LMND 10-Q
Lemonade, Inc. (LMND)
10-Q
2026-08-04
For: 2026-06-30
View Original
Added on
August 04, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2026
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ___________________ to ___________________
Commission File Number: 001-39367
(Exact Name of Registrant as Specified in Its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(844 ) 733-8666
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common Stock, $0.00001 par value per share | ||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
x | Accelerated filer | o | ||||||||||||
| Non-accelerated filer | o | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 3, 2026, the registrant had 77,396,615 shares of common stock, $0.00001 par value per share, outstanding.
Table of Contents
| Page | ||||||||
| PART I. | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the "Quarterly Report") contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report are forward-looking statements, including without limitation statements regarding the following: our future results of operations and financial position, our ability to achieve profitability and expand our business, our ability to effectively manage the growth of our business, our ability to attract, retain and expand our customer base and attain greater value from each customer, our ability to operate under and maintain our business model, our ability to maintain and enhance our brand and reputation, the effects of seasonal trends on our results of operations, the impact of catastrophe events or natural disasters on our results of operations, our ability to compete effectively in our industry, the future performance of the markets in which we operate, our ability to maintain reinsurance contracts and the adequacy of our loss and loss adjustment reserves and pricing, the impact of the evolving conflict in Israel and the surrounding region, the potential effects of macroeconomic conditions including inflation, changes in trade policy and tariffs on our claims costs and results of operations, our ability to develop and deploy artificial intelligence and technology, maintain relationships with third-party service providers and protect the continuity and security of our technology infrastructure and customer data, our ability to expand into new products and geographic markets, anticipated benefits of and our ability to maintain our financing arrangements, the impact of current and future laws and regulations including tax legislation, the outcome and potential impact of litigation and legal proceedings, the sufficiency of our capital and liquidity, and the plans and objectives of management for future operations and capital expenditures. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including:
•We have a history of losses and we may not achieve or maintain profitability in the future.
•Our success and ability to grow our business depend on retaining and expanding our customer base.
•Denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations, and prospects.
•Our future revenue growth depends on our ability to increase the lifetime value of our customers and attaining greater value from each customer.
•Intense competition in the segments of the insurance industry in which we operate could negatively affect our ability to attain or increase profitability.
•Our proprietary artificial intelligence algorithms may not operate properly or as we expect them to which could cause us to write policies we should not write, price those policies inappropriately or overpay claims that are made by our customers.
•Failure to maintain our risk-based capital at the required levels could adversely affect the ability of our insurance subsidiaries to maintain regulatory authority to conduct our business.
•If we are unable to maintain and implement relationships with third-party service providers, or renew contracts with them on favorable terms, or if those parties are adversely impacted by financial, reputational, regulatory and other risks, our prospects for future growth and our business may be adversely affected.
•If we are unable to expand our product offerings, or penetrate new markets, our future growth may be limited.
•We rely on artificial intelligence, telematics, mobile technology, and our digital platforms to collect data and any legal or regulatory requirements that prohibit or restrict our ability to collect or use this data could adversely affect our business.
2
•If we are unable to underwrite risks accurately and charge competitive yet profitable rates our business will be adversely affected.
•Our pricing model for self-driving technologies and reliance on direct vehicle telemetry may not function as expected.
•We may require additional capital to grow our business, which may not be available on terms acceptable to us or at all.
•Interruptions or delays in the services provided by our sole provider of third-party data centers could impair the operability of our website.
•Security incidents or real or perceived errors, failures or bugs in our systems could impair our operations.
•We are periodically subject to examinations by our primary state insurance regulators, which could result in adverse examination findings and necessitate remedial actions.
•Reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business and impact our capital needs.
•We may face particular privacy, data security, and data protection risks as we continue to expand into Europe and the UK in connection with the GDPR and other data protection regulations.
•We may be unable to prevent or address the misappropriation of our data.
•If our customers were to claim that the policies they purchased failed to provide adequate or appropriate coverage, we could face claims.
•Our product development cycles are complex and subject to regulatory approval, and we may incur significant expenses before we generate revenues.
•Litigation and legal proceedings filed by or against us and our subsidiaries could have a material adverse effect.
•The "Lemonade" brand may not become as widely known as incumbents' brands or the brand may become tarnished.
•Our expansion within the United States and any future international expansion strategy will subject us to additional costs and risks.
•There may be an adverse impact of the Customer Investment Agreement and New Business Financing Agreement.
•We are subject to extensive insurance industry regulations.
•Severe weather events and other catastrophes are inherently unpredictable and may have a material adverse effect on our financial results and financial condition.
•We rely on data from our customers and third parties for pricing and underwriting our insurance policies handling claims and maximizing automation, the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business.
•Our results of operations and financial condition may be adversely affected due to limitations in the analytical models used to assess and predict our exposure to catastrophe losses.
•Our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations.
•Our insurance subsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.
The factors described under the sections "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "Annual Report on Form 10-K") and in this Quarterly Report.
3
You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. In this Quarterly Report, unless we indicate otherwise or the context requires, "Lemonade," the “Company," "we," "our," "ours" and "us" refer to Lemonade, Inc. and its consolidated subsidiaries, including Lemonade Insurance Company, Lemonade Insurance Agency, LLC, and Metromile, Inc. and Metromile Insurance Company.
Where You Can Find More Information
Investors and others should note that we may use our website (https://investor.lemonade.com/home/default.aspx), our company account on X (formerly Twitter) (@Lemonade_Inc), and LinkedIn (@Lemonade-Inc) as a means of disclosing information and for complying with our disclosure obligations under Regulation FD. The information we post through these channels may be deemed material. Accordingly, in addition to reviewing our press releases, SEC filings, and public conference calls, investors should monitor these channels. The contents of our website and social media channels are not part of this Quarterly Report.
4
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
LEMONADE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions, except share and per share amounts)
| As of | |||||||||||
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Investments | |||||||||||
Fixed maturities available-for-sale, at fair value (amortized cost: $ | $ | $ | |||||||||
Short-term investments (cost: $ | |||||||||||
| Total investments | |||||||||||
| Cash, cash equivalents and restricted cash | |||||||||||
Premium receivable, net of allowance for credit losses of $ | |||||||||||
| Reinsurance recoverable | |||||||||||
| Prepaid reinsurance premium | |||||||||||
| Deferred acquisition costs | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets | |||||||||||
| Goodwill | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Unpaid loss and loss adjustment expense | $ | $ | |||||||||
| Unearned premium | |||||||||||
| Trade payables | |||||||||||
| Funds held for reinsurance treaties | |||||||||||
| Deferred ceding commission | |||||||||||
| Ceded premium payable | |||||||||||
| Borrowings under financing agreement | |||||||||||
| Other liabilities and accrued expenses | |||||||||||
| Total liabilities | |||||||||||
| Commitments and Contingencies (Note 15) | |||||||||||
| Stockholders' equity | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive (loss) income | ( | ||||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
LEMONADE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
($ in millions, except share and per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| Net earned premium | $ | $ | $ | $ | ||||||||||||||||||||||
| Ceding commission income | ||||||||||||||||||||||||||
| Net investment income | ||||||||||||||||||||||||||
| Commission and other income | ||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||
| Expense | ||||||||||||||||||||||||||
| Loss and loss adjustment expense, net | ||||||||||||||||||||||||||
| Other insurance expense | ||||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||
| Technology development | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Total expense | ||||||||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive loss, net of tax | ||||||||||||||||||||||||||
| Unrealized (loss) gain on investments in fixed maturities | ( | ( | ||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | |||||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Per share data: | ||||||||||||||||||||||||||
| Net loss per share attributable to common stockholders - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
LEMONADE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
($ in millions, except share amounts)
(Unaudited)
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2025 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
| Exercise of stock options and distribution of restricted stock units | — | — | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
| Exercise of stock options and distribution of restricted stock units | — | — | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
Balance as of December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Exercise of stock options and distribution of restricted stock units | — | — | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Exercise of stock options and distribution of restricted stock units | — | — | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7
LEMONADE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited)
| Six Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Stock-based compensation | ||||||||||||||
Amortization of premium on bonds | ( | ( | ||||||||||||
| Provision for bad debt | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Premium receivable | ( | ( | ||||||||||||
| Reinsurance recoverable | ( | |||||||||||||
| Prepaid reinsurance premium | ( | |||||||||||||
| Deferred acquisition costs | ( | ( | ||||||||||||
| Other assets | ||||||||||||||
| Unpaid loss and loss adjustment expense | ||||||||||||||
| Unearned premium | ||||||||||||||
| Trade payables | ( | |||||||||||||
| Funds held for reinsurance treaties | ( | |||||||||||||
Deferred ceding commission | ( | |||||||||||||
| Ceded premium payable | ( | |||||||||||||
| Other liabilities and accrued expenses | ||||||||||||||
| Net cash used in operating activities | ( | ( | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Proceeds from short-term investments sold or matured | ||||||||||||||
| Proceeds from bonds sold or matured | ||||||||||||||
| Cost of short-term investments acquired | ( | ( | ||||||||||||
| Cost of bonds acquired | ( | ( | ||||||||||||
| Purchases of property and equipment | ( | ( | ||||||||||||
Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
Proceeds from borrowings under financing agreement | ||||||||||||||
Payments on borrowings under financing agreement | ( | ( | ||||||||||||
| Proceeds from stock exercises | ||||||||||||||
| Net cash provided by financing activities | ||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | |||||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | |||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||
| Cash paid for income taxes | $ | $ | ||||||||||||
Cash paid for interest expense on borrowings under financing agreement | $ | $ | ||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
8
LEMONADE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.Nature of the Business
Lemonade, Inc. is a public benefit corporation organized under Delaware law on June 17, 2015. It provides certain personnel, facilities and services to each of its property and casualty insurance subsidiaries and non-insurance subsidiaries (together with Lemonade, Inc., the “Company”), all of which are 100 % owned, directly or indirectly, by Lemonade, Inc. For the list of the Company's subsidiaries and for more complete descriptions and discussions, see Note 1 - Nature of the Business, of the audited consolidated financial statements and related notes thereto for the year ended December 31, 2025 as included in the Company's Annual Report on Form 10-K (the "Annual Report on Form 10-K").
2. Basis of Presentation
Risks and Uncertainties
Lemonade, Inc. conducts certain of its operations in Israel. The evolving conflict in Israel and the surrounding region has increased global economic and political uncertainty. There is still uncertainty regarding the extent to which the war and its broader macroeconomic implications will impact our operations in Israel. The Company will continue to evaluate the extent to which this may impact the Company's business, financial condition, or results of operations.
Unaudited interim financial information
The accompanying unaudited condensed consolidated financial statements, in the opinion of the Company's management, contain all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of its financial position and its results of operations, changes in stockholders’ equity and cash flows. The condensed consolidated balance sheets at December 31, 2025 were derived from the audited annual financial statements and do not contain all of the footnote disclosures from the audited annual financial statements of the Company. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2025 as included in the Company’s Annual Report on Form 10-K.
3.Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates estimates, including those related to contingent assets and liabilities as of the date of the condensed consolidated financial statements as well as the reported amounts of revenue and expense during the reporting period. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. All revisions to accounting estimates are recognized in the period in which the estimates are revised. Significant estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, reserves for loss and loss adjustment expense, uncertain tax position and valuation allowance on deferred tax assets.
9
4.Summary of Significant Accounting Policies
Cash, cash equivalents and restricted cash
The following represents the Company’s cash, cash equivalents and restricted cash as of June 30, 2026 and December 31, 2025 ($ in millions):
| June 30, | December 31, | |||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||||||||
Cash and cash equivalents consist primarily of bank deposits and money market accounts with maturities of three months or less at the date of acquisition and are stated at cost, which approximates fair value. The Company’s restricted cash primarily relates to insurance policy premiums collected by the Company that it holds in a segregated cash account for transmittal to the underwriting carrier, or settlement of insurance related claims. The Company also has restricted cash relating to security deposits for certain office leases. The carrying value of restricted cash approximate fair value.
New Accounting Pronouncements
Recently Issued Accounting Pronouncements Pending Adoption
In December 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, requiring additional disclosures in the financial statements which disaggregates information underlying certain relevant income statement expense captions in tabular format. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 31, 2027, and retrospective application is permitted. The Company is currently evaluating the impact of the adoption of this standard.
In September 2025, the FASB issued ASU 2025-06, which amends the guidance in ASC 350-40, Intangibles - Goodwill and Other - Internal-Use Software. The amendment modernizes the recognition and disclosure for internal-use software costs, removes previous references to project stages and introduced a more judgment-based approach in capitalizing costs. This ASU is effective for annual periods beginning after December 15, 2027, on a prospective, retrospective or modified transition approach. The Company is currently evaluating the impact of the adoption of this standard.
There are no other new accounting standards identified and not yet implemented that are expected to have a material effect on the Company's consolidated financial statements.
