Khairani Afifi Noordin Thu, Jun 02, 2022
Singapore-listed software company Silverlake Axis recently announced Fermion Group, an insurtech entity which identifies and creates ways for businesses to integrate insurance ecosystems into customer journeys. But its managing director Andrew Tan tells The Edge Singapore that Fermion was formed at least eight years ago, when it acquired Merimen, a cloud computing software-as-a-service platform for insurance companies.
“The conscious decision to buy Merimen was our first entry point. Back then, we knew that we had to diversify from banking and insurance was a natural extension,” says Tan.
He describes the transaction as a “small acquisition”. At the time, Merimen was only operating in the niche space of processing motor claims for insurance companies in Malaysia, Singapore, Indonesia and the Philippines. Gradually expanding the business, Silverlake eventually acknowledged that insurance is a good business to be in, leading to a business expansion.
“If you normalise it and measure it in pre-Covid conditions, Merimen has consistently grown about 15% to 20% annually and it still continues to grow. As the insurance industry pivots into digital transformation, we thought that we are in a perfect storm to do a lot more, so we started pouring investments into Merimen, expanding into selling policies for our insurance customers within various sectors,” says Tan.
He adds that today, all of the non-life insurance companies that provide motor insurance in Malaysia and Singapore are Silverlake’s clients, while the number is close to 50% in Indonesia. Although the business was affected by the pandemic due to the lack of cars on the road, it is returning to pre-Covid levels, says Tan.
In 2013 — the same year that Silverlake acquired Merimen — it also acquired technology solutions for the financial services industry Cyber Village, which was itself one-time listed on the Singapore Exchange. While Cyber Village’s strength was primarily in banking, Silverlake has replicated Cyber Village’s capabilities into the insurance sector to complement Merimen’s offerings.
With the formalisation of the insurtech unit Fermion, Tan is optimistic on Silverlake’s insurance business prospects and planning to grow it further. The company is able to do this by leveraging on its first-mover advantage of almost a decade of experience in insurtech, which makes it insurance companies’ first port of call.
“To be honest, if we did not acquire Merimen back then, we probably would not have been in insurance due to stiff competition. There are insurance policy management solution providers such as Guidewire and Cover Genius, insurance distribution players such as Grab and AirAsia (Capital A), and core insurance application providers such as DynaFront Holdings … the list goes on. There are a lot of players in different parts of the value chain, and we are leveraging on our experience and capabilities to stand out,” says Tan.
In 9MFY2022 ended March 31, Silverlake’s insurance ecosystem transaction services revenue increased 6% from RM26.6 million ($8.3 million) to RM28.2 million. The company said its revenue from vehicle claims processing activities has seen a significant recovery since Q2FY2022 with the phasing out of lockdowns in countries it operates in. As a whole, Silverlake has been enjoying a growth momentum. For 9MFY2022, the company reported profit before tax of RM134.8 million, up 27% from the same period last year. Revenue was up 18% to RM530.4 million, contributed by strong growth in new project licences and professional services.
In its results filing, the company said its momentum in deal closures remain strong albeit at a slower pace in Q3FY2022 compared to Q2FY2022. Nevertheless, it remains confident in its short-term prospects and expect the momentum built year to date to Q3FY2022 ended March 31 to continue into its full-year results and be reflected in its underlying financial performance. Shares in Silverlake Axis closed flat on June 1 at 31.5 cents.
Further acquisition and outlook
Part of Silverlake Axis’ growth came inorganically. Last year, Silverlake acquired a “small stake” in Malaysia-listed DynaFront, holding 4.86% interest in the company as at Sept 3, 2021. Tan says the acquisition’s aim is to further complement Silverlake’s insurance offerings as well as synergise with DynaFront — especially considering the latter has a very strong footprint in Indonesia.
Silverlake is also in the final stages of closing a “significant investment” in a Singapore-based insurtech company which distributes insurance policies to the airline industry. The company will continue to look for similar investment opportunities to achieve both organic and inorganic growth, says Tan.
Earlier this year, Malaysia’s central bank released a discussion paper on Licensing Framework for Digital Insurers and Takaful Operators to encourage digital innovation in the insurance and takaful sector. Takaful refers to shariah-compliant insurance system, which has a large take-up in Malaysia due to the Muslim-majority population. Since then, several parties pursuing the licence had approached Silverlake to talk about the possibility of a partnership or collaboration, says Tan.
“We are not saying no, we will be looking at either cash or technology injection. We will be quite aggressive in this space,” he adds.
Moving forward, Tan says he sees more immense opportunities in insurtech compared to banking solutions within Southeast Asia. Given the digitally savvy, rising middle class population, insurance companies stand to capture larger market share with increasing technology investments.
“The insurance companies are well aware of these opportunities and are putting a lot of focus on the tech side. We want to be in that ecosystem and we have been for many years. So I think it is going to be exciting,” says Tan.