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Embattled e-tailer Priceline.com and insurance holding company W.R. Berkley Corporation announced Tuesday that they have shelved plans to sell automobile insurance over the Internet, saying that current market conditions are "not conducive to creating the new business."
The companies, which are both headquartered in Connecticut, initially agreed to the formation of the Priceline Auto Insurance Agency, Inc. in August. The business model for the venture was slated to follow Priceline's "name-your-own-price" brand and allow customers to purchase insurance premiums through the e-tailer's site. The offering had been scheduled to launch in the beginning of this year.
The dissolution of the operation, which the companies said is still in the early developmental stages, will result in the return of its venture capital to investors.
Original Targets
In August, Priceline.com and W.R. Berkley said that the enterprise would help them capture a chunk of the competitive US$110 billion vehicle insurance market, one of the largest segments of the insurance industry.
W.R. Berkley also said that merging the respective abilities of the two companies into Priceline.com Auto Insurance would allow consumers to save money on their auto insurance bills and help participating insurers attract new customers.
The terms of the agreement originally brokered by the two companies called for Priceline Auto Insurance to pay Priceline an annual licensing fee based on revenues generated by the company. W.R. Berkley was going to recruit a supplier base of auto insurance companies to participate in the service and help the company with insurance underwriting.
Curtailing Expansion
Priceline's withdrawal from the proposed auto insurance business is the latest hitch in its expansion plans. Over the past few months, the company scuttled plans to introduce services to Australia and New Zealand, and canceled a planned expansion project in Japan.
In December, Priceline also postponed plans to offer a business-to-business service, cellular phone plans and life insurance.
In addition, the company slashed jobs and lost several high profile executives last month, including founder Jay Walker, who stepped down from his position as vice chairman of the company's board of directors.
Downward Spiral
Launched in April 1998, the once high-flying Priceline broke new ground on the Internet with its name-your-own-price model for selling airline tickets and travel reservations. However, the company ran into problems after it started expanding its offerings to include mortgages, cars and phone service.
Priceline stock, which went public in March 1999 at $16 per share and skyrocketed to $165 at one point, has been slammed as the company's woes multiplied. As of early Wednesday, Priceline shares were trading at $1.41.
The announcement that the company was scrapping its auto insurance plans was issued after the close of trading Tuesday.
In the third quarter of 2000, Priceline reported that it lost $2 million, or a penny per share, before special charges, compared with a loss of $12 million, or 8 cents, during the same quarter of the previous year.
Although its revenue rose 124 percent from a year earlier to $341 million,
the e-tailer predicted lower revenues for the fourth quarter, which will also
include an unspecified restructuring charge.
