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Lemonade Growing Premiums Faster Than Esurance's Homeowners Business Did

Capital Markets

S&P Global - Data Services

Disney Ups Its Bid For Fox Assets To $84.97 Billion


Power Forecast Briefing: Natural Gas And Coal Dynamics, Pressure On Nuclear, And Southwest Capacity

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Lemonade Growing Premiums Faster Than Esurance's Homeowners Business Did

Feb. 28 2018 — Insurtech startup Lemonade Insurance Co. is demonstrating impressive growth when viewed in the context of Esurance Insurance Co., which was in the vanguard of selling insurance online when it was founded in the late 1990s.

Esurance began writing renters and homeowners insurance more than a decade after its founding. It grew renters and homeowners policies quickly, going from about $9,000 in direct premiums written in the third quarter of 2012 to $25.5 million in the third quarter of 2017. Lemonade, by contrast, hit the $2.5 million mark in five quarters, as opposed to eight for Esurance.

Lemonade premium growing faster than Esurance's reters/homeowners business at same age

While Esurance had already made inroads in auto, renters and homeowners insurance were new territory back in 2012. It began selling renters insurance in five states that year, added homeowners policies in the following yea, and continued to expand both lines over the succeeding years. This data comes from filings submitted to the National Association of Insurance Commissioners. Insurers report only "homeowners" premiums in these filings, but the category is broader than that. It also includes renters insurance.

But there are also differences between Lemonade and Esurance. Since Esurance sells auto insurance, it offers discounts on homeowners insurance to customers that bundle, which Lemonade cannot do. Esurance is also owned by Allstate Corp., a relationship that offers vast capital resources but, at the same time, means that Esurance does not have the same autonomy that a startup like Lemonade possesses.

While Esurance might not have grown its homeowners business as quickly, it bested Lemonade in another area: loss ratios. On average, its loss ratio was about 70% in its first five quarters of operation, versus 102% for Lemonade. The first quarter of 2017 was particularly rough for Lemonade, when it recorded a loss ratio of 241%. The company acknowledges these struggles, writing in a January 23 blog post that underwriting was "pretty shoddy" in the early days. But with the influx of more data, its underwriting models have improved, Lemonade wrote.


In terms of where they write business, the two companies took different paths. Whereas New York was the first state where Lemonade wrote, it is still not a major area of focus for Esurance. Esurance does not write renters business in New York (only homeowners), and in 2016 the state made up less than 1% of its total homeowners direct premiums written. Esurance began with several Midwest states — Illinois, Missouri, Ohio, and Wisconsin — and has not specifically gone after states with large metropolitan areas like Lemonade has. For instance, Esurance has avoided California whereas Lemonade quickly expanded into the Golden State. In the third quarter of 2017, Lemonade wrote 1.7x as many premiums in California as it did in New York.

California eclipsing New York as source of Lemonade Insurance Co.'s direct premiums written ($M)

California is a larger market, however. Insurers wrote about $7.70 billion in direct homeowners premium there in 2016, versus $5.25 billion for New York. State Farm Mutual Automobile Insurance Co. was the leader in California, with about 19.5% of the market, while Allstate captured the most market share in New York, with 14.4%. State Farm was not far behind Allstate in New York, though, with 13.8% of the market.

While fourth-quarter 2017 statutory data is not yet available, we know that Lemonade entered Nevada, Ohio and Rhode Island in October and November, based on the company's website. Lemonade has notably avoided Florida, which is not only the largest homeowners insurance market in the U.S., but also has a high average premium relative to the number of households there.

Other startups have also been taking their time before entering the Sunshine State. As Swyfft LLC CEO Sean Maher explained, coastal states require a significant amount of expertise. But his company plans to do business there soon, shooting for a June launch.


As Swyfft shows, Lemonade has some competition from other insurtech startups. Hippo Analytics Inc. and Kin Insurance Inc. are other examples, though they do not also write renters business like Lemonade does. Meanwhile, there are a handful of companies that offer renters insurance, but not homeowners insurance. These companies write in more states, which makes sense given that it takes much more volume to achieve the same amount of revenue from renters insurance that one would receive from homeowners insurance. On average, annual U.S. renters premiums were only about one sixth of U.S. homeowners premiums in 2015, based on data available from The Insurance Information Institute, an industry association.


We estimate the potential renters insurance market in the U.S. is about $8 billion in size. By our calculations, California was the largest market for renters insurance, at roughly $1.2 billion, followed by Texas with about $854.4 million and New York with $720.4 million.

