The, the next session here. Thanks for joining us. I'm really thrilled to have, Lemonade here with us. Tim Bixby is their CFO. Tim, thank you. Welcome. Morning. Maybe start at the top. Just, Lemonade has, you know, sort of one of the early insurtechs and really set out to fundamentally rethink, insurance. As the company has scaled, as you kind of sit back and reflect, what aspects of the original vision have proven the most durable and where in the kind of as you've gone along, have you had to maybe adapt the most? Sure. Good morning, everybody. one of the most striking things about Lemonade and there's a few striking. Mm-hmm Things about Lemonade is the consistency of the original vision. Mm-hmm. From, the original whiteboard or napkin concept in 2015, where our two founders, Daniel Schreiber and Shai Wininger got together and started the kickoff to today. Really the change has been almost nominal. Mm-hmm In terms of the original vision, strategy, go-to-market approach, AI first, from day one. Our first policy was sold by AI Maya. Mm-hmm. Our first claim was managed by AI Jim, and this was in 2016. Lemonade was founded the year that OpenAI was founded. A lot of water under the bridge since then, but we were built really for this day, this day meaning 2021, 2022, 2023, up to what we're seeing day by day now from an AI perspective. Fundamentally unchanged. What the core premise of that is insurance can be done fundamentally differently from a user perspective, from a consumer experience perspective. Mm-hmm If enabled by the latest and greatest technology, whether that's the LLM from last week. Mm-hmm Machine learning from 2015 and everything in between. Perfect. you obviously mentioned AI there a few times, and going back, 10 years ago, I know you guys were, you know, before it was really a everyday word. You've been kind of preparing for the AI world and some of the rapid advances we're seeing more recently for a long time. What's your view or anything more you can add to the headlines around, insurance via GPT has kind of been the last few weeks or SaaSpocalypse, kind of a lot of the fears in the market? This cycle is similar to the ones I've seen before, of course different and fundamentally different in a couple of ways. A lot of similarities to cycles we've seen historically where the fancy new thing comes and it gets very exciting and then it'll be immediate disruption. T he selling insurance via LLM or GPT or Claude or what have you is interesting, but the experience is poor. Yes. Whether that experience will be poor a week from now or a month from now or a year from now, we don't need to know. Lemonade has had the highest standards of customer experience at heart in our DNA from day one. Using an LLM to sell insurance will be no different. If and when we get there, we'll be at the front of the line. Mm-hmm. We talk to these folks all day, every day, but the consumer experience will drive it. Great. you guys made a pretty exciting announcement recently related to Tesla and, auto insurance product, FSD. Maybe can you talk about that a little bit and then, more broadly kinda what is at top of mind for Lemonade as you think about kind of the autonomous vehicle, wave that's coming? Sure. T he most notable thing from my view about the Tesla announcement was not sort of the flashy part. Mm-hmm. It's nice to have a big announcement with a big partner and a, and a company like Tesla that has lots of folks who love it and then lots of other folks as well. That, that's always good from a PR perspective, and a kind of plant the flag perspective. From, from my view, under the covers, I think what I would take away from it if I were kind of looking at the company from the outside is the pace and the speed and the agility with which we're able to do these things. Mm-hmm. Whether autonomous and assisted and supervised, and there's some different flavors of driving that are coming to fruition here, whether the acceleration and the pace of adoption is fast or slow or in between, it doesn't matter. It doesn't matter for us 'cause we're, we'll constantly be at the forefront. There's probably a tipping point before too long where this is kind of a rule of thumb where if once 10% of the miles are fully autonomous. Mm-hmm Supervised, that creates sort of a dynamic where there's likely to be seismic market. Okay Shifts. Today, we're at a tenth of a percent. Yeah. Fully autonomous is a tenth of a tenth of a%. So we're going to have a little bit of time to think that through. Mm-hmm. Lemonade was a pioneer in pay-per-mile. Yeah .W hich feels low tech now. Mm-hmm. We've been in that for many years, where a customer who drives less, and is therefore a much, a fundamentally lower risk. They're not no risk, but a lower risk. Mm-hmm. We've had a pricing model that's been adaptable to that pay-per-mile model for years. Yeah. Autonomous is, It's a major step change. Mm-hmm Beyond the pay-per-mile approach, but that's one of the reasons we were able to put something together with the Tesla folks, with our product team in just a matter of months. Mm-hmm. Our employees are friends. Some of our employees have worked at Tesla. These things are just natural when you're AI first and data first. Yes. There'll be many more to come. Cool. Great. Maybe if we shift to your, you know, as we think Lemonade going forward, the recent shareholder letter talked a little bit about some, investment areas with, I think the way you guys termed it was like medium term ROI. Mm-hmm. Can you expand a little bit there, kind of what you're thinking about, what we might expect to see? Sure. I think, another striking thing about Lemonade perhaps is the