Insurtech Lemonade booked a third-quarter net loss of $91.4 million compared with a net loss of $66.4 million during the same quarter last year, but in a letter to shareholders, the company said both top and bottom lines came in ahead of expectations.
The New York City-based startup firm posted in-force premiums of $609 million during the third quarter – a 76% increase compared to the third quarter of 2021 – and also netted a gross earned premium of $136 million, a 71% increase year-over-year.
A notable reversal: Lemonade posted an 8% jump in gross loss ratio during the third quarter of 2022. The insurance company pointed to its acquisition of Metromile, a pay-per-mile car insurer, and other factors for the recent spike, which brought its GLR to 94% — a 17% increase year-over-year.
“In our most recent earnings call we noted that ‘we expect the acquisition of Metromile… to add something like 3 to 5 percentage points to our loss ratios for the next few quarters, [and] every now and then a CAT event will put an unforeseen dent in our loss ratios,'” reads a shareholder letter. “Indeed, completing the acquisition had the effect we’d foreseen, while ‘Ian’ – the deadliest hurricane to hit Florida since 1935 – added the ‘unforeseen.'”
During the company’s third-quarter call, the impact of claims paid from Ian was described as “fairly minimal” on the loss ratio and totaled less than $3 million. Florida, in aggregate, represents less than 1% of the company’s business. Looking forward, company leaders expect Lemonade’s loss ratio to continue its overarching downward trajectory of recent quarters, with occasional unforeseen – if short-lived – reversals.
Lemonade’s customer count increased to 1,775,824 during Q3 2022 – a 30% increase compared to the third quarter of 2021. Premium per customer increased 35% versus the prior year to $343. Third quarter revenue of $74 million increased by $38.3 million or 107% as compared to the third quarter of 2021, primarily due to the increase of gross earned premium during the quarter, and to a lesser extent, a reduction in the proportion of earned premium ceded to reinsurers.
During an Investor Day presentation on Nov. 15., Tim Bixby, Lemonade’s chief financial officer, explained that company leadership has noted several times in recent quarters that it expected the third quarter of 2022 “to be our quarter of peak losses, in terms of the EBITDA loss that we reported. And we continue to believe that that is the case.”
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