Esurance can be a case study for the renters insurance market as well. It offered renters insurance in more than 20 states as of the end of 2016, though there were only three where it offered renters but not homeowners coverage: Arkansas, Louisiana, and West Virginia. They illustrate how much less the renters insurance line produces in terms of premium. In 2016, it only generated $423,000 in combined premium from those states.

Selling renters and homeowners insurance online is not a new concept, but companies like Lemonade seem to be putting a new spin on it. Lemonade has added more innovations — such as a chat bot named Maya — and has streamlined the process, which appears to be winning over customers. Whether it can achieve this growth while also turning a profit, though, remains to be seen.

Watch: S&P Global - Data Services

Technology, Media & Telecommunications
Disney Ups Its Bid For Fox Assets To $84.97 Billion


The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Jun. 21 2018 — Walt Disney Co. on June 20 submitted a new bid for 21st Century Fox Inc.'s assets valued at approximately $71.17 billion in equity, or $84.97 billion including assumed debt.

The new bid is $38 per share, a step up from Disney's previous $28-per-share offer made in December 2017, and more in line with Comcast Corp.'s $35-per-share all-cash bid from June 13. In the merger release, Disney said, "Since the original agreement was announced, the intrinsic value of these assets has increased, notably due to tax reform and operating improvements."

Disney's new bid allows Fox shareholders to choose cash or stock, something the management of both companies believe is a better deal than Comcast's proposal. There is a collar on the stock consideration that will ensure that 21st Century Fox shareholders receive a number of Disney shares equal to $38 in value if the average Disney stock price at closing is between $93.53 and $114.32.

The previous Disney bid for the Fox assets had a seller's multiple of 12.8x and a buyer's multiple of 9.0x. The new bid puts the seller's multiple at 15.4x cash flow and the buyer's synergized multiple at 10.8x cash flow.

After six months of integration planning, Disney's management team is confident in its outlook as the company has made progress toward meeting regulatory requirements in countries around the world.

On the investor call to discuss the bid, Disney Chairman and CEO Bob Iger said the combination would allow for the creation of more appealing content while also expanding Disney's direct-to-consumer offerings and international presence, especially in Europe, India and Latin America. He also cited the acquisitions of Pixar, Marvel and Lucasfilm as recent evidence of Disney's ability to effectively integrate cultures across corporations.

Iger said that vertical-integration concerns with Comcast are significant because the Philadelphia-based company is the leading provider of broadband in the U.S. Disney feels it has a much clearer path to the merger, as it is not a leading provider of video or broadband distribution.

Judge OKs AT&T/Time Warner, Opening A Potential Bidding War For FOX Assets

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Watch: Power Forecast Briefing: Natural Gas And Coal Dynamics, Pressure On Nuclear, And Southwest Capacity

Jun. 20 2018 — Steve Piper shares his Q1 2018 analysis and power market insights along with guidance from our Power Forecast solution on the Market Intelligence platform. The next guidance report will be released around mid-July 2018.

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Technology, Media & Telecommunications
Bidding War Over Fox Could Spur Titans To Take A Look At Paramount Pictures


The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Jun. 15 2018 — Potentially boosting its international portfolio and massively increasing the company's film and television library, Comcast Corp. on June 13 announced a $35-per-share cash bid for most of 21st Century Fox Inc., a 25% premium to the $28 per share offered by Walt Disney Co.

Kagan estimates that the Comcast offer values the Fox filmed entertainment division at $17.76 billion, nearly $4 billion more than the value placed on it in Disney's original bid. The transaction places the most value on the regional sports networks at more than $19 billion, or 24.2% of the total offer, with filmed entertainment coming in a close second at 22.4%.

While 21st Century Fox has close to a 16% share of the box office year-to-date, it has done better in prior years when big franchise films were in release. Comcast's NBCUniversal Media LLC would benefit greatly by adding the Fox studio to its portfolio. NBCU currently has less than a 10% share of the box office versus Disney's more than one-third share for its films.

The question is, who is next? Long-struggling Viacom Inc. missed a chance to sell a 49% stake in Paramount Pictures Corp. to Dalian Wanda Group Corp. Ltd. in 2016 at a valuation of $8 billion-$10 billion, an impressive number given the fact that the filmed entertainment division had negative operating income before depreciation and amortization of $328 million in fiscal 2017 and negative $407 million in fiscal 2016.

With the much-publicized showdown between Shari Redstone and Les Moonves over the future of Viacom, a sale of Paramount Pictures, all of Viacom or even a piecemeal sale of Viacom assets at high prices could help resolve this simmering feud.

Economics of TV & Film is a regular feature from Kagan, a group within S&P Global Market Intelligence's TMT offering, providing exclusive research and commentary.

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