Lemonade: The pet-first, ex-CAT insurer
Key takeaways of Lemonade’s Q2’23 shareholder letter:
- Q2’23 had better top and bottom lines than anticipated.
- In-force premium (IFP) reached $687 million, up 50% YoY.
- 55% quota share reinsurance program was oversubscribed.
- Secured customer acquisition cost (CAC) financing to enhance cash-flow.
- California approved rate hikes: 30% for homeowners, 23% for Lemonade Pet.
- Rate increases are accelerating with expected improvements in loss ratio.
- Adjusted EBITDA loss: $53 million, better than projected despite CAT losses.
- Q2 net loss: $67 million.
- Two new structures have been introduced for risk retention: Lemonade Re in the Cayman Islands and a captive cell in Bermuda.
- The newly introduced Synthetic Agents program aims for capital efficiency by addressing the upfront costs in the direct-to-consumer strategy.
- The Synthetic Agents help balance the cash outflows with premium collections, enabling accelerated growth without a ‘cash flow gap’.
- Lemonade is analyzing homeowners business based on several factors to assess risk better – some policies shouldn’t be renewed.
- Already non-renewed about 2,000 homeowners policies.
- This review is an ongoing process – anticipate it to significantly reduce loss ratio by a double-digit percentage in the upcoming years.
- Reached the one-year mark since acquiring Metromile, which has integrated smoothly with Lemonade.
- Though the acquisition significantly boosted Lemonade’s metrics last year, its impact will start to fade in year-on-year comparisons. For instance, while Lemonade reported a 50% IFP growth year-on-year, its growth without Metromile’s contribution was 28%.
- Customer count increased by 21% to 1,906,408 as compared to Q2’22.
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