[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially. It lists numerous risk factors, including historical losses, customer retention, brand reputation, claims management, reinsurance availability, operational history, growth management, AI algorithm efficacy, competition, regulatory compliance, product expansion, business model novelty, Giveback program, data collection restrictions, capital needs, security incidents, regulatory examinations, underwriting accuracy, product development cycles, expansion risks, industry regulations, catastrophe events, climate risks, ESG matters, and the General Catalyst agreement - The company has a history of losses and may not achieve or maintain profitability in the future[12](index=12&type=chunk) - Success depends on retaining and expanding the customer base; failure to do so could harm business, revenue, operating results, and financial condition[12](index=12&type=chunk) - Reinsurance may be unavailable at current levels and prices, limiting new business and impacting capital needs, and subjects the company to counterparty risk[12](index=12&type=chunk) - Operations in Israel expose the company to political, economic, and military instability in the region[16](index=16&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part contains the unaudited condensed consolidated financial statements and related notes, management's discussion and analysis of financial condition and results of operations, quantitative and qualitative disclosures about market risk, and controls and procedures [Item 1. Financial Statements.](index=7&type=section&id=Item%201.%20Financial%20Statements.) This item presents the unaudited condensed consolidated financial statements for Lemonade, Inc. and its subsidiaries, including the balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity, and statements of cash flows, along with their accompanying notes [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show the financial position of Lemonade, Inc. and its subsidiaries as of June 30, 2025, and December 31, 2024. Total assets increased, primarily driven by investments and premium receivables, while total liabilities also increased, mainly due to unpaid loss and loss adjustment expense, unearned premium, and borrowings under financing agreements. Stockholders' equity decreased | Metric | June 30, 2025 ($ millions) | December 31, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------------- | :-------------------------- | :----------------------------- | :------------------ | :------- | | Total assets | 1,934.6 | 1,849.1 | 85.5 | 4.6% | | Total liabilities | 1,407.5 | 1,255.7 | 151.8 | 12.1% | | Total stockholders' equity | 527.1 | 593.4 | (66.3) | (11.2)% | | Investments | 645.8 | 634.9 | 10.9 | 1.7% | | Premium receivable, net | 346.7 | 301.2 | 45.5 | 15.1% | | Unpaid loss and loss adjustment expense | 309.8 | 298.1 | 11.7 | 3.9% | | Unearned premium | 509.5 | 455.0 | 54.5 | 12.0% | | Borrowings under financing agreement | 123.5 | 83.4 | 40.1 | 48.1% | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The condensed consolidated statements of operations and comprehensive loss show a decrease in net loss for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to increased total revenue and a smaller increase in total expenses. For the six months, net loss slightly increased | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Total revenue | 164.1 | 122.0 | 42.1 | 34.5% | | Total expense | 206.7 | 177.1 | 29.6 | 16.7% | | Net loss | (43.9) | (57.2) | 13.3 | (23.2)% | | Net loss per share (basic and diluted) | (0.60) | (0.81) | 0.21 | (25.9)% | | Metric | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Total revenue | 315.3 | 241.1 | 74.2 | 30.8% | | Total expense | 419.3 | 341.4 | 77.9 | 22.8% | | Net loss | (106.3) | (104.5) | (1.8) | 1.7% | | Net loss per share (basic and diluted) | (1.45) | (1.48) | 0.03 | (2.0)% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) The statements of changes in stockholders' equity show a decrease in total stockholders' equity from $593.4 million as of December 31, 2024, to $527.1 million as of June 30, 2025, primarily due to net losses incurred during the period, partially offset by stock-based compensation and other comprehensive income | Metric | December 31, 2024 ($ millions) | June 30, 2025 ($ millions) | Change ($ millions) | | :-------------------------------- | :----------------------------- | :-------------------------- | :------------------ | | Total Stockholders' Equity | 593.4 | 527.1 | (66.3) | | Accumulated Deficit | (1,298.8) | (1,405.1) | (106.3) | | Additional Paid-In Capital | 1,898.3 | 1,928.0 | 29.7 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows indicate that for the six months ended June 30, 2025, net cash used in operating activities remained relatively stable compared to the prior year, while cash used in investing activities increased significantly, and cash provided by financing activities also increased | Metric | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Change ($ millions) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | | Net cash used in operating activities | (41.7) | (41.5) | (0.2) | | Net cash (used in) provided by investing activities | (10.8) | 92.2 | (103.0) | | Net cash provided by financing activities | 44.1 | 29.1 | 15.0 | | Cash, cash equivalents and restricted cash at end of period | 386.0 | 349.7 | 36.3 | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining the nature of the business, basis of presentation, use of estimates, significant accounting policies, and specific details regarding investments, fair value measurements, loss and loss adjustment expenses, financing agreements, liabilities, stockholders' equity, stock-based compensation, income taxes, net loss per share, related party transactions, commitments, contingencies, and segment information [1. Nature of the Business](index=13&type=page&id=1.%20Nature%20of%20the%20Business) Lemonade, Inc. is a Delaware public benefit corporation providing property and casualty insurance through its wholly-owned subsidiaries in the US and Europe - Lemonade, Inc. is a public benefit corporation providing property and casualty insurance[29](index=29&type=chunk) [2. Basis of Presentation](index=13&type=page&id=2.%20Basis%20of%20Presentation) The financial statements are prepared in accordance with U.S. GAAP, consolidating all wholly-owned subsidiaries and a variable interest entity. All figures are in U.S. dollars in millions, except share amounts. The company notes ongoing uncertainties due to the conflict in Israel impacting its operations there - Financial statements are prepared under U.S. GAAP and consolidate wholly-owned subsidiaries[30](index=30&type=chunk) [Risks and Uncertainties](index=13&type=page&id=Risks%20and%20Uncertainties) - The evolving conflict in Israel and the surrounding region has increased global economic and political uncertainty, potentially impacting the company's operations in Israel[31](index=31&type=chunk) [Unaudited interim financial information](index=13&type=page&id=Unaudited%20interim%20financial%20information) - The unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary for fair presentation[32](index=32&type=chunk) [3. Use of Estimates](index=13&type=page&id=3.%20Use%20of%20Estimates) The preparation of financial statements requires management to make significant estimates and assumptions, particularly for loss and loss adjustment expense reserves, reinsurance recoverable, intangible assets, uncertain tax positions, and deferred tax asset valuation allowances. Actual results may differ from these estimates - Significant estimates are made for loss and loss adjustment expense reserves, reinsurance recoverable, intangible assets, uncertain tax positions, and valuation allowance on deferred tax assets[33](index=33&type=chunk) [4. Summary of Significant Accounting Policies](index=15&type=page&id=4.%20Summary%20of%20Significant%20Accounting%20Policies) This section details the company's significant accounting policies, including the composition of cash, cash equivalents, and restricted cash, and notes recently issued accounting pronouncements pending adoption, such as ASU 2023-09 on Income Tax Disclosures and ASU 2024-03 on Disaggregation of Income Statement Expenses [Cash, cash equivalents and restricted cash](index=15&type=page&id=Cash%2C%20cash%20equivalents%20and%20restricted%20cash) | Metric | June 30, 2025 ($ millions) | December 31, 2024 ($ millions) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Cash and cash equivalents | 377.5 | 376.0 | | Restricted cash | 8.5 | 9.7 | | Total cash, cash equivalents and restricted cash | 386.0 | 385.7 | [New Accounting Pronouncements](index=15&type=page&id=New%20Accounting%20Pronouncements) - FASB issued ASU 2023-09 (Income Tax Disclosures) effective after December 15, 2024, and ASU 2024-03 (Disaggregation of Income Statement Expenses) effective after December 15, 2026, both pending evaluation by the company[35](index=35&type=chunk)[36](index=36&type=chunk) [5. Investments](index=16&type=page&id=5.