Lemonade, Inc.

Hello and welcome to the Lemonade fourth quarter 2022 earnings call. My name is Harry and I'll be your operator today. If you'd like to ask a question during the Q&A, please press star one on your telephone keypad. I'd now like to hand over to Yael Wisner-Levy to begin. Yael, please go ahead now.

Good morning and welcome to Lemonade's fourth quarter 2022 earnings call. My name is Yael Wisner-Levy and I'm 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 Bixby, chief financial officer. A letter to shareholders covering the company's fourth quarter 2022 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 1, 2022, our Form 10-Q, filed with the SEC on November 9, 2022, and our other filings with the SEC. Any forward-looking statements made on this file 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 their 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 in-force premium, premium per customer, gross loss ratio, and net loss ratio, and 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 for some opening remarks. Daniel?

Good morning, and thanks for joining us to review Lemonade's results for Q4 and for the full year of 2022, as well as our outlook for 2023. 2022 posed challenges to businesses and industries worldwide in the form of soaring inflation geopolitical unrest, rising interest rates, and tumbling markets. Happily, Lemonade had a good year notwithstanding the global tumult. It's not that we were unaffected by these convulsions by any means, but we're grateful to have been able to respond in ways that blunted their force. When inflation put upward pressure on our loss ratio, we counted by upping our rate of filings eightfold. While we've not seen off the threat of inflation, we can tentatively say that it is in retreat. As the cost of capital rose dramatically, we moderated our spending so that our sizable reserves should now last the distance. As our results this quarter indicate, we believe that peak losses are now behind us and that we're progressing per our plan along our path to profitability. In parallel to fending off threats from without, we've made progress from within, launching new products, new markets, acquiring and integrating Metromile, and growing our business by two-thirds year on year. All told, with a hat tip to Churchill's precept to never let a good crisis go to waste, we ended 2022 materially stronger, better, and bigger than we entered it. Zooming in on our fourth quarter, we're happy to report strong results with both top and bottom lines coming in better than expected. Q4 was also an interesting case study of some of the challenges and surprises insurance companies face, in particular seasonality and extreme weather. On seasonality, the last quarter of the year is usually characterized by fewer renters and homeowners moving, more holidays, higher cost of acquisition, and hence slower sales. This year, probably driven by spending pullback by companies across industries, our marketing efficiencies were actually stronger than we'd anticipated, helping both our top and bottom lines, a pleasant surprise. And then there was an unpleasant surprise when winter storm Elliot inflicted misery on millions of Americans over the Christmas holiday. Such a storm so late in the year is also atypical, and the fact that our loss ratio continued its decline notwithstanding, Elliot, is suggestive of a strong underlying downward trend. In fact, we saw continued loss ratio improvements across our business very much in line with the predictions we shared in our November Investor Day. Which brings us to the year ahead, and I'll hand over to Shai to provide some color commentary on 2023. Shai? Thanks, Daniel.