# Branch Financial Model

Tech-enabled home & auto insurance company operating as a reciprocal exchange, selling bundled policies via embedded, direct, and agency channels.

- Canonical: https://finamodel.com/startups/branch
- Excel download: https://finamodel.com/startup-models/branch.xlsx
- Category: InsurTech
- Model type: Insurance GWP
- Funding round: Series C
- Funding: $147M
- Founded: 2022
- Geography: United States [DECK, slide 3]
- Customer: B2B2C

## About the company

Branch is a technology-enabled home and auto insurer operating through a reciprocal exchange. It offers bundled policies with a simplified purchase flow and distributes through embedded partners, direct channels, and independent agencies.

The reciprocal structure means Branch earns management and subscription-fee income for operating the exchange, while subscribers hold underwriting risk. The company reached roughly $100 million of annualized sales run rate in late 2021 with rapid in-force premium growth.

The model separates management-fee revenue from exchange underwriting results. Policies, average premium, channel mix, fee rate, loss ratio, reinsurance, and acquisition cost determine economics. Embedded distribution, policy retention, and combined ratio drive the forecast.

## What's included

- 5-year monthly revenue build with stage-appropriate growth assumptions
- Full P&L, headcount plan, and operating-expense schedule
- Cash-flow statement, runway, and burn-rate tracking
- Valuation via exit multiple with a DCF cross-check
- Returns analysis with MOIC and IRR
- Unit economics including CAC, LTV, payback, and cohort retention

## Product & value proposition

- Bundled home + auto insurance sold as a single purchase (name + address only) - frictionless bundling saves customers ~16% per year vs. incumbents.
- Three distribution channels: Embedded (API-native, highest LTV:CAC), Direct (DTC bundled), Agency (independent agents).
- Reciprocal exchange structure: risk sits with subscribers; Branch earns a management/subscription fee, generating stable fee income regardless of underwriting profit.
- Public Benefit Corporation (PBC) alignment; social mission framing around client outcomes.

## Market

- TAM: $355B - 2020 U.S. Home & Auto premiums

## Revenue model

- Revenue stream 1: Management/subscription fee income from operating the reciprocal exchange - described as "consistent, subscription fee income regardless of risk-based underwriting profit outcome". Specific fee % not disclosed.
- Revenue stream 2: Underwriting profit participation (implied by reciprocal structure) - not quantified.
- Pricing by channel of origin: Branch explicitly varies policy price by acquisition channel to reflect CAC in the premium.
- Product: bundled home + auto policies (two policies per customer in direct channel).

## Traction & metrics

- Annualized Sales Run Rate: reached ~$100M ARR by December 2021 (bar chart y-axis top = $100.0M, Dec 2021 bar at ~$100M)
- YoY sales growth: 1,934% - Dec '21 vs. Dec '20
- 2021 In-Force Premium CMGR: 23.56% (monthly compound growth rate, FY 2021)
- Competitor CMGR benchmarks for context: Lemonade 4.77%, Hippo 4.65%, Root 1.84%, GEICO 0.96%, Progressive 0.71%, State Farm 0.53%, Allstate 0.24%
- Bundle rate: ~56% of all Branch policies are bundled vs. Progressive ~10%, Lemonade ~3%
- Account lifetime: ~9.1 years (Branch) vs. Progressive ~5.5, Lemonade ~4.3, Root ~2.3

## Unit economics

- LTV:CAC by channel (based on '22 gross margin target and YE22 plan):
  - Embedded: 11.8
  - Direct: 3.6
  - Agency: 2.3
- Gross margin definition: '22 gross margin target by channel (footnote states this is forward-looking plan, not actuals)
- Bundling saves customers 16% per year on average vs. incumbents

## Competition / moat

- Incumbents: high CAC, friction-heavy bundling, misaligned incentives, earnings volatility
- Insurtechs: unsustainable loss ratios, overpaying for acquisition, complicated expense structures
- Branch moats: API-native distribution (instantaneous purchase), frictionless bundling, price-by-origination underwriting, vertically integrated fixed-fee reciprocal structure, PBC/social mission
- Fastest 2021 in-force premium CMGR among all named peers (23.56% vs. next-best Lemonade at 4.77%)

## Team & funding ask / use of funds

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## Recommended financial model

- **Archetype + why:** Insurance GWP / management-fee model with a reciprocal exchange overlay. Branch earns a management fee on Gross Written Premium (GWP); the exchange holds underwriting risk. The correct P&L has two layers: (a) fee income = fee rate × GWP, which is stable and subscription-like; (b) exchange underwriting results (combined ratio) shown separately. This is distinct from a pure SaaS or DTC model. A 3-statement build should sit underneath.

