Lemonade posts best gross loss ratio ever in Q4, share price drops on 2025 guidance

By Michael Loney

Feb 26 - (The Insurer) - Lemonade has reported that its gross loss ratio improved 14 points year over year to 63% in Q4 2024 and that its first-quarter results will include $45 million in gross and $20 million in net losses from the Los Angeles wildfires.

• Q4 63% gross loss ratio compares with 77% in prior year period

• Q4 revenue up 29% to $148.8mn; $23.8 million adjusted Ebitda loss compares to $28.9 million

• Estimates Q1 2025 $45mn LA wildfires gross losses, $20mn adjusted Ebitda impact

• Share price drops on Wednesday morning on Q1 and FY 2025 guidance

After markets closed on Tuesday, Lemonade reported its “best result ever”, with a Q4 gross loss ratio of 63% compared to 77% in Q4 2023 and 73% in Q3 2024.

The trailing twelve months (TTM) gross loss ratio came in at 73%, which Lemonade said was in line with its target range, 12 points improved compared with the prior-year period and 4 points improved sequentially.

“This marks the sixth consecutive quarter of sequential improvement in the TTM gross loss ratio,” the insurtech said in a letter to shareholders.

Lemonade’s fourth quarter revenue of $148.8 million was up 29% from the $115.5 million in the fourth quarter of 2023, primarily due to the increase of gross earned premium, ceding commission income and net investment income.

Fourth quarter gross profit of $63.9 million increased by 90% from $33.6 million in the fourth quarter of 2023, primarily due to higher earned premium and improved loss ratio in the fourth quarter this year.

Adjusted gross profit of $66.2 million in the fourth quarter was up 88% from $35.3 million in the fourth quarter of 2023, primarily due to higher earned premium and improved loss ratio in the fourth quarter this year.

The Q4 net loss was $30.0 million compared to $42.4 million in the fourth quarter of 2023.

The adjusted Ebitda loss of $23.8 million compared to a loss of $28.9 million in the fourth quarter of 2023, which Lemonade said was primarily due to increase in total revenue, offset by growth spend in the fourth quarter this year.

In-force premium grew 26% YoY to $944 million, from $747 million in Q4 2024. This was the fifth consecutive quarter of accelerating growth.

Lemonade said that its current estimate of the impact of the California wildfires on its Q1 2025 results is $45 million in gross losses and an adjusted Ebitda impact of $20 million.

“If not for the diversity of our CA book of business across home, renters, pet and car coverage, and initiatives to manage CAT exposure, specifically underwriting revisions, the financial impact of these wildfire events might have been five times greater,” the shareholders letter said.

New York-listed Lemonade’s share price was down around 6% as of 10.30 a.m. EST (1530 GMT) on Wednesday, having dropped nearly 14% after markets opened.

In a research note released before markets opened on Wednesday, Citizens JMP equity analyst Matthew Carletti noted Lemonade’s share price had dropped after hours Monday as a result of its 2025 guidance including the impact of the wildfires.

Carletti said this included Q1 in-force premium guidance of $997 million to $1 billion compared to $997 million analyst consensus, revenue guidance of $143 million to $145 million compared to $150 million consensus and adjusted Ebitda loss guidance of $49 million to $46 million compared to consensus of $39 million.

For the full year 2025, Carletti said the in-force premium guidance of $1.20 billion to $1.21 billion compared to consensus of $1.21 billion, revenue guidance of $655 million to $657 million compared to consensus of $665 million, and the guidance of an adjusted Ebitda loss of $140 million to $135 million compared to consensus of $126 million.

Carletti highlighted that the Q4 2024 results “beat expectations on the top and bottom lines, the TTM gross loss ratio improved for the sixth consecutive quarter, and Lemonade sustained adjusted cash flow positivity for the third consecutive quarter (achieving it annually for the first time).”

He reiterated Citizens’ “market outperform” rating and price target of $60 for Lemonade.