%20Investments) The company's investment portfolio primarily consists of fixed maturities available-for-sale and short-term investments. The section details unrealized gains and losses, contractual maturities, net investment income, and investment gains and losses. Gross unrealized losses decreased, and the company does not intend to sell these investments before recovery. Restricted investments are held in a trust account for reinsurance obligations [Unrealized gains and losses](index=16&type=page&id=Unrealized%20gains%20and%20losses) | Investment Type | June 30, 2025 Fair Value ($ millions) | December 31, 2024 Fair Value ($ millions) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Corporate debt securities | 488.1 | 470.8 | | U.S. Government obligations | 88.0 | 107.7 | | Asset-backed securities | 33.9 | 22.9 | | Non-U.S. government obligations | 14.5 | 6.0 | | Total Fixed Maturities | 624.5 | 607.4 | - Gross unrealized losses for fixed maturities decreased from **$1.3 million** (Dec 31, 2024) to **$0.3 million** (June 30, 2025), primarily due to interest rate environment changes, not credit risk[38](index=38&type=chunk)[45](index=45&type=chunk) [Contractual maturities of bonds](index=16&type=page&id=Contractual%20maturities%20of%20bonds) | | June 30, 2025 | | :--- | :--- | | Due in one year or less | $271.5 | | Due after one year through five years | $352.8 | | Due after five years through ten years | $0.2 | | Total | $624.5 | [Net investment income](index=17&type=page&id=Net%20investment%20income) | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :---------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net investment income | 9.4 | 8.1 | 18.9 | 15.7 | [Investment gains and losses](index=17&type=page&id=Investment%20gains%20and%20losses) - The company had pre-tax net realized capital gain of **$0.1 million** for the three and six months ended June 30, 2025[42](index=42&type=chunk) [Aging of gross unrealized losses](index=17&type=page&id=Aging%20of%20gross%20unrealized%20losses) | | June 30, 2025 | | :--- | :--- | | Total Gross Unrealized Losses | $(0.3) | | Total Fair Value | $122.5 | - Investments in fixed maturities with gross unrealized losses for twelve months or more was **$0.2 million** as of June 30, 2025[45](index=45&type=chunk) [Restricted investments](index=19&type=page&id=Restricted%20investments) - Restricted investments, securing reinsurance obligations, totaled **$83.0 million** as of June 30, 2025[46](index=46&type=chunk) [6. Fair Value Measurements](index=19&type=page&id=6.%20Fair%20Value%20Measurements) The company's financial assets and liabilities are measured using a fair value hierarchy. All fixed maturities and short-term investments are classified as Level 2, with fair values estimated using quoted prices from a third-party valuation service provider. There were no transfers between fair value levels during the reporting periods - All fixed maturities and short-term investments are classified as **Level 2** in the fair value hierarchy[47](index=47&type=chunk)[49](index=49&type=chunk) [7. Unpaid Loss and Loss Adjustment Expense](index=21&type=page&id=7.%20Unpaid%20Loss%20and%20Loss%20Adjustment%20Expense) This section details the activity in the liability for unpaid loss and loss adjustment expense (LAE), net of reinsurance. The company experienced favorable development on net loss and LAE reserves, primarily from homeowners multi-peril products. It also incurred significant net incurred loss and LAE related to the January 2025 California Wildfires | Metric | June 30, 2025 ($ millions) | June 30, 2024 ($ millions) | | :---------------------------------------------------- | :-------------------------- | :-------------------------- | | Unpaid loss and LAE at beginning of period | 298.1 | 262.3 | | Net unpaid loss and LAE at end of period | 156.0 | 144.5 | | Unpaid loss and LAE, gross of reinsurance recoverable, at end of period | 309.8 | 282.2 | - Favorable development on net loss and LAE reserves was **$12.6 million** for the six months ended June 30, 2025, primarily due to better than expected loss reserve emergence on homeowners multi-peril product[52](index=52&type=chunk) - Current accident year net incurred loss and LAE included **$16.9 million** related to the January 2025 California Wildfires[53](index=53&type=chunk) - The company sold subrogation rights related to the January 2025 California wildfires, reducing net unpaid losses by **$4.2 million**[54](index=54&type=chunk) [Reinsurance](index=21&type=page&id=Reinsurance) The company uses various reinsurance contracts (proportional and non-proportional) to manage exposure to large losses, catastrophic risks, and regulatory capital. While ceding risk, the company remains primarily liable to policyholders. The reinsurance program effective July 1, 2024, ceded approximately 55% of premium, but the renewed program effective July 1, 2025, reduced the effective cession rate to approximately 20% - Reinsurance is used to reduce loss exposure and manage capital, but the company remains primarily liable to policyholders[57](index=57&type=chunk) [Whole Account Quota Share Reinsurance Contracts](index=23&type=page&id=Whole%20Account%20Quota%20Share%20Reinsurance%20Contracts) - The Whole Account Quota Share Reinsurance Contracts effective July 1, 2024, ceded approximately **55% of premium**[58](index=58&type=chunk) - The renewed Reinsurance Program effective July 1, 2025, will have a reduced effective cession rate of approximately **20%**[58](index=58&type=chunk) [Property Per Risk Excess of Loss and Auto Facultative Property Per Risk Reinsurance Contracts](index=23&type=page&id=Property%20Per%20Risk%20Excess%20of%20Loss%20and%20Auto%20Facultative%20Property%20Per%20Risk%20Reinsurance%20Contracts) - The PPR Contract, covering claims in excess of **$750,000** up to **$2,250,000**, was renewed at similar terms effective July 1, 2025[59](index=59&type=chunk) - The Automatic Facultative PPR Contract with Arch Re, covering claims over **$3,000,000**, expired on June 30, 2024, and was not renewed[60](index=60&type=chunk) [Captives](index=23&type=page&id=Captives) - The XOL reinsurance contract through a Bermuda captive, covering catastrophe risk on property and auto business, was renewed at similar terms effective July 1, 2025[61](index=61&type=chunk) - The MIC QS reinsurance contract was amended to increase the cession rate to **35%** and ceding commission rate effective July 1, 2025[62](index=62&type=chunk) [8. Borrowings under Financing Agreement](index=24&type=page&id=8.%20Borrowings%20under%20Financing%20Agreement) The company has an Amended and Restated Customer Investment Agreement with General Catalyst (GC) for sales and marketing growth efforts. The agreement provides up to $150 million (initially), an additional $140 million through December 31, 2025, and a further $200 million from January 1, 2026, to December 31, 2026. As of June 30, 2025, outstanding borrowings were $123.5 million, and interest expense for the six months ended June 30, 2025, was $7.3 million - The company has a financing agreement with General Catalyst for sales and marketing growth, providing up to **$490 million** in total financing across multiple periods[64](index=64&type=chunk)[65](index=65&type=chunk) | Metric | June 30, 2025 ($ millions) | December 31, 2024 ($ millions) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Outstanding borrowings under financing agreement | 123.5 | 83.4 | | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :---------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Interest expense | 4.0 | 1.0 | 7.3 | 1.5 | [9. Other Liabilities and Accrued Expenses](index=24&type=page&id=9.%20Other%20Liabilities%20and%20Accrued%20Expenses) This section details the composition of other liabilities and accrued expenses, which increased from $105.7 million at December 31, 2024, to $124.2 million at June 30, 2025. Key components include lease liabilities, accrued advertising costs, ceding commission payable, and employee compensation | Metric | June 30, 2025 ($ millions) | December 31, 2024 ($ millions) | | :------------------------------------ | :-------------------------- | :----------------------------- | | Total Other liabilities and accrued expenses | 124.2 | 105.7 | | Lease liabilities | 20.2 | 23.8 | | Accrued advertising costs | 18.7 | 13.4 | | Ceding commission payable | 18.5 | 3.9 | | Employee compensation | 10.9 | 13.2 | [10. Stockholders' Equity](index=25&type=page&id=10.%20Stockholders%27%20Equity) This section outlines the company's common stock and undesignated preferred stock authorizations and outstanding amounts. It also details the termination of the warrant agreement with Chewy, resulting in the cancellation of 3,170,834 unvested warrant shares [Common stock](index=25&type=page&id=Common%20stock) - The company's common stock authorized is **200,000,000 shares**, with **73,819,710 shares** issued and outstanding as of June 30, 2025[68](index=68&type=chunk) [Undesignated Preferred Stock](index=25&type=page&id=Undesignated%20Preferred%20Stock) - The company is authorized to issue up to **10,000,000 shares** of undesignated preferred stock, with no shares issued or outstanding as of June 30, 2025[70](index=70&type=chunk) [Warrants](index=25&type=page&id=Warrants) - The warrant agreement with Chewy was terminated on April 4, 2025, leading to the cancellation of **3,170,834 unvested warrant shares**[71](index=71&type=chunk) [11. Stock-based Compensation](index=25&type=page&id=11.