Insurance Technologies CEO David Fenimore expects the company to expand its workforce by 10% to 15% a year for the next two years in the wake of a Boston-based private equity firm agreeing to buy the Colorado Springs-based financial software provider.
Fenimore, who has been CEO for six years and has been with the company since 1996, said Insurance Technologies plans to expand into new parts of the financial services industry and extend its global reach after Thomas H. Lee Partners acquires a majority interest in Insurance Technologies next month. THL said in a news release last week that it plans to retain Fenimore, the rest of the company’s management team and all employees after the deal is completed. The company employs 250 people with about two-thirds at its downtown Colorado Springs headquarters, where the company plans to remain.
Larry Wiedeman, who died in 2017, started the company with six employees in his home to administer life insurance and health and dental plans, managing deferred compensation for top executives and creating complex formulas that calculate life insurance benefits. Insurance Technologies moved its offices in 1998 to a former department store building in the Palmer Center and received a $5.4 million investment in 2005 to expand its product line and geographic reach. NexPhase Capital, a New York-based private equity firm, acquired Insurance Technologies in 2014 from Wiedeman and another investor.
Fenimore spoke with The Gazette about how the deal happened, how its operations changed during the COVID-19 pandemic and the company’s growth plans under its new owner.
Question: How did the deal with THL come about?
NexPhase made a decision to divest Insurance Technologies in June 2019. The pandemic and other factors delayed the transaction. They had owned the company since late 2014 and realized quite a bit of value out of their investment. They had acquired about 60% of the company from a previous investor and our founder; the rest of the company is owned by a couple of management employees (including Fenimore). The company has been growing at an 18% annual rate for the past several years, based on the success of our products and services.
Do you plan to expand your workforce?
You will probably see our employment base here on average go up 10 to 15% a year for the next couple of years. That has been the case this year and we expect that to continue in 2021. We have hired 15 people just in the last six weeks. We are very committed to the Colorado Springs market; this is where we were founded and we have no intention to move. We believe this is the perfect location for work-life balance. Our (five-year) value creation plan has us becoming five times bigger. Both of our previous investors realized a return of six times their investment, which is about twice the return most private equity funds seek.
What will drive that growth?
Most likely we will expand further into financial services — wealth management, group and worksite marketing and additional work with property and casualty (auto and homeowners coverage) insurers. We also may expand beyond the domestic market where we are focused right now. Especially with Thomas H. Lee, we will be able to grow the organization and are also looking at acquisition opportunities. We also see significant growth for the company and our product. The (insurance) industry is looking to increase the speed of and lower the cost (of selling policies). Our product allows agents to use one platform to sell policies from any company. We focus on the top 50 domestic insurers, but we handle all five tiers of companies and all types of distribution for not only life insurance, but also disability, Medicare supplements and critical illness coverage.
How did the company cope with restrictions related to the COVID-19 pandemic?
We are (working) fully remote and intend to remain that way for the foreseeable future. We have engaged a contractor to mitigate the risk of returning to work, but we will remain remote probably through the end of 2020. We will not force them (employees) to come back. Some employees have told us they are successful (working) remote and have asked if that can stay on that status. We have said yes. Where this goes, who knows, but we will find out fairly soon. The biggest thing we are concerned about is the risk we would subject our employees to if they return to work and the risk to the company. We have not seen lawsuits yet where employers have been held liable (for bringing employees back to work), but business owners are taking a hard look at it. It is a hard decision for everyone when confronting the risk of bringing people back, but that is where we are at and will remain for a while.
Questions and answers are edited for clarity and brevity.