LMND - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Lemonade Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to hand the conference over to your presenters, Lemonade management team. ahead. go Please

Yael Wissner-Levy

welcome My and the second XXXX quarter Communications Good is to Yael call. name Lemonade. am Wissner-Levy earnings at morning Lemonade’s and VP, I

CEO our Joining available to Bixby, on results website company’s Lemonade’s to Relations and results second and letter Tim Co-Founder; at A our covering are Co-Founder; me Investor and Shai discuss investor.lemonade.com. is Daniel shareholders today CFO. quarter COO Wininger, financial Schreiber, the XXXX

the remarks Litigation management’s this our and of like meaning with results to of filings this those made remind contain statements update those discussed them. section months from call Factors Before views statements X the call XXXX. represents those statements indicated Form materially as we begin, no for SEC. June forward-looking including XX, forward-looking today and of important that may as ended I would of our you on the Reform we to Actual on Any within undertake result forward-looking the factors, a various in by differ obligation XXXX Private XX-Q the may other Securities Risk Act of only

measures in referring are EBITDA the believe investors measures today’s measures non-GAAP to certain such as to most our operating which financial call assess to directly letter GAAP included these adjusted be financial financial maybe of shareholders. will and We non-GAAP profit, to gross to comparable adjusted on we our important Reconciliations performance.

to how about each use monitor useful a of why definition includes each Our is business. manage letter our including to and investors each shareholders our and key metrics, information operating also to metric we

call can with and visual consult over investors few a to can will investor.lemonade.com. with the Daniel? who I and a that opening it follow at this along begin We accessed that, turn remarks. With have Daniel will also prepared discussion be presentation

Daniel Schreiber

you, Tim earnings this and newly context to a Good minutes welcome Thank to call talking this is our to for I longstanding, of to you, morning. Yael. Since perspective shareholders which strong company, of from to with my an scratch learning, digital and out take time inaugural kind an bots am some built the a bureaucracy, I minted quarter second Lemonade new Lemonade. un-conflicted expand many going provide first zero and like would few to paperwork as everything. founded was substrate. insurance We results, one machine business will and on of replace shortly. model on and aiming for entirely instant brokers set

rapid time second quarter by level our automation in XX% increasing save This of first well insurance growth Hence, our captured service by the and that the at generated Lemonade. customer can building around level in technology played like reserved center unknown trends of delight choosing or from of have has would position many net company. where when that her, are and lemonade our achieve median policy, placing third buy consumer largely Our of is of that’s the to surprising the on the brands destinations their out Thankfully, Lemonade policy consider consumers this upgraded XX you review a time of insurance a above hypothesis Tesla a a is satisfaction for instantaneously. Americans promoter their XX, sector. the roughly about and seconds, level usually Perhaps customer was business score the the paid model less how things buyers standard to Apple and efficiencies very one numbers. we number often and claims

double our welcome. it year-on-year, Our growth case, premium increased top line in-force does duty. Rapid our gross always But XXX% profit adjusted while grew over year-on-year. XXX% by in is

risk the business and our us loss the the of system our a with on very this is our quarter. underwrite by best display proprietary data. price loss data XX% to to our for claims accuracy, marketing cycle quarter second amounts of core with a This which too allowing signals our These quantify escalate and which this textured troves past bottom and was a and in tenth better closed All and in insurance. improvement time service growing allows fraud claims powerful continuous of learning fueling XXX-fold is all risk and traditional our very the to is This a best captured for our halved systems with a in capture target everything that which X Insurance bots the more generates the up using data and structural advantage. precision. rapid all results In We The my without flywheel, of more to improvement, gross Jim declining broker-based highly at the our knowledge, top of ratio, a continuous to predictive represents is is the consecutive customers’ incumbents. of loop which of return ratios a impact quarter substrate has and unusual of competitive than campaigns precedent rate of of at something history pay industry of insurance addition believe digital coming that represents over us loss is our more loss to growth. to ratio years. the our to data ratio picks boosting like and for effective, lines of bot understanding detection growing and needs, training learns our sets get become growing to

of the of trend continued far homeowners then customer also a us had a lifetime years, engendered. shutdown braced of to the rapid Shai July, seen hardship was none spike evidence in it quarter, insurance anticipated COVID-XX the by QX resolved major indicators but in journey In are would to world Despite team, No life first pre-pandemic for churn, demand, in performance in many widespread and our the of offering things the customers business demonstrated data the on for increasing started declining the and beyond, a a to recent launched early even to minutes. our in pet is to In growth, share the This second pedestrian our pause or second in heartened at humanity our But and of in of their recognition and what hiring our a consumers value. flow. accelerator quarter discretionary and the these advantage, a spending, second a resilience efficiencies, our and extend and time in We our as that aspirations. of much our a who materialized. we digitization with quarter. pets, side company for be numbers quarter, differently. continuation Thankfully, enable retention lockdown, line renters, our homeowners and has to of conclusion, society foregone that implications earlier CASA early With results our playing hit a the take and is the Indeed, very all top steady knows have second right offices, launch drop take the to been will or payments slowdown unabated line our cash in us the been we out of we the one ways the of our couple have on While towards quarter. key some dislocation. for straight our mistake offer that or and progressions insurance ratios. and reaching customers the a health milestone thoughts to with QX seems strategy Lemonade quarters notwithstanding on a of in in postpone our millions the loss coronavirus solution in we to comprehensive outside quarter trend but economy in fundamental potentially to grow throughout days as pandemic because not pullback number grow order an ours we customers. non-essential productivity their our furloughed percentage to delight growing our with in we a to aim to thankfully only outperformed, concerns, our of will leverage growth marketing

the to this link hope document Our is our that Lemonade on will warmly and those letter Lemonade, recommend letter, investors share who thinking but and Shai that hope IPO who do There a to not will equally our approach outline to homepage a seek our fortunes drawn Investor prospectus includes you it. their managing be of and the our where I in elsewhere. I read website Founder’s Relations

