LEMONADE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes and other information included elsewhere in this
Quarterly Report and Annual Report on Form 10-K for the year ending December 31,
2021. The discussion and analysis below includes forward-looking statements that
are subject to risks, uncertainties and other factors described in the "Risk
Factors" section of 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.

In this Quarterly Report, unless we indicate otherwise or the context requires,
"Lemonade, Inc.," "Lemonade," "the company," "our company," "the registrant,"
"we," "our," "ours" and "us" refer to Lemonade, Inc. and its consolidated
subsidiaries, including Lemonade Insurance Company and Lemonade Insurance
Agency, LLC.

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 behavioral economics, we believe we are
making insurance more delightful, more affordable, more precise, and more
socially impactful. To that end, we have built a vertically-integrated company
with wholly-owned insurance carriers in the United States and Europe, 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 three 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, finance to regulation. Our architecture melds artificial
intelligence with the human kind, and learns from the prodigious data it
generates to become ever better at delighting customers and quantifying risk.

In addition to digitizing insurance end-to-end, we also reimagined the
underlying business model to minimize volatility while maximizing trust and
social impact. In a departure from the traditional insurance model, where
profits can literally depend on the weather, we typically retain a fixed fee,
currently 25% of premiums, and our gross margin is expected to change little in
good years and in bad. At Lemonade, excess claims are generally offloaded to
reinsurers, while excess premiums are usually donated to nonprofits selected by
our customers as part of our annual "Giveback." These two ballasts, reinsurance
and Giveback, reduce volatility, while creating an aligned, trustful, and
values-rich relationship with our customers.

Lemonade's cocktail of delightful experience, aligned values, and great prices
enjoys broad appeal, while over indexing on younger and first time buyers of
insurance. As these customers progress through predictable lifecycle events,
their insurance needs typically grow to encompass more and higher-value
products: renters regularly acquire more property and frequently upgrade to
successively larger homes; home buying often coincides with a growing household
and a corresponding need for life or pet insurance, and so forth. These
progressions can trigger orders-of-magnitude increases in insurance premiums.

The result is a business with highly-recurring and naturally-growing revenue
streams; a level of automation that we believe delights consumers while
collapsing costs; and an architecture that generates and employs data to price
and underwrite risk with ever-greater precision to the benefit of our company,
our customers and their chosen nonprofits.

Acquisition of Metromile


On July 28, 2022, the Company completed the acquisition of Metromile, Inc.
("Metromile"), a leading digital insurance platform in the United States that
offers real-time, personalized auto insurance policies by the mile. The Company
acquired 100% of the equity of Metromile, through an all-stock transaction based
upon the exchange ratio of 0.05263 shares of Lemonade for each outstanding share
of Metromile, for a total consideration of approximately $146.0 million at close
date.
                                       24
--------------------------------------------------------------------------------

Metromile is a leading digital insurance platform in the United States. With
data science at its foundation, Metromile offers real-time, personalized auto
insurance policies by the mile instead of the industry's reliance on
approximations that have historically made prices unfair. Metromile's digitally
native offering is built around the modern driver's needs, featuring automated
claims and complementary smart driving features. In addition, through Metromile
Enterprise, Metromile licenses its technology platform to insurance companies
around the world. Metromile's cloud-based software as a service enables carriers
to operate with greater efficiency, automate claims to expedite resolution,
reduce losses associated with fraud, and unlock the productivity of employees.

Key Factors and Trends Affecting our Operating Results

CHOOSE YOUR CHOICE GIFT CARD OFFER TODAY

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 claims and 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.

COVID-19 Impact


The COVID-19 pandemic has severely impacted businesses worldwide, including many
in the insurance sector. Insurers of travel, events or business interruption may
be directly and adversely affected by claims from COVID-19 or the lock-down it
engendered. Other insurers, in lines of business that are not directly impacted
by COVID-19, may nevertheless be dependent on office-based brokers, in-person
inspections, or teams that are poorly equipped to work from home - all of which
can translate into value erosion. Finally, the broader financial crisis may hurt
insurers in other ways, too.

Against this backdrop it is noteworthy that our business has continued to grow,
and the key drivers of our business have continued their positive progress,
despite the pandemic.

