Root (ROOT) 10 Nov 222022 Q3 Earnings call transcript

Company Profile

Participants

Jodi Baker	Vice President and Corporate Secretary
Alex Timm	Chief Executive Officer
Rob Bateman	Chief Financial Officer
Dan Rosenthal	Chief Operating Officer
Matt Bonakdarpour	Chief Technology Officer
Frank Palmer	Chief Insurance Officer
Michael Phillips	Morgan Stanley
Elyse Greenspan	Wells Fargo
Yaron Kinar	Jefferies
Matt Carletti	JMP
Tracy Benguigui	Barclays
Francois Maisonrouge	Evercore
Mark Hughes	Truist
Brian Meredith	UBS
Andrew Kligerman	Credit Suisse
Tommy McJoynt	KBW

Call transcript

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Operator

Good day, and welcome to the Root Incorporated Third Quarter 2022 Earnings Conference Call. Please note, today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. [Operator Instructions] Thank you. would Vice turn President I to conference time, Baker, Jodi and this like the to over At Corporate Secretary. Ms. begin may you your Baker, conference.

Jodi Baker

is Chief results. Participating thank us today's Financial call discuss Good Officer. for Timm, on and third hosting Co-Founder Rob Alex Root Chief and its earnings and to Officer; this XXXX morning, quarter are call Executive you today. joining Bateman,

Matt be Bonakdarpour, portion issued of its Technology Last and the joined will by question-and-answer presenters Revenue Officer. Dan results. the financial Frank During Operating a and our Officer; Chief Officer Insurance announcing Palmer, Chief Rosenthal, call, shareholder Chief letter Root evening,

our discussed information which XX-Q, quarter filed While this performance, XXXX with encourage financial was items Exchange and the document, read for also evening. within about reflect Commission third our more last complete call Form we will Securities to that you

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

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

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

XXXX, as that materially results the will a our differ our from actual please December for letter risk year review as you factors, our to these For see XX, A XX-K this will call, you performance. like the a the non-GAAP factors company's website discuss third I more statements of shareholder could measures quarter description Form while ended call well released discussion during Relations available of cause of detailed be Root's the our we talking Investor that Form also to replay conference remind under will on about last evening. section. XXXX XX-Q and would where some

historical which comparable our reconciliations You SEC Form evening with call Timm, those website now filed at over posted the last CEO. the Alex and I our shareholder can XX-Q on and will of Root's to measures find are GAAP our the letter in ir.joinroot.com. measures released Co-Founder turn to nearest

Alex Timm

Root. want to back I Jodi. up everyone today's remind you, and to Thank built a call take of why minute we

ever the to us on During environments inflationary the has to have continued worst technology our last year, hit how one recognize auto comment the insurance we of allowed to industry.

that ratio effectively industry. above how in XX We improved continuing communicated see QX, to the drive continually This else have go We direction. our the loss loss had while business, of other technology In in loss anyone year-over-year, beyond the margins most what exactly you their tripled improvement is improvements. industry allows points ratio this we of are to ratio us saw. loss our the and others in and ratio

we underwrite software Step scale, ability differentiated to analytics to but believe improving best customers. is improvement We and ability have predictive to is of risk bedrock the done what using profitably very segment it and is just while access classify building risk, That step our the in technology X. is our this risk development. X

channel. believe more, by channel Even platform inflationary demonstrated as we differentiate were our underwriting environment, invested year-to-date. during further able further this innovation growth on runaway to costs we our through extremely in attractive and this have rates, What's offers We our product conversion embedded our acquisition XXX% embedded product ratios.

