Lemonade cuts losses, plans to raise premium prices
The company’s growth rate in the fourth quarter of 2022 was 116%, but despite revenues reaching $88.4 million, Lemonade still lost $63 million in the quarter
Insurtech company Lemonade showed rapid growth alongside buds of improvement in the bottom line of its financial statements for the fourth quarter of 2022.
2022 was the first year Lemonade sold all five of its core products: renters, homeowners, car, pet, and life. During the year, it completed the acquisition of the American company Metromile in a stock deal that initially stood at a valuation of half a billion dollars but ultimately shrank to only $145 million due to the drop in the value of Lemonade stock.
The purchase of Metromile, which specializes in car insurance, contributed to the doubling of the revenues of the merged company, reaching $256.7 million. The number of customers jumped from 1.4 million to 1.8 million and the average premium per customer increased by 30% to $346. Among the reasons for the jump in the size of the premium is an increase in the number of customers who hold more than one policy, alongside the increase in the share of customers with car insurance, where the premiums are higher.
At the quarterly level, the growth rate was 116% and the revenues reached $88.4 million. Alongside the sharp increase in revenues, Lemonade's loss dropped from $70.3 million in the last quarter of 2021 to $63 million in the fourth quarter of 2022. The trend is also similar at the annual level with a loss of $241 million in all of 2022 compared to a loss of $298 million in 2021.
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According to Shai Wininger, co-founder and CEO of Lemonade, a slowdown in the growth rate is expected in the first half of the year. "We showed a significant improvement in the EBITDA in the fourth quarter and to continue this we want to focus on the issue of pricing," said Wininger. "Premiums are becoming more expensive both due to inflationary pressures and due to global warming which produces extreme weather events. The price update in the U.S. requires approval from the regulator and should this be approved we can update the policy prices. As long as Lemonade is in this process, we will slow down the pace of acquiring new customers and the plan is that in the second half of 2023 there will be an acceleration in growth.”
According to Lemonade's forecast, it will report revenues of $89-87 million in the first quarter, similar to the last quarter of 2022. At the annual level, it expects revenues of $379-375 million, an amount that will reflect a high double-digit growth rate.
