Interesting read! It took me a bit longer to get through that S1 than you though. A few points I'd love to discuss
> to become more efficient versus than competitors and ultimately lower loss ratios
I didn't see them explicitly mention their focus on reducing LR for their business model. I read the LR data as a metric to prove their sustainability.
However, I explicitly saw them mention that they want to generate consistent profits, with a reduced focus on pricing/claims, by just taking a fee. Their utilization of ML AI is focused on the UI
> Thus the strategy of lowering their revenue, as ceded revenue to reinsurers doesn’t contribute to GAAP revenue
Where is there GAAP revenue reported? To me it looks like they included ceded revenue in both "Total Revenue" (is this GAAP?) and their non-GAAP "Operating Revenue"
Definitely the easiest insurance line to get started in for a variety of reasons. Things like easier compliance, younger and uninsured demographics that are easier to market to, and reduced complexity
Regulators also don't put as much financial scrutiny in lines that don't have high caps (although they still scrutinize other aspects like consumer protection).
If a "renters only" insurance agency goes under, most guaranteed funds could pay it out without much consequence.
It is a whole different story if a major health insurance company were to go under.
From an individual stock's financial performance perspective, sure.
Right now it looks like individual stocks are highly correlated to the broader market. [1]
The economy and a diversified portfolio could benefit more from benefits to broader society than anything they do individually. Public benefit corporations could be a trend that could significantly grow in the coming years
Why does LR even matter? They cede 75% of their risk so they operate more like a broker. I reckon the reason they don't cede more risk is because the re-insurers want them to have skin in the game. The re-insurers could get adversely selected if Lemonade can't price well
> to become more efficient versus than competitors and ultimately lower loss ratios
I didn't see them explicitly mention their focus on reducing LR for their business model. I read the LR data as a metric to prove their sustainability.
However, I explicitly saw them mention that they want to generate consistent profits, with a reduced focus on pricing/claims, by just taking a fee. Their utilization of ML AI is focused on the UI
> Thus the strategy of lowering their revenue, as ceded revenue to reinsurers doesn’t contribute to GAAP revenue
Where is there GAAP revenue reported? To me it looks like they included ceded revenue in both "Total Revenue" (is this GAAP?) and their non-GAAP "Operating Revenue"