A detail look at $LMND
This thread will cover all the good and the bad of $LMND.
Most importantly, whether $LMND has the potential to become THE insurance company for the 21st century.
Here is everything that you need to know about $LMND
A thread 👇👇👇
This thread will cover all the good and the bad of $LMND.
Most importantly, whether $LMND has the potential to become THE insurance company for the 21st century.
Here is everything that you need to know about $LMND
A thread 👇👇👇
1. Overview
$LMND aims to be an insurance company for the 21st century. $LMND seeks to disrupt the ‘old fashion’ insurance by using AI. $LMND currently offers renters, homeowners, term life and pet insurance in the US, France, and Germany.
$LMND aims to be an insurance company for the 21st century. $LMND seeks to disrupt the ‘old fashion’ insurance by using AI. $LMND currently offers renters, homeowners, term life and pet insurance in the US, France, and Germany.
2. Total Addressable Market - BIG and disruptable
@daschreiber, CEO of $LMND - ‘The insurance industry makes up to 11% of the US GDP and 5 trillion worldwide. No major insurance players have more than 4% of the total market share.
@daschreiber, CEO of $LMND - ‘The insurance industry makes up to 11% of the US GDP and 5 trillion worldwide. No major insurance players have more than 4% of the total market share.
2.1 This couple with the fact that insurance has largely remained unchanged over decades, makes insurance, the single most disruptable industry on the plant.
3. Fun fact
The average age of an insurance company is 125 years old!
The average age of an insurance company is 125 years old!
4. $LMND's strategy
$LMND seeks to build an insurance company for the 21st century to disrupt the insurance industry with (1) a different business model and (2) the use of AI and machine learning to provide a user experience that is ‘Delightful’ yet cost saving.
$LMND seeks to build an insurance company for the 21st century to disrupt the insurance industry with (1) a different business model and (2) the use of AI and machine learning to provide a user experience that is ‘Delightful’ yet cost saving.
5. $LMND Business Model
A typical insurance company can make extra money by denying claims. $LMND reverses the traditional insurance money, by treating the premiums customer pays, as if it’s their money, not $LMND's.
A typical insurance company can make extra money by denying claims. $LMND reverses the traditional insurance money, by treating the premiums customer pays, as if it’s their money, not $LMND's.
6. How does the $LMND model works?
When $LMND receives an insurance premium, $LMND takes a flat fee (25%) to run everything. The remaining 75% will be put into a big pool. This pool is used to pay out claims. If there are any leftovers from the 75%, $LMND will not take the
When $LMND receives an insurance premium, $LMND takes a flat fee (25%) to run everything. The remaining 75% will be put into a big pool. This pool is used to pay out claims. If there are any leftovers from the 75%, $LMND will not take the
6.1 excess as their profits. Instead, the remainder will be given back to charities chosen by customers. This means that $LMND does not have a conflict of interest with customers when they are filling a claim, because $LMND does not have any incentive to deny the claims.
6.2 Whether $LMND denies the claim or not, the money does not go to $LMND but back to the customer or charity! This makes $LMND a public benefit corporation and certified B corp company.
7. $LMND strategy – AI
@daschreiber believes with technology, $LMND can drive down the cost, but at the same time delight customers. $LMND uses their AI to predict the risks of their customers and price accordingly. $LMND also uses machine learning to make their AI better at
@daschreiber believes with technology, $LMND can drive down the cost, but at the same time delight customers. $LMND uses their AI to predict the risks of their customers and price accordingly. $LMND also uses machine learning to make their AI better at
7.1 detecting fraud and handling claims. The more data input to the $LMND AI, the more $LMND's AI improves. This improvement is evident with $LMND's improvement in loss ratio overtime (note that q1 2021 was impacted by the severe Texas freeze).
7.2 In $LMND's words ‘Our digital platform is designed to delight consumers, fueling rapid growth, which spawns highly predictive data, that our machine learning crunches to make our platform even better at evaluating risk and delighting consumers, fueling further growth ...'.
8. Instant sign up
When you try to purchase an ‘insurance’, traditionally, you will need to answer 20-25 questions for the insurance company to assess your risk. $LMND seeks to provide a new experience, by streamlining everything with the Lemonade App.
When you try to purchase an ‘insurance’, traditionally, you will need to answer 20-25 questions for the insurance company to assess your risk. $LMND seeks to provide a new experience, by streamlining everything with the Lemonade App.
8.1 With the Lemonade app, an insurance policy can be purchased with as little as 90 seconds.
9. The Data Advantage
Rather than asking customers to fill out 20-25 generic questions when they sign up, $LMND collects 1600+ data points when the customer is signing up to assess the risk of that customer.
