Lemonade Inc
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
LMND$39.55-4.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0001691421-24-000026
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0001691421-25-000031
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 205 previous paragraphs and 203 current paragraphs.
152 unchanged; 41 reworded; 5 added; 10 removed; 2 previous and 5 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
We had $83.4 million and $14.9 million of outstanding borrowings under the Amended and Restated Agreement as of December 31, 2024 and December 31, 2023, respectively. We incurred interest expense of $6.2 million and $0.4 million for the years ended December 31, 2024 and December 31, 2023, respectively, and such interest is included in “General and administrative expense” in the consolidated statements of operations and comprehensive income.
Current report
Net written premium increased $65.8 million, or 19%, to $415.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to factors noted above.
Current report
Loss and LAE, net decreased $3.4 million, or 1%, to $277.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was in line with growth in premium, increased claim costs and the impact of an extra-contractual car claim liability related to pre-acquisition Metromile, offset by reserve releases due to better than expected loss reserve emergence on homeowners multi-peril and pet lines of business. Net incurred losses in 2024 also included $3.5 million from Hurricane Helene and $4.0 million from Hurricane Beryl.
Current report
Income tax (benefit) expense decreased $8.8 million, or 124%, from $7.1 million income tax expense for the year ended December 31, 2023 to $1.7 million income tax benefit for the year ended December 31, 2024, due to decrease in the liability for uncertain tax positions due to updated benchmarking analyses in the current year.
Current report
(3) Includes $3.9 million extra-contractual car claim liability related to pre-acquisition Metromile, and asset impairment charge of $0.3 million related to a portion of the New York office sublease (Note 22), net of gain on termination of lease for the year ended December 31, 2024.
Removed paragraphs (10)
Previous report
Acquisition of Metromile
Previous report
On July 28, 2022 (the “Acquisition Date”), we completed the acquisition of Metromile, Inc. (“Metromile"), a leading digital insurance platform in the United States that offers real-time, personalized car insurance policies by the mile. We acquired 100% of Metromile's equity through an all-stock transaction based upon the exchange ratio of 0.05263 shares of Lemonade for each outstanding share of Metromile (the “Metromile Acquisition”). As a result of the Metromile Acquisition, Metromile stockholders received 6,901,934 shares of Lemonade's common stock, with minimal cash paid in lieu of fractional shares. In addition, we assumed all outstanding and unexercised options, and outstanding restricted stock units as of the Acquisition Date, which were converted into corresponding awards with substantially identical terms and conditions prior to the Acquisition Date, at the same exchange ratio of 0.05263. Our results of operations include those of Metromile from the Acquisition Date through December 31, 2023.
Previous report
We had $14.9 million of outstanding borrowings under the financing agreement and incurred interest expense of $0.4 million as of and for the year ended December 31, 2023.
Previous report
We decreased the overall share of proportional reinsurance from 75% of the premium to 70% effective July 1, 2021, and to 55% effective July 1, 2022. In addition, we purchased a reinsurance program to protect us against natural catastrophe risk in the U.S. that exceeds $80 million in losses effective July 1, 2022, and expired on June 30, 2023. Other non-proportional reinsurance contracts were renewed with terms similar to the expiring contracts. The proportional reinsurance and other non-proportional reinsurance contracts expired on June 30, 2023.
Previous report
(1) Includes Metromile beginning in the third quarter of 2023.
Previous report
•Gross profit, excluding net investment income and interest income and expense, and net realized gains and losses on sale of investments, plus
Previous report
Net written premium increased $126.7 million, or 57%, to $349.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily due to the $182.7 million, or 33% increase in gross written premium offset by the increase in ceded written premium of $56.0 million, or 17% for the year ended December 31, 2023, as compared to year ended December 31, 2022.
Previous report
Loss and LAE, net increased $113.1 million, or 68%, to $280.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily in line with growth in premium, increase in net retained losses due to change in participation under the proportional reinsurance contract and increased claims costs due to impact of inflation. Net incurred losses included $10.4 million from winter storm Elliott and $4.2 million from the hail storm that impacted our customers in Texas.
Previous report
Income tax expense increased $4.1 million, or 137%, to $7.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to change in transfer pricing methodology and uncertain tax positions.
Previous report
Cash used in operating activities was $163.0 million for the year ended December 31, 2022, an increase of $18.4 million from $144.6 million for the year ended December 31, 2021. This reflected the $56.5 million increase in our net loss, primarily offset by increases in unearned premium, funds held, and unpaid loss and loss adjustment expense that exceeded the increase in prepaid reinsurance premium, premiums receivable and amounts expected to be recovered from our reinsurance partners.
Reworded paragraphs (41)
Previous wording
Lemonade is rebuilding insurance from the ground up on a digital substrate and an innovative business model. By leveraging technology, data, artificial intelligence, contemporary design, and social impact, we believe we are making insurance more delightful, more affordable, and more precise. To that end, we have built a vertically-integrated company with wholly-owned insurance carriers in the United States and Europe, including the United Kingdom and the full technology stack to power them.
