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Workers' Compensation
Pie CEO Says $315 Million Fundraise Advances Expansion to Full-Stack Carrier

Pie distributes direct, through wholesale and retail agencies and via partnerships with payroll and small and medium-sized businesses.
  • Renée Kiriluk-Hill
  • November 2022

Insurtech delegated underwriting authority enterprise Pie Insurance, which operates as a managing general agent, plans to transition to a full-stack carrier, deepen its workers' compensation business and expand to at least one other commercial line in 2023 following a $315 million fundraise, co-founder and Chief Executive Officer John Swigart said. The company is working on acquiring a second carrier, a shell company that will bring 50 state licenses, he said.

Last year, subsidiary Pie Carrier Holdings acquired Western Select Insurance Co. and its three licenses—since expanded to 19—and renamed the company Pie Casualty Insurance Co. Pie isn't yet directly writing business on Pie Casualty, but it is taking balance sheet risk, assuming 24% of premium from partner SiriusPoint, said Swigart. It will acquire a second shell to give Pie a base for differentiated offerings across the spectrum, he explained. “We write a very broad range of customers—Main Street retail, offices, restaurants up through general contractors, trades, transportation risks, lower- to middle- and high-hazard risks. We need multiple insurance companies.”

Related: Pie Carrier Holdings to Acquire Western Select Insurance

John Swigart Pie Insurance

“We write a very broad range of customers—Main Street retail, offices, restaurants up through general contractors, trades, transportation risks, lower- to middle- and high-hazard risks. We need multiple insurance companies.”

John Swigart
Pie Insurance

It is building out an in-house claims organization after hiring Chief Claims Officer Dimitrius King, who formerly held leadership roles in personal and commercial lines at Liberty Mutual and Hartford, in May.

The frequency of claims in the workers' compensation space has returned to pre-pandemic levels and severity is slightly higher, said Swigart. During the pandemic, injured workers had less access to medical care, delaying appointments, elongating issues and making for a slower return to work. The situation is improving but hasn't fully resolved, he said.

The Workers' Compensation Insurance Rating Bureau of California sought a 7.6% increase this year on advisory pure premium rates that was rebuffed by regulators. “It usually starts in California then shows up in other places,” said Swigart. “I don't know where the inflection point is. I do see a stability and leveling” in the near term.

The Series D fundraise was the largest round of financing for any U.S.-based property/casualty insurtech company this year, Pie said. Overall, Pie has raised more than $615 million.

“The real key is having a business that's performing well … strong underwriting results, loss ratios that aren't three digits,” said Swigart. The round was led by Centerbridge Partners and Allianz Group's digital investment arm, Allianz X. White Mountains Insurance Group joined as a new investor.

Another goal is to near profitability within two years, Swigart said. He was with Esurance from 2003-2013, helping to build the direct automobile insurance company that was acquired by Allstate, along with sister company Answer Financial, from White Mountain Insurance Group Ltd. for $1 billion in 2011. “I was involved in building one of these businesses before. I understand where you can get out over your skis. Growth is phantom growth when it's underpriced,” he said.

Related: California Contractors Board Requiring Workers’ Comp for Four Contractor Groups

Until a business reaches sufficient scale, an insurtech's expense ratio will run too high, said Swigart, but growth isn't sustainable “if you're charging less than they should be paying.” Becoming EBITDA—earnings before interest, taxes, depreciation and amortization—positive would head off another fundraise, he said.

Pie distributes direct, through wholesale and retail agencies and via partnerships with payroll and small and medium-sized businesses. It is working to expand each channel, said Swigart.

With the changes underway at Pie, Swigart said hundreds of people have joined the company since the end of last year. Even so, he said it remains “selective. We're not hiring too far in advance” of needs. Managing general agent operations will continue as a financially distinct company from Pie carriers, according to Swigart.


Renée Kiriluk-Hill is an associate editor. She can be reached at renee.kiriluk-hill@ambest.com.



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