BBH Select Mid Cap ETF on Guidewire Software Inc.
Thesis
BBH continues to own Guidewire despite a quarterly share-price decline because it believes recent deal slippage reflects timing rather than weakening demand. The company remains the leading provider of core systems software to property and casualty insurers, with a healthy pipeline and a large remaining modernization opportunity because only a minority of industry premiums run on Guidewire systems. BBH argues that AI is more likely to accelerate cloud migration than disrupt Guidewire because modern core systems are a prerequisite for insurers to deploy AI effectively. With more than 80% win rates in competitive requests for proposals and pricing tied to insurance premiums rather than employee seats, BBH sees a decade-long growth runway.
“We believe this migration will drive Guidewire’s growth for the next decade”
Key risks
- Annual recurring revenue growth recently fell short of the high end of guidance because deals slipped past quarter-end.
- The market perceives AI as a potential disruption risk.
- Execution on cloud migrations and customer conversion remains important to the long-term thesis.