Current wording
Lemonade is rebuilding insurance from the ground up on a digital substrate and an innovative business model. By leveraging technology, data, artificial intelligence, contemporary design, and social impact, we believe we are making insurance more delightful, more affordable, and more precise. To that end, we have built a vertically-integrated company with wholly-owned insurance carriers in the United States and Europe, including the UK and the full technology stack to power them.
Previous wording
On June 28, 2023, we entered into a Customer Investment Agreement (the “Agreement”), with GC Customer Value Arranger, LLC (a General Catalyst company) ("GC"). Under the Agreement, up to $150 million of financing will be provided for our sales and marketing growth efforts. The Agreement has a commitment period of 18 months which expires on December 31, 2024 (“Original Commitment End Date”). Under the Agreement, subject to certain terms and conditions specified therein, at the start of each growth period, an Investment Amount of up to 80% of our growth spend (the "Investment Amount") will be advanced by GC. During each growth period, we will repay each
Current wording
On June 28, 2023, we entered into a Customer Investment Agreement (the “Agreement”), with GC Customer Value Arranger, LLC (a General Catalyst company) ("GC"). Under the Agreement, up to $150 million of financing will be provided for our sales and marketing growth efforts. The Agreement has a commitment period of 18 months which expires on December 31, 2024 (“Original Commitment End Date”). Under the Agreement, subject to certain terms and conditions specified therein, at the start of each growth period, an Investment Amount of up to 80% of our growth spend (the "Investment Amount") will be advanced by GC. During each growth period, we will repay each Investment Amount including a 16% rate of return based upon an agreed schedule. Once fully repaid, we will retain all future reference income related to each respective Investment Amount.
Previous wording
On January 8, 2024, we entered into an Amended and Restated Customer Investment Agreement (“Amended Agreement”) where GC will provide up to an additional $140 million of financing for our sales and marketing growth efforts beginning from the Original Commitment End Date through December 31, 2025. All other material terms and condition from the Agreement remain unchanged. The Amended Agreement contains standard customary representations, warranties and covenants by the parties, and will continue in effect unless terminated by any party pursuant to its terms.
Current wording
On January 8, 2024, we entered into an Amended and Restated Customer Investment Agreement (“Amended Agreement”) where GC will provide up to an additional $140 million of financing for our sales and marketing growth efforts beginning from the Original Commitment End Date through December 31, 2025. This was further amended and restated in April 2024 and June 2024 to clarify certain provisions. On February 3, 2025, the Agreement was further amended under which GC will provide up to an additional $200 million of financing from January 1, 2026 to December 31, 2026 for our sales and marketing growth efforts (collectively, with the Amended Agreement, the “Amended and Restated Agreement”). The Amended and Restated Agreement contains standard customary representations, warranties and covenants by the parties, and will continue in effect unless terminated by any party pursuant to its terms.
Previous wording
We conduct certain of our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and the region, including the evolving conflict in Israel and surrounding region. The conflict between Israel and Hamas, primarily within Gaza, has increased global economic and political uncertainty. There is still uncertainty regarding the extent to which the war and its broader macroeconomic implications will impact our operations in Israel. We will continue to evaluate the extent to which this may impact our business, financial condition, or results of operations. These and other uncertainties could result in changes to our current expectations. For additional information, see “Risk Factors - Risks Relating to our Business - We conduct certain of our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and the surrounding region.”
Current wording
We conduct certain of our operations in Israel and therefore our results may be adversely affected by political, economic and military instability and conflict in Israel and the surrounding region. This evolving conflict has increased global economic and political uncertainty. There is still uncertainty regarding the extent to which the war and its broader macroeconomic implications will impact our operations in Israel. We will continue to evaluate the extent to which this may impact our business, financial condition, or results of operations. These and other uncertainties could result in changes to our current expectations. For additional information, see “Risk Factors - Risks Relating to our Business - We conduct certain of our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and the surrounding region.”
Previous wording
We maintain proportional reinsurance contracts which cover all of the Company's products and geographies, and transferred, or “ceded,” a specified percentage of the premium to reinsurers ("Proportional Reinsurance Contracts"). In exchange, these reinsurers pay a ceding commission for every dollar ceded, in addition to funding all of the corresponding claims at the same specified percentage as applied to premium. We opted to manage the remaining percentage of the business with alternative forms of reinsurance through non-proportional reinsurance contracts ("Non-Proportional Reinsurance Contracts").
Current wording
We maintain proportional reinsurance contracts which cover all of the Company's products and geographies, and transferred, or “ceded,” a specified percentage of the premium to reinsurers ("Proportional Reinsurance Contracts"). We also opted to manage the remaining percentage of the business with alternative forms of reinsurance through non-proportional reinsurance contracts ("Non-Proportional Reinsurance Contracts").
Previous wording
Effective July 1, 2023 through June 30, 2024, we agreed to the terms of our reinsurance program which includes Whole Account Quota Share Reinsurance Contracts by and among the Company, Lemonade Insurance Company ("LIC"), Metromile Insurance Company and Lemonade Insurance N.V. ("Lemonade Insurance"), and each of Hannover Ruck SE, MAPFRE Re, and Swiss Reinsurance America Corporation (collectively referred to as “Reinsurers”) ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," a share of premium to the Reinsurers. In exchange, these Reinsurers pay us a ceding commission on all premiums ceded to the Reinsurers, in addition to funding the corresponding claims, subject to certain limitations, including but not limited to, the exclusion of hurricane losses, and a limit of $5,000,000 per occurrence for non-hurricane catastrophe losses. The overall share of proportional reinsurance under the Reinsurance Program is approximately 55% of premium. The Per Risk Cap across the contracts is $750,000. Additionally, the contracts are subject to loss ratio caps and variable ceding commission levels, which align our interests with those of its Reinsurers.
