Results

Lemonade Inc.

11/05/2025 | Press release | Distributed by Public on 11/05/2025 10:32

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes and other information included elsewhere in this Quarterly Report, Annual Report on Form 10-K, and in our other filings with the Securities and Exchange Commission ("SEC"). This discussion and analysis below includes forward-looking statements that are subject to risks, uncertainties and other factors described in the "Risk Factors" section of this Quarterly Report and our Annual Report on Form 10-K that could cause actual results to differ materially from such forward-looking statements. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Our Business
Lemonade is rebuilding insurance from the ground up on a digital substrate and an innovative business model. By leveraging technology, data, artificial intelligence, contemporary design, and social impact, we believe we are making insurance more delightful, more affordable, and more precise. To that end, we have built a vertically-integrated company with wholly-owned insurance carriers in the United States and Europe, including the United Kingdom, and the full technology stack to power them.
A brief chat with our bot, AI Maya, is all it takes to get covered with renters, homeowners, pet, car or life insurance, and we expect to offer a similar experience for other insurance products over time. Claims are filed by chatting with another bot, AI Jim, who pays claims in as little as two seconds. This breezy experience belies the extraordinary technology that enables it: a state-of-the-art platform that spans marketing to underwriting, customer care to claims processing, and finance to regulation. Our architecture melds artificial intelligence with the human kind, and learns from the prodigious data it generates to become even better at delighting customers and evaluating risks.
In addition to digitizing insurance end-to-end, we also reimagined the underlying business model to minimize volatility while maximizing trust and social impact. To lessen the volatility inherent in an industry directly impacted by the weather, we utilize several forms of reinsurance, with the goal of dampening the impact on our gross margin. The result is that excess claims are generally offloaded to reinsurers, while excess premiums can be donated to nonprofits selected by our customers as part of our annual "Giveback". These two ballasts, reinsurance and Giveback, reduce volatility, while creating an aligned, trustful, and values-rich relationship with our customers.
Customer Investment Agreement
On June 28, 2023, we entered into a Customer Investment Agreement (the "Agreement"), with GC Customer Value Arranger, LLC (a General Catalyst company) ("GC"). Under the Agreement, up to $150 million of financing will be provided for our sales and marketing growth efforts. The Agreement had a commitment period of 18 months which expired on December 31, 2024 ("Original Commitment End Date").
On January 8, 2024, we entered into an Amended and Restated Customer Investment Agreement where GC will provide up to an additional $140 million of financing for our sales and marketing growth efforts beginning from the Original Commitment End Date through December 31, 2025. This was further amended and restated in April 2024 and June 2024 to clarify certain provisions with no changes to material terms and conditions of the Agreement. On February 3, 2025, the Agreement was further amended under which GC will provide up to an additional $200 million of financing from January 1, 2026 to December 31, 2026 for our sales and marketing growth efforts (collectively, the "Amended and Restated Agreement"). The Amended and Restated Agreement as of February 2025 contains standard customary representations, warranties and covenants by the parties, and will continue in effect unless terminated by any party pursuant to its terms. Under all of these agreements, subject to certain terms and conditions specified therein, at the start of each growth period, an Investment Amount of up to 80% of our growth spend (the "Investment Amount") will be advanced by GC. During each growth period, we will repay each Investment Amount including a 16% rate of return based upon an agreed schedule. Once fully repaid, we will retain all future reference income related to each respective Investment Amount.
As of September 30, 2025, we had $139.0 million of outstanding borrowings under the Amended and Restated Agreement. We incurred interest expense of $11.9 million for the nine months ended September 30, 2025 and such interest is included in "General and Administrative expense" in the condensed consolidated statements of operations and comprehensive loss.
Key Factors and Trends Affecting our Operating Results
Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:
Seasonality
Seasonal patterns can impact both our rate of customer acquisition and the incurrence of claims and losses. Based on historical experience, existing and potential customers move more frequently in the third quarter, compared to the rest of the calendar year. As a result, we may see greater demand for new or expanded insurance coverage, and increased online engagement resulting in proportionately more growth during the third quarter. We expect that as we grow our customers, expand geographically, and launch new products, the impact of seasonal variability on our rate of growth may decrease.
Additionally, seasonal weather patterns impact the level and amount of claims we receive. These patterns include hurricanes, wildfires, and coastal storms in the fall, cold weather patterns, and changing home heating needs in the winter, and tornados and hailstorms in the spring and summer. The mix of geographic exposure and products within our customer base impacts our exposure to these weather patterns. For additional information, see "Risk Factors - Risks Relating to our Industry - Severe weather events and other catastrophes, including the effects of climate change and global pandemics, are inherently unpredictable and may have a material adverse effect on our financial results and financial condition." in our Annual Report on Form 10-K.
Current Macroeconomic Environment
Changing U.S. and global economic conditions, including the potential impact from evolving tariff policy and capital market volatility, may impact our business. In particular, the effects of inflation, if any, could impact our claims costs, product pricing and investment yield, among other impacts. The actual effects of the current and potential future impact on our results remains to be unknown and cannot be estimated with precision.
We conduct certain of our operations in Israel and therefore our operations and results may be adversely affected by political, economic and military instability and conflict in Israel and the surrounding region. There is still uncertainty regarding the extent to which the war and its broader macroeconomic implications will impact our operations in Israel. We will continue to evaluate the extent to which this may impact our business, financial condition, or results of operations. These and other uncertainties could result in changes to our current expectations. For additional information, see "Risk Factors - Risks Relating to our Business- We conduct certain of our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and the surrounding region." in our Annual Report on Form 10-K.
In addition, on October 1, 2025, the U.S. government shut down and certain regulatory agencies, such as the SEC, have had to furlough critical government employees and stop critical activities. If a prolonged government shutdown occurs, it could impact our ability to access the public markets and obtain necessary capital in order to properly fund our operations.
Reinsurance
We obtain reinsurance to help manage our exposure to property and casualty insurance risks. Although our reinsurance counterparties are liable to us according to the terms of the reinsurance policies, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured. For additional information, see "Risk Factors - Risks Relating to Our Business" and "Risks Relating to our Industry" in our Annual Report on Form 10-K. As a result, reinsurance does not eliminate the obligation of our insurance subsidiaries to pay all claims, and we are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits inherent in our reinsurance contracts, each of which could have a material effect on our results of operations and financial condition. Furthermore, reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business.
