Lemonade’s stock plunges as wildfires erase early financial gains
The company braces for a $45 million loss from California fires despite strong 2024 growth.
Every time insurtech company Lemonade shows signs of improvement, it serves as a reminder of the challenges faced by a small insurance company without significant geographic diversification. Lemonade reported strong results for the last quarter of 2024 and the full year, exceeding expectations. Notably, 2024 became the first year in the company’s history with positive cash flow from operations, totaling $48 million. This achievement was driven by disciplined budget management alongside steady growth.
Total premiums from Lemonade’s contents, auto, and pet insurance segments are approaching $1 billion, reaching $944 million in 2024—an increase of 26% compared to 2023. The average premium per customer rose by 5% to $388, while the number of policyholders grew by 20% to 2.4 million. The company also reported an improved insurance ratio of 63%, reflecting a lower proportion of claims payments relative to revenue.
However, the California wildfires in January 2025 are expected to significantly impact Lemonade’s performance. The company stated that it would provide a detailed forecast of the financial effects, but it has already estimated a gross loss of $45 million and a $20 million negative impact on adjusted EBITDA. Lemonade noted that diversification, driven by the expansion of its auto and pet insurance segments, helped mitigate the damage, which it claims could have been “five times greater.” The company also emphasized its use of AI and aerial photography to expedite claims processing, resolving some cases within hours—even while fires were still active.
The expected impact of the wildfires, combined with a weaker-than-expected profit outlook, sent Lemonade’s stock tumbling 15% in after-hours trading, following an 8% decline before the earnings release. The company projects first-quarter revenue of $143–145 million, with an adjusted EBITDA loss of $46–49 million—below the $149 million in revenue recorded in the fourth quarter of 2024 and nearly double the prior quarter’s adjusted operating loss of $23.8 million.
For the full year 2024, Lemonade posted revenue of $526.5 million, reflecting 22% annual growth. Looking ahead to 2025, the company forecasts revenue of approximately $655 million, suggesting it will maintain its current growth trajectory. However, optimism surrounding profitability, which had fueled Lemonade’s stock rally over the past year, has faded. The company now projects an adjusted operating loss of about $140 million—similar to 2024’s figure. Despite its growth and operational improvements, including a stable workforce for over a year, Lemonade ended 2024 with a net loss of $202 million—an improvement from its $237 million loss in 2023 but still a significant drag on performance.
