Lemonade, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of the Business

Lemonade, Inc. is a public benefit corporation organized under Delaware law on June 17, 2015. It provides certain personnel, facilities and services to each of its property and casualty insurance subsidiaries and non-insurance subsidiaries (together with Lemonade, Inc., the “Company”), all of which are 100% owned, directly or indirectly, by Lemonade, Inc. For the list of the Company's subsidiaries and for more complete descriptions and discussions, see Note 1 - Nature of the Business, of the audited consolidated financial statements and related notes thereto for the year ended December 31, 2025 as included in the Company's Annual Report on Form 10-K (the "Annual Report on Form 10-K").

2. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries and a variable interest entity for which the Company is deemed to be the primary beneficiary. All material intercompany balances and transactions have been eliminated. All foreign currency amounts in the condensed consolidated statements of operations and comprehensive loss have been translated using an average rate for the reporting period. All foreign currency balances in the condensed consolidated balance sheets have been translated using the spot rate at the end of the reporting period. All figures expressed, except share amounts, are represented in U.S. dollars in millions.

Risks and Uncertainties

Lemonade, Inc. conducts certain of its operations in Israel. The evolving conflict in Israel and the surrounding region 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. The Company will continue to evaluate the extent to which this may impact the Company's business, financial condition, or results of operations.

Unaudited interim financial information

The accompanying unaudited condensed consolidated financial statements, in the opinion of the Company's management, contain all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of its financial position and its results of operations, changes in stockholders’ equity and cash flows. The condensed consolidated balance sheets at December 31, 2025 were derived from the audited annual financial statements and do not contain all of the footnote disclosures from the audited annual financial statements of the Company. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2025 as included in the Company’s Annual Report on Form 10-K.

3. Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates estimates, including those related to contingent assets and liabilities as of the date of the condensed consolidated financial statements as well as the reported amounts of revenue and expense during the reporting period. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, reserves for loss and loss adjustment expense, uncertain tax position and valuation allowance on deferred tax assets.

4. Summary of Significant Accounting Policies

Cash, cash equivalents and restricted cash

The following represents the Company’s cash, cash equivalents and restricted cash as of June 30, 2026 and December 31, 2025 ($ in millions):

Cash and cash equivalents consist primarily of bank deposits and money market accounts with maturities of three months or less at the date of acquisition and are stated at cost, which approximates fair value. The Company’s restricted cash primarily relates to insurance policy premiums collected by the Company that it holds in a segregated cash account for transmittal to the underwriting carrier, or settlement of insurance related claims. The Company also has restricted cash relating to security deposits for certain office leases. The carrying value of restricted cash approximate fair value.

New Accounting Pronouncements

Recently Issued Accounting Pronouncements Pending Adoption

In December 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, requiring additional disclosures in the financial statements which disaggregates information underlying certain relevant income statement expense captions in tabular format. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 31, 2027, and retrospective application is permitted. The Company is currently evaluating the impact of the adoption of this standard.

In September 2025, the FASB issued ASU 2025-06, which amends the guidance in ASC 350-40, Intangibles - Goodwill and Other - Internal-Use Software. The amendment modernizes the recognition and disclosure for internal-use software costs, removes previous references to project stages and introduced a more judgment-based approach in capitalizing costs. This ASU is effective for annual periods beginning after December 15, 2027, on a prospective, retrospective or modified transition approach. The Company is currently evaluating the impact of the adoption of this standard.

There are no other new accounting standards identified and not yet implemented that are expected to have a material effect on the Company's consolidated financial statements.

5. Investments

Unrealized gains and losses

The following tables present cost or amortized cost and fair values of investment in fixed maturities as of June 30, 2026 and December 31, 2025 ($ in millions):

Gross unrealized losses for investments in fixed maturities was $4.0 million as of June 30, 2026 and less than $0.1 million as of December 31, 2025. Gross unrealized gains and losses on investments in fixed maturities were recorded as a component of accumulated other comprehensive income (loss).

Contractual maturities of bonds

The following table presents the cost or amortized cost and estimated fair value of investments in fixed maturities as of June 30, 2026 by contractual maturity ($ in millions). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Net investment income

Details of the Company's net investment income is as follows ($ in millions):

Investment gains and losses

The Company had pre-tax net realized capital gain of $0.2 million and $0.5 million for the three and six months ended June 30, 2026 and pre-tax net realized capital gain of $0.1 million for the three and six months ended June 30, 2025, which were included in "Commission and other income" in the condensed consolidated statements of operations and comprehensive loss.