We maintain proportional reinsurance contracts which cover all of the Company's products and geographies, and transfers, or "cedes," a specified percentage of the premium to reinsurers. We also manage the remaining percentage of the business with alternative forms of reinsurance through non-proportional reinsurance contracts.
We agreed to the terms of our reinsurance program effective July 1, 2024 through June 30, 2025 which included Whole Account Quota Share Reinsurance Contracts by and among the Company, Lemonade Insurance Company ("LIC"), Metromile Insurance Company ("MIC") and Lemonade Insurance N.V. ("LINV"), and each of Hannover Ruck SE ("Hannover"), MAPFRE Re Compania De Reaseguros S.A. ("MAPFRE"), and Swiss Reinsurance America Corporation (collectively referred to as "Reinsurers") ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," approximately 55% of premium to the Reinsurers. In exchange, these Reinsurers pay us a ceding commission on all premiums ceded to the Reinsurers, in addition to funding the corresponding claims, subject to certain limitations, including but not limited to, the exclusion of hurricane losses, and a limit of $10,000,000 per occurrence for non-hurricane catastrophe losses. The Per Risk Cap across the contracts is $750,000. Additionally, these contracts are subject to loss ratio caps and variable ceding commission, which align our interests with those of our Reinsurers and is settled primarily on a funds withheld basis. We renewed the Reinsurance Program with Hannover and MAPFRE effective July 1, 2025 and will expire on June 30, 2026, with a reduced effective cession rate of 20% and with similar terms to the contracts that expired on June 30, 2025.
LIC and MIC entered into a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract") which was effective July 1, 2024 and expired on June 30, 2025. Under the PPR Contract, claims in excess of $750,000 were 100% ceded up to a maximum recovery of $2,250,000, subject to certain limitations. The PPR Contract was renewed at similar terms effective July 1, 2025 and will expire on June 30, 2026.
LIC entered into an Automatic Facultative PPR Contract with Arch Re, in which claims in excess of $3,000,000 were 100% ceded with a potential recovery of at least $10,000,000, subject to certain limitations, which expired on June 30, 2024, and was not renewed.
We also entered into an Excess of Loss Reinsurance Contract (the "XOL reinsurance contract") through a captive in Bermuda in which we have a variable interest. This XOL reinsurance contract primarily covers catastrophe risk on property and car business underwritten by LIC and MIC over the initial $50,000,000 limit for each loss occurrence, and further subject to a limit of $80,000,000 for each loss occurrence and in aggregate. This XOL reinsurance contract effective July 1, 2024 expired on June 30, 2025, and was renewed at similar terms effective July 1, 2025 and expiring on June 30, 2026.
We are also exposed to some risks on property, auto and pet insurance underwritten by LIC and MIC ceded through Quota Share Reinsurance Contracts (the "QS reinsurance contracts") which is retained in an offshore captive subsidiary, Lemonade Re SPC in the Cayman Islands. The MIC QS reinsurance contract which became effective July 1, 2023 was terminated and the parties agreed to a new QS reinsurance contract effective July 1, 2025 on the same terms except for the increase in cession rate to 35% and ceding commission rate effective July 1, 2025. The new MIC QS reinsurance contract will remain effective for an indefinite period until terminated by either party. The LIC QS reinsurance contract became effective on July 1, 2025 and will expire on June 30, 2026.
Through our captives, we are exposed to the risk of natural catastrophe events and other covered risks under the reinsurance agreements from assumed risks from policies underwritten by both LIC and MIC.
Components of our Results of Operations
Revenue
Gross Written Premium
Gross written premium is the amount received, or to be received, for insurance policies written by us during a specific period of time without reduction for premiums ceded to reinsurers. Gross written premium includes direct and assumed premium. We began assuming premium related to car insurance policies written in Texas in December 2022, in connection with our fronting arrangement with a third party carrier in Texas. We also include gross written premium from the sale of pay-per-mile car insurance policies within the United States following the Metromile Acquisition in July 2022. The volume of our gross written premium in any given period is generally influenced by new business submissions, binding of new business submissions into policies, renewals of existing policies, and average size and premium rate of bound policies.
Ceded Written Premium
Ceded written premium is the amount of gross written premium ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses as well as to provide additional capacity for growth. Ceded written premium is earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premium is impacted by the level of our gross written premium and any decision we make to increase or decrease reinsurance limits, retention levels, and co-participation. Our ceded written premium can also be impacted significantly in certain periods due to changes in reinsurance agreements. In periods where we start or stop ceding a large volume of our premium, ceded written premium may increase or decrease significantly compared to prior periods and these fluctuations may not be indicative of future trends.
Gross Earned Premium
Gross earned premium represents the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. Our insurance policies generally have a term of one year and premium is earned pro rata over the term of the policy. In addition, we also include earned premiums from the pay-per-mile car insurance policies which are written for six-month terms. Premium for the policy provides a base rate per month for the entire policy term upon binding of the policy plus a per-mile rate multiplied by the miles driven each day (based on data from the telematics device, subject to a daily maximum).
Ceded Earned Premium
Ceded earned premium is the amount of gross earned premium ceded to reinsurers.
Net Earned Premium
Net earned premium represents the earned portion of our gross written premium, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements. Premium is earned pro rata over the term of the policy, which is generally one year. Net earned premium from the pay-per-mile car insurance policies is earned over the term of the policy which is written for six-month terms.
Ceding Commission Income
Ceding commission income is commission we receive based on premium ceded to third-party reinsurers to reimburse us for acquisition and underwriting expenses. We earn commissions on reinsurance premium ceded in a manner consistent with the recognition of the earned premium on the underlying insurance policies, on a pro-rata basis over the terms of the policies reinsured. The portion of ceding commission income which represents reimbursement of successful acquisition costs related to the underlying policies is recorded as an offset to other insurance expense.
