Earnings call transcript Q2 2023

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Operator

Hello, and welcome to the Lemonade Q2 2023 Earnings Call. My name is Alex. I'll be coordinating the call today. [Operator Instructions] I'll now hand it over to your host, Yael Wissner-Levy from Lemonade. Please go ahead.

Yael Wissner-Levy

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

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

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

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

each premium earned loss net and why and ex gross manage each use useful indicators, dollar how investors key gross loss ratio, including business. we of and includes and is to metric, also shareholders per information premium, letter Our our each our about cat ratio definition retention, monitor performance customers annual premium, to a customer, loss gross ratio in-force to

some to opening remarks. turn Daniel Daniel? call I'll for the that, With over

Daniel Schreiber

Good year. our Lemonade's for us the joining discuss morning, you to results QX and for and outlook thank updated

our the outsized weather both The Tim and provide though. entire quarter results on shortly, industry. bottom bested will top details second expectations all events, dampened the the across which lines despite

that operating only XX% our is premium grew growing scalability is expense loss headline than faster highlights our grew decreased. our net of X% than business. while the year-on-year, The more our and five times expenses, in-force Premium

continue to we dynamic drive we progress As grow, this towards expect to our profitability.

in back as study you long-time scale and this major on anything our is quite game agents of achieving program something of the written cover like do importance at was synthetic its news on blog behind the not business we have of in our this program its The with force investor material piece letter impact I be a QX, to and XXXX our Catalyst. and driving of beyond. the General encourage about length and seen We it yesterday. we've in a launch before, will changer published of mechanics believe shareholder a it believe is the program we

spent us typically our on to because expenditure business it initial for even their XX us, no the CAC by costs, but time the is direct-to-consumer money. us CAC has times over customers our date, their with clear, model extremely that borne acronym CAC To briefly. about it explain upfront, of are well acquisition known change have to me does our with months and plans accounting customer be downside, value Let To repay lifetime and served one it it, outlay. recoup three over well money takes

million cash outlay, CAC could expect rapid $XXX a example, in in we year million to year two flow recoup compelling for year growth is over very we time takes If to on spend one, it But and which negative. initial about typically and because the million profit billion ROI. that $XXX of gross time, CAC yield is in investment $XXX three, $X in million $XXX

our our of elevated, we but profitability a good, the dip higher not program, approach synthetic path balance, growth its that expense the preserves gross at see lowering our account cost Without the terminal This near-term agents rates. cash and dramatic before generate of our pace value. of is caps profitability profit sustainable limits which growth growth, we capital particularly a amount would also is of while bank in saw it But slowing this trade-off can at return, cash, slowing comes reserves. long-term to

independent Now we that CAC while do cash and can to our agents issue. the grow extent, insurance with company the distribution have model. agents The not depleting let this don't But partner reserves. through some sell insurance prefer to we become primary this companies agent finances without

we Lemonade the magical with commoditizing down data the one, For mediated replaces agent collect. our own watering experience business the the brand and agent's interface,

the agent matches profit of the of the life greatly For the LTV. or offers over gross [ph] customer another, stipend half value of reducing the customer, the lifetime

flow and significant, solve which where synthetic is gap, of relationship in gross agents come customer So terms their profit, are the cash costs agents in. while do brand, data

perceive be up a a finance. it existed agents. wasn't designed be premiums downside. to have How? of broadly those portion commission get our XX% of the Synthetic the finance they wouldn't to their other agents equivalent a They cohorts and for of have to agents right cash recourse were is funding. precise, to if independent or that XX% just from independent CAC whatsoever, helped it That of no flow similar they agents the their provide without we Synthetic benefits to to what biggest

stop of agents the of a payments X customer, Lemonade agents, from to They for difference. owns synthetic independent it. after far X huge the and unlike the lifetime That's years thereafter. to aren't LTV But XXX%

partners, Secondly, synthetic they and and financial the intermediate between us agents our don't therefore, relationship are just customers.

the rapid data, without another and the foregoing difference. huge upshot agents our without relationship our LTV customer customer remains we depleting without is Synthetic and the equity the forgoing selling program a Our direct-to-consumer, to without this customer we the and model cash finance changer. game reserves And why the larger believe of more in program that and relationship, more way a paved see with profit to customer our own something business The is much and growth that you cash enables bank. experience synthetic hopefully, sooner agents growth.

as Staying with program The quarter is one yielding program, top-tier our making in of most capital markets same of of addition for our the this agents notwithstanding the seed the had renewal previously to same the program, announcing hardest our efficiency. reinsurers theme reinsurance many [indiscernible] saw of synthetic the capital the years. to also reinsurance many, these we similar in XX%

for renewed example, formed are particularly million treatment There there's some while events, are structures our of capital cat. the bear changes maintaining program, event to in efficiency. per Yet hurricanes $X comfortably are newly a our named and around target risks captive these can the cat we excluded,

significant. Taken our burdens growth, up elemental insurance, together, the why of That's our capital of both are the working cash capital program reinsurance and capital regulatory impact In profitability. delaying program so QX material. slowing down, agreement that and agents weigh synthetic idling state, is and would

our General regulatory capital burden share Catalyst our synthetic through relieve through capital agents and partners burden reinsurance relieves program program. quota our working Our our

