Is It Too Late to Buy Lemonade Stock?

Lemonade (NYSE: LMND) went public in 2020 with the quirky mission of creating a more "beloved" insurance experience, which is unusual in a category most people view as a commodity. It aimed to do so with a digital-first model that used artificial intelligence (AI) to speed up and simplify the processes of buying policies and making claims.

For much of the time since its July 2, 2020, IPO, its pursuit of that goal has been accompanied by weak share price performance. From Feb. 12, 2021, to Feb. 12, 2025, the stock shed 80% of its value.

However, over the past year or so, the story has started to look different, with Lemonade reporting improving loss ratios, a near-tripled claims handling efficiency, and its eighth consecutive quarter of in‑force premium growth in Q3 2025. After about doubling in the past 12 months, it's trading at around $60 today -- though that's still below its first-day close of $69.41.

Naturally, investors are wondering if this is part of a real turnaround driven by results, or if the easy money over the last year has already been made thanks to the market's enthusiasm around AI stocks.

Here's one percentage that won't answer every question, but remains one of the most telling indicators in the insurance industry.

Separating progress from hype

Loss ratios help show whether Lemonade is pricing policies accurately, whether claims are becoming more predictable, and whether it is moving toward profitability.

Image source: Getty Images.

In Q3 2024, Lemonade reported a trailing-12-month gross loss ratio of 77%, meaning it paid out roughly $0.77 in claims for every $1 of premiums it collected. By Q3 2025, that had fallen to an all-time low of 62%.

The following isn't a perfect apples-to-apples comparison due to the broader scope of the included data. Still, according to the National Association of Insurance Commissioners, the industry loss ratio for property and casualty insurance as of September 2025 was 68.4%, giving us a valid starting point for evaluating Lemonade's improvement.

With all that progress in mind, understand that risks remain, and the insurer needs to keep improving its efficiencies to narrow its losses.

We'll get our next indicator of what sort of momentum Lemonade's business is enjoying when it reports its Q4 2025 earnings on Feb. 19.

Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.