Net Investment Income
Net investment income represents interest earned from fixed maturity securities, short term and other investments, net of investment fees paid to the Company's investment manager. Our cash and invested assets are primarily comprised of fixed maturity securities, and may also include cash and cash equivalents, equity securities, and short-term investments. The principal factors that influence net investment income are the size of our investment portfolio and the yield on that portfolio. As measured by amortized cost (which excludes changes in fair value, such as changes in interest rates), the size of our investment portfolio is mainly a function of our invested equity capital along with premium we receive from our customers less payments on customer claims. Over time, we expect that net investment income will represent a more meaningful component of our results of operations.
Commission and Other Income
Commission income consists of commissions earned for policies placed with third-party insurance companies where we have no exposure to the insured risk. Such commission is recognized on the effective date of the associated policy which is when the performance obligation is completed. Other income primarily consists of fees collected from policyholders relating to installment premiums. These fees are recognized at the time each policy installment is billed. Other income also includes net realized gains or losses from sale of investments and sublease income.
Expense
Loss and Loss Adjustment Expense, Net
Loss and loss adjustment expense ("LAE"), net represent the costs incurred for losses net of amounts ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses as well as to provide additional capacity for growth. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying risks. Loss and LAE are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Loss and LAE may be paid out over a period of years. Certain policies we write are subject to catastrophe losses. Catastrophe losses are losses resulting from events involving claims and policyholders, including earthquakes, hurricanes, floods, storms, terrorist acts or other aggregating events that are designated by internationally recognized organizations, such as Property Claims Services, that track and report on insured losses resulting from catastrophic events.
Other Insurance Expense
Other insurance expense consists primarily of amortization of commissions and premium taxes incurred on the successful acquisition of business written on a direct basis, and credit card processing fees not charged to our customers. Other insurance expense also includes employee compensation, including stock-based compensation and benefits, of our underwriting teams as well as allocated occupancy costs and related overhead based on headcount. Other insurance expense is partially offset by the portion of ceding commission income which represents reimbursement of successful acquisition costs related to the underlying policies.
Sales and Marketing
Sales and marketing includes third-party marketing, advertising, branding, public relations and sales expenses. Sales and marketing also includes associated employee compensation and benefits, including employee and non-employee stock-based compensation and benefits, as well as allocated occupancy costs and related overhead based on headcount. Sales and marketing costs are expensed as incurred.
We plan to continue to invest in sales and marketing to attract and acquire new customers and increase our brand awareness. We expect that, in the long-term, our sales and marketing costs will decrease as a percentage of revenue as we continue to drive customer acquisition efficiencies and as the proportion of renewals to our total business increases.
Technology Development
Technology development consists of employee compensation, including stock-based compensation and benefits, and expenses related to vendors engaged in product management, design, development and testing of our websites and products. Technology development also includes allocated occupancy costs and related overhead based on headcount. We expense technology development costs as incurred, except for costs that are capitalized related to internal-use software development projects and subsequently depreciated over the expected useful life of the developed software.
We expect to continue to incur product technology development costs, a portion of which will be capitalized, to continue to grow in the foreseeable future as we identify opportunities to invest in the development of new products and internal tools and enhancement of our existing products and technologies that we believe will drive the long-term profitability of the business.
General and Administrative
General and administrative includes employee compensation, including stock-based compensation and benefits for executive, finance, accounting, legal, business operations, and other administrative personnel. In addition, general and administrative includes outside professional services, non-income based taxes, insurance, charitable donations, bad debt expense and allocated occupancy costs and related overhead based on headcount. Depreciation and amortization expense, interest expense on borrowings under the financing agreement, and non-recurring items, if any, are also recorded as a component of general and administrative.
We expect to continue to incur incremental general and administrative costs to support our global operational growth and enhancements to support our reporting and planning functions.
We have incurred and expect to continue to incur significant additional general and administrative expense as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the New York Stock Exchange and New York Stock Exchange American, additional corporate, director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees.
Income Tax Expense
Our provision for income taxes consists primarily of foreign income taxes related to income generated by our subsidiaries organized under the laws of the Netherlands and Israel. As we expand the scale of our international business activities, any changes in the U.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future.
We have a valuation allowance for our U.S. and U.K. deferred tax assets, including federal and state net operating losses and U.K. net operating losses. We expect to maintain this valuation allowance until it becomes more likely than not, that the benefit of our federal and state deferred tax assets will be realized through expected future taxable income in the U.S. and U.K., respectively.
Key Operating and Financial Metrics
We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe these non-GAAP and operational measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). See "-Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation to the most directly comparable financial measures prepared in accordance with U.S. GAAP.
The following table sets forth these metrics as of and for the periods presented:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
($ in millions, except
Premium per customer) 		($ in millions, except
Premium per customer)
Customers (end of period) 2,869,900 2,313,113 2,869,900 2,313,113
In force premium (end of period) $ 1,157.9 $ 889.1 $ 1,157.9 $ 889.1
Premium per customer (end of period) $ 403 $ 384 $ 403 $ 384
Annual dollar retention (end of period)
85 % 87 % 85 % 87 %
Total revenue $ 194.5 $ 136.6 $ 509.8 $ 377.7
Gross earned premium $ 274.7 $ 213.1 $ 760.6 $ 600.9
Gross profit $ 79.9 $ 37.5 $ 182.8 $ 103.0
Adjusted gross profit $ 80.9 $ 38.6 $ 192.5 $ 108.7
Net loss $ (37.5) $ (67.7) $ (143.8) $ (172.2)
Adjusted EBITDA $ (25.6) $ (49.0) $ (113.5) $ (125.9)
Gross profit margin 41 % 27 % 36 % 27 %
Adjusted gross profit margin 42 % 28 % 38 % 29 %
Ratio of Adjusted gross profit to Gross earned premium
29 % 18 % 25 % 18 %
Gross loss ratio 62 % 73 % 69 % 77 %
Net loss ratio 64 % 81 % 71 % 80 %
Customers
We define customers as the number of current policyholders underwritten by us or placed by us with third-party insurance partners (who pay us recurring commissions) as of the period end date. A customer that has more than one policy counts as a single customer for the purposes of this metric. We view customers as an important metric to assess our financial performance because customer growth drives our revenue, expands brand awareness, deepens our market penetration, creates additional upsell and cross-sell opportunities, and generates additional data to continue to improve the functioning of our platform.
