Lemonade (LMND) Q4 Earnings and Revenues Beat Estimates
Lemonade, Inc. LMND reported fourth-quarter 2022 operating loss of 93 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.17 as well as the year-ago loss of $1.14 per share.
Improved gross earned premiums, driven by an increase in in-force premium earned, were offset by higher expense.
Lemonade, Inc. Price, Consensus and EPS Surprise
Lemonade, Inc. price-consensus-eps-surprise-chart | Lemonade, Inc. Quote
Behind the Q4 Headlines
Revenues increased more than double year over year to $88.4 million, driven by an increase in gross earned premium and a reduction in the proportion of earned premium ceded to reinsurers. The top line beat the Zacks Consensus Estimate by 12.1%.
Gross earned premiums soared 69% year over year to $151 million, driven by an increase in in-force premiums earned.
Lemonade’s in-force premium of $625 million jumped 64%, driven by a 27% increase in the number of customers as well as a 30% increase in premium per customer. The increase in premium per customer was largely driven by the acquisition of Metromile. The increasing prevalence of multiple policies per customer, overall growth in average policy value and the continued shift of its business mix toward products with higher average policy values also acted as tailwinds.
Total operating expenses, excluding net loss and loss adjustment expense, increased 12.4% year over year to $95 million, attributable to increased expenses related to the Metromile acquisition.
Adjusted EBITDA was negative $52 million, wider than negative $51.2 million in the year-ago quarter, attributable to increased operating expenses.
The gross loss ratio of 89 improved 700 basis points year over year while the net loss ratio improved 100 basis points. Lemonade estimates the net loss ratio to be less than 75 in the long term.
Financial Update
Cash, cash equivalents, and investments were $1 billion as of Dec 31, down 3.3% from 2021 end, reflecting net proceeds from cash used in operations.
As of Sep 30, LMND had assets worth $1.7 billion, up 11.4% from the level at 2021 end.
Shareholder equity at 2022-end was $866.8 billion, down 12.2% from the 2021-end level.
Cash used in operations was $163 million in 2022, higher than $144.6 million used in 2021.
Q1 2023 Guidance
In-force premium at quarter-end is projected between $635 million and $637 million. Gross earned premium is expected in the range of $148-$150 million. Lemonade expects revenues between $87 million and $89 million. Adjusted EBITDA loss is expected to be between $63 million and $65 million. Capital expenditure is estimated to be $2 million. Shares outstanding are estimated to be 70 million.
2023 View
Lemonade projects in-force premiums between $695 million and $700 million.
Gross earned premium is expected in the range of $632-$636 million.
Revenues are anticipated to be between $375 million and $379 million.
Adjusted EBITDA loss is expected to be in the range of $240-$245 million.
Capital expenditure is estimated to be $8 million. Stock-based compensation expense is estimated to be about $60 million.
Shares outstanding are estimated to be 65 million.
Zacks Rank
Lemonade currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Radian Group Inc. RDN reported fourth-quarter 2022 adjusted operating income of $1.05 per share, which beat the Zacks Consensus Estimate by 20.6%. The bottom line decreased 1.8% year over year. Operating revenues decreased 8.2% year over year to $307.9 million due to lower net premiums earned, services revenues and other income. Net premiums earned were $232.8 million, down 10.9% year over year.
MI New Insurance Written decreased 45.8% year over year to $12.8 billion. Primary mortgage insurance in force was $261 billion as of Dec 31, 2022, up 6.1% year over year. Primary delinquent loans were 21,913 as of Dec 31, 2022, down 24.6% year over year. The expense ratio was 27.3, a deterioration of 170 bps from the year-ago quarter.
MGIC Investment Corporation MTG reported fourth-quarter 2022 operating net income per share of 64 cents, which beat the Zacks Consensus Estimate by 8.5% and our estimate of 59 cents. The reported figure increased 4.9% year over year. MGIC Investment recorded total operating revenues of $291 million, which decreased 0.6% year over year on lower premiums earned. The top line missed the consensus mark by 12.9% and our estimate of $334.1 million. Net premiums written decreased 2.8% year over year to $231.4 million. The figure was lower than our estimate of $260.1 million.
Insurance in force increased 7.6% from the prior-year quarter to $295.3 billion. The figure was higher than our estimate of $294.9 billion. The insurer witnessed a 20.7% decrease in primary delinquency to 26,387 loans. New insurance written was $12.9 billion, down 52.4% year over year due to a decline in origination markets. For the quarter under review, the loss ratio was (12.8%) compared with (9.9%) for the fourth quarter of 2021.
MetLife, Inc. MET reported fourth-quarter 2022 adjusted operating earnings of $1.55 per share, which missed the Zacks Consensus Estimate of $1.74 and our estimate of $1.77. The bottom line declined 29% year over year. Adjusted operating revenues of MetLife amounted to $15,836 million, which decreased 21.6% year over year. The top line missed the consensus mark of $16,996 million and our estimate of $16,303.1 million.
Adjusted premiums, fees and other revenues, excluding pension risk transfer (PRT), were $11,375 million, down 1% year over year. MetLife expects a pre-tax variable investment income of $2 billion for 2023. Corporate & Other adjusted losses are expected to be $650-$750 million for the year. The effective tax rate is likely to be 22-24%. MET expects its MetLife Holdings’ adjusted premiums, fees and other revenues to decline 12-14% in 2023 and then 6-8% per annum. It expects to generate adjusted earnings of $1-$1.2 billion in 2023 from this segment.
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