Root’s gross earned premium declined by 23% YoY

Root Insurance hosted its Q2’23 earnings call on Aug 3, 2023. Select highlights:

  • New writings grew 65% quarter-over-quarter.
  • Launched a partnership and telematics capabilities on the embedded platform.
  • Tripled customer adoption through the Carvana partnership, demonstrating differentiation.
  • Ended the second quarter with $520 million of unencumbered cash (cash or liquid assets that are not tied up or restricted by any financial obligations) compared to $524 million at the end of the first quarter. The minimal consumption during the quarter was largely due to an improvement in their operating results as well as a reduction in required capital contributions to their insurance subsidiaries and the timing of various net cash settlements.
  • Launched its latest segmentation model, which utilizes policyholder data to enhance pricing accuracy. This model incorporates almost double the amount of proprietary data compared to previous models and estimated to be 17% more predictive than the previous model.
  • By the end of 2023, the company plans to file this model in states that account for approximately 75% of new business.
  • Gross written premium increased by 3% year-over-year to $145 million.
  • Gross earned premium declined by 23% year-over-year to $132 million.
  • 17-point improvement in gross accident period loss ratio and 12-point improvement in gross expense ratio year-over-year.
  • Telematics platform (within embedded platform) launched in the second quarter allows data collection in various ways, including partnering with financial service applications or other apps. Possibility to collect telematics data from consumers who may not be initially looking for insurance.
  • Consideration to embed telematics directly with vehicles to get closer to them.
  • Already pulling data from connected cars since 2017, plan to expand the program and explore opportunities with Carvana.
  • “I just want to make sure that it’s clear that Root has no direct relationship with Vesttoo” – Megan Nicole Binkley, Principal Accounting Officer, CFO & Treasurer.
  • Spent $25 million on acquisition costs, and in the second half, expect to spend around $50 million, with 50% allocated to performance marketing.
  • Concentrating marketing investment in performance marketing channels such as vertical search, search engine marketing, and direct mail.