The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements, the accompanying notes and other information included elsewhere in
this Annual Report. This discussion and analysis below includes forward-looking
statements that are subject to risks, uncertainties and other factors described
in the "Risk Factors" section that could cause actual results to differ
materially from such forward-looking statements. Additionally, our historical
results are not necessarily indicative of the results that may be expected for
any period in the future. A discussion of the year ended December 31, 2021
compared to the year ended December 31, 2020 has been reported previously under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the year ended December 31,
2021 filed with the SEC on March 1, 2022 (the "2021 Annual Report'").

In this Annual Report, unless we indicate otherwise or the context requires,
"Lemonade, Inc.," "Lemonade," "the Company," "we," "our," "ours" and "us" refer
to Lemonade, Inc. and its consolidated subsidiaries, including Lemonade
Insurance Company, Lemonade Insurance Agency, LLC, and Metromile, Inc.

Overview



Lemonade is rebuilding insurance from the ground up on a digital substrate and
an innovative business model. By leveraging technology, data, artificial
intelligence, contemporary design, and social impact, we believe we are making
insurance more delightful, more affordable, and more precise. To that end, we
have built a vertically-integrated company with wholly-owned insurance carriers
in the United States and Europe, and the full technology stack to power them.

A brief chat with our bot, AI Maya, is all it takes to get covered with renters,
homeowners, pet, car or life insurance, and we expect to offer a similar
experience for other insurance products over time. Claims are filed by chatting
with another bot, AI Jim, who pays claims in as little as three seconds. This
breezy experience belies the extraordinary technology that enables it: a
state-of-the-art platform that spans marketing to underwriting, customer care to
claims processing, finance to regulation. Our architecture melds artificial
intelligence with the human kind, and learns from the prodigious data it
generates to become ever better at delighting customers and evaluating risk.

In addition to digitizing insurance end-to-end, we also reimagined the
underlying business model to minimize volatility while maximizing trust and
social impact. To lessen the volatility inherent in an industry directly
impacted by the weather, we utilize several forms of reinsurance, with the goal
of dampening the impact on our gross margin. The result is that excess claims
are generally offloaded to reinsurers, while excess premiums can be donated to
nonprofits selected by our customers as part of our annual "Giveback". These two
ballasts, reinsurance and Giveback, reduce volatility, while creating an
aligned, trustful, and values-rich relationship with our customers. See
"Business - Our Business Model" and "Business - Our Product Offerings - Giveback
Feature."

Acquisition of Metromile

On July 28, 2022 (the "Acquisition Date"), the Company completed the acquisition
of Metromile, Inc. ("Metromile"), a leading digital insurance platform in the
United States that offers real-time, personalized car insurance policies by the
mile. The Company acquired 100% of Metromile's equity through an all-stock
transaction based upon the exchange ratio of 0.05263 shares of Lemonade for each
outstanding share of Metromile (the "Metromile Acquisition"). As a result of the
Metromile Acquisition, Metromile stockholders received 6,901,934 shares of
Lemonade's common stock, with minimal cash paid in lieu of fractional shares. In
addition, the Company assumed all outstanding and unexercised options, and
outstanding restricted stock units as of the Acquisition Date, which were
converted into corresponding awards with substantially identical terms and
conditions prior to the Acquisition Date, at the same exchange ratio of 0.05263.
Our results of operations include those of Metromile from the Acquisition Date
through December 31, 2022.


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Key Factors and Trends Affecting our Operating Results

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:

Seasonality

Seasonal patterns can impact both our rate of customer acquisition and the incurrence of claims and losses.



Based on historical experience, existing and potential customers move more
frequently in the third quarter, compared to the rest of the calendar year. As a
result, we may see greater demand for new or expanded insurance coverage, and
increased online engagement resulting in proportionately more growth during the
third quarter. We expect that as we grow our customers, expand geographically
and launch new products, the impact of seasonal variability on our rate of
growth may decrease.

Additionally, seasonal weather patterns impact the level and amount of claims we
receive. These patterns include hurricanes, wildfires, and coastal storms in the
fall, cold weather patterns and changing home heating needs in the winter, and
tornados and hailstorms in the spring and summer. The mix of geographic exposure
and products within our customer base impacts our exposure to these weather
patterns.

Current Macroeconomic Environment



The global pandemic resulting from the coronavirus, including variants
("COVID-19") has severely impacted the global economy and caused a significant
slowdown in economic activity. While the global economy began to reopen in 2021,
there remains to be an uncertainty about the duration and macroeconomic impact
of COVID-19. Although the Company did not see a material impact on its results
of operations, management continues to monitor and cannot definitively determine
the ultimate financial impact of COVID-19, and the related economic conditions.

Our investment portfolio consists of high-quality securities, and we do not
expect a material adverse impact in the value of our investment portfolio, or
long-term negative impact on our financial condition, results of operations or
cash flows as it relates to COVID-19.

General economic inflation has increased and there is a risk of inflation
remaining elevated for an extended period. We anticipate the effects of
inflation impacting our investment portfolio, pricing of our products and in
estimating reserves for unpaid claims and claim expenses. The actual effects of
the current and potential future increase in inflation on our results remains to
be unknown and cannot be estimated with precision.

See "Risk Factors - Risks Relating to our Industry - Severe weather events and
other catastrophes, including the effects of climate change and global
pandemics, are inherently unpredictable and may have a material adverse effect
on our financial results and financial condition."

Reinsurance



We obtain reinsurance to help manage our exposure to property and casualty
insurance risks. Although our reinsurance counterparties are liable to us
according to the terms of the reinsurance policies, we remain primarily liable
to our policyholders as the direct insurers on all risks reinsured, see "Risk
Factors - Risks Relating to Our Business" and "Risks Relating to Our Industry."
As a result, reinsurance does not eliminate the obligation of our insurance
subsidiaries to pay all claims, and we are subject to the risk that one or more
of our reinsurers will be unable or unwilling to honor its obligations, that the
reinsurers will not pay in a timely fashion, or that our losses are so large
that they exceed the limits inherent in our reinsurance contracts, each of which
could have a material effect on our results of operations and financial
condition. Furthermore, reinsurance may be unavailable at current levels and
prices, which may limit our ability to write new business.

Through June 30, 2021, we had proportional reinsurance contracts which cover all
of our products and geographies, we transferred, or "ceded," 75% of our premium
to our reinsurers ("Proportional Reinsurance Contracts"). In exchange, these
reinsurers paid us a ceding commission of 25% for every dollar ceded, in
addition to funding all of the corresponding claims, or 75% of all our claims.
The Company opted to manage the remaining 25% of the business with alternative
forms of reinsurance through non-proportional reinsurance contracts
("Non-Proportional Reinsurance Contracts").
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A portion of the Company's proportional reinsurance program expired on June 30,
2021 and June 30, 2022. As the business continued to grow and diversify, and
with stability in our insurance results, we decreased the overall share of
proportional reinsurance from 75% of premium to 55% effective July 1, 2022. In
addition, we purchased a new reinsurance program to protect us against natural
catastrophe risk in the U.S. that exceeds $80 million in losses effective July
1, 2022. Other non-proportional reinsurance contracts were renewed with terms
similar to the expired contracts.

