A Bearish Take on Lemonade
$LMND tries to play up the data angle, but the incumbent insurance companies are actually very savvy on data and have been for decades. They have more data than anyone and they’ve been collecting it for hundreds of years.

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Quick Numbers for Lemonade:

  • 3.4 billion in market cap
  • 67 million in revenue
  • 109 million in net losses
  • Compared to $160 million in gross written premium

In their S1 they said their gross loss ratio is 161% and now its down to 80%.

Net loss per dollar of gross written premium is 94%.

That means they are losing 94 cents for every dollar of gross written premium.

That math doesn’t add up. They’re going to need to raise more capital. They don’t have enough cash on their balance sheet to continue to run their business.

It seems like early stage venture in the public markets, but there are a lot of companies I would own before this one.

Lemonade's “data play” isn’t as much of of competitive advantage as people think it is. Legacy insurance companies don’t have 94 cents of losses for each dollar of gross written premium. The way Lemonade is trying to do it is very difficult to scale.

The insurance game is all about balance sheet, and it’s all about scale.

There’s a big opportunity for the tech enablers of the incumbents, but for Lemonade to try and go directly to consumer, it doesn’t appear to be working with their net loss per dollar of gross written premium.
grantmagdanz.eth 🦇🔊's avatar
Have your feelings on $LMND changed at all since you wrote this?
Nathan Worden's avatar
haha agh I am definitely warming up to it. I'm meeting more and more people who use the product and like it. And as far as them losing money... investors seem committed to giving them the capital required to stay in business.

Even if they diluted shares all of a sudden, I don't see that as being an existential threat any more.

I haven't bought yet, but I'm keeping an eye on it. I don't mind being wrong on this one.
Nathan Worden's avatar
I think I am going to ask @investing about it, as they have a position.