10
5. Investments
Unrealized gains and losses
The following tables present cost or amortized cost and fair values of investment in fixed maturities as of June 30, 2026 and December 31, 2025 ($ in millions):
| Cost or Amortized Cost | Gross Unrealized | Fair Value | ||||||||||||||||||||||||
| Gains | Losses | |||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||
| Corporate debt securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
| U.S. Government obligations | ( | |||||||||||||||||||||||||
| Asset-backed securities and collateralized loan obligations | ( | |||||||||||||||||||||||||
Non-U.S. government obligations | ( | |||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Corporate debt securities | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. Government obligations | ||||||||||||||||||||||||||
| Asset-backed securities | ||||||||||||||||||||||||||
Non-U.S. government obligations | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Gross unrealized losses for investments in fixed maturities was $4.0 million as of June 30, 2026 and less than $0.1 million as of December 31, 2025. Gross unrealized gains and losses on investments in fixed maturities were recorded as a component of accumulated other comprehensive income (loss).
Contractual maturities of bonds
The following table presents the cost or amortized cost and estimated fair value of investments in fixed maturities as of June 30, 2026 by contractual maturity ($ in millions). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
| June 30, 2026 | ||||||||||||||
| Cost or Amortized Cost | Fair Value | |||||||||||||
| Due in one year or less | $ | $ | ||||||||||||
| Due after one year through five years | ||||||||||||||
| Due after five years through ten years | ||||||||||||||
| Due after ten years | ||||||||||||||
| Sub-total | ||||||||||||||
| Asset-backed securities and collateralized loan obligations | ||||||||||||||
| Total | $ | $ | ||||||||||||
11
Net investment income
Details of the Company's net investment income is as follows ($ in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Interest on cash and cash equivalents | $ | $ | $ | $ | ||||||||||||||||||||||
| Fixed maturities | ||||||||||||||||||||||||||
| Short-term investments | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
Investment expense | ||||||||||||||||||||||||||
| Net investment income | $ | $ | $ | $ | ||||||||||||||||||||||
Investment gains and losses
The Company had pre-tax net realized capital gain of $0.2 million and $0.5 million for the three and six months ended June 30, 2026 and pre-tax net realized capital gain of $0.1
Aging of gross unrealized losses
The following table presents the gross unrealized losses and related fair values for the Company’s investment in fixed maturities, grouped by duration of time in a continuous unrealized loss position as of June 30, 2026 and December 31, 2025 ($ in millions):
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | $ | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||||||||||
| U.S. Government obligations | ( | ( | ||||||||||||||||||||||||||||||||||||
| Asset-backed securities and collateralized loan obligations | ( | ( | ||||||||||||||||||||||||||||||||||||
Non-U.S. government obligations | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||||||||||
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| U.S. Government obligations | ||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | ||||||||||||||||||||||||||||||||||||||
Non-U.S. government obligations | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
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As of June 30, 2026, 541 of the securities held were in an unrealized loss position. There were no investments in fixed maturities with gross unrealized losses for twelve months or more as of June 30, 2026. Investments in fixed maturities with gross unrealized losses for twelve months or more amounted to less than $0.1 million as of December 31, 2025. The Company determined that unrealized losses on fixed maturities were primarily due to the interest rate environment, general market conditions, and not credit risk related to issuers of these securities. The Company does not intend to sell these investments in fixed maturities, and it is not more likely than not that the Company will be required to sell these investments in fixed maturities before recovery of the amortized cost basis. No allowance for credit losses related to any of these securities was recorded for the three and six months ended June 30, 2026. The Company does not measure an allowance for credit losses on accrued interest receivable and would instead write off accrued interest receivable at the time an issuer defaults or is expected to default on payments.
Restricted investments
Restricted investments are held in a trust account securing the Company’s insurance subsidiary's contractual obligations under the Property Catastrophe Excess of Loss reinsurance contract with a captive in Bermuda (see Note 7) which will not be released until the underlying risks have expired or have been settled. Restricted investments include certain investments in debt securities and short-term investments of $82.5 million as of June 30, 2026 and $81.5 million as of December 31, 2025.
6. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 ($ in millions):
| June 30, 2026 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||||||||
| Corporate debt securities | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. Government obligations | ||||||||||||||||||||||||||
| Asset-backed securities and collateralized loan obligations | ||||||||||||||||||||||||||
Non-U.S. government obligations | ||||||||||||||||||||||||||
| Fixed maturities | $ | $ | $ | $ | ||||||||||||||||||||||
| Short term investments | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||||||||
| Corporate debt securities | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. Government obligations | ||||||||||||||||||||||||||
| Asset-backed securities | ||||||||||||||||||||||||||
Non-U.S. government obligations | ||||||||||||||||||||||||||
| Fixed maturities | $ | $ | $ | $ | ||||||||||||||||||||||
| Short term investments | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Financial Liabilities: | ||||||||||||||||||||||||||
Warrant Liability (1) | $ | $ | $ | $ | ||||||||||||||||||||||
(1) Fair value of Public and Private warrant liability amounted to less than $0.1 million as of December 31, 2025. These warrants expired on February 9, 2026.
The carrying value of Borrowings under financing agreement approximates the fair value as of June 30, 2026 and December 31, 2025, and is classified as Level 3.
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The fair value of all different classes of Level 2 fixed maturities and short-term investments are estimated by using quoted prices from a third-party valuation service provider to gather, analyze and interpret market information and derive fair values based upon relevant methodologies and assumptions for individual instruments.
There were no transfers between Level 1, Level 2, or Level 3 during the six months ended June 30, 2026 and for the year ended December 31, 2025.
7. Unpaid Loss and Loss Adjustment Expense
The following table presents the activity in the liability for unpaid loss and loss adjustment expense ("LAE") for the six months ended June 30, 2026 and 2025 ($ in millions):
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Unpaid loss and LAE at beginning of period | $ | $ | ||||||||||||
Less: Reinsurance recoverable at beginning of period (1) | ||||||||||||||
| Net unpaid loss and LAE at beginning of period | ||||||||||||||
| Add: Incurred loss and LAE, net of reinsurance, related to: | ||||||||||||||
| Current year | ||||||||||||||
| Prior years | ( | ( | ||||||||||||
| Total incurred | ||||||||||||||
| Deduct: Paid loss and LAE, net of reinsurance, related to: | ||||||||||||||
| Current year | ||||||||||||||
| Prior years | ||||||||||||||
| Total paid | ||||||||||||||
| Unpaid loss and LAE, net of reinsurance recoverable, at end of period | ||||||||||||||
Reinsurance recoverable at end of period (1) | ||||||||||||||
| Unpaid loss and LAE, gross of reinsurance recoverable, at end of period | $ | $ | ||||||||||||
(1) Reinsurance recoverable in this table includes only ceded unpaid loss and LAE.
Unpaid loss and LAE includes anticipated salvage and subrogation recoverable.
Considerable variability is inherent in the estimate of the reserve for losses and LAE. Although management believes the liability recorded for losses and LAE is adequate, the variability inherent in this estimate could result in changes to the ultimate liability, which may be material to stockholders' equity. Additional variability exists due to accident year allocations of ceded amounts in accordance with the reinsurance agreements, which is not expected to result in any changes to the ultimate liability. Other factors that can impact loss reserve development may also include trends in general economic conditions, including the effects of inflation. The Company had prior year favorable development on net loss and LAE reserves of $16.4 million for the six months ended June 30, 2026, and prior year favorable development on net loss and LAE reserves of $12.6 million for the six months ended June 30, 2025. No additional premiums or returned premiums have been accrued as a result of prior year effects.
For the six months ended June 30, 2025, current accident year net incurred loss and LAE included $16.9 million related to the January 2025 California Wildfires, excluding the impact of the aggregate catastrophe cap limits, and represented the Company's best estimates based upon available information, including but not limited to industry data, reported claims, reinsurance recoveries and subrogation.
In March 2025, the Company entered into the Participation of Recovery Rights Agreements to sell its subrogation rights related to the January 2025 California wildfires resulting in a reduction of $4.2 million in net unpaid losses.
Reinsurance
In the ordinary course of business, the Company cedes losses and LAE to reinsurance companies to reduce the potential net loss exposure from large losses or catastrophic risks, and to manage regulatory capital requirements. Certain of these arrangements consist of excess of loss and catastrophe contracts, which protect against losses exceeding stipulated amounts. The ceding of risk through reinsurance does not relieve the Company from its obligations to policyholders, and the
14
Company remains primarily liable with respect to ceded losses and LAE in the event that any reinsurer does not meet obligations assumed under the reinsurance agreements. The Company does not have any significant unsecured recoverable for losses, paid and unpaid including Incurred But Not Reported ("IBNR"), loss adjustment expenses, and unearned premium with any individual reinsurer.
The Company maintains proportional reinsurance contracts which cover all of the Company's products and geographies, and transfers, or “cedes,” a specified percentage of the premium to reinsurers. The Company also opted to manage a portion of the remaining business with non-proportional reinsurance contracts.
Whole Account Quota Share Reinsurance Contracts
The Company agreed to the terms of a reinsurance program effective July 1, 2025 through June 30, 2026 which included Whole Account Quota Share Reinsurance Contracts by and among the Company, Lemonade Insurance Company ("LIC"), Metromile Insurance Company ("MIC") and Lemonade Insurance N.V. ("LINV"), and each of Hannover Ruck SE ("Hannover") and MAPFRE Re Compania De Reaseguros S.A. ("MAPFRE") (collectively referred to as “Reinsurers”) ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," approximately 20 % of premium to the Reinsurers. In exchange, these Reinsurers pay the Company a ceding commission on all premiums ceded to the Reinsurers, in addition to funding the corresponding claims, subject to certain limitations, including but not limited to, the exclusion of hurricane losses, and a limit of $10,000,000 per occurrence for non-hurricane catastrophe losses. The Per Risk Cap across the contracts is $750,000 . Additionally, the contracts are subject to loss ratio caps and variable ceding commission levels, which align the Company's interests with those of its Reinsurers, and is settled primarily on a funds-withheld basis. The Reinsurance Program was renewed effective July 1, 2026 and will expire on June 30, 2027, with a reduced effective cession rate of approximately 18 % of premiums to Reinsurers. The renewed terms include a $40,000,000 limit per loss occurrence and $100,000,000 in aggregate, including catastrophe losses. Other terms are similar to the contracts that expired on June 30, 2026.
Property Per Risk Excess of Loss Reinsurance Contract
LIC and MIC entered into a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract") which was effective July 1, 2025 and expired on June 30, 2026. Under the PPR Contract, claims in excess of $750,000 were 100 % ceded up to a maximum recovery of $2,250,000 , and further subject to certain limitations. The PPR Contract was not renewed.
Captives
LIC and MIC entered into an Excess of Loss ("XOL") Reinsurance Contract with a captive in Bermuda in which the Company has variable interest. This XOL reinsurance contract primarily covers catastrophe risk on property and car business underwritten by LIC and MIC over the initial $50,000,000 limit for each loss occurrence, and further subject to a limit of $80,000,000 for each loss occurrence and in aggregate. This XOL reinsurance contract which was effective July 1, 2025 expired on June 30, 2026. The XOL reinsurance contract between the captive and LIC was renewed effective July 1, 2026 and will expire on June 30, 2027, with a limit of liability of $50,000,000 for each loss occurrence and in aggregate. The XOL reinsurance contract between the captive and MIC was not renewed.
The Company is also exposed to some risks on property, car and pet insurance underwritten by LIC and MIC ceded through Quota Share ("QS") Reinsurance Contracts which is retained in an offshore captive subsidiary, Lemonade Re SPC. The MIC QS reinsurance contract which became effective July 1, 2025 was terminated and the parties agreed to a new QS reinsurance contract effective July 1, 2026 with an increase in cession rate from 35 % to 40 %. The MIC QS reinsurance contract shall remain effective for an indefinite period until terminated by either party. The LIC QS reinsurance contract was renewed effective July 1, 2026 through June 30, 2027 with an increase in cession rate from 15 % to 25 %.
Through the captives, the Company is exposed to the risk of natural catastrophe events and other covered risks under the reinsurance contracts from policies underwritten by LIC and MIC.
15
8. Borrowings under Financing Agreement
Customer Investment Agreement
On June 28, 2023, the Company entered into a Customer Investment Agreement (the “Agreement”), with GC Customer Value Arranger, LLC (a General Catalyst company) ("GC"). Under the Agreement, up to $150 million of financing would be provided for the Company’s sales and marketing growth efforts. The Agreement had a commitment period of 18 months which expired on December 31, 2024 ("Original Commitment End Date").
On January 8, 2024, the Company entered into an Amended and Restated Customer Investment Agreement with GC to provide up to an additional $140 million of financing to the Company from the Original Commitment End Date through December 31, 2025 for sales and marketing growth efforts. On February 3, 2025, the Agreement was further amended under which GC will provide up to an additional $200 million of financing for sales and marketing growth efforts from January 1, 2026 to December 31, 2026. In addition, the Agreement was further amended and restated in April 2024, June 2024 and December 2025 to clarify certain provisions with no material changes to terms and conditions (collectively, the "Amended and Restated Agreement"). The Amended and Restated Agreement contains standard customary representations, warranties and covenants by the parties, and will continue in effect unless terminated by any party pursuant to its terms. Under all of these agreements, subject to certain terms and conditions specified therein, at the start of each growth period, an Investment Amount of between 50 % to 80 % of the Company’s growth spend (the "Investment Amount") will be advanced by GC. During each growth period, the Company will repay a portion of each outstanding Investment Amount including a 16 % rate of return based upon an agreed schedule. Once fully repaid, the Company will retain all future reference income related to each respective Investment Amount.