Current wording
Our proportional reinsurance contracts provides 55% protection on covered risks. We agreed to the terms of our reinsurance program effective July 1, 2023 through June 30, 2024 which included Whole Account Quota Share Reinsurance Contracts by and among the Company, Lemonade Insurance Company ("LIC"), Metromile Insurance Company ("MIC") and Lemonade Insurance N.V. ("LINV"), and each of Hannover Ruck SE, MAPFRE Re, and Swiss Reinsurance America Corporation (collectively referred to as “Reinsurers”) ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," a share of premium to the Reinsurers. In exchange, these Reinsurers pay us a ceding commission on all premiums ceded to the Reinsurers, in addition to funding the corresponding claims, subject to certain limitations, including but not limited to, the exclusion of hurricane losses, and a limit of $5,000,000 per occurrence for non-hurricane catastrophe losses. The overall share of proportional reinsurance under the Reinsurance Program is approximately 55% of premium. The Per Risk Cap across the contracts is $750,000. Additionally, the contracts are subject to loss ratio caps and variable ceding commission levels, which align our interests with those of our Reinsurers, and is settled primarily on a funds withheld basis. We renewed the Reinsurance Program effective July 1, 2024 and will expire on June 30, 2025, with similar terms to the contracts that expired on June 30, 2024, except for the limit per occurrence for non-hurricane catastrophe losses which increased to $10,000,000.
Previous wording
Metromile entered into a Quota Share reinsurance agreement effective January 1, 2022 which expired on June 30, 2023. Under the terms of the agreement, the Company ceded 30% of premiums and losses to reinsurers.
Current wording
MIC entered into a Quota Share reinsurance agreement effective January 1, 2022 and expired on June 30, 2023, and was not renewed. Under the terms of the agreement, the Company ceded 30% of premiums and losses to reinsurers.
Previous wording
In addition, LIC and Lemonade Insurance agreed to the terms of a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract"), and LIC agreed to the terms of an Automatic Facultative Property Per Risk Excess of Loss Reinsurance Contract with Arch Re (the "Automatic Facultative PPR Contract"), each effective from July 1, 2023 until June 30, 2024. Under the PPR Contract, claims in excess of $750,000 are 100% ceded up to a maximum recovery of $2,250,000, subject to certain limitations. Under the Automatic Facultative PPR Contract, claims in excess of $3,000,000 are 100% ceded with a potential recovery of at least $10,000,000, subject to certain limitations.
Current wording
LIC and LINV entered into a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract"), and LIC entered into an Automatic Facultative Property Per Risk Excess of Loss Reinsurance Contract with Arch Re (the "Automatic Facultative PPR Contract"), each effective from July 1, 2023 until June 30, 2024. Under the PPR Contract, claims in excess of $750,000 are 100% ceded up to a maximum recovery of $2,250,000, subject to certain limitations. The PPR Contract was renewed at similar terms effective July 1, 2024 through June 30, 2025. The Automatic Facultative PPR Contract, in which claims in excess of $3,000,000 are 100% ceded with a potential recovery of at least $10,000,000, subject to certain limitations, expired on June 30, 2024, and was not renewed.
Previous wording
We also purchased an Excess of Loss ("XOL") Reinsurance Contract through a captive in Bermuda to cover catastrophe risk over the initial $50,000,000 limit for each loss occurrence, which is further subject to a limit of $80,000,000 for each loss occurrence and in aggregate, primarily on property and auto business underwritten by LIC. This XOL reinsurance contract became effective July 1, 2023 and will expire on June 30, 2024. We are also exposed to some risks from MIC ceded through the Quota Share ("QS") Reinsurance Contract which is retained in a captive subsidiary, Lemonade Re SPC in the Cayman Islands. This QS reinsurance contract became effective July 1, 2023 and shall remain in force for an indefinite period until terminated by either party. Through our captives, we are exposed to the risk of natural catastrophe events and other covered risks under the reinsurance agreements from assumed risks from policies underwritten by both LIC and MIC.
Current wording
We also entered into an Excess of Loss Reinsurance Contract (the "XOL reinsurance contract") through a captive in Bermuda in which we have a variable interest, primarily to cover catastrophe risk over the initial $50,000,000 limit for each loss occurrence, and further subject to a limit of $80,000,000 for each loss occurrence and in aggregate, primarily on property and car business underwritten by LIC. This XOL reinsurance contract became effective July 1, 2023 and expired on June 30, 2024. We have renewed the XOL reinsurance contract effective July 1, 2024 and will expire on June 30, 2025, at similar terms and is expanded to include risks written by MIC.
