Insurtech Lemonade

Insurtech Lemonade says that in-force premiums (IFP) with the firm have risen 76% year on year to reach $609m in 2022.

IFP stood at $347m in Q3 2021 and at $189m in Q3 2020. Gross earned premiums over the same periods rose from $43m in Q3 2020, to $80m in Q3 2021, and reached $136m in this year’s third quarter.

At $66m, the firm’s EBITDA loss in Q3 2022 was better than expected. According to the insurer, this was primarily due to increased operating expenses.

Net loss for the period was $91.4m, compared to the $66.4m, reported in the third quarter of 2021. The insurer’s gross loss ratio went from 77% in Q3 2021 to 94% in Q3 2022.

While Q3 saw improvements across most KPIs, a notable exception was our gross loss ratio, though this reversal was largely anticipated, and accounted for in our guidance.

Lemonade expect the acquisition of Metromile to add something like 3 to 5 percentage points to our loss ratios for the next few quarters, every now and then a CAT event will put an unforeseen dent in our loss ratios.

Indeed, completing the acquisition had the effect we’d foreseen, while ‘Ian’ – the deadliest hurricane to hit Florida since 1935 – added the ‘unforeseen’.

Looking forward, we expect our loss ratio to continue the downward trajectory of recent quarters, with occasional ‘unforeseen’, if short lived, reversals.

It is slowing down for Q4 2022. Lemonade business enjoys strong seasonality, and after a couple less predictable COVID-years, the familiar patterns were on full display this summer. With Q4 typically being the most seasonably weak quarter, startup drew down marketing resources earmarked for Q4, and deployed them to greater effect in Q3.

The insurtech said that the resultant Q4 slowdown may primarily reflect seasonality, and highlighted that it is also a reminder of the fiscal responsibility Lemonade is committed to.

by Peter Sonner