In October 2023 I published a 12-page writeup titled “Lemonade: Short-Term Headwinds Will Soon be Tailwinds.” Fourteen months later, it looks like that title is turning out to be quite prescient. My last paragraph in that writeup was the following:

As inflation inevitably slows down and Lemonade’s rate increases get approved, their loss ratios should come down. This will also allow them to turn marketing back on and thus growth will accelerate. As their heavy investments to build out their three new lines of insurance are mostly complete, I expect [2024’s] growth to have high incremental margins and prove once more the operating leverage Lemonade has. Reaccelerating to 20-30%+ growth while loss ratios decrease and margins increase should result in a significant sentiment shift in Lemonade’s stock.

In summary, I predicted four things:

1. Loss ratios would decrease
2. Growth would accelerate
3. Margins would increase
4. Sentiment would improve

All four of those things happened in 2024, but more importantly, I expect 2025 to be the real inflection. I predict all of those same four things will happen again in 2025. Let’s walk through why.

Continue reading “Lemonade: 2024 Review and 2025 Preview” →