Root (ROOT) 11 Nov 212021 Q3 Earnings call transcript

Company Profile

Participants

Christine Patrick	Vice President of Investor Relations
Dan Rosenthal	Chief Operating Officer, Chief Revenue Officer, and Chief Financial Officer
Frank Palmer	Chief Insurance Officer
Matt Bonakdarpour	Chief Data Science and Analytics Officer
Alex Timm	Co-Founder and Chief Executive Officer
Michael Phillips	Morgan Stanley
Matt Carletti	JMP Securities
Josh Siegler	Cantor Fitzgerald
Elyse Greenspan	Wells Fargo
Nick Jones	Citi
Tracy Benguigui	Barclays
David Motemaden	Evercore ISI
Mark Hughes	Truist
Andrew Kligerman	Credit Suisse
Charlie	Wolfe Research
Christopher Martin	KBW
Ryan Tunis	Autonomous Research
Youssef Squali	Truist Securities

Call transcript

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Operator

Good day and thank you for standing by. Welcome to the Root’s Third Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please turn over Patrick, to would ahead. President now speaker conference to like go please Christine I your the to Investor Relations, of Vice day,

Christine Patrick

Financial you morning. to Operating Officer; on and Chief call Third Officer. today's for Good are its and Chief thank joining today. Revenue Timm, hosting discuss Results. Root Earnings XXXX Chief Executive Alex Dan Officer, us Officer, Quarter call Rosenthal, this is Participating Chief and And Co-Founder

portion Analytics question-and-answer our Insurance will Frank the results. issued call, During of Chief financial presenters its Root Chief be this Bonakdarpour, a Matt Data Palmer, announcing shareholder Officer. evening, joined Officer, by Last Science letter and and

complete to our encourage information we also this Form our our read performance, about within While items reflect more call financial you will as XX-K. discussed XXXX well XXQ as for that document

I begin, business management's opinions include assumptions. and we discussed will that our forward-looking that you call information no current performance, Before goals, today's operating related a to to this that of on based the on want call our these which are we statements obligation financial revise statements reflect of matters may forward-looking beliefs remind to outlook, undertake new of occur. Please developments result as and date note this as and

our could Forward-looking today. differ statements those are subject factors and uncertainties, actual results described cause to and to that various risks, from expected other materially

to a and subject of are business financial significantly we addition, our that In number risks may results. impact

during factors shareholder replay to as from Company's will performance. Root see the Relations statements that review released of well on materially also risk call, that once website some non-GAAP of please you talking will Form I description these as our our conference about we XX-K, our of For discussion the differ 's where our under actual could in cause available measures remind discussing section. would Investor detailed letter you to factors, a the are this last more results call a like be A evening. again,

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Alex Timm

Good and for you Christine. quarter joining you, third Thank our thank us morning, everyone, call. on

with During in questioning long-standing of seeing of world-class along scores grow to commitment the be fairness others incumbents our quarter, use the initiatives the unfairness our founding toward and as our building we industry and insurance inefficiencies leading many by to and industry. auto the on addresses that made in credit deepened movement and evidenced We're lead following progress bringing pricing. key technology in We're the largest charge some excited the this of us. the

on this third when channels, of industries. an think like moments our enabled and Root’s a toward us bring person to partnership Dan's placed we and role, to meet opportunity and This ability drive through we untapped also Root: technology embedded responsibilities now growth, creates quarter, to To operations. mid-August, Chief Carvana. profitable the last this walk I Rosenthal. sizable teams I'd product in oversees the progress in Chief a announcing lead adjacent of Dan that focused offering call. charge Operating history business that under providing Carvana with of our This highlights for distribution our our cross-functional life, customer X us areas marketing, on point-of-sale integrated Revenue up offering. meaningful is entrepreneurial gives By him his a quarter's consumers diversifying offer streamline new they under been access perfect differentiated build success, partnership to Since organization. building product opportunities have the quote Officer broaden our you a insurance, development. and critical our We exclusive an In growth top-line distribution. Dan in he we initiative minute With quarter. the and detailed at to to most developing and largely vastly work in need fully Root to powers customers superior opens This experience. embedding hard made

are XX on in iteration detail and providing first the months forward ahead. testing in currently signs look we positive states. are additional We Early results to the

by a ease-of-use larger independent to to Root investments of demographic channel, powered We bring speed made the consumers. giving the agency technology have our to and access

We takes to date. compared to fraction a increases other We're positive for time of currently have this required five largely a product our This developed platforms. in states agency feedback the quote-and-buying testing carriers’ partners. with process productivity that

approach acquisition prudent reducing the million and with customer and profitable, quarter ourselves sales our in move to top-line we This deliver additional be capital, $XX the will operating we particularly a %. loss by environment of This in can investing improvement reduced inflationary customers current a customer to in year. spend diversification values, our use enable our significantly has provide further to spend While compared marketing We acquisition strong, distribution which the higher second costs, dialed us of find channels, believe our given attract lower have of greatly seen marketing levers diversified costs, XX performance back in. growth. loss to this the is lifetime channel