the the rate we all distance, to set which rates, to from hurdle to go up least into loss and to perspective, picking we're clear more agreements July the therefore, that capital ratio most that grow us brings next came before our a means notably and At growth need effect broadly. X approvals

brief the trajectory I our be to reversal. our by to line current remarks to cat but said those continues I outsized quote, and saw last trend broadly reversal outsized quarter, I with expect albeit we my comments. line In introduce events, when indeed occasional a in a QX hiccups underlying expectations. with cats continue, due stand

rate increase in, as rates, California and moving also business. and are have earn some to steam Our of these Significantly, and need time our will for product more pet homeowners have things they now. we to XX% faster believe still approvals to ought we approved XX% to. reason for in filings our but take rate It take rates a gained coming are

is Importantly, to parallel up, inflation down. rate our picking significant us. has This really slowing in been approvals to

quarter, as ratio occasional downward hiccups to reversal. trajectory as when loss our last with albeit a these cats outsized to continue, so gross continue broadly expect trends of continue, the And I brief said long we'll introduce

hand let the a view to that, can details with on half over me Tim? who more results call QX And of second XXXX. provide into Tim, and our the

Tim Bixby

really our efficiencies some with questions. despite quarter provide Daniel. continued review cat It then we'll the and highlights the control. third full nice across loss quarter year, take was expense and QX of expectations and impressive a headwinds, our Thanks, strong for board, progress marketing Great. and results ratio I'll the

acquisition, of XX%. compared as QX Absent in XX% was year annual organic grew $XXX approximately growth impact the IFP, or Metromile million. the to premium In-force to prior the

as Premium was primarily the to Our price shift, customer impact This of including count prior year XX% by pay-per-mile increased a increased increase by the lesser extent, XX% the $X.X to customers of million coverage. compared volume per addition $XXX. both year. Metromile's the and driven mix to and versus prior growth increased customer to and,

churn. and as basis value, improved and impact flat measure includes to ADR changes policy the or year. as quarter percentage prior an reminder, in annual the XX% compared versus policy ADR a the retention cohort and purchases prior by dollar Annual on X to was additional We this points of

that quarters. rest product add change higher on driven this the the worth decline acquisition with noting our base as X-year ADR dissipate than recently over slightly Metromile we by of XX. of our book. may will This quarters subsequent in July the a It's to I the coming in expect customers of in mix somewhat headwind rates anniversary ADR churn passed will

increased XX% from compared increase be gross reinsurers in quarter the in prior The $XXX to proportion million. approximately revenue roughly ceded, XX% roughly change as well earned our the year gross XX% QX the as in growth Absent in by the premium in growth line in with increased premium in the in-force driven compared premium. gross the the with in was as to in year to to XXX% a of Our growth to proportion line million, $XXX the to the QX year. in earned the increase in roughly premium. as prior premium prior would Revenue revenue in ceded earned reduction

around as points XX% XX% at ratio. compared for loss ratio impact within was QX cats detail of of QX, to ratio Our flat of do be actually the roughly can QX do quarter. as results the QX prior XX roughly out in the improvement solid loss non-cat in we roughly impact X QX our in versus backing was insurance something points an think year transparency XXXX QX XXXX. and Certainly, the but Absent loss we not in prior cats providing underlying additional cats showed the helpful. XX% The gross percentage and and can analytically all gross from is percentage business,

Operating QX professional fees, large adjustment expenses, driven acquisition, expense the X% excluding expense, loss and by marketing due lower to and expense. compared and stock-based primarily as the This $XX million partially expense, increased legal is sales and in prior to personnel to offset year. Metromile compensation increased in part loss by

roughly Other year, line prior insurance grew expense earned premium. of the XX% in with growth versus the QX in

new prior IFP million more the sales spend advertising sales lower declined of to due approximately growth XX% and million due Each to roughly improved growth efficiency primarily acquire this in to or spend. roughly spent Notably, level. quarter XX% this about or quarter part growth We marketing in spend the $XX.X our and customers. QX, large in versus total growth significantly dollar acquisition While XX% total $XX our on marketing by expense spending for year. lower generated spent

quarter. expense increased as year primarily the Metromile the while Technology prior as compared to G&A increased expense notably to XX%, compared decreased development due to acquisition, but XX% the prior X%

stable Personnel premium. quite despite growth and customers expense and headcount in continued continued to be

year, In fact, as essentially as has the X% acquisition actually year-end Headcount to and XX% our to compared compared XXXX prior in due primarily QX flat running. headcount been year. to increased decreased last the for X,XXX to quarters three

