Note: We've updated Lemonade's card to reflect the recent changes. View it here.
Early in Q3, Lemonade launched health insurance for cats and dogs.
- Plans start at $10 per month for both new and existing customers.
- Existing customers can get 10% off if they bundle their renters or homeowners policy with a pet policy.
- Learn more.
What it covers:
- Diagnostics-X-rays, MRIs, and labwork.
- Procedures-Emergency care, hospitalization, and surgery.
- Medications-Injections and prescriptions meds.
- Accidents-Unexpected events like road accidents, poisonings, broken bones, and sprains.
- Illness-Vomiting, diarrhea, infections, cancer, heart disease, plus much more.
Lemonade retired its existing reinsurance contracts and replaced them with proportional reinsurance contracts.
- Proportional reinsurance-The reinsurer's share of risk is defined for each policy.
- For Lemonade, they cede 75% of premiums collected to reinsurance companies. In return, the reinsurers pay Lemonade a ceding commission of 25 cents for every dollar ceded.
This is both good and bad
The good: Capital efficiency. Every dollar of surplus can support three times the amount of premium it did in Q2, pushing Lemonade further into a capital-light business.
The bad: The restructuring changes how GAAP revenue is calculated. GAAP revenue excludes all ceded premiums (proportional reinsurance is fundamentally about ceded premium).
This change will result in a drop in GAAP revenue and a spike in GAAP gross margin in the third quarter (see chart below).
What they're projecting for Q3 2020 and full-year 2020.
|In force premium (IFP)||$170-$175 million|
|Gross earned premium (GEP)||$37-$39 million|
|Adjusted EBITDA loss||$(32)-$(33) million|
|Stock based compensation exp.||$3 million|
|In force premium (IFP)||$195-$190 million|
|Gross earned premium (GEP)||$147-$151 million|
|Adjusted EBITDA loss||$(106)-$(109) million|
|Stock based compensation exp.||$11 million|
Stock performance YTD:
|S&P 500 ($SPY)||6.02%|