%20Stock-based%20Compensation) This section describes the company's stock option plans (2020 Incentive Compensation Plan, 2020 ESPP, 2015 Plan, and Assumed Plans from Metromile acquisition) and restricted stock units (RSUs). It provides details on stock option and RSU activity, fair value assumptions, and the allocation of stock-based compensation expense across various operational categories. The termination of the Chewy warrant agreement significantly impacted warrant-related compensation expense [Share option plans](index=25&type=page&id=Share%20option%20plans) [2020 Incentive Compensation Plan](index=25&type=page&id=2020%20Incentive%20Compensation%20Plan) - The 2020 Incentive Compensation Plan share pool increased by **3,636,043 shares** on January 1, 2025, with **9,139,699 shares** available for future grants as of June 30, 2025[74](index=74&type=chunk) [2020 Employee Stock Purchase Plan](index=26&type=page&id=2020%20Employee%20Stock%20Purchase%20Plan) - The 2020 ESPP has **1,000,000 shares** initially reserved, with no increase on January 1, 2025, and no shares issued as of June 30, 2025[75](index=75&type=chunk) [2015 Incentive Share Option Plan](index=26&type=page&id=2015%20Incentive%20Share%20Option%20Plan) - No shares are available for future grant under the 2015 Plan as of June 30, 2025, with remaining shares transferred to the 2020 Plan[77](index=77&type=chunk) [Assumed Share Option Plans](index=26&type=page&id=Assumed%20Share%20Option%20Plans) - The company assumed **404,207 equity awards** from Metromile's 2011 and 2021 Incentive Stock Plans, with no new awards to be granted under these plans[78](index=78&type=chunk) [Options granted to employees and non-employees](index=26&type=page&id=Options%20granted%20to%20employees%20and%20non-employees) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------------------- | :----------------------------- | | Stock Options Outstanding | 7,896,415 | 9,376,193 | | RSUs Outstanding | 3,834,992 | 4,278,383 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Weighted average expected term (years) | 6.0 | 5.7 | | Risk-free interest rate | 4.1% | 4.3% | | Volatility | 79% | 77% | [Stock-based compensation expense](index=28&type=page&id=Stock-based%20compensation%20expense) | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total stock-based compensation expense | 15.4 | 15.4 | 25.7 | 30.3 | - The termination of the Warrant Agreement with Chewy resulted in a **$5.2 million** impact for the six months ended June 30, 2025, reducing sales and marketing expense[81](index=81&type=chunk)[83](index=83&type=chunk) | Award Type | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Stock options | 5.8 | 7.1 | 12.3 | 14.8 | | RSUs | 9.6 | 6.7 | 18.6 | 13.0 | | Warrant shares | — | 1.6 | (5.2) | 2.5 | [Warrants](index=30&type=page&id=Warrants) - The termination of the Warrant Agreement with Chewy resulted in the cancellation of **3,170,834 unvested warrant shares** and a **$5.2 million** impact for the six months ended June 30, 2025[83](index=83&type=chunk) [12. Income Taxes](index=30&type=page&id=12.%20Income%20Taxes) The consolidated effective tax rate for the six months ended June 30, 2025, was (2.2)%, reflecting changes in foreign jurisdiction profit, valuation allowance, and uncertain tax positions. Unrecognized tax benefits decreased, primarily due to a change in transfer pricing methodology. The company recorded an $11.7 million tax refund under the ERC program | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Consolidated effective tax rate | (2.2)% | (4.2)% | - Unrecognized tax benefits decreased to **$10.6 million** as of June 30, 2025, from **$15.7 million** as of June 30, 2024, mainly due to a change in transfer pricing methodology[85](index=85&type=chunk) - The company recorded an **$11.7 million** tax refund under the Employee Retention Credit (ERC) program for the period ended June 30, 2025[86](index=86&type=chunk) [13. Net Loss per Share](index=31&type=page&id=13.%20Net%20Loss%20per%20Share) Basic and diluted net loss per share attributable to common stockholders decreased for the three months ended June 30, 2025, but slightly increased for the six months ended June 30, 2025, compared to the prior year. Potentially dilutive securities were excluded as their effect would be anti-dilutive | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net loss per share (basic and diluted) | (0.60) | (0.81) | (1.45) | (1.48) | - Potentially dilutive securities (stock options, unvested RSUs, warrants) were excluded from diluted EPS calculation due to their anti-dilutive effect[88](index=88&type=chunk) [14. Related Party Transactions](index=31&type=page&id=14.%20Related%20Party%20Transactions) The company's CEO and President are board members of the Lemonade Foundation, to which the company contributed 500,000 common shares. As of June 30, 2025, the Foundation owned 400,000 shares - The Lemonade Foundation, a related party, owned **400,000 shares** of the company's common stock as of June 30, 2025[90](index=90&type=chunk) [15. Commitments and Contingencies](index=31&type=page&id=15.%20Commitments%20and%20Contingencies) This section addresses the company's legal proceedings, including a probable liability claim related to Metromile's cybersecurity incident. It also covers guarantees for office leases, an assessment charge from the California FAIR Plan related to the January 2025 California Wildfires, and a sublease agreement for office space [Litigation](index=31&type=page&id=Litigation) - The company has recorded a probable liability for a cybersecurity incident related to Metromile's online pre-filled quote form[92](index=92&type=chunk) [Charges and guarantees](index=33&type=page&id=Charges%20and%20guarantees) - The company provided guarantees of **$2.7 million** for certain office leases as of June 30, 2025[94](index=94&type=chunk) [Assessments](index=33&type=page&id=Assessments) - The company received a **$6.9 million** assessment charge from the California FAIR Plan due to the January 2025 California Wildfires and is seeking regulatory approval for recoupment[95](index=95&type=chunk) [Sublease](index=33&type=page&id=Sublease) - The company entered into a sublease agreement for a portion of its New York City office space in June 2024, recording an impairment charge of **$0.3 million**[96](index=96&type=chunk) [16. Segment Information](index=33&type=page&id=16.%20Segment%20Information) The company operates in one reportable segment, providing personal property and casualty insurance in the US, Europe, and the UK. Gross written premium increased by 26% for the three months and 25% for the six months ended June 30, 2025, driven by customer growth and increased premium per customer. California, Texas, and New York remain the largest jurisdictions by gross written premium - The company operates as a single reportable segment, offering personal property and casualty insurance[97](index=97&type=chunk)[100](index=100&type=chunk) | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenue | 164.1 | 122.0 | 315.3 | 241.1 | | Segment / Consolidated Net Loss | (43.9) | (57.2) | (106.3) | (104.5) | | Jurisdiction | 3 Months Ended June 30, 2025 GWP ($ millions) | % of GWP (2025) | 3 Months Ended June 30, 2024 GWP ($ millions) | % of GWP (2024) | | :---------------- | :------------------------------------------ | :-------------- | :------------------------------------------ | :-------------- | | California | 61.3 | 21.5% | 55.3 | 24.4% | | Texas | 38.8 | 13.6% | 35.9 | 15.9% | | New York | 27.0 | 9.5% | 22.8 | 10.1% | | US Total | 274.9 | 96.6% | 222.8 | 98.5% | | Europe and UK | 9.6 | 3.4% | 3.4 | 1.5% | | Total GWP | 284.5 | 100.0% | 226.2 | 100.0% | - Gross written premium increased by **26%** for the three months and **25%** for the six months ended June 30, 2025, driven by a **24%** increase in customers and a **4%** increase in premium per customer[160](index=160&type=chunk)[176](index=176&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business model, key factors and trends affecting performance, detailed analysis of revenue and expense components, key operating and financial metrics, and a comparison of results for the three and six months ended June 30, 2025 and 2024 [Our Business](index=36&type=section&id=Our%20Business) Lemonade is a vertically-integrated insurance company leveraging technology, AI, and a digital platform to offer renters, homeowners, pet, car, and life insurance. Its business model minimizes volatility through reinsurance and maximizes trust and social impact via its "Giveback" program - Lemonade is a vertically-integrated company using AI and a digital platform for insurance, aiming for delightful, affordable, and precise coverage[102](index=102&type=chunk)[103](index=103&type=chunk) - The business model uses reinsurance to dampen volatility and a "Giveback" program to donate excess premiums to nonprofits, fostering trust and social impact[104](index=104&type=chunk) [Customer Investment Agreement](index=36&type=section&id=Customer%20Investment%20Agreement) The company has an Amended and Restated Customer Investment Agreement with General Catalyst (GC) to finance sales and marketing growth. The