$X.XX in reported we the loss QX compared million or $XX loss per million loss $XX $X.XX [ph] or Net to the of a a loss of quarter was share share. of as per XXXX second in

in million adjusted $XX to was quarter XXXX. $XX the second loss of the in million loss EBITDA adjusted compared our as QX EBITDA While

equivalents and the ended use reflecting million quarter operations for approximately $XX million, year-end primarily a total cash, since cash cash of of XXXX. $XXX at Our investments

in metrics specific quarter the expectations and With financial these the goals outline year our third full for mind, and I'll XXXX. for

million, premium quarter, between and loss gross and revenue for XX earned $XX and between we $XXX of So the and premium expect million at and third in-force between million September $XX $XXX $XXX million, million. million $XXX adjusted $XXX between $XXX million of EBITDA an million

capital approximately approximately shares. of $X compensation weighted $XX stock-based a million expenditures million, expense expect and XX of share approximately also million We count average of

expect $XXX and million, million And approximately million, and December for of million $XXX the between gross of EBITDA at full and between premium year between earned in-force million XXXX, million and $XXX compensation we and XX expense revenue million million premium $XXX $XX stock-based $XXX $XXX million. $XXX adjusted between and $XXX loss

capital expenditures expect million weighted count also of share We approximately XX million and average of approximately $XX a shares.

over that, would to I with things Shai. And to like hand

Shai Wininger

in for year's Thanks, asked time most paper the shareholders' first bag plan profitability last XXXX likely about the XXXX asked safe a profitability our Day. out questions for platform. between update years occur? now to the think we we question, Tim. line turn He reach through Investor when We'll and submitted laid our as to In would

bag, paper When multiyear know financial in a shared today, changes long-term and in agents our XX, funding improvement our notable we EBITDA. what timing. we November was scenarios based before breakeven before synthetic little in bit Well, see on we our it

into plan view more our and work that So give to planning a we shortly. long-term updated

K. Patrick the left asks Lemonade Giveback noting to the this is for I question, about our second feed demonstrated He political going how the that program, has neutrality and forward? unintentional. that bias show that will company the the know wanted In back company twitted leaning citing Twitter

be core party control may above always company. a Zeno since we for public about when to political, that we impact means of can [ph] social been benefit considered like corporation founded topic it stay Patrick, of Lemonade politics. mind and its topics but us was the Well, this into DNA. started a the has That we integrated and be comes vocal change, as fray the is that gun climate top which

at right a not even when cup of brand of thing, believe being everyone's is it that the we doing Beyond important for taking comes the and business stand our tea. cost

be without this please As opinion part with our Giveback read rather our of hurts take brand than that I rather once loved [ph] being role We having and it. by we'd bold all. to post the an our by some helps But than as strategy, our believe on Lemonade values affiliation. our any with branding ignored you'll issue. I that are to party they're find or political while moderate And coming intentional is I think This our team driven, the they foundation sensible, alignment where and believe also and perfect and investors. time

that wide As you Giveback which find our quite our options of that our offer for causes, of values. cause think found with a a aligns range will customers I for we most

is And on making have into the believe yours many politically you 'XX the Patrick, of prototypes to how beyond? welcome asked answer, estimated our we other it up intention have no can this what and and part be generative question, made sum on Darrin charities Giveback and thoughts In production? program. AI this of charged a next impact

So their efficiency that automation into to generative is in added or advanced it and take will quarter, extremely gains tech risky the it to will moment many impact implement further generative to spoke potential we see I AI start year I going AI our business so. the to AI major platform, time learning how trust plan challenging developments even now AI, companies Using about and we systems. and our other in our find give in generative a just machine alongside quite believe in of insurance our this platforms. positive some perfect for we into last highly already context, be and to

impossible and result. it's and often compliant are For models consistent one, highly create a perfectly unpredictable by generative design, to AI

gains agents, to large often expense their those portion we insurance rely being more Secondly, ratio, leaves with customer our with of we'll challenge. they on than see XXX% tech much in don't of not, less who companies which mostly translate efficiency a automate this customers. to directly and control communications, us handle can using because compliance our able reductions a Since communicate

needed of to As ours compliance an of clear these language strong require capabilities now with with able way With to at AI, predictability AI large our experimenting time. capable now a language CX of things generative the models We're compliant happy generative AI already models. fully zero team. period that but I'm and large we new report size attain we with auditability, hundreds of was area customer still platform. complex intervention generative that a and technology one that aren't a scale it compliant in our is very generative and started Regulators focus tasks which performing has to of We're capabilities our able consistent This we've solved. our short e-mails Chat running combine deploy in to I'm lab handles mode, say platform, and to and of been from models. generative proud we're of predictable, new

the new our AI, photos review look non-renewals, seeing damage functionality more. in with of vision of models, allowing day. stages extremely positive interested parallel, development new VAT advanced generative almost records, we're coming capabilities and parties results. in such secondary In more you insureds cancels online at utilize adds that features also to policies, Our system handles as with existing every of Mix and we're documents

and that about believe how I to As with software I it service operating to AI, more soon. promised costs from will Lemonades-tech maintaining and mentioned customers, our help when generative I before, share we combined building reduce our

of we me take friends street. the let so the on some questions our with to And hand can from that, over operator the the call

Operator

Jefferies. from Kinar comes for Instructions] you. [Operator Yaron Thank Our question first today from

now line is open. ahead. Your Please go

Yaron Kinar

reinsurance maybe about, affiliated losses this the you And questions applied reinsurance losses reinsurance loss there [ph] they My were you. they if in, a the let's program structure? Bermuda. How track also, quarter or the first the cat cat had in new now corridor you're the that losses same. at been - can - we touch and you a the gone retaining couple new that Good program. net when should entity think through are XQ with Is say, morning. this the quarter up, have hurricane on of question fact on Thank risk in losses or

