Another quarter, another earnings call. Since going public on the NYSE, insurtech Lemonade has regularly selected top voted investor questions for its top team to answer during its quarterly financial calls. This time around there were shareholder question marks over just why Lemonade insiders are not buying into the brand – or at least putting their own money where their mouths are.
“How can we expect investors to support the current team if insiders aren't buying shares at today's low levels?”, asked an individual named only as Darren, whose question was read out first as voted for by investors.
The question came as Lemonade’s stock, at $12.40 at Wednesday’s close, has sat at far lower levels than its July 2020 post-IPO price of nearly $70. At launch, the insurtech was priced at $29 per share.
While the price has rallied slightly since the insurer’s financials – as of Friday, May 5, it opened at $14.51 – it remains a far cry from its February 2021 peak of close to $164, a height it reached in the weeks after Lemonade co-CEO and co-founder Daniel Schreiber sold 300,000 shares to bag a windfall of just under $49 million. Schreiber has banked $87.13 million total and fellow co-CEO and co-founder Wininger $62.14 million from share sales since the loss-making insurtech went public, according to Benzinga data.
“Lemonade has been and remains by far our largest holding, and we don't plan for that to change anytime soon,” Wininger said in response to the shareholder question, commenting only on his and co-CEO and co-founder Daniel Schreiber’s positions. “We are both heavily financially invested in Lemonade and wholeheartedly believe in the long-term vision we shared with our shareholders.
“For that reason, we're both completely aligned with our investors financially.”
Wininger drew attention to himself and Schreiber receiving compensation updates paid in shares “with a high strike price” and said that in his view “this aligns us with our investors even further”.
“In any event, though, I believe that personal financial decisions of other people shouldn't be the main factor for anyone when deciding to invest in a company,” Wininger said. “People have different considerations, including availability of cash, portfolio balancing, as well as family and other commitments.
“I wouldn't recommend investors buy or sell shares by mistakenly treating insiders’ liquidity decisions as signals.”
Other focus areas in the earnings call included generative AI use – competitors dealing with legacy will have a hard time getting on board and may never experience the technology living up to “its full potential,” Wininger said – and a $10.1 million decline in marketing spend.
Last year, the insurer closed its purchase of pay-per-mile auto insurer Metromile, and Wininger flagged both data and cost savings benefits from the deal.
“We continue to optimize our operations, and once we are able to transition all of Metromile's customers to Lemonade systems, we will unlock even more savings,” he said.
The insurtech reported a net loss of $65.8 million for Q1 2023, an improvement on Q1 2022’s net loss of $74.8 million. In the earnings call, Schreiber highlighted a “welcome decline” in the insurer’s net loss ratio, which was 87% for the quarter (Q1 2022: 93%).
Gross written premium was $164 million (Q1 2022: $110.6 million), while net written premium was $82.7 million (Q1 2022: $35 million).
In its letter to shareholders, the insurtech said deals would be “inked in the coming weeks” as per reinsurance arrangements, with discussions with reinsurers and regulators having “validated our planned mix of risk retention, ceding to a captive, and commercial reinsurance.”
“We don't want to get too far ahead of ourselves and talk about terms that are not in place yet,” Schreiber said during the earnings call. “That said, a captive structure is something we've thought about and designed as a potential option going forward.”
