Q2 2024 Lemonade Inc Earnings Call

Hello and welcome everyone to the Lemonade Q2 2024 Earnings School. My name is Maxine and I'll be coordinating the call today. If you would like to ask a question, you may do so by pressing star followed by 1 on your telephone keypad.

School.

Matt Smith: My name is Matt Smith, and I'll be coordinating the call today.

Matt Smith: If you would like to ask a question, you may do so by pressing staff for the number one on the telephone keypad.

Matt Smith: I will now hand you over to Yael Wissner Levy, VP Communications at Lemonade's begin. Yael, please go ahead when you are ready.

Yael Wissner Levy: Good morning, and welcome to Lemonade's second quarter 2024 earnings call. My name is Yael Wissner Levy, and I'm the VP Communications at Lemonade.

Yael Wissner: Good morning, and welcome to Lemonade's second quarter 2024 earnings call. My name is Yael Wissner-Levy, and I'm the VP of Communications at Lemonade.

Yael Wissner: Joining me today to discuss our results are Daniel Schreiber, CEO and co-founder, Shai Winninger, President and co-founder, and Tim Bixby, our Chief Financial Officer. A letter to shareholders covering the company's second quarter 2024 financial results is available on our investor relations website, investor.lemonade.com. Before we begin, I would like to remind you that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Yael Wissner Levy: Joining me today to discuss our results are Daniel Schreiber, CEO and co-founder; Shai Winninger, President and co-founder; and Tim Bixby, our Chief Financial Officer. A letter of shareholders covering the company's second quarter 2024 financial results is available on our investor relations website, investor.leminade.com. Before we begin, I would like to remind you that management remarks on this call made it contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results made different materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our 2023 Form 10-Q, filed with the SEC on May 1st, 2024, and our other filings with the SEC.

Yael Wissner: Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our 2023 Form 10-Q, filed with the SEC on May 1, 2024, and our other filings with the SEC. Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them. We will be referring to certain non-GAAP financial measures in today's call, such as adjusted EBITDA and adjusted gross profit, which we believe may be important to investors to assess their operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our letter to shareholders.

Speaker Change: Before we begin I would like to remind you that management's remarks on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the risk factors section of our 2023 Form 10-Q filed with the SEC.

Yael Wissner: Our letter to shareholders also includes information about our key performance indicators, including customers, enforced premium, premium per customer, annual dollar retention, gross earned premium, gross loss ratio, gross loss ratio XCAT, and net loss ratio, and the definition of each metric, why each is useful to investors, and how we use each to monitor and manage our business. I'd also like to bring your attention to our upcoming Investor Day to be held on November 19th, 2024 in New York City. We will be providing detailed updates on our strategic expansion plans, operating efficiencies, and growth trajectory. I hope to see you there.

Speaker Change: The first 2024 and our other filings with the SEC any forward looking statements made on this call represent our views only as of today and we undertake no obligation to update them.

Yael Wissner Levy: Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligation to update them. We will be referring to Sarton non-gap financial measures in today's call, such as adjusted Evita and adjusted gross profit, which we believe may be important to investors to assess our operating performance. Reconciliation of these non-GAAP financial measures, the most direct comparable GAAP financial measures, are included in our letter to shareholders. Our letter to shareholders also includes information about our key performance indicators, including customers, enforce premium, premium per customer, annual dollar retention, growth earn premium, gross loss ratio, gross loss ratio, ex-cat, and net loss ratio.

Speaker Change: We will be referring to certain non-GAAP financial measures on today's call such as adjusted EBITDA and adjusted gross profit, which we believe may be important to investors to assess our operating performance reconciliation of these non-GAAP financial measures to the most the most direct comparable GAAP financial measures are included in our letter to shareholders our letter to shareholders.

Speaker Change: It also includes information about our key performance indicators, including customers in force premium premium per customer annual dollar retention gross earned premium gross loss ratio gross loss ratio ex cat and net loss ratio and the definition of each metric why each is useful to investors and how we use each to monitor and manage our business.

Yael Wissner Levy: And in definition of each metric, why each is useful to investors and how we use each to monitor and manage our business.

Yael Wissner Levy: I'd also like to bring your attention to our upcoming Investor Day to be held on November the 19th, 2024, in New York City. We will be providing detailed updates on our strategic expansion plans, operating efficiencies, and gross trajectory. Hope to see you there.

Speaker Change: I'd also like to bring your attention to our upcoming Investor day to be held on November 19th 2024 in New York City, we will be providing detailed updates on our strategic expansion plans operating as operating efficiencies and growth trajectory I hope to see you there with that I'll turn the call over to Daniel for some opening remarks Daniel.

Daniel Asher Schreiber: With that, I'll turn the call over to Daniel for some opening remarks. Good morning, and thank you for joining us to discuss Lemonade's results for Q2 2024. I'm happy to report continued consistent and strong progress across the board. Year on year, our top line grew 22%, adjusted EBITDA losses improved by 18%, and our gross profit grew by a remarkable 155%. Despite a quarter that saw elevated cat losses across the industry, our loss ratio came in at 79%, improving 15 points year on year. This is no accident.

Yael Wissner Levy: With that, I'll turn the call over to Daniel for some opening remarks.

Daniel Schreiber: Daniel? Good morning, and thank you for joining us to discuss Lemonade's results for Q2 2020-24. I'm happy to report continued consistent and strong progress across the board. Year-on-year, our top line group 22% adjusted Evita loss improved by 18%, and our gross profit group by a remarkable 155%. Despite a quarter that saw elevated cat losses across the industry, our loss ratio came in at 79%, improving 15 points year-on-year. This is no accident. We have been laser-focused on reducing cat volatility by growing products with lower cat exposure, notably pet and renters, geographic diversification of growth, including via Europe, where we recently launched homeowners insurance in the UK and France, continuing to eliminate homeowners insurance in the US only where our AI predicts attractive LTVs and simultaneously placing some home premiums with third parties in select geography.

Daniel Asher Schreiber: We have been laser focused on reducing cat volatility by growing products with lower cat exposure, notably pet and renters, and geographic diversification of growth, including via Europe, where we recently launched homeowner's insurance in the UK and France, continuing to sell Lemonade homeowner's insurance in the US only where our AI predicts attractive LTVs, and simultaneously, placing some home premiums with third parties in select geography. Tellingly, our trailing 12-month gross loss ratio continued its decline for the fourth consecutive quarter, also hitting 79%.

Daniel: Good morning.

Thank you for joining us to discuss eliminates results for Q2 2024.

Daniel: I'm happy to report continued consistent and strong progress across the board.

Daniel: Year on year, our top line grew 22% adjusted EBITDA loss improved by 18% and our gross profit grew by a remarkable 155%.

Daniel: Despite a quarter that saw elevated cat losses across the industry. Our loss ratio came in at 17, 9% improving 15 points year on year.

Daniel: This is no accident, we have been laser focused on reducing cat volatility by growing products with lower cost exposure, notably pattern renters geographic diversification of growth, including via Europe, where we recently launched homeowners insurance in the UK and France.

Daniel: Continuing to sell lemonade homeowners insurance in the U S only.

Daniel: I predict attractive ltvs and simultaneously, placing some whom premiums with third parties in select geographies.

Daniel Schreiber: Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police Police. I'm also pleased to share that Q2 was net cashflow positive. We expect cashflow to be positive consistently here on out, accepting only Q4 this year, where various timing issues will make that quarter a one-off exception. In any event, we don't expect our cash balances to decline by more than 1 or maybe 2% before climbing consistently. With these updates, we feel exceedingly well positioned to continue investing in robust and profitable growth.

Speaker Change: Telling me.

Speaker Change: Trailing 12 month gross loss ratio continued to decline for the fourth consecutive quarter also hitting 79%. We think this number in preference to the quarterly results neutralize some of the volatility and provides a more bankable indication of our ongoing performance.

Daniel Asher Schreiber: We think this number, in preference to the quarterly results, neutralizes some of the volatility and provides a more bankable indication of our ongoing performance. But whatever your preferred metric is, the picture that emerges is the same. Great progress that enables us to deliver notably expanded gross margins. I'm also pleased to share that Q2 was net cash flow positive. We expect cash flow to be positive consistently here on out, accepting only Q4 this year, where various timing issues will make that quarter a one-off exception.

Speaker Change: Whatever your preferred metric is the picture that emerges as the same great progress that enables us to deliver notably expanded gross margins.

Speaker Change: I'm also pleased to share that Q2 was net cash flow positive, we expect cash flow to be positive consistently here on out excepting only Q4. This year various timing issues will make that quarter, a one off exceptions.

Daniel Asher Schreiber: In any event, we don't expect our cash balances to decline by more than 1 or maybe 2% before climbing consistently. With these updates, we feel exceedingly well positioned to continue investing in robust and profitable growth. I also wanted to put a spotlight on our Give Back program for a moment. A couple of weeks ago, we announced our contribution of more than $2 million to 43 non-profits around the globe, our eighth consecutive year of giving back to dozens of local and global charities chosen by our customers. Social impact is a core pillar of who we are at Lemonade.

Speaker Change: In any event, we don't expect our cash balances to decline by more than one or maybe 2% before climbing consistently with.

Speaker Change: With these updates we feel exceedingly well positioned to continue investing in a robust and profitable growth.

Daniel Schreiber: I also wanted to put a spotlight on our give-back program for a moment. A couple of weeks ago, we announced our contribution of more than $2 million to 43 nonprofits around the globe, our eighth consecutive year of giving back to dozens of local and global charities chosen by our customers. Social impact is a core pillar of who we are at Lemonade. Our contribution since inception now exceeds $10 million, and this program reflects the collective power of the Lemonade community and its ability to drive meaningful change. It's something we're very proud of, and we know this is only the beginning.

Speaker Change: I also wanted to put a spotlight on a give back program for a moment a couple of weeks ago, We announced our contribution of more than 2 million to 43 nonprofits around the globe.

Speaker Change: <unk> consecutive year of giving back to dozens of local and global charities chosen by our customers.

Speaker Change: Social impacts as a core pillar of who we are eliminate a contribution since inception now exceeds $10 million and this program reflects the collective power of eliminates community and its ability to drive meaningful change. It's something we're very proud of and we know this is only the beginning.

Shai Winninger: Our contribution since inception now exceeds $10 million, and this program reflects the collective power of the Lemonade community and its ability to drive meaningful change. It's something we're very proud of, and we know this is only the beginning. Next, I'd like to hand over to Shai to tell you more about our recent efficiency improvements unlocked via our technology. Shai?

Daniel Schreiber: Next, I'd like to hand over to Shai to tell you more about our recent efficiency improvements unlocked by our technology.

Speaker Change: Next I would like to hand over to Sai to tell you more about our recent efficiency improvements unlocked by our technology shy.

Shai Winninger: Shai? Thanks, Daniel. On the expense side, we've continued to deliver on our autonomous organization vision with remarkable stability. Our operating expense base, excluding growth spend, which is now financed via the synthetic agents program, was unchanged year over year. This underscores the scalability of our tech vision, which leads to measurable efficiency in our operations. This dynamic we're witnessing, robust predictable ISP growth alongside an expense base that remains comparatively steady and even shrinks at times, isn't the short term anomaly. We expect this train to persist in the coming quarters and years as we approach a sustainable profitability at scale.

Shai Winninger: Thanks, Daniel. On the expense side, we've continued to deliver on our autonomous organization vision with remarkable stability. Our operating expense base, excluding growth spend, which is now financed via the synthetic agents program, was unchanged year over year. This underscores the scalability of our tech vision, which leads to measurable efficiency in our operation. This dynamic we're witnessing, robust, predictable IFP growth alongside an expense base that remains comparatively steady and even shrinks at times, isn't a short-term anomaly. We expect this trend to persist in the coming quarters and years as we approach sustainable profitability at scale. This trajectory is a testament to the power of our technology-first approach and our commitment to operations.

Sai: Thanks, Daniel on.

Sai: On the expense side, we've continued to deliver on our autonomous organization vision with remarkable stability.

Sai: Our operating expense base, excluding growth spend which is now financed via the synthetic agents program was unchanged year over year. This underscores the scalability of our tech vision, which leads to measurable efficiency in our operations.

Sai: This dynamic we are witnessing robust predictable ISP growth alongside an expense base that remains comparatively steady and even shrinks at times isn't a short term anomaly we.

Sai: We expect this trend to persist in the coming quarters and years as we approach sustainable profitability at scale.

Shai Winninger: This trajectory is a testament of the power of our technology-first approach and our commitment to operational excellence. Investors and analysts often ask about the practical impact of our investment in building our own tech-based insurance tech. I believe our recent quarterly results clearly demonstrate that. With large parts of our business running on code rather than people, I believe our tech obsession is paying off in a big way and help separate us from incumbents in visible, measurable, and impactful ways.