Tim Bixby

Sure.

comments just Tim. A couple of So thank, – This new reinsurance the Yaron. structure. is on

loss a defined traditional no, terms of not scale quarter. a there's in So commission. traditionally sliding a loss There - is quarter,

somewhat structure, upside. a our some static fixed with it's prior which commission more in So rate was nuanced potential

So out I point unchanged. sort proportion it's somewhat players The different. are overall, of But ceding the would is quota the share so the same, same. substantially

of With more risk. that the you noted, are retaining the acceptance we cat

So is for hurricanes main excluded. example, hurricane, fully

If you we low been historically, and back hurricanes and more not where for underwrite roll have present. of our that's but quite a result how zero named losses we're

where areas So no and in then fairly active with underwriting real homeowners in other are homeowners. we presence conservative Florida

In years, for quarter unpredictable perform That's most they why of result, those to against storms which or gross reinsurance hit terms was of so last achieve X events our elevated existing the able and amount protect designed, our an fairly hurricanes we've exactly not the those us storms, fairly mitigated did - significant EBITDA kind other a that and losses. and example, had previous obviously, loss have in as in of - ratio. this unique significant were despite quite should as main we're a

broadly. you designing past, happened that not in have know more We're really thinking things the for the

history on Those enables more a of capital had to risk. in light risk have we We'll new we're the and that. to our would more That us be take quite place. are given we with than but sort put And previously. will comfortable in But continue that recent we've captive exclusion, ads. structures taking on that we are approach, our bit use hurricane volatility so

Yaron Kinar

the Got updating given so. term them would near it. on burn taking yourself then growth it And my And your up? do see Do and your Thank cash synthetic upfront potentially you. now targets that maybe question, second term? longer agent, you lowers or

Tim Bixby

a of to Hey, view, we certainly Yaron. gave do of in being back freedom XX% When optimal. now have structure we analysis will. a the lot We kind growth point a degrees from Yes, financing XX% last CAGR on basis about a kind rate think significantly expanded. Investor of of to capital more Day, have during a view point we as from our I in-depth multiyear of spoke November our flexibility

we slower capital scale, to the grow don't faster would grow and You get the that's way much excessive. too and required be much along

the So meaningfully that, cash That that, of money to to we've there was But expand one the bag. actually, we impacting corridor got path a remains of in a path quite on right to us. reserves. available without wide end our now with the can now significantly profitability

of capital of view, at there freedom. view, from financial point new point a least requirements So degrees from a are of

other we As want will only profitably. constrained we earlier, mentioned to We grow be things. still by

the getting our grow LTV rates is a being approved kind to cat of and to in growth to where rates. places So precondition able see want we we accelerating that

loss rates terms to But up their products the come able of hope we ratio, march as as downward growth our rate. underlying pick be those online, to our continue do in

The in we our [ph] coming two don't we've well, past spoken the those next upgraded underline largely for through a remains remains all about bit, we we the conditions guidance because - quarters. as will astrix little but I year it anticipate one this is as in

hopeful still in them. the some if quarters plan we that and in So XXXX, that focus we our on they'll the a during will able little longer, XXXX, growth. and take bit earning than go to a slowed bit do those two if be to we reaccelerate be year at longer, take And things little earlier implementing quarters they think we down where point next are that into growth will rates,

Yaron Kinar

understood. you, Thank

Tim Bixby

might. Yaron, I if

might. is here. one around questions, if of just worth reinsurance. over think was notes which I your which clarifying, Sorry, checking Yaron, I my the skipped I I was

large which be kind expect continue quantity would covered a for a QX, structure. at under of to of look you that event, significant aggregated notable that we to cats, the relatively to events If for new very number of was its small combination

but substantially given the not So same, unchanged what we saw in exactly QX.

Yaron Kinar

commission the But [ph] the structure sliding have net impacted it. wouldn't Got commit results?

Tim Bixby

of It on but a would view year significant not would impact. sort have again, the macro have course the a a over in of isolation,

Yaron Kinar

quick on prior or Did Got it. question development. quarter? a numbers PYD And have in you then any period the

Tim Bixby

modest. the majority in of period. fairly impact vast but was The Yes,

Yaron Kinar

the Do any have by Okay. you number chance?

Tim Bixby

Let me check that the double We'll I'll that, and moment. to add question. next on go in Thanks. a

Operator

Thank you.

next Our question of from America. Shanker Josh of Bank comes

ahead. Your line Please is open. now go

Josh Shanker

Yeah. Good morning.

about on up the little Following a growth. conversation with bit Yaron

spoken Did capital control You've XQ in you materially program ambitious But and how in the before quickly markets plans. [ph] more the past you're And capital guidance Lemonade this through? the willing by more raining conserving before grow are exceeded the the put light was cash you year have half growth until back 'XX, in than agents that of growth embrace for desired? limited rates the really the do desiring in pushes to in the place. much is

Tim Bixby

is you're efficient. established more productive what growth we're reducing your see you're choice, that with continuing has a been rates a theme conserve lower and is sort lower And efficient back to growth by couple of you left dial spend in when what quarters for by when less this spend channels spend when choosing than Yes, of now or definition, less large you capital. the rates,

difficult predict efficient you more And so sometimes will how become. it's much to

of QX particularly been in guidance, And you've a so versus the result as QX own and really some our that. has of upside seen

