FT Partners The Only Investment Bank
Focused Exclusively on FinTech
  • San Francisco
  • New York
  • Miami
  • London

News

Wall Street Journal

Prudential to Pay $2.35 Billion for Online Startup Assurance IQ
Largest insurer by assets expects three-year-old company to help it draw middle-class customers

Sept. 5, 2019 – by Leslie Scism

Prudential Financial Inc. has agreed to pay $2.35 billion for an online startup as traditional life insurers seek to reach digital-savvy customers who shop on the internet.

Executives of Prudential said Assurance IQ Inc., a three-year-old company based in Bellevue, Wash., can help it solve a decades-old problem bedeviling many of the biggest names in life insurance: selling to middle-class clients. The 144-year-old Prudential, the nation’s largest life-insurance company by assets, said it would provide up to $1.15 billion in additional cash and equity if Assurance meets certain growth objectives.

The deal is part of a trend in which traditional life insurers are pairing with what are known as insuretech firms to reach new audiences and benefit from data analysis driven by algorithms.

In addition, big venture-capital checks are being written to small companies in nearly every category of the broader insurance industry. SoftBank Group Corp. led a $300 million investment round in April for Lemonade Insurance Co., which sells renters’ and homeowners’ policies online. Clover Health, a San Francisco startup that sells Medicare Advantage health-insurance plans, raised $500 million in January.

Assurance sells life, health, Medigap and auto policies online, and it has agents available by phone to help consumers with buying decisions if they want a human to answer questions. The privately held firm currently offers products from more than 20 providers, not including Prudential. The Newark, N.J., insurance giant plans to make money initially from the commissions and other fees that Assurance receives from providers, while adding its own products, including life insurance and annuities, to the mix over time.

“We think Assurance has cracked the code” to reach consumers whose business is typically too small to make it worthwhile for agents to seek, Prudential Chief Executive Charles Lowrey said in an interview.

Assurance uses online advertising and other marketing to attract consumers to its online platforms. The company uses data science and machine learning to assess needs, guide customers to products they can afford and speed up the application process. Those comfortable with buying online can make a purchase that way, or the firm will route customers to an agent if preferred.

Prudential officials said they see Assurance’s approach as helping to ramp up sales to a wider selection of households while Prudential’s network of financial advisers will continue focusing on more-affluent clients.

Sales of individual life-insurance policies have fallen about 45% since the mid-1980s to hold steady in recent years at about 9.6 million policies annually, according to Limra, an industry-funded research firm. The decline came as proliferating mutual funds and 401(k) savings programs made products combining life insurance and savings, a mainstay for commission-paid agents, generally less attractive to middle-class families.

» Full Article

FT Partners served as exclusive strategic and financial advisor to Assurance — view more details on the transaction here.


« Back