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Hello Friends! Hard to believe July is almost in the rearview, the year is going fast. It was a busy week of earnings announcements and we are following the themes. Also, Openly launches an insurance carrier and Lemonade and Root have news ahead their earnings in a couple of weeks, here are the three things we learned: |
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Earnings Theme Lower Profits There was a slew of earnings announcements from many insurers including Chubb, AXIS, Arch & Everest Re among others who all look strong but have lower profitability from one year ago. So far, this appears to be a theme with most of the carriers that have reported. In his comments around the earnings announcement Evan Greenberg indicated that inflation, interest rates and the Ukraine conflict remain concerns. Chubb will increase their loss cost models to ensure they plan for these conditions. Meanwhile, Brown & Brown, AJ Gallagher, like Marsh last week, are benefiting from not having to pay claims as a broker / MGA focused businesses, posting strong revenue and profit increases. There is certainly no need for grave concern as combined ratios continue to be strong and insurers are built to live through recessions. |
[2] |
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Openly Launches a Carrier Openly, a home insurer MGA, we recently reported closing a large funding round, announced the launch of an insurance carrier. It appears that they acquired a defunct medical professional liability shell with licenses in 17 states many of which are located in the upper Midwest. They can use this platform to add more states and file their home products to selectively underwrite the best risks themselves. This is a good use of capital and would signal that they are going to take a methodical approach to building a valuable insurance business or as Matteo Carbone explains “walk the walk”. |
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Hope for Lemonade & Root Both Lemonade and Root had announcements this week. Lemonade closed their acquisition of Metromile. They hope this will bolster their car insurance offering, a key pillar of their product diversification strategy. Most valuable in the deal will be 49 state licenses and precision data on 500 million car trips though they do also receive in force premiums and cash. Root announced the latest iteration of their embedded Carvana product, touting that they can provide coverage in just ‘3 clicks’. Many of us thought that Carvana might be the savior for Root but both companies have been struggling. Earnings for both firms release on August 9th and neither of these moves appear to have direct affect on their combined ratios, but we will see. |
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