Previous wording
Gross written premium is the amount received, or to be received, for insurance policies written by us during a specific period of time without reduction for premiums ceded to reinsurance. Gross written premium includes direct and assumed premium. In December 2022, we began assuming premium related to car insurance policies written in Texas, in connection with our fronting arrangement with a third party carrier in Texas. Following the Metromile Acquisition, we also include gross written premium from the sale of pay-per-mile car insurance policies within the United States. The volume of our gross written premium in any given period is generally influenced by new business submissions, binding of new business submissions into policies, renewals of existing policies, and average size and premium rate of bound policies.
Current wording
Gross written premium is the amount received, or to be received, for insurance policies written by us during a specific period of time without reduction for premiums ceded to reinsurers. Gross written premium includes direct and assumed premium. We began assuming premium related to car insurance policies written in Texas in December 2022, in connection with our fronting arrangement with a third party carrier in Texas. We also include gross written premium from the sale of pay-per-mile car insurance policies within the United States following the Metromile Acquisition in July 2022. The volume of our gross written premium in any given period is generally influenced by new business submissions, binding of new business submissions into policies, renewals of existing policies, and average size and premium rate of bound policies.
Previous wording
Gross earned premium represents the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. Our insurance policies generally have a term of one year and premium is earned pro rata over the term of the policy. In addition, following the Metromile Acquisition, we also include earned premiums from the pay-per-mile car insurance policies which are written for six-month terms. Premium for the policy provides a base rate per month for the entire policy term upon binding of the policy plus a per-mile rate multiplied by the miles driven each day (based on data from the telematics device, subject to a daily maximum).
Current wording
Gross earned premium represents the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. Our insurance policies generally have a term of one year and premium is earned pro rata over the term of the policy. In addition, we also include earned premiums from the pay-per-mile car insurance policies which are written for six-month terms. Premium for the policy provides a base rate per month for the entire policy term upon binding of the policy plus a per-mile rate multiplied by the miles driven each day (based on data from the telematics device, subject to a daily maximum).
Previous wording
Net earned premium represents the earned portion of our gross written premium, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements. Premium is earned pro rata over the term of the policy, which is generally one year. Net earned premiums from the pay-per-mile car insurance policies are earned over the term of the policy which is written for six-month terms.
Current wording
Net earned premium represents the earned portion of our gross written premium, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements. Premium is earned pro rata over the term of the policy, which is generally one year. Net earned premiums from the pay-per-mile car insurance policies is earned over the term of the policy which is written for six-month terms.
Previous wording
We define customers as the number of current policyholders underwritten by us or placed by us with third party insurance partners (who pay us recurring commissions) as of the period end date. A customer that has more than one policy counts as a single customer for the purposes of this metric. We view customers as an important metric to assess our financial performance because customer growth drives our revenue, expands brand awareness, deepens our market penetration, creates additional upsell and cross-sell opportunities, and generates additional data to continue to improve the functioning of our platform.
Current wording
We define customers as the number of current policyholders underwritten by us or placed by us with third party insurance partners (who pay us recurring commissions) as of the period end date. A customer that has more than one policy count as a single customer for the purposes of this metric. We view customers as an important metric to assess our financial performance because customer growth drives our revenue, expands brand awareness, deepens our market penetration, creates additional upsell and cross-sell opportunities, and generates additional data to continue to improve the functioning of our platform.
Previous wording
ii)In force placed premium — the annualized premium of in force policies placed with third party insurance companies for which we earn a recurring commission payment. In force placed premium currently reflects approximately 1% of IFP.
Current wording
ii)In force placed premium — the annualized premium of in force policies placed with third party insurance companies for which we earn a recurring commission payment. In force placed premium currently reflects approximately 2% of IFP.
Previous wording
Gross earned premium is the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. In December 2022, we began assuming premium related to car insurance policies written in Texas, in connection with our fronting arrangement with a third party carrier in Texas, and this did not impact the key performance indicators for periods prior to the fourth quarter of 2022.
Current wording
Gross earned premium is the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. We also began assuming premium related to car insurance policies written in Texas in December 2022, in connection with our fronting arrangement with a third party carrier in Texas.
Previous wording
We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding the impact of income tax expense, depreciation and amortization, stock-based compensation, interest income and expense, net investment income, net realized gains and losses on sale of investments, change in fair value of warrants liability, amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile Acquisition, interest expense on borrowings under the financing agreement and other non-cash adjustments and other transactions that we consider to be unique in nature. See “- Non-GAAP Financial Measures” for a reconciliation of net loss to adjusted EBITDA in accordance with GAAP.
Current wording
We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding the impact of income tax expense, depreciation and amortization, stock-based compensation, interest expense, interest income and others, net investment income, change in fair value of warrants liability, amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile Acquisition, and other non-cash adjustments and other transactions that we consider to be unique in nature. See “- Non-GAAP Financial Measures” for a reconciliation of net loss to adjusted EBITDA in accordance with GAAP.
Previous wording
The following table presents our results of operations for the periods indicated:
Current wording
The following table presents our results of operations:
Previous wording
Net earned premium increased by$142.8 million, or 83%, to $315.2 millionfor the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to the earning of increased gross written premium, and decrease in cession of ceded written premium under our Proportional Reinsurance Contracts as discussed in detail above under “Reinsurance.”
