One of the most exciting things in insurance today, but also something I suspect has some in the industry fairly terrified, is how rapidly Insurtech is growing. And becoming not just a maybe but a must for current carriers, current distributors, current enablers as money has flowed in. And the possibilities, the dreams that Insurtech represents have become closer to reality. Now, getting a handle on the size of the market is a bit of a challenge. However, what seems to be clear is that it's large and growing. For example, one recent estimate of the size of the industry, this is in 2018, is that revenue was already about half a billion dollars. And that is a significant number if we consider the growth of the industry, which we'll show you in just a second, from just a couple of years ago. Some have suggested that the cumulative growth rates over the next five years will see it reach about $1.2 billion in revenues by 2023. Across the world, the AsiaPacific, or APAC, regions will likely have the greatest growth rate, in part because of the growth in financial hubs like Singapore and Hong Kong, Mumbai, and elsewhere. And in fact, the sub-segment of health insurance is expected to have the highest growth rate, again by some. Others have suggested that the industry is growing by the metrics of investments. 2017 total Insurtech investments surmounted $3 billion, with about 200 deals having been done during the year. Over 80% of those involved insurer or reinsurer making the investment. So industry natives investing in technological advancements in the industry at some point along the value chain. The estimates for that level of investment was forecasted to be a 45% growth rate. In terms of the market for corporate control, as well as venture capital and private equity investments, you can see dramatic growth. From 2013, and just about 90 deals having been done, to 2017 and just under 260 deals being done. Recent private investment seems to have peaked in 2016, but still remains substantial at just under $6 billion in 2018. When we drill down both by segment and by geography into some of these numbers, we see that really is a global phenomenon, and also is not just health insurance phenomenon. Now, although we saw a slight decline in global private investment, M&A, and investment activity from venture capitals and private equity firms in the last year. If you look at a little bit longer horizon, comparing 2015 to 2017, the number of starups has absolutely skyrocketed. According to SMA, we count something like 50 in 2015. Or as we now count, almost 1,200 at some point launching in 2017. AXA, the global insurance company, identifies at least six different areas of disruption for the insurance industry in its Insurtech entrance. Mobile platforms, home office connectivity, P2P, and sharing economies, connected health blockchain, connected cars and so on IoT, all disrupting the insurance industry. Mobile platforms allowing products to be distributed, bought, and sold. Home offices and homes in general connecting back to the kind of information aggregation that, for example, property and casualty insurance might like, for example, monitoring the status of a home. Take connected health, being able to isolate people's bodily functions or state of their being. Or take connected cars being able to reroute traffic and understand traffic patterns, where the ability to drive more safely might arise. And of course, blockchain with data privacy and data integrity at the heart of the insurance industry. An adjunct to these trends in Insurtech is the movement of business processes, data aggregation sharing, and so on, to the cloud. From a recent survey from Ovum, the increase in software as a service, SaaS, really most of it in the cloud, grew from about 13% in 2016 to 26%, doubling in 2018. What they identify at around the same order of magnitude is claims, systems, processing data, fraud detection systems, and customer relation management and marketing systems all moving to the cloud. Embracing, perhaps some would say by necessity, this new modus of cloud-based software as a service. And of course with the advent of ongoing data sharing, aggregation, collection, and dissemination, its integrity is on everyone's mind. Blockchain has as good an application in insurance as anywhere else. So we can see examples. AIA Hong Kong recently launched an application to share very private life insurance policy data with its distribution chain using blockchain secrecy technology. The insurance company AXA in Europe offers specific insurance, flight delay insurance, organized on a blockchain platform with smart contracts. Ovum's annual survey again highlighting the growth in the space. Carriers and consortiums, collections of carriers, are almost surely going to increase the use of blockchain along the entire value spectrum in insurance because of concerns around data technology. And what it provides for the ability to, in real time, aggregate, dissemination, and change contracts to be specific and customized. For example, in the fourth quarter of 2018, over 63 Insurtech deals were announced in the United States at about 1.6 billion in value. Compared to one year before that, that was a 24% increase in deal count and an increase in funding volume by just under 160%. Those 63 transactions surmounted those in the third quarter but were lower than in Q1 and Q2. Around the globe, in the UK we saw some variation, down 9% from the previous quarter with China being the second largest investor after US based flows. Since 2012, UK has been responsible for under 10% of total investments. That have been said, investment from international markets still remains strong. X, US transactions represent just under 50% about 43% of total transactions since 2012 and just under 60% since the fourth quarter of 2018. Very early stage investing remain strong, which makes these numbers even more imppressive. Very early or seed stage investments as well as first post seed round, known as series A, account for just under 65% of total transactions since 2012. In addition Insurtech funding is maturing. Mid and later stages were about 45% of financing in 2018 via series A, B, or C stages. We'll see what happens next, but it's reasonable to expect consolidation as time moves on. Across segments P&C, otherwise known as property and casualty insurance, increased its funding volume by just under 60% in 2018, Q3 and Q4 up by 90%. That marked 41 property casualty transactions. Just a little higher than the 40 transactions in Q3, but a 52% increase over the prior year. Life and health, as we mentioned earlier, one of the largest areas of Insurtech focus. That was a 362% increase from the fourth quarter of 2017. Deal count increased overall by 10% from Q3 and funding volume increased by 26%. Again in life and health. To get a bit of a more of a refined view of the time series pattern, take a look at CB Insights historical record. For funding volume across all stages here going back to 2012, when really this is a life and health arena, with the exception perhaps of the second quarter of 2012. As time moves on, you can see property and casualty came to the game. And we see dramatic growth across the entire industry. You don't need a regression model but perhaps could use the ocular technique to see perhaps a structural break around 2015. And then ever increasing funding volume reaching that $1.6 billion mark in the fourth quarter of 2018. The geographic detail points out a couple things. First, the United States, over the previous five years, represents the greatest preponderance of transactions by way of target country. That seemed to be true in the fourth quarter of 2018, as well as over the last five years. The UK, China, and Germany, followed by India and France, represent the remaining top players, again by target country. And the ordering remains fairly constant in the last quarter of 2018. With respect to stage of the investment, what we saw on the last five years, namely that seed and angel rounds were larger by comparison to Series A, also remained true in the fourth quarter of 2018, with Series B and Series C being dramatically smaller. When we look at the pattern of Insurtech transaction by investment stage over the last five years, we see that the seed an angel stage financing was by far the largest component, followed by series A, B, and C. That pattern remain true in the most recent data from fourth quarter of 2018. Again, the later stage financing, Series D, E, and so on, and later stages, have not yet ramped up in the industry. Which makes sense, given the pattern across time that we saw in the previous graph. It also, again, raises the possibility of consolidation as companies and efforts move through the various stages of maturity in this part of the industry. An important question that you might be wondering about is what the incumbents are doing. That's an interesting question to ask in all industries. If we're thinking about startups or disruptors affecting an industry, we look at the data we just did. If were thinking about what the insurance industry itself has been doing, we can look at private technology investment by those firms. If we look at the pattern across time of incumbent investment, we see that it was essentially nascent if we go back to 2012. We only saw one, essentially one deal in the fourth quarter. However, by 2014 we saw just under 30. By 2015 we saw 66, and then by 2017 and 2018 we saw almost a 120 deals. Another way to interpret this is that outside disruption was putting pressure, and has been putting pressure, on insurance incumbents. And insurance incumbents, by acquisition or by direct investment, have now joined the party. Again, the question wasn't if, but when the current incumbents invested or purchased into the FinTech space. And I think you're going to be seeing that continue to increase as time moves forward.
