Wefox warns shareholders of insolvency
According to a report by Sky News, German insurance startup Wefox may become insolvent by the summer unless it can secure the sale of a number of assets.
Mark Hartigan, Wefox’s newly-appointed CEO, sent out a memo to shareholders describing the situation, which was obtained by Sky News. Hartigan stated that the startup was engaged in urgent discussions aimed at stemming losses in its Italian unit, as well as closing operations in Germany, selling part of its business in Poland and unwinding a joint venture in Switzerland.
“My key deduction is that Italy has been running on systematically false operating assumptions…and is now insolvent without ongoing Group cash support,” he shared in the memo while adding that the opportunity to rebuild through restructuring and any optionality for the future remains dependent upon reaching a sustainable position by balancing cashflows with the timing of the planned disposals. “The increasing demands on Group cash from country demands to stay solvent, from the Regulatory requirements for upfront carrier capital, from business disruption from increased media leading to partner uncertainty, from the control of cash and increased costs related to the [Revolving Credit Facility], leads me to remain very concerned that this balance will be disrupted.”
Last month we covered Wefox and its carrier subsidiary, which ended 2023 with a net underwriting loss of $40.5 million and a combined ratio of 123%. A German media outlet recently published a story about Wefox, claiming that it lost €125 million and €141 million in 2022 and 2023, respectively. It was also reported that Wefox had just ~€20 million in cash left at the end of last year.
Following the insolvency news, Wefox backer Chrysalis shared an update regarding its portfolio company:
“The Investment Adviser has been in discussions with wefox management and other shareholders for a number of months. A plan has been put in place to simplify wefox’s business model to drive the company towards profitability. Following these conversations, the Investment Adviser believes there is a route to ensuring a successful outcome for wefox and Chrysalis’s investment.
In recent weeks, wefox has raised approximately €20 million from shareholders, to which the Company contributed €3 million in support of the aforementioned strategy; the Investment Adviser continues to consider how best to support wefox achieve its ambitions and is confident of continued shareholder support for the company, if required.
As announced on 4 May 2024, the Company’s valuation of its investment in wefox was reduced for the period ending 31 March 2024, where it represented 14.4% (22.1% at 31 December 2023) of the Company’s net asset value.”
