By Josh Recamara
Lemonade posted its strongest quarterly performance to date, showing accelerating growth, improving loss ratios and progress toward profitability. The company credited its use of artificial intelligence (AI) for helping it scale efficiently while maintaining cost discipline.
In Q3 2025, the company said its in force premium (IFP) rose 30% year over year to $1.16 billion, marking the insurtech's eighth consecutive quarter of accelerating growth. Gross profit more than doubled to $80 million, while gross profit margin improved by 14 percentage points to 41%.
Adjusted EBITDA loss narrowed 48% year over year to $26 million, and net loss improved 45% to $38 million. The company also reported $18 million in adjusted free cash flow and $5 million in operating cash flow, underscoring a steady move toward positive earnings.
Two years ago, Lemonade was growing IFP at 18% with a 19% gross profit margin and a net loss equal to 36% of gross earned premium. By Q3 2025, IFP growth had accelerated to 30% and margins more than doubled to 41%, while net loss as a percentage of GEP improved to 14%. The company maintained a 3:1 lifetime value to customer acquisition cost (LTV/CAC) ratio, with marketing spend more than tripling. AI-driven segmentation and pricing helped offset higher spending by keeping operating costs nearly flat.
Lemonade Car strengthens, AI efficiency gains
Lemonade Car continued to outperform expectations, with its gross loss ratio improving 16 points year over year to 76%. The book’s performance benefited from stronger pricing and risk models. The segment ended the quarter with $163 million in IFP, representing about 40% annual growth. More than half of new car policies came from existing Lemonade customers, highlighting the company’s ability to expand wallet share without additional customer acquisition costs.
The company expects further acceleration in car insurance growth with new state launches, including Pennsylvania, which will expand its footprint to nine of the ten largest US cities.
Meanwhile, Lemonade’s Loss Adjustment Expense ratio fell from 13% three years ago to 7% this quarter, even as claims volume increased more than 2.5 times. The company said this reflects nearly triple the claims-handling efficiency, positioning it ahead of many larger insurers that typically report LAE ratios around 9%.
Guidance raised
Lemonade raised its full-year 2025 guidance, expecting revenue between $727 million and $732 million and adjusted EBITDA loss between $127 million and $130 million. The company aims to achieve positive adjusted EBITDA by Q4 2026..
Compared with peers such as Hippo and Root, Lemonade is showing stronger growth and faster efficiency gains, narrowing the gap with established carriers like Progressive and Allstate.