We improved our models. pricing and have substantially underwriting

and national representing overall roughly in active McModel We model XX segmentation, continued and currently quotes users. the UBI addressable our model. telematics this X.X, the to is able X.X quote, Since of an XX our of states, our been This does to precise XX improves out have of telematics rollout additional enables with data. we model, a less more XX market. % UBI of roll extend our % of greatest pricing latest and X.X, model,

dataset improve segmentation, the Root's customer. coverages, modeled a predict to better value the McModel ruling of and We are of out also in lifetime which expand process X.X, leverages growing

flywheel. momentum stated dataset, we previously, I’ve our accelerate As growing by can the of the

cost algorithms and bring we of for a down allows the drivers, which improve, pricing to good business. retain of our As mix more attract profitable us insurance

to our by the driven efficiencies. level model improvements addition on tightening refining and management segmentation also underwriting unlock and endorsements leaning contracts to state In we're by enhancements, state group our

I'll thoughtfully, We demonstrate to quarters this will growth still we process your impact see the to to these toward balancing team continue do, of support profitability. we've know We line. I'm actions our positively and deploying of the the our have improvements need over what in and an do come. taken investors. results find With customers, of Dan. our work to thankful drive will ways bottom to to This and we to capital the call profitability. we continued for ongoing quarter trust and turn that, but members, is The awareness and

Dan Rosenthal

Alex. Thanks,

third environment. the and of a for results marketing our Our quarter decrease spend from the in reflected XXXX loss continued pressure

GAAP find contained will we letter a shareholder evening, our You the highlights. yesterday the but we results in wanted full key published financial give few of to

XX we year-over-year $XXX written On million. premium gross to grew the top line, %

premium increased year-over-year XX Our gross million. earned to $XXX %

surge was total of out premium effect performance states tail earned dollars performance driven from previously to gross premiums. by cash XX as % especially from burn, cost XX and top performance the inflationary declined current expense marketing The Overall, the we earned environment. seasoned marketing reduce and action Our increased face to for sales line's committed. % took of in the marketing in the quarter, the

more of in half our fourth XXXX, against third as to year-over-year active reflect a the quarter QX distribution operating loss. and was XXXX cost-efficient low take customer increase otherwise acquisition expect gross first investments, reposition and declines year-over-year environment year. to costs continue pursue We period profitability, reduce ratio the gross when written steps channels, to compared and premium loss for marketing XX% loss to XX-point we our last Shifting the quarter, accident with

was than faster million coming loss the with in norms the XX driven frequency Direct our and recorded rating direct covered improvement has loss us by Operating The More related compared was planned was decline months. and taken more away and and from points $XX improvement respond levels second cost the in X with A quarter loss rate increase ratio as $XX QX driven partially miles-driven demonstrating X-point book. the industry offset XXXX, to third million by increases prepandemic of environment. when inflationary primarily the $XXX technology, above contribution improved above. data margin primarily The the spend. pressures in was marketing performance by the a architecture aforementioned during in million. points the contribution which current severity, as quarter. ratio performance stripping a remained of allowed importantly, is year-over-year in our pandemic, costs impact we the direct increased for loss Leveraging driven X loss reduction and quarter engine I by of when

our close, term we quarter loan and Following both loan B. repaid A term

We larger maturity a facility our funds signed Management, term term a sheet loan its in behalf place accounts with exclusive structure. than have of Inc. and Financial on to BlackRock management an put with longer under previous

negotiation in the of and to expect subject documentation. the in with and work We the and good terms close final documentation definitive terms facility contained faith conditions before year-end to to BlackRock

remain Turning laid to quarter. path on we outlook, out last the we our

role us to year future. income. is laying With favorable 's of I deploying and the and and the Frank, my actions term. reined work taken given original guidance growth the like opportunities profitable appreciate customer centric we a doing the products, in invest of continue further in view opportunities Chief to customer to acquisition side Operating our questions. drivers take for In the before actively line I inflationary am us These and $XXX the cost grow echo I demonstrate actions over midpoint the handful support. aligning million. is It to also look management business that on securing thoughtfulness now forward we customer effort to costs business. these would million a about and loss are experience, Officer, something is our The operating and a full-year the giving our around focus improve a your as to create of ongoing. capital. our Alex have that critical our drive step to flexibility Revenue profitable Matt market and to expect excited have I'm our We're an continued Chief seriously bottom statement - to our new of with key to have $XXX Alex, around very that are more in forward work your tasked close We we optimistic environment growth. the We foundation of around necessary of long excited of

Operator

Instructions]. Thank [Operator you.

question first Michael with Phillips Morgan Our comes from Stanley.

Your open. line is

Michael Phillips

in loss severity last auto trend the be overall in change like I looks any driving environment It seen out maybe you from and the numbers true, your just what's if thoughts Have morning. there. am Good wondering can that bit. thanks. Hey, quarter? that's a

Frank Palmer

Frank. is This Sure.

was question there. loss I'd a that the on Your factors we're say of trends. number seeing

frequency. number of is a that translates industry First, higher seen different driven, I an thing. industry, reports we which in just so that's Root into We've believe see a thing miles the that not increased across

As we've super the seen, in but used especially is in costs, the a [Indiscernible]. used which normal overall inflation causing there's in increases cars, in across cost of which car parts, the particular increase severity, U.S.

severe one over amount losses been probably XX, Historically, the past, So, trend of turns years. increased time. the in there things a have seen turns this together dramatically but of XX most short that is I've in these very trend have two

