Lemonade's Q1 2025 Earnings Call: Unpacking Contradictions on Subrogation Strategies and Tariff Impacts

Subrogation recovery strategy and expectations, impact of tariffs and international trade conditions, expansion strategy and market growth opportunities, subrogation recovery strategy, impact of tariffs on financial forecasting are the key contradictions discussed in Lemonade's latest 2025Q1 earnings call.



Revenue and Customer Growth:
- Lemonade reported revenue of $159 million for Q1 2025, up 27% year-on-year, and in force premium grew 27% to $1.061 billion.
- The growth was driven by strong top-line surges across all key metrics, supported by no material rise in expenses as fixed costs stayed flat or fell.

Loss Ratio and Profitability Stability:
- The company's gross loss ratio was 78% for Q1, excluding CAT impacts, which was 59%, and the trailing 12-month gross loss ratio remained stable at 73%.
- Despite challenges like the California wildfires impacting loss ratios, the stability reflects Lemonade's ability to manage risks and maintain profitability through AI-driven models and underwriting strategies.

Car Business Expansion:
- Lemonade Car's quarter-over-quarter IFP growth exceeded the rest of the business for the first time in Q1.
- This growth is attributed to unique differentiators like telematics models and an untapped growth pool of non-car customers, influencing product development and geographic expansion.

Cross-Sale and Retention Dynamics:
- The company saw a significant jump in cross-sale volume, with half of new car sales now coming from existing customers.
- This trend is expected to continue, enhancing overall retention and driving profitable growth without commensurate increases in fixed costs, particularly through AI optimization of products and price points.