Aging of gross unrealized losses

The following table presents the gross unrealized losses and related fair values for the Company’s investment in fixed maturities, grouped by duration of time in a continuous unrealized loss position as of June 30, 2026 and December 31, 2025 ($ in millions):

As of June 30, 2026,541 of the securities held were in an unrealized loss position. There wereno investments in fixed maturities with gross unrealized losses for twelve months or more as of June 30, 2026. Investments in fixed maturities with gross unrealized losses for twelve months or more amounted toless than$0.1 million as of December 31, 2025. The Company determined that unrealized losses on fixed maturities were primarily due to the interest rate environment, general market conditions, and not credit risk related to issuers of these securities. The Company does not intend to sell these investments in fixed maturities, and it is not more likely than not that the Company will be required to sell these investments in fixed maturities before recovery of the amortized cost basis. No allowance for credit losses related to any of these securities was recorded for the three and six months ended June 30, 2026. The Company does not measure an allowance for credit losses on accrued interest receivable and would instead write off accrued interest receivable at the time an issuer defaults or is expected to default on payments.

Restricted investments

Restricted investments are held in a trust account securing the Company’s insurance subsidiary's contractual obligations under the Property Catastrophe Excess of Loss reinsurance contract with a captive in Bermuda (see Note 7) which will not be released until the underlying risks have expired or have been settled. Restricted investments include certain investments in debt securities and short-term investments of $82.5 million as of June 30, 2026 and $81.5 million as of December 31, 2025.

6. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 ($ in millions):

(1) Fair value of Public and Private warrant liability amounted to less than $0.1 million as of December 31, 2025. These warrants expired on February 9, 2026.

The carrying value of Borrowings under financing agreement approximates the fair value as of June 30, 2026 and December 31, 2025, and is classified as Level 3.

The fair value of all different classes of Level 2 fixed maturities and short-term investments are estimated by using quoted prices from a third-party valuation service provider to gather, analyze and interpret market information and derive fair values based upon relevant methodologies and assumptions for individual instruments.

There were no transfers between Level 1, Level 2, or Level 3 during the six months ended June 30, 2026 and for the year ended December 31, 2025.

7. Unpaid Loss and Loss Adjustment Expense

The following table presents the activity in the liability for unpaid loss and loss adjustment expense ("LAE") for the six months ended June 30, 2026 and 2025 ($ in millions):

(1) Reinsurance recoverable in this table includes only ceded unpaid loss and LAE.

Unpaid loss and LAE includes anticipated salvage and subrogation recoverable.

Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders' equity. Additional variability exists due to accident year allocations of ceded amounts in accordance with the reinsurance agreements, which is not expected to result in any changes to the ultimate liability. Other factors that can impact loss reserve development may also include trends in general economic conditions, including the effects of inflation. The Company had prior year favorable development on net loss and LAE reserves of $16.4 million for the six months ended June 30, 2026, and prior year favorable development on net loss and LAE reserves of $12.6 million for the six months ended June 30, 2025. No additional premiums or returned premiums have been accrued as a result of prior year effects.

For the six months ended June 30, 2025, current accident year net incurred loss and LAE included $16.9 million related to the January 2025 California Wildfires, excluding the impact of the aggregate catastrophe cap limits, and represented the Company's best estimates based upon available information, including but not limited to industry data, reported claims, reinsurance recoveries and subrogation.

In March 2025, the Company entered into the Participation of Recovery Rights Agreements to sell its subrogation rights related to the January 2025 California wildfires resulting in a reduction of $4.2 million in net unpaid losses.

Reinsurance

In the ordinary course of business, the Company cedes losses and LAE to reinsurance companies to reduce the potential net loss exposure from large losses or catastrophic risks, and to manage regulatory capital requirements. Certain of these arrangements consist of excess of loss and catastrophe contracts, which protect against losses exceeding stipulated amounts. The ceding of risk through reinsurance does not relieve the Company from its obligations to policyholders, and the

Company remains primarily liable with respect to ceded losses and LAE in the event that any reinsurer does not meet obligations assumed under the reinsurance agreements. The Company does not have any significant unsecured recoverable for losses, paid and unpaid including Incurred But Not Reported ("IBNR"), loss adjustment expenses, and unearned premium with any individual reinsurer.