visibility and the predictability of the model. Yeah. Even though, in an era within insurance that has been really one of the most tumultuous-. Mm The last six or eight years in history, even in that era, Lemonade's key metrics have been sort of up and to the right in a almost surprisingly linear. Mm-hmm Fashion. While the outside world and the macro world and have been quite a bit more volatile. We set out a target to prove that we can do several things at the same time: dramatically improve our underwriting, go from a relatively immature insurance company to a mature insurance company, show loss ratios that consistently- Yeah Improve quarter-over-quarter-over-quarter with a new customer base and significant growth. Mm-hmm. Doing all of that without moving the sort of the goal line of. Yeah EBITDA positive. Yes. we planted that flag, I think it was as much as almost four years ago. Yeah, it was. At this point, and it hasn't moved. Part of that is by our own choice, but part of it is the visibility and the predictability of our model and our ability to grow at a pace of our own choosing. Mm-hmm. Importantly, the market is not our limitation. Mm. We could grow faster. The insurance market, the addressable market is enormous, by every, almost every measure. We spend money to acquire each new customer, typically. Sometimes it's a cross-sell. Mm-hmm. We spend that money up front, and it burdens the P&L, and we wanted to be able to show that we would hit that breakeven point. Despite that, under the covers, we're continuing to invest. Yes. To your specific question, there are things that we can see in under the covers, in the numbers, in the analytics that are tougher to see externally, where we can invest in areas where we know they'll have positive ROI. Mm In the medium term, but perhaps not in year. Yes. Some of that is built into the guidance. Nevertheless, we're going to grow at a faster rate than last year. Yes. We expect loss ratios, in line or better than industry best. Our loss adjustment expense, a key measure of the efficiency of the underlying machine, is something like 6% in Q4. Industry norms are 9%, ours used to be 15%. Yeah. We can do more than two or three things at once. Yes. Can you maybe expand on that a little bit? 'Cause for maybe people who don't know Lemonade as well, like, it's been pretty impressive kind of your how your expenses have gone, how your head count has gone versus your premium over the past few years. Maybe talk a little bit about that and how you've really used technology to scale the business. That's it. I've been with Lemonade nine, almost nine years now, I think, one of the most pleasantly surprising things that I started seeing the numbers several years ago is when this dynamic broke, right? Yeah. The traditional dynamic in insurance is you're gonna add a certain amount of business or add a certain number of customers, and you're gonna add a good slug of costs, and maybe there's some efficiency gains. What we started to see in the numbers about three years ago was head count increases falling to zero. Mm-hmm. Netting to roughly zero, our top line accelerating, our ability to continue to grow the business. After a few quarters of you know, convincing ourselves that the change had come, that's really the underlying benefit of our approach and our single system. We have a single, one data stack, one technical system that supports and drives the entire- Mm-hmm Business. The reason that that dynamic started to occur, a big part of it is we were able to take big chunks of cost out of the system. Not just become more efficient, but just eliminate entire costs. Yeah. For example, in our pet insurance business, has some really interesting, unique dynamics. One is frequency. Mm-hmm. The frequency in a normal line might be 2 or 3 or 5%. Mm Of your customers have a claim in a given year. With pet, it's something like 100%- Yeah or 120%. Yes. There's just a constant flow, which we actually like. It enables the flywheel to move faster. It builds our data advantage and it expands our data advantage faster. Something like 50% or 60% of our claims in pet, we were able to take to zero. Close them, pay them in real time, money in the bank account within a few seconds. It's not just getting more efficient. Mm-hmm It's literally pulling pieces of cost out of the, out of the P&L. it's part of what drives that LAE- Yes, for sure. Improvement. When you're able to get to these sort of, efficiency gains that are visible and sustainable, we're so subscale. Mm-hmm. We're a billion dollar- I know. Plus insurance company. You know, at $10 billion or $100 billion, then you're starting to get to some real scale. yes. Those are the folks we compete with. But when you start to see this at our scale, that's what really tells you the model is really working well. Yes, You touched on it there, just kind of the more data and the feedback loops, and if I kinda tie a couple things together. Like, on one side with kinda what's going on with AI and so forth, you know, there are a lot more AI tools available to competitors, today, kinda easily attainable tha. I mean, you guys had to build it from scratch- Yeah 10 years ago. When you kinda take that on one side and say, like, does that hurt your kinda competitive advantage or the moat that you've built around the business? But on the flip side, like, how important is all those new product lines you've added, the new geographies you've added? Mm-hmm. That really that just that data and that feedback loop, like how do you think about those two things? It's a like the common question is, can you build Lemonade overnight. Mm-hmm. Over a weekend now? It took