Current wording
Net earned premium increased by$55.4 million, or 18%, to $370.6 millionfor the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to the earning of increased gross written premium and impact of our reinsurance program to ceded written premium under our Proportional Reinsurance Contracts as discussed above under “Reinsurance.”
Previous wording
Gross written premium increased $182.7 million, or 33%, to $738.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily due to a 12% increase in net added customers year over year driven by the success of our digital advertising campaigns and partnerships. We also continued to expand our geographic footprint and product offerings. We also saw a 7% increase in premiums per customer year over year due to an increasing prevalence of multiple policies per customer, growth in the overall average policy value, and continued shift in the mix of underlying products toward higher value policies. Assumed premium related to car insurance policies written in Texas from our fronting arrangement with a third party carrier in Texas which began in December 2022 also contributed to the increase in gross written premium during the period.
Current wording
Gross written premium increased $190.6 million, or 26%, to $929.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was primarily due to a 20% increase in net added customers year over year, driven by the success of our digital advertising campaigns and partnerships. We also continued to expand our geographic footprint and product offerings. In addition, we saw a 5% increase in premiums per customer year over year due to an increasing prevalence of multiple policies per customer, growth in the overall average policy value, and continued shift in the mix of underlying products toward higher value policies. Assumed premium related to car insurance policies written in Texas from our fronting arrangement with a third party carrier in Texas also contributed to the increase in gross written premium during the period.
Previous wording
Ceded written premium increased $56.0 million, or 17%, to $389.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to growth in business across all products and the impact of our reinsurance arrangements. Under the terms of our Reinsurance Program which became effective July 1, 2023, our overall share under the proportional reinsurance is approximately 55% of premium. The Per Risk Cap across the contracts is $750,000 and contracts are subject to loss ratio caps and variable commission levels. In 2022, we decreased the overall share of proportional reinsurance from 70% of premiums to 55% effective July 1, 2022. We also purchased a new reinsurance program to protect against natural catastrophe risk in the U.S. that exceed $80 million in losses effective July 1, 2022. Other non-proportional reinsurance contracts were renewed with terms similar to expired contracts. See "Reinsurance" above for further information.
Current wording
Ceded written premium increased $124.8 million, or 32%, to $513.9 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to growth in business across all products and the impact of our reinsurance arrangements. Under the terms of our proportional reinsurance program, we cede approximately 55% of premium and are subject to loss ratio caps and variable commission. Other non-proportional reinsurance contracts were renewed with terms similar to expired contracts. See "Reinsurance" above for further information.
Previous wording
The table below shows the amount of premium we earned on a gross and net basis. Ceded earned premium as a percentage of gross earned premium decreased to 53% for the year ended December 31, 2023, as compared to 65% for the year ended December 31, 2022 primarily due to the change in total participation under the proportional reinsurance contracts, as discussed above.
Current wording
The table below shows the amount of premium we earned on a gross and net basis. Ceded earned premium as a percentage of gross earned premium slightly increased to 55% for the year ended December 31, 2024, as compared to 53% for the year ended December 31, 2023 primarily due to the impact of the renewed terms under the proportional reinsurance contracts, as discussed above.
Previous wording
Ceding commission income increased $5.7 million, or 9% to $69.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, consistent with the increase in ceded earned premium related to the proportional reinsurance contracts with third-party reinsurance companies during the year.
Current wording
Ceding commission income increased $21.3 million, or 31% to $91.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, consistent with the increase in ceded earned premium related to the proportional reinsurance contracts with third-party reinsurance companies during the year.
Previous wording
Net investment income increased $16.3 million, or 194%, to $24.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by the diversification of the Company’s investment portfolio with higher returns in comparison to prior year, offset by investment expenses of $0.3 million. We mainly invest in cash, money market funds, U.S. Treasury bills, corporate debt securities, asset-backed securities, notes and other obligations issued or guaranteed by the U.S. Government.
Current wording
Net investment income increased $9.3 million, or 38%, to $34.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was primarily driven by the diversification of the Company’s investment portfolio with higher returns in comparison to prior year, offset by investment expenses of $0.3 million. We mainly invest in cash, money market funds, U.S. Treasury bills, corporate debt securities, asset-backed securities, notes and other obligations issued or guaranteed by the U.S. Government and non-US Government.
Previous wording
Commission and other income increased $8.3 million, or 70% to $20.1 million for the year ended December 31, 2023 compared to year ended December 31, 2022, due to growth in premiums placed with third-party insurance companies and an increase in installment fees.
Current wording
Commission and other income increased $10.7 million, or 53% to $30.8 million for the year ended December 31, 2024 compared to year ended December 31, 2023, primarily due to growth in premiums placed with third-party insurance companies, installment fees and sublease income from our New York and San Francisco office space.
Previous wording
Other insurance expense increased $15.2 million, or 35%, to $59.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Professional fees, and other increased by $5.2 million, or 41%, as compared to the year ended December 31, 2022, primarily in support of growth and expansion initiatives. Amortization of deferred acquisition costs, net of ceded commissions also increased by $4.3 million, or 77% as compared to the year ended December 31, 2022, consistent with growth in business. Credit card processing fees increased $3.4 million, or 35%, as a result of the increase in customers and associated premium. Employee-related expense, including stock based compensation, increased by $2.3 million, or 14%, as compared to the year ended December 31, 2022, driven by an increase in underwriting staff to support our continued growth.