Michael Phillips

Frank, your this think -- quarter X was last severity was wording XX. points was I quarter I guess, and

I'm seems maybe So, but that that down, reading be wrong. to

be there? So, anything there looks might it's improving that like

Frank Palmer

Yeah.

a step I saw function X. big quarter think quarter to we X from

same step seeing We quarter X. increased are seeing quarter the we're still amount X not increase from trends, but to of

that in seeing still see pressures away there it's the are we the would quarter still I But in say news. high. in inflationary but quarter We're much an are as loss not still of we X, still So, trends. are as inflation. did acceleration -- seeing X We

Michael Phillips

Thank you. Okay.

this prior your up calls, of your understand affect ratio. would going of -- the couple but half your take this did to how talked of I You in that one around a year, % think had delay back reinsurance was %. XX quarter. don't treaties, guided was back still XX last about at I that. they it that's I thought was you to of down It to wording seeded

XQ So, and expect think we or it going is just in going can be stay and way until XQ on what then to going something else to that this about trying down there and it was why how forward? to was

Dan Rosenthal

Yeah. Thanks Mike. morning. This is Dan and good

Michael Phillips

Good morning.

Dan Rosenthal

right. You're

that roughly Our function %, just remained the we where that's XX in take of We're, follows way the third-quarter this a months multi-year new additional X-X year a a are new business that we've as executed depends treaties [session] treaties really there of level work. cohort and (ph) function then refresher, years, base the and into at levels first XX business really of our on business. flat upon treaties reinsurance the of and new X-X cohort just treaty two and

staying given in the to And roughly marketing so the did that levels spend, quarter, that the of in that the the fourth the new third expect flat on we've fact about session the business continue pullback level lower lead I'd talked to quarter.

point. we our a put see in treaty, place is this oversubscribed which rates will session higher at XX-X You little as bit

terms of levels stand we forward. going where that's So session in

Michael Phillips

XQ one saw When from assume maybe now, and direct I spike reductions further or you what acquisition there guess, to in was costs, in the in environment to that relative about mean you the more occurred for mean current talk XQ? from, reduction I guess in your channel prior we'll do Dan. Okay, you happening further then here what you I see. and customer Thanks.

Dan Rosenthal

reductions Yeah. terms sales We effectively in of on basis. quarter-over-quarter spend marketing and further mean a

marketing focused that note sales what the efficient you'll on the marketing pulled on QX we We third we So, really by about and in back most quarter, the side, call. marketing the performance channels. on XX% said utilizing talked

was and in had talking you committed the some some that quarter that we think to August started. dollars of as I quarter third that already the early were in were we level third

And that back further quarter. even to so we're being now, able effectively the enter we pull fourth as

Michael Phillips

hat And I and that Dan, Chiefs Thanks wearing very Okay. you're good you today. much. with thank triple luck your

Dan Rosenthal

Mike. Thanks,

Operator

you. Thank

Our with JMP next question comes from Matt Securities. Carletti

open. is line Your

Matt Carletti

morning. Hey, thanks. Good

Alex Timm

Good morning.

Matt Carletti

it as I little seen was peel hoping you also question churn? think could onion offer impact test-drive you and X.X well of the to in bit. and enables back implications might quote a I data. that the the past about around in you had for letter, with that's the talked have less on how, a terms have UBI as What First you that in the And periods

Matt Bonakdarpour

how our is Matt before Bonakdarpour. were data much for model, defined can released when we This the Hi. eligibility Thanks to is price question. in the Historically, which we scoring need produce way we telematics we conservative first our we rules, score with.

less data, we've test do that and As dig in different eligible question models to to degrades we've a able sooner allowed and data conversion UBI quote models becoming if collected require we level. see more does as drive less. predictive deep seeing if are more pushing sooner. can telematics People inspired test come. to in more and better continue a folks, that test drive; telematics-inspired into to the We're issue really that Users that X.X been the are power. much we'll translate into that work getting down with us on period much result, to

Matt Carletti

flow. And lines, then those just process along could great. you hoping Okay,

How comes and drive, or do works. work Somebody think does to how the about differently? test gets app about I a adjusted does how to they is channel then or differently that your Carvana that over than to that a the agent, process? knowing time? have agent quote work comes I history Just an independent downloading a do somebody think get of growing, we direct-to-consumer that When test-drive do the after they app a might who have think that

Alex Timm

flows where question. thank Right with Right we the new still channel, you and agency different introduce can it's now in product are continuing and Alex for we very telematics. and we to now, Yeah. experiment are is what that independent this

very telematics the where a us model, we it more platform also -- and before month and for direct allows over both which have to policy we telematics beneficial collect see as have customer. quote, data our upfront us be telematics data flexible We or that quote a period traditional of to after our X incorporate most even in

the still right introducing instant purchase. channel, in about the vehicle we're And rate. is actually with the that that. That Carvana very In quote where now agency channel exploring telematics basically are so an independent we're we excited

connected do And collecting really we vehicle. but plans are insurance just product so incorporate to get data it flow, And allows to telematics to have now, in future through that consumer not a right that we telematics iterations.

Matt Carletti

Great. the Thank color luck. you much for and best very the

Alex Timm

Thank you.

