Group 1 - The core thesis on Lemonade, Inc. (NYSE: LMND) is that it is transforming a historically volatile, capital-intensive commodity into a learning system that improves its economics as it scales [1] - The company is positioned as a tech insurer, but its real value lies in its ability to learn and adapt policy by policy [1] Group 2 - The article emphasizes the importance of understanding how great businesses create long-term value and the focus on identifying mispriced quality companies [1] - It highlights the disciplined, fundamentals-first approach to investing, which is grounded in long-term thinking and resilience across market cycles [1]

Core Viewpoint - Lemonade's stock experienced a significant increase of over 9% on Wednesday, outperforming the S&P 500 index, which only rose by 0.3% due to positive analyst coverage [1]. Analyst Coverage - Cantor Fitzgerald's Ryan Tunis initiated coverage of Lemonade with an overweight (buy) recommendation and set a price target of $60 per share [2]. - Jefferies' Andrew Andersen raised his price target from $30 to $37 per share but maintained an underperform (sell) rating [3]. Company Performance - The increase in price target by analysts is attributed to Lemonade's higher premium retention, which is expected to drive revenue growth [4]. - Concerns were raised regarding Lemonade's increasing leverage, which could negatively impact its fundamentals if not managed properly [4]. Profitability Concerns - Despite being an innovative company, there are concerns about Lemonade's consistent bottom-line losses, leading to caution regarding its stock until it can demonstrate consistent profitability [5].

Core Viewpoint - Lemonade has shown significant growth potential, with a recent 38% stock increase following its second-quarter earnings report, although it remains 72% below its previous highs [3][4]. Company Performance - In-force premium (IFP) increased by 31% year-over-year, surpassing $1 billion, while customer count rose by 25% to nearly 2.7 million [7]. - The net loss narrowed from $57 million to $44 million year-over-year, indicating potential for future profitability as operating expenses remain stable [8]. - The loss ratio improved to 67% for the quarter and 70% for the trailing 12 months, with home-related products showing a loss ratio of 60% [9]. Growth Strategy - Management aims to increase IFP to $10 billion, representing a tenfold increase from current levels, while maintaining operational efficiency [10]. - Approximately one-third of sales are organic, suggesting reduced reliance on marketing as brand presence strengthens [11]. - The company anticipates achieving positive adjusted EBITDA before the end of 2026 and positive net income by 2027, with expectations of "massive" profits thereafter [11]. Competitive Advantage - Lemonade's digital-first approach and reliance on AI and machine learning provide a competitive edge over traditional insurance companies, which still depend on human agents [12]. - The company targets a younger demographic, being the most popular insurance brand among individuals aged 22 to 40, positioning itself for long-term growth as these customers begin their insurance journeys [13].

Core Insights - Lemonade's stock surged approximately 25% following the release of its second-quarter results, which exceeded expectations in terms of revenue and earnings, and the company raised its guidance [1][2] - The company is demonstrating significant progress in profitability and underwriting, particularly with its new car insurance product gaining traction [1][6] Group 1: Financial Performance - In-force premium increased by 29% year-over-year to $1.08 billion, marking the seventh consecutive quarter of accelerating growth [4] - The number of customers reached nearly 2.7 million, a 24% increase compared to the previous year [4] - Lemonade reported a positive operating cash flow of $6 million, a turnaround from a $12 million loss a year ago, with gross profit more than doubling year-over-year [5] Group 2: Underwriting and Loss Ratios - The company has made significant improvements in underwriting, with the gross loss ratio trending downward over the past four quarters [8][9] - The trailing-12-month gross loss ratio has shown a consistent decline, from 88% in Q3 2023 to a projected 70% by Q2 2025 [10] Group 3: Future Growth Potential - The Lemonade Car product is showing promising growth, with in-force premium up 12% sequentially and a 13-percentage-point improvement in loss ratio year-over-year [6] - The European market has emerged as a high-potential growth area, with in-force premium roughly tripling year-over-year [6] - The stock, currently trading around $50, has the potential to reach $100 per share, implying a market cap of approximately $7.3 billion, contingent on continued growth and strong underwriting performance [11][12]

