Forget ChatGPT: 1 AI Stock Down 91% You'll Wish You'd Bought on ...
Lemonade (LMND 3.32%) has been transforming the insurance industry since 2016 by placing technology at the center of its mission. It has developed artificial intelligence (AI) algorithms to interact with consumers, pay claims, and calculate more accurate premiums. The positive impact of AI on its business is rapidly becoming apparent.
Insurers succeed in their ability to price premiums accurately. Last year, Lemonade released its lifetime value 6 (LTV6) AI model, which had the ability to predict which customers were most likely to switch insurance providers and those most likely to make claims. It also unlocked new cross-selling opportunities by identifying customers who were likely to purchase multiple Lemonade products.
Lemonade's Q1 revenue came in at $95 million, up a whopping 115% year over year, and beyond the $89 million forecasted. A higher in-force premium has the ability to smooth out the volatility in Lemonade's gross loss ratio, which is calculated by deducting the value of claims paid out from the value of premiums taken in. As the below chart shows, the company managed to shrink its gross loss ratio to 87% in Q1 from 90% at the same time last year.
Despite the 27% jump in Lemonade's stock price the day following its Q1 earnings release, it's still down 91% from its all-time high. But the good news is Lemonade expects to achieve profitability with the cash it has on hand. It has identified over 100 business processes that can be automated using generative AI, which will speed up business processes and likely require a lighter workforce.
In the long run, investors might be glad they took this opportunity to buy Lemonade stock on the dip.
