Lemonade, Inc.

Thank you for standing by. My name is Sydney and I will be your conference operator today. At this time, I would like to welcome everyone to the Lemonade Q1 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star and the 1. Thank you. We will now turn it over to Yael to begin the conference.

Good morning, and welcome to Lemonade's first quarter 2023 earnings call. My name is Yael Wissner-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, our chief financial officer. A letter to shareholders covering the company's first quarter 2023 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 security Form 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 the 3rd, 2023, 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 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 thank you for joining us to discuss Lemonade's Q1 results and our updated outlook for the year. We are heartened by the continued progress we're seeing across all the KPIs that we rely on in managing our business. Our growth metrics, IFP, of course, but also its component parts like annual dollar retention and premium per customer all moved up nicely. And at the same time, our loss ratio and adjusted EBITDA loss both moved down nicely. And I think that tells a compelling story. Looked at from another angle, we see that our gross earned premium and gross profit both grew by over 60% year on year, even as our operating expense grew by only 4%. Whichever way you look at it, Q1's results suggest that the business is progressing, both in size and profitability, very much in line with what we'd hoped to see. As Tim will share shortly, we're boosting our adjusted EBITDA guidance for the year by some 20%, suggesting that we don't see this goodness as limited to Q1, but rather that we believe Q1's results will be reflective of an improved trend line on our path to profitability. Delaying on the loss ratio for a minute longer, despite continued inflation and increased frequency of natural disasters or CAT, a loss ratio continued its descent, clocking in at 87% down from 89% in the previous quarter and 94% the quarter before that. This welcome decline is even more pronounced when examining the underlying progression, net of CAT. Using this filter, we see a seven percentage point drop quarter on quarter and a 16% drop over the past six months. As mentioned in previous calls, we expect our current trajectory to broadly continue, albeit with occasional hiccups when outside cats introduce a brief reversal. Powering this progress is continuous advancement in our AI and machine learning capabilities and the increasingly predictive power of the data sets on which they are fed. At our investor day last November, we demonstrated LTV6, our integrated array of AIs able to predict churn, cross-sells, and claims with what we believe is unprecedented precision. In the first quarter of this year, we deployed our latest model, LTV7, and its successor, LTV8, will supplant LTV7 by mid-year. Each new generation represents a significant milestone within our company. LTV7, for example, refined our cat loss predictions pretty dramatically, While LTV6 predicted cat exposures at a zip code level, LTV7 increased that resolution, and we now assess cat exposure of each discrete home individually. Our models will continue evolving as our data becomes richer and more extensive, bringing us ever closer to achieving true precision pricing and underwriting. Finally, I want to highlight that a much-anticipated CHUI partnership launched in Arizona this week and will continue to roll out across the U.S. in the weeks to come. We're eager to see the results of combining two such tech-powered and values-aligned companies to serve pet families nationwide. With that, I'll hand the call over to Shai to dig a little deeper into what's happening in the world of AI and the welcome implications for Lemonade. Shai? Thanks, Daniel.