Xerox announced in a news release in May that it would be acquiring ISG Holdings, a parent company of healthcare technology firm ISG Services, for $225 million as part of an initiative to establish a heightened presence in the workers' comp market.
The deal was closed May 30.
A 'win-win' for Xerox, ISG
Business analysts posit that this arrangement is a win-win scenario for both parties, notes Zacks Equity Research. Xerox will be enhancing its comprehensive payment and compensation scheme marketed towards its clients in the casualty and property insurance industry, while ISG will improve its SaaS (Software as a Service) cloud delivery platform.
The company confirmed in its news release that its acquisition of ISG will help support Xerox's commitment to the top 20 U.S. casualty, commercial health and property insurance firms as well as to other third-party administrators, managed care services providers and government employers.
Bob Zapfel, president of Xerox Services, stated that the company views the workers' comp market as a "growing" factor of the healthcare and insurance industries.
"The workers' compensation industry generates $60 billion in medical payments each year - that equates to approximately 75 million bills in need of financial validation," said Zapfel in a statement last month. "This acquisition demonstrates our commitment to the property and casualty sector and makes us an industry leader in workers' compensation bill review software and care management services."
Xerox making gains in insurance sector
For instance, Xerox CEO Ursula Burns has previously cited the company's additional spending on its government healthcare enterprises as part of the reason why its first-quarter revenue was flat. Its Q1 2014 results showed a two percent dip in revenues to $5.1 billion, while operating profit grew 13 percent to $442 million.
"Our first-quarter performance reflects the value of our diversified business. Good profitability in Document Technology along with strength in document outsourcing and in commercial outsourcing services contributed positively to our results," said Burns in a statement released in April.
"But these gains were offset by higher-than-anticipated investments in our government healthcare business as we implement new Medicaid and health insurance exchange platforms. We're focused on driving Services growth and margin improvement by executing on our Five-Plank Strategy and expect the benefits to build through 2014."
Xerox garnered $286 million in cash flow from its operations throughout the first quarter and the company repurchased $275 million in Xerox stock. Since the deal was closed, Xerox (XRX) has traded steadily at 12.35.
Andrew Moran is a full-time professional writer and journalist, who covers business, economics and personal finance in Canada and the United States.
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