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Lemonade (LMND) Q1 Earnings, Revenues Beat, Premiums Up Y/Y

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Lemonade, Inc. (LMND - Free Report) reported first-quarter 2022 operating loss of $1.21 per share, narrower than the Zacks Consensus Estimate of a loss of $1.43. The loss was however wider than the year-ago loss of 81 cents per share.

The results reflect gross earned premiums improved, driven by an increase in-force premium earned offset by higher expense.

Lemonade, Inc. Price, Consensus and EPS Surprise

 

Behind the Q1 Headlines

Revenues increased 88.5% year over year to $44.3 million, driven by an increase in net earned premium, net investment income and commission and other income. The top line beat the Zacks Consensus Estimate by 2.4%.

Gross earned premiums soared 71% year over year to $96 million, driven by an increase in in-force premiums earned.

Lemonade’s in-force premium of $419 million jumped 66%, driven by a 37% increase in the number of customers as well as a 22% increase in premium per customer. Premium per customer increased driven by the continued shift of business mix toward products with higher average policy values, increased prevalence of multiple policies per customer, and growth in the overall average policy value.

Total operating expenses, excluding net loss and loss adjustment expense, increased 68% year over year to $92.5 million, attributable to higher sales & marketing, technology development, and general and administrative expenses.

Adjusted EBITDA was negative $57.4 million, wider than negative $41.3 million in the year-ago quarter, attributable to increased operating expenses.

The loss ratio of 89 deteriorated 3100 basis points year over year. LMND estimates the loss ratio to be less than 75 in the long term.

Financial Update

Cash, cash equivalents, and investments were $1 billion as of Mar 31, 2022, down from 2021 end level of $1.1 billion, reflecting net proceeds from cash used in operations.

As of Mar 31, 2022, Lemonade had assets worth $1.5 billion, down about 1% from the level at 2021 end.

Shareholder equity at quarter-end was $912.7 billion, down 7.6% from the 2020-end level.

Cash used in operations was $39.5 million, lower than $40.3 million used in the year-ago quarter.

Q2 Guidance

In-force premium at quarter-end is projected between $445 and $450 million. Gross earned premium is expected in the range of $103-$105 million. Lemonade expects revenues between $46 million and $48 million. Adjusted EBITDA loss is expected to be $65-$70 million. Capital expenditure is estimated to be $4 million.

2022 View

Lemonade projects in-force premium between $535 million and $545 million. Gross earned premium is expected in the range of $426 million to $430 million. Revenues are anticipated between $205 million and $208 million. Adjusted EBITDA loss is expected to be in the range of $265-$280 million. Capital expenditure is estimated to be $14 million. Stock-based compensation expense is estimated to be about $60 million    

Zacks Rank

Lemonade currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported first-quarter results so far, The Travelers Companies (TRV - Free Report) and RLI Corporation (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation (PGR - Free Report) missed the mark.

Travelers reported first-quarter 2022 core income of $4.22 per share, which beat the Zacks Consensus Estimate by 14% and increased 54.6% year over year. Total revenues increased 6.8% from the year-ago quarter to $8.8 billion, primarily due to higher premiums and fee income but missed the consensus estimate. Travelers’ combined ratio deteriorated 530 bps year over year to 91.3.

RLI’s first-quarter 2022 operating earnings of $1.43 per share beat the Zacks Consensus Estimate by 40.2% and improved 64.4% from the prior-year quarter. Operating revenues were $287 million, up 17.1% year over year and beat the Zacks Consensus Estimate by 0.8%. RLI’s gross premiums written increased 22% year over year to $359.2 million. The combined ratio improved 900 bps year over year to 77.9.

Progressive’s first-quarter 2022 earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.24 and declined 34.9% from the year-ago quarter. Net premiums written were $13.2 billion in the quarter, up 12% from $11.7 billion a year ago. Progressive’s combined ratio deteriorated 520 bps from the prior-year quarter to 94.7.