Insurtechs Root, Lemonade Book Q1 Net Income Losses but Each Tout Progress

Insurtech Root Inc. posted a net loss for the first quarter 2024 of $6.2 million but said it recorded operating income for the first time in the company’s history.

The net income loss for the first three months of the year is compared to a loss of nearly $41 million during the same time period a year ago. Root booked operating income of $5.4 million compared to a loss of almost $30 million in the first quarter 2023.

The Columbus, Ohio-based company’s Q1 2024 net combined ratio was 102—an improvement of about 59 points from Q1 2023.

Co-founder and CEO Alex Timm said in a letter to shareholders that first-quarter results give Root “the flexibility to focus on the long term while remaining nimble as opportunities arise.”

“Most importantly, we continued to advance our strategy in the quarter by improving our pricing algorithms, investing in our data and technology, launching multiple new partnerships, and enhancing our customer
experience,” he added in the letter.

Policies-in-force doubled to 401,255, with gross premiums written up 146% to about $331 million, Root reported, adding that much of the growth was from the direct channel, although the partnership channel “continues to grow consistently and has nearly doubled new writings year-over-year.” Timm said Root is look to expand its footprint from the 34 states the insurer currently does business.

As the company collects more driver data, its machine-learning approach to risk pricing strengthens, Timm said. “Mobile sensor data tied to granular claims data creates what we believe to be the most predictive proprietary algorithms and supports fair, accurate rates for all customers,” he added in the letter. “We continue to see important gains in our ability to match price to risk.”

Lemonade Books $47M Q1 Net Loss

Insurtech Lemonade followed 2023—”the year when the plan came together“—with a first quarter 2024 net loss of $47.3 million. The result is about 28% better than the same time a year ago and, in a letter to shareholders, Lemonade said it expects positive cash flow breakeven by the end of 2024.

Lemonade has previously set a breakeven goal of the first half of 2025 but its expectation improved based on “sustained strength in our underlying unit economics, impact of technology on various expense categories, and working capital benefits of our reinsurance structure.”

“By Q1 2025, we expect to be generating positive net cash flow on a consistent basis,” Lemonade said in the letter.

Lemonade said it believes artificial intelligence “has the potential to completely redefine what good looks like in insurance,” and the insurtech’s use of the tool led to a loss adjustment expense (LAE) ratio of 7.6 in the first quarter. Lemonade said it has halved this ratio in 2 years.

The insurer’s headcount shrank 11% year-over year but in-force premium grew 22% to $794 million. “This speaks volumes for the widespread impact of technology throughout the company,” Lemonade said.

Revenue for Q1 was up about 25% to $119.1 million and gross profit was $34.7 million—an increase of about $18.2 million from the year prior.

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Profit Loss
InsurTech
Tech