Insurtech Lemonade has reported a 20% rise in in-force premium to $747 mn for 4Q 2023, while its gross loss ratio fell 12% to 77% in the quarter.
Q4 delivered more topline growth than we had anticipated, and the outperformance of the bottom line was more significant yet. Relative to expectations at the outset of the year, we saw materially higher top line growth (~$50 mn better), and even more significant improvements in our bottom line (~$70 mn better)
Stepping back further, an 18 month panoramic view shows that – for the first time since our founding – our top and bottom lines have been moving in unison: up and to the right.
Lemonade’s customer count increased 12% to over 2 mn in Q4’23, and premium per customer rose 7% year-on-year to $369 mn.
In the insurance industry it is customary to share a trailing 12 months loss ratio just once a year, at the end of each year (Annual Loss Ratio) – and in 2023 ours was 85%, down from 90% in 2022.
“We believe this trailing 12 month view does add a more credible perspective on longer term trends“, insurtech says.
Going forward, we expect to share TTM Loss Ratio, in an effort to give a less noisy view of our results, and a more comprehensive view of progress.
Gross earned premium also increased by $29.7 mn or 20% to $181 mn, compared to the fourth quarter of 2022, primarily due to the increase of IFP earned during the quarter.
“While our target of <75% seems tantalizingly close, we want to caution that we expect continued bumpiness on our way, and that we may have not seen the last of the 80s quite yet”.
Despite the surprises that nature unleashes every now and then, loss ratios do have a forecastable rhythm to them. In large measure this traces back to the globe’s axial tilt and the familiar seasons it induces, though holiday and travel patterns also register on loss ratios in a broadly predictable way.
At $115.5 mn, revenue increased 31% in Q4’23, primarily due to the increase of gross earned premium during the quarter, coupled with greater investment income.
Lemonade has reported Q4 2023 gross profit of $33.6 mn increased by $20.9 mn or 165% as compared to the fourth quarter of 2022, primarily due to higher earned premium and improved loss ratio in the fourth quarter this year.
Total operating expense, excluding net loss and loss adjustment expense, fell by 5% to $90.1 mn in the fourth quarter of 2023, primarily driven by lower employee related costs.
Despite the improvements, Lemonade still reported a net loss of $42.4 mn in Q4’23, although this is narrower than the $63.7 mn loss seen a year earlier.
by Peter Sonner
