LMND earnings tomorrow

I’m looking forward to seeing Lemonade’s earnings report tomorrow. I’m fascinated by the company and what it could do in the insurance industry. Growth rate is impressive: 200% increase in premiums in 2019 and expected revenue growth of 74% in 2020 and 50% in 2021. It is targeting younger consumers, whose insurance needs should grow over time, leading to built in organic growth.

But what really intrigues me is how it has the potential to differentiate itself from the rest of the insurance market. Not only could the technology it uses shake up the industry, but the company is focused on things that should build up a loyal customer base. In particular, customers can choose a charity to which any of their unused premiums will be donated. If it does things right, Lemonade could differentiate itself from the rest of the insurance market and create an extremely profitable company… or they could totally crash and burn. Like I said, I’m looking forward to earnings.


Yes, I had this on my calendar to watch as well.

Supposedly the underwriting costs are too high?

I don’t know anything about the insurance business. But this concerns me as it may mean their AI doesn’t work as claimed. I am very interested to see what they report today, and what guidance is for the next quarter. Lots of people are moving, which should be positive for their growth.

I’ll read the call transcript later, but there was a lot of impressive info in the letter to shareholders:

  • 100% yoy growth in premiums
  • 67% yoy new customer growth
  • international expansion
  • 19% yoy increase in premium/customer

I’m not too concerned about the loss ratio/underwriting costs at this time. While there wasn’t any improvement this quarter, it is still trending in the right direction. With lower overhead costs (thanks to AI biz model) it make sense that the loss ratio can be higher. Finally, some of these concerns strike me as the style of comments you get from representatives of the old guard who don’t see the disruption coming.

If successful, Lemonade seems to have the same potential for explosive growth as SaaS.


I took a small position in LMND. I then downloaded the app and walked through the renter’s insurance (I own a townhome) and the pet (dog) insurance (ridiculous premiums). I wasn’t too impressed. I’d recommend doing so before taking a big position. Plus, LMND says they are pushing some of their profits into the public good (instead of my pocket).

I sold at a small loss. I’m not a believer.


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I work for a large insurance company. I looked at LMND a long time ago and passed. Insurance is VERY competitive market, lots of people playing in the field. The Big insurance companies Allstate, State Farm, Farmers Insurance, etc… have all started (or bought) on line companies to compete with the likes of Lemonade. Plus these other companies have huge amounts of money backing them up.

When looking at insurance you need to look at their combined Ratio. The amount of revenue they bring in vs the amount being paid out in claims. The big insurance carriers run very close to 100 or slightly over, meaning they spend all the money they bring in on claims. They make their money by investing this money for a time before it is paid out on claims. I know Lemonade is much more efficient than the old big insurance dogs, but how is there combined ratio these days? (too lazy to go look it up).

The second big stat you need to look at is Surplus. Government requires an insurance company to hold so much money in reserves so they know they will have the ability to pay their claims. If you don’t have enough surplus you can’t write new business. This is where the big old insurance dogs come in. They can back their new internet start up companies with a big surplus. As far as I have seen I don’t think Lemonade has a backer with deep pockets (do they?). If they don’t and they are not making money that is going to come back to bite them.

I am not sold on LMND much better investments other places right now.