Lemonade, Inc. Third Quarter 2021 Results Conference Call Letter to Shareholders

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Dear shareholders,

Let’s start with the most exciting news – Lemonade Car launched last week, and today, as part of our continued investment in our automotive business, we are announcing the acquisition of Metromile.

While we have been at the forefront of the use of big data and AI in home and pet insurance, Metromile has paved a parallel path for auto insurance. Metromile’s precision car-mounted sensors have completed more than 400 million road trips, spanning billions of kilometers and sending real-time data streams to the Metromile cloud. These were mapped to behaviors (how much a person drives, when, where, and how) and crossed with actual claims data, producing accurate predictions for loss per mile driven. These algorithms promise to propel Lemonade Car from a newcomer to auto insurance to its forefront.

We believe today’s deal will be a significant unlock of value for our shareholders and clients, and we expect this transaction to pay dividends in three important currencies: collapsing time, flattening risks and increasing efficiency. You can read more about our strategic rationale for pursuing this transaction in a our blog post co-CEO,Daniel Schreiber, or in the presentation to investorsaccompanying this letter.

Launching Lemonade Car has been a Herculean effort by our team – the result is an auto insurance product built from the ground up in 2021 by the largest team we have ever assigned to a single project. You can learn more about our product in a our blog post co-CEO,Shai Wininger, and we’re incredibly proud of what we’ve built. We also believe that following the acquisition of Metromile, things will only get better from here. We anticipate that injecting all of Metromile’s capabilities into Lemonade Car will lead to a unique product offering in the market: we will have all the people and tools in place to deliver the most transparent and efficient auto insurance product. more customer-centric, that is to say also the most affordable, precise and fair. This is our plan.

In parallel to these significant developments in our automotive product and our strategy, in the rest of our business portfolio, a key theme for 2021 was fortunately maintained until the third quarter: we leaned and sequentially increased our investment in growth. We saw robust IFP growth in the third quarter, with IFP increasing 84% year-on-year. We closed Q3 21 with PFI of $ 347 million and approximately 1.4 million customers. We would like to highlight a few key trends that are forming across the book.

Growth, Business Mix & Consolidation

In Q3 21, we broke a record IFP sequential increase of $ 50 million. This marks the third consecutive record quarter and was a direct result of looking into: a sequential increase in ad investments over the period. Across our business portfolio, we are seeing trends that are improving customer lifetime value – including the increasing prevalence of consolidation and improving loss rates in our new lines of business – and we are doing this. gives confidence to accelerate our pace of investment.

Additionally, the third quarter is typically the quarter where we see seasonally driven tailwinds in tenant moving behavior. We have leveraged this effectively, delivering a record gross new tenant business volume during the period – this reflects a sequential increase> 25% from Q2-21.

While tenant growth remains healthy, consistent with our continued strategy of portfolio diversification as long as the unit economy is attractive, we have in fact delivered faster year-over-year growth rates in each of our business lines. not tenants. As a result, the evolution of the business mix that we outlined in detail last quarter has been maintained, with the share of non-tenants in our overall business portfolio amounting to 47% compared to 44% in the previous quarter. . Our pet business line has added 2% to its share, now up to 15%, the share of life has increased to 2%, and the share of owners is stable at 30%.

As always, going forward, our growth investment strategy will continue to allocate dollars primarily to those areas of our business that demonstrate the economic profitability of the healthiest unit. In the letter of the last quarter, we mentioned the formation of favorable trends in our European loss ratios. Therefore, Short term, we plan to reallocate marketing dollars from our life businesses to Europe. Although our Europe and Life businesses are each relatively small in scope today, we continue to believe that they will achieve a Lemonade-like growth curve with significant scale over the long term.

While our growth was robust during the quarter, in line with increasing media costs across the industry, we recorded a 26% year-over-year decline in marketing effectiveness, as measured by the variation in IFP induced by advertising spending. This industry-wide phenomenon affected us less than most as our conversion rates improved over the period across our various product lines. As a result, we were able to meet our IFP growth targets with convincing LTV / CAC ratios despite this headwind.

Unlike our new customer acquisition strategy, we are seeing positive trends in contributing to the growth of our existing customer base. The behavior of bundles is increasing significantly across the portfolio, with bundles now accounting for 8% of total IFP, up from 0% before the launch of pet insurance in Q3-20. At T321, we have identified a recording volume cross-selling at around $ 5 million, and saw a > 4x increase in the number of clients with policies in several lines of business compared to Q3-20. While the average premium per client across our overall business volume was $ 254 in T321, the premium per client for our bundled clients is ~3x upper.

Loss rate

Our gross loss ratio in Q3-21 was 77%, compared to 72% a year ago, despite the fact that our new products show improved loss ratios.

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Disclaimer

Lemonade Inc. published this content on 08 November 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on 09 November 2021 01:22:04 AM UTC.

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Analyst Recommendations on LEMONADE, INC.
Sales 2021 124 million

Net income 2021 -237 million

Net debt 2021

PER 2021 ratio -16.5x
Yield 2021
Capitalization 3,874 million
3,874 million
Capi. / Sales 2021 31.2x
Capi. / Sales 2022 18.9x
Number of employees 567
Free float 64.9%

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Number of analysts 9
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Average price target

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Spread / Average target 19.2%


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