Root, Inc.

Thank you for standing by and welcome to the fourth quarter 2021 earnings conference call. At this time, all participants are on listen-only mode. After the speaker's presentations, there'll be a question and answer session. To ask a question at that time, please press star then one on your touchtone telephone. As a reminder, today's conference call is being recorded. I will now turn to conference host, Ms. Christine Patrick, Vice President of Investor Relations. Please go ahead.

Good morning and thank you for joining us today. BRUTE is hosting this call to discuss its fourth quarter 2021 earnings results. Participating on today's call are Alex Timm, co-founder and CEO, and Dan Rosenthal, Chief Operating Officer, Chief Revenue Officer, and Chief Financial Officer. During the question and answer portion of the call, our presenters will be joined by Matt Ben-Octopore, Chief Technology Officer, and Frank Palmer, Chief Insurance Officer. Last evening, Root issued a shareholder letter announcing its financial results. While this call will reflect items within that document, for more complete information about our financial performance, we also encourage you to read our 2021 Form 10-K. Before we begin, I want to remind you that matters discussed on today's call will include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinions as of the date of this call and we undertake no obligation to revise this information as a result of new developments that may occur. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today. In addition, we are subject to a number of risks that may significantly impact our business and financial results. For a more detailed description of our risk factors, once again, please review our Form 10-K, where you will see a discussion of factors that could cause the company's actual results to differ materially from these statements, as well as our shareholder letter released last evening. A replay of this conference call will be available on our website under the Investor Relations section. I would like to also remind you that during the call, we are discussing some non-GAAP measures and talking about Roots performance. You can find the reconciliation of those historic measures to the nearest comparable gap measures in our shareholder letter released last evening and our filings with the SEC, each of which will be posted on our website at ir.joinroot.com. I will now turn the call over to Alex Tim, Root's founder and CEO.

Thanks, Christine. I'm going to get right to it. 2021 was a challenging year as inflation pushed losses to new levels and digital marketing spend became less efficient. However, because of our technology and data advantage, We were able to identify these trends early and take swift action. Our ability to respond quickly is reflected in our fourth quarter results, where our loss ratio has been stable since the initial impact of inflation hit earlier in the year, while industry trend continued to rise. We also reduced marketing spend another 65% in the fourth quarter, cutting our operating loss roughly in half since the second quarter. During the quarter, we continue to make progress on strengthening our underwriting and building our embedded product. we've made substantial progress in our partnership with Carvana. Through open collaboration, the quality and effectiveness of what we've been able to build in less than six months has surpassed expectations on both sides. After rolling out the first version of our product in 12 states, we've made improvements to the customer experience and are focused on driving adoption. We continue to add new states to the embedded footprint every week. As initial results have been very promising, Carvana has increased our share of traffic months ahead of schedule. We have a strong roadmap to continue to drive increased buying rates. As we build the second version of our product, we will explore how telematics can be used to inform pricing, underwriting, and the customer experience. We are also building a brokerage offering to serve customers in states where Root currently does not write business. While it's still early, the metrics around attach rate, loss ratio, and retention look extremely positive. We expect that Carvana customers will represent a material percentage of new writings in Q1 and continue to build throughout the year. On top of our successes with embedded insurance, we are tightening our underwriting standards in a state-by-state approach to further drive profitability. This work is critical to the efficacy of the data science models and their ability to drive differentiation in roots risk segmentation. In addition, we have continued to advance our machine learning-based loss and underwriting models. Having built our pricing and underwriting systems on the very best technology, Root has been able to respond to the environmental changes quickly. During the fourth quarter, we implemented eight rate increases, and an additional five were implemented to date in the first quarter. We have improved pricing segmentation through enhancements to McModel, our countrywide pricing model. This model leverages Root's growing data set to expand modeled coverages improve segmentation, and better predict the lifetime value of a customer. Our UBI 4.0 model is also now active in 24 states. Through detailed testing of this model, we have experienced a material improvement in frequency to premium ratios, while simultaneously offering better prices to good drivers. This further demonstrates how the predictive power of our technology translates into measurable results. Taken together, we expect these actions to drive improvement in our 2022 loss ratio and bring our performance closer to our stated goal of 65%. We are driving this company to profitability. The actions we took over the last quarter will materially improve our underwriting results while building defensible growth. We were able to act quickly because our engineering and data science-driven infrastructure allows us to collect actionable, real-time data, analyze it quickly, and then implement change. And that was demonstrated by our Q4 performance. Before I turn it over to Dan, I want to share two employee announcements. I'm excited to report that Matt VanOctopore has been promoted to Chief Technology Officer. Matt's contributions to Root over the past four years is incredibly significant. By more closely aligning our data science technology teams with Matt at the helm of both, we can continue to unlock opportunities to build a world-class data science technology stack. We also announced that Hemal Shah has decided to leave Root. He will be taking some time for himself and his family. I would like to thank Hemel for his contributions to building our product, our teams, and our processes. I'm thankful for the dedication of our team members who are working every day to unbreak insurance. I appreciate the trust of our customers and investors. And with that, I'll turn the call over to Dan.