Fintech disruptor and SoftBank-backed insurtech Lemonade went public July 2, 2020 (NYSE: LMND) and marked the most successful IPO of the year (at the time), closing up 140% from its $29 pricing, and valuing the company north of $3B. The insurtech, founded June 17, 2015, has stayed true to its objective of turning the incumbent insurance market on its head, with an all-digital platform, leveraging AI and automation to create a speedy, highly efficient, user-friendly customer experience for its main business lines of homeowners, pet health, and term life insurance.
Lemonade has also stayed true to its core value of serving the betterment of society, proudly brandishing its certified B-Corp status and solidifying its bona fides as a legitimate ESG (Environmental, Social, and Governance) investment by virtue of its Giveback program where up to 40% of surplus premiums – annual premium monies remaining after payouts on claims – get bundled and sent to customers’ chosen charities at the end of each year.
At this writing, the company is coming of a rather disappointing August, with its stock price having fallen 17% for the month. This cements the continuation of a steady decline from its all-time high of $183.26 earlier this year. Lemonade, like many of its other start-up peers, has yet to turn a profit. It has also been on the receiving end of a rather challenging first quarter due to significant loss exposure to February’s “Texas Freeze”, of which Lemonade CEO, Daniel Schreiber stated “became the largest catastrophe we as a company have ever contended with.”
However, despite the start-up’s volatility since its public launch, the company is showing signs of bearing fruit for investors. In its most recent earnings release, August 5, Lemonade reported YOY growth in in-force premium – monies paid for active policies – of 97%, and accelerated YOY premium per customer of 29%. It’s also continuing the state-by-state approval process for Lemonade Car, a new auto insurance line it hopes to launch before the end of the year. Though a highly competitive market, auto is also a highly lucrative one, estimated to be around $311B in revenue 2021.
Along with its disruptive insurtech peer Hippo (NYSE: HIPO), which went public in August via SPAC ‘Reinvent Technology Partners’, Lemonade appears to be executing its business plan well. Though its market position is still a bit precarious due to it still lacking the scale to withstand losses from additional catastrophic events, Lemonade has done a good job of laying-off risk to re-insurance partners, and appears well on its way to achieving its founding goal of changing the way insurance business will be conducted in the future.