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Short interest: InsurTech rising, incumbents falling

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The latest FINRA short interest report, including short interest data up to July 30, came out yesterday evening.

The bi-monthly data report is a great indicator of market sentiment regarding the insurance industry and individual firms, which is informed by a company’s valuation, fundamentals, or upcoming news. All else being equal, higher short interest indicates that investors are pessimistic about the future performance of a company or its stock value.

Continuing the trend noted in past reports, InsurTech firms continue to garner the most short interest attention.

Root and Lemonade are again the highest shorted insurance stocks. Root had short interest of 33% – up 5.5 pts from two weeks ago – and Lemonade had short interest of 21%, up 0.2 pts from the last set of data released.

Note, Root has significant private equity and insider ownership, limiting the public float as compared to more mature industry peers, which skews the ratio to the upside. Metromile ranked a close third with 20.6% of float shorted, and HCI at 18.8% of float. HCI stock recently jumped 14% on its earnings, which might be an indication of short covering.

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Short interest has experienced big swings in both directions over the past two weeks, with increases for many of the InsurTech firms and decreases for other incumbent or established companies. Aon experienced a steep drop in short interest as a percentage of float, down to 8.8%, or almost 3 pts, following the failure of the merger with Willis Towers Watson. Similarly, Willis experienced a drop in short interest, down to 3.6% of float for a decrease of 1.6 pts.

Root saw the largest increase in short interest over the past two weeks, in light of the broader discussion surrounding earnings as well as a continued investor rotation out of this sector.

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On a days to cover basis, Greenlight Re’s measure jumped to 22.3 and remains the highest among the companies we looked at by almost a full week.

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Given the rocky stock price performance we’ve seen from InsurTechs following their earnings reports, the next short interest report will likely see large movements.

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