Lemonade

Products

Insurance

Mobile app to easily get insured via chatbot. Frictionless signup experience

  • Renters
  • Homeowners
  • Pet
  • Life
  • Car (soon)

Business Model

  • IFP: 297M (+91% YoY)
    • IFP: aggregate annualzied premium
    • Prem per customer: $246 (+29% YoY)
    • 57% Renters
    • 30% Homeowner
    • 13% Pet
    • 1% Life
  • Customers: 1.2M (+48% YoY)
    • 33% churn (renters)
  • Gross Loss Ratio: 74%
  • Gross Earned premium: $67M (+90% YoY)
    • 75% of premium cede to reinsurance
  • Gross profit: $66.9 x 26% = $17M
  • Gross annualized IFP without ceding to reinsurance: $77M

Risk

Geographic breakdown of gross written premium

Analysis

Lemonade’s numbers are slightly harder to crunch since they operate in insurance and they also cede reinsurance to lower their capital requirements. I believe the best way to evaluate them to make them comparable to other tech firms is to look at their gross annualized IFP without ceding to reinsurance. I.e. all the premium they earn after insurance claims and if they didn’t cede to reinsurance. This would be equivalent to their “true revenue”. For F21, this comes out to ~$77M compared to $47M last year (+63% YoY).

With a gross loss ratio 74%, they are doing a pretty good job of pricing their risk models and I’m sure they could get it low enough to be similar to other traditional insurance companies.

Currently at a 54x “revenue” valuation, LMND looks much more reasonable than when it was 100x. I believe in 3 years, LMND could grow their IFP to $1.5B with a gross loss ratio of 70% with a “true revenue” of ~$525M and reach a ~$10-15B valuation (2-3x upside).

 

tech investing