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| So good progress across the board, 9% to 18%, we'll continue to give that sort of color commentary where it's helpful, but it's not something we disclose specific numbers every single quarter |
| In fact, in 2023, Car actually grew significantly in places where profitability was attractive |
| Since Q4 of last year, our adjusted gross profit has nearly doubled, while our adjusted EBITDA loss nearly halved |
| top line up 20%, adjusted gross profit up 97%, operating expenses down 5%, and EBITDA loss 44% improved, an impressive combination |
| It's important to note that in Illinois, we have continued to see good progress |
| We think we've got very strong teams, well-staffed, and conceptually, we could double and triple and perhaps even 10x our business without seeing any significant growth in those teams |
| This isn't a mission accomplished moment, not by a long shot, but the progress in 2023 was tangible and material, and it increases our confidence that we're on track not only to turn cash flow positive next year with plenty of cash in the bank, but to build a large, enduring and profitable business thereafter |
| Gross profit and adjusted gross profit have shown notable improvement over time, driven by continued premium growth coupled with loss ratio and investment income improvements |
| The really outstanding historical operating leverage that I've mentioned just now was really delivered both by an ever-improving, pretty dramatic improvement in automation rate, placing very significant downward pressure on the growth of variable headcount, plus a lot of smart expense management and targeted automation initiatives that keep the rest of the organization more or less in a stable size, marketing and other teams that are using generative AI, coding, and teams that are using generative AI, etc |
| Again, I think very strong indicators that you're looking for |
| Our top line will grow significantly faster and that the growth of these teams will be a fraction of the book's growth rate, and that's really where the scalability and the financial results come from |
| We are, we believe, leaner and more focused, stronger and more resilient with better unit economics and with fewer competitors than would have been the case had the turbulence never come |
| As you will have seen, Q4 was an excellent quarter, capping off a year of dramatic progress for Lemonade |
| So beyond the quantity, I also share that the quality of the book has been very good, really on par with our own book in terms of premiums, in terms of retention, loss rates, bundle rates, etc |
| Zooming out as noted in our shareholder letter, our actual IFP results in 2023 came in nearly $50 million better than our initial expectations shared a year ago, while EBITDA came in nearly $70 million better |
| There are -- this year several exciting technology advancements that should help with cross-selling and with even further refinement of our telemetry and the data science behind that those will be released in 2024 and will really enable us to accelerate growth -- car growth further in 2025 |
| It was a strong quarter across the board with excellent loss ratio improvement coupled with rigorous cost control, resulting in strong results exceeding our own expectations |
| We remain very bullish about our ability to continue to leverage that platform |
| Underpinning our results was a steady stream of improvements in our ability to match rate to risk as well as in our operational efficiencies, all these mediated by a singular integrated system that improves and is improved by all our customer interactions |
| From a product perspective, loss ratio has improved across the business, with the loss ratios of each of the four products we underwrite, Renters, Home, Car, and Pet, all improving between 9 percentage points and 18 percentage points year-over-year |
| We expect our loss ratio to continue to improve in 2024 and that our new generative AI tech, as well as many other technology innovations currently in the pipeline will allow us to grow faster with minimal impact to our OpEx |
| Because we've delivered significant operating leverage in recent years |
| So where opportunities present, we can grow pretty aggressively |
| In other words, we'll be spending dollar that will positively boost our EBITDA over time, but will be a drag on it in 2024 |
| We hope our latest results boost your confidence alongside our own |
| We saw a consistent improvement across the other three expense lines, sales and marketing, technology development, and G&A, all coming in lower than the prior year in absolute terms during a year of notable growth |
| They've all improved |
| So we're seeing a very notable acceleration |
| Q4 gross profit increased by 165% to $34 million versus the prior year, while adjusted gross profit increased by 97% over the same period |
| And as more rate updates come into effect, we'll have more products in more areas where we can accelerate our growth |
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| All else being equal, that could have translated into year-over-year EBITDA deterioration, but we believe that not all else will be equal |
| In 2023, we intentionally slowed our growth to minimize sales of products in areas where we're underpriced |
| As Tim indicated, rate adequacy as you know has been a challenge for the industry |
| We are far more cautious about disclosing partners' results |
| And even in places where we are very profitable, particularly in those, there's always the risk of getting over-indexed on those regions |
| And so in 2024, we plan to accelerate our growth rate, but beyond being a welcome sign of improving conditions accelerated growth also presents challenges we want you to be aware of |
| The last couple of years were some of the toughest for both established insurance companies and for up and coming tech companies |
| That said, piloting with tailwinds comes with its own set of challenges |
| We still await significant further rate approvals |
| While there is always the aspiration for outperformance, especially this early in the year, we would urge listeners' caution about assuming that our guidance is overly conservative |
| In other words, we will continue to throttle growth this year too |
| Inflation appears to be receding, costs of capital may have peaked, and rates are finally catching up with risks |
| At nearly 20% annual growth, we outpaced most of the industry, yet for us it was a slowdown compared to previous years, and if things goes to plan to coming years as well |
| As we look forward to 2024, there's reason for optimism that the worst of these storms may be behind us |
| As the African proverb says, smooth seas never made a skillful sailor |
| Notably, prior period development from CATs was about 1.5% unfavorable, while non-CAT prior period development was about 3% favorable |
| E-mails are much harder |
| So that's been a harder nut to crack |
| As we choose to launch new markets and new products, we may have to introduce a bit more headcount |
| And so for much of 2024, we will continue to constrain sales of two products with the highest average premium and the largest markets, Home and Car |
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