Big Blue’s Insurance Buy Fits New Policy

Jumping into a new area with both feet, IBM will acquire
Liberty Insurance Services (LIS) to become a significant player in life
insurance and annuity processing and administration, the companies announced
today.

The exact price paid to Liberty’s parent, RBC Insurance of Canada, was not
disclosed. However, a source close to the transaction classified it as a
“multi-million dollar deal.”

IBM and RBC Insurance also signed a long-term agreement for IBM to handle
back-end tasks for RBC’s U.S. operations, including contact center
management, policy administration, claims management and payment receipt and
reconciliation.

Most of the 700 LIS employees are expected to become part of a new IBM
subsidiary, which will handle administrative and IT jobs for more than a
dozen insurers.

Details about the unit’s location and organizational structure will be
hammered out during the next 90 days, Stacy Simpson, an IBM spokeswoman,
told internetnews.com.

IBM said the industry is seeking to cut costs and improve efficiency by
outsourcing and that life insurance processing is expected to be a $2
billion market by 2005.

“This is another example of the higher-value work that clients are
increasingly turning to IBM to do,” Simpson said. “It’s a whole new area of
spending. [The spending] used to be on the inside, but now companies are
turning to outside vendors.”

Today’s purchase is part of IBM’s larger Business Performance Transformation
Services (BPTS) strategy, being executed
through its consulting group. The philosophy combines deep technical and
industry-specific abilities.

During the company’s spring meeting with Wall Street analysts, IBM Chairman
Sam Palmisano said the BPTS market opportunity is about $500 billion over
and above the traditional $1.2 trillion that businesses around the globe
spend on IT products and services each year.

Big Blue’s $3.5 billion acquisition of PwC Consulting two years ago laid the
foundation for IBM to offer these types of services.

For RBC, today’s deal helps it shed non-core functions. The deal will not
impact RBC Insurance’s own U.S. operations, which are separate from
Liberty’s, in South Carolina and Missouri.

News Around the Web