Sai: This trajectory is a testament of the power of our technology first approach and our commitment to operational excellence.

Shai Winninger: Investors and analysts often ask about the practical impact of our investment in building our own tech-based insurance. With large parts of our business running on code rather than people, I believe our tech obsession is paying off in a big way and helps separate us from incumbents in visible, measurable, and impactful ways. With L2, we anticipate additional efficiency gains alongside acceleration of our product operation. These improvements should position us to adapt quickly to market changes, as well as capitalize on new opportunities, products, markets, and even business models. The potential impact of L2 extends beyond mere cost savings. It's about reimagining how insurance companies should operate in the AI era.

Sai: Investors and analysts often ask about the practical impact of our investments in building our own tech based insurance deck.

Sai: I believe our recent quarterly results clearly demonstrate that with large parts of our business running on code rather than people I believe our tech obsession is paying off in a big way and help separate us from incumbents invisible measurable and impactful ways.

Shai Winninger: What we've achieved so far is just the beginning. Our team has been hard at work on our next generation technology platform, code name L2, which is designed to bring step change improvements to areas such as underwriting, insurance operations, compliance, and product development. With L2, we anticipate additional efficiency gains alongside acceleration of our product operations. These improvements should position us to adapt quickly to market changes, as well as capitalize on new opportunities, products, markets, and even business. models. The potential impact of L2 extends beyond mere cost savings. It's about reimagining how insurance companies should operate in the AI era.

Sai: What we've achieved so far is just the beginning our team has been hard at work on our next generation technology platform code named <unk>, which is designed to bring step change improvements to areas such as underwriting insurance operations compliance and product development.

Sai: Without <unk>, we anticipate additional efficiency gains alongside acceleration of our product operations. These improvements should position us to adapt quickly to market changes as well as capitalize on new opportunities product markets and even business models.

Sai: The potential impact of <unk> extends beyond mere cost savings, it's about re imagining how insurance companies should operate in the AI era.

Tim Bixby: We look forward to sharing more about all this at our Investor Day, November 19th in New York City. And with that, let me hand it over to Tim to cover our financial results and outlook in greater detail.

Timothy E. Bixby: We look forward to sharing more about all this at our investor day on November 19th in New York. Premium per customer increased 8% versus the prior year to $387, driven primarily by rate. The impact of catastrophes in Q2 was roughly 17% within the gross loss ratio, nearly all driven by convective storm and winter storm activity.

Sai: We look forward to sharing more about all this at our Investor Day November 19th in New York City.

Sai: And with that let me hand, it over to Tim to cover our financial results and outlook in greater detail Tim.

Tim Bixby: Tim? Great, thanks, Shai. I'll review highlights of our Q2 results and provide our expectations for Q3 and the full year, and then we'll take some questions.

Tim: Great. Thanks Shai.

Tim: Our review highlights of our Q2 results and provide our expectations for Q3 and the full year and then we'll take some questions.

Tim Bixby: Overall, it was again a terrific quarter with results very much in line with, or better than expectations, and continued notable loss ratio improvement across the board. Enforced premium grew 22% to $839 million, while customer count increased by 14% to 2.2 million. Premium per customer increased 8% versus the prior year to $387, driven primarily by rate increases. Annual dollar retention or ADR was 88% up 1 percentage point since this time last year. Gross earned premium in Q2 increased 22% as compared to the prior year to $200 million, in line with IFP growth. Our revenue in Q2 increased 17% from the prior year to $122 million.

Tim: Overall, it was again a terrific quarter with results very much in line with or better than expectations and continued notable loss ratio improvement across the board.

Tim: In force premium grew 22% to $839 million, while customer count increased by 14% to $2 2 million.

Tim: Premium per customer increased 8% versus the prior year to $387 driven primarily by rate increases.

Tim: Annual dollar retention or ADR was 88% up one percentage point since this time last year.

Tim: Gross earned premium in Q2 increased 22% as compared to the prior year to $200 million in line with ISP growth.

Tim: Our revenue in Q2, Q2 increased 17% from the prior year to $122 million the growth in revenue was driven by the increase in gross earned premium a slightly higher effective ceding commission rate under our quota share reinsurance as well as a 45% increase in investment income.

Tim Bixby: The growth in revenue was driven by the increase in gross earned premium, a slightly higher effective seeding commission rate under our quota share reinsurance, as well as a 45% increase in investment income. Our gross loss ratio was 79% for Q2 as compared to 94% in Q2 2023, and 79% in Q1 2024. The impact of cats in Q2 was roughly 17 percentage points within the gross loss ratio, nearly all driven by convective storm and winter storm activity. Absent this total cat impact, the underlying gross loss ratio X cat was 62% in line with the prior quarter and fully 10 percentage points better than the prior year.

Tim: Our gross loss ratio was 79% for Q2 as compared to 94% in Q2, 2023 and 79% in Q1 2024 the.

Tim: The impact of cats in Q2 was roughly 17 percentage points within the gross loss ratio nearly all driven by convective storm and winter storm activity.

Tim: Absent this total cat impact the underlying gross loss ratio ex cat was 62% in line with the prior quarter and fully 10 percentage points better than the prior year.

Tim Bixby: Prior period development had a roughly 3% favorable impact on gross loss ratio in the quarter. Notably, the cat prior period development was about 2% unfavorable, while non-cat was about 5% favorable, netting out to the 3% favorable impact. Trailing 12 months or TTM loss ratio was about 79% or 12 points better year on year and four points better sequentially. From a product perspective, gross loss ratio improved notably for all products, with year on year improvements ranging from 5 to 30%. Operating expenses excluding loss and loss adjustment expense increased 13% to $107 million in Q2 as compared to the prior year.

Timothy E. Bixby: Prior period development had a roughly 3% favorable impact on gross loss ratio in the quarter; trailing 12 months or TTM loss ratio was about 79% or 12 points better year on year and four points better sequentially. From a product perspective, gross loss ratio improved notably for all products with year-on-year improvements ranging from 5 to 30 percent. Other insurance expense grew 25% in Q2 versus the prior year in line with the growth of earned premium, primarily in support of our increased investment in rate filing.

Tim: Prior period development had a roughly 3% favorable impact on gross loss ratio in the quarter.

Tim: Notably the cat prior period development was about 2% unfavorable while non cat was about 5% favorable netting out to the 3% favorable impact.

Tim: Trailing 12 months or TTM loss ratio was about 79% or 12 points better year on year and four points better sequentially.

Tim: From a product perspective gross loss ratio improved notably for all products with year on year improvements ranging from 5% to 30%.

Tim: Operating expenses, excluding loss and loss adjustment expense increased 13% to $107 million in Q2 as compared to the prior year.

Tim Bixby: The increase of $12 million year on year was driven predominantly by an increase in growth acquisition spending within sales and marketing expenses. Other insurance expense grew 25% in Q2 versus the prior year, in line with the growth of earned premium, primarily in support of our increase investment in rate filing. and capacity. Total sales and marketing expense increased by $12 million, as noted, or 48%, primarily due to the increased growth spend, partially offset by lower personnel-related costs driven by efficiency gains. Total growth spend in the quarter was about $26 million, roughly double the $13 million figure in the prior year.

Tim: The increase of $12 million year on year was driven predominantly by an increase in growth acquisition spending within sales and marketing expenses.

Tim: Other insurance expense grew 25% in Q2 versus the prior year in line with the growth of earned premium primarily in support of our increased investment in rate filing capacity.

Tim: Total sales and marketing expense increased by $12 million as noted our 48% primarily due to increased gross spend partially offset by lower personnel related costs driven by efficiency gains.

Timothy E. Bixby: Total growth spend in the quarter was about $26 million, roughly double the $13 million figure in the prior year, a roughly 18% improvement year on year. This positive net cash flow contrasts markedly with a net use of cash of $51 million in the same quarter of the prior year. With these metrics in mind, I'll outline our specific financial expectations for the third quarter and full year 2024. Our expectations for the full year remain unchanged as compared to our guidance on our Q1 earnings call.

Tim: Total gross spend in the quarter was about $26 million roughly double the $13 million in the prior year.

Tim Bixby: We continue to utilize our synthetic agent's growth funding program and have financed 80% of our growth spend since the start of the year. As a reminder, you'll see 100% of our growth spend flow through the P&L as always, while the impact of the new growth mechanism of synthetic agents is visible on the cash flow statement and balance sheet. And the net financing to date under this agreement is about $44 million as of June 30th. Technology development expense declined 12% year-on-year to $21 million due primarily to personnel cost efficiencies, while GNA expense also declined 3% as compared to the prior year to $30 million, primarily due to both lower personnel and insurance expenses.

Tim: We continue to utilize our synthetic agents growth funding program and are financed 80% of our gross spend since the start of the year.

Tim: As a reminder, youll see 100% of our gross spend flows through the P&L as always while the impact of the new growth mechanism of synthetic agents is visible on the cash flow statement and balance sheet.

Tim: And the net financing to date under this agreement is about $44 million as of June 30.

Tim: Technology development expense declined 12% year on year to $21 million due primarily to personnel cost efficiencies, while G&A expense also declined 3% as compared to the prior year to $30 million, primarily due to both lower personnel and insurance expenses.

Tim Bixby: Personnel expense and headcount control continue to be a high priority. Total headcount is down about 9% as compared to the prior year at 1,200, 11, while the top line IFP has noted grew about 22%. Including outsourced personnel expense, which has been part of our strategy for several years, this expense improvement rate would be similar. Our net loss was a loss of $57 million in Q2 or 81 cents per share, which is a 15% improvement as compared to the second quarter a year ago. Our adjusted EBITDA loss was a loss of $43 million in Q2, a roughly 18% improvement year-on-year.

Tim: Personnel expense and head count control continues to be a high priority total head count is down about 9% as compared to the prior year at 211.

Tim: While the topline RFP as noted grew about 22%.

Tim: Including outsourced personnel expense, which has been part of our strategy for several years this expense improvement rate would be similar.

Tim: Our net loss was a loss of $57 million in Q2, or <unk> 81 per share, which is a 15% improvement as compared to the second quarter a year ago. Our adjusted EBITDA loss was a loss of $43 million in Q2.

Tim: Roughly 18% improvement year on year.

Tim Bixby: Our total cash, cash equivalence, and investments ended the quarter at approximately $931 million, up $4 million versus the prior quarter, showing a nice positive net cash flow trend in the quarter. This positive net cash flow contrasts markedly with net use of cash of $51 million in the same quarter in the prior year.

Tim: Our total cash cash equivalents and investments ended the quarter at approximately $931 million up $4 million versus the prior quarter, showing a nice positive net cash flow trend in the quarter.

This positive net cash flow contrasts markedly with a net use of cash of $51 million in the same quarter in the prior year.

Tim Bixby: With these metrics in mind, I'll outline our specific financial expectations for the third quarter and full year 2024. Our expectations for the full year remain unchanged as compared to our guidance on our Q1 earnings call. As has been the case in some prior years, there's a notable seasonal difference in our expected results in Q3 and Q4. Specifically, Q3 is typically our highest growth spend quarter, which tends to drive up sales and marketing spend, and also typically a higher expected loss ratio as compared to Q4. Our third quarter guidance and our implied Q4 guidance reflect these seasonal themes.

Tim: With these metrics in mind, I will outline our specific financial expectations for the third quarter and full year 2024.

Tim: Our expectations for the full year remain unchanged as compared to our guidance on our Q1 earnings call.

Tim: As has been the case in some prior years Theres a notable seasonal difference and our expected results in Q3 and Q4, specifically Q3 is typically our highest gross spend quarter, which tends to drive up sales and marketing spend and also typically a higher expected loss ratio as compared to Q4.

Timothy E. Bixby: Our third-quarter guidance and our implied Q4 guidance reflect these seasonal themes. From a growth spend perspective, we expect to invest roughly $25 million more in Q3 as compared to Q3 in the prior year to generate profitable customers with a healthy lifetime value. As our AIs have become increasingly good at identifying such policies,

Tim: Our third quarter guidance and our implied Q4 guidance reflect these seasonal themes.

Tim Bixby: From a growth spend perspective, we expect to invest roughly $25 million more in Q3 as compared to Q3 in the prior year to generate profitable customers with a healthy lifetime value. At the same time, we will be proactively non-renewing customers with unhealthy lifetime value, specifically certain cat-exposed homeowners policies. As our AIs have become increasingly good at identifying such policies. and as our latest underwriting rules have been approved by regulators, we now have the ability to identify older policies that we wouldn't write today. We expect us to remove between 20 and $25 million of IFP from our book in the second half of 2024, dampening growth in the immediate term while concurrently boosting cash flow and profitability in the medium term and further reducing cat volatility.