In Force Premium
We define in force premium ("IFP"), as the aggregate annualized premium for customers as of the period end date. At each period end date, we calculate IFP as the sum of:
i)In force written premium - the annualized premium of in force policies underwritten by us; and
ii)In force placed premium - the annualized premium of in force policies placed with third party insurance companies for which we earn a recurring commission payment. In force placed premium currently reflects approximately 4% of IFP.
The annualized value of premiums is a legal and contractual determination made by assessing the contractual terms with our customers. The annualized value of contracts is not determined by reference to historical revenues, deferred revenues or any other GAAP financial measure over any period. IFP is not a forecast of future revenues nor is it a reliable indicator of revenue expected to be earned in any given period. We believe that our calculation of IFP is useful to analysts and investors because it captures the impact of growth in customers and premium per customer at the end of each reported period, without adjusting for known or projected policy updates, cancellations, rescissions, and non-renewals. We use IFP because we believe it gives our management useful insight into the total reach of our platform by showing all in force policies underwritten and placed by us. Other companies, including companies in our industry, may calculate IFP differently or not at all, which reduces the usefulness of IFP as a tool for comparison.
Premium per customer
We define premium per customer as the average annualized premium customers pay for products underwritten by us or placed by us with third-party insurance partners. We calculate premium per customer by dividing IFP by customers. We view premium per customer as an important metric to assess our financial performance because premium per customer reflects the average amount of money our customers spend on our products, which helps drive strategic initiatives.
Annual Dollar Retention
We define Annual Dollar Retention ("ADR"), as the percentage of IFP retained over a twelve month period, inclusive of changes in policy value, changes in number of policies, changes in policy type, and churn. To calculate ADR we first aggregate the IFP from all active customers at the beginning of the period and then aggregate the IFP from those same customers at the end of the period. ADR is then equal to the ratio of ending IFP to beginning IFP. We believe that our calculation of ADR is useful to analysts and investors because it captures our ability to retain customers and sell additional products and coverage to them over time. We view ADR as an important metric to measure our ability to provide a delightful end-to-end customer experience, satisfy our customers' evolving insurance needs and maintain our customers' trust in our products. Our customers become more valuable to us every year they continue to subscribe to our products. Other companies, including companies in our industry, may calculate ADR differently or not at all, which reduces the usefulness of ADR as a tool for comparison.
Gross Earned Premium
Gross earned premium is the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. We also began assuming premium related to car insurance policies written in Texas in December 2022, in connection with our fronting arrangement with a third party carrier in Texas.
We use this operating metric as we believe it gives our management and other users of our financial information useful insight into the gross economic benefit generated by our business operations and allows us to evaluate our underwriting performance without regard to changes in our underlying reinsurance structure. See "- Components of Our Results of Operations - Revenue - Gross Earned Premium."
Unlike net earned premium, gross earned premium excludes the impact of premiums ceded to reinsurers, and therefore should not be used as a substitute for net earned premium, total revenue, or any other measure presented in accordance with GAAP.
Gross Profit
Gross profit is calculated in accordance with GAAP as total revenue less loss and loss adjustment expense, net, other insurance expense, and depreciation and amortization (allocated to cost of revenue).
Adjusted Gross Profit
We define adjusted gross profit, a non-GAAP financial measure, as:
•Gross profit, excluding net investment income, interest income and other income, plus
•Employee-related expense, plus
•Professional fees and other, plus
•Depreciation and amortization (allocated to cost of revenue).
See "- Non-GAAP Financial Measures" for a reconciliation of total revenue to adjusted gross profit.
Adjusted EBITDA
We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding the impact of income tax expense, depreciation and amortization, stock-based compensation, interest expense, interest income and others, net investment income, change in fair value of warrants liability, amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile Acquisition, and other non-cash adjustments and other transactions that we consider to be unique in nature. See "- Non-GAAP Financial Measures" for a reconciliation of net loss to adjusted EBITDA in accordance with GAAP.
Gross Profit Margin
We define gross profit margin, expressed as a percentage, as the ratio of gross profit to total revenue.
Adjusted Gross Profit Margin
We define adjusted gross profit margin, a non-GAAP financial measure, expressed as a percentage, as the ratio of adjusted gross profit to total revenue. See "- Non-GAAP Financial Measures."
Ratio of Adjusted Gross Profit to Gross Earned Premium
We define Ratio of Adjusted Gross Profit to Gross Earned Premium, a non-GAAP financial measure, expressed as a percentage, as the ratio of adjusted gross profit to gross earned premium. Our Ratio of Adjusted Gross Profit to Gross Earned Premium provides management with useful insight into our operating performance. See "- Non-GAAP Financial Measures."
Gross Loss Ratio
We define gross loss ratio, expressed as a percentage, as the ratio of losses and loss adjustment expense to gross earned premium.
Net Loss Ratio
We define net loss ratio, expressed as a percentage, as the ratio of losses and loss adjustment expense, less amounts ceded to reinsurers, to net earned premium.
Results of Operations
Comparison of the Three Months Ended September 30, 2025 and 2024
Three Months Ended
September 30,
2025 2024 Change % Change
($ in millions)
Revenue
Net earned premium $ 140.0 $ 95.7 $ 44.3 46 %
Ceding commission income 32.2 24.0 8.2 34 %
Net investment income 9.7 8.9 0.8 9 %
Commission and other income 12.6 8.0 4.6 58 %
Total revenue 194.5 136.6 57.9 42 %
Expense
Loss and loss adjustment expense, net 89.6 77.9 11.7 15 %
Other insurance expense 24.1 19.8 4.3 22 %
Sales and marketing 57.4 51.4 6.0 12 %
Technology development 24.7 21.9 2.8 13 %
General and administrative 35.0 31.4 3.6 11 %
Total expense 230.8 202.4 28.4 14 %
Loss before income taxes (36.3) (65.8) 29.5 (45) %
Income tax expense 1.2 1.9 (0.7) (37) %
Net loss $ (37.5) $ (67.7) $ 30.2 (45) %
Net Earned Premium
Net earned premium increased $44.3 million, or 46%, to $140.0 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to the earning of increased gross written premium and the impact of the Company's new reinsurance program as discussed in more detail in the "Reinsurance" section above.
