Root, Inc.

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 speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one again. Thank you. At this time, I would like to turn the conference over to Jody Baker, Vice President and Corporate Secretary. Ms. Baker, you may begin your conference.

Good morning, and thank you for joining us today. Root is hosting this call to discuss its third quarter 2022 earnings results. Participating on today's call are Alex Timm, co-founder and chief executive officer, and Rob Bateman, chief financial officer. During the question and answer portion of the call, Our presenters will be joined by Dan Rosenthal, Chief Revenue and Operating Officer, Matt Benakdipour, 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 discussed within that document, for more complete information about our financial performance, we also encourage you to read our third quarter 2022 Form 10-Q, which was filed with the Securities and Exchange Commission last evening. 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, please review our Form 10-K for the year ended December 31, 2021, 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 and third quarter 2022 Form 10-Q released last evening. A replay of this conference call will be available on our website under the investor relations section. I would also like to remind you that during the call, we will discuss some non-GAAP measures while talking about roots performance. You can find reconciliations of those historical measures to the nearest comparable GAAP measures in our shareholder letter released last evening and our Form 10-Q filed with the SEC which are posted on our website at ir.joinroot.com. I will now turn the call over to Alex Tim, Root's co-founder and CEO.

Thank you, Jodi. I want to take today's call and back up a minute to remind everyone of why we built Root. During the last year, we have continued to comment on how our technology has allowed us to recognize one of the worst inflationary environments to ever hit the auto insurance industry. We have continually communicated how that technology allows us to drive loss ratio improvement above and beyond anyone else in the industry. In Q3, this is exactly what you saw. We improved our loss ratio 14 points year over year, while most others in the industry had their loss ratio go in the other direction. This effectively tripled the margins of our business, and we are continuing to see loss ratio improvements. We have done this while improving our ability to segment risk, underwrite risk, and classify risk using what we believe is the very best technology in predictive analytics and software development. That improvement is the bedrock of our ability to profitably scale, but it is just step one. Step two is building differentiated access to customers. We have further invested in our product innovation through our embedded channel. Even during this runaway inflationary environment, we were able to further differentiate our product as demonstrated by 200% growth on our embedded platform year-to-date. What's more, we believe this channel offers extremely attractive conversion rates, acquisition costs, and underwriting ratios. We are progressing towards finalizing our second embedded partnership and look forward to providing further details in the months ahead. We believe we're at the very beginning of a massive shift in auto insurance distribution and that we are at the tip of the spear. In our direct channel, we are focusing on only writing clearly profitable business with an immediate return. This means utilizing our deep understanding of customer segmentation and geography to drive profitable new writings with very limited marketing spend. By leveraging our ability to quickly retrain our loss models, we can drive frequent increases to the sophistication and accuracy of our prices. We believe we are in a position to drive growth in the most profitable segments as we go forward. Over the last year, one thing has been made crystal clear. Root must control its own destiny. To do this, we are driving the company to profitability. Year over year, we have reduced our operating cash consumption by 55%. As part of this, we had to make the difficult decision to separate with 17% of our workforce yesterday. At the same time, we continue to right-size our non-headcount expenses. Together, these actions will lower our run rate expenses by roughly $50 million annually. I would like to thank the customers and shareholders that have been with us on this journey. I would also like to share my gratitude with all Root employees, current and past. I am grateful for their hard work and contributions to Root. I'll now turn the call over to Rob to discuss our operating results in more detail.