Acquisition

4 July 2014

Xchanging strengthens Xuber insurance software business

 with significant acquisition of Agencyport Europe

· Acquisition of all the European operations ("Agencyport Europe") from US-headquartered insurance software company Agencyport Software for consideration of £64.1 million in cash.

· Expected to be value enhancing, marginally earnings accretive in the financial year to 31 December 2014 and materially earnings accretive in the financial year to 31 December 2015.

· Agencyport Europe is a provider of software to the property & casualty and health insurance markets. Highly complementary to Xuber's insurance software, a core product for Xchanging, extending its product range, notably with risk exposure modelling, and providing access to the fast growing health insurance sector.

· In line with Xchanging's strategy of making selective technology acquisitions, particularly where they bring intellectual property, and of expanding its insurance business globally.

· Cross-selling opportunities to the enlarged client base and international opportunity for Agencyport Europe's offerings through Xchanging's global sales and marketing resources.

· Management team, with proven innovation and growth track record, joins Xchanging, as well as separate external appointment, Chris Baker as Managing Director, Xuber.

Commenting on the announcement, Ken Lever, CEO of Xchanging, said: "Agencyport Europe is a very exciting and highly complementary addition to our insurance software business, Xuber. This is a significant acquisition that is perfectly aligned with our strategy, and follows the announcement of our acquisition of insurance software business, Total Objects Limited, yesterday. We are delighted that Phil, Andy and their team are joining Xuber.

"The customers in the markets in which we operate increasingly emphasise the importance of technology-enabled solutions to add value to their businesses. Today's acquisition sees a further step for Xchanging towards being the provider of choice in our chosen markets for technology-enabled business processing services."

Phil Race, Managing Director of Agencyport Europe, said: "There is significant value in the two companies coming together, not only for our businesses, but for our combined customer community and our talented people. We will continue to offer the best product suite available and will remain absolutely focussed on delivering on our customer commitments. It is clear that we share similar strong values and an open and engaging approach with clients. We look forward to integrating with Xuber and working together."

Background

The acquisition of Agencyport Europe advances Xchanging's growth plans and is in line with the stated strategy of acquiring further technology that either complements existing technology offerings or enhances the value generating capability of its existing business, particularly through ownership of intellectual property.

Agencyport Europe is headquartered in London and provides software to the property & casualty and health insurance markets, with a particularly strong presence in the UK. The Agencyport Europe product suite provides policy administration, billing and claims software for the health insurance and property & casualty markets, together with risk analysis and exposure modelling software that is complementary to the existing insurance software suite of Xchanging's Xuber business. The company has 160 employees based in offices in London, Leeds and Cwmbran.

For the year ended 31 December 2013, Agencyport Europe had revenue of £18.9 million and adjusted EBITDA of £5.0 million. The gross assets of Agencyport Europe as at 31 December 2013, excluding goodwill, were £15.2 million. The acquisition has been financed from Xchanging's existing cash resources.

Benefits of the Transaction

The acquisition will expand and further strengthen Xchanging's existing Xuber insurance software product range, and enable expansion into the risk exposure modelling and Health insurance markets.

Xchanging intends to enhance Agencyport Europe's existing risk exposure modelling offering by accelerating its evolution from software installed individually for single users into a Xuber platform that can be installed once for use by an entire enterprise.

The acquisition will provide Xchanging with an additional customer base of more than 60 organisations, offering global cross-selling opportunities for Xuber and for Xchanging's other product and service offerings.

Rebranded "Xuber", Agencyport Europe's product portfolio will benefit from Xchanging's global distribution and sales & marketing capability.

Xchanging also expects benefits from cost rationalisation as part of the integration process, and from combining product development capabilities. These development capabilities will, for example, supplement the accelerating development of the Xuber module for the US Admitted Insurance market.

Senior Management

The employees of Agencyport Europe will be joining Xuber within Xchanging's Technology Services business, including Phil Race (Managing Director of Agencyport Europe) and Andy Lovett (Chief Operating Officer of Agencyport Europe). In addition, Chris Baker, until recently Senior Vice President at Oracle, will be joining Xchanging with effect from 1 August 2014, as Managing Director, Xuber.

This transaction follows the previous successful technology acquisitions of AR Enterprise in November 2012, which brought an enhanced technology platform to Xchanging's Italian fund administration business, and MarketMaker4 in September 2013, the eSourcing platform that expanded Xchanging's procurement offerings and provided the core of the technology strategy for the Procurement Services business. More recently, Xchanging announced the acquisition of insurance software business, Total Objects Limited, yesterday.

Xchanging is scheduled to release its half year results on 31 July 2014.

Conference call for analysts and investors today

There will be a conference call for investors and analysts at 08:30 today.

Dial in No: +44 (0) 1452 555566

Conference ID: 67254856

A powerpoint presentation to accompany this call will be available via the homepage of Xchanging's website www.xchanging.com

Enquiries

Xchanging plc Tel: +44 (0) 203 604 6999

David Bauernfeind, Chief Financial Officer

Alexandra Hockenhull, Director of Corporate Communications

and Investor Relations

Maitland Tel: +44 (0) 207 379 5151

Peter Ogden

Martin Barrow

www.xchanging.com

@XchangingGroup

Linkedin/company/xchanging

 Cautionary Statement: 

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Xchanging's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approval or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.