Insurtech Quarterly Earnings – Q3 2020
Third quarter earnings across our Insurtech coverage were strong across the board as the industry continues to lean towards digital transformation as the new age of insurance. Additionally, the quarter experienced a number IPOs and M&A activity across the industry. There were five companies hit the public market including Lemonade, Accolade, GoHealth, Duck Creek Technologies, and GoodRx. Furthermore, Majesco, a major insurtech, was acquired by Thoma Bravo, a leading private equity firm focused on the software and technology enabled services sectors.
One of the more interesting trends in 2020 is the conversion of Insurtechs into traditional carriers, with our conversations suggesting business owners feared “leaving money on the table” by not capturing underwriting margins. Examples of this transition included Next Insurance, Kin Insurance, Clearcover and Metromile.
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Insurance Coverage Team
- Leroy Davis, Partner
- Nicholas Prendergast, Vice President
- Steve Buffington, Associate
- Nic Anderle, Analyst
Insurtech Industry Overview
The insurance industry has traditionally been defined by conservative business practices and a “slow to change” attitude. Thus, it comes as no surprise that the industry continues to lag in terms of digital transformation. However, with the emergence of COVID-19, several Insurtechs have come forth to expedite change, and insurers are beginning to shift their focus to more modern methodologies, technologies, and innovation. Insurtechs bring a new wave of digital insurance, pushing the traditional approach aside.
Broadly speaking, Insurtechs utilize technology to transform and improve the efficiency of the current insurance industry’s model and approach. The Insurtech ecosystem consists of technology providers and other companies developing innovative products that reconstruct the way the world uses and interacts with insurance. The industry is split into two verticals, Direct to Consumer and Enablement technology. Direct to Consumer is made up of three horizontal segments, property and casualty (P&C), Health & Life, and Commercial. Enablement Technology is also made up of three horizontal segments, distribution & intermediation, underwriting, and administration & claims.
As of September 30, 2020, there have been 52 M&A transactions year to date, totaling $3.2 billion in deal value for the insurtech industry, suggesting the industry is on pace to close 69 deals totaling $4.2 billion for the year (vs. 96 deals at $10.5 billion in 2019). Additionally, insurtech businesses raised $1.9 billion across 85 deals, a 69% increase from the previous quarter of $1.1 billion. One of the more interesting trends in 2020 is the conversion of Insurtechs into traditional carriers, with our conversations suggesting business owners feared “leaving money on the table” by not capturing underwriting margins. Examples of this transition included Next Insurance, Kin Insurance, Clearcover and Metromile.
as of 9.20.2020
- Lemonade Inc. is a licensed insurance carrier offering renters, homeowners, and pet health insurance in the US and content and liability policies in Germany and the Netherlands
- The Company provides a fully digital access to products reducing costs in the traditional insurance shopping experience
- Lemonade Inc. (NYSE:LMD) had its initial public offering on July 2, 2020. The stock opened at $29 and ended the day at $69.41.
- The Company raised $319mm on July 2, 2020.
- Accolade is a personalized health and benefits solution that dramatically improves the experience, outcomes and cost of healthcare employers, health plans and their members.
- The Company provides a platform that uses cloud-based technology with the support from Health Assistants and Clinicians at Accolade.
- Accolade (NAS: ACCD) had its initial public offering on July 2, 2020. The stock opened at $35 and ended the day at 29.70.
- GoHealth is a leading health insurance marketplace that operates in America.
- The Company’s technology platform leverages modern machine learning algorithms and helps individuals find the best health insurance plan for their specific needs.
- GoHealth (NAS: GOCO) raised $913.50m in its initial public offering on July 15, 2020. A total of 43.5mm shares were sold at $21 per share.
Duck Creek Technologies
- Duck Creek Technologies is a leading SaaS enterprise software for the P&C insurance industry.
- The Company’s software and applications are designed to work either independently or combined to enable optimized outcomes.
- Duck Creek Technologies, Inc. (NAS: DCT) had its initial public offering on August 14, 2020. The stock opened at $42 and ended the day at $40.
- GoodRx Holdings Inc. provides a digital healthcare platform that provides pricing and discounts for prescription drugs.
- Since 2011, the company estimates it has saved consumers $20bn and has helped 18m people pay for a prescription they could not afford.
- GoodRx (NASDAQ: GDRX) raised $1.14bn in its initial public offering on September 23, 2020. After the offering the company was valued at $12.65bn.
- Majesco acquired by Thomabravo
- Franco Signor acquired by Verisk
- Delphi Technology acquired by Sapiens
- Brolly acquired by Direct Line Group
- Virtual MGA acquired by Insurity
To see reporting on companies in the public basket, please download our full report.