agreement provides up to $150 million (initial), an additional $140 million through December 31, 2025, and a further $200 million from January 1, 2026, to December 31, 2026. As of June 30, 2025, $123.5 million was outstanding, with $7.3 million in interest expense for the six months ended June 30, 2025 - The agreement with GC provides up to **$490 million** in financing for sales and marketing growth across multiple periods[105](index=105&type=chunk)[106](index=106&type=chunk) | Metric | June 30, 2025 ($ millions) | | :------------------------------------ | :-------------------------- | | Outstanding borrowings under financing agreement | 123.5 | | Interest expense (six months ended June 30, 2025) | 7.3 | [Key Factors and Trends Affecting our Operating Results](index=37&type=section&id=Key%20Factors%20and%20Trends%20Affecting%20our%20Operating%20Results) Operating results are influenced by seasonality (customer acquisition and claims due to weather), the current macroeconomic environment (inflation, capital market volatility), and reinsurance arrangements. The company's operations in Israel also expose it to regional instability [Seasonality](index=37&type=page&id=Seasonality) - Seasonal patterns impact customer acquisition (higher in Q3) and claims (weather-related events)[108](index=108&type=chunk)[109](index=109&type=chunk) [Current Macroeconomic Environment](index=37&type=page&id=Current%20Macroeconomic%20Environment) - Macroeconomic conditions, including inflation, could affect claims costs, pricing, and investment yield[110](index=110&type=chunk) - Operations in Israel are subject to political, economic, and military instability in the region[111](index=111&type=chunk) [Reinsurance](index=37&type=page&id=Reinsurance) - Reinsurance helps manage exposure but does not eliminate the company's primary liability to policyholders, and availability/pricing can impact business[112](index=112&type=chunk) - The reinsurance program effective July 1, 2024, ceded approximately **55% of premium**, but the renewed program effective July 1, 2025, reduced the effective cession rate to approximately **20%**[114](index=114&type=chunk) [Components of our Results of Operations](index=39&type=section&id=Components%20of%20our%20Results%20of%20Operations) This section defines and explains the various revenue and expense components that constitute the company's results of operations, including gross and net premiums, ceding commission income, investment income, commission and other income, and different categories of expenses like loss and LAE, other insurance expense, sales and marketing, technology development, general and administrative, and income tax expense [Revenue](index=39&type=page&id=Revenue) Revenue components include Gross Written Premium (influenced by new business, renewals, policy size, and rates), Ceded Written Premium (impacted by reinsurance contracts), Gross Earned Premium (pro rata earning over policy term), Ceded Earned Premium, Net Earned Premium, Ceding Commission Income (reimbursement for acquisition costs), Net Investment Income (from fixed maturity securities and other investments), and Commission and Other Income (from third-party policies, installment fees, and investment gains/losses) [Gross Written Premium](index=39&type=page&id=Gross%20Written%20Premium) - Gross Written Premium is driven by new customer acquisitions, policy renewals, and average policy value, including car insurance policies in Texas[121](index=121&type=chunk) [Ceded Written Premium](index=39&type=page&id=Ceded%20Written%20Premium) - Ceded written premium is impacted by gross written premium levels and decisions to adjust reinsurance limits, retention, and co-participation[122](index=122&type=chunk) [Gross Earned Premium](index=39&type=page&id=Gross%20Earned%20Premium) - Gross earned premium is the earned portion of gross written premium, recognized pro rata over the policy term, typically one year or six months for pay-per-mile car insurance[123](index=123&type=chunk) [Ceded Earned Premium](index=39&type=page&id=Ceded%20Earned%20Premium) - Ceded earned premium is the portion of gross earned premium ceded to reinsurers[124](index=124&type=chunk) [Net Earned Premium](index=39&type=page&id=Net%20Earned%20Premium) - Net earned premium is the earned portion of gross written premium, less amounts ceded to third-party reinsurers[125](index=125&type=chunk) [Ceding Commission Income](index=39&type=page&id=Ceding%20Commission%20Income) - Ceding commission income is received from reinsurers to reimburse for acquisition and underwriting expenses, recognized pro-rata with earned premium[126](index=126&type=chunk) [Net Investment Income](index=40&type=page&id=Net%20Investment%20Income) - Net investment income is expected to become a more meaningful component of results over time, influenced by the size and yield of the investment portfolio[127](index=127&type=chunk) [Commission and Other Income](index=40&type=page&id=Commission%20and%20Other%20Income) - Commission and other income includes commissions from third-party policies, installment fees, and net realized gains/losses from investments[128](index=128&type=chunk) [Expense](index=40&type=page&id=Expense) Expense categories include Loss and Loss Adjustment Expense, Net (costs for losses net of reinsurance, based on actuarial analysis, subject to catastrophe losses), Other Insurance Expense (amortization of commissions, premium taxes, credit card fees, underwriting team compensation), Sales and Marketing (third-party marketing, advertising, employee compensation, expected to decrease as a percentage of revenue long-term), Technology Development (employee compensation, R&D, expected to grow), General and Administrative (executive, finance, legal, professional services, public company compliance costs), and Income Tax Expense (primarily foreign income taxes, with a valuation allowance for U.S. deferred tax assets) [Loss and Loss Adjustment Expense, Net](index=40&type=page&id=Loss%20and%20Loss%20Adjustment%20Expense%2C%20Net) - Loss and Loss Adjustment Expense, net, represents costs for losses, net of reinsurance, and is subject to variability from catastrophe events[129](index=129&type=chunk) [Other Insurance Expense](index=40&type=page&id=Other%20Insurance%20Expense) - Other insurance expense includes amortization of commissions, premium taxes, credit card fees, and underwriting team compensation, offset by ceding commission income[130](index=130&type=chunk) [Sales and Marketing](index=40&type=page&id=Sales%20and%20Marketing) - Sales and marketing costs are expensed as incurred and are expected to decrease as a percentage of revenue in the long term due to customer acquisition efficiencies and increased renewals[131](index=131&type=chunk)[132](index=132&type=chunk) [Technology Development](index=41&type=page&id=Technology%20Development) - Technology development costs, including employee compensation and R&D, are expensed as incurred (except for capitalized internal-use software) and are expected to grow[133](index=133&type=chunk)[134](index=134&type=chunk) [General and Administrative](index=41&type=page&id=General%20and%20Administrative) - General and administrative expenses include compensation for executive, finance, legal, and administrative personnel, professional services, taxes, and public company compliance costs[135](index=135&type=chunk)[137](index=137&type=chunk) [Income Tax Expense](index=41&type=page&id=Income%20Tax%20Expense) - Income tax expense primarily consists of foreign income taxes, and a valuation allowance is maintained for U.S. deferred tax assets until future taxable income is more likely than not to be realized[138](index=138&type=chunk)[139](index=139&type=chunk) [Key Operating and Financial Metrics](index=42&type=section&id=Key%20Operating%20and%20Financial%20Metrics) This section defines and presents key operating and non-GAAP financial metrics used to evaluate business performance, including Customers, In Force Premium (IFP), Premium per customer, Annual Dollar Retention (ADR), Gross Earned Premium, Gross Profit, Adjusted Gross Profit, Adjusted EBITDA, Gross Profit Margin, Adjusted Gross Profit Margin, Ratio of Adjusted Gross Profit to Gross Earned Premium, Gross Loss Ratio, and Net Loss Ratio | Metric | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Customers (end of period) | 2,693,107 | 2,167,194 | 525,913 | 24.3% | | In force premium (end of period) | $1,083.4 | $838.8 | $244.6 | 29.2% | | Premium per customer (end of period) | $402 | $387 | $15 | 3.9% | | Annual dollar retention (end of period) | 84% | 88% | (4)% | (4.5)% | | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenue | $164.1 | $122.0 | $315.3 | $241.1 | | Gross earned premium | $252.3 | $199.9 | $485.9 | $387.8 | | Gross profit | $64.3 | $30.8 | $102.9 | $65.5 | | Adjusted gross profit | $65.6 | $33.4 | $111.6 | $70.1 | | Net loss | $(43.9) | $(57.2) | $(106.3) | $(104.5) | | Adjusted EBITDA | $(40.9) | $(43.0) | $(87.9) | $(76.9) | | Gross profit margin | 39% | 25% | 33% | 27% | | Adjusted gross profit margin | 40% | 27% | 35% | 29% | | Ratio of Adjusted gross profit to Gross earned premium | 26% | 17% | 23% | 18% | | Gross loss ratio | 67% | 79% | 73% | 79% | | Net loss ratio | 69% | 79% | 75% | 79% | - Annual