The Company maintains proportional reinsurance contracts which cover all of the Company's products and geographies, and transfers, or “cedes,” a specified percentage of the premium to reinsurers. The Company also opted to manage a portion of the remaining business with non-proportional reinsurance contracts.

Whole Account Quota Share Reinsurance Contracts

The Company agreed to the terms of a reinsurance program effective July 1, 2025 through June 30, 2026 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 ("Hannover") and MAPFRE Re Compania De Reaseguros S.A. ("MAPFRE") (collectively referred to as “Reinsurers”) ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," approximately 20% of premium to the Reinsurers. In exchange, these Reinsurers pay the Company 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 $10,000,000 per occurrence for non-hurricane catastrophe losses. 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 the Company's interests with those of its Reinsurers, and is settled primarily on a funds-withheld basis. The Reinsurance Program was renewed effective July 1, 2026 and will expire on June 30, 2027, with a reduced effective cession rate of approximately 18% of premiums to Reinsurers. The renewed terms include a $40,000,000 limit per loss occurrence and $100,000,000 in aggregate, including catastrophe losses. Other terms are similar to the contracts that expired on June 30, 2026.

Property Per Risk Excess of Loss Reinsurance Contract

LIC and MIC entered into a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract") which was effective July 1, 2025 and expired on June 30, 2026. Under the PPR Contract, claims in excess of $750,000 were 100% ceded up to a maximum recovery of $2,250,000, and further subject to certain limitations. The PPR Contract was not renewed.

Captives

LIC and MIC entered into an Excess of Loss ("XOL") Reinsurance Contract with a captive in Bermuda in which the Company has variable interest. This XOL reinsurance contract primarily covers catastrophe risk on property and car business underwritten by LIC and MIC 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. This XOL reinsurance contract which was effective July 1, 2025 expired on June 30, 2026. The XOL reinsurance contract between the captive and LIC was renewed effective July 1, 2026 and will expire on June 30, 2027, with a limit of liability of $50,000,000 for each loss occurrence and in aggregate. The XOL reinsurance contract between the captive and MIC was not renewed.

The Company is also exposed to some risks on property, car and pet insurance underwritten by LIC and MIC ceded through Quota Share ("QS") Reinsurance Contracts which is retained in an offshore captive subsidiary, Lemonade Re SPC. The MIC QS reinsurance contract which became effective July 1, 2025 was terminated and the parties agreed to a new QS reinsurance contract effective July 1, 2026 with an increase in cession rate from 35% to 40%. The MIC QS reinsurance contract shall remain effective for an indefinite period until terminated by either party. The LIC QS reinsurance contract was renewed effective July 1, 2026 through June 30, 2027 with an increase in cession rate from 15% to 25%.

Through the captives, the Company is exposed to the risk of natural catastrophe events and other covered risks under the reinsurance contracts from policies underwritten by LIC and MIC.

8. Borrowings under Financing Agreement

Customer Investment Agreement

On June 28, 2023, the Company 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 would be provided for the Company’s sales and marketing growth efforts. The Agreement had a commitment period of 18 months which expired on December 31, 2024 ("Original Commitment End Date").

On January 8, 2024, the Company entered into an Amended and Restated Customer Investment Agreement with GC to provide up to an additional $140 million of financing to the Company from the Original Commitment End Date through December 31, 2025 for sales and marketing growth efforts. On February 3, 2025, the Agreement was further amended under which GC will provide up to an additional $200 million of financing for sales and marketing growth efforts from January 1, 2026 to December 31, 2026. In addition, the Agreement was further amended and restated in April 2024, June 2024 and December 2025 to clarify certain provisions with no material changes to terms and conditions (collectively, 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. Under all of these agreements, subject to certain terms and conditions specified therein, at the start of each growth period, an Investment Amount of between 50% to 80% of the Company’s growth spend (the "Investment Amount") will be advanced by GC. During each growth period, the Company will repay a portion of each outstanding Investment Amount including a 16% rate of return based upon an agreed schedule. Once fully repaid, the Company will retain all future reference income related to each respective Investment Amount.