very are insurance the providing very months details at focusing believe This profitable we means can at prices. beginning spend. loss a utilizing go with drive immediate ability with marketing quickly frequent profitable spear. a profitable accuracy auto leveraging writing In are shift clearly as By and of channel, drive look of we sophistication our in deep drive partnership growth the embedded our further our direct forward. and are to to second understanding tip to the massive our on of of we limited and retrain geography we only to customer that our we in an finalizing towards progressing most believe writings the and We the are models, business position the segmentation new segments return. ahead. we We We increases our to forward in are distribution in

must company thing to year, control Root been its by we XX%. operating profitability. consumption cash has crystal we To the are clear, our destiny. this, have Year-over-year, Over own one do made last the driving reduced

million As and thank the this, to rightsize like more and shareholders with us annually. make same the will Together, roughly that customers had on At time, workforce I'll XX% turn the to by now Rob Root to $XX am separate these I difficult Root. our to of part would of with to rate contributions also share run operating continue journey. to our to employees, our expenses expenses. actions and have I we yesterday. the would I all decision our non-headcount lower we grateful like detail. past. to current gratitude their for this my with been call results discuss hard in over work

Rob Bateman

Alex. Thanks,

key full shareholder I disclosed GAAP are we focus few in a evening, to the want letter published yesterday highlights. financial results on but Our

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

a segments, XX% marketing and premium line million. along gross underperforming year-over-year decline top with Our to new XXXX. reflects The stricter writings in and decreased quarter higher profitability. reduction rates the renewals this earned actions geographies up business $XXX of decrease in XX% with earned customer we making premium caused with XX% of quarter focus gross third have on to as These underwriting compared spend

loss committed are expenses ratio the reduce further losses. We to and operating lowering to

we the a performance of XX-point the a this our to quarter, items, $XX improved business, clearer of loss noncash EBITDA, a During XX%. Gross quarter, was third million, certain ratio give third loss year improvement year. XX% for excluding KPI the versus introduced XXXX. operating prior of over accident period underlying a improvement quarter the Adjusted third the was XX% view

Our filings weight implemented loss along of higher ability driven year-over-year to we total have with have rate of consistent book. XX recognize and an average renewal premium, trend representing early, to Year-to-date, of our with respond improvement. XX% a increase XX%,

and In XX have premium refine in our revised addition, fee underwriting, we contracts to filed reduce states leakage. tighten schedules

in we forward, our to continue we have we where address the ratio allow continue to the inflationary loss levels will with rate response and we long over trends our In actively this concerns. believe approach improve where generate in to to markets working we are term. combination to Going to states will take forecast and adequate target pricing, profitability capital

further have expense cash we to actions discussed, Alex burn. decrease As taken

We our to moving structure are cost by optimal further closer expenses. non-headcount both reducing and headcount

the of to The collectively by include with third million $XXX approximately roughly of these $X.X quarter capital expenditures $X end million, including $XXX quarter roughly to at annually. reduce the fourth expect restructuring run to ended actions million million. a million quarter of We fourth million cash quarter. charge the $XX rate expenses We will approximately unencumbered $XX.X compared second million of with $XX.X

has consumption dropped cash operating XX% Our year-to-date.

focused strengthening as reduce we are financial company. burn We are foundation to the enact continuing cash on measures the of to

Turning to our outlook.

premium We declines are we business. We focus the growth accretive will embedded overshadowed our anticipate expect next navigate direct our is our gross environment. as written continue the results this channel channel year taking by on challenging in we that decline as to through actions reflect as into we in

first XXXX. and adjusted loss in expect cost-cutting in operating of fourth a continued months the improve X to bottom efforts though quarter, EBITDA to than year-over-year the improvement degree begin quarter We the the our fourth as in line lesser

against priorities, are but and further efforts will shareholder create returns, recognize believe done. We are capital By positioning With Root immediate work look to reach our in in forward there's be questions. your areas to we that, making long-term produce we we focusing strategic value. progress deployment we to profitability believe our

Operator

question with first the line Morgan comes Phillips Your Michael from Instructions] of Stanley. [Operator

Michael Phillips

question. first guess I

channel as of of limited in profitable First meant question expand and with the looking your that relates you're then going you embedded primary over you marketing say it's focus years, you out because X, that for kind in do look marketing versus upon to And kind of new that writings period, our what wording the letter, there. direct direct be what's whatever X similar to time do to our mix business?