Dollar Retention (ADR) decreased from **88%** to **84%**, indicating a slight reduction in the ability to retain customers and sell additional products[141](index=141&type=chunk)[146](index=146&type=chunk) [Customers](index=42&type=page&id=Customers) - Customer growth drives revenue, brand awareness, market penetration, upsell/cross-sell opportunities, and data generation for platform improvement[142](index=142&type=chunk) [In Force Premium](index=42&type=page&id=In%20Force%20Premium) - In Force Premium (IFP) is the aggregate annualized premium for customers, including policies underwritten by the company and those placed with third parties[143](index=143&type=chunk) [Premium per customer](index=44&type=page&id=Premium%20per%20customer) - Premium per customer is the average annualized premium customers pay, reflecting the average spend on products[145](index=145&type=chunk) [Annual Dollar Retention](index=44&type=page&id=Annual%20Dollar%20Retention) - Annual Dollar Retention (ADR) measures the percentage of IFP retained over a twelve-month period, including changes in policy value, number of policies, type, and churn[146](index=146&type=chunk) [Gross Earned Premium](index=44&type=page&id=Gross%20Earned%20Premium) - Gross earned premium is the earned portion of gross written premium, excluding ceded premiums, and provides insight into gross economic benefit and underwriting performance[147](index=147&type=chunk)[148](index=148&type=chunk) [Gross Profit](index=44&type=page&id=Gross%20Profit) - Gross profit is calculated as total revenue less net loss and loss adjustment expense, other insurance expense, and allocated depreciation and amortization[149](index=149&type=chunk) [Adjusted Gross Profit](index=44&type=page&id=Adjusted%20Gross%20Profit) - Adjusted gross profit is a non-GAAP measure that excludes net investment income, interest income, and other income from gross profit, and adds back fixed costs and overhead associated with underwriting operations[150](index=150&type=chunk) [Adjusted EBITDA](index=45&type=page&id=Adjusted%20EBITDA) - Adjusted EBITDA is a non-GAAP measure that excludes income tax expense, depreciation and amortization, stock-based compensation, interest expense, net investment income, and other non-cash adjustments from net loss[152](index=152&type=chunk) [Gross Profit Margin](index=45&type=page&id=Gross%20Profit%20Margin) - Gross profit margin is the ratio of gross profit to total revenue, expressed as a percentage[153](index=153&type=chunk) [Adjusted Gross Profit Margin](index=45&type=page&id=Adjusted%20Gross%20Profit%20Margin) - Adjusted gross profit margin is the ratio of adjusted gross profit to total revenue, expressed as a percentage[154](index=154&type=chunk) [Ratio of Adjusted Gross Profit to Gross Earned Premium](index=45&type=page&id=Ratio%20of%20Adjusted%20Gross%20Profit%20to%20Gross%20Earned%20Premium) - The Ratio of Adjusted Gross Profit to Gross Earned Premium measures the relationship between business volume and underlying profitability, excluding reinsurance structure volatility[154](index=154&type=chunk) [Gross Loss Ratio](index=45&type=page&id=Gross%20Loss%20Ratio) - Gross loss ratio is the ratio of losses and loss adjustment expense to gross earned premium, expressed as a percentage[155](index=155&type=chunk) [Net Loss Ratio](index=45&type=page&id=Net%20Loss%20Ratio) - Net loss ratio is the ratio of losses and loss adjustment expense, less amounts ceded to reinsurers, to net earned premium, expressed as a percentage[156](index=156&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2025, versus the same periods in 2024, analyzing changes in revenue and expense line items [Comparison of the Three Months Ended June 30, 2025 and 2024](index=46&type=page&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the three months ended June 30, 2025, total revenue increased by 35% to $164.1 million, while total expenses increased by 17% to $206.7 million, resulting in a 23% decrease in net loss to $43.9 million. Key drivers included increased gross written premium, higher ceding commission income, and increased sales and marketing spend | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Total revenue | 164.1 | 122.0 | 42.1 | 35% | | Net loss | (43.9) | (57.2) | 13.3 | (23)% | [Net Earned Premium](index=46&type=page&id=Net%20Earned%20Premium) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Net earned premium | 112.5 | 89.3 | 23.2 | 26% | | Gross written premium | 284.5 | 226.2 | 58.3 | 26% | | Ceded written premium | (157.1) | (124.3) | (32.8) | 26% | - The increase in gross written premium was driven by a **24%** increase in net added customers and a **4%** increase in premium per customer year-over-year[160](index=160&type=chunk) [Ceding Commission Income](index=48&type=page&id=Ceding%20Commission%20Income) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Ceding commission income | 30.4 | 16.5 | 13.9 | 84% | [Net Investment Income](index=48&type=page&id=Net%20Investment%20Income) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Net investment income | 9.4 | 8.1 | 1.3 | 16% | [Commission and Other Income](index=48&type=page&id=Commission%20and%20Other%20Income) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Commission and other income | 11.8 | 8.1 | 3.7 | 46% | [Loss and Loss Adjustment Expense, Net](index=48&type=page&id=Loss%20and%20Loss%20Adjustment%20Expense%2C%20Net) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Loss and loss adjustment expense, net | 77.5 | 70.5 | 7.0 | 10% | [Other Insurance Expense](index=48&type=page&id=Other%20Insurance%20Expense) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Other insurance expense | 21.4 | 18.8 | 2.6 | 14% | [Sales and Marketing](index=49&type=page&id=Sales%20and%20Marketing) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Sales and marketing | 59.6 | 36.8 | 22.8 | 62% | - Advertising and customer acquisition costs increased by **$23.9 million**, or **93%**[170](index=170&type=chunk) - Compensation expense related to warrant shares decreased by **$1.6 million** (**100%**) due to the termination of the Warrant Agreement with Chewy[170](index=170&type=chunk) [Technology Development](index=49&type=page&id=Technology%20Development) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Technology development | 22.4 | 21.2 | 1.2 | 6% | [General and Administrative](index=49&type=page&id=General%20and%20Administrative) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | General and administrative | 25.8 | 29.8 | (4.0) | (13)% | - Interest expense from financing agreements increased by **$2.9 million** (**264%**)[172](index=172&type=chunk) - The company recorded an **$11.7 million** tax refund under the ERC program[172](index=172&type=chunk) [Income Tax Expense](index=49&type=page&id=Income%20Tax%20Expense) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Income tax expense | 1.3 | 2.1 | (0.8) | (38)% | [Net Loss](index=49&type=page&id=Net%20Loss) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Net loss | (43.9) | (57.2) | 13.3 | (23)% | [Comparison of the Six Months Ended June 30, 2025 and 2024](index=50&type=page&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the six months ended June 30, 2025, total revenue increased by 31% to $315.3 million, while total expenses increased by 23% to $419.3 million, resulting in a slight 2% increase in net loss to $106.3 million. Growth was driven by increased gross written premium and ceding commission income, alongside higher sales and marketing and other insurance expenses | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Total revenue | 315.3 | 241.1 | 74.2 | 31% | | Total expense | 419.3 | 341.4 | 77.9 | 23% | | Net loss | (106.3) | (104.5) | (1.8) | 2% | [Net Earned Premium](index=50&type=page&id=Net%20Earned%20Premium) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Net earned premium | 216.8 | 173.7 | 43.1 | 25% | | Gross written premium | 538.7 | 431.8 | 106.9 | 25% | | Ceded written premium | (295.9) | (236.0) | (59.9) | 25% | - The increase in gross written premium was primarily due to a **24%** increase in net added customers and a **4%** increase in premium per customer year-over-year[176](index=176&type=chunk) [Ceding Commission Income](index=52&type=page&id=Ceding%20Commission%20Income) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Ceding commission income | 57.3 | 37.5 | 19.8 | 53% | [Net Investment Income](index=52&type=page&id=Net%20Investment%20Income) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Net investment income | 18.9 | 15.7 | 3.2 | 20% | [Commission and Other Income](index=52&type=page&id=Commission%20and%20Other%20Income) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Commission and other income | 22.3 | 14.2 | 8.1 | 57% | [Loss and Loss Adjustment Expense, Net](index=52&type=page&id=Loss%20and%20Loss%20Adjustment%20Expense%2C%20Net) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Loss and loss adjustment expense, net | 162.9 | 136.4 | 26.5 | 19% | - Net incurred losses included **$16.9 million** related to the January 2025 California Wildfires[184](index=184&type=chunk) [Other Insurance Expense](index=52&type=page&id=Other%20Insurance%20Expense) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Other insurance expense | 47.5 | 36.1 | 11.4 | 32% | - Includes a **$6.9 million** California FAIR Plan assessment charge related to the January 2025 California Wildfires[185](index=185&type=chunk) [Sales and Marketing](index=53&type=page&id=Sales%20and%20Marketing) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Sales and marketing | 102.8 | 67.2 | 35.6 | 53% | - Advertising and customer acquisition channels increased by **$42.2 million**, or **93%**[186](index=186&type=chunk) - Compensation expense related to warrant shares decreased by **$7.7 million** (**308%**) due to the termination of the Warrant Agreement with Chewy[186](index=186&type=chunk) [Technology Development](index=53&type=page&id=Technology%20Development) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Technology development | 44.4 | 42.1 | 2.3 | 5% | [General and Administrative](index=53&type=page&id=General%20and%20Administrative) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | General and administrative | 61.7 | 59.6 | 2.1 | 4% | - Interest expense from financing agreements increased by **$5.6 million** (**329%**)[188](index=188&type=chunk) - The company recorded an **$11.7 million** tax refund under the ERC program[188](index=188&type=chunk) [Income Tax Expense](index=53&type=page&id=Income%20Tax%20Expense) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Income tax expense | 2.3 | 4.2 | (1.9) | (45)% | [Net Loss](index=53&type=page&id=Net%20Loss) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------ | :------- | | Net loss | (106.3) | (104.5) | (1.8) | 2% | [Non-GAAP Financial Measures](index=54&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Gross Profit Margin, Ratio of Adjusted Gross Profit to Gross Earned Premium, and Adjusted EBITDA. These metrics are used by management to evaluate business performance and underlying profitability trends, excluding certain non-cash or unique items [Adjusted Gross Profit and Adjusted Gross Profit Margin](index=54&type=page&id=Adjusted%20Gross%20Profit%20and%20Adjusted%20Gross%20Profit%20Margin) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Gross profit | 64.3 | 30.8 | 102.9 | 65.5 | | Adjusted gross profit | 65.6 | 33.4 | 111.6 | 70.1 | | Gross profit margin | 39% | 25% | 33% | 27% | | Adjusted gross profit margin | 40% | 27% | 35% | 29% | - Adjusted gross profit is a key measure for evaluating progress towards profitability and variable contribution from underwriting operations[193](index=193&type=chunk) [Ratio of Adjusted Gross Profit to Gross Earned Premium](index=55&type=page&id=Ratio%20of%20Adjusted%20Gross%20Profit%20to%20Gross%20Earned%20Premium) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Ratio of Adjusted gross profit to Gross earned premium | 26% | 17% | 23% | 18% | - The ratio uses gross earned premium as the denominator to reflect business volume and gross economic benefit, excluding the impact of ceded premiums which can add volatility[197](index=197&type=chunk) [Adjusted EBITDA](index=57&type=page&id=Adjusted%20EBITDA) | Metric | 3 Months Ended June 30, 2025 ($ millions) | 3 Months Ended June 30, 2024 ($ millions) | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net loss | (43.9) | (57.2) | (106.3) | (104.5) | | Adjusted EBITDA | (40.9) | (43.0) | (87.9) | (76.9) | - Adjusted EBITDA excludes items not directly attributable to underlying operating performance, such as stock-based compensation and net investment income[201](index=201&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had $377.5 million in cash and cash equivalents and $645.8 million in investments. It has historically financed operations through equity sales and third-party financing, including a $490 million agreement with General Catalyst. The company believes existing capital is sufficient for the next 12 months, but its ability to pay dividends is regulated by subsidiaries' statutory restrictions. U.S. insurance subsidiaries maintain capital in excess of risk-based requirements | Metric | June 30, 2025 ($ millions) | | :-------------------------- | :-------------------------- | | Cash and cash equivalents | 377.5 | | Investments | 645.8 | | Total available (cash, cash equivalents, investments) | 1,023.3 | - The company has a financing agreement with General Catalyst for up to **$490 million** for sales and marketing growth[206](index=206&type=chunk) - U.S. insurance subsidiaries' total adjusted capital exceeds prescribed risk-based capital requirements[211](index=211&type=chunk) [Operating Activities](index=60&type=page&id=Operating%20Activities) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | | Net cash used in operating activities | (41.7) | (41.5) | (0.2) | [Investing Activities](index=60&type=page&id=Investing%20Activities) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | | Net cash (used in) provided by investing activities | (10.8) | 92.2 | (103.0) | [Financing Activities](index=60&type=page&id=Financing%20Activities) | Metric | 6 Months Ended June 30, 2025 ($ millions) | 6 Months Ended June 30, 2024 ($ millions) | Change ($ millions) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------ | | Net cash provided by financing activities | 44.1 | 29.1 | 15.0 | [Critical Accounting Policies and Estimates](index=61&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Th

Core Insights - Lemonade reported Q2 2025 results with GAAP revenue of $164.1 million, exceeding analyst estimates of $160.77 million, marking a 35% year-over-year growth [1][5] - Adjusted gross profit reached $65.6 million, a 96.4% increase from $33.4 million in Q2 2024, with a gross loss ratio improving to 67% from 79% [1][6] - The company narrowed its GAAP earnings per share (EPS) loss to ($0.60) compared to ($0.81) in Q2 2024, indicating improved financial performance [1][2] Financial Performance - Q2 2025 GAAP revenue was $164.1 million, up from $122.0 million in Q2 2024, reflecting a 34.5% year-over-year increase [2] - Adjusted gross profit nearly doubled year-over-year to $65.6 million, with an adjusted gross profit margin expanding to 40% [6] - Gross earned premium reached $252.3 million, a 26.2% increase from $199.9 million in Q2 2024 [2][5] Business Operations - Lemonade operates as a tech-driven insurance platform, utilizing AI to streamline customer interactions and claims processing [3][4] - The company focuses on digital innovation and customer-centric features, such as the "Giveback" program, to align interests with policyholders [4] - The European segment showed significant growth, with in-force premium increasing over 200% year-over-year to $43 million [7][11] Strategic Focus - A major shift in the reinsurance strategy was announced, reducing the portion of premiums reinsured from 55% to 20%, which is expected to enhance revenue and gross profit [9] - The company aims to achieve adjusted EBITDA breakeven by the end of FY2026, with revenue growth rates anticipated to outpace premium growth in the coming quarters [13][14] - Key priorities include improving loss ratios and retention rates while scaling new products and markets [14] Customer Metrics - Total customer count reached nearly 2.7 million, with in-force premium valued at $1.08 billion, a 29% year-over-year increase [5] - Annual dollar retention (ADR) remained at 84%, reflecting a proactive approach to managing unprofitable accounts [8]

Core Viewpoint - Lemonade's stock price surged over 30% following the release of its Q2 earnings report, indicating strong market reaction to the company's performance [1] Financial Performance - The company reported a Q2 loss of $0.60 per share, which was better than the market expectation of a loss of $0.81 per share [1] - This loss also improved compared to the same period last year, where the loss was $0.81 per share [1] - Lemonade achieved revenue of $164.1 million in Q2, exceeding analyst expectations and representing a year-over-year growth of approximately 34% from $122 million [1] - The company has consistently outperformed market expectations in both earnings and revenue for the past four consecutive quarters, demonstrating a trend of stability and improvement [1]

Core Viewpoint - Lemonade's stock price surged over 30% following the release of its Q2 earnings report, indicating positive market reaction to the company's performance [1] Financial Performance - The company reported a Q2 loss of $0.60 per share, which was better than the market expectation of a loss of $0.81 per share and also an improvement from the loss of $0.81 per share in the same quarter last year [1] - Revenue for the quarter reached $164.1 million, exceeding analyst expectations and representing a year-over-year growth of approximately 34% from $122 million [1] - Lemonade has consistently outperformed market expectations in both earnings and revenue for the past four consecutive quarters, demonstrating a trend of stability and improvement in its financial performance [1]