The Company had $206.4 million and $158.1 million of outstanding borrowings under financing agreement as of June 30, 2026 and December 31, 2025, respectively. The Company incurred interest expense of $7.0 million and $13.2 million for the three and six months ended June 30, 2026, respectively, and $4.0 million and $7.3 million for the three and six months ended June 30, 2025, respectively. Interest expense is included in “General and administrative expense” in the condensed consolidated statements of operations and comprehensive loss.
New Business Financing Agreement
On June 22, 2026, the Company and Hannover Re (Ireland) DAC ("Hannover Re") entered into a New Business Financing Agreement (the “Financing Agreement”) under which Hannover Re will provide up to $250 million of outstanding capital related to the financing of the Company’s sales and marketing growth efforts. This Financing Agreement is subject to a maximum outstanding capital amount of $150 million from January 1, 2027 through December 31, 2027, and up to $250 million at any time during the period from January 1, 2028 through December 31, 2028.
Under the Agreement, subject to certain terms and conditions, at the start of each month, Hannover Re shall provide financing of up to 80 % of the Company's growth spend but not to exceed $20 million per reference cohort. The Company will repay each amount financed based on a specific percentage of premiums collected for assigned customer cohorts associated with the funded growth spend. This repayment amount will include the funding amount plus a rate of return in accordance with the Counterparty Cap Amount, defined as the sum of (a) the greater of (i) 0 % or (ii) the three-year U.S. Treasury Bill rate, plus (b) 5.8 %. Once fully repaid, the Company will retain all future reference premium related to each assigned customer cohorts. The Financing Agreement also includes certain financial covenants, cancellation and commitment termination provisions.
Beginning January 1, 2027, new financing of the Company’s sales and marketing growth efforts shall be under the Financing Agreement with Hannover Re. Separate reference premium from customer cohorts shall be attributed to financing with Hannover Re. Reference premium from customer cohorts under the Amended and Restated Agreement will continue to be applied to financing with GC.
16
9. Other Liabilities and Accrued Expenses
Other liabilities and accrued expenses as of June 30, 2026 and December 31, 2025 consist of the following ($ in millions):
| June 30, | December 31, | |||||||||||||
| 2026 | 2025 | |||||||||||||
| Accrued advertising costs | $ | $ | ||||||||||||
| Lease liabilities | ||||||||||||||
| Payable to carriers | ||||||||||||||
| Uncertain tax position | ||||||||||||||
| Employee compensation | ||||||||||||||
| Premium taxes payable | ||||||||||||||
| Advance premium | ||||||||||||||
| Accrued professional fees | ||||||||||||||
| Reinsurance payable | ||||||||||||||
| Interest payable | ||||||||||||||
| Income taxes payable | ||||||||||||||
| Other payables | ||||||||||||||
| Total | $ | $ | ||||||||||||
10. Stockholders’ Equity
Common stock
The Company's certificate of incorporation, as amended and restated, authorized the Company to issue 200,000,000 0.00001 77,326,718 75,907,215
The Company in 2020 made a contribution of 500,000 issued shares of common stock to the Lemonade Foundation, a related party (Note 14), of which 400,000
Undesignated Preferred Stock
The Company's certificate of incorporation, as amended and restated in 2020, authorized the Company to issue up to 10,000,000 0.00001 no
Warrants
The Company in 2022 entered into an omnibus agreement (the “Omnibus Agreement”) and a warrant agreement (the “Warrant Agreement” and, together with the Omnibus Agreement, the “Agreements”) with Chewy Insurance Services, LLC (the “Warrantholder” or "Chewy") in connection with the execution of an agency agreement on the same date between the Company, Lemonade Insurance Agency, LLC, Lemonade Insurance Company and the Warrantholder. In connection with the Agreements, the Company is authorized to issue to the Warrantholder 3,352,025 shares of the Company’s common stock underlying the warrant with an exercise price of $0.01 per share, which will vest in installments, in increasing amounts over a period of five years . The Warrant Agreement allows the Company to cancel unvested warrant shares which are subject to certain vesting events and thresholds. On April 4, 2025, the Company terminated the Agreements with Chewy and canceled the remaining 3,170,834 unvested warrant shares.
The agency agreement remains in effect between the Company, Lemonade Insurance Agency, LLC, Lemonade Insurance Company and Chewy.
17
11. Stock-based Compensation
Share option plans
2020 Incentive Compensation Plan
On July 2, 2020, the Company’s board of directors adopted and the Company’s stockholders approved the 2020 Incentive Compensation Plan (the “2020 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering ("IPO") in 2020. The 2020 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards.
The number of shares initially reserved for issuance under the 2020 Plan is 5,503,678 shares, inclusive of available shares previously reserved for issuance under the 2015 Incentive Share Option Plan, as amended and restated on September 4, 2019 (the “2015 Plan”). In addition, the number of shares reserved for issuance under the 2020 Plan is subject to increase for awards previously issued under the 2015 Plan which are forfeited or lapse unexercised. Annually, on the first day of each calendar year beginning on January 1, 2021 and ending on and including January 1, 2030, the reserve will be increased by an amount equal to the lesser of (A) 5 % of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the Company’s board of directors, provided that no more than 3,650,000 shares may be issued upon the exercise of incentive stock options. On January 1, 2026, the 2020 Plan share pool was increased by 3,650,000 shares, equal to the maximum increase allowed under the 2020 Plan. As of June 30, 2026, there were 8,902,808 shares of common stock available for future grants.
2020 Employee Stock Purchase Plan
On July 2, 2020, the Company's board of directors adopted and the Company's stockholders approved the 2020 Employee Stock Purchase Plan (the "2020 ESPP"), which became effective immediately prior to the effectiveness of the registration statement for the Company's IPO in 2020. The total shares of common stock initially reserved for issuance under the 2020 ESPP is limited to 1,000,000 shares. In addition, the number of shares available for issuance under the 2020 ESPP will be increased on January 1 of each calendar year beginning in 2021 and ending in and including 2030, by an amount equal to the lesser of (A) 1,000,000 shares, (B) 1 % of the shares outstanding on the final day of the immediately preceding calendar year and (C) such smaller number of shares as is determined by the board of directors. The board of directors or a committee of the board of directors will administer and will have authority to interpret the terms of the 2020 ESPP and determine eligibility of participants. On January 1, 2026, there was no increase in the 2020 ESPP share pool. As of June 30, 2026, there were no shares of common stock issued under the 2020 ESPP.
2015 Incentive Share Option Plan
In July 2015, the Company adopted the 2015 Incentive Share Option Plan ("2015 Plan"). The 2015 Plan has been amended and restated from time to time to increase the number of shares reserved for grant and to enable the grant of options to employees of the Company’s subsidiaries. Under the 2015 Plan, options to purchase common stock of the Company may be granted to employees, officers, directors and consultants of the Company. Each option granted can be exercised for one share of common stock of the Company. Options granted to employees generally vest over a period of no more than four years . The options expire ten years from the date of grant.
Pursuant to the 2015 Plan, the Company had reserved 7,312,590 shares of common stock for issuance. Effective immediately upon the approval of the 2020 Plan, the remaining shares of common stock available for future grant under the 2015 Plan were transferred to the 2020 Plan. As of June 30, 2026, there were no shares of common stock available for future grant under the 2015 Plan. Subsequent to the approval of the 2020 Plan, no additional grants will be made under the 2015 Plan and any outstanding awards under the 2015 Plan will continue with their original terms.
18
Assumed Share Option Plans
As part of the acquisition of Metromile in 2022, the Company assumed the Metromile 2011 Incentive Stock Plan ("2011 Plan") and Metromile 2021 Incentive Stock Plan ("2021 Plan") (collectively referred to as "Assumed Plans"). The Company assumed equity awards of 404,207 which were granted from the respective Assumed Plans and will be settled in the Company's common stock. The remaining unallocated shares reserved under both 2011 Plan and 2021 Plan were canceled and no new awards will be granted under these Assumed Plans.
Options granted to employees and non-employees
The fair value of each option granted during the six months ended June 30, 2026 and 2025 is estimated on the date of grant using the Black-Scholes model based on the following assumptions:
| Six Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Weighted average expected term (years) | ||||||||||||||
| Risk-free interest rate | ||||||||||||||
| Volatility | ||||||||||||||
| Expected dividend yield | ||||||||||||||
Expected volatility is calculated based on implied volatility from market comparisons of certain publicly traded companies and other factors. The expected term of options granted is based on the simplified method, which uses the midpoint between the vesting date and the contractual term in accordance with ASC Topic 718, “Compensation - Stock Compensation”. The risk-free interest rate is based on observed interest rates appropriate for the term of the Company’s stock options. The dividend yield assumption is based on the Company’s historical and expected future dividend payouts and may be subject to substantial change in the future.
The following tables summarize activity of stock options and restricted stock units:
Stock options
| Number of Options | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||
Outstanding as of December 31, 2025 | $ | $ | ||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
| Exercised | ( | $ | ||||||||||||||||||||||||
Canceled/Forfeited | ( | $ | ||||||||||||||||||||||||
Outstanding as of June 30, 2026 | $ | $ | ||||||||||||||||||||||||
Options exercisable as of June 30, 2026 | $ | $ | ||||||||||||||||||||||||
Options unvested as of June 30, 2026 | $ | $ | ||||||||||||||||||||||||
19
Restricted Stock Units with service condition
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Outstanding as of December 31, 2025 | $ | |||||||||||||
| Granted | $ | |||||||||||||
| Vested | ( | $ | ||||||||||||
Canceled/Forfeited | ( | $ | ||||||||||||
Outstanding as of June 30, 2026 | $ | |||||||||||||
Restricted Stock Units with market condition
In March 2026, the Company’s board of directors approved the grant of 180,000 Restricted Stock Units with market condition ("RSUs with market condition") to each of the Company’s Chief Executive Officer and President. The RSUs with market condition vest based on the achievement of a stock closing price target of $110.00 or above per share for 30 consecutive trading days within a performance window of 24 months from the grant date, and will be forfeited if the market condition is not met. The total grant-date fair value of the RSUs with market condition amounted to $15.4 million. Summarized in the table below are the assumptions used in determining the grant-date fair value of $42.80 using the Monte-Carlo simulation approach for the RSUs with market condition:
Expected term (years) | ||||||||
| Risk-free interest rate | % | |||||||
| Volatility | % | |||||||
| Expected dividend yield | % | |||||||
Stock-based compensation expense relating to the RSUs with market condition is recognized on a straight-line basis over the derived service period of 2 years commencing on grant date, regardless of whether the market condition is satisfied. If the related market condition is achieved earlier than its estimated derived service period, the stock-based compensation expense is accelerated, and a cumulative catch-up expense is recorded during the period in which the market condition is met. Stock-based compensation expense is not reversed if the achievement of the market condition does not occur. Stock-based compensation expense amounted to $1.9 million and $2.5 million for the three and six months ended June 30, 2026, respectively, and presented under “Technology Development” and “General and Administrative” expense line items in the condensed consolidated statements of operations and comprehensive loss.
Stock-based compensation expense
Stock-based compensation expense from stock options, Restricted Stock Units with service condition ("RSUs with service condition") and RSUs with market condition, including equity awards from the Assumed Plans as discussed above and warrants (Note 10), were included and presented in the condensed consolidated statements of operations and comprehensive loss as follows ($ in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Loss and loss adjustment expense, net | $ | $ | $ | $ | ||||||||||||||||||||||
| Other insurance expense | ||||||||||||||||||||||||||
Sales and marketing (1) | ( | |||||||||||||||||||||||||
Technology development (2) | ||||||||||||||||||||||||||
General and administrative (2) | ||||||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||||||||||||
(2) Includes $1.9 million and $2.5 million of compensation expense related to the RSUs with market condition for the three and six months ended June 30, 2026.
20
Stock-based compensation expense classified by award type are included in the condensed consolidated statements of operations and comprehensive loss as follows ($ in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Stock options | $ | $ | $ | $ | ||||||||||||||||||||||
RSUs with service condition | ||||||||||||||||||||||||||
RSUs with market condition | ||||||||||||||||||||||||||
| Warrant shares | ( | |||||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||||||||||||
The total unrecognized expense granted to employees and non-employees outstanding at June 30, 2026 was $26.3 million for the stock options and $226.1 million for the RSUs, with a remaining weighted-average vesting period of 1.2 years for the stock options and 2.5 years for the RSUs. Total unrecognized stock-based compensation expense related to RSUs with market condition amounted to $12.9 million for the six months ended June 30, 2026.
