Lemonade has reported a 64% increase in in-force premium for the fourth quarter of 2022, alongside improvements in its loss ratios and a narrower net loss.
Premiums totalled $625.1 million at the end of Q4, with Lemonade attributing the increase to a 27% increase in the number of customers as well as a 30% increase in premium per customer.
Annual growth of in-force premiums absent the impact of Lemonade’s acquisition of Metromile would have been approximately 38%.
The company also reported “steady and significant improvement” in loss ratios across its book, with the gross loss ratio measured at 89% for the quarter, versus 94% for the same period in the prior year, and 96% in the year before that.
Accordingly, Lemonade’s adjusted EBITDA loss contracted to $52 million, down from $66 million in Q3; while net loss for the period was $64 million, down from $91 million in the prior quarter.
Q4 revenue was recorded at $88.4 million, up 116% from 2021, partly due to a reduction in the proportion of earned premium ceded to reinsurers, from approximately 72% in Q4 2021 to 58% in Q4 2022.
Writing in a letter to shareholder alongside the results, Lemonade noted that 2022 marked its first full year with all five of its major products in market, namely, Renters, Homeowners, Car, Pet, and Life.
“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 commented.
However, it also highlighted that regulatory rate approvals in some of the states in operates in have not kept pace with inflationary pressures, which could have implicated for its loss ratio and growth prospects going forward.
“So long as these mismatched pockets persist, our growth will be more muted, as we skirt mispriced enclaves,” it said. “Happily, the unusually rapid pace of inflation in 2022 may be showing signs of slowing, and these mismatched holdouts are shrinking. Yet, inflation in pet services and home and car repairs, have trended disproportionately high, and some regulators have been slow or resistant in approving commensurate rate adjustments.”
Excluding these areas from its growth plans means the company now expects to report overall growth in in-force premiums of around 11% to 12% per year.
“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,” it concluded.