Lemonade's Q2 2025 Earnings Call: Key Contradictions in Loss Ratios, Premium Leverage, and Growth Strategies

Car loss ratio improvement, premium leverage ratio targets, growth spend and efficiency, loss ratio targets and priorities, and reinsurance structure and capital management are the key contradictions discussed in Lemonade's latest 2025Q2 earnings call.



Financial Performance and Loss Ratio Improvement:
- Lemonade reported 29% year-on-year growth in in force premium (IFP) for Q2 2025 and a 67% gross loss ratio, a 12-point improvement from the previous year.
- The improvement was attributed to leveraging AI for pinpointing risk and improving profitable growth, leading to a trailing 12-month gross loss ratio of 70%.

Car Insurance Growth and Improved Loss Ratios:
- Lemonade's car insurance business crossed $150 million in in force premium with a 55% growth rate.
- The division's gross loss ratio improved to 82%, indicating a 13-point improvement from the previous year, primarily due to product enhancements and geographic expansion.

Reinsurance Transition and Capital Efficiency:
- Lemonade reduced the quota share program from 55% to 20%, reflecting its confidence in improved underwriting performance and loss ratios.
- The transition allows Lemonade to retain more revenue but has no impact on IFP growth, and the change is expected to roll out over several quarters without disrupting regulatory capital needs.

European Expansion and Performance:
- Lemonade's European business, primarily renter and homeowners insurance in key markets like the U.K., Netherlands, France, and Germany, achieved 200% growth in in force premium with $43 million in IFP.
- The growth was attributed to structural cost advantages from AI-driven platforms, resulting in an 83% gross loss ratio, a 15-point improvement from the prior year.