Brookfield, Wis. — Fiserv Inc., a Brookfield, Wis.-based provider of IT services to the financial and insurance industries worldwide, has signed a definitive agreement with Trident IV, a private equity fund managed by Greenwich, Conn.-based Stone Point Capital LLC, in which Trident will invest approximately $205 million in equity and $335 million in debt to acquire a 51% majority interest in Fiserv’s insurance businesses. According to Fiserv, the transaction includes Fiserv’s Property & Casualty, Life and Financial, Workers’ Comp Pharmacy and Flood Services divisions. Fiserv Inc. will concentrate on its core banking and payments businesses, retain 49% interest and have board representation in the newly formed Fiserv Insurance Solutions.
Fiserv expects to receive approximately $515 million in net after-tax proceeds. The transaction is anticipated to close in July 2008, subject to regulatory approval and other customary closing conditions. The transaction will impact nearly all of Fiserv’s insurance segment. The current management team and employee base will continue with the company, which will be known as Fiserv Insurance Solutions Inc.

“Stone Point Capital brings a proven track record of insurance industry success that we believe will accelerate the growth opportunities for Fiserv Insurance Solutions and its clients,” says Jeffery Yabuki, president and CEO of Fiserv. “Within Fiserv, we are able to free up capital, maintain an interest in Fiserv Insurance Solutions that should increase in value, and intensify our focus on delivering products and services within the broad financial services and payments landscape.” 

Eddie Jones, SVP, Marketing & Product Management at Fiserv, echoes Yabuki in a conversation with INN earlier today. “Stone Point Capital is a smart, strong private equity company with a huge portfolio of investments,” he says. “And, virtually all of which are in the insurance space.”

Stone Point Capital and its predecessor operations have a 20-year history of successful investing in the global insurance and financial services industries. The company primarily targets investments in the insurance and financial services industries, including insurance underwriting, distribution and services, benefits and healthcare, asset management and retirement savings, and banking and depository institutions.

“Fiserv Insurance Solutions is a leading player in the insurance technology and outsourcing space,” says Chuck Davis, CEO of Stone Point Capital. “We believe there are a number of exciting growth opportunities for the business, and we look forward to working with the Fiserv Insurance Solutions management team to pursue these growth initiatives as an independent company focused on serving the insurance marketplace. We also are pleased that Fiserv will be continuing its involvement, through a significant minority ownership position, which we believe will further enhance the company’s prospects for success.”

Fiserv plans to operate as usual. “We have a significant amount of product development underway,” Jones tells INN. “Right now we’re in business-as-usual mode—we’ve got many great products, services, customers and employees, and are focusing on the operation at hand. But, over the next three to six months there will be an evolution of thought as we assess the opportunities of operating independently. This relationship with Stone Point—and Fiserv’s strong minority equity position—is about growth.”

Fiserv expects to receive approximately $515 million of net transaction proceeds, and predicts a slight 2008 earnings dilution of $0.0 to $0.04 per share, or approximately 1%, depending upon reinvestment of the net proceeds. In connection with the sale, Fiserv also reaffirmed its 2008 adjusted earnings per share guidance of $3.28 to $3.40 from continuing operations. Fiserv believes the transaction to be accretive to its long-term revenue, earnings and margin growth rates.

Upon closing the transaction, Fiserv will no longer consolidate revenue and expenses from Fiserv Insurance Solutions. Due to the sale of its majority interest, the company will report its 49% share of net earnings in Fiserv Insurance Solutions on a single income statement line item, which is anticipated to begin in Fiserv’s third quarter earnings announcement.

In a related action, the Fiserv board of directors authorized the repurchase of up to an additional 10 million shares of Fiserv common stock.

Source: Fiserv Insurance Solutions Inc.

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