Prudential, the insurance giant, has made the decision to shut down Assurance IQ, a tech startup it acquired for $2.35 billion in 2019. Caroline Feeney, head of Prudential’s U.S. businesses, cited the need to invest directly in core businesses and capabilities for growth as the reason behind the decision. Assurance used technology to match consumers with insurance plans, and although it reached unicorn status as a $1 billion company, signs of trouble began to emerge as it struggled to meet financial targets and faced regulatory inquiries.
The acquisition of Assurance by Prudential was seen as a strategic move to expand direct-to-consumer access to the mass market in the U.S. However, the startup faced challenges in the broader insurtech industry and ultimately became a financial burden for Prudential. Assurance reported adjusted operating income of $29 million in the fourth quarter of 2022 but was later included in Prudential’s “Corporate and Other” segment, which reported a $435 million loss in the most recent quarter. The company also took goodwill impairment charges totaling $2.14 billion over the past three years.
Assurance had around 1,700 employees as of December 2022, including 170 in Seattle. The company’s CEO, Allison Arzeno, expressed shock and uncertainty in an email to employees, stating that the majority of employees will be laid off. Despite the shutdown of Assurance, Prudential reported first quarter net income of $1.1 billion, though down from the year-ago period. The company’s stock has seen a 30% increase over the past 12 months, with a market capitalization above $39 billion.
Prudential’s decision to wind down Assurance is part of its strategy to focus on core businesses and capabilities for higher growth and efficiency. The company expressed gratitude towards Assurance employees and partners for their dedication over the past five years. While the shutdown of Assurance marks the end of a significant chapter in Prudential’s history, the company remains committed to serving its customers and clients through its core businesses. It is a difficult decision, but one that Prudential believes is necessary for its long-term success and sustainability as an enterprise.
