Equal Ventures
5 min readJul 11


Q2 2023

By: Rick Zullo & Adam Chadroff

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We launched the insurance index last quarter to help investors keep tabs on trends and valuations in the insurance ecosystem. With Q2 now (somehow already) behind us, we’re back to report on performance over the past quarter and the first half of the year.

Insurtech equities rebounded in 1H 2023, and our insurtech carrier and broker indices (up 48% and 63%, respectively, YTD through 6/30) outperformed other high-growth and high-beta indices (for example, the Nasdaq +29%, and the EMCLOUD index +24%). But insurtechs remain down sharply from their peak 2021 valuations. Whether 1H was a dead cat bounce or sentiment has finally bottomed is anyone’s guess. Below, we dive a bit deeper into the metrics to comment on what may be driving valuations and what it means going forward.

YTD performance of our index of Legacy P&C Carriers vs. insurtech challenger carriers; Source: Yahoo Finance as of 6/30/2023
YTD performance of our index of Legacy Brokers vs. emerging distribution companies; Source: Yahoo Finance as of 6/30/2023

The YTD trend of insurtech carriers outperforming legacy P&C carriers was especially pronounced in Q2. Whereas legacy P&C carriers were roughly flat in Q2 (meaningfully underperforming the broader market), insurtech carriers ripped over the past quarter. Performance of the carrier indices and of each component stock is shown in the table below.

Source: Bloomberg Financial as of 6/30/2023; Earnings and Revenue are based on forward estimates.

Part of the insurtech carrier outperformance can be explained by a risk-on environment that benefited the broader (albeit beaten down) tech sector, with the insurtech carriers recouping some of their losses as the market moved higher. But stock-specific improvements and catalysts over recent weeks are also at play (especially with so few stocks in our index), demonstrating that some of the digital challengers may be turning a corner.

LMND, for example, raised its 2023 guidance, and showed traction toward improving its combined ratio as more conservative rate filings are realized and with more discipline on expenses. In recent weeks, the company also made a marketing push to showcase its buzzy “synthetic agents” initiative —essentially using venture debt to finance customer acquisition with the aim of accelerating growth and improving cash flow. The stock was up 16% in Q2.

ROOT was reportedly approached with a takeover offer above $19 per share, ~3x its share price before the bid was reported. Though the market still heavily discounts a deal getting done, the stock approximately doubled in Q2.

But despite these substantial recent price increases, the market clearly remains skeptical of the insurtech carrier model. Though the group’s EV/Revenue expanded significantly since Q1, it remains roughly 75% lower than that of the legacy carrier group in our index (though this is skewed by ROOT and HIPO, who still have negative EV). Whether that makes this group cheap depends on who you ask. On one hand, ROOT’s implied takeover price of ~$275m is just above the shareholder equity on its balance sheet at the end of Q1. On the other, LMND’s EV/Revenue (2.1x) is a 30% premium to the legacy carrier group’s average, despite having a 200%+ combined ratio for the foreseeable future.

Legacy P&C carriers traded roughly flat on average in Q2, continuing their trend from Q1, as they continue to grapple with generally elevated combined ratios despite decelerating inflation. Premium growth lags inflation and reinsurance rates/capacity remain tight. Moreover, the difficulty of managing cat risks remains top of mind for carriers, as exemplified the well-publicized recent carrier exits from California. Brokers, in contrast, are benefitting from ongoing premium (commissions) growth, as well as from a macro environment that has proven generally more resilient to higher interest rates than many previously feared. As shown in the table below, legacy brokers outperformed the market in Q2 (+12% vs. SPY +9%) and remain the top performing group in our index over the past 24 months by a longshot.

Source: Bloomberg Financial as of 6/30/2023; Earnings, Revenue, and EBITDA are based on forward estimates.

Insurtech distribution and marketing enablers fared far worse in Q2 vs. the legacy peers we compare them against — this marks a reversal of their strong performance from Q1. But the group average masks significant volatility across the index components. Lead gen providers were generally down sharply, whereas brokerage platforms (which more closely mirror the performance of agencies) were stronger. GSHD, for example, was up 20% in Q2, and trades at EBITDA and Revenue multiples that are much richer compared to the rest of the index group. Broadly speaking, this datapoint is consistent with the Insurtech 1.0 vs. 2.0 narrative that we’ve discussed before: the market is rewarding brokers and those enabling them.

In private markets, VC dollars into insurtech were reportedly 50% lower in 1H 2023 compared to 1H 2022. Consistent with other venture sectors, the slowdown is particularly pronounced at the late-stage, which is more sensitive to public market valuations and IPO trends compared to earlier stages. In Q2, there was an uptick in M&A activity (e.g., Policygenius; Thimble; Root is in play…), and we suspect this will continue if insurtech valuations stabilize. Challenger carriers and lead gen providers are likely to remain out of favor, but we continue to believe that the ecosystem demands innovative solutions for expense management and brokerage efficiency.

As we said last quarter, our aim in sharing this brief analysis is to facilitate a conversation about how insurance investors can evaluate opportunities (and not to provide a definitive commentary on valuations). If you’re building something new in insurance or have other thoughts about insurance market trends, please reach out.



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