QX sorry, like the or a XX% saw increase we compare example, for a dollar - ago. just efficiency to prior if year, something year for the versus in QX, dollar QX So you

as if we We're be would in ago, can't number be the expect so same get not would were be consistently efficiency spend better that would take I as you over dollars favorable, increments, a that. time saw. we It Now exact so it but spending credit dramatic dollars not all year would fewer to difference probably for of of we significant. likely

of quarter, that mid-teens out the the some quarter going into try terms we our had, lays updating guidance overperformance a in the So guidance sort because underperformance, year, a we haven't growth guidance capture of a what of we do for is. but of that or rest ISP forward which rate and have in we're variance by year the

expect we an sort that repeat. So dramatic portion don't you see could of some that I to but expect versus see wouldn't overperformance our - guidance, of

Coming development, the just prior percent period back Yaron's on and question was period or or over remainder X.X so, so quickly otherwise. to development was real X% prior the

Josh Shanker

I [ph] - X.X% favorable or unfavourable?

Tim Bixby

Unfavorable.

Josh Shanker

then the coming question. the no I almost And guidance mean basically Okay. guidance, so if XQ. growth in I to XQ growth XQ back from guidance implies the the subtract

XX% growth. in the homeowners almost that if there's You XX% that it have rate coming through and suggest in California, no count does I I mean layer - policy

that Your can am guess. Is shut anticipation I way? it the I when is that you down, - reading numbers correctly I that think

Daniel Schreiber

next the skewed moving the yes, It will we're to in largely on X is months it's every when going dollar growth we'll season, be do Yes, further. - Daniel here. what Josh, goes QX.

So couple for this QX taking general. our in them towards to in and spent dollars skew we're reasons. QX busy of we prior years. about gets are a going spoken We've

the just said, the shopping means but more costly. ad I as holiday season off, also the words tapers season, is, moving become them of One season that

So we'll expect broad towards this the definitely count we Do QX in but skew think holds. your do, a strength I of spend. policy analysis QX, growth we

Josh Shanker

very Thank much. you

Operator

Thank you.

Wang [ph] from Morgan comes Bob next of Our Stanley. question

is now ahead. line Your go open. Please

Unidentified Analyst

you about think question AI, I about get right? to just past, a learning, in but Hi, regarding is a good much One so if your commentary would lower generative the form sub-XX% As all, talked of morning. broadly, around you ratio. at machine which not maybe AI, AI loss quick speak, AI, to

given that of sub technological for in next X of well efficient the data what as XX% cloud, think you development AI the the achieve infrastructure you loss terms AI as we implementation which path much scalable. you continued to Can be the about the maybe see Just data as analytics, on the how impetration? more And help us just do going your years the especially forward? in is more and would ratio continued years plan X

Daniel Schreiber

Hey, Bob.

are to So be. I where pretty our much think them need we AIs

in LTV-X we comments shared of LTV-X, delineating months. is just exploded analysis - the few the to certainly but which did where Our X Shai's about back over AI, November worth about generative was it were graduated spoke what course our last in Investor Day, it's it

AIs assessment. and are risk mature much machine more Our on they're in focused learning

have every cetera, likelihood of about to customer that et we about claim, making likelihood models, et channel, likelihood predictions learning claim, machine comes to a cetera. different So to into upsell, Lemonade, severity XX

And fairly them, So we have making we be finding now true. predictions. them and detailed are as a to infrastructure specific we pretty robust holding audit

So these every models with relying of confidence in we the is our growing timing cycle. on

The big lie of about once loss AI. for those received, not been getting implementing regulatory does learning or us domain It's and in that. of have hurdle today ratio the machine terms approvals, in

let's So where get environment, The price opportunity to today than as apple a it regulatory fact that than now, one at we it don't saw price year get you you in a set hurdles. you're don't the get XX% from home had and and higher when today other months be another XX% and you midyear alone that start with claim means until field been fielding year the get or an ago, particularly another and that in inflation you that may bite later. it, repairs, a inflation significant renewal then of year means let car to you heavy X in if before price policy car XX% - you you you amend XX% which the that even has for a

they'll period much approved, regulatory to you because longer your how everybody then at and have up, at year And a once that full you inflation remains rates. which take who what approve take will come effect, wait regulators to new if a was since then filing, and older take time why renewals race rates you're in the for those it constant and high, until adapt pretty of to if their approve a every in policy much have priced is an may it have take limitations likely on more frequency, than year. earning is processes rate And bit sometimes more you it's

don't a gap. You knowledge have

one is comes down each rates and actually Our remains down that. have is. machines in to and want inflation and tell in indeed us as we're that, is our well. rate and we that - that that One a cat lag the up And when will this between risk. our it industry. knowledge the it don't we've dissipates is the goes and pretend What inflation have away, will feeling significantly, books comes seen second game. remain filing elevated, It it two time across certainly, for mouse and exactly I It's as ways. come hits and need that remain we seeing a approvals, when pick we we're to what of

we other, inflation we're getting But need we've one optimism to event, the as two the that on and and where path top in to seeing a these rate, towards of broken combined which back lines coming give go. of is the two the this trend decreasing on increasing us to thing

