Lemonade, one of the most prominent Insurtechs in the US, has filed an S-1 for an initial public offering (IPO) on the New York Stock Exchange (NYSE). Co-founded by CEO Daniel Schreiber and Shai Wininger, Lemonade seeks to disrupt the traditional insurance market with consumer-friendly plans and a heightened degree of transparency. Lemonade provides renters and homeowners insurance to a good number of US states with plans to cover the entire country. Last year, Lemonade announced the expansion into Germany in advance of a rumored IPO. The wording of the S-1 foreshadows expansion into other European countries including the UK.
Chatter has previously pegged an IPO at raising up to $500 million at a $2 billion valuation. As of March 2020, Lemonade reported approximately $275 million in cash and cash equivalents. The company had about 730,000 customers at the end of Q1 2020 doubling versus the same quarter year prior.
Goldman Sachs, Morgan Stanley, Allen & Company, and Barclays are expected to underwrite the offering. Shares are anticipated to trade on the NYSE under the symbol “LMND.”
According to the document filed with the SEC, Lemonade reports growing from $9 million in 2017 to $116 million two years later in 2019.
“For the three months ended March 31, 2020, our GWP was $38 million. In parallel, our net losses per dollar of GWP dropped from over $3 in 2017 to under $1 both in 2019 and for the three months ended March 31, 2020. Our revenue was $2 million, $23 million, and $67 million in 2017, 2018 and 2019, respectively, and our net losses were $28 million, $53 million, and $109 million, respectively. For the three months ended March 31, 2020, our revenue was $26 million and our net losses were $37 million … In parallel to this growth of topline and increasing efficiencies, our gross loss ratio declined steadily from 161% in 2017, to 113% in 2018, to 79% in 2019 and to 72% for the three months ended March 31, 2020.”
Lemonade seeks to “leverage technology in everything we do” while delighting their customers and aligning interests for policyholders.
“We seek to encourage good behavior and build a long-term relationship based on mutual trust by endeavoring to decouple our financial incentives from variability in claims. In our model, we minimize any incentive to deny legitimate claims as we aim to give back, rather than pocket, leftover monies. After our customers purchase a policy, we ask them to designate a charitable cause for us to support with the residual premiums from their policy. Despite there being no contractual obligation requiring us to donate leftover premiums to nonprofits, when a customer embellishes a claim, such customer reduces the total amount available that can be contributed to nonprofits. As a result, we believe customers are less inclined to embellish claims as they would be hurting a nonprofit they care about, rather than an insurance company they do not.”
Lemonade is an Insurtech that aims to provide an alternative to traditional insurance companies that are frequently reviled by their users as providing poor service at a high cost while regularly denying claims.
Of note, top investment crowdfunding platform OurCrowd lists Lemonade as one of its portfolio companies and thus may be expected as added to its growing list of exits for platform investors.
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