Core Insights - Lemonade (LMND) reported $164.1 million in revenue for Q2 2025, a year-over-year increase of 34.5% and a surprise of +1.05% over the Zacks Consensus Estimate of $162.39 million [1] - The company posted an EPS of -$0.60, improving from -$0.81 a year ago, resulting in an EPS surprise of +25.93% [1] Financial Performance Metrics - In force premium at the end of the period was $1.08 billion, slightly above the estimated $1.07 billion [4] - Premium per Customer was reported at $402.00, closely matching the estimate of $402.07 [4] - The number of customers reached 2,693,107, exceeding the estimate of 2,655,423 [4] - The net loss ratio was 69%, better than the estimated 76.4% [4] - The gross loss ratio was reported at 67%, compared to the estimate of 75.4% [4] - Net investment income was $9.4 million, slightly below the estimate of $9.69 million, but representing a year-over-year increase of +16.1% [4] - Ceding commission income was $30.4 million, significantly above the estimate of $25.26 million, reflecting a year-over-year change of +84.2% [4] - Commission and other income reached $11.8 million, surpassing the estimate of $11.3 million, with a year-over-year increase of +45.7% [4] - Net earned premium was reported at $112.5 million, below the estimate of $116.16 million, but still showing a year-over-year increase of +26% [4] Stock Performance - Lemonade's shares have returned -13.2% over the past month, contrasting with the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Data and Key Metrics Changes - The company reported a 29% year-on-year growth in in-force premium (IFP), reaching just above $1 billion [13][3] - The gross loss ratio improved to 67%, a 12-point improvement compared to Q2 of the previous year, with a trailing twelve-month gross loss ratio of 70% [3][14] - Gross profit increased by over 100% in Q2, with a gross margin of 39%, one of the highest recorded [4][3] - Adjusted free cash flow generation reached $25 million, more than a tenfold increase compared to 2024 [4][17] Business Line Data and Key Metrics Changes - Lemonade Cars saw significant growth, crossing $150 million in IFP, with a gross loss ratio of 82%, marking a 13-point improvement year-on-year [5][6] - The European business concluded Q2 with $43 million in IFP, representing over 200% growth, marking the eighth consecutive quarter of triple-digit growth [9][10] - The gross loss ratio for the European segment improved to 83%, a 15% improvement compared to the previous year [10] Market Data and Key Metrics Changes - The company operates in four key European markets, servicing over 250,000 customers, with a focus on renters and homeowners insurance [8][9] - The U.S. market remains a significant focus, with ongoing efforts to improve profitability through targeted non-renewals [13][67] Company Strategy and Development Direction - The company aims to leverage AI for risk management and profitable growth, with a focus on maintaining a capital-light structure [3][38] - A strategic reduction in the quota share reinsurance program from 55% to 20% reflects confidence in improved loss ratios and capital generation [7][19] - The company plans to continue expanding its geographical footprint and product offerings, particularly in the European market [10][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive EBITDA by the end of next year, with a focus on maintaining low loss ratios and capital efficiency [12][19] - The company anticipates that revenue growth rates will outpace IFP growth rates during the transition period of the reinsurance program [20][19] - Management acknowledged potential headwinds in the second half of the year but remains optimistic about maintaining growth momentum [66][67] Other Important Information - The company reported a net loss of $44 million in Q2, an improvement from a net loss of $57 million in the prior year [17] - A one-time tax refund of approximately $12 million contributed to the financial results, but this is not expected to recur [91] Q&A Session Summary Question: What is your plan with synthetic agents going forward? - The synthetic agent program has been effective in driving growth and will continue to be utilized in 2026 with an expected $200 million of capital available [22] Question: What is the largest impediment to releasing CAR to more states? - The company is currently live in 10 states and plans to increase coverage, with new state launches requiring strategic management of loss ratios [24][25] Question: Does the team believe they are ahead of other AI-first companies? - Management believes they have a significant data edge and a fully integrated AI system that enhances operational efficiency [26][27] Question: Can you discuss the reinsurance change and its impact? - The reduction in quota share reinsurance is primarily a capital management decision, allowing the company to retain more profit while maintaining risk management policies [34][38] Question: What is the outlook for car loss ratios? - The company is seeing a notable improvement in loss ratios from renewal policies compared to initial policies, indicating effective risk selection [61][62] Question: Why has the EBITDA guidance remained unchanged? - The unchanged EBITDA guidance reflects the dynamics of growth spending and its impact on the bottom line, with a focus on long-term profitability [80][82]

Financial Data and Key Metrics Changes - The company reported a 29% year-on-year growth in in-force premium (IFP), reaching just above $1 billion [12][3] - The gross loss ratio improved to 67%, a 12-point decrease from the previous year, with a trailing twelve-month gross loss ratio of 70% [3][13] - Gross profit increased by over 100% in Q2, with a gross margin of 39%, one of the highest recorded [4][3] - Adjusted free cash flow generation was $25 million, more than a tenfold increase compared to 2024 [4] Business Line Data and Key Metrics Changes - Lemonade Cars saw significant growth, crossing $150 million in IFP, with a gross loss ratio of 82%, marking a 13-point improvement from last year [5][6] - The European business concluded Q2 with $43 million in IFP, representing over 200% growth, and an 83% gross loss ratio, which is 15% better than the previous year [8][9] Market Data and Key Metrics Changes - The company operates in four key European markets, servicing over 250,000 customers, with a focus on renters and homeowners insurance [7] - The European market is seen as a diversification benefit with lower catastrophe exposure and a flexible regulatory environment [8] Company Strategy and Development Direction - The company aims to leverage AI for risk management and profitable growth, with a focus on maintaining a low cost structure while expanding [3][4] - A strategic reduction in the quota share reinsurance program from 55% to 20% reflects confidence in improved loss ratios and capital efficiency [6][20] - The company plans to continue expanding its geographical footprint and product offerings, particularly in the car insurance sector [9][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive EBITDA by the end of 2026, with expectations for continued top-line growth despite some headwinds [11][82] - The company anticipates that revenue growth rates will outpace IFP growth rates during the transition period of the reinsurance program [20][39] - Management highlighted the importance of balancing growth and profitability, particularly in the home insurance segment [68] Other Important Information - The company reported a net loss of $44 million in Q2, an improvement from a net loss of $57 million in the prior year [17] - Total cash, cash equivalents, and investments at the end of the quarter were approximately $1.03 billion, up $11 million from the end of 2024 [18] Q&A Session Summary Question: What is the plan with synthetic agents going forward? - The synthetic agent program has been effective in driving growth and will continue to be utilized in 2026, with a significant increase in growth spend expected [22][23] Question: What is stopping Lemonade from releasing CAR to more states? - The company is currently live in 10 states and plans to increase coverage, with new state launches requiring careful management of loss ratios [25][26] Question: Does the team believe they are ahead of other AI-first companies? - Management believes they have a significant data edge and a fully integrated AI system that enhances efficiency and effectiveness compared to competitors [27][28] Question: Can you discuss the reinsurance change and its implications? - The reduction in quota share reinsurance is primarily a capital management decision, allowing the company to retain more profit and reduce dependency on external capital [39][40] Question: What are the drivers of improvement in car loss ratios? - The company is seeing a notable difference in loss ratios between new and renewal policies, with overall improvements in both segments [62][64] Question: Why has the EBITDA guidance remained unchanged? - The guidance reflects the dynamics of growth spending and its impact on the bottom line, with expectations for continued top-line growth without immediate bottom-line improvements [81][84]