Tim: From a gross spend perspective, we expect to invest roughly $25 million more dollars in Q3 as compared to Q3 in the prior year.

Tim: To generate profitable customers with a healthy lifetime value at.

Tim: At the same time, we will be proactively non renewing customers with unhealthy lifetime value, specifically certain cat exposed homeowners policies.

Tim: As our AI has had become increasingly good at identifying such policies.

Tim: And as our latest underwriting rules have been approved by regulators. We now have the ability to identify older policies that we wouldn't write today.

Timothy E. Bixby: We expect this to remove between 20 and $25 million of IFP from our book in the second half of 2024, dampening growth in the immediate term while concurrently boosting cash flow and profitability in the medium term and further reducing cat volatility. Importantly, though, our IFP guidance for the year reflects these plans and remains unchanged. We expect stock-based compensation expense of approximately $16 million, capital expenditures of approximately $3 million, and a weighted average share count for the quarter of approximately 71 million shares.

Tim: We expect this to remove between 20% and $25 million of ISP from our book in the second half of 2024 dampening growth in the immediate term, while concurrently boosting cash flow and profitability in the medium term and further reducing cat volatility.

Tim Bixby: Importantly, though, our IFP guidance for the year reflects these plans and remains unchanged. For the third quarter of 2024, we expect enforced premium at September 30, between $875 and $879 million. Rose earned premium between $208 and $210 million. Revenue between $124 and $126 million. And adjusted EBITDA loss of between $58 and $56 million. We expect stock-based compensation expense of approximately $16 million, capital expenditures of approximately $3 million, and a weighted average share count for the quarter of approximately 71 million shares. And for the full year of 2024, we expect enforced premium at December 31 of between $940 and $944 million, gross-earned premium between $818 and $822 million.

Tim: <unk>, though our <unk> guidance for the year reflects these plants and remains unchanged.

Tim: For the third quarter of 2024, we expect in force premium at September 30 of between 875 and $879 million.

Tim: Gross earned premium between 208 and $210 million.

Tim: Revenue between 124, and $126 million and an adjusted EBITDA loss of between 58 and $56 million.

Tim: We expect stock based compensation expense of approximately $16 million capital expenditures of approximately $3 million and a weighted average share count for the quarter of approximately 71 million shares.

Tim: And for the full year of 2024, we expect enforced premium at December 31 of between 940 and $944 million gross earned premium between 818 and $822 million.

Tim Bixby: Revenue between $511 and $515 million. And adjusted EBITDA loss of between $155 and $151 million. And we expect stock-based compensation for the full year of approximately $64 million, cap X of approximately $10 million, and a weighted average share count of approximately 71 million shares.

Timothy E. Bixby: Revenue between $511 and $515 million. And we expect stock-based compensation for the full year of approximately $64 million, CapEx of approximately $10 million, and a weighted average share count of approximately 71 million shares. So, thank you, Nomi.

Tim: <unk> revenue between $511 $515 million and adjusted EBITDA loss of between 155 and $151 million.

Speaker Change: And we expect stock based compensation for the full year of approximately $64 million Capex.

Speaker Change: Capex of approximately $10 million and a weighted average share count of approximately 71 million shares.

Shai Winninger: And with that, I'd like to hand things back over to Shai to answer some questions from a few of our retail investors.

Speaker Change: And with that I'd like to hand things back over to Shai to answer some questions from a few of our retail investors shy.

Shai Winninger: Shai? Thanks, Tim. We now turn over to our shareholders' questions submitted through the save platform. I'll start with Matthew H. Who asks, how are we leveraging AI technology to improve on writing, claim processing, and overall customer experience, and are there any major business risks or challenges to further leveraging AI? Thanks, Matthew.

Shai: Thanks, Tim.

Speaker Change: We'll now turn it over to our shareholders' questions submitted through the <unk> platform.

Shai: I'll start with Matthew <unk> asks how are we leveraging AI technology to improve underwriting claim processing and overall customer experience.

Shai: And other any major business risks or challenges to further leveraging AI.

Shai: Thanks, Matthew we've spoken about this at some depth in prior shareholders of centers as I showed in the past, we're well underway to leverage AI at every stage of the customer journey as well as in many areas of our internal operations, we do that to drive efficiency improve our underwriting.

Shai Winninger: We've spoken about this at some depth in prior shareholders' letters. As I shared in the past, we're well underway to leverage AI at every stage of the customer journey, as well as in many areas of our internal operations. We do that to drive efficiency, improve our underwriting, and enhance customer experience, with fast and always available smart service. Our underwriting, customer service, and claims management, even employee management, administration, engineering, product operations, all use AI heavily. As an example, in just over a year, we've gone from a standing start to having a comprehensively rolled out generative AI platform to handle incoming customer communications.

Shai: Enhanced customer experience with fast and always available smart service.

Our underwriting customer service and claims management, even employee management administration engineering product operations all use a heavily as an example in just over a year.

Shai: <unk> went from a standing start to.

Having a comprehensively rolled out generative AI platform to handle incoming customer communications.

Shai Winninger: We handle email and text communications coming in, and we're now handling more than 30% of these interactions with absolutely no human intervention.

Shai: We handle email and text communications coming in and we're now handling more than 30% of these interactions with absolutely no human intervention.

Shai Winninger: Progress today is the tip of the iceberg, though, and I expect us to continue to focus on additional applications of these technologies. Delivering concrete measurable impact to the business and helping us widen the gap between our tech and the competition.

Shai: Progress to date is the people of the iceberg, though and I expect us to continue to focus on additional applications of these technologies.

Shai: Delivering concrete measurable impact to the business and helping us.

Shai: And the gap between our tech in the competitions.

Shai Winninger: Naomi K asks if we can share the performance metrics and customer feedback from states where all five of Lemonade's insurance products are available, and what are the main challenges or limiting factors preventing a broader rollout to additional states, and how do we plan to address these? So thank you, Naomi. The specific order of state expansion is generally based on growth potential and expected profitability in those markets, as well as prioritization aspects that have to do with focus and resource allocation. We expect cross-selling activity to be an increasingly powerful driver of growth as a result. In Illinois, for example, where we have all of our products available, we're seeing multi-line customer rates that are roughly double the rest of the book.

Shai: Nomi K asks if we can share the performance metrics and customer feedback from states, where all five of eliminate the insurance products are available.

Nomi K: And what are the main challenges or limiting factors, preventing a broader rollout to additional states.

Speaker Change: How do we plan to address these.

Speaker Change: Thank you Nuomi.

Operator: The specific order of state expansion is generally based on growth potential and expected profitability in those markets, as well as prioritization aspects that have to do with focus and resource allocation. We also see other metrics improve, such as superior retention rates after bundling and outstanding customer feedback as measured by NPM. Thank you. If you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad now.

Speaker Change: Specific order of state expansion is.

Speaker Change: Generally based on growth potential and expected profitability in those markets as well as the <unk> aspects that have to do with focus and resource allocation.

Speaker Change: We expect the cross selling activity to be an increasingly powerful driver of growth as a result in Illinois. For example, where we have all of our products available. We're seeing multiline customer rates that are roughly double the rest of the book.

Shai Winninger: We also see other metrics improve, such as superior retention rates after bundling, and outstanding customer feedback is measured by NPS.

Speaker Change: We also see other metrics improve such as superior retention rates after bundling and outstanding customer feedback as measured by NPS.

Shai Winninger: There are several questions about car rollout timing and expectations, and I'll just say that the organization is running around car in a remarkable way, and we're expecting the growth rate of car to begin accelerating in the near future as a result. We plan to roll out car to several additional states during 2025, with our main considerations being profitability predictions and regulatory approval rates. We aim to operate first in states where we can move quickly and write new business profitably. In the second half, and beyond, with the unlock of rate adequacy in multiple geographies, we'll be expanding investment in new customer acquisition, as well as cross-selling to our existing user base.

Speaker Change: There were several questions about car rollout timing and expectations.

Speaker Change: And I'll, just say that the organization is running around car in a remarkable way and we're expecting the growth rate of car to begin accelerating in the near future as a result, we.

Speaker Change: We plan to rollout car to several additional states during 2025 with our main considerations being profitability predictions and regulatory approval rates. We aim to operate first in states, where we can move quickly and write new business profitably.

Speaker Change: In the second half.

Speaker Change: And beyond with the unlock of rate adequacy in multiple geographies will be expanding investment in new customer acquisition as well as cross selling to our existing user base.

Operator: And now, I'll turn the call back to the operator for more questions from our friends from the street.

Speaker Change: And now I'll turn the call back to the operator for more questions from our friends from the Street.

Operator: Thank you.

Operator: If you do change your mind, please press star followed by two. When preparing to ask your question, please ensure that your line is unmuted locally. Yeah, so a couple thoughts there. In terms of the distribution across the state, it's really more of the most challenging loss ratio we have.

Speaker Change: Thank you if you would like to ask a question you may do so by pressing star followed by one on your kind of think he pat-down. If you change your mind. Please press star followed by one of the patents last your question. Please ensure that your line is on mute locally.

Operator: If you would like to ask a question, you may do so by passing Starfleet by one on your telephone keypad now. If you do change your mind, please pass Starfleet by two. One preparing to ask your question, please ensure that your line is unmuted locally.

Jack Matten: Our first question today comes from Jack Mathins from BMO. Please go ahead, Jack. Your line is now open.

Speaker Change: Our first question today comes from Jack Atkins from BMO. Please go ahead. Your line is now open.

Jack Matten: Hey, good morning. Just wanted to keep providing some more details on the non-renewals of the cat exposed home business, and which state of your actions primarily taking place in other particular years of business that you're focused on. I guess if, in general, if you talk about any insights that you've learned from your more recent miles of lead to your decision. Yeah, so a couple thoughts there. In terms of the distribution across states, it can be concentrated in states. It's really focused on expected lifetime value, which tends to be quite driven by a higher than target loss ratio that tends to be concentrated within the home book, almost entirely, which is the most challenging loss ratio we have.

Jack Atkins: Hey, good morning.

I'm just wondering if you could provide some more details on the non renewals of the cat exposed business.

Speaker Change: And what states you're actions, primarily taking place in other particular years of business that youre focused on.

Speaker Change: That's in general can you talk about any insights you've learned from your more recent models what led to your decision.

Speaker Change: Yes, so a couple of thoughts there in terms of the distribution across across states, it's really more of a.

Speaker Change: It can be concentrated in states, it's really focused since we focus more on on.

Speaker Change: Expected lifetime value, which tends to be quite driven by a higher than target loss ratio.

Speaker Change: To be concentrated within the home book.

Most entirely which is the most challenging loss ratio we have.

Jack Matten: So we've talked a little bit about, in the letter, the range that we're targeting, which is 20 to 25. We talk about a range because it's not a hard number, but it's based on what we know, and as we're developing that analysis, that feels like the most appropriate range. Important to note that while it puts downward pressure on IFP growth, because all of our, every customer adds up to that total IFP member, from a cash perspective or a value perspective, it's a very high ROI. We're taking out much more expected costs than we are taking out contribution to premium, so it's that we ROI positive.

Speaker Change: So we've talked a little bit about.

In the letter the range that we're targeting which is 20% to 25.

Speaker Change: We've talked about a range because it's not a it's not a hard number but.

Speaker Change: Based on what we know and as we're developing that analysis, but it feels like.

Speaker Change: Most appropriate range of important to note that while it puts downward pressure on ISP growth is all about.

Speaker Change: Customer kind of adds up to that total number from a cash perspective from a value perspective, it's been a very high ROI. We're.

Speaker Change: We're taking out.

Speaker Change: More expected costs and we are taking out contribution from the premium. So it's definitely ROI positive. So if you take out for example.

Jack Matten: So if you take out, for example, $25 million of IFP with an elevated loss ratio, you can generate, you know, just using our own model, something like $50 or $60 million in net positive value. So a little short-term pressure on IFP, but over the medium-term, long-term, long-term value. In terms of time frame, these tend to be older policies, so our underwriting rules and our AI models get a little bit better every day. And so the concentration tends to be business we wrote two or three or four years ago in some cases. And as noted, the vast majority, if not 100% of this business, would be business we wouldn't write today under our current underwriting guidelines.

Speaker Change: $25 million of ISP with an elevated loss ratio.

Speaker Change: Can generate.

Speaker Change: Using our own model is something like 50 or $60 million and net positive.

Speaker Change: So a little short term pressure on IP.

Speaker Change: Over the medium term long term long term value in terms of timeframe. These tend to be older policies. So our underwriting rules and our AI models.

Speaker Change: Little bit better every day.

Speaker Change: And so the concentration tends to be business, we wrote.

