I heard / my answers: "LMND is not an insurance company" -not true "LMND doesn’t invest float" -yes, they do "They don’t care if they pay claims" -yes, they do "They are not profitable" -duh, of course not yet "Giveback gives too much" - they actually give < 1% of premiums "Incumbents have better data" - possible, but arguably not when you speak to people that work at incumbent insurance companies and consider that how systems are structured is the biggest key to gathering data
@@Nanalyze I mean most of your points are addressed and refuted by the 2022 Investors day presentation; going through them one by one: Fraud/Giveback: They have a Fraud algorithm/AI that is extremely effective at flagging fraudulent claims, and they do delay paying claims that lack documentation or have any other tell tale markers Data Disadvantage: The type of data that other inurance companies collect is quite different, it may be a county, sex of participant, or other wide latitude features, LMND collects hundreds of features and uses AI to parse home inspections for concerning information, uses telemetrics to learn driving habits or identify when a noninsured individual is driving Cross Selling: LMND is just starting to get into offer bundling discounts through multiline insurance which encourages consumers to stay Improving loss ratio: The loss ratio is now down to 77% - which is a good trend. This is of course a start up going through rapid growth (one that was recently cash flow positive I might add) so a "bouncy" loss ratio is not terrible so long as its not significantly more bouncy than the seasonal expectations of the industry as a whole. YoY the loss ratio continues to improve No Agents: LMND does not use agents - you balk at only taking 20-25% of each premium, reserving the rest to pay claims or giveback. The giveback is at board discretion and is publicly released and the ratios are always able to be changed, but more to the point, they arent stuck giving 20% of the policy premium as a commission to an agent as all other insurance companies are. Scale: Most AI/tech investments have been made and are able to support 2x,3x, or even 10x the number of customers they have now. All they will need is to employ larger claims teams. They wont need significantly larger underwriting teams or engineering teams to collect 2x,3x, or 10x the premiums and this can be seen in the declining expenses concurrent with rising revenues in Q4. With a falling or at least steady rate environment I think investors can expect for the reinsurance market to stabilize and provide some growth support to LMND this year. But I think the largest point in all of this is that: Its a Growth Stock in a startup phase - They don't try to be like the typical insurance companies you mention, they try to break that model and are very upfront that it will only be effective at scale. If you do not have any appetite for risk, you can say that and no one will fault you, but the model they show is workable and they have a path that they laid out in 2022 towards profitability which they are still on track to hit in mid 2025
@Nanalyze your paying subscribers can answer??? just thought it might be good content to create with your valuable thoughts. You usually say you try to cover once a year. So suggested it. I understand I will get better feedback if I pay :).
We should have added more color on that response. :) We are completely overwhelmed with requests to cover companies so we're having all new requests be raised on Discord where paying subscribers can vote on them. Companies we cover once per year are firms we hold or like. Anything we're not keen on just doesn't get followed up on. Does it seem like the points of contention raised in this video have changed? Joe P.
They are a loss-making business at the moment because they need to get to scale. You've spent a lot of time looking at their lagging indicators instead of looking at their leading indicators. They've laid out their year-1 predicted loss ratios, and they are coming in better than those projections. This means the new business they're bringing in is profitable business.
You keep reverting back to attacking the messenger, so maybe this will help. Nanalyze is a team of experienced financial professionals who take a critical look at disruptive technology stocks through a risk management lens. We help people become better investors, but clearly that's not everyone's agenda. You might be more comfortable in a Reddit echo chamber where nobody ever says anything negative and we're perfectly fine with that.
Lemonade's combined ratio will improve as the business scales. You will see operating expenditure as a % of gross-earned premium continue to reduce as they grow over the coming 12 months. Such has always been the thesis for the company.
Nice video. Lemonade has no loss reserves. I don't recall that being mentioned. Also I don't recall reinsurance being mentioned. That's where Lemonade's money goes. In a high rate environment, it's become more expensive.
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I heard / my answers:
"LMND is not an insurance company" -not true
"LMND doesn’t invest float" -yes, they do
"They don’t care if they pay claims" -yes, they do
"They are not profitable" -duh, of course not yet
"Giveback gives too much" - they actually give < 1% of premiums
"Incumbents have better data" - possible, but arguably not when you speak to people that work at incumbent insurance companies and consider that how systems are structured is the biggest key to gathering data
We literally said verbatim what the company said. So if you disagree with what the company tells investors, that's on you mate.