Operator

Our next question with comes Siegler from Cantor Fitzgerald. Josh

Your open. line is

Josh Siegler

allowed or for For on responsible taking for or capabilities Hi, in that the identifying by miles, to telematic your morning more higher-speed you and question. better find trends are array the platform? my wide weather your and do impacting of these macro drivers a market? good drivers segmentation increased and thanks example, severity Have you frequency drivers

Frank Palmer

Frank. is Great This Sure. question.

I and first are into the think greater happening. that trends insight granularity greater gives it us

miles before rate we frequencies up, of to up could started we up. So the and even to actions driven anticipation frequency go that in see going could going start prepare was

really understand explain So going us what granular great help we to was data and have on.

the going see that a As like, was have started is is onetime thing, we that frequency patterns to driving been, it been other actually thing? could tell they've in We causing paused, carriers increases this frequency. were this a up, may catastrophe

so could industry. the respond much than And we faster

The granular that a roads. We customer maybe much our faster. although to not what's speeding think, trends with course been level, actual the us on of customers at the insight since So on I has there's score, would big less respond time. to allowed regular granular of more our score benefit, extent as because in going it that into capture the rate

Josh Siegler

road. this down then there. [Indiscernible] Got it. continuing A on color the And just

the these in the still. took understand I or it's environment? mentioned nature to you loss has Albeit increases larger stage perhaps reacted step-ups to early XQ. reflect incremental XX And during them? how You market rate Were rate increases

Frank Palmer

Sure. some QX. with start [Indiscernible] we late early I'd great also increases even had in or

we in intend around So that to the then telematic X. followed X. rate up increases take in in quarter still the the quarter bunch in with quarter more X, driving frequency increase that started and and We based on X, quarter had and actually data and quarter more X

new greater of Some helping which out rolling base we're we as well rate. rate give we also more increases also think as as X, us capture our power mentioned but are us segmentation will them McModel

Josh Siegler

Thank you it. Got very much.

Operator

with Greenspan Wells from question a have Elyse Fargo. We

Your line is open.

Elyse Greenspan

getting to, as guidance? My first the guidance morning. your you're you than Good across to decline we across thanks. that a QX policy saw expect level in gross us given to you quarter. as you Hi, levels alluded increases in your just for significant expect as expecting in that and expected fourth decline in you're count rate still good you sense just premiums premiums decline a guys the the within provided sequentially I'm -- back But you question getting growth give goes book. a given the guys well third book of assuming of count of embedded in the expect can you're you good you your PIP quarter the

Dan Rosenthal

Yeah.

-- look, good morning Elyse, for question. think I and you the thank

retention. follow call. policy the that premiums the both with the next think we not half We're wanted provide consistent the you is loosely the guiding taken of on to what of count. and to to specific it the I QX actions levels why the for model color we've way And quarter about fourth will that's Given we it year and marketing, and shared think should sales on continue first any

environment. level, impact reduce to in But not the guidance I can an with there We're just that we well that sales marketing we're specific respect expect the doing think and PIF. continue spend contest be any on of providing macro will what as to renewals. you articulated extremely Frank

Elyse Greenspan

I to guys working spend return pursue when kind growth? does marketing getting through about you think rain marketing and the the and assumed the like severity to you're and consider guess marketing issues in spend, guys greater beyond you be of looking half issues to we the as that that will loss through persist the continue to next right Then frequency of year first changing increasing Impact issues to

Alex Timm

that. is This Alex. for Thanks

that think really that I the results we're really our about when and drive growth. really sources already continue seeing differentiated drivers we're product. that sure we they demand. what believe making long-term marketing to spend think can moment and And so Company, in more over is are going we're consumers and meeting excited strong develop doing our we continue to product capital, And we of and embedded to the to develop is access customers given really preserving in that particularly really environment that of where we now in our growth we're we long-term that that are diversified are the inflationary

may I our want over can when talk timing, for terms as we In get inflationary see levels correction that to Frank. of will to to see turn the a it the pricing He we about environment.

Frank Palmer

to today, we as think about your in. business rates time changes, think when to about X growth, of increase, but earn And Sure. you rate Impact the those takes you rate for raise there's a full when it has your returning parts renewals that new

As might what expect so turn might or year rate in our be target we on take actions, new total the faster back our ratio what we pipe a to year we to expect ability loss these fee, rates period. actually return faster renewable to raise calendar and business marketing than to profitability see calendar than we

at pretty state-by-state and with, that look have models segment data-science come take do level marketing advanced As a that we a customer customer the profitability. some up group by has

marketing that first able starting likely on so states I segments grow various be again. to start either And new of to in entire on business turn we'll and think quarter, it's

Elyse Greenspan

you. That's helpful. Thank

Operator

Citi. Okay, Jones our from next comes Nick question with

open. is line Your

Nick Jones

there's cars. I on to broader my is auto and car and guess actually that people X. heard taking -- pricing I high delay environment, how for we purchases are new used for challenge the questions. guess due to we've thanks X. Great, this still trying chip

and auto go of question have into the is second a think a about changes? that potentially So terms to I insurance year ahead, next -- in people heading follow-up. And triggering headwind

