Why Lemonade’s stock price fell nearly 3% today

What happened

insurance company Lemonade (LMND -2.99%) trended lower on Friday, ending the day down 2.95% at $21.42 per share. It had fallen below $21 per share, falling to $20.97 as of 12:31 a.m. ET. The stock price is down about 49% year-to-date (YTD).

It’s unclear what drove the stock price lower, as insurance stocks in general were all over the place in Friday’s trading session, with stocks like Aegon (AEG 1.94%) up more than 2% and several others, including Lemonade, down.

So what

Lemonade is part of a new breed of insurance companies using artificial intelligence (AI) to price policies and review claims. Its customer and revenue growth has been strong and steady, but it remains unprofitable due to high expenses as it accelerates its technology and expands its markets.

Today’s nearly 3% decline was preceded by a more than 6% gain on Thursday, as the stock price surged after two Federal Reserve Board members, James Bullard and Christopher Waller, in separate events, argued for another 75 basis point interest rate hike in July. . Rising interest rates are good for insurance companies because they improve the returns on their underlying bond investments.

Now what

Lemonade has grown from its roots offering renters, owners and pet health insurance. It now also offers life and automobile insurance. The first quarter of this year was the first in which it offered all five types of insurance in one package, but only in a few states. The company plans to expand this offer to other states.

But the next big thing to watch is Lemonade’s acquisition of Metromile (MILE 0.00%), a company that sets per-mile insurance rates and, like Lemonade, uses AI and machine learning to develop policies. The deal was supposed to close in the second quarter, but that didn’t happen, so the third quarter is likely.

Dave Kovaleski has no position in the stocks mentioned. The Motley Fool holds positions and recommends Lemonade, Inc. The Motley Fool has a Disclosure Policy.

Richard L. Militello