Company Performance - Lemonade reported a quarterly loss of $0.6 per share, better than the Zacks Consensus Estimate of a loss of $0.81, and improved from a loss of $0.81 per share a year ago, representing an earnings surprise of +25.93% [1] - The company posted revenues of $164.1 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.05%, and up from $122 million in the same quarter last year [2] - Over the last four quarters, Lemonade has exceeded consensus EPS estimates four times and has also topped consensus revenue estimates four times [2] Future Outlook - The sustainability of Lemonade's stock price movement will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is -$0.74 on revenues of $180.86 million, and for the current fiscal year, it is -$2.77 on revenues of $694.36 million [7] - The estimate revisions trend for Lemonade was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Insurance - Multi line industry, to which Lemonade belongs, is currently in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Group 1 - The largest insurance companies in the USA were established nearly a century ago, indicating the industry's long-standing presence and significance [1] - The insurance industry generates trillions of dollars in annual premiums in the USA, highlighting its scale and economic impact [1] - The focus is on identifying and investing in small to mid-cap growth companies in the Canadian and U.S. markets, particularly those in the "new economy" sectors such as software, AI, clean technology, and renewable energy [1] Group 2 - The investment strategy emphasizes long-term investments in high-quality companies that are profitable and cash-generating, especially those in early growth stages [1] - The analyst has over 8 years of active investing experience, primarily in the technology sector, and holds a CFA Charter [1] - The goal is to share top investment ideas through in-depth analyses, focusing on stocks that are undervalued or mispriced relative to their growth potential [1]

[Executive Summary & Q2 2025 Highlights](index=2&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Highlights) [Q2 2025 Performance Overview](index=3&type=section&id=Q2%202025%20Performance%20Overview) Lemonade reported strong Q2 2025 results with accelerating growth, healthy underwriting, and effective expense management, raising full-year guidance - Lemonade achieved its **seventh consecutive quarter of IFP growth acceleration**, alongside **significant improvements** in **gross loss ratio** and **gross profit**[7](index=7&type=chunk)[9](index=9&type=chunk) Q2 2025 Key Financial & Operational Highlights | Metric | Q2 2025 Value | YoY Change | | :----------------------- | :-------------- | :--------- | | In Force Premium (IFP) | $1.08 billion | +29% | | Revenue | $164.1 million | +35% | | TTM Gross Loss Ratio | 70% | -3 points (sequential) | | Q2 Gross Loss Ratio | 67% | -12 points | | Gross Profit | $64.3 million | +109% | | Gross Margin | 39% | +14 points | | Operating Expenses (excl. growth spend) | Declined $1 million | -2% | | Adjusted EBITDA Loss | ($41) million | +5% improvement | | Net Loss | ($44) million | +23% improvement | | Adjusted Free Cash Flow | $25 million | +$23 million | | Cash Flow from Operations | $6 million | +$17 million | [Key Metrics Snapshot](index=2&type=section&id=Key%20Metrics%20Snapshot) Key metrics for Q2 2025 demonstrate significant year-over-year growth in customers and In Force Premium, alongside improved profitability Q2 2025 Key Metrics (in millions) | Metric | Q2 2025 | YoY Change | | :-------------------- | :-------- | :--------- | | Total Customers | 2,693,107 | +24% | | In Force Premium (IFP) | $1,083 | +29% | | Premium Per Customer | $402 | +4% | | Adjusted EBITDA Net Loss | ($41) | Improved from ($43) | | Gross Earned Premium (GEP) | $252 | Increased from $200 | | Adjusted Gross Profit | $64 | Increased from $33 | | Adjusted Free Cash Flow | $25 | Increased from $2 | [Business Performance & Strategic Initiatives](index=4&type=section&id=Business%20Performance%20%26%20Strategic%20Initiatives) [Overall Growth and Operating Leverage](index=4&type=section&id=Overall%20Growth%20and%20Operating%20Leverage) Lemonade achieved accelerating IFP growth and improved loss ratios for seven consecutive quarters, demonstrating operating leverage and nearly tripling gross profit - Lemonade has demonstrated sustained operating leverage through AI and automation, leading to a **significant increase in gross profit** alongside accelerating IFP growth and improving loss ratios[9](index=9&type=chunk) IFP Growth and TTM Gross Loss Ratio Trends | Quarter | IFP YoY Growth Rate | TTM Gross Loss Ratio | | :------ | :------------------ | :------------------- | | Q3 23 | 20% | 88% | | Q4 23 | 22% | 85% | | Q1 24 | 22% | 83% | | Q2 24 | 24% | 79% | | Q3 24 | 26% | 77% | | Q4 24 | 27% | 73% | | Q1 25 | 29% | 73% | | Q2 25 | 29% | 70% | [Lemonade Car Update](index=5&type=section&id=Lemonade%20Car%20Update) Lemonade Car accelerated its growth in Q2 2025 with 12% sequential IFP growth and a 13-point YoY improvement in gross loss ratio to 82%, driven by telematics and expansion - Lemonade Car achieved **12% sequential IFP growth**, outpacing the overall business, driven by successful telematics integration and geographic expansion[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) - The Car segment's gross loss ratio improved significantly to **82% (13 points YoY)**, the lowest since launch, due to precise risk evaluation enabled by telematics[13](index=13&type=chunk) Lemonade Car IFP and Gross Loss Ratio Trends | Quarter | IFP ($m) | Gross Loss Ratio (GLR) | | :------ | :------- | :--------------------- | | Q1 24 | $117 | 95% | | Q2 24 | $123 | 95% | | Q3 24 | $132 | 92% | | Q4 24 | $122 | 83% | | Q1 25 | $134 | 88% | | Q2 25 | $150 | 82% | [Spotlight: Lemonade Europe](index=6&type=section&id=Spotlight%3A%20Lemonade%20Europe) Lemonade's European business is a significant growth engine, with over 200% YoY IFP growth to $43 million in Q2, contributing over 20% of new customers and demonstrating superior efficiency - European operations provide growth diversification, lower catastrophe exposure, and a regulatory environment that accelerates AI model refinement and pricing accuracy[16](index=16&type=chunk) - Europe's IFP grew **over 200% YoY to $43 million** in Q2, contributing **over 20% of net new customers**, with a **15-point YoY improvement in gross loss ratio** to the low 80s[17](index=17&type=chunk) - The European business exhibits **better gross loss ratios (20 points better)** and **double the new business per growth spend dollar** compared to the U.S. at a similar IFP level[19](index=19&type=chunk) Europe IFP Growth Rate | Quarter | IFP ($m) | Growth Rate | | :------ | :------- | :---------- | | Q1 24 | $12 | 50% (approx) | | Q2 24 | $14 | 100% (approx) | | Q3 24 | $19 | 150% (approx) | | Q4 24 | $24 | 200% (approx) | | Q1 25 | $33 | 200% (approx) | | Q2 25 | $43 | >200% | [Reinsurance Program Renewal](index=7&type=section&id=Reinsurance%20Program%20Renewal) Lemonade renewed its reinsurance program, reducing the proportional quota share from 55% to 20% to retain more revenue and gross profit, with revenue growth expected to outpace IFP during the transition - Lemonade reduced its proportional quota share reinsurance cession from **55% to 20%** for the year starting July 1, 2025, aiming to retain more revenue and gross profit[20](index=20&type=chunk) - The reduction in quota share was made possible by consistent improvements in loss ratios and predictable underwriting performance, with no material change to the capital plan due to improved loss ratios and expanded use of Lemonade Re[21](index=21&type=chunk)[23](index=23&type=chunk) - A lower quota share cession will cause revenue growth rates to outpace IFP growth rates during the gradual transition period, as ceded earned premium ramps down from 55% to 20% over several quarters[23](index=23&type=chunk) [Financial Guidance](index=8&type=section&id=Financial%20Guidance) Lemonade raised its full-year 2025 guidance for IFP, GEP, and Revenue, while reiterating Adjusted EBITDA guidance and expecting positive Adjusted Free Cash Flow for FY 2025 - Lemonade raised its FY 2025 guidance for **IFP, GEP, and Revenue**, while maintaining its FY Adjusted EBITDA guidance[24](index=24&type=chunk) - The company expects to achieve **positive Adjusted Free Cash Flow for FY 2025** and **positive Adjusted EBITDA before the end of FY 2026**[25](index=25&type=chunk) Q3 and Full Year 2025 Guidance | Metric (in millions) | Q3 2025 (Low - High) | Full Year 2025 (Low - High) | | :------------------- | :------------------- | :-------------------------- | | In force premium (IFP) | $1,144 - $1,147 | $1,213 - $1,218 | | Gross earned premium (GEP) | $267 - $269 | $1,036 - $1,039 | | Revenue | $183 - $186 | $710 - $715 | | Adjusted EBITDA loss | ($37) - ($34) | ($140) - ($135) | | Stock-based compensation expense | $17 | $61 | | Weighted avg. common shares | 74 | 74 | [Q2 2025 Detailed Financial Results & KPIs](index=9&type=section&id=Q2%202025%20Detailed%20Financial%20Results%20%26%20KPIs) [Key Operating Metrics](index=9&type=section&id=Key%20Operating%20Metrics) In Q2 2025, IFP grew 29% to $1,083.4 million, customer count increased 24%, and revenue rose 35% to $164.1 million, reflecting strong top-line expansion Q2 2025 Key Operating Metrics | Metric | Q2 2025 Value | YoY Change | | :-------------------------- | :-------------- | :--------- | | In Force Premium (IFP) | $1,083.4 million | +29% | | Customers | 2,693,107 | +24% | | Premium per Customer | $402 | +4% | | Annual Dollar Retention (ADR) | 84% | -4 points | | Gross Earned Premium (