Major growth in the ‘complex’ health benefits automation market offers shareholder value
“SEB offers a state of the art solution to this complex environment that lagged in automation.” — Dr. Luc Duchesne
Smart Employee Benefits Inc. (TSXV: SEB) is showing significant market inroad for its Health Benefits Management Software for health claims adjudication.
Claims adjudication is the process for determination of the insurer’s payment or financial responsibility after the member’s insurance benefits are applied to a medical claim.
A million years ago, health claims were processed manually through a process that was both painful and tedious: the claimant would fill out a paper form, attach receipts, mail the documents and then wait for the insurer to send a cheque back or most often, ask for more information or another signature. It was equally painful on the insurer side: someone had to open envelopes, record the filing, review the file for completeness, ask for more information, cut a cheque and then mail it.
It was complex, tedious, boring and offered countess avenues for human mistake.
SEB offers a state of the art solution to this complex environment that lagged in automation.
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SEB’s core expertise is the provision of software, solutions and services for the automation of employee benefits management. SEB utilizes proprietary software and business savvy to service the needs of large organizations.
SEB’s technology permits insurers to eliminate outsourcing and regain better control over their adjudication process.
SEB provides its clients with a technology platform which can manage more efficiently and cost effectively while providing significantly enhanced services and solutions as compared to the competition by giving administrators the ability to switch from outsourced third parties to in-house adjudication.
SEB is experiencing major growth in a huge, international market. Consolidated 2017 forecasts are $135M revenue and $12M EBITDA, up from 2016 (2016 estimates: $100M rev and $3.2 EBITDA). SEB has $300M backlog with blue chip corporate and government customers (Manulife, Rogers, IBM, RBC, Government of Canada, City of Toronto, Liquor Control Board of Ontario (LCBO) etc.) for its services, which is expected to provide sustainable growth for the next quarters.
Its client update is growing steadily from the adoption of its software by blue chip corporate and government clients.
The company is structured in two divisions. Its Technology Division (TD) has steady growth with blue chip corporate and government clients and represents the majority of revenues to this point.
A second division, the Benefits Division offers high margins and future growth and it is just starting to come on stream with a number of partnerships in the works. One such potential partner, according to company information, is a top tier global reinsurer that currently owns a large equity stake in SEB and is utilizing SEB’s processing software as they roll out 5 new products in Canada in 2017.
This reinsurer has a $50M budget for each product and SEB expects to gross 15% or $7.5M per product (~ $37M rev to SEB) at 40% to 50% net margin ($15M profit). The relationship and opportunity with this reinsurance partner is expected to be a significant driver of SEB’s BD growth going forward as the reinsurer intends to use SEB’s software not only in Canada but in several other countries where they have operations. The BD also has a number of other initiatives that will enhance performance in 2017 outside of this key strategic relationship.
In addition, SEB is waiting for the outcome of dozens of proposal to RFPs for their services to Federal, Provincial and other agencies, worth millions to the Company even if they only win a small portion. These RFPs are not included in any corporate projections since the timing of contracts being awarded is uncertain. However, as SEB inevitably becomes the successful bidder on some of these tenders, the contracts will provide big upside to the bottom line.
With so much business in the works there is significant potential for SEB in the next few quarters.
Dr. Luc C. Duchesne is a Speaker and Author with a PhD in Biochemistry. With three decades of scientific and business experience, he has published ... <Read more about Dr. Luc Duchesne>