Metromile entered into a Quota Share reinsurance agreement effective January 1,
2022 through June 30, 2023. Under the terms of the agreement, the Company cedes
30% of premiums and losses to reinsurers.

Components of our Results of Operations

Revenue

Gross Written Premium



Gross written premium is the amount received, or to be received, for insurance
policies written by us during a specific period of time without reduction for
premiums ceded to reinsurance. Gross written premium includes direct and assumed
premium. In December 2022, we began assuming premium related to car insurance
policies written in Texas, in connection with our fronting arrangement with a
third party carrier in Texas. Following the Metromile Acquisition, we also
include direct written premium from the sale of pay-per-mile car insurance
policies within the United States. The volume of our gross written premium in
any given period is generally influenced by new business submissions, binding of
new business submissions into policies, renewals of existing policies, and
average size and premium rate of bound policies.

Ceded Written Premium



Ceded written premium is the amount of gross written premium ceded to
reinsurers. We enter into reinsurance contracts to limit our exposure to
potential losses as well as to provide additional capacity for growth. Ceded
written premium is earned over the reinsurance contract period in proportion to
the period of risk covered. The volume of our ceded written premium is impacted
by the level of our gross written premium and any decision we make to increase
or decrease in reinsurance limits, retention levels and co-participation. Our
ceded written premium can also be impacted significantly in certain periods due
to changes in reinsurance agreements. In periods where we start or stop ceding a
large volume of our premium, ceded written premium may increase or decrease
significantly compared to prior periods and these fluctuations may not be
indicative of future trends.

Gross Earned Premium



Gross earned premium represents the earned portion of our gross written premium.
Gross earned premium includes direct and assumed premium. Our insurance policies
generally have a term of one year and premium is earned pro rata over the term
of the policy. In addition, following the Metromile Acquisition, we also include
earned premiums from the pay-per-mile car insurance policies which are written
for six-month terms. Premium for the policy provides a base rate per month for
the entire policy term upon binding of the policy plus a per-mile rate
multiplied by the miles driven each day (based on data from the telematics
device, subject to a daily maximum).

Ceded Earned Premium

Ceded earned premium is the amount of gross earned premium ceded to reinsurers.

Net Earned Premium



Net earned premium represents the earned portion of our gross written premium,
less the earned portion that is ceded to third-party reinsurers under our
reinsurance agreements. Premium is earned pro rata over the term of the policy,
which is generally one year. Net earned premium from the pay-per-mile car
insurance policies are earned over the term of the policy which is written for
six-month terms.
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Ceding Commission Income



Ceding commission income is commission we receive based on the premium ceded to
third-party reinsurers to reimburse us for acquisition and underwriting
expenses. We earn commissions on reinsurance premium ceded in a manner
consistent with the recognition of the earned premium on the underlying
insurance policies, on a pro-rata basis over the terms of the policies
reinsured. The portion of ceding commission income which represents
reimbursement of successful acquisition costs related to the underlying policies
is recorded as an offset to other insurance expense.

Net Investment Income



Net investment income represents interest earned from fixed maturity securities,
short term securities and other investments, and the gains or losses from the
sale of investments, net of investment fees paid to the Company's investment
manager. Our cash and invested assets are primarily comprised of fixed-maturity
securities, and may also include cash and cash equivalents, equity securities,
and short-term investments. The principal factors that influence net investment
income are the size of our investment portfolio and the yield on that portfolio.
As measured by amortized cost (which excludes changes in fair value, such as
changes in interest rates), the size of our investment portfolio is mainly a
function of our invested equity capital along with premium we receive from our
customers less payments on customer claims. Over time, we expect that net
investment income will represent a more meaningful component of our results of
operations.

Commission and Other Income

Commission income consists of commissions earned for policies placed with
third-party insurance companies where we have no exposure to the insured risk.
Such commission is recognized on the effective date of the associated policy
which is when the performance obligation is completed. Other income primarily
consists of fees collected from policyholders relating to installment premiums.
These fees are recognized at the time each policy installment is billed.

Expense

Loss and Loss Adjustment Expense, Net



Loss and loss adjustment expense ("LAE"), net represent the costs incurred for
losses net of amounts ceded to reinsurers. We enter into reinsurance contracts
to limit our exposure to potential losses as well as to provide additional
capacity for growth. These expenses are a function of the size and term of the
insurance policies we write and the loss experience associated with the
underlying risks. Loss and LAE are based on an actuarial analysis of the
estimated losses, including losses incurred during the period and changes in
estimates from prior periods. Loss and LAE may be paid out over a period of
years. Certain policies we write are subject to catastrophe losses. Catastrophe
losses are losses resulting from events involving claims and policyholders,
including earthquakes, hurricanes, floods, storms, terrorist acts or other
aggregating events that are designated by internationally recognized
organizations, such as Property Claims Services, that track and report on
insured losses resulting from catastrophic events.

Other Insurance Expense



Other insurance expense consists primarily of amortization of commissions costs
and premium taxes incurred on the successful acquisition of business written on
a direct basis, and credit card processing fees not charged to our customers.
Other insurance expense also includes employee compensation, including
stock-based compensation and benefits, of our underwriting teams as well as
allocated occupancy costs and related overhead based on headcount. Other
insurance expense is offset by the portion of ceding commission income which
represents reimbursement of successful acquisition costs related to the
underlying policies.


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Sales and Marketing

Sales and marketing includes third-party marketing, advertising, branding, public relations and sales expenses. Sales and marketing also includes associated employee compensation, including stock-based compensation and benefits, as well as allocated occupancy costs and related overhead based on headcount. Sales and marketing costs are expensed as incurred.



We plan to continue to invest in sales and marketing to attract and acquire new
customers and increase our brand awareness. We expect that sales and marketing
costs will increase in absolute dollars in future periods and vary from
period-to-period as a percentage of revenue in the near-term. We expect that, in
the long-term, our sales and marketing costs will decrease as a percentage of
revenue as we continue to drive customer acquisition efficiencies and as the
proportion of renewals to our total business increases.

Technology Development



Technology development consists of employee compensation, including stock-based
compensation and benefits, and expenses related to vendors engaged in product
management, design, development and testing of our websites and products.
Technology development also includes allocated occupancy costs and related
overhead based on headcount. We expense technology development costs as
incurred, except for costs that are capitalized related to internal-use software
development projects and subsequently depreciated over the expected useful life
of the developed software.