Speaker Change: Two or three or four years ago in some cases and as noted.

Speaker Change: The vast majority if not 100% of this business with new business, we wouldn't.

Speaker Change: Right today under our current.

Speaker Change: Underwriting guidelines.

Jack Matten: The couple, thank you.

Speaker Change: That's helpful. Thank you.

Speaker: The second question is on capital. Can you talk about the premium to surplus ratio that LeMade expects to maintain as your business makes evolves? I guess somewhat, relatively, it looks like your invested asset balance has been falling in recent quarters. Is that something that the company expects to continue doing the move forward? I think you're trying to get some insight into that investment income.

Speaker Change: The second question is on capital can you talk about the premium to surplus ratio of about.

Speaker Change: <unk> expects to maintain your business mix evolves.

Speaker Change: And I guess somewhat relatedly it looks like you're invested asset balances been falling in recent quarters.

Speaker Change: Is that something that probably expects to continue.

Speaker Change: Moving forward I think you're trying to get some insights into that investment income. Thank you.

Speaker: Thank you. Sure, so on the capital surplus, you've not talked about that for a while because things are essentially unchanged. Our target is and continues to be a roughly one-to-six ratio of required surplus to roaster and premium, and we've got at least a couple of very effective tools in place to help us drive that number to what is already we've sort of best been classy industry. This is what many insurance companies should do, and I think we're performing quite well on that metric. Our quota share structure, our Cayman cap structure, these are really designed not only to mitigate volatility, but more importantly to drive to enable significant capital surplus efficiency, so that's really unchanged at that one-to-six ratio.

Timothy E. Bixby: So on the capital surplus, we've not talked about that for a while because things are essentially unchanged. Our target is and continues to be a roughly one to six ratio of required surplus to grocer and premium. And we've got at least a couple of very effective tools in place to help us drive that number to enable a significant capital surplus, and the most current forecasts into our guidance in terms of what expected investment income is likely to be.

Speaker Change: Sure so on the capital surplus.

Speaker Change: We've not talked about that for a while because things are essentially unchanged. Our target is and continues to be.

Roughly 1% to six ratio.

Speaker Change: Required surplus too.

Speaker Change: Gross earned premium.

Speaker Change: And we've got at least a couple of very effective tools in place to help us drive that number two what is arguably sort of best in class industry. This is with many insurance companies should do.

Speaker Change: And I think we are.

Speaker Change: Performing quite well on that metric our quota share structure, our Cayman capital structure of these are really designed not only to mitigate volatility, but more importantly to drive.

Speaker Change: Enable significant capital surplus efficiency.

Speaker Change: So that's really unchanged at one 1% to six ratio.

Speaker: From a cash investment standpoint, yeah, you will know that if you kind of chart it out, the cash balance has increased somewhat as a percentage of the total. That's not so much a concerted strategy; I would expect that trend to moderate or even flatten out before too long. However, the interest rate environment is what it is. We're expecting what you and others are expecting: the market that there will be perhaps more downward pressure on interest rates than upward pressure, and we factored in the most current forecast into our guidance in terms of what the expected investment income is likely to be.

Speaker Change: From a cash and investment standpoint, you will note if you kind of chartered out that cash balances increase.

Speaker Change: Increased somewhat as a percentage of the total.

Speaker Change: Not so much a concerted strategy I would expect that trend to moderate or even flatten out before too long however, the interest environment.

Speaker Change: We're expecting what you and others are expecting the market that there will be perhaps more downward pressure on interest rates and upward pressure and we've factored in.

Speaker Change: It's sort of the most current forecast into our guidance.

Speaker Change: Guidance in terms of what expected investment income is likely to abate.

Speaker: The good news is our cash investments balance actually went up this quarter in total. We're earning really strong returns on the cash as well as investments, and so that's something that I would highlight. You foresee that cash investments balance, basically troughing, might drop another one or two percent as you noted, but that puts us well above a $900 million total cash investments balance from here on out, as far as we can see. Compare that to three or four years ago when there was quite a bit more uncertainty as to our growth trajectory and where that balance might end up.

Speaker Change: The good news is our cash and investments balance actually went up this quarter.

Speaker Change: In total we're earning a really strong returns on the cash as well as the investments.

Speaker Change: And so.

It's something that I would highlight.

Speaker Change: You've received that cash in investments balance basically trough.

Speaker Change: It might drop another one or 2% as you noted.

Speaker Change: But that puts us well above our $900 million total cash investments balance from from here on out as far as we can see compare that to three years or four years ago. When there was quite a bit more uncertainty as to.

Speaker Change: Our growth trajectory, and where that where that balance might end up.

Speaker: That's a dramatic change, and I think probably has a tremendous foundation for us going forward.

Speaker Change: That's a dramatic change in I think provides a tremendous foundation.

Speaker Change: For us going forward.

Speaker: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. The next question comes from Michael Phillips from Oppenheimer. Please go ahead, Michael Your line is now open.

Michael Phillips: The next question comes from Michael Phillips from Oppenheimer. Please go ahead, Michael. Your line is now open. Thank you. Good morning, everybody. A question first to an auto and kind of follow up from the opening comments about new state expansions as you get into next year. Last kind of ahead, I think you were 11 states. I'm not sure if that's still right.

Timothy E. Bixby: Thank you. Good morning, everybody. A question first on auto and kind of follow up from the opening comments about some new state expansions as you get into next year. Last time I checked, I think you were at 11 states.

Michael David Zaremski: Thank you good morning, everybody.

Michael David Zaremski: A question first on auto and kind of follow up from my opening comments about some of these state expansion because you get into next year.

Speaker Change: Last time I heard I think you were the 11 states I'm not sure if that's alright.

Daniel Asher Schreiber: I'm not sure if that's still right. As you look out over the next maybe 18 months, given kind of a decent rate environment for auto, it might be slowing down. But, you know, should we expect state expansion by, say, the year 2025 to be close to like 20 states or 40 states or just kind of how aggressively you want to be over the next 18 months? And whereas, our first approximation for the incumbents, that's none or zero.

Michael Phillips: As you look at over the next maybe 18 months, given kind of a decent rate environment for auto, it might be slowing down, but you know, should we expect a state expansion by say you're in 25 to be close to like 20 states or 40 states, or is this kind of how aggressively you want to be over the next 18 months? Mike. No, I don't think we'll be at 40 states. And of course, the state to the obvious that not all states are born equal. So we will be expanding throughout 2025. We haven't given specific numbers, and so my answer today is it can remain a little bit bigger.

Speaker Change: As you look out over the next maybe 18 months, given kind of a decent rate environment for auto it might be slowing down but.

Speaker Change: Should we expect.

Speaker Change: State expansion by say year end 2005 to be closer to like 20 states or 40 states or just kind of how aggressively do you want to be over the next 18 months.

Mike: Hey, Mike.

Speaker Change: Im.

Speaker Change: Yeah.

Mike: No I don't think will be up 40 states and of course.

Speaker Change: The obvious not all states are born equal so we will be expanding.

Speaker Change: Throughout 2025, we haven't given specific numbers and so my answer today is I can remember.

Speaker Change: So one of the driving factors is going to be the graduation of renters to the call.

Michael Phillips: One of the driving factors is going to be the graduation of renters to be car car customers. So we will be looking in one of the guiding principles, Shysburg, about regulatory environment and predictive loss ratios.

Speaker Change: Core customers. So we will be looking in one of the guiding principles I spoke about.

Speaker Change: Regulatory environments, and predictive loss ratios and the other one is.

Michael Phillips: Another one is where we have the largest footprint of renters who have cars, but don't have coin drones with us, and that would be another driving force, but we're not ready to disclose numbers of state yet. Okay, I can appreciate that. Thanks. Do you know, I guess continuing with that maybe follow up on that is, you know, typically as we're growing in new states, there can be some pressure on our margin in auto. Maybe for you guys, I guess I want to see what you think that might be a bit muted than what normally is the case, given.

Speaker Change: Where we have the largest footprint of renters.

Speaker Change: Who have caused by don't have coinsurance with us and that will be another driving force, but we're not ready to disclose numbers of states yes.

Speaker Change: Okay I can appreciate that thanks, Daniel I guess, continuing with that maybe a follow up on that as well.

Speaker Change: Typically as we're growing in new states there can be some pressure on our margin in auto.

Speaker Change: Maybe for you guys I guess I wanted to see what do you think that might be a bit muted than what normally is the case given.

Michael Phillips: And you know, I think you've talked about knowledge that you have from your current renters and homeowners customer base and how that can translate into more information and in your initial pricing for auto as that starts to grow. Yeah, look, we are sort of matters before, but we are very bullish in the medium long time on car. We think it's a highly differentiated product with a strong and structural competitive advantage given that. At first approximation, all our customers use telematics on an ongoing basis. And whereas, at first approximation for the incumbent, that's none or zero, so this is really a very powerful differentiator.

Speaker Change: I think you've talked about.

Speaker Change: Now that you have from your current renters and homeowners customer base and how that can translate into more information and your initial pricing for auto parts.

Speaker Change: Zero.

Speaker Change: Yes.

Speaker Change: We are.

Speaker Change: Talking about this before but we are very bullish in the medium to long time on the call. We think it's a highly differentiated product with a strong and structural competitive advantage given that.

Speaker Change: First approximation of all our customers use telematics.

Speaker Change: <unk> basis.

Speaker Change: Whereas a first approximation for the incumbent none zero. So this is really.

Daniel Asher Schreiber: So this is really a very powerful differentiator. Quite beside or in addition to the fact that we have a really spectacular user experience, very high customer satisfaction levels, etc., they have a much, to use your word, muted loss ratio. In fact, their whole economics are dramatically different. The cost of acquisition is effectively zero.

Speaker Change: That's a powerful differentiator.

Michael Phillips: Quite the site, or in addition to the fact that you have a really spectacular user experience, very high customer satisfaction levels, etc. Going back to my comment earlier about the renters aspect here, yes, we are seeing that renters who buy cars. Lawrence, have a much to use your word muted loss ratio. In fact, the whole economics are dramatically different. The cost of acquisition is effectively zero. You might even conceive of it as being negative cat because our answer's book is very profitable. And then you've got existing customers who are sent to be have paid to be lemonade customers, but they are profitable.

Speaker Change: Quite decided.

Speaker Change: In addition to the fact that yes spectacular user experience very high customer satisfaction levels et cetera going back to my comment earlier about the renters.

Speaker Change: Aspects, yes, we are seeing that renters, who buy card charge.

Speaker Change: Much to use your word muted loss ratio and in fact, the whole economics.

Speaker Change: Dramatically different the cost of acquisition is effectively zero, you might even conceive of it as being negative.

Daniel Asher Schreiber: You might even conceive of it as being negative CAC because our renters book, we can price them effectively, we don't see the new business penalty that you see when you usually grow a book. So, very, very different unit economics and lifetime value of existing customers. This is really, I think, a strategic pillar that we will expand on during our investor day later in the year. And we do have, you know, over 2 million existing customers, many of whom have contracts just not with Lemonade.

This book is there.

Speaker Change: Very profitable.

Speaker Change: And then you've got existing customers, who tend to be have paid to be eliminated customers, but they are profitable at the outset, when we get to sell them a car policy with no incremental cost again, I'm rounding here, but I think a first approximation that holds true and we have found them to be not only highly profitable because of the absence of any customer acquisition costs, but.

Michael Phillips: At the outset, then we get to sell them a car policy with no incremental costs. Again, I'm rounding here, but I think at first the approximation that holds true. And we have found them to be not only highly profitable because the absence of any customer acquisition costs, but much better because we do use the fact that you said much better risks. So we can price them effectively. We don't see the new business penalty that you see when you usually grow a book. So very, very different unit economics and lifetime value of existing costs.

Speaker Change: Much better because we do use the fact that you said much better risks.

Speaker Change: So we can price them effectively we don't see the new business penalty that you see when you.

Speaker Change: Usually grow our book, so very very different unit economics, and lifetime value of existing customers. This is really.

Michael Phillips: This is really, I think, a strategic pillar that we will expand on during our investor there as well. And later in the year, we do have, you know, over two million existing customers, many of whom have a conference just not to eliminate, and that opportunity transactions are very, very sizable, and ultimately we expect they profitable opportunity for us. Probably also worth knowing that the external environment. Extra environment is improving as well.

Speaker Change: I think a strategic pillar that we will expand on during our Investor day as well later in the year.

Speaker Change: Do have.

Speaker Change: Over 2 million existing customers many of whom have.

Speaker Change: It's just not with lemonade and that opportunity translates into a very very sizable and ultimately we expect very profitable opportunity for us.

Speaker Change: Probably also worth noting.

Speaker Change: Kind of environment.