Dan Rosenthal

prove for out economics, drive thanks we go with question. the the Rosenthal. product needs unit it's we we're as technology opportunity those service think embedded Yes, This only Look, special better is experience. a a can the that experience. seeing have really and forward. And superior customer better And Dan we really

coming nice really in look percentage on can our our that that percentage letter new is embedded, the you growing that a ahead. the trend to the We focus. So see and it, from line we put writings are quarters a of in but for don't forward

and help embedded us we On will the profitable and much and technology again, of emphasis focus where really seeing XXXX our that been. to that we segments narrowed direct be are learnings our on find leverage greater continue. the continue, that's have has our But direct, areas you're profitable. channel our going to as a and in there focus forward, We immediately for

Michael Phillips

think, about have is for beams when else upcoming I embedded, your already OEMs universe think with well, the some okay, partnership guess of But I the announcement auto partnership. about what for as kind I obviously on OEMs. most the next on I think And insurance, think the I somebody. the of

educational on could should can like you specific thinking you about in like upcoming be can insurance? maybe auto announcement, what about just in with embedded along an where for give So on else help be me think I me your

Dan Rosenthal

Yes, with Carvana success absolutely. partnership. in the it's real Look, starting

progressing year-to-date And XXX% our the map the shareholder on we growth with is quarters competitive a as product lot road finalizing in letter, ahead towards exciting. So a we're partner. more mentioned next of the in

rapidly. stages coming to expect And multiple one we've announcement of in prospects months. the in various additional advancing got with of an than discussion those more have We

XXXX, ramp on we're And work business going and up embedded. our our to development so as we product going forward enter

and expand meeting points embedded our seconds. revenue companies a financial as is companies across it include product their auto to sector Our focus sector. our to interested logical will customer the more wide speed XX platforms existing actually that in There's consumers produce learning quote bindable services generate their are quite that breadth out in and bases within about at the the

with auto really Carvana. sort not of experience. compare Specifically, bindable that in consumers a that about that with within of partnerships place read the don't They not are a meeting have OEMs, They lot product are differentiated driving not you truly a XX seconds. we quote are They embedded. are with the the to

an at a technology getting going consumers our learnings helps that that the lot meet a technology appealing right. quickly It out opportunities will think channel. lot to logical And we of getting and experience, across differentiation bind with right. there the build be a places different seamless that embedded folks. with again, really starts our quality, industry-leading in starts is So to be the to sectors the product we ahead, have It quarters that a partners embedded of integrate that just

Michael Phillips

Okay. Last could. I if one,

a pricing? your You for assuming What's forward And you frequency in do bull are frequent going you what on you your declines as had then already. driving guys? neatest the

Alex Timm

start XX%. we've got net I'll around in going pricing, -- forward, with Sure. X%, trends our as assuming we higher

this We are flat seeing vehicle kind prices. year, of

months. see higher X look you most we're when we the trends severity than So like year-over-year, recent seeing in

our we business. more preferred frequency, in got do segments. shifts more the towards more have On tenured We've or mix profitable some

the have from renewal. new to also shift We

versus of in will the decrease some in year. in are All earlier we kind third mileage to a contribute And lower higher severity. then of seasonality seeing those quarter frequency,

Operator

comes line next Fargo. Your with question from Greenspan Elyse Wells of the

Elyse Greenspan

My reduction, first right embedded bringing information but relationship. new also question, right focusing you around they're a on headcount provided

gross and decline level of know that in you of growth? throughout relative next be I start guys XXXX? So year, into quarter next when should the decline the have premium do do Or -- to say a sense a returning sense is what start might but year also seen of how of will you you just you said to we've the this third

Alex Timm

Yes. growth mode Elyse, say are look first, when at I our you would embedded we in channel.

year-to-date, XXX% channel and continue We amount that is grow a opportunity to think us. there huge we And that of in those writings have to that channel. new expect we for grown

on believe that for growth highly positioned we are do our channel, so well that that's And based in differentiated we technology. and

In our terms about I'll talk expect and we premium guidance to Rob when it go turn forward, of declines our expectations. you over a in could bit