•Lemonade writes insurance in lines that have so far been largely unaffected by
COVID-19, or indeed, historically, by recession.


•Our systems are entirely cloud based and accessible to our teams from any
browser anywhere in the world. Customers' phone calls are routed to our team's
laptops, and answered and logged from wherever they happen to be. Internal
communication has been via Slack and Zoom since our founding. The upshot is that
while we all enjoy each other's company, our teams are able to access systems,
support customers and collaborate with each other from anywhere, much as they
did before the pandemic.

•Our customers’ experience with Lemonade is likewise largely unaffected by the
turmoil, as AI Maya and AI Jim chat with customers, wherever they may be,
without triggering concerns about social distancing.


This resilience is reflected in our results in which as of June 30, 2022, our in
force premium ("IFP"), was about 54% higher than it was on June 30, 2021. For
information regarding how we calculate IFP, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Key Operating and
Financial Metrics - In Force Premium."


                                       25
--------------------------------------------------------------------------------

While the global economy began to reopen in the first quarter of 2021, and
continues to show positive economic growth in the U.S. as the vaccination
roll-out has reduced the spread and severity of COVID-19 and variants of the
virus, there remains to be an uncertainty about the duration and ultimate impact
of COVID-19 and variants of the virus, including the length of time needed to
vaccinate a significant segment of the global population and effectiveness of
the vaccines with respect to the new variants of the virus. Management continues
to monitor and cannot definitively determine the ultimate financial impact of
COVID-19 and variants of the virus, and the related economic conditions at this
time.

With respect to our investment portfolio which showed a diversified mix of
securities beginning in the third quarter of 2021, and given the conservative
nature of our portfolio and investment in high-quality securities, we do not
expect a material adverse impact in the value of our investment portfolio, or
long-term negative impact on our financial condition, results of operations or
cash flows as it relates to COVID-19 and variants of the virus.

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.

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, 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.

Through June 30, 2021, we had proportional reinsurance covering 75% of our
business. Under the proportional reinsurance contracts, which cover all of our
products and geographies, we transferred, or "ceded," 75% of our premium to our
reinsurers ("Proportional Reinsurance Contracts"). In exchange, these reinsurers
paid us a ceding commission of 25% for every dollar ceded, in addition to
funding all of the corresponding claims, or 75% of all our claims. This
arrangement mirrors our fixed fee, and hence shields our gross profit margin,
from the volatility of claims, while boosting our capital efficiency
dramatically. We opted to manage the remaining 25% of our business with
alternative forms of reinsurance.

A portion of Lemonade's proportional reinsurance program expired on June 30,
2021 and on June 30, 2022. As the business continued to grow and diversify, and
with stability in our insurance results, we decreased the overall share of
proportional reinsurance from 75% of premium to 55% effective July 1, 2022. In
addition, we purchased a reinsurance program to protect us against natural
catastrophe risk in the U.S. that exceeds $80 million in losses effective July
1, 2022. Other non-proportional reinsurance contracts were renewed with terms
similar to the expiring contracts.

                                       26
--------------------------------------------------------------------------------

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 reinsurance. 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 in 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.
Our insurance policies generally have a term of one year and premium is earned
pro rata over the term of the policy.

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.

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.

Net Investment Income


Net investment income represents interest earned from fixed maturity securities,
short term securities, and other investments, and the gains or losses from the
sale of 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.
                                       27
--------------------------------------------------------------------------------

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.
Other income consists of fees collected from policyholders relating to
installment premiums. These fees are recognized at the time each policy
installment is billed.

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 costs
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 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, including 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 sales and marketing
costs will increase in absolute dollars in future periods and vary from
period-to-period as a percentage of revenue in the near-term. 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.

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 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.
                                       28
--------------------------------------------------------------------------------

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, and allocated occupancy costs and related
overhead based on headcount. Depreciation and amortization expense is recorded
as a component of general and administrative.

We expect 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. We also expect to
increase the size of our general and administrative function to support our
increased compliance requirements and the growth of our business. As a result,
we expect that our general and administrative expense will increase in absolute
dollars in future periods and vary from period-to-period as a percentage of
revenue.