Speaker Change: External environment is improving as well so for sometime we another car <unk>.

Michael Phillips: So for some time we another car providers were chasing a target with inflation's unfavorable impact on cost of repairs and cost of claims. The data is now really showing that that trend has has slowed, if not stalled, and in some cases may even reverse. And so, you know, chasing that target is now much impact our rate increases both those already in place and those are continued to work on haven't even greater impact, and that that really provides a higher level of confidence comfort in our planning for car for the rest of this year and well into next year as well.

Speaker Change: Providers.

Speaker Change: Chasing a target with Inflations.

Speaker Change: Unfavorable impact on cost of repairs and cost of claims.

Speaker Change: The data is not really showing that that trend has has slowed if not stalled and in some cases may even reverse.

Speaker Change: And so chasing that target is now much.

Speaker Change: Impact of our rate increases both those already in place and those are continuing to work on have been even greater.

Speaker Change: Packed and that really provides.

Speaker Change: A higher level of confidence comfort in our planning for car for the rest of this year and well into next year as well we noted that our.

Michael Phillips: We noted that our gross loss ratio improvement across our product lines improved anywhere from five to 30%. Car was right at the upper end of that range. So we're seeing lots of great indicators. Yeah, perfect. Okay, great. Thank you, guys.

Speaker Change: Gross loss ratio improvement across our product lines.

Speaker Change: Improved anywhere from five to.

Speaker Change: 30% car was.

Speaker Change:

Speaker Change: Right at the upper end of that range. So we're seeing lots of great indicators.

Speaker Change: Yes, perfect. Okay, great. Thank you guys appreciate it.

Speaker: Thank you.

Operator: And that opportunity translates into a very, very sizable and, ultimately, we expect, very profitable opportunity. The data is now really showing that that trend has slowed, if not stalled, and in some cases, may even reverse. Thank you. The next question comes from Tommy Mcjoynt from Stiefel. Please go ahead. Your line is now open.

Speaker Change: Thank you. The next question comes from Tony.

Tommy Look: The next question comes from Tommy Look joint from default. Please go ahead. You're not open.

Speaker Change: Stifel. Please go ahead. Your line is now open.

Speaker Change: Yeah.

Tommy Look: Hey, good morning, guys. Thanks for taking my questions. Tim, kind of going back to the first question that you got on the non-written will side. So you mentioned the 25 million dollars of non-renewed IFP, and that's, you know, going to be offset by a time, like I said, 50 to 60 million dollars of sort of net positive value. But let's call it 50 million. Is, sorry, is that saying that the LTV of those policies, you know, instead of being presumably positive when you wrote it, is now being sort of reassessed at negative 50 million dollars and hence by not writing, non-renewing that business it will now be zero.

Timothy E. Bixby: Thanks for taking my questions. Tim, kind of going back to the first question that you got on the non-renewal side. So you mentioned the $25 million of non-renewed IFP, and that's, you know, going to be offset by it sounded like I think you said 50 to $60 million of sort of net positive value. But let's call it 50 million.

Tony: Hey, good morning, guys. Thanks for taking my questions.

Tony: Tim kind of going back to the first question.

Tim: Got on the on the non renewal side.

Speaker Change: So you mentioned the <unk>.

Speaker Change: $25 million of of Nonrenewed, ISP, and thats going to be offset by it sounded like I think you said $50 million to $60 million of sort of net positive value.

Speaker Change: Well, let's call it $50 million, sorry is that saying that the LTV of those.

Timothy E. Bixby: Sorry, is that saying that the LTV of those, notably, notably positive ROI for those? Okay, got it. And do you know what the impact on the loss ratio from that sort of 25 million ISP was in the first half of the year or, or even in absolute dollars, kind of how much sort of operating loss that that business generated contributed? Hard to really put a precise number on that. I would think of that range of 20 to 25 as over the course of the year, with the vast majority in Q3 and Q4, so it's really a forward-looking number and expected impact. We have started the process.

Speaker Change: Policies instead of being presumably positive when you wrote it is now being sort of reassess that negative $50 million and hence by not writing non renewing that business. It will now be zero, just kind of help explain sort of what that $50 million to $60 million number that you mentioned actually yeah.

Tommy Look: Just kind of help explain sort of what that 50 to 60 million dollars number that you mentioned actually is. Yeah, yeah, in rough strokes the way you described it is right. A customer has an expected lifetime value, let's say, of three times its acquisition cost, which is often typical for us. That means over the course of their lifetime, two, three, four years depending on the product or more, we expect to generate that incremental cash lower value. What this says is we expect that lifetime value to be a negative 50 or 60 million in the case I described for an IF, so think of that ratio sort of a negative two-to-one ratio.

Speaker Change: Yes in rough strokes. The way you described it is right.

Speaker Change: Okay.

Speaker Change: Customer hasnt expected lifetime value, let's say of.

Speaker Change: Three times its acquisition cost, which is which is often typical for us.

Speaker Change: That means over the course of their lifetime 234 years, depending on the product or more.

Speaker Change: We expect to generate that incremental cash.

Speaker Change: Cash flow or value.

Speaker Change: This says as we expect.

Speaker Change: That lifetime value to be a negative 50 or $60 million in the case I described for <unk>.

Speaker Change: Yeah.

Speaker Change: So think of that ratio is sort of.

Speaker Change: Negative two to one ratio I mean, it's really almost entirely driven by the elevated loss ratio.

Tommy Look: I mean, that's really almost entirely driven by the elevated loss ratio. If a customer has an expected 150% loss ratio, for example, and you carry that customer out for a couple, three years or more, that's the driver. So I think you have the analysis, right? It's rough justice, but it's notable, notably positive ROI for those changes.

Speaker Change: Customer has an expected 150% loss ratio for example, and you carry that customer out for.

Speaker Change: Three years or more.

Speaker Change: That's the drivers so I think you have any analysis right.

Speaker Change: Rough justice, but it's notable.

Speaker Change:

Speaker Change: Notably, notably positive ROI for those changes.

Tommy Look: Okay, got it. And do you know what the impact on the loss ratio from that sort of 25 million IFP was in the first half of the year or even in absolute dollars, kind of how much sort of operating loss that that business generated contributed? Hard to really put a precise number on that. I would think of that range of 20 to 25 is over the course of the year. The vast majority in Q3 and Q4, so it's really a forward looking, a forward looking number and expected impact. We probably rounds to pretty close to zero.

Speaker Change: Okay got it and do you know what the impact on the loss ratio from that sort of $25 million ISP was in the first half of the year or.

Speaker Change: Or even in absolute dollars kind of how much sort of operating loss that that business generated contributed.

Speaker Change: Hard to really put a precise number on that I would think of that.

Speaker Change: Range of 20% to 25 is over the course of the year.

Speaker Change: The vast majority in Q3 and Q4, so it's really a forward looking.

Our forward looking number unexpected impact we have started the process there was a nominal amount in Q2.

Timothy E. Bixby: There was a nominal amount in Q2, but pretty close to zero. So it's really Q3, Q4, and forward expectation. A little more concentrated in Q3 than Q4. Okay. I got it.

Speaker Change: B rounds to.

Speaker Change: It's pretty close to zero, so it's really a Q3 Q4 and forward expectation.

Tommy Look: So it's really a Q3, Q4, and forward expectation, a little more concentrated in Q3 than Q4. Our loss ratio does, you know, has borne the burden of that business. And so it's really notable, I think, that our loss ratio improved, you know, mid double digit year on year, with some of that downward pressure. And so all of all of these changes, not just rate changes, we'll have a favorable, you know, continued favorable impact on the loss ratio going forward.

Speaker Change: A little more concentrated in Q3.

Speaker Change: In Q4.

Speaker Change: Our loss ratio does.

Speaker Change: Born the burden of that business and so it's really notable I think that our loss ratio.

Speaker Change: Improved mid double digit.

Speaker Change: Year on year.

Speaker Change: With some of that downward pressure and so all of all of these changes.

Speaker Change: Not just rate changes.

Speaker Change: We will have a favorable continued favorable impact on the loss ratio going forward.

Speaker Change: Got it.

Speaker Change: Yep.

Tommy Look: One other kind of vantage point of color and to mention this briefing is common. This is really a humunous focused fix. It's one part of our business that has had pockets of sustained negative LTV. And in addition to being negative in LTV, there've also been an environment that oftentimes we could not get the rate approval in theory. Any risk can be priced adequately, but we don't always find regulators affording us that luxury. So this is parts of the business where we just were not able to get the approval and don't expect to in any fashion.

Speaker Change: I'm sorry.

Speaker Change: One other kind of bonkers point of color and Tim mentioned with prepayments comment. This is really a homeowner's focused.

Speaker Change: Fix.

Speaker Change: One part of our business that has had pockets of sustained negative LTV.

Speaker Change: In addition to being negative in the LTV the vote to be an environment, but oftentimes we could not get the rate approval in theory any risk can be priced adequately, but we don't always find regulators affording us that luxury. So this is parts of the business, where we just were not able to get the approval then don't expect any.

Tommy Look: Otherwise, we would have been kind of shown more forbearance if we thought it's on the cost of turning profitable. But in addition to being stubbornly unprofitable, it also tends to concentrate very much in volatile parts of the country. So even some of this business where we to get to long-term, long-term average profitability, we've always sought to avoid the most cat exposed part of our business or the country rather, sorry, and we have avoided writing in the most cat exposed places really since our inception in places where we have still found that the availability is higher than we want now knowing what we know.

Speaker Change: Fashion, otherwise, we would have been kind of showing more forbearance, if we got it on the cusp of turning profitable.

Speaker Change: But in addition to being stubbornly unprofitable.

Speaker Change: It also tends to concentrate very much in volatile parts of the country. So even some of this business, where we need to get to long time long time average profitability. We've always sought to avoid the most cat exposed to talk about business.

Speaker Change: The country, rather sorry, and we have avoided writing the most cat exposed places really since our inception and places where we have still found that the volatility is higher than we want now knowing what we know.

Tommy Look: We're also taking this opportunity to more renew that part.

Speaker Change: So taking this opportunity to non renew that part.

Tommy Look: And maybe just to put a fine point on it based on a couple of questions I've gotten already. I'll answer a question that has not been asked, which is if this number is 25, as we expected it to be, the question might be: would your ISP expectations have been 25 million dollars greater if not for the impact of this answers yet? Yes. Okay, got it. Appreciate that color.

Speaker Change: And maybe just to put a fine point on it based on a couple of questions Ive gotten already.

Speaker Change: I'll answer a question that has not been asked which is.

Speaker Change: If this number is 25% as we expect it to be a question might be would your.

Speaker Change: If the expectations have been $25 million greater if not.

Speaker Change: The impact of this answers yet.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay got it I appreciate that color and then just quickly you mentioned the expectations for growth spend in <unk> to be $25 million up year over year.

Tommy Look: And then just quickly, you mentioned the expectations for growth spend in 3Q to be 25 million dollars, up year over year. Did you give a 4Q number, or do we have the full year kind of expectation? Yeah, I was thinking the full year has really unchanged; the timing over the course of the quarters has changed somewhat. The guidance we gave historically is between 100 and 110, 105 as a member we've mentioned. So I think we're still on track and planning to spend that rough amount over the course of the full year. We have adjusted the timing of that somewhat a little bit more than initially planned in Q3, than otherwise Q3 is typically the highest growth spend quarter in any case in most years.

Speaker Change: Did you give a forward view number or do we have the full year kind of expectations.

Timothy E. Bixby: Yeah, I would think of the full year as really unchanged. And for the fourth quarter, obviously, if you kind of do the math, it will be somewhat elevated as well. Q1 was really the ramp-up quarter. And so it's a pretty steep climb, and we expect Q3 to be at the rate. Got it, thanks.

Speaker Change: Yes, I would think of the full year is really unchanged the timing over the course of the quarters has changed somewhat.

Speaker Change: Yes.

Speaker Change: The guidance, we gave historically.

Speaker Change: Sort of a 100 between 100 and 110 to 105 is the number we've mentioned so I think we're still sort of on track and planning to spend that restaurant or the.

Speaker Change: Of course of the full year, we have adjusted the timing of that somewhat a little bit more than initially planned in Q3.

Speaker Change: Then otherwise.

Speaker Change: Q3 is typically the highest gross spend quarter.

Speaker Change: In any case in most years.

Tommy Look: And for the fourth quarter, obviously, if you kind of do the math, will be somewhat elevated as well. Q1 was really the ramp up quarter, and so it's a pretty steep climb, and we expect Q3 to be at the rate we disclosed. Thanks.

Speaker Change: And for the fourth quarter, obviously, if you can kind of do the math will be somewhat elevated as well Q1 was really the ramp up quarter.

