Lemonade Inc., a tech-powered insurance coverage supplier, mentioned Tuesday it could spend extra on development this yr, a transfer it mentioned would harm earnings within the months forward following a yr of “extraordinary challenges” within the insurance coverage business.
In a letter to shareholders, administration mentioned Lemonade
LMND,
deliberate to “roughly double” its development funds this yr from the $55 million it spent in 2023.
“As the universe of products and geographies where we are rate-adequate expands, we intend to grow in lockstep. Ours, after all, is a business that grows in profitability as it grows in scale — and so grow we must,” the corporate mentioned.
“The associated spend, and the resultant growth, should boost our bottom line a couple of years hence, but it will weigh on our bottom line in the coming quarters,” it added. “Threading that needle — doubling growth spend while shrinking adjusted Ebitda losses — will be our central challenge in 2024.”
The firm — which presents lease, house owner, life and pet insurance coverage backed by AI-driven forecasting — reported a fourth-quarter per-share lack of 61 cents per share, narrower than FactSet forecasts for 80 cents a share. Revenue was $115.5 million, above estimates for $111.7 million.
Shares fell 13.7% after hours.
The firm issued the outcomes and forecast following a yr of upper rates of interest. Lemonade additionally famous injury to properties from storms within the first half of the yr, rising prices of house repairs and its personal efforts to decrease its publicity to that phase.
“2023 was a year of extraordinary challenges in the insurance world: the hardest reinsurance market in decades, some of the worst winter storms on record, and combined ratios above 100 throughout the industry,” the corporate mentioned. “Several of the largest insurers in the U.S. pulled out of some of its largest states — an unprecedented sign of distress.”
However, it famous that its losses had peaked in 2022, and mentioned its adjusted Ebitda — or earnings earlier than curiosity, taxes, depreciation and amortization — had improved even because the enterprise expanded.
“Turning to 2024, there’s reason to be hopeful that many of the industry’s headwinds of ’22-’23 may turn into tailwinds in ’24-’25: inflation seems to be receding, new rate approvals are adding up and earning in, and if the costs of capital come down, we may yet see a moderation in reinsurance costs too,” the corporate mentioned.
“Even if all these wishes come true, however, within the four walls of
Lemonade we will have our work cut out for us,” it mentioned.
Source web site: www.marketwatch.com