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. deferred tax assets, including
federal and state 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 United States.
                                       29
--------------------------------------------------------------------------------

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 GAAP. See "-Non-GAAP Financial Measures" for
additional information on non-GAAP financial measures. and a reconciliation to
the most comparable GAAP measures.

The following table sets forth these metrics as of and for the periods
presented:

                                             Three Months Ended June 30,                   Six Months Ended June 30,
                                              2022                   2021                  2022                  2021
                                                ($ in millions, except                      ($ in millions, except
                                                Premium per customer)                        Premium per customer)
Customers (end of period)                   1,579,936             1,206,172             1,579,936             1,206,172
In force premium (end of period)        $       457.6           $     296.8          $      457.6           $     296.8
Premium per customer (end of period)    $         290           $       246          $        290           $       246
Annual dollar retention (end of period)            83  %                 82  %                 83  %                 82  %
Total revenue                           $        50.0           $      28.2          $       94.3           $      51.7
Gross earned premium                    $       106.8           $      66.9          $      202.8           $     123.1
Gross profit                            $        11.3           $       9.8          $       21.5           $      11.7
Adjusted gross profit                   $        17.5           $      12.8          $       33.8           $      17.8
Net loss                                $       (67.9)          $     (55.6)         $     (142.7)          $    (104.6)
Adjusted EBITDA                         $       (50.3)          $     (40.4)         $     (107.7)          $     (81.7)
Gross profit margin                                23  %                 35  %                 23  %                 23  %
Adjusted gross profit margin                       35  %                 45  %                 36  %                 34  %
Ratio of Adjusted Gross Profit to Gross
Earned
Premium                                            16  %                 19  %                 17  %                 14  %
Gross loss ratio                                   86  %                 74  %                 88  %                 96  %
Net loss ratio                                     90  %                 80  %                 90  %                 98  %


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 2.0% of IFP.
                                       30
--------------------------------------------------------------------------------

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.


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, plus

•Employee-related costs, plus

•Professional fees and other, plus

                                       31
--------------------------------------------------------------------------------

•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 interest expense, income tax expense, depreciation, amortization,
stock-based compensation, net investment income, 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.

                                       32
--------------------------------------------------------------------------------

Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

                                                Three Months Ended June 30,
                                                  2022                  2021              Change               % Change
                                                                ($ in millions)
Revenue
Net earned premium                          $         31.2          $    16.3          $    14.9                       91  %
Ceding commission income                              15.5               10.6                4.9                       46  %
Net investment income                                  1.2                0.2                1.0                      500  %
Commission and other income                            2.1                1.1                1.0                       91  %
Total revenue                                         50.0               28.2               21.8                       77  %
Expense
Loss and loss adjustment expense, net                 28.1               13.0               15.1                      116  %
Other insurance expense                                9.7                5.2                4.5                       87  %
Sales and marketing                                   37.0               33.1                3.9                       12  %
Technology development                                17.8               14.0                3.8                       27  %
General and administrative                            22.4               15.8                6.6                       42  %
Total expense                                        115.0               81.1               33.9                       42  %
Loss before income taxes                             (65.0)             (52.9)             (12.1)                      23  %
Income tax expense                                     2.9                2.7                0.2                        7  %
Net loss                                    $        (67.9)         $   (55.6)         $   (12.3)                      22  %




Net Earned Premium

Net earned premium increased $14.9 million, or 91%, to $31.2 million for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021, primarily due to the earning of increased gross written premium and
increased retention of ceded written premium under our Proportional Reinsurance
Contracts as discussed above under "Reinsurance."

                                Three Months Ended June 30,
                                      2022                    2021       Change      % Change
                                            ($ in millions)
Gross written premium   $          126.1                    $ 89.5      $ 36.6           41  %
Ceded written premium              (87.9)                    (66.5)      (21.4)          32  %
Net written premium     $           38.2                    $ 23.0      $ 15.2           66  %


Gross written premium increased $36.6 million, or 41%, to $126.1 million for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. The increase was primarily due to a 31% increase in net added 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 18% 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.