We expect product technology development costs, a portion of which will be
capitalized, to continue to grow in the foreseeable future as we identify
opportunities to invest in the development of new products and internal tools
and enhancement of our existing products and technologies that we believe will
drive the long-term profitability of the business.

General and Administrative



General and administrative includes employee compensation, including stock-based
compensation and benefits for executive, finance, accounting, legal, business
operations, and other administrative personnel. In addition, general and
administrative includes outside professional services, non-income based taxes,
insurance, charitable donations, and allocated occupancy costs and related
overhead based on headcount. Depreciation and amortization expense is recorded
as a component of general and administrative.

We expect to incur incremental general and administrative costs to support our
global operational growth and enhancements to support our reporting and planning
functions.

We have incurred and expect to continue to incur significant additional general
and administrative expense as a result of operating as a public company,
including expenses related to compliance with the rules and regulations of the
SEC and the listing standards of the NYSE, additional corporate, director and
officer insurance expenses, greater investor relations expenses and increased
legal, audit and consulting fees. We also expect to increase the size of our
general and administrative function to support our increased compliance
requirements and the growth of our business. As a result, we expect that our
general and administrative expense will increase in absolute dollars in future
periods and vary from period-to-period as a percentage of revenue.

Income Tax Expense



Our provision for income taxes consists primarily of foreign income taxes
related to income generated by our subsidiaries organized under the laws of the
Netherlands and Israel. As we expand the scale of our international business
activities, any changes in the U.S. and foreign taxation of such activities may
increase our overall provision for income taxes in the future.

We have a valuation allowance for our U.S. deferred tax assets, including
federal and state net operating losses. We expect to maintain this valuation
allowance until it becomes more likely than not that the benefit of our federal
and state deferred tax assets will be realized through expected future taxable
income in the United States.

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Key Operating and Financial Metrics



We regularly review a number of metrics, including the following key operating
and financial metrics, to evaluate our business, measure our performance,
identify trends in our business, prepare financial projections and make
strategic decisions. We believe these non-GAAP and operational measures are
useful in evaluating our performance, in addition to our financial results
prepared in accordance with GAAP. See "- Non-GAAP Financial Measures" for
additional information on non-GAAP financial measures and a reconciliation to
the most comparable GAAP measures.

The following table sets forth these metrics as of and for the periods
presented:

                                                                            Year Ended
                                                                           December 31,
                                                                      2022              2021
                                                                         ($ in millions,
                                                                   except Premium per customer)
Customers (end of period)                                           1,807,548        1,427,481
In force premium (end of period)                                $       625.1     $       380.1
Premium per customer (end of period)                            $         346     $         266
Annual dollar retention (end of period)                                    86  %             82  %
Total revenue                                                   $       256.7     $       128.4
Gross earned premium                                            $       490.5     $       292.0
Gross profit                                                    $        42.3     $        31.2
Adjusted gross profit                                           $        64.9     $        45.6
Net loss                                                        $      (297.8)    $      (241.3)
Adjusted EBITDA                                                 $      (225.1)    $      (184.2)
Gross profit margin                                                        16  %             24  %
Adjusted gross profit margin                                               25  %             36  %
Ratio of Adjusted Gross Profit to Gross Earned Premium                     13  %             16  %
Gross loss ratio                                                           90  %             90  %
Net loss ratio                                                             97  %             93  %



Customers

We define customers as the number of current policyholders underwritten by us or
placed by us with third-party insurance partners (who pay us recurring
commissions) as of the period end date. A customer that has more than one policy
counts as a single customer for the purposes of this metric. We view customers
as an important metric to assess our financial performance because customer
growth drives our revenue, expands brand awareness, deepens our market
penetration, creates additional upsell and cross-sell opportunities and
generates additional data to continue to improve the functioning of our
platform.

In Force Premium

We define in force premium ("IFP") as the aggregate annualized premium for customers as of the period end date. At each period end date, we calculate IFP as the sum of:

i)In force written premium - the annualized premium of in force policies underwritten by us; and



ii)In force placed premium - the annualized premium of in force policies placed
with third party insurance companies for which we earn a recurring commission
payment. In force placed premium currently reflects less than 2% of IFP.
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The annualized value of premiums is a legal and contractual determination made
by assessing the contractual terms with our customers. The annualized value of
contracts is not determined by reference to historical revenues, deferred
revenues, or any other GAAP financial measure over any period. IFP is not a
forecast of future revenues nor is it a reliable indicator of revenue expected
to be earned in any given period. We believe that our calculation of IFP is
useful to analysts and investors because it captures the impact of growth in
customers and premium per customer at the end of each reported period, without
adjusting for known or projected policy updates, cancellations, rescissions and
non-renewals. We use IFP because we believe it gives our management useful
insight into the total reach of our platform by showing all in force policies
underwritten and placed by us. Other companies, including companies in our
industry, may calculate IFP differently or not at all, which reduces the
usefulness of IFP as a tool for comparison.

Premium per customer



We define premium per customer as the average annualized premium customers pay
for products underwritten by us or placed by us with third-party insurance
partners. We calculate premium per customer by dividing IFP by customers. We
view premium per customer as an important metric to assess our financial
performance because premium per customer reflects the average amount of money
our customers spend on our products, which helps drive strategic initiatives.

Annual Dollar Retention



We define Annual Dollar Retention ("ADR"), as the percentage of IFP retained
over a twelve month period, inclusive of changes in policy value, changes in
number of policies, changes in policy type, and churn. To calculate ADR we first
aggregate the IFP from all active customers at the beginning of the period and
then aggregate the IFP from those same customers at the end of the period. ADR
is then equal to the ratio of ending IFP to beginning IFP. We believe that our
calculation of ADR is useful to analysts and investors because it captures our
ability to retain customers and sell additional products and coverage to them
over time. We view ADR as an important metric to measure our ability to provide
a delightful end-to-end customer experience, satisfy our customers' evolving
insurance needs and maintain our customers' trust in our products. Our customers
become more valuable to us every year they continue to subscribe to our
products. Other companies, including companies in our industry, may calculate
ADR differently or not at all, which reduces the usefulness of ADR as a tool for
comparison.

Gross Earned Premium

Gross earned premium is the earned portion of our gross written premium. Gross
earned premium includes direct and assumed premium. In December 2022, we began
assuming premium related to car insurance policies written in Texas, in
connection with our fronting arrangement with a third party carrier in Texas,
and this does not impact the key performance indicators for any prior periods.

We use this operating metric as we believe it gives our management and other
users of our financial information useful insight into the gross economic
benefit generated by our business operations and allows us to evaluate our
underwriting performance without regard to changes in our underlying reinsurance
structure. See ''- Components of Our Results of Operations - Revenue - Gross
Earned Premium.''

