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Investing.com -- Lemonade Inc (NYSE:LMND) stock gained 4.8% after the digital insurance company announced it would significantly reduce the ceded proportion of its quota share reinsurance from approximately 55% to 20%, effective July 1.
The company cited strong progress in diversification, underwriting capabilities, and improved loss ratio trajectory as key factors behind the decision. The variable ceding commission rate related to the quota share agreements is expected to remain roughly equivalent to expiring agreements.
"This year, we continued to reduce our reinsurance overhead, which is a reflection of how much stronger and more precise our tech based underwriting and pricing machines have become," said Shai Wininger, Lemonade’s President and cofounder. "Reinsurance comes at a cost, and thanks to years of steady improvements, we’re now in a position to retain more of the risk ourselves, improve margins, and stay capital-light—all while continuing to work with some of the world’s top reinsurers."
The AI-powered insurance provider will maintain its primary quota share carriers and expects to renew other ancillary reinsurance programs, including Property Per Risk coverage, at terms roughly in line with expiring agreements.
The new reinsurance program will be in effect for a standard 12-month term and covers all Lemonade businesses globally.
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