Alex Timm

going into year. that headwind high. We particularly very don't as demand for see think still right now actually is next We cars a

chain Although levels. well. we seeing some there anything, historic that If demand being and than of also of amounts material pretty related, more are excited supply we're are we chip the related inflationary seeing as are a interest there pressures is that it

Nick Jones

then it's Great. rate partnership, any on is Carvana of days, I know early early still what [Indiscernible]. that And is the Root but there seeing attach on kind indication on

Dan Rosenthal

Thanks, bit Nick. This Dan. And a is on this. touched Alex little

live members closed this the excited shown in Josh Andy a October. more (ph), in We customer fact, the forward I consumer Carvana no the Columbus the retailer and in Johnston Brown, the for And technology about already first relationship, auto which provide Nelson, opportune And like commitment Cole of auto week. Carvana. teams on to partner, they are success there's have been on commend had and - moment their the more And fact no Root, their just has really and purchased in their enthusiasm team investment and exclusive more Rachel first dozen of very really we centric the than hard Lesko, some moment we no partnership that insurance really vehicle. to to us the than Their and states. people more there's connect all color, with by iteration the and at XX testing work better all than

our been have and expectations So really we back in exceeded. about were excited partnership August, the

into fair but start. levels get timing, talk we're consumers. and to you the XXXX. at going about yet, to to on time specific want off We'll you to tell experience and time. price I don't a deliver a to it's right Nick, come Now, attach would seamless growth in I back milestones, We're great to a quite

Nick Jones

questions. the taking for Thanks Great.

Operator

Thank you.

question comes next Benguigui from Tracy with Barclays. Our

Your line open. is

Tracy Benguigui

question, morning. first Thank a Good you. question. more My of this is philosophical

even % I You your loss Since may trends of of renewed I'm target. last quarters wondering % XX state. so set revisiting were two ratio benign [Indiscernible] in if well to you to to cost long-term your XX % north be as target more XX pandemic, that the % within noticed that when range loss the business XX seasoned your

Frank Palmer

pricing to a is know want price I to has don't profitability Great This Frank. philosophy lifetime of We customers. that changed question. on cohort still a the lot.

So cohort new new on. long-term expenses in, as upon we to like ratio business a based coming would we of target loss and so business still XX think about that have anticipated

currently. what Now, the have that -- we balanced book flows that by in is somewhat

And so and ratio we that given loss bring want renewals, do new both current down to the for environment.

Tracy Benguigui

a on efficiency. I also have marketing question your

You work I'm so, independent is agency cost mix? channel with maybe the that and in is And meaningful your you agency distribution? the for in discussed lower idea how your could least do at short-term think source if revenue be if wondering this

Dan Rosenthal

Thanks, Tracy.

get is our distribution CAC the had I I the by channels. quarters think levels -- think into diversifying we're not channels, us key going to several for and specific last discussion we over the

too the channels. were performance we us, in so And marketing concentrated for obviously,

of following QX call. had half that this conversation year, first The the we the that's

on insurance with executing product. are embedded Carvana that We on the

agent on are the on product. that we We with exploring independent executing are what

focused come back come obviously but those testing and also and with on we'll and which the investments, lifetime the of focused across on specifically as we're each to CAC, value further. of we customers through And that on diversification, So on on execute develops iterating, testing capital has those do focused the talk channels. that channels return

Frank Palmer

of the UBI concerned not think there There it strength still segments, also that that a UBI. about by are generally is is in the in are our agency to with agency they're agency -- are channel, that Frank. independent it channel. the of there I developed we getting add lot groups And in into a in also independent consumer as do plays new an expansion carriers both lot as well there direct cherry carriers. being picked UBI. This would not have plays

we ability agency to both being And compared see the good as as rate and some channel, our a carriers, of their under some deliver able telematics. to at drivers, or them so for minute a write are in we lower in with customer do that independent well demand technology minutes other X XX to for

there think we good pricing abilities that competitive there's So too.

Tracy Benguigui

reached actually heard some waters would thought like that to that that be interesting guess, and is they're consistency you're, And done cause one the we've I their with. of customers. some work testing the agents It out looking for for I

[Indiscernible] that does could how in limit be you pricing So agile

Alex Timm

One of earlier, now think an bit sure works independent with for is I we're and telematics we make right things program little to referenced the agents, a the this independent that actually agent. doing

at may We direct look will it pricing repricing the may we mid-term. be different So -- than be renewal. telematics where data now model using

a And allows developed agent, iterate as agent's our both really works that that for consumers experience does we product product using for customer. where product works to an think telematics. have on that's well and we're to well as develop that starting also that consumer a for to And work that opt-in channel. well We that really really

Tracy Benguigui

taking role. you your new on Thank context. helpful Very for Dan questions, my and congrats

Dan Rosenthal

Thanks Tracy.

Operator

next comes from question Evercore Motemaden David Our ISI. with

Your line is open.