Unidentified Analyst

the the the But to or if losses what you of think of to said nullify way kind really regulatory secondary case, as the underwriting far and efficiency whereas that? of sorry, advantage Okay. helpful. such a and tech underwriting essentially on to secondary in my you're regulatory wrong is topic catastrophe far about somewhat it more I of macro imply Then having. then technological I stay how essentially, should fair the would a you from that Is the environment, it? from is environment, current lot so tech-driven the of is that Or think environment, as a macro that essentially that follow-up. just the the very so can development That's

Daniel Schreiber

at draw over shared your fair dramatic things. your this the from last XXX few a of the when XXs the perhaps quarter of I'd a have dropping neutralize in to is the attention improvements to a that happened One ratios past like our question. - last of of product what just - look look months couple draw some cat high loss and masks our course you we the It's the ex impact by cat. to attention, cat homeowners

cats, our improvement. As effort to for for an cats. Tim it have does a to demonstrate This for but responsibility said, isn't paying we fundamental pay sidestep

are. the everybody ratios they industry names, if And competitive indeed, quarter, I of and a in we you'll that their the than but of in some see last some better significantly some players loss industry advantage. who look what at And you this look best-known best you are for known won't were came in of suggesting the names in loss the this name knows names, the best at ratios call the

emerging. no as it competitive more received, whole are remains, environment, And see will of industry the where that. will you pronounced. while is is high as So true. look. That to as is already evidence a the And times and can look is also brunt know when I the inflation that we competitive more in as inflation you you a us if become normalize, you suffer advantage of the well headline beneath see there an the advantage But doubt, think kind it

the being risks is And selecting But And the to increasingly howling in the as become that affords that building storm there's storm long this will has by, hard we're I think, us term, that by passed outside, superior technology advantage how and infrastructure see us that think pricing industry at that. and a that I won when it's agreed obvious. them.

Unidentified Analyst

helpful. That's very you. Thank

Operator

Thank you.

Our next Helfstein of from Oppenheimer. question comes Jason

is ahead. line Your now Please open. go

Jason Helfstein

I right, whether - came want Thank et long-term weather, views up how the plan, when categorize cetera. public, with mean you I go think your originally to it's the change, you. does you climate look, it of et about that you I cetera. cetera, storms like back came guys just when on kind whether depending more it's et regardless of seem frequent, are seem

catalysts about have again, announcements, of if to feel you. like it's - of again, need of a Thank how just you the say because out. kind that, just recent that about X starting that Do of you X we think we're reflect that it risk some back kind bigger of may in all as spreading result And then the been you'd some we're the absorb or to like how have that business now years? you if a

Daniel Schreiber

at and question. great come that's Jason, Tim that anything that then in omitted. a a I'll with back I've take

rather in us it that suggesting different a reconfirms think strategy. course than action, multi-geography I a of multi-product,

saw some we quarter. outcomes severe yes, pretty this So,

well. just our we're of quarter homeowners our business. rest That's business. minority a see a our business, almost course, pet It's not of performing of you is now our in our loss business, And per is sizable about large business. we very, as a business. again, ratios, which Of fraction business as a of what's shared, homeowners our product very happening our the And

You business. in our our homeowners see what's larger happening renters which than is business,

that already report So line, and we EBITDA worst our that speaks in risks. we is top mitigating multi-geography those on that the multi-product a to line beat the bottom reported to including on a XX% beat think, are notwithstanding gross of structures the I fact the Indeed, the able volumes the and ratio, we put loss a reinsurance. place,

know loss - loss financials, we oversell sold and just our that quarter. you was our ratio, don't this particularly if we our but to want this, I severe you you It's tell didn't a P&L, wouldn't

to strong and line buffer these So to us a from that top EBITDA able are deliver and structures last of allow the ourselves to strong storms be there worst in notwithstanding. place

with coming price are through agree handle which and our gets that there more regulatory a premise, a that pricing. is certainly, experience. So that Ultimately, for allow We your to you time insurance will discuss Once time major cycle, that full doing catastrophes risks, understand becoming is been other underlying frequent, correct. I has that. the them, on course lag it lags in you can

comments is tell meantime, cash on you, exposed. the focus that our our less areas of part and in this the earlier letter, and laid will to down, In out slowing I are we in the

we been exposure these for mentioned and Tim hurricane very - about risks, have exposure. pretty We cautious So and that those years, we're understood are wildfire many already conservative.

around We to write have those. been able

risks As well. sidestepping other us, these are more we as them become palpable to

We now that have written are prior we stuff for. paying

look quarters, minimis. you But new ourselves to sales really were see these you'll in if that at areas de exposed our are many

taking So corrective course actions. are we

rate We that are we price filing for need. the

that are healthier our I all diversifying think translates there? I business omitted by of We And as by. a product. geographically Tim, into anything portfolio passes time and up

