This insurance disruptor has many growth opportunities.
Would Lemonade’s (NYSE: LMND)business expand 100-fold over its current size? In a recent conversation with Lemonade Co-CEO Daniel Schreiber, Fool.com contributor Matt Frankel found out that management is working towards that high-risk goal in the long haul. The Fool Live video clip, that was recorded on January 10., Frankel and fellow contributors Jason Hall and Danny Vena discuss the possibility that this could be a reality.
Matt Frankel Matt Frankel choice for me. I joined my Lemonade job a few weeks ago. I had a conversation with their chief executive in Industry Focus a few weeks ago. He said the company could double based on its premiums, which would mean it’s an insurance company with a middle-of-the-road level but not one of the largest. It’s a small insurance firm because its primary insurance products, such as renters and homeowners insurance, aren’t costly.
Life insurance is still a tiny part of its operations. However, it has plenty of potentials to increase its revenues over time. In addition, it offers car insurance and possibly other kinds over time. The company’s valuation is too high, but as the CEO stated, a lot of it comes from people who claim that it sells for 30 times its written price or something similar. Because they use a variety of reinsurance policies in their primary business model, they cannot consider it as premium income under GAAP accounting standards, which can distort the numbers slightly.
Jason Hall: Misunderstood.
Frankel The reason I say this is that I believe that the market doesn’t know what it is worth to Lemonade. I think that the recent price movement is evidence of this.
Hall: Yeah, no doubt about it. Many people think that it’s either too expensive or don’t trust the company. It’s also worth looking at the short-term interest it has in it.
Frankel: Danny, any thoughts?
Danny Vena: Yeah, Lemonade is among the companies I will continue to follow due to it being a top-rated company in the Fool universe. It’s a company that I’m not too sure about due to a few reasons. I put it as the number. 4 out of four top contributors’ stocks for 2022the year 2022]. I don’t have Lemonade as of yet. It’s a show I’m continuing to follow. There are a few things I can say to note about it. The first is that I still have some of the same questions Jason asked earlier in the year. It has to be related to the reinsurance side that the company operates. There is no way to build an inventory of business in which they can be reinsurance themselves, so they must go out to other underwriters to cover their policies. That’s the aspect of a business.
Additionally, I enjoy the aspects of the company, and it is nearly all application-based. They use chatbox instead of service representatives in 90 90%+ of cases, and customers can apply for insurance online, and I believe everything else is something that Lemonade can offer. So far, I’m waiting to find out whether or whether Lemonade will remain able in its growth.
As you and I both mentioned, it’s a small insurance business, and the fact that they’re required by law to offer a significant portion of their profits will not allow it to become a stock that is a gangbuster. I’ve not convinced the claims of earnings per share; they’re not offering their profits away, this could be a misinterpretation from my side. However, if you don’t think I have a solid understanding of the situation, I’m not the most avid customer of insurance companies. Suppose I had to run an insurance business; that would be Lemonade. However, I do not know the business enough to feel comfortable investing in it.
Hall hall: I think it’s fair for me. I believe the most critical aspect is the risk-reward ratio is high. You’re right, Danny. I believe that the company must answer many of these questions. At this point, I’m willing to accept the risk.