Rather than asking customers to fill out 20-25 generic questions when they sign up, $LMND collects 1600+ data points when the customer is signing up to assess the risk of that customer.
9.1 @daschreiber had found out that a customer’s risk cannot be uniquely identified with 20-25 generic question. However, with the 1600 data points that $LMND collects, such as how fast the customer read over the insurance coverage policy, whether the customer ask extra
9.2 questions on policies, how long the customer spent on the sign-up process, a customer look very different to another customer. Therefore, $LMND can assess a customer’s risk more accurately and adjust their premium accordingly.
10. Fast repayment
33% of claims filed to $LMND are resolved and pay out instantly. This is possible because $LMND uses AI (with assistance of humans) to handle the claim process.
Fun fact: the fastest claim paid out by Lemonade was only 3 seconds! This is a world record.
33% of claims filed to $LMND are resolved and pay out instantly. This is possible because $LMND uses AI (with assistance of humans) to handle the claim process.
Fun fact: the fastest claim paid out by Lemonade was only 3 seconds! This is a world record.
11. The Cost Advantage
$LMND by using their Lemonade app and AI, creates a significant cost advantage for $LMND. $LMND saves a large amount of labor without any agents and physical presence. This makes $LMND a much more efficient company than an incumbent insurance company.
$LMND by using their Lemonade app and AI, creates a significant cost advantage for $LMND. $LMND saves a large amount of labor without any agents and physical presence. This makes $LMND a much more efficient company than an incumbent insurance company.
11.1 In fact, $LMND's customer service can handle as much as 5x the amount of claims an incumbent can handle.
11.2 One example of the $LMND cost advantage benefit is that $LMND’s entry level renters’ insurance is typically 50% cheaper than the minimum premiums of incumbents. $LMND at scale should be able to price all their insurance at a noticeably lower price.
12. High Net Promoter Score
Net promoter score measures the willingness of customers to recommend a company’s products to others. $LMND has constantly received a net promoter score of over 70+, which is in the realm of Apple and Tesla! In comparison,
Net promoter score measures the willingness of customers to recommend a company’s products to others. $LMND has constantly received a net promoter score of over 70+, which is in the realm of Apple and Tesla! In comparison,
12.1 the average net promotor score of the US insurance industry is only 41. Even in denied claims $LMND receives NPS of around 40-50 and in the Texas freeze incident 60s, all significantly higher than industry average. (CONTINUE)
13. High Review Scores
$LMND's app has score 4.9/5 on IOS app store with over 45.8k review. $LMND also receives a 4.5/5 on google place, 4.3 on Supermoney and 4.86 on Cleasurance (highest ranking in home and renter’s insurance).
$LMND's app has score 4.9/5 on IOS app store with over 45.8k review. $LMND also receives a 4.5/5 on google place, 4.3 on Supermoney and 4.86 on Cleasurance (highest ranking in home and renter’s insurance).
14. Focus on young customer
$LMND seeks to break the traditional ‘switch and save’ insurance module by focusing on acquiring young customers (Millenials and GenZ) and growing with their customers’ overtime. 90% of $LMND’s customer are new insurance customer and the average
$LMND seeks to break the traditional ‘switch and save’ insurance module by focusing on acquiring young customers (Millenials and GenZ) and growing with their customers’ overtime. 90% of $LMND’s customer are new insurance customer and the average
14.1 $LMND customer age is early 30s. Many of $LMND’s customers start off with renter’s insurance, but as they move to a bigger house or buy a house, the customer will switch to homeowner insurance, which multiply the premiums collected.
14.2 $LMND has been improving on their ability to retain and ‘grow’ with their customers overtime as shown with the annual dollar retention.
15. Build and integrated on one platform
$LMND have its entire system (sign up, customer service, and claims) all built on one platform. This allows $LMND to become very efficient. Furthermore, it helps prevent fraud.
$LMND have its entire system (sign up, customer service, and claims) all built on one platform. This allows $LMND to become very efficient. Furthermore, it helps prevent fraud.
15.1 An example of the benefits of one system @daschreiber : 'One person asks a very weird insurance coverage question on Facebook, and two days later, Lemonade received the same ‘weird insurance coverage’ claim, and a fraud was detected fraud'
16. Ability to scale
Since $LMND sell their insurance through the App rather than a broker, $LMND can expand without being there physically. This allows for easy expansion. With the ability to scale, $LMND have the potential to become a real global insurance company.
