Branch Insurance, Central Ohio's newest tech unicorn, has cut 55 jobs in Ohio and an undetermined number elsewhere, citing catastrophic claims losses from unprecedented natural disasters this year.
The Columbus digital home and auto insurer quickly added both policyholders and employees so far this year, in step with an "ambitious" growth plan – at the same time it raised premiums faster than any U.S. insurance carrier, co-founder and CEO Steve Lekas said in a companywide email announcing the workforce reduction, which he reposted to Medium.com.
But this year's catastrophic storms caused losses even at some century-old giants, he said, and as a startup Branch does not have the capital cushion to sustain that amount.
"Simply put, we have grown faster than our loss ratio can allow," Lekas said. "In just four short years, with the help of each and every Brancher, we’ve built something incredibly different and valuable in an industry that has been historically difficult to disrupt.
"Though this is true, it is also true that as stewards of our members’ capital, we need to meet this moment with a sound and responsible plan for our members, employees, and shareholders."
Branch's capital surplus dropped to $31 million as of March 31 from $44.5 million at Dec. 31, according to financial reports to the Ohio Department of Insurance. (The state minimum requirement is $2 million.)
The reduction affects 55 positions in Ohio, nearly all work-from-home, according to a required notice filed with the state Department of Job and Family Services.
Company spokespeople via email declined to disclose the number of jobs affected in other states, nor the size of the remaining workforce.
Branch's LinkedIn profile indicates more than 480 employees, up from 400 at the beginning of the year. That includes 150 in Ohio and 50 in Texas, where according to insurance filings it has the most premiums, plus dozens apiece in other states.
"This is an incredibly sad day as we say goodbye to talented colleagues who have gifted us their energy, enthusiasm, know-how, and grit to help us build the company we’ve all always wanted to work for," Lekas said.
The workforce reduction came one year to the day since Branch Financial Inc. was valued at $1.05 billion in a $147 million private equity Series C round.
Mass layoffs have swept technology from startups to giants for more than a year.
Branch's journey
Branch sold its first policies and moved to Columbus in 2019. Lekas has said that while it sets premiums high enough to cover costs, the goal since inception has been to lower those costs so consumers still save. For example, it reduces advertising expenses through direct embedded quotes at online mortgage lenders and auto dealers.
This January it was certified as a B Corp – a for-profit company demonstrates a commitment to promoting community and member interests – for its mission to restore insurance as a "force for communal good."
Through March 31, Branch had $39 million in direct earned premium, four times that of the same period last year and nearly half the total for all of 2022, according to state financial filings.
But for those first three months, the ratio of direct losses to earned premiums rose to 1.14 from 1.1 in 2022. In 2021, when the book of business was much smaller, losses were kept to 78%.
While persistent inflation and this year's storms have beset the entire property and casualty sector, Lekas said in his company message he sees positive signs for the company: This year sales of policies kept increasing despite Branch's rapid premium hikes.
"When we asked why, our agencies told us 'because you make it so easy to sell and the customer experience is exceptional,'” he said.
Branch emailed its notification to the state on Monday, the letter indicates, and said it would notify affected employees on Thursday, "which is also their date of separation." Individual notifications were to be sent 15 minutes after the companywide email, Lekas' post said.
The company is offering severance based on tenure, two months' continued benefits, outplacement services, the option to keep the company laptop and other mitigations.
"If you are leaving Branch today, know that this is not your fault and that being a part of this reduction doesn’t label or judge you and who you are," Lekas' message said. "I submit my sincere apologies to you and your family.
"(For those who remain) our culture will face its biggest test yet. Feelings of mistrust may surface. Cynicism may creep in. Fear may follow," he said.
"Two things remain true: The macroeconomic moment is a continued challenge to all insurance companies, including ours. And we have collectively created something genuinely special."
