Luko's acquisition won't make everyone happy, but the insurtech will live on

Allianz Direct, a digital-first German subsidiary of the insurance giant, has acquired the French home insurance business of ailing insurtech Luko for €4.3 million (around $4.65 million).

This was both expected and unexpected: The two companies were hoping to get the green light on a deal in November. But that didn’t happen, and Luko’s parent company instead went under judicial reorganization, a procedure that meant it needed to urgently find a buyer whose offer would meet the court’s requirements.

Non-unicorn insurtech Luko urgently needs a buyer, but will it be Allianz?

For a while, many options were back on the table, including not-so-great ones — until this week.

A happy ending of sorts? Not quite. After all, Luko had ambitions to become a European insurtech unicorn on its own, and maybe it’s now paying the price for it. But there’s also relief for some in knowing that the company won’t be sold for parts after all — and the business unit that will live on is arguably what it should have stuck to all along.

Yo-yo pricing

Luko was mostly known for offering digital home insurance in France, with some 230,000 policies sold. Along the way, things became more complicated and debt mounted as it expanded in other markets and made acquisitions: German startup Coya and fellow French startup Unkle, both in 2022.

That diversification is now in the past: European digital insurtech startup Getsafe acquired Luko’s German portfolio, which was mostly Coya’s. Meanwhile in France, insurance players Solly Azar and Sada Assurances partnered to take over the unpaid rent insurance portfolio that Luko had acquired from Unkle.

What’s left of Luko today is its core, and that’s what Allianz is interested in. For the German incumbent insurer, the deal should help boost its latest DTC push into France, led by Allianz Direct local CEO Fanny Limare-Wolf.

“This acquisition not only strengthens our presence in the French direct insurance market and allows us to expand our customer base under the ‘Luko’ brand, but will ultimately help us to position ourselves as a leader in the French online insurance market,” Allianz Direct CEO Philipp Kroetz wrote on LinkedIn.

On Luko’s side, stakes were arguably higher. The acquisition puts an end to the roller-coaster ride that the startup and its stakeholders have been on since June. At the time, Demain ES, the holding behind Luko, entered accelerated ​​safeguard proceedings to buy time to face its €45 million debt as a Series C round of funding became out of reach.

Since then, the fate of the company went through more ups and downs, with equally variable price tags. None of these came close to the €72 million that Luko had raised since its creation in 2018, but they still made for wildly different paths.

When Luko agreed to be acquired by Admiral Group shortly after seeking help, it was supposed to be for a total of €14 million.

After the British insurance group backed down in October, things became more blurry: Was Allianz’s subsequent offer worth €14 million, too, or €8 million, as the court viewed it? Either way, it soon became impossible to tell who would buy Luko, or for how much; rumor had it that new offers had fallen to single digits.

Court documents seen by TechCrunch+ confirm that Luko received several offers, some of which were very limited in their pricing and breadth. Unlike suitors Laka and Lovys, French insurtechs Leocare and Magnolia made global offers. But there was arguably more to like about Allianz Direct’s proposal, at least in its final form — and not just because it is the only one that went through the last step of the proceedings.

The best suitor?

To quote German regulator BaFin, which gave the deal its approval in principle, it is “a good solution that is in the best interests of policyholders.”

Its price tag was also the highest, and that’s not a detail. As French bank BNP Paribas noted in an observation to the court, many creditors will still be left unpaid. Our understanding is that besides investors, those who won’t get all of their money back include BNP itself, but also venture lender TriplePoint and Unkle’s shareholders.

The bankruptcy judge noted that Allianz Direct’s offer wouldn’t make creditors whole, but it had the very important merit of enabling business to continue and jobs to be maintained. Indeed, Allianz Direct will take over all 112 staffers from the entities covered by the deal, Demain ES and Luko Cover. And that’s not all.

Following the acquisition, Allianz Direct plans to spend another €25 million in the business, which it sees as complementary to its own and with a different customer target, the court reported. After restructuring it and acquiring more clients accustomed to the use of digital tools, Allianz Direct expects Luko’s home insurance activity to reach profitability in 2027.

Addressing the Luko team on LinkedIn, Limare-Wolf told them that they “will be key to the further development of [Allianz Direct’s] business in France.”

How fast time flies: Mere months ago, the insurance executive was leading Admiral’s French subsidiary, L’Olivier, a digital-first car insurance specialist whose offering Luko would have complemented had the M&A gone through. Instead, she and Luko will now work toward helping Allianz expand its digital-first offering into France, Allianz Direct’s fifth market.

While Luko’s co-founders, Benoît Bourdel and Raphaël Vullierme, also expressed happiness about the deal on LinkedIn, they might not be in for a smooth ride. After all, Allianz is also an incumbent, and its general agents are reportedly not too happy at the prospect of competing with underpriced policies. But at least it is not the end of the road for Luko, even if it won’t ever be a unicorn.