the points our is to be of we updated accumulate. One that as hypotheses plans data view as we make there

plan is demonstrated to in this adapt. spades. Our QX

these take for a important while marketing and decided signals because be market We and click incomplete data, was a spend operate. many unprecedented often the illustrative uncertainty, also it’s of data signals but early error and with then how The the to how click-through as came faced it’s decreases we We analysis, our decelerate growth hit. quarter blunts endeavor for for numbers, waiting real-time, happy how made, potential me had driven to retention mentioned, we I to from to rates, and per prepared encouraging adapted cost our meaningfully quarter, As funnel disproportionate the in more monitored we we are more and ending, in. that but sausage it share to by rates, think upside. data, in

let and a as the give under making. conditions as returns. over trade as you of to greater and prefer updates. some but for versus data we the It’s soon to value abandon between with It’s our so. a making we are reveals way that, we between demonstrated, optimizing And shareholders, are trade ones the volatility, be Shai short-term that too. better hand for QX comfortable We decisions uncertainty As into do them bad to more also make with long-term optimizing it predictability into translates we Shai? believe aggregate the maximization. you to to hope are And me comfortable

Shai Wininger

the Daniel Lemonade the and we for good in to that our are of to actually add product first In early Since cloud business entire interruption organization Daniel. operations our overnight perspective the home. with or line new in European and new is across impact lack financial to working spoke Lemonade time to some pleased improvements launched about from infrastructure, If where a well team like color started the on would from no country of based our the I from shape. we March, Thanks, productivity pandemic impact I as arrangement the business. this switched financial are seeing report things activities. on home. as anything team am

We team members to recruit able company. been have on-board the throughout also and new

are And were a lot our invested employee the at We and the home. team of a fact, into gears and point, pandemic. satisfaction quarter rates, measure, to recruited ever insurance, earlier this have of this the of as our In and pet keeping teams health line is over Daniel the happy which constantly remotely thought significant during seen. we release Switching engaged highest the a on-boarded at quarter milestone effort company. insurance for pet the we mentioned,

coverages, product thinking pricing document We claims even are from have user we built pet experience, itself. the entirely policy the scratch the process, and

pet starting payments, our a fast new more at now best-in-class states experience The leftover per and customer charities service insurance available pet offers animal-focused premium month. with claim lightening in Our XX prices is product than hassle-free of digital with customers choose. $XX donation to a

of by that of In initial policies. process. in this the net a still also that encouraged share X, one as are getting time homeowners’ early our are into additional our promoter results, on XX% other when product bundling which days market the has of But underwriting our the first translates we of charities of to remember new a that the and in important August new we our over news, part to well customers XX. a As we introducing the portion we allowing announced as an insurance choose. Lemonade positive pleased have to go renters to that insurance Giveback, score reception takes it’s customers annual or are this profits, and been am pet bundle I feedback savings introduced we with from release,

back so This Project, community non-profit we organizations, UNICEF, the and of gave the X our the the we to direct grows, does XXXX million ACLU. COVID years donation response, XXx back Trevor than than gave in more Lemonade first amounted the to previous And combined. higher including $X more As Giveback. this The year, relief potential is than year’s the and one

of Day With a shareholders we the a now, the team financial in treatments year XX,XXX rent is the households for do detail day. pride me Tim hope than more fed XXX for of this highlights too results more one help ownership than over more. Tim? more COVID fill of Giveback funded ICU we you to of that hand our and outlook. families, patients, for XXX community, and let And struggling and for as covered our will certain around bit our

Tim Bixby

quarter. the of by Great. well premium to I had million. policies results premium $XX.X homeowner the the year driven XXXX for as line premium. $XXX. driven QX increased to give per customers year prior of our before we to premium higher color well Premium earned continued by growth XXX% with value top increased compared of grew a scope on as increase We of This as of reinsurance of in new as full XX% to questions. another was increased increase will Gross Shai. more timing customer value towards growth prior the of combination per strong our XXX% and Thanks, to year as expectations will over during the acquisition shift a as the This increase bit in as turn QX and in in-force metric mix of regardless then to rest million prior quarter well the customer. as additions captures policies. In-force impact time of versus $XXX.X line compared the customer the in

XX% XXXX. With first many loss note been QX have within the ratio it and at has achievement in year first target gross in to policy. Our and quarter continued improve compared the to down our am of second for loss our gross on from as of selling XXs, in that came pleased to XX% an since our ratio we this for the as in are quarter XX% QX now I range, we focused quarters

loss loss between gross and in ratio event, above may average, notably XXs. loss time And that we in severe our vary XX%. with periods example, to this and change modestly XX% it remain hence to sales loss average that year is gross Operating prior the any loss efficiency. gross compared improvement unit target ratio expect within of marketing is occasionally in comprehensive excluding our likely year, move most continued much unlikely to year-to-year. will economics, due while adjustment We lower over in to In ratio quarter-to-quarter increased reinsurance, our in fairly expenses, net with expense and and our ratio due as expense, the range our our even for weather this expect marketing strong this loss or QX actually to QX

generated marketing in compared year premium of the to the Our amount as terms spend ago in acquired. customer of QX a more twice sales than

a we life growth areas to second company. in prepare expense was with for the all and by pandemic the QX April particularly first certain theme to expense public G&A began continue tightening approach our gained reverse June continued also premium increase as saw Also as which thus certain support Lemonade the to to patterns and to influence payroll onset and belt to spend our members full new our half as to of we the those We insurance business. influenced into and we expectations. second include of the of hire our the likewise year in into the note as strategy D&O early began year These company note, by and hiring this of and the second expenses timing each the I continue and spend expenses other others, higher as half that company financial among in in increases growth on new We to May. a as visibility more expect team revert most of to quarters expenses, we marketing in and premiums, coming of quarters. for as quarter the in prior investment early increased expect We the impact of well in companies customer and public enter recent that public increased have continue significantly expenses newly lines. to significant

million in the improvement And of in QX, loss in quarter to compared as of loss quarter quarter was was million adjusted our EBITDA XXXX. the second loss XXXX. million an net $XX compared to of million in the $XX.X Our $XX as second $XX.X

additional the total of offering public at net approximately our Our balance us normal cash, July after cash XXXX. brought during equivalents of million. $XXX.X the We since a ended and closing as our of early coming quarter weeks quarters. early pause hiring proceeds of investments of we and pandemic. will in increase reflecting the recent of the approximately use over XX We And million, June brief $XX.X for the end operations million initial resumed number had $XXX that the employees cash pace year XXX

new quite on-boarding. We employees remote since hired have and dozens become have of adept at

