Insurtech Lemonade reported in-force premium of $1.33 bn, up 32%, extending a ten-quarter run of accelerating growth. Revenue climbed faster, rising 71% to $258 mn, driven by higher premium retention following a reinsurance shift.
Gross profit reached $100 mn, up 159% year over year. Adjusted EBITDA loss narrowed to $17 mn, improving 64%, while net loss fell 43% to $36 mn.
Cash flow improved sharply, with adjusted free cash flow at $17 mn and operating cash flow near breakeven.
The firm still targets its first adjusted EBITDA positive quarter in Q4 2026.
AI sits at the centre of scaling. Since late 2022, Lemonade Inc. embedded large language models across its stack, pushing efficiency higher while reducing headcount by 6%.
The company now runs at roughly $1 mn of in-force premium per employee, a level it says matches larger peers such as Progressive Corporation, Allstate Corporation, GEICO, and Travelers Companies.
Management sees further upside here. Automation expands capacity without hiring, keeps support quality tight, and pushes operating leverage higher.
Marketing efficiency held steady even as spend surged. Growth investment rose about 200% since Q1 2023, yet LTV to CAC stayed at or above 3x.
According to Beinsure analysts, this points to tight targeting models and stronger cross-sell economics rather than brute-force acquisition.
Pet insurance leads the book. The segment crossed $500 mn in in-force premium early in Q2, becoming the largest product line.
The business scaled in under six years and now ranks as the fourth-largest carrier by written premium in the US, while also becoming the most searched pet insurance brand.
Loss adjustment expense ratios sit near 4%, giving cost flexibility. Pricing relies on granular AI models, which match rate to risk with tighter segmentation. Distribution mixes direct sales, partnerships, and internal cross-sell, with about $85 mn of pet premium coming from existing customers.
Auto insurance shows similar momentum. In-force premium grew 60% year over year, a sharp acceleration from 9% a year earlier.
The segment delivered a 74% gross loss ratio, while new business more than doubled across both direct and cross-sell channels.
Newer states contribute meaningfully. Colorado, launched in 2025, already ranks as the fourth-largest state by auto premium share.
Early performance from the autonomous product looks strong, with conversion rates roughly 70% higher than standard offerings. Expansion into additional states is planned this year.
Across lines, underwriting trends remain stable even as growth accelerates. Management points to improving loss ratios across new and renewal books, which supports confidence in scaling without margin erosion.
The broader picture looks simple enough. Growth continues, losses narrow, and AI keeps pushing efficiency higher. The path to profitability stays in view, though execution still needs to hold at this pace.
Lemonade’s customer base increased 23% year over year to 3,142,581 in Q1 2026. Premium per customer rose 7% to $424, calculated as in-force premium divided by total customers.
Annual dollar retention reached 85%, up 1 pp from Q1 2025 and flat versus Q4 2025. Gross earned premium increased 31% to $306.2 mn, driven by higher in-force premium earned during the quarter.
Revenue rose 71% to $258 mn. Growth came from higher gross earned premium and a higher premium retention rate after Lemonade reduced quota share cession rates in Q3 2025.
Adjusted gross profit rose 119% to $100.8 mn. Both metrics benefited from higher revenue and a 19 pp improvement in net loss ratio, helped by stronger underwriting results and the comparison with Q1 2025, which included California wildfire losses.
Operating expenses excluding net loss and loss adjustment expense increased 25% to $159.3 mn. The rise mainly reflected higher growth spend for customer acquisition. Growth spend reached $54.3 mn, compared with $38.1 mn a year earlier.
Net loss narrowed to $35.8 mn, or $0.47 per share, from $62.4 mn, or $0.86 per share, in Q1 2025. Adjusted EBITDA loss improved to $17.1 mn from $47 mn, supported by revenue growth and better underwriting, partly offset by higher growth spend.
Cash, cash equivalents, and investments stood at about $1.14 bn at March 31, 2026. Lemonade was required to hold around $290 mn of regulatory surplus at its insurance subsidiaries.
Adjusted free cash flow improved to $17.4 mn, compared with negative $31 mn in Q1 2025.