Ceded written premium increased $21.4 million, or 32%, to $87.9 million for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021, primarily due to the impact of the change in reinsurance arrangements. The
Company renewed the majority of the reinsurance contracts that expired on
June 30, 2021 at terms that are very similar to the prior agreements, and
decreased the overall share of proportional reinsurance from 75% of premium to
70%. The Company also purchased a new reinsurance program to protect against
natural catastrophe risk in the U.S. that exceeds $60 million in losses
effective July 1, 2021. Other non-proportional reinsurance contracts were
renewed in 2021 with terms similar to the expired contracts.
                                       33
--------------------------------------------------------------------------------


Net written premium increased $15.2 million, or 66%, to $38.2 million for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. The increase was primarily due to the $36.6 million, or 41%, increase in
gross written premium offset by the increase in ceded written premium of $21.4
million, or 32%, for the three months ended June 30, 2022, as compared to the
three months ended June 30, 2021.

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 decreased to
approximately 71% for the three months ended June 30, 2022, as compared to
approximately 76% for the three months ended June 30, 2021 primarily due to the
change in proportional reinsurance. contracts.

                                Three Months Ended June 30,
                                      2022                    2021       Change      % Change
                                            ($ in millions)
Gross earned premium    $          106.8                    $ 66.9      $ 39.9           60  %
Ceded earned premium               (75.6)                    (50.6)      (25.0)          49  %
Net earned premium      $           31.2                    $ 16.3      $ 14.9           91  %



Ceding Commission Income

Ceding commission income increased $4.9 million, or 46%, to $15.5 million for
the three months ended June 30, 2022 compared to the three months ended June 30,
2021, consistent with the increase in ceded earned premium related to the
proportional reinsurance contracts with third-party reinsurers during the
period.

Net Investment Income


Net investment income amounted to $1.2 million for the three months ended June
30, 2022 and $0.2 million for the three months ended June 30, 2021. We mainly
invest in cash, money market funds, U.S. Treasury bills, corporate debt
securities, notes and other obligations issued or guaranteed by the U.S.
Government. Net investment income for the period was primarily driven by
interest rates on investment balances, and offset by investment expenses of $0.1
million.

Commission and Other Income

Commission and other income increased $1.0 million, or 91%, to $2.1 million for
the three months ended June 30, 2022 compared to the three months ended June 30,
2021, due to growth in premiums placed with third-party insurance companies
during the period and an increase in installment fees billed.

Loss and Loss Adjustment Expense, Net


Loss and LAE, net increased $15.1 million, or 116%, to $28.1 million for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. The increase was primarily in line with growth in premium, increase in net
retained losses due to change in proportional reinsurance contract and increased
claims costs due to impact of inflation. These increases were partially offset
by favorable prior period development.

Other Insurance Expense


Other insurance expense increased $4.5 million, or 87%, to $9.7 million for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. The increase was primarily due to employee-related expense, including
stock-based compensation, which increased by $2.6 million, or 153%, as compared
to the three months ended June 30, 2021, driven by an increase in underwriting
staff to support our continued growth. Professional fees and other increased
$1.0 million, or 77%, primarily in support of growth and expansion initiatives
for new products. Credit card processing fees increased $0.6 million, or 38%, as
a result of the increase in customers and associated premium. Amortization of
deferred acquisition costs, net of ceding commissions increased $0.3 million, or
50%.
                                       34
--------------------------------------------------------------------------------

Sales and Marketing


Sales and marketing expense increased $3.9 million, or 12%, to $37.0 million for
the three months ended June 30, 2022 compared to the three months ended June 30,
2021. Employee-related expense, including stock-based compensation, increased by
$2.4 million, or 38%, as compared to the prior year period, driven by an
increase in sales and marketing headcount to support our continued growth and
expansion. Expense related to brand and performance advertising also increased
by $0.7 million, or 3%, for the three months ended June 30, 2022 as compared to
the three months ended June 30, 2021, as a result of greater spending on search
advertising and other customer acquisition channels in response to new product
offerings.

Technology Development

Technology development expense increased $3.8 million, or 27%, to $17.8 million
for the three months ended June 30, 2022 compared to the three months ended June
30, 2021. Employee-related expense, including stock-based compensation, and net
of capitalized costs for the development of internal-use software, increased
$2.4 million, or 19%, as compared to the three months ended June 30, 2021,
driven by an increase in payroll expense for product, engineering, design and
quality assurance personnel to support our continued growth and product
development initiatives, including automation, improvement in machine learning
and geographic expansion. Technology tools and software expense increased by
$0.6 million, or 67%.