Unlike net earned premium, gross earned premium excludes the impact of premiums
ceded to reinsurers, and therefore should not be used as a substitute for net
earned premium, total revenue, or any other measure presented in accordance with
GAAP.

Gross Profit

Gross profit is calculated in accordance with GAAP as total revenue less loss
and loss adjustment expense, net, other insurance expense, and depreciation and
amortization (allocated to cost of revenue).


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Adjusted Gross Profit

We define adjusted gross profit, a non-GAAP financial measure, as:



•Gross profit, excluding net investment income, and interest income and expense,
plus
•Employee-related costs, plus
•Professional fees and other, plus
•Depreciation and amortization (allocated to cost of revenue)

See "- Non-GAAP Financial Measures" for a reconciliation of total revenue to adjusted gross profit.



Adjusted EBITDA

We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding
the impact of interest income and expense, income tax expense, depreciation,
amortization, stock-based compensation, net investment income, change in fair
value of warrants liability, and other non-cash adjustments and other
transactions that we consider to be unique in nature. See "- Non-GAAP Financial
Measures" for a reconciliation of net loss to adjusted EBITDA in accordance with
GAAP.

Gross Profit Margin

We define gross profit margin, expressed as percentage, as the ratio of gross profit to total revenue.



Adjusted Gross Profit Margin

We define adjusted gross profit margin, a non-GAAP financial measure, expressed
as a percentage, as the ratio of adjusted gross profit to total revenue. See "-
Non-GAAP Financial Measures."

Ratio of Adjusted Gross Profit to Gross Earned Premium



We define Ratio of Adjusted Gross Profit to Gross Earned Premium, a non-GAAP
financial measure, expressed as a percentage, as the ratio of adjusted gross
profit to gross earned premium. Our Ratio of Adjusted Gross Profit to Gross
Earned Premium provides management with useful insight into our operating
performance. See ''- Non-GAAP Financial Measures.''

Gross Loss Ratio

We define gross loss ratio, expressed as a percentage, as the ratio of losses and loss adjustment expense to gross earned premium.

Net Loss Ratio

We define net loss ratio, expressed as a percentage, as the ratio of losses and loss adjustment expense, less amounts ceded to reinsurers, to net earned premium.


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Results of Operations



The following table presents our results of operations for the periods
indicated:
                                                         Years Ended December 31,
                                                          2022                2021             Change             % Change
                                                                      ($ in millions)
Revenue
Net earned premium                                  $       172.4          $   77.0          $  95.4                    124  %
Ceding commission income                                     64.1              44.9             19.2                     43  %
Net investment income                                         8.4               1.9              6.5                    342  %
Commission and other income                                  11.8               4.6              7.2                    157  %
Total revenue                                               256.7             128.4            128.3                    100  %
Expense
Loss and loss adjustment expense, net                       167.3              71.9             95.4                    133  %
Other insurance expense                                      44.0              24.1             19.9                     83  %
Sales and marketing                                         138.3             141.6             (3.3)                    (2) %
Technology development                                       79.6              51.8             27.8                     54  %
General and administrative                                  122.3              72.6             49.7                     68  %
Total expense                                               551.5             362.0            189.5                     52  %
Loss before income taxes                                   (294.8)           (233.6)           (61.2)                    26  %
Income tax expense                                            3.0               7.7             (4.7)                   (61) %
Net loss                                            $      (297.8)         $ (241.3)         $ (56.5)                    23  %


Comparison of the Years Ended December 31, 2022 and 2021

Net Earned Premium



Net earned premium increased by $95.4 million, or 124%, to $172.4 million for
the year ended December 31, 2022 compared to the year ended December 31, 2021
primarily due to the earning of increased gross written premium, and increased
retention of ceded written premium under our Proportional Reinsurance Contracts
as discussed in detail above under "Reinsurance."

                             Years Ended
                             December 31,
                          2022         2021        Change       % Change
                                  ($ in millions)
Gross written premium   $ 555.7      $ 375.7      $ 180.0           48  %

Ceded written premium (333.1) (273.4) (59.7) 22 % Net written premium $ 222.6 $ 102.3 $ 120.3 118 %




Gross written premium increased $180.0 million, or 48%, to $555.7 million for
the year ended December 31, 2022 compared to the year ended December 31, 2021.
The increase was primarily due to a 27% increase in net added customers year
over year driven by the success of our digital advertising campaigns. We also
continued to expand our geographic footprint and product offerings. In addition,
we saw a 30% increase in premiums per customer year over year due to an
increasing prevalence of multiple policies per customer, growth in the overall
average policy value, and continued shift in the mix of underlying products
toward higher value policies.
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Ceded written premium increased $59.7 million, or 22%, to $333.1 million for the
year ended December 31, 2022 compared to the year ended December 31, 2021,
primarily due to the impact of the change in reinsurance arrangements. The
Company renewed a portion of the reinsurance contracts that expired on June 30,
2021 and June 30, 2022, which decreased the overall share of proportional
reinsurance from 75% of premium to 55% effective July 1, 2022. The Company also
purchased a new reinsurance program to protect against natural catastrophe risk
in the U.S. Other non-proportional reinsurance contracts were renewed with terms
similar to expired contracts.

Net written premium increased $120.3 million, or 118%, to $222.6 million for the
year ended December 31, 2022 compared to the year ended December 31, 2021. The
increase was primarily due to the $180.0 million, or 48% increase in gross
written premium offset by the increase in ceded written premium of $59.7
million, or 22% for the year ended December 31, 2022, as compared to year ended
December 31, 2021.

The table below shows the amount of premium we earned on a gross and net basis.
Ceded earned premium as a percentage of gross earned premium decreased to 65%
for the year ended December 31, 2022, as compared to 74% for the year ended
December 31, 2021 primarily due to the change in total participation in
proportional reinsurance contracts, as discussed above.

                             Years Ended
                             December 31,
                          2022         2021        Change       % Change
                                  ($ in millions)
Gross earned premium    $ 490.5      $ 292.0      $ 198.5           68  %
Ceded earned premium     (318.1)      (215.0)      (103.1)          48  %
Net earned premium      $ 172.4      $  77.0      $  95.4          124  %


Ceding Commission Income



Ceding commission income increased $19.2 million, or 43% to $64.1 million for
the year ended December 31, 2022 compared to the year ended December 31, 2021,
consistent with the increase in ceded earned premium related to the proportional
reinsurance contracts with third-party reinsurance companies during the year.

Net Investment Income



Net investment income increased $6.5 million, or 342%, to $8.4 million for the
year ended December 31, 2022 compared to the year ended December 31, 2021. The
increase was primarily driven by the diversification of the Company's investment
portfolio with higher returns in comparison to prior year, offset by investment
expenses of $0.4 million. We mainly invest in cash, money market funds, U.S.
Treasury bills, corporate debt securities, asset-backed securities, notes and
other obligations issued or guaranteed by the U.S. Government.

