Why Lemonade Stock Skyrocketed This Week
Yahoo Finance ·
With a single change it recently made in its operations, Lemonade ( LMND +3.16% ) stands to become significantly more profitable. On this major development, investors piled into the stock this holiday-shortened trading week to lift it to a nearly 24% increase, according to data compiled by S&P Global Market Intelligence . On Tuesday, Lemonade announced it has renewed its reinsurance program (reinsurance is insurance for insurers, protecting them against a sudden wave of claims in catastrophic events). That wouldn't be anything earth-shaking, usually, but the company also managed to renegotiate it to effectively retain more of its premiums. Lemonade said it managed to lower the quota share cession in the program, i.e., the portion of its premiums paid to the reinsurer for coverage. Under the new regime, this is around 18%; previously it was roughly 20%. At the same time, the insurer will benefit from expanded protection against catastrophic and major weather events. In the press release touting the adjustment, the company said it advocated for it to " retain more of the economics from its growing business."
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