SSP Group, the provider of IT services to the general insurance industry is beginning to show the benefits of several years’ consistent effort. SSP has been able to build a unique position which is expected to result in solid revenue growth (double digit?) and an improvement in margins.
Results for the year to March 2013 showed revenue roughly flat at £70.7m with EBITDA of £18.2m, with margins of 25.8%. The first quarter has already got off to an excellent start as discussed in a meeting yesterday with Laurence Walker, CEO and Carol Thompson, CFO. SSP is owned by the US Private Equity house, Hellman and Friedman.
The key element of value creation is the company’s success in supplying over 160 insurers, including 20 of the largest globally, and over 1,000 insurance broker customers giving SSP the largest share of the UK market. SSP technology is used in the writing of premiums totalling over £5bn p.a.. Over 40% of UK insurance business goes through SSP’s centralised Quote Hub. This access to scale and diversity of channel gives SSP market-leading insight into the sector. This builds a repository of data which can be used to enrich and inform the propositions of insurers and brokers so that they can generate better margins. The scale of the SSP processing and policy management operations, hosted on its private cloud, also provides insurers and brokers with a modern and low-cost supply alternative as they wrestle with expensive and inflexible legacy systems.
SSP can also offer its customers a route to innovation, for example its telematics product for the recording of driver behaviour. Innovation can enable SSP’s customers to avoid price-dominated competition in the face of continued advances from the aggregators and comparison web sites.
The current year should show further advances in SSP’s international operations as well as some growth in a mixed UK market. Recurring revenues now constitute around 80% of revenue so that management have good revenue and earnings visibility. Professional Services will also be a focus this year, with better margins expected due to a rationalised product range and operating model.