Topic: How To Invest

Spinoffs & Takeovers Hotline – Friday, July 10, 2020

Article Excerpt

LEMONADE INC., $84.66, symbol LMND on New York, is an online property and casualty insurance company based in New York City. It provides homeowners, renters, and condo insurance in 24 U.S. states. Founded in late 2016, the company aims to use artificial intelligence and other tools to rapidly underwrite and pay claims via its popular smartphone app. There are already some online companies in the insurance area, such as EverQuote Inc. (symbol EVER on Nasdaq), that simply match customers and insurers. But Lemonade is an underwriter of insurance, is regulated like an insurer, and must hold capital against risk. Still, the company aims to emphasize the tech side of its business. As part of that, it intends to offload 75% of its claims risk to reinsurers, and limit its exposure to the remaining 25%. The goal is to give Lemonade a stable, fee-like revenue stream and mostly insulate it from the volatility of claims. Reinsurance is insurance for insurance companies: It’s coverage that an…

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