Why did LMND's Q3 earnings exceed forecasts significantly?

Lemonade's Q3 earnings exceeded forecasts significantly due to several key factors:

1. **Revenue Growth**: Lemonade reported a 29% year-over-year increase in revenue, reaching $148.8 million, surpassing the estimated $144.93 million. This growth was driven by a 26% rise in In-Force Premium (IFP) to $944 million, which contributed to the company's strong revenue performance.
2. **Gross Profit Improvement**: The company's gross profit margin expanded to 43%, with a significant increase in gross profit amounting to $63.9 million, a 90% year-over-year growth. This improvement reflects enhanced operational efficiency and a better loss ratio.
3. **Adjusted EBITDA Improvement**: Lemonade's Adjusted EBITDA loss narrowed by 18% to ($23.8) million, indicating improved operational efficiencies and higher revenue. This reduction in loss reflects effective cost management and strategic investments in growth areas.
4. **Loss Ratio Reduction**: The company achieved a record low loss ratio of 63% for the quarter, marking a 12-point improvement year-over-year. This significant reduction in loss ratio contributes to higher profitability and cash flow.
5. **Positive Free Cash Flow**: Lemonade generated a positive Adjusted Free Cash Flow of $26.5 million in Q4, contributing to a full-year positive Adj. FCF of $48 million. This positive cash flow indicates the company's ability to generate sufficient cash to support ongoing growth and operations.

In conclusion, Lemonade's Q3 earnings exceeded forecasts significantly due to robust revenue growth, improved gross profit, enhanced operational efficiencies, reduction in loss ratio, and positive free cash flow. These factors combined to deliver a strong financial performance that surpassed market expectations.