Insurtech start-up Lemonade has released its results for the second quarter of 2020, reporting a 9% decrease in its net loss and a 115% increase for in force premiums (IFP).
The firm posted a net loss of $21.0 million for Q2, compared with a net loss of $23.1 million for the same period last year.
Since its inception in 2015, Lemonade has seen success with its a strategy of targeting young first-time insurance buyers, with the long-term goal being to retain these customers later into life.
Lemonade also raised $319 million at its Initial Public Offering (IPO) after high-demand saw its price increase to $29 a share.
But the firm is not yet profitable, with Morgan Stanley forecasting net income profitability by 2026 and underwriting profitability by 2030.
However, the insurtech seems to have fared well in the pandemic, compared to its more traditional insurance peers.
For instance, less than 1% of Lemonade’s customers opted to defer their payments in Q2, while retention rates, click-through rates, and conversion rates all held steady.
Additionally, the firm saw little to no impact on positive trends that had been in progress prior to the coronavirus outbreak, including business growth, improving marketing efficiencies, and declining loss ratios.
“With millions of people fired or furloughed and billions in lockdown, Lemonade entered Q2 on a defensive footing,” the company stated in a letter to shareholders.
“At the start of the quarter we significantly slowed our marketing spend, suspended nonessential hiring, and offered to defer customers’ payments. Then, we braced for impact. We expected to see a spike in churn, a drop in demand, and a hit to our cash flow. None materialized.”
It continued: “Indeed, the COVID-19 pandemic seems to have been a fundamental accelerator of the trend towards digitization throughout society, and Lemonade is thankfully on the right side of that dislocation.”
Instead, over the Q2 period Lemonade improved its IFP by 115% to $155.1 million, primarily due to an 84% increase in the number of customers, as well as a 17% increase in premium per customer.
The firm’s total customer count increased by 84% to 814,160 as compared to the second quarter of 2019.
And premium per customer, defined as in force premium divided by number of customers, was similarly up 17% to $190, mainly due to a continued shift of product mix toward higher value homeowner policies, as well as growth in the overall average policy value.
Lemonade’s revenue for the quarter increased by $16.1 million, or 117%, to $29.9 million due to the increase of net earned premium during the quarter.
Earnings were offset by a 12% increase in operating expenses, which rose from $26.9 million to $30.1 million, with increases in other insurance expense, technology investment and general and administrative expense driven primarily by personnel growth and customer growth.
That said operating expenses were somewhat lower than expected in Q2, as Lemonade delayed hiring and decreased growth spending, particularly in the earlier part of the quarter, in reaction to uncertainty related to the onset of the 6 COVID-19 pandemic.