Commission and Other Income



Commission and other income increased $7.2 million, or 157% to $11.8 million for
the year ended December 31, 2022 compared to year ended December 31, 2021, due
to growth in premiums placed with third-party insurance companies during the
period and an increase in installment fees billed.

Loss and Loss Adjustment Expense, Net



Loss and LAE, net increased $95.4 million, or 133%, to $167.3 million for the
year ended December 31, 2022 compared to the year ended December 31, 2021. The
increase was primarily in line with growth in premium, increase in net retained
losses due to change in proportional reinsurance contract and increased claims
costs due to impact of inflation. During the second half of 2022, net incurred
losses of $0.4 million was recorded due to Hurricane Ian and $7.6 million due to
winter storm Elliott. These increases were offset by favorable prior period
development.
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Other Insurance Expense



Other insurance expense increased $19.9 million, or 83%, to $44.0 million for
the year ended December 31, 2022 compared to the year ended December 31, 2021.
Professional fees, and other increased by $6.8 million, or 115% primarily in
support of growth and expansion initiatives during the year ended December 31,
2022. Employee-related expense, including stock based compensation, increased by
$6.6 million, or 71%, as compared to the year ended December 31, 2021, driven by
an increase in underwriting staff to support our continued growth. Credit card
processing fees increased $3.2 million, or 48%, as a result of the increase in
customers and associated premium. Amortization of deferred acquisition costs,
net of ceded commissions also increased by $3.2 million, or 133% as compared to
the year ended December 31, 2021.

Sales and Marketing



Sales and marketing expenses decreased $3.3 million, or 2%, to $138.3 million
for the year ended December 31, 2022 compared to the year ended December 31,
2021. Expense related to brand and performance advertising decreased by $16.1
million, or 15%, as a result of reduced spending on search advertising and other
customer acquisition channels. Employee-related expense, including stock based
compensation, increased $8.2 million, or 29%, as compared to the year ended
December 31, 2021, driven by an increase in sales and marketing headcount to
support our continued growth and expansion into new markets. Software expense
also increased by $3.4 million, or 243%.

Technology Development



Technology development expenses increased $27.8 million, or 54%, to $79.6
million for the year ended December 31, 2022 compared to the year ended
December 31, 2021. Employee-related expense, including stock based compensation,
net of capitalized costs for the development of internal-use software, increased
$19.3 million, or 43%, as compared to the year ended December 31, 2021, driven
by an increase in payroll expense for product, engineering, design and quality
assurance personnel to support our continued growth and product development
initiatives, including automation, improvement in machine learning, new
products, and geographic expansion. Technology tools and software expense
increased by $5.6 million, or 147%.

General and Administrative



General and administrative expenses increased $49.7 million, or 68%, to $122.3
million for the year ended December 31, 2022 compared to the year ended
December 31, 2021. Employee related expense, including stock-based compensation,
increased by $17.1 million, or 49%, as we increased finance, legal, business
operations and administrative personnel. Depreciation and amortization increased
by $8.5 million or 230%. Non-recurring transaction and integration costs of $8.4
million primarily relating to legal and other professional fees and employee
retention and severance costs were incurred relating to the Metromile
Acquisition. Legal and Professional fees increased $6.1 million, or 102%.
Software costs increased by $3.2 million, or 110%. Bad debt expense increased by
$2.5 million, or 40%.

Income tax

Income tax expense decreased $4.7 million, or 61%, to $3.0 million for the year
ended December 31, 2022 compared to the year ended December 31, 2021 due to
decreased tax liability related to income generated by our subsidiary in Israel,
and uncertain tax positions.

Net loss

Net loss increased $56.5 million, or 23%, to $297.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to the factors described above.


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Non-GAAP Financial Measures



The non-GAAP financial measures below have not been calculated in accordance
with GAAP and should be considered in addition to results prepared in accordance
with GAAP and should not be considered as a substitute for, or superior to, GAAP
results. In addition, adjusted gross profit and adjusted gross profit margin,
ratio of adjusted gross profit to gross earned premium, and adjusted EBITDA
should not be construed as indicators of our operating performance, liquidity or
cash flows generated by operating, investing and financing activities, as there
may be significant factors or trends that they fail to address. We caution
investors that non-GAAP financial information, by its nature, departs from
traditional accounting conventions. Therefore, its use can make it difficult to
compare our current results with our results from other reporting periods and
with the results of other companies.

Our management uses these non-GAAP financial measures, in conjunction with GAAP
financial measures, as an integral part of managing our business and to, among
other things: (i) monitor and evaluate the performance of our business
operations and financial performance; (ii) facilitate internal comparisons of
the historical operating performance of our business operations;
(iii) facilitate external comparisons of the results of our overall business to
the historical operating performance of other companies that may have different
capital structures and debt levels; (iv) review and assess the operating
performance of our management team; (v) analyze and evaluate financial and
strategic planning decisions regarding future operating investments; and
(vi) plan for and prepare future annual operating budgets and determine
appropriate levels of operating investments.

Adjusted Gross Profit and Adjusted Gross Profit Margin



We define adjusted gross profit, a non-GAAP financial measure, as gross profit
excluding net investment income, and interest income and expense, plus fixed
costs and overhead associated with our underwriting operations including
employee-related expense and professional fees and other, and depreciation and
amortization allocated to cost of revenue. After these adjustments, the
resulting calculation is inclusive of only those variable costs of revenue
incurred on the successful acquisition of business and without the volatility of
investment income. We use adjusted gross profit as a key measure of our progress
towards profitability and to consistently evaluate the variable contribution to
our business from underwriting operations from period to period.

We define adjusted gross profit margin, a non-GAAP financial measure, expressed as a percentage, as the ratio of adjusted gross profit to total revenue.



The following table provides a reconciliation of total revenue to adjusted gross
profit and the related adjusted gross profit margin for the periods presented:
                                                           Year Ended December 31,
                                                           2022                   2021
                                                               ($ in millions)
Total revenue                                        $      256.7              $ 128.4
Adjustments:
Loss and loss adjustment expense, net                $     (167.3)             $ (71.9)
Other insurance expense                                     (44.0)               (24.1)
Depreciation and amortization                                (3.1)                (1.2)
Gross profit                                         $       42.3              $  31.2
Gross profit margin (% of total revenue)                       16  %                24  %
Adjustments:
Net investment income                                $       (8.4)             $  (1.9)
Interest income                                              (0.7)                   -
Employee-related costs                                       15.9                  9.2
Professional fees and other                                  12.7                  5.9
Depreciation and amortization                                 3.1                  1.2
Adjusted gross profit                                $       64.9              $  45.6
Adjusted gross profit margin (% of total revenue)              25  %        

36 %


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Ratio of Adjusted Gross Profit to Gross Earned Premium



The Ratio of Adjusted Gross Profit to Gross Earned Premium measures the
relationship between the underlying business volume and gross economic benefit
generated by our underwriting operations, on the one hand, and our underlying
profitability trends, on the other. We rely on this measure, which supplements
our gross profit ratio as calculated in accordance with GAAP, because it
provides management with insight into our underlying profitability trends over
time.

