Auto insurtech Lemonade has reported a gross loss ratio of 96% for the fourth quarter of 2021, up from 73% a year ago, and 77% in the third quarter of 2021.
The company attributed the increase to an unfavorable prior period development due to a handful of older large losses for which it under-reserved.
This resulted in a larger overall net loss during the quarter, which amounted to $70.3 million, compared to $33.9 million for the same period last year.
However, Lemonade’s gross profit did still increase by $0.3 million, or 4.0%, to $7.8 million, primarily due to an increase in gross earned premium, partially offset by the higher net loss ratio.
Revenue likewise doubled to $41.0 million due to the increase of gross earned premium during the quarter, as well increases in net investment income & commission income, and a modest reduction in the scope of Lemonade’s quota share program.
Lemonade’s in force premium, defined as the aggregate annualized premium for customers as of the period end date, increased by 78% to $380 million in the quarter, primarily due to a 43% increase in the number of customers as well as a 25% increase in premium per customer.
As a result, the insurtech’s gross earned premium for Q4 also increased by $39.3 million or 79% as compared to the fourth quarter of 2020, coming in at $39.3 million.
“2021 was a very productive year for us, and we ended it materially larger, more diversified, and strategically stronger than ever,” Lemonade said in an address to shareholders.
“Looking to 2022, having rounded out the major product categories (in 18 months we moved from a monoline underwriter, to offering pet, life, and car in addition to home and renters), we expect that this will be the year we shift much of our firepower to the next phase of our growth.”
“While we will continue to develop new products and new technologies for many years to come, for the first time we believe we’ve achieved a critical mass of both, enabling us to shift resources to harnessing our technology and products in new ways. This means leveraging our technology to lower expense ratio through automation, and loss ratio through machine learning, while growing LTV/CAC through cross selling and bundling.”
