transactions (M&A and strategic investments) continue at a strong pace and probably won’t abate.  Hippo, a leading home insurance firm, raised a large slug from Bond.

In this issue, we pause our CEO interviews, but if you would like to be profiled in a future issue, please reach out to us, as our distribution list exceeds 5,000 strategic firms and investors.

Download: Q3 2019-Newsletter

Evolve Capital Partners // Q3:2018 Quarterly Newsletter

We discuss the evolution of FinTech since the late 2000’s through today (we are in the Fourth Stage where AI is gaining acceptance), rising adoption of technology in financial services and return of intermediaries in insurance

Interviews with executives from these disruptive insurance technology companies:  Trov, Slice and Socotra

Financial services and technology have gone through four stages since the late 2000’s.  We are now into the stage where AI and machine learning are being rolled out across organizations to drive operational efficiencies

Insurance “intermediaries,” which can invoke up a love-hate relationship, continue to be integral in the insurance markets and are deploying technology to create “rich” digital experiences.  Two of our favorites are Bold Penguin and Swyfft (both are profiled)

Download: Q3 2018-Newsletter

Evolve Capital Partners // Q2:2018 Quarterly Newsletter

Focus on Open Banking, Wealth Management Tech 3.0 (building on our Q3:2017 Newsletter) and Data & Analytics

Interviews with executives from these emerging companies PeerIQ and Pefin, and a detailed case study of N26, a mobile bank

Open Banking: APIs Ushering in a Sea of Change in Banking

Wealth Management 3.0: An Increasing Use of RPA in Customer Functions and the Rise of Hybrid Advisors

Exchanges diversifying revenue streams with analytics

Download: Q2 2018-Newsletter

Evolve Capital Partners // Q1:2018 Quarterly Newsletter

We adjusted our Exclusive Quarterly Research & Insight newsletter title from the end of the quarter to the start of the quarter; hence, this issue’s title is “Q1:2018“.

Focus on RegTech + Blockchain, Remittances and Insurance Tech 2.0 (building on our Q3:2017 Newsletter)

Interviews with executives from these emerging companies North Capital, MatchMove Pay, and Insuritas

RegTech + Blockchain:  Blockchain is integral to RegTech as regulatory requirements increase

Remittances: Mobile wallets cashing in on explosion in global remittances

Insurance Tech 2.0:  Reinsurers sidestepping legacy carriers by partnering with TPAs and MGAs

Download: Q1 2018-Newsletter

Evolve Capital Partners // Q3:2017 Quarterly Newsletter

Focus on FinTech and increased activity in the ISVs, VARs, and Integrated Payments; Wealth Management Tech 2.0 and Risk Analytics spaces

Interviews with executives from emerging companies Trizic, Rapid Ratings, and SwervePay

Wealth Techs shifting from customer acquisition initiatives to strategic partnerships for growth

Risk Analytics businesses redefining how companies assess and mitigate risk, including newest forms of cyber risk.

Download: Q3 2017-Newsletter

Evolve Capital Partners // Q2:2017 Quarterly Newsletter

A look at InsurTech, WealthTech, and HealthTech, with in-depth valuation analyses, public valuation comparables and interviews with management of emerging companies StratiFi, TheGuarantors, and Vestwell.

Analytics and digitization revolutionizing InsuranceTech

Skyrocketing demand for wealth services from GenX to drive Wealth Tech adoption

Customer experience optimization driving healthcare investments

Download: Q2 2017-Newsletter

Evolve Capital Partners // Q1:2017 Quarterly Newsletter

Increasing use of payment analytics to gauge consumer behavior

Focus shifting from Bitcoin cryptocurrency to Blockchain technology

Consolidation in sight for small and medium-sized Enterprise Lending Platforms

Interviews with Management of iovation, Cortera and Powerlytics

iovation is a leading provider of online fraud and abuse management services

Cortera is a provider of online based commercial credit ratings

Powerlytics is a market intelligence platform providing accurate and granular financial data

Public valuation comparables for Payment Analytics, Blockchain, and SME Lending platforms

Download: Q1 2017-Newsletter

Evolve Capital Partners // March:2017 Special Issue on BPOs

Special issue following our LeaseDimensions/Genpact M&A transaction

In-depth analysis of BPOs and Third Party BPOs

Race towards automation, analytics and service-based models

Loan servicing, healthcare and life sciences emerging as key growth segments

Download: March 2017 Special BPO-Newsletter

Download: Genpact – LeaseDimensions M&A Deal Announcement

Evolve Capital Partners // Q4:2016 Quarterly Newsletter

Third Party BPO’s experiencing vendor consolidation amid expansion of offerings

The rise of the internet of things (IoT) and how data analytics can provide real-time optimization opportunities

Online and alternative lending platforms brace for consolidation

Download: Q4 2016-Newsletter

Evolve Capital Partners // Q3:2016 Quarterly Newsletter

Focus on capital markets, financing platforms, operations & maintenance and IoT companies in the sustainability space

With green energy’s popularity increasing, alternative financing platforms experience explosive growth

The sharp rise in the number of companies that produce IoT SaaS applications continues

Download: Q3 2016-Newsletter

Evolve Capital Partners // Q2:2016 Quarterly Newsletter

A look at energy storage solutions, market drivers, financing activity and successful business models in this space

Discussion and analysis of Chinese M&A opportunities in sustainability and technology companies given falling foreign exchange reserves

Download: Q2 2016-Newsletter

Evolve Capital Partners // Q1:2016 Quarterly Newsletter

Factors behind the decline of Yieldcos

Impact of tax credit extension on solar financing activities

Opportunities and challenges in China’s sustainability space

Download: Q1 2016-Newsletter

Evolve Capital Partners // Q4:2015 Quarterly Newsletter

Factors behind the increasing deal activity in the sustainability sector

Overinvestment in the LED sector results in recent market correction

Download: Q4 2015-Newsletter