According to the Sky News report, in a memo circulated to shareholders earlier this month, Wefox’s new executive chairman and chief executive, Mark Hartigan, outlined the dire financial situation. The company, which boasts nearly 3 million customers, faces severe regulatory and financial challenges that could lead to its collapse unless significant measures are taken.
Launched in 2015, Wefox, whose investors include Barclays and JP Morgan, has been grappling with losses in several of its operations. Hartigan, formerly the CEO of UK-based insurance mutual LV=, reportedly warned that the holding company could become insolvent by August or even earlier if the current trajectory continues.
Hartigan has been implementing job cuts in central functions, having already reduced the workforce by 60 roles recently, with more layoffs anticipated.
In July 2022, Wefox secured a $400 million Series D funding round, which valued the company at $4.5 billion, positioning it as one of Europe’s largest fintech firms. This followed a $650 million round in May 2021 that valued the company at $3 billion, demonstrating strong investor enthusiasm for scale-ups with potential for significant global impact. Additionally, a year ago, Wefox obtained $55 million in equity financing and an equal amount in debt funding from Barclays and JP Morgan.
In statement from a wefox spokesperson to Sky News, the insurtech said: “As a general statement, we reiterate what we have said when Mark Hartigan took over as CEO on March 6.
“Supported by the board of directors, in which the most important investors are represented, and together with the current management team, he will lead the company through the next phase of development.
“Following the rapid growth of recent years, this will also involve a consolidation and concentration of Wefox’s international activities. The simplification of our business model will allow us to save costs and will provide us with the financial flexibility to continue pursuing our ambition of making insurance distribution smarter, more effective, and more efficient through technology.”
Continuous pressure
The company is urgently working to mitigate these financial pressures by addressing losses in its Italian unit, closing operations in Germany, selling parts of its business in Poland, and unwinding a joint venture in Switzerland. These steps are part of a broader strategy to stabilise the company and prevent insolvency.
Recently appointed executive chairman and CEO Mark Hartigan, who succeeded co-founder Julian Teicke, communicated the company’s restructuring progress in a memo to investors. Teicke, who stepped into the president role in March, stated he wanted to focus more on supporting new ventures.
In his memo, Hartigan focussed on the importance of ongoing restructuring efforts and the potential for a sustainable future, provided the company can balance its cash flows and complete planned asset disposals.
Hartigan said: “My key deduction is that Italy has been running on systematically false operating assumptions…and is now insolvent without ongoing Group cash support.”
He wrote: “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.”
In response to an inquiry from Sky News about its insolvency warning to shareholders, Wefox declined to comment on rumours or speculation. The company reiterated a previous statement made when Mark Hartigan assumed the role of CEO on March 6, emphasising that, with the support of the board of directors and the current management team, he will steer the company through its next phase of development.