Three Months Ended
September 30,
2025 2024 Change % Change
($ in millions)
Gross written premium $ 333.3 $ 268.9 $ 64.4 24 %
Ceded written premium (56.7) (153.4) 96.7 (63) %
Net written premium $ 276.6 $ 115.5 $ 161.1 139 %
Gross written premium increased $64.4 million, or 24%, to $333.3 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily due to a 24% increase in net added customers year over year driven by the success of our digital advertising campaigns and partnerships. We also continued to expand our geographic footprint and product offerings. In addition, we also saw a 5% increase in premium per customer year over year due to an increasing prevalence of multiple policies per customer, growth in the overall average policy value, and continued shift in the mix of underlying products toward higher value policies. Assumed premium related to car insurance policies written in Texas through our fronting arrangement with a third party carrier in Texas also contributed to the increase in gross written premium during the period.
Ceded written premium decreased $96.7 million, or 63%, to $56.7 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to impact of the Company's new reinsurance program. See "Reinsurance" above for further information.
Net written premium increased $161.1 million, or 139%, to $276.6 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
The table below shows the amount of premium we earned on a gross and net basis. Ceded earned premium as a percentage of gross earned premium is at 49% and 55% for the three months ended September 30, 2025 and 2024, respectively, consistent with our participation rate in our reinsurance contracts as discussed in more detail in the "Reinsurance" section above.
Three Months Ended
September 30,
2025 2024 Change % Change
($ in millions)
Gross earned premium $ 274.7 $ 213.1 $ 61.6 29 %
Ceded earned premium (134.7) (117.4) (17.3) 15 %
Net earned premium $ 140.0 $ 95.7 $ 44.3 46 %
Ceding Commission Income
Ceding commission income increased $8.2 million, or 34%, to $32.2 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, consistent with the increase in ceded earned premium during the period and the impact of our variable ceding commission arrangement with reinsurers driven by favorable loss ratio development in comparison to prior period.
Net Investment Income
Net investment income increased $0.8 million, or 9% to $9.7 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily driven by the diversification of the Company's investment portfolio with higher returns, offset by investment expenses. We mainly invest in cash, money market funds, U.S. Treasury bills, corporate debt securities, asset-backed securities, notes and other obligations issued or guaranteed by the U.S. Government and Non-US Government.
Commission and Other Income
Commission and other income increased $4.6 million, or 58%, to $12.6 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to growth in premiums placed with third-party insurance companies during the period, installment fees and sublease income from our New York and San Francisco office space.
Loss and Loss Adjustment Expense, Net
Loss and LAE, net increased $11.7 million, or 15%, to $89.6 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was due to growth in premium offset by reserve releases due to better than expected loss reserve emergence on homeowners multi-peril line of business and car.
Other Insurance Expense
Other insurance expense increased $4.3 million, or 22%, to $24.1 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 consistent with growth in earned premium. Credit card processing fees increased $1.9 million, or 40%, as compared to the three months ended September 30, 2024 as a result of the increase in customers and associated premium. Amortization of deferred acquisition costs, net of ceding commissions increased $1.6 million, or 43% as compared to the three months ended September 30, 2024 as a result of growth in business across all products. Professional and other services increased $0.7 million or 175% as compared to the three months ended September 30, 2024.
Sales and Marketing
Sales and marketing expense increased $6.0 million, or 12%, to $57.4 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily due to brand and performance advertising, which is the largest component of our sales and marketing expenses. Expense related to advertising, other customer acquisition channels and partner payments increased $6.2 million, or 16%, as compared to the three months ended September 30, 2024 consistent with growth in our business. Compensation expense related to the warrant shares decreased $2.0 million, or 100%, as compared to the three months ended September 30, 2024 due to the termination of the Warrant Agreement with Chewy.
Technology Development
Technology development expense increased $2.8 million, or 13%, to $24.7 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Employee-related expense, including stock-based compensation, and net of capitalized costs for the development of internal-use software, increased $2.8 million, or 16%, as compared to the three months ended September 30, 2024.
General and Administrative
General and administrative expense increased $3.6 million, or 11%, to $35.0 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Interest expense related to borrowings from financing agreement with GC increased $2.9 million, or 171%, as compared to three months ended September 30, 2024 due to increased borrowings during the period. Employee-related expense, including stock-based compensation, increased $2.3 million, or 16%, as compared to three months ended September 30, 2024. Bad debt expense increased by $2.6 million or 100%, as compared to three months ended September 30, 2024. Depreciation and amortization decreased by $1.7 million, or 33% as compared to three months ended September 30, 2024. During the period, we recorded $2.3 million of gain on early lease termination related to the Company's office space in San Francisco.
Income Tax Expense
Income tax expense decreased $0.7 million, or 37%, to $1.2 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily due to a change in uncertain tax positions related to the change in transfer pricing methodology in prior year.
Net Loss
Net loss decreased $30.2 million, or 45%, to $37.5 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 due to the factors described above.
Comparison of the Nine Months Ended September 30, 2025 and 2024
Nine Months Ended
September 30,
2025 2024 Change % Change
($ in millions)
Revenue
Net earned premium $ 356.8 $ 269.4 $ 87.4 32 %
Ceding commission income 89.5 61.5 28.0 46 %
Net investment income 28.6 24.6 4.0 16 %
Commission and other income 34.9 22.2 12.7 57 %
Total revenue 509.8 377.7 132.1 35 %
Expense
Loss and loss adjustment expense, net 252.5 214.3 38.2 18 %
Other insurance expense 71.6 55.9 15.7 28 %
Sales and marketing 160.2 118.6 41.6 35 %
Technology development 69.1 64.0 5.1 8 %
General and administrative 96.7 91.0 5.7 6 %
Total expense 650.1 543.8 106.3 20 %
Loss before income taxes (140.3) (166.1) 25.8 (16) %
Income tax expense 3.5 6.1 (2.6) (43) %
Net loss $ (143.8) $ (172.2) $ 28.4 (16) %
Net Earned Premium
Net earned premium increased $87.4 million, or 32%, to $356.8 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to the earning of increased gross written premium and impact of the Company's new reinsurance program as discussed in more detail in the "Reinsurance" section above.