David Motemaden

another a Good on I just Hi. question had morning. the outlook.

of understand And in quarter, to half the the I so fourth then down expected first written the 'XX. in gross be premiums and are

right. to sure I wanted thinking this So I'm just make about

quarter I again? start of sort gross $XXX can guys the had 'XX, quarter premiums written third when strong gross a million think -- obviously think You that you that this written, you grow we guys when The about timing guess third of is year. premiums to is

Dan Rosenthal

we the Thanks, on of to color David, earlier Dan. touched through first I the quarter with this a little bit of are half wanted this in for is We Yeah, the year where XXXX. the question. lease. fourth provide on This

the and given going call have line-of-sight get we and we've and I'd full that rather come have the to our timing, following to and today the to we of Carvana But shared back for sales yet. thoughts Given what the the those QX and quite we're like, on both market year lot the about about development QX our the a specifics timing for quarters product talk next XXXX. specific on not year into marketing quarter-by-quarter

of further that are as we we'll to on Carvana the develops in channels the on, back come focused you, we execution. now As Alex right develop but testing touched talk diversification and just

of focused this our really focus the now. of impacts come our about a Frank differentiated back in talk about on it cost environment. and -play display call, you and to a how has February focused technology on We We'll talking get our That's ability loss you to are to internally and what XXXX. ahead we call right lot is ', 'one on what play been

David Motemaden

of Okay. rationalized necessarily is And I to the quarter-by-quarter, maybe But trend helpful. just going if on ratio frame marketing also thoughts by like just wondering somewhat It in of over sounds Great. just that then spend. you over that expect sales well, thoughts was loss on year. driven be on the the that you and but question this not I is could guess That's to how terms time an 'XX operating outlook really as touch next loss.

Dan Rosenthal

been focused of guidance. side over the Thanks, then operating I'll and we loss execution highlighted And execution. that disciplined dip a This this start And expect of turn we're that that continue loss close year operating strategy quarter. and loss and our Again, think XXXX I the and function quarter favorable operating David. improvement performance in XXXX we midpoint full-year continue say is that as during on it expecting we On to in that we to marketing the the it's meaningful fair the we've with maybe spend versus the of deliver report is Frank Dan. levels the with overall, that on in to that original loss we're to a ratio. the undertaking pleased to

it I next turn you trends the speak loss year. will to to will As over see for ratio, to Frank

Frank Palmer

Sure.

we the loss mentioned, have ratio. to number improve of Alex a opportunities As

we're early rate contracts. underwriting So got and improving our coming at new we've with looking make in, started increases, our our model we

timing improvement trends takes so trying loss in but them to that we time to XXXX, less we're clear. on expect ratio the in we the the as And meaningful in, it actions, macroeconomic put earn in understand are. these probably what still Certainly is for

quarter As there's to further X, been a mentioned earlier, still only it's we've but X got actually that trends. over not a quarter those accelerating see few months little indication in

exactly wait develop. understand how how much So to ratio we'll as have improvement see we'll see these and loss we trends

David Motemaden

in. in success the of to early some you some Thanks Do that. out Carvana will rolled on just sneak that basis? about on more have just broader Good be hear sense Great. one maybe a testing the a guess, of you're in when partnership. And I states XX the can for I for,

Alex Timm

by can and meeting and and this the We to that in the accelerate future, think is purchased work continue about as consumer continue mature to excited really product a insurance do and We be product we and excited as it's develop this. a clearly experience to we'll experience. We continuing really We're think more those going the get that hard product, are superior out roll they how seamless we're more it should and in becomes we're to continue we learnings. where really consumers focus. to absolutely

David Motemaden

you. Thank Great.

Operator

Thank you.

next Our Mark from Hughes Truist. with comes question

Your line is open

Mark Hughes

Yeah. X proxy like policy place Good think % that average we Is say up your the should for quarter. terms what premium the of per hikes? you're QX in morning. a What Looks in good Thanks. in was about about rate QX? putting

Frank Palmer

right? the got taking, to So new we underwriting. got have and back actions that model do we've improved we've rate segmentations, the we're Go increases,

think of loss just about kind improvement to come flat I As from the rate is part of increases. that, going ratio

we through expect that expect different flat our given not picking XX up maybe our totally first McModel McModel also new states necessarily We quarter, be XX the to -- to up that, version.

premiums customer And will greatly by increase so the actual in vary segment.

the to a idea got this target don't much know we've like how loss is we'll change, to of get much kind meaningful got ratio. improvements the I in premium think an as average that we as so going with And as -- is

Mark Hughes

yes, agent you an then think ahead. within Okay. And -- go when

Alex Timm

Please continue.

Mark Hughes

quickly channel, When Okay. you that that right. associations up of that you. your about or there independent how of think All out? agency can maybe the Are market? bigger roll speed to groups you Thank agency chunks you target penetration can

Dan Rosenthal

is Dan appreciate This I question. and the Thanks.

the the towards I to to on This profitability. path focused of we now testing channel is This that driving select and are testing. is the answer with is This focused agents we about we're continue as about testing iterating again. diversification. think about right group better that We'll a that executing on right to the Absolutely, there and on market. timing. we're back agency as broader leverage going opportunities Frank touched and product around and on growth But and our right now. talk take specifics then now about we with to believe it testing, and focus iterating, come are

Mark Hughes

the that And then bring? think that what signing benefits with talk for sheet repayment the the BlackRock, more about will if of one I rationale loans, you term and the can the you might,

Dan Rosenthal

Yeah.

to parts for us two think I there's that.

really more come is the the talked excited really partnership will we we'll place about with a letter deal facility BlackRock. have and We we're first us, executed it's think provide to back work we as that the and in a fully The about that for in market specifics. well

it's about our that's partnership prudent of maturity BlackRock. or account management -- just capital facilities entity overall. an what took as we of as in sheet thinking and And our of us, prior balance thoughtful timing into For through and like well maturity the terms with level the