- **Forecast horizon & granularity:** 5 years (2022–2026), monthly for Year 1, quarterly for Years 2–3, annual for Years 4–5. Monthly in Year 1 is important given the rapid non-linear growth curve visible through 2021.

- **Key drivers & assumptions:**

| Driver | Value | Source |
| -- | -- | -- |
| Starting Annualized GWP (Jan 2022) | ~$100M | - |
| 2021 in-force CMGR | 23.56% | - |
| Year 1 (2022) GWP growth rate | 80–120% YoY | deceleration from 1,934% base-year growth; still exceptionally high early-stage |
| Year 2–5 GWP growth rates | 50% / 40% / 30% / 25% | tapering as book scales; typical high-growth insurtech trajectory |
| Channel mix: Embedded / Direct / Agency | 30% / 40% / 30% | based on narrative emphasis on embedded as strategic priority |
| Bundle rate | 56% | held flat as a model assumption |
| Average account lifetime | 9.1 years | - |
| LTV:CAC - Embedded / Direct / Agency | 11.8 / 3.6 / 2.3 | YE22 plan targets |
| Management fee rate (% of GWP) | 15–20% | typical reciprocal exchange management fee range; not disclosed |
| Gross margin by channel | - | footnote on slide 5 references '22 gross margin target by channel |
| Loss ratio (exchange level) | 65–75% | target range for personal lines; actual not in deck |
| Expense ratio | 25–35% | combined ratio target ~95–100%; management co. expenses separate |
| CAC - Embedded / Direct / Agency | back-solve from LTV:CAC ratios once LTV is estimated | - |
| Policies per account | ~1.78 (56% bundle × 2 + 44% × 1) | derived from bundle rate |

- **Scenarios (Base / Bull / Bear - which variables flex):**
  - **Base:** GWP CMGR decelerates from ~23% monthly to ~8% by Year 3; fee rate 17%; loss ratio 70%.
  - **Bull:** CMGR holds at ~15–18% through Year 2 on embedded channel acceleration; fee rate 20%; loss ratio 65%.
  - **Bear:** Regulatory headwind or reinsurance cost spike slows growth to 30% YoY in 2022; loss ratio 80%; CAC escalation compresses LTV:CAC to 1.5× across channels.
  - **Key flex variables:** GWP growth rate, management fee rate, loss ratio, channel mix (Embedded % higher = better LTV:CAC).

- **Required sheets / outputs:**
  1. **Assumptions** - all drivers with / tags, scenario toggles
  2. **GWP Build** - new business by channel × premium per policy, renewal retention model (9.1-yr lifetime → ~89% annual retention)
  3. **Management Company P&L** - fee income (fee rate × GWP), operating expenses, EBITDA
  4. **Exchange Underwriting P&L** - GWP, net earned premium, loss ratio, expense ratio, combined ratio, underwriting profit/loss
  5. **Unit Economics** - CAC by channel, LTV by channel, LTV:CAC by channel; cohort retention curve
  6. **Balance Sheet** - reserves, cash, equity (simplified)
  7. **Cash Flow** - operating cash to management co.; capital requirements for exchange surplus
  8. **Dashboard** - KPI summary: GWP, fee revenue, combined ratio, LTV:CAC by channel, bundle rate, retention

## Frequently asked questions

### Is the Branch financial model free?

Yes. The Branch model is a free Excel download with live formulas.

### Can I change the assumptions?

Yes. The workbook is editable and its live formulas recalculate when assumptions change.