We use gross earned premium as the denominator in calculating this ratio, which
excludes the impact of premiums ceded to reinsurers, because we believe that it
reflects the business volume and the gross economic benefit generated by our
underlying underwriting operations, which in turn are the key drivers of our
future profit opportunities. We exclude the impact of ceded premiums from the
denominator because ceded premiums can change rapidly and significantly based on
the type and mix of reinsurance structures we use and, therefore, add volatility
that is not indicative of our underlying profitability. For example, a shift to
a proportional reinsurance arrangement would result in an increase in ceded
premium, with offsetting benefits to gross profit from ceded losses and ceding
commissions earned, resulting in a nominal overall economic impact. This shift
would result in a steep decline in total revenue with a corresponding spike in
gross margin, whereas we expect that the Ratio of Adjusted Gross Profit to Gross
Earned Premium would remain relatively unchanged. We expect our reinsurance
structure to evolve along with our costs and capital requirements, and we
believe that our reinsurance structure at a given time does not reflect the
performance of our underlying underwriting operations, which we expect to be the
key driver of our costs of reinsurance over time.

On the other hand, the numerator, which is adjusted gross profit, includes the
net impact of all reinsurance, including ceded premiums and the benefits of
ceded losses and ceding commissions earned. Because our reinsurance structure is
a key component of our risk management and a key driver of our profitability or
loss in a given period, we believe this is meaningful.

Therefore, by providing this Ratio of Adjusted Gross Profit to Gross Earned
Premium for a given period, we are able to assess the relationship between
business volume and profitability, while eliminating the volatility from the
cost of our then-current reinsurance structure, which is driven primarily by the
performance of our insurance underwriting platform rather than our business
volume.

The following table sets forth our calculation of the Ratio of Adjusted Gross Profit to Gross Earned Premium for the periods presented:


                                                                Year Ended
                                                               December 31,
                                                            2022          2021
                                                             ($ in millions)
Numerator: Adjusted gross profit                         $  64.9       $  

45.6


Denominator: Gross earned premium                        $ 490.5       $ 

292.0

Ratio of Adjusted Gross Profit to Gross Earned Premium 13 % 16 %





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Adjusted EBITDA

We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding
interest Income and expense, income tax expense, depreciation, amortization,
stock-based compensation, net investment income, change in fair value of
warrants liability, other non-cash adjustments and other transactions that we
would consider to be unique in nature. We exclude these items from adjusted
EBITDA because we do not consider them to be directly attributable to our
underlying operating performance. We use adjusted EBITDA as an internal
performance measure in the management of our operations because we believe it
gives our management and other customers of our financial information useful
insight into our results of operations and our underlying business performance.
Adjusted EBITDA should not be viewed as substitute for net loss calculated in
accordance with GAAP, and other companies may define adjusted EBITDA
differently.

The following table provides a reconciliation of adjusted EBITDA to net loss for
the periods presented.

                                                    Year Ended
                                                   December 31,
                                                2022          2021
                                                 ($ in millions)
Net loss                                     $ (297.8)     $ (241.3)
Adjustments:
Income tax expense                                3.0           7.7
Depreciation and amortization                    12.2           3.7
Stock-based compensation                         58.5          44.1
Transaction and integration cost (1)              8.4           3.5
Interest (income) expense, net                   (0.8)            -
Net investment income                            (8.4)         (1.9)
Change in fair value of warrants liability       (0.2)            -
Adjusted EBITDA                              $ (225.1)     $ (184.2)



(1) Total transaction and integration cost for the year ended December 31, 2022
was $8.4 million related to the Metromile Acquisition, comprised of $1.8 million
of professional services and other costs, and $6.6 million of retention and
severance costs, of which $0.8 million was stock-based compensation.


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Liquidity and Capital Resources



As of December 31, 2022, we had $282.5 million in cash and cash equivalents, and
$750.1 million in investments. From the date we commenced operations, we have
generated negative cash flows from operations, and we have financed our
operations primarily through private sales of equity securities. On January 14,
2021, we issued and sold 3,300,000 shares of common stock, and generated net
proceeds to us of $525.7 million after deducting underwriting discounts and
other offering costs. On February 1, 2021, the underwriters exercised their
option to purchase additional shares, which resulted in the issuance and sale of
an additional 718,647 shares of common stock by us, and generated additional net
proceeds of $114.6 million. Excluding capital raises, our principal sources of
funds are insurance premiums, investment income, reinsurance recoveries and
proceeds from maturity and sale of invested assets. These funds are primarily
used to pay claims, operating expenses and taxes. We believe our cash and cash
equivalents as of December 31, 2022 will be sufficient to meet our working
capital and capital expenditures needs over at least the next 12 months.

Our cash flows used in operations may differ substantially from our net loss due to non-cash charges or due to changes in balance sheet accounts.



The timing of our cash flows from operating activities can also vary among
periods due to the timing of payments made or received. Some of our payments and
receipts, including loss settlements and subsequent reinsurance receipts, can be
significant. Therefore, their timing can influence cash flows from operating
activities in any given period. The potential for a large claim under an
insurance or reinsurance contract means that our insurance subsidiaries may need
to make substantial payments within relatively short periods of time, which
would have a negative impact on our operating cash flows.

We are a holding company that transacts a majority of our business through
operating subsidiaries. Consequently, our ability to pay dividends to
stockholders, meet debt payment obligations and pay taxes and operating expenses
is largely dependent on dividends or other distributions from our subsidiaries
and affiliates, whose ability to pay us is highly regulated.

Our U.S. and Dutch insurance company subsidiaries, and our Dutch insurance
holding company, are restricted by statute as to the amount of dividends that
they may pay without the prior approval of their respective competent regulatory
authorities. As of December 31, 2022, cash and investments held by these
companies was $350.4 million.

Insurance companies in the United States are also required by state law to
maintain a minimum level of policyholder's surplus. Insurance regulators in the
states in which we operate have a risk-based capital standard designed to
identify property and casualty insurers that may be inadequately capitalized
based on inherent risks of the insurer's assets and liabilities and its mix of
net written premium. Insurers falling below a calculated threshold may be
subject to varying degrees of regulatory action. As of December 31, 2022, the
total adjusted capital of our U.S. insurance subsidiaries was in excess of its
respective prescribed risk-based capital requirements.

