Lemonade shares soar after promising Q3 results
Lemonade shares soar after promising Q3 results
Insurtech company signals turnaround with strong cash flow and positive revenue forecasts.
Insurtech company Lemonade released its third-quarter reports, indicating effective expense management and improvement in cash flow. The company's stock soared more than 25% on the New York Stock Exchange during the first hours of trading, culminating in a 130% increase over the past year, reaching a value of around $1.7 billion.
Following this positive quarter in terms of revenue, Lemonade expects fourth-quarter revenues of $144-146 million and has slightly raised its annual revenue forecast to $522-524 million, compared to the previous estimate of $511-515 million.
Although the insurtech company is still operating at a loss, it is expected to finish 2024 with positive cash flow after recording an additional $48 million in this area in the third quarter. Contributing factors include the continued improvement in the claims payment ratio to revenue, which reached a four-year low of 73% after hovering around 90% in the past and standing at 83% in the corresponding quarter.
This positive news is particularly noteworthy given the numerous extreme weather events in the U.S. during the quarter. While most of Lemonade's revenue comes from building and contents insurance policies, the company also operates in the car and pet insurance markets. In the last quarter, the growth rate of policies unaffected by weather events accelerated, contributing to an improvement in the insurance ratio.
On the revenue front, Lemonade reported a 19% increase to $137 million, slightly above forecasts. During the quarter, the company significantly increased its investment in marketing and customer acquisition, resulting in a customer base of 2.3 million at the end of the reporting period. As a result of the increased marketing expenses, operating costs rose by 27% to $124.5 million. However, Lemonade continues to show significant losses, amounting to $68 million this quarter, compared to a loss of $62 million in the previous quarter.