General and Administrative

General and administrative expense increased $6.6 million, or 42%, to
$22.4 million for the three months ended June 30, 2022 compared to the three
months ended June 30, 2021. Employee-related expense, including stock-based
compensation, increased by $4.4 million, or 63%, as we increased finance, legal,
business operations and administrative personnel. Legal, accounting and other
professional fees increased $0.8 million, or 50%, to support the compliance
requirements necessary to operate as a growing global, multi-product line of
business and regulated companies. Depreciation expense increased $0.8 million,
or 100%, and software costs increased $0.6 million, or 86%.

Income Tax Expense


Income tax expense increased $0.2 million, or 7%, to $2.9 million for the three
months ended June 30, 2022 compared to the three months ended June 30, 2021 due
to increased tax liability related to income generated by our subsidiaries
organized under the laws of the Netherlands and Israel.

Net Loss


Net loss increased $12.3 million, or 22%, to $67.9 million for the three months
ended June 30, 2022 compared to the three months ended June 30, 2021 due to the
factors described above.
                                       35
--------------------------------------------------------------------------------

Comparison of the Six Months Ended June 30, 2022 and 2021

                                                  Six Months Ended June 30,
                                                   2022                 2021              Change               % Change
                                                                ($ in millions)
Revenue
Net earned premium                           $        58.6          $    30.1          $    28.5                       95  %
Ceding commission income                              29.5               19.6                9.9                       51  %
Net investment income                                  2.1                0.4                1.7                      425  %
Commission and other income                            4.1                1.6                2.5                      156  %
Total revenue                                         94.3               51.7               42.6                       82  %
Expense
Loss and loss adjustment expense, net                 52.5               29.5               23.0                       78  %
Other insurance expense                               18.8               10.0                8.8                       88  %
Sales and marketing                                   75.3               62.2               13.1                       21  %
Technology development                                34.7               21.1               13.6                       64  %
General and administrative                            50.6               29.9               20.7                       69  %
Total expense                                        231.9              152.7               79.2                       52  %
Loss before income taxes                            (137.6)            (101.0)             (36.6)                      36  %
Income tax expense                                     5.1                3.6                1.5                       42  %
Net loss                                     $      (142.7)         $  (104.6)         $   (38.1)                      36  %


Net Earned Premium

Net earned premium increased $28.5 million, or 95%, to $58.6 million for the six
months ended June 30, 2022 compared to the six months ended June 30, 2021
primarily due to the earning of increased gross written premium and increased
retention of ceded written premium under our Proportional Reinsurance Contracts
as discussed above under "Reinsurance."

                               Six Months Ended June 30,
                                   2022                 2021        Change      % Change
                                          ($ in millions)
Gross written premium   $       236.7                 $ 165.3      $ 71.4           43  %
Ceded written premium          (163.5)                 (122.1)      (41.4)          34  %
Net written premium     $        73.2                 $  43.2      $ 30.0           69  %


Gross written premium increased $71.4 million, or 43%, to $236.7 million for the
six months ended June 30, 2022 compared to the six months ended June 30, 2021.
The increase was primarily due to a 31% increase in net added 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 18% 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.

Ceded written premium increased $41.4 million, or 34%, to $163.5 million for the
six months ended June 30, 2022 compared to the six months ended June 30, 2021. A
portion of the Company's proportional reinsurance program expired on June 30,
2021. The Company renewed the majority of the reinsurance contracts that expired
on June 30, 2021 at terms that are very similar to the prior agreements, and
decreased the overall share of proportional reinsurance from 75% of premium to
70%. The Company also purchased a new reinsurance program to protect against
natural catastrophe risk in the U.S. that exceeds $60.0 million. Other
non-proportional reinsurance contracts were renewed with terms similar to the
expiring contracts.

                                       36
--------------------------------------------------------------------------------

Net written premium increased $30.0 million, or 69%, to $73.2 million for the
six months ended June 30, 2022 compared to the six months ended June 30, 2021.
The increase was primarily due to the $71.4 million, or 43%, increase in gross
written premium offset by the increase in ceded written premium for the six
months ended June 30, 2022 as compared to the six months ended June 30, 2021.