Nine Months Ended
September 30,
2025 2024 Change % Change
($ in millions)
Gross written premium $ 872.0 $ 700.7 $ 171.3 24 %
Ceded written premium (352.6) (389.4) 36.8 (9) %
Net written premium $ 519.4 $ 311.3 $ 208.1 67 %
Gross written premium increased $171.3 million, or 24%, to $872.0 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily due to a 24% increase in net added customers year over year driven by the success of our digital advertising campaigns and partnerships. We also continued to expand our geographic footprint and product offerings. We also saw a 5% increase in premium per customer year over year primarily due to an increasing prevalence of multiple policies per customer, growth in the overall average policy value, and continued shift in the mix of underlying products toward higher value policies. Assumed premium related to car insurance policies written in Texas from our fronting arrangement with a third party carrier in Texas also contributed to the increase in gross written premium during the period.
Ceded written premium decreased $36.8 million, or 9%, to $352.6 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to growth in business across all products offset by the impact of the Company's reinsurance program. See "Reinsurance" above for further information.
Net written premium increased $208.1 million, or 67%, to $519.4 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due to factors noted above.
The table below shows the amount of premium we earned on a gross and net basis. Ceded earned premium as a percentage of gross earned premium is at 53% and 55% for the nine months ended September 30, 2025 and 2024, consistent with our participation rate in our reinsurance contracts as discussed in more detail in the "Reinsurance" section above.
Nine Months Ended
September 30,
2025 2024 Change % Change
($ in millions)
Gross earned premium $ 760.6 $ 600.9 $ 159.7 27 %
Ceded earned premium (403.8) (331.5) (72.3) 22 %
Net earned premium $ 356.8 $ 269.4 $ 87.4 32 %
Ceding Commission Income
Ceding commission income increased $28.0 million, or 46%, to $89.5 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, consistent with the increase in ceded earned premium and the impact of our variable ceding commission arrangement with reinsurers driven by favorable loss ratio development in comparison to prior period.
Net Investment Income
Net investment income increased $4.0 million, or 16%, to $28.6 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily driven by the diversification of the Company's investment portfolio with higher returns offset by investment expenses. We mainly invest in cash, money market funds, U.S. Treasury bills, corporate debt securities, asset-backed securities, notes and other obligations issued or guaranteed by the U.S. and non-U.S. Government.
Commission and Other Income
Commission and other income increased $12.7 million, or 57%, to $34.9 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, due to growth on premium placed with third-party insurance companies during the period, installment fees and sublease income from our New York and San Francisco office space.
Loss and Loss Adjustment Expense, Net
Loss and LAE, net increased $38.2 million, or 18%, to $252.5 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was due to growth in premium offset by reserve releases due to better than expected loss reserve emergence on homeowners multi-peril line of business and car. Net incurred losses included the impact of the California Wildfires in January 2025 in the amount of $19.9 million.
Other Insurance Expense
Other insurance expense increased $15.7 million, or 28%, to $71.6 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 consistent with growth in earned premiums and the California FAIR Plan assessment charge of $6.9 million related to the January 2025 California Wildfires. Credit card fees also increased $4.5 million, or 35%, as compared to the nine months ended September 30, 2024, as a result of the increase in customers and associated premium. Amortization of deferred acquisition costs, net of ceding commissions increased $2.7 million, or 27%, as compared to the nine months ended September 30, 2024. Underwriting data costs increased $2.3 million, or 28%, as compared to the nine months ended September 30, 2024. Employee-related expense, including stock-based compensation, increased $1.5 million, or 9%, as compared to the nine months ended September 30, 2024. Insurance regulatory fees decreased $1.5 million, or 35% as compared to the nine months ended September 30, 2024.
Sales and Marketing
Sales and marketing expense increased $41.6 million, or 35%, to $160.2 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to brand and performance advertising, which is the largest component of our sales and marketing expenses. Expense related to advertising, other customer acquisition channels and partner payments increased $48.4 million, or 57%, as compared to the nine months ended September 30, 2024 consistent with growth in our business. Compensation expense related to the warrant shares decreased $9.7 million, or 216%, due to the termination of the Warrant Agreement with Chewy.
Technology Development
Technology development expense increased $5.1 million, or 8%, to $69.1 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Employee-related expense, including stock-based compensation, net of capitalized costs for the development of internal-use software, increased $6.2 million, or 13%, as compared to the nine months ended September 30, 2024. Hosting and development costs decreased by $1.3 million, or 21%, as compared to the nine months ended September 30, 2024.
General and Administrative
General and administrative expense increased $5.7 million, or 6%, to $96.7 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Interest expense related to borrowings from financing agreement with GC increased $8.5 million, or 250%, as compared to nine months ended September 30, 2024 due to increased borrowings during the period. Employee-related expense, including stock-based compensation, increased by $6.8 million, or 17%, as compared to the nine months ended September 30, 2024. Bad debt expense increased $6.2 million, or 78% compared to the nine months ended September 30, 2024. Depreciation and amortization expense decreased $2.7 million, or 18% compared to nine months ended September 30, 2024. During the period, we recorded $11.7 million of tax refund received under the ERC program and $2.3 million of gain on early lease termination related to the Company's office space in San Francisco.
Income Tax Expense
Income tax expense decreased $2.6 million, or 43%, to $3.5 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to a change in uncertain tax positions related to the change in transfer pricing methodology in prior year.
Net Loss
Net loss decreased $28.4 million, or 16%, to $143.8 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due to the factors described above.
Non-GAAP Financial Measures
The non-GAAP financial measures below have not been calculated in accordance with U.S. GAAP and should be considered in addition to results prepared in accordance with U.S. GAAP and should not be considered as a substitute for, or superior to, U.S. GAAP results. In addition, adjusted gross profit, adjusted gross profit margin, ratio of adjusted gross profit to gross earned premium, and adjusted EBITDA should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.
Our management uses these non-GAAP financial measures, in conjunction with U.S. GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.
Adjusted Gross Profit and Adjusted Gross Profit Margin
We define adjusted gross profit, a non-GAAP financial measure, as gross profit excluding net investment income, interest income and other income, plus fixed costs and overhead associated with our underwriting operations including employee-related expense, professional fees and other, and depreciation and amortization allocated to cost of revenue, and other adjustments that we would consider to be unique in nature. After these adjustments, the resulting calculation is inclusive of only those variable costs of revenue incurred on the successful acquisition of business and without the volatility of investment income. We use adjusted gross profit as a key measure of our progress towards profitability and to consistently evaluate the variable contribution to our business from underwriting operations from period to period.
