# Marshmallow Financial Model Technology-powered licensed insurance carrier offering cheap, fast, and fair UK car insurance, expanding into European non-life markets. - Canonical: https://finamodel.com/startups/marshmallow - Excel download: https://finamodel.com/startup-models/marshmallow.xlsx - Category: InsurTech - Model type: SaaS ARR / Valuation - Funding round: Series B - Funding: $30M - Founded: 2020 - Geography: UK (primary - motor insurance); expanding to European non-life markets [DECK]. - Customer: B2C ## About the company Marshmallow is a technology-powered UK motor-insurance carrier selling directly online. It uses alternative data, pricing, and fraud technology to offer faster, fairer cover, particularly for customer groups poorly served by traditional underwriting. The company earns gross written premium and retains underwriting risk, with reinsurance reducing net exposure. It reported a run-rate turnover above $175 million while planning expansion from UK motor into property and European non-life markets. The model is a carrier GWP and combined-ratio forecast. Policies, average premium, loss ratio, fraud savings, reinsurance, and expense ratio determine underwriting income. Pricing accuracy, claims severity, reserve needs, and international growth are the key variables. ## 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 - UK private motor insurance sold direct-to-consumer online. - Differentiators claimed: - Faster: purchase in minutes, policy changes in seconds online, chat response under 2 minutes. - Fairer pricing: proprietary data model uses different data inputs per customer segment (e.g. expats, unemployed, smart-car owners) rather than blunt categorical proxies. - No change fees: no mid-term adjustment fees, unlike incumbent insurers. - Operates as a full-stack carrier (Marshmallow Insurance Ltd, MIL) - owns underwriting, pricing, and claims. - Reinsurance programme in place: xx% of risk reinsured. - Future products: UK property insurance ($10bn+ market), European motor and non-life. --- ## Market - UK auto insurance: $20bn - EU auto insurance: $173bn - EU non-life insurance: $500bn (also cited as >€500bn) - Global P&C insurance: $1.7tn - UK property insurance: $10bn+ - Market fragmentation: No UK auto insurer holds >15% market share; only 8 hold >5%. Only Allianz holds >10% of European non-life. - COVID tailwind: 44% of people reducing public transport use; 48% of ride-sharing users reducing use; 15% of used car buyers unplanned purchasers. 90% of European customers still buy insurance offline - large online conversion opportunity. --- ## Revenue model - Primary revenue: Gross Written Premium (GWP) from policyholders; reported as "turnover" in the deck. - Average premium: ~$xxx vs. market average ~$705. - Net earned premium = GWP minus reinsurance ceded. - Profit lever: loss ratio management through proprietary fraud detection and pricing models. - Secondary lines (future): UK property, European motor/non-life. - Distribution: direct-to-consumer online only (no broker channel mentioned). --- ## Traction & metrics All specific business-volume numbers (policies sold, users, team size, run-rate turnover detail, EBITDA, cash reserve) are redacted with XXX/XX placeholders throughout slides 4, 5, 7, 11, and 15. Unredacted data points: - Run-rate turnover: **$175m+** - Market average annual premium: **~$705** - Marshmallow's own avg premium is redacted - Carrier licence granted: **December 2020** - Monthly new policies: "over xxk new policies in August" - Loss ratio: described as "excellent" with "xx% incurred loss ratio over the last three years" - figure redacted - Efficiency: xx FTE per £1m turnover - LTV/CAC: described as "xxx CAC" (LTV is a multiple of CAC); CAC earned back immediately on policy inception - NPS and CSAT: "rising" - figures redacted - Marketing efficiency: "~$xx of turnover for every $1 spent on marketing" - Growth rate 2019–2020: "xxx%" --- ## Unit economics All unit-economic figures are redacted. Structural claims only: - Average premium: Marshmallow's own is below market average of ~$705 - Loss ratio: below industry average (claim made via comparison vs. US insurtechs Hippo, Lemonade, Root, Metromile - all figures redacted) - LTV/CAC: LTV described as "xxx × CAC"; claimed to be superior to US insurtechs - CAC payback: immediate at policy inception - Reinsurance: significant % of risk ceded (exact % redacted) - GWP per $1 of net loss: metric shown vs. peers but all values redacted --- ## Competition / moat Competitors cited: - UK: Admiral (~15% share), AXA, Direct Line Group, Aviva, Liverpool Victoria - Europe: Allianz, AXA, Zurich, Talanx, Generali, Mapfre, Ergo, Covea, Aviva, Groupama Moat claims: - Proprietary pricing and fraud technology - uses alternative data sources for underwriting - Licensed carrier: full control of product, pricing, and claims (unlike MGAs dependent on panel insurers) - End-to-end tech stack: very low FTE per £1m turnover vs. incumbents - NPS/CSAT trajectory improving as digital ownership increases - Reinsurance partnerships protect balance sheet while scaling Comparator benchmarking (slide 11): Claims superior loss ratio, LTV/CAC, and