Lemonade (LMND) Q4 Earnings Miss Estimates, Revenues Beat
Lemonade, Inc. LMND reported fourth-quarter 2021 operating loss of $1.14 per share, wider than the Zacks Consensus Estimate of a loss of $1.13. The loss was also wider than the year-ago loss of 60 cents per share.
Gross earned premiums improved driven by an increase in-force premium earned.
Lemonade, Inc. Price, Consensus and EPS Surprise
Lemonade, Inc. price-consensus-eps-surprise-chart | Lemonade, Inc. Quote
Behind the Q4 Headlines
Total revenues nearly doubled year over year to $41 million, driven by an increase in gross earned premium, rise in net investment income & commission income, and a moderate reduction in the scope of the quota share program. The top line beat the Zacks Consensus Estimate by 4.2%.
Gross earned premiums soared 79% year over year to $89.3 million, driven by an increase in in-force premium earned.
Lemonade’s in-force premium of $380 million jumped 78%, driven by a 43% increase in the number of customers as well as a 25% increase in premium per customer. Premium per customer increased driven by the continued shift of business mix toward products with higher average policy values, increased prevalence of multiple policies per customer, and growth in the overall average policy value.
Total operating expenses, excluding net loss and loss adjustment expense, increased 89% year over year to $84.5 million, attributable to higher sales & marketing, technology development, and general and administrative expenses.
Adjusted EBITDA was negative $51.2 million, wider than negative $31.7 million in the year-ago quarter, attributable to increased operating expenses.
Loss ratio of 96 deteriorated 230 basis points year over year. The company estimates the loss ratio to be less than 75 in the long term.
Financial Update
Cash, cash equivalents, and investments were $1.1 billion as of Dec 31, 2021, up 90.1% from 2020 end, reflecting net proceeds from a follow-on offering of approximately $640 million, partially offset by $144.6 million of cash used in operations.
As of Dec 31, 2021, Lemonade had assets worth $1.5 billion, up 82.3% from the level at 2020 end.
Shareholder equity at quarter-end was $988.2 billion, up 82.7% from the 2020-end level.
Cash used in operations was $144.6 million, higher than $91.7 million used in the year-ago quarter.
Q1 Guidance
In-force premium at quarter-end is projected between $405 and $410 million. Gross earned premium is expected in the range of $92-$94 million. Lemonade expects revenues between $41 million and $43 million. Adjusted EBITDA loss is expected to be $65-$70 million. Capital expenditure is estimated to be $2 million.
2022 View
Lemonade projects in-force premium between $530 million and $540 million. Gross earned premium is expected in the range of $423 million to $427 million. Revenues are anticipated between $202 million and $205 million. Adjusted EBITDA loss is expected to be in the range of $275-$290 million. Capital expenditure is estimated to be $10 million. Stock-based compensation expense is estimated to be about $80 million
Zacks Rank
Lemonade currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Multiline Insurers
Of the insurance industry players that have reported fourth-quarter results so far, CNO Financial Group CNO, American International Group. AIG and Assurant Inc. AIZ beat the Zacks Consensus Estimate for earnings.
CNO Financial’s fourth-quarter 2021 adjusted earnings per share of 87 cents beat the Zacks Consensus Estimate by 47.5% and surged 43% year over year. Total revenues of $1.1 billion dipped 0.1% year over year in the fourth quarter due to lower general account assets.
CNO Financial’s total insurance policy income remained almost flat year over year at $629.9 million. Annuity collected premiums of $397.4 million climbed 15% year over year while new annualized premiums for life and health products rose 2% year over year to $87.5 million.
American International Group’s adjusted operating earnings of $1.58 per share surpassed the Zacks Consensus Estimate of $1.14 and increased from 94 cents per share a year ago. Total revenues of $14.1 billion grew 45.6% year over year and beat the consensus mark of $11.6 billion.
Both the segments at AIG generated improved premiums. Though General Insurance’s underwriting income rebounded from the year-ago loss. Life and Retirement’s underwriting income declined year over year.
Assurant’s fourth-quarter 2021 net operating income of $2.47 per share beat the Zacks Consensus Estimate by 7.4% and increased 35.7% from the year-ago quarter. Total revenues were up 2.2% year over year to $2.5 billion but missed the Zacks Consensus Estimate by 0.07%.
In 2022, AIZ expects 8% to 10% growth in adjusted EBITDA, excluding reportable catastrophes, driven by expansion across Global Lifestyle and Global Housing.
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