Insurance giant Prudential is shutting down Assurance IQ, five years after spending $2.35 billion to acquire the under-the-radar tech startup based in the Seattle region.
“As we look to the future, we believe that directly investing in our core businesses and capabilities will help us become a higher growth, more capital efficient company,” Caroline Feeney, head of Prudential’s U.S. businesses, wrote in an email to employees obtained by GeekWire. “After a careful review of our businesses and strategic initiatives, we have made the difficult decision to wind down our Assurance business.”
Prudential noted in its first quarter earnings report on Tuesday that it “decided to exit” the Assurance business. The company confirmed the shutdown in a statement to GeekWire.
Assurance uses technology to match consumers with insurance plans that are purchased online or through an agent.
Its acquisition to Prudential was one of the largest in Seattle tech history, and the largest insurance tech exit in history, according to Financial Technology Partners.
The startup, founded in 2016 by Michael Rowell and Michael Paulus, never raised any outside capital and quietly reached unicorn status as a $1 billion company.
At the time of the deal, Prudential said Assurance’s “rapid-growth model offers compelling economic advantages with low fixed costs and low capital requirements that produce high margins and high degree of scalability.”
“Assurance accelerates the strategy and growth potential of Prudential’s financial wellness businesses, bringing us closer to more people across the entire socio-economic spectrum to better serve the full picture of their needs,” Prudential CEO Charles Lowrey said in 2019.
But just a few years later there were signs of trouble. A story by The Wall Street Journal in 2022, “How Prudential’s Big Tech Bet Went Sour,” cited missed financial targets and government inquiries over regulatory matters.
Many insurance technology companies struggled amid the broader tech downturn that started in 2022.
Prudential stopped reporting Assurance financial data in January 2023, in part because “its financial results and operations are not considered significant,” the company said at the time.
Assurance reported adjusted operating income of $29 million in the fourth quarter of 2022, compared to a net operating loss of $10 million a year prior.
Prudential took goodwill impairment charges, used when a company’s value decreases following an acquisition, of $177 million, $903 million and $1.06 billion in the fourth quarters of 2023, 2022 and 2021, respectively.
Assurance had around 1,700 employees as of December 2022 and now has 1,000 employees, in addition to contract workers who help customers find insurance plans. Update: A filing with the Washington state Employment Security Department shows 112 workers in Seattle being laid off, starting July 3.
In an email to employees on Tuesday, Assurance CEO Allison Arzeno wrote that “I realize this news comes as a shock and creates uncertainty.” She said a majority of the company’s employees will be laid off.
“Together, we built something special here,” wrote Arzeno, who took over as CEO in 2020. “Our work made a difference. We helped hundreds of thousands of people navigate complex insurance tradeoffs and secure coverage that improved and protected their personal and financial well-being.”
Prudential reported first quarter net income of $1.1 billion, down from $1.46 billion in the year-ago period.
Asked about M&A deals on the company’s earnings call with analysts Wednesday, Lowrey said Prudential “anticipated a different outcome when we purchased Assurance.”
“As we look forward we will focus on acquisitions of more established businesses that present opportunities to expand our capabilities and scale in our existing market-leading businesses,” he said.
The company’s stock is up nearly 30% in the past 12 months. It has a market capitalization above $39 billion.
Read the full memo from Feeney below.
“As we look to the future, we believe that directly investing in our core businesses and capabilities will help us become a higher growth, more capital efficient company. After a careful review of our businesses and strategic initiatives, we have made the difficult decision to wind down our Assurance business.
Assurance was acquired by Prudential in 2019 to expand the company’s direct-to-consumer access to the U.S. mass market. Since then, the team has made meaningful progress in realizing Assurance’s vision to help people improve and protect their personal and financial well-being, while navigating a challenging business environment for the broader insurtech industry.
However, as we sharpen our focus as an enterprise on growth, it is critical that we prioritize core businesses and capabilities where we have a competitive advantage. Business decisions like this are never easy, and we are working with the Assurance leadership team to support our employees, customers, and partners throughout this process.
I want to thank all of our employees and other partners at Assurance for their dedication over the past five years.
And more broadly to our teams across the U.S., thank you for always keeping our customers, clients, and each other top of mind.”