Hello fellow regards. I'm normally in the "stonks only go up and to the right" camp, but today I'm making the bear case for Lemonade (LMND). I've worked in the P&C insurance industry for 15 years as a fully credentialed actuary, and this company has sucked, and will continue to suck, for a very long time.

The Founders
So, the founders—Daniel Schreiber and Shai Wininger—are basically tech guys trying to play in the insurance sandbox without a shovel or pail. Schreiber used to be the president over at Powermat Technologies, dealing with wireless charging gadgets. Wininger co-founded Fiverr, the freelance marketplace. Cool backgrounds if we're talking about tech startups, but when it comes to insurance? Not so much.

Insurance isn't some app you can whip up in a weekend hackathon. It's a complex, heavily regulated industry that eats newbies for breakfast. Even seasoned pros with decades under their belts struggle to keep a profitable book. The margins are thin, the competition is fierce, and the regulations are a nightmare. So what makes these tech bros think they can just waltz in and disrupt an industry they know nothing about?

Running a large, multi-line insurance carrier isn't about flashy interfaces or AI chatbots. It's about nailing down underwriting, managing risk, handling claims efficiently, and navigating a maze of state and federal regulations. You need to know how to price policies correctly, have enough reserves to cover claims, and stay compliant with a ton of legal requirements. Without that deep industry knowledge, they're basically flying blind.

If industry veterans are having a tough time keeping things profitable, what chance do these guys have? They're out of their depth, and that's a big red flag for anyone thinking about throwing money into Lemonade. Just because they crushed it in tech doesn't mean they can pull off the same magic in insurance.

The Results
Alright, let's dive into Lemonade's financial mess. They just ended Q3 with a staggering $68 million loss. That's not pocket change—that's a glaring signal that things aren't going well under the hood. (https://coverager.com/lemonade-ends-q3-with-68-million-loss/) You'd think they'd just hike up their rates to cover the bleeding, right? Not so fast.

In the insurance world, you can't just slap on higher rates whenever you feel like it. The industry is heavily regulated, and states have profit caps in place to prevent insurers from overcharging customers. So even if Lemonade wants to raise rates to stop the cash drain, they have to jump through regulatory hoops that make it almost impossible.

Take California as a prime example. They straight-up deny well-supported rate increase requests, and not always for the right reasons. Sometimes it's pure politics. Even if an insurer shows they need higher rates to stay afloat, regulators can slam the door in their face. This isn't just a California problem either—getting rate increases approved is like pulling teeth in many states.

So, Lemonade is stuck. They need to raise rates to offset their massive losses, but the regulatory environment is giving them the middle finger. This isn't some minor hiccup; it's a fundamental issue that could keep them in the red for a long time. They're burning through cash, can't adjust pricing to compensate, and are at the mercy of regulators who aren't exactly sympathetic to their plight.

Bottom line: Lemonade's poor financial results aren't just a blip—they're a sign of deeper problems that aren't going away anytime soon. they haven't been profitable, and with regulatory friction, it will be a long time before they're even allowed to get to rate adequacy. Don't think quarters, think years or even a decade.

PS, here's their combined ratio by quarter. (https://www.alphaquery.com/stock/LMND/fundamentals/quarterly/combined-ratio) This basically says that for every $1 in sales they spend over $2 in losses and operating expenses. These types of ratios would okay for a new company, but not a carrier that was founded nearly 10 years ago.

Funky Accounting
Alright, let's dive into Lemonade's funky accounting tricks. I stumbled upon this wild article (https://iansbnr.com/no-accounting-for-taste-reviewing-lemonades-revenue/) that spills the beans on how they're juicing up their financials with some sketchy reinsurance moves. Basically, they're shifting money from one pocket to the other and calling it revenue. This left-hand to right-hand shuffle has been their jam since day one.

One Big Marketing Exercise

At the core, these guys think they can just outgrow and out-market everyone else like it's some kind of tech startup playground. They even pull stunts like calling ex-policyholders—you know, people who ditched them and don't pay premiums anymore—"alumni." Seriously? Who brands lost customers like they're part of some prestigious club?

There's a ton more where that came from. Remember when they started off as a "charity" organization, claiming they'd donate excess profits to the charity of your choice? Sounds heartwarming until you realize they run an agency that skims 20% off the top for policy admin services—and surprise, surprise, it's a for-profit setup. So while they're waving the altruism flag, they're lining their pockets. Classic.

Industry veterans aren't buying their BS for a second. Even Warren Buffett isn't interested in touching Lemonade with a ten-foot pole (https://coverager.com/buffett-isnt-interested-in-lemonade/). If you think someone's gonna be swayed by their flashy pink branding and cute graphics, think again. No one's keen on acquiring a book of business that lacks solid underwriting and profitability fundamentals.

Bottom line: Lemonade is all about the hype, using marketing smoke and mirrors to distract from their shaky financials and operational red flags. They're banking on style over substance, but in the cutthroat world of insurance, that's a one-way ticket to disaster. My industry analysts puts the price target at $21 GENEROUSLY.

My recommendation. Sell it short and lots of it!