Lemonade says losses have peaked

27 February 2023

US insurtech Lemonade reported a smaller net loss for October-December and says it had been a quarter of “good news across the board,” with strong growth, improved loss ratios and “peak losses expected to be behind us”.

Steady and significant improvement across the book cut Lemonade’s gross loss ratio to 89%, from 96% a year earlier.

“Our business was two thirds larger this year than last – highlighting the rapid and demonstrable improvements to our underlying business during the course of 2022,” the insurtech said.

“All told, we enter 2023 materially stronger, better and bigger than we entered 2022. We fully expect 2023 to see continued improvements in loss ratio, efficiencies and growing with our customers.”

Lemonade now has five major products: renters, homeowners, car, pet and life.

Its fourth-quarter net loss was $US63.7 million ($94.66 million), compared with $US70.3 million ($104.47 million) a year earlier and $US91 million ($135.24 million) in the third quarter of 2022.

Revenue was $US88.4 million ($131.37 million), compared with $US41 million ($60.93 million) a year earlier, while net earned premium jumped to $US63.2 million ($93.92 million) from $US25.4 million ($37.74 million).

“With the heavy lifting associated with building new products behind us, we were able to shift much of our firepower to lowering our loss ratio and expense ratio, all while growing with our customers,” it said. “Our loss ratio continued its (uneven) decline and we saw what we expect are peak losses.

“We expect continued loss ratio improvement.”

CFO Tim Bixby says Lemonade’s long-term goal is a loss ratio is well under 75%.