Lemonade Inc. is strengthening its auto-insurance business by acquiring Metromile Inc., a pay-per-mile digital insurance start-up in San Francisco.
The Metromile went public earlier this year in a merger with a blank check company valued at $ 500 million in the acquisition deal as per a statement on Monday.
The deal is expected to be closed in mid-2022, in which Metromile shareholders will receive Lemonade shares in the ratio of 19:1.
Lemonade which had gone public in 2020, debuted into an auto insurance product known as Lemonade Car. The product is currently offered to car owners in Illinois with plans to expand in other states.
Lemonade wants to build up the business by buying out Metromile. The acquisition will give auto- claims data and a team with experience in the industry for a decade, as per a Lemonade blog post.
As per Bloomberg intelligence, Lemonade acquiring Metromile for $ 500 million, which is about less than twice the in-force premium is beneficial to both companies but does not enhance profitability.
As per Daniel Schreiber, the CEO of Lemonade, “Metromile has gone down the auto insurance road a billion time and acquiring them save costs and time with having their proprietary data and ML Algorithms. The auto insurance market is vast and competitive, and a deal like this unlocks value for the shareholders and customers“, he said.
Schreiber, in a phone interview, said that most of Lemonade’s 1.4 million customers are car owners, and offering them new car insurance products along with other product lines will attract the existing and new customers. He termed the new opportunity as “hugely symbiotic.”
In a late Monday trading in New York, Metromile shares gained 10% while Lemonade’s Share dropped by about 5%. This year saw a decline in Metromile and Lemonade share prices by 80% and 42 %, respectively.