@@Nanalyze I mean most of your points are addressed and refuted by the 2022 Investors day presentation; going through them one by one:
Fraud/Giveback: They have a Fraud algorithm/AI that is extremely effective at flagging fraudulent claims, and they do delay paying claims that lack documentation or have any other tell tale markers
Data Disadvantage: The type of data that other inurance companies collect is quite different, it may be a county, sex of participant, or other wide latitude features, LMND collects hundreds of features and uses AI to parse home inspections for concerning information, uses telemetrics to learn driving habits or identify when a noninsured individual is driving
Cross Selling: LMND is just starting to get into offer bundling discounts through multiline insurance which encourages consumers to stay
Improving loss ratio: The loss ratio is now down to 77% - which is a good trend. This is of course a start up going through rapid growth (one that was recently cash flow positive I might add) so a "bouncy" loss ratio is not terrible so long as its not significantly more bouncy than the seasonal expectations of the industry as a whole. YoY the loss ratio continues to improve
No Agents: LMND does not use agents - you balk at only taking 20-25% of each premium, reserving the rest to pay claims or giveback. The giveback is at board discretion and is publicly released and the ratios are always able to be changed, but more to the point, they arent stuck giving 20% of the policy premium as a commission to an agent as all other insurance companies are.
Scale: Most AI/tech investments have been made and are able to support 2x,3x, or even 10x the number of customers they have now. All they will need is to employ larger claims teams. They wont need significantly larger underwriting teams or engineering teams to collect 2x,3x, or 10x the premiums and this can be seen in the declining expenses concurrent with rising revenues in Q4.
With a falling or at least steady rate environment I think investors can expect for the reinsurance market to stabilize and provide some growth support to LMND this year. But I think the largest point in all of this is that: Its a Growth Stock in a startup phase - They don't try to be like the typical insurance companies you mention, they try to break that model and are very upfront that it will only be effective at scale. If you do not have any appetite for risk, you can say that and no one will fault you, but the model they show is workable and they have a path that they laid out in 2022 towards profitability which they are still on track to hit in mid 2025
Your intent is clear here. Many statements taken and used out of context but that's ok, cheaper stock price 🎉 for me !
Not the first time Nanalyze has made a video on a company it hasn't done enough research on. Won't be the last.
Worthwhile to revisit this?
Our paying subscribers can answer that question. Best to raise on our Discord server.
@Nanalyze your paying subscribers can answer??? just thought it might be good content to create with your valuable thoughts. You usually say you try to cover once a year. So suggested it. I understand I will get better feedback if I pay :).
We should have added more color on that response. :) We are completely overwhelmed with requests to cover companies so we're having all new requests be raised on Discord where paying subscribers can vote on them. Companies we cover once per year are firms we hold or like. Anything we're not keen on just doesn't get followed up on. Does it seem like the points of contention raised in this video have changed? Joe P.
@@Nanalyze makes sense. Thanks
They are a loss-making business at the moment because they need to get to scale. You've spent a lot of time looking at their lagging indicators instead of looking at their leading indicators. They've laid out their year-1 predicted loss ratios, and they are coming in better than those projections. This means the new business they're bringing in is profitable business.
We look at what's happening today. Stories and $5 might get you a cup of coffee at Starbucks.
@@Nanalyze then you're not doing any value add analysis. good luck
You keep reverting back to attacking the messenger, so maybe this will help. Nanalyze is a team of experienced financial professionals who take a critical look at disruptive technology stocks through a risk management lens. We help people become better investors, but clearly that's not everyone's agenda. You might be more comfortable in a Reddit echo chamber where nobody ever says anything negative and we're perfectly fine with that.
Lemonade's combined ratio will improve as the business scales. You will see operating expenditure as a % of gross-earned premium continue to reduce as they grow over the coming 12 months. Such has always been the thesis for the company.
Awesome.
Nice video. Lemonade has no loss reserves. I don't recall that being mentioned. Also I don't recall reinsurance being mentioned. That's where Lemonade's money goes. In a high rate environment, it's become more expensive.
You are right. There are additional complexities here that weren't covered in the interest of time.
alot of the things you’re saying is why I never liked this company. That and the things I didn’t know. Wow. Great piece. 💯
Really glad you enjoyed the piece!
Interesting, good video
We're always glad to hear positive feedback!
High quality stuff Nanalyze, thanks!
This channel is synonymous with high quality. I highly recommend their premium subscription membership 👍
We really appreciate the feedback!
This is very objective, thank you.
We appreciate the feedback!
Hahahaha. Lemonade is the Best share to speculate ;) this guy doesnt know anything about investing. Look at the chart.
Look everyone! A speculator who believes in astrology for men. ;)