Mark Hughes

you. Thank

Operator

Our next question Suisse. comes from Andrew with Credit Kligerman

open. is line Your

Andrew Kligerman

you prior down to marketing million? about range into off third earlier on $XX some Q-over-Q, questions on year, -- of for get in the you're you to about you the from quarter sales thinking the and the to range Is the the down. fourth immediate area. costs say, in the the million just sharp million follow-up that to quarter that do last year, dialing term? talked drop that of that $XX Do of $XXX it dialing and million marketing $XX To sales After

Dan Rosenthal

for would Thanks how I that s on that is the the I question, really touch Impact to seasonality think Andrew, this. focus some of way Yeah. on

quarter quarter consumers other is those approaching quarter when, holidays. both And just the most focused are it's the been focus car a quarter then frankly, as talked about fourth channels little the in focus holidays. we have their and the on less insurance approaching So more things traditionally expensive from like on we've marketing a that bit a retail purchases

So quarter of quarters. that for efficient approach more we than back channels us, channels. seasonally, in that performance on differently we is in the the then concentrated those in and fact are highlighted this pulling fourth most year focusing prior marketing by the some would already And marketing

fourth dollars in come to taking down right the expect level focused the we're can materially the quarter and in you really and investing from there. channels So our it on

Andrew Kligerman

around So that? no numbers

Dan Rosenthal

Sorry, no numbers.

Andrew Kligerman

as a you're running that maybe where to think I independent Okay. is you situation add be And the spend. not go going Is independent you're firm, said what exactly the than get it other about All X, again, a into it and it and pretty or the less on Is wholesaler upcoming get potential last and and could can to you brokerage digital? then going want focus iterating a sense and need your the magnitude the right. regard testing for channel, just you of to quickly? you looking at up the but channel, with agency, materially of sharply large question, agency also and than less on expensive you to numbers the here, channels?

Alex Timm

This Alex. is

direct more. channel, I agency relative paying the a the In Any on of channel. what we a through channels, different. or a will see based be just fee get cost you'd It's will channel necessarily comes to not be the the commission. to Instead flat terms less is independent direct think we commission see we premium of in customer that a as the it's paying

very And flow so do customer we get because all acquisition pay of not that cash to that pay over costs efficient like rather that. of customer. you but really it's life We the you upfront think the

got all the Today, agency channel We third also of persist. seen customer we've go is know really it's there a roughly that that independent decade ago, to A very and independent all a that third segments channels volume. of had retaining high volume. still agency

we believe that that the to our think both to for productivity that then, acquisition in will cash valuable us really well, flow And And quote have a favorable customers those a terms favorable and using is so to platform retention, deliver as agents. costs. profile that minute of it customer economics we under allows again, of in unit

Andrew Kligerman

Helpful. Thank you.

Operator

Thank you.

comes Our Mike with Research. next question Wolfe Zaremski from

Your open. line is

Charlie

quarter? Is could level? vary be share views across that consistent seeing, relationship provide months you states miles or Any and the driven all color Charlie it there has vary? is at frequency if the levels versus this on you some Hey, Did the across you're on Wondering can it -pandemic does changed themes or helpful. it Good accident pre or for Mike. morning. would

Matt Bonakdarpour

time Sure. thanks uptake question. see going Since about we then, frequency. day year, this We about trend April. consistent accident day it's Talking for of been until -- looked frequency is Talking pretty -- into in did now. an at this Matt, month-over-month the a

from from mileage seen have AM say, pre in the -pandemic in are as We vehicle levels. to frequency accurate the out both and with XX:XX X:XX mornings of increased frequency pandemic, These AM. line an weekday we come and

terms changes, frequency Root because of but mix-shifted into model other as pricing decrease model accident underwriting, frequency That's, telematics we have In seen our within customers. in pricing and underwriting and has of population not changes. only lower-frequency

on we're seeing the our a we're year but going uptick this overall beyond. frequency average seeing lower and book, within into So April

Charlie

rates raising you your you And talked my you're earlier helpful. Georgia for seasoned can can didn't slow Is a the you state now? like It there? talk growth. then looks in -- Georgia, That's guys about year question, Thanks. what it second about seeing in

Frank Palmer

a did increase there. have we Georgia, rate In

It's a turned Georgia rolling on. market are so We we in fully new out haven't in fully yet to do program. expect the back fourth We not quarter.

Charlie

Okay. Thank you.