Warrants
In connection with the Warrant Agreement as discussed in Note 10, the Company was authorized to issue 3,352,025 warrant shares with a grant date fair value of $20.37 that will vest in installments on a yearly basis in increasing amounts for a period of five years . Compensation expense is recognized over the vesting period, for each of the installments, in increasing amounts over five years and presented under “Sales and Marketing expense” in the condensed consolidated statements of operations and comprehensive loss. There were 181,191 warrant shares which vested in April 2024 and were exercised in June 2024. As a result of the termination of the Warrant Agreement as discussed in Note 10, the remaining unvested warrant shares of 3,170,834 were canceled. The Company recognized the impact of the canceled unvested warrant shares for contract year 2 in the amount of $5.2 million for the six months ended June 30, 2025.
12. Income Taxes
The consolidated effective tax rate was (3.6 )% and (2.2 )% for the six months ended June 30, 2026 and 2025, respectively. The change in effective tax rate over the two periods was predominantly reflective of the change in profit before tax of the Company's foreign jurisdictions, change in valuation allowance and change in unrecognized tax benefits.
The Company's unrecognized tax benefits related to tax positions, excluding penalty and interest, amounted to $13.4 million and $10.6 million as of June 30, 2026 and 2025, respectively. The increase was primarily due to a prior year change in transfer pricing methodology. Interest and penalties related to unrecognized tax expense (benefits) are recognized in income tax expense, when applicable. Interest and penalties amounted to $1.0 million and $0.6 million as of June 30, 2026 and 2025, respectively. The Company's management believes it is reasonably possible that the unrecognized tax benefits could change within the next 12 months.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the U.S. in 2020 to provide certain relief as a result of the COVID-19 pandemic. The Employee Retention Credit ("ERC") program was established under the CARES Act whereby companies who meet the eligibility requirements may claim a tax credit against certain employment taxes paid in 2020 and 2021. For the period ended June 30, 2025, the Company recorded $11.7 million of tax refund received under the ERC program which is presented under “General and Administrative expense” in the condensed consolidated statements of operations and comprehensive loss.
The One Big Beautiful Bill Act ("OBBBA") enacted on July 4, 2025 includes both tax and non-tax provisions. The changes resulting from the tax provisions in OBBBA did not have a material impact on the Company's results of operations.
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13. Net Loss per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
| Net loss attributable to common stockholders ($ in millions) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
Weighted average common shares outstanding - basic and diluted | ||||||||||||||||||||||||||
Net loss per share attributable to common stockholders - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The Company’s potentially dilutive securities, which include stock options, unvested RSUs and warrants for common stock, have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect.
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Options to purchase common stock | ||||||||||||||
| Unvested restricted stock | ||||||||||||||
Warrants for common stock (1) | ||||||||||||||
| Total | ||||||||||||||
14. Related Party Transactions
The Company’s Chief Executive Officer and President, both of whom are also members of the Company’s board of directors, are the two sole members of the board of directors of the Lemonade Foundation. The Company contributed 500,000 shares of common stock with a fair market value of $24.36 per share (Note 10), of which 400,000 no
15. Commitments and Contingencies
Litigation
The Company is occasionally a party to routine claims or litigation incidental to its business. The Company records accruals for loss contingencies with these legal matters when it is probable that a liability will be incurred, and the amount of the loss can be reasonably estimated.
The Company finalized settlements related to the previously disclosed liability exposure from its car insurance quote flow that likely led to the exposure of certain data received by a third party data provider. An accrual for the net liability of $0.9 million was recorded in accordance with ASC 450, and final settlement was made in July 2026.
The Company will continue to monitor all legal issues and assess whether to accrue liability in accordance with ASC 450 based on new information and as further developments arise.
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Charges and guarantees
The Company provided guarantees in an aggregate amount of $2.7
Assessments
The Company is a member of the California FAIR Plan ("FAIR Plan") which is an insurance pool that provides coverage to California homeowners who are unable to obtain insurance in the voluntary market. To the extent the FAIR Plan is unable to pay losses during a catastrophe event, it may seek regulatory approval to assess member companies based on their relevant market share. Members are also allowed to request prior approval for temporary supplemental fees to recoup up to 50 % of the assessed amount. The Company in February 2025 received an assessment charge of $6.9 million from the FAIR Plan related to the January 2025 California Wildfires which was paid and expensed in the first quarter of 2025. This expense is presented under “Other Insurance Expense” in the condensed consolidated statements of operations and comprehensive loss. The Company received regulatory approval for recoupment of up to 50 % of the assessment over a period of 2 years and was implemented in 2026.
16. Segment Information
The Company operates in one The operating results of the personal property and casualty insurance reportable segment is presented in the following table below ($ in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| less: Loss and loss adjustment expenses, net | ||||||||||||||||||||||||||
| Other insurance expense | ||||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||
| Advertising expenses | ||||||||||||||||||||||||||
| Technology development | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
Other expenses (1) (2) | ( | ( | ( | |||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Segment / Consolidated Net Loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
(1) Includes $11.7 million of tax refund under the ERC program (see Note 12).
(2) Includes $1.7 million recovery related to a pre-acquisition Metromile extra-contractual claim liability which was previously recorded in the third quarter of 2024.
The measure of segment assets is based on total assets as reported on the condensed consolidated balance sheets. The Company does not allocate its assets, including investments, or income taxes in evaluating the segment / consolidated net income (loss).
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Gross written premium by location is as follows ($ in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Location | Amount | % of GWP | Amount | % of GWP | Amount | % of GWP | Amount | % of GWP | ||||||||||||||||||||||||||||||||||||||||||
| California | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Texas | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| New York | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Washington | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Illinois | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| New Jersey | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Colorado | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Florida | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Arizona | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Pennsylvania | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| All other | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| US | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Europe and UK | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes and other information included elsewhere in this Quarterly Report, Annual Report on Form 10-K, and in our other filings with the Securities and Exchange Commission ("SEC"). This discussion and analysis below includes forward-looking statements that are subject to risks, uncertainties and other factors described in the "Risk Factors" section of this Quarterly Report and our Annual Report on Form 10-K that could cause actual results to differ materially from such forward-looking statements. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Our Business
Lemonade is rebuilding insurance from the ground up on a digital substrate and an innovative business model. By leveraging technology, data, artificial intelligence, contemporary design, and social impact, we believe we are making insurance more delightful, more affordable, and more precise. To that end, we have built a vertically-integrated company with wholly-owned insurance carriers in the United States and Europe, including the United Kingdom, and the full technology stack to power them.
A brief chat with our bot, AI Maya, is all it takes to get covered with renters, homeowners, pet, car or life insurance, and we expect to offer a similar experience for other insurance products over time. Claims are filed by chatting with another bot, AI Jim, who pays claims in as little as two seconds. This breezy experience belies the extraordinary technology that enables it: a state-of-the-art platform that spans marketing to underwriting, customer care to claims processing, and finance to regulation. Our architecture melds artificial intelligence with the human kind, and learns from the prodigious data it generates to become even better at delighting customers and evaluating risks.
In addition to digitizing insurance end-to-end, we also reimagined the underlying business model to minimize volatility while maximizing trust and social impact. To lessen the volatility inherent in an industry directly impacted by the weather, we utilize several forms of reinsurance, with the goal of dampening the impact on our gross margin. The result is that excess claims are generally offloaded to reinsurers, while excess premiums can be donated to nonprofits selected by our customers as part of our annual "Giveback". These two ballasts reinsurance, which reduces volatility, and Giveback, which creates an aligned, trustful, and values-rich relationship with our customers, are central to our model.
New Business Financing Agreement
On June 22, 2026, we entered into a New Business Financing Agreement (the “Financing Agreement”) with Hannover Re (Ireland) DAC ("Hannover Re") under which Hannover Re will provide up to $250 million of outstanding capital related to the financing of our sales and marketing growth efforts. This Financing Agreement is subject to a maximum outstanding capital amount of $150 million from January 1, 2027 through December 31, 2027, and up to $250 million at any time during the period from January 1, 2028 through December 31, 2028.
Under the Agreement, subject to certain terms and conditions, at the start of each month, Hannover Re shall provide financing of up to 80 % of our growth spend but not to exceed $20 million per reference cohort. We will repay each amount financed based on a specific percentage of premiums collected for assigned customer cohorts associated with the funded growth spend. This repayment amount will include the funding amount plus a rate of return in accordance with the Counterparty Cap Amount, defined as the sum of (a) the greater of (i) 0 % or (ii) the three-year U.S. Treasury Bill rate, plus (b) 5.8 %. Once fully repaid, we will retain all future reference premium related to each assigned customer cohorts. The Agreement also includes certain financial covenants, cancellation and commitment termination provisions.
Beginning January 1, 2027, financing of our sales and marketing growth efforts shall solely be under the Financing Agreement with Hannover Re. Separate reference premium from customer cohorts shall be attributed to financing with Hannover Re. Reference premium from customer cohorts under the Amended and Restated Agreement will continue to be applied to financing with GC.
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Customer Investment Agreement
On June 28, 2023, we entered into a Customer Investment Agreement (the “Agreement”), with GC Customer Value Arranger, LLC (a General Catalyst company) ("GC") under which GC agreed to provide up to $150 million of financing for our sales and marketing growth efforts through December 31, 2024. Under the Agreement, subject to certain terms and conditions specified therein, at the start of each growth period, an Investment Amount of between 50% to 80% of our growth spend (the "Investment Amount") will be advanced by GC. During each growth period, we repay a portion of each outstanding Investment Amount including a 16% rate of return based upon an agreed schedule. Once fully repaid, we retain all future reference income related to each respective Investment Amount.
The Agreement has been amended and restated on several occasions to extend the commitment period and increase the financing agreement. On January 8, 2024, the Agreement was amended and restated to provide up to an additional $140 million of financing December 31, 2025. On February 3, 2025, the Agreement was further amended to provide up to an additional $200 million of financing from January 1, 2026 through December 31, 2026 for our sales and marketing growth efforts. In addition, the Agreement was amended in April 2024, June 2024 and December 2025 to clarify certain provisions with no material changes to terms and conditions. The Agreement, as amended and restated (the “Amended and Restated Agreement”) contains standard customary representations, warranties and covenants by the parties, and will continue in effect unless terminated by any party pursuant to its terms.
As of June 30, 2026, we had $206.4 million of outstanding borrowings under the Amended and Restated Agreement. We incurred interest expense of $13.2 million for the six months ended June 30, 2026.
Key Factors and Trends Affecting our Operating Results
Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:
Seasonality
Seasonal patterns can impact both our rate of customer acquisition and the incurrence of losses.
Based on historical experience, existing and potential customers move more frequently in the third quarter, compared to the rest of the calendar year. As a result, we may see greater demand for new or expanded insurance coverage, and increased online engagement resulting in proportionately more growth during the third quarter. We expect that as we grow our customers, expand geographically, and launch new products, the impact of seasonal variability on our rate of growth may decrease.
Additionally, seasonal weather patterns impact the level and amount of claims we receive. These patterns include hurricanes, wildfires, and coastal storms in the fall, cold weather patterns, and changing home heating needs in the winter, and tornados and hailstorms in the spring and summer. The mix of geographic exposure and products within our customer base impacts our exposure to these weather patterns. For additional information, see “Risk Factors - Risks Relating to our Industry - Severe weather events and other catastrophes, including the effects of climate change and global pandemics, are inherently unpredictable and may have a material adverse effect on our financial results and financial condition.” in our Annual Report on Form 10-K.
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Current Macroeconomic Environment
Changing U.S. and global economic conditions may impact our business. Evolving U.S. trade policy, including tariffs imposed on imported goods in 2025, could affect our claims costs. In February 2026, the United States Supreme Court ruled that the use of the International Emergency Economic Powers Act ("IEEPA") to impose tariffs was not authorized by Congress, invalidating a significant portion of tariffs that had been in effect since April 2025. While the ruling struck down the IEEPA-based tariffs, it does not prevent the administration from imposing tariffs using other legal authorities. Following the ruling, the administration invoked alternative statutory authorities imposing a global tariff, and the administration has indicated its intention to continue to pursue alternative statutory mechanisms to reinstate or impose new tariffs. Tariffs on building materials may increase home repair costs, tariffs on automotive parts may increase vehicle repair and replacement costs, and tariffs on consumer goods may increase the cost of replacing covered personal property. To the extent tariff-driven cost increases are sustained, we may seek premium rate adjustments, subject to regulatory approval in applicable states; however, there may be a lag between when we experience increased claims costs and when we are able to implement corresponding rate increases, which could negatively impact our loss ratios in the interim. More broadly, inflation, whether driven by tariffs, supply chain disruptions, labor market conditions, or other factors, if any, has impacted and could continue to impact our claims costs, product pricing and investment yield, among other impacts. Capital market volatility may also affect our investment portfolio and access to capital. The actual effects of these macroeconomic factors on our results remains unknown and cannot be estimated with precision.
We conduct certain of our operations in Israel and therefore our results may be adversely affected by political, economic and military instability and conflict in Israel and the surrounding region. There is still uncertainty regarding the extent to which the war and its broader macroeconomic implications will impact our operations in Israel. We will continue to evaluate the extent to which this may impact our business, financial condition, or results of operations. These and other uncertainties could result in changes to our current expectations. For additional information, see "Risk Factors - Risks Relating to our Business - We conduct certain of our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and the surrounding region." in our Annual Report on Form 10-K.
