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Lemonade (LMND) Q4 Loss Narrows Y/Y, Revenues Beat Estimates

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Lemonade, Inc. LMND reported fourth-quarter 2020 operating loss of 60 cents per share, narrower than the Zacks Consensus Estimate loss of 65 cents. Notably, the figure was also narrower than a loss of $2.90 per share incurred in the year-ago quarter.

The quarter benefited from improvement in gross earned premiums driven by increase of in-force premium earned and lower expenses.

Behind the Q4 Headlines

Total revenues declined 12.8% year over year to $20.5 million, primarily due to lower net earned premiums and net investment income. However, the top line beat the Zacks Consensus Estimate by 6.4%.

Gross earned premiums soared 92% year over year to $50 million driven by increase of in force premium earned.

In-force premium of $213 million jumped 87% driven by higher number of customer and premium per customer. Premium per customer improved 20% year over year driven by continued shift of business mix toward products with higher average policy values, an increasing prevalence of multiple policies per customer, and growth in the overall average policy value and pricing impact.

Total operating expenses, excluding net loss and loss adjustment expense, increased 10% year over year to $44.6 million, attributable to higher other insurance expenses, technology development, and general and administrative expenses. However, lower sales and marketing expenses were partial offset.

Adjusted EBITDA was negative 29.7 million, narrower than $314 million loss in the year-ago quarter.

Loss ratio of 73 remained flat year over year.

Lemonade, Inc. Price, Consensus and EPS Surprise

Lemonade, Inc. Price, Consensus and EPS Surprise
Lemonade, Inc. Price, Consensus and EPS Surprise

Lemonade, Inc. price-consensus-eps-surprise-chart | Lemonade, Inc. Quote

Financial Update

Cash, cash equivalents, and investments were $578 million at Dec 31, 2020, up 74.7% from 2019 end, largely reflecting the net proceeds from the initial public offering, partially by cash used in operations.

As of Dec 31, 2020, Lemonade had assets worth $828.7 million, more than doubled from the level at 2019 end.

Shareholder equity at 2020 end was $541 million, compared favorably with deficit of $182.5 million in 2019.

Cash used in operations were $91.7 million, higher than $78.1 million used in 2019.

Q1 Outlook

In force premium is projected between $241million and $246 million. Gross earned premium is expected in the range of $53.5-$54.5 million. Revenues are anticipated between $21.5 million and $22.5 million. Adjusted EBITDA loss is expected to be $40-$43 million. Capital expenditures is estimated to be $2 million.

2021 Outlook

In force premium is projected between $372-$378 million. Gross earned premium is expected in the range of $270 million and $275 million. Revenues are anticipated between $114 million and $117 million. Adjusted EBITDA loss is expected to be $163-$173 million. Capital expenditures is estimated to be $8 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 Insurers

Of the insurance industry players that have reported fourth-quarter results so far, The Travelers Companies TRV, W.R. Berkley Corporation WRB and Progressive Corporation PGR beat the Zacks Consensus Estimate for earnings.

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