After a slide that began seven years ago, 2012 has been a better year for shareholders of Automated Benefits (TSXV:AUT).
In January, the company announced it would acquire the claims division of Marshall & Swift/Boeckh, for $18.1-million. MSB, which was owned by Kansas City based market research firm Decision Insight, added three execs to the board of Automated Benefits and became the largest single shareholder in the company.
The acquisition added annualized revenue of approximately $8-milion to Automated Benefit’s topline. The Toronto-based company is divided into two operating divisions, Automated Benefits Inc., which develops software to improve health and dental claims, and Symbility Solutions, which focuses on property claims. Symbility speeds up property claims and makes the process more transparent by giving every claim participant real-time access and collaborative tools.
Cormark analyst Richard Tse says there are a number of reasons investors should now be looking at Automated Benefits. He says the insurance industry is beginning to embrace technology, and the company has a deep technology platform as a Software as a Service (SaaS) technology vendor. He believes that after years of building up its offerings, AUT’s Symbility division (the company will soon change its name to Symbility) is positioned well to gain market share, especially considering the reach and influence of a recently added strategic investor in the company, TPG. This morning, Tse initiated coverage of Automated Benefits with a SPECULATIVE BUY rating and $.70 cent target.
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Tse says Automated Benefits is poised to benefit from larger trends in the insurance industry. He points to a 2012 U.S. Property Claims Satisfaction Study conducted by J.D. Powers and Associates which showed that a major driver of customer retention for insurers is the speed with which claims are processed. Since three-quarters of an insurance company’s operating costs come from the claims department, he says, this is an obvious place for efficiencies to be introduced, especially considering the industry is subject to many costs it cannot control, such as interest rates and catastrophic disasters.
Compared to other industries, offers Tse, the insurance industry is particularly ripe for IT adoption. The Cormark analyst says the space is suffering from an aging workforce, out of date legacy equipment, and and error rate that costs the industry billions each year. In this light, Automated Benefits’ recent win with Farmers Insurance, the third largest property and casualty company in the US, is particularly important, and could serve as a strong reference in landing other business.
Shares of Automated Benefits closed today even at $.405 cents.