Forget Lemonade (LMND) Stock and Buy This Instead
Key Points
Lemonade is growing like a weed, but its business model is shaky.
Chubb is a more stable evergreen play on the insurance market.
Lemonade (NYSE: LMND), an online insurer that streamlines the byzantine insurance-buying process with AI chatbots and algorithms, appears to be a disruptive company. By pulling younger customers away from traditional insurers, it nearly tripled its customer base from 1.00 million to 2.87 million between the end of 2020 and the third quarter of 2025.
Lemonade initially offered only homeowners and renters' insurance, but it expanded into the term life, pet, and auto insurance markets after its 2020 IPO. It plans to grow its in-force premium from $1.16 billion in its latest quarter to $10 billion in the "coming years" as it expands across more states, rolls out additional insurance products, and upgrades its AI capabilities.
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From 2025 to 2027, analysts expect Lemonade's revenue to grow at a 42% CAGR, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) turning positive in the final year. With an enterprise value of $5.7 billion, it still looks reasonably valued at five times next year's sales. However, it's still deeply unprofitable and faces significant competition as the larger insurers roll out similar AI-powered chatbots and services.
Chubb might be a better alternative to Lemonade
While Lemonade could keep growing over the next few years, it might be smarter to stick with a mature blue chip insurance company in this wobbly market. Chubb (NYSE: CB) -- the world's largest publicly traded provider of property, casualty, supplemental, and health insurance -- fits that description. The Swiss company was previously known as ACE Limited until 2016, when it acquired Chubb and adopted its brand.
Chubb's combined property and casualty (P&C) ratio, which should remain below 100% (indicating its claims don't exceed its premiums earned), came in at just 85.7% at the end of 2025. That's well below the industry average of 96.6% for P&C insurers in the United States. It's also been upgrading its own AI capabilities to keep up with Lemonade and other tech-driven insurers.
Chubb doesn't disclose its exact customer count, but analysts expect it to generate roughly 43 times Lemonade's revenue in 2026. They only expect its revenue to grow at a 5% CAGR from 2025 to 2027, but it's firmly profitable. Wall Street expects its EPS to increase at 6% CAGR during that period. Its stock still looks like a bargain at 12 times this year's earnings; it pays a decent forward yield of 1.2%; and it has repurchased 15% of its shares over the past decade. So if you're looking for an evergreen, safe-haven insurance play in this volatile market, Chubb would be a much better bet than Lemonade's speculative stock.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.