Lemonade, Metromile, EIS: “one of the best insurance deals in 2022” | Business Insurance

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On July 29, the day after the Metromile acquisition closed, Lemonade fired 20% of the Metromile team, with the explanation: “This acquisition is synergistic, in the sense that the combined entity is better than the sum of its parts and can operate with fewer people than were needed to staff the two freelancers.”

And to wrap up a week of big announcements, the insurtech revealed on August 1 that it had sold Metromile’s Enterprise Business Solutions (EBS) platform to digital insurance platform EIS. EBS was Metromile’s SaaS claims automation and fraud detection platform licensed to large insurance companies. Terms of the cash transaction were not disclosed.

Read below: EIS Gains New Data Prowess with Metromile EBS Acquisition

While some in the insurance industry may see Lemonade’s divestiture of the EBS platform as a sign of a looming recession, Novidea’s senior vice president and general manager for North America Eric Ayala sees it more as a ” Lemonade’s cool commercial move” and “the icing on the cake”. in the cake of one of the best deals in 2022.”

“It’s the last chess move of a very well-executed merger and acquisition,” he told Insurance Business. “While the terms of this cash deal with EIS were not disclosed, consider that Lemonade acquired Metromile with stock, which meant zero cash outlay for them.

As part of that deal, Lemonade also received an estimated $150 million in cash, plus a $100 million premium, licenses to sell auto insurance products in 49 states, a brilliant team of Metromile data engineers, arguably that was its greatest asset, and algorithms that will change the landscape of auto insurance. This is the kind of thing that can take a company years and years of work to achieve organic growth.”

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According to Ayala, the sale of Metromile EBS was Lemonade selling assets that did not align with its strategy. The same goes for the Metromile layoffs, which he described as “nothing more than the removal of redundant staff caused by the acquisition.”

read more: Lemonade Causes Layoffs at Metromile

The Novidea executive described Lemonade’s Metromile and EIS deals as “a textbook private equity move.”[s]” that show how today’s insurtechs are not only experts in technology, but also in business. He said established insurers should “be absolutely concerned” and Lemonade’s “serious business moves” should be a wake-up call for big insurance players.

“We are seeing that well-managed insurtechs make big strategic moves,” Ayala said. “It’s not just a consolidation of the market, which will leave a handful of extremely strong insurtechs, but it’s a consolidation of talent, and talent is in very short supply.

“But more so, it is the investment that insurtechs are making today in data and data analytics that should concern the headlines. Soon, the level of profitability that insurtechs will be able to achieve will offer them strategic opportunities that incumbents will not have the flexibility to take advantage of.”

In the future, Ayala expects to see more sophisticated mergers and acquisitions of well-established insurtechs. He said the market has punished the big insurtechs, not only for extremely high revenue multiples (which they gave themselves), but also for a lack of diversity in their product portfolios.

“[The big insurtechs] will seek acquisitions to add new lines of business and expand into new states for existing products,” he said. “Lemonade has just written the playbook of what we will see in the future.”

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