Root’s Q1 2023 results

Root Insurance shared its Q1 2023 results. Here are some highlights:

  • The company ended the quarter with 199,685 policies in force, a decrease of 135,588 auto policies (40%) compared to Q1 2022. Between Q4 2022 and Q1 2023, Root’s policy count decreased by ~21k.
  • Gross written premium for the quarter stood at $135 million, a ~28% decrease from the same period last year.
  • Gross accident period loss ratio was 69.3%, down from 81.5% in Q1 2022. Gross combined ratio improved 13 points to 123%. Net combined ratio stood at 161.2%.
  • Premium per auto policy was $1,292, a 24% increase compared to the same quarter of last year.
  • Net loss for the quarter stood at $40.9 million, an improvement of 47% or $37 million compared to Q1 2022.
  • Sales and marketing expense stood at $3.6 million.

As of March 31, 2023, Root had $679.3 million in cash and cash equivalents, of which $523.6 million was held outside of regulated insurance entities. The company also had $126.5 million in marketable securities. Currently, Root’s debt covenants require cash and cash equivalents held in entities other than its insurance subsidiaries to be at least $200 million at all times. This threshold may be reduced to $150 million under two sets of circumstances: issuing 62,500 insurance policies through the Carvana embedded product and achieving a ratio of direct contribution to gross premiums earned of 12%; or ceasing any customer acquisition spend outside of the Carvana commercial agreement and reducing monthly cash burn to no greater than $12 million.

Root typically shares the percentage of new policies attributed to its Carvana channel, but the company did not provide any specifics for the quarter. Root pays Carvana for every policy it sells (Coverager Research members know the dollar amount per policy). This cost falls under the company’s sales and marketing expense, which includes other channels and categories such as performance marketing, branding, PR, sponsorships, referral fees, and related personnel costs.

Root shared that it is “thrilled to announce a third embedded partnership” with more details to come in the quarters ahead. We’re still waiting for the announcement regarding the second embedded partner – a digital financial services provider. According to insurance filings, this unannounced partner may be banking startup Chime.