The following table summarizes our cash flow data for the periods presented:
                                                             Year Ended
                                                            December 31,
                                                         2022          2021
                                                          ($ in millions)
Net cash used in operating activities                 $ (163.0)     $ 

(144.6)

Net cash provided by (used in) investing activities $ 181.1 $ (804.8) Net cash provided by financing activities

$    3.6      $  

649.6


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Operating Activities



Cash used in operating activities was $163.0 million for the year ended
December 31, 2022, an increase of $18.4 million from $144.6 million for the year
ended December 31, 2021. This reflected the $56.5 million increase in our net
loss, primarily offset by increases in unearned premium, funds held, and unpaid
loss and loss adjustment expense that exceeded the increase in prepaid
reinsurance premium, premiums receivable and amounts expected to be recovered
from our reinsurance partners. The increase in cash used in operating activities
from year ended December 31, 2022 compared to year ended December 31, 2021 was
primarily due to claims payments, settlements, settlements with our reinsurance
partners, and increased spend related to growth and expansion.

Cash used in operating activities was $144.6 million for the year ended
December 31, 2021. This reflected the $119.0 million increase in our net loss,
partially offset by non-cash charges and net cash provided by changes in our
operating assets and liabilities. Non-cash charges primarily consisted of
non-cash stock-based compensation. Net cash provided by changes in operating
assets and liabilities primarily consisted of increases in funds held for
reinsurance treaties, unearned premium, unpaid losses and loss adjustment
expenses and deferred ceding commission included in accrued and other
liabilities, offset by increases in premiums receivable, prepaid reinsurance
premiums and amounts expected to be recovered from our reinsurance partners.

Investing Activities

Cash provided by investing activities was $181.1 million for the year ended December 31, 2022 primarily due to cash from our Metromile Acquisition, sales and maturities of U.S. government obligations, corporate debt securities, asset-backed securities, short term investments, offset by purchases, and property and equipment purchased during the year.



Cash used in investing activities was $804.8 million for the year ended
December 31, 2021 primarily due to purchases of U.S. government obligations,
corporate debt securities, short term investments and purchases of property and
equipment during the year.

Financing Activities

Cash provided by financing activities was $3.6 million for the year ended December 31, 2022 primarily due to proceeds from stock exercises.

Cash provided by financing activities was $649.6 million for the year ended December 31, 2021 primarily due to proceeds received from our Follow-on Offering as discussed above and proceeds from stock exercises.



We do not have any current plans for material capital expenditures other than
current operating requirements. We believe that we will generate sufficient cash
flows from operations to satisfy our liquidity requirements for at least the
next 12 months and for the foreseeable future. The following table summarizes
the Company's contractual obligations and commitments as of December 31, 2022,
and the effect of such obligations are expected to have on our liquidity and
cash flows in the future periods.

                                                                     Payments Due by Period
                                                         Less than           1 to 3            4 to 5            More than
                                        Total              1 Year             Years             Years             5 Years
                                                                         ($ in millions)
Unpaid losses and loss adjustment
expense(1)                           $  256.2          $    184.2          $   57.0          $    7.8          $      7.2
Operating lease commitments              41.2                 8.8              23.7               2.6                 6.1
Total                                $  297.4          $    193.0          $   80.7          $   10.4          $     13.3


___________
(1)The reserve for losses and loss adjustment expenses represent management's
estimate of the ultimate cost of settling losses. As more fully discussed in
"- Critical Accounting Policies and Estimates - Unpaid loss and loss adjustment
expenses", the estimation of the unpaid losses and loss adjustment expenses is
based on various complex and subjective judgments. Actual losses paid may
differ, perhaps significantly, from the reserve estimates reflected in our
consolidated financial statements. Similarly, the timing of payment of our
estimated losses is not fixed and there may be significant changes in actual
payment activity. The assumptions used in estimating the likely payments due by
period are based on our historical claims payment experience and industry
payment patterns, but due to the
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inherent uncertainty in the process of estimating the timing of such payments,
there is a risk that the amounts paid can be significantly different from the
amounts disclosed.

The amounts in the above table represent our gross estimates of known
liabilities as of December 31, 2022 and do not include any allowance for claims
for future events within the time period specified. Accordingly, we expect that
the total amounts of obligations paid by us in the time periods shown will be
greater than those indicated in the table.

To the extent our future operating cash flows are insufficient to cover our net
losses from catastrophic events, we had $1,032.6 million in cash and cash
equivalents, and investment securities available at December 31, 2022. We also
have the ability to access additional capital through pursuing third-party
borrowings, sales of our equity, issuance of debt securities or entrance into
new reinsurance arrangements. There can be no assurance that we will be able to
raise additional capital on favorable terms or at all.

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Critical Accounting Policies and Estimates



Our financial statements are prepared in accordance with GAAP in the United
States. The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires our
management to make a number of estimates and assumptions relating to the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the period. We evaluate our
significant estimates on an ongoing basis, including, but not limited to,
estimates related to unpaid loss and loss adjustment expense, reinsurance
assets, intangible assets, stock-based compensation, income tax assets and
liabilities, including recoverability of our net deferred tax asset, income tax
provisions and certain non-income tax accruals. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results could differ from those
estimates.

We believe that the accounting policies described below involve a significant
degree of judgment and complexity. Accordingly, we believe these are the most
critical to aid in fully understanding and evaluating our consolidated financial
condition and results of operations. For further information, see "Note 4 -
Summary of Significant Accounting Policies" in the Notes to Consolidated
Financial Statements included in this Annual Report.

Unpaid loss and loss adjustment expense



The reserves for loss and LAE represent management's best estimate of the
ultimate cost of all reported and unreported losses and LAE incurred through the
balance sheet date. Unpaid losses and LAE are based on the assumption that past
developments are an appropriate indicator of future events. The incurred but not
reported portion of unpaid losses and LAE is based on past experience and other
factors.

The estimate of the unpaid loss and loss adjustment expense relies on several key judgments:



•the determination of the actuarial models used as the basis for these
estimates;
•the relative weights given to these models;
•the underlying assumptions used in these models; and
•the determination of the appropriate groupings of similar product lines and, in
some cases, the disaggregation of dissimilar losses.

Because actual experience can differ from key assumptions used in establishing
reserves, there is potential for significant variation in the development of
loss reserves.

For property coverage, the nature of claims is generally a short reporting period with volatility arising from occasional severe events. The process for estimating and recording unpaid losses and LAE is dependent on historical reported claims, industry information, the frequency and latency of claims reported, and assumptions of current environmental factors.

