Lemonade, an AI-powered digital insurance company, has announced its third quarter of 2025 financial results, reporting a net loss of $37.5 million, compared to the $67.7 million net loss seen in the same quarter last year.
Premium per customer, defined as in force premium divided by customers, was $403 at the end of the third quarter, up 5% from the third quarter of 2024.
Gross earned premiums $274.7 million increased by $61.6 million or 29% as compared to Q3 2024, primarily due to the increase of IFP earned during the quarter.
Lemonade also reported $194.5 million in revenue for Q3 2025, which increased $57.9 million or 42% compared to Q3 2024.
According to the insurer, this increase was primarily due to gross earned premium growth, ceding commission income, and reduced premium cession rate related to quota share reinsurance following the company’s recent renewal.
Gross profit stood at $79.9 million, a $42.4 million or 113% increase compared to the third quarter of 2024, primarily due to the 42% increase in revenue and 17 percentage points improvement in net loss ratio.
Total operating expense, excluding net loss and loss adjustment expense increased by $16.7 million or 13%, to $141.2 million, compared to the third quarter of 2024.
The increase was primarily driven by higher growth spend for customer acquisition. Growth spend, included in sales and marketing expense, was $46.1 million in the quarter, as compared to $39.9 million in the third quarter 2024.
Adjusted EBITDA loss was $25.6 million, as compared to an Adjusted EBITDA loss of $49.0 million in the third quarter 2024.
This year over year improvement, the insurer noted, is primarily attributable to revenue growth, and improved underwriting results, partially offset by the increase in growth spend. Adjusted EBITDA is a non-GAAP measure.
Lemonade’s cash, cash equivalents, and investments totalled approximately $1.06 billion at September 30, 2025. As of September 30, 2025, approximately $278 million is carried by the company’s insurance subsidiaries as regulatory surplus.
Adjusted free cash flow in Q3 2025 was $18.1 million, as compared to $37.6 million in the same period last year.
“Two years ago, we were growing IFP at 18% with a 19% gross profit margin and net loss represented (36%) of GEP. Two years on, IFP growth has accelerated to 30% while gross profit margin has more than doubled to 41%, driving triple-digit gross profit growth,” Lemonade stated.
Adding: “We’ve maintained a 3:1 LTV/CAC ratio as marketing spend more than tripled, thanks to AI-powered improvements in segmentation and pricing; AI also enabled us to keep our operating expenses, excluding growth spend, almost flat. The result: net loss as % of GEP has improved by nearly two-thirds to (14%), and our path to profit is plain to see.”
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