Core Insights - Lemonade is rapidly transforming the insurance industry by leveraging artificial intelligence to enhance customer experience and operational efficiency [2][5][6] - The company reported a significant increase in customer base and in-force premium, indicating strong business momentum [6][7] - Despite recent stock gains, Lemonade's stock price remains significantly below its peak, suggesting potential for future growth [3][14] Customer Growth - Lemonade's customer base reached a record 2.7 million by the end of Q2 2025, reflecting a 24% year-over-year increase, up from 21% in the previous quarter [6] - The company operates in various insurance markets, including renters, homeowners, pet, life, and car insurance, utilizing AI chatbots for quick quotes and claims processing [5][6] Financial Performance - In Q2 2025, Lemonade's in-force premium (IFP) hit a record $1.08 billion, representing a 29% year-over-year increase, marking the seventh consecutive quarter of accelerated IFP growth [7] - Revenue for Q2 reached $164.1 million, a 35% increase year-over-year, surpassing management's forecast of $158 million [11] - The company raised its full-year revenue guidance for 2025 by $50.5 million, from $662 million to $712.5 million, following strong Q2 results [11] Profitability and Losses - Lemonade reported an adjusted EBITDA loss of $40.9 million in Q2, an improvement from the $43 million loss in the same period last year, indicating progress towards profitability [12] - The company maintains over $1 billion in liquidity, providing ample resources for continued investment in growth initiatives [13] Valuation and Future Outlook - Lemonade's price-to-sales (P/S) ratio has decreased to 6.1, making the stock appear attractive compared to its peak of 90 during the tech frenzy in 2021 [14] - The company aims to grow its IFP to $10 billion over the next decade, suggesting significant long-term growth potential for investors [16]

Core Insights - Lemonade, Inc. (LMND) reported a narrower net loss of $0.60 per share for Q2 2025, compared to a loss of $0.81 per share in the same quarter last year, driven by increased revenues despite higher growth spending [1][8] Financial Performance - Total operating revenues reached $164.1 million, reflecting a 35% year-over-year increase, surpassing the Zacks Consensus Estimate by 1.2% [3][8] - In-force premium grew by 29% year-over-year to $1,083.4 million, marking the seventh consecutive quarter of growth acceleration [3] - Net investment income increased by 16% year-over-year to $9.4 million [3] - Customer count rose by 24% year-over-year to 2,693,107 [3] Profitability Metrics - Premium per customer was $402, a 4% increase year-over-year [4] - Gross earned premium increased by 26% year-over-year to $252.3 million [4] - Gross profit doubled year-over-year to $64.3 million, attributed to a 35% revenue increase and a 10-point improvement in the net loss ratio [4] - Adjusted gross profit surged 96% year-over-year to $65.6 million [5] Expenses and Cash Flow - Total operating expenses, excluding net loss and loss adjustment expense, rose by 21% year-over-year to $129.2 million, mainly due to higher customer acquisition costs [5] - Adjusted EBITDA loss improved to $40.9 million from a loss of $43 million in the previous year [6] - Adjusted free cash flow increased more than tenfold year-over-year to $25 million in Q2 2025 [7] Balance Sheet and Guidance - As of June 30, 2025, Lemonade had cash, cash equivalents, and investments totaling $1.03 billion, a 1% increase from the end of 2024 [7] - The company projects Q3 revenues between $183 million and $186 million, with a full-year revenue outlook of $710 million to $715 million [8][11]

Group 1 - Lemonade (LMND) has reached a significant support level and is considered a good pick for investors from a technical perspective [1] - LMND recently broke through the 20-day moving average, indicating a short-term bullish trend [1] - The 20-day simple moving average is a popular trading tool that smooths out price fluctuations and provides trend reversal signals [2] Group 2 - Over the past four weeks, LMND has gained 14.9% [4] - The company is currently ranked a Zacks Rank 2 (Buy), suggesting potential for further upward movement [4] - Positive earnings estimate revisions support the bullish case, with 2 revisions higher for the current fiscal year and no lower revisions [4] Group 3 - Investors are encouraged to consider adding LMND to their watchlist due to the important technical indicator and positive earnings estimate revisions [5]

The bullish case only gets stronger once investors take into account LMND's positive earnings estimate revisions. There have been 2 higher compared to none lower for the current fiscal year, and the consensus estimate has moved up as well. Given this move in earnings estimate revisions and the positive technical factor, investors may want to keep their eye on LMND for more gains in the near future. LMND could be on the verge of another rally after moving 14.9% higher over the last four weeks. Plus, the comp ...

[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]