Metromile, Inc.

Greetings. Welcome to Metro Mile Incorporated second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Gary Edson at ICR. Thank you. You may begin.

Thank you, operator. Good afternoon and welcome to MetroMile's second quarter 2021 earnings call. This afternoon, the company released its financial results for the quarter ended June 30th, 2021. Shareholder letter is available in the investor relations section of the company's website at www.metromile.com. I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. Any statements that refer to projections, forecasts, or other characterizations of future plans, events, or circumstances, including any underlying assumptions, are forward-looking statements. These statements are based on management's current expectations, beliefs, and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. I refer you to the company's filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied in any forward-looking statements made today. The company undertakes no duty to update any forward-looking statements that may be made during the course of this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at www.sec.gov. Joining me on the call today are Dan Preston, the company's Chief Executive Officer, Troy Dye, Senior Vice President of Growth, and Reggie Van Galil, Metromile's Chief Financial Officer. With that, I am now going to turn the call over to Dan.

Thank you. Good afternoon to everyone and welcome to our second quarter 2021 earnings call. We appreciate your interest and continued support of Metromile. During the second quarter, we encountered several unexpected challenges, including some shifts in consumer behavior that we are seeing as the country continues the journey to a post-COVID-19 environment. We are learning how to best navigate the shifting market. And with a new growth leader on board, we are also using this as an opportunity to refresh and optimize our long-term growth strategy. During the quarter, we experienced several positive milestones. Driving return to near pre-pandemic levels, which sparked a sizable increase in our direct earned premiums and premium run rate as of June 30, 2021. As more Americans continue hitting the road, We expect to continue to generate solid direct earned premium year-over-year growth on a more consistent basis. We continue to experience high new customer one-year retention, which measured a robust 68% for the second quarter. Drivers continue to switch to Metro Mile to save, and we believe they stay with us because of the experience. We rounded out our senior leadership team with the key hires of Troy Dye as Senior Vice President Growth and Reggie Vengelo as our Chief Financial Officer. Both are already making significant and valuable contributions to Metromile, and we're excited to have them on board. Personally, I am thrilled to have a complete seasoned management team and look forward to working with this group to drive the business forward. That said, the positives were offset by headwinds we experienced toward the latter part of the quarter. First, our accident quarter loss ratio trended higher, as it did for others throughout the industry. We note that excluding bodily injury, claim frequency per mile has largely been consistent since the onset of the pandemic, However, claims severity has increased throughout the industry, mainly due to inflation and bodily injury and physical damage claims. Further, we have observed that the relationship between miles driven and losses is even more elastic than previously modeled. In recent rate filings, we have leveraged this insight to adjust more of our premium to be priced variably, or per mile, and reduced monthly fixed costs and expect to do so further in subsequent rate filings. This is a powerful way to drive improved unit economics, and additional price competitiveness for the millions of low-mileage drivers in the U.S. Second, although we noted in our last call that cancellations related to government-mandated COVID-19 payment extensions would be processed in the second quarter, those cancellations turned out to be greater than we expected. We also experienced higher-than-expected cancellations due to consumer behavioral changes, such as out-of-state moves, vehicle fails, and high-mileage driving. Finally, we encountered unexpected industry-wide regulatory delays, which deferred timely approvals of our pricing changes. We have since received those approvals, and they will go into effect at the end of August. As a reminder, we expect these pricing changes will drive additional policy and force in the future. As a result of these headwinds, policies and force were roughly flat for the second quarter and contribution margin dipped. These results are not acceptable to us, and we'll outline a few examples of the high-priority areas we're executing on to drive growth. We believe we have a superior underwriting model and customer experience and deliver a strong value proposition for our customers. As we've consistently noted, drivers who switched to Metromile say 47% annually on average. Additionally, when driving returned to near pre-pandemic levels in the second quarter, nearly half of prospects exploring Metromile self-reported 20% or greater savings compared to their current premium. This clearly demonstrates the substantial savings we can provide for nearly two-thirds of Americans before, during, and after the pandemic. As we continue laying the groundwork for our nationwide expansion, the recent challenges and significant strengthening of our leadership team have given us an opportunity to thoroughly assess our go-to-market growth strategy to introduce Metromile to new states. We believe we now have a more robust and visible path to achieve our mid- and long-term growth plan. However, to execute this strategy, our near-term policies and force growth will be deferred by a few quarters as we focus on implementation. While this leads to slower near-term policy growth, the long-term trajectory remains unchanged. We believe that most Americans would save substantially with metro miles per mile insurance, and we have clear paths towards scale, driven by an incredible team we recently brought on board to drive the Go-To-Market Strategy Board. With that, I'll turn the call over to our new Senior Vice President of Growth, Troy Dye. Troy joined us in late May from Capital One and immediately went to work refining our growth plan. He'll walk you through them now.