Lemonade, Inc.

Hello everyone and thank you for joining the Lemonade INC Q2 2021 earnings conference call. My name is Will and I'll be moderating the call today. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I now have the pleasure of handing the call over to Elle Wisney-Levy from Lemonade. Please go ahead.

Good morning and welcome to Lemonade's second quarter 2021 earnings call. My name is Yael Wissner-Levy and I am the VP Communications at Lemonade. Joining me today to discuss our results are Daniel Schreiber, co-CEO and co-founder, Shai Winninger, co-CEO and co-founder, and Tim Bixey, our Chief Financial Officer. A letter to shareholders covering the company's second quarter 2021 financial results is available on our investor relations website, investor.lemonade.com. Before we begin, I would like to remind you that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our Form 10-K filed with the SEC on March 8, 2021, and our other filings with the SEC. Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them. We will be referring to certain non-GAAP financial measures on today's call, such as adjusted EBITDA and adjusted gross profit, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our letter to shareholders. Our letter to shareholders also includes information about our key operating metrics, including a definition of each metric, why each is useful to investors, and how we use each to monitor and manage our business. With that, I'll turn the call over to Daniel, who will begin with a few opening remarks. Daniel?

Good morning. I'm happy to be able to report on another quarter of strong advances along our key performance indicators. As compared to Q2 2020, our top line, Inforce Premium or IFP, grew 91% to $297 million. For the second consecutive quarter, this represents an accelerating rate of year-over-year growth. Premium per customer also increased at an accelerated rate to 29% year-on-year as recent product launches continue to bolster iEconomics. Our IFP growth rates reflect our decision to lean in. Earlier in the year, we spoke about compelling unit economics, giving us confidence to ramp up growth investment levels, and that's exactly what we've done. For the fourth consecutive quarter, we've sequentially increased our investments in marketing. I expect this theme of leaning in to continue through the second half of 2021. As long as we're able to acquire business at an attractive LTV to CAC ratio, we'll continue to put our foot to the gas. Tim will elaborate on our expected numbers shortly. I wanted to provide an update on our reinsurance program. In Q1 2021, our business encountered a cat, a catastrophe event, which exerted more pressure on our gross loss ratio than any other before it, the Texas freeze. We were able to effectively endure this pressure due to the outstanding reinsurance program we implemented in Q3 of 2020, a 75% proportional or quota share reinsurance program. As a result, our bottom line was shielded from 75% of the impact of the Texas freeze. In this hypergrowth stage of our business, our proportional reinsurance program is especially helpful. Not only does it reduce our volatility exposure, but it enables us to be capital light as it relates to regulatory surplus requirements. However, over time, as our business matures and our expected volatility declines, we anticipate a gradual reduction of the proportion of our business that we seed. When we entered into our current reinsurance program a year ago, we locked in 55 of the 75 points for a three-year term, with the remaining 20 points up for renewal each year. Having just completed the first annual renewal process, we are pleased to share that we were able to secure similar financial terms on the portion of the quota share that we renewed. Consistent with my earlier comment, we made a modest reduction in the scope of our quota share program, stepping down from 75% to 70%. Put differently, we renewed 15 of the 20 points that were up for renewal. I've spent time in prior quarters speaking about the product diversification at Lemonade, a critically important aspect of our strategy that Shai will elaborate on in a moment. But I wanted to share an update on another important aspect of our business mix, geographic diversification. Today, at least one Lemonade product is available for purchase in each of the 50 US states, and we continue to push towards being able to service 100% of our customers' insurance needs regardless of where they live. We recently made a meaningful progress in the pursuit of this goal with the launch of our renter's insurance product in Florida. The renter's insurance market in Florida is large. In fact, it's the fourth largest market in the nation as measured by total gross written premium. By first focusing on renter's insurance in Florida, we will be able to fine-tune our approach in a risky cat state before we develop a homeowner's product in that market. We look forward to bringing the lemonade renter's experience to Floridians and anticipate our product suite in the state will expand over time. As a tech-enabled business, we've been uniquely, perhaps, able to address markets across continents. To date, our investments have been heavily lopsided in the favor of the United States, as that's been where we've seen the most compelling unit economics. In response to favorable recent trends around improving conversion rates and steadily declining loss ratios that we're observing in Europe, we've started investing more meaningfully in R&D in the continent. We anticipate this will lead to a step change in growth investment levels in the continent in 2022 and beyond, and we'll certainly keep you posted. And with that, let me hand over to Shai for some more updates on our product. Over to you, Shai.