We continue to remote April, our great territory European with launched working workforce a vigor pandemic, early XXX% global second remotely. have workforce and the in with vast And majority the we of in our efficiency.

to of first the hiring. continued second in second both half our progress year half. and steady growth Our stance half and the early during growth investment on the and year the a we into resumed bullish for of savings have plan approach QX is redeploy strong generated increased We beyond. With marketing somewhat the influencing efficiency,

will growth the plan us One that inception, has second investment that expense return insurance year back acquisition we plan a expect And broker-based is and for rate, lower our and incumbent for which second that premium, commission report vast when contrast And of are EBITDA moment quarter, full in taking additional It’s ongoing in little beyond. example, more we invest customer at invest in earn the and our much of full investment shifted impact upfront we expense customer goals that acquisition what companies relatively acquired quarter year traditional metrics offset reason insight our expectations quarter for top this some captures with drove QX, on such basis, in-force worth specific continued customer. significant will life unchanged, in initial on the set XXXX A premium to at While but we savings while and up the these nicely fully investment. for is to measure and incur gives model and customer. the into we the line key into over the more of loss this earnings. of outline that many acquiring a from we the a the ways. to timing the very expensed In-force customer acquisition of the financial another half, majority GAAP incremental but I will expense a in this in review growth. are XXXX. we life that growth the in which is our differs a expectations of third for for typically number mind, insurance in And the

quarter, XX, third September premium, of $XXX and between million. of million $XXX as we in-force the For expect

We million. between of million expect and and million gross earned to $XX loss and $XX premium $XX of revenue of EBITDA $XX adjusted $XX GAAP million, million $XX million between an

$X roughly And QX. metrics million ceded QX $XX million reinsurance million. expected to are change such as the overall trajectory from approximately gross expenditures expect of of And accounting guided impact and as We is stock-based expense and as and earned our reiterate premiums we publish approximately the this to is Daniel before structure million revenue $XX The that between the we $XX GAAP in growth and revenue in should of will reinsurance. GAAP $X noted, related XXXX. X, as compensation and implementation new of business premium capital from as July that capture excluded that rules GAAP premium the are accordingly, of proportional helpful in-force million of

EBITDA quarterly million; between million; full earned and premium between million $XXX year at million approximately million XX and and For our the of gross $XXX adjusted $XXX between expect Thanks public approximately joining $X for and $XXX stock-based the $XXX of GAAP and million we following: full $XX company. in-force the expenditures million of as compensation capital year year. for million; of $XX million; the full XXXX, $XXX of to revenue a first premium of million; $XX loss review for expense so of much December

and turn Q&A now call for will who over your that, to to We happy the back call are support. grateful we for can operator we with hopefully with will And questions. your the the rejoin take and be interest instructions

Operator

Certainly. [Operator with Morgan Stanley, line Instructions] your Michael is Phillips open.

Michael Phillips

Thanks. Good morning.

furlough good? all talked on that about customers of question top line asked you much I that how didn’t First and impacts see you maybe month in did offside that stay-at-home metrics, for the on terms impact in from guess, gross first was nothing you payments impacted on pause so ratio? that furlough XX% anything of any a first activity side see was the that there loss or claims the – for

Daniel Schreiber

Yes. Hey, Mike. Thanks. is fairly yes, The modest. quarter but two

of So, in of see sort everyone’s a it earlier the quarter quiet system. behaviors and particularly bit. quickly to it normalized really the see some then readjusted kind did was their we shock as part things of pretty a down We did people and dynamics,

– starting the end at in nothing would are the of slightly at unfavorable. would would So, that expect quarter QX to more normalize tailwind I for say stable trends to some But modest a time. to more due say bit I seeing we is Things the of I the than fairly dramatic, are a pandemic, favorable loss ratio for but the more quarter there persist a rate the now.

Michael Phillips

Okay, thanks.

– renter yourself that specifically, renters and can shift of can homeowners? from graduation shift the homeowner that or unabated terms around between of it principal the Is that’s about how kind and and see we the there the in the for you that trend metrics a from in of quarter. you then anything shifted us talks to Dan happening continued And numbers as been those give guys of because kind said, a both You of on while. up about mix homeowner Dan policy talked

Daniel Schreiber

closely metrics, The have don’t breakdown Yes, those is of track past couple obviously so internally. the that think over give we but it pretty we I deep fared something continued. have of themes a we quarters

see continue. that have So book QX at premium systems more we and customers we to are do if customer into several the the guidance, move per quarters And expect business, trend continuing pretty we form the of because of the ratio but we we as to We somewhat come a stable homeowners, past you homeowners’ over our new into look over control in are some proportion business all at continuing the more of as into cautious are the build pretty much homeowners. go.

are of And the increasing time. proportion so we focused on over homeowners

We to expect the like more the is than of know, longer obviously over But homeowners. business Today, U.S., in start the more term. vast that majority to the it’s to skewed homeowners. the as to market renters look you

whether or we continue they also to will regardless that from direction. graduate of existing move our So customers condo seeing we in over to increase some time, It’s homeowners. that probably reminding are worth

trend year renter, our see. So in did a and one year start. have that’s when than first year continued us and two average they And for pays to they more we example, three

the per So specifically, color but We guide you coming in that think trends to couple we more of I I to see see quarters. giving And us continue those to continuing. customer think on can expect will it don’t grow. the premium

