Root Inc. reported a net loss of $64 million in the third quarter, down from a net loss of $133 million in the same quarter last year. Losses to date are $230 million, down from $411 million at the end of Q3 2021.
At the same time, the insurtech reported a 14-point year-over-year reduction in its gross loss ratio to 79% — a tripling of Root’s business margins, according to Alex Timm, the company’s co-founder and chief executive officer. He said the organization has the ability to drive growth in profitable segments.
“Our first priority is to become self-sufficient in the coming years so that we can 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” in its strategy to accelerate the growth of new writings on Root’s embedded platform while significantly reducing its year-over-year loss ratio.
The company ended the third quarter with $629 million in unencumbered capital, compared to $696 million at the end of the second quarter. Root reported that working capital consumption has declined significantly year-over-year, with a 55% reduction in capital consumption year-to-date.
“By focusing our efforts and capital deployment on areas we believe will deliver clear and immediate returns, we believe we are setting up Root to become profitable,” Timm wrote in his letter to shareholders. “Through further loss ratios and reductions in fixed costs, we will be in a better position to manage our own financial future by self-financing this difficult period.”
On a year-over-year basis, sales in the third quarter were 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 cut headcount by about 20%, marking the second round of job cuts this year.
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