The Company had $206.4 million and $158.1 million of outstanding borrowings under financing agreement as of June 30, 2026 and December 31, 2025, respectively. The Company incurred interest expense of $7.0 million and $13.2 million for the three and six months ended June 30, 2026, respectively, and $4.0 million and $7.3 million for the three and six months ended June 30, 2025, respectively. Interest expense is included in “General and administrative expense” in the condensed consolidated statements of operations and comprehensive loss.

New Business Financing Agreement

On June 22, 2026, the Company and Hannover Re (Ireland) DAC ("Hannover Re") entered into a New Business Financing Agreement (the “Financing Agreement”) under which Hannover Re will provide up to $250 million of outstanding capital related to the financing of the Company’s sales and marketing growth efforts. This Financing Agreement is subject to a maximum outstanding capital amount of $150 million from January 1, 2027 through December 31, 2027, and up to $250 million at any time during the period from January 1, 2028 through December 31, 2028.

Under the Agreement, subject to certain terms and conditions, at the start of each month, Hannover Re shall provide financing of up to 80% of the Company's growth spend but not to exceed $20 million per reference cohort. The Company will repay each amount financed based on a specific percentage of premiums collected for assigned customer cohorts associated with the funded growth spend. This repayment amount will include the funding amount plus a rate of return in accordance with the Counterparty Cap Amount, defined as the sum of (a) the greater of (i)0% or (ii) the three-year U.S. Treasury Bill rate, plus (b)5.8%. Once fully repaid, the Company will retain all future reference premium related to each assigned customer cohorts. The Financing Agreement also includes certain financial covenants, cancellation and commitment termination provisions.

Beginning January 1, 2027, new financing of the Company’s sales and marketing growth efforts shall be under the Financing Agreement with Hannover Re. Separate reference premium from customer cohorts shall be attributed to financing with Hannover Re. Reference premium from customer cohorts under the Amended and Restated Agreement will continue to be applied to financing with GC.

9. Other Liabilities and Accrued Expenses

Other liabilities and accrued expenses as of June 30, 2026 and December 31, 2025 consist of the following ($ in millions):

10. Stockholders’ Equity

Common stock

The Company's certificate of incorporation, as amended and restated, authorized the Company to issue 200,000,000 shares of par value $0.00001 per share common stock. The voting, dividend and liquidation rights of the holders of the Company’s common stock is subject to and qualified by the rights, powers and preferences of the holders of the preferred stock. There were 77,326,718 and 75,907,215 total issued and outstanding shares as of June 30, 2026 and December 31, 2025, respectively.

The Company in 2020 made a contribution of 500,000 issued shares of common stock to the Lemonade Foundation, a related party (Note 14), of which 400,000 shares were owned as of both June 30, 2026 and December 31, 2025.

Undesignated Preferred Stock

The Company's certificate of incorporation, as amended and restated in 2020, authorized the Company to issue up to 10,000,000 shares of undesignated preferred stock, with par value $0.00001 per share. As of both June 30, 2026 and December 31, 2025, there wereno shares of undesignated preferred stock issued or outstanding.

Warrants

The Company in 2022 entered into an omnibus agreement (the “Omnibus Agreement”) and a warrant agreement (the “Warrant Agreement” and, together with the Omnibus Agreement, the “Agreements”) with Chewy Insurance Services, LLC (the “Warrantholder” or "Chewy") in connection with the execution of an agency agreement on the same date between the Company, Lemonade Insurance Agency, LLC, Lemonade Insurance Company and the Warrantholder. In connection with the Agreements, the Company is authorized to issue to the Warrantholder 3,352,025 shares of the Company’s common stock underlying the warrant with an exercise price of $0.01 per share, which will vest in installments, in increasing amounts over a period offive years. The Warrant Agreement allows the Company to cancel unvested warrant shares which are subject to certain vesting events and thresholds. On April 4, 2025, the Company terminated the Agreements with Chewy and canceled the remaining 3,170,834 unvested warrant shares.

The agency agreement remains in effect between the Company, Lemonade Insurance Agency, LLC, Lemonade Insurance Company and Chewy.