Reinsurance
We obtain reinsurance to help manage our exposure to property and casualty insurance risks. Although our reinsurance counterparties are liable to us according to the terms of the reinsurance policies, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured. For additional information, see "Risk Factors - Risks Relating to Our Business" and "Risks Relating to Our Industry" in our Annual Report on Form 10-K. As a result, reinsurance does not eliminate the obligation of our insurance subsidiaries to pay all claims, and we are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits inherent in our reinsurance contracts, each of which could have a material effect on our results of operations and financial condition. Furthermore, reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business.
We maintain proportional reinsurance contracts which cover all of the Company's products and geographies, and transfer, or “cede,” a specified percentage of the premium to reinsurers. We also manage a portion of the remaining business with non-proportional reinsurance contracts.
We agreed to the terms of our reinsurance program effective July 1, 2025 through June 30, 2026 which included Whole Account Quota Share Reinsurance Contracts by and among the Company, Lemonade Insurance Company ("LIC"), Metromile Insurance Company ("MIC") and Lemonade Insurance N.V. ("LINV"), and each of Hannover Ruck SE ("Hannover") and MAPFRE Re Compania De Reaseguros S.A. ("MAPFRE") (collectively referred to as “Reinsurers”) ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," approximately 20% of premium to the Reinsurers. In exchange, these Reinsurers pay us a ceding commission on all premiums ceded to the Reinsurers, in addition to funding the corresponding claims, subject to certain limitations, including but not limited to, the exclusion of hurricane losses, and a limit of $10,000,000 per occurrence for non-hurricane catastrophe losses. The Per Risk Cap across the contracts is $750,000. Additionally, these contracts are subject to loss ratio caps and variable ceding commission, which align our interests with those of our Reinsurers and is settled primarily on a funds withheld basis. We renewed the Reinsurance Program with Hannover and MAPFRE effective July 1, 2026 and will expire on June 30, 2027, with a reduced effective cession rate of 18% of premiums to Reinsurers. The renewed terms include a $40,000,000 limit per loss occurrence and $100,000,000 in aggregate, including catastrophe losses as defined in the agreement. Other terms are similar to the contracts that expired on June 30, 2026.
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LIC and MIC entered into a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract") which was effective July 1, 2025 and expired on June 30, 2026. Under the PPR Contract, claims in excess of $750,000 were 100% ceded up to a maximum recovery of $2,250,000, subject to certain limitations. The PPR Contract was not renewed.
We also entered into an Excess of Loss Reinsurance Contract (the "XOL reinsurance contract") through a captive in Bermuda in which we have a variable interest. This XOL reinsurance contract primarily covers catastrophe risk on property and car business underwritten by LIC and MIC over the initial $50,000,000 limit for each loss occurrence, and further subject to a limit of $80,000,000 for each loss occurrence and in aggregate. This XOL reinsurance contract which was effective July 1, 2025 expired on June 30, 2026. The XOL reinsurance contract between the captive and LIC was renewed effective July 1, 2026 and will expire on June 30, 2027, with a limit of liability of $50,000,000 for each loss occurrence and in aggregate. The XOL reinsurance contract between the captive and MIC was not renewed.
We are also exposed to some risks on property, car and pet insurance underwritten by LIC and MIC ceded through Quota Share Reinsurance Contracts (the "QS reinsurance contracts") which is retained in an offshore captive subsidiary, Lemonade Re SPC in the Cayman Islands. The MIC QS reinsurance contract which became effective July 1, 2025 was terminated and the parties agreed to a new QS reinsurance contract effective July 1, 2026 with an increase in cession rate from 35% to 40%. The MIC QS reinsurance contract will remain effective for an indefinite period until terminated by either party. The LIC QS reinsurance contract was renewed effective on July 1, 2026 through June 30, 2027 with an increase in cession rate from 15% to 25%.
Through our captives, we are exposed to the risk of natural catastrophe events and other covered risks under the reinsurance agreements from assumed risks from policies underwritten by both LIC and MIC.
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Components of our Results of Operations
Revenue
Gross Written Premium
Gross written premium is the amount received, or to be received, for insurance policies written by us during a specific period of time without reduction for premiums ceded to reinsurers. Gross written premium includes direct and assumed premium. The volume of our gross written premium in any given period is generally influenced by new business submissions, binding of new business submissions into policies, renewals of existing policies, and average size and premium rate of bound policies.
Ceded Written Premium
Ceded written premium is the amount of gross written premium ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses as well as to provide additional capacity for growth. Ceded written premium is earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premium is impacted by the level of our gross written premium and any decision we make to increase or decrease reinsurance limits, retention levels, and co-participation. Our ceded written premium can also be impacted significantly in certain periods due to changes in reinsurance agreements. In periods where we start or stop ceding a large volume of our premium, ceded written premium may increase or decrease significantly compared to prior periods and these fluctuations may not be indicative of future trends.
Gross Earned Premium
Gross earned premium represents the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. Our insurance policies generally have a term of one year and premium is earned pro rata over the term of the policy. In addition, we also include earned premiums from the pay-per-mile car insurance policies which are written for six-month terms. Premium for the policy provides a base rate per month for the entire policy term upon binding of the policy plus a per-mile rate multiplied by the miles driven each day (based on data from the telematics device, subject to a daily maximum).
Ceded Earned Premium
Ceded earned premium is the amount of gross earned premium ceded to reinsurers.
Net Earned Premium
Net earned premium represents the earned portion of our gross written premium, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements. Premium is earned pro rata over the term of the policy, which is generally one year. Net earned premium from the pay-per-mile car insurance policies is earned over the term of the policy which is written for six-month terms.
Ceding Commission Income
Ceding commission income is commission we receive based on the premium ceded to third-party reinsurers to reimburse us for acquisition and underwriting expenses. We earn commissions on reinsurance premium ceded in a manner consistent with the recognition of the earned premium on the underlying insurance policies, on a pro-rata basis over the terms of the policies reinsured. The portion of ceding commission income which represents reimbursement of successful acquisition costs related to the underlying policies is recorded as an offset to other insurance expense.
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Net Investment Income
Net investment income represents interest earned from fixed maturity securities, short term and other investments, net of investment fees paid to the Company's investment manager. Our cash and invested assets are primarily comprised of fixed maturity securities, and may also include cash and cash equivalents, equity securities, and short-term investments. The principal factors that influence net investment income are the size of our investment portfolio and the yield on that portfolio. As measured by amortized cost (which excludes changes in fair value, such as changes in interest rates), the size of our investment portfolio is mainly a function of our invested equity capital along with premium we receive from our customers less payments on customer claims. Over time, we expect that net investment income will represent a more meaningful component of our results of operations.
Commission and Other Income
Commission income consists of commissions earned for policies placed with third-party insurance companies where we have no exposure to the insured risk. Such commission is recognized on the effective date of the associated policy which is when the performance obligation is completed. Other income primarily consists of fees collected from policyholders relating to installment premiums. These fees are recognized at the time each policy installment is billed. Other income also includes net realized gains or losses from sale of investments and sublease income.
Expense
Loss and Loss Adjustment Expense, Net
Loss and loss adjustment expense ("LAE"), net represent the costs incurred for losses net of amounts ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses as well as to provide additional capacity for growth. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying risks. Loss and LAE are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Loss and LAE may be paid out over a period of years. Certain policies we write are subject to catastrophe losses. Catastrophe losses are losses resulting from events involving claims and policyholders, including earthquakes, hurricanes, floods, storms, terrorist acts or other aggregating events that are designated by internationally recognized organizations, such as Property Claims Services, that track and report on insured losses resulting from catastrophic events.
Other Insurance Expense
Other insurance expense consists primarily of amortization of commissions and premium taxes incurred on the successful acquisition of business written on a direct basis, and credit card processing fees not charged to our customers. Other insurance expense also includes employee compensation, including stock-based compensation and benefits, of our underwriting teams as well as allocated occupancy costs and related overhead based on headcount. Other insurance expense is partially offset by the portion of ceding commission income which represents reimbursement of successful acquisition costs related to the underlying policies.
Sales and Marketing
Sales and marketing includes third-party marketing, advertising, branding, public relations and sales expenses. Sales and marketing also includes associated employee compensation and benefits, including employee and non-employee stock-based compensation and benefits, as well as allocated occupancy costs and related overhead based on headcount. Sales and marketing costs are expensed as incurred.
We plan to continue to invest in sales and marketing to attract and acquire new customers and increase our brand awareness. We expect that, in the long-term, our sales and marketing costs will decrease as a percentage of revenue as we continue to drive customer acquisition efficiencies and as the proportion of renewals to our total business increases.
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Technology Development
Technology development consists of employee compensation, including stock-based compensation and benefits, and expenses related to vendors engaged in product management, design, development and testing of our websites and products. Technology development also includes allocated occupancy costs and related overhead based on headcount. We expense technology development costs as incurred, except for costs that are capitalized related to internal-use software development projects and subsequently depreciated over the expected useful life of the developed software.
We expect to continue to incur product technology development costs, a portion of which will be capitalized, to continue to grow in the foreseeable future as we identify opportunities to invest in the development of new products and internal tools and enhancement of our existing products and technologies that we believe will drive the long-term profitability of the business.
General and Administrative
General and administrative includes employee compensation, including stock-based compensation and benefits for executive, finance, accounting, legal, business operations, and other administrative personnel. In addition, general and administrative includes outside professional services, non-income based taxes, insurance, charitable donations, bad debt expense and allocated occupancy costs and related overhead based on headcount. Depreciation and amortization expense, interest expense on borrowings under the financing agreement, and non-recurring items, if any, are also recorded as a component of general and administrative.
We expect to continue to incur incremental general and administrative costs to support our global operational growth and enhancements to support our reporting and planning functions.
We have incurred and expect to continue to incur significant additional general and administrative expense as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the New York Stock Exchange, additional corporate, director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees.
Income Tax Expense
Our provision for income taxes consists primarily of foreign income taxes related to income generated by our subsidiaries organized under the laws of the Netherlands and Israel. As we expand the scale of our international business activities, any changes in the U.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future.
We have a valuation allowance for our U.S. and U.K. deferred tax assets, including federal and state net operating losses and U.K. net operating losses. We expect to maintain this valuation allowance until it becomes more likely than not, that the benefit of our federal and state deferred tax assets will be realized through expected future taxable income in the U.S. and U.K., respectively.
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Key Operating and Financial Metrics
We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe these non-GAAP and operational measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). See “- Non-GAAP Financial Measures” for additional information on non-GAAP financial measures and a reconciliation to the most directly comparable financial measures prepared in accordance with U.S. GAAP.
The following table sets forth these metrics as of and for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| ($ in millions, except Premium per customer) | ($ in millions, except Premium per customer) | ||||||||||||||||||||||
| Customers (end of period) | 3,308,666 | 2,693,107 | 3,308,666 | 2,693,107 | |||||||||||||||||||
| In force premium (end of period) | $ | 1,434.3 | $ | 1,083.4 | $ | 1,434.3 | $ | 1,083.4 | |||||||||||||||
| Premium per customer (end of period) | $ | 433 | $ | 402 | $ | 433 | $ | 402 | |||||||||||||||
Annual dollar retention (end of period) | 85 | % | 84 | % | 85 | % | 84 | % | |||||||||||||||
| Total revenue | $ | 294.4 | $ | 164.1 | $ | 552.4 | $ | 315.3 | |||||||||||||||
| Gross earned premium | $ | 332.4 | $ | 252.3 | $ | 638.6 | $ | 485.9 | |||||||||||||||
| Gross profit | $ | 113.2 | $ | 64.3 | $ | 213.3 | $ | 102.9 | |||||||||||||||
| Adjusted gross profit | $ | 114.4 | $ | 65.6 | $ | 215.2 | $ | 111.6 | |||||||||||||||
| Net loss | $ | (43.4) | $ | (43.9) | $ | (79.2) | $ | (106.3) | |||||||||||||||
| Adjusted EBITDA | $ | (18.7) | $ | (40.9) | $ | (35.8) | $ | (87.9) | |||||||||||||||
| Gross profit margin | 38 | % | 39 | % | 39 | % | 33 | % | |||||||||||||||
| Adjusted gross profit margin | 39 | % | 40 | % | 39 | % | 35 | % | |||||||||||||||
Ratio of Adjusted gross profit to Gross earned premium | 34 | % | 26 | % | 34 | % | 23 | % | |||||||||||||||
| Gross loss ratio | 60 | % | 67 | % | 61 | % | 73 | % | |||||||||||||||
| Net loss ratio | 61 | % | 69 | % | 62 | % | 75 | % | |||||||||||||||
Customers
We define customers as the number of current policyholders underwritten by us or placed by us with third-party insurance partners (who pay us recurring commissions) as of the period end date. A customer that has more than one policy counts as a single customer for the purposes of this metric. We view customers as an important metric to assess our financial performance because customer growth drives our revenue, expands brand awareness, deepens our market penetration, creates additional upsell and cross-sell opportunities, and generates additional data to continue to improve the functioning of our platform.