us years to put together. I think, the underlying advantage is not for Lemonade sort of a silver bullet. Mm-hmm. It's kind of like the culmination or the combination of all the. Yeah. All these different pieces. If you just took an extreme example, let's say you took Lemonade's front end and you gave it to a large incumbent- Mm-hmm. For free. You know, AI feels free even though you have to pay for it. Let's say you could code that thing up and hand it off to one of our competitors. The question is, what do you do with that capability? Mm-hmm. It's not getting the capabilities, what do you do with the capability? The real value of the Lemonade system is built under the hood on our proprietary data. We all share publicly available- Mm-hmm. Data, and that's been true for a very long- Yes. Time. If AI enables some of those sort of external facing pieces to be easier to build or easier to code, then that may very well be. The, but our fundamental advantage, we think, is actually expanding, not shrinking. Mm-hmm. Because of the pace of the sort of acceleration here. If we're all accelerating at a similar speed, whoever started first- Yes. You heard Daniel publish this in the last couple days. If you started earlier and you're all accelerating at the same speed, your advantage is gonna widen. Yes. Is not going to narrow. It's kind of like it's a little bit of the. It's a different version of The Innovator's Dilemma, where, for decades, you know, to be an amazing insurance company, you had to be a bit of a sumo wrestler, right? Yes. You had to be really big and really smart and have a lot of reserves, and that. Yep. -was how that system was built over decades and decades. We're playing in a different game. We're not trying to sumo wrestle the sumo wrestler. Yep. We're doing the biathlon. Mm-hmm. We have a rifle and some skis and next week the sport's gonna change again. Yeah. whoever's most agile, and that's really where our advantage lies. not mastering today's model release- Mm-hmm. Knowing that we're gonna be best fitted to master three releases from now in six or 12 or 18 months. Yep, that makes sense. Along those lines of constantly expanding, growing, I think a lot of people think of Lemonade as a, as a U.S. company, but Europe's kinda stealthily, you know, getting on the map and growing, and you have a number of countries there, products. Can you just spend a couple minutes talking about kind of the strategy there? Sure. kinda maybe, you know, how the regulatory environment there is, you know, welcomes that sort of thing? Mm-hmm. Mm-hmm. Yeah. Again, going back to day one of the strategic pillars of Lemonade was we can go where the market is. Mm-hmm. We don't bring in 1,000 agents, and we don't build big buildings and put our name on them. It became clear to us that we could launch Texas, for example. Mm. -with no employees in Texas, or, we could launch Michigan with no employees in Michigan. We kinda planted the flag in Europe and we said, "We're gonna do this because we can. Mm-hmm. If you had asked me in my prior life before Lemonade, I probably would have strongly recommended against it for all the normal. Mm-hmm. -reasons. Yep. Risk and capital and all those things. That was really the reason we did it, because we could. For a while, for a few years, it was under the covers, and now it's really, Europe has come into its own. Mm-hmm. It's got some really interesting dynamics from a pricing perspective. There's no pricing regulation. price comparison websites drive a lot of the business. At first, we didn't like that 'cause we didn't have an advantage. Right. Yeah, yeah. The direct consumer model was really our fundamental advantage. We had to learn it. We had to become part of it. We failed a bit, then we started to succeed quite a bit. Europe someday can be. It could be half the business, right? Exactly. The relative market size, maybe it's 50/50. We're following the game plan from the US. We've gone from one product to two products. We think car insurance will be great in Europe. Yeah, for sure. We don't have it yet. We think pet insurance likewise will be great to add. More than half our business in Europe is from the U.K.- Mm-hmm. which is our newest territory. More than half the business is from home insurance versus renters insurance. That's the newer product. Yeah. Again, we're seeing this pattern that we saw in maybe 2016, 2017. Yeah. 2018 in the, in the U.S., we have a nimble team. It's actually interesting when you, when you think about the sort of LLM question, you know? Mm-hmm. GPT sell insurance? In some ways, Europe was a bit of a test case, right? Yeah. We had to figure out price comparison engines. Yep. It's a little distant from our customer experience. Right. We had to figure it out. Yep. We had to nail it. Obviously, AI and the LLMs are going to be a step change beyond those websites. Maybe that was a bit of a dry run. Yeah. - that prepped us. Good point. Okay, great. I mean, CFO's here, so let's put a financial hat on. can you talk a little bit about the virtual agents and kind of the kind of the growth financing arrangement that you put in place? It is. It's pretty. Mm-hmm. unique, but it seems to be working very well. You've renewed it, you know, so on. Yep. Like it's, I think a big, something people might gloss over but is pretty unique. It's a Synthetic Agents program, we call it. We really, we developed it. When I say we developed it, we have partners who were thinking along the same line. General Catalyst is our partner in this. Others in the market do it. It's a bit rare outside of tech. Yeah Software, It's a little more common in private companies than public companies. We've