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 decreased to 71%
for the six months ended June 30, 2022, as compared to 76% for the six months
ended June 30, 2021 primarily due to the change in proportional reinsurance
contracts.

                               Six Months Ended June 30,
                                   2022                 2021        Change      % Change
                                          ($ in millions)
Gross earned premium    $       202.8                 $ 123.1      $ 79.7           65  %
Ceded earned premium           (144.2)                  (93.0)      (51.2)          55  %
Net earned premium      $        58.6                 $  30.1      $ 28.5           95  %



Ceding Commission Income

Ceding commission income increased $9.9 million, or 51%, to $29.5 million for
the six months ended June 30, 2022 compared to six months ended June 30, 2021,
consistent with the increase in ceded earned premium related to the proportional
reinsurance contracts with third-party reinsurers during the period.

Net Investment Income


Net investment income increased $1.7 million, or 425%, to $2.1 million for the
six months ended June 30, 2022 compared to the six months ended June 30, 2021.
We mainly invest in cash, money market funds, U.S. Treasury bills, corporate
debt securities, notes and other obligations issued or guaranteed by the U.S.
Government. Net investment income for the period was primarily driven by
interest rates on investment balances, and offset by investment expenses of $0.2
million.

Commission and Other Income

Commission and other income increased $2.5 million, or 156%, to $4.1 million for
the six months ended June 30, 2022 compared to the six months ended June 30,
2021, due to growth on premium placed with third-party insurance companies
during the period and increase in installment fees billed.

Loss and Loss Adjustment Expense, Net


Loss and LAE, net increased $23 million, or 78%, to $52.5 million for the six
months ended June 30, 2022 compared to the six months ended June 30, 2021. The
increase was primarily in line with growth in premium, increase in net retained
losses due to change in proportional reinsurance contract and increased claims
costs due to impact of inflation. These increases were partially offset by
favorable prior period development.

Other Insurance Expense


Other insurance expense increased $8.8 million, or 88%, to $18.8 million for the
six months ended June 30, 2022 compared to the six months ended June 30, 2021.
The increase was primarily due to employee-related expense, including
stock-based compensation, which increased by $4.7 million, or 138%, as compared
to the six months ended June 30, 2021, driven by an increase in underwriting
staff to support our continued growth. Professional fees and other increased
$2.2 million, or 85%, primarily in support of growth and expansion initiatives.
Amortization of deferred acquisition costs, net of ceding commissions increased
$0.7 million, or 70%.



                                       37
--------------------------------------------------------------------------------

Sales and Marketing


Sales and marketing expense increased $13.1 million, or 21%, to $75.3 million
for the six months ended June 30, 2022 compared to the six months ended June 30,
2021. Expense related to brand and performance advertising, the largest
component of our sales and marketing expenses, increased by $5.8 million, or
13%, for the six months ended June 30, 2022 as compared to the six months ended
June 30, 2021, as a result of greater spending on search advertising and other
customer acquisition channels in response to new product offerings.
Employee-related expense, including stock-based compensation, increased by $5.4
million, or 43%, as compared to the prior year period, driven by an increase in
sales and marketing headcount to support our continued growth and expansion.

Technology Development


Technology development expense increased $13.6 million, or 64%, to $34.7 million
for the six months ended June 30, 2022 compared to the six months ended June 30,
2021. Employee-related expense, including stock-based compensation, net of
capitalized costs for the development of internal-use software, increased $10.7
million, or 57%, as compared to the six months ended June 30, 2021, driven by an
increase in payroll expense for product, engineering, design and quality
assurance personnel to support our continued growth and product development
initiatives, including automation, improvement in machine learning and
geographic expansion. Technology tools and software expense increased by $1.3
million, or 81%.

General and Administrative

General and administrative expense increased $20.7 million, or 69%, to
$50.6 million for the six months ended June 30, 2022 compared to the six months
ended June 30, 2021. Employee-related expense, including stock-based
compensation, increased by $9.5 million, or 66%, as we increased finance, legal,
business operations and administrative personnel. Legal, accounting and other
professional fees increased $5.0 million, or 161%, to support the compliance
requirements necessary to operate as a growing global, multi-product line of
business and regulated companies. Software cost increased $1.5 million, or 136%,
depreciation expense increased $1.4 million, or 82%, and bad debt expense
increased by $1.3 million, or 57%.