In Force Premium
We define in force premium ("IFP"), as the aggregate annualized premium for customers as of the period end date. At each period end date, we calculate IFP as the sum of:
i)In force written premium - the annualized premium of in force policies underwritten by us; and
ii)In force placed premium - the annualized premium of in force policies placed with third party insurance companies for which we earn a recurring commission payment. In force placed premium currently reflects approximately 4% of IFP.
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The annualized value of premiums is a legal and contractual determination made by assessing the contractual terms with our customers. The annualized value of contracts is not determined by reference to historical revenues, deferred revenues or any other GAAP financial measure over any period. IFP is not a forecast of future revenues nor is it a reliable indicator of revenue expected to be earned in any given period. We believe that our calculation of IFP is useful to analysts and investors because it captures the impact of growth in customers and premium per customer at the end of each reported period, without adjusting for known or projected policy updates, cancellations, rescissions, and non-renewals. We use IFP because we believe it gives our management useful insight into the total reach of our platform by showing all in force policies underwritten and placed by us. Other companies, including companies in our industry, may calculate IFP differently or not at all, which reduces the usefulness of IFP as a tool for comparison.
Premium per customer
We define premium per customer as the average annualized premium customers pay for products underwritten by us or placed by us with third-party insurance partners. We calculate premium per customer by dividing IFP by customers. We view premium per customer as an important metric to assess our financial performance because premium per customer reflects the average amount of money our customers spend on our products, which helps drive strategic initiatives.
Annual Dollar Retention
We define Annual Dollar Retention ("ADR"), as the percentage of IFP retained over a twelve month period, inclusive of changes in policy value, changes in number of policies, changes in policy type, and churn. To calculate ADR we first aggregate the IFP from all active customers at the beginning of the period and then aggregate the IFP from those same customers at the end of the period. ADR is then equal to the ratio of ending IFP to beginning IFP. We believe that our calculation of ADR is useful to analysts and investors because it captures our ability to retain customers and sell additional products and coverage to them over time. We view ADR as an important metric to measure our ability to provide a delightful end-to-end customer experience, satisfy our customers’ evolving insurance needs and maintain our customers’ trust in our products. Our customers become more valuable to us every year they continue to subscribe to our products. Other companies, including companies in our industry, may calculate ADR differently or not at all, which reduces the usefulness of ADR as a tool for comparison.
Gross Earned Premium
Gross earned premium is the earned portion of our gross written premium. Gross earned premium includes direct and assumed premium. We have assumed premium related to car insurance policies written in Texas, in connection with our fronting arrangement with a third party carrier in Texas.
We use this operating metric as we believe it gives our management and other users of our financial information useful insight into the gross economic benefit generated by our business operations and allows us to evaluate our underwriting performance without regard to changes in our underlying reinsurance structure. See “Components of Our Results of Operations - Revenue - Gross Earned Premium.”
Unlike net earned premium, gross earned premium excludes the impact of premiums ceded to reinsurers, and therefore should not be used as a substitute for net earned premium, total revenue, or any other measure presented in accordance with GAAP.
Gross Profit
Gross profit is calculated in accordance with GAAP as total revenue less loss and loss adjustment expense, net, other insurance expense, and depreciation and amortization (allocated to cost of revenue).
Adjusted Gross Profit
We define adjusted gross profit, a non-GAAP financial measure, as:
•Gross profit, excluding net investment income, interest income and other income, plus
•Employee-related expense, plus
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•Professional fees and other, plus
•Depreciation and amortization (allocated to cost of revenue).
See “Non-GAAP Financial Measures” for a reconciliation of total revenue to adjusted gross profit.
Adjusted EBITDA
We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding the impact of income tax expense, depreciation and amortization, stock-based compensation, interest expense, interest income and others, net investment income, amortization of fair value adjustment on insurance contract intangible liability relating to the acquisition of Metromile, and other one time and non-cash adjustments and other transactions that we consider to be unique in nature. See “Non-GAAP Financial Measures” for a reconciliation of net loss to adjusted EBITDA in accordance with GAAP.
Gross Profit Margin
We define gross profit margin, expressed as a percentage, as the ratio of gross profit to total revenue.
Adjusted Gross Profit Margin
We define adjusted gross profit margin, a non-GAAP financial measure, expressed as a percentage, as the ratio of adjusted gross profit to total revenue. See “Non-GAAP Financial Measures.”
Ratio of Adjusted Gross Profit to Gross Earned Premium
We define Ratio of Adjusted Gross Profit to Gross Earned Premium, a non-GAAP financial measure, expressed as a percentage, as the ratio of adjusted gross profit to gross earned premium. Our Ratio of Adjusted Gross Profit to Gross Earned Premium provides management with useful insight into our operating performance. See “Non-GAAP Financial Measures.”
Gross Loss Ratio
We define gross loss ratio, expressed as a percentage, as the ratio of losses and loss adjustment expense to gross earned premium.
Net Loss Ratio
We define net loss ratio, expressed as a percentage, as the ratio of losses and loss adjustment expense, less amounts ceded to reinsurers, to net earned premium.
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Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Net earned premium | $ | 252.0 | $ | 112.5 | $ | 139.5 | 124 | % | |||||||||||||||
| Ceding commission income | 20.4 | 30.4 | (10.0) | (33) | % | ||||||||||||||||||
| Net investment income | 9.7 | 9.4 | 0.3 | 3 | % | ||||||||||||||||||
| Commission and other income | 12.3 | 11.8 | 0.5 | 4 | % | ||||||||||||||||||
| Total revenue | 294.4 | 164.1 | 130.3 | 79 | % | ||||||||||||||||||
| Expense | |||||||||||||||||||||||
| Loss and loss adjustment expense, net | 154.0 | 77.5 | 76.5 | 99 | % | ||||||||||||||||||
| Other insurance expense | 26.7 | 21.4 | 5.3 | 25 | % | ||||||||||||||||||
| Sales and marketing | 77.7 | 59.6 | 18.1 | 30 | % | ||||||||||||||||||
| Technology development | 30.0 | 22.4 | 7.6 | 34 | % | ||||||||||||||||||
| General and administrative | 47.8 | 25.8 | 22.0 | 85 | % | ||||||||||||||||||
| Total expense | 336.2 | 206.7 | 129.5 | 63 | % | ||||||||||||||||||
| Loss before income taxes | (41.8) | (42.6) | 0.8 | (2) | % | ||||||||||||||||||
| Income tax expense | 1.6 | 1.3 | 0.3 | 23 | % | ||||||||||||||||||
| Net loss | $ | (43.4) | $ | (43.9) | $ | 0.5 | (1) | % | |||||||||||||||
Net Earned Premium
Net earned premium increased $139.5 million, or 124%, to $252.0 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily due to the earning of increased gross written premium and the impact of the reduced cession rate from the Company's reinsurance program as discussed in more detail in the "Reinsurance" section above.
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Gross written premium | $ | 380.0 | $ | 284.5 | $ | 95.5 | 34 | % | |||||||||||||||
| Ceded written premium | (81.9) | (157.1) | 75.2 | (48) | % | ||||||||||||||||||
| Net written premium | $ | 298.1 | $ | 127.4 | $ | 170.7 | 134 | % | |||||||||||||||
Gross written premium increased $95.5 million, or 34%, to $380.0 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily due to a 23% increase in customers year over year driven by the success of our digital advertising campaigns and partnerships. We also continued to expand our geographic footprint and product offerings. In addition, we also saw a 8% increase in premium per customer year over year due to an increasing prevalence of multiple policies per customer, growth in the overall average policy value, and continued shift in the mix of underlying products toward higher value policies. Assumed premium related to car insurance policies written in Texas through our fronting arrangement with a third party carrier in Texas also contributed to the increase in gross written premium during the period.
Ceded written premium decreased $75.2 million, or 48%, to $81.9 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily due to the impact of the reduced cession rate from the Company's reinsurance program, offset by growth in business across all products. See "Reinsurance" above for further information.
Net written premium increased $170.7 million, or 134%, to $298.1 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
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The table below shows the amount of premium we earned on a gross and net basis. Ceded earned premium as a percentage of gross earned premium is at 24% and 55% for the three months ended June 30, 2026 and 2025, respectively, consistent with the change in our participation rate from our reinsurance contracts as discussed in more detail in the "Reinsurance" section above.
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Gross earned premium | $ | 332.4 | $ | 252.3 | $ | 80.1 | 32 | % | |||||||||||||||
| Ceded earned premium | (80.4) | (139.8) | 59.4 | (42) | % | ||||||||||||||||||
| Net earned premium | $ | 252.0 | $ | 112.5 | $ | 139.5 | 124 | % | |||||||||||||||
Ceding Commission Income
Ceding commission income decreased $10.0 million, or 33%, to $20.4 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, consistent with the reduction in cession rate from the reinsurance program.
Net Investment Income
Net investment income increased $0.3 million, or 3% to $9.7 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily driven by the diversification of the Company's investment portfolio with higher returns offset by investment expenses. We mainly invest in cash, money market funds, U.S. Treasury bills, corporate debt securities, asset-backed securities, notes and other obligations issued or guaranteed by the U.S. Government and Non-U.S. Government.
Commission and Other Income
Commission and other income increased $0.5 million, or 4%, to $12.3 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily due to installment fees and continued growth on premium placed with third-party insurance companies during the period.
Loss and Loss Adjustment Expense, Net
Loss and LAE, net increased $76.5 million, or 99%, to $154.0 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was due to growth in premium and impact of the reduced cession rate from the reinsurance program, offset by reserve releases due to better than expected loss reserve emergence on homeowners multi-peril line of business and car.
Insurance Expense
Other insurance expense increased $5.3 million, or 25%, to $26.7 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Amortization of deferred acquisition costs, net of ceding commissions increased $3.3 million, or 85% as compared to the three months ended June 30, 2025 as a result of growth in business across all products. Credit card processing fees increased $2.0 million, or 35%, as compared to the three months ended June 30, 2025 as a result of the increase in customers and associated premium. Employee-related expense decreased $1.1 million or 18%, as compared to the three months ended June 30, 2025.
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Sales and Marketing
Sales and marketing expense increased $18.1 million, or 30%, to $77.7 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 primarily due to brand and performance advertising, which is the largest component of our sales and marketing expenses. Expense related to advertising, other customer acquisition channels and partner payments increased $14.7 million, or 30%, as compared to the three months ended June 30, 2025 consistent with growth in our business. Employee-related expense, including stock-based compensation, increased $1.5 million, or 21%, as compared to three months ended June 30, 2025.
Technology Development
Technology development expense increased $7.6 million, or 34%, to $30.0 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Employee-related expense, including stock-based compensation, and net of capitalized costs for the development of internal-use software, increased $5.7 million, or 31%, as compared to the three months ended June 30, 2025 primarily due to increase in headcount. Software expense increased $1.5 million, or 125%, as compared to the three months ended June 30, 2025.
General and Administrative
General and administrative expense increased $22.0 million, or 85%, to $47.8 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Employee-related expense, including stock-based compensation, increased $7.7 million, or 50%, as compared to three months ended June 30, 2025. Interest expense related to borrowings from financing agreement with GC increased $3.0 million, or 75%, as compared to three months ended June 30, 2025 due to increased borrowings during the period. Bad debt expense increased by $2.1 million or 49%, as compared to three months ended June 30, 2025. Depreciation and amortization decreased by $2.3 million, or 49% as compared to three months ended June 30, 2025. During the three months ended June 30, 2025, we also recorded $11.7 million of tax refund received under the ERC program.
Income Tax Expense
Income tax expense slightly increased by $0.3 million, or 23%, to $1.6 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by increase in foreign income tax expense and unrecognized tax benefits.
Net Loss
Net loss slightly decreased by $0.5 million, or 1%, to $43.4 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 due to the factors described above.
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Comparison of the Six Months Ended June 30, 2026 and 2025
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Net earned premium | $ | 464.6 | $ | 216.8 | $ | 247.8 | 114 | % | |||||||||||||||
| Ceding commission income | 44.0 | 57.3 | (13.3) | (23) | % | ||||||||||||||||||
| Net investment income | 19.5 | 18.9 | 0.6 | 3 | % | ||||||||||||||||||
| Commission and other income | 24.3 | 22.3 | 2.0 | 9 | % | ||||||||||||||||||
| Total revenue | 552.4 | 315.3 | 237.1 | 75 | % | ||||||||||||||||||
| Expense | |||||||||||||||||||||||
| Loss and loss adjustment expense, net | 287.3 | 162.9 | 124.4 | 76 | % | ||||||||||||||||||
| Other insurance expense | 50.8 | 47.5 | 3.3 | 7 | % | ||||||||||||||||||
| Sales and marketing | 143.8 | 102.8 | 41.0 | 40 | % | ||||||||||||||||||
| Technology development | 56.9 | 44.4 | 12.5 | 28 | % | ||||||||||||||||||
| General and administrative | 90.0 | 61.7 | 28.3 | 46 | % | ||||||||||||||||||
| Total expense | 628.8 | 419.3 | 209.5 | 50 | % | ||||||||||||||||||
| Loss before income taxes | (76.4) | (104.0) | 27.6 | (27) | % | ||||||||||||||||||
| Income tax expense | 2.8 | 2.3 | 0.5 | 22 | % | ||||||||||||||||||
| Net loss | $ | (79.2) | $ | (106.3) | $ | 27.1 | (25) | % | |||||||||||||||
Net Earned Premium
Net earned premium increased $247.8 million, or 114%, to $464.6 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to the earning of increased gross written premium and impact of the reduced cession rate from the Company's reinsurance program as discussed in more detail in the "Reinsurance" section above.