Operator

Thank you.

comes question Christopher from KBW. next Our Martin with

open. is line Your

Christopher Martin

in it's quarter. questions are in immediate follow-up little bit the different close? on you X model, the fees be done a which around going we a But using that that traditional to back really pricing And growth be them if in out the going first bringing to Yeah. about fees. side. score [Indiscernible] to telematics Carvana the working to feel [Indiscernible] or Is built from Carvana not kind is the said with [Indiscernible] of the I Congrats credit [Indiscernible] pricing. and the

Alex Timm

traditional future a Carvana, We model differentiation think actually models. big not in it's pricing and is that a there just underwriting a the and for

vehicle. when very we closer get an a And Carvana closer technology us opportunity that in and that that are consumers, the actually vehicle that's to actually to opportunity possession to they're to things of gives vehicles interesting of the exploring of are One is that sold these inside the first.

unique more science continue And and so continue and development, product themselves. to to also from phones, more and fully we really we sources as to partnership bring do consumers, in data data the mobile capabilities then from both vehicles and expand this more expect

Christopher Martin

have [Indiscernible] door sense. That chatter, all XX with Great. this three-year-old makes may the on -- just minutes the the agent But about ago. my I missed kicking And Okay. independent direct anything your if given that will right from or as placed trigger an be core what would business? place, the to then in Carvana, fully side, independent agent a be you're

Alex Timm

would That business. be fully direct

Christopher Martin

Okay. Thank you.

Operator

Thank you. with a And question have Autonomous Research. we Tunis Ryan from

open. is line Your

Ryan Tunis

Thanks.

agency some Best up or like of rating strength Following for understanding been writing questions, has channel S&P. financial independent stakes in that the my A is on always the an minus AM from table

Best go if strength AM get You can an don't your away who us S&P, one? from maybe about out to and And have minus or trying get Could with now? is you if Demotech giving you A have you rating Company. coastal thought remind financial you're a you

Alex Timm

now. not are right rated We

We found have from strong actually we partners of demand have our spoken any not agency to. a that

something that's so personal demanding. are I think and primarily because consumers it really is typically also auto themselves not that

or this point. that Demotech have seen we AM Best do And with to at agents. so at be from our And not we rating partnerships not a financial have all a blocker

Ryan Tunis

a with lot doing pullback, guess you Got what just the efficient to theme follow-up you at I becoming looking you makes point our this was your did that some carriers the theoretically that maybe it. marketing you of dollar if do arguably seeing of spend, to little advertising you And of get ad X maybe cheaper up if pull a is seeing with could actually given a the want there. bit you wanted back more -- then sense. are I for -- like my color. some are But which guys performance

Matt Bonakdarpour

for the Matt Thanks questions. Bonakdarpour. This is

our that marketing targeting sophisticated lifetime providing seeing value. And marketing that budget ensure we We in a profitable not pullback, it's are are also just segmentation and in efficiency allocating improvement spend. an pullback more but to are on back segments the definitely of

efficient marketing are spend we certainly on it's a that that's more as and a And -- result. so return new seeing level a spend spend of

Ryan Tunis

Thank you. hear. to good That's

Operator

a Squali Securities. Truist question Youssef Thank And have we from with you.

Your line is open.

Youssef Squali

Great. Thank much. very you

the of on are it. but to one maybe Metromile deal we more my of Lemonade couple guys all It tied Yesterday, this. people colleague and years a Stepping asked just Mark double on in like, hand, seems few click one few between a up want to more ago, it. earlier, of companies Just a more talking questions higher follow the back, very virtues a and telematics level, -- are were and about on or companies Alex. you at the saw

a you just thought Can from traction at to importance Your any seems today campaign maybe X to just credit or the evolving describe maybe it, the with ago there. X feel just little glance. quote, how and a maybe years pricing even update your you instant its it second, drop Thanks. bit give And how years away about versus least Carvana, ago? you the move us it of around an on score telematics at is and industry and con first

Alex Timm

forefront across of we telematics telematics more data, validation Absolutely. is, are X. seen Thank that that and at and for being points you the also reasons. and I few that the a seeing comfortable we've several a industry. said, as sharing more is for know wave That of the think that know we we that consumers become is becoming of question. future more What we're

personal method is market, disrupt focused disrupting new on auto committed data and entirely which a the are auto market. We billion to and using U.S. $XXX science

focused last all in evolution it. the technology. the all building entirely the really is We Carvana, just seen investments, and we've years dedicated resources, best we believe have X technology have our space, next of actually to for and our the of The of and that

we is stops. we the insurance that's piece sources. we is We embed we don't not And think that evolution the stops a wave and than of any the peers out states that allows but think demonstrated to technology is believe to technology We our now based we've mobile forefront. of develop insurtech the pivotal wave are are of that and We multiple believe have in size believe be data science smartphone. We we're puzzle, there. that at excited future and into we smartphone telematics where really even we it as of behavioral do so we this them. and are data leading the at highly the of really and think us unique more differentiated differentiated, the on the ingest most that rich more other actually also vehicles data now to of that believe that to And and

we In look at we those score, the of consumers shake, lots car terms think do aren't consumers a particularly that discriminatory that and dropping that of most. that go we getting insurance need know today. We dropping the pricing credit fair there's into when that industry believe it also score factors

those considering -- has we Commissioners and laws started incumbent exist into that drop now here incredibly discrimination and us major movement now level X to lead. to years Insurance launch for have we decided progress and model and out to not things we're that our score, credit And campaign handle laws the we're are again, how And even to also followed with And did so the excited industry. a challenge a happy Association really in that car this forefront to it's of are actually have we've National they really where ago. insurance. see And the we in the following were

really it we And at are know is that forefront. And is so the we moving. the industry changing,

Youssef Squali

Good Thanks. right. color. All

Operator

for conference questions. call. the participating. all today's concludes That's This time have for we Thank you

everyone. disconnect day. Have may now You great

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