Lemonade’s Q3 highlights

Lemonade shared their Q3 2021 results yesterday and here are some highlights:

  • In-force premium reached $347M, an 84% year-over-year increase
  • Total number of customers stood at 1,363,754, a 45% year-over-year increase
  • Premium per customer reached $254, up 26% from Q3 2020
  • Bundles represented 8% of total IFP and the premium per bundled customers is 3x higher than non-bundled customers
  • Gross loss ratio was 77%, up from 72% a year ago
  • Operating expense, excluding net loss and loss adjustment expense, increased by 98% to $82.4 million. The main drivers for this increase are sales and marketing, technology development, and general and administrative
  • Net loss reached $66.4 million, compared to a $30.9 million in Q3 2020
  • Lemonade’s cash, cash equivalents, and investments totaled $1.1 billion at the end of the quarter compared to $578 million as of December 31, 2020, primarily reflecting the net proceeds from its follow-on offering of approximately $640 million, partially offset by $94.7 million of cash used in operations

Lemonade’s book of business is 53% renters, 30% homeowners, 15% pet, and 2% life. The company’s non-renters’ share of its overall book of business reached 47%, up 3 points from 44% in Q2 2021. If you’re encouraged by homeowners making up 30%, consider this – a year ago, when Lemonade only offered renters and homeowners, renters policies accounted for 70%, which means the homeowners percentage relative to the book of business hasn’t grown.

In Lemonade’s Q2 2021 letter to shareholders, the company said that its life product has been a bit slower out of the gate. “Given we were primarily working through product improvements in Q1 21, Q2 21 is the first time we allocated meaningful advertising dollars to the product. While the dollars were still small relative to the scope of our total business, the signals were strong, with tangible traction and conversion funnel improvement achieved in this first quarter of growth investment. We are encouraged by the trends we are seeing in the life business and look forward to life representing a meaningful slice of the Lemonade IFP pie over time.” Despite these strong signals, Lemonade has decided to re-allocate marketing dollars from the life business to the European business in the near term. That’s bad news for Bestow.

Similar to other advertisers, Lemonade saw a decline in their marketing efficiency as measured by the change in IFP driven by advertising spend. The decline was 26% year-over-year and in total, the company spent $42.2 million on sales and marketing during the quarter, increasing its net customer base by 157,582 between Q2 and Q3 of 2021.