Lemonade reported a 64% increase in in-force premium for the fourth quarter of 2022, as well as improved loss ratios and a narrower net loss.
At the end of Q4, premiums totaled $625.1 million, with Lemonade attributing the increase to a 27% increase in customer count and a 30% increase in premium per customer.
Without the impact of Lemonade’s acquisition of Metromile, annual growth in in-force premiums would have been around 38%.
The company also reported “steady and significant improvement” in loss ratios across its book, with the gross loss ratio measuring 89% for the quarter, compared to 94% for the same period last year and 96% the year before.
As a result, Lemonade’s adjusted EBITDA loss shrank to $52 million, down from $66 million in Q3, and its net loss was $64 million, down from $91 million in the previous quarter.
Q4 revenue was $88.4 million, an increase of 116% over 2021, owing in part to a decrease in the proportion of earned premium ceded to reinsurers, from approximately 72% in Q4 2021 to 58% in Q4 2022.
Lemonade noted in a letter to shareholders accompanying the results that 2022 marked the company’s first full year with all five of its major products in market, namely Renters, Homeowners, Car, Pet, and Life.
“With the heavy lifting of 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,” the company said.
However, it also stated that regulatory rate approvals in some of the states in which it operates have not kept up with inflationary pressures, which could have implications for its loss ratio and future growth prospects.
“As long as these mismatched pockets persist, our growth will be more muted, as we avoid overpriced enclaves,” the report said. “Fortunately, the unusually rapid pace of inflation in 2022 may be slowing, and these mismatched holdouts are shrinking. Nonetheless, inflation in pet services, as well as home and auto repairs, has been disproportionately high, and some regulators have been slow or resistant to approving commensurate rate adjustments.”
By excluding these areas from its expansion plans, the company now expects to report annual growth in in-force premiums of around 11% to 12%.
“In total, we enter 2023 materially stronger, better, and larger than we did in 2022. We fully expect continued improvements in loss ratio, efficiencies, and customer growth in 2023,” it concluded.