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Gross written premium | $ | 723.9 | $ | 538.7 | $ | 185.2 | 34 | % | |||||||||||||||
| Ceded written premium | (151.8) | (295.9) | 144.1 | (49) | % | ||||||||||||||||||
| Net written premium | $ | 572.1 | $ | 242.8 | $ | 329.3 | 136 | % | |||||||||||||||
Gross written premium increased $185.2 million, or 34%, to $723.9 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was primarily due to a 23% increase in customers year over year driven by the success of our digital advertising campaigns and partnerships. We also continued to expand our geographic footprint and product offerings. We also saw a 8% increase in premium per customer year over year primarily due to an increasing prevalence of multiple policies per customer, growth in the overall average policy value, and continued shift in the mix of underlying products toward higher value policies. Assumed premium related to car insurance policies written in Texas from our fronting arrangement with a third party carrier in Texas also contributed to the increase in gross written premium during the period.
Ceded written premium decreased $144.1 million, or 49%, to $151.8 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to impact of the reduced cession rate from the Company's reinsurance program, offset by growth in business across all products. See "Reinsurance" above for further information.
Net written premium increased $329.3 million, or 136%, to $572.1 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 due to factors noted above.
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The table below shows the amount of premium we earned on a gross and net basis. Ceded earned premium as a percentage of gross earned premium is at 27% and 55% for the six months ended June 30, 2026 and 2025, consistent with the change in our participation rate from our reinsurance contracts as discussed in more detail in the "Reinsurance" section above.
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Gross earned premium | $ | 638.6 | $ | 485.9 | $ | 152.7 | 31 | % | |||||||||||||||
| Ceded earned premium | (174.0) | (269.1) | 95.1 | (35) | % | ||||||||||||||||||
| Net earned premium | $ | 464.6 | $ | 216.8 | $ | 247.8 | 114 | % | |||||||||||||||
Ceding Commission Income
Ceding commission income decreased $13.3 million, or 23%, to $44.0 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, consistent with the reduction in cession rate from the reinsurance program.
Net Investment Income
Net investment income increased $0.6 million, or 3%, to $19.5 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was primarily driven by the diversification of the Company's investment portfolio with higher returns offset by investment expenses. We mainly invest in cash, money market funds, U.S. Treasury bills, corporate debt securities, asset-backed securities, notes and other obligations issued or guaranteed by the U.S. and non-U.S. Government.
Commission and Other Income
Commission and other income increased $2.0 million, or 9%, to $24.3 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, due to installment fees and continued growth on premium placed with third-party insurance companies during the period.
Loss and Loss Adjustment Expense, Net
Loss and LAE, net increased $124.4 million, or 76%, to $287.3 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was due to growth in premium offset by reserve releases due to better than expected loss reserve emergence on homeowners multi-peril line of business and car. Net incurred losses included the impact of the California Wildfires in January 2025 in the amount of $19.6 million for the six months ended June 30, 2025.
Other Insurance Expense
Other insurance expense increased $3.3 million, or 7%, to $50.8 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 consistent with growth in business. Amortization of deferred acquisition costs, net of ceding commissions increased $5.5 million, or 75%, as compared to the six months ended June 30, 2025. Credit card fees increased $4.0 million, or 37%, as compared to the six months ended June 30, 2025, as a result of the increase in customers and associated premium. Insurance regulatory fees increased $1.3 million, or 87%, as compared to the six months ended June 30, 2025. Employee-related expense decreased $2.3 million or 19%, as compared to the six months ended June 30, 2025. During the six months ended June 30, 2025, we recorded the California FAIR Plan assessment charge of $6.9 million related to the January 2025 California Wildfires.
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Sales and Marketing
Sales and marketing expense increased $41.0 million, or 40%, to $143.8 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to brand and performance advertising, which is the largest component of our sales and marketing expenses. Expense related to advertising, other customer acquisition channels and partner payments increased $30.9 million, or 35%, as compared to the six months ended June 30, 2025 consistent with growth in our business. Employee-related expense, including stock-based compensation, increased $2.4 million, or 17%, as compared to six months ended June 30, 2025. Compensation expense related to the warrant shares of $5.2 million due to the termination of the Warrant Agreement with Chewy was recorded during the six months ended June 30, 2025.
Technology Development
Technology development expense increased $12.5 million, or 28%, to $56.9 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Employee-related expense, including stock-based compensation, net of capitalized costs for the development of internal-use software, increased $9.9 million, or 28% , for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Software expense increased by $2.4 million, or 100%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
General and Administrative
General and administrative expense increased $28.3 million, or 46%, to $90.0 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Employee-related expense, including stock-based compensation, increased by $12.6 million, or 41%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Interest expense related to borrowings from financing agreement with GC increased $5.9 million, or 81%, as compared to six months ended June 30, 2025 due to increased borrowings during the period. Bad debt expense increased $3.4 million, or 38% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Depreciation and amortization expense decreased $4.1 million, or 45% for the six months ended June 30, 2026 compared to six months ended June 30, 2025. During the six months ended June 30, 2025, we also recorded $11.7 million of tax refund received under the ERC program.
Income Tax Expense
Income tax expense increased $0.5 million, or 22%, to $2.8 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily driven by increase in foreign income tax expense and unrecognized tax benefits.
Net Loss
Net loss decreased $27.1 million, or 25%, to $79.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 due to the factors described above.
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Non-GAAP Financial Measures
The non-GAAP financial measures below have not been calculated in accordance with U.S. GAAP and should be considered in addition to results prepared in accordance with U.S. GAAP and should not be considered as a substitute for, or superior to, U.S. GAAP results. In addition, adjusted gross profit, adjusted gross profit margin, ratio of adjusted gross profit to gross earned premium, and adjusted EBITDA should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.
Our management uses these non-GAAP financial measures, in conjunction with U.S. GAAP financial measures, as an integral part of managing our business and to, among other things: (i) monitor and evaluate the performance of our business operations and financial performance; (ii) facilitate internal comparisons of the historical operating performance of our business operations; (iii) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.
Adjusted Gross Profit and Adjusted Gross Profit Margin
We define adjusted gross profit, a non-GAAP financial measure, as gross profit excluding net investment income, interest income and other income, plus fixed costs and overhead associated with our underwriting operations including employee-related expense, professional fees and other, and depreciation and amortization allocated to cost of revenue, and other adjustments that we would consider to be unique in nature. After these adjustments, the resulting calculation is inclusive of only those variable costs of revenue incurred on the successful acquisition of business and without the volatility of investment income. We use adjusted gross profit as a key measure of our progress towards profitability and to consistently evaluate the variable contribution to our business from underwriting operations from period to period.
We define adjusted gross profit margin, a non-GAAP financial measure, expressed as a percentage, as the ratio of adjusted gross profit to total revenue.
The following table provides a reconciliation of total revenue and gross profit margin to adjusted gross profit and the related adjusted gross profit margin, respectively, for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Total revenue | $ | 294.4 | $ | 164.1 | $ | 552.4 | $ | 315.3 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Loss and loss adjustment expense, net | (154.0) | (77.5) | (287.3) | (162.9) | |||||||||||||||||||
| Other insurance expense | (26.7) | (21.4) | (50.8) | (47.5) | |||||||||||||||||||
| Depreciation and amortization | (0.5) | (0.9) | (1.0) | (2.0) | |||||||||||||||||||
| Gross profit | $ | 113.2 | $ | 64.3 | $ | 213.3 | $ | 102.9 | |||||||||||||||
| Gross profit margin (% of total revenue) | 38 | % | 39 | % | 39 | % | 33 | % | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Net investment income | $ | (9.7) | $ | (9.4) | $ | (19.5) | $ | (18.9) | |||||||||||||||
| Interest income and other income | (1.2) | (2.0) | (2.6) | (3.8) | |||||||||||||||||||
| Employee-related expense | 4.9 | 6.1 | 9.7 | 12.0 | |||||||||||||||||||
| Professional fees and other | 6.7 | 5.7 | 13.3 | 17.4 | |||||||||||||||||||
| Depreciation and amortization | 0.5 | 0.9 | 1.0 | 2.0 | |||||||||||||||||||
| Adjusted gross profit | $ | 114.4 | $ | 65.6 | $ | 215.2 | $ | 111.6 | |||||||||||||||
Adjusted gross profit margin (% of total revenue) | 39 | % | 40 | % | 39 | % | 35 | % | |||||||||||||||
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Ratio of Adjusted Gross Profit to Gross Earned Premium
We define the Ratio of Adjusted Gross Profit to Gross Earned Premium as the ratio of adjusted gross profit to gross earned premium. The Ratio of Adjusted Gross Profit to Gross Earned Premium measures the relationship between the underlying business volume and gross economic benefit generated by our underwriting operations, on the one hand, and our underlying profitability trends, on the other. We rely on this measure, which supplements our gross profit ratio as calculated in accordance with U.S. GAAP, because it provides management with insight into our underlying profitability trends over time.
We use gross earned premium as the denominator in calculating this ratio, which excludes the impact of premiums ceded to reinsurers, because we believe that it reflects the business volume and the gross economic benefit generated by our underlying underwriting operations, which in turn are the key drivers of our future profit opportunities. We exclude the impact of ceded premiums from the denominator because ceded premiums can change rapidly and significantly based on the type and mix of reinsurance structures we use and, therefore, add volatility that is not indicative of our underlying profitability. For example, a shift to a proportional reinsurance arrangement would result in an increase in ceded premium, with offsetting benefits to gross profit from ceded losses and ceding commissions earned, resulting in a nominal overall economic impact. This shift would result in a steep decline in total revenue with a corresponding spike in gross margin, whereas we expect that the Ratio of Adjusted Gross Profit to Gross Earned Premium would remain relatively unchanged. We expect our reinsurance structure to evolve along with our costs and capital requirements, and we believe that our reinsurance structure at a given time does not reflect the performance of our underlying underwriting operations, which we expect to be the key driver of our costs of reinsurance over time.
On the other hand, the numerator, which is adjusted gross profit, includes the net impact of all reinsurance, including ceded premiums and the benefits of ceded losses and ceding commissions earned. Because our reinsurance structure is a key component of our risk management and a key driver of our profitability or loss in a given period, we believe this is meaningful.
Therefore, by providing this Ratio of Adjusted Gross Profit to Gross Earned Premium for a given period, we are able to assess the relationship between business volume and profitability, while eliminating the volatility from the cost of our then-current reinsurance structure, which is driven primarily by the performance of our insurance underwriting platform rather than our business volume.
The following table sets forth our calculation of the Ratio of Adjusted Gross Profit to Gross Earned Premium for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Numerator: Adjusted gross profit | $ | 114.4 | $ | 65.6 | $ | 215.2 | $ | 111.6 | |||||||||||||||
| Denominator: Gross earned premium | $ | 332.4 | $ | 252.3 | $ | 638.6 | $ | 485.9 | |||||||||||||||
Ratio of Adjusted gross profit to Gross earned premium | 34 | % | 26 | % | 34 | % | 23 | % | |||||||||||||||
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Adjusted EBITDA
We define Adjusted EBITDA, a non-GAAP financial measure, as net loss excluding income tax expense, depreciation and amortization, stock-based compensation, interest expense, interest income and others, net investment income, amortization of fair value adjustment on insurance contract intangible liability relating to the acquisition of Metromile, and other one time and non-cash adjustments and other transactions that we would consider to be unique in nature. We exclude these items from Adjusted EBITDA because we do not consider them to be directly attributable to our underlying operating performance. We use Adjusted EBITDA as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted EBITDA should not be viewed as a substitute for net loss calculated in accordance with U.S. GAAP, and other companies may define Adjusted EBITDA differently.
