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Guidewire CEO: Cyence will bring leadership in modeling cybersecurity risk

Guidewire Software Inc. expects Cyence to bring it to the cutting edge of data collection that insurance companies need to price complex risks like cybersecurity, according to Guidewire President and CEO Marcus Ryu.

The company believes insurers will be writing much greater premium in emerging product areas, and Guidewire expects the acquisition to help companies augment their conventional approaches to developing insurance products, Ryu said.

Cybersecurity is one of the fastest-growing "next generational" risks that require Cyence's method of data gathering, the CEO said during a conference call to discuss the deal.

The combined company will be able to apply the data platform to all lines of business, Ryu said.

"Most in the industry would agree that there is a need to augment conventional data collection and actuarial approaches with much more big data science and data listening approaches," he said. The immediate focus will be to shore up Cyence's edge in cybersecurity risk modeling, Ryu said.

New data collection techniques that insuretech companies sell to the the property and casualty sector help fulfill insurers' growing demand to have less intrusive interactions with their customers while still learning more about them, Ryu said.

Cyence has built an engine to collect data at internet scale, said its co-founder and CEO, Arvind Parthasarathi. The company gathers reams of information and parses out the valuable data points it uses to help insurance companies price insurance policies and manage their exposure risk, Parthasarathi said.

The company has commercial arrangements with more than 30 customers, including carriers, brokers, reinsurers, rating agencies and regulators, executives said during the call.

Guidewire expects Cyence to contribute $9 million to $11 million in revenue in fiscal year 2018 after purchase price adjustments. Guidewire anticipates 3 percentage points of dilution to its non-GAAP operating margin in fiscal year 2018. The deal is expected to be accretive to quarterly non-GAAP operating income in fiscal year 2020, following investments planned for the Cyence division, CFO Richard Hart said.