Tim Bixby

far I look nicely. they in We've more too not public, thought, term, would results, several just larger the more like broad we've frequent in and out larger line of years but at this period probably if which seen is feels larger what much is, storms, of short elevated you since the add intensity incumbents. sort much surprises brush from of volatile test that have been more in one one of going again, weathered of

see seen we've think much products of more a we've in think, it reasonable, would newer been have more smaller - this I loss to than base with period if of and a I premium seen. ratio actually challenge

improvement consistently then So premium ratio you look expense to solid I relative on consistent news. think too. that's losses good line, if improvement really declining at think the the there, And in our side, I just

for think out that's that test a we've So rigor, very this but didn't I X well. test be we the - think I set a weathered of been last to years

Jason Helfstein

then a technology like And just question.

and companies of, that call language competitive et become Thanks. learning kind next So the now accessible technically a of to to upstart did because available some early hard not work your yourself as like think machine more available without the competitors large is technologies models pioneers, companies you as do to of more becoming that those it, that for competitor, use if threat and kind were choose are going cetera? other them

Tim Bixby

in transition forever. language that that there amplifies in we advantages are technology. platform so built too by been day we're large troubled by place. competitive one too of having the access something But been such true models have I to only, that's think, troubled are all new of the in our Certainly, of It's are year, past we us. anticipation We're for the things that from - not advantages large believe data about just

Daniel Schreiber

we and Jason. that, he Berkshire some Ajit, say, Well start He said look months hi, to was himself. just you time, few on the spoke just, XXX if he a going but Vice of about Hathaway at AGM to finish. I Chair and - I I went commented back to said Hathway corrected have then our challenges actually back Yes, GEICO that - it's at overcome don't something challenges kind his nontrivial held are entirely the say ago. okay, certainly powerful that it insurmountable, difficult very, of into and to the of XXX talk want they systems these operations other. and each novel to over them technologies, very matter. is don't applying which I Those an that are kinds to of the is in integrating legacy company but make seamlessly Shai referenced comments, the systems but

reinforcing just says. Tim what So

now a able think that would be models. We and models Tim's it major these having put into to effort I everybody these technologies, headline not a trained lot is our deploy own of can This threat to in like a are at sounds easy comments us. exactly right. rest

Jason Helfstein

you. Thank

Operator

you. Thank

BMO. Our Zaremski from comes next from question Mike

Your line open. ahead. now is go Please

Mike Zaremski

good Thanks for morning. question. my taking Hey,

a around First a XX Is net question similar is gross on catastrophe calculating just losses on points. a numbers question we're on was the it basis, basis? that

Tim Bixby

is. it Yes,

Mike Zaremski

Okay.

was XX% annually - think back you in mentioned retention Metromile's Metromile's it the kind prepared retention is - when looking follow-up, rate was And of of rate said I disclosed in level? XXXX. Is the it of Metromile's rest Okay. that Tim rate the churn than kind my portfolio. - annual slightly higher that is I remarks around customer still that around annual I that

Tim Bixby

Yes.

more the previously. the when than realm period and is - things how been since customers, some since of rate renewals a - of we took is specifically, of don't over changed, under obviously, time better marketing we of course we the The the book eliminated disclose somewhat with approach approach. So eliminate have they've retention part in of are that and Metromile couple deal

has customer modest fairly been has a declined, when level the rate been than base premium the what's growth originally interesting increasing acquired has declined. customer has has The declined, therefore, the outpaced more run business. we much It though the has therefore, the the continued count not that premium is customer had but actual assumed rate at proactively And we've steady. And been base. even and churn we

Mike Zaremski

That's helpful. Thank you.

Operator

you. Thank

from comes question Halter Financial. next Matt Ferguson Our of Smith

ahead. go Please open. now is line Your

Matt Smith

to bit. thanks. stick wanted Hi, on I the little theme a Metromile

haven't the on. that have the kind more notes loss of in of of you customers. lot for and probably the just ratio, those And data we it made that you progress me made letter really personalized One would strike auto a was textured

to wondering forward? plan of kind going the I'm that loss ratio So mind what's get in

Daniel Schreiber

majority Matt, The Thanks Metromile you. clarity a mile overwhelming and question. of paper business good welding majority talk to their bulk the for business of amount Yes, to good California. we the there. of have the premiums of car a is are our in

waiting order risks. concentrated ratio. That But coming So back the got for unlock be rate not-too-distant the cycle single very that the future. be on a to is with dependent rates would a which there's here line geographically with we've approval I in get big in approvals and concentration, a there, book hope that very such loss a in will we're a

Matt Smith

mean bundling of the I more you until the get - and struck me and to other ratios in the that to prove just then you and piece first California loss have seeing geographies? of you line? kind are to trying Are kind expand of that you're out business in grow try trying market it So that not

Daniel Schreiber

We it do states. a number have of in

the improved letter referring improved selling dramatically. just car results earlier from, dramatically. I hasn't are we our is come in were book So comment close historical to car said that from But existing which hasn't said the just our that in terms - was that loss where of states. the ratio, fixing a explaining the why we dozen you bulk of to

making areas where part of account absolutely rates for in we to just adequate. In are the our book. the are happens new That we sales, those feel terms a small of

Matt Smith

I Okay. And switch the then just if over to synthetic could agents.

the curious, been. we've in given recently? that over the LTV do increase ratio cat - to holding versus again, of seen over what in have you're mentioned, that kind events kind I'm comment. have modeling opening given in what You that your time you realized X CAC Is confidence your ratio what results just of

Daniel Schreiber

surprisingly perhaps been constant. It's

being slightly a fairly stable, company, improving as [ph] through overall some over economy been years time. an but multi we've constant, we've as that So as an seen fairly industry,

that rates our I of. too new continue I optimism our continue rates improve there optimism for - We say rates room future, headwinds the invar that in think is area that as come that the as is I'll to we improve improve we're regard. see retention online, So side, about this no suggest can to to it we hesitate aware on I as to put continue an cross-sell much the but upon our

Matt Smith

Thanks so much. Okay.