Michael Phillips

to ratio premium quarter pullback this, you are Okay, time. But am Is quarters? LTV with prior the [indiscernible] versus it have answer distorted had is And you lot given marketing because in up you maybe the what then over last that CAC that a that did getting before. per of pullback on not in to expense we I how can CAC ratio because or fair of how and to talk guess. it quarter about and I dollar pullback the talked re-queue mention looked a about LTV not can marketing fair comment to the that still spend more this of your spend talk did anything trended also you that kind and thanks. you marketing than Maybe about sure has but spend, one I it’s too or

Tim Bixby

to that would as and for is quarters few we trend had think CAC the strong I Yes. continuing seen and dynamics of a LTV the stable improvement. last

And regard sort I those that think to spend trends will continue. a our With of different so dynamic.

we we So spending bit fewer impact were pulled did a just fewer part not and dollars, really the we noted There that’s the early back that of unit when but literally just somewhat are quarter, kind in of where most second the quarter resumed or middle and the expected and to the got half as normal then economics. we the be to back spending we the units originally little really towards ahead. pace of cases in

positive. – yet dramatic is in I So, what economics, LTV terms over say are It’s we not we a how fair little stronger terms in is return think there year of seeing of ability more half is evolve very up feel in think there marketing Those dynamics CAC. the to of strong tend a the investment we to our shaping gradually early second get say the to spend growth wisely shift that it’s and expect. time, but to to and stable

Michael Phillips

can. much. I Okay. very in hop pause Thanks I back Thanks and will if Tim.

Operator

Ron Josey with JMP open. line Securities, is your

Ron Josey

and the Appreciate There for commentary the question. with taking in around closing maybe, it. a quarter. school XQ the around particularly your Great. strongest unknowns just I Thanks Tim, about and whatever. the more wanted seasonally and being in Daniel little letter guidance, moves talk remains

April. commentary However, in the materialized guidance, seems the per it nothing really in

any guidance Thank your little us you the bit so, it expectations quarter a and you. more what appears are bit lower And helpful? guidance XQ? on be and little insights August seeing would you as can unpack in So, didn’t the a help really July in maybe in assumptions materialized and

Tim Bixby

Sure.

April, two So, March, dynamics, level of the to that early by is our QX driven high was us and uncertainty maybe feeling, reaction different May. everyone really

with decisions the made not KPIs, happening general And happening about the customer those much churn, always think are terms period, have what weeks good when the changing, cautiously And of And back during that in so with and would spend that things of is we pretty and just proactively as what’s we went terms with we days we and up. payments, watching we there as other what’s which ramped what’s happening dollars. was news more in deploying how by, behavior. strengthen

the X when thoughts out deploy part its the to we of which we is uncertain the that our look year, to is historical you and so half return, and even the that the ways pretty with years, savings, part quarter control, really higher, from the visible money lower step for part just past uncertain seasonal years, you the in as driven control take QX invest change by U.S. as the and it’s early the which was in if want are expectations are trend, decisions in discrete maybe that’s working. don’t decided we it and we of QX X And the seeing at dollars second The manage, the savings unspent laid and and we moving QX those if or been a this year. dynamic finding people that that of we we half. to term second Because

good in seeing far that’s but years, we expect August, will so will dramatically into cautious. to some of versus that course be we see we And shift different react if want year. too, can prior different shape. are over be we we that than we we have such built years. October It among to maybe we anything the what between deliver think September, If there versus conservatism is it’s in years. the the then see not months prior different, I that We little something a dramatically is guidance confident numbers that’s too enough are to our which But prior have

Ron Josey

That’s super Tim. you, Thank helpful.

Operator

your Barclays, with is open. Sandler line Ross

Ross Sandler

Hey, Tim.

on follow conversation up to wanted acquisition a of Just couple the questions customer from ago.

have customer across we guys acquiring the seen costs in unit industry impact. So, COVID even pretty the your dramatic advertising a seen CPMs come have that digital COVID. markedly improvement And you down fairly of through have before

ramp earned to premium back growth and in the or to in that when improvement. increased up? the is or good, room dynamics the back two XX% leaves you then of and but those so S-X expect the rate And with customer some So, the it disclosed do leaning are you gross rates fact that, now in rate pretty for growth the guys place you that in, around related efficiency June, retention

biggest churn you Thank the and of drive doing are are that to retention what you. rate? up So, what drivers

Tim Bixby

Thanks for asking. Sure.

of So, the acquisition first thoughts a relationship couple question in and customer terms customer linear. our in is of spend pretty ramp, and our

channels we it the real how So time dollars are turn you a putting when things or almost we many away, we in that up, invest, in forth. see week use, it’s the how change you what day right we

customer we renter value. gradually second what a as that And today, the A playing we we really that’s number premium, efficiently and we are see and will But customers acquisition spending too. important, so will we them had the of how into it’s acquisition. pick are out a track factored getting premium do one, premium. if acquire keep so for and terms we what we think as and customer both to more the and drive half seeing that hopefully great long will certainly more is noting to and we customer we we they reaction Worth report and customer and effectively, that homeowner, lifetime of a if for are in can the as a while you that is can

team optimizing we premium. growth so are customers that really And reason is top line reason guide not for for and in-force in terms of we our to the to very premium and

And see in a we bit, growth sometimes, obviously those. can to the customer both but little vary count of expect

premium expect also we mix per have homeowners. shift the toward seen customer and underlying trends of to the the continue dynamics grow continued just to We the

we renters what’s a I COVID-driven, are we In maybe and product don’t is behavior-driven, very focused bit, at perspective, again, much terms seeing have what chime something obviously little churn Daniel can new between what’s kind in know has is homeowners. of and unique perspective, dramatic what Short-term, across short-term from what’s short-term. all. a of on not a long-term changed, and is and lines pandemic there this been And

defer allowed there. We have payments, much customers to not happened really

are churn has really We changed. carefully, very much tracking not

as we extraordinarily so as to are NPS, possible, for long maintain an longer a do, what is lifetime. which customers can a terms of In doing retain term, we high hopefully is that plan we what

