Reinsurance News

Lemonade reports boon results

9th August 2022 - Author: Pete Carvill

A letter from Lemonade to its shareholders says that in-force premiums (IFP) with the firm have risen 54% year on year to reach $458m in Q2 2022.

LemonadeThe insurer said that (IFP) stood at $297m in Q2 2021 and at $155m in Q2 2020. Gross earned premiums over the same periods rose from $35m in Q2 2020, to $67m in Q2 2021, and reached $107m in Q2 of this year.

Writing in the letter, Lemonade said: “As noted above, our top and bottom lines came in ahead of our expectations. This belies the global financial picture, and it is noteworthy that one would struggle to detect the macroeconomic downturn based on our internal dashboards.”

It added: “This is less a credit to Lemonade than a reflection of the fact that we operate in an industry that is largely impervious to recessions, supply chain interruptions, and bear markets – and that we have a diversified portfolio of products and regions that enable us to offset local issues through rebalancing. Our screens are showing strong demand, marketing efficiency 3 ahead of plan, operational efficiencies continuing their ascent, and loss ratios continuing their descent.”

However, it said that its business was being impacted by inflation and the cost of capital, saying that concerns around the latter were persisting. However, it said that it had taken appropriate measures to mitigate the threat. The impact of this, it says, is being seen on the impact on its moderating loss ratio.

Stratumn, by SIA Partners

Around capital, it said: “Our last major capital raise was in January 2021, and in the intervening months we’ve seen our cost of capital increase by about one order of magnitude – a direct corollary of what has happened to ‘growth stocks’ during this period. Fortunately, we were well capitalised entering the downturn, so this heightened cost of capital has not had a first-order impact on our business.”

The firm also made reference to its recent acquisition of Metromile. As we reported back then, the deal means that Metromile shareholders will receive 7.3m Lemonade shares, while Lemonade received a business with over $155m in cash, over $110m in premiums, an insurance entity licensed in 49 states, and a team unsurpassed in harnessing precision data for auto insurance.

The firm said at the time that most Metromile employees will transition to roles at Lemonade, and Metromile CEO, Dan Preston, has assumed the role of senior vice president of strategic initiatives.

In its new letter to shareholders, Lemonade said: “Speaking of miles and driving, we’re thrilled to have closed our acquisition of Metromile 12 days ago. We spent approximately $145m-worth of stock on this acquisition, and in return we’ve received nearly 100,000 new customers, over $110m of additional IFP, over $155m in cash and cash equivalents, a second insurance entity with 49 state licenses, and precision data from about half a billion road trips. Downturns have their upsides.”

It added: “The closing of the Metromile transaction opens seven more markets in which we can soon bundle Car & Home, and further launches are in the works. While these developments will take several quarters to fully hit their stride, their value-unlock may prove significant in time.”

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