Oracle-owned i-flex solutions, a software company providing financial services to banks, will buy out the remaining 49 per cent stake from Castek Software, a Toronto-based provider of insurance systems for the global property and casualty insurance industry.
In a statement to the Bombay Stock Exchange, the i-flex board approved i-flex America Inc, the wholly-owned subsidiary of i-flex solutions, to buy the remaining 49 per cent stake in Castek.
The transaction is expected to be completed by March 2008. The board has also decided to invest an additional $12 million in i-flex America.
In May 2005, i-flex America entered into an equity financing arrangement with Castek that allowed i-flex to be the largest shareholder in the latter. In August that year, i-flex America and Castek agreed to modify the agreement they had entered into at the time of the alliance, following which i-flex America received a minimum 51 per cent ownership stake in Castek. Further, R Ravishankar, then CEO of international operations at i-flex, joined the board of Castek at the time of the announcement.
The property and casualty industry is currently dominated by legacy (older) systems, which are expensive to maintain compared to current systems, that are used on a wider scale, according to IT analysts.
Celent, a Boston-based research firm, forecasts that North American insurance carriers will spend more than $1.4 billion on policy administration systems till 2008 and over 50 per cent of this spend could be attributed to the property and casualty segment.
"Our investment in Castek creates a winning combination of i-flex's project and quality management skills built over a decade coupled with Castek's advanced product intellectual property and domain expertise," Ravishankar had said in 2005.
Avinash Vasishta of Tholons, an offshore advisory company, said: "Insurance companies seeking to upgrade their existing systems are concerned about risks associated with execution of such projects and seek partners who can mitigate these risks."
Software major Oracle owns about 85 per cent in i-flex, which employs 9,500 people.