Insurance disruptor Lemonade (LMND -0.47%) reported third-quarter results after Tuesday's market close that surpassed management's own expectations for both revenue and bottom-line earnings. However, the news wasn't all good, and there is one key metric that is likely responsible for the stock's muted reaction to the report.

With that in mind, here's an overview of Lemonade's latest results, where the business stands, and the pros and cons investors should keep in mind.

Lemonade's third-quarter results were mostly strong

As mentioned, Lemonade's third-quarter numbers generally looked great. In-force premium grew by 76% year over year, and the company has about 1.78 million total customers, 30% more than a year ago. Even though 32 percentage points of the premium growth came from the Metromile acquisition, this is still an impressive figure.

The in-force premium has more than tripled over the past two years, so it's tough to argue that the company's growth trajectory hasn't been impressive. Gross earned premium for the quarter grew by 71% compared with the third quarter of 2021, which is notable considering the economic climate.

On the bottom line, Lemonade posted a net loss of $91 million for the quarter, but this was actually better than expected. Three months ago, Lemonade's management said that it anticipated that losses would peak in the third quarter and then gradually improve until the insurance company achieved profitability.

1 big unanswered question remains

The biggest negative in Lemonade's results is its gross loss ratio, which came in at 94% in the third quarter. This simply means that 94% of the money Lemonade took in for insurance premiums went to paying out claims. As you might imagine, this doesn't leave much room to cover expenses (or to make a profit) -- hence the big net losses.

Lemonade is targeting a 75% loss ratio to eventually achieve profitability. This leaves a much more reasonable 25% of collected premiums to cover expenses, invest, and donate (a big part of Lemonade's mission). It had a 77% loss ratio a year ago and had advised that the now-completed Metromile acquisition would increase it by 3 to 5 percentage points.

Management attributes the rest of the increase to Hurricane Ian; however, costly natural disasters happen every so often (the Texas winter storms of a few years ago had a similar effect), and investors would like to see Lemonade better prepare for them.

There's plenty of time to get it right, but investors want to see progress

It remains to be seen whether Lemonade will ultimately achieve profitability, but it does have some time to get it right. At the end of the third quarter, Lemonade had about $1.1 billion in cash on its balance sheet, and if losses indeed peaked this past quarter, this gives the company plenty of runway. However, investors will want to see progress -- not just toward top-line growth, but in profitability as well.

Having said that, this was a solid quarter for Lemonade. The company is intentionally slowing down its growth spending to better manage cash burn but still feels a 20% to 25% annual growth rate is achievable. If Lemonade can control its losses while maintaining growth, the stock could be a bargain today, especially considering that its market cap isn't much higher than the cash sitting on its balance sheet. But there's quite a bit that needs to go right for Lemonade to become a home run.