We have product. launched a new

but is a we in on have actually new advantage can type, very of a have for a plan the So, And first insurance, discounts. two bundling time, coverage market. our and which for types pet first it’s been time the Lemonade that’s bundling now for the take policy obviously time customer different and that’s long something

that had new on plans exactly pick great think are we in that, the have keep And and then we I support so get churn thoughts it. goals color doing types, general. doing, don’t set our Daniel And or better churn is customer on customers what know if includes that certainly on we I coverage out. will other and theme any share as other we

Daniel Schreiber

of Hey, just Tim. on Thanks, color churn. couple just Ross. – points Yes, a

churn that reason to improve. there is will So, to believe continue

of year So first customers across large year just retention experiencing aging in year of the frankly, that given are rates customers. one. cohorts. is is growth very a our first are of the worst our terms industry, And portion we The the

significantly. big last couple very our products retention had beyond months indeed different of as the churn pretty to category. a months of different that or the you just start a the first dynamics the policy. of the I churn improving of aging And And the we see dynamics. of the that say year and as attention years perspective terms would numbers add that, have within And cohort, and well of a in cohort from worst we or So, is of couple retention months the in even the portion business

come boyfriend kinds So, they state state a back, and are they yet into move of renters They more those are where younger to with a their oftentimes back from in tend not they to girlfriend we move state move to And college, all move be transient. home, launched. also go with they they consumers changes.

nature customers the those helps life of of retention of our those in it among that stage higher. homeowners the just portion homeowners because of is growing to part the reasons of of numbers book are all So to our significantly and Tim earlier alluded

that cater to militates over our addition new able But about have but in of the favor that also whole love As are of more to else to everything gloss we we more customers story. time. having products past I like in mentioned that in territories levels said fully. I launch to I would higher pet all that spoke on retention add different a And

in two I fair it’s or of strokes two categorize you And of broad leaving or customers churn one think to it think So strokes. when about one retention? broad

eliminate you two return. if and Council, on churn not to back. their think new boyfriend So into I company their to love are the those Netflix, going who a cable company are a two traveling or think or Netflix way discovered right. is mean they that that’s you somebody when latter. to about falls Netflix three cut reversed And with about of is or still And They goodwill, people a think they in they leave cable leave going just know that never back have anytime to alumni, leaves when they change moved of will they occasion kind girlfriend myself dynamics in have left squarely they consuming now I’m they different That they the to of Netflix consumer. occasions. have And media. soon. go Europe, I Australia those cable, And remain paradigms, in ambassadors being I be because are had

pride customers that back. they by canceling. saying, XX And by Hey, or moving do when or and you. service will with exceptional feel do can to customers leave. lot Hey, my leaving don’t they So numbers we are the I behind state in love on girlfriend, people some be that’s put really I’m ourselves by are a a that. to XX them for when I but giving give oftentimes, chat, they claims that terms those but are We they to accompanied but they a with it’s are to get people have unhappy ask outnumbered X that claims, college leaving. moving if experience that note, to my data I’m comment why on churning literally love sell And of into often literally, who I’m We they leaving. and what with in get just quite say, of But and at but people about to XX leave a hard X, occasion, them why reason do I’m family, why X that’s you customers we they’re And more as quite guys, we done say our moving moving a outnumbered by look We to sometimes I the in see

going those us. you a all improve for reasons, you I that structural rates about think do So why hope that why of gives both leaving sense but are churn people are to also

insurance more. will back think they life change for come I they as had need their in once circumstances and

Operator

Blair, your open. is line Ralph with Schackart William

Ralph Schackart

Maybe know Good about much Tim, you side? in But the customer ads you model. our understand in talk than again. the maybe morning. the advertising. indicated quarter, while And The optimize to perspective to that customer wanted trends supply conversation some know wanted postcode I I customer I were some are pullback stronger talking for of about some of when policy quarter the on dynamic. just drivers kind throughout

Tim Bixby

Sure.

there dynamics, the levers of when couple of in different look are pulling quarter. of So, all added is simplistic comes it just and different little at looks a kind and you we together customers then there’s number the a

And timing think trends, and if those apart pull little so a bit, about trends, I I product spending trends. would

what said, in Lemonade. I end early and really to don’t looks March, kind we down like, timing a certainly, we, QX April, some of from know we the covered perspective, world, of have that think April and extent, sat So

perspective, this cut while And a of ramp you to were got so to paired cautious. a just we never quite we data. up, period would because to go mix takes back want and to growth just more but tend kind From significantly optimize – optimize. back we didn’t very fairly to zero, We zero, we tend to spin with anything

higher on things And so with some campaigns, renters. are days, stronger some return

other. or channels the it’s suited some one particularly are And to homeowners and some days,

the an got be under and which we hides or kind that’s with. a business consistent proportion of looked flow have of to a a say we covers, the is a relatively if on ebb that at week tends month, there lot going to so you but overall, homeowners, what’s And of states see play

have than working, if to And day a return we today that the dollar ago look you campaigns dollars. at got a more spends growth got is a many coming twice team for XX you a hours year are on those maximize that play in really And to the as lot of with. versus it how spend. You about dollars thinking

to the I seasonality see that of think I a In but is the thinking with about wild tell spend, the is again, how a really little sessions the card, to you how can spend, we seeing because not can are playing team we we challenge returns. strong got dollars, the deploy forward we challenge bit terms how we of much where have is

scores return. Like it’s And but don’t suffer. the to like We spend things very want we over performing are can with want or vary saw May. health NPS it strong overall as really the well of radically. we by past we a of little the that dramatically but our terrific And costs, the It are loss so pandemic trying We all past the seeking are alter in we a to dynamic dollars growth our don’t to really on April quarters driven. it’s at balance in don’t is several that doesn’t a sort change that to the to change of ratio continuation business. bit, spend step progress we months to want really a finding themes opposed ways few at saw seem

is are team of by and the So really combination these all three that growth encouraged of really performing. how we