Rob Bateman

Yes.

accretive year next spend is sort have in that Bateman, and in direct partners states going think little Rob is and on the premium into we I expectation will ramp channel. very the book runs decline possibly additional into we we this direct marketing. and our as up that business is, of with as down XXXX embedded

Elyse Greenspan

then increases? a And take from of and of amount the rate rate And throughout I to continued rate your guess this of you you XXXX through good where site the book balance expect, perspective of a in into guess, you business? are increases. what increase add I year terms do

Frank Palmer

took Sure. In quarter XX three, increases. we rate

As Select mentioned and future earning earlier, XX% We around taken as earlier, year. somewhere I -- between Trend about XX this in. Trend monitoring, Select, got we've We're we've still XX% still mentioned rate XX%. got throughout that's of XX

seeing aggressively are taking trends those and of how as those of but aggressive are pan as continue trends. planning types long we out, seeing we're we to rate So those kind monitoring

Elyse Greenspan

one, guys expect out, trend the quarter. did last point in loss that ratio you to get continue? And Would you right, then did underlying better like the that

Alex Timm

Yes, that until an October. we QX we ratio is improvements our progression loss on-level continued hit we've We loss and we do that targets. seen continue, expect continued -- to ratio, below in earning our with that through rate materially expect with do

Operator

next comes Jefferies. the from Kinar of question line Yaron Your with

Yaron Kinar

back going to improvement. First question, the frequency

if elaborate as something So the of the Carvana from is you a see growth? bit? called driver part reason a change that direct trying you there figure much mix on there. I a maybe the maybe Can think as that that embedded Do frequency Or I'm improving, just loss ratio little maybe stabilize. I'm this to else? out impact there you is that risk out not our And see I is while still we improving the guess as trends asking

Frank Palmer

Yes.

trends. -- Frank. we're is When again, of increase pricing of think XX% I future to those we're I think -- trends, this loss

XX%. we're So go up to expecting losses

down we're So severity about going concerned or total. more mix, that frequency going up the

we Now business new know renewal. higher has that losses than

see even rate. down if start shift an loss the taking saw that taking we're you're maintain more, expect grow But ratio we're to go frequency up, go going up still we So if to ratio, to go you'd to rate if enough if up. loss frequency severity overall you the a

that's So look we the way at it.

mix those segments. into shifts, question, your profitable So yes, some of to are more

Some of into that shifting is Carvana.

segments is of new with lower rates. that Some seeing preferred our get segmentation We're models. more

we're mix a mix renewal those segments And as as seeing. well new so we're seeing into shift the shift that

decrease. So over we kind But three, combined of expect observed going frequency of quarter those that that's again, frequency all severity to an quarter three what not necessarily forward.

Yaron Kinar

that those you with actions then actions top think year. the on And headcount in took overnight, come the of I earlier

can from? and is bit is about it we, look units? cutting And Or this it little talk at as the to not outsiders, a where maybe that specific coming how broad-based? maybe in So Is have you're bone? reduction confidence the you do concentrated

Alex Timm

Yaron. for that question, thanks Yes,

focused now profitability. driving are we to on where So right the is company

on and is we we we headcount materially cash our throughout that that, been the given And appropriate cost fixed that's both reduced capital, that in And expenses expense increase of think and taking have have uncertain in, necessary. believe year are the that the environment and very year-to-date. action so we we given aggressive non-headcount,

ship with what our Now where the point for is in of we flows still and Carvana we the out, innovative customers. to actually of innovation XXX% were during entirely XX% I able we an product almost bone, grow that through will expenses, improvements eliminating were incredibly experience fixed and and terms to period cash that the almost believe product product cutting and

are do the we So that we not to cutting bone. believe

meaningful models. able segmentation meaningful and were improvements segmentation to improvements our continue to we in make make addition, In

actually the you to keep still are Rob, to want where on do a the going savings occurring? we forward. momentum comment So bit able exactly expense are

Rob Bateman

Sure.