found it to be a bit of a sleeper, to put it mildly, which is, it's one of the few financing mechanisms I've ever seen or experienced that does everything you want it to do and none of the bad things that you don't want it to do. With all due respect to all the bankers and lenders in the world, there's always a trade-off. Of course. Cost and covenants and all that stuff. There's so much flexibility built into this program, and it gives us downside- Mm-hmm Flexibility, but it also enables us to make decisions going forward so we can grow at a pace of our choosing. We've been able to replicate the benefit of agents, where, you know, we're competing against big incumbents with large installed. Yes Bases. Those can be a liability and can be cumbersome Yeah To manage and train and pay. The nice thing about them is you can. it stretches out your customer acquisition cost. Mm-hmm Over a very long period of time, the, essentially the lifetime of the customer. We were able to do that, replicate that. There's a cost, right? Mm-hmm. The partner makes a healthy return, but it's debt-like. It's got all the advantages of debt. Mm-hmm Where we're able to get the balance sheet benefit, lessen the cash flow burden, but also maintain our flexibility. There's no covenants, there's no limitations, there's no decisions we make that we can't, couldn't make otherwise because of the debt, a traditional debt structure. It's just been ideal for our business and the kind of customer cohorts that we acquire. Yes. It's been a great fit. Great. Before we open it up for questions in the last few minutes, may I ask you this kind of 1 forward-looking, kind of, you know, if you, as you look out 5 to 10 years. I guess look out 10 years, and Lemonade's kind of 10 years old now, so let's look out 10 years. Like, what how do you, 1, see where Lemonade is, but 2, just the broader insurance landscape, at least in your, you know, personal line sort of universe? Yeah Particularly with AI coming of age and those sorts of things? I think, in broad strokes, we have what we need. We don't have to, we don't have to, you know, there's another continent or two out there. Mm-hmm That we're not in, and that's always an opportunity. There's other products that we could launch- Mm-hmm We don't need to. We likely will over time. We have the core capabilities. We have the core products. Mm-hmm. We're in 50 states with a couple products, but we're not in 50 states with all products. Yeah. We'll continue that geographic expansion. I think from a 5- or 10-year view, we have always believed that there's room in the insurance world. Yep For a single, at least a single, digital leader, the Spotify of insurance, the Uber of insurance. Yeah T he Netflix of insurance. That doesn't mean, you know, that sort of indicates a winner-take-most dynamic, which I don't think is how insurance plays out. There's no one in the market that's ahead of us. Correct. Four years ago, I would say that same sentence. Mm-hmm Kind of waiting for the, you know, the shoe to drop and the companies to flood in, and we've still not seen that. Yeah. Our real direct competition is really ourselves, right? Yeah. To maintain our standards, to adapt to these new technologies, to accelerate growth, to do all the things we've been able to do. I think in the same way that people love and use Spotify and would panic if you took it away from them. I think Lemonade will occupy a place like that in financial services and in insurance 5 or 10 years from now. Great. We got a couple minutes left if there's any questions in the room. Let's see with the light here. One. Just an economic one, not maybe specific to Lemonade. Just in terms of your underwriting, is there anything that you need to change or address just based on the state of the consumer out there? I'm sure you're making tweaks all the time, but is there anything general you can say about Lemonade's view of the end consumer health? Maybe you're getting at the long-term view of employment and compensation and some of those economic issues that are certainly. However you wanna address it. Starting to come pretty fast. I'll just assume that that might be where you're going. we're highly cognizant of the benefits of AI to businesses and cost structures and all those things, and we are even more cognizant of the broader pressures that we expect or might expect developing on consumers. In the short term, consumers, we're providing a service and a product that's of utmost importance to a consumer, whether they're wealthy or not wealthy or employed or unemployed or. It's a critical need. While recession-proof might be an exaggeration, there's a bit of truth to that. People will pull down their discretionary spending, but they wanna make sure their bike is covered and their pet is covered and their, and their home, their most important asset is covered. I think that will be a short-term and a medium-term dynamic. But in the long term, we have to have customers, and they have to be healthy customers that have, that own valuable things. It's in all of our incentives as leaders of businesses to think about these things. I don't I have no more magic vision than the, than the next guy. I do, the leader of Lemonade, Daniel Schreiber, has actually done quite a bit of thinking along these lines and outside of work is kind of a key thought leader in how these economic structures play out. It is a top-of-mind thing for us. It's top of mind for me and probably you, anyone who has kids and grandkids, and it's critically important. From Lemonade's perspective, we'll be at the front of the line, but we do have a greater responsibility, I think. Great. We are