Speaker Change: And so it's a pretty steep climb and we expect Q3 to be.

Speaker Change: At the rate we disclosed.

Speaker Change: Got it thanks.

Speaker Change: Yeah.

Speaker: Thank you.

Bob Lang: The next question comes from Bob Lang from Morgan Stanley. Please go ahead, Bob; your line is now open. Great. Thank you. So the first one is on your 17 points of improvement in cat losses, which was, I mean, sorry, 17 points of impact on cat losses, which is a five point improvement. Directionally speaking, that's obviously similar to the industry. As you've not renewed the homeowner side, is there a run rate expectation on what cat losses should look like going forward? Can you give us a little bit more color on just like all we should think about that impact?

Speaker Change: Thank you. The next question comes from Bob Wang from Morgan Stanley. Please go ahead, Bob Your line is now open.

Timothy E. Bixby: Thank you. So, it is coming down as a percentage, but just modestly. I think it came down in the quarter. And this is home and condo combined, came in at about just under 20%, and it's down a couple points year on year. And so you can kind of back into if we were to take 25 million of IFP out, back into what that impact might be. So I would expect, you know, we'll give as much of an indication on that as we can.

Bob Wang: Great. Thank you so.

Bob Wang: First one is on your 17 points of improvement in Cat losses.

Speaker Change: What I mean, sorry, 17 points of impact on Cat losses, which was a five point improvement Directionally speaking, that's obviously similar to the industry.

Bob Wang: The non renewal of the homeowner side is there a run rate expectation on what cat losses should look like going forward can you give us a little bit more color on just like.

Speaker Change: I always think about that impact I know that you already talked about quite a bit on the impact on the other side of thing.

Bob Lang: I know that you already talked about quite a bit on the impact on the other side of things on the homeowner renewal just to see if there's any additional color on the cat side.

Speaker Change: Homeowner renewal just to see.

Speaker Change: If there is any additional color on the cat side.

Speaker Change: Yeah.

Bob Lang: That's probably a little bit beyond some of the guidance we've given. I can give a little bit of the way I think about our home business as a share of the total business is coming down as a percentage, but just modestly. I think it came in the quarter and this is home and Kondo combined came in about just under 20%, and it's down a couple points year on year. And so you can kind of back into if we were to take 25 million of IFP out, back into what that impact might be. In terms of a specific reduction on loss ratio, it's a little tricky to do.

Speaker Change: That's probably a little bit beyond some of the guidance.

Speaker Change: We've we've given.

Speaker Change: A little bit of the way you might think about our home business as a share of total business.

Speaker Change: Is coming down as a percentage, but just modestly.

Speaker Change: It came in the quarter.

Speaker Change: And this is home and condo combined came in about just under 20% and it's down a couple of points year on year.

Speaker Change: And so you can kind of back into if we were to take $25 million of RFP out.

Speaker Change: Back into what that impact might be.

Speaker Change: In terms of a specific reduction on loss ratio, it's a little tricky to do I'm not going to venture that far but.

Bob Lang: I'm not going to venture that far. Pat is really isolated, almost entirely to home, not quite a hundred percent, but primarily home. And really, these are the most challenging policies, obviously, that we'll go after.

Speaker Change: Cat is really isolate it.

Speaker Change: Almost entirely to home not quite 100%, but primarily home.

Speaker Change: And really.

Speaker Change: These are the most challenging policies, obviously, you've got that we'll go after so I will leave it to you to kind of do some math.

Bob Lang: So I'll leave it to you to kind of do some math, but that's how I would go about it.

Speaker Change: But that's how I would go about it.

Speaker Change: Okay.

Bob Lang: Okay, maybe set them on, just hopefully, just think about feeding commission. So if we look at a feeding commission as a percent of premium last, call it five quarters in general, about 20%. This quarter was notably lower than that. Is this more of a one-time thing? What's driving that? And should it go back to about 20% of premium going forward? Yeah, so a couple of ways to think about the feeding commission. So year on year, there's a change because there was a change in the structure. The prior year was a fixed structure up through July renewal a year ago.

Speaker Change: Maybe second one on the call.

Speaker Change: How we should think about ceding commission. So if we look at our ceding commission that the percent of premium last call. It five quarters generally about 20%.

Speaker Change: Quarter was notably lower than that.

Speaker Change: More of a onetime thing.

Speaker Change: What's driving that sort of go back to about 20% of premium going forward.

Speaker Change #100: Yes, so a couple of ways to think about the ceding commission. So year on year. There is a change because there was a change in the structure.

Speaker Change: Prior year was a fixed.

Speaker Change: The structure up through July renewal a year ago.

Bob Lang: And so you saw the face of the P&L; you know, roughly a 20% effective commission. Now our commission, because of the way we do the accounting, is split into two pieces. So our effective commission rate was about running about 23%. But the most important thing was it was static. It was; it was a fixed number. That's now variable that's, you know, helpful in some ways, but a little less, a little more trickier when you're building a model. But the net difference over, you know, I think one way to think about is look at Q1 and Q2, the net commission was about 18% versus 20.

Speaker Change: Uh huh.

Speaker Change: And so you saw on the face of the P&L roughly a 20% effective Commission now our commission because of the way we do the accounting gets split into two pieces. So our effective commission rate was about running about 23%, but the most important thing was.

Speaker Change: It was that it was it was.

Speaker Change: A fixed number that is now variable.

Speaker Change #101: Helpful in some ways, but a little less little more.

Speaker Change: Little trickier, when you're building a model, but the net difference over I think one way to think about it look at Q1 and Q2.

Speaker Change: The net.

Speaker Change: Commissioner was about 18% versus 20, so modestly lower lower but just a couple of points.

Bob Lang: So modestly lower, you know, lower, but just by a couple of points. But more volatility, more variability. So Q1 was, after a bit lower, Q2 was higher. We'll continue to see that move around a little bit quarter to quarter, but that gets true up as you go through the course of the year. So I would expect, you know, we'll give as much of an indication on that as we can, but I would think of it as a couple of points lower than prior year. But there are some offsets to that as well. Our renewal this year was similar.

Speaker Change: More volatility more variability so Q1 was.

Speaker Change: A fair bit lower Q2 was higher.

Speaker Change: We will continue to see that move around a little bit quarter to quarter, but that gets chewed up as you go through the course of the year.

Speaker Change: <unk>.

Speaker Change: So I would expect.

Speaker Change: <unk> will give us as much of an indication on that as we can but I would think of it as a couple of points lower than prior year.

Timothy E. Bixby: I would think of it as a couple of points lower than the prior year. But there are some offsets to that as well. Our renewal this year was similar. Thank you. It's probably also probably also worth asking another question. I like answering questions that weren't weren't asked, so I'll throw in another one.

Speaker Change: But there are some offsets to that as well.

Speaker Change:

Speaker Change: Our renewal this year with similar.

Bob Lang: It is also a sliding scale that begins this month, began in July. But the scale and the expected effective rate will actually be a little bit better.

Speaker Change #107: He is also a sliding scale that begins this month began in July.

Speaker Change: But the scale of the expected effective rate.

Speaker Change: We will actually be a little bit better.

Bob Lang: At this point, it's hard to say that it gets back, you know, to the prior level, but it should be up, you know, maybe a pointer to any sort of apples to apples comparison. So slightly better terms in this renewal.

Speaker Change: At this point is hard to see if it gets back.

Speaker Change: The prior level, but it should be up.

Speaker Change #102: Maybe a point or two.

Speaker Change #102: You sort of apples to apples comparison, so slightly better terms and this renewal.

Speaker: Very helpful. Thank you very much.

Speaker Change #105: Got it very helpful. Thank you very much.

Speaker: Thank you.

Speaker Change #105: Thank you probably also.

Speaker: Probably also worth asking another. I'd like to answer any questions that weren't asked. I'll throw in another one, which is because a loss ratio varies. Obviously, quarter to quarter, the typical pattern has been a Q4 loss ratio. That's the lowest of the four quarters. That's happened often in prior years. We expect it will happen this year. And it's that plays out as expected. That has a pretty strong favorable impact on that commission rate. And so again, a little more volatile quarter to quarter, but if things play out as expected and as historical patterns, you see a nice favorable impact.

Speaker Change #102: Also.

Speaker Change #104: Also without asking another I'd like to answer any questions that werent werent as I'll throw in another one which is.

Speaker Change #102:

Speaker Change #106: The loss ratio varies obviously quarter to quarter.

Speaker Change #106: Typical pattern has been a Q4.

Speaker Change #106: Loss ratio the loss ratio, that's the lowest of.

Speaker Change #103: The four quarters, that's happened often in prior years, we expect it will happen this year.

Speaker Change #103: And if that plays out as expected that has a pretty strong favorable impact on that commission rate.

Speaker Change #103: And so again, a little more volatile quarter to quarter, but if things play out as expected and as historical patterns, you see a nice favorable impact.

Speaker: So, over the course of the year, it gets us, you know, back on track versus some of the prior quarters; it can be a little bit lower commission rate.

Speaker Change #103: For the course of the year.

Speaker Change #103: It gets us back on track versus.

Speaker Change #103: Some of the prior quarters, it can be a little bit lower commission rate.

Speaker Change #103: Yeah.

Matthew O'Neil: Thank you.

Speaker Change #103: Thank you. The next question comes from Matthew <unk> from Ft Partners. Please go ahead Matthew Your line is now open.

Matthew O'Neil: The next question comes from Matthew O'Neil from F.T. Partners. Please go ahead, Matthew. Your line is now open.

Matthew O'Neil: Yeah, thank you so much for taking my question. I just wanted to ask a little bit about premium per customer. It's been growing impressively, but the rate may be decelerating slightly. So I'm just curious if you could give us an assessment of how far through the rate increases you are on the enforced book. Yeah, so that can vary quarter to quarter. It has been a pretty steady contributor, but our customer count was a stronger contributor to growth this year quarter and quarter than the price increase. It varies by product. So, as I mentioned in car, you're seeing a pretty dramatic impact in rent, much less, though, because it's really, it's really so optimized.

Matthew: Yes. Thank you so much for taking my question.

Matthew: I just wanted to ask a little bit about premium per customer it's been growing impressively, but the rate may be decelerating slightly. So I was just curious if you could give us an assessment of kind of how far through the rate increases you are on the in force book.

Timothy E. Bixby: Yeah, so that can vary quarter to quarter. It has been such a strong loss ratio as it is in pricing. So it varies, it varies by product.

Speaker Change #111: Yes, so that can vary quarter to quarter.

Speaker Change #108: Has been.

Speaker Change #109: Pretty steady contributor, but our customer count was a stronger contributor to growth this year quarter on quarter.

Speaker Change #114: And then the price increase it varies by product so as I mentioned, an in car youre seeing a pretty dramatic impact.

Speaker Change #122: In in rent much less though because it really is.

Speaker Change #112: Really so optimize the loss ratio as such.

Matthew O'Neil: The loss ratio is such a strong loss ratio as it is, and pricing is quite good. So it varies; it varies by product. In terms of where we are, I think two or three quarters ago, we mentioned that we were sort of halfway through. You know, there was a hundred million dollars or so remaining to earn in. That's more or less unchanged because as we, the pace of us earning in rate and the pace of spot and for new rate has been roughly in balance. So I think of us in a similar spot now where there's still plenty of rate to earn in.

Speaker Change #103: Such a strong loss ratio as it is and pricing is quite good. So it varies it varies by product in terms of where we are.

Timothy E. Bixby: In terms of where we are, I think, two or three quarters ago, we mentioned that we were sort of halfway through, you know, there's a hundred million dollars or so remaining to earn. That's more or less unchanged because, as we have, the pace of us earning rates and the pace of us fighting for new rates has been roughly in balance. So I think of us in a similar spot now where there's still plenty of rates to earn in.

Speaker Change #103: I think two or three quarters ago, we mentioned that we were sort of halfway through.

Speaker Change #103: 100 million or so remaining to earn in.

Speaker Change #103: That's more or less unchanged because as we the pace of us, earning in ray and the <unk> filing for new rates, it's been roughly in balance. So I'd think of us in a similar spot now where there is still plenty of rate turned in.

Timothy E. Bixby: Obviously, that doesn't last forever, uh, there will always be rate filings and always increases even in a low or no inflation environment, but we're quite a ways away from that. Thanks, that's very helpful.

Matthew O'Neil: Obviously, that doesn't last forever. There will always be rate filings and always increases, even in a, in a low or no inflation environment, but we're quite a ways away from that. That is fact that in our, you know, the key three, two, four guidance that will continue to earn in that pace. And it will; it will go into next year. So things that are approved and in place will earn well into next year. Thanks. That's very helpful.

Speaker Change #103: That doesn't last.