Since $LMND sell their insurance through the App rather than a broker, $LMND can expand without being there physically. This allows for easy expansion. With the ability to scale, $LMND have the potential to become a real global insurance company.
16.1 Currently, $LMND has expanded into Germany and France without being there physically. International expansion will decide the ceiling of $LMND.
17. Ability to handle catastrophic events
The Texas Freeze in 2021 Q1 has made $LMND received a year’s worth of claims within the few days, providing an extreme stress test for $LMND’s operations and financial model. Fortunately, most claims were fully resolved within a week of
The Texas Freeze in 2021 Q1 has made $LMND received a year’s worth of claims within the few days, providing an extreme stress test for $LMND’s operations and financial model. Fortunately, most claims were fully resolved within a week of
17.1 the storm’s onset. The Texas freeze has blown up $LMND’s Q1 loss ratio and reduced $LMND’s gross profit and margin. However, $LMND hasn’t change their guidance for 2021, showing $LMND’s resistance to catastrophic events.
18. Opportunity – Car insurance
$LMND is going to expand into car insurance this year. The US car insurance market is 70x the size of renters insurance, 80x pet insurance and 3x homeowner insurance. With car insurance, $LMND can finally offer insurance bundles to more customers.
$LMND is going to expand into car insurance this year. The US car insurance market is 70x the size of renters insurance, 80x pet insurance and 3x homeowner insurance. With car insurance, $LMND can finally offer insurance bundles to more customers.
$LMND ‘believes that our homeowners insurance customers today already spend about $1 billion on car insurance, but they’ve been unable to spend it at Lemonade’. With this launch, this revenue can potentially come to $LMND.
19. Financials
$LMND’s premium per customers, in force premiums, gross earned premium have all experienced 80%+ growth in 2020. However, the growth rate has not been as high as 2019, and it is crucial for $LMND to maintain such a high growth rate into the future.
$LMND’s premium per customers, in force premiums, gross earned premium have all experienced 80%+ growth in 2020. However, the growth rate has not been as high as 2019, and it is crucial for $LMND to maintain such a high growth rate into the future.
20. Risk – How good can $LMND's AI become?
Although $LMND’s AI seems like a great plan, it is still questionable how good $LMND’s AI can become. The biggest question is at the end, what loss ratio can $LMND achieve? Can $LMND have a loss ratio that is 10-20% lower than others?
Although $LMND’s AI seems like a great plan, it is still questionable how good $LMND’s AI can become. The biggest question is at the end, what loss ratio can $LMND achieve? Can $LMND have a loss ratio that is 10-20% lower than others?
20.1 I personally believe that $LMND will become very good as more data is fed in, but if $LMND’s AI does not become very good, $LMND will not become THE insurance company.
21. Risk – Valuation
There is no doubt that $LMND is trading at a high valuation with an EV/revenue of 58.29 and P/S of 67.8 as of 14 June. At this level, in the short term, anything can happen to $LMND’s stock price.
There is no doubt that $LMND is trading at a high valuation with an EV/revenue of 58.29 and P/S of 67.8 as of 14 June. At this level, in the short term, anything can happen to $LMND’s stock price.
21.1 Although a 67% crash seems unlikely again soon, anything can happen to $LMND given $LMND expensive valuation.
22. Risk – still a money losing company
$LMND is still widening their loses as they are rapidly expanding. When $LMND will achieve profitability are still questionable.
$LMND is still widening their loses as they are rapidly expanding. When $LMND will achieve profitability are still questionable.
23. Risk – Success in home and car insurance
$LMND has started off with a focus on the ‘unloved’ renters’ and pet insurance. After $LMND’s initial success, $LMND now aims to expand heavily into car and home. These expansions will be the true test for $LMND, as $LMND’s competitor
$LMND has started off with a focus on the ‘unloved’ renters’ and pet insurance. After $LMND’s initial success, $LMND now aims to expand heavily into car and home. These expansions will be the true test for $LMND, as $LMND’s competitor
23.1 are a lot more focus on these areas, as they are much larger and profitable than renters’ and pet insurances.
23.2 Currently, 90% of $LMND customers are renters and only 90% of premiums come from homeowners (compare to industry average of 90%). $LMND will need to attract more customers from home and car insurance to become THE insurance company for the 21st century,
24.Risk – Slow customer growth
$LMND only recorded a 9.5% customer growth from Q4 2020 to Q1 2021. The YoY customer growth has also been slowing (on the left). This may not be enough to justify the high valuation.