11. Stock-based Compensation

Share option plans

2020 Incentive Compensation Plan

On July 2, 2020, the Company’s board of directors adopted and the Company’s stockholders approved the 2020 Incentive Compensation Plan (the “2020 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering ("IPO") in 2020. The 2020 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards.

The number of shares initially reserved for issuance under the 2020 Plan is 5,503,678 shares, inclusive of available shares previously reserved for issuance under the 2015 Incentive Share Option Plan, as amended and restated on September 4, 2019 (the “2015 Plan”). In addition, the number of shares reserved for issuance under the 2020 Plan is subject to increase for awards previously issued under the 2015 Plan which are forfeited or lapse unexercised. Annually, on the first day of each calendar year beginning on January 1, 2021 and ending on and including January 1, 2030, the reserve will be increased by an amount equal to the lesser of (A)5% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the Company’s board of directors, provided that no more than 3,650,000 shares may be issued upon the exercise of incentive stock options. On January 1, 2026, the 2020 Plan share pool was increased by 3,650,000 shares, equal to the maximum increase allowed under the 2020 Plan. As of June 30, 2026, there were 8,902,808 shares of common stock available for future grants.

2020 Employee Stock Purchase Plan

On July 2, 2020, the Company's board of directors adopted and the Company's stockholders approved the 2020 Employee Stock Purchase Plan (the "2020 ESPP"), which became effective immediately prior to the effectiveness of the registration statement for the Company's IPO in 2020. The total shares of common stock initially reserved for issuance under the 2020 ESPP is limited to 1,000,000 shares. In addition, the number of shares available for issuance under the 2020 ESPP will be increased on January 1 of each calendar year beginning in 2021 and ending in and including 2030, by an amount equal to the lesser of (A)1,000,000 shares, (B)1% of the shares outstanding on the final day of the immediately preceding calendar year and (C) such smaller number of shares as is determined by the board of directors. The board of directors or a committee of the board of directors will administer and will have authority to interpret the terms of the 2020 ESPP and determine eligibility of participants. On January 1, 2026, there wasno increase in the 2020 ESPP share pool. As of June 30, 2026, there wereno shares of common stock issued under the 2020 ESPP.

2015 Incentive Share Option Plan

In July 2015, the Company adopted the 2015 Incentive Share Option Plan ("2015 Plan"). The 2015 Plan has been amended and restated from time to time to increase the number of shares reserved for grant and to enable the grant of options to employees of the Company’s subsidiaries. Under the 2015 Plan, options to purchase common stock of the Company may be granted to employees, officers, directors and consultants of the Company. Each option granted can be exercised forone share of common stock of the Company. Options granted to employees generally vest over a period of no more than four years. The options expireten years from the date of grant.

Pursuant to the 2015 Plan, the Company had reserved 7,312,590 shares of common stock for issuance. Effective immediately upon the approval of the 2020 Plan, the remaining shares of common stock available for future grant under the 2015 Plan were transferred to the 2020 Plan. As of June 30, 2026, there wereno shares of common stock available for future grant under the 2015 Plan. Subsequent to the approval of the 2020 Plan, no additional grants will be made under the 2015 Plan and any outstanding awards under the 2015 Plan will continue with their original terms.

Assumed Share Option Plans

As part of the acquisition of Metromile in 2022, the Company assumed the Metromile 2011 Incentive Stock Plan ("2011 Plan") and Metromile 2021 Incentive Stock Plan ("2021 Plan") (collectively referred to as "Assumed Plans"). The Company assumed equity awards of 404,207 which were granted from the respective Assumed Plans and will be settled in the Company's common stock. The remaining unallocated shares reserved under both 2011 Plan and 2021 Plan were canceled and no new awards will be granted under these Assumed Plans.

Options granted to employees and non-employees

The fair value of each option granted during the six months ended June 30, 2026 and 2025 is estimated on the date of grant using the Black-Scholes model based on the following assumptions:

Expected volatility is calculated based on implied volatility from market comparisons of certain publicly traded companies and other factors. The expected term of options granted is based on the simplified method, which uses the midpoint between the vesting date and the contractual term in accordance with ASC Topic 718, “Compensation - Stock Compensation”. The risk-free interest rate is based on observed interest rates appropriate for the term of the Company’s stock options. The dividend yield assumption is based on the Company’s historical and expected future dividend payouts and may be subject to substantial change in the future.