We define adjusted gross profit margin, a non-GAAP financial measure, expressed as a percentage, as the ratio of adjusted gross profit to total revenue.
The following table provides a reconciliation of total revenue and gross profit margin to adjusted gross profit and the related adjusted gross profit margin, respectively, for the periods presented:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
($ in millions)
Total revenue $ 194.5 $ 136.6 $ 509.8 $ 377.7
Adjustments:
Loss and loss adjustment expense, net (89.6) (77.9) (252.5) (214.3)
Other insurance expense (24.1) (19.8) (71.6) (55.9)
Depreciation and amortization (0.9) (1.4) (2.9) (4.5)
Gross profit $ 79.9 $ 37.5 $ 182.8 $ 103.0
Gross profit margin (% of total revenue) 41 % 27 % 36 % 27 %
Adjustments:
Net investment income $ (9.7) $ (8.9) $ (28.6) $ (24.6)
Interest income and other income (2.2) (2.7) (6.0) (7.2)
Employee-related expense 5.5 5.5 17.5 16.0
Professional fees and other 6.5 5.8 23.9 17.0
Depreciation and amortization 0.9 1.4 2.9 4.5
Adjusted gross profit $ 80.9 $ 38.6 $ 192.5 $ 108.7
Adjusted gross profit margin (% of total revenue) 42 % 28 % 38 % 29 %
Ratio of Adjusted Gross Profit to Gross Earned Premium
We define the Ratio of Adjusted Gross Profit to Gross Earned Premium as the ratio of adjusted gross profit to gross earned premium. The Ratio of Adjusted Gross Profit to Gross Earned Premium measures the relationship between the underlying business volume and gross economic benefit generated by our underwriting operations, on the one hand, and our underlying profitability trends, on the other. We rely on this measure, which supplements our gross profit ratio as calculated in accordance with U.S. GAAP, because it provides management with insight into our underlying profitability trends over time.
We use gross earned premium as the denominator in calculating this ratio, which excludes the impact of premiums ceded to reinsurers, because we believe that it reflects the business volume and the gross economic benefit generated by our underlying underwriting operations, which in turn are the key drivers of our future profit opportunities. We exclude the impact of ceded premiums from the denominator because ceded premiums can change rapidly and significantly based on the type and mix of reinsurance structures we use and, therefore, add volatility that is not indicative of our underlying profitability. For example, a shift to a proportional reinsurance arrangement would result in an increase in ceded premium, with offsetting benefits to gross profit from ceded losses and ceding commissions earned, resulting in a nominal overall economic impact. This shift would result in a steep decline in total revenue with a corresponding spike in gross margin, whereas we expect that the Ratio of Adjusted Gross Profit to Gross Earned Premium would remain relatively unchanged. We expect our reinsurance structure to evolve along with our costs and capital requirements, and we believe that our reinsurance structure at a given time does not reflect the performance of our underlying underwriting operations, which we expect to be the key driver of our costs of reinsurance over time.
On the other hand, the numerator, which is adjusted gross profit, includes the net impact of all reinsurance, including ceded premiums and the benefits of ceded losses and ceding commissions earned. Because our reinsurance structure is a key component of our risk management and a key driver of our profitability or loss in a given period, we believe this is meaningful.
Therefore, by providing this Ratio of Adjusted Gross Profit to Gross Earned Premium for a given period, we are able to assess the relationship between business volume and profitability, while eliminating the volatility from the cost of our then-current reinsurance structure, which is driven primarily by the performance of our insurance underwriting platform rather than our business volume.
The following table sets forth our calculation of the Ratio of Adjusted Gross Profit to Gross Earned Premium for the periods presented:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
($ in millions)
Numerator: Adjusted gross profit $ 80.9 $ 38.6 $ 192.5 $ 108.7
Denominator: Gross earned premium $ 274.7 $ 213.1 $ 760.6 $ 600.9
Ratio of Adjusted gross profit to Gross earned premium
29 % 18 % 25 % 18 %
Adjusted EBITDA
We define Adjusted EBITDA, a non-GAAP financial measure, as net loss excluding income tax expense, depreciation and amortization, stock-based compensation, interest expense, interest income and others, net investment income, change in fair value of warrants liability, amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile Acquisition, and other non-cash adjustments and other transactions that we would consider to be unique in nature. We exclude these items from Adjusted EBITDA because we do not consider them to be directly attributable to our underlying operating performance. We use Adjusted EBITDA as an internal performance measure in the management of our operations because we believe it gives our management and other customers of our financial information useful insight into our results of operations and our underlying business performance. Adjusted EBITDA should not be viewed as a substitute for net loss calculated in accordance with U.S. GAAP, and other companies may define Adjusted EBITDA differently.
The following table provides a reconciliation of Adjusted EBITDA to net loss for the periods presented:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
($ in millions)
Net loss $ (37.5) $ (67.7) $ (143.8) $ (172.2)
Adjustments:
Income tax expense $ 1.2 $ 1.9 3.5 $ 6.1
Depreciation and amortization 3.4 5.1 12.6 15.3
Stock-based compensation (1)
17.1 16.9 42.8 47.2
Interest expense 4.6 1.7 11.9 3.4
Interest income and others (1.4) (1.8) (3.6) (4.9)
Net investment income (9.7) (8.9) (28.6) (24.6)
Amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile acquisition - (0.1) (0.2) (0.3)
Other adjustment (2) (3) (4) (5) (6)
(3.3) 3.9 (8.1) 4.1
Adjusted EBITDA $ (25.6) $ (49.0) $ (113.5) $ (125.9)
(1) Includes the impact of canceled unvested warrant shares for contract year 2 related to the termination of the Warrant Agreement with Chewy of $5.2 million for the nine months ended September 30, 2025 and compensation expense related to the warrant shares of $2.0 million and $4.5 million for the three and nine months ended September 30, 2024, respectively (See Note 11 of the unaudited condensed consolidated financial statements).
