The comedy of the three main public insurtechs rivals the slapstick nature of the 3 Stooges. In the playful yet insightful universe of The Three Stooges, each character embodies a unique blend of folly and wisdom, often finding themselves in seemingly insurmountable predicaments only to emerge with unexpected victories. This whimsical narrative mirrors the unfolding drama in the insurtech space as we analyze the Q3 2023 performance of Root Insurance, Hippo Insurance, Lemonade, and some breaking news this week for the still private Next Insurance.  Their performances in this quarter reveal a tale of resilience, savvy maneuvers, and the relentless quest for a winning formula in the insurtech arena.

Summary

The Q3 earnings reports from leading insurtechs Root, Lemonade, and Hippo revealed a mixed bag of resilience and struggle. Root showed strong premium growth but ongoing losses. Lemonade impressed investors despite shaky finances. Hippo grew premiums but made heavy cuts to reduce losses. The varied results showcase the turbulent journey of insurtechs trying to find winning formulas against large incumbents. While some like Root show savvy innovation, others like Lemonade rely more on charisma than fundamentals. The path ahead remains uncertain but filled with dramatic potential.

The Insurtech Stooges: An Odyssey of Triumphs and Tribulations in Q3 2023

The Q3 2023 financial performances of Root Insurance, Lemonade, and Hippo Insurance are reflective of distinct paths in the insurtech landscape. Here’s a brief summary highlighting premiums, net income, and loss ratios:

1. Root Insurance:
   • Policies In Force: Increased to 259,522 from 255,279 in the same period last year, marking a 1.7% growth.  However, policy counts grew 27% since 2Q23.
   • Premiums: Experienced a significant rise in gross premiums from $150.7 million in Q3 2022 to $224.2 million in Q3 2023, indicating a strong growth trajectory, with almost half of premium being new business.  This could lead to higher loss ratios in future quarters.
   • Net income continues to be negative.  Root lost $45.8M in the quarter, however their 9-month net income is about 50% lower than last year.  Indicating significant improvement, YOY.
2. Lemonade:
   • In-Force Premium: Reported an 18% year-on-year growth, with a significant slowing of growth since 2Q23.  Premium per customer is now $362.  After losses, that leaves them with just about $70 per customer, and that money has to cover all expenses from marketing to servicing.  It is difficult to see how any company other than Walmart can make money with such low margins.
   • Gross Loss Ratio: Improved by 11%, which is a positive sign of better claim management and pricing decisions, although it is still higher than it was 2 years ago.
   • Operating Expenses: Saw an 11% decline, which is beneficial for its overall operational efficiency.
3. Hippo Insurance:
   • In-force premium grew to over $1B dollars, which is nearly a 50% YOY increase.  The primary growth in premium is Spinnaker Insurance which had a 72% YOY growth vs the Hippo Home Insurance program which was flat.
   • In a further attempt to get to profitability, Hippo announced they were laying off 20% of their workforce, this was on top or a 10% reduction earlier in the year.
   • Net Loss: Reported a net loss of $53 million for Q3 2023.

Root: The Moe of the group

In a scene that echoes the wise-cracking leadership of Moe Howard, Root Insurance emerges as the sage of insurtechs amidst a troupe of flailing innovators. The company’s record-breaking premiums and a robust growth trajectory in Q3 2023 underscore a mastery in navigating the traditional insurance maze, much like Moe’s knack for steering his fellow stooges through comedic chaos. The spotlight on Root illuminates a roadmap towards carving a niche in a sector ripe for digital transformation.

Lemonade: The loveable Curly

On the other side of the stage, Lemonade channels the lovable antics of Curly Howard, winning over the audience – in this case, investors – with a charismatic leadership approach. Despite a shaky stock performance, the company managed to narrow its quarterly loss, sparking a 50% rally in its stock. The charisma of Lemonade’s leadership, akin to Curly’s endearing follies, hints at a narrative of redemption and an unwavering investor faith that might just set the stage for many more entertaining events than their current performance should allow.

Hippo: Always surprising like Larry

Now, shifting the lens towards Hippo, the narrative takes a compelling twist. Much like Larry Fine, the quiet stooge with an occasional flair for the unexpected, Hippo’s story unfolds with a blend of hope and meticulous strategy. The growth of their Insurance as a Service business, helmed by Spinnaker Insurance, unveils a promising subplot. Spinnaker, with its tight underwriting practice and limited retained risk, casts a glow of stability on Hippo’s financial tableau. This prudent approach towards risk management resonates with Larry’s often understated yet crucial interventions that steer the stooges clear of calamity. As long as Spinnaker continues its disciplined underwriting narrative, the prospects of sustained profitability and stability for Hippo remain a compelling storyline.

Next’s Rocky Round

Enter Next Insurance, the Rocky Balboa in our cinematic narrative, displaying a gritty resolve amidst adversities. The recent $265 million investment from insurance behemoths Allstate and Allianz may appear as a hefty endorsement at a glimpse. However, delving deeper into the script reveals a tale of a lifeline, possibly indicative of a down round. The juxtaposition of hope and struggle embodied by Rocky reflects the journey of Next Insurance – a contender undeterred by the punches, yet facing an uphill battle towards claiming the championship belt yet again.

As the act of Q3 2023 draws to a close, the insurtech narrative is imbued with lessons, laughter, and the anticipation of what the next quarter will unveil. The dynamic interplay among our insurtech stooges and the gritty boxer echoes the broader theme of innovation, resilience, and the relentless pursuit of success in a sector that continues to evolve amidst a blend of comedy, drama, and action. The stage is now set for a riveting sequel, as the market awaits with bated breath for the next scene in this high-stakes Insurtech saga.