Speaker Change #103: Forever.

Speaker Change #103: We'll always be rate filings and always increases even in a low or no inflation environment, but where we are.

Speaker Change #103: Quite a ways away from that.

Speaker Change #103: That is factored into our Q3 Q4 guidance that that will continue to earn at that pace.

Speaker Change #103: And it will.

Speaker Change #103: We will go into next year, so things that are approved and in place will earn well into next year.

Timothy E. Bixby: And maybe just a quick one, and I realize I may be jumping the gun on potential Investor Day content, but I know you've spoken about the long term or ultimate target for the loss ratio in the high 60s to 70s. I don't know if there's kind of an internal or a way to think about the ultimate target for the expense ratio going forward and Matthew High. That said, I'll add that manual's reference to this in the letter as well. And we think of you. Thank you. The next question comes from Yaron Kinar from Jeffreys. Please go ahead; your line is now open.

Speaker Change #113: Thanks, that's very helpful and maybe just a quick one and I realize that maybe jumping the gun on potential investor day content, but.

Matthew O'Neil: And maybe just a quick one, and I realize I may be jumping the gun on potential investor day content. But I know you've spoken about the long term or ultimate target for the loss ratio on the high 60s to 70s. I don't know if there's kind of an internal or a way to think about the ultimate target for the expense ratio going forward.

Speaker Change #115: I know you've spoken about the long term our ultimate target for the loss ratio in the high <unk> I don't know if there is kind of an internal or a way to think about the ultimate target for the expense ratio going forward.

Speaker Change #103: Yeah.

Matthew O'Neil: Matthew, hi. So we are determined to have an expense load that will be absolutely best in the industry. We're beginning to look less at ratios because we also intend to be a price leader. And that might not give you as clear a picture of just how advantage we think we're becoming due to our technology, but it will reflect itself in, I think, best-in-class expense ratio and even more dramatically in actual expense load. And if you kind of put it on an apple's apples basis with the same premium and that's being charged by competitors and manifest itself more powerfully still that when you look at it against our own lower premiums because we think we get to pass some of those savings on to customers and that can accelerate growth.

Matthew: Matthew Hi.

Matthew: We are determined to have an expense.

Speaker Change #117: That will be absolutely best in the industry.

Speaker Change #119: We are beginning to look less.

Speaker Change #119: At ratios because we also intends to be a price leader.

Speaker Change #119: And that might give you.

Speaker Change #103: Yes.

Speaker Change #103: As clear a picture of just how advantage, we think we'd be coming due to our technology, but it will reflect itself in I think best in class expense ratio and even more dramatically in actual expense load.

Speaker Change #116: You kind of put it on an apples to apples basis with the same premium and Thats.

Matthew O'Neil: Accelerate your attention lower class of acquisition and the last achieve our ultimate and rather ambitious goals for the company. Lee. But if I answer your question kind of more straightforwardly, we think that at scale, we will be in the teens. We just goes last quarter that the LAE component of our expense stack has already achieved parity with the very best in the industry. We recorded a 7.6% LAE last quarter. Shai mentioned some of the efficiencies that were gaining through automation, and we're seeing these rollout very, very powerfully. Some of the numbers that we shared earlier about what happened to our headcount expense, what's happened to our, what we're calling IFP for human, how many people were needed to generate, you know, as we doubled our book, we've been able to, over the course of the last few years, we've been able to harp the ratio of people needed to generate as we tell our premium.

Speaker Change #103: Over the course of the last few years, we've been able to halve the ratio of people needed to generate that'd be tullow premium. So we're seeing very dramatic advancement all of which will ultimately reflect themselves in a competitive.

Matthew O'Neil: So we're seeing very dramatic advancements, all of which will ultimately reflect themselves in our competitive expense structure, some of which will manifest as little prices and some of which will manifest, we believe, still as best-in-class expense ratio. That said, I'll add that, and it was reference to this in the letter as well, and we think of, for structural reasons that may be obvious and some that are less than obvious, we think of growth as a gift that keeps on giving. We really think that the number that I just gave in the direction that I just outlined will become. At the moment, you can look at various numbers and see it in action, and I referenced a few of them. I think a few years from now it will be unmissable; it will be kind of glaringly obvious, and the difference between our amendments that will continue to grow.

Speaker Change #103: Expense structure, some of which will manifest as milk prices and some of which will manifest. We believe still has best in class expense ratio that said I'll add to that and there was reference to this in the letter as well.

Speaker Change #103: We think of it.

Speaker Change #103: For structural reasons that maybe obvious and some that are less than obvious we think of growth as the gift that keeps on giving.

Speaker Change #103: We really think that the.

Speaker Change #118: The number that I just gave in a direction that I just outlined will become at the moment you can look at there is somebody who can see it in action and I referenced a few of them I think a few years from now it will be a miscible it will be kind of glaringly obvious in the difference between now and then is that will continue to grow.

Matthew O'Neil: And as we continue to grow, as we've doubled our business while holding our expense structure flat, we kind of shared that over the course of the last few years, we've seen expense net of customer acquisition actually decline, even as we've enjoyed rapid growth. Play that movie forward, holding expenses relatively flat, and you really start seeing how this generates a very, very profitable business. But that dynamic will continue to manifest with ever greater force as we continue to grow. So when we double our business, you will see it with greater clarity. When we 10x of the next service, it will be glaringly obvious.

Speaker Change #124: And as we continue to grow as we doubled our business, while holding our expense structure flat, we kind of showed that over the course of the last.

Speaker Change #120: A few years, we've seen expense net of customer acquisition actually declined even as we've enjoyed rapid growth play that movie forward holding expenses relatively.

Speaker Change #120: And flat and you really start seeing how this generates a very very profitable business.

Speaker Change #120: But that dynamic will continue to manifest with ever Greater force as we continue to grow so when you double that business, you'll see it with greater clarity when we <unk> our business others say it will be glaringly obvious.

Matthew O'Neil: Thank you for the detailed answer; really helpful. I'll jump back in the queue. Thank you.

Speaker Change #129: Thank you for that detailed answer really helpful. I'll jump back in the queue.

John <unk>: Thank you. The next question comes from John <unk> from Jefferies. Please go ahead. Your line is now open.

Yaren Kena: The next question comes from Yaren Kena from Jeffries. Please go ahead; your line is not open.

Yaren Kena: Hi guys, good morning. This is Charlie on for your own. A couple of questions: the first one with the decision to non-renew certain cat exposed homeowners. Was that previously contemplated in guidance? No.

Speaker Change #120: Hi, guys. Good morning. This is Charlie on for you around a couple of questions. The first one.

Speaker Change #121: The decision to non renew certain cat exposed homeowners was that previously contemplated in guidance.

Timothy E. Bixby: Was that previously contemplated in guidance? No. So netting out to the three. Uh, okay, sorry, and just to clarify, was that gross?

Speaker Change #121: No.

Yaren Kena: Okay, thanks. And then, are you guys able to give us cat prior year development and LAE on that basis? So the prior peer development, you can split into two pieces, so it's three points favorable. It was two points unfavorable from a cat perspective and five points favorable from a non-cat perspective. So netting out to the three favourable. Okay, sorry.

Speaker Change #121: Okay.

Speaker Change #137: And then are you guys able to give us cat and prior year development and LAE on a net basis.

Speaker Change #121: So the prior period development.

Speaker Change #126: You can split into two pieces, so three points favorable.

Speaker Change #125: It was two points unfavorable from a cat perspective, and five points favorable from a non cat.

Speaker Change #121: Perspective.

Speaker Change #121: So netting out to the three favorable.

Speaker Change #123: Okay, sorry, and just to clarify was that.

Yaren Kena: And just to clarify, was that growth cat or net cat impact? That is growth. Okay. Are you guys able to give it net? Yeah, and then that breakdown would be roughly similar on a net basis. The prior period development. The total cat impact on a net basis was about 15 points. Whereas on a growth basis, it was about 17 points.

Speaker Change #120: Gross.

Speaker Change #120: Our net cat impact.

Timothy E. Bixby: Uh, that is growth. The total CAD impact on a net basis was about 15 points, whereas on a gross basis, it came in at about 8%. Just looking at the underlying loss ratio. It's really important to look at the year-on-year comparison from a seasonal perspective. And on a trailing 12-month basis, obviously, continued significant improvement. You know, any given comparison of quarters, you might see some favorable outcomes by the end of the quarter netting out, you know, what ended up to be a quarter that was, Hi, thanks for this.

Speaker Change #120: That is growth.

Speaker Change #120: Okay.

Speaker Change #120: And are you guys able to.

Speaker Change #120: No.

Speaker Change #136: Yeah, and then that breakdown would be roughly similar on a net basis.

Speaker Change #120: Prior period development.

Speaker Change #120: The total cat in the total cat impact on a net basis was about 15 points, whereas on a gross basis.

Speaker Change #132: Was about 17 points.

Yaren Kena: L.A. came in about eight percent. It's been seven point, you know, mid sevens, etched up a little bit, but in that sort of seven to eight percent range, but that eight percent is quarter. Okay, great, thanks. And then last one, if I could, just looking at the underlying loss ratio, it looks like, you know, contemplating those components, you guys thought about 22 points of underlying improvement. But if we look at the first quarter of 24 on a year-over-year basis from the first quarter of 23, it looks like it was relatively flat. Is there anything underlying that, that you guys could provide some color on?

Lee: Lee came in about.

Speaker Change #120: Came in about 8%.

Speaker Change #120: It's been seven point mid sevens edged up a little bit but.

Speaker Change #120: In that in that sort of 7% to 8% range by 8% this quarter.

Speaker Change #130: Okay, great. Thanks.

Speaker Change #131: And then last one if I could.

Yaren Kena: Pretty distinct quarters. Yeah, on a full quarter basis, there was it was pretty stable. I think that it's really important to look at the year-on-year comparison from a seasonal perspective. And a trailing 12 months basis, obviously, continued significant improvement. You know, any given comparison of quarters, you might see some trends that are interesting, but not necessarily indicative of the longer-term trend. So nothing in particular to call out that was distinct between Q1 and Q2. You know, Q2 was a really interesting quarter as it evolved, you know, really significant impacts early in the quarter, and really dramatic, you know, favorable outcomes by the end of the quarter, netting out, you know, what ended up to be a quarter that was even better, just modestly better than our expectations.

Yaren Kena: So the month can be pretty unpredictable, but the quarters are a little more, a little more predictable. All right, great. Thank you guys for the answers. Thank you.

Operator: As a final reminder, if you would like to ask a question, you may do so repressing staff a little by one. And you kind of think he had now.

Speaker Change #146: Thank you as a final reminder, if you would like to ask a question you may do so by pressing stuff in it by one when you kind of think he Pat now.

Bob Wang: We have a follow-up question from Bob Wang from Morgan Stanley. Please go ahead, Bob.

Speaker Change #147: We have a follow up question from Bob Wang from Morgan Stanley. Please go ahead, Bob Your line is now open.

Bob Wang: You're on the snow open. Hi, thanks for this. Just maybe just a follow up on the PYD question, five points of favorable on everything else and two points on favorable on the cat, PYD on the five points.

Timothy E. Bixby: Just maybe a follow-up on the PYD question. Five points are favorable on everything else and two points unfavorable on the CAT PYD. On the five points, can you give us maybe a little bit more color on the geography of those?

Bob Wang: Hi, Thanks for this.

Bob Wang: Maybe just a follow up on the <unk> question.

Speaker Change #133: Five points of favorable.

Bob Wang: Everything else and two points of unfavorable on the cap you Eddie on the five points can you give us maybe a little bit more color on.

Bob Wang: Can you give us maybe a little bit more color on the geography of those? Like, what are those five points coming from? It's possible. Sorry if I missed this a little earlier. We did not. It's a little more concentrated in the pet product, but it was distributed across products other than home. The cats are primarily a home dynamic, and the increase was driven by those really significant storms from a year ago. And a bit earlier this year that have evolved, continued to evolve, but the underlying favorable development, I think, is really testament to the non-cat portion of the business, which is really all the product lines other than home.

Timothy E. Bixby: Like, what are those five points coming from, if possible? Sorry if I missed this a little earlier. We did not, it's a little more concentrated in the pet product, but it was distributed across products other than home. The cats are, primarily, a home dynamic.

Speaker Change #134: The geography of those like what are those five points coming from you talked about sorry, if I missed this a little earlier.

Speaker Change #142: We did not it's a little more concentrated in the pet product.

Speaker Change #145: But it was distributed across products.

Speaker Change #150: Products other than home the cats are.