(2) Includes the California FAIR Plan assessment of $6.9 million related to the January 2025 California Wildfires for the nine months ended September 30, 2025 (See Note 15 of the unaudited condensed consolidated financial statements).
(3) Includes $11.7 million of tax refund received under the Employee Retention Credit Program for the nine months ended September 30, 2025 (See Note 12 of the unaudited condensed consolidated financial statements).
(4) Includes $2.3 million of gain on early lease termination related to the Company's office space in San Francisco for the three and nine months ended September 30, 2025 (See Note 15 of the unaudited condensed consolidated financial statements).
(5) Includes $1.0 million of gain from settlement of previously disclosed data security matter for the three and nine months ended September 30, 2025 (See Note 15 of the unaudited condensed consolidated financial statements).
(6) Includes impairment charge of $0.3 million related to a portion of the New York office sublease, net of gain on termination of lease for the nine months ended September 30, 2024 (See Note 15 of the unaudited condensed consolidated financial statements).
Liquidity and Capital Resources
As of September 30, 2025, we had $345.9 million in cash and cash equivalents, and $705.3 million in investments. From the date we commenced operations, we have generated negative cash flows from operations, and we have financed our operations primarily through private and public sales of equity securities and third party financing. Our principal sources of funds are insurance premiums, investment income, reinsurance recoveries and proceeds from maturity and sale of invested assets. These funds are primarily used to pay claims, operating expenses and taxes. In June 2023, we entered into an Agreement with GC, where up to $150 million of financing was provided for our sales and marketing growth efforts through December 31, 2024. The Agreement was amended and restated in January 2024, pursuant to which an additional financing of $140 million will be provided for our sales and marketing growth efforts through December 31, 2025, and was further amended and restated in April 2024 and June 2024 to clarify certain provisions and all material terms and conditions remain unchanged. On February 3, 2025, the Agreement was further amended in which GC will provide up to an additional $200 million of financing for our sales and marketing growth efforts from January 1, 2026 to December 31, 2026. As of September 30, 2025, we had $139.0 million of outstanding borrowings under the Amended and Restated Agreement with GC. We believe our existing cash and cash equivalents as of September 30, 2025 will be sufficient to meet our working capital, liquidity and capital expenditure needs over at least the next 12 months. This belief is subject, to a certain extent, on general economic, financial, competitive, regulatory and other factors that are beyond our control.
Our cash flows used in operations may differ substantially from our net loss due to non-cash charges or due to changes in balance sheet accounts.
The timing of our cash flows from operating activities can also vary among periods due to the timing of payments made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant. Therefore, their timing can influence cash flows from operating activities in any given period. The potential for a large claim under an insurance or reinsurance contract means that our insurance subsidiaries may need to make substantial payments within relatively short periods of time, which would have a negative impact on our operating cash flows.
We are a holding company that transacts a majority of our business through operating subsidiaries. Consequently, our ability to pay dividends to stockholders, meet debt payment obligations and pay taxes and operating expenses is largely dependent on dividends or other distributions from our subsidiaries and affiliates, whose ability to pay us is highly regulated.
Our U.S. and Dutch insurance company subsidiaries, and our Dutch insurance holding company, are restricted by statute as to the amount of dividends that they may pay without the prior approval of their respective competent regulatory authorities. As of September 30, 2025, cash and investments held by these companies was $703.5 million of which $278.1 million is held as regulatory surplus.
Insurance companies in the United States are also required by state law to maintain a minimum level of policyholder's surplus. Insurance regulators in the states in which we operate have a risk-based capital standard designed to identify property and casualty insurers that may be inadequately capitalized based on inherent risks of the insurer's assets and liabilities and its mix of net written premium. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. As of September 30, 2025, the total adjusted capital of our U.S. insurance subsidiaries was in excess of its respective prescribed risk-based capital requirements.
The following table summarizes our cash flow data for the periods presented:
Nine Months Ended
September 30,
2025 2024
($ in millions)
Net cash used in operating activities $ (37.2) $ (25.2)
Net cash (used in) provided by investing activities
$ (70.2) $ 38.1
Net cash provided by financing activities $ 68.1 $ 52.7
Operating Activities
Cash used in operating activities was $37.2 million for the nine months ended September 30, 2025, an increase of $12.0 million from $25.2 million for the nine months ended September 30, 2024. This reflected the $28.4 million decrease in our net loss, primarily offset by changes in our operating assets and liabilities. The increase in cash used in operating activities from the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to claim payments, settlements with our reinsurance partners, and growth and expansion spend of the Company, offset by collection of premiums and recoveries from reinsurance partners.
Investing Activities
Cash used in investing activities was $70.2 million for the nine months ended September 30, 2025, primarily due to purchases of U.S. government obligations, corporate debt securities, asset-backed securities, offset by proceeds from sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments. We also purchased property and equipment during the period.
Cash provided by investing activities was $38.1 million for the nine months ended September 30, 2024, primarily due to proceeds from sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments offset by purchases of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments. We also purchased property and equipment during the period.
Financing Activities
Cash provided by financing activities was $68.1 million for the nine months ended September 30, 2025, primarily due to borrowings under the financing agreement offset by principal payments. We also had proceeds from stock option exercises during the period.
Cash provided by financing activities was $52.7 million for the nine months ended September 30, 2024, primarily due to borrowings under the financing agreement offset by principal payments. We also had proceeds from stock option exercises during the period.
We do not have any current plans for material capital expenditures other than current operating requirements. There have been no material changes as of September 30, 2025 to our contractual obligations from those described in our Annual Report on Form 10-K. To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $1,051.2 million in cash, cash equivalents and investments available at September 30, 2025. We may also seek to raise additional capital through third-party borrowings, sales of our equity, issuance of debt securities or entrance into new reinsurance arrangements. There can be no assurance that we will be able to raise additional capital on favorable terms or at all.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to unpaid loss and loss adjustment expense, reinsurance assets, intangible assets, stock-based compensation, income tax assets and liabilities, including recoverability of our net deferred tax asset, income tax provisions and certain non-income tax accruals. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K and the notes to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report. During the nine months ended September 30, 2025, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
See "Note 4 - Summary of Significant Accounting Policies" in the notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of new accounting pronouncements.
Lemonade Inc. published this content on November 05, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 05, 2025 at 16:32 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]