The following table provides a reconciliation of Adjusted EBITDA to net loss for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Net loss | $ | (43.4) | $ | (43.9) | $ | (79.2) | $ | (106.3) | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Income tax expense | $ | 1.6 | $ | 1.3 | $ | 2.8 | $ | 2.3 | |||||||||||||||
| Depreciation and amortization | 2.4 | 4.7 | 5.1 | 9.2 | |||||||||||||||||||
Stock-based compensation (1) | 24.5 | 15.4 | 45.7 | 25.7 | |||||||||||||||||||
| Interest expense | 7.0 | 4.0 | 13.2 | 7.3 | |||||||||||||||||||
| Interest income and others | (1.0) | (1.2) | (2.1) | (2.2) | |||||||||||||||||||
| Net investment income | (9.7) | (9.4) | (19.5) | (18.9) | |||||||||||||||||||
| Amortization of fair value adjustment on insurance contract intangible liability relating to the Metromile acquisition | (0.1) | (0.1) | (0.1) | (0.2) | |||||||||||||||||||
Other adjustment (2) (3) (4) | — | (11.7) | (1.7) | (4.8) | |||||||||||||||||||
| Adjusted EBITDA | $ | (18.7) | $ | (40.9) | $ | (35.8) | $ | (87.9) | |||||||||||||||
(1) Includes the impact of canceled unvested warrant shares for contract year 2 related to the termination of the Warrant Agreement with Chewy of $5.2 million which was recorded in the first quarter of 2025 (See Note 11 of the condensed consolidated financial statements).
(2) Includes $11.7 million of tax refund received in the second quarter of 2025 under the ERC Program (See Note 12 of the condensed consolidated financial statements).
(3) Includes the California FAIR Plan assessment of $6.9 million related to the January 2025 California Wildfires which was recorded in the first quarter of 2025 (See Note 15 of the condensed consolidated financial statements).
(4) Includes $1.7 million recovery received in the first quarter of 2026 related to a pre-acquisition Metromile extra-contractual claim which was previously recorded in the third quarter of 2024.
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Liquidity and Capital Resources
As of June 30, 2026, we had $367.6 million in cash and cash equivalents, and $695.2 million in investments. From the date we commenced operations, we have generated negative cash flows from operations, and we have financed our operations primarily through private and public sales of equity securities and third party financing. Our principal sources of funds are insurance premiums, investment income, reinsurance recoveries and proceeds from maturity and sale of invested assets. These funds are primarily used to pay claims, operating expenses and taxes. In June 2023, we entered into an Agreement with GC, where up to $150 million of financing was provided for our sales and marketing growth efforts through December 31, 2024. The Agreement was amended and restated in January 2024, pursuant to which an additional financing of $140 million will be provided for our sales and marketing growth efforts through December 31, 2025. On February 3, 2025, the Agreement was further amended in which GC will provide up to an additional $200 million of financing for our sales and marketing growth efforts from January 1, 2026 to December 31, 2026. In addition, the Agreement was further amended and restated in April 2024, June 2024 and December 2025 to clarify certain provisions with no material changes to terms and conditions. As of June 30, 2026, we had $206.4 million of outstanding borrowings under the Amended and Restated Agreement with GC. On June 22, 2026, we entered into a Financing Agreement with Hannover Re under which up to $250 million of outstanding capital will be provided to our sales and marketing growth efforts from January 1, 2027 through December 31, 2028, subject to a maximum outstanding capital amount of $150 million from Funding Begin Date through December 31, 2027, and up to $250 million at any time during the period from January 1, 2028 through December 31, 2028. We believe our existing cash and cash equivalents as of June 30, 2026 will be sufficient to meet our working capital, liquidity and capital expenditure needs over at least the next 12 months. This belief is subject, to a certain extent, to general economic, financial, competitive, regulatory and other factors that are beyond our control.
Our cash flows used in operations may differ substantially from our net loss due to non-cash charges or due to changes in balance sheet accounts.
The timing of our cash flows from operating activities can also vary among periods due to the timing of payments made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant. Therefore, their timing can influence cash flows from operating activities in any given period. The potential for a large claim under an insurance or reinsurance contract means that our insurance subsidiaries may need to make substantial payments within relatively short periods of time, which would have a negative impact on our operating cash flows.
We are a holding company that transacts a majority of our business through operating subsidiaries. Consequently, our ability to pay dividends to stockholders, meet debt payment obligations and pay taxes and operating expenses is largely dependent on dividends or other distributions from our subsidiaries and affiliates, whose ability to pay us is highly regulated.
Our U.S. and Dutch insurance company subsidiaries, and our Dutch insurance holding company, are restricted by statute as to the amount of dividends that they may pay without the prior approval of their respective competent regulatory authorities. As of June 30, 2026, cash and investments held by these companies was $810.5 million of which $352.4 million is held as regulatory surplus.
Insurance companies in the United States are also required by state law to maintain a minimum level of policyholder’s surplus. Insurance regulators in the states in which we operate have a risk-based capital standard designed to identify property and casualty insurers that may be inadequately capitalized based on inherent risks of the insurer’s assets and liabilities and its mix of net written premium. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. As of June 30, 2026, the total adjusted capital of our U.S. insurance subsidiaries was in excess of its respective prescribed risk-based capital requirements.
The following table summarizes our cash flow data for the periods presented:
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| ($ in millions) | |||||||||||
| Net cash used in operating activities | $ | (4.0) | $ | (41.7) | |||||||
Net cash used in investing activities | $ | (66.8) | $ | (10.8) | |||||||
| Net cash provided by financing activities | $ | 54.4 | $ | 44.1 | |||||||
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Operating Activities
Cash used in operating activities was $4.0 million for the six months ended June 30, 2026, a decrease of $37.7 million from $41.7 million for the six months ended June 30, 2025. The improvement was driven by the $27.1 million reduction in our net loss and changes in our operating assets and liabilities. The decrease in cash used in operating activities from the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to claim payments, settlements with our reinsurance partners, and growth and expansion spend of the Company, offset by collection of premiums and recoveries from reinsurance partners.
Investing Activities
Cash used in investing activities was $66.8 million for the six months ended June 30, 2026, primarily due to purchases of U.S. government obligations, corporate debt securities, asset-backed securities including collateralized loan obligations, short term investments offset by proceeds from sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments. We also purchased property and equipment during the period.
Cash used in investing activities was $10.8 million for the six months ended June 30, 2025, primarily due to purchases of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments, offset by proceeds from sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments. We also purchased property and equipment during the period.
Financing Activities
Cash provided by financing activities was $54.4 million for the six months ended June 30, 2026, primarily due to borrowings under the financing agreement offset by principal payments. We also had proceeds from stock option exercises during the period.
Cash provided by financing activities was $44.1 million for the six months ended June 30, 2025, primarily due to borrowings under the financing agreement offset by principal payments. We also had proceeds from stock option exercises during the period.
We do not have any current plans for material capital expenditures other than current operating requirements. There have been no material changes as of June 30, 2026 to our contractual obligations from those described in our Annual Report on Form 10-K. To the extent our future operating cash flows are insufficient to cover our net losses from catastrophic events, we had $1,062.8 million in cash, cash equivalents and investments available at June 30, 2026. We may also seek to raise additional capital through third-party borrowings, sales of our equity, issuance of debt securities or entrance into new reinsurance arrangements. There can be no assurance that we will be able to raise additional capital on favorable terms or at all.
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Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to unpaid loss and loss adjustment expense, stock-based compensation, income tax assets and liabilities, including recoverability of our net deferred tax asset, income tax provisions and certain non-income tax accruals. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K and the notes to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report. During the six months ended June 30, 2026, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
See “Note 4 - Summary of Significant Accounting Policies” in the notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of new accounting pronouncements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in equity prices, interest rates, foreign currency exchange rates and commodity prices. Our condensed consolidated balance sheets include assets and liabilities with estimated fair values that are subject to market risk, and the primary components of market risk affecting the Company are interest rate risk and credit risk on investments in fixed maturities. The Company does not have equity price risk or exposure to commodity risk.
Overview
The Company’s investment portfolio is primarily fixed income securities issued by the U.S. government and government agencies, non-U.S. government and corporate issuers with relatively short durations. The investment portfolio is managed in accordance with the investment policies and guidelines approved by the board of directors. The Company’s investment policy and objectives provide a balance between current yield, conservation of capital, and liquidity requirements of the Company’s operations setting guidelines that provide for a well-diversified investment portfolio that is compliant with insurance regulations applicable in the states in which we operate. The policy, which may change from time to time, and is approved by the board of directors and reviewed on a regular basis in order to ensure that the policy evolves in response to changes in the financial markets.
Interest Rate Risk
Interest rate risk is the risk that the Company will incur a loss due to adverse changes in interest rates relative to the interest rate characteristics of interest bearing assets and liabilities. Our fixed maturities portfolio is exposed to interest rate risk. Changes in interest rates have a direct impact on the market valuation of these securities. As market interest rates increase, market value of fixed maturities decrease, and vice versa. Certain of our securities are held in an unrealized loss position, and we do not intend to sell and believe we will not be required to sell any of these securities held in an unrealized loss position before its anticipated recovery. A common measure of the interest sensitivity of fixed maturities is modified duration, a calculation that utilizes maturity, coupon rate, yield and call terms to calculate an average age to receive the present value of all the cash flows generated by such assets, including reinvestment of interest. The longer the duration, the more sensitive the asset is to market interest rate fluctuations. We manage this interest rate risk by investing in securities with relatively short durations. In addition, if a 10% change in interest rates were to have immediately occurred on June 30, 2026, this change would not have a material effect on the fair value of our investments as of that date.
Credit Risk
We are also exposed to credit risk on our investment portfolio and reinsurance recoverable. Credit risk results from uncertainty in a counterparty’s ability to meet its obligations. We monitor our investment portfolio to ensure that credit risk does not exceed prudent levels. The majority of our investment portfolio is invested in high credit quality, investment grade fixed maturity securities. As of June 30, 2026, none of our fixed maturity securities were unrated or rated below investment grade. To reduce credit exposure to reinsurance recoverable balances, the Company obtains letters of credit from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. In addition, under the terms of its reinsurance contracts, the Company may retain funds due to reinsurers as security for those recoverable balances. The Company also has reinsurance recoverable balances from reinsurers with a majority of the reinsurers having an A.M. Best rating of A (Excellent) or better.
Inflation Risk
Inflationary factors such as increases in overhead costs may adversely affect our operating results. In addition, inflation could lead to higher interest rates which may impact the market value of our investment portfolio. The current short duration of the Company's fixed maturity portfolio minimizes the negative effects of higher interest rates.
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Item 4. Controls and Procedures.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2026, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is occasionally a party to routine claims or litigation incidental to its business. The Company does not believe that it is a party to any pending legal proceeding that is likely to have a material adverse effect on its business, financial condition or results of operations. See Note 15 to the accompanying unaudited condensed consolidated financial statements for more information.
Item 1A. Risk Factors.
The Company's business, results of operations, and financial condition are subject to various risks described in the Company's Annual Report on Form 10-K. There have been no material changes to the risk factors identified in the Company's Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities; Purchases of Equity Securities by the Issuer or Affiliated Purchaser
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
49
Item 5. Other Information.
(a) None.
(b) None.
(c) Insider Trading Arrangements and Policies
Trading Arrangement | ||||||||||||||||||||
Action | Date | Rule 10b5-1* | Non-Rule 10b5-1** | Total Shares to be Sold | Expiration Date | |||||||||||||||
X | ||||||||||||||||||||
*Intended to satisfy the affirmative defense of Rule 10b5-1(c).
**Not intended to satisfy the affirmative defense of Rule 10b5-1(c).
Except for the foregoing, during the three months ended June 30, 2026, no director or officer of the Company adopted or terminated
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Item 6. Exhibits.
| Exhibit Number | Description | Incorporated by Reference | |||||||||||||||||||||
| Form | File No. | Exhibit | Filing Date | ||||||||||||||||||||
| 2.1 | S-4 | 333-261629 | 2.3 | 12/14/2021 | |||||||||||||||||||
| 3.1 | 8-K | 001-39367 | 3.1 | 7/10/2020 | |||||||||||||||||||
| 3.2 | 8-K | 001-39367 | 3.1 | 12/20/2023 | |||||||||||||||||||
| 4.1 | S-1/A | 333-239007 | 4.1 | 6/23/2020 | |||||||||||||||||||
| 4.2 | S-1 | 333-253055 | 4.2 | 2/12/2021 | |||||||||||||||||||
| 4.3 | 8-K | 001-39484 | 4.1 | 9/9/2020 | |||||||||||||||||||
| 10.1*† | |||||||||||||||||||||||
| 10.2*† | |||||||||||||||||||||||
| 10.3*† | |||||||||||||||||||||||
| 10.4*† | |||||||||||||||||||||||
| 31.1* | |||||||||||||||||||||||
31.2* | |||||||||||||||||||||||
| 32.1** | |||||||||||||||||||||||
32.2** | |||||||||||||||||||||||
| 101.INS* | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because the XBRL tags are embedded within the Inline XBRL document | ||||||||||||||||||||||
| 101.SCS* | Inline XBRL Taxonomy Extension Schema Document | ||||||||||||||||||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||||||||||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||||||||||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||||||||||||||||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||||||||||||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||||||||||||||||||||
____________
* Filed herewith.
** Furnished herewith.
† Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Lemonade, Inc. | |||||||||||
| Date: | August 4, 2026 | By: | /s/ Daniel Schreiber | ||||||||
| Daniel Schreiber | |||||||||||
Chief Executive Officer | |||||||||||
| Date: | August 4, 2026 | By: | /s/ Tim Bixby | ||||||||
| Tim Bixby | |||||||||||
| Chief Financial Officer | |||||||||||
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