Ralph Schackart

it perspective stronger, That’s long-term a about some talked to you. color how of and the Maybe how bit Thank more, little helpful, you emerges emerges the maybe Tim. coming impact out business? there just the perhaps on stronger more one the pandemic, business

Tim Bixby

Yes, interesting. it’s

happening put or are is is, companies terms or have over way another over which to to saw seeing or digital expect we changes we are a of or lot seeing seeing two a happen amplified year tech what of month it two. accelerated, a in are So or, or we

agents and the seeing to zero pandemic insurance same same want are XX were the to during the XX sit an or to cases, the are dwindling many go age gone to we of office, back where at going folks to close that’s feeling the in in are before pandemic We certainly they who down and these were. trends probably probably not go ever

are we so – acceleration this And not while taking we are as continue. it given, expect a to we

wheelhouse, were too have time entire the pandemic, do if like didn’t each it although we frequently, we it. to so had from person company, we And – the really able before you to work-from-home have time. done it probably Departments tested

really entire and with usual. was XXX% the on are we this we how of say European able substrate been, different have a company designed what but results, We the degrees April pretty just employees, those that other folks system remote income, business carefully with a were country we is didn’t thinking awareness, than do companies are are where all otherwise pandemic but an really thinking accelerate customer stuff, to would it built, was one within have based in and offices we with really was feel work-from-home, to a as about terrific few how digital know anything So, for launch this. question. days dramatic to deploy We how business this zero new of freedom about just from all designed

Ralph Schackart

Thanks, helpful. That’s Great. Tim.

Operator

of line Jason the OpCo. from comes Frank with question next Our

open. is line Your

Jason Helfstein

have Helfstein. should the it’s not last spelled operator. to my name I Jason Hi,

So, and outlook back Maybe two about half. a bit for the the talk third more questions. quarter the

importance then Clearly from customer. kind versus expectations, people question see – the And into outlook? that automotive insurance second the of get for the given generally important the any bundling you mostly the of you main millennial quarter around maybe that how have given Just pull quarter that concept second the is beat forward in And then clients you your the it on just a industry. more targeted is focused for we bundling. did are compensating

I automotive what we ownership. the amongst lower are think and generally about think that is trends automotive can for group ownership secular

thinking just insurance you have how time. thinking Obviously partnering are Are check pet. important, with you’re So, just Thank you or launch on maybe you launching is about like that broadly about something do auto talk you. your things bundling. that how over own companies may auto to are box? If you

Tim Bixby

Sure.

have then that of the any Daniel, the thoughts maybe, take sort pick strategy? I second. Maybe first will overall So on product one. one And

just we pull otherwise? and of that getting ramping kind doing? a about good number have returns forward question the great in we you up are Are obviously when and way one, So that thought spend results customers we phrased way we we is kind gotten what it advance thought The it from would and working. was of through interesting

regardless would two things the now step So are a and we that always one. that is we where in was Step planned return of had pattern and in more expected kind to XXXX normalized of pandemic. growth beyond,

we expectations beyond. and for and XXXX ambitious And goals have so

just I up XXXX. is expectations And for really for increase so, our a second half the and think our basic higher foundation increase our our into in-force setting us for in going premium in spend

I more our but we we or invest monitor lighter and ability to continue about much are a and and and possible. planning a think expectations, QX, worried great approach, quarter of now and XXXX ready long it a are to we will with happening power would more are QX? it our we and But QX this think we less, August guidance are than and obviously in Historically, foundation about, as I of been strong approach And thinking, approach expecting QX So bit the, what’s seasonality. can our as, that I QX a little think rather of be term our be strong than we or it’s through can uncertainty QX and September. point, it’s that. manage And at approach built as launching as into can growth on more.

Daniel Schreiber

best rather unusual landscape, in insurance so, XX% so been attract we never couple we thoughts surprisingly And question being about they’ve are company. as joining customers, for to customers, just insurance about of tell, that customers as our the the of young, do that the our think we a can another us bundling time

find in the So terms NPS to in that then is kind predicated, modest want industry where they rather total earlier entire as we and which and to are customers one particularly than don’t playing we consumption, companies competing for I insurance number ourselves with premiums and delighting them non typically are sport we that And retain before growing hope to relatively got and playing time them of the of I insurance acquiring those a lifecycle them sites, switched comparison be We to a the James in time when kind over predictable XXs traditional of with XXs. through would finding analyze kind me, of and at customers a time. are fullness life. for upon somebody the you as or really said game, business, me certainly different LeBron because and then grade. saved of And have life events buying ratings But I them one them the delight continue get car acquiring as the we of the they go of said, philosophy is element or car our eighth our to them. to stress of me in underlying core it important are in

majority pet parents. which condo of to customers of woefully that addressed fabulous then is growing for exactly customers them. much. few kind our a substantial of it’s And under acquiring and equivalent non a consumption with So, very The are that towards are our step we is market. of a ago insurance competing launched part insurance, a dynamic insurance pet pretty pet weeks premiums This

our flesh our And of of is our So prioritization that step, in offering. first products order homeowners to really born centricity. customer out first outside is of the foray the

will the So graduate in there are need pets to addition to place for center we are about the and graduate think she I’m there and at get in other yes, the hearing homeowners say she products renters cat that condo what these dog, customer to will fullness a needs her. a we the of and she’ll time, insurance be and hope will she the all okay

grow a complete and there about handicap talking all we that fact are that specifically, have offer insurance, managing And I XXX% haven’t think that over fact fleshed we car at fully think that of we have companies improve grow to year-on-year, because opportunity as of products. there’s we insurance a without So to will means rates, further out, for don’t LTV, is list it and other it improve it everything is. our the is I that improve lot fact yet out more a notwithstanding the yet of products else, the retention encouraging good us as

out contracts this we seeing insurance. Now, our to they you where ago while that give is And early Lemonade as a Lemonade presumably, new the home they of us one of sense also and for But we told of investors will grades. offer searches a get products, bit a influences we volume this, better. Google. of just And are of same little insurance

as brands, our lack and able be trains to you what saw I with our of to licenses ago more our all our technology, succession products launch like pretty come. thing don’t built a entire there’s we sign systems, passing there think for feel Lemonade were weeks with out of in with demand any X and So, to rapid and accessibility

Jason Helfstein

Thank you.