Current wording
Other insurance expense increased $17.6 million, or 30%, to $76.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 consistent with growth in premium. Professional fees, and other increased by $5.9 million, or 33%, as compared to the year ended December 31, 2023, primarily in support of growth and expansion initiatives. Credit card processing fees increased $4.3 million, or 33%, as a result of the increase in customers and associated premium. Amortization of deferred acquisition costs, net of ceded commissions also increased by $3.8 million, or 38% as compared to the year ended December 31, 2023, consistent with growth in business. Employee-related expense, including stock based compensation, increased by $3.6 million, or 20%, as compared to the year ended December 31, 2023, driven by an increase in underwriting staff to support our continued growth.
Previous wording
Sales and marketing expenses decreased$36.4 million, or 26%, to $101.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Expense related to brand and performance advertising decreased by $33.3 million, or 38%, as a result of reduced spending on search advertising and other customer acquisition channels. Employee-related expense, including stock-based compensation decreased by $1.7 million or 5%, as compared to the year ended December 31, 2022, due to reduced headcount.
Current wording
Sales and marketing expense increased$64.4 million, or 63%, to $166.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. Expense related to brand and performance advertising increased by $66.3 million, or 120%, as a result of increased spending on search advertising and other customer acquisition channels. Software costs increased by $1.4 million, or 82% as compared to December 31, 2023. Fees paid to contractors increased by $1.2 million, or 100% as compared to December 31, 2023. Employee-related expense, including stock-based compensation decreased by $3.7 million or 11%, as compared to the year ended December 31, 2023, due to reduced headcount.
Previous wording
Technology development expenses increased $9.2 million, or 12%, to $88.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Employee-related expense, including stock based compensation, net of capitalized costs for the development of internal-use software, increased $3.3 million, or 5%, as compared to the year ended December 31, 2022, driven by an increase in payroll expense for product, engineering, design and quality assurance personnel to support our continued growth and product development initiatives, including automation, improvement in machine learning, new products, and geographic expansion. Hosting and development costs also increased by $3.0 million, or 49%, as compared to the year ended December 31, 2022 consistent with growth of business. Fees paid to contractors increased by $2.5 million, or 179%, as compared to December 31, 2022, due to the integration of Metromile.
Current wording
Technology development expense decreased $3.0 million, or 3%, to $85.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. Employee-related expense, including stock based compensation, net of capitalized costs for the development of internal-use software, decreased $1.6 million, or 2%, as compared to the year ended December 31, 2023, driven by decrease in payroll and stock compensation expense for product, engineering, design and quality assurance personnel. Hosting and development costs also decreased $1.0 million, or 11%, as compared to the year ended December 31, 2023.
Previous wording
General and administrative expenses increased $7.0 million, or 6%, to $129.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Depreciation and amortization increased by $7.8 million or 64%, as compared to the year ended December 31, 2022, mainly due to acquired assets from Metromile. Employee related expense, including stock-based compensation, increased by $2.9 million, or 6%, as compared to the year ended December 31, 2022, as we increased finance, legal, business operations and administrative personnel. An asset impairment on the right-of-use asset related to the San Francisco office in the amount of $3.7 million and an accrual for a potential liability claim of $3.0 million related to Metromile were recorded during the third quarter of 2023. Allocated occupancy and related costs increased by $2.7 million, or 57%, as compared to the year ended December 31, 2022, and was primarily related to the integration of Metromile. Nonrecurring transaction and integration costs of $8.4 million incurred in 2022 primarily relates to legal and other professional fees and employee retention and severance costs were incurred relating to the Metromile Acquisition. Insurance expense decreased $3.6 million or 42%, as compared to the year ended December 31, 2022. Legal and Professional fees decreased $2.5 million or 21%.
Current wording
General and administrative expense decreased $4.8 million, or 4%, to $124.5 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. During the third quarter of 2023, we recognized nonrecurring items which include an asset impairment charge on the right-of-use asset related to the San Francisco office in the amount of $3.7 million and an accrual for a potential liability claim of $3.0 million related to Metromile. Bad debt expense increased by $2.9 million, or 36%, as compared to the year ended December 31, 2024.
Previous wording
Net loss decreased $60.9 million, or 20%, to $236.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to the factors described above.
Current wording
Net loss decreased $34.7 million, or 15%, to $202.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to the factors described above.
Previous wording
We define adjusted gross profit, a non-GAAP financial measure, as gross profit excluding net investment income, interest income and other income, net realized gains and losses on sale of investments, plus fixed costs and overhead associated with our underwriting operations including employee-related expense, professional fees and other, and depreciation and amortization allocated to cost of revenue, and other adjustments that we would consider to be unique in nature. After these adjustments, the resulting calculation is inclusive of only those variable costs of revenue incurred on the successful acquisition of business and without the volatility of investment income. We use adjusted gross profit as a key measure of our progress towards profitability and to consistently evaluate the variable contribution to our business from underwriting operations from period to period.
