Root Inc. reported a third-quarter net loss of $64 million, down from a net loss of $133 million during the same quarter last year. Year-to-date losses sit at $230 million, which is down from $411 million at the end of the third quarter of 2021.
At the same time, the insurtech reported a 14-point year-over-year reduction in its gross loss ratio to 79% — effectively tripling the margins of Root’s business, according to Alex Timm, the company’s co-founder and chief executive officer. He said the organization is in a position to drive growth in profitable segments.
“Our number one priority is to become self-funding in coming years, allowing us to control our own destiny,” Timm wrote in a letter to stakeholders.
In that letter, he said the Ohio-based company’s third quarter shows “clear progress” on its strategy of accelerating new writings growth on Root’s embedded platform while materially reducing loss ratio year-over-year.
The company ended the third quarter with $629 million in unencumbered capital, compared with $696 million at the end of the second quarter. Root reported that operating capital consumption has dropped substantially on a year-over-year basis, with a 55% reduction in capital consumed year-to-date.
“By focusing our effort and capital deployment in areas we believe will produce clear and immediate returns, we believe we are setting Root up to reach profitability,” Timm wrote in his letter to shareholders. “Through further loss ratio and fixed expense reductions, we will be in a better position to control our own financial future by self-funding through this difficult period.”
Year-over-year, Q3 revenue was down 21% to $73.7 million. Gross written premium decreased 26% to $151 million compared to 2021, and gross earned premium decreased 18% to $155 million. In the letter, Root also announced plans to reduce its headcount by roughly 20% — marking its second round of job cuts this year.
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