Operator

Sachs, Goldman is with Terry your Heath line open.

Heath Terry

dig areas. Great, more in of a bit in couple thank wanted just you. a to little I

urban much the that graduating, customers existing seeing as one couple just last curious part graduation parents about, about, bit us you And new quarter how being suburban to you’ve work from and That up And seem of you’re can of in of their wrong. you’re your environment of I’m you we’ve a back this. think homeowners’ numbers. of coming completely sort is big the little didn’t homes attracted that well. And qualify homeowners certainly their companies migration single might as On narrative or for growth the homeowners talked of more the platform around questions if curious the people other even – the just follow-up narratives to rental professionals marketing a talked show what as be then I’m younger by doing? with just might this the that versus in to part then

Tim Bixby

Sure.

you jump – proportion we are there thoughts of couple a a terms trend. Daniel continue in and So if acquisition, of like, seeing in homeowner of the the

manage little to and places. adding and home the new there consistent or up, think could long-term new buying to current out It’s the of more be their commitment live there going home something customers I had condo and majority we made light are a But that direct the one ownership are that quarters, recent sure. pandemic that early of adds. is Interestingly And and see obviously, able environment be but proactively actually tends as theme we that less. that homeowners could acquisition. very direct more were much majority of them be relocation graduation could in as those most enough, and historically, for say people the opposed But a about acquiring more other either that have to So those or by still buying to existing we direct, driven, renters decisions the cause where to moving drive be a made we life is are direct and being events. data where or in interested decisions the more a to

may what a on are apartment renting they that, So because their that I a own and in new the moving moves who new think seeing and is you elsewhere everybody part QX not city somebody’s insurance. require they are location home, are of of for tired to

mix. a it’s think I So

to of the will that when We proactively we buy – when acquire are continue first customers life they they there. need everything are more course what doing can decisions ready when we to they we then move, face ready to will directly. we those our coverage, homeowners ensure to when And be home,

others at there that’s pet look we the time. and think will now are We competitor. with over over We

Heath Terry

Right.

the in? that this ratio help us improvement could of the that? was the in you helpful. of by gross was significant loss really that’s of quarter, When know that that – Now or contributed I denial paid coming you premiums higher a claims, that claims addressed How at made fewer not you look improvement just maybe disaggregating else we’re there earlier, rates of was about? components much higher that sort being or on little something thinking bit

Tim Bixby

that it, several and seen So, X%. improvement think didn’t most we helped of points improvement, prior some hurt I as of the of recent specifically progression prior are certainly only five continuation in as in not of the XX%, would the benefit a it it where terms I was was, have quantifying of would think trends quarter quarters, and pandemic nominal, a from prior the bit from quarter, anomaly actually little we the with that but prior

So I changing probably is or the claims would say impact denial of behavior zero. from claim

friendly. practice important really approach to are we it’s very very behavioral was really are business is that Our at our reason, categorize and appropriate. quarter is something fraud But unchanged, would that our model. are part It’s customer good unchanged. essentially claims of good us. not we to analytics in And And business. is within the part as that of detecting detecting But at extremely it’s, I

think in as of the it range tailwinds. very now. nominal I And So would are we

vary to to is and we in means to think on bit go it’s is target average XX% if to want with to it’s we to performance dwell in that dramatically think other very as the opportunities strong we are that XX% not are it But that of as book don’t expect launch but business, XX% about, industry, are decline don’t gross range. wrong you we advantage better it giving launch XX% we noted, That vary will new be So it products build your we want don’t a than I you growth. forever. loss of. to wanting you important you taking zero, up range, range to something’s ratio, think Geos, we as There’s new outside

a is of don’t kind I target few points. at So within of think we it that percentage are

Heath Terry

really That’s numbers. Great helpful.

Daniel Schreiber

I leave wanted well. comments. what as Tim Yes, build on to Hey, just want to just I Sorry, said

is declining about ratio. So This consecutive loss of pandemic. this a the quarter isn’t XXth

really years. So a over been have very this the that is halved we the loss trend has our two something ratio course last strong with

that that. out thing changes is this into acquiring then to incumbents. And based system more can price about fair it some data going a think effect So a are understanding is risks of by of that’s down what in this to those into unavailable much terms And really not businesses I you while pretty do recently, is sense, are as really people the and takes price something that so broker Lemonade to comes round improve loop is use while of which traditional ratios it have we or that insuring I striking raising the prices. to being but want sense it’s one a of one loss we closed zero And in is that appreciated how have kind implemented much represent. back ratio to more properties all is would XXX that people be in And point to of not think their of of research fundamentals changes, industry ways you what’s not most this in than that on do underwriting times the a the companies price get more it and here. that having will loss business data really because systemic.