The following tables summarize activity of stock options and restricted stock units:

Stock options

Restricted Stock Units with service condition

Restricted Stock Units with market condition

In March 2026, the Company’s board of directors approved the grant of 180,000 Restricted Stock Units with market condition ("RSUs with market condition") to each of the Company’s Chief Executive Officer and President. The RSUs with market condition vest based on the achievement of a stock closing price target of $110.00 or above per share for 30 consecutive trading days within a performance window of 24 months from the grant date, and will be forfeited if the market condition is not met. The total grant-date fair value of the RSUs with market condition amounted to $15.4 million. Summarized in the table below are the assumptions used in determining the grant-date fair value of $42.80 using the Monte-Carlo simulation approach for the RSUs with market condition:

Stock-based compensation expense relating to the RSUs with market condition is recognized on a straight-line basis over the derived service period of 2 years commencing on grant date, regardless of whether the market condition is satisfied. If the related market condition is achieved earlier than its estimated derived service period, the stock-based compensation expense is accelerated, and a cumulative catch-up expense is recorded during the period in which the market condition is met. Stock-based compensation expense is not reversed if the achievement of the market condition does not occur. Stock-based compensation expense amounted to $1.9 million and $2.5 million for the three and six months ended June 30, 2026, respectively, and presented under “Technology Development” and “General and Administrative” expense line items in the condensed consolidated statements of operations and comprehensive loss.

Stock-based compensation expense

Stock-based compensation expense from stock options, Restricted Stock Units with service condition ("RSUs with service condition") and RSUs with market condition, including equity awards from the Assumed Plans as discussed above and warrants (Note 10), were included and presented in the condensed consolidated statements of operations and comprehensive loss as follows ($ in millions):

(1) Includes the impact of the canceled unvested warrant shares for contract year 2 related to the termination of the Warrant Agreement with Chewy in the amount of $5.2 million for the six months ended June 30, 2025.

(2) Includes $1.9 million and $2.5 million of compensation expense related to the RSUs with market condition for the three and six months ended June 30, 2026.

Stock-based compensation expense classified by award type are included in the condensed consolidated statements of operations and comprehensive loss as follows ($ in millions):

The total unrecognized expense granted to employees and non-employees outstanding at June 30, 2026 was $26.3 million for the stock options and $226.1 million for the RSUs, with a remaining weighted-average vesting period of 1.2 years for the stock options and 2.5 years for the RSUs. Total unrecognized stock-based compensation expense related to RSUs with market condition amounted to $12.9 million for the six months ended June 30, 2026.

Warrants

In connection with the Warrant Agreement as discussed in Note 10, the Company was authorized to issue 3,352,025 warrant shares with a grant date fair value of $20.37 that will vest in installments on a yearly basis in increasing amounts for a period offive years. Compensation expense is recognized over the vesting period, for each of the installments, in increasing amounts over five years and presented under “Sales and Marketing expense” in the condensed consolidated statements of operations and comprehensive loss. There were 181,191 warrant shares which vested in April 2024 and were exercised in June 2024. As a result of the termination of the Warrant Agreement as discussed in Note 10, the remaining unvested warrant shares of 3,170,834 were canceled. The Company recognized the impact of the canceled unvested warrant shares for contract year 2 in the amount of $5.2 million for the six months ended June 30, 2025.

12. Income Taxes

The consolidated effective tax rate was (3.6)% and (2.2)% for the six months ended June 30, 2026 and 2025, respectively. The change in effective tax rate over the two periods was predominantly reflective of the change in profit before tax of the Company's foreign jurisdictions, change in valuation allowance and change in unrecognized tax benefits.

The Company's unrecognized tax benefits related to tax positions, excluding penalty and interest, amounted to $13.4 million and $10.6 million as of June 30, 2026 and 2025, respectively. The increase was primarily due to a prior year change in transfer pricing methodology. Interest and penalties related to unrecognized tax expense (benefits) are recognized in income tax expense, when applicable. Interest and penalties amounted to $1.0 million and $0.6 million as of June 30, 2026 and 2025, respectively. The Company's management believes it is reasonably possible that the unrecognized tax benefits could change within the next 12 months.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the U.S. in 2020 to provide certain relief as a result of the COVID-19 pandemic. The Employee Retention Credit ("ERC") program was established under the CARES Act whereby companies who meet the eligibility requirements may claim a tax credit against certain employment taxes paid in 2020 and 2021. For the period ended June 30, 2025, the Company recorded $11.7 million of tax refund received under the ERC program which is presented under “General and Administrative expense” in the condensed consolidated statements of operations and comprehensive loss.

