Is LMND's Rising In-Force Premium Fueling Growth & Operating Leverage?

Lemonade Inc. LMND is a compelling long-term investment case, backed by steady growth in premiums-in-force, which, in turn, is driven by a compelling portfolio, geographic expansion and technology.  

Third quarter in-force premium (IFP) grew to $1.16 billion, marking the eighth straight quarter of accelerating growth. A strong product portfolio, AI-powered improvements in segmentation and pricing continued to support the improvement.  Management estimates year-end IFP between $1.218 billion and $1.223 billion and FY 2026 IFP growth of 30%.

This insurer has been making continuous efforts to improve its IFP.  Lemonade has expanded beyond renters and homeowners insurance into auto (Metromile buyout), pet and life coverage. Also, geographic expansion continues to be a growth lever. Europe diversifies its growth opportunity beyond the United States, with lower catastrophe exposure and a favorable regulatory environment. Prudent underwriting powered by artificial intelligence and telematics improves retention and risk selection, thus supporting a more stable long-term IFP. 

An improving IFP leads to an impressive efficiency with loss adjustment expense or LAE improving to 7%, on average, across all its products. LAE measures the cost of handling claims as a percentage of premiums. Notably, over the past three years, LMND has improved its LAE ratio by 600 basis points.

An improving IFP thus strengthens visibility into recurring premium streams while enhancing operational leverage across Lemonade’s business.

What About Other Insurers?

Universal Insurance Holdings’ UVE growth is underpinned by a steady rise in premiums-in-force, driven by strategic rate increases, inflation-linked valuation adjustments, and prudent underwriting. This positive trend has bolstered both direct premiums written and earned, supporting stronger underwriting revenues and overall profitability for Universal Insurance.

HCI Group’s HCI growth has largely been fueled by a notable increase in premiums-in-force, driven by disciplined pricing and the strategic acquisition of several rounds of Citizens policies. This expansion has resulted in a strong rise in gross premiums earned, significantly enhancing underwriting revenues and overall profitability.

LMND Price Performance

Shares of LMND have gained 100.6% year to date, underperforming the industry.

LMND’s Expensive Valuation

The stock is overvalued compared to its industry. It is currently trading at a price-to-book multiple of 10.33, higher than the industry average of 2.4. But it carries a Value Score of F.

Estimates for LMND 

The Zacks Consensus Estimate for LMND’s 2025 earnings has moved north while that for 2026 has moved south in the past 30 days. 
 

The Zacks Consensus Estimate for the company’s 2025 and 2026 earnings indicates a 16.8% and a 32.3% year-over-year increase, respectively. The consensus estimates for 2025 and 2026 revenues suggest year-over-year improvements, too. LMND has a Growth Score of A.

LMND stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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