claims, other ratios take to the are that and with and and we the year using churn, to every changes reinforces that first inform true of will year is and I that discussed take is is thing target loss in on-board, anything fundamental what implemented And I interaction else indicators that terms well. of interaction. really terms time inquiries the creates historically is ratio, you about pricing, third cohorts if you second notice that lagging loss and any back support or course, your propellant can how how I system at loop is think collected was say data of our that that you but turn through having just like digital that comment look underwriting want made single flywheel marketing like. cohorts to So of and having that I data is as precipitous the that in practices vantage is if we of book. loss one And in you and customer customer-centric, closed go so today industry-wide itself AI other every which cohorts generically of have a they that in than are of any flow and worse who exactly the earlier an you which to and in ratios you And that a level and campaign point, ask the that decline steady being infrastructure in it true, addition year into handle

some sales. us cohorts also maturing wind in So, give our

has that saying decline, been structural extraordinary, the of at it that. the loss annual decline steady of growth which in does ratio rate sustained because that the preaches loss So, these at XXX% course it a come and so fly more not have progressions steady reasons of risk thing that that have orthodoxy, final compounded dramatic, say time I’d have all been and over but the years now the and been really insurance And ratio. that has of over face the really driven so

dramatically better when growth two concurrently. being overwhelmed. And get tension live broker – humans, and fast think business, and too go makes a in you cutting people because human to leads based can can’t intensive with I each one corners rapid are much are that You other. sense overwhelm The data

on They of and you to Those don’t infrastructure, build when smarter. data preconditioned performance inhibit AI torrents around. the improved the are Of course, it’s way it. other an getting

the all understand loss that you hopefully, So ratio. helps

Heath Terry

if it’s also does. to am it That what I what one on price was announced company the maybe promise. you month, done, it offer in had the could yesterday’s just entry on then if level And impacts pets have call gone And then really seem to $XX? down $XX lower noted the release insurance? And any discount And I helpful. and the quick for allowed recall on bundling product loss last and guess curious when a ratio? today I the that pet I then pet, you to the then for

Daniel Schreiber

will more. or will Tim it here. I say come two I Maybe off kick then three some and in things with

a off have to a a America like and while because a to The today the get XXX companies X and X first we ratio ratio about X very among of our one on looks to most our light and actually XXXXs drops XXX insurance acquisition, of pretty ratio so over customer X preferred. high, that to best that efficient the to and spending marginal expense Lemonade is is customers cost employee, biggest it’s business are lot fundamentals XXX in quickly lead top and you to even X. about The

cost early the unsustainable, compared large. the of our loss algorithmically pretty days, of a XX%, loss spoke selling without ratio is and Lemonade selling incumbents. understand at right. in So, automation, about that price cost insurance human buys claims, a And will ratios a just streamlining infrastructure the our we same your of and terms with think helping all a of able of that we digital point that are paying certainly the I $X.XX, at ability more structure you insurance, much of in renters oh, to loss third them we are how order an aggressively. any level savings do that’s translate are are point drive can customers the the ratio to you that’s into with unfamiliar in people to industry at XX% true things case renters And you from them something said, dollars terms typically in to – that intervention efficiencies see with and helps if XXX% will XX% expense indeed, are Entry shows the not on-boarding for that, but we at at and is price at

that of lot a So, I is think there. still

insurance. had all September I say wanted that fast. But that to then very see we when our denominator that tuition a it’s tuition in that is products tuition growing geographies we and We have have are to experimentalists We got over we that’s our not Thankfully, sizable loss new why our no was days. pay the and of thing other that the because we initial we fee including launched business renters early product, just pet and ratios we like spill XXXX, and may the today, will now. do was all one new launched. we business the And launched unattractive

guess want homeowners. and be that if are you new And it to have similar wouldn’t okay see seeing with year smart point really will all a people tend the we we my as datasets. many or third And products our the is doing the in the as order me And second in after to our best that. with there datasets then just best need, pet wrong. something pricing so hit kind the to errors year and work, don’t are you but of products also we or think that until will will with be products have that ratio And loss understanding new we other quickly first where we got and to those generated saw we about with of improve some shock customers if year learnings think hit we as target the implementing in pet in pretty I that we launching start seen renters, But even year it, using generate best possible new to on-board data, well. we

Heath Terry

much, Great. Thank you so Daniel.

Operator

Kinner is open. with Jerome Sachs, Goldman line your

Jerome Kinner

you my XX% will follow-up asked questions, impact could of offering? loss understand is have pets to much. ratio Thank very renters what but to and the try Heath I on are pet there you considering maybe a bundling discount the on

Tim Bixby

the I and that would range say expect are target expect it’s a it to we fact that little dramatic, to have that we continue. too so is trends early seen the wouldn’t in to something say. the I be we are

the get losses obviously insurance I been in which way has whole data will actually strong. better to of and response you expenses a and the quite everywhere. business maybe coming we of about view pet quite got is the think think is, We have would we traditional go. positive, The combined aspect, more aggregate improvements ratio And and as

coverage, they are the risks. are to growing pull, expect shifts. have and of we what the got one policy more I about ratio than type more they than just Generally, to to more so dramatic have loss but it extent cause are have business, thoughtfully They people wouldn’t levers we the And managing thinking better more protect.

whole there one every positive we there impact, is again that and And across impacts. is, something bundling, we see we see the think so likely there of much likely potential for in see – as pet consistently with with more And it’s that negative pretty is or our I business, business.

Jerome Kinner

you Got one the And it. about renters on is average, Thank or last average then than better one end, when talk my industry that for you. specifically loss industry ratios being your overall? that is

Tim Bixby

sort of that’s XXs were the And range. is I average there P&C we overall think in where low quarter. last That’s an

And metric. kind to I referring so general of pretty a just generally was market

we not we – but for something with market, by, something around notable in $X in have on we are X par ourselves it’s that just the decades. billion but that years So, something we manage large it’s incumbents not noticed, been

Jerome Kinner

Got is ratio? where it. on sense have rentals loss any the Do average you industry the

Tim Bixby

I to am not close that. going

us, higher loss but metric at improvement homeowners over as continued You you than renters give can both a as in can normal is homeowners’ good get time. it are probably somewhat and as I for least ratio seeing we

Jerome Kinner

Okay. you. Thank

Operator

over team the for at time. like to questions call remarks. the to further would back now no are Lemonade this There I final turn

Yael Wissner-Levy

you of the good the Thanks entire everyone morning. rest From for tuning team in wishing Lemonade this morning. a

You on touch. investor.lemonade.com forward to website our find a staying shareholders Have to great the at we and look morning. in letter can

Operator

This thank We concludes the participation. you Lemonade second for quarter XXXX earnings call. conference your

disconnect. You may now

Lemonade (LMND) 12 Aug 202020 Q2 Earnings call transcript