Digital insurance player Lemonade reported better-than-expected results on Tuesday (Mar. 2), but failed to impress the market with its outlook on the coming year. The mobile insurance firm nonetheless went into its earnings call with analysts enthusiastic about the progress the firm has made in diversifying its offerings since its July 2020 IPO, thus growing both the size and monetizable value of its customer base.
“Back in July, at the time of our IPO, we were a monoline business, as we had been since our inception. Yet, a couple of quarters later, we offer three very different types of insurance property and casualty, pet health, and term life — and have more in the works,” Lemonade CEO Daniel Schreiber noted in his call with analysts after the results were public.
Growth was the repeated theme of the reporting, with Lemonade now available in all 50 states, up from 27 at the time of its IPO, and with one million customers signed on after just four years in operations. It took USAA 40 years to hit that milestone, Schreiber noted.
The firm concluded 2020 with a premium per customer of $213 — a 20 percent increase year on year, the firm’s third sequential quarter of accelerating growth. That increase in premium value, Schreiber noted, comes as a direct result of Lemonade’s expansion in the last six months beyond its core product of renters’ insurance into the connected areas of homeowners’, pet and term life insurance products. Its homeowners’ insurance product “has handily outpaced the rest of our book,” according to Schreiber. Homeowners’ and pet insurance represented more than 40 percent of Lemonade’s new business in Q4 2020, up from about a third in Q4 2019.
“We continue to love the renters’ insurance business due to the strategic benefit of acquiring customers cheaply and driving Lifetime Value (LTV) upward over time via cross-sales, upsells and graduation,” Schreiber wrote in his annual letter to investors. “Happily, we have demonstrated that we are also able to acquire customers upfront on higher premium products at customer acquisition costs (CAC) that are compelling.”
And Lemonade said that more “useful and relevant” insurance products are on the way to its growing audience of mobile customers. The specifics of those new products were not disclosed, though Schreiber did assure investors that he would be less “cloak and dagger” on the subject soon, with product announcements planned for spring of 2021.
Thay news did little, it seemed, to stem investor disappointment with Lemonade’s predictions for its own performance in early 2021. The firm’s stock declined on Tuesday morning, despite the firm having exceeded analysts’ expectations for Q4 earnings and revenue.
The company reported a fourth-quarter loss of $33.9 million, or 60 cents a share, compared with a loss of $32.7 million, or $2.90 a share, at this time last year. Revenue also declined to $20.5 million from $23.5 million at this time last year. Those declines are not as steep as the loss of 64 cents a share on revenue of $19.2 million that analysts were expecting. But Lemonade’s forecast for Q1 revenue of $21.5 million to $22.5 million came in short of analysts’ forecasts of $22.1 million on the low end. The company’s forecast for the year of $114 million in revenue was ahead of the $111.6 million that analysts predicted.
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