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Is Lemonade more than another SoftBank growth-machine?

by
Mario Gabriele
The Generalist
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Overview

  • Digital insurance company Lemonade will go public soon under the ticker LMND
  • The company is expected to price at $23 - $26 a share for a valuation of ~$1.4bn
  • A SoftBank company, Lemonade has utilized paid marketing to grow gross written premiums by 450% CAGR since 2017
  • The company has yet to turn a profit

Disrupting Insurance

  • Insurance boils down to risk and how to manage it
  • Insurance firms profit from positive cash flow cycles
    • Insurers bring in money always before a claim must be paid out (if it is paid out at all)
    • They invest this excess cash and profit off short to mid-term gains
  • Lemonade primarily focuses on renters' insurance, and have built a modern product that pays out claims in shorter amounts of time
  • The company has developed and relies on a data-driven technology platform to price insurance claims

Performance and Feasibility

  • A $5tn industry, insurance remains incredibly fragmented - no leading insurer holds more than 0.4% of the market
  • Lemonade currently holds just 0.1% of the homeowner and renters' insurance market but is poised to grow that figure as more insurance services move online
  • Lemonade loses roughly ~40% of customers between Year 1 and Year 2 - not a good look
  • Quick estimates give an LTV / CAC ratio of 1.26 - not great, not terrible
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