about of a talking to is we're more pivot So growth. embedded

direct down. that were needed we to they reductions, marketing things you other personnel around premium and just our in that if support So our really headcount that other some areas out just marketing take that support the comes headcount then to other as at felt -- areas look And employees, we channel. were

Operator

Carletti from question the Your of line JMP. comes next Matt with

Matt Carletti

I the to guess believe the of we . that have you without you answered. one happening additional I coming we been need your question down In have is that years. is, to reach ability additional My the left that a say have raising others the in road? breakeven lot letter, question that do capital? Or the caveat capital with see for

Rob Bateman

believe, So we -- the coming have Matt, have say, we enough this to is capital would years. Rob. execute I strategy our we in

we're expenses. the policy take year, to reductions our at marketing cash the implementing going reducing $XXX expense look about rates. holder loss of minimizing even we're we're you fees, If ratio, million the taking this invest interest the to in combination advantage And of of and

to in everything That's can the own underwriting a either we destiny. and So what we our do years control really next control generate to cash. talking expense about the execute reduce we're through enough we embedded. that that do reductions or to want the here is we And we're growth through capital believe strategy. we to I like said, lot investment what even cash both, doing doing. burn with over around the at to look have is We stuff What and couple of our do own have we're destiny trajectory

The what in we've it it look what actions have macro course, forward, always to with we the we going -- But on -- the think other we strategy. thing the can we of way and the just done at in execute and the past happens taken environment. other, depends the our now we've runway

Operator

Tracy of line Benguigui with the from comes question next Your Barclays.

Tracy Benguigui

get rate you made in rates number are earning still you comment comment your clarity that achieved on in to But a adequacy I could expect letter, I your take mentioned market. actions you heard these shareholder some significant if I where of you in. you some think rate believe a have and you

much confidence book does adequacy? So that gives markets of that significant how And represent? you've achieved you what rate

Frank Palmer

Sure.

Frank. this So is

ratio, we certainly by varies about As overall the think greatly that state. loss

allowed for So almost increases rate for California example, hasn't X years.

-- and there. So writings rate not pulled we're shrank greatly We back, adequate there. our

are and in have states think, rolling expect next And We rates be states. in between those there's other then year. XX in now, we that adequate states. to rate X in, still adequate We the we rate do

focused -- those and of starting we that capitally we limited where in are we're in the about So some we think accretive talk where believe rate states be marketing, as we're of can targeting focused marketing, segments amounts particular, then, doing adequate short term. we

Alex Timm

And I'd does add, we ratio, so rates This when that loss for of account on-level the we quarter, not an accounting the future take. rate will at have third for all already even we look taken. have the we

We is seeing we the loss low an publicly are said, target our XX%. on-level And ratio XXs. long-term as in

that many to us that when business lot you So areas. taken of appropriate in a we gives confidence get book the rate look to have adequacy of at action

Tracy Benguigui

book XX what of those represent? is your premium-wise to percentage states So X

Rob Bateman

About XX%.

Tracy Benguigui

frequency And the about then improvement. to comments going the back just

expecting you're to You not continue. that said

So when you're you view come what side? up booking and on you that your or a the with frequency perspective your seeing loss picks, now reflects seeing are number not

Frank Palmer

X% XX%, to I or future frequency and mentioned, which expected what not severity to three. loss published we quarter and pricing are three right? for We're as year-over-year again, quarter the So Correct. year-over-year, and seeing necessarily on we're trends, between

of as on medical flat the costs. some on but but not liability medical we're car And seeing severity. flatter cost. been and so have litigation seeing increase prices dramatically we're much had [indiscernible] Used most or you year, increasing this in last much This the this, year, year,

frequency I severity so quarter over the three. quarter wouldn't of based prices set three the And on

rate our and setting about And expectations going upon that we're total, XX% in based rate future future forward. so need

Operator

Your the next comes Maisonrouge from line Francois of Evercore. question with

Francois Maisonrouge

quantify release, be goal press you less of you How in us? the you that would cash expecting In mentioned burn decreasing cash the XXXX? year. next for burn much Can

