InsWeb Scoops Up Intuit's Insurance Arm
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In an effort to focus on its strength, which is primarily software, Intuit Inc. Monday unloaded its popular QuickenInsurance business to online insurance provider InsWeb Corp. for a $14-million equity stake.
InsWeb will offer Intuit a 16.6 percent stake upon the deal's closing, targeted for first calendar quarter of 2001. The deal doesn't stop there -- InsWeb will become the sole consumer insurance manager for Intuit's Quicken.com and QuickenInsurance Web sites in a five-year agreement for which terms were not disclosed.
In reciprocation, Intuit will share associated revenues and has agreed to transition its relationships with its online distribution sources to InsWeb. Intuit will also seek approval from some of its online-distribution allies to transfer their consumer insurance offerings from QuickenInsurance to InsWeb.
For Intuit, the deal echoes a familiar sentiment: "If you can't beat them, join them!" While its Quickbooks and TurboTax software applications have been very successful, QuickenInsurance has not fared as well.
And while Intuit is not a new player to the insurance arena, (having formed Intuit Insurance Services Inc. after acquiring Interactive Insurance Services Corp. four years ago in a $9 million stock transaction), the firm doesn't believe it gives them a "sustainable competitive advantage," according to Steve Bennett, Intuit's president and chief executive officer.
Bennett, who will join InsWeb's board of directors, said the deal was a smart branding strategy on his firm's part because InsWeb is so well known. Boasting five years of experience, InsWeb has accrued partnerships with more than 40 insurance companies for its technology platform.
What is less definitive is what will befall QuickenInsurance's 75 employees, as Intuit will be killing its Alexandria, VA.-based insurance business in favor of the new deal.
Intuit said some may be offered positions at InsWeb or in other Intuit businesses, which insinuates that others may be let go.
Intuit expects no material impact from this transaction on its fiscal year 2001, but it will see an improvement in pro forma operating income between $3 million and $5 million, distributed approximately evenly between Intuit's third and fourth fiscal quarter results. Intuit expects costs associated with the transaction to be approximately $10 million.
Intuit, whose Quicken.com is a ubiquitous financial site, develops and markets QuickBooks, the leading small business accounting software and TurboTax, the best-selling tax preparation software. It is also a player in the online bill presentment and payment sector.