Daniel Schreiber

you. Thank Sure.

Operator

you. Thank

from Jefferies. next Our from Yaron question Kinar comes

now go Your is open. ahead. line Please

Yaron Kinar

Thanks for follow up. taking my

by appreciate [ph] for Difficulty] But loss number you - you total the the loss homeowners, CAC [Technical with the On provided for line. offered ratios the ratio?

Tim Bixby

carefully. that We Yes. chose

business, We but at more haven't disclosed you disclosed we've home to wanted good progress. can show probably and I somewhat by item. just not it every into elevated rate the line where the share making of back

hopefully back to we'll more over came on Yaron, share time. earlier in, I you so And And Josh can period development. the prior you glad to so I'm correct and my misstatement

I X by So point. it is percentage favorable unfavorable said was actually

wanted the So that for correct I just record the to and transcript. for

Yaron Kinar

both.... for Thank And it. Got you.

Tim Bixby

just Yaron, please? your broke repeat unfortunately, Can a you bit audio little that, for us. up

Yaron Kinar

us Yes. from? capability tell you Can came the where maybe

Tim Bixby

Nothing only was point. - notable. It one only

fairly It was highlight So category. specific material. any I wouldn't

Yaron Kinar

Got it.

Okay. And back to the going then agent. maybe synthetic

go the agency, below the they - on go the the Just to accounting debt into line and sure they want do above the call Or to the do associated Does make I'm correctly. marketing? about payment/ so with our line

Tim Bixby

will mechanics just be General The change. as but customers return EBITDA, the the and Catalyst actually expense as current provider, that as flow to that that the P&L. through which the in expense a continue the interest from the will not IRR by little expense and expense, of on bit, to line will will think an sort so be and earned So marketing the acquire unchanged show the spend will past up interest in to XX% we about sales that is the incremental excluded expense, line

Yaron Kinar

Okay. Thank you.

Operator

you. Thank

question comes from of Tommy McJoynt next Our Stifel.

is line Please go Your open. now ahead.

Tommy McJoynt

guys a behind I a captives guess, are Thanks just you the risk I of an efficiency? form for back questions. it? is strictly introducing. where true Or little wanted taking do to that capital them new third-party opportunity for bit capital see you my to transfer, as there's Hey, guys. go there

Tim Bixby

all risk basis. with we think captive, Cayman retain a will integrated, and really optionality wholly basically I the on that have consolidated that's we

really a that's So structure. capital-driven

are With with there time, are yet, the there us are but be that That's Bermuda not could we've there something there that opportunities transformer, otherwise, instituted parties. not and to opportunities that there structures be over third there where interaction third-party available where exist involvement. could

more And the and so we stay when out we'll provide clarity tuned more coming operational. those becomes as over quarters, that roll

Tommy McJoynt

your guess, that spend? liability of be assume next maximum of marketing the to just of sheet end Okay. understanding cadence quarters. lumpy just out agent, acquisition that spend might on Is the a And pushed of other be potentially synthetic would then and Got it deploying of financing fair the the the on million the it. $XXX customer by full the balance year, I given question, couple trajectory

Tim Bixby

but is sort expectation, back possible, underlying that, and earlier realm lines. our improvement, we're each giving certainly think the again, primarily decision driver I loss it's because coming LTV CAC certainly it's that - of beyond won't I the rates online, current our the comments, our won't is to of say the ratio there of coming to product of So not reason but within year, guidance of I the

And that we we year-end. by likely more we and amount perhaps growth improvement or move it can to that accelerate, continue up have would higher that obviously, make see so that full and if

certain. So it's certainly not possible, but

Tommy McJoynt

of And first agencies financing Do this your last balance treat leverage on kind question. balance Okay. than, the rating would sheet? my just the expect traditional Got that debt on what putting guess, of to it. the be then This any I you sheet. is differently form obviously you're

Tim Bixby

one of can't is the Well, terms yes, would different to rating that expect unique a that, speak from that distinctions other fairly essentially they - We're significantly it take I be that those traditional flows the account agencies of something we're - - unique no this regulator. companies true is acquired cash But number for recognized. which from structure. cohorts, are small hopeful, the into That these as There's distinct a aspects. employing not recourse of structure. than I the result that like We're said, though will has is a relatively debt.

Tommy McJoynt

Thank Got sense. it. Makes you.

Operator

today. We have you. for Thank currently no questions further

call. conference So for Thank that joining. you today's all concludes

may disconnect lines.+ your now You

Lemonade (LMND) 3 Aug 232023 Q2 Earnings call transcript