Rob Bateman

can I everything is Like we earlier cash. decrease we're to Rob. to call, and generate said burn in this Well, the cash doing

it this We less substantially next to was expect than year. our cash year burn be

do We could haven't than there this lower yet on look improved a And in improved year-over-year, be we our to -- we plan expect number you we EBITDA, it that, year-over-year. if published adjusted And you significantly we XX% see as loss business, cash year. to -- year. actions but expense things we're with on improvements the we're significantly we do lower fees, doing expect other the we've the the as well and we're taking, next with burn doing ratio to rate reductions be taken at things

Francois Maisonrouge

And annual expect $XX the just saves, full reach on expense $XX timing would when of to the million? million you that

Rob Bateman

headcount piece will by would of -- the I XXXX. full year the reach the of end reductions say for

rest On take will the of to non-headcount full year reduction, recognize $XX million. that the it the for

Operator

the Your Hughes comes line Truist. next from question with Mark of

Mark Hughes

your see Can terms much reinsurance, basis? a to in rely reinsurance you you on on pricing perhaps dynamics? about just of you talk How go-forward posture intend towards what

Rob Bateman

on programs. So reinsurance this we program, our of again. the market, is if number so Rob a treaties our in so have about The -- you think

So we have cat auto. a typical for treat

support is have a But primary capital single also share agreements. XOL. We quota our some occurrence

share We quota that we a Right the what in that we've year. have for total renew get the now, get. want of we to, to market, seeing turns most we're able been X part, have we the each agreements

the and seen terms pressure us. We on lot haven't pricing for a of really

down quarter shares a by our taken amount. have We pretty small

we So XX% gets however, terms over them, to pull seen of that ratio quota better, quota time. on tightening share. as quota will really for expect from our much. share XX% our went loss one a that the But we we haven't example, the do back We shares

Our some we punitive we those that include agreements. move bit from are remove our quotas that as to, shares like loss loss quota over time, a corridors

Mark Hughes

capital the but was number, that of at end didn't the unencumbered And what then I number? quarter, the get that

Rob Bateman

I script. It's -- Yes. in was the think it

Operator

UBS. of Your Meredith line Brian next question comes from with the

Brian Meredith

quick couple you. here questions of A for

loss Ann? the some you losses any Hurricane have in that losses any hurricane. in First, there cat from auto did there's quarter? Because Was know I

Rob Bateman

at exposure quarter, last once nothing. a lot cash just the essentially question, don't Ian, the Brian, go of we to of on back this it end have in was We on Florida. had XXX the is

a months ago. you about we If writing of Florida started think in it, just couple

very -- So in we've minimal exposure gotten this very, at point. our the are number claims of

Brian Meredith

then And much out And respect respect rolling that ramifications with next do there my I -- Carvana? so is to then as any press a investment to financial with make? Carvana been question, far you Carvana there guess in back just more to relationship of financial that their question recently more my something worker on there's seen at you slowdown I'm curious, lot situation. in And as to the Have event to is all that? any needs with does happen is

Dan Rosenthal

Dan. question. per an the in driving car focused an is unit, means question, team are even on higher And where We the this and product. profit No Brian, conditions for level. Thanks a Carvana areas. conditions is the on believe economic is macro focus frankly, economic insurance are the sales focus higher that right gross on impacting even

being are road we map out. proven So is building the that product

on so, rate to and it product. attach next is improve our wonderful doing there's the embedded companies from year, expect which We focus both for

sales ultimately negative conditions again, to the new far that in attach new impact on we the writings. that going writings. a to part car to sell around focused any have driving our they rate of I Carvana. not no, ability to as leading we're It's the macroeconomic and believe drive are question, financial And we have agreement foresee with place can't pretty second cars, straightforward ramifications your As as continue in with that

Brian Meredith

has in to here. slip remind the guess business? little then been And going I'm sense. you I on what's noticing want sequentially Makes renters that quickly us with declining I just for a Can that while. Pip