GWP efficiency vs. Hippo, Lemonade, Metromile, Root - but all figures redacted. --- ## Team & funding ask / use of funds Founding team: - Alexander Kent-Braham - Co-CEO, MTL (Law degree; ex-QCM hedge fund, Yoti) - Oliver Kent-Braham - Co-CEO, MTL (Business degree; ex-M&A, Yoti) - David Goate - CTO (CS First Class; ex-IG, Yoti, 5th employee) - Tim Holliday - CEO, MIL; ex-Zurich UK MD Personal Lines / CUO, responsible for >£2bn GWP; Oxford Maths MA + PhD Statistics Key management: VP Operations (ex-Zipcar/Pragma), Head of Pricing (actuary, ex-Covea/Zurich), Underwriting Director (ex-Pukka Insurance CIO), Head of Data Science (ex-QuantumBlack/McKinsey), VP Marketing (ex-Dyson P&L), Head of People (ex-Faculty/EY). Board: - Bernard Kantor - NED; co-founder Investec (grew 10→10,000 people) - Eileen Burbidge - NED; Passion Capital (Monzo, GoCardless); UK Fintech Special Envoy to Treasury - Karl Bedlow - Chairman; ex-Tesco Bank MD Insurance, Zurich MD Personal Lines - Kathryn Morgan - NED; trained actuary, ex-FCA/PRA Founded: 2017. --- ## Recommended financial model ### Archetype + why **Insurance P&L / GWP model with carrier economics.** Marshmallow is a licensed carrier, not an MGA or broker. The correct model architecture is: GWP → net earned premium (after reinsurance) → underwriting result (loss ratio + expense ratio = combined ratio) → EBITDA. This is fundamentally different from a SaaS or marketplace model. The $175m+ run-rate turnover is GWP, not SaaS ARR. ### Forecast horizon & granularity - Horizon: 5 years (FY2021–FY2025) to capture the "projections to 2024" framing plus one forward year - Granularity: Annual (deck only shows annual projections); quarterly optional for UK motor only - Geographies: UK Motor (primary), UK Property (Year 3+), EU expansion (Year 4+) - per deck roadmap ### Key drivers & assumptions **Volume** - Policies in force (PIF): start from implied base consistent with $175m+ GWP at ~$705 avg premium ≈ ~250k+ policies; grow at 40–60% p.a. in base case (rapid growth claim; 2019–2020 growth rate redacted but described as very high vs. US insurtech peers) - Average premium per policy: £600–£650 for Marshmallow (below market avg ~$705 reflecting target segment discount); assume 3% annual increase (CPI-linked) - Monthly new policy volume: ~30–50k/month in Year 1, scaling per PIF growth **Revenue (underwriting)** - GWP: PIF × average premium - Reinsurance ceded %: 40–60% of GWP ceded (heavy quota share typical for growth-stage carriers; exact % redacted) - Net earned premium (NEP): GWP × (1 − reinsurance %) **Loss ratio** - Gross loss ratio: 70–80% (UK motor market typical; Marshmallow claims superior - below market - but figure redacted) - Net loss ratio post-reinsurance: 55–70% depending on quota share structure - Reinsurance recoveries modelled separately **Expense ratio** - Acquisition / marketing costs: 10–20% of NEP; deck claims immediate CAC payback at inception - Management expense ratio (MER): 15–25% of NEP; deck highlights low FTE per £1m turnover - build operating leverage assumption - Combined ratio: loss ratio + expense ratio; target <100% for underwriting profit **Unit economics** - CAC: £50–£150 per policy (UK digital insurance benchmark; exact figure redacted) - LTV: CAC × "xxx" multiple per deck claim; model as: avg premium × gross margin × avg policy tenure (2–3 years) - Retention rate: 70–80% annual renewal (UK motor benchmark; not in deck) **P&L structure** - Turnover = GWP (confirmed by deck usage) - Gross profit: NEP − net claims - EBITDA: Gross profit − opex (tech, people, marketing) - Carrier capital requirement (Solvency II): 10–15% of NEP held as regulatory capital - flags balance sheet need **Expansion** - UK Property: Year 3 launch, £0 GWP Year 1 → ramp over 3 years; separate loss ratio assumption (property ≠ motor) - EU expansion: Year 4 launch; loss-making 2–3 years as stated ### Scenarios | Variable | Bear | Base | Bull | | -- | -- | -- | -- | | GWP growth rate | 30% p.a. | 50% p.a. | 75% p.a. | | Loss ratio (net) | 75% | 65% | 55% | | Reinsurance ceded % | 50% | 45% | 35% | | CAC (£ per policy) | 150 | 100 | 60 | | Renewal retention | 65% | 75% | 82% | | EU launch timing | Year 5 | Year 4 | Year 3 | ### Required sheets / outputs 1. **Assumptions** - all drivers in one place, colour-coded vs. 2. **Policies model** - new policies, renewals, lapses, PIF by segment (UK Motor / UK Property / EU) 3. **GWP bridge** - PIF × avg premium, by segment 4. **Reinsurance schedule** - ceded %, retained GWP, reinsurance recoveries 5. **Underwriting P&L** - NEP, net claims, loss ratio, expense ratio, combined ratio, underwriting profit 6. **Operating P&L** - EBITDA waterfall: gross profit → marketing → tech → people → EBITDA 7. **Unit economics** - CAC, LTV, payback period, LTV/CAC ratio 8. **Capital / balance sheet summary** - regulatory capital (Solvency II SCR proxy), cash reserve runway 9. **Scenarios** - toggle sheet driving Bear/Base/Bull 10. **Dashboard** - KPI summary: GWP, NEP, combined ratio, EBITDA, PIF, LTV/CAC ## Frequently asked questions ### Is the Marshmallow financial model free? Yes. The Marshmallow 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.