Current wording
We define adjusted gross profit, a non-GAAP financial measure, as gross profit excluding net investment income, interest income and other income, plus fixed costs and overhead associated with our underwriting operations including employee-related expense, professional fees and other, and depreciation and amortization allocated to cost of revenue, and other adjustments that we would consider to be unique in nature. After these adjustments, the resulting calculation is inclusive of only those variable costs of revenue incurred on the successful acquisition of business and without the volatility of investment income. We use adjusted gross profit as a key measure of our progress towards profitability and to consistently evaluate the variable contribution to our business from underwriting operations from period to period.
Previous wording
We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding income tax expense, depreciation and amortization, stock-based compensation, interest income and others, net investment income, net realized gains and losses on sale of investments, change in fair value of warrants liability, amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile Acquisition, interest expense on borrowings under the financing agreement, and other non-cash adjustments and other transactions that we would consider to be unique in nature. We exclude these items from Adjusted EBITDA because we do not consider them to be directly attributable to our underlying operating performance. We use Adjusted EBITDA as an internal performance measure in the management of our operations because we believe it gives our management and other customers of our financial information useful insight into our results of operations and our underlying business performance. Adjusted EBITDA should not be viewed as substitute for net loss calculated in accordance with GAAP, and other companies may define adjusted EBITDA differently.
Current wording
We define Adjusted EBITDA, a non-GAAP financial measure, as net loss excluding income tax expense, depreciation and amortization, stock-based compensation, interest expense, interest income and others, net investment income, change in fair value of warrants liability, amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile Acquisition, and other non-cash adjustments and other transactions that we would consider to be unique in nature. We exclude these items from Adjusted EBITDA because we do not consider them to be directly attributable to our underlying operating performance. We use Adjusted EBITDA as an internal performance measure in the management of our operations because we believe it gives our management and other customers of our financial information useful insight into our results of operations and our underlying business performance. Adjusted EBITDA should not be viewed as substitute for net loss calculated in accordance with GAAP, and other companies may define adjusted EBITDA differently.
Previous wording
(1) Includes compensation expense related to warrant shares of $2.5 million for the year ended December 31, 2023.
Current wording
(1) Includes compensation expense related to warrant shares of $6.5 million and $2.5 million for the years ended December 31, 2024 and 2023.
Previous wording
(2) Includes impairment charge of $3.7 million related to the San Francisco office sublease and $3.0 million accrual for a potential liability claim, both related to Metromile.
Current wording
(2) Includes asset impairment charge of $3.7 million related to the San Francisco office sublease (Note 22) and $3.0 million accrual for a potential liability claim, both related to Metromile for the year ended December 31, 2023.
Previous wording
As of December 31, 2023, we had $271.5 million in cash and cash equivalents, and $673.2 million in investments. From the date we commenced operations, we have generated negative cash flows from operations, and we have financed our operations primarily through private and public sales of equity securities. On January 14, 2021, we issued and sold 3,300,000 shares of common stock, and generated net proceeds to us of $525.7 million after deducting underwriting discounts and other offering costs. On February 1, 2021, the underwriters exercised their option to purchase additional shares, which resulted in the issuance and sale of an additional 718,647 shares of common stock by us, and generated additional net proceeds of $114.6 million. Excluding capital raises, our principal sources of funds are insurance premiums, investment income, reinsurance recoveries and proceeds from maturity and sale of invested assets. These funds are primarily used to pay claims, operating expenses and taxes. We believe our existing cash and cash equivalents as of December 31, 2023 will be sufficient to meet our working capital,liquidity and capital expenditures needs over at least the next 12 months and for the foreseeable future. However, this is subject, to a certain extent, on general economic, financial, competitive, regulatory and other factors that are beyond our control.
Current wording
As of December 31, 2024, we had $385.7 million in cash and cash equivalents, and $634.9 million in investments. From the date we commenced operations, we have generated negative cash flows from operations, and we have financed our operations primarily through private and public sales of equity securities and third-party financing. Our principal sources of funds are insurance premiums, investment income, reinsurance recoveries and proceeds from maturity and sale of invested assets. These funds are primarily used to pay claims, operating expenses and taxes. In June 2023, we entered into an Agreement with GC, where up to $150.0 million of financing will be provided for our sales and marketing growth efforts through December 31, 2024. The Agreement was amended and restated in January 2024, pursuant to which an additional financing of $140.0 million will be provided for our sales and marketing growth efforts through December 31, 2025, and was further amended and restated in April 2024 and June 2024 to clarify certain provisions and all material terms and conditions remain unchanged. On February 3, 2025, the Agreement was further amended under which GC will provide up to an additional $200 million of financing for our sales and marketing growth efforts from January 1, 2026 to December 31, 2026. As of December 31, 2024, we had $83.4 million of outstanding borrowings under the Amended and Restated Agreement with GC. We believe our existing cash and cash equivalents as of December 31, 2024 will be sufficient to meet our working capital, liquidity and capital expenditure needs over at least the next 12 months. This belief is subject, to a certain extent, on general economic, financial, competitive, regulatory and other factors that are beyond our control.
Previous wording
Our U.S. and Dutch insurance company subsidiaries, and our Dutch insurance holding company, are restricted by statute as to the amount of dividends that they may pay without the prior approval of their respective competent regulatory authorities. As of December 31, 2023, cash and investments held by these companies was $423.8 million, of which $181.6 million is held as regulatory surplus.