The following tables summarize our gross and net reserves for unpaid loss and LAE as of December 31, 2022 and 2021, respectively:


                                                       December 31, 2022
                                      Gross        % of total        Net    

% of Total


                                                        ($ in millions)
Loss and loss adjustment reserves
Case reserve                        $   89.0             35  %    $  44.3             34  %
IBNR                                   167.2             65  %       87.3             66  %
Total reserves                      $  256.2            100  %    $ 131.6            100  %


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                                                       December 31, 2021
                                       Gross        % of total       Net        % of Total
                                                        ($ in millions)
Loss and loss adjustment reserves
Case reserve                        $    44.8             46  %    $ 10.9             43  %
IBNR                                     53.1             54  %      14.4             57  %
Total reserves                      $    97.9            100  %    $ 25.3            100  %


We have assessed the impact of potential reserve deviations from our carried
reserve at December 31, 2022. We applied sensitivity factors to incurred losses
for the three most recent accident years and to the carried reserve for all
prior accident years combined. Due to our contractual arrangements with our
reinsurers, the sensitivity analysis results in no change to our previous income
or stockholders' equity.

The amount by which estimated losses differ from those originally reported for a period is known as "Development."



Development is unfavorable when the losses ultimately settle for more than the
amount reserved or subsequent estimates indicate a basis for reserve increases
on unresolved claims. Development is favorable when losses ultimately settle for
less than the amount reserved, or subsequent estimates indicate a basis for
reducing loss reserves on unresolved claims. We reflect favorable or unfavorable
development of loss reserves in the results of operations in the period the
estimates are changed.

The following tables summarize our Gross Ultimate Losses and LAE, and Net Ultimate Losses and LAE as of December 31, 2022 and 2021, respectively.



                    Gross Ultimate Losses and LAE
                             ($ in millions)
                              Calendar Year              Development
   Accident Year            2022              2021       2021 to 2022
        2016         $      -               $    -      $          -
        2017              5.1                  5.1                 -
        2018             23.2                 23.2                 -
        2019             59.9                 58.4               1.5
        2020            119.4                121.0              (1.6)
        2021            263.6                262.8               0.8
        2022            439.9                    N/A               N/A
                                                        $        0.7


                  Net Ultimate Losses and LAE
                       ($ in millions)
                        Calendar Year              Development
 Accident Year         2022             2021       2021 to 2022
     2016       $      2.0             $   -      $        2.0
     2017             34.2               1.7              32.5
     2018             47.3              13.4              33.9
     2019             70.9              46.2              24.7
     2020             64.3              52.0              12.3
     2021            140.9              69.4              71.5
     2022            204.5                 N/A               N/A
                                                  $      176.9


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Reinsurance assets



The estimation of reinsurance recoverable involves a significant amount of
judgment. Reinsurance assets include reinsurance recoverable on unpaid losses
and loss adjustment expenses that are estimated as part of our loss reserving
process and, consequently, are subject to similar judgments and uncertainties.
This estimate requires significant judgment for which key considerations
include:

•paid and unpaid amounts recoverable;
•whether the balance is in dispute or subject to legal collection;
•the financial condition of a reinsurer (i.e., liquidated, insolvent, in
receivership or otherwise subject to formal or informal regulatory restriction);
and
•the collectability of the reinsurance recovery for factors such as, amounts
outstanding, length of collection periods, disputes, any collateral or letters
of credit held and other relevant factors.

Income tax assets and liabilities, including recoverability of our net deferred tax asset



The evaluation of the recoverability of our deferred tax asset and the need for
a valuation allowance requires us to weigh all positive and negative evidence to
reach a conclusion that it is more likely than not that all or some portion of
the deferred tax asset will not be realized. The weight given to the evidence is
commensurate with the extent to which it can be objectively verified. The more
negative evidence that exists, the more positive evidence is necessary and the
more difficult it is to support a conclusion that a valuation allowance is not
needed.

We consider a number of factors to reliably estimate future taxable income so we
can determine the extent of our ability to realize NOLs, foreign tax credits,
realized capital loss and other carryforwards. These factors include forecasts
of future income for each of our businesses and actual and planned business and
operational changes, both of which include assumptions about future
macroeconomic and company-specific conditions and events. We subject the
forecasts to stresses of key assumptions and evaluate the effect on tax
attribute utilization.

Intangible Assets



Intangible assets are recorded at their acquisition date fair values which
involves the use of valuation methodologies and various assumptions that are
inherently subjective. Identifiable intangible assets consist of value of
business acquired and technology, which are subject to amortization, and
insurance licenses and trademark, and are not subject to amortization. These
intangible assets were acquired as part of the Metromile Acquisition except for
trademark associated with the Company's name, which was acquired in 2019.
Finite-lived intangible assets, which are amortized over their estimated
economic lives, are reviewed for impairment only when events occur or there are
changes in circumstances indicating that their carrying value may exceed fair
value. Impairment exists when the carrying value of intangible assets exceeds
fair value. Indefinite-lived intangible assets are not amortized but are rather
reviewed for potential impairment on an annual basis, or whenever indications of
potential impairment exist.

Goodwill represents the excess of purchase price over the fair value of net
assets acquired from our acquisition. Goodwill is not amortized, but instead is
reviewed for impairment at the reporting unit level on an annual basis, during
the fourth quarter, or more frequently if indicators of impairment exist. The
annual impairment test for goodwill is initially completed through a qualitative
assessment to determine if it is more likely than not that the fair value of a
reporting unit is less than its carrying amount. If facts and circumstances
determine that it is not more likely than not that a reporting unit fair value
is less than its carrying amount, then additional testing of goodwill is not
required. However, if we determine that it is more likely than not that the
value of a reporting unit is less than the carrying amount, then we will perform
a quantitative analysis. The quantitative analysis compares the estimated fair
value of a reporting unit to its book value, including goodwill. If the fair
value exceeds the book value, goodwill is considered not the be impaired.
However, if the book value exceeds the fair value of a reporting unit, an
impairment loss will be recognized in the amount of the excess book value over
fair value limited by the total amount of goodwill for the reporting unit.


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Stock-based compensation

We account for stock-based compensation in accordance with ASC Topic 718,
"Compensation - Stock Compensation." Stock options are mainly awarded to
employees and members of our board of directors and measured at fair value at
each grant date. We calculate the fair value of share options on the date of
grant using the Black-Scholes option-pricing model and the expense is recognized
over the requisite service period for awards expected to vest using the
straight-line method. The requisite service period for share options is
generally four years. We recognize forfeitures as they occur.

See "Note 16 - Stock-based compensation" in the Notes to Consolidated Financial Statements included in this Annual Report for a complete description of the accounting for stock-based awards.

Recently Issued and Adopted Accounting Pronouncements

See "Note 4 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements included in this Annual Report for a discussion of accounting pronouncements adopted and their impact to our consolidated financial statements.


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