$LMND only recorded a 9.5% customer growth from Q4 2020 to Q1 2021. The YoY customer growth has also been slowing (on the left). This may not be enough to justify the high valuation.
24.1 $LMND's CFO @tebixby has justified that $LMND's advertisement has been aimed to maximize lifetime value of a customer and in force premium rather than increasing customer count, which is showed by the increase in premium per customer and in force premium.
25. Risk – Low Moat
ARK Invest has commented that $LMND has low moat compare to other insurtech companies. $LMND will only gain a moat once it has many data and customers. This means that a lot will depend on $LMND’s management execution. (CONTINUE)
ARK Invest has commented that $LMND has low moat compare to other insurtech companies. $LMND will only gain a moat once it has many data and customers. This means that a lot will depend on $LMND’s management execution. (CONTINUE)
26. Risk – Insider Selling
@daschreiber and @shai_wininger , co-founder of $LMND, has sold some $LMND stocks in the past couple of months. Daniel has commented that his and Shai’s majority of wealth is still in $LMND. Daniel said that those transactions were automatically
@daschreiber and @shai_wininger , co-founder of $LMND, has sold some $LMND stocks in the past couple of months. Daniel has commented that his and Shai’s majority of wealth is still in $LMND. Daniel said that those transactions were automatically
26.1 executed as part of a 10b51 plan, which is a predetermined plan at specific prices for insider to sell. What happens was that some of the pre-set price targets where set a while ago, and they and some insiders did not foresee $LMND will run up so fast
26.2 (in the absence of the Motley Fool report). Although I believe that they don’t have intention to sell many of their $LMND stocks, however, this may signals that $LMND had ran too fast ahead of itself when it hit $180, even by the founders standards.
27. Risk – Reinsurance*
Depending on how you view reinsurance, reinsurance can be viewed as a risk. Nevertheless, $LMND mainly uses reinsurance to protect from loss ratio spikes and being more capital light (allow them to go from 1 dollar to 3 dollar of IFP to 1 to 7).
Depending on how you view reinsurance, reinsurance can be viewed as a risk. Nevertheless, $LMND mainly uses reinsurance to protect from loss ratio spikes and being more capital light (allow them to go from 1 dollar to 3 dollar of IFP to 1 to 7).
27.1 Reinsurance successfully pay off during the Texas freeze, preventing $LMND to incur an even larger loss.
28. Risk – Competition
Insurance incumbent has taken noticed of $LMND and more insuretech (e.g. Metromile and Hippo) have joined insurance trying to digitalised it. Competition will only become fiercer and $LMND will need to execute well to stay on top of competition.
Insurance incumbent has taken noticed of $LMND and more insuretech (e.g. Metromile and Hippo) have joined insurance trying to digitalised it. Competition will only become fiercer and $LMND will need to execute well to stay on top of competition.
29. Conclusion
$LMND is a high-risk high reward company for the long term. If $LMND wins, $LMND have the potential to become the most dominant insurance company, because with more data, $LMND’s AI can be significantly better than others, and it will be harder and harder for
$LMND is a high-risk high reward company for the long term. If $LMND wins, $LMND have the potential to become the most dominant insurance company, because with more data, $LMND’s AI can be significantly better than others, and it will be harder and harder for
29.1 others to compete (similarly to how google search is so good that others cannot compete, $LMND AI can become so good that $LMND can effectively undercut everyone and decrease their loss ratio as $LMND pinpoint a person’s exact risk). However, execution will be key.
30. END
Thank you for reading this thread. I hope you have enjoyed it and learned one or two more things about $LMND. If you like this thread, please like and retweet it so that it can reach more $LMND investors, potential investors or people that may be interested in $LMND!
Thank you for reading this thread. I hope you have enjoyed it and learned one or two more things about $LMND. If you like this thread, please like and retweet it so that it can reach more $LMND investors, potential investors or people that may be interested in $LMND!
31. Also, feel free to follow me for regular threads like this on exciting companies in the future!
Appreciate all your support!
Appreciate all your support!
Tagging some users who may be interested in $LMND or this thread! @Innovestor_ @Invesquotes @StockMarketNerd @BahamaBen9 @BackpackerFI @mukund @mhvestergaard @heydave7 @Couch_Investor
@ztinvesting @7investingSteve @InvestiAnalyst @themarkcooke @investing_city @GetBenchmarkCo @BlaineCapital @MT_Capital1 @HonestInvesting
All comments/feedbacks/thoughts on what you guys think about $LMND and the thread are all appreciated! Thanks!
All comments/feedbacks/thoughts on what you guys think about $LMND and the thread are all appreciated! Thanks!
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