Current wording
Our U.S. and Dutch insurance company subsidiaries, and our Dutch insurance holding company, are restricted by statute as to the amount of dividends that they may pay without the prior approval of their respective competent regulatory authorities. As of December 31, 2024, cash and investments held by these companies was $593.9 million, of which $271.4 million is held as regulatory surplus.
Previous wording
Cash used in operating activities was $119.1 million for the year ended December 31, 2023, a decrease of $43.9 million from $163.0 million for the year ended December 31, 2022. This reflected the $60.9 million decrease in our net loss, primarily offset by changes in our operating assets and liabilities. The decrease in cash used in operating activities from year ended December 31, 2023 compared to year ended December 31, 2022 was primarily due to claims payments, settlements with our reinsurance partners, and decreased spend related to growth and expansion, offset by collection of premiums and recoveries from reinsurance partners.
Current wording
Cash used in operating activities was $119.1 million for the year ended December 31, 2023, a decrease of $43.9 million from $163.0 million for the year ended December 31, 2022. This reflected the $60.9 million decrease in our net loss, primarily offset by changes in our operating assets and liabilities. The decrease in cash used in operating activities from the year ended December 31, 2023 compared to December 31, 2022 was primarily due to claims payments, settlements with our reinsurance partners, and decreased spend related to growth and expansion, offset by collection of premiums and recoveries from reinsurance partners.
Previous wording
Cash provided by investing activities was $181.1 million for the year ended December 31, 2022 primarily due to cash from the Metromile Acquisition, sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments, offset by purchases, and property and equipment purchased during the year.
Current wording
Cash provided by investing activities was $40.6 million for the year ended December 31, 2024 primarily due to proceeds from sales and maturities of U.S. and non-US government obligations, corporate debt securities, asset-backed securities, short term investments, offset by purchases of U.S. and non-US government obligations, corporate debt securities, asset-backed securities, short term investments. We also purchased property and equipment during the year.
Previous wording
Cash provided by investing activities was $88.7 million for the year ended December 31, 2023 primarily due to proceeds from sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments, offset by purchases of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments. We also purchased property and equipment during the year.
Current wording
Cash provided by investing activities was $88.7 million for the year ended December 31, 2023 primarily due to proceeds from sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments, offset by purchases of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments. We also purchased property and equipment purchased during the year.
Previous wording
Cash provided by financing activities was $3.6 million for the year ended December 31, 2022 primarily due to proceeds from stock exercises.
Current wording
Cash provided by financing activities was $87.7 million for the year ended December 31, 2024 primarily due to borrowings under the Amended and Restated Agreement with GC and proceeds from stock exercises.
Previous wording
We do not have any current plans for material capital expenditures other than current operating requirements. We currently have a financing agreement with GC (see “Note 14 - Borrowings under financing agreement”). To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $937.7 million in cash and cash equivalents, and investments available at December 31, 2023. We may also seek to raise additional capital through third-party borrowings, sales of our equity, issuance of debt securities or entrance into new reinsurance arrangements. There can be no assurance that we will be able to raise additional
Current wording
We do not have any current plans for material capital expenditures other than current operating requirements. We currently have a financing agreement with GC, the Amended and Restated Agreement with GC (see “Note 14 - Borrowings under financing agreement”). To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $1,010.9 million in cash and cash equivalents, and investments available at December 31, 2024. We may also seek to raise additional capital through third-party borrowings, sales of our equity, issuance of debt securities or entrance into new reinsurance arrangements. There can be no assurance that we will be able to raise additional capital on favorable terms or at all.
Showing the first 40 of 41 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
We also entered into a reinsurance program to protect against catastrophe risk in the U.S. that exceed $80,000,000 in losses effective July 1, 2022 and expired on June 30, 2023, and was not renewed
Current report — wording carried from elsewhere
We are also exposed to some risks from MIC ceded through the Quota Share Reinsurance Contract (the “QS reinsurance contract”) which is retained in a captive subsidiary, Lemonade Re SPC in the Cayman Islands. This QS reinsurance contract became effective July 1, 2023 and shall remain in force for an indefinite period until terminated by either party.
Current report — wording carried from elsewhere
Through our captives, we are exposed to the risk of natural catastrophe events and other covered risks under the reinsurance agreements from assumed risks from policies underwritten by both LIC and MIC.
Current report — wording carried from elsewhere
•Gross profit, excluding net investment income, interest income and other income, plus
Current report — wording carried from elsewhere
Cash used in operating activities was $11.4 million for the year ended December 31, 2024, a decrease of $107.7 million from $119.1 million for the year ended December 31, 2023. This reflected the $34.7 million decrease in our net loss, primarily offset by changes in our operating assets and liabilities. The decrease in cash used in operating activities from year ended December 31, 2024 compared to year ended December 31, 2023 was primarily due to claims payments and settlements with our reinsurance partners, offset by collection of premiums and recoveries from reinsurance partners.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Investment Amount including a 16% rate of return based upon an agreed schedule. Once fully repaid, we will retain all future reference income related to each respective Investment Amount.
Previous report — wording carried elsewhere
capital on favorable terms or at all.