Why the lemonade stock jumped 18.6% in January

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What happened

Actions of Lemonade (NYSE: LMND) jumped 18.6% in January, according to data provided by S&P Global Market Intelligence.

The insurance company went public at $ 29 in July last year, and its shares have since climbed five-fold as the company posted a strong growth Numbers.

Image source: Getty images.

So what

The home and pet insurance provider released a solid set of numbers for its third quarter, demonstrating rapid growth in customer acquisition. Lemonade’s business relies on artificial intelligence and behavioral economics to perform underwriting and pricing, and the company announced it had more than one million active customers by year-end. latest after its launch over four years ago. This achievement is an important step, as it may take decades for other insurers to attract the same number of clients.

Financial measures have also shown a strong improvement. For its third quarter, Lemonade’s premium per customer jumped nearly 20% year-over-year from $ 169 to $ 201, while gross earned premiums doubled from $ 21 million to $ 42.9 million over the same period. The launch of pet insurance in the quarter acted as a catalyst that allowed the company to sell its other services, leading to a near quadrupling of median premiums for clients who added a pet policy. of company.

Now what

Lemonade plans to test and launch life insurance this quarter and bring term life insurance to its customers. This foray into life insurance is a gamble the company is willing to make, as it won’t underwrite the policies, but will rely on its current platform and customer base to get the job done.

Chief Operating Officer Shai Wininger mentionned on the company’s last conference call, the addressable term life insurance market is at $ 800 billion and is expected to grow at a compound annual rate of 10% through 2030. Lemonade is expected to find plenty of business opportunities. ” broaden its revenue stream given the large size of the market.

Another factor that works in the company’s favor is that the average age of its customers is around 33 years old. This is usually the time when people switch from renting to home ownership to have their first child as well, and is an ideal age to consider their first life insurance policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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