TARIK KIZILKAYA
Lemonade (NYSE:LMND) stock got a sorely needed boost last week when co-founder and CEO Daniel Schreiber appeared on CNBC extolling the benefits of AI in the insurance business.
“Businesses within our sector that are not built on AI are missing out on one of the most forceful technologies around,” he said in an interview late last Monday. “For us, it affects everything that we do. The whole company was built upon it.”
In the next trading session, the stock jumped 8.8%. During the holiday-shortened week, Lemonade (LMND) rose 13%.
AI helps the company make underwriting, marketing spend, and claims-processing decisions. AI affects everything from risk management, to the cost-to-serve, to the user experience, Schreiber said. “Every consumer who comes in has about 50 different machine-learning models analyzing and making predictions about ‘will they buy, will they churn, will they cross-sell, will they claim’?”
Lemonade has grown its business by 5x and gross profit by 15x since its IPO four years ago, he said. However, it has been tough going for the stock. The stock closed on Friday at $16.10, or 44% below its IPO price of $29. Year-to-date, the stock has slipped 0.2%, lagging the S&P 500’s 15% climb and competitor Root’s (ROOT) fourfold increase and Hippo Holdings (HIPO) 76% gain in the same time period.
“This is a business that’s really driving on every metric — gross profit, top line, bottom line, profitability, cash flow — it’s all green lights everywhere. The stock market will notice that sooner or later,” Schreiber said in the interview.
The SA Quant system isn’t as bullish on Lemonade (LMND), assigning the company a Hold rating, the same as Root (ROOT) and Progressive (PGR). By comparison, Hippo (HIPO) gets a Buy rating, and Allstate merits a Strong Buy.
Looking at the broader property & casualty insurance sector, the SA Quant system rates HCI Group (HCI), the highest, followed by Old Republic International (ORI), Universal Insurance Holdings (UVE), and Allstate (ALL), all with Strong Buys.