Lemonade Inc. is reducing its reinsurance cession from 55% to 20% for new and renewing policies, a structural change that allows the company to retain a larger share of premiums while reinsurers take on a smaller portion of risk.
The adjustment began on July 1 and will phase in as policies are written or renewed, with the share of gross earned premium ceded to quota share partners expected to be about 45% in the second half of 2025.
Alongside this change, Lemonade has updated its financial guidance. For full-year 2025, the company projects in-force premium (IFP) of US$1.213-US$1.218 billion, gross earned premium (GEP) of US$1.036-US$1.039 billion, and revenue of US$710-US$715 million. Adjusted EBITDA loss is forecast between US$135 million and US$140 million. Lemonade reiterated its expectation of positive adjusted free cash flow for 2025 and said it expects positive adjusted EBITDA before the end of 2026.
Second-quarter 2025 results showed growth across IFP, revenue, and profitability measures. IFP rose 29% year over year to US$1.08 billion. Revenue was US$164.1 million, an increase of 35% from US$122 million a year earlier, while GEP reached US$252.3 million, up from US$199.9 million. Gross profit more than doubled to US$64.3 million, with gross margin improving to 39% from 25%. Adjusted gross profit was US$65.6 million compared with US$33.4 million a year ago, translating into a margin of 40%, up from 27%.
Lemonade recorded a net loss of US$43.9 million, compared with US$57.2 million in Q2 2024. Adjusted EBITDA loss was US$40.9 million, compared with US$43 million in the prior-year period. For the first six months of 2025, net loss stood at US$106.3 million, while adjusted EBITDA loss was US$87.9 million.
The company reported 2.69 million customers at the end of Q2, an increase of more than 148,000 during the quarter, compared with 72,000 in the same quarter of 2024. Premium per customer increased to US$402 from US$387, while annual dollar retention was 84%, down from 88% a year earlier.
Loss ratios also moved lower. Gross loss ratio declined to 67% from 79% in the prior year, while net loss ratio decreased to 69% from 79%. For the first half of 2025, gross loss ratio was 73%, down from 79% in the first half of 2024, and net loss ratio was 75%, also down from 79%.
Product and regional contributions played a role in these results. Lemonade Car reached US$150 million in IFP, nearly twice the level of the prior year and now accounting for 14% of the company’s book. Conversion rates improved by about 60%, while the gross loss ratio for the car business came in at 82%, down 13 points year over year.
In Europe, IFP grew more than 200% year over year to US$43 million, or roughly 4% of total IFP. The company reported gross loss ratios in the “low 80s,” 15 points lower year over year and 20 points better than when its U.S. operations reached US$50 million in IFP.
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