Prudential is closing Assurance IQ, a Seattle-based digital business it acquired for $2.35 billion five years ago.
“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, Prudential’s U.S. business leader, wrote in an email to workers 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 said in its first-quarter results release on Tuesday that it has “decided to exit” the Assurance business. The corporation acknowledged the suspension in a statement to GeekWire.
Assurance employs technology to connect clients with insurance policies that may be purchased online or through an agent.
Financial Technology Partners reports that the acquisition by Prudential was one of the largest in Seattle tech history and the largest insurance tech exit in history.
Founded in 2016 by Michael Rowell and Michael Paulus, the startup achieved unicorn status as a $1 billion company without raising any outside financing.
Prudential praised Assurance’s rapid-growth model for its minimal fixed costs and capital requirements, resulting in excellent profitability and 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,” Charles Lowrey, president and CEO of Prudential, said in
However, just a few years later, there were indications of disaster. In 2022, The Wall Street Journal reported, “How Prudential’s Big Tech Bet Went Sour,” citing missed financial targets and government inquiries into regulatory problems.
Insurance technology companies faltered during the IT slowdown that began in 2022.
Prudential discontinued providing Assurance financial data in January 2023, citing the fact that “its financial results and operations are not considered significant,” the company stated at the time.
In the fourth quarter of 2022, Assurance recorded an adjusted operating income of $29 million, up from a net operating loss of $10 million the previous year.
Prudential recorded goodwill impairment charges of $177 million, $903 million, and $1.06 billion in the fourth quarters of 2023, 2022, and 2021, respectively. These charges are utilized when a company’s value declines following an acquisition.
As of December 2022, Assurance has approximately 1,700 employees. It presently has 1,000 employees, including contract workers who assist consumers in finding insurance coverage.
In an email to workers on Tuesday, Assurance CEO Allison Arzeno said, “I realize this news comes as a shock and creates uncertainty.” She indicated the bulk of the company’s employees would be laid off.
“Together, we built something special here,” commented Arzeno, CEO since 2020. “Our efforts made a difference. We assisted hundreds of thousands of people in navigating complex insurance decisions and obtaining coverage that enhanced and preserved their personal and financial well-being.
Prudential recorded a net income of $1.1 billion in the first quarter, a decrease from $1.46 billion the previous year.
When asked about M&A deals during the company’s earnings call with investors Wednesday, Lowrey stated that 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 went on to say.
The company’s stock has risen over 30% in the last year. It has a market capitalization greater than $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.”