Insurtech Metromile announced Tuesday that it is the latest fintech to go public via a SPAC (special purpose acquisition company) at a valuation of $1.3 billion.
Specifically, it will go public via INSU Acquisition Corp. II, a publicly traded SPAC sponsored by Cohen & Company.
Upon closing of the transaction, the combined company will be named Metromile Inc. and is expected to remain listed on NASDAQ under the new ticker symbol “MLE.
Founded in 2011, Metromile launched its personalized pay-per-mile auto insurance a year later. The company has raised $293 million in funding from the likes of NEA and Index Ventures.
The premise behind Metromile is that if you don’t drive much, you shouldn’t have to pay as much for auto insurance as those who do drive a lot. Customers pay a base rate, and then pennies per mile, according to the company.
I spoke with Rick Chen, Metromile’s communications director, who said the insurtech is slated to go public in the first quarter of 2021.
He said that besides being an insurance provider, Metromile is a true technology play that also licenses out its underlying technology to large incumbents – a big revenue-generator for the company. It also has built car sensors and mobile APIs that it uses for phones and integrate directly with car manufacturers for connected vehicles.
“All this telematics data helps us understand risk moment-by-moment,” Chen told FinLedger. “Typical insurance companies rely on decades of data to figure out th erisk of each driver and policy. How they price is from taking a look back. For us, we see it more in real-time. We’re an insurance company built for the future.”
The company asserts that its AI claims system, called AVA, is the “first of its kind system” designed to accelerate the process of verifying and paying out insurance claims.
Metromile said the data it is able to extract gives it the ability to do things such as reconstruct the scene of an accident to instantly determine if claim details are accurate. The company also says it can automatically approve payments once a claim is verified.
The numbers
The transaction includes a $160 million “PIPE” led by Social Capital (headed by Chamath Palihapitiya) and joined by Miller Value, Clearbridge, Hudson Structured, Mark Cuban and New Enterprise Associates.
Metromile has two lines of business. First, it offers the straight to consumer pay per mile car insurance. And that unit’s run rate for 2020 is expected to be $111 million, according to Chen. Its second line of business revolves around its data science and cloud-based software-as-a-service (SaaS) business segment that it launched in 2019.
Looking ahead, Metromile is projecting $1 billion of premium run-rate by year-end 2024. Its SaaS business segment lets it profit from large incumbent insurers’ profit improvements. This has led to growing and recurring high-margin revenue, which it estimates will reach $48 million in 2024.
Specifically, Metromile said that by licensing key components of its technology platform – including claims automation and fraud detection tools –it is able to accelerate P&C carriers’ digital roadmaps and “meaningfully participate in the profit improvements they realize, generating growing and recurring high-margin revenue.”
Metromile also said that it has a 59% loss ratio through Sept. 30, 2020, meaning that it paid out 59 cents in claims on every $1.00 it has earned in premiums.
“What we’ve been doing for the last 18-24 months is really focusing on the right unit economics to scale a business, profitability and building something really durable and sustaining,” Chen told FinLedger.
The company claims its customers save 47% on average compared to what they were paying their previous auto insurer.
In related news, Billtrust – a B2B provider of cloud-based software and integrated payment processing solutions – announced in October it would go public through a merger via SPAC South Mountain Merger Corp. in a deal also valued at $1.3 billion, including debt.
As FinLedger has previously reported, SPACs (special purpose acquisition companies) are becoming an increasingly popular method to go public. In recent months, we’ve covered the launch of a number of fintech-focused SPACs, including Cascade and Lefteris.
Also, earlier this year, two other insurance technology companies went public – but via the traditional route of an initial public offering: Root and Lemonade.