Lemonade Set to Buy Insurer Metromile in Its First Takeover

(Bloomberg) -- Lemonade Inc. is bolstering its nascent auto-insurance business by acquiring pay-per-mile insurer Metromile Inc. in its first takeover.

The deal values San Francisco-based Metromile, which went public via a merger with a blank-check company earlier this year, at roughly $500 million, according to a statement Monday. Metromile shareholders will receive Lemonade common shares at a ratio of 19 to 1, and the deal is expected to close by mid-2022. 

Lemonade, which went public last year, last week debuted an auto-insurance product called Lemonade Car, currently being sold in Illinois with plans to roll out the offering in other states. Buying Metromile helps New York-based Lemonade build up that business while giving it auto-claims data and a team that’s worked in the business for a decade, according to a Lemonade blog post.

What Bloomberg Intelligence Says

“Lemonade’s deal to acquire Metromile for about $500 million, or less than 2x in-force-premium (IFP), may be beneficial to both companies and is a reasonable price but we don’t think it enhances profitability.”

--Matthew Palazola, senior industry analyst, and Kylie Towbin, associate analyst

“They have been down this road billions of times, and their proprietary data and machine-learning algorithms can vault us over the most time and cost-intensive parts of the journey,” Lemonade Chief Executive Officer Daniel Schreiber said in the statement. “In a vast and competitive market like auto insurance, today’s deal is a huge unlock of value for our customers and shareholders.”

In a phone interview, Schreiber said that most of Lemonade’s approximately 1.4 million customers are car owners, and that bundling its new car insurance with other business lines would allow the insurer to entice existing customers and new ones alike. He called it a “hugely symbiotic” opportunity.

Metromile’s shares gained 10% at 5:14 p.m. in late New York trading, while Lemonade’s dropped 5%. Metromile had declined 80% this year through the close of regular U.S. trading Monday, and Lemonade was down 42%.

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