Alex Timm

Yes.

monoline cross-sell we renters a a just to opportunity. cost. have the product, It's acquisition look so don't ever to low-premium acquire very hard as It's recoup customer really We renters.

cross-sell direct it so a active channel. in primarily is And product is that our

as of those, force so to and the favor in decline. channel embedded PIF deprioritized, policies in have extent, the the we have their we the growing some channel, direct And seen

Dan Rosenthal

this Yes. Dan. Brian, I think -- is

laser and and play, from for improving We've a been Frank, is focus underwriting prioritization. technology a foundation. corner play, think heard seeing I you execution terms been the our We've us off. from one and it's leveraging just year. and you're in running on And more of turned paying what pricing our Alex this than

So growth the to focused on now got what driving for And chart continued and that's continue course to and embedded executing. prioritization. the focus just we driving that we're

Operator

Siegler from Cantor with Your Fitzgerald. next question Josh of comes the line

Unidentified Analyst

is on Josh. This for Keeler

So you exciting scale? hear And you're product been learned embedded easier to the Will did really and might the Carvana second a has embedded in to Carvana to close a that closing the and bring work rollout what impressive market growth and to you partnership. second lessons product add detail make second able like? to a embedded on are any around look

Dan Rosenthal

we are that is worked, what Carvana, more we types the on resources successful not positive worked an require significant has seeing a This and leverage writings level and in customization. into channel. that's the in focused that going of faster we're can for drive Dan. seamless drive that's partners have product channel we're place. have about the able we of can to One We're to integration partner leverage going Thanks focused the part what within And creating on two a of customized more we and product learnings the really the finding to types the particular see And in customized, what Yes. excited product. you're also of build And that opportunities partners. how of learnings for the be is underlying within don't order to to that two really those the we more question, Josh. other way, with customer, opportunities create volume as embedded from there team then and That's that products more opportunities new we what drive hearing to has us. particular off-the-shelf the writings that from with And in so that partners. new we're

Operator

next Your line Kligerman with Credit of Suisse. the from Andrew comes question

Andrew Kligerman

year? take and -- And coming more done need it like this for in and does litigation that your the to have areas Is yes work I you're not why how First were just think inflation. is is from to XX% a -- that need it's across clarification more increases you rates coming saying -- you really future social on rate pricing board that from that. elaborate on question, that you little mean Maybe losses.

Alex Timm

Absolutely.

when given today. in current where rate That said, and are levels industry whether believe we do where we're to level medical as believe in, current forward, again, we cost be, need claims where many So that we inflation adequate broadly take that as keep the inside do to rates rising look up whatever loss continues, from our today, of going it's continue rates we take the think parts XXs, are inflation, low social inflation, do come costs to it for seeing inflation, we we believe, when of the on-level will severities come entire to continue we the we an at with in ever being inflation, markets our across may labor and need are ratio frequencies about loss costs. that to loss

can XX% want say we is talking what so to we when So up XX% forward sort a take are we're least that rate we that of talking with that's is -- going at that about forward we trend when inflation. keep

Andrew Kligerman

right where, think about that you expect say So to the inflation hard that and it feeling continue. to exactly it? Is to way but you're

Alex Timm

it. going will I than seeing lower assuming are forward. right now actual note we're in numbers, to something think the about we what right way our That's

conservative And believe, XX% stance, so forward we are very we trend. with in a a

Andrew Kligerman

share Could is your is think the business your profitability loss anything a on lot ratio so the around you which date? much, about to there? ratios direct, loss having we And with when improved than newer Carvana, Carvana how

Alex Timm

on Absolutely. Carvana largely we business. ratios driven the why price. us, loss lot customers actually purchasing materially We're for not seeing embedded of it's necessarily believe are better these and That's a because

on purchases purchase when comparing direct options so when on actually they they than fewer are us our against Carvana, And a customer channel.

moral we've that eliminated also We believe hazards. some

less there's channel. So in fraud that

a is -- term are so when direct Carvana our early, all is we loss leading looking ratios. very those first the from indicators at indicators, look on positive it ratio. the just And although it of loss business early outperforming on And

