How does Wall Street fall in love with you? Sector?

It’s been an awful week for public neoinsurance companies. Neoinsurance is a sub-sector within the wider insurtech industry. They tackle a variety of insurance categories with a combination of machine learning and modern app design in an effort to create more profitable and user-friendly insurance products.

Venture capitalists found the idea attractive and invested in several companies that were working in this area. It worked so well, that we have seen a few U.S. Neoinsurance companies become public in the past year.

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This is the only good news. Since the IPOs and SPAC combinations that took MetroMile, Hippo, Lemonade and Root public, the group has seen their values either decline sharply below their initial trading prices or far under their recent highs.

Some of the declines have been covered in our recent reports. We wondered whether we should worry about how neoinsurance valuations may affect startups. We’re looking at what happened this week to neoinsurance firms, how it affected startups, and why.

The Exchange conducted an interview with Root CEO Alex Timm to ground our work in the aftermath of their earnings report. This is a good example of the current state of the industry: Busy, bustling and unloved.

Recent declines

Here’s an overview of the public neoinsurance market, comparing yesterday’s closing prices to Friday’s.

  • Hippo: -20%
  • MetroMile: 30%
  • Root: 23%
  • Lemonade: -6%

Declines from recent highs are more extreme for several of the now-public neoinsurance companies, something that we discussed last Friday. This is a point that we have made more frequently since then. Although we could include Oscar Health to the list, health insurance is so distinct from these companies, I’m not going to try to make it more confusing.

The new thing about all this is the fact that some companies’ values are approaching their cash balance. They are moving towards low-end enterprise value. Let’s look at the numbers:

Publited at Fri 13 August 2021, 15:37.04 (+0000).

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