The One Big Beautiful Bill Act ("OBBBA") enacted on July 4, 2025 includes both tax and non-tax provisions. The changes resulting from the tax provisions in OBBBA did not have a material impact on the Company's results of operations.

13. Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:

The Company’s potentially dilutive securities, which include stock options, unvested RSUs and warrants for common stock, have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect.

(1) Each outstanding warrant of Metromile assumed by the Company converted automatically into warrants denominated in the Company's common stock with the number of warrants and exercise price adjusted based on the exchange ratio of 0.05263. These warrants expired on February 9, 2026.

14. Related Party Transactions

The Company’s Chief Executive Officer and President, both of whom are also members of the Company’s board of directors, are thetwo sole members of the board of directors of the Lemonade Foundation. The Company contributed 500,000 shares of common stock with a fair market value of $24.36 per share (Note 10), of which 400,000 shares were owned by the Lemonade Foundation as of June 30, 2026 and December 31, 2025. There wasno outstanding amount due to or from the Lemonade Foundation as of June 30, 2026 and December 31, 2025.

15. Commitments and Contingencies

Litigation

The Company is occasionally a party to routine claims or litigation incidental to its business. The Company records accruals for loss contingencies with these legal matters when it is probable that a liability will be incurred, and the amount of the loss can be reasonably estimated.

The Company finalized settlements related to the previously disclosed liability exposure from its car insurance quote flow that likely led to the exposure of certain data received by a third party data provider. An accrual for the net liability of $0.9 million was recorded in accordance with ASC 450, and final settlement was made in July 2026.

The Company will continue to monitor all legal issues and assess whether to accrue liability in accordance with ASC 450 based on new information and as further developments arise.

Charges and guarantees

The Company provided guarantees in an aggregate amount of $2.7 million as of both June 30, 2026 and December 31, 2025, with respect to certain office leases.

Assessments

The Company is a member of the California FAIR Plan ("FAIR Plan") which is an insurance pool that provides coverage to California homeowners who are unable to obtain insurance in the voluntary market. To the extent the FAIR Plan is unable to pay losses during a catastrophe event, it may seek regulatory approval to assess member companies based on their relevant market share. Members are also allowed to request prior approval for temporary supplemental fees to recoup up to 50% of the assessed amount. The Company in February 2025 received an assessment charge of $6.9 million from the FAIR Plan related to the January 2025 California Wildfires which was paid and expensed in the first quarter of 2025. This expense is presented under “Other Insurance Expense” in the condensed consolidated statements of operations and comprehensive loss. The Company received regulatory approval for recoupment of up to 50% of the assessment over a period of 2 years and was implemented in 2026.

16. Segment Information

The Company operates inone reportable segment providing personal property and casualty insurance products within the United States and Europe, including the UK. Insurance coverage under thehomeowners multi-peril, inland marine and general liability and private passenger auto lines of business are offered to individual customers through its direct to consumer distribution channel which follows the same underwriting and claims process. The Company's Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM manages the Company’s operations, evaluates the operating performance and decides on allocation of resources based on segment / consolidated net income (loss). Loss and loss adjustment expenses andadvertising expenses (growth spend), as included in “Sales and Marketing expenses”, in the condensed consolidated statements of operations and comprehensive loss, represents the significant expenses which are regularly provided and reviewed by the CODM. The operating results of the personal property and casualty insurance reportable segment is presented in the following table below ($ in millions):

(1) Includes $11.7 million of tax refund under the ERC program (see Note 12).

(2) Includes $1.7 million recovery related to a pre-acquisition Metromile extra-contractual claim liability which was previously recorded in the third quarter of 2024.

The measure of segment assets is based on total assets as reported on the condensed consolidated balance sheets. The Company does not allocate its assets, including investments, or income taxes in evaluating the segment / consolidated net income (loss).

Gross written premium by location is as follows ($ in millions):