3 Things – State Farm UW Loss, Maneuvers Continue & Funding Events Focus on Value

Hi Friends!  It was an extra long month of February but we have finally reached March.  Earnings reports continue but are winding down.  State Farm leads the pack with a record underwriting loss and is joined by others including insurtech stalwart Lemonade.  ROOT investors were happy this week when the stock spiked over $40/share.  In other news, launches and maneuvers continue across the value chain from established carriers to new entrants and insurtechs.  Fundraising also chugs along but continues to see rounds with strategic focus on value.  So, as we always do about this time, let’s jump right in and explore the 3 Things We Learned, unpacking the week and tying everything together into major themes to tell the story of our insurance industry.

State Farm Records Record UW Loss, Lemonade and Other Earnings

State Farm faced a challenging year with its underwriting losses reaching a record level of $14 billion, yet managed to narrow its net loss and increase total revenue, with growth and investment income taking advantage of high interest rates.  Lemonade, on the other hand, showed a strategic pivot by rebalancing its portfolio, resulting in a slower customer growth but significant improvement in financial metrics like in-force premium and gross loss ratio.  CEO Daniel Schrieber says “This isn’t ‘mission accomplished’ but tried to highlight the progress and journey towards profitability.

Munich Re outperformed its initial guidance with a notable net result and announced a significant dividend increase, showcasing strength and confidence in its diversified business portfolio.  Ambac’s report was highlighted by subsidiary Everspan who recorded impressive growth in premiums and improved underwriting results, highlighting the effectiveness of its strategic focus.

Erie reported a significant increase in net income and operating income growth, driven by revenue increase from policy issuance and renewal services, indicating a robust performance and strategic expansion efforts.  Ryan Specialty Group announced substantial financial growth, operational achievements, and the initiation of a quarterly dividend, reflecting strong performance and strategic acquisitions.

Each company’s approach, whether through strategic pivots, operational efficiencies, or diversification, reflects a dynamic landscape where adaptability and strategic foresight are key to navigating challenges and capitalizing on opportunities for sustainable growth.

Strategic Launches and Maneuvers Continue

In the dynamic landscape of the insurance industry, strategic launches and maneuvers signify not just growth but adaptation to market needs and opportunities. Three companies—Rainbow, Adroit (in partnership with Nationwide), and Core Specialty— made moves this week, each illustrating a keen understanding of market dynamics and the strategic agility required to seize opportunities.

Rainbow’s launch of a restaurant insurance program in California comes at a crucial time.  Amid a widespread pullback by carriers in the state, Rainbow has positioned itself as a beacon for restaurants seeking reliable insurance options.  This move not only fills a gap left by traditional carriers but also positions Rainbow strategically within a critical market.

On another front, Adroit and Nationwide have embarked on a partnership aimed at servicing mid-sized employers with high-risk operations through specialized workers’ compensation insurance.  This collaboration marries Nationwide’s expansive reach and insurance expertise with Adroit’s specialized knowledge in high-risk industries such as construction, energy, and transportation.  Founded in 2021, Adroit’s niche focus complements Nationwide’s strategic expansion into the workers’ compensation market, highlighting the value of partnerships in accessing specialized segments and driving mutual growth.

Core Specialty’s strategic acquisition of the Specialty Markets Group (SMG) from American National Group represents a significant maneuver within the specialty insurance sector.  It also signals a portfolio rebalancing move by parent Brookfield Re, also the owner of Argo Group.  This transfer includes the integration of SMG’s staff into Core Specialty and the establishment of a new Financial Services Division under Mark Walker’s leadership. This move not only expands Core Specialty’s portfolio but also strengthens its position in the bond, credit, and guarantee market.

Funding Events Continue to Focus on Value Creation

In the context of the current trend towards more strategic funding rounds focused on value creation in the insurance value chain, the recent fundraising events of embedded business insurance Agency Coverdash and Intenseye serve as prime examples of how insurtechs are attracting investment by offering innovative solutions that enhance efficiency and provide tangible benefits to the insurance industry.

Coverdash’s $13.5 million Series A funding, raising its total funds to $16 million since its 2022 launch, underscores the appeal of embedded insurance technology.  By enabling service providers in various sectors to integrate commercial insurance offerings seamlessly, Coverdash is not just simplifying insurance access for startups and SMBs but is also creating new value streams within the insurance ecosystem.  This approach aligns with the current investment theme, where the focus is on technologies that can embed insurance products into broader business operations, thus driving value creation through enhanced client relationships and opening new revenue streams. The success of Coverdash, evidenced by over 100 embedded partnerships in its first year, highlights the demand for solutions that streamline the integration of insurance into daily business processes, making it a strategic area for investors.

Intenseye’s $64 million Series B funding represents another facet of value creation within the insurance value chain, focusing on the use of AI to enhance workplace safety.  By utilizing existing facility cameras to identify potential safety hazards, Intenseye offers a proactive approach to risk management, which is fundamental to the insurance industry.  The partnership with major insurers like AXA XL and the deployment of its solutions across thousands of sites globally demonstrate how Intenseye is aligning with insurers’ needs for innovative risk mitigation tools. This not only helps in reducing claims and improving safety outcomes but also positions Intenseye as a leader in leveraging technology to transform workplace safety.

Join us as we continue to explore the headlines and news shaping the insurance sector, and stay tuned for more insights on the unfolding narrative of our industry!  Stay productive, stay safe and stay in touch!