Timothy E. Bixby: And the increase was driven by those really significant storms. But the underlying, you know, favorable development, I think, is really a testament to the non-CAT portion of the business. For newly acquired customers, there is no change. So we expect customers we acquire today and tomorrow to be fully profitable. We've seen a ratio greater than three to one, three to one is a good rule of thumb, but we've seen, you know, certainly periods where we take on board the time value of money that's already factored in at a fairly robust discount rate.

Speaker Change #143: Primarily a home dynamic.

Speaker Change #140: And the increase was driven by those really significant storms from a year ago.

Speaker Change #120: And.

Speaker Change #120: A bit earlier this year.

Speaker Change #120: That have evolved.

Speaker Change #120: Continued continue to evolve.

Speaker Change #120: But the underlying favorable development I think is really is really testament to the non cat portion of the business, which is really all of the all the product lines other than home.

Bob Wang: Okay, so basically cattle is unfavorable and dogs were favorable. Thank you for that. That's very helpful.

Speaker Change #138: Okay. So basically catalysts unfavorable in dogs were favorable thank you for that that's very helpful.

Bob Wang: On the other one, maybe on the LTV to CAC side. I know that you talked about previously; you kind of mentioned LTV to CAC about three times. That would be the ratio. And then I think one thing we're trying to figure out is that if you have the homeowner non-renewal going forward, is that three times LTV to CAC equation still holds? How should we think about that renewal impact on the LTV to CAC? Yeah, so LTV to CAC is an important metric, but it's a forward metric. It's based on a model; it's based on all the information we collected. It improves a little bit every day, every week, every month, as we go forward.

Speaker Change #135: On the other one maybe on the LTV to CAC side.

Speaker Change #139: I know that you talked about.

Speaker Change #144: Previously you kind of mentioned LTV to CAC is about.

Speaker Change #141: Three times.

Speaker Change #151: That would be the ratio and then I think one thing we're trying to figure out is that if you have the homeowner non renewal going forward.

Speaker Change #149: Is that three times LTV to CAC equation still holds.

Speaker Change #135: Should we think about that renewal impact on the LTV to CAC.

Speaker Change #135: Yes so.

Speaker Change #135: LTV to CAC is Ah is an important metric, but it's a forward metric.

Speaker Change #135: Based on our model.

Speaker Change #135: Based on all the information we collect it improves a little bit every day every week every month as we go forward.

Bob Wang: And so when we acquired that business, when our models were less than, by definition, less sophisticated than today, two, three, four years ago, we expected those to be profitable customers. As we learn more in our models and our existing customer base and claims activity, invariably a certain portion of the customer base, their expected LTV will change. For newly acquired customers, there is no change. So we expect customers we acquire today and tomorrow to be fully profitable. We've seen a ratio greater than three to one; three to one is a good rule of thumb, but we've seen certainly periods where it's three and a half or four or more.

Speaker Change #135: And so when we acquired that business when our models were less by definition less sophisticated than today 234 years ago. We.

Speaker Change #135: We expected those to be profitable customers as we learn more.

Speaker Change #135: In our models and our existing customer base and claims activity invariably a certain portion of the customer base.

Speaker Change #135: They're expected LTV will change.

Speaker Change #135: For newly acquired customers. There is no change so we expect customers, we acquired today and tomorrow to be fully profitable we've seen a ratio of greater than three to one three to one is a good rule of thumb, but we've seen certainly periods where it.

Speaker Change #135: Three and a half for four or more.

Bob Wang: There tends to be a little bit more pressure when you spend more, so we're spending double today what we spent a year ago. It tends to put downward pressure on LTV to CAC, but that's a good thing. And we earn our way in, and we develop channels, and we expand our spending, and overall, three to one is a good metric to think about. I'll add one other comment in that area, which is helpful, which is, you know, LTV to CAC is kind of policy by policy focused. And if you look at our spending per net added customer, you might think things got more expensive for us in the quarter.

Speaker Change #135: There tends to be a little bit more pressure when you spend more so we're spending doubled today, what we said a year ago, and so that tends to put downward pressure on LTV to CAC.

Speaker Change #135: But that's a good thing and we earn our way in and you develop channels, we expand our spending.

Speaker Change #135: <unk> 301 is a good metric to think about.

Speaker Change #152: I'll add one other comment in that area, which is helpful.

Speaker Change #152: Is <unk>.

Speaker Change #152: LTV to CAC is kind a policy by policy focused and if you look at our spending per net added customer you might you might think things got more expensive for us in the quarter and while that exact math is correct. It is important to look at ISP net added RFP gross add it really is what we are acquiring with that tax spend.

Bob Wang: And while that exact math is correct, it's important to look at IFP. Net added IFP, gross added IFP, really is what we're acquiring that CAC spend, and by that measure, we're actually more efficient in the second quarter than we were in the year-ago quarter and even in the prior quarter. So all around that number stable, and that's what's enabling us to really say we're very comfortable with growth rates that are accelerating. We started out the year in the low 20s, going to the mid 20s, and now we're going to try it. for that.

Speaker Change #152: And by that measure we were.

Speaker Change #135: Actually more efficient.

Speaker Change #135: In the second quarter than we were in the year ago quarter.

Speaker Change #135: And even in the prior quarter, so all around that number stable and and.

Speaker Change #135: Thats whats, enabling us to really say.

Speaker Change #135: We're very comfortable with growth rates that are accelerating we started out the year in the low to mid.

Speaker Change #135: Mid <unk> and now we're pushing towards the high twenty's growth rate.

Speaker Change #135: That's the core driver for them.

Bob Wang: Let me go to that. Okay, thank you very much. Comments of color commentary, both as well. Elf me to CAC. You always want it to be as high as possible per customer, but truly you want to keep growing until you hit the marginal customer with the LTV equals CAC. In other words, if you could spend a dollar and get a dollar in ten cents instead of getting three dollars, that is still marginally good for the business; you're still growing a profitable business. And since that LTV calculations take on board the time value of money, that's really effective at a fairly robust discount rate.

Speaker Change #153: Maybe that's okay. Thank you very much comment on.

Speaker Change #159: Color commentary brothers as well.

Speaker Change #153: Im.

Speaker Change #148: Help me to CAC.

Speaker Change #160: You always want it to be as high as possible.

Speaker Change #154: Customer, but truly you want to keep growing until you hit the module customer would the LTV equals CAC.

Speaker Change #148: And otherwise if you could spend a dollar and you get a $1.10 instead of getting $3, but there is still margin is good for the business youre still growing profitable business and since our LTV calculations.

Speaker Change #148: On board the time value of money, that's already factored in at a fairly robust discount rate. So.

Daniel Asher Schreiber: So while our LTV2CAC is three, that's just our average. We have many higher customers than that. We acquire many customers in the double digits of LTV2CAC as well, but when we'll stop investing is when we hit the marginal customer who's closer to an LTV2CAC of one. We take a bit of a margin of safety, but conceptually, that is the philosophy. We want every marginally profitable customer, and we will continue to grow using them.

Bob Wang: So, while our LTV to CAC is three, that's our average. We have many higher customers than that. We require many customers in the double digits of LTV to CAC as well. When we'll stop investing is when we hit the marginal customer who's closer to an LTV to CAC. Why don't we take a bit of a margin of safety, but conceptually that is the philosophy. We want to every margin profitable customer we want, and we will continue to grow using that. We have never deviated from that. We have never tried to acquire customers of negative LTV.

Speaker Change #148: While LTV to CAC is three that's on average we have many high our customers in that way, we acquired many customers in the double digits of LTV to CAC as well when we will stop investing is when we hit the module customer who's closer to an LTV to CAC I wanted to take a bit of a margin of safety, but conceptually that is lost.

Speaker Change #148: Every marginally profitable customer we won and we will continue to grow using that we have never deviated from that we have never tried to acquire customers over negative LTV.

Daniel Asher Schreiber: Sometimes we find this confusing to some investors, because in the short term, they do, custom acquisition can impact our financials negatively in the short term. The year in which you spend that CAC, because we are not an agent-based business, and we pay all, we take all our pain up front, what we're talking about today for the first time is that in addition to being conservative and careful and never knowingly writing negative business and proactively working to bring back into profitability any business that fell out of it and largely succeeding, we're also not tolerating business that has fallen between the cracks and we've not been able to bring back to profitability.

Bob Wang: Sometimes we find this confusing to some investors because in the short term, they do a customer acquisition can impact our financial negatively in the short term, the year in which you spend that CAC because we are not an agent-based business and we pay all, we take all our paying up front. We earn it back over time. Therefore, when we grow, sometimes it can appear to be a near-term loss, but that is just the nature of the flow of time fundamentally. It's about spending a dollar now and getting three dollars back. In these terms, if that means that in the near term we take a hit to our every dollar, we're okay with that.

Speaker Change #148: Sometimes you find this confusing to some investors because in the short term they do customer acquisition can impact our financials negatively in the short term.

Speaker Change #161: Yeah, and what you spend that cash because we are not an agent based business and we pay all we take all our pain upfront.

Bob Wang: We don't take a hit to our cash because we've got our synthetic agents program in place, so we've neutralized the trough in terms of the cash. In terms of EBITDA, those things will work their way out during the course of the lifetime of the customer. At any rate, because of that, we have always sought to grow customers on an LTV to CAC basis, never acquiring knowingly negative LTV business. Over the course of the last couple of years, with inflationary pressures and others, larger swaths of the nation and of our portfolio were hard to grow in an LTV-positive environment.

Bob Wang: And we've spoken back that, and we've slowed our growth, which we're now re-accelerating. And much of those segments of our business have become profitable over time as we've got to sorry adequacy.

Bob Wang: I'm spoken about this. We were able to recover them back to where we thought they would be all along. What we're talking about today for the first time is that, in addition to being conservative and careful and never knowingly writing negative business and proactively working to bring back into profitability and business that fell out of it and largely succeeding, we're also not tolerating business that has fallen between the cracks and we've not been able to bring back to profitability. So not only are we not writing knowingly unprofitable business as we never have, we are now not renewing such business either, having in some places exhausted in the near term what rate can deliver, and therefore the philosophy is the same philosophy; the profitability, the focus of the business has been the same consistently, but now we're actually not really slowing down in places that aren't profitable, but even potentially going into reverse pockets that don't contribute.

Daniel Asher Schreiber: So not only are we not writing knowingly unprofitable business as we never have, we are now not renewing such business either, having in some places exhausted in the near term what rate can deliver and therefore the philosophy is the same philosophy, the profitability focus of the business has been the same consistently but now actually not merely slowing down in places that aren't profitable but even potentially going into reverse pockets that don't contribute and Tim's earlier comment that yes you may see a hit, a potential hit of 25 million dollars to IFP with reiterated guidance, we think we're going to manage that within the guidance already given so we think that we're over delivering for the year and we have that spare to be able to hit guidance notwithstanding this so you won't see a hit to the IFP but it could have been much higher as Tim said but we've always been focused not merely on growing IFP but in growing the total value of the book and this really is a boon to that as Tim said 50-60 million dollars of LTV added to our business because of this decision.

Speaker Change #148: If you have the same philosophy the profitability focus of the business has been the same consistently.

Speaker Change #158: But now actually not many slowing down in places that are unprofitable, but even potentially going into reverse in pockets that don't contribute in <unk> and <unk>.

Bob Wang: And Tim's earlier comment that yes, you may see a hit, a potential hit of 25 million dollars to IFP with reiterative guidance. We think we're going to manage that within the guidance already given, so we think that we're over-delivering for the year and we have that spare to be able to hit guidance notwithstanding this. So you won't see a hit to the IFP, but it could have been much higher, as Tim said. But we've always been focused not million growing IFP, but in growing the total value of the book, and this really has a boom to that. As Tim said, it's 50, 60 million dollars of LTV added to our business because of this.

Speaker Change #155: Comment that yes, you may see a hit potential hit from $25 million of RFP reiterated guidance, we think we're going to manage that within the guidance already given so we think that we're over delivering for the year and we have that spot to be able to hit guidance. Notwithstanding. This so you won't see a hit to the RFP, but it could it be much higher as Tim said.

Tim: But we've always been focused not only on growing our paper and growing the total value of the book.

Tim: This really is a boon to that.

Tim: Tim said $50 million to $60 million of LTV added to our business because of this decision.

Bob Wang: Thank you very much; really appreciate it.

Speaker Change #156: Alright, Thank you very much really appreciate it.

Speaker: Thank you.

Operator: Thank you. That was our final question for today. So this does conclude today's call. Thank you all for joining us. You may now disconnect your lines.

Speaker Change #157: Thank you that was our final question for today. So this does conclude today's call. Thank you for joining you may now disconnect your lines.

Operator: That was our final question for today, so this does complete today's call. Thank you all for joining.

Operator: You may now disconnect your lines.

Speaker Change #157: [music].

Tim: Sure.

Tim: [music].