Andrew Kligerman

what seeing congrats competition that's that on I'm the to embedded doing. lot of of if sure would And embedded aim lot then you could you're in seeing what write a you competition And elaborate are on lastly, business? a big taking that the players how of terms second auto you you and great. as just notice product, business? be of are for out, Are playing

Dan Rosenthal

Yes. is the question. for Thanks This Dan.

the customer that we talk a lot are people and competition not said about the Alex we of But you think around seeing are offer. about embedded. terms what experience, around when in product We seeing of just ease

is the and fast built allows One, our We for priority. the number have are for others technology in reasons. two right doing then you're from integrate very very, customers, experience And buying leveraging the quickly than us so, seamless everything stack us access it a their we've way, embedded interconnected manner. to that and in a technology that we're to our think, partners built we have I faster hearing two,

are said, already driving top in growth embedded we're as auto mode. Alex for our And growth. priority as a We insurance

to We leveraging forward underwriting the team Frank are growth. foundation team embedded the side Matt already that around with go and the and and build pricing helped and have

need, driving to that customer and can that they from and and address we a prospective can fast. very us When questions level able this ask or say, you they partners really of partners interact prioritization with introduce introduce us. respond this something are product to you specific very, are customization feeling So is they

that many our second that feeling. embedded way many, else car consumers just the to customer speed are buy partners is one an and have on going deeply an And prospective no for feeling is is that We to a come. creating have a differentiated years to none, to that's what They're customization their passionate experience about team a impact has. insurance level of speed, a market that

Andrew Kligerman

me Interesting. follow-on. one Actually gives last

this given partners a that and give about binding? be optimism Just today lot of that second what you said, we'll the and more does about partner you just hearing more you'll what be XXXX and announced with you

Dan Rosenthal

for the Thanks Yes. question.

And very success XXX% to partner. be we the scale frankly, scaled Look, built build the don't have So second right going products a that to over-exuberant we do those test to product. excitement right to clear, new right then to very, multiple We're states showing want just the and make I continue we're be want deep the products we right today. around partner we our not writings and funnel partners, clear this. segments the that think those customer then in Alex differentiated partners into with just as now that said, and the product highly we we've them. we're launch And a year-to-date. announcing on with and, We announcing so, but sure that that choose is

So our focus. that's

think want significant perspective. But embedded quarter, priority growth and want to don't next So not to from you new promising insurance embedded that. is I'm growth you that a our understand writing top I I

invest We in are the continue channel here. it we scaling seeing and are from to going work, to

Operator

McJoynt comes question final Tommy line Your from with the KBW. of

Tommy McJoynt

two on or actually on follow-up question quick a reinsurance. Just Mark's earlier

and if your share seen expecting commission you confirming have quota in I those correctly that not on ceding heard contracts? the Just any are not comments changes

Rob Bateman

nonconcurrent put We've change we terms out order minimal percentage. gotten partnership firm toward -- on we sticking terms very nonconcurrent backing our done firm and we We're ceding terms on seen What just order the to off -- when backed is there, the nonconcurrent commission. we've our terms. Yes. just we've off see had we've are

of actually gets loss to some which when within comes our we would loss the bit corridor see contracts terms Now do ratio that so. the as improving expect a said, it the better, you

Tommy McJoynt

or what's multi? of share Or your quota remind the staggered just are setup those? And agreement me,

Frank Palmer

Yes.

work attaching. the they're way is So are agreements we yes, that multiyear risk

write that this X the with risk depending I X years, share So it's period for we on about on if it's have the books year, the will -- contract, that years. for we stay that quota risk X that a up to think

Tommy McJoynt

long-term envision? the share percentage just And state you steady a quota level is one, then sort for last of that there

Frank Palmer

there -- have gotten -- not we we just is haven't There yet.

We haven't -- we still have some analysis to do around it.

Operator

Thank participating. for That you concludes today's conference.

You time. may this disconnect at

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