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Lemonade (LMND) Q2 Earnings and Revenues Beat Estimates

Lemonade, Inc. LMND reported second-quarter 2022 operating loss of $1.10 per share, narrower than the Zacks Consensus Estimate of a loss of $1.36. The loss was however wider than the year-ago loss of 90 cents per share.

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

Lemonade, Inc. Price, Consensus and EPS Surprise

 

Behind the Q2 Headlines

Revenues increased 77.3% year over year to $50 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 5.2%.

Gross earned premiums soared 60% year over year to $107 million, driven by an increase in in-force premiums earned.

Lemonade’s in-force premium of $458 million jumped 54%, driven by a 31% increase in the number of customers as well as an 18% increase in premium per customer. Premium per customer increased, driven by the increasing prevalence of multiple policies per customer, growth in the overall average policy value, and the continued shift of its business mix toward products with higher average policy values.

Total operating expenses, excluding net loss and loss adjustment expense, increased 27.6% year over year to $86.9 million, attributable to increased investment in advertising and employee-related expenses.

Adjusted EBITDA was negative $50.3 million, wider than the negative $40.4 million in the year-ago quarter, attributable to increased operating expenses.

The loss ratio of 86 deteriorated 1200 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 Jun 30, 2022, down from 2021 end level of $1.1 billion, reflecting net proceeds from cash used in operations.

As of Jun 30, 2022, Lemonade had assets worth $1.5 billion, down 3.3% from the level at 2021 end.

Shareholder equity at quarter-end was $849.1 billion, down 14.1% from the 2021-end level.

Cash used in operations was $79.7 million in the first half of 2022, higher than $56.5 million used in the year-ago quarter.

Q3 Guidance

In-force premium at quarter-end is projected between $595 and $600 million. Gross earned premium is expected in the range of $127-$129 million. Lemonade expects revenues between $63 million and $65 million. Adjusted EBITDA loss is expected to be $69-$74 million. Capital expenditure is estimated to be $3 million.

2022 View

Lemonade projects in-force premiums between $610 million and $615 million, up from $535 million and $545 million guided earlier. Gross earned premium is expected in the range of $476 million to $480 million, up from $426 million and $430 million guided earlier. Revenues are anticipated between $236 million and $239 million, up from $205 million and $208 million guided earlier. Adjusted EBITDA loss is expected to be in the range of $240-$245 million, better than a loss of $265-$280 million guided earlier. Capital expenditure is estimated to be $10 million, down from $14 million guided earlier. Stock-based compensation expense is estimated to be about $60 million    
Zacks Rank

Lemonade currently carries a Zacks Rank #2 (Buy). 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 second-quarter results so far, The Travelers Companies TRV and RLI Corporation RLI beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation PGR met the mark.

Travelers’ core income of $2.57 per share beat the Zacks Consensus Estimate by 28.5% but decreased 26% year over year. Total revenues increased 7% year over year, primarily due to higher premiums, and beat the consensus estimate by 1.8%. Net written premiums increased 11%, driven by strong retention rates and positive renewal premium changes across all the segments. Underwriting gain of $113 million decreased 65% year over year in the reported quarter.  

Travelers’ combined ratio deteriorated 300 bps year over year to 98.3 due to higher catastrophe losses and a higher underlying combined ratio.

RLI’s operating earnings of $1.49 per share beat the Zacks Consensus Estimate by 6.1% and improved 36.7% from the prior-year quarter. Operating revenues were $301.3 million, up 16.9% year over year, driven by 17.3% higher net premiums earned and 10.5% higher net investment income. The top line beat the Zacks Consensus Estimate of $276 million by 0.9%.

RLI’s underwriting income of $56 million increased 53%, primarily due to the strong performance of the Property and Surety segments. The combined ratio improved 460 bps year over year to 80.2.

Progressive’s earnings per share of 95 cents came in line with the Zacks Consensus Estimate. The bottom line declined 37.1% year over year. Progressive’s net premiums written were $12.4 billion in the quarter, up 8% from $11.7 billion a year ago.


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RLI Corp. (RLI): Free Stock Analysis Report
 
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Lemonade, Inc. (LMND): Free Stock Analysis Report
 
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