Income Tax Expense


Income tax expense increased $1.5 million, or 42%, to $5.1 million for the six
months ended June 30, 2022 compared to the six months ended June 30, 2021 due to
increased tax liability related to income generated by our subsidiaries
organized under the laws of the Netherlands and Israel.

Net Loss


Net loss increased $38.1 million, or 36%, to $142.7 million for the six months
ended June 30, 2022 compared to the six months ended June 30, 2021 due to the
factors described above.
                                       38
--------------------------------------------------------------------------------

Non-GAAP Financial Measures


The non-GAAP financial measures below have not been calculated in accordance
with GAAP and should be considered in addition to results prepared in accordance
with GAAP and should not be considered as a substitute for, or superior to, GAAP
results. In addition, adjusted gross profit and 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 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 plus fixed cost and overhead associated with our
underwriting operations including employee-related expense and professional fees
and other, and depreciation and amortization allocated to cost of revenue. 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 to adjusted gross
profit and the related adjusted gross profit margin for the periods presented:
                                                 Three Months Ended June 30,                 Six Months Ended June 30,
                                                   2022                  2021                 2022                 2021
                                                                            ($ in millions)
Total revenue                                $        50.0           $    28.2          $       94.3           $    51.7
Adjustments:
Loss and loss adjustment expense, net        $       (28.1)          $   (13.0)         $      (52.5)          $   (29.5)
Other insurance expense                               (9.7)               (5.2)                (18.8)              (10.0)
Depreciation and amortization                         (0.9)               (0.2)                 (1.5)               (0.5)
Gross profit                                 $        11.3           $     9.8          $       21.5           $    11.7
Gross profit margin (% of total revenue)                23  %               35  %                 23  %               23  %
Adjustments:
Net investment income                        $        (1.2)          $    (0.2)         $       (2.1)          $    (0.4)
Employee-related expense                               4.3                 1.7                   8.2                 3.4
Professional fees and other                            2.2                 1.3                   4.7                 2.6
Depreciation and amortization                          0.9                 0.2                   1.5                 0.5
Adjusted gross profit                        $        17.5           $    12.8          $       33.8           $    17.8
Adjusted gross profit margin (% of total
revenue)                                                35  %               45  %                 36  %               34  %


                                       39
--------------------------------------------------------------------------------

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 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,
                                                 2022                  2021                 2022                 2021
                                                                          ($ in millions)
Numerator: Adjusted gross profit           $        17.5           $    12.8          $       33.8           $    17.8
Denominator: Gross earned premium          $       106.8           $    66.9          $      202.8           $   123.1
Ratio of Adjusted Gross Profit to Gross
Earned Premium                                        16  %               19  %                 17  %               14  %




                                       40
--------------------------------------------------------------------------------

Adjusted EBITDA


We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding
interest expense, income tax expense, depreciation, amortization, stock-based
compensation, net investment income, 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 customers 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 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,
                                                    2022                  2021                 2022                 2021
                                                                             ($ in millions)
Net loss                                      $        (67.9)         $   (55.6)         $      (142.7)         $  (104.6)
Adjustments:
Income tax expense                            $          2.9          $     2.7          $         5.1          $     3.6
Depreciation and amortization                            1.5                0.8                    3.0                1.7
Stock-based compensation                                13.9               11.9                   28.0               18.0
Transaction costs                                        0.5                  -                    1.0                  -

Net investment income                                   (1.2)              (0.2)                  (2.1)              (0.4)
Adjusted EBITDA                               $        (50.3)         $   (40.4)         $      (107.7)         $   (81.7)



                                       41
--------------------------------------------------------------------------------

Liquidity and Capital Resources


As of June 30, 2022, we had $199.6 million in cash and cash equivalents and
$760.0 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. On
January 14, 2021, we issued and sold 3,300,000 shares of common stock, and
generated net proceeds to us of $525.7 million after deducting underwriting
discounts and other offering costs. On February 1, 2021, the underwriters
exercised their option to purchase additional shares, which resulted in the
issuance and sale of an additional 718,647 shares of common stock by us, and
generated additional net proceeds of $114.6 million. Excluding capital raises,
our principal sources of funds are insurance premiums, investment income,
reinsurance recoveries and proceeds from the maturity and sale of invested
assets. These funds are primarily used to pay claims, operating expenses and
taxes. We believe our existing cash and cash equivalents as of June 30, 2022
will be sufficient to meet our working capital and capital expenditures needs
over at least the next 12 months.

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, 2022, cash and short-term investments held by these
companies was $194.8 million.

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, 2022, the total
adjusted capital of our U.S. insurance subsidiary 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,
                                                                       2022                 2021
                                                                           ($ in millions)
Net cash used in operating activities                            $       (79.7)         $    (56.5)
Net cash provided by (used in) by investing activities           $        13.0          $    (69.3)
Net cash provided by financing activities                        $         1.0          $    648.1



Operating Activities

Cash used in operating activities was $79.7 million for the six months ended
June 30, 2022, an increase of $23.2 million from $56.5 million for the six
months ended June 30, 2021. This reflected the $38.1 million increase in our net
loss, primarily offset by increases in unearned premium, unpaid loss and loss
adjustment expense and funds held that exceeded the increases in premiums
receivable and amounts expected to be recovered from our reinsurance partners
and prepaid reinsurance premium. The increase in cash used in operating
activities from the six months ended June 30, 2022 compared to the six months
ended June 30, 2021 was primarily due to claim payments, settlements with our
reinsurance partners, and increased spend related to growth and expansion.
                                       42
--------------------------------------------------------------------------------

Cash used in operating activities was $56.5 million for six months ended June
30, 2021. This resulted from our net loss of $104.6 million, partially offset by
non-cash charges and net cash provided by changes in our operating assets and
liabilities. Non-cash charges primarily consisted of non-cash stock-based
compensation. Net cash provided by changes in operating assets and liabilities
primarily consisted of increases in unearned premiums, unpaid loss and loss
adjustment expense, funds held and accrued and other liabilities partially
offset by increases in prepaid reinsurance, premiums receivables and amounts
expected to be recovered from our reinsurance partners.

Investing Activities


Cash provided by investing activities was $13.0 million for the six months ended
June 30, 2022 primarily due to proceeds from sales and maturities and offset by
purchases of U.S. government obligations, corporate debt securities, short term
investments, and property and equipment purchased during the period.

Cash used in investing activities was $69.3 million for the six months ended
June 30, 2021 primarily due to purchases of fixed maturities and property and
equipment.

Financing Activities

Cash provided by financing activities was $1.0 million for the six months ended
June 30, 2022 primarily due to proceeds from stock option exercises.


Cash provided by financing activities was $648.1 million for the six months
ended June 30, 2021 primarily due to proceeds received from our Follow-on
Offering (as defined in Note 10 to the unaudited interim condensed financial
statements included elsewhere in this Quarterly Report) and proceeds from stock
option exercises.

We do not have any current plans for material capital expenditures other than
current operating requirements. We believe that we will generate sufficient cash
flows from operations to satisfy our liquidity requirements for at least the
next 12 months and for the foreseeable future. There have been no material
changes as of June 30, 2022 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 $959.6
million in cash and investments available at June 30, 2022. We also have the
ability to access additional capital through pursuing third-party borrowings,
sales of our equity, issuance of debt securities or entrance into new
reinsurance arrangements.


                                       43
--------------------------------------------------------------------------------

Critical Accounting Policies and Estimates


Our consolidated financial statements are prepared in accordance with GAAP in
the United States. The preparation of the 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 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, reinsurance
assets, stock-based compensation prior to the Company's initial public offering
("IPO"), 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 interim condensed consolidated
financial statements appearing elsewhere in this Quarterly Report. During the
six months ended June 30, 2022, 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
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report for a discussion of accounting pronouncements recently adopted
and their impact to our unaudited condensed consolidated financial statements.


                                       44

——————————————————————————–

© Edgar Online, source Glimpses

Source link

LEMONADE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

CHOOSE